<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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EQUALITY BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 6035 APPLIED FOR
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION) EQUALITY BANCORP, INC.
9920 WATSON ROAD
ST. LOUIS, MISSOURI 63126
(314) 965-7090
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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RICHARD C. FELLHAUER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EQUALITY BANCORP, INC.
9920 WATSON ROAD
ST. LOUIS, MISSOURI 63126
(314) 965-7090
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
CHRISTOPHER J. ZINSKI, ESQ. PAUL M. AGUGGIA, ESQ.
SCHIFF HARDIN & WAITE BREYER & AGUGGIA
7200 SEARS TOWER 1300 "I" STREET, N.W., SUITE 470 EAST
CHICAGO, ILLINOIS 60606 WASHINGTON, D.C. 20005
(312) 258-5548 (202) 737-7900
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act 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 this form is a post-effective amendment filed pursuant to Rule 462(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE(/1/) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share................... 1,058,000 shares $10.00 $10,580,000 $3,206(2)
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Common Stock, par value
$.01 per share................... 930,721 shares $6.35 $5,912,834 $1,792(3)
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Total............................ 1,988,721 shares N/A $16,492,834 $4,998
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Participation Interests.......... (/4/) (/4/) (/4/) (/4/)
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated in accordance with Rule 457(a).
(3) Calculated in accordance with Rule 457(f)(2) on the basis of the book
value, as of March 31, 1997, of the securities to be canceled in the
conversion and reorganization.
(4) This Registration Statement also covers an indeterminate amount of
interests to be offered or sold pursuant to the Equality Savings and
Security Plan described herein for which no separate fee is required.
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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.
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<PAGE>
EQUALITY BANCORP, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
CAPTION OF LOCATION IN SUBSCRIPTION
FORM S-1 ITEM NUMBER AND DESCRIPTION AND COMMUNITY OFFERING PROSPECTUS
------------------------------------ -----------------------------------
<S> <C>
1.Forepart of the Registration Statement and Forepart of the Registration Statement;
Outside Front Cover Page of Prospectus.. Outside Front Cover Page of Prospectus
2.Inside Front and Outside Back Cover Pages Inside Front Cover Page of Prospectus;
of Prospectus........................... Outside Back Cover Page of Prospectus
3.Summary Information, Risk Factors and Summary; Risk Factors
Ratio of Earnings to Fixed Charges......
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... The Conversion and Reorganization--Stock
Pricing, Exchange Ratio and Number of
Shares to be Issued
6. Dilution................................. Not Applicable
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Market for Common Stock; The Conversion and
Reorganization--The Offering; The
Conversion and Reorganization--Marketing
Arrangements; The Conversion and
Reorganization--Syndicated Community
Offering; The Conversion and
Reorganization--Alternative Offerings of
Common Stock
9. Description of Securities to be The Conversion and Reorganization--
Registered............................... Restrictions on Transfer of Subscription
Rights and Shares; Comparison of
Stockholders' Rights; Restrictions on
Acquisition of the Holding Company;
Description of Capital Stock
10. Interests of Named Experts and Counsel... Not Applicable
11. Information with Respect to the Equality Bancorp, Inc.; Equality Savings
Registrant............................... and Loan Association, F.A.; Business of
the Association; Market for Common Stock;
Dividend Policy; Regulation and
Supervision--Federal Savings Association
Regulation--Limitation on Capital
Distributions; Index to Consolidated
Financial Statements; Summary--Selected
Consolidated Financial Information of the
Association; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Management of the
Holding Company and Association
12.Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities.............................
</TABLE>
<PAGE>
SUPPLEMENT TO PROSPECTUS
EQUALITY BANCORP, INC.
EQUALITY SAVINGS AND SECURITY PLAN
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This Prospectus Supplement relates to the offer and sale to participants
(the "Participants") in the Equality Savings and Security Plan (the "Plan") of
participation interests in the Plan and up to shares of Equality
Bancorp, Inc. (the "Holding Company") common stock, par value $.01 per share
(the "Holding Company Stock"), as set forth herein.
The Holding Company's principal executive offices are located at 9920 Watson
Road, St. Louis, Missouri 63126. Its telephone number is (314) 965-7090.
In connection with the proposed Conversion and Reorganization (as described
in the Prospectus dated , 1997 (the "Prospectus")), Equality
Savings and Loan Association, F.A. (the "Association") will become a wholly-
owned subsidiary of the Holding Company and the shares of the Association
common stock, par value $.01 per share (the "Association Shares") currently
held under the Plan will be exchanged for shares of Holding Company Stock. In
addition, the Plan has been amended to provide that each Participant in the
Plan may direct the trustee of the Plan (the "Trustee") to purchase Holding
Company Stock with certain amounts in the Plan attributable to such
Participant. This Prospectus Supplement relates to the election of a
Participant to direct the purchase of Holding Company Stock in the Conversion
and Reorganization.
The Prospectus attached to this Prospectus Supplement includes detailed
information with respect to the Conversion and Reorganization, the Holding
Company, the Association, the Holding Company Stock and the financial
condition, results of operations and business of the Holding Company and the
Association. This Prospectus Supplement, which provides detailed information
with respect to the Plan, should be read only in conjunction with the
Prospectus.
A Participant's eligibility to purchase Holding Company Stock in the
Conversion and Reorganization through the Plan is subject to the Participant's
general eligibility to purchase shares of Holding Company Stock in the
Conversion and Reorganization and the maximum and minimum purchase limitations
set forth in the Plan of Conversion and Reorganization. See "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.
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THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), THE OFFICE OF THRIFT SUPERVISION
("OTS"), ANY STATE SECURITIES COMMISSION ("STATE COMMISSION") OR THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), NOR HAS THE COMMISSION,
OTS, STATE COMMISSION OR FDIC 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.
<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, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
HOLDING COMPANY, THE ASSOCIATION 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 HOLDING COMPANY, THE ASSOCIATION, 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 HERETO AND SHOULD BE RETAINED FOR FUTURE REFERENCE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE OFFERING.............................................................. 2
Securities Offered...................................................... 2
Election to Purchase Holding Company Stock in the Conversion and
Reorganization......................................................... 2
Value of Participation Interests........................................ 2
Method of Election...................................................... 2
Time for Election....................................................... 2
Irrevocability of Election.............................................. 2
Direction to Purchase Holding Company Stock After the Conversion and
Reorganization......................................................... 2
Purchase Price of Holding Company Stock................................. 3
Nature of a Participant's Interest in the Holding Company Stock......... 3
Voting of Holding Company Stock......................................... 3
DESCRIPTION OF THE PLAN................................................... 3
Introduction............................................................ 3
Eligibility............................................................. 4
Contributions Under the Plan............................................ 4
Limitations on Contributions............................................ 5
Investment of Contributions............................................. 6
Benefits Under the Plan................................................. 8
Withdrawals and Distributions from the Plan............................. 8
Plan Loans.............................................................. 9
Administration of the Plan.............................................. 10
Reports to Plan Participants............................................ 10
Amendment and Termination............................................... 10
Merger, Consolidation or Transfer....................................... 10
Claims Procedures....................................................... 11
Federal Tax Aspects of the Plan......................................... 11
Restrictions on Resale of Holding Company Stock......................... 12
LEGAL OPINIONS............................................................ 13
</TABLE>
<PAGE>
THE OFFERING
SECURITIES OFFERED
The securities offered hereby are participation interests in the Plan and up
to shares of Holding Company Stock which may be acquired by the Plan
for the Accounts of those employees participating in the Plan who elect to have
all or a portion of their Plan Account balances attributable to their own
contributions used to purchase Holding Company Stock. Shares sold pursuant to
the Plan will be included in the individual purchase limitation of $ of
Holding Company Stock sold in the Conversion and Reorganization. Accordingly,
the actual number of shares purchased by the Plan may be less than
shares of Holding Company Stock. Information with regard to the Plan is
contained in this Prospectus Supplement and information with regard to the
Conversion and Reorganization and the financial condition, results of
operations and business of the Holding Company and the Association is contained
in the attached Prospectus.
ELECTION TO PURCHASE HOLDING COMPANY STOCK IN THE CONVERSION AND REORGANIZATION
As part of the Conversion and Reorganization, each Participant has an
election to allocate up to 100% of the funds which represent his or her
beneficial interest in the assets of the Plan held in his or her Salary
Deferral Contributions Account, Voluntary Contributions Account and Rollover
Contributions Account to the purchase of Holding Company Stock. The Trustee of
the Plan will follow the Participants' directions and exercise subscription
rights to purchase Holding Company Stock in the Conversion and Reorganization.
Funds not allocated to the purchase of Holding Company Stock will be invested
in other Trust investments, including those authorized by Participants.
VALUE OF PARTICIPATION INTERESTS
The assets of the Plan are valued on an ongoing basis and each Participant is
informed by the Plan Administrator of the value of his or her beneficial
interest in the Plan on an annual basis. The value represents the market value
of contributions to the Plan by the Association and by the Participants and
earnings thereon, less distributions.
METHOD OF ELECTION
Enclosed with this Prospectus Supplement is an investment form (the
"Investment Form"). If a Participant wishes to allocate a part of his or her
beneficial interest in the assets of the Plan to the purchase of Holding
Company Stock in the Conversion and Reorganization, he or she should indicate
that decision on the Investment Form and return it to the Trustee. If a
Participant does not wish to make such an election, he or she does not need to
take any action.
TIME FOR ELECTION
The deadline for the election for purchase of Holding Company Stock in the
Conversion and Reorganization is , 1997. The Election Form should
be returned to the Trustee by 12:00 noon, local time, on such date.
IRREVOCABILITY OF ELECTION
The election of a Participant to direct the Trustee to exercise subscription
rights in the Conversion and Reorganization becomes irrevocable at 12:00 noon,
local time, , 1997. Prior to such time, a Participant may revoke or
amend any previously filed Investment Form by filing a new Investment Form with
the Association's personnel department.
DIRECTION TO PURCHASE HOLDING COMPANY STOCK AFTER THE CONVERSION AND
REORGANIZATION
After the Conversion and Reorganization, a Participant will be able to direct
that up to 100% of such Participant's interest in the Plan held in his or her
Salary Deferral Contributions Account, Voluntary
2
<PAGE>
Contributions Account and Rollover Contributions Account be transferred to the
Holding Company Stock fund and invested in Holding Company Stock.
Alternatively, a Participant may direct that a certain percentage of such
Participant's interest in the Holding Company Stock fund be transferred from
the Holding Company Stock fund to the other investment funds available under
the Plan. A Participant will be permitted to direct that future Salary Deferral
Contributions, Voluntary Contributions and Rollover Contributions made to the
Plan by or on such Participant's behalf be invested in Holding Company Stock.
Following the initial election, the allocation of a Participant's interest in
the Holding Company Stock fund may be changed by the Participant. Special
restrictions apply to transfers directed by those Participants who are
executive officers, directors and principal stockholders of the Holding Company
or the Association who are subject to the provisions of Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
PURCHASE PRICE OF HOLDING COMPANY STOCK
The funds allocated for the purchase of Holding Company Stock in the
Conversion and Reorganization will be used by the Trustee to purchase Holding
Company Stock. The price paid for such shares of Holding Company Stock will be
the same price as is paid by all other persons who purchase Holding Company
Stock in the Conversion and Reorganization. The price paid by the Trustee for
shares of Holding Company Stock will not exceed "adequate consideration" as
defined in Section 3(18) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and no fees or commissions will be paid by the Plan
with respect to the purchase of Holding Company Stock in the Conversion and
Reorganization. See "Stock Pricing and Number of Shares to be Issued" in the
Prospectus for a discussion of how the stock price will be determined in the
Conversion and Reorganization.
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 Plan as a segregated, earmarked investment for the
Account. 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 OF HOLDING COMPANY STOCK
Each Participant will have the opportunity to direct the Trustee as to the
manner in which the Holding Company Stock held in his or her Accounts will be
voted. In the event the Participant does not so direct the Trustee, the Trustee
will vote the Holding Company Stock held in the Participant's Accounts
proportionately in the same manner as it votes shares for which it has received
voting instructions.
DESCRIPTION OF THE PLAN
INTRODUCTION
The Plan, which currently is maintained by First Missouri Financial, M.H.C.
(the "Mutual Holding Company"), was originally adopted effective as of April 1,
1986 and subsequently has been amended and restated, effective January 1, 1990.
In connection with the Conversion and Reorganization, the Plan will be amended
to designate the Holding Company as successor sponsor of the Plan. The Plan is
a profit sharing plan with a cash or deferred arrangement established in
accordance with the requirements of Sections 401(a) and 401(k) of the Internal
Revenue Code (the "Code"). The Plan has a calendar year fiscal year (the "Plan
Year").
The Plan has received from the Internal Revenue Service a determination that
the Plan, as amended, is qualified under Section 401(a) of the Code and
satisfies the requirements under Section 401(k) of the Code. It is intended
that the Plan will comply in operation with each of the requirements of the
Code which are applicable to a plan qualified under Section 401(a) of the Code
and the requirements which are applicable to a qualified cash or deferred
arrangement under Section 401(k) of the Code.
3
<PAGE>
The Plan is an "individual account plan" other than a "money purchase pension
plan" within the meaning of ERISA. As such, the Plan is subject to all the
reporting, disclosure, participation, vesting and fiduciary responsibility
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 plan). The Plan is also subject to the provisions of Title III
regarding jurisdiction, administration and enforcement. The Plan is not subject
to Title IV (Plan Termination Insurance) of ERISA.
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 (and trust). Copies of the Plan (and trust) are available to all
employees upon request. Each employee is urged to read carefully the full text
of the Plan (and trust).
ELIGIBILITY
Each employee of the Association or its subsidiaries Equality Mortgage Corp.
and Equality Commodity Corp. is eligible to become a Participant in the Plan as
of the January 1st or July 1st (the "Entry Date") following or coinciding with
the date on which he or she completes one year of service. (An employee earns a
year of service if he or she completes 1,000 or more hours of service during
the twelve month period beginning with his or her date of employment, or if
later, the Plan Year or anniversary thereof that begins during the first year
of employment.) Notwithstanding the foregoing, an employee is not eligible to
participate in the Plan if he or she is covered by a collective bargaining
agreement under which retirement benefits were the subject of good faith
bargaining.
An employee who has met the eligibility requirements must complete and file
with the Plan administrator (the "Plan Administrator") a prescribed written
application form and contribute to the Plan.
As of June 1, 1997, there were 84 employees eligible to participate in the
Plan, and 71 employees had elected to participate in the Plan.
CONTRIBUTIONS UNDER THE PLAN
Salary Deferral Contributions. Each Participant in the Plan may elect to
reduce his or her Compensation (as defined below) from 1 to 15% on a before-tax
basis and have that amount contributed to the Plan on his or her behalf
("Salary Deferral Contributions"). For purposes of the Plan, "Compensation"
means the total compensation actually paid by the Association or a subsidiary
that is reported on Form W-2, including the amounts of Salary Deferral
Contributions and certain other pre-tax contributions made by the Participant.
The annual Compensation of each Participant taken into account under the Plan
is limited to Compensation earned while a Participant, to a maximum of $160,000
in 1997 (this dollar limitation is adjusted periodically for increases in the
cost of living pursuant to the Code). A Participant may change or terminate his
or her Salary Deferral Contributions at any time, provided that a change in the
rate of contribution may be made once in any six month period and no change or
termination may be made within 60 days of the end of the Plan Year. If a
Participant terminates his or her Salary Deferral Contributions, he or she may
not recommence such Salary Deferral Contributions until the following Plan
Year. Salary Deferral Contributions are credited to the Participant's Salary
Deferral Contributions Account.
Voluntary Contributions. Each Participant in the Plan may also elect to
contribute to the Plan an additional amount of his or her Compensation (minimum
of 1%) on an after-tax basis ("Voluntary Contributions"). A Participant may
change or terminate his or her Voluntary Contributions at any time, provided
that a change in the rate of contribution may be made once in any six month
period and if a Participant terminates his or her Voluntary Contributions, he
or she may not recommence such Voluntary Contributions until six months from
the date of such termination.
4
<PAGE>
Rollover Amounts from Other Plans. A Participant may, subject to the approval
of the Plan Administrator and consistent with the requirements of Section
402(c) or Section 408(d)(3) of the Code, transfer to the Plan distributions
received by the Participant from another qualified plan. Such amounts are
credited to the Participant's "Rollover Account."
Matching Contributions. The Mutual Holding Company will make a Matching
Contribution to the Plan for each Plan Year on behalf of each Participant who
is making Salary Deferral Contributions or Voluntary Contributions on the last
day of such Plan Year. The Matching Contribution will be an amount equal to 50%
of the first 2% of the aggregate of the Participant's (i) Salary Deferral
Contributions made during the Plan Year; and (ii) Voluntary Contributions made
and not withdrawn during the Plan Year. Matching Contributions are credited to
each Participant's Matching Contributions Account.
Discretionary Contributions. The Mutual Holding Company may make
Discretionary Contributions to the Plan for each Plan Year. Each Participant
who is employed on the last day of the Plan Year is eligible to share in the
allocation of the Discretionary Contributions, if any, for the Plan Year.
Discretionary Contributions are allocated to each eligible Participant's
Account based on the ratio of each such Participant's number of units to the
aggregate number of units of all such Participants. A Participant will be
credited with one unit for each $500 of annual Compensation (with fractional
units rounded to one full unit) and four units for each full year of service. A
Participants earns a year of service for this purpose for each Plan Year in
which he or she is employed on the last day of such Plan Year. Discretionary
Contributions are credited to each Participant's Discretionary Contributions
Account.
LIMITATIONS ON CONTRIBUTIONS
Limitation on Annual Additions. Pursuant to the requirements of the Code, the
Plan provides that the annual additions to each Participant's Accounts during
any Plan Year may not exceed the lesser of 25% of the Participant's taxable
compensation for the Plan Year or $30,000 (adjusted for increases in the cost
of living as permitted by the Code).
Limitation on Salary Deferral Contributions. The total amount of Salary
Deferral Contributions of a Participant (when aggregated with any elective
deferrals of the Participant under another qualified cash or deferred
arrangement, a simplified employee pension plan, a salary reduction
arrangement, a deferred compensation plan under Code Section 457 or a Section
501(c)(8) trust) may not exceed $9,500 for the calendar year which began
January 1, 1997. This limitation is adjusted periodically for increases in the
cost of living pursuant to the Code. Salary Deferral Contributions in excess of
this limitation ("excess deferrals") will be included in the Participant's
gross income for federal income tax purposes in the year they are made. In
addition, any excess deferral will again be subject to federal income tax when
distributed by the Plan to the Participant, unless the excess deferral (and any
income allocable to the excess deferral) is distributed to the Participant not
later than the April 15 following the close of the calendar year in which the
excess deferral is made. Any income on the excess deferral that is distributed
not later than such April 15 will 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. A Participant must notify the Plan Administrator in
writing not later than April 1 of the following Plan Year that he has excess
elective deferrals for the previous Plan Year which must be distributed.
Limitation on Contributions for Highly Compensated Employees. The Code limits
the amount of Salary Deferral Contributions, Voluntary Contributions and
Matching Contributions that may be made to the Plan in any Plan Year on behalf
of Highly Compensated Employees (defined below) in relation to the amount of
Salary Deferral Contributions, Voluntary Contributions and Matching
Contributions made by all other employees eligible to participate in the Plan.
In the case of Salary Deferral Contributions, the actual deferral percentage
(i.e., the average of the ratios, calculated separately for each eligible
employee in each group, of the amount of Salary Deferral Contributions of such
eligible employee to such eligible employee's compensation for the Plan Year)
of Highly Compensated Employees may not exceed either (i) 125% of the actual
deferral percentage of all
5
<PAGE>
other eligible employees, or (ii) 200% of the actual deferral percentage of all
other eligible employees and does not exceed the actual deferral percentage of
all other eligible employees by more than two percentage points. In general, a
Highly Compensated Employee includes any employee who (1) during the Plan Year
or the preceding Plan Year was at any time a 5% owner (i.e., owns directly or
indirectly more than 5% of the stock of the Holding Company or the Association,
or stock possessing more than 5% of the total combined voting power of all
stock of the Holding Company or the Association) or (2) during the preceding
Plan Year received compensation from the Holding Company, Association or a
subsidiary in excess of $80,000 (as adjusted for cost-of-living increases
pursuant to the Code).
In order to avoid tax disqualification of the Plan, any Salary Deferral
Contributions of Highly Compensated Employees that exceed the foregoing
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. Alternatively, the Mutual Holding
Company may in its sole discretion, elect to make additional contributions to
the Plan on behalf of Participants who are not Highly Compensated Employees in
order to satisfy the limitation on the actual deferral percentage.
Any Voluntary Contributions and Matching Contributions made under the Plan
are subject to similar limits, and if such limitations are exceeded for a Plan
Year the excess (including earnings allocable thereto) shall be returned to
Highly Compensated Employees or forfeited in accordance with procedures
described above in order to satisfy such limits.
Top-Heavy Plan Requirements. If for any Plan Year the Plan is a Top-Heavy
Plan (as defined below), then (i) the Mutual Holding Company 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 would apply with
respect to the combination of annual additions to the Plan and projected annual
benefits under any defined benefit plan maintained by the Mutual Holding
Company, Association, Holding Company or any subsidiary.
In general, the Plan will be 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 Participants who are Key Employees exceeds 60% of the aggregate balance of
the Accounts of all Participants. Key Employees generally include any employee
who, at any time during the Plan Year or any of the four preceding Plan Years,
is (1) an officer of the Mutual Holding Company, Holding Company, Association
or any subsidiary having annual compensation in excess of $60,000 (as adjusted
for cost-of-living increases pursuant to the Code), (2) one of the ten
employees having annual compensation in excess of $30,000 (as adjusted for
cost-of-living increases pursuant to the Code) and owning, directly or
indirectly, the largest interests in the Holding Company or Association, (3) a
5% owner of the Holding Company or Association (i.e., owns directly or
indirectly more than 5% of the stock of the Holding Company or Association, or
stock possessing more than 5% of the total combined voting power of all stock
of the Holding Company or Association), or (4) a 1% owner of the Holding
Company or Association having annual compensation in excess of $150,000.
INVESTMENT OF CONTRIBUTIONS
All amounts credited to Participants' Accounts under the Plan are held in the
trust maintained under the Plan (the "Trust") which is administered by the
Trustee appointed by the Mutual Holding Company's Board of Directors.
A Participant may elect to direct the investment of all or any portion of his
or her Accounts under the Plan. Accordingly, a Participant, in his or her sole
and absolute discretion, may give directions to the Trustee in such form as the
Trustee may require concerning the investment of the Participant's Accounts,
which directions must generally be followed by the Trustee. A Participant may
direct the Trustee to invest his or her Accounts in specific assets as
permitted by the Plan Administrator, in multiples of 25%. The Plan permits
investments in Holding Company Stock.
6
<PAGE>
The net gain (or loss) of the Plan from investments, other than Holding
Company Stock, (including interest payments, realized and unrealized gains and
losses on securities, and expenses paid from the Plan) will be determined as of
each Valuation Date and will be allocated among the Accounts of Participants
according to the balance of each such Account, excluding the amount of any
Account invested in Holding Company Stock. For purposes of such allocations,
all assets of the Plan are valued at their fair market value.
Participants in the Plan may elect to have all or a portion of their Salary
Deferral Contributions Accounts, Voluntary Contributions Accounts and Rollover
Contributions Accounts invested in Holding Company Stock. Transfers to or out
of the Holding Company Stock fund may occur as of any January 1, April 1, July
1 or October 1 upon 20 days advance written notice to the Plan Administer. If
an Account is invested in Holding Company Stock, the shares will be held in the
Plan as a separate investment for the Account. Any earnings, losses or expenses
with respect to the Holding Company Stock held in the Account, including
without limitation dividends and appreciation or depreciation of the value of
the shares, will be credited or debited to the Account and will not be credited
to or borne by any other Account of any other Participant. Any cash dividends
and other cash distributions paid on any Holding Company Stock will be
reinvested by the Trustee as directed by each Participant under the Plan. A
Participant may direct the Trustee to sell all or any of the shares of Holding
Company Stock held in his or her Plan Accounts in accordance with Plan
procedures. Any sales of Holding Company Stock by the Trustee must be made in
compliance with all federal and state securities laws. Under current federal
securities laws, it may be necessary for any such sales to be made in
compliance with Rule 144 under the Securities Act of 1933, which places certain
conditions on any such sale, including a limit on how many shares may be sold
by the Trustee during any three month period. If Holding Company Stock is sold,
the proceeds will be credited to the Account from which the shares were sold
and thereafter invested by the Trustee as part of the remainder of the general
fund under the Plan. Accounts which are invested in Holding Company Stock will
continue to be invested in such shares until the Participant directs the
Trustee to sell the shares.
Investment Funds. The following table sets forth certain information about
the relative historical performance of each of the currently available
investment funds (other than the Holding Company Stock fund) in which amounts
credited to Participants' Accounts may be invested. Participants are advised
that past performance is not necessarily indicative of the future performance
of these funds.
TOTAL RETURN PERFORMANCE BASED ON NET ASSET VALUE
(NET OF ALL FEES AND EXPENSES) WITH ALL DISTRIBUTIONS
<TABLE>
<CAPTION>
NAME OF FUND 1996 1995 1994
------------ ------ ------ ------
<S> <C> <C> <C>
Guaranteed Interest Fund................................. 5.45% 7.90% 7.35%
Common Stock Index Fund.................................. 22.90% 36.86% 1.15%
Money Market Fund........................................ 5.51% 5.96% 4.21%
Publicly Traded Bond Fund................................ 2.92% 18.90% (4.13%)
Balanced Fund............................................ 15.79% 29.02% (3.85%)
Association Shares Fund.................................. 9.85% 6.00% 6.00%
</TABLE>
A Participant may upon request obtain additional information about each
investment fund (e.g., each fund's operating expenses, the prospectus and
financial statements of each fund and a list of assets comprising each fund) by
contacting: Linda L. Pipitone, 4131 South Grand Boulevard, St. Louis, Missouri
63118-3436, telephone (314) 352-3333.
Equity securities in these investment funds, except for the Holding Company
Stock fund, will be voted by the Trustee. If a Participant has invested in the
Holding Company Stock fund, he is entitled to exercise any voting or tender
rights attributable to such participation. In this regard, prior to any
shareholders meeting at which the Holding Company Stock is entitled to be
voted, or if there is a tender offer made for the Holding Company Stock, each
Participant will receive information from the Trustee with instructions how to
exercise his or her voting or tender rights. If a Participant does not exercise
his or her voting rights, the Trustee will vote the shares
7
<PAGE>
representing his or her portion of this fund proportionately in the same
manner as it votes Holding Company Stock for which it has received voting
instructions. If a Participant does not exercise his or her tender rights, the
shares representing his or her portion of this Fund will not be tendered. If a
Participant exercises his or her tender rights, the funds obtained when the
shares of Holding Company Stock are sold will be invested in the investment
funds, other than the Holding Company Stock fund, in the same proportions as
are set forth in his or her election then in effect, or based on a new
investment election made by the Participant. All information relating to the
exercise of any voting or tender rights is confidential and shall not be
divulged or released to any officers or employees of the Mutual Holding
Company. The responsibility for monitoring compliance with the procedures for
ensuring such confidentiality has been delegated to: Linda L. Pipitone, 4131
South Grand Boulevard, St. Louis, Missouri 63118-3436, telephone (314) 352-
3333.
BENEFITS UNDER THE PLAN
Vesting. A Participant has at all times a fully vested, nonforfeitable
interest in his or her Salary Deferral Contributions Account, Voluntary
Contributions Account and Rollover Contributions Account. A Participant who
terminates employment on or after age 65, or due to death or disability, will
become fully vested in his or her Matching Contributions Account and
Discretionary Contributions Account. Any other Participant will become fully
vested and have a nonforfeitable interest in his or her Matching Contributions
Account and Discretionary Contributions Account according to the following
vesting schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE VESTED%
---------------- -------
<S> <C>
less than 3............................... 0%
3......................................... 20%
4......................................... 40%
5......................................... 60%
6......................................... 80%
7 or more................................. 100%
</TABLE>
(A Participant earns a Year of Service for each Plan Year in which he or she
is employed with the Holding Company, Association or a subsidiary on the last
day of the Plan Year, or in the event he or she is not so employed, for each
Plan Year in which he or she earns at least 1,000 hours of service.) Any
forfeitures resulting from a Participant's termination of employment prior to
full vesting in his or her Matching Contributions Account and Discretionary
Contributions Accounts will be reallocated among remaining Participants who
are employed on the last day of the Plan Year.
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN
Hardship Withdrawals. A Participant may request a hardship withdrawal from
the vested portion of his or her Accounts (excluding amounts attributable to
any earnings accruing after December 31, 1988 on Salary Deferral
Contributions). A hardship withdrawal will be approved only if necessary to
pay for an immediate financial need, which may include payment of medical
expenses, the purchase of a principal residence, payment of certain fees and
expenses for post secondary education, or to prevent eviction from or
foreclosure on the Participant's principal residence. The Participant must
first obtain all other available amounts from other resources, including
liquidation of other assets, cessation of contributions under the Plan or
distributions or loans from other plans of the Mutual Holding Company, Holding
Company or the Association.
Withdrawal of Voluntary Contributions. A Participant may withdraw all or a
portion of his or her Voluntary Contributions Account upon 30 days advance
written notice to the Plan Administrator, with the consent of his or her
spouse, if any. If the withdrawal is not due to a financial hardship (as
described above), further withdrawals are not permitted for 12 months.
8
<PAGE>
Distribution To Participant Upon Termination of Employment. A Participant who
terminates employment for any reason will be paid the vested portion of his or
her Accounts in one or more of the following forms, as chosen by the
Participant:
1. a lump sum
2. a direct rollover to another qualified retirement plan or to an IRA
3. an annuity in one of the following forms:
. straight life
. 5, 10 or 15 years certain
. 100%, 66 2/3% or 50% joint and survivor annuity
. cash refund
If a married Participant elects an annuity, distribution will automatically
be in the form of a 50% joint and survivor annuity with the spouse as
beneficiary, unless the Participant waives such form and his or her spouse
consents. Such waiver and consent generally must be made within the 90 day
period prior to the date benefits commence.
If the vested portion of the Participant's Accounts exceeds $3,500, no
distribution generally will be made from the Plan to the Participant prior to
the Participant's attaining age 65 unless the Participant consents to an
earlier distribution. Notwithstanding the foregoing, if the vested portion of
the Participant's Accounts does not exceed $3,500, it will be distributed to
him or her in either an immediate lump sum payment or direct rollover, as
elected by the Participant.
Distribution To Beneficiary Upon Death. The Accounts of a Participant who
dies will be paid to the Participant's designated beneficiary. If the
Participant is married at his or her death, his or her surviving spouse will be
the beneficiary unless the spouse has consented to the designation of another
beneficiary. Distribution will be made in one of the forms as described in the
preceding paragraph, as elected by the Participant (or if not elected by the
Participant, then by the beneficiary). Notwithstanding the foregoing, if the
value of the Participant's Accounts does not exceed $3,500, it will be
distributed to his or her beneficiary in either an immediate lump sum payment
or direct rollover, as elected by the beneficiary.
Payment in Cash or Holding Company Stock. The amount which a Participant or
beneficiary is entitled to receive at any time from an Account which is
invested in Holding Company Stock will be paid by distributing cash, or if
elected by the Participant, shares of Holding Company Stock, to the Participant
or beneficiary. The amount payable to a Participant or beneficiary which is not
invested in Holding Company Stock will be paid in cash.
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 are not 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 will be void.
PLAN LOANS
A Participant may obtain a loan from the vested portion of his Accounts in
accordance with procedures established by the Plan Administrator. The minimum
amount of such loan is $1,000 and the maximum of such loan is the lesser of (i)
$50,000, reduced by the amount of all loans made to the Participant during the
12-month period before the loan is made, or (ii) 50% of the vested amount of
the Participant's Accounts. Only one loan may be outstanding at any time.
Repayment of the loan and interest will be made through irrevocable payroll
deductions according to an amortization schedule established by the Plan
Administrator. Repayments of loan principal and interest will be allocated to
the Participant's Accounts from which withdrawn and invested in
9
<PAGE>
accordance with his or her investment election then in effect. Should a default
and an acceleration of an unpaid balance and interest of the loan occur, the
Plan Administrator has the right to use any remedies available to any creditor
at law. If the Participant has a loan outstanding, and an event occurs pursuant
to which the Participant or his or her beneficiary will receive a distribution
from the Participant's Accounts, the amount needed to liquidate the loan plus
interest will be paid to the Trustee prior to any such distribution.
ADMINISTRATION OF THE PLAN
The Plan Administrator. Richard C. Fellhauer is the Plan Administrator. The
business address of the Plan Administrator is 4131 South Grand Boulevard, St.
Louis, Missouri 63118-3436 (telephone (314) 352-3333). The Plan Administrator
is responsible for administration of the Plan. The Plan Administrator has
appointed individuals to assist in the administration of the Plan and in
carrying out his responsibilities for interpretation of the provisions of the
Plan, prescribing procedures for filing applications for benefits, preparation
and distribution of information explaining the Plan, furnishing the Association
with reports with respect to the administration of the Plan, and receiving,
reviewing and keeping on file reports of the financial condition of the Trust.
If so designated by the Mutual Holding Company, the Plan Administrator shall
also be responsible for maintenance of Plan records, 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 and beneficiaries under Sections 104 and 105 of
ERISA.
Trustee. The Trustee is appointed by the board of directors of the Mutual
Holding Company. The individuals currently serving as the Trustee of the Plan
are Michael A. Deelo, Berenice Mahacek and Richard C. Fellhauer. The business
address of the Trustee is 4131 South Grand Boulevard, St. Louis, Missouri
63118-3436 (telephone (314) 352-3333). The Trustee receives and holds the
contributions to the Plan in trust and distributes them to Participants and
beneficiaries in accordance with the provisions of the Plan and the directions
of the Plan Administrator. The Trustee is responsible for investment of the
assets of the Trust, other than assets invested as directed by the
Participants.
REPORTS TO PLAN PARTICIPANTS
Not less than once each year, each Participant will receive a statement
showing (i) balances in the Participant's Accounts as of the end of that
period, (ii) the amount of contributions allocated to his or her Accounts for
that period, and (iii) the adjustments to his or her Accounts to reflect his or
her share of Plan earnings, including any dividends on Holding Company Stock
held in his or her Accounts.
AMENDMENT AND TERMINATION
It is the intention of the Mutual Holding Company to continue the Plan
indefinitely. Nevertheless, the Mutual Holding Company 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 Participant affected by such termination
will have a fully vested interest in all of his or her Accounts, including his
or her Matching Contributions Account and Discretionary Contributions Account.
The Mutual Holding Company 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
Participants or their beneficiaries; provided, however, that the Mutual Holding
Company may make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with ERISA and/or the Code.
MERGER, CONSOLIDATION OR TRANSFER
In the event of the merger or consolidation of the Plan with another plan, or
the transfer of the Trust assets to another plan, the Plan requires that each
Participant would (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 would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
10
<PAGE>
CLAIMS PROCEDURES
Claims for benefits under the Plan may be filed on forms provided by the Plan
Administrator. If a claim for benefits is wholly or partially denied, the
Participant will receive written notice explaining the reason for the denial
and the Plan provision on which it was based. The Participant will also be
notified of any additional material or information he or she could submit to
perfect the claim and the reasons such information is necessary. In order to
appeal a denial of a claim, the Participant or his or her representative may
request review of the claim by submitting written application not later than 60
days after receiving written notification of the claim denial. The Participant
or his or her representative may also review pertinent documents and submit
issues and comments in writing. These requests should be sent to the Plan
Administrator. They will be reviewed within 60 days after the Plan
Administrator's receipt of the Participant's request and a decision will be
communicated to Participant in writing not later than 120 days after receipt of
the Participant's request.
FEDERAL TAX ASPECTS OF THE PLAN
As noted above, the Plan has received from the IRS a determination that the
Plan is qualified under Section 401(a) of the Code. Assuming that the Plan is
administered in accordance with the requirements of the Code and that the Plan
remains qualified under Section 401(a) of the Code, participation in the Plan
should have the following implications under existing federal income tax laws:
(a) Amounts contributed to a Participant's Accounts (other than the
Participant's Voluntary Contributions Account), and the investment earnings
thereon, are not includable in the Participant's federal taxable income
until such contributions or earnings are actually distributed or withdrawn
from the Plan. (However, the amount of a Participant's Voluntary
Contributions will be included in his or her federal taxable income in the
year such amounts are earned by the Participant, and the amount of a
Participant's Salary Deferral Contributions will be included in his or her
income in the year such amounts are earned by the Participant for purposes
of Social Security taxes.)
(b) Income earned on assets of the Trust maintained under the Plan will
not be taxable to the Trust.
Distributions and Withdrawals. Distributions and withdrawals generally become
taxable in the year they are received by the Participant, except for amounts
attributable to after-tax contributions such as Voluntary Contributions. A
Participant may, however, elect to defer federal income taxation of all or a
portion of a distribution or withdrawal that qualifies as an "eligible rollover
distribution" by rolling over the distribution or withdrawal to a qualified
retirement plan of another employer or to an IRA. In such event, the amount
rolled over and earnings thereon are not subject to federal income tax until
subsequently distributed to the Participant or his or her beneficiary. Any
amount of an eligible rollover distribution that is not rolled over will be
subject to a mandatory 20% withholding requirement (see "Income Tax
Withholding" below).
Distribution in the Form of an Annuity. A distribution in the form of an
annuity from the Plan is taxed under the general annuity rules of Section 72 of
the Code. These rules apply to all "amounts received as an annuity", and
specific rules apply to distributions from qualified plans. The Code provides
that amounts actually distributed to any Participant or beneficiary under the
Plan excluding any non-deductible after tax employee contributions and life
insurance benefits, are generally taxable in the year distributed. Generally,
the taxable portion of each payment is ordinary income.
Distribution of Holding Company Stock. If a lump sum distribution (i.e., a
payment within one year of the entire vested balance of all Accounts) includes
shares of Holding Company Stock, the excess, if any, of the fair market value
of such Holding Company Stock over the cost of the Holding Company Stock to the
Trustee is not subject to federal income tax at the time of distribution but
generally will be subject to federal income tax when such Holding Company Stock
is subsequently sold. To the extent provided by the Code, a Participant may
elect not to defer the tax on net unrealized appreciation in Holding Company
Stock until the year of disposition of such Holding Company Stock, thus
subjecting the entire distribution to federal income tax at the time of
distribution.
11
<PAGE>
Additional Tax on Early Distributions. An additional 10% excise tax will be
imposed on any taxable distribution or withdrawal received by a Participant
before he reaches age 59 1/2 unless such distribution or withdrawal is (i)
rolled over to another qualified plan or an IRA; (ii) made to a beneficiary
after the Participant's death; (iii) made on Account of the Participant's
retirement due to disability (as defined by the Plan Administrator); (iv) made
after the Participant's separation from service after attainment of age 55;
(v) made to the Participant for payment of medical expenses that could be
deducted on his or her tax return; (vi) made to an alternate payee pursuant to
a qualified domestic relations order; or (vii) paid to the Participant over
his or her life or life expectancy or the joint lives or life expectancies of
the Participant and his or her beneficiary.
15% Tax on Excess Distributions. The Code also imposes a 15% excise tax on
the portion of a lump sum distribution that exceeds a dollar limitation in a
calendar year. Distributions from all tax-qualified plans and IRAs received in
the same calendar year will be aggregated in calculating this tax. The 15%
excise tax applies irrespective of the Participant's age at the time of
distribution, but does not apply to an excess distribution that is (i) rolled
over into another qualified retirement plan or an IRA; (ii) made to an
alternate payee under a qualified domestic relations orders; or (iii) made on
Account of the Participant's death (although an additional estate tax
attributable to the excess distribution is due in the event of death).
Notwithstanding the above, the 15% excise tax has been suspended for
distributions made during 1997, 1998 and 1999.
Forward Averaging Rules. Amounts that are included in taxable income may
qualify for five-year forward averaging tax treatment if a Participant
receives the amount in a lump sum distribution after he or she reaches age 59
1/2 and if he or she actively participated in the Plan for at least five years
prior to the year in which the lump sum is distributed. Under a transitional
rule, if the Participant reached age 50 before January 1, 1986, he or she may
make one election, without regard to the age 59 1/2 requirement, to use either
five-year forward averaging (using current tax rates) or 10-year forward
averaging (using the 1986 tax rates) with respect to the lump sum
distribution, if otherwise eligible.
Income Tax Withholding. Most Plan distributions and withdrawals are subject
to mandatory federal income tax withholding. The Trustee is required to
withhold 20% of any "eligible rollover distribution", unless the Participant
elects to have the Trustee make a direct rollover of such distribution into
another employer's qualified retirement plan that accepts rollovers or to an
IRA. An "eligible rollover distribution" generally includes any distribution
and withdrawal other than (i) one paid over the Participant's life or life
expectancy, or the joint lives or life expectancies of the Participant and his
or her beneficiary (i.e., an annuity); or (ii) one paid over a specified
period of 10 years or more. In addition, a distribution is not an "eligible
rollover distribution", and thus may not be rolled over, if it is (i) a
distribution of after-tax contributions; (ii) a required distribution pursuant
to Code Section 401(a)(9); or (iii) a distribution made to a non-spousal
beneficiary. If a Participant requests a distribution or withdrawal of his or
her Holding Company Stock in the form of stock rather than cash, the Holding
Company Stock will not be liquidated to pay the withholding tax; however, the
applicable taxes will be withheld from any cash portion of the distribution or
withdrawal.
A distribution or withdrawal that is not an "eligible rollover distribution"
is subject to voluntary federal income tax withholding, which means that a
Participant can request that no withholding tax be deducted from his or her
distribution.
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 may wish 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 OF HOLDING COMPANY STOCK
There are generally no restrictions on the resale of Holding Company Stock
purchased for or contributed to the Plan unless such shares have been
distributed to an employee who is deemed to be an "affiliate" of the
12
<PAGE>
Holding Company at the time such employee resells such shares. Any person
receiving shares of Holding Company Stock under the Plan who is an "affiliate"
of the Holding Company as the term "affiliate" is used in Rules 144 and 405
under the Securities Act of 1933 (e.g., directors, officers and substantial
shareholders of the Holding Company) may reoffer or resell such shares only
pursuant to a registration statement filed under the Securities Act of 1933
(the Holding Company having no obligation to file such a registration
statement) or, assuming the availability thereof, pursuant to Rule 144 or some
other exemption from the registration requirements of the Securities Act of
1933. Any person who may be an "affiliate" of the Holding Company may wish to
consult with counsel before transferring any Holding Company Stock owned by him
or her. In addition, Participants are advised to consult with counsel as to the
applicability of Section 16 of the Exchange Act which may restrict the sale of
Holding Company Stock where acquired under the Plan, or other sales of Holding
Company Stock.
LEGAL OPINIONS
The legality of the Holding Company Stock will be passed upon by Schiff
Hardin & Waite which firm acted as special counsel for the Holding Company in
connection with the Conversion and Reorganization.
13
<PAGE>
INVESTMENT FORM
(HOLDING COMPANY STOCK FUND)
EQUALITY SAVINGS AND SECURITY PLAN
Name of Participant: ___________________________________
Social Security Number: ________________________________
1. Instructions. In connection with the proposed Conversation and
Reorganization, the Plan has been amended to permit Participants to direct all
or a portion of their Salary Deferral Contributions Accounts, Voluntary
Contributions Accounts and Rollover Contributions Accounts under the Plan into
a Holding Company Stock Fund. Amounts transferred at the direction of
Participants into the Holding Company Stock Fund will be used to purchase
shares of common stock of the holding company Equality Bancorp, Inc. (the
"Common Stock").
You may use this form to direct a transfer of up to 100% of the funds
credited to your Salary Deferral Contributions Account, Voluntary
Contributions Account and Rollover Contributions Account to the Holding
Company Stock Fund, to be used to purchase Common Stock in the Conversion and
Reorganization. To direct such a transfer to the Holding Company Stock Fund,
you should complete and file this form with the Personnel Department no later
than 12:00 noon, Central Daylight Time, on , 1997.
2. Transfer Direction. Check only one of the following:
----- ALLOCATION CHANGE ONLY:
Please change the allocation percentages on file as follows:
(This change will affect all deposits made on or after
, 1997.)
----- ALLOCATION CHANGE AND FUNDS TRANSFER:
Please change the allocation percentages on file and transfer all
funds to equal the following:
Note: Allocations of an Account to a particular Investment Fund must be in 25%
increments. If neither alternative is checked, "Allocation change only"
will be effective. All prior allocation percentages are hereby canceled.
This designation shall remain in effect until changed in writing.
PERCENTAGE OF TOTAL ACCOUNT ASSETS
SALARY DEFERRAL CONTRIBUTIONS ACCOUNT
% Holding Company Stock Fund
% Guaranteed Interest Fund
% Common Stock Index Fund
% Money Market Fund
% Publicly Traded Bond Fund
% Balanced Fund
VOLUNTARY CONTRIBUTIONS ACCOUNT
% Holding Company Stock Fund
% Guaranteed Interest Fund
% Common Stock Index Fund
% Money Market Fund
% Publicly Traded Bond Fund
% Balanced Fund
<PAGE>
ROLLOVER CONTRIBUTIONS ACCOUNT
% Holding Company Stock Fund
% Guaranteed Interest Fund
% Common Stock Index Fund
% Money Market Fund
% Publicly Traded Bond Fund
% Balanced Fund
MATCHING CONTRIBUTIONS ACCOUNT
% Guaranteed Interest Fund
% Common Stock Index Fund
% Money Market Fund
% Publicly Traded Bond Fund
% Balanced Fund
DISCRETIONARY CONTRIBUTIONS ACCOUNT
% Guaranteed Interest Fund
% Common Stock Index Fund
% Money Market Fund
% Publicly Traded Bond Fund
% Balanced Fund
3. Effectiveness of Direction. I understand that this Investment Form shall
be subject to all of the terms and conditions of the Plan. I acknowledge that I
have received a copy of the Prospectus and the Prospectus Supplement.
- ------------------------------------- -------------------------
Signature of Participant Date
4. Acknowledgment of Receipt. This Investment Form was received by the Plan
Administrator and will become effective on the date noted below.
- ------------------------------------- -------------------------
Plan Administrator Date
<PAGE>
PROSPECTUS
EQUALITY BANCORP, INC.
(Proposed Holding Company for Equality Savings and Loan Association, F.A.)
UP TO 1,729,323 SHARES OF COMMON STOCK
Equality Bancorp, Inc. (the "Holding Company"), a Delaware corporation
formed at the direction of Equality Savings and Loan Association, F.A. (the
"Association"), is offering up to 1,729,323 shares of its common stock, par
value $0.01 per share (the "Common Stock"), in connection with its Plan of
Conversion and Reorganization (the "Plan") as adopted by the Boards of
Directors of the Association and First Missouri Financial, M.H.C. (the "Mutual
Holding Company"), a federally chartered mutual holding company that
(continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE, CALL THE STOCK INFORMATION CENTER AT
(314) 352-3199.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN RISKS TO
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), OR
ANY OTHER FEDERAL AGENCY OR STATE SECURITIES COMMISSION, NOR HAS THE
SEC, THE OTS OR OTHER AGENCY OR COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENT AGENCY.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED UNDERWRITING ESTIMATED
SUBSCRIPTION COMMISSIONS AND NET PROCEEDS
PRICE OTHER EXPENSES (1) TO ISSUER (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............. $10.00 $0.52(3) $9.48
- -------------------------------------------------------------------------------
Minimum Total.......... $6,800,000(4) $415,000 $6,385,000
- -------------------------------------------------------------------------------
Midpoint Total......... $8,000,000(4) $415,000 $7,585,000
- -------------------------------------------------------------------------------
Maximum Total.......... $9,200,000(4) $415,000 $8,785,000
- -------------------------------------------------------------------------------
Maximum Total, as ad-
justed................. $10,580,000(4)(5) $415,000 $10,165,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Consists of the estimated costs to be incurred in connection with the
Conversion and Reorganization, including $120,000 in fees for financial
advisory, consulting and marketing services and expense reimbursements
(including legal fees) to be paid to Trident Securities, Inc. ("Trident")
in connection with the Offering. See "The Conversion and Reorganization--
Marketing Arrangements." The actual fees and expenses may vary from the
estimates. Such fees paid to Trident may be deemed to be underwriting
fees.
(2) Actual net proceeds may vary substantially from estimated amounts
depending on the number of shares sold in the Offering. See "Pro Forma
Data."
(3) Assumes the sale of the midpoint number of shares. If the minimum, maximum
or 15% above the maximum number of shares are sold, estimated expenses per
share would be $0.61, $0.45 or $0.39, respectively, resulting in estimated
net proceeds per share of $9.39, $9.55 or $9.61, respectively.
(4) Based upon the minimum, midpoint, maximum and 15% above the maximum of the
Offering Price Range (as such term is defined herein), respectively. Such
amount does not include the offering of Exchange Shares (as such term is
defined herein).
(5) Reflects a 15% increase in the Offering Price Range, which may occur
without a resolicitation of subscribers or any right of cancellation, to
reflect changes in market and financial conditions prior to the completion
of the Conversion and Reorganization or to fill the order of the ESOP. If
an insufficient amount of Conversion Stock is available to permit the ESOP
to purchase its full amount, the ESOP may purchase additional shares of
Common Stock after the Conversion and Reorganization in the open market up
to its full amount. See "Management of the Holding Company and
Association--Employee Benefit Plans--Employee Stock Ownership Plan."
TRIDENT SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1997
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(continued from previous page)
presently holds a majority ownership interest in the Association. As more
fully described herein, pursuant to the Plan, the Association would become a
wholly-owned subsidiary of the Holding Company and existing stockholders of
the Association, other than the Mutual Holding Company (the "Public
Stockholders") and other than any Public Stockholders who exercise dissenters'
rights, would exchange the shares of Association common stock, par value $1.00
per share (the "Association Shares"), at the Exchange Ratio (as defined below)
for shares of Common Stock (the "Exchange"). In addition, pursuant to the
Plan, the Holding Company would offer additional shares of Common Stock in a
Subscription Offering (as such term is defined below) and a Community Offering
(as such term is defined below). The Subscription Offering and the Community
Offering (as well as any syndicated community offering that might be conducted
pursuant to the Plan) shall be hereinafter collectively referred to as the
"Offering." Upon consummation of the Plan, the Association would change its
name to "Equality Savings Bank." The Exchange and the Offering, collectively
with the other transactions described herein, shall be referred to hereinafter
as the "Conversion and Reorganization." References herein to the Association
shall mean the Association together with its subsidiaries unless specified
otherwise or unless the context indicates otherwise.
The Exchange. As a result of the Conversion and Reorganization and pursuant
to the Plan, the 445,000 Association Shares (53.2% of the total outstanding
Association Shares) held by the Mutual Holding Company will be canceled. Each
Association Share held by the Public Stockholders, in the aggregate 391,400
Association Shares or 46.8% of the total outstanding Association Shares (the
"Public Association Shares"), at , 1997, other than Association Shares
for which dissenters' rights are properly exercised, will be converted into
shares of Common Stock (the "Exchange Shares") pursuant to a ratio (the
"Exchange Ratio") that will result in the Public Stockholders owning in the
aggregate approximately the same percentage of the Holding Company as they
owned of the Association, before giving effect to (i) the payment of cash in
lieu of fractional Exchange Shares, (ii) any shares of Common Stock purchased
by such stockholders in the Offering described herein or by the Association's
Employee Stock Ownership Plan ("ESOP") thereafter or (iii) any exercise of
dissenters' rights. As discussed under "Independent Valuation" below and
herein, the final Exchange Ratio will be determined based on the Public
Stockholders' ownership interest and not on the market value of the Public
Association Shares.
The Offering. In addition to the Exchange, nontransferable subscription
rights to subscribe for up to 920,000 shares (which may be increased to
1,058,000 shares under certain circumstances described below) of Common Stock
(the "Conversion Stock") have been granted to (i) certain depositors of the
Association as of March 31, 1996, (ii) employee stock benefit plans of the
Association or the Holding Company that meet the requirements to be
"qualified" under Section 401 of the Internal Revenue Code ("Code"), which
would include the ESOP ("Employee Stock Benefit Plans"), (iii) certain
depositors of the Association as of , 1997, (iv) certain other
depositors and borrowers of the Association as of , 1997, the
voting record date, (v) directors, officers and employees of the Association
or any subsidiary thereof, of the Mutual Holding Company or of the Holding
Company, and (vi) the Public Stockholders, subject to the limitations
described herein (the "Subscription Offering"). Commencing concurrently with,
or after completion of, the Subscription Offering, and subject to the prior
rights of holders of subscription rights, the right of the Holding Company,
the Mutual Holding Company and the Association (the "Primary Parties") to
reject such orders in whole or in part and the other limitations described
herein, the Holding Company is offering the shares of Conversion Stock not
subscribed for in the Subscription Offering, if any, for sale in a community
offering (the "Community Offering") to certain members of the general public
to whom a copy of this Prospectus is delivered by or on behalf of the Holding
Company, with preference given to natural persons residing in the Missouri
counties of St. Louis City, St. Louis, Jefferson, St. Charles and Franklin
("Local Community").
The Plan also provides that shares of Conversion Stock may be made available
in the Community Offering through a direct community marketing program that
would provide for the utilization of a broker, dealer, consultant, or
investment banking firm experienced and expert in the sale of financial
institution securities. See "The Conversion and Reorganization--Syndicated
Community Offering."
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The Primary Parties have engaged Trident to consult with and advise them in
the Conversion and Reorganization, and Trident has agreed to use its best
efforts to solicit subscriptions and purchase orders for shares of Conversion
Stock in the Offering. Trident is not obligated to take or purchase any shares
of Conversion Stock in the Offering. See "The Conversion and Reorganization--
Marketing Arrangements."
THE SUBSCRIPTION OFFERING WILL TERMINATE AT 12:00 NOON, CENTRAL TIME, ON
, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE HOLDING COMPANY, WITH
APPROVAL OF THE OTS, IF NECESSARY. THE COMMUNITY OFFERING IS EXPECTED TO
TERMINATE AT THE SAME TIME AS THE SUBSCRIPTION OFFERING, ASSUMING THE PRIMARY
PARTIES DO NOT ELECT TO COMMENCE THE COMMUNITY OFFERING AFTER COMPLETION OF THE
SUBSCRIPTION OFFERING. IN ANY EVENT, THE COMMUNITY OFFERING MUST BE COMPLETED
WITHIN 45 DAYS AFTER THE CLOSE OF THE SUBSCRIPTION OFFERING, OR , 1997,
UNLESS EXTENDED BY THE HOLDING COMPANY WITH THE APPROVAL OF THE OTS, IF
NECESSARY. Orders submitted are irrevocable until the completion of the
Conversion and Reorganization; provided that, if the Conversion and
Reorganization is not completed within the 45-day period referred to above,
unless such period has been extended with the consent of the OTS, if necessary,
all subscribers will have their funds returned promptly with interest, and all
withdrawal authorizations will be canceled. See "The Conversion and
Reorganization--The Offering--Subscription Offering."
Independent Valuation. Pursuant to regulations of the OTS, the Offering is
required to be based on an independent valuation of the pro forma market value
of the Conversion Stock and Exchange Shares. RP Financial, LC. ("RP Financial")
has prepared an independent appraisal, which states that the estimated pro
forma market value of the Conversion Stock and Exchange Shares was $15,037,594
as of June 20, 1997 (the "Appraisal"). The Appraisal was multiplied by the
Mutual Holding Company's percentage interest in the Association (i.e., 53.2%)
to determine a midpoint of the offering range ($8,000,000), and the minimum and
maximum range were set at 15% below and above the midpoint, respectively,
resulting in a range of $6,800,000 to $9,200,000 (the "Offering Price Range").
The Boards of Directors of the Primary Parties determined that the Conversion
Stock would be sold at $10.00 per share (the "Purchase Price"), resulting in a
range of 680,000 to 920,000 shares of Conversion Stock being offered. Upon
consummation of the Conversion and Reorganization, the Conversion Stock and the
Exchange Shares will represent approximately 53.2% and 46.8%, respectively, of
the Holding Company's total outstanding shares. Based upon the Offering Price
Range, the Exchange Ratio is expected to range from 1.5283 to 2.0678, resulting
in a range of 598,195 Exchange Shares to 809,323 Exchange Shares to be issued
in the Conversion and Reorganization. The 1,729,323 shares of Common Stock
offered hereby include up to 920,000 shares of Conversion Stock (subject to
adjustment up to 1,058,000 shares as described herein) and up to 809,323
Exchange Shares (subject to adjustment up to 930,721 shares as described
herein). The Offering Price Range may be increased or decreased to reflect
changes in market and economic conditions prior to completion of the Conversion
and Reorganization, and under certain circumstances specified herein
subscribers will be resolicited and given the right to modify or cancel their
orders. See "The Conversion and Reorganization--Stock Pricing, Exchange Ratio
and Number of Shares to be Issued."
Required Approvals. The consummation of the Conversion and Reorganization is
subject to the receipt of various regulatory approvals and the approval of the
members of the Mutual Holding Company and the stockholders of the Association
in the manner set forth herein.
The Holding Company has never issued capital stock and, consequently, there
is no market for the Common Stock. The National Association of Securities
Dealers, Inc. (the "NASD") has conditionally approved the Holding Company's
application to have the Common Stock listed on the Nasdaq National Market
System ("NMS") under the proposed symbol "ESBX," subject to the Holding
Company's continued compliance with all Nasdaq criteria for initial listing at
the time of listing of the Common Stock. If the Holding Company fails to
qualify the Common Stock for listing on the Nasdaq NMS, the Holding Company
intends to list the Common Stock on the Nasdaq SmallCap Market under the same
proposed symbol, subject to the applicable listing criteria. Prior to the
Conversion and Reorganization, there has not been an active and liquid market
for the Public Association Shares, and there can be no assurance that an active
and liquid trading market for the Common Stock will develop. See "Market for
Common Stock." Trident intends to act as a market maker for the Common Stock.
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ADDITIONAL INFORMATION
The Association is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the OTS. Such reports, proxy statements and other information can be
inspected at the principal office of the OTS at 1700 G Street, N.W.,
Washington, D.C. 20552.
The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Conversion Stock and
Exchange Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information regarding the Holding Company and the Common Stock
offered hereby, reference is hereby made to such Registration Statement and
such exhibits, which can be inspected without charge at the office of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of which can be
obtained from the SEC at prescribed rates. Such materials may also be
available at the SEC's web site at "http://www.sec.gov."
The Mutual Holding Company has filed an Application for Conversion with the
OTS with respect to the Conversion and Reorganization. This Prospectus omits
certain information contained in that application. The application may be
examined at the principal office of the OTS, 1700 G Street, N.W., Washington,
D.C. 20552, and at the Midwest Regional Office of the OTS located at 122 West
John Carpenter Freeway, Suite 600, Irving, Texas 75039.
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EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
[INSERT MAP]
The Conversion and Reorganization is contingent upon (i) the approval of the
Plan of Merger providing for the merger of the Mutual Holding Company with and
into the Association by the holders of at least two-thirds of the outstanding
Association Shares, (ii) the approval of the Plan of Merger providing for the
merger of Interim II Savings and Loan Association, F.A. ("Interim") with and
into the Association by the holders of at least two-thirds of the outstanding
Association Shares, (iii) the approval of the Plan, including the Plans of
Merger discussed above, by at least a majority of the votes cast by the Public
Stockholders at the Stockholders' Meeting (as such term is defined herein),
(iv) the approval of the Plan by at least a majority of the total outstanding
votes of the voting members of the Mutual Holding Company at the Members'
Meeting (as such term is defined herein), (v) the sale of at least 680,000
shares of Conversion Stock in the Offering pursuant to the Plan and (vi)
receipt of all required regulatory approvals.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial information appearing elsewhere in this
Prospectus.
EQUALITY BANCORP, INC.
The Holding Company was incorporated as a Delaware corporation on May 14,
1997 at the direction of the Board of Directors of the Association to hold all
of the capital stock of the Association and to facilitate the Conversion and
Reorganization. The Holding Company has not engaged in any business to date and
is not expected to engage in any business until the consummation of the
Conversion and Reorganization. The Holding Company's office is located at 9920
Watson Road, St. Louis, Missouri 63126, and its telephone number is (314) 965-
7090. See "Equality Bancorp, Inc."
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
The Association is a federally-chartered-stock-savings association regulated
by the OTS, and its deposits are insured by the FDIC through the SAIF. The
deposits of the Association will continue to be insured by the FDIC after the
Conversion and Reorganization. The Association was originally chartered in
1884. At March 31, 1997, the Association had total assets of $200.8 million,
deposit accounts of $123.0 million and total stockholders' equity of $12.6
million. The Association conducts its business through three full-service
branch offices and five limited-service loan production offices. The
Association's main office is located at 4131 South Grand Boulevard, St. Louis,
Missouri 63118-3464, and its telephone number is (314) 352-3333.
On October 22, 1993, Equality Savings and Loan Association (the predecessor
of the Association) (i) reorganized into a mutual holding company and changed
its name to "First Missouri Financial, M.H.C." and (ii) transferred
substantially all of its assets and all of its liabilities to the Association,
which sold a minority interest in its common stock to depositors of Equality
Savings and Loan Association and various stock compensation plans (the "Mutual
Holding Company Reorganization"). A total of 380,000 shares of newly issued
common stock were sold at $10.00 per share. An additional 11,400 authorized but
unissued shares were later sold to the Association's 1993 Management
Recognition Plan (the "1993 MRP") at $10.00 per share. The Association realized
net proceeds of approximately $3.2 million from the sale of its common stock.
On June 13, 1995, the Association converted from a Missouri-chartered-stock-
savings-and-loan association to a federally-chartered-stock-savings-and-loan
association.
The Association's business is similar in many respects to other savings
associations in that it gathers deposits from its local community and uses
these funds, along with FHLB advances, to invest primarily in residential one-
to four-family mortgage loans, U.S. government and agency securities and
mortgage-backed securities and, to a lesser extent, multifamily and commercial
real estate, consumer and commercial business loans. Notwithstanding these
traditional thrift attributes, the Association's operations are distinct in
that it conducts its residential mortgage lending business primarily through a
wholly-owned mortgage-banking subsidiary--Equality Mortgage Corporation
("EMC"). See "Equality Savings and Loan Association, F.A." and "Business of the
Association."
FIRST MISSOURI FINANCIAL, M.H.C.
The Mutual Holding Company is a federally chartered mutual holding company
that was chartered in 1993 in connection with the Mutual Holding Company
Reorganization. The Mutual Holding Company's primary asset is 445,000
Association Shares, which represents 53.2% of the total issued and outstanding
Association Shares. The Mutual Holding Company's only other assets consist of a
deposit account in the amount of $50,000 as of March 31, 1997 (which will
become an asset of the Association upon consummation of the Conversion and
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Reorganization). Prior to the Conversion and Reorganization, each depositor in
the Association has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the Mutual Holding Company based upon
the value in his or her account, which interest may only be realized in the
event of a liquidation of the Mutual Holding Company. As part of the Conversion
and Reorganization, the Mutual Holding Company will convert from mutual form to
a federal interim stock savings association and simultaneously merge with and
into the Association, with the Association being the surviving entity. See
"First Missouri Financial, M.H.C."
THE CONVERSION AND REORGANIZATION
Purposes of the Conversion and Reorganization. The Boards of Directors of the
Mutual Holding Company and the Association believe that a conversion of the
Mutual Holding Company to stock form and the reorganization of the Association
pursuant to the Plan is in the best interests of the Mutual Holding Company and
the Association, as well as the best interests of the members of the Mutual
Holding Company and the Public Stockholders. The Conversion and Reorganization
will result in the Association being wholly owned by a stock holding company,
which is a more common structure and form of ownership than a mutual holding
company. In addition, the Conversion and Reorganization will result in the
raising of additional equity capital for the Association and the Holding
Company and is expected to result in a more active and liquid market for the
Common Stock than currently exists for the Association Shares, although there
can be no assurances that this will be the case.
If the Association had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of Association Shares to be sold than resulted
in the amount of net proceeds raised in connection with the formation of the
Mutual Holding Company. In addition, if a standard conversion had been
conducted in 1993, management of the Association believed that it would have
been difficult to profitably invest the larger amount of capital that would
have been raised, when compared to the amount of net proceeds raised in
connection with the formation of the Mutual Holding Company. A standard
conversion in 1993 also would have immediately eliminated all aspects of the
mutual form of organization.
Subsequent to the formation of the Mutual Holding Company, there have been
certain changes in the regulations and policies of the OTS relating to mutual
holding companies. In recent years, the U.S. Congress has proposed major
overhauls to the structure of the thrift industry that include eliminating the
federal savings association charter, which is the charter under which the
Association currently operates. These proposals also have created uncertainty
concerning the future of the mutual form of ownership. In addition, since the
Mutual Holding Company Reorganization in 1993, the Boards of Directors of the
Mutual Holding Company and the Association have realized a need to create
additional liquidity for the Association Shares and believe the Holding Company
and the Association can effectively deploy the additional equity capital raised
in the Conversion and Reorganization. In light of the foregoing, the Boards of
Directors of the Mutual Holding Company and the Association believe that it is
in the best interests of such companies and their respective members and
stockholders to undertake the Conversion and Reorganization. See "The
Conversion and Reorganization--Purposes of the Conversion and Reorganization."
Description of the Conversion and Reorganization. On May 16, 1997, the Boards
of Directors of the Association and the Mutual Holding Company adopted the
Plan, which was amended on June 20, 1997. At the direction of the Association,
the Holding Company was incorporated under Delaware law on May 14, 1997 and is
currently a first-tier wholly owned subsidiary of the Association. Pursuant to
the Plan, (i) the Mutual Holding Company will convert from mutual form to a
federal interim stock savings association and simultaneously merge with and
into the Association, pursuant to which the Mutual Holding Company will cease
to exist and the Association Shares held by the Mutual Holding Company will be
canceled, and (ii) Interim will then merge with and into the Association. As a
result of the merger of Interim with and into the Association, the Association
will become a wholly-owned subsidiary of the Holding Company and the Public
Association Shares will be converted
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into the Exchange Shares pursuant to the Exchange Ratio, which will result in
the holders of such shares owning in the aggregate approximately the same
percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Stock and the Exchange
Shares) as the percentage of Association Shares owned by them in the aggregate
immediately prior to consummation of the Conversion and Reorganization, before
giving effect to (a) the payment of cash in lieu of issuing fractional Exchange
Shares, (b) any shares of Conversion Stock purchased by the Public Stockholders
in the Offering or the ESOP thereafter, and (c) any exercise of dissenters'
rights. Upon consummation of the Conversion and Reorganization, the Association
will change its name to "Equality Savings Bank."
The Plan of Merger providing for the merger of the Mutual Holding Company
with and into the Association and the Plan of Merger providing for the merger
of Interim with and into the Association each must be approved by the holders
of at least two-thirds of the outstanding Association Shares at a special
meeting of the stockholders of the Association to be held for such purpose on
, 1997 (the "Stockholders' Meeting"). The Plan of Merger between Interim
and the Association also must be approved by the Holding Company, as the sole
stockholder of Interim.
In addition, the Primary Parties have conditioned the consummation of the
Conversion and Reorganization upon the approval of the Plan, including the
Plans of Merger, by at least a majority of the votes cast, in person or by
proxy, by the Public Stockholders at the Stockholders' Meeting. The Plan is
subject to the approval of the OTS, and it also must be approved by at least a
majority of the total outstanding votes of the voting members of the Mutual
Holding Company at a special meeting of the members of the Mutual Holding
Company to be held for such purpose on , 1997 (the "Members' Meeting"),
which votes may be cast in person or by proxy. See "The Conversion and
Reorganization--Description of the Conversion and Reorganization."
THE OFFERING
As part of the Conversion and Reorganization, the Holding Company is offering
up to 920,000 shares of Common Stock (i.e., Conversion Stock) at a Purchase
Price of $10.00 per share in the Subscription Offering. As described in more
detail below, nontransferable rights to subscribe for the Conversion Stock in
the Subscription Offering have been granted to certain persons according to
certain preference categories and, subject to the prior rights of holders of
Subscription Rights, the Holding Company is also offering shares of Conversion
Stock in the Community Offering to members of the general public (with
preference given to natural persons residing in the local community). In the
event of an oversubscription in the Subscription and Community Offering, up to
138,000 additional shares may be issued to reflect changes in market and
financial conditions and to cover additional subscriptions. The Primary Parties
may reject, in whole or in part, orders received in the Community Offering in
their sole discretion.
The Primary Parties have retained Trident as consultant and advisor in
connection with the Offering and to assist in soliciting subscriptions in the
Offering.
The Plan also provides that shares of Conversion Stock may be made available
in the Community Offering through a direct community marketing program that may
provide for the utilization of a broker, dealer, consultant, or investment
banking firm experienced and expert in the sale of financial institution
securities. See "The Conversion and Reorganization--The Offering."
NONTRANSFERABILITY OF SUBSCRIPTION RIGHTS
Subscription Rights may be exercised only by the person to whom they are
issued and only for his or her own account. Subscription Rights are
nontransferable; persons found to be transferring Subscription Rights may be
subject to forfeiture of such rights and possible further sanctions by the OTS
or other government agencies. Each person subscribing for shares of Conversion
Stock is required to represent that he or she is purchasing
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shares for his or her own account and that he or she has no agreement or
understanding with any other person for the sale or transfer of such shares.
PROSPECTUS DELIVERY
To ensure that each subscriber receives a Prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act, no
Prospectus will be mailed any later than five days prior to the Expiration Date
or hand delivered any later than two days prior to such date. Execution of the
order form will confirm receipt or delivery of a Prospectus in accordance with
Rule 15c2-8. Order forms will only be distributed with a Prospectus.
PURCHASE LIMITATIONS
With the exception of Employee Stock Benefit Plans (which would include the
ESOP), which may purchase up to an aggregate of 7% of the number of shares of
Conversion Stock to be issued in the Offering, no person or entity, together
with associates of, or persons acting in concert with, such person or entity,
may purchase shares of Conversion Stock in an amount that, when combined with
Exchange Shares received by such person, exceeds 62,500 shares of Common Stock.
Each person subscribing for Conversion Stock in the Offering must subscribe for
at least 25 shares. See "The Conversion and Reorganization--Limitations on
Conversion Stock Purchases" for other purchase and sale limitations. Because
the purchase limitations contained in the Plan include Exchange Shares to be
issued to Public Stockholders for their Public Association Shares, certain
holders of Public Association Shares may be limited in their ability to
purchase Conversion Stock in the Offering.
STOCK PRICING, EXCHANGE RATIO AND NUMBER OF SHARES TO BE ISSUED IN THE
CONVERSION AND REORGANIZATION
The Plan requires that the purchase price of the Conversion Stock must be
based on the appraised pro forma market value of the Conversion Stock, as
determined on the basis of an independent valuation. The Primary Parties have
retained RP Financial to make such valuation. The Appraisal has been prepared
by RP Financial in reliance upon the information contained in this Prospectus,
including the Consolidated Financial Statements of the Association. RP
Financial also considered the following factors, among others: the present and
projected operating results and financial condition of the Primary Parties and
the economic and demographic conditions in the Association's existing market
area; certain historical, financial and other information relating to the
Association; a comparative evaluation of the operating and financial statistics
of the Association with those of other similarly situated publicly-traded
companies located in Missouri and Illinois and other regions of the United
States; the aggregate size of the offering of the Conversion Stock; the impact
of the Conversion and Reorganization on the Association's net worth and
earnings potential; the proposed dividend policy of the Holding Company and the
Association; and the trading market for the Association Shares and securities
of comparable companies and general conditions in the market for such
securities.
On the basis of the foregoing, RP Financial has advised the Primary Parties
in its opinion the estimated pro forma market value of the Conversion Stock and
the Exchange Shares was $15,037,594 as of June 20, 1997. Because the holders of
the Public Association Shares will continue to hold the same aggregate
percentage ownership interest in the Holding Company as they currently hold in
the Association (before giving effect to the payment of cash in lieu of issuing
fractional Exchange Shares, any exercise of dissenters' rights and any shares
of Conversion Stock purchased by the Association's stockholders in the Offering
or by the ESOP thereafter), the Appraisal was multiplied by the Mutual Holding
Company's percentage interest in the Association (i.e., 53.2%) to determine the
midpoint of the valuation ($8,000,000), and the minimum and maximum of the
valuation were set at 15% below and above the midpoint, respectively, resulting
in a range of $6,800,000 to $9,200,000. The Boards of Directors of the Primary
Parties determined that the Conversion Stock would be sold at $10.00 per share,
resulting in a range of 680,000 to 920,000 shares of Conversion Stock being
offered. Upon consummation of the Conversion and Reorganization, the Conversion
Stock and the Exchange Shares will represent
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approximately 53.2% and 46.8%, respectively, of the Holding Company's total
outstanding shares. The Boards of Directors of the Primary Parties reviewed RP
Financial's appraisal report, including the methodology and the assumptions
used by RP Financial, and determined that the Offering Price Range was
reasonable and adequate. The Boards of Directors of the Primary Parties also
established the formula for determining the Exchange Ratio. Based upon such
formula and the Offering Price Range, the Exchange Ratio ranged from a minimum
of 1.5283 to a maximum of 2.0678 Exchange Shares for each Public Association
Share, with a midpoint of 1.7981. Based upon these Exchange Ratios, the Holding
Company expects to issue between 598,195 and 809,323 Exchange Shares to the
holders of Public Association Shares outstanding immediately prior to the
consummation of the Conversion and Reorganization. See "The Conversion and
Reorganization--Stock Pricing, Exchange Ratio and Number of Shares to be
Issued."
MARKETING, APPRAISAL AND RELATED FEES
Based upon negotiations between the Primary Parties and Trident, Trident will
receive a fixed fee of $90,000 for its services in connection with the
Conversion and Reorganization. In the event that a selected dealers agreement
is entered into in connection with a syndicated community offering, the
Association will pay a fee to Trident and to selected broker-dealers for shares
sold by such NASD member firms pursuant to a selected dealers agreement in an
amount to be agreed upon jointly by Trident, the Holding Company and the
Association to reflect market requirements at the time of the syndicated
community offering. Fees paid to Trident and to any other broker-dealer may be
deemed to be underwriting fees, and Trident and such broker-dealers may be
deemed to be underwriters. Trident also will be reimbursed for its reasonable
out-of-pocket expenses (including legal fees and expenses) not to exceed
$30,000. The Primary Parties have agreed to indemnify Trident in connection
with certain claims or liabilities, including certain liabilities under the
Securities Act.
For its services in making its appraisal and any expenses incurred in
connection therewith, RP Financial will receive a maximum fee of $22,500 plus
out of pocket expenses, and a fee of no greater than $5,000 plus out of pocket
expenses for the preparation of a business plan and other services performed in
connection with the Holding Company's application to the OTS. The Primary
Parties have agreed to indemnify RP Financial and its employees and affiliates
against certain losses (including any losses in connection with claims under
the federal securities laws) arising out of its services as appraiser, except
where RP Financial's liability results from its negligence or bad faith.
DIFFERENCES IN STOCKHOLDER RIGHTS
The Holding Company is a Delaware corporation subject to the provisions of
the Delaware General Corporation Law (the "DGCL"), and the Association is a
federally chartered savings association subject to federal laws and
regulations. Upon consummation of the Conversion and Reorganization, the Public
Stockholders of the Association will become stockholders of the Holding Company
and their rights will be governed by the Holding Company's Certificate of
Incorporation and Bylaws and the DGCL. The rights of stockholders of the
Association are materially different in certain respects from the rights of
stockholders of the Holding Company. See "Comparison of Stockholders' Rights"
and "Description of Capital Stock."
BENEFITS OF THE CONVERSION AND REORGANIZATION TO MANAGEMENT AND RELATED PERSONS
General. The Board of Directors of the Holding Company has approved three
benefit plans pursuant to which officers, directors and employees of the
Holding Company and the Association may be entitled to receive, following the
Conversion and Reorganization, shares of Common Stock or options to acquire
shares of Common Stock. In addition, the Board of Directors of the Holding
Company has approved employment agreements for its executive officers. Those
benefit plans and employment agreements are summarized below and elsewhere
herein. See "Management of the Holding Company and Association--Employee
Benefit Plans"; "--Employment Agreements."
5
<PAGE>
Employee Stock Ownership Plan. In connection with the Mutual Holding Company
Reorganization, the Association adopted the ESOP for the exclusive benefit of
participating employees. Employees who have attained the age of 21 years and
have completed one year of service with the Association are eligible to
participate under the ESOP. The Association has received a Determination Letter
from the IRS confirming the tax-qualified status of the ESOP under Section
401(a) of the Code. The ESOP has been funded by contributions made by the
Association in cash and, upon consummation of the Conversion and
Reorganization, will continue to be funded by contributions made by the
Association solely in cash. The ESOP intends to purchase in the Offering up to
an aggregate of 7% of the number of shares of Conversion Stock to be issued in
the Offering.
1997 Stock Option Plan. The Board of Directors of the Holding Company intends
to adopt the 1997 Stock Option and Incentive Plan (the "1997 Stock Option
Plan") and to submit it to stockholders for approval following consummation of
the Conversion and Reorganization. The 1997 Stock Option Plan is intended to
promote stock ownership by directors and selected officers and employees of the
Holding Company and the Association to increase their proprietary interest in
the Holding Company and to encourage them to remain in the service of the
Holding Company or the Association.
6
<PAGE>
Notwithstanding when the 1997 Stock Option Plan is submitted to and approved
by the stockholders, upon receipt of stockholder approval to establish the 1997
Stock Option Plan, the Board of Directors intends to reserve an amount of stock
equal to 10% of the Conversion Stock sold in the Offering for issuance under
the 1997 Stock Option Plan (or between 68,000 shares and 92,000 shares,
assuming the sale of between 680,000 shares and 920,000 shares of Conversion
Stock in the Offering). It is anticipated that the following awards of stock
options will be made pursuant to the 1997 Stock Option Plan to directors and
officers of the Holding Company and the Association as of the date of the
approval of the 1997 Stock Option Plan by the stockholders of the Holding
Company (assuming the sale of 920,000 shares of Conversion Stock in the
Offering at the maximum of the Offering Price Range, and the reservation of
92,000 shares of Common Stock for issuance under the 1997 Stock Option Plan):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM(1)
NUMBER OF % OF -----------------------
RECIPIENT OPTIONS GRANTED TOTAL OPTIONS 0% 5% 10%
- --------- --------------- ------------- --- -------- ----------
<S> <C> <C> <C> <C> <C>
Nonemployee Directors:
Daniel C. Aubuchon...... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Stacey W. Braswell...... 4,600 5.0% $ 0 $ 29,000 $ 73,000
LeRoy C. Crook.......... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Kenneth J. Hrdlicka..... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Berenice J. Mahacek..... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Charles J. Wolter....... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Officers:
Richard C. Fellhauer.... 23,000 25.0% $ 0 $145,000 $ 367,000
Michael A. Deelo........ 16,100 17.5% $ 0 $101,000 $ 257,000
Leonard O. Wolter....... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Michael J. Walsh........ 4,600 5.0% $ 0 $ 29,000 $ 73,000
Seymour Bailis.......... 4,600 5.0% $ 0 $ 29,000 $ 73,000
John L. Tacke........... 4,600 5.0% $ 0 $ 29,000 $ 73,000
All Directors and
Officers as a Group (12
Persons)............... 85,100 92.5% $ 0 $536,000 $1,354,000
</TABLE>
- --------
(1) Assumes the options are granted at the Purchase Price ($10.00 per share),
the options have a 10-year term, the market price of the Common Stock
underlying the option appreciates annually in value from the date of grant
to the end of the option term at a compounded rate of either 5% or 10% as
indicated in the columns. There can be no assurance that the Common Stock
will appreciate annually at a compounded rate of 5% or 10%. The Holding
Company is unaware of any formula which provides an accurate determination
of the value of a stock option as of the date of grant.
1997 Management Recognition Plan. The Board of Directors of the Holding
Company intends to adopt the 1997 Management Development and Recognition Plan
(the "1997 MRP") and to submit it to stockholders for approval following
consummation of the Conversion and Reorganization. The 1997 MRP is intended as
a method of providing directors, officers and certain employees of the Holding
Company or the Association with a proprietary interest in the Holding Company
and to encourage such persons to remain with the Holding Company or the
Association.
Notwithstanding when the 1997 MRP is submitted to and approved by the
stockholders, when the Holding Company receives stockholder approval to
establish the 1997 MRP, the Holding Company will contribute funds to the 1997
MRP to enable it to acquire shares of Common Stock in an amount equal to 3% of
the number of shares of Conversion Stock sold in the Offering, or up to 27,600
shares of Common Stock assuming the sale of
7
<PAGE>
920,000 shares at $10.00 per share (the maximum of the Offering Price Range).
It is anticipated that the following awards will be made pursuant to the 1997
MRP to directors and executive officers of the Association and the Holding
Company as of the date of approval of the 1997 MRP by the stockholders of the
Holding Company (assuming the sale of 920,000 shares of Common Stock in the
Offering, at the maximum of the Offering Price Range, and the purchase of
27,600 shares of Common Stock by the 1997 MRP):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR TEN YEARS FROM GRANT
NUMBER % OF DATE(1)
OF SHARES TOTAL MRP --------------------------
RECIPIENT AWARDED SHARES 0% 5% 10%
- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Nonemployee Directors:
Daniel C. Aubuchon............. 690 2.50% $ 6,900 $ 11,000 $ 18,000
Stacey W. Braswell............. 690 2.50% $ 6,900 $ 11,000 $ 18,000
LeRoy C. Crook................. 690 2.50% $ 6,900 $ 11,000 $ 18,000
Kenneth J. Hrdlicka............ 690 2.50% $ 6,900 $ 11,000 $ 18,000
Berenice J. Mahacek............ 690 2.50% $ 6,900 $ 11,000 $ 18,000
Charles J. Wolter.............. 690 2.50% $ 6,900 $ 11,000 $ 18,000
Officers:
Richard C. Fellhauer........... 6,900 25.00% $ 69,000 $112,000 $179,000
Michael A. Deelo............... 4,830 17.50% $ 48,300 $ 79,000 $125,000
Leonard O. Wolter.............. 2,070 7.50% $ 20,700 $ 34,000 $ 54,000
Michael J. Walsh............... 1,035 3.75% $ 10,350 $ 17,000 $ 27,000
Seymour Bailis................. 690 2.50% $ 6,900 $ 11,000 $ 18,000
John L. Tacke.................. 690 2.50% $ 6,900 $ 11,000 $ 18,000
James W. Caulfield............. 345 1.25% $ 3.450 $ 6,000 $ 9,000
All Directors and Executive
Officers as a Group (13
Persons)...................... 20,700 75.00% $207,000 $336,000 $538,000
</TABLE>
- --------
(1) Assumes the 1997 MRP awards are granted at the Purchase Price ($10.00 per
share) and the market price of the Common Stock underlying the 1997 MRP
award appreciates annually in value from the date of grant until 10 years
thereafter at a compounded rate of either 5% or 10% as indicated in the
columns. MRP awards do not have a term like stock options; however, in
order to compare the value of the 1997 MRP awards to the value of the stock
options granted to these named individuals a comparable 10-year time period
has been used. There can be no assurance that the Common Stock will
appreciate annually at a compounded rate of either 5% or 10%.
Employment Agreements. The Holding Company intends to enter into new
employment agreements with Richard C. Fellhauer, President and Chief Executive
Officer of the Holding Company and the Association, Michael A. Deelo, Executive
Vice President and Chief Financial Officer of the Association, and Leonard O.
Wolter, Vice President of the Association, each of which would be effective as
of the consummation of the Conversion and Reorganization. Each employment
agreement provides that the individual will be employed for a three-year term.
Such term may be extended for additional one-year periods by action of the
Board of Directors of the Holding Company taken on each successive anniversary
of the effective date of the employment agreement. Each of Messrs. Fellhauer,
Deelo and Wolter may terminate their employment agreements at any time upon 90
days' prior written notice to the Board of Directors of the Holding Company and
the Association.
USE OF PROCEEDS
The net proceeds from the sale of the Conversion Stock are expected to range
from $6.4 million, at the minimum of the Offering Price Range, to $8.8 million,
at the maximum of the Offering Price Range. At the midpoint of the Offering
Price Range, the estimated net proceeds from the sale of the Conversion Stock
would
8
<PAGE>
be $7.6 million. Pursuant to the business plan adopted by the Holding Company
and the Association on June 20, 1997 in contemplation of the Conversion and
Reorganization, the Holding Company plans to contribute to the Association 50%
of the net proceeds from the sale of the Conversion Stock and retain the
remainder of the net proceeds. Assuming that the Conversion and Reorganization
is consummated at the midpoint of the Offering Price Range, the Association
will receive approximately $3.8 million and the Holding Company will retain
approximately $3.8 million, out of which the Holding Company will make a loan
to the Association's ESOP in the amount of $696,000 and fund the 1997 MRP at a
later date in the amount of $240,000, provided the 1997 MRP is approved by the
Holding Company's stockholders. The Holding Company intends to invest the net
proceeds of the Offering that it retains initially in short-term and
intermediate-term deposits and U.S. government and federal agency securities.
Thereafter, funds retained by the Holding Company will be deployed in
accordance with the Holding Company's and the Association's business plan as
determined by the Board of Directors of the Holding Company, as specific
business opportunities or requirements arise and for general corporate
purposes. The Association will invest the proceeds of the Offering that are
made available to it by the Holding Company initially in cash and short-term
investment securities (i.e., remaining maturities ranging up to 12 months)
pending their application pursuant to its business plan. The business plan of
the Holding Company and Association contemplates continuation of the
Association's current lending and investment strategies that emphasize one- to
four-family mortgage loans and U.S. government and agency securities and
mortgage-backed securities. See "Use of Proceeds."
DIVIDENDS
Upon consummation of the Conversion and Reorganization, the Board of
Directors of the Holding Company will have the authority to declare and pay
dividends on the Common Stock. The Board of Directors of the Holding Company
intends to pay cash dividends on the Common Stock at an initial quarterly rate
equal to $0.17 per share (the amount of the existing quarterly dividend on the
Association Shares) divided by the Exchange Ratio, commencing with the first
full quarter following consummation of the Conversion and Reorganization, which
will have the effect of initially maintaining the aggregate amount of quarterly
cash dividends received by the Public Stockholders. Based on the current
Offering Price Range, the Exchange Ratio is expected to be 1.5283, 1.7981,
2.0678 and 2.3779 at the minimum, midpoint, maximum and 15% above maximum of
the Offering Price Range, respectively, resulting in an initial quarterly
dividend rate of $0.11, $0.09, $0.08 and $0.07 per share, respectively.
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
Association's and the Holding Company's financial condition and results of
operations, tax considerations and general economic conditions. In order to pay
such cash dividends, however, the Holding Company must have available cash
either from the net proceeds raised in the Offering and retained by the Holding
Company, dividends received from the Association or earnings on Holding Company
assets. In addition, from time to time in an effort to reduce capital to a
desirable level or further reward stockholders for their investment, or both,
the Board of Directors may determine to pay special cash dividends. The Holding
Company will not, however, declare or pay a capital distribution in the form of
a "return of capital" to its stockholders or take any steps in furtherance of
any such capital distribution during the period ending one year after the
consummation of the Conversion and Reorganization. Special cash dividends, if
paid, may be paid in addition to, or in lieu of, any regular cash dividends. No
assurances can be given that any dividends, regular or special, will be
declared or, if declared, what the amount of dividends will be or whether such
dividends, once declared, will continue. Moreover, no representation is being
made regarding any "return of capital" following one year after the
consummation of the Conversion and Reorganization. See "Dividend Policy."
DISSENTERS' RIGHTS OF APPRAISAL
Holders of Association Shares are entitled to appraisal rights under Section
552.14 of the OTS' regulations as a result of the merger of the Mutual Holding
Company (following its conversion to a federal interim stock
9
<PAGE>
savings association) with and into the Association and the merger of Interim
with and into the Association. Any such stockholder who wishes to exercise such
appraisal rights should review carefully the discussion of such rights in the
Association's proxy statement, including Appendix A thereto, because failure to
timely and properly comply with the procedures specified will result in the
loss of appraisal rights under Section 552.14. Pursuant to the Plan,
consummation of the Conversion and Reorganization is conditioned upon holders
of less than 10% of the outstanding Association Shares exercising appraisal
rights. See "The Conversion and Reorganization--Dissenters' Rights of
Appraisal."
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock (other than 100 shares
issued to the Association, which will be canceled upon consummation of the
Conversion and Reorganization), and to date an active and liquid trading market
has not developed for the 391,400 Public Association Shares outstanding prior
to the Offering. Consequently, there is no established market for the Common
Stock to be issued in the Exchange and the Offering. The Holding Company has
received conditional approval to have the Common Stock listed on the Nasdaq NMS
under the symbol "ESBX." In order for the Common Stock to be listed on the
Nasdaq NMS, however, there must be, among other things, two market makers for
the Common Stock. Trident intends to act as a market maker for the Common Stock
and will assist the Holding Company in retaining at least one other market
maker. The Holding Company will use its best efforts to encourage and assist
market makers in establishing and maintaining a market for the Common Stock.
There can be no assurance, however, that any additional market makers for the
Common Stock will be obtained or that the Common Stock will be listed on the
Nasdaq NMS or, if listed, will continue to be eligible for such listing. If the
Holding Company should prove unable, for any reason, to list the Common Stock
on the Nasdaq NMS or to continue to be eligible for such listing, then the
Holding Company intends to list the Common Stock on the Nasdaq SmallCap Market,
under the same symbol, subject to the applicable listing criteria for that
market. See "Market for Common Stock."
RISK FACTORS
See "Risk Factors" for a discussion of certain risks related to the Exchange
and the Offering.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE ASSOCIATION
The following table sets forth, on an historical basis, certain selected
consolidated financial data for the Association and its subsidiaries. This
summary has been derived from, and should be read in conjunction with, the
audited consolidated financial statements of the Association and the related
notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT AND FOR THE FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Total assets............. $200,764 $195,768 $163,659 $147,143 $141,077
Cash, interest-bearing
deposits, and investment
securities(1)........... 79,828 59,864 56,106 59,304 56,519
Mortgage-backed
securities.............. 14,954 28,096 15,260 16,987 93
Loans receivable, net.... 95,928 96,998 83,235 61,683 75,643
Savings deposits......... 122,983 124,515 121,560 132,844 131,216
Borrowed money........... 64,249 57,305 29,256 1,105 --
Stockholders' equity..... 12,634 12,789 11,873 12,050 8,067
OPERATING DATA:
Total interest income.... $ 13,610 $ 12,275 $ 9,697 $ 9,420 $ 10,357
Total interest expense... 9,112 8,540 6,132 6,028 6,686
-------- -------- -------- -------- --------
Net interest income
before provision for
losses on loans......... 4,498 3,735 3,565 3,392 3,671
Provision for losses on
loans................... 50 31 9 12 14
-------- -------- -------- -------- --------
Net interest income after
provision for losses on
loans................... 4,448 3,704 3,556 3,380 3,657
Gain on sales of mortgage
loans................... 1,121 1,248 775 2,432 2,025
Other noninterest
income.................. 1,448 1,460 1,500 1,386 1,283
Total noninterest
expense................. 6,209 5,341 5,321 6,073 5,664
-------- -------- -------- -------- --------
Income before income tax
expense and cumulative
effect of change in
accounting principle.... 808 1,071 510 1,125 1,301
Income tax expense....... 303 418 188 400 453
-------- -------- -------- -------- --------
Income before cumulative
effect of change in
accounting principle.... 505 653 322 725 848
Cumulative effect of
change in accounting
principle............... -- -- -- 188 --
-------- -------- -------- -------- --------
Net income............... $ 505 $ 653 $ 322 $ 913 $ 848
======== ======== ======== ======== ========
Earnings per share....... $ 0.61 $ 0.80 $ 0.39 $ 0.22 N/A
======== ======== ======== ======== ========
PERFORMANCE RATIOS:
Return on average assets
(net income divided by
average assets)......... 0.25% 0.35% 0.20% 0.59%(2) 0.58%
Return on average equity
(net income divided by
average equity)......... 3.98% 5.18% 2.79% 8.92%(2) 10.92%
Average equity to average
assets.................. 6.30% 6.68% 7.24% 6.62% 5.33%
Equity to assets (end of
year)................... 6.29% 6.53% 7.25% 8.19% 5.72%
Interest rate spread
(difference between
average yield on
interest-earning assets
and average cost of
interest-bearing
liabilities)............ 2.12% 1.90% 2.21% 2.23% 2.46%
Net interest margin (net
interest income as a
percentage of average
interest-earning
assets)................. 2.31% 2.09% 2.39% 2.38% 2.69%
Noninterest expense to
total assets............ 3.09% 2.73% 3.25% 4.13% 4.01%
Noninterest expense to
average assets.......... 3.08% 2.83% 3.34% 3.93% 3.89%
Average interest-earning
assets to average
interest-bearing
liabilities............. 104.19% 104.13% 104.37% 103.48% 104.73%
ASSET QUALITY RATIOS:
Allowance for loan losses
to total loans at end of
period.................. 0.29% 0.24% 0.26% 0.39% 0.30%
Net charge-offs to
average outstanding
loans during the
period.................. * 0.02% 0.04% * *
Nonperforming assets to
total assets............ 0.35% 0.39% 0.44% 0.29% 0.40%
OTHER DATA:
Number of real estate
loans outstanding....... 1,828 1,989 1,750 1,633 1,778
Number of deposit
accounts................ 14,944 15,442 15,647 16,256 16,634
Full service offices..... 3 3 3 3 3
Loan origination
offices................. 5 3 3 2 2
</TABLE>
- --------
(1) Includes interest-bearing deposits in other depository institutions.
(2) Includes cumulative effect of change in accounting principle totaling
$188,408, or .12% and 1.84% of average assets and average equity,
respectively.
* Insignificant
11
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS PRESENTED
BELOW, IN ADDITION TO OTHER CONSIDERATIONS DISCUSSED ELSEWHERE IN THIS
PROSPECTUS.
EFFECT OF INTEREST RATES
The financial condition and results of operations of the Association, and of
savings institutions in general, are significantly influenced by general
economic conditions, by the related monetary and fiscal policies of the
federal government, and by the regulations of the OTS, the FDIC and the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board").
Deposit flows and the cost of funds are influenced by interest rates of
competing investments and general market rates of interest. Lending activities
are affected by the demand for mortgage financing and for consumer and other
types of loans, which in turn is affected by the interest rates at which such
financing may be offered and by other factors affecting the supply of housing
and the availability of funds.
The Association's profitability is substantially dependent on its net
interest income, which is the difference between the interest income received
from its interest-earning assets and the interest expense incurred in
connection with its interest-bearing liabilities. The mismatch between
maturities and interest rate sensitivities of balance sheet items (i.e.
interest-earning assets and interest-bearing liabilities) results in interest
rate risk. The extent of interest rate risk to which the Association is
subject is monitored by management by modeling the change in its market value
of equity ("MVE") over a variety of interest rate scenarios. MVE 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 MVE
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. At March 31, 1997,
there would have been an estimated $3.4 million, or 21.8%, decrease in the
Association's MVE, assuming a 200 basis point increase in interest rates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Asset and Liability Management" for a discussion of the MVE method
of analyzing interest rate risk.
At March 31, 1997, the Association had approximately $55.0 million of
adjustable rate mortgage loans ("ARMs") in its loan portfolio. The
Association's ARMs contain annual and lifetime interest rate adjustment limits
which, in a rising interest rate environment, may prevent such loans from
repricing to market interest rates. See "Business of the Association--Lending
and Mortgage-Banking Activities--Residential One- to Four- Family Loans."
While management anticipates that the Association's ARMs will better offset
the adverse effects of an increase in interest rates as compared to fixed-rate
mortgages, the increase in mortgage payments required of ARM borrowers in a
rising interest rate environment could potentially cause an increase in
delinquencies and defaults.
Changes in interest rates can affect the amount of loans originated by an
institution, as well as the value of its loans and other interest-earning
assets and the resultant ability to realize gains on the sale of such assets.
At March 31, 1997, the Association had net unrealized losses of $252,000 in
its mortgage-backed securities portfolio and net unrealized losses of $707,000
in its investment securities portfolio due primarily to changes in interest
rates since such securities were purchased by the Association.
Changes in interest rates also can result in the flow of funds away from
savings associations into investments in U.S. government and corporate
securities, and other investment vehicles which, because of the absence of
federal insurance premiums and reserve requirements among other reasons,
generally can pay higher rates of return than savings associations.
RELIANCE ON MORTGAGE-BANKING OPERATIONS
Mortgage-banking activities significantly influence the Association's
results of operations. The Association's mortgage-banking operations conducted
through EMC involve the origination, purchase and sale
12
<PAGE>
of mortgage loans for the purpose of generating income from the sale of
mortgage loans and from servicing fees and late charges. The profitability of
EMC's mortgage-banking operations depends in a large part on managing the
volume of loan originations, purchases and sales and the expenses associated
with such activity 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 or purchased by EMC and demanded by investors to whom the loans are
sold. Generally, EMC's loan origination, purchase 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, purchases and sales and the profitability of this
activity can vary significantly from period to period, which can have
significant effects on the Association's results of operations from period to
period. In addition, EMC's (and therefore the Association's) results of
operations are affected by the amount of noninterest 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, EMC's (and therefore the Association'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.
As part of its mortgage-banking activities, EMC originates loans, and to a
lesser extent in recent years purchases loans, for subsequent sale into the
secondary market. Between the time that origination commitments are issued and
the time the loans are sold, EMC is exposed to movements in the price (due to
changes in interest rates) of such loans (or of securities into which such
loans are sometimes converted). EMC attempts to manage this risk by utilizing
the sale of forward commitments through which EMC agrees to sell loans at a
specified price on a future specified date. The amount of such forward
commitments and the date on which they settle is based upon management's
estimate as to estimated closing volumes and the length of the origination
commitment. Differences between the volume or timing of actual loan
originations and in management's estimates or in actual sales of the loans can
expose EMC to significant interest rate risk. This activity is managed on a
continuous basis. There can be no assurance that EMC will be successful in its
efforts to reduce the risk of interest rate fluctuation between the time of
origination of a mortgage loan and the time of the ultimate sale of the loan.
To the extent EMC does not adequately manage this interest rate risk, it may
incur significant mark-to-market losses or losses relating to the sale of such
loans, adversely affecting its and the Association's financial condition and
results of operations.
FEDERAL LEGISLATIVE PROPOSALS WOULD ELIMINATE THE FEDERAL SAVINGS ASSOCIATION
AND UNITARY SAVINGS AND LOAN HOLDING COMPANY CHARTERS
The U.S. Congress is considering legislative proposals, including a proposal
announced by the Clinton Administration on May 21, 1997, that would modernize
the financial services industry. Many of these proposals, including the
Administration's, would eliminate the federal savings association charter by
requiring that all federal thrifts convert to national banks or other banking
charters. Likewise, the unitary savings and loan holding company would be
eliminated and all thrift holding companies would become bank holding
companies regulated by the Federal Reserve Board. The Association is a federal
savings association and the Holding Company, upon completion of the Conversion
and Reorganization, will be a unitary savings and loan holding company. If
federal legislation is enacted that eliminates the federal savings association
and unitary savings and loan holding company charters, the Association and the
Holding Company would be required to change their charters. No assurance can
be given whether federal legislation will be enacted that affects the federal
savings association or unitary savings and loan holding company charters, or
if such legislation is enacted, what form this legislation might take.
Accordingly, management of the Association and the Holding Company cannot
predict what effect, if any, such legislation would have on the activities and
operations of the Association and the Holding Company.
ADEQUACY OF THE ASSOCIATION'S ALLOWANCE FOR LOAN LOSSES
At March 31, 1997, the Association's ratio of its allowance for loan losses
to total loans outstanding was .29%, and the ratio of the allowance for loan
losses to total nonperforming loans was 44.0%; however, the majority of
nonperforming loans are FHA and VA loans which have guaranteed return of
principal. Excluding
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these amounts, the Association's ratio of its allowance for loan losses to
total nonperforming loans was 393.1%. The Association determines the desired
level of allowance for loan losses based on an evaluation of the loan portfolio
including consideration of the collateral underlying problem loans, prior loss
experience, economic conditions, volume, growth and composition of the loan
portfolio, and other relevant factors. This evaluation is inherently subjective
as it requires material estimates including the amounts and timing of future
cash flows expected to be received on impaired loans that may be susceptible to
significant change. No assurance can be given that the Association will not
experience significant provisions for loan losses or charges against its
allowance for loan losses in the future related to a deterioration in the
quality of its loan portfolio. Furthermore, because future events affecting
borrowers and collateral cannot be predicted with any certainty, there can be
no assurance that existing reserves will be adequate or that substantial
increases will not be required should the quality of the loans deteriorate. The
allowance for loan losses at March 31, 1997 is maintained at a level believed
adequate by management to absorb losses in the loan portfolio. Any material
increase in loan provisions or material loss for which adequate reserves have
not been established may materially adversely affect the Association's
financial condition or results of operations, including reducing or eliminating
the Association's profitability.
COMPETITION
The Association faces intense and increasing competition both in making loans
and in attracting deposits. The Association's market area has a large number of
financial institutions, many of which have greater financial resources, name
recognition and market presence than the Association, and all of which are
competitors of the Association to varying degrees. Particularly intense
competition exists for deposits and the origination of all of the loan products
emphasized in the Association's business plan. The Association's competition
for loans comes principally from commercial banks, other savings and loan
associations, savings banks, mortgage-banking companies, finance companies and
credit unions. The Association's most direct competition for deposits
historically has come from other savings and loan associations, savings banks,
commercial banks and credit unions. In addition, the Association faces
increasing competition for deposits from non-bank institutions such as
brokerage firms, insurance companies, money market mutual funds, other mutual
funds (such as corporate and government securities funds) and annuities. Trends
toward the consolidation of the banking industry and the lifting of interstate
banking and branching restrictions may make it more difficult for smaller
institutions, such as the Association, to compete effectively with large
national and regional banking institutions.
DEPENDENCE ON KEY PERSONNEL
The Association depends to a considerable degree on a limited number of key
management personnel, and the loss of such personnel could adversely affect the
Association. In order to minimize the likelihood of such an occurrence, the
Association and the Holding Company intend to enter into new employment
agreements with Richard C. Fellhauer, President and Chief Executive Officer of
the Holding Company and the Association, Michael A. Deelo, Executive Vice
President and Chief Financial Officer of the Association, and Leonard O.
Wolter, Vice President of the Association. The Association maintains "key man"
life insurance with respect to Messrs. Fellhauer, Deelo and Wolter. See
"Management of the Holding Company and Association--Employment Agreements."
EFFECT OF ANTI-TAKEOVER PROVISIONS IN DISCOURAGING TAKEOVER OFFERS AND CHANGES
IN MANAGEMENT
The Holding Company's certificate of incorporation and bylaws provide, among
other things, that (1) no person may acquire or hold the beneficial ownership
of more than 10% of the voting shares of the Holding Company, and if any person
acquires or holds the beneficial ownership of more than 10% of the voting
shares of the Holding Company, each share in excess of such 10% limit shall
have its voting power reduced to 1/100 of one vote; (2) the Holding Company's
Board of Directors will be divided into three classes with one class to be
elected each year; (3) special meetings of the Holding Company's stockholders
may be called only by the chairman of the Board of Directors, the president or
a majority of the Holding Company's Board of Directors; (4) the Board of
Directors may issue additional shares of authorized Common Stock and fix the
terms and
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designations of and issue shares of authorized preferred stock without any
further action by the stockholders; (5) certain Business Transactions (as
defined in the certificate of incorporation) must be approved in advance by a
majority of the Board of Directors, approved in advance by the holders of 80%
of the outstanding shares of voting stock other than shares owned by persons
who are Interested Parties (as defined in the certificate of incorporation)
with respect to the Business Transaction or approved after-the-fact by two-
thirds of directors who are not themselves Interested Directors (as defined in
the certificate of incorporation) with respect to the Business Transaction; and
(6) stockholders who propose to nominate a candidate for election to the Board
of Directors of the Holding Company or to present new business at a
stockholders' meeting must give advance notice of, and furnish information
relating to, the proposed nominee and business to the Holding Company. The
management of the Holding Company does not have the ability to waive any of
these provisions. A vote of 80% of the total votes eligible to be cast, voting
together as a single class, is required to amend, repeal or adopt any
provisions inconsistent with certain provisions of the certificate of
incorporation and the bylaws, including most of the provisions enumerated
above. See "Comparison of Stockholders' Rights" and "Restrictions on
Acquisition of the Holding Company--Restrictions in the Holding Company's
Certificate of Incorporation and Bylaws; Employment Agreements."
Such provisions are intended to encourage a potential acquiror of the Holding
Company to negotiate with the Board of Directors, which is in the best position
to act on behalf of all of the stockholders, before seeking to obtain control
of the Holding Company. Such provisions may, however, have the effect of
discouraging takeover offers that certain stockholders might deem to be in
their best interests, including takeover proposals in which stockholders might
receive a premium for their shares over the then-current market price. Such
provisions will also make it more difficult for individual stockholders or a
group of stockholders to replace existing management, whether or not such
stockholders believe that a change in management is in the best interests of
the Holding Company.
EFFECT OF VOTING CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS ON CORPORATE
GOVERNANCE
Directors and executive officers of the Holding Company expect to purchase
approximately 7.6% of the shares of Conversion Stock issued in the Offering
based upon the midpoint of the Offering Price Range. See "Proposed
Subscriptions by Directors and Executive Officers." Directors, executive
officers and employees are also expected to eventually control the voting of 3%
of the shares of Conversion Stock issued in the Offering through the 1997 MRP.
In addition, 7% of the shares of Conversion Stock issued in the Offering are
expected to be acquired by the ESOP. Employees will vote the shares allocated
to them under the ESOP, and unallocated shares will be voted by the ESOP
trustee in the same proportion as the allocated shares. Accordingly, directors
and executive officers as a group, together with the ESOP and the MRP, and
taking into account the Exchange Shares to be beneficially owned by such
persons, may have effective control over as much as 17.9%, at the midpoint of
the Offering Price Range, of the Common Stock to be issued and outstanding at
the completion of the Conversion and Reorganization.
In addition, following the Conversion and Reorganization, executive officers
and directors are expected to be granted options under the 1997 Stock Option
Plan to purchase an amount of Common Stock equal to 10% of the shares of
Conversion Stock issued in the Offering. If all of the options were issued to
directors and executive officers, exercised and satisfied with newly issued
shares, and if the Holding Company did not issue any other shares of Common
Stock, the shares held by directors and executive officers, including the
shares noted above, would give such persons effective control over as much as
23.2%, at the midpoint of the Offering Price Range, of the Common Stock issued
and outstanding. Because the Holding Company's Certificate of Incorporation
will require the affirmative vote of 80% of the outstanding shares entitled to
vote in order to approve certain mergers, consolidations or other business
combinations without the prior approval of two-thirds of the Holding Company's
directors, the officers and directors and their associates, as a group, could
effectively block such transactions. See "Comparison of Stockholders' Rights--
Voting Restrictions on Certain Business Combinations; Fair Price Provision."
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POSSIBLE DILUTIVE EFFECT OF ISSUANCE OF ADDITIONAL SHARES
Various possible and planned issuances of Common Stock could dilute the
interests of prospective stockholders of the Holding Company following
consummation of the Conversion and Reorganization, as noted below.
The number of shares to be sold in the Conversion and Reorganization may be
increased as a result of an increase in the Offering Price Range of up to 15%
to reflect changes in market and financial conditions following the
commencement of the Offering. In the event that the Offering Price Range is so
increased, it is expected that the Holding Company will issue up to 1,058,000
shares of Conversion Stock at the Purchase Price for an aggregate price of up
to $10,580,000. An increase in the number of shares will decrease net earnings
per share and stockholders' equity per share on a pro forma basis and will
increase the Holding Company's consolidated stockholders' equity and net
earnings. See "Capitalization" and "Pro Forma Data."
The ESOP intends to purchase an amount of the Conversion Stock that, when
combined with the Exchange Shares to be received by the ESOP, aggregates 7% of
the total shares of Common Stock to be outstanding upon consummation of the
Conversion and Reorganization. In the event that there are insufficient shares
available to fill the ESOP's order due to an oversubscription by Eligible
Account Holders and the total number of shares of Conversion Stock issued in
the Conversion and Reorganization is increased by up to 15%, the additional
shares will first be allocated to fill the ESOP's subscription and thereafter
in accordance with the terms of the Plan. Alternatively, the Holding Company
may issue authorized but unissued shares of Common Stock to the ESOP in an
amount sufficient to fill the ESOP's order and/or the ESOP may purchase such
shares in the open market. In the event that additional shares of Common Stock
are issued to the ESOP to fill its order, stockholders would experience
dilution of their ownership interests (by up to 3.72% at the maximum of the
Offering Price Range, assuming the ESOP purchased no shares in the Offering)
and per share stockholders' equity and per share net earnings would decrease as
a result of an increase in the number of outstanding shares of Common Stock.
See "Management of the Holding Company and Association--Employee Benefit
Plans--Employee Stock Ownership Plan" and "The Conversion and Reorganization--
The Offering--Subscription Offering Category 2: Employee Stock Benefit Plans."
If the 1997 MRP is approved by stockholders at an annual or special meeting
of the Holding Company's stockholders held at least six months following the
consummation of the Conversion and Reorganization, the 1997 MRP intends to
acquire an amount of Common Stock that, when combined with the Association
Shares purchased by the 1993 MRP following the Mutual Holding Company
Reorganization (as adjusted to give effect to the Exchange Ratio), would
aggregate 3% of the total shares of Common Stock to be outstanding upon
consummation of the Conversion and Reorganization. Such shares of Common Stock
may be acquired in the open market with funds provided by the Holding Company,
if permissible, or from authorized but unissued shares of Common Stock. In the
event that additional shares of Common Stock are issued to the 1997 MRP,
stockholders would experience dilution of their ownership interests (by 1.57%
at the maximum of the Offering Price Range) and per share stockholders' equity
and per share net earnings would decrease as a result of an increase in the
number of outstanding shares of Common Stock. See "Pro Forma Data" and
"Management of the Holding Company and Association--Employee Benefit Plans--
1997 Management Recognition Plan."
If the Holding Company's 1997 Stock Option Plan is approved by stockholders
at an annual or special meeting of stockholders held at least six months
following the consummation of the Conversion and Reorganization, the Holding
Company will reserve for future issuance pursuant to such plan a number of
authorized shares of Common Stock equal to an aggregate of 10% of the
Conversion Stock issued in the Offering (92,000 shares, based on the maximum of
the Offering Price Range). See "Pro Forma Data" and "Management of the Holding
Company and Association--Employee Benefit Plans--1997 Stock Option Plan."
The Association also has adopted and maintains the 1993 Stock Option and
Incentive Plan, which reserved for issuance 38,000 Association Shares. As of
March 31, 1997, no shares had been issued as a result of the exercise of
options granted under such option plan. Upon consummation of the Conversion and
Reorganization,
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the obligations and rights of this plan will be assumed by the Holding Company,
and Common Stock will be issued in lieu of Association Shares pursuant to the
terms of such plan. See "Management of the Holding Company and Association--
Employee Benefit Plans--1993 Stock Option and Incentive Plan."
INCREASE IN COMMERCIAL BUSINESS LENDING
During the fiscal year ended March 31, 1997, the Association began to
originate commercial business loans on a limited basis. Such loans generally
have shorter terms and higher interest rates than traditional mortgage loans.
Such lending, however, generally involves more credit risk than traditional
single-family residential lending because of the type and nature of the
collateral. As of March 31, 1997, commercial business loans amounted to
approximately $1.3 million, or 1.3% of the Association's loan portfolio. To
date, the Association has not experienced any significant credit problems with
respect to its commercial business loan portfolio and, as of March 31, 1997,
none of the Association's commercial business loans were nonperforming. See
"Business of the Association--Lending and Mortgage-Banking Activities--
Commercial Business Loans."
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES
The Association has received an opinion of KPMG Peat Marwick LLP that states
that, for federal and state income tax purposes, consummation of the Conversion
and Reorganization will not be taxable to the Association, the Holding Company
or depositors of the Association. The opinion also states, however, that if the
Subscription Rights granted to Eligible Account Holders, Supplemental Eligible
Account Holders, Other Members, directors, officers and employees and Public
Stockholders are deemed to have an ascertainable fair market value, income or
gain may be recognized by the recipients of the Subscription Rights (in certain
cases, whether or not the rights are exercised) in an amount equal to such
value. Additionally, the Association could recognize a gain for tax purposes on
such distribution. This opinion is not binding on the Internal Revenue Service
("IRS"). No assurance can be given that the IRS will not take a contrary
position. See "The Conversion and Reorganization--Tax Aspects."
EQUALITY BANCORP, INC.
The Holding Company was incorporated as a Delaware corporation on May 14,
1997 at the direction of the Board of Directors of the Association to hold all
of the capital stock of the Association and to facilitate the Conversion and
Reorganization. The Holding Company has not engaged in any business to date and
is not expected to engage in any business until the consummation of the
Conversion and Reorganization. The Holding Company's offices are located at
9920 Watson Road, St. Louis, Missouri 63126, and its telephone number is (314)
965-7090.
The Holding Company will have no material assets or liabilities prior to the
consummation of the Conversion and Reorganization. Immediately following the
consummation of the Conversion and Reorganization, the Holding Company will
have, as its only material assets, the stock of the Association and that
portion of the net proceeds of the Offering that it retains. See "Use of
Proceeds" for a discussion of how the Holding Company intends to invest the net
proceeds of the Offering retained by it. Immediately following the Conversion
and Reorganization, the Holding Company will have no material liabilities.
Following the Conversion and Reorganization, the Holding Company will be
engaged in the business of managing its investments and directing, planning and
coordinating the business activities of the Association. In the future, the
Holding Company may acquire or organize other operating subsidiaries, although
there are no current plans or agreements to do so.
The Association expects the Holding Company's application to become a savings
and loan holding company under the Home Owners' Loan Act ("HOLA") and to
acquire the Association to be approved by the OTS prior to the Expiration Date.
Upon completion of the Conversion and Reorganization, the Holding Company will
be subject to regulation by OTS. See "Regulation and Supervision--Holding
Company Regulation."
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EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
The Association is a federally-chartered-stock-based-savings association
regulated by the OTS, and its deposits are insured by the FDIC through the
SAIF. The deposits of the Association will continue to be insured by the FDIC
after the Conversion and Reorganization. The Association was originally
chartered in 1884. At March 31, 1997, the Association had total assets of
$200.8 million, deposit accounts of $123.0 million and total stockholders'
equity of $12.6 million. The Association conducts its business through three
full-service branch offices and five limited-service-loan-production offices.
The Association's main office is located at 4131 South Grand Boulevard, St.
Louis, Missouri 63118-3464, and its telephone number is (314) 352-3333.
On October 22, 1993, Equality Savings and Loan Association (the predecessor
of the Association) (i) reorganized into a mutual holding company and changed
its name to "First Missouri Financial, M.H.C." and (ii) transferred
substantially all of its assets and all of its liabilities to the Association,
which sold a minority interest in its common stock to depositors of Equality
Savings and Loan Association and various stock compensation plans. A total of
380,000 shares of newly issued common stock were sold at $10.00 per share. An
additional 11,400 authorized but unissued shares were later sold to the 1993
MRP at $10.00 per share. The Association gained net proceeds of approximately
$3.2 million from the sale of its common stock. On June 13, 1995, the
Association converted from a Missouri-chartered-stock-savings-and-loan
association to a federally-chartered-stock-savings-and-loan association.
THE ASSOCIATION'S BUSINESS OPERATIONS
The Association's business is similar in many respects to other savings
associations in that it gathers deposits from its local community and uses
these funds, along with FHLB advances, to invest primarily in residential one-
to four-family mortgage loans, U.S. government and agency securities and
mortgage-backed securities and, to a lesser extent, multifamily and commercial
real estate, consumer and commercial business loans. Notwithstanding these
traditional thrift attributes, the Association's operations are distinct in
that it conducts its residential mortgage lending business primarily through a
wholly-owned mortgage-banking subsidiary--EMC.
. Mortgage-Banking Operations. EMC acts as a conduit for the origination,
purchase and sale of residential mortgage loans for the benefit of the
Association. It funds its mortgage-banking activities through lines of
credit from the Association and an unrelated commercial bank. EMC
provides several benefits to the Association, including, among other
things, originating a variety of mortgage loan products for the
Association's portfolio and generating noninterest income for the
Association through its activities in the secondary mortgage market. EMC
contributed approximately 17% to the Association's total interest income
and other income for the year ended March 31, 1997. For additional
information concerning the Association's mortgage-banking operations,
see "Business of The Association--Lending and Mortgage-Banking
Operations."
. Capital Position. At March 31, 1997, the Association's capital exceeded
the OTS's tangible, core and risk-based capital requirements of 1.5%,
3.0% and 8.0% of adjusted total assets, respectively. At this date, the
Association's tangible and core capital totaled $12.6 million, or 6.29%
of adjusted total assets, and its risk-based capital totaled $12.9
million, or 11.75% of risk-weighted assets. For additional information
concerning the Association's compliance with regulatory capital
requirements, see Note 2 to Notes to Consolidated Financial Statements.
. Asset Quality. At March 31, 1997, the Association's nonperforming assets
totaled $709,000 (representing .67% of gross loans and .35% of total
assets), the majority of which were FHA/VA loans secured by residential
one- to four-family dwellings and the related principal and interest of
which were either insured by the FHA or guaranteed by the VA. For
additional information concerning the Association's nonperforming
assets, see "Business of the Association--Lending and Mortgage-Banking
Activities--Nonperforming Assets and Their Classification."
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. Loan Servicing Portfolio. At March 31, 1997, EMC serviced $323.0 million
in residential mortgage loans (of which $90.6 million was for the
Association). EMC earned $888,000 in servicing fee income for fiscal
year 1997. Loan servicing fees on loans serviced for institutions other
than the Association totaled $674,000, $603,000 and $622,000 for fiscal
years 1997, 1996 and 1995, respectively. Because EMC sells conventional
mortgage loans (non-FHA and VA) servicing retained, the Association's
loan servicing portfolio (and the associated earnings stream) continues
to grow.
. FHLB Borrowings. The amount of the Association's savings deposits has
declined by approximately $8 million since 1993, while its loan demand
through EMC has steadily increased. To fund this loan growth and to take
advantage of interest rate spreads, the Association began borrowing
funds from the FLHB of Des Moines in 1994. Since then, the Association's
FHLB borrowings have increased to $63 million at March 31, 1997.
Management of the Association attributes the decline in traditional
savings accounts to intense competition for investment funds by other
financial institutions in the Association's local market and other
financial service providers such as mutual funds and insurance
companies. For additional information concerning the Association's
borrowings and deposit activity, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Financial
Condition."
. Internal Expansion. In May 1997, the Association purchased a building in
Arnold, Missouri (which is in Jefferson County and adjacent to St. Louis
County) that the Association is remodeling as a full-service branch
office. The Association expects this office to be completed by the
summer of 1998. In addition, the Association is relocating a store-front
branch office several blocks and concurrently converting it into a
branch office with a drive-up facility; the relocation is expected to be
completed in September 1997. In early 1997, in connection with its
hiring of a new commercial lending officer, the Association began
originating a limited number of commercial business loans. Management
expects this type of lending to increase gradually over the next several
years. For additional information concerning the Association's
commercial business lending, see "Business of the Association--Lending
and Mortgage-Banking Activities--Commercial Business Loans."
BUSINESS STRATEGIES
The Association's business strategy includes (i) maintaining a strong capital
level, (ii) maintaining a high level of asset quality, (iii) limiting the
Association's exposure to fluctuations in interest rates, (iv) emphasizing
local originations of one- to four-family fixed-rate mortgage loans and ARMs
and (v) continuing to emphasize high quality customer service with a
competitive service fee structure. Management of the Association believes that
the proceeds raised in the Conversion and Reorganization, and the additional
operating flexibility gained by converting to the full-stock-form-of-ownership,
will assist the Association in accomplishing this strategy, while continuing to
grow its business.
The capital raised in the Conversion and Reorganization will allow the
Association to continue its internal expansion through growth in core
operations. The Association intends to continue its community-oriented focus by
originating loans in the St. Louis metropolitan area. Management believes there
is an opportunity for the Association, as a independent-community-oriented
financial institution to compete for customers of national and super-regional
banking organizations that have offices in the Association's market. Many of
these larger banks recently have combined with other large financial
institutions, and management of the Association believes that customer
dissatisfaction with services provided by these combined organizations will
give the Association the opportunity to expand its depositor and borrower base
by offering superior personal service as an independent community banking
organization. To this end and in order to expand its market share, the
Association is in the process of relocating a store-front branch office and
concurrently converting it into a branch office with a drive-up facility and
also is constructing an additional full-service branch facility. The additional
capital raised in the Conversion and Reorganization will allow the Association
to continue to grow the operations of EMC, which focus on one- to four-family
lending, but also will make funds available, as needs arise, to finance non-
mortgage types of lending, which would be intended to improve the yield and
interest rate sensitivity of the Association's assets.
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Prospects for external growth also will be enhanced by the capital raised in
the Conversion and Reorganization because the Association will have additional
capital available to support acquisitions of other financial institutions and
branch expansion. The Association, however, has no plans at this time for such
acquisitions or expansion, except as discussed in this Prospectus. For
additional information concerning how the Association intends to use the
proceeds raised in the Conversion and Reorganization, see "Use of Proceeds."
REGULATION
The OTS is charged with overseeing and regulating the Association's
activities and monitoring its financial condition. This regulatory framework
sets parameters for the Association's activities and operations and grants the
OTS extensive discretion with regard to its supervisory and enforcement powers
and examination policies. The Association files periodic reports with the OTS
concerning its activities and financial condition, must obtain OTS approval
prior to entering into certain transactions or initiating new activities, and
is subject to periodic examination by the OTS to evaluate the Association's
compliance with various regulatory requirements.
FIRST MISSOURI FINANCIAL, M.H.C.
The Mutual Holding Company is a federally chartered mutual holding company
that was chartered in 1993 in connection with the Mutual Holding Company
Reorganization. The Mutual Holding Company's primary asset is 445,000
Association Shares, which represents 53.2% of the total issued and outstanding
Association Shares. The Mutual Holding Company's only other assets consist of
a deposit account in the amount of $50,000 as of March 31, 1997 (which will
become an asset of the Association upon consummation of the Conversion and
Reorganization). Prior to the Conversion and Reorganization, each depositor in
the Association has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the Mutual Holding Company based upon
the value in his or her account, which interest may only be realized in the
event of a liquidation of the Mutual Holding Company. As part of the
Conversion and Reorganization, the Mutual Holding Company will convert from
mutual form to a federal interim stock savings association and simultaneously
merge with and into the Association, with the Association being the surviving
entity.
USE OF PROCEEDS
The net proceeds from the sale of the Conversion Stock are expected to range
from $6.4 million, at the minimum of the Offering Price Range, to $8.8
million, at the maximum of the Offering Price Range. At the midpoint of the
Offering Price Range, the estimated net proceeds from the sale of the
Conversion Stock would be $7.6 million.
Pursuant to the business plan adopted by the Holding Company and the
Association on June 20, 1997 in contemplation of the Conversion and
Reorganization, the Holding Company plans to contribute to the Association 50%
of the net proceeds from the sale of the Conversion Stock and retain the
remainder of the net proceeds. Assuming that the Conversion and Reorganization
is consummated at the midpoint of the Offering Price Range, the Association
will receive approximately $3.8 million and the Holding Company will retain
approximately $3.8 million, out of which the Holding Company will make a loan
to the Association's ESOP in the amount of $696,000 and fund the 1997 MRP at a
later date in the amount of $240,000, provided the 1997 MRP is approved by the
Holding Company's stockholders. The ESOP will repay such loan from the Holding
Company with contributions made to the ESOP by the Association and any
dividends on the Common Stock held by the ESOP. The loan will require annual
interest and principal payments over a 10-year period and will bear interest
at a fixed rate established at the prime rate, as reported by The Wall Street
Journal, Midwest Edition, in effect at the time of completion of the
Conversion and Reorganization.
The Holding Company intends to invest the net proceeds of the Offering that
it retains initially in short-term and intermediate-term deposits and U.S.
government and federal agency securities. Thereafter, funds retained by the
Holding Company will be deployed in accordance with the Holding Company's and
the Association's
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business plan as determined by the Board of Directors of the Holding Company,
as specific business opportunities or requirements arise and for general
corporate purposes. The net proceeds retained by the Holding Company may be
used to support the future expansion of operations, such as the establishment
of new branch offices, the acquisition of branches from other financial
institutions or the acquisition of other financial institutions and for other
business or investment purposes, including the possible infusion of additional
equity into the Association, the possible payment of dividends and the possible
repurchase of shares of the Holding Company's Common Stock as permitted by the
OTS. See "Dividend Policy" and "The Conversion and Reorganization--Certain
Restrictions on Purchase or Transfer of Shares after the Conversion and
Reorganization." The Holding Company, upon consummation of the Conversion,
initially will be a unitary savings and loan holding company which, under
existing laws, would generally not be restricted as to investments or as to the
types of business activities in which it may engage, provided that the
Association continues to be a qualified thrift lender under applicable OTS
regulations.
It is expected that the Holding Company's return on equity will initially be
lower than historical levels as the Holding Company and the Association deploy
the proceeds from the Offering. While the Board of Directors and management
recognize this challenge will exist for the foreseeable future, the Holding
Company intends to manage capital through controlled growth, the payment of
regular cash dividends and possibly the payment of periodic special dividends.
In addition, the Holding Company may repurchase the Common Stock as market and
regulatory limits permit.
The Association will invest the proceeds of the Offering that are made
available to it by the Holding Company initially in cash and short-term
investment securities (i.e., remaining maturities ranging up to 12 months)
pending their application pursuant to its business plan. The business plan of
the Holding Company and Association contemplates continuation of the
Association's current lending and investment strategies that emphasize one- to
four-family mortgage loans and U.S. government and agency securities and
mortgage-backed securities. See "Business of the Association--Lending and
Mortgage-Banking Activities," and "--Investment Activities." The Association
may also use a portion of the net proceeds to pay dividends to the Holding
Company, subject to applicable legal requirements. See "Regulation and
Supervision--Federal Savings Association Regulation--Limitation on Capital
Distributions."
The Holding Company and the Association also may use the net proceeds of the
Offering to expand their operations through acquisitions of other financial
institutions or other financial services companies or portions thereof, subject
to applicable regulatory restrictions. However, neither the Association nor the
Holding Company has any pending plans or agreements regarding acquisitions of
any specific financial institutions or other financial services companies or
portions thereof.
There can be no assurance that the Holding Company and the Association will
be able to effectively implement their business plan, as currently in effect,
and the business plan is subject to change.
DIVIDEND POLICY
Upon consummation of the Conversion and Reorganization, the Board of
Directors of the Holding Company will have the authority to declare and pay
dividends on the Common Stock. The Board of Directors of the Holding Company
intends to pay cash dividends on the Common Stock at an initial quarterly rate
equal to $0.17 per share (the amount of the existing quarterly dividend on the
Association Shares) divided by the Exchange Ratio, commencing with the first
full quarter following consummation of the Conversion and Reorganization, which
will have the effect of initially maintaining the aggregate amount of quarterly
cash dividends received by the Public Stockholders. Based on the current
Offering Price Range, the Exchange Ratio is expected to be 1.5283, 1.7981,
2.0678 and 2.3779 at the minimum, midpoint, maximum and 15% above maximum of
the Offering Price Range, respectively, resulting in an initial quarterly
dividend rate of $0.11, $0.09, $0.08 and $0.07 per share, respectively.
21
<PAGE>
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
Association's and the Holding Company's financial condition and results of
operations, tax considerations and general economic conditions. In order to pay
such cash dividends, however, the Holding Company must have available cash
either from the net proceeds raised in the Offering and retained by the Holding
Company, dividends received from the Association or earnings on Holding Company
assets. In addition, from time to time in an effort to reduce capital to a
desirable level or further reward stockholders for their investment, or both,
the Board of Directors may determine to pay special cash dividends. The Holding
Company will not, however, declare or pay a capital distribution in the form of
a "return of capital" to its stockholders or take any steps in furtherance of
any such capital distribution during the period ending one year after the
consummation of the Conversion and Reorganization. Special cash dividends, if
paid, may be paid in addition to, or in lieu of, any regular cash dividends. No
assurances can be given that any dividends, regular or special, will be
declared or, if declared, what the amount of dividends will be or whether such
dividends, once declared, will continue. Moreover, no representation is being
made regarding any "return of capital" following one year after the
consummation of the Conversion and Reorganization.
It is anticipated that a source of income to the Holding Company in the
future could consist of dividends on the Association's stock held by the
Holding Company. Consequently, future declarations of cash dividends by the
Holding Company could depend upon dividend payments by the Association to the
Holding Company or stock repurchases by the Association, which payments or
repurchases will be subject to various restrictions. The Association is subject
to federal regulatory restrictions on the declaration and payment of dividends.
For information concerning federal regulations that apply to the Association
regarding a savings institution's ability to make capital distributions
including payment of dividends to its holding company, see "Regulation and
Supervision--Federal Savings Association Regulation--Limitation on Capital
Distributions."
Unlike the Association, the Holding Company is not subject to federal
regulatory restrictions on the declaration or payment of dividends to its
stockholders, although the source of such dividends could depend upon dividend
payments from the Association in addition to that portion of the net proceeds
of the Offering retained by the Holding Company and earnings thereon. The
Holding Company is subject, however, to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of its net assets
(the amount by which total assets exceed total liabilities) over its stated
capital or, if there is no such excess, to its net profits for the current
and/or immediately preceding fiscal year.
Depositors of the Association who are also stockholders of the Holding
Company after consummation of the Conversion and Reorganization may elect to
have cash dividends deposited directly into an existing account with the
Association by completing section of the order form for the Conversion
Stock. By entering an account number in section of the order form,
stockholders will have all future dividends directly deposited into interest-
bearing insured accounts at the Association.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock (other than 100 shares
issued to the Association, which will be canceled upon consummation of the
Conversion and Reorganization), and to date an active and liquid trading market
has not developed for the 391,400 Public Association Shares outstanding prior
to the Offering. Consequently, there is no established market for the Common
Stock to be issued in the Exchange and the Offering.
The Holding Company has received conditional approval to have the Common
Stock listed on the Nasdaq NMS under the symbol "ESBX." In order for the Common
Stock to be listed on the Nasdaq NMS, however, there must be, among other
things, two market makers for the Common Stock. Trident intends to act as a
market maker for the Common Stock and will assist the Holding Company in
retaining at least one other market maker. The Holding Company will use its
best efforts to encourage and assist market makers in establishing and
22
<PAGE>
maintaining a market for the Common Stock. There can be no assurance, however,
that any additional market makers for the Common Stock will be obtained or
that the Common Stock will be listed on the Nasdaq NMS or, if listed, will
continue to be eligible for such listing. If the Holding Company should prove
unable, for any reason, to list the Common Stock on the Nasdaq NMS or to
continue to be eligible for such listing, then the Holding Company intends to
list the Common Stock on the Nasdaq SmallCap Market, under the same symbol,
subject to the applicable listing criteria for that market.
Making a market involves maintaining bid and asked quotations and being
able, as principal, to effect transactions in reasonable quantities at those
quoted prices, subject to various securities laws and other regulatory
requirements. In addition, the development of a liquid public market depends
on the existence of willing buyers and sellers, the presence of which is not
within the control of the Holding Company, the Association or any market
maker. The smaller the number of holders of the stock, the less likely a
liquid market will develop. Accordingly, there can be no assurance that an
active and liquid trading market for the Common Stock will develop or, if
developed, be maintained, that resales of the Common Stock can be made at or
above the Purchase Price, or that quotations will be available on the Nasdaq
NMS as contemplated. In the absence of a liquid public market for the Common
Stock, 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.
At March 31, 1997, there were 836,400 Association Shares outstanding,
including 391,400 Public Association Shares, which were held by approximately
620 stockholders of record. There is no established market for the Association
Shares nor any uniformly quoted prices. The last sale price of the Association
Shares of which the Association is aware was $15.00 per share on April 7,
1997.
23
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the Association
at March 31, 1997, 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 Conversion Stock at the
minimum, midpoint, maximum and maximum, as adjusted, of the Offering Price
Range. The shares that would be issued at the maximum, as adjusted, of the
Offering Price Range would be subject to receipt of OTS approval of an updated
appraisal confirming such valuation. A CHANGE IN THE NUMBER OF SHARES TO BE
ISSUED IN THE CONVERSION AND REORGANIZATION WOULD MATERIALLY AFFECT PRO FORMA
CONSOLIDATED CAPITALIZATION.
<TABLE>
<CAPTION>
HOLDING COMPANY PRO FORMA CONSOLIDATED CAPITALIZATION
AS OF MARCH 31, 1997 BASED UPON THE SALE AT THE
PURCHASE PRICE
-----------------------------------------------------
ASSOCIATION 680,000 800,000 920,000 1,058,000
HISTORICAL SHARES SHARES SHARES SHARES
CAPITALIZATION AT (MINIMUM (MIDPOINT (MAXIMUM (15% ABOVE
MARCH 31, 1997 OF RANGE)(1) OF RANGE)(1) OF RANGE)(1) MAXIMUM)(1)(2)
----------------- ------------ ------------ ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits(3)............. $122,983 $122,983 $122,983 $122,983 $122,983
FHLB advances and note
payable to
Association............ 64,113 64,113 64,113 64,113 64,113
Debt in connection with
the acquisition of
Association Shares by
the ESOP............... 136 -- -- -- --
-------- -------- -------- -------- --------
Total deposits and
borrowed funds......... $187,232 $187,096 $187,096 $187,096 $187,096
======== ======== ======== ======== ========
Stockholders' equity:
Common Stock(4)....... 836 13 15 17 20
Additional paid-in
capital.............. 2,769 9,977 11,175 12,373 13,750
Retained earnings(5).. 9,675 9,725 9,725 9,725 9,725
Unrealized gain (loss)
on available for sale
securities........... (510) (510) (510) (510) (510)
Less: existing stock
plans
Association Shares
acquired by ESOP..... (136) -- -- -- --
Common Stock acquired
by ESOP(6)........... -- (612) (696) (780) (877)
Common Stock to be
acquired by 1997
MRP(7)............... -- (204) (240) (276) (317)
-------- -------- -------- -------- --------
Total stockholders'
equity................. $ 12,634 $ 18,389 $ 19,469 $ 20,549 $ 21,791
======== ======== ======== ======== ========
</TABLE>
- --------
(1) Does not reflect the possible increase in the Offering Price Range to
reflect material changes in the financial condition or results of
operations of the Association or changes in market conditions or general
financial, economic and regulatory conditions, or the issuance of
additional shares under the 1997 Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
if the aggregate number of shares of Conversion Stock issued in the
Offering is 15% above the maximum of the Offering Price Range. See "Pro
Forma Data" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of Conversion Stock are
not reflected. Such withdrawals will reduce pro forma deposits by the
amounts thereof.
(4) The Association's authorized capital will consist solely of 4,000,000
shares of common stock, par value $1.00 per share, shares of which will
be issued to the Holding Company, and 1,000,000 shares of preferred stock,
par value $1.00 per share, none of which will be issued in connection with
the Conversion and Reorganization.
24
<PAGE>
(5) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Association 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 Eligible Account Holders and Supplemental Eligible Account
Holders at the consummation of the Conversion and Reorganization and
adjusted downward thereafter as such account holders reduce their balances
or cease to be depositors. See "The Conversion and Reorganization--
Liquidation Rights." Historical retained earnings does not include $50,000
of assets currently held at the Mutual Holding Company level, and which
will be consolidated with the Association's book value.
(6) Assumes that 7% of the shares of Conversion Stock sold in the Offering will
be acquired by the ESOP with funds borrowed from the Holding Company. Under
generally accepted accounting principles ("GAAP"), the amount of Conversion
Stock to be purchased by the ESOP represents unearned compensation and is,
accordingly, reflected as a reduction of capital. As shares are released to
ESOP participants' accounts, a corresponding 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 Holding Company and Association--Employee
Benefit Plans--Employee Stock Ownership Plan."
(7) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed 1997 MRP, of a number of shares equal to 3% of the shares of
Conversion Stock issued in the Offering at the minimum, midpoint, maximum
and 15% above the maximum of the Offering Price Range. The issuance of such
additional Conversion Stock of the MRP from authorized but unissued shares
of Common Stock would dilute the ownership interest of stockholders by
1.57%. The shares are reflected as a reduction of stockholders' equity. See
"Risk Factors--Possible Dilutive Effect of Issuance of Additional Shares,"
"Pro Forma Data" and "Management of the Holding Company and Association--
Employee Benefit Plans--1997 Management Recognition Plan." The 1997 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 and Reorganization.
25
<PAGE>
REGULATORY CAPITAL
The following table presents the Association's historical and pro forma
capital position relative to its capital requirements at March 31, 1997. The
amount of capital infused into the Association for purposes of the following
table is 50% of the net proceeds from the sale of the Conversion Stock. 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 1997 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 OTS capital regulations as
discussed under "Regulation and Supervision--Federal Savings Association
Regulation--OTS Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1997
----------------------------------------------------------------------------------
ACTUAL REGULATORY 1,058,000 SHARES
CAPITAL AT 680,000 SHARES 800,000 SHARES 920,000 SHARES (15% ABOVE
MARCH 31, 1997 (MINIMUM OF RANGE) (MIDPOINT OF RANGE) (MAXIMUM OF RANGE) MAXIMUM OF RANGE)
----------------- -------------------- ---------------------- -------------------- -----------------
% OF % OF % OF % OF % OF
AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1)
------- --------- --------- ---------- ---------- ----------- --------- ---------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital(2)........ $12,634 6.29% $ 15,197 7.46% $ 15,677 7.67% $ 16,157 7.88% $16,709 8.13%
Tangible capital(2).... $12,637 6.29% $ 15,200 7.46% $ 15,680 7.67% $ 16,160 7.89% $16,712 8.13%
Tangible capital
requirement........... 3,011 1.50% 3,057 1.50% 3,066 1.50% 3,074 1.50% 3,084 1.50%
------- ------ --------- -------- ---------- --------- --------- -------- ------- ------
Excess................. $ 9,626 4.79% $ 12,142 5.96% $ 12,614 6.17% $ 13,086 6.39% $13,628 6.63%
======= ====== ========= ======== ========== ========= ========= ======== ======= ======
Core capital(2)........ $12,637 6.29% $ 15,200 7.46% $ 15,680 7.67% $ 16,160 7.89% $16,712 8.13%
Core capital
requirement(3)........ 6,023 3.00% 6,114 3.00% 6,131 3.00% 6,148 3.00% 6,167 3.00%
------- ------ --------- -------- ---------- --------- --------- -------- ------- ------
Excess................. $ 6,614 3.29% $ 9,085 4.46% $ 9,548 4.67% $ 10,012 4.89% $10,544 5.13%
======= ====== ========= ======== ========== ========= ========= ======== ======= ======
Total capital(4)....... $12,920 11.75% $ 15,483 14.00% $ 15,963 14.42% $ 16,443 14.84% $16,995 15.32%
Risk-based capital
requirement........... 8,799 8.00% 8,848 8.00% 8,857 8.00% 8,866 8.00% 8,876 8.00%
------- ------ --------- -------- ---------- --------- --------- -------- ------- ------
Excess................. $ 4,121 3.75% $ 6,635 6.00% $ 7,106 6.42% $ 7,577 6.84% $ 8,118 7.32%
======= ====== ========= ======== ========== ========= ========= ======== ======= ======
</TABLE>
- ------
(1) Based upon total adjusted assets of $200.8 million at March 31, 1997 and
$203.8 million, $204.4 million, $204.9 million and $205.6 million at the
minimum, midpoint, maximum and maximum, as adjusted, of the Offering Price
Range, respectively, for purposes of the tangible and core capital
requirements, and upon risk-weighted assets of $110.0 million at March 31,
1997 and $110.6 million, $110.7 million, $110.8 million and $111.0 million
at the minimum, midpoint, maximum and maximum, as adjusted, of the Offering
Price Range, respectively, for purposes of the risk-based capital
requirement.
(2) An unrealized loss on securities available-for-sale, net of taxes of
$510,000 and an investment in non-includable subsidiaries of $507,000
account for the difference between GAAP capital and both tangible capital
and core capital.
(3) 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.
(4) Percentage represents total core and supplementary capital divided by total
risk-weighted assets. Assumes net proceeds are invested in assets that
carry a 20% risk-weighting.
26
<PAGE>
PRO FORMA DATA
Under the Plan, the shares of Conversion Stock must be sold at a price equal
to the estimated pro forma market value of the Conversion Stock, based upon an
independent valuation. The Offering Price Range as of June 20, 1997 is from a
minimum of $6,800,000 to a maximum of $9,200,000 with a midpoint of $8,000,000
or, at a price per share of $10.00, a minimum number of shares of 680,000, a
maximum number of shares of 920,000 and a midpoint number of shares of 800,000.
The actual net proceeds from the sale of the Conversion Stock cannot be
determined until the Conversion and Reorganization is completed. Net proceeds
set forth on the following table are based upon the assumption that Conversion
and Reorganization expenses will total approximately $415,000 at each of the
minimum, midpoint, maximum and 15% above the maximum of the Offering Price
Range. Actual expenses may vary from this estimate.
The pro forma consolidated net income of the Association for the year ended
March 31, 1997 has been calculated as if the Conversion and Reorganization had
been consummated at the beginning of the period and the estimated net proceeds
received by the Holding Company and the Association had been invested at 5.81%
at the beginning of the period, which represents the arithmetic average of the
Association's yield on interest-earning assets and interest-bearing deposits
for the year ended March 31, 1997. As discussed under "Use of Proceeds," the
Holding Company expects to retain 50% of the net proceeds from the sale of the
Conversion Stock from which it will fund the ESOP loan. A pro forma after-tax
return of 3.63% is used for both the Holding Company and the Association for
the period, after giving effect to an incremental combined federal and state
income tax rate of 37.5% for the year ended March 31, 1997. 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 March 31, 1997,
but without any adjustment of per share historical or pro forma stockholders'
equity to reflect the earnings on the estimated net proceeds.
The following table summarizes the historical net income and retained
earnings of the Association and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the date
indicated, based on the minimum, midpoint and maximum of the Offering Price
Range and based on a 15% increase in the maximum of the Offering Price Range.
No effect has been given to: (i) the shares to be reserved for issuance under
the 1997 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 and Reorganization; (ii) withdrawals from deposit accounts for
the purpose of purchasing Conversion Stock in the Offering; (iii) the issuance
of shares from authorized but unissued shares to the 1997 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 and Reorganization;
(iv) the payment of cash in satisfaction of dissenters' rights or (v) the
establishment of a liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders. See "Management of the
Holding Company and Association--Employee Benefit Plans--1997 Stock Option
Plan" and "The Conversion and Reorganization--Stock Pricing, Exchange Ratio and
Number of Shares Issued." Shares of Conversion Stock may be purchased with
funds on deposit at the Association, 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
such purchases.
The following pro forma information may not be representative of the
financial effects of the Conversion and Reorganization at the date on which the
Conversion and Reorganization 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 according to GAAP. Stockholders' equity has not
been increased or decreased to reflect the difference between the carrying
value of loans and 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.
27
<PAGE>
<TABLE>
<CAPTION>
HOLDING COMPANY PRO FORMA
AT OR FOR THE FISCAL YEAR ENDED MARCH 31,
1997
-----------------------------------------------
680,000 800,000 920,000 1,058,000
SHARES SHARES SHARES SHARES
(MINIMUM (MIDPOINT (MAXIMUM (15% ABOVE
OF RANGE) OF RANGE) OF RANGE) MAXIMUM)(1)
---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Gross proceeds................ $ 6,800 $ 8,000 $ 9,200 $ 10,580
Less: estimated offering
expenses..................... (415) (415) (415) (415)
---------- ---------- ---------- ----------
Estimated net proceeds...... $ 6,385 $ 7,585 $ 8,785 $ 10,165
Less: Common Stock acquired by
ESOP......................... (476) (560) (644) (741)
Less: Common Stock to be
acquired by 1997 MRP......... (204) (240) (276) (317)
Add: Assets consolidated from
the Mutual Holding Company... 50 50 50 50
---------- ---------- ---------- ----------
Estimated net proceeds, as
adjusted................... $ 5,755 $ 6,835 $ 7,915 $ 9,157
========== ========== ========== ==========
Consolidated net income:
Historical.................. $ 505 $ 505 $ 505 $ 505
Pro forma income on net
proceeds(2)................ 209 248 287 333
Pro forma ESOP
adjustments(3)............. (30) (35) (40) (46)
Pro forma 1997 MRP
adjustments(4)............. (26) (30) (35) (40)
---------- ---------- ---------- ----------
Pro forma net income........ $ 658 $ 688 $ 717 $ 752
========== ========== ========== ==========
Per share net income (reflects
SOP 93-6)(5)(6):
Historical.................. $ 0.41 $ 0.35 $ 0.30 $ 0.26
Pro forma income on net
proceeds................... 0.16 0.16 0.17 0.17
Pro forma ESOP
adjustments(3)............. (0.02) (0.02) (0.02) (0.02)
Pro forma 1997 MRP
adjustments(4)............. (0.02) (0.02) (0.02) (0.02)
---------- ---------- ---------- ----------
Pro forma net income per
share...................... $ 0.53 $ 0.47 $ 0.43 $ 0.39
========== ========== ========== ==========
Offering price as a percentage
of pro forma net earnings per
share........................ 18.87% 21.28% 23.26% 25.64%
Number of shares used in
earnings per share
calculations................. 1,237,497 1,455,879 1,674,261 1,925,400
Stockholders' equity (book
value):
Historical(10).............. $ 12,684 $ 12,684 $ 12,684 $ 12,684
Estimated net proceeds...... 6,385 7,585 8,785 10,165
Less: Common Stock acquired
by ESOP.................... (476) (560) (644) (741)
Less: Common Stock acquired
by 1997 MRP(4)............. (204) (240) (276) (317)
---------- ---------- ---------- ----------
Pro forma stockholders'
equity(7).................. $ 18,389 $ 19,469 $ 20,549 $ 21,791
========== ========== ========== ==========
Stockholders' equity per share
(does not reflect
SOP 93-6)(6)(8):
Historical(6)(10)........... $ 9.92 $ 8.43 $ 7.33 $ 6.38
Estimated net proceeds...... 5.00 5.05 5.08 5.11
Less: Common Stock acquired
by ESOP.................... (0.37) (0.37) (0.37) (0.37)
Less: Common Stock acquired
by 1997 MRP(4)............. (0.16) (0.16) (0.16) (0.16)
---------- ---------- ---------- ----------
Pro forma stockholders'
equity per share(9)........ $ 14.39 $ 12.95 $ 11.88 $ 10.96
========== ========== ========== ==========
Pro forma tangible
stockholders' equity per
share...................... $ 14.39 $ 12.95 $ 11.88 $ 10.96
========== ========== ========== ==========
Offering price as a percentage
of pro forma stockholders'
equity per share............. 69.49% 77.22% 84.18% 91.24%
Offering price as a percent of
pro forma tangible equity.... 69.49% 77.22% 84.18% 91.24%
Number of shares used in book
value per share
calculations................. 1,278,195 1,503,759 1,729,323 1,988,721
</TABLE>
28
<PAGE>
- --------
(1) Gives effect to the sale of an additional 138,000 shares of Conversion
Stock in the Conversion and Reorganization, which may be issued to cover
an increase in the pro forma market value of the Conversion Stock and
Exchange Shares without the resolicitation of subscribers or any right of
cancellation. The issuance of such additional shares will be conditioned
on a determination by RP Financial that such issuance is compatible with
its determination of the estimated pro forma market value of the
Conversion Stock and Exchange Shares. See "The Conversion and
Reorganization--Stock Pricing, Exchange Ratio and Number of Shares to be
Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing shares of Conversion Stock. Since funds on deposit
at the Association may be withdrawn to purchase shares of Conversion
Stock (which will reduce deposits by the amount of such purchases), the
net amount of funds available to the Association for investment following
receipt of the net proceeds of the Offering will be reduced by the amount
of such withdrawals.
(3) It is assumed that 7% of the shares of Conversion Stock issued in the
Conversion and Reorganization 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 and Reorganization, which rate is
currently %) from the net proceeds from the Offering retained by the
Holding Company. The amount of this borrowing has been reflected as a
reduction from gross proceeds to determine estimated net investible
proceeds. The Association intends to make contributions to the ESOP at
least equal to the principal and interest requirement of the debt. As the
debt is repaid, stockholders' equity will be increased. The Association's
payment of the ESOP debt is based upon equal installments of principal
over a 10-year period, assuming a combined federal and state income tax
rate of 37.5%. Interest income earned by the Holding Company on the ESOP
debt offsets the interest paid by the Association on the ESOP loan. No
reinvestment is assumed on proceeds contributed to fund the ESOP. The
ESOP expense reflects adoption of Statement of Position ("SOP") 93-6,
which will require recognition of expense based upon shares committed to
be released and the exclusion of unallocated shares from earnings per
share computations. The valuation of shares committed to be released
would be based upon the average market value of the shares during the
year, which, for purposes of this calculation, was assumed to be equal to
the $10.00 per share Purchase Price. See "Management of the Holding
Company and Association--Employee Benefit Plans--Employee Stock Ownership
Plan."
(4) In calculating the pro forma effect of the 1997 MRP, it is assumed that
the required stockholder approval has been received, that the shares were
acquired by the 1997 MRP at the beginning of the period presented in open
market purchases at the Purchase Price, that 20% of the amount
contributed was an amortized expense during such period, and that the
combined federal and state income tax rate is 37.5%. The issuance of
authorized but unissued shares of the Common Stock instead of open market
purchases would dilute the voting interests of existing stockholders by
approximately 1.57% and pro forma net income per share would be $.52,
$.46, $.42 and $.38 at the minimum, midpoint, maximum and 15% above the
maximum of the Offering Price Range for the year ended March 31, 1997,
respectively, and pro forma stockholders' equity per share would be
$14.32, $12.90, $11.85 and $10.94 at the minimum, midpoint, maximum and
15% above the maximum of the Offering Price Range at March 31, 1997,
respectively. Shares issued under the 1997 MRP vest 20% per year and, for
purposes of this table, compensation expense is recognized on a straight-
line basis over each vesting period. In the event the fair market value
per share is greater than $10.00 per share on the date shares are awarded
under the 1997 MRP, total 1997 MRP expense would increase. The total
estimated 1997 MRP expense was multiplied by 20% (the total percent of
shares for which expense is recognized in the first year) resulting in
pre-tax 1997 MRP expense of $40,800, $48,000, $55,200 and $63,480 at the
minimum, midpoint, maximum and 15% above the maximum of the Offering
Price Range for the fiscal year ended March 31, 1997, respectively. No
effect has been given to the shares reserved for issuance under the
proposed 1997 Stock Option Plan. If stockholders approve the 1997 Stock
Option Plan following the Conversion and Reorganization, the Holding
Company will have reserved for issuance under the 1997 Stock Option Plan
authorized but unissued shares of Common Stock representing an amount of
shares equal to 10% of the shares of Conversion Stock sold in the
Offering. If all of the options were to be exercised utilizing these
authorized but unissued shares rather than treasury shares which could be
acquired, the voting and ownership interests of existing stockholders
would be diluted by
29
<PAGE>
approximately 5.05%. Assuming stockholder approval of the 1997 Stock
Option Plan and that all options were exercised at the end of the year
ended March 31, 1997 at an exercise price of $10.00 per share, pro forma
net earnings per share would be $.50, $.45, $.41 and $.37, respectively,
for the year ended March 31, 1997, and pro forma stockholders' equity per
share would be $14.17, $12.80, $11.79 and $10.91, respectively, for the
year ended March 31, 1997 at the minimum, midpoint, maximum and 15% above
the maximum of the Offering Price Range. See "Management of the Holding
Company and Association--Employee Benefit Plans--1997 Stock Option Plan"
and "--Employee Benefit Plans--1997 Management Recognition Plan" and "Risk
Factors--Possible Dilutive Effect of Issuance of Additional Shares."
(5) Per share amounts are based upon shares outstanding of 1,237,497,
1,455,879, 1,674,261 and 1,925,400 at the minimum, midpoint, maximum and
15% above the maximum of the Offering Price Range for the fiscal year
ended March 31, 1997, respectively, which includes the shares of
Conversion Stock sold in the Offering, less the number of shares assumed
to be held by the ESOP not committed to be released within the first year
following the Conversion and Reorganization.
(6) Historical per share amounts have been computed as if the Conversion
Stock expected to be issued in the Conversion and Reorganization 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 and Reorganization, the additional ESOP
expense or the proposed 1997 MRP expense, as described above.
(7) "Book value" represents the difference between the stated amounts of the
Association'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 and Reorganization, or the federal income tax consequences of
the restoration to income of the Association's special bad debt reserves
for income tax purposes which would be required in the unlikely event of
liquidation. 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 1,278,195,
1,503,759, 1,729,323, 1,988,721 at the minimum, midpoint, maximum and 15%
above the maximum of the Offering Price Range, respectively.
(9) Does not represent possible future price appreciation or depreciation of
the Common Stock.
(10) Historical book value includes $50,000 of assets currently held at the
Mutual Holding Company level, and which will be consolidated with the
Association's book value.
30
<PAGE>
PROPOSED SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, for each of the Holding Company's directors
and executive officers and for all of the directors and executive officers as
a group, (1) the number of Exchange Shares to be beneficially held upon
consummation of the Conversion and Reorganization, based upon their beneficial
ownership of Association Shares as of May 31, 1997 (see "Beneficial Ownership
of Capital Stock"), (2) the proposed purchases of Conversion Stock, assuming
sufficient shares are available to satisfy their subscriptions, and (3) the
total amount of Common Stock to be held upon consummation of the Conversion
and Reorganization, in each case assuming that 800,000 shares of Conversion
Stock are sold, which is the midpoint of the Offering Price Range.
<TABLE>
<CAPTION>
PROPOSED PURCHASES TOTAL COMMON STOCK
OF CONVERSION TO BE BENEFICIALLY
STOCK HELD(2)
BENEFICIAL ------------------ ------------------
OWNERSHIP OF NUMBER
EXCHANGE NUMBER OF PERCENTAGE
NAME SHARES(1) AMOUNT OF SHARES SHARES OF TOTAL
- ---- ------------ -------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
LeRoy C. Crook.............. 89 $ 15,000 1,500 1,589 *
Kenneth J. Hrdlicka......... 3,527 $ 50,000 5,000 8,527 *
Michael J. Walsh............ 14,965 $ 35,000 3,500 18,465 1.23%
Richard C. Fellhauer........ 42,703 $100,000 10,000 52,703 3.50%
Daniel C. Aubuchon.......... 4,736 $ 50,000 5,000 9,736 *
Stacey W. Braswell.......... 5,545 $100,000 10,000 15,545 1.03%
Berenice J. Mahacek......... 14,503 $100,000 10,000 24,503 1.63%
Charles J. Wolter........... 4,563 $ 25,000 2,500 7,063 *
Michael A. Deelo............ 27,368 $100,000 10,000 37,368 2.48%
Leonard O. Wolter........... 10,209 $ 35,000 3,500 13,709 *
All directors and executive
officers of the Holding
Company as a group (ten
persons)................... 128,208 $610,000 61,000 189,208 12.58%
</TABLE>
- --------
(1) Excludes shares which may be received upon the exercise of outstanding
stock options. Based upon the Exchange Ratio of 1.7981 Exchange Shares for
each Public Association Share at the midpoint of the Offering Price Range.
(2) Excludes stock options and awards to be granted under the Company's 1997
Stock Option Plan and 1997 MRP if such plans are approved by stockholders
following the Conversion and Reorganization. See "Management of the
Company--Employee Benefit Plans."
* Less than 1%.
31
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
CONSOLIDATED STATEMENTS OF INCOME
The Consolidated Statements of Income of the Association for each of the
three years ended March 31, 1997 have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears elsewhere in this
Prospectus. KPMG Peat Marwick LLP did not audit the financial statements of
Equality Mortgage Corporation (a consolidated subsidiary), which statements
reflect total assets constituting 3% and 7% in 1997 and 1996, respectively, and
total interest income and other income constituting 17%, 19%, and 17% in 1997,
1996, and 1995, respectively, of the related consolidated totals. Those
statements were audited by other auditors whose report has been furnished to
KPMG Peat Marwick LLP, and whose opinion, insofar as it relates to the amounts
included for Equality Mortgage Corporation, is based solely on the report of
the other auditors. The Consolidated Statements of Income should be read in
conjunction with the Association's Consolidated Financial Statements and
related Notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MARCH
31,
------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Interest income:
Loans receivable....................... $ 7,448,854 $ 7,046,845 $5,868,970
Investment securities and interest-
bearing deposits...................... 4,399,442 3,723,795 2,950,035
Mortgage-backed securities............. 1,530,005 1,333,153 777,025
Other.................................. 231,968 171,569 101,041
----------- ----------- ----------
Total interest income.................... 13,610,269 12,275,362 9,697,071
Interest expense:
Savings deposits....................... 5,682,184 5,728,828 5,323,168
Advances from Federal Home Loan Bank... 3,377,929 2,742,672 740,721
Other borrowed money................... 51,976 69,226 67,951
----------- ----------- ----------
Total interest expense................... 9,112,089 8,540,726 6,131,840
Net interest income...................... 4,498,180 3,734,636 3,565,231
Provision for losses on loans............ 50,000 31,225 9,000
----------- ----------- ----------
Net interest income after provision for
losses on loans......................... 4,448,180 3,703,441 3,556,231
Noninterest income:
Gain on sales of mortgage loans........ 1,120,907 1,248,346 775,330
Loan servicing fees and late charges... 747,289 673,142 682,296
Gain (loss) on sale of investment and
mortgage-backed securities available
for sale, net......................... 7,284 (8,280) (34,202)
Equity in earnings (loss) of joint
ventures.............................. (2,433) (29,634) 188,022
Rental income.......................... 172,581 309,173 355,419
Other.................................. 523,451 516,356 307,734
----------- ----------- ----------
Total noninterest income................. 2,569,079 2,709,103 2,274,599
Noninterest expense:
Salaries and employee benefits......... 2,917,772 2,905,168 2,845,846
Occupancy.............................. 481,620 486,751 457,556
Data processing........................ 192,333 191,739 172,922
Advertising............................ 90,363 76,071 47,027
Federal insurance premiums............. 216,451 277,417 298,494
Savings Association Insurance Fund
special assessment.................... 788,770 -- --
Other.................................. 1,521,719 1,404,130 1,499,063
----------- ----------- ----------
Total noninterest expense................ 6,209,028 5,341,276 5,320,908
Income before income tax expense......... 808,231 1,071,238 509,922
Income tax expense....................... 303,459 417,782 188,247
----------- ----------- ----------
Net income............................... $ 504,772 $ 653,456 $ 321,675
=========== =========== ==========
Earnings per share....................... $ 0.61 $ 0.80 $ 0.39
=========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
32
<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 Association's financial
condition, changes in financial condition and results of operations. The
information contained in this section should be read in conjunction with the
Consolidated Financial Statements, the accompanying Notes to Consolidated
Financial Statements and the other sections contained in this Prospectus.
The Association attracts deposits from the general public and uses these
deposits, together with other funding sources, to originate or invest in
residential and other mortgage loans and, to a lesser extent, nonmortgage
loans, investments, and other assets. Because the Association is primarily
dependent on net interest margin (interest income from loans and investments
minus interest expense on deposit accounts and borrowed money) for earnings,
the focus of the Association's planning has been to devise and employ
strategies that provide a stable, positive spread between the yield on
interest-earning assets and the cost of interest-bearing liabilities in order
to maximize the dollar amount of net interest income.
A substantial portion of the Association's operations and income is derived
from the operations of EMC. EMC provides several benefits to the Association,
including, among other things, originating a variety of mortgage loan products
for the Association's portfolio and generating fee income for the Association
through its activities in the secondary mortgage market. EMC's mortgage-
banking activities produce primarily two types of income--gain on sale of
mortgage loans and loan servicing fees and late charges. EMC's mortgage-
banking activities consist of the origination, purchase, and sale of
residential mortgage loans.
33
<PAGE>
AVERAGE BALANCE SHEET
The following table sets forth, for the periods indicated, information
regarding average balances of interest-earning assets and interest-bearing
liabilities as well as the total dollar amounts of interest income from
average interest-earning assets and interest expense on average interest-
bearing liabilities, resultant yields, interest rate spread, net interest
margin, and ratio of average interest-earning assets to average interest-
bearing liabilities. Average balances for a period have been calculated using
the average of month-end balances during such period. Management of the
Association does not believe that the use of month-end balances results in
averages that are materially different from those calculated using daily
average balances.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ---------------------------- ----------------------------
INTEREST INTEREST INTEREST
AVERAGE AND YIELD/ AVERAGE AND YIELD/ AVERAGE AND YIELD/
BALANCE(1) DIVIDENDS COST BALANCE(1) DIVIDENDS COST BALANCE(1) DIVIDENDS COST
---------- --------- ------- ---------- --------- ------- ---------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans(2)(3).. $ 96,113 $ 7,265 7.56% $ 90,257 $ 6,879 7.62% $ 74,339 $5,724 7.70%
Consumer loans(2)..... 2,091 182 8.70% 1,926 168 8.72% 1,830 145 7.92%
Commercial loans(2)... 107 2 11.21% -- -- -- % -- -- -- %
-------- ------- -------- ------- -------- ------
Total loans receivable.. 98,311 7,449 7.58% 92,183 7,047 7.65% 76,169 5,869 7.71%
Investment
securities........... 63,710 3,931 6.17% 45,945 2,827 6.15% 38,187 2,064 5.41%
Interest-bearing
deposits............. 7,738 468 6.05% 13,290 897 6.75% 17,285 886 5.13%
Mortgage-backed
securities........... 21,778 1,530 7.03% 24,642 1,333 5.41% 16,105 777 4.83%
FHLB stock............ 3,300 232 7.03% 2,438 171 7.01% 1,256 101 8.04%
-------- ------- -------- ------- -------- ------
Total interest-earning
assets................. $194,837 $13,610 6.99% $178,498 $12,275 6.88% $149,002 $9,697 6.51%
------- ------- ------
Interest-bearing
liabilities:
Regular savings....... $ 21,846 $ 546 2.50% $ 22,398 $ 562 2.51% $ 25,851 $ 695 2.69%
NOW accounts.......... 11,325 169 1.49% 10,884 186 1.71% 10,835 200 1.85%
Money market
accounts............. 5,402 151 2.80% 6,298 176 2.80% 9,490 265 2.79%
Certificates of
deposit.............. 84,102 4,816 5.73% 83,463 4,805 5.76% 79,854 4,163 5.21%
-------- ------- -------- ------- -------- ------
Total savings deposits.. 122,675 5,682 4.63% 123,043 5,729 4.66% 126,030 5,323 4.22%
FHLB advances......... 61,917 3,378 5.46% 46,000 2,742 5.96% 14,417 741 5.14%
Other interest-bearing
liabilities.......... 2,409 52 2.16% 2,374 69 2.91% 2,320 68 2.93%
-------- ------- -------- ------- -------- ------
Total interest-bearing
liabilities............ $187,001 $ 9,112 4.87% $171,417 $ 8,540 4.98% $142,767 $6,132 4.30%
------- ------- ------
Net interest income..... $ 4,498 $ 3,735 $3,565
======= ======= ======
Interest rate spread.... 2.12% 1.90% 2.21%
Net interest margin(4).. 2.31% 2.09% 2.39%
Ratio of average
interest-earning assets
to average interest-
bearing liabilities.... 104.19% 104.13% 104.37%
</TABLE>
- -------
(1) Average balances are computed on a monthly basis (month-end balances).
(2) Does not include interest on loans 90 days or more past due.
(3) Includes loans held for sale.
(4) Net interest income divided by average interest-earning assets.
Note: At March 31, 1997, the weighted average yields on certain interest-
earning assets and the weighted average cost on certain interest-bearing
liabilities were as follows: loans receivable, 7.65%; mortgage-backed
securities, 6.95%; investment securities, 6.91%; total interest-earning
assets, 7.30%; savings deposits, 4.63%; borrowed money, 5.30%; total
interest-bearing liabilities, 4.86%; and interest rate spread, 2.44%.
34
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth the effects of changing rates and volumes on
the Association's net interest income. Information is provided with respect to
(i) effects on interest income attributable to changes in rate (changes in
rate multiplied by prior volume); (ii) effects on interest income attributable
to changes in volume (changes in volume multiplied by prior rate); and (iii)
changes in rate/volume.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH FISCAL YEAR ENDED MARCH
FISCAL YEAR ENDED MARCH 31, 31,
31, 1996 COMPARED TO 1995 1995 COMPARED TO 1994
1997 COMPARED TO 1996 INCREASE (DECREASE) DUE INCREASE (DECREASE) DUE
INCREASE (DECREASE) DUE TO TO TO
---------------------------- ---------------------------- ----------------------------
RATE/ RATE/ RATE/
RATE VOLUME VOLUME NET RATE VOLUME VOLUME NET RATE VOLUME VOLUME NET
----- ------ ------ ------ ---- ------ ------ ------ ----- ------ ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans(1)...... $ (54) $ 446 $ (6) $ 386 $(59) $1,226 $ (12) $1,155 $(464) $ 757 $ (63) $ 230
Consumer loans(1)...... -- 14 -- 14 15 8 -- 23 (5) (3) -- (8)
Commercial loans(1).... -- -- 2 2 -- -- -- -- -- -- -- --
----- ------ ---- ------ ---- ------ ----- ------ ----- ----- ----- -----
Total loans receivable.. (54) 460 (4) 402 (44) 1,234 (12) 1,178 (469) 754 (63) 222
Investment securities.. 9 1,093 2 1,104 283 420 60 763 215 (58) (7) 150
Interest-bearing
deposits.............. (93) (375) 39 (429) 280 (205) (64) 11 74 (418) (25) (369)
Mortgage-backed
securities............ 399 (155) (47) 197 94 412 50 556 (74) 406 (59) 273
FHLB stock............. -- 60 1 61 (13) 95 (12) 70 -- 2 (1) 1
----- ------ ---- ------ ---- ------ ----- ------ ----- ----- ----- -----
Total net change in
income on interest-
earning assets......... 261 1,083 (9) 1,335 600 1,956 22 2,578 (254) 686 (155) 277
Interest-bearing
liabilities:
Regular savings........ (2) (14) -- (16) (47) (93) 7 (133) (63) (37) 3 (97)
NOW accounts........... (24) 8 (1) (17) (15) 1 -- (14) 12 (19) (1) (8)
Money market accounts.. -- (25) -- (25) 1 (89) (1) (89) (25) (71) 6 (90)
Certificates of
deposit............... (25) 37 (1) (11) 439 188 15 642 (195) (274) 13 (456)
----- ------ ---- ------ ---- ------ ----- ------ ----- ----- ----- -----
Total savings deposits.. (51) 6 (2) (47) 378 7 21 406 (271) (401) 21 (651)
FHLB advances.......... (230) 949 (83) 636 118 1,623 260 2,001 2 559 174 735
Other interest-bearing
liabilities........... (18) 1 -- (17) (1) 2 -- 1 8 10 2 20
----- ------ ---- ------ ---- ------ ----- ------ ----- ----- ----- -----
Total net change in
expense on interest-
bearing liabilities.... (299) 956 (85) 572 495 1,632 281 2,408 (261) 168 197 104
----- ------ ---- ------ ---- ------ ----- ------ ----- ----- ----- -----
Net change in interest
income................. $ 560 $ 127 $ 76 $ 763 $105 $ 324 $(259) $ 170 $ 7 $ 518 $(352) $ 173
===== ====== ==== ====== ==== ====== ===== ====== ===== ===== ===== =====
</TABLE>
- -------
(1) Does not include interest on loans 90 days or more past due.
35
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The Association has employed various strategies intended to manage the
effect of interest rate risk on its future operations. Progress has been made
toward restructuring the composition of the loan portfolio, and liquidity has
been accumulated into investments in U.S. government and agency notes and
bonds.
Adjustable-rate mortgages, shorter-term consumer loans and commercial
business loans are among the tools currently utilized by the Association to
restructure the loan portfolio. The proper pricing of deposit accounts is also
significant. During periods of low or declining rates, the long-term deposits
extend attractive rates while in periods of high rates, the short-term deposit
accounts are competitively priced. This position allows the Association to
benefit from the ability to reprice as necessary based on market conditions.
Through EMC, the Association has focused on the origination of adjustable-
rate mortgages that reprice based on fluctuations in interest rates. Fixed-
rate mortgage loan originations are generally sold in the secondary market. In
addition, EMC's loan servicing operations have been a significant source of
noninterest income to the Association.
The principal objective of the Association's interest rate risk management
function is to evaluate the interest rate risk included in certain balance
sheet accounts, determine the level of risk appropriate given the
Association's business strategy, operating environment, capital and liquidity
requirements and performance objectives, and manage the risk consistent with
the Board of Directors' approved guidelines. Through such management, the
Association seeks to monitor the vulnerability of its operations to changes in
interest rates. The extent of the movement of interest rates is an uncertainty
that could have a negative effect on the earnings of the Association. See
"Risk Factors--Effect of Interest Rates."
The Association's interest rate sensitivity is monitored by management,
through the use of a model produced by the FHLB of Des Moines, on a quarterly
basis based upon custom data submitted by the Association and on the
Association's quarterly Thrift Financial Reports. The model generates
estimates of an immediate change in net interest income ("NII") and MVE that
would occur in the event of an immediate change in interest rates, without
giving effect to any steps that management of the Association might take to
counteract that change. MVE is the difference between incoming and outgoing
discounted cash flows from assets, liabilities and off-balance sheet
contracts. The MVE ratio, under any interest rate scenario, is defined as the
MVE in that scenario divided by the market value of assets in the same
scenario.
36
<PAGE>
The following table presents the Association's MVE at March 31, 1997, as
calculated by the FHLB of Des Moines based on information provided to the FHLB
of Des Moines by the Association. At March 31, 1997, the changes in MVE in the
various interest rate scenarios noted below were within the limits approved by
the Association's Board of Directors.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
- ----------------------------------------------------------------------
MARKET VALUE OF EQUITY MVE AS % OF PV OF ASSETS
- ------------------------------------------ ---------------------------
CHANGE IN RATE $ AMOUNT $ CHANGE % CHANGE MVE RATIO BP CHANGE
- -------------- -------- -------- -------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
+ 400bp 8,956 (6,631) (42.5) 5.20 - 284
+ 300 10,444 (5,144) (33.0) 5.94 - 210
+ 200 12,182 (3,405) (21.8) 6.67 - 137
+ 100 13,967 (1,620) (10.4) 7.36 - 68
0 15,587 -- -- 8.04 --
- 100 16,931 1,344 8.6 8.39 + 35
- 200 17,864 2,277 14.6 8.73 + 69
- 300 18,791 3,203 20.6 8.93 + 89
- 400 19,717 4,130 26.5 9.13 + 109
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1997
-----------------
<S> <C>
RISK MEASURES: 200 BP RATE SHOCK:
Pre-Shock MVE Ratio: MVE as % of PV of Assets......... 8.04
Exposure Measure: Post-Shock MVE Ratio................ 6.67
Sensitivity Measure: Change in MVE Ratio.............. - 137bp
CALCULATION OF CAPITAL COMPONENT:
Change in MVE as % of PV of Assets.................... - 176bp
</TABLE>
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the
Association's assets mature or reprice more quickly than its liabilities, the
Association's MVE would increase during periods of rising interest rates but
decrease during periods of falling interest rates. If the Association's assets
mature or reprice more slowly than its liabilities, the Association's MVE
would decrease during periods of rising interest rates but increase during
periods of falling interest rates.
Certain shortcomings are inherent in the methodology used in the above
interest rate risk measurements. Modeling changes in MVE requires the making
of certain assumptions that may or may not reflect the manner in which actual
yields and costs respond to changes in market interest rates. In this regard,
the MVE model presented assumes that the composition of the Association's
interest sensitive assets and liabilities existing at the beginning of a
period remains constant over the period being measured and also assumes that a
particular change in interest rates is reflected uniformly across the yield
curve regardless of the duration to maturity or repricing of specific assets
and liabilities. Accordingly, although the MVE measurements provide an
indication of the Association's interest rate risk exposure at a particular
point in time, such measurements are not intended to and do not provide a
precise forecast of the effect of changes in market interest rates on the
Association's net interest income and will differ from actual results.
LIQUIDITY AND CAPITAL RESOURCES
The Association's primary sources of funds are deposits, borrowings,
amortization and prepayment of loan principal (including mortgage-backed
securities) and, to a lesser extent, maturities of investment securities,
short-term investments, and operations. While scheduled loan repayments and
maturing investments are relatively predictable, deposit flows and early loan
repayments are more influenced by interest rates, general economic conditions,
and competition. The Association attempts to price its deposits to meet its
asset/liability objectives discussed above, consistent with local market
conditions. Excess balances are temporarily invested in overnight funds. In
addition, the Association is eligible to borrow funds from the FHLB of Des
Moines.
37
<PAGE>
Under OTS regulations, a member thrift institution is required to maintain
an average daily balance of liquid assets (cash, certain time deposits and
savings accounts, bankers' acceptances, 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 of its net withdrawable
accounts plus short-term borrowings. This liquidity requirement, which is
currently 5.0%, may be changed from time to time by the OTS to any amount
within the range of 4.0% to 10.0%, depending upon economic conditions and the
savings flow of member associations. Existing OTS regulations also require
each member 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 savings accounts and borrowings payable in one year or less.
Monetary penalties may be imposed for failure to meet liquidity requirements.
The short-term and total liquidity ratios of the Association at March 31, 1997
were 3.1% and 16.9%, respectively.
The primary investing activity of the Association is lending. During the
fiscal year ended March 31, 1997, the Association originated $73.3 million of
loans, of which $71.0 million were residential mortgage loans, purchased $5.9
million of loans, and sold $61.5 million of loans in the secondary market. In
addition, $16.4 million of loans were converted into mortgage-backed
securities and sold.
Liquidity management is both a short- and long-term responsibility of the
Association's management. The Association adjusts its investments in liquid
assets based upon management's assessment of (i) expected loan demand, (ii)
projected loan sales, (iii) expected deposit flows, (iv) yields available on
interest-bearing deposits, and (v) liquidity of its asset/liability management
program. Excess liquidity is invested generally in interest-bearing overnight
deposits and other short-term government and agency obligations. If the
Association requires funds beyond its ability to generate them internally, it
has additional borrowing capacity with the FHLB of Des Moines and collateral
eligible for repurchase agreements.
The Association anticipates that it will have sufficient funds available to
meet current loan commitments. At March 31, 1997, the Association had
outstanding commitments to originate loans of $953,000.
Certificates of deposit scheduled to mature in one year or less at March 31,
1997 totaled $36.3 million. Based upon management's experience and familiarity
with the customers involved and the Association's pricing policy relative to
that of its competitors, management believes the Association will retain a
significant portion of these deposits.
EFFECT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto included in this
Prospectus 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 changes in the relative purchasing power of
money over time due to inflation. The impact of inflation is reflected in the
increased cost of the Association's operations. Unlike industrial companies,
nearly all of the assets and liabilities of the Association are monetary in
nature. As a result, interest rates have a greater impact on the Association's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
FINANCIAL CONDITION
The total assets of the Association increased approximately $5.0 million, or
2.6%, to $200.8 million at March 31, 1997 from $195.8 million at March 31,
1996. This increase in asset size primarily relates to the purchase of
investment securities and the origination of mortgage loans, which were funded
through cash reserves, sales of mortgage-backed securities, and advances from
the FHLB of Des Moines.
Investment securities available for sale increased by approximately $31.2
million, or 80.3%, to $70.1 million at March 31, 1997 from $38.9 million at
March 31, 1996. This increase resulted from the application of proceeds
38
<PAGE>
generated by the sale of mortgage-backed securities, which were sold to fund
the investment in higher-yielding agency securities, and from advances from
the FHLB of Des Moines.
Loans held for investment totaled $91.9 million at March 31, 1997, an
increase of approximately $8.0 million, or 9.5%, from the March 31, 1996
balance of $83.9 million. This increase is primarily the result of continued
portfolio mortgage lending on one-to four-family residences, offset by
principal repayments.
Investment in real estate decreased $1.0 million, or 54.2%, from $1.9
million at March 31, 1996 to $870,000 at March 31, 1997 as a result of the
sale of a multifamily investment property by Equality Commodity Corporation, a
wholly-owned subsidiary of the Association ("ECC"), at a $106,000 gain.
Savings deposits totaled $123.0 million at March 31, 1997, a decrease of
approximately $1.5 million, or 1.2%, from the March 31, 1996 balance of $124.5
million. Interest credited during March 31, 1997 was approximately $4.3
million.
FHLB advances increased $7.0 million, or 12.5%, to $63.0 million at March
31, 1997 from $56.0 million at March 31, 1996. Proceeds from these advances
were used to fund the increase in investment securities available for sale and
to fund mortgage loans.
Other borrowed money decreased by $57,000, or 4.3%, to $1.2 million at March
31, 1997 from $1.3 million at March 31, 1996. The note payable to bank relates
to EMC, the proceeds of which were invested solely in residential mortgage
loans. The ESOP debt is included on the balance sheet of the Association as
the debt is guaranteed by the Association.
RESULTS OF OPERATIONS
The operating results of the Association depend primarily on its net
interest income, which is the difference between interest income on interest-
earning assets, primarily loans, investment securities, and mortgage-backed
securities, and interest expense on interest-bearing liabilities, primarily
deposits and borrowed money. The Association's net income also is affected by
the establishment of provisions for losses on loans and the level of its other
income, loan servicing fees, deposit service charges, the results of real
estate activities, gain on sales of mortgage loans, as well as its other
expenses and income tax provisions.
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO MARCH 31, 1996
Net Income. Net income decreased $148,000, or 22.8%, from $653,000 in 1996
to $505,000 in 1997. The decrease was primarily a result of legislation passed
by Congress to recapitalize the Savings Association Insurance Fund ("SAIF"),
in which the Association was assessed a one-time-deposit-insurance premium
(like all other SAIF-insured institutions) of $789,000 on November 27, 1996,
offset by an increase of $764,000, or 20.4%, in net interest income and a
reduction of $114,000, or 27.4%, in income tax expense. Without giving effect
to the special assessment, net income for the fiscal year ended March 31, 1997
would have been $986,000, an increase of $333,000, or 50.9%, when compared to
the fiscal year ended March 31, 1996.
Interest Income. Interest income increased $1.3 million, or 10.9%, from
$12.3 million in 1996 to $13.6 million in 1997. Interest on loans receivable
increased by $402,000, or 5.7%, to $7.4 million in 1997 as compared to $7.0
million in 1996. This increase was primarily due to an increase in the average
balance of loans outstanding from $92.2 million in 1996 to $98.3 million in
1997, offset by a decrease in the yield on loans from 7.65% in 1996 to 7.58%
in 1997. The higher average balance of loans outstanding in 1997 reflects an
increase in mortgage loan portfolio lending. Interest on investment securities
increased $1.1 million, or 38.9%, from $2.8 million in 1996 to $3.9 million in
1997 due to an increase in the average balance of investment securities from
$45.9 million in 1996 to $63.7 million in 1997. During the same period, the
yield on investment securities increased from 6.15% in 1996 to 6.17% in 1997.
Interest income on mortgage-backed securities increased $197,000, or 14.8%,
from $1.3 million in 1996 to $1.5 million in 1997 due to an increase in the
yield on
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<PAGE>
mortgage-backed securities from 5.41% in 1996 to 7.03% in 1997, offset by a
decrease in the average balances from $24.6 million in 1996 to $21.8 million
in 1997.
Interest Expense. Interest expense increased from $8.5 million in 1996 to
$9.1 million in 1997. The increase of $572,000, or 6.7%, resulted primarily
from increased average FHLB advances. The weighted average cost of deposits
decreased from 4.66% in 1996 to 4.63% in 1997, while average deposit balances
decreased $368,000, or 0.3%, from $123.0 million in 1996 to $122.7 million in
1997. Average advances from the FHLB increased $15.9 million, or 34.6%, to
$61.9 million in 1997 compared to $46.0 million in 1996. The weighted average
cost of advances decreased 50 basis points from 5.96% in 1996 to 5.46% in 1997
due to effective borrowing programs offered by the FHLB.
Provision for Losses on Loans. Provision for losses on loans increased
$19,000, or 60.1%, from $31,000 in 1996 to $50,000 in 1997. The provision for
losses on loans is based on management's evaluation of the credit risk
inherent in the loan portfolio and the amount required to be maintained in the
allowance for loan losses. The provision in 1997 was made in response to the
Association's entry into the commercial business lending area. The
Association's allowance for loan losses totaled $283,000 at March 31, 1997 and
$233,000 at March 31, 1996. Management believes the allowance for loan losses
is adequate.
Noninterest Income. Noninterest income decreased $139,000, or 5.2%, from
$2.7 million in 1996 to $2.6 million in 1997. The decrease is due primarily to
gain on sales of mortgage loans that decreased from $1.2 million in 1996 to
$1.1 million in 1997, and a reduction in rental income of $137,000 due to the
sale of a 26 unit residential rental property in June 1996, offset by
increased loan servicing fees and late charges which increased $74,000, or
11.0%, from $673,000 in 1996 to $747,000 in 1997. The decrease of $127,000, or
10.2%, on gain on sales of mortgage loans was due to unfavorable market
conditions during the first and second quarters of 1996. The Association,
through EMC, sold $77.8 million of mortgage loans in 1997 as compared to $77.9
million in 1996. In addition to the minor decrease in sales volume of
$100,000, gain on sale of mortgage loans decreased compared to 1996 due to the
condition of the secondary mortgage market. Loan servicing fees and late
charges increased due primarily to an increase in the servicing portfolio of
EMC. Loans serviced by EMC increased $29.0 million, or 9.9%, from $294.0
million at March 31, 1996 to $323.0 million at March 31, 1997.
Noninterest Expense. Noninterest expense increased $868,000, or 16.3%, from
$5.3 million in 1996 to $6.2 million in 1997, due primarily to legislation
passed by Congress to recapitalize the SAIF in which the Association was
assessed a one-time insurance premium of $789,000, as well as an increase of
$136,000, or 283.3%, in amortization of originated mortgage servicing rights
("OMSR") from $50,000 in 1996 to $185,000 in 1997. The increase in
amortization of OMSR is the result of increased mortgage loan refinancing
activity and increased average balances subject to OMSR.
Income Taxes. Income tax expense decreased from $418,000 in 1996 to $303,000
in 1997. The decrease of $115,000, or 27.4%, was the result of the decrease in
income before income tax expense of $263,000. The effective tax rate was
approximately 37.5% and 39.0% in 1997 and 1996, respectively.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO MARCH 31, 1995
Net Income. The Association reported net income of $653,000 in 1996 as
compared to $322,000 in 1995. The increase in net income of $331,000, or
103.1%, is mainly attributed to increased gain on sales of mortgage loans of
$473,000 and increased net interest income of $170,000 offset by increased
income tax expense of $230,000. During the period, the Association experienced
improved loan demand and fluctuating market interest rates that resulted in
increased mortgage lending activity. For 1996, the Association sold $66.6
million of mortgage loans as compared to $26.7 million in 1995. The increased
volume of $39.9 million resulted in a higher level of gain on sales of
mortgage loans.
Interest Income. Interest income increased from $9.7 million in 1995 to
$12.3 million in 1996. The increase of $2.6 million, or 26.6%, resulted
primarily from an increase in the interest on loans receivable, an
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increase in interest on investment securities, and an increase in interest on
mortgage-backed securities. Interest on loans receivable increased by $1.2
million, or 20.1%, to $7.0 million in 1996. This increase resulted from an
increase in the average balance of loans outstanding from $76.2 million in
1995 to $92.2 million in 1996, offset by a decrease in the average yield on
loans from 7.71% in 1995 to 7.65% in 1996. The higher balance of loans
outstanding during 1996 reflects an increase in adjustable rate portfolio
mortgage lending. While the Association continued to originate a variety of
mortgage loans, fixed-rate originations were generally sold in the secondary
market and adjustable rate loans were retained for the Association's
portfolio. Interest on investment securities and interest-bearing deposits
increased $774,000, or 26.2%, to $3.7 million in 1996 from $3.0 million in
1995 as a result of the reinvestment of proceeds from sales and maturities
into higher yielding U.S. government and agency obligations. The increase is
mainly attributed to an increase in the average balance of investment
securities from $38.2 million in 1995 to $45.9 million in 1996 and an increase
in the average rate from 5.41% in 1995 to 6.15% in 1996. Interest on mortgage-
backed securities increased $556,000, or 71.6%, to $1.3 million in 1996 from
$777,000 in 1995. The increase is mainly attributed to an increase in the
average balance of mortgage-backed securities of $8.5 million from $16.1
million in 1995 to $24.6 million in 1996, and an increase in the average rate
from 4.83% for 1995 to 5.41% for 1996.
Interest Expense. Interest expense increased from $6.1 million in 1995 to
$8.5 million in 1996. The increase of $2.4 million, or 39.3%, resulted
primarily from the increased cost of savings deposits and FHLB advances and
increased FHLB advances partially offset by decreased average savings
deposits. The weighted average cost of deposits increased 44 basis points from
4.22% in 1995 to 4.66% in 1996, due to the effects of increased market
interest rates. Average deposit balances decreased $3.0 million, or 2.4%, from
$126.0 million at March 31, 1995 to $123.0 million at March 31, 1996.
FHLB advances average balances increased $31.6 million, or 219.1%, from
$14.4 million in 1995 to $46.0 million in 1996. FHLB advances were acquired to
fund increases in loans held for sale, investment securities and mortgage-
backed securities. In addition, the cost of FHLB advances increased 82 basis
points from 5.14% in 1995 to 5.96% in 1996 due to a general increase in
interest rates.
Provision for Losses on Loans. The Association has historically experienced
insignificant loan losses. The provision for losses on loans is determined by
management as the amount to be added to the allowance for loan losses, after
net credit losses and other adjustments have been deducted, to bring the
allowance to a level which is considered adequate to absorb potential losses
inherent in the loan portfolio. The provision for losses on loans increased
$22,000, or 246.9%, from $9,000 in 1995 to $31,000 in 1996.
Noninterest Income. Gain on sales of mortgage loans increased from $775,000
in 1995 to $1.2 million in 1996. The increase of $473,000, or 61.0%, was due
primarily to increased loan demand and generally favorable interest rates. The
Association capitalized $297,000 of mortgage servicing rights as a result of
adopting Statement of Financial Accounting Standards No. 122. In 1996, the
Association sold $77.9 million of mortgage loans as compared to $26.7 million
in 1995. The increased sales volume of $51.2 million resulted in the increased
gain on sales of mortgage loans.
Equity in earnings (loss) of joint ventures decreased from income of
$188,000 in 1995 to a loss of $30,000 in 1996. The decrease of $218,000 was
primarily the result of the sale of Manchester 97 Joint Venture in June 1994
and the operations of WC Joint Venture. Prior to June 1994, the Association,
through ECC, owned a 50% interest in both Manchester 97 Joint Venture and WC
Joint Venture, which own and operate commercial property in St. Louis County.
During June 1994, ECC sold its ownership in Manchester 97 Joint Venture at a
profit of $215,000. Joint ventures are accounted for using the equity method.
Other noninterest income increased from $308,000 in 1995 to $516,000 in
1996. The increase of $208,000, or 67.8%, resulted primarily from increased
income associated with the operations of ECC and ECC's recognition of gain on
sale of residential investment property. During 1996, ECC's commissions on
insurance and specialty products increased $61,000 while ECC's net gain on
sale of the investment property before income taxes was $116,000. There was no
comparable item in 1995.
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Noninterest Expense. Salaries and employee benefits expense increased from
$2.8 million in 1995 to $2.9 million in 1996. The increase of $59,000, or
2.1%, was primarily the result of increased loan commissions, and increased
bonus and profit sharing contributions, offset by a decrease in the number of
mortgage personnel. Commissioned loan officers are paid on the basis of loans
closed. The Association closed and sold $77.9 million of mortgage loans in
1996 as compared to $26.7 million in 1995. The increased volume of $51.2
million resulted in increased commission expense of $93,000, bonus and profit-
sharing expense was increased by $21,000 while compensation expenses and
related fringes decreased approximately $61,000.
Other noninterest expense decreased from $1.5 million in 1995 to $1.4
million in 1996. The decrease of $95,000, or 6.3%, resulted from decreased
expense related to the operations of the Association. During 1996, the
Association experienced reductions in legal expenses of $37,000, office
expenses of $39,000, and supervisory expenses of $17,000.
Income Taxes. The provision for federal income taxes increased from $188,000
in 1995 to $418,000 in 1996. The increase of $230,000, or 121.9% was the
result of increased pretax income of $561,000 for 1996 as compared to 1995.
The effective tax rate was 39.0% and 36.9% for 1996 and 1995, respectively.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
Accounting for Stock-Based Compensation. In October 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS
123 establishes financial accounting and reporting standards for stock-based
employee compensations plans and also applies to transactions in which an
entity issues its equity instruments to acquire goods or services from
nonemployees. SFAS 123 defines a fair value-based method of accounting for an
employee stock option or similar equity instruments and encourages all
entities to adopt that method of accounting. SFAS 123 also allows an entity to
continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). SFAS 123
was effective for transactions entered into in fiscal years beginning after
December 15, 1995. Pro forma disclosures required for entities that elect to
continue to measure compensation cost using APB 25 must include the effect of
all awards granted in fiscal years beginning after December 15, 1995. Equality
continues to measure compensation cost using APB 25. No stock options were
granted during the year ended March 31, 1997. SFAS 123 is not expected to have
a material impact on the Association's consolidated financial statements.
Earnings Per Share. In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, Earnings per Share ("SFAS 128"). SFAS 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
SFAS 128 simplifies the current standards for computing earnings per share and
makes them comparable to international earnings per share standards. Under
SFAS 128 the presentation of primary earnings per share is replaced with a
presentation of basic earnings per share. SFAS 128 also requires dual
presentation of basic and diluted earnings per share on the face of the income
statement for all entities with complex capital structures and requires the
reconciliation of the numerator and denominator of the basic earnings per
share computation to the numerator and denominator of the diluted earnings per
share computation. SFAS 128 is effective for financial statements issued for
periods ending after December 31, 1997, including interim periods; early
application is not permitted. SFAS 128 will require the restatement of all
prior-period earnings per share data presented. The adoption of SFAS 128 is
not expected to have a material impact on the Association's consolidated
financial statements.
Disclosure of Information about Capital Structure. Also in February 1997,
the FASB issued Statement of Financial Accounting Standards No. 129,
Disclosure of Information about Capital Structure ("SFAS 129"). SFAS 129
applies to all entities and establishes standards for disclosing information
about an entity's capital structure. SFAS 129 is effective for financial
statements for periods ending after December 15, 1997. The adoption of SFAS
129 is not expected to have a material impact on the Association's
consolidated financial statements.
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BUSINESS OF THE ASSOCIATION
GENERAL
Originally chartered in 1884, the Association serves the City of St. Louis
and St. Louis and St. Charles Counties through three full-service branch
offices and five limited-service-loan-production offices. The Association's
business is similar in many respects to other savings associations in that it
gathers deposits from its local community and uses these funds, along with FHLB
advances, to invest primarily in residential one- to four-family mortgage
loans, U.S. government and agency securities and mortgage-backed securities
and, to a lesser extent, multifamily and commercial real estate, consumer and
commercial business loans. Notwithstanding these traditional thrift attributes,
the Association's operations are distinct in that it conducts its residential
mortgage lending business primarily through a wholly-owned mortgage-banking
subsidiary--EMC.
Operating through the Association's eight full and limited service offices,
EMC acts as a conduit for the origination, purchase and sale of residential
mortgage loans for the benefit of the Association. It funds its mortgage-
banking activities through lines of credit from the Association and an
unrelated commercial bank. EMC provides several benefits to the Association,
including, among other things, originating a variety of mortgage loan products
for the Association's portfolio and generating noninterest income for the
Association through its activities in the secondary mortgage market. The
Association's President and Chief Executive Officer, Richard C. Fellhauer, also
is President of EMC. Leonard Wolter, Vice President of EMC, is EMC's Chief
Operating Officer. Mr. Wolter, in consultation with Mr. Fellhauer and Michael
A. Deelo, the Association's Chief Financial Officer, manages the day to day
operations of EMC. These individuals have 50 years combined experience in the
mortgage-banking business. The following description includes detailed
information regarding the business of the Association and EMC.
LENDING AND MORTGAGE-BANKING ACTIVITIES
The Association concentrates its business in residential mortgage finance,
which involves the origination, purchase and sale of residential real estate
loans secured by one- to four-family, owner-occupied residential properties. In
the past, and to a much lesser degree, the Association has originated
conventional loans secured by multifamily residential dwellings and commercial
real estate projects. The Association also originates short-term consumer
loans, primarily loans secured by savings deposits, home equity and second
mortgage loans, direct automobile loans and student loans, and, since early
1997, commercial business loans.
Loan Originations. During the first several years of its existence, EMC
originated primarily government mortgage loans (FHA and VA loans) on behalf of
the Association, while the Association originated conventional loans. But in
1989, the Association shifted its mortgage loan origination function to EMC;
however, the Association will still on occasion originate a mortgage loan
directly and it continues to originate a limited amount of consumer and other
non-mortgage loans.
Today, EMC, using its 40 employees (including 8 commissioned loan
originators), underwrites residential mortgage loans averaging in size between
$10,000 and $500,000, which are secured by properties located primarily in the
St. Louis metropolitan area. In addition, through the Association's Affordable
Housing Program, EMC provides mortgage financing to low- and moderate-income
families, which provides the Association with an effective way to attract
customers in its local market area. During 1997, EMC originated mortgage loans
totaling $66.2 million, all of which were one- to four-family loans.
Loan Sales. Central to EMC's loan origination activity is the sale of fixed-
rate mortgage loans to the secondary mortgage market. All loans originated by
EMC satisfy the guidelines of the Federal Housing Administration ("FHA"), the
Veterans Administration ("VA"), the Federal National Mortgage Association
("FNMA"), the Government National Mortgage Association ("GNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") or various private investors so that
the loans can be sold in the secondary mortgage market. The Association has
been approved under the FHA Direct Endorsement Program and, consequently, the
Association's FHA approved direct endorsement underwriters are authorized to
approve or reject FHA insured
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loans up to maximum amounts established by the FHA. The Association also has
been approved as a VA "automatic approved lender," which enables designated
qualified Association personnel to approve or reject loans on behalf of the
Association.
In most cases, EMC sells in the secondary mortgage market fixed-rate loans it
originates, while its ARM originations are sold to the Association and retained
by the Association in its portfolio. The current strategy of selling fixed-rate
loans and retaining ARMs assists the Association in management of the interest-
rate sensitivity of its assets. Moreover, the loans retained by the Association
contribute to the Association's net interest rate margin.
EMC's loan-origination-and-sale activities create interest rate risk for the
Association in that if interest rates decline after the loan commitment date
below the interest rate on the loan, and the Association has not hedged its
interest rate risk using a forward commitment, the Association may incur a loss
when the loan is sold. The Association manages this risk by using a
computerized tracking system that allows EMC's management to closely monitor
the interest rates for all loans being processed by EMC, reviewing the future
prospects for movements in interest rates, and entering into forward commitment
contracts with FNMA, GNMA and FHLMC for the sale of fixed-rate loans that limit
the potential loss on loan sales, but which also limit the potential gain.
EMC's success in managing the interest-rate risk associated with the
origination-and-sale and purchase-and-resale of fixed-rate mortgage loans
depends primarily on the abilities of its managers. For a discussion of the
risks associated with the mortgage-banking business, see "Risk Factors--
Reliance on Mortgage-Banking Operations."
Loan Purchases and Resales. In addition to originating residential mortgage
loans for sale in the secondary market, EMC also purchases loans from other
financial institutions for packaging (or securitization) and resale in the
secondary mortgage market as either whole loans or as loan pools to FNMA, GNMA,
FHLMC or other investors. Other financial institutions may sell loans to EMC
because they lack the capability or expertise to package and sell their own
loans in the secondary market. EMC performs strict underwriting on each loan
purchased based on guidelines of the federal secondary mortgage market agencies
and private investors and standards otherwise applicable to loans originated by
the Association. Immediately following the purchase of a loan or loan package,
EMC simultaneously sells the mortgage or group of mortgages for future
delivery. Accordingly, the Association does not assume so-called pipeline risk
because the loans are not held in inventory. Pipeline risk is the hazard that
market interest rates will increase before the loan is sold, thereby reducing
the price at which the loan may be sold. During fiscal 1997, EMC purchased
mortgage loans totaling $5.9 million.
EMC's Contributions to the Business of the Association. EMC contributes
significantly to the Association's operations by providing an additional income
stream and by providing a conduit to offer lending services to the local
community. EMC's mortgage-banking activities produce primarily two types of
income--gain on sale of mortgage loans and loan servicing fees and late
charges. Each of these two types of income accounted for 47.1% and 40.8%,
respectively, of EMC's total income for the fiscal year ended March 31, 1997.
EMC contributed approximately 17% to the Association's total interest income
and other income for the year ended March 31, 1997.
Loan sales are intended to generate one-time gains, while loan originations
(whether the loans are sold or retained by the Association in portfolio)
produce loan origination fees that generally approximate 1% of the loan amount.
FHA and VA loans are generally sold with servicing released, for which the
Association generally receives an additional servicing fee of approximately
1.5% of the aggregate loan amount, and, because EMC sells conventional mortgage
loans (non-FHA and VA) servicing retained, the Association's loan servicing
portfolio (and the associated earnings stream) continues to grow.
At March 31, 1997, EMC serviced $323.0 million in residential mortgage loans
(of which $90.6 million was for the Association) and has the capacity to expand
its servicing portfolio significantly through additional loan originations. EMC
earned $888,000 in servicing fee income for fiscal year 1997. Loan servicing
fees on loans serviced for institutions other than the Association totaled
$674,000, $603,000 and $622,000 for fiscal years
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1997, 1996 and 1995, respectively. The proportionate contribution made by gains
on loan sales, loan origination fees and loan servicing fees to the
Association's net income varies each year depending on interest rates, which,
in turn, affects EMC's business focus from year to year.
EMC's residential mortgage loan origination volume has increased steadily
since 1994, and during this same period, ARMs have been in demand, which has
resulted in an increase in the Association's loan portfolio. As a result, EMC
has focused its efforts toward increasing its loan servicing portfolio and
increasing the associated income stream through increased servicing retention.
EMC's focus on servicing retention and fluctuating interest rates have
contributed to instability in recent years in EMC's gains on loan sales. For
information concerning the risks associated with a mortgage-banking operation,
see "Risk Factors--Reliance on Mortgage-Banking Operations." EMC has not, nor
does it anticipate, selling a bulk portion of its loan servicing portfolio to
augment earnings.
Composition of the Loan Portfolio. The following table sets forth the
composition of the Association's loan portfolio by type of loan as of the dates
indicated:
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans secured by real estate:
Residential:
One- to four-family:
Conventional(1).......... $69,810 72.5% $64,873 66.6% $61,455 73.5%
FHA/VA................... 14,233 14.8% 13,656 14.0% 13,616 16.3%
Loans held for sale...... 4,398 4.6% 13,507 13.9% 2,971 3.5%
Multifamily................ 1,637 1.7% 783 .8% 828 1.0%
Commercial................... 2,662 2.8% 2,622 2.7% 2,975 3.5%
------- ------ ------- ------ ------- ------
Total loans secured by real
estate.................... 92,740 96.4% 95,441 98.0% 81,845 97.8%
------- ------ ------- ------ ------- ------
Consumer loans:
Loans secured by savings
deposits.................... 366 .4% 453 .5% 448 .5%
Property improvement......... 1,596 1.7% 1,300 1.3% 1,053 1.3%
Automobiles.................. 122 .1% 97 .1% 126 .2%
Other consumer loans......... 162 .1% 96 .1% 175 .2%
------- ------ ------- ------ ------- ------
Total consumer loans....... 2,246 2.3% 1,946 2.0% 1,802 2.2%
Commercial business loans...... 1,280 1.3% -- -- % -- -- %
------- ------ ------- ------ ------- ------
Total loans.................... 96,266 100.0% 97,387 100.0% 83,647 100.0%
====== ====== ======
Less:
Deferred loan fees........... 46 59 71
Unearned discounts........... 4 12 24
Allowance for loan losses.... 283 233 217
Valuation reserve on loans
held for sale............... 5 85 100
------- ------- -------
Total loans receivable, net.... $95,928 $96,998 $83,235
======= ======= =======
</TABLE>
- --------
(1) Includes construction loans converted to permanent loans.
Residential One- to Four-Family Loans. The primary lending activity of the
Association has been the making of mortgage loans to enable borrowers to
purchase existing homes or to construct new single-family homes. The mortgage
loans are primarily originated by EMC and are sold to the Association at par.
Management believes that this policy of focusing on single-family residential
mortgage loans has been successful in contributing to interest income while
keeping delinquencies and losses to a minimum. At March 31, 1997,
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approximately $88.4 million, or 91.9% of the total loan portfolio, consisted of
loans secured by one- to four-family residential real estate. In recent years,
the Association's one- to four-family mortgage lending has been concentrated in
St. Louis City and St. Louis County.
EMC presently originates both fixed-rate mortgage loans and ARMs secured by
one- to four-family properties with loan terms of 10 to 30 years. The ARMs have
interest rates that adjust at regular intervals ranging between one- to five-
years generally based upon changes in the One-, Three- and Five-Year Treasury
Index. At March 31, 1997, the Association's ARM portfolio totaled approximately
$55.0 million. The majority of these loans provide that the amount of any
increase or decrease in the interest rate is limited to one or two percentage
points (upward or downward) per adjustment period and are generally limited to
an increase or decrease of five to eight percentage points over the life of the
loan. Borrower demand for ARMs versus fixed-rate mortgage loans is a function
of the level of interest rates, the expectation of changes in the level of
interest rates, and the difference between the interest rates and loan fees
offered for fixed-rate mortgage loans and the first year "teaser rates" and
loan fees for ARMs. The relative amount of fixed-rate mortgage loans and ARMs
that can be originated at any time is largely determined by the demand for each
in a competitive mortgage finance environment. During 1997, total one- to four-
family mortgage loan originations were $70.0 million of which $21.6 million, or
30.9%, were subject to periodic interest rate adjustments and $48.4 million, or
69.1%, were long-term, fixed-rate mortgage loans.
ARMs generally involve credit risks different from those inherent in fixed-
rate mortgage loans, primarily because if interest rates rise, the underlying
payments of the borrower rise, thereby increasing the potential for default.
The Association underwrites ARMs based on the borrower's ability to repay the
loan assuming the fully indexed accrual rate on the ARM remains constant during
the loan term. As a result, the potential for a substantial increase in
delinquencies and defaults is lessened.
The retention of ARMs as opposed to fixed-rate mortgage loans in the
Association's loan portfolio helps reduce the Association's exposure to
interest rate risk. In an environment of rapidly increasing interest rates,
however, it is possible for the interest rate increase to exceed the maximum
aggregate adjustment on ARMs, which would negatively affect the spread between
the Association's interest income and its cost of funds. In addition, because
the interest earned on ARMs, which are refinanced on a one- to three-year
cycle, varies with prevailing interest rates, such loans do not offer the
Association as predictable a cash flow as do longer-term, fixed-rate loans.
EMC originates long-term, fixed-rate loans under guidelines established by
FNMA and FHLMC, which facilitates the sale of such loans to FNMA or FHLMC in
the secondary market. Long-term, fixed-rate mortgage loans are originated with
terms of between 10 and 30 years, amortized on a monthly basis with principal
and interest due each month. At March 31, 1997, the Association had
approximately $40.4 million of long-term, fixed-rate mortgage loans in its
portfolio. A determination is made at the time of origination whether the loan
is held for sale. Currently, EMC is originating fixed-rate loans primarily for
sale in the secondary market. At March 31, 1997, the Association had
approximately $4.4 million of loans held for sale of which $4.0 million were
fixed-rate loans.
The Association's lending policies generally limit the maximum loan-to-value
ratio on fixed-rate and adjustable-rate residential mortgage loans to 80% of
the lesser of the appraised value or purchase price of the underlying
residential property unless private mortgage insurance to cover the excess over
80% is obtained, in which case the mortgage is limited to 95% of the lesser of
appraised value or purchase price. The loan-to-value ratio, maturity, and other
provisions of the loans made by the Association are generally reflected in the
policy of making less than the maximum loan permissible under federal
regulations, in accordance with established lending practices, market
conditions, and underwriting standards maintained by the Association. The
Association requires title, fire, and extended insurance coverage on all
mortgage loans originated. All of the Association's real estate loans contain
due-on-sale clauses, and the Association obtains appraisals on all its real
estate loans from outside appraisers.
46
<PAGE>
The Association also originates construction loans on residential properties
against commitments for permanent financing at the completion of construction.
Construction loans are generally for a term of six to 11 months, and bear an
interest rate tied to the Association's cost of funds which varies on the term
and amount of the loan. At March 31, 1997, the Association had no construction
loans outstanding.
Construction lending is generally considered to involve a higher degree of
credit risk than residential mortgage lending. The Association's risk of loss
on a construction loan is dependent largely upon the accuracy of the initial
estimate of the property's value at completion of construction and the
estimated cost (including interest) of construction. If the estimate of
construction cost proves to be inaccurate, the Association may be required to
advance funds beyond the amount originally committed to permit completion of
the dwelling. If the estimate of value proves to be inaccurate, the Association
may be confronted with, at or before the maturity of the loan, loan security
with a value which is insufficient to assure full repayment. In addition,
construction lending entails the risk that the project may not be completed due
to cost overruns or changes in market conditions.
Multifamily and Commercial Real Estate Loans. In addition to originating one-
to four-family residential real estate loans, the Association originates loans
secured by multifamily dwelling units (more than four units). At March 31,
1997, the Association had $1.6 million, or 1.7% of the total loan portfolio,
secured by multifamily dwelling units, located primarily in the Association's
primary market area. At March 31, 1997, the Association's largest multifamily
residential loan was a $941,000 loan secured by a 26-unit apartment complex.
Multifamily real estate loans are generally originated at 75% of the appraised
value of the property or selling price, whichever is less, and are generally
originated for 10- to 30-year terms with the principal amortized over 30 years.
Loans secured by multifamily residential real estate are generally larger and
involve a greater degree of risk than one- to four-family residential mortgage
loans, similar to the risks associated with commercial real estate lending. At
March 31, 1997, the Association had no multifamily loans accounted for on a
nonaccrual basis.
The Association's permanent commercial real estate loans are secured by
improved properties such as office buildings, restaurants, and various retail
operations located in the Association's primary market area. At March 31, 1997,
commercial real estate loans totaled approximately $2.7 million, or 2.8% of the
Association's total loan portfolio. The Association originates permanent loans
on commercial real estate at up to 80% of the appraised value.
Currently, it is the Association's policy to originate commercial real estate
loans only to selected borrowers known to the Association and on properties in
its primary market area. These loans generally have prepayment schedules based
upon a 10- to 25-year constant payment amortization, but may have a 10-year
final maturity (balloon payment) and are currently originated with an interest
rate that floats over the prime rate. At March 31, 1997, the Association had no
commercial real estate loans accounted for on a nonaccrual basis.
The largest commercial real estate loan in the portfolio at March 31, 1997
totaled $1.5 million, which was secured by a real estate mortgage on a shopping
center located in the St. Louis metropolitan area. This loan is a seasoned loan
having been originated in 1994. The Association's legal lending limit is
approximately $1.9 million. Of primary concern in commercial real estate
lending is the borrower's creditworthiness, and the feasibility and cash flow
potential of the project. Loans secured by income properties are generally
larger and involve greater risks than residential mortgage loans because
payments on loans secured by income properties are often dependent on the
successful operation or management of the properties. As a result, repayment of
such loans may be subject to a greater extent than residential real estate
loans to adverse conditions in the real estate market or the economy. Although
many thrift institutions have had material adverse loss experience in
commercial real estate lending, the Association has sustained few losses, and
those losses were not significant relative to the size of the entire commercial
real estate loan portfolio or the mortgage loan portfolio at the time. The
Association does not presently intend to emphasize or expand this type of
lending in the future.
Consumer Loans. The Association originates a wide variety of consumer loans,
which are made primarily on a secured basis to existing customers. Such loans
include loans secured by savings deposits, home equity and second mortgage
loans, direct automobile loans, and student loans. These loans are made at both
fixed- and
47
<PAGE>
variable-rates of interest, which adjust annually, and vary in terms depending
on the type of loan. In addition, the Association offers unsecured consumer
loans. Consumer loans totaled approximately $2.2 million at March 31, 1997, or
2.3% of the Association's total loan portfolio.
The Association applies strict underwriting standards for consumer loans.
These procedures include an assessment of the applicant's payment history on
other debts and ability to meet existing obligations and payments on the
proposed loans. Although the applicant's creditworthiness is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, to the proposed loan amount. The Association
underwrites and originates all of its consumer loans internally, which
management believes limits exposure to credit risks relating to loans
underwritten or purchased from brokers or other outside sources. The
Association views consumer lending as a component of its business operations
because consumer loans generally have shorter terms and higher yields, thus
reducing exposure to changes in interest rates. In addition, the Association
believes that offering consumer loans helps to expand and create stronger ties
to its customer base. The Association does not presently intend to emphasize or
expand this type of lending in the future.
The Association's consumer loan portfolio had no loans 90 days or more
delinquent at March 31, 1997. Consumer loans may entail greater risk than do
residential mortgage loans, particularly in the case of consumer loans which
are unsecured or secured by assets that depreciate rapidly, such as
automobiles. In the latter case, repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment for the
outstanding loan and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. 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. 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. Such loans may also give rise to
claims and defenses by the borrower against the Association as the holder of
the loan, and a borrower may be able to assert claims and defenses that it has
against the seller of the underlying collateral.
Commercial Business Loans. In early 1997, in connection with its hiring of a
new commercial lending officer, the Association began originating a limited
number of commercial business loans based on community needs. Management of the
Association expects this type of lending to gradually increase over the next
several years. Such loans include, but are not limited to, automobile dealer
floor planning, commercial use vehicles and general working capital loans.
These loans are made at both fixed and variable rates of interest and vary in
terms depending on the type of loan and collateral.
At March 31, 1997, approximately $1.3 million, or 1.3% of the Association's
loan portfolio, consisted of commercial business loans, which are primarily
secured by automobile floor planning collateral. At March 31, 1997, the largest
commercial loan in the portfolio, which was secured by floor planned vehicles,
had a principal balance of approximately $256,000. Unlike residential mortgage
loans, which generally are made on the basis of the borrower's ability to make
repayment based on the borrower's salary and other income and which are secured
by real property the value of which tends to be more easily ascertainable,
commercial business loans typically are made on the basis of the borrower's
ability to make repayment from the cash flow of the borrower's business. As a
result, the availability of funds for the repayment of commercial business
loans may be substantially dependent on the success of the business itself
(which, in turn, is likely to be dependent, in part, upon the general economic
environment). The Association's commercial business loans are usually secured
by business assets, which may depreciate over time, may be difficult to
appraise and may fluctuate in value based on the success of the business.
The Association's underwriting standards for commercial business loans
include credit file documentation and analysis of the borrower's character,
capacity to repay the loan, the adequacy of the borrower's capital and
collateral as well as an evaluation of conditions affecting the borrower.
Analysis of the borrower's past, present and future cash flows is also an
important aspect of the Association's current credit analysis. Nonetheless,
such loans, are believed to carry higher credit risk than residential mortgage
loans. The Association generally requires personal guarantees from corporate
borrowers.
48
<PAGE>
Loan Maturity and Repricing. The following table sets forth certain
information at March 31, 1997 regarding the dollar amount of loans maturing in
the Association's portfolio based on their contractual terms to maturity, but
does not include scheduled payments or potential prepayments. Overdrafts are
reported as due in one year or less. Mortgage and commercial business loans
that have adjustable rates are shown as maturing at their next repricing date.
Loan balances do not include undisbursed loan proceeds, unearned discounts,
unearned income, and allowance for loan losses.
<TABLE>
<CAPTION>
DUE AFTER 3 DUE AFTER 5 DUE AFTER 10
DUE DURING THE YEAR ENDED THROUGH 5 THROUGH 10 THROUGH 15 DUE AFTER 15
MARCH 31, YEARS AFTER YEARS AFTER YEARS AFTER YEARS AFTER
-------------------------- MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1999 2000 1997 1997 1997 1997 TOTAL
-------- -------- -------- ----------- ----------- ------------ ------------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans secured by real
estate:
Residential(1)(2)...... $ 25,784 $ 10,236 $ 13,632 $ 9,363 $ 9,099 $7,789 $14,175 $90,078
Commercial............. 53 -- 160 180 2,089 180 -- 2,662
Loans secured by savings
deposits............... 324 39 3 -- -- -- -- 366
Property improvement.... 8 67 133 636 539 213 -- 1,596
Automobiles............. 5 38 34 45 -- -- -- 122
Other consumer loans.... 98 64 -- -- -- -- -- 162
Commercial business
loans.................. 1,118 20 81 61 -- -- -- 1,280
-------- -------- -------- ------- ------- ------ ------- -------
Total loans............ $ 27,390 $ 10,464 $ 14,043 $10,285 $11,727 $8,182 $14,175 $96,266
======== ======== ======== ======= ======= ====== ======= =======
</TABLE>
- --------
(1) Includes $4.4 million of loans held for sale, reported as due in one year
or less.
(2) Includes multifamily loans totaling $1.6 million.
The following table sets forth the dollar amount of all loans due after
March 31, 1998 which have fixed interest rates and adjustable interest rates.
<TABLE>
<CAPTION>
FIXED ADJUSTABLE
RATES RATES
----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Loans secured by real estate:
Residential...................................... $ 32,173 $ 32,121
Commercial....................................... 2,494 115
Loans secured by savings deposits.................. 42 --
Property improvement............................... 1,588 --
Automobiles........................................ 117 --
Other consumer loans............................... 64 --
Commercial business loans.......................... 162 --
----------- -----------
Total loans...................................... $ 36,640 $ 32,236
=========== ===========
</TABLE>
49
<PAGE>
The following table sets forth total loans originated, purchased, sold, and
repaid during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total loans at beginning of period................. $97,387 $83,647 $62,188
Loans originated:
Residential one- to four-family.................. 70,019 75,779 56,606
Multifamily...................................... 950 -- --
Commercial business loans........................ 1,462 -- --
Consumer (property improvement and automobiles).. 774 666 475
Other loans...................................... 107 105 180
------- ------- -------
Total loans originated......................... 73,312 76,550 57,261
------- ------- -------
Loans purchased--residential one- to four-family... 5,892 17,396 934
Loans sold:
Whole loans:
Servicing retained............................. (45,669) (49,667) (12,266)
Servicing released............................. (15,617) (25,079) (13,302)
Participation loans (servicing retained)......... (185) -- --
------- ------- -------
Total loans sold............................... (61,471) (74,746) (25,568)
------- ------- -------
Loan principal repayments.......................... (2,486) (2,282) (10,067)
Loans converted to mortgage-backed securities and
sold.............................................. (16,368) (3,178) (1,101)
------- ------- -------
Total loans at end of period....................... $96,266 $97,387 $83,647
======= ======= =======
</TABLE>
Loan Soliciting and Processing. Loan originations are derived primarily
through EMC loan officers' solicitation and personal visits to the local real
estate offices in the metropolitan St. Louis area as well as current and walk-
in customers. These loan officers have developed a clientele over the years
that send potential customers to EMC for loans. By use of the EMC loan
officers and client contacts, the Association has been able to cover a broad
market area and offer mortgage services to an extended number of potential
customers.
The Executive Loan Committee, composed of Messrs. Fellhauer, Wolter, Deelo,
and Fuchs, and one Association staff member are authorized to approve
residential mortgage loans up to $200,000. Residential mortgage loans in
excess of $200,000 require full Board of Directors approval. All residential
mortgage loans are subsequently approved by the full Board of Directors.
Loans-to-One Borrower Limitations. The Association's loans and extensions of
credit to a person outstanding at one time and not fully secured may not
exceed 15% of the unimpaired capital and surplus of the Association. This
limitation calls for a loan-to-one borrower limitation for the Association of
$1.9 million at March 31, 1997. Loans and extensions of credit fully secured
by readily marketable collateral may comprise an additional 10% of unimpaired
capital and surplus. At March 31, 1997, the largest aggregate amount of loans
by the Association to any borrower was approximately $1.5 million, which was
secured by a real estate mortgage on a shopping center located in the St.
Louis metropolitan area.
Loan Commitments. The Association issues commitments for fixed- and
adjustable-rate single-family residential mortgage loans conditioned upon the
occurrence of certain events. Such commitments are made in writing on
specified terms and conditions and are honored for up to 30 days from
approval, depending on the type of transaction. The Association had
outstanding loan commitments of approximately $953,000 at March 31, 1997.
50
<PAGE>
Loan Origination and Other Fees. The Association, in most instances,
receives loan origination fees and discount "points." Loan fees and points are
a percentage of the principal amount of the mortgage loan that are charged to
the borrower for funding the loan. The Association usually charges origination
fees of 1% on all real estate loans. Current accounting standards require fees
received for originating loans to be deferred and amortized into interest
income over the contractual life of the loan. Deferred fees associated with
loans that are sold are included in the gain/loss computation at the time of
sale. The Association had approximately $46,000 of net deferred loan fees at
March 31, 1997.
The Association offsets all loan origination fees and certain related direct
loan origination costs against all fees and costs associated with loan
origination. The resulting net amount is deferred and amortized over the
contractual life of the related loans as an adjustment to the yield on such
loans, unless prepayments of a large group of similar loans are probable and
the timing and amount of prepayments can be reasonably estimated. The
Association offsets commitment fees against related direct costs and the
resulting net amount is recognized over the contractual life of the related
loans as an adjustment of yield if the commitment is exercised. If the
commitment expires unexercised, the fees collected are recognized as
noninterest income upon expiration of the commitment.
Delinquencies. The Association's collection procedures provide that when a
loan is 30 days overdue and again after an additional 15 days, the borrower
will be contacted by mail and payment requested. After a delinquency of 15
days, a late charge is assessed. If the delinquency continues, subsequent
efforts will be made to contact the delinquent borrower. In certain instances,
the Association may modify the loan or grant a limited moratorium on loan
payments to enable reorganization of the borrower's financial affairs. If the
loan continues in a delinquent status for 90 days or more, the Association
generally will initiate foreclosure proceedings.
Nonperforming Assets and Their Classification. The following table sets
forth information with respect to the Association's nonperforming assets for
the periods indicated. During the periods shown, the Association had no
restructured loans within the meaning of Statement of Financial Accounting
Standards No. 15, Accounting by Debtors and Creditors for Troubled Debt
Restructurings:
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis(1):
Residential one- to four-family(2).............. $ 643 $ 669 $ 653
Consumer........................................ -- -- 9
------- ------- -------
Total......................................... 643 669 662
Real estate owned................................. 66 97 52
------- ------- -------
Total nonperforming assets...................... $ 709 $ 766 $ 714
======= ======= =======
Nonperforming loans to gross loans................ .67% .69% .79%
Total nonperforming assets to total assets........ .35% .39% .44%
</TABLE>
- --------
(1) All loans contractually past due 90 days or more are accounted for on a
nonaccrual basis by the Association.
(2) Includes $571,000, $326,000 and $528,000 of FHA/VA loans, the principal
and interest payments of which are either insured by the FHA or guaranteed
by the VA, at March 31, 1997, 1996 and 1995, respectively.
The Association had $643,000 in loans 90 days or more delinquent at March
31, 1997 which consisted of 25 one- to four-family residential mortgage loans,
each with an outstanding principal balance of less than $70,000.
For fiscal 1997 and 1996, gross interest income which would have been
recorded had the nonaccruing loans been current in accordance with their
original terms amounted to $55,000 and $57,000, respectively, of which $30,000
and $44,000, respectively, was included in interest income.
51
<PAGE>
Asset Classification. The OTS asset classification system conforms with
commercial banking practices and puts the establishment of loan loss
allowances on a basis consistent with the requirements of GAAP. 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 must have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. "Doubtful" assets
have the weaknesses of substandard assets with the additional characteristic
that the weaknesses make collection or liquidation in full on the basis of
currently existing facts, conditions and values questionable, and there is a
high possibility of loss. An asset classified "loss" is considered
uncollectible and of such little value that continuance as an asset of the
institution is not warranted. The regulations have also created a "special
mention" category, described as assets which do not currently expose an
insured institution to a sufficient degree of risk to warrant classification
but do possess credit deficiencies or potential weaknesses deserving
management's close attention. Assets classified as substandard or doubtful
require the institution to establish general allowances for loan losses. If an
asset or portion thereof is classified loss, the insured institution must
either establish specific allowances for loan losses in the amount of 100% of
the portion of the asset classified loss or charge-off such amount. A portion
of general loss allowances established to cover possible losses related to
assets classified substandard or doubtful may be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital.
The Association's classified assets, general and specific loss allowances,
and charge-offs were as follows for the periods indicated:
<TABLE>
<CAPTION>
AT OR FOR THE YEAR
ENDED MARCH 31,
-----------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Substandard assets.................................. $ 138 $ 441 $ 714
General loss allowances............................. 283 233 217
Specific loss allowances............................ -- -- --
Charge-offs......................................... -- 15 34
</TABLE>
Real Estate Owned. Real estate acquired by the Association as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate
owned until sold. When property is acquired it is recorded at the lower of
cost (principal balance of the former mortgage loan plus the costs of
obtaining title and possession) or estimated fair value. The Association had
$66,000 in real estate owned at March 31, 1997, which consisted of three
single-family residences, all located in St. Louis, Missouri.
Allowance for Loan Losses. The Association's management evaluates the need
to establish reserves against losses on loans and other assets based on
estimated losses on specific loans and on any real estate held for investment
or acquired through foreclosure when it is determined that a decline in value
has occurred. Such evaluation includes a review of all loans for which full
collectibility may not be reasonably assured and considers, among other
matters, the estimated market value of the underlying collateral of problem
loans, prior loss experience, economic conditions, and overall portfolio
quality. These provisions for losses are charged against earnings in the year
they are established. The Association established provisions for losses on
loans for fiscal 1997, 1996, and 1995 of approximately $50,000, $31,000 and
$9,000, respectively. At March 31, 1997, the Association had an allowance for
loan losses of $283,000, which represented .29% of total loans. Based on past
experience and future expectations, management believes that loan loss
reserves are adequate.
52
<PAGE>
The following table sets forth an analysis of the Association's allowance
for loan losses for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Allowance at beginning of period................ $ 233 $ 217 $ 242
Provision for losses on loans................... 50 31 9
Charge-offs--residential one- to four-family.... -- (15) (34)
------- ------- -------
Balance at end of period........................ $ 283 $ 233 $ 217
======= ======= =======
Ratio of allowance to total loans outstanding at
the end of the period.......................... .29% .24% .26%
Ratio of net charge-offs to average loans
outstanding during the period.................. * .02% .04%
Allowance for loan losses to total nonperforming
assets......................................... 39.9% 30.4% 30.4%
Allowance for loan losses to total nonperforming
loans.......................................... 44.0% 34.8% 32.8%
</TABLE>
- --------
*Insignificant
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------------------------------------
1997 1996 1995
------------------------- ------------------------- -------------------------
AMOUNT OF LOAN AMOUNT OF LOAN AMOUNT OF LOAN
ALLOWANCE AMOUNTS % OF ALLOWANCE AMOUNTS % OF ALLOWANCE AMOUNTS % OF
FOR BY TOTAL FOR BY TOTAL FOR BY TOTAL
LOAN LOSS CATEGORY LOANS LOAN LOSS CATEGORY LOANS LOAN LOSS CATEGORY LOANS
--------- -------- ------ --------- -------- ------ --------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans secured by real
estate:
Residential one- to
four-family(1)........ $174 $88,441 91.9% $174 $92,036 94.5% $202 $78,042 93.3%
Multifamily and
Commercial............ 49 4,299 4.5% 41 3,405 2.7% 11 3,803 3.5%
Property improvement.... 20 1,596 1.7% 16 1,300 1.3% -- 1,053 1.3%
Automobiles............. 2 122 .1% 2 97 .1% 4 126 .2%
Other................... -- 528 .5% -- 549 1.4% -- 623 1.7%
Commercial business
loans.................. 38 1,280 1.3% -- -- -- % -- -- -- %
---- ------- ------ ---- ------- ------ ---- ------- ------
Total................... $283 $96,266 100.0% $233 $97,387 100.0% $217 $83,647 100.0%
==== ======= ====== ==== ======= ====== ==== ======= ======
</TABLE>
- --------
(1) Includes loans held for sale.
INVESTMENT ACTIVITIES
The Association classifies its investment securities and mortgage-backed
securities for financial accounting purposes into one of three categories:
Held to Maturity: includes investments in debt securities, which the
Association has the positive intent and ability to hold until maturity.
Trading: includes investments in debt and equity securities purchased and
held principally for the purpose of selling them in the near term.
Available for Sale: includes investments in debt and equity securities
not classified as held to maturity or trading (i.e., investments that the
Association has no present plans to sell in the near term but may be sold
in the future under different circumstances).
53
<PAGE>
Investment and mortgage-backed securities classified as held to maturity are
measured at amortized cost, in which the amortization of premiums and
accretion of discounts, which are recognized as adjustments to interest
income, are recorded using methods approximating the interest method.
Unrealized holding gains and losses for trading securities (for which no
securities were so designated at March 31, 1997 or 1996) are included in
earnings, while such gains and losses for available for sale securities are
excluded from earnings and reported as a net amount as a separate component of
stockholders' equity, net of income taxes, until realized. Unrealized holding
gains and losses for held to maturity securities are excluded from earnings
and stockholders' equity. Gains or losses for available for sale securities
are realized and included in other noninterest income upon sale, based on the
amortized cost of the individual security sold. All previous market value
adjustments included in the separate component of stockholders' equity are
reversed upon sale. Mortgage-backed securities represent a significant portion
of the debt security portfolio. Amortization of premiums and accretion of
discounts on mortgage-backed securities are analyzed in relation to the
corresponding prepayment rates, both historical and estimated, using a method
that approximates the interest method.
It has been the Association's practice to maintain assets in investment
securities at levels higher than required by federal regulations. The
Association's investment securities portfolio at March 31, 1997 consisted of
$4.8 million in U.S. government and agency obligations classified as held to
maturity, with an estimated market value of $4.7 million, and $70.1 million in
U.S. government and agency obligations classified as available for sale.
The overall objective of the Association's investment portfolio is to
provide a sufficient and consistent spread over the Association's marginal
cost of funds by investing funds that are not currently required for lending
purposes and to provide a liquidity reserve in excess of regulatory
requirements. The Association has traditionally maintained an investment
portfolio in the range of 15% to 20% of total assets. The Association's long-
term liquidity ratio at March 31, 1997 was 16.9%. The portfolio is also
intended to assist in managing the Association's asset and liability interest
rate sensitivity.
The Association's chief financial officer is responsible for daily
management of the Association's investment activities and is authorized to
perform any Board of Directors approved transaction necessary to achieve the
objectives established by the Board of Directors and that falls within
parameters established by the Board of Directors.
The following table sets forth the Association's investment securities at
the dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31,
--------------------------------------------------------------------------------
1997 1996 1995
-------------------------- -------------------------- --------------------------
CARRYING % OF MARKET CARRYING % OF MARKET CARRYING % OF MARKET
VALUE PORTFOLIO VALUE VALUE PORTFOLIO VALUE VALUE PORTFOLIO VALUE
-------- --------- ------- -------- --------- ------- -------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government and
agency obligations:
Available for sale..... $70,123 93.5% $70,123 $38,898 86.9% $38,898 $31,953 77.9% $31,953
Held to maturity....... 4,849 6.5% 4,725 5,845 3.1% 5,589 9,047 22.1% 8,607
------- ------ ------- ------- ------ ------- ------- ------ -------
Total.................. $74,972 100.0% $74,848 $44,743 100.0% $44,487 $41,000 100.0% $40,560
======= ====== ======= ======= ====== ======= ======= ====== =======
</TABLE>
54
<PAGE>
The following table sets forth the maturities and weighted average yields of
the Association's investment securities at March 31, 1997.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
---------------------------------------------------------------------------------------------------------------
LESS THAN ONE YEAR ONE TO FIVE YEARS FIVE TO TEN YEARS OVER TEN YEARS TOTAL
-------------------- ----------------- ----------------- ----------------- -----------------------------------
AVERAGE
WEIGHTED WEIGHTED WEIGHTED WEIGHTED REMAINING WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE YEARS TO CARRYING MARKET AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD MATURITY VALUE VALUE YIELD
--------- --------- -------- -------- -------- -------- -------- -------- --------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government
and agency
obligations:
Available for
sale........... $ 297 6.45% $13,804 6.98% $50,428 7.12% $5,594 7.53% 7.5 $70,123 $70,123 7.12%
Held to
maturity....... 2,249 4.49% 2,000 3.40% 600 3.50% -- -- % 1.6 4,849 4,725 3.91%
--------- -------- ------- ----- ------- ----- ------ ----- --- ------- ------- -----
Total........... $ 2,546 4.72% $15,804 6.53% $51,028 7.08% $5,594 7.53% 7.1 $74,972 $74,848 6.91%
========= ======== ======= ===== ======= ===== ====== ===== === ======= ======= =====
</TABLE>
MORTGAGE-BACKED SECURITIES
In order to supplement residential loan demand in its primary market area
and maintain geographic diversity in its loan portfolio, the Association has a
substantial portfolio of mortgage-backed securities that are classified as
available for sale and, accordingly, are carried at fair market value. All of
the Association's mortgage-backed securities are federal agency securities.
Mortgage-backed securities represent a participation interest in a pool of
single-family or multi-family mortgages, the principal and interest payments
of which are passed from the mortgage originators through intermediaries that
pool and repackage the participation interest in the form of securities to
investors such as the Association. Such intermediaries may include quasi-
governmental agencies such as FHLMC, FNMA and GNMA that guarantee or insure
the payment of principal and interest to investors. Mortgage-backed securities
generally increase the quality of the Association's assets by virtue of the
guarantees that back them, are more liquid than individual mortgage loans and
may be used to collateralize borrowings or other obligations of the
Association.
Mortgage-backed securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans
with interest rates that are within an identified range and have similar
maturities. The underlying pool of mortgages can be composed of either fixed
rate mortgages, ARMs or balloon loans. Mortgage-backed securities generally
are referred to as mortgage participation certificates or pass-through
certificates. As a result, the interest rate risk characteristics of the
underlying pool of mortgages, i.e., fixed rate or adjustable rate, as well as
prepayment risk, are passed on to the certificate holder. The life of a
mortgage-backed pass-through security is equal to the life of the underlying
mortgages.
The actual maturity of a mortgage-backed security varies, depending on when
the mortgagors prepay or repay the underlying mortgages. Prepayments of the
underlying mortgages may shorten the life of the investment, thereby adversely
affecting its yield to maturity and the related market value of the mortgage-
backed security. The yield is based upon the interest income and the
amortization of the premium or accretion of the discount related to the
mortgage-backed security. Premiums and discounts on mortgage-backed securities
are amortized or accredited over the estimated term of the securities using a
level yield method. The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the
yield of the mortgage-backed security and these assumptions are reviewed
periodically to reflect the actual prepayment. The actual prepayments of the
underlying mortgages depend on many factors, including the type of mortgages,
the coupon rate, the age of mortgages, the geographical location of the
underlying real estate collateralizing the mortgages and general levels of
market interest rates. The difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates is an
important determinant in the rate of prepayments. If the coupon rate of the
underlying mortgages significantly exceeds the prevailing market interest
rates offered for mortgage loans, refinancing generally increases and
accelerates the prepayment of the underlying mortgages. Prepayment experience
is more difficult to estimate for adjustable rate mortgage-backed securities.
55
<PAGE>
Certain of the Association's mortgage-backed securities yield above-market
rates of interest and are subject to substantial risk of prepayment. In a
declining interest rate environment, the Association may experience
significant prepayments of both fixed and adjustable rate mortgage-backed and
related securities. In such instances, the Association may be unable to
reinvest the cash flow from these securities into comparable yielding
investments, and would expect this reinvestment risk to continue so long as
interest rates remained relatively low.
The majority of the Association's mortgage-backed securities are fixed-rate
balloon securities due within 15 years. Depending on the Association's
asset/liability mix and future market conditions, however, the Association may
determine to purchase adjustable-rate mortgage-backed securities in the
future. The Association's holdings of mortgage-backed securities have
decreased in the past year as a result of an improved level of loan
origination in the Association's principal lending area. Because federal
agency mortgage-backed securities generally carry a yield of approximately 50
to 100 basis points below that of the corresponding type of residential loan
(due to the implied federal agency guarantee fee and the retention of a
servicing spread by the loan servicer) in the event that the proportion of the
Association's assets consisting of mortgage-backed securities increases, the
Association's asset yields could be somewhat adversely affected. Due to the
existence of the federal agency guarantee on the Association's mortgage-backed
securities and the availability of adjustable-rate mortgage-backed securities,
however, the Association's interest rate risk and credit risk would not
necessarily be increased by a future increase in mortgage-backed securities
volume. The Association will evaluate mortgage-backed securities purchases in
the future based on its asset/liability objectives, market conditions, and its
alternate investment opportunities.
The following table sets forth certain information regarding carrying and
market values and percentage of total carrying values of the Association's
mortgage-backed securities portfolio.
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- -----------------------
CARRYING % OF MARKET CARRYING % OF MARKET CARRYING % OF MARKET
VALUE TOTAL VALUE VALUE TOTAL VALUE VALUE TOTAL VALUE
-------- ------ ------- -------- ------ ------- -------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FNMA.................... $ 7,025 47.0% $ 7,025 $16,126 57.4% $16,126 $ 2,370 15.5% $ 2,299
FHLMC................... 4,555 30.5% 4,555 10,089 35.9% 10,089 12,890 84.5% 12,536
GNMA.................... 3,374 22.5% 3,374 1,881 6.7% 1,881 -- -- % --
------- ------ ------- ------- ------ ------- ------- ------ -------
Total mortgage-backed
securities............. $14,954 100.0% $14,954 $28,096 100.0% $28,096 $15,260 100.0% $14,835
======= ====== ======= ======= ====== ======= ======= ====== =======
</TABLE>
- --------
(1) In 1995, the Association's mortgage-backed securities were classified as
held to maturity and, accordingly, were carried at historical cost.
The following table sets forth the activity in the Association's mortgage-
backed securities during the periods indicated:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MARCH 31,
--------------------------------------
1997 1996 1995
------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Mortgage-backed securities:
At beginning of period............... $ 28,096 $ 15,260 $ 16,987
Purchases.......................... 14,211 24,235 1,172
Sales.............................. (22,254) (6,898) --
Repayments......................... (4,585) (4,022) (2,651)
Premium/discount amortization,
net............................... (295) (446) (248)
SFAS 115 fair market value
adjustment........................ (219) (33) --
------------ ----------- -----------
End of period........................ $ 14,954 $ 28,096 $ 15,260
============ =========== ===========
</TABLE>
56
<PAGE>
The composition and maturities of the Association's mortgage-backed
securities portfolio are indicated in the following table.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
-----------------------------------------------------------------------------
LESS THAN 1 YEAR 1 TO 5 YEARS 5 TO 10 YEARS GREATER THAN 10 YEARS
----------------- ----------------- ----------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
-------- -------- -------- -------- -------- -------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FNMA............. $ 54 8.88% $2,723 6.64% $ -- -- % $ 4,248 6.75%
FHLMC............ 701 7.92% 1,133 7.69% 2,307 6.66% 414 7.25%
GNMA............. -- -- % 229 9.00% -- -- % 3,145 6.06%
---- ----- ------ ----- ------ ----- ----------- ----------
Total mortgage-
backed
securities..... $755 7.99% $4,085 7.07% $2,307 6.66% $ 7,807 6.50%
==== ===== ====== ===== ====== ===== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1997
-------------------------------------
TOTAL
-------------------------------------
AVERAGE
REMAINING ESTIMATED WEIGHTED
YEARS TO CARRYING MARKET AVERAGE
MATURITY VALUE VALUE YIELD
--------- -------- --------- --------
<S> <C> <C> <C> <C>
FNMA............. 11.4 $ 7,025 $ 7,025 6.72%
FHLMC............ 5.9 4,555 4,555 7.16%
GNMA............. 13.9 3,374 3,374 6.26%
---- ------- ------- -----
Total mortgage-
backed
securities..... 10.3 $14,954 $14,954 6.75%
==== ======= ======= =====
</TABLE>
At March 31, 1997, the Association did not hold any security of an issuer
(other than U. S. government and agency securities and mutual funds which
invest exclusively in such securities) which had an aggregate book value or
aggregate market value in excess of 10% of the Association's stockholders'
equity at the dates indicated.
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
General. Deposits are the primary source of the Association's funds for
lending and other investment purposes. In addition to deposits, the
Association derives funds from loan principal repayments. Loan repayments are
a relatively stable source of funds while deposit inflows and outflows may be
significantly influenced by the general level of interest rates and money
market conditions. The Association also has access to advances from the FHLB
of Des Moines. These advances can be used on a short-term basis to compensate
for reductions in the availability of funds from other sources or they may be
used on a longer term basis for general business purposes.
Deposit Accounts. Local deposits are and traditionally have been the primary
source of the Association's funds for use in lending and other general
business purposes. Deposits are attracted from within the Association's
primary market area (metropolitan St. Louis) through an offering of a variety
of financial accounts including savings, checking, money market, certificates
of deposit, retirement plan accounts, and commercial checking. The account
terms vary by type of account according to minimum balance requirements,
interest rate, and the length of time the account must remain open without
incurring a penalty for withdrawal of the funds as well as other factors. The
Association relies on the location of its offices, customer satisfaction, and
other references as its primary sources of deposit solicitation. To a lesser
degree, local media advertising is used in the seeking of deposit funds.
In determining the individual characteristics of its deposit accounts, the
Association considers the products and rates offered by the competition, the
attractiveness of the product to its customer base, the profitability of the
product to the Association, and the effect the account will have on the asset
liability mix of the institution. Attractive, convenient locations and quality
service are the Association's benchmark of success. The Association does not
use brokered deposits.
57
<PAGE>
The following table sets forth information concerning the Association's
savings deposits at the dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
--------------------------------------------------------------------------------
1997 1996 1995
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
PERCENT AVERAGE PERCENT AVERAGE PERCENT AVERAGE
OF TOTAL NOMINAL OF TOTAL NOMINAL OF TOTAL NOMINAL
BALANCE DEPOSITS RATE BALANCE DEPOSITS RATE BALANCE DEPOSITS RATE
-------- -------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NOW accounts............ $ 7,170 5.83% 2.24% $ 6,990 5.61% 2.27% $ 7,522 6.19% 2.24%
Regular savings......... 21,577 17.55% 2.51% 21,831 17.54% 2.51% 23,878 19.64% 2.51%
Money market demand..... 6,135 4.99% 3.22% 6,552 5.26% 2.93% 7,778 6.40% 2.80%
Noninterest checking.... 4,993 4.06% 0.00% 3,824 3.07% 0.00% 2,637 2.18% 0.00%
Certificates of Deposit:
28-91 days--Fixed-term,
fixed rate............ 34 0.03% 2.88% 51 0.04% 2.81% 88 0.07% 2.89%
6 months--Fixed-term,
fixed rate............ 2,439 1.98% 4.01% 2,667 2.14% 4.00% 4,008 3.30% 4.01%
9 months--Fixed-term,
fixed rate............ 7,932 6.45% 5.27% 6,906 5.55% 5.43% 2,533 2.08% 5.27%
12 months--Fixed-term,
fixed rate............ 8,350 6.79% 5.06% 9,248 7.43% 5.32% 10,545 8.67% 5.06%
24 months--Fixed-term,
fixed rate............ 6,760 5.50% 5.55% 6,328 5.08% 5.49% 5,063 4.17% 5.55%
36 months--Fixed-term,
fixed rate............ 3,010 2.45% 5.35% 4,218 3.39% 4.71% 5,371 4.42% 5.35%
48 months--Fixed-term,
fixed rate............ 11,568 9.41% 6.39% 10,225 8.21% 6.44% 5,051 4.16% 6.39%
60 months--Fixed-term,
fixed rate............ 18,300 14.88% 5.67% 20,062 16.11% 5.80% 22,759 18.72% 5.67%
24 months--Fixed-term,
variable-rate......... 631 0.51% 5.50% 904 0.73% 5.50% 835 0.69% 5.50%
5-20 years--Fixed-term,
fixed rate (Guaranteed
Account).............. 115 0.09% 8.93% 107 0.09% 8.91% 101 0.08% 8.93%
1-60 months--Negotiated
rate.................. 2,718 2.21% 6.20% 3,428 2.75% 5.96% 2,935 2.41% 6.20%
Retirement Account
(IRAs):
12 months--Fixed-term,
fixed-rate............ 962 0.78% 5.00% 1,037 0.83% 5.00% 1,181 0.97% 5.00%
24 months--Fixed-term,
fixed-rate............ 942 0.77% 5.53% 809 0.65% 5.53% 734 0.60% 5.53%
36 months--Fixed-term,
fixed-rate............ 755 0.61% 5.44% 940 0.75% 4.89% 949 0.78% 5.44%
48 months--Fixed-term,
fixed-rate............ 10,260 8.34% 6.59% 8,563 6.88% 6.74% 4,677 3.85% 6.59%
60 months--Fixed-term,
fixed-rate............ 7,710 6.27% 5.87% 9,293 7.46% 6.08% 12,329 10.14% 5.87%
120 months--Fixed-term,
fixed-rate............ 370 0.30% 10.00% 346 0.28% 10.00% 326 0.27% 10.00%
24 months--Fixed-term,
variable-rate......... 252 0.20% 5.50% 188 0.15% 5.50% 261 0.21% 5.50%
-------- ------ -------- ------ -------- ------
$122,983 100.0% $124,517 100.0% $121,561 100.0%
======== ====== ======== ====== ======== ======
</TABLE>
The following table indicates the amount of the Association's jumbo
certificates of deposit by time remaining until maturity as of March 31, 1997.
Jumbo certificates of deposit require minimum deposits of $100,000 and have
negotiable rates.
<TABLE>
<CAPTION>
MATURITY PERIOD CERTIFICATES OF DEPOSIT
--------------- -----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less.............................. $ 200
Three through six months.......................... 340
Six through twelve months......................... 1,313
Over twelve months................................ 865
------
Total........................................... $2,718
======
</TABLE>
58
<PAGE>
DEPOSIT FLOW
The following table sets forth the balances of savings deposit in the
various types of savings accounts offered by the Association at the dates
indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
--------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ---------------------------- ----------------------------
PERCENT INCREASE PERCENT INCREASE PERCENT INCREASE
AMOUNT OF TOTAL (DECREASE) AMOUNT OF TOTAL (DECREASE) AMOUNT OF TOTAL (DECREASE)
-------- -------- ---------- -------- -------- ---------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing
deposits............... $ 4,993 4.06% $ 1,170 $ 3,823 3.07% $1,186 $ 2,637 2.18% $ (605)
NOW checking............ 7,170 5.83% 180 6,990 5.61% (532) 7,522 6.19% (416)
Regular savings
accounts............... 21,577 17.55% (254) 21,831 17.54% (2,047) 23,878 19.64% (3,930)
Money market deposits... 6,135 4.99% (417) 6,552 5.26% (1,226) 7,778 6.40% (4,149)
Fixed-rate
certificates........... 82,225 66.86% (2,002) 84,227 67.64% 5,577 78,650 64.69% (2,494)
Variable-rate
certificates........... 883 .71% (209) 1,092 .88% (3) 1,095 .90% 310
-------- ------ ------- -------- ------- ------ -------- ------- --------
Total.................. $122,983 100.0% $(1,532) $124,515 100.00% $2,955 $121,560 100.00% $(11,284)
======== ====== ======= ======== ======= ====== ======== ======= ========
</TABLE>
CERTIFICATES OF DEPOSIT BY RATES
The following table sets forth the certificates of deposits classified by
rates as of the dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Less than 3.00%.............. $ 8 $ 19 $ 20
3.00% to 3.99%............... 251 1,344 7,550
4.00% to 4.99%............... 3,925 6,553 16,456
5.00% to 5.99%............... 49,200 43,120 23,705
6.00% to 6.99%............... 17,083 19,200 13,661
7.00% to 7.99%............... 12,155 14,630 14,947
8.00% and greater............ 486 453 3,406
------- ------- -------
Total...................... $83,108 $85,319 $79,745
======= ======= =======
</TABLE>
Certificate of deposit accounts at March 31, 1997, 1996 and 1995 are
scheduled to mature as indicated in the following table.
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ ------------------------
AMOUNT PERCENT OF TOTAL AMOUNT PERCENT OF TOTAL AMOUNT PERCENT OF TOTAL
------- ---------------- ------- ---------------- ------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Within one year......... $36,335 43.7% $32,402 38.0% $29,401 36.9%
Second year............. 22,832 27.5% 16,287 19.1% 12,015 15.1%
Third year.............. 16,693 20.1% 18,727 21.9% 12,472 15.6%
Fourth year............. 4,949 6.0% 15,464 18.1% 18,444 23.1%
Thereafter.............. 2,299 2.8% 2,439 2.9% 7,413 9.3%
------- ------ ------- ------ ------- ------
Total................. $83,108 100.0% $85,319 100.0% $79,745 100.0%
======= ====== ======= ====== ======= ======
</TABLE>
59
<PAGE>
The following table sets forth the savings activities of the Association for
the periods indicated.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MARCH 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance................... $ 124,515 $ 121,560 $ 132,844
Net decrease before interest
credited........................... (5,811) (1,331) (15,209)
Interest credited................... 4,279 4,286 3,925
----------- ----------- -----------
Ending balance...................... $ 122,983 $ 124,515 $ 121,560
=========== =========== ===========
</TABLE>
BORROWINGS
While deposits are the primary source of funds for the Association, advances
from the FHLB of Des Moines are necessary periodically to supplement the funds
required for operations. At March 31, 1997, the Association had $63.0 million
in FHLB of Des Moines advances outstanding. During fiscal year 1997, the
Association utilized FHLB advances to offset deposit outflows to provide for
increased originations of portfolio loans and increased investment in
securities.
EMC maintains a custodial borrowing relationship at an unaffiliated bank
secured by investment securities with an amortized cost and a market value of
approximately $4.0 million at March 31, 1997. At March 31, 1997, there was
$1.1 million outstanding on this note payable.
Concurrent with the Mutual Holding Company Reorganization, the Association
established the ESOP. The ESOP initially borrowed $266,000 to finance the
acquisition of stock to be held in trust for future allocations to eligible
participants. At March 31, 1997, there was $136,000 outstanding on this note
payable. The debt of the ESOP is guaranteed by the Association and is
reflected as a liability in the consolidated balance sheet at March 31, 1997.
The following table sets forth certain information regarding borrowings by
the Association at the end of and during the periods indicated.
<TABLE>
<CAPTION>
AT
AND FOR THE YEAR ENDED MARCH 31,
--------------------------------
1997 1996 1995
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Weighted average rate paid on:
FHLB of Des Moines borrowings.............. 5.34% 5.52% 6.28%
Note payable to bank....................... 2.25% 2.25% 2.25%
ESOP debt.................................. 9.50% 9.25% 10.00%
Maximum amount of borrowings outstanding at
any month-end:
FHLB of Des Moines borrowings.............. $67,000 $62,000 $28,000
Note payable to bank....................... 4,000 3,000 3,000
ESOP debt.................................. 158 193 220
Approximate average borrowings outstanding
with respect to:
FHLB of Des Moines borrowings.............. $61,917 $46,000 $14,417
Note payable to bank....................... 2,259 2,194 2,109
ESOP debt.................................. 150 180 211
Approximate weighted average rate paid on:
FHLB of Des Moines borrowings.............. 5.46% 5.96% 5.14%
Note payable to bank....................... 2.25% 2.25% 2.25%
ESOP debt.................................. 9.25% 9.73% 8.96%
</TABLE>
60
<PAGE>
COMPETITION
The Association has been, and intends to continue to be, a community-
oriented financial institution offering a wide variety of financial services
to meet the needs of the communities it serves. The Association is
headquartered in St. Louis, Missouri. It currently operates out of eight full
and limited service offices in the St. Louis area.
The Association faces intense competition both in making loans and in
attracting deposits. The St. Louis area has a large number of financial
institutions, many of which have greater financial resources, name recognition
and market presence than the Association, and all of which are competitors of
the Association to varying degrees. Particularly intense competition exists
for deposits and in all of the lending activities engaged in by the
Association.
The Association's competition for loans comes principally from national,
regional and local mortgage-banking companies, commercial banks, other savings
and loan associations, savings banks, insurance companies, finance companies
and credit unions. Thus, no assurances can be made that the Association will
be able to maintain its current level of such loans. The Association competes
for loans principally through EMC. Competition is based on a combination of
interest rates and loan fees charged in addition to the availability of
special issues such as the Affordable Housing Program. The efficiency and
quality of the service provided also plays a significant role in the
Association's competitive position.
The Association's most direct competition for deposits historically has come
from other savings and loan associations, commercial banks, savings banks and
credit unions. In addition, the Association faces increasing competition for
deposits from non-bank institutions such as brokerage firms and insurance
companies in such areas as money market funds, other mutual funds (such as
corporate and government securities funds) and annuities. The Association
competes for deposits by offering customers a variety of savings accounts,
checking accounts, certificates of deposit, and a responsive, customer-
oriented staff, as well as convenient access to the Association by 24-Hour
Teller Machines or personal appointment.
Trends toward the consolidation of the banking industry and the lifting of
interstate banking and branching restrictions may make it more difficult for
smaller institutions, such as the Association, to compete effectively with
large, national and regional banking institutions.
Smaller institutions such as the Association will be forced to either
compete with larger institutions on pricing of products and services, or to
identify and operate in a "niche" that will allow for operating margins to be
maintained at profitable levels. As a locally-based financial institution, the
Association's strategy has been to position itself as a community-oriented
financial institution that provides high quality products and services to meet
the retail banking needs of its local customer base. This strategy is designed
to identify a niche in the Association's market where it can effectively
compete against much larger institutions.
SUBSIDIARY ACTIVITIES AND JOINT VENTURES
The Association has two wholly owned subsidiaries, EMC and ECC. ECC operates
a full-service insurance agency under the name Equality Insurance Agency
("EIA") and owns several income-producing properties and participates in a
real estate joint venture. EIA provides a full array of insurance products,
including property and casualty, automobile, health and life insurance, and,
to a much lesser degree, commercial fire and casualty insurance. EIA also
offers annuities and operates Flood Information Specialists, which issues
flood plain certificates. These certificates are required by all mortgage loan
lenders and is a requirement for selling a loan in the secondary market.
In 1986, ECC purchased a 14-unit complex located in south St. Louis near
Hampton Village. The property produces a stable income stream. At March 31,
1997, the property had a net book value of $233,000.
61
<PAGE>
ECC has a 50% interest in a real estate joint venture, WC Joint Venture. WC
Joint Venture owns two properties in St. Louis County, Missouri. Tenants at
the properties include DDA, Suburban Journal, IBT, Inc. and Airport Bowl.
The Association is required to deduct from capital a certain percentage of
its investment in ECC because ECC is considered a "nonincludable" subsidiary
as a result of its real estate investment activities. The Association intends
to continue to divest itself of various properties in an orderly and prudent
manner, taking advantage of more favorable economic conditions.
PROPERTIES
The Association conducts its business through three full-service offices.
The Association's main office is located at 4131 South Grand Boulevard, St.
Louis, Missouri. The Association owns its main office and South County Branch
in fee and they are unencumbered.
<TABLE>
<CAPTION>
OWNED NET LEASE
YEAR OR TOTAL BOOK EXPIRATION SQUARE
LOCATION OPENED LEASED INVESTMENT VALUE DATE FOOTAGE
-------- ------ ------ ---------- ------ ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
MAIN OFFICE:
4131 South Grand Boulevard 1944 Owned $2,274 $1,269 -- 21,740
St. Louis, Missouri 63118
BRANCHES:
Yorkshire Branch 1957 Leased 60 -- 1997 2,928
1281 South Laclede Station
Road
Webster Groves, Missouri
63119
South County Branch 1987 Owned 1,528 1,264 -- 4,545
5400 South Lindbergh
Boulevard
St. Louis, Missouri 63123
LOAN OFFICES:
Florissant Loan Office 1992 Leased 20 10 1998 1,306
2620 North Lindbergh
Florissant, Missouri 63033
West County Loan Office 1993 Leased 3 2 1999 1,200
14334 South Outer Forty
Chesterfield, Missouri
63017
O'Fallon Loan Office 1994 Leased -- -- 1997 300
2017 Highway K
O'Fallon, Missouri 63366
Crestwood Loan Office 1996 Leased -- -- 1997 500
9920 Watson Road, Suite 207
Crestwood, Missouri 63126
Chesterfield Loan Office 1996 Leased -- -- 1997 500
361 Chesterfield Center
Chesterfield, Missouri
63017
</TABLE>
In May 1997, the Association purchased a building in Arnold, Missouri (which
is in Jefferson County and adjacent to St. Louis County) that the Association
is remodeling as a full-service branch office. The Association expects this
office to be completed by the summer of 1998. In addition, the Association is
relocating a store-front branch office several blocks and concurrently
converting it into a branch office with a drive-up facility; the
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relocation is expected to be completed in September 1997. With the exception
of the foregoing, the Association believes that its current facilities are
adequate to meet the present and foreseeable needs of the Association and the
Holding Company.
The net book value of the Association's investment in office properties and
equipment totaled $2.9 million at March 31, 1997.
The Association uses an outside data processing firm to process customer
records and monetary transactions, post deposit and general ledger entries,
and record activity in installment lending. EMC uses a second outside data
processing firm to process loan servicing and loan originations.
PERSONNEL
As of March 31, 1997, the Association, including subsidiaries, had 76 full-
time employees and 24 part-time employees. The employees are not represented
by a union or collective bargaining unit. The Association believes its
relationship with its employees are good.
LEGAL PROCEEDINGS
The Association is, from time to time, a party to legal proceedings arising
in the ordinary course of its business, including legal proceedings to enforce
its rights against borrowers. The Association is not currently a party to any
legal proceedings which could reasonably be expected to have a material
adverse effect on the financial condition or operations of the Association.
REGULATION AND SUPERVISION
GENERAL
The Association is chartered under federal law by the OTS. It is a member of
the FHLB System, and its deposit accounts are insured up to legal limits by
the FDIC under the SAIF. The OTS is charged with overseeing and regulating the
Association's activities and monitoring its financial condition. This
regulatory framework sets parameters for the Association's activities and
operations and grants the OTS extensive discretion with regard to its
supervisory and enforcement powers and examination policies. The Association
files periodic reports with the OTS concerning its activities and financial
condition, must obtain OTS approval prior to entering into certain
transactions or initiating new activities, and is subject to periodic
examination by the OTS to evaluate the Association's compliance with various
regulatory requirements.
The Holding Company will be a savings and loan holding company and, like the
Association, will be subject to regulation by the OTS. As part of this
regulation, the Holding Company will be required to file certain reports with,
and will be subject to periodic examination by, the OTS.
RECENT LEGISLATIVE AND REGULATORY DEVELOPMENTS
Since late in 1996, several new laws and regulations were adopted that
affect savings associations like the Association.
Deposit Insurance Reform Legislation. The SAIF and the Bank Insurance Fund
(the "BIF") were required by law to achieve and maintain a ratio of insurance
reserves to total insured deposits equal to 1.25%. The BIF reached this
required reserve ratio during 1995, while some predictions indicated the SAIF
would not reach this target until the year 2002. The SAIF had not grown as
quickly as the BIF for many reasons, but in large part because almost half of
SAIF premiums had to be used to retire bonds issued by the Financing
Corporation ("FICO Bonds") in the late 1980's to recapitalize the Federal
Savings and Loan Insurance Corporation.
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Until 1995, the SAIF and BIF deposit insurance premium rate schedules had
been identical. But in mid-1995, the FDIC issued final rules modifying its
assessment rate schedules for SAIF and BIF member institutions. Under the
revised schedule, SAIF members continued to pay assessments ranging from $0.23
to $0.31 per $100 of deposits, while BIF members paid assessments ranging from
zero to $0.27 per $100 of deposits. But the majority of BIF members paid only
the $2,000 minimum annual premium. Thrift industry representatives argued that
this significant premium differential caused savings associations to operate
at a competitive disadvantage to their BIF-insured bank counterparts.
On September 30, 1996, President Clinton signed the Deposit Insurance Funds
Act of 1996 ("DIFA") that was part of the omnibus spending bill enacted by
Congress at the end of its 1996 session. DIFA mandated that the FDIC impose a
special assessment on the SAIF-assessable deposits of each insured depository
institution at a rate applicable to all such institutions that the FDIC
determined would cause the SAIF to achieve its designated reserve ratio of
1.25% as of October 1, 1996. The assessment was based on the amount of SAIF-
insured deposits owned by each institution as of March 31, 1995, the record
date established in the original drafts of the legislation. DIFA allowed the
FDIC to exempt any insured institution that it determined to be weak from
paying the special assessment if the FDIC determined that the exemption would
reduce the risk to the SAIF.
DIFA provides that the FDIC may not set semiannual assessments with respect
to SAIF or BIF in excess of the amount needed to maintain the 1.25% designated
reserve ratio or, if the reserve ratio is less than the designated reserve
ratio, to increase the reserve ratio to the designated reserve ratio.
On October 10, 1996, the FDIC adopted a final rule governing the payment of
the SAIF special assessment. The FDIC imposed a special assessment in the
amount of 65.7 basis points, which is less than the 85-95 basis points
estimated during the early stages of the law's enactment in 1995. The SAIF
special assessment was due by November 27, 1996. The Association's portion of
this special assessment amounted to $789,000 on a pre-tax basis. The
Association accrued this amount during its fiscal second quarter ended
September 30, 1996. Payment was made in November 1996. DIFA also confirmed
that the special assessment is tax deductible.
In response to the recapitalization of the SAIF, the FDIC announced on
December 11, 1996 that deposit insurance rates for most savings associations
insured under the SAIF would be lowered to zero effective January 1, 1997.
BIF-insured institutions would also no longer have to pay the $2,000 minimum
for deposit insurance, thereby equalizing deposit premiums for savings
associations and banks.
Merger of SAIF and BIF. DIFA mandates the merger of the SAIF and BIF,
effective January 1, 1999, but only if no insured depository institution is a
savings association on that date. The combined deposit insurance fund will be
called the "Deposit Insurance Fund," or "DIF."
FICO Bond Payments. Before DIFA, federal regulators and thrift industry
trade groups were predicting that a default would occur on the FICO Bonds as
early as 1998, as SAIF-assessable deposits continued to decline. DIFA amends
The Federal Home Loan Bank Act to impose the FICO assessment against both SAIF
and BIF deposits beginning after December 31, 1996. But the assessment imposed
on insured depository institutions with respect to any BIF-assessable deposit
will be assessed at a rate equal to one-fifth of the rate (approximately 1.3
basis points) of the assessments imposed on insured depository institutions
with respect to any SAIF-assessable deposit (approximately 6.7 basis points).
The FICO assessment for 1996 was paid entirely by SAIF-insured institutions.
BIF-insured banks will pay the same FICO assessment as SAIF-insured
institutions beginning as of the earlier of December 31, 1999 or the date as
of which the last savings association ceases to exist.
Deposit Shifting. DIFA provides that until the earlier of December 31, 1999
or the date as of which the last savings association ceases to exist, the
Office of the Comptroller of the Currency (the "OCC"), the FDIC, the Federal
Reserve Board, and the OTS will take appropriate actions, including
enforcement actions and denial of applications, to prevent insured depository
institutions from facilitating or encouraging the shifting of deposits from
SAIF-assessable deposits to BIF-assessable deposits for the purpose of evading
the assessments imposed on insured depository institutions with respect to
SAIF-assessable deposits.
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Bad Debt Recapture. The Small Business Job Protection Act of 1996, signed by
President Clinton on August 20, 1996, removed a significant tax obstacle for
savings associations that desire to become commercial banks. It also
eliminated a potential impediment to business combinations between banks and
thrifts and the creation of a new depository institution charter.
Before this new law, savings associations that converted to commercial banks
had to change their method of accounting for bad debt reserves, which forced a
recapture of the savings association's untaxed bad debt reserves into taxable
income. Under prior law, savings associations were allowed to use the reserve
method for establishing bad debt reserves. This meant in recent years they
could deduct up to 8% of their taxable income each year as a charge for bad
debts, regardless of their actual loan loss experience. Since the 1950's, this
deduction has steadily declined from its initial rate of 100%. These annual
deductions resulted in significant tax savings for savings associations and an
accumulation by savings associations of untaxed income.
Under the new law, a savings association's base-year reserves established
before 1988 will not be taxed should it convert to a commercial bank. But
reserves created after 1987 would be recaptured into taxable income ratably
over six years (beginning with the first tax year after December 31, 1995)
whether or not a savings association converts to a commercial bank. Recapture
of post-1987 reserves may be deferred until after January 1, 1998 if the
savings association maintains a high level of residential loan originations.
In the future, all savings associations must account for bad debts under tax
rules applicable to commercial banks.
Relaxation of the Qualified Thrift Lender Test. In September 1996, the
Economic Growth and Regulatory Paperwork Reduction Act of 1996 became law (the
"Economic Growth Act of 1996"). In the past, savings associations were
required to satisfy a qualified thrift lender test ("QTL" test) by maintaining
65% of their portfolio assets (defined as all assets minus intangible assets,
property used by the association in conducting its business and liquid assets
equal to 20% of total assets) in certain "qualified thrift investments"
(primarily residential mortgages and related investments, including certain
mortgage- backed securities) on a monthly basis in nine out of every twelve
months.
The Economic Growth Act of 1996 liberalized the QTL test for savings
associations by permitting them to satisfy a similar-but-different 60% asset
test under the Internal Revenue Code. Alternatively, savings associations may
meet the QTL test by satisfying a more liberal 65% asset test that allows an
institution to include small business, credit card and education loans as
qualified investments for purposes of the test. Furthermore, consumer loans
now count as qualified thrift investments up to 20% of portfolio assets. On
November 27, 1996, OTS issued an interim final rule that implements provisions
of the Economic Growth Act of 1996, including the amended QTL test.
Increased Commercial and Consumer Lending Authority. Before the Economic
Growth Act of 1996, federal savings associations were able to lend up to 10%
of their assets in commercial business loans (i.e., secured or unsecured loans
for commercial, corporate, business, or agricultural purposes) and, subject to
OTS approval for a higher amount, up to 400% of their capital in commercial
real estate loans. In addition, federal savings associations were permitted to
make consumer loans (i.e., loans for personal, family or household purposes)
in an amount not to exceed 35% of their assets.
The Economic Growth Act of 1996 amended the commercial-lending-asset limit
by increasing the ceiling from 10% to 20%, but provides that amounts in excess
of 10% may be used only for small business loans. Moreover, the new law
exempts credit card and educational loans from any percentage of asset
limitations applicable to consumer loans. The interim final rule issued by the
OTS on November 27, 1996, defines a "small business loan" as one which meets
the Small Business Administration size eligibility standards. This definition
also applies for purposes of the new QTL test.
Effective October 30, 1996, the OTS (as part of its regulatory streamlining
project) amended its lending regulations for federal savings associations to
remove the requirement that commercial loans made at the service corporation
level be aggregated with the 10% of assets limit on commercial lending.
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Charter Overhaul. Proposals to eliminate the savings association charter
have been considered by the U.S. Congress several times in recent years. DIFA
mandates that the Secretary of the Treasury conduct a study of all issues
which the Secretary considers to be relevant with respect to the development
of a common charter for all insured depository institutions and the abolition
of separate and distinct charters between banks and savings associations.
The Secretary of the Treasury was required to submit a report to the
Congress on or before March 31, 1997, containing the findings and conclusions
of the Secretary in connection with this study. The report needed to include a
detailed analysis of each issue the Secretary considers relevant to the
subject of the study, recommendations of the Secretary with regard to the
establishment of a common charter for insured depository institutions and such
recommendations for legislative and administrative action as the Secretary
determines to be appropriate to implement the recommendations of the
Secretary. See "--Recent Legislative and Regulatory Developments--
Modernization of Financial Services Industry."
Regulatory Relief for Thrifts and Banks. The Economic Growth Act of 1996
included dozens of changes to financial institution laws granting regulatory
relief to financial institutions (including savings associations) and
simplifying and streamlining the regulatory application process with respect
to certain transactions. Many existing laws were affected by the new
legislation, including the Truth in Lending Act (the "TILA"), the Real Estate
Settlement Procedures Act, the Truth in Savings Act, the Fair Credit Reporting
Act, the Home Mortgage Disclosure Act and Fair Lending, among others. In
particular, the new law expands the definition of a small depository
institution that qualifies for an extended examination cycle (18 rather than
12 months) to include institutions with assets of $250 million (as opposed to
the former $175 million asset threshold).
Environmental Liability Reform. On September 30, 1996, President Clinton
signed into law amendments to the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"). These amendments provide relief for
lenders in connection with their liability for environmental contamination in
making and administering loans.
Overhaul of Thrift Conflict of Interest, Corporate Opportunity and Corporate
Governance Rules. For several years the OTS has been engaged in an extensive
review of its regulations to identify regulations that are obsolete and areas
where regulatory streamlining is appropriate. This review has culminated in
several substantial revisions to OTS regulations. In 1996, the OTS issued
final regulations streamlining its regulations in the areas of lending and
investment authority, corporate governance, subsidiaries and equity
investments and conflicts of interest, among others. As a result of this
project, many OTS regulations have been removed to the OTS Thrift Activities
Handbook.
New Thrift Subsidiary and Equity Investment Rules. On December 18, 1996, the
OTS issued a final rule updating and streamlining its regulations governing
subsidiary and equity investments. The regulation recasts operating
subsidiaries and service corporations as "subordinate organizations," revises
the list of permissible activities for service corporations, confirms federal
preemption of state law regarding the activities of operating subsidiaries and
clarifies the application process for establishing subordinate organizations.
The new rule also codifies the authority of a federal savings association to
invest in certain pass-through investments, such as limited partnerships and
mutual funds.
Modernization of Financial Services Industry. On May 21, 1997, the Clinton
Administration announced a plan to modernize the financial services industry.
The proposal, among other things, addresses the ongoing debate concerning
mixing banking and commerce, elimination of the savings association charter
and the merger of the SAIF and BIF. Under the proposal, companies that own
banks (bank holding companies) and meet certain qualifications would--subject
to certain safeguards--be permitted to engage in any financial activity,
including the full range of securities activities, insurance activities,
investment advisory activities and mutual fund sponsorship and merchant
banking. Likewise, financial companies could own banks.
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Regarding financial activities of insured depository institutions and their
subsidiaries, the proposal provides that national banks (and state banks to
the extent permitted by state law) would be authorized, subject to certain
safeguards, to conduct any financial activity through subsidiaries (except
that national bank subsidiaries would not be authorized to engage in real
estate development). National banks would be permitted to engage in the full
scope of activities that have previously been permissible for national banks
or federally chartered savings associations (except engaging in the real
estate development). Moreover, national banks (and state banks to the extent
permitted by state law) would be permitted to act as general agents for the
sale of insurance, but would be prohibited from engaging directly in insurance
underwriting other than what is currently permissible (for instance, credit-
related insurance). Additionally, national banks (and state banks to the
extent permitted by state law) would be permitted to underwrite and deal in
municipal revenue bonds in addition to other securities activities currently
permissible in the bank.
The Clinton Administration's proposal also addressed affiliations between
banking organizations and non-financial companies. The proposal recommended
two alternative approaches--the "basket" approach and the "financial-only"
approach. Under the basket approach, bank holding companies that derive some
significant percentage (as specified by the U.S. Congress) of their gross
revenues in the U.S. from financial activities could derive the remainder of
their revenues from non-financial activities. In addition to the basket
limitation, the proposal suggested prohibiting any affiliation between a bank
holding company and a non-financial firm having assets in excess of a
specified amount (calculated to approximate the 1,000 largest non-financial
companies). Moreover, banks would be prohibited from extending any credit to,
or for the benefit of, any non-financial affiliate.
Under the basket approach, the federal savings association charter would be
eliminated after two years (thereby requiring all federal thrifts to convert
to bank charters), and existing unitary thrift holding companies (which
presently have no activity restrictions) would be given a grandfather
exemption from the "basket" test (terminable upon a change of control). All
remaining state-chartered thrifts would be treated as banks for federal bank
regulatory purposes. The OTS and the OCC would be merged at the end of the
two-year-conversion period and the SAIF and BIF would be merged. The Federal
Reserve Board, however, would continue to approve the formation of, and to
supervise and regulate all bank holding companies.
Under the financial-only approach, bank holding companies would not be
permitted to engage in any non-financial activities. But the existing federal
savings association charter would be preserved, and thrift holding companies
would retain their current authority to engage in any lawful activity.
Furthermore, the OTS and OCC would be kept in tact, but the SAIF and BIF would
be merged.
The Administration's proposal also sets forth capital protections and other
safeguards associated with the new activities contemplated for banks. In order
for a bank holding company or a subsidiary of a bank to engage as a principal
in activities not permissible for a national bank to engage in directly, the
bank would have to remain "well capitalized"--that is, to be in the highest
regulatory capital category, with regulatory capital exceeding normal
requirements--and it would have to deduct from its regulatory capital the
entire amount of its equity investment in a subsidiary engaged in such
activities. The bank also would have to be well-managed.
The U.S. Congress is scheduled to consider the Administration's proposal, as
well as proposals offered by others, during the summer of 1997. There can be
no assurance that legislation will be enacted that modernizes the financial
services industry, or if enacted, what form such legislation might take.
FEDERAL SAVINGS ASSOCIATION REGULATION
Business Activities. The activities of savings associations are governed by
the Home Owners' Loan Act, as amended (the "HOLA"), and, in certain respects,
the Federal Deposit Insurance Act (the "FDI Act"). The HOLA and the FDI Act
were amended by the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA") and the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"). FIRREA was enacted for the purpose of
resolving problem savings associations, establishing a new thrift
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insurance fund, reorganizing the regulatory structure applicable to savings
associations, and imposing bank-like standards on savings associations.
FDICIA, among other things, requires that federal banking regulators intervene
promptly when a depository institution experiences financial difficulties,
mandates the establishment of a risk-based deposit insurance assessment system
and requires imposition of numerous additional safety and soundness
operational standards and restrictions. FIRREA and FDICIA both contain
provisions affecting numerous aspects of the operations and regulations of
federally-insured savings associations and empowers the OTS and the FDIC,
among other agencies, to promulgate regulations implementing its provisions.
Branching. A federally-chartered savings association, like the Association,
can establish branches in any state or states in the United States and its
territories, subject to a few exceptions. The exercise by the OTS of its
authority to permit interstate branching by federal savings associations is
preemptive of any state law purporting to address the subject of branching by
a federal savings association.
Loans to One Borrower. Under HOLA, savings associations are generally
subject to the national bank limits regarding loans to one borrower.
Generally, savings associations may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of the association's
unimpaired capital and surplus, where the borrowing is not fully secured by
readily-marketable collateral. An additional amount may be lent, equal to 10%
of the association's unimpaired capital and surplus, if such additional
borrowing is secured by readily-marketable collateral at least equal to the
amount of such additional funds. At March 31, 1997, the Association had no
outstanding loans or commitments that exceeded the loans to one borrower limit
at the time made or committed.
Brokered Deposits. Well-capitalized savings associations that are not
troubled are not subject to brokered deposit limitations. Adequately-
capitalized associations are able to accept, renew or roll over brokered
deposits but only (i) with a waiver from the FDIC and (ii) subject to the
limitation that they do not pay an effective yield on any such deposit that
exceeds by more than (a) 75 basis points the effective yield paid on deposits
of comparable size and maturity in such association's normal market area for
deposits accepted in its normal market area or (b) 120 basis points of the
current yield on similar maturity U.S. Treasury obligations or, in the case of
any deposit at least half of which is uninsured, 130% of such Treasury yield.
Undercapitalized associations are not permitted to accept brokered deposits
and may not solicit deposits by offering an effective yield that exceeds by
more than 75 basis points the prevailing effective yields on insured deposits
of comparable maturity in the association's normal market area or in the
market area in which such deposits are being solicited. The Association is not
presently soliciting brokered deposits.
Enforcement. Under the FDI Act, the OTS has primary enforcement
responsibility over savings associations and has the authority to bring
enforcement action against all "institution-related parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on
an insured association. Civil penalties cover a wide range of violations and
actions. Criminal penalties for most financial association crimes include
fines and imprisonment. In addition, regulators have substantial discretion to
impose enforcement action on an association that fails to comply with its
regulatory requirements, particularly with respect to amounts of capital.
Possible enforcement action ranges from requiring the preparation of a capital
plan or imposition of a capital directive to receivership, conservatorship or
the termination of deposit insurance. Under the FDI Act, the FDIC has the
authority to recommend to the Director of OTS enforcement action be taken with
respect to a particular savings association. If action is not taken by the
Director, the FDIC has authority to take enforcement action under certain
circumstances.
Assessments. Savings associations are required by OTS regulation to pay
assessments to the OTS to fund the operations of the OTS. The general
assessment paid on a semi-annual basis is computed based upon the savings
association's total assets, including consolidated subsidiaries, as reported
in the association's latest quarterly thrift financial report.
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Federal Home Loan Bank System. The Association is a member of the FHLB
System, which consists of 12 regional FHLB's. The FHLB provides a central
credit facility primarily for member associations. The Association, as a
member of the FHLB-Des Moines, is required to acquire and hold shares of
capital stock in that FHLB in an amount at least equal to 1% of the aggregate
principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB-Des Moines, whichever is greater. The Association
is in compliance with this requirement, with an investment in FHLB-Des Moines
stock at March 31, 1997, of $3.4 million. FHLB advances must be secured by
specified types of collateral and may be obtained only for the purpose of
purchasing or funding new residential housing finance assets.
OTS Capital Requirements. The OTS capital regulations require savings
associations to meet three capital standards: a 1.5% tangible capital
standard, a 3% leverage ratio (or core capital ratio) and an 8% risk-based
capital standard.
Tangible capital is defined as common stockholders' equity (including
retained earnings), noncumulative perpetual preferred stock and related
earnings, certain nonwithdrawable accounts and pledged deposits of mutual
savings associations, and minority interests in equity accounts of fully
consolidated subsidiaries, less intangible assets (other than certain mortgage
servicing rights) and certain equity and debt investments in nonqualifying
subsidiaries (as hereinafter defined).
Core capital is defined as common stockholders' equity (including retained
earnings), certain noncumulative perpetual preferred stock and related
surplus, minority interests in equity accounts of consolidated subsidiaries,
certain nonwithdrawable accounts and pledged deposits of mutual savings
associations, certain amounts of goodwill resulting from prior regulatory
accounting practices, less intangible assets (other than certain mortgage
servicing rights) and certain equity and debt investments in nonincludable
subsidiaries.
The OTS capital regulation requires that in meeting the leverage ratio,
tangible and risk-based capital standards, savings associations must deduct
investments in and loans to subsidiaries engaged in activities not permissible
for a national bank (a "nonincludable subsidiary"). At March 31, 1997, ECC was
considered a nonincludable subsidiary.
In April 1991, the OTS issued a proposal to amend its regulatory capital
regulation to establish a 3% leverage ratio (defined as the ratio of core
capital to adjusted total assets) for associations in the strongest financial
and managerial condition, with a 1 CAMEL Rating (the highest rating of the OTS
for savings associations). For all other associations, the minimum core
capital leverage ratio would be 3% plus at least an additional 100 to 200
basis points. In determining the amount of additional capital under the
proposal, the OTS would assess both the quality of risk management systems and
the level of overall risk in each individual association through the
supervisory process on a case-by-case basis. Associations that failed the new
leverage ratio would be required to file with the OTS a capital plan that
details the steps they would take to reach compliance. If enacted in final
form as proposed, management does not believe that the proposed regulation
would have a material effect on the Association.
Although the OTS has not adopted this regulation in final form, generally a
savings association that has a leverage capital ratio of less than 4% will be
deemed to be "undercapitalized" under the OTS prompt corrective action
regulations and consequently can be subject to various limitations on
activities.
The OTS' risk-based capital standard requires that savings associations
maintain a ratio of total capital (which is defined as core capital and
supplementary capital) to risk-weighted assets of 8%. In calculating total
capital, a savings association must deduct reciprocal holdings of depository
institution capital instruments, all equity investments and that portion of
land loans and nonresidential construction loans in excess of 80% loan-to-
value ratio and its interest rate risk component (as discussed below), in
addition to the assets that must be deducted in calculating core capital. In
determining the amount of risk-weighted assets, all assets, including
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certain off-balance sheet assets, are multiplied by a risk-weight of 0% to
100%, as assigned by the OTS capital regulation based on the risks OTS
believes are inherent in the type of asset.
The components of core capital are equivalent to those discussed above under
the 3% leverage standard. The components of supplementary capital include
cumulative preferred stock, long-term perpetual preferred stock, mutual
capital certificates, certain nonwithdrawable accounts and pledged deposits,
certain net worth certificates, income capital certificates, certain perpetual
subordinated debt, mandatory convertible subordinated debt, certain
intermediate-term preferred stock, certain mandatorily redeemable preferred
stock and allowance for loan and lease losses (up to 1.25% of risk-weighted
assets). Allowance for loan and lease losses includable in supplementary
capital is limited to a maximum of 1.25%. Overall, the amount of capital
counted toward supplementary capital cannot exceed 100% of core capital. At
March 31, 1997, the Association met each of its capital requirements.
FDICIA required that the OTS (and other federal banking agencies) revise
risk-based capital standards, with appropriate transition rules, to ensure
that they take account of interest rate risk, concentration of risk and the
risks of nontraditional activities.
The OTS' interest rate risk component became effective on January 1, 1994.
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 (except when the three-month Treasury bond equivalent yield
falls below 4%, then the decrease would be equal to one-half of that Treasury
rate) 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 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 association's measured interest rate
risk and 2%, multiplied by the estimated economic value of the association's
assets. That dollar amount is deducted from an association's total capital in
calculating compliance with its risk-based capital requirement. Savings
associations with assets of less than $300 million and risk-based capital
ratios in excess of 12% are not subject to the interest rate risk component.
The rule also provides that the Director of the OTS may waive or defer an
association's interest rate risk component. The OTS has postponed the date
that the risk component will first be deducted from an institution's total
capital to allow, among other things, the OTS to evaluate the interest rate
risk proposals issued by the other banking agencies.
Liquidity. The Association is required to maintain an average daily balance
of liquid assets (e.g., cash, accrued interest on liquid assets, certain time
deposits, savings accounts, bankers' acceptances, specified U.S. government,
state or federal agency obligations, shares of certain mutual funds and
certain corporate debt securities and commercial paper) equal to not less than
a specified percentage of the average daily balance of its net withdrawal
deposit accounts plus short-term borrowings. This liquidity requirement may be
changed from time to time by the OTS to any amount within the range of 4% to
10% depending upon economic conditions and the savings flows of member
associations; this requirement is currently 5%. OTS regulations also require
each member savings association to maintain an average daily balance of short-
term liquid assets at a specified percentage (currently 1%) of the average
daily balance of its net withdrawable deposit accounts and borrowings. The OTS
may initiate enforcement actions for failure to meet these liquidity
requirements. The Association has never been subject to monetary penalties for
failure to meet its liquidity requirements.
Insurance of Deposit Accounts. FDICIA required the FDIC to establish a risk-
based assessment system for insured depository associations that takes into
account the risks attributable to different categories and concentrations of
assets and liabilities. Under the rule, the FDIC assigns an association to one
of three capital categories consisting of (i) well capitalized, (ii)
adequately capitalized or (iii) undercapitalized, and one of three supervisory
subcategories. The supervisory subgroup to which an association is assigned is
based on a
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supervisory evaluation provided to the FDIC by the association's primary
federal regulator and information which the FDIC determines to be relevant to
the association's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
association's state supervisor). An association's assessment rate depends on
the capital category and supervisory category to which it is assigned. There
are nine assessment risk classifications (i.e., combinations of capital groups
and supervisory subgroups) to which different assessment rates are applied.
Assessment rates range from 23 basis points for an association in the highest
category (i.e., well-capitalized and healthy) to 31 basis points for an
association in the lowest category (i.e., undercapitalized and of substantial
supervisory concern).
Limitation on Capital Distributions. The OTS regulations impose limitations
upon all capital distributions by savings associations, such as cash
dividends, payments to repurchase or otherwise acquire its shares, payments to
shareholders of another association in a cash-out merger and other
distributions charged against capital. The regulations establish three tiers
of associations. An association that exceeds all fully phased-in capital
requirements before and after the proposed capital distribution ("Tier 1
Association") and has not been advised by the OTS that it is in need of more
than normal supervision, could, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year up to the higher of
(a) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the
calendar year or (b) 75% of its net reserve over the most recent four-quarter
period. Any additional capital distributions would require prior regulatory
approval. In computing the association's permissible percentage of capital
distributions, previous distributions made during the prior four quarter
period must be included. As of March 31, 1997, the Association met the
requirements of a Tier 1 Association. In the event the Association's capital
fell below its fully phased-in requirement or the OTS notified it that it was
in need of more than normal supervision, the Association's ability to make
capital distributions could be restricted. In addition, the OTS could prohibit
a proposed capital distribution by any association, which would otherwise be
permitted by regulation, if the OTS determines that such distribution would
constitute an unsafe or unsound practice. Moreover, under the OTS prompt
corrective action regulations, the Association would be prohibited from making
any capital distribution if, after the distribution, the Association would
have, (i) total risk-based capital ratio of less than 8%, (ii) Tier 1 risk-
based capital ratio of less than 4%, or (iii) a leverage ratio of less than 4%
or has a leverage ratio that is less than 3% if the association is rated
composite 1 under the CAMEL rating system in the most recent examination of
the association and is not experiencing or anticipating significant growth.
Community Reinvestment. The OTS, the FDIC, the Federal Reserve Board and the
OCC have jointly issued a final rule (the "Final Rule") under the Community
Reinvestment Act (the "CRA"). The Final Rule eliminates the existing CRA
regulation's 12 assessment factors and substitutes a performance based
evaluation system. The Final Rule will be phased in over a period of time and
become fully effective by July 1, 1997. Under the Final Rule, an institution's
performance in meeting the credit needs of its entire community, including
low- and moderate-income areas, as required by the CRA, will generally be
evaluated under three tests: the "lending test," the "investment test," and
the "service test."
The lending test analyzes lending performance using five criteria: (i) the
number and amount of loans in the institution's assessment area, (ii) the
geographic distribution of lending, including the proportion of lending in the
assessment area, the dispersion of lending in the assessment area, and the
number and amount of loans in low-, moderate-, middle-, and upper-income areas
in the assessment area, (iii) borrower characteristics, such as the income
level of individual borrowers and the size of businesses or farms, (iv) the
number and amount, as well as the complexity and innovativeness of an
institution's community development lending and (v) the use of innovative or
flexible lending practices in a safe and sound manner to address the credit
needs of low- or moderate-income individuals or areas. The investment test
analyzes investment performance using four criteria: (i) the dollar amount of
qualified investments, (ii) the innovativeness or complexity of qualified
investments, (iii) the responsiveness of qualified investments to credit and
community development needs, and (iv) the degree to which the qualified
investments made by the institution are not routinely provided by private
investors. The service test analyzes service performance using six criteria:
(i) the institution's branch distribution among low-,
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moderate-, middle-, and upper-income areas, (ii) its record of opening and
closing branches, particularly in low- and moderate-income areas, (iii) the
availability and effectiveness of alternative systems for delivering retail
banking services, (iv) the range of services provided in low-, moderate-,
middle- and upper-income areas and extent to which those services are tailored
to meet the needs of those areas, (v) the extent to which the institution
provides community development services, and (vi) the innovativeness and
responsiveness of community development services provided.
An independent financial institution with assets of less than $250 million,
or a financial institution with assets of less than $250 million that is a
subsidiary of a holding company with assets of less than $1 billion, will be
evaluated under a streamlined assessment method based primarily on its lending
record. The streamlined test considers an institution's loan-to-deposit ratio
adjusted for seasonal variation and special lending activities, its percentage
of loans and other lending related activities in the assessment area, its
record of lending to borrowers of different income levels and businesses and
farms of different sizes, the geographic distribution of its loans, and its
record of taking action, if warranted, in response to written complaints. In
lieu of being evaluated under the three assessment tests or the streamlined
test, a financial institution can adopt a "strategic plan" and elect to be
evaluated on the basis of achieving the goals and benchmarks outlined in the
strategic plan.
Transactions with Related Parties. The Association's authority to engage in
transactions with related parties or "affiliates," (i.e., any company that
controls or is under common control with an association) including the Holding
Company and its non-savings-association subsidiaries or to make loans to
certain insiders, is limited by Sections 23A and 23B of the Federal Reserve
Act ("FRA"). Subsidiaries of a savings association are generally exempted from
the definition of "affiliate." Section 23A limits the aggregate amount of
transactions with any individual affiliate to 10% of the capital and surplus
of the savings association and also limits the aggregate amount of
transactions with all affiliates to 20% of the savings association's capital
and surplus. Certain transactions with affiliates are required to be secured
by collateral in an amount and of a type described in the FRA and the purchase
of low quality assets from affiliates is generally prohibited. Section 23B
provides that certain transactions with affiliates, including loans and asset
purchases, must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the
association as those prevailing at the time for comparable transactions with
non-affiliated companies. In the absence of comparable transactions, such
transactions may only occur under terms and circumstances, including credit
standards, that in good faith would be offered to or would apply to non-
affiliated companies. Notwithstanding Sections 23A and 23B, FIRREA prohibits
any savings association from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies under Section
4(c) of the Bank Holding Company Act ("BHC Act"). Further, no savings
association may purchase the securities of any affiliate other than a
subsidiary.
The Association's authority to extend credit to executive officers,
directors and 10% shareholders, as well as such entities such persons control
are currently governed by Section 22(g) and 22(h) of the FRA and Regulation O
promulgated by the Federal Reserve Board. Among other things, these
regulations require such loans to be made on terms substantially similar to
those offered to unaffiliated individuals, place limits on the amount of loans
the Association may make to such persons based, in part, on the Association's
capital position, and require certain approval procedures to be followed. OTS
regulations, with the exception of minor variations, apply Regulation O to
savings associations.
Prompt Corrective Regulatory Action. FDICIA establishes a system of prompt
corrective action to resolve the problems of undercapitalized associations.
Under this system, the OTS is required to take certain supervisory actions
against undercapitalized associations, the severity of which depends upon the
association's degree of undercapitalization. Generally, subject to a narrow
exception, FDICIA requires the OTS to appoint a receiver or conservator for an
association that is critically undercapitalized. FDICIA authorizes the OTS to
specify the ratio of tangible equity to assets at which an association becomes
critically undercapitalized and requires that ratio be no less than 2% of
assets.
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Under OTS regulations, a savings association is considered to be
undercapitalized if it has risk-based capital of less than 8% or has a Tier 1
risk-based capital ratio that is less than 4% or has a leverage ratio that is
less than 4% or has a leverage ratio less than 3% if the savings association
is rated composite 1 under the CAMEL rating system in the most recent
examination of the association. A savings association that has risk-based
capital less than 6% or a Tier 1 risk-based capital ratio that is less than 3%
or a leverage ratio that is less than 3% would be considered to be
"significantly undercapitalized." A savings association that has a tangible
equity to total assets ratio equal to or less than 2% would be deemed to be
"critically undercapitalized." Generally, a capital restoration plan must be
filed with the OTS within 45 days of the date an association receives notice
that it is undercapitalized, significantly undercapitalized or critically
undercapitalized. In addition, numerous mandatory supervisory actions become
immediately applicable to the association, including, but not limited to,
restrictions on growth, investment activities, capital distributions, and
affiliate transactions. In addition, the OTS could issue a capital directive
to the savings association that includes additional discretionary restrictions
on the savings association.
Real Estate Lending Standards. The OTS and the other federal banking
agencies have uniform regulations prescribing real estate lending standards.
The OTS regulation requires each savings association to establish and maintain
written internal real estate lending standards consistent with safe and sound
banking practices and appropriate to the size of the institution and the
nature and scope of its real estate lending activities. The policy must also
be consistent with accompanying OTS guidelines, which include maximum loan-to-
value ratios for the following types of real estate loans: raw land (65%),
land development (75%), nonresidential construction (80%), improved property
(85%) and one- to four-family residential construction (85%). Owner-occupied
one- to four-family mortgage loans and home equity loans do not have maximum
loan-to-value ratio limits, but those with a loan-to-value ratio at
origination of 90% or greater are to be backed by private mortgage insurance
or readily marketable collateral. Institutions are also permitted to make a
limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are appropriately reviewed and
justified. The guidelines also list a number of lending situations in which
exceptions to the loan-to-value standard are justified.
Standards for Safety and Soundness. As required by FDICIA and subsequently
amended by the Riegle Community Development and Regulatory Improvement Act of
1994, the federal banking regulators adopted interagency guidelines
establishing standards for safety and soundness for depository institutions on
matters such as internal controls, loan documentation, credit underwriting,
interest-rate risk exposure, asset growth, compensation and other benefits and
asset quality and earnings (the "Guidelines"). The agencies expect to request
a compliance plan from an institution whose failure to meet one or more of the
standards is of such severity that it could threaten the safe and sound
operation of the institution. FDIC regulations enacted under FDICIA also
require all depository institutions to be examined annually by the banking
regulators (but see, "Regulatory Relief for Thrifts and Banks") and depository
institutions having $500 million or more in total assets to have an annual
independent audit, an audit committee comprised solely of outside directors,
and to hire outside auditors to evaluate the institution's internal control
structure and procedures and compliance with laws and regulations relating to
safety and soundness. The FDIC, in adopting the regulations, reiterated its
belief that every depository institution, regardless of size, should have an
annual independent audit and an independent audit committee.
Financial Management Requirements. FDICIA imposes new financial reporting
requirements on all depository institutions with assets of more than $500
million, their management, and their independent auditors. It also establishes
new rules for the composition, duties and authority of such institutions'
audit committees and boards of directors. Among other things, all such
depository institutions will be required to prepare and make available to the
public annual reports on their financial condition and management (including
statements of managements' responsibility for the financial statements,
internal controls and compliance with certain federal banking laws and
regulations relating to safety and soundness, and an assessment by management
of the effectiveness of the institution's internal controls and procedures and
the institution's compliance with such laws and regulations). The
institution's independent public accountants are required to attest to these
management assessments. Each such institution is also required to have an
audit committee composed of independent directors.
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FEDERAL RESERVE SYSTEM
The Federal Reserve Board regulations require savings institutions to
maintain noninterest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts), non-personal time deposits
(those which are transferable or held by a person other than a natural person)
with an original maturity of less than one and one-half years and certain
money market accounts. The Federal Reserve Board regulations generally require
that reserves of 3% must be maintained against aggregate transaction accounts
of $52 million or less (subject to adjustment by the Federal Reserve Board)
and an initial reserve of $1.6 million plus 10% (subject to adjustment by the
Federal Reserve Board between 8% and 14 %) against that portion of total
transaction accounts in excess of $52 million. The first $4.3 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements. The Association is in
compliance with the foregoing requirements.
The balances maintained to meet the reserve requirements imposed by the
Federal Reserve Board may be used to satisfy liquidity requirements by the
OTS. Because required reserves must be maintained in the form of either vault
cash, a non-interest-bearing account at a Federal Reserve Bank or a pass-
through account as defined by the Federal Reserve Board, the effect of this
reserve requirement is to reduce the Association's interest-earning assets.
FHLB System members are also authorized to borrow from the Federal Reserve
"discount window," but Federal Reserve Board regulations require institutions
to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.
HOLDING COMPANY REGULATION
Upon consummation of the Conversion and Reorganization, the Holding Company
will be considered a non- diversified, savings and loan holding company within
the meaning of the HOLA, will be registered as a savings and loan holding
company with the OTS and will be subject to OTS regulations, examinations,
supervision and reporting requirements. In addition, the OTS will have
enforcement authority over the Holding Company and its non-savings association
subsidiaries. Among other things, this authority permits the OTS to restrict
or prohibit activities that are determined to be a serious risk to the
subsidiary savings association.
The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from (i) acquiring control
of, or acquiring by merger or purchase of assets, another savings association
or holding company thereof, without prior written approval of the OTS; (ii)
acquiring or retaining, with certain exceptions, more than 5% of a non-
subsidiary savings association, a non-subsidiary holding company, or a non-
subsidiary company engaged in activities other than those permitted by the
HOLA; or (iii) acquiring or retaining control of an institution that is not
federally insured. In evaluating applications by holding companies to acquire
savings associations, the OTS must consider the financial and managerial
resources and future prospects of the company and institution involved, the
effect of the acquisition on the risk to the insurance funds, the convenience
and needs of the community and competitive factors.
As a unitary savings and loan holding company, the Holding Company generally
will not be restricted under existing laws as to the types of business
activities in which it may engage, provided that its savings association
subsidiary continues to satisfy the QTL test. Upon any acquisition by the
Holding Company of another SAIF-insured institution (other than the Holding
Company), a federal savings association insured by the BIF, or a state-
chartered BIF-insured savings association meeting the QTL test that is deemed
to be a savings institution by OTS, except for a supervisory acquisition, the
Holding Company would become a multiple savings and loan holding company (if
the acquired institution is held as a separate subsidiary) and would be
subject to extensive limitations on the types of business activities in which
it could engage. The HOLA, as amended by the FIRREA, limits the activities of
a multiple savings and loan holding company and its non-insured institution
subsidiaries primarily to activities permissible for bank holding companies
under Section 4(c)(8) of the BHC Act, subject to the prior approval of the
OTS, and activities in which multiple savings and loan holding companies were
authorized by regulation to engage in on March 5, 1987. Such activities
include mortgage-banking, consumer
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finance, operation of a trust company, and certain types of securities
brokerage. The services and activities in which multiple holding companies
were authorized to engage in on March 5, 1987 generally correspond to the
activities which are permitted for service corporations of federally-chartered
savings institutions.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION
For federal income tax purposes, the Association files a federal income tax
return based upon a tax year ended March 31. The Mutual Holding Company does
not currently file a consolidated federal income tax return with the
Association since it owns less than 80% of the Association Shares. After the
Conversion and Reorganization, it is expected that the Holding Company and its
subsidiaries (including the Association) will file a consolidated federal tax
return on a tax year ended March 31. Consolidated returns have the effect of
eliminating intercompany distributions, including dividends, from the
computation of consolidated taxable income for the year in which the
distribution occurs.
Prior to 1997, if certain conditions were met, savings and loan associations
and savings banks were allowed special bad debt deductions in determining
taxable income based on either specified experience formulas or on a
percentage of taxable income before such deduction. Bad debt deductions in
excess of actual losses were tax-preference items, and were subject to a
minimum tax. The Association used the percentage of taxable income method for
1996 and 1995 in determining the bad debt deduction for tax purposes.
The special bad debt deduction accorded thrift institutions is covered under
Section 593 of the Code. The Small Business Job Protection Act of 1996
included the repeal of certain portions of Section 593 effective for tax years
beginning after December 31, 1995. As a result, the Association is no longer
allowed a percentage method bad debt deduction. The repeal of the thrift
reserve method generally requires thrift institutions to recapture into income
the portion of tax bad debt reserves accumulated since 1987 ("base year
reserve"). The recapture will generally be taken into income ratably over six
tax years. However, if the Association meets a residential loan requirement
for tax years beginning in 1997 and 1998, recapture of the reserve can be
deferred until the tax year beginning in 1999. At March 31, 1997, the
Association had bad debts deducted for tax purposes in excess of the base year
reserve of approximately $241,000. The Association has recognized a deferred
income tax liability for this amount.
Certain events covered by Code Section 593(e), which was not repealed, will
trigger a recapture of the base year reserve. The base year reserve of thrift
institutions would be recaptured if a thrift ceases to qualify as a "bank" for
federal income tax purposes. The base year reserves of thrift institutions
also remain subject to income tax penalty provisions which, in general,
require recapture upon certain stock redemptions of, and excess distributions
to, stockholders. At March 31, 1997, retained earnings included approximately
$2.9 million of base year reserves, for which no deferred federal income tax
liability has been recognized.
Deferred income taxes arise from the recognition of certain items of income
and expense for tax purposes in years different from those in which they are
recognized in the consolidated financial statements.
The Association is subject to the corporate alternative minimum tax which is
imposed to the extent it exceeds the Association's regular income tax for the
year. The alternative minimum tax will be imposed at the rate of 20% of a
specially computed tax base. Included in this base will be a number of
preference items, including the following: (i) 100% of the excess of a thrift
institution's bad debt deduction over the amount that would have been
allowable on the basis of actual experience; and (ii) for years beginning in
1988 and 1989 an amount equal to one-half of the amount by which an
institution's "book income" (as specially defined) exceeds its taxable income
with certain adjustments, including the addition of preference items (for
taxable years commencing after 1989 this adjustment item is replaced with a
new preference item relating to "adjusted current earnings" as specially
computed). In addition, for purposes of the new alternative minimum tax, the
amount of
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alternative minimum taxable income that may be offset by net operating losses
is limited to 90% of alternative minimum taxable income.
The Association has not been audited by the IRS within the last five years.
For additional information regarding taxation, see Note 13 of Notes to
Consolidated Financial Statements.
MISSOURI TAXATION
The Association is subject to a state financial institutions tax, computed
on the basis of its state taxable income, at a rate of 7%.
MANAGEMENT OF THE HOLDING COMPANY AND ASSOCIATION
DIRECTORS OF THE HOLDING COMPANY
The Board of Directors of the Holding Company is currently the same as that
of the Association. The names and biographical information of the directors
are set forth below under "--Directors of the Association." The Board of
Directors is divided into three classes, each of which will serve a three-year
term (except with respect to two of the classes for the first two years after
the incorporation of the Holding Company). One class of directors, consisting
of LeRoy C. Crook, Kenneth J. Hrdlicka and Michael J. Walsh, has a term of
office expiring at the first annual meeting of the Holding Company following
the Conversion and Reorganization; a second class, consisting of Richard C.
Fellhauer, Daniel C. Aubuchon and Stacey W. Braswell, has a term of office
expiring at the annual meeting to be held one year thereafter, and a third
class, consisting of Berenice J. Mahacek, Charles J. Wolter and Michael A.
Deelo, has a term of office expiring at the annual meeting to be held two
years thereafter. Mr. Fellhauer is the president and chief executive officer
of the Holding Company.
None of the directors has received remuneration from the Holding Company to
date, and it is expected that no compensation will initially be paid to them
by the Holding Company after the Conversion and Reorganization. Information
concerning the principal occupations and employment of, and compensation
received from the Association by, the directors of the Holding Company is set
forth under "--Directors of the Association;" and "--Directors' Fees."
DIRECTORS OF THE ASSOCIATION
Upon completion of the Conversion and Reorganization, each director of the
Association immediately prior to the Conversion and Reorganization will
continue to serve as a director of the Association after the Conversion and
Reorganization. Each director serves for a term of three years. The terms are
staggered so that approximately one-third of the Board of Directors is elected
each year. Because the Holding Company will own all of the issued and
outstanding capital stock of the Association following the Conversion and
Reorganization, the Holding Company will elect the directors of the
Association following the Conversion and Reorganization.
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The following table sets forth certain information with respect to the
persons who currently serve as members of the Board of Directors of the
Association.
<TABLE>
<CAPTION>
AGE AT POSITION HELD DIRECTOR TERM
NAME JUNE 30, 1997 WITH THE ASSOCIATION SINCE EXPIRES
---- ------------- -------------------- -------- -------
<S> <C> <C> <C> <C>
LeRoy C. Crook.......... 88 Director 1965 1998
Kenneth J. Hrdlicka..... 54 Director 1983 1998
Michael J. Walsh........ 53 Director 1986 1998
Richard C. Fellhauer.... 55 Director, Chairman of the Board, 1973 1999
President and Chief Executive Officer
Daniel C. Aubuchon...... 49 Director 1981 1999
Stacey W. Braswell...... 53 Director 1982 1999
Berenice J. Mahacek..... 63 Director 1982 2000
Charles J. Wolter....... 79 Director 1989 2000
Michael A. Deelo........ 41 Director, Executive Vice President 1994 2000
and Chief Financial Officer
</TABLE>
The business experience for the past five years of each of the current
directors is as follows:
LeRoy C. Crook, now retired, was a Vice President of Vess Bottling Company.
Kenneth J. Hrdlicka has been the Director of Business Development of
Anheuser Busch, Inc. for more than the past five years.
Michael J. Walsh has been a Vice President of ECC for more than the past
five years.
Richard C. Fellhauer has been affiliated with the Association since 1966 and
assumed the position of Chairman of the Board, President and Chief Executive
Officer in 1982.
Daniel C. Aubuchon has been a partner with the law firm of Aubuchon, Raniere
& Lally, P.C. for more than the past five years.
Stacey W. Braswell has been a principal stockholder and Vice President of
Blaine-Braswell and Associates, an insurance agency, for more than the past
five years.
Berenice J. Mahacek has been retired since 1996. Prior to that time she was
a Senior Vice President of the Association.
Charles J. Wolter has been the President of Realty Net--Wolter Real Estate
for more than the past five years. Charles J. Wolter is the father of Leonard
O. Wolter, an executive officer of the Holding Company.
Michael A. Deelo has been an Executive Vice President and Chief Financial
Officer of the Association since 1996. Prior to that time, he served as Vice
President and Chief Financial Officer of the Association.
ASSOCIATE DIRECTORS OF THE ASSOCIATION
The Association also has four non-voting Associate Directors who are
appointed each year by the Board of Directors. The current Associate Directors
are Seymour Bailis, James W. Caulfield, Leonard O. Wolter and John L. Tacke.
While the Associate Directors attend the Board of Directors meetings and
provide periodic advice to the Board, they do not vote on any matters
presented to the Board for a vote.
MEETINGS AND COMMITTEES OF THE BOARDS OF DIRECTORS
The Holding Company has established two standing committees: audit and
compensation. The Board of Directors intends for each committee to meet only a
few times each year.
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Directors Aubuchon, Hrdlicka and Mahacek are members of the audit committee.
The audit committee is principally responsible for recommending which firm to
engage as the Holding Company's external auditor and for reviewing the Holding
Company's annual financial statements and matters relating thereto.
Directors Aubuchon, Braswell and Hrdlicka are members of the compensation
committee. The compensation committee is principally responsible for
administering the Holding Company's benefit plans and addressing other
compensation issues at the Holding Company level.
The full Board of Directors of the Holding Company will act on matters
relating to the nomination of directors.
The Board of Directors of the Association conducts its business through
meetings and committees of the Board. During the fiscal year ended March 31,
1997, the Board of Directors of the Association held 13 meetings. No director
of the Association attended fewer than 75% of the total meetings of the Board
and committee on which such Board member served during this period.
The Board of Directors of the Association has an audit committee and a
nominating committee. It does not have a compensation committee.
The audit committee of the Association selects the Association's independent
auditors and meets with them to discuss the results of the annual audit and
any related matters. The audit committee meets quarterly to review internal
accounting controls and to review all reports, findings and all other
information presented to them by senior management. The audit committee met
four times during the fiscal year ended March 31, 1997. The audit committee
currently consists of Directors Aubuchon, Braswell and Hrdlicka.
The Association's bylaws provide that the Board of Directors of the
Association shall act as a nominating committee for selecting the management
nominees for election as directors. The nominating committee proposes and
considers candidates for election to the Board of Directors. The Board of
Directors of the Association met once in its capacity as the nominating
committee during the fiscal year ended March 31, 1997.
DIRECTORS' FEES
Members of the Board of Directors of the Association received a fee of $600
for each Board meeting attended. No fees are paid for attending committee
meetings of the Board. Associate directors of the Association received $500
for each Board meeting attended.
The Holding Company's Board of Directors intends to meet quarterly.
Directors of the Holding Company will not receive any fees in consideration of
their service.
EXECUTIVE OFFICERS
Upon consummation of the Conversion and Reorganization, the Holding Company
will have three executive officers. Mr. Fellhauer is the President and Chief
Executive Officer of the Holding Company. Mr. Deelo is the Treasurer and Chief
Financial Officer of the Holding Company. For information concerning Messrs.
Fellhauer's and Deelo's business experience, see "--Directors of the
Association." Leonard O. Wolter is Vice President of the Holding Company. Mr.
Wolter is also a Vice President of the Association and Vice President of EMC
and has held such positions for more than the past five years. Leonard O.
Wolter is the son of Charles J. Wolter, a director of the Holding Company.
EXECUTIVE COMPENSATION
The following tables summarize compensation information for the fiscal years
ended March 31, 1997, 1996 and 1995 with respect to the Association's
President and Chief Executive Officer. No other officers of the Association
received compensation in excess of $100,000 during the fiscal year ended March
31, 1997. The
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Holding Company does not plan to pay compensation to officers of the Holding
Company for their services as such.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- -----------------------
SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS OPTIONS COMPENSATION(2)
------------------ ---- -------- ------- --------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard C. Fellhauer.... 1997 $141,000 -- $6,700 -- -- $3,300
President & Chief 1996 $125,000 $10,000 $6,500 -- 5,000 $4,700
Executive Officer 1995 $121,000 $ 2,500 $6,000 -- -- $8,000
</TABLE>
- --------
(1) Consisting solely of directors' fees.
(2) Represents the dollar value of matching and discretionary profit sharing
contributions pursuant to the Association's tax-qualified thrift plan for
the fiscal year ended March 31, 1994 and ESOP contributions (based on the
value of the Common Stock on the date the Common Stock was allocated) made
by the Association for the fiscal years ended March 31, 1995, 1996 and
1997.
The following table sets forth information regarding the fiscal year-end
values of unexercised options under the 1993 Stock Option and Incentive Plan
held by the named executive officer.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
SHARES ACQUIRED VALUE -------------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- -------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Fellhauer.... -- -- 12,600 -- $48,000 --
President & Chief
Executive Officer
</TABLE>
- --------
(1) This amount represents the difference between the market value of one
share of the Association's Common Stock on March 31, 1997 ($15.00) and the
option exercise price times the total number of shares subject to
exercisable or unexercisable options.
EMPLOYEE BENEFIT PLANS
Insurance. Full-time employees of the Association and its subsidiaries are
provided group plan insurance that covers hospitalization, dental, dependent
coverage, long-term disability and life insurance. This insurance is available
generally and on the same basis to all full-time employees after completion of
90 days of service. The Association pays 100% of employee premiums, while
employees pay 100% of dependent coverage premiums.
Profit Sharing Plan. The Mutual Holding Company currently maintains a
defined contribution profit sharing plan (the "Profit Sharing Plan") for the
benefit of its eligible employees and the eligible employees of its
subsidiaries. The Profit Sharing Plan is a tax qualified retirement plan under
Sections 401(a) and 401(k) of the Code.
All employees who have completed one year of service with the Association
and its subsidiaries are eligible to participate in the Profit Sharing Plan. A
participant may elect to contribute from 1-15% of his or her compensation on a
pre-tax basis to his or her account under the Profit Sharing Plan. Any such
contribution defers the amount of compensation otherwise paid to the
participant and the participant is not taxed on that compensation, or earnings
thereon, until he or she withdraws such amount from the Profit Sharing Plan. A
participant may also elect to make after-tax contributions to his or her
account under the Profit Sharing Plan equal to a specified percentage of his
or her compensation. The earnings on such after-tax contributions are not
subject to tax until the participant withdraws such amount from the Profit
Sharing Plan.
The Mutual Holding Company will make a matching contribution for a plan year
on behalf of each participant who is making contributions to the Profit
Sharing Plan on the last day of the plan year (i.e., December 31) and will be
an amount equal to 50% of the first 2% of the participant's total pre-tax and
after-tax contributions made during the plan year. In addition, the Mutual
Holding Company may, in its sole discretion,
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<PAGE>
make a discretionary employer contribution. Such contribution will be allocated
to the account of each participant who is employed on the last day of the plan
year, on the basis of the participant's compensation and service.
A participant in the Profit Sharing Plan is 100% vested at all times in his
or her own pre-tax and after-tax contributions and the earnings thereon. A
participant will vest in the matching and employer contributions allocated to
his or her account at a rate equal to 20% after three years of service, and 20%
for each additional year of service (up to 100%). A participant becomes fully
vested in all matching and employer contributions allocated to his or her
account, regardless of years of service, upon the participant's death,
disability or retirement on or after normal retirement age.
A participant is entitled to a distribution of the vested portion of his or
her benefits under the Profit Sharing Plan upon termination of employment.
Benefits will be paid in the form elected by the participant, in either a lump
sum, direct rollover or an annuity. If the participant elects an annuity and he
or she is married, the benefit will be paid in the form of a 50% joint and
survivor annuity with the spouse as beneficiary, unless the participant elects
a different form of payment and the spouse consents. If the participant dies
prior to the date his or her benefits are distributed, they will be paid to his
or her designated beneficiary.
A participant may also elect an in-service withdrawal of (i) his or her
after-tax contribution account; or (ii) his or her pre-tax contributions, if
necessary to meet a financial hardship. A participant may also obtain a loan
from the Profit Sharing Plan, which must be repaid by payroll deductions.
The administrator of the Profit Sharing Plan is Richard C. Fellhauer and the
trustees of the Profit Sharing Plan are Michael A. Deelo, Berenice Mahacek and
Richard C. Fellhauer.
1993 Stock Option and Incentive Plan. In connection with the Mutual Holding
Company Reorganization, the Association adopted and maintains the 1993 Stock
Option and Incentive Plan. Pursuant to the 1993 Stock Option and Incentive
Plan, 38,000 Association Shares were reserved for issuance upon the exercise of
stock options granted to full-time employees and non-employee directors of the
Association and its subsidiaries. Of the 38,000 Association Shares reserved for
issuance under the 1993 Stock Option and Incentive Plan, none have been issued
upon the exercise of stock options as of March 31, 1997. Upon consummation of
the Conversion and Reorganization, the obligations and rights of this plan will
be assumed by the Holding Company, and Common Stock will be issued in lieu of
Association Shares pursuant to the terms of such plan.
1993 Management Recognition Plan. In connection with the Mutual Holding
Company Reorganization, the Association adopted the 1993 MRP. Under the 1993
MRP 11,400 Association Shares were available for award to certain officers of
the Association, all of which have been awarded and vested as of March 31,
1997.
Employee Stock Ownership Plan. In connection with the Mutual Holding Company
Reorganization, the Association adopted the ESOP for the exclusive benefit of
participating employees. Employees who have attained the age of 21 years and
have completed one year of service with the Association are eligible to
participate under the ESOP. The Association has received a Determination Letter
from the IRS confirming the tax-qualified status of the ESOP under Section
401(a) of the Code.
The ESOP has been funded by contributions made by the Association in cash
and, upon consummation of the Conversion and Reorganization, will continue to
be funded by contributions made by the Association solely in cash. Following
consummation of the Conversion and Reorganization, benefits under the ESOP will
be paid either in shares of Common Stock or in cash. The ESOP borrowed funds
from an unrelated third party lender to purchase 26,600 Association Shares in
the Conversion and Reorganization. At March 31, 1997, 12,617 of such
Association Shares had been allocated to participant's accounts. At March 31,
1997, the unpaid principal amount of the ESOP debt was $136,000 (the "Existing
ESOP Debt"). Upon consummation of the Conversion and Reorganization, the
Association Shares held by the ESOP will convert into Common Stock based upon
the Exchange Ratio and the Existing ESOP Debt will be retired and replaced by
the New ESOP Debt (as defined below).
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<PAGE>
The ESOP anticipates borrowing funds from the Holding Company (the "New ESOP
Debt") to pay the Existing ESOP Debt and to acquire up to an aggregate of 7%
of the number of shares of Conversion Stock to be issued in the Offering. The
New ESOP Debt will be secured by the unallocated shares of Common Stock held
by the ESOP and will be repaid by the ESOP with funds from the Association's
contributions to the ESOP. Unallocated ESOP shares are held in a suspense
account for allocation among participants as the loan is repaid. The
Association expects to make contributions to the ESOP at such times and in an
amount that, at a minimum, will enable the ESOP to meet its debt service
obligations on the New ESOP Debt. Any contributions in excess of this amount
may be made at the Association's discretion. While the New ESOP Debt is
outstanding, any cash dividends received with respect to the shares held in
the ESOP will be applied to the principal and interest payments due on such
loan. The New ESOP Debt will require annual interest and principal payments
over a 10- year period and will bear interest at a fixed rate established at
the prime rate, as reported in The Wall Street Journal, Midwest Edition, in
effect at the time of completion of the Conversion and Reorganization.
The Association's contributions to the ESOP to retire the principal and
interest on the New ESOP Debt will be accounted for as compensation and
employee benefits expense. The contributions to repay principal and interest
on the New ESOP Debt are tax deductible to the Association. The ESOP, in turn,
will use the Association's contribution with respect to principal and interest
to repay the New ESOP Debt. Interest paid by the ESOP to the Holding Company
on the New ESOP Debt will be taxable income to the Holding Company; however,
such amount, when netted against the deduction to the Association for its
interest contribution to the ESOP, will negate any income or deduction to the
Holding Company on a consolidated tax basis with respect to the New ESOP Debt.
The Association intends to record compensation and employee benefits expense
related to the ESOP in accordance with SOP 93-6. As a result, to the extent
the value of the Common Stock appreciates over time, compensation and employee
benefits expense related to the ESOP will increase. For additional information
regarding SOP 93-6, see "Pro Forma Data."
As stated above, the ESOP intends to purchase in the Offering up to an
aggregate of 7% of the number of shares of Conversion Stock to be issued in
the Offering; however, under certain circumstances the ESOP's purchases in the
Conversion and Reorganization may be limited to a lesser amount or may be
prohibited altogether. If the final Conversion valuation exceeds $9.2 million
(the maximum of the Offering Price Range), an additional number of shares may
be issued in the Offering to the ESOP to enable the ESOP to purchase up to an
aggregate of 7% of the number of shares of Conversion Stock to be issued in
the Offering, subject to the approval of OTS. If the final Conversion
valuation does not exceed $9.2 million, the ESOP will be permitted to purchase
Conversion Stock in the Offering only if stock is available after satisfaction
of orders by Eligible Account Holders. If an insufficient amount of stock is
available after the satisfaction of orders by Eligible Account Holders to
permit the ESOP to purchase its full amount, the ESOP intends to purchase
stock after the Conversion and Reorganization, either in the open-market or
from the Holding Company's authorized but unissued shares, up to its full
amount. If the ESOP purchases shares of Common Stock after the Conversion and
Reorganization, the ESOP must purchase the Common Stock at the then prevailing
market price.
Contributions to the ESOP by the Association and shares released from the
suspense account are allocated among participants based on compensation.
Except for participants who retire, become disabled or die during the plan
year, all other participants are required to have completed at least 1,000
hours of service and be employed on the last day of the plan year in order to
receive an allocation. Participant benefits vary in accordance with the
following schedule: three years of service--20% vested, four years of
service--40% vested, five years of service--60% vested, six years of service--
80% vested, seven years of service or greater--100% vested. All years of
service are counted toward vesting. Vesting is accelerated upon retirement,
death, disability or termination of the ESOP. Forfeitures are reallocated to
other participants to reduce future funding costs. Benefits may be payable
upon retirement, death, disability or separation from service. Contributions
to the ESOP are not fixed, so benefits payable under the ESOP cannot be
estimated.
The Board of Directors has appointed a committee to administer the ESOP.
Messrs. Aubuchon, Braswell and Hrdlicka collectively act as the trustee ("ESOP
Trustee") under the ESOP. Under the ESOP, the ESOP
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<PAGE>
Trustee is required to vote all allocated shares held in the ESOP in accordance
with the instructions of the participating employees. Shares for which
employees do not give instructions and unallocated shares must be voted by the
ESOP Trustee in the same proportion as determined by the vote of participants
with respect to allocated shares.
The Board of Directors may amend the ESOP in any manner which it deems
desirable, except that the ESOP may not be amended in any way to deprive any
participant or beneficiary of any benefits to which be is entitled with respect
to contributions previously made.
The ESOP may purchase Common Stock in the open market at then prevailing
prices from time to time following the Conversion and Reorganization. The ESOP
is subject to requirements of ERISA and regulations of the IRS and the
Department of Labor promulgated thereunder.
1997 Stock Option Plan. The Board of Directors of the Holding Company intends
to adopt the 1997 Stock Option Plan and to submit it to stockholders for
approval following consummation of the Conversion and Reorganization. The 1997
Stock Option Plan is intended to promote stock ownership by directors and
selected officers and employees of the Holding Company and the Association to
increase their proprietary interest in the Holding Company and to encourage
them to remain in the service of the Holding Company or the Association.
OTS conversion regulations prohibit the Association from seeking ratification
of the 1997 Stock Option Plan by the Holding Company's stockholders sooner than
six months after completion of the Conversion and Reorganization. Moreover,
pursuant to OTS conversion regulations, if the 1997 Stock Option Plan is
effective within one year after completion of the Conversion and
Reorganization, options awarded under the plan cannot vest at a rate greater
than 20% per year, vesting of awards cannot be accelerated in the event of a
change of control of the Holding Company and the number of options that can be
allocated to directors and officers is subject to certain limits set by OTS.
The Board of Directors of the Holding Company has not decided when the 1997
Stock Option Plan will be submitted to stockholders for approval; however, in
no event will the 1997 Stock Option Plan be submitted for stockholder approval
sooner than six months after completion of the Conversion and Reorganization.
The Holding Company and Association intend to comply with applicable law
governing implementation and terms of the 1997 Stock Option Plan (including OTS
regulations and policies) in effect at the time the 1997 Stock Option Plan is
submitted to the Holding Company's stockholders for approval.
Depending upon when the Board of Directors decides it wishes to submit the
1997 Stock Option Plan to stockholders of the Holding Company for approval, the
plan could be submitted either at the Holding Company's first annual meeting of
stockholders (currently expected to be held in August 1998) (the "First Annual
Meeting") or at a special meeting of stockholders which could be held earlier
than the First Annual Meeting (but not sooner than six months after completion
of the Conversion and Reorganization). The 1997 Stock Option Plan may not, and
will not, be established and become effective unless and until approved by the
Holding Company's stockholders.
The 1997 Stock Option Plan is to be administered by the Holding Company's
compensation committee (the "Committee"). None of the members of the Committee
may be an officer or employee of the Holding Company or the Association. The
Committee will have the authority, among other things, to select the employees
and directors to whom options may be granted, to determine the terms of each
option, to interpret the provisions of the 1997 Stock Option Plan and to make
all other determinations that it may deem necessary or advisable for the
administration of the 1997 Stock Option Plan. Each determination or other
action made or taken pursuant to the 1997 Stock Option Plan, including
interpretation of the 1997 Stock Option Plan and the specific terms and
conditions of the options granted thereunder, by the Committee will be final
and conclusive for all purposes and upon all persons.
The 1997 Stock Option Plan provides for the grant of "incentive stock
options" within the meaning of Section 422 of the Code and for options that do
not constitute incentive stock options (referred to herein as "nonstatutory
options"), as determined in each individual case by the Committee. Incentive
stock options
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<PAGE>
granted under the 1997 Stock Option Plan have certain advantageous tax
attributes under federal and state income tax laws. No taxable income is
recognized by the option holder for federal income tax purposes at the time of
the grant or exercise of an incentive stock option, and no federal income tax
deduction is available to the Holding Company or the Association as a result
of such a grant or exercise. Any gain or loss recognized by an option holder
on the later disposition of shares acquired pursuant to the exercise of an
incentive stock option generally will be treated as long-term capital gain or
loss if such disposition does not occur prior to one year after the date of
exercise of the option or two years after the date the option was granted.
As in the case of incentive stock options, the grant of a nonstatutory stock
option will not result in taxable income to the recipient of the option for
federal income tax purposes nor will the Holding Company or the Association be
entitled to an income tax deduction. Upon exercise of a nonstatutory stock
option, however, the option holder will generally recognize ordinary income
for federal income tax purposes equal to the difference between the exercise
price and the fair market value of the shares acquired on the date of
exercise, and the Holding Company, the Association or any other subsidiary of
the Holding Company which is the employer of the option holder will be
entitled to federal income tax deductions equal to the amount of ordinary
income recognized by the option holder. In general, any further gain or loss
realized by the option holder on the subsequent disposition of such shares
will be long-term or short-term capital gain or loss, depending on the length
of time the shares are held after the option is exercised.
The Committee will initially, and from time to time thereafter, select those
officers and other key employees of the Holding Company, the Association or
any of their subsidiaries to participate in the 1997 Stock Option Plan on the
basis of the special importance of their services in the management,
development and operations of the Holding Company, the Association or their
subsidiaries. Such officers and other key employees may receive either
incentive stock options or nonstatutory options under the 1997 Stock Option
Plan. Unless expressly provided otherwise at the time of the grant, however,
such officers and other key employees will receive incentive stock options.
The exercise price of options granted under the 1997 Stock Option Plan must
at least equal the fair market value of the Common Stock subject to the option
(determined as provided in the 1997 Stock Option Plan) on the date the option
is granted. Assuming the 1997 Stock Option Plan is submitted and the Holding
Company's stockholders approve it at the First Annual Meeting, the exercise
price of options granted at the time of such approval would equal the fair
market value of the Holding Company's stock on the date of the First Annual
Meeting.
Options granted under the 1997 Stock Option Plan will vest and become
exercisable at a rate of 20% per year, commencing one year after the grant
date, and 20% on each anniversary date thereof for the following four years.
Notwithstanding such a five-year vesting schedule, all awards will be 100%
vested upon the death or disability of the recipient, in which case all of the
recipient's options will expire on the earlier of (i) the first anniversary of
the date of the recipient's death or disability or (ii) the date that any
option of the recipient expires in accordance with its terms. Subject to the
earlier termination of an employee's employment with the Holding Company, the
Association or any of their subsidiaries, each option granted under the 1997
Stock Option Plan will expire on the tenth anniversary of the date on which
such option was granted. If an employee's employment terminates with the
Holding Company, the Association or any of their subsidiaries for any reason
other than death or disability, all the employee's unvested options will be
forfeited; provided, however, that an employee who is also a director will not
forfeit any of his or her unvested options by reason of his or her retirement
as an employee of the Holding Company, the Association or any of their
subsidiaries if such director continues his or her service on the Board of
Directors after retirement as an employee, in which case that director's
options will continue to vest and will remain exercisable in the same manner
and to the same extent as before that director retired as an employee. If a
director's service on the Board of Directors terminates for any reason other
than death, disability or retirement, that director's unvested options will be
forfeited. In the event of a director's death or disability, all of that
director's awards will be 100% vested, in which case all of that director's
options will expire on the earlier of (i) the first anniversary of the date of
the director's death or disability or (ii) the date that
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<PAGE>
any option held by that director expires in accordance with its terms. In the
event of a director's retirement from the Board of Directors, that director's
options will continue to vest and will remain exercisable in the same manner
and to the same extent as before that director retired as a director. In
general, any shares of Common Stock subject to issuance upon exercise of
options but which are not issued because of a surrender, forfeiture,
expiration, termination or cancellation of any such option will once again be
available for issuance pursuant to subsequently granted options.
An incentive stock option granted under the 1997 Stock Option Plan to an
employee owning more than 10% of the total combined voting power of all
classes of stock of the Holding Company is subject to the further restrictions
that such option must have an exercise price of at least 110% of the fair
market value of the shares issuable on exercise of the option (determined as
of the date the option is granted) and will expire, and all rights to purchase
shares thereunder will cease, no later than the fifth anniversary of the date
on which the incentive stock option was granted. Incentive stock options are
subject to the further restriction that the aggregate fair market value
(determined as of the date of grant) of stock as to which any such incentive
stock option first becomes exercisable in any calendar year is limited to
$100,000. To the extent options covering more than $100,000 worth of stock
first become exercisable in any one calendar year, the excess will be
nonstatutory options.
The full exercise price for all shares purchased on exercise of options
granted under the 1997 Stock Option Plan may be purchased by paying cash, by
paying cash received from a broker-dealer to whom the optionee has submitted
an exercise notice consisting of a fully endorsed option, by delivering shares
of Common Stock having an aggregate fair market value on the date of exercise
equal to the exercise price, by directing the Holding Company to withhold such
number of shares of Common Stock otherwise issuable upon exercise of such
option having an aggregate fair market value on the date of exercise equal to
the exercise price, by using other medium of payment, in the case of an
officer or employee, as the Committee, in its discretion, shall authorize at
the time of grant or by using any combination of the above methods.
The Board of Directors or the Committee has the authority to terminate,
suspend or amend the 1997 Stock Option Plan, in whole or in part, from time to
time, without the approval of the stockholders of the Holding Company to the
extent allowed by law. The 1997 Stock Option Plan provides for appropriate
adjustment in the number and kind of shares subject to the 1997 Stock Option
Plan and in the number, kind and per share exercise price of shares subject to
unexercised options in the event of any change in the outstanding Common Stock
of the Holding Company by reason of a stock split, stock dividend, combination
or reclassification of shares, recapitalization, merger or similar event.
Notwithstanding when the 1997 Stock Option Plan is submitted to and approved
by the stockholders, upon receipt of stockholder approval to establish the
1997 Stock Option Plan, the Board of Directors intends to reserve an amount of
stock equal to 10% of the Conversion Stock sold in the Offering for issuance
under the 1997 Stock Option Plan (or between 68,000 shares and 92,000 shares,
assuming the sale of between 680,000 shares and 920,000 shares of Conversion
Stock in the Offering). Each nonemployee director of the Holding Company, as
of the time the 1997 Stock Option Plan is approved by stockholders, will
receive (notwithstanding when the 1997 Stock Option Plan is submitted to
stockholders for their ratification), subject to the vesting rules above, a
nondiscretionary grant of a 10-year nonstatutory option to purchase 4,600
shares of Common Stock (based on 920,000 shares of Conversion Stock sold at
the maximum of the Offering Price Range and 92,000 shares of Common Stock
reserved under the 1997 Stock Option Plan). Non-employee directors will also
be eligible to receive discretionary grants of nonstatutory options as
determined by the Committee from time to time. The shares used to fund these
option awards will come from authorized but unissued shares, from treasury
shares or from shares held in a grantor trust. As a result, in the event that
all options under the 1997 Stock Option Plan are awarded and exercised, the
percentage interests of stockholders as of the date the Conversion and
Reorganization is consummated will be diluted by approximately 5.05%. If more
or less than 920,000 shares of Conversion Stock are sold in the Offering, the
number of options granted under the 1997 Stock Option Plan will be adjusted to
maintain the ratio of the awards intended to be made to the number of shares
sold at the maximum of the Offering Price Range.
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The total number of shares of Common Stock that may be available for options
under the 1997 Stock Option Plan will be adjusted each January 1, through
January 1, 2007, so that the total number of shares of Common Stock that may be
issued and sold under the 1997 Stock Option Plan as of each January 1 will be
equal to 5.32% of the outstanding shares of Common Stock on such date;
provided, however, that no such adjustment may reduce the total number of
shares of Common Stock that may be issued and sold under the 1997 Stock Option
Plan below 10% of the shares originally reserved. The shares of Common Stock
issued and sold under the 1997 Stock Option Plan may be issued from shares
specifically reserved for such purpose by the Board of Directors, may be issued
from shares repurchased by the Holding Company ("Treasury Shares") (whether or
not such Treasury Shares were repurchased by the Holding Company specifically
for the purpose of being issued under the 1997 Stock Option Plan) or may be
issued from shares held in a grantor trust. In the event of a stock split,
reverse stock split or stock dividend, the number of shares of Common Stock
reserved under the 1997 Stock Option Plan and the number of options granted
pursuant thereto and exercise price of the options will be adjusted to reflect
such increase or decrease in the total number of shares of Common Stock
outstanding.
At any time following approval of the 1997 Stock Option Plan by the
stockholders of the Holding Company, the Association or the Holding Company may
contribute sufficient funds to a grantor trust to purchase, and such trust may
purchase in the open market, a number of shares of Common Stock equal to 10% of
the Conversion Stock sold in the Offering. Such shares would be held by the
trust for issuance to stock option holders upon the exercise of stock options.
Whether such shares are purchased, and the timing of such purchases, will
depend on market and other conditions and the alternative uses of capital
available to the Holding Company.
Notwithstanding when the 1997 Stock Option Plan is submitted to and approved
by stockholders, it is anticipated that the following awards of stock options
will be made pursuant to the 1997 Stock Option Plan to directors and officers
of the Holding Company and the Association as of the date of the approval of
the 1997 Stock Option Plan by the stockholders of the Holding Company (assuming
the sale of 920,000 shares of Conversion Stock in the Offering at the maximum
of the Offering Price Range, and the reservation of 92,000 shares of Common
Stock for issuance under the 1997 Stock Option Plan):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION TERM(1)
NUMBER OF % OF --------------------------------------
RECIPIENT OPTIONS GRANTED TOTAL OPTIONS 0% 5% 10%
- --------- --------------- ------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
NONEMPLOYEE DIRECTORS:
Daniel C. Aubuchon...... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Stacey W. Braswell...... 4,600 5.0% $ 0 $ 29,000 $ 73,000
LeRoy C. Crook.......... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Kenneth J. Hrdlicka..... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Berenice J. Mahacek..... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Charles J. Wolter....... 4,600 5.0% $ 0 $ 29,000 $ 73,000
OFFICERS:
Richard C. Fellhauer.... 23,000 25.0% $ 0 $ 145,000 $ 367,000
Michael A. Deelo........ 16,100 17.5% $ 0 $ 101,000 $ 257,000
Leonard O. Wolter....... 4,600 5.0% $ 0 $ 29,000 $ 73,000
Michael J. Walsh........ 4,600 5.0% $ 0 $ 29,000 $ 73,000
Seymour Bailis.......... 4,600 5.0% $ 0 $ 29,000 $ 73,000
John L. Tacke........... 4,600 5.0% $ 0 $ 29,000 $ 73,000
All Directors and
Officers as a Group
(12 Persons)........... 85,100 92.5% $ 0 $ 536,000 $ 1,354,000
</TABLE>
- --------
(1) Assumes the options are granted at the Purchase Price ($10.00 per share),
the options have a 10-year term, the market price of the Common Stock
underlying the option appreciates annually in value from the date of grant
to the end of the option term at a compounded rate of either 5% or 10% as
indicated in the columns. There can be no assurance that the Common Stock
will appreciate annually at a compounded rate of 5% or 10%. The Holding
Company is unaware of any formula which provides an accurate determination
of the value of a stock option as of the date of grant.
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Under the Plan and presently effective regulations and policies of the OTS,
the shares of Common Stock for which options may be granted during the first
year following the Conversion and Reorganization may not exceed 10% of the
total number of shares of Conversion Stock sold in the Offering. Furthermore,
during that first year following the Conversion and Reorganization, no
individual may be granted options to purchase more than 25% of the total shares
covered by the 1997 Stock Option Plan, and nonemployee directors may not be
granted options to purchase more than 5% individually, or more than 30% as a
group, of the shares covered by the 1997 Stock Option Plan, unless the OTS
allows greater awards. The 1997 Stock Option Plan may not and will not be
established in the absence of stockholder approval.
1997 Management Recognition Plan. The Board of Directors of the Holding
Company intends to adopt the 1997 MRP and to submit it to stockholders for
approval following consummation of the Conversion and Reorganization. The 1997
MRP is intended as a method of providing directors, officers and certain
employees of the Holding Company or the Association with a proprietary interest
in the Holding Company and to encourage such persons to remain with the Holding
Company or the Association.
OTS conversion regulations prohibit the Association from seeking ratification
of the 1997 MRP by the Holding Company's stockholders sooner than six months
after completion of the Conversion and Reorganization. Moreover, pursuant to
OTS conversion regulations, if the 1997 MRP is effective within one year after
completion of the Conversion and Reorganization, awards under the plan cannot
vest at a rate greater than 20% per year, vesting of awards cannot be
accelerated in the event of a change of control of the Holding Company and the
number of MRP awards that can be allocated to directors and officers is subject
to certain limits set by OTS. The Board of Directors of the Holding Company has
not decided when the 1997 MRP will be submitted to stockholders for approval;
however, in no event will the 1997 MRP be submitted for stockholder approval
sooner than six months after the completion of the Conversion and
Reorganization. The Holding Company and the Association intend to comply with
applicable law governing implementation and terms of the 1997 MRP (including
OTS regulations and policies) in effect at the time the 1997 MRP is submitted
to the Holding Company's stockholders for approval.
Depending upon when the Board of Directors decides to submit the 1997 MRP to
stockholders of the Holding Company for approval, the plan could be submitted
either at the First Annual Meeting or at a special meeting of stockholders
which could be held earlier than the First Annual Meeting (but not sooner than
six months after completion of the Conversion and Reorganization). The 1997 MRP
may not, and will not, be established and become effective unless and until
approved by the Holding Company's stockholders.
The 1997 MRP will be administered by the Holding Company's compensation
committee. Officers and employees of the Holding Company, the Association and
any of their subsidiaries as of the date the 1997 MRP is approved by the
stockholders of the Holding Company will be eligible for grants of shares of
Common Stock of the Holding Company held by the 1997 MRP. Nonemployee
directors, officers and employees will become vested in shares of Common Stock
awarded to them under the 1997 MRP at a rate of 20% per year, commencing one
year after the grant date, and 20% on each anniversary date thereof for the
following four years. Notwithstanding such a five-year vesting schedule, all
awards will be 100% vested upon the death or disability of the recipient. If an
employee's employment terminates (or a director's service as a director
terminates) with the Holding Company, the Association or any of their
subsidiaries for any reason other than death or disability, that employee's (or
director's) unvested awards will be forfeited.
MRP award recipients will recognize taxable ordinary income equal to the
aggregate fair market value of the shares of Common Stock awarded at the time
such shares become vested. Income recognized by MRP award recipients will be a
deductible expense to the Holding Company or the Association for tax purposes.
When cash dividends are paid with respect to plan shares vested and allocated
to a recipient, such recipient will be entitled to receive an amount equal to
such cash dividend. No recipient will have any voting or other rights of a
stockholder with respect to any plan shares awarded to such recipient prior to
the time such shares are actually distributed.
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The Plan and applicable regulations and policies of the OTS prohibit the 1997
MRP from subscribing for shares of Conversion Stock in the Offering or
otherwise being funded with shares of stock purchased in the Offering.
Following completion of the Offering and approval of the 1997 MRP, the 1997 MRP
may purchase either outstanding shares of Common Stock in the open-market at
the then market price of the Common Stock or authorized but previously unissued
shares of Common Stock from the Holding Company (which the Holding Company
intends to reserve for issuance) at the then market price of the Common Stock.
Whether such shares purchased will be purchased in the open market or will be
newly issued shares, and the timing of such purchase, will depend on market and
other conditions and the alternative uses of capital available to the Holding
Company.
Notwithstanding when the 1997 MRP is submitted to and approved by the
stockholders, when the Holding Company receives stockholder approval to
establish the 1997 MRP, the Holding Company will contribute funds to the 1997
MRP to enable it to acquire shares of Common Stock in an amount equal to 3% of
the number of shares of Conversion Stock sold in the Offering, or up to 27,600
shares of Common Stock assuming the sale of 920,000 shares at $10.00 per share
(the maximum of the Offering Price Range). No contributions by employees or
recipients will be permitted. Each nonemployee director as of the effective
date of the 1997 MRP will be granted 690 shares of Common Stock held by the
1997 MRP (based on 920,000 shares of Conversion Stock sold at the maximum of
the Offering Price Range and 27,600 shares of Common Stock purchased by the
1997 MRP in the open market). Assuming that the 1997 MRP is funded entirely
through purchases of authorized but previously unissued shares of stock from
the Holding Company, the percentage interest of stockholders as of the date of
such purchase will be diluted by approximately 1.57%. If more or less than
920,000 shares of Conversion Stock are sold in the Offering, the number of MRP
awards granted to directors, officers and other employees of the Holding
Company and Association will be adjusted to maintain the ratio of the awards
intended to be made to the number of shares sold at the maximum of the Offering
Price Range.
Notwithstanding when the 1997 MRP is submitted to and approved by the
stockholders, it is anticipated that the following awards will be made pursuant
to the 1997 MRP to directors and executive officers of the Association and the
Holding Company as of the date of approval of the 1997 MRP by the stockholders
of the Holding Company (assuming the sale of 920,000 shares of Common Stock in
the Offering, at the maximum of the Offering Price Range, and the purchase of
27,600 shares of Common Stock by the 1997 MRP):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
NUMBER % OF FOR TEN YEARS FROM GRANT DATE(1)
OF SHARES TOTAL MRP ---------------------------------
RECIPIENT AWARDED SHARES 0% 5% 10%
- --------- --------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NONEMPLOYEE DIRECTORS:
Daniel C. Aubuchon........ 690 2.50% $ 6,900 $ 11,000 $ 18,000
Stacey W. Braswell........ 690 2.50% $ 6,900 $ 11,000 $ 18,000
LeRoy C. Crook............ 690 2.50% $ 6,900 $ 11,000 $ 18,000
Kenneth J. Hrdlicka....... 690 2.50% $ 6,900 $ 11,000 $ 18,000
Berenice J. Mahacek....... 690 2.50% $ 6,900 $ 11,000 $ 18,000
Charles J. Wolter......... 690 2.50% $ 6,900 $ 11,000 $ 18,000
OFFICERS:
Richard C. Fellhauer...... 6,900 25.00% $ 69,000 $ 112,000 $ 179,000
Michael A. Deelo.......... 4,830 17.50% $ 48,300 $ 79,000 $ 125,000
Leonard O. Wolter......... 2,070 7.50% $ 20,700 $ 34,000 $ 54,000
Michael J. Walsh.......... 1,035 3.75% $ 10,350 $ 17,000 $ 27,000
Seymour Bailis............ 690 2.50% $ 6,900 $ 11,000 $ 18,000
John L. Tacke............. 690 2.50% $ 6,900 $ 11,000 $ 18,000
James W. Caulfield........ 345 1.25% $ 3,450 $ 6,000 $ 9,000
All Directors and
Executive Officers as a
Group
(13 Persons)............. 20,700 75.00% $ 207,000 $ 336,000 $ 538,000
</TABLE>
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- --------
(1) Assumes the 1997 MRP awards are granted at the Purchase Price ($10.00 per
share) and the market price of the Common Stock underlying the 1997 MRP
award appreciates annually in value from the date of grant until 10 years
thereafter at a compounded rate of either 5% or 10% as indicated in the
columns. MRP awards do not have a term like stock options; however, in
order to compare the value of the 1997 MRP awards to the value of the stock
options granted to these named individuals a comparable 10-year time period
has been used. There can be no assurance that the Common Stock will
appreciate annually at a compounded rate of either 5% or 10%.
Under the Plan and presently effective regulations and policies of the OTS,
during that first year following the Conversion and Reorganization, no
individual may be awarded more than 25% of the total number of shares of Common
Stock held by the 1997 MRP, and nonemployee directors may not be awarded more
than 5% individually, or more than 30% as a group, of the number of shares of
Common Stock held by the 1997 MRP, unless the OTS allows greater awards. The
1997 MRP may not and will not be established in the absence of stockholder
approval.
EMPLOYMENT AGREEMENTS
The Holding Company intends to enter into new employment agreements with
Richard C. Fellhauer, President and Chief Executive Officer of the Holding
Company and the Association, Michael A. Deelo, Executive Vice President and
Chief Financial Officer of the Association, and Leonard O. Wolter, Vice
President of the Association (each an "executive," or the "executives"), each
of which would be effective as of the consummation of the Conversion and
Reorganization. Each employment agreement provides that the individual will be
employed for a three-year term. Such term may be extended for additional one-
year periods by action of the Board of Directors of the Holding Company taken
on each successive anniversary of the effective date of the employment
agreement. Each of Messrs. Fellhauer, Deelo and Wolter may terminate their
employment agreements at any time upon 90 days' prior written notice to the
Board of Directors of the Holding Company and the Association.
Under the employment agreements, the base annual salary for each executive
may be increased from time to time during the term of the employment agreement
in the sole discretion of the Board of Directors of the Holding Company, but
the executive's salary shall not be reduced below the level then in effect. In
addition, the executive will be entitled to participate in incentive
compensation plans or arrangements as may from time to time be established by
the Holding Company or the Association on a basis consistent with the treatment
of other executive officers of the Holding Company or the Association, but
recognizing differences in responsibilities among executive officers. The
executive also shall be entitled to receive any other bonus or discretionary
compensation payments as the Board of Directors of the Holding Company may
determine from time to time. Pursuant to the employment agreements, each
executive also will be provided such other benefits (including but not limited
to medical, health, life and other insurance coverage) and will be entitled to
participate in such retirement plans of the Holding Company and the
Association, as are generally made available to other executive officers of the
Holding Company or the Association. During his employment, each executive also
will be entitled to customary vacations in accordance with vacation policies
and practices of the Holding Company or the Association prevailing from time to
time, and to reimbursement for reasonable expenses incurred on behalf of the
Holding Company or the Association in accordance with the then prevailing
policies and practices of the Holding Company.
Each employment agreement provides for continuing benefits in the event the
executive is terminated by the Holding Company, other than for "just cause," or
in the event the executive voluntarily terminates the employment agreement for
"good reason." Under the employment agreement, "just cause" would include
personal dishonesty, incompetence, willful misconduct or breach of a fiduciary
duty involving personal profit in the performance of his duties under the
employment agreement, intentional and continued failure to perform stated
duties, willful violation of any law, rule or regulation (other than a law,
rule or regulation relating to a misdemeanor, traffic violation or similar
offense), final cease-and-desist order or material breach of any provision
88
<PAGE>
of the employment agreement. Under the employment agreement, "good reason"
would be deemed to exist if the executive terminated his employment because,
without his express written consent, the Holding Company breached any of the
terms of the employment agreement. In such instances, the executive generally
will continue to receive all benefits due to him under the employment agreement
through the remaining term of the agreement. If the executive is terminated
within one year after a "change of control" of the Holding Company, other than
for just cause or if the executive terminates his employment for any reason,
then the Holding Company will pay to the executive a lump sum equal to 2.99
times the "Base Amount," as that term is defined in Section 280G(b)(3) of the
Code, and will continue to provide coverage for the executive and his
dependents, beneficiaries and estate under all executive benefit plans of the
Holding Company and the Association for the remainder of the term of the
employment agreement. If payments and benefits under the employment agreements
would constitute an "Excess Parachute Payment" under Section 280G of the Code,
then such payments and benefits will be reduced to one dollar less than the
maximum amount that the Association may pay under Section 280G of the Code
without losing its ability to deduct such payments for tax purposes. A "change
of control" is defined in each employment agreement to include, among other
events, the acquisition of beneficial ownership of 20% or more of the voting
power of the Holding Company's capital stock.
TRANSACTIONS WITH MANAGEMENT
The Association has followed the policy of offering residential mortgage
loans for the financing of personal residences, share loans and consumer loans
to its officers, directors and employees. The loans are made in the ordinary
course of business and are also made on substantially the same terms and
conditions, including interest rate and collateral, as those of comparable
transactions prevailing at the time with other persons, and do not include more
than the normal risk of collectibility or present other unfavorable features.
As of March 31, 1997, approximately $1.2 million of loans were outstanding from
the Association to executive officers and directors of the Association and
their affiliates.
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BENEFICIAL OWNERSHIP OF CAPITAL STOCK
The following table sets forth, as of May 31, 1997, certain information as
to those persons known by the Association to be the beneficial owners of more
than 5% of the outstanding Association Shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) STOCK OUTSTANDING
------------------- ----------------------- -----------------
<S> <C> <C>
First Missouri Financial, M.H.C. .... 445,000 53.20%
4131 South Grand Boulevard
St. Louis, Missouri 63118-3464
</TABLE>
- --------
(1) Unless otherwise indicated, the nature of beneficial ownership for shares
shown in this column is sole voting and investment power.
The following table sets forth, as of May 31, 1997, the number of
Association Shares beneficially owned by each director, the executive officer
named in the Summary Compensation Table above (who is also a director), each
associate director and all directors and executive officers of the Association
as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) STOCK OUTSTANDING
- ------------------------ ----------------------- -----------------
<S> <C> <C>
Richard C. Fellhauer................. 36,349 4.28%(2)
Berenice J. Mahacek.................. 10,066 1.20%(2)
Daniel C. Aubuchon................... 3,014 *
Stacey W. Braswell................... 3,464 *
Charles J. Wolter.................... 2,918 *
LeRoy C. Crook....................... 430 *
Kenneth J. Hrdlicka.................. 2,342 *
Michael J. Walsh..................... 9,583 1.15%(2)
Michael A. Deelo..................... 22,021 2.61%(2)
Seymour Bailis....................... 10,250 1.22%(2)
James W. Caulfield................... 380 *
Leonard O. Wolter.................... 7,938 *
John L. Tacke........................ -- --
All directors and executive officers
as a group (13 persons)............. 108,755 12.57%(3)
</TABLE>
- --------
* Less than 1%
(1) Unless otherwise indicated, the nature of beneficial ownership for shares
shown in this column is sole voting and investment power. The beneficially
owned shares set forth in this column include the following Association
Shares which the beneficial owner has the right to acquire within sixty
(60) days through the exercise of stock options: Fellhauer: 12,600;
Mahacek: 2,000; Aubuchon: 380; Braswell: 380; C. Wolter: 380; Crook: 380;
Hrdlicka: 380; Walsh: 1,260; Deelo: 6,800; Bailis: 950; Caulfield: 380; L.
Wolter: 2,260; J. Tacke: 0; and all directors and officers as a group:
28,150.
(2) Percentage is calculated on a partially diluted basis, assuming only the
exercise of stock options by such individual which are exercisable within
60 days.
(3) Percentage is calculated on a fully diluted basis, assuming the exercise
of all stock options which are exercisable within 60 days.
THE CONVERSION AND REORGANIZATION
THE BOARDS OF DIRECTORS OF THE MUTUAL HOLDING COMPANY, THE ASSOCIATION AND
THE HOLDING COMPANY HAVE APPROVED THE PLAN, AS HAS THE OTS, SUBJECT TO
APPROVAL BY THE MEMBERS OF THE MUTUAL HOLDING COMPANY AND THE STOCKHOLDERS OF
THE ASSOCIATION ENTITLED TO VOTE ON THE MATTER AND THE SATISFACTION OF CERTAIN
OTHER CONDITIONS. SUCH OTS APPROVAL, HOWEVER, DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY SUCH AGENCY.
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GENERAL
The Boards of Directors of the Mutual Holding Company and the Association
unanimously adopted the Plan as of May 16, 1997, which was amended on June 20,
1997. The Plan has been approved by the OTS, subject to, among other things,
approval of the Plan by the Members of the Mutual Holding Company and the
stockholders of the Association. The Members' Meeting and the Stockholders'
Meeting have been called for this purpose on , 1997.
The following is a brief summary of pertinent aspects of the Plan and the
Conversion and Reorganization. The summary is qualified in its entirety by
reference to the Plan, which is available for inspection at each office of the
Association and at the offices of the OTS. The Plan also is filed as an
exhibit to the Registration Statement of which this Prospectus is a part,
copies of which may be obtained from the SEC. See "Available Information."
PURPOSES OF THE CONVERSION AND REORGANIZATION
The Boards of Directors of the Mutual Holding Company and the Association
believe that a conversion of the Mutual Holding Company to stock form and the
reorganization of the Association pursuant to the Plan is in the best
interests of the Mutual Holding Company and the Association, as well as the
best interests of the members of the Mutual Holding Company and the Public
Stockholders. The Conversion and Reorganization will result in the Association
being wholly owned by a stock holding company, which is a more common
structure and form of ownership than a mutual holding company. In addition,
the Conversion and Reorganization will result in the raising of additional
equity capital for the Association and the Holding Company and is expected to
result in a more active and liquid market for the Common Stock than currently
exists for the Association Shares, although there can be no assurances that
this will be the case. Finally, the Conversion and Reorganization has been
structured to reunite the accumulated earnings and profits tax attribute
retained by the Mutual Holding Company with the retained earnings of the
Association through a tax-free reorganization. This will increase the
Association's ability to pay dividends in the future.
If the Association had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of Association Shares to be sold than resulted
in the amount of net proceeds raised in connection with the formation of the
Mutual Holding Company. In addition, if a standard conversion had been
conducted in 1993, management of the Association believed that it would have
been difficult to profitably invest the larger amount of capital that would
have been raised, when compared to the amount of net proceeds raised in
connection with the formation of the Mutual Holding Company. A standard
conversion in 1993 also would have immediately eliminated all aspects of the
mutual form of organization.
Subsequent to the formation of the Mutual Holding Company, there have been
certain changes in the regulations and policies of the OTS relating to mutual
holding companies. In recent years, the U.S. Congress has proposed major
overhauls to the structure of the thrift industry that include eliminating the
federal savings association charter, which is the charter the Association
currently operates under. These proposals also have created uncertainty
concerning the future of the mutual form of ownership. In addition, since the
Mutual Holding Company Reorganization in 1993, the Boards of Directors of the
Mutual Holding Company and the Association have realized a need to create
additional liquidity for the Association Shares and believe the Holding
Company and the Association can effectively deploy the additional equity
capital raised in the Conversion and Reorganization. In light of the
foregoing, the Boards of Directors of the Mutual Holding Company and the
Association believe that it is in the best interests of such companies and
their respective members and stockholders to undertake the Conversion and
Reorganization.
DESCRIPTION OF THE CONVERSION AND REORGANIZATION
On May 16, 1997, the Boards of Directors of the Association and the Mutual
Holding Company adopted the Plan, which was amended on June 20, 1997. At the
direction of the Association, the Holding Company was
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incorporated under Delaware law on May 14, 1997 and is currently a first-tier
wholly owned subsidiary of the Association. Pursuant to the Plan, (i) the
Mutual Holding Company will convert from mutual form to a federal interim
stock savings association and simultaneously merge with and into the
Association, pursuant to which the Mutual Holding Company will cease to exist
and the Association Shares held by the Mutual Holding Company will be
canceled, and (ii) Interim will then merge with and into the Association. As a
result of the merger of Interim with and into the Association, the Association
will become a wholly-owned subsidiary of the Holding Company and the Public
Association Shares will be converted into the Exchange Shares pursuant to the
Exchange Ratio, which will result in the holders of such shares owning in the
aggregate approximately the same percentage of the Common Stock to be
outstanding upon the completion of the Conversion and Reorganization (i.e.,
the Conversion Stock and the Exchange Shares) as the percentage of Association
Shares owned by them in the aggregate immediately prior to consummation of the
Conversion and Reorganization, before giving effect to (a) the payment of cash
in lieu of issuing fractional Exchange Shares, (b) any shares of Conversion
Stock purchased by the Public Stockholders in the Offering or the ESOP
thereafter, and (c) any exercise of dissenters' rights. Upon consummation of
the Conversion and Reorganization, the Association will change its name to
"Equality Savings Bank."
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The following diagram summarizes the current organizational structure of the
parties' ownership interests.
[FLOW CHART APPEARS HERE]
93
<PAGE>
The following diagram reflects the Conversion and Reorganization including (i)
the merger of the Mutual Holding Company (following its conversion into an
interim federal stock savings association) with and into the Association, (ii)
the merger of Interim with and into the Association, pursuant to which the
Public Association Shares will be converted into Exchange Shares, and (iii) the
offering of Conversion Stock.
[FLOW CHART APPEARS HERE]
94
<PAGE>
The following diagram summarizes the resulting organizational structure of the
parties' ownership interests.
[FLOW CHART APPEARS HERE]
95
<PAGE>
The Plan of Merger providing for the merger of the Mutual Holding Company
with and into the Association, which is attached to the Plan as Annex A, and
the Plan of Merger providing for the merger of Interim with and into the
Association, which is attached to the Plan as Annex B, each must be approved
by the holders of at least two-thirds of the outstanding Association Shares at
the Stockholders' Meeting. The Plan of Merger between Interim and the
Association also must be approved by the Holding Company, as the sole
stockholder of Interim.
In addition, the Primary Parties have conditioned the consummation of the
Conversion and Reorganization upon the approval of the Plan, including the
Plans of Merger, by at least a majority of the votes cast, in person or by
proxy, by the Public Stockholders at the Stockholders' Meeting. The Plan is
subject to the approval of the OTS, and it also must be approved by at least a
majority of the total outstanding votes of the voting members of the Mutual
Holding Company at the Members' Meeting, which votes may be cast in person or
by proxy.
EFFECTS OF THE CONVERSION AND REORGANIZATION
General. Prior to the Conversion and Reorganization, each depositor in the
Association has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the Mutual Holding Company based upon
the balance in his account, which interest may only be realized in the event
of a liquidation of the Mutual Holding Company. This ownership interest,
however, is tied to the depositor's account and has no tangible market value
separate from such deposit account. A depositor who reduces or closes his or
her account receives a portion or all of the balance in the account but
nothing for his ownership interest in the net worth of the Mutual Holding
Company, which is lost to the extent that the balance in the account is
reduced.
Consequently, the depositors of the Association normally have no way to
realize the value of their ownership interest in the Mutual Holding Company,
which has realizable value only in the unlikely event that the Mutual Holding
Company is liquidated. In such event, the depositors of record at that time,
as owners, would share pro rata in any residual surplus and reserves of the
Mutual Holding Company after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of
the net worth of the Holding Company. The Common Stock of the Holding Company
is separate and apart from deposit accounts and cannot be and is not insured
by the FDIC or any other governmental agency. Certificates are issued to
evidence ownership of the permanent stock. The stock certificates are
transferable, and therefore the stock may be sold or traded if a purchaser is
available with no effect on any account the seller may hold in the
Association.
Continuity. While the Conversion and Reorganization is being accomplished,
the normal business of the Association of accepting deposits and making loans
will continue without interruption. The Association will continue to be
subject to regulation by the OTS and the FDIC. After the Conversion and
Reorganization, the Association will continue to provide services for
depositors and borrowers under current policies by its present management and
staff.
The directors and officers of the Association at the time of the Conversion
and Reorganization will continue to serve as directors and officers of the
Association after the Conversion and Reorganization. The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the Mutual Holding Company and the Association, and
they generally will retain their positions in the Holding Company after the
Conversion and Reorganization.
Effect on Public Association Shares. Under the Plan, upon consummation of
the Conversion and Reorganization, the Public Association Shares shall be
converted into Common Stock based upon the Exchange Ratio without any further
action on the part of the holder thereof. Upon surrender of the Public
Association Shares, Common Stock will be issued in exchange for such shares.
See "--Delivery and Exchange of Certificates."
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Upon consummation of the Conversion and Reorganization, the Public
Stockholders of the Association, a federally chartered savings association,
will become stockholders of the Holding Company, a Delaware corporation. For a
description of certain changes in the rights of stockholders as a result of
the Conversion and Reorganization, see "Comparison of Stockholders' Rights"
below.
Effect on Deposit Accounts. Under the Plan, each depositor in the
Association at the time of the Conversion and Reorganization will
automatically continue as a depositor after the Conversion and Reorganization,
and each such deposit account will remain the same with respect to deposit
balance, interest rate and other terms, except to the extent that funds in the
account are withdrawn to purchase Conversion Stock to be issued in the
Offering. Each such account will be insured by the FDIC to the same extent as
before the Conversion and Reorganization. Depositors will continue to hold
their existing certificates, passbooks and other evidences of their accounts.
Effect on Loans. No loan outstanding from the Association will be affected
by the Conversion and Reorganization, and the amount, interest rate, maturity
and security for each loan will remain as they were contractually fixed prior
to the Conversion and Reorganization.
Effect on Voting Rights of Members. At present, all depositors and certain
borrowers of the Association are members of, and have voting rights in, the
Mutual Holding Company as to all matters requiring membership action. Upon
completion of the Conversion and Reorganization, depositors and borrowers will
cease to be members and will no longer be entitled to vote at meetings of the
Mutual Holding Company (which will cease to exist). Upon completion of the
Conversion and Reorganization, all voting rights in the Association will be
vested in the Holding Company as the sole stockholder of the Association.
Exclusive voting rights with respect to the Holding Company will be vested in
the holders of Common Stock. Depositors of and borrowers from the Association
will not have voting rights in the Holding Company after the Conversion and
Reorganization, except to the extent that they become stockholders of the
Holding Company.
Tax Effects. Consummation of the Conversion and Reorganization is
conditioned on prior receipt by the Mutual Holding Company and the Association
of rulings or opinions with regard to federal and Missouri income taxation
indicating that the adoption and implementation of the Plan set forth herein
will not be a taxable event for federal or Missouri income tax purposes to the
Mutual Holding Company, the Association or the Association's Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members, except as
discussed below. See "--Tax Aspects" below.
Effect on Liquidation Rights. If the Mutual Holding Company ever liquidated,
all claims of the Mutual Holding Company's creditors would be paid first.
Thereafter, if there were any assets remaining, members of the Mutual Holding
Company would receive such remaining assets, pro rata, based upon the deposit
balances in their deposit accounts at the Association immediately prior to
liquidation. In the unlikely event that the Association were to liquidate
after the Conversion and Reorganization, all claims of creditors (including
those of depositors, to the extent of their deposit balances) also would be
paid first, followed by distribution of the "liquidation account" to certain
depositors (see "--Liquidation Rights" below), with any assets remaining
thereafter distributed to the Holding Company as the holder of the
Association's capital stock. Pursuant to the rules and regulations of the OTS,
a merger, consolidation, sale of bulk assets or similar combination or
transaction with another insured institution would not be considered a
liquidation for this purpose and, in such a transaction, the liquidation
account would be required to be assumed by the surviving institution.
Effect on Existing Compensation Plans. Upon consummation of the Plan, the
rights and obligations of the Association under Association's 1993 Stock
Option and Incentive Plan will be assumed by the Holding Company, and shares
of Common Stock will be issued (or reserved for issuance) pursuant to such
plan in substitution for Association Shares. See "Management of the Holding
Company and Association--Employee Benefit Plans."
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THE OFFERING
As part of the Conversion and Reorganization, the Holding Company is
offering up to 920,000 shares of Common Stock (i.e., Conversion Stock) at a
Purchase Price of $10.00 per share in the Subscription Offering. As described
in more detail below, nontransferable rights to subscribe for the Conversion
Stock in the Subscription Offering have been granted to certain persons
according to certain preference categories and, subject to the prior rights of
holders of Subscription Rights, the Holding Company is also offering shares of
Conversion Stock in the Community Offering to members of the general public.
In the event of an oversubscription in the Subscription and Community
Offering, up to 138,000 additional shares may be issued to reflect changes in
market and financial conditions and to cover additional subscriptions. The
Primary Parties may reject, in whole or in part, orders received in the
Community Offering in their sole discretion.
The Subscription and Community Offering will expire on the Expiration Date,
as described on the cover page of the Prospectus.
Subscription Offering. In accordance with the OTS's regulations,
subscription rights have been granted pursuant to the Subscription Offering
under the Plan to the following persons (collectively, the "Eligible
Subscribers") in the following order of priority: (1) Eligible Account Holders
(depositors with aggregate account balances of $50 or more on deposit at the
Association as of March 31, 1996); (2) Employee Stock Benefit Plans (which
would include the ESOP but not include the 1997 MRP); (3) Supplemental
Eligible Account Holders (depositors with aggregate account balances of $50 or
more on deposit at the Association, other than officers or directors of the
Mutual Holding Company or the Association or any of their associates, as of
, 1997); (4) Other Members (depositors and certain borrowers as of ,
1997, the voting record date, who are not Eligible Account Holders or
Supplemental Eligible Holders); (5) directors, officers and employees of the
Mutual Holding Company and the Association; and (6) the Public Stockholders.
Subscription Rights are nontransferable and have been granted to Eligible
Subscribers without charge. No Eligible Subscriber is required to purchase any
shares of Conversion Stock in the Subscription Offering. All subscriptions
received will be subject to the availability of Conversion Stock after
satisfaction of subscriptions of all Eligible Subscribers having prior rights
in the Subscription Offering and to the maximum purchase limitations and other
terms and conditions set forth in the Plan and described below.
CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS. Subject to the minimum purchase
limitation set forth in the Plan, each Eligible Account Holder will receive,
without payment, nontransferable subscription rights to purchase up to the
greater of (i) the number of shares of Conversion Stock that when combined
with Exchange Shares received aggregate 62,500 shares of Common Stock (or such
maximum purchase limitation as may be established for the Community Offering),
(ii) one-tenth of one percent of the total offering of shares of Conversion
Stock in the Subscription Offering or (iii) 15 times the product (rounded down
to the next whole number) obtained by multiplying the total number of shares
of Conversion Stock to be issued in the Subscription Offering by a fraction,
of which the numerator is the amount of the qualifying deposit of the Eligible
Account Holder and the denominator is the total amount of qualifying deposits
of all Eligible Account Holders.
Subscription rights received by officers and directors of the Mutual Holding
Company or the Association and their associates, as Eligible Account Holders,
based on their increased deposits in the Association in the one year period
preceding March 31, 1996 will be subordinated to all other subscriptions
involving the exercise of subscription rights pursuant to this category.
In the event of an oversubscription for shares of Conversion Stock by
Eligible Account Holders, available shares 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 his or her
total allocation equal to 100 shares or the total amount of his or her
subscription, whichever is less. Thereafter, any shares remaining will be
allocated among Eligible Account Holders in the proportion that the amount of
the qualifying deposit of each such Eligible Account Holder bears to the total
amount of the qualifying deposits of all such Eligible Account Holders. If the
amount of shares so allocated to one or more Eligible Account Holders exceeds
the
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amount subscribed for by such Eligible Account Holder(s), the excess will be
reallocated (one or more times, as necessary) among those Eligible Account
Holders whose subscriptions are still not fully satisfied on the same
principle until all available shares have been allocated or all subscriptions
satisfied. No fractional shares will be issued in connection with the
allocation of shares under this category.
CATEGORY 2: EMPLOYEE STOCK BENEFIT PLANS. Each Employee Stock Benefit Plan
(which would include the ESOP but not include the 1997 MRP) will receive,
without payment, subscription rights to purchase the number of shares of
Conversion Stock requested by such Employee Stock Benefit Plan, subject to (i)
the availability of sufficient shares of Conversion Stock after filling in
full all subscription orders of Eligible Account Holders and (ii) the maximum
purchase limitations described in "--Limitation on Conversion Stock Purchases"
below. The Employee Stock Benefit Plans will not be deemed to be associates of
any director, officer or employee of the Mutual Holding Company, the
Association or the Holding Company for purposes of the purchase limitations.
In the event that, after completion of the Subscription Offering, the number
of shares of Conversion Stock to be issued is increased to an amount greater
than the number of shares representing the maximum of the Offering Price Range
("Maximum Shares"), the Employee Stock Benefit Plans will have a priority
right to purchase any such shares exceeding the Maximum Shares up to the
purchase limitations described in "--Limitation on Conversion Stock Purchases"
below.
CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Subject to the minimum
purchase limitation set forth in the Plan, each Supplemental Eligible Account
Holder will receive, without payment, nontransferable subscription rights
entitling such Supplemental Eligible Account Holder to purchase up to the
greater of (i) number of shares of Conversion Stock that when combined with
Exchange Shares received aggregate 62,500 shares of Common Stock (or such
maximum purchase limitation as may be established for the Community Offering),
(ii) one-tenth of one percent of the total offering of shares of Conversion
Stock in the Subscription Offering or (iii) 15 times the product (rounded down
to the next whole number) obtained by multiplying the total number of shares
of Conversion Stock to be issued in the Subscription Offering by a fraction,
of which the numerator is the amount of the qualifying deposit of the
Supplemental Eligible Account Holder and the denominator is the total amount
of the qualifying deposits of all Supplemental Eligible Account Holders. Any
subscription rights to purchase shares of Conversion Stock received by an
Eligible Account Holder in accordance with Category 1 will reduce to the
extent thereof the subscription rights to be distributed pursuant to Category
3.
In the event of an oversubscription for shares of Conversion Stock by
Supplemental Eligible Account Holders, available shares 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 his or her total allocation equal to 100
shares or the total amount of his or her subscription, whichever is less.
Thereafter, any shares remaining will be allocated among Supplemental Eligible
Account Holders in the proportion that the amount of the qualifying deposit of
each such Supplemental Eligible Account Holder bears to the total amount of
the qualifying deposits of all such Supplemental Eligible Account Holders. If
the amount of shares so allocated to one or more Supplemental Eligible Account
Holders exceeds the amount subscribed for by such Supplemental Eligible
Account Holder(s), the excess will be reallocated (one or more times, as
necessary) among those Supplemental Eligible Account Holders whose
subscriptions are still not fully satisfied on the same principle until all
available shares have been allocated or all subscriptions satisfied. No
fractional shares will be issued in connection with the allocation of shares
under this category.
CATEGORY 4: OTHER MEMBERS. Subject to the minimum purchase limitation set
forth in the Plan, each Other Member will receive, without payment,
nontransferable subscription rights entitling such Other Member to purchase up
to the greater of (i) the number of shares of Conversion Stock that when
combined with Exchange Shares received aggregate 62,500 shares of Common Stock
(or such maximum purchase limitation as may be established for the Community
Offering), and (ii) or one-tenth of one percent of the total offering of
Conversion Stock in the Subscription Offering.
In the event of an oversubscription for shares of Conversion Stock by Other
Members, the available shares of Conversion Stock will be allocated among the
subscribing Other Members pro rata (to the extent of their
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orders) in the same proportion as the amount of Conversion Stock subscribed
for by each Other Member bears to the amount of Conversion Stock subscribed
for by all Other Members.
CATEGORY 5: DIRECTORS, OFFICERS AND EMPLOYEES. To the extent that there are
sufficient shares remaining after satisfaction of all subscriptions by
Eligible Account Holders, Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members, then directors, officers and employees of
the Mutual Holding Company, the Association and the Holding Company will
receive, without payment, nontransferable subscription rights to purchase up
to an aggregate of 21% of the shares of Conversion Stock offered in the
Subscription Offering. The ability of directors, officers and employees to
purchase Conversion Stock under this category is in addition to rights that
are otherwise available to them under the Plan, which generally allows such
persons to purchase in the aggregate up to 31% of the total number of shares
of Conversion Stock sold in the Offering. See "--Limitations on Conversion
Stock Purchases."
In the event of an oversubscription in this category, subscription rights
will be allocated among the individual directors, officers and employees on a
point system basis, whereby such individuals will receive subscription rights
in the proportion that the number of points assigned to each of them bears to
the total points assigned to all directors, officers and employees, provided
that no fractional shares shall be issued. One point will be assigned for each
year of service with the Mutual Holding Company and the Association, one point
for each salary increment of $5,000 per annum and five points for each office
presently held in the Mutual Holding Company and the Association, including
directorships. For information as to the number of shares of Conversion Stock
proposed to be purchased by certain of the directors and officers, see
"Beneficial Ownership of Capital Stock--Proposed Subscriptions by Directors
and Executive Officers."
CATEGORY 6: PUBLIC STOCKHOLDERS. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, Employee Stock Benefit Plans, Supplemental Eligible Account Holders,
Other Members and directors, officers and employees, each Public Stockholder
as of the voting record date for the Stockholders' Meeting will receive,
without payment, nontransferable subscription rights to purchase Conversion
Stock in the Subscription Offering up to the greater of (i) the number of
shares of Conversion Stock that when combined with Exchange Shares received
aggregate 62,500 shares of Common Stock (or such maximum purchase limitations
as may be established for the Community Offering) and (ii) one-tenth of one
percent of the total offering of shares of Conversion Stock in the
Subscription Offering.
In the event of an oversubscription in this category, available shares will
be allocated among subscribing Public Stockholders on a pro rata basis in the
same proportion as each Public Stockholder's subscription bears to the total
subscriptions of all subscribing Public Stockholders, provided that no
fractional shares will be issued.
Expiration Date for the Subscription Offering. The Subscription Offering
will expire at 12:00 Noon, Central Time, on , 1997, unless extended by
the Holding Company with the approval of the OTS, if necessary. Such
extensions may not be extended beyond , 199 . Subscription rights which
have not been exercised prior to the Expiration Date will become void.
The Primary Parties will not execute orders until at least the minimum
number of shares of Conversion Stock (680,000 shares) have been subscribed for
or otherwise sold. If all shares have not been subscribed for or sold within
45 days after the Expiration Date, unless such period is extended with the
consent of the OTS, all funds delivered to the Holding Company pursuant to the
Subscription Offering will be returned promptly to the subscribers with
interest and all withdrawal authorizations will be canceled. If an extension
beyond the 45-day period following the Expiration Date is granted, the Holding
Company will notify subscribers of the extension of time and subscribers will
be resolicited and permitted to modify or cancel their subscriptions.
Community Offering. Subject to the minimum purchase limitation set forth in
the Plan and to the availability of shares of the Conversion Stock after
satisfaction of all subscriptions of Eligible Account Holders, Employee Stock
Benefit Plans, Supplemental Eligible Account Holders, Other Members,
directors, officers and
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employees and Public Stockholders, the remaining shares of the Conversion
Stock will be offered in the Community Offering to natural persons who reside
in Missouri and to whomever else the Prospectus is delivered ("Other
Purchasers"), giving preference to natural persons residing in the Missouri
counties of St. Louis City, St. Louis, Jefferson, St. Charles and Franklin
("Preferred Other Purchasers") in a manner designed to achieve the widest
possible distribution of Conversion Stock. The Community Offering may commence
concurrently with or as soon as practicable after completion of the
Subscription Offering and must be completed within 45 days after completion of
the Subscription Offering, unless extended with the approval of the OTS.
Other purchasers, together with associates of and persons acting in concert
with such persons, may purchase up to the number of shares of Conversion Stock
that when combined with Exchange Shares received aggregate 62,500 shares of
Common Stock. See "--Limitations on Conversion Stock Purchases." THE
OPPORTUNITY TO SUBSCRIBE FOR SHARES OF CONVERSION STOCK IN THE COMMUNITY
OFFERING CATEGORY IS SUBJECT TO THE RIGHT OF THE PRIMARY PARTIES, IN THEIR
SOLE DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS IN WHOLE OR IN PART
EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING
THE EXPIRATION DATE.
If orders are received in the Community Offering for shares in excess of the
available Conversion Stock, accepted subscriptions from Preferred Other
Purchasers will first be filled in full up to a maximum of 2% of the
Conversion Stock and thereafter remaining shares will be allocated on an equal
number of shares basis per order until all orders of Preferred Other
Purchasers have been filled, before any subscriptions in the Community
Offering are filled from subscribers who are not Preferred Other Purchasers.
If Preferred Other Purchasers order more shares of Conversion Stock than are
available for purchase in the Community Offering, available shares of
Conversion Stock will be allocated first to Preferred Other Purchasers pro
rata (to the extent of their orders) in the same proportion as the amount of
the Conversion Stock ordered by each bears to the total amount of the
Conversion Stock ordered by all Preferred Other Purchasers. The Primary
Parties may require a Person to provide evidence, satisfactory to the Primary
Parties, that such Person qualifies as a Preferred Other Purchaser.
Determinations as to whether a Person qualifies as a Preferred Other Purchaser
will be made by the Primary Parties in their sole discretion and will be final
and conclusive.
To the extent that there are shares of Conversion Stock available after
satisfaction of the subscriptions of Preferred Other Purchasers, accepted
subscriptions from subscribers in the Community Offering who are not Preferred
Other Purchasers will first be filled in full up to a maximum of 2% of the
Conversion Stock and thereafter remaining shares will be allocated on an equal
number of shares basis per order until all orders of subscribers who are not
Preferred Other Purchasers have been filled. If Subscribers who are not
Preferred Other Purchasers order more shares of Conversion Stock than are
available for purchase in the Community Offering, available shares of
Conversion Stock will be allocated first to such subscribers pro rata (to the
extent of their orders) in the same proportion as the amount of the Conversion
Stock ordered by each bears to the total amount of the Conversion Stock
ordered by all subscribers in the Community Offering who are not Preferred
Other Purchasers.
SYNDICATED COMMUNITY OFFERING
The Plan also provides that shares of Conversion Stock may be made available
in the Community Offering through a direct community marketing program that
may provide for the utilization of a broker, dealer, consultant, or investment
banking firm, experienced and expert in the sale of financial institution
securities. Should a syndicated community offering be utilized, Trident would,
acting as agent of the Holding Company, organize and form a syndicate of
registered-broker dealers as selected dealers to assist the Holding Company
and the Association in the sale of the Conversion Stock as part of the
Community Offering. Neither Trident nor any registered broker-dealer will have
any obligation to take or purchase shares of Conversion Stock in the
syndicated community offering; however, Trident 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 Purchase Price, and
hence will be sold at the same price as all other shares in the Offering.
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ALTERNATIVE OFFERINGS OF CONVERSION STOCK
If for any reason a Syndicated Community Offering of shares of Conversion
Stock not sold in the Subscription Offering or the Community Offering cannot
be effected, or in the event that an insignificant amount of Conversion Stock
is sold in the Subscription Offering or the Community Offering or in
syndicated community offering, other arrangements will be made for the
disposition of unsubscribed shares by the Holding Company, if possible. Such
other purchase arrangements would be subject to the approval of the OTS, and
with respect to federal securities matters, the SEC, and may provide for
purchases for investment purposes by directors, their associates and other
persons in excess of the limitations provided below and in excess of the
proposed director and officer purchases set forth above. If such other
purchase arrangements cannot be made, the Conversion and Reorganization will
terminate.
STOCK PRICING, EXCHANGE RATIO AND NUMBER OF SHARES TO BE ISSUED
The Plan requires that the purchase price of the Conversion Stock must be
based on the appraised pro forma market value of the Conversion Stock, as
determined on the basis of an independent valuation. The Primary Parties have
retained RP Financial to make such valuation. For its services in making its
appraisal and any expenses incurred in connection therewith, RP Financial will
receive a maximum fee of $22,500 plus out of pocket expenses, and a fee of no
greater than $5,000 plus out of pocket expenses for the preparation of a
business plan and other services performed in connection with the Holding
Company's application to the OTS. The Primary Parties have agreed to indemnify
RP Financial and its employees and affiliates against certain losses
(including any losses in connection with claims under the federal securities
laws) arising out of its services as appraiser, except where RP Financial's
liability results from its negligence or bad faith.
The Appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements of the Association. RP Financial also considered the following
factors, among others: the present and projected operating results and
financial condition of the Primary Parties and the economic and demographic
conditions in the Association's existing market area; certain historical,
financial and other information relating to the Association; a comparative
evaluation of the operating and financial statistics of the Association with
those of other similarly situated publicly-traded companies located in
Missouri and Illinois and other regions of the United States; the aggregate
size of the offering of the Conversion Stock; the impact of the Conversion and
Reorganization on the Association's net worth and earnings potential; the
proposed dividend policy of the Holding Company and the Association; and the
trading market for the Association Shares and securities of comparable
companies and general conditions in the market for such securities.
On the basis of the foregoing, RP Financial has advised the Primary Parties
in its opinion the estimated pro forma market value of the Conversion Stock
and Exchange Shares was $15,037,594 as of June 20, 1997. Because the holders
of the Public Association Shares will continue to hold the same aggregate
percentage ownership interest in the Holding Company as they currently hold in
the Association (before giving effect to the payment of cash in lieu of
issuing fractional Exchange Shares, any exercise of dissenters' rights and any
shares of Conversion Stock purchased by the Association's stockholders in the
Offering or by the ESOP thereafter), the Appraisal was multiplied by the
Mutual Holding Company's percentage interest in the Association (i.e., 53.2%)
to determine the midpoint of the valuation ($8,000,000), and the minimum and
maximum of the valuation were set at 15% below and above the midpoint,
respectively, resulting in a range of $6,800,000 to $9,200,000. The Boards of
Directors of the Primary Parties determined that the Conversion Stock would be
sold at $10.00 per share, resulting in a range of 680,000 to 920,000 shares of
Conversion Stock being offered. Upon consummation of the Conversion and
Reorganization, the Conversion Stock and the Exchange Shares will represent
approximately 53.2% and 46.8%, respectively, of the Holding Company's total
outstanding shares. The Boards of Directors of the Primary Parties reviewed RP
Financial's appraisal report, including the methodology and the assumptions
used by RP Financial, and determined that the Offering Price Range was
reasonable and adequate. The Boards of Directors of the Primary Parties also
established the formula for determining the Exchange Ratio.
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Based upon such formula and the Offering Price Range, the Exchange Ratio ranged
from a minimum of 1.5283 to a maximum of 2.0678 Exchange Shares for each Public
Association Share, with a midpoint of 1.7981. Based upon these Exchange Ratios,
the Holding Company expects to issue between 598,195 and 809,323 Exchange
Shares to the holders of Public Association Shares outstanding immediately
prior to the consummation of the Conversion and Reorganization. The Offering
Price Range and the Exchange Ratio may be amended with the approval of the OTS,
if required, or if necessitated by subsequent developments in the financial
condition of any of the Primary Parties or market conditions generally. In the
event the Appraisal is updated to below $12,781,955 or above $19,887,218, such
updated Appraisal will be filed with the SEC by post-effective amendment.
Based upon current market and financial conditions and recent practices and
policies of the OTS, in the event the Holding Company receives orders for
Conversion Stock in excess of $9,200,000 (the maximum of the Offering Price
Range) and up to $10,580,000 the maximum of the Offering Price Range, as
adjusted by 15%), the Holding Company may be required by the OTS to accept all
such orders. No assurances, however, can be made that the Holding Company will
receive orders for Conversion Stock in excess of the maximum of the Offering
Price Range or that, if such orders are received, that all such orders will be
accepted because the Holding Company's final valuation and number of shares to
be issued are subject to the receipt of an updated appraisal from RP Financial
which reflects such an increase in the valuation and the approval of such
increase by the OTS. There is no obligation or understanding on the part of
management to take and/or pay for any shares of Conversion Stock in order to
complete the Offering.
The following table sets forth, based upon the minimum, midpoint, maximum and
15% above the maximum of the Offering Price Range, the following: (i) the total
number of shares of Conversion Stock and Exchange Shares to be issued in the
Conversion and Reorganization, (ii) the percentage of the total Common Stock
represented by the Conversion Stock and the Exchange Shares, (iii) the total
shares of Common Stock to be outstanding upon consummation of the Conversion
and Reorganization, and (iv) the Exchange Ratio. The table assumes that no
holder of Public Association Shares exercises dissenters' rights and that there
is no cash paid in lieu of issuing fractional Exchange Shares.
<TABLE>
<CAPTION>
CONVERSION STOCK EXCHANGE SHARES
TO BE ISSUED TO BE ISSUED TOTAL SHARES OF
----------------- --------------- COMMON STOCK TO EXCHANGE
AMOUNT PERCENT AMOUNT PERCENT BE OUTSTANDING RATIO
--------- ------- ------- ------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Minimum............. 680,000 53.2% 598,195 46.8% 1,278,195 1.5283
Midpoint............ 800,000 53.2% 703,759 46.8% 1,503,759 1.7981
Maximum............. 920,000 53.2% 809,323 46.8% 1,729,323 2.0678
15% above Maximum... 1,058,000 53.2% 930,721 46.8% 1,988,721 2.3779
</TABLE>
RP Financial's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares. RP
Financial did not independently verify the Consolidated Financial Statements
and other information provided by the Association and the Mutual Holding
Company, nor did RP Financial value independently the assets or liabilities of
the Association. The valuation considers the Association and the Mutual Holding
Company as going concerns and should not be considered as an indication of the
liquidation value of the Association and the Mutual Holding Company. Moreover,
because such valuation is necessarily based upon estimates and projections of a
number of matters, all of which are subject to change from time to time, no
assurance can be given that persons purchasing Conversion Stock or receiving
Exchange Shares in the Conversion and Reorganization will thereafter be able to
sell such shares at prices at or above the Purchase Price or in the range of
the foregoing valuation of the pro forma market value thereof.
No sale of shares of Conversion Stock or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that
nothing of a material nature has occurred which, taking into account all
relevant factors, would cause it to conclude that the Purchase Price is
materially incompatible with the estimate of the pro forma market value of a
share of Common Stock upon consummation of the Conversion and Reorganization.
If such is not the case, a new Offering Price Range may be set, a new Exchange
Ratio may
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be determined based upon the new Offering Price Range, a new Subscription
Offering and Community Offering and/or syndicated community offering may be
held or such other action may be taken as the Primary Parties shall determine
and the OTS may permit or require.
Depending upon market or financial conditions following the commencement of
the Subscription Offering, the total number of shares of Conversion Stock to
be issued in the Offering may be increased or decreased without a
resolicitation of subscribers, provided that the product of the total number
of shares times the Purchase Price is not below the minimum or more than 15%
above the maximum of the Offering Price Range (exclusive of the number of
shares of Conversion Stock which may be issued to the ESOP out of authorized
but unissued shares of Common Stock to the extent such shares are not
purchased in the Offering due to an oversubscription). In the event market or
financial conditions change so as to cause the aggregate Purchase Price of the
shares to be below the minimum of the Offering Price Range or more than 15%
above the maximum of such range (exclusive of additional shares that may be
issued to the ESOP), purchasers will be resolicited (i.e., permitted to
continue their orders, in which case they will need to affirmatively reconfirm
their subscriptions prior to the expiration of the resolicitation offering or
their subscription funds will be promptly refunded with interest at the
Association's passbook rate of interest, or be permitted to modify or rescind
their subscriptions). Any increase or decrease in the number of shares of
Conversion Stock will result in a corresponding change in the number of
Exchange Shares, so that upon consummation of the Conversion and
Reorganization the Conversion Stock and the Exchange Shares will represent
approximately 53.2% and 46.8%, respectively, of the Holding Company's total
outstanding shares of Common Stock (exclusive of the effects of the exercise
of outstanding stock options).
An increase in the number of shares of Conversion Stock, either as a result
of an increase in the appraisal of the estimated pro forma market value or due
to the purchase by the ESOP of authorized but unissued shares (see "--The
Offering--Subscription Offering--Category 2: Employee Stock Benefit Plans"),
would decrease both a subscriber's ownership interest and the Holding
Company's pro forma net earnings and stockholders' equity on a per share basis
while increasing pro forma net earnings and stockholders' equity on an
aggregate basis. A decrease in the number of shares of Conversion Stock would
increase both a subscriber's ownership interest and the Holding Company's pro
forma net earnings and stockholders' equity on a per share basis while
decreasing pro forma net earnings and stockholders' equity on an aggregate
basis. See "Risk Factors--Possible Dilutive Effect of Issuance of Additional
Shares" and "Pro Forma Data."
The appraisal report of RP Financial has been flied as an exhibit to the
Registration Statement and Application for Conversion of which this Prospectus
is a part and is available for inspection in the manner set forth under
"Additional Information."
PERSONS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES
The Holding Company will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled
to subscribe for stock pursuant to the Plan reside. The Holding Company,
however, is not required to offer stock in the Subscription Offering to any
person who resides in a foreign country or resides in a state of the United
States with respect to which all of the following apply: (a) the number of
persons otherwise eligible to subscribe for shares under the Plan who reside
in such jurisdiction is small; (b) the granting of subscription rights or the
offer or sale of shares of Conversion Stock to such persons would require any
of the Primary Parties or their officers or directors, under the laws of such
jurisdiction, to register as a broker, dealer, salesman or selling agent or to
register or otherwise qualify its securities for sale in such jurisdiction or
to qualify as a foreign corporation or file a consent to service of process in
such jurisdiction; and (c) such registration, qualification or filing in the
judgment of the Primary Parties would be impracticable or unduly burdensome
for reasons of costs or otherwise. Where the number of persons eligible to
subscribe for shares in one state is small, the Primary Parties would intend
to base their decision as to whether or not to offer the Conversion Stock in
such state on a number of factors, including but not limited to the size of
accounts held by account holders in the state, the cost of registering or
qualifying the shares or the need to register the Holding Company, its
officers or directors as brokers, dealers or salesmen.
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LIMITATIONS ON CONVERSION STOCK PURCHASES
The Plan includes the following limitations on the number of shares of
Conversion Stock that may be purchased:
(a) Purchases of Conversion Stock in the Subscription Offering, including
purchases in the Community Offering, by any person, and associates thereof,
or a group acting in concert (as such terms are defined in the Plan), shall
be limited to that number of shares of Conversion Stock that when combined
with Exchange Shares received aggregate 62,500 shares of Common Stock,
except that the Employee Stock Benefit Plans may purchase up to an
aggregate of 7% of the number of shares of Conversion Stock to be issued in
the Offering. Shares to be held by the Employee Stock Benefit Plans and
attributable to a person shall not be aggregated with other shares
purchased directly by or otherwise attributable to such person.
(b) Directors and officers of the Association and the Mutual Holding
Company and any associates thereof may not purchase in the aggregate more
than 31% of the shares of Conversion Stock.
(c) The Boards of Directors of the Primary Parties will not be deemed to
be associates or a group acting in concert with other directors or trustees
solely as a result of membership on the Board of Directors.
(d) To the extent that shares of Conversion Stock are available, no
subscriber will be allowed to purchase less than 25 shares of Conversion
Stock.
(e) The Boards of Directors of the Primary Parties, with the approval of
the OTS and without further approval of members of the Mutual Holding
Company or the Public Stockholders, may, as a result of market conditions
and other factors, increase or decrease the purchase limitation in
paragraph (a) above or the number of shares of Conversion Stock to be sold
in the Conversion and Reorganization; provided that in no event may such
purchase limitations be less than 1% or greater than 5% of the total number
of shares of Conversion Stock to be issued in the Conversion and
Reorganization, which purchase limit shall include Exchange Shares
received. If the Primary Parties increase the maximum purchase limitations
or the number of shares of Conversion Stock to be sold in the Conversion
and Reorganization, the Holding Company is only required to resolicit
persons who subscribed for the maximum purchase amount and may, in the sole
discretion of the Holding Company, resolicit certain other large
subscribers. If the Primary Parties decrease the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in the
Conversion and Reorganization, the orders of any person who subscribed for
the maximum purchase amount shall be decreased by the minimum amount
necessary so that such person shall be in compliance with the then maximum
number of shares permitted to be subscribed for by such person.
(f) The purchase limitations in paragraphs (a) and (b) above may be
increased to exceed 5% of the shares of Common Stock, provided that orders
for Common Stock exceeding 5% shall not exceed in the aggregate 10% of the
shares of Common Stock sold in the Conversion and Reorganization, including
Exchange Shares, except that Employee Stock Benefit Plans may purchase up
to an aggregate of 7% of the number of shares of Conversion Stock to be
issued in the Offering.
(g) Each Person purchasing Conversion Stock in the Conversion and
Reorganization shall be deemed to confirm that such purchase does not
conflict with the purchase limitations under the Plan or otherwise imposed
by law, rule or regulation. If the number of shares of Conversion Stock
otherwise allocable pursuant to the Plan to any person or that person's
associates would be in excess of the maximum number of shares permitted as
set forth above, the number of shares of Conversion Stock allocated to each
such person shall be reduced to the lowest purchase limitation applicable
to that person, and then the number of shares allocated to each group
consisting of a person and that person's associates shall be reduced so
that the aggregate allocation to that person and his or her associates
complies with the above purchase limitations, and such maximum number of
shares shall be reallocated among that person and his or her associates as
they may agree, or in the absence of an agreement, in proportion to the
shares subscribed for by each (after first applying the purchase
limitations applicable to each person, separately).
(h) The Primary Parties shall have the right to take all such actions as
they may, in their sole discretion, deem necessary, appropriate or
advisable in order to monitor and enforce the terms, condition, limitations
and restrictions contained in the Plan and the terms, conditions and
representations contained in
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the order form for the Conversion Stock, including, but not limited to, the
absolute right (subject only to any necessary regulatory approvals or
concurrences) to reject, limit or revoke acceptance of any subscription or
order and to delay, terminate or refuse to consummate any sale of
Conversion Stock that they believe might violate, or is designed to, or is
any part of a plan to, evade or circumvent such terms, conditions,
limitations, restrictions and representations. Any such action shall be
final, conclusive and binding on all persons, and the Primary Parties and
their respective Boards shall be free from any liability to any person on
account of any such action.
(i) Notwithstanding anything to the contrary contained in this Plan, the
Public Stockholders will not have to sell any Association Shares or to be
limited in receiving Exchange Shares even if their ownership of Association
Shares when converted into Exchange Shares would exceed an applicable
purchase limitation.
For purposes of the purchase limitations set forth in the Plan of Conversion,
Exchange Shares will be valued at the same price that shares of Conversion
Stock are issued in the Offering.
In the event of an increase in the total number of shares of Conversion Stock
offered in the Conversion due to an increase in the Offering Price Range of up
to 15% (the "Adjusted Maximum"), the additional shares will be allocated in the
following order of priority in accordance with the Plan: (i) in the event that
there is an oversubscription by Eligible Account Holders, to fill Employee
Stock Benefit Plan subscriptions; (ii) in the event that there is an
oversubscription by Eligible Account Holders, to fill unfulfilled subscriptions
of Eligible Account Holders, inclusive of the Adjusted Maximum; (iii) in the
event that there is an oversubscription by Supplemental Eligible Account
Holders, to fill unfulfilled subscriptions of Supplemental Eligible Account
Holders, inclusive of the Adjusted Maximum; (iv) in the event that there is an
oversubscription by Other Members, to fill unfulfilled subscriptions of Other
Members, inclusive of the Adjusted Maximum; (v) in the event there is an
oversubscription by directors, officers and employees of the Mutual Holding
Company, the Association and the Holding Company, to fill unfulfilled
subscriptions of directors, officers and employees, inclusive of the Adjusted
Maximum; (vi) in the event that there is an oversubscription by Public
Stockholders, to fill unfulfilled subscriptions of Public Stockholders,
inclusive of the Adjusted Maximum; and (vii) to fill unfulfilled subscriptions
in the Community Offering to the extent possible, inclusive of the Adjusted
Maximum.
MARKETING ARRANGEMENTS
The Primary Parties have engaged Trident as a financial advisor and marketing
agent in connection with the offering of the Conversion Stock, and Trident has
agreed to use its best efforts to solicit subscriptions and purchase orders for
shares of Conversion Stock in the Offering. Trident is a member of the NASD and
a broker-dealer registered with the SEC. Trident will provide various services
including, but not limited to, (1) training and educating the Association's
employees who will be performing certain ministerial functions in the Offering
regarding the mechanics and regulatory requirements of the stock sales process;
(2) providing its employees to staff the Stock Information Center to assist the
Association's customers and internal stock purchasers and to keep records of
orders for shares of Conversion Stock; (3) targeting the Holding Company's
sales efforts, including preparation of marketing materials; and (4) assisting
in the solicitation of proxies of members of the Mutual Holding Company and
stockholders of the Association for use at the Members' Meeting and the
Stockholders' Meeting, respectively. Based upon negotiations between the
Primary Parties and Trident, Trident will receive a fixed fee of $90,000. In
the event that a selected dealers agreement is entered into in connection with
a syndicated community offering, the Association will pay a fee to Trident and
to selected broker-dealers for shares sold by such NASD member firms pursuant
to a selected dealers agreement in an amount to be agreed upon jointly by
Trident, the Holding Company and the Association to reflect market requirements
at the time of the syndicated community offering. Fees paid to Trident and to
any other broker-dealer may be deemed to be underwriting fees, and Trident and
such broker-dealers may be deemed to be underwriters. Trident also will be
reimbursed for its reasonable out-of-pocket expenses (including legal fees and
expenses) not to exceed $30,000. The Primary Parties have agreed to indemnify
Trident in connection with certain claims or liabilities, including certain
liabilities under the Securities Act.
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Directors and executive officers of the Primary Parties may participate in
the solicitation of offers to purchase Conversion Stock. Other employees of
the Association may participate in the Offering in ministerial capacities or
providing clerical work in effecting a sales transaction. Such other employees
have been instructed not to solicit offers to purchase Conversion Stock or
provide advice regarding the purchase of Conversion Stock. Questions of
prospective purchasers will be directed to executive officers or registered
representatives. The Holding Company will rely on Rule 3a4-1 under the
Exchange Act, and sales of Conversion Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees
to participate in the sale of Conversion Stock. No officer, director or
employee of the Primary Parties will be compensated in connection with his
solicitations or other participation in the Offering or the Exchange by the
payment of commissions or other remuneration based either directly or
indirectly on transactions in the Conversion Stock and Exchange Shares,
respectively.
PROCEDURE FOR PURCHASING SHARES IN THE OFFERING
To ensure that each subscriber receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
order form will confirm receipt or delivery of the Prospectus in accordance
with Rule 15c2-8. Order forms will only be distributed with a Prospectus.
To purchase shares in the Offering, an executed order form with the required
payment for each share subscribed for, or with appropriate authorization for
withdrawal from a deposit account at the Association (which may be given by
completing the appropriate blanks in the order form), must be received by the
Association at any of its offices by 12:00 Noon, Central Time, on the
Expiration Date. In addition, the Primary Parties will require a prospective
purchaser to execute a certification in the form required by applicable OTS
regulations in connection with any sale of Conversion Stock. Order forms which
are not received by such time or are executed defectively or are received
without full payment (or appropriate withdrawal instructions) are not required
to be accepted. In addition, the Association will not accept orders submitted
on photocopied or facsimiled order forms nor order forms unaccompanied by an
executed certification form. The Primary Parties have the right to waive or
permit the correction of incomplete or improperly executed forms, but do not
represent that they will do so. Once received, an executed order form may not
be modified, amended or rescinded without the consent of the Primary Parties,
unless the Offering has not been completed within 45 days after the end of the
Subscription and Community 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 priority, depositors as of the close of business on the Eligibility
Record Date (March 31, 1996) or the Supplemental Eligibility Record Date
( , 1997) and depositors and certain borrowers as of the close of business
on the voting record date for the Members' Meeting ( , 1997) must list on
the order form all accounts in which they have an ownership interest, giving
all names in each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in person at
any office of the Association, (ii) by check or money order or (iii) by
authorization of withdrawal from deposit accounts maintained with the
Association. Interest will be paid on payments made by cash, check or money
order at the Association's passbook rate of interest from the date payment is
received until completion or termination of the Conversion and Reorganization.
If payment is made by authorization of withdrawal from deposit accounts, the
funds authorized to be withdrawn from a deposit account will continue to
accrue interest at the contractual rates until completion or termination of
the Conversion and Reorganization, but a hold will be placed on such funds,
thereby making them unavailable to the depositor until completion or
termination of the Conversion and Reorganization.
If a subscriber authorizes the Association to withdraw the aggregate amount
of the purchase price from a deposit account, the Association will do so as of
the effective date of the Conversion and Reorganization. The Association will
waive any applicable penalties for early withdrawal from certificate accounts.
If the remaining
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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 passbook rate.
Employee Stock Benefit Plans will not be required to pay for the shares
subscribed for at the time it subscribes, but rather may pay for such shares
of Conversion Stock subscribed for by it at the Purchase Price upon
consummation of the Offering, 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 Employee Stock
Benefit Plan, at such time, the aggregate Purchase Price of the shares for
which it subscribed.
Owners of self-directed Individual Retirement Accounts ("IRAs") may use the
assets of such IRAs to purchase shares of Conversion Stock in the Offering,
provided that such IRAs are not maintained at the Association. Persons with
self-directed IRAs maintained at the Association must have their accounts
transferred to an unaffiliated institution or broker to purchase shares of
Conversion Stock in the Offering. In addition, ERISA provisions and IRS
regulations require that officers, directors and 10% stockholders who use
self-directed IRA funds to purchase shares of Conversion Stock in the Offering
make such purchases for the exclusive benefit of the IRAs. Any interested
parties wishing to use IRA funds for stock purchases are advised to contact
the Stock Information Center for additional information and allow sufficient
time for the account to be transferred as required.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
Pursuant to the rules and regulations of the OTS, no person with
subscription rights may transfer or enter into any agreement or understanding
to transfer the legal or beneficial ownership of the subscription rights
issued under the Plan or the shares of Conversion Stock to be issued upon
their exercise. Such rights may be exercised only by the person to whom they
are granted and only for that person's account. Persons exercising such
subscription rights will be required to certify that they are purchasing
shares solely for their own account and that they have no agreement or
understanding regarding the sale or transfer of such shares. Federal
regulations also prohibit any person from offering or making an announcement
of an offer or intent to make an offer to purchase such subscription rights or
shares of Conversion Stock prior to the completion of the Conversion and
Reorganization.
THE PRIMARY PARTIES WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN
THE EVENT THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND WILL
NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE TRANSFER OF SUCH RIGHTS.
LIQUIDATION RIGHTS
In the unlikely event of a complete liquidation of the Mutual Holding
Company in its present mutual form, each depositor of the Association would
receive his or her pro rata share of any assets of the Mutual Holding Company
remaining after payment of claims of all creditors. Each depositor's pro rata
share of such remaining assets would be in the same proportion as the value of
his or her deposit account was to the total value of all deposit accounts in
the Association at the time of liquidation. After the Conversion and
Reorganization, each depositor, in the event of a complete liquidation of the
Association, would have a claim as a creditor of the same general priority as
the claims of all other general creditors of the Association. However, except
as described below, his or her claim would be solely in the amount of the
balance in his or her deposit account plus accrued interest. He or she would
not have an interest in the value or assets of the Association or the Holding
Company above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders
in an amount equal to the amount of any dividends waived by the Mutual Holding
Company plus the greater of (1) the Association's retained earnings of
$8,067,000 at March 31, 1993, the date of the latest
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statement of financial condition contained in the final offering circular
utilized in the Mutual Holding Company Reorganization, or (2) 53.2% of the
Association's total stockholders' equity as reflected in its latest balance
sheet contained in the final Prospectus utilized in the Offering. As of the
date of this Prospectus, the initial balance of the liquidation account would
be $ . Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he were to continue to maintain his deposit account at the
Association, would be entitled, upon a complete liquidation of the Association
after the Conversion and Reorganization, to an interest in the liquidation
account prior to any payment to the Holding Company as the sole stockholder of
the Association. Each Eligible Account Holder and Supplemental Eligible
Account Holder would have an initial interest in such liquidation account for
each deposit account, including passbook accounts, transaction accounts such
as checking accounts, money market deposit accounts and certificates of
deposit, held in the Association at the close of business on March 31, 1996 or
, 1997, as the case may be. Each Eligible Account Holder and Supplemental
Eligible Account Holder will have a pro rata interest in the total liquidation
balance of each such deposit account on the March 31, 1996 Eligibility Record
Date (or the , 1997 Supplemental Eligibility Record Date, as the case may
be) bore to the balance of all deposit accounts in the Association on such
date.
If, however, on any March 31 annual closing date of the Association,
commencing March 31, 1998, the amount in any deposit account is less than the
amount in such deposit account on March 31, 1996 or , 1997, as the case
may be, or any other annual closing date, then the interest in the liquidation
account relating to such deposit account would be reduced by the proportion of
any such reduction, and such interest will cease to exist if such deposit
account is closed. In addition, no interest in the liquidation account would
ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would
be distributed to the Holding Company as the sole stockholder of the
Association.
TAX ASPECTS
Consummation of the Conversion and Reorganization is expressly conditioned
upon prior receipt of either a ruling or an opinion of counsel or of a
certified public accounting firm with respect to federal tax laws, and either
a ruling or an opinion with respect to Missouri income tax laws, to the effect
that consummation of the transactions contemplated hereby will not result in a
taxable reorganization under the provisions of the applicable codes or
otherwise result in any adverse tax consequences to the Mutual Holding
Company, the Association, the Holding Company or to account holders receiving
subscription rights, except to the extent, if any, that subscription rights
are deemed to have fair market value on the date such rights are issued. This
condition may not be waived by the Primary Parties.
KPMG Peat Marwick LLP has issued an opinion to the Holding Company, the
Association and the Mutual Holding Company to the effect that, for federal
income tax purposes: (1) the converted Mutual Holding Company's merger with
and into the Association, with the Association being the surviving
institution, will qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, (2) no gain or loss will be recognized by the
Association upon the receipt of the assets of the Mutual Holding Company in
such merger, (3) the merger of Interim with and into the Association, with the
Association being the surviving institution, will qualify as a reorganization
within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Code, (4) no gain or loss will be recognized by Interim upon the transfer of
its assets to the Association, (5) no gain or loss will be recognized by the
Association upon the receipt of the assets of Interim, (6) no gain or loss
will be recognized by the Holding Company upon the receipt of Association
common stock solely in exchange for Common Stock, (7) no gain or loss will be
recognized by the Public Stockholders upon the receipt of Common Stock solely
in exchange for their Public Association Shares, (8) the basis of the Common
Stock to be received by the Public Stockholders will be the same as the basis
of the Public Association Shares surrendered in exchange therefor, before
giving effect to any payment of cash in lieu of fractional shares, (9) the
holding period of the Common Stock to be received by the Public Stockholders
will include the holding period of the Public Association Shares, provided
that the Public Association Shares were held as a capital asset on the date of
the exchange, and (10) no gain or loss will be recognized by Eligible Account
Holders and Supplemental Eligible
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Account Holders upon distribution to them of subscription rights to purchase
shares of Conversion Stock, provided that the amount paid for the Conversion
Stock is equal to the fair market value of the Conversion Stock.
KPMG Peat Marwick LLP has also issued an opinion to the Holding Company and
the Association to the effect that there are no material adverse Missouri
income tax consequences as a result of the Conversion and Reorganization.
In the opinion of RP Financial, which opinion is not binding on the IRS, the
subscription rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration, and afford the recipients the right only to purchase the Conversion
Stock at a price equal to its estimated fair market value, which will be the
same price as the Purchase Price for the unsubscribed shares of Conversion
Stock. If the subscription rights granted to eligible subscribers are deemed
to have an ascertainable value, receipt of such rights likely would be taxable
only to those eligible subscribers who exercise the subscription rights
(either as a capital gain or ordinary income) in an amount equal to such
value, and the Primary Parties could recognize gain on such distribution.
Eligible subscribers are encouraged to consult with their own tax advisor as
to the tax consequences in the event that such subscription rights are deemed
to have an ascertainable value.
Unlike private rulings, an opinion is not binding on the IRS and the IRS
could disagree with conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
DELIVERY AND EXCHANGE OF CERTIFICATES
Conversion Stock. Certificates representing Conversion Stock issued in
connection with the Offering will be mailed by the Holding Company's transfer
agent for the Common Stock to the persons entitled thereto at the addresses of
such persons appearing on the stock order form for Conversion Stock as soon as
practicable following consummation of the Conversion and Reorganization. Any
certificates returned as undeliverable will be held by the Holding Company
until claimed by persons legally entitled thereto or otherwise disposed of in
accordance with applicable law. Until certificates for Conversion Stock are
available and delivered to subscribers, subscribers may not be able to sell
such shares.
Exchange Shares. After consummation of the Conversion and Reorganization,
each holder of a certificate or certificates theretofore evidencing issued and
outstanding Association Shares (other than the Mutual Holding Company), upon
surrender of the same to an agent, duly appointed by the Holding Company,
which is anticipated to be the transfer agent for the Common Stock (the
"Exchange Agent"), shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of full shares of Common
Stock for which the Association Shares theretofore represented by the
certificate or certificates so surrendered shall have been converted based on
the Exchange Ratio. The Exchange Agent shall promptly mail to each such holder
of record of an outstanding certificate which immediately prior to the
consummation of the Conversion and Reorganization evidenced Association
Shares, and which is to be exchanged for Common Stock based on the Exchange
Ratio as provided in the Plan, a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to such
certificate shall pass, only upon delivery of such certificate to the Exchange
Agent) advising such holder of the terms of the exchange effected by the
Conversion and Reorganization and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing Common Stock. The Association's stockholders should not forward
Association Shares certificates to the Association or the Exchange Agent until
they have received the transmittal letter.
No holder of a certificate theretofore representing Association Shares shall
be entitled to receive any dividends in respect of the Common Stock into which
such shares shall have been converted by virtue of the Conversion and
Reorganization until the certificate representing such Association Shares is
surrendered in exchange for certificates representing shares of Common Stock.
In the event that dividends are declared and paid
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by the Holding Company in respect of Common Stock after the consummation of
the Conversion and Reorganization but prior to surrender of certificates
representing Association Shares, dividends payable in respect of shares of
Common Stock not then issued shall accrue (without interest). Any such
dividends shall be paid (without interest) upon surrender of the certificates
representing such Association Shares. The Holding Company shall be entitled,
after the consummation of the Conversion and Reorganization, to treat
certificates representing Association Shares as evidencing ownership of the
number of full shares of Common Stock into which the Association Shares
represented by such certificates shall have been converted, notwithstanding
the failure on the part of the holder thereof to surrender such certificates.
The Holding Company shall not be obligated to deliver a certificate or
certificates representing shares of Common Stock to which a holder of
Association Shares would otherwise be entitled as a result of the Conversion
and Reorganization until such holder surrenders the certificate or
certificates representing the Association Shares for exchange as provided
above, or, in default thereof, an appropriate affidavit of loss and indemnity
agreement and/or a bond as may be required in each case by the Holding
Company. If any certificate evidencing shares of Common Stock is to be issued
in a name other than that in which the certificate evidencing Association
Shares surrendered in exchange therefor is registered, it shall be a condition
of the issuance thereof that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other tax
required by reason of the issuance of a certificate for shares of Common Stock
in any name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
REQUIRED APPROVALS
Various approvals of the OTS are required in order to consummate the
Conversion and Reorganization. The OTS has approved the Plan, subject to
approval by the Mutual Holding Company's members and the Association's
stockholders. In addition, consummation of the Conversion and Reorganization
is subject to OTS approval of the Holding Company's application to acquire all
of the to-be-outstanding Association common stock and the applications with
respect to the merger of the Mutual Holding Company (following its conversion
to a federal interim stock savings association) into the Association and the
merger of Interim into the Association, with the Association being the
surviving entity in both mergers. Applications for these approvals have been
filed and are currently pending. There can be no assurances that the requisite
OTS approvals will be received in a timely manner, in which event the
consummation of the Conversion and Reorganization may be delayed beyond the
expiration of the Offering.
The Plan of Merger providing for the merger of the Mutual Holding Company
with and into the Association, which is attached to the Plan as Annex A, and
the Plan of Merger providing for the merger of Interim with and into the
Association, which is attached to the Plan as Annex B, each must be approved
by the holders of at least two-thirds of the outstanding Association Shares at
the Stockholders' Meeting. The Plan of Merger between Interim and the
Association also must be approved by the Holding Company, as the sole
stockholder of Interim.
In addition, the Primary Parties have conditioned the consummation of the
Conversion and Reorganization upon the approval of the Plan, including the
Plans of Merger, by at least a majority of the votes cast, in person or by
proxy, by the Public Stockholders at the Stockholders' Meeting. The Plan is
subject to the approval of the OTS, and it also must be approved by at least a
majority of the total outstanding votes of the voting members of the Mutual
Holding Company at the Members' Meeting, which votes may be cast in person or
by proxy.
DISSENTERS' RIGHTS OF APPRAISAL
Holders of Association Common Stock are entitled to appraisal rights under
Section 552.14 of the OTS regulations as a result of the merger of the Mutual
Holding Company (following its conversion to a federal interim stock savings
association) with and into the Association and the merger of Interim with and
into the Association. A holder of Association Shares wishing to exercise his
or her appraisal rights must deliver to the
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Secretary of the Association, before the vote on the Plans of Merger at the
Stockholders' Meeting, a writing which identifies such stockholder and which
states his or her intention to demand appraisal of and payment for his or her
Association Shares. Such demand must be in addition to and separate from any
proxy or vote against the Plans of Merger. Any such stockholder who wishes to
exercise such appraisal rights should review carefully the discussion of such
rights in the Association's proxy statement, including Appendix A thereto,
because failure to timely and properly comply with the procedures specified
will result in the loss of appraisal rights under Section 552.14. All written
demands for appraisal should be sent or delivered to the attention of the
Secretary of the Association, Equality Savings and Loan Association, F.A.,
4131 South Grand Boulevard, St. Louis, Missouri 63118-3436 so as to be
received prior to the vote at the Stockholders' Meeting with respect to the
Plans of Merger. Pursuant to the Plan, consummation of the Conversion and
Reorganization is conditioned upon holders of less than 10% of the outstanding
Association Shares exercising appraisal rights.
CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER THE CONVERSION
AND REORGANIZATION
All shares of Conversion Stock purchased in connection with the Conversion
and Reorganization by a director or an executive officer of the Primary
Parties will be subject to a restriction that the shares not be sold for a
period of one year following the Conversion and Reorganization, except in the
event of the death of such director or executive officer or pursuant to a
merger or similar transaction approved by the OTS. Each certificate for
restricted shares will bear a legend giving notice of this restriction on
transfer, and appropriate stop-transfer instructions will be issued to the
Holding Company's transfer agent. Any shares of Common Stock issued within
this one-year period as a stock dividend, stock split or otherwise with
respect to such restricted stock will be subject to the same restrictions. The
directors and executive officers of the Holding Company will also be subject
to the insider trading rules promulgated pursuant to the Exchange Act.
Purchases of Common Stock of the Holding Company by directors, executive
officers and their associates during the three-year period following
completion of the Conversion and Reorganization may be made only through a
broker or dealer registered with the SEC, except with the prior written
approval of the OTS. This restriction does not apply, however, to negotiated
transactions involving more than 1.0% of the Holding Company's outstanding
Common Stock or to the purchase of stock pursuant to any tax-qualified
employee stock benefit plan, such as the ESOP, or by any non-tax-qualified
employee stock benefit plan, such as the 1997 MRP.
Pursuant to OTS regulations, the Holding Company will generally be
prohibited from repurchasing any shares of Common Stock within one year
following consummation of the Conversion and Reorganization. During the second
and third years following consummation of the Conversion and Reorganization,
the Holding Company may not repurchase any shares of its Common Stock other
than pursuant to (i) an offer to all stockholders on a pro rata basis which is
approved by the OTS; (ii) the repurchase of qualifying shares of a director,
if any; (iii) purchases in the open market by a tax-qualified or non-tax-
qualified employee stock benefit plan in an amount reasonable and appropriate
to fund the plan; or (iv) purchases that are part of an open-market program
not involving more than 5% of its outstanding capital stock during a 12-month
period, if the repurchases do not cause the Association to become
undercapitalized and the Association provides to the Regional Director of the
OTS no later than 10 days prior to the commencement of a repurchase program
written notice containing a full description of the program to be undertaken
and such program is not disapproved by the Regional Director. However, the
Regional Director has authority to permit repurchases during the first year
following consummation of the Conversion and Reorganization and to permit
repurchases in excess of 5% during the second and third years upon the
establishment of exceptional circumstances (i.e., where such repurchases would
be in the best interests of the institution and its stockholders).
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COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
As a result of the Conversion and Reorganization, stockholders of the
Association, a federally chartered savings association which is a majority
owned subsidiary of the Mutual Holding Company, will become stockholders of
the Holding Company, a Delaware corporation.
There are certain differences in the rights of stockholders as a result of
the differences between the Association's charter and bylaws and the Holding
Company's certificate of incorporation and bylaws and the differences between
laws with respect to federally chartered savings associations and the DGCL.
The following discussion is not intended to be a complete statement of the
differences affecting the rights of stockholders and is qualified in its
entirety by reference to the certificate of incorporation and bylaws of the
Holding Company and the DGCL.
AUTHORIZED CAPITAL STOCK
The Holding Company's authorized capital stock consists of 4,000,000 shares
of common stock, par value $0.01 per share, and 200,000 shares of preferred
stock, par value $0.01 per share, whereas the Association's authorized capital
stock consists of 4,000,000 shares of common stock, par value $1.00 per share
and 1,000,000 shares of preferred stock, par value $1.00 per share. The Board
of Directors of the Holding Company has determined to issue no preferred stock
and up to 1,729,323 shares of Common Stock in the Conversion and
Reorganization.
The Holding Company's certificate of incorporation authorized the additional
shares of Common Stock to provide the Board of Directors with as much
flexibility as possible to effect, among other transactions, financings,
acquisitions, stock dividends, stock splits, shares under the Reinvestment
Plan and employee stock options. These additional authorized shares of Common
Stock, however, may also be used by the Board of Directors, to the extent
consistent with its fiduciary duties to the stockholders of the Holding
Company, to deter future attempts to gain control of the Holding Company. With
regard to the authorized but unissued preferred stock of the Holding Company,
the Board of Directors has sole authority to determine the terms of any one or
more series of such preferred stock, including voting rights, conversion
rates, and liquidation preferences. See "Description of Capital Stock--
Preferred Stock." As a result of the ability to fix voting rights for a series
of preferred stock, the Board of Directors of the Holding Company has the
power, to the extent consistent with its fiduciary duties to the stockholders
of the Holding Company, to issue a series of preferred stock to persons
friendly to management in order to attempt to block a post-tender offer merger
or other transaction by which a third party seeks control, and thereby to
assist management to retain its position. The Holding Company's Board of
Directors currently has no plans for the issuance of any preferred stock or of
any additional shares of Common Stock, other than the issuance of additional
shares of Common Stock pursuant to the terms of the employee benefit plans.
The Holding Company will be subject to an annual franchise tax in the State
of Delaware and in the State of Missouri. As a federally chartered
institution, the Association is not subject to franchise taxes, regardless of
the amount of its authorized capitalization.
ISSUANCE OF CAPITAL STOCK
Pursuant to applicable laws and regulations, the Mutual Holding Company is
required to own not less than a majority of the outstanding Association
Shares. There will be no such restriction applicable to the Holding Company
following consummation of the Conversion and Reorganization.
The certificate of incorporation of the Holding Company does not contain
restrictions on the issuance of shares of capital stock to directors, officers
or controlling persons of the Holding Company, whereas the charter of the
Association restricts such issuance to general public offerings, or if
qualifying shares, to directors, unless
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the share issuance or the plan under which they would be issued has been
approved by a majority of the total votes eligible to be cast at a legal
meeting.
Thus, stock-related compensation plans such as stock option plans could be
adopted by the Holding Company and the Association without stockholder
approval and shares of Holding Company capital stock and Association capital
stock could be issued directly to directors, officers or controlling persons
without stockholder approval. The bylaws of the NASD, however, generally
require corporations with securities which are quoted on the Nasdaq NMS to
obtain stockholder approval of most stock compensation plans for directors,
officers and key employees of the corporation. Moreover, although generally
not required, stockholder approval of stock-related compensation plans may be
sought in certain instances in order to qualify such plans for favorable
federal income tax treatment under current laws and regulations.
Neither the charter and bylaws of the Association nor the certificate of
incorporation and bylaws of the Holding Company provide for preemptive rights
to stockholders in connection with the issuance of capital stock.
VOTING RIGHTS
The Association's charter and the certificate of incorporation and bylaws of
the Holding Company eliminate cumulative voting in elections of directors.
Elimination of cumulative voting will help to ensure continuity and stability
of the Holding Company's Board of Directors and the policies adopted by it by
making it more difficult for the holders of a relatively small amount of the
Common Stock to elect their nominees to the Board of Directors and possibly by
delaying, deterring or discouraging proxy contests.
The Association's charter permits the provision of separate class voting
rights for holders of a class of the Association preferred stock only under
specified circumstances, including (i) mergers, consolidations and sales,
leases or conveyances of property of the Association if the class of the
Association preferred stock is to be exchanged for securities of another
corporation, (ii) amendments of the charter that would adversely change the
specific terms of any class or series of the Association preferred stock and
(iii) the provision of class voting rights to holders of the Association
preferred stock permitting such holders to elect a specified number of
directors of the Board of Directors of the Association (which must be less
than a majority of directors) in the event of default in the payment of
dividends on the Association preferred stock. The certificate of incorporation
of the Holding Company does not contain any specification of or limitation on
the circumstances under which separate class voting rights may be provided to
a particular class or series of Holding Company preferred stock.
For additional information relating to voting rights, see "--Limitations on
Acquisitions of Voting Stock and Voting Rights" below.
PAYMENT OF DIVIDENDS
The ability of the Association to pay dividends on its capital stock is
restricted by OTS regulations. See "Regulation and Supervision--Federal
Savings Association Regulation--Limitation on Capital Distributions." Although
the Holding Company is not subject to these restrictions as a Delaware
corporation, such restrictions will indirectly affect the Holding Company
because dividends from the Association will be a primary source of funds of
the Holding Company for the payment of dividends to stockholders of the
Holding Company.
The DGCL generally provides that, subject to any restrictions in the
corporation's certificate of incorporation, dividends may be declared from the
corporation's surplus, as defined by Delaware law, or, if there is no surplus,
from its net profits for the fiscal year in which the dividend is declared and
the preceding fiscal year. However, if the corporation's capital has been
diminished to an amount less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets, dividends may not be declared and
paid out of such net profits until the deficiency in such capital has been
repaired.
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BOARD OF DIRECTORS
The Association's bylaws and the certificate of incorporation of the Holding
Company, respectively, require the Board of Directors of the Association and
the Holding Company to be divided into three classes as nearly equal in number
as possible and that the members of each class shall be elected for a term of
three years and until their successors are elected and qualified, with one
class being elected annually.
Under the Association's bylaws, any vacancies in the Board of Directors of
the Association may be filled by the affirmative vote of a majority of the
remaining directors although less than a quorum of the Board of Directors.
Persons elected by the directors of the Association to fill vacancies may only
serve until the next annual meeting of stockholders. Under the Holding
Company's certificate of incorporation, however, any vacancy occurring in the
Board of Directors of the Holding Company, including any vacancy created by
reason of an increase in the number of directors, may be filled by the
remaining directors, and any director so chosen shall hold office for the
remainder of the term to which the director has been elected and until his or
her successor is elected and qualified.
Under the Association's bylaws, any director may be removed for cause by the
holders of a majority of the outstanding voting shares, provided that if less
than the entire board is to be removed, none of the directors may be removed
if the votes cast against the removal would be sufficient to elect a director
if then cumulatively voted at an election of the class of directors of which
such director is a member. The certificate of incorporation and the bylaws of
the Holding Company provide that directors may be removed from office only for
cause and only upon the vote of the holders of at least 80% of the outstanding
shares of all classes of capital stock of the Holding Company.
The classification of directors, the removal requirements and the absence of
cumulative voting in the Holding Company's certificate of incorporation and
bylaws have the effect of making it more difficult for stockholders to change
the composition of the Board of Directors in a relatively short period of
time.
LIMITATIONS ON LIABILITY
The Holding Company's certificate of incorporation currently provides that
directors of the Holding Company shall not be personally liable to the Holding
Company or its stockholders for monetary damages for breaches of fiduciary
duty, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) for the payment of certain unlawful dividends and the making of
certain stock purchases or redemptions, or (iv) for any transaction from which
the director derived an improper personal benefit. This provision would
absolve directors of personal liability for simple negligence in the
performance of their duties. It would not permit a director to be exculpated,
however, for liability for actions involving conflicts of interest or breaches
of the traditional "duty of loyalty" to the Holding Company and its
stockholders, and it would not affect the availability of injunctive or other
equitable relief as a remedy.
The provision in the Holding Company's certificate of incorporation that
limits the personal liability of directors is designed to ensure that the
ability of the Holding Company's directors to exercise their best business
judgment in managing the Holding Company's affairs is not unreasonably impeded
by exposure to the potentially high personal costs or other uncertainties of
litigation. The nature of the tasks and responsibilities undertaken by
directors of publicly-held corporations often require such persons to make
difficult judgments of great importance that can expose such persons to
personal liability, but from which they will acquire no personal benefit. In
recent years, litigation against publicly held corporations and their
directors challenging good faith business judgments and involving no
allegations of personal wrongdoing has become common. Such litigation
regularly involves damage claims in huge amounts that bear no relationship to
the amount of compensation received by the directors, particularly in the case
of directors who are not employees of the corporation. The expense of such
litigation, whether it is well-founded or not, can be enormous. The provision
of the certificate of incorporation relating to director liability is intended
to reduce, in appropriate cases, the risk incident to serving as a director
and to enable the Holding Company to elect and retain the persons most
qualified to serve as directors.
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Currently, federal law does not permit federally chartered savings
associations such as the Association to limit the personal liability of
directors in the manner authorized by the DGCL and the laws of many other
states.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Association's charter and bylaws do not contain any provision relating
to indemnification of directors and officers of the Association. Under present
OTS regulations, however, the Association shall indemnify its directors,
officers and employees for any costs incurred in connection with any
litigation involving any such person's activities as a director, officer or
employee if such person obtains a final judgment on the merits in his or her
favor. In addition, indemnification is permitted in the case of a settlement,
a final judgment against such person or final judgment other than on the
merits, if a majority of disinterested directors determine that such person
was acting in good faith within the scope of his or her employment as he or
she could reasonably have perceived it under the circumstances and for a
purpose he or she could reasonably have believed under the circumstances was
in the best interest of the Association or its stockholders. The Association
also is permitted to pay ongoing expenses incurred by a director, officer or
employee if a majority of disinterested directors concludes that such person
may ultimately be entitled to indemnification. Before making any
indemnification payment, the Association is required to notify the OTS of its
intention and such payment cannot be made if the OTS objects to it.
The Holding Company's certificate of incorporation and bylaws provide that
the Holding Company shall indemnify and advance expenses to 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, by reason of the fact that such person is or
was a director or officer of the Holding Company, or is or was a director or
officer of the Holding Company and is or was serving at the request of the
Holding Company as a director or officer of another enterprise against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding to the fullest extent authorized by the DGCL.
SPECIAL MEETINGS OF STOCKHOLDERS
The Association's charter and bylaws provide that special meetings of the
stockholders of the Association may be called by the Chairman, President, a
majority of the Board of Directors or the holders of not less than one-tenth
of the outstanding capital stock of the Association entitled to vote at the
meeting; provided that special meetings of stockholders relating to changes in
control of the Association or amendments to its charter may be called only
upon direction of the Board of Directors of the Association.
The certificate of incorporation and bylaws of the Holding Company allow
only the chairman of the Board of Directors, the president or a majority of
the Board of Directors to call a special stockholders' meeting. Stockholders
do not have the right to call such a meeting. This provision may have the
effect of delaying consideration of a stockholder proposal until the next
annual meeting of stockholders.
STOCKHOLDER NOMINATIONS AND PROPOSALS
The Association's bylaws generally provide that stockholders may submit
nominations for election as director at an annual meeting of stockholders and
any new business to be taken up at such a meeting at least five days before
the date of any such meeting.
The Holding Company's certificate of incorporation requires advance
notification to the secretary of the Holding Company of nominations of persons
for election to the Board of Directors by a stockholder. The notice must be
received not later than the date corresponding to 40 days before the first
anniversary date of the immediately preceding annual meeting of stockholders.
The notice by a stockholder must comply with certain information requirements
specified in the certificate of incorporation. Advance written notification is
also required by the Holding Company's bylaws before a stockholder may bring
any item of business before the
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annual meeting of stockholders. The notice must be received by the secretary
of the Holding Company not later than the date corresponding to 60 days before
the first anniversary date of the immediately preceding annual meeting of
stockholders. The notice by a stockholder must comply with certain information
requirements specified in the bylaws. The purpose of such advance notice
requirements is to insure the orderly conduct of business at annual meetings
of stockholders and to afford the board of directors a meaningful opportunity
to consider the qualifications of proposed nominees and to inform themselves,
and where appropriate, to inform the stockholders in advance of the meeting of
any business proposed to be conducted at the meeting. Such procedures may,
however, have the effect of precluding the nomination of a director, or a
slate of directors, or the consideration of business at a particular meeting
if the proper procedures have not been followed prior to the meeting.
STOCKHOLDER ACTION WITHOUT A MEETING
The bylaws of the Association provide that any action to be taken or which
may be taken at any annual or special meeting of stockholders may be taken if
a consent in writing, setting forth the actions so taken, is given by the
holders of all outstanding shares entitled to vote.
The Holding Company's certificate of incorporation and bylaws prohibit
action that is required or permitted to be taken at any annual or special
meeting of stockholders of the Holding Company from being taken by the written
consent of the stockholders without a meeting. This provisions may have the
effect of delaying consideration of a stockholder proposal until the next
annual meeting of stockholders.
STOCKHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS
A federal regulation that is applicable to the Association provides that
stockholders may inspect and copy specified books and records of a federally
chartered savings association after proper written notice for a proper
purpose.
The DGCL similarly provides that a stockholder may inspect books and records
upon written demand under oath stating the purpose of the inspection, if such
purpose is reasonably related to such person's interest as a stockholder.
LIMITATIONS ON ACQUISITIONS OF VOTING STOCK AND VOTING RIGHTS
The certificate of incorporation of the Holding Company provides that no
person shall directly or indirectly acquire or hold beneficial ownership of
more than 10% of the voting shares of the Holding Company. This limitation
does not apply to the purchase of shares by underwriters in connection with a
public offering, to any reclassification of securities, recapitalization or
any merger or consolidation that does not have the effect of changing the
beneficial ownership interests of the Holding Company's stockholders, or to
the purchase of shares by employee benefit plans of the Holding Company or any
subsidiary of the Holding Company. The certificate of incorporation further
provides that, where any person directly or indirectly acquires beneficial
ownership of more than 10% of the voting shares of the Holding Company, the
voting power of the securities beneficially owned in excess of 10% shall be
reduced to 1/100 of one vote for each share held in excess of such limit. The
certificates evidencing the shares of Common Stock sold in the Conversion and
Reorganization will bear a legend reflecting such restrictions.
The charter of the Association contains a similar provision. Upon
consummation of the Conversion and Reorganization the Association will amend
its charter to delete this provision because as a wholly-owned subsidiary of
the Holding Company this provision would have no practical effect in the
Association's charter.
VOTING RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS; FAIR PRICE PROVISION
Under the Holding Company's certificate of incorporation, the adoption or
approval of certain business transactions, including mergers, consolidations,
asset and securities sales, plans of liquidation or dissolution and
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certain reclassifications involving any "Interested Party" (as defined below)
and certain affiliates of any such Interested Party, requires an affirmative
vote of the holders of at least that number of voting shares that equals the
sum of (i) the number of voting shares beneficially owned by all Interested
Parties with respect to the proposed business transaction plus (ii) 80% of the
remaining number of voting shares that are not beneficially owned by any such
Interested Party. An "Interested Party" is defined in the Holding Company
certificate of incorporation to mean generally the beneficial owner of 10% or
more of the voting stock of the Holding Company.
The 80% affirmative voting requirement is not applicable to business
transactions (i) approved by a resolution adopted by a majority of the Board
of Directors holding office at the time such resolution is adopted, provided
that such resolution approving the business transaction is adopted prior to
the time all Interested Parties with respect to the business transaction
become Interested Parties, or (ii) approved by a resolution adopted by 66 2/3%
of the directors holding offices at the time such resolution is adopted who
are not themselves Interested Parties or affiliates of an Interested Party.
The 80% affirmative voting requirement also is not applicable to any
business transaction and such business transaction need only be approved by a
simple majority vote of the stockholders (if such a vote is required under
applicable Delaware law) if all of the following conditions have been met: (i)
the per share consideration to be received by holders of Common Stock in such
business transaction is not less than the greater of (A) the highest per share
price paid by the Interested Party in acquiring its holdings of Common Stock
during the immediately preceding five years, (B) the per share book value of
the Common Stock at the end of the fiscal quarter immediately preceding such
business transaction or (C) the highest market price per share of Common Stock
during the two-year period ending immediately prior to the first public
announcement of such business transaction; (ii) the consideration to be
received by holders of Common Stock is in cash or in the same form as the
consideration paid by the Interested Party to acquire the largest number of
shares of Common Stock acquired by the Interested Party from a non-Interested
Party; (iii) as of the record date for the determination of stockholders
entitled to vote on the proposed business transaction, there is at least one
director of the Holding Company who is not an Interested Party or an affiliate
of an Interested Party; and (iv) holders of voting shares as of the record
date for the determination of stockholders entitled to vote on the business
transaction shall have received a proxy or information statement complying
with the rules and regulations under the Exchange Act, which proxy or
information statement includes, among other things, an opinion of an
investment banking firm as to the fairness from a financial point of view of
the consideration to be received by the stockholders in the proposed business
transaction.
Neither the Association's charter and bylaws nor federal laws and
regulations contain a provision that restricts business combinations between
the Association and interested stockholders in the manner described above.
NON-STOCKHOLDER CONSTITUENCIES
The Holding Company's certificate of incorporation provides that in
evaluating certain transactions which could effect a change in control of the
Holding Company, it is proper for the Board of Directors to consider the
effects of such transactions on the employees, suppliers and customers of the
Holding Company and the communities in which the principal offices of the
Holding Company are located. Neither the Association's charter nor bylaws
provide for a similar provision.
AMENDMENT OF GOVERNING INSTRUMENTS
No amendment of the Association's charter may be made unless it is first
proposed by the Board of Directors of the Association, then preliminarily
approved by the OTS, and thereafter approved by the holders of a majority of
the total votes eligible to be cast at a legal meeting.
No amendment of the Holding Company's certificate of incorporation may be
made unless it is first approved by the Board of Directors of the Holding
Company and thereafter is approved by the holders of a
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majority of the shares of the Holding Company entitled to vote generally in an
election of directors, voting together as a single class, as well as such
additional vote of the preferred stock as may be required by the provisions of
any series thereof; provided, however, that the classified board, limitation
of beneficial ownership, fair price, special meeting, stockholder consent,
advance notice, bylaw amendment and non-stockholder constituency provisions of
the certificate of incorporation of the Holding Company may be altered,
amended or repealed only if the holders of at least 80% of the outstanding
shares of voting stock entitled to vote in the election of directors vote in
favor of such action.
The bylaws of the Association may be amended by a majority vote of the full
Board of Directors of the Association or by a majority vote of the votes cast
by the stockholders of the Association at any legal meeting. Amendments to the
bylaws of the Holding Company may be made only upon (i) the affirmative vote
of a majority of the members of the Board of Directors, or (ii) the
affirmative vote of the holders of at least 80% of the outstanding shares of
voting stock entitled to vote in the election of directors.
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
RESTRICTIONS IN THE HOLDING COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS;
EMPLOYMENT AGREEMENTS
The Holding Company has implemented certain measures designed to enhance the
ability of the Board of Directors to protect stockholders against, among other
things, unsolicited attempts to acquire a significant interest in the Holding
Company or to influence the Holding Company's management (whether through open
market purchases, tender offers or otherwise) that do not offer an adequate
price to all stockholders or that the Board of Directors otherwise considers
not in the best interests of the Holding Company and its stockholders.
Certain provisions in the certificate of incorporation and bylaws of the
Holding Company may impact significantly the stockholders' ability to change
the composition of the incumbent Board of Directors or the ability of a
substantial holder of the Common Stock to acquire control of, or to remove,
the incumbent Board of Directors, and might discourage certain types of
transactions that involve an actual or threatened change of control of the
Holding Company.
The provisions of the certificate of incorporation and bylaws are intended
to encourage persons seeking to acquire control of the Holding Company to
initiate such an acquisition through arm's-length negotiations with the
Holding Company's management and Board of Directors. Management of the Holding
Company does not have the power to waive any of these provisions. These
provisions could have the effect of discouraging a third party from making a
tender offer to or otherwise attempting to obtain control of the Holding
Company, even though certain stockholders of the Holding Company might deem
such an attempt to be in the best interests of the Holding Company and its
stockholders or in which stockholders may receive a substantial premium for
their shares over then current market prices. At the same time, these
provisions ensure that the Board of Directors, if confronted by an unsolicited
proposal from a third party who has recently acquired a block of Common Stock,
will have sufficient time to review the proposal and alternatives to it and to
seek better proposals or negotiate better terms for the Holding Company's
stockholders, employees, suppliers, customers and others. 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 "Available Information" as to how to
obtain a copy of these documents.
These provisions, which are described under "Comparison of Stockholders'
Rights" above, provide, among other things, that: (1) no person may acquire or
hold the beneficial ownership of more than 10% of the voting shares of the
Holding Company, and if any person acquires or holds the beneficial ownership
of more than 10% of the voting shares of the Holding Company, each share in
excess of such 10% limit shall have its voting power reduced to 1/100 of one
vote; (2) the Holding Company's Board of Directors will be divided into three
classes with one class to be elected each year; (3) special meetings of the
Holding Company's stockholders may be
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called only by the chairman of the Board of Directors, the president or a
majority of the Holding Company's Board of Directors; (4) the Board of
Directors may issue additional shares of authorized Common Stock and fix the
terms and designations of and issue shares of authorized preferred stock
without any further action by the stockholders; (5) certain Business
Transactions (as defined in the certificate of incorporation) must be approved
in advance by a majority of the Board of Directors, approved in advance by the
holders of 80% of the outstanding shares of voting stock other than shares
owned by persons who are Interested Parties (as defined in the certificate of
incorporation) with respect to the Business Transaction or approved after-the-
fact by two-thirds of directors who are not themselves Interested Directors
(as defined in the certificate of incorporation) with respect to the Business
Transaction; and (6) stockholders who propose to nominate a candidate for
election to the Board of Directors of the Holding Company or to present new
business at a stockholders' meeting must give advance notice of, and furnish
information relating to, the proposed nominee and business to the Holding
Company. The management of the Holding Company does not have the ability to
waive any of these provisions. A vote of 80% of the total votes eligible to be
cast, voting together as a single class, is required to amend, repeal or adopt
any provisions inconsistent with certain provisions of the certificate of
incorporation and the bylaws, including most of the provisions enumerated
above.
The provisions described above are intended to reduce the Holding Company's
vulnerability to takeover attempts and certain other transactions which have
not been negotiated with and approved by members of the Board of Directors.
The provisions of the proposed employment agreements with Messrs. Fellhauer,
Deelo and Wolter may also discourage takeover attempts by increasing the costs
to be incurred by the Association and the Holding Company in the event of a
takeover. See "Management of the Holding Company and Association."
The Holding Company's Board of Directors believes that the provisions of the
certificate of incorporation, the bylaws and the proposed employment
agreements are in the best interest of the Holding Company and its
stockholders. An unsolicited, non-negotiated proposal can seriously disrupt
the business and management of a corporation and cause it great expense.
Accordingly, the Board of Directors believes it is in the best interest of the
Holding Company and its stockholders to encourage potential acquirors to
negotiate directly with management and that these provisions will encourage
such negotiations and discourage non-negotiated takeover attempts. It is also
the Board of Directors' view that these provisions should not discourage
persons from proposing a merger or other transaction at a price that reflects
the true value of the Holding Company and that otherwise is in the best
interest of all stockholders.
REGULATORY RESTRICTIONS
The OTS regulations prohibit any person, prior to the completion of the
Conversion and Reorganization, from transferring, or from entering into any
agreement or understanding to transfer, to the account of another, legal or
beneficial ownership of the subscription rights issued under the Plan or of
the Conversion Stock to be issued upon the exercise of such rights. The OTS
regulations also prohibit any person, prior to the completion of the
Conversion and Reorganization, from offering, or making an announcement of an
offer or intent to make an offer, to purchase such subscription rights or
Conversion Stock.
For three years following the Conversion and Reorganization, OTS regulations
prohibit any person from acquiring or making an offer to acquire more than 10%
of the stock of the Holding Company without the prior written consent of the
OTS except for: (i) offers that, if consummated, would not result in the
acquisition by such person during the preceding twelve-month period of more
than 1% of such stock; (ii) offers for up to 25% of the stock in the aggregate
by the ESOP or other tax-qualified plans of the Association or the Holding
Company; or (iii) offers made exclusively to the Holding Company by
underwriters or members of a selling group acting on the Holding Company's
behalf for resale to the general public. Such acquisition may be disapproved
by the OTS if it is found, among other things, that the proposed acquisition:
(a) would frustrate the purposes of the provisions of the regulations
regarding conversions; (b) would be manipulative or deceptive; (c) would
subvert the fairness of the Conversion; (d) would be likely to result in
injury to the Association; (e) would not be consistent with economical home
financing; (f) would otherwise violate some law or regulation; or (g) would
not contribute to the prudent deployment of the Association's conversion
proceeds. In the event that
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any person, directly or indirectly, violates this regulation, the securities
beneficially owned by such person in excess of 10% shall not be counted as
shares entitled to vote and shall not be voted by any person or counted as
voting shares in connection with any matters submitted to a vote of
stockholders. The definition of beneficial ownership for these regulations
extends to persons holding revocable or irrevocable proxies for the Holding
Company's stock under circumstances that give rise to a conclusive or
rebuttable determination of control under the OTS regulations, as described
below.
In addition, federal laws and regulations contain a number of provisions
that affect the acquisition of insured institutions such as the Association,
and a savings institution holding company such as the Holding Company. The
Change in Bank Control Act provides that no person, acting directly or
indirectly or through or in concert with one or more persons, may acquire
control of a savings association unless the OTS has been given 60 days' prior
written notice and the OTS does not issue a notice disapproving the proposed
acquisition. Moreover, certain provisions of the HOLA provide that no company
may acquire control of a savings and loan association without the prior
approval of the OTS. Any company that acquires such control becomes a "savings
institution holding company" subject to registration, examination and
regulation by the OTS. Such change in control restrictions on the acquisition
of Holding Company stock are not limited to three years after the Conversion,
but will apply as long as such regulations are in effect.
Pursuant to applicable regulations, control of a savings institution or its
holding company is conclusively deemed to have been acquired by, among other
things, the acquisition of more than 25% of any class of voting stock of a
savings association or the ability to control the election of a majority of
the directors of such an institution. Alternatively, control is presumed to
have been acquired, subject to rebuttal, upon the acquisition of more than 10%
of any class of voting stock, or more than 25% of any class of stock, of a
savings association, where one or more enumerated "control factors" are also
present in the acquisition. The OTS may prohibit an acquisition of control of
the Holding Company 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 Association 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.
The foregoing restrictions do not apply to the acquisition of the Holding
Company's capital stock by one or more tax-qualified employee stock benefit
plans, provided that the plan or plans do not have beneficial ownership in the
aggregate of more than 25% of any class of equity security.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Holding Company consists of 4,000,000
shares of Common Stock, par value $0.01 per share, and 200,000 shares of
Preferred Stock, par value $0.01 per share. The Holding Company currently
expects to issue 1,729,323 shares of Common Stock in the Offering at the
maximum of the Offering Price Range and no shares of Preferred Stock in the
Offering. 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, all such shares of Common Stock will be
duly authorized, fully paid and nonassessable. Series of Preferred Stock may
be issued by the Board of Directors, from time to time, on terms set by the
board without further authorization from the stockholders.
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED
BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
COMMON STOCK
General. The holders of shares of Common Stock are entitled to share pro
rata in distributions to stockholders upon liquidation, dissolution,
distribution of assets, or winding up of the Holding Company, subject to the
prior rights of any holders of Preferred Stock. No holders of shares of Common
Stock have any preemptive
121
<PAGE>
right to subscribe for or purchase any additional issue of capital stock or
securities convertible into capital stock of the Holding Company.
Dividend Rights. Subject to the preferential dividend rights of any
outstanding Preferred Stock, the holders of Common Stock are entitled to such
dividends, ratably in proportion to the number of shares of Common Stock held
by them respectively, as the Board of Directors, in its discretion, may
declare out of funds legally available for the payment of such dividends.
Funds for the payment of dividends and expenses of the Holding Company will be
obtained primarily from dividends received from the Association.
Voting Rights. Except as may otherwise be required by law or the certificate
of incorporation of the Holding Company, each holder of Common Stock is
entitled to one vote for each share held with respect to all matters voted
upon by the stockholders.
Stock Repurchases. For information regarding restrictions on the Holding
Company's ability to repurchase its stock, see "The Conversion and
Reorganization--Certain Restrictions on Purchase or Transfer of Shares after
the Conversion and Reorganization."
PREFERRED STOCK
Under the Holding Company's certificate of incorporation, the Board of
Directors of the Holding Company may, from time to time, authorize the
issuance of up to 200,000 shares of Preferred Stock, in one or more series,
with such provisions as to voting rights, dividend rates and preferences,
redemption, sinking funds, and convertibility, and such preferences,
privileges and powers, and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions of such series of
Preferred Stock, as shall be stated in the resolution of the Board of
Directors providing for the issuance of the Preferred Stock. No Preferred
Stock is currently outstanding nor will any be issued in the Conversion.
REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC pursuant to
Section 12(g) of the Exchange Act prior to completion of the Conversion and
Reorganization and will not deregister its Common Stock for a period of at
least three years following the completion of the Conversion and
Reorganization. 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is the Illinois Stock
Transfer Company, Chicago, Illinois.
LEGAL OPINIONS
The legality of the Common Stock will be passed upon for the Holding Company
by Schiff Hardin & Waite, Chicago, Illinois. Breyer & Aguggia, Washington,
D.C., has acted as counsel to Trident.
EXPERTS
The Consolidated Financial Statements of the Association as of March 31,
1997 and 1996 and for each of the years in the three-year period ended March
31, 1997, have been included in this Prospectus and the
122
<PAGE>
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. KPMG Peat
Marwick LLP did not audit the financial statements of Equality Mortgage
Corporation (a consolidated subsidiary), which statements reflect total assets
constituting 3% and 7% in 1997 and 1996, respectively, and total interest
income and other income constituting 17%, 19%, and 17% in 1997, 1996, and 1995,
respectively, of the related consolidated totals. Those statements were audited
by other auditors whose report has been furnished to KPMG Peat Marwick LLP, and
whose opinion, insofar as it relates to the amounts included for Equality
Mortgage Corporation, is based solely on the report of the other auditors.
RP Financial has consented to the inclusion herein of the summary of its
appraisal report as to the estimated pro forma market value of the Conversion
Stock and Exchange Shares and to the use of its name and all statements with
respect to it appearing herein.
123
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Reports............................................. F-2
Consolidated Balance Sheets as of March 31, 1997 and 1996................. F-4
Consolidated Statements of Income for the years ended March 31, 1997, 1996
and 1995................................................................. 32
Consolidated Statements of Stockholders' Equity for the years ended March
31, 1997, 1996 and 1995.................................................. F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1997,
1996 and 1995............................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
All schedules are omitted as the required information is either not
applicable or the required information is included in the Consolidated
Financial Statements or related Notes.
The Mutual Holding Company has limited assets other than its Association
Shares (which will be canceled in connection with the Conversion and
Reorganization) and has engaged in only minimal activities to date;
accordingly, the financial statements of the Mutual Holding Company have been
omitted because of their immateriality.
The Holding Company was incorporated on May 14, 1997, has been initially
capitalized with $1,000 and has engaged in only minimal activities to date;
accordingly, the financial statements of the Holding Company have been omitted
because of their immateriality.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Equality Savings and Loan Association, F.A.
St. Louis, Missouri:
We have audited the accompanying consolidated balance sheets of Equality
Savings and Loan Association, F.A. and subsidiaries (Equality) as of March 31,
1997 and 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended March 31, 1997. These consolidated financial statements are the
responsibility of Equality's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the financial statements of Equality Mortgage Corporation (a
consolidated subsidiary), which statements reflect total assets constituting
3% and 7% in 1997 and 1996, respectively, and total interest income and other
income constituting 17%, 19%, and 17% in 1997, 1996, and 1995, respectively,
of the related consolidated totals. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Equality Mortgage Corporation, is based
solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits, and the report of the
other auditors, provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Equality Savings and Loan
Association, F.A. and subsidiaries as of March 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended March 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
May 9, 1997
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Equality Mortgage Corporation
St. Louis, Missouri
We have audited the balance sheet of Equality Mortgage Corporation as of
March 31, 1997 and 1996 and the related statements of income, retained
earnings and cash flows for the years ended March 31, 1997, 1996 and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Equality Mortgage
Corporation as of March 31, 1997 and 1996, and the results of its operations
and its cash flows for the years ended March 31, 1997, 1996 and 1995 in
conformity with generally accepted accounting principles.
Rubin, Brown, Gornstein & Co. LLP
April 10, 1997
F-3
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Cash, primarily interest-bearing demand accounts.... $ 1,037,199 5,550,292
Interest-bearing deposits........................... 3,819,744 9,570,490
Investment securities:
Available for sale, at market value............... 70,122,807 38,898,346
Held to maturity, at cost......................... 4,848,587 5,845,193
Mortgage-backed securities available for sale, at
market value....................................... 14,954,025 28,096,499
Loans receivable, net............................... 95,927,983 96,998,052
Investment in real estate........................... 869,898 1,898,427
Stock in Federal Home Loan Bank..................... 3,350,000 3,150,000
Mortgage servicing rights........................... 513,275 261,067
Office properties and equipment, net................ 2,933,591 3,134,839
Accrued interest receivable and other assets........ 2,386,533 2,364,485
------------ -----------
$200,763,642 195,767,690
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits.................................... $122,982,954 124,515,370
Accrued interest payable on savings deposits........ 134,599 102,142
Borrowed money...................................... 64,248,804 57,305,406
Advance payments by borrowers for taxes and insur-
ance............................................... 86,776 113,684
Income taxes payable................................ 99,863 --
Deferred income taxes............................... 196,427 400,346
Accrued expenses and other liabilities.............. 379,958 541,330
------------ -----------
Total liabilities............................... 188,129,381 182,978,278
------------ -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value per share; 1,000,000
shares authorized; none issued and outstanding... -- --
Common stock, $1 par value per share; 4,000,000
shares authorized; 836,400 shares issued and out-
standing......................................... 836,400 836,400
Additional paid-in capital........................ 2,768,548 2,759,797
Retained earnings................................. 9,674,676 9,402,887
Unrealized loss on investment and mortgage-backed
securities available for sale, net of tax........ (509,523) (47,232)
Unearned ESOP shares.............................. (135,840) (162,440)
------------ -----------
Total stockholders' equity...................... 12,634,261 12,789,412
------------ -----------
$200,763,642 195,767,690
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
UNREALIZED LOSS
ON INVESTMENT
AND MORTGAGE-
COMMON STOCK ADDITIONAL BACKED SECURITIES UNEARNED TOTAL
---------------- PAID-IN RETAINED AVAILABLE UNAMORTIZED ESOP STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS FOR SALE, NET STOCK AWARDS SHARES EQUITY
------- -------- ---------- --------- ----------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31,
1994................... 836,400 $836,400 2,744,600 8,870,785 (105,366) (76,000) (220,000) 12,050,419
Net income.............. -- -- -- 321,675 -- -- -- 321,675
Additional stock
offering expenses...... -- -- (4,100) -- -- -- -- (4,100)
Amortization of stock
awards................. -- -- -- -- -- 47,500 -- 47,500
Amortization of ESOP
awards................. -- -- 8,977 -- -- -- 15,960 24,937
Dividend declared on
non-mutual holding
company owned common
stock at $.60 per
share.................. -- -- -- (219,809) -- -- -- (219,809)
Change in unrealized
loss on investment
securities available
for sale, net.......... -- -- -- -- (347,241) -- -- (347,241)
------- -------- --------- --------- -------- ------- -------- ----------
Balance, March 31,
1995................... 836,400 836,400 2,749,477 8,972,651 (452,607) (28,500) (204,040) 11,873,381
Net income.............. -- -- -- 653,456 -- -- -- 653,456
Amortization of stock
awards................. -- -- -- -- -- 28,500 -- 28,500
Amortization of ESOP
awards................. -- -- 10,320 -- -- -- 41,600 51,920
Dividend declared on
non-mutual holding
company owned common
stock at $.60 per
share.................. -- -- -- (223,220) -- -- -- (223,220)
Change in unrealized
loss on investment and
mortgage-backed
securities available
for sale, net.......... -- -- -- -- 405,375 -- -- 405,375
------- -------- --------- --------- -------- ------- -------- ----------
Balance, March 31,
1996................... 836,400 836,400 2,759,797 9,402,887 (47,232) -- (162,440) 12,789,412
Net income.............. -- -- -- 504,772 -- -- -- 504,772
Amortization of ESOP
awards................. -- -- 8,751 -- -- -- 26,600 35,351
Dividend declared on
non-mutual holding
company owned common
stock at $.62 per
share.................. -- -- -- (232,983) -- -- -- (232,983)
Change in unrealized
loss on investment and
mortgage-backed
securities available
for sale, net.......... -- -- -- -- (462,291) -- -- (462,291)
------- -------- --------- --------- -------- ------- -------- ----------
Balance, March 31,
1997................... 836,400 $836,400 2,768,548 9,674,676 (509,523) -- (135,840) 12,634,261
======= ======== ========= ========= ======== ======= ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 504,772 653,456 321,675
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization:
Office properties and equipment...... 280,383 313,436 338,482
Real estate investments.............. 17,140 48,163 87,820
Premiums and discounts, net.......... 216,824 329,123 281,475
Mortgage servicing rights............ 185,281 49,667 1,807
Stock awards......................... -- 28,500 47,500
Increase in accrued interest receiv-
able................................. (221,226) (153,915) (333,011)
Provision for losses on loans......... 50,000 31,225 9,000
Decrease in valuation reserve on loans
held for sale........................ (80,291) (14,906) (50,000)
Loss (gain) on the sale of real estate
acquired through foreclosure......... (7,696) 1,179 19,388
Gain on sale of investment in real es-
tate................................. (105,875) (116,482) --
Loss (gain) on the sale of investment
and mortgage-backed securities avail-
able for sale, net................... (7,284) (8,280) 34,202
Increase in accrued interest payable
on savings deposits.................. 32,457 48,334 1,739
Stock dividend from FHLB.............. -- (50,000) --
Change in income taxes payable........ 228,326 103,943 109,588
Equity in loss (earnings) of joint
ventures............................. 2,433 29,634 (188,022)
Other, net............................ 26,476 (288,948) (33,511)
Increase (decrease) in loans held for
sale................................. (9,109,380) (10,535,516) 2,184,309
----------- ------------ -----------
Net cash provided by (used in) operat-
ing activities........................ (7,987,660) (9,531,387) 2,832,441
----------- ------------ -----------
Cash flows from investing activities:
Net change in loans receivable........ 10,080,084 (3,308,774) (23,746,843)
Decrease in interest-bearing
deposits............................. 5,750,746 4,508,510 3,687,732
Principal repayments on investment
securities available for sale........ 476,709 112,466 --
Principal repayments on mortgage-
backed securities available for
sale................................. 4,584,586 4,021,889 2,650,584
Proceeds from maturities of investment
securities available for sale........ 11,935,000 14,600,000 5,000,000
Proceeds from the sale of investment
securities available for sale........ 28,377,443 31,147,503 16,349,851
Proceeds from the sale of mortgage-
backed securities available for
sale................................. 22,254,028 6,897,588 --
Proceeds from maturities of investment
securities held to maturity.......... 1,000,000 1,500,000 --
Purchase of investment securities
available for sale................... (72,469,418) (50,052,295) (20,661,218)
Purchase of mortgage-backed securities
available for sale................... (14,211,212) (24,234,815) (1,171,550)
Purchase of investment securities held
to maturity.......................... -- (244,062) (1,443,477)
Cash distribution from joint venture.. -- -- 214,786
Proceeds from the sale of real estate
acquired through foreclosure......... 178,249 18,427 57,745
Proceeds from the sale of investment
in real estate....................... 1,071,372 298,140 --
Decrease in joint venture borrowings.. 12,513 11,527 367,006
Purchase of stock in FHLB............. (200,000) (1,700,000) (158,500)
Increase in cost of mortgage servicing
rights............................... (437,489) (296,583) --
Purchase of office properties and
equipment, net....................... (79,135) (55,325) (225,558)
----------- ------------ -----------
Net cash used in investing activities.. (1,676,524) (16,775,804) (19,079,442)
----------- ------------ -----------
Cash flows from financing activities:
Net increase (decrease) in savings de-
posits............................... (1,532,416) 2,955,006 (11,283,618)
Proceeds from FHLB advances........... 101,000,000 143,000,000 104,000,000
Repayment of FHLB advances............ (94,000,000) (112,000,000) (79,000,000)
Net change in FHLB line of credit..... -- (3,000,000) 3,000,000
Proceeds from other borrowed money.... -- 91,316 166,245
Repayment of other borrowed money..... (56,602) (41,600) (15,960)
Cash dividends paid................... (232,983) (223,220) (219,809)
Increase (decrease) in advance pay-
ments by borrowers for taxes and in-
surance ............................. (26,908) 49,747 (20,995)
----------- ------------ -----------
Net cash provided by financing activi-
ties.................................. 5,151,091 30,831,249 16,625,863
----------- ------------ -----------
Net increase (decrease) in cash and
cash equivalents...................... (4,513,093) 4,524,058 378,862
Cash and cash equivalents, beginning of
year.................................. 5,550,292 1,026,234 647,372
----------- ------------ -----------
Cash and cash equivalents, end of
year.................................. $ 1,037,199 5,550,292 1,026,234
=========== ============ ===========
Supplemental disclosure of cash flow
information:
Interest paid......................... $ 9,079,632 8,492,392 6,130,101
Income taxes paid..................... 989 225,014 26,285
Noncash transfers of loans to real
estate acquired through foreclosure.. 253,689 72,516 52,382
Transfer of investment securities held
to maturity to investment securities
availble for sale.................... -- 1,966,984 --
Transfer of mortgage-backed securities
held to maturity to mortgage-backed
securities available for sale........ -- 14,265,565 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
On October 22, 1993, Equality Savings and Loan Association, F.A. and
Subsidiaries (Equality) reorganized from a Missouri-chartered mutual savings
and loan association into a mutual holding company. The mutual holding company
is a federal corporation, chartered and regulated by the Office of Thrift
Supervision (OTS), and is named First Missouri Financial, M.H.C. (the MHC). As
part of the reorganization, Equality transferred substantially all of its
assets and all of its liabilities to a new Missouri-chartered savings and loan
association and retained its same name. The reorganization was accounted for
as a change in corporate form with the historic basis of Equality's assets,
liabilities, and retained earnings unchanged as a result.
Concurrent with the reorganization, Equality offered a minority interest in
its common stock to its depositors and to its Employee Stock Ownership Plan
(ESOP). A total of 380,000 shares of newly issued common stock was sold at
$10.00 per share. An additional 11,400 authorized shares of common stock were
sold to Equality's Management Recognition Plan (MRP) at $10.00 per share. The
cost of issuing the 391,400 shares totaled $333,000 and was deducted from the
sale proceeds.
Equality will be a majority-owned subsidiary of the MHC at all times as long
as the MHC remains in existence. The existing rights of Equality's depositors
upon liquidation were transferred to the MHC and records will be maintained to
ensure such rights receive statutory priority in the event of a future mutual-
to-stock conversion, or in the more unlikely event of the MHC's liquidation.
On May 16, 1997, First Missouri Financial, M.H.C. and Equality Savings and
Loan Association, F.A. adopted a Plan of Conversion and Reorganization
pursuant to which First Missouri Financial, M.H.C. will convert from the
mutual to stock form of organization. Shares of common stock of a new holding
company, Equality Bancorp, Inc., will be offered in a subscription offering in
descending order of priority to eligible account holders; employee stock
benefit plans; supplemental eligible account holders; other members;
directors, officers, and employees; and public stockholders. Any shares
remaining unsold in the subscription offering will be sold through a community
offering.
Business
Equality provides a full range of banking services to individual and
corporate customers from its home office and two branch locations in the St.
Louis area. In addition, Equality provides mortgage lending services from five
locations. Equality is subject to competition from other financial
institutions, is subject to the regulations of certain regulatory agencies,
and undergoes periodic examinations by those regulatory authorities.
Basis of Financial Statement Presentation
The consolidated financial statements of Equality have been prepared in
conformity with generally accepted accounting principles and conform to
predominant practices within the savings and loan industry. The preparation of
the consolidated financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions,
including the determination of the allowance for loan losses and the valuation
of real estate acquired through foreclosure or in satisfaction of loans, that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Principles of Consolidation
The consolidated financial statements include the accounts of Equality
Savings and Loan Association, F.A. and its wholly owned subsidiaries, Equality
Commodity Corporation (ECC) and Equality Mortgage Corporation (EMC). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Restricted Cash
Included in cash is $56,257 and $116,721 at March 31, 1997 and 1996,
respectively, which consists of assistance funds held by EMC on behalf of
mortgagors participating in a subsidy program. The subsidy is passed through
to the investors monthly.
Investment and Mortgage-Backed Securities
At the time of purchase, investment and mortgage-backed securities are
classified in one of two categories: available for sale or held to maturity.
Held to maturity securities are those securities which Equality has the
ability and intent to hold until maturity. All equity securities, and debt
securities not classified as held to maturity, are classified as available for
sale.
Available for sale securities are recorded at fair value. Held to maturity
securities are recorded at cost, adjusted for the amortization of premiums or
discounts. Unrealized gains and losses, net of the related tax effect, on
available for sale securities are excluded from earnings and reported as a
separate component of stockholders' equity until realized. Gains and losses on
the sale of available for sale securities are determined using the specific
identification method.
A decline in the market value of any available for sale or held to maturity
security below cost that is deemed to be other than temporary is charged to
earnings and results in the establishment of a new cost basis for the
security.
Loans Receivable and Related Fees
Loans receivable, other than loans held for sale, are carried at cost
because Equality has both the intent and the ability to hold them for the
foreseeable future. Mortgage loans held for sale are valued at the lower of
cost or market, computed on an aggregate loan basis. Interest is credited to
income as earned; however, interest receivable is accrued only if deemed
collectible. Loans are placed on nonaccrual status when management believes
that the borrower's financial condition, after consideration of economic
conditions and collection efforts, is such that collection of interest is
doubtful. A loan remains on nonaccrual status until the loan is current as to
payment of both principal and interest and/or the borrower demonstrates the
ability to pay and remain current.
EMC derives income primarily from the origination and subsequent sale of
mortgage loans and from the servicing of mortgage loans. EMC recognizes the
origination fee charged on nonconventional mortgage loans as income when the
loan is recorded on its books. For conventional loans, management has elected
to recognize the origination fee as income when the loan is sold to investors.
The remaining income for both types of loans is recognized upon receipt of
proceeds from the sale of the mortgage from the investor. Mortgages are sold
at such times as management deems advisable. EMC's activities are performed
primarily in the St. Louis metropolitan area.
Beginning in 1996, in accordance with Statement of Financial Accounting
Standards No. 122, Accounting for Mortgage Servicing Rights, an amendment of
FASB Statement No. 65 (SFAS 122), EMC capitalized the cost of originated
mortgage servicing rights retained as assets. Previously, only the cost of
purchased mortgage servicing rights could be capitalized as assets. The cost
of the mortgage servicing rights is being amortized over
F-8
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
periods ranging up to eight years using the straight-line method. SFAS 122
provides for a valuation allowance when the carrying value of the mortgage
servicing rights exceeds the fair value.
The allowance for loan losses is increased by provisions charged to expense
and is reduced by loan charge-offs, net of recoveries. Management utilizes a
systematic, documented approach in determining the appropriate level of the
allowance for loan losses. Management's approach, which provides for general
and specific valuation allowances, considers numerous factors including
general economic conditions, loan portfolio composition, prior loss
experience, independent appraisals, and such other factors which, in
management's judgment, deserve current recognition in estimating loan losses.
Management believes the allowance for loan losses is adequate to absorb
possible losses in the loan portfolio. While management uses available
information to recognize loan losses, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowance for loan losses. Such agencies may require
Equality to increase the allowance for loan losses based on their judgment
about information available to them at the time of their examination.
Premiums and Discounts
Premiums and discounts on investment securities, mortgage-backed securities,
and purchased loans and unearned discounts on property improvement loans are
amortized using the interest method over the period to maturity, adjusted for
anticipated prepayments.
Funds Held for Investors
EMC holds funds belonging to investors in separate bank accounts which are
offset by liabilities for escrow and other fiduciary funds. These funds and
the related liabilities are not included in the consolidated balance sheets.
These amounts totaled $2,604,137 and $2,253,139 at March 31, 1997 and 1996,
respectively.
At March 31, 1997 and 1996, escrow funds related to loans serviced by EMC
for Equality totaled $705,097 and $673,541, respectively, and are included in
savings deposits in the consolidated balance sheets.
Investment in Real Estate
Investment in real estate includes real estate held for investment,
investment in real estate joint ventures, and real estate acquired through
foreclosure.
Real estate held for investment is recorded at the lower of cost, net of
accumulated depreciation, or net realizable value. Depreciation is charged to
expense using the straight-line method over an estimated useful life of 30
years.
Equality accounts for its investment in real estate joint ventures using the
equity method.
Real estate acquired through foreclosure is initially recorded at fair
value. If the fair value of the real estate declines subsequent to
foreclosure, the difference is recorded as a valuation allowance through a
charge to expense. Subsequent increases in fair value are recorded through a
reversal of the valuation allowance. Expenses incurred in maintaining the
properties are charged to expense.
Profit on sales of real estate is recognized when title has passed, minimum
down payment requirements have been met, the terms of any notes received by
Equality are such to satisfy initial and continuing payment requirements, and
Equality is relieved of any requirement for continued involvement in the real
estate.
F-9
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock in Federal Home Loan Bank
Equality, as a member of the Federal Home Loan Bank System administered by
the Federal Housing Finance Board, is required to maintain an investment in
the capital stock of the Federal Home Loan Bank of Des Moines (FHLB) in an
amount equal to the greater of 1% of Equality's total mortgage-related assets
at the beginning of each year, 0.3% of Equality's total assets at the
beginning of each year, or 5% of advances from the FHLB to Equality. The stock
is recorded at cost which represents redemption value.
Office Properties and Equipment
Land is carried at cost. Office buildings and improvements, furniture and
equipment, and automobiles are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization are charged to expense using
the straight-line method over the estimated useful lives of the related
assets. Useful lives are 10 to 50 years for office buildings and improvements,
7 to 10 years for furniture and equipment, and 5 years for automobiles.
Income Taxes
Equality files a consolidated federal income tax return. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Reclassifications
Certain reclassifications of 1996 and 1995 information have been made to
conform with the 1997 presentation. Such reclassifications have no effect on
previously reported net income.
Earnings Per Share
Earnings per share are based upon the weighted average number of common
shares and common stock equivalents, if dilutive, outstanding during the
period. The weighted average number of common stock equivalents is calculated
using the treasury stock method. The average number of common shares and
common equivalent shares outstanding for 1997, 1996, and 1995 was 821,190,
817,383, and 815,167, respectively.
Equality only considers ESOP shares that have been committed to be released
outstanding for purposes of computing earnings per share. At March 31, 1997,
1996, and 1995, ESOP shares totaling 14,213, 10,356, and 6,196, respectively,
are considered outstanding for earnings per share calculations.
(2) CAPITAL REQUIREMENTS
Equality 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
Equality's consolidated financial statements. Under capital adequacy
guidelines, Equality must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. Equality's capital
amounts and classifications are also subject to quantitative judgments by the
regulators about components, risk-weightings and other factors. At March 31,
1997, Equality meets all capital adequacy requirements.
F-10
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Equality is also subject to the regulatory framework for prompt corrective
action. The most recent notification from the regulatory agencies categorized
Equality as well capitalized. To be categorized as well capitalized, Equality
must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the following table. There are no conditions or events
since the dates of the aforementioned notifications that management believes
have changed Equality's category.
Equality's actual and required capital amounts and ratios at March 31, 1997
are as follows:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
MINIMUM FOR FOR PROMPT
CAPITAL ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
------------------- ----------------- ------------------
RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT
----- ------------ ----- ---------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity,
and ratio to total
assets................. 6.29% $ 12,634,261
Unrealized loss on
investment and
mortgage-backed
securities available
for sale............... 509,523
Investment in and
advances to
nonincludable
subsidiaries........... (507,000)
------------
Tangible capital, and
ratio to adjusted total
assets................. 6.29% $ 12,636,784 1.50% $3,011,492
===== ============ ==== ==========
Tier I (core) capital,
and ratio to adjusted
total assets........... 6.29% $ 12,636,784 3.00% $6,022,985 5.00% $10,038,308
===== ============ ==== ========== ===== ===========
Tier I capital, and
ratio to risk-weighted
assets................. 11.49% 12,636,784 6.00% $ 6,599,000
===== ===========
Allowance for loan
losses................. 283,000
Total risk-based
capital, and ratio to
risk-weighted assets... 11.75% $ 12,919,784 8.00% $8,799,200 10.00% $10,999,000
===== ============ ==== ========== ===== ===========
Total assets.......... $200,763,642
============
Adjusted total
assets............... $200,766,165
============
Risk-weighted assets.. $109,990,000
============
</TABLE>
(3) SUBSIDIARIES' OPERATIONS
ECC operates under the name of Equality Insurance Agency and Flood
Information Specialists and is a wholly owned subsidiary of Equality. ECC's
services and activities include sales of multiple lines of insurance to the
general public, the issuance of flood plain certificates, and investments in
real estate joint ventures.
EMC operates as a mortgage banker and is a wholly owned subsidiary of
Equality. At March 31, 1997, EMC serviced approximately $323.0 million in
loans of which $90.2 million are for Equality. In addition, EMC was carrying a
blanket bond in the amount of $4,560,000 and an errors and omissions policy in
the amount of $1,000,000.
F-11
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) INVESTMENT SECURITIES
The amortized cost and market value of investment securities classified as
available for sale at March 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and agency
obligations:
1997....................... $70,705,833 255,529 838,555 70,122,807
1996....................... $38,942,766 260,901 305,321 38,898,346
</TABLE>
The amortized cost and market value of investment securities classified as
available for sale at March 31, 1997, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
AMORTIZED COST MARKET VALUE
-------------- ------------
<S> <C> <C>
Due in one year or less.......................... $ 294,978 297,094
Due after one year through five years............ 13,844,221 13,804,129
Due after five years through ten years........... 50,924,967 50,427,327
Due after ten years.............................. 5,641,667 5,594,257
----------- ----------
$70,705,833 70,122,807
=========== ==========
</TABLE>
Proceeds from sales of investment securities during 1997, 1996, and 1995
were approximately $28.4 million, $31.1 million, and $16.3 million,
respectively. During 1997, 1996, and 1995, gross gains of $77,173 $125,167,
and $23,594, respectively, and gross losses of $41,296, $66,252, and $57,796,
respectively, were recognized on these sales.
The amortized cost and estimated market value of investment securities
classified as held to maturity at March 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. government and agency ob-
ligations:
1997......................... $4,848,587 476 124,063 4,725,000
1996......................... $5,845,193 120 256,313 5,589,000
</TABLE>
The amortized cost and estimated market value of investment securities
classified as held to maturity at March 31, 1997, by contractual maturity, are
as follows:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
---------- ---------
<S> <C> <C>
Due in one year or less................................. $2,248,587 2,236,000
Due after one year through five years................... 2,000,000 1,936,250
Due after five years through ten years.................. 600,000 552,750
---------- ---------
$4,848,587 4,725,000
========== =========
</TABLE>
F-12
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) MORTGAGE-BACKED SECURITIES
The amortized cost and market value of mortgage-backed securities classified
as available for sale at March 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1997
FNMA.......................... $ 7,193,758 17,364 186,609 7,024,513
FHLMC......................... 4,562,858 28,305 35,790 4,555,373
GNMA.......................... 3,449,668 19,702 95,231 3,374,139
----------- ------- ------- ----------
$15,206,284 65,371 317,630 14,954,025
=========== ======= ======= ==========
Weighted average interest rate
at March 31.................. 6.95%
====
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1996
FNMA.......................... $16,209,663 19,818 103,023 16,126,458
FHLMC......................... 10,043,002 77,896 31,483 10,089,415
GNMA.......................... 1,876,756 7,579 3,709 1,880,626
----------- ------- ------- ----------
$28,129,421 105,293 138,215 28,096,499
=========== ======= ======= ==========
Weighted average interest rate
at March 31.................. 6.96%
====
</TABLE>
The amortized cost and market value of mortgage-backed securities classified
as available for sale at March 31, 1997, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers have the right to prepay
obligations with or without prepayment penalties. The following table does not
take into consideration the effects of scheduled repayments or the effects of
possible prepayments.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
----------- ----------
<S> <C> <C>
Due in one year or less............................... $ 747,622 755,068
Due after one year through five years................. 4,076,527 4,084,204
Due after five years through ten years................ 2,334,004 2,307,471
Due after ten years................................... 8,048,131 7,807,282
----------- ----------
$15,206,284 14,954,025
=========== ==========
</TABLE>
Proceeds from the sale of mortgage-backed securities during 1997 and 1996
were approximately $22.3 million and $6.9 million, respectively. During 1997
and 1996, gross gains of $97,917 and $3,186, respectively, and gross losses of
$126,510 and $70,381, respectively, were recognized on these sales. There were
no sales of mortgage-backed securities during 1995.
F-13
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Loans secured by real estate:
Residential:
One- to four-family:
Conventional.................................. $69,810,802 64,873,244
FHA and VA.................................... 14,233,144 13,656,084
Multifamily..................................... 1,637,293 782,952
Commercial........................................ 2,661,620 2,621,296
Loans held for sale............................... 4,397,614 13,506,994
----------- ----------
Total loans secured by real estate.................. 92,740,473 95,440,570
----------- ----------
Commercial business................................. 1,279,641 --
Loans secured by savings deposits................... 366,082 452,764
Property improvement................................ 1,595,572 1,299,752
Automobiles......................................... 122,403 97,410
Other............................................... 162,297 96,350
----------- ----------
Total loans......................................... 96,266,468 97,386,846
Less:
Deferred loan fees, net........................... 46,159 58,691
Unearned discounts................................ 4,523 12,009
Allowance for loan losses......................... 283,000 233,000
Valuation reserve on loans held for sale.......... 4,803 85,094
----------- ----------
$95,927,983 96,998,052
=========== ==========
Weighted average interest rate at March 31........ 7.65% 7.63%
</TABLE>
Adjustable rate mortgages at March 31, 1997 and 1996 totaled approximately
$55,000,000 and $45,000,000, respectively.
At March 31, 1997 and 1996, loans secured by real estate contractually
delinquent 90 days or more totaled $642,856 and $669,395, respectively. Of
these amounts, $571,386 and $326,102, respectively, were insured by the
Federal Housing Administration or guaranteed by the Veterans Administration.
No loans were deemed by management to be impaired at March 31, 1997 or 1996.
EMC had commitments to sell loans of approximately $3,920,000 and $1,628,000
at March 31, 1997 and 1996, respectively.
Loans serviced by EMC at March 31, 1997, 1996, and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
For Equality............................ $ 90,600,283 83,926,591 80,465,279
For others.............................. 232,430,243 210,037,963 195,745,355
------------ ----------- -----------
$323,030,526 293,964,554 276,210,634
============ =========== ===========
</TABLE>
F-14
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Balance, beginning of year........................ $233,000 216,775 242,000
Provision charged to expense...................... 50,000 31,225 9,000
Charge-offs....................................... -- (15,000) (34,225)
-------- ------- -------
Balance, end of year.............................. $283,000 233,000 216,775
======== ======= =======
</TABLE>
Following is a summary of activity for 1997 of loans made by Equality to
executive officers and directors or to entities in which such individuals had
beneficial interest. Such loans were made in the normal course of business on
substantially the same terms, including interest and collateral requirements,
as those prevailing at the same time for comparable transactions with other
persons and did not involve more than the normal risk of collectibility or
present unfavorable features.
<TABLE>
<S> <C>
Balance at March 31, 1996........................................ $1,164,415
New loans........................................................ 50,000
Payments received................................................ (62,169)
----------
Balance at March 31, 1997........................................ $1,152,246
==========
</TABLE>
(7) INVESTMENT IN REAL ESTATE
Investment in real estate is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Real estate held for investment........................ $ 291,045 1,273,682
Investment in real estate joint venture:
Equity in operations................................. (150,405) (147,972)
Loan to real estate joint venture.................... 662,912 675,425
Real estate acquired through foreclosure............... 66,346 97,292
--------- ---------
$ 869,898 1,898,427
========= =========
</TABLE>
The investment in real estate joint venture consists of the WC Joint
Venture, a 50%-owned venture formed in 1986 for the purpose of acquiring,
developing, and selling real estate.
(8) MORTGAGE SERVICING RIGHTS
The cost of mortgage servicing rights capitalized and the resulting increase
in gain on sale of mortgage loans amounted to $483,093 in 1997 and $317,001 in
1996. Equality established an impairment reserve of $66,022 in 1997 and
$20,418 in 1996. The fair value of the capitalized mortgage servicing rights
was approximately $979,000 and $418,000 at March 31, 1997 and 1996,
respectively. The fair value was estimated based on quoted market prices for
mortgage servicing rights of a similar nature. Note rate and loan type are the
predominant characteristics used to evaluate the carrying and fair value of
the capitalized mortgage servicing rights.
F-15
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Land.................................................... $1,146,688 1,146,688
Office buildings and improvements....................... 2,483,865 2,483,865
Furniture and equipment................................. 2,212,369 2,183,916
Automobiles............................................. 81,758 61,927
---------- ---------
5,924,680 5,876,396
Less accumulated depreciation and amortization.......... 2,991,089 2,741,557
---------- ---------
$2,933,591 3,134,839
========== =========
</TABLE>
Depreciation and amortization expense for 1997, 1996, and 1995 was $280,383,
$313,436 and, $338,482, respectively.
Equality is obligated under certain noncancellable leases on properties. The
future minimum lease payments under these leases total $68,676 during 1998.
(10) ACCRUED INTEREST RECEIVABLE AND OTHER ASSETS
Accrued interest receivable and other assets are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Accrued interest:
Loans receivable...................................... $ 487,720 478,444
Interest-bearing deposits............................. 181,528 231,268
Investment securities................................. 989,575 630,469
Mortgage-backed securities............................ 89,961 187,377
---------- ---------
Total accrued interest.............................. 1,748,784 1,527,558
Accounts receivable..................................... 346,380 372,056
Prepaid expenses........................................ 255,005 256,892
Income tax receivable................................... -- 128,463
Other................................................... 36,364 79,516
---------- ---------
$2,386,533 2,364,485
========== =========
</TABLE>
F-16
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) SAVINGS DEPOSITS
Savings deposits are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
WEIGHTED WEIGHTED
AVERAGE PERCENT AVERAGE PERCENT
INTEREST OF TOTAL INTEREST OF TOTAL
AMOUNT RATE SAVINGS AMOUNT RATE SAVINGS
------------ -------- -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits:
NOW................... $ 12,163,249 1.32% 9.9% $ 10,813,992 1.47% 8.7%
Passbook.............. 21,576,722 2.51 17.5 21,831,026 2.51 17.5
Money market.......... 6,135,128 3.22 5.0 6,551,797 2.93 5.3
------------ ---- ----- ------------- ---- -----
Total demand
deposits........... 39,875,099 2.25 32.4 39,196,815 2.28 31.5
------------ ---- ----- ------------- ---- -----
Certificates of deposit:
Negotiated rate
($100,000 or more)... 2,717,985 6.20 2.2 3,427,991 5.96 2.7
Other................. 80,389,870 5.75 65.4 81,890,564 5.78 65.8
------------ ---- ----- ------------- ---- -----
Total certificates
of deposit......... 83,107,855 5.76 67.6 85,318,555 5.79 68.5
------------ ---- ----- ------------- ---- -----
$122,982,954 4.63% 100.0% $ 124,515,370 4.69% 100.0%
============ ==== ===== ============= ==== =====
</TABLE>
Certificate of deposit accounts by interest rate ranges are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Less than 3.00%...................... $ 7,791 2.50% $ 19,075 2.50%
3.00% to 3.99%....................... 250,986 3.85 1,343,986 3.89
4.00% to 4.99%....................... 3,925,295 4.26 6,553,454 4.24
5.00% to 5.99%....................... 49,200,044 5.39 43,119,557 5.44
6.00% to 6.99%....................... 17,083,022 6.20 19,199,628 6.20
7.00% to 7.99%....................... 12,154,898 7.00 14,629,987 7.03
8.00% and greater.................... 485,819 9.75 452,868 9.76
----------- ---- ----------- ----
$83,107,855 5.76% $85,318,555 5.79%
=========== ==== =========== ====
</TABLE>
Certificate of deposit accounts at March 31, 1997 and 1996 are scheduled to
mature as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Within one year.................... $36,334,368 43.7% $32,401,947 38.0%
Second year........................ 22,832,417 27.5 16,286,882 19.1
Third year......................... 16,693,320 20.1 18,726,853 21.9
Fourth year........................ 4,948,760 5.9 15,463,905 18.1
Thereafter......................... 2,298,990 2.8 2,438,968 2.9
----------- ----- ----------- -----
$83,107,855 100.0% $85,318,555 100.0%
=========== ===== =========== =====
</TABLE>
F-17
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest expense on savings deposits by type is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
NOW and money market demand................... $ 320,394 362,174 464,452
Passbook...................................... 545,808 562,264 695,313
Certificates of deposit....................... 4,815,982 4,804,390 4,163,403
---------- --------- ---------
$5,682,184 5,728,828 5,323,168
========== ========= =========
</TABLE>
(12) BORROWED MONEY
Borrowed money at March 31, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
INTEREST INTEREST
AMOUNT RATE AMOUNT RATE
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Note payable to bank............... $ 1,112,964 2.25% $ 1,142,966 2.25%
Advances from the FHLB:
Due in 1997...................... -- -- 46,000,000 5.47
Due in 1998...................... 7,000,000 5.69 10,000,000 5.76
Due in 2002...................... 56,000,000 5.30 -- --
ESOP debt.......................... 135,840 9.50 162,440 9.25
----------- ---- ----------- ----
$64,248,804 5.30% $57,305,406 5.47%
=========== ==== =========== ====
</TABLE>
The note payable to bank, which is tied to average collected funds of EMC on
deposit at such bank, is due April 28, 1997. Investment securities with an
amortized cost of $3,974,475 and a market value of $3,941,875 secure the note
payable to bank at March 31, 1997.
FHLB advances are secured under a blanket agreement which assigns all FHLB
stock, certain investment securities, and mortgage loans equal to 150% of the
outstanding advances balance. Investment securities with an amortized cost of
$17,645,473 and a market value of $17,432,201 are pledged to secure advances
from the FHLB at March 31, 1997.
The ESOP borrowed $266,000 to finance the acquisition of the stock to be
held in trust for future allocation to eligible participants. The debt of the
ESOP is guaranteed by Equality and is reflected as a liability in the
consolidated balance sheet. The loan is due on September 30, 2003. Principal
payments totaling $26,600, $41,600, and $15,960 and interest payments totaling
$13,553, $18,033, and $18,946 were made during 1997, 1996, and 1995,
respectively.
(13) INCOME TAXES
Prior to 1997, if certain conditions were met, savings and loan associations
and savings banks were allowed special bad debt deductions in determining
taxable income based on either specified experience formulas or on a
percentage of taxable income before such deduction. Bad debt deductions in
excess of actual losses were tax-preference items, and were subject to a
minimum tax. Equality used the percentage of taxable income method for 1996
and 1995 in determining the bad debt deduction for tax purposes.
The special bad debt deduction accorded thrift institutions is covered under
Section 593 of the Internal Revenue Code (IRC). On August 20, 1996, the Small
Business Job Protection Act of 1996 (the Act) was signed
F-18
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
into law. This Act included the repeal of certain portions of Section 593
effective for tax years beginning after December 31, 1995. As a result,
Equality is no longer allowed a percentage method bad debt deduction. The
repeal of the thrift reserve method generally requires thrift institutions to
recapture into income the portion of tax bad debt reserves accumulated since
1987 (base year reserve). The recapture will generally be taken into income
ratably over six tax years. However, if Equality meets a residential loan
requirement for tax years beginning in 1997 and 1998, recapture of the reserve
can be deferred until the tax year beginning in 1999. At March 31, 1997,
Equality had bad debts deducted for tax purposes in excess of the base year
reserve of approximately $241,000. Equality has recognized a deferred income
tax liability for this amount.
Certain events covered by IRC Section 593(e), which was not repealed, will
trigger a recapture of the base year reserve. The base year reserve of thrift
institutions would be recaptured if a thrift ceases to qualify as a "bank" for
federal income tax purposes. The base year reserves of thrift institutions
also remain subject to income tax penalty provisions which, in general,
require recapture upon certain stock redemptions of, and excess distributions
to, stockholders. At March 31, 1997, retained earnings included approximately
$2.9 million of base year reserves, for which no deferred federal income tax
liability has been recognized.
The composition of income tax expense for 1997, 1996, and 1995 is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal........................................... $187,974 273,713 171,945
State............................................. 23,752 19,111 10,526
-------- ------- -------
Total current................................... 211,726 292,824 182,471
Deferred............................................ 91,733 124,958 5,776
-------- ------- -------
Total income tax expense........................ $303,459 417,782 188,247
======== ======= =======
</TABLE>
Applicable income taxes for financial reporting purposes differ from the
amount computed by applying the statutory federal income tax rate of 34% for
the reasons noted in the table below:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Tax at statutory federal income tax rate........... $274,799 364,221 173,373
State income tax, net of federal tax benefit....... 15,676 12,613 6,947
Other, net......................................... 12,984 40,948 7,927
-------- ------- -------
$303,459 417,782 188,247
======== ======= =======
</TABLE>
F-19
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred tax assets and deferred tax liabilities at March
31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Deferred tax assets:
General loan loss allowance............................. $105,050 86,490
Deferred compensation................................... 9,409 20,656
Deferred loan fees...................................... 13,728 20,592
Excess servicing gains.................................. 20,026 25,440
Available for sale securities market valuation.......... 325,849 30,197
Other................................................... 9,117 44,855
-------- -------
Total deferred tax assets............................. $483,179 228,230
======== =======
Deferred tax liabilities:
Tax depreciation in excess of that recorded for book
purposes............................................... $246,172 281,255
FHLB stock dividends.................................... 154,162 154,162
Allowance for loan losses in excess of base-year
reserve................................................ 81,858 80,872
Mortgage servicing rights............................... 186,616 92,325
Other................................................... 10,798 19,962
-------- -------
Total deferred tax liabilities........................ 679,606 628,576
-------- -------
Net deferred tax liability................................ $196,427 400,346
======== =======
</TABLE>
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it
is more likely than not that Equality will realize the benefits of these
temporary differences at March 31, 1997 and, therefore, has not established a
valuation reserve.
(14)EMPLOYEE STOCK OWNERSHIP PLAN, STOCK OPTION AND INCENTIVE PLAN, MANAGEMENT
RECOGNITION PLAN, AND 401(K) PLAN
In connection with the conversion to the stock form of ownership, Equality's
Board of Directors established an employee stock ownership plan for the
exclusive benefit of participating employees. Employees age 21 or older who
have completed one year of service are eligible to participate. The ESOP is to
be funded by contributions made in cash or common stock.
Upon the issuance of the common stock, the ESOP acquired 26,600 shares (3.2%
of total shares issued) of $1 par value common stock at the subscription price
of $10.00 per share. Equality makes quarterly contributions to the ESOP equal
to the ESOP's debt service less dividends received by the ESOP. All dividends
received by the ESOP are used to pay debt service. The ESOP shares initially
were pledged as collateral for its debt. As the debt is repaid, shares are
released from collateral and allocated to active employees, based upon the
proportion of debt service paid in the year. As shares are released from
collateral, Equality reports compensation expense equal to the current market
price of the shares, and the shares become outstanding for earnings per share
computations. Dividends on ESOP shares are used to pay principal and interest
on the debt. ESOP compensation expense was $28,544, $32,577, and $35,578 for
1997, 1996, and 1995, respectively. There were 14,213 and 10,356 allocated
ESOP shares and 12,387 and 16,244 unreleased ESOP shares at March 31, 1997 and
1996, respectively. The fair value of unreleased ESOP shares was $185,805 and
$219,294 at March 31, 1997 and 1996, respectively.
F-20
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Board of Directors adopted a stock option plan under which 38,000 shares
of common stock have been reserved for future issuance. Equality accounts for
stock-based compensation under the stock option plan in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees and, accordingly, recognizes no compensation expense as the exercise
price of Equality's employee stock options equals the market price of the
underlying stock on the date of grant.
Information on Equality's stock options are summarized as follows:
<TABLE>
<CAPTION>
PER SHARE
AVERAGE PRICE OPTION
SHARES PER SHARE PRICE RANGE
------ ------------- ------------
<S> <C> <C> <C>
Outstanding and exercisable at March 31,
1994................................... 24,200 $10.00 $ 10.00
Granted................................. -- -- --
------ ------
Outstanding and exercisable at March 31,
1995................................... 24,200 10.00 10.00
Granted................................. 13,800 13.00 13.00
------ ------
Outstanding and exercisable at March 31,
1996................................... 38,000 11.09 10.00-13.00
Granted................................. -- -- --
------ ------
Outstanding and exercisable at March 31,
1997................................... 38,000 $11.09 $10.00-13.00
====== ======
</TABLE>
Also in conjunction with the conversion to a stock form of ownership,
Equality established a management recognition plan which acquired 11,400
shares (2.7% of total shares issued) of $1 par value stock at a subscription
price of $10.00 per share. The MRP provides that such common stock can be
issued to employees in key management positions to encourage such key
employees to remain with Equality. Interest in the MRP for each participant
vested in three equal installments beginning December 31, 1993. Accordingly,
as of December 31, 1995, all stock had been released to the appropriate
participants. Compensation expense related to vesting in the MRP totaled
approximately $28,500 and $47,500 during 1996 and 1995, respectively.
Equality sponsors a defined contribution plan qualifying under Section
401(k) of the Internal Revenue Code. Participants may designate up to 15% of
their annual compensation as their contribution to the plan, which is
partially matched by Equality. Expense included in the consolidated statements
of income totaled approximately $21,585, $17,259, and $17,274 for 1997, 1996,
and 1995, respectively.
(15) DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
Equality is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
The commitment to extend credit may involve, to varying degrees, elements of
credit in excess of the amount recognized in the consolidated balance sheets.
The contractual amounts of these instruments reflect the extent of involvement
Equality has in this particular class of financial instruments.
Equality's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of these instruments. Equality uses the
same credit policies in making commitments and conditional obligations as they
do for financial instruments recorded in the consolidated balance sheets. At
March 31, 1997, Equality had outstanding commitments to originate fixed rate
mortgage loans of $644,000 (at interest rates ranging from 7.625% to 8.50%)
and variable rate mortgage loans of $309,000 (at an interest rate of 6.50%).
In addition, Equality had commitments to sell mortgage loans totaling $3.9
million at March 31, 1997.
F-21
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the carrying amounts and fair values of Equality's financial
instruments at March 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
ASSETS ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash, primarily interest-
bearing demand deposits.. $ 1,037,199 1,037,199 5,550,292 5,550,292
Interest-bearing
deposits................. 3,819,744 3,853,575 9,570,490 9,684,427
Investment securities..... 74,971,394 74,847,807 44,743,539 44,487,346
Mortgage-backed
securities............... 14,954,025 14,954,025 28,096,499 28,096,499
Loans receivable.......... 95,927,983 94,395,483 96,998,052 97,389,327
Stock in Federal Home Loan
Bank..................... 3,350,000 3,350,000 3,150,000 3,150,000
Accrued interest
receivable............... 1,748,784 1,748,784 1,527,558 1,527,558
------------ ----------- ----------- -----------
$195,809,129 194,186,873 189,636,430 189,885,449
------------ ----------- ----------- -----------
LIABILITIES
Savings deposits.......... 122,982,954 122,925,487 124,515,370 126,248,126
Accrued interest payable
on savings deposits...... 134,599 134,599 102,142 102,142
Borrowed money............ 64,248,804 63,984,429 57,305,406 57,203,352
Advance payments by
borrowers for taxes and
insurance................ 86,776 86,776 113,684 113,684
------------ ----------- ----------- -----------
$187,453,133 187,131,291 182,036,602 183,667,304
------------ ----------- ----------- -----------
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
such value:
Cash, Primarily Interest-Bearing Demand Deposits
For cash, primarily interest-bearing demand deposits, the carrying amount is
a reasonable estimate of fair value, as such instruments reprice in a short
time period.
Interest-Bearing Deposits
The fair value of interest-bearing deposits is based on the discounted value
of contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturity.
Investment and Mortgage-Backed Securities
Fair values are based on quoted market prices or dealer quotes.
Loans Receivable
Fair values are estimated for portfolios of loans receivable with similar
financial characteristics. Loans are segregated by type such as residential,
commercial, and consumer. Each loan receivable category is further segmented
into fixed and adjustable rate interest terms. The fair value of loans
receivable is calculated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates equal to rates at
which loans, similar in type, would be originated at March 31, 1997. Estimated
maturities are based upon the average remaining contractual lives for each
loan receivable classification.
F-22
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock in Federal Home Loan Bank
Fair value is equal to cost, which represents redemption value.
Accrued Interest Receivable
For accrued interest receivable, the carrying amount is a reasonable
estimate of fair value because of the short maturity for this financial
instrument.
Savings Deposits
The fair value of savings deposits with no stated maturity is equal to the
amount payable on demand. The fair value of time deposits is based on the
discounted value of contractual cash flows. The discount rate is estimated
using the rates currently offered for savings deposits of similar remaining
maturities.
Accrued Interest Payable on Savings Deposits
For accrued interest payable, the carrying amount is a reasonable estimate
of fair value because of the short maturity for this financial instrument.
Borrowed Money
The fair value of borrowed money is based on the discounted value of
contractual cash flows. The discount rate is estimated using rates on borrowed
money with similar remaining maturities.
Advance Payments by Borrowers for Taxes and Insurance
The carrying amount of advance payments by borrowers for taxes and insurance
approximates fair value because of the short maturity for this financial
instrument.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit and standby letters of credit
are estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements, the
likelihood of the counterparties drawing on such financial instruments, and
the present creditworthiness of such counterparties. Equality believes such
commitments have been made on terms which are competitive in the markets in
which it operates.
The fair value estimates provided are made at a point in time based on
market information and information about the financial instruments. Because no
market exists for a portion of Equality's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the fair value estimates.
(16) CONTINGENCIES
Equality is involved in various litigation arising in the ordinary course of
business. In the opinion of management, at the present time, disposition of
the suits and claims will not have a material effect on the financial position
of Equality.
F-23
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(17) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the year ended March 31, 1997 and 1996
is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1996 1996 1997
-------- ------------- ------------ ---------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total interest income....... $ 3,265 3,492 3,388 3,465
Total interest expense...... (2,229) (2,352) (2,304) (2,227)
------- ------ ------ ------
Net interest income......... 1,036 1,140 1,084 1,238
Provision for losses on
loans...................... -- -- -- (50)
Noninterest income.......... 723 529 752 565
Noninterest expense......... (1,326) (2,201) (1,344) (1,338)
------- ------ ------ ------
Income before income tax ex-
pense...................... 433 (532) 492 415
Income tax expense (bene-
fit)....................... 169 (207) 192 149
------- ------ ------ ------
Net income (loss)........... $ 264 (325) 300 266
======= ====== ====== ======
Earnings (loss) per share... $ .32 (.39) .37 .31
======= ====== ====== ======
<CAPTION>
QUARTER ENDED
----------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1996
-------- ------------- ------------ ---------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Total interest income....... $ 2,818 3,037 3,103 3,317
Total interest expense...... (1,913) (2,190) (2,156) (2,281)
------- ------ ------ ------
Net interest income......... 905 847 947 1,036
Provision for losses on
loans...................... (6) -- -- (25)
Noninterest income.......... 730 731 621 626
Noninterest expense......... (1,289) (1,350) (1,300) (1,402)
------- ------ ------ ------
Income before income tax ex-
pense...................... 340 228 268 235
Income tax expense.......... 133 89 104 92
------- ------ ------ ------
Net income.................. $ 207 139 164 143
======= ====== ====== ======
Earnings per share.......... $ .25 .17 .20 .18
======= ====== ====== ======
</TABLE>
(18) EVENT SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT--ADOPTION OF
PLAN OF CONVERSION TO STOCK CHARTER (UNAUDITED)
On May 16, 1997, as amended on June 20, 1997, First Missouri Financial,
M.H.C. (the MHC), which owns approximately 53% of Equality's common stock, and
Equality Savings and Loan Association, F.A., adopted a Plan of Conversion and
Reorganization (the Plan), pursuant to which the MHC will convert from the
mutual to stock form of organization. Shares of common stock of a new holding
company, Equality Bancorp, Inc., will be offered in a subscription offering in
descending order of priority to eligible account holders; employee stock
benefit plans; supplemental eligible account holders; other members;
directors, officers, and employees; and public stockholders. Any shares
remaining unsold in the subscription offering will be sold through a community
offering.
In general, the Plan provides for the conversion of the MHC (a federally
chartered mutual holding company) to stock form (whereby the MHC will be
extinguished) and the creation of Equality Bancorp, Inc. (the Holding
F-24
<PAGE>
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company), a capital stock corporation organized under Delaware law (the
Conversion). The Holding Company, as a result of the Conversion, will acquire
100% of the outstanding shares of stock of Equality. The MHC currently owns a
majority of the common stock of Equality. The purpose of the Conversion is to
convert the MHC to the capital stock form of organization, which will provide
the Holding Company and Equality with greater flexibility and capital
resources to respond to changing regulatory and market conditions and to
effect corporate transactions, including mergers and acquisitions. The Holding
Company will offer common stock (the Conversion Stock) upon the terms and
conditions set forth in the Plan. Stockholders of Equality, other than the
MHC, will exchange their Equality shares for shares of the Holding Company.
The Conversion will result in the attributes of ownership of the MHC being
transferred from Equality's depositors (and certain borrowers) to persons who
purchase stock in the Conversion stock offering and persons who exchange
common stock of Equality for common stock of the Holding Company. The
Conversion will have no impact on depositors, borrowers, or customers of
Equality. Equality will continue to be a member of the Federal Home Loan Bank
System and all of its insured savings deposits will continue to be insured by
the Federal Deposit Insurance Corporation, through the Savings Association
Insurance Fund, to the extent provided by applicable law.
Conversion costs will be deferred and deducted from the proceeds of the
shares sold in the Conversion. If the Conversion is not successfully
completed, the costs incurred in connection with the Conversion will be
expensed at the time that the unsuccessful completion is determined.
F-25
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPEC-
TUS 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 AU-
THORIZED BY THE HOLDING COMPANY, THE MUTUAL HOLDING COMPANY, THE ASSOCIATION
OR TRIDENT SECURITIES, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ASSOCIATION SINCE ANY OF
THE DATES AS OF WHICH INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE HERE-
OF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 12
Equality Bancorp, Inc.................................................... 17
Equality Savings and Loan Association, F.A............................... 18
First Missouri Financial, M.H.C.......................................... 19
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 21
Market for Common Stock.................................................. 22
Capitalization........................................................... 24
Regulatory Capital....................................................... 26
Pro Forma Data........................................................... 27
Proposed Subscriptions by Directors and Executive Officers............... 31
Consolidated Statements of Income........................................ 32
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 33
Business of the Association.............................................. 42
Regulation and Supervision............................................... 63
Federal and State Taxation............................................... 75
Management of the Holding Company and Association........................ 76
Beneficial Ownership of Capital Stock.................................... 90
The Conversion and Reorganization........................................ 90
Comparison of Stockholders' Rights....................................... 113
Restrictions on Acquisition of the Holding Company....................... 119
Description of Capital Stock............................................. 121
Registration Requirements................................................ 122
Transfer Agent and Registrar............................................. 122
Legal Opinions........................................................... 122
Experts.................................................................. 122
Index to Consolidated Financial Statements............................... F-1
</TABLE>
UNTIL THE LATER OF , 1997 OR 90 DAYS AFTER COMMENCEMENT OF THE OFFERING
OF COMMON STOCK, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURI-
TIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,729,323 SHARES
EQUALITY BANCORP, INC.
(PROPOSED HOLDING COMPANY FOR
EQUALITY SAVINGS AND LOAN
ASSOCIATION, F.A.)
COMMON STOCK
----------------
PROSPECTUS
----------------
TRIDENT SECURITIES, INC.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Equality Bancorp, Inc.
Proposed Holding Company for
Equality Association, FSB
St. Louis, Missouri
Proposed Marketing Materials
<PAGE>
Marketing Materials for
Equality Bancorp, Inc.
St. Louis, Missouri
Table of Contents
-----------------
I. Press Release
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Quantity and Method of Distribution
C. Example
IV. Officer and Director Support Brochure
A. Explanation
B. Method of Distribution
C. Example
V. IRA Mailing
A. Explanation
B. Quantity and Method of Distribution
C. IRA Mailing Example
VI. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VII. Invitations
A. Explanation
B. Quantity - Method of Distribution
C. Examples
VIII. Letters
A. Explanation
B. Method of Distribution
C. Examples
<PAGE>
IX. Proxygram
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers, community members and other
interested investors receive prompt accurate information in a simultaneous
manner, Trident advises the Association to forward press releases to area
newspapers, radio stations, etc. at various points during the Conversion
and Reorganization process.
Only press releases approved by Conversion and Reorganization Counsel and
the OTS, if necessary, will be forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion and Reorganization
2. Close of Stock Offering
<PAGE>
National and Local Distribution List
------------------------------------
The Association should provide a supplemental distribution list that includes
all local newspapers that it considers to be within its market area.
(TO BE PROVIDED)
<PAGE>
Press Release FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Richard C. Fellhauer
President and Chief Executive Officer
Equality Savings and Loan Association, F.A.
(314) 352-3333
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
-------------------------------------------
REORGANIZATION FROM MUTUAL HOLDING COMPANY TO STOCK
---------------------------------------------------
HOLDING COMPANY APPROVED
-------------------------
Richard C. Fellhauer, President and Chief Executive Officer of Equality
Savings and Loan Association, F.A. (the "Association"), St. Louis, Missouri-,
announced today that the Association has received approval from the Office of
Thrift Supervision in Washington, D.C. to reorganize from the mutual holding
company form of organization to the stock holding company form of organization.
In connection with the reorganization, the Association has formed a company,
Equality Bancorp, Inc. (the "Company"), to serve as the holding company of the
Association.
Pursuant to a plan of conversion and reorganization, the Company is
offering up to ________ shares, subject to adjustment, of its common stock, at a
price of $10.00 per share. Certain depositors and borrowers as of specified
record dates, the Association's Employee Stock Ownership Plan, directors,
officers and employees and public stockholders of the Association will have an
opportunity to purchase stock through a Subscription Offering that closes on
September ___, 1997. Concurrent with the Subscription Offering, stock will be
offered to persons who reside in Missouri or to whomever else the prospectus is
delivered to in a Community Offering with first preference given to natural
persons who reside in St. Louis City, St. Louis, Jefferson, St. Charles and
Franklin Counties, Missouri. The Subscription and Community Offering (together,
the "Offering") will be managed by Trident Securities, Inc. of Raleigh, North
Carolina. In addition,
<PAGE>
public stockholders of the Association as of the effective date of the
reorganization will receive shares of common stock in the Company in exchange
for the common shares of Equality Savings and Loan Association, F.A. at an
exchange ratio specified in the Prospectus. Prospectuses describing, among other
things, the terms of the Offering will be mailed to certain customers and
stockholders of the Association and certain local community members on or about
August _____, 1997.
As a result of the reorganization, the Association will operate as a
subsidiary of the Company. According to Mr. Fellhauer, "Our day to day
operations will not change as a result of the reorganization and deposits will
continue to be insured by the FDIC up to the applicable legal limits."
Customers or stockholders with questions concerning the reorganization
should call the Stock Information Center at (314) ________________, or visit the
Association's main office in St. Louis, Missouri.
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Equality Bancorp, Inc. The offer is made only by the Prospectus. The shares
of Common Stock are not deposits or savings accounts and will not be insured by
the Federal Deposit Insurance Corporation or any other government agency.
<PAGE>
Press Release FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Richard C. Fellhauer
President and Chief Executive Officer
Equality Savings and Loan Association, F.A.
(314) 352-3333
EQUALITY BANCORP, INC. COMPLETES STOCK OFFERING
-----------------------------------------------
St. Louis, Missouri - (August __, 1997) Richard C. Fellhauer, President and
Chief Executive Officer of Equality Savings and Loan Association, F.A. (the
"Association"), announced today that Equality Bancorp, Inc. (the "Company"), the
holding company for the Association, will complete its stock offering on
September __, 1997 in connection with the Association's Conversion and
Reorganization from the mutual holding company form of organization to the stock
holding company form of organization. __________ shares were sold at $10.00 per
share in connection with the stock offering, and __________ shares will be
issued in exchange for shares of common stock of the Association.
On ________, 1997, the Association's Plan of Conversion and Reorganization
and Agreement and Plan of Reorganization will be approved by the voting members
of First Missouri Financial, M.H.C. and the stockholders of the Association at a
Special Meeting of Members and a Special Meeting of Stockholders, respectively.
Mr. Fellhauer indicated that the officers and board of directors of the
Company and the Association want to express their thanks for the response to the
stock offering and that the Association looks forward to serving the needs of
its customers and stockholders as a community-based stock institution. The
offering was managed by Trident Securities, Inc. The stock will commence trading
on the Nasdaq National Market System under the symbol "ESBX" on ___________,
1997. In connection with the reorganization, the Association also has changed
its name to "Equality Savings Bank".
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify the
Association's customers, stockholders and members of the local community
that the Conversion and Reorganization offering is underway.
The intended use of advertisement "B" is to remind the Association's
customers and stockholders of the closing date of the subscription
offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval and run
weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the subscription
offering.
Trident may feel it is necessary to run more ads in order to remind
customers, stockholders and community members of the close of the
Subscription/Community Offering.
Alternatively, Trident may, depending upon the response from the customer
and stockholder base, choose to run fewer ads or no ads at all.
<PAGE>
Advertisement (A)
- --------------------------------------------------------------------------------
This announcement is neither an offer to sell nor a solicitation of an
offer to buy these securities. The offer is made only by the Prospectus. These
shares have not been approved or disapproved by the Securities and Exchange
Commission, the Office of Thrift Supervision or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation, nor has such
commission, office or corporation passed upon the accuracy or adequacy of the
prospectus. Any representation to the contrary is unlawful.
New Issue _______, 1997
- ---------
________ Shares
These shares are being offered pursuant
to a Plan of Conversion and Reorganization whereby
Equality Savings and Loan Association, F.A.
St. Louis, Missouri will
convert from the mutual holding company form of organization
to a federal stock Association
and become a wholly-owned subsidiary of
Equality Bancorp, Inc.
Common Stock
_______________
Price $10.00 Per Share
_______________
Trident Securities, Inc.
For a copy of the prospectus call (314) ________.
Copies of the Prospectus may be obtained in any State in which this announcement
is circulated from the undersigned or such other brokers and dealers
as may legally offer these securities in such state.
- --------------------------------------------------------------------------------
<PAGE>
Advertisement (B)
- --------------------------------------------------------------------------------
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.'S CUSTOMERS,
STOCKHOLDERS
AND MEMBERS OF THE GENERAL PUBLIC
_____________, IS THE DEADLINE TO
ORDER STOCK OF EQUALITY BANCORP, INC.
Customers and stockholders of Equality Bancorp, Inc.
and members of the general public have the opportunity
to invest in Equality Savings and Loan Association, F.A. by subscribing
for common stock in its proposed holding company
EQUALITY BANCORP, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (314) _____________.
This announcement is not an offer to sell or a
solicitation of an offer to buy the stock of Equality Bancorp, Inc. The offer is
made only by the Prospectus. The shares of Common Stock are not deposits or
savings accounts and will not be insured
by the Federal Deposit Insurance Corporation
or any other government agency.
Copies of the Prospectus may be obtained in any State in which this announcement
is circulated from the undersigned or such other brokers and dealers
as may legally offer these securities in such state.
- --------------------------------------------------------------------------------
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
Conversion and Reorganization. It serves to answer some of the most
commonly asked questions in "plain, everyday language". Although most of
the answers are taken verbatim from the Prospectus, it saves the individual
from searching for the answer to a simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and Answer
brochure. However, regardless of the method the brochures are always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members and stockholders of the Association.
2. Question and Answer brochures are available at the Association.
3. Question and Answer brochures are distributed in information packets
at community meetings.
4. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
<PAGE>
QUESTIONS AND ANSWERS
REGARDING
THE PLAN OF CONVERSION AND REORGANIZATION
On May 16, 1997 the Boards of Directors of Equality Savings and Loan
Association, F.A. (the "Association") and First Missouri Financial, M.H.C. (the
"Mutual Holding Company") unanimously adopted the Plan of Conversion and
Reorganization (the "Plan of Conversion and Reorganization") pursuant to which
the Mutual Holding Company will convert from mutual to stock form and the
Association will reorganize as a wholly owned subsidiary of a new company --
Equality Bancorp, Inc. (the "Company").
This brochure is provided to answer basic questions regarding the
Conversion and reorganization. Following the conversion and reorganization, the
Association will continue to provide financial services to its depositors,
borrowers and other customers and will operate with its existing management and
employees. The will not affect the terms, balances, interest rates or existing
federal insurance coverage on the Association's deposits or the terms or
conditions of any loans to existing borrowers under their individual contract
arrangements with the Association.
For complete information regarding the conversion and reorganization, see
the Prospectus dated _________________, 1997. Copies of the Prospectus may be
obtained by calling the Stock Information Center at (314)
________________________.
Background
On October 22, 1993 the Association reorganized into a relatively new form of
organization, the mutual holding company structure. In connection with this
transaction, the Mutual Holding Company was formed, and the Association became a
public company through an offering of common stock.
The primary business of the Mutual Holding Company has been to hold shares of
the Association's common stock (the "Association Common Stock"). As majority
shareholder of the Association, it holds 456,400 shares or 53.2% of the shares
of Association Common Stock outstanding. The remaining shares (the "Public
Association Shares") are traded publicly. They are owned by the Association's
management, benefit plans, customers and members of the general public
(collectively, the "Public Stockholders").
In connection with the conversion and reorganization, the Company intends to
issue up to __________ shares (which may be increased to __________ shares) of
Company common stock (the "Conversion and Reorganization Stock") at a purchase
price of $10.00 per share (the "Purchase Price") in a Subscription and Community
Offering, and, if necessary, a Syndicated Community Offering (collectively, the
"Offerings"). Additional shares of the Company's common stock are designated for
an exchange offering - in which case the shares of the Association Common Stock
held by the Public Stockholders as of the effective date of the Conversion and
Reorganization (the "Effective Date") will be converted into shares of Company
common stock (the "Exchange Shares") at a stated Exchange Ratio (the
"Exchange"). The Public Stockholders will be mailed instructions with regard to
effecting the Exchange. The Conversion and
<PAGE>
Reorganization of the Mutual Holding Company, the Offerings and the Exchange are
referred to collectively herein as the "Conversion and Reorganization". As
required by Office of Thrift Supervision regulations, members of the Mutual
Holding Company and the Association's stockholders are being asked to approve
the Plan of Conversion and Reorganization, as addressed below in the section
entitled "Voting."
1. Q. What will be the effect of the Conversion and Reorganization?
A. . The Company will replace the Mutual Holding Company as the
holding company for the Association.
. The Company will issue shares of common stock.
. The Company's common stock will be publicly held and will be
traded on the NASDAQ National Market System under the symbol
"ESBX".
. The Public Stockholders will exchange their Association Common
stock for common stock of the Company.
2. Q. What is the reason for the Conversion and Reorganization?
A. In 1993, the Association reorganized into the mutual holding company
structure for a number of reasons, including the ability to raise
capital on an incremental basis so that new capital could be invested
in a controlled manner. If the Association had undertaken a standard
Conversion and Reorganization involving the formation of a stock
holding company in 1993, applicable Office of Thrift Supervision
regulations would have required a greater amount of common stock to be
sold, resulting in more proceeds than could have been utilized at the
time.
A principal purpose of the Conversion and Reorganization is to
structure the Company in the stock form of organization that is used
by most other holding companies of savings institutions and commercial
banks. This structure, along with the increased capital resulting
from the Offerings, will facilitate possible diversification into
other banking-related businesses and will provide the Company with
additional operating flexibility.
Additionally, the Conversion and Reorganization will result in an
increase in the number of outstanding shares of common stock that will
increase the likelihood of the development of an active and liquid
trading market.
The Board of Directors believes that the Conversion and Reorganization
of the Mutual Holding Company from the mutual to the stock form of
organization and the related Offerings and Exchange are consistent
with the goal of enhancing value for shareholders and customers.
<PAGE>
3. Q. Will the Conversion and Reorganization have any effect on my
savings account or loan account with the Association?
A. No. Customers will be served in the same offices by the same staff.
The Conversion and Reorganization will not affect the amount, interest
rate or withdrawal rights of deposit accounts, which will continue to
be insured by the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation to the maximum legal limit. Likewise,
the loan accounts and rights of borrowers will not be affected.
4. Q. Will there be changes in directors, officers or employees as a
result of the Conversion and Reorganization?
A. No. Officers and employees of the Association will continue in their
current capacities. The directors of the Association will serve as the
initial directors of the Company.
5. Q. How has the Association performed recently?
A. For the ____ months ended ____________, the Association recorded net
income of __________, or $____ per share. Net income represented an
___% annualized return on average assets and a ____% annualized return
on average equity. For the years ended _________ and __________, net
income was $_______ and $________, respectively.
6. Q. Does the Company anticipate paying cash dividends on the Company's
common stock?
A. After the completion of the Conversion and Reorganization, the Board
of Directors of the Company expects to pay cash dividends on its
common stock at an initial quarterly rate of $.17 per share divided by
the Exchange Ratio, commencing with the first full quarter following
the consummation of the Conversion and Reorganization. This would
result in an initial quarterly cash dividend rate of between $____ per
share and $____ per share. There can be no assurance, however, that
dividends will be paid or that, if paid, such dividends will not be
reduced or eliminated in future periods.
7. Q. How will the proceeds of the Offerings be used?
A. Net proceeds from the sale of the Conversion and Reorganization Stock
are estimated to be between $____ million and $____ million. The
Company plans to contribute to the Association 50% of the net proceeds
from the Offerings and retain the remainder of the net proceeds. The
Company intends to use a portion of the net proceeds retained by it to
make a loan directly to an employee stock ownership plan of the
Association (the "ESOP") to enable the ESOP to purchase 7.0% of the
common stock, and the remainder of the net proceeds retained by the
Company will initially be invested in short-term and intermediate-term
deposits and federal agency
<PAGE>
securities. Funds retained by the Company may be used to support the
future expansion of operations and for other business or investment
purposes. Subject to applicable limitations, such funds also may be
used in the future to repurchase shares of common stock. Funds
contributed to the Association from the Company s will be used to
support the Association's lending and investment strategies.
VOTING - YOUR VOTE IS IMPORTANT
The Mutual Holding Company's Members (as defined below) are being asked to
approve the Plan of Conversion and Reorganization, which was adopted by the
Boards of Directors of the Association and the Mutual Holding Company and
approved by the Office of Thrift Supervision. The Association's shareholders
are also being asked to approve the Plan of Conversion and Reorganization. A
copy of the Plan of Conversion and Reorganization may be obtained from any
Association office or by calling the Stock Information Center.
Voting on the Plan of Conversion and Reorganization does not affect deposit or
loan accounts at the Association, and does not obligate customers or
shareholders to purchase stock in the Offerings.
8. Q. Which customers of the Association are being asked to vote on the
Plan of Conversion and Reorganization?
A. Depositors of the Association as of _____________, 1997 and borrowers
of the Association as of October 22, 1993 who continue to be borrowers
as of ___________, 1997 (the "Members"). The Members have been
provided with Proxy Cards and Proxy Statements describing the Plan of
Conversion and Reorganization.
Each depositor Member will be entitled to cast one vote for each $100
or fraction thereof of the withdrawable value of any savings accounts
in the Association as of _____________, 1997. Each borrower Member
will be entitled to cast one vote, in addition to any number of votes
to which such Member is entitled to as holder of a savings account.
The maximum number of votes eligible to be cast by a Member may not
exceed 1,000. The affirmative vote of a majority of the total
outstanding votes of the Members is required for approval of the Plan.
In accordance with Office of Thrift Supervision regulations, Members
are being solicited to vote. The Board of Directors urges Members to
vote FOR the Plan of Conversion and Reorganization. Not voting will
have the same effect as a vote against the Plan of Conversion and
Reorganization. Without sufficient favorable votes, the Conversion
and Reorganization cannot be completed. In that event, funds
submitted by investors in connection with the Offerings would be
promptly returned, with interest and the exchange will not occur.
9. Q. Which shareholders of the Association may vote on the Plan of
Conversion and Reorganization?
<PAGE>
A. Public Stockholders of the Association as of __________, 1997. These
shareholders have been provided with a Proxy Statement describing the
Plan of Conversion and Reorganization and the transactions
contemplated clearly. They have also received a Proxy Card. The
affirmative vote of at least a majority of the votes cast by Public
Stockholders and two thirds of the outstanding Association Common
Stock (including shares held by the Mutual Holding Company) is
required for approval of the Plan of Conversion and Reorganization.
The Board of Directors urges shareholders to vote FOR the Plan of
Conversion and Reorganization.
10. Q. How do I vote by proxy?
A. Please read the Proxy Statement that you received. You may vote by
completing, signing and returning the Proxy Card in the Proxy Return
Envelope provided. If you are a Public Stockholder and a Member you
should have received two Proxy Statements and Proxy Cards and you may
vote both capacities. Please respond promptly.
11. Q. Why may I have received several Proxy Cards?
A. If you have more than one deposit or loan account at the Association,
you could receive more than one informational packet and each packet
should contain a separate Proxy Card, depending on the ownership
structure of your accounts.
If you owned shares of the Association Common Stock under more than
one registration, you will receive more than one informational packet
and each packet should contain a separate Proxy Card. PLEASE VOTE,
SIGN AND PROMPTLY RETURN ALL PROXY CARDS.
12. Q. Am I obligated to purchase stock if I vote in favor of the Plan of
Conversion and Reorganization?
A. No. To purchase stock in the Offerings, you must place an order and
make a payment.
THE OFFERINGS
Investment in common stock involves certain risks. Before making an investment
decision, please carefully read the enclosed Prospectus, including the section
entitled "Risk Factors."
13. Q. Who may purchase Conversion and Reorganization Stock in the Offerings?
A. The Offerings consist of (i) a Subscription Offering to certain past
and current customers of the Association, the ESOP, directors,
officers and employees of the Mutual Holding Company and the
Association and the Public Stockholders and (ii) a possible Community
Offering to certain members of the general public, with preference
given to natural persons residing in St. Louis City, St. Louis,
Jefferson, St. Charles and Franklin Counties, Missouri.
<PAGE>
The Conversion and Reorganization Stock is being offered in the
following order of priority: (i) depositors of the Association with
account balances of $50.00 or more as of the close of business on
March 31, 1996 ("Eligible Account Holders"); (ii) the ESOP; (iii)
depositors of the Association with account balances of $50.00 or more
as of the close of business on __________ ("Supplemental Eligible
Account Holders"); (iv) depositors of the Association as of the close
of business on _________, 1997 (other than Eligible Account Holders
and Supplemental Eligible Account Holders) and borrowers of the
Association as of the close of business on October 22, 1993 who
continue to be borrowers as of the close of business on ___________,
1997 ("Other Members"); (v) directors, officers and employees of the
Mutual Holding Company and the Association; (vi) Public Stockholders;
(vii) natural persons residing in St. Louis City, St. Louis,
Jefferson, St. Charles and Franklin Counties, Missouri; and (viii)
members of the general public residing elsewhere.
14. Q. What is the price per share?
A. The shares of Conversion and Reorganization Stock are being offered at
a Purchase Price of $10.00 per share. All subscribers will pay the
same price per share. No commission will be charged.
15. Q. How was the offering range and Purchase Price of the Conversion and
Reorganization Stock determined?
A. Federal regulations require that the aggregate purchase price of the
common stock in the Offerings be consistent with an independent
appraisal of the pro forma value of the Association and the Company.
The appraisal, dated __________ was conducted by RP Financial, CC, a
firm experienced in valuations of financial institutions. The
appraisal indicated an estimated aggregate pro forma market value of
$____ million (the "Independent Valuation"). Because the Public
Stockholders will continue to hold the same aggregate percentage
ownership interest in the Company as they held in the Association as a
result of the exchange, the Appraisal was multiplied by the Company's
percentage interest in the Association to determine the midpoint of
the valuation price range (the "Valuation Price Range"), of
$__________. The Board of Directors has determined to offer the
common stock at a purchase price of $10.00 per share. Based on this
price and the independent valuation, the Company is offering a range
of between approximately $____ million and $____ million of common
stock, or between __________ shares and __________ shares of common
stock, subject to a potential 15% increase to __________ shares. An
additional 7% of shares may be sold to the ESOP, under certain
circumstances.
Upon consummation of the Conversion and Reorganization, shares issued
in the Offerings will represent approximately 53.2% of shares
outstanding, while shares issued pursuant to the Exchange will
represent approximately 41.8% of outstanding shares. Assuming the
sale of __________ shares, the midpoint of the Valuation Price Range,
it is anticipated that there will be __________ shares of common stock
<PAGE>
outstanding upon consummation of the Conversion and Reorganization
including shares to be issued in the Exchange.
The Independent Valuation will be updated at the conclusion of the
Offerings. In the event that less than __________ shares are sold in
the Offerings, a resolicitation of subscribers may be necessary.
Resolicitation will also be necessary in the event that more than
__________ shares are issued in the Offerings (although an additional
7% of shares may be sold to the ESOP, without a resolicitation of
subscribers).
16. Q. When do the Offerings terminate?
A. The Offerings will terminate at _____ p.m. ________ Time, on
__________1997, unless the Offerings are extended.
17. Q. How do I purchase Conversion and Reorganization Stock in the
Offerings?
A. Please carefully read and complete the Stock Order Form. The
Association is not required to accept copies of Stock Order Forms. You
may hand deliver the Stock Order Form to any Association office, or
you may use the enclosed Order Form Reply Envelope. Payment may be
made by check or money order or by authorization of withdrawal from
your Association passbook or certificate of deposit account(s). A hold
will be placed on the designated account(s) for the authorized
amount(s). Withdrawal will be made at the consummation of the
Conversion and Reorganization. Any applicable penalty for early
withdrawal will be waived.
18. Q. Will I receive interest on funds I submit?
A. Yes. Funds received will be placed in a segregated account at the
Association, and interest will be paid at the Association's passbook
rate until the Offerings are consummated. With respect to authorized
account withdrawals, interest will continue to accrue at the account's
contractual rate until the Offerings are consummated.
19. Q. How may I purchase the common stock through a Association IRA?
A. If you have an IRA at the Association, you will need to transfer your
existing relationship to an independent trustee authorized to hold
self-directed IRA accounts. Please call the Stock Information Center
for assistance in transferring your account or establishing a new
self-directed IRA for the purchase of stock. Because IRA-related
procedures take time, please contact the Stock Information Center as
early as possible.
20. Q. What is the minimum and maximum number of shares that I may subscribe
for in the Offerings?
<PAGE>
A. Purchase limitations are described in detail in the Prospectus. The
minimum purchase is 25 shares. The maximum purchase in each of the
Subscription, Community or Syndicated Community Offering is $625,000.
The overall purchase limit in the Offerings for any person, together
with associates, or group acting in concert is $625,000. Please do
not order more than this amount in the Offerings. Please note that
for holders of Public Association Shares, these maximum and overall
purchase limits are inclusive of the number of shares of Association
Common Stock that will be received in the Exchange, which may limit
the number of shares that such persons may subscribe for in the
Offerings. See the section below, entitled "The Exchange." These
purchase limits may be further increased or decreased by the
Association.
21. Q. What will happen to my order if orders are received for more stock
than is available?
A. The allocation method depends on the purchase priority category in
which the oversubscription takes place. Please read the Prospectus,
which includes details about the allocation procedures. Following is
a summary of such procedures.
If there are insufficient shares to fill orders of Eligible Account
Holders (as defined above) in the Subscription Offering, the Company
will initially allocate a maximum of 100 shares to each such
subscriber. Shares remaining will be allocated among such subscribers
whose orders remain unfilled. The allocation formula is based on
qualifying deposits (as defined in the Plan of Conversion and
Reorganization) as of March 31, 1996. Each subscriber's allocation is
obtained by multiplying the available shares of common stock by a
fraction - the numerator is the subscriber's qualifying deposit and
the denominator is the total qualifying deposits of all subscribers
whose orders remain unfilled.
If an oversubscription occurs in the Supplemental Eligible Account
Holder category of the Subscription Offering, the allocation procedure
will be the same as described for Eligible Account Holders, with
allocation based on qualifying deposits as of _________, 1997.
Because qualifying deposits are utilized in allocating shares, each
Eligible Account Holder and Supplemental Eligible Account Holder
should be sure to list on the Stock Order Form all deposit accounts in
which he or she had an ownership interest at the applicable date March
31, 1996 or __________, 1997.
If oversubscription occurs in the Other Member category of the
Subscription Offering, available shares will be allocated to
subscribing Other Members, pro rata, based on order size.
If an oversubscription occurs in the Directors, Officers and Employees
category, shares will be allocated among the individual directors,
officers and employees on a point system basis, whereby such
individuals will receive subscription rights in the
<PAGE>
proportion that the number of points assigned to each of them bears to
the total points assigned to all directors, officers and employees,
provided that no fractional shares shall be issued.
If an oversubscription occurs in the Public Stockholder category,
shares will be allocated among subscribing Public Stockholders on a
pro rata basis in the same proportion as each Public Stockholder's
subscription bears to the total subscriptions of all subscribing
Public Stockholders, provided that no fractional shares shall be
issued.
22. Q. Will the Company's common stock be insured by the Federal Deposit
Insurance Corporation?
A. No.
23. Q. Are directors and officers purchasing common stock in the Offerings?
A. Yes. In the Offerings, they expect to purchase an aggregate of
________ shares. After exchange of their shares for Company common
stock, directors and executive officers are expected to own ____% of
the outstanding common stock of the Company, assuming the sale of
__________ shares in the Offerings.
24. Q. When will I receive my stock certificate for shares I purchased in the
Offerings?
A. Stock certificates will be mailed as soon as practicable after the
Offerings are consummated. Please be aware that you may not be able
to sell the shares you purchased until you have received a stock
certificate.
25. Q. How may I purchase or sell shares in the future?
A. You may purchase or sell shares through a stockbroker or discount
brokerage. The Company expects to list the common stock on the NASDAQ
National Market System under the symbol "ESBX." It is expected that
the Company's common stock will be more liquid than the Association's
stock has been, because there will be a significantly larger number of
shares owned by the public. There can be no assurance, however, than
an active and liquid market for the common stock will exist.
THE EXCHANGE
Upon the Effective Date, trading in the Association Common Stock will cease.
Each Public Stockholder as of the Effective Date will be contacted for the
purpose of exchanging Public Association Shares for shares of Company common
stock. Please refer to the Prospectus for a detailed discussion of the
Exchange.
26. Q. What is the Exchange?
A. Each share of Association Common Stock owned by Public Stockholders on
the Effective Date will automatically be converted into shares of the
Company's
<PAGE>
common stock pursuant to an exchange ratio ("Exchange Ratio").
27. Q. How was the Exchange Ratio determined?
A. The Exchange Ratio was derived to ensure that each Public Stockholder
will own approximately the same percentage of the Company's common
stock as was owned of the Association's Common Stock. The Public
Stockholders currently own ____% of the Association Common Stock.
Based on this percentage and on the offering range of between ________
and ________ shares, the Exchange Ratio is expected to range from
______ to ______ shares, respectively, of the Company's common stock
for each share of the Association's common stock. If the offering
range is increased 15% to __________ shares, the Exchange Ratio would
increase to _______.
Assuming the sale of ________ shares, the midpoint of the offering
range, one share of Association Common Stock would be exchanged for
______ shares of Company common stock.
28. Q. How will the Exchange be accomplished?
A. As of the Effective Date, the shares of the Association Common Stock
held by the Mutual Holding Company will be canceled, and the shares of
Association Common Stock owned by Public Stockholders will no longer
trade. As soon as practicable, the Association will send transmittal
forms to Public Stockholders. The transmittal forms are expected to be
mailed promptly following the Effective Date and will contain
instructions with respect to the surrender of certificates
representing the Association Stock to be exchanged for the Company's
common stock. It is expected that certificates for shares of the
Company's common stock will be distributed promptly after receipt of
the properly executed transmittal forms. Cash will be issued in lieu
of fractional shares.
Shareholders should not forward certificate until they receive
instructions.
MUTUAL TO STOCK CONVERSION AND REORGANIZATION
---------------------------------------------
29. Q. How can I get further information concerning the Conversion and
Reorganization?
A. You may call the Stock Information Center at (314) __________________
for further information or to request a copy of the Prospectus, a
Stock Order Form or a Proxy Card.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY EQUALITY BANCORP, INC. COMMON STOCK. OFFERS TO BUY OR TO SELL
MAY BE MADE ONLY BY THE PROSPECTUS. IF YOU ARE CONSIDERING PURCHASING STOCK, YOU
SHOULD READ THE PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION. COPIES OF THE
PROSPECTUS MAY
<PAGE>
BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (314) _______________.
THE SHARES OF EQUALITY BANCORP, INC. COMMON STOCK BEING OFFERED IN THE
OFFERINGS AND THE EXCHANGE ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
IV. Officer and Director Support Brochure
A. Explanation
An Officer and Director Brochure merely highlights in brochure form the
purchase commitments shown in the Prospectus.
B. Quantity
An Officer and Director brochure is proposed to be sent out in the initial
mailing to all customers and stockholders of the Association along with the
Prospectus.
<PAGE>
DIRECTOR AND EXECUTIVE OFFICER
PURCHASE COMMITMENT
<TABLE>
<CAPTION>
Proposed Purchases of Total Common Stock
Conversion and to be Held
-------------------- ----------
Reorganization Stock
Number of Exchange Number of Number of Percentage
Name Shares to be Held Amount Shares Shares of Total
- ---- ------ --------- --------- ----------
<S> <C> <C> <C> <C> <C>
</TABLE>
All directors and
executive officers of
the Association as a
group (___ persons)
- ------------------------
<PAGE>
V. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of the
Association in order to alert the customers and stockholders that funds
held in an IRA can be used to purchase stock. Since this transaction is not
as simple as designating funds from a certificate of deposit like a normal
stock purchase, this letter informs the customer or stockholder that this
process is slightly more detailed and involves a personal visit to the
Association.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer or stockholder
of the Association. These letters would be mailed following OTS approval
for the Conversion and Reorganization and after each customer or
stockholder has received the initial mailing containing a Proxy Statement
and a Prospectus.
C. Example - See following page.
<PAGE>
Equality Savings and Loan Association, F.A. Letterhead
________, 1997
Dear Individual Retirement Account Participant:
As you know, Equality Savings and Loan Association, F.A. (the
"Association") is in the process of converting from the mutual holding company
form of organization to the stock holding company form of organization and has
formed Equality Bancorp, Inc. (the "Company") to own all of the stock of the
Association. Through the Conversion and Reorganization, certain current and
former customers and stockholders have the opportunity to purchase shares of
common stock of the Company in a Subscription Offering. The Company currently is
offering up to __________ shares, subject to adjustment, of the Company at a
price of $10.00 per share.
As the holder of an individual retirement account ("IRA") at the
Association, you have an opportunity to become a stockholder in the Company
using some or all of the funds being held in your IRA. If you desire to purchase
shares of common stock of the Company through your IRA, the Association can
assist you in self-directing those funds. This process can be done without an
early withdrawal penalty and generally without a negative tax consequence to
your retirement account.
If you are interested in receiving more information on self-directing your
IRA, please contact our Stock Information Center at (314) ____________. Because
it may take several days to process the necessary IRA forms, a response is
requested (but not required) by _______, 1997 to accommodate your interest.
Sincerely,
Richard C. Fellhauer
President and Chief Executive Officer
This letter is neither an offer to sell nor a solicitation of an offer to buy
Equality Bancorp, Inc. Common Stock. The offer is made only by the Prospectus,
which was recently mailed to you. The shares of Equality Bancorp, Inc. Common
Stock are not deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
<PAGE>
VI. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to the
Association's customers, stockholders and members of the local community
that the stock sale is underway and (2) to remind the customers and
stockholders of the end of the Subscription Offering. Trident has learned
in the past that many people forget the deadline for subscribing and
therefore we suggest the use of these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used at teller windows and on
customer service representatives' desk.
Approximately 1 - 2 Lobby posters will be used at the office of the
Association
C. Example
<PAGE>
C. POSTER
OR
COUNTER CARD
Equality Bancorp, Inc.
Proposed Holding Company for
Equality Savings and Loan Association, F.A.
"STOCK OFFERING MATERIALS
AVAILABLE HERE"
Subscription Offering Ends
_______, 1997
<PAGE>
VII. Invitations
A. Explanation
In order to educate the public about the stock offering, Trident suggests
holding several Community Meetings in various locations. In an effort to
target a group of interested investors Trident requests that each Director
of the Association submit a list of friends that he would like to invite to
a Community Meeting.
Prospectuses are given to each prospect at the Community meeting.
B. Quantity and Method of Distribution
Each Director submits a list of their prospects. An invitation is mailed to
each director's prospect.
<PAGE>
The Directors, Officers & Employees
of
Equality Savings and Loan Association, F.A.
cordially invite you
to attend a brief presentation
regarding the stock offering of
Equality Bancorp, Inc.
Please join us at
Place
Address
on
Date
at Time
for hors d'oeuvres
R.S.V.P.
(314) _________________
<PAGE>
VIII. Letters
A. Explanation
Once the application for Conversion and Reorganization has been approved by
the OTS, Trident will send out a series of three letters to the Officer's
and Director's targeted prospects. These letters are used to help
facilitate the marketing effort to this group. All prospects will receive a
Prospectus as soon as they are available.
B. Method of Distribution
Each Director submits his list of prospects. Each prospect is sent the
series of three letters all during the Subscription and Community Offering.
C. Examples
1. Introductory letter
2. A. Thank you letter
or
B. Sorry you were unable to attend letter
3. Final reminder letter
<PAGE>
Example 1
(Introductory Letter)
(Equality Savings and Loan Association, F.A. Letterhead)
_______, 1997
Name
Address
City, State, Zip
Dear Name:
You have probably read recently in the newspaper that Equality Savings and
Loan Association, F.A. (the "Association") will soon be converting from the
mutual holding company form of organization to stock form. This Conversion and
Reorganization is the biggest step in the history of the Association in that it
allows customers, employee benefit plans, community members, employees,
officers, directors and current stockholders the opportunity to subscribe for
stock in our new holding company - Equality Bancorp, Inc. (the "Company").
I have enclosed a Prospectus and a Stock Order Form that will allow you to
subscribe for shares and possibly become a charter stockholder of the Company
should you so desire. In addition, we will be holding several presentations for
friends of the Association in order to review the Conversion and Reorganization
and the merits of becoming a charter stockholder of the Company. You will
receive an invitation shortly.
I hope that if you have any questions you will feel free to call me or the
Association's Stock Information Center at (314) _____________. I look forward
to seeing you at our presentation.
Sincerely,
Director
The shares of Common Stock offered in the Conversion and Reorganization are not
deposits and are not insured by the Federal Deposit Insurance Corporation or any
other governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 2A
(Thank You Letter)
(Equality Savings and Loan Association, F.A. Letterhead)
___________, 1997
Name
Address
City, State, Zip
Dear Name:
On behalf of the Board of Directors and management of Equality Savings and
Loan Association, F.A., I would like to thank you for attending our recent
presentation regarding the stock offering by Equality Bancorp, Inc. We are
enthusiastic about the stock offering and look forward to completing the
Subscription and Community Offerings on _______, 1997.
I hope that you will join me in being a charter stockholder, and once again
thank you for your interest.
Sincerely,
Richard C. Fellhauer
President and Chief Executive Officer
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured by the Federal Deposit
Insurance Corporation, the Savings Association Insurance Fund or any other
governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 2B
(Sorry You Were Unable to Attend)
(Equality Savings and Loan Association, F.A. Letterhead)
_______________, 1997
Name
Address
City, State, Zip
Dear Name:
I am sorry you were unable to attend our recent presentation regarding
Equality Savings and Loan Association, F.A.'s Conversion and Reorganization from
the mutual holding company form of organization to the stock holding company
form of organization. The Board of Directors and management are committed to
building long term stockholder value, and as a group we are investing over
$______ of our own funds in Equality Bancorp, Inc., which includes amounts we
have already invested in Equality Savings. We are enthusiastic about the stock
offering and look forward to completing the Subscription and Community Offerings
on _______, 1997.
We have established a Stock Information Center to answer any questions
regarding the stock offering. Should you require any assistance between now and
_______, I encourage you either to stop by any office of Equality Savings and
Loan Association, F.A. or to call our Stock Information Center at (314)
____________.
I hope you will join me in becoming a charter stockholder of Equality
Bancorp, Inc.
Sincerely,
Richard C. Fellhauer
President and Chief Executive Officer
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured by the Federal Deposit
Insurance Corporation, the Savings Association Insurance Fund or any other
governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 3
(Final Reminder Letter)
(Equality Savings and Loan Association, F.A. Letterhead)
___________, 1997
Name
Address
City, State, Zip
Dear Name:
Just a quick note to remind you that the deadline is quickly approaching
for purchasing stock in Equality Bancorp, Inc., the proposed holding company for
Equality Savings and Loan Association, F.A. I hope you will join me in becoming
a charter stockholder in St. Louis' newest publicly owned financial institution
holding company.
The deadline for subscribing for shares to become a charter stockholder is
_______, 1997. If you have any questions, I hope you will call our Stock
Information Center at (314) __________________.
Once again, I look forward to having you join me as a stockholder of
Equality Bancorp, Inc.
Sincerely,
Richard C. Fellhauer
President and Chief Executive Officer
The shares of Common Stock offered in the Conversion and Reorganization are not
savings accounts or deposits and are not insured by the Federal Deposit
Insurance Corporation, the Savings Association Insurance Fund or any other
governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
IX. Proxygram
A. Explanation
A proxygram is used when the majority of votes needed to adopt the Plan of
Conversion and Reorganization is still outstanding. The proxygram is mailed
to those "target vote" depositors and stockholders who have not previously
returned their signed proxy.
The target vote depositors and stockholders are determined by the
Conversion and Reorganization agent and registrar.
B. Example
<PAGE>
B. Example
_______________________________________________________________________________
P R O X Y G R A M
Equality Savings and Loan Association, F.A.
First Missouri Financial, M.H.C.
YOUR VOTE ON OUR PLAN OF CONVERSION AGREEMENT AND PLAN OF REORGANIZATION HAS NOT
BEEN RECEIVED.
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION AND REORGANIZATION WILL NOT AFFECT THE INSURANCE OF
YOUR ACCOUNT. IT WILL CONTINUE TO BE INSURED UP TO $100,000 BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION.
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
PROXY CARD TO EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A. TODAY. PLEASE VOTE
ALL PROXY CARDS RECEIVED.
WE RECOMMEND THAT YOU VOTE "FOR" THE PLAN OF CONVERSION AND REORGANIZATION.
THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
AND FIRST MISSOURI FINANCIAL, M.H.C. COMPANY
_______________________________________________________________________________
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (314) __________.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses (other than
underwriting discounts and commissions) to be incurred in connection with the
issuance of the shares:
<TABLE>
<S> <C>
Counsel fees and expenses...................................... $136,000
Accounting fees and expenses................................... 25,000
Appraisal and business plan preparation fees and expenses...... 27,500
Conversion Agent fees and expenses............................. 10,000
Underwriting fees and expenses................................. 97,500
Underwriter's counsel fees and expenses........................ 22,500
Printing, postage and mailing expenses......................... 60,000
OTS filing fee................................................. 13,400
Securities and Exchange Commission registration fee............ 5,000
NASD registration fee.......................................... 1,600
NASDAQ registration fee........................................ 15,000
Fees and expenses for qualifications under state securities
laws.......................................................... 1,500
--------
Total...................................................... $415,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is empowered by Section 145 of the Delaware General
Corporation Law, subject to the procedures and limitations stated therein, to
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her in the defense of any threatened, pending or completed action, suit or
proceeding in which such person is made a party by reason of his or her being
or having been a director, officer, employee or agent of the Registrant, or
serving or having served at the request of the Registrant as a director,
officer, employee or agent of another enterprise. The statute provides that
this indemnification is not exclusive of other rights of indemnification to
which a person may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise.
The Certificate of Incorporation and Bylaws of the Registrant provide,
subject to certain procedures and limitations stated therein, that the
Registrant shall indemnify any person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in the defense of any threatened, pending or completed
action, suit or proceeding in which such person is made a party by reason of
his or her being or having been a director or officer of the Registrant, or
being or having been a director or officer of the Registrant and serving or
having served at the request of the Registrant as a director, officer, employee
or agent of another enterprise. The indemnification is not exclusive of other
rights of indemnification to which a person may be entitled under any statute,
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
The Registrant maintains an insurance policy under which its officers and
directors are insured, within the limits and subject to the limitations of the
policy, against certain losses arising from any claim or claims made against
them in their respective capacities of directors or officers. The policy also
provides for reimbursement to the Registrant for any indemnification of
officers and directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Registrant is a newly formed corporation and, as such, will not
previously have engaged in the issuance or sale of securities other than 100
shares of common stock to Equality Savings and Loan Association, F.A. in
connection with the organization of the Registrant, which shares will be
canceled in the Conversion and Reorganization.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The Exhibits filed herewith are set forth on the Exhibit Index.
(b) The financial statement schedules have been omitted because they are
inapplicable or because the information is provided elsewhere in the
Consolidated Financial Statements and Notes thereto included in the
Prospectus.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement,
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "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; provided, however, that any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(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 deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ST. LOUIS, STATE OF
MISSOURI, ON JUNE 26, 1997.
Equality Bancorp, Inc.
(Registrant)
/s/ Richard C. Fellhauer
By: _________________________________
Richard C. Fellhauer
Chairman of the Board, President,
Chief
Executive Officer and Director
Each person whose signature appears below hereby constitutes and appoints
Richard C. Fellhauer and Michael A. Deelo, and each of them, the true and
lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, fully to all intents and purposes as the undersigned might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES SET FORTH OPPOSITE THEIR NAMES AND ON JUNE 26, 1997:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Richard C. Fellhauer Chairman of the Board, President, Chief
___________________________________________ Executive Officer and Director (Principal
Richard C. Fellhauer Executive Officer)
/s/ Michael A. Deelo Treasurer, Chief Financial Officer and
___________________________________________ Director (Principal Financial Officer and
Michael A. Deelo Principal Accounting Officer)
/s/ LeRoy C. Crook Director
___________________________________________
LeRoy C. Crook
/s/ Kenneth J. Hrdlicka Director
___________________________________________
Kenneth J. Hrdlicka
/s/ Michael J. Walsh Director
___________________________________________
Michael J. Walsh
/s/ Daniel C. Aubuchon Director
___________________________________________
Daniel C. Aubuchon
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Stacey W. Braswell Director
___________________________________________
Stacey W. Braswell
/s/ Berenice J. Mahacek Director
___________________________________________
Berenice J. Mahacek
/s/ Charles J. Wolter Director
___________________________________________
Charles J. Wolter
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM EXHIBIT
---- -------
<C> <S> <C> <C>
1. Underwriting agreement 1.1 Engagement Letter with Trident
Securities, Inc.
1.2 Form of Agency Agreement with Trident
Securities, Inc.*
2. Plan of acquisition, 2.1 Amended Plan of Conversion and
reorganization, arrangement, Reorganization of First Missouri
liquidation, or succession Financial, M.H.C. and Equality Savings
and Loan Association, F.A.
3. Articles of Incorporation 3.1 Certificate of Incorporation of
and Bylaws Registrant as filed in Delaware on May
14, 1997
3.2 Bylaws of Registrant as adopted by the
Board of Directors of Registrant on
June 20, 1997
4. Instruments defining the 4.1 Specimen Stock Certificate of
rights of holders, incl. Registrant
indentures
4.2 Articles IV, V, VI, VII, XI, XII,
XIII, XIV, XVI and XVII of the
Registrant's Certificate of
Incorporation (see Exhibit 3.1)
4.3 Articles II, III, IV, VIII and XI of
the Registrant's Bylaws (see Exhibit
3.2)
5. Opinion re: legality 5.1 Opinion of Schiff Hardin & Waite,
counsel to the Registrant
8. Opinion re: tax matters 8.1 Form of Opinion of KPMG Peat Marwick
LLP regarding federal income tax
consequences and Missouri income tax
consequences of the Conversion and
Reorganization
10. Material contracts 10.1 Equality Savings and Loan Association
1993 Stock Option and Incentive Plan
10.2 Credit Agreement between Registrant
and Equality Savings and Loan
Association, F.A. Employee Stock
Ownership Plan
10.3 Equality Bancorp, Inc. 1997 Stock
Option and Incentive Plan
10.4 Equality Bancorp, Inc. 1997 Management
Development and Recognition Plan
10.5 Form of Employment Agreement to be
entered into between Equality Bancorp,
Inc. and Richard C. Fellhauer
10.6 Form of Employment Agreement to be
entered into between Equality Bancorp,
Inc. and Michael A. Deelo
10.7 Form of Employment Agreement to be
entered into between Equality Bancorp,
Inc. and Leonard O. Wolter
21. Subsidiaries of the 21.1 List of subsidiaries of the Registrant
registrant
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
ITEM EXHIBIT
---- -------
<C> <S> <C> <C>
23. Consent of experts and 23.1 Consent of KPMG Peat Marwick LLP (and
counsel included in Exhibit 8.1)
23.2 Consent of Schiff Hardin & Waite
(contained in the opinion filed as
Exhibit 5.1)
23.3 Consent of RP Financial, L.C.
23.4 Consent of Rubin, Brown, Gornstein &
Co. LLP
24. Power of attorney 24.1 Powers of attorney are included on the
signature page to the Registration
Statement
27. Financial Data Schedule 27.1 Financial Data Schedule
99. Additional exhibits 99.1 Engagement Letter with RP Financial,
L.C. as Appraiser
99.2 Appraisal Report of RP Financial, L.C.
99.3 Stock Order Form and Order Form
Instructions for Offering
99.4 Proxy Statement for Special Meeting of
Members of First Missouri Financial,
M.H.C.
99.5 Form of Proxy for Special Meeting of
Members of First Missouri Financial,
M.H.C.
</TABLE>
- --------
* To be filed by amendment.
II-6
<PAGE>
TRIDENT SECURITIES, INC.
4601 SIX FORKS ROAD, SUITE 400
RALEIGH, NORTH CAROLINA 27609
TELEPHONE (919) 781-8900
FACSIMILE (919) 787-1670
MAY 16, 1997
Board of Directors
Equality Savings and Loan Association, FA
4131 South Grand Blvd.
St. Louis, Missouri 63118
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Equality Savings and Loan Association, FA, St.
Louis, Missouri (the "Association") concerning our investment banking services
in connection with the Association's second-step mutual-to-stock conversion. The
conversion will involve (i) the organization of Equality Bancorp, Inc. ("EBI")
as a unitary savings and loan holding company under the Home Owners' Loan Act,
which company will be chartered under the laws of Delaware and will become the
new stock-based holding company for the Association upon completion of the
conversion, (ii) the elimination of First Missouri Financial, M.H.C., the
Association's mutual holding company, (iii) the conversion of each of the issued
and outstanding shares of common stock of the Association (other than shares of
common stock owned by First Missouri Financial, M.H.C.) into a right to receive
a number of shares of common stock of EBI pursuant to an exchange ratio that
ensures that after the conversion the minority stockholders will own the same
aggregate percentage of EBI's common stock as they currently own of the
Association's common stock, and (iv) the offer and sale by EBI of additional
shares of its common stock in a subscription and community offering according to
certain preference categories provided for in regulations of the Office of
Thrift Supervision (the "OTS").
Trident is prepared to assist the Association and EBI in connection with the
offering of EBI's shares of common stock during the subscription offering and
community offering as such terms are defined in the Association's Plan of
Conversion and Agreement and Plan of Reorganization. The specific terms of the
services contemplated hereunder shall be set forth in a definitive sales agency
agreement (the "Agreement") between Trident and the Association to be executed
on the date the offering circular/prospectus is declared effective by the
appropriate regulatory authorities. The price of the shares during the
subscription offering and community offering will be the price established by
EBI's Board of Directors, based upon an independent appraisal as approved by the
appropriate regulatory authorities.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the
Association and EBI in the sale of EBI's common stock during the subscription
offering and community offering. Trident will use its best efforts to accomplish
a distribution of the shares of EBI common stock which is consistent with the
goals of the Association and EBI and the policies of the OTS. Services which
will be provided, at the request of management, include but are not limited to
those services outlined in Attachment I. All activities of Trident will be
performed in compliance with applicable federal and state laws and regulatory
requirements. Additionally, Trident may enter into agreements with other
National
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
May 16, 1997
Page 2
Association of Securities Dealers, Inc., ("NASD") member firms to act as
selected dealers, assisting in the sale of the common stock. Trident and the
Association will determine the selected dealers to assist the Association during
the community offering. At the appropriate time, Trident in conjunction with its
counsel, will conduct an examination of the relevant documents and records of
the Association as Trident deems necessary and appropriate. To facilitate this
process, the Association will make all documents, records and other information
deemed necessary by Trident or its counsel available to them upon request.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Association:
1. A management fee in the amount of $90,000.
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by Trident and the Association to reflect market requirements
at the time of the stock allocation in a Syndicated Community
Offering.
3. The foregoing fees and commissions are to be payable to Trident at
closing as defined in the Agreement to be entered into between the
Association and Trident.
4. Trident shall be reimbursed for reasonable allocable expenses incurred
by them, including legal fees, whether or not the Agreement is
consummated. Trident's out-of-pocket expenses shall not exceed $7,500
and its legal fees shall not exceed $22,500. The Association shall
forward to Trident a check in the amount of $7,500 as an advance
payment to defray the allocable expenses of Trident.
It further is understood that the Association will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either Trident's attorneys or its
attorneys relating to any required state securities law filings, telephone
charges, air freight, rental equipment, supplies, transfer agent charges, fees
relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material dealings
within the last 12 months between the Association and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Association has any affiliation with the NASD; (d) except as
contemplated by this engagement letter with Trident, the Association has no
financial or management consulting contracts outstanding with any other person;
(e) the Association has not granted Trident a right of first refusal with
respect to the underwriting of any future offering of the Association stock; and
(f) there has been no intermediary between Trident and the Association in
connection with the public offering of the Association's shares, and no person
is being compensated in any manner for providing such service.
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
May 16, 1997
Page 3
The Association agrees to indemnify and hold harmless Trident and each person,
if any, who controls the firm against all losses, claims, damages or
liabilities, joint or several and all legal or other expenses reasonably
incurred by them in connection with the investigation or defense thereof
(collectively, "Losses"), to which they may become subject under the securities
laws or under the common law, that arise out of or are based upon the conversion
or the engagement hereunder of Trident, but only if Trident has acted grossly
negligent or in bad faith. If the foregoing indemnification is unavailable for
any reason, the Association agrees to contribute to such Losses in the
proportion that its financial interest in the conversion bears to that of the
indemnified parties. If the Agreement is entered into with respect to the common
stock to be issued in the conversion, the Agreement shall provide for
indemnification, which shall be in addition to any rights that Trident or any
other indemnified party may have at common law or otherwise. The indemnification
provision of this paragraph shall be superseded by the indemnification
provisions of the Agreement entered into by the Association and Trident.
Trident acknowledges that certain information obtained by it during the course
of its due diligence examination of the Association and EBI may be confidential.
Trident will maintain the confidentiality of such information consistent with
its traditional practices and will disclose such information only as needed to
fulfill its obligations hereunder or as required by law. It is further agreed by
Trident that account/customer data shall be strictly safeguarded and not used,
made available to, or otherwise employed by Trident, any related or controlling
entity, or by any of their respective employees or agents, except as necessary
in connection with the conversion and conversion-related services contemplated
hereunder, including acting as a market maker in EBI common stock following the
conversion.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (4) above with regard to the obligation to reimburse
Trident for allocable expenses to be incurred prior to the execution of the
Agreement, the immediately preceding paragraph regarding confidentiality and the
indemnity described in the paragraph preceding the confidentiality paragraph.
While Trident and the Association agree in principle to the contents hereof and
propose to proceed promptly, and in good faith, to work out the arrangements
with respect to the proposed offering, any legal obligations between Trident and
the Association shall be only as set forth in a duly executed Agreement. Such
Agreement shall be in form and content satisfactory to Trident and the
Association, as well as their counsel, and Trident's obligations thereunder
shall be subject to, among other things, there being in Trident's opinion no
material adverse change in the condition or obligations of the Association or no
market conditions which might render the sale of the shares by EBI hereby
contemplated inadvisable.
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
May 16, 1997
Page 4
Please acknowledge your agreement to the foregoing by signing below and
returnng to Trident one copy of this letter along with the advance payment
of $7,500. This proposal is open for your acceptance for a period of thirty
(30) days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ R. Lee Burrows, Jr.
-------------------------
R. Lee Burrows, Jr.
Managing Director
Agreed and accepted to this 19th day
of May, 1997
EQUALITY SAVINGS AND LOAN ASSOCIATION, FA
By: /s/ Richard C. Fellhauer
-----------------------------
Richard C. Fellhauer
Chairman, President and CEO
<PAGE>
EXHIBIT 2.1
-----------
PLAN OF CONVERSION AND REORGANIZATION
OF
FIRST MISSOURI FINANCIAL, M.H.C.
AND
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
As Adopted on May 16, 1997
As Amended on June 20, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
GENERAL.......................................................... 1
ARTICLE II
DEFINITION....................................................... 3
ARTICLE III
GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION.............. 10
ARTICLE IV
CONVERSION STOCK OFFERING........................................ 13
ARTICLE V
LIQUIDATION ACCOUNT.............................................. 24
ARTICLE VI
DISSENTING STOCKHOLDERS.......................................... 26
ARTICLE VII
EFFECTIVE TIME OF CONVERSION AND REORGANIZATION.................. 26
ARTICLE VIII
EFFECTIVE TIME OF CONVERSION AND REORGANIZATION.................. 26
ARTICLE IX
MISCELLANEOUS.................................................... 28
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN................................. 30
</TABLE>
Annex A Plan of Merger between First Missouri Financial, M.H.C. and Equality
Savings and Loan Association, F.A.
Annex B Plan of Merger between Equality Savings and Loan Association, F.A. and
Interim II Savings and Loan Association, F.A.
<PAGE>
ARTICLE I
GENERAL
For purposes of this Article I, all capitalized terms have the meanings
ascribed to them in Article II.
On October 22, 1993, Equality Savings and Loan Association, a Missouri-
chartered mutual savings and loan association (the "State Mutual Association"),
reorganized into the mutual holding company form of organization. To
accomplish the mutual holding company formation, the State Mutual Association
organized a Missouri-chartered stock savings and loan association under the name
"Equality Savings and Loan Association" (the "State Stock Association") as a
wholly-owned subsidiary. The State Mutual Association then transferred
substantially all of its assets and liabilities to the State Stock Association
in exchange for 456,400 shares of State Stock Association Common Stock, and
reorganized itself into a federally-chartered mutual holding company known as
First Missouri Financial, M.H.C. The State Stock Association simultaneously
sold 380,000 shares of State Stock Association Common Stock to certain eligible
depositors and other members of State Mutual Association and the general public.
On June 13, 1995, the State Stock Association converted to a federally-
chartered stock savings and loan association (the "State-to-Federal Conversion")
and simultaneously changed its name to "Equality Savings and Loan Association,
F.A." (the "Federal Stock Association"). In connection with the State-to-
Federal Conversion, all of the issued and outstanding shares of common stock of
State Stock Association converted into shares of common stock of Federal Stock
Association. As of the date of adoption of this Plan of Conversion, 836,400
shares of Federal Stock Association Common Stock were issued and outstanding,
and the Mutual Holding Company and the Public Stockholders own an aggregate of
53.2 percent and 46.8 percent of the outstanding Federal Stock Association
Common Stock, respectively.
The Boards of Directors of the Mutual Holding Company and the Association
believe that a conversion of the Mutual Holding Company to stock form and the
reorganization of the Association pursuant to this Plan of Conversion is in the
best interests of the Mutual Holding Company and the Association, as well as the
best interests of the respective Members and Public Stockholders. The Boards of
Directors determined that this Plan of Conversion equitably provides for the
interests of Members through the granting of subscription rights and the
establishment of a liquidation account. The Conversion and Reorganization will
result in the Association being wholly owned by a stock holding company, which
is a more common structure and form of ownership than a mutual holding company.
In addition, the Conversion and Reorganization will result in the raising of
additional equity capital for the Association and the Holding Company and is
expected to result in a more active and liquid market for the Holding Company
Common Stock than currently exists for the Association Common Stock, although
there can be no assurances that this will be the case. Finally, the Conversion
and Reorganization has been structured to reunite the accumulated earnings and
profits tax attribute retained by the Mutual Holding Company with the retained
earnings of the Association through a tax-free reorganization. This will
increase the Association's ability to pay dividends in the future.
1
<PAGE>
If the Association had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of Association Common Stock to be sold than
resulted in the amount of net proceeds raised in connection with the formation
of the Mutual Holding Company. In addition, if a standard conversion had been
conducted in 1993, management of the Association believed that it would have
been difficult to profitably invest the larger amount of capital that would have
been raised, when compared to the amount of net proceeds raised in connection
with the formation of the Mutual Holding Company. A standard conversion in 1993
also would have immediately eliminated all aspects of the mutual form of
organization.
Subsequent to the formation of the Mutual Holding Company, there have been
certain changes in the regulations and policies of the OTS relating to mutual
holding companies. In recent years, the U.S. Congress has proposed major
overhauls to the structure of the thrift industry that include eliminating the
federal savings association charter, which is the charter the Association
currently operates under. These proposals also have created uncertainty
concerning the future of the mutual form of ownership. In addition, since the
Association's Mutual Holding Company Reorganization in 1993, the Boards of
Directors of the Mutual Holding Company and the Association have realized a need
to create additional liquidity for the Association's Common Stock and believe
the Holding Company and the Association can effectively deploy the additional
equity capital raised in the Conversion and Reorganization. In light of the
foregoing, the Boards of Directors of the Mutual Holding Company and the
Association believe that it is in the best interests of such companies and their
respective Members and Stockholders to undertake the Conversion and
Reorganization at this time.
In connection with the Conversion and Reorganization, the Association will
form a new first-tier, wholly-owned subsidiaries known as Equality Bancorp,
Inc., which will become the Holding Company upon consummation of the Conversion
and Reorganization. The Holding Company will in turn form Interim (as
hereinafter defined) as a wholly-owned subsidiary. As described in more detail
in Article III, the Mutual Holding Company will convert from the mutual form to
a federal interim stock savings association and simultaneously merge with and
into the Association pursuant to the Plan of Merger included as Annex A hereto,
-------
pursuant to which the Mutual Holding Company will cease to exist and a
liquidation account will be established by the Association for the benefit of
depositor Members as of specified dates. Interim will then merge with and into
the Association pursuant to the Plan of Merger between Equality Savings and Loan
Association, F.A. and Interim II Savings and Loan Association, F.A. included as
Annex B hereto, pursuant to which the Association will become a wholly-owned
- -------
subsidiary of the Holding Company and, in connection therewith, each share of
Association Common Stock held by the Public Stockholders outstanding
immediately prior to the effective time thereof shall be automatically
converted, without further action by the holder thereof, into and become the
right to receive shares of Holding Company Common Stock based on the Exchange
Ratio, plus cash in lieu of any fractional share interest. Simultaneous with the
completion of the Conversion and Reorganization, the Association will amend its
federal stock charter to, among other things, change its name to "Equality
Savings Bank."
In connection with the Conversion and Reorganization, the Holding Company
will offer shares of Conversion Stock in the Offerings as provided herein.
Shares of Conversion Stock will
2
<PAGE>
be offered in a Subscription Offering in descending order of priority to
Eligible Account Holders, Employee Stock Benefit Plans, Supplemental Eligible
Account Holders, Other Members, Directors, Officers and Employees and Public
Stockholders. Any shares of Conversion Stock remaining unsold after the
Subscription Offering will be offered for sale to the public through a Community
Offering, or, if feasible, in a Public Offering, as determined by the Boards of
Directors of the Holding Company and the Association in their sole discretion.
This Plan was adopted by the Boards of Directors of the Mutual Holding
Company and the Association on May 16, 1997 by a vote of not less than two-
thirds of their entire membership.
The Plan of Merger between the Mutual Holding Company and the Association,
which is attached to the Plan as Annex A, and the Plan of Merger between the
-------
Association and Interim, which is attached to the Plan as Annex B, must be
-------
approved by the holders of at least two-thirds of the outstanding Association
Common Stock at the Stockholders' Meeting. The Plan of Merger between the
Association and Interim, which is attached to the Plan as Annex B, also must be
-------
approved by the Holding Company, as the sole stockholder of Interim, by written
consent.
Furthermore, the Primary Parties have conditioned the consummation of the
Conversion and Reorganization on the approval of the Plan of Conversion and the
Plans of Merger by at least a majority of the votes cast, in person or by proxy,
by the Public Stockholders at the Stockholders' Meeting. This Plan is subject
to the approval of the OTS, and it also must be approved by at least a majority
of the total outstanding votes of the Voting Members of the Mutual Holding
Company at the Special Meeting, which votes may be cast in person or by proxy.
After the Conversion and Reorganization, the Association will continue to
be regulated by the OTS, as its chartering authority, and by the FDIC, which
insures the Association's deposits. In addition, the Association will continue
to be a member of the Federal Home Loan Bank System and all insured savings
deposits will continue to be insured by the FDIC and the SAIF up to the maximum
amounts provided by law.
ARTICLE II
DEFINITIONS
In addition to terms defined elsewhere in this Plan, for purposes of this
Plan, the following terms shall have the following meanings:
SECTION 2.1 "ACTING IN CONCERT": The term Acting in Concert means:
----------- --------------------
(a) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether pursuant to an express agreement;
or
(b) 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.
3
<PAGE>
For purposes of this Plan, a Person or company that acts in concert with another
Person or company ("other party") shall also be considered to be acting in
concert with any Person or company who is also acting in concert with that other
party, provided that any Employee Plan shall not be considered to be acting in
--------
concert with its trustee or a Person who serves in a similar capacity solely to
determine whether stock held by the trustee and stock held by such Employee Plan
shall be aggregated. Persons who are Acting in Concert may be referred to in
this Plan as a "Group Acting in Concert."
SECTION 2.2 "ACTUAL PURCHASE PRICE": The term Actual Purchase Price
----------- ------------------------
means the per share price at which Conversion Stock is ultimately sold by the
Holding Company in the Offerings in accordance with the terms hereof.
SECTION 2.3 "ASSOCIATE": The term Associate, when used to indicate a
----------- ------------
relationship with any Person, means:
(a) any corporation or organization (other than the Mutual Holding
Company, the Association, the Holding Company or a majority-owned subsidiary of
the Mutual Holding Company, the Association, or the Holding Company) of which
such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities; and
(b) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, except that the term "Associate" does not include any
Employee Plan in which a Person has a substantial beneficial interest or serves
as a trustee or in a similar fiduciary capacity; and
(c) any relative or spouse of such Person, or any relative of such spouse,
who has the same home as such Person or who is a director or officer of the
Association, any of its subsidiaries, the Mutual Holding Company or the Holding
Company.
SECTION 2.4 "ASSOCIATION": The term Association means Equality Savings
----------- --------------
and Loan Association, F.A. after its conversion to stock form in connection with
the Mutual Holding Company Reorganization.
SECTION 2.5 "ASSOCIATION COMMON STOCK": The term Association Common
----------- ---------------------------
Stock means the common stock of the Association, par value $1.00 per share.
SECTION 2.6 "ASSOCIATION MERGER": The term Association Merger means the
----------- ---------------------
merger of Interim with and into the Association pursuant to the Plan of Merger
included as Annex B hereto.
--------
SECTION 2.7 "COMMUNITY OFFERING": The term Community Offering means the
----------- ---------------------
offering for sale of shares of Conversion Stock to certain members of the
general public with a preference to Preferred Other Purchasers, concurrently
with or after completion of the Subscription Offering, to the extent shares of
Conversion Stock remain available after satisfying all subscriptions received in
the Subscription Offering and accepted by the Association and the Mutual Holding
Company.
4
<PAGE>
SECTION 2.8 "CONVERSION AND REORGANIZATION": The term Conversion and
----------- --------------------------------
Reorganization means (i) the conversion of the Mutual Holding Company from
mutual form to a federal interim stock savings association and the subsequent
Mutual Holding Company Merger, pursuant to which the Mutual Holding Company will
cease to exist, (ii) the Association Merger, pursuant to which the Association
will become a wholly-owned subsidiary of the Holding Company and, in connection
therewith, each share of Association Common Stock held by the Public
Stockholders outstanding immediately prior to the effective time thereof shall
automatically be converted, without further action by the holder thereof, into
and become the right to receive shares of Holding Company Common Stock based on
the Exchange Ratio, plus cash in lieu of any fractional share interest, and
(iii) the issuance of Conversion Stock by the Holding Company in the Offerings
as provided herein, which will increase the number of shares of Holding Company
Common Stock outstanding.
SECTION 2.9 "CONVERSION APPLICATION": The term Conversion Application
----------- -------------------------
means the Application for Approval of Conversion filed by the Mutual Holding
Company with the OTS for approval of the Conversion and Reorganization.
SECTION 2.10 "CONVERSION STOCK": The term Conversion Stock means Holding
------------ -------------------
Company Stock to be issued and sold by the Holding Company in the Offerings
pursuant to the Plan.
SECTION 2.11 "DEPOSIT ACCOUNT(S)": The term Deposit Account means
------------ ---------------------
withdrawable or repurchasable shares, investment certificates or deposits or
other savings accounts, including money market deposit accounts and negotiable
order of withdrawal accounts of the Association, owned by a Member.
SECTION 2.12 "DIRECTOR": The term Director means a member of the Board
------------ -----------
of Directors of the Association or the Mutual Holding Company, but does not
include an advisory director, honorary director, director emeritus or person
holding a similar position unless such person is otherwise performing functions
similar to those of a member of the Board of Directors of the Association or the
Mutual Holding Company.
SECTION 2.13 "DIRECTOR, OFFICER AND EMPLOYEE": The terms Director,
------------ ---------------------------------
Officer and Employee means the terms as applied respectively to any person who
is a Director, Officer or employee of the Mutual Holding Company, the
Association or any subsidiary thereof, or the Holding Company.
SECTION 2.14 "EFFECTIVE TIME OF THE CONVERSION AND REORGANIZATION": The
------------ ------------------------------------------------------
term Effective Time of the Conversion and Reorganization shall mean the date and
time at which the Conversion is deemed to occur and be effective in accordance
with Article VII hereof.
SECTION 2.15 "ELIGIBLE ACCOUNT HOLDER": The term Eligible Account
------------ --------------------------
Holder means the holder of a Qualifying Deposit in the Association on March 31,
1996.
SECTION 2.16 "ELIGIBILITY RECORD DATE": The term Eligibility Record Date
------------ --------------------------
means March 31, 1996.
5
<PAGE>
SECTION 2.17 "EMPLOYEE PLAN": The term Employee Plan means any employee
------------ ----------------
stock benefit plans, MRPs and Stock Option Plans approved by the Board of
Directors of the Association or the Holding Company.
SECTION 2.18 "EMPLOYEE STOCK BENEFIT PLAN": The term Employee Stock
------------ ------------------------------
Benefit Plan means any defined benefit plan or defined contribution plan of the
Association or the Holding Company other than an MRP, such as an employee stock
ownership plan, employee stock bonus plan, profit-sharing plan or other plan,
which, with its related trust, meets the requirements to be "qualified" under
Section 401 of the Internal Revenue Code.
SECTION 2.19 "ESTIMATED PRICE RANGE": The term Estimated Price Range
------------ ------------------------
means the range of the estimated pro forma market value of the Conversion Stock
as determined by an independent appraiser prior to the Subscription Offering,
pursuant to the OTS's Conversion Regulations, and as may be amended from time to
time thereafter.
SECTION 2.20 "EXCHANGE RATIO": The term Exchange Ratio means the rate at
------------ -----------------
which shares of Holding Company Common Stock will be exchanged for shares of
Association Common Stock held by the Public Stockholders in connection with the
Association Merger. The exact rate shall be determined by the Board of
Directors of the Mutual Holding Company and the Association in order to ensure
that upon consummation of the Conversion and Reorganization the Public
Stockholders will own in the aggregate approximately the same percentage of the
Holding Company Common Stock to be outstanding upon completion of the Conversion
and Reorganization as the percentage of Association Common Stock owned by them
in the aggregate immediately prior to consummation of the Conversion and
Reorganization, before giving effect to (a) cash paid in lieu of any fractional
interests of Holding Company Common Stock and (b) any shares of Conversion Stock
purchased by the Public Stockholders in the Offerings or tax-qualified employee
stock benefit plans thereafter.
SECTION 2.21 "EXCHANGE SHARES": Exchange Shares means the shares of
------------ ------------------
Holding Company Common Stock to be issued to the Public Stockholders in
connection with the Association Merger.
SECTION 2.22 "FEDERAL STOCK ASSOCIATION": The term Federal Stock
------------ ----------------------------
Association means Equality Savings and Loan Association, F.A., organized as a
federal capital stock savings association.
SECTION 2.23 "HOLDING COMPANY": The term Holding Company means Equality
------------ ------------------
Bancorp, Inc., a corporation to be organized under the laws of the State of
Delaware. Such corporation will be initially formed as a first-tier, wholly-
owned subsidiary of the Association. Upon completion of the Conversion and
Reorganization, the Holding Company shall hold all of the outstanding capital
stock of the Association.
SECTION 2.24 "HOLDING COMPANY APPLICATION": The term Holding Company
------------ ------------------------------
Application means the application to the OTS on Application H-(e)1-S for
approval of the Holding Company's acquisition of control of the Association
pursuant to the Conversion and Reorganization.
6
<PAGE>
SECTION 2.25 "HOLDING COMPANY STOCK:" The term Holding Company Stock
------------ ------------------------
means the common stock of the Holding Company, par value $.01 per share, which
is issued in the Conversion and Reorganization as Conversion Stock and Exchange
Shares.
SECTION 2.26 "INTERIM": The term Interim means Interim II Savings and
------------ ----------
Loan Association, F.A., which will be formed as a first tier, wholly-owned
subsidiary of the Holding Company to facilitate the Association Merger.
SECTION 2.27 "MARKET MAKER": The term Market Maker means a dealer (i.e.,
------------ --------------- ----
any person who engages either for all or part of his time, directly or
indirectly, as agent, broker, or principal, in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another person)
who, with respect to a particular security, (a) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (b) furnishes bona fide competitive bid and offer quotations on
request; and (c) is ready, willing and able to effect transactions in reasonable
quantities at his or her quoted prices with other brokers or dealers.
SECTION 2.28 "MAXIMUM PURCHASE PRICE": The term Maximum Purchase Price
---------- -------------------------
means the per share price at which Conversion Stock is offered for sale in the
Subscription Offering and the Community Offering.
SECTION 2.29 "MEMBERS": The term Members means all persons or entities
------------ ----------
who qualify as members of the Mutual Holding Company pursuant to its charter and
bylaws, as in effect prior to the Conversion and Reorganization, and the laws of
the United States.
SECTION 2.30 "MRPS": The term MRPs means any management recognition
------------ -------
plan(s) established by the Holding Company to induce certain Directors, Officers
and Employees of the Holding Company and the Association to serve the Holding
Company and the Association following the Conversion and Reorganization through
awards of Holding Company Stock in accordance with the terms and conditions of
this Plan and the documents establishing the MRPs.
SECTION 2.31 "MUTUAL HOLDING COMPANY": The term Mutual Holding Company
------------ -------------------------
means First Missouri Financial, M.H.C., a federally-chartered mutual holding
company under the Home Owners' Loan Act.
SECTION 2.32 "MUTUAL HOLDING COMPANY MERGER": The term Mutual Holding
------------ --------------------------------
Company Merger means the merger of the Mutual Holding Company (following its
conversion into a federal interim stock savings association -- Interim I Savings
and Loan Association, F.A.) with and into the Association pursuant to the Plan
of Merger included as Annex A hereto.
-------
SECTION 2.33 "MUTUAL HOLDING COMPANY REORGANIZATION": The term Mutual
------------ ----------------------------------------
Holding Company Reorganization means the State Mutual Association's formation of
the Mutual Holding Company in 1993, including State Stock Association's issuance
of State Stock Association Common Stock to the Public Stockholders.
7
<PAGE>
SECTION 2.34 "NET PROCEEDS": The term Net Proceeds means the number of
------------ ---------------
shares of Conversion Stock sold in the Offerings multiplied by the Actual
Purchase Price, less the expenses incurred and payable by the Holding Company to
complete the Conversion and Reorganization.
SECTION 2.35 "OFFERINGS": The term Offerings means the Subscription and
------------ ------------
Community Offerings.
SECTION 2.36 "OFFICER": The term Officer means an executive officer of
------------ ---------
the Mutual Holding Company or the Association which includes the Chairman of the
Board, President, Vice Presidents, Secretary, Treasurer or principal financial
officer, Comptroller or principal accounting officer, and any other person
performing similar functions.
SECTION 2.37 "ORDER FORMS": The term Order Forms means forms to be
------------ --------------
used for the purchase of Conversion Stock sent to Eligible Account Holders and
other parties eligible to purchase Conversion Stock in the Offerings pursuant to
the Plan.
SECTION 2.38 "OTHER MEMBERS": The term Other Members means Members
------------ ----------------
(other than Eligible Account Holders and Supplemental Eligible Account Holders)
as of the Voting Record Date for the Special Meeting.
SECTION 2.39 "OTS": The term OTS means the Office of Thrift Supervision
------------ -----
or any successor thereto.
SECTION 2.40 "OTS'S CONVERSION REGULATIONS": The term OTS's Conversion
------------ -------------------------------
Regulations means the regulations of the OTS governing conversions of federally-
chartered savings associations from the mutual to the stock form of ownership,
as set forth at 12 C.F.R. (S) 563b et. seq.
--------
SECTION 2.41 "PARTICIPANT": The term Participant means any Eligible
------------ --------------
Account Holders, Employee Stock Benefit Plans, Supplemental Eligible Account
Holder, Other Members, Directors, Officers and Employees and Public
Stockholders as of the Voting Record Date.
SECTION 2.42 "PERSON": The term Person means an individual, a
------------ ---------
corporation, a partnership, an association, a joint stock company, a trust, an
unincorporated organization or a government or any political subdivision
thereof.
SECTION 2.43 "PLAN AND PLAN OF CONVERSION": The terms Plan and Plan of
------------ ------------------------------
Conversion mean this Plan of Conversion and Reorganization as adopted by the
Boards of Directors of the Mutual Holding Company and the Association and any
amendment hereto approved as provided herein. The Board of Directors of the
Holding Company shall adopt this Plan as soon as practicable following its
organization, and the Board of Directors of Interim shall adopt the Plan of
Merger included as Annex B hereto as soon as practicable following its
-------
organization.
SECTION 2.44 "PLAN OF MERGER:" The term Plan of Merger means the Plan of
------------ -----------------
Merger between First Missouri Financial, M.H.C. and Equality Savings and Loan
Association, F.A. as attached to this Plan as Annex A or the Plan of Merger
-------
between Equality Savings and Loan
8
<PAGE>
Association, F.A. and Interim II Savings and Loan Association, F.A. as attached
to this Plan as Annex B, as the case may be. References herein to "Plans of
-------
Merger" refer to Annex A and Annex B.
------- -------
SECTION 2.45 "PREFERRED OTHER PURCHASERS": The term Preferred Other
------------ -----------------------------
Purchasers means natural persons who reside in the Missouri counties of St.
Louis City, St Louis, Jefferson, St. Charles and Franklin.
SECTION 2.46 "PRIMARY PARTIES": The term Primary Parties means the Mutual
------------ ------------------
Holding Company, the Association and the Holding Company.
SECTION 2.47 "PROSPECTUS": The term Prospectus means the document by
------------ -------------
which the shares of Conversion Stock are offered for sale, as authorized for use
in connection with the Conversion and Reorganization by the SEC and the OTS.
SECTION 2.48 "PUBLIC OFFERING": The term Public Offering means the
------------ ------------------
offering for sale of shares of Conversion Stock to members of the general
public, after completion of the Subscription Offering and the Community
Offering, to the extent shares of Conversion Stock remain available after
satisfying all subscriptions received in the Subscription Offering and all
orders received in the Community Offering are accepted by the Association and
the Mutual Holding Company.
SECTION 2.49 "PUBLIC STOCKHOLDERS": The term Public Stockholders means
------------ ----------------------
those Persons who own shares of Association Common Stock, excluding the Mutual
Holding Company.
SECTION 2.50 "QUALIFYING DEPOSIT": The term Qualifying Deposit means the
------------ --------------------
total of the deposit balances of the Deposit Accounts of an Eligible Account
Holder or Supplemental Eligible Account Holder in the Association as of the
close of business on the Eligibility Record Date or, in the case of a
Supplemental Eligible Account Holder, the Supplemental Eligibility Record Date,
provided that Deposit Accounts of an Eligible Account Holder or Supplemental
- --------
Eligible Account Holder with total deposit balances of less than $50 shall not
constitute a Qualifying Deposit.
SECTION 2.51 "REGISTRATION STATEMENT": The term Registration Statement
------------ -------------------------
means the registration statement on Form S-1 filed by the Holding Company with
the SEC.
SECTION 2.52 "SAIF": the term SAIF means the Savings Association
------------ -------
Insurance Fund of the FDIC.
SECTION 2.53 "SEC": The term SEC means the Securities and Exchange
------------ ------
Commission.
SECTION 2.54 "SPECIAL MEETING": The term Special Meeting means the
------------ -----------------
special meeting of members of the Mutual Holding Company called for the purpose
of submitting this Plan to the Members for their approval, including any
adjournments thereof.
SECTION 2.55 "STATE MUTUAL ASSOCIATION": The term State Mutual
------------ ---------------------------
Association means Equality Savings and Loan Association organized as a Missouri-
chartered mutual savings and loan association prior to its conversion to a State
Stock Association in 1993.
9
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SECTION 2.56 "STATE STOCK ASSOCIATION": The term State Stock Association
------------ --------------------------
means Equality Savings and Loan Association organized as a Missouri-chartered
capital stock savings and loan association subsequent to the Mutual Holding
Company Reorganization in 1993.
SECTION 2.57 "STATE STOCK ASSOCIATION COMMON STOCK": The term State
------------ ---------------------------------------
Stock Association Common Stock means the shares of common stock, $1.00 par value
per share, issued by the State Stock Association and outstanding prior to the
State-to-Federal Conversion.
SECTION 2.58 "STATE-TO-FEDERAL CONVERSION": The term State-to-Federal
------------ ------------------------------
Conversion means the conversion of the State Stock Association to a Federal
Stock Association in 1995.
SECTION 2.59 "STOCKHOLDERS' MEETING": The terms Stockholders' Meeting
------------ ------------------------
means the annual or special meeting of stockholders of the Association called
for the purpose of submitting the Plan of Conversion, the Plan of Merger
included as Annex A hereto and the Plan of Merger included as Annex B hereto to
------- -------
the stockholders for their approval, including any adjournments of such meeting.
SECTION 2.60 "STOCK OPTION PLAN": The term Stock Option Plan means any
------------ --------------------
stock option plan adopted by the Holding Company providing for grants of options
to purchase Holding Company Stock to Directors, Officers and Employees in
accordance with the terms and conditions of this Plan and the documents
establishing the Stock Option Plan.
SECTION 2.61 "SUBSCRIBER": The term subscriber means any Person who
------------ -------------
subscribes for shares of Conversion Stock in the Subscription Offering or the
Community Offering.
SECTION 2.62 "SUBSCRIPTION OFFERING": The term Subscription Offering
------------ ------------------------
means the offering of shares of Conversion Stock to the Eligible Account
Holders, Employee Stock Benefit Plans, Supplemental Eligible Account Holders,
Other Members, Directors, Officers and Employees and Public Stockholders.
SECTION 2.63 "SUBSCRIPTION PRICE RANGE": The term "Subscription Price
------------ ---------------------------
Range" is the price range established by the Primary Parties prior to the
commencement of the Subscription Offering, and is based on an independent
appraisal.
SECTION 2.64 "SUBSCRIPTION RIGHTS": The term Subscription Rights means
------------ ----------------------
the non-transferable, non-negotiable, personal rights of the Eligible Account
Holders, Employee Stock Benefit Plans, Supplemental Eligible Account Holders,
Other Members, Directors, Officers, Employees and Public Stockholders to
subscribe for shares of the Conversion Stock in the Subscription Offering in
accordance with this Plan.
SECTION 2.65 "SUPPLEMENTAL ELIGIBILITY RECORD DATE": The term
------------ ---------------------------------------
Supplemental Eligibility Record Date means the last day of the calendar quarter
preceding the approval of the Plan by the OTS.
10
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SECTION 2.66 "SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER": The term
------------ --------------------------------------
Supplemental Eligible Account Holder means the holder of a Qualifying Deposit in
the Association (other than an Officer or Director or their Associates) on the
Supplemental Eligibility Record Date.
SECTION 2.67 "VOTING RECORD DATE": The term Voting Record Date means the
------------ --------------------
date or dates for determining the eligibility of Members to vote at the Special
Meeting and Stockholders to vote at the Stockholders' Meeting, as applicable.
ARTICLE III
GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION
(a) After the Association's organization of the Holding Company and the
receipt of all requisite regulatory approvals, the Holding Company will form
Interim as a first-tier, wholly owned subsidiary of the Holding Company, and the
Board of Directors of Interim shall adopt the Plan of Merger included as Annex B
-------
hereto by at least a two-thirds vote. In addition, the Holding Company shall
approve such Plan of Merger in its capacity as the sole stockholder of Interim.
(b) The Conversion Application shall be submitted to the OTS for approval.
The Mutual Holding Company and the Association also will cause notice of the
adoption of the Plan by the Boards of Directors of the Mutual Holding Company
and the Association to be given by publication in a newspaper having general
circulation in each community in which an office of the Association is located;
and will cause copies of the Plan to be made available at each office of the
Mutual Holding Company and the Association for inspection by Members. After
receipt of notice from the OTS to do so, the Mutual Holding Company and the
Association will post the notice of the filing of the Application for Conversion
in each of their offices and will again cause to be published, in accordance
with the requirements of applicable regulations of the OTS, a notice of the
filing with the OTS of an application to convert the Mutual Holding Company from
mutual to stock form.
(c) Promptly following receipt of requisite approval of the OTS, this Plan
will be submitted to the Members for their consideration and approval at the
Special Meeting. The Mutual Holding Company may, at its option, mail to all
Members as of the Voting Record Date, at their last known address appearing on
the records of the Mutual Holding Company and the Association, a proxy statement
in either long or summary form describing the Plan which will be submitted to a
vote of the Members at the Special Meeting. The Holding Company also shall mail
to all such Members (as well as other Participants) either a Prospectus and
Order Form for the purchase of Conversion Stock or a letter informing them of
their right to receive a Prospectus and Order Form and a postage prepaid card to
request such materials, subject to the provisions of Section 4.7 hereof. In
addition, all such Members will receive, or be given the opportunity to request
by returning a postage-prepaid card which will be distributed with the proxy
statement, letter or other written communication, a copy of the certificate of
incorporation and bylaws of the Holding Company.
(d) Subscription Rights to purchase shares of Conversion Stock will be
issued without payment therefor to Eligible Account Holders, Employee Stock
Benefit Plans, Supplemental Eligible Account Holders, Other Members, Directors,
Officers and Employees and Public Stockholders as of the Voting Record Date, as
set forth in Sections 4.2(a)(1), (2), (3), (4), (5) and (6) hereof.
11
<PAGE>
(e) The Association shall file preliminary proxy materials with the OTS in
order to seek the approval of the Plan and the Plans of Merger by the Public
Stockholders. Promptly following clearance of such proxy materials and the
receipt of any other requisite approval of the OTS, the Association will mail
definitive proxy materials to the Public Stockholders as of the Voting Record
Date, at their last known address appearing on the records of the Association,
for their consideration and approval of the Plan and the Plans of Merger at the
Stockholders' Meeting. The Plan and the Plans of Merger must be approved by the
holders of at least two-thirds of the outstanding Association Common Stock as of
the Voting Record Date. In addition, the Primary Parties have conditioned the
consummation of the Conversion and Reorganization on the approval of the Plan
and the Plans of Merger by at least a majority of the votes cast, in person or
by proxy, by the Public Stockholders at the Stockholders' Meeting.
(f) The Holding Company shall submit or cause to be submitted a Holding
Company Application to the OTS for approval of the acquisition of the
Association. Such application also shall include an application to form
Interim. In addition, an application to merge the Mutual Holding Company
(following its conversion into a federal interim stock savings association) and
the Association and an application to merge Interim and the Association shall be
filed with the OTS, either as exhibits to the Holding Company Application or
separately. All notices required to be published in connection with such
applications shall be published at the times required.
(g) The Holding Company shall file a Registration Statement with the SEC
to register the Holding Company Common Stock to be issued in the Conversion and
Reorganization under the Securities Act of 1933, as amended, and shall register
such Holding Company Common Stock under any applicable state securities laws,
unless exempt. Upon registration and after the receipt of all required
regulatory approvals, the Conversion Stock shall be first offered for sale in a
Subscription Offering to Eligible Account Holders, Employee Stock Benefit Plans,
Supplemental Eligible Account Holders, Other Members, Directors, Officers and
Employees and Public Stockholders as of the Voting Record Date. It is
anticipated that any shares of Conversion Stock remaining unsold after the
Subscription Offering will be sold through a Community Offering. The purchase
price per share for the Conversion Stock shall be a uniform price determined in
accordance with Section 4.1 hereof. The Holding Company shall contribute to the
Association an amount of the net proceeds received by the Holding Company from
the sale of Conversion Stock as shall be determined by the Boards of Directors
of the Holding Company and the Association and as shall be approved by the OTS.
(h) The effective date of the Conversion and Reorganization shall be the
date set forth in Article VII hereof. Upon the effective date, the following
transactions shall occur:
(i) The Mutual Holding Company shall convert from a mutual holding
company to a federal interim stock savings association and simultaneously
merge with and into the Association in the Mutual Holding Company Merger,
with the Association being the surviving institution. As a result of the
Mutual Holding Company Merger, (x) the shares of Association Common Stock
held by the Mutual Holding Company (following its conversion to a federal
interim stock savings association) shall be extinguished and (y) Eligible
Account Holders and Supplemental Account Holders will be granted interests
in the liquidation account to be established by the Association pursuant to
Article V hereof.
12
<PAGE>
(ii) Interim shall merge with and into the Association pursuant to
the Association Merger, with the Association being the surviving
institution. As a result of the Association Merger, (x) the shares of
Holding Company Common Stock held by the Association shall be extinguished;
(y) the shares of Association Common Stock held by the Public Stockholders
shall be converted into the right to receive shares of Holding Company
Common Stock based upon the Exchange Ratio, plus cash in lieu of any
fractional share interest based upon the Actual Purchase Price; and (z) the
shares of common stock of Interim held by the Holding Company shall be
converted into shares of Association Common Stock on a one-for-one basis,
with the result that the Association shall become a wholly-owned subsidiary
of the Holding Company. In addition, as a result of the Association Merger,
options to purchase shares of Association Common Stock which are
outstanding immediately prior to consummation of the Conversion and
Reorganization shall be converted into options to purchase shares of
Holding Company Common Stock, with the number of shares subject to the
option and the exercise price per share in be adjusted based upon the
Exchange Ratio so that the aggregate exercise price remains unchanged, and
with the duration of the option remaining unchanged.
(iii) The Holding Company shall sell the Conversion Stock in the
Offerings, as provided herein.
(i) The Primary Parties may retain and pay for the services of financial
and other advisors and investment bankers to assist in connection with any or
all aspects of the Conversion and Reorganization, including in connection with
the Offerings, the payment of fees to brokers and investment bankers for
assisting Persons in completing and/or submitting Order Forms. All fees,
expenses, retainers and similar items shall be reasonable.
(j) The Mutual Holding Company and the Association shall obtain an opinion
of counsel, an opinion of a certified public accounting firm or a favorable
ruling from the Internal Revenue Service that shall state that the Conversion
and Reorganization will not result in any gain or loss for federal income tax
purposes to the Mutual Holding Company, the Association, Eligible Account
Holders, Supplemental Eligible Account Holders, or Other Members, and a
comparable opinion or ruling from the State of Missouri taxing authorities shall
be obtained with respect to Missouri income tax laws. Receipt of favorable
opinions or rulings are conditions precedent to completion of the Conversion and
Reorganization.
ARTICLE IV
CONVERSION STOCK OFFERING
SECTION 4.1 NUMBER OF SHARES AND PURCHASE PRICE OF SHARES
----------- ---------------------------------------------
(a) All shares of Conversion Stock sold in the Conversion and
Reorganization shall be sold at a uniform price per share, referred to in this
Plan as the "Actual Purchase Price". The Actual Purchase Price and the total
number of shares to be issued in the Conversion and Reorganization shall be
determined by the Boards of Directors of the Primary Parties immediately prior
to the simultaneous completion of all such sales contemplated by this Plan on
the basis of the estimated pro forma market value of the Conversion Stock and
the Estimated Price Range. The
13
<PAGE>
estimated pro forma market value of the Conversion Stock shall be determined for
such purpose by an independent appraiser on the basis of such appropriate
factors as are not inconsistent with the OTS's Conversion Regulations.
(b) Immediately prior to the Subscription Offering, an Estimated Price
Range shall be established which shall vary from 15 percent above the average of
the minimum and maximum of such price range and the minimum of which shall be no
more than 15 percent below such average. The Maximum Purchase Price and the
number of shares offered in the Conversion shall then be determined within the
Subscription Price Range by the Boards of Directors of the Primary Parties. The
Estimated Price Range and Subscription Price Range may be revised after the
completion of the Subscription Offering with the approval of the OTS, without a
resolicitation of proxies or Order Forms or both. If upon completion of the
Conversion and Reorganization, the Actual Purchase Price is less than the
Maximum Purchase Price, the difference in such prices multiplied by the number
of shares sold to a Subscriber shall be refunded to such Subscriber unless the
Subscriber affirmatively elects to have the difference applied to the purchase
of additional shares of Conversion Stock.
(c) Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the independent appraiser
confirms to the Primary Parties and to the OTS that, to the best knowledge of
the independent appraiser, nothing of a material nature has occurred which,
taking into account all relevant factors, would cause the independent appraiser
to conclude that the aggregate value of Conversion Stock at the Actual Purchase
Price is incompatible with its estimate of the pro forma market value of the
Conversion Stock. If such confirmation is not received, the Mutual Holding
Company may cancel the Subscription Offering and Community Offering, hold a new
Subscription Offering and Community Offering or take such other action as the
OTS may permit.
(d) The Conversion Stock to be issued in the Conversion shall be fully
paid and nonassessable, unless subject to any limitations imposed by applicable
state corporate law.
SECTION 4.2 METHOD OF OFFERING SHARES
----------- -------------------------
The Conversion Stock shall be offered and sold in the Subscription Offering
and Community Offering, or in such other manner as the OTS may approve, as
hereinafter provided in this Section 4.2.
(a) SUBSCRIPTION OFFERING
---------------------
Subscription Rights shall be issued at no cost to Eligible Account
Holders, Employee Stock Benefit Plans, Supplemental Eligible Account Holders,
Other Members, Directors, Officers and Employees and Public Stockholders as of
the Voting Record Date pursuant to priorities established by this Plan and the
OTS's Conversion Regulations. The priorities established for the purchase of
shares are as follows:
(1) CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS
------------------------------------
14
<PAGE>
(A) Each Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Eligible Account Holder to purchase up to the
greater of (i) the number of shares of Conversion Stock that when combined with
Exchange Shares received aggregate $625,000 of Holding Company Common Stock (or
such maximum purchase limitation as may be established for the Community
Offering), (ii) one-tenth of one percent of the total offering of shares of
Conversion Stock in the Subscription Offering or (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total number
of shares of Conversion Stock to be issued in the Subscription Offering by a
fraction, of which the numerator is the amount of the Qualifying Deposit of the
Eligible Account Holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders, subject to Section 4.7 hereof.
(B) Subscription Rights received by Officers and Directors and their
Associates, as Eligible Account Holders, based on their increased deposits in
the Association in the one year period preceding the Eligibility Record Date
shall be subordinated to all other subscriptions involving the exercise of
Subscription Rights pursuant to this Category.
(C) In the event of an oversubscription for shares of Conversion
Stock by Eligible Account Holders pursuant to Section 4.2(a)(1)(A), available
shares shall 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 his or her total allocation equal to 100
shares or the total amount of his or her subscription, whichever is less.
Thereafter, any shares remaining shall be allocated among Eligible Account
Holders in the proportion that the amount of the Qualifying Deposit of each such
Eligible Account Holder bears to the total amount of the Qualifying Deposits of
all such Eligible Account Holders. If the amount of shares so allocated to one
or more Eligible Account Holders exceeds the amount subscribed for by such
Eligible Account Holder(s), the excess shall be reallocated (one or more times,
as necessary) among those Eligible Account Holders whose subscriptions are still
not fully satisfied on the same principle until all available shares have been
allocated or all subscriptions satisfied. No fractional shares shall be issued
in connection with the allocation of shares under this category.
(2) CATEGORY 2: EMPLOYEE STOCK BENEFIT PLANS
----------------------------------------
Each Employee Stock Benefit Plan shall receive, without payment,
Subscription Rights to purchase the number of shares of Conversion Stock
requested by such Employee Stock Benefit Plan, subject to (A) the availability
of sufficient shares of Conversion Stock after filling in full all subscription
orders of Eligible Account Holders and (B) the purchase limitations set forth in
Section 4.3 of this Plan. The Employee Stock Benefit Plans shall not be deemed
to be Associates of any Director, Officer or Employee. In the event that, after
completion of the Subscription Offering, the number of shares of Conversion
Stock to be issued is increased to an amount greater than the number of shares
representing the maximum of the Estimated Price Range included in the Prospectus
distributed in connection with the Subscription Offering (whether or not such
increase requires a resolicitation of Subscribers) ("Maximum Shares"), the
Employee Stock Benefit Plans shall have a priority right to purchase any such
shares exceeding the Maximum Shares up to the purchase limitations set forth in
Section 4.3 of this Plan.
(3) CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS
-------------------------------------------------
15
<PAGE>
(A) Supplemental Eligible Account Holders shall receive, without
payment, Subscription Rights entitling such Supplemental Eligible Account Holder
to purchase up to the greater of (i) number of shares of Conversion Stock that
when combined with Exchange Shares received aggregate $625,000 of Holding
Company Common Stock (or such maximum purchase limitation as may be established
for the Community Offering), (ii) one-tenth of one percent of the total offering
of shares of Conversion Stock in the Subscription Offering or (iii) 15 times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock to be issued in the Subscription
Offering by a fraction, of which the numerator is the amount of the Qualifying
Deposit of the Supplemental Eligible Account Holder and the denominator is the
total amount of the Qualifying Deposits of all Supplemental Eligible Account
Holders, subject to Section 4.7 hereof.
(B) Subscription Rights received pursuant to this Category shall be
subordinated to the Subscription Rights received by Eligible Account Holders and
the Employee Stock Benefit Plans.
(C) Any Subscription Rights to purchase shares of Conversion Stock
received by an Eligible Account Holder in accordance with Category 1 shall
reduce to the extent thereof the Subscription Rights to be distributed pursuant
to this Category.
(D) In the event of an oversubscription for shares of Conversion
Stock by Supplemental Eligible Account Holders pursuant to Section 4.2(a)(3)(A),
available shares shall 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 his or
her total allocation equal to 100 shares or the total amount of his or her
subscription, whichever is less. Thereafter, any shares remaining shall be
allocated among Supplemental Eligible Account Holders in the proportion that the
amount of the Qualifying Deposit of each such Supplemental Eligible Account
Holder bears to the total amount of the Qualifying Deposits of all such
Supplemental Eligible Account Holders. If the amount of shares so allocated to
one or more Supplemental Eligible Account Holders exceeds the amount subscribed
for by such Supplemental Eligible Account Holder(s), the excess shall be
reallocated (one or more times, as necessary) among those Supplemental Eligible
Account Holders whose subscriptions are still not fully satisfied on the same
principle until all available shares have been allocated or all subscriptions
satisfied. No fractional shares shall be issued in connection with the
allocation of shares under this category.
(4) CATEGORY 4: OTHER MEMBERS
-------------------------
Other Members shall receive Subscription Rights to purchase shares of
Conversion Stock, after satisfying the subscriptions of Eligible Account
Holders, Employee Stock Benefit Plans, and Supplemental Eligible Account
Holders, pursuant to Categories one, two or three above, subject to the
following conditions:
(A) Each such Other Member shall be entitled to subscribe for up to
the greater of (i) the number of shares of Conversion Stock that when combined
with Exchange Shares received aggregate $625,000 of Holding Company Common Stock
(or such maximum purchase
16
<PAGE>
limitation as may be established for the Community Offering), and (ii) or one-
tenth of one percent of the total offering of Conversion Stock in the
Subscription Offering, subject to Section 4.7 hereof.
(B) In the event of an oversubscription for shares of Conversion
Stock by Other Members, the available shares of Conversion Stock shall be
allocated among the subscribing Other Members pro rata (to the extent of their
orders) in the same proportion as the amount of Conversion Stock subscribed for
by each Other Member bears to the amount of Conversion Stock subscribed for by
all Other Members.
(5) CATEGORY 5: DIRECTORS, OFFICERS AND EMPLOYEES
---------------------------------------------
Directors, Officers and Employees shall receive Subscription Rights to
purchase shares of Conversion Stock, after satisfying the subscriptions of
Eligible Account Holders, Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members, pursuant to Categories one, two, three and
four above, subject to the following conditions:
(A) Directors, Officers and Employees shall receive, without payment,
Subscription Rights to purchase in this category up to an aggregate of 21
percent of the number of shares of Conversion Stock offered in the Subscription
Offering.
(B) In the event of an oversubscription for shares of Conversion
Stock pursuant to Section 4.2(a)(5)(A), Subscription Rights for the purchase of
such shares shall be allocated among the individual Directors, Officers and
Employees on a point system basis, whereby a point will be assigned for each
year of employment and for each salary increment of $5,000 per annum and five
points for each office held in the Mutual Holding Company and the Association,
including a directorship. If any such Director, Officer or Employee does not
subscribe for his or her full allocation of shares, any shares not subscribed
for may be purchased by other Directors, Officers and Employees in proportion to
their respective subscriptions, provided that no fractional shares shall be
issued.
(6) CATEGORY 6: PUBLIC STOCKHOLDERS
-------------------------------
Public Stockholders as of the Voting Record Date for the Stockholders'
Meeting shall receive Subscription Rights to purchase shares of Conversion
Stock, after satisfying the subscriptions of Eligible Account Holders, Employee
Stock Benefit Plans, Supplemental Eligible Account Holders, Other Members and
Directors, Officers and Employees, pursuant to Categories one, two, three, four
and five above, subject to the following conditions:
(A) Each Public Stockholder as of the Voting Record Date shall
receive, without payment, Subscription Rights to purchase up to the greater of
(i) the number of shares of Conversion Stock that when combined with Exchange
Shares received aggregate $625,000 of Holding Company Common Stock (or such
maximum purchase limitation as may be established for the Community Offering)
and (ii) one-tenth of one percent of the total offering of shares of Conversion
Stock in the Subscription Offering, in each case subject to Section 4.7 hereof.
17
<PAGE>
(B) If, pursuant to Section 4.2(a)(6)(A), Public Stockholders as of
the Voting Record Date subscribe for a number of shares of Conversion Stock in
excess of the total number of shares of Conversion Stock remaining, available
shares shall be allocated among subscribing Public Stockholders as of the Voting
Record Date on a pro rata basis in the same proportion as each such Public
Stockholder's subscription bears to the total subscriptions of all such
subscribing Public Stockholders, provided that no fractional shares shall be
issued.
(b) COMMUNITY OFFERING
------------------
(1) Any shares of Conversion Stock not subscribed for by Eligible
Account Holders, the Employee Stock Benefit Plans, Supplemental Eligible Account
Holders, Other Members, Directors, Officers and Employees and Public
Stockholders shall be sold in a Community Offering to natural persons who reside
in Missouri and to whomever else the Prospectus is delivered, giving first
preference to Preferred Other Purchasers, or, if feasible, in a Public Offering
or under such other terms and conditions as may be established by the Boards of
Directors of the Primary Parties and approved by the OTS. The Community
Offering may commence concurrently with or as soon as practicable after the
completion of the Subscription Offering and must be completed within 45 days
after completion of the Subscription Offering, unless extended with the approval
of the OTS. The Conversion Stock shall be offered at the Maximum Purchase Price
and sold in the Community Offering at the Actual Purchase Price, and in a manner
which will achieve the widest possible distribution of the Conversion Stock.
The shares of Conversion Stock may be made available in the Community Offering
through a direct community marketing program which may provide for utilization
of a broker, dealer, consultant, or investment banking firm, experienced and
expert in the sale of financial institution securities. Such entities may be
compensated on a fixed fee basis, on a commission basis, or a combination
thereof.
(2) The right to subscribe for shares of Conversion Stock under this
Category is subject to the right of the Primary Parties to accept or reject such
subscriptions in whole or in part.
(3) If orders are received in the Community Offering for shares in
excess of the available Conversion Stock, accepted subscriptions from Preferred
Other Purchasers shall first be filled in full up to a maximum of 2 percent of
the Conversion Stock and thereafter remaining shares shall be allocated on an
equal number of shares basis per order until all orders of Preferred Other
Purchasers have been filled (subject to the maximum purchase limitation set
forth in Section 4.3(b) of this Plan and the minimum purchase limitation set
forth in Section 4.3(h) of this Plan), before any subscriptions in the Community
Offering are filled from Subscribers who are not Preferred Other Purchasers. If
Preferred Other Purchasers order more shares of Conversion Stock than are
available for purchase in the Community Offering, available shares of Conversion
Stock shall be allocated first to Preferred Other Purchasers pro rata (to the
extent of their orders) in the same proportion as the amount of the Conversion
Stock ordered by each bears to the total amount of the Conversion Stock ordered
by all Preferred Other Purchasers. The Primary Parties may require a Person to
provide evidence, satisfactory to the Primary Parties, that such Person
qualifies as a Preferred Other Purchaser. Determinations as to whether a Person
qualifies as a Preferred Other Purchaser shall be made by the Primary Parties in
their sole discretion and shall be final and conclusive.
18
<PAGE>
(4) To the extent that there are shares of Conversion Stock available
after satisfaction of the subscriptions of Preferred Other Purchasers, accepted
subscriptions from Subscribers in the Community Offering who are not Preferred
Other Purchasers shall first be filled in full up to a maximum of 2 percent of
the Conversion Stock and thereafter remaining shares shall be allocated on an
equal number of shares basis per order until all orders of Subscribers who are
not Preferred Other Purchasers have been filled (subject to the maximum purchase
limitation set forth in Section 4.3(b) of this Plan and the minimum purchase
limitation set forth in Section 4.3(h) of this Plan). If Subscribers who are
not Preferred Other Purchasers order more shares of Conversion Stock than are
available for purchase in the Community Offering, available shares of Conversion
Stock shall be allocated first to such Subscribers pro rata (to the extent of
their orders) in the same proportion as the amount of the Conversion Stock
ordered by each bears to the total amount of the Conversion Stock ordered by all
Subscribers in the Community Offering who are not Preferred Other Purchasers.
(5) Instead of a separate Subscription Offering, all Subscription
Rights issued in connection with the Conversion and Reorganization may be
exercised by delivery of properly completed and executed Order Forms to the
Mutual Holding Company, the Holding Company or selling agent utilized in
connection with the Community Offering. If a separate Subscription Offering is
not held, orders for Conversion Stock in the Community Offering shall first be
filled pursuant to the priorities and limitations stated in Section 4.2.
(6) In the event a Community Offering does not appear feasible, the
Primary Parties will immediately consult the OTS to determine the most viable
alternative available to effect the completion of the Conversion and
Reorganization. Should no viable alternative exist, the Primary Parties may
terminate the Conversion and Reorganization with the concurrence of the OTS.
SECTION 4.3 LIMITATIONS UPON PURCHASES
----------- --------------------------
The following additional limitations shall be imposed upon purchases of
shares of Conversion Stock.
(a) Purchases of Conversion Stock in the Subscription Offering, including
purchases in the Community Offering, by any person, and Associates thereof, or a
Group Acting in Concert, shall be limited to that number of shares of Conversion
Stock that when combined with Exchange Shares received aggregate $625,000,
except that the Employee Stock Benefit Plans may purchase an amount of
Conversion Stock that aggregates 7 percent of the shares of Holding Company
Stock. Shares to be held by the Employee Stock Benefit Plans and attributable
to a person shall not be aggregated with other shares purchased directly by or
otherwise attributable to such person.
(b) Purchases of Conversion Stock in the Community Offering by any person,
including an Associate thereof, or a Group Acting in Concert shall be limited to
that number of shares of Conversion Stock that when combined with Exchange
Shares received aggregate $625,000.
19
<PAGE>
(c) Directors and Officers and Associates thereof may not purchase in the
aggregate that number of shares of Conversion Stock that when combined with
Exchange Shares aggregate more than 31 percent of the shares of Holding Company
Stock.
(d) The Boards of Directors of the Primary Parties will not be deemed to
be Associates or a Group Acting in Concert with other directors or trustees
solely as a result of membership on the Board of Directors.
(e) No person, Associate thereof, or Group Acting in Concert, may purchase
Conversion Stock in an amount that when combined with Exchange Shares received
exceeds an aggregate purchase price of $625,000, except that the Employee Stock
Benefit Plans may purchase an amount of Conversion Stock that aggregates 7
percent of the shares of Holding Company Stock. Shares held or to be held by the
Employee Stock Benefit Plans and attributable to a person shall not be
aggregated with other shares purchased directly by or otherwise attributable to
such person.
(f) The Boards of Directors of the Primary Parties, with the approval of
the OTS and without further approval of Members or Public Stockholders, may, as
a result of market conditions and other factors, increase or decrease the
purchase limitation in paragraphs (a), (b) and (e) above or the number of shares
of Conversion Stock to be sold in the Conversion and Reorganization; provided
that in no event may such purchase limitations be less than 1 percent or greater
than 5 percent of the total number of shares of Holding Company Stock to be
issued in the Conversion and Reorganization, which purchase limit shall include
Exchange Shares received. If the Primary Parties increase the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in the
Conversion and Reorganization, the Holding Company is only required to resolicit
persons who subscribed for the maximum purchase amount and may, in the sole
discretion of the Holding Company resolicit certain other large subscribers. If
the Primary Parties decrease the maximum purchase limitations or the number of
shares of Conversion Stock to be sold in the Conversion and Reorganization, the
orders of any person who subscribed for the maximum purchase amount shall be
decreased by the minimum amount necessary so that such person shall be in
compliance with the then maximum number of shares permitted to be subscribed for
by such person.
(g) The purchase limitation in paragraphs 5(a), (b) and (c) above may be
increased to exceed 5 percent of the shares of Holding Company Stock, provided
that orders for Holding Company Stock exceeding 5 percent shall not exceed in
the aggregate 10 percent of the shares of Holding Company Stock sold in the
Conversion and Reorganization, except that Employee Stock Benefit Plans may
purchase in the aggregate an amount of Conversion Stock that aggregates 7
percent of the shares of Holding Company Stock.
(h) Each Person purchasing Conversion Stock in the Conversion and
Reorganization shall be deemed to confirm that such purchase does not conflict
with the purchase limitations under this Plan or otherwise imposed by law, rule
or regulation. If the number of shares of Conversion Stock otherwise allocable
pursuant to Section 4.2 of this Plan to any Person or that Person's Associates
would be in excess of the maximum number of shares permitted as set forth above,
the number of shares of Conversion Stock allocated to each such Person shall be
reduced to the lowest purchase limitation applicable to that Person, and then
the number of shares allocated to
20
<PAGE>
each group consisting of a Person and that Person's Associates shall be reduced
so that the aggregate allocation to that Person and his or her Associates
complies with the above purchase limitations, and such maximum number of shares
shall be reallocated among that Person and his or her Associates as they may
agree, or in the absence of an agreement, in proportion to the shares subscribed
for by each (after first applying the purchase limitations applicable to each
Person, separately).
(i) To the extent that shares of Conversion Stock are available, no
Subscriber will be allowed to purchase less than 25 shares of Conversion Stock.
(j) The Primary Parties shall have the right to take all such actions as
they may, in their sole discretion, deem necessary, appropriate or advisable in
order to monitor and enforce the terms, condition, limitations and restrictions
contained in this Section 4.3 and elsewhere in this Plan and the terms,
conditions and representations contained in the Order Form, including, but not
limited to, the absolute right (subject only to any necessary regulatory
approvals or concurrences) to reject, limit or revoke acceptance of any
subscription or order and to delay, terminate or refuse to consummate any sale
of Conversion Stock which they believe might violate, or is designed to, or is
any part of a plan to, evade or circumvent such terms, conditions, limitations,
restrictions and representations. Any such action shall be final, conclusive
and binding on all persons, and the Primary Parties and their respective Boards
shall be free from any liability to any Person on account of any such action.
(k) Notwithstanding anything to the contrary contained in this Plan, the
Public Stockholders will not have to sell any Association Common Stock or to be
limited in receiving Exchange Shares even if their ownership of Association
Common Stock when converted into Exchange Shares pursuant to the Association
Merger would exceed an applicable purchase limitation.
(l) For purposes of this Plan, Exchange Shares shall be valued at the
Actual Purchase Price.
SECTION 4.4 MAILING OF OFFERING MATERIALS AND COLLATION OF SUBSCRIPTIONS
----------- ------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days nor
more than 45 days from the date of mailing, unless extended, to properly
complete, execute and return the Order Form to the Holding Company or the Mutual
Holding Company. Self-addressed, postage prepaid, return envelopes shall
accompany all Order Forms when they are mailed. Failure of any eligible
subscriber to return a properly completed and executed Order Form within the
prescribed time limits shall be deemed a waiver and a release by such eligible
subscriber of any rights to purchase shares of Conversion Stock under the Plan.
21
<PAGE>
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion must be completed within 45 days after the last
day of the Subscription Offering, unless extended by the Holding Company with
the approval of the OTS. In the event the Subscription Offering and Community
Offering are commenced prior to the date of the Special Meeting and the
Stockholders' Meeting, the offer and sale of Conversion Stock pursuant thereto
shall be conditioned upon approval of this Plan by the Members and the
Stockholders.
SECTION 4.5 METHOD OF PAYMENT
----------- -----------------
Payment for all shares of Conversion Stock may be made in cash, by check or
by money order, or if a subscriber has a Deposit Account in the Association such
subscriber may authorize the Association to charge the subscriber's Deposit
Account. The Holding Company shall pay interest at not less than the passbook
rate on all amounts paid in cash or by check or money order to purchase shares
of Conversion Stock from the date payment is received until the Conversion and
Reorganization is completed or terminated. The Association is not permitted
knowingly to loan funds or otherwise extend any credit to any person for the
purpose of purchasing Conversion Stock.
If a subscriber authorizes the Association to charge his Deposit Account,
the funds shall remain in the subscriber's Deposit Account and shall continue to
earn interest, but may not be used by such subscriber until the Conversion and
Reorganization is completed or terminated, whichever is earlier. The withdrawal
shall be given effect only concurrently with the sale of all shares of
Conversion Stock proposed to be sold in the Conversion and Reorganization and
only to the extent necessary to satisfy the subscription at a price equal to the
Actual Purchase Price. The Association shall allow subscribers to purchase
shares of Conversion Stock by withdrawing funds from certificate accounts held
with the Association without the assessment of early withdrawal penalties. In
the case of early withdrawal of only a portion of such account, if the remaining
balance of the account is less than the applicable minimum balance requirement
then the remaining balance shall earn interest at the passbook rate. This
waiver of the early withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Conversion Stock under the Plan.
Employee Stock Benefit Plans may subscribe for shares by submitting an
Order Form, along with evidence of a loan commitment from a financial
institution or the Holding Company for the purchase of shares, during the
Subscription Offering and by making payment for the shares on the date of the
closing of the Conversion and Reorganization.
SECTION 4.6 UNDELIVERED, DEFECTIVE OR LATE ORDER FORMS: INSUFFICIENT
----------- --------------------------------------------------------
PAYMENT
- -------
If an Order Form (a) is not delivered and is returned to the Holding
Company or the Mutual Holding Company by the United States Postal Service (or
the Holding Company or the Mutual Holding Company is unable to locate the
addressee); (b) is not received back by the Holding Company or the Mutual
Holding Company, or is received by the Holding Company or the Mutual Holding
Company after expiration of the date specified thereon; (c) is defectively
completed or executed; (d) is not accompanied by the total required payment for
the shares of Conversion Stock subscribed for (including cases in which the
Subscribers' Deposit Accounts are insufficient to cover the authorized
withdrawal for the required payment), or (e) is submitted by or on behalf of a
Person
22
<PAGE>
whose representations the Boards of Directors of the Primary Parties believe to
be false or they otherwise believe, either alone or Acting in Concert with
others, is violating, evading or circumventing, or intends to violate, evade or
circumvent, the terms and conditions of this Plan, the Subscription Rights of
the Person to whom such rights have been granted will not be honored and will be
treated as though such person failed to return the completed Order Form within
the period specified therein. Alternatively, the Holding Company or the Mutual
Holding Company may, but shall not be required to, waive any irregularity
relating to any Order Form or require the submission of a corrected Order Form
or the remittance of full payment for the shares of Conversion Stock subscribed
for by such date as the Holding Company or the Mutual Holding Company may
specify. Subscription orders, once tendered, shall not be revocable. The
Holding Company's and the Mutual Holding Company's interpretation of the terms
and conditions of the Plan and of the Order Forms shall be final.
SECTION 4.7 MEMBERS IN NON-QUALIFIED STATES OR IN FOREIGN COUNTRIES
----------- -------------------------------------------------------
The Holding Company shall make reasonable efforts to comply with the
securities laws of all states of the United States in which persons entitled to
subscribe for shares of Conversion Stock pursuant to the Plan reside. No such
person, however, shall be offered or receive any such shares under the Plan who
resides in a foreign country or who resides in a state of the United States with
respect to which all of the following apply: (a) a small number of persons
otherwise eligible to subscribe for shares of Conversion Stock reside in such
state; (b) the granting of Subscription Rights or offer or sale of shares of
Conversion Stock to such persons would require any of the Primary Parties or the
Directors and Officers, under the securities laws of such state, to register as
a broker-dealer, salesman or selling agent or to register or otherwise qualify
the Conversion Stock or Exchange Shares or both, for sale in such state, or the
Holding Company or the Mutual Holding Company would be required to qualify as a
foreign corporation or file a consent to service of process in such state; and
(c) such registration, qualification or filing would be impractical or unduly
burdensome for reasons of cost or otherwise.
SECTION 4.8 RESTRICTIONS ON AND OTHER CHARACTERISTICS OF STOCK BEING SOLD
----------- -------------------------------------------------------------
(a) Transferability. Conversion Stock purchased by persons other than
----------------
Officers and Directors shall be transferable without restriction. Conversion
Stock purchased by Officers and Directors shall not be sold or otherwise
disposed of for value for a period of one year from the date of the Conversion
and Reorganization, except for any disposition following the death of the
original purchaser.
The Conversion Stock issued by the Holding Company to Officers and
Directors shall bear a legend giving appropriate notice of the one year holding
period restriction. Said legend shall state as follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this certificate pursuant to
Regulations of the Office of Thrift Supervision. These shares may not be
transferred prior thereto without an opinion of counsel that said transfer is
permissible under the provisions of applicable laws and regulations."
23
<PAGE>
In addition, the Holding Company shall give appropriate instructions
to the transfer agent of the Holding Company's stock with respect to the
foregoing restrictions. Any shares of Holding Company Stock subsequently issued
as a stock dividend, stock split or otherwise, with respect to any such
restricted stock, shall be subject to the same holding period restrictions for
Officers and Directors as may then be applicable to such restricted stock.
Without prior approval of the OTS, Officers and Directors, and their
Associates, shall be prohibited for a period of three years following completion
of the Conversion from purchasing outstanding shares of Holding Company Stock,
except from a broker or dealer registered with the SEC. Notwithstanding this
restriction, purchases involving more than one percent of the total outstanding
shares of Holding Company Stock and purchases made and shares held by an
Employee Stock Benefit Plan (whether or not the plan is tax-qualified) which may
be attributable to Officers or Directors may be made in negotiated transactions
without the OTS's permission or the use of a broker or dealer.
(b) Stock Repurchases and Dividend Rights. Pursuant to the OTS's
--------------------------------------
Conversion Regulations, the Holding Company (a) may not, for a period of one
year after the Conversion and Reorganization, repurchase its stock from any
person, and (b) may repurchase, as part of an open-market stock repurchase
program, in years two and three after the Conversion and Reorganization no more
than 5 percent of outstanding Holding Company Stock during a twelve month
period. Notwithstanding these restrictions, (a) the OTS may permit stock
repurchases in excess of such amounts where exceptional circumstances are
established, (b) the Holding Company may repurchase its shares on a pro rata
basis pursuant to an offer approved by the OTS and made to all stockholders of
the Holding Company, and (c) the Holding Company may repurchase qualifying
shares of a Director.
Present regulations also provide that after the Conversion and
Reorganization the Association may not declare or pay a cash dividend on or
repurchase any Association Common Stock if the result thereof would be to reduce
the capital of the Association below the amount required for the liquidation
account described below. Furthermore, any dividend declared or paid on, or
repurchase of, the Association's Common Stock must be in compliance with the
OTS's regulation governing capital distributions (12 C.F.R. (S) 563.134).
The above limitations shall not preclude payments of dividends or
repurchases of Holding Company Stock in the event applicable federal regulatory
limitations are liberalized subsequent to the Conversion and Reorganization.
(c) Voting Rights. After the Conversion and Reorganization, Members shall
--------------
not have voting rights in the Mutual Holding Company or the Holding Company.
Exclusive voting rights with respect to the Holding Company shall be vested in
the holders of the stock issued by the Holding Company, and the Holding Company
will have exclusive voting rights with respect to the Association's Common
Stock. Except as otherwise limited by the Holding Company's certificate of
incorporation or applicable law, each stockholder of the Holding Company shall
be entitled to vote on any matters coming before the stockholders of the Holding
Company for consideration, and holders of Holding Company Stock shall be
entitled to one vote for each share of stock owned by such stockholders.
24
<PAGE>
ARTICLE V
LIQUIDATION ACCOUNT
(a) At the time of the Mutual Holding Company Merger, the Association
shall establish a liquidation account in an amount equal to the amount of the
dividends with respect to the Association Common Stock waived by the Mutual
Holding Company plus the greater of (i) $8,067,000, which is equal to 100
percent of the retained earnings of the Association as of March 31, 1993, the
date of the latest statement of financial condition contained in the final
offering circular utilized in the Association's initial public offering in
connection with the Mutual Holding Company Reorganization or (ii) 53.2 percent
of the Association's total stockholders' equity as reflected in its latest
statement of financial condition contained in the final Prospectus utilized in
the Conversion and Reorganization. The function of the liquidation account will
be to preserve the rights of certain holders of Deposit Accounts in the
Association who maintain such accounts in the Association following the
Conversion and Reorganization to a priority to distributions in the unlikely
event of a liquidation of the Association subsequent to the Conversion and
Reorganization.
(b) The liquidation account shall be maintained for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders who maintain
their Deposit Accounts in the Association after the Conversion and
Reorganization. Each such account holder will, with respect to each Deposit
Account held, have a related inchoate interest in a portion of the liquidation
account balance, which interest will be referred to in this Article V as the
"subaccount balance." All Deposit Accounts having the same social security
number will be aggregated for purposes of determining the initial subaccount
balance with respect to such Deposit Accounts, except as provided in paragraph
(d) of this Article V.
(c) In the event of a complete liquidation of the Association subsequent
to the Conversion and Reorganization (and only in such event), each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidation distribution from the liquidation account in the amount of
the then current subaccount balances for Deposit Accounts then held (adjusted as
described below) before any liquidation distribution may be made with respect to
the capital stock of the Association. No merger, consolidation, sale of bulk
assets or similar combination transaction with another FDIC-insured institution
in which the Association is not the surviving entity shall be considered a
complete liquidation for this purpose. In any merger or consolidation
transaction the liquidation account shall be assumed by the surviving entity.
(d) The initial subaccount balance for a Deposit Account held by an
Eligible Account Holder and Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of the Qualifying Deposits of such
account holder and the denominator is the total amount of Qualifying Deposits of
all Eligible Account Holders and Supplemental Eligible Account Holders. For
Deposit Accounts in existence at both the Eligibility Record Date and the
Supplemental Eligibility Record Date separate initial subaccount balances shall
be determined on the basis of the Qualifying Deposits in such Deposit Accounts
on each such record date. Initial subaccount balances shall not be increased,
and shall be subject to downward adjustment as provided below.
25
<PAGE>
(e) If the aggregate deposit balance in the Deposit Account(s) of any
Eligible Account Holder or Supplemental Eligible Account Holder at the close of
business on any March 31 annual closing date, commencing March 31, 1998, is less
than the lesser of (a) the aggregate deposit balance in such Deposit Account(s)
at the close of business on any other annual closing date subsequent to such
record dates or (b) the aggregate deposit balance in which Deposit Account(s) as
of the Eligibility Record Date or the Supplemental Eligibility Record Date, the
subaccount balance for such Deposit Account(s) shall be adjusted by reducing
such subaccount balance in an amount proportionate to the reduction in such
deposit balance. In the event of such a downward adjustment, the subaccount
balance shall not be subsequently increased, notwithstanding any subsequent
increase in the deposit balance of the related Deposit Account(s). The
subaccount balance of an Eligible Account Holder or Supplemental Eligible
Account Holder will be reduced to zero if the Account Holder ceases to maintain
a Deposit Account at the Association that has the same social security number as
appeared on his Deposit Account(s) at the Eligibility Record Date or, if
applicable, the Supplemental Eligibility Record Date.
(f) Subsequent to the Conversion and Reorganization, the Association may
not pay cash dividends generally on deposit accounts and/or capital stock of the
Association, or repurchase any of the capital stock of the Association, if such
dividend or repurchase would reduce the Association's regulatory capital below
the aggregate amount of the then current subaccount balances for Deposit
Accounts then held; otherwise, the existence of the liquidation account shall
not operate to restrict the use or application of any of the net worth accounts
of the Association
(g) For purposes of this Article V, a Deposit Account includes a
predecessor or successor account which is held by an Account Holder with the
same social security number.
ARTICLE VI
DISSENTING STOCKHOLDERS
If any Public Stockholders dissent from the Conversion and Reorganization
and exercise and perfect the right to obtain valuation of and payment for their
shares of Association Common Stock ("Dissenting Shares") pursuant to 12 C.F.R.
(S)552.14, then (a) the Dissenting Shares, if any, will be deemed to have been
retired and canceled immediately prior to consummation of the Conversion and
Reorganization, with the effect that such shares will not be exchanged for
Holding Company Common Stock pursuant to Section 3(h)(ii) hereof, and (b) all
payments to be made to the holders of such Dissenting Shares will be made
directly by the Association. Consummation of the Conversion and Reorganization
is conditioned upon the number of Dissenting Shares being less than 10 percent
of the shares of Association Common Stock issued and outstanding immediately
prior to consummation of the Conversion and Reorganization.
ARTICLE VII
EFFECTIVE TIME OF CONVERSION AND REORGANIZATION
The effective date of the Conversion and Reorganization shall be the date
upon which the last of the following actions occurs: (i) the filing of Articles
of Combination with the OTS with respect to the Mutual Holding Company Merger,
(ii) the filing of Articles of Combination with the OTS with respect to the
Association Merger or (iii) the closing of the issuance of the shares of
Conversion
26
<PAGE>
Stock in the Offerings. The filing of Articles of Combination relating to the
Mutual Holding Company Merger and the Association Merger and the closing of the
issuance of shares of Conversion Stock in the Offerings shall not occur until
all requisite regulatory, Member and Public Stockholder approvals have been
obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the Mutual Holding Company Merger, the Association
Merger and the sale of shares of Conversion Stock in the Offerings shall occur
consecutively and substantially simultaneously.
ARTICLE VIII
POST-CONVERSION MATTERS
SECTION 8.1 POST CONVERSION FILING AND MARKET MAKING
----------- ----------------------------------------
(a) In connection with the Conversion, the Holding Company shall register
its Conversion Stock and the Exchange Shares with the SEC pursuant to the
Securities Exchange Act of 1934, as amended, and shall undertake not to
deregister such shares for a period of three years thereafter.
(b) The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the shares of its
stock. The Holding Company shall also use its best efforts to list its stock
through the National Association of Securities Dealers Automated Quotation
System or on a national or regional securities exchange.
SECTION 8.2 STATUS OF DEPOSIT ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
----------- -------------------------------------------------------------
All Deposit Accounts in the Association shall retain the same status after
the Conversion and Reorganization as these accounts had prior to Conversion and
Reorganization. Each Deposit Account holder shall retain, without payment, a
withdrawable Deposit Account or accounts in the Association after the Conversion
and Reorganization, equal in amount to the withdrawable value of such holder's
Deposit Account or accounts prior to the Conversion and Reorganization. All
Deposit Accounts will continue to be insured by the SAIF of the FDIC up to the
applicable limits of insurance coverage. All loans shall retain the same status
after the Conversion and Reorganization as they had prior to the Conversion and
Reorganization.
SECTION 8.3 DIRECTORS AND OFFICERS OF THE PRIMARY PARTIES
----------- ---------------------------------------------
Each person serving as a Director of the Association and its subsidiaries
at the time of the Conversion and Reorganization shall continue to serve as a
member of the Association's Board of Directors, or the Board of Directors of its
subsidiaries, following the Conversion and Reorganization. The persons serving
as Officers of the Association and its subsidiaries immediately prior to the
Conversion and Reorganization will continue to serve at the discretion of the
Board of Directors in their respective capacities as Officers of the Association
or its subsidiaries following the Conversion and Reorganization. In connection
with the Conversion and Reorganization, the Association or the Holding Company,
or both, may enter into employment and/or severance agreements on such terms and
with such Officers as shall be determined by the Board of Directors of the
Association or the Holding Company or both, as the case may be.
27
<PAGE>
SECTION 8.4 EXECUTIVE COMPENSATION
----------- ----------------------
The Association may adopt, subject to any required approvals, executive
compensation or other benefit programs including but not limited to compensation
plans involving stock options, stock appreciation rights, restricted stock
grants, employee recognition programs and the like.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 EXPENSES OF THE CONVERSION
----------- --------------------------
The Primary Parties shall use their best efforts to ensure that expenses
incurred in connection with the Conversion and Reorganization are reasonable.
SECTION 9.2 EMPLOYEE PLAN MATTERS
----------- ---------------------
(a) Subject to any required approval by the OTS, the Association and the
Holding Company may establish one or more MRPs or Stock Option Plans following
consummation of the Conversion and Reorganization in accordance with the
following requirements:
(1) The material terms and provisions of each such MRP and Stock
Option Plan to be established prior to the first anniversary of the Effective
Time of the Conversion and Reorganization shall be fully disclosed in the proxy
solicitation materials distributed to the Members in connection with the
Conversion and Reorganization and in the Prospectus;
(2) The total number of shares of Holding Company Stock for which
options may be granted under all Stock Option Plans established prior to the
first anniversary of the Effective Time of the Conversion and Reorganization may
not exceed 10 percent of the total number of shares of Conversion Stock sold in
the Conversion and Reorganization (which amount shall be in addition to options
authorized under similar plans established by the Association in the Mutual
Holding Company Reorganization);
(3) Except as the OTS otherwise permits or requires, the total number
of shares of Holding Company Stock held by all MRPs established by the Holding
Company prior to the first anniversary of the Effective Time of the Conversion
and Reorganization may not exceed 3 percent of the total number of shares of
Holding Company Stock sold in the Conversion and Reorganization (which amount
shall include amounts acquired under similar plans established by the
Association in the Mutual Holding Company Reorganization);
(4) Except as the OTS otherwise permits or requires, the total number
of shares of Holding Company Stock acquired by the Employee Stock Benefit Plans
and MRPs in the Conversion prior to the first anniversary of the Effective Time
of the Conversion and Reorganization may not exceed 10 percent of the total
number of shares of Holding Company Stock sold in the Conversion and
Reorganization (which amount shall include amounts acquired under similar plans
established by the Association in the Mutual Holding Company Reorganization);
28
<PAGE>
(5) Except as the OTS otherwise allows, no individual shall receive
more than 25 percent of the shares held by any MRP or Stock Option Plan and
Directors of the Holding Company or the Association who are not employees of the
Association shall not receive more than 5 percent individually, or more than 30
percent in the aggregate, of the shares of Holding Company Stock held by any MRP
or Stock Option Plan (which amounts shall be in addition to awards received by
these individuals under similar plans established in the Mutual Holding Company
Reorganization);
(6) All such MRPs and Stock Option Plans shall be approved by the
stockholders of the Holding Company prior to implementation and no earlier than
six months after the Effective Time of the Conversion and Reorganization;
(7) All options granted under any Stock Option Plan shall be granted
at the market price at which the Holding Company Stock is trading at the time of
the grant;
(8) No shares of Conversion Stock shall be used to fund any MRP; and
(9) To the extent required by the regulations and policies of the
OTS, all such MRPs and Stock Option Plans shall be submitted to the OTS for
approval prior to implementation.
(b) The Association may make scheduled discretionary contributions to any
Employee Plan to the extent such contributions do not cause the Association to
fail to meet its regulatory capital requirements.
SECTION 9.3 INTERPRETATION
----------- --------------
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Primary
Parties shall be final, subject to the authority of the OTS.
ARTICLE X
AMENDMENT OR TERMINATION OF PLAN
(a) If deemed necessary or desirable by the Boards of Directors of the
Primary Parties, this Plan may be substantively amended, as a result of comments
from regulatory authorities or otherwise, at any time prior to the solicitation
of proxies from Members and the Public Stockholders to vote on the Plan and at
any time thereafter with the concurrence of the OTS. Any amendment to this Plan
made after approval by the Members and the Public Stockholders with the
concurrence of the OTS shall not necessitate further approval by the Members or
the Public Stockholders, unless otherwise required by the OTS or applicable law.
(b) This Plan shall terminate if the sale of all shares of Conversion
Stock is not completed within 24 months from the date of the Special Meeting.
(c) Prior to the earlier of the Special Meeting and the Stockholders'
Meeting, this Plan may be terminated by the Boards of Directors of the Primary
Parties without approval of the OTS;
29
<PAGE>
after the Special Meeting or the Stockholders' Meeting, the Boards of Directors
may terminate this Plan only with the approval of the OTS.
(d) In the event that mandatory new regulations pertaining to conversions
are adopted by the OTS or any successor agency prior to the completion of the
Conversion and Reorganization, the Plan shall be amended to conform to the new
mandatory regulations without a resolicitation of proxies or another meeting of
Members or Public Stockholders unless otherwise required by the OTS or
applicable law. In the event that new conversion regulations adopted by the OTS
and/or any successor agency prior to completion of the Conversion and
Reorganization contain optional provisions, the Plan may be amended to utilize
such optional provisions at the discretion of the Board of Directors without a
resolicitation of proxies or another meeting of Members or a resolicitation of
proxies or another meeting of Public Stockholders unless otherwise required by
the OTS or applicable law.
(e) By adoption of the Plan, the Members and the Public Stockholders
authorize the Board of Directors to amend and/or terminate the Plan under the
circumstances set forth above.
30
<PAGE>
ANNEX A
-------
PLAN OF MERGER
BETWEEN
FIRST MISSOURI FINANCIAL, M.H.C.
AND
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
Plan of Merger, dated as of ____________, 1997, between First Missouri
Financial, M.H.C. (the "Mutual Holding Company"), a federally-chartered mutual
holding company, and Equality Savings and Loan Association, F.A. (the
"Association" or the "Surviving Association"), a federally-chartered savings
association.
WITNESSETH:
WHEREAS, the Mutual Holding Company and the Association have adopted a Plan
of Conversion and Reorganization of First Missouri Financial, M.H.C. and
Equality Savings and Loan Association, F.A. (the "Plan"), pursuant to which (i)
the Mutual Holding Company will convert to a federally-chartered interim stock
savings association and simultaneously merge with and into the Association, (ii)
the Association and a newly-formed interim savings association will merge,
pursuant to which the Association will become a wholly-owned subsidiary of the
Holding Company (the "Association Merger"), and (iii) the Holding Company will
offer shares of its common stock in the manner set forth in the Plan; and
WHEREAS, the Mutual Holding Company, which owns 53.2% of the outstanding
common stock of the Association, par value $1.00 per share ("Association Common
Stock"), will convert to a federally-chartered interim stock savings association
pursuant to the Plan and merge with and into the Association pursuant to this
Plan of Merger (the "Mutual Holding Company Merger"), pursuant to which, among
other things, all interests of members in the Mutual Holding Company and all
shares of Association Common Stock held by the Mutual Holding Company will be
canceled; and
WHEREAS, the Mutual Holding Company and the Association (the "Constituent
Corporations") desire to provide for the terms and conditions of the Mutual
Holding Company Merger.
NOW, THEREFORE, the Mutual Holding Company and the Association hereby agree
as follows:
1. EFFECTIVE DATE. The Mutual Holding Company Merger shall become
effective on the date specified in the endorsement of the Articles of
Combination relating to the Mutual Holding Company Merger by the Secretary of
the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R. (S)552.13(k), or
any successor thereto (the "Effective Date").
A-1
<PAGE>
2. THE MUTUAL HOLDING COMPANY MERGER AND EFFECT THEREOF. Subject to the
terms and conditions set forth herein and the prior approval of the OTS of the
Conversion and Reorganization as defined in the Plan and the expiration of all
applicable waiting periods, the Mutual Holding Company shall convert from the
mutual form to a federal interim stock savings association and simultaneously
merge with and into the Association, which shall be the Surviving Association.
Upon consummation of the Mutual Holding Company Merger, the Surviving
Association shall be considered the same business and corporate entity as each
of the Constituent Corporations and thereupon and thereafter all the property
rights, powers and franchises of each of the Constituent Corporations shall vest
in the Surviving Association and the Surviving Association shall be subject to
and be deemed to have assumed all of the debts, liabilities, obligations and
duties of each of the Constituent Corporations and shall have succeeded to all
of each of their relationships, fiduciary or otherwise, as fully and to the same
extent as if such property, rights, privileges, powers, franchises, debts,
obligations, duties and relationships had been originally acquired, incurred or
entered into by the Surviving Association. In addition, any reference to either
of the Constituent Corporations in any contract, will or document, whether
executed or taking effect before or after the Effective Date, shall be
considered a reference to the Surviving Association if not inconsistent with the
other provisions of the contract, will or document; and any pending action or
other judicial proceeding to which either of the Constituent Corporations is a
party shall not be deemed to have abated or to have been discontinued by reason
of the Mutual Holding Company Merger, but may be prosecuted to final judgment,
order or decree in the same manner as if the Mutual Holding Company Merger had
not occurred or the Surviving Association may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the Mutual Holding Company Merger had not occurred.
3. CANCELLATION OF ASSOCIATION COMMON STOCK HELD BY THE MUTUAL HOLDING
COMPANY AND MEMBER INTERESTS; LIQUIDATION ACCOUNT
(a) On the Effective Date, (i) each share of Association Common Stock
issued and outstanding immediately prior to the Effective Date and held by the
Mutual Holding Company shall, by virtue of the Mutual Holding Company Merger and
without any action on the part the holder thereof, be canceled, (ii) the
interests in the Mutual Holding Company of any person, firm or entity who or
which qualified as a member of the Mutual Holding Company in accordance with its
mutual charter and bylaws and the laws or the United States prior to the Mutual
Holding Company's conversion from mutual to stock form (the "Members") shall, by
virtue or the Mutual Holding Company Merger and without any action on the part
of the holder thereof, be canceled, and (iii) the Association shall establish a
liquidation account on behalf of each depositor member of the Mutual Holding
Company, as defined in the Plan, in accordance with Article V of the Plan.
(b) At or after the Effective Date and prior to the Association Merger
each certificate or certificates theretofore evidencing issued and outstanding
shares of Association Common Stock other than any such certificate or
certificates held by the Mutual Holding Company, which shall be canceled, shall
continue to represent issued and outstanding shares of Association Common Stock.
4. DISSENTING SHARES. The Association shall notify holders of
Association Common Stock of their right to dissent from the Mutual Holding
Company Merger and demand payment of
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<PAGE>
the appraised value of their shares not less than twenty days prior to the
date of the meeting at which this Plan of Merger is to be submitted for
stockholder approval. Any stockholder of the Association who (i) prior to voting
on this Plan of Merger files a written statement identifying himself or herself
and stating his or her intention thereby to demand appraisal of and payment for
his or her shares pursuant to 12 C.F.R. (S) 552.14, and (ii) does not vote in
favor of the Plan of Merger at the Stockholders' Meeting (as defined in the
Plan) shall be entitled to receive from the Surviving Association within ten
days after the Effective Time a written notice of the Effective Time of the
Mutual Holding Company Merger and notification of the sixty day time period
during which the dissenting stockholder may file a petition with the OTS if the
stockholder and the Surviving Association do not agree as to the fair value of
his or her shares, and a written offer to pay for dissenting shares at a
specified price deemed by the Surviving Association to be the fair value
thereof. Such notice and offer shall be accompanied by a balance sheet and
statement of income of the Surviving Association for a fiscal year ending not
more than sixteen months before the date of notice and offer, together with the
latest available interim financial statements.
If within sixty days of the Effective Time the Surviving Association
and any stockholder who has complied with the provisions of 12 C.F.R. (S)
552.14(c)(2) agree as to the fair value of the dissenting stockholders' shares,
payment therefor shall be made within ninety days of the Effective Time. If
within sixty days of the Effective Time the Surviving Association and any
stockholder who has complied with the provisions of 12 C.F.R. (S) 552.14(c)(2)
do not agree as to the fair value of the dissenting stockholders' shares, then
any such stockholder may file a petition with the OTS (with a copy by registered
or certified mail to the Surviving Association) demanding a determination of the
fair market value of the stock of all such stockholders. A stockholder entitled
to file a petition under 12 C.F.R. (S) 552.14(c)(5) who fails to file such
petition within sixty days of the Effective Time shall be deemed to have
accepted the terms offered under the Mutual Holding Company Merger.
Within sixty days of the Effective Time of the Mutual Holding Company
Merger, each stockholder demanding appraisal and payment under 12 C.F.R. (S)
552.14 shall submit to the Surviving Association's transfer agent his or her
certificates of stock for notation thereon that an appraisal and payment have
been demanded with respect to such stock and that appraisal proceedings are
pending. Any stockholder who fails to submit his stock certificates for such
notation shall no longer be entitled to appraisal rights under 12 C.F.R. (S)
552.14 and shall be deemed to have accepted the terms offered pursuant to the
Mutual Holding Company Merger. At any time within sixty days after the
Effective Time, any stockholder shall have the right to withdraw his or her
demand for appraisal and to accept the terms offered upon this Plan of Merger.
The Director of the OTS shall, as he or she may elect, either appoint
one or more independent persons or direct appropriate staff of the OTS to
appraise the shares to determine their fair market value, as of the Effective
Time, exclusive of any element of value arising from the accomplishment or
expectation of the Mutual Holding Company Merger. Appropriate staff of the OTS
shall review and provide an opinion on appraisals prepared by independent
persons as to the suitability of the appraisal methodology and the adequacy of
the analysis and supportive data. The Director after consideration of the
appraisal report and the advice of the appropriate staff shall, if he or she
concurs in the valuation of the shares, direct payment by the Surviving
Association of the appraised fair market value of the shares, upon surrender of
the certificates representing such
A-3
<PAGE>
stock. Payment shall be made, together with interest from the Effective Time, at
a rate deemed equitable by the Director.
The costs and expenses of any proceeding under 12 C.F.R. (S) 552.14
may be apportioned and assessed by the Director as he or she may deem equitable
against all or some of the parties. In making this determination the Director
shall consider whether any party has acted arbitrarily, vexatiously, or not in
good faith in respect to the rights provided under 12 C.F.R. (S) 552.14.
Any stockholder who has demanded appraisal rights shall thereafter
neither be entitled to vote such stock for any purpose nor be entitled to the
payment of dividends or other distributions on the Exchange Shares (as defined
in the Plan) (except dividends or other distribution payable to, or a vote to be
taken by, stockholders of record at a date which is on or prior to, the
Effective Time); provided that, if any stockholder becomes unentitled to
appraisal and payment of appraised value with respect to such stock and accepts
or is deemed to have accepted the terms offered pursuant to the Mutual Holding
Company Merger, such stockholder shall thereupon be entitled to vote and receive
such distributions.
Should any stockholder become entitled to the payment of the appraised
value of his or her shares pursuant to the exercise of his or her appraisal
rights under 12 C.F.R. (S) 552.14, such shares shall be and become converted
into the right to receive cash from the Holding Company in the amount of the
appraised value of such shares.
5. AMENDMENT TO SURVIVING ASSOCIATION'S FEDERAL STOCK CHARTER.
By approving this Plan, the stockholders of the Association hereby approve
the form of amended federal stock charter (attached to this Plan as Exhibit A)
---------
as the charter for the Surviving Association, which reflects, among other
things, amendments to change the name of the Association to "Equality Savings
Bank" and references from "Association" to "Savings Bank," and to delete Section
8 of the Association's charter regarding certain provisions applicable for five
years.
6. DIRECTORS OF THE SURVIVING ASSOCIATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the number of directors of the Surviving
Association shall be thirteen. The names of those persons who, upon and after
the Effective Date, shall be directors of the Surviving Association are set
forth below. Each such director shall serve for the term which expires at the
annual meeting of stockholders of the Surviving Association in the year set
forth after his or her respective name, and until a successor is elected and
qualified.
A-4
<PAGE>
<TABLE>
<CAPTION>
Name Residence Address Term Expires
---- ----------------- ------------
<S> <C> <C>
Richard C. Fellhauer 8827 Paragon Circle 1999
St.Louis, MO 63123
Charles J. Wolter 6104 Deerwood 1997
St.Louis, MO 63123
Michael A. Deelo 3702 Sunset Chase Dr. 1997
St.Louis, MO 63127
LeRoy C. Crook 6161 Marwinette 1998
St.Louis, MO 63116
Daniel C. Aubuchon 12135 Bridle Trail 1999
St.Louis, MO 63128
Stacey W. Braswell 17418 Bridle Trails West 1999
Glencoe, MO 63038
Berenice J. Mahacek 7361 Whitehaven Dr. 1997
St.Louis, MO 63123
Kenneth J. Hrdlicka 12018 Southwick 1998
St.Louis, MO 63128
Michael J. Walsh 7316 Shiloh Lane 1998
St.Louis, MO 63123
Associate Directors
-------------------
Seymour Bailis 178 Emerald Green Court 1997
Creve Coeur, MO 63141
James W. Caulfield 867 Portsdown Road 1997
Ballwin, MO 63011
Leonard O. Wolter 9617 Donald's Ct. 1997
St.Louis, MO 63126
John L. Tacke 9 Hickory Hills Dr. 1997
DeSoto, MO 63020
</TABLE>
7. OFFICERS OF THE SURVIVING ASSOCIATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the officers of the Association immediately
prior to the Effective Date shall be the officers of the Surviving Association.
8. OFFICES. Upon the Effective Date, all offices of the Association
shall be offices of the Surviving Association. As of the Effective Date the
home office of the Surviving Association shall remain at 4131 South Grand
Boulevard, St. Louis, Missouri 63118, and the location of the other deposit-
taking offices of the Surviving Association shall be as set forth below, except
for the addition of deposit-taking offices authorized or the elimination of
deposit-taking offices closed subsequent to the date hereof and the Effective
Date:
1281 Laclede Station Road
Webster Grove, Missouri 63119
A-5
<PAGE>
5400 South Lindbergh
St. Louis, Missouri 63123
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter of
the Association as in effect immediately prior to the Effective Date shall be
the Charter of the Surviving Association, as amended in accordance with the
terms of Section 5 hereof.
On and after the Effective Date,the Bylaws of the Association as in
effect immediately prior to the Effective Date shall be the Bylaws of the
Surviving Association until amended in accordance with the terms thereof and
applicable law.
10. STOCKHOLDER AND MEMBER APPROVALS. This Plan of Merger must be
approved at the Stockholders' Meeting (as defined in the Plan) by (i) the
holders of at least two-thirds of the outstanding Association Common Stock and
(ii) at least a majority of the votes cast, in person or by proxy, by the Public
Stockholders (as defined in the Plan).
11. POST-MERGER AGREEMENTS. Each of the Constituent Corporations hereby
appoints the Surviving Association to be its true and lawful attorney for the
purpose of taking, in its name, place and stead, any and all actions that the
Surviving Association deems necessary or advisable to vest in the Surviving
Association title to all property or rights of each of the Constituent
Corporations or otherwise to effect the purposes of this Agreement, and each of
the Constituent Corporations hereby grants to said attorney full power and
authority to take all actions necessary to effect those purposes, including the
power to execute, in its name, place and stead, such further assignments or
assurances in law necessary or advisable to vest in the Surviving Association
title to all property and rights of each of the Constituent Corporations.
12. TERMINATION. Anything herein to the contrary notwithstanding, this
Agreement may be abandoned by either of the Constituent Corporations by
appropriate resolution of its board of directors at any time prior to the Mutual
Holding Company Merger becoming effective, whether before or after any
stockholder action.
13. AMENDMENT. This Plan of Merger may not be amended except by an
instrument in writing signed on behalf of each of the Constituent Corporations;
provided, however, that after this Plan of Merger has been approved by the
stockholders of the Constituent Corporations, no such amendment shall affect the
rights of such stockholders in a manner which is materially adverse to the
interests of such stockholders.
14. CAPTIONS. The captions in this Plan of Merger have been inserted for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Plan of Merger.
15. COUNTERPARTS. This Plan of Merger may be executed in any number of
counterparts, each of which when so executed shall constitute an original, but
all of which together shall constitute one and the same instrument.
16. SUCCESSORS. This Agreement shall be binding on the successors of the
Mutual Holding Company and the Association.
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<PAGE>
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America.
A-7
<PAGE>
IN WITNESS WHEREOF, the Mutual Holding Company and the Association have
caused this Plan of Merger to be executed by their duly authorized officers as
of the day and year first above written.
FIRST MISSOURI FINANCIAL, M.H.C.
ATTEST:
____________________ By: _____________________________
Patricia R. Todd Richard C. Fellhauer
Corporate Secretary President and Chief Executive
Officer
EQUALITY SAVINGS AND LOAN
ASSOCIATION, F.A.
ATTEST:
____________________ By: _____________________________
Patricia R. Todd Richard C. Fellhauer
Corporate Secretary President and Chief Executive
Officer
A-8
<PAGE>
ANNEX B
-------
PLAN OF MERGER
BETWEEN
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
AND
INTERIM II SAVINGS AND LOAN ASSOCIATION, F.A.
Plan of Merger, dated as of ________________, 1997, among Equality
Savings and Loan Association, F.A. (the "Association" or the "Surviving
Association"), a federally-chartered savings association, Equality Bancorp,
Inc. (the "Holding Company,"), a Delaware corporation, and Interim II Savings
and Loan Association, F.A. ("Interim"), a federally-chartered interim savings
association.
WITNESSETH:
WHEREAS, the Association has organized the Holding Company as a first-tier,
wholly-owned subsidiary for the purpose of becoming the stock holding company of
the Association upon completion of the Conversion and Reorganization, as
defined in the Plan of Conversion and Reorganization of First Missouri
Financial, M.H.C. (the "Mutual Holding Company") and Equality Savings and Loan
Association, F.A. (the "Plan"); and
WHEREAS, the Mutual Holding Company, a federally-chartered mutual holding
company, which owns 53.2% of the common stock of the Association, par value
$1.00 per share ("Association Common Stock"), will convert to a federally-
chartered interim stock savings association and simultaneously merge with and
into the Association pursuant to the Plan and the Plan of Merger included as
Annex A thereto (the "Mutual Holding Company Merger"), pursuant to which all
- -------
shares of Association Common Stock held by the Mutual Holding Company will be
canceled; and
WHEREAS, the formation of a stock holding company by the Association will
be facilitated by causing the Holding Company to become the sole stockholder of
a newly-informed interim federally-chartered stock savings association and then
merging the interim savings association with and into the Association (the
"Association Merger"), pursuant to which the Association will become a wholly-
owned subsidiary of the Holding Company and, in connection therewith, all
outstanding shares of Association Common Stock held by the Public Stockholders
(as defined in the Plan) will be converted automatically into and become shares
of common stock of the Holding Company, par value $.01 per share ("Holding
Company Common Stock"); and
WHEREAS, Interim is being organized by the officers of the Association as
an interim federally-chartered stock savings association with the Holding
Company as its sole stockholder in order to effect the Association Merger; and
WHEREAS, the Association and Interim (the "Constituent Associations")
desire to provide for the terms and conditions of the Association Merger.
NOW, THEREFORE, the Association and Interim hereby agree as follows:
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1. EFFECTIVE DATE. The Association Merger shall become effective on the
date specified in the endorsement of the Articles of Combination relating to the
Association Merger by the Secretary of the Office of Thrift Supervision ("OTS")
pursuant to 12 C.F.R. (S) 552.13(k), or any successor thereto (the "Effective
Date").
2. THE ASSOCIATION MERGER AND EFFECT THEREOF. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and Reorganization, as defined in the Plan, and the expiration of all applicable
waiting periods, Interim shall merge with and into the Association which shall
be the Surviving Association. Upon consummation of the Association Merger, the
Surviving Association shall be considered the same business and corporate entity
as each of the Constituent Associations and thereupon and thereafter all the
property, rights, powers and franchises of each of the Constituent Associations
shall vest in the Surviving Association, and the Surviving Association shall be
subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of the Constituent Associations and shall have
succeeded to all of each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property, rights, privileges, powers,
franchises, debts, obligations, duties and relationships had been originally
acquired, incurred or entered into by the Surviving Association. In addition,
any reference to either of the Constituent Associations in any contract, will or
document, whether executed or taking effect before or after the Effective Date,
shall be considered a reference to the Surviving Association if not inconsistent
with the other provisions of the contract, will or document, and any pending
action or other judicial proceeding to which either of the Constituent
Associations is a party shall not be deemed to have abated or to have been
discontinued by reason of the Association Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the Association Merger had
not occurred or the Surviving Association may be substituted as a party to such
action or proceeding and any judgment order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Associations if the Association Merger had not occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of Association Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Association Merger and without any action on the part of the holder
thereof, be converted into the right to receive Holding Company Common Stock
based on the Exchange Ratio, as defined in the Plan, plus the right to receive
cash in lieu of any fractional share interest, as determined in accordance with
Section 3(c) hereof, (ii) each share of common stock, par value $1.00 per
share, of Interim ("Interim Common Stock") issued and outstanding immediately
prior to the Effective Date shall, by virtue of the Association Merger and
without any action on the part of the holder thereof, be converted into one
share of Association Common Stock, and (iii) each share of Holding Company
Common Stock issued and outstanding immediately prior to the Effective Date
shall, by virtue of the Association Merger and without any action on the part of
the holder thereof, be canceled. By voting in favor of this Plan of Merger,
the Holding Company as the sole stockholder of Interim, shall have agreed (i) to
issue shares of Holding Company Common Stock in accordance with the terms hereof
and (ii) to cancel all previously issued and outstanding shares of Holding
Company Common Stock upon the effectiveness of the Association Merger.
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<PAGE>
(b) On and after the Effective Date, there shall be no registrations
of transfers on the stock transfer books of Interim or the Association of shares
of Interim Common Stock or Association Common Stock, which were outstanding
immediately prior to the Effective Dave.
(c) Notwithstanding any other provision hereof, no fractional shares
of Holding Company Common Stock shall be issued to holders of Association Common
Stock. In lieu thereof, each holder of shares of Association Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder's
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Actual Purchase
Price, as defined in the Plan. No such holder shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share.
4. EXCHANGE OF SHARES
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Association
Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares of
Holding Company Common Stock for which the shares of Association Common Stock
theretofore represented by the certificate or certificates so surrendered shall
have been converted as provided in Section 3 hereof. The Exchange Agent shall
mail to each holder of record of an outstanding certificate which immediately
prior to the Effective Date evidenced shares of Association Common Stock, and
which is to be exchanged for Holding Company Common Stock as provided in Section
3 hereof, a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to such certificate shall pass,
only upon delivery of such certificate to the Exchange Agent) advising such
holder of the terms of the exchange effected by the Association Merger and of
the procedure for surrendering to the Exchange Agent such certificate in
exchange for a certificate or certificates evidencing Holding Company Common
Stock.
(b) No holder of a certificate theretofore representing shares of
Association Common Stock shall be entitled to receive any dividends in respect
of the Holding Company Common Stock into which such shares shall have been
converted by virtue of the Association Merger until the certificate representing
such shares of Association Common Stock is surrendered in exchange for
certificates representing shares of Holding Company Common Stock. In the event
that dividends are declared and paid by the Holding Company in respect of
Holding Company Common Stock after the Effective Date but prior to surrender of
certificates representing shares of Association Common Stock, dividends payable
in respect of shares of Holding Company Common Stock not then issued shall
accrue (without interest). Any such dividends shall be paid (without interest)
upon surrender of the certificates representing such shares of Association
Common Stock. The Holding Company shall be entitled, after the Effective Date,
to treat certificates representing shares of Association Common Stock as
evidencing ownership of the true number of full shares of Holding Company Common
Stock into which the shares of Association Common Stock represented by such
certificates shall have been converted, notwithstanding the failure on the part
of the holder thereof to surrender such certificates.
B-3
<PAGE>
(c) The Holding Company shall not be obligated to deliver a
certificate or certificates representing shares of Holding Company Common Stock
to which a holder of Association Common Stock would otherwise be entitled as a
result of the Association Merger until such holder surrenders the certificate or
certificates representing the shares of Association Common Stock for exchange as
provided in this Section 4, or, in default thereof, an appropriate affidavit of
loss and indemnity agreement and/or a bond as may be required in each case by
the Holding Company. If any certificate evidencing shares of Holding Company
Common Stock is to be issued in a name other than that in which the certificate
evidencing Association Common Stock surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange Agent
any transfer or other tax required by reason of the issuance of a certificate
for shares of Holding Company Common Stock in any name other than that of the
registered holder of the certificate surrendered or otherwise establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) If, between the date hereof and the Effective Date the shares of
Association Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. DISSENTING SHARES. The Association shall notify holders of
Association Common Stock of their right to dissent from the Association Merger
and demand payment of the appraised value of their shares not less than twenty
days prior to the date of the meeting at which this Plan of Merger is to be
submitted for stockholder approval. Any stockholder of the Association who (i)
prior to voting on the Plan of Merger files a written statement identifying
himself or herself and stating his or her intention thereby to demand appraisal
of and payment for his or her shares pursuant to 12 C.F.R. (S) 552.14, and (ii)
does not vote in favor of the Plan of Merger at the Stockholders' Meeting (as
defined in the Plan) shall be entitled to receive from the Surviving Association
within ten days after the Effective Time a written notice of the Effective Time
of the Association Merger and notification of the sixty day time period during
which the dissenting stockholder may file a petition with the OTS if the
stockholder and the Surviving Association do not agree as to the fair value of
his or her shares, and a written offer to pay for dissenting shares at a
specified price deemed by the Surviving Association to be the fair value
thereof. Such notice and offer shall be accompanied by a balance sheet and
statement of income of the Surviving Association for a fiscal year ending not
more than sixteen months before the date of notice and offer, together with the
latest available interim financial statements.
If within sixty days of the Effective Time the Surviving Association
and any stockholder who has complied with the provisions of 12 C.F.R. (S)
552.14(c)(2) agree as to the fair value of the dissenting stockholders' shares,
payment therefor shall be made within ninety days of the Effective Time. If
within sixty days of the Effective Time the Surviving Association and any
stockholder who has complied with the provisions of 12 C.F.R. (S) 552.14(c)(2)
do not agree as to the fair value of the dissenting stockholders' shares, then
any such stockholder may file a petition with the OTS (with a copy by registered
or certified mail to the Surviving Association) demanding a determination of the
fair market value of the stock of all such stockholders. A stockholder entitled
B-4
<PAGE>
to file a petition under 12 C.F.R. (S) 552.14(c)(5) who fails to file such
petition within sixty days of the Effective Time shall be deemed to have
accepted the terms offered under the Association Merger.
Within sixty days of the Effective Time of the Association Merger,
each stockholder demanding appraisal and payment under 12 C.F.R. (S) 552.14
shall submit to the Surviving Association's transfer agent his or her
certificates of stock for notation thereon that an appraisal and payment have
been demanded with respect to such stock and that appraisal proceedings are
pending. Any stockholder who fails to submit his stock certificates for such
notation shall no longer be entitled to appraisal rights under 12 C.F.R. (S)
552.14 and shall be deemed to have accepted the terms offered pursuant to the
Association Merger. At any time within sixty days after the Effective Time, any
stockholder shall have the right to withdraw his or her demand for appraisal and
to accept the terms offered upon this Plan of Merger.
The Director of the OTS shall, as he or she may elect, either appoint
one or more independent persons or direct appropriate staff of the OTS to
appraise the shares to determine their fair market value, as of the Effective
Time, exclusive of any element of value arising from the accomplishment or
expectation of the Association Merger. Appropriate staff of the OTS shall
review and provide an opinion on appraisals prepared by independent persons as
to the suitability of the appraisal methodology and the adequacy of the analysis
and supportive data. The Director after consideration of the appraisal report
and the advice of the appropriate staff shall, if he or she concurs in the
valuation of the shares, direct payment by the Surviving Association of the
appraised fair market value of the shares, upon surrender of the certificates
representing such stock. Payment shall be made, together with interest from the
Effective Time, at a rate deemed equitable by the Director.
The costs and expenses of any proceeding under 12 C.F.R. (S) 552.14
may be apportioned and assessed by the Director as he or she may deem equitable
against all or some of the parties. In making this determination the Director
shall consider whether any party has acted arbitrarily, vexatiously, or not in
good faith in respect to the rights provided under 12 C.F.R. (S) 552.14.
Any stockholder who has demanded appraisal rights shall thereafter
neither be entitled to vote such stock for any purpose nor be entitled to the
payment of dividends or other distributions on the Exchange Shares (as defined
in the Plan) (except dividends or other distribution payable to, or a vote to be
taken by, stockholders of record at a date which is on or prior to, the
Effective Time); provided that, if any stockholder becomes unentitled to
appraisal and payment of appraised value with respect to such stock and accepts
or is deemed to have accepted the terms offered pursuant to the Association
Merger, such stockholder shall thereupon be entitled to vote and receive such
distributions.
Should any stockholder become entitled to the payment of the appraised
value of his or her shares pursuant to the exercise of his or her appraisal
rights under 12 C.F.R. (S) 552.14, such shares shall be and become converted
into the right to receive cash from the Holding Company in the amount of the
appraised value of such shares.
B-5
<PAGE>
6. AMENDMENT TO SURVIVING ASSOCIATION'S FEDERAL STOCK CHARTER. By
approving this Plan, the stockholders of the Association hereby approve the form
of amended federal stock charter (attached to this Plan as Exhibit A) as the
---------
charter for the Surviving Association, which reflects, among other things,
amendments to change the name of the Association to "Equality Savings Bank" and
references from "Association" to "Savings Bank," and to delete Section 8 of the
Association's charter regarding certain provisions applicable for five years.
7. DIRECTORS OF THE SAVINGS ASSOCIATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the number of directors of the Surviving
Association Shall be thirteen. The names of those persons who, upon and after
the Effective Due, shall be directors of the Surviving Association are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Association in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Residence Address Term Expires
---- ----------------- ------------
Richard C. Fellhauer 8827 Paragon Circle 1999
St. Louis, MO 63123
Charles J. Wolter 6104 Deerwood 1997
St. Louis, MO 63123
Michael A. Deelo 3702 Sunset Chase Dr. 1997
St. Louis, MO 63127
LeRoy C. Crook 6161 Marwinette 1998
St. Louis, MO 63116
Daniel C. Aubuchon 12135 Bridle Trail 1999
St. Louis, MO 63128
Stacey W. Braswell 17418 Bridle Trails West 1999
Glencoe, MO 63038
Berenice J. Mahacek 7361 Whitehaven Dr. 1997
St. Louis, MO 63123
Kenneth J. Hrdlicka 12018 Southwick 1998
St. Louis, MO 63128
Michael J. Walsh 73216 Shiloh Lane 1998
St. Louis, MO 63123
Associate Directors
-------------------
Seymour Bailis 178 Emerald Green Court 1997
Creve Coeur, MO 63141
James W. Caulfield 867 Portsdown Road 1997
Ballwin, MO 63011
Leonard O. Wolter 9617 Donald's Ct. 1997
St. Louis, MO 63126
John L. Tacke 9 Hickory Hills Dr. 1997
DeSoto, MO 63020
B-6
<PAGE>
RP Financial,LC.
Page 3.13
8. OFFICERS OF THE SURVIVING ASSOCIATION. Upon the Effective Date, all
offices of the Association shall be offices of the Surviving Association. As of
the Effective Date, the home office of the surviving Corporation shall remain at
4131 South Grand Boulevard, St. Louis, Missouri 63118, and the location of the
other deposit-taking offices of the Surviving Association shall be as set forth
below, except for the addition of deposit-taking offices authorized or the
elimination of deposit-taking offices closed subsequent to the date hereof and
the Effective Date:
1281 Laclede Station Road
Webster Grove, Missouri 63119
5400 South Lindbergh
St. Louis, Missouri 63123
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter of
the Association as in effect immediately prior to the Effective Date shall be
the Charter of the Surviving Association as amended in accordance with the terms
of Section 5 hereof.
On and after the Effective Date, the Bylaws of the Association as in effect
immediately prior to the Effective Date shall be the Bylaws of the Surviving
Association until amended in accordance with the terms thereof and applicable
law.
10. SAVINGS ACCOUNTS. Upon the Effective Date, any savings accounts of
Interim, without reissue shall be and become savings accounts of the Surviving
Association without change in their respective terms, including, without
limitation, maturity, minimum required balances or withdrawal value.
11. STOCK COMPENSATION PLANS. By voting in favor of this Plan of Merger,
the Holding Company shall have approved assumption of all obligations and
liabilities unless the Association's existing 1993 Stock Option and Incentive
Plan (the "Stock Option Plan") and shall have agreed to issue Holding Company
Common Stock in lieu of Association Common Stock pursuant to the terms of the
Stock Option Plan. As of the Effective Date, options outstanding under the
Stock Option Plan shall be assumed by the Holding Company and thereafter shall
be options only for shares of Holding Company Common Stock, with each such
option being for a number of shares of Holding Company Common Stock equal to the
number of shares of Association Common Stock that were available thereunder
immediately prior to the Effective Date times the Exchange Ratio, as defined in
the Plan, and the price of each such option shall be adjusted to reflect the
Exchange Ratio and so that the aggregate purchase price of the option is
unaffected, but with no change in any other term or condition of such option.
The Holding Company shall make appropriate amendments to the Stock Options to
reflect the assumption of the Stock Option Plan by the Holding Company without
adverse effect upon the options outstanding thereunder.
12. STOCKHOLDER APPROVAL. This Plan of Merger must be approved at the
Stockholders' Meeting (as defined in the Plan) by (i) the holders of at least
two-thirds of the outstanding Association Common Stock and (ii) at least a
majority of the votes cast, in person or by proxy, by the Public Stockholders
(as defined in the Plan). This Plan of Merger also must be approved by the
Holding Company, as the sole stockholder of Interim, by written consent.
B-7
<PAGE>
13. REGISTRATION; OTHER APPROVAL. In addition to the approvals set forth
in Sections 1 and 14 hereof and the Plan, the parties' obligations to consummate
the Association Merger shall be subject to the Holding Company Common Stock to
be issued hereunder in exchange for Association Common Stock being registered
under the Securities Act of 1993, as amended, and registered or qualified under
applicable state securities laws, as well as the receipt of all other approvals,
consents or waivers as the parties may deem necessary or advisable.
14. POST-MERGER AGREEMENTS. Each of the Constituent Associations hereby
appoints the Surviving Association to be its true and lawful attorney for the
purpose of taking, in its name, place and stead, any and all actions that the
Surviving Association deems necessary or advisable to vest in the Surviving
Association title to all property or rights of each of the Constituent
Associations or otherwise to effect the purposes of this Agreement, and each of
the Constituent Associations hereby grants to said attorney full power and
authority to take all actions necessary to effect those purposes, including the
power to execute, in its name, place and stead, such further assignments or
assurances in law necessary or advisable to vest in the Surviving Association
title to all property and rights of each of the Constituent Associations.
15. TERMINATION. Anything herein to the contrary notwithstanding, this
Agreement may be abandoned by either of the Constituent Associations by
appropriate resolution of its board of directors at any time prior to the
Association Merger becoming effective, whether before or after any stockholder
action.
16. AMENDMENT. This Plan of Merger may not be amended except by an
instrument in writing signed on behalf of each of the Constituent Associations;
provided, however, that after this Plan of Merger has been approved by the
stockholders of the Constituent Associations, no such amendment shall affect the
rights of such stockholders in a manner which is materially adverse to the
interests of such stockholders.
17. CAPTIONS. The captions in this Plan of Merger have been inserted for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Plan of Merger.
18. COUNTERPARTS. This Plan of Merger may be executed in any number of
counterparts, each of which when so executed shall constitute an original, but
all of which together shall constitute one and the same instrument.
19. SUCCESSORS. This Agreement shall be binding on the successors of the
Association and Interim.
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America.
B-8
<PAGE>
IN WITNESS WHEREOF, the Association and Interim have caused this Plan of
Merger to be executed by their duly authorized officers as of the day and year
first above written.
EQUALITY SAVINGS AND LOAN
ASSOCIATION, F.A.
ATTEST:
_____________________________ By: _____________________________________
Patricia R. Todd Richard C. Fellhauer
Corporate Secretary President and Chief Executive Officer
INTERIM II SAVINGS ASSOCIATION, F.A.
(In Organization)
ATTEST:
_____________________________ By: _____________________________________
Patricia R. Todd Richard C. Fellhauer
Corporate Secretary President and Chief Executive Officer
B-9
<PAGE>
EQUALITY SAVINGS BANK EXHIBIT A
---------
FEDERAL STOCK CHARTER
SECTION 1. CORPORATE TITLE. The full corporate title of the savings bank
is Equality Savings Bank ("Savings Bank").
SECTION 2. OFFICE. The home office shall be located in the City of St.
Louis, the County of St. Louis, and the State of Missouri.
SECTION 3. DURATION. The duration of the Savings Bank is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the Savings Bank is to
pursue any or all of the lawful objectives of a Federal savings bank chartered
under section 5 of the Home Owners' Loan Act and to exercise all of the express,
implied, and incidental powers conferred thereby and by all acts amendatory
thereof and supplemental thereto, subject to the Constitution and laws of the
United States as they are now in effect, or as they may hereafter be amended,
and subject to all lawful and applicable rules, regulations, and orders of the
Office of Thrift Supervision ("Office").
SECTION 5. CAPITAL STOCK. The total number of shares of all classes of
the capital stock that the Savings Bank has the authority to issue is 5,000,000,
of which 4,000,000 shall be common stock of par value of $1.00 per share and of
which 1,000,000 shall be serial preferred stock of par value of $1.00 per share.
The shares may be issued from time to time as authorized by the board of
directors without further approval of shareholders, except as otherwise provided
in this Section 5 or to the extent that such approval is required by governing
law, rule, or regulation. The consideration for the issuance of the shares
shall be paid in full before their issuance and shall not be less than the par
value. Neither promissory notes nor future services shall constitute payment or
part payment for the issuance of shares of the Savings Bank. The consideration
for the shares shall be cash, tangible or intangible property (to the extent
direct investment in such property would be permitted), labor, or services
actually performed for the Savings Bank, or any combination of the foregoing.
In the absence of actual fraud in the transaction, the value of such property,
labor, or services, as determined by the board of directors of the Savings Bank,
shall be conclusive. In the case of a stock dividend, that part of the retained
earnings of the Savings Bank that is transferred to common stock or paid-in
capital accounts upon the issuance of shares as a stock dividend shall be deemed
to be the consideration for their issuance.
Except for shares issuable in the initial organization of the Savings Bank
or in connection with the conversion of the Savings Bank from the mutual to
stock form of capitalization, no shares of capital stock (including shares
issuable upon conversion, exchange, or exercise of other securities) shall be
issued, directly or indirectly, to officers, directors, or controlling persons
of the Savings Bank other than as part of a general public offering or as
qualifying shares to a director, unless the issuance or the plan under which
they would be issued has been approved by a majority of the total votes eligible
to be cast at a legal meeting.
<PAGE>
Nothing contained in this section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class of a series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
to the cumulation of votes for the election of directors unless the charter
otherwise provides that there shall be no such cumulative voting: Provided, That
this restriction on voting separately by class or series shall not apply:
(i) To any provision that would authorize the holders of preferred stock,
voting as a class or series, to elect some members of the board of directors,
less than a majority thereof, in the event of default in the payment of
dividends on any class or series of preferred stock;
(ii) To any provision which would require the holders of preferred stock,
voting as a class or series, to approve the merger or consolidation of the
Savings Bank with another corporation or the sale, lease, or conveyance (other
than by mortgage or pledge) of properties or business in exchange for securities
of a corporation other than the Savings Bank if the preferred stock is exchanged
for securities of such other corporation: Provided, That no provision may
require such approval for transactions undertaken with the assistance or
pursuant to the direction of the Office or the Federal Deposit Insurance
Corporation;
(iii) To any amendment which would adversely change the specific terms of
any class or series of capital stock as set forth in this Section 5 (or in any
supplementary sections hereto), including any amendment which would create or
enlarge any class or series ranking prior thereto in rights and preferences. An
amendment which increases the number of authorized shares of any class or series
of capital stock, or substitutes the surviving association in a merger or
consolidation for the Savings Bank, shall not be considered to be such an
adverse change.
A description of the different classes and series (if any) of the Savings
Bank's capital stock and a statement of the designations, and the relative
rights, preferences, and limitations of the shares of each class of and series
(if any) of capital stock are as follows:
A. COMMON STOCK. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except as to the
cumulation of votes for the election of directors, unless the charter otherwise
provides that there shall be no such cumulative voting.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund, or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the Savings
Bank, the holders of the common stock (and the holders of any class or series of
stock entitled to participate with the common stock in the distribution of
assets) shall be entitled to receive, in cash or in kind, the assets
2
<PAGE>
of the Savings Bank available for distribution remaining after: (i) Payment or
provision for payment of the Savings Bank's debts and liabilities; (ii)
distributions or provision for distributions in settlement of its liquidation
account; and (iii) distributions or provisions for distributions to holders of
any class or series of stock having preference over the common stock in the
liquidation, dissolution, or winding up of the Savings Bank. Each share of
common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. PREFERRED STOCK. The Savings Bank may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and
issued in series, with each series separately designated so as to distinguish
the shares thereof from the shares of all other series and classes. The terms
of each series shall be set forth in a supplementary section to the charter.
All shares of the same class shall be identical except as to the following
relative rights and preferences, as to which there may be variations between
different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding up of the
Savings Bank;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and the
manner of its application, including the price(s) at which such shares may be
redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the
association and, if so, the conversion price(s) or the rate(s) of exchange, and
the adjustments thereof, if any, at which such conversion or exchange may be
made, and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
3
<PAGE>
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption of
supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established by a
supplementary charter section adopted by the board of directors, the Savings
Bank shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the Savings
Bank shall not be entitled to preemptive rights with respect to any shares of
the Savings Bank which may be issued.
SECTION 7. LIQUIDATION ACCOUNT. Pursuant to the requirements of the
Office's regulations (12 CFR Part 563b), the Savings Bank shall establish and
maintain a liquidation account for the benefit of its savings account holders as
of March 31, 1996 and ____________, 1997 ("eligible savers"). In the event of a
complete liquidation of the Savings Bank, it shall comply with such regulations
with respect to the amount and the priorities on liquidation of each of the
association's eligible savers' inchoate interest in the liquidation account, to
the extent it is still in existence: Provided, That an eligible saver's
--------
inchoate interest in the liquidation account shall not entitle such eligible
saver to any voting rights at meetings of the Savings Bank's stockholders.
SECTION 8. DIRECTORS. The Savings Bank shall be under the direction of a
board of directors. The authorized number of directors, as stated in the
Savings Bank's bylaws, shall not be fewer than five nor more than fifteen except
when a greater or lesser number is approved by the Director of the Office, or
his or her delegate.
4
<PAGE>
SECTION 9. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be made,
unless such is first proposed by the board of directors of the Savings Bank,
approved by the shareholders by a majority of the total votes eligible to be
cast at a legal meeting, unless a higher vote is otherwise required, and
approved or preapproved by the Office.
Attest:_________________________________________________________________
Secretary of the Savings Bank
By: _________________________________________________________________
President or Chief Executive Officer of the Savings Bank
Attest:_________________________________________________________________
Secretary of the Office of Thrift Supervision
By: _________________________________________________________________
Director of the Office of Thrift Supervision
Effective Date: _______________________________
5
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
EQUALITY BANCORP, INC.
ARTICLE I
The name of the Corporation is: Equality Bancorp, Inc.
ARTICLE II
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of capital stock which the
Corporation has the authority to issue is 4,200,000 shares, which are divided
into two classes as follows:
(a) 200,000 shares of Preferred Stock with a par value of $0.01 per
share (the "Preferred Stock"); and
(b) 4,000,000 shares of Common Stock with a par value of $0.01 per
share (the "Common Stock").
The designations, voting powers, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of the above classes of stock are as follows:
SECTION 1. PREFERRED STOCK. The board of directors is authorized, at
---------------
any time and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series with such designations, preferences,
voting powers and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof as are stated and expressed
in the resolution or resolutions providing for the issuance of such Preferred
Stock adopted by the board of directors, including, but not limited to,
determination of any of the following:
<PAGE>
(a) the distinctive serial designation and the number of shares
constituting a series;
(b) the dividend rate or rates, whether dividends are cumulative (and
if so on what terms and conditions), the payment date or dates for dividends and
the participating or other special rights, if any, with respect to dividends;
(c) the voting rights, full or limited, if any, of the shares of the
series, which could include the right to elect a specified number of directors
in any case if dividends on the series are not paid for in a specified period of
time;
(d) whether the shares of the series are redeemable and, if so, the
price or prices at which, and the terms and conditions on which, the shares may
be redeemed, which prices, terms and conditions may vary under different
conditions and at different redemption dates;
(e) the amount or amounts, if any, payable upon the shares of the
series in the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation prior to any payment or distribution of the assets
of the Corporation to any class or classes of stock of the Corporation ranking
junior to the series;
(f) whether the shares of the series are entitled to the benefit of a
sinking or retirement fund to be applied to the purchase or redemption of shares
of the series and the amount of the fund and the manner of its application,
including the price or prices at which the shares of the series may be redeemed
or purchased through the application of the fund;
(g) whether the shares are convertible into, or exchangeable for,
shares of any other class or classes or of any other series of the same or any
other class or classes of stock of the Corporation and the conversion price or
prices, or the rates of exchange, and the adjustments thereof, if any, at which
the conversion or exchange may be made, and any other terms and conditions of
the conversion or exchange; and
(h) any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of a series, as the board of directors may deem advisable and as
are not inconsistent with the provisions of this Certificate of Incorporation.
SECTION 2. COMMON STOCK.
------------
A. DIVIDENDS. Subject to the preferential rights of the Preferred
---------
Stock, the holders of the Common Stock are entitled to receive, to the extent
permitted by law, such dividends as may be declared from time to time by the
board of directors.
B. LIQUIDATION. In the event of the voluntary or involuntary
-----------
liquidation, dissolution, distribution of assets or winding up of the
Corporation, after distribution in full of the preferential amounts, if any, to
be distributed to the holders of shares of Preferred Stock,
2
<PAGE>
holders of Common Stock shall be entitled to receive all of the remaining assets
of the Corporation of whatever kind available for distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by them
respectively. The board of directors may distribute in kind to the holders of
Common Stock such remaining assets of the Corporation or may sell, transfer or
otherwise dispose of all or any part of such remaining assets to any other
corporation, trust or other entity and receive payment therefor in cash, stock
or obligations of such other corporation, trust or other entity, or any
combination hereof, and may sell all or any part of the consideration so
received and distribute any balance thereof in kind to holders of Common Stock.
Neither the merger or consolidation of the Corporation into or with any other
corporation or corporations, nor the purchase or redemption of shares of stock
of the Corporation of any class, nor the sale or transfer by the Corporation of
all or any part of its assets, nor the reorganization or recapitalization of the
Corporation, shall be deemed to be a dissolution, liquidation or winding up of
the Corporation for the purposes of this paragraph.
C. VOTING RIGHTS. Except as may be otherwise required by law or this
-------------
Certificate of Incorporation, each holder of Common Stock has one vote in
respect of each share of stock held by the holder of record on the books of the
Corporation on all matters voted upon by the stockholders.
SECTION 3. OTHER PROVISIONS.
----------------
A. NO PREEMPTIVE RIGHTS. No stockholder shall have any preemptive
--------------------
right to subscribe to an additional issue of stock, whether now or hereafter
authorized, of any class or series or to any securities of the Corporation
convertible into such stock.
B. CHANGES IN AUTHORIZED CAPITAL STOCK. Subject to the protective
-----------------------------------
conditions and restrictions of any outstanding Preferred Stock, any amendment to
this Certificate of Incorporation which increases or decreases the authorized
capital stock of any class or classes may be made only by the affirmative vote
of the holders of a majority of the outstanding shares of all classes of stock
of the Corporation generally entitled to vote in the election of directors,
considered for purposes of this Section 3.B of Article IV as one class.
C. UNCLAIMED DIVIDENDS. Any and all right, title, interest and claim
-------------------
in or to any dividends declared by the Corporation, whether in cash, stock, or
otherwise, which are unclaimed by the stockholder entitled thereto for a period
of six years after the close of business on the payment date, shall be and be
deemed to be extinguished and abandoned; and such unclaimed dividends in the
possession of the Corporation, its transfer agents or other agents or
depositaries shall at such time become the absolute property of the Corporation,
free and clear of any and all claims of any persons whatsoever.
ARTICLE V
SECTION 1. ELECTION AND TERMS OF DIRECTORS. The business and affairs
-------------------------------
of the Corporation shall be managed by or under the direction of a board of
directors. The board of directors shall be divided into three classes as nearly
equal in number as possible. The initial
3
<PAGE>
term of office of Class I directors shall expire at the annual meeting of
stockholders to be held in 1998; the initial term of office of Class II
directors shall expire at the annual meeting of stockholders to be held in 1999;
and the initial term of office of Class III directors shall expire at the annual
meeting of stockholders to be held in 2000, and in each case until their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors shall be chosen to succeed those whose terms then
expire, shall be elected for a term of office expiring at the third succeeding
annual meeting of stockholders after their election, and in each case until
their respective successors are elected and qualified.
The names and mailing addresses of the persons who are to serve as the
initial directors of each class of directors of the Corporation until their
successors are elected and qualified or until their earlier resignation or
removal are as follows:
<TABLE>
<CAPTION>
=========================================================================
Name Address Class Designation
- -------------------------------------------------------------------------
<S> <C> <C>
LeRoy C. Crook 4131 South Grand Boulevard I
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Kenneth J. Hrdlicka 4131 South Grand Boulevard I
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Michael J. Walsh 4131 South Grand Boulevard I
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Richard C. Fellhauer 4131 South Grand Boulevard II
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Daniel C. Aubuchon 4131 South Grand Boulevard II
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Stacey W. Braswell 4131 South Grand Boulevard II
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Berenice J. Mahacek 4131 South Grand Boulevard III
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Charles J. Wolter 4131 South Grand Boulevard III
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
Michael A. Deelo 4131 South Grand Boulevard III
St. Louis, Missouri 63118-3436
- -------------------------------------------------------------------------
</TABLE>
SECTION 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
-----------------------------------------
directorships resulting from any increase in the authorized number of directors
or any vacancies in the board of directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by a majority vote of the directors then in office, although less than a quorum,
or by a sole remaining director. Directors so chosen shall hold office for a
term expiring at the annual meeting of stockholders at which
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the term of the class to which they have been elected expires. No decrease in
the number of directors constituting the board of directors shall shorten the
term of any incumbent director. Newly created directorships shall be allocated
among the classes of directors so that each class of directors shall consist, as
nearly as possible, of one-third of the total number of directors.
SECTION 3. REMOVAL. Any director, or the entire board of directors,
-------
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally entitled
to vote in the election of directors, considered for purposes of this Section 3
of Article V as one class.
SECTION 4. ADVANCE NOTICE OF NOMINATIONS FOR DIRECTORS. (a)
-------------------------------------------
Nominations of persons for election to the board of directors shall be brought
before an annual meeting (i) pursuant to the Corporation's notice of meeting,
(ii) by or at the direction of the board of directors or (iii) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section 4(a), who is entitled to vote with
respect thereto and who complies with the notice procedures set forth in this
Section 4(a). For nominations to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed to and received by the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 40th day nor earlier than the close of business on the 70th day
prior to the first anniversary of the preceding year's annual meeting. In no
event shall the public or other announcement of an adjournment of an annual
meeting or the adjournment thereof commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice to the
Secretary shall set forth (i) as to each person whom such stockholder proposes
to nominate for election or reelection as a director, all information relating
to such person that would be required to be disclosed in solicitations of
proxies for election of directors in an election contest, or otherwise required,
if such solicitations of proxies were subject to Regulation 14A under the
Securities Exchange Act of 1934 and Rule 14a-11 thereunder (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director, if elected), and (ii) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination is made,
(A) the name and address of such stockholder, as they appear on the
Corporation's books, and the name and address of such beneficial owner and (B)
the class, series (if applicable) and number of shares of the Corporation's
capital stock that are owned beneficially and of record by such stockholder and
such beneficial owner.
Notwithstanding anything in the third sentence of the preceding
paragraph of this Section 4 to the contrary, in the event that the number of
directors to be elected to the board of directors of the Corporation is
increased and there is no public disclosure by the Corporation naming all of the
nominees for director or specifying the size of the increased board of directors
at least 50 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 4 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be
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delivered to or mailed to and received by the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
10th day following the day on which such public disclosure is first made by the
Corporation.
(b) Nominations of persons for election to the board of directors of
the Corporation may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the board of directors or, (ii) provided that the
board of directors has determined that directors shall be elected at such
special meeting, by any stockholder of the Corporation who is a stockholder of
record at the time of the giving of notice of the special meeting provided for
in this Section 4, who is entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Section 4.
In the event the Corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the board, any such stockholder may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation's notice of meeting if the
stockholder's notice, in the form required by Section 4(a), shall be delivered
to the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 14th day following (i) the date on which
public disclosure of the date of such meeting and of the nominees proposed by
the board of directors to be elected at such meeting is first made by the
Corporation or (ii) the date on which notice of such meeting is mailed to the
stockholders, whichever is earlier; provided, however, that if such public
disclosure is not made by the Corporation or notice of such meeting is not
mailed to the stockholders more than 21 days before the date of such special
meeting, the stockholder's notice, in the form required by Section 4(a), shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 7th day following the
date on which such public disclosure is first made by the Corporation or notice
of such meeting is mailed to the stockholders, whichever is earlier. In no
event shall the public or other announcement of an adjournment of a special
meeting or the adjournment thereof commence a new time period for the giving of
a stockholder's notice as described above.
(c) (i) Notwithstanding anything in this Certificate of Incorporation
to the contrary, only such persons who are nominated in accordance with the
procedures set forth in this Section 4 shall be eligible for election as
directors of the Corporation. The officer of the Corporation or other person
presiding over the meeting shall, if the facts so warrant, determine and declare
to the meeting that a nomination was not made in accordance with the provisions
of this Section 4 and, if such presiding officer should so determine, he or she
shall so declare to the meeting and any such defective nomination shall be
disregarded.
(ii) Nothing in this Section 4 shall be deemed to affect any
rights of the holders of any class or series of Preferred Stock to elect
directors under specified circumstances.
SECTION 5. AMENDMENT, ALTERATION OR REPEAL. In addition to any
-------------------------------
affirmative vote that may be otherwise required, the affirmative vote of the
holders of at least eighty percent (80%) of the outstanding shares of all
classes of stock of the Corporation generally entitled to vote in the election
of directors, considered for purposes of this Section as one class, shall
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be required to amend, alter or repeal in any respect, or adopt any provision
inconsistent with, this Article V.
ARTICLE VI
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
Special meetings of stockholders of the Corporation may be called only
by the Chairman, by the President or by the board of directors pursuant to a
resolution approved by a majority of the entire board of directors, upon not
less than 10 nor more than 60 days' written notice.
In addition to any affirmative vote which may be otherwise required,
the affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally entitled
to vote in the election of directors, considered for purposes of this Article VI
as one class, shall be required to amend, alter or repeal in any respect, or
adopt any provision inconsistent with, this Article VI.
ARTICLE VII
The Bylaws of the Corporation may be amended, altered or repealed and
new Bylaws not inconsistent with any provisions of this Certificate of
Incorporation may be made only (1) by the affirmative vote of a majority of the
members of the board of directors then in office, or (2) by the affirmative vote
of the holders of at least eighty percent (80%) of the outstanding shares of all
classes of stock of the Corporation generally entitled to vote in the election
of directors, considered for purposes of this Article VII as one class.
In addition to any affirmative vote which may be otherwise required,
the affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally entitled
to vote in the election of directors, considered for purposes of this Article
VII as one class, shall be required to amend, alter or repeal in any respect, or
adopt any provision inconsistent with, this Article VII.
ARTICLE VIII
The name and mailing address of the incorporator of this Corporation
are as follows:
Name Address
---- -------
Richard C. Fellhauer 4131 South Grand Boulevard
St. Louis, Missouri 63118-3436
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ARTICLE IX
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation so provide.
ARTICLE X
Except as otherwise provided in the Certificate of Incorporation, the
board of directors shall have authority to authorize the issuance, from time to
time without any vote or other action by the stockholders, of any or all shares
of stock of the Corporation of any class at any time authorized, any securities
convertible into or exchangeable for any such shares so authorized, and any
warrant, option or right to purchase, subscribe for or otherwise acquire, shares
of stock of the Corporation of any class at any time authorized, in each case to
such persons and for such consideration and on such terms as the board of
directors from time to time in its discretion lawfully may determine. Stock so
issued, for which the consideration has been paid to the Corporation, shall be
fully paid stock, and the holders of such stock shall not be liable to any
further call or assessments thereon.
ARTICLE XI
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
(S)291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
(S)279 of Title 8 of the Delaware Code order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
ARTICLE XII
Each person who is or was a director or officer of the Corporation,
and each person who is or was a director or officer of the Corporation and
serves or served at the request of the Corporation as a director or officer of
another enterprise, shall be indemnified by the Corporation in accordance with,
and to the fullest extent authorized by, the General Corporation Law of the
State of Delaware as it may be in effect from time to time.
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In addition to any affirmative vote which may be otherwise required,
the affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally entitled
to vote in the election of directors, considered for purposes of this Article
XII as one class, shall be required to amend, alter or repeal in any respect, or
adopt any provision inconsistent with, this Article XII.
ARTICLE XIII
No person who was at any time a director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty by such person as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is hereafter amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
In addition to any affirmative vote which may be otherwise required,
the affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally entitled
to vote in the election of directors, considered for purposes of this Article
XIII as one class, shall be required to amend, alter or repeal in any respect,
or adopt any provision inconsistent with, this Article XIII.
ARTICLE XIV
SECTION 1. VOTE REQUIRED FOR CERTAIN BUSINESS TRANSACTIONS. In
-----------------------------------------------
addition to any affirmative vote which may be otherwise required, no Business
Transaction, except as otherwise expressly provided in this Article XIV, shall
be effected or consummated, unless such Business Transaction has been approved
by the affirmative vote of the holders of at least that number of the Voting
Shares which equals the sum of (a) the number of Voting Shares beneficially
owned by all Interested Parties with respect to the Business Transaction, plus
(b) eighty percent (80%) of the remaining number of Voting Shares that are not
beneficially owned by any such Interested Party.
SECTION 2. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of this
--------------------------------
Article XIV shall not apply to any Business Transaction if:
A. Prior to the acquisition of beneficial ownership of ten
percent (10%) or more of the Voting Shares by all Interested Parties
with respect to the
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Business Transaction, the Business Transaction has been approved by a
resolution adopted by a majority of the board of directors holding
office at the time such resolution is adopted; or
B. The Business Transaction has been approved by a resolution
adopted by sixty-six and two-thirds percent (66 2/3%) of those members
of the board of directors holding office at the time such resolution
is adopted who are not themselves Interested Directors with respect to
the Business Transaction; or
C. All of the following conditions have been met:
(1) the aggregate amount of the cash and the fair market value
(as determined by the investment banking firm referred to in
subsection (4) below) of consideration other than cash to be received
for each share of Common Stock in the Business Transaction by holders
thereof is not less than the highest of (i) the highest per share
price (including any brokerage commissions, transfer taxes, soliciting
dealer's fees, dealer-management compensation and similar expenses)
paid or payable by the Interested Party with respect to the Business
Transaction to acquire beneficial ownership of any shares of Common
Stock within the five-year period immediately prior to the record date
for the determination of stockholders entitled to vote on the proposed
Business Transaction, (ii) the per share book value of Common Stock
(computed in accordance with generally accepted accounting principles)
at the end of the fiscal quarter of the Corporation immediately
preceding the record date for the determination of stockholders
entitled to vote on the proposed Business Transaction, and (iii) the
highest market price per share of Common Stock during the two-year
period ending immediately prior to the first public announcement of
the proposal of the Business Transaction;
(2) the consideration to be received in the Business Transaction
by holders of Common Stock other than an Interested Party with respect
to the Business Transaction shall be either in cash or in the same
form used by an Interested Party with respect to the Business
Transaction to acquire the largest number of shares of Common Stock
acquired by all Interested Parties with respect to the Business
Transaction from a person who is not an Interested Party with respect
to the Business Transaction;
(3) at the record date for the determination of stockholders
entitled to vote on the Business Transaction, there shall be one or
more directors of the Corporation who are not Interested Directors
with respect to the Business Transaction; and
(4) a proxy or information statement describing the Business
Transaction and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing
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<PAGE>
such Act, rules or regulations) shall be mailed to the holders of
Voting Shares as of the record date for the determination of
stockholders entitled to vote on the Business Transaction, at least
thirty (30) days prior to the consummation of such Business
Transaction (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent provisions),
and such proxy or information statement shall contain in a prominent
place (i) any recommendations as to the advisability (or
inadvisability) of the Business Transaction that those members of the
board of directors who are not themselves Interested Directors with
respect to the Business Transaction may choose to state, and (ii) the
opinion of an investment banking firm as to both (x) the fair market
value of any consideration other than cash to be received in the
Business Transaction by holders of Common Stock, and (y) the fairness
(or not) of the terms of the Business Transaction from a financial
point of view to the holders of Common Stock other than Interested
Parties with respect to the Business Transaction. Such investment
banking firm shall be engaged solely on behalf of the holders of
Common Stock other than Interested Parties with respect to the
Business Transaction, shall be selected by a majority of the directors
of the Corporation who are not themselves Interested Directors with
respect to the Business Transaction, shall be paid a reasonable fee
for its services by the Corporation upon receipt of such opinion and
shall be one of the national major bracket investment banking firms
that has not previously been associated with any Interested Party with
respect to the Business Transaction. For purposes of subsection (1)
above, the term "consideration other than cash to be received" shall
include Common Stock retained by the Corporation's stockholders in the
event of a Business Transaction in which the Corporation is the
surviving corporation.
SECTION 3. DEFINITIONS. For purposes of this Article XIV,
-----------
A. An "Associate" of a specified person is (1) a person that,
directly or indirectly, (i) controls, or is controlled by, or is under
common control with, the specified person, (ii) is the beneficial
owner of ten percent (10%) or more of any class of equity securities
of the specified person, or (iii) has ten percent (10%) or more of any
class of its equity securities beneficially owned, directly or
indirectly, by the specified person; (2) any person (other than the
Corporation or a Subsidiary) of which the specified person is an
officer, director, partner or other official and any officer,
director, partner or other official of the specified person; (3) any
trust or estate in which the specified person serves as trustee or in
a similar fiduciary capacity, or any trustee or similar fiduciary of
the specified person; and (4) any relative or spouse of the specified
person, or any relative of such spouse, who has the same home as the
specified person or who is an officer or director of any person (other
than the Corporation or a Subsidiary), directly or indirectly,
controlling, controlled by or under common control with the specified
person. No director of the Corporation, however, shall be deemed to be
an Associate of any other director of the Corporation by
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reason of such service as a director or by concurrence in any action
of the board of directors.
B. "Beneficial ownership" of any Voting Shares shall be
determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934 as in effect on January 1, 1997; provided, however, that a person
shall, in any event, be the beneficial owner of any Voting Shares: (1)
which such person, or any of such person's Associates, beneficially
owns, directly or indirectly; (2) which such person or any of such
person's Associates, directly or indirectly, (i) has the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding; or upon the exercise of conversion rights, exchange
rights, warrants or options; or pursuant to the power to revoke a
trust, discretionary account or other arrangement; or otherwise; or
(ii) has or shares the power, or has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) the exclusive or shared power, to vote or direct the vote
pursuant to any agreement, arrangement, relationship or understanding;
or pursuant to the power to revoke a trust, discretionary account or
other arrangement; or otherwise; or (3) which are beneficially owned,
directly or indirectly, by any other person with which such first-
mentioned person or any of its Associates has any agreement,
arrangement or understanding, or is acting in concert, with respect to
acquiring, holding, voting or disposing of any Voting Shares;
provided, however, that no director of the Corporation shall be deemed
to be acting in concert with any other director of the Corporation by
reason of such service as a director or by concurrence in any action
of the board of directors.
C. "Business Transaction" shall mean: (1) any merger or
consolidation of the Corporation or any Subsidiary with or into any
Interested Party or any Associate of an Interested Party; (2) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one or a series of related transactions) of all or any Substantial
Part of the Consolidated Assets of the Corporation to or with any
Interested Party or any Associate of an Interested Party; (3) any
issuance, sale, exchange, transfer or other disposition by the
Corporation or any Subsidiary (in one or a series of related
transactions) of any securities of the Corporation or any Subsidiary
to or with any Interested Party or any Associate of an Interested
Party (except any such issuance, sale, exchange, transfer or
disposition made to security holders generally); (4) any spin-off,
split-up, reclassification of securities (including any reverse stock
split), recapitalization or reorganization of the Corporation or any
Subsidiary, or any merger or consolidation of the Corporation with any
Subsidiary (whether or not with or into or otherwise involving an
Interested Party) which has the effect, directly or indirectly, of
increasing the proportionate interest of any Interested Party or any
Associate of an Interested Party in the equity securities of the
Corporation; (5) any liquidation or dissolution of the Corporation or
any Subsidiary proposed by or on behalf of the Interested Party or any
Associate of an Interested Party; (6) any other transaction involving
the Corporation or any
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Subsidiary (whether or not with or otherwise involving an Interested
Party) which has the effect, directly or indirectly, of increasing the
proportionate interest of any Interested Party or any Associate of an
Interested Party in the equity securities or assets of the Corporation
or any Subsidiary; or (7) adoption of any plan or proposal with
respect to any of the foregoing.
D. "Interested Director" shall mean each director of the
Corporation who (1) is an Interested Party or an Associate of an
Interested Party; (2) has an Associate who is an Interested Party or
an Associate of an Interested Party; (3) was nominated or proposed to
be elected as a director of the Corporation by an Interested Party or
an Associate of an Interested Party; or (4) is, or has been nominated
or proposed to be elected as, an officer, director or employee of an
Interested Party or an Associate of an Interested Party.
E. "Interested Director with respect to the Business
Transaction" shall mean any Interested Director who is an Interested
Director as a result of his relationship with an Interested Party with
respect to the Business Transaction.
F. "Interested Party" shall mean any person (other than the
Corporation or a Subsidiary) who or which is the beneficial owner of
ten percent (10%) or more of the Voting Shares: (1) in connection with
determining the required vote by stockholders on any Business
Transaction, as of any of the following dates: the record date for the
determination of stockholders entitled to notice of or to vote on such
Business Transaction or immediately prior to the consummation of any
such transaction or the adoption by the Corporation of any plan or
proposal with respect thereto; (2) in connection with determining the
required vote by stockholders on any amendment, alteration or repeal
of this Article XIV pursuant to subsections (a) and (b) of Section 5
of this Article XIV, as of the record date for the determination of
stockholders entitled to notice of and to vote on such amendment,
alteration or repeal; and (3) in connection with determining whether a
person who is a director is an "Interested Director" in respect of any
approval by the board of directors of the amendment, alteration or
repeal of this Article XIV pursuant to Section 5 of this Article XIV
or in respect of any determination made by the board of directors
pursuant to Section 4 of this Article XIV, as of the date at which the
vote on such recommendation or determination is being taken, or as
close as is reasonably practicable to such date.
G. "Interested Party with respect to the Business Transaction"
shall mean any Interested Party who has, or whose Associates have, an
interest in the Business Transaction of the nature described in
Section 3.C of this Article XIV.
H. "Market Price" shall mean the closing sales price of a share
of Common Stock on the Composite Tape for New York Stock Exchange-
Listed
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Stocks, or, if such stock is not quoted on the Composite Tape, on the
New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed on any such exchange,
the closing sales price or the average of the bid and asked prices
reported with respect to a share of such stock on the National
Association of Securities Dealers, Inc. Automated Quotation System or
any system then in use.
I. A "person" shall include any individual, firm, corporation,
partnership, group, trust or other entity, organization or
association.
J. "Subsidiary" shall mean any corporation of which a majority
of any class of equity security is owned, directly or indirectly, by
the Corporation; provided, however, that for purposes of Section 3.F
of this Article XIV, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.
K. "Substantial Part of the Consolidated Assets" of the
Corporation shall mean assets of the Corporation and/or any Subsidiary
having a book value (determined in accordance with generally accepted
accounting principles) in excess of ten percent (10%) of the book
value (determined in accordance with generally accepted accounting
principles) of the total consolidated assets of the Corporation and
all Subsidiaries which are consolidated for public financial reporting
purposes, at the end of its most recent quarterly fiscal period ending
prior to the time the determination is made for which financial
information is available.
L. "Voting Shares" shall mean the outstanding shares of all
classes of stock of the Corporation generally entitled to vote in the
election of directors, considered for purposes of this Article XIV as
one class. "Voting Shares" shall include shares beneficially owned by
any Interested Party through application of Section 3.B of this
Article XIV, but shall not include any other shares which may be
issuable based upon a right to acquire any other shares (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, warrants or options,
or pursuant to the power to revoke a trust, discretionary account or
other arrangement, or otherwise.
SECTION 4. DETERMINATIONS OF THE BOARD OF DIRECTORS. Sixty-six and
----------------------------------------
two-thirds percent (66 2/3%) of those members of the board of directors who are
not themselves Interested Directors with respect to a Business Transaction shall
have the power and duty to make all determinations to be made under this Article
XIV, including whether (a) a transaction is a Business Transaction; (b) a person
is an Interested Party or is an Interested Director; (c) a person is an
Associate of another person; (d) a person is an Interested Party with respect to
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the Business Transaction or is an Interested Director with respect to the
Business Transaction; (e) the assets subject to any Business Transaction
constitute a Substantial Part of the Consolidated Assets of the Corporation; (f)
a transaction has the effect of increasing the proportionate interest of any
Interested Party or any Associate of an Interested Party in the equity
securities or assets of the Corporation or any Subsidiary; (g) a person
beneficially owns any Voting Shares; (h) a person has an agreement, arrangement,
relationship or understanding, or is acting in concert, with another as to the
matters referred to in Section 3.B of this Article XIV; (i) shares of stock of
the Corporation are included within the term Voting Shares; (j) an amount equals
or exceeds the highest per share price paid or payable for Common Stock by an
Interested Party with respect to the Business Transaction; (k) an amount equals
or exceeds the per share book value of Common Stock; (l) an amount equals or
exceeds the highest market price per share of Common Stock; (m) the aggregate
amount of the cash and the fair market value of consideration other than cash to
be received for each share of Common Stock in the Business Transaction is not
less than the highest of the amounts referred to in clauses (i), (ii) and (iii)
of Section 2.C(a) of this Article XIV; (n) a form of consideration other than
cash is of the same type used by an Interested Party with respect to the
Business Transaction to acquire the largest number of shares of Common Stock
previously acquired by all Interested Parties with respect to the Business
Transaction from a person not an Interested Party with respect to the Business
Transaction; (o) an investment banking firm is a national major bracket firm;
(p) a fee to be paid an investment banking firm is reasonable; (q) an investment
banking firm has been previously associated with an Interested Party with
respect to the Business Transaction; or (r) the most recent quarterly fiscal
period for which financial information is available. Any such determination
shall be conclusive and binding for all purposes of this Article XIV.
SECTION 5. AMENDMENT, ALTERATION OR REPEAL. In addition to any
-------------------------------
affirmative vote which may be otherwise required, the affirmative vote of the
holders of at least that number of the Voting Shares which equals the sum of (a)
the number of all the Voting Shares beneficially owned by all Interested
Parties, plus (b) eighty percent (80%) of the remaining number of Voting Shares
that are not beneficially owned by any Interested Party, shall be required to
amend, alter or repeal in any respect, or adopt any provisions inconsistent
with, this Article XIV; provided that this Section 5 shall not apply to, and
such vote shall not be required for, any such amendment, alteration, repeal or
adoption approved by a resolution adopted by at least sixty-six and two-thirds
percent (66 2/3%) of those members of the board of directors holding office at
the time such resolution is adopted who are not themselves Interested Directors.
SECTION 6. NO EFFECT ON FIDUCIARY OBLIGATIONS. Nothing contained in
----------------------------------
this Article XIV shall be construed to relieve any Interested Party or any
Associate of an Interested Party from any fiduciary obligation imposed by law.
15
<PAGE>
ARTICLE XV
The Corporation shall not be governed by Section 203 of the General
Corporation Law of the State of Delaware, as amended from time to time, said
Section being entitled "Business Combinations with Interested Stockholders."
ARTICLE XVI
In discharging the duties of their respective positions, the board of
directors, committees of the board, individual directors and individual officers
may, in considering the best long term and short term interests of the
Corporation, consider the effects of any action involving or relating to a sale,
takeover or change in control or a potential sale, takeover or change in control
of the Corporation upon employees, suppliers, and customers of the Corporation
and its subsidiaries, communities in which offices or other establishments of
the Corporation or its subsidiaries are located and all other pertinent factors.
In addition to any affirmative vote which may be otherwise required,
the affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of all classes of stock of the Corporation generally entitled
to vote in the election of directors, considered for purposes of this Article
XVI as one class, shall be required to amend, alter or repeal in any respect, or
adopt any provision inconsistent with, this Article XVI.
ARTICLE XVII
SECTION 1. APPLICABILITY OF ARTICLE. The provisions of this Article
------------------------
XVII shall become effective upon the date Equality Savings and Loan Association,
F.A. becomes a wholly-owned subsidiary of the Corporation. All terms used in
this Article XVII and not otherwise defined herein shall have the meanings
ascribed to such terms in Section 3 of Article XIV, above.
SECTION 2. PROHIBITIONS RELATING TO BENEFICIAL OWNERSHIP OF VOTING
-------------------------------------------------------
SHARES. No person (other than the Corporation, any Subsidiary or any pension,
- ------
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation or by a member of a controlled group of corporations or trades or
businesses of which the Corporation is a member for the benefit of the employees
of the Corporation and/or any Subsidiary, or any trust or custodial arrangement
established in connection with any such plan) shall directly or indirectly
acquire or hold the beneficial ownership of more than ten percent (10%) of the
issued and outstanding Voting Shares of the Corporation. Any person so
prohibited who directly or indirectly acquires or holds the beneficial ownership
of more than ten percent (10%) of the issued and outstanding Voting Shares in
violation of this Section 2 shall be subject to the provisions of Sections 3 and
4 of this Article XVII. The Corporation is authorized to refuse to recognize a
transfer or attempted transfer of any Voting Shares to any person who
beneficially owns, or who the Corporation believes would become by virtue of
such transfer the beneficial owner of, more than ten percent (10%) of the Voting
Shares.
16
<PAGE>
SECTION 3. EXCESS SHARES. If, notwithstanding the foregoing
-------------
prohibition, a person shall, voluntarily or involuntarily, become or attempt to
become the purported beneficial owner (the "Purported Owner") of Voting Shares
in excess of ten percent (10%) of the issued and outstanding Voting Shares, the
number of shares in excess of ten percent (10%) shall be deemed to be "Excess
Shares," and the holder thereof shall be entitled to cast one one-hundredth
(1/100) of one vote per share for each Excess Share.
The restrictions set forth in this Article XVII shall be noted
conspicuously on all certificates evidencing ownership of Voting Shares.
SECTION 4. POWERS OF THE BOARD OF DIRECTORS.
--------------------------------
(a) The Board of Directors may, to the extent permitted by law, from
time to time establish, modify, amend or rescind, by Bylaw or otherwise,
regulations and procedures not inconsistent with the express provisions of this
Article XVII for the orderly application, administration and implementation of
the provisions of this Article XVII. Such procedures and regulations shall be
kept on file with the Secretary of the Corporation and with the Transfer Agent,
shall be made available for inspection by the public and, upon request, shall be
mailed to any holder of Voting Shares of the Corporation.
(b) When it appears that a particular person has become a Purported
Owner of Excess Shares in violation of Section 2 of this Article XVII, or of the
regulations or procedures of the Board of Directors with respect to this Article
XVII, and that the provisions of this Article XVII require application,
interpretation or construction, then a majority of the directors of the
Corporation shall have the power and duty to interpret all of the terms and
provisions of this Article XVII and to determine on the basis of information
known to them after reasonable inquiry all facts necessary to ascertain
compliance with this Article XVII, including, without limitation, (i) the number
of Voting Shares beneficially owned by any person or Purported Owner, (ii)
whether a person or Purported Owner is an affiliate or Associate of, or is
acting in concert with, any other person or Purported Owner, (iii) whether a
person or Purported Owner has an agreement, arrangement or understanding with
any other person or Purported Owner as to the voting or disposition of the
Voting Shares, (iv) the application of any other definition or operative
provision of this Article XVII to the given facts or (v) any other matter
relating to the applicability or effect of this Article XVII.
The Board of Directors shall have the right to demand that any person
who is reasonably believed to be a Purported Owner of Excess Shares (or who
holds of record Voting Shares beneficially owned by any person reasonably
believed to be a Purported Owner in excess of such limit) supply the Corporation
with complete information as to (i) the record owner(s) of all Voting Shares
beneficially owned by such person or Purported Owner and (ii) any other factual
matter relating to the applicability or effect of this Article XVII as may
reasonably be requested of such person or Purported Owner.
Any applications, interpretations, constructions or any other
determinations made by the Board of Directors pursuant to this Article XVII, in
good faith and on the basis of such information and assistance as was then
reasonably available for such purpose, shall be
17
<PAGE>
conclusive and binding upon the Corporation and its stockholders, and neither
the Corporation nor any of its stockholders shall have the right to challenge
any such application, interpretation, construction, or determination.
SECTION 5. SEVERABILITY. In the event any provision (or portion
------------
thereof) of this Article XVII shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Article XVII shall remain in full force and effect, and shall be construed
as if such invalid, prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of this
Corporation and its stockholders that each such remaining provision (or portion
thereof) of this Article XVII remain, to the fullest extent permitted by law,
applicable and enforceable as to all stockholders, including Purported Owners,
if any, notwithstanding any such finding.
SECTION 6. EXCLUSIONS. This Article XVII shall not apply to (a) any
----------
offer or sale with a view towards public resale made exclusively by the
Corporation to any underwriter or underwriters acting on behalf of the
Corporation, or to the selling group acting on such underwriter's or
underwriters' behalf, in connection with a public offering of the Common Stock;
or (b) any reclassification of securities (including any reverse stock split),
or recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction or
reorganization that does not have the effect, directly or indirectly, of
changing the beneficial ownership interests of the Corporation's stockholders,
other than pursuant to the exercise of any dissenters' appraisal rights, except
as a result of immaterial changes due to fractional share adjustments, which
changes do not exceed, in the aggregate, one percent (1%) of the issued and
outstanding shares of such class of equity or convertible securities.
SECTION 7. AMENDMENT, ALTERATION OR REPEAL. In addition to any
-------------------------------
affirmative vote which may be otherwise required, the affirmative vote of the
holders of at least eighty percent (80%) of the outstanding shares of all
classes of stock of the Corporation generally entitled to vote in the election
of directors, considered for purposes of this Article XVII as one class, shall
be required to amend, alter or repeal in any respect, or adopt any provision
inconsistent with, this Article XVII; provided that this Section 7 shall not
apply to, and such vote shall not be required for, any such amendment,
alteration, repeal or adoption approved by a resolution adopted by at least
sixty-six and two-thirds percent (66 2/3%) of those members of the board of
directors holding office at the time such resolution is adopted who are not
themselves Purported Owners or Associates of Purported Owners.
ARTICLE XVIII
The Corporation reserves the right to amend, alter or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute or by this Certificate of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
18
<PAGE>
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly, has hereunto set his hand this 9th day of May, 1997.
/s/ Richard C. Fellhauer
-------------------------------------------
Richard C. Fellhauer
19
<PAGE>
EXHIBIT 3.2
-----------
BYLAWS
OF
EQUALITY BANCORP, INC.
As Adopted on June 20, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES....................................................... -1-
Section 1.1 Registered Office....................................... -1-
-----------------
Section 1.2 Other Offices........................................... -1-
-------------
ARTICLE II STOCKHOLDERS.................................................. -1-
Section 2.1 Annual Meeting.......................................... -1-
--------------
Section 2.2 Special Meetings........................................ -1-
----------------
Section 2.3 Place of Meeting........................................ -1-
----------------
Section 2.4 Notice of Meetings...................................... -1-
------------------
Section 2.5 Stockholder List........................................ -2-
----------------
Section 2.6 Quorum.................................................. -2-
------
Section 2.7 Proxies................................................. -2-
-------
Section 2.8 Voting.................................................. -2-
------
Section 2.9 Voting of Certain Shares................................ -3-
------------------------
Section 2.10 Action Without Meeting.................................. -3-
----------------------
Section 2.11 Treasury Stock.......................................... -3-
--------------
Section 2.12 Business to be Considered by Stockholders............... -3-
-----------------------------------------
ARTICLE III DIRECTORS..................................................... -4-
Section 3.1 Number and Election..................................... -4-
-------------------
Section 3.2 Resignations and Vacancies.............................. -4-
--------------------------
Section 3.3 Nominations for Directors............................... -5-
-------------------------
Section 3.4 Management of Affairs of Corporation.................... -5-
------------------------------------
Section 3.5 Dividends and Reserves.................................. -5-
----------------------
Section 3.6 Regular Meetings........................................ -5-
----------------
Section 3.7 Special Meetings........................................ -6-
----------------
Section 3.8 Notice of Special Meetings.............................. -6-
--------------------------
Section 3.9 Quorum.................................................. -6-
------
Section 3.10 Presumption of Assent................................... -6-
---------------------
Section 3.11 Action Without Meeting.................................. -6-
----------------------
Section 3.12 Presiding Officer....................................... -7-
-----------------
Section 3.13 Executive Committee..................................... -7-
-------------------
Section 3.14 Other Committees........................................ -7-
----------------
Section 3.15 Alternates.............................................. -7-
----------
Section 3.16 Quorum and Manner of Acting--Committees................. -7-
---------------------------------------
Section 3.17 Committee Chairman, Books and Records, Etc.............. -7-
------------------------------------------
Section 3.18 Fees and Compensation of Directors...................... -8-
----------------------------------
Section 3.19 Reliance Upon Records................................... -8-
---------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV NOTICES........................................................-8-
Section 4.1 Manner of Notice.........................................-8-
----------------
Section 4.2 Waiver of Notice.........................................-8-
----------------
ARTICLE V OFFICERS.......................................................-9-
Section 5.1 Offices and Official Positions...........................-9-
------------------------------
Section 5.2 Election and Term of Office..............................-9-
---------------------------
Section 5.3 Removal and Resignation..................................-9-
-----------------------
Section 5.4 Vacancies................................................-9-
---------
Section 5.5 Chairman of the Board....................................-9-
---------------------
Section 5.6 President...............................................-10-
---------
Section 5.7 Vice Presidents.........................................-10-
---------------
Section 5.8 Secretary...............................................-10-
---------
Section 5.9 Treasurer...............................................-11-
---------
Section 5.10 Assistant Treasurers and Assistant Secretaries..........-11-
----------------------------------------------
Section 5.11 Salaries................................................-11-
--------
ARTICLE VI DIVISIONS.....................................................-12-
Section 6.1 Divisions of the Corporation............................-12-
----------------------------
Section 6.2 Official Positions Within a Division....................-12-
------------------------------------
ARTICLE VII CONTRACTS, LOANS, CHECKS AND DEPOSITS.........................-12-
Section 7.1 Contracts and Other Instruments.........................-12-
-------------------------------
Section 7.2 Loans...................................................-12-
-----
Section 7.3 Checks, Drafts, Etc.....................................-12-
-------------------
Section 7.4 Deposits................................................-12-
--------
ARTICLE VIII CERTIFICATES OF STOCK AND THEIR TRANSFER......................-12-
Section 8.1 Certificates of Stock...................................-12-
---------------------
Section 8.2 Lost, Stolen or Destroyed Certificates..................-13-
--------------------------------------
Section 8.3 Transfers of Stock......................................-13-
------------------
Section 8.4 Restrictions on Transfer................................-13-
------------------------
Section 8.5 No Fractional Share Certificates........................-14-
--------------------------------
Section 8.6 Stockholders of Record..................................-14-
----------------------
ARTICLE IX INDEMNIFICATION...............................................-14-
ARTICLE X GENERAL PROVISIONS............................................-17-
Section 10.1 Fiscal Year.............................................-17-
-----------
Section 10.2 Seal....................................................-17-
----
ARTICLE XI AMENDMENTS....................................................-17-
</TABLE>
-ii-
<PAGE>
BYLAWS
OF
EQUALITY BANCORP, INC.
ARTICLE I
OFFICES
SECTION 1.1 REGISTERED OFFICE. The registered office of the Corporation
-----------------
in the State of Delaware shall be located at 1209 Orange Street in the City of
Wilmington, County of New Castle, and the name of the Corporation's registered
agent, located at such address, is The Corporation Trust Company.
SECTION 1.2 OTHER OFFICES. The Corporation may also have offices at such
-------------
other places both within or without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. The annual meeting of the stockholders shall
--------------
be held at 4:00 p.m. on the second Friday in August in each year, beginning in
1998, if not a legal holiday, or, if a legal holiday, then on the next
succeeding business day, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
annual meeting for the election of directors shall not be held on the day
hereinbefore designated therefor, the Board of Directors shall cause the meeting
to be held as soon thereafter as convenient.
SECTION 2.2 SPECIAL MEETINGS. Except as otherwise prescribed by statute,
----------------
special meetings of the stockholders for any purpose or purposes may be called
and the location thereof designated by the Chairman of the Board or the
President, and shall be called and the location thereof designated by the
Secretary at the direction of a majority of the entire Board of Directors.
SECTION 2.3 PLACE OF MEETING. Each meeting of the stockholders for the
----------------
election of directors shall be held at the office of the Corporation in St.
Louis, Missouri, unless the Board of Directors shall, by resolution, designate
any other place, within or without the State of Delaware, as the place of such
meeting. Meetings of stockholders for any other purpose may be held at such
place, within or without the State of Delaware, and at such time as shall be
determined pursuant to Section 2.2, Special Meetings, and stated in the notice
----------------
of the meeting or in a duly executed waiver of notice thereof.
SECTION 2.4 NOTICE OF MEETINGS. Written or printed notice stating the
------------------
place, date and hour of each annual or special meeting of the stockholders and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be given not less than
<PAGE>
ten (10) days nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting.
When a meeting is adjourned to another time or place, no notice of the
adjourned meeting other than an announcement at the meeting as to the time and
place of the adjourned meeting need be given unless the adjournment is for more
than thirty (30) days or a new record date is fixed for the adjourned meeting
after such adjournment.
SECTION 2.5 STOCKHOLDER LIST. At least ten (10) days before every
----------------
meeting of stockholders, a complete list of the stockholders entitled to vote at
such meeting, arranged in alphabetical order, and showing the address of each
such stockholder and the number of shares registered in the name of each such
stockholder, shall be prepared by the Secretary. Such list shall be open to
examination of any stockholder of the Corporation during ordinary business
hours, for any purpose germane to the meeting, for a period of at least ten (10)
days prior to the meeting, at a place within the city where the meeting is to be
held, which place shall be specified in the notice of meeting, and the list
shall be produced and kept at the time and place of meeting during the whole
time thereof, and subject to the inspection for any purpose germane to the
meeting of any stockholder who is present.
SECTION 2.6 QUORUM. A majority of the shares entitled to vote, present
------
in person or represented by proxy, shall be requisite for, and shall constitute,
a quorum at all meetings of the stockholders of the Corporation for the
transaction of business, except as otherwise provided by statute, the
Certificate of Incorporation or these Bylaws. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat present in person or represented by proxy
shall have power to adjourn the meeting from time to time until a quorum shall
be present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 2.7 PROXIES. At every meeting of the stockholders, each
-------
stockholder having the right to vote thereat shall be entitled to vote in person
or by proxy. Such proxy shall be appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three (3) years
prior to such meeting, unless such proxy provides for a longer period; and it
shall be filed with the Secretary of the Corporation before, or at the time of,
the meeting.
SECTION 2.8 VOTING. Unless the Certificate of Incorporation provides
------
otherwise, at every meeting of stockholders, each stockholder shall be entitled
to one (1) vote for each share of stock of the Corporation entitled to vote
thereat and registered in the name of such stockholder on the books of the
Corporation on the corresponding record date. When a quorum is present at any
meeting of the stockholders, the vote of the holders of a majority of the stock
having voting power which is present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one upon
which, by provision of the statutes, the Certificate of Incorporation or these
Bylaws, a different vote is required, in which case such provision shall govern
and control the decision of such question. If the Certificate of Incorporation
provides for more or less than one vote for any share on any
-2-
<PAGE>
matter, every reference in these Bylaws to a majority or other proportion of
stock shall refer to such majority or other proportion of the votes of such
stock.
SECTION 2.9 VOTING OF CERTAIN SHARES. Shares standing in the name of
------------------------
another corporation, domestic or foreign, and entitled to vote may be voted by
such officer, agent, or proxy as the bylaws of such corporation may prescribe
or, in the absence of such provision, as the board of directors of such
corporation may determine. Shares standing in the name of a deceased person, a
minor or an incompetent and entitled to vote may be voted by the administrator,
executor, guardian or conservator, as the case may be, either in person or by
proxy. Shares standing in the name of a trustee, receiver or pledgee and
entitled to vote may be voted by such trustee, receiver or pledgee either in
person or by proxy as provided by Delaware law.
SECTION 2.10 ACTION WITHOUT MEETING. Any action required or permitted to
----------------------
be taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders and may not be effected without a meeting by a
consent in writing by such stockholders.
SECTION 2.11 TREASURY STOCK. Shares of its own stock belonging to the
--------------
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall not be voted at any meeting and shall not
be counted in determining the total number of outstanding shares for the purpose
of determining whether a quorum is present. Nothing in this Section 2.11 shall
be construed to limit the right of the Corporation to vote shares of its own
stock held by it in a fiduciary capacity.
SECTION 2.12 BUSINESS TO BE CONSIDERED BY STOCKHOLDERS. (a) Business to
-----------------------------------------
be considered by the stockholders shall be brought before an annual meeting (i)
pursuant to the Corporation's notice of meeting, (ii) by or at the direction of
the Board of Directors or (iii) by any stockholder of the Corporation who was a
stockholder of record at the time of giving of notice provided in subsection (a)
of this Section 2.12, who is entitled to vote with respect thereto and who
complies with the notice procedures set forth in subsection (a) of this Section
2.12. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such proposed business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice must
be delivered to or mailed to and received by the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting. In no event shall the
public or other announcement of an adjournment of an annual meeting or the
adjournment thereof commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice to the Secretary shall set
forth (i) as to any business the stockholder proposes to bring before the annual
meeting, (A) a brief description of the business desired to be brought before
the annual meeting, (B) the reasons for conducting such business at the annual
meeting, (C) any material interest in such business to such stockholder and (D)
the beneficial owner, if any, on whose behalf the proposed business is made, and
(ii) as to the
-3-
<PAGE>
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the proposed business is to be brought, (A) the name and address of such
stockholder, as they appear on the Corporation's books, and the name and address
of such beneficial owner and (B) the class and number of shares of the
Corporation's capital stock that are owned beneficially and of record by such
stockholder and such beneficial owner.
(b) At any special meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting.
(c) Notwithstanding anything in the Bylaws of the Corporation to the
contrary, only such business shall be brought before or conducted at a meeting
of stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 2.12. The officer of the Corporation
or other person presiding over the meeting shall, if the facts so warrant,
determine and declare to the meeting that business was not brought before the
meeting in accordance with the provisions of this Section 2.12 and, if such
person should so determine, such person shall so declare to the meeting and any
such business so determined not to be properly before the meeting shall be
disregarded.
(d) Notwithstanding the foregoing provisions of this Section 2.12, if
applicable, a stockholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder with respect to the matters set forth in this Section
2.12. Nothing in this Section 2.12 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act, if applicable.
ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER AND ELECTION. The board of directors of the
-------------------
Corporation shall consist of not less than 7 nor more than 12 persons. The
exact number of directors within the minimum and maximum limitations specified
in the preceding sentence shall be fixed from time to time by the board of
directors pursuant to a resolution adopted by a majority of the entire board of
directors. Except for vacancies filled pursuant to Section 3.2, Resignations
------------
and Vacancies, the directors shall be elected by the stockholders of the
- -------------
Corporation, and at each election the persons receiving the greatest number of
votes, up to the number of directors then to be elected, shall be the persons
then elected. The election of directors is subject to any provisions contained
in the Certificate of Incorporation relating thereto, including any provisions
for a classified board. Directors need not be residents of the state of
Delaware or the state of Missouri.
SECTION 3.2 RESIGNATIONS AND VACANCIES. Any director may resign at any
--------------------------
time by giving written notice to the Board of Directors, to the Chairman or to
the President. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
-4-
<PAGE>
Newly created directorships resulting from any increase in the authorized
number of directors or any vacancies in the Board of Directors resulting from
death, resignation, retirement, disqualification, removal from office or other
cause shall be filled by a majority vote of the directors then in office,
although less than a quorum, or by a sole remaining director. Directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of the class to which they have been elected
expires. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director. Newly created
directorships shall be allocated among the classes of directors so that each
class of directors shall consist, as nearly as possible, of one-third of the
total number of directors.
Any director, or the entire Board of Directors, may be removed from office
at any time, but only for cause and only by the affirmative vote of the holders
of at least eighty percent (80%) of the outstanding shares of all classes of
stock of the Corporation generally entitled to vote in the election of
directors, considered for purposes of this paragraph of Section 3.2 as one
class.
SECTION 3.3 NOMINATIONS FOR DIRECTORS. Nominations for the election of
-------------------------
directors may be made by the Board of Directors or by any stockholder entitled
to vote for the election of directors who complies with the requirements
provided in the Certificate of Incorporation.
SECTION 3.4 MANAGEMENT OF AFFAIRS OF CORPORATION. The property, business
------------------------------------
and affairs of the Corporation shall be managed by and under the direction of
its Board of Directors, which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these Bylaws directed or required to be
exercised or done by stockholders. In case the Corporation shall transact any
business or enter into any contract with a director or officer, or with any
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, the officers of the Corporation and
directors in question shall be severally under the duty of disclosing all
material facts as to their interest to the remaining directors promptly if and
when such interested officers or such interested directors in question shall
become advised of the circumstances. In the case of continuing relationships in
the normal course of business such disclosure shall be deemed effective, when
once given, as to all transactions and contracts subsequently entered into.
SECTION 3.5 DIVIDENDS AND RESERVES. Dividends upon stock of the
----------------------
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, in shares
of stock or otherwise in the form, and to the extent, permitted by law. The
Board of Directors may set apart, out of any funds of the Corporation available
for dividends, a reserve or reserves for working capital or for any other lawful
purpose, and also may abolish any such reserve in the manner in which it was
created.
SECTION 3.6 REGULAR MEETINGS. An annual meeting of the Board of
----------------
Directors shall be held, without other notice than these Bylaws, immediately
after, and at the same place as, the annual meeting of the stockholders. The
Board of Directors may provide, by resolution, the
-5-
<PAGE>
time and place, either within or without the State of Delaware, for the holding
of additional regular meetings without other notice than such resolution.
SECTION 3.7 SPECIAL MEETINGS. Special meetings of the Board of Directors
----------------
may be called by the Chairman or the President and shall be called by the
Secretary at the request of any two (2) directors, to be held at such time and
place, either within or without the State of Delaware, as shall be designated by
the call and specified in the notice of such meeting; and notice thereof shall
be given as provided in Section 3.8, Notice of Special Meetings, of these
--------------------------
Bylaws.
SECTION 3.8 NOTICE OF SPECIAL MEETINGS. Except as otherwise prescribed
--------------------------
by statute, written or actual oral notice of the time and place of each special
meeting of the Board of Directors shall be given at least two (2) days prior to
the time of holding the meeting or within such shorter period before the meeting
as the person or persons calling such meeting deem appropriate in the
circumstance. Any director may waive notice of any meeting.
SECTION 3.9 QUORUM. At each meeting of the Board of Directors, the
------
presence of not less than a majority of the whole board shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, the Certificate of Incorporation or these
Bylaws. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any member of the Board of Directors or of any committee designated by
the Board may participate in a meeting of the directors or any committee thereof
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such equipment shall constitute presence
in person at such meeting.
SECTION 3.10 PRESUMPTION OF ASSENT. Unless otherwise provided by
---------------------
statute, a director of the Corporation who is present at a meeting of the Board
of Directors at which action is taken on any corporate matter shall be presumed
to have assented to the action taken unless such director's dissent shall be
entered in the minutes of the meeting or unless such director shall file a
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
SECTION 3.11 ACTION WITHOUT MEETING. Unless otherwise restricted by the
----------------------
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, if a written consent thereto is signed
by all members of the Board or of such committee, as the
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case may be, and such written consent is filed with the minutes of proceedings
of the Board or committee.
SECTION 3.12 PRESIDING OFFICER. The presiding officer at any meeting of
-----------------
the Board of Directors shall be the Chairman of the Board or, in the Chairman's
absence, the President or, in the President's absence, any other director
elected chairman by vote of a majority of the directors present at the meeting.
SECTION 3.13 EXECUTIVE COMMITTEE. The Board of Directors may, by
-------------------
resolution passed by two-thirds of the total number of directors, designate two
or more directors of the Corporation to constitute an executive committee,
which, to the extent provided in the resolution and by Delaware law, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers which may require it.
SECTION 3.14 OTHER COMMITTEES. The Board of Directors may, by resolution
----------------
passed by a majority of the number of directors fixed by these Bylaws, designate
such other committees as it may from time to time determine. Each such
committee shall consist of such number of directors, shall serve for such term
and shall have and may exercise, during intervals between meetings of the Board
of Directors, such duties, functions and powers as the Board of Directors may
from time to time prescribe.
SECTION 3.15 ALTERNATES. The Board of Directors may from time to time
----------
designate from among the directors alternates to serve on one or more committees
as occasion may require. Whenever a quorum cannot be secured for any meeting of
any committee from among the regular members thereof and designated alternates,
the member or members of such committee present at such meeting and not
disqualified from voting, whether or not the member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in place of such absent or disqualified member.
SECTION 3.16 QUORUM AND MANNER OF ACTING--COMMITTEES. The presence of a
---------------------------------------
majority of members of any committee shall constitute a quorum for the
transaction of business at any meeting of such committee, and the act of a
majority of those present shall be necessary for the taking of any action
thereat, provided that no action may be taken by any such committee without the
favorable vote of members of the committee who are not officers or full-time
employees of the Corporation at least equal to the favorable vote of members of
such committee who are officers or full-time employees of the Corporation.
SECTION 3.17 COMMITTEE CHAIRMAN, BOOKS AND RECORDS, ETC. The chairman of
------------------------------------------
each committee shall be selected from among the members of the committee by a
majority of the committee. Each committee shall keep a record of its acts and
proceedings, and all actions of each committee shall be reported to the Board of
Directors at its next meeting. Each committee shall fix its own rules of
procedure not inconsistent with these Bylaws or the resolution of the Board of
Directors designating such committee and shall meet at such times and places and
upon such call or notice as shall be provided by such rules.
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SECTION 3.18 FEES AND COMPENSATION OF DIRECTORS. Directors shall not
----------------------------------
receive any stated salary for their services as such; but, by resolution of the
Board of Directors, a fixed fee, with or without expenses of attendance, may be
allowed for attendance at each regular or special meeting of the Board. Members
of the Board shall be allowed their reasonable traveling expenses when actually
engaged in the business of the Corporation. Members of any committee may be
allowed like fees and expenses for attending committee meetings. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 3.19 RELIANCE UPON RECORDS. Every director of the Corporation,
---------------------
or member of any committee designated by the Board of Directors, shall, in the
performance of such person's duties, be fully protected in relying in good faith
upon the records of the Corporation and upon such information, opinions, reports
or statements presented to the Corporation by any of the Corporation's officers
or employees, or committees of the Board of Directors, or by any other person as
to matters the director or member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
ARTICLE IV
NOTICES
SECTION 4.1 MANNER OF NOTICE. Whenever under the provisions of the
----------------
statutes, the Certificate of Incorporation or these Bylaws notice is required to
be given to any stockholder, director or member of any committee designated by
the Board of Directors, it shall not be construed to require personal delivery
and such notice may be given in writing by depositing it, in a sealed envelope,
in the United States mails, air mail or first class, postage prepaid, addressed
(or by delivering it to a telegraph company, charges prepaid, for transmission
or by facsimile) to such stockholder, director or member either at the address
of such stockholder, director or member as it appears on the books of the
Corporation or, in the case of such a director or member, at such person's
business address; and such notice shall be deemed to be given at the time when
it is thus deposited in the United States mails (or delivered to the telegraph
company or the facsimile transmission is acknowledged). Such requirement for
notice shall be deemed satisfied, except in the case of stockholder meetings
with respect to which written notice is mandatorily required by law, if actual
notice is received orally or in writing by the person entitled thereto as far in
advance of the event with respect to which notice is given as the minimum notice
period required by law, the Certificate of Incorporation or these Bylaws.
SECTION 4.2 WAIVER OF NOTICE. Whenever any notice is required to be
----------------
given under the provisions of the statutes, the Certificate of Incorporation, or
these Bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before, at or after the time stated therein,
shall be deemed equivalent thereto. Attendance by a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the
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stockholders, directors or committee of directors need be specified in any
written waiver of notice unless so required by statute, the Certificate of
Incorporation or these Bylaws.
ARTICLE V
OFFICERS
SECTION 5.1 OFFICES AND OFFICIAL POSITIONS. The officers of the
------------------------------
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such Assistant Secretaries, Assistant
Treasurers, and other officers as the Board of Directors shall determine. Any
two or more offices may be held by the same person. Except for the Chairman of
the Board, none of the officers need be a director, a stockholder of the
Corporation or a resident of the State of Delaware. The Board of Directors may
from time to time establish, and abolish, official positions within the
divisions into which the business and operations of the Corporation may be
divided, pursuant to Section 6.1, Divisions of the Corporation, of these Bylaws,
----------------------------
and assign titles and duties to such positions. Those appointed to official
positions within divisions may, but need not, be officers of the Corporation.
The Board of Directors shall appoint officers to official positions within a
division and may with or without cause remove from such a position any person
appointed to it. In any event, the authority incident to an official position
within a division shall be limited to acts and transactions within the scope of
the business and operations of such division.
SECTION 5.2 ELECTION AND TERM OF OFFICE. The officers of the Corporation
---------------------------
shall be elected annually by the Board of Directors at their first meeting held
after each regular annual meeting of the stockholders. If the election of
officers shall not be held at such meeting of the Board, such election shall be
held at a regular or special meeting of the Board of Directors as soon
thereafter as may be convenient. Each officer shall hold office until such
officer's successor is elected and qualified or until such officer's death or
resignation or until such officer shall have been removed in the manner
hereinafter provided.
SECTION 5.3 REMOVAL AND RESIGNATION. Any officer may be removed, either
-----------------------
with or without cause, by a majority of the directors then in office at any
regular or special meeting of the Board; but such removal shall be without
prejudice to the contract rights, if any, of such person so removed. Any
officer may resign at any time by giving written notice to the Board of
Directors, to the Chairman, to the President or to the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 5.4 VACANCIES. A vacancy in any office because of death,
---------
resignation, removal, or any other cause may be filled by the Board of
Directors.
SECTION 5.5 CHAIRMAN OF THE BOARD. The Board of Directors shall elect a
---------------------
Chairman of the Board from among the directors. The Chairman of the Board shall
preside at all meetings of the stockholders and directors, and shall have such
other powers and duties as the Board of Directors may from time to time
prescribe.
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SECTION 5.6 PRESIDENT. The President shall be the chief executive
---------
officer of the Corporation. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the stockholders and, if a member, at
all meetings of the Board of Directors. The President shall have the overall
supervision of the business of the Corporation and shall direct the affairs and
policies of the Corporation, subject to such policies and directions as may be
provided by the Board of Directors. The President shall have authority to
designate the duties and powers of other officers and delegate special powers
and duties to specified officers, so long as such designation shall not be
inconsistent with the statutes, these Bylaws or action of the Board of
Directors. The President shall also have power to execute, and shall execute,
deeds, mortgages, bonds, contracts or other instruments of the Corporation
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by the President to some other officer or agent of
the Corporation. The President may sign with the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, certificates for shares of
stock of the Corporation the issuance of which shall have been duly authorized
by the Board of Directors, and shall vote, or give a proxy to any other person
to vote, all shares of the stock of any other Corporation standing in the name
of the Corporation. The President in general shall have all other powers and
shall perform all other duties which are incident to the chief executive office
of a Corporation or as may be prescribed by the Board of Directors from time to
time.
SECTION 5.7 VICE PRESIDENTS. In the absence of the President, or in the
---------------
event of the President's inability or refusal to act, the Vice Presidents in
order of their rank as fixed by the Board of Directors or, if not ranked, the
Vice President designated by the Board of Directors or the President, shall
perform all duties of the President and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties, not
inconsistent with the statutes, these Bylaws, or action of the Board of
Directors, as from time to time may be prescribed for them, respectively, by the
Board of Directors or the President. Any Vice President may sign, with the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certificates for shares of stock of the Corporation the issuance of which shall
have been duly authorized by the Board of Directors.
SECTION 5.8 SECRETARY. The Secretary shall: (i) keep the minutes of the
---------
meetings of the stockholders, the Board of Directors and committees of
directors, in one or more books provided for that purpose; (ii) see that all
notices are fully given in accordance with the provisions of these Bylaws or as
required by law; (iii) have charge of the corporate records and of the seal of
the Corporation; (iv) affix the seal of the Corporation or a facsimile thereof,
or cause it to be affixed, to all certificates for shares prior to the issuance
thereof and to all documents the execution of which on behalf of the Corporation
under its seal is duly authorized by the Board of Directors or otherwise in
accordance with the provisions of these Bylaws; (v) keep a register of the post
office address of each stockholder, director and committee member which shall
from time to time be furnished to the Secretary by such stockholder, director or
member; (vi) sign with the President, or a Vice President, certificates for
shares of stock of the Corporation, the issuance of which shall have been duly
authorized by resolution of the Board of Directors; (vii) have general charge of
the stock transfer books
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of the Corporation; and (viii) in general, perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
by the President or by the Board of Directors. The Secretary may delegate such
details of the performance of duties of the office as may be appropriate in the
exercise of reasonable care to one or more persons in his or her stead, but
shall not thereby be relieved of responsibility for the performance of such
duties.
SECTION 5.9 TREASURER. The Treasurer shall: (i) be responsible to the
---------
Board of Directors for the receipt, custody and disbursements of all funds and
securities of the Corporation; (ii) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositories as shall from time to time be selected in accordance with the
provisions of Section 7.4, Deposits, of these Bylaws; (iii) disburse the funds
--------
of the Corporation as ordered by the Board of Directors or the President or as
otherwise required in the conduct of the business of the Corporation; (iv)
render to the President or Board of Directors, upon request, an account of all
transactions as Treasurer and on the financial condition of the Corporation; and
(v) in general, perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned by the President, by the
Board of Directors or these Bylaws. The Treasurer may sign, with the President,
or a Vice President, certificates for shares of stock of the Corporation, the
issuance of which shall have been duly authorized by resolution of the Board of
Directors. The Treasurer may delegate such details of the performance of duties
of the office as may be appropriate in the exercise of reasonable care to one or
more persons in his or her stead, but shall not thereby be relieved of
responsibility for the performance of such duties. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his or
her duties in such sum, and with such surety or sureties, as the Board of
Directors shall determine.
SECTION 5.10 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
----------------------------------------------
Assistant Treasurers and Assistant Secretaries shall perform all functions and
duties which the Secretary or Treasurer, as the case may be, may assign or
delegate; but such assignment or delegation shall not relieve the principal
officer from the responsibilities and liabilities of his or her office. In
addition, an Assistant Secretary or an Assistant Treasurer, as thereto
authorized by the Board of Directors, may sign with the President, or a Vice
President, certificates for shares of the Corporation, the issuance of which
shall have been duly authorized by resolution of the Board of Directors; and the
Assistant Secretaries and Assistant Treasurers shall, in general, perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or by the Board of Directors. The Assistant
Treasurers shall, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums, and with such surety or
sureties, as the Board of Directors shall determine.
SECTION 5.11 SALARIES. The salaries of the officers shall be fixed from
--------
time to time by the Board of Directors or by such officer as the Board of
Directors may designate for such purpose or as the Board of Directors may
otherwise direct. No officer shall be prevented from receiving a salary or
other compensation by reason of the fact that he or she is also a director of
the Corporation.
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ARTICLE VI
DIVISIONS
SECTION 6.1 DIVISIONS OF THE CORPORATION. The Board of Directors
----------------------------
shall have the power to create and establish such operating divisions of the
Corporation as it may from time to time deem advisable.
SECTION 6.2 OFFICIAL POSITIONS WITHIN A DIVISION. The President may
------------------------------------
appoint individuals, whether or not they are officers of the Corporation, to,
and may, with or without cause, remove them from, official positions established
within a division, but not filled by the Board of Directors. (See also Section
5.1, Offices and Official Positions, of these Bylaws.)
------------------------------
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 7.1 CONTRACTS AND OTHER INSTRUMENTS. The Board of Directors may
-------------------------------
authorize any officer or officers, agent or agents, to enter into any contract
or execute and deliver any instrument in the name of and on behalf of the
Corporation, or of any division thereof, and such authority may be general or
confined to specific instances.
SECTION 7.2 LOANS. No loans shall be contracted on behalf of the
-----
Corporation, or any division thereof, and no evidence of indebtedness shall be
issued in the name of the Corporation, or any division thereof, unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 7.3 CHECKS, DRAFTS, ETC. All checks, demands, drafts or
-------------------
other orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation, or any division thereof, shall be signed
by such officer or officers, agent or agents of the Corporation; and in such
manner, as shall from time to time be authorized by the Board of Directors.
SECTION 7.4 DEPOSITS. All funds of the Corporation, or any division
--------
thereof, not otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies or other depositories
as the Board of Directors may select.
ARTICLE VIII
CERTIFICATES OF STOCK AND THEIR TRANSFER
SECTION 8.1 CERTIFICATES OF STOCK. The certificates of stock of the
---------------------
Corporation shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the holder's name and number
of shares and shall be signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
If any stock certificate is signed (i) by a transfer agent or an assistant
transfer agent or (ii) by a transfer clerk acting on behalf of the Corporation
and a registrar, the signature of any officer of the Corporation may be a
facsimile. In case any such officer whose facsimile signature has
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thus been used on any such certificate shall cease to be such officer, whether
because of death, resignation or otherwise, before such certificate has been
delivered by the Corporation, such certificate may nevertheless be delivered by
the Corporation, as though the person whose facsimile signature has been used
thereon had not ceased to be such officer. All certificates properly
surrendered to the Corporation for transfer shall be canceled and no new
certificate shall be issued to evidence transferred shares until the former
certificate for at least a like number of shares shall have been surrendered and
canceled and the Corporation reimbursed for any applicable taxes on the
transfer, except that in the case of a lost, destroyed or mutilated certificate
a new certificate may be issued therefor upon such terms, and with such
indemnity (if any) to the Corporation, as the Board of Directors may prescribe
specifically or in general terms or by delegation to a transfer agent for the
Corporation.
SECTION 8.2 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of
--------------------------------------
Directors in individual cases, or by general resolution or by delegation to the
transfer agent, may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificates, or such owner's legal representative, to advertise the same in
such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 8.3 TRANSFERS OF STOCK. Upon surrender to the Corporation or
------------------
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, and upon payment of applicable taxes with respect to such transfer,
and in compliance with any restrictions on transfer applicable to the
certificate or shares represented thereby of which the Corporation shall have
notice and subject to such rules and regulations as the Board of Directors may
from time to time deem advisable concerning the transfer and registration of
certificates for shares of capital stock of the Corporation, the Corporation
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books. Transfers of shares
shall be made only on the books of the Corporation by the registered holder
thereof or by such holder's attorney or successor duly authorized as evidenced
by documents filed with the Secretary or transfer agent of the Corporation.
SECTION 8.4 RESTRICTIONS ON TRANSFER. Any stockholder may enter into
------------------------
an agreement with other stockholders or with the Corporation providing for
reasonable limitation or restriction on the right of such stockholder to
transfer shares of capital stock of the Corporation held by such stockholder,
including, without limiting the generality of the foregoing, agreements granting
to such other stockholders or to the Corporation the right to purchase for a
given period of time any of such shares on terms equal to terms offered such
stockholders by any third party. Any such limitation or restriction on the
transfer of shares of the Corporation may be set forth on certificates
representing shares of capital stock or notice thereof may be otherwise given to
the Corporation or the transfer agent, in which case
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the Corporation or the transfer agent shall not be required to transfer such
shares upon the books of the Corporation without receipt of satisfactory
evidence of compliance with the terms of such limitation or restriction.
SECTION 8.5 NO FRACTIONAL SHARE CERTIFICATES. Certificates shall not
--------------------------------
be issued representing fractional shares of stock.
SECTION 8.6 STOCKHOLDERS OF RECORD. The Corporation shall be
----------------------
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
ARTICLE IX
INDEMNIFICATION
(a) The Corporation shall 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 such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation 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 such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person 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 or her 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 the
person 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 or her conduct was unlawful.
(b) The Corporation shall 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 such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation 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
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person 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 Delaware Court of Chancery or
the court in which such
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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 Delaware Court of Chancery or such other court shall deem proper.
(c) The Corporation may indemnify any person who is or was an employee or
agent of the Corporation, or is or was an employee or agent of the Corporation
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise to the extent and under the circumstances provided by subsections (a)
and (b) of this ARTICLE IX with respect to a person who is or was a director or
officer of the Corporation. To the extent that an employee or agent of the
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
ARTICLE IX, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this ARTICLE IX
(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
or officer is proper in the circumstances because such person has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
ARTICLE IX. Such determination shall be made (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
(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 such person is not entitled to be
indemnified by the Corporation as authorized in this ARTICLE IX. 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 ARTICLE IX 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 such
person's official capacity and as to action in another capacity while holding
such office.
(g) The Corporation shall have the 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
such person and incurred by such person in any such capacity, or arising out
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<PAGE>
of such person's status as such, whether or not the Corporation would have the
power to indemnify such person against such liability under this ARTICLE IX or
otherwise.
(h) For purposes of this ARTICLE IX, 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 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 ARTICLE IX with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this ARTICLE IX, 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 or officer of the Corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person 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 ARTICLE IX.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this ARTICLE IX shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(k) The Delaware Court of Chancery is vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this ARTICLE IX. The Delaware Court of Chancery
may summarily determine the Corporation's obligation to advance expenses
(including attorneys' fees).
(l) Notwithstanding any other Article of these Bylaws, no amendment,
modification, restatement or repeal of the Bylaws shall limit or impair in any
manner the rights of any person to indemnification or advancement of expenses
under this ARTICLE IX in respect of any action or failure to act occurring prior
to such amendment, modification, restatement or repeal.
(m) The provisions of this ARTICLE IX shall be deemed to be a contract
between the Corporation and each person who serves as such officer or director
in any such capacity at any time while this ARTICLE IX and the relevant
provisions of the General Corporation Law of the State of Delaware or other
applicable laws, if any, are in effect, and any repeal or modification of any
such law or this ARTICLE IX shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding
-16-
<PAGE>
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 FISCAL YEAR. The fiscal year of the Corporation shall
-----------
begin on April 1 of each year and end on March 31 of each year.
SECTION 10.2 SEAL. The corporate seal shall have inscribed thereon
----
the name of the Corporation, and the words "CORPORATE SEAL" and "DELAWARE;" and
it shall otherwise be in the form approved by the Board of Directors. Such seal
may be used by causing it, or a facsimile thereof, to be impressed or affixed or
otherwise reproduced.
ARTICLE XI
AMENDMENTS
Subject to any contrary or limiting provisions contained in the
Certificate of Incorporation, these Bylaws may be amended or repealed, or new
Bylaws may be adopted only (i) by the affirmative vote of the holders of at
least eighty percent (80%) of the outstanding shares of all classes of stock of
the Corporation generally entitled to vote in the election of directors,
considered for purposes of this ARTICLE XI as one class, or (ii) by the
affirmative vote of a majority of the members of the Board of Directors then in
office at any regular or special meeting. Any Bylaws adopted or amended by the
stockholders may be amended or repealed by the Board of Directors or the
stockholders.
-17-
<PAGE>
Atlas Corporate & Notary Supply Co., P.O. Box 1638, Skokie, Illinois 60076
Number Eagle Picture Shares
ORGANIZED UNDER THE LAWS OF THE STATE OF
DELAWARE
EQUALITY BANCORP, INC.
Authorized 4,000,000 Shares of S0.01 Par Value Each
------------- ----------
THIS CERTIFIES THAT___________________________________________ is the owner of
____________________________ Shares of the Capital Stock of the above named
Corporation, fully paid, non-assessable and transferable only on the books of
the Corporation by the holder hereof in person or by duly authorized Attorney
upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this _____________ day of ________________ 19 _______________
____________________________ ____________________________
SECRETARY PRESIDENT
<PAGE>
EXHIBIT 5.1
Christopher J. Zinski
(312) 258-5548
June 26, 1997
Board of Directors
Equality Bancorp, Inc.
4131 South Grand Boulevard
St. Louis, Missouri 63118-3464
RE: EQUALITY BANCORP, INC.
REGISTRATION STATEMENT ON FORM S-1
----------------------------------
Ladies and Gentlemen:
We are acting as special counsel to Equality Bancorp, Inc., a
Delaware corporation (the "Company"), in connection with the Company's filing
of a Registration Statement on Form S-1 (the "Registration Statement") under
the Securities Act of 1933 (the "Act"), relating to the offering and sale by
the Company of up to 1,988,721 shares of Common Stock of the Company, $0.01
par value (the "Shares"), in certain exchange, subscription and community
offerings, as more fully described in the Registration Statement.
The Shares will be issued in connection with the mutual-to-stock
conversion of First Missouri Financial, M.H.C., a federally-chartered-mutual-
holding company ("First Missouri"), under the terms of a Plan of Conversion
and Reorganization of First Missouri Financial, M.H.C. and Equality Savings
and Loan Association, F.A. (the "Plan of Conversion and Reorganization"). It
is our understanding that First Missouri currently owns 53.2 percent of the
outstanding common stock of Equality Savings and Loan Association, F.A.
("Equality Savings"), a federally-chartered-capital-stock-savings association,
while the remaining shares of Equality Savings' common stock are owned by
public stockholders (the "Public Stockholders").
Pursuant to the Plan of Conversion and Reorganization,
(i) First Missouri will convert from a federal-mutual-holding company
to a federal-interim-stock-savings association ("Interim I");
(ii) simultaneous to the conversion referenced in paragraph (i),
Interim I will merge with and into Equality Savings (pursuant to a Plan of
Merger Between First Missouri Financial, M.H.C. and Equality Savings and Loan
Association, F.A.), whereby First Missouri and Interim I will cease to exist
and Equality Savings will survive the merger;
<PAGE>
Board of Directors
Equality Bancorp, Inc.
June 26, 1997
Page 2
(iii) Equality Savings will form the Company as a new first-tier,
wholly-owned subsidiary;
(iv) the Company will, in turn, form a federally-chartered-interim-
savings association ("Interim II") as its wholly-owned subsidiary;
(v) Interim II will then merge with and into Equality Savings (pursuant
to a Plan of Merger between Equality Savings and Loan Association, F.A. and
Interim II Savings and Loan Association, F.A.) and, in connection therewith,
each share of Equality Savings' common stock held by the Public Stockholders
will be automatically converted, without further action by the holder thereof,
into and become the right to receive shares of Company common stock based on
an exchange ratio (plus cash in lieu of any fractional share interest), as
more fully described in the Registration Statement (the "Exchange Offering");
and
(vi) the Company will offer shares of its common stock in a subscription
and community offering, as more fully described in the Registration Statement
(the "Subscription and Community Offering").
In this connection, we have examined such corporate records,
certificates and other documents and have made such other factual and legal
investigations as we have deemed necessary or appropriate for purposes of this
opinion.
Based on the foregoing, we are of the opinion that,
1. the Company is a corporation duly incorporated and validly
existing under the laws of the State of Delaware, and
2. the Shares have been duly authorized, and will be legally
issued, fully paid and non-assessable when,
(a) the Registration Statement, as then amended, shall have
become effective under the Act,
(b) the Plan of Merger between First Missouri Financial,
M.H.C. and Equality Savings and Loan Association, F.A. and the Plan of Merger
between Equality Savings and Loan Association, F.A. and Interim II Savings and
Loan Association, F.A. shall have been duly authorized, executed and delivered
by the parties thereto; and
(c) the Shares shall have been issued and exchanged in the
Exchange Offering and offered and sold in the Subscription and Community
Offering, as contemplated in the Registration Statement and in accordance with
the terms and conditions of the Plan of Conversion and Reorganization.
<PAGE>
Board of Directors
Equality Bancorp, Inc.
June 26, 1997
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Opinions" in the Prospectus forming a part of the Registration
Statement.
Very truly yours,
SCHIFF HARDIN & WAITE
By: /s/ Christopher J. Zinski
---------------------------------
Christopher J. Zinski
<PAGE>
________________, 1997
PRIVATE
- -------
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
4131 South Grand Boulevard
St. Louis, Missouri 63118
Re: Federal and State of Missouri Income Tax Consequences of a
proposed merger of First Missouri Financial, M.H.C. into Equality
Savings & Loan Association, F.A. in a statutory merger to be
effected under the Internal Revenue Code of 1986, as amended
(hereafter the "IRC" or the "Code") (S)368(a)(1)(A), followed by
a merger of Equality Interim II Savings & Loan Association, F.A.
with and into Equality Savings & Loan Association, F.A. to be
effected under IRC(S)368(a)(1)(A) and IRC (S)368(a)(2)(E).
Dear Sirs:
You have requested an opinion on the potential Federal income tax consequences
and State of Missouri income tax and financial institution franchise tax
consequences of the proposed merger of First Missouri Financial, M.H.C. (the
"MHC"), with and into Equality Savings & Loan Association, F.A. (the
"Association") in a statutory merger to be effected under IRC (S)368(a)(1)(A),
followed by a merger of Equality Interim II Savings & Loan Association, F.A.
("Interim II") with and into the Association to be effected under IRC
(S)368(a)(1)(A) and IRC (S)368(a)(2)(E). In conjunction with the merger of
Interim II into the Association, the Association's shareholders will exchange
their common stock in the Association solely for voting stock of Equality
Bancorp, Inc., a Delaware-chartered stock holding company (the "Company").
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 2
June 26, 1997
Based upon our understanding of the Facts (as detailed in Section I) and your
Representations (as detailed in Section III), we have rendered our Opinion (as
detailed in Section IV) and Analysis (as detailed in Section V) regarding the
potential Federal income tax effect and State of Missouri income tax effect and
financial institutions franchise tax effect of the proposed transactions
("Transactions") enumerated above (and as detailed in Section II).
Our opinion is restricted solely to the Federal income tax consequences and
State of Missouri income tax and financial institution franchise tax
consequences of the Transactions discussed herein. We express no opinion
regarding matters not expressly addressed herein and no inference should be made
regarding any matter or matters not expressly addressed.
This opinion is exclusively for the use of the MHC, Association and the Company
in their submission to the appropriate governmental body or agency for approval
of the Transactions and is not to be used for any other purpose without our
written consent. We do consent to the inclusion of this opinion as an Exhibit
to the Form S-1 Registration Statement of Company to be filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Registration Statement") and any reference to this opinion in such
Registration Statement.
Our conclusions reflect our professional judgment based upon the facts and
representations delineated herein as well as existing tax authorities that are
subject to change. Any changes in the facts, representations, or in existing
tax authority could, of course, affect our conclusions. Further, our opinion
represents merely our view of the Transactions. No assurance can be given that
either the U.S. Department of the Treasury, the Internal Revenue Service (the
"Service"), or the Missouri Department of Revenue (the "DOR") will agree with
our opinion.
SECTION I
---------
STATEMENT OF FACTS
------------------
The MHC is a federally-chartered mutual holding company with its sole office
located in St. Louis, Missouri. The MHC is a "corporation" under RSMo
(S)143.441.1(1); as such, it is subject to an income tax on its Missouri
taxable income. RSMo (S)143.431.
The Association is a federally-chartered stock savings association headquartered
in St. Louis, Missouri. The Association's deposits are insured by the Federal
Deposit
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 3
June 26, 1997
Insurance Corporation and the Association is regulated by the Office of
Thrift Supervision ("OTS"). The Association is an "association" under Missouri
Revised Statutes (RSMo) (S)148.610(1); as such, it is subject to an annual
franchise tax for the privilege of exercising its corporate franchise in
Missouri. RSMo (S)148.620.3. Such franchise tax is in lieu of all other state
and local taxes against and upon associations, their capital, or income, except
taxes on all property, contributions paid pursuant to the unemployment
compensation law of Missouri, social security taxes, sales and use taxes. Id.
--
The Association is the successor to Equality Savings & Loan Association, a
Missouri-chartered mutual savings and loan association (the "Mutual
Association"). On October 22, 1993, the Mutual Association reorganized into the
mutual holding company form of organization (the "MHC Reorganization"). The
Mutual Association organized a Missouri-chartered stock savings and loan
association (the "State Stock Association") as a wholly-owned subsidiary. The
Mutual Association then transferred substantially all of its assets and
liabilities to the State Stock Association in exchange for 456,400 shares of
State Stock Association common stock, and reorganized itself into a federally-
chartered mutual holding company known as First Missouri Financial, M.H.C. The
State Stock Association simultaneously sold 380,000 shares of State Stock
Association common stock to certain eligible depositors and other members of
Mutual Association and the general public. On June 13, 1995, the State Stock
Association converted to a federally-chartered stock savings and loan
association (the "State-to-Federal Conversion") and simultaneously changed its
name to "Equality Savings & Loan Association, F.A. (the "Federal Stock
Association"). In connection with the State-to-Federal Conversion, all of the
issued and outstanding shares of common stock of State Stock Association
converted into shares of common stock of Federal Stock Association. As of the
date of adoption of the Plan of Conversion (as described in Section II below),
836,400 shares of Federal Stock Association common stock were issued and
outstanding, and the MHC and public stockholders own an aggregate of 53.2% and
46.8% of the outstanding Federal Stock Association common stock, respectively.
The MHC has no material assets other than its stock investment in the
Association
At the time of the MHC Reorganization, the Association requested a ruling from
the Service with respect to the tax consequences of the MHC Reorganization,
which was effectuated as a tax-free exchange under IRC (S) 351. On May 11,
1994, the Association obtained a favorable ruling from the Service.
SECTION II
----------
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 4
June 26, 1997
PROPOSED TRANSACTION
--------------------
On May 16, 1997, the Board of Directors of the MHC and the Association adopted a
Plan of Conversion and Reorganization, which was subsequently amended on June
20, 1997 (as amended, the "Plan of Conversion"), pursuant to which the MHC will
convert from a Missouri-chartered mutual holding company to a Delaware-chartered
stock holding company (i.e., the Company), and the Association will be
reorganized (the "Conversion and Reorganization"). Pursuant to the Plan of
Conversion, execution will be effected as follows:
1. The Association will organize the Company (which will subsequently become
the stock holding company of the Association) as a first tier, wholly-
owned subsidiary of the Association and will transfer only minimum capital
to it. Company will have authorized solely shares of voting common stock.
2. The Company will organize Interim II as a wholly-owned federally-chartered
stock savings bank subsidiary of the Company and Company will transfer
only the minimum capital required to Interim II.
3. The MHC will shall convert from a mutual holding company to a federal
interim stock savings association ("Interim I" Savings and Loan
Association, F.A.) and simultaneously merge with and into the Association
(in a tax-free reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended {the "IRC"}) (the "MHC Merger") pursuant
to the Agreement of Merger between the MHC and the Association, with the
Association being the resulting institution. As a result of the MHC
Merger: (i) the shares of Association common stock held by the MHC
(following its conversion to a federal interim stock association) shall be
extinguished; and (ii) each member of the MHC who is an Eligible Account
Holder (as defined below) or Supplemental Eligible Account Holder (as
defined below) will receive an interest in a liquidation account
established in the Association pursuant to regulations of the OTS (the
"Liquidation Account") in exchange for such member's ownership interest in
the MHC.
4. Interim II will merge in a statutory merger (a tax-free reorganization
pursuant to IRC (S)368(a)(1)(A) and IRC (S)368(a)(2)(E)) with and into the
Association with the Association being the resulting institution (the
"Association Merger"), pursuant to the Agreement of Merger between the
Association and Interim II. As a result of the Association Merger: (i)
shares of Company common stock held by
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 5
June 26, 1997
the Association shall be extinguished; (ii) the shares of Association
common stock held by persons who own Association common stock (excluding
the MHC) ("Public Shareholders") shall be converted into the right to
receive shares of Company common stock based upon an Exchange Ratio (as
defined below), plus cash in lieu of any fractional share interest based
upon the per share price at which Company common stock is ultimately sold
in the Offerings (as defined below) (the "Actual Purchase Price"); (iii)
the shares of Interim II common stock held by the Company shall be
converted to shares of Association common stock on a one-for-one basis,
with the Association thence becoming a wholly-owned subsidiary of the
Company; (iv) existing options to purchase shares of Association common
stock which are outstanding immediately prior to the consummation of the
Conversion and Reorganization shall be converted into options to purchase
shares of Company common stock, with the number of shares subject to the
option and the exercise price per share being adjusted based on the
Exchange Ratio so that the aggregate purchase price remains unchanged, and
with the duration of the option remaining unchanged. The "Exchange Ratio"
is the rate at which shares of the Company common stock will be exchanged
for shares of Association common stock held by the Public Stockholders in
connection with the Association Merger. The exact rate will be determined
in order to ensure that upon consummation of the Conversion and
Reorganization, the Public Stockholders will own, in the aggregate,
approximately the same percentage of the Company common stock outstanding
upon completion of the Conversion and Reorganization as the percentage of
Association common stock owned by them in the aggregate immediately prior
to the consummation of the Conversion and Reorganization, before giving
effect to (a) cash paid in lieu of fractional interests of Company common
stock, and (b) any shares of Conversion Stock (as defined below) purchase
by the Public Stockholders in the Offerings (as defined below) or tax-
qualified employee stock benefit plans thereafter.
5. Simultaneously with the completion of the Conversion and Reorganization,
the Association will amend it federal stock charter to change its name to
"Equality Savings Bank, FSB".
6. As a result of the Association Merger, the Company will own all of the
outstanding shares of common stock of the Association, and the Company
will offer for sale its shares of common stock (the "Conversion Stock") in
an offering that will occur contemporaneously with the execution of the
Plan of Conversion ( the "Offering", as discussed below).
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 6
June 26, 1997
It is expected that after the execution of the Plan of Conversion, the common
stock of the Company will trade on the [Nasdaq National Market or Nasdaq
SmallCap Market] System.
The affirmative vote of a majority of the total eligible votes of the MHC's
members at a special meeting of members is required to approve the Plan of
Conversion, MHC Merger and Association Merger. The affirmative vote of the
holders of at least two-thirds of the outstanding Association common stock, in
person or by proxy, at a special meeting of stockholders of the Association, is
required to approve the Plan of Conversion, MHC Merger and Association Merger.
Further, the Plan of Conversion, MHC Merger and Association Merger must be
approved by at least a majority of the votes cast, in person or by proxy, by the
Public Stockholders at the special meeting.
Contemporaneously with the execution of the Plan of Conversion, the Company will
offer shares of its common stock in a subscription offering, in descending order
of priority, to Eligible Account Holders, certain employee stock benefit plans,
Supplemental Eligible Account Holders, other members, directors, officers and
employees, and Public Stockholders. Subject to the prior rights of holders of
subscription rights, the Company is offering the shares of common stock, not
subscribed for in the subscription offering, for sale in a community offering to
natural persons who reside in Missouri and to whomever else the prospectus is
delivered, giving first preference to natural persons residing in the Missouri
counties of St. Louis City, St. Louis, Jefferson, St. Charles and Franklin. The
subscription and community offerings are hereinafter referred to collectively as
the "Offering".
As set forth above, the stockholders of the Company will be the former Public
Stockholders of the Association immediately prior to the Association Merger,
plus those persons who purchase shares of Company common stock in the Offering.
Nontransferable rights to subscribe for the Company's common stock will be
granted, in order of priority, to: (i) depositors of the Association who have
account balances of $50.00 or more as of the close of business on March 31, 1996
("Eligible Account Holders"); (ii) any tax-qualified defined benefit plan or
defined contribution plan of the Association or Company (other than any
management recognition plan established by the Company to induce certain
directors, officers and employees of the Association and Company to continue to
serve the Association and Company following the Conversion and Reorganization);
(iii) depositors of the Association (other than an officer or director or their
associates) who have account balances of $50.00 or more as of the close of
business on the last day of the calendar quarter preceding the approval of the
Plan of Conversion by the OTS ("Supplemental Eligible Account Holders); (iv) all
persons or entities who qualify as members of the MHC ("Other Members"); (v)
directors, officers
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 7
June 26, 1997
and employees of the MHC, the Association or any subsidiary thereof, or the
Company; and (vi) Public Stockholders.
SECTION III
-----------
REPRESENTATIONS
---------------
1. With respect to the MHC Reorganization that occurred on October 23, 1993:
The Association treats the Mutual Association's base year (as defined in
IRC (S)585(b)(2)(B)) immediately before the MHC Reorganization as its own
base year amount for purposes of determining its six-year moving average
amounts (as defined in IRC (S)585(b)(2)(A)) and computing deductible
additions to its reserve, and Association treats the Mutual Association's
outstanding loans and loan loss experience before the MHC Reorganization,
as those of the Association.
2. With respect to merger of the MHC into the Association (i.e., the MHC
Merger):
REPRESENTATION AS REQUIRED BY REV. PROC. 86-42.
The fair market value of the Association stock and other consideration
received by each target shareholder will be approximately equal to the fair
market value of the MHC stock surrendered in exchange.
REPRESENTATION WHICH CAN BE GIVEN.
The fair market value of the interest of each member who is an Eligible
Account Holder or Supplemental Eligible Account Holder in the Liquidation
Account established in the Association will be approximately equal to the
fair market value of the voting and liquidation rights surrendered by such
members in the exchange.
The representation must be modified because the target is a mutual holding
company that has neither shares of stock nor shareholders in the
traditional sense. Further, in accordance with rules and regulations issued
by the OTS, the Liquidation Account is to be established in the Association
for Eligible Account Holders and Supplemental Eligible Account Holders.
REPRESENTATION AS REQUIRED BY REV. PROC. 86-42.
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 8
June 26, 1997
There is no plan or intention by the shareholders of the MHC who own 1
percent or more of the MHC stock, and to the best of the knowledge of the
management of the MHC, there is no plan or intention on the part of the
remaining shareholders of the MHC to sell, exchange or otherwise dispose of
a number of shares of Association stock received in the transaction that
would reduce the ownership of acquiring stock to a number of shares having
a value as of the date of the transaction, of less than 50% of the value of
all the formerly outstanding stock of target as of the same date. For
purposes of this representation, shares of target stock exchanged for cash
or other property, surrendered by dissenters, or exchanged for cash in lieu
of fractional shares of acquiring stock will be treated as outstanding
target stock on the date of the transaction. Moreover, shares of target
stock and shares of acquiring stock held by target shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this representation.
REPRESENTATION WHICH CAN BE GIVEN.
There is no plan or intention by the members of the MHC who have
liquidation and voting rights with respect to 1% or more of the MHC stock
and to the best of the knowledge of management of the MHC, there is no plan
or intention on the part of the remaining members of the MHC who are
Eligible Account Holders and Supplemental Eligible Account Holders to sell,
exchange or otherwise dispose of their interest in the Liquidation Account
received in the transaction that would reduce the interest of such former
MHC members in the Association to a value, as of the date of the
transaction, of less than 50% of the value of their membership interests in
the MHC.
As discussed above, because the target is a mutual holding company, its
members who are Eligible Account Holders and Supplemental Eligible Account
Holders will exchange their interest in the MHC for an interest in the
Liquidation Account in the Association, as contemplated by rules and
regulations of the OTS. The MHC members will not have the opportunity to
obtain cash, stock or other property for their membership interests, and
will have no dissenters' rights.
REPRESENTATION AS REQUIRED BY REV. PROC. 86-42.
The Association has no plan or intention to reacquire any of its stock
issued in the transaction.
REPRESENTATION WHICH CAN BE GIVEN.
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 9
June 26, 1997
The Association has no plan or intention to reacquire any portion of the
Liquidation Account or the subscription rights transferred to the former
MHC members who are Eligible Account Holders and Supplemental Eligible
Account Holders in exchange for their voting and liquidation rights in the
MHC.
The Association has no plan or intention to sell or otherwise dispose of
any of the assets of the MHC acquired in the MHC Merger, except for
dispositions made in the ordinary course of business or transfers described
in IRC (S)368(a)(2)(C).
The liabilities of the MHC assumed by the Association, if any, and the
liabilities to which the transferred assets of the MHC are subject, if any,
were incurred by the MHC in the ordinary course of its business.
Following the MHC Merger, the Association will continue its historic
business, the historic business of the MHC or use a significant portion of
the MHC's historic business assets in the Association's business.
The Association, the MHC, and the shareholders of the Association and
members of the MHC will pay their respective expenses, if any, incurred in
connection with the MHC Merger.
There is no inter-corporate indebtedness existing between the MHC and the
Association that was issued, acquired or will be settled at a discount.
No two parties to the transaction are investment companies as defined in
IRC (S)(S)368(a)(2)(F)(iii) and (iv).
The MHC is not under the jurisdiction of a court in a title 11 or similar
case within the meaning of IRC (S)368(a)(3)(A).
The fair market value of the assets of the MHC transferred to the
Association will equal or exceed the sum of the liabilities assumed by the
Association plus the amount of the liabilities, if any, to which the
transferred assets are subject.
To the best of the knowledge and belief of the taxpayer, the statutory
merger of the MHC with and into the Association will qualify as a
reorganization under IRC (S)368(a)(1)(A).
3. With respect to the merger of Interim II into the Association (i.e., the
Association Merger):
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 10
June 26, 1997
There is no plan or intention by the shareholders of the Association who
own 5 percent or more of the Association stock, and to the best of the
knowledge of the management of the Association, there is no plan or
intention on the part of the remaining shareholders of Association to sell,
exchange or otherwise dispose of a number of shares of Company stock
received in the transaction that would reduce the Association shareholders'
ownership of Company stock to a number of shares having a value as of the
date of the Association Merger, of less than 50% of the value of all the
formerly outstanding stock of target as of the same date, disregarding
shares held by the MHC that were canceled in the MHC Merger. For purposes
of this representation, shares of Association stock exchanged for cash or
other property, surrendered by dissenters, or exchanged for cash in lieu of
fractional shares of acquiring stock will be treated as outstanding target
stock on the date of the transaction. Moreover, shares of Company stock and
shares of Company stock held by Association shareholders and otherwise
sold, redeemed, or disposed of prior or subsequent to the Association
Merger will be considered in making this representation.
Following the Association Merger, the Association will hold at least 90% of
the fair market value of its net assets and at least 70% of the fair market
value of its gross assets and at least 90% of the fair market value of
Interim II's net assets (other than stock of Company distributed to
Association's shareholders in the transaction) and at least 70% of the fair
market value of Interim II's gross assets (other than stock of Company
distributed to Association's shareholders in the Association Merger) held
immediately prior to the Association Merger. For purposes of this
representation, amounts paid by the Association or Interim II to
dissenters, amounts paid by the Association or Interim II to shareholders
who receive cash or other property, amounts used by the Association or
Interim II to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by the
Association will be included as assets of the Association or Interim II,
respectively, immediately prior to the Association Merger.
The Association has no plan or intention to sell or otherwise dispose of
any of the assets of Interim II acquired in the Association Merger, except
for dispositions made in the ordinary course of business or transfers
described in IRC (S)368(a)(2)(C).
Prior to the Association Merger, the Company will be in control of Interim
II within the meaning of IRC (S)368(c).
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 11
June 26, 1997
The Association has no plan or intention to issue additional shares of its
stock that would result in the Company losing control of the Association
within the meaning of IRC (S)368(c).
The Company has no plan or intention to reacquire any of its stock issued
in the Association Merger.
The Company has no plan or intention to liquidate the Association; to merge
the Association with or into another corporation; to sell or otherwise
dispose of the stock of the Association except for transfers of stock to
corporations controlled by Company; or to cause the Association to sell or
otherwise dispose of any of its assets or any of the assets acquired from
Interim II, except for dispositions made in the ordinary course of business
or transfers of assets to a corporation controlled by the Association.
Interim II will have no liabilities to be assumed by the Association, and
will not transfer to the Association any assets subject to liabilities in
the Association Merger.
Following the Association Merger, the Association will continue its
historic business or use a significant portion of its historic business
assets in a business.
The Company, Interim II, the Association, and the shareholders of the
Association will pay their respective expenses, if any, incurred in
connection with the Association Merger.
There is no inter-corporate indebtedness existing between the Company and
the Association or between Interim II and the Association that was issued,
acquired, or will be settled at a discount.
In the Association Merger, shares of Association stock representing control
of the Association, as defined in IRC (S)368(c), will be exchanged solely
for voting stock of the Company. For purposes of this representation,
shares of Association stock exchanged for cash or other property
originating with the Company will be treated as outstanding Association
stock on the date of the Association Merger.
At the time of the Association Merger, the Association will not have
outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in the
Association that, if exercised or converted, would affect the Company's
acquisition or retention of control of the Association, as defined in IRC
(S)368(c).
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 12
June 26, 1997
The Company does not own, nor has it owned during the past five years, any
shares of the stock of the Association.
No two parties to the Association Merger are investment companies as
defined in IRC (S)(S)368(a)(2)(F)(iii) and (iv).
On the date of the Association Merger, the fair market value of the assets
of the Association will exceed the sum of its liabilities, plus the amount
of liabilities, if any to which the assets are subject.
The Association is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of IRC (S)368(a)(3)(A).
The fair market value of Company voting common stock to be received by each
Association shareholder will be approximately equal to the fair market
value of Association stock surrendered in the exchange.
To the best of the knowledge and belief of the taxpayer, the statutory
merger of Interim II with and into the Association will qualify as a
reorganization under IRC (S)368(a)(1)(A) and IRC (S)368(a)(2)(E).
SECTION IV
----------
FEDERAL AND STATE OF MISSOURI TAX OPINION
-----------------------------------------
MISSOURI INCOME TAX.
The computation of Missouri taxable income begins with Federal taxable income
for the taxable year, subject to Missouri modifications. RSMo (S)143.431.1. A
corporation's taxable year for Missouri income tax purposes is the same as its
taxable year for Federal income tax purposes. RSMo (S)143.271.1. A
corporation's method of accounting for Missouri income tax purposes must be the
same as for Federal income tax purposes. RSMo (S)143.281.1. Missouri has
adopted the Internal Revenue Code of 1986, as amended, for purposes of computing
Missouri taxable income, and all terms used in the Missouri income tax laws have
the same meaning as those terms that are defined in Federal law when used in a
comparable context, unless a different meaning is clearly required under state
law. RSMo (S)143.091. There are no specific provisions in the
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 13
June 26, 1997
Missouri income tax laws which govern the Transactions, or which modify the
Federal recognition or nonrecognition rules applicable to reorganizations.
Therefor, our opinion below is dependent on the Federal income tax consequences
of the Transactions which, as indicated above, should also be the Missouri
income tax consequences.
MISSOURI FINANCIAL INSTITUTIONS FRANCHISE TAX.
Savings and loan associations are subject to an annual franchise tax measured by
net income for the preceding year. RSMo (S)148.620.1. Net income of savings and
loan associations is computed by deducting from gross income all ordinary and
necessary business expenses. RSMo (S)148.630.2. "Gross income" of savings and
loan associations is defined as all gains, profits, earnings, and other income,
from whatever source, and includes interest from any governmental obligations.
RSMo (S)148.630.1. The computation of taxable net income for computation of the
franchise tax does not, by statute or regulation, make reference to Federal
taxable income or the statutes or regulations of the Code; however, the DOR is
limited, insofar as feasible, to issuing rules and regulations which are
consistent with the rules and regulations of the Internal Revenue Code of 1986,
as amended. RSMo (S)148.100. Further, the DOR has administratively required
that the computation of taxable net income begin with Federal taxable income
before any net operating loss deduction or special deduction (DOR 1997 Form-INT-
3, Part 1, Line 1), and other references in the financial institutions franchise
tax law make specific reference to Federal income tax statutes and regulations.
See Mo. Code. Regs. tit. 12, (S)10-10.125 (an accrual basis taxpayer which is a
member of an affiliated group filing a consolidated tax return must allocate its
consolidated tax liability among the members of the group for the year using the
method elected to allocated earnings and profits by the group under IRC (S)1552
for the applicable year, without regard to any additional allocations under
Treas. Reg. (S)1.1502-33(d)). There are no provisions in the Missouri financial
institutions franchise tax laws which govern the Transactions. Thus, our
opinion below is dependent on the Federal income tax consequences of the
Transactions which, as indicated above, should also be the Missouri financial
institutions franchise tax consequences.
OPINION.
Based solely upon the facts and representations listed above, and provided that
such facts and representations are correct, we render the following opinion with
respect to the Federal income tax consequences and State of Missouri income tax
and financial institutions franchise tax consequences of the proposed
transactions. Our opinion is only applicable to the tax effects of those Code
sections specifically discussed below. No
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 14
June 26, 1997
opinion is expressed nor can any inferences be drawn as to the applicability of
any other Code section.
The following Federal income tax results will occur:
1. The MHC Merger qualifies as a tax-free reorganization within the meaning of
IRC (S)368(a)(1)(A).
2. The MHC will not recognize any gain or loss on the transfer of its assets
to the Association in exchange for an interest in a liquidation account
established in the Association for the benefit of the MHC's members who
remain depositors of the Association and non-transferable subscription
rights to purchase stock. IRC (S)361.
3. The exchange of the members' equity interests in the MHC for interests in a
liquidation account established at the Association in the MHC Merger will
satisfy the continuity of interest requirement of Treas. Reg. (S)1.368-1(b)
of the Income Tax Regulations (of Rev. Rul. 69-3, 1969-1 C.B. 103, and Rev.
Rul. 69-646, 1969-2 C.B. 54).
4. No gain or loss will be recognized by the Association upon the receipt of
the assets of the MHC in the MHC Merger in exchange for the transfer to the
members of the MHC of an interest in the liquidation account in the
Association and non-transferable subscription rights. IRC (S)1032(a).
5. The basis of the assets of MHC (other than stock in Association) to be
received by Association will be the same as the basis of such assets in the
hands of the MHC immediately prior to the transfer. IRC (S)362(b).
6. The holding period of the assets of the MHC (other than stock in
Association) to be received by Association will include the holding period
of those assets in the hands of the MHC immediately prior to the transfer.
IRC (S)1223(2).
7. The MHC members will recognize no gain or loss upon the receipt of an
interest in the liquidation account in Association and non-transferable
subscription rights in exchange for their membership interest in MHC. IRC
(S)354(a).
8. The Association Merger qualifies as a reorganization within the meaning of
IRC (S)368(a)(1)(A), pursuant to IRC (S)368(a)(2)(E) of the Code. The
Association Merger is not disqualified from qualifying as a reorganization
within the meaning of IRC (S)368(a)(1)(A) because Company common stock will
be conveyed to the
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 15
June 26, 1997
Association's stockholders in exchange for their Association common stock.
IRC (S)368(a)(2)(E).
9. Interests in the liquidation account established at the Association, and
the shares of Association common stock held by the MHC prior to
consummation of the MHC Merger, will be disregarded for the purpose of
determining that an amount of stock in the Association which constitutes
"control" of such corporation was acquired by the Company in exchange for
shares of common stock of the Company pursuant to the Association Merger.
IRC (S)368(c).
10. The exchange of shares of common stock of the Company for the shares of
common stock of the Association in the Association Merger, following
consummation of the MHC Merger, will satisfy the continuity of interest
requirement of Treas. Reg. (S)1.368-1(b) in the Association Merger.
11. Interim II will not recognize any gain or loss on the transfer of its
assets to Association in exchange for Association stock and the assumption
by Association of the liabilities, if any, of Interim II. IRC (S)361(a) and
IRC (S)357(a).
12. Association will not recognize any gain or loss on the receipt of the
assets of Interim II in exchange for Association stock. IRC (S)1032(a).
13. Association's basis in the assets received from Interim II in the proposed
transaction will, in each case, be the same as the basis of such assets in
the hands of Interim II immediately prior to the transaction. IRC
(S)362(b).
14. Association's holding period for the assets received from Interim II in the
proposed transaction will, in each instance, include the period during
which such assets were held by Interim II. IRC (S)1223(2).
15. The Company will not recognize any gain or loss upon its receipt of
Association stock in exchange for Interim II stock. IRC (S)354(a).
16. Association shareholders will not recognize any gain or loss upon their
exchange of Association stock solely for shares of Company common stock.
IRC (S)354(a).
17. Each Association shareholder's aggregate basis in his or her Company Common
Stock received in the exchange will be the same as the aggregate basis of
the Association stock surrendered in exchange therefor. IRC (S)358(a).
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 16
June 26, 1997
18. Each Association shareholder's holding period in his or her Company Common
Stock received in the exchange will include the period during which the
Association stock surrendered was held, provided that the Association stock
surrendered is a capital asset in the hands of the Association shareholder
on the date of the exchange. IRC (S)1223(1).
19. No gain or loss will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders upon distribution to them of
subscription rights to purchase shares of common stock, provided that the
amount to be paid for the common stock is equal to the fair market value of
the common stock.
Based on the foregoing, it is our view that there should be no material adverse
Federal income tax consequences, or material adverse State of Missouri income
tax or financial institutions franchise tax consequences, to the Association and
its affiliates, or Eligible Account Holders and other recipients of conversion
stock, as a result of the above-referenced transactions. However, as indicated
earlier, our opinion is based upon facts and representations detailed herein as
well as current Federal income tax law, regulations, related cases, rulings,
etc., and State of Missouri income tax and financial institutions franchise tax
laws, related cases, rulings, etc. Any changes in the proposed transactions or
in Federal income tax law and State of Missouri income tax and financial
institutions franchise tax law prior to the consummation of the proposed
Transactions, or which are retroactive in effect, could cause us to modify our
opinion. The opinions contained herein are not binding upon the IRS or any other
tax court or authority, and no assurance can be given that a position contrary
to any of those contained herein will not be asserted by a tax authority.
SECTION V
---------
ANALYSIS
--------
IRC (S)368(a)(1)(A) defines the term "reorganization" to include a "statutory
merger or consolidation" of corporations such as the MHC Merger and the
Association Merger. IRC (S)368(a)(2)(E) provides that a transaction otherwise
qualifying as a merger under IRC (S)368(a)(1)(A), such as the Association
Merger, shall not be disqualified by reason of the fact that common stock of a
corporation (referred to in the Code as the "controlling corporation") (i.e.,
the Company) which before the merger was in control of the merged corporation is
used in the transaction if:
(i) after the transaction, the corporation surviving the merger (the
Association) holds substantially all of its properties and the
properties of
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 17
June 26, 1997
the merged corporation (Interim II) (other than common
stock of the controlling corporation [the Company] distributed in the
transaction); and
(ii) in the transaction, former stockholders of the surviving corporation
(the Association stockholders) exchanged, for an amount of voting
common stock of the controlling corporation, an amount of common
stock in the surviving corporation which constitutes control of such
corporation.
Treas. Reg. (S)1.368-2(b)(1) provides that, in order to qualify as a
reorganization under IRC (S)368(a)(1)(a), a transaction must be a merger or
consolidation effected pursuant to the corporation laws of the United States or
a state. The Plan of Conversion provides that the MHC Merger and the
Association Merger will be accomplished in accordance with applicable state and
federal law.
Treasury Regulations and case law require that, in addition to the existence of
statutory authority for a merger, certain other conditions must be satisfied in
order to qualify a proposed transaction as a reorganization within the meaning
of IRC (S)368(a)(1)(A).
(i) The "business purpose test," which requires a proposed merger to have
a bona fide business purpose, must be satisfied. See Treas. Reg.
---
(S)1.368-1(c). For the reasons set forth in Article I of the Plan of
Conversion, we believe that the MHC Merger and Association Merger
satisfy the business purpose test.
(ii) The "continuity of business enterprise test" requires an acquiring
corporation either to continue an acquired corporation's historic
business or use a significant portion of its historic assets in a
business. See Treas. Reg. (S)1.368-1(d). Based on the Representations
---
set forth above, we believe that the business conducted by the
Association prior to the MHC Merger and the Association Merger will
be unaffected by the transactions.
(iii) The "continuity of interest doctrine" requires that the continuing
common stock interest of the former owners of an acquired
corporation, considered in the aggregate, represent a "substantial
part" of the value of their former interest, and provide them with a
"definite and substantial interest" in the affairs of the acquiring
corporation or a corporation in control of the acquiring corporation.
Paulsen v. Commissioner, 469 U.S. 131 (1985); Helvering v. Minnesota
------------------------ ----------------------
Tea Co., 296 U.S. 378 (1935); John A. Nelson Co. v. Helvering, 296
------- -------------------------------
374 (1935); Southwest Natural Gas
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 18
June 26, 1997
Co. v. Commissioner, 189 F.2d 332 (5th Cir. 1951), cert. denied, 342
--------------------
U.S. 860 (1951). Based on (a) the Registration Statement, and (b)
Rev. Rul. 69-3 1965-1 C.B. 103 and Rev. Rul 69-646, 1969-2 C.B. 54,
we believe that the MHC Merger satisfies the continuity of interest
doctrine. Based on the Representations set forth above, we believe
that the Association Merger satisfies the continuity of interest
doctrine. In addition, we believe other applicable requirements of
the Treasury Regulations and case law which are preconditions to
qualification of the MHC Merger and Association Merger as a
reorganization, within the meaning of IRC (S)368(a)(1)(A) and IRC
(S)368(a)(2)(E), are satisfied on the basis of the information
contained in the Plan of Conversion and Registration Statement.
Please note that, in December 1994, the Service published Rev. Proc. 94-76 1994-
2 C.B. 825, which states that the Service will not issue private letter rulings
with respect to a transaction in which one corporation owns stock in a second
corporation, the first corporation is not the 80% distributee of the second
corporation and the two corporations are merged. The Service assumed this "no-
rule" position to study whether such downstream mergers circumvent the purpose
behind the repeal of General Utilities & Operating Co. v. Helvering, 296 U.S.
----------------------------------------------
200 (1935). Although the Service has assumed a "no-rule" position to study the
issues associated with such mergers, the Service has not specifically rescinded
its prior position with respect to such mergers, and therefor, at the time that
this transaction is consummated, the law prior to the publication of Rev. Proc.
94-76, as reflected in the Code, Treasury Regulations and case law, will
continue to control the transaction. Under such law, we believe that the MHC
Merger qualifies as a tax-free reorganization within the meaning of IRC
(S)368(a)(1)(A). Moreover, there is no indication that the Service position
will change as the result of this study. If the Service does change its
position with respect to the downstream merger of one corporation into its less
than 80% owned distributee, there is no reason to believe that any such change
will have retroactive effect; provided, however, that if the Service should
conclude that such mergers circumvent the repeal of General Utilities, the
-----------------
issuance of regulations prior to the effective date of the MHC Merger could
significantly modify the opinions expressed herein.
IRC (S)354 provides that no gain or loss shall be recognized by stockholders who
exchange common stock in a corporation, such as the Association, which is a
party to a reorganization, solely for common stock in another corporation which
is a party to the reorganization, such as the Company. IRC (S)365 provides that
the stockholders shall recognize gain to the extent they receive money as part
of a reorganization, such as cash received in lieu of fractional shares. IRC
(S)358 provides that, with certain adjustments
<PAGE>
Boards of Directors
First Missouri Financial, M.H.C.
Equality Savings & Loan Association, F.A.
Equality Bancorp, Inc.
Page 19
June 26, 1997
for money received in a reorganization, such as cash received in lieu of
fractional shares, a stockholder's basis in the common stock he or she receives
in a reorganization shall equal the basis of the common stock which her or she
surrendered in the transaction. IRC (S)1223(1) states that, where a stockholder
receives property in an exchange which has the same basis as the property
surrendered, he or she shall be deemed to have held the property received for
the same period as the property exchanged, provided that the property exchanged
had been held as a capital asset.
IRC (S)361 provides that no gain or loss shall be recognized to a corporation,
such as Interim II, which is a party to a reorganization, on any transfer of
property pursuant to a plan of reorganization such as the Plan of Conversion.
IRC (S)362 provides that if property is acquired by a corporation, such as the
Association, in connection with a reorganization, then the basis of such
property shall be the same as it would be in the hands of the transferor
immediately prior to the transfer. IRC (S)1223(2) states that where a
corporation, such as the Association, will have a carryover basis in property
received from another corporation which is a party to a reorganization, the
holding period of such assets in the hands of the acquiring corporation shall
include the period for which such assets were held by the transferor, provided
that the property transferred had been held as a capital asset. IRC (S)1032
states that no gain or loss shall be recognized to a corporation, such as the
Company, on the receipt of property in exchange for common stock.
* * * * * * * *
We consent to the inclusion of this opinion as an exhibit to the Registration
Statement of the Company and any reference to and summary of this opinion in
such Registration Statement.
Very truly yours,
KPMG Peat Marwick LLP
<PAGE>
EXHIBIT 10.1
------------
EQUALITY SAVINGS AND LOAN ASSOCIATION
ST. LOUIS, MISSOURI
1993 STOCK OPTION AND INCENTIVE PLAN
1. Purpose of the Plan. The Plan shall be known as the Equality Savings
-------------------
and Loan Association 1993 Stock Option and Incentive Plan (the "Plan"). The
purpose of the Plan is to attract and retain the best available personnel as
officers, directors and employees and to provide additional incentive to
employees of Equality Savings and Loan Association (the "Association") or any
present or future parent or subsidiary of the Association to promote the success
of the business. The Plan is intended to provide for the grant of "Incentive
Stock Options", within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and Non-Incentive Stock Options. Each and every
one of the provisions of the Plan relating to Incentive Stock Options shall be
interpreted to conform to the requirements of Section 422 of the Code.
2. Definitions. As used herein, the following definitions shall apply.
-----------
(a) "Association" means Equality Savings and Loan Association as a
capital stock savings bank subsidiary of the Mutual Holding
Company.
(b) "Award" means the grant by the Committee of an Incentive Stock
Option, a Non-Incentive Stock Option, or any combination thereof,
as provided in the Plan.
(c) "Board" shall mean the Board of Directors of the Association.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Common Stock" shall mean common stock, $1.00 par value per
share, of the Association.
(f) "Committee" shall mean the Stock Option Committee appointed by
the Board in accordance with paragraph 4(a) of the Plan.
(g) "Continuous Employment" or "Continuous Status as an Employee"
shall mean the absence of any interruption or termination of
employment by the Association or any present or future Parent or
Subsidiary of the Association. Employment shall not be considered
interrupted in the case of sick leave, military leave or any
other leave of absence approved by the Association or in the case
of transfers between payroll locations of the Association or
between the Association, its Parent, its Subsidiaries or a
successor.
(h) "Effective Date" shall mean the date specified in Section 14
hereof.
(i) "Employee" shall mean any person employed by the Association or
any present or future Parent or Subsidiary of the Association.
<PAGE>
(j) "Incentive Stock Option" or "ISO" means an option to purchase
Shares granted by the Committee pursuant to Section 7 hereof
which is subject to the limitations and restrictions of Section 7
hereof and is intended to qualify under Section 422 of the Code.
(k) "Mutual Holding Company" shall mean First Missouri Financial,
M.H.C., the parent corporation of the Association formed under
Part 575 of the Regulations of the Office of Thrift Supervision.
(l) "Non-Incentive Stock Option" or "Non-ISO" means an option to
purchase Shares granted by the Committee pursuant to Section 8,
which option is not intended to qualify under Section 422 of the
Code.
(m) "Option" shall mean an Incentive or Non-Incentive Stock Option
granted pursuant to this Plan.
(n) "Optioned Stock" shall mean stock subject to an Option granted
pursuant to the Plan.
(o) "Optionee" shall mean any person who receives an Option.
(p) "Parent" shall mean any present or future corporation which would
be a "parent corporation" as defined in Subsections 425(e) and
(g) of the Code.
(q) "Participant" means any director, officer or key employee of the
Association or any Parent or Subsidiary of the Association or any
other person providing a service to the Association who is
selected by the Committee to receive an Award.
(r) "Plan" shall mean the Equality Savings and Loan Association 1993
Stock Option and Incentive Plan.
(s) "Reorganization" shall mean the reorganization of Equality
Savings and Loan Association from a Missouri-chartered savings
and loan association into a mutual holding company structure and
the minority offering of Common Stock of the Association.
(t) "Share" shall mean one share of the Common Stock.
(u) "Subsidiary" shall mean any present or future corporation which
would be a "subsidiary corporation" as defined in Subsections
425(f) and (g) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
--------------------------
provisions of Section 12 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall be 38,000 shares. Such
Shares may either be authorized but unissued or treasury shares.
-2-
<PAGE>
An Award shall not be considered to have been made under the Plan with
respect to any Option which terminates and new Awards may be granted under the
Plan with respect to the number of Shares as to which such termination has
occurred.
4. Administration of the Plan.
--------------------------
(a) Composition of the Committee. The Plan shall be administered by
the Committee consisting of at least two directors of the Association appointed
by the Board. Officers, directors, key employees and other persons who are
designated by the Committee shall be eligible to receive Awards under the Plan,
and all directors designated as members of the Committee shall be "disinterested
persons" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended ("Exchange Act"). A "disinterested person" is an administrator
who at the time he exercises discretion in administering the Plan has not, at
any time within one year prior thereto, received a discretionary grant or award
pursuant to any stock plan of the Association or any of its affiliates.
(b) Powers of the Committee. The Committee is authorized (but only to
the extent not contrary to the expressed provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The Chairman of the Association and such other officers as shall
be designated by the Committee are hereby authorized to execute instruments
evidencing Awards on behalf of the Association and to cause them to be delivered
to the Participants.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.
5. Eligibility.
-----------
(a) Awards may be granted to officers, directors, key employees and
other persons. The Committee shall from time to time determine the officers,
directors, key employees and other persons who shall be granted Options or
Awards under the Plan, the number to be granted to each such officers,
directors, key employees and other persons under the Plan, and whether Options
granted to each such Participant under the Plan shall be Incentive and/or Non-
Incentive Stock Options. In selecting Participants and in determining the
number of shares of Common Stock to be granted to each such Participant pursuant
to each Award granted under the Plan, the Committee may consider the nature of
the services rendered by each such Participant, each such Participant's current
and potential contribution to the Association, and such other factors as the
Committee may, in its sole discretion, deem relevant. Officers, directors, key
employees or other persons who have been granted an Award may, if otherwise
eligible, be granted additional Options or Awards.
-3-
<PAGE>
(b) The aggregate fair market value (determined as of the date the
Option is granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by each Employee during the calendar year in
which they are first exercisable (under all Incentive Stock Option plans, as
defined in Section 422 of the Code, of the Association or any present or future
Parent or Subsidiary of the Association) shall not exceed $100,000.
Notwithstanding the prior provisions of this Section 5, the Committee may grant
Options in excess of the foregoing limitations, provided said Options shall be
clearly and specifically designated as not being Incentive Stock Options, as
defined in Section 422 of the Code.
6. Term of Plan. The Plan shall continue in effect for a term of ten
------------
years from the Effective Date, unless sooner terminated pursuant to Section 17.
No Option shall be granted under the Plan after ten years from the Effective
Date.
7. Terms and Conditions of Incentive Stock Options. Incentive Stock
-----------------------------------------------
Options may be granted only to Participants who are Employees. Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each and every
Incentive Stock Option granted pursuant to the Plan shall comply with, and be
subject to, the following terms and conditions:
(a) OPTION PLAN.
(i) The price per share at which each Incentive Stock Option
granted under the Plan may be exercised shall not, as to any
particular Incentive Stock Option, be less than the fair market value
of the Common Stock at the time such Incentive Stock Option is
granted. For such purposes, if the Common Stock is traded otherwise
than on a national securities exchange at the time of the granting of
an Option, then the price per share of the Optioned Stock shall be not
less than the mean between the bid and asked price on the date the
Incentive Stock Option is granted or, if there be no bid and asked
price on said date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is
available, then the price per share shall be determined by the
Committee. If the Common Stock is listed on a national securities
exchange at the time of the granting of an Incentive Stock Option,
then the price per share shall be not less than the average of the
highest and lowest selling price on such exchange on the date such
Incentive Stock Option is granted or, if there were no sales on said
date, then the price shall be not less than the mean between the bid
and asked price on such date.
(ii) In the case of an Employee who owns Common Stock
representing more than 10% of the outstanding Common Stock at the time
the Incentive Stock Option is granted, the Incentive Stock Option
price shall not be less than 110% of the fair market value of the
Common Stock at the time the Incentive Stock Option is granted.
(b) PAYMENT.
Full payment for each share of Common Stock purchased upon the
exercise of any Incentive Stock Option granted under the Plan shall be made at
the time of exercise of each such Incentive Stock Option and shall be paid in
cash (in United States Dollars), Common Stock or a combination of cash and
Common Stock. Common Stock utilized in full or partial payment of the exercise
price shall be valued at its fair market value at the date of exercise. The
Association shall accept full or partial payment in Common
-4-
<PAGE>
Stock only to the extent permitted by applicable law. No shares of Common Stock
shall be issued until full payment therefor has been received by the
Association, and no Optionee shall have any of the rights of a shareholder of
the Association until shares of Common Stock are issued to him.
(c) TERM OF INCENTIVE STOCK OPTION.
The term of each Incentive Stock Option granted pursuant to the Plan
shall be not more than ten years from the date each such Incentive Stock Option
is granted, provided that in the case of an Employee who owns stock representing
more than 10% of the Common Stock outstanding at the time the Incentive Stock
Option is granted, the term of the Incentive Stock Option shall not exceed five
years.
(d) EXERCISE GENERALLY.
Except as otherwise provided in Section 9 hereof, no Incentive Stock
Option may be exercised unless the optionee shall have been in the employ of the
Association at all times during the period beginning with the date of grant of
any such Incentive Stock Option and ending on the date three months prior to the
date of exercise of any such Incentive Stock Option. The Committee may impose
additional conditions upon the right of an Optionee to exercise any Incentive
Stock Option granted hereunder which are not inconsistent with the terms of the
Plan or the requirements for qualification as an Incentive Stock Option under
Section 422 of the Code.
(e) TRANSFERABILITY.
Any Incentive Stock Option granted pursuant to the Plan shall be
exercised during any Optionee's lifetime only by the Optionee to whom it was
granted and shall not be assignable or transferable otherwise than by will or by
the laws of descent and distribution.
8. Terms and Conditions of Non-Incentive Stock Options. Each Non-
---------------------------------------------------
Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
and every Non-Incentive Stock Option granted pursuant to the Plan shall comply
with and be subject to the following terms and conditions:
(a) OPTIONS GRANTED TO DIRECTORS IN THE REORGANIZATION.
Each member of the Board of Directors of the Association who is not an
Employee at the Effective Date shall receive on the Effective Date Options for
380 shares. Such options shall be designated as non-incentive stock options,
shall be exercisable at any time following stockholder approval of the Plan as
provided in Section 15 hereof, and shall have a term of ten years following the
Effective Date.
(b) OPTION PRICE.
The exercise price per share of Common Stock for each Non-Incentive
Stock Option granted pursuant to the Plan, other than Options granted under
Section 7(a) of the Plan, shall be such price as the Committee may determine in
its sole discretion.
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<PAGE>
(c) PAYMENT.
Full payment for each share of Common Stock purchased upon the
exercise of any Non-Incentive Stock Option granted under the Plan shall be made
at the time of exercise of each such Non-Incentive Stock Option and shall be
paid in cash (in United States Dollars), Common Stock or a combination of cash
and Common Stock. Common Stock utilized in full or partial payment of the
exercise price shall be valued at its fair market value at the date of exercise.
The Association shall accept full or partial payment in Common Stock only to the
extent permitted by applicable law. No shares of Common Stock shall be issued
until full payment therefor has been received by the Association and no Optionee
shall have any of the rights of a shareholder of the Association until the
shares of Common Stock are issued to him.
(d) TERM.
The term of each Non-Incentive Stock Option granted pursuant to the
Plan shall be not more than ten years from the date each such Non-Incentive
Stock Option is granted, provided that, in the case of an Employee who owns
stock representing more than 10% of the Common Stock at the time the Incentive
Stock Option is granted, the term of the Non-Incentive Stock Option shall not
exceed five years.
(e) EXERCISE GENERALLY.
The Committee may impose additional conditions upon the right of any
Participant to exercise any Non-Incentive Stock Option granted hereunder which
are not inconsistent with the terms of the Plan.
(f) TRANSFERABILITY.
Any Non-Incentive Stock Option granted pursuant to the Plan shall be
exercised during any Optionee's lifetime only by the Optionee to whom it was
granted and shall not be assignable or transferable otherwise than by will or by
the laws of descent and distribution.
9. Effect of Termination of Employment, Disability or Death on Incentive
---------------------------------------------------------------------
Stock Options.
-------------
(a) TERMINATION OF EMPLOYMENT.
In the event that any Optionee's employment by the Association shall
terminate for any reason, other than Permanent and Total Disability (as such
term is defined in Section 22(e) (3) of the Code) or death, all of any such
Optionee's Incentive Stock Options, and all of any such Optionee's rights to
purchase or receive shares of Common Stock pursuant thereto, shall automatically
terminate on the earlier of (i) the respective expiration dates of any such
Incentive Stock Options or (ii) the expiration of not more than three months
after the date of such termination of employment, but only if, and to the extent
that, the Optionee was entitled to exercise any such Incentive Stock Options at
the date of such termination of employment. In the event that a subsidiary
ceases to be a subsidiary of the Association, the employment of all of its
employees who are not immediately thereafter employees of the Association shall
be deemed to terminate upon the date such subsidiary so ceases to be a
subsidiary of the Association.
-6-
<PAGE>
(b) DISABILITY.
In the event that any Optionee's employment by the Association shall
terminate as the result of the Permanent and Total Disability of such Optionee,
such Optionee may exercise any Incentive Stock Options granted to him pursuant
to the Plan at any time prior to the earlier of (i) the respective expiration
dates of any such Incentive Stock Options or (ii) the date which is one year
after the date of such termination of employment, but only if, and to the extent
that, the Optionee was entitled to exercise any such Incentive Stock Options at
the date of such termination of employment.
(c) DEATH.
In the event of the death of any Optionee, any Incentive Stock Options
granted to any such Optionee may be exercised by the person or persons to whom
the Optionee's rights under any such Incentive Stock Options pass by will or by
the laws of descent and distribution (including the Optionee's estate during the
period of administration) at any time prior to the earlier of (i) the respective
expiration dates of any such Incentive Stock Options or (ii) the date which is
one year after the date of death of such Optionee but only if, and to the extent
that, the Optionee was entitled to exercise any such Incentive Stock Options at
the date of death. For purposes of this Section 9(c), any Incentive Stock Option
held by an Optionee shall be considered exercisable at the date of his death if
the only unsatisfied condition precedent to the exercisability of such Incentive
Stock Option at the date of death is the passage of a specified period of time.
(d) INCENTIVE STOCK OPTIONS DEEMED EXERCISABLE.
For purposes of Sections 9(a), 9(b) and 9(c) above, any Incentive
Stock Option held by any Optionee shall be considered exercisable at the date of
the termination of his employment if any such Incentive Stock Option would have
been exercisable at such date of termination of employment.
(e) TERMINATION OF INCENTIVE STOCK OPTIONS.
To the extent that any Incentive Stock Option granted under the Plan
to any Optionee whose employment by the Association terminates shall not have
been exercised within the applicable period set forth in this Section 9, any
such Incentive Stock Option, and all rights to purchase or receive shares of
Common Stock pursuant thereto, as the case may be, shall terminate on the last
day of the applicable period.
10. Effect of Termination of Employment, Disability or Death on Non-
---------------------------------------------------------------
Incentive Stock Options. The terms and conditions of Non-Incentive Stock Options
- -----------------------
relating to the effect of the termination of an Optionee's employment,
disability of an Optionee or his death shall be such terms and conditions as the
Committee shall, in its sole discretion, determine at the time of termination.
11. Right of Repurchase and Restrictions on Disposition. The Committee,
---------------------------------------------------
in its sole discretion, may include, as a term of any Incentive Stock Option or
Non-Incentive Stock Option, the right (the "Repurchase Right"), but not the
obligation, to repurchase all or any amount of the Shares acquired by an
Optionee pursuant to the exercise of any such Options. The intent of the
Repurchase Right is to encourage the continued employment of the Optionee. The
Repurchase Right shall provide for, among other things, a specified duration of
the Repurchase Right, a specified price per Share to be paid upon the exercise
of the Repurchase Right and a restriction on the disposition of the Shares by
the Optionee during the period of the Repurchase Right. The Repurchase Right may
permit the Association to transfer or assign such right to
-7-
<PAGE>
another party. The Association may exercise the Repurchase Right only to the
extent permitted by applicable law.
12. Recapitalization, Merger, Consolidation, Change in Control and Similar
----------------------------------------------------------------------
Transactions.
- ------------
(a) ADJUSTMENT.
Subject to any required action by the shareholders of the Association,
the aggregate number of shares of Common Stock for which stock options may be
granted hereunder, the number of shares of Common Stock covered by each
outstanding stock option, and the exercise price per share of Common Stock of
each such stock option, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Common Stock), the full mutual to stock
conversion of the Association or any other increase or decrease in the number of
such shares of Common Stock effected without the receipt of consideration by the
Association.
(b) CHANGE IN CONTROL
All outstanding Options shall become immediately exercisable in the
event of a change in control or imminent change in control of the Association
involving any entity other than the Mutual Holding Company as acquiror, as
determined by the Committee. In the event of such a change in control or
imminent change in control, the Optionee shall, at the discretion of the
Committee, be entitled to receive cash in an amount equal to the fair market
value of the Common Stock subject to any Incentive or Non-Incentive Stock Option
over the Option Price of such shares, in exchange for the surrender of such
Options by the Optionee on that date in the event of a change in control or
imminent change in control of the Association. For purposes of this Section,
"change in control" shall mean: (i) the execution of an agreement for the sale
of all, or a material portion, of the assets of the Association; (ii) the
execution of an agreement for a merger or recapitalization of the Association or
any merger or recapitalization whereby the Association is not the surviving
entity; (iii) a change of control of the Association, as otherwise defined or
determined by the Office of Thrift Supervision or regulations promulgated by it
or, if applicable, by any other applicable bank regulatory agency; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Exchange Act, as
amended and the rules promulgated thereunder) of 25% or more of the outstanding
voting securities of the Association by any person, trust, entity or group other
than a mutual holding company. The term "person" refers to an individual or a
corporation, partnership, trust, Association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. For purposes of this Section, "imminent change in
control" shall refer to any offer or announcement, oral or written, by any
person or persons acting as a group, to acquire control of the Association. The
decision of the Committee as to whether a change in control or imminent change
in control has occurred shall be conclusive and binding.
(c) EXTRAORDINARY CORPORATE ACTION.
Subject to any required action by the shareholders of the Association,
in the event of any Change in Control, recapitalization, merger, consolidation,
exchange of shares, spin-off, reorganization, tender offer, liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
-8-
<PAGE>
(i) appropriately adjust the number of shares of Common Stock
subject to each stock option, the exercise price per share of Common Stock,
and the consideration to be given or received by the Association upon the
exercise of any outstanding Option;
(ii) cancel any or all previously granted Options, provided that
appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan as
the Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable; provided, however, that no action shall be taken
by the Committee which would cause Incentive Stock Options granted pursuant
to the Plan to fail to meet the requirements of Section 422 of the Code.
Except as expressly provided in Section 12(a) and 12(b) hereof, no
Optionee shall have any rights by reason of the occurrence of any of the
events described in this Section 12.
(d) ACCELERATION.
The Committee shall at all times have the power to accelerate the
exercise date of Options previously granted under the Plan.
13. Time of Granting Options. The date of grant of an Option under the
------------------------
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the determination shall be
given to each Employee to whom an Option is so granted within a reasonable time
after the date of such grant.
14. Effective Date. The Plan shall become effective upon completion of
--------------
the formation of the Mutual Holding Company. Options may be granted prior to
ratification of the Plan by the stockholders if the exercise of such Options is
subject to such stockholder ratification.
15. Approval of Stockholders. The Plan shall be approved by stockholders
------------------------
of the Association within 12 months before or after the date it becomes
effective.
16. Modification of Options. At any time and from time to time, the Board
-----------------------
may authorize the Committee to direct the execution of an instrument providing
for the modification of any outstanding Option, provided no such modification,
extension or renewal shall confer on the holder of said Option any right or
benefit which could not be conferred on him by the grant of a new Option at such
time, or shall not materially decrease the Optionee's benefits under the Option
without the consent of the holder of the Option, except as otherwise permitted
under Section 17 hereof.
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<PAGE>
17. Amendment and Termination of the Plan.
--------------------------------------
(a) ACTION OF THE BOARD.
The Board may alter, suspend or discontinue the Plan, except that no
action of the Board may increase (other than as provided in Section 12) the
maximum number of shares permitted to be optioned under the Plan, materially
increase the benefits accruing to Participants under the Plan or materially
modify the requirements for eligibility for participation in the Plan unless
such action of the Board shall be subject to approval or ratification by the
shareholders of the Association.
(b) CHANGE IN APPLICABLE LAW.
Notwithstanding any other provision contained in the Plan, in the
event of a change in any Federal or state law, rule or regulation which would
make the exercise of all or part of any previously granted Incentive and/or Non-
Incentive Stock Option unlawful or subject the Association to any penalty, the
Committee may restrict any such exercise without the consent of the Optionee or
other holder thereof in order to comply with any such law, rule or regulation or
to avoid any such penalty.
18. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law and the requirements
of any stock exchange upon which the Shares may then be listed.
The inability of the Association to obtain from any regulatory body or
authority deemed by the Association's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder shall relieve the Association of any
liability with respect to the nonissuance of such Shares.
As a condition to the exercise of an Option, the Association may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
19. Reservation of Shares. During the term of the Plan, the Association
---------------------
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
20. Unsecured Obligation. No Participant under the Plan shall have any
--------------------
interest in any fund or special asset of the Association by reason of the Plan
or the grant of any Incentive or Non-Incentive Stock Option to him under the
Plan. No trust fund shall be created in connection with the Plan or any grant of
any Incentive or Non-Incentive Stock Option hereunder and there shall be no
required funding of amounts which may become payable to any Participant.
21. Withholding Tax. Where a Participant or other person is entitled to
---------------
receive Shares pursuant to the exercise of an Option pursuant to the Plan, the
Association shall have the right to require the Participant or such other person
to pay the Association the amount of any taxes which the Association is required
to withhold with respect to such Shares, or, in lieu thereof, to retain, or sell
without notice, a number of such Shares sufficient to cover the amount required
to be withheld.
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<PAGE>
22. Governing Law. The Plan shall be governed by and construed in
-------------
accordance with the laws of the State of Missouri, except to the extent that
Federal law shall be deemed to apply.
-11-
<PAGE>
EXHIBIT 10.2
CREDIT AGREEMENT
----------------
This Credit Agreement (the "Credit Agreement"), dated as of ___________,
1997, is by and between Equality Savings and Loan Association Employee Stock
Ownership Plan Trust (the "Borrower") and Equality Bancorp, Inc. (the "Lender").
WHEREAS, the Borrower is authorized to borrow money to purchase shares of
stock of the Lender; and
WHEREAS, the Lender has agreed, subject to the terms and conditions
provided herein, to lend the aggregate sum of $________ to the Borrower for the
purpose of providing the funds necessary for the Borrower to purchase stock from
the Lender in the subscription and community offering registered under the
Securities Act of 1933, as amended, made by the Lender in connection with the
Conversion and Reorganization (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1. Definitions. As used in this Credit Agreement or in any other
-----------
documents made or delivered pursuant hereto, unless the context shall otherwise
require, the following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
"Association" means Equality Savings and Loan Association, F.A., a
-----------
federally-chartered capital stock savings association. Upon the consummation of
the Conversion and Reorganization, the Association will change its name to
Equality Savings Bank, FSB.
"Borrower" means the Equality Savings and Loan Association Employee
--------
Stock Ownership Plan Trust, created by ESOP Trust Agreement (as hereinafter
defined).
"Closing Date" means ______________, 1997.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, including any regulations related thereto.
"Conversion and Reorganization" means the transaction pursuant to
-----------------------------
which (i) the Association will become a wholly-owned subsidiary of the Lender,
and (ii) all of the outstanding capital stock of the Association will be
exchanged for shares of Lender Stock (as hereinafter defined), and (iii) the
Lender will sell in a public offering a maximum of ___________ shares of Lender
Stock.
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<PAGE>
"Credit Agreement" means this Credit Agreement and all amendments,
----------------
modifications, and supplements hereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, including any regulations related thereto.
"ESOP Plan" means the Equality Savings and Loan Association Employee
----
Stock Ownership Plan effective as of January 1, 1993, as amended from time to
time, and any successor plan thereto.
"ESOP Trust Agreement" means the Trust Agreement creating the
--------------------
Borrower entered into on September 23, 1993, effective as of January 1, 1993, by
and between the Association and the Trustees, as amended from time to time.
"Event of Default" means any of the acts, conditions, or events
----------------
described in Section 7.1.
"Lender" means Equality Bancorp, Inc., a corporation organized under
------
the laws of the State of Delaware, and its successors and assigns.
"Lender Stock" means the common stock, par value $0.01 per share,
------------
issued by the Lender and any other class of "qualifying employer securities"
(within the meaning of Section 4975(e)(8) of the Code) that may be approved by
the Lender in writing for purchase by the Borrower.
"Loan" means the Loan described in Section 2.1.
----
"Loan Documents" means collectively, this Credit Agreement, the Note,
--------------
the Pledge Agreement, and all other documents, certificates, and instruments
executed in connection herewith or therewith.
"Note" means the note described in Section 2.2.
----
"Obligations" means the obligations of the Borrower: (i) to pay
-----------
principal of and any interest on the Note, and (ii) to pay or perform all other
obligations to the Lender under this Credit agreement, the Note, the Pledge
Agreement, and any other Loan Document, each as now existing or hereafter
amended (including, without limitation, obligations hereunder and thereunder to
reimburse advances and expenses, pay costs of collection and enforcement
including attorneys' fees, and pay other reasonable fees and expenses).
"Person" means an individual, corporation, partnership, joint
------
venture, trust, unincorporated organization, federal, state, or local government
or any federal, state, or local governmental instrumentality, body, department,
agency, commission, board, or bureau.
"Plan Administrator" means the Committee that administers the ESOP
------------------
Plan pursuant to Section 12 of the ESOP Plan.
-2-
<PAGE>
"Pledge Agreement" means the Pledge and Security Agreement in the
----------------
form of Exhibit B attached hereto to be executed by the Borrower in favor of the
Lender on the Closing Date pursuant to which the Borrower will pledge to the
Lender the Pledged Collateral.
"Pledged Collateral" is defined in the Pledge and Security Agreement.
------------------
"Shares" means an aggregate of __________ shares of Lender Stock to
------
be acquired by the Borrower with the proceeds of the Loan.
"Trustee" means Kenneth J. Hrdlicka, Stacey W. Braswell and Daniel C.
-------
Aubuchon and their successors and assigns as trustee under the ESOP Trust
Agreement.
1.2. Accounting Terms and Principles. All accounting terms, unless
-------------------------------
otherwise specifically defined herein, shall be construed in accordance with
generally accepted accounting principles consistently applied from year to year,
and all financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
ARTICLE II
----------
LOAN
----
2.1. Loan. Subject to the terms and conditions of this Credit Agreement,
----
the Lender agrees to make a term loan (the "Loan') to the Borrower in the
principal amount of ________________________ ($____________). The Lender shall
make the principal amount of the Loan available to the Borrower on the Closing
Date.
2.2. Note. The Loan shall be evidenced by a note (the "Note") in the form
----
of Exhibit A attached hereto.
2.3. Prepayment. Subject to the conditions and restrictions contained
----------
herein, the Borrower may prepay the Note at any time, in whole or in part,
without premium or penalty, on at least three business days' prior written
notice to the Lender, specifying the date and the amount of prepayment, and upon
the payment of accrued but unpaid interest on the amount prepaid to the date of
such prepayment. Partial prepayments on the Note shall be in an aggregate
principal amount of at least $1,000.00 and shall be applied on account of the
installments of principal of the Note in the inverse order of their stated
maturities. Prepayments on the Note shall not in any way alter or suspend any
obligation of the Borrower under this Credit Agreement except to the extent that
such prepayments result in a credit against payments on the Note, as provided
above, and the Borrower shall continue to perform and be responsible for the
performance of all of the terms and provisions of this Credit Agreement.
2.4. Application of Payments. All payments received by the Lender shall
-----------------------
be applied first to the payment of any interest (including interest on overdue
principal and, to the extent permitted by law, on interest then due), second to
the payment of any other amount (other than principal) then due, and third, to
the payment of any amount of principal of the Note then due. Prepayments shall
be applied in the manner provided in Section 2.3.
-3-
<PAGE>
2.5. Source of Payment. Other sections of this Agreement to the contrary
-----------------
notwithstanding, the Loan shall be without recourse against the Borrower or the
Trustee within the meaning of Treas. Reg. Sec. 54.4975-7(b)(5) and ERISA Reg.
Sec. 2550.408b-3(e) and the Lender shall not have any right, for payment of the
Loan, to assets of the Borrower or the Trustee other than: (a) the Pledged
Collateral; (b) contributions (other than contributions of "employer securities"
as defined in Section 409(l) of the Code) to the Borrower to meet its
obligations under the Loan; and (c) earnings attributable to the Pledged
Collateral and the investment of such contributions.
2.6. Payment on Non-Business Days. Whenever any payment to be made
----------------------------
hereunder or under the Note becomes due on a day that is not a business day, the
due date for such payment shall be extended to the next succeeding business day,
and interest shall continue to accrue during each such extension.
ARTICLE III
-----------
CONDITIONS TO LENDING
---------------------
3.1. Conditions to Lending. The Lender shall not be required to make the
---------------------
Loan unless and until all of the following documents, each in form and substance
satisfactory to the Lender and its counsel, have been delivered to the Lender:
(a) The fully executed Note;
(b) The fully executed Pledge Agreement together with all
certificates, assignments, powers, instruments, and other documents
required to be delivered pursuant thereto in the form required by the
Pledge Agreement;
(c) A copy, certified by the Trustee and appropriate officers of the
Association, of the ESOP Trust Agreement and a copy, certified by
appropriate officers of the Association, of the ESOP Plan; and
(d) Such other documents, instruments, and certificates as the Lender
may reasonably require.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Lender to enter into this Credit Agreement and to
make the Loan, the Borrower hereby represents and warrants to the Lender as
follows:
4.1. Power and Authority. The Borrower has all requisite power and
-------------------
authority to own its properties, to execute, deliver, and perform its
obligations under this Credit Agreement, the Note, the Pledge Agreement, and
each of the other Loan Documents to which it is a party, and to consummate the
transactions contemplated herein and therein.
-4-
<PAGE>
4.2. Credit Authorization. The execution and delivery by the Borrower of
--------------------
this Credit Agreement, the Note, the Pledge Agreement, and the other Loan
Documents to which it is a party and the performance by the Borrower of its
obligations hereunder and thereunder have been duly authorized by all requisite
action on the part of the Borrower, and no other proceedings on the part of the
Borrower are necessary or required in connection therewith under applicable
federal or other law or by the ESOP Trust Agreement or the ESOP Plan.
4.3. No Conflict. Neither the execution, delivery, or performance by the
-----------
Borrower of this Credit Agreement, the Note, the Pledge Agreement, or any other
Loan Document, the consummation by the Borrower of the transactions contemplated
hereby or thereby, nor the performance by the Borrower of or compliance with the
terms and conditions contained herein or therein to be performed or complied
with by the Borrower will:
(a) violate any provision of any law, regulation, or order of any
court or other Person applicable to the Borrower, the ESOP Trust Agreement,
or the ESOP Plan;
(b) violate any provision of any indenture, agreement, or other
instrument to which the Borrower is a party or by which the Borrower or any
of its properties or assets are bound;
(c) conflict with, result in a breach of, or constitute (with notice,
lapse of time, or both) a default under any such indenture, agreement, or
other instrument;
(d) result in the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of the properties or assets
of the Borrower in favor of any Person other than the Lender; or
(e) require the consent of or any notice to or filing with any Person
except as otherwise expressly provided herein.
All authorizations, consents, and approvals of any Person required in connection
with the execution or delivery by the Trustee of this Credit Agreement, the
Note, the Pledge Agreement, or any other Loan Document to which the Borrower is
a party or in connection with the performance of the Borrower's obligations
hereunder or thereunder have been obtained.
This Credit Agreement has been duly and validly executed and delivered by
the Borrower and constitutes the legal, valid, and binding obligation of the
Borrower, enforceable against it in accordance with its terms. Upon the
execution and delivery of the Note and the Pledge Agreement on the Closing Date,
the Note and the Pledge Agreement will constitute the legal, valid, and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms.
4.4. Litigation. There is no action, suit, inquiry, investigation, or
----------
proceeding pending or, to the knowledge of the Borrower, threatened against of
affecting the Borrower or any of its properties or assets in any court or before
any arbitrator of any kind or before any Person that may materially adversely
affect the Borrower's ability to perform its obligations hereunder or pursuant
to the Note or the Pledge Agreement.
-5-
<PAGE>
4.5. Burdensome Agreements. The Borrower is not a party to any indenture,
---------------------
loan, or credit agreement or any other agreement, contract, or instrument or
subject to any restriction that may reasonably be expected to have an adverse
effect on its condition (financial or otherwise) or on its ability to carry out
its obligations under this Credit Agreement, the Note, the Pledge Agreement, or
any other Loan Document to which it is a party.
4.6. No Default. The Borrower is not in default in the performance,
----------
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any contract, agreement, or instrument to which it is a party where
such default could have a material adverse effect on the condition (financial or
otherwise) of the Borrower, or the ability of the Borrower to comply with the
terms and conditions of the ESOP Trust Agreement, this Credit Agreement, the
Note, the Pledge Agreement, or any other Loan Document to which it is a party.
The Borrower is not in default with respect to any judgment, order, writ,
injunction, decree, or award or any rule or regulation of any court or Person
where such default, could have a material adverse effect on the condition
(financial or otherwise) of the Borrower or the ability of the Borrower to
comply with the terms and conditions of this Credit Agreement, the Note, the
Pledge Agreement, any other Loan Document to which it is a party, or the ESOP
Trust Agreement. Neither any Event of Default nor any act, condition, or event
which, with the giving of notice or lapse of time or both, would constitute an
Event of Default, now exists.
4.7. Use of Proceeds of the Loan. All proceeds of the Loan will be used by
---------------------------
the Borrower solely to purchase the Shares. All Shares purchased with the
proceeds of the Loan will be "qualifying employer securities" within the meaning
of Section 4975(e)(8) of the Code for the Borrower.
4.8. Pledged Collateral. The execution and delivery of the Pledge
------------------
Agreement and the delivery of the Pledged Collateral thereunder will create a
valid and perfected first priority security interest and lien in and to the
Pledged Collateral covered thereby in favor of the Lender securing the payment
of all obligations purported to be secured thereby.
4.9. Accuracy of Statements. All statements, representations, and
------------------------
warranties made by the Borrower and the Plan Administrator in this Credit
Agreement and in any other agreement, document, certificate, or instrument
delivered or to be delivered by or on behalf of the Borrower under this Credit
Agreement are and shall be true, correct, and complete on the date made and on
and as at the Closing Date, and no information has been or will be omitted
therefrom that would make any of them misleading or incomplete as at each such
date. It is understood by the Borrower that each of such statements,
representations, and warranties shall be deemed to have been relied on by the
Lender as a material inducement to making the Loan.
4.10 (a). Purchase Price of the Shares. The consideration paid by the
----------------------------
Borrower for the Shares purchased with the proceeds of the Loan will not exceed
"adequate consideration" as defined in Section 3(18) of ERISA. Unless otherwise
permitted by law, no purchases of Lender Stock have been made by the Borrower
from a person who is a "party in interest" or a "disqualified person" as such
terms are defined in Section 3(14) of ERISA and Section 4975(e)(2) of the Code,
respectively, in which purchases the Borrower was charged any "commissions" as
defined in Reg. Sec. 2550.408e(e).
4.11. Status of Borrower. The Plan Administrator represents that:
------------------
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<PAGE>
(a) The Borrower is a trust established by the ESOP Trust Agreement
and pursuant to the ESOP Plan and is exempt from federal income taxation
under Section 501(a) of the Code;
(b) The ESOP Plan is an "employee stock ownership plan" within the
meaning of Section 4975(e)(7) of the Code;
(c) The ESOP Trust Agreement and the ESOP Plan in the forms
heretofore submitted to the Lender have been duly authorized and executed
by all parties thereto, have not been modified or amended since the date of
delivery, remain in full force and effect, and constitute all of the
instruments establishing and governing the Borrower. The execution,
delivery, and performance of this Credit Agreement and the Note and the
consummation of the transactions contemplated thereby by the parties
thereto will not involve any transaction that is subject to the
prohibitions of Section 406 of ERISA and will not otherwise constitute a
violation of, or give rise to any liability under, any other provision of
Title I of ERISA or Section 4975 of the Code; and
(d) The Borrower has not incurred any indebtedness and, as of the
Closing Date, will not have incurred any indebtedness other than
indebtedness represented by the Note.
4.12. ERISA and Code Compliance. The Borrower has complied with all
-------------------------
provisions of ERISA and the Code applicable to it and with all other applicable
laws and regulations. Neither the Borrower's borrowing under this Credit
Agreement, the acquisition of Shares with the proceeds of the Loan, nor any
other transaction contemplated by this Credit Agreement or the other Loan
Documents is a non-exempt "prohibited transaction" under ERISA or the Code. The
Borrower is not in breach of any of its obligations under, or in violation of
any provision of ERISA or the Code with respect to, the ESOP Trust Agreement or
the ESOP Plan.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any portion of the Note shall remain unpaid, the Borrower shall
take the following actions unless the Lender shall otherwise consent in writing:
5.1. Payment of Indebtedness, Taxes, Etc.
-----------------------------------
(a) Pay and perform its material indebtedness, liabilities, and
obligations to its creditors promptly and in accordance with normal terms;
(b) Prepare and timely file all federal, state, and local tax returns
required to be filed;
(c) Pay and discharge all taxes, assessments, and governmental
charges or levies imposed upon it or its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach
thereto; and
(d) Pay and discharge all lawful claims that, if unpaid, might become
liens or charges upon any properties of the Borrower or any part thereof;
provided, however, that the Borrower
-7-
<PAGE>
shall not be required to pay any such tax, assessment, charge, levy, or
claim during the period when the same is being contested in good faith and
by proper proceedings, and adequate reserves for the accrual of any of the
same are maintained, if required by generally accepted accounting
principles.
5.2. Compliance with Laws. Comply with the requirements of all applicable
--------------------
laws, rules, regulations, ordinances, and orders of any governmental authority,
noncompliance with which might adversely affect the Borrower's businesses or
condition (financial or otherwise).
5.3. Keeping of Records and Books of Account. Maintain full and accurate
---------------------------------------
records and books of account in accordance with generally accepted accounting
principles and reflecting all financial transactions of the Borrower, and upon
reasonable notice, at any reasonable time and from time to time, permit the
Lender or any agents or representatives thereof to examine and make copies of
and abstracts from the records and books of account (unless otherwise deemed
confidential by a federal regulatory agency) of the Borrower.
5.4. ERISA Compliance, Etc. At all times: (a) comply with respect to the
---------------------
ESOP Plan and the Borrower with all applicable provisions of ERISA and the Code;
(b) comply with all of the terms of the ESOP Trust Agreement and the ESOP Plan
and take all actions necessary to continue the qualification of the ESOP Plan
under Section 401(a) of the Code; and (c) maintain the tax-exempt status of the
Borrower under Section 401(a) of the Code and cause the ESOP Plan to maintain
its status as an "employee stock ownership plan" within the meaning of Section
4975(e)(7) of the Code.
5.5. Maintenance of Existence. Maintain its existence as a trust and not
------------------------
terminate or permit the ESOP Trust Agreement or the ESOP Plan to be amended or
modified except for changes that are required to be made in order for the
Borrower to comply with ERISA or the Code and that do not in any way affect the
ESOP Plan's status as an "employee stock ownership plan" within the meaning of
Sections 401(a), 501(a), and 4975(e)(7) of the Code and Sections 54.4975-7 and
54.4975-11 of the Treasury Regulations.
5.6. Accounting. Account separately on its books of account for all
----------
contributions made to it to meet the Borrower's Obligations under this Credit
Agreement and the Note and earnings attributable to the investment of such
contributions.
5.7. Application of Contributions. Apply to payment of the Loan all
----------------------------
contributions received by the Borrower.
5.8. IRS Determination Letter. Apply to the Internal Revenue Service (with
------------------------
a contemporaneous copy provided to the Lender), by 180 days from the Closing
Date for a determination letter from the Internal Revenue Service to the effect
that the ESOP Plan meets the requirements for qualification under Sections
401(a) and 4975(e)(7) of the Code and the ESOP Trust Agreement meets the
requirements for tax exemption under Section 501(a) of the Code (such letter
shall not contain any conditions reasonably deemed unacceptable by the Lender
and its counsel). The Borrower shall keep the Lender informed of the status of
such application and comply with any conditions imposed by the Internal Revenue
Service, including, without limitation, any changes in the ESOP Plan or ESOP
Trust Agreement that may be required for the
-8-
<PAGE>
issuance of such determination letter, and within seven days of receipt thereof
by the Borrower, provide the Lender with a copy of such determination or ruling
letter.
5.9. Further Assurances. Upon the reasonable request of the Lender, do,
------------------
execute, acknowledge, and deliver or cause to be done, executed, acknowledged,
and delivered all such further instruments, acts, deeds, and assurances as may
be required by the Lender for the purpose of carrying out the provisions and the
intent of this Credit Agreement.
5.10. Notice of Defaults. Furnish to the Lender, as soon as possible and in
------------------
any event within five days after knowledge of the occurrence of each Event of
Default or each act, condition, or event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default, the written
statement of the ESOP Plan's Administration Committee setting forth details of
such Event of Default or act, condition, or event and the action which the
Borrower proposes to take with respect thereto.
5.11. Notice of Certain Events. Furnish to the Lender, as soon as possible
------------------------
and in any event within 15 days after acquiring knowledge thereof, the written
statement of the ESOP Plan Administrator setting forth details of any action,
event, or condition of any nature of which the Borrower has knowledge which may
reasonably be expected to have a material adverse effect upon the business,
assets, or condition (financial or otherwise) of the Borrower and the action
which the Borrower proposes to take with respect thereto.
5.12. Notice of Legal Actions. Furnish to the Lender, immediately after
-----------------------
knowledge of the commencement thereof but in no event later than five days after
the Borrower receives notice or knowledge thereof, notice in writing of all
actions, suits, proceedings, or investigations before any court or before or by
any Person which could have a material adverse effect on the properties,
operations, or condition (financial or otherwise) of the Borrower.
5.13. Tax Returns. Furnish to the Lender, promptly after filing with the
-----------
Internal Revenue Service, copies of any Form 5500.
5.14. ERISA and Code Matters. Furnish to the Lender, promptly upon receipt,
----------------------
copies of all reports, communications, filings, and other documents that are
from time to time prepared with respect to the ESOP Plan and the Borrower in
compliance with ERISA and the Code and all notices and communications from the
Internal Revenue Service, the U.S. Department of Labor, and any other Person
with respect to the ESOP Plan and the Borrower.
5.15. Notice of ESOP Plan Matters. Furnish to the Lender, promptly upon
---------------------------
receipt thereof, copies of any notice, filing, or other document: (a) received
by the Borrower, the Trustee, or the Association from any participant in the
ESOP Plan claiming any noncompliance with the ESOP Plan, the ESOP Trust
Agreement, or ERISA if such claim is not resolved to the satisfaction of the
participant by the conclusion of the ESOP plan's claims appeal process; (b)
disseminated by the Borrower, the Trustee, or the Association to the
participants generally in the ESOP Plan; or (c) filed with or communicated to
any governmental authority (in addition to any annual report) and relating to
the Borrower's, the Trustee's, or the Association's compliance or noncompliance
with ERISA, the Code, and other laws applicable to the Borrower and the ESOP
Plan.
-9-
<PAGE>
5.16. Prohibited Transactions. Furnish to the Lender, promptly upon
-----------------------
becoming aware of the occurrence of any "prohibited transaction," as such term
is defined in Section 4975 of the Code or in Section 406 of ERISA, in connection
with the ESOP Plan and the trust created thereunder, a written notice specifying
the nature thereof, what action the Borrower proposes to take with respect
thereto, and, when known, any action taken or threatened by the Internal Revenue
Service or the U.S. Department of Labor with respect thereto.
5.17. Other Information. As long as no Event of Default or any act,
-----------------
condition, or event which, with the giving of notice, lapse of time, or both
would constitute an Event of Default shall have occurred and be continuing,
furnish to the Lender such other information respecting the business,
properties, condition, or operations, financial or otherwise, of the Borrower as
the Lender may from time to time reasonably request, as permitted by law.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
So long as any portion of the Note shall remain unpaid, the Borrower shall
not take any of the following actions unless the Lender shall otherwise consent
in writing:
6.1. Limitation on Indebtedness. Create, incur, assume, or permit to exist
--------------------------
any indebtedness or liability of any kind, whether accrued, absolute,
contingent, or otherwise, exceeding $10,000 in the aggregate.
6.2. Limitation on Liens and Encumbrances. Create, assume, or permit to
------------------------------------
exist any mortgage, security interest, lien, or charge of any kind, including
any restriction against mortgages, security interests, liens, or charges, upon
any of the Pledged Collateral, whether now owned or hereafter acquired, except:
(a) liens in favor of the Lender; and (b) liens in favor of the Trustee which
are not in violation of the terms of the ESOP Plan as in effect on the date
hereof or of ERISA.
6.3. ERISA. Engage in a nonexempt "prohibited transaction," as such term
-----
is defined in Section 4975 of the Code or in Section 406 of ERISA.
6.4. Liquidation; Merger. Liquidate, dissolve, or merge with or into or
-------------------
consolidate with or into any person or engage in any other transaction with any
other Person which materially increases the liability of the ESOP Plan or the
Borrower or interferes with its ability to repay the Note.
6.5. Federal Reserve Board. Take any action or permit any action that
---------------------
might cause this Credit Agreement or any document or instrument delivered
pursuant hereto to violate any regulation of the Board of Governors of the
Federal Reserve System including, but not limited to, Regulations G, U, and T.
-10-
<PAGE>
ARTICLE VII
-----------
EVENTS OF DEFAULT
-----------------
7.1. Event of Default. Any one or more of the following shall constitute
an Event of Default hereunder:
(a) The Borrower shall fail to pay in full the amount of any
installment of principal of the Note, or shall fail to pay any interest on
the Note, in each case as and when such payment or installment shall become
due and payable whether at the stated maturity thereof or at any date fixed
for payment by acceleration, by notice of prepayment, or otherwise;
(b) Any representation or warranty made by the Borrower in any of the
Loan Documents or in any certificate, agreement, instrument, report, or
statement contemplated by or made or delivered pursuant to or in connection
with any of the Loan Documents is incorrect or misleading in any material
respect when made;
(c) The Borrower shall fail to perform or observe any covenant or
agreement set forth in Article VI of this Credit Agreement;
(d) The Borrower shall fail to perform or observe any other term,
covenant, or agreement contained in this Credit Agreement or any of the
Loan Documents on its part to be performed or observed and any such failure
remains unremedied for ten days after written notice thereof shall have
been given to the Borrower by the Lender; provided, however, that in cases
where the Borrower has knowledge of such failure, no notice from the Lender
to the Borrower shall be required hereunder and it shall be an Event of
Default if the Borrower shall fail to perform or observe such other term,
covenant, or agreement and such failure goes unremedied for 15 days;
(e) The Borrower shall fail to pay any material indebtedness (other
than as evidenced by the Note) owed by it to the Lender or any other
creditor, or any interest or premium thereon, when due, whether such
indebtedness shall become due by scheduled maturity, by required
prepayment, by acceleration, by demand, or otherwise; or any event of
default or event, act, or condition which, with the giving of notice or
lapse of time or both, would constitute an event of default shall occur
under any agreement or instrument evidencing or securing or relating to any
material indebtedness owing by the Borrower;
(f) The Borrower shall default in any obligation under any material
contract, instrument, or agreement to which it is a party (other than this
Credit Agreement or the other Loan Documents) pursuant to which the
obligation of the Borrower exceeds $50,000 and the default is not cured
within the grace period provided thereunder;
(g) Any of the Loan Documents at any time after execution and
delivery and for any reason shall cease to be in full force and effect or
shall be declared to be null and void, or the Borrower shall contest the
payment of any amount due to the Lender hereunder, or the Borrower shall
deny that it has any or further liability or obligation under any of the
Loan Documents to which the Borrower is a party;
-11-
<PAGE>
(h) A final judgment or judgments for the payment of money
aggregating $50,000 or more against the Borrower shall be rendered and
remain outstanding (with no discharge or stay of execution) for a period of
30 days;
(i) One or more levies or attachments aggregating $50,000 or more
against the Borrower (except for the attachments of a participant's spouse
in a marital dispute) shall be made and remain unstayed or unbonded for a
period of 30 days;
(j) A decree or order for relief shall be entered in respect of the
Borrower under Title 11 of the U.S. Code, as amended, or any other
applicable federal or state financial institution receivership, bankruptcy,
insolvency, or other similar law, or a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official shall be appointed
for the Borrower or for any substantial part of its properties, or the
winding-up or liquidation of its affairs shall be ordered and any such
decree, order, or appointment shall continue undismissed for a period of 30
days;
(k) The Borrower shall commence a voluntary case under Title 11 of
the U.S. Code, as amended, or any other applicable federal or state
financial institution receivership, bankruptcy, insolvency, or other
similar law, or shall consent to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator, or
other similar official, of the Borrower or of any substantial part of its
properties, or shall make any assignment for the benefit of creditors, or
the Borrower shall fail generally to pay its debts as such debts become due
or take any action in furtherance of any of the following;
(l) The Office of Thrift Supervision or any other governmental
authority shall take any action under any applicable law to appoint a
receiver or conservator of the Association; or
(m) Any "prohibited transaction," as such term is defined in Section
4975 of the Code or in Section 406 of ERISA, shall have occurred in
connection with the Borrower that could result in a tax or penalty against
the Borrower exceeding $50,000.
7.2. Remedies on Default. Whenever any Event of Default shall have
-------------------
occurred and be continuing, the Lender may take any one or more of the following
steps:
(a) By notice to the Borrower, declare all amounts payable hereunder
and pursuant to the Note to be immediately due and payable, both as to
principal and interest, without presentment, demand, protest, or other
notice of any kind, all of which are expressly waived hereby by the
Borrower, anything in the Note or herein to the contrary notwithstanding;
(b) Take any action at law or in equity to collect the payment then
due and thereafter to become due hereunder or under the Note or to enforce
the performance and observance of any one or more of the obligations,
agreements, and covenants of the Borrower under this Credit Agreement, the
Note, and the other Loan Documents;
(c) Exercise any and all rights and remedies conferred upon secured
parties by the Uniform Commercial Code of the State of Illinois and other
applicable laws, except as limited by the pledge Agreement;
-12-
<PAGE>
(d) Immediately and without prior notice or other act, set off,
appropriate, and apply any or all moneys or rights to receive the same, and
the proceeds thereof, now or hereafter held by the Lender in any deposit
account maintained by the Borrower and any sum owed by the Lender in any
capacity (other than a fiduciary capacity) to the Borrower's obligations to
the Lender. The Lender shall give the Borrower notice of each exercise of
its right to set off not later than ten days after such right is exercised;
and
(e) If an Event of Default specified in subsection, (j), (k) or (l)
of Section 7.1 shall occur, the Note shall become immediately due and
payable, both as to principal and interest, without any action by the
Lender and without presentment, protest, or any other notice of any kind,
all of such are hereby expressly waived, anything contained herein or in
the Note to the contrary notwithstanding
7.3. Further Rights of the Lender. The Borrower shall do all things and
----------------------------
deliver all instruments reasonably requested by the Lender to protect or perfect
any security interest or lien given hereunder or pursuant to the Pledge
Agreement including, without limitation, financing statements under the Uniform
Commercial Code of the State of Illinois. The Borrower hereby appoints such
Person or Persons as the Lender may designate as its attorney-in-fact who may,
upon the occurrence of any Event of Default, endorse the name of the Borrower on
any checks, notes, drafts, or other forms of payment or security that may come
into the possession of the Lender. The powers granted herein, being coupled
with an interest, are irrevocable, and the Borrower approves and ratifies all
acts of the attorney-in-fact. Neither the Lender nor the attorney-in-fact shall
be liable for any act or omission, error in judgment, or mistake of law so long
as the same is not malicious, willful, or grossly negligent. The Lender shall
give the Borrower notice of each exercise of its rights under this Section 7.3
not later than ten days after such exercise.
7.4. Specific Performance. If the Borrower commits or threatens to commit
--------------------
a breach of this Credit Agreement, the Pledge Agreement, or any other Loan
Document, the Lender shall have the right and remedy, without posting bond or
other security, to have the provisions of this Credit Agreement, the Pledge
Agreement, or such other Loan Document specifically enforced by any court having
equity jurisdiction it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable harm to the Lender and that monetary
damages will not provide an adequate remedy therefor.
7.5. Termination of Proceedings. If the Lender shall have proceeded to
--------------------------
enforce its rights under this Credit Agreement and such proceedings shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Lender, then the Borrower and the Lender shall be restored to
their respective positions hereunder, and all rights, remedies, and powers of
the Borrower and the Lender shall continue as though the proceeding, had not
taken place, except as otherwise specifically set forth in such proceedings.
7.6. Limitation on Acceleration. In the event the Lender or other holder
--------------------------
of the Note is a disqualified person (within the meaning of Section 4975(e)(2)
of the Code) or a "party in interest" (within the meaning of Section 3(14) of
ERISA) with respect to the ESOP Plan, then notwithstanding any Event of Default,
the Note may not be accelerated and the holder of the Note may only exercise all
available remedies to collect overdue payments on the Note in accordance with
the scheduled maturities stated therein.
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<PAGE>
ARTICLE VIII
------------
MISCELLANEOUS
-------------
8.1. No Waiver; Cumulative Remedies.
------------------------------
(a) No failure or delay on the part of the Lender or any other holder
of the Note in exercising any right, power, or remedy hereunder or under
the Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, or remedy preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy
hereunder or under the Note.
(b) Except as otherwise provided herein, no remedy herein conferred
or reserved to the Lender is intended to be exclusive of any other
available remedy, but each and every remedy shall be cumulative and in
addition to every other remedy given under this Credit Agreement or any
other Loan Document or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power occurring upon
any Event of Default shall impair any such right o power or shall be
construed to be a waiver thereof, but any such right or power may be
exercised from time to time and as often as may be deemed expedient. The
Lender may exercise any remedy reserved to it in this Credit Agreement or
in any other Loan Document without giving notice of its intention to do so,
unless such notice is expressly required by this Credit Agreement or
another Loan Document.
8.2. Amendments, Etc. Neither any amendment, modification, termination, or
---------------
waiver of any provision of this Credit Agreement or of the Note nor any consent
to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
8.3. Address for Notices. All notices, requests, demands, directions, and
-------------------
other communications provided for hereunder and under the Note shall be in
writing and mailed, certified mail, return receipt requested, or hand delivered
to the applicable party at the address indicated below:
If to Borrower: Trustees under the Equality Savings and
Loan Association Employee Stock Ownership Plan
c/o Equality Savings and Loan Association
4131 South Grand Boulevard
St. Louis, Missouri 63118
If to the Lender: Equality Bancorp, Inc.
4131 South Grand Boulevard
St. Louis, Missouri 63118
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Section. All such notices, requests, demands,
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<PAGE>
directions, and other communications shall, when mailed, be effective on the
third day following the date of deposit in the mail postage prepaid, or upon
receipt if hand delivered.
8.4. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all
-------------------------
reasonable costs and expenses of the Lender in connection with enforcement of
this Credit Agreement, the Note, and the other Loan Documents, including,
without limitation, the fees and out-of-pocket expenses of legal counsel,
independent public accountants, and other outside experts retained by the Lender
in connection with the enforcement of this Credit Agreement, the Note, and the
other Loan Documents and all costs and expenses, if any, in connection with
perfecting, collecting, defending, declaring, and enforcing the Lender's
security interest and rights under this Credit Agreement, the Note, the Pledge
Agreement, and the other Loan Documents. The covenants and agreements of this
Section 8.4 shall survive the repayment of the Loan and the cancellation of the
Note.
8.5. Execution in Counterpart. This Credit Agreement may be executed in
------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts of this Credit Agreement taken
together shall constitute but one and the same instrument.
8.6. Binding Effects Assignment. This Credit Agreement shall become
--------------------------
effective when it shall have been executed by the Borrower and the Lender and
thereupon shall be binding upon the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign any of its rights or obligations hereunder or any interest herein without
the prior written consent of the Lender.
8.7. Governing Law. This Credit Agreement and the other Loan Documents are
-------------
governed by, and construed in accordance with, the laws of the State of Illinois
without regard to the choice of law provisions thereof, except to the extent
that the laws of the State of Illinois are superseded by mandatory provisions of
applicable federal law.
8.8. Severability of Provisions. Any provision of this Credit Agreement,
--------------------------
or of the Note which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or thereof
or affecting the validity or enforceability of such provision in any other
jurisdiction.
8.9. Heading. Article and Section headings in this Credit Agreement are
-------
included herein for convenience of reference only and shall not constitute a
part of this Credit Agreement for any other purpose.
8.10. Integration Entire Agreement. This Credit Agreement, the Note, the
----------------------------
Pledge Agreement, and the other Loan Documents and other instruments and
documents to be delivered hereunder and thereunder are intended by the parties
hereto and thereto to be an integrated contract, which together contain the
entire understanding of the parties with respect to the subject matter contained
herein and therein. There are no restrictions, warranties, representations,
covenants, or undertakings other than those expressly set forth herein and
therein. This Credit Agreement, the Note, the Pledge Agreement, and the other
Loan Documents and other instruments and documents to be delivered hereunder and
thereunder supersede all prior agreements and understandings between the parties
with respect to such subject matter.
-15-
<PAGE>
8.11. Survival of Agreements. All agreements, covenants, representations
----------------------
and warranties made herein shall survive the delivery of the Note and shall
continue in full force and effect as long as the Note is outstanding and unpaid.
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be executed by their duly authorized officers an of the day and year first above
written.
EQUALITY BANCORP, INC.
By:___________________________ _____________________________
Kenneth J. Hrdlicka
Title_________________________ _____________________________
Stacey W. Braswell
_____________________________
Daniel C. Aubuchon
Attest:
______________________________
Title:________________________
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<PAGE>
EXHIBIT A
NOTE
----
FOR VALUE RECEIVED, the undersigned, Equality Savings and Loan Association
Employee Stock Ownership Plan Trust, under agreement dated as of
___________________, 1997 (the "Borrower"), promises to pay to the order of
Equality Bancorp, Inc. (the "Lender"), at its offices located at 4131 South
Grand Boulevard, St. Louis, Missouri 63118, or such other place as the holder
hereof may from time to time designate in writing, in same day or other
immediately available funds, the principal sum of ______________________
($_______________) in ten (10) annual installments in the amount set forth below
on __________________ of each year set forth opposite such amount commencing
_________________, with the final installment of all remaining unpaid principal
hereunder payable _________________:
Principal Payment Payment Date
----------------- ------------
$_______ ______________
$_______ ______________
$_______ ______________
$_______ ______________
$_______ ______________
$_______ ______________
$_______ ______________
$_______ ______________
$_______ ______________
$_______ ______________
The Borrower also promises to pay interest on the unpaid principal balance
outstanding from time to time from the date hereof until the principal hereof is
paid in full, annually on the _____ day of _________of each year commencing
______________ and at maturity, at a rate per annum (computed on the basis of a
365-day year and the actual number of days elapsed) at a rate of interest equal
to _____%, which is the Prime Rate on _____________, 1997, except that any
principal and, to the extent not prohibited by law, interest not paid when due
shall bear interest at a rate of interest equal to the Prime Rate and shall be
payable upon demand of the Lender. The "Prime Rate" shall mean the interest
rate publicly announced by The Wall Street Journal, Midwest Edition from time to
time as its Prime Rate for interest rate determinations, which is solely a
reference rate and may be at, above, or below the rate or rates at which the
Lender lends to other persons. All payments shall be applied first to accrued
interest and then to principal or to principal installments in the reverse order
of maturity.
This Note is payable and secured in accordance with, is governed by and
subject to, and is entitled to the benefit of, the Credit Agreement, dated as of
the date hereof, between the Borrower and the Lender (the "Credit Agreement").
Upon any Event of Default as provided in the Credit Agreement, to the extent not
prohibited by the Credit Agreement, the principal amount of this Note, together
with accrued interest shall, or upon election of the Lender may, become due and
payable. This Note may be prepaid in whole or in part at any time without
premium or penalty.
A-1
<PAGE>
Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest required to be paid
hereunder exceeds the maximum rate permitted by such law, such rate shall
automatically be reduced to the maximum rate permitted by such law.
Presentment, demand, Protest, and notice of dishonor are hereby waived by
the Borrower. The undersigned agrees to pay all reasonable costs incurred by
Lender in enforcing its rights under this Note, including reasonable attorneys'
fees. This Note shall be construed in accordance with and governed by the
internal laws, and not the law of conflicts, of the State of Illinois.
EQUALITY BANCORP, INC. EQUALITY SAVINGS AND LOAN
ASSOCIATION EMPLOYEE STOCK
OWNERSHIP PLAN TRUST
By:______________________ ___________________________, TRUSTEE
By:_____________________________________
Title____________________
Title:__________________________________
Attest:
_____________________________
Title:__________________________
A-2
<PAGE>
EXHIBIT B
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Pledge Agreement"), dated as
of ______________, 1997 is by and between Equality Savings and Loan Association
Employee Stock Ownership Plan Trust (the "Pledgor") and Equality Bancorp, Inc.
(the "Secured Party").
WHEREAS, Equality Savings and Loan Association, F.A. has established
the Equality Savings and Loan Association Employee Stock Ownership Plan (the
"ESOP Plan"), pursuant to which ESOP Plan the Pledgor was created; and
WHEREAS, the Pledgor and the Secured Party are parties to a Credit
Agreement, dated as of the date hereof (the "Credit Agreement"), pursuant to
which the Secured Party has agreed to make a loan to the Pledgor in the
principal amount of __________________ ($________) (the "Loan") for the purpose
of enabling the Pledgor to purchase an aggregate amount of ____________ shares
of the common stock, par value $0.01 per share, of the Secured Party (the
"Pledged Shares") from the Secured Party in a subscription and community
offering registered under the Securities Act of 1933, as amended; and
WHEREAS, the Pledgor has agreed to execute and deliver this Pledge
Agreement in order to provide the Secured Party with assurance of the repayment
of the Loan;
WHEREAS, the Trustee of the Pledgor has been directed to execute this
Pledge Agreement by the Plan Administrator of the plan.
NOW, THEREFORE, in consideration of the Loan, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Pledgor hereby agrees for the benefit of the Secured Party as
follows:
1. Pledge. To secure the Secured Obligations (as defined in Section 2 of
------
this Pledge Agreement), the Pledgor hereby pledges and assigns to the Secured
Party and grants to the Secured Party a first priority security interest in and
to: (i) the Pledged Shares, being all shares of Equality Bancorp, Inc. common
stock acquired by Pledgor with the proceeds of the Loan; (ii) all cash,
securities, interest, dividends, distributions, rights and other property at any
time and from time to time declared or distributed in respect of, in exchange
for, or attached to or issued with respect to, any or all of the Pledged Shares;
(iii) all contributions (other than contributions of employer securities) now or
hereafter made to the Pledgor to meet its obligations under the Loan; and (iv)
all earnings attributable to the Pledged Shares and to the investment of
contributions. All such items of collateral are hereinafter collectively
referred to as the "Pledged Collateral".
2. Secured Obligations. This Pledge Agreement secures, and the Pledged
-------------------
Collateral is collateral security for, the prompt payment in full when due,
whether by acceleration or otherwise: of (i) the principal of and interest on
the Note (as defined in the Credit Agreement); and (ii) all obligations and
liabilities of the Pledgor to the Secured Party under the Credit Agreement and
this Pledge Agreement. All such obligations are hereinafter collectively
referred to as the "Secured Obligations."
3. Delivery of Pledged Collateral. All stock certificates representing
------------------------------
or evidencing the Pledged Collateral as of the date hereof, as more particularly
described in Schedule I annexed hereto, are
B-1
<PAGE>
being delivered to the Secured Party by the Pledgor pursuant to this Pledge
Agreement simultaneously with the execution and delivery of this Pledge
Agreement, accompanied by appropriate undated stock powers duly executed by the
Pledgor, with signatures guaranteed. The Pledgor shall take all actions
reasonably requested by the Secured Party in order to perfect a security
interest in the Pledged Collateral, including the execution and delivery of any
financing statements pursuant to the Uniform Commercial Code in effect in the
State of Illinois at that time (the "UCC"), and will pay on demand the cost of
filing the same in all public offices wherever filing is or is deemed by the
Secured Party to be necessary or desirable. At any time and from time to time
after the date hereof the Pledgor shall execute and deliver to the Secured Party
at the request of the Secured Party one or more additional financing statements
and continuation statements pursuant to the UCC in a form sufficient to perfect
or continue a security interest in the Pledged Collateral and will pay on demand
the cost of filing the same in all public offices wherever filing is or is
deemed by the Secured Party to be necessary or desirable. The Secured Party may
prepare and file such financing statements and continuation statements executed
only by the Secured Party covering the Pledged Collateral and in any
jurisdiction where the execution by the Pledgor is required may execute such
statements on behalf of the Pledgor pursuant to Section 18 of this Pledge
Agreement.
4. Representations and Warranties of the Pledgor. The Pledgor hereby
---------------------------------------------
represents and warrants to the Secured Party as follows:
(a) The Pledgor is the legal owner of the Pledged Collateral delivered
hereunder, free and clear of any lien or security interest except for the
lien and security interest created by this Pledge Agreement.
(b) The Pledgor has full power, authority, and legal right to pledge
and grant a security interest in all the Pledged Collateral to the Secured
Party pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly and validly executed and
delivered by the Pledgor and constitutes the legal and valid obligation of
the Pledgor, enforceable against the Pledgor in accordance with its terms.
(d) No notice by the Pledgor to any governmental authority or
regulating body or filing by the Pledgor with any governmental authority or
regulatory body (other than the filing of the financing statements
described in Section 3 of this Pledge Agreement or notices previously
given) is required, nor, with the exception of actions previously obtained,
is the Pledgor required to obtain any consent, authorization, approval, or
other action by any governmental authority or regulatory body, for (i) the
execution, delivery, or performance of this Pledge Agreement by the
Pledgor, (ii) the pledge by the Pledgor of the Pledged Collateral pursuant
to this Pledge Agreement, or (iii) the exercise by the Secured Party of the
rights provided for in this Pledge Agreement.
(e) The pledge and delivery of the Pledged Collateral pursuant to this
Pledge Agreement and the filing of the financing statements described in
Section 3 of this Pledge Agreement create a valid and perfected first
priority security interest in the Pledged Collateral in favor of the
Secured Party securing the payment of the Secured Obligations.
5. Further Assurances. The Pledgor agrees that at any time and from time
------------------
to time it will promptly execute and deliver all such further instruments and
documents and take all such further actions, as may be necessary or as the
Secured Party may reasonably request, in order to further perfect and protect
B-2
<PAGE>
the security interest in the Pledged Collateral in favor of the Secured Party
granted or purported to be granted pursuant to this Pledge Agreement and to
enable the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to the Pledged Collateral.
6. Payments. The Secured Party shall have the sole right to receive and
--------
hold as Pledged Collateral any and all dividends paid on or with respect to the
Pledged Collateral so long as any Portion of the Loan remains outstanding and
unpaid. All such dividends paid on or with respect to the Pledged Collateral
that are received by the Pledgor contrary to the provisions of this Section 6
shall be received by the Pledgor in trust for the benefit of the Secured Party,
shall be segregated from other funds of the Pledgor, and shall be immediately
paid over to the Secured Party as Pledged Collateral in the same form as so
received (with any necessary endorsements). In order to permit the Secured
Party to receive such dividends paid on or with respect to the Pledged
Collateral which it is authorized to receive and retain pursuant to this Section
6, the Pledgor shall, if necessary, upon written request of the Secured Party,
from time to time execute and deliver (or cause to be executed and delivered) to
the Secured Party all such payment orders and other instruments as the Secured
Party may reasonably request.
7. Voting Rights. As long as no Event of Default (as defined in the
-------------
Credit Agreement) or any act, condition, or event which, with the giving of
notice, lapse of time, or both would constitute an Event of Default shall have
occurred and be continuing, the Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of this Pledge
Agreement or the Credit Agreement, in the manner described in the ESOP Plan and
the related trust agreement entered into on September 23, 1993, creating the
Pledgor. The Pledgor grants to the Secured Party an irrevocable proxy to vote
the Pledged Collateral, which proxy shall be effective immediately upon the
occurrence of an Event of Default and shall be deemed coupled with an interest.
After the occurrence and during the continuance of an Event of Default, the
Pledgor agrees to deliver to the Secured Party such further evidence of such
irrevocable proxy or such further irrevocable proxies to vote the Pledged
Collateral as the Secured Party may request.
8. Transfer and Other Liens. The Pledgor agrees that it will not (a) sell
------------------------
or otherwise dispose of, or grant any option or warrant with respect to, any of
the Pledged Collateral, or (b) create or permit to exist any lien, security
interest, charge, or other encumbrance upon or with respect to any of the
Pledged Collateral, except for the lien and security interest granted under this
Pledge Agreement. Any such option, warrant, lien, security interest, charge, or
other encumbrance shall be null and void and of no force or effect whatsoever.
9. Reasonable Care. The Secured Party shall be deemed to have exercised
---------------
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially
equivalent to that which the Secured Party accords its own property consisting
of negotiable securities. Without limiting the generality of the foregoing, the
Secured Party shall not have any responsibility for ascertaining or taking
action with respect to calls, conversions, rights to subscribe, payment of
dividends, reorganizations, exchanges, maturities, tenders, voting rights, or
other matters, whether similar or dissimilar to the foregoing, relative to any
Pledged Collateral, whether or not the Secured Party has, or is deemed to have,
knowledge of such matters, or taking any necessary steps (other than steps taken
in accordance with the standard of care set forth above to maintain possession
of the Pledged Collateral) to preserve rights of the Pledgor or anyone else
against any person with respect to any Pledged Collateral. The Secured Party
shall further be deemed to have exercised reasonable care in the custody and
preservation of any of the Pledged Collateral in its possession if it takes such
action for that purpose as the Pledgor shall request in writing, but failure by
the Secured Party to comply with any such request shall not of itself be deemed
a failure to exercise reasonable care, and no failure by the
B-3
<PAGE>
Secured Party, to do any act with respect to the preservation of such Pledged
Collateral not so requested by the Pledgor shall of itself be deemed a failure
to exercise reasonable care in the custody or preservation of such Pledged
Collateral.
10. Remedies Upon Default. If any Event of Default (as defined in the
---------------------
Credit Agreement) shall occur and be continuing:
(a) The Secured Party may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it under any other agreement or instrument, all the
rights and remedies of a secured party under the UCC after the default of a
debtor, and the Secured Party may also in its sole discretion, without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board, or at any of the Secured Party's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and
upon such other terms as the Secured Party may deem commercially
reasonable, irrespective of the impact of any such sales on the market
price of the Pledged Collateral; provided, however, that the Secured
Party's right to exercise such rights and remedies shall be subject to
Section 7.6 of the Credit Agreement. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part
of the Pledgor, and the Pledgor hereby waives (to the extent permitted by
law) all rights of redemption, stay, or appraisal which it now has or may
at any time in the future have under any rule of law or statute now
existing or hereafter enacted. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least seven days' notice to the
Pledgor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.
The Secured Party shall not be obligated to make any sale of the Pledged
Collateral regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The Pledgor hereby waives and agrees to the fullest extent
allowed by applicable law not to assert any rights or privileges it may
acquire under the UCC and any claims against the Secured Party arising by
reason of the fact that the price at which any Pledged Collateral may have
been sold at such a private sale was less than the price that might have
been obtained at a public sale, even if the Secured Party accepts the first
offer received and does not offer such Pledged Collateral to more than one
offeree.
(b) The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws, the Secured Party may be compelled,
with respect to any sale of all or any part of the Pledged Collateral, to
limit purchasers to those who will agree, among other things, to acquire
the Pledged Collateral for their own account, for investment, and not with
a view to the distribution or resale thereof, or to take other action such
that registration of such securities under the Securities Act is not
required. The Pledgor acknowledges that any such sales may be at prices
and on terms less favorable to the Secured Party than those obtainable
through a public offering pursuant to a registration statement under the
Securities Act, and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Secured Party shall have no obligation to
engage in public sales and no obligation to delay the sale of any Pledged
Collateral for the period of time necessary to permit registration for a
form of public sale requiring registration under the Securities Act or
under applicable state securities laws.
B-4
<PAGE>
11. Application of Proceeds. After and during the continuance of an Event
-----------------------
of Default, any cash held by the Secured Party as Pledged Collateral and all
cash proceeds received by the Secured Party (all such cash being "Proceeds") in
respect of any sale of, collection from, or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by the Secured Party of
its rights and remedies as a secured creditor shall be applied by the Secured
Party as follows:
First, to the payment of all reasonable expenses (including, but not
-----
limited to, reasonable attorneys' fees) incurred by the Secured Party in
enforcing its rights under this Pledge Agreement and collecting, preparing
for sale, and selling the Pledged Collateral (including, but not limited
to, reasonable attorneys' fees and other expenses incurred in connection
with obtaining a "no action" letter from the staff of the Securities and
Exchange Commission in connection with any such sale of the Pledged
Collateral);
Second, to the payment of all other Secured Obligations other than
------
principal and interest with respect to the Note;
Third, to the payment of interest with respect to the Note;
-----
Fourth, to the payment of principal with respect to the Note; and
------
Fifth, after the payment in full of the Secured Obligations, to the
-----
Pledgor or its successors or assigns or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.
12. No Waiver. No failure on the part of the Secured Party to exercise,
---------
no course of dealing with respect to, and no delay in exercising any right,
power, or remedy hereunder shall operate as a waiver theretofore nor shall any
single or partial exercise by the Secured Party of any right, power, or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy. The remedies herein provided are to the fullest
extent permitted by law cumulative and are not exclusive of any other remedies
provided by law.
13. Amendments. No amendment or waiver of any provision of this Pledge
----------
Agreement or consent to departure therefrom shall be effective unless agreed to
in writing by the Pledgor and the Secured Party in the case of an amendment or
by the Secured Party in the case of a waiver or consent to departure therefrom.
14. Termination of Security Interest and Release. When all Secured
--------------------------------------------
Obligations have been indefeasibly paid in full, this Pledge Agreement shall
terminate and the Secured Party shall forthwith assign, transfer, and deliver to
or on the order of the Pledgor, against receipt and without recourse to or
warranty by the Secured Party, such of the Pledged Collateral as shall not have
been released, sold, or otherwise applied pursuant to the terms hereof. For
each Plan Year, as defined in Section 1.20 of the ESOP Plan, during the term of
this Pledge Agreement, there shall be released from the security interest of the
Secured Party arising under this Pledge Agreement a portion of the number of
shares of Pledged Shares held by the Secured Party hereunder determined as
follows: the number of shares of Pledged Shares to be released shall be equal
to the number of unreleased shares of Pledged Shares held immediately before
release for such Plan Year multiplied by a fraction, the numerator of which is
the principal and interest on the Note paid for such Plan Year and the
denominator of which is the sum of the numerator plus principal and interest on
the Note to be paid for all future years. Immediately following the end of each
such Plan Year, the Secured Party shall cause stock certificates evidencing the
released shares of Pledged
B-5
<PAGE>
Shares with respect to such Plan Year to be released from the security interest
of the Secured Party arising under this Pledge Agreement and delivered to the
Pledgor or its designee. For the purposes of this section 14, all securities
held by the Secured Party as Pledged Collateral that were delivered to the
Secured Party on account of the Pledged Shares being released shall also be
released to the Pledgor or its designee.
15. Addresses for Notices. All notices, requests, demands, or other
---------------------
communications to or from the Secured Party or the Pledgor shall be in writing
and shall be deemed to have been duly given and made on the third day following
deposit in the mail if sent postage prepaid by certified mail, return receipt
requested, or when received if delivered by hand. Any such notice, request,
demand, or communication shall be addressed or delivered as follows:
If to the Pledgor: Trustees under the Equality Savings and
Loan Association Employee Stock Ownership Plan
c/o Equality Savings and Loan Association
4131 South Grand Boulevard
St. Louis, Missouri 63118
If to the Secured Party: Equality Bancorp, Inc.
4131 South Grand Boulevard
St. Louis, Missouri 63118
or at such other address as the Secured Party or the Pledgor shall designate by
written notice to the other party hereto.
16. Continuing Security Interest: Releases: Transfer of Note. This Pledge
--------------------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall remain in full force and effect until indefeasible payment in full of
all Secured Obligations, shall be binding upon the Pledgor, its successors and
assigns and shall inure, together with the rights and remedies of the Secured
Party hereunder, to the benefit of the Secured Party and each of its successors,
transferees, and assigns.
17. Governing Law; Terms. This Pledge Agreement shall be governed by and
--------------------
construed in accordance with the laws of the State of Illinois not including
principles of conflict or laws, except as required by mandatory provisions of
law and except to the extent that the validity or perfection of the security
interest granted to the Secured Party hereunder or the enforcement of any
remedies granted to the Secured Party hereunder in respect of any particular
Pledged Collateral are mandatorily governed by the laws of a jurisdiction other
than the State of Illinois. Unless otherwise defined herein or in the Credit
Agreement, terms defined in Articles 8 and 9 of the UCC are used herein as
therein defined.
18. Attorney-in-Fact. The Pledgor hereby appoints the Secured Party, and
----------------
any officer or agent of Secured Party, as the Pledgor's attorney-in-fact, with
full power of substitution and full authority in the place and stead of Pledgor
and in the name of Pledgor or otherwise, from and after the occurrence and
during the continuance of an Event of Default or any act, condition, or event
which, with the giving of notice, lapse of time, or both would constitute an
Event of Default, for the purpose of carrying out the provisions of this Pledge
Agreement and taking any action and executing any instrument that the Secured
Party may deem necessary or advisable to accomplish the purposes hereof. The
foregoing power of attorney is coupled with an interest and shall be irrevocable
prior to indefeasible payment in full of the Secured Obligations.
B-6
<PAGE>
19. Rights of Secured Party. The Secured Party may at any time, before or
-----------------------
after maturity of any of the Secured Obligations and without notice or demand of
any kind: (a) transfer any of the Pledged Collateral into its name or that of
its nominee with or without disclosing that such Pledged Collateral is subject
to a security interest under this Pledge Agreement; (b) notify obligors on or
issuers of any Pledged Collateral to make payment or delivery to the Secured
Party of any amounts, securities or rights due or distributable thereon or
notices given in connection therewith; (c) in Pledgor's name or otherwise,
enforce collection of any Pledged Collateral by suit or otherwise, or surrender,
release or exchange all or any part of it, or compromise, extend or renew for
any period any obligation provided by the Pledged Collateral; (d) receive
proceeds of the Pledged Collateral and exercise all rights as a holder of the
Pledged Collateral, subject to the terms of this Pledge Agreement; (e) hold any
increase or profits (including money) received from the Pledged Collateral as
additional security for the Secured Obligations; and (f) sign or endorse
Pledgor's name on the Pledged Collateral.
20. Acts Not Affecting Obligations. None of the following shall affect
------------------------------
the liabilities of the Pledgor under this Pledge Agreement, or the Secured
Obligations, or the rights of the Secured Party with respect to the Pledged
Collateral: (a) acceptance or retention by the Secured Party of other property
or interests as security for the Secured Obligations, or for the liability of
any person other than the Pledgor with respect to the Secured Obligations; (b)
the release of all or any of the Pledged Collateral or other security for any of
the Secured Obligations; (c) any release, extension, renewal, modification, or
compromise of any of the Secured Obligations or the liability of any obligor
thereon; or (d) failure by the Secured Party to resort to other security or any
person liable for any of the Secured Obligations before resorting to the Pledged
Collateral.
21. Successors and Assigns. This Pledge Agreement shall be binding upon
----------------------
Pledgor and its successors and assigns and shall inure to the benefit of the
Secured Party and its successors and assigns.
22. Interpretation; Partial Invalidity. Whenever possible, each provision
----------------------------------
of this Pledge Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Pledge
Agreement shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge Agreement.
23. Headings. The Section headings used in this Pledge Agreement are for
--------
convenience of reference only and shall not define or limit the provisions of
this Pledge Agreement.
24. Counterparts. This Pledge Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts of this Pledge Agreement taken together shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the Pledgor and the Secured Party have caused this
Pledge Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
Attest:
________________________________
Title:______________________________
B-7
<PAGE>
SCHEDULE I
----------
DESCRIPTION OF PLEDGED COLLATERAL
---------------------------------
___________ shares of common stock of Equality Bancorp, Inc.
B-8
<PAGE>
EXHIBIT 10.3
------------
EQUALITY BANCORP, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
------------------------------------
<PAGE>
CERTIFICATE
-----------
I, Patricia R. Todd, Secretary of Equality Bancorp, Inc., hereby
certify that the attached document is a correct copy of the EQUALITY BANCORP,
INC. 1997 STOCK OPTION AND INCENTIVE PLAN.
Dated this ____ day of ____________________, 1997.
____________________________________
Secretary as Aforesaid
(Corporate Seal)
<PAGE>
EQUALITY BANCORP, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
------------------------------------
SECTION 1. PURPOSE.
- --------------------
The purpose of the Equality Bancorp, Inc. 1997 Stock Option and Incentive
Plan (the "Plan") is to benefit Equality Bancorp, Inc. (the "Company") and its
Subsidiaries (as defined in Section 2) by recognizing the contributions made to
the Company by officers and other key employees (including Directors of the
Company who are also employees) of the Company and its Subsidiaries, to provide
such persons with additional incentive to devote themselves to the future
success of the Company, and to improve the ability of the Company to attract,
retain and motivate individuals, by providing such persons with a favorable
opportunity to acquire or increase their proprietary interest in the Company
over a period of years through receipt of options to acquire common stock of the
Company. In addition, the Plan is intended as an additional incentive to
members of the Board of Directors of the Company who are not employees of the
Company ("Non-Employee Directors") to serve on the Board of Directors of the
Company (the "Board") and to devote themselves to the future success of the
Company by providing them with a favorable opportunity to acquire or increase
their proprietary interest in the Company through receipt of options to acquire
common stock of the Company.
The Company may grant stock options that constitute "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or stock options that do not constitute ISOs
("NSOs") (ISOs and NSOs being hereinafter collectively referred to as
"Options").
SECTION 2. ELIGIBILITY.
- ------------------------
Non-Employee Directors shall participate in the Plan only in accordance
with the provisions of Section 5 of the Plan. The Committee (as defined in
Section 3) shall initially, and from time to time thereafter, select those
officers and other key employees (including Directors of the Company who are
also employees) (collectively referred to herein as "Key Employees") of the
Company or any other entity of which the Company is the direct or indirect
beneficial owner of not less than fifty percent (50%) of all issued and
outstanding equity interests ("Subsidiaries"), to participate in the Plan on the
basis of the special importance of their services in the management, development
and operations of the Company or its Subsidiaries (each such Director and Key
Employee receiving Options granted under the Plan is referred to herein as an
"Optionee").
SECTION 3. ADMINISTRATION.
- ---------------------------
3.1. The Committee. The Plan shall be administered by the Compensation
-------------
Committee of the Board (the "Committee"). The Committee shall be comprised of
two (2) or more members of the Board who are "non-employee directors" within the
meaning of Rule 16b-3 promulgated
<PAGE>
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), or any
successor rule or regulation.
3.2. Authority of the Committee. No person, other than members of the
--------------------------
Committee, shall have any authority concerning decisions regarding the Plan.
Subject to the express provisions of this Plan, including but not limited to
Section 5, the Committee shall have sole discretion concerning all matters
relating to the Plan and Options granted hereunder. The Committee, in its sole
discretion, shall determine the Key Employees of the Company and its
Subsidiaries to whom, and the time or times at which Options will be granted,
the number of shares to be subject to each Option, the expiration date of each
Option, the time or times within which the Option may be exercised, the
cancellation of the Option (with the consent of the holder thereof) and the
other terms and conditions of the grant of the Option. The terms and conditions
of the Options need not be the same with respect to each Optionee or with
respect to each Option.
The Committee may, subject to the provisions of the Plan, establish such
rules and regulations as it deems necessary or advisable for the proper
administration of the Plan, and may make determinations and may take such other
action in connection with or in relation to the Plan as it deems necessary or
advisable. Each determination or other action made or taken pursuant to the
Plan, including interpretation of the Plan and the specific terms and conditions
of the Options granted hereunder by the Committee shall be final and conclusive
for all purposes and upon all persons including, but without limitation, the
Company, its Subsidiaries, the Committee, the Board, officers and the affected
employees of the Company and/or its Subsidiaries and their respective successors
in interest.
No member of the Committee shall, in the absence of bad faith, be liable
for any act or omission with respect to service on the Committee. Service on
the Committee shall constitute service as a Director of the Company so that
members of the Committee shall be entitled to indemnification pursuant to the
Company's Certificate of Incorporation and By-Laws.
SECTION 4. SHARES OF COMMON STOCK SUBJECT TO PLAN.
- ---------------------------------------------------
4.1. The total number of shares of common stock, par value $.01 per share,
of the Company (the "Common Stock"), that may be issued and sold under the Plan
initially shall be ____,000. The total number of shares of Common Stock that
may be available for Options under the Plan shall be adjusted on January 1 of
each calendar year, within the Applicable Period (as defined below), so that the
total number of shares of Common Stock that may be issued and sold under the
Plan as of January 1 of each calendar year within the Applicable Period shall be
equal to ten percent (10%) of the outstanding shares of Common Stock of the
Company on such date, less the number of shares of Common Stock that may be
issued and sold under the Equality Savings and Loan Association 1993 Stock
Option and Incentive Plan; provided, however, that no such adjustment shall
reduce the total number of shares of Common Stock that may be issued and sold
under the Plan below ___,000. For purposes of the preceding sentence,
Applicable Period shall be the ten-year period commencing on _______, 1997 and
ending on ________, 2007. The aforementioned total number of shares of Common
Stock shall be adjusted in accordance with the provisions of Section 4.2 hereof.
The number of shares of Common Stock delivered by any such Optionee or withheld
by the Company on behalf of any such Optionee pursuant to Section 8.2 or 8.3 of
the Plan shall once again be available for issuance pursuant to subsequent
Options. Any
-3-
<PAGE>
shares of Common Stock subject to issuance upon exercise of Options but which
are not issued because of a surrender (other than pursuant to Sections 8.2 or
8.3 of the Plan), forfeiture, expiration, termination or cancellation of any
such Option, to the extent consistent with applicable law, rules and
regulations, shall once again be available for issuance pursuant to subsequent
Options.
4.2. The number of shares of Common Stock subject to the Plan and to
Options granted under the Plan shall be adjusted as follows: (a) in the event
that the number of outstanding shares of Common Stock is changed by any stock
dividend, stock split or combination of shares, the number of shares subject to
the Plan and to Options previously granted thereunder shall be proportionately
adjusted; (b) in the event of any merger, consolidation or reorganization of the
Company with any other corporation or corporations, there shall be substituted
on an equitable basis as determined by the Board of Directors, in its sole
discretion, for each share of Common Stock then subject to the Plan and for each
share of Common Stock then subject to an Option granted under the Plan, the
number and kind of shares of stock, other securities, cash or other property to
which the holders of Common Stock of the Company are entitled pursuant to the
transaction; and (c) in the event of any other change in the capitalization of
the Company, the Committee, in its sole discretion, shall provide for an
equitable adjustment in the number of shares of Common Stock then subject to the
Plan and to each share of Common Stock then subject to an Option granted under
the Plan. In the event of any such adjustment, the exercise price per share
shall be proportionately adjusted.
SECTION 5. GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS.
- -------------------------------------------------------
5.1. Grants. Each individual who is a Non-Employee Director on the
------
effective date of the Plan shall be granted automatically a NSO to purchase
_____ shares of Common Stock on the effective date of the Plan. Non-Employee
Directors shall also be eligible to receive discretionary grants of NSOs as
determined by the Committee from time to time.
5.2. Exercise Price and Period. The per share Option exercise price of
-------------------------
each such NSO granted to a Non-Employee Director shall be the "Fair Market
Value," on the date on which the Option is granted, of the Common Stock subject
to the Option. "Fair Market Value" shall mean the average of the closing price
for Company Stock as reported on The Nasdaq Stock Market for the 20 business
days ending on the third business day preceding the date with respect to which
such Company Stock is being valued, for which trades in Company Stock were
reported on The Nasdaq Stock Market. If no trades occur on a certain day, the
closing price for the last preceding day on which trading occurred will be used
as the closing price for that day. In the event that Company Stock is not
readily tradable on an established securities market, the fair market value of
Company Stock shall be determined by an independent appraiser meeting
requirements similar to the requirements of the treasury regulations promulgated
under Section 170(a)(1) of the Code.
Each such NSO shall become exercisable with respect to one-fifth of the
total number of shares of Common Stock subject to the Option on the date twelve
months after the date of its grant and with respect to an additional one-fifth
of the total number of shares of Common Stock subject to the Option at the end
of each twelve-month period thereafter during the succeeding four years. Each
NSO shall expire on the date ten years after the date of grant.
-4-
<PAGE>
In addition to the terms and conditions set forth in this Section 5, NSOs
also shall be subject to such terms and conditions applicable to ISOs according
to Sections 6.2, 6.3, 6.4 and 6.6, provided, however, such additional terms and
-------- -------
conditions are not inconsistent with the terms and conditions set forth in
Section 5 of this Plan.
SECTION 6. GRANTS OF OPTIONS TO EMPLOYEES.
- -------------------------------------------
6.1. Grant. Subject to the terms of the Plan, the Committee may from time
-----
to time grant Options, which may be ISOs or NSOs, to Key Employees of the
Company or any of its Subsidiaries. Unless otherwise expressly provided at the
time of the grant, Options granted under the Plan to Key Employees will be ISOs.
6.2. Option Agreement. Each Option shall be evidenced by a written Option
----------------
Agreement specifying the type of Option granted, the Option exercise price, the
terms for payment of the exercise price, the expiration date of the Option, the
number of shares of Common Stock to be subject to each Option and such other
terms and conditions established by the Committee, in its sole discretion, not
inconsistent with the Plan.
6.3. Expiration. Except to the extent otherwise provided in or pursuant
----------
to Section 7, each Option shall expire, and all rights to purchase shares of
Common Stock shall expire, on the tenth anniversary of the date on which the
Option was granted.
6.4. Exercise Period. Except to the extent otherwise provided in or
---------------
pursuant to Section 7 or in the proviso to this sentence, Options shall become
exercisable pursuant to the following schedule: with respect to one-fifth of the
total number of shares of Common Stock subject to Option on the date twelve
months after the date of its grant and with respect to an additional one-fifth
of the total number of shares of Common Stock subject to the Option at the end
of each twelve-month period thereafter during the succeeding four years;
provided, however, that the Committee, in its sole discretion, shall have the
authority to shorten or lengthen the exercise schedule with respect to any or
all Options, or any part thereof, granted to Key Employees under the Plan,
subject to applicable law.
6.5. Required Terms and Conditions of ISOs. Each ISO granted to a Key
--------------------------------------
Employee shall be in such form and subject to such restrictions and other terms
and conditions as the Committee may determine, in its sole discretion, at the
time of grant, subject to the general provisions of the Plan, the applicable
Option Agreement, and the following specific rules:
(a) Except as provided in Section 6.5(d), the per share exercise
price of each ISO shall be the Fair Market Value of the shares of Common
Stock on the date such ISO is granted.
(b) The aggregate Fair Market Value (determined with respect to each
ISO at the time such Option is granted) of the shares of Common Stock with
respect to which ISOs are exercisable for the first time by an individual
during any calendar year (under all incentive stock option plans of the
Company and its parent and subsidiary corporations) shall not exceed
$100,000. If the aggregate Fair Market Value (determined at the time of
grant) of the Common Stock subject to an Option,
-5-
<PAGE>
which first becomes exercisable in any calendar year exceeds the limitation
of this Section 6.5(b), so much of the Option that does not exceed the
applicable dollar limit shall be an ISO and the remainder shall be a NSO;
but in all other respects, the original Option Agreement shall remain in
full force and effect.
(c) As used in this Section 6, the words "parent" and "subsidiary"
shall have the meanings given to them in Section 424(e) and 424(f) of the
Code.
(d) Notwithstanding anything herein to the contrary, if an ISO is
granted to an individual who owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporations, within the meaning of
Section 422(b)(6) of the Code, (i) the purchase price of each share of
Common Stock subject to the ISO shall be not less than one hundred ten
percent (110%) of the Fair Market Value of the Common Stock on the date the
ISO is granted, and (ii) the ISO shall expire and all rights to purchase
shares thereunder shall cease no later than the fifth anniversary of the
date the ISO was granted.
(e) No ISOs may be granted under the Plan after _______, 2007.
6.6. Required Terms and Conditions of NSOs. Each NSO granted to Key
-------------------------------------
Employees or Non-employee Directors shall be in such form and subject to such
restrictions and other terms and conditions as the Committee may determine, in
its sole discretion, at the time of grant, subject to the general provisions of
the Plan, the applicable Option Agreement, and the following specific rule: the
per share exercise price of each NSO shall be the Fair Market Value of the
shares of Common Stock on the date the NSO is granted; provided however, that in
no event may the exercise price be less than the par value of the shares of
Common Stock subject to such NSO.
SECTION 7. EFFECT OF TERMINATION OF EMPLOYMENT.
- ------------------------------------------------
7.1. Termination Generally. Except as provided in Sections 7.2 and 7.3, or
---------------------
by the Committee, in its sole discretion, any Option not yet exercisable shall
terminate on the date of the Optionee's termination of employment with the
Company and its Subsidiaries or termination of service on the Board for any
reason. An Optionee's transfer of employment from the Company to a Subsidiary,
or from a Subsidiary to the Company, or from a Subsidiary to another Subsidiary,
shall not constitute a termination of employment for purposes of the Plan.
Options granted under the Plan shall not be affected by any change of duties in
connection with the employment of the Optionee or by leave of absence authorized
by the Company or a Subsidiary.
7.2. Death and Disability. In the event of an Optionee's death or
--------------------
Disability (as defined below) during employment with the Company or any of its
Subsidiaries or during service on the Board, all Options held by the Optionee
shall become fully exercisable on such date of death or Disability. Each of the
Options held by such an Optionee shall expire on the earlier of: (a) the first
anniversary of the date of the Optionee's death or Disability; or (b) the date
that such Option expires in accordance with its terms. For purposes of this
Section 7.2, "Disability" shall mean the inability of an individual to discharge
current job responsibilities by reason of any medical determinable physical or
mental impairment which is expected to result in death or which has lasted
-6-
<PAGE>
or can be expected to last for a continuous period of not less than twelve (12)
months. The Committee, in its sole discretion, shall determine the date of any
Disability.
7.3. Retirement of Employees.
-----------------------
(a) Non-Employee Directors. In the event the service of a Non-
----------------------
Employee Director on the Board shall be terminated by reason of the
retirement of such Non-Employee Director of the Company in accordance with
the Company's retirement policy for Directors, any Options granted to such
Non-Employee Director shall continue to vest and remain exercisable
pursuant to Section 5, in the same manner and to the same extent as if such
Director had continued his or her service on the Board during such period.
(b) Key Employees Who Are Also Directors. Section 7.3(a) shall be
------------------------------------
applicable to Options held by any Key Employee who is also a Director in
the event the employment of such Key Employee with the Company and/or its
Subsidiaries shall be terminated by reason of Employee Retirement, so long
as the service of such Key Employee on the Board continues after such
Employee Retirement.
SECTION 8. EXERCISE OF OPTIONS.
- --------------------------------
8.1. Notice. A person entitled to exercise an Option may do so by delivery
------
of a written notice to that effect specifying the number of shares of Common
Stock with respect to which the Option is being exercised and any other
information the Committee may prescribe. The notice shall be accompanied by
payment as described in Section 8.2. The notice of exercise shall be accompanied
by the Optionee's copy of the writing or writings evidencing the grant of the
Option. All notices or requests provided for herein shall be delivered to the
Secretary of the Company.
8.2. Exercise Price. Except as otherwise provided in the Plan or in any
--------------
Option Agreement, the Optionee shall pay the purchase price of the shares of
Common Stock upon exercise of any Option: (a) in cash; (b) in cash received from
a broker-dealer to whom the Optionee has submitted an exercise notice consisting
of a fully endorsed Option (however, in the case of an Optionee subject to
Section 16 of the 1934 Act, this payment option shall only be available to the
extent such insider complies with Regulation T issued by the Federal Reserve
Board); (c) by delivering shares of Common Stock having an aggregate Fair Market
Value on the date of exercise equal to the Option exercise price; (d) by
directing the Company to withhold such number of shares of Common Stock
otherwise issuable upon exercise of such Option having an aggregate Fair Market
Value on the date of exercise equal to the Option exercise price; (e) in the
case of a Key Employee or Non-Employee Director, by such other medium of payment
as the Committee, in its discretion, shall authorize at the time of grant; or
(f) by any combination of (a), (b), (c), (d) and (e). In the case of an election
pursuant to (a) or (b) above, cash shall mean cash or a check issued by a
federally insured bank or savings and loan, and made payable to the Company. In
the case of payment pursuant to (b), (c) or (d) above, the Optionee's election
must be made on or prior to the date of exercise and shall be irrevocable. In
lieu of a separate election governing each exercise of an Option, an Optionee
may file a blanket election with the Committee that shall govern all future
exercises of Options until revoked by the Optionee. The Company shall issue, in
the name of the Optionee, stock certificates representing the total number of
shares of Common Stock issuable pursuant to the exercise of any Option as soon
as reasonably practicable after such exercise,
-7-
<PAGE>
provided that any shares of Common Stock purchased by an Optionee through a
broker-dealer pursuant to clause (b) above shall be delivered to such broker-
dealer in accordance with 12 C.F.R. (S) 220.3(e)(4) or other applicable
provision of law.
8.3. Taxes Generally. At the time of the exercise of any Option, as a
---------------
condition of the exercise of such Option, the Company may require the Optionee
to pay the Company an amount equal to the amount of the tax the Company or any
Subsidiary may be required to withhold to obtain a deduction for federal and
state income tax purposes as a result of the exercise of such Option by the
Optionee or to comply with applicable law.
8.4. Payment of Taxes. At any time when an Optionee is required to pay an
----------------
amount required to be withheld under applicable income tax or other laws in
connection with the exercise of an Option, the Optionee may satisfy this
obligation in whole or in part by: (a) directing the Company to withhold such
number of shares of Common Stock otherwise issuable upon exercise of such Option
having an aggregate Fair Market Value on the date of exercise equal to the
amount of tax required to be withheld; or (b) delivering shares of Common Stock
of the Company having an aggregate Fair Market Value equal to the amount
required to be withheld. In the case of payment of taxes pursuant to (a) or (b)
above, the Optionee's election must be made on or prior to the date of exercise
and shall be irrevocable. The Committee may disapprove any election or delivery
or may suspend or terminate the right to make elections or deliveries. In lieu
of a separate election governing each exercise of an Option, an Optionee may
file a blanket election with the Committee which shall govern all future
exercises of Options until revoked by the Optionee.
SECTION 9. TRANSFERABILITY OF OPTIONS.
- ---------------------------------------
No Option granted pursuant to the Plan shall be transferable otherwise than
by will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code. Notwithstanding the preceding
sentence, an Option Agreement for NSOs may provide that the Optionee, at any
time prior to his death, may assign all or any portion of an Option granted to
him to (i) his spouse or lineal descendant, (ii) the trustee of a trust for the
primary benefit of his spouse or lineal descendant, (iii) a partnership of which
his spouse and lineal descendants are the only partners, or (iv) a tax exempt
organization as described in Code Section 501(c)(3). In such event, the spouse,
lineal descendant, trustee, partnership or tax exempt organization will be
entitled to all of the rights of the Optionee with respect to the assigned
portion of such Option, and such portion of the Option will continue to be
subject to all of the terms, conditions and restrictions applicable to the
Option, as set forth herein and in the related Option Agreement immediately
prior to the effective date of the assignment. Any such assignment will be
permitted only if: (i) the Optionee does not receive any consideration
therefore; and (ii) the assignment is expressly permitted by the applicable
Agreement as approved by the Committee. Any such assignment shall be evidenced
by an appropriate written document executed by the Optionee, and a copy thereof
shall be delivered to the Company on or prior to the effective date of the
assignment.
SECTION 10. RIGHTS AS STOCKHOLDER.
- -----------------------------------
An Optionee or a transferee of an Optionee pursuant to Section 9 shall have
no rights as a stockholder with respect to any Common Stock covered by an Option
or receivable upon the
-8-
<PAGE>
exercise of an Option until the Optionee or transferee shall have become the
holder of record of such Common Stock, and no adjustments shall be made for
dividends in cash or other property or other distributions or rights in respect
to such Common Stock for which the record date is prior to the date on which the
Optionee shall have in fact become the holder of record of the shares of Common
Stock acquired pursuant to the Option.
SECTION 11. POSTPONEMENT OF EXERCISE.
- --------------------------------------
The Committee may postpone any exercise of an Option for such time as the
Committee in its sole discretion may deem necessary in order to permit the
Company (a) to effect, amend or maintain any necessary registration of the Plan
or the shares of Common Stock issuable upon the exercise of an Option under the
Securities Act of 1933, as amended, or the securities laws of any applicable
jurisdiction, (b) to permit any action to be taken in order to (i) list such
shares of Common Stock on a stock exchange if shares of Common Stock are then
listed on such exchange or (ii) comply with restrictions or regulations incident
to the maintenance of a public market for its shares of Common Stock, including
any rules or regulations of any stock exchange on which the shares of Common
Stock are listed, or (c) to determine that such shares of Common Stock and the
Plan are exempt from such registration or that no action of the kind referred to
in (b)(ii) above needs to be taken; and the Company shall not be obligated by
virtue of any terms and conditions of any Option or any provision of the Plan to
recognize the exercise of an Option or to sell or issue shares of Common Stock
in violation of the Securities Act of 1933 or the law of any government having
jurisdiction thereof. Any such postponement shall not extend the term of an
Option and neither the Company nor its directors or officers shall have any
obligation or liability to an Optionee, to the Optionee's successor or to any
other person with respect to any shares of Common Stock as to which the Option
shall lapse because of such postponement.
SECTION 12. TRUST AGREEMENT.
- -----------------------------
The Company may enter into a trust agreement ("Trust Agreement") whereby
the Company shall agree to contribute to a trust ("Trust") for the purpose of
accumulating shares of Common Stock to assist the Company in fulfilling its
obligations to Optionees hereunder. Such Trust Agreement shall be substantially
in the form of the model trust agreement set forth in Internal Revenue Service
Revenue Procedure 92-64, or any subsequent Internal Revenue Service Revenue
Procedure, and shall include provisions required in such model trust agreement
that all assets of the Trust shall be subject to the creditors of the Company in
the event of insolvency.
SECTION 13. TERMINATION OR AMENDMENT OF PLAN.
- ----------------------------------------------
The Board or the Committee may terminate, suspend, or amend the Plan, in
whole or in part, from time to time, without the approval of the stockholders of
the Company to the extent allowed by law.
The Committee may correct any defect or supply an omission or reconcile any
inconsistency in the Plan or in any Option granted hereunder in the manner and
to the extent it shall deem desirable, in its sole discretion, to effectuate the
Plan.
-9-
<PAGE>
No amendment or termination of the Plan shall in any manner affect any
Option theretofore granted without the consent of the Optionee, except that the
Committee may amend the Plan in a manner that does affect Options theretofore
granted upon a finding by the Committee that such amendment is in the best
interest of holders of outstanding Options affected thereby.
This Plan is intended to comply with all applicable requirements of Rule
16b-3 or its successors under the 1934 Act, insofar as participants subject to
Section 16 of the 1934 Act are concerned. To the extent any provision of the
Plan does not so comply, the provision shall, to the extent permitted by law and
deemed advisable by the Committee, be deemed null and void with respect to such
participants.
SECTION 14. EFFECTIVE DATE.
- ----------------------------
The Plan shall be effective upon the date of approval of the Plan by an
affirmative vote of a majority of the shares of the voting stock of the Company
entitled to be voted by the holders of stock represented at a duly held
stockholders' meeting, within 12 months after the date of adoption of the Plan
by the Board.
-10-
<PAGE>
EXHIBIT 10.4
------------
EQUALITY BANCORP, INC.
MANAGEMENT DEVELOPMENT AND RECOGNITION PLAN
-------------------------------------------
<PAGE>
EQUALITY BANCORP, INC.
MANAGEMENT DEVELOPMENT AND RECOGNITION PLAN
-------------------------------------------
ARTICLE I
ESTABLISHMENT OF THE PLAN
-------------------------
1.01. Equality Bancorp, Inc. (the "Company") hereby establishes the
Management Development and Recognition Plan (the "Plan") upon the terms and
conditions hereinafter stated in this Management Development and Recognition
Plan (the "Plan").
ARTICLE II
PURPOSE OF THE PLAN
-------------------
2.01. The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing such key employees with a proprietary
interest in the Company as compensation for their contributions to the Company
and its Subsidiaries and as an incentive to make such contributions in the
future.
ARTICLE III
DEFINITIONS
-----------
The following words and phrases, when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Whenever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01. "Association" means Equality Savings and Loan Association, F.A., a
Federally-chartered savings association, and its successors and assigns. The
Association, with the consent of the Board, has agreed to participate in this
Plan.
3.02. "Beneficiary" means the person or persons designated by a Recipient
to receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, the Recipient's estate.
3.03. "Board" means the Board of Directors of the Company.
3.04. "Committee" means the Compensation Committee of the Board.
-2-
<PAGE>
3.05. "Common Stock" means shares of the common stock, $.01 par value per
share, of the Company.
3.06. "Company" means Equality Bancorp, Inc., a Savings and Loan Holding
Company registered under Section 10(b) of the Home Owners' Loan Act that owns
100% of the Capital Stock of the Association.
3.07. "Director" means a member of the Board of Directors of the Company
or the Association.
3.08. "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of a Recipient to perform the work
customarily assigned to him. A medical doctor selected or approved by the Board
must advise the Committee that it is either not possible to determine when such
Disability will terminate or that it appears probable that such Disability will
be permanent during the remainder of the Recipient's lifetime.
3.09. "Effective Date" means the date stockholders of the Company approve
the Plan.
3.10. "Employee" means any person who is currently employed by the
Company, the Association or a Subsidiary, including officers.
3.11 "Non-Employee Director" means a member of the Board of Directors of
the Company or the Association who is not an Employee.
3.12. "Plan Shares" means shares of Common Stock issued or issuable to a
Recipient pursuant to the Plan.
3.13. "Plan Share Award" means a right granted under this Plan to earn
Plan Shares.
3.14. "Recipient" means an Employee or Non-Employee Director who receives
a Plan Share Award under the Plan.
3.15. "Retirement" means retirement at the normal or early retirement date
as set forth in the Association's Employee Stock Ownership Plan.
3.16. "Subsidiary" means any other entity of which the Company is the
direct or indirect beneficial owner of not less than fifty percent (50%) of all
issued and outstanding equity interests. A Subsidiary may, with the consent of
the Board, agree to participate in this Plan.
-3-
<PAGE>
ARTICLE IV
ADMINISTRATION OF THE PLAN
--------------------------
4.01. Role of the Committee. The Plan shall be administered and
---------------------
interpreted by the Committee, which shall be appointed by the Board. The
Committee shall be comprised of two (2) or more members of the Board who are
"non-employee directors" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934. The Committee shall have all of the powers allocated to
it in this and other Sections of the Plan. The Committee shall have the power to
interpret and construe the terms and provisions of the Plan or of any Plan Share
Award granted hereunder, and all such interpretations and constructions by the
Committee shall be final and binding. The Committee, in its sole discretion,
shall determine the Employees and Directors of the Company and its Subsidiaries
to whom, and the time or times at which Plan Share Awards will be granted, the
number of Plan Share Awards, the expiration date of each Plan Share Award, the
cancellation of the Plan Share Award (with the consent of the holder thereof)
and the other terms and conditions of the grant of the Plan Share Award. The
terms and conditions of the Plan Share Awards need not be the same with respect
to each Recipient or with respect to each Plan Share Award.
The Committee shall act by vote or written consent of a majority of
its members. Subject to the express provisions and limitations of the Plan, the
Committee may adopt such rules, regulations and procedures as it deems
appropriate for the conduct of its affairs. The Committee shall report its
actions and decisions with respect to the Plan to the Board at appropriate
times, but in no event less than one time per calendar year.
4.02. Role of the Board. The Board shall appoint or approve members of
-----------------
the Committee and any trustee or the trustees of a Trust established pursuant to
Section 7.07. The Board may, in its discretion, from time to time, remove
members from or add members to the Committee and may remove, replace or add
Trustees. The Board may not revoke any Plan Share Award already made without
the consent of the Recipient.
4.03. Limitation on Liability. No member of the Board or the Committee
-----------------------
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards it grants. If a member of the
Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Company and
its Subsidiaries shall indemnify such member against expense (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such member in connection with such action, suit or
proceeding if the member acted in good faith and in the manner he reasonably
believed to be in the best interests of the Company and its Subsidiaries and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
-4-
<PAGE>
ARTICLE V
ELIGIBILITY AND ALLOCATIONS
---------------------------
5.01. Eligibility. Officers and key management Employees of the Company,
-----------
the Association and its Subsidiaries are eligible to receive Plan Share Awards.
Non-Employee Directors also may receive Plan Share Awards pursuant to Article
VIII hereof and discretionary grants made by the Committee from time to time.
5.02. Allocations. The number of Shares covered by Plan Share Awards may
-----------
not exceed, prior to the first anniversary of the Effective Time of the
Conversion and Reorganization (as defined in the Plan of Conversion and
Reorganization of First Missouri Financial, M.H.C. and Equality Savings and Loan
Association, F.A., as first adopted on May 16, 1997 (the "Plan of Conversion and
Reorganization")), 3% of the total shares of Common Stock issued and sold in the
Conversion and Reorganization (excluding so-called "Exchange Shares" as defined
in the Plan of Conversion and Reorganization). In no event shall any Awards be
made which will violate the Certificate of Incorporation or Bylaws of the
Company, the Federal Stock Charter or Bylaws of the Association or Plan of
Conversion and Reorganization, or any applicable federal or state law or
regulation. In the event Plan Shares are forfeited for any reason, the
Committee may determine which of the Employees will be granted additional Plan
Shares to be awarded from forfeited Plan Shares. In selecting those Employees
to whom Plan Share Awards will be granted and the number of Shares covered by
such Awards, the Committee shall consider the position and responsibilities of
the eligible Employees, the value of their services to the Company and the
Association and its Subsidiaries, and any other factors the Committee may deem
relevant, including the recommendations of the Chairman of the Board.
5.03. Form of Allocation. As promptly as practicable after a
------------------
determination is made pursuant to Section 5.02 that a Plan Share Award is to be
issued, the Committee shall notify the Recipient in writing of the grant of the
Award, the number of Plan Shares covered by the Award and the terms upon which
the Plan Shares subject to the Award may be earned. The date on which the
Committee so notifies the Recipient shall be considered the date of grant of the
Plan Share Award. The Committee shall maintain records as to all grants of Plan
Share Awards under the Plan.
5.04. Allocations Not Required. Notwithstanding anything to the contrary
------------------------
in Sections 5.01 and 5.02, no Employee or Director shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards being at the
total discretion of the Committee, nor shall the salaried Employees as a group
have such a right.
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<PAGE>
ARTICLE VI
EARNING AND DISTRIBUTION OF PLAN SHARES
---------------------------------------
VOTING RIGHTS
-------------
6.01. Earning Plan Shares: Forfeitures. Unless the Committee shall
--------------------------------
specifically state to the contrary at the time a Plan Share Award is granted,
Plan Shares subject to an Award shall be earned by a Recipient in five equal
annual installments over the first five years after the date of grant, if the
Employee remains employed with the Company or a Subsidiary continuously
throughout such period, provided, however, that the Committee may provide for a
-------- -------
less rapid earnings rate than that set forth herein for all Awards or for any
given Award. If the employment of a Recipient is terminated prior to the fifth
anniversary (or such later date as the Committee shall determine) of the date of
grant of an Award for any reason (except as specifically provided in subsections
(a) and (b) below), the Recipient shall forfeit the right to earn any shares
subject to the Award which have not theretofore been earned. No fractional
shares shall be issued.
(a) Exception for Terminations Due to Death or Disability.
-----------------------------------------------------
Notwithstanding the general rule contained in this Section, Plan Shares
subject to a Plan Share Award held by a Recipient whose employment with the
Company or a Subsidiary terminates due to Death or Disability, or any part
of such Award that has not theretofore been earned, shall be deemed earned
as of the Recipient's last day of employment with the Company or a
Subsidiary.
(b) Revocation for Misconduct. Notwithstanding anything herein to the
-------------------------
contrary, the Board may, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded
under this Plan, to the extent Plan Shares have not been delivered
thereunder to the Recipient, whether or not yet earned, in the case of an
Employee or Director who is discharged from the Company or a Subsidiary for
cause (as hereinafter defined), or who is discovered after termination of
employment to have engaged in conduct that would have justified termination
for cause. "Cause" is defined as personal dishonesty, willful misconduct,
any breach of fiduciary duty involving personal profit, intentional failure
to perform stated duties, or the willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) which
results in a material loss to the Company or its Subsidiaries, or final
cease and desist order.
6.02. Distribution of Plan Shares. Plan Shares shall be distributed to
---------------------------
the Recipient or his Beneficiary, as the case may be, as soon as is practicable
after a Plan Share Award is made. All Plan Shares shall be distributed in the
form of Common Stock. One share of Common Stock shall be given for each Plan
Share earned and payable.
6.04. Voting and Dividend Rights. No Recipient shall have any voting
--------------------------
or dividend rights or other rights of a stockholder with respect to any Plan
Shares covered by a Plan
-6-
<PAGE>
Share Award prior to the time said Plan Shares are actually distributed to him.
When cash dividends are paid with respect to Plan Shares allocated to a
Recipient, such Recipient shall be entitled to receive an amount equal to such
cash dividend. Stock dividends with respect to shares allocated to a Recipient
shall be distributed when the Plan Shares with respect to which they are
declared are so distributable.
ARTICLE VII
MISCELLANEOUS
-------------
7.01. Amendment and Termination of Plan. The Board may, by resolution,
---------------------------------
at any time, amend or terminate the Plan.
7.02. Nontransferable. Plan Share Awards and rights to Plan Shares
---------------
shall not be transferable by a Recipient and, during the lifetime of the
Recipient, Plan Shares may only be earned by and paid to the Recipient who was
notified in writing of the Award by the Committee pursuant to Section 5.03. No
Recipient or Beneficiary shall have any right in or claim to any assets of the
Plan or Trust, nor shall the Company or any Subsidiary be subject to any claim
for benefits hereunder.
7.03. Employment Rights. Neither the Plan nor any grant of a Plan
-----------------
Share Award or Plan Shares hereunder nor any action taken by the Committee or
the Board in connection with the Plan shall create any right on the part of any
Employee to continue in the employ of the Company, the Association or a
Subsidiary.
7.04. Governing Law. The Plan shall be governed by the laws of the
-------------
State of Missouri.
7.05. Term of Plan. This Plan shall remain in effect until the earlier
------------
of: (1) termination by the Board of Directors; (2) the distribution to
Recipients, Beneficiaries, the Company or the Association of all assets of the
Trust; or (3) 21 years from the Effective Date. Termination of the Plan shall
not, unless expressly specified, affect any Plan Share Awards previously
granted, and such Awards shall remain valid and in effect until they have been
paid, or by their terms expire or are forfeited.
7.06. Expenses. All costs and expenses incurred in the operation and
--------
administration of this Plan shall be borne by the Company and its Subsidiaries.
7.07. Trust Agreement. Notwithstanding any other terms of this Plan,
---------------
the Company may enter into a trust agreement ("Trust Agreement") whereby the
Company shall agree to contribute to a trust ("Trust") for the purpose of
accumulating assets to assist the Company in fulfilling its obligations to
Recipients hereunder. Such Trust Agreement shall be substantially in the form
of the model trust agreement set forth in Internal Revenue
-7-
<PAGE>
Service Revenue Procedure 92-64, or any subsequent Internal Revenue Service
Revenue Procedure, and shall include provisions required in such model trust
agreement that all assets of the Trust shall be subject to the creditors of the
Company in the event of insolvency.
ARTICLE VIII
OUTSIDE DIRECTOR AWARDS
-----------------------
Each Non-Employee Director on the Effective Date shall be granted a Plan
Share Award equal to __________ shares, subject to availability, to vest in five
equal annual installments beginning with the first anniversary of the Effective
Date.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
all on this _____ day of ___________, 1997.
EQUALITY BANCORP, INC.
By:___________________________
ATTEST:
----------------------------
Its Secretary
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<PAGE>
EXHIBIT 10.5
SHW Draft
=========
6-26-97
=======
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is entered into as of
this ____ day of ______________, 1997 between Richard C. Fellhauer ("Executive")
and Equality Bancorp, Inc., a Delaware corporation (the "Company").
WHEREAS, Executive is currently employed by Equality Savings and Loan
Association, F.A. (the "Association"), a federally-chartered capital stock
savings association, as its President and Chief Executive Officer under the
employment agreement entered into between Executive, First Missouri Financial,
M.H.C. ("First Missouri"), the Association's mutual holding company, and the
Association dated as of March 1, 1996, (the "Prior Agreement"); and
WHEREAS, Executive is currently employed by First Missouri as its
President and Chief Executive Officer; and
WHEREAS, First Missouri and the Association adopted a Plan of
Conversion and Reorganization on May 16, 1997, as subsequently amended, whereby,
among other things, First Missouri will be converted to the stock form of
organization, the Association will change its corporate title to "Equality
Savings Bank" (the "Bank"), the Company will acquire 100 percent of the
outstanding shares of stock of the Bank, First Missouri will cease to exist and
the Company will issue shares of its common stock in an exchange offer to the
public stockholders of the Association and in a subscription and community
offering to eligible members of First Missouri and the general public; and
WHEREAS, Executive and the Company desire to enter into this Agreement
pertaining to the terms of the employment of Executive by the Company and the
continued employment of the Executive by the Bank and the security the Company
is providing to Executive with respect to his employment in lieu of the terms
and conditions of the Prior Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT OF EXECUTIVE. The Company hereby employs Executive, and
-----------------------
Executive hereby accepts employment with the Company, upon the terms and
conditions hereinafter set forth, for the term set forth in Section 2 of this
Agreement. Executive is employed by the Company to perform the duties of
President and Chief Executive Officer of the Company and the Bank, and the
Company shall cause the Bank to appoint Executive to such positions. The
services to be performed by the Executive shall include those normally performed
by the President and Chief Executive Officer of similar banking organizations
and as directed by the Board of Directors of the Company, which are not
inconsistent with the
<PAGE>
foregoing. It is the Company's present intention that the services to be
performed by Executive shall be substantially similar to the services presently
being performed by Executive. Executive agrees to devote his full business time
to the rendition of such services, subject to absences for customary vacations
and for temporary illnesses. The Company agrees that during the term of this
Agreement (a) it will not reduce the Executive's job titles, status or
responsibilities without the Executive's consent, (b) Executive shall not be
required, without his express written consent, to be based anywhere other than
within the St. Louis metropolitan area, except for reasonable business travel in
connection with the Company's business, (c) Executive shall not be assigned
duties materially inconsistent with his position, duties, responsibilities, and
status as President and Chief Executive Officer of the Company and the Bank, (d)
it will not change in any significant way the nature or scope of Executive's
authority or his overall working environment, (e) it will not terminate any
incentive compensation plan or arrangement, so that when considered in the
aggregate and with any substitute plan or plans, the incentive plan or
arrangement in which Executive is participating fail to provide him with
substantially the same level of benefits, (f) it will not materially reduce the
secretarial or other administrative support of the Executive, (g) it will not
materially reduce the number or seniority of other Company personnel who report
to Executive, or materially reduce the frequency with which, or the nature of
the matters with respect to which, such personnel are to report to Executive,
other than as part of a Company-wide reduction in staff; and (h) it will not
reduce or adversely change the salary, perquisites, benefits, contingent
benefits or vacation time which had theretofore been provided to the Executive.
During the term of this Agreement, Executive also shall serve as a director of
the Company (subject to being elected by shareholders), the Bank or any
subsidiaries thereof and shall receive as compensation therefor directors fees
in the same amount paid to other directors of the Company, the Bank or any
subsidiaries thereof, as the case may be, for similar services (which amount
shall be in addition to the compensation provided for under Section 3 hereof).
During the term of this Agreement, Executive also shall serve as an officer of
any subsidiaries of the Company or the Bank without any additional compensation.
Executive also may serve on boards of directors of charitable organizations and
other business corporations and may request personal time off to attend to
civic, charitable and personal investment activities, provided Executive
notifies the Board of Directors of the Company concerning such service and
activities, the Board of Directors does not disapprove them and such service and
activities do not interfere with the discharge of Executive's management duties.
2. TERM OF EMPLOYMENT. The term of this Agreement and of Executive's
------------------
employment hereunder shall be for an initial period commencing on the date
hereof (the "Commencement Date") and ending on the third anniversary of the date
hereof, unless terminated earlier as provided in Sections 5, 6 and 7 hereof.
Beginning on the date one year after the Commencement Date, and each anniversary
of the Commencement Date thereafter but not including the expiration date of
this Agreement (each such date is hereinafter referred to as an "Anniversary
Date"), the Board of Directors of the Company may extend the term of this
Agreement for a period of one year in addition to the then-remaining term, if
any, by giving the
-2-
<PAGE>
Executive written notice of such extension. Reference herein to the term of
this Agreement shall refer to both the initial term and such extended term.
3. COMPENSATION. The Company agrees to compensate or to cause the Bank
------------
to compensate the Executive for his services hereunder during the term of this
Agreement by payment of a base salary at the annual rate of $132,500 in such
monthly, semi-monthly or other payments as are from time to time applicable to
other executive officers of the Bank. The Executive's salary may be increased
from time to time during the term of this Agreement in the sole discretion of
the Board of Directors of the Company, but Executive's salary shall not be
reduced below the level then in effect. Executive also shall be paid directors
fees as provided in Section 1 hereof. In addition, Executive shall be entitled
to participate in incentive compensation plans or arrangements as may from time
to time be established by the Company or the Bank on a basis consistent with the
treatment of other executive officers of the Company or the Bank (but
recognizing differences in responsibilities among executive officers). Executive
also shall be entitled to receive any other bonus or discretionary compensation
payments as the Board of Directors of the Company may determine from time to
time.
4. ADDITIONAL BENEFITS - EXPENSES. Executive shall be provided such
------------------------------
other benefits (including but not limited to medical, health, life and other
insurance coverage) and shall be entitled to participate in such retirement
plans of the Company and the Bank, as are generally made available to other
executive officers of the Company or the Bank. During his employment, Executive
also shall be entitled to customary vacations in accordance with vacation
policies and practices of the Company or the Bank prevailing from time to time,
and to reimbursement for reasonable expenses incurred on behalf of the Company
or the Bank in accordance with the then prevailing policies and practices of the
Company. Executive also shall be provided an automobile by the Company for his
business and personal use (but Executive agrees to reimburse the Company for his
personal use of the vehicle at a rate established by the Company). All payments
under this Agreement shall be subject to all federal, state or local
withholdings which may be required.
5. TERMINATION.
-----------
(A) JUST CAUSE. The Board of Directors of the Company may terminate
----------
the employment of Executive with the Company and the Bank at any time for "Just
Cause." "Just Cause" shall mean personal dishonesty, incompetence, willful
misconduct or breach of a fiduciary duty involving personal profit in the
performance of his duties under this Agreement, intentional failure to perform
stated duties (provided that such nonperformance has continued for 10 days after
the Company has given written notice of such nonperformance to the Executive and
its intention to terminate Executive's employment because of such
nonperformance), willful violation of any law, rule or regulation (other than a
law, rule or regulation relating to a misdemeanor, traffic violation or similar
offense), final cease-and-desist order or material breach of any provision of
this Agreement. If Executive's employment is terminated for "Just Cause", the
Executive shall be entitled to receive his theretofore unpaid
-3-
<PAGE>
base salary for the period of employment up to the date of termination, but
shall not be entitled to any compensation or employment benefits pursuant to
this Agreement for any period after the date of termination.
(B) TERMINATION OR SUSPENSION OF EMPLOYMENT AS REQUIRED BY LAW.
----------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, the following
provisions shall limit the obligation of the Company to continue employing
Executive, but only to the extent required by the applicable regulations of the
OTS (12 C.F.R. (S) 563.39), or similar succeeding regulations:
(i) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12
U.S.C. (S) 1818(e)(3) and (g)(1)), the Company's obligations under this
Agreement shall be suspended as of the date of service of notice, unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, the
Company may in its discretion (i) pay Executive all or part of the compensation
withheld while its contract obligations hereunder were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were suspended. If
the Company does not pay Executive all of the compensation withheld while its
contract obligations hereunder were suspended or does not reinstate in whole its
obligations which were suspended, Executive may terminate his employment
hereunder pursuant to Section 5(d) and such termination shall be considered as
termination for "Good Reason."
(ii) If the Executive is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. (S)
1818(e)(4) or (g)(1)) all obligations of the Company under this Agreement shall
terminate as of the effective date of the order.
(iii) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act), all obligations to Executive hereunder
shall terminate as of the date of default, but such termination shall not affect
any vested rights of Executive, the Company or the Bank.
(iv) All obligations under this Agreement may be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank: (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee at the time the
Federal Deposit Insurance Company enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c) of
the Federal Deposit Insurance Act and (ii) by the Director, or his or her
designee at the time the Director or such designee approves a supervisory merger
to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition.
-4-
<PAGE>
(v) Termination under this Section 5(b) shall not affect other
rights hereunder which are vested at the time of termination.
(C) VOLUNTARY TERMINATION. Executive may terminate his employment
---------------------
hereunder at any time for any reason upon giving the Company written notice, at
least ninety (90) days prior to termination of employment. Upon such
termination, Executive shall be entitled to receive Executive's theretofore
unpaid base salary for the period of employment up to the date of termination,
but shall not be entitled to any compensation or employment benefits pursuant to
this Agreement for any period after the date of termination.
(D) GOOD REASON. Executive may terminate his employment hereunder at
-----------
any time for "Good Reason." "Good Reason" shall be deemed to exist if Executive
terminates his employment because, without his express written consent, the
Company breaches any of the terms of this Agreement. If Executive terminates his
employment for "Good Reason," Executive shall receive (i) his base salary under
Section 3 hereof through the then-remaining term of employment under Section 2
(calculated as if his employment had not been terminated under this Section
5(d)), which amount shall be paid in a lump-sum or in equal monthly installments
at the discretion of Executive, (ii) his theretofore unpaid base salary and pro-
rated incentive compensation for the period of employment up to the date of
termination, (iii) medical and other insurance through the then remaining term
of employment under Section 2 (calculated as if his employment had not been
terminated under this Section 5(d)) consistent with the terms and conditions set
forth in Section 4, (iv) any other benefits to which Executive is entitled by
law or the specific terms of the Company's policies in effect at the time of
termination of employment and (v) an amount equal to the product of the
Company's or the Bank's annual aggregate contribution, for the benefit of
Executive in the year preceding termination, to all qualified retirement plans
in which Executive participated multiplied by three (calculated as if his
employment had not been terminated under this Section 5(d)). The benefit in (v)
under this Section 5(d) shall be in addition to any benefit payable from any
qualified or non-qualified plans or programs maintained by the Company or the
Bank at the time of termination.
(E) TERMINATION WITHOUT JUST CAUSE. The Company may terminate
------------------------------
Executive's employment without Just Cause, in which case the Executive shall
receive the amounts that would be paid Executive under Section 5(d) if he had
terminated his employment for Good Reason.
(F) CHANGE IN CONTROL. (i) If, at any time after the date hereof, a
-----------------
"Change in Control" (as hereinafter defined) occurs and within twelve (12)
months thereafter Executive's employment is terminated by the Company other than
for Just Cause or Executive terminates his employment for any reason, then
Executive shall be entitled to the benefits provided below.
(A) The Company shall promptly pay to Executive an amount
equal to the product of 2.99 times Executive's "base amount" as defined in
Section 280G(b)(3)
-5-
<PAGE>
of the Code (such "base amount" to be derived from Executive's compensation paid
by the Company and the Bank).
(B) For purposes of all employee benefit plans (including,
but not limited to, health and life insurance and incentive, pension and
retirement plans) of the Company and the Bank, Executive (and his dependents and
beneficiaries, as the case may be) shall be given service credit for all
purposes for, and shall be deemed to be an employee of the Company and the Bank
during, the term of this Agreement set forth in Section 2 (calculated as if
employment had not been terminated under this Section 5(f)), notwithstanding the
fact that he is no longer an employee of the Company or the Bank; provided that,
if the terms of any of such employee benefit plans do not permit such credit or
deemed employee treatment, the Company or the Bank will make payments and
distributions to Executive outside of the plans in amounts substantially
equivalent to the payments and distributions Executive would have received
pursuant to the terms of the plans and attributable to such credit or deemed
employee treatment, had such credit or deemed employee treatment been permitted
pursuant to the terms of the plans.
(ii) (A) Anything in this Agreement to the contrary
notwithstanding, it is the intention of the Company and Executive that no
portion of any payment under this Agreement, or payments to or for the benefit
of Executive under any other agreement or plan, be deemed an "Excess Parachute
Payment" as defined in Section 280G of the Code, or its successors. It is agreed
that the present value of and any payment to or for the benefit of Executive in
the nature of compensation, receipt of which is contingent on the occurrence of
a Change in Control, and to which Section 280G of the Code applies (in the
aggregate "Total Payments") shall not exceed an amount equal to one dollar less
than the maximum amount that the Company may pay without loss of deduction under
Section 280G(a) of the Code. Present value for purposes of this Agreement shall
be calculated in accordance with Section 280G(d)(4) of the Code. Within sixty
days (60) following the earlier of (1) the giving of notice of termination of
employment or (2) the giving of notice by the Company to Executive of its belief
that there is a payment or benefit due Executive, the Company, at the Company's
expense, shall obtain the opinion of the Company's public accounting firm (the
"Accounting Firm"), which opinion need not be unqualified, which sets forth: (a)
the amount of the Base Period Income of Executive (as defined in Code Section
280G), (b) the present value of Total Payments and (c) the amount and present
value of any excess parachute payments. In the event that such opinion
determines that there would be an Excess Parachute Payment, the payment
hereunder shall be modified, reduced or eliminated as specified by Executive in
writing delivered to the Company within thirty (30) days of his receipt of such
opinion or, if Executive fails to so notify the Company, then as the Company
shall reasonably determine, so that under the bases of calculation set forth in
such opinion there will be no Excess Parachute Payment. In the event that the
provisions of Sections 280G and 4999 of the Code are repealed without
succession, this Section shall be of no further force or effect.
-6-
<PAGE>
(B) In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm under Section
5(f)(ii)(A)). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any determination by the Accounting Firm shall be binding upon
the Company and Executive.
(iii) For purposes of Section 5(f) of this Agreement, a "Change
in Control" shall be deemed to have occurred if:
(A) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the
date hereof), becomes the beneficial owner of shares of the Company having 20%
or more of the total number of votes that may be cast for the election of
directors of the Company, including for this purpose any shares beneficially
owned by such third person or group as of the date hereof; or
(B) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company. (In the event of any reorganization
involving the Company in a transaction initiated by the Company in which the
shareholders of the Company immediately prior to such reorganization become the
shareholders of a successor or ultimate parent company of the Company resulting
from such reorganization and the persons who were directors of the Company
immediately prior to such reorganization constitute a majority of the Board of
Directors of such successor or ultimate parent, no "Change in Control" shall be
deemed to have taken place solely by reason of such reorganization,
notwithstanding the fact that the Company may have become the wholly-owned
subsidiary of another company in such reorganization and members of the Board of
Directors of the Company may have become members of the Board of Directors of
such successor company, and thereafter the term "Company" for purposes of this
paragraph shall refer to such successor or ultimate parent company.); or
(C) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the
date hereof), acquires control, as defined in 12 C.F.R. (S) 574.4, or any
successor regulation, of the Company that would require the filing of an
application for acquisition of control or notice of change in control in a
manner set forth in 12 C.F.R. (S) 574.3, or any successor regulation.
6. DEATH OF EXECUTIVE. If Executive shall die during the term of this
------------------
Agreement, his employment with the Company and this Agreement shall terminate
and the Company shall pay to a beneficiary designated in writing by Executive,
or in the absence of such designation,
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<PAGE>
to Executive's estate, the full amount of his theretofore unpaid base salary and
pro-rated incentive compensation for the period of employment up to the date of
termination, and the Company shall have no further obligations hereunder. The
preceding sentence shall not be construed to limit any benefit payable in the
event of the death of Executive under any applicable benefit plans or other
arrangements.
7. DISABILITY OF EXECUTIVE. If Executive becomes Totally and Permanently
-----------------------
Disabled (as defined below) during the term of this Agreement, the Company may
terminate Executive's employment and this Agreement, except Sections 8 and 9
hereof, by giving Executive written notice of such termination not less than 5
days before the effective date thereof. If Executive's employment and this
Agreement are terminated pursuant to this Section 7, the Company shall pay to
Executive his theretofore unpaid base salary and pro-rated incentive
compensation for the period of employment up to the date of termination, and the
Company shall have no further obligations to Executive under this Agreement.
The preceding sentence shall not be construed to limit any benefit payable to
Executive under any applicable benefit plans or other arrangements. The
Executive is Totally and Permanently Disabled for purposes of this Section 7 if
he is disabled or incapacitated to the extent that he is unable to perform the
duties of President and Chief Executive Officer of the Company or the Bank for
more than three (3) consecutive months, and such disability or incapacity is
expected to continue for more than three (3) additional months as certified by a
medical doctor of Executive's own choosing and concurred in by a doctor of the
Company's choosing.
8. COVENANT NOT TO COMPETE. Executive acknowledges that the Company
-----------------------
would be substantially damaged by an association of Executive with a depository
institution that competes for customers with the Company, the Bank and any
subsidiaries of the Company or the Bank. Without the consent of the Company,
Executive shall not at any time during the term of this Agreement or Executive's
employment, and for a period of three years thereafter (regardless of the reason
for termination), (a) solicit any person who was a customer of the Company or
the Bank or any of their subsidiaries during the two year period prior to the
termination of this Agreement or Executive's employment hereunder for Executive
or any other person, to offer the same products or render the same services to
such customer as were provided or proposed to be provided by the Company or the
Bank or any of their subsidiaries to such customer as of the time of termination
of Executive's employment, (b) directly or indirectly, on Executive's behalf or
in the service or on the behalf of others, render or be retained to render
similar services as described in Section 1 hereof, whether as an officer,
partner, trustee, consultant, or employee for any depository institution, which
has a banking office located within 25 miles of any office of the Bank or any
banking office of the Company as of the date of Executive's termination of
employment, provided, however, that Executive shall not be deemed to have
breached this undertaking if his sole relationship with any other such entity
consists of his holding, directly or indirectly, an equity interest in such
entity not greater than three percent (3%) of such entity's outstanding equity
interest, or (c) actively induce or solicit any employees of the Company or the
Bank to leave such employ. For purposes of this Section 8, "person"
-8-
<PAGE>
shall include any individual, corporation, partnership, trust, firm,
proprietorship, venture or other entity of any nature whatsoever.
9. CONFIDENTIAL INFORMATION. Executive acknowledges that he now has, and
------------------------
hereunder will have, access to important and confidential information regarding
the business and services of the Company, the Bank and their subsidiaries, and
that the disclosure to, or the use of such information by, any business in
competition with the Company, the Bank or their subsidiaries shall result in
substantial and undeterminable harm to the Company, the Bank and its
subsidiaries. In order to protect the Company, the Bank and its subsidiaries
against such harm and from unfair competition, Executive agrees with the Company
that while employed by the Company and at any time thereafter, Executive will
not disclose, communicate or divulge to anyone, or use in any manner adverse to
the Company, the Bank or their subsidiaries any information concerning
customers, methods of business, financial information or other confidential
information of the Company, the Bank, or their subsidiaries, except for
information as is in the public domain or ascertainable through common sources
of public information (otherwise than as a result of any breach of this covenant
by Executive).
10. LIMITATION ON TERMINATION OR DISABILITY PAY. Any payments made to
-------------------------------------------
Executive pursuant to this Agreement or otherwise are subject to and conditioned
upon the compliance of such payments with 12 U.S.C. (S) 1828(k) and any
regulations promulgated thereunder.
11. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
------------------------
expenses that Executive may incur in connection with his enforcement of the
terms of this Agreement, but only if and after a legal judgment or settlement
has been reached. Executive shall be entitled to receive interest thereon for
the period of any delay in payment from the date such payment was due at the
rate determined by adding two hundred basis points to the six-month Treasury
Bill rate.
12. INQUIRIES REGARDING PROPOSED ACTIVITIES. In the event Executive shall
---------------------------------------
inquire in writing of the Company whether any proposed action on the part of
Executive would be considered by the Company to be prohibited by or in breach of
the terms of this Agreement, the Company shall have 30 days after receipt of
such notice to express in writing to Executive its position with respect thereof
and in the event such writing shall not be given to Executive, such proposed
action, as set forth in the writing of the Company, shall not be deemed to be a
violation of or breach of this Agreement.
13. NO DUTY OF MITIGATION. Executive shall not be required to mitigate
---------------------
the amount of any payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
Executive as the result of employment by another employer, by retirement
benefits after the date of termination or otherwise.
-9-
<PAGE>
14. SUCCESSORS. This Agreement may not be assigned by the Company except
-----------
in connection with a merger involving the Company or a sale of substantially all
of its assets (subject to the Change in Control provisions of Section 5(f)), and
the obligations of the Company provided for in this Agreement shall be formally
assumed by, and be the binding legal obligations of, any successor to the
Company by purchase, merger, consolidation, or otherwise. This Agreement may not
be assigned by Executive during his life, and upon his death will be binding
upon and inure to the benefit of his heirs, legatees and the legal
representatives of his estate.
15. NOTICE. For the purposes of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Company shall be directed to the attention of the Board of
Directors of the Company with a copy to the Secretary of the Company), or to
such other address as either party may have furnished to the other in writing in
accordance herewith.
16. AMENDMENTS. No amendment or additions to this Agreement shall be
----------
binding unless in writing and signed by all parties, except as herein otherwise
provided.
17. SEVERABILITY. The provisions of this Agreement shall be deemed
-------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If,
however, any provision of this Agreement is declared invalid or unenforceable by
a court of competent jurisdiction, then the parties hereto shall in good faith
amend this Agreement to include an alternative provision that accomplishes a
similar result.
18. GOVERNING LAW. This Agreement shall be governed by the laws of the
-------------
United States to the extent applicable and otherwise by the internal laws of the
State of Missouri.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EQUALITY BANCORP, INC.
By: _____________________________
Its:_______________________________
EXECUTIVE
__________________________________
Richard C. Fellhauer
The Bank hereby acknowledges this Agreement and by its execution of
this Agreement hereby agrees to fulfill its obligations hereunder.
EQUALITY SAVINGS BANK
By: _____________________________
Its:_______________________________
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<PAGE>
EXHIBIT 10.6
SHW Draft
=========
6-26-97
=======
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is entered into as of
this ____ day of ______________, 1997 between Michael A. Deelo ("Executive") and
Equality Bancorp, Inc., a Delaware corporation (the "Company").
WHEREAS, Executive is currently employed by Equality Savings and Loan
Association, F.A. (the "Association"), a federally-chartered capital stock
savings association, as its Executive Vice President and Chief Financial Officer
under the employment agreement entered into between Executive, First Missouri
Financial, M.H.C. ("First Missouri"), the Association's mutual holding company,
and the Association dated as of March 1, 1996, (the "Prior Agreement"); and
WHEREAS, Executive is currently employed by First Missouri as its Vice
President and Treasurer; and
WHEREAS, First Missouri and the Association adopted a Plan of
Conversion and Reorganization on May 16, 1997, as subsequently amended, whereby,
among other things, First Missouri will be converted to the stock form of
organization, the Association will change its corporate title to "Equality
Savings Bank" (the "Bank"), the Company will acquire 100 percent of the
outstanding shares of stock of the Bank, First Missouri will cease to exist and
the Company will issue shares of its common stock in an exchange offer to the
public stockholders of the Association and in a subscription and community
offering to eligible members of First Missouri and the general public; and
WHEREAS, Executive and the Company desire to enter into this Agreement
pertaining to the terms of the employment of Executive by the Company and the
continued employment of the Executive by the Bank and the security the Company
is providing to Executive with respect to his employment in lieu of the terms
and conditions of the Prior Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT OF EXECUTIVE. The Company hereby employs Executive, and
-----------------------
Executive hereby accepts employment with the Company, upon the terms and
conditions hereinafter set forth, for the term set forth in Section 2 of this
Agreement. Executive is employed by the Company to perform the duties of
Treasurer and Chief Financial Officer of the Company and Executive Vice
President and Chief Financial Officer of the Bank, and the Company shall cause
the Bank to appoint Executive to such positions. The services to be performed by
the Executive shall include those normally performed by the Executive Vice
<PAGE>
President, Treasurer and Chief Financial Officer of similar banking
organizations and as directed by the Board of Directors of the Company, which
are not inconsistent with the foregoing. It is the Company's present intention
that the services to be performed by Executive shall be substantially similar to
the services presently being performed by Executive. Executive agrees to devote
his full business time to the rendition of such services, subject to absences
for customary vacations and for temporary illnesses. The Company agrees that
during the term of this Agreement (a) it will not reduce the Executive's job
titles, status or responsibilities without the Executive's consent, (b)
Executive shall not be required, without his express written consent, to be
based anywhere other than within the St. Louis metropolitan area, except for
reasonable business travel in connection with the Company's business, (c)
Executive shall not be assigned duties materially inconsistent with his
position, duties, responsibilities, and status as Treasurer and Chief Financial
Officer of the Company and Executive Vice President and Chief Financial Officer
of the Bank, (d) it will not change in any significant way the nature or scope
of Executive's authority or his overall working environment, (e) it will not
terminate any incentive compensation plan or arrangement, so that when
considered in the aggregate and with any substitute plan or plans, the incentive
plan or arrangement in which Executive is participating fail to provide him with
substantially the same level of benefits, (f) it will not materially reduce the
secretarial or other administrative support of the Executive, (g) it will not
materially reduce the number or seniority of other Company personnel who report
to Executive, or materially reduce the frequency with which, or the nature of
the matters with respect to which, such personnel are to report to Executive,
other than as part of a Company-wide reduction in staff; and (h) it will not
reduce or adversely change the salary, perquisites, benefits, contingent
benefits or vacation time which had theretofore been provided to the Executive.
During the term of this Agreement, Executive also shall serve as a director of
the Company (subject to being elected by shareholders), the Bank or any
subsidiaries thereof and shall receive as compensation therefor directors fees
in the same amount paid to other directors of the Company, the Bank or any
subsidiaries thereof, as the case may be, for similar services (which amount
shall be in addition to the compensation provided for under Section 3 hereof).
During the term of this Agreement, Executive also shall serve as an officer of
any subsidiaries of the Company or the Bank without any additional compensation.
Executive also may serve on boards of directors of charitable organizations and
other business corporations and may request personal time off to attend to
civic, charitable and personal investment activities, provided Executive
notifies the Board of Directors of the Company concerning such service and
activities, the Board of Directors does not disapprove them and such service and
activities do not interfere with the discharge of Executive's management duties.
2. TERM OF EMPLOYMENT. The term of this Agreement and of Executive's
------------------
employment hereunder shall be for an initial period commencing on the date
hereof (the "Commencement Date") and ending on the third anniversary of the date
hereof, unless terminated earlier as provided in Sections 5, 6 and 7 hereof.
Beginning on the date one year after the Commencement Date, and each anniversary
of the Commencement Date thereafter but not including the expiration date of
this Agreement (each such date is hereinafter referred to as an "Anniversary
Date"), the Board of Directors of the Company may extend the term of this
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<PAGE>
Agreement for a period of one year in addition to the then-remaining term, if
any, by giving the Executive written notice of such extension. Reference herein
to the term of this Agreement shall refer to both the initial term and such
extended term.
3. COMPENSATION. The Company agrees to compensate or to cause the Bank
------------
to compensate the Executive for his services hereunder during the term of this
Agreement by payment of a base salary at the annual rate of $________ in such
monthly, semi-monthly or other payments as are from time to time applicable to
other executive officers of the Bank. The Executive's salary may be increased
from time to time during the term of this Agreement in the sole discretion of
the Board of Directors of the Company, but Executive's salary shall not be
reduced below the level then in effect. Executive also shall be paid directors
fees as provided in Section 1 hereof. In addition, Executive shall be entitled
to participate in incentive compensation plans or arrangements as may from time
to time be established by the Company or the Bank on a basis consistent with the
treatment of other executive officers of the Company or the Bank (but
recognizing differences in responsibilities among executive officers). Executive
also shall be entitled to receive any other bonus or discretionary compensation
payments as the Board of Directors of the Company may determine from time to
time.
4. ADDITIONAL BENEFITS - EXPENSES. Executive shall be provided such
------------------------------
other benefits (including but not limited to medical, health, life and other
insurance coverage) and shall be entitled to participate in such retirement
plans of the Company and the Bank, as are generally made available to other
executive officers of the Company or the Bank. During his employment, Executive
also shall be entitled to customary vacations in accordance with vacation
policies and practices of the Company or the Bank prevailing from time to time,
and to reimbursement for reasonable expenses incurred on behalf of the Company
or the Bank in accordance with the then prevailing policies and practices of the
Company. All payments under this Agreement shall be subject to all federal,
state or local withholdings which may be required.
5. TERMINATION.
-----------
(A) JUST CAUSE. The Board of Directors of the Company may terminate
----------
the employment of Executive with the Company and the Bank at any time for "Just
Cause." "Just Cause" shall mean personal dishonesty, incompetence, willful
misconduct or breach of a fiduciary duty involving personal profit in the
performance of his duties under this Agreement, intentional failure to perform
stated duties (provided that such nonperformance has continued for 10 days after
the Company has given written notice of such nonperformance to the Executive and
its intention to terminate Executive's employment because of such
nonperformance), willful violation of any law, rule or regulation (other than a
law, rule or regulation relating to a misdemeanor, traffic violation or similar
offense), final cease-and-desist order or material breach of any provision of
this Agreement. If Executive's employment is terminated for "Just Cause", the
Executive shall be entitled to receive his theretofore unpaid base salary for
the period of employment up to the date of termination, but shall not be
entitled
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<PAGE>
to any compensation or employment benefits pursuant to this Agreement for any
period after the date of termination.
(B) TERMINATION OR SUSPENSION OF EMPLOYMENT AS REQUIRED BY LAW.
----------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, the following
provisions shall limit the obligation of the Company to continue employing
Executive, but only to the extent required by the applicable regulations of the
OTS (12 C.F.R. (S) 563.39), or similar succeeding regulations:
(i) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12
U.S.C. (S) 1818(e)(3) and (g)(1)), the Company's obligations under this
Agreement shall be suspended as of the date of service of notice, unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, the
Company may in its discretion (i) pay Executive all or part of the compensation
withheld while its contract obligations hereunder were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were suspended. If
the Company does not pay Executive all of the compensation withheld while its
contract obligations hereunder were suspended or does not reinstate in whole its
obligations which were suspended, Executive may terminate his employment
hereunder pursuant to Section 5(d) and such termination shall be considered as
termination for "Good Reason."
(ii) If the Executive is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. (S)
1818(e)(4) or (g)(1)) all obligations of the Company under this Agreement shall
terminate as of the effective date of the order.
(iii) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act), all obligations to Executive hereunder
shall terminate as of the date of default, but such termination shall not affect
any vested rights of Executive, the Company or the Bank.
(iv) All obligations under this Agreement may be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank: (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee at the time the
Federal Deposit Insurance Company enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c) of
the Federal Deposit Insurance Act and (ii) by the Director, or his or her
designee at the time the Director or such designee approves a supervisory merger
to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition.
-4-
<PAGE>
(v) Termination under this Section 5(b) shall not affect other
rights hereunder which are vested at the time of termination.
(C) VOLUNTARY TERMINATION. Executive may terminate his employment
---------------------
hereunder at any time for any reason upon giving the Company written notice, at
least ninety (90) days prior to termination of employment. Upon such
termination, Executive shall be entitled to receive Executive's theretofore
unpaid base salary for the period of employment up to the date of termination,
but shall not be entitled to any compensation or employment benefits pursuant to
this Agreement for any period after the date of termination.
(D) GOOD REASON. Executive may terminate his employment hereunder at
-----------
any time for "Good Reason." "Good Reason" shall be deemed to exist if Executive
terminates his employment because, without his express written consent, the
Company breaches any of the terms of this Agreement. If Executive terminates his
employment for "Good Reason," Executive shall receive (i) his base salary under
Section 3 hereof through the then-remaining term of employment under Section 2
(calculated as if his employment had not been terminated under this Section
5(d)), which amount shall be paid in a lump-sum or in equal monthly installments
at the discretion of Executive, (ii) his theretofore unpaid base salary and pro-
rated incentive compensation for the period of employment up to the date of
termination, (iii) medical and other insurance through the then remaining term
of employment under Section 2 (calculated as if his employment had not been
terminated under this Section 5(d)) consistent with the terms and conditions set
forth in Section 4, (iv) any other benefits to which Executive is entitled by
law or the specific terms of the Company's policies in effect at the time of
termination of employment and (v) an amount equal to the product of the
Company's or the Bank's annual aggregate contribution, for the benefit of
Executive in the year preceding termination, to all qualified retirement plans
in which Executive participated multiplied by three (calculated as if his
employment had not been terminated under this Section 5(d)). The benefit in (v)
under this Section 5(d) shall be in addition to any benefit payable from any
qualified or non-qualified plans or programs maintained by the Company or the
Bank at the time of termination.
(E) TERMINATION WITHOUT JUST CAUSE. The Company may terminate
------------------------------
Executive's employment without Just Cause, in which case the Executive shall
receive the amounts that would be paid Executive under Section 5(d) if he had
terminated his employment for Good Reason.
(F) CHANGE IN CONTROL. (i) If, at any time after the date hereof, a
-----------------
"Change in Control" (as hereinafter defined) occurs and within twelve (12)
months thereafter Executive's employment is terminated by the Company other than
for Just Cause or Executive terminates his employment for any reason, then
Executive shall be entitled to the benefits provided below.
(A) The Company shall promptly pay to Executive an amount
equal to the product of 2.99 times Executive's "base amount" as defined in
Section 280G(b)(3)
-5-
<PAGE>
of the Code (such "base amount" to be derived from Executive's compensation paid
by the Company and the Bank).
(B) For purposes of all employee benefit plans (including,
but not limited to, health and life insurance and incentive, pension and
retirement plans) of the Company and the Bank, Executive (and his dependents and
beneficiaries, as the case may be) shall be given service credit for all
purposes for, and shall be deemed to be an employee of the Company and the Bank
during, the term of this Agreement set forth in Section 2 (calculated as if
employment had not been terminated under this Section 5(f)), notwithstanding the
fact that he is no longer an employee of the Company or the Bank; provided that,
if the terms of any of such employee benefit plans do not permit such credit or
deemed employee treatment, the Company or the Bank will make payments and
distributions to Executive outside of the plans in amounts substantially
equivalent to the payments and distributions Executive would have received
pursuant to the terms of the plans and attributable to such credit or deemed
employee treatment, had such credit or deemed employee treatment been permitted
pursuant to the terms of the plans.
(ii) (A) Anything in this Agreement to the contrary
notwithstanding, it is the intention of the Company and Executive that no
portion of any payment under this Agreement, or payments to or for the benefit
of Executive under any other agreement or plan, be deemed an "Excess Parachute
Payment" as defined in Section 280G of the Code, or its successors. It is agreed
that the present value of and any payment to or for the benefit of Executive in
the nature of compensation, receipt of which is contingent on the occurrence of
a Change in Control, and to which Section 280G of the Code applies (in the
aggregate "Total Payments") shall not exceed an amount equal to one dollar less
than the maximum amount that the Company may pay without loss of deduction under
Section 280G(a) of the Code. Present value for purposes of this Agreement shall
be calculated in accordance with Section 280G(d)(4) of the Code. Within sixty
days (60) following the earlier of (1) the giving of notice of termination of
employment or (2) the giving of notice by the Company to Executive of its belief
that there is a payment or benefit due Executive, the Company, at the Company's
expense, shall obtain the opinion of the Company's public accounting firm (the
"Accounting Firm"), which opinion need not be unqualified, which sets forth: (a)
the amount of the Base Period Income of Executive (as defined in Code Section
280G), (b) the present value of Total Payments and (c) the amount and present
value of any excess parachute payments. In the event that such opinion
determines that there would be an Excess Parachute Payment, the payment
hereunder shall be modified, reduced or eliminated as specified by Executive in
writing delivered to the Company within thirty (30) days of his receipt of such
opinion or, if Executive fails to so notify the Company, then as the Company
shall reasonably determine, so that under the bases of calculation set forth in
such opinion there will be no Excess Parachute Payment. In the event that the
provisions of Sections 280G and 4999 of the Code are repealed without
succession, this Section shall be of no further force or effect.
-6-
<PAGE>
(B) In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm under Section
5(f)(ii)(A)). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any determination by the Accounting Firm shall be binding upon
the Company and Executive.
(iii) For purposes of Section 5(f) of this Agreement, a "Change
in Control" shall be deemed to have occurred if:
(A) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the
date hereof), becomes the beneficial owner of shares of the Company having 20%
or more of the total number of votes that may be cast for the election of
directors of the Company, including for this purpose any shares beneficially
owned by such third person or group as of the date hereof; or
(B) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company. (In the event of any reorganization
involving the Company in a transaction initiated by the Company in which the
shareholders of the Company immediately prior to such reorganization become the
shareholders of a successor or ultimate parent company of the Company resulting
from such reorganization and the persons who were directors of the Company
immediately prior to such reorganization constitute a majority of the Board of
Directors of such successor or ultimate parent, no "Change in Control" shall be
deemed to have taken place solely by reason of such reorganization,
notwithstanding the fact that the Company may have become the wholly-owned
subsidiary of another company in such reorganization and members of the Board of
Directors of the Company may have become members of the Board of Directors of
such successor company, and thereafter the term "Company" for purposes of this
paragraph shall refer to such successor or ultimate parent company.); or
(C) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the
date hereof), acquires control, as defined in 12 C.F.R. (S) 574.4, or any
successor regulation, of the Company that would require the filing of an
application for acquisition of control or notice of change in control in a
manner set forth in 12 C.F.R. (S) 574.3, or any successor regulation.
6. DEATH OF EXECUTIVE. If Executive shall die during the term of this
------------------
Agreement, his employment with the Company and this Agreement shall terminate
and the Company shall pay to a beneficiary designated in writing by Executive,
or in the absence of such designation,
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<PAGE>
to Executive's estate, the full amount of his theretofore unpaid base salary and
pro-rated incentive compensation for the period of employment up to the date of
termination, and the Company shall have no further obligations hereunder. The
preceding sentence shall not be construed to limit any benefit payable in the
event of the death of Executive under any applicable benefit plans or other
arrangements.
7. DISABILITY OF EXECUTIVE. If Executive becomes Totally and Permanently
-----------------------
Disabled (as defined below) during the term of this Agreement, the Company may
terminate Executive's employment and this Agreement, except Sections 8 and 9
hereof, by giving Executive written notice of such termination not less than 5
days before the effective date thereof. If Executive's employment and this
Agreement are terminated pursuant to this Section 7, the Company shall pay to
Executive his theretofore unpaid base salary and pro-rated incentive
compensation for the period of employment up to the date of termination, and the
Company shall have no further obligations to Executive under this Agreement. The
preceding sentence shall not be construed to limit any benefit payable to
Executive under any applicable benefit plans or other arrangements. The
Executive is Totally and Permanently Disabled for purposes of this Section 7 if
he is disabled or incapacitated to the extent that he is unable to perform the
duties of Treasurer and Chief Financial Officer of the Company or Executive Vice
President and Chief Financial Officer of the Bank for more than three (3)
consecutive months, and such disability or incapacity is expected to continue
for more than three (3) additional months as certified by a medical doctor of
Executive's own choosing and concurred in by a doctor of the Company's choosing.
8. COVENANT NOT TO COMPETE. Executive acknowledges that the Company
-----------------------
would be substantially damaged by an association of Executive with a depository
institution that competes for customers with the Company, the Bank and any
subsidiaries of the Company or the Bank. Without the consent of the Company,
Executive shall not at any time during the term of this Agreement or Executive's
employment, and for a period of three years thereafter (regardless of the reason
for termination), (a) solicit any person who was a customer of the Company or
the Bank or any of their subsidiaries during the two year period prior to the
termination of this Agreement or Executive's employment hereunder for Executive
or any other person, to offer the same products or render the same services to
such customer as were provided or proposed to be provided by the Company or the
Bank or any of their subsidiaries to such customer as of the time of termination
of Executive's employment, (b) directly or indirectly, on Executive's behalf or
in the service or on the behalf of others, render or be retained to render
similar services as described in Section 1 hereof, whether as an officer,
partner, trustee, consultant, or employee for any depository institution, which
has a banking office located within 25 miles of any office of the Bank or any
banking office of the Company as of the date of Executive's termination of
employment, provided, however, that Executive shall not be deemed to have
breached this undertaking if his sole relationship with any other such entity
consists of his holding, directly or indirectly, an equity interest in such
entity not greater than three percent (3%) of such entity's outstanding equity
interest, or (c) actively induce or solicit any employees of the Company or the
Bank to leave such employ. For purposes of this Section 8, "person"
-8-
<PAGE>
shall include any individual, corporation, partnership, trust, firm,
proprietorship, venture or other entity of any nature whatsoever.
9. CONFIDENTIAL INFORMATION. Executive acknowledges that he now has, and
------------------------
hereunder will have, access to important and confidential information regarding
the business and services of the Company, the Bank and their subsidiaries, and
that the disclosure to, or the use of such information by, any business in
competition with the Company, the Bank or their subsidiaries shall result in
substantial and undeterminable harm to the Company, the Bank and its
subsidiaries. In order to protect the Company, the Bank and its subsidiaries
against such harm and from unfair competition, Executive agrees with the Company
that while employed by the Company and at any time thereafter, Executive will
not disclose, communicate or divulge to anyone, or use in any manner adverse to
the Company, the Bank or their subsidiaries any information concerning
customers, methods of business, financial information or other confidential
information of the Company, the Bank, or their subsidiaries, except for
information as is in the public domain or ascertainable through common sources
of public information (otherwise than as a result of any breach of this covenant
by Executive).
10. LIMITATION ON TERMINATION OR DISABILITY PAY. Any payments made to
-------------------------------------------
Executive pursuant to this Agreement or otherwise are subject to and conditioned
upon the compliance of such payments with 12 U.S.C. (S) 1828(k) and any
regulations promulgated thereunder.
11. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
------------------------
expenses that Executive may incur in connection with his enforcement of the
terms of this Agreement, but only if and after a legal judgment or settlement
has been reached. Executive shall be entitled to receive interest thereon for
the period of any delay in payment from the date such payment was due at the
rate determined by adding two hundred basis points to the six-month Treasury
Bill rate.
12. INQUIRIES REGARDING PROPOSED ACTIVITIES. In the event Executive shall
---------------------------------------
inquire in writing of the Company whether any proposed action on the part of
Executive would be considered by the Company to be prohibited by or in breach of
the terms of this Agreement, the Company shall have 30 days after receipt of
such notice to express in writing to Executive its position with respect thereof
and in the event such writing shall not be given to Executive, such proposed
action, as set forth in the writing of the Company, shall not be deemed to be a
violation of or breach of this Agreement.
13. NO DUTY OF MITIGATION. Executive shall not be required to mitigate
---------------------
the amount of any payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
Executive as the result of employment by another employer, by retirement
benefits after the date of termination or otherwise.
-9-
<PAGE>
14. SUCCESSORS. This Agreement may not be assigned by the Company except
-----------
in connection with a merger involving the Company or a sale of substantially all
of its assets (subject to the Change in Control provisions of Section 5(f)), and
the obligations of the Company provided for in this Agreement shall be formally
assumed by, and be the binding legal obligations of, any successor to the
Company by purchase, merger, consolidation, or otherwise. This Agreement may not
be assigned by Executive during his life, and upon his death will be binding
upon and inure to the benefit of his heirs, legatees and the legal
representatives of his estate.
15. NOTICE. For the purposes of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Company shall be directed to the attention of the Board of
Directors of the Company with a copy to the Secretary of the Company), or to
such other address as either party may have furnished to the other in writing in
accordance herewith.
16. AMENDMENTS. No amendment or additions to this Agreement shall be
----------
binding unless in writing and signed by all parties, except as herein otherwise
provided.
17. SEVERABILITY. The provisions of this Agreement shall be deemed
-------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If,
however, any provision of this Agreement is declared invalid or unenforceable by
a court of competent jurisdiction, then the parties hereto shall in good faith
amend this Agreement to include an alternative provision that accomplishes a
similar result.
18. GOVERNING LAW. This Agreement shall be governed by the laws of the
-------------
United States to the extent applicable and otherwise by the internal laws of the
State of Missouri.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EQUALITY BANCORP, INC.
By: ______________________________
Its:______________________________
EXECUTIVE
__________________________________
Michael A. Deelo
The Bank hereby acknowledges this Agreement and by its execution of
this Agreement hereby agrees to fulfill its obligations hereunder.
EQUALITY SAVINGS BANK
By: ______________________________
Its:______________________________
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<PAGE>
EXHIBIT 10.7
SHW Draft
=========
6-26-97
=======
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is entered into as of this
____ day of ______________, 1997 between Leonard O. Wolter ("Executive") and
Equality Bancorp, Inc., a Delaware corporation (the "Company").
WHEREAS, Executive is currently employed by Equality Savings and Loan
Association, F.A. (the "Association"), a federally-chartered capital stock
savings association, as its Vice President under the employment agreement
entered into between Executive, First Missouri Financial, M.H.C. ("First
Missouri"), the Association's mutual holding company, and the Association dated
as of March 1, 1996, (the "Prior Agreement"); and
WHEREAS, Executive is currently employed by First Missouri as its Vice
President; and
WHEREAS, First Missouri and the Association adopted a Plan of Conversion
and Reorganization on May 16, 1997, as subsequently amended, whereby, among
other things, First Missouri will be converted to the stock form of
organization, the Association will change its corporate title to "Equality
Savings Bank" (the "Bank"), the Company will acquire 100 percent of the
outstanding shares of stock of the Bank, First Missouri will cease to exist and
the Company will issue shares of its common stock in an exchange offer to the
public stockholders of the Association and in a subscription and community
offering to eligible members of First Missouri and the general public; and
WHEREAS, Executive and the Company desire to enter into this Agreement
pertaining to the terms of the employment of Executive by the Company and the
continued employment of the Executive by the Bank and the security the Company
is providing to Executive with respect to his employment in lieu of the terms
and conditions of the Prior Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT OF EXECUTIVE. The Company hereby employs Executive, and
-----------------------
Executive hereby accepts employment with the Company, upon the terms and
conditions hereinafter set forth, for the term set forth in Section 2 of this
Agreement. Executive is employed by the Company to perform the duties of Vice
President of the Company and the Bank, and the Company shall cause the Bank to
appoint Executive to such positions. The services to be performed by the
Executive shall include those normally performed by the Vice President of
similar banking organizations and as directed by the Board of Directors of the
Company, which are not inconsistent with the foregoing. It is the Company's
present intention
<PAGE>
that the services to be performed by Executive shall be substantially similar to
the services presently being performed by Executive. Executive agrees to devote
his full business time to the rendition of such services, subject to absences
for customary vacations and for temporary illnesses. The Company agrees that
during the term of this Agreement (a) it will not reduce the Executive's job
titles, status or responsibilities without the Executive's consent, (b)
Executive shall not be required, without his express written consent, to be
based anywhere other than within the St. Louis metropolitan area, except for
reasonable business travel in connection with the Company's business, (c)
Executive shall not be assigned duties materially inconsistent with his
position, duties, responsibilities, and status as Vice President of the Company
and the Bank, (d) it will not change in any significant way the nature or scope
of Executive's authority or his overall working environment, (e) it will not
terminate any incentive compensation plan or arrangement, so that when
considered in the aggregate and with any substitute plan or plans, the incentive
plan or arrangement in which Executive is participating fail to provide him with
substantially the same level of benefits, (f) it will not materially reduce the
secretarial or other administrative support of the Executive, (g) it will not
materially reduce the number or seniority of other Company personnel who report
to Executive, or materially reduce the frequency with which, or the nature of
the matters with respect to which, such personnel are to report to Executive,
other than as part of a Company-wide reduction in staff; and (h) it will not
reduce or adversely change the salary, perquisites, benefits, contingent
benefits or vacation time which had theretofore been provided to the Executive.
During the term of this Agreement, Executive also shall serve as an associate
director of the Company (subject to being elected by shareholders), the Bank or
any subsidiaries thereof and shall receive as compensation therefor directors
fees in the same amount paid to other associate directors of the Company, the
Bank or any subsidiaries thereof, as the case may be, for similar services
(which amount shall be in addition to the compensation provided for under
Section 3 hereof). During the term of this Agreement, Executive also shall
serve as an officer of any subsidiaries of the Company or the Bank without any
additional compensation. Executive also may serve on boards of directors of
charitable organizations and other business corporations and may request
personal time off to attend to civic, charitable and personal investment
activities, provided Executive notifies the Board of Directors of the Company
concerning such service and activities, the Board of Directors does not
disapprove them and such service and activities do not interfere with the
discharge of Executive's management duties.
2. TERM OF EMPLOYMENT. The term of this Agreement and of Executive's
------------------
employment hereunder shall be for an initial period commencing on the date
hereof (the "Commencement Date") and ending on the third anniversary of the date
hereof, unless terminated earlier as provided in Sections 5, 6 and 7 hereof.
Beginning on the date one year after the Commencement Date, and each anniversary
of the Commencement Date thereafter but not including the expiration date of
this Agreement (each such date is hereinafter referred to as an "Anniversary
Date"), the Board of Directors of the Company may extend the term of this
Agreement for a period of one year in addition to the then-remaining term, if
any, by giving the Executive written notice of such extension. Reference herein
to the term of this Agreement shall refer to both the initial term and such
extended term.
-2-
<PAGE>
3. COMPENSATION. The Company agrees to compensate or to cause the Bank to
------------
compensate the Executive for his services hereunder during the term of this
Agreement by payment of a base salary at the annual rate of $________ in such
monthly, semi-monthly or other payments as are from time to time applicable to
other executive officers of the Bank. The Executive's salary may be increased
from time to time during the term of this Agreement in the sole discretion of
the Board of Directors of the Company, but Executive's salary shall not be
reduced below the level then in effect. Executive also shall be paid directors
fees as provided in Section 1 hereof. In addition, Executive shall be entitled
to participate in incentive compensation plans or arrangements as may from time
to time be established by the Company or the Bank on a basis consistent with the
treatment of other executive officers of the Company or the Bank (but
recognizing differences in responsibilities among executive officers). Executive
also shall be entitled to receive any other bonus or discretionary compensation
payments as the Board of Directors of the Company may determine from time to
time.
4. ADDITIONAL BENEFITS - EXPENSES. Executive shall be provided such other
------------------------------
benefits (including but not limited to medical, health, life and other insurance
coverage) and shall be entitled to participate in such retirement plans of the
Company and the Bank, as are generally made available to other executive
officers of the Company or the Bank. During his employment, Executive also
shall be entitled to customary vacations in accordance with vacation policies
and practices of the Company or the Bank prevailing from time to time, and to
reimbursement for reasonable expenses incurred on behalf of the Company or the
Bank in accordance with the then prevailing policies and practices of the
Company. All payments under this Agreement shall be subject to all federal,
state or local withholdings which may be required.
5. TERMINATION.
-----------
(A) JUST CAUSE. The Board of Directors of the Company may
----------
terminate the employment of Executive with the Company and the Bank at any time
for "Just Cause." "Just Cause" shall mean personal dishonesty, incompetence,
willful misconduct or breach of a fiduciary duty involving personal profit in
the performance of his duties under this Agreement, intentional failure to
perform stated duties (provided that such nonperformance has continued for 10
days after the Company has given written notice of such nonperformance to the
Executive and its intention to terminate Executive's employment because of such
nonperformance), willful violation of any law, rule or regulation (other than a
law, rule or regulation relating to a misdemeanor, traffic violation or similar
offense), final cease-and-desist order or material breach of any provision of
this Agreement. If Executive's employment is terminated for "Just Cause", the
Executive shall be entitled to receive his theretofore unpaid base salary for
the period of employment up to the date of termination, but shall not be
entitled to any compensation or employment benefits pursuant to this Agreement
for any period after the date of termination.
(B) TERMINATION OR SUSPENSION OF EMPLOYMENT AS REQUIRED BY LAW.
----------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, the following
provisions shall limit
-3-
<PAGE>
the obligation of the Company to continue employing Executive, but only to the
extent required by the applicable regulations of the OTS (12 C.F.R. (S) 563.39),
or similar succeeding regulations:
(i) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12
U.S.C. (S) 1818(e)(3) and (g)(1)), the Company's obligations under this
Agreement shall be suspended as of the date of service of notice, unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, the
Company may in its discretion (i) pay Executive all or part of the compensation
withheld while its contract obligations hereunder were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were suspended. If
the Company does not pay Executive all of the compensation withheld while its
contract obligations hereunder were suspended or does not reinstate in whole its
obligations which were suspended, Executive may terminate his employment
hereunder pursuant to Section 5(d) and such termination shall be considered as
termination for "Good Reason."
(ii) If the Executive is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. (S)
1818(e)(4) or (g)(1)) all obligations of the Company under this Agreement shall
terminate as of the effective date of the order.
(iii) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act), all obligations to Executive hereunder
shall terminate as of the date of default, but such termination shall not affect
any vested rights of Executive, the Company or the Bank.
(iv) All obligations under this Agreement may be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank: (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee at the time the
Federal Deposit Insurance Company enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c) of
the Federal Deposit Insurance Act and (ii) by the Director, or his or her
designee at the time the Director or such designee approves a supervisory merger
to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition.
(v) Termination under this Section 5(b) shall not affect other
rights hereunder which are vested at the time of termination.
(C) VOLUNTARY TERMINATION. Executive may terminate his employment
---------------------
hereunder at any time for any reason upon giving the Company written notice, at
least ninety (90) days prior to termination of employment. Upon such
termination, Executive shall be
-4-
<PAGE>
entitled to receive Executive's theretofore unpaid base salary for the period of
employment up to the date of termination, but shall not be entitled to any
compensation or employment benefits pursuant to this Agreement for any period
after the date of termination.
(D) GOOD REASON. Executive may terminate his employment hereunder
-----------
at any time for "Good Reason." "Good Reason" shall be deemed to exist if
Executive terminates his employment because, without his express written
consent, the Company breaches any of the terms of this Agreement. If Executive
terminates his employment for "Good Reason," Executive shall receive (i) his
base salary under Section 3 hereof through the then-remaining term of employment
under Section 2 (calculated as if his employment had not been terminated under
this Section 5(d)), which amount shall be paid in a lump-sum or in equal monthly
installments at the discretion of Executive, (ii) his theretofore unpaid base
salary and pro-rated incentive compensation for the period of employment up to
the date of termination, (iii) medical and other insurance through the then
remaining term of employment under Section 2 (calculated as if his employment
had not been terminated under this Section 5(d)) consistent with the terms and
conditions set forth in Section 4, (iv) any other benefits to which Executive is
entitled by law or the specific terms of the Company's policies in effect at the
time of termination of employment and (v) an amount equal to the product of the
Company's or the Bank's annual aggregate contribution, for the benefit of
Executive in the year preceding termination, to all qualified retirement plans
in which Executive participated multiplied by three (calculated as if his
employment had not been terminated under this Section 5(d)). The benefit in (v)
under this Section 5(d) shall be in addition to any benefit payable from any
qualified or non-qualified plans or programs maintained by the Company or the
Bank at the time of termination.
(E) TERMINATION WITHOUT JUST CAUSE. The Company may terminate
------------------------------
Executive's employment without Just Cause, in which case the Executive shall
receive the amounts that would be paid Executive under Section 5(d) if he had
terminated his employment for Good Reason.
(F) CHANGE IN CONTROL. (i) If, at any time after the date hereof, a
-----------------
"Change in Control" (as hereinafter defined) occurs and within twelve (12)
months thereafter Executive's employment is terminated by the Company other than
for Just Cause or Executive terminates his employment for any reason, then
Executive shall be entitled to the benefits provided below.
(A) The Company shall promptly pay to Executive an amount
equal to the product of 2.99 times Executive's "base amount" as defined in
Section 280G(b)(3) of the Code (such "base amount" to be derived from
Executive's compensation paid by the Company and the Bank).
(B) For purposes of all employee benefit plans (including, but
not limited to, health and life insurance and incentive, pension and retirement
plans) of the Company and the Bank, Executive (and his dependents and
beneficiaries, as the case may be) shall be given service credit for all
purposes for, and shall be deemed to be an employee of the
-5-
<PAGE>
Company and the Bank during, the term of this Agreement set forth in Section 2
(calculated as if employment had not been terminated under this Section 5(f)),
notwithstanding the fact that he is no longer an employee of the Company or the
Bank; provided that, if the terms of any of such employee benefit plans do not
permit such credit or deemed employee treatment, the Company or the Bank will
make payments and distributions to Executive outside of the plans in amounts
substantially equivalent to the payments and distributions Executive would have
received pursuant to the terms of the plans and attributable to such credit or
deemed employee treatment, had such credit or deemed employee treatment been
permitted pursuant to the terms of the plans.
(ii) (A) Anything in this Agreement to the contrary
notwithstanding, it is the intention of the Company and Executive that no
portion of any payment under this Agreement, or payments to or for the benefit
of Executive under any other agreement or plan, be deemed an "Excess Parachute
Payment" as defined in Section 280G of the Code, or its successors. It is agreed
that the present value of and any payment to or for the benefit of Executive in
the nature of compensation, receipt of which is contingent on the occurrence of
a Change in Control, and to which Section 280G of the Code applies (in the
aggregate "Total Payments") shall not exceed an amount equal to one dollar less
than the maximum amount that the Company may pay without loss of deduction under
Section 280G(a) of the Code. Present value for purposes of this Agreement shall
be calculated in accordance with Section 280G(d)(4) of the Code. Within sixty
days (60) following the earlier of (1) the giving of notice of termination of
employment or (2) the giving of notice by the Company to Executive of its belief
that there is a payment or benefit due Executive, the Company, at the Company's
expense, shall obtain the opinion of the Company's public accounting firm (the
"Accounting Firm"), which opinion need not be unqualified, which sets forth: (a)
the amount of the Base Period Income of Executive (as defined in Code Section
280G), (b) the present value of Total Payments and (c) the amount and present
value of any excess parachute payments. In the event that such opinion
determines that there would be an Excess Parachute Payment, the payment
hereunder shall be modified, reduced or eliminated as specified by Executive in
writing delivered to the Company within thirty (30) days of his receipt of such
opinion or, if Executive fails to so notify the Company, then as the Company
shall reasonably determine, so that under the bases of calculation set forth in
such opinion there will be no Excess Parachute Payment. In the event that the
provisions of Sections 280G and 4999 of the Code are repealed without
succession, this Section shall be of no further force or effect.
(B) In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm under Section
5(f)(ii)(A)). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any determination by the Accounting Firm shall be binding upon
the Company and Executive.
-6-
<PAGE>
(iii) For purposes of Section 5(f) of this Agreement, a "Change
in Control" shall be deemed to have occurred if:
(A) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the
date hereof), becomes the beneficial owner of shares of the Company having 20%
or more of the total number of votes that may be cast for the election of
directors of the Company, including for this purpose any shares beneficially
owned by such third person or group as of the date hereof; or
(B) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company. (In the event of any reorganization
involving the Company in a transaction initiated by the Company in which the
shareholders of the Company immediately prior to such reorganization become the
shareholders of a successor or ultimate parent company of the Company resulting
from such reorganization and the persons who were directors of the Company
immediately prior to such reorganization constitute a majority of the Board of
Directors of such successor or ultimate parent, no "Change in Control" shall be
deemed to have taken place solely by reason of such reorganization,
notwithstanding the fact that the Company may have become the wholly-owned
subsidiary of another company in such reorganization and members of the Board of
Directors of the Company may have become members of the Board of Directors of
such successor company, and thereafter the term "Company" for purposes of this
paragraph shall refer to such successor or ultimate parent company.); or
(C) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the
date hereof), acquires control, as defined in 12 C.F.R. (S) 574.4, or any
successor regulation, of the Company that would require the filing of an
application for acquisition of control or notice of change in control in a
manner set forth in 12 C.F.R. (S) 574.3, or any successor regulation.
6. DEATH OF EXECUTIVE. If Executive shall die during the term of this
------------------
Agreement, his employment with the Company and this Agreement shall terminate
and the Company shall pay to a beneficiary designated in writing by Executive,
or in the absence of such designation, to Executive's estate, the full amount of
his theretofore unpaid base salary and pro-rated incentive compensation for the
period of employment up to the date of termination, and the Company shall have
no further obligations hereunder. The preceding sentence shall not be construed
to limit any benefit payable in the event of the death of Executive under any
applicable benefit plans or other arrangements.
7. DISABILITY OF EXECUTIVE. If Executive becomes Totally and Permanently
-----------------------
Disabled (as defined below) during the term of this Agreement, the Company may
terminate
-7-
<PAGE>
Executive's employment and this Agreement, except Sections 8 and 9 hereof, by
giving Executive written notice of such termination not less than 5 days before
the effective date thereof. If Executive's employment and this Agreement are
terminated pursuant to this Section 7, the Company shall pay to Executive his
theretofore unpaid base salary and pro-rated incentive compensation for the
period of employment up to the date of termination, and the Company shall have
no further obligations to Executive under this Agreement. The preceding
sentence shall not be construed to limit any benefit payable to Executive under
any applicable benefit plans or other arrangements. The Executive is Totally
and Permanently Disabled for purposes of this Section 7 if he is disabled or
incapacitated to the extent that he is unable to perform the duties of Vice
President of the Company or the Bank for more than three (3) consecutive months,
and such disability or incapacity is expected to continue for more than three
(3) additional months as certified by a medical doctor of Executive's own
choosing and concurred in by a doctor of the Company's choosing.
8. COVENANT NOT TO COMPETE. Executive acknowledges that the Company would
-----------------------
be substantially damaged by an association of Executive with a depository
institution that competes for customers with the Company, the Bank and any
subsidiaries of the Company or the Bank. Without the consent of the Company,
Executive shall not at any time during the term of this Agreement or Executive's
employment, and for a period of three years thereafter (regardless of the reason
for termination), (a) solicit any person who was a customer of the Company or
the Bank or any of their subsidiaries during the two year period prior to the
termination of this Agreement or Executive's employment hereunder for Executive
or any other person, to offer the same products or render the same services to
such customer as were provided or proposed to be provided by the Company or the
Bank or any of their subsidiaries to such customer as of the time of termination
of Executive's employment, (b) directly or indirectly, on Executive's behalf or
in the service or on the behalf of others, render or be retained to render
similar services as described in Section 1 hereof, whether as an officer,
partner, trustee, consultant, or employee for any depository institution, which
has a banking office located within 25 miles of any office of the Bank or any
banking office of the Company as of the date of Executive's termination of
employment, provided, however, that Executive shall not be deemed to have
breached this undertaking if his sole relationship with any other such entity
consists of his holding, directly or indirectly, an equity interest in such
entity not greater than three percent (3%) of such entity's outstanding equity
interest, or (c) actively induce or solicit any employees of the Company or the
Bank to leave such employ. For purposes of this Section 8, "person" shall
include any individual, corporation, partnership, trust, firm, proprietorship,
venture or other entity of any nature whatsoever.
9. CONFIDENTIAL INFORMATION. Executive acknowledges that he now has, and
------------------------
hereunder will have, access to important and confidential information regarding
the business and services of the Company, the Bank and their subsidiaries, and
that the disclosure to, or the use of such information by, any business in
competition with the Company, the Bank or their subsidiaries shall result in
substantial and undeterminable harm to the Company, the Bank and its
subsidiaries. In order to protect the Company, the Bank and its subsidiaries
against such
-8-
<PAGE>
harm and from unfair competition, Executive agrees with the Company that while
employed by the Company and at any time thereafter, Executive will not disclose,
communicate or divulge to anyone, or use in any manner adverse to the Company,
the Bank or their subsidiaries any information concerning customers, methods of
business, financial information or other confidential information of the
Company, the Bank, or their subsidiaries, except for information as is in the
public domain or ascertainable through common sources of public information
(otherwise than as a result of any breach of this covenant by Executive).
10. LIMITATION ON TERMINATION OR DISABILITY PAY. Any payments made to
-------------------------------------------
Executive pursuant to this Agreement or otherwise are subject to and conditioned
upon the compliance of such payments with 12 U.S.C. (S) 1828(k) and any
regulations promulgated thereunder.
11. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
------------------------
expenses that Executive may incur in connection with his enforcement of the
terms of this Agreement, but only if and after a legal judgment or settlement
has been reached. Executive shall be entitled to receive interest thereon for
the period of any delay in payment from the date such payment was due at the
rate determined by adding two hundred basis points to the six-month Treasury
Bill rate.
12. INQUIRIES REGARDING PROPOSED ACTIVITIES. In the event Executive shall
---------------------------------------
inquire in writing of the Company whether any proposed action on the part of
Executive would be considered by the Company to be prohibited by or in breach of
the terms of this Agreement, the Company shall have 30 days after receipt of
such notice to express in writing to Executive its position with respect thereof
and in the event such writing shall not be given to Executive, such proposed
action, as set forth in the writing of the Company, shall not be deemed to be a
violation of or breach of this Agreement.
13. NO DUTY OF MITIGATION. Executive shall not be required to mitigate
---------------------
the amount of any payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
Executive as the result of employment by another employer, by retirement
benefits after the date of termination or otherwise.
14. SUCCESSORS. This Agreement may not be assigned by the Company except
-----------
in connection with a merger involving the Company or a sale of substantially all
of its assets (subject to the Change in Control provisions of Section 5(f)), and
the obligations of the Company provided for in this Agreement shall be formally
assumed by, and be the binding legal obligations of, any successor to the
Company by purchase, merger, consolidation, or otherwise. This Agreement may not
be assigned by Executive during his life, and upon his death will be binding
upon and inure to the benefit of his heirs, legatees and the legal
representatives of his estate.
-9-
<PAGE>
15. NOTICE. For the purposes of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Company shall be directed to the attention of the Board of
Directors of the Company with a copy to the Secretary of the Company), or to
such other address as either party may have furnished to the other in writing in
accordance herewith.
16. AMENDMENTS. No amendment or additions to this Agreement shall be
----------
binding unless in writing and signed by all parties, except as herein otherwise
provided.
17. SEVERABILITY. The provisions of this Agreement shall be deemed
-------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If,
however, any provision of this Agreement is declared invalid or unenforceable by
a court of competent jurisdiction, then the parties hereto shall in good faith
amend this Agreement to include an alternative provision that accomplishes a
similar result.
18. GOVERNING LAW. This Agreement shall be governed by the laws of the
-------------
United States to the extent applicable and otherwise by the internal laws of the
State of Missouri.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
EQUALITY BANCORP, INC.
By: ___________________________________
Its:____________________________________
EXECUTIVE
_______________________________________
Leonard O. Wolter
The Bank hereby acknowledges this Agreement and by its execution of this
Agreement hereby agrees to fulfill its obligations hereunder.
EQUALITY SAVINGS BANK
By: ___________________________________
Its:____________________________________
-11-
<PAGE>
EXHIBIT 21.1
Equality Bancorp, Inc.
List of Subsidiaries
(Effective Upon Consummation of the Conversion and Reorganization)
<TABLE>
<CAPTION>
Name under which State or Other Jurisdiction of
Name of Subsidiary: Subsidiary Does Business: Incorporation or Organization
- ------------------- ------------------------- -------------------------------
<S> <C> <C>
Equality Savings Bank Equality Savings Bank Federally-chartered
(formerly Equality
Savings and Loan
Association, F.A.
Equality Mortgage Equality Mortgage Missouri corporation
Corporation (wholly- Corporation
owned subsidiary of
Equality Savings Bank)
Equality Commodity Equality Insurance Agency Missouri corporation
Corporation (wholly-owned
subsidiary of
Equality Savings Bank)
Dutch Town Dutch Town Development Missouri corporation
Development Co. Co.
(wholly-owned subsidiary
of Equality Commodity
Corporation)
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Equality Savings and Loan Association, F.A.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Prospectus included in the Registration
Statement on Form S-1.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements of Equality Savings and Loan Association, F.A.
and subsidiaries present fairly, in all material respects, the financial
position as of March 31, 1997 and 1996, and the results of operations and cash
flows for each of the years in the three-year period ended March 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
June 27, 1997
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------------
Financial Services Industry Consultants
June 27, 1997
Board of Directors
First Missouri Financial, M.H.C.
Equality Savings and Loan Association, F.A.
4131 South Grand Boulevard
St. Louis, Missouri 63118
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of First Missouri Financial, M.H.C., the mutual holding company for
Equality Savings and Loan Association, F.A., St. Louis, Missouri and any
amendments thereto, in the Form S-1 Registration Statement and any amendments
thereto and in the Form H(e)1-s for Equality Bancorp, Inc. We also hereby
consent to the inclusion of, summary of and references to our Appraisal Report
in such filings including the Prospectus of Equality Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of our report dated April 10, 1997, with respect to
the financial statements of Equality Mortgage Corporation, included in the
Prospectus forming a part of Equality Bancorp, Inc.'s Registration Statement on
Form S-1.
/s/ Rubin, Brown, Gornstein & Co. LLP
RUBIN, BROWN, GORNSTEIN & CO. LLP
June 27, 1997
St. Louis, Missouri
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,037
<INT-BEARING-DEPOSITS> 3,820
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 85,077
<INVESTMENTS-CARRYING> 4,849
<INVESTMENTS-MARKET> 4,725
<LOANS> 95,928
<ALLOWANCE> 283
<TOTAL-ASSETS> 200,764
<DEPOSITS> 122,983
<SHORT-TERM> 1,113
<LIABILITIES-OTHER> 897
<LONG-TERM> 63,136
0
0
<COMMON> 836
<OTHER-SE> 11,798
<TOTAL-LIABILITIES-AND-EQUITY> 200,764
<INTEREST-LOAN> 7,449
<INTEREST-INVEST> 5,929
<INTEREST-OTHER> 232
<INTEREST-TOTAL> 13,610
<INTEREST-DEPOSIT> 5,682
<INTEREST-EXPENSE> 9,112
<INTEREST-INCOME-NET> 4,948
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 6,209
<INCOME-PRETAX> 808
<INCOME-PRE-EXTRAORDINARY> 808
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 505
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<YIELD-ACTUAL> 6.99
<LOANS-NON> 643
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 233
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 283
<ALLOWANCE-DOMESTIC> 283
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
April 9, 1997
Mr. Richard C. Fellhauer
Chairman, President and Chief Executive Officer
Equality Savings and Loan Association
4131 South Grand
St. Louis, Missouri 63118-3464
Dear Mr. Fellhauer:
This letter sets forth the agreement between Equality Savings and Loan
Association, St. Louis, Missouri ("Equality" or the "Association") and RP
Financial, LC. ("RP Financial") for certain conversion appraisal services
pertaining to the mutual-to-stock conversion of First Missouri Financial, MHC.
(the "MHC"), a federal mutual holding company and the majority shareholder of
Equality, and the Plan of Reorganization between the MHC and Equality. The
specific services to be rendered by RP Financial are described below. These
services will be rendered by a team of two senior consultants on staff.
Description of Conversion Appraisal Services
- --------------------------------------------
RP Financial will prepare a written detailed valuation report which will be
fully consistent with applicable regulatory guidelines and standard valuation
practices. The valuation report will conclude with an estimate of the pro forma
market value of the shares of stock to be offered and sold in the conversion. RP
Financial understands that as part of the conversion, the shares of Equality
which are held by public shareholders (i.e. stockholders other than the MHC)
will be exchanged for newly issued shares of common stock of a newly organized
stock holding company ("SHC") and that shares offered in the conversion will be
SHC shares. The valuation report will incorporate such key transaction
parameters as the financial strength and operations of Equality, the proposed
treatment in the conversion of the publicly-traded shares of Equality (including
the proposed exchange), and the financial strength and operations of the MHC
unconsolidated. The estimate of pro forma market value will be a preliminary
value, subject to confirmation by RP Financial at the closing of the offering.
Prior to preparing the valuation report, RP Financial will conduct a
financial due diligence, including on-site interviews of senior management and
reviews of financial and other documents and records, to gain insight into the
operations, financial condition, profitability, risks and external factors which
impact the Association. The valuation will include an in-depth analysis of the
Association's financial condition and operating results, as well as assess the
Association's interest rate risk, credit risk and liquidity risk. The valuation
report will describe the Association's business strategies and market area and
prospects for the future. A peer group analysis relative to publicly-traded
savings institutions will be conducted for the purpose of determining
appropriate valuation adjustments relative to the group. The valuation report
will conclude with a midpoint pro forma valuation for the shares to be offered
in the conversion, as well as a range of value around the midpoint value. The
valuation report may be periodically updated throughout the conversion process
and there will be at least one updated valuation prepared at the time of the
closing of the stock offering.
<PAGE>
RP FINANCIAL, LC.
Mr. Richard C. Fellhauer
April 9, 1997
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Equality at the above address in conjunction with the
filing of the regulatory application. Subsequent updates will be filed promptly
as certain events occur which would warrant the preparation and filing of such
valuation updates. Further, RP Financial agrees to perform such other services
as are necessary or required in connection with the regulatory review of the
appraisal and respond to the regulatory comments, if any, regarding the
valuation appraisal and subsequent updates.
Fee Structure and Payment Schedule
- ----------------------------------
Equality agrees to pay RP Financial a fixed fee of $22,500 for these
services, plus reimbursable expenses. Payment of these fees shall be made
according to the following schedule:
o $5,000 upon execution of the letter of agreement engaging RP Financial's
services as outlined herein;
o $15,000 upon delivery of the completed original appraisal report; and
o $2,500 upon completion of the conversion to cover all subsequent
valuation updates that may be required.
The Association will reimburse RP Financial for out-of-pocket expenses
incurred in the preparation of the appraisal report. Such out-of-pocket expenses
will include travel, telephone, facsimile, copying, shipping, computer and data.
RP Financial will make all attempts to keep out-of-pocket expenses to a minimum.
In the event Equality or the MHC shall, for any reason, discontinue the
proposed conversion prior to delivery of the completed documents set forth above
and payment of the respective progress payment fees, Equality agrees to
compensate RP Financial according to RP Financial's standard billing rates for
consulting services based on accumulated and verifiable time expenses, not to
exceed the respective fee caps noted above, after giving full credit to the
initial retainer fee. RP Financial's standard billing rates range from $75 per
hour for research associates to $250 per hour for managing consultants.
If during the course of the proposed transaction, unforeseen events occur
so as to materially change the nature or the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Equality and RP Financial. Such unforeseen events shall
include, but not be limited to, major changes in the conversion regulations,
appraisal guidelines or processing procedures as they relate to conversion
appraisals, major changes in management or procedures, operating policies or
philosophies, and excessive delays or suspension of processing of conversion
applications by the regulators such that completion of the conversion
transaction requires the preparation by RP Financial of a new appraisal.
Representations and Warranties
- ------------------------------
Equality and RP Financial agree to the following:
1. The Association agrees to make available or to supply to RP Financial
such information with respect to its business and financial condition as RP
Financial may reasonably request in order to provide the aforesaid valuation.
Such information heretofore or hereafter supplied or made available to RP
Financial shall include: annual financial statements, periodic regulatory
filings and material agreements, debt instruments, off
<PAGE>
RP FINANCIAL, LC.
Mr. Richard C. Fellhauer
April 9, 1997
Page 3
balance sheet assets or liabilities, commitments and contingencies, unrealized
gains or losses and corporate books and records. All information provided by the
Association to RP Financial shall remain strictly confidential (unless such
information is otherwise made available to the public), and if conversion is not
consummated or the services of RP Financial are terminated hereunder, RP
Financial shall upon request promptly return to the Association the original and
any copies of such information.
2. The Association hereby represents and warrants to RP Financial that
any information provided to RP Financial does not and will not, to the best of
the Association's knowledge, at the times it is provided to RP Financial,
contain any untrue statement of a material fact or fail to state a material fact
necessary to make the statements therein not false or misleading in light of the
circumstances under which they were made.
3. (a) The Association agrees that it will indemnify and hold harmless
RP Financial, any affiliates of RP Financial, the respective directors,
officers, agents and employees of RP Financial or their successors and assigns
who act for or on behalf of RP Financial in connection with the services called
for under this agreement (hereinafter referred to as "RP Financial"), from and
against any and all losses, claims, damages and liabilities (including, but not
limited to, all losses and expenses in connection with claims under the federal
securities laws) attributable to (i) any untrue statement or alleged untrue
statement of a material fact contained in the financial statements or other
information furnished or otherwise provided by Equality to RP Financial, either
orally or in writing, (ii) the omission or alleged omission of a material fact
from the financial statements or other information furnished or otherwise made
available by Equality to RP Financial or (iii) any action or omission to act by
Equality, or Equality's respective officers, directors, employees or agents
which action or omission is willful or negligent. Equality will be under no
obligation to indemnify RP Financial hereunder if a court determines that RP
Financial was negligent or acted in bad faith with respect to any actions or
omissions of RP Financial related to a matter for which indemnification is
sought hereunder. Any time devoted by employees of RP Financial to situations
for which indemnification is provided hereunder, shall be an indemnifiable cost
payable by Equality at the normal hourly professional rate chargeable by such
employee.
(b) RP Financial shall give written notice to the Association of such
claim or facts within thirty days of the assertion of any claim or discovery of
material facts upon which the RP Financial intends to base a claim for
indemnification hereunder. In the event the Association elects, within seven
days of the receipt of the original notice thereof, to contest such claim by
written notice to RP Financial, RP Financial will be entitled to be paid any
amounts payable by the Association hereunder, together with interest on such
costs from the date incurred at the rate of fifteen percent (15%) per annum
within five days after the final determination of such contest either by written
acknowledgement of the Association or a final judgment of a court of competent
jurisdiction. If the Association does not so elect, RP Financial shall be paid
promptly and in any event within thirty days after receipt by the Association of
the notice of the claim.
(c) The Association shall pay for or reimburse the reasonable
expenses, including attorneys' fees, incurred by RP Financial in advance of the
final disposition of any proceeding within thirty days of the receipt of such
request if RP Financial furnishes the Association: (1) a written statement of RP
Financial's good faith belief that it is entitled to indemnification hereunder;
and (2) a written undertaking to repay the advance if it ultimately is
determined in a final adjudication of such proceeding that it or he is not
entitled to such indemnification.
(d) In the event the Association does not pay any indemnified loss or
make advance reimbursements of expenses in accordance with the terms of this
agreement, RP Financial shall have all remedies available at law or in equity to
enforce such obligation.
It is understood that, in connection with RP Financial's above-mentioned
engagement, RP Financial may also be engaged to act for the Association in one
or more additional capacities, and that the terms of the original
<PAGE>
RP FINANCIAL, LC.
Mr. Richard C. Fellhauer
April 9, 1997
Page 4
engagement may be embodied in one or more separate agreements. The provisions of
Paragraph 3 herein shall apply to the original engagement, any such additional
engagement, any modification of the original engagement or such additional
engagement and shall remain in full force and effect following the completion or
termination of RP Financial's engagement(s). This agreement constitutes the
entire understanding of the Association and RP Financial concerning the subject
matter addressed herein, and such contract shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. This agreement may not
be modified, supplemented or amended except by written agreement executed by
both parties.
Equality and RP Financial are not affiliated, and neither Equality nor RP
Financial has an economic interest in, or is held in common with, the other and
has not derived a significant portion of its gross revenues, receipts or net
income for any period from transactions with the other.
The MHC and RP Financial are not affiliated, and neither the MHC nor RP
Financial has an economic interest in, or is held in common with, the other and
has not derived a significant portion of its gross revenues, receipts or net
income for any period from transactions with the other.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as indicated
below and returning to RP Financial a signed copy of this letter, together with
the initial retainer fee of $5,000.
Sincerely,
William E. Pommerening
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: Mr. Richard C. Fellhauer
--------------------------------------------------
Chairman, President and Chief Executive Officer
For: Equality Savings and Loan Association
St. Louis, Missouri
Date Executed:
-----------------------------------
<PAGE>
-----------------------------------------------
CONVERSION APPRAISAL REPORT
EQUALITY BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
EQUALITY SAVINGS BANK, FSB
(currently Equality Savings and
Loan Association, F.A.)
St. Louis, Missouri
Dated As Of:
June 20, 1997
-----------------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
June 20, 1997
Board of Directors
First Missouri Financial, M.H.C.
Equality Savings and Loan Association, F.A.
4131 South Grand Boulevard
St. Louis, Missouri 63118
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal of the estimated pro forma market value of the common stock which is
to be issued by Equality Bancorp, Inc., St. Louis, Missouri ("Equality Bancorp"
or the "Holding Company"), in connection with the mutual-to-stock conversion of
First Missouri Financial, M.H.C. (the "Mutual Holding Company" or the "MHC").
The Mutual Holding Company currently has a majority ownership interest in, and
its principal asset consists of, the common stock of Equality Savings and Loan
Association, F.A., St. Louis, Missouri ("Equality Savings" or the Association")
to be known as Equality Savings Bank, FSB following the mutual-to-stock
conversion. The conversion involves the offering of shares of common stock to
depositors, employee stock benefit plans, directors, officers and employees,
public stockholders and to certain members of the general public (the
"Subscription and Community offerings").
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
- -----------------------------
On May 16, 1997, the Board of Directors of the Association and the Mutual
Holding Company adopted the Plan of Conversion and Reorganization, which was
amended on June 20, 1997 (the "Plan"), pursuant to which the Mutual Holding
Company will convert from a federally chartered mutual holding company to a
capital stock corporation organized under Delaware law. In the reorganization
process: (1) the MHC, which currently owns approximately 53.2 percent of the
Association's common stock, will convert to a federally-chartered interim stock
savings association and simultaneously merge with and into the Association,
pursuant to which all shares of the Association's common stock held by the MHC
will be canceled; (2) as a result of the merger of the interim stock savings
association into the Association, the Association will become a wholly-owned
subsidiary of the Holding Company; and (3) the outstanding shares of the
Association's common stock held by the Public Stockholders will be converted
automatically into and become shares of common stock of the Holding Company (the
"Exchange Shares") pursuant to a ratio that will result in the holders of such
shares owning the same percentage of the Holding Company as they currently own
of the Association (the "Exchange Ratio").
<PAGE>
RP Financial, LC.
Board of Directors
June 20, 1997
Page 2
Pursuant to the reorganization, shares of Equality Bancorp stock will be
offered in Subscription and Community offerings that will represent an ownership
interest in the Holding Company of approximately 53.2 percent (the same
percentage ownership that the MHC currently maintains in the Association).
RP Financial, LC.
RP Financial, LC.
- -----------------
("RP Financial") is a financial consulting firm that specializes in
financial valuations and analyses of business enterprises and securities. The
background and experience of RP Financial are detailed in Exhibit V-1. We
believe that, except for the fee we will receive for our appraisal of the shares
to be issued by the Holding Company and assisting the Association in the
preparation of its business plan, we are independent of the Association, the
Mutual Holding Company, the Holding Company and other parties engaged by the
Association to assist in the stock issuance process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed the Mutual Holding Company's
Application for Approval of Conversion, including the Proxy Statement, as filed
with the OTS and the Holding Company's Form S-1 registration statement as filed
with the Securities and Exchange Commission ("SEC"). We have conducted an
analysis of the Association and the Mutual Holding Company (hereinafter,
collectively referred to as the "Association"), that has included due diligence
related discussions with the Association's management; KPMG Peat Marwick LLP,
the Association's independent auditor; Schiff Hardin & Waite, the Association's
conversion counsel; and Trident Securities, Inc., which has been retained by the
Association 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
Association operates and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of conversion on the
Association's operating characteristics and financial performance as they relate
to the pro forma market value of Equality Savings. We have reviewed the economy
in the Association's primary market area and have compared the Association's
financial performance and condition with selected publicly-traded thrift
institutions with similar characteristics as the Association'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 Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the assets or liabilities of the Association. The
valuation considers the Association only as a going concern and should not be
considered as an indication of the liquidation value of Equality Savings.
<PAGE>
RP Financial, LC.
Board of Directors
June 20, 1997
Page 3
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory 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 Association's value alone. It is our understanding Equality
Savings intends to remain an independent institution and there are no current
plans for selling control of the Association 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 the Holding
Company'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.
Valuation Conclusion
- --------------------
It is our opinion that, as of June 20, 1997, the aggregate pro forma market
value of the Association and the Mutual Holding Company was $15,037,590 at the
midpoint. Based on this valuation and the approximate 53.20 percent ownership
interest being sold to the public, the midpoint of the Holding Company's stock
offering was $8,000,000, equal to 800,000 shares offered at a per share value of
$10.00. Pursuant to OTS conversion guidelines, the 15 percent offering range
includes a minimum of $6,800,000 and a maximum of $9,200,000. Based on the
$10.00 per share offering price, this range equates to an offering of 680,000
shares at the minimum to 920,000 shares at the maximum. In the event that the
appraised value is subject to an increase, up to 1,058,000 shares may be sold at
an issue price of $10.00 per share, for an aggregate offering size of
$10,580,000, without a resolicitation.
Establishment of Exchange Ratio
- -------------------------------
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the
Association's common stock for common stock of the Holding Company. The proposed
Exchange Ratio has been designed to preserve the current aggregate percentage
ownership in the Association represented by the Public Stockholders. The
Exchange Ratio will be determined at the end of the Holding Company's stock
offering based on the total number of shares sold in the Subscription and
Community offerings. Based upon the valuation conclusion and offering range
concluded above, the Exchange Ratio would be 1.5283 shares, 1.7981 shares,
2.0678 shares and 2.3779 shares of Equality Bancorp stock issued for each share
of common stock held by the Public Stockholders, at the minimum, midpoint,
maximum and super range of the offering, respectively.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the initial offering will thereafter be able to sell
such shares at prices related to the foregoing valuation of the pro forma market
value. The appraisal does not take into account any trading activity with
respect to the purchase and sale of common stock
<PAGE>
RP Financial, LC.
Board of Directors
June 20, 1997
Page 4
in the secondary market, and reflects only a valuation range as of this date for
the pro forma market value of the Association immediately upon issuance of the
stock.
RP Financial's valuation was determined based on the financial condition,
operations and shares outstanding as of March 31, 1997, the date of the
financial data included in the Holding Company's Prospectus. The proposed
Exchange Ratio and the exchange of the Public Stockholders' shares for newly
issued Holding Company shares was determined independently. RP Financial
expresses no opinion on the proposed Exchange Ratio and the exchange of shares
held by the Public Stockholders for newly issued Holding Company shares.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated should market conditions or changes in
Equality Savings' operating results warrant. The valuation will also be updated
at the completion of the Holding Company's stock offering. These updates will
consider, among other things, any developments or changes in the Association's
financial performance and condition, management policies, and current conditions
in the equity markets for thrift shares, both existing issues and new issues.
Also, these updates will consider changes in other external factors which impact
value including, but not limited to: various changes in the legislative and
regulatory environment (including changes in the appraisal guidelines), the
stock market and the market for thrift stocks, and interest rates. Should any
such new developments or changes be material, in our opinion, to the valuation
of the shares, appropriate adjustments to the estimated pro forma market value
will be made. The reasons for any such adjustments will be explained in the
update at the date of the release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
St. Louis, Missouri
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C>
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
Introduction 1.1
Plan of Conversion and Reorganization 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 1.16
Subsidiary 1.17
Legal Proceedings 1.17
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 3.13
Summary 3.16
</TABLE>
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
St. Louis, Missouri
(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 4.8
6. Liquidity of the Shares 4.9
7. Marketing of the Issue 4.9
A. The Public Market 4.9
B. The New Issue Market 4.13
C. The Acquisition Market 4.16
D. The Market for Equality Savings Stock 4.16
8. Management 4.17
9. Effect of Government Regulation and Regulatory Reform 4.17
Summary of Adjustments 4.17
Valuation Approaches 4.18
1. Price-to-Earnings ("P/E") 4.19
2. Price-to-Book ("P/B") 4.20
3. Price-to-Assets ("P/A") 4.21
Valuation Conclusion 4.21
Establishment of Exchange Ratio 4.24
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF TABLES
EQUALITY SAVINGS AND LOAN ASSOCIATION, F.A.
St. Louis, Missouri
<TABLE>
<CAPTION>
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <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 2.8
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 3.15
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
4.5 Calculation of Exchange Ratios 4.24
</TABLE>
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
Equality Savings and Loan Association, F.A. ("Equality Savings" or the
"Association") is a federally chartered mutual savings and loan association
headquartered in St. Louis, Missouri. Equality Savings serves the St. Louis
metropolitan area through three full service branch offices and five loan
production offices ("LPOs"). One of the branch offices is located at the main
office and the other two are located in St. Louis County, which accounts for the
largest concentration of the St. Louis MSA's population. The Association's
wholly-owned mortgage banking subsidiary, Equality Mortgage Corporation ("EMC"),
is headquartered at the main office as well and the five LPOs are all located
within the St. Louis MSA. Equality Savings was organized in 1884 and has
operated as a federally insured institution since 1945. Equality Savings 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 March 31, 1997,
Equality Savings had $200.8 million in assets, $123.0 million in deposits and
net worth of $12.6 million or 6.3 percent of total assets.
In October 1993, the Association completed a reorganization from a Missouri
chartered mutual savings and loan association into a mutual holding company. The
mutual holding company is a federal corporation, chartered and regulated by the
OTS, and is named First Missouri Financial, M.H.C. (the "MHC"). Pursuant to the
reorganization, Equality Savings transferred substantially all of its assets and
liabilities to a newly-formed stock association in exchange for 445,000 shares
of stock issued to the MHC. Simultaneously, the Association sold 380,000 shares
of stock to the public in Subscription and Community offerings. An additional
11,400 shares of common stock were sold to Equality Savings' Management
Recognition Plan. As of March 31, 1997, there were 836,400 total shares of the
Association's common stock issued and outstanding, of which 445,000 shares, or
53.20 percent, were owned by the MHC and 391,400 shares, or 46.80 percent, were
owned by the public. On June 13, 1995, Equality Savings converted from a
Missouri chartered savings and loan association to a federally chartered savings
and loan association.
Plan of Conversion and Reorganization
- -------------------------------------
On May 16, 1997, the Board of Directors of the Association and the MHC
adopted the Plan of Conversion and Reorganization, which was amended on June 20,
1997 (the "Plan"), pursuant to which the MHC will convert from a federally
chartered mutual holding company to a capital stock corporation organized under
Delaware law. In the reorganization process: (1) the MHC, which currently owns
approximately 53.2 percent of the Association's common stock, will convert to a
federally-chartered interim stock savings association and
<PAGE>
RP Financial, LC.
Page 1.2
simultaneously merge with and into the Association, pursuant to which all shares
of the Association's common stock held by the MHC will be canceled; (2) as a
result of the merger of the interim stock savings association into the
Association, the Association will become a wholly-owned subsidiary of Equality
Bancorp, Inc. ("Equality Bancorp" or the "Holding Company"); and, (3) the
outstanding shares of the Association's common stock held by the Public
Stockholders will be converted automatically into and become shares of common
stock of the Holding Company (the "Exchange Shares") pursuant to a ratio that
will result in the holders of such shares owning the same percentage of the
Holding Company as they currently own of the Association (the "Exchange Ratio").
Pursuant to the reorganization, shares of Equality Bancorp stock will be
offered in Subscription and Community offerings that will represent an ownership
interest in the Holding Company of approximately 53.2 percent (the same
percentage ownership that the MHC currently maintains in the Association).
Going forward, Equality Bancorp will own 100 percent of the Association's
stock, and the Association will be Equality Bancorp's sole subsidiary. At this
time, no other activities are contemplated for Equality Bancorp other than the
ownership of the Association, a loan to the newly-formed employee stock
ownership plan ("ESOP") and investment of Holding Company cash in investment
securities. In the future, Equality Bancorp may acquire or organize other
operating subsidiaries, although there are no specific plans at present.
Strategic Overview
- ------------------
Throughout most of its history, Equality Savings 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, beginning with
the early-1980s, the Association embarked on a diversification strategy designed
to increase earnings and reduce the Association's reliance on traditional
residential lending for earnings. This strategy included: (1) formation of EMC
(1982), a residential mortgage banking company, to take advantage of
developments in the secondary mortgage market, generate loan fee income and to
build an off-balance sheet portfolio of loan servicing; (2) pursuit of real
estate investments and joint venture real estate development projects (mid-
1980s) to take advantage of management's real estate expertise and the healthy
St. Louis real estate market in the mid-1980s; and (3) diversification of
operations into non-traditional thrift activities, such as real estate brokerage
and the sale of insurance and specialty products.
In recent years, the Association has maintained it mortgage banking
emphasis, reflecting the success of EMC in originating 1-4 family permanent
mortgage loans, providing the Association with a source of 1-4 family permanent
mortgage loans, and generating income through loan sale gains and fee income,
including loan
<PAGE>
RP Financial, LC.
Page 1.3
servicing income realized from loans sold to the secondary market with servicing
retained. Comparatively, Equality Savings is winding down its real estate
investment and development activities, in light of the negative regulatory
capital implications associated with such investment activities and the mixed
earnings results that have been realized from the Association's real estate
investment activities. Income generated through Equality Savings' insurance and
real estate brokerage activities has been relatively modest.
Over the past several years, the Association has maintained a mortgage
banking emphasis, which has been supported by a generally favorable interest
rate environment for the origination of 1-4 family permanent mortgage loans. EMC
originates 1-4 family permanent mortgage loans throughout the St. Louis MSA and
is the sole source of 1-4 family loans for the Association. Typically, Equality
Savings retains ARM and balloon loans originated by EMC, while longer term fixed
rate loans are sold to the secondary market. Part of the Association's strategy
going forward will be to reduce its dependence on its mortgage banking
operations through pursuing greater lending diversification and, in particular
focusing on growth in commercial business loans. Such growth is expected to be
facilitated by the recent hiring of a commercial lending officer from a super
regional bank competitor.
To supplement its lending activities, Equality Savings maintains a notable
portion of its interest-earning assets in investments. Equality Savings'
investment portfolio is largely comprised of U.S. Government and Federal agency
obligations, most of which mature in less than ten years. The Association also
maintains a portfolio of mortgage-backed securities ("MBS"), as a means to
deploy excess liquidity at more favorable yields than other investment
alternatives that are consistent with the Association's investment philosophy.
Mortgage-backed securities held by the Association consist of securities
guaranteed or insured by a federal agency and are primarily fixed rate
securities. During fiscal 1996, the Association utilized borrowings to fund
purchases of mortgage-backed securities as a measure to increase earnings
through the net interest margin. In fiscal 1997, approximately half of the
mortgage-backed securities portfolio was sold and redeployed into intermediate-
term investments. The borrowings utilized to fund the Association's leveraging
strategy consist substantially of FHLB advances which are callable within one
year. Accordingly, Equality Savings assumed some additional interest rate risk
for the purposes of improving earnings. Equality Savings' current investment
strategy has de-emphasized purchases of mortgage-backed securities, with cash
flow being largely redeployed into loans and U.S. Government and agency
securities.
The Association's earnings composition is reflective of its mortgage
banking emphasis, with a substantial proportion of Equality Savings' pre-tax
earnings being derived from fees and gains generated by its mortgage banking
operations. High operating expenses are also representative of Equality Savings'
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). Net interest income has been
<PAGE>
RP Financial, LC.
Page 1.4
constrained by an interest-earning asset composition which reflects a relatively
low concentration of loans and an interest-bearing liability composition which
is concentrated in CDs and borrowings.
In recent years, the Association's operating strategy has resulted in
strong asset growth, which has been funded by borrowings. Deposit growth has
been negative, due to competitive forces and the Association's decision to
control deposit costs through funding growth with borrowings. As the result of
the growth, the Association's capital position has declined to a level that will
not support further leveraging of the balance sheet. Equality Savings'
leveraging strategy has served to enhance core earnings through the net interest
margin, although at the expense of increasing the interest rate risk associated
with net interest income. Notwithstanding the additional interest rate risk
assumed through the leveraging strategy, Equality Savings has implemented
strategies to control interest risk exposure which include selling most fixed
rate loans to the secondary market and holding a relatively high concentration
of longer term CDs. Credit risk has been effectively controlled through the
Association's 1-4 family lending emphasis and maintenance of a high
concentration of assets in low risk investments.
The Association's Board of Directors has elected to convert to the full
stock form of ownership to improve the competitive position of Equality Savings.
A full stock conversion will also provide existing public shareholders with
greater liquidity in their shares by more than doubling the number of shares
outstanding to the public, which is expected to facilitate a NASDAQ listing for
the stock (trading of Equality Savings' stock is currently primarily conducted
through the Association's office). The additional capital realized from
conversion proceeds will increase liquidity to support funding of future loan
growth and other interest-earning assets, and reduce interest rate risk by
enhancing the Association's interest-earnings assets/interest-bearing
liabilities ratio ("IEA/IBL") ratio. The additional funds realized from the
stock offering will also serve as an alternative funding source to deposits and
borrowings in meeting the Association's future funding needs, which may
facilitate a reduction in the Association's funding costs. Additionally,
Equality Savings' higher equity-to-assets ratio will also better position the
Association to take advantage of expansion opportunities as they arise and
further leveraging of the balance sheet. Such expansion would most likely occur
through acquiring branches or other financial institutions in areas that would
provide for further penetration in the markets currently served by the
Association or nearby surrounding markets. At this time, the Association has no
other specific plans for expansion other than internal growth. The Association's
projected internal use of proceeds are highlighted below.
The proceeds from the conversion are expected to be deployed as follows:
o Holding Company. Up to 50 percent of the net conversion proceeds will
---------------
be retained by Equality Bancorp. Such funds will be invested initially
into short-term investments. Over time, the Holding Company funds may
be utilized for various corporate purposes, including
<PAGE>
RP Financial, LC.
Page 1.5
payment of dividends and possible repurchases of common stock
consistent with OTS limitations.
o Equality Savings. The remaining net proceeds of the conversion will be
----------------
infused into the Association. Proceeds infused into the Association
will initially be held in short-term investments. Over time, the
proceeds are expected to be redeployed into the Association's loan
growth and normal investment activities.
Balance Sheet Trends
- --------------------
From March 31, 1993 through March 31, 1997, Equality Savings exhibited
annual asset growth of 9.2 percent (see Table 1.1), with the most notable growth
occurring during fiscal 1996. Equality Savings recorded asset growth of $32.1
million during fiscal 1996, reflecting the Association's leveraging strategy of
funding mortgage-backed securities with FHLB borrowings. In fiscal 1997
approximately half of the mortgage-backed securities portfolio was sold and
redeployed into U.S. Government and agency securities. As the result of Equality
Savings' strategy of leveraging through investments, the concentration of loans
comprising total assets has declined during the past five years. Assets have
been primarily funded by deposits, although the Association's use of borrowings
has become more prominent in recent years. Borrowings and capital, including
proceeds realized from the minority stock offering in fiscal 1994, has funded
asset growth over the past five fiscal years, as the Association's balance of
deposits has declined since fiscal year end 1993.
The Association's loan portfolio increased at an annual rate of 6.1 percent
from fiscal year 1993 through fiscal year end 1997, with fiscal years 1994 and
1995 accounting for the only two years of loan growth recorded during the
period. After peaking at a balance of $97.0 million at fiscal year end 1996, the
loan portfolio balance declined to $95.9 million at fiscal year end 1997. The
decline in the fiscal 1997 balance was attributable to a reduction in the loans
held for sale balance, as loans held in-portfolio by the Association increased
during fiscal 1997. Overall, the concentration of loans comprising total assets
decreased from 53.6 percent at fiscal year end 1993 to 47.8 percent at fiscal
year end 1997.
Equality Savings' emphasis on 1-4 family lending is readily apparent, as
the 1-4 family permanent mortgage loan portfolio comprised 91.9 percent of
gross loans outstanding at March 31, 1997, including loans held for sale which
accounted for 4.6 percent of gross loans outstanding. Similarly, at fiscal year
end 1995, 1-4 family permanent mortgage loans comprised 93.3 percent of total
loans outstanding, including loans held for sale which accounted for 3.5
percent of total loans outstanding. EMC originates all of the Association's 1-4
family loans, which are either sold to the Association at par or sold to the
secondary market. Typically, adjustable rate and balloon loans are sold to the
Association, while longer term fixed rate loans are sold to the secondary
market. In addition to the Association's 1-4 family permanent mortgage loan
portfolio, EMC
<PAGE>
RP Financial, LC
Page 1.6
Table 1.1
Equality Savings and Loan Association, F.A.
Historical Balance Sheets(1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
At Fiscal Year End March 31,
--------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
--------------------------------------------------------------------------------------------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $141,077 100.0% $147,143 100.0% $163,659 100.0% $195,768 100.0% $200,764 100.0%
Cash and investments 56,519 40.1% 59,304 40.3% 56,106 34.3% 59,864 30.6% 79,828 39.8%
Mortgage-backed securities 93 0.1% 16,987 11.5% 15,260 9.3% 28,096 14.4% 14,954 7.4%
Loans receivable, net 75,643 53.6% 61,683 41.9% 83,235 50.9% 96,996 49.5% 95,928 47.8%
Deposits 131,216 93.0% 132,844 90.3% 121,560 74.3% 124,515 63.6% 122,983 61.3%
Borrowings 0 0.0% 1,105 0.8% 29,256 17.9% 57,305 29.3% 64,249 32.0%
Total equity 8,067 5.7% 12,050 8.2% 11,873 7.3% 12,789 6.5% 12,634 6.3%
Full service branches 3 3 3 3 3
Loan production offices 2 3 3 3 5
<CAPTION>
Annual
Growth
Rate
----
Pct
---
(%)
<S> <C>
Total Amount of:
Assets 9.22%
Cash and investments 9.02%
Mortgage-backed securities 256.10%
Loans receivable, net 6.12%
Deposits -1.61%
Borrowings N.M.
Total equity 11.87%
Full service branches
Loan production offices
</TABLE>
_________________________
(1) Ratios are as a percent of ending assets.
Source: Equality Savings' prospectus.
<PAGE>
RP Financial, LC.
Page 1.7
serviced $232.3 million of loans for others as of March 31, 1997. The balance of
the loan portfolio is diversified among consumer, commercial real estate/multi-
family, and commercial business loans, with commercial real estate/multi-family
loans accounting for the Association's most notable area of lending
diversification. As of March 31, 1997, commercial real estate/multi-family loans
comprised $4.3 million or 4.5 percent of the Association's loan portfolio.
Consumer loans represented the next largest type of lending diversification,
totaling $2.2 million or 2.3 percent of total loans outstanding at March 31,
1997. The Association's plan is to emphasize lending diversification growth in
commercial business loans, while commercial real estate/multi-family and
consumer loan growth is expected to be fairly limited.
Equality Savings' cash and investments balance was fairly stable during
fiscal years 1993 through 1996, ranging from a low of $56.1 million at fiscal
year end 1995 to a high of $59.8 million at fiscal year end 1996. However, as a
percent of assets, the cash and investments balance declined from 40.1 percent
at fiscal year end 1993 to 30.6 percent at fiscal year end 1996. Comparatively,
in connection with the Association's leveraging strategy, the cash and
investments balance increased sharply during fiscal 1997. As of March 31, 1997,
Equality Savings' cash and investments totaled $79.8 million or 39.8 percent of
assets. Exhibit I-4 provides historical detail of the Association's investment
portfolio. The investment securities portfolio totaled $75.0 million at March
31, 1997 and was comprised entirely of U.S. Government and agency securities.
The U.S Government and agency obligations have maturities ranging up to 15
years, with the largest concentration of the portfolio maturing within five-to-
ten years. Available for sale and held to maturity classifications accounted for
$70.1 million and $4.8 million of the investment portfolio, respectively, as of
March 31, 1997. Equality Savings maintained a pre-tax unrealized loss of
$583,000 on the available for sale portfolio, as of March 31, 1997. In addition
to investment securities, the Association held cash and cash equivalents and
interest-bearing deposits in other depository institutions, which amounted to
$1.0 million and $3.8 million, respectively, as of March 31, 1997. The
Association also maintained a FHLB stock balance of $3.4 million at March 31,
1997, which was not included in the cash and investments balance.
The balance of the Association's interest-earning assets consist of
mortgage-backed securities, which ranged from a low of $93,000, or 0.1 percent
of assets, in fiscal 1993 to a high of $28.1 million, or 14.4 percent of assets,
in fiscal 1996. The peak balance in mortgage-backed securities was the result of
the Association's leveraging strategy, in which borrowings were utilized to fund
purchases of mortgage-backed securities. Mortgage-backed securities were sold
during fiscal 1997, as the balance declined to $15.0 million, or 7.4 percent of
assets. Proceeds from the sale of mortgage-backed securities were redeployed
into U.S. Government and agency securities. The Association maintained a pre-tax
unrealized loss of $252,000 on the mortgage-backed securities portfolio at March
31, 1997, and the entire portfolio was classified as available for sale. All
mortgage-backed securities held by the Association are guaranteed or insured by
a federal agency.
<PAGE>
RP Financial, LC.
Page 1.8
Retail deposits constitute the largest component of the Association's
funding composition, although borrowings and capital have funded Equality
Savings' asset growth during the past five fiscal years. The Association's
balance of deposits declined at a 1.6 percent annual rate during the past five
fiscal years, with the most notable decline occurring during fiscal 1995.
Subsequent to the decline in fiscal 1995, the Association has maintained a
relatively stable deposit balance. However, the Association's ratio of deposits-
to-assets has declined steadily over the past five fiscal years, declining from
93.0 percent at fiscal year end 1993 to 61.3 percent at fiscal year end 1997.
CDs represent the largest component of the Association's deposit composition,
accounting for 67.6 percent of total deposits at fiscal year end 1997.
Transaction and savings accounts comprised the remaining 32.4 percent of the
Association's deposit composition at fiscal year end 1997. Equality Savings' use
of borrowings increased considerably over the past five fiscal years, as the
Association added borrowings to fund asset and deposit run-off. Borrowings for
the Association totaled $64.2 million, or 32.0 percent of assets, at March 31,
1997, versus a comparative zero balance maintained at fiscal year end 1993. FHLB
advances account for the substantial portion of the Association's borrowings
($63.0 million at March 31, 1997), with the balance consisting of a line of
credit maintained with an unaffiliated bank for purposes of funding loans
originated by EMC ($1.1 million at March 31, 1997) and the current ESOP debt
($136,000 at March 31, 1997).
Positive earnings over the past four years, along with the sale of minority
stock in fiscal 1994, translated into an annual capital growth rate of 11.9
percent from fiscal year end 1993 through fiscal year end 1997. Reflecting the
impact of the Association's leveraging strategy, Equality Savings' equity-to-
assets ratio declined from a peak of 8.2 percent at fiscal year end 1994 to 6.3
percent at fiscal year end 1997. All of the Association's capital is tangible
capital. Equality Savings maintains capital surpluses relative to all of its
regulatory capital requirements. The addition of conversion proceeds will serve
to strengthen Equality Savings' capital position and competitive posture within
its primary market area, as well as possibly support expansion in
existing or other nearby markets.
Income and Expense Trends
- -------------------------
The Association has reported positive earnings over the last five fiscal
years (see Table 1.2), ranging from a low of 0.20 percent of average assets in
fiscal 1995 to a high of 0.58 percent of average assets in fiscal 1993. For
fiscal 1997, the Association reported net income of $505,000, equal to 0.25
percent of average assets. Earnings during the most recent twelve month period
were depressed by the one time special assessment to recapitalize the SAIF. Net
interest income and operating expenses represent the major components of
Equality Savings' core earnings, although profitability is highly contingent
upon loan sale gains and fee income derived from Equality Savings' mortgage
banking and servicing activities.
<PAGE>
RP Financial, LC
Page 1.9
Table 1.2
Equality Savings and Loan Association, F.A.
Historical Income Statements(1)
(Amount and Percent of Average Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended March 31,
-------------------------------------------------------------------------------
1993 1994 1995 1996
-------------------------------------------------------------------------------
Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $10,357 7.08% $9,420 6.09% $9,697 6.02% $12,275 6.58%
Interest Expense (6,686) -4.57% (6,028) -3.90% (6,132) -3.81% (8,541) -4.58%
------- ------ ------- ----- ------ ------ ------- ------
Net Interest Income $3,671 2.51% $3,392 2.19% $3,565 2.21% $3,734 2.00%
Provision for Loan Losses (14) -0.01% (12) -0.01% (9) -0.01% (31) -0.02%
---- ------ ---- ----- --- ------ ---- ------
Net Interest Income after Provisions $3,657 2.50% $3,380 2.18% $3,556 2.21% $3,703 1.98%
Other Income 1,283 0.88% 1,385 0.90% 1,534 0.95% 1,469 0.79%
Operating Expense (5,664) -3.87% (6,073) -3.92% (5,321) -3.30% (5,341) -2.86%
------- ------ ------- ----- ------ ------ ------- ------
Net Operating Income ($724) -0.50% ($1,308) -0.85% ($231) -0.14% ($169) -0.09%
Non-Operating Income
- --------------------
Net gain(loss) on sales of securities $0 0.00% $0 0.00% ($34) -0.02% ($8) 0.00%
Net gain(loss) on loan sales 2,025 1.39% 2,432 1.57% 775 0.48% 1,248 0.67%
Other non-operating income(loss) 0 0.00% 0 0.00% 0 0.00% 0 0.00%
------- ------ ------ ----- ------- ------ ------- ------
Net Non-Operating Income 2,025 1.39% 2,432 1.57% 741 0.46% 1,240 0.66%
Net Income Before Tax $1,301 0.89% $1,124 0.73% $510 0.32% $1,071 0.57%
Income Taxes (453) -0.31% (400) -0.26% (188) -0.12% (418) -0.22%
Change in Acctg. Principle -- ---- 188 0.12% 0 0.00% -- ---
-- ----- --- ----- - ----- -- ---
Net Income (Loss) $848 0.58% $912 0.59% $322 0.20% $653 0.35%
Core Earnings
- -------------
Net Income Before Ext. Items $848 0.58% $724 0.47% $322 0.20% $653 0.35%
Addback: Non-Operating Losses 0 0.00% 0 0.00% 34 0.02% 8 0.00%
Deduct: Non-Operating Gains 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Tax Effect Non-Op. Items(2) 0 0.00% 0 0.00% (13 -0.01% (3) 0.00%
- ----- - ----- ---- ----- -- -----
Core Net Income $848 0.58% $724 0.47% $343 0.21% $658 0.35%
<CAPTION>
------------------
1997
------------------
Amount Pct
------ ---
($000) (%)
<S> <C> <C>
Interest Income $13,610 6.74%
Interest Expense (9,112) -4.51%
------- ------
Net Interest Income $4,498 2.23%
Provision for Loan Losses (50) -0.02%
--- ------
Net Interest Income after Provisions $4,448 2.20%
Other Income 1,441 0.71%
Operating Expense (5,420) -2.68%
------ -----
Net Operating Income $469 0.23%
Non-Operating Income
- --------------------
Net gain(loss) on sales of securities $7 0.00%
Net gain(loss) on loan sales 1,121 0.55%
Other non-operating income(loss) (789) -0.39%
----- ------
Net Non-Operating Income 339 0.17%
Net Income Before Tax $808 0.40%
Income Taxes (303) -0.15%
Change in Acctg. Principle -- ---
-- ----
Net Income (Loss) $505 0.25%
Core Earnings
- -------------
Net Income Before Ext. Items $505 0.25%
Addback: Non-Operating Losses 789 0.39%
Deduct: Non-Operating Gains (7) 0.00%
Tax Effect Non-Op. Items(2) (293) -0.15%
----- ------
Core Net Income $995 0.49%
</TABLE>
____________________________________
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 37.5 percent.
Sources: Equality Savings' prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.10
Equality Savings' net interest income to average asset ratio has been
maintained at a relatively low level over the past five fiscal years, ranging
from a low of 2.00 percent in fiscal 1996 to a high of 2.51 percent in fiscal
1993. For fiscal 1997, the Association's net interest income to average assets
ratio equaled 2.23 percent. Equality Savings' relatively low net interest income
to average assets ratio can be largely attributed to an interest-earning asset
composition which is concentrated in investments, as opposed to generally higher
yielding loans. Trends in the Association's net interest margin generally
paralleled the widening and narrowing of the yield-cost spread. As set forth in
Exhibits I-3 and I-5, the decline exhibited in the net interest margin between
fiscal 1993 and fiscal 1996 coincided with the narrowing of the Association's
interest rate spread from 2.46 percent during fiscal 1993 to 1.90 percent during
fiscal 1996. The narrowing of the Association's interest rate spread was
attributable to both a decline in the yield earned on interest-earning assets
(primarily during fiscal 1994) and an increase in funding costs (primarily
during fiscal 1996). A decline in the concentration of loans comprising
interest-earning assets contributed to the reduction in yield recorded during
fiscal 1994, while more extensive use of borrowings largely accounted for the
Association's higher funding costs during fiscal 1996. The higher net interest
margin posted during fiscal 1997 was supported by an increase in the
Association's interest rate spread to 2.12 percent, which was the result of both
an increase in the yield earned on interest-earning assets and a decline in
funding costs.
Non-interest operating income has been a key contributor to Equality
Savings' earnings in recent years, with such income consisting substantially of
service fees and charges. Rental income, equity in joint venture earnings or
losses, and miscellaneous sources of income comprises the balance of the
Association's non-interest operating income. Fee income is primarily generated
from the Association's portfolio of loans serviced for others, which totaled
$232.3 million at March 31, 1997. For the twelve months ended March 31, 1997,
non-interest operating income equaled 0.71 percent of average assets, which was
slightly lower than the level recorded by the Association in fiscal 1996 and a
more notable drop-off from levels recorded during fiscal years 1993 through
1995. The decline in Association's non-interest operating income from fiscal
1996 to fiscal 1997 stemmed largely from a reduction in rental income, due to
the sale of a 26-unit residential rental property. A positive earnings
contribution from the Association's joint ventures, particularly during fiscal
years 1994 and 1995, and a state tax refund during fiscal years 1993 and 1994,
supported the higher level of non-interest operating income recorded by the
Association during fiscal years 1993 through 1995.
Equality Savings' operating expenses as a percent of average assets have
been maintained at a relatively high level throughout the period shown in Table
1.2, although the Association's operating expense ratio has declined since
peaking at 3.92 percent during fiscal 1994. A reduction in operating expenses
and implementation of leveraging strategy have both served to reduce the
Association's operating expense ratio. For fiscal 1997, Equality Savings'
operating expense to average assets ratio equaled 2.68 percent. The most
<PAGE>
RP Financial, LC.
Page 1.11
notable factor accounting for the Association's relatively high operating
expense ratio is its mortgage banking activities, which materially impact
operating expenses but have a minimal effect on the Association's asset size. As
the result of the mortgage banking operations, which includes loan servicing,
the staffing needs of the Association's operations are high for an institution
with $201 million in assets. As of March 31, 1997, the Association maintained 95
full time equivalent employees, or assets per employee of $2.113 million.
Comparatively, assets per employee maintained by all publicly-traded SAIF-
insured thrifts averaged $4.419 million, or 2.1 times above the Association's
measure. Further upward pressure will be placed on the Association's operating
expense ratio in the forthcoming year, due to increase costs associated with
operating as a fully converted publicly-traded company, including expenses
related to the stock benefit plans. At the same time, the increase in capital
provided by conversion proceeds will increase the Association's leverage
capacity.
In light of the Association's relatively low net interest margin and
relatively high operating expense ratio, Equality Savings maintains a low
expense coverage ratio (net interest income divided by operating expenses).
Equality Savings' expense coverage ratio equaled 0.83 times for the twelve
months ended March 31, 1997, indicating that the Association's profitability is
dependent upon sources of non-interest operating income. Given the Association's
mortgage banking emphasis and the resulting importance of non-interest operating
income on earnings, Equality Savings' efficiency ratio (operating expenses as a
percent of net interest income and non-interest operating income) is viewed as a
key measure of the Association's core earnings strength. For the twelve months
ended March 31, 1997, the Association's efficiency ratio equaled 91.2 percent,
which is considered high and indicates only marginal profitability. When
factoring in loan sale gains, Equality Savings' efficiency ratio improved to
76.8 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 Equality
Savings' earnings over the past five fiscal years. Prior to fiscal 1996, the
Association's loan sale gains were the result of marketing gains. Beginning in
1996, loan sale gains reflect the capitalizing of mortgage servicing rights in
accordance with SFAS 122. In each of the past five fiscal years, loan sale gains
have exceeded the Association's pre-tax earnings, indicating that profitability
is highly dependent upon the gains. For the twelve months ended March 31, 1997,
the Association recorded loan sale gains or $1.1 million, or 0.55 percent of
average assets, which was consistent with the level of loan sale gains recorded
during fiscal year 1996 and above the fiscal 1994 gains of $775,000, or 0.48
percent of average assets. Comparatively, loan sale gains were relatively high
during fiscal years 1993 and 1994, equaling $2.0 million and $2.4 million,
respectively. The higher amount of loan sale gains recorded during fiscal years
1993 and 1994 was supported by the notable amount of refinancing activity
occurring during that period.
<PAGE>
RP Financial, LC.
Page 1.12
Gains and losses resulting from the sale of investments typically have not
been a material factor in the Association's earnings, with such gains and losses
resulting from the ongoing management of the investment portfolio. The special
assessment to recapitalize the SAIF is shown as a non-operating loss during
fiscal 1997, amounting to $789,000, or 0.39 percent of average assets.
Loss provisions established by the Association have not had a significant
impact on earnings over the past five fiscal years, which has been supported by
Equality Savings' maintenance of favorable credit quality measures, emphasis on
relatively low risk 1-4 family permanent mortgage loans, and maintenance of an
interest-earning asset composition with a relatively high concentration of low
risk investments. During fiscal 1997, the Association established loss
provisions of $50,000, or 0.02 percent of average assets, which was comparable
to the level of loss provisions established by Equality Savings in recent prior
years. As of March 31, 1997, the Association maintained valuation allowances of
$283,000, equal to 0.30 percent of net loans receivable and 39.9 percent of non-
performing assets. Exhibit I-6 sets forth the Association's loan loss allowance
activity during the past three fiscal years.
The Association's effective tax rate has ranged from 34.8 percent in fiscal
1993 to 39.0 percent in fiscal 1996. In fiscal 1997, Equality Savings' effective
tax rate equaled 37.5 percent. It is anticipated that the Association's normal
effective tax rate in the future will approximate recent historical levels.
Interest Rate Risk Management
- -----------------------------
The interest rate risk associated with the Association's balance sheet is
viewed as being somewhat limited, as indicated by the slightly positive one year
gap position maintained by Equality Savings as of March 31, 1997. Equality
Savings' gap analysis provided by the FHLB of Des Moines indicated a cumulative
one year gap to assets ratio of positive 1.1 percent as of March 31, 1997.
However, notably, the gap analysis assumed that approximately $56.0 million of
callable FHLB advances held by the Association would not be called within the
first year. If the gap analysis assumed that the FHLB advances would be called
within one year, the Association would maintain a negative one year gap ratio.
The Market Value of Equity ("MVE") analysis provided by the FHLB of Des Moines
indicated that a 2.0 percent instantaneous and sustained rise in interest rates
would result in a 21.8 percent decline in the Association's MVE (see Exhibit I-
7). The Association manages interest rate risk primarily from the asset side of
the balance sheet, through such strategies as maintaining a high concentration
of interest-earning assets as available for investments, selling most longer
term fixed rate 1-4 family loan originations in the secondary market, and
retaining adjustable rate and balloon 1-4 family loan originations for
portfolio. The Association's planned growth in commercial business lending
should serve to further increase the interest sensitivity of the loan portfolio.
As of March 31, 1997, of the total loans
20
<PAGE>
RP Financial, LC.
Page 1.13
due after March 31, 1998, ARM loans comprised 46.8 percent of those loans (see
Exhibit I-8). The Association's off-balance sheet portfolio of loans serviced
for others is also viewed as limiting the Associatoin's interest rate risk
exposure, given the general stability of loan servicing income. On the liability
side of the balance sheet, the Association manages interest rate risk primarily
through extending attractive rates on longer term CDs during periods of low and
declining interest rates. As of March 31, 1997, $46.8 million or 56.3 percent of
the Association's CDs had maturities of more than one year.
Equality Savings' interest rate risk measures indicate that net interest
income should not exhibit a great deal of volatility in various interest rate
environments. However, some additional interest rate risk was assumed by the
Association in connection with its leverage strategy, as FHLB advances which are
callable within one were utilized to purchase longer term investments for
purposes of improving earnings. The infusion of stock proceeds will serve to
further limit the Association'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 Association's funding needs.
Lending Activities and Strategy
- -------------------------------
The Association'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 March 31, 1997, 1-4
family permanent mortgage loans accounted for $88.4 million, or 91.9 percent, of
Equality Savings' total loan portfolio. Included in the 1-4 family loan balance
were loans held for sale of $4.4 million, or 4.6 percent of total loans
outstanding. The Association's second and third largest category of loans were
commercial real estate/multi-family and consumer loans, which totaled $4.3
million, or 4.5 percent, and $2.2 million, or 2.3 percent, of total loans
outstanding at March 31, 1997, respectively. Commercial business loans comprised
the balance of the loan portfolio at March 31, 1997, equaling $1.3 million, or
1.3 percent, of total loans outstanding. Exhibit I-11 provides the contractual
maturity of the Association's loan portfolio, by loan type, as of March 31,
1997.
All of the Association's 1-4 family lending activities are conducted
through EMC. EMC offers a variety of loan products, including 15- and 30-year
fixed rate loans, ARM loans which reprice every 1, 3 or 5 years, and 7-year
balloon loans. FHA/VA loans are also originated by EMC. Adjustable rate and
balloon loan originations are generally passed through to Equality Savings' loan
portfolio, while fixed rate originations are typically sold to the secondary
market. Conventional fixed rate loans are usually sold to FNMA or FHLMC on a
servicing retained basis, although some shorter term non-conforming fixed rate
loans may be retained in-portfolio by the Association. FHA and VA loans are
generally sold on a servicing released basis. The
21
<PAGE>
RP Financial, LC.
Page 1.14
substantial portion of 1-4 family loans originated by the Association are
underwritten to conform to FNMA/FHLMC requirements.
In the current interest rate environment, fixed rate loans have accounted
for most of the Association's 1-4 family loan volume. To enhance the
attractiveness of ARM loans, the Association offers a variety of ARM loan
products and initial rates are discounted from the fully-indexed rate. In
addition to the standard one year ARM loan, Equality Savings offers ARM loans
which reprice every three and five years. ARM loans are indexed to the
comparable term U.S. Treasury note rate, with the initial rate of interest being
dependent upon the length of the repricing term (i.e., a higher rate is charged
for loans with a longer repricing term). Most 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
current subject to an annual repricing cap of 2.0 percent and a life time
repricing cap of 5.0 to 5.5 percent.
To supplement the origination of 1-4 family loans, EMC purchases 1-4 family
loans from correspondent banking relationships. Purchased loans are subject to
the same underwriting standards as originated loans. Most purchased loans are
conventional fixed rate loans which are sold to the secondary market with
servicing retained. Immediately following the purchase of a loan package, a
simultaneous sale is made for future delivery. Accordingly, the Association
assumes no "pipeline" risk, since the loans are not held in inventory.
Commercial real estate and multi-family loans held by the Association are
collateralized by properties in its normal lending territory. In recent year
years, Equality Savings has been largely inactive in originating commercial real
estate and multi-family loans. Commercial real estate and multi-family loans are
extended up to a LTV ratio of 80.0 percent, with loan terms typically providing
for up to 25-year amortizations and a balloon payment within ten years. In light
of the higher credit risk associated with commercial real estate and multi-
family loans, loan rates offered on those loans are at a premium to the
Association's 1-4 family loan rates. Properties securing the commercial real
estate and multi-family loan portfolio include apartments, office buildings, and
various retail establishments. At March 31, 1997, the Association's largest
multi-family loan had an outstanding balance of $941,000 and was secured by a
26-unit apartment complex. Equality Savings' largest commercial real estate loan
had an outstanding balance of $1.5 million at March 31, 1997 and was secured by
a shopping center. Both loans were performing in accordance with their terms, as
of March 31, 1997. The Association's present lending strategy has de-emphasized
the origination of multi-family and commercial real estate loans.
To date, the Association's diversification into non-mortgage types of
lending has been limited, consisting of minor balances of commercial business
loans and consumer loans. The modest balance of
22
<PAGE>
RP Financial, LC.
Page 1.15
consumer loans held by the Association include a mix of loans secured by
deposits, home equity and second mortgage loans, direct auto loans and
miscellaneous other closed-end loans. Property improvement loans represented the
largest component of the consumer loan portfolio at March 31, 1997, with such
loans totaling $1.6 million, or 1.7 percent, of the total loan balance. Consumer
lending is expected to remain as a minor area of lending diversification for the
Association.
Commercial business loans held by the Association consist substantially of
secured lines of credit, which are extended to local businesses. The lines of
credit are floating rate loans, which are typically priced at a 1.5 to 2.0
percent premium to the Prime Rate. Commercial business lending is a planned
growth area for the Association, with such growth being facilitated by the
recent hiring of an experienced commercial lending officer. The officer was
hired from a super regional bank competitor, and it is the Association's
expectation that a number of his previous lending relationships will bring their
business to Equality Savings. Growth in commercial business lending is expected
to include loans for automobile dealer floor planning, commercial use vehicles
and general working capital.
Exhibit I-10, which shows the Association's loan originations, sales,
purchases and repayments over the past three fiscal years, further highlights
Equality Savings' emphasis on 1-4 family lending. Originations of 1-4 family
permanent mortgage loans have accounted for more than 96 percent of the
Association's lending volume in each of the past three fiscal years. Supported
by increased originations of 1-4 family loans, total loans originated by
Equality Savings amounted to $76.6 million and $73.3 million in fiscal years
1996 and 1997, respectively, versus total originations of $57.3 million in
fiscal 1995. In light of the Association's mortgage banking emphasis, a notable
portion of the Association's 1-4 family loan originations are either sold as
whole loans or converted to mortgage-backed securities and sold. Loan sales,
either as a whole loans or loans converted to mortgage-backed securities,
equaled 46.3 percent, 83.6 percent and 102.5 percent of total 1-4 family loan
originations and purchases during fiscal years 1995, 1996 and 1997,
respectively. Over the past three fiscal years, loans purchased by the
Association ranged from a low of $934,000 in fiscal 1995 to a high of $17.4
million in fiscal 1996. Loan originations other than 1-4 family permanent
mortgage loans have been very limited during the past three fiscal years, with
the most notable activity occurring during fiscal 1997 when the Association
originated $1.5 million of commercial business loans, $950,000 of multi-family
loans and $881,000 of consumer and other loans. Going forward, the Association's
lending strategy is to place a greater emphasis on the origination of commercial
business loans, although the origination of 1-4 family permanent mortgage loans
is expected to continue to dominate the Association's lending activities.
23
<PAGE>
RP Financial, LC.
Page 1.16
Asset Quality
- -------------
The Association's historical 1-4 family lending emphasis and relatively low
level of loans comprising interest-earning assets has supported favorable credit
quality measures in recent years. Over the past five fiscal years, Equality
Savings' non-performing assets-to-assets ratio has ranged from a low of 0.29
percent at fiscal year end 1994 to a high of 0.44 percent at fiscal year end
1995. As of March 31, 1997, Equality Savings' balance of non-performing assets
totaled $709,000, or 0.35 percent of total assets. As shown in Exhibit I-12,
non-performing assets held by the Association consisted of $643,000 of non-
accruing loans and $66,000 of real estate owned. Non-accruing loans held by the
Association at March 31, 1997 consisted entirely of 1-4 family permanent
mortgage loans and included $571,000 of FHA/VA loans, in which case the
principal and interest payments are either insured by the FHA or guaranteed by
the VA.
The Association reviews and classifies assets on a regular basis and
establishes loan loss provisions based on the overall quality, size and
composition of the loan portfolio, as well other factors such as historical loss
experience, industry trends and local real estate market and economic
conditions. At March 31, 1997, the Association had $138,000 of assets classified
as Substandard. The Association maintained valuation allowances of $283,000 at
March 31, 1997, equal to 0.30 percent of net loans receivable and 39.9 percent
of non-performing assets.
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Association's primary source of funds
and at March 31, 1997 deposits accounted for 67.6 percent of Equality Savings'
interest-bearing liabilities. Exhibit I-13 sets forth the Association's deposit
composition and Exhibit I-14 provides the interest rate and maturity composition
of the CD portfolio at March 31, 1997. The Association's deposit composition has
consistently been concentrated in CDs, with Equality Savings' current CD
composition reflecting a higher concentration of longer term CDs (maturities of
one year or more). As of March 31, 1997, the CD portfolio totaled $83.1 million,
with 56.3 percent of those CDs having maturities of one year or more. As of
March 31, 1997, jumbo CDs (CD accounts with balances of $100,000 or more)
amounted to $2.7 million, or 3.3 percent, of total CDs. Equality Savings
typically does not pay a premium rate for higher balance CDs. Deposit rates
offered by the Association are generally in the middle of the range of rates
offered by local competitors.
Lower costing savings and transaction accounts comprise the remainder of
Equality Savings' deposits, amounting to $39.9 million, or 32.4, percent of
total deposits at March 31, 1997. Over the past three fiscal years, the
Association's concentration of transaction and savings accounts comprising total
deposits has declined slightly (34.4 percent at fiscal year 1995 versus 32.4
percent at fiscal year end 1997). Growth in CDs
24
<PAGE>
RP Financial, LC.
Page 1.17
and shrinkage in transaction and savings accounts have both contributed to the
declining ratio of transaction and savings accounts maintained by the
Association.
Borrowings have been utilized to a greater degree by the Association in
recent years, most notably with respect to support leveraging of the balance
sheet through funding purchases of investments with FHLB advances. The
Association's borrowings totaled $64.3 million at March 31, 1997, of which $63.0
million consisted of FHLB advances. Exhibit I-15 provides detail of the
Association's borrowing activities over the past three fiscal years. Short-term
FHLB advances have been primarily utilized by the Association, as substantially
all of Equality Savings' FHLB advances mature or are subject to being called
within one year. The balance of the Association's borrowings consist of a line
of credit maintained with an unaffiliated bank for purposes of funding loans
originated by EMC ($1.1 million balance at March 31, 1997) and the current ESOP
debt ($136,000). It is anticipated that the current ESOP note will be paid-off
at the time of the Association's conversion. To the extent additional borrowings
are utilized by the Association, such borrowings are expected to consist
primarily of FHLB advances.
Subsidiary
- ----------
Equality Savings maintains two wholly-owned subsidiaries, EMC and Equality
Commodity Corporation ("ECC"). As has been previously discused, EMC is the
Association's mortgage banking subsidiary and represents a major component of
the Association's operations. ECC is involved in real estate investments and the
sale of insurance and specialty products on an agency basis. In connection with
its real estate investment activities, ECC holds two properties which are
currently being marketed. One property is a 14-unit apartment and the other
property is a vacant residential lot. ECC also has a 50 percent interest in a
real estate joint venture, WC Joint Venture. WC Joint Venture owns two
properties in St. Louis County. It is the Association's intention for ECC to
divest of its real estate holdings, as market conditions allow. Following the
divestment of the properties, ECC's activities will be limited to earning
commission income through the sale of insurance and specialty products. At this
time, no other subsidiary activities are being planned by the Association. At
March 31, 1997, the Association's investment in subsidiaries totaled $1.8
million.
Legal Proceedings
- -----------------
The Association is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
to be immaterial to the financial condition of the Association.
25
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Equality Savings serves the St. Louis metropolitan area through three full
service branch offices and five LPOs. The main office, which includes a full
service branch, is located in the City of St. Louis, while the other two full
service branch offices are located in St. Louis County. St. Louis County
accounts for the largest concentration of the MSA's population. EMC also
maintains its headquarters at the main office and the five LPOs are all located
within the St. Louis MSA. Exhibit II-1 provides information on the
Association's office facilities.
Consistent with large metropolitan areas in general, the economy in
Equality Savings' market area is based on a mixture of service, manufacturing,
wholesale/retail trade, state and local government. Notably, the market area
economy suffered a downturn in terms of economic activity and real estate value
in the early 1990s -- in lockstep with the national recession. More recently,
the St. Louis economy has rebounded from the downturn, which can be attributed
to an improved national economy and economic diversification within the St.
Louis MSA. Maintaining operations in a large metropolitan area serves as a
benefit to the Association in periods of economic growth, while at the same time
fosters significant competition for the financial services provided by Equality
Savings. The Association's competitive environment includes a large number of
thrifts, commercial banks, and other financial services companies, some of which
have a regional or national presence.
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 Association and the relative economic health of
the Association's market area.
Market Area Demographics
- ------------------------
Demographic and economic growth trends, measured by changes in population,
number of households, age distribution and median household income, provide key
insight into the health of the Association's market area (see Table 2.1). In
the 1990s, the Association's market area has generally exhibited less favorable
growth characteristics than the comparative growth rates of Missouri and the
U.S. The City of St. Louis experienced a decline in population from 1990 to
1997, versus comparative increases recorded by St. Louis County and the St.
Louis MSA. The decline in the City's population can be attributed to residents
<PAGE>
RP Financial, LC.
Page 2.2
Table 2.1
Equality Savings and Loan Association, F.A.
Summary Demographic Data
<TABLE>
<CAPTION>
Year Growth Rate Growth Rate
------------------------------------
POPULATION (000) 1990 1997 2002 1990-97 1997-2002
- ---------------- --------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
UNITED STATES 248,710 267,805 281,209 1.1% 1.0%
MISSOURI 5,117 5,399 5,620 0.8% 0.8%
ST LOUIS COUNTY 994 1,004 1,012 0.2% 0.2%
ST LOUIS CITY 397 344 329 -2.0% -0.9%
ST LOUIS MSA 2,493 2,556 2,622 0.4% 0.5%
HOUSEHOLDS (000)
- ----------------
UNITED STATES 91,947 99,020 104,001 1.1% 1.0%
MISSOURI 1,961 2,060 2,139 0.7% 0.8%
ST LOUIS County 380 383 385 0.1% 0.1%
ST LOUIS CITY 165 143 137 -2.0% -0.9%
ST LOUIS MSA 942 960 982 0.3% 0.4%
MEDIAN HOUSEHOLD INCOME ($)
- ---------------------------
UNITED STATES $ 29,199 $ 36,961 $ 42,042 3.4% 2.6%
MISSOURI 26,600 36,142 38,956 4.5% 1.5%
ST LOUIS County 40,012 50,321 51,191 3.3% 0.3%
ST LOUIS CITY 19,855 28,722 30,112 5.4% 0.9%
ST LOUIS MSA 32,638 42,115 45,822 3.7% 1.7%
PER CAPITA INCOME - ($)
- -------------------------
UNITED STATES $ 13,179 $ 18,100 ---- 4.6% N/A
MISSOURI 12,354 17,661 ---- 5.2% N/A
ST LOUIS COUNTY 17,304 24,656 ---- 5.2% N/A
ST LOUIS CITY 10,909 16,601 ---- 6.2% N/A
ST LOUIS MSA 14,265 19,999 ---- 4.9% N/A
1997 AGE DISTRIBUTION(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
- ------------------------ ---------- ----------- ----------- ----------- --------- ----------
UNITED STATES 21.7 13.6 31.4 20.5 12.7 34.8
MISSOURI 21.5 13.7 29.7 21.0 14.1 35.6
ST LOUIS COUNTY 21.2 12.1 30.6 22.3 13.8 36.7
ST LOUIS CITY 22.5 13.4 30.8 17.5 15.8 34.8
ST LOUIS MSA 22.6 12.8 31.1 20.6 12.9 35.2
Less Than 1 ,000 to 2 ,000 to $50,000 to 10,000 to
1997 HH INCOME Dist.(%) $ 15,000 25,000 $ 50,000 $100,000 $ 150,000 $150,000+
- ------------------------ -------- -------- -------- -------- ---------- ---------
UNITED STATES 17.7 14.4 33.5 26.5 5.4 2.6
MISSOURI 17.6 15.1 34.5 26.1 4.9 1.8
ST LOUIS COUNTY 8.4 9.7 31.5 36.0 9.6 4.8
ST LOUIS CITY 24.5 18.2 32.6 19.5 3.6 1.6
ST LOUIS MSA 13.4 12.1 33.9 31.2 6.6 2.7
Source: CACI.
</TABLE>
<PAGE>
RP Financial, LC.
Page 2.3
migrating to more suburban markets, as the result of the more favorable economic
growth occurring in those markets. Growth in households mirrored the population
growth rates, with household growth in the Association's market area falling
below the comparative measures for Missouri and the U.S. Over the next five
years, population and household growth trends are projected to remain
essentially the same for Equality Savings' primary market area, indicating
growth opportunities for the Association are likely to be more favorable in the
outlying suburban markets.
Median household and per capita income measures for the City of St. Louis
were well below the comparative measures for St. Louis County and the St. Louis
MSA. The low income levels for the City of St. Louis reflect a labor force that
is composed of a high concentration of blue collar workers, both skilled and
unskilled, as well as some concentrations of poverty in certain areas of the
City. Comparatively, the relative affluence of the more suburban markets is
indicated by the St. Louis County and St. Louis MSA household and per capita
income measures, which were above the comparative measures for Missouri and the
U.S. The greater wealth of the suburban markets is consistent with national
trends, in which the white collar professionals who work in the City generally
reside in the surrounding suburbs. Population growth has served to spur economic
growth in the suburban markets as well. Consistent with projected household
income for the U.S. and Missouri, household income growth throughout the
Association's primary market area is projected to decelerate over the next five
years. The general slow down exhibited in household income growth reflects that
most of the job growth is being realized in service related jobs, which tend to
be relatively low paying jobs. Based upon these demographic trends, most of the
lending demand in the Association's market area will likely come from customers
who live outside of the City of St. Louis.
National Economic Factors
- -------------------------
Over the past year, national economic growth has been mixed. At the
beginning of the third quarter of 1996, 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.
<PAGE>
RP Financial, LC.
Page 2.4
Economic data released at the beginning of the fourth quarter generally
confirmed that the national economy was slowing. October 1996 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
rate that became 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 beginning of the first quarter of 1997
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 unemployment rate was attributable to more people entering the job force, as
some markets were beginning 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. Signs of inflation became more notable during
March and April, with most economic indicators posting month-to-month increases
from January to February. Most notably, during February industrial production
increased 0.5 percent, housing starts rose 12.2 percent and the sale of existing
homes jumped 9.0 percent. Accelerating economic growth was further indicated by
a decline in the March unemployment rate to 5.2 percent, versus 5.3 percent for
February, and a higher than expected rise in the March "core" producer price
index, which posted its largest increase in 18 months.
Indications of strong economic growth continued into early-May 1997, as
first quarter GDP growth was measured at 5.8 percent and the April unemployment
rate declined to 4.9 percent. Consumer spending was up dramatically in the first
quarter as well. However, despite the strong growth measures, inflation data
indicated that the economy was not overheating. Prices increased at a modest 2.2
percent annual rate in the first quarter, which was down from 2.6 percent in the
fourth quarter of 1996. Inflation concerns were further moderated by the
balanced budget agreement reached by the President and Congress in early-May,
and April economic data which generally indicated a slowing pace of economic
growth. The April economic data reflected falling retail
<PAGE>
RP Financial, LC.
Page 2.5
sales and producer prices, while factory production declined for the first time
in more than a year. At the end of May, low unemployment and a favorable job
market provided for a 27-year high in the Consumer Confidence index for May. The
labor market showed signs of further tightening in early-June, as indicated by
the May unemployment rate declining to 4.8 percent of the work force - the
lowest level since November 1973. Notwithstanding the favorable job market,
inflation data released in mid-June did not indicate that the economy was
overheating. The non-threatening inflation data included declines in both retail
sales and producer prices for the month of May.
Consistent with the mixed economic activity, interest rate trends have been
varied as well over the past year. In early-July 1996, the release of a strong
June employment report had a 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 move interest rates at its December
meeting.
With few inflationary signs, interest rates held steady at the beginning of
1997, which was followed by a mild easing in interest rates during the first
half of February. Indications of slowing economic growth and the Federal
Reserve's decision to leave rates unchanged at its early-February meeting
spurred the 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.
After stabilizing briefly, the strengthening economy and growing expectations of
a rate increase by the Federal Reserve propelled interest rates higher in late-
March. The Federal Reserve increased short-term interest rates by 0.25 percent
in late-March, which was followed by a sharp sell-off in the bond market. For
the first time in six months, the rate on the 30-year benchmark bond moved above
7.0 percent in late-March.
<PAGE>
RP Financial, LC.
Page 2.6
Inflation concerns pushed interest rates higher during the first half of
April, which was followed by a slight decline in interest rates on rumors of a
national budget accord. News of the budget agreement and favorable inflation
data sustained the rally in bond prices through early-May. Interest rates
stabilized in mid-May, as the Federal Reserve opted not to raise interest rates
at its May meeting. The high level of consumer confidence indicated by the May
reading caused the 30-year bond yield to briefly edge above 7.0 percent in late-
May, which was followed by a mild rally in bond prices on expectations of
slowing economic growth. Despite inflation concerns sparked by the May
unemployment data, bond prices surged higher on the day the unemployment data
was released. The favorable inflation data indicated by the May retail sales
report sustained the bond market rally through mid-June. As of June 20, 1997,
one- and thirty-year U.S. Government bonds were yielding 5.63 percent and 6.66
percent, respectively. Exhibit II-2 provides historical interest rate trends
from 1991 through June 20, 1997.
Local Economy
- -------------
The St. Louis MSA economy has traditionally been supported by
manufacturing, supplemented by services and trade. The St. Louis MSA serves as
headquarters to a large number of manufacturing companies, including Anheuser
Busch, McDonnell Douglas, Monsanto, and Ralston Purina. While manufacturing
continues to represent a notable portion of industry earnings in the St. Louis
MSA (21.6 percent in 1994), manufacturing has declined as an employment sector
for several years. Manufacturing jobs accounted for 16.4 percent of the MSA's
employment in 1989, versus a comparative measure of 13.9 percent in 1994. One of
the largest employers in the St. Louis MSA is McDonnell Douglas, which is being
acquired by Boeing. At this time, it is unknown what impact the merger will have
on McDonnell Douglas' operations, if any.
Similar to national trends, most of the job growth being realized in the
St. Louis MSA has been realized in service related industries. Based on the most
recent data available (1994), services represent the largest employment sector
in the St. Louis MSA, accounting for 31.6 percent of the jobs and 27.1 percent
of the earnings.
Overall, while the economy in the St. Louis MSA has become more diversified
and less dependent on the manufacturing sector, the strength of the local
economy continues to be heavily influenced by manufacturing employment.
Accordingly, economic growth in the Association's market area is viewed as being
somewhat cyclical, for the most part paralleling trends in the national economy.
Comparative unemployment rates for the primary market area, as well as for
the U.S. and Missouri, are shown in Table 1.2. The unemployment data for the
market area further implies that the more favorable
<PAGE>
RP Financial, LC.
Page 2.7
growth opportunities exist outside of the City of St. Louis, with both St. Louis
County and the St. Louis MSA recording lower unemployment rates compared to the
City. Relatively low levels of unemployment were reflected in both the County's
and MSA's most recent measures, as both rates were below the Missouri and U.S.
measures. Comparatively, the April 1997 unemployment rate for the City of St.
Louis exceeded the unemployment rates for Missouri and the U.S. Similar to the
U.S. and Missouri, unemployment rates declined in the Association's primary
market from a year ago.
Table 2.2
Market Area Unemployment Trends
<TABLE>
<CAPTION>
Region April 1996 April 1997
------ ---------- ----------
<S> <C> <C>
United States 5.4% 4.8%
Missouri 4.3 4.2
St. Louis County 3.3 3.0
St. Louis City 7.4 6.8
St. Louis MSA 4.4 3.9
Source: U.S. Bureau of Labor Statistics.
</TABLE>
Competition
- -----------
Competition among financial institutions in the Association's market area
is significant, and, as larger institutions compete for market share to achieve
economies of scale, the market environment for the Association's products and
services is expected to become increasingly competitive in the future. Smaller
institutions such as Equality Savings will be forced to either compete with
larger institutions on pricing, or to identify and operate in a "niche" that
will allow for operating margins to be maintained at profitable levels.
The Association's retail deposit base is closely tied to the economic
fortunes of the St. Louis metropolitan area and, in particular, the areas of the
MSA that are nearby to one of Equality Savings' three branches. Table 2.3
displays deposit market trends from June 30, 1994 through June 30, 1996 for St.
Louis City and St. Louis County, the two jurisdictions where the Association
maintained branches during that period. Additional data is also presented for
the State of Missouri. The data indicates that deposit growth in the
Association's primary market area was positive, with a much higher growth rate
exhibited by St Louis City. Deposit growth in St. Louis City was largely the
result of growth in commercial bank deposits, with most of the growth being
concentrated in two super regional banks (Boatmen's and Mercantile). Thrifts
also recorded positive deposit growth in the City of St. Louis, which was
supported by an increase in the number of thrift
<PAGE>
RP Financial, LC.
Page 2.8
-----------------------------------------------
Table 2.3
Equality Savings and Loan Association, F.A.
Deposit Summary
-----------------------------------------------
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of June 30,
---------------------------------------------------------------
1994 1996 Deposit
---------------------------------------------------------------
Market Number Market No. of Growth Rate
of
Deposits Share Branches Deposits Share Branches 1994-1996
-------- ----- -------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
A. Deposit Summary
- ------------------
State of Missouri $65,690,283 100.0% 1,848 $70,073,391 100.0% 1,783 3.3%
Commercial Banks 54,410,515 82.8% 1,541 60,305,716 86.1% 1,532 5.3%
Savings and Loans 11,279,768 17.2% 307 9,767,675 13.9% 251 -6.9%
St Louis County $14,752,323 100.0% 257 $15,396,479 100.0% 244 2.2%
Commercial Banks 10,688,837 72.5% 174 12,586,259 81.7% 198 8.5%
Savings and Loans 4,063,486 27.5% 83 2,810,220 18.3% 46 -16.8%
Equality Savings (1) 58,810 1.4% 2 60,849 2.2% 2 1.7%
Equality Savings (2) 0.4% 0.4%
St Louis City $ 6,516,456 100.0% 78 $ 8,307,296 100.0% 72 12.9%
Commercial Banks 6,190,830 95.0% 70 7,599,592 91.5% 60 10.8%
Savings and Loans 325,626 5.0% 8 707,704 8.5% 12 47.4%
Equality Savings (1) 69,871 21.5% 1 64,566 9.1% 1 -3.9%
Equality Savings (2) 1.1% 0.8%
(1) Percent of S&L deposits.
(2) Percent of total deposits.
</TABLE>
Sources: FDIC, OTS, SNL Securities, LP.
- ----------------------------------------------------------------------------
<PAGE>
RP Financial, LC.
Page 2.9
branches maintained in the City. Comparatively, St. Louis County exhibited a
more modest deposit growth rate, as growth in commercial bank deposits was
partially offset by a decline in thrift deposits. The drop in thrift deposits
was largely attributable to the acquisition of thrift deposits by commercial
banks, as indicated by the respective increase and decline in total bank and
thrift branches maintained in St. Louis County during the period covered in
Table 2.3.
Equality Savings recorded a slight increase in deposits with its two St.
Louis County branches, which served to preserve its market share of total bank
and thrift deposits at 0.4 percent. Comparatively, deposits at the Association's
main office in the City of St. Louis declined from 1994 to 1996, resulting in a
decline in deposit market share from 1.1 percent to 0.8 percent. As highlighted
by the relatively low market share of deposits maintained by the Association,
competition for deposits in the primary market served by Equality Savings is
significant and includes a number of financial institutions with greater
resources than maintained by the Association.
Future deposit growth may be enhanced by the infusion of the conversion
proceeds, as the additional capital will improve Equality Savings' competitive
position and leverage capacity. The Association 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
provide Equality Savings with additional opportunities to acquire customers,
facilities and key personnel that become available as the result of community
banks being acquired. However, given the competition faced by Equality Savings,
it will be difficult for the Association to realize notable gains in deposit
market share without paying above market rates for deposits or further expanding
Equality Savings' branch network. In addition to relocating one of its branches
in St. Louis County, the Association is also planning to expand its branch
network within the St. Louis MSA. At this time, the most likely expansion site
is Arnold, Missouri (Jefferson County), where the Association recently completed
the purchase of a branch facility.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Equality Savings' operations versus a
group of comparable savings institutions (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The basis of the pro forma
market valuation of Equality Savings is provided by these institutions. Factors
affecting the Association's pro forma value such as financial condition, credit
risk, interest rate risk, loan composition and recent operating results can be
readily assessed in relation to the Peer Group. Current market pricing of the
Peer Group, subject to appropriate adjustments to account for differences
between Equality Savings and the Peer Group, will then be used as a basis for
the pro forma valuation of Equality Savings' to-be-issued common stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have also excluded from the Peer Group those
companies under acquisition, mutual holding companies and recent conversions,
since their pricing ratios are subject to distortion and/or do not have a
seasoned trading history.
From the universe of publicly-traded thrifts, we selected ten institutions
with characteristics similar to those of Equality Savings. In the selection
process, we applied two primary "screens" to the universe of all public
companies:
o SCREEN #1. MISSOURI INSTITUTIONS WITH ASSETS OF $100 MILLION TO $750
MILLION, EQUITY-TO-ASSETS RATIOS BETWEEN 8.0 PERCENT AND 16.0 PERCENT,
AND POSITIVE CORE RETURN ON AVERAGE ASSETS OF LESS THAN 1.0 PERCENT.
Two companies met the criteria for Screen #1 and both were included
for the Peer Group: Capital Savings Bancorp and Hardin Bancorp.
Exhibit III-2 details the financial characteristics of all publicly-
traded Missouri institutions.
o SCREEN #2. MID-WEST INSTITUTIONS WITH ASSETS OF $100 MILLION TO $750
MILLION, EQUITY-TO-ASSETS RATIOS BETWEEN 8.0 PERCENT AND 16.0 PERCENT,
POSITIVE CORE RETURN ON AVERAGE ASSETS OF LESS THAN 1.0 PERCENT, AND
AN OPERATING EXPENSE TO AVERAGE ASSETS RATIO OF 2.25 PERCENT OR
GREATER. Thirteen institutions met the selection criteria for Screen
#2 (see Exhibit III-3), and eight were included as part of Equality
Savings' Peer Group: ASB Financial Corp. of Ohio, Bank West Fin. Corp.
of Michigan, First Federal Bancorp of Minnesota, First Mutual Bancorp
of Illinois, Kankakee Bancorp of Illinois, North Bancshares of
Illinois, Potters Financial Corporation, and Western Ohio Financial
Corporation of Ohio.
<PAGE>
RP Financial, LC.
Page 3.2
Of the five institutions excluded, two were excluded as the result of
loan portfolio compositions which emphasized higher risk types of
lending compared to Equality Savings' loan portfolio composition. HF
Financial Corporation of South Dakota and Perpetual Midwest Financial
of Iowa maintained 41.6 percent and 45.1 percent of their respective
loan and mortgage-backed securities portfolio compositions in 1-4
family permanent mortgage loans and mortgage-backed securities, versus
a comparative ratio of 93.0 percent for the Association.
The remaining three companies were excluded on the basis of
maintaining asset compositions that were considered to be relatively
less comparable to Equality Savings' asset composition. In particular,
the three companies with the highest ratio of loans-to-assets were
eliminated from the Peer Group: Camco Financial Corporation of Ohio
(82.6 percent), Citizens First Financial Corporation of Illinois (81.7
percent), and LSB Financial Corporation of Lafayette Indiana (85.3
percent). Comparatively, the Association's loan-to-assets ratio
equaled 47.8 percent.
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 Equality
Savings, we believe that the Peer Group provides a good representation of
publicly-traded thrifts with operations comparable to those of the Association
and, thus, will provide a good basis for valuation. The following sections
present a comparison of Equality Savings' financial condition, income and
expense trends, loan composition, interest rate risk and credit risk versus the
Peer Group. The conclusions drawn from the comparative analysis are then
factored into the valuation analysis discussed in the final chapter.
A summary description of the key characteristics of each of the Peer Group
companies, which we determined warranted their inclusion as a comparable
institution to Equality Savings, is detailed below.
o ASB Financial Corp. of OH. Selected due to relatively low concentration of
loans comprising interest-earning assets, and MBS and loan portfolio
concentrated in 1-4 family permanent mortgage loans and MBS.
o Bank West Fin. Corp. of MI. Selected due to comparable asset size, above
average earnings contribution from non-interest operating income,
comparable level of operating expenses, high concentration of 1-4 family
permanent mortgage loans comprising the MBS and loan portfolio, and
favorable credit quality measures.
o Capital Savings Bancorp of MO. Selected due to Missouri market area,
comparable asset size, above average earnings contribution from non-
interest operating income, high concentration of MBS and 1-4 family
permanent mortgage loans comprising the MBS and loan portfolio, and
favorable credit quality measures.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
June 26, 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)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 425 7 12-31 07/95 15.00 56
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 400 6 12-31 07/94 22.00 51
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 342 10 03-31 12/92 29.00 41
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 238 7 06-30 12/93 16.62 31
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 147 2 06-30 03/95 14.00 25
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 120 2 06-30 12/93 19.25 20
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 117 4 12-31 12/93 21.55 10
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 109 1 06-30 04/95 12.00 21
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 108 5 09-30 04/95 18.75 13
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 103 3 03-31 09/95 14.62 13
</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: 06/26/97
<PAGE>
RP Financial, LC.
Page 3.4
o First Fed. Bancorp of MN. Selected due to similar interest-earning asset
composition, similar capital position as the Association's pro forma
capital position, above average earnings contribution from non-interest
operating income, comparable level of operating expenses, and favorable
credit quality measures.
o First Mutual Bancorp of IL. Selected due to comparable level of operating
expenses, similar concentration of 1-4 family permanent mortgage loans
comprising MBS and loan portfolio, and favorable credit quality measures.
o Hardin Bancorp of Hardin MO. Selected due to Missouri market area, same
size of branch network, relatively low concentration of loans comprising
interest-earning assets, similar capital position as the Association's pro
forma capital position, high concentration of MBS and 1-4 family permanent
mortgage loans comprising the MBS and loan portfolio, and favorable credit
quality measures.
o Kankakee Bancorp of IL. Selected due to similar capital position as the
Association's pro forma capital position, similar interest-earning asset
composition, MBS and loan portfolio concentrated in 1-4 family permanent
mortgage loans and MBS, and favorable credit quality measures.
o North Bancshares of Chicago IL. Selected due to similar funding
composition, comparable level of operating expenses, high concentration of
MBS and 1-4 family permanent mortgage loans comprising the MBS and loan
portfolio, and favorable credit quality measures.
o Potters Financial Corporation of OH. Selected due to relatively low
concentration of loans comprising interest-earning assets, comparable level
of operating expenses, high concentration of MBS and 1-4 family permanent
mortgage loans comprising the MBS and loan portfolio, and favorable credit
quality measures.
o Western Ohio Fin. Corp. of OH. Similar funding composition, high
concentration of MBS and 1-4 family permanent mortgage loans comprising the
MBS and loan portfolio, and favorable credit quality measures.
In aggregate, the Peer Group companies are similarly capitalized as the
industry average (12.47 percent of assets versus 12.85 percent for the all SAIF
average), generate lower earnings as a percent of average assets (0.67 percent
core ROAA versus 0.84 percent for the all SAIF average), and generate a lower
ROE (5.24 percent core ROE versus 7.34 percent for the all SAIF average).
Overall, the Peer Group's average P/B ratio and core P/E multiple were below and
approximately the same as the respective comparable SAIF averages (see next
page).
Ideally, the Peer Group companies would be comparable to Equality Savings
in terms of all of the selection criteria, but the universe of publicly-traded
thrifts does not provide for an appropriate number of such companies. However,
in general, the companies selected for the Peer Group were fairly comparable to
Equality Savings, as will be highlighted in the following comparative analysis.
<PAGE>
RP Financial, LC.
Page 3.5
<TABLE>
<CAPTION>
As of June 20, 1997
-------------------
Peer All SAIF
Group Insured
----- -------
<S> <C> <C>
Equity-to-Assets 12.47% 12.85%
Core Return on Assets ("ROA") 0.67 0.84
Core Return on Equity ("ROE") 5.24 7.34
Price-to-Book ratio ("P/B") 110.83% 131.24%
Core Price-to-Earnings multiple ("P/E") 17.97x 18.09x
Price-to-Assets ratio ("P/A") 13.70% 15.97%
</TABLE>
Source: Table 4.4 - Chapter IV Valuation Analysis.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for Equality Savings and
the Peer Group, reflecting the expected similarities and some differences given
the selection procedures outlined above. The Association's and the Peer Group's
ratios reflect balances as of March 31, 1997. Equality Savings' net worth base
of 6.3 percent was below the Peer Group's average net worth ratio of 12.5
percent; however, with the addition of stock proceeds, the Association's pro
forma capital position (consolidated with the holding company) will be more
comparable to the Peer Group's ratio. All of Equality Savings' capital consisted
of tangible capital, while the Peer Group's equity-to-assets ratio included 0.5
percent of intangible net worth. Both the Association'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 greater
capital surpluses. Again, on a pro forma basis, the Association's capital
surpluses will be more comparable to the Peer Group's ratios.
The interest-earning asset compositions for the Association and the Peer
Group reflected some differences, in light of the relatively high concentration
of cash and investments and relatively low concentration of loans maintained by
Equality Savings. Equality Savings' combined level of loans and mortgage-backed
securities equaled 55.2 percent, versus a comparative ratio of 73.4 percent for
the Peer Group. Conversely, Equality Savings' ratio of cash and investments to
assets was well above the Peer Group's ratio, based on comparative ratios of
41.4 percent and 23.4 percent, respectively. Overall, Equality Savings'
interest-earning assets amounted to 96.6 percent of assets, which was similar to
the Peer Group's comparative ratio of 96.8 percent.
Equality Savings' 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
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1997
<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.Stockap.
----------- ------ ----- -------- -------- ----- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Savings
- ----------------
March 31, 1997 41.4 47.8 7.4 61.3 32.0 0.0 6.3 0.0 6.3 0.0
SAIF-Insured Thrifts 18.1 66.7 11.5 71.6 14.3 0.2 12.5 0.2 12.3 0.0
State of MO 18.1 71.2 7.6 71.4 11.2 0.0 16.3 0.1 16.2 0.0
Comparable Group Average 23.4 64.5 8.9 72.7 13.6 0.0 12.5 0.5 12.0 0.0
Mid-West Companies 23.4 64.5 8.9 72.7 13.6 0.0 12.5 0.5 12.0 0.0
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 23.4 64.8 8.4 79.8 2.2 0.0 15.7 0.0 15.7 0.0
BWFC Bank West Fin. Corp. of MI 24.4 70.3 1.3 68.3 15.7 0.0 15.3 0.0 15.3 0.0
CAPS Capital Savings Bancorp of MO 9.0 78.8 10.5 71.1 18.9 0.0 8.7 0.0 8.7 0.0
BDJI First Fed. Bancorp. of MN 40.9 47.7 8.0 75.8 11.8 0.0 11.2 0.0 11.2 0.0
FMBD First Mutual Bancorp of IL 22.5 70.7 0.0 79.6 5.7 0.0 13.4 3.1 10.3 0.0
HFSA Hardin Bancorp of Hardin MO 26.7 52.8 18.6 67.9 18.4 0.0 12.8 0.0 12.8 0.0
KNK Kankakee Bancorp of IL 20.2 66.7 9.8 81.3 7.1 0.0 10.7 0.7 10.0 0.0
NBSI North Bancshares of Chicago IL 30.3 61.7 5.9 60.1 23.2 0.0 14.6 0.0 14.6 0.0
PTRS Potters Financial Corp of OH 19.4 57.8 19.8 83.8 6.4 0.0 8.9 0.0 8.9 0.0
WOFC Western Ohio Fin. Corp. of OH 16.9 74.2 6.3 59.6 26.6 0.0 13.4 0.8 12.6 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg. Cap.
------ ----------- ----- -------- -------- ------ ------- -------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Savings
- ----------------
March 31, 1997 2.55 32.00 -11.36 -1.23 12.12 -1.21 -1.21 6.29 6.29 11.75
SAIF-Insured Thrifts 12.67 3.99 13.09 7.50 23.50 -1.72 -2.23 10.87 10.94 22.94
State of MO 8.94 8.67 8.18 4.45 15.25 -3.77 -4.00 13.02 13.04 27.54
Comparable Group Average 12.80 -0.25 12.81 12.82 47.02 -13.20 -14.92 10.83 11.81 23.20
Mid-West Companies 12.80 -0.25 12.81 12.82 47.02 -13.20 -14.92 10.83 11.81 23.20
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH -2.06 -13.82 1.65 5.56 68.38 -33.23 -33.23 12.15 12.15 27.02
BWFC Bank West Fin. Corp. of MI 5.60 19.88 0.02 13.29 5.98 -18.27 -18.27 13.30 13.30 26.46
CAPS Capital Savings Bancorp of MO 17.46 56.22 14.64 12.35 60.71 -2.50 -2.50 7.85 7.85 16.51
BDJI First Fed. Bancorp. of MN 7.14 12.52 3.55 -0.47 NM -16.75 -16.75 9.75 9.75 19.42
FMBD First Mutual Bancorp of IL 48.83 NM 30.40 72.49 88.98 -20.96 -39.18 NM 20.61 21.26
HFSA Hardin Bancorp of Hardin MO 23.95 NM 6.56 5.40 NM -17.62 -17.62 11.19 11.19 28.85
KNK Kankakee Bancorp of IL -5.73 -18.01 -1.96 -5.37 -17.88 2.73 3.65 8.66 8.66 16.30
NBSI North Bancshares of Chicago IL 4.96 -18.93 20.91 -3.78 65.97 -11.57 -11.57 13.70 13.70 32.40
PTRS Potters Financial Corp of OH 2.69 -29.86 16.04 -2.26 NM -6.05 -6.05 8.53 8.53 19.60
WOFC Western Ohio Fin. Corp. of OH 25.19 -10.04 36.30 30.98 56.99 -7.74 -7.67 12.35 12.35 24.13
</TABLE>
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>
RP Financial, LC.
Page 3.7
Association and the Peer Group. The Association's deposits equaled 61.3 percent
of assets, which was lower than the Peer Group average of 72.7 percent. More
than offsetting Equality Savings' lower ratio of deposits was its higher level
of borrowings, as the Association and the Peer Group posted borrowings-to-assets
ratios of 32.0 percent and 13.6 percent, respectively. Accordingly, the Peer
Group was considered to have greater borrowing capacity than the Association.
Total interest-bearing liabilities maintained by the Association and the Peer
Group, as a percent of assets, equaled 93.3 percent and 86.3 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 Association's IEA/IBL ratio is lower than the Peer
Group's ratio, based on respective ratios of 103.5 percent and 112.2 percent.
The additional capital realized from stock proceeds should serve to partially
address the lower IEA/IBL ratio currently maintained by the Association, as the
interest free capital realized in Equality Savings' stock offering will be
deployed into interest-earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. Equality Savings' and the Peer Group's growth rates are
based on annual growth for the twelve months ended March 31, 1997. Asset growth
rates of positive 2.6 percent and positive 12.8 percent were posted by the
Association and the Peer Group, respectively. Equality Savings' asset growth
measures reflect notable growth was recorded in cash and investments (32.0
percent growth rate), reflecting the redeployment of funds realized from
mortgage-backed securities sales into investments. Substantially negating the
Association's cash and investments growth was an 11.4 percent decline in loans
and mortgage-backed securities, with most of the decline consisting of the
mortgage-backed securities that were sold. The Peer Group's stronger asset
growth was realized through growth in loans and mortgage-backed securities
(growth rate of 12.8 percent), which was slightly negated by a 0.3 percent
decline in cash and investments. Overall, the Peer Group's asset growth measures
would tend to support greater earnings growth relative to the Association's
measures. However, following the conversion, Equality Savings' leverage capacity
will be more comparable to the Peer Group's.
Borrowings funded the Association's asset growth, as well as a modest
amount of deposit run-off. 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 three of the Peer Group companies
included companies with borrowings growth rates in excess of 100 percent. For
the period shown in Table 3.2, all three of the Peer Group companies showing
"NM" growth rates posted borrowing growth rates in excess of 100 percent.
Negative capital growth rates of 1.2 percent and negative 13.2 percent were
posted by the Association and the Peer Group, respectively, with the Peer
Group's higher return on assets being more than offset dividend payments, stock
repurchases and possible negative
<PAGE>
RP Financial, LC.
Page 3.8
SFAS 115 adjustments. Equality Savings' negative capital growth resulted from
earnings being more than offset by dividend payments and a negative SFAS 115
adjustment.
Income and Expense Components
- -----------------------------
Equality Savings and the Peer Group reported net income to average assets
ratios of o.25 percent and 0.47 percent, respectively, based on earnings for the
twelve months ended March 31, 1997 (see Table 3.3). Both the Association'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 Peer Group's higher profitability was supported by maintenance of
a higher net interest margin and lower level of operating expenses, which was
partially offset by Equality Savings' higher level of non-interest operating
income and positive net non-operating income (the Association's gains on sale
offset the impact of the special SAIF assessment)
The Peer Group's more favorable net interest income ratio resulted from
both a higher interest income ratio and a lower interest expense ratio. The Peer
Group's higher interest income ratio was supported by a higher yield earned on
interest-earning assets (7.54 percent versus 6.99 percent for the Peer Group),
which was consistent with the Peer Group's high concentration of loans
comprising interest-earning assets and greater diversification into higher
yielding types of loans. Comparatively, the Peer Group's lower interest expense
ratio was realized through maintaining a lower level of interest-bearing
liabilities, which was partially negated by the slightly lower cost of funds
maintained by Equality Savings (4.87 percent versus 4.93 percent for the Peer
Group). Following the infusion of conversion proceeds, the level of interest-
bearing liabilities maintained by the Association should be more comparable to
the Peer Group's ratio. Overall, Equality Savings and the Peer Group reported
net interest income to average assets ratios of 2.27 percent and 3.16 percent,
respectively.
In another key area of core earnings strength, the Association maintained a
higher level of operating expenses than the Peer Group. For the period covered
in Table 3.3, the Association and the Peer Group recorded operating expense to
average assets ratios of 2.73 percent and 2.46 percent, respectively. Equality
Savings' 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 Association's asset size. Most notably, the Association's off-balance sheet
portfolio of loans serviced for others equaled $232.4 million, or 115.8 percent
of assets, while comparatively the Peer Group's loans serviced for others
portfolio averaged $18.2 million, or 8.6 percent of assets. The inflating impact
of Equality Savings' more notable off-balance sheet activities on the operating
expense ratio is further indicated by the Association's assets per full time
equivalent employee measure of $2.1
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1997
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -----------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Savings
----------------
March 31, 1997 0.25 6.86 4.60 2.27 0.03 2.24 0.38 0.00 0.35 0.73
SAIF-Insured Thrifts 0.63 7.36 4.09 3.26 0.14 3.12 0.12 0.01 0.28 0.42
State of MO 0.78 7.44 4.08 3.36 0.08 3.28 0.07 0.02 0.33 0.42
Comparable Group Average 0.47 7.31 4.15 3.16 0.01 3.16 0.05 0.01 0.28 0.34
Mid-West Companies 0.47 7.31 4.15 3.16 0.01 3.16 0.05 0.01 0.28 0.34
Comparable Group
----------------
Mid-West Companies
------------------
ASBP ASB Financial Corp. of OH 0.61 7.49 4.09 3.40 0.02 3.38 0.00 0.02 0.20 0.22
BWFC Bank West Fin. Corp. of MI 0.74 7.18 4.19 2.99 0.06 2.93 0.16 0.00 0.33 0.49
CAPS Capital Savings Bancorp of MO 0.65 7.63 4.42 3.20 0.05 3.15 0.09 0.01 0.40 0.50
BDJI First Fed. Bancorp. of MN 0.32 7.25 4.01 3.23 0.00 3.23 0.10 0.01 0.44 0.55
FMBD First Mutual Bancorp of IL 0.15 7.22 4.00 3.21 0.07 3.14 0.04 -0.01 0.27 0.30
HFSA Hardin Bancorp of Hardin MO 0.51 7.29 4.27 3.02 0.04 2.98 0.04 0.01 0.25 0.30
KNK Kankakee Bancorp of IL 0.61 7.27 4.22 3.04 0.01 3.03 0.06 0.01 0.35 0.41
NBSI North Bancshares of Chicago IL 0.45 7.33 4.02 3.31 0.00 3.31 0.00 0.00 0.18 0.18
PTRS Potters Financial Corp of OH 0.31 7.03 3.85 3.17 -0.27 3.45 0.00 0.05 0.26 0.30
WOFC Western Ohio Fin. Corp. of OH 0.31 7.47 4.41 3.05 0.11 2.95 0.00 0.00 0.14 0.14
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- ------------- --------------------------
MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp
------- ------- ------- ------- --------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Savings
----------------
March 31, 1997 2.73 0.00 0.17 0.00 6.99 4.87 2.12 2,113
SAIF-Insured Thrifts 2.21 0.02 -0.34 0.00 7.36 4.62 2.74 4,419
State of MO 2.10 0.02 -0.33 0.00 7.70 4.93 2.76 3,105
Comparable Group Average 2.44 0.02 -0.32 0.00 7.54 4.93 2.60 3,432
Mid-West Companies 2.44 0.02 -0.32 0.00 7.54 4.93 2.60 3,432
Comparable Group
----------------
Mid-West Companies
------------------
ASBP ASB Financial Corp. of OH 2.28 0.00 -0.40 0.00 7.71 5.22 2.49 4,757
BWFC Bank West Fin. Corp. of MI 2.63 0.00 0.33 0.00 7.48 5.13 2.35 2,723
CAPS Capital Savings Bancorp of MO 2.16 0.00 -0.43 0.00 7.77 4.94 2.83 3,050
BDJI First Fed. Bancorp. of MN 2.72 0.00 -0.52 0.00 7.51 4.65 2.86 2,693
FMBD First Mutual Bancorp of IL 2.79 0.07 -0.36 0.00 7.54 5.06 2.48 2,605
HFSA Hardin Bancorp of Hardin MO 1.99 0.00 -0.48 0.00 7.43 5.15 2.29 5,742
KNK Kankakee Bancorp of IL 2.26 0.07 -0.26 0.00 7.52 4.74 2.77 2,926
NBSI North Bancshares of Chicago IL 2.60 0.00 -0.30 0.00 7.49 4.89 2.60 3,750
PTRS Potters Financial Corp of OH 2.64 0.00 -0.55 0.00 7.25 4.28 2.96 2,852
WOFC Western Ohio Fin. Corp. of OH 2.27 0.10 -0.20 0.00 7.68 5.29 2.39 3,226
<CAPTION>
MEMO:
Effective
Tax Rate
--------
<S> <C>
Equality Savings
----------------
March 31, 1997 37.50
SAIF-Insured Thrifts 35.92
State of MO 37.52
Comparable Group Average 35.42
Mid-West Companies 35.42
Comparable Group
----------------
Mid-West Companies
------------------
ASBP ASB Financial Corp. of OH 33.92
BWFC Bank West Fin. Corp. of MI 33.94
CAPS Capital Savings Bancorp of MO 39.14
BDJI First Fed. Bancorp. of MN 41.02
FMBD First Mutual Bancorp of IL 32.05
HFSA Hardin Bancorp of Hardin MO 36.99
KNK Kankakee Bancorp of IL 29.65
NBSI North Bancshares of Chicago IL 23.93
PTRS Potters Financial Corp of OH 43.80
WOFC Western Ohio Fin. Corp. of OH 39.75
</TABLE>
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>
RP Financial, LC.
Page 3.10
million, which was well below the Peer Group average of $3.4 million.
Accordingly, in assessing Equality Savings' core earnings strength relative to
the Peer Group's, the Association'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 Equality Savings. The Peer Group and the
Association reported expense coverage ratios of 0.83x and 1.28x, respectively.
Equality Savings' 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 Association's mortgage banking activities and, thus,
can be somewhat volatile in nature. Taking non-interest operating income into
account (but not gains on sale), the Association's efficiency ratio of 91.0
percent compares unfavorably to the Peer Group's average efficiency ratio of
70.3 percent. On a post-conversion basis, the Association's operating expenses
can be expected to increase from additional expenses associated with the stock
benefit plans; however, at the same time, Equality Savings' higher pro forma
capital position will better position the Association to leverage operating
expenses through increased asset growth.
Sources of non-interest operating income, which does not include gains
realized from Equality Savings' mortgage banking operations, made a higher
contribution to the Association's earnings than the Peer Group's, based on
comparative non-interest operating income to average assets ratios of 0.73
percent and 0.34 percent, respectively. When factoring in loan sale gains, the
Association'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 Association's earnings, with gains
realized from the sale of loans amounting to 0.55 percent of Equality Savings'
average assets. After factoring in the SAIF assessment and a modest gain
recorded on the sale of investments and mortgage-backed securities, net gains
recorded by Equality Savings equaled positive 0.17 percent of average assets,
versus a comparative ratio of negative 0.32 percent for the Peer Group. Given
that the gains on mortgage loan sales were realized from Equality Savings'
mortgage banking activities, in which gains are derived from the capitalizing of
mortgage servicing rights, such gains warrant consideration in evaluating the
Association's core earnings strength. Real estate operations were not a material
factor in either the Association's or the Peer Group's earnings.
Favorable credit quality measures and low risk operating strategies served
to limit the impact of loss provisions on Equality Savings' and the Peer Group's
earnings, with loss provisions established by the Association and the Peer Group
amounting to 0.03 percent and 0.01 percent of average assets, respectively.
Similarly, extraordinary items were not a factor in either the Association's or
the Peer Group's earnings.
Both the Association and the Peer Group exhibited effective tax rates which
indicated earnings were being fully taxed, with Equality Savings recording a
higher effective tax rate than the Peer Group (37.50 percent
<PAGE>
RP Financial, LC.
Page 3.11
versus 35.42 percent for the Peer Group). Overall, net of the one time SAIF
assessment expense, the Association's and the Peer Group's reported earnings
were considered to be fairly representative of their core earnings.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of Equality Savings
and the Peer Group. The Peer Group'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
93.0 percent and 81.1 percent of Equality Savings' and the Peer Group's loan and
MBS portfolios, respectively. Equality Savings' higher ratio was primarily
attributable to its higher concentration of 1-4 family permanent mortgage loans,
as the Association's and the Peer Group's loan and mortgage-backed securities
portfolio compositions exhibited similar concentrations of mortgage-backed
securities. Highlighting the Association's mortgage banking emphasis, Equality
Savings maintained a much higher balance of loans serviced for others than the
Peer Group ($232.4 million versus $18.2 million for the Peer Group), which
translated into a higher balance of loan servicing assets as well ($513,000
versus $36,000 for the Peer Group).
As indicated by the higher percentage of 1-4 family loans and mortgage-
backed securities maintained by the Association, lending diversification was
more extensive for the Peer Group. Multi-family/commercial real estate loans
accounted for both Equality Savings' and the Peer Group's primary area of
lending diversification, amounting to 3.9 percent and 9.1 percent of their
respective loan and MBS portfolios. Other areas of lending diversification for
the Association were fairly limited, consisting of modest balances of consumer
and commercial business loans. The balance of the Peer Group's lending
diversification was comprised mostly of commercial business loans, while
construction/land and consumer loans constituted relatively modest areas of
lending diversification for the Peer Group. Notwithstanding the Peer Group's
greater diversification into higher risk types of lending, the Association
maintained a higher risk weighted assets-to-assets ratio than the Peer Group
(54.8 percent versus 47.5 percent for the Peer Group). Equality Savings' higher
risk weighted ratio can be explained by the 100 percent risk weighting applied
to some of the Association's investments. Overall, both the Association's and
the Peer Group's risk weighted assets ratios were indicative of relatively low
risk operating strategies, as both ratios did not vary significantly from the
SAIF-insured average of 51.1 percent.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of March 31, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
- ----------- ------ ------ ------ -------- -------- ---------- -------- ----------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Savings 13.44 79.52 0.00 3.87 1.15 2.02 54.79 232,430 513
SAIF-Insured Thrifts 15.07 61.75 5.48 11.67 6.55 1.68 51.05 344,084 2,520
State of MO 11.83 67.71 8.92 9.38 4.74 0.78 50.23 35,439 160
Comparable Group Average 13.31 67.78 2.85 9.06 6.70 1.64 47.54 18,197 36
Comparable Group
- ----------------
ASBP ASB Financial Corp. of OH 12.68 60.02 1.83 15.47 8.70 3.03 46.19 0 0
BWFC Bank West Fin. Corp. of MI 2.15 87.45 13.28 1.53 0.73 1.04 49.67 27,519 144
CAPS Capital Savings Bancorp of MO 13.50 75.52 1.38 3.76 6.24 0.00 49.16 42,924 0
BDJI First Fed. Bancorp. of MN 16.09 43.07 0.51 20.53 17.71 3.04 51.63 176 0
FMBD First Mutual Bancorp of IL 0.01 75.59 1.52 11.09 9.77 1.99 50.08 47,875 111
HFSA Hardin Bancorp of Hardin MO 29.12 61.57 1.83 1.28 6.97 0.00 39.32 8,412 0
KNK Kankakee Bancorp of IL 11.32 57.05 2.76 14.01 11.14 4.09 55.82 34,672 49
NBSI North Bancshares of Chicago IL 10.23 84.36 0.00 4.76 0.30 0.74 37.29 135 0
PTRS Potters Financial Corp of OH 30.69 53.22 0.93 9.64 3.84 1.91 46.64 532 0
WOFC Western Ohio Fin. Corp. of OH 7.26 79.96 4.47 8.57 1.56 0.60 49.62 19,724 52
</TABLE>
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>
RP Financial, LC
Page 3.13
Interest Rate Risk
- ------------------
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Association versus the Peer Group companies. In terms
of balance sheet composition, Equality Savings' interest rate risk
characteristics were considered to be less favorable than the Peer Group's. In
particular, Equality Savings' lower capital position and lower IEA/IBL ratio
indicate a greater dependence on the yield-cost spread to sustain the net
interest margin. Likewise, Equality Savings' higher level of non-interest
earning assets results in a lower capacity to generate interest income. On a pro
forma basis, the infusion of stock proceeds should serve to increase the
Association's equity-to-assets ratio and IEA/IBL ratio to levels that are more
comparable to the comparative Peer Group 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 Equality Savings and the Peer Group. In general, there was a greater degree
of fluctuation reflected in the Association's net interest margin, indicating a
potentially greater degree of interest rate risk exposure associated with
Equality Savings' net interest margin. However, the relative fluctuations in
both the Association's and the Peer Group's net interest income to average
assets ratios were not considered to be representative of significant interest
rate risk exposure. The stability of the Association's net interest margin
should be enhanced by the infusion of stock proceeds, as interest-rate sensitive
liabilities will be funding a lower portion of Equality Savings' assets.
Credit Risk
- -----------
Overall, Equality Savings' credit risk exposure does not appear to be
materially different than the Peer Group's, with both the Association's and the
Peer Group's credit quality measures being representative of limited credit risk
exposure. As shown in Table 3.6, Equality Savings' ratio of non-performing
assets (REO, non-accruing loans and accruing loans more than 90 days past due)
to assets was lower than Peer Group's ratio (0.35 percent versus 0.62 percent
for the Peer Group). Equality Savings and the Peer Group exhibited comparable
non-performing loans to loans ratio of 0.67 percent and 0.62 percent,
respectively. However, loss reserve ratios as a percent of problem assets
indicated a potentially higher degree of credit risk exposure for the
Association, with the Association 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 39.9 percent and 149.5 percent, respectively. The Peer Group
also maintained a higher level of loss reserves as a percent of loans, based on
comparative ratios of 0.3 percent and 0.9 percent for the Association and the
Peer Group, respectively. Net loan charge-offs were not a material factor for
either the Association or the Peer Group during the period covered in Table 3.6.
<PAGE>
RP Financial, LC.
Page 3.14
Table 3.5
Equality Savings and Loan Association, F.A. 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>
Equality Savings(3) 6.3% 103.5% 3.3%
Peer Group Average 12.5% 112.2% 2.9%
Peer Group(4)
- -------------
ASB Financial Corp. of OH 15.7% 117.8% 3.7%
Bank West Fin. Corp. of MI 15.3% 114.3% 2.9%
Capital Savings Bancorp of MO 8.7% 109.2% 1.8%
First Fed. Bancorp of MN 11.2% 110.3% 3.3%
First Mutual Bancorp of IL 13.4% 109.3% 3.5%
Hardin Bancorp of Hardin MO 12.8% 113.7% 1.9%
Kankakee Bancorp of IL 10.7% 109.4% 3.6%
North Bancshares of Chicago IL 14.6% 117.5% 2.0%
Potters Financial Corporation of OH 8.9% 107.5% 2.9%
Western Ohio Fin. Corp. of OH 13.4% 113.0% 3.5%
</TABLE>
Net Interest Income Analysis
----------------------------
<TABLE>
<CAPTION>
Change in Change Change Change
During Association'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>
3/31/96 11 -7 24 71
6/30/96 -8 2 30 20
9/30/96 17 -8 1 5
12/31/96 -12 5 -20 -28
3/31/97 32 -10 51 46
</TABLE>
(1) Interest-earning assets includes cash; interest-bearing liabilities includes
non-interest bearing deposits but excludes escrows.
(2) Comprised of REO, non-accuring loans, and other non interest-earning assets.
(3) Equality Savings' data is as of March 31, 1997.
(4) Peer Group data is as of March 31, 1997 or most recent date availiable.
(5) Calculated as quaterly change in net interest income as a percent of average
assets, annualized.
Source: SNL Securities.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of March 31, 1997 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>
Equality Savings 0.03 0.35 0.67 0.30 44.01 39.92 0 0.00
SAIF-Insured Thrifts 0.29 0.78 0.86 0.83 177.85 128.60 277 0.10
State of MO 0.14 0.74 0.76 0.66 223.69 117.76 7 0.03
Comparable Group Average 0.11 0.62 0.62 0.85 223.44 149.46 16 0.05
Comparable Group
----------------
ASBP ASB Financial Corp. of OH 0.61 1.58 1.45 1.23 84.76 50.98 0 0.00
BWFC Bank West Fin. Corp. of MI 0.03 0.03 NA 0.20 NA 458.70 0 0.00
CAPS Capital Savings Bancorp of MO 0.03 0.26 0.16 0.38 234.98 116.53 8 0.02
BDJI First Fed. Bancorp. of MN 0.21 0.31 0.01 0.82 NA 127.79 13 0.10
FMBD First Mutual Bancorp of IL 0.00 0.16 0.06 0.46 723.04 207.98 91 0.12
HFSA Hardin Bancorp of Hardin MO 0.10 0.37 0.50 0.29 57.66 41.58 6 0.04
KNK Kankakee Bancorp of IL 0.08 1.06 0.72 1.01 140.69 64.54 15 0.03
NBSI North Bancshares of Chicago IL 0.00 NA NA 0.28 NA NA 0 0.00
PTRS Potters Financial Corp of OH 0.00 0.83 1.40 3.23 231.18 231.18 26 0.16
WOFC Western Ohio Fin. Corp. of OH 0.01 0.96 0.64 0.59 91.77 45.88 0 0.00
</TABLE>
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>
RP Financial, LC.
Page 3.16
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 Equality Savings. Such general characteristics as asset size, capital
position, interest-earning asset composition, funding composition, core earnings
strength, credit quality, interest rate risk and loan composition all tend to
support the reasonability of the Peer Group from a financial standpoint.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of the MHC. 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. 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
Equality Savings' valuation in order to evaluate the Association'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>
RP Financial, LC.
Page 4.2
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Association's operations and financial
condition; (2) monitor the Association's operations and financial condition
relative to the Peer Group to identify any fundamental changes; (3) monitor the
external factors affecting value including, but not limited to, local and
national economic conditions, interest rates, and the stock market environment,
including the market for thrift stocks; and (4) monitor pending conversion
offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their related impact on value, if any, over the course of the conversion
process. RP Financial will also prepare a final valuation update at the closing
of the conversion offering to determine if the preliminary range of value
continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability) may materially impact the market value of
all thrift stocks, including Equality Savings, or Equality Savings' value alone.
To the extent a change in factors impacting the Association's value can be
reasonably anticipated and/or quantified, RP Financial has incorporated the
estimated impact into 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 Association and the Peer Group and how those differences
affect our pro forma valuation. Emphasis is placed on the specific strengths and
weaknesses of the Association relative to the Peer Group in such key areas as
financial condition, profitability, growth and viability of earnings, asset
growth, primary market area, dividends, liquidity of the issue, marketing of the
issue, management, and the effect of government regulations and/or regulatory
reform. We have also considered the market for thrift stocks, and in particular
new issues, to assess the impact on value of Equality Savings 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>
RP Financial, LC.
Page 4.3
sources in assessing investment attractiveness. The similarities and differences
in the Association's and the Peer Group's financial strengths are noted as
follows:
o Overall A/L Composition. The Peer Group's interest-earning asset
-----------------------
composition exhibited a higher concentration of loans and a greater
degree of diversification into higher risk types of loans, which
provided the Peer Group with a higher yielding interest-earning asset
composition. The Association's and the Peer Group's credit quality
measures indicated limited credit risk exposure, while the interest
rate risk characteristics associated with Equality Savings' balance
sheet are currently considered to be less favorable than the Peer
Group's. However, the infusion of stock proceeds will provide the
Association with equity-to-assets and IEA/IBL ratios that are more
comparable to the Peer Group's ratios. Equality Savings' funding
composition reflected a lower concentration of deposits and a higher
concentration of borrowings than the comparative Peer Group ratios,
indicating greater future borrowing capacity for the Peer Group. For
valuation purposes, RP Financial concluded a slight downward
adjustment was warranted for the Association's asset/liability
composition.
o Credit Quality. Both the Association's and the Peer Group's credit
--------------
quality measures were indicative of limited credit risk exposure.
Equality Savings maintained a slightly lower non-performing
assets-to-assets ratio than the Peer Group, while the Peer Group
maintained higher loss reserves as a percent of non-performing assets,
non-performing loans and loans than the comparative ratios for the
Association. Notwithstanding the higher concentration of loans
comprising the Peer Group's assets, as well the Peer Group's greater
diversification into higher risk types of lending, Equality Savings'
risk weighted assets-to-assets ratio was higher than the Peer Group's
ratio. Overall, the Association's and the Peer Group's credit quality
measures were considered to indicative of limited credit risk
exposure. Therefore, RP Financial concluded that no adjustment was
warranted for valuation purposes.
o Balance Sheet Liquidity. The Association operated with a higher
-----------------------
balance of cash and investment securities than the Peer Group (41.4
percent of assets versus 23.4 percent for the Peer Group). Borrowings
were utilized to a greater degree by the Association (32.0 percent of
assets versus 13.6 percent for the Peer Group), thereby indicating
that the Association's future borrowing capacity is more limited than
the Peer Group's. The infusion of conversion proceeds will serve to
increase the Association's balance sheet liquidity, as the proceeds
will initially be deployed into short-term investments. Overall, RP
Financial concluded no adjustment was warranted for balance sheet
liquidity.
o Funding Liabilities. Retail deposits served as the primary interest-
-------------------
bearing source of funds for the Association and the Peer Group, with
the Peer Group maintaining a higher level of deposits than the
Association. More than offsetting the Association's lower level of
deposits was its greater utilization of borrowings, which was less
favorable for the Association in terms of future borrowing capacity.
Currently, the Association maintains a higher level of interest-
bearing liabilities than the Peer Group (93.3 percent of assets versus
86.3 percent for the Peer Group), which was attributable to Equality
Savings' lower capital position. Following the conversion, the
increase in Equality Savings' capital position will provide for a more
comparable level of interest-bearing liabilities as maintained by the
Peer Group. Accordingly, primarily as the result of the Association's
greater utilization of borrowings, RP Financial concluded that a
slight downward adjustment was warranted for Equality Savings' funding
composition.
o Capital. The Association operates with a lower pre-conversion capital
-------
ratio than the Peer Group, 6.3 percent and 12.5 percent of assets,
respectively. This disadvantage will be lessened
<PAGE>
RP Financial, LC.
Page 4.4
as a result of the stock offering, although Equality Savings' pro
forma capital position can be expected to remain lower than Peer
Group's equity-to-assets ratio. Accordingly, RP Financial concluded
that a slight downward adjustment was warranted for the Association's
capital position.
Overall, we concluded that a slight downward valuation adjustment was
warranted for the Association'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 the Peer Group's earnings.
Comparatively, the Association's earnings were more dependent upon sources of
non-interest income, particularly income realized from its mortgage banking
operations. The specific factors considered in the valuation include:
o Reported Earnings. The Association recorded lower earnings on a ROAA
-----------------
basis (0.0.25 percent of average assets versus 0.47 percent for the
Peer Group). Both the Association's and the Peer Group's reported
earnings were depressed by the one time assessment to recapitalize the
SAIF. Absent the SAIF assessment expense, Equality Savings' reported
earnings were lower than the Peer Group's. The Peer Group's more
favorable reported earnings resulted primarily from maintenance of a
stronger net interest margin and a lower level of operating expenses,
which was partially negated by loan sale gains and the higher level of
non-interest operating income recorded by the Association.
Reinvestment of conversion proceeds into interest-earning assets will
serve to increase the Association's earnings, with the benefit of
reinvesting proceeds expected to be somewhat offset by higher
operating expenses associated with operating as a fully converted
publicly-traded company and the implementation of the stock benefit
plans. Overall, the difference between the Association's and the Peer
Group's reported earnings was considered to be representative of the
Peer Group's superior earnings strength and, thus, Equality Savings'
lower reported earnings warranted a slight downward adjustment for
valuation purposes.
o Core Earnings. A higher net interest margin and a lower level of
-------------
operating expenses provided the Peer Group with a more favorable
expense coverage ratio than maintained by the Association (1.28x
versus 0.83x for the Association). Equality Savings' higher level of
operating expenses was largely attributable to its off-balance sheet
mortgage banking operations, which provides the Association with non-
interest operating income and gains realized from the sale of loans.
Non-interest operating income and gains were a more notable
contributor to the Association's earnings, which was largely
attributable to Equality Savings' mortgage banking operations.
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 Equality Savings, the
gains provided by its mortgage banking operations warrant some
consideration as a core earnings factor, since such gains have
consistently been a prominent
<PAGE>
RP Financial, LC.
Page 4.5
part of the Association's earnings in recent years and are
substantially derived from the capitalizing of mortgage servicing
rights. Nonetheless, the Association'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 and non-interest operating income. Even when giving credit to
the gains realized from mortgage loan sales, Equality Savings' core
earnings were lower than the Peer Group's. Overall, these measures, as
well as the expected earnings benefits the Association 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 fully converted publicly-traded
company, indicate that the Association's core earnings are not as
strong as the Peer Group's and a moderate downward adjustment was
warranted for the Association's core earnings.
o Interest Rate Risk. Quarterly changes in the Association's and the
------------------
Peer Group's net interest income to average assets ratios indicated a
slightly greater degree of interest rate risk exposure in the
Association'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
partially address the Association's lower capital position and lower
IEA/IBL ratio, as well as enhance the stability of the Association's
net interest margin through the reinvestment of stock proceeds into
interest-earning assets. Overall, the interest rate risk associated
with the Association's earnings appears to be greater than the Peer
Group's and, thus, a slight downward adjustment was warranted for this
factor.
o Credit Risk. Loan loss provisions were not a significant factor in
-----------
either Equality Savings' or the Peer Group's earnings. In terms of
future exposure to credit quality related losses, both the
Association's and the Peer Group's operating strategies and credit
quality measures indicated relatively limited credit risk exposure.
Lending diversification into higher risk types of loans was more
notable for the Peer Group and the Peer Group maintained a higher
concentration of loans as a percent of assets, which would tend to
indicate greater credit risk exposure for the Peer Group. However, the
Peer Group's risk weighted assets-to-assets ratio was lower than the
Association's ratio, and the Peer Group's credit quality measures were
not materially different than the Association's in terms of indicating
potential exposure to credit quality related losses. Overall, RP
Financial concluded that the credit risk exposure associated with the
Association's earnings was similar to the Peer Group's and no
adjustment was warranted for valuation purposes.
o Earnings Growth Potential. Several factors were considered in
-------------------------
assessing earnings growth potential. First, while the Association
currently maintains a significantly higher level of investments than
the Peer Group, a substantial portion of the investment portfolio
consists of intermediate-term investments which do not represent a
potential source of liquidity to fund loan growth. Accordingly, in
terms of earnings growth potential to be realized from the
redeployment of liquidity into more favorable yielding instruments,
there was seemingly no comparative advantage maintained by the
Association. Second, opportunities for lending growth in the
Association's market area are considered to be less favorable than in
the primary market areas served by the Peer Group companies, as
indicated by the stronger population growth rates exhibited by the
primary areas served by the Peer Group companies (see Exhibit III-4).
However, Equality Savings' loan growth potential is considered to be
at least as favorable as the Peer Group's, as the result of the
mortgage lending capabilities of its mortgage banking subsidiary.
Lastly, the Association's leverage capacity will be less than Peer
<PAGE>
RP Financial, LC.
Page 4.6
Group's, based on a pro forma capital position that will be lower than
the Peer Group's equity-to-assets ratio. On balance, the Association's
earnings growth potential was considered to be not quite as favorable
as the Peer Group's and a slight down adjustment was warranted for
valuation purposes.
Overall, in comparison to the Association'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 Association's earnings relative to
the Peer Group's.
3. Asset Growth
------------
Equality Savings' asset growth was lower than the Peer Group's, during the
period covered in our comparative analysis (positive 2.6 percent versus positive
12.8 percent for the Peer Group). This characteristic would normally be
considered as a negative, but was somewhat offset by the potential asset growth
the Association will be able to realize following the infusion of stock
proceeds. On a pro forma basis, the Association's equity-to-assets ratio will be
more comparable to the Peer Group's, although the Peer Group's leverage capacity
will continue to be greater than Equality Savings'. Opportunities for loan
growth do not appear to be materially different for the Association or the Peer
Group, as Equality Savings has ample capacity to generate loan growth through
its mortgage banking subsidiary. On balance, we believe a slight downward
adjustment is warranted for this factor, primarily on the basis of the
Association's less favorable leverage capacity on a pro forma basis.
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. Operating in the St. Louis
metropolitan area, the Association faces significant competition for loans and
deposits from larger financial institutions, who provide a broader array of
services and have significantly larger branch networks than maintained by the
Association. Like many large metropolitan areas, the St. Louis metropolitan area
is characterized by mixed demographic tends. St. Louis County and the St. Louis
MSA as a whole are exhibiting positive demographic growth trends, versus
declines in population and households recorded by the City of St. Louis.
Similarly, in terms of potential credit risk exposure, the comparatively higher
unemployment rate in the City of St. Louis (6.8 percent), as compared to St.
Louis County (3.0 percent) and the St. Louis MSA (3.9 percent), suggests that
the suburban markets provide for greater economic stability and a lower degree
of credit risk exposure.
<PAGE>
RP Financial, LC.
Page 4.7
In general, the Peer Group companies operate in smaller and less populous
markets than served by the Association. Population growth in the markets served
by the Peer Group companies was on average more favorable than the primary
market area served by the Association. On average, the Peer Group companies
maintained a notably larger deposit market share than the Association,
indicating a competitive advantage for the Peer Group companies in terms of the
degree of competition faced for deposits. Summary demographic and deposit
market share data for the Association and the Peer Group companies is provided
in Exhibit III-4. As shown in Table 4.1, April 1997 unemployment rates in the
markets served by the Peer Group companies were not dramatically different from
the comparative measures for the Association's primary market area. Overall,
the Peer Group companies appear to operate in smaller, less competitive and
faster growing markets than the St. Louis MSA, which would tend to support
potentially greater growth opportunities for the Peer Group companies.
Therefore, we concluded a slight downward adjustment was appropriate for the
Association's market area.
Table 4.1
Market Area Unemployment Rates
Equality Savings and the Peer Group Companies (1)
<TABLE>
<CAPTION>
April 1997
County Unemployment
------ ------------
<S> <C> <C>
Equality Savings - MO St. Louis City 6.8%
St. Louis County 3.0
St. Louis MSA 3.9
The Peer Group
--------------
ASB Financial Corp. - OH Scioto 9.0%
Bank West Fin. Corp. - MI Kent 2.9
Capital Savings Bancorp - MO Cole 2.1
First Fed. Bancorp. - MN Beltrami 7.1
First Mutual Bancorp - IL Macon 7.3
Hardin Bancorp - MO Ray 8.3
North Bancshares of Chicago - IL Cook 5.1
Potters Financial Corporation - OH Columbiana 6.0
Western Ohio Fin. Corp. - OH Clark 4.2
</TABLE>
(1) Unemployment rates are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
<PAGE>
RP Financial, LC.
Page 4.8
5. Dividends
---------
The Holding Company has indicated its intentions to pay an annual cash
dividend. At this time, the Association has indicated that the annual dividend
payment will approximate $0.36 per share at the midpoint of the valuation range,
which would provide for a yield of 3.6 percent based on the initial offering
price of $10.00 per share, and a pro forma payout ratio of approximately 46
percent. As set forth in the prospectus, the indicated annual dividend payment
will range from $0.44 per share at the minimum of the valuation range to $0.28
per share at the supermaximum of the valuation range. However, future
declarations of dividends by the Board of Directors will depend upon a number of
factors, including investment opportunities available to the Holding Company or
the Association, capital requirements, regulatory limitations, the Holding
Company's and the Association's financial condition and results of operations,
tax considerations 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 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 1.44 percent to 4.55 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.26 percent as of June 20, 1997,
representing an average earnings payout ratio of 40.63 percent. As of June 20,
1997, approximately 83 percent of all publicly-traded SAIF-insured thrifts had
adopted cash dividend policies (see Exhibit IV-1), exhibiting an average yield
of 2.09 percent and an average payout ratio of 42.70 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.
<PAGE>
RP Financial, LC.
Page 4.9
The Holding Company's indicated dividend yield and payout ratio are
comparable to the Peer Group averages. Accordingly, given the comparability of
the Association's and the Peer Group's dividend payments and dividend paying
capacities, no adjustment was necessary for this valuation.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, nine of which trade on the NASDAQ system and one of which
trades 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 $10.5 million to $56.1 million as of June 20, 1997, with an average market
value of $28.1 million. The shares outstanding of the Peer Group members ranged
from 487,000 to 3.7 million, with average shares outstanding of approximately
1.6 million. The Association's conversion offering will result in a market value
and shares outstanding that are less than and similar to the comparative Peer
Group averages. While the Association's pro forma market value is less than the
Peer Group, it is within the range of market values exhibited by the Peer Group
companies. Furthermore, it is anticipated the Holding Company's stock will be
listed on the NASDAQ National Market. Accordingly, in comparison to the Peer
Group companies, we do not anticipate that the liquidity characteristics of the
Holding Company's stock will be materially different and, thus, no adjustment
was required for this factor.
7. Marketing of the Issue
----------------------
We believe that four separate markets exists for thrift stocks coming to
market such as Equality Savings: (1) the after-market for public companies, in
which trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE and dividends; (2) the new issue
market in which converting thrifts are evaluated on the basis of the same
factors but on a pro forma basis without the benefit of a stock trading history
and reporting quarterly operating results as a publicly-held company; (3) the
acquisition market for thrift franchises in Missouri; and (4) the market for the
public stock of Equality Savings. All of these markets were considered in the
valuation of the Association's to-be-issued stock.
A. The Public Market
-----------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. 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.
<PAGE>
RP Financial, LC.
Page 4.10
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. 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
moved back 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 one-day 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 bond and
stock prices surged higher in mid-September, as most of the economic data for
August indicated that the economy was slowing down 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.
<PAGE>
RP Financial, LC.
Page 4.11
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 excesses in the stock market; particularly, as the DJIA
closed above the 7000 mark in mid-February. Profit taking, growing expectations
of a correction and comments by the Federal Reserve Chairman pulled the market
lower in late-February.
Following a downturn in late-February 1997, the market recovered in
early-March. Despite increasing expectations of an interest rate hike by the
Federal Reserve, the Dow Jones Industrial Average ("DJIA") closed to a new
record high of 7085.16 on March 11, 1997. However, an upward revision to the
January retail sales figure triggered a one day sell-off in stocks and bonds on
March 13, 1997, as the stronger than expected growth heightened expectations of
an interest rate increase by the Federal Reserve. Unease over higher interest
rates, profitability concerns in the technology sector and litigation concerns
for tobacco stocks pulled the stock market lower in mid-March. As expected, the
Federal Reserve increased the rate on short-term funds by 0.25 percent at its
late-March meeting. Following the rate increase, the sell-off in the stock
market became more severe amid further signs of an accelerating economy. Stocks
bottomed-out on news of a stronger than expected rise in core producer prices
for March, with the DJIA closing at 6391.69 on April 11, 1997, or 9.8 percent
below its all-time high recorded a month ago.
Some favorable first quarter earnings reports and news of a possible
settlement by tobacco companies to resolve the threat of liability lawsuits
provided for a modest recovery in the stock market in mid-April 1997. In late-
April, the release of economic data which indicated mild inflationary pressures
furthered the rally in bond and stock prices. News of a budget agreement and a
favorable ruling for tobacco companies sent the stock market soaring to record
highs in early-May. Mixed economic data and the Federal Reserve's decision to
leave its target for the federal-funds rate unchanged at its May meeting
sustained a positive trend in the stock market through the end of May. Profit
worries caused a sell-off in high-technology stocks in early-June, while
declining interest rates served to stabilize the broader market. Non-threatening
inflation data, as indicated by declining retail sales and wholesale prices for
May sustained the bond market rally and propelled the stock market to new highs
in mid-June. As of June 20, 1997, the DJIA closed at 7796.51 translating into an
increase of 36.7 percent from a year ago.
<PAGE>
RP Financial, LC.
Page 4.12
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. The Supreme Court's
ruling in favor of thrifts seeking damages for goodwill served to boost thrift
prices in the beginning of July 1996, but the upturn was abbreviated by a sharp
increase in interest rates. The sharp rise in interest rates, which was prompted
by the stronger than expected June unemployment report, pushed interest-rate
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. Similar to the overall stock market, thrift prices traded lower in
early-December. Profit taking and expectations of higher interest rates were
factors contributing to the pull back in thrift issues.
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 Index soaring in mid-February. Stable interest rates and acquisition
activity supported higher thrift prices in early-March, with the SNL Index
posting a new high of 579.1 on March 11, 1997. Like the stock market in general,
the peak in thrift prices was followed by a sharp sell-off in mid-March. In
fact, interest-rate sensitive issues were among the sectors hardest hit by the
revised January retail sales report, as the 30-year bond approached 7.0 percent.
Interest-rate sensitive issues continued to experience selling pressure in late-
March and early-April, as signs of a strengthening economy pushed interest rates
higher. The sell-off in thrift stocks culminated on April 11, 1997, as interest
rates increased sharply on news of the higher than expected rise in
<PAGE>
RP Financial, LC.
Page 4.13
core producer prices for March. Thrift prices edged modestly higher in mid-
April, reflecting generally favorable first quarter earnings and a slight
decline in interest rates following the release of economic data which showed
that inflation was low. Favorable inflation data and the budget agreement
provided for a more substantial rally in thrift stocks in late-April and early-
May, as interest-rate sensitive issues were bolstered by declining interest
rates. The rally in thrift stocks continued during the first half of June, which
was largely attributable to the improved interest-rate outlook. The SNL Index
for all publicly-traded thrifts closed at 625.9 on June 20, 1997, an increase of
62.9 percent from one year ago.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Association's pro forma market value. Over the past year, the
market for converting thrift issues has generally been favorable. After
experiencing a softening in demand for the stocks of converting thrifts during
the second quarter of 1996, 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. The favorable market environment for converting thrift issues has
generally been sustained during the first two quarters of 1997; however, in
comparison to other periods of market strength for thrift stocks, the number of
conversion offerings completed during the past three months has been relatively
low. As shown in Table 4.2, the median one week change in price for offerings
completed during the latest three months equaled positive 30.0 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
94.16 percent reflects a discount of 28.3 percent from the average P/B ratio of
all publicly-traded SAIF-insured thrifts (equal to 131.24 percent), and the
average core P/E ratio of 22.33 times reflects a premium of 23.4 percent from
the all SAIF-insured public average core P/E ratio of 18.09 times. The pricing
ratios of the better capitalized but lower earning recently converted thrifts
(based on return on equity measures) 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
<PAGE>
RP FINANCIAL, L C.
-----------------------------------------------------------------------
TABLE 4.2
RECENT CONVERSIONS (LAST THREE MONTHS)
CONVERSION PRICING CHARACTERISTICS: SORTED CHRONOLOGICALLY
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL INFORMATION PRE-CONVENTION DATA OFFERING INSIDE PURCHASES
-------------------------------- INFORMATION
FINANCIAL INFO. ASSETS QUALITY
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFIT PLANS
--------------
CONVERSION EQUITY/ NPAs/ RES. GROSS % OF ? RECOG. ?
INSTITUTION STATE DATE TICKER ASSETS ASSETS ASSETS CONV PROC. MID. PROC. ESOP PLANS & ?
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- ----- ---- ----- ------
($Ms) (%) (%)(2) (%) ? (%) (%) (%) (%) (%)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFB Banorp TN 05/30/97 P.Sheet $47 10.04% 0.08% 82% $7.7 132% 3.2% 8.0% 4.0% 5.3%
Rocky Font Financial CO 05/22/97 P.Sheet 21 13.92% 0.00% NA 4.2 132% 8.3% 8.0% 4.0% 23.6%
HCB Banc shares AR 05/07/97 HCBB 176 7.81% 0.21% 110% 26.5 132% 2.8% 8.0% 4.0% 4.3%
Peoples Sidney Fin.
Corp. OH 04/28/97 PSFC 92 10.08% 1.11% 33% 17.9 132% 3.2% 8.0% 4.0% 9.8%
NewSouth Bancorp(1) NC 04/08/97 NSBC 199 9.52% 0.41% 299% 43.6 132% 2.9% 8.0% 4.0% 0.8%
Hemlock Fed.Fin Corp. IL 04/02/97 HMLK 146 7.86% 0.44% 117% 20.8 132% 3.1% 8.0% 4.0% 6.0%
Cumberland Mto.
Banshares(8) KY 04/01/97 P.Sheet 92 5.14% 1.31% 19% 4.4 132% 8.0% 6.2% 4.0% 4.5%
GS Financial Corp. LA 04/01/97 GSLA 88 28.30% 0.29% 107% 34.4 132% 2.4% 8.0% 4.0% 5.3%
Market Fin Corp. OH 03/27/97 MRKF 46 16.73% 0.99% 11% 13.4 132% 3.5% 8.0% 4.0% 7.8%
? Bancorp(1) IL 03/26/97 P.Sheet 36 6.63% 0.97% 39% 4.0 132% 7.2% 8.0% 4.0% 16.4%
AVERAGES: $54 11.60% 0.65% 91% $17.7 132% 4.5% 7.8% 4.0% 8.4%
MEDIANS: 90 9.78% 0.62% 82% $15.6 132% 3.2% 8.0% 4.0% 5.6%
AVERAGES, EXCLUDING 2ND STEPS $95 12.32% 0.58% 100% $19.1 132% 4.1% 8.0% 4.0% 8.8%
MEDIANS, EXCLUDING 2ND STEPS $88 10.04% 0.44% 98% $17.9 132% 3.2% 8.0% 4.0% 6.0%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PRO FORMA DATA
------------------------------------------------------------------------------
PRICING RATIO(4) FIN.CHARACTERISTICS
- -----------------------------------------------------------------------------------------------------------------------------------
CONVERSION
INSTITUTION STATE DATE P/TB P?(5) P/A ROA TE/A ROE
- ----------- ----- ---- ---- ----- --- --- ---- ---
(%) (*) (%) (%) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFB Banorp TN 05/30/97 P.Sheet 70.1% 13.9 14.5% 1.0% 20.7% 5.1%
Rocky ? Financial CO 05/22/97 P.Sheet 67.9% 14.6 17.7% 1.2% 26.1% 4.6%
HCB Banc shares AR 05/07/97 HCBB 72.9% 34.4 13.3% 0.4% 18.2% 2.1%
Peoples ? Fin. Corp. OH 04/28/97 PSFC 71.0% 13.7 16.5% 1.2% 23.3% 5.2%
NewSouth Bancorp(1) NC 04/08/97 NSBC 77.0% 20.7 18.5% 0.9% 23.7% 3.8%
HemLock Fed. Fin.Corp.IL 04/02/97 HMLK 72.8% 20.3 12.7% 0.6% 17.4% 3.6%
Cumberland Mto. ?(8) KY 04/01/97 P.Sheet 81.2% 13.8 7.1% 0.5% 8.5% 5.9%
GS Financial Corp. LA 04/01/97 GSLA 63.4% 25.9 29.4% 1.1% 46.3% 2.4%
Market Fin Corp. OH 03/27/97 MRKF 70.6% 20.0 23.4% 1.2% 33.2% 3.5%
? Bancorp(1) IL 03/26/97 P.Sheet 71.0% 18.7 10.1% 0.5% 14.2% 3.8%
AVERAGES: 71.9% 19.6 16.3% 0.9% 23.2% 4.0%
MEDIANS: 71.0% 19.3 15.5% 1.0% 22.0% 3.8%
AVERAGES, EXCLUDING 2ND STEPS 70.8% 20.2 17.3% 0.9% 20.8% 3.8%
MEDIANS, EXCLUDING 2ND STEPS 71.0% 20.0 16.5% 1.0% 23.3% 3.8%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
?-IPO PRICING TRENDS
-----------------------------------------------------------------------
CLOSING PRICE
------------------------------------------------------------
FRONT AFTER AFTER
CONVERSION IPO TRADING % FIRST % FIRST %
INSTITUTION STATE DATE PRICE DAY ? WEEKS(6) ? MONTH(7) ?
- ----------- ----- ---- ----- ------- ---- -------- ---- -------- ----
($) ($) (%) ($) (%) ($) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFB Banorp TN 05/30/97 P.Sheet $10.00 $33.81 38.1% $13.38 33.8% $14.00 40.0%
Rocky ? Financial CO 05/22/97 P.Sheet 10.00 13.00 30.0% 13.13 31.3% 13.50 35.0%
HCB Banc shares AR 05/07/97 HCBB 10.00 12.63 26.3% 12.69 26.9% 12.88 28.8%
Peoples ? Fin. Corp. OH 04/28/97 PSFC 10.00 12.56 25.6% 13.25 32.5% 12.88 28.8%
NewSouth Bancors(1) NC 04/08/97 NSBC 15.00 20.25 35.0% 22.00 46.7% 23.50 56.7%
Hemlock Fed.Fin. Corp IL 04/02/97 HMLK 10.00 12.88 28.8% 12.88 28.8% 13.00 30.0%
Cumberland Mto. ?(8) KY 04/01/97 P.Sheet 10.00 11.88 18.8% 12.25 22.5% 12.63 26.3%
GS Financial Corp. LA 04/01/97 GSLA 10.00 13.38 33.8% 13.63 36.2% 14.00 40.0%
Market Fin Corp. OH 03/27/97 MRKF 10.00 12.94 29.4% 12.50 25.0% 12.63 26.3%
? Bancorp(1) IL 03/26/97 P.Sheet 10.00 12.38 23.7% 12.25 22.5% 11.75 17.5%
AVERAGES: $70.50 $13.57 28.9% $13.79 30.6% $14.08 32.9%
MEDIANS: $10.00 $12.91 29.1% 13.80 30.0% $12.94 29.4%
AVERAGES, EXCLUDING 2ND STEPS $10.56 $13.76 30.1% 13.90 30.8% $14.24 33.7%
MEDIANS, EXCLUDING 2ND STEPS 10.00 12.94 29.4% 13.13 31.3% 13.00 30.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: - Appraisal performed by RP Financial: "NT" - Not Traded: "NA" - Not
Applicable, Not Available.
(1) Non - OTS regulated thrifts. JUNE 20,1997
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assesment on earnings.
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
- -------------------------------------------------------------------------------
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Table 4.3
Market Pricing Comparatives
Prices As of June 20, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.54 138.39 1.14 15.57 20.57 131.24 15.97 134.69 18.09
Converted Last 3 Mths (no MHC) 13.61 31.17 0.44 14.45 24.32 94.16 26.34 94.98 22.33
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
GSLA GS Financial Corp. of LA 15.25 52.44 0.29 15.77 NM 96.70 44.81 96.70 NM
HCBB HCB Bancshares of AR 12.94 34.23 0.29 13.73 NM 94.25 17.20 98.33 NM
HMLK Hemlock Fed. Fin. Corp. of IL 13.25 27.51 0.37 14.49 NM 91.44 16.72 91.44 NM
MRKF Market Fin. Corp. of OH 13.00 17.37 0.50 14.17 NM 91.74 30.46 91.74 26.00
PSFC Peoples Sidney Fin. Corp of OH 13.62 24.31 0.73 14.09 24.32 96.66 22.49 96.66 18.66
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- ------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------- ------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ------ ------- ------- ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.84 29.06 1,119 12.85 0.78 0.61 5.25 0.84 7.34
Converted Last 3 Mths (no MHC) 0.00 0.00 0.00 129 27.87 0.67 0.43 1.01 0.82 3.26
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
GSLA GS Financial Corp. of LA 0.00 0.00 0.00 117 46.34 0.13 0.85 1.84 0.85 1.84
HCBB HCB Bancshares of AR 0.00 0.00 0.00 199 18.25 NA -0.11 -0.58 0.39 2.11
HMLK Hemlock Fed. Fin. Corp. of IL 0.00 0.00 0.00 165 18.29 NA -0.39 -2.85 0.49 3.64
MRKF Market Fin. Corp. of OH 0.00 0.00 0.00 57 33.20 0.89 0.89 2.68 1.17 3.53
PSFC Peoples Sidney Fin. Corp of OH 0.00 0.00 0.00 108 23.26 1.00 0.92 3.97 1.21 5.18
</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
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 Equality
Savings' stock price of recently completed and pending acquisitions of other
thrifts operating in Equality Savings' market area. As shown in Exhibit IV-4,
there were five thrifts acquired in 1995, 1996 and year-to-date 1997, and three
acquisitions are currently pending. Roosevelt Financial, which is one of three
thrifts subject to a pending acquisition, was the buyer of four out of the five
Missouri thrifts acquired since the beginning of 1995. The recent acquisition
activity involving Missouri thrifts may imply a certain degree of acquisition
speculation for the Association's stock. To the extent that acquisition
speculation may impact the Association's offering, we have largely taken this
into account in selecting Missouri and other Mid-West based companies, which
operate in markets that have experienced a comparable level of acquisition
activity as the Association's market and, thus, are subject to the same type of
acquisition speculation that may influence Equality Savings' trading price.
D. The Market for Equality Savings Stock
-------------------------------------
Equality Savings' minority shares of stock are not traded on NASDAQ or
any other exchange. Accordingly, trading activity in the Association's stock is
very infrequent and is generally conducted through the Association's office. As
indicated by the Association's management, the most recent trade in the
Association's stock (April 1997) was $15.00 per share. In addition to the
liquidity differences between the minority shares currently traded and the new
conversion stock (the new conversion stock will more liquid owing to the greater
number of public shares outstanding and expected NASDAQ listing), there are
other differences between the Association's minority stock and the conversion
stock that will be issued by the Holding Company. Such differences include a
lower return on equity for the Holding Company's conversion stock, and dividend
payments will be made on all shares outstanding; thereby requiring a higher
payout ratio to sustain the current level of dividends paid to non-MHC
shareholders. For these reasons, RP Financial discounted somewhat the
meaningfulness of the trading level of the Association's minority stock in its
valuation analysis.
Taking these factors and trends into account, primarily recent trends
in the new issue market, market conditions overall, and recent trends in the
acquisition market, as well as considering recent trades in the Association's
minority stock, RP Financial concluded that no adjustment was appropriate in the
valuation analysis for purposes of marketing of the issue.
<PAGE>
RP Financial, LC.
Page 4.17
8. Management
----------
Equality Savings' management team has experience and expertise in all of
the key areas of the Association's operations. Exhibit IV-5 provides summary
resumes of Equality Savings' Board of Directors and executive management. While
the Association does not have the resources to develop a great deal of
management depth, given its 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 Association'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 Association and the Peer Group companies were similarly impacted by the
recently enacted SAIF rescue legislation, as Equality Savings and all ten of the
Peer Group companies are SAIF-insured institutions and, thus, were subject to
the same one time assessment. Likewise, the Association and all of the Peer
Group companies' deposits will be assessed at the same rate going forward. In
summary, as a fully-converted SAIF-insured savings institution, Equality Savings
will operate in substantially the same regulatory environment as the Peer Group
members -- all of whom are adequately capitalized institutions and are operating
with no apparent restrictions. Exhibit IV-6 reflects the Association's pro
forma regulatory capital ratios. On balance, RP Financial concluded that no
adjustment to the Association's value was warranted for this factor.
Summary of Adjustments
- ----------------------
Overall, we believe the Association's pro forma market value should be
discounted relative to the Peer Group as follows:
<PAGE>
RP Financial, LC.
Page 4.18
<TABLE>
<CAPTION>
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
<S> <C>
Financial Condition Slight Downward
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth Slight Downward
Primary Market Area Slight Downward
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
</TABLE>
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 Equality Savings' 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 selling the MHC's
interest to the public. In computing the pro forma impact of the conversion and
the related pricing ratios, we have incorporated the valuation parameters
disclosed in Equality Savings' prospectus for offering expenses, the effective
tax rate, reinvestment rate, and stock benefit plan assumptions (summarized in
Exhibits IV-7 and IV-8). A reinvestment rate of 5.81 percent was utilized,
equal to the arithmetic average of the Association's average yield on interest-
earnings assets and cost of deposits for the fiscal year ended March 31, 1997
(the reinvestment rate calculation specified by OTS conversion guidelines). The
5.81 percent reinvestment rate is believed to be representative of the blended
rate reflecting the Association's business plan as converted and incorporating
the impact of deposit withdrawals to fund a portion of the stock issued in
conversion. In our estimate of value, we assessed the relationship of the pro
forma pricing ratios relative to the Peer Group and the recent conversions.
In addition to the three valuation methodologies specified by the OTS, RP
Financial also considered recent trades in the Association's stock. However such
trades were not given significant weight, in light of the differences between
the characteristics of the Association's minority stock and the fully-converted
stock of the Association, particularly with respect to the absence of a liquid
trading market for the minority stock.
o 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 Association's earnings, due to the 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.
o 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
<PAGE>
RP Financial, LC.
Page 4.19
conditions, particularly the market for new conversions where the P/B
approach tends to be more highly emphasized.
o 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.
o Trading of Equality Savings' Stock. Converting institutions generally
----------------------------------
do not have stock outstanding. Equality Savings, however, has public
shares outstanding due to the mutual holding company form of
ownership. However, since there is not an active and liquid market for
Equality Savings' minority shares of common stock (the shares are
typically traded through the Association's office, and are not listed
on NASDAQ or any other exchange), and the conversion stock will have
different characteristics than the minority shares, this valuation
method was deemed to be less relevant than the other valuation
methodologies and therefore received limited weighting in our
valuation.
The Association has adopted Statement of Position ("SOP") 93-6, which will
cause earnings per share computations to be based on shares issued and
outstanding excluding 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 Association's conversion stock is $15,037,590 at
the midpoint at this time. The midpoint value and resulting valuation range is
based on the sale of a 53.2 percent ownership interest to the public, which
provides for an $8.0 million public offering at the midpoint value.
1. Price-to-Earnings ("P/E"). The application of the P/E valuation method
-------------------------
requires calculating the Association's pro forma market value by applying a
valuation P/E multiple times the pro forma earnings base. Ideally, the pro
forma earnings base is composed principally of the Association's recurring
earnings base, that is, earnings adjusted to exclude any one-time non-operating
items, plus the estimated after-tax earnings benefit of the reinvestment of net
conversion proceeds. Equality Savings' reported earnings equaled $505,000 for
the twelve months ended March 31, 1997. In deriving Equality Savings' core
earnings, two adjustments were made to reported earnings. The first adjustment
was to eliminate the one time special SAIF assessment of $789,000, which on a
tax effected basis, assuming an effective tax rate of 37.5 percent, increased
core earnings by $493,000. The second adjustment was to take into account the
reinvestment of the $50,000 of assets currently held at the MHC, which will be
consolidated with the Association as the result of the conversion. Reinvestment
of the MHC assets at the 5.81 percent reinvestment rate added approximately
$2,000 to Equality
<PAGE>
RP Financial, LC.
Page 4.20
Savings' after tax earnings. Gains provided by the Association's mortgage
banking operations were included as a part of the Association's core earnings,
since such gains have been a consistently prominent part of the Association's
earnings in recent years and are substantially derived from the capitalizing of
mortgage servicing rights. However, the higher degree of volatility associated
with mortgage banking gains, as compared to the other components of the
Association's core earnings, was accounted for in the discount applied to
Equality Savings' P/E multiple. As shown below, Equality Savings' core earnings
were determined to equal $1,000,000 for the twelve months ended March 31, 1997.
(Note: see Exhibit IV-9 for the adjustments applied to the Peer Group's earnings
in the calculation of core earnings).
<TABLE>
<CAPTION>
Amount
------
<S> <C>
($000)
Net income $505
Adjustment for SAIF assessment(1) 493
Reinvestment of MHC assets(1) 2
-
Core earnings estimate $1,000
(1) Tax effected at 37.5 percent.
</TABLE>
Based on Equality Savings' trailing twelve month estimated core earnings,
and incorporating the impact of the pro forma assumptions discussed previously,
the Association's pro forma P/E multiple at the $15.0 million midpoint value was
12.73 times, resulting in a discount of 29.2 percent from the Peer Group average
of 17.97 times core earnings. The discounted earnings multiple was consistent
with valuation adjustments outlined earlier, as well as the higher degree of
volatility associated with Equality Savings' core earnings derived from mortgage
banking gains.
2. Price-to-Book ("P/B"). The application of the P/B valuation method
---------------------
requires calculating the Association's pro forma market value by applying a
valuation P/B ratio to Equality Savings' pro forma book value. The pre-
conversion book value for Equality Savings of $12,684,000 was equal to the
Association's reported capital at March 31, 1997, plus the $50,000 of mutual
holding company assets at March 31, 1997 which will be consolidated with the
Association's capital as a result of the conversion. Based on the $15.0 million
midpoint valuation, Equality Savings' pro forma P/B ratio was 77.24 percent. In
comparison to the average P/B ratio for the Peer Group of 110.83 percent,
Equality Savings' valuation reflected a discount of 30.3 percent. At the top of
the super range, the discount under the P/B approach narrowed to 17.7 percent.
RP Financial considered the discount under the P/B approach to be reasonable in
light of the valuation adjustments referenced earlier.
<PAGE>
RP Financial, LC.
Page 4.21
Given the emphasis on limiting near term aftermarket trading in the revised
appraisal guidelines, RP Financial also considered the pro forma P/B ratios of
recent conversions in its valuation analysis. It is these companies that provide
the best proxy for aftermarket trading for a new issue such as Equality Savings'
conversion stock, and it is the pro forma P/B ratio that investors emphasize in
evaluating the trading of new issues. At the midpoint value of $15.0 million,
Equality Savings' pro forma P/B ratio of 77.24 percent represented a premium of
7.4 percent from the average P/B ratio of the recently completed stock
conversions at closing of 71.9 percent (see Table 4.2). The Association's pro
forma P/B ratio at the midpoint reflected a discount of 18.0 percent from the
94.16 percent average P/B ratio of the recently completed stock conversions in
the after market (see Table 4.3). The pricing in the upper portion of the
Association's valuation range approximates the average P/B ratio of the recent
conversions in the after market.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio to the Association's pro forma
asset base, conservatively assuming no deposit withdrawals are made to fund
stock purchases. In all likelihood there will be deposit withdrawals, which
results in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, Equality Savings' value equaled 7.24 percent of
pro forma assets. Comparatively, the Peer Group companies exhibited an average
P/A ratio of 13.70 percent, which implies a 47.2 percent discount being applied
to the Association's pro forma P/A ratio.
Valuation Conclusion
- --------------------
It is our opinion that, as of June 20, 1997, the aggregate pro forma market
value of the Association, inclusive of the sale of the Mutual Holding Company's
ownership interest to public shareholders was $15,037,590 the midpoint. Based on
this valuation and the approximate 53.2 percent ownership interest being sold in
the public offering, the midpoint value of the Holding Company's stock offering
was $8,000,000, equal to 800,000 shares at a per share value of $10.00. Pursuant
to OTS conversion guidelines, the 15 percent offering range includes a minimum
value of $6,800,000 and a maximum value of $9,200,000. Based on the $10.00 per
share offering price, this range equates to an offering of 680,000 shares at the
minimum to 920,000 shares at the maximum. The Holding Company's offering also
includes a provision for a super range, which if exercised, would result in an
offering size of $10,580,000, equal to 1,058,000 shares at the $10.00 per share
offering price. The comparative pro forma valuation ratios relative to the Peer
Group are shown in Table 4.4, and the key valuation assumptions are detailed in
Exhibit IV-7. The pro forma calculations for the range are detailed in Exhibit
IV-8.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Equality Savings and the Comparables
As of June 20, 1997
<TABLE>
<CAPTION>
Market Per Share Data
--------------
Capitalization Core Book Pricing Ratios(3)
---------------- ---------------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------ ------ ------ ------- ------- ------- -------- ---------
($) ($Mil) ($) ($) (X) (1/2) (X) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Savings
- ----------------
Superrange 10.00 19.89 0.53 10.96 26.46 91.26 9.47 91.26 15.98
Range Maximum 10.00 17.29 0.70 11.88 24.09 84.16 8.29 84.16 14.28
Range Midpoint 10.00 15.04 0.79 12.95 21.85 77.24 7.24 77.24 12.73
Range Minimum 10.00 12.78 0.90 14.39 19.40 69.51 6.19 69.51 11.10
SAIF-Insured Thrifts(7)
- -----------------------
Averages 20.54 138.39 ?.14 15.57 20.57 131.24 15.97 134.69 18.09
Medians --- --- --- --- 20.75 124.69 14.60 129.05 17.15
All Non-MHC State of MO(7)
- --------------------------
Averages 21.00 45.31 1.14 16.25 20.76 131.02 20.40 134.31 18.15
Medians --- --- --- --- 21.67 108.89 19.96 108.89 17.62
Comparable Group Averages
- -------------------------
Averages 18.28 28.14 0.93 16.86 24.07 110.83 13.70 115.13 17.97
Medians --- --- --- --- 23.73 110.07 12.97 112.29 16.61
State of MO
- -----------
CBES CBES Bancorp of MO 16.87 17.29 0.86 17.06 24.45 98.77 18.16 98.77 19.62
CNSB CNS Bancorp of of MO 16.50 27.27 0.47 14.73 NM 112.02 27.80 112.02 NM
CHRN Cameron Fin. Corp. of MO 16.75 44.92 0.95 16.92 21.75 99.00 22.72 99.00 17.45
CAPS Capital Savings Bancorp of MO 16.62 31.45 1.10 10.89 21.58 152.62 13.22 152.52 15.11
FBSI First Bancshares of MO 20.00 23.20 1.45 19.80 16.95 101.01 14.50 101.16 13.79
FINB Fulton Bancorp of MO 20.00 34.38 0.58 14.47 NM 138.22 34.57 138.22 NM
GSBC Great Southern Bancorp of MO 17.00 140.90 1.23 7.35 15.60 231.29 20.75 231.29 13.82
HFSA Hardin Bancorp of Hardin MO 14.62 12.56 0.88 15.38 27.07 95.06 12.15 95.06 16.61
JSBA Jefferson Svgs Bancorp of MO 29.87 148.48 1.43 18.09 NM 165.12 12.93 211.54 20.89
JOAC Joachim Bancorp of MO 14.50 11.02 0.37 13.60 NM 106.62 30.90 106.62 NM
LXMO Lexington B&L Fin. Corp. of MO 15.19 16.53 0.58 17.24 NM 88.11 26.80 88.11 26.19
MBLF MBLA Financial Corp. of MO(7) 24.00 31.58 1.36 21.51 22.86 111.58 15.06 111.58 17.65
NSLB NS&L Bancorp of Neosho MO 16.50 11.68 0.62 16.35 NM 100.92 20.11 100.92 26.61
NASB North American SB of MO 44.00 99.31 3.74 24.35 11.43 180.70 14.41 186.76 11.76
PCBC Perry Co. Fin. Corp. of MO 19.75 15.96 0.95 18.76 28.21 105.28 19.85 105.28 20.79
RFED Roosevelt Fin. Grp. Inc. of MO(7) 24.12 1027.87 1.77 10.16 NM 237.40 13.18 NM 13.63
SMFC Sho-Me Fin. Corp. of MO 40.25 61.14 2.06 19.13 23.27 210.40 20.08 210.40 19.54
SNBC Southern Missouri Bncrp of MO 17.62 28.86 1.00 15.85 17.27 111.17 17.42 111.17 17.62
Comparable Group
- ----------------
ASBP ASB Financial Corp. of OH 12.00 20.65 0.57 10.00 NM 120.00 18.87 120.00 21.05
BWFC Bank West Fin. Corp. of MI 14.00 24.96 0.42 12.62 23.73 110.94 16.98 110.94 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------------ -----------------------------------------------------
Amount/ Payout Total Equity/ NPAs Reported Core
------------ ----------
Share Yield Ratio(5) Assets Assets Assets ADA ADE ADA ADE
------- ----- --------- ------- ------ ------ ---- ---- ---- ----
($) (?) (%) ($Mil) (?) (?) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equality Savings
- ----------------
Superrange 0.28 2.80 44.74 210 10.38 0.34 0.36 3.45 0.59 5.71
Range Maximum 0.32 3.20 45.71 209 9.85 0.34 0.34 3.49 0.58 5.89
Range Midpoint 0.36 3.60 45.83 208 9.38 0.34 0.33 3.54 0.57 6.07
Range Minimum 0.44 4.40 48.83 207 8.90 0.34 0.32 3.58 0.56 6.26
SAIF-Insured Thrifts(7)
- -----------------------
Averages 0.37 1.84 29.06 1,119 12.85 0.78 0.61 5.25 0.84 7.34
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of MO(7)
- --------------------------
Averages 0.36 1.93 33.47 263 17.20 0.74 0.79 5.85 1.02 7.40
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.40 2.26 40.63 211 12.47 0.62 0.46 3.53 0.67 5.24
Medians --- --- --- --- --- --- --- --- --- ---
State of MO
- -----------
CBES CBES Bancorp of MO 0.40 2.37 46.51 95 18.39 0.77 0.77 5.22 0.96 6.51
CNSB CNS Bancorp of of MO 0.20 1.21 42.55 98 24.82 0.45 0.53 2.41 0.81 3.66
CHRN Cameron Fin. Corp. of MO 0.28 1.67 29.17 198 22.95 0.60 1.12 4.46 1.39 5.56
CAPS Capital Savings Bancorp of MO 0.24 1.44 21.82 238 8.66 0.26 0.65 7.16 0.92 10.23
FBSI First Bancshares of MO 0.20 1.00 13.79 160 14.35 0.32 0.91 5.88 1.11 7.22
FINB Fulton Bancorp of MO 0.20 1.00 34.48 99 25.01 NA 0.74 3.81 1.05 5.39
GSBC Great Southern Bancorp of MO 0.40 2.35 32.52 679 8.97 1.83 1.36 14.03 1.53 15.83
HFSA Hardin Bancorp of Hardin MO 0.48 3.28 54.55 103 12.78 0.37 0.51 3.17 0.82 5.16
JSBA Jefferson Svgs Bancorp of MO 0.40 1.34 27.97 1,148 7.83 0.52 0.25 3.41 0.63 8.56
JOAC Joachim Bancorp of MO 0.50 3.45 NM 36 28.99 0.68 0.51 1.71 0.78 2.64
LXMO Lexington B&L Fin. Corp. of MO 0.30 1.97 51.72 62 30.42 0.63 0.97 4.48 1.34 6.18
MBLF MBLA Financial Corp. of MO(7) 0.40 1.67 29.41 210 13.49 0.25 0.66 4.90 0.86 6.34
NSLB NS&L Bancorp of Neosho MO 0.50 3.03 NM 58 19.93 0.06 0.49 2.30 0.74 3.47
NASB North American SB of MO 0.80 1.82 21.39 689 7.97 3.34 1.23 16.83 1.19 16.35
PCBC Perry Co. Fin. Corp. of MO 0.40 2.03 42.11 80 18.85 0.05 0.71 3.66 0.96 4.97
RFED Roosevelt Fin. Grp. Inc. of MO(7) 0.68 2.82 38.42 7,796 5.55 0.98 0.11 2.23 0.85 17.13
SMFC Sho-Me Fin. Corp. of MO 0.00 0.00 0.00 304 9.54 0.09 0.91 8.68 1.09 10.34
SNBC Southern Missouri Bncrp of MO 0.50 2.84 50.00 166 15.67 1.10 1.03 6.46 1.01 6.33
Comparable Group
- ----------------
ASBP ASB Financial Corp. of OH 0.40 3.33 70.18 109 15.73 1.58 0.60 3.01 0.88 4.40
BWFC Bank West Fin. Corp. of MI 0.28 2.00 66.67 147 15.30 0.03 0.74 4.25 0.53 3.03
<CAPTION>
Memo: Memo:
Exchange Offering
Ratio Size
($Mil)
<S> <C> <C>
Equality Savings
- ----------------
Superrange 2.3779 10.58
Range Maximum 2.0678 9.20
Range Midpoint 1.7981 8.00
Range Minimum 1.5283 6.80
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Equality Savings and the Comparables
As of June 20, 1997
<TABLE>
<CAPTION>
Market Per Share Data
------------------
Capitalization Core Book Pricing Ratios (3)
--------------- -----------------------------------------------
Price/ Market 12-Nth Value/
Share (1) Value EPS (2) Share P/E P/B P/A P/TB P/CORE
--------- ------- --------- -------- -------- ------- ------- -------- ---------
($) ($N11) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPS Capital Savings Bancorp of WO 16.62 31.45 1.10 10.89 21.58 152.62 13.22 152.62 15.11
BDJI First Fed. Bancorp. of NN 18.75 13.14 1.00 17.17 NM 109.20 12.20 109.20 18.75
FMBD First Mutual Bancorp of IL 15.00 56.13 0.34 15.22 NM 98.55 13.22 128.10 NM
HFSA Hardin Bancorp of Hardin NO 14.62 12.56 0.88 15.38 27.07 95.06 12.15 95.06 16.61
KKK Kankakee Bancorp of IL 29.00 41.18 1.94 25.74 19.21 112.67 12.03 120.33 14.95
NBSI North Bancshares of Chicago IL 19.25 19.92 0.74 16.94 NM 113.64 16.60 113.64 26.01
PIRS Potters Financial Corp of OH 21.55 10.49 1.62 21.38 28.73 100.80 8.98 100.80 13.30
WOFC Western Ohio Fin. Corp. of DP 22.00 50.86 0.69 23.21 NM 94.79 12.71 100.59 NM
<CAPTION>
Dividends (4) Financial Characteristics (6)
--------------------------- ---------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
-------------------------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
-------- -------- -------- ------- ------ ------- -------- ------- ------ -------
($) (%) (%) ($N11) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPS Capital Savings Bancorp of WO 0.24 1.44 21.82 238 8.66 0.26 0.65 7.16 0.92 10.23
BDJI First Fed. Bancorp. of NN 0.00 0.00 0.00 108 11.17 0.31 0.32 2.58 0.66 5.38
FMBD First Mutual Bancorp of IL 0.32 2.13 NM 425 13.41 0.16 0.15 0.75 0.38 1.97
HFSA Hardin Bancorp of Hardin NO 0.48 3.29 54.55 103 12.78 0.37 0.51 3.17 0.82 5.16
XXK Kankakee Bancorp of IL 0.48 1.66 24.74 342 10.68 1.06 0.61 5.97 0.78 7.67
NBSI North Bancshares of Chicago IL 0.48 2.49 64.86 120 14.61 NA 0.46 2.95 0.65 4.19
PIRS Potters Financial Corp of OH 0.36 1.67 22.22 117 8.91 0.83 0.31 3.45 0.67 7.45
WDFC Western Ohio Fin. Corp. of DP 1.00 4.55 NM 400 13.41 0.96 0.31 2.02 0.44 2.90
</TABLE>
(1) Average of high/low or bid/ask price 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 affected basis, and is shown on a pro forma basis where approp
(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>
RP FINANCIAL, LC.
PAGE 4.24
Establishment of Exchange Ratio
- -------------------------------
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the
Associations's common stock for common stock of the Holding Company. The Board
of Directors of the Mutual Holding Company has independently established a
formula to determine the exchange ratio. The formula has been designed to
preserve the current aggregate percentage ownership in the Association
represented by the Public Stockholders, which is an approximate 46.8 percent
ownership interest. Pursuant to the formula, the Exchange Ratio will be
determined at the end of the Holding Company's stock offering based on the total
number of shares sold in the Subscription and Community offerings. Based upon
this formula, and the valuation conclusion and offering range concluded above,
the Exchange Ratio would be 1.5283 shares, 1.7981 shares, 2.0678 shares and
2.3779 shares of Equality Bancorp stock issued for each share of stock held by
the Public Stockholders, at the minimum, midpoint, maximum and supermaximum of
the offering, respectively.
The Exchange Ratio formula and share exchange procedures were determined
independently by the Board of Directors. RP Financial expresses no opinion on
the proposed exchange of Holding Company shares for the Public Stockholders'
shares or on the proposed Exchange Ratio.
<TABLE>
<CAPTION>
TABLE 45
Equality Savings and Loan Association, F.A.
Calculation of Exchange Ratios
Shares Price/ Exchange Implied
Offered Share Shares(1) Exch. Ratio(2)
--------- --------- --------- ---------------
($000)
<S> <C> <C> <C> <C>
Minimum 680,000 $10.00 598,195 1.5283
Midpoint 800,000 10.00 703,759 1.7981
Maximum 920,000 10.00 809,323 2.0678
Super Maximum 1,058,000 10.00 930,721 2.3779
</TABLE>
__________________________
(1) Calculated to preserve the Public Stockholders percentage ownership in the
Holding Company at 46.8 percent (391,400 existing shares outstanding
divided by 836,400 total shares outstanding).
(2) Calculated as pro forma exchange shares divided by 391,400 existing Public
Shares outstanding.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
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 MVE Analysis
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
I-15 Borrowings
II-1 Description of Office Facilities
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 Financial Analysis of Missouri Institutions
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS(continued)
<TABLE>
<CAPTION>
<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 June 20, 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
Equality Savings and Loan Association, F.A.
Map of Office Locations
<PAGE>
[MAP OF COUNTY-TOWN MISSOURI APPEARS HERE]
<PAGE>
EXHIBIT I-2
Equality Savings and Loan Association, F.A.
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Equality Savings and Loan Association, F.A.
Key Operating Ratios
<TABLE>
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net income divided by average assets)............ 0.25% 0.35% 0.20% 0.59%/2/ 0.58%
Return on average equity (net income divided by average equity)............ 3.98% 5.18% 2.79% 8.92%/2/ 10.92%
Average equity to average assets........................................... 6.30% 6.68% 7.24% 6.62% 5.33%
Equity to assets (end of year)............................................. 6.29% 6.53% 7.25% 8.19% 5.72%
Interest rate spread (difference between average yield on
interest-earning assets and average cost of interest-
bearing liabilities)..................................................... 2.12% 1.90% 2.21% 2.23% 2.46%
Net interest margin (net interest income as a percentage
of average interest-earning assets)...................................... 2.31% 2.09% 2.39% 2.38% 2.69%
Noninterest expense to total assets........................................ 3.09% 2.73% 3.25% 4.13% 4.01%
Noninterest expense to average assets...................................... 3.08% 2.83% 3.34% 3.93% 3.89%
Average interest-earning assets to average interest-bearing
liabilities.............................................................. 104.19% 104.13% 104.37% 103.48% 104.73%
ASSET QUALITY RATIOS:
Allowance for loan losses to total loans at end of period.................. 0.29% 0.24% 0.26% 0.39% 0.30%
Net charge-offs to average outstanding loans during the period............. * 0.02% 0.04% * *
Nonperforming assets to total assets....................................... 0.35% 0.39% 0.44% 0.29% 0.40%
OTHER DATA:
Number of real estate loans outstanding.................................... 1,828 1,989 1,750 1,633 1,778
Number of deposit accounts................................................. 14,944 15,442 15,647 16,256 16,634
Full service offices....................................................... 3 3 3 3 3
Loan origination offices................................................... 5 3 3 2 2
</TABLE>
_______________________
(1) Includes interest-bearing deposits in other depository institutions.
(2) Includes cumulative effect of charge in accounting principle totaling
$188.408, or .12% and 1.84% of average assets and average equity,
respectively.
* Insignificant
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-4
Equality Savings and Loan Association, F.A.
Investment Portfolio Composition
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------------------------------------------
1997 1996 1995
--------------------------------- --------------------------------- --------------------------------
Carrying % of Market Carrying % of Market Carrying % of Market
Value Portfolio Value Value Portfolio Value Value Portfolio Value
----- --------- ----- ----- --------- ----- ----- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government and
agency obligations:
Available for sale . $ 70,123 93.5% $ 70,123 $ 38,898 86.9% $ 38,898 $ 31,953 77.9% $ 31,953
Held to maturity ... 4,849 6.5% 4,725 5,845 3.1% 5,589 9,047 22.1% 8,607
--------- ------- --------- --------- ------- --------- --------- ------- ---------
Total ............ $ 74,972 100.0% $ 74,848 $ 44,743 100.0% $ 44,487 $ 41,000 100.0% $ 40,560
========= ======= ========= ========= ======= ========= ========= ======= =========
</TABLE>
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT 1-5
Equality Savings and Loan Association, F.A.
Yields and Costs
<TABLE>
<CAPTION>
For the fiscal year ended March 31,
-------------------------------------------------------------------
1997 1996
-------------------------------- --------------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance(1) Dividends Cost Balance(1) Dividends Cost
--------- --------- ---- ---------- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Mortgage loans(2)(3).......................... $ 96.113 $ 7,265 7.56% $ 90,257 $ 6,879 7.62%
Consumer loans(2)............................. 2,091 185 8.70% 1,926 168 8.72%
Commercial loans(2)........................... 107 2 11.21% -- -- --%
--------- --------- -------- -------
Total loans receivable.......................... 98,311 7,449 7.58% 92,183 7,047 7.65%
Investment securities......................... 63,710 3,931 6.17% 45,945 2,827 6.15%
Interest-bearing deposits..................... 7,738 468 6.05% 13,290 897 6.75%
Mortgage-backed securities...................... 21,778 1,530 7.03% 24,642 1,333 5.41%
FHLB stock.................................... 3,300 232 7.03% 2,438 171 7.01%
--------- -------- --------- --------
Total interest-earning assets................... $ 194,837 $ 13,610 6.99% $ 178,498 $ 12,275 6.88%
-------- --------
Interest-bearing liabilities:
Regular savings............................... $ 21,846 $ 546 2.50% $ 22,398 $ 562 2.51%
NOW accounts.................................. 11,325 169 1.49% 10,884 186 1.71%
Money market accounts......................... 5,402 151 2.80% 6,298 176 2.80%
Certificates of deposit....................... 84,102 4,816 5.73% 83,463 4,805 5.76%
--------- -------- -------- --------
Total saving deposits........................... 122,675 5,682 4.63% 123,043 5,729 4.66%
FHLB advances................................. 61,917 3,378 5.46% 46,000 2,742 5.96%
Other interest-bearing liabilities............ 2,409 52 2.16% 2,374 69 2.91%
-------- --------- -------- --------
Total interest-bearing liabilities.............. $187,001 $ 9,112 4.87% $ 171,417 $ 8,540 4.98%
-------- --------
Net interest income............................. $ 4,498 $ 3,735
======== ========
Interest rate spread............................ 2.12% 1.90%
Net interest margin(4).......................... 2.31% 2.09%
Ratio of average interest-earning
assets to average interest-bearing
liabilities................................... 104.19% 104.13%
<CAPTION>
------------------------------
1995
------------------------------
Interest
Average and Yield/
Balance(1) Dividends Cost
---------- --------- ----
<S> <C> <C> <C>
Interest earning assets:........................ $ 74.339 $ 5,724 7.70%
Mortgage loans(2)(3).......................... 1,830 145 7.92%
Consumer loans(2)............................. -- -- --%
Commercial loans(2)........................... --------- --------
76,169 5,869 7.71%
Total loans receivable.......................... 38,187 2,064 5.41%
Investment securities......................... 17,285 886 5.13%
Interest-bearing deposits..................... 16,105 777 4.83%
Mortgage-backed securities...................... 1,256 101 8.04%
--------- --------
FHLB stock.................................... $ 149,002 $ 9,697 6.51%
--------
Total interest-earning assets
Interest-bearing liabilities:................... $ 25,851 $ 695 2.69%
Regular savings............................... 10,835 200 1.85%
NOW accounts.................................. 9,490 265 2.79%
Money market accounts......................... 79,854 4,163 5.21%
--------- --------
Certificates of deposit....................... 126,030 5,323 4.22%
Total saving deposits........................... 14,417 741 5.14%
FHLB advances................................. 2,320 68 2.93%
--------- --------
Other interest-bearing liabilities............ $ 142,767 $ 6,132 4.30%
--------
Total interest-bearing liabilities.............. $ 3,565
========
Net interest income............................. 2.21%
Interest rate spread............................ 2.39%
Net interest margin(4)
Ratio of average interest-earning
assets to average interest-bearing
liabilities................................... 104.37%
</TABLE>
____________________
(1) Average balances are computed on a monthly basis (month-end balances).
(2) Does not include interest on loans 90 days or more past due.
(3) Includes loans held for sale.
(4) Net interest income divided by average interest-earning assets.
Note: At March 31, 1997, the weighted average yeilds on certain interest-
earning assets and the weighted average cost on certain interest-
bearing liabilities were as follows: loans receivable, 7.65%;
mortgage-backed securities, 6.95%; investment securities, 6.91%; total
interest-earning assets, 7.30%; savings deposits, 4.63%; borrowed
money, 5.30%; total interest-bearing liabilities, 4.86%; and interest
rate spread, 2.44%.
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-6
Equality Savings and Loan Association, F.A.
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Year ended March 31.
---------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Allowance at beginning of period................... $ 233 $ 217 $ 242
Provision for losses on loans...................... 50 31 9
Charge-offs - residential one- to four-family...... -- (15) (34)
------ ------ ------
Balance at end of period........................... $ 283 $ 233 $ 217
====== ====== ======
Ratio of allowance to total loans outstanding
at the end of the period......................... .29% .24% .26%
Ratio of net charge-offs to average loans
outstanding during the period.................... * .02% .04%
Allowance for loan losses to total
nonperforming assets............................. 39.9% 30.4% 30.4%
Allowance for loan losses to total
nonperforming loans.............................. 44.0% 34.8% 32.8%
</TABLE>
______________________
* Insignificant
Source: Equality Savings' Prospectus.
<PAGE>
EXHIBIT I-7
Equality Savings and Loan Association, F.A.
MVE Analysis
<TABLE>
<CAPTION>
At March 31, 1997
- --------------------------------------------------------------------------------------
Market Value of Equity MVE as % of PV of Assets
- ----------------------------------------------------- -------------------------------
Change in Rate $ Amount $ Change % Change MVE Ratio BP Change
- ----------------- ---------- ---------- ---------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+400bp 8,956 (6,631) (42.5) 5.20 -284
+300 10,444 (5,144) (33.0) 5.94 -210
+200 12,182 (3,405) (21.8) 6.67 -137
+100 13,967 (1,620) (10.4) 7.36 - 68
0 15,587 - - 8.04 -
-100 16,931 1,344 8.6 8.39 + 35
-200 17,864 2,277 14.6 8.73 + 69
-300 18,791 3,203 20.6 8.93 + 89
-400 19,717 4,130 26.5 9.13 +109
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1997
-----------------------
<S> <C>
RISK MEASURES: 200 BP RATE SHOCK:
Pre-Shock MVE Ratio: MVE as % of PV of Assets.............. 8.04
Exposure Measure: Post-Shock MVE Ratio..................... 6.67
Sensitivity Measure: Change in MVE Ratio................... -137bp
CALCULATION OF CAPITAL COMPONENT:
Change in MVE as % of PV of Assets......................... -176bp
</TABLE>
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-8
Equality Savings and Loan Association, F.A.
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
Fixed Adjustable
rates rates
----- -----
(Dollars in thousands)
<S> <C> <C>
Loans secured by real estate:
Residential.......................... $ 32,173 $ 32,121
Commercial........................... 2,494 115
Loans secured by savings deposits...... 42 --
Property improvement................... 1,588 --
Automobiles............................ 117 --
Other consumer loans................... 64 --
Commercial business loans.............. 162 --
--------- ---------
Total loans.......................... $ 36,640 $ 32,236
========= =========
</TABLE>
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-9
Equality Savings and Loan Association, F.A.
Loan Portfolio Composition
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------------
1997 1996 1995
---------------------- --------------------------- --------------------
Amount Precent Amount Precent Amount Precent
------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans secured by real estate:
Residential:
One-to four-family:
Conventional (1)...................... $ 69,810 72.5% $ 64,873 66.6% $ 61,455 73.5%
FHA/VA................................ 14,233 14.3% 13,656 14.0% 13,616 16.3%
Loans held for sale................... 4,398 4.6% 13,507 13.9% 2,971 3.5%
Multifamily............................ 1,637 1.7% 783 .8% 828 1.0%
Commercial.............................. 2,662 2.8% 2,622 2.7% 2,975 3.5%
--------- ------- --------- ------- --------- -------
Total loans secured by
real estate........................... 92,740 96.4% 95,441 98.0% 81,845 97.8%
--------- ------- --------- ------- --------- -------
Consumer loans:
Loans secured by
savings deposits....................... 366 .4% 453 .5% 448 .5%
Property improvement.................... 1,596 1.7% 1,300 1.3% 1,053 1.3%
Automobiles............................. 122 .1% 97 .1% 126 .2%
Other consumer loans.................... 162 .1% 96 .1% 175 .2%
--------- ------- --------- ------- --------- -------
Total consumer loans................... 2,246 2.3% 1,946 2.0% 1,802 2.2%
Commercial business loans................ 1,280 1.3% - -% - -%
--------- ------- --------- ------- --------- -------
Total loans.............................. 96,266 100.0% 97,387 100.00% 83,647 100.0%
======= ======= =======
Less:
Deferred loan fees...................... 46 59 71
Unearned discounts...................... 4 12 24
Allowance for loan losses............... 283 233 217
Valuation reserve on loans
held for sale.......................... 5 85 100
--------- --------- ---------
Total loans receivable, net.............. $ 95,928 $ 96,998 $ 83,235
========= ========= =========
</TABLE>
__________________
(1) Includes construction loans converted to permanent loans.
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-10
Equality Savings and Loan Association, F. A.
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Year ended march 31,
------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Total loans at beginning of period......................... $ 97,387 $ 83,647 $ 62,188
Loans originated:
Residential one-to four-family........................... 70,019 75,779 56,606
Multifamily.............................................. 950 -- --
Commercial business loans................................ 1,462 -- --
Consumer (property improvement and automobiles........... 774 666 475
Other loans.............................................. 107 105 180
-------- -------- --------
Total loans originated................................. 73,312 76,550 57,261
-------- -------- --------
Loans purchased - residential one-to four-family........... 5,892 17,396 934
Loans sold:
Whole loans:
Servicing retained...................................... (45,669) (49,667) (12,226)
Servicing released...................................... (15,617) (25,079) (13,302)
Participation loans (serving retained)................... (185) -- --
-------- -------- --------
Total loans sold........................................ (61,471) (74,746) (25,568)
-------- -------- --------
Loan principal repayments.................................. (2,486) (2,282) (10,067)
Loans converted to mortgage-backed securities and sold..... (16,368) (3,178) (1,101)
-------- -------- --------
Total loans at end of period............................... $ 96,266 $ 97,387 $ 83,647
======== ======== ========
</TABLE>
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-11
Equality Savings and Loan Association, F.A.
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
Due after 3 Due after 5 Due after 10 Due after
through 5 through 10 through 15 15
Due during the year ended years after years after years after years after
March 31, March 31, March 31, March 31, March 31,
------------------------------
1998 1999 2000 1997 1997 1997 1997 Total
---- ---- ---- ---- ---- ---- ---- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans secured by real estate:
Residential (1)(2).......... $ 25,784 $ 10,236 $ 13,632 $ 9,363 $ 9,099 $ 7,789 $ 14,175 $ 90,078
Commercial.................. 53 - 160 180 2,089 180 - 2,662
Loans secured by savings
deposits.................... 324 39 3 - - - - 366
Property improvement......... 8 67 113 636 539 213 - 1,596
Automobiles.................. 5 38 34 45 - - - 122
Other consumer loans......... 98 64 - - - - - 162
Commercial business loans.... 1,118 20 81 61 - - - 1,280
-------- -------- -------- -------- -------- -------- --------- ---------
Total loans................. $ 27,390 $ 10,464 $ 14,043 $ 10,285 $ 11,727 $ 8,182 $ 14,175 $ 96,266
======== ======== ======== ======== ======== ======== ========= =========
</TABLE>
_________________
(1) Includes $4,398,000 of loans held for sale, reported as due in one year or
less.
(2) Includes multifamily loans totaling $1,637,000.
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-12
Equality Savings and Loan Association, F.A.
Non-Performing Assets
<TABLE>
<CAPTION>
At March 31,
--------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Loans accounted for on a nonaccrual basis(1):
Residential one- to four-family (2).................... $ 643 $ 669 $ 653
Consumer............................................... -- -- 9
------- ------- -------
Total................................................. 643 669 662
Real estate owned....................................... 66 97 52
------- ------- -------
Total nonperforming assets............................. $ 709 $ 766 $ 714
======= ======= =======
Nonperforming loans to gross loans...................... .67% .69% .79%
Total nonperforming assets to total assets.............. .35% .39% .44%
</TABLE>
__________________
(1) All loans contractually past due 90 days or more are accounted
for on a nonaccrual basis by the Association.
(2) Includes $571,000, $326,000 and $528,000 of FHA/VA loans, the
principal and interest payments of which are either insured by
the FHA or guaranteed by the VA, at March 31, 1997, 1996 and
1995, respectively.
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT I-13
Equality Savings and Loan Association, F.A.
Deposit Composition
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
Weighted Weighted
Percent Average Percent Average
of Total Nominal of Total Nominal
Balance Deposits Rate Balance Deposits Rate
------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
NOW accounts.............................................. $ 7,170 5.83% 2.24% $ 6,990 5.61% 2.27%
Regular savings........................................... 21,577 17.55% 2.51% 21,331 17.54% 2.51%
Money market demand....................................... 6,135 4.99% 3.22% 6,552 5.26% 2.93%
Noninterest checking...................................... 4,993 4.06% 0.00% 3,824 3.07% 0.00%
Certificates of Deposit:
28-91 days-Fixed-term, fixed rate....................... 34 0.03% 2.88% 51 0.04% 2.81%
6 months- Fixed-term, fixed rate........................ 2,439 1.98% 4.01% 2,667 2.14% 4.00%
9 months- Fixed-term, fixed rate........................ 7,932 6.45% 5.27% 6,906 5.55% 5.43%
12 months- Fixed-term, fixed rate....................... 8,350 6.79% 5.06% 9,248 7.43% 5.32%
24 months- Fixed-term, fixed rate....................... 6,760 5.50% 5.55% 6,328 5.08% 5.49%
36 months- Fixed-term, fixed rate....................... 3,010 2.45% 5.35% 4,218 3.39% 4.71%
48 months- Fixed-term, fixed rate....................... 11,568 9.41% 6.39% 10,225 8.21% 6.44%
60 months- Fixed-term, fixed rate....................... 18,300 14.88% 5.67% 20,062 16.11% 5.80%
24 months- Fixed-term, variable-rate.................... 631 0.51% 5.50% 904 0.73% 5.50%
5-20 years- Fixed-term, fixed rate (Guaranteed
Account).............................................. 115 0.09% 8.93% 107 0.09% 8.91%
1-60 months- Negotiated rate............................ 2,718 2.21% 6.20% 3,428 2.75% 5.96%
Retirement Account (IRAs):
12 months- Fixed-term, fixed rate....................... 962 0.78% 5.00% 1,037 0.83% 5.00%
24 months- Fixed-term, fixed rate....................... 942 0.77% 5.53% 809 0.65% 5.53%
36 months- Fixed-term, fixed rate....................... 755 0.61% 5.44% 940 0.75% 4.89%
48 months- Fixed-term, fixed rate....................... 10,260 8.34% 6.59% 8,563 6.88% 6.74%
60 months- Fixed-term, fixed rate....................... 7,710 6.27% 5.87% 9,293 7.46% 6.08%
120 months- Fixed-term, fixed rate...................... 370 0.30% 10.00% 346 0.28% 10.00%
24 months- Fixed-term, variable rate.................... 252 0.20% 5.50% 188 0.15% 5.50%
--------- -------- --------- --------
$ 122,983 100.0% $ 124,517 100.0%
========= ======== ========= ========
<CAPTION>
At March 31,
---------------------------------
1995
---------------------------------
Weighted
Percent Average
of Total Nominal
Balance Deposits Rate
------- -------- ----
<S> <C> <C> <C>
NOW accounts.............................................. $ 7,522 6.19% 2.24%
Regular savings........................................... 23,878 19.64% 2.51%
Money market demand....................................... 7,778 6.40% 2.80%
Noninterest checking...................................... 2,637 2.18% 0.00%
Certificates of Deposit:
28-91 days-Fixed-term, fixed rate....................... 88 0.07% 2.89%
6 months- Fixed-term, fixed rate........................ 4,008 3.30% 4.01%
9 months- Fixed-term, fixed rate........................ 2,533 2.08% 5.27%
12 months- Fixed-term, fixed rate....................... 10,545 8.67% 5.06%
24 months- Fixed-term, fixed rate....................... 5,063 4.17% 5.55%
36 months- Fixed-term, fixed rate....................... 5,371 4.42% 5.35%
48 months- Fixed-term, fixed rate....................... 5,051 4.16% 6.39%
60 months- Fixed-term, fixed rate....................... 22,759 18.72% 5.67%
24 months- Fixed-term, variable-rate.................... 835 0.69% 5.50%
5-20 years- Fixed-term, fixed rate (Guaranteed
Account).............................................. 101 0.08% 8.93%
1-60 months- Negotiated rate............................ 2,935 2.41% 6.20%
Retirement Account (IRAs):
12 months- Fixed-term, fixed rate....................... 1,181 0.97% 5.00%
24 months- Fixed-term, fixed rate....................... 734 0.60% 5.53%
36 months- Fixed-term, fixed rate....................... 949 0.78% 5.44%
48 months- Fixed-term, fixed rate....................... 4,677 3.85% 6.59%
60 months- Fixed-term, fixed rate....................... 12,329 10.14% 5.87%
120 months- Fixed-term, fixed rate...................... 326 0.27% 10.00%
24 months- Fixed-term, variable rate.................... 261 0.21% 5.50%
--------- --------
$ 121,561 100.0%
========= ========
</TABLE>
Source: Equality Saving' prospectus.
<PAGE>
EXHIBIT 1-14
Equality Savings and Loan Association, F.A.
Time Deposit Rate/Maturity
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------- ------------------------------- --------------------------------
Amount Percent of total Amount Percent of total Amount Percent of total
------ ---------------- ------ ---------------- ------ ----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Within one year $ 36,335 43.7% $ 32,402 38.0% $ 29,401 36.9%
Second year ...... 22,832 27.5% 16,287 19.1% 12,015 15.1%
Third year ....... 16,693 20.1% 18,727 21.9% 12,472 15.6%
Fourth year ...... 4,949 6.0% 15,464 18.1% 18,444 23.1%
Thereafter ....... 2,299 2.8% 2,439 2.9% 7,413 9.3%
---------- -------- ---------- -------- ----------- --------
Total ............ $ 83,108 100.0% $ 85,319 100.0% $ 79,745 100.0%
========== ======== ========== ======== =========== ========
</TABLE>
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT 1-15
Equality Savings and Loan Association, F.A.
Borrowings
<TABLE>
<CAPTION>
At and For the Year Ended March 31.
--------------------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Weighted average rate paid on:
FHLB of Des Moines borrowings.................................. 5.34% 5.52% 6.28%
Note payable to bank........................................... 2.25% 2.25% 2.25%
ESOP debt...................................................... 9.50% 9.25% 10.00%
Maximum amount of borrowings outstanding at any month-end:
FHLB of Des Moines borrowings.................................. $ 67,000 $ 62,000 $ 28,000
Note payable to bank........................................... 4,000 3,000 3,000
ESOP debt...................................................... 158 193 220
Approximate average borrowings outstanding with respect to:
FHLB of Des Moines borrowings.................................. $ 61,917 $ 46,000 $ 14,417
Note payable to bank........................................... 2,259 2,194 2,109
ESOP debt...................................................... 150 180 211
Approximate weighted average rate paid on:
FHLB of Des Moines borrowings.................................. 5.46% 5.96% 5.14%
Note payable to bank........................................... 2.25% 2.25% 2.25%
ESOP debt...................................................... 9.25% 9.73% 8.96%
</TABLE>
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT II-1
Equality Savings and Loan Association, F.A.
List of Branch Offices
<TABLE>
<CAPTION>
Owned Net Lease
Year or Total Book Expiration Square
Location Opened Leased Investment Value Date Footage
-------- ------ ------ ---------- ----- ---- -------
(Dollars in thousand)
<S> <C> <C> <C> <C> <C> <C>
MAIN OFFICE:
4131 South Grand Boulevard 1944 Owned $ 2,274 $1,269 -- 21,740
St. Louis, Missouri 63118
BRANCHES:
Yorkshire Branch 1957 Leased 60 -- 1997 2,928
1281 South Laclede Station Road
Webster Groves, Missouri 63119
South County Branch 1987 Owned 1,528 1,264 -- 4,545
5400 South Lindbergh Boulevard
St. Louis, Missouri 63123
LOAN OFFICE:
Florissant Loan Office 1992 Leased 20 10 1998 1,306
2620 North Lindbergh
Florissant, Missouri 63033
West County Loan Office 1993 Leased 3 2 1999 1,200
14334 South Outer Forty
Chesterfield, Missouri 63017
O'Fallon Loan Office 1994 Leased -- -- 1997 300
2017 Highway K
O'Fallon, Missouri 63366
Crestwood Loan Office 1996 Leased -- -- 1997 500
9920 Watson Road, Suite 207
Crestwood, Missouri 63126
Chesterfield Loan Office 1996 Leased -- -- 1997 500
361 Chesterfield Center
Chesterfield, Missouri 63017
</TABLE>
Source: Equality Saving's prospectus.
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
HISTORICAL INTEREST RATES(1)
<TABLE>
<CAPTION>
Year/Qtr. Prime 90 Day One Year 30 Year
Ended Rate T-Bill T-Bill T-Bond
- -------------- ------ ------ -------- -------
<S> <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%
1997:Quarter 1 8.50% 5.32% 6.00% 7.10%
June 20, 1997 8.50% 5.06% 5.63% 6.66%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 26, 1997(1)
<TABLE>
<CAPTION> Primary Operating Total
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices
- ------ ---------------------------------------- ------ ------------------- ---------- ------ -------
($Mil)
<S> <C> <C> <C> <C> <C> <C>
California Companies
- --------------------
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 48,698 345
GWP Great Western Fin. Corp. of CA NYSE CA, FL Div. 42,878 416
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 38,530 232
GLN Glendale Fed. Bk FSB of CA NYSE CA Div. 15,394 150
CSA Coast Savings Financial of CA NYSE California R.E. 8,797 89
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,484 52
FED FirstFed. Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,130 25
WES Westcorp Inc. of Orange CA NYSE California Div. 3,406 25
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,295 33
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,045 27
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,536 22
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,263 18
FRC First Republic Bancorp of CA (3) NYSE CA, NV M.B. 2,183 11
AFFF2 America First Fin Fund of CA OTC San Francisco CA Div. 2,183 36
CFHC California Fin. Hld. Co. of CA OTC Central CA Thrift 1,315 22
REDF Redfed Bancorp of Redlands CA OTC Southern CA Thrift 909 14
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 828 S 9
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 827 J 12
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 810 11
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 781 8
PROV Provident Fin. Holdings Of CA OTC M.B. 609 0
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 480 11
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 422 6
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 400 6
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 343 4
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 117 D 3
FSSB First FS&LA of San Bern. CA OTC San Bernard. CA Thrift 104 4
<CAPTION>
Fiscal Conv. Stock Market
Ticker Financial Institution Year Date Price Value
- ------ ---------------------------------------- ---- ---- ----- -------
($) ($Mil)
<S> <C> <C> <C> <C> <C>
California Companies
- --------------------
AHM Ahmanson and Co. H.F. of CA 12-31 10/72 47.12 4,740
GWP Great Western Fin. Corp. of CA 12-31 / 56.00 7,722
GDW Golden West Fin. Corp. of CA 12-31 05/59 73.25 4,191
GLN Glendale Fed. Bk FSB of CA 06-30 10/83 25.37 1,276
CSA Coast Savings Financial of CA 12-31 12/85 46.00 855
DSL Downey Financial Corp. of CA 12-31 01/71 23.25 622
FED FirstFed. Fin. Corp. of CA 12-31 12/83 30.62 323
WES Westcorp Inc. of Orange CA 12-31 05/86 18.75 488
BPLS Bank Plus Corp. of CA 12-31 / 10.00 182
BVCC Bay View Capital Corp. of CA 12-31 05/86 26.62 345
PFFB PFF Bancorp of Pomona CA 03-31 03/96 17.25 325
CENF CENFED Financial Corp. of CA 12-31 10/91 32.75 189
FRC First Republic Bancorp of CA (3) 12-31 / 21.50 215
AFFF2 America First Fin Fund of CA 12-31 / 39.56 238
CFHC California Fin. Hld. Co. of CA 12-31 04/83 29.62 141
REDF Redfed Bancorp of Redlands CA 12-31 04/94 15.63 112
HTHR Hawthorne Fin. Corp. of CA 12-31 / 11.37 30
HEMT HF Bancorp of Hemet CA 06-30 06/95 14.06 88
ITLA Imperial Thrift & Loan of CA (3) 12-31 / 16.00 125
QCBC Quaker City Bancorp of CA 06-30 12/93 17.00 81
PROV Provident Fin. Holdings Of CA 06-30 06/96 16.75 85
HBNK Highland Federal Bank of CA 12-31 / 23.87 54
MBBC Monterey Bay Bancorp of CA 12-31 02/95 16.75 54
SGVB SGV Bancorp of W. Covina CA 06-30 06/95 14.00 33
PCCI Pacific Crest Capital of CA (3) 12-31 / 13.37 39
BYFC Broadway Fin. Corp. of CA 12-31 01/96 10.75 10
FSSB First FS&LA of San Bern. CA 06-30 12/92 9.50 3
</TABLE>
Florida Companies
- -----------------
<PAGE>
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
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv.
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date
- ------ --------------------- ------ ------------------ --------- ------ ------- ------ -----
($Mil)
<S> <C> <C> <C> <C> <C> <C> <C>
Florida Companies (continued)
- -----------------------------
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,773 43 12-31 11/83
OCWN Ocwen Financial Corp. of FL OTC Southeast FL Div 2,649 1 12-31 /
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,558 31 09-30 09/93
BKUNA BankUnited SA of FL OTC Miami FL Thrift 1,453 7 09-30 12/85
HARB Harbor FSB, MHC of FL (46.0) OTC Eastern FL Thrift 1,105 22 09-30 01/94
FFFL Fidelity FSB, MHC of FL (47.4) OTC Southeast FL Thrift 927 20 12-31 01/94
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 682 17 09-30 10/94
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 359 8 12-31 01/94
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 317 D 11 12-31 10/88
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY, NJ, FL M.B. 18,465 87 12-31 08/86
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,261 82 06-30 01/94
SVRN Sovereign Bancorp of PA OTC PA, NJ, DE M.B. 10,287 120 12-31 08/86
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 7,689 46 12-31 11/93
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,814 36 09-30 04/94
COFD Collective Bancorp Inc. of NJ OTC Southern NJ Thrift 5,518 79 06-30 02/84
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,032 34 11-30 04/86
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY, MA Thrift 3,496 70 06-30 04/92
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,404 15 12-31 06/93
NYB New York Bankcorp, Inc. of NY AMEX Southeastern NY Thrift 3,175 29 09-30 01/88
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 2,849 6 12-31 01/97
GRTR The Greater New York SB of NY (3) OTC New York NY Div. 2,571 14 12-31 06/87
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 2,542 15 12-31 03/90
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,236 39 06-30 06/96
NWSB Northwest SB, MHC of PA (29.9) OTC Pennsylvania Thrift 1,997 53 06-30 11/94
HARS Harris SB, MHC of PA (24.2) OTC Southeast PA Thrift 1,943 31 12-31 01/94
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 1,927 28 06-30 03/94
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 1,875 D 18 03-31 08/94
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,728 20 12-31 09/93
JSBF JSB Financial, Inc. of NY OTC New York City NY Thrift 1,531 13 12-31 06/90
<CAPTION>
Stock Market
Price Value
Ticker Financial Institution ----- ------
- ------ --------------------- ($) ($Mil)
<S> <C> <C>
Florida Companies (continued)
- -----------------------------
BANC BankAtlantic Bancorp of FL 14.12 262
OCWN Ocwen Financial Corp. of FL 29.75 797
FFPB First Palm Beach Bancorp of FL 30.25 152
BKUNA BankUnited SA of FL 9.62 85
HARB Harbor FSB, MHC of FL (46.0) 40.75 202
FFFL Fidelity FSB, MHC of FL (47.4) 19.37 131
CMSV Commty. Svgs, MHC of FL (48.5) 21.75 107
FFLC FFLC Bancorp of Leesburg FL 28.50 67
FFFG F.F.O. Financial Group of FL 4.87 41
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) 19.00 2,000
GPT GreenPoint Fin. Corp. of NY (3) 66.37 3,112
SVRN Sovereign Bancorp of PA 14.12 986
ASFC Astoria Financial Corp. of NY 45.62 969
LISB Long Island Bancorp, Inc of NY 36.12 875
COFD Collective Bancorp Inc. of NJ 46.12 943
RCSB RCSB Financial, Inc. of NY (3) 45.25 670
ALBK ALBANK Fin. Corp. of Albany NY 39.81 510
ROSE T R Financial Corp. of NY (3) 23.50 414
NYB New York Bankcorp, Inc. of NY 34.75 569
RSLN Roslyn Bancorp, Inc. of NY (3) 20.00 873
GRTR The Greater New York SB of NY (3) 21.25 291
BKCO Bankers Corp. of NJ (3) 25.87 320
CMSB Cmnwealth Bancorp of PA 16.62 284
NWSB Northwest SB, MHC of PA (29.9) 15.25 356
HARS Harris SB, MHC of PA (24.2) 21.25 238
RELY Reliance Bancorp, Inc. of NY 26.87 237
MLBC ML Bancorp of Villanova PA 19.06 199
HAVN Haven Bancorp of Woodhaven NY 37.00 160
JSBF JSB Financial, Inc. of NY 43.87 431
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlinton, Virginia 22209 Exhibit III-1
(703) 528-1700 Characteristics of Publicly-Traded Thrifts
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ -------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (Continued)
- ----------------------------------
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,478 14 12-31 11/86 13.62 171
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,388 9 12-31 07/96 33.12 300
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,373 13 12-31 11/93 46.12 514
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,252 17 06-30 07/94 27.37 132
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,237 15 06-30 06/96 19.12 251
YFED York Financial Corp. of PA OTC PA, MD Thrift 1,157 22 06-30 02/84 19.50 136
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,128 25 02-28 06/87 44.25 142
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,025 17 12-31 06/92 24.00 174
PVSA Parkvale Financial Corp. of PA OTC Southwestern PA Thrift 973 28 06-30 07/87 28.37 115
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 878 17 12-31 08/84 29.62 113
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 861 13 12-31 11/85 6.94 87
MBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 848 S 17 09-30 08/92 19.25 55
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 811 7 12-31 11/95 19.87 161
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 740 8 09-30 10/94 15.50 171
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 709 7 12-31 06/95 16.00 109
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 706 9 12-31 06/90 15.00 59
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 694 14 12-31 12/86 30.37 89
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 670 10 12-31 03/96 18.94 159
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 644 11 06-30 07/94 18.37 75
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 636 D 16 03-31 10/95 17.12 82
TSBS Trenton SB, FSB MHC of NJ (35.0) OTC Central NJ Thrift 626 10 12-31 08/95 19.50 176
PBIX Patriot Bank Corp. of PA OTC Southeast PA Thrift 594 7 12-31 12/95 16.31 70
FSNJ First SB of NJ, MHC (45.9) OTC Northern NJ Thrift 579 D 4 05-31 01/95 26.00 80
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 554 16 12-31 12/88 23.50 56
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 516 4 09-30 09/86 19.62 60
FSPG First Home Bancorp of NJ OTC NJ, DE Thrift 508 10 12-31 04/87 19.37 52
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 487 S 9 07-31 11/95 16.12 58
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 478 9 12-31 12/95 16.00 70
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 472 D 8 07-31 12/93 32.25 74
CNY Carver Bancorp, Inc. of NY OTC New York, NY Thrift 424 8 03-31 10/94 12.25 28
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 401 4 12-31 04/93 26.00 54
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 400 9 12-31 07/83 9.50 36
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 375 5 12-31 03/87 30.00 46
</TABLE>
<PAGE>
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
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Officers Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ -------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
- ----------------------------------
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 367 8 12-31 10/89 19.75 57
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV, OH Thrift 346 9 12-31 01/95 21.00 51
HARL Harleysville SA of PA OTC Southeastern PA Thrift 333 4 09-30 08/87 22.00 36
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 328 8 09-30 06/88 20.00 31
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 315 5 09-30 01/96 23.00 28
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 305 6 06-30 03/87 21.00 43
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 303 7 12-31 01/96 14.12 39
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 296 4 09-30 09/93 36.25 22
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 284 4 09-30 04/96 15.37 49
LFED Leeds FSB, MHC of MD (36.2) OTC Baltimore MD Thrift 282 1 06-30 03/94 19.00 66
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 280 5 06-30 11/93 25.75 45
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 274 3 09-30 04/96 15.50 78
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 269 5 09-30 08/94 17.25 30
IFSB Independence FSB of DC OTC Washington DC Ret. 263 2 12-31 06/85 9.00 12
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 257 D 3 07-31 / 5.25 22
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 252 2 09-30 04/96 15.12 46
WYNE Wayne Bancorp of NJ OTC Thrift 245 0 12-13 06/96 19.50 42
GDVS Greater DV SB, MHC of PA (19.9) (3) OTC Southeast PA Thrift 239 7 12-13 03/95 13.00 43
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 237 6 09-30 04/96 15.00 30
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY, PA Ret. 223 6 12-31 03/85 19.25 14
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 219 6 03-31 08/94 18.00 32
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 213 4 04-30 11/94 16.50 29
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 209 6 06-30 02/87 21.50 32
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 183 3 06-30 12/95 15.00 48
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 169 P 5 12-31 04/97 13.00 27
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 169 3 12-31 06/95 16.50 21
SKBO First Carnegie, MHC of PA (45.0) OTC Western PA Thrift 150 P 3 03-31 04/97 13.87 32
PRBC Prestige Bancorp of PA OTC Thrift 127 0 12-31 06/96 15.75 14
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 120 S 1 03-31 10/95 16.50 25
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 108 2 03-31 06/96 18.25 12
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 104 2 06-30 01/97 14.25 15
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 98 5 09-30 04/96 14.25 22
ALBG Albion Banc Corp. of Albion NY OTC Western NY Thrift 66 2 09-30 07/93 22.00 6
</TABLE>
<PAGE>
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
June 26, 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>
Mid-Atlantic Companies (Continued)
- ----------------------------------
PWBK Penwood SB of PA (3) OTC Pittsburg PA Thrift 48 3 12-31 07/96 15.00 9
Mid-West Companies
- ------------------
COFI Charter One Financial of OH OTC OH, MI Div. 14,040 155 12-31 01/88 51.00 2,363
RFED Roosevelt Fin. Grp. Inc. of MO OTC MO, IL, KS Div. 7,796 D 79 12-31 01/87 24.12 1,028
CFB Commercial Federal Corp. of NE NYSE NE, CO, KS, OK M.B. 6,902 98 06-30 12/84 37.50 807
FFHC First Financial Corp. of WI OTC WI, IL Div. 5,809 129 12-31 12/80 28.62 1,042
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,485 52 12-31 05/87 33.87 774
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,647 42 06-30 01/94 94.50 870
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,236 13 06-30 01/90 41.37 431
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 3,002 41 12-31 03/94 34.75 489
CTZN Citfed Bancorp of Dayton OH OTC Dayton OH M.B. 2,937 33 03-31 01/92 37.56 324
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,489 13 12-31 08/94 24.94 404
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,885 33 03-31 07/92 50.00 229
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,579 13 09-30 06/93 33.25 179
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,530 44 12-31 11/89 22.00 201
DNFC D&N Financial Corp. of MI OTC MI, WI Ret. 1,528 35 12-31 02/85 19.06 159
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,481 28 12-31 08/83 20.87 219
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,313 10 09-30 07/92 29.87 159
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO, TX Thrift 1,148 D 21 12-31 04/93 29.87 148
FFSW First Fed Fin. Serv. of OH OTC Northeastern OH Thrift 1,088 18 12-31 04/87 38.25 175
AADV Advantage Bancorp of WI OTC WI, IL Thrift 1,021 15 09-30 03/92 39.00 126
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 859 26 12-31 08/94 22.50 113
CFSB CFSB Bancorp Of Lansing MI OTC Central MI Thrift 834 18 12-31 06/90 23.25 120
IFSL Indiana Federal Corp. of IN OTC Northwestern IN Thrift 819 15 12-31 02/87 28.50 136
NASB North American SB of MO OTC KS, MO M.B. 689 8 09-30 09/85 44.00 99
GSBC Great Southern Bancorp of MO OTC Southwest MO Div. 679 25 06-30 12/89 17.00 141
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 664 15 06-30 01/88 27.75 94
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 663 22 12-31 07/92 9.62 41
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 635 6 03-31 04/95 14.00 49
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 635 13 03-31 01/88 21.37 107
</TABLE>
<PAGE>
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
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock
Ticker Financial Institution Exchg. Market Strat. (2) Assets Offices Year Date Price
- ------ -------------------------------- ------ ------------- --------- ------ ------- ---- ---- -----
($Mil) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
FNGB First Northern Cap. Corp of WI 0TC Northeast WI Thrift 618 20 12-31 12/83 21.25
FFYF FFY Financial Corp. of OH 0TC Youngstown OH Thrift 599 10 06-30 06/93 25.87
EMLD Emerald Financial Corp of OH 0TC Cleveland OH Thrift 589 13 12-31 / 14.06
HFFC HF Financial Corp. of SD 0TC South Dakota Thrift 561 19 06-30 04/92 19.75
HMNF HMN Financial, Inc. of MN 0TC Southeast MN Thrift 553 7 12-31 06/94 23.00
COVB CoVest Bancshares of IL 0TC Chicago IL Thrift 533 3 12-31 07/92 18.25
FDEF First Defiance Fin. Corp. of OH 0TC Northwest OH Thrift 546 9 06-30 10/95 14.50
FFBH First Fed. Bancshares of AR 0TC Northern AR Thrift 520 8 12-31 05/96 19.31
FFOH Fidelity Financial of OH 0TC Cincinnati OH Thrift 513 4 12-31 03/96 15.00
CBCI Calumet Bancorp of Chicago IL 0TC Chicago IL Thrift 495 5 06-30 02/92 39.50
FBCI Fidelity Bancorp of Chicago IL 0TC Chicago IL Thrift 486 5 09-30 12/93 19.00
CABI Camco Fin. Corp. of OH 0TC Eastern OH M.B. 472 7 12-31 / 18.00
FFSX First FS&LA. MHC of IA (46.0) 0TC Western IA Thrift 463 12 06-30 06/92 23.75
FMBD First Mutual Bancorp of IL 0TC Central IL Thrift 425 7 12-31 07/95 15.00
PERM Permanent Bancorp of IN 0TC Southwest IN Thrift 413 D 11 03-31 04/94 25.00
HALL Hallmark Capital Corp. of WI 0TC Milwaukee WI Thrift 409 3 06-30 01/94 21.62
SFSB SuburbFed Fin. Corp. of IL 0TC IL, IN Thrift 408 12 12-31 02/92 24.50
ASBI Americana Bancorp of IN 0TC Eastern IN, OH Thrift 402 8 12-31 02/87 15.63
WOFC Western Ohio Fin. Corp. of OH 0TC Western OH Thrift 400 6 12-31 07/94 22.00
PMFI Perpetual Midwest Fin. of IA 0TC EastCentral IA Thrift 398 4 12-31 03/94 19.00
CBSB Charter Financial Inc. of IL 0TC Southern IL Thrift 395 6 09-30 12/95 17.06
PFSL Pocahnts Fed, MHC of AR (46.4) 0TC Northeast AR Thrift 373 5 09-30 04/94 20.75
FFKY First Fed. Fin. Corp. of KY 0TC Central KY Thrift 372 7 06-30 07/87 18.50
SWBI Southwest Bancshares of IL 0TC Chicago IL Thrift 372 5 12-31 06/92 20.50
MCBS Mid Continent Bancshares of KS 0TC Central KS M.B. 371 7 09-30 06/94 27.50
CASH First Midwest Fin. Corp. of LA 0TC IA, SD R.E. 370 9 09-30 09/93 15.12
FFHH FSF Financial Corp. of MN 0TC Southern MN Thrift 367 11 09-30 10/94 17.44
HBEI Home Bancorp of Elgin IL 0TC Northern IL Thrift 359 5 12-31 09/96 16.00
PVFC PVF Capital Corp. of OH 0TC Cleveland OH R.E. 356 9 06-30 12/92 19.12
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 342 10 03-31 12/92 29.00
HVFC Haverfield Corp. of OH 0TC Cleveland OH Thrift 342 10 12-31 03/85 25.87
HMCI Homecorp, Inc. of Rockford IL 0TC Northern IL Thrift 336 9 12-31 06/90 14.25
INBI Industrial Bancorp of OH 0TC Northern OH Thrift 334 10 12-31 08/95 13.44
<CAPTION>
Market
Ticker Financial Institution Value
- ------ -------------------------------- ------
($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C>
FNGB First Northern Cap. Corp of WI 94
FFYF FFY Financial Corp. of OH 112
EMLD Emerald Financial Corp of OH 71
HFFC HF Financial Corp. of SD 59
HMNF HMN Financial, Inc. of MN 97
COVB CoVest Bancshares of IL 55
FDEF First Defiance Fin.Corp. of OH 137
FFBH First Fed. Bancshares of AR 95
FFOH Fidelity Financial of OH 84
CBCI Calumet Bancorp of Chicago IL 88
FBCI Fidelity Bancorp of Chicago IL 53
CABI Camco Fin. Corp. of OH 55
FFSX First FS&LA. MHC of IA (46.0) 67
FMBD First Mutual Bancorp of IL 56
PERM Permanent Bancorp of IN 52
HALL Hallmark Capital Corp. of WI 31
SFSB SuburbFed Fin. Corp. of IL 31
ASBI Americana Bancorp of IN 51
WOFC Western Ohio Fin. Corp. of OH 51
PMFI Perpetual Midwest Fin. of IA 36
CBSB Charter Financial Inc. of IL 72
PFSL Pocahnts Fed, MHC of AR (46.4) 34
FFKY First Fed. Fin. Corp. of KY 77
SWBI Southwest Bancshares of IL 54
MCBS Mid Continent Bancshares of KS 54
CASH First Midwest Fin. Corp. of LA 43
FFHH FSF Financial Corp. of MN 54
HBEI Home Bancorp of Elgin IL 112
PVFC PVF Capital Corp. of OH 44
KNK Kankakee Bancorp of IL 41
HVFC Haverfield Corp. of OH 49
HMCI Homecorp, Inc. of Rockford IL 24
INBI Industrial Bancorp of OH 73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock
Ticker Financial Institution Exchg. Market Strat. (2) Assets Offices Year Date Price
- ------ ---------------------------- ------ --------------- ---------- ------ ------- ---- ----- -----
($Mil) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- -------------------------------
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 328 8 09-30 03/95 20.62
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 310 1 12-31 06/92 24.25
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 304 7 12-31 06/94 40.25
WFCO Winton Financial Corp. of OH OTC Cincinnati OH R.E. 292 S 4 09-30 08/88 13.12
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 283 6 09-30 07/87 22.25
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 281 6 06-30 11/90 25.75
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 273 1 06-30 04/87 31.50
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 272 6 12-31 05/96 16.00
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 269 D 6 03-31 09/93 24.75
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 250 4 06-30 08/87 9.25
WAYN Wayne S & L Co. MHC of OH (47.8) OTC Central OH Thrift 250 D 6 03-31 06/93 17.00
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 246 D 5 09-30 10/94 18.25
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 238 7 06-30 12/93 16.62
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 234 4 09-30 03/94 19.75
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 230 4 12-31 02/93 25.25
DFIN Damen Fin. Corp. of Chicago IL OTC Chicago IL Thrift 227 3 11-30 10/95 14.37
CBCO CB Bancorp of Michigan City IN OTC Northwest IN Thrift 227 D 3 03-31 12/92 34.19
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 226 7 12-31 01/88 20.00
LARK Landmark Bancshares of KS OTC Central KS Thrift 224 5 09-30 03/94 20.12
SBCN Suburban Bancorp. of OH OTC Cincinnati OH Thrift 222 8 06-30 09/93 19.50
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 212 3 07-31 12/96 16.00
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 210 2 06-30 06/93 24.00
FFFD North Central Bancshares of IA OTC Central IA Thrift 204 4 12-31 03/96 15.25
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 202 7 12-31 04/95 14.25
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 201 9 12-31 07/92 19.75
HCBB HCB Bancshares of AR OTC Southern AR Thrift 199 P 5 06-30 05/97 12.94
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 198 3 09-30 04/95 16.75
GFED Guarnty FS & LA, MHC of MO (31.0) OTC Southwest MO Thrift 196 4 06-30 04/95 20.50
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 192 6 09-30 06/92 18.25
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 188 3 12-31 02/95 20.87
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 179 2 09-30 10/94 14.00
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 178 3 12-31 08/96 14.75
PULB Pulaski SB, MHC of MO (29.0) OTC St Louis MO Thrift 178 5 09-30 05/94 18.75
<CAPTION>
Market
Ticker Financial Institution Value
- ------ ---------------------------- ------
($Mil)
<S> <C> <C>
Mid-West Companies (continued)
- -------------------------------
HBFW Home Bancorp of Fort Wayne IN 54
WCBI WestCo Bancorp of IL 62
SMFC Sho-Me Fin. Corp. of MO 61
WFCO Winton Financial Corp. of OH 26
PFDC Peoples Bancorp of Auburn IN 51
GFCO Glenway Financial Corp. of OH 29
FBCV 1st Bancorp of Vincennes IN 22
CBK Citizens First Fin.Corp.of IL 45
FCBF FCB Fin. Corp. of Neenah WI 61
FFED Fidelity Fed. Bancorp of IN 23
WAYN Wayne S & L Co. MHC of OH (47.8) 38
EFBI Enterprise Fed. Bancorp of OH 37
CAPS Capital Savings Bancorp of MO 31
MFBC MFB Corp. of Mishawaka IN 34
OHSL OHSL Financial Corp. of OH 31
DFIN Damen Fin. Corp. of Chicago IL 47
CBCO CB Bancorp of Michigan City IN 40
FFHS First Franklin Corp. of OH 24
LARK Landmark Bancshares of KS 36
SBCN Suburban Bancorp. of OH 29
BFFC Big Foot Fin. Corp. of IL 40
MBLF MBLA Financial Corp. of MO 32
FFFD North Central Bancshares of IA 52
WEFC Wells Fin. Corp. of Wells MN 29
MWFD Midwest Fed. Fin. Corp of WI 32
HCBB HCB Bancshares of AR 34
CMRN Cameron Fin. Corp. of MO 45
GFED Guarnty FS & LA, MHC of MO (31.0) 64
FFBZ First Federal Bancorp of OH 29
LSBI LSB Fin. Corp. of Lafayette IN 20
MFFC Milton Fed. Fin. Corp. of OH 33
PFED Park Bancorp of Chicago IL 36
PULB Pulaski SB, MHC of MO (29.0) 38
</TABLE>
<PAGE>
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-Treated Thrifts
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock
Ticker Financial Institution Exchg. Market Strat. (2) Assets Offices Year Date Price
- ------ ---------------------------- ------ --------------- ---------- ------ ------- ---- ----- -------
($Mil) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- -------------------------------
MARN Marion Capital Holdings of IN OTC Central IN Thrift 174 2 06-30 03/93 22.62
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 173 3 12-31 06/95 15.00
EGLB Eagle BancGroup of IL OTC Central IL Thrift 171 1 12-31 07/96 15.63
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 166 8 06-30 04/94 17.62
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 165 3 12-31 04/97 13.25
JXSB Jcksnville SB, MHC of IL (44.6) OTC Central IL Thrift 164 4 12-31 04/95 17.62
FFWD Wood Bancorp of OH OTC Northern OH Thrift 163 6 06-30 08/93 16.87
FBSI First Bancshares of MO OTC Southcentral MO Thrift 160 5 06-30 12/93 20.00
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 158 3 06-30 03/93 26.00
SJSB SJS Bancorp of St. Joseph MI OTC Southwest MI Thrift 152 S 4 06-30 02/95 26.50
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 148 S 2 06-30 04/95 20.50
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 147 2 06-30 03/95 14.00
CNBA Chester Bancorp of IL OTC Southern IL Ret. 142 6 Dec 10/96 14.81
MWBI Midwest Bancshares, Inc. of IA OTC Southeast LA Thrift 139 4 12-31 11/92 31.50
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 138 7 12-31 12/96 14.75
GTPS Great American Bancorp of IL OTC East Central IL Thrift 138 3 09-30 06/95 16.50
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 130 2 12-31 09/96 13.75
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 128 D 1 03-31 12/95 14.25
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 128 3 06-30 07/95 12.12
MFCX Marshalltown Fin. Corp. of IA OTC Central LA Thrift 127 3 09-30 03/94 15.12
MIFC Mid Iowa Financial Corp. of LA OTC Central LA Thrift 124 6 09-30 10/92 8.75
NBSI North Bancshares of Chicago Il OTC Chicago IL Thrift 120 2 06-30 12/93 19.25
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 117 4 12-31 12/93 21.55
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 109 1 06-30 04/95 12.00
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 109 1 09-30 10/93 11.19
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 108 2 09-30 10/95 15.00
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 108 P 2 06-30 04/97 13.62
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 108 5 09-30 04/95 18.75
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 107 1 09-30 11/96 14.62
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 103 3 03-31 09/95 14.62
FTNB Fulton Bancorp of MO OTC Central MO Thrift 99 2 04-30 10/96 20.00
CNSB CNS Bancorp of MO OTC Central MO Thrift 98 5 12-31 06/96 16.50
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 97 3 06-30 02/95 13.50
<CAPTION>
Market
Ticker Financial Institution Value
- ------ ---------------------------- ------
($Mil)
<S> <C> <C>
Mid-West Companies (continued)
- -------------------------------
MARN Marion Capital Holdings of IN 41
NEIB Northeast Indiana Bncrp of IN 26
EGLB Eagle BancGroup of IL 20
SMBC Southern Missouri Bncrp of MO 29
HMLK Hemlock Fed. Fin. Corp. of IL 28
JXSB Jcksnville SB, MHC of IL (44.6) 22
FFWD Wood Bancorp of OH 25
FBSI First Bancshares of MO 23
FFWC FFW Corporation of Wabash IN 18
SJSB SJS Bancorp of St. Joseph MI 24
QCFB QCF Bancorp of Virginia MN 29
BWFC Bank West Fin. Corp. of MI 25
CNBA Chester Bancorp of IL 32
MWBI Midwest Bancshares, Inc. of IA 11
RIVR River Valley Bancorp of IN 18
GTPS Great American Bancorp of IL 29
WEHO Westwood Hmstd Fin Corp of OH 39
CLAS Classic Bancshares of KY 19
FKKY Frankfort First Bancorp of KY 41
MFCX Marshalltown Fin. Corp. of IA 21
MIFC Mid Iowa Financial Corp. of LA 15
NBSI North Bancshares of Chicago Il 20
PTRS Potters Financial Corp of OH 10
ASBP ASB Financial Corp. of OH 21
FFSL First Independence Corp. of KS 11
HFFB Harrodsburg 1st Fin Bcrp of KY 30
PSFC Peoples Sidney Fin. Corp of OH 24
BDJI First Fed. BAncorp. of MN 13
DCBI Delphos Citizens Bancorp of OH 30
HFSA Hardin Bancorp of Hardin MO 13
FTNB Fulton Bancorp of MO 34
CNSB CNS Bancorp of MO 27
CIBI Community Inv. Bancorp of OH 13
</TABLE>
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 26, 1997 (1)
<TABLE>
<CAPTION> Primary Operating Total Fiscal
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year
- ------ ----------------------------------- ----------- ------------------ ----------- ---------- ------- --------
($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
CBES CBES Bancorp of MC OTC Western MO Thrift 95 2 06-30
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 95 3 03-31
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 95 2 09-30
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 94 4 12-31
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 93 1 12-31
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 93 2 12-31
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 91 3 06-30
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 90 2 09-30
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 89 2 06-30
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 88 1 06-30
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 87 S 4 06-30
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 85 1 06-30
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 85 2 06-30
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 84 D 3 09-30
PCBC Perry CO. Fin. Corp. of MO OTC EastCentral MO Thrift 80 D 1 09-30
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 79 1 12-31
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 79 3 06-30
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 78 3 06-30
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 76 2 06-30
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 75 1 12-31
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 71 3 06-30
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 1 09-30
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 68 1 06-30
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 66 2 06-30
LXMO Lexington B & L Fin. Corp. of MO OTC West Central MO Thrift 62 S 1 09-30
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31
NSLB NS & L Bancorp of Neosho MO OTC Southwest MO Thrift 58 2 09-30
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 57 P 2 09-30
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 50 S 1 09-30
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 48 S 1 June
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 47 2 09-30
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 39 0 06-30
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30
<CAPTION>
Conv. Stock Market
Ticker Financial Institution Date Price Value
- ------ ------------------------- ------ ------ --------
($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C>
CBES CBES Bancorp of MC 09/96 16.87 17
NWEQ Northwest Equity Corp. of WI 10/94 14.75 12
FTSB Fort Thomas Fin. Corp. of KY 06/95 10.50 16
AMFC AMB Financial Corp. of IN 04/96 14.00 15
WCFB Wbstr Cty FSB MHC of IA (45.2) 08/94 14.75 31
FFBI First Financial Bancorp of IL 10/93 18.75 8
INCB Indiana Comm. Bank, SB of IN 12/94 15.00 14
PFFC Peoples Fin. Corp. of OH 09/96 15.25 23
KYF Kentucky First Bancorp of KY 08/95 11.00 15
GFSB GFS Bancorp of Grinnell IA 01/94 13.25 13
THR Three Rivers Fin. Corp. of MI 08/95 15.75 13
FFDF FFD Financial Corp. of OH 04/96 13.50 20
SFFC StateFed Financial Corp. of IA 01/94 19.12 15
HHFC Harvest Home Fin. Corp. of OH 10/94 10.50 10
PCBC Perry CO. Fin. Corp. of MO 02/95 19.75 16
LOGN Logansport Fin. Corp. of IN 06/95 14.00 18
SOBI Sobieski Bancorp of S. Bend IN 03/95 14.75 11
HZFS Horizon Fin'l. Services of IA 06/94 19.25 8
MSBF MSB Financial Corp. of MI 02/95 22.00 14
PSFI PS Financial of Chicago IL 11/96 14.75 32
ATSB AmTrust Capital Corp. of IN 03/95 12.62 7
MIVI Miss. View Hold. Co. of MN 03/95 14.62 12
HCFC Home City Fin. Corp. of OH 12/96 14.00 13
GWBC Gateway Bancorp of KY 01/95 17.50 19
LXMO Lexington B & L Fin. Corp. of MO 06/96 15.19 17
CKFB CKF Bancorp of Danville KY 01/95 19.25 18
NSLB NS & L Bancorp of Neosho MO 06/95 16.50 12
MRKF Market Fin. Corp. of OH 03/97 13.00 17
CSBF CSB Financial Group Inc of IL (3) 10/95 12.50 12
RELI Reliance Bancshares Inc of WI (3) 04/96 8.25 21
HBBI Home Building Bancorp of IN 02/95 21.00 7
HWEN Home Financial Bancorp of IN 07/96 15.75 8
LONF London Financial Corp. of OH 04/96 14.87 8
</TABLE>
<PAGE>
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
June 26, 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>
Mid-West Companies (continued)
- ------------------------------
FLKY First Lancaster Bncshrs of KY OTC Thrift 37 D 0 06-30 07/96 15.50 15
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 36 1 03-31 12/95 14.50 11
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (37.4) (3) OTC Southwestern CT Div. 7,538 84 12-31 07/88 26.50 1,617
WBST Webster Financial Corp. of CT OTC Central CT Thrift 5,584 64 12-31 12/86 43.87 524
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME, NH Div. 5,458 82 12-31 12/86 35.75 1,016
CFX CFX Corp of NH (3) AMEX S.W. NH, MA M.B. 1,744 23 12-31 02/87 18.12 236
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 1,512 19 09-30 02/87 30.75 140
SISB SIS Bank of Springfield MA (3) OTC Central MA Div. 1,349 D 21 12-31 02/95 29.62 168
ANDB Andover Bancorp, Inc, of MA (3) OTC Northeastern MA M.B. 1,210 11 12-31 05/86 29.37 151
FESX First Essex Bancorp of MA (3) OTC MA, NH Div. 1,147 10 12-31 08/87 16.50 123
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,055 10 12-31 / 24.37 157
MDBK Medford Savings Bank of MA (3) OTC Eastern MA Thrift 1,054 16 12-31 03/86 30.50 138
FAB FirstFed America Bancorp of MA AMEX Southeast MA M.B. 980 14 12-31 01/97 17.00 148
FFES First FS & LA of E. Hartford CT OTC Central CT Thrift 975 12 12-31 06/87 29.75 79
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 941 8 12-31 10/95 17.69 105
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 901 14 12-31 05/86 46.75 126
EBCP Eastern Bancorp of NH OTC VT, NH M.B. 866 25 09-30 11/83 26.62 98
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 814 10 12-31 07/86 23.00 118
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 789 0 12-31 06/96 18.75 99
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 701 18 12-31 11/86 22.62 122
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 8 12-31 06/94 28.37 68
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 589 15 12-31 12/81 35.50 82
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 581 9 06-30 05/86 37.75 93
MWBX Metro West of MA (3) OTC Eastern MA Thrift 555 9 12-31 10/86 5.56 78
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 549 14 12-31 10/86 15.12 54
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 522 5 12-31 07/86 2.66 44
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 492 7 12-31 06/86 25.00 47
PBNB Peoples Sav. Fin. Corp. of CT (3) OTC Central CT Thrift 479 8 12-31 08/86 36.25 69
SWCB Sandwich CO-OP. Bank of MA (3) OTC Southeastern MA Thrift 475 11 04-30 07/86 31.00 59
</TABLE>
<PAGE>
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
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year
- ------ ------------------------------------ ------ ---------------------- ---------- -------- ------- ------
($Mil)
<S> <C> <C> <C> <C> <C> <C> <C>
New England Companies (continued)
- ---------------------------------
PETE Primary Bank of NH (3) OTC Southern NH Ret. 436 8 12-31
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 414 3 12-31
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 412 7 12-31
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 361 6 12-31
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 342 6 12-31
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 324 D 11 04-30
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 317 12 06-30
NHTB NH Thrift Bancshares of NH OTC central NH Thrift 313 10 12-31
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 263 3 12-31
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 248 8 06-30
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 237 7 12-31
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 206 4 12-31
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 189 2 12-31
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 177 5 12-31
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 166 4 12-31
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 149 P 4 09-30
KSEK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 133 J 8 12-31
MFLR Mayflower Co-op. Bank of MA (3) OTC Southeastern MA Thrift 125 4 04-30
NTMG Nutmeg FS&LA of CT OTC CT M.B. 94 3 12-31
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 90 1 09-30
MCBN Mid-Coast Bancorp of ME OTC Easter ME Thrift 58 D 2 03-31
GLBK Glendale Co-op. Bank of MA (3) OTC Boston MA Thrift 37 D 1 04-30
North-West Companies
- --------------------
WAMU Washington Mutual Inc. of WA (3) OTC WA, OR, ID, UT, MT Div, 46,051 290 12-31
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,789 89 09-30
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,771 31 12-31
STSA Sterling Financial Corp. of WA OTC WA OR M.B. 1,557 41 06-30
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 977 D 16 03-31
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 684 7 09-30
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 515 12 03-31
<CAPTION>
Conv. Stock Market
Ticker Financial Institution Date Price Value
- ------- ----------------------------------- ----- ------ ---------
($) ($Mil)
<S> <C> <C> <C> <C>
New England Companies (continued)
- ---------------------------------
PETE Primary Bank of NH (3) 10/93 24.87 52
BKCT Bancorp Connecticut of CT (3) 07/86 25.50 65
EIRE Emerald Island Bancorp, MA (3) 09/86 18.50 41
WRNB Warren Bancorp of Peabody MA (3) 07/86 18.00 66
LSBX Lawrence Savings Bank of MA (3) 05/86 10.75 46
CEBK Central Co-Op. Bank of MA (3) 10/86 18.12 36
NMSB Newmil Bancorp. of CT (3) 02/86 10.25 40
NHTB NH Thrift Bancshares of NH 05/86 15.25 31
POBS Portsmouth Bank Shrs Inc of NH (3) 02/88 16.00 94
NBN Northeast Bancorp of ME (3) 08/87 14.37 18
TBK Tolland Bank of CT (3) 12/86 19.12 22
HIFS Hingham Inst. for Sav. of MA (3) 12/88 19.87 26
HPBC Home Port Bancorp, Inc. of MA (3) 08/88 20.25 37
BSBC Branford SB of CT (3) 11/86 4.69 31
IPSW Ipswich SB of Ipswich MA (3) 05/93 16.25 19
AFED AFSALA Bancorp, Inc. of NY 10/96 14.75 21
KSEK KSB Bancorp of Kingfield ME (3) 06/93 35.00 14
MFLR Mayflower Co-op. Bank of MA (3) 12/87 18.00 16
NTMG Nutmeg FS&LA of CT / 8.25 6
FCB Falmouth Co-Op Bank of MA (3) 03/96 16.25 24
MCBN Mid-Coast Bancorp of ME 11/89 19.50 4
GLBK Glendale Co-op. Bank of MA (3) 01/94 27.00 7
North-West Companies
- --------------------
WAMU Washington Mutual Inc. of WA (3) 03/83 62.69 7,413
WFSL Washington FS&LA of Seattle WA 11/82 27.69 1,314
IWBK Interwest SB of Oak Harbor WA / 36.00 289
STSA Sterling Financial Corp. of WA / 19.00 105
FWWB First Savings Bancorp of WA (3) 11/95 21.50 226
KFBI Klamath First Bancorp of OR 10/95 18.75 187
HRZB Horizon Financial Corp. of WA (3) 08/86 16.12 119
</TABLE>
<PAGE>
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
June 26, 1997 (1)
<TABLE>
<CAPTION>
Primary Operating Total
Ticker Financial Institution Exchg. Market Strat. (2) Assets Offices
- ------ ---------------------------------- ------ ---------------- ---------- ------ -------
($Mil)
<S> <C> <C> <C> <C> <C>
North-West Companies (continued)
- ---------------------------------
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 417 D 6
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 352 6
RVSB Rvrview SB, FSB MHC of WA (41.7) OTC Southwest WA M.B. 224 9
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3
South-East Companies
- --------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,602 32
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift. 1,408 20
MGNL Magna Bancorp of MS OTC MS, AL M.B. 1,383 62
AMFB American Federal Bank of SC OTC Northwest SC Thrift 1,307 41
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,248 29
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 929 D 16
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 843 8
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 817 23
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 707 D 15
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 666 D 10
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 656 19
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 607 12
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 550 11
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 485 9
TSH Teche Holding Company of LA AMEX Southern LA Thrift 394 8
COOP Cooperative Bk. for Svgs. of NC OTC Eastern NC Thrift 349 17
FSFC First So. east Fin. Corp. of SC OTC Northwest SC Thrift 335 11
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 271 5
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 270 9
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 264 D 4
FSTC First Citizens Corp of GA OTC Western GA M.B. 257 D 8
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 239 2
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 229 8
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 223 D 5
FLAG Flag Financial Corp of GA OTC Western GA M.B. 222 4
<CAPTION>
Fiscal Conv. Stock Market
Ticker Financial Institution Year Date Price Value
- ------ ---------------------------------- ---- ----- ------ ------
($) ($Mil)
<S> <C> <C> <C> <C> <C>
North-West Companies (continued)
- ---------------------------------
FMSB First Mutual SB of Bellevue WA (3) 12-31 12/85 17.25 47
CASB Cascade SB of Everett WA 06-30 08/92 18.50 38
RVSB Rvrview SB, FSB MHC of WA (41.7) 03-31 10/93 22.00 53
EFBC Empire Federal Bancorp of MT 06-30 01/97 13.50 35
South-East Companies
- --------------------
FFCH First Fin. Holdings Inc. of SC 09-30 11/83 29.50 187
LIFB Life Bancorp of Norfolk VA 12-31 10/94 23.62 233
MGNL Magna Bancorp of MS 06-30 03/91 26.37 363
AMFB American Federal Bank of SC 12/31 01/89 31.75 350
FLFC First Liberty Fin. Corp. of GA 9-30 12/83 21.75 168
ISBF ISB Financial Corp. of LA 12-31 04/95 23.25 163
HFNC HFNC Financial Corp. of NC 06-30 12/95 16.75 288
VFFC Virginia First Savings of VA 06-30 01/78 22.62 131
CNIT Cenit Bancorp of Norfolk VA 12-31 08/92 44.50 73
EBSI Eagle Bancshares of Tucker GA 03-31 04/86 17.87 81
PALM Palfed, Inc. of Aiken SC 12-31 12/85 16.69 88
VABF Va. Beach Fed. Fin. Corp of VA 12-31 11/80 12.84 64
FFFC FFVA Financial Corp. of VA 12-31 10/94 26.75 121
CFCP Coastal Fin. Corp. of SC 09-30 09/90 23.00 107
TSH Teche Holding Company of LA 09-30 04/95 18.69 64
COOP Cooperative Bk. for Svgs. of NC 03-31 08/91 21.25 32
FSFC First So. east Fin. Corp. of SC 06-30 10/93 10.12 44
SOPN First SB, SSB, Moore Co. of NC 06-30 01/94 24.00 89
UFRM United FS&LA of Rocky Mount NC 12-31 07/80 12.00 37
ANA Acadiana Bancshares of LA (3) 12-31 07/96 19.37 53
FSTC First Citizens Corp of GA 03-31 03/86 24.75 39
SSFC South Street Fin. Corp. of NC (3) 09-30 10/96 16.50 74
MERI Meritrust FSB of Thibodaux LA 12-31 / 38.00 29
PERT Perpetual of SC, MHC (46.8) 09-30 10/96 29.50 44
FLAG Flag Financial Corp of GA 12-31 12/86 14.25 29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Service Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 26, 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>
South-East Companies (continued)
- --------------------------------
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 206 1 09-30 03/96 17.62 75
PLE Pinnacle Bank of AL AMEX Central AL. Thrift 200 5 06-30 12/86 21.37 19
ESX Essex Bancorp of VA AMEX VA, NC M.B 180 12 12-31 / 1.12 1
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 174 3 09-30 04/96 17.75 76
FTF Texarkana Fst. Fin. Corp of Ar AMEX Southwest AR Thrift 168 5 09-30 07/95 18.00 33
CFFC Community Fin. Corp. of Va OTC Central VA Thrift 167 3 03-31 03/88 22.50 29
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 147 7 09-30 02-87 7.25 22
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 132 3 09-30 08/94 20.75 24
FFBS FFBS Bancorp of Columbia MS OTC Columbus MS Thrift 129 3 06-30 06/93 23.00 36
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 119 2 06-30 12/95 10.37 29
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 117 P 3 12-31 04/97 15.25 52
GSLC Guaranty Svgs & Loan FA of VA OTC Charltsvl VA M.B 116 D 3 06-30 / 10.63 16
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 109 4 06-30 11/96 14.37 27
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 27.25 50
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 D 4 06-30 10/95 14.87 18
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 104 3 12-31 01/95 19.00 16
KSAV KS Bancrop of Kenly NC OTC Central NC Thrift 101 3 12-31 12/93 24.50 17
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 100 1 06-30 12/96 69.25 28
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 93 2 09-30 02/95 15.12 12
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 87 3 09-30 07/95 16.00 14
CZF Citisave Fin. Corp. of LA AMEX Baton Rouge LA Thrift 75 5 12-31 07/95 20.25 19
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 73 P 3 09-30 12/96 14.25 16
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 2 09-30 04/96 16.25 30
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 18.25 13
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 34 1 12-31 07/96 16.37 16
South-West Companies
- --------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B 2,853 40 12-31 / 28.75 143
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B 279 D 5 03-31 06/31 28.75 24
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 218 6 09-30 04/96 14.94 38
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 112 2 09-30 01/95 18.37 20
</TABLE>
<PAGE>
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
June 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ------------------------ ------ ------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-West Companies (continued)
- --------------------------------
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 106 3 12-31 08/86 5.75 7
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 87 1 06-30 06/95 19.00 16
Western Companies (Excl GA)
- ---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,514 D 26 12-31 01/96 18.87 312
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 932 20 06-30 01/94 20.62 114
GBCI Glacier Bancorp of MT OTC Western MT Div. 552 13 06-30 03/84 17.75 121
UBMT United Fin. Corp. of MT OTC Central MT Thrift 108 4 12-31 09/86 19.50 24
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 86 2 12-31 09/93 21.25 13
CRZY Crazy Woman Creek Bancorp of WY OTC Northeast WY Thrift 52 1 09-30 03/96 13.50 14
</TABLE>
Other Areas
- -----------
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 06/26/97
<PAGE>
EXHIBIT III-2
Financial Analysis of Missouri Institutions
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Comparatives
Prices As of June 20, 1997
<TABLE>
<CAPTION>
Market Per Share Data
------------------
Capitalization Core Book Pricing Ratios(3)
-------------- --------------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- -------- -------- -------- ------- ------- ------- ------- --------
($) ($MIL) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.54 138.39 1.14 15.57 20.57 131.24 15.97 134.69 18.09
State of MO 20.84 43.29 1.11 15.93 20.76 133.30 20.45 136.39 19.07
Comparable Group
- ----------------
State of MO
- -----------
CBES CBES Bancorp of MO 16.67 17.29 0.86 17.08 24.45 98.77 18.16 98.77 19.62
CNSB CNS Bancorp of MO 16.60 27.27 0.47 14.73 NM 112.02 27.80 112.02 NM
CHRN Cameron Fin. Corp. of MO 16.75 44.92 0.96 16.92 21.75 99.00 22.72 99.00 17.45
CAPS Capital Savings Bancorp of MO 16.62 31.45 1.10 10.89 21.58 152.62 13.22 152.62 15.11
FBSI First Bancshares of MO 20.00 23.20 1.45 19.80 16.95 101.01 14.50 101.16 13.79
FINB Fultan Bancorp of MO 20.00 34.38 0.58 14.47 NM 138.22 34.57 138.22 NM
GSBC Great Southern Bancorp of MO 17.00 140.90 1.23 7.35 15.60 231.29 20.75 231.29 13.82
GFED Guarnty FS&LA, MHC of MO (31.0)(7) 20.50 19.86 0.49 8.68 NM 236.18 32.68 236.18 NM
HFSA Hardin Bancorp of Hardin MO 14.62 12.56 0.88 16.38 27.07 96.06 12.15 95.05 16.61
JSBA Jefferson Svgs Bancorp of MO 29.87 148.48 1.43 18.09 NM 165.12 12.93 211.54 20.89
JOAC Joachim Bancorp of MO 14.50 11.02 0.37 13.60 NM 106.62 30.90 106.62 NM
LXHO Lexington B&L Fin. Corp. of MO 15.19 16.53 0.58 17.24 NM 88.11 26.80 88.11 26.19
MBLA MBLA Financial Corp. of MO(7) 24.00 31.58 1.36 21.51 22.86 111.58 15.06 111.58 17.65
NSLB NS&L Bancorp of Neosho MO 16.50 11.68 0.62 16.35 NM 100.92 20.11 100.92 26.61
NASB North American SB of MO 44.00 99.31 3.74 24.35 11.43 180.70 14.41 186.76 11.76
PCBC Perry Co. Fin. Corp. of MO 19.75 15.96 0.95 18.76 28.21 105.28 19.85 105.28 20.79
PULB Pulaski SB, MHC of MO (29.0) 18.25 10.95 0.67 10.75 NM 169.77 21.37 169.77 27.24
RFED Roosevelt Fin. Grp. Inc. of MO(7) 24.12 1027.87 1.77 10.16 NM 237.40 13.18 NM 13.63
SMFC Sho-Me Fin. Corp. of MO 40.25 61.14 2.08 19.13 23.27 210.40 20.08 210.40 19.54
SMBC Southern Missouri Bncrp of MO 27.62 28.86 1.00 15.85 17.27 111.17 17.42 111.17 17.62
<CAPTION>
Dividends(4) Financial Characteristics(6)
-------------------------- ---------------------------------------------------------
Amount/ Payout Total Equity/ NPAs Reported Core
------------- ----------------
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 0.37 1.84 29.06 1,119 12.85 0.78 0.61 5.25 0.84 7.34
State of MO 0.40 2.13 33.47 258 16.92 0.74 0.77 5.74 1.01 7.33
Comparable Group
- ----------------
State of MO
- -----------
CBES CBES Bancorp of MO 0.40 2.37 46.51 96 18.39 0.77 0.77 5.22 0.96 6.51
CNSB CNS Bancorp of MO 0.20 1.21 42.55 98 24.82 0.45 0.53 2.41 0.81 3.66
CHRN Cameron Fin. Corp. of MO 0.28 1.67 29.17 198 22.95 0.60 1.12 4.46 1.39 5.56
CAPS Capital Savings Bancorp of MO 0.24 1.44 21.82 238 8.66 0.25 0.65 7.16 0.92 10.23
FBSI First Bancshares of MO 0.20 1.00 13.79 160 14.35 0.32 0.91 5.88 1.11 7.22
FINB Fultan Bancorp of MO 0.20 1.00 34.48 99 25.01 NA 0.74 3.81 1.05 5.39
GSBC Great Southern Bancorp of MO 0.40 2.35 32.52 679 8.97 1.83 1.36 14.03 1.53 15.83
GFED Guarnty FS&LA, MHC of MO (31.0)(7) 0.40 1.95 NM 196 13.64 0.54 0.50 3.50 0.81 5.71
HFSA Hardin Bancorp of Hardin MO 0.48 3.28 54.55 103 12.78 0.37 0.51 3.17 0.82 5.16
JSBA Jefferson Svgs Bancorp of MO 0.40 1.34 27.97 1,148 7.83 0.52 0.25 3.41 0.63 8.56
JOAC Joachim Bancorp of MO 0.50 3.45 NM 36 28.99 0.68 0.51 1.71 0.78 2.64
LXHO Lexington B&L Fin. Corp. of MO 0.30 1.97 51.72 62 30.42 0.63 0.97 4.48 1.34 6.18
MBLA MBLA Financial Corp. of MO(7) 0.40 1.67 29.41 210 13.49 0.25 0.66 4.90 0.86 6.34
NSLB NS&L Bancorp of Neosho MO 0.50 3.03 NM 58 19.93 0.06 0.49 2.30 0.74 3.47
NASB North American SB of MO 0.80 1.82 21.39 559 7.97 3.34 1.23 16.83 1.19 16.35
PCBC Perry Co. Fin. Corp. of MO 0.40 2.03 42.11 80 18.85 0.05 0.71 3.86 0.95 4.97
PULB Pulaski SB, MHC of MO (29.0) 1.00 5.48 NM 179 12.59 NA 0.49 3.91 0.78 6.24
RFED Roosevelt Fin. Grp. Inc. of MO(7) 0.68 2.82 38.42 7,796 5.55 0.98 0.11 2.23 0.85 17.13
SMFC Sho-Me Fin. Corp. of MO 0.00 0.00 0.00 304 9.54 0.09 0.91 8.68 1.09 10.34
SMBC Southern Missouri Bncrp of MO 0.50 2.84 50.00 166 15.67 1.10 1.03 6.46 1.01 6.33
</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 1 less (including the SAIF assessment)on a
tax effected basis.
(3) P/E = Price to earnings; P/8 = 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) Excluses 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-3
Financial Analysis of Midwest Peer Group Candidates
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Cooparatives
Prices As of June 20, 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
- --------------------- --------- ------- ------- ------- ------ ------ ------- ------- -------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.54 138.39 1.14 15.57 20.57 131.24 15.97 134.69 18.09
State of NO 20.84 43.29 1.12 15.93 20.76 133.30 20.45 136.39 19.07
Comparable Group Average 18.96 34.80 0.91 17.26 21.67 110.09 13.07 114.22 18.64
Mid-West Companies 18.36 34.80 0.91 17.26 21.67 110.09 13.07 114.22 18.64
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 12.00 20.65 0.57 10.00 NM 120.00 18.87 120.00 21.05
BWFC Bank West Fin. Corp. of NI 14.00 24.96 0.42 12.62 23.73 110.94 16.98 110.94 NM
CAFI Canco Fin. Corp. of OH 18.00 55.12 1.16 14.95 18.18 120.40 11.67 130.81 15.52
CBK Citizens First Fin. Corp. of IL 16.00 44.78 0.53 14.21 NN 112.60 16.49 112.60 NN
BD?I First Fed. Bancorp. of HN 18.75 13.14 1.00 17.17 NH 109.20 12.20 109.20 18.75
FMBD First Mutual Bancorp of IL 15.00 56.13 0.34 15.22 NH 98.55 13.22 128.10 NM
HFFC HF Financial Corp. of SD 19.75 59.21 1.51 17.21 17.95 114.76 10.55 115.03 13.08
KNK Kankakee Bancorp of IL 29.00 41.18 1.94 25.74 19.21 112.67 12.03 120.33 14.95
LSBI LSB Fin. Corp. of Larayette IN 20.87 19.72 0.79 18.06 22.20 115.56 10.49 115.56 26.42
NBSI North Bancshares of Chicago IL 19.25 19.92 0.74 16.94 NM 113.64 16.60 113.64 26.01
PMFI Perpetual Midwest Fin. of IA 19.00 36.23 0.53 17.72 NN 107.22 9.11 107.22 NN
PTRS Potters Financial Corp of OH 21.55 10.39 1.62 21.38 28.73 100.80 8.98 100.80 13.30
WOFC Western Chio Fin. Corp. of OH 22.00 50.86 0.69 23.21 NH 94.79 12.71 100.59 NM
<CAPTION>
Dividends (4) Financial Characteristics (6)
------------------ ------------------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
------------- ---------------
Financial Institution Share Yield Ratio(s) Assets Assets Assets AOA RDE ROA ROE
- --------------------- ------- ------ --------- ------- ------- ------- ------ ----- ----- ------
($) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.84 29.05 1.119 12.85 0.78 0.61 5.26 0.84 7.34
State of No 0.40 2.13 33.47 258 16.92 0.74 0.77 5.74 1.01 7.33
Comparable Group Average 0.37 1.97 37.68 281 11.87 0.69 0.44 3.71 0.61 5.18
Mid-West Companies 0.37 1.97 37.68 281 11.87 0.69 0.44 3.71 0.61 5.18
Comparable Group
- ----------------
Mid-West Companies
- -------------------
ASBP ASB Financial Corp. of OH 0.40 3.33 70.18 109 15.73 1.58 0.60 3.01 0.88 4.40
BWFC Bank West Fin. Corp. of NI 0.28 2.00 66.67 147 15.30 0.03 0.74 4.25 0.53 3.03
CAFI Canco Fin. Corp. of OH 0.52 2.89 44.83 472 9.69 0.68 0.75 8.54 0.88 10.01
CBK Citizens First Fin. Corp. of IL 0.00 0.00 0.00 272 14.64 0.54 0.27 1.98 0.58 4.19
BD?I First Fed. Bancorp. of HN 0.00 0.00 0.00 108 11.17 0.31 0.32 2.58 0.66 5.38
FMBD First Mutual Bancorp of IL 0.32 2.13 NM 425 13.41 0.16 0.15 0.75 0.38 1.97
HFFC HF Financial Corp. of SD 0.36 1.82 23.84 561 9.19 0.40 0.59 6.44 0.81 8.85
KNK Kankakee Bancorp of IL 0.48 1.66 24.74 342 10.68 1.06 0.6? 5.97 0.78 7.67
LSBI LSB Fin. Corp. of Larayette IN 0.32 1.53 40.51 188 9.08 1.34 0.50 5.26 0.42 4.42
NBSI North Bancshares of Chicago IL 0.48 2.49 64.86 120 14.51 NA 0.46 2.95 0.65 4.19
PMFI Perpetual Midwest Fin. of IA 0.30 1.58 56.60 398 8.50 0.41 0.09 0.99 0.26 2.92
PTRS Potters Financial Corp of OH 0.36 1.67 22.22 117 8.91 0.83 0.31 3.45 0.67 7.45
WOFC Western Chio Fin. Corp. of OH 1.00 4.55 NM 400 13.41 0.96 0.31 2.02 0.44 2.90
</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 Market Area Comparative Analysis
<TABLE>
<CAPTION>
Proj. Per Capita 1997
Income Deposit
---------------
Population Pop. 1990-97 1997-2002 % State Market
------------- Median
Institution County 1990 1997 2002 % Change % Change Age Amount Average Share(1)
- ----------- ------ ---- ---- ---- -------- --------- ------- ------ ------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASB Financial Corp. of OH Scioto 80 81 81 0.7% 0.5% 36.7 11,564 67.1% 12.0%
Bank West Fin. Corp. of MI Kent 501 541 569 8.1% 5.2% 32.7 21,033 108.9% 1.2%
Capital Savings Bancorp of Cole 64 69 72 8.3% 5.3% 35.5 19,705 111.6% 5.1%
MO
First Fed. Bancorp. of MN Beltrami 34 39 42 13.0% 7.9% 29.8 12,263 58.9% 13.3%
First Mutual Bancorp of IL Macon 117 115 113 -2.1% -1.4% 36.4 16,742 84.9% 8.4%
Hardin Bancorp of Hardin MO Ray 22 23 23 4.1% 2.7% 36.5 15,618 88.4% 22.0%
Kankakee Bancorp of IL Kankakee 96 102 107 6.4% 4.2% 34.0 15,952 80.9% 16.4%
North Bancshares of Cook 5,105 5,089 5,078 -0.3% -0.2% 34.7 20,791 105.4% 0.1%
Chicago IL
Potters Financial Columbiana 108 112 114 3.0% 2.0% 37.0 13,047 75.7% 9.3%
Corporation
Western Ohio Fin. Corp. of Clark 148 147 147 -0.1% 0.0% 36.4 16,384 95.0% 10.5%
OH ----- ----- ----- ------ ----- ---- ------ ----- -----
AVERAGES: 628 632 635 4.1% 2.6% 35.0 16,310 87.7% 9.8%
MEDIANS: 102 107 110 3.5% 2.4% 36.0 16,168 86.7% 9.9%
EQUALITY SAVINGS ST. LOUIS 397 344 321 -13.3% -6.6% 34.8 16,601 94.0% 0.7%
CITY
</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 June 20, 1997
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Weekly Thrift Market Line - Part One
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------------ -------------------------------------------
Shares Market 52 Week (1) % Change From
-------------- --------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- --------- ------ ---------- ------ ----- ---- ---- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF - Insured Thrifts(no HHC)
- ------------------------------------------------
SAIF - Insured Thrifts(314) 20.55 5,335 144.6 21.45 14.46 20.23 1.56 168.18 17.47
NYSE Traded Companies(0) 37.73 38,943 1,662.8 39.36 23.56 37.00 2.03 245.10 20.28
AMEX Traded Companies(18) 16.08 3,927 83.7 19.16 12.35 17.65 2.37 279.18 17.14
NASDAQ Listed OTC Companies(287) 20.18 4,409 102.7 21.05 14.32 19.88 1.49 158.91 17.40
California Companies(24) 23.84 18,136 670.8 24.92 14.96 23.26 2.40 104.27 19.55
Florida Companies(6) 22.45 12,310 272.5 23.85 14.71 21.95 2.05 124.35 20.00
Mid-Atlantic Companies(59) 21.30 6,329 145.5 21.98 14.12 20.92 2.14 152.85 22.21
Mid-West Companies(153) 19.85 3,208 82.8 20.78 14.53 19.59 1.16 192.03 15.18
New England Companies(11) 22.12 4,473 121.7 22.35 15.30 21.86 2.30 289.09 18.71
North-West Companies(6) 22.24 12,602 327.9 22.50 15.61 21.62 2.41 125.83 18.99
South-East Companies(43) 19.80 3,376 65.8 21.13 14.33 19.63 0.86 150.54 18.59
South-West Companies(6) 19.26 1,904 41.2 19.54 12.69 18.75 2.38 -14.81 12.86
Western Companies (Excl CA)(6) 18.58 5,290 99.6 18.94 14.32 18.00 3.37 275.01 10.76
Thrift Strategy (245) 19.68 3,486 77.4 20.55 14.06 19.40 1.39 145.94 17.03
Mortgage Banker Strategy(39) 24.88 12,967 445.6 25.56 16.59 24.35 2.69 222.94 23.27
Real Estate Strategy(11) 21.23 7,021 177.5 22.39 14.01 21.00 0.71 176.88 18.91
Diversified Strategy(14) 28.78 22,414 715.0 30.39 18.65 28.06 2.69 206.83 13.16
Retail Banking Strategy(5) 14.37 3,215 53.1 16.35 11.50 14.29 1.11 233.91 2.65
Companies Issuing Dividends(262) 20.97 5,289 149.1 21.88 14.80 20.68 1.34 182.14 17.33
Companies Without Dividends(52) 18.40 5,573 121.7 19.23 12.74 17.92 2.69 89.68 18.30
Equity/Assets 6%(26) 23.67 16,800 500.1 24.49 14.74 23.06 2.83 177.66 20.62
Equity/Assets 6-12%(156) 22.69 5,740 169.8 23.57 15.45 22.34 1.55 168.56 20.44
Equity/Assets more than 12%(132) 17.63 2,813 52.6 18.56 13.33 17.40 1.33 152.32 13.37
Converted Last 3 Mths (no MHC)(5) 13.61 2,256 31.2 13.77 12.66 13.37 1.73 0.00 0.00
Actively Traded Companies(45) 28.71 16,741 598.9 29.53 18.75 28.34 1.26 199.41 23.01
Market Value Below $20 Million(68) 16.00 885 13.4 16.87 12.36 15.89 0.97 143.44 12.92
Holding Company Structure(276) 20.74 5,213 146.2 21.62 14.66 20.41 1.53 158.62 16.98
Assets Over $1 Billion (66) 30.61 16,902 560.2 31.45 19.58 29.88 2.54 209.61 21.89
Assets $500 Million - $1 Billion(51) 19.59 5,525 99.8 20.42 13.57 19.43 1.22 185.98 20.38
Assets $250 - $500 Million(65) 20.15 2,564 47.9 21.07 14.07 19.72 2.12 137.98 18.92
Assets less than $250 Million(132) 15.58 1,448 23.1 17.51 12.69 16.44 0.96 105.11 13.42
Goodwill Companies(129) 23.75 8,676 245.1 24.63 15.88 23.31 1.86 192.18 19.22
Non-Goodwill Companies(184) 18.44 3,118 78.0 19.36 13.53 18.20 1.36 131.61 16.21
Accuirors of FSLIC Cases(11) 31.18 33,955 1,395.5 32.15 20.11 30.57 1.68 221.41 19.47
<CAPTION>
Current Per Share Financials
-----------------------------------------------------------
Tangible
Trailing 12 MO. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF - Insured Thrifts(no HHC)
- ------------------------------------------------
SAIF - Insured Thrifts(314) 0.83 1.15 15.74 15.24 155.82
NYSE Traded Companies(0) 1.80 2.67 20.84 19.96 373.05
AMEX Traded Companies(18) 0.65 0.97 14.21 14.02 112.01
NASAQ Listed OTC Companies(287) 0.81 1.11 15.68 15.17 151.93
California Companies(24) 0.70 1.08 16.32 15.33 258.18
Florida Companies(6) 0.98 0.95 13.43 12.73 175.35
Mid-Atlantic Companies(59) 0.96 1.36 15.92 15.22 169.91
Mid-West Companies(153) 0.81 1.10 16.07 15.73 138.70
New England Companies(11) 0.88 1.36 16.82 15.64 223.75
North-West Companies(6) 0.50 1.26 13.25 12.68 151.06
South-East Companies(43) 0.74 1.04 14.28 13.97 120.66
South-West Companies(6) 0.57 1.09 16.27 15.49 216.35
Western Companies (Excl CA)(6) 0.86 1.03 15.88 15.17 103.62
Thrift Strategy (245) 0.76 1.08 15.94 15.48 141.26
Mortgage Banker Strategy(39) 1.20 1.52 15.85 14.94 229.70
Real Estate Strategy(11) 0.89 1.27 14.17 13.89 211.17
Diversified Strategy(14) 1.53 1.81 13.47 13.10 185.83
Retail Banking Strategy(5) 0.20 0.20 13.14 12.79 146.74
Companies Issuing Dividends(262) 0.91 1.24 15.94 15.41 153.07
Companies Without Dividends(52) 0.39 0.70 14.75 14.34 170.06
Equity/Assets 6%(26) 0.85 1.42 13.87 12.94 288.83
Equity/Assets 6-12%(156) 1.01 1.38 16.00 15.23 192.54
Equity/Assets 12%(132) 0.61 0.85 15.80 15.66 91.26
Converted Last 3 Mths (no MHC)(5) 0.17 0.44 14.45 14.34 58.36
Actively Traded Companies(45) 1.46 1.99 17.55 16.93 236.53
Market Value Below $20 Million(68) 0.46 0.76 15.42 15.30 122.85
Holding Company Structure(276) 0.82 1.15 16.06 15.56 152.86
Assets Over $1 Billion (66) 1.41 1.92 18.13 16.80 256.72
Assets $500 Million - $1 Billion(51) 0.96 1.08 14.15 13.43 153.77
Assets $250 - $500 Million(65) 0.92 1.19 15.87 15.38 164.93
Assets less than $250 Million(132) 0.55 0.81 15.21 15.15 106.41
Goodwill Companies(129) 1.01 1.39 16.38 15.23 204.99
Non-Goodwill Companies(184) 0.70 0.99 15.33 15.25 123.17
Accuirors of FSLIC Cases(11) 1.51 2.31 18.26 17.27 298.15
</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>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market line - Part One
Prices As of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------------ -------------------------------------
Shares Market 52 Week (1) % Change From
-------------- -------------------------
Price/ Oust- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- -------- -------- ------ ------- ------- ------- -------- --------
($) (000) ($N11) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages, AIF-Insured Thrifts(no HHC)
- ---------------------------------------------
GIF-Insured Thrifts(69) 23.02 10,142 336.7 23.61 14.90 22.60 1.76 170.12 20.85
HYSE Traced Companies(3) 35.62 54,046 1,775.6 36.66 17.12 34.42 4.02 233.32 32.30
AMEX Traced Companies(5) 21.67 4,142 83.4 22.02 13.62 21.72 -0.22 101.78 31.43
NASDAQ Listed OTC Companies(61) 22.38 8,066 274.5 22.97 14.89 21.97 1.83 172.84 19.03
California Companies(3) 16.96 6,919 126.5 18.54 11.08 16.46 2.94 377.78 17.10
Mid-Atlantic Companies(18) 25.26 17,723 511.6 25.70 15.38 24.71 2.14 105.40 22.84
Mid-West Companies(2) 12.50 942 11.8 12.50 9.00 12.50 0.00 0.00 23.52
New England Companies(37) 21.26 4,870 107.8 21.81 13.87 20.96 1.64 182.19 20.29
North-West Companies(4) 29.39 34,716 1,951.2 29.98 16.23 28.28 2.44 133.84 26.88
South-East Companies(5) 27.17 2,091 39.5 27.97 21.80 27.00 0.46 0.00 15.40
Thrift Strategy(45) 23.47 5,060 161.6 23.95 15.61 23.05 1.79 171.58 20.59
Mortgage Banker Strategy(10) 2O.87 29,965 587.0 22.04 13.60 20.60 1.70 162.94 19.43
Real Estate Strategy(6) 14.11 4,650 60.6 15.05 9.31 13.95 1.78 232.71 15.95
Diversified Strategy(6) 11.64 34,470 1,778.2 31.86 16.40 30.46 3.15 158.53 32.27
Retail Banking Strategy(2) 19.25 706 13.6 21.25 14.75 20.50 -6.10 33.96 5.48
Companies Issuing Dividends(55) 24.56 9,015 349.0 25.16 16.01 24.13 1.65 167.24 20.04
Companies Without Dividends(24) 15.79 15,440 279.3 16.35 9.66 15.41 2.30 191.75 24.57
Equity/Assets less than 6%(5) 27.61 59,907 2,409.5 27.61 14.06 25.97 5.68 142.26 37.40
Equity/Assets 6-12%(45) 22.73 6,299 195.4 23.45 14.50 22.40 1.39 178.41 19.37
Equity/Assets greater than 12%(19) 22.53 6,588 145.5 22.96 16.03 22.14 1.64 41.16 20.07
Actively Traded Companies(24) 24.79 17,201 630.2 25.44 15.23 24.18 2.34 214.15 24.04
Market Value Below $2D Million(9) 15.96 940 14.9 16.62 11.19 15.95 0.33 105.42 13.84
Holding Company Structure(45) 23.49 9,568 354.0 24.04 15.52 23.06 1.66 175.13 21.47
Assets Over $1 Billion(17) 30.90 30,688 1,181.8 31.37 16.89 29.99 2.82 184.66 29.74
Assets $500 Million-$1 Billion(16) 22.72 5,804 110.4 23.12 15.57 22.26 1.82 128.37 20.24
Assets $250-$500 Million(18) 19.24 2,968 52.2 20.19 12.85 19.17 1.02 208.53 16.83
Assets less than $250 Million(18) 19.47 1,711 24.9 20.02 14.32 19.24 1.42 155.73 17.46
Goodwill Companies(31) 25.23 16,684 625.3 25.92 15.64 24.73 1.94 165.78 22.88
Non-Goodwill Companies(37) 21.17 4,656 94.7 21.58 14.27 20.82 1.62 177.15 19.21
<CAPTION>
Current Per Share Financials
-----------------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
---------- --------- --------- --------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
GIF-Insured Thrifts(69) 1.40 1.43 15.68 14.87 156.95
HYSE Traced Companies(3) 1.84 1.80 18.92 14.54 225.59
AMEX Traced Companies(5) 1.22 1.21 15.34 14.93 150.13
NASDAQ Listed OTC Companies(61) 1.39 1.43 15.51 14.88 153.44
California Companies(3) 1.27 1.17 12.13 12.11 146.25
Mid-Atlantic Companies(18) 1.25 1.34 16.59 14.69 169.99
Mid-West Companies(2) 0.25 0.38 13.57 12.80 53.10
New England Companies(37) 1.62 1.58 14.03 13.50 162.36
North-West Companies(4) 1.01 1.33 13.59 13.31 176.51
South-East Companies(5) 1.21 1.27 26.67 26.67 97.34
Thrift Strategy(45) 1.42 1.41 16.95 15.97 150.69
Mortgage Banker Strategy(10) 1.26 1.45 13.28 13.13 163.73
Real Estate Strategy(6) 1.23 1.15 9.10 9.09 105.91
Diversified Strategy(6) 1.72 1.98 14.11 13.07 218.17
Retail Banking Strategy(2) 0.89 0.85 19.87 19.02 315.32
Companies Issuing Dividends(55) 1.53 1.56 16.53 15.57 165.69
Companies Without Dividends(24) 0.80 0.82 11.66 11.56 115.85
Equity/Assets less than 6%(5) 1.08 1.39 11.04 10.64 208.90
Equity/Assets 6-12%(45) 1.66 1.62 14.85 13.68 179.77
Equity/Assets greater than 12%(19) 0.88 0.99 18.73 18.68 91.18
Actively Traded Companies(24) 1.69 1.72 14.88 14.14 181.55
Market Value Below $2D Million(9) 0.80 0.81 14.17 13.65 136.51
Holding Company Structure(45) 1.35 1.40 16.07 15.36 147.10
Assets Over $1 Billion(17) 1.71 1.85 15.81 14.34 196.44
Assets $500 Million-$1 Billion(16) 1.57 1.52 15.61 14.32 169.49
Assets $250-$500 Million(18) 1.24 1.25 13.99 13.76 139.82
Assets less than $250 Million(18) 1.10 1.12 17.18 16.91 124.35
Goodwill Companies(31) 1.50 1.59 15.81 14.04 196.66
Non-Goodwill Companies(37) 1.31 1.30 15.57 15.57 123.72
</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 NHC institutions, market value reflects share price multiplied by
public (non-NHC) 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>
RP Financial, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As of June 20, 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(i) 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 (21) 20.33 5,045 37.6 21.56 14.24 19.76 2.21 198.04 17.64
BIF-Insured Thrifts (2) 19.75 32,145 205.0 20.25 11.42 18.44 6.37 236.72 31.51
NASDAQ Listed OTC Companies (23) 20.27 7,755 54.3 21.43 13.95 19.63 2.63 210.93 19.18
Florida Companies (3) 27.29 5,550 68.6 27.71 17.00 26.17 2.93 0.00 9.74
Mid-Atlantic Companies (10) 17.26 7,085 41.7 18.03 12.23 17.11 0.78 140.00 20.89
Mid-West Companies (7) 18.69 2,028 13.9 21.17 14.03 18.12 3.13 256.07 18.43
New England Companies (1) 26.50 61,017 401.6 26.50 13.58 24.37 8.74 236.72 37.66
South-East Companies (1) 29.50 1,505 20.8 29.75 20.25 27.00 9.26 0.00 21.65
Thrift Strategy (21) 19.94 4,952 36.1 21.16 13.97 19.38 2.31 198.04 18.10
Diversified Strategy (1) 26.50 61,017 401.6 26.50 13.58 24.37 8.74 236.72 37.66
Companies Issuing Dividends (22) 20.60 8,042 56.4 21.78 14.08 19.91 2.91 210.93 19.18
Companies Without Dividends (1) 13.87 2,300 14.4 14.75 11.62 14.25 2.67 0.00 0.00
Equity Assets 5-12 % (15) 21.35 10,196 71.5 22.81 14.28 20.69 2.58 210.93 19.22
Equity Assets more than 12 % (8) 18.27 3,223 22.4 18.87 13.36 17.66 2.73 0.00 19.08
Actively Traded Companies (1) 24.00 7,247 81.7 25.25 14.09 23.75 1.05 140.00 29.73
Holding Company Structure (1) 24.00 7,247 81.7 25.25 14.09 23.75 1.05 140.00 29.73
Assets Over $1 Billion (4) 25.55 21,565 148.0 26.17 15.38 24.25 4.49 188.36 22.38
Assets $500 Million-$1 Billion (?) 20.21 6,908 58.0 20.91 13.21 20.33 -0.62 0.00 12.37
Assets $250-$500 Million (4) 20.13 2,540 18.0 23.31 15.23 19.41 3.68 256.07 15.80
Assets less than $250 Million (10) 17.06 2,050 12.6 17.72 12.70 16.59 2.16 0.00 22.19
Goodwill Companies (9) 23.80 15,807 110.4 25.78 15.29 22.92 3.06 210.93 20.58
Non-Goodwill Companies (14) 17.92 2,388 17.0 18.53 13.07 17.44 2.35 0.00 18.06
MHC Institutions (23) 20.27 7,755 54.3 21.43 13.95 19.63 2.63 210.93 19.18
MHC Converted Last 3 Months (2) 13.44 2,185 13.4 14.13 11.56 13.88 -3.19 0.00 0.00
<CAPTION>
Current Per Share Financials
---------------------------------------------------------
Tangible
Trailing 12 No. Book Book
12 No. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share EPS (4) Share
- --------------------- -------- ------- ------ --------- --------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts (21) 0.63 0.99 12.74 12.42 123.69
BIF-Insured Thrifts (2) 0.67 0.65 9.38 9.38 98.25
NASDAQ Listed OTC Companies (23) 0.64 0.95 12.40 12.11 121.14
Florida Companies (3) 1.08 1.53 15.32 15.05 166.11
Mid-Atlantic Companies (10) 0.40 0.69 11.05 10.51 98.91
Mid-West Companies (7) 0.59 0.97 12.09 12.07 127.11
New England Companies (1) 1.33 1.06 10.39 10.38 123.54
South-East Companies (1) 1.00 1.41 19.69 19.69 148.17
Thrift Strategy (21) 0.60 0.95 12.51 12.20 121.02
Diversified Strategy (1) 1.33 1.06 10.39 10.38 123.54
Companies Issuing Dividends (22) 0.66 0.98 12.52 12.21 124.09
Companies Without Dividends (1) 0.24 0.35 10.21 10.21 65.23
Equity Assets 5-12 % (15) 0.69 1.07 12.49 12.12 142.08
Equity Assets more than 12 % (8) 0.55 0.74 12.24 12.10 82.27
Actively Traded Companies (1) 0.69 1.22 13.00 11.52 141.40
Holding Company Structure (1) 0.69 1.22 13.00 11.52 141.40
Assets Over $1 Billion (4) 0.97 1.30 12.74 11.83 149.25
Assets $500 Million-$1 Billion (? 0.72 0.93 13.06 12.70 114.98
Assets $250-$500 Million (4) 0.74 1.16 12.82 12.79 146.42
Assets less than $250 Million (10 0.35 0.64 11.73 11.73 93.25
Goodwill Companies (9) 0.86 1.15 12.58 11.86 139.54
Non-Goodwill Companies (14) 0.49 0.82 12.28 12.28 108.88
MHC Institutions (23) 0.64 0.95 12.40 12.11 121.14
MHC Converted Last 3 Months (2) 0.24 0.44 10.02 10.02 73.53
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if coverted 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) ROE ( 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 chracteristics.
(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>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
-------------------------- ----------------------------------------------------
Shares Market 52 Week (1) % Change From
---------------- -------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institutions 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>
MYSE Traded Companies
- ---------------------
AHH Ahmanson and Co. H.F. of CA 47.12 100,596 4,740.1 47.12 24.00 45.62 3.29 151.31 44.98
CSA Coast Savings Financial of CA 46.00 18,593 855.3 48.75 29.25 45.00 2.22 291.92 25.61
CFA Commercial Federal Corp. of ME 37.50 21,523 907.1 39.00 24.00 37.25 0.67 916.26 17.19
DME Dime Bancorp, Inc. of NY 19.00 105,259 1,999.9 19.00 11.75 18.00 5.56 88.87 28.81
DSL Downey Financial Corp. of CA 23.25 26,734 621.6 23.25 12.86 22.00 5.68 114.09 24.40
FAC First Republic Bancorp of CA 21.50 9,992 214.8 24.62 12.62 20.75 3.61 377.78 28.36
FED FirsiFed Fin. Corp. of CA 30.62 10,560 323.3 30.62 16.75 30.37 0.82 89.60 39.18
GLN Glendale Fed. Bk, FSB of CA 25.37 50,305 1,276.3 28.00 16.50 26.12 -2.87 56.12 9.12
GDN Golden West Fin. Corp. of CA 73.25 57,218 4,191.2 74.25 51.87 71.62 2.28 179.69 16.05
GWF Great Western Fin. Corp. of CA(8) 56.00 137,885 7,721.6 56.00 21.12 32.25 7.18 222.39 93.10
GPT GreenPoint Fin. Corp. of NY 66.37 46,888 3,112.0 66.37 27.00 64.50 2.90 N.A. 39.73
WES Westcorp Inc. of Orange CA 18.75 26,414 487.9 23.87 13.25 18.00 4.17 155.80 -14.31
AMEX Traded Companies
- ---------------------
AHA Acsciana Bancshares of LA 19.37 2,731 52.9 19.97 11.69 19.62 -1.27 N.A. 30.26
BKC American Bank of Waterbury CT 35.50 2,332 81.7 36.00 24.50 35.50 0.00 89.33 26.79
BFD BostonFed Bancorp of MA 17.69 5,963 205.5 17.75 11.62 17.37 1.84 N.A. 19.93
CFX CFX Corp of NH 18.12 13,050 236.5 18.50 11.90 18.00 0.67 52.27 16.90
CZF Citisave Fin. Corp. of LA(8) 20.25 962 19.5 20.25 13.00 20.00 1.25 N.A. 44.64
CBK Citizens First Fin. Corp. of IL 16.00 2,799 44.8 16.75 9.50 16.00 0.00 N.A. 11.34
ESX Essex Bancorp of MA(8) 1.12 1,055 1.2 2.81 1.00 1.12 0.00 -93.31 -48.86
FCB Falmouth Co-Op Bank of MA 16.25 1,455 23.6 16.25 10.25 16.12 0.81 N.A. 23.86
FAB FirstFed America Bancorp of MA 17.00 8,707 148.0 17.00 13.62 15.37 10.61 N.A. N.A.
GAF GA Financial Corp. of PA 18.94 8,408 159.2 18.94 10.25 17.50 8.23 N.A. 25.26
KNK Kankakee Bancorp, of IL 29.00 1,420 41.2 29.00 18.50 28.50 1.75 190.00 17.17
KYF Kentucky First Bancorp of KY 11.00 1,319 14.5 15.25 10.62 11.00 0.00 N.A. 1.20
NYB New York Bancorp, Inc. of NY 34.75 16,381 569.2 34.75 16.92 33.62 3.36 390.13 34.53
POB Piedmont Bancorp of NC 10.37 2,751 28.5 19.12 9.25 10.31 0.58 N.A. -1.24
PLE Pinnacle Bank of AL 21.37 890 19.0 22.62 16.12 21.88 -2.33 216.59 23.03
SSB Scotland Bancorp of NC 16.25 1,840 29.9 16.75 11.97 16.25 0.00 N.A. 15.08
SZB SouthFirst Bancshares of AL 15.12 821 12.4 15.25 12.00 15.00 0.80 N.A. 14.11
SRN Southern Banc Company of AL 14.87 1,230 18.3 15.37 12.25 14.75 0.81 N.A. 13.34
SSM Stone Street Bancorp of NC 27.25 1,825 49.7 27.25 16.25 26.25 3.81 N.A. 32.93
TSH Teche Holding Company of LA 18.69 3,438 64.3 19.25 12.00 18.37 1.74 N.A. 30.06
FTF Texarkana Fst. Fin. Corp of AR 18.00 1,833 33.0 18.12 13.62 17.62 2.16 N.A. 15.16
THR Three Rivers Fin. Corp of MI 15.75 824 13.0 15.87 12.50 15.12 4.17 N.A. 12.50
TBK Tolland Banc of CT 19.12 1,172 22.4 19.50 9.75 19.37 -1.29 163.72 59.33
WSB Washington SB, FAS of MD 5.25 4,220 22.2 5.69 4.38 5.12 2.54 320.00 7.80
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 31.50 698 22.0 33.25 24.76 30.75 2.44 N.A. 10.53
AFED AFSALA Bancorp, Inc. of NY 14.75 1,455 21.5 14.75 11.31 14.62 0.89 N.A. 22.92
ALBK ALBANK Fin. Corp. of Albany NY 39.81 12,819 510.3 39.81 25.12 39.00 2.08 71.23 26.90
AMFC AMB Financial Corp. of IN 14.00 1,068 15.0 15.00 10.25 14.37 -2.57 N.A. 5.66
ASBP ASB Financial Corp. of OH 12.00 1,721 20.7 18.25 11.50 11.87 1.10 N.A. -7.69
ABBK Abington Savings Bank of MA(8) 25.00 1,894 47.4 25.50 15.25 25.25 -0.99 277.64 28.21
AABC Access Anytime Bancorp of MN 5.75 1,143 6.6 6.25 5.25 5.75 0.00 -14.31 4.55
AFBC Advance Fin. Bancorp of WV 14.25 1,084 15.4 14.50 12.75 13.62 4.63 N.A. N.A.
AADV Advantage Bancorp of WI 39.00 3,232 126.0 41.25 31.25 39.00 0.00 323.91 20.93
AFCA Affiliated Cana BC, inc of MA 24.37 6,456 157.3 25.00 13.40 25.00 -2.52 N.A. 42.51
ALBC Albion Banc Corp. of Albion NY 22.00 250 5.5 23.00 16.50 23.00 -4.35 69.23 31.34
<CAPTION>
Current Per Share Financials
--------------------------------------------------------
Tangible
Trailing 12 No. Book Book
12 No. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
--------- --------- --------- --------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
MYSE Traded Companies
- ---------------------
AHH Ahmanson and Co. H.F of CA 1.41 2.80 19.05 16.08 484.09
CSA Coast Savings Financial of CA 0.73 2.31 23.45 23.12 473.14
CFA Commercial Federal Corp. of ME 1.99 2.84 18.99 16.90 320.67
DME Dime Bancorp, Inc. of NY 1.05 1.34 10.01 9.92 175.42
DSL Downey Financial Corp. of CA 0.84 1.42 14.58 14.76 205.15
FAC First Republic Bancorp of CA 1.38 1.23 16.20 16.19 218.52
FED FirsiFed Fin. Corp. of CA 0.95 1.89 18.48 18.24 391.07
GLN Glendale Fed. Bk, FSB of CA 0.65 1.63 17.31 16.10 306.00
GDN Golden West Fin. Corp. of CA 6.49 7.96 42.19 42.19 673.39
GWF Great Western Fin. Corp. of CA(8) 0.67 2.09 17.55 15.54 310.97
GPT GreenPoint Fin. Corp. of NY 3.09 2.82 30.56 17.51 282.83
WES Westcorp Inc. of Orange CA 1.30 0.51 12.29 12.25 130.92
AMEX Traded Companies
- ---------------------
AHA Acsciana Bancshares of LA 0.29 0.30 17.24 17.24 96.80
BKC American Bank of Waterbury CT 3.02 2.62 20.39 19.49 255.68
BFD BostonFed Bancorp of MA 0.64 0.88 14.05 13.56 157.81
CFX CFX Corp of NH 0.94 1.17 10.25 9.56 133.67
CZF Citisave Fin. Corp. of LA(8) 0.40 0.61 12.95 12.95 77.90
CBK Citizens First Fin. Corp. of IL 0.25 0.53 14.21 14.21 97.04
ESX Essex Bancorp of MA(8) -7.54 -3.77 0.21 -0.08 170.55
FCB Falmouth Co-Op Bank of MA 0.52 0.50 15.17 15.17 62.04
FAB FirstFed America Bancorp of MA -0.28 0.44 14.03 14.03 112.52
GAF GA Financial Corp. of PA 0.77 0.97 13.76 13.62 79.73
KNK Kankakee Bancorp, of IL 1.51 1.94 25.74 24.10 241.11
KYF Kentucky First Bancorp of KY 0.53 0.70 10.86 10.86 67.42
NYB New York Bancorp, Inc. of NY 2.39 2.82 9.81 9.81 193.82
POB Piedmont Bancorp of NC -0.14 0.36 7.31 7.31 43.08
PLE Pinnacle Bank of AL 1.26 1.89 17.34 16.78 224.27
SSB Scotland Bancorp of NC 0.55 0.67 13.74 13.74 37.46
SZB SouthFirst Bancshares of AL 0.05 0.30 15.82 15.82 113.17
SRN Southern Banc Company of AL 0.19 0.50 14.40 14.24 85.57
SSM Stone Street Bancorp of NC 0.99 1.15 20.72 20.72 57.80
TSH Teche Holding Company of LA 0.80 1.10 15.23 15.23 114.47
FTF Texarkana Fst. Fin. Corp of AR 1.25 1.55 14.70 14.70 91.70
THR Three Rivers Fin. Corp of MI 0.54 0.81 15.35 15.29 106.03
TBK Tolland Banc of CT 1.35 1.45 13.63 13.21 202.48
WSB Washington SB, FAS of MD 0.31 0.45 5.06 5.06 60.81
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 0.91 0.13 31.17 30.48 391.25
AFED AFSALA Bancorp, Inc. of NY 0.61 0.61 14.05 14.05 102.70
ALBK ALBANK Fin. Corp. of Albany NY 2.17 2.71 25.10 21.77 272.75
AMFC AMB Financial Corp. of IN 0.55 0.69 14.29 11.29 87.68
ASBP ASB Financial Corp. of OH 0.39 0.57 10.00 10.00 63.58
ABBK Abington Savings Bank of MA(8) 1.98 1.72 17.86 16.00 259.80
AABC Access Anytime Bancorp of MN -0.57 -0.22 6.34 6.34 93.17
AFBC Advance Fin. Bancorp of WV 0.35 0.71 14.76 14.76 95.55
AADV Advantage Bancorp of WI 1.08 2.68 27.92 25.87 316.04
AFCA Affiliated Cana BC, inc of MA 1.45 1.66 15.96 15.86 163.41
ALBC Albion Banc Corp. of Albion NY 0.22 0.93 23.62 23.62 265.26
</TABLE>
<PAGE>
RP Financial, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------------- ------------------------------------------------------
Shares Market 52 Week (1) % Change Form
------------- -----------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding(9) ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ---------- ---------- ----- ------ ----- ----- -------- ----------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listen OTC Companies (continued)
- ---------------------------------------
ABCL Allied Bancorp of IL 29.87 5,334 159.3 31.25 22.00 29.62 0.84 198.70 19.48
ATSB Amtrust Capital Corp. of NY 12.62 626 6.6 12.75 8.50 12.75 -1.02 N.A. 26.20
AHCI Amoanc holding Co. Inc. of NY 16.00 4,392 70.3 16.00 9.50 15.12 5.82 N.A. 42.22
ASBI Ameriana Bancorp of IH 15.63 3,260 51.0 16.37 13.25 16.00 -2.31 69.34 -2.31
AFFFZ American First Fin, Fund of CA (8) 39.56 6,011 237.8 39.56 25.87 38.37 3.10 110.99 30.78
AMFB American Federal Bank of SC (8) 31.75 11,035 350.4 32.25 15.50 31.25 1.60 568.42 68.26
AMBK American Nat'l Bancorp of ND 16.12 3,613 58.2 16.12 9.75 15.00 7.47 N.A. 33.00
ABCK Anchor Bancorp Wisconsin of WI 50.00 4,581 229.1 50.00 33.00 47.00 6.38 70.24 39.86
ANDB Andover Bancorp, INC. of MA 29.37 5,146 151.1 31.12 19.17 31.00 -5.26 173.21 14.64
ASFC Astoria Financial Corp. of NY 45.62 21,243 969.1 46.25 24.62 43.62 4.59 73.79 23.73
AV?D Avondale Fin. Corp, of IL 14.00 3,525 49.4 18.50 12.50 13.44 4.17 N.A. -18.22
? Bancorp Connection of CT 25.50 2,560 65.3 26.25 20.00 25.62 -0.47 191.43 13.33
BPLS Bank Plus Corp, of CA 10.00 18,245 182.5 13.75 8.75 10.25 -2.44 N.A. -13.04
BWFC Bank West Fin, Corp. of NI 14.00 1,783 25.0 14.25 10.25 13.56 3.24 N.A. 31.83
BANC BankAtlantic Bancorp of FL 14.12 18,553 262.0 14.25 8.24 14.00 0.86 171.54 31.96
BKUNA BankUnited SA of FL 9.62 8,847 85.1 11.25 7.12 9.50 1.26 77.16 -1.80
BNCO Bankers Corp, of NJ (8) 25.67 12,378 320.2 26.00 17.25 25.75 0.47 313.92 28.58
BYCC Bay View Capital Corp, of CA 26.62 12,970 345.3 28.62 16.19 25.75 3.38 34.78 25.63
BFSB Bedford Bancshares of VA 20.75 1,142 23.7 20.75 16.50 20.25 2.47 97.62 17.76
BFFC Big Foot Fin. Corp. of IL 16.00 2,513 40.2 16.12 12.31 16.06 -0.37 N.A. 23.08
BSEC Branford SA of CT 4.69 6,559 30.8 4.75 2.87 4.50 4.22 121.23 21.19
BYFC Broadway Fin, Corp. of CA 10.75 803 9.6 11.25 9.00 10.75 0.00 N.A. 16.22
CBCO CB Bancorp of Michigan City IN (8) 34.19 1,162 39.7 34.75 17.00 33.75 1.30 210.82 43.96
CBES CBES Bancorp of HO 16.87 1,025 17.3 17.50 12.62 16.87 0.00 N.A. 18.39
CCFN CCF Holding Company of GA 16.00 865 13.8 16.75 11.50 16.75 -4.48 N.A. 8.47
CENF CENFED Financial Corp, of CA 32.75 5,760 188.6 32.75 19.09 31.12 5.24 108.86 23.17
CFSB CFSB Bancorp of Lansing 23.25 5,167 120.1 24.75 16.11 24.75 -6.06 158.33 31.13
CKFB CKF Bancorp of Danville ? 10.25 927 17.9 20.75 17.50 19.25 0.00 N.A. -4.94
CMSB CMS Bancorp of MO 16.50 1,653 27.3 17.50 11.00 15.75 4.76 N.A. 9.13
CSBF CSB Financial Group Inc of IL 12.50 942 11.8 12.50 9.00 12.50 0.00 N.A. 23.52
CFHC California Fin. Hld. Co. of CA(8) 29.62 4,766 141.2 30.00 21.50 29.62 0.00 182.10 2.60
CBCI Calunet Bancorp of Chicago IL 39.50 2,238 88.4 39.50 27.75 38.00 3.95 95.06 18.80
CAFI Canco Fin. Corp. of OH 18.00 3,062 55.1 19.29 14.75 18.50 -2.70 N.A. 13.42
CMRN Cameron Fin. Corp. of NO 16.75 2,682 44.9 17.00 13.50 16.50 1.52 N.A. 4.69
CAPS Capital Savings Bancorp of MO 16.62 1,992 31.4 18.25 9.00 17.50 -5.03 25.43 27.85
CFNC Carolina Fincorp of NC 14.37 1,851 26.6 15.25 13.00 14.37 0.00 N.A. 7.48
CNY Carver Bancorp, Inc. of NY 12.25 2,314 28.3 12.25 7.37 10.62 15.35 96.00 48.48
CASB Cascade SB of Everett NA 18.50 2,054 38.0 21.00 13.00 19.00 -2.63 44.53 14.76
CAIB Catskill Fin, Corp. of NY 15.50 5,027 77.9 16.50 9.87 15.37 0.85 N.A. 10.71
CNET Cenit Bancorp of Horfolk VA 44.50 1,640 73.0 46.50 31.75 45.50 -2.20 180.23 7.23
CEBK Central Co-OP. Bank of NA 18.12 1,965 35.6 18.50 14.75 17.12 5.84 245.14 3.54
CENB Century Bancshares of NC 69.25 407 28.2 71.00 62.00 68.50 1.09 N.A. 6.54
CBSB Charter Financial Inc. of IL 17.06 4,220 72.0 18.00 10.87 17.25 -1.10 N.A. 36.48
COFI Charter One Financial of OH 51.00 46,339 2,363.3 51.00 32.02 49.25 3.55 191.43 21.43
CNGA Chester Bancorp of IL 14.81 2,182 32.3 15.37 12.62 15.00 -1.27 N.A. 12.88
CVAL Chestar Valley Bancorp of PA 21.00 2,054 43.1 21.00 13.90 20.25 3.70 85.35 41.89
CIZN CitFed Bancorp of Dayton OH 37.56 8,613 323.5 38.00 24.17 37.25 0.83 317.33 13.82
CLAS Classic Bancshares of KY 14.25 1,322 18.8 14.75 10.37 14.50 -1.72 N.A. 22.63
CMSB Comwealth Bancorp of PA 16.62 17,111 284.4 16.62 9.75 15.75 5.52 N.A. 10.80
COVB Covest Bancsharesof IL 18.25 3,018 55.1 19.00 16.25 19.00 -3.95 174.02 5.80
CBSA Coastal Bancorp of Houston TX 28.75 4,969 142.9 28.75 16.50 27.75 3.60 N.A. 25.71
CFCP Coastal Fin. Corp. of SC 23.00 4,637 106.7 23.00 12.90 22.00 4.55 130.00 46.03
COFO Collective Bancorp Inc. of NJ (8) 46.12 20,447 943.0 46.50 23.00 45.62 1.10 505.25 31.32
CHSY County. Svgs, NHC of FL (48.5) 21.75 4,921 51.5 22.37 15.25 21.88 -0.59 N.A. 6.10
CBNH Community Bankshares Inc of NH (8) 37.75 2,465 93.1 38.00 17.50 37.75 0.00 906.67 84.15
<CAPTION>
Current Per Share Financials
---------------------------------------------------
Tangible
Trailing 12 No. Book Book
12 No. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- --------- ------- ------ -------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listen OTC Companies (continued)
- ---------------------------------------
ABCL Allied Bancorp of IL 0.63 1.06 22.93 22.63 246.18
ATSB Amtrust Capital Corp. of NY 0.40 0.26 13.73 13.58 135.04
AHCI Amoanc holding Co. Inc. of NY -0.65 -0.65 13.85 13.85 108.86
ASBI Ameriana Bancorp of IH 0.73 1.05 13.38 13.37 123.36
AFFFZ American First Fin, Fund of CA (8) 5.32 6.51 30.07 29.64 363.18
AMFB American Federal Bank of SC (8) 1.35 1.67 10.65 9.93 118.43
AMBK American Nat'l Bancorp of ND 0.19 0.68 12.33 12.33 134.69
ABCK Anchor Bancorp Wisconsin of WI 3.04 3.97 25.73 25.23 411.48
ANDB Andover Bancorp, INC. of MA 2.52 2.60 18.96 18.96 235.06
ASFC Astoria Financial Corp. of NY 1.77 2.62 27.51 22.89 361.97
AV?D Avondale Fin. Corp, of IL -1.22 -2.30 14.88 14.88 180.27
? Bancorp Connection of CT 2.01 1.92 16.61 16.81 161.61
BPLS Bank Plus Corp, of CA -0.63 -0.07 8.88 8.86 180.58
BWFC Bank West Fin, Corp. of NI 0.59 0.42 12.62 12.62 82.46
BANC BankAtlantic Bancorp of FL 1.11 0.96 8.23 6.69 149.47
BKUNA BankUnited SA of FL 0.21 0.41 7.33 5.89 164.25
BNCO Bankers Corp, of NJ (8) 2.04 2.18 15.98 15.72 205.34
BYCC Bay View Capital Corp, of CA 0.94 1.59 14.81 14.08 234.74
BFSB Bedford Bancshares of VA 1.16 1.48 16.49 16.49 115.15
BFFC Big Foot Fin. Corp. of IL 0.04 0.35 14.34 14.34 84.45
BSEC Branford SA of CT 0.31 0.30 2.58 2.58 27.05
BYFC Broadway Fin, Corp. of CA -0.31 0.16 14.26 14.26 131.13
CBCO CB Bancorp of Michigan City IN (8) 1.76 2.06 17.22 17.22 194.97
CBES CBES Bancorp of HO 0.69 0.86 17.08 17.08 92.90
CCFN CCF Holding Company of GA 0.25 0.41 14.39 14.39 100.51
CENF CENFED Financial Corp, of CA 1.84 2.70 20.06 20.02 392.95
CFSB CFSB Bancorp of Lansing 1.17 1.57 12.32 12.32 161.46
CKFB CKF Bancorp of Danville ? 0.84 0.83 15.38 15.38 64.94
CMSB CMS Bancorp of MO 0.31 0.47 14.73 14.73 59.35
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) 1.48 2.27 19.21 19.13 275.92
CBCI Calunet Bancorp of Chicago IL 2.49 3.22 35.23 35.23 220.98
CAFI Canco Fin. Corp. of OH 0.99 1.16 14.95 13.76 154.29
CMRN Cameron Fin. Corp. of NO 0.77 0.96 16.92 16.92 73.71
CAPS Capital Savings Bancorp of MO 0.77 1.10 10.89 10.89 125.75
CFNC Carolina Fincorp of NC 0.65 0.61 13.92 13.92 58.71
CNY Carver Bancorp, Inc. of NY -0.76 -0.05 14.76 14.13 183.02
CASB Cascade SB of Everett NA 0.76 0.96 10.59 10.59 171.53
CAIB Catskill Fin, Corp. of NY 0.84 0.85 14.70 14.70 54.49
CNET Cenit Bancorp of Horfolk VA 3.17 2.95 30.25 27.58 431.16
CEBK Central Co-OP. Bank of NA 0.96 1.08 16.94 15.03 165.04
CENB Century Bancshares of NC 4.31 4.36 73.51 73.51 245.57
CBSB Charter Financial Inc. of IL 0.84 1.06 13.22 11.60 93.56
COFI Charter One Financial of OH 2.88 3.66 20.53 19.10 302.99
CNGA Chester Bancorp of IL 0.71 0.71 14.50 14.50 65.30
CVAL Chestar Valley Bancorp of PA 0.87 1.28 12.72 12.72 148.58
CIZN CitFed Bancorp of Dayton OH 1.76 2.55 21.59 19.23 341.03
CLAS Classic Bancshares of KY 0.30 0.50 14.49 12.17 97.10
CMSB Comwealth Bancorp of PA 0.66 0.85 12.50 9.60 130.68
COVB Covest Bancsharesof IL 0.31 0.85 16.36 15.59 183.09
CBSA Coastal Bancorp of Houston TX 1.49 2.49 19.64 16.59 574.11
CFCP Coastal Fin. Corp. of SC 0.89 0.98 6.37 6.37 104.51
COFO Collective Bancorp Inc. of NJ (8) 2.45 2.98 18.89 17.08 269.85
CHSY County. Svgs, NHC of FL (48.5) 0.83 1.26 15.57 15.57 138.65
CBNH Community Bankshares Inc of NH (8) 2.08 1.68 16.80 16.80 235.56
</TABLE>
<PAGE>
RP FINANCIAL, LC
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line-Part One
Prices As of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Current Per Share Financials
--------------------------- -------------------------------------------------------
Shares Market 52 Week (1) % Change From
------------------ -------------------------------
Price/ Outst- Capital- Last Last Dec 31,
Financial Institution Share(1) anding ization (9) High Low Week Week 1994 (2)
- --------------------- -------- -------- -------- ------- -------- ------- --------- --------
($) (000) ($MIL) ($) ($) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
CFIP Community Fed. Bancorp of HS 17.62 4,282 75.4 20.00 12.25 17.50 0.69 N.A.
CFFC Community Fin. Corp. of VA 22.50 1,272 28.6 23.50 19.50 22.50 0.00 221.43
CIBI Community Inv. Bancorp of OK 13.50 949 12.8 13.50 10.00 12.54 7.66 N.A.
COOP Cooperative Bk. for Svgs. of NC 21.25 1,492 31.7 22.00 16.50 21.00 1.19 112.50
CRZY Crazy Woman Creek Bncorp of NY 13.50 1,005 13.6 14.25 10.06 13.12 2.90 N.A.
CWFC D&N Financial Corp. of HI 19.06 8,316 158.5 19.12 12.37 18.25 4.44 117.83
DFIN Damen Fin. Corp. of Chicago IL 14.37 3,247 46.7 15.00 11.00 14.12 1.77 N.A.
DCBI Delphos Citizens Bancorp of OH 14.62 2,039 29.8 14.75 11.75 14.75 -O.88 N.A.
DIME Dime Community Bancorp of NY 19.12 13,126 251.0 19.62 11.69 17.87 6.99 N.A.
DIEX Dime Financial Corp. of CT 23.00 5,136 118.1 24.12 14.50 24.12 -4.64 119.05
EGLB Eagel BancGroup of IL 15.63 1,268 19.8 16.25 10.50 15.00 4.20 N.A.
EBSI Eagel Bancshares of Tucker GA 17.87 4,552 81.3 17.52 13.62 16.75 6.69 146.48
EGFC Eagle Financial Corp. of CT 30.75 4,554 140.0 30.75 23.75 30.62 0.42 251.43
ETFS East Texas Fin. Serv. of TX 18.37 1,079 19.8 18.75 14.25 17.50 4.97 N.A.
EBCP Eastern Bancorp of NH(8) 26.62 3,630 98.0 27.12 16.00 26.12 1.91 112.11
EHLD Emerald Financial Corp of OH 14.06 5,062 71.2 15.00 10.25 14.37 -2.16 N.A.
EIME Emerald Island Bancorp. MH 16.50 2,235 41.3 20.50 11.20 18.00 2.78 142.72
EFBC Empire Federal Bancorp of MT 13.50 2,592 35.0 14.44 12.50 13.27 0.97 N.A.
EFBI Enterprise Fed. Bancorp of CH 18.25 2,011 36.7 19.12 12.75 18.75 -2.67 N.A.
EQSB Equicable FSA of Whearon 35.25 602 21.8 38.00 22.50 36.25 0.00 N.A.
FFFG F.F.O. Financial Group of FL(8) 4.87 8,430 41.1 4.87 2.50 4.38 11.19 -41.40
FCBF FCB Fin. Corp. of Neenan MT 24.75 2,460 60.9 25.12 17.00 24.50 1.02 N.A.
FFAS FFBS Bancorp of Columous MS 23.00 1,557 35.9 24.25 19.75 23.00 0.00 N.A.
FFDF FFO Financial Corp. of OH 13.50 1,455 19.6 14.00 10.12 13.50 0.00 N.A.
FFLC FFLC Bancorp of Leesburg FL 28.50 2.342 66.7 28.50 18.00 27.00 5.56 N.A.
FFFC FFYA Financial Corp. of YA 26.75 4,521 120.9 27.25 15.75 26.75 0.00 N.A.
FFWC FFW Corporation of Wabash IH 26.00 697 18.1 26.75 19.25 26.75 -2.80 N.A.
FFYF FFY Financial Corp. of OH 25.87 4,328 112.0 26.37 23.25 26.37 -1.90 N.A.
FMCO FHS Financial Corp. of NJ 23.50 2,328 56.1 25.50 15.50 24.00 -2.08 161.11
FFHH FSF Financial Corp. of MH 17.44 3,095 54.0 18.25 11.37 15.75 4.12 N.A.
FOBC Fed One Bancorp of Wheeling WV 21.00 2,443 51.3 21.00 13.25 20.87 0.62 110.00
FBCI Fidelity Bancorp of Chicago IL 19.00 2,792 53.0 20.87 15.50 13.50 2.70 N.A.
FSBI Fidelity Bancorp, Inc. of PA 20.00 1,541 30.8 21.70 14.54 20.25 -1.23 158.73
FFFL Fidelity FSB. MBC of FL (47-4) 19.37 6,766 61.7 20.00 12.00 19.37 0.00 N.A.
FFED Fidelity Fed. Bancorp of IN 9.25 2,490 23.0 12.00 7.50 9.25 0.00 31.21
FFCH Fidelity Financial of GH 15.00 5,594 93.9 15.00 9.62 14.50 3.45 N.A.
FIBC Financial Bancorp, Inc. of NY 17.25 1,160 30.2 18.50 12.37 17.00 1.45 N.A.
FBSI First Bancshares, of NO 20.00 1,748 23.2 20.75 15.00 20.12 -0.60 56.86
FBBC First Bell Bancorp of FA 16.00 6,803 108.8 17.37 13.12 15.12 5.82 N.A.
FSER First Bergen Bancorp of NJ 15.12 3,015 45.6 15.12 9.00 13.62 11.01 N.A.
SKBO First Carnagle, NBIC of PA(45.0) 13.87 2,300 14.4 14.75 11.62 14.25 -2.67 N.A.
FCIT First Cit. Fin. Corp of MD(8) 30.37 2,944 89.4 30.37 16.00 30.00 1.23 249.48
FSTC First Citizens Corp of GA 24.75 1,588 39.1 26.75 18.87 25.75 -3.88 98.00
FFBA First Colorado Bancorp of Co 18.87 16.555 312.4 18.87 12.50 18.75 0.64 471.82
FDEF First Defiance Fin. Corp. of OH 14.50 9,423 136.6 14.50 9.87 14.37 0.90 N.A.
FEXS First Essex Bancorp of ? 16.50 7,484 123.5 17.12 10.00 16.37 0.79 175.00
FFES First FS&LA of E. Hartford 29.75 2,649 78.8 30.37 16.50 30.25 -1.65 357.69
FSSB First FS&LA of Sam Bern. CA 9.50 328 3.2 10.75 9.25 9.12 4.17 -5.00
FFSK First FS&LA. AMC or IA (46.0) 23.75 2,827 20.6 35.00 21.00 23.00 3.26 256.07
FFSW First Fed Fin. Serv. of OH 38.25 4,588 175.5 39.00 22.20 36.50 4.79 181.25
BDJI First Fed. Bancorp. of ? 18.75 701 13.1 19.25 12.25 18.75 0.00 N.A.
FFBH First Fed. Bancshares of AR 19.31 4.896 94.5 20.37 12.75 19.37 -0.31 N.A.
FTFC First Fed. Capital Corp. of WI 22.00 9,134 200.9 22.00 13.00 20.37 8.00 193.33
FFKY First Fed. Fin. Corp. of KY 18.50 4,165 77.1 21.50 17.75 19.00 -2.63 17.06
FFBZ First Federal Bancorp of OH 18.25 1,572 28.7 19.00 11.75 17.50 4.29 82.50
<CAPTION>
Current Per Share Financial
---------------------------------------------------------
Tangible
Trailing 12 NO. BOOK BOOK
Dec 31 12 NO. Core Value/ Value/ ASSETS/
1995 (2) EPS (3) ESP(3) Share Share(4) Share
--------- ---------- -------- -------- ---------- ----------
(%) ($) ($) ($) ($) (1)
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
CFIP Community Fed. Bancorp of HS 3.65 0.68 0.81 16.13 16.13 48.12
CFFC Community Fin. Corp. of VA 8.43 1.31 1.65 18.05 18.05 131.03
CIBI Community Inv. Bancorp of OK 19.15 0.66 0.98 11.82 11.82 102.68
COOP Cooperative Bk. for Svgs. of NC 4.94 -1.96 0.29 17.49 17.49 233.58
CRZY Crazy Woman Creek Bncorp of NY 12.50 0.51 0.64 14.42 14.42 51.78
CWFC D&N Financial Corp. of HI 13.79 1.06 1.43 10.67 10.56 183.80
DFIN Damen Fin. Corp. of Chicago IL 11.66 0.51 0.64 14.12 14.12 70.03
DCBI Delphos Citizens Bancorp of OH 21.83 0.62 0.62 14.88 14.88 52.51
DIME Dime Community Bancorp of NY 29.63 0.87 0.97 14.53 12.47 94.26
DIEX Dime Financial Corp. of CT 33.33 2.61 2.69 12.41 11.96 158.57
EGLB Eagel BancGroup of IL 5.11 -0.26 0.15 16.27 16.27 134.49
EBSI Eagel Bancshares of Tucker GA 15.29 0.80 1.09 12.74 12.74 146.35
EGFC Eagle Financial Corp. of CT 0.82 1.55 2.47 22.91 17.24 332.02
ETFS East Texas Fin. Serv. of TX 12.22 0.34 0.68 19.69 19.69 103.51
EBCP Eastern Bancorp of NH(8) 13.28 0.87 1.36 17.86 16.95 235.23
EHLD Emerald Financial Corp of OH 24.98 0.75 0.96 8.73 8.58 116.28
EIME Emerald Island Bancorp. MH 15.63 1.41 1.49 12.84 12.84 184.40
EFBC Empire Federal Bancorp of MT N.A. 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of CH 25.66 0.75 0.82 15.62 15.50 122.52
EQSB Equicable FSA of Whearon 28.32 2.20 3.52 24.92 24.92 491.70
FFFG F.F.O. Financial Group of FL(8) 44.51 0.19 0.31 2.41 2.41 37.60
FCBF FCB Fin. Corp. of Neenan MT 33.78 0.97 1.17 19.11 19.11 109.16
FFAS FFBS Bancorp of Columous MS 0.00 0.96 1.21 16.05 16.05 82.64
FFDF FFO Financial Corp. of OH 1.89 0.44 0.61 14.50 14.50 58.62
FFLC FFLC Bancorp of Leesburg FL 32.56 1.00 1.47 22.16 22.18 153.09
FFFC FFYA Financial Corp. of YA 30.49 1.27 1.57 15.78 15.43 121.50
FFWC FFW Corporation of Wabash IH 18.83 1.98 2.46 22.75 22.75 227.32
FFYF FFY Financial Corp. of OH 2.21 1.20 1.72 19.50 19.50 138.32
FMCO FHS Financial Corp. of NJ 28.77 1.41 2.15 14.59 14.29 232.02
FFHH FSF Financial Corp. of MH 15.34 0.72 0.93 13.97 13.97 118.68
FOBC Fed One Bancorp of Wheeling WV 33.33 0.96 1.37 16.45 15.68 141.72
FBCI Fidelity Bancorp of Chicago IL 11.76 0.88 1.26 17.74 17.69 174.07
FSBI Fidelity Bancorp, Inc. of PA 10.01 1.07 1.70 14.81 14.81 212.70
FFFL Fidelity FSB. MBC of FL (47-4) 9.13 0.49 0.78 12.08 11.98 136.99
FFED Fidelity Fed. Bancorp of IN -5.13 0.17 0.30 5.17 5.17 100.52
FFCH Fidelity Financial of GH 30.43 0.40 0.64 12.03 10.57 91.72
FIBC Financial Bancorp, Inc. of NY 15.00 0.77 1.42 14.98 14.91 154.00
FBSI First Bancshares, of NO 20.34 1.18 1.45 19.80 19.77 137.97
FBBC First Bell Bancorp of FA 20.75 1.07 1.26 10.63 10.63 104.22
FSER First Bergen Bancorp of NJ 31.48 0.35 0.63 13.76 13.76 83.65
SKBO First Carnagle, NBIC of PA(45.0) N.A. 0.24 0.35 10.21 10.21 65.23
FCIT First Cit. Fin. Corp of MD(8) 66.41 1.19 1.79 14.39 14.39 235.67
FSTC First Citizens Corp of GA -1.98 2.91 2.43 15.18 11.94 162.02
FFBA First Colorado Bancorp of Co 11.00 1.03 1.02 13.08 12.92 91.46
FDEF First Defiance Fin. Corp. of OH 17.22 0.44 0.60 12.41 12.41 57.95
FEXS First Essex Bancorp of ? 25.76 1.27 1.11 11.20 9.65 153.24
FFES First FS&LA of E. Hartford 29.35 1.56 2.49 23.00 23.00 367.95
FSSB First FS&LA of Sam Bern. CA 5.56 -3.66 -3.67 13.70 13.20 316.08
FFSK First FS&LA. AMC or IA (46.0) 21.79 0.68 1.17 13.32 13.20 363.72
FFSW First Fed Fin. Serv. of OH 22.99 2.01 1.59 14.35 12.12 237.17
BDJI First Fed. Bancorp. of ? 1.35 0.48 1.00 17.17 17.17 153.66
FFBH First Fed. Bancshares of AR 21.68 0.61 1.16 16.79 16.79 106.16
FTFC First Fed. Capital Corp. of WI 40.40 1.18 1.37 10.65 9.98 167.53
FFKY First Fed. Fin. Corp. of KY -8.64 1.08 1.29 12.16 11.42 89.39
FFBZ First Federal Bancorp of OH 14.06 0.36 1.18 9.34 9.33 121.94
</TABLE>
<PAGE>
RP Financial, LC.
- --------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(Continued)
Weekly Thrift Market Line - Part One
Prices As of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------------- ---------------------------------------------------
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- -------------- ------------------------------
Share(1) anding ization(9) Last Last Dec 31, Dec 31
Financial Institution High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------- ---------- ------ --- ---- ---- ------ --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listen OTC Companies (continued)
- ---------------------------------------
FFCH First Fin. Holdings Inc. of SC 29.50 6,326 186.6 30.00 17.50 29.00 1.72 140.82 31.11
FFBI First Financial Bancorp of IL 18.75 415 7.8 18.75 15.50 17.25 8.70 N.A. 18.15
FFHC First Financial Corp. of WI (8) 28.62 36,411 1,042.1 28.75 17.20 28.75 -0.45 81.71 16.82
FFHS First Franklin Corp. of OIL 20.00 1,178 23.6 20.75 14.25 20.75 -3.61 52.44 21.21
FGHC First Georgia Hold. Corp of GA 7.25 3,052 22.1 8.25 4.00 7.50 -3.33 89.30 27.87
FSPG First Home Bancorp of RJ 19.37 2,708 52.5 19.37 13.31 19.37 0.00 222.83 39.65
FFSL First Independence Corp. of KS 11.19 1,005 11.2 12.25 8.87 11.19 0.00 N.A. 7.91
FISB First Indiana Corp. of IN 20.87 10,505 219.2 24.30 16.80 21.88 -4.62 54.59 -2.48
FKFS First Keystone Fin. Corp of PA 23.00 1,728 28.2 23.00 16.75 22.62 1.68 N.A. 19.48
FLKY First Lancaster Bncshrs of KY 15.50 959 14.9 16.25 13.12 15.00 3.33 N.A. 6.02
FLFC First Liberty Fin. Corp. of GA 21.75 7,725 168.0 22.50 13.67 22.00 -1.14 328.15 18.40
CASR First Midwest Fin. Corp. of IA 15.12 2,827 42.7 17.50 14.50 16.00 -5.50 N.A. -1.37
FMBD First Mutual Bancorp of IL 15.00 3,742 56.1 16.00 11.62 14.87 0.87 N.A. 0.00
FMSB First Mutual SB of Bellevue WA 17.25 2,699 46.6 19.00 11.14 17.25 0.00 122.58 8.42
FHGB First Northern Cap. Corp of WI 21.25 4,410 91.9 21.25 15.25 20.00 6.25 45.95 30.77
FFPB First Palm Beach Bancorp of FL 30.25 5,009 151.5 30.50 19.94 29.62 2.13 N.A. 28.07
FSLA First SB SLA NHC of KJ (47.5) 24.00 7,247 81.7 25.25 14.09 23.75 1.05 140.00 29.73
FSNJ First SB of NJ, NHC (45.9) (8) 26.00 3,064 36.5 27.00 14.00 26.00 0.00 N.A. 13.04
SOPA First SB, SSB, Moore Co. of NC 24.00 3.697 88.7 24.00 16.75 23.12 3.81 N.A. 28.00
FWNB First Savings Bancorp of WA 21.50 10,519 226.2 22.12 14.37 22.00 -2.27 N.A. 17.04
SNEN First Sherango Bancorp of PA 26.00 2,053 53.6 26.00 20.00 25.50 1.96 N.A. 15.56
FSFC First So. east Fin. Corp. of SC 10.12 4,338 44.4 18.62 9.12 10.52 -4.71 N.A. 7.89
FLAG Flag Financial Corp of GA 14.25 2,037 29.0 14.25 9.75 13.12 8.61 45.41 32.56
FFIC Flushing Fin. Corp. of NY 19.87 8,088 160.7 19.94 16.37 19.37 2.58 N.A. 9.66
FBHC Fort Bend Holding Corp. of TX 28.75 822 23.6 28.75 16.87 28.00 2.68 N.A. 12.75
FTSB Fort Thomas Fin. Corp. of KY 10.50 1,495 15.7 17.75 9.25 10.12 3.75 N.A. -28.18
FKKY Frankfort First Bancorp of KY 12.12 3,385 41.0 12.25 9.75 12.12 0.00 N.A. 6.60
FTRB Fulton Bancorp of HO 20.00 1,719 34.3 20.12 12.50 20.00 0.00 N.A. 30.12
GFSB GFS Bancorp of Grinnell IA 13.25 988 13.1 14.24 10.12 11.25 -7.02 N.A. 24.76
GDPB GFSB Bancorp Gullop HM 10.00 839 15.9 19.00 13.25 10.00 0.00 N.A. 19.75
GSLA GS Financial Corp. of LA 16.25 3,439 52.4 15.25 13.37 14.62 4.31 N.A. N.A.
GWEC Gateway Bancorp of KY (8) 17.50 1,076 18.8 17.75 13.00 16.87 3.73 N.A. 22.81
GBCI Glacier Bancorp of NI 17.75 6,799 120.7 17.75 13.50 16.25 9.23 267.49 8.70
GLOK Glendale Co-op. Bank of NA (8) 27.00 247 6.7 27.00 16.50 27.00 0.00 N.A. 35.00
GFCO Glenway Financial Corp. of OH 25.75 1,144 29.5 26.50 18.00 23.00 11.96 N.A. 25.61
GTPS Great American Bancorp of IL 16.50 1,760 29.0 16.50 13.19 16.00 3.13 N.A. 11.41
GIFN Great Financial Corp. of KY 34.75 14,073 189.0 35.00 25.37 34.31 1.28 N.A. 19.33
GSBC Great Southern Bancorp of NO 17.00 8,288 140.9 18.00 13.12 16.87 0.77 482.19 -4.55
GDVS Greater Oil SB, NHC OF PA (19.9) 13.00 3,272 8.4 14.00 9.25 12.50 4.00 N.A. 25.36
GSFC Green Street Fin. Corp. of NC 17.75 4,298 76.3 18.87 12.50 17.58 1.08 N.A. 14.52
GSLC Guaranty Svgs & Loan FA of VA 10.63 1,499 15.9 11.00 7.25 10.25 3.71 N.A. 21.49
GFED Guarnty FS&LA, NHC of HO (31.0) (8) 20.50 3,125 19.9 20.50 9.75 17.00 20.59 N.A. 69.98
HCBB HCB Bancshares of AR 12.94 2,645 34.2 13.25 12.62 13.00 -0.46 N.A. N.A.
HEHF HF Bancorp of Hemet CA 14.06 6,282 88.3 14.50 9.25 13.62 3.23 N.A. 26.44
HFFC HF Financial Corp. of SD 19.75 2,098 59.2 20.50 14.75 19.69 0.30 295.00 14.10
HFNC HFNC Financial Corp. of NC 16.75 17,192 288.0 22.06 15.87 17.25 -2.90 N.A. -6.27
? ? Financial, Inc. of HN 23.00 4,210 98.8 23.75 15.12 21.50 6.98 N.A. 26.93
HALL Hallmark Capital Corp. of WI 21.62 1,443 31.2 21.62 14.50 19.75 9.47 N.A. 21.80
HARB Harbor FSB, MHC of FL (46.0) 40.75 4,962 92.5 40.75 23.75 37.25 9.40 N.A. 13.99
HRBF Harbor Federal Bancorp of NO 18.00 1,754 31.6 18.75 12.37 18.00 0.00 80.00 14.29
HFSA Hardin Bancorp of Hardin NO 14.62 859 12.6 15.50 11.00 14.62 0.00 N.A. 16.96
HAAL Harleysville SA of PA 22.00 1,651 36.3 23.00 14.00 22.00 0.00 23.94 39.24
HARS Harris SB, MHC of PA (24.2) 21.25 11,221 57.7 22.62 14.75 20.75 2.41 N.A. 16.44
HFFB Harrodsburg 1st Fin Bcrp of KY 15.00 2,025 30.4 19.00 14.37 15.50 -3.23 N.A. -20.51
HHFC Harvest Home Fin. Corp. of OH 10.50 935 9.8 13.75 9.25 10.50 0.00 N.A. 7.69
<CAPTION>
Current Per Share Financials
----------------------------------------------------
Tangible
Trailing 12 No. 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 Listen OTC Companies (continued)
- ---------------------------------------
FFCH First Fin. Holdings Inc. of SC 1.35 2.05 15.57 15.57 253.24
FFBI First Financial Bancorp of IL -0.05 1.05 17.52 17.52 224.47
FFHC First Financial Corp. of WI (8) 1.43 1.95 11.14 10.82 159.53
FFHS First Franklin Corp. of OIL 0.27 1.15 16.93 16.81 192.05
FGHC First Georgia Hold. Corp of GA 0.47 0.28 4.09 3.73 48.20
FSPG First Home Bancorp of RJ 1.63 2.14 12.36 12.14 187.68
FFSL First Independence Corp. of KS 0.53 0.81 11.42 11.42 108.69
FISB First Indiana Corp. of IN 1.26 1.45 13.51 13.34 141.00
FKFS First Keystone Fin. Corp of PA 1.24 1.84 18.12 18.12 256.22
FLKY First Lancaster Bncshrs of KY 0.38 0.49 14.27 14.27 38.43
FLFC First Liberty Fin. Corp. of GA 1.76 1.42 11.87 10.62 161.56
CASR First Midwest Fin. Corp. of IA 0.96 1.24 15.18 13.43 130.94
FMBD First Mutual Bancorp of IL 0.13 0.34 15.22 11.71 113.47
FMSB First Mutual SB of Bellevue WA 1.45 1.40 10.15 10.15 154.41
FHGB First Northern Cap. Corp of WI 0.81 1.20 16.09 16.09 139.83
FFPB First Palm Beach Bancorp of FL -0.02 0.15 21.04 20.50 311.09
FSLA First SB SLA NHC of KJ (47.5) 0.69 1.22 13.00 11.52 141.40
FSNJ First SB of NJ, NHC (45.9) (8) -0.70 0.47 16.18 16.18 188.83
SOPA First SB, SSB, Moore Co. of NC 0.99 1.19 18.04 18.04 73.34
FWNB First Savings Bancorp of WA 0.81 0.77 14.06 14.06 92.89
SNEN First Sherango Bancorp of PA 1.55 2.08 20.79 20.79 194.34
FSFC First So. east Fin. Corp. of SC 0.01 0.70 7.80 7.80 76.29
FLAG Flag Financial Corp of GA -0.07 0.15 10.25 10.25 109.02
FFIC Flushing Fin. Corp. of NY 0.86 0.89 16.06 16.06 100.30
FBHC Fort Bend Holding Corp. of TX 0.74 1.72 21.78 20.15 338.85
FTSB Fort Thomas Fin. Corp. of KY 0.30 0.46 10.19 10.19 63.33
FKKY Frankfort First Bancorp of KY 0.24 0.36 9.93 9.93 37.91
FTRB Fulton Bancorp of HO 0.41 0.58 14.47 14.47 57.86
GFSB GFS Bancorp of Grinnell IA 0.85 1.09 10.32 10.32 89.22
GDPB GFSB Bancorp Gullop HM 0.69 0.87 16.88 16.88 103.50
GSLA GS Financial Corp. of LA 0.29 0.29 15.77 15.77 34.03
GWEC Gateway Bancorp of KY (8) 0.53 0.74 15.95 16.95 61.16
GBCI Glacier Bancorp of NI 1.00 1.13 7.77 7.55 81.24
GLOK Glendale Co-op. Bank of NA (8) 1.11 1.07 24.48 24.48 149.50
GFCO Glenway Financial Corp. of OH 0.92 1.67 23.46 23.10 245.47
GTPS Great American Bancorp of IL 0.33 0.42 16.58 16.58 78.35
GIFN Great Financial Corp. of KY 1.46 1.40 19.83 18.97 213.33
GSBC Great Southern Bancorp of NO 1.09 1.23 7.35 7.35 81.94
GDVS Greater Oil SB, NHC OF PA (19.9) 0.01 0.24 8.37 8.37 72.95
GSFC Green Street Fin. Corp. of NC 0.57 0.70 14.64 14.64 40.57
GSLC Guaranty Svgs & Loan FA of VA 0.33 0.31 4.43 4.43 77.50
GFED Guarnty FS&LA, NHC of HO (31.0) (8) 0.30 0.49 8.68 9.68 62.73
HCBB HCB Bancshares of AR -0.08 0.29 13.73 13.16 75.24
HEHF HF Bancorp of Hemet CA -0.36 -2.62 12.91 0.00 131.63
HFFC HF Financial Corp. of SD 1.10 1.51 17.21 17.17 187.22
HFNC HFNC Financial Corp. of NC 0.51 0.67 9.23 9.23 49.03
? ? Financial, Inc. of HN 0.99 1.20 18.71 18.71 131.36
HALL Hallmark Capital Corp. of WI 1.20 1.58 19.82 19.82 283.64
HARB Harbor FSB, MHC of FL (46.0) 1.93 2.54 18.30 17.61 222.68
HRBF Harbor Federal Bancorp of NO 0.51 0.82 16.09 16.09 125.12
HFSA Hardin Bancorp of Hardin NO 0.54 0.88 15.38 15.38 120.32
HAAL Harleysville SA of PA 1.30 1.86 12.82 12.82 201.43
HARS Harris SB, MHC of PA (24.2) 0.36 0.88 13.71 11.83 173.19
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.08 14.08 53.43
HHFC Harvest Home Fin. Corp. of OH 0.17 0.44 11.12 11.12 89.47
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
1700 NORTH MOORE STREET, SUITE 2210
ARLINGTON, VIRGINIA 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------- ------------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share (1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- --------- ------ ---------- ------ ------- -------- ------ ------- ------
($) (000) ($MIL) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASCAQ Listed OTC Companies (continued)
- ---------------------------------------
HAVN Haven Bancorp of Woodhaven NY 37.00 4,330 160.2 37.00 25.56 34.38 7.62 N.A. 29.28
HVFD Haverfeild Corp. of OH(e) 25.87 1,906 49.3 26.00 17.00 25.62 0.98 66.90 35.30
HTHR Hawthorne Fin, Corp. of CA 11.37 2,629 29.9 11.75 6.62 11.37 0.00 -52.65 39.85
HELK Hemlock Fed. Fin. Corp. of IL 13.25 2,076 27.5 13.25 12.50 12.87 2.95 N.A. N.A.
HBNK Highland Federal Bnk of CA 23.87 2,282 54.5 24.00 14.25 22.75 4.92 N.A. 40.41
HIFS Hingham Inst. For Sav. of MA* 19.87 1,301 25.9 19.87 14.00 18.50 7.41 335.75 5.97
HBEI Home Bancorp of Elgin IL 16.00 7,039 112.1 16.25 11.01 16.00 0.00 N.A. 18.52
HBFW Home Bancorp of Fort Wayne IN 20.62 2,623 54.1 20.87 14.75 20.50 0.59 N.A. 8.53
HBBI Home Building Bancorp of EH 21.00 312 6.6 22.00 17.00 21.00 0.00 N.A. 6.33
HCFC Home City Fin. Corp. of OH 14.00 952 13.3 14.25 12.00 13.67 0.94 N.A. 5.66
HCMF Home Fed Bancorp of Seymour IA 27.75 3,390 94.1 28.25 17.33 27.00 2.78 176.12 7.77
HWEN Home Financial Bancorp of IH 15.75 486 7.7 15.75 9.87 15.75 0.00 N.A. 23.53
HPBC Home Port Bancorp, Inc. of MA 20.25 1,842 37.3 20.37 12.50 19.87 1.91 153.13 22.73
HACI Homecorp, Inc. of Rocktoro IL 14.25 1,693 24.1 15.17 11.33 14.25 0.00 42.50 11.76
HZFS Horizon Fin'l. Services of IA 19.25 426 8.2 19.25 14.00 19.25 0.00 N.A. 27.31
HRZB Horizon Financial Corp. of HA 16.12 7,399 119.3 16.12 10.65 15.37 4.88 41.16 37.31
IBSF IBS Financial Corp. of MJ 15.50 11,012 170.7 16.25 10.37 15.75 -1.59 N.A. 14.05
ISBF ISB Financial Corp. of LA 23.25 7,001 162.8 26.12 13.62 23.00 1.09 N.A. 29.17
ITLA Imperial Thrift & Loans of CA* 16.00 7,829 125.3 17.25 12.62 15.63 2.37 N.A. 6.67
IFSB Independence FSB OF DC 9.00 1,280 11.5 9.75 6.75 8.50 5.88 350.00 12.50
INCB Indiana Comm. Bank, SB OF IN 15.00 922 13.8 19.00 13.25 16.25 -7.69 N.A. -7.69
IFSL Indiana Federal Corp. of IN(g) 28.50 4,786 136.4 28.50 18.25 27.50 3.64 277.98 27.40
INBI Industrial Bancorp of OH 13.44 5,410 72.7 13.50 9.87 12.87 4.43 N.A. 5.41
IWBK Interwest SB of Oak Harbor MA 36.00 8,018 288.6 36.25 23.87 34.25 5.11 260.00 11.63
IPSW Ipswich SB of Ipswich MA* 16.25 1,198 19.3 16.37 9.75 16.12 0.81 N.A. 35.42
JSBF JSB Financial, Inc. of NV 43.87 9,830 431.2 46.00 32.75 45.75 -4.11 281.48 15.45
JXVL Jacksonville Bancorp of TX 14.94 2,572 38.4 15.75 10.00 14.50 3.03 N.A. 2.19
JXSB Jacksonville SB, MCH of IL (44.6) 17.62 1,272 10.0 18.00 11.50 17.50 0.69 N.A. 32.98
JSBA Jefferson Svgs Bancorp of MO 29.87 4,971 148.5 30.50 22.25 28.50 4.81 N.A. 14.88
JOAC Joachin Bancorp of MO 14.50 760 11.0 15.25 12.25 11.50 0.00 N.A. 0.00
KSAV KS Bancorp of Kenly NC 25.50 663 16.9 25.53 18.00 22.00 15.91 N.A. 28.33
KSAK KSB Bancorp of Kingfield ME (8)* 35.00 413 14.5 35.00 20.00 33.00 6.06 N.A. 52.17
KFAI Kiamath First Bancorp of CR 18.75 9,962 186.8 19.00 13.37 19.00 -1.32 N.A. 19.05
LSBI LSB Fin. Corp. of Lafayette IN 20.37 945 19.7 20.87 14.29 20.25 3.06 N.A. 12.39
LVSB Lakeview SB of Paterson NJ 32.25 2,302 74.2 33.50 17.73 30.75 4.88 N.A. 29.67
LARK Landmark Bancshares of KS 20.12 1,808 36.4 20.12 15.25 19.75 1.87 N.A. 11.78
LARL Laurel Capital Group of PA 21.50 1,498 32.2 22.50 14.50 21.50 0.00 67.97 30.30
LSBX Lawrence Savings Bank of MA 10.75 4,255 45.8 11.00 5.12 10.87 -1.10 212.50 32.23
LFED Leeds FSB HHC OF MD (36.2) 19.00 3,455 23.7 19.00 13.00 17.75 7.04 N.A. 18.75
LXND Lexington BSL Fin. Corp. of MO 15.19 1,088 16.5 15.75 9.62 14.75 2.98 N.A. 12.52
LIFB Life Bancorp of Norfolk VA 23.62 9,847 232.8 23.62 14.12 23.25 1.59 N.A. 31.22
LFBI Little Falls Bancorp of NJ 14.12 2,745 38.8 14.12 9.87 14.00 0.86 N.A. 10.75
LOGN Logansport Fin. Corp. of IN 14.00 1,256 17.6 15.00 11.12 13.25 5.66 N.A. 24.44
LONF London Financial Corp. of OH 14.67 515 7.7 17.50 10.00 14.62 1.71 N.A. 5.31
LISB Long Island Bancorp, Inc. of NY 36.12 24,223 275.1 39.25 27.69 35.50 1.75 N.A. 3.20
MAFB MAF Bancorp of IL 41.37 10,429 431.4 42.62 22.25 42.62 -2.93 386.71 19.05
MBFL MBLA Financial Corp. of MO (8) 24.00 1,316 31.6 24.00 19.00 23.50 2.13 N.A. 26.32
MFBC MFB Corp. of Mishawaka ILL 19.75 1,735 34.3 19.75 13.75 19.00 3.95 N.A. 18.83
MLBC ML Bancorp of Villanova PA 19.06 10,415 198.5 20.25 11.87 19.37 -1.60 N.A. 34.99
MBB MSB Bancorp of Middletown NY 19.25 2,837 54.6 20.50 15.50 19.00 1.32 92.50 -1.89
MSBF MSB Financial Corp. of MI 22.00 630 13.9 22.00 16.50 22.00 0.00 N.A. 15.79
MGBL Llagna Bancorp of MS (8) 26.37 13,754 362.7 26.37 16.75 25.50 3.41 427.40 50.69
MARN Marion Capital Holdings of IN 22.62 1,828 41.3 23.25 19.25 22.62 0.00 N.A. 17.51
MRKF Market Fin. Corp. of OH 13.00 1,336 17.4 13.37 12.25 13.00 0.00 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA (8) 15.12 1,411 21.3 16.62 14.25 15.00 0.80 N.A. 1.58
<CAPTION>
Current Per Share Financials
----------------------------------------------
Tangible
Trailing 12 No. Book Book
12 No. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- --------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASCAQ Listed OTC Companies (continued)
- ---------------------------------------
HAVN Haven Bancorp of Woodhaven NY 2.28 3.32 23.13 23.04 399.03
HVFD Haverfeild Corp. of OH(e) 0.88 1.86 15.04 15.04 179.26
HTHR Hawthorne Fin, Corp. of CA 2.39 1.65 12.11 12.11 314.87
HELK Hemlock Fed. Fin. Corp. of IL -0.29 0.37 14.49 14.49 79.24
HBNK Highland Federal Bnk of CA 0.59 1.03 15.70 15.70 210.43
HIFS Hingham Inst. For Sav. of MA* 1.73 1.73 15.10 15.10 158.08
HBEI Home Bancorp of Elgin IL 0.15 0.39 14.39 14.39 51.18
HBFW Home Bancorp of Fort Wayne IN 0.68 1.10 17.43 17.43 124.97
HBBI Home Building Bancorp of EH 0.27 0.74 18.11 18.11 150.01
HCFC Home City Fin. Corp. of OH 0.51 0.77 14.77 14.77 71.68
HCMF Home Fed Bancorp of Seymour IA 1.93 2.29 16.54 16.00 195.77
HWEN Home Financial Bancorp of IH 0.45 0.64 15.12 15.12 81.16
HPBC Home Port Bancorp, Inc. of MA 1.69 1.68 11.11 11.11 102.72
HACI Homecorp, Inc. of Rocktoro IL 0.23 0.77 12.52 12.52 198.73
HZFS Horizon Fin'l. Services of IA 0.75 1.35 19.31 19.31 183.96
HRZB Horizon Financial Corp. of HA 1.05 1.03 10.61 10.61 69.95
IBSF IBS Financial Corp. of MJ 0.35 0.50 11.45 11.45 67.20
ISBF ISB Financial Corp. of LA 0.75 1.01 16.28 13.74 132.73
ITLA Imperial Thrift & Loans of CA* 1.37 1.37 11.77 11.72 103.52
IFSB Independence FSB OF DC 0.29 0.66 13.39 11.74 205.28
INCB Indiana Comm. Bank, SB OF IN 0.16 0.50 12.27 12.27 99.05
IFSL Indiana Federal Corp. of IN(g) 1.10 1.56 15.03 14.12 171.11
INBI Industrial Bancorp of OH 0.44 0.86 11.41 11.41 61.71
IWBK Interwest SB of Oak Harbor MA 1.67 2.34 14.82 14.47 220.94
IPSW Ipswich SB of Ipswich MA* 1.53 1.20 8.59 8.59 139.32
JSBF JSB Financial, Inc. of NV 2.76 2.62 34.52 34.52 155.74
JXVL Jacksonville Bancorp of TX 0.74 1.02 13.27 13.27 84.89
JXSB Jacksonville SB, MCH of IL (44.6) 0.33 0.77 13.25 13.26 128.80
JSBA Jefferson Svgs Bancorp of MO 0.57 1.43 18.09 14.12 230.96
JOAC Joachin Bancorp of MO 0.24 0.37 13.60 13.60 16.92
KSAV KS Bancorp of Kenly NC 1.34 1.76 21.01 21.00 151.97
KSAK KSB Bancorp of Kingfield ME (8)* 2.75 2.74 21.90 20.27 320.90
KFAI Kiamath First Bancorp of CR 0.59 0.87 14.03 14.03 68.64
LSBI LSB Fin. Corp. of Lafayette IN 0.94 0.79 18.06 18.06 198.97
LVSB Lakeview SB of Paterson NJ 2.85 1.78 20.78 16.64 204.95
LARK Landmark Bancshares of KS 0.98 1.22 18.11 18.11 123.78
LARL Laurel Capital Group of PA 1.50 1.92 14.51 14.51 139.24
LSBX Lawrence Savings Bank of MA 1.30 1.30 7.06 7.06 80.37
LFED Leeds FSB HHC OF MD (36.2) 0.63 0.90 13.20 13.20 81.59
LXND Lexington BSL Fin. Corp. of PA 0.42 0.58 17.24 17.24 56.68
LIFB Life Bancorp of Norfolk VA 0.96 1.18 15.42 14.94 142.97
LFBI Little Falls Bancorp of NJ 0.27 0.53 14.30 13.16 110.52
LOGN Logansport Fin. Corp. of IN 0.73 0.95 12.41 12.41 63.14
LONF London Financial Corp. of OH 0.54 0.79 14.63 14.63 73.66
LISB Long Island Bancorp, Inc. of NY 1.38 1.64 21.62 21.41 239.98
MAFB MAF Bancorp of IL 2.23 3.11 24.46 21.24 310.33
MBFL MBLA Financial Corp. of MO (8) 1.05 1.36 21.51 21.51 159.41
MFBC MFB Corp. of Mishawaka ILL 0.71 1.07 19.59 19.59 135.04
MLBC ML Bancorp of Villanova PA 1.26 1.15 13.55 13.22 180.04
MBB MSB Bancorp of Middletown NY 0.44 0.48 19.57 7.69 299.00
MSBF MSB Financial Corp. of MI 1.22 1.52 19.94 19.94 120.05
MGBL Llagna Bancorp of MS (8) 1.33 1.57 9.62 9.30 100.56
MARN Marion Capital Holdings of IN 1.27 1.53 21.99 21.99 95.41
MRKF Market Fin. Corp. of OH 0.38 0.50 14.17 14.17 42.68
MFCX Marshalltown Fin. Corp. of IA (8) 0.30 0.63 14.06 14.06 90.08
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Service Industry Consultants
1700 North Moore Street, Suite 2210
Arlington,Virginia 22209
(703) 528-1700 (Continued)
Weekly Thrift Market Line- Part One
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- --------------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Share(1) anding ization(g) High Low Week Week 1994(2) 1995(2)
----------------------- ------- ------ ------ ------ ------- --------
($) (000) ($Mil) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Institution
- ----------------------
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MFSL Maryland Fed. Bancorp of MD 44.25 3,210 142.0 45.00 26.91 43.50 1.72 321.43 27.34
MASA MassBank Corp,of Reading MA* 46.75 2,586 125.6 46.75 32.50 43.50 7.47 275.16 22.64
MFCA Maryflower Co-Op. Bank of MA* 18.00 890 16.0 19.75 13.12 16.25 10.77 260.00 5.88
MECH Mechanics SB of Hartford CT* 18.75 5,290 99.2 19.00 11.00 18.50 1.35 N.A. 19.05
MDBK Medford Savings Bank of MA* 30.50 4,540 138.5 30.50 20.75 29.50 3.39 335.71 18.45
MEAT Maritruss FSB of Thibodauk LA 38.00 774 29.4 41.50 30.75 38.00 0.00 N.A. 20.18
MWBX Metro West of MA* 5.56 13,943 77.5 5.56 3.50 5.56 0.00 34.95 3.54
MCBS Mid Cancinens Bancshares of KS 27.50 1,958 53.8 27.60 17.50 27.50 0.00 N.A. 17.67
MIFC Mid Iowa Financial Corp. of IA 8.75 1,676 14.7 9.00 6.00 9.00 -2.78 75.00 37.36
MCBN Mid-Coast Bancorp of NE 19.50 230 4.5 20.25 18.00 19.50 0.00 241.51 2.63
MUBI Midwest Bancshares, Inc. of IA 31.50 348 11.0 31.50 24.50 31.50 0.00 215.00 18.87
MUFD Midwest Fed. Fin. Corp of WI 19.75 1,625 32.1 24.50 15.12 19.75 0.00 295.00 6.76
MFFC Milton Fed. Fin. Corp of OH 14.00 2,327 32.6 16.00 11.50 14.12 -0.85 N.A. -3.45
MIVT Miss View. Hold. Co. of HI 14.62 819 12.0 15.63 10.75 14.62 0.00 N.A. 21.83
MBSP Mitcnell Bancorp of NC* 16.37 968 15.8 16.75 10.19 16.75 -2.27 N.A. 14.88
MBBC Monterey Bay Bancorp of CA 16.75 3,245 54.4 18.25 11.37 16.25 3.08 N.A. 13.56
MSBK Mutual SB, FSB of Bay City HI 9.62 4,274 41.1 9.62 5.12 8.87 8.46 9.94 74.91
NHTB NH Thrift Bancshares of NH 15.25 2,041 31.1 15.50 9.75 15.25 0.00 230.09 20.84
NSLB NS&L Bancorp of heosho MO 16.50 708 11.7 17.25 12.00 16.50 0.00 N.A. 21.15
NMSB Newall Bancorp. cr CT* 10.25 3,888 39.9 10.25 6.75 9.62 6.55 60.91 5.13
NASB North American SB of MO 44.00 2,257 99.3 46.25 29.25 44.75 -1.68 935.29 28.47
NBSI North Bancshares of Chicago IL 19.25 1,035 19.9 20.12 15.26 19.25 0.00 N.A. 16.67
NCFD North Central Bancshares of IA 15.25 3,429 52.3 16.62 10.37 15.12 0.86 N.A. 12.46
NBN Northeast Bancorp of NE 14.37 1,275 18.3 14.75 12.50 14.50 -0.90 22.30 2.64
NEIB Northeast Indiana Bncrp of IN 15.00 1,763 26.4 16.00 11.75 15.00 0.00 N.A. 10.13
NNEQ Northwest Equity Corp. of WI 14.75 839 12.4 15.00 10.25 14.25 3.51 N.A. 21.70
NWSB Northwest SB, NHC of PA (29.9) 15.25 23,376 106.6 15.75 10.75 15.12 0.86 N.A. 14.06
NSSY Norwalk Saving Society of CT* 28.37 2,404 68.2 28.37 20.87 27.87 1.79 N.A. 21.39
NSSB Norwich Financial Corp. of CT 22.62 5,400 122.1 23.25 14.12 22.00 2.82 223.14 15.29
NTAG Nutmeg FS&LA of CT 8.25 725 6.0 8.25 7.00 7.37 11.94 N.A. 10.00
OHSL OHSL Financial Corp. of OH 25.25 1,208 30.5 25.25 19.25 24.00 5.21 N.A. 18.16
OOFC Ocean Fin. Corp. of NJ 33.12 9,059 300.0 33.12 19.62 31.25 5.98 N.A. 29.88
OCHI Ocuen Financial Corp. of FL 29.75 26,800 797.3 34.75 20.25 29.62 0.44 N.A. 11.21
OFCP Ottawa Financial Corp. of HI 22.50 5,040 113.4 22.75 16.00 21.75 3.45 N.A. 33.85
PFFB PFF Bancorp of prauna CA 17.25 18,846 325.1 17.25 10.37 15.37 12.23 N.A. 16.01
PSFI PS Financial of Chicago IL 14.75 2,182 32.2 14.75 11.62 11.37 2.64 N.A. 25.53
PVFC PVF Capital Corp. of OH 19.12 2,323 44.4 19.12 12.00 19.12 0.00 334.55 21.40
PCCI Pacific Crest Capital of CA* 13.37 2,937 39.3 13.72 8.00 13.00 2.85 N.A. 16.26
PALM Palfed, Inc. of Aiken SC 16.69 5,278 88.1 17.50 11.62 17.50 -4.63 8.59 19.21
PBCI Panrapo Bancorp, Inc. of NJ 19.75 2,863 56.5 23.75 18.25 20.00 -1.25 250.80 -1.25
PFED Park Bancorp of Chicago IL 14.75 2,431 35.9 16.12 10.19 14.50 1.72 N.A. 13.46
PVSA Parkvale Financial Corp of PA 28.37 4,060 115.2 29.50 19.60 28.75 -1.32 242.63 9.12
PBIX Patriot Bank Corp. of PA 16.31 4,266 69.6 16.75 10.62 16.00 1.94 N.A. 20.81
PEEK Peekskill Fin. Corp. of NY 15.00 3,203 48.0 15.25 11.25 14.62 2.60 N.A. 5.26
PFSB PennFed Fin. Services of NJ 27.37 4,821 132.0 27.37 14.87 26.50 3.28 N.A. 35.16
PWBC PennFirst Bancorp of PA 15.00 3,911 58.7 15.50 13.00 14.25 5.26 87.97 10.13
PWBK Pennwood SB of PA* 15.00 610 9.2 15.00 9.00 15.00 0.00 N.A. 9.09
PBKB People's SB of Brockton MA* 15.12 3,592 54.3 15.12 9.00 14.37 5.22 154.55 42.37
PFDC People's Bancorp of Auburn IN 22.25 2,279 50.7 23.00 19.25 21.75 2.30 27.14 9.88
PBCT Peoples Bank, NHC of CT (37.4)* 26.50 61,017 401.6 26.50 13.58 24.37 8.74 236.72 37.65
PFFC Peoples Fin. Corp. of OH 15.25 1,491 22.7 16.00 10.87 15.25 0.00 N.A. 12.96
PHBK Peoples Heritage Fin Grp of NE* 35.75 28,425 1,016.2 36.25 19.00 35.44 0.87 133.51 27.68
PGNB Peoples Sav. Fin. Corp. of CT (8)* 36.25 1,907 69.1 36.25 21.50 35.87 1.06 267.27 30.63
PSFC Peoples Sidney Fir. Corp of OH 13.62 1,785 24.3 13.75 12.56 13.37 1.87 N.A. N.A.
PEAM Pernament Bancorp of IN 25.00 2,083 52.1 25.50 15.75 24.12 3.65 N.A. 23.46
<CAPTION>
Current Per Share Financials
---------------------------------------------
Tanagible
Trailing 12 Mo. Book Book
12 Mo. Care Value/ Value/ Assets/
Financial Institution EPS (3) EPS (3) Share Share (4) Share
- ---------------------- -------- ------- ------- --------- ---------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MFSL Maryland Fed. Bancorp of MD 2.03 2.96 29.68 29.28 351.55
MASA MassBank Corp,of Reading MA* 3.60 3.34 33.49 33.49 335.49
MFCA Maryflower Co-Op. Bank of MA* 1.33 1.30 13.21 12.98 140.10
MECH Mechanics SB of Hartford CT* 0.35 0.37 14.50 14.50 149.06
MDBK Medford Savings Bank of MA* 2.33 2.26 20.43 18.91 232.18
MEAT Maritruss FSB of Thibodauk LA 1.77 2.98 23.34 23.34 295.34
MWBX Metro West of MA* 0.50 0.50 2.92 2.92 39.80
MCBS Mid Cancinens Bancshares of KS 1.75 2.00 19.04 19.04 189.57
MIFC Mid Iowa Financial Corp. of IA 0.64 0.34 6.71 6.70 73.73
MCBN Mid-Coast Bancorp of NE 0.97 1.55 21.63 21.63 251.47
MUBI Midwest Bancshares, Inc. of IA 1.84 3.04 27.71 27.71 399.44
MUFD Midwest Fed. Fin. Corp of WI 1.16 1.13 10.66 10.24 123.74
MFFC Milton Fed. Fin. Corp of OH 0.40 0.55 11.32 11.32 76.82
MIVT Miss. View Hold. Co. of HI 0.58 0.86 15.55 15.55 85.17
MBSP Mitcnell Bancorp of NC* 0.47 0.59 15.17 15.17 35.01
MBBC Monterey Bay Bancorp of CA 0.31 0.57 13.98 12.82 130.15
MSBK Mutual SB, FSB of Bay City HI 0.15 0.06 9.31 9.31 155.02
NHTB NH Thrift Bancshares of NH 0.44 0.65 11.47 9.72 153.37
NSLB NS&L Bancorp of heosho MO 0.41 0.62 16.35 16.35 82.05
NMSB Newall Bancorp. cr CT* 0.65 0.63 8.13 8.13 81.54
NASB North American SB of MO 3.85 3.74 24.35 23.56 305.38
NBSI North Bancshares of Chicago IL 0.52 0.74 16.94 16.94 115.95
NCFD North Central Bancshares of IA 0.98 1.14 14.59 14.59 59.35
NBN Northeast Bancorp of NE 0.64 0.51 13.49 11.66 194.14
NEIB Northeast Indiana Bncrp of IN 0.94 1.11 14.87 14.87 98.06
NNEQ Northwest Equity Corp. of WI 0.85 1.08 12.94 12.94 113.35
NWSB Northwest SB, NHC of PA (29.9) 0.56 0.81 8.30 7.80 85.45
NSSY Norwalk Saving Society of CT* 2.42 2.77 20.69 19.95 256.51
NSSB Norwich Financial Corp. of CT 1.34 1.27 14.27 12.80 129.86
NTAG Nutmeg FS&LA of CT 0.34 0.44 7.35 7.35 129.17
OHSL OHSL Financial Corp. of OH 1.08 1.54 21.00 21.00 190.24
OOFC Ocean Fin. Corp. of NJ -0.06 1.30 27.30 27.30 153.20
OCHI Ocuen Financial Corp. of FL 2.59 1.88 8.40 8.40 98.86
OFCP Ottawa Financial Corp. of HI 0.70 1.20 15.07 12.06 170.42
PFFB PFF Bancorp of prauna CA 0.14 0.56 14.09 13.93 134.55
PSFI PS Financial of Chicago IL 0.66 0.68 14.88 14.88 34.43
PVFC PVF Capital Corp. of OH 1.54 2.03 10.77 10.77 153.36
PCCI Pacific Crest Capital of CA* 1.06 0.90 8.43 8.43 116.70
PALM Palfed, Inc. of Aiken SC 0.07 0.70 10.07 10.07 124.23
PBCI Panrapo Bancorp, Inc. of NJ 1.07 1.51 16.43 16.29 128.31
PFED Park Bancorp of Chicago IL 0.53 0.74 15.88 15.88 73.21
PVSA Parkvale Financial Corp of PA 1.64 2.46 17.91 17.76 239.56
PBIX Patriot Bank Corp. of PA 0.52 0.71 11.26 11.26 139.25
PEEK Peekskill Fin. Corp. of NY 0.63 0.81 14.58 14.58 57.01
PFSB PennFed Fin. Services of NJ 1.35 2.01 19.55 15.12 259.78
PWBC PennFirst Bancorp of PA 0.76 1.14 12.77 11.65 180.58
PWBK Pennwood SB of PA* 0.46 0.73 15.30 15.30 78.57
PBKB People's SB of Brockton MA* 1.16 0.69 8.57 9.21 152.78
PFDC People's bancorp of Auburn IN 1.35 1.79 18.87 18.87 124.28
PBCT Peoples Bank, NHC of CT (37.4)* 1.33 1.06 10.39 10.38 123.54
PFFC Peoples Fin. Corp. of OH 0.05 0.21 16.18 16.18 60.15
PHBK Peoples Heritage Fin Grp of NE* 2.00 2.14 15.76 13.30 192.02
PGNB Peoples Sav. Fin. Corp. of CT (8)* 2.20 2.19 24.13 22.61 251.23
PSFC Peoples Sidney Fir. Corp of OH 0.56 0.73 14.09 14.09 60.57
PEAM Pernament Bancorp of IN 0.46 1.01 19.23 19.04 198.26
</TABLE>
<PAGE>
RP Financial, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginial 22209
(703) 528-1700
(continued)
Weekly Thrift Market Lime - Part One
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Market Capitalization
----------------------------------
Shares Market
Price/ Outst- Capital-
Financial Institution Share(1) anding ization(9)
- --------------------- ---------- ------- --------
($) (000) ($ Mil)
<S> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PMFI Perpetual Midwest Fin. of IA 19.00 1,907 36.2
PERT Perpetual of SC, MHC (46.8) 29.50 1,505 20.8
PCBC Perry Ca. Fin. Corp. of NO 19.75 809 16.0
PHFC Pittsburgh Hune Fin.of PA 15.00 1,983 29.7
PFSL Pocahnts Fed, MHC of AR (46.4) 20.75 1,629 15.6
PCBS Portsmouth Bank Shrs Inc of MA(8) 16.00 5,872 94.0
PTRS Potters Financial Corp of OH 21.55 487 10.5
PKPS Poughkeepsle Fin. Corp NY 6.94 12,595 87.4
PRBC Prestige Bancorp of PA 15.75 920 14.5
PETE Primary Bank of HH(8) 24.87 2,087 51.9
PFHC Progress Financial Corp. of PA 9.50 3,814 36.2
PSBK Progressive Bank, Inc. of NY 29.62 3,825 113.3
PAC/V Provident Fin. Holdings of CA 16.75 5,075 85.0
PBLB Pulaski 5B, MHC of MO (29.0) 18.25 2,094 11.0
PLSK Pulaski 5B, MHC of MJ (46.0) 13.00 2,070 12.4
PBLS Pulse Bancorp of S. River NO 19.62 3,061 60.1
QCFB QCF Bancorp of Virginia MN 20.50 1,426 29.2
QCBC Quaker City Bancorp of CA 17.00 4,778 81.2
QCSB Queens County Bancorp of NY 46.12 11,137 513.6
RCSB RCSB Fiancial, Inc. of NY (8) 45.25 14,816 670.4
RARB Raritan Bancorp, of Raritan MA 30.00 1,532 46.0
REBF ReaFed Bancorp of Redlands CA 15.63 7,164 112.0
RELY Reliance Bancorp, Inc. of Ny 26.87 8,823 237.1
RELY Reliance Bancshares Inc of NI (8) 8.25 2,528 20.9
RIVR River Valley Bancorp of IN 14.75 1,190 17.8
RFED Roosevelt Fin. Grp. Inc. of MO (8) 24.12 42,615 1,027.9
RSLB Roslyn Bancorp, Inc. of NY 20.00 43,642 872.8
RVSB Rvrview SB, FSB MHC of HA (41.7) (8) 22.00 2,416 20.2
SCCB S. Carolina Co??? Bnshrs of SC 18.25 704 12.8
SBFL SB Fngr Lakes HHC of NY (33.1) 16.50 1,785 9.7
SFED SFS Bancorp of Scheneciady NY 16.50 1,271 21.0
SGVB SGV Bancorp of N. Covina CA 14.00 2,342 32.8
SISB SIS BanA of Springfield HA 29.62 5,662 167.7
SJSB SJS Bancorp of St. Joseph NJ (8) 26.50 918 24.3
SNCB Sanowich Co-Cp, Bank of MA 31.00 1,906 59.1
SECP Security Capital Corp. Of NI (8) 94.50 9,203 889.7
SFSL Security First Corp. Of OH 21.37 5,003 106.9
SMFC Sho-?? Fin. Corp. of MO 40.25 1,519 61.1
SCSI Sobieski Bancorp of S. Berd IN 14.75 760 11.2
SOSA Somerset Savings Bank of MA (8) 2.66 16,662 44.3
SSFC South Street Fin. Corp. of NC 16.50 4,496 74.2
SCBS Southern Common. Bncshrs of AL 14.25 1,137 16.2
SMBC Southern Missouri Bncshrs of Mo 17.62 1,638 28.9
SWBI Southwest Bancshares of IL 20.50 2,639 54.1
SVRN Sovereign Bancorp of PA 14.12 69,832 986.0
SIFR St. Francis Cap. Corp. of WI 33.25 5,386 179.1
SPBC St. Paul Bancorp, Inc. of IL 33.87 22,840 773.6
STHO Standard Fin. of Chicago IL (8) 24.94 16,204 404.1
SFFO StateFed Financial Corp. of IA 19.12 790 15.1
SFIN State?? Fin. Corp. of NJ 17.12 4,771 81.7
STSA Sterling Finanancial Corp. of WA 19.00 5,543 105.3
SFSB SuburbFed Fin. Corp. of IL 24.50 1,261 30.9
SBCH Surburban Bancorp. of OH (8) 19.50 1,475 28.8
ROSE T R Financial Corp. of NY 23.50 17,632 414.4
T?RD TF Financial Corp. of PA 18.37 4,087 75.1
<CAPTION>
Price Change Data
---------------------------------------------------------------
52 Week (1) % Change From
--------- ----------------
Last Last Dec 31, Dec 31,
High Low Week Week 1994(2) 1996(2)
-------- ------- ------- ------- ------- -----
($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
PMFI Perpetual Midwest Fin. of IA 22.00 17.00 19.75 -3.8D N.A. -1.30
PERT Perpetual of SC MHC (46.8) 29.75 20.25 27.00 9.26 N.A. 21.65
PCBC Perry Ca. Fin. Corp. of NO 20.25 15.50 19.75 0.00 N.A. 16.18
PHFC Pittsburgh Hune Fin, of PA 15.50 9.50 14.37 4.38 N.A. 12.19
PFSL Pocahnts Fed, MHC of AR (46.4) 20.75 14.25 19.87 4.43 N.A. 18.57
PCBS Portsmouth Bank Shrs Inc of MA(8) 16.50 12.38 16.50 -3.03 53.70 16.62
PTRS Potters Financial Corp of OH 21.75 15.50 21.75 -0.92 N.A. 7.75
PKPS Poughkeepsle Fin. Corp NY 7.31 4.75 7.12 -2.53 -10.45 32.19
PRBC Prestige Bancorp of PA 16.12 9.75 15.50 1.61 N.A. 16.67
PETE Primary Bank of HH(8) 24.87 11.19 24.25 2.56 N.A. 63.19
PFHC Progress Financial Corp. of PA 9.50 5.75 9.02 5.32 -13.71 13.50
PSBK Progressive Bank, Inc. of NY 29.62 18.50 28.87 2.60 121.54 30.20
PAC/V Provident Fin. Holdings of CA 17.19 10.12 17.00 -1.47 N.A. 19.64
PBLB Pulaski 5B, MHC of MO (29.0) 20.00 12.25 17.37 5.07 N.A. 25.86
PLSK Pulaski 5B, MHC of MJ (46.0) 13.50 11.50 13.50 -3.70 N.A. N.A.
PBLS Pulse Bancorp of S. River NO 19.62 15.50 19.00 3.26 53.61 24.57
QCFB QCF Bancorp of Virginia MN 21.00 14.75 20.50 0.00 N.A. 12.33
QCBC Quaker City Bancorp of CA 17.50 10.30 17.37 -2.13 126.67 11.84
QCSB Queens County Bancorp of NY 46.12 23.25 43.87 5.13 N.A. 46.04
RCSB RCSB Fiancial, Inc. of NY (8) 45.25 24.00 43.12 4.94 267.59 56.03
RARB Raritan Bancorp, of Raritan MA 30.75 20.25 30.50 -1.64 267.69 29.03
REBF ReaFed Bancorp of Redlands CA 15.75 8.37 15.50 0.84 N.A. 15.78
RELY Reliance Bancorp, Inc. of Ny 26.87 15.63 26.12 2.87 N.A. 37.79
RELY Reliance Bancshares Inc of NI (8) 10.12 6.50 7.62 8.27 N.A. 22.22
RIVR River Valley Bancorp of IN 15.50 13.25 14.50 1.72 N.A. 7.27
RFED Roosevelt Fin. Grp. Inc. of MO (8) 24.25 15.63 24.00 0.50 518.46 14.86
RSLB Roslyn Bancorp, Inc. of NY 20.00 15.00 18.94 5.60 N.A. N.A.
RVSB Rvrview SB, FSB MHC of HA (41.7) (8) 24.00 13.07 20.50 7.32 N.A. 38.28
SCCB S. Carolina Co??? Bnshrs of SC 20.00 15.00 18.87 -3.29 N.A. 21.67
SBFL SB Fngr Lakes HHC of NY (33.1) 24.50 12.75 16.62 -0.72 N.A. 20.00
SFED SFS Bancorp of Scheneciady NY 17.00 12.00 13.50 0.00 N.A. 11.86
SGVB SGV Bancorp of N. Covina CA 18.00 7.75 29.00 3.70 N.A. 24.44
SISB SIS BanA of Springfield HA 14.25 17.50 26.50 2.14 N.A. 29.51
SJSB SJS Bancorp of St. Joseph NJ (8) 29.62 19.50 32.00 0.00 N.A. 4.95
SNCB Sanowich Co-Cp, Bank of MA 34.00 19.50 96.75 -3.13 259.63 4.20
SECP Security Capital Corp. Of NI (8) 96.75 59.00 21.00 -2.33 N.A. 28.14
SFSL Security First Corp. Of OH 22.00 13.25 36.12 1.76 35.68 17.94
SMFC Sho-?? Fin. Corp. of MO 40.25 15.50 14.75 11.43 N.A. 85.06
SCSI Sobieski Bancorp of S. Berd IN 16.00 11.75 2.66 0.00 N.A. 1.72
SOSA Somerset Savings Bank of MA (8) 2.88 1.44 15.75 0.00 -48.05 35.03
SSFC South Street Fin. Corp. of NC 17.00 12.12 14.25 4.76 N.A. 17.86
SCBS Southern Common. Bncshrs of AL 14.25 13.00 17.00 0.00 N.A. 7.55
SMBC Southern Missouri Bncshrs of Mo 17.62 13.50 20.25 3.65 N.A. 17.47
SWBI Southwest Bancshares of IL 21.00 17.83 13.75 1.23 105.00 12.33
SVRN Sovereign Bancorp of PA 14.12 8.02 30.25 2.69 215.88 29.07
SIFR St. Francis Cap. Corp. of WI 33.25 24.00 33.19 9.92 N.A. 27.88
SPBC St. Paul Bancorp, Inc. of IL 33.87 17.80 24.75 2.05 100.77 44.13
STHO Standard Fin. of Chicago IL (8) 25.00 15.25 18.75 0.77 N.A. 27.12
SFFO StateFed Financial Corp. of IA 19.12 15.00 17.37 1.97 N.A. 15.88
SFIN State?? Fin. Corp. of NJ 17.50 11.25 17.62 -1.44 N.A. 19.14
STSA Sterling Finanancial Corp. of WA 19.00 13.00 24.00 7.83 109.05 34.56
SFSB SuburbFed Fin. Corp. of IL 25.25 16.25 19.12 2.08 267.32 28.95
SBCH Surburban Bancorp. of OH (8) 19.50 14.25 23.00 1.99 N.A. 27.87
ROSE T R Financial Corp. of NY 23.62 13.00 18.00 2.17 N.A. 32.39
T?RD TF Financial Corp. of PA 19.25 13.75 23.00 2.06 N.A. 13.05
<CAPTION>
Current per Share Financials
------------------------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share share(4) Share
-------- -------- -------- -------- -------
($) ($) ($) (%) (%)
<S> <C> <C> <C> <C> <C>
PMFI Perpetual Midwest Fin. of IA 0.18 0.53 17.72 17.72 208.59
PERT Perpetual of SC MHC (46.8) 1.00 1.41 19.69 19.69 148.17
PCBC Perry Ca. Fin. Corp. of NO 0.70 0.96 18.76 18.76 99.61
PHFC Pittsburgh Hune Fin, of PA 0.59 0.84 13.71 13.55 119.51
PFSL Pocahnts Fed, MHC of AR (46.4) 1.34 1.87 14.61 14.61 229.14
PCBS Portsmouth Bank Shrs Inc of MA(8) 1.02 0.89 11.25 11.25 44.78
PTRS Potters Financial Corp of OH 0.75 1.62 21.38 21.38 240.08
PKPS Poughkeepsle Fin. Corp NY 0.14 0.32 5.75 5.75 68.37
PRBC Prestige Bancorp of PA 0.32 0.68 16.11 16.11 137.86
PETE Primary Bank of HH(8) 1.68 1.66 13.79 13.79 208.78
PFHC Progress Financial Corp. of PA 0.44 0.54 5.47 4.79 104.97
PSBK Progressive Bank, Inc. of NY 2.48 2.50 19.17 16.93 229.46
PAC/V Provident Fin. Holdings of CA 0.26 0.13 17.06 17.06 119.94
PBLB Pulaski 5B, MHC of MO (29.0) 0.42 0.57 10.75 10.75 85.39
PLSK Pulaski 5B, MHC of MJ (46.0) 0.23 0.52 9.83 9.83 81.83
PBLS Pulse Bancorp of S. River NO 1.17 1.75 13.14 13.14 168.55
QCFB QCF Bancorp of Virginia MN 1.32 1.32 18.35 18.35 104.01
QCBC Quaker City Bancorp of CA 0.49 0.89 14.56 14.54 163.42
QCSB Queens County Bancorp of NY 2.05 2.07 18.47 18.47 123.31
RCSB RCSB Fiancial, Inc. of NY (8) 2.62 2.60 21.36 20.82 272.16
RARB Raritan Bancorp, of Raritan MA 2.18 2.36 10.37 18.46 244.87
REBF ReaFed Bancorp of Redlands CA 0.15 0.57 18.80 10.36 126.81
RELY Reliance Bancorp, Inc. of Ny 1.16 1.76 10.37 12.31 218.38
RELY Reliance Bancshares Inc of NI (8) 0.25 0.25 17.56 11.59 18.98
RIVR River Valley Bancorp of IN -0.21 -0.21 11.59 14.15 116.24
RFED Roosevelt Fin. Grp. Inc. of MO (8) 0.23 1.77 14.37 9.55 182.95
RSLB Roslyn Bancorp, Inc. of NY 0.23 0.93 10.16 14.01 85.29
RVSB Rvrview SB, FSB MHC of HA (41.7) (8) 0.83 1.06 14.08 9.39 92.87
SCCB S. Carolina Co??? Bnshrs of SC 0.52 0.70 10.36 17.11 65.93
SBFL SB Fngr Lakes HHC of NY (33.1) 0.08 0.54 17.11 11.27 119.23
SFED SFS Bancorp of Scheneciady NY 0.60 1.08 11.27 17.26 132.84
SGVB SGV Bancorp of N. Covina CA 0.22 0.57 17.26 12.18 170.70
SISB SIS BanA of Springfield HA 3.21 3.11 12.41 18.00 298.19
SJSB SJS Bancorp of St. Joseph NJ (8) 0.28 0.79 18.00 17.23 185.45
SNCB Sanowich Co-Cp, Bank of MA 2.24 2.27 17.23 19.59 249.34
SECP Security Capital Corp. Of NI (8) 4.40 5.27 20.55 62.82 396.28
SFSL Security First Corp. Of OH 1.28 1.62 62.82 11.67 126.88
SMFC Sho-?? Fin. Corp. of MO 1.73 2.06 11.88 19.13 200.46
SCSI Sobieski Bancorp of S. Berd IN 0.30 0.60 19.13 16.03 104.05
SOSA Somerset Savings Bank of MA (8) 0.18 0.18 16.03 1.85 31.36
SSFC South Street Fin. Corp. of NC 0.35 0.47 1.85 13.51 53.11
SCBS Southern Common. Bncshrs of AL 0.40 0.71 13.51 13.30 64.05
SMBC Southern Missouri Bncshrs of Mo 1.02 1.00 13.30 15.85 101.15
SWBI Southwest Bancshares of IL 1.04 1.46 15.85 15.19 140.80
SVRN Sovereign Bancorp of PA 0.55 0.91 5.96 4.37 147.31
SIFR St. Francis Cap. Corp. of WI 1.53 1.81 23.74 20.89 293.16
SPBC St. Paul Bancorp, Inc. of IL 1.28 1.89 17.16 17.11 196.38
STHO Standard Fin. of Chicago IL (8) 0.68 1.02 16.74 16.72 153.60
SFFO StateFed Financial Corp. of IA 1.05 1.29 19.00 19.00 107.95
SFIN State?? Fin. Corp. of NJ 0.66 1.18 14.03 14.00 133.31
STSA Sterling Finanancial Corp. of WA 0.18 0.86 11.22 9.52 280.93
SFSB SuburbFed Fin. Corp. of IL 1.02 1.67 21.23 21.14 323.39
SBCH Surburban Bancorp. of OH (8) 0.72 1.07 17.56 17.56 150.46
ROSE T R Financial Corp. of NY 1.76 1.54 11.90 11.90 193.08
T?RD TF Financial Corp. of PA 0.79 1.11 17.09 14.90 157.66
</TABLE>
<PAGE>
(continued)
Weekly Thift Market Line - Part One
Prices As of June 20, 1997
<TABLE>
<CAPTION>
Price Change Date
Market Capitilization --------------------------------
------------------------------------ 52 Week (1) % Change From
Shares Market ------------- ---------------
Price/ Outst - Capital - Last Last
Financial Instruction Shares(1) anding ization High Low Week Week
- --------------------- ------------ ---------- ----------- ------ ----- ------ ------
($) (000) ($N11) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed QTC Companies (continued)
- ------
TPMZ Tappan Zee Fin.. Inc. ? 16.50 1,534 25.3 17.37 11.62 16.50 0.00
ESBK The Elmira SB F5B of Elmira NY* 19.25 706 13.6 21.25 14.75 20.50 -6.10
GR7R The Greater New York SB of NY (8)- 21.25 13,678 250.7 21.37 10.12 20.62 3.06
TSBS Tranton SB, FSB MHC of KJ (35,0 19.50 9,037 60.8 20.37 12.37 19.75 -1.27
TRIC Tri- County Bancorp of WY 21.25 609 12.9 21.25 18.00 20.25 $.94
TNIN Twin City Bancorp YN 19.00 853 16.2 19.50 16.00 18.50 2.70
UFRM United FS&LA of Rocky Mount NC 12.00 3,066 36.8 12.00 7.00 12.00 0.00
UART United Fin. Corp. of MT 19.50 1,223 23.8 19.75 18.00 19.25 1.30
YABF Ya. Beach Fred. Fin. Corp 12.84 4,912 63.8 13.25 6.88 13.12 -2.13
VFFC Virginia First Savings of VA (?) 22.62 5,805 131.3 23.00 11.00 22.75 -0.57
NHGB NHG Banc?hares of ? 14.25 1,539 21.9 14.75 11.00 13.75 3.64
HSFS HSFS Financial Corp. of? 13.62 12,530 170.7 13.62 6.75 13.00 4.77
WVFC WVS Financial Corp. of PA 25.75 1,737 44.7 27.25 20.25 25.62 0.51
HRNB Warren Bancorp of Peabody MA 18.00 3,691 66.4 19.00 11.87 18.62 -3.33
WFSL Washington FS & LA of Seattle 27.69 47,444 1,313.7 27.69 17.90 26.50 4.49
? Washington Mutual 62.69 118,248 7,413.3 62.69 28.75 58.50 7.16
? Wayne Bancorp of ?J 19.? 2,168 42.? 19.50 10.75 19.25 .30
NAYN Wayne S & L Co. MHC of OH (47.8) 17.00 2,248 12.2 18.50 12.67 17.00 0.00
WCFB Wbstr Cty FS6 MHC of IA (45.2) 14.75 2,100 14.0 14.75 12.50 14.00 5.36
WEST Webster Financial Corp. ?'. CT 43.87 11,954 524.4 43.87 28.00 43.25 1.43
WEFC Wells Fin. Corp. of MH 14.25 2,024 28.8 16.00 11.37 14.75 -3.39
KCBI WestCo Bancorp of IL 24.25 2,554 61.9 25.12 20.00 24.37 -0.49
NSTR Westerfed Fin. Corp. of Wells MH 20.62 5,551 114.5 21.75 13.87 20.37 1.23
WOFC Western Ohio Fin. Corp. of OH 22.00 2,312 50.9 23.00 19.50 21.25 3.53
WWFC Nestwood Fin. Corp. of OH 18.25 645 11.8 21.25 10.25 21.25 -14.12
WEHD Westwood Innsid Fin. Corp. of OH 13.75 2,843 39.1 14.50 10.37 13.25 3.77
WFCD Winton Financial Corp. of OH 13.12 1,9? 26.1 14.50 11.25 13.12 0.00
FFWD Wood Bancorp of OH 16.97 1,493 25.2 17.25 12.33 17.00 -0.76
YFCB Yonkers Fin. Corp. of NY 16.37 3,190 48.9 15.75 9.50 14.75 4.20
YFED York Financial Corp. of PA 19.?0 6,971 135.9 20.00 14.54 20.00 -2.50
<CAPTION>
Current Per Share Financial
----------------------------------
% Change From Tang(
----------------------------- Trailing 12 No. Book Book
Dec 31, Dec 31, 12 No. Core Value/ Value
1994 (2) 1995 (2) EPS (3) EPS (3) Share Share
----------------------------- -------------- --------- ------- -------
(%) (%) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed QTC Companies (continued)
- ------
TPMZ Tappan Zee Fin.. Inc. ? N.A. 21.15 0.52 0.48 14.00 14.00
ESBK The Elmira SB F5B of Elmira NY* 33.96 5.18 0.89 0.85 19.87 19.02
GR7R The Greater New York SB of NY (8)- 128.25 56.02 0.86 0.74 11.78 11.78
TSBS Tranton SB, FSB MHC of KJ (35,0 N.A. 21.88 0.84 0.74 11.54 10.55
TRIC Tri- County Bancorp of WY N.A. 18.06 1.00 1.30 21.62 21.62
TNIN Twin City Bancorp YN N.A. 10.14 0.70 0.97 15.83 15.83
UFRM United FS&LA of Rocky Mount NC 269.23 41.18 0.19 0.40 6.70 6.70
UART United Fin. Corp. of MT 85.? 1.30 0.94 1.16 19.95 19.95
YABF Ya. Beach Fred. Fin. Corp 173.77 36.02 0.18 0.50 8.29 8.29
VFFC Virginia First Savings of VA (?) ***.** 77.41 1.81 1.66 11.35 10.96
NHGB NHG Banc?hares of ? N.A. 8.61 0.47 0.47 14.00 14.00
HSFS HSFS Financial Corp. of? 87.86 33.66 1.39 1.40 6.05 5.99
WVFC WVS Financial Corp. of PA N.A. 4.59 1.64 2.04 20.50 20.50
HRNB Warren Bancorp of Peabody MA 434.12 20.00 2.02*
WFSL Washington FS & LA of Seattle 89.79 14.94
? Washington Mutual 237.77 44.75
? Wayne Bancorp of ?J N.A. 27.87
NAYN Wayne S & L Co. MHC of OH (47.8) N.A. 4.10
WCFB Wbstr Cty FS6 MHC of IA (45.2) N.A. 7.27
WEST Webster Financial Corp. ?'. CT 364.72 19.37
WEFC Wells Fin. Corp. of MH N.A. 8.61
KCBI WestCo Bancorp of IL 142.50 12.79
NSTR Westerfed Fin. Corp. of Wells MH N.A. 12.99
WOFC Western Ohio Fin. Corp. of OH N.A. 1.15
WWFC Nestwood Fin. Corp. of OH N.A. 10.61
WEHD Westwood Innsid Fin. Corp. of OH N.A. 13.45
WFCD Winton Financial Corp. of OH N.A. 14.09
FFWD Wood Bancorp of OH N.A. -0.76
YFCB Yonkers Fin. Corp. of NY N.A. 19.43
YFED York Financial Corp. of PA 106.35 20.00
</TABLE>
<PAGE>
RP FINANCIAL. LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Weekly Thrift Market Line - Part Two
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
--------------------------------------------------------- -------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings 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(???)
- ------------------------------------------
SAIF - Insured Thrifts(314) 12.93 12.65 0.62 5.27 3.74 0.84 7.32 0.80 126.24 0.83
MYSE Traded Companies(9) 6.02 5.78 0.50 7.79 4.37 0.67 11.62 1.42 69.96 1.38
AMEX Traded Companies(16) 16.86 15.47 0.61 4.61 3.21 0.95 7.23 0.71 120.82 0.74
NASDAQ Listed OTC Companies(287) 12.96 12.69 0.62 5.23 3.75 0.64 7.20 0.79 128.43 0.32
California Companies(24) 7.37 6.76 0.21 3.20 3.01 0.29 5.02 1.75 63.17 1.35
Florida Companies(6) 7.94 7.52 0.90 10.89 4.44 0.82 9.72 1.40 66.01 0.82
Mid-Atlantic Companies(59) 10.65 10.28 0.61 6.15 4.22 0.85 8.79 0.91 97.56 0.95
Mid-West Companies(153) 14.34 14.51 0.65 5.10 3.80 0.89 6.93 0.62 143.41 0.70
New England Companies(11) 8.48 8.08 0.41 5.01 3.80 0.64 8.26 0.74 96.48 1.04
North-West Companies(6) 13.96 13.63 0.79 6.99 3.69 1.05 9.84 0.54 112.30 0.67
South-East Companies(43) 15.49 15.30 0.70 5.13 3.30 0.97 7.09 0.86 133.79 0.89
South-West Companies(6) 11.27 11.10 0.31 1.80 1.38 0.59 5.41 0.88 53.10 0.72
Western Companies (Exc1 CA)(5) 16.78 16.32 0.99 6.61 4.59 1.18 7.75 0.23 299.54 0.73
Thrift Strategy(245) 14.23 13.96 0.63 4.72 3.68 0.88 6.74 0.70 131.92 0.75
Mortage Banker Strategy(39) 7.46 7.05 0.52 7.22 4.19 0.65 9.38 1.12 96.28 1.00
Real Estate Strategy(11) 7.52 7.34 0.44 5.30 3.17 0.72 9.30 1.66 100.42 1.35
Diversified Strategy(14) 7.83 7.68 1.08 13.23 5.43 1.14 14.41 1.36 106.28 1.32
Retail Banking Strategy(5) 11.03 10.86 0.26 2.39 1.19 0.29 2.94 0.76 164.76 1.62
Companies Issuing Dividends(262) 13.09 12.81 0.68 5.78 4.07 0.91 7.82 0.74 126.42 0.79
Companies without Dividends(62) 12.11 11.82 0.32 2.64 1.99 0.49 4.76 1.17 125.29 1.04
Equity/Assets less-than 6 ?/4(26) 4.93 4.60 0.34 6.66 4.41 0.52 10.25 1.20 92.43 1.15
Equity/Assets 6-12 %/4(156) 8.64 8.25 0.56 6.45 4.02 0.75 8.71 0.94 120.21 0.94
Equity/Assets greater-than 12% 4/4(26) 19.10 18.97 0.73 3.72 3.31 1.00 5.25 0.57 139.55 0.65
Converted Last 3 Mtns (no MHC)(5) 27.87 27.72 0.43 1.01 1.23 0.82 3.26 0.67 89.00 0.87
Actively Traded Companies(45) 8.68 8.45 0.71 8.60 5.04 0.94 11.71 1.03 107.39 0.99
Market Value Below $20 Million(68) 15.01 14.93 0.50 2.89 3.03 0.75 4.79 0.82 117.39 0.70
Holding Company Structure(276) 13.52 13.26 0.62 5.17 3.68 0.85 7.20 0.78 125.08 0.81
Assets Over $1 Billion(68) 7.84 7.29 0.65 8.40 4.38 0.83 11.13 1.03 89.59 1.02
Assets $500 Million-$1 Billion(51) 10.36 9.88 0.60 5.94 4.03 0.78 7.69 0.80 160.90 1.03
Assets $250-$500 Million(65) 10.69 10.37 0.56 5.27 3.76 0.81 7.75 0.79 134.75 0.79
Assets less than $250 Million(132) 17.33 17.28 0.64 3.60 3.32 0.89 5.24 0.69 126.37 0.69
Goodwill Companies(129) 8.92 8.32 0.58 6.48 4.21 0.77 8.76 0.88 112.15 0.90
Non-Goodwill Companies(134) 15.61 15.55 0.65 4.50 3.42 0.89 6.37 0.75 136.37 0.79
Acquirors of FSLIC Cases(11) 7.14 6.76 0.54 7.08 4.15 0.80 11.25 1.57 52.89 0.91
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------------- --------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Earning Book Assets Book Earnings Share Yield Ratio(7)
------- ------- ------- ------- -------- ------- ------- -------
(X) (%) (%) (%) (X) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF - Insured Thrifts(314) 20.48 129.51 15.85 132.85 17.88 0.35 1.75 35.97
MYSE Traded Companies(9) 18.06 179.33 10.48 175.77 15.33 0.29 0.84 19.02
AMEX Traded Companies(16) 22.75 116.94 19.22 118.23 19.12 0.38 2.20 43.41
NASDAQ Listed OTC Companies(287) 20.38 128.72 15.80 132.54 17.88 0.35 1.75 36.23
California Companies(24) 17.38 138.72 9.75 136.98 18.11 0.14 0.51 13.08
Florida Companies(6) 17.57 143.80 14.75 162.64 18.77 0.24 0.90 14.70
Mid-Atlantic Companies(59) 20.16 131.48 13.64 136.26 16.50 0.38 1.79 38.72
Mid-West Companies(153) 20.67 123.10 16.64 125.05 17.71 0.35 1.83 36.01
New England Companies(11) 21.24 128.86 10.64 139.71 17.36 0.43 1.74 38.94
North-West Companies(6) 20.26 168.07 19.29 177.70 20.18 0.35 1.44 26.82
South-East Companies(43) 20.96 140.46 20.53 144.18 20.06 0.43 2.14 44.58
South-West Companies(6) 22.34 114.59 12.23 120.85 18.35 0.31 1.53 50.88
Western Companies (Exc1 CA)(5) 20.91 129.03 19.67 135.39 18.56 0.54 2.92 52.58
Thrift Strategy(245) 20.98 121.96 16.76 125.78 18.08 0.37 1.88 38.89
Mortage Banker Strategy(39) 19.05 159.35 11.41 164.97 17.37 0.33 1.28 26.10
Real Estate Strategy(11) 15.12 145.61 10.66 148.09 16.57 0.14 0.89 21.44
Diversified Strategy(14) 18.35 204.63 17.48 201.87 15.32 0.45 1.60 30.22
Retail Banking Strategy(5) 19.42 112.86 12.07 115.13 19.46 0.16 1.29 16.90
Companies Issuing Dividends(262) 20.61 131.19 16.21 134.71 17.86 0.42 2.09 42.70
Companies without Dividends(62) 19.15 120.79 13.97 123.11 18.03 0.00 0.00 0.00
Equity/Assets less-than 6 %/4(26) 17.51 164.62 8.57 168.58 15.33 0.21 0.78 15.93
Equity/Assets 6-12 %/4(156) 19.48 140.31 12.24 146.11 16.49 0.38 1.68 35.39
Equity/Assets greater-than 12 4/4(26) 22.44 111.79 21.14 113.14 20.09 0.36 2.01 41.48
Converted Last 3 Mtns (no MHC)(5) 24.32 94.16 26.34 94.98 22.33 0.00 0.00 0.00
Actively Traded Companies(45) 18.55 163.14 13.55 161.50 15.61 0.49 1.82 32.42
Market Value Below $20 Million(68) 22.46 105.32 15.59 106.16 19.57 0.32 1.94 42.85
Holding Company Structure(276) 20.87 127.67 16.37 130.44 18.08 0.36 1.80 37.33
Assets Over $1 Billion(68) 19.46 165.15 13.09 174.42 16.64 0.45 1.44 29.82
Assets $500 Million-$1 Billion(51) 18.79 140.61 14.45 145.66 17.41 0.34 1.65 39.23
Assets $250-$500 Million(65) 19.81 127.91 13.62 132.56 16.88 0.34 1.80 33.71
Assets less than $250 Million(132) 22.09 110.88 18.75 111.50 19.28 0.33 1.92 39.59
Goodwill Companies(129) 19.66 144.57 12.51 153.16 17.05 0.39 1.68 33.93
Non-Goodwill Companies(134) 21.09 119.48 18.09 119.56 18.46 0.33 1.81 37.70
Acquirors of FSLIC Cases(11) 18.82 161.75 11.16 160.21 15.47 0.37 1.55 30.01
</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 dividend by
(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 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>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 20, 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)
- --------------------- ------ ------ ---------------------- --------------
% % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BFI-Insured Thrifts (no MHCs)
- ----------------------------------------------
BIF-Insured Thrifts(69) 11.90 11.54 0.99 10.36 6.18 1.02 10.47
NYSE Traded Companies(3) 7.97 6.42 0.76 10.56 5.53 0.76 10.88
AMEX Traded Companies(5) 12.93 12.71 0.81 8.54 5.09 0.82 8.81
NASDAQ Listed DTC Companies(61) 12.04 11.73 1.02 10.53 6.33 1.06 10.61
California Companies(3) 8.67 8.65 1.05 12.34 7.64 0.98 11.29
Mid-Atlantic Companies(18) 12.08 11.40 0.79 8.22 4.74 0.91 8.96
Mid-West Companies(2) 25.56 24.11 0.54 2.08 2.00 0.82 3.16
New England Companies(37) 9.08 8.79 1.09 12.84 7.55 1.06 12.41
North-West Companies(4) 10.49 10.42 0.96 8.81 4.96 1.05 10.73
South-East Companies(5) 28.04 28.04 1.06 4.11 3.45 1.17 4.54
Thrift Strategy(45) 13.42 12.99 0.99 9.34 5.87 1.01 9.22
Mortgage Banker Strategy(10) 9.50 9.39 0.77 10.56 5.88 1.00 12.11
Real Estate Strategy(6) 9.04 9.03 1.31 14.63 8.39 1.21 13.51
Diversified Strategy(6) 6.64 6.12 1.06 15.16 7.10 1.13 16.67
Retail Banking Strategy(2) 6.30 6.03 0.28 4.48 4.62 0.27 4.28
Companies Issuing Dividends(55) 11.52 11.12 1.02 10.54 6.35 1.05 10.63
Companies Without Dividends(14) 13.70 13.54 0.82 9.51 5.34 0.88 9.71
Equity/Assets less than 6%(5) 5.36 5.21 0.73 13.16 6.14 0.80 14.66
Equity/Assets 6-12%(45) 8.43 7.93 1.05 12.56 7.41 1.02 12.24
Equity/Assets greater than 12%(19) 21.57 21.47 0.92 4.57 3.34 1.08 5.34
Actively Traded Companies(24) 8.68 8.29 1.10 12.92 7.44 1.09 12.92
Market Value Below $20 million(9) 16.74 16.34 0.75 6.88 4.83 0.85 6.78
Holding Company Structure(45) 13.24 12.90 1.03 9.84 5.81 1.08 10.15
Assets Over $1 Billion (17) 8.88 8.27 0.98 12.28 6.18 1.09 13.31
Assets $500 Million-$1 Billion(16) 10.01 9.49 1.06 11.11 6.74 1.03 10.66
Assets $250-$500 Million (18) 11.17 11.05 0.95 10.38 6.46 0.94 10.20
Assets less than $250 Million (18) 17.16 16.96 0.97 7.85 5.37 1.02 7.90
Goodwill Companies(31) 9.06 8.27 0.86 10.63 6.22 0.93 11.16
Non-Goodwill Companies(37) 14.29 14.29 1.10 10.14 6.14 1.10 9.89
</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)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts (no MHCs)
- ----------------------------------------------
BIF-Insured Thrifts(69) 0.99 122.83 1.47 14.85 148.80 16.58 150.33 15.95
NYSE Traded Companies(3) 2.16 39.24 1.08 18.38 179.90 14.71 162.17 18.40
AMEX Traded Companies(5) 1.08 109.25 1.43 15.06 142.13 16.62 147.18 14.07
NASDAQ Listed DTC Companies(61) 0.91 129.32 1.50 14.56 147.55 16.69 150.16 15.91
California Companies(3) 1.43 74.61 1.40 13.29 142.42 12.25 142.64 14.67
Mid-Atlantic Companies(18) 1.00 117.28 1.44 17.26 153.27 17.45 155.03 17.49
Mid-West Companies(2) 0.74 41.29 0.53 0.00 92.11 23.54 97.66 0.00
New England Companies(37) 1.06 134.22 1.71 13.38 155.16 13.76 157.57 13.83
North-West Companies(4) 0.42 148.23 1.06 17.93 158.27 18.39 158.27 21.37
South-East Companies(5) 0.70 110.74 0.77 19.09 107.97 30.10 107.97 22.40
Thrift Strategy(45) 0.92 126.81 1.37 15.27 142.58 17.71 145.23 16.26
Mortgage Banker Strategy(10) 1.14 118.19 1.58 15.30 161.03 14.75 163.58 15.38
Real Estate Strategy(6) 1.39 91.31 1.82 12.29 160.52 14.53 160.63 13.07
Diversified Strategy(6) 1.03 138.02 1.94 12.47 190.96 13.89 187.64 16.08
Retail Banking Strategy(2) 0.83 76.33 0.80 21.63 96.88 6.10 101.21 22.65
Companies Issuing Dividends(55) 0.89 132.10 1.48 15.17 149.85 16.49 151.58 16.13
Companies Without Dividends(14) 1.48 82.04 1.46 12.67 143.93 17.01 144.95 14.85
Equity/Assets less than 6%(5) 1.59 69.24 1.64 13.64 197.12 12.09 201.03 18.85
Equity/Assets 6-12% (45) 1.12 123.56 1.59 13.78 155.06 13.09 157.47 14.11
Equity/Assets greater than 12%(19) 0.56 136.24 1.16 19.98 125.25 25.79 125.64 20.75
Actively Traded Companies(24) 0.96 127.51 1.60 13.60 159.60 14.14 162.19 14.95
Market Value Below $20 Million(9) 1.30 59.48 1.07 17.06 118.13 18.20 122.27 20.31
Holding Company Structure(45) 0.78 145.29 1.52 15.37 148.52 18.35 151.27 16.60
Assets Over $1 Billion(17) 1.09 118.24 1.58 15.41 182.60 16.64 180.27 16.78
Assets $500 Million-$1 Billion(16) 0.96 132.06 1.56 14.58 150.59 14.87 159.72 15.55
Assets $250-$500 Million(18) 0.91 132.00 1.58 13.66 140.08 14.83 141.79 13.52
Assets less than $250 Million(18) 1.01 110.32 1.19 15.92 125.97 19.76 128.20 17.81
Goodwill Companies(31) 1.23 104.40 1.58 15.10 152.67 13.66 156.89 16.19
Non-Goodwill Companies(37) 0.79 139.94 1.39 14.61 145.67 19.03 145.67 15.73
</TABLE>
<TABLE>
<CAPTION>
Dividend Data(6)
-----------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
- --------------------- ------ ------ --------
($) (%) (%)
<S> <C> <C> <C>
Market Averages. BIF-Insured Thrifts (no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(69) 0.46 1.87 28.10
NYSE Traded Companies(3) 0.33 0.50 10.79
AMEX Traded Companies(5) 0.62 2.61 33.65
NASDAQ Listed DTC Companies(61) 0.45 1.88 28.91
California Companies(3) 0.00 0.00 0.00
Mid-Atlantic Companies(18) 0.45 1.72 34.41
Mid-West Companies(2) 0.00 0.00 0.00
New England Companies(37) 0.51 2.27 29.77
North-West Companies(4) 0.47 1.57 27.23
South-East Companies(5) 0.59 1.71 25.72
Thrift Strategy(45) 0.50 1.99 31.45
Mortgage Banker Strategy(10) 0.33 1.56 10.19
Real Estate Strategy(6) 0.18 1.22 14.28
Diversified Strategy(6) 0.54 1.64 22.19
Retail Banking Strategy(2) 0.64 3.32 71.91
Companies Issuing Dividends(55) 0.56 2.27 34.27
Companies Without Dividends(14) 0.00 0.00 0.00
Equity/Assets less than 6%(5) 0.37 1.14 12.64
Equity/Assets 6-12% (45) 0.50 2.10 27.57
Equity/Assets greater than 12%(19) 0.40 1.52 33.51
Actively Traded Companies(24) 0.51 1.97 26.61
Market Value Below $20 Million(9) 0.30 1.79 36.04
Holding Company Structure(45) 0.48 1.90 27.75
Assets Over $1 Billion(17) 0.54 1.73 22.51
Assets $500 Million-$1 Billion(16) 0.47 1.94 25.88
Assets $250-$500 Million(18) 0.41 1.87 28.51
Assets less than $250 Million(18) 0.43 1.94 34.21
Goodwill Companies(31) 0.52 2.01 28.43
Non-Goodwill Companies(37) 0.41 1.75 27.85
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) RDA (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 c.
(6) Annualized, based on last regular quarter 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>
RP FINANCIAL. LC.
- ---------------------------------------
Financial Service Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 20,1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings
---------------------- --------------------
Financial Institution Assets Assets ROA (S) ROE (S) ROI (S) ROA (S) ROE (S)
- --------------------- ------- ------- -------- -------- -------- -------- -------
(%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Market Averages. NHC Institutions
- ----------------------------------
SAIF - Insured Thrifts (21) 11.58 11.32 0.56 4.91 2.93 0.85 7.72
BIF - Insured Thrifts (2) 9.94 9.94 0.56 6.81 2.65 0.61 6.64
NASDAQ Listed OTC Companies (23) 11.41 11.18 0.56 5.11 2.89 0.83 7.63
Florida Companies (3) 9.42 9.29 0.65 6.87 3.69 0.93 9.78
Mid-Atlantic Companies (10) 12.03 11.57 0.48 3.65 2.21 0.76 6.22
Mid-west Companies (7) 11.68 11.67 0.51 4.76 3.06 0.83 7.88
New England Companies (1) 8.41 8.40 1.10 13.63 5.02 0.88 10.86
South-East Companies (1) 13.23 13.29 0.75 6.48 3.39 1.06 9.13
Thrift Strategy (21) 11.57 11.33 0.53 ?.66 2.78 0.32 7.46
Diversified Strategy (1) 8.41 8.40 1.10 13.63 5.02 0.88 10.86
Companies Issuing Dividends (22) 11.19 10.95 0.57 5.25 2.95 0.84 7.85
Companies Without Dividends (1) 15.66 15.65 0.37 2.35 ?.73 0.54 3.43
Equity/Assets 6-12 1/2 (15) 9.10 8.86 0.47 5.41 2.91 0.76 8.39
Equity/Assets greater than 12 1/2 (?) 15.70 15.50 0.72 4.55 2.85 0.96 6.22
Actively Traded Companies (1) 9.19 8.15 0.51 5.44 2.88 0.90 9.61
Holding Company Structure (1) 9.19 9.15 0.51 5.44 2.88 0.90 9.61
Assets Over $1 Billion (6) 8.69 9.08 0.70 7.95 3.60 0.92 10.32
Assets $500 Million-St Billion (4) 12.23 11.73 0.75 5.66 3.55 0.92 7.10
Assets $250- $500 Million (4) 9.95 9.94 0.52 5.65 3.60 0.83 9.07
Assets less than $250 Million (10) 13.54 13.54 0.41 2.86 1.84 0.73 5.42
Goodwill Companies (9) 9.63 9.06 0.71 7.06 3.46 0.89 9.20
Non-Goodwill Companies (14) 12.60 12.60 0.46 3.81 2.51 0.78 6.58
MHC Institutions (23) 11.41 11.18 0.56 5.11 2.89 0.83 7.63
MHC Converted Last 3 Months (2) 13.83 13.83 0.32 2.35 1.75 0.59 4.36
<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) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. NHC Institutions
- ---------------------------------
SAIF - Insured Thrifts (21) 0.52 165.73 0.76 23.79 158.61 18.04 163.48 21.49
BIF - Insured Thrifts (2) 1.85 84.60 1.87 19.92 155.32 19.64 155.32 25.00
NASDAQ Listed OTC Companies (23) 0.66 156.19 0.88 23.24 158.43 18.20 163.05 21.69
Florida Companies (3) 0.45 120.09 0.78 23.66 174.24 16.04 177.59 19.38
Mid-Atlantic Companies (10) 0.88 177.29 0.99 25.22 156.23 18.59 164.67 22.52
Mid-west Companies (7) 0.36 150.22 0.63 15.49 155.27 17.86 155.54 21.61
New England Companies (1) 0.91 125.48 1.68 19.92 0.00 21.45 0.00 25.00
South-East Companies (1) 0.00 0.00 1.01 29.50 149.82 19.91 149.82 20.92
Thrift Strategy (21) 0.65 158.11 0.83 23.79 158.43 18.03 163.05 21.49
Diversified Strategy (1) 0.91 125.48 1.68 19.92 0.00 21.45 0.00 25.00
Companies Issuing Dividends (22) 0.66 163.85 0.89 23.24 159.69 18.0? 164.56 21.69
Companies Without Dividends (1) 0.74 33.56 0.66 0.00 135.85 21.26 135.85 0.00
Equity/Assets 6-12 1/2 (15) 0.73 110.98 1.00 21.99 164.04 15.45 170.02 20.36
Equity/Assets greater than 12 1/2 (?) 0.50 303.10 0.62 26.36 148.82 23.30 151.09 24.13
Actively Traded Companies (1) 0.58 93.31 1.05 0.00 184.62 16.97 208.33 19.67
Holding Company Structure (1) 0.58 93.31 1.05 0.00 184.62 16.97 208.33 19.67
Assets Over $1 Billion (6) 0.70 115.46 1.20 22.76 186.51 17.37 203.72 20.74
Assets $500 Million-St Billion (4) 0.55 67.73 0.57 24.71 156.34 19.32 162.07 22.82
Assets $250- $500 Million (4) 0.29 365.36 0.61 15.49 157.94 15.53 158.34 19.11
Assets less than $250 Million (4) 0.94 82.65 0.94 29.50 145.43 19.63 145.43 24.04
Goodwill Companies (9) 0.59 122.21 0.95 22.87 179.09 17.95 191.62 21.90
Non-Goodwill Companies (14) 0.72 186.39 0.83 23.73 146.38 18.36 146.38 21.52
MHC Institutions (23) 0.66 156.19 0.88 23.24 158.43 18.20 163.05 21.69
MHC Converted Last 3 Months (2) 0.71 33.56 0.66 0.00 134.05 18.57 134.05 25.00
<CAPTION>
Dividend Data (6)
---------------------------------------
Ind. Divi.
Divi./ dend Payout
Financial Institution Share Yield Ratio (7)
- --------------------- ----------- ----------- ----------
($) (%) (%)
<S> <C> <C> <C>
Market Averages. NHC Institutions
- ---------------------------------
SAIF - Insured Thrifts (21) 0.66 3.16 54.10
BIF - Insured Thrifts (2) 0.52 2.65 50.38
NASDAQ Listed OTC Companies (23) 0.65 3.11 53.63
Florida Companies (3) 1.03 3.90 72.54
Mid-Atlantic Companies (10) 0.39 2.24 42.09
Mid-west Companies (7) 0.70 3.85 68.88
New England Companies (1) 0.57 2.53 50.38
South-East Companies (1) 1.10 4.75 0.00
Thrift Strategy (21) 0.64 3.14 54.10
Diversified Strategy (1) 0.67 2.53 50.38
Companies Issuing Dividends (22) 0.68 3.27 61.29
Companies Without Dividends (1) 0.00 0.00 0.00
Equity/Assets 6-12 1/2 (15) 0.64 2.95 64.56
Equity/Assets greater than 12 1/2 (?) 0.56 3.39 20.83
Actively Traded Companies (1) 0.48 2.00 69.57
Holding Company Structure (1) -0.48 2.00 69.57
Assets Over $1 Billion (6) 0.69 2.56 62.41
Assets $500 Million-St Billion (4) 0.68 3.35 41.67
Assets $250- $500 Million (4) 0.69 3.49 68.28
Assets less than $250 Million (4) 0.58 3.18 0.00
Goodwill Companies (9) 0.63 2.59 60.31
Non-Goodwill Companies (14) 0.65 3.46 33.58
MHC Institutions (23) 0.65 3.11 53.63
MHC Converted Last 3 Months (2) 0.15 1.15 0.00
</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 date 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 c
(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>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
------------------------------------------------------------- -------------------------
Tang-
Equity/ Equity/ Reported Earnings Core Earnings 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>
MYSE Traded Institution
- -----------------------
AHM Ahsanson and Co. H.F. of CA 3.94 3.32 0.29 6.90 2.99 0.57 13.71 2.06 38.66 1.24
CSA Coast Savings Financial of CA 4.56 4.89 0.16 3.19 1.59 0.50 10.09 1.34 71.08 1.37
CFA Commercial Federal Corp, of ME 5.92 5.27 0.64 10.85 5.31 0.91 15.46 1.01 70.83 0.95
DME Dime Bancorp, Inc. of NY 5.71 5.65 0.58 10.88 5.63 0.73 13.89 2.36 23.73 0.94
DSL Downey Financial Corp of CA 7.30 7.?9 0.45 5.74 3.61 0.76 9.71 1.11 50.35 0.62
FAC First Republic Bancorp of CA 7.41 7.41 0.66 10.90 6.42 0.59 9.72 1.28 65.82 0.95
FED FirstFed Fin. Corp of CA 4.73 4.66 0.24 5.24 3.10 0.48 10.?2 1.74 110.91 2.53
GLN Glendale Fed. Bk, SEB of CA 5.66 5.26 0.22 3.99 2.56 0.55 10.01 1.66 64.79 1.45
GDN Golden West Fin. Corp. of CA 6.27 6.27 1.01 15.83 8.86 1.24 19.41 1.44 37.62 0.68
GWF Great Western Fin. Corp. of CA(8) 5.64 5.00 0.21 3.73 1.20 0.66 11.65 1.28 58.56 1.02
GPT Greatpoint Fin. Corp. of NY 10.91 6.19 1.06 9.91 4.66 0.96 9.05 2.94 28.16 1.36
WES Westcorp Inc. of Orange CA 9.30 9.36 0.99 10.58 5.93 0.39 4.15 1.02 115.45 2.20
AMEX Traded Companies
- ---------------------
AHA ????lana Banshares of LA 17.81 17.81 0.31 2.70 1.50 0.33 2.79 0.51 192.62 1.37
BKC American Bank of Waterbury, CT 7.07 7.62 1.27 16.70 8.51 1.10 13.16 1.97 44.68 1.43
BFD BostonFed Bancorp of MA 8.90 8.59 0.48 4.34 3.62 0.65 5.97 0.63 91.43 0.71
CFX CFX Corp of NH 7.67 7.15 0.90 10.59 5.19 1.12 13.18 0.61 147.62 1.34
CZF Citisave Fin. Corp. of LA(9) 16.62 16.62 0.50 3.00 1.98 0.77 4.58 0.20 46.05 0.15
CBK Citizens First Fin. Corp. of IL 14.64 14.64 0.27 1.98 1.56 0.58 4.19 0.54 35.90 0.24
ESX Essex Bancorp of MA(8) 0.07 -0.05 -3.47 NM NM -1.73 NM 3.23 40.63 1.50
FCB Falmouth Co-Op Bank of MA 24.45 24.45 0.85 3.46 3.20 0.32 3.32 0.02 NA 1.06
FAB FirstFed America Bancorp of MA 12.47 12.47 -0.27 -3.69 -1.65 0.42 5.80 NA NA 1.06
GAF GA Financial Corp, of PA 17.26 17.08 1.07 5.21 4.07 1.15 6.57 0.12 136.73 0.48
KNK Kankakee Bancorp, Inc. of NY 10.68 10.00 0.61 5.97 5.21 0.18 7.67 1.06 64.54 1.01
KYF Kentucky First Bancorp of KY 16.11 16.11 0.90 3.99 4.82 1.06 5.27 0.14 296.31 0.77
NYB New York Bancorp, Inc of NY 6.06 5.05 1.31 24.82 6.88 1.55 29.28 1.29 48.39 1.01
POB Piedmont Bancorp of NC 16.97 16.97 -0.31 -1.27 -1.35 0.79 3.28 0.91 71.22 0.80
PLE Pinnacle Bank of AL 7.73 7.43 0.58 7.39 5.90 0.88 11.08 1.53 39.16 0.87
SSB Scotland Bancorp of NC 36.88 36.88 1.46 4.01 3.38 1.78 4.88 NA NA 0.50
SZB SouthFirst Banshares of AL 13.98 13.98 0.05 0.31 0.33 0.27 1.89 0.64 44.97 0.40
SRN Southern Banc Company of AL 16.83 16.64 0.22 1.14 1.28 0.57 3.00 NA NA NA
SSM Stone Street Bancorp of NC 35.86 35.85 1.67 4.76 3.63 1.94 5.52 0.18 274.87 0.62
TSH Teche Holding Company of LA 13.30 13.30 0.73 5.04 4.28 1.01 6.94 0.27 303.33 0.97
FTF Texakand Fst. Fin. Corp. of AR 16.03 16.03 1.39 7.83 6.94 1.72 9.71 0.47 144.57 0.82
THR Three Rivers Fin. Corp. of ?? 14.43 14.42 0.54 3.58 3.43 0.81 5.36 1.21 44.02 0.80
TBK Tolland Banc of CT 6.73 6.52 0.69 10.81 7.06 0.75 11.61 2.31 52.07 1.95
WSB Washington SB, FSA of MD 8.32 8.32 0.51 6.16 5.90 0.74 8.96 NA NA 0.90
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 7.97 7.79 0.24 2.95 2.89 0.03 0.42 0.71 51.00 0.55
AFED AFSALA Bancorp, Inc. of NY 13.68 13.68 0.59 4.34 4.14 0.59 4.34 NA NA NA
ALBK ALBANK Fin, Corp. of Albany NY 9.20 7.98 0.81 8.74 5.45 1.01 10.91 0.92 78.02 0.98
AMFC AMB Financial Corp. of IN 16.30 16.30 0.69 3.72 3.93 0.87 4.67 0.58 64.22 0.50
ASBP ASB Financial Corp. of OH 15.73 15.73 0.60 3.01 3.25 0.88 4.40 1.58 50.98 1.23
ABBK Abington Savings Bank of MA(8) 6.87 6.16 0.77 11.55 7.92 0.67 10.04 0.30 133.04 0.64
AABC Access Anytime Bancorp of MA 6.80 6.80 -0.59 -11.49 - 9.91 -0.23 -4.44 1.59 26.30 0.94
AFBC Advance Fin. Bancorp of WV 15.45 15.45 0.39 3.45 2.46 0.79 7.00 0.37 89.84 0.40
AADV Advantage Bancorp of WI 8.83 8.19 0.35 3.80 2.77 0.86 9.43 0.56 102.27 1.01
AFCA Affiliated Cana BC, Inc of MA 9.77 9.71 0.93 9.45 5.95 1.07 10.81 0.46 163.49 1.19
ALBC Albion Banc Corp. of Albion NY 8.90 8.90 0.09 0.93 1.00 0.38 3.93 NA NA 0.65
ABCL Allied Bancorp of IL 9.31 9.19 0.42 4.88 2.11 0.71 8.21 0.18 236.73 0.50
<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) ($) (%) (%)
MYSE Traded Institution
- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahsanson and Co. H.F. of CA NM 247.35 9.73 NM 16.83 0.88 1.87 62.41
CSA Coast Savings Financial of CA NM 196.16 9.72 198.96 19.91 0.00 0.00 0.00
CFA Commercial Federal Corp, of ME 18.84 197.47 11.69 221.89 13.20 0.28 0.28 14.07
DME Dime Bancorp, Inc. of NY 18.10 189.81 10.83 191.53 14.18 0.00 0.00 0.00
DSL Downey Financial Corp of CA 27.68 155.21 11.33 157.52 16.37 1.38 1.38 38.10
FAC First Republic Bancorp of CA 15.58 132.72 9.84 132.80 17.48 0.00 0.00 0.00
FED FirstFed Fin. Corp of CA NM 165.69 7.83 167.87 16.20 0.00 0.00 0.00
GLN Glendale Fed. Bk, SEB of CA NM 146.56 8.29 157.58 15.56 0.00 0.00 0.00
GDN Golden West Fin. Corp. of CA 11.29 173.62 10.88 173.62 9.20 0.44 0.60 6.78
GWF Great Western Fin. Corp. of CA(8) NM NM 18.01 NM 26.79 1.00 1.79 NM
GPT Greatpoint Fin. Corp. of NY 21.48 217.18 23.47 NM 23.54 1.00 1.51 32.56
WES Westcorp Inc. of Orange CA 14.42 152.56 14.32 152.94 NM 0.40 2.13 30.77
AMEX Traded Companies
- ---------------------
AHA ????lana Banshares of LA NM 112.35 20.01 112.35 NM 0.36 1.86 NM
BKC American Bank of Waterbury, CT 11.75 174.10 13.88 182.14 13.55 1.44 4.06 47.68
BFD BostonFed Bancorp of MA 27.64 125.91 11.21 130.46 20.10 0.28 1.58 43.75
CFX CFX Corp of NH 19.28 176.78 13.56 189.54 15.49 0.38 4.86 NM
CZF Citisave Fin. Corp. of LA(9) NM 156.37 26.99 156.37 NM 0.40 1.98 NM
CBK Citizens First Fin. Corp. of IL NM 112.60 16.49 112.60 NM 0.00 0.00 0.00
ESX Essex Bancorp of MA(8) NM NM 0.66 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA NM 107.12 26.19 107.12 NM 0.20 1.23 38.46
FAB FirstFed America Bancorp of MA NM 121.17 15.11 121.17 NM 0.00 0.00 NM
GAF GA Financial Corp, of PA 24.60 137.65 23.76 139.06 19.53 0.10 2.11 61.95
KNK Kankakee Bancorp, Inc. of NY 19.21 112.67 12.03 120.33 14.95 0.48 1.66 31.79
KYF Kentucky First Bancorp of KY 20.75 101.29 16.32 101.29 15.71 0.50 4.55 NM
NYB New York Bancorp, Inc of NY 14.54 NM 17.93 NM 12.32 0.60 1.73 25.10
POB Piedmont Bancorp of NC NM 141.86 24.07 141.86 28.81 0.40 3.86 NM
PLE Pinnacle Bank of AL 16.96 123.24 9.53 127.35 11.31 0.80 3.74 63.49
SSB Scotland Bancorp of NC 29.55 118.27 43.38 118.27 24.25 0.30 1.86 54.55
SZB SouthFirst Banshares of AL NM 95.58 13.36 95.58 NM 0.50 3.31 NM
SRN Southern Banc Company of AL NM 103.26 17.38 104.42 29.74 0.35 2.35 NM
SSM Stone Street Bancorp of NC 27.53 131.52 47.15 131.52 23.70 0.45 1.65 45.46
TSH Teche Holding Company of LA 23.36 122.72 16.33 122.72 16.99 0.50 2.68 62.50
FTF Texakand Fst. Fin. Corp. of AR 14.40 122.45 19.63 122.45 11.61 0.45 2.50 36.00
THR Three Rivers Fin. Corp. of ?? 29.17 102.61 14.85 103.01 19.44 0.36 2.25 66.67
TBK Tolland Banc of CT 14.16 140.28 9.44 144.74 13.19 0.20 1.05 14.81
WSB Washington SB, FSA of MD 16.94 103.75 8.63 103.75 11.67 0.10 1.90 32.26
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN NM 101.06 8.05 103.35 NM 0.40 1.27 43.96
AFED AFSALA Bancorp, Inc. of NY 24.18 104.98 14.36 104.98 24.18 0.16 1.08 26.23
ALBK ALBANK Fin, Corp. of Albany NY 18.35 158.61 14.60 182.87 14.69 0.60 1.51 27.65
AMFC AMB Financial Corp. of IN 25.45 97.97 15.97 97.97 20.29 0.24 1.71 43.64
ASBP ASB Financial Corp. of OH NM 120.00 18.87 120.00 21.05 0.40 3.33 NM
ABBK Abington Savings Bank of MA(8) 12.63 139.98 9.62 156.25 14.53 0.40 1.60 20.20
AABC Access Anytime Bancorp of MA NM 90.69 6.17 90.69 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 96.54 14.91 96.54 20.07 0.32 2.25 NM
AADV Advantage Bancorp of WI NM 139.68 12.34 150.75 14.55 0.40 1.03 37.04
AFCA Affiliated Cana BC, Inc of MA 16.81 152.69 14.91 153.66 14.68 0.48 1.97 33.10
ALBC Albion Banc Corp. of Albion NY NM 93.14 8.29 93.14 23.66 0.31 1.41 NM
ABCL Allied Bancorp of IL NM 130.27 12.13 131.99 28.18 0.65 2.18 NM
</TABLE>
<PAGE>
RP FINANCIAL L.C.
- --------------------------------------------
Financial Services Industry Consultants
1700 Notrth Moore Street, Suite 2210
Arlington, Virginia 22309
(703) 529-1700
(CONTINUED)
WEEKLY THRIFT MARKET LINE - PART TWO
PRICES AS OF JUNE, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
--------------------------------------------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
- --------------------- ------- ------- ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed DTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ATSB Antrust Capital Corp. of IN 10.17 10.06 0.29 2.88 3.17 0.19 1.87
AIICI Ambank Holding Co., Inc. of NY 12.72 12.72 -0.62 -4.16 -4.06 -0.52 -4.16
ASBI American Bancorp of IN 10.56 10.84 0.60 6.40 4.67 0.36 7.77
AFFFZ American First Fin. ? CA (8) 2.29 8.16 1.42 19.23 13.45 1.74 23.53
AMFB American Federal Bank of SC (8) 8.99 8.38 1.10 13.34 4.25 1.37 16.50
AMBK American Flat-l Bancorp of MO 9.15 9.15 0.16 1.44 1.18 0.54 5.14
ABCW Anchor Bancorp Winconsin of M? 6.25 6.13 0.76 12.01 6.08 0.99 15.69
ANDB Andover Bancorp, Inc. of MA 8.07 8.07 1.09 14.05 8.58 1.13 14.50
ASFC Astoria Financial Corp. of NY 7.60 6.32 0.52 6.54 3.88 0.17 9.68
AVND Avondale Fin. Corp. of IL 8.25 8.25 -3.71 -7.35 -8.71 -1.34 -13.86
BKCT Bancorp Connecticut of CT 10.40 10.40 1.26 11.92 7.88 1.20 11.39
BPLS Bank Plus Corp. of CA 4.92 4.91 -0.36 -6.90 -6.30 -0.04 -0.77
BWFC Bank Nest Fin. Corp. of MI 15.30 15.30 0.74 4.25 4.21 0.53 3.03
BANC BankAtlantic Bancorp of FL 5.51 4.48 0.92 14.32 7.86 0.71 11.10
BKUNA BankUnited SA FL 4.46 3.59 0.18 3.57 2.18 0.35 6.97
BKCD Bankers Corp. of ? 7.78 7.65 1.10 13.28 7.89 1.18 14.19
BVCC Bay View Capital Corp. of CA 6.31 6.07 3.38 6.12 1.53 0.64 10.36
BFSB ? ? of? 14.32 14.32 1.05 7.12 5.59 1.35 9.09
BFFC Big Foot Fin. Corp. of IL 15.96 16.93 0.05 3.29 0.25 0.42 2.45
BSBC Branford ? of CT 9.54 9.54 1.24 12.65 8.61 1.11 12.24
BYFC Broadway Fin. Corp of CA 10.87 10.87 -1.24 -2.42 -2.88 0.12 1.25
CBCC CB Bancorp of Michigan City ?(9) 8.83 8.83 1.00 10.68 5.15 1.17 12.50
CBES CBES Bancorp of MO 18.39 18.39 0.77 6.22 4.09 0.96 6.51
CCFH CCF Holding Company of CA 14.32 14.32 0.26 1.47 1.56 0.43 2.41
CENF CENFED Financial Corp. of CA 5.10 5.09 0.49 9.61 5.62 0.72 14.11
CFSB CFSB Bancorp of Lansing MI 7.63 7.63 0.75 9.50 5.03 1.00 12.75
CKFB CKF Bancorp of Danville KY 23.68 23.68 1.31 5.12 4.36 1.29 5.05
CNSB CNS Bancorp of MO 24.82 24.82 0.53 2.41 1.88 0.81 3.66
CSBF CSB Financial Group Inc of IL 25.56 24.11 0.54 2.08 2.00 0.82 3.16
CFNC California Fin. ? Co. of CA(3) 8.96 6.93 0.53 8.00 5.00 0.82 12.26
CBCI Calumes Bancorp of Chicargo IL 15.94 15.94 1.11 6.86 6.30 1.44 8.87
CAFI Canco Fin. Corp. of OR 9.69 8.92 0.75 8.54 5.50 0.88 10.01
CHAN Cameron Fin. Corp. of FO 22.95 22.95 1.12 4.46 4.60 1.39 5.56
CAPS Capital Savings Bancorp of MO 8.66 8.66 0.65 7.16 4.63 0.92 10.23
CFNC Coralina Fincorp of NC 23.71 23.71 1.11 4.65 4.52 1.05 4.36
CNY Curver Bancorp, Inc. of NY 8.06 7.72 -0.47 -5.07 -6.20 -0.03 -0.33
CASB Csacade SB of Everest ? 6.17 6.17 0.46 7.46 4.11 0.58 9.42
CATB Catskill Fin. Corp. of NY 25.98 26.98 1.42 6.14 5.42 1.44 6.22
CNIT Cenit Bancorp of Nerfolk VA 7.02 6.40 0.74 10.48 7.12 0.68 9.75
CEBK Central Co-Op. Bank of MA 10.26 9.11 0.59 5.92 5.30 0.66 6.66
CENB Century Bancshares of NC 29.93 29.93 1.76 5.86 6.22 1.78 5.93
CBSB Charter Financial Inc. of IL 14.13 12.40 0.97 5.94 4.92 1.22 7.50
COFI Charter One Financial of ? 6.78 6.30 0.97 14.40 5.65 1.23 18.30
CHBA Chester Bancorp of IL 22.21 22.21 1.09 4.90 4.79 1.09 4.90
CVAL Chester Valley Bancorp of PA 8.56 8.56 0.63 7.00 4.14 0.92 10.30
CTZN CitFed Bancorp of Dayton DH 6.33 5.64 0.55 8.47 4.69 0.79 12.27
CLAS Classic Bancshares of KY 14.92 12.53 0.42 2.06 2.11 0.71 3.43
? Cmnwealth Bancorp of PA 9.57 7.35 0.56 5.44 3.97 0.72 7.00
COVB CoVest Bancshares of IL 6.94 3.51 0.16 1.78 1.70 0.43 4.89
CBSA Coastal Bancorp of Houston TX 3.42 2.89 0.26 7.87 5.18 0.44 13.15
CFCP Coastal Fin. Corp. of SC 6.10 6.10 0.90 14.88 3.87 0.99 16.14
COFO Collective Bancorp Inc. of NJ(8) 7.00 6.33 0.94 13.56 5.31 1.15 16.49
CMSV Comnty. Svgs. MHC of FL (48.5) 11.23 11.23 0.63 5.41 3.82 0.55 8.21
CB?H Community Bankshares Inc. of HH(3) 7.13 7.13 0.93 13.02 5.51 0.95 10.52
CFTP Community Fed. Bancorp of HS 33.52 33.52 1.43 4.31 3.86 1.70 5.13
CFFC Community Fin. Corp. of VA 13.78 13.78 1.04 7.50 5.32 1.31 9.44
<CAPTION>
Asset Quality Ratios Pricing Ratios
---------------------------- -----------------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earnings Book Assets Book Earnings
- --------------------- ------ ------ ----- -------- ------ ------ ------ --------
(%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed DTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATSB ? Capital Corp. of IN 2.84 23.48 0.93 KM 91.92 9.35 92.93 NN
AIICI ? Holding Co., Inc. of NY 1.06 72.94 1.47 KM 115.52 14.70 115.52 NN
ASBI American Bancorp of IN 0.43 63.58 0.38 21.41 116.82 12.67 116.90 14.89
AFFFZ American First Fin. ? CA (8) 0.41 80.65 0.50 7.44 131.96 10.89 133.47 6.08
AMFB American Federal Bank of SC (8) 0.44 193.22 1.30 23.52 NM 26.81 NN 19.01
AMBK American Flat-l Bancorp of MO NA NA 1.17 KM 130.74 11.97 130.74 23.71
ABCW Anchor Bancorp Winconsin of M? 0.75 161.56 1.53 16.45 194.33 12.15 198.18 12.59
ANDB Andover Bancorp, Inc. of MA 1.14 89.41 1.41 11.65 154.91 12.49 154.91 11.30
ASFC ? Financial Corp. of NY 0.52 35.00 0.60 25.77 166.83 12.60 199.30 17.41
AVND Avondale Fin. Corp. of IL 1.66 194.83 5.35 NM 94.09 7.77 94.09 NM
BKCT Bancorp Connecticut of CT 1.11 108.02 1.98 12.69 151.70 15.78 151.70 13.28
BPLS Bank Plus Corp. of CA 3.22 49.87 1.96 NM 112.61 5.54 112.87 NN
BWFC Bank Nest Fin. Corp. of MI 0.03 458.70 0.20 23.73 110.94 16.98 110.94 NN
BANC BankAtlantic Bancorp of FL 0.78 120.47 1.40 12.72 171.57 9.45 211.06 16.42
BKUNA BankUnited SA FL 0.74 26.73 0.24 NM 131.24 5.86 163.33 23.46
BKCD Bankers Corp. of ? 1.20 23.83 0.46 12.68 161.89 12.60 164.57 11.87
BVCC Bay View Capital Corp. of CA 0.79 115.33 1.20 28.32 179.74 11.34 189.06 16.74
BFSB ? ? of? 0.63 77.52 0.57 17.89 125.83 18.02 125.83 14.02
BFFC Big Foot Fin. Corp. of IL 0.09 151.52 0.34 NM 111.58 18.94 111.58 NN
BSBC Branford ? of CT 1.94 112.22 3.09 15.13 181.78 17.34 181.78 15.63
BYFC Broadway Fin. Corp of CA 2.42 41.50 1.19 NM 76.39 8.20 75.39 NN
CBCC CB Bancorp of Michigan City ?(9) 2.90 27.47 1.98 19.43 198.55 17.54 198.55 16.60
CBES CBES Bancorp of MO 0.77 54.05 0.46 28.45 98.77 18.16 98.77 19.62
CCFH CCF Holding Company of CA 0.34 189.90 0.79 NM 111.19 15.92 111.19 HN
CENF CENFED Financial Corp. of CA 1.40 51.06 1.03 17.80 163.26 8.33 163.59 12.13
CFSB CFSB Bancorp of Lansing MI 0.10 566.80 0.62 19.87 188.72 14.40 188.72 14.81
CKFB CKF Bancorp of Danville KY 1.48 12.02 0.20 22.92 125.16 29.64 125.16 23.19
CNSB CNS Bancorp of MO 0.45 80.36 0.57 NH 112.02 27.80 112.02 NM
CSBF CSB Financial Group Inc of IL 0.74 41.29 0.53 NH 92.11 23.54 97.66 NM
CFNC California Fin. ? Co. of CA(3) 1.04 54.70 0.77 20.01 154.19 10.73 154.84 13.05
CBCI Calumes Bancorp of Chicargo IL 1.40 84.90 1.54 15.86 112.12 17.87 112.12 12.27
CAFI Canco Fin. Corp. of OR 0.68 38.86 0.32 18.18 120.40 11.67 130.81 15.52
CHAN Cameron Fin. Corp. of ? 0.60 135.41 0.95 21.75 99.00 22.72 99.00 17.45
CAPS Capital Savings Bancorp of MO 0.26 116.53 0.38 21.58 152.62 13.22 152.62 15.11
CFNC Coralina Fincorp of NC 0.28 133.67 0.54 22.11 103.23 24.48 103.23 23.56
CNY Curver Bancorp, Inc. of NY 1.53 34.62 1.12 NM 82.99 6.69 86.69 NM
CASB Csacade SB of Everest ? 0.59 142.60 1.02 24.34 174.69 10.79 174.69 19.27
CATB Catskill Fin. Corp. of NY 0.50 133.79 1.47 18.45 105.44 28.45 105.44 18.21
CNIT Cenit Bancorp of Nerfolk VA 0.65 85.28 0.87 14.04 147.11 10.32 161.35 15.06
CEBK Central Co-Op. Bank of MA 1.67 53.48 1.24 18.88 106.97 10.38 120.58 16.78
CENB Century Bancshares of NC 0.39 139.39 0.91 16.07 94.20 28.20 94.20 15.88
CBSB Charter Financial Inc. of IL 0.51 114.56 0.80 20.31 129.05 18.23 147.07 16.09
COFI Charter One Financial of ? 0.32 147.01 0.77 17.71 248.42 16.83 NM 13.93
CHBA Chester Bancorp of IL 0.25 107.12 0.70 20.86 102.14 22.68 102.14 20.86
CVAL Chester Valley Bancorp of PA 0.47 187.15 1.10 24.14 165.09 14.13 165.09 16.41
CTZN CitFed Bancorp of Dayton DH 0.45 128.08 0.99 21.34 173.97 11.01 195.32 14.73
CLAS Classic Bancshares of KY 0.91 68.31 0.99 NM 98.34 14.68 117.09 28.50
? Cmnwealth Bancorp of PA 0.42 106.34 0.86 25.18 132.96 12.72 173.13 19.55
COVB CoVest Bancshares of IL 0.23 118.11 0.43 HM 111.55 9.97 117.06 21.47
CBSA Coastal Bancorp of Houston TX 0.65 37.23 0.56 19.30 146.38 5.01 173.30 11.55
CFCP Coastal Fin. Corp. of SC 0.26 350.59 1.14 25.84 NM 22.01 NM 23.47
COFO Collective Bancorp Inc. of NJ(8) 0.40 60.69 0.47 18.82 244.15 17.09 NM 15.48
CMSV Comnty. Svgs. MHC of FL (48.5) 0.57 66.20 0.64 26.20 139.69 15.69 139.69 17.26
CB?H Community Bankshares Inc. of HH(3) 0.61 115.48 1.01 18.15 224.70 16.03 224.70 22.47
CFTP Community Fed. Bancorp of HS 0.35 79.45 0.47 25.91 109.24 36.62 109.24 21.75
CFFC Community Fin. Corp. of VA 0.35 180.62 0.70 17.18 124.65 17.17 124.65 13.64
<CAPTION>
Dividend Data(6)
---------------------------
Ind. Divi-
Div./ dend Payout
? Yield Ratio(7)
------- -------- ---------
($) (%) (%)
Financial Institution
- ---------------------
NASDAQ Listed DTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C>
ATSB ? Capital Corp. of IN 0.20 1.58 50.00
AIICI ? Holding Co., Inc. of NY 0.00 0.00 NM
ASBI American Bancorp of IN 0.50 3.85 NM
AFFFZ American First Fin. ? CA (8) 1.60 4.04 30.08
AMFB American Federal Bank of SC (8) 0.48 1.51 35.58
AMBK American Flat-l Bancorp of MO 0.12 0.74 63.16
ABCW Anchor Bancorp Winconsin of M? 0.66 1.12 18.42
ANDB Andover Bancorp, Inc. of MA 0.68 2.32 25.98
ASFC ? Financial Corp. of NY 0.60 1.32 13.90
AVND Avondale Fin. Corp. of IL 0.00 0.00 ?
BKCT Bancorp Connecticut of CT 0.99 3.45 43.78
BPLS Bank Plus Corp. of CA 0.00 0.00 NM
BWFC Bank Nest Fin. Corp. of MI 0.26 2.00 47.46
BANC BankAtlantic Bancorp of FL 0.12 0.85 10.81
BKUNA BankUnited SA FL 0.00 0.00 0.00
BKCD Bankers Corp. of ? 0.64 2.47 31.37
BVCC Bay View Capital Corp. of CA 0.32 1.20 31.04
BFSB ? ? of? 0.56 2.70 46.28
BFFC Big Foot Fin. Corp. of IL 0.00 0.00 0.00
BSBC Branford ? of CT 0.08 1.71 25.81
BYFC Broadway Fin. Corp of CA 0.20 1.86 NM
CBCC CB Bancorp of Michigan City ?(9) 0.00 0.00 0.00
CBES CBES Bancorp of MO 0.40 2.37 57.87
CCFH CCF Holding Company of CA 0.50 2.13 NM
CENF CENFED Financial Corp. of CA 0.33 1.01 17.93
CFSB CFSB Bancorp of Lansing MI 0.60 2.58 51.28
CKFB CKF Bancorp of Danville KY 0.44 2.29 52.38
CNSB CNS Bancorp of MO 0.20 1.21 64.42
CSBF CSB Financial Group Inc of IL 0.00 0.00 0.00
CFNC California Fin. ? Co. of CA(3) 0.44 1.49 29.73
CBCI Calumes Bancorp of Chicargo IL 0.00 0.00 0.00
CAFI Canco Fin. Corp. of OR 0.52 2.89 52.53
CHAN Cameron Fin. Corp. of ? 0.28 1.67 36.36
CAPS Capital Savings Bancorp of MO 0.24 1.44 31.17
CFNC Coralina Fincorp of NC 0.20 1.39 30.77
CNY Curver Bancorp, Inc. of NY 0.20 1.63 ?
CASB Csacade SB of Everest ? 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY 0.28 1.91 33.33
CNIT Cenit Bancorp of Nerfolk VA 1.00 2.25 31.55
CEBK Central Co-Op. Bank of MA 0.32 1.77 33.33
CENB Century Bancshares of NC 2.00 2.89 46.40
CBSB Charter Financial Inc. of IL 0.32 1.88 38.10
COFI Charter One Financial of ? 1.00 1.96 34.72
CHBA Chester Bancorp of IL 0.24 1.62 33.80
CVAL Chester Valley Bancorp of PA 0.44 2.10 50.57
CTZN CitFed Bancorp of Dayton DH 0.32 0.85 18.18
CLAS Classic Bancshares of KY 0.28 1.96 W1
? Cmnwealth Bancorp of PA 0.28 1.68 42-42
COVB CoVest Bancshares of IL 0.00 2.19 ?
CBSA Coastal Bancorp of Houston TX 0.48 1.67 32.21
CFCP Coastal Fin. Corp. of SC 0.33 1.43 37.08
COFO Collective Bancorp Inc. of NJ(8) 1.00 2.17 40.82
CMSV Comnty. Svgs. MHC of FL (48.5) 0.90 4.14 NM
CB?H Community Bankshares Inc. of HH(3) 0.64 1.70 30.77
CFTP Community Fed. Bancorp of HS 0.30 1.70 4?.12
CFFC Community Fin. Corp. of VA 0.56 2.49 42.75
</TABLE>
<PAGE>
RP FINANCIAL. LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
--------------------------------------------------------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings
--------------------------- ---------------------
Financial Institution Assets Assets ROA (5) ROE (5) ROI (5) ROA (5) ROE (5)
- ---------------------- -------- ------- ---------- -------- ------- --------- ---------
(%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
NASDAO Listed OTC Companies (continued)
- ----------------------------------------
CIBI Community Inv. Bancorp of OH 11.51 11.51 0.67 8.51 4.89 1.00 8.19
COCP Cooperative B?. for S?gs. of NC 7.49 7.49 -0.89 -10.79 -9.22 0.33 1.60
CRZY Crazy Woman Creek Bncorp of WY 27.85 27.85 1.01 3.35 3.78 1.27 4.20
DUFC N?H Financial Corp. of MI 5.81 5.75 0.63 10.98 5.56 0.85 14.32
OFIII Danten Fin. Corp. of Chicago IL 20.16 20.16 0.71 3.13 3.55 0.89 3.93
DCB? Delphos Citizens Bancorp of OH 28.34 28.34 1.27 6.07 4.24 1.27 6.07
DIME Dime Community Bancorp of NY 15.41 13.23 0.93 6.19 4.55 1.03 6.90
DIBK Dime Financial Corp. of CT 7.83 7.54 1.85 22.66 11.35 1.91 23.35
EGIB Eagle Bancorp of IL 12.10 12.10 -0.20 -1.89 -1.66 0.12 1.09
EBSI Eagle Bancshares of Incker GA 8.71 8.71 0.59 6.82 4.48 0.80 9.29
EGFC Eagle Financial Corp. of CT 6.90 5.19 3.58 2.18 6.02 0.78 10.92
ETFS East Texas Fin. Serv. of TK 19.02 19.02 3.32 2.70 1.85 0.64 3.41
EBCP Eastern Bancorp of NH(B) 7.59 7.20 3.38 4.96 3.27 0.69 7.76
EMLJ Emerald Financial Corp of OH 7.51 7.38 0.69 8.89 5.33 0.89 11.37
EIRE Emerald Island Bancorp MA 6.96 6.96 0.81 12.00 7.62 0.86 12.68
EFBC Empire Federal Bancorp of MI 34.89 34.29 0.83 2.37 2.59 1.09 3.12
EFBI Enterprise Bancorp of OH 12.67 12.65 0.68 4.72 4.11 0.75 5.16
EQSB Equitable ??? of ?eaton ?? 5.07 5.07 0.48 9.33 6.07 0.76 14.93
FFFG F.F.O. Financial Group of F-(8) 6.41 6.41 0.52 8.41 3.00 0.85 13.72
FCBF FCB Fin. Corp. of Meenan WI 17.51 17.51 0 91 5.04 3.92 1.10 0.08
FFBS FFBS Bancorp of Columbus MS 19.42 19.42 1.19 6.07 4.17 1.49 7.65
FFDS FFD Financial Corp. of CH 24.74 24.74 0.78 3.42 3.26 1.09 4.74
FFLC FFLC Bancrop of Leesbur? FL 14.48 14.48 0.60 4.30 3.51 1.01 6.32
FFFC FFVA Financial Corp. of WA 12.98 12.69 1.08 7.35 4.75 1.34 9.09
FFWC FFW Corporation of Maoash ?M 10.01 10.01 0.90 8.74 7.62 1.11 10.86
FFYF FFY Financial Corp. of Ob 14.10 14.10 0.89 5.44 4.64 1.27 7.80
FHCO FHS Financial Corp. of llJ 6.29 6.16 0.84 9.89 6.00 0.97 15.08
FFHH FSF Financial Corp. of MN 11.77 11.77 0.64 4.73 4.13 0.83 6.11
FOBC Fea One Bancorp of Wheeling NY 11.61 11.06 0.69 5.79 4.57 0.98 8.27
FBCI Fidelity Bancorp of Chicago IL 10.19 10.16 0.63 4.92 4.63 0.75 7.05
FSBI Fidelity Bancorp Inc. of PA 6.96 6.96 0.52 7.41 5.35 0.83 11.77
FFFL Fidelity FSA, MMC of FL ??.?) 8.22 8.75 0.39 4.09 2.53 0.62 6.51
FFED Fidelity F??. Bancorp of T? 6.14 5.14 0.16 3.18 1.84 0.28 5.62
FFO? Fidelity Financial of CH 13.12 11.52 0.63 3.90 2.57 1.01 6.24
FIBC Financial Bancorp, Inc, of MY 9.73 9.68 0.61 5.14 4.46 0.95 9.49
FBSI First Bancshares of MO 14.35 14.33 0.91 5.88 5.90 1.11 7.22
FBBC First Bell Bancorp of PA 10.20 10.20 1.19 7.34 6.69 1.40 8.65
FBER First Bergen Bancorp of NJ 16.44 16.44 0.42 2.50 2.31 0.75 4.50
SRBO First Carneqie, NHC of PS(45.0) 15.65 16.65 0.37 2.35 1.73 0.54 3.43
FCIT First Cit. Fin. Corp of MD(3) 6.11 6.11 0.53 8.65 3.92 3.79 13.02
FSTC First Citizens Corp of GA 9.37 7.37 1.80 19.17 11.76 1.50 16.01
FFBA First Colorada Bancorp of Co 14.30 14.13 1.13 7.87 5.46 1.12 7.80
FDEF First Defiance Fin. Corp. of OH 21.42 21.42 0.78 3.37 3.03 1.06 4.60
FESX First Essex Bancorp of MA 7.31 6.30 1.01 13.37 7.70 0.88 11.68
FFES First FSDLA of E. Hartford CT 6.25 6.25 0.43 7.04 5.24 0.69 11.23
FSSB First FS&LA of San Bern. CA 4.33 4.18 -1.18 -24.68 NM -1.18 -24.75
FFSX First FS&LA. NHC of IA (46.0) 8.14 8.06 0.43 5.19 2.86 0.73 8.93
FFSW First fed. Fin. Serv. of OH 6.05 5.11 0.87 15.36 5.25 0.69 12.15
BDJ? First Fed. Bancorp. of ?? 11.17 11.17 0.32 2.58 2.56 0.66 5.38
FFBH First Fed. Bancshares of AR 15.82 15.82 0.79 5.42 4.19 1.13 7.76
FFFC First Fed. Capital Corp. of WI 6.36 5.96 0.74 11.32 5.36 0.88 13.15
FFKY First Fed. capital Corp of KY 13.60 12.78 1.25 9.33 5.84 1.49 10.79
FFBZ First Federal Bancorp of OH 7.66 7.65 0.74 9.56 4.71 1.01 13.14
FFCH First Fin. Holdings Inc. of SC 6.15 6.15 0.55 8.85 4.56 0.84 13.43
FFBI First Financial Bancorp of IL 7.81 7.81 -0.02 -0.27 -0.27 0.47 5.76
FFHC First Financial Corp. of WI (E) 6.98 6.78 0.93 12.87 5.00 1.26 17.55
<CAPTION>
Assets Quality Ratios Pricing Ratios
--------------------------------- --------------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earnings Book Assets Book Earnings
- --------------------- --------- ---------- ------ ---------- ------ -------- ----- -------
(%) (%) (%) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAO Listed O C Companies (continued)
- ----------------------------------------
CIBI Community Inv. Bancorp of OH 0.72 65.53 0.62 20.45 114.21 13.15 114.21 13.78
COCP Cooperative B?. for S?gs. of NC 0.45 53.51 0.30 NM 121.50 9.10 321.50 NH
CRYZ Crazy Woman Creek Bncorp of WY 0.23 240.34 1.03 26.47 93.62 26.07 93.62 21.09
DUFC N?H Financial Corp. of MI 0.37 192.28 1.01 17.98 178.63 10.37 180.49 13.13
OFIII Danten Fin. Corp. of Chicago IL 0.20 76.34 0.38 28.18 101.77 20.52 101.77 22.45
DCB? Delphos Citizens Bancorp of OH 0.10 93.46 0.13 23.58 98.25 27.84 98.25 23.58
DIME Dime Community Bancorp of NY 0.82 97.78 1.45 21.98 131.59 20.28 153.33 19.71
DIBK Dime Financial Corp. of CT 0.46 337.58 3.23 8.81 185.33 14.50 192.31 8.55
EGIB Eagle Bancorp of IL 1.67 31.93 0.90 NM 96.07 11.62 96.07 HM
EBSI Eagle Bancshares of Incker GA 0.88 65.80 0.84 22.34 140.27 12.21 140.27 16.39
EGFC Eagle Financial Corp. of CT 1.21 47.66 1.01 16.62 134.22 9.26 178.36 12.45
ETFS East Texas Fin. Serv. of TK 0.25 100.00 0.53 NM 93.30 17.75 93.30 27.01
EBCP Eastern Bancorp of NH(B) 1.27 25.79 0.57 NM 149.05 11.31 157.05 19.57
EMLJ Emerald Financial Corp of OH 0.34 75.41 0.30 16.75 161.05 12.09 163.87 14.66
EIRE Emerald Island Bancorp MA 0.62 105.23 0.97 3.12 144.08 10.03 144.08 12.42
EFBC Empire Federal Bancorp of MI NA NA 0.47 NM 01.46 31.91 91.46 29.35
EFBI Enterprise Bancorp of OH 0.01 NA 0.28 24.33 117.59 14.90 117.74 22.26
EQSB Equitable ??? of ?eaton ?? 1.07 19.82 0.31 16.48 145.47 7.37 145.47 10.30
FFFG F.F.O. Financial Group of F-(8) 3.17 55.02 2.41 25.63 202.07 12.05 202.07 15.71
FCBF FCB Fin. Corp. of Meenan WI 0.11 426.25 0.56 25.52 125.51 22.67 129.51 21.15
FFBS FFBS Bancorp of Columbus MS 0.42 109.44 0.66 23.96 143.30 27.83 143.30 19.01
FFDS FFD Financial Corp. of CH NA NA 0.27 NM 93.10 23.03 93.10 22.13
FFLC FFLC Bancrop of Leesbur? FL 0.27 116.25 0.46 28.50 128.61 18.52 128.61 19.39
FFFC FFVA Financial Corp. of WA 0.10 585.64 1.01 21.06 169.52 22.00 173.36 17.04
FFWC FFW Corporation of Maoash ?M 0.22 150.42 0.48 13.13 114.29 11.44 114.29 10.57
FFYF FFY Financial Corp. of Ob 0.72 73.17 0.69 21.56 132.67 18.70 132.67 15.04
FHCO FHS Financial Corp. of llJ 1.07 47.56 0.90 16.67 161.07 10.13 164.45 10.93
FFHH FSF Financial Corp. of MN 0.10 216.04 0.34 24.22 124.84 14.69 124.84 18.75
FOBC Fea One Bancorp of Wheeling NY 0.45 93.65 1.00 21.98 127.66 14.82 133.93 15.33
FBCI Fidelity Bancorp of Chicago IL 0.70 24.69 0.23 21.59 107.10 10.92 107.11 15.08
FSBI Fidelity Bancorp inc. of PA 0.51 100.48 1.06 18.69 135.04 9.40 135.04 11.76
FFFL Fidelity FSA, MMC of FL ??.?) 0.30 77.48 0.31 NM 160.35 14.14 161.69 24.83
FFED Fidelity F?? Bancorp of T? 0.16 455.75 0.85 HM 178.92 9.20 178.92 NM
FFO? Fidelity Financial of CH 0.18 174.34 0.38 HM 124.69 16.35 141.91 23.44
FIBC Financial Bancorp, Inc, of MY 2.77 16.97 0.85 22.40 115.15 11.20 115.69 12.15
FBSI First Bancshares of MO 0.32 88.41 0.35 16.95 101.01 14.50 101.16 13.79
FBBC First Bell Bancorp of PA 0.09 107.87 0.12 14.95 150.52 15.35 150.52 12.70
FBER First Bergen Bancorp of NJ 0.74 161.82 2.41 HM 109.88 18.07 109.88 24.00
SRBO First Carneqie, NHC of PS(45.0) 0.74 33.56 0.66 HM 135.85 21.26 135.85 NM
FCIT First Cit. Fin. Corp of MD(3) 1.52 52.05 1.33 25.52 211.05 12.89 211.05 16.97
FSTC First Citizens Corp of GA 1.26 87.96 1.40 8.51 163.04 15.28 207.29 10.19
FFBA First Colorada Bancorp of Co 0.19 136.49 0.37 18.32 144.27 20.63 146.05 18.50
FDEF First Defiance Fin. Corp. of OH 0.45 93.68 0.55 MN 116.84 25.02 116.84 24.17
FESX First Essex Bancorp of MA 0.62 143.10 1.42 12.99 147.32 10.77 170.98 11.86
FFES First FSDLA of E. Hartford CT 0.51 55.25 1.57 19.07 129.35 8.09 129.35 11.95
FSSB First FS&LA of San Bern. CA 2.31 45.41 1.47 NM 69.34 3.01 71.97 HM
FFSX First FS&LA. NHC of IA (46.0) 0.14 263.34 0.52 NM 178.30 14.51 179.92 20.30
FFSW First fed. Fin. Serv. of OH 0.38 73.66 0.40 19.03 NH 16.13 HM 24.06
BDJ? First Fed. Bancorp. of ?? 0.31 127.79 0.82 NM 109.20 12.20 109.20 18.75
FFBH First Fed. Bancshares of AR 0.19 127.69 0.31 23.84 115.01 18.19 115.01 16.25
FFFC First Fed. Capital Corp. of WI 0.17 308.37 0.68 18.64 206.57 13.13 220.44 16.06
FFKY First Fed. capital Corp of KY 0.40 115.33 0.53 17.13 152.14 20.70 162.00 14.34
FFBZ First Federal Bancorp of OH 0.58 153.04 1.02 21.22 195.40 14.97 195.61 15.47
FFCH First Fin. Holdings Inc. of SC 1.82 39.24 0.84 21.85 189.47 11.65 189.47 14.39
FFBI First Financial Bancorp of IL 0.27 200.40 0.69 NM 107.02 8.35 107.02 17.86
FFHC First Financial Corp. of WI (E) 0.29 137.23 0.65 20.01 HN 17.94 NM 14.68
<CAPTION>
Dividend Data (6)
---------------------------------
Ico. Divi-
Divi./ dendn Payout
Financial Institution Share Yield Ratio (7)
- ---------------------- ---------- -------- ---------
(%) (%) (%)
<S> <C> <C> <C>
NASDAO Listed ? C Companies (continued)
- ----------------------------------------
CIBI Community Inv. Bancorp of OH 0.27 2.00 40.91
COCP Cooperative B?. for S?gs. of NC 0.03 0.00 MH
CRYZ Crazy Woman Creek Bncorp of WY 0.40 2.96 MH
DUFC N?H Financial Corp. of MI 0.00 0.00 0.00
OFIII Danten Fin. Corp. of Chicago IL 0.24 1.67 47.06
DCB? Delphos Citizens Bancorp of OH 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 0.18 0.94 20.69
DIBK Dime Financial Corp. of CT 0.40 1.74 13.33
EGIB Eagle Bancorp of IL 0.00 0.00 HH
EBSI Eagle Bancshares of Incker GA 0.50 3.36 76.00
EGFC Eagle Financial Corp. of CT 0.92 2.99 45.73
ETFS East Texas Fin. Serv. of TK 0.20 1.09 58.82
EBCP Eastern Bancorp of NH(B) 0.64 2.40 73.66
EMLJ Emerald Financial Corp of OH 0.24 1.71 32.00
EIRE Emerald Island Bancorp MA 0.28 1.51 19.85
EFBC Empire Federal Bancorp of MI 0.30 2.22 NH
EFBI Enterprise Bancorp of OH 1.00 5.48 NH
EQSB Equitable ??? of ?eaton ??? 0.00 0.00 0.00
FFFG F.F.O. Financial Group of F-(8) 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Meenan WI 0.72 2.01 74.23
FFBS FFBS Bancorp of Columbus MS 0.50 2.17 52.08
FFDS FFD Financial Corp. of CH 0.30 2.22 68.18
FFLC FFLC Bancrop of Leesbur? FL 0.48 1.68 48.00
FFFC FFVA Financial Corp. of WA 0.48 1.79 37.80
FFWC FFW Corporation of Maoash ?M 0.72 2.77 36.36
FFYF FFY Financial Corp. of Ob 0.70 2.71 58.33
FHCO FHS Financial Corp. of llJ 0.20 0.85 14.18
FFHH FSF Financial Corp. of MN 0.50 2.87 69.44
FOBC Fea One Bancorp of Wheeling NY 0.58 2.76 60.42
FBCI Fidelity Bancorp of Chicago IL 0.32 1.68 36.36
FSBI Fidelity Bancorp Inc. of PA 0.36 1.80 33.64
FFFL Fidelity FSA, MMC of FL ??.?) 0.80 4.13 MN
FFED Fidelity F?? Bancorp of T? 0.40 4.32 HM
FFO? Fidelity Financial of CH 0.29 1.87 70.00
FIBC Financial Bancorp, Inc, of MY 0.40 2.32 51.95
FBSI First Babcshares of MO 0.20 1.00 18.95
FBBC First Bell Bancorp of PA 0.40 2.50 37.38
FBER First Bergen Bancorp of NJ 0.12 0.79 34.29
SRBO First Carneqie, NHC of PS(45.0) 0.00 0.00 0.00
FCIT First Cit. Fin. Corp of MD(3) 0.00 0.00 0.00
FSTC First Citizens Corp of GA 0.44 1.78 15.12
FFBA First Colorada Bancorp of Co 0.44 2.33 42.72
FDEF First Defiance Fin. Corp. of OH 0.32 2.21 72.73
FESX First Essex Bancorp of MA 0.48 2.91 37.80
FFES First FSDLA of E. Hartford CT 0.50 2.02 38.46
FSSB First FS&LA of San Bern. CA 0.00 0.00 NM
FFSX First FS&LA. NHC of IA (46.0) 0.48 2.02 70.59
FFSW First fed. Fin. Serv. of OH 0.44 1.15 21.89
BDJ? First Fed. Bancorp. of ?? 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 0.20 1.04 24.69
FFFC First Fed. Capital Corp. of WI 0.48 2.18 40.68
FFKY First Fed. capital Corp of KY 0.52 2.81 48.15
FFBZ First Federal Bancorp of OH 0.24 1.32 27.91
FFCH First Fin. Holdings Inc. of SC 0.72 2.44 53.33
FFBI First Financial Bancorp of IL 0.00 0.00 MM
FFHC First Financial Corp. of WI (E) 0.60 2.10 41.96
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 20,1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------------------------
Tang
Equity/ Equity/ Reported Earnings Core Earnings
---------------------- ----------------
Financial Institution Assets Assets ROA(5) ROE(5) ROF(5) ROA(5) ROE(5)
- --------------------- ------ ------ ------- ------ ------- -------- -------
(%) (%)b (%) (%)b (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
FFHS First Franklin Corp. ???? 8.92 8.75 0.14 1.59 1.35 0.62 6.76
FGHC First Georgia Hold. Corp of GA 8.49 7.74 0.96 11.69 6.48 0.57 6.97
FSPG First Home Bancorp of ?? 6.59 6.47 0.90 13.90 8.42 1.19 18.24
FFSL First Independence Corp. of KS 10.51 10.51 0.05 4.27 4.74 0.76 6.53
FISB First Indiana Corp. of ??? 9.58 9.46 0.89 9.68 6.04 1.03 11.14
FRFS First Keystone Fin. Corp. of FA 7.07 7.07 0.51 6.65 5.39 0.76 9.86
FLKY First Lancaster Bncshrs of KY 37.13 37.13 0.98 1.94 2.45 1.26 2.50
FLFC First Liberty Fin. Corp. of GA 7.35 6.57 1.09 14.83 8.09 0.88 11.96
CAS? First Midwest Fin. Corp. of IA 11.59 10.26 0.76 6.54 6.35 0.98 8.44
FMBD First Mutual Bancorp of IL 13.41 10.32 0.15 0.75 0.87 0.38 3.97
FMSB First Mutual SB of Bellevue NA 6.57 6.57 1.01 15.31 8.41 0.98 14.78
FNGB First Northern Cap. Corp of NI 11.51 11.51 0.60 6.05 3.91 0.89 7.48
FFPB First Palm Beach Bancorp of FL 6.76 6.59 -0.01 -0.09 -0.07 0.05 0.69
FSLA First SB SLA MHC of NJ (47.5) 9.19 8.15 0.51 5.44 2.88 0.90 9.61
FSNJ First SB of NJ, MHC (45.9)(8) 8.57 8.57 -0.34 -4.31 -2.69 0.23 2.89
SOP? First SB, SSB, Moore Co. of HC 24.60 24.60 1.39 5.48 4.13 1.67 6.58
FWWB First Savings Bancorp of MA 15.14 15.14 1.06 5.65 3.77 1.01 5.37
SHEB First Shenango Bancorp of FA 10.76 10.90 0.83 7.07 5.96 1.12 9.49
FSFC First So. east Fin. Corp. of SC 10.22 10.22 0.01 0.11 0.10 0.92 7.48
FLAG Flag Financial Corp of ???? 9.40 9.40 -0.05 -0.68 -0.49 0.14 1.45
FFIC Flushing Fin. Corp. of NY 16.01 16.01 0.90 6.16 4.33 0.93 5.34
FBMC Fort Bend Holding Corp of ?? 6.43 5.95 0.23 3.44 2.57 0.64 7.99
FTSB Fort Thomas Fin. Corp. of KY 16.09 16.09 0.50 2.50 2.86 0.76 3.83
FKKY Frankfort First Bancorp of KY 26.19 26.19 0.62 2.19 1.98 0.93 3.29
FTUB Fulton Bancorp of MO 26.01 26.01 0.74 3.81 2.05 1.05 6.39
GFSA GFS Bancorp of Grimmell LA 11.57 11.57 0.99 8.43 6.42 1.27 10.81
GUPB GFSB Bancorp of Galiup ?? 16.30 16.30 0.74 3.86 3.53 0.93 4.86
GSLA GS Financial Corp. of ?? 46.34 46.34 0.85 1.94 1.90 0.85 1.84
GWBC Gateway Bancorp of NY (8) 26.08 26.08 0.82 3.25 3.03 1.15 4.54
GBCK Glacier Bancorp of ?? 0.56 0.29 1.39 14.68 5.63 1.57 16.69
GLBK Glendale Co-op. Bank of MA (8) 16.37 16.37 0.75 4.64 4.11 0.72 4.47
GFCO Glenway Financial Corp. of ??? OH 9.56 9.41 0.38 3.95 3.57 0.68 7.17
GTPS Great American Bancorp of EL 21.16 21.16 0.43 1.95 2.00 0.66 2.48
GFFN Great Financial Corp. of KY 9.30 8.89 0.73 7.40 4.20 0.70 7.09
GSBC Great Southern Bancorp of MO 8.97 8.97 1.36 14.03 6.41 1.53 15.83
GDYS Greater OV SB,MHC of PA (19.0) 11.47 11.47 0.01 0.12 0.08 0.33 2.81
GSFC Green Street Fin. Corp. of WC 36.09 36.09 1.33 4.48 3.21 1.64 5.50
GSLC Guaranty Svgs & ?? FA of VA 5.72 6.72 0.46 7.73 3.10 0.43 7.26
GFED Guaranty FS&LA, HHC Of MO (31.0) (8) 13.84 13.84 0.50 3.50 1.46 0.81 5.71
HCBB HCB Bancshares of AR 18.25 17.49 -0.11 -0.58 -0.62 0.39 2.11
HEMT HCB Bancorp of Hewet CA 9.81 0.00 -0.31 -2.63 -2.56 -2.27 -19.11
HFFC HF Financial Corp. of SD 9.19 9.17 0.69 6.44 5.57 0.81 8.85
HFNC HFNC Financial Corp. of NC 19.83 18.83 1.07 3.82 3.04 1.41 5.01
H?NF HUN Financial, Inc. of MH 14.24 14.24 0.75 4.93 4.30 0.91 5.98
HALL Hallmark Capital Corp. of ???? 6.99 6.99 0.45 6.30 6.55 0.60 8.30
HARB Harbor FSB, HHC of FL (45.01) 3.22 7.91 0.93 11.11 4.74 1.22 14.62
HRBF Harbor Federal Bancorp of MG 12.86 12.86 0.43 3.20 2.83 0.68 5.15
HFSA Hardin Bancorp of Hardin MC 12.78 12.78 0.51 3.17 3.69 0.82 6.16
HARL Hardeysville SA of PA 6.36 6.36 0.69 10.70 6.91 0.99 25.31
HARS Harris SB, HHC OF PA (24.2) 7.92 6.83 0.25 2.68 1.69 0.60 6.55
HFFB Harrodsburg 1st Fin Corp of NY 26.36 26.35 1.03 3.73 3.67 1.36 4.95
HHFC Harvest Home Fin. Corp. of OH 12.43 12.43 0.21 1.35 1.62 0,54 3.49
HAVA Haven Bancorp of Woodhaven NY 5.80 6.77 0.62 10.26 6.16 0.91 14.94
HYFO Haverfield Corp. of OH (?) 8.39 8.39 0.49 5.94 3.40 1.03 12.55
HTHR Hawthorne Fin. Corp. of LA 3.95 3.85 0.85 21.02 21.02 0.56 14.51
HMLK Healock Fed. Fin. of IL 18.29 18.29 -0.39 -2.85 -2.19 0.49 3.64
<CAPTION>
Asset Quality Ratios Pricing Ratios
-------------------- -----------------------------------------------
Price/ Price/
NPAs Resvs/ Revs/ 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>
FFHS First Franklin Corp. ???? 0.62 68.29 0.62 NM 118.13 10.41 118.98 17.39
FGHC First Georgia Hold. Corp of GA 1.35 50.33 0.79 15.43 177.26 15.04 194.37 25.89
FSPG First Home Bancorp of ?? 0.79 93.39 0.41 11.98 156.72 10.32 159.56 9.05
FFSL First Independence Corp. of KS 0.90 69.84 0.97 21.11 97.99 10.30 97.99 13.81
FISB First Indiana Corp. of ??? 1.55 85.76 1.59 16.56 154.48 14.80 156.45 14.39
FRFS First Keystone Fin. Corp. of FA 2.46 34.36 1.46 18.55 126.93 8.98 126.93 12.50
FLKY First Lancaster Bncshrs of KY 0.75 32.89 0.29 N? 108.62 40.33 108.62 N?
FLFC First Liberty Fin. Corp. of GA 0.75 1?4.80 1.23 12.36 183.24 13.46 204.80 15.32
CAS? First Midwest Fin. Corp.of IA 0.79 81.63 0.97 16.75 99.00 11.55 112.58 12.19
FMBD First Mutual Bancorp of IL 0.16 207.98 0.46 N? 98.65 13.22 128.00 N?
FMSB First Mutual SB of Bellevue NA NA NA 1.24 11.90 169.95 11.17 169.95 12.32
FNGB First Northern Cap. Corp of NI 0.13 368.77 0.54 26.23 132.07 15.20 132.07 17.71
FFPB First Palm Beach Bancorp of FL 1.09 46.69 0.74 N? 143.77 9.72 147.56 N?
FSLA First SB SLA MHC of NJ (47.5) 0.58 93.31 1.05 N? 184.62 16.97 208.33 19.67
FSNJ First SB of NJ, MHC (45.9)(8) 0.97 58.25 1.21 N? 160.69 13.77 160.69 N?
SOP First SB, SSB, Moore Co. of HC 0.12 192.97 0.32 24.24 133.04 32.72 133.04 20.1?
FWWB First Savings Bancorp of MA 0.32 210.94 1.03 26.64 152.92 23.15 152.92 27.92
SHEB First Shenango Bancorp of FA 0.60 144.74 1.14 16.77 125.06 13.38 125.06 ?2.50
FSFC First So. east Fin. Corp. of SC 0.11 362.15 0.50 N? 129.74 13.27 129.74 14.46
FLAG Flag Financial Corp of ??? 4.62 44.14 2.91 N? 139.02 13.07 139.02 N?
FFIC Flushing Fin. Corp. of NY 0.27 251.62 1.28 23.10 123.72 19.81 123.72 22.33
FBMC Fort Bend Holding Corp of ?? NA NA 0.98 N? 132.00 8.48 142.68 16.72
FTSB Fort Thomas Fin. Corp. of KY 2.02 25.00 0.57 N? 103.04 16.58 103.04 22.83
FKKY Frankfort First Bancorp of KY 0.06 138.89 0.08 N? 122.05 31.97 122.05 N?
FTUB Fulton Bancorp of MO NA NA 1.01 N? 138.22 34.57 138.22 N?
GFSA GFS Bancorp of Grimmell LA 1.54 45.77 0.81 15.59 128.39 14.85 128.39 12.16
GUPB GFSB Bancorp of Galiup ?? NA NA 0.69 27.54 112.56 18.34 112.56 21.84
GSLA GS Financial Corp. of ?? 0.13 214.61 0.85 N? 96.70 44.81 96.70 N?
GWBC Gateway Bancorp of NY (8) 0.78 15.82 0.40 N? 109.72 28.61 109.72 23.65
GBCK Glacier Bancorp of ?? 0.28 212.30 0.85 17.75 235.10 21.85 235.10 15.71
GLBK Glendale Co-op. Bank of MA (8) NA NA 0.72 24.32 110.29 18.06 110.29 25.23
GFCO Glenway Financial Corp. of ??? OH 0.32 84.04 0.32 27.99 109.76 10.49 131.47 15.42
GTPS Great American Bancorp of EL 0.16 188.02 0.42 N? 99.52 21.06 99.62 N?
GFFN Great Financial Corp. of KY 3.42 13.77 0.72 23.80 175.24 16.29 183.18 24.82
GSBC Great Southern Bancorp of MO 1.83 124.20 2.60 15.60 231.29 20.75 231.29 13.82
GDYS Greater OV SB,MHC of PA (19.0) 2.78 43.72 2.05 N? 155.32 17.82 155.72 N?
GSFC Green Street Fin. Corp. of WC 0.14 97.92 0.19 N? 121.24 43.75 121.24 25.36
GSLC Guaranty Svgs & ?? FA of VA NA NA 1.00 N? 239.95 13.72 239.95 N?
GFED Guaranty FS&LA, HHC Of MO (31.0) (8) 0.54 206.36 1.42 N? 236.18 32.63 236.18 N?
HCBB HCB Bancshares of AR NA NA 1.47 N? 94.25 17.20 98.33 N?
HEMT HF Bancorp of Hewet CA NA NA 1.10 N? 108.91 10.68 NA N?
HFFC HFNC Financial Corp. of SD 0.40 200.58 1.04 17.95 114.76 10.55 115.03 13.08
HFNC HF Financial Corp. of NC 0.99 94.51 1.26 N? 181.47 34.16 181.47 26.00
H?NF HUN Financial, Inc. of MH 0.08 555.50 0.70 23.23 122.93 17.51 122.93 19.17
HALL Hallmark Capital Corp. of ?? 0.02 NA 0.60 1?.02 109.08 7.62 109.08 13.68
HARB Harbor FSB, HHC of FL (45.01) 0.47 216.59 1.38 21.11 222.68 18.30 231.40 16.04
HRBF Harbor Federal Bancorp of MG 0.13 131.49 0.26 N? 111.87 14.39 111.87 2?.95
HFSA Hardin Bancorp of Hardin MC 0.37 41.58 0.29 27.07 95.06 12.15 95.06 16.01
HARL Hardeysville SA of PA 0.12 475.58 0.77 16.92 171.61 10.92 171.61 11.83
HARS Harris SB, HHC OF PA (24.2) 0.70 61.7? 0.98 N? 155.00 12.27 179.63 24.15
HFFB Harrodsburg 1st Fin Stop of NY 0.47 58.12 0.37 27.27 106.53 28.07 106.63 20.55
HHFC Harvest Home Fin. Corp. of OH 0.15 90.48 0.26 N? 94.42 11.74 91.42 23.86
HAVA Haven Bancorp of Woodhaven NY 0.78 84.95 1.23 16.23 159.97 9.27 160.59 11.14
HYFO Haverfield Corp. of OH (?) 1.00 87.44 1.00 29.40 172.01 14.43 172.01 13.91
HTHR Hawthorne Fin. Corp. of LA NA NA 1.92 4.76 93.89 3.61 93.89 6.89
HMLK Healock Fed. Fin. of IL NA NA 1.37 N? 91.44 16.72 91.44 N?
<CAPTION>
Dividend Data (6)
-------------------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
- --------------------- ------- ---------- ----------
($) (%) (%)
<S> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
FFHS First Franklin Corp. ???? 0.32 1.60 NM
FGHC First Georgia Hold. Corp of GA 0.06 0.69 10.64
FSPG First Home Bancorp of ?? 0.40 2.07 24.54
FFSL First Independence Corp. of KS 0.25 2.23 47.17
FISB First Indiana Corp. of ??? 0.48 2.30 38.10
FRFS First Keystone Fin. Corp. of FA 0.20 0.87 16.13
FLKY First Lancaster Bncshrs of KY 0.00 0.00 0.00
FLFC First Liberty Fin. Corp. of GA 0.40 1.84 22.73
CAS? First Midwest Fin. Corp. of IA 0.36 2.38 37.50
FMBD First Mutual Bancorp of IL 0.32 2.13 PBI
FMSB First Mutual SB of Bellevue NA 0.20 1.16 13.79
FNGB First Northern Cap. Corp of NI 0.64 3.01 NM
FFPB First Palm Beach Bancorp of FL 0.60 1.98 HM
FSLA First SB SLA MHC of NJ (47.5) 0.48 2.00 69.57
FSNJ First SB of NJ, MHC (45.9)(8) 0.50 1.92 NM
SOP? First SB, SSB, Moore Co. of HC 0.80 3.33 NM
FWWB First Savings Bancorp of MA 0.28 1.30 34.57
SHEB First Shenango Bancorp of FA 0.60 2.31 38.71
FSFC First So. east Fin. Corp. of SC 0.24 2.37 NM
FLAG Flag Financial Corp of ??? 0.34 2.39 NM
FFIC Flushing Fin. Corp. of NY 0.24 1.21 27.91
FBMC Fort Bend Holding Corp of ?? 0.28 0.92 37.84
FTSB Fort Thomas Fin. Corp. of KY 0.26 2.38 NM
FKKY Frankfort First Bancorp of KY 0.36 2.97 PBI
FTUB Fulton Bancorp of MO 0.20 1.00 48.78
GFSA GFS Bancorp of Grimmell LA 0.20 1.51 23.53
GUPB GFSB Bancorp of Galiup ?? 0.40 2.11 57.97
GSLA GS Financial Corp. of ?? 0.00 0.00 0.00
GWBC Gateway Bancorp of NY (8) 0.40 2.29 NM
GBCK Glacier Bancorp of ?? 0.43 2.42 43.00
GLBK Glendale Co-op. Bank of MA (8) 0.00 0.00 0.00
GFCO Glenway Financial Corp. of ??? OH 0.68 2.64 73.91
GTPS Great American Bancorp of EL 0.40 2.42 ??
GFFN Great Financial Corp. of KY 0.80 1.73 41.10
GSBC Great Southern Bancorp of MO 0.40 2.55 36.70
GDYS Greater OV SB,MHC of PA (19.0) 0.36 2.77 HN
GSFC Green Street Fin. Corp. of WC 0.40 2.25 70.18
GSLC Guaranty Svgs & ?? FA of VA 0.10 0.94 30.30
GFED Guaranty FS&LA, HHC Of MO (31.0) (a) 0.40 1.95 NM
HCBB HCB Bancshares of AR 0.00 0.00 HN
HEMT HCB Bancorp of Hewet CA 0.00 0.00 HH
HFFC HF Financial Corp. of SD 0.36 1.82 33.73
HFNC HFNC Financial Corp. of NC 0.28 1.67 54.90
H?NF HUN Financial, Inc. of MH 0.00 0.00 0.00
HALL Hallmark Capital Corp. of ?? 0.00 0.00 0.00
HARB Harbor FSB, HHC of FL (45.01) 1.40 3.44 72.54
HRBF Harbor Federal Bancorp of MG 0.40 2.22 ??
HFSA Hardin Bancorp of Hardin MG 0.48 3.28 ??
HARL Hardeysville SA of PA 0.40 1.82 30.77
HARS Harris SB, HHC OF PA (24.2) 0.58 2.73 ??
HFFB Harrodsburg 1st Fin Stop of NY 0.40 2.67 72.73
HHFC Harvest Home Fin. Corp. of OH 0.40 3.81 MN
HAVA Haven Bancorp of Woodhaven NY 0.60 1.62 26.32
HYFO Haverfield Corp. of OH (?) 0.56 2.16 63.64
HTHR Hawthorne Fin. Corp. of LA 0.00 0.00 0.00
HMLK Healock Fed. Fin. of IL 0.00 0.00 NM
</TABLE>
<PAGE>
RP FINANCIAL
- -----------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
1700 NORTH MOORE STREET, SUITE 2210
ARLINGTON, VIRGINIA 32209
(703) 528-1700
(CONTINUED)
Weekly Thrift Marker Line - Part Two
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- ----------------------
Tang
Equity/ Equity: Reported Earnings Core Earnings NPAs Resvs/ Resvs/
---------------------- -----------------
Financial Instalation Assets Assets ROA(5) ROE(5) HOT(5) ROA(5) HOE(5) Assets NPAs Loan
- --------------------- ------ ------ ------ ------ ------ ------ ------ ------ ---- ----
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASCAQ Listed O-C Companies Continued
- -------------------------------------
ABNK Highland Federal Bank of CA 7.46 7.46 0.29 3.88 2.47 0.51 6.77 3.23 57.68 2.28
HIFS Hingman Inst. for Sav. or ?* 9.55 9.55 1.16 12.00 8.71 1.16 12.00 0.55 125.61 0.91
HBEI Home Bancorp of ? EL 28.12 28.12 0.31 1.41 0.94 0.81 3.66 0.35 77.63 0.37
HEFW Home Bancorp of Fort Wayne IH 13.95 33.95 3.56 3.74 3.30 0.90 6.05 0.09 468.58 0.53
HBBI Home Building Bancorp of IX 12.07 22.07 0.19 1.47 1.29 0.53 4.02 0.52 35.51 0.28
SCFC Home City Fin. Corp. of OH 20.61 20.61 0.78 5.01 3.64 1.17 7.57 0.62 110.36 0.57
HFBF Home Fev Bancorp of Seymour IN 8.45 8.17 1.03 12.42 6.95 1.22 14.74 0.43 121.80 0.61
HFBH Home Financial Bancorp of IN 19.63 18.63 0.57 3.68 2.36 0.82 5.23 N/A N/A 0.63
HFBC Home Fort Bancorp, Inc. of BA* 10.92 10.82 1.70 15.85 8.35 1.69 15.76 0.25 501.45 1.53
? Homeccrp, Inc. of Rocktorc IL 6.30 6.30 0.11 1.87 1.61 0.38 6.24 3.68 13.13 0.62
AZFS Horizon Fin'l. Services of LA 10.50 10.50 0.43 3.87 3.90 0.60 5.42 1.02 36.63 0.56
HRZB Horizon Financial Corp. of NA* 15.23 15.21 1.55 9.82 6.51 1.52 9.64 0.01 N/A 0.85
IBSF IES Financial Corp. of SJ 17.04 17.04 0.52 2.73 2.26 0.88 4.68 0.15 94.57 0.52
I? IES Financial Corp. of LA 12.27 10.35 0.74 4.49 3.23 1.00 6.05 N/A N/A 0.79
ITLA Imperial Thorne & Loan of CA* 11.37 11.32 1.46 23.06 8.56 1.46 13.06 1.78 75.09 1.63
IFSB Independence FSB Of DC 6.52 5.72 0.14 2.19 3.22 0.33 4.98 N/A N/A 0.34
INAB Indiana Conn. Bana, SB of IN 12.39 12.39 0.16 1.24 1.07 0.51 3.88 N/A N/A 0.71
IFSL Indiana Federal Corp. of ?* 8.78 8.35 0.67 7.44 3.86 0.95 10.55 0.82 102.87 1.11
INBI Industrial Bancorp of CH 18.49 18.49 0.73 3.87 3.27 1.43 7.56 0.42 115.71 0.55
IWBK Interwest SB and Oak Harbor WA 6.71 6.55 0.84 12.48 4.64 1.18 17.49 0.59 69.69 0.81
IPSW Ipswich SB of Ipswich WA 6.17 6.17 1.18 19.52 9.42 0.93 15.31 1.94 49.55 1.26
JSBF JSB Financial, Inc. of TX 22.17 22.17 1.78 8.11 6.29 1.69 7.69 1.08 33.09 0.62
JXVL Jacksonville Bancorp of TX 15.63 15.63 0.88 5.43 4.95 1.21 7.48 1.04 48.35 0.67
JKSB Jcksnville SB, NHC of IL (44.6) 10.30 10.30 0.29 2.50 1.87 0.67 5.84 0.39 125.08 0.63
JSBA Jefferson Svgs Bancorp of MO 7.83 5.11 0.25 3.41 1.91 0.63 8.56 0.62 117.45 0.82
JOAC Joachin Bancorp of MO 28.99 28.99 0.51 1.71 1.56 0.78 2.64 0.68 30.45 0.31
KSAV KS Bancorp of Kenly MC 13.83 13.82 0.92 6.45 5.25 1.21 8.47 0.42 70.56 0.35
KSBK KSB Bancorp of Kingfield ME (4)* 6.82 6.32 0.88 13.36 7.36 0.88 13.31 N/A N/A 1.00
KFBI Klamath First Bancorp of OH 20.44 20.44 0.90 3.79 3.15 1.33 5.59 0.30 176.70 0.24
LSBI LSB Fin. Corp. of Laragessa IN 9.08 9.08 0.50 5.26 4.50 0.42 4.42 1.34 68.99 1.07
LVSB Lalaveiw SB of Paterson NJ 10.14 8.12 1.43 13.88 8.84 0.89 8.67 N/A N/A N/A
LARK Landmark Bancshares of ? 14.63 14.63 0.84 5.40 4.87 1.05 6.72 0.60 62.24 0.67
LARL Laurel Capital Group of PA 10.42 10.42 1.12 10.59 6.98 1.43 13.55 0.51 181.25 1.31
LSBX Lawrence Savings Bank of MA* 8.78 8.78 1.55 20.38 12.09 1.66 20.38 0.36 290.57 2.27
LFEO Leeds FSB, HHC of MO (SE.2) 16.18 16.18 0.79 4.89 3.32 1.13 6.98 0.02 977.36 0.30
LXMO Lexington BSL Fin. Corp. of MO 30.42 30.42 0.97 4.48 2.76 1.34 6.18 0.63 58.31 0.49
LIFB Life Bancorp of Norfolk VA 10.79 10.45 0.71 6.30 4.06 0.87 7.74 0.49 144.60 1.54
LFBI Little Falls Bancorp of MJ 32.94 11.91 0.25 1.78 1.91 0.50 3.48 0.90 36.77 0.82
LOGN Logansport Fin. Corp. of IN 10.65 19.65 1.17 5.26 5.21 1.53 6.84 0.45 67.13 0.42
LONF London Financial Corp. of DR 19.86 19.86 0.74 3.55 3.63 1.09 5.19 0.79 62.54 0.64
LISB Long Island Bancorp. Inc of NY 9.01 8.92 0.62 6.41 3.82 0.74 7.62 1.04 56.14 0.95
NAFB NAF Bancorp of IL 7.88 6.84 0.79 10.58 5.39 1.10 14.75 0.49 113.73 0.72
NBLF NBLA Financial Corp. of MO(8: 13.49 13.49 0.66 4.90 4.38 0.56 6.34 0.25 111.82 0.49
MFBC MFB Corp. of Mishawaka IN 14.51 14.51 0.56 3.37 3.69 0.85 5.09 0.03 529.85 0.20
MLBC ML Bancorp of Villanova PA 7.53 7.34 0.72 9.30 6.61 0.65 8.49 N/A N/A 1.73
MBB MSB Bancorp of Middletown NY* 6.55 2.57 0.18 2.32 2.29 0.20 2.53 0.70 36.62 0.60
MSBF MSB Financial Corp. of ILL 16.61 16.61 1.20 6.08 5.55 1.49 7.58 1.02 48.65 0.57
MGBL Llagna Bancorp or MS(8) 9.57 9.25 1.38 14.29 5.04 1.63 16.86 3.25 22.63 1.12
MERH Marlon Capital Holdings of IN 23.05 23.05 1.32 5.68 5.61 1.59 6.85 0.76 153.22 1.35
MRKF Market Fin. Corp of CH 33.20 33.20 0.89 2.68 2.92 1.17 3.53 0.89 10.40 0.20
MFCX Marshal town Fin, Corp. of MA(8) 15.61 15.61 0.34 2.17 1.98 0.71 4.56 N/A N/A 0.19
MFSL Maryland Fed. Bancorp of MO 8.44 8.33 0.58 6.97 4.59 0.34 10.17 N/A N/A N/A
MASB MassBank Corp. of Reading MA* 9.98 9.98 1.10 10.91 7.70 1.02 10.12 0.19 128.64 0.88
MRLR Mayflower Co-op. Bank of MA* 9.43 9.26 1.00 10.42 7.39 0.98 10.18 1.03 90.08 1.56
MECH Mechanics SE of Hartford CT* 9.73 9.73 0.25 2.93 1.87 0.27 3.10 1.71 67.13 1.72
MSBK Medford Savings Bank of MA* 3.30 8.14 1.04 11.72 7.84 1.01 11.37 0.45 146.30 1.22
<CAPTION>
Pricing Ratios Dividend Data(6)
------------------------------------------- ---------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Care Divi-/ dend Payout
Financial Intalation Earning Book Assets Book Earnings Shares yeild Ratio
- -------------------- ------- ---- ------ ---- -------- ------ ----- -----
(%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASCAQ Listed O-C Companies Continued
- -------------------------------------
ABNK Highland Federal Bank of CA NH 152.04 11.34 152.04 23.17 0.00 0.00 0.00
HIFS Hingman Inst. for Sav. or ?* 11.49 131.59 12.57 131.59 11.49 0.40 2.01 23.12
HBEI Home Bancorp or ? EL NH 111.19 31.26 111.19 NH 0.40 2.50 NH
HEFW Home Bancorp of Fort Wayne IH NH 118.30 16.50 118.30 16.75 0.20 0.97 29.41
HBBI Home Building Bancorp of IX NH 115.96 14.00 115.96 28.38 0.30 1.43 NH
SCFC Home City Fin. Corp. of OH 22.45 94.79 19.53 94.79 18.18 0.32 2.29 62.75
HFBF Home Fev Bancorp of Seymour IN 14.38 167.78 14.17 173.44 12.12 1.50 1.80 25.91
HFBH Home Financial Bancorp of IN NH 104.17 19.41 104.17 24.61 0.20 1.27 44.44
HFBC Home Fort Bancorp, Inc. of BA* 11.98 182.27 19.71 182.27 12.05 0.30 3.95 47.34
? Homeccrp, Inc. of Rocktorc IL NH 113.82 7.17 113.82 18.51 0.00 0.00 0.00
AZFS Horizon Fin'l. Services of LA* 25.67 59.69 10.46 99.69 18.33 0.32 1.66 42.67
HRZB Horizon Financial Corp. of NA 15.35 151.99 23.14 151 93 15.65 0.35 2.17 33.33
IBSF IES Financial Corp. of SJ NH 135.37 23.07 135.37 25.81 O.32 2.06 NH
I? IES Financial Corp. of LA NH 142.81 17.52 169.21 23.02 0.40 1.72 53.33
ITLA Imperial Thorne & Loan of CA* 11.68 135.94 15.46 136.52 11.68 0.00 0.00 0.00
IFSB Independence FSB Of DC NH 67.21 4.28 75.55 13.64 0.22 2.44 NH
INAB Indiana Conn. Bana, SB of IN NH 122.25 15.14 122.25 30.00 0.36 2.40 NH
IFSL Indiana Federal Corp. of ? 25.91 189.62 16.56 201.64 18.27 0.72 2.53 65.45
INBI Industrial Bancorp of CH NH 117.79 21.78 17.79 15.63 0.48 3.57 NH
IWBK Interwest SB and Oak Harbor WA 21.56 242.91 16.29 248.79 15.31 0.60 1.67 35.93
IPSW Ipswich SB of Ipswich WA 10.62 189.17 11.66 189.17 13.54 0.24 1.48 15.69
JSBF JSB Financial, Inc. of TX 10.89 127.09 28.17 127.09 16.74 1.40 3.19 50.72
JXVL Jacksonville Bancorp of TX 20.19 112.52 17.60 112.58 14.65 O.50 3.35 67.57
JKSB Jcksnville SB, NHC of IL (44.6) NH 132.88 13.68 132.88 22.88 0.40 2.27 NH
JSBA Jefferson Svgs Bancorp of MO NH 165.12 12.93 211.54 20.89 0.40 1.34 70.18
JOAC Joachin Bancorp of MO NH 106.62 30.90 106.62 NH 0.50 1.45 NH
KSAV KS Bancorp of Kenly MC 19.03 121.37 16.78 121.43 14.49 0.60 2.35 44.78
KSBK KSB Bancorp of Kingfield ME (4)* 12.73 159.82 10.91 172.67 12.71 0.24 0.69 8.73
KFBI Klamath First Bancorp of OH NH 133.64 27.32 133.64 21.55 0.30 1.60 50.85
LSBI LSB Fin. Corp. of Laragessa IN 22.20 115.56 10.49 115.56 26.42 0.32 1.53 34.04
LVSB Lalaveiw SB of Paterson NJ 11.32 155.20 15.74 193.81 18.12 0.25 0.78 8.77
LARK Landmark Bancshares of ? 20.53 111.10 16.25 111.10 16.49 0.40 1.99 40.82
LARL Laurel Capital Group of PA 14.33 148.17 15.44 148.17 11.20 0.44 2.05 29.33
LSBX Lawrence Savings Bank of MA* 8.27 152.27 13.38 152.27 8.27 0.00 0.00 0.00
LFEO Leeds FSB, HHC of MO (SE.2) NH 143.94 23.29 143.94 21.11 0.76 4.00 NH
LXMO Lexington BSL Fin. Corp. of MO NH 88.11 26.80 88.11 26.19 0.30 1.97 71.43
LIFB Life Bancorp of Norfolk VA 24.60 153.18 16.52 158.10 20.02 0.48 2.03 50.00
LFBI Little Falls Bancorp of MJ NH 98.74 12.78 107.29 26.64 0.12 0.85 44.44
LOGN Logansport Fin. Corp. of IN 19.18 112.81 22.17 112.81 14.74 0.40 2.86 54.79
LONF London Financial Corp. of DR 27.54 101.64 20.19 101.64 18.62 0.24 1.61 44.44
LISB Long Island Bancorp. Inc of NY 26.17 167.07 15.05 168.71 22.02 0.60 1.66 43.48
NAFB NAF Bancorp of IL 18.55 169.13 13.33 194.77 13.30 0.42 1.02 18.83
NBLF NBLA Financial Corp. of MO(8: 22.86 111.58 15.06 111.58 17.65 0.40 1.67 38.10
MFBC MFB Corp. of Mishawaka IN 27.82 100.82 14.63 100.82 15.46 0.32 1.62 45.07
MLBC ML Bancorp of Villanova PA 15.13 140.66 10.59 144.18 16.57 0.40 2.10 31.75
MBB MSB Bancorp of Middletown NY* NH 98.36 6.41 NH NH 0.60 3.12 NH
MSBF MSB Financial Corp. of ILL 18.03 110.33 18.33 110.33 14.47 0.56 2.55 45.90
MGBL Llagna Bancorp or MS(8) 19.83 NH 26.22 NH 16.80 0.60 2.28 45.11
MERH Marlon Capital Holdings of IN 17.81 102.86 23.71 102.86 14.78 0.38 3.99 69.29
MRKF Market Fin. Corp of CH NH 91.74 30.46 91.74 26.00 0.00 0.00 0.00
MFCX Marshal town Fin, Corp. of MA(8) NH 107.54 16.79 107.54 24.00 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MO 21.80 149.09 12.59 151.13 14.95 0.90 1.81 39.41
MASB MassBank Corp. of Reading MA* 12.99 139.59 13.93 139.59 14.00 1.08 2.31 30.00
MRLR Mayflower Co-op. Bank of MA* 13.53 136.26 12.85 138.67 13.85 0.60 3.33 45.11
MECH Mechanics SE of Hartford CT* NH 129.31 12.58 129.31 NH 0.00 0.00 0.00
MSBK Medford Savings Bank of MA* 13.09 149.29 13.14 161.29 13.50 0.72 2.36 30.90
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Marker Line - Part Two
Prices As of June 20, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------------- -----------------------
Tang
Equity/ Equity/ Reported Earnings Core Earnings NPAs Resvs/ Resvs/
--------------------------- ----------------
Financial Institution Assets Assets ROA(5) ROE(5) (ROI)(5) ROA(5) (ROE)(5) Assets NPAs Loans
- --------------------- ------- --------- ------- --------- --------- ------- --------- --------- ------ -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MERI Reritrust FSB of Throbogaux LS 7.90 7.90 0.60 7.01 4.66 0.98 12.87 0.38 80.65 0.58
MWBX Metro West of MA 7.34 7.34 1.37 18.25 8.99 1.37 18.25 1.19 98.62 1.37
MCBS Mid Continent Bancshares of KS 10.04 10.04 1.02 9.26 6.36 1.17 10.58 0.19 53.92 0.19
MIFC Mid Iowa Financial Corp. of IA 9.10 9.09 0.91 9.88 7.31 1.19 12.96 0.13 186.45 0.44
MCBN Mid-Coast Bancorp of ME 9.60 9.60 0.40 4.53 4.97 0.84 7.23 0.40 128.70 0.61
MWBI Midwest Bancshares, Inc. of IA 6.94 6.94 0.26 6.80 5.84 0.77 11.24 0.82 61.28 0.34
MWFO Midwest Fed. Fin. Corp of WI 3.61 8.25 0.94 10.88 5.87 0.91 10.60 0.14 543.01 1.01
MFFC Milten Fed. Fin. Corp. of OH 14.74 14.74 0.53 3.00 2.86 0.72 4.13 0.32 91.83 0.46
MIVI Miss. Yeild Hold. Co. of ?? 18.26 18.26 0.68 3.67 3.97 1.01 5.44 0.25 488.70 1.93
MBSP Hitenald Bancorp of MC 43.33 43.33 1.34 3.08 2.87 1.68 3.86 2.06 24.32 0.52
MBBC Monterey Bay Bancorp of CA 10.74 9.65 3.28 2.17 1.85 0.51 3.99 0.36 94.16 0.61
MSBK Muttal ?B. FSB of Bay City ?? 6.01 6.01 3.09 1.62 1.56 0.04 0.65 0.17 168.15 0.71
MHIB ?? Thrift Bancshares of ?? 7.48 6.34 3.33 4.46 2.89 0.49 6.59 1.03 91.05 1.14
NSLB MS?&L Bancorp of Iteosho HO 19.93 19.93 0.49 2.30 2.48 0.74 3.47 0.06 127.27 0.13
NMSB Nempil Bancorp. of CT* 9.97 9.97 0.82 7.36 6.34 0.80 7.62 1.30 123 07 3.01
MASB North American SA of M? 7.97 7.71 1.23 16.83 8.75 1.19 16.35 3.34 26.40 1.00
MBSI North Bancshares of Chicago IL 14.61 14.61 0.46 2.95 2.70 0.65 4.19 NA NA 3.28
FFFD North Central Bancshares of IA 24.58 24.58 1.70 6.31 6.43 1.98 7.35 0.22 457.01 1.18
??B? Northeast Bancorp of HE* 6.95 6.01 0.33 4.74 4.45 0.31 4.52 1.37 77.15 1.32
MEIB Northeast Indiana Bncrp of IN 15.16 15.16 1.04 5.98 6.27 1.23 7.07 0.49 126.20 0.71
??EQ Northeast Equity Corp. of WI 11.42 11.42 0.77 6.16 5.76 0.97 7.83 NA NA 0.59
YWSB Northwest SB, NHC of PA (29.9) 9.71 9.13 0.69 6.58 3.67 1.00 9.95 0.84 80.17 0.89
OSSY Northwalk Savings Society of CT* 8.06 7.77 0.97 12.51 8.53 1.11 14.32 2.09 56.84 1.70
NSSB Nor?icn Financial Corp. of CT* 10.99 9.86 1.03 9.60 5.92 0.97 9.10 1.00 200.13 2.98
NTMG Nutmeg FS&LA of CT 5.69 5.69 0.27 4.76 4.12 0.35 6.16 NA NA 0.60
OHGL O?SL Financial Corp. of ?? 11.04 11.04 0.51 5.15 4.28 0.86 7.34 0.33 68.18 0.31
???? Ocean Fin. Corp. of ?? 17.32 17.32 -0.04 -O.29 -0.18 O.95 6.33 0.64 69.12 0.88
UCW? Ocean Financial Corp. of FL 8.50 8.50 2.70 32.38 8.72 1.96 23.50 4.10 19.90 1.13
OFCP Otland Financial Corp. of MI 3.34 7.08 0.43 4.52 3.11 0.74 7.76 0.31 112.26 0.42
PFFB PFF Bancorp of Panona CA 10.47 10.35 0.11 0.93 0.81 0.45 3.74 1.87 58.54 1.50
PSFI PS Financial of Chicago IL 43.22 43.22 1.92 4.46 4.47 1.98 4.59 O.43 57.23 0.52
PVFC PVF C??la Corp. of C? 7.02 7.02 1.05 15.54 8.05 1.39 20.48 1.20 61.53 0.79
PCCI Pacific Crest Capital of CA* 7.22 7.22 1.05 13.05 7.93 0.89 11.08 1.23 82.93 1.62
PALM Palfed. Inc. of Aiken SC 9.11 9.11 0.06 0.70 0.42 0.57 6.99 2.52 42.12 1.29
PHCI Pomrapo Bancoro, Inc. Of ?J 12.30 12.70 0.94 5.70 5.42 1.18 3.04 3.60 20.89 1.33
PFED Park Bancorp of Chicago IL 21.69 21.69 0.77 4.08 3.59 1.07 5.70 0.20 139.28 0.70
PVSA Parkya ? Financial Corp of FA 1.48 7.41 0.71 9.51 5.78 1.07 14.27 0.24 604.11 2.08
PB?X Patriot Park Corp. of PA 8.09 8.09 0.47 4.26 3.19 0.65 5.81 0.13 242.39 0.65
PEEK Peskskill Fin. Corp. of NY 25.57 25.57 1.07 3.74 4.20 1.38 1.81 1.23 26.98 1.36
PFSB PennFed Fin.Services of ?J 7.53 6.21 0.57 7.10 4.93 0.85 10.57 0.69 31.83 0.31
PWBC PennFirst Bancorp of PA 7.07 6.45 0.43 5.89 5.07 0.64 8.84 0.58 86.14 1.57
PWBK Peanwood SB of PA* 19.47 19.47 0.61 3.89 3.07 0.97 6.17 1.13 57.64 1.40
PBKB People's SB of Brochton MA* 9.61 5.37 0.80 14.39 7.67 0.47 8.56 0.38 91.05 1.65
PFDC Peoples Bancorp of Auourn I? 15.18 15.18 1.10 7.16 6.07 1.45 9.50 0.42 73.36 0.39
PBCT Peoples Bank, NHC of CT (37.4) 8.41 8.40 1.10 13.63 5.02 0.88 10.86 0.91 125.48 1.68
FFFC Peoples Fin. Corp. of O? 26.90 26.90 0.08 0.31 0.33 0.40 1.48 0.01 NA 0.41
FHBK Peoples Heritage Fin Grp of HE* 8.21 8.93 1.24 14.93 5.69 1.32 15.97 0.94 130.42 1.77
PB?B Peoples Sav. Fin. Corp. of CT(8)* 9.00 9.00 0.93 9.31 6.07 0.92 9.26 0.54 70.66 0.69
PSFC Peoples Sidney Fin. Corp. of OH 23.26 23.26 0.92 3.97 4.11 1.21 5.18 1.00 42.00 0.45
FERM Permanent Bancorp of IL 9.70 9.60 0.24 2.35 1.84 0.52 5.16 1.08 46.25 0.98
PMFI Perpetual Midwest Fin. of IA 8.50 8.50 0.09 0.99 0.95 0.26 2.92 0.41 172.00 0.94
PERT Perpetual of SC, ??? (46.8) 11.20 13.20 0.75 6.48 3.39 1.06 9.13 NA NA 1.01
PCBC Perry C?. Fin. Corp. of ?? 18.25 18.85 0.71 3.66 3.54 0.96 4.97 0.05 54.10 0.20
PHFC Pittsburgh h?me Fin. of PA 11.47 11.34 0.57 4.58 3.93 0.81 6.53 1.74 30.40 0.78
PFSL Poc?bnis Feo, MHC of AR (46.4) 6.38 6.38 0.58 9.56 6.46 0.81 13.35 0.28 170.57 1.20
POBS Portsmouth Bank Shrs Inc of MH(8)* 25.12 25.12 2.24 8.99 6.38 1.95 7.85 0.38 69.08 0.70
<CAPTION>
Pricing Ratios Dividend Data(6)
------------------------------------------ -----------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earnings Book Assets Book Earnings Shares Yield Ratio(7)
- --------------------- -------- ----- ------ ----- -------- ------- ------ -----------
(X) (%) (%) (%) (X) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MERI Reritrust FSB of Throbogaux LS 21.47 162.81 12.37 162.81 13.19 0.70 1.84 39.55
MWBX Metro West of MA 11.12 190.41 13.97 190.41 11.12 0.12 2.16 24.00
MCBS Mid Continent Bancshares of KS 15.71 144.43 14.51 144.43 13.75 0.40 1.45 22.86
MIFC Mid Iowa Financial Corp. of IA 13.67 130.40 11.87 130.60 10.42 0.08 0.91 12.50
MCBN Mid-Coast Bancorp of ME 20.10 90.15 7.75 90.15 12.58 0.52 2.67 53.61
MWBI Midwest Bancshares, Inc. of IA 17.12 113.68 7.89 113.68 10.36 0.60 1.90 32.61
MWFO Midwest Fed. Fin. Corp of WI 17.03 185.27 15.96 192.87 17.48 0.34 1.72 29.31
MFFC Milten Fed. Fin. Corp. of OH NM 123.67 18.22 123.67 25.45 0.60 4.29 NM
MIVI Miss. Yeild Hold. Co. of ?? 25.21 94.02 17.17 94.02 17.00 0.16 1.09 27.59
MBSP Hitenald Bancorp of MC NM 107.91 46.76 107.91 27.75 0.00 O.00 0.00
MBBC Monterey Bay Bancorp of CA NM 119.81 12.87 130.66 29.39 0.10 0.60 32.26
MSBK Muttal ?B. FSB of Bay City ?? NM 103.33 6.21 103.33 NM 0.00 0.00 0.00
MHIB ?? Thrift Bancshares of ?? NM 132.96 9.94 156.89 23.46 0.50 3.28 NM
NSLB MS?&L Bancorp of Iteosho HO NM 100.92 20.11 100.92 26.61 0.50 3.03 NM
NMSB Nempil Bancorp. of CT* 15.77 126.08 12.57 126.08 16.27 0.24 2.34 36.92
MASB North American SA of M? 11.43 180.70 14.41 186.76 11.76 0.80 1.32 20.78
MBSI North Bancshares of Chicago IL NM 113.64 16.60 113.64 26.01 0.43 2.49 NM
FFFD North Central Bancshares of IA 15.56 104.52 25.70 104.52 13.39 0.25 1.64 25.51
??B? Northeast Bancorp of HE* 22.45 106.52 7.40 123.24 23.56 0.32 2.23 50.00
MEIB Northeast Indiana Bncrp of IN 15.96 100.87 15.30 100.87 13.51 0.32 2.13 34.04
??EQ Northeast Equity Corp. of WI 17.35 113.99 13.01 113.99 13.66 0.48 3.25 56.47
YWSB Northwest SB, NHC of PA (29.9) 27.23 183.73 17.85 195.51 18.83 0.32 2.10 57.14
OSSY Northwalk Savings Society of CT* 11.72 137.12 11.05 142.21 10.24 0.40 1.41 16.53
NSSB Nor?icn Financial Corp. of CT* 16.88 158.51 17.42 176.72 17.81 0.56 2.48 41.79
NTMG Nutmeg FS&LA of CT 24.26 112.24 6.39 112.24 18.75 0.00 0.00 0.00
OHGL O?SL Financial Corp. of ?? 23.38 120.24 13.27 120.24 16.40 0.81 3.49 NM
???? Ocean Fin. Corp. of ?? NM 121.32 21.62 121.32 25.48 0.80 2.42 NM
UCW? Ocean Financial Corp. of FL 11.49 NM 30.09 NM 15.82 0.00 0.00 0.00
OFCP Otland Financial Corp. of MI NM 149.30 13.20 186.57 18.75 0.40 1.78 57.14
PFFB PFF Bancorp of Panona CA NM 122.43 12.82 123.83 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 22.35 99.13 42.84 99.13 21.69 0.32 2.17 48.48
PVFC PVF C??la Corp. of C? 12.42 177.53 12.47 177.53 9.42 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 12.61 158.60 11.46 158.60 14.36 0.00 0.00 0.00
PALM Palfed. Inc. of Aiken SC NM 165.74 13.43 165.74 23.84 0.12 0.72 NM
PHCI Pomrapo Bancoro, Inc. Of ?J 18.46 120.21 15.39 121.24 13.08 1.00 5.06 NM
PFED Park Bancorp of Chicago IL 27.83 92.88 20.15 92.88 19.93 0.00 0.00 0.00
PVSA Parkya ? Financial Corp of FA 17.30 158.40 11.84 159.74 11.53 0.52 1.83 31.71
PB?X Patriot Park Corp. of PA NM 144.85 11.71 144.85 22.97 0.35 2.15 67.31
PEEK Peskskill Fin. Corp. of NY 23.81 102.88 26.31 102.88 18.52 0.36 2.40 57.14
PFSB PennFed Fin.Services of ?J 20.27 140.00 10.54 169.79 13.62 0.28 1.02 20.74
PWBC PennFirst Bancorp of PA 19.74 117.46 8.31 128.76 13.16 0.36 2.40 47.37
PWBK Peanwood SB of PA* NM 98.04 19.09 98.04 20.55 0.32 2.13 69.57
PBKB People's SB of Brochton MA* 13.03 176.43 9.90 184.17 21.91 0.44 2.91 37.93
PFDC Peoples Bancorp of Auourn I? 16.48 117.91 17.90 117.93 12.43 0.60 2.70 44.44
PBCT Peoples Bank, NHC of CT (37.4) 19.92 NM 21.45 NM 25.00 0.67 2.53 50.38
FFFC Peoples Fin. Corp. of O? NM 94.25 25.35 94.25 NM 0.50 3.28 NM
FHBK Peoples Heritage Fin Grp of HE* 17.88 226.84 18.62 NM 16.71 0.72 2.01 36.00
PB?B Peoples Sav. Fin. Corp. of CT(8)* 16.48 150.23 14.43 160.33 16.56 0.92 2.51 41.82
PSFC Peoples Sidney Fin. Corp. of OH 24.32 96.66 22.49 96.66 18.66 0.00 0.00 0.00
FERM Permanent Bancorp of IL NM 130.01 12.61 131.30 24.75 0.30 1.20 65.22
PMFI Perpetual Midwest Fin. of IA NM 107.22 9.11 107.22 NM 0.30 1.58 NM
PERT Perpetual of SC, ??? (46.8) 29.50 149.82 19.91 149.82 20.92 1.40 4.75 NM
PCBC Perry C?. Fin. Corp. of ?? 28.21 105.28 19.85 105.28 20.79 0.40 2.03 57.14
PHFC Pittsburgh h?me Fin. of PA 25.42 109.41 12.55 110.70 17.85 0.24 1.60 40.68
PFSL Poc?bnis Feo, MHC of AR (46.4) 15.49 142.03 9.06 142 03 11.10 0.90 4.34 67.16
POBS Portsmouth Bank Shrs Inc of MH(8)* 15.69 142.22 35.73 142.22 17.98 0.80 3.75 58.82
</TABLE>
<PAGE>
RP FINANCIAL
- ----------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
1700 NORTH MOORE STREET, SUITE 2210
ARLINGTON, VIRGINIA 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
------------------------------------------------------------------ -----------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings NPAs Resvs/ Resvs/
---------------------------- -----------------
Financial Institution Assets Assets ROA(5) (ROE)(5) (ROI)(5) ROA(5) (ROE)(5) Assets NPAs Loans
--------- --------- -------- --------- --------- ------- --------- --------- ------ -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PTRS Potters Fianancial Corp of OH 8.91 8.91 0.31 3.45 3.48 0.67 7.45 0.83 231.18 3.23
PXPS Poughkeepsie Fin. Corp of NY 8.41 8.41 0.21 2.47 2.02 0.47 5.65 4.21 26.20 1.45
PRBC Prestige Bancorp of PA 11.69 11.69 0.27 2.17 2.03 0.53 4.61 0.32 78.54 0.39
PETE Primary Bank of NH(8)* 6.62 6.61 0.84 13.14 6.76 0.83 12.98 1.05 54.10 1.02
FFNC Progress Financial Corp. of PA 5.21 4.56 0.45 8.54 4.63 0.56 10.49 1.36 51.30 1.22
PSBK Progressive Bank, Inc. of NY* 8.35 7.40 1.10 13.18 8.37 1.11 13.28 0.84 127.85 1.58
PROV Provident Fin. Holdings of CA 14.22 14.22 0.23 1.72 1.55 0.11 0.86 1.97 44.11 1.03
PULB Pulaski SB, MHC of Mo (29.0) 12.59 12.59 0.49 3.91 2.30 0.78 6.24 NA NA 0.33
PLSK Pulaski SB, MHC of MO (46.0) 12.01 12.01 0.28 2.34 1.77 0.64 5.29 0.68 NA NA
PULS Pulse Bancorp of S. River ?? 7.90 7.80 0.72 8.47 5.96 1.08 12.67 0.75 60.59 1.83
QCFB QCF Bancorp of Virginia NH 17.64 17.64 1.24 6.25 6.44 1.24 6.25 NA NA NA
QCBC Quaker City Bancorp of CA 8.91 8.90 0.32 3.44 2.88 0.67 6.25 1.49 69.17 1.25
QCSB Queens County Bancorp of NY* 14.98 14.98 1.72 10.84 4.44 1.74 10.94 0.75 91.25 0.80
RCSB RCSB Financial, Inc. of NY (8)* 7.85 7.65 0.96 12.27 5.79 0.96 12.17 0.79 88.29 1.38
RARB Raritan Bancorp. of Raritan NJ* 7.68 7.54 0.93 12.34 7.27 1.01 13.36 0.46 179.82 1.27
REDF RedFed Bancorp of Redianus CA 3.18 8.17 0.12 1.71 0.96 0.47 6.50 3.26 34.86 3.33
RELY Reliance Bancorp, Inc. of NY 8.34 5.64 0.56 6.66 4.32 0.85 10.11 0.75 33.69 0.56
RELI Reliance Bancshares Inc of NY(8)* 61.06 61.06 1.32 2.16 3.03 1.32 2.16 NA NA 0.52
RIVR River Valley Bancorp of ??? 12.36 12.17 -0.18 -1.46 -1.42 -0.18 - 1.46 0.12 700.00 1.06
RFED Roosevelt Fin. Grp. Inc. of MO(6) 5.55 5.22 0.11 2.23 0.95 0.85 17.13 0.98 29.36 0.50
RSLH Roslyn Bancorp INc. of NY* 21.57 21.46 0.35 1.63 1.15 1.42 6.61 0.31 264.38 3.59
RVSA Ryrview SB, FSB MhC of MA (41.?)(?) 11.16 10.11 0.92 8.38 3.77 1.17 10.71 0.10 372.65 0.54
SCCB S. Carolina Comm. Bnshrs of SC 25.06 25.95 0.82 2.99 2.85 1.10 4.03 1.78 35.52 0.81
SBFL SB Fngr Lakes MHC of Ny (33.1) 9.45 9.45 0.07 0.71 0.48 0.49 4.77 0.78 68.91 1.22
SFED SFS Bancorp of Scnenecrady NY 12.99 12.99 0.46 3.46 3.64 0.83 5.22 0.69 58.23 0.57
SGVB SGV Bancorp of M. Covina CA 1.27 7.14 0.14 1.66 1.57 0.37 4.29 0.61 49.82 0.42
SISB SIS Bank of Springfield MA* 1.56 7.56 1.50 20.13 10.84 1.46 10.50 0.46 254.44 2.57
SJSA SJS Bancorp of St. Joseph MI (8) 10.41 10.41 0.17 1.51 1.06 0.49 4.26 0.36 131.93 0.65
SWCB Sandwich Co-Op. Bank of MA* 9.24 7.86 0.94 11.30 7.23 0.95 11.45 1.28 62.63 1.13
SECP Security Capital Corp. of WI (8) 16.85 15.85 1.15 7.17 4.66 1.38 8.58 0.11 989.84 1.46
SFSL Security First Corp. of OH 9.36 9.20 1.10 11.88 5.99 1.39 15.04 0.26 301.46 0.87
SMFC ???? Fin. Corp. of ??? 9.54 9.54 0.91 8.68 4.30 1.09 10.34 0.09 664.29 0.70
SOBI ???? Bancorp of S. Bend IN 16.41 15.41 0.29 1.67 2.03 0.58 3.35 0.25 102.04 0.35
SOSA Somerset Savings Bank of MA(8)* 6.90 5.90 0.65 10.29 6.77 0.58 10.29 6.50 19.62 1.69
SSFC South Street Fin. Corp. of NC* 25.44 25.44 0.77 4.27 2.12 1.03 5.74 0.28 63.69 0.39
SCBS Southern Commun. Bncshrs of AL 20.77 20.77 0.62 3.01 2.81 1.11 5.34 2.28 50.34 2.02
SMBC Southern Missouri Bncro of MO 15.67 15.67 1.03 6.46 5.79 1.01 6.33 1.10 37.60 0.64
SWBI Southwest Bancshares of IL 10.79 10.79 0.75 6.83 5.07 1.05 9.59 0.18 112.82 0.28
SYR? Sovereign Bancorp of PA 4.05 2.97 0.41 10.30 3.90 0.68 17.04 0.60 81.74 0.77
STFA St. Francis Cap. Corp. of WI 3.10 7.13 0.59 6.39 4.60 0.69 7.56 0.27 143.07 0.88
SPBC St. Paul Bancorp, Inc. of IL 6.74 8.71 0.68 7.65 3.78 1.00 11.30 0.48 163.91 1.18
STNO Standard Fin. of Chicago IL(8) 10.90 10.89 0.47 4.12 2.73 0.71 6.18 0.22 137.54 0.49
SFFC StateFed Financial Corp. of IA 17.60 17.60 1.04 5.59 5.49 1.27 6.87 1.89 15.67 0.37
SFIM Statewide Fin. Corp. of MO 10.52 10.50 0.50 4.60 3.86 0.89 8.23 0.49 30.61 0.81
STSA Sterling Financial Corp. of MA 3.99 3.39 0.07 1.61 0.95 0.31 7.68 0.43 119.58 0.81
SFSB Suburbfed Fin. Corp. of IL 6.56 6.54 0.33 4.93 4.16 0.54 8.08 0.27 75.49 0.33
SBCN ????? Bancorp. of OH(8) 11.67 11.67 0.51 4.13 3.89 0.75 6.14 0.19 725.46 1.73
ROSE I R Financial Corp. of NY* 6.16 6.16 0.98 15.56 7.49 0.85 13.70 0.40 108.61 0.83
THRO Tf Financial Corp. of FA 10.34 9.45 0.54 4.44 4.30 0.76 6.24 0.33 88.83 0.60
TPNZ Tappan Zee fin., Inc. of NY 17.92 17.92 0.69 4.14 3.15 0.64 3.82 NA NA 1.18
ESBK The Elmira SB FSB of Elmira NY* 6.30 6.03 0.28 4.48 4.62 0.27 4.28 0.83 76.33 0.80
GRIA The Greater New York SB of NY (8)* 6.27 6.27 0.46 7.67 4.05 0.40 6.60 7.49 8.61 1.72
TSBS Trenton SB, FSB NHC of ?? (35.0) 16.65 15.22 1.36 7.47 4.31 1.20 6.58 0.77 59.50 0.75
TRIC Tri-County Bancorp of NY 15.31 15.31 0.76 4.72 4.71 0.99 6.14 0.05 965.12 1.16
IWIN Twin City Bancorp of T? 12.92 12.92 0.57 4.36 3.68 0.79 6.04 0.19 127.41 0.33
UFRM United FS&LA or Rocky Mount NC 7.00 7.60 0.22 2.86 1.58 0.47 6.02 0.85 124.07 1.42
<CAPTION>
Pricing Ratios Dividend Data(6)
------------------------------------------ -----------------------------
Price/ Price Ind. Divi-
Price/ Price/ Price/ Tang. core Div./ dend Payout
Financial Institution Earnings Book Assets Book Earnings Share Yield Ratio(7)
--------- ------- ------- ------- -------- ------- -------- --------
(X) (%) (%) (%) (X) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PTRS Potters Fianancial Corp of OH 28.73 100.80 8.98 100.80 13.30 0.36 1.67 48.00
PXPS Poughkeepsie Fin. Corp of NY NM 120.70 10.15 120.70 21.89 0.10 1.44 74.33
PRBC Prestige Bancorp of PA NM 97.77 11.42 97.77 23.16 0.12 0.76 37.50
PETE Primary Bank of NH(8)* 14.80 179.96 11.91 180.35 14.98 0.00 0.00 0.00
FFNC Progress Financial Corp. of PA 21.59 173.67 9.05 198.33 17.59 0.08 0.84 18.18
PSBK Progressive Bank, Inc. of NY* 11.94 154.51 12.91 174.44 11.85 0.63 2.30 27.42
PROV Provident Fin. Holdings of CA NM 98.18 13.97 98.18 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of Mo (29.0) NM 169.77 21.37 169.77 27.24 1.00 5.48 NM
PLSK Pulaski SB, MHC of MO (46.0) NM 132.25 15.89 132.25 25.00 0.30 2.31 NM
PULS Pulse Bancorp of S. River ?? 16.77 149.32 11.64 149.32 11.21 0.70 3.67 59.83
QCFB QCF Bancorp of Virginia NH 15.53 111.72 19.71 111.72 15.53 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA NM 116.76 10.40 116.92 19.10 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 22.50 249.70 37.40 249.70 22.29 0.80 ?.73 39.02
RCSB RCSB Financial, Inc. of NY (8)* 17.27 211.84 16.63 217.34 17.40 0.60 1.33 22.90
RARB Raritan Bancorp Raritan NJ* 13.76 159.57 12.25 162.51 12.71 0.72 2.40 33.03
REDF RedFed Bancorp of Redianus CA NM 150.72 12.32 150.87 27.42 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 23.16 153.02 12.30 218.28 15.27 0.64 2.38 55.17
RELI Reliance Bancshares Inc of NY(8)* NM 71.18 43.47 71.18 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of ??? NM 102.64 12.59 104.24 NM 0.00 0.00 NM
RFED Roosevelt Fin. Grp. Inc. of MO(6) NM 237.40 13.16 NM 13.63 0.68 2.32 NM
RSLH Roslyn Bancorp INc. of NY* NM 142.05 30.63 142.76 21.51 0.20 1.00 NM
RVSA Syrview SB, FSB MhC of MA (41.?)(?) 26.51 212.36 23.69 234.29 20.75 0.22 1.00 26.51
SCCB S. Carolina Comm. Bnshrs of SC NM 106.66 27.68 106.66 26.07 0.60 3.29 NM
SBFL SB Fngr Lakes MHC of Ny (33.1) NM 146.41 13.84 146.61 NM 0.40 2.42 NM
SFED SFS Bancorp of Scnenecrady NY 27.50 95.60 12.42 95.60 15.28 0.28 1.70 46.67
SGVB SGV Bancorp of M. Covina CA NM 112.81 8.20 114.94 24.56 0.00 0.00 0.00
SISB SIS Bank of Springfield MA* 9.23 164.56 12.44 164.56 9.52 0.48 1.62 14.95
SJSA SJS Bancorp of St. Joseph MI (8) NM 153.80 16.02 153.80 NM 0.44 1.66 NM
SWCB Sandwich Co-Op. Bank of MA* 13.84 150.85 12.43 158.24 13.66 1.20 3.87 53.57
SECP Security Capital Corp. of WI (8) 21.48 150.43 23.85 150.43 17.93 1.20 1.27 27.27
SFSL Security First Corp. of OH 16.70 179.88 16.84 183.12 13.19 0.48 2.25 37.50
SMFC ???? Fin. Corp. of ??? 23.27 210.40 20.08 210.40 19.54 0.00 0.00 0.00
SOBI ???? Bancorp of S. Bend IN NM 92.01 14.18 92.01 24.58 0.28 1.90 NM
SOSA Somerset Savings Bank of MA(8)* 14.78 143.78 8.48 143.78 14.78 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 122.13 31.07 122.13 NM 0.40 2.42 NM
SCBS Southern Commun. Bncshrs of AL NM 107.14 22.25 107.14 20.07 0.30 2.11 75.00
SMBC Southern Missouri Bncro of MO 17.27 111.17 17.42 111.17 17.62 0.50 2.84 49.02
SWBI Southwest Bancshares of IL 19.71 134.96 14.56 134.96 14.04 0.76 3.71 73.08
SYR? Sovereign Bancorp of FA 25.67 236.91 9.59 NM 15.52 0.08 0.57 14.55
STFA St. Francis Cap. Corp. of WI 21.73 140.06 11.34 159.17 18.37 0.48 1.44 31.37
SPBC St. Paul Bancorp, Inc. of IL 26.46 197.38 17.25 197.95 17.92 0.48 1.42 37.50
STNO Standard Fin. of Chicago IL(8) NM 148.98 16.24 149.16 24.45 0.40 1.50 58.82
SFFC StateFEd Financial Corp. of IA 18.21 100.63 17.71 100.63 14.82 0.40 2.09 38.10
SFIM Statewide Fin. Corp. of MO 25.94 122.02 12.84 122.29 14.51 0.40 2.34 60.61
SFSA Sterling Financial Corp. of MA NM 169.34 6.76 199.58 22.09 0.00 0.00 0.00
SFSB Suburbfed Fin. Corp. of IL 24.02 115.40 7.58 115.89 14.67 0.32 1.31 31.37
SBCN ????? Bancorp. of OH(8) 27.08 111.05 12.96 111.05 18.22 0.60 3.08 NM
ROSE I R Financial Corp. of NY* 13.35 197.48 12.17 197.48 15.26 0.52 2.21 29.55
THRO Tf Financial Corp. of FA 23.25 107.49 11.65 123.29 16.55 0.40 2.12 50.63
TPNZ Tappan Zee fin., Inc. of NY NM 117.86 21.12 117.86 NM 0.20 1.21 38.46
ESBK The Elmira SB FSB of Elmira NY* 21.63 96.88 6.10 101.21 22.65 0.64 3.32 71.91
GRIA The Greater New York SB of NY (8)* 24.71 180.39 11.31 180.39 28.72 0.20 0.94 23.26
TSBS Trenton SB, FSB NHC of ?? (35.0) 23.21 168.98 28.13 184.83 26.35 0.35 1.79 41.57
TRIC Tri-County Bancorp of NY 21.25 98.29 15.05 98.29 16.35 0.60 2.82 60.00
IWIN Twin City Bancorp of T? 27.14 120.03 15.51 120.03 19.59 0.64 3.37 NM
UFRM United FS&LA or Rocky Mount NC NM 179.10 13.62 179.10 30.00 0.24 2.00 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Par: Two
Prices As Of June 20, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
----------------------------------------- --------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings NPAs Resvs/ Resvs/
---------------------- --------------
Financial Institution Assets Assets ROA(5) ROE(5) ROT(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ ------ ------ ------ ------ ----- ------ ----- ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UFCM United Fir. Corp. of MI 22.65 22.65 1.09 4.70 4.82 1.34 5.80 0.42 16.41 0.21
VABF Va. Beach Fed. Fin. Corp of Va 6.79 6.79 0.15 2.19 1.40 0.41 6.09 1.15 63.74 0.96
VFFC Virginia First Savings of VA(8) 8.05 7.78 1.36 17.14 8.00 1.25 15.72 2.29 47.29 1.19
WHGB HMG Bancshares OF MD 21.88 21.88 0.74 3.28 3.30 0.74 3.28 0.39 57.59 0.28
WSFS WSFS Financial Corp. of DE* 5.13 5.08 1.30 22.90 10.21 1.31 23.06 2.19 76.62 2.83
WVFC WVS Financial Corp. of PA* 12.72 12.72 1.08 8.12 6.37 1.34 10.10 0.31 229.86 1.31
WRRB Warren Bancorp of Peabody WA* 10.09 10.09 2.10 22.37 11.22 1.73 18.49 1.39 81.06 1.81
WFSL Washington FSSLA of Seattle WA 11.56 10.41 1.65 14.21 6.72 1.83 15.74 0.90 52.91 0.66
WAMW Washington Mutual Inc. of WA* 5.01 4.73 0.24 4.46 1.15 0.70 13.14 0.93 85.52 1.13
WYNE Wayne Bancorp of NE 14.56 14.56 0.37 2.58 2.00 0.37 2.58 0.85 91.84 1.24
WAYN Wayne S&L Co. MIC of DE (47.8) 9.12 9.12 0.27 2.96 1.76 0.64 7.01 0.71 50.17 0.42
WCFB Wbstr Cty 558 MMC of CA (45.2) 23.56 23.56 1.01 4.44 3.12 1.35 5.89 0.27 141.96 0.67
WBST Webster Financial Corp. of CT 5.08 4.27 0.34 6.67 2.74 0.69 13.50 0.94 97.81 1.44
WEFC Wells Fin. Corp. of Wells MLI 14.24 14.24 0.63 4.43 4.35 1.02 7.14 0.30 106.53 0.36
WCBI NestCo Bancorp of IL 15.57 15.57 1.10 7.06 5.48 1.41 9.08 0.84 33.74 0.39
WSTA WesterFed Fin. Corp. of MI 10.98 8.67 0.56 4.33 3.15 0.78 5.99 0.22 226.57 0.75
WOFC Western Ohio Fin. Corp. of CH 13.41 12.64 0.31 2.02 2.18 0.44 2.90 0.96 45.88 0.59
WWFC Westwood Fin. Corp. of IM 9.22 3.17 0.43 4.44 3.67 0.80 8.22 0.14 146.31 0.51
WEHD Westwood Hostd Fin Corp of OH 30.96 30.96 0.55 2.11 1.60 0.93 3.54 NA NA 0.19
WFCO Winton Financial Corp. of OH 7.13 6.95 0.66 8.78 6.40 0.84 11.18 NA NA 0.33
FFWD Wood Bancorp of OH 12.70 12.70 1.00 7.48 6.05 1.24 9.24 0.10 346.50 0.41
YFCB Yonkers Fin. Corp. of NY 15.30 15.30 0.84 5.28 4.36 1.16 7.25 0.73 51.78 1.17
YFED York Financial Corp. of PA 8.43 8.43 0.60 7.20 4.97 0.77 9.28 2.49 22.69 0.65
<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)
- --------------------- -------- ------ ------ ------ -------- ----- ----- ------
(%) (%) (%) (%) (%) ($) (%) (%)
KASOAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UFCM United Fir. Corp. of MI 20.74 97.74 22.14 97.74 16.81 0.96 4.92 NN
VABF Va. Beach Fec. Fin. Corp of Va NN 154.89 10.51 154.89 25.68 0.20 1.56 NN
VFFC Virginia First Savings of VA(8) 12.50 199.30 16.07 206.39 13.63 0.10 0.44 5.52
WHGB HMG Bancshares OF MD NN 101.79 22.27 101.79 NN 0.20 1.40 42.55
WSFS WSFS Financial Corp. of DE* 9.80 225.12 11.55 227.38 9.73 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 15.70 125.61 15.98 125.61 12.62 0.90 3.11 48.78
WRRB Warren Bancorp of Peabody WA* 8.91 182.19 18.39 182.19 10.78 0.52 2.89 25.74
WFSL Washington FSSLA of Seattle WA 14.89 196.38 22.69 218.03 13.44 0.88 3.18 47.31
WAMW Washington Mutual Inc. of WA* NN NN 16.10 NN 29.57 1.04 1.66 NN
WYNE Wayne Bancorp of NE NN 117.68 17.13 117.68 NN 0.20 1.03 51.28
WAYN Wayne S&L Co. MIC of DE (47.8) NN 167.49 15.28 167.49 23.94 0.61 3.59 NN
WCFB Wbstr Cty 558 MMC of CA (45.2) NN 141.15 33.25 141.15 24.18 0.80 5.42 NN
WBST Webster Financial Corp. of CT NN 184.95 9.39 219.79 18.05 0.50 1.82 66.67
WEFC Wells Fin. Corp. of Wells MLI 22.98 100.35 14.29 100.35 14.25 0.00 0.00 0.00
WCBI NestCo Bancorp of IL 16.23 128.37 19.98 128.37 14.18 0.60 2.47 45.11
WSTA WesterFed Fin. Corp. of MI NN 111.82 12.28 141.52 22.91 0.42 2.04 64.62
WOFC Western Ohio Fin. Corp. of CH NN 94.79 12.71 100.55 NN 1.00 4.55 NN
WWFC Westwood Fin. Corp. of IM 27.24 118.28 10.90 133.50 14.72 0.20 1.10 29.85
WEHD Westwood Hostd Fin Corp of OH NN 97.17 30.08 97.17 NN 0.28 2.04 NN
WFCO Winton Financial Corp. of OH 15.62 125.07 8.92 128.25 12.26 0.46 3.51 54.76
FFWD Wood Bancorp of OH 16.54 121.28 15.40 121.28 13.39 0.40 2.37 39.22
YFCB Yonkers Fin. Corp. of NY 22.94 112.35 17.19 112.35 16.72 0.20 1.30 29.85
YFED York Financial Corp. of PA 20.10 139.39 11.75 139.39 15.60 0.50 3.08 61.86
</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
1997:Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
June 20, 1997 7796.5 898.7 1,447.1 625.9 344.8
</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
------------------------------------------ ---------------------------------------------
05/30/97 1 MONTH YTD 52 WEEK 1 MONTH YTD 52 WEEK
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 577.9 537.2 483.6 383.4 7.58 19.50 50.75
MHC Index 628.7 587.7 538.0 424.8 6.98 16.84 47.98
INSURANCE INDICES
- -----------------------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 516.8 484.2 439.2 359.6 6.75 17.67 43.74
BIF Thrifts 757.3 689.7 616.8 454.9 9.80 22.78 66.49
STOCK EXCHANGE INDICES
- -----------------------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 172.6 166.7 156.2 134.9 3.52 10.49 27.95
NYSE Thrifts 342.3 314.7 277.3 257.9 8.75 23.45 32.71
OTC Thrifts 667.0 622.5 569.7 459.1 7.16 17.08 45.28
GEOGRAPHICAL INDICES
- -----------------------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,148.2 1,077.4 970.7 745.1 6.58 18.29 54.09
Midwestern Thrifts 1,293.8 1,234.5 1,159.3 970.8 4.80 11.60 33.27
New England Thrifts 498.8 458.4 428.9 318.4 8.82 16.31 56.68
Southeastern Thrifts 521.3 499.4 447.2 383.9 4.40 16.58 35.80
Southwestern Thrifts 383.5 347.5 315.9 264.2 10.35 21.41 45.14
Western Thrifts 592.5 539.7 474.7 377.6 9.78 24.81 56.90
ASSET SIZE INDICES
- -----------------------------------------------------------------------------------------------------------------------------------
Less than $250M 648.7 639.4 586.6 545.1 1.45 10.59 19.01
$250M to $500M 898.1 865.2 789.8 688.3 3.80 13.72 30.49
$500M to $1B 590.0 558.9 521.8 434.1 5.56 13.07 35.90
$1B to $5B 639.9 593.8 546.0 430.8 7.77 17.19 48.53
Over $5B 374.7 344.1 305.8 238.0 8.89 22.51 57.41
COMPARATIVE INDICES
- -----------------------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 7,331.0 7,009.0 6,448.3 5,693.4 4.59 13.69 28.76
S&P 500 848.3 801.3 740.7 671.7 5.86 14.52 26.29
</TABLE>
ALL SNL indices are market-value weighted: i.e., an institution's effect on
an index's 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 11649.
MID-ATLANTIC: DE, DC, PA, MD, NJ, NY, PR,; MIDWEST: IA, IL, IN, KS, KY,MI,
MN, MO, ND, NE, OH, SD, WI,; NEW ENGLAND: CT, ME, MA, NH, RI, VT;
SOUTHEAST: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV; SOUTHWEST: CO, LA, NM,
OK, TX, UT; WEST: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
COMPLETED MISSOURI THRIFT ACQUISITIONS 12/31/94-PRESENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Seller Financials at Deal Aannouncement Deal Terms at Announcement
---------------------------------------------------------------- --------------------------
Total TgEq/ TTM TTM NPAs/ Rsrvs/ Deal Deal
Comp/ Assets Assets ROE ROA Assets NPLs Value Price Consider
Ann'd Seller ST ($000) (%) ($000) ($000) (%) (%) ($M) Share (S) Type
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/25/96 Mutual Bancompany MO 54,913 11.31 0.00% 0.00% 0.00 NA 7.5 22.500 Stock
04/09/96 Roosevelt Financial MO
10/31/96 Sentinel Financial MO 151,578 7.25 2.87% 0.21% 0.01 2271.43 13.4 24.726 Stock
03/22/96 Roosevelt Financial MO
12/29/95 Kirksville Bacshrs MO 131,607 14.85 5.52% 0.82% NA NA 30.2 46.125 Stock
06/16/95 Roosevelt Financial MO
01/05/96 St Francois Cnty Fnl MO 39,751 18.53 4.03% 0.75% 0.03 NA 10.8 24.000 Cash
06/09/95 New Era Bancorp Inc MO
10/20/95 WSB Bancorp MO 95,676 18.98 2.46% 0.47% 0.06 514.75 26.2 22.750 Cash
04/12/95 Roosevelt Financial MO
AVERAGE 94,705 14.18 2.98% 0.45% 0.03 1393.09 17.6 28.020
MEDIAN 95,676 14.85 2.87% 0.47% 0.02 1393.09 13.4 24.000
Source: SNL Securities, LP.
<CAPTION>
- -------------------------------------------------------------------------------------
Deal Pricing at Announcement
-----------------------------------------------
Deal Pr/ Deal Pr/ Deal Pr/ Deal Pr/
Comp/ Pr/Bk Tg Bk Assets 4-Qtr
Ann'd Seller ST (%) (%) (%) EPS (x)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/25/96 Mutual Bancompany MO 121.62 121.62 14.56 NA
04/09/96 Roosevelt Financial MO
10/31/96 Sentinel Financial MO 108.71 108.81 9.32 13.66
03/22/96 Roosevelt Financial MO
12/29/95 Kirksville Bacshrs MO 137.11 137.11 22.17 21.16
06/16/95 Roosevelt Financial MO
01/05/96 St Francois Cnty Fnl MO 121.65 121.65 27.61 35.79
06/09/95 New Era Bancorp Inc MO
10/20/95 WSB Bancorp MO 125.34 125.34 27.03 29.17
04/12/95 Roosevelt Financial MO
AVERAGE 122.89 122.91 20.14 24.95
MEDIAN 121.65 121.65 22.17 25.17
Source: SNL Securities, LP.
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
PENDING MISSOURI THRIFT ACQUISITIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Seller Financials at Deal Announcement Deal Terms at Announcement
-------------------------------------- ----------------------------
Total TgEq/ YTD YTD NPAs/ Rsrvs/ Deal Deal
Ann'd Seller Purch/ Assets Assets ROAA ROAE Assets NPLs Value Price Per Consider
Date Buyer ST Pooling ($000) (%) (%) (%) (%) (%) (SM) Share (S) Type
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/28/97 American Fed S & L MO Not Disc 18,913 19.73 0.52 2.72 0.00 NA NA NA Not Disc
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Missouri HC MO
03/21/97 Reliance Financial MO Purchase 31,705 21.52 0.39 1.82 0.11 580.00 10.2 20.926 Stock
Allegiant Bancorp MO
12/23/96 Roosevelt Financial MO Purchase 9,047,562 5.35 0.60 10.90 0.74 196.37 1073.2 21.371 Mixture
Mercantile Bancorp MO
AVERAGE 3,032,727 15.53 0.50 5.15 0.28 388.19 541.7 21.149
MEDIAN 31,705 19.73 0.52 2.72 0.11 388.19 541.7 21.149
Source: SNL Securities. LP.
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
Deal Pricing at Announcement
----------------------------
Pr/ Pr/ Pr/
Ann'd Seller Purch/ Pr/Bk Tg Bk Assets 4-Qtr
Date Buyer ST Pooling (%) (%) (%) EPS(x)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
03/28/97 American Fed S & L MO Not Disc NA NA NA NA
- -----------------------------------------------------------------------------------------
Mid-Missouri HC MO
03/21/97 Reliance Financial MO Purchase 130.54 130.54 32.17 NA
Allegiant Bancorp MO
12/23/96 Roosevelt Financial MO Purchase 198.62 209.52 11.86 27.05
Mercantile Bancorp MO
AVERAGE 164.58 170.03 22.02 27.05
MEDIAN 164.58 170.03 22.02 27.05
Source: SNL Securities. LP.
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT IV-5
Director and Senior Management Summary Resumes
<PAGE>
EXHIBIT IV-5
Equality Savings and Loan Association, F.A.
Director and Senior Management Summary Resumes
LeRoy C. Crook, now retired, was a Vice President of Vess Bottling Company.
Kenneth J. Hrdlicka has been the Director of Business Development of
Anheuser Busch, Inc. for more than the past five years.
Michael J. Walsh has been a Vice President of ECC for more than the past
five years.
Richard C. Fellhauer has been affiliated with the Association since 1966
and assumed the position of Chairman of the Board, President and Chief Executive
Officer in 1982.
Daniel C. Aubuchon has been a partner with the law firm of Aubuchon,
Raniere & Lally, P.C. for more than the past five years.
Stacey W. Braswell has been a principal stockholder and Vice President of
Blaine-Braswell and Associates, an insurance agency, for more than the past five
years.
Berenice J.Mahacek has been retired since 1996. Prior to that time she was
a Senior Vice President of the Association.
Charles J. Wolter has been the President of Realty Net - Wolter Real Estate
for more than the past five years. Charles J. Wolter is the father of Leonard
O. Wolter, an executive officer of the Holding Company.
Michael A. Deelo has been an Executive Vice President and Chief Financial
Officer of the Association since 1996. Prior to that time, he served as Vice
President and Chief Financial Officer of the Association.
Source: Equality Savings' prospectus.
<PAGE>
EXHIBIT IV-6
Equality Savings and Loan Association, F.A.
Pro Forma Regulatory Capital Ratios
<PAGE>
Equality Bancorp, Inc.
Stock Order Form
------------------------------------
EXPIRATION DATE
EQUALITY SAVINGS for Stock Order
STOCK INFORMATION Forms:
CENTER , 1997
4131 S. Grand Blvd. 12:00 Noon,
St. Louis, MO 63118 Central Time
(314) 352-3199
- --------------------------------------------------------------------------------
IMPORTANT--PLEASE NOTE: A properly completed original stock order form must
be used to subscribe for common stock. Faxes or copies of this form will not
be accepted. Please read the Stock Ownership Guide and Stock Order Form
Instructions as you complete this Form.
- --------------------------------------------------------------------------------
The minimum number of shares that
(1) NUMBER OF SHARES may be subscribed for is 25
SUBSCRIPTION PRICE shares. The maximum number is
62,500 shares for any individual,
which includes Exchange Shares as
defined in the Prospectus.
(2) TOTAL PAYMENT DUE
$10.00
X =
[_]
(3) EMPLOYEE/OFFICER/DIRECTOR INFORMATION (6) PURCHASER INFORMATION
Eligible Account Holder --
Check here if you are a director, Check here if you were a
officer or employee of Equality Savings depositor of at least $50.00
or a member of such person's immediate at Equality Savings on March
family. 31, 1996. Enter information
below for all deposit
accounts that you had at
Equality Savings on March 31,
1996.
A. [_]
- -------------------------------------------
Check Amount
[_] (4) METHOD OF PAYMENT/CHECK
Supplemental Eligible Account
Holder--Check here if you
were a depositor of at least
$50.00 at Equality Savings on
, 1997 but are not an
Eligible Account Holder.
Enter information below for
all deposit accounts that you
had at Equality Savings on
, 1997.
B. [_]
Enclosed is a check,
bank draft or money
order made payable to
Equality Bancorp.
Inc. in the amount
of:
- -------------------------------------------
[_] (5) METHOD OF PAYMENT/WITHDRAWAL Other Member -- Check here if
you held a deposit at
Equality Savings on ,
1997 or a loan as of October
22, 1995 which was
outstanding on ,
1997.
C. [_]
The undersigned authorizes withdrawal
from the following account(s) at
Equality Savings. There is no penalty
for early withdrawal used for this
payment.
--------------------------------------
Account Number(s) Withdrawal
Amount(s)
-------------------------------------- Account Title (Names on
Accounts)
Account
Number(s)
-------------------------------------- ----------------------------------
-------------------------------------- ----------------------------------
-------------------------------------- ----------------------------------
Total Withdrawal ------------------
Amount PLEASE NOTE: FAILURE TO LIST
ALL YOUR ACCOUNTS MAY RESULT IN
THE LOSS OF PART OR ALL OF YOUR
SUBSCRIPTION RIGHTS. IF
ADDITIONAL SPACE IS NEEDED,
PLEASE UTILIZE THE BACK OF THIS
STOCK ORDER FORM.
(7) STOCK REGISTRATION/FORM OF STOCK OWNERSHIP
[_] Individual [_] Joint Tenants
[_] Tenants in Common
[_] Corporation or Partnership
[_] Uniform Gifts to Minors Act
[_] Fiduciary (i.e. trust, estate, etc.) [_] Other _________________
(8) NAME(S) IN WHICH STOCK IS TO BE REGISTERED (PLEASE PRINT CLEARLY)
Social Security # or
Tax ID
--------------------------
Name(s) continued (10) DIVIDEND DIRECT
DEPOSIT OPTION
[_]
Check here if you
Street Address City wish to have
dividends deposited
directly into an
Equality Savings
account.
(9) TELEPHONE State Zip Code
INFORMATION Daytime
( ) ACCOUNT NUMBER
------------- ----------------------
- --------------------------------------------------------------------------------
(11) NASD AFFILIATION
[_] (12) ASSOCIATE--ACTING
IN CONCERT
[_]
Check here, and
Check here if you are a member of the National complete the reverse
Association of Securities Dealers, Inc. ("NASD"), side of this Form, if
a person associated with an NASD member, a member you or any associates
of the immediate family of any such person to (as defined on the
whose support such person contributes, directly reverse side of this
or indirectly, or the holder of an account in Form) or persons
which an NASD member or person associated with an acting in concert
NASD member has a beneficial interest. To comply with you have
with conditions under which an exemption from the submitted other
NASD's Interpretation With Respect to Free-Riding orders for shares in
and Withholding is available, you agree, if you the Subscription
have checked the NASD Affiliation box, (i) not to and/or Community
sell, transfer or hypothecate the stock for a Offerings.
period of 90 days following issuance, and (ii) to
report this subscription in writing to the
applicable NASD member within one day of payment
therefor.
- --------------------------------------------------------------------------------
(13) ACKNOWLEDGMENT
This fully completed Stock Order Form must be actually received by Equality
Savings, no later than 12:00 p.m. Noon, Central Time, on , 1997,
unless extended; otherwise this Stock Order Form and all subscription rights
will be void. Completed Stock Order Forms, together with the required
payment or withdrawal authorization, may be delivered to any full service
office of Equality Savings or may be mailed to the Post Office Box indicated
on the enclosed business reply envelope. All rights exercisable hereunder
are not transferable and shares purchased upon exercise of such rights must
be purchased for the account of the person exercising such rights.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of Conversion and
Reorganization of First Missouri Financial, M.H.C. and Equality Savings and
Loan Association, F.A. (the "Plan of Conversion and Reorganization"). If the
Plan of Conversion and Reorganization is not approved by the voting members
of First Missouri Financial, M.H.C. at a Special Meeting to be held on
, 1997, or any adjournment thereof, or certain other conditions set forth
in the Plan of Conversion and Reorganization are not satisfied, all orders
will be cancelled and funds received as payment, with accrued interest, will
be returned promptly.
The undersigned agrees that after receipt by Equality Savings, this Stock
Order Form may not be modified, withdrawn or cancelled (unless the
conversion and reorganization is not completed within 45 days after the
completion of the Subscription Offering) without the consent of First
Missouri, and if authorization to withdraw from deposit accounts at Equality
Savings has been given as payment for shares, the amount authorized for
withdrawal shall not otherwise be available for withdrawal by the
undersigned.
Under penalty of perjury, I certify that the Social Security or Tax ID
Number and the other information provided under number 8 of this Stock Order
Form are true, correct and complete, that I am purchasing for my own account
and that there is no agreement or understanding regarding the transfer of my
subscription rights or the sale or transfer of these shares.
Applicable Regulations prohibit any person from transferring or entering
into any agreement directly or indirectly to transfer, the legal or
beneficial ownership of conversion subscription rights, or the underlying
securities to the account of another. Equality Savings and Equality Bancorp,
Inc. may 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 such transfer.
SIGNATURE DATE SIGNATURE DATE
I acknowledge that the common stock offered is not a savings or deposit
account and is not federally insured or guaranteed.
I also acknowledge receipt of a Prospectus dated , 1997
CATEGORY ____________
ORDER # ___ BATCH ___
DEPOSIT _____________
A SIGNED CERTIFICATION MUST ACCOMPANY ALL STOCK ORDER FORMS
(SEE REVERSE SIDE)
<PAGE>
ITEM (6)A, B, C--(CONTINUED)
Account Title (Names on Account Account Title (Names on Account
Accounts) Number(s) Accounts) Number(s)
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
ITEM (12)--(CONTINUED)
List below all other orders "Associate" is defined as: (i) any
submitted by you or your corporation or organization (other than
Associates (as defined) or by Equality Savings, First Missouri, Equity
persons acting in concert with Bancorp, or a majority-owned subsidiary of
you. Equality Savings, First Missouri or Equality
Bancorp) 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 a trustee or in
a similar fiduciary capacity; provided,
however, such term shall not include
Equality Bancorp's or Equality Savings'
employee benefit plans in which such person
has a substantial beneficial interest or
serves as a trustee or in a similar
fiduciary capacity; and (iii) any relative
or spouse of such person, or any relative of
such spouse, who has the same home as such
person or who is a director or officer of
Equality Savings, any of its subsidiaries,
First Missouri or Equality Bancorp.
Number of
Name(s) listed on Shares
other Stock Order Ordered
Forms
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK
FORM OF CERTIFICATION
I/WE ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED, AND IS NOT GUARANTEED BY EQUALITY SAVINGS AND LOAN
ASSOCIATION, F.A. (THE "ASSOCIATION") OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or guaranteed, or
is as safe as an insured deposit, I should call the Office of Thrift
Supervision, Midwest Regional Director, 112 W. John Carpenter Freeway,
Dallas, Texas 75039-2010 at (972) 281-2000.
I/We further certify that, before purchasing the common stock, par value
$.01 per share, of Equality Bancorp, Inc., the proposed holding company for
Equality Savings and Loan Association, F.A., I/we received a Prospectus
dated , 1997 (the "Prospectus").
The Prospectus that I/we received contains disclosure concerning the nature
of the security being offered and describes the risks involved in the
investment, including but not limited to:
1. Effect of Interest Rates
2. Reliance on Mortgage-Banking Operations
3. Federal Legislative Proposals Would Eliminate the Federal Savings
Association and Unitary Savings and Loan Holding Company Charters
4. Increase in Commercial Business Lending
5. Adequacy of the Association's Allowance for Loan Losses
6. Competition
7. Dependence on Key Personnel
8. Effect of Anti-Takeover Provisions in Discouraging Takeover Offers
and Changes in Management
9. Effect of Voting Control by Directors and Executive Officers on
Corporate Governance
10. Possible Dilutive Effect of Issuance of Additional Shares
11. Possible Adverse Income Tax Consequences
Signature Date Signature Date
Name (Please Print) Name (Please Print)
<PAGE>
FIRST MISSOURI FINANCIAL, M.H.C.
4131 SOUTH GRAND BOULEVARD
ST. LOUIS, MISSOURI 63118-3464
(314) 352-3333
NOTICE OF SPECIAL MEETING OF MEMBERS
TO BE HELD ON , 1997
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of the
members of First Missouri Financial, M.H.C. (the "Mutual Holding Company")
will be held at the Mutual Holding Company's office located at 4131 South
Grand Boulevard, St. Louis, Missouri, on , 1997, at .m., to consider
and vote upon:
(i) a Plan of Conversion and Reorganization, as amended from time to time
(the "Plan"), and a related Plan of Merger, pursuant to which (i) the
Mutual Holding Company, which owns 53.2% of the outstanding shares of
common stock of Equality Savings and Loan Association, F.A. (the
"Association"), will convert from mutual form to a federal interim stock
savings association and simultaneously merge with and into the
Association, whereby the Mutual Holding Company will cease to exist and
the Association's shares of common stock held by the Mutual Holding
Company will be canceled; (ii) the Association will establish, as a
wholly-owned subsidiary, Equality Bancorp, Inc., a Delaware corporation
(the "Holding Company"), that will become the new holding company for
the Association upon completion of the transactions contemplated by the
Plan, (iii) the Holding Company will establish, as a wholly-owned
subsidiary, a second federal interim stock savings association that will
merge with and into the Association, whereby the Association will become
a wholly-owned subsidiary of the Holding Company and the shares of
common stock held by the stockholders of the Association other than the
Mutual Holding Company will be converted into shares of Holding Company
common stock (the "Common Stock") under the terms of an exchange ratio
determined by the Board of Directors of the Mutual Holding Company; and
(iv) the Holding Company will grant nontransferable rights to subscribe
for shares of the Common Stock to certain persons in a subscription
offering according to certain preference categories and, subject to the
prior rights of holders of subscription rights, the Holding Company also
may offer shares of Common Stock in a community offering to members of
the general public (collectively, the "Conversion and Reorganization");
and
(ii) an adjournment of the Special Meeting if necessary to permit further
solicitation of proxies in the event there are insufficient votes at the
time of the Special Meeting to approve the Plan; and
(iii) such matters as may properly be brought before the Special Meeting or
any adjournment thereof (Note: Management of the Mutual Holding
Company is not aware of any such other matters).
The Board of Directors has fixed the close of business on , 1997, as
the record date for the determination of members entitled to notice of and to
vote at the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Richard C. Fellhauer
President and Chief Executive Officer
St. Louis, Missouri
, 1997
IMPORTANT
---------
YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY. PLEASE SIGN, DATE AND
PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE. THIS WILL ASSURE THAT YOUR VOTE
WILL BE COUNTED IF YOU ARE UNABLE TO ATTEND THE SPECIAL MEETING BUT WILL NOT
PREVENT YOU FROM ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON. YOU MAY
REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED TO THE SECRETARY OF THE
MUTUAL HOLDING COMPANY AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING, BY
SUBMITTING A LATER DATED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING
IN PERSON.
THE MUTUAL HOLDING COMPANY MAY NOT USE ANY PROXIES EXECUTED PRIOR TO THE
DATE OF THE ENCLOSED PROSPECTUS TO VOTE FOR THE PLAN. THEREFORE, THE FAILURE
OF A MEMBER TO RETURN AN EXECUTED PROXY WILL HAVE THE EFFECT OF A VOTE AGAINST
THE PLAN, UNLESS THE MEMBER ATTENDS THE SPECIAL MEETING AND VOTES IN PERSON.
THE BOARD OF DIRECTORS OF THE MUTUAL HOLDING COMPANY
RECOMMENDS THAT YOU VOTE FOR THE PLAN.
<PAGE>
FIRST MISSOURI FINANCIAL, M.H.C.
4131 SOUTH GRAND BOULEVARD
ST. LOUIS, MISSOURI 63118-3464
(314) 352-3333
----------------
PROXY STATEMENT
----------------
SPECIAL MEETING OF MEMBERS
TO BE HELD ON , 1997
PURPOSE OF THE SPECIAL MEETING
This Proxy Statement is being furnished to the members of the Mutual Holding
Company (the "Mutual Holding Company") in connection with management's
solicitation of proxies to be voted at the special meeting (the "Special
Meeting") of members of the Mutual Holding Company to be held at the Mutual
Holding Company's office located at 4131 South Grand Boulevard, St. Louis,
Missouri on , 1997, at .m., and at any adjournment thereof. The Special
Meeting is being held for the purpose of considering and voting on a Plan of
Conversion and Reorganization of First Missouri Financial, M.H.C. and Equality
Savings and Loan Association, F.A., as first adopted on May 16, 1997 and
subsequently amended (the "Plan"), which is attached to this proxy statement
as Appendix A, and a related Plan of Merger Between First Missouri Financial,
M.H.C. and Equality Savings and Loan Association, F.A., dated , 1997, a copy
of which is attached to this proxy statement as Appendix B, pursuant to which:
(i) the Mutual Holding Company, which owns 53.2% of the outstanding
shares of common stock of Equality Savings and Loan Association, F.A. (the
"Association"), will convert from mutual form to a federal interim stock
savings association ("Interim") and simultaneously merge with and into the
Association, whereby the Mutual Holding Company will cease to exist and the
Association's shares of common stock held by the Mutual Holding Company
will be canceled;
(ii) the Association will establish, as a wholly-owned subsidiary,
Equality Bancorp, Inc., a Delaware corporation (the "Holding Company"),
that will become the new holding company for the Association upon
completion of the transactions contemplated by the Plan;
(iii) the Holding Company will establish, as a wholly-owned subsidiary, a
second federal interim stock savings association that will merge with and
into the Association, whereby the Association will become a wholly-owned
subsidiary of the Holding Company and the shares of common stock (the
"Public Association Shares") held by the stockholders (the "Public
Stockholders") of the Association other than the Mutual Holding Company
will be converted into shares of Holding Company common stock (the
"Exchange Shares") under the terms of an exchange ratio determined by the
Board of Directors of the Mutual Holding Company (the "Exchange Ratio")
that will result in the holders of the Public Shares owning in the
aggregate approximately the same percentage of the common stock of the
Holding Company (the "Common Stock") to be outstanding upon the completion
of the transactions contemplated by the Plan as the percentage of shares of
common stock of the Association ("Association Shares") owned by them in the
aggregate immediately prior to the transactions, before giving effect to
(a) the payment of cash in lieu of issuing fractional Exchange Shares, (b)
any shares of Common Stock purchased by the Public Stockholders in the
Offerings (as hereinafter defined) or the Holding Company's Employee Stock
Ownership Plan (the "ESOP") thereafter, and (c) any exercise of dissenters'
rights; and
(iv) nontransferable rights to subscribe for shares of the Common Stock
will be granted to certain persons in a subscription offering according to
certain preference categories and, subject to the prior rights of holders
of subscription rights, the Holding Company also may offer shares of Common
Stock in a community offering to members of the general public
(collectively, the shares of Common Stock offered in the subscription and
community offerings (the "Offering") are hereinafter referred to as
"Conversion
<PAGE>
Shares" and the transactions contemplated by the Plan are hereinafter
referred to as the "Conversion and Reorganization"). Upon consummation of
the Conversion and Reorganization, the Association will change its name to
"Equality Savings Bank."
A vote in favor of the Plan and Plan of Merger also will constitute a vote
in favor of the amended federal stock charter of the Association, a copy of
which a Member may request from the Mutual Holding Company (see "HOW TO OBTAIN
ADDITIONAL INFORMATION"), to read in the form of a federal stock savings bank
charter; the amendment to take effect upon consummation of the Conversion and
Reorganization or shortly thereafter. Hereinafter, references to the Plan
shall be deemed to include the Plan of Merger.
RECOMMENDATION OF MANAGEMENT
THE BOARD OF DIRECTORS OF THE MUTUAL HOLDING COMPANY
RECOMMENDS THAT YOU VOTE FOR THE PLAN.
A VOTE IN FAVOR OF THE PROPOSED PLAN WILL NOT OBLIGATE ANYONE TO PURCHASE
COMMON STOCK IN THE CONVERSION AND REORGANIZATION, NOR WILL APPROVAL OF THE
PLAN BY THE MUTUAL HOLDING COMPANY'S MEMBERS AT THE SPECIAL MEETING OBLIGATE
ANY PERSON TO PURCHASE ANY COMMON STOCK.
Certain officers and directors of the Mutual Holding Company and the
Association will receive awards under various employee stock benefit plans
implemented at the time of the Conversion and Reorganization or shortly
thereafter. Accordingly, these officers and directors will benefit personally
from approval of the Plan.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The Board of Directors of the Mutual Holding Company has fixed the close of
business on , 1997, as the record date (the "Voting Record Date") for
the determination of members entitled to notice of and to vote at the Special
Meeting. All holders of the Association's savings, demand or other authorized
accounts of the Association are members of the Mutual Holding Company. All
members of record as of the close of business on the Voting Record Date who
continue to be members on the date of the Special Meeting or any adjournment
thereof will be entitled to vote at the Special Meeting or such adjournment.
Each holder of an account in the Association will be entitled at the Special
Meeting to cast one vote for each $100, or fraction thereof, of the withdrawal
value of all of the depositor's accounts in the Association as of the Voting
Record Date, up to 1,000 votes. (For example, a depositor with $2,031 on
deposit at the Association on or before the Voting Record Date would be
entitled to cast 21 votes.) Borrowers of the Association as of October 22,
1993 who had borrowings outstanding at such date that continue to be
outstanding as of the Voting Record Date are entitled to cast one vote at the
Special Meeting. Any number of members present and voting, represented in
person or by proxy at the Special Meeting, will constitute a quorum.
Approval of the Plan to be presented at the Special Meeting will require the
affirmative vote of at least a majority of the total outstanding votes of the
Mutual Holding Company's members eligible to be cast at the Special Meeting.
Any questions as to the eligibility of a member to vote or the number of votes
allocated to each member, or any other matter related to voting will be
resolved by the Secretary of the Mutual Holding Company at the time of the
Special Meeting, and the records of the Mutual Holding Company will control
any such resolution. As of the Voting Record Date for the Special Meeting,
there were approximately votes eligible to be cast of which votes
constitute a majority. Adjournment of the Special Meeting at which a quorum is
present to permit the further solicitation of proxies in the event there are
insufficient votes at the time of the Special Meeting to approve the Plan will
require the affirmative vote of at least a majority of the total outstanding
votes of the Mutual Holding Company's members represented, in person or by
proxy, at the Special Meeting.
2
<PAGE>
This proxy statement and related materials are first being mailed to Members
on or about , 1997.
APPROVAL OF THE PLAN WILL REQUIRE THE AFFIRMATIVE VOTE OF AT LEAST A
MAJORITY OF THE TOTAL OUTSTANDING VOTES OF THE MUTUAL HOLDING COMPANY'S
MEMBERS ELIGIBLE TO BE CAST AT THE SPECIAL MEETING.
PROXIES
Members may vote at the Special Meeting or any adjournment thereof in person
or by proxy. Any member giving a proxy will have the right to revoke his proxy
at any time before it is voted by giving written notice to the Secretary of
the Mutual Holding Company, provided that such written notice is received by
the Secretary prior to the Special Meeting or any adjournment thereof, by
submitting a later dated proxy or by attending the Special Meeting and
choosing to vote in person.
Enclosed is a proxy that may be used by any member to vote on the Plan. All
properly executed proxies received by the Board of Directors of the Mutual
Holding Company will be voted in accordance with the instructions indicated
thereon by the members giving such proxies. If no instructions are given, such
proxies will be voted in favor of the Plan (and the adjournment of the Special
Meeting, if necessary). If any other matters are properly presented before the
Special Meeting and may properly be voted upon, all proxies will be voted on
such matters in accordance with the best judgment of the proxy holders named
therein. If the enclosed proxy is returned, it may be revoked at any time
before it is voted by written notice to the Secretary of the Mutual Holding
Company, by submitting a later dated proxy, or by attending and voting in
person at the Special Meeting. The proxies being solicited are only for use at
the Special Meeting and any and all adjournments thereof, and will not be used
for any other meeting. A member may vote at the Special Meeting or any
adjournment thereof only by returning an executed proxy or by voting in
person. General proxies will not be voted on the Plan. Management is not aware
of any other business to be presented at the Special Meeting.
Deposits held in a trust or other fiduciary capacity may be voted by the
trustee or other fiduciary to whom voting rights are delegated under the trust
instrument or other governing document or applicable law. In the case of IRA
trusts established at the Association, the beneficiary may direct the
trustee's vote on the Plan by returning a completed proxy card to the Mutual
Holding Company. IF NO PROXY CARD IS RETURNED, THE TRUSTEE WILL VOTE IN FAVOR
OF APPROVAL OF THE PLAN ON BEHALF OF SUCH BENEFICIARY. The Association's Board
of Directors acts as trustee for IRA trusts established at the Association.
Proxies also may be solicited by officers, directors or other employees of
the Mutual Holding Company and the Association in person, by telephone or
through other forms of communication. Such persons will be reimbursed by the
Mutual Holding Company or the Association for their expenses incurred in
connection with such solicitation. If necessary to permit further solicitation
of proxies, the Special Meeting may be adjourned to a later date.
Questions regarding the voting of proxies or proxy revocation procedures,
may be directed to the Stock Information Center at telephone number (314) 352-
3199.
THE FAILURE OF A MEMBER TO RETURN AN EXECUTED PROXY WILL HAVE THE EFFECT OF
A VOTE AGAINST THE PLAN IF THE MEMBER DOES NOT ATTEND THE SPECIAL MEETING AND
VOTE FOR THE PLAN IN PERSON. THEREFORE, MEMBERS SHOULD MAKE EVERY EFFORT TO
RETURN AN EXECUTED PROXY.
3
<PAGE>
CAPSULE SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing in the Holding Company's
Prospectus, dated , 1997 (the "Prospectus"), being delivered herewith,
the contents of which are hereby incorporated herein by reference.
The Association: The Association is a federally-chartered-stock-
savings association regulated by the Office of
Thrift Supervision (the "OTS"), and its deposits
are insured by the Federal Deposit Insurance
Corporation (the "FDIC") through the Savings
Association Insurance Fund (the "SAIF"). The
deposits of the Association will continue to be
insured by the FDIC after the Conversion and
Reorganization. The Association was originally
chartered in 1884. At March 31, 1997, the
Association had total assets of $201.0 million,
deposit accounts of $123.0 million and total
stockholders' equity of $12.6 million. The
Association conducts its business through three
full-service branch offices and five limited-
service-loan-production offices. The Association's
main office is located at 4131 South Grand
Boulevard, St. Louis, Missouri 63118-3464, and its
telephone number is (314) 352-3333.
On October 22, 1993, Equality Savings and Loan
Association (the predecessor of the Association)
(i) reorganized into a mutual holding company and
changed its name to "First Missouri Financial,
M.H.C." and (ii) transferred substantially all of
its assets and all of its liabilities to the
Association, which sold a minority interest in
its common stock to depositors of Equality
Savings and Loan Association and various stock
compensation plans (the "Mutual Holding Company
Reorganization").
The Association's business is similar in many
respects to other savings associations in that it
gathers deposits from its local community and
uses these funds, along with FHLB advances, to
invest primarily in residential one- to four-
family mortgage loans, U.S. government and agency
securities and mortgage-backed securities and, to
a lesser extent, multifamily and commercial real
estate, consumer and commercial business loans.
Notwithstanding these traditional thrift
attributes, the Association's operations are
distinct in that it conducts its residential
mortgage lending business primarily through a
wholly-owned mortgage-banking subsidiary--
Equality Mortgage Corporation ("EMC").
The Holding Company: The Holding Company was incorporated as a
Delaware corporation on May 14, 1997 at the
direction of the Board of Directors of the
Association to hold all of the capital stock of
the Association and to facilitate the Conversion
and Reorganization. The Holding Company has not
engaged in any business to date and is not
expected to engage in any business until the
consummation of the Conversion and
Reorganization. The Holding Company's offices are
located at 9920 Watson Road, St. Louis, Missouri
63126, and its telephone number is (314) 965-
7090. Following the Conversion and
Reorganization, the Holding Company will be
subject to regulation by the OTS.
The Mutual Holding
Company: The Mutual Holding Company is a federally-
chartered--mutual-holding company that was
chartered in 1993 in connection with the
4
<PAGE>
Mutual Holding Company Reorganization. The Mutual
Holding Company's primary asset is 445,000
Association Shares, which represents 53.2% of the
total issued and outstanding Association Shares.
The Mutual Holding Company's only other assets
consist of a deposit account in the amount of
$50,000 as of March 31, 1997 (which will become
an asset of the Association upon consummation of
the Conversion and Reorganization).
The Conversion and
Reorganization: On May 16, 1997, the Boards of Directors of the
Association and the Mutual Holding Company
adopted the Plan, which was amended on June 20,
1997. The Holding Company is currently a first-
tier wholly owned subsidiary of the Association.
Pursuant to the Plan, (i) the Mutual Holding
Company will convert from mutual form to a
federal interim stock savings association and
simultaneously merge with and into the
Association, pursuant to which the Mutual Holding
Company will cease to exist and the Association
Shares held by the Mutual Holding Company will be
canceled, and (ii) Interim will then merge with
and into the Association. As a result of the
merger of Interim with and into the Association,
the Association will become a wholly-owned
subsidiary of the Holding Company and the Public
Association Shares will be converted into the
Exchange Shares pursuant to the Exchange Ratio,
which will result in the holders of such shares
owning in the aggregate approximately the same
percentage of the Common Stock to be outstanding
upon the completion of the Conversion and
Reorganization (i.e., the Conversion Stock and
the Exchange Shares) as the percentage of
Association Shares owned by them in the aggregate
immediately prior to consummation of the
Conversion and Reorganization, before giving
effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares, (b) any
shares of Conversion Stock purchased by the
Public Stockholders in the Offering or the ESOP
thereafter, and (c) any exercise of dissenters'
rights. Upon consummation of the Conversion and
Reorganization, the Association will change its
name to "Equality Savings Bank."
The Plan of Merger providing for the merger of
the Mutual Holding Company with and into the
Association, which is attached to this proxy
statement as Appendix B, and the Plan of Merger
providing for the merger of Interim with and into
the Association, each must be approved by the
holders of at least two-thirds of the outstanding
Association Shares at a special meeting of the
stockholders of the Association to be held for
such purpose on , 1997 (the "Stockholders'
Meeting"). The Plan of Merger between Interim and
the Association also must be approved by the
Holding Company, as the sole stockholder of
Interim.
In addition, the Mutual Holding Company, the
Association and the Holding Company
(collectively, the "Primary Parties") have
conditioned the consummation of the Conversion
and Reorganization upon the approval of the Plan,
including the Plans of Merger, by at least a
majority of the votes cast, in person or by
proxy, by the Public Stockholders at the
Stockholders' Meeting. The Plan is subject to the
approval of the OTS, and it also must be approved
by at least a majority of the total outstanding
votes of the voting members of the
5
<PAGE>
Mutual Holding Company at the Special Meeting,
which votes may be cast in person or by proxy.
See "SUMMARY OF PROPOSED CONVERSION AND
REORGANIZATION."
Securities Offered: Pursuant to the Plan, the Holding Company is
offering shares of its Common Stock in the
Offering.
Purchase Price: The Holding Company will offer shares of its
Common Stock in the Offering at a purchase price
of $10.00 per share (the "Purchase Price").
The Offering;
Purchase Priorities: As part of the Conversion and Reorganization, the
Holding Company is offering up to 920,000 shares
of Common Stock (i.e., Conversion Stock) at a
Purchase Price of $10.00 per share in the
Subscription Offering. As described in more
detail below, nontransferable rights to subscribe
for the Conversion Stock in the Subscription
Offering have been granted to certain persons
according to certain preference categories and,
subject to the prior rights of holders of
Subscription Rights, the Holding Company is also
offering shares of Conversion Stock in the
Community Offering to members of the general
public. In the event of an oversubscription in
the Subscription and Community Offering, up to
138,000 additional shares may be issued to
reflect changes in market and financial
conditions and to cover additional subscriptions.
The Primary Parties may reject, in whole or in
part, orders received in the Community Offering
in their sole discretion.
The Primary Parties have retained Trident
Securities, Inc. as consultant and advisor in
connection with the Offering and to assist in
soliciting subscriptions in the Offering.
Non-Transferability of
Subscription Rights: Prior to completion of the Conversion, holders of
Subscription Rights may not transfer or enter
into any agreement or understanding to transfer
Subscription Rights or the shares of Common Stock
to be issued upon the exercise of Subscription
Rights.
Subscription and Community
Expiration Time: Subscription Rights will expire at 12:00 noon,
St. Louis, Missouri time, on , 1997 (the
"Subscription Expiration Time"), unless the
Subscription Offering is extended by the
Association and the Holding Company. The
Community Offering, if one is held, is expected
to begin immediately after the Subscription
Expiration Time, but may begin at any time during
the Subscription Offering. The Community Offering
may terminate on or after the Subscription
Expiration Time, but not later than , 1997
(or , 1997 if the Subscription Offering is
fully extended) ("Community Offering Expiration
Time"), unless further extended with the consent
of the OTS.
Appraisal; Number of
Shares Offered: The Plan requires that the purchase price of the
Conversion Stock must be based on the appraised
pro forma market value of the Conversion Stock,
as determined on the basis of an independent
valuation. The Primary Parties have retained RP
Financial to make such valuation.
6
<PAGE>
The Appraisal has been prepared by RP Financial
in reliance upon the information contained in
this Prospectus, including the Consolidated
Financial Statements of the Association. RP
Financial also considered the following factors,
among others: the present and projected operating
results and financial condition of the Primary
Parties and the economic and demographic
conditions in the Association's existing market
area; certain historical, financial and other
information relating to the Association; a
comparative evaluation of the operating and
financial statistics of the Association with
those of other similarly situated publicly-traded
companies located in Missouri and Illinois and
other regions of the United States; the aggregate
size of the offering of the Conversion Stock; the
impact of the Conversion and Reorganization on
the Association's net worth and earnings
potential; the proposed dividend policy of the
Holding Company and the Association; and the
trading market for the Association Shares and
securities of comparable companies and general
conditions in the market for such securities.
RP Financial has advised the Primary Parties in
its opinion the estimated pro forma market value
of the Association and the Mutual Holding Company
on a combined basis was $15,037,594 as of June
20, 1997. Because the holders of the Public
Association Shares will continue to hold the same
aggregate percentage ownership interest in the
Holding Company as they currently hold in the
Association (before giving effect to the payment
of cash in lieu of issuing fractional Exchange
Shares, any exercise of dissenters' rights and
any shares of Conversion Stock purchased by the
Association's stockholders in the Offering or by
the ESOP thereafter), the Appraisal was
multiplied by the Mutual Holding Company's
percentage interest in the Association (i.e.,
53.2%) to determine the midpoint of the valuation
($8,000,000), and the minimum and maximum of the
valuation were set at 15% below and above the
midpoint, respectively, resulting in a range of
$6,800,000 to $9,200,000. The Boards of Directors
of the Primary Parties determined that the
Conversion Stock would be sold at $10.00 per
share, resulting in a range of 680,000 to 920,000
shares of Conversion Stock being offered.
Upon consummation of the Conversion and
Reorganization, the Conversion Stock and the
Exchange Shares will represent approximately
53.2% and 46.8%, respectively, of the Holding
Company's total outstanding shares. The Boards of
Directors of the Primary Parties reviewed RP
Financial's appraisal report, including the
methodology and the assumptions used by RP
Financial, and determined that the Offering Price
Range was reasonable and adequate. The Boards of
Directors of the Primary Parties also established
the formula for determining the Exchange Ratio.
Based upon such formula and the Offering Price
Range, the Exchange Ratio ranged from a minimum
of 1.5283 to a maximum of 2.0678 Exchange Shares
for each Public Association Share, with a
midpoint of 1.7981. Based upon these Exchange
Ratios, the Holding Company expects to issue
between 598,195 and 809,323 Exchange Shares to
the holders of Public Association Shares
outstanding immediately prior to the consummation
of the Conversion and Reorganization.
7
<PAGE>
Purchase Limitations: With the exception of Employee Stock Benefit
Plans (which would include the ESOP), which may
purchase up to an aggregate of 7% of the number
of shares of Conversion Stock to be issued in the
Offering, no person or entity, together with
associates of, or persons acting in concert with,
such person or entity, may purchase shares of
Conversion Stock in an amount that, when combined
with Exchange Shares received by such person,
exceeds 62,500 shares of Common Stock. Each
person subscribing for Conversion Stock in the
Offering must subscribe for at least 25 shares.
Because the purchase limitations contained in the
Plan include Exchange Shares to be issued to
Public Stockholders for their Public Association
Shares, certain holders of Public Association
Shares may be limited in their ability to
purchase Conversion Stock in the Offering.
Certain Benefits: The Board of Directors of the Holding Company has
approved three benefit plans pursuant to which
officers, directors and employees of the Holding
Company and the Association may be entitled to
receive, following the Conversion and
Reorganization, shares of Common Stock or options
to acquire shares of Common Stock, In addition,
the Board of Directors of the Holding Company has
approved employment agreements for its executive
officers.
In connection with the Mutual Holding Company
Reorganization, the Association adopted the ESOP
for the exclusive benefit of participating
employees. Employees who have attained the age of
21 years and have completed one year of service
with the Association are eligible to participate
under the ESOP. Upon consummation of the
Conversion and Reorganization, the ESOP will be
funded by contributions made by the Association
solely in cash. The ESOP intends to purchase in
the Offering up to an aggregate of 7% of the
number of shares of Conversion Stock to be issued
in the Offering.
The Board of Directors of the Holding Company
intends to adopt the 1997 Stock Option and
Incentive Plan (the "1997 Stock Option Plan") and
to submit it to stockholders for approval
following consummation of the Conversion and
Reorganization. The 1997 Stock Option Plan is
intended to promote stock ownership by directors
and selected officers and employees of the
Holding Company and the Association to increase
their proprietary interest in the Holding Company
and to encourage them to remain in the service of
the Holding Company or the Association.
Notwithstanding when the 1997 Stock Option Plan
is submitted to and approved by the stockholders,
upon receipt of stockholder approval to establish
the 1997 Stock Option Plan, the Board of
Directors intends to reserve an amount of stock
equal to 10% of the Conversion Stock sold in the
Offering for issuance under the 1997 Stock Option
Plan (or between 68,000 shares and 92,000 shares,
assuming the sale of between 680,000 shares and
920,000 shares of Conversion Stock in the
Offering).
The Board of Directors of the Holding Company
intends to adopt the 1997 Management Recognition
Plan and Trust (the "1997 MRP") and to submit it
to stockholders for approval following
consummation of the Conversion and
Reorganization. The 1997 MRP is intended as a
8
<PAGE>
method of providing directors, officers and
certain employees of the Holding Company or the
Association with a proprietary interest in the
Holding Company and to encourage such persons to
remain with the Holding Company or the
Association.
Notwithstanding when the 1997 MRP is submitted to
and approved by the stockholders, when the
Holding Company receives stockholder approval to
establish the 1997 MRP, the Holding Company will
contribute funds to the 1997 MRP to enable it to
acquire shares of Common Stock in an amount equal
to 3% of the number of shares of Conversion Stock
sold in the Offering, or up to 27,600 shares of
Common Stock assuming the sale of 920,000 shares
at $10.00 per share (the maximum of the Offering
Price Range).
The Holding Company intends to enter into new
employment agreements with Richard C. Fellhauer,
President and Chief Executive Officer of the
Holding Company and the Association, Michael A.
Deelo, Executive Vice President and Chief
Financial Officer of the Association, and Leonard
O. Wolter, Vice President of the Association,
each of which would be effective as of the
consummation of the Conversion and
Reorganization. Each employment agreement
provides that the individual will be employed for
a three-year term. Such term may be extended for
additional one-year periods by action of the
Board of Directors of the Holding Company taken
on each successive anniversary of the effective
date of the employment agreement. Each of Messrs.
Fellhauer, Deelo and Wolter may terminate their
employment agreements at any time upon 90 days'
prior written notice to the Board of Directors of
the Holding Company and the Association.
Use of Proceeds: The net proceeds from the sale of the Conversion
Stock are expected to range from $6.4 million, at
the minimum of the Offering Price Range, to $8.8
million, at the maximum of the Offering Price
Range. At the midpoint of the Offering Price
Range, the estimated net proceeds from the sale
of the Conversion Stock would be $7.6 million.
Pursuant to the business plan adopted by the
Holding Company and the Association on June 20,
1997 in contemplation of the Conversion and
Reorganization, the Holding Company plans to
contribute to the Association 50% of the net
proceeds from the sale of the Conversion Stock
and retain the remainder of the net proceeds.
Assuming that the Conversion and Reorganization
is consummated at the midpoint of the Offering
Price Range, the Association will receive
approximately $3.8 million and the Holding
Company will retain approximately $3.8 million,
out of which the Holding Company will make a loan
to the Association's ESOP in the amount of
$696,000 and fund the 1997 MRP at a later date in
the amount of $240,000, provided the 1997 MRP is
approved by the Holding Company's stockholders.
The Holding Company intends to invest the net
proceeds of the Offering that it retains
initially in short-term and intermediate-term
deposits and U.S. government and federal agency
securities. Thereafter, funds retained by the
Holding Company will be deployed in accordance
with the Holding Company's and the Association's
business plan as determined by the Board of
Directors of the Holding Company, as specific
business opportunities or requirements arise and
for general corporate purposes.
9
<PAGE>
The Association will invest the proceeds of the
Offering that are made available to it by the
Holding Company initially in cash and short-term
investment securities (i.e., remaining maturities
ranging up to 12 months) pending their
application pursuant to its business plan. The
business plan of the Holding Company and
Association contemplates continuation of the
Association's current lending and investment
strategies that emphasize one- to four-family
mortgage loans and U.S. government and agency
securities and mortgage-backed securities.
Dividends: Upon consummation of the Conversion and
Reorganization, the Board of Directors of the
Holding Company will have the authority to
declare and pay dividends on the Common Stock.
The Board of Directors of the Holding Company
intends to pay cash dividends on the Common Stock
at an initial quarterly rate equal to $0.17 per
share (the amount of the existing quarterly
dividend on the Association Shares) divided by
the Exchange Ratio, commencing with the first
full quarter following consummation of the
Conversion and Reorganization, which will have
the effect of initially maintaining the aggregate
amount of quarterly cash dividends received by
the Public Stockholders. Based on the current
Offering Price Range, the Exchange Ratio is
expected to be 1.5283, 1.7981, 2.0678 and 2.3779
at the minimum, midpoint, maximum and 15% above
maximum of the Offering Price Range,
respectively, resulting in an initial quarterly
dividend rate of $0.11, $0.09, $0.08 and $0.07
per share, respectively. 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 Association's and the Holding
Company's financial condition and results of
operations, tax considerations and general
economic conditions.
Market for Common Stock The Holding Company has never issued capital
stock (other than 100 shares issued to the
Association, which will be canceled upon
consummation of the Conversion and
Reorganization), and to date an active and liquid
trading market has not developed for the 391,400
Public Association Shares outstanding prior to
the Offering. Consequently, there is no
established market for the Common Stock to be
issued in the Exchange and the Offering. The
Holding Company has received conditional approval
to have the Common Stock listed on the Nasdaq
National Market ("NMS") under the symbol "ESBX."
In order for the Common Stock to be listed on the
Nasdaq NMS, however, there must be, among other
things, two market makers for the Common Stock.
Trident intends to act as a market maker for the
Common Stock and will assist the Holding Company
in retaining at least one other market maker. The
Holding Company will use its best efforts to
encourage and assist market making to establish
and maintain a market for the Common Stock. There
can be no assurance, however, that any additional
market makers for the Common Stock will be
obtained or that the Common Stock will be listed
on the Nasdaq NMS or, if listed, will continue to
be eligible for such listing. If the Holding
Company should prove unable, for any reason, to
list the Common Stock on the Nasdaq NMS or to
continue to be eligible for such listing, then
the Holding Company intends to list the Common
Stock on the Nasdaq SmallCap Market, subject to
the applicable listing criteria for that market.
10
<PAGE>
SUMMARY OF PROPOSED CONVERSION AND REORGANIZATION
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing in the Prospectus, being
delivered herewith, the contents of which are hereby incorporated herein by
reference.
THE CONVERSION
The Boards of Directors of the Mutual Holding Company and the Association
unanimously adopted the Plan as of May 16, 1997, which was amended on June 20,
1997. The Plan has been approved by the OTS, subject to, among other things,
approval of the Plan by the Members of the Mutual Holding Company at the
Special Meeting and the stockholders of the Association at a special meeting
called for this purpose on , 1997. The Holding Company's application to
become the holding company for the converted Association must be approved by
the OTS before the Conversion can be completed.
At the direction of the Association, the Holding Company was incorporated
under Delaware law on May 14, 1997 and is currently a first-tier wholly owned
subsidiary of the Association. Pursuant to the Plan, (i) the Mutual Holding
Company will convert from mutual form to a federal interim stock savings
association and simultaneously merge with and into the Association, pursuant
to which the Mutual Holding Company will cease to exist and the Association
Shares held by the Mutual Holding Company will be canceled, (ii) the
Association will establish, as a wholly-owned subsidiary, the Holding Company,
that will become the new holding company for the Association upon completion
of the transactions contemplated by the Plan, (iii) the Holding Company will
establish, as a wholly-owned subsidiary, a second federal interim stock
savings association that will merge with and into the Association, whereby the
Association will become a wholly-owned subsidiary of the Holding Company and
the Public Association Shares will be converted into the Exchange Shares
pursuant to the Exchange Ratio, which will result in the holders of such
shares owning in the aggregate approximately the same percentage of the Common
Stock to be outstanding upon the completion of the Conversion and
Reorganization as the percentage of Association Shares owned by them in the
aggregate immediately prior to consummation of the Conversion and
Reorganization, before giving effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares, (b) any shares of Conversion Stock
purchased by the Public Stockholders in the Offering or the ESOP thereafter,
and (c) any exercise of dissenters' rights. Upon consummation of the
Conversion and Reorganization, the Association will change its name to
"Equality Savings Bank."
11
<PAGE>
The following diagram summarizes the current organizational structure of the
parties' ownership interests.
- ---------------------------------- ----------------------------------
Public Stockholders First Missouri Financial, M.H.C.
- ---------------------------------- ----------------------------------
46.8% 53.2%
-------------------------------------------------------------------
100%
-------------------------------------------------------
Equality Savings and Loan Association, F.A.
-------------------------------------------------------
-------------------------------------------------------------------
100% 100%
- ---------------------------------- ----------------------------------
Equality Commodity Corporation Equality Mortgage Corporation
- ---------------------------------- ----------------------------------
100%
- ----------------------------------
Dutch Town Development Co.
- ----------------------------------
12
<PAGE>
The following diagram reflects the Conversion and Reorganization including (i)
the merger of the Mutual Holding Company (following its conversion into an
interim federal stock savings association) with and into the Association, (ii)
the merger of Interim with and into the Association, pursuant to which the
Public Association Shares will be converted into Exchange Shares, and (iii) the
offering of Conversion Stock.
-------------- ---------------- --------------
Existing First Missouri New
Public Financial, Public
Stockholders M.H.C. Stockholders
-------------- ---------------- --------------
MHC converts to Eligible
Stock Interim Thrift Account-
holders and
46.8% 53.2% others
--------------------------
100%
---------
Stock
Interim
------------------------ Thrift
Equality Savings and ---------
Loan Association, F.A.
------------------------ Stock Interim Thrift
Merges into Equality:
Equality forms 100% 53.2% ownership cancelled
Bancorp
------------------------
Equality Bancorp, Inc. Offering of
------------------------ conversion stock
100%
Bancorp forms Stock
Interim Thrift
---------
Stock
Interim
Thrift
---------
Stock Interim Thrift merges into Equality; existing public
stockholders exchange shares of Equality for some proportional
ownership of Bancorp: shares of Stock Interim Thrift held by
Bancorp continue as shares of survivor in the merger; shares of
Bancorp held by Equality cancelled.
13
<PAGE>
The following diagram summarizes the resulting organizational structure of the
parties' ownership interests.
-------------------------------------------------------
Existing and New Public Stockholders
-------------------------------------------------------
100%
-------------------------------------------------------
Equality Bancorp, Inc.
-------------------------------------------------------
100%
-------------------------------------------------------
Equality Savings Bank,
(Formerly, Equality Savings and Loan Association, F.A.)
-------------------------------------------------------
-------------------------------------------------------------------
100% 100%
- ---------------------------------- ----------------------------------
Equality Commodity Corporation Equality Mortgage Corporation
- ---------------------------------- ----------------------------------
100%
- ----------------------------------
Dutch Town Development Co.
- ----------------------------------
14
<PAGE>
The Plan of Merger providing for the merger of the Mutual Holding Company
with and into the Association, which is attached to this proxy statement as
Appendix B, and the Plan of Merger providing for the merger of Interim with
and into the Association each must be approved by the holders of at least two-
thirds of the outstanding Association Shares at the Stockholders' Meeting. The
Plan of Merger between Interim and the Association also must be approved by
the Holding Company, as the sole stockholder of Interim.
In addition, the Primary Parties have conditioned the consummation of the
Conversion and Reorganization upon the approval of the Plan, including the
Plans of Merger, by at least a majority of the votes cast, in person or by
proxy, by the Public Stockholders at the Stockholders' Meeting. The Plan is
subject to the approval of the OTS, and it also must be approved by at least a
majority of the total outstanding votes of the voting members of the Mutual
Holding Company at the Special Meeting, which votes may be cast in person or
by proxy.
PURPOSES OF CONVERSION
The Boards of Directors of the Mutual Holding Company and the Association
believe that a conversion of the Mutual Holding Company to stock form and the
reorganization of the Association pursuant to the Plan is in the best
interests of the Mutual Holding Company and the Association, as well as the
best interests of the members of the Mutual Holding Company and the Public
Stockholders. The Conversion and Reorganization will result in the Association
being wholly owned by a stock holding company, which is a more common
structure and form of ownership than a mutual holding company. In addition,
the Conversion and Reorganization will result in the raising of additional
equity capital for the Association and the Holding Company and is expected to
result in a more active and liquid market for the Common Stock than currently
exists for the Association Shares, although there can be no assurances that
this will be the case. Finally, the Conversion and Reorganization has been
structured to reunite the accumulated earnings and profits tax attribute
retained by the Mutual Holding Company with the retained earnings of the
Association through a tax-free reorganization. This will increase the
Association's ability to pay dividends in the future.
If the Association had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of Association Shares to be sold than resulted
in the amount of net proceeds raised in connection with the formation of the
Mutual Holding Company. In addition, if a standard conversion had been
conducted in 1993, management of the Association believed that it would have
been difficult to profitably invest the larger amount of capital that would
have been raised, when compared to the amount of net proceeds raised in
connection with the formation of the Mutual Holding Company. A standard
conversion in 1993 also would have immediately eliminated all aspects of the
mutual form of organization.
Subsequent to the formation of the Mutual Holding Company, there have been
certain changes in the regulations and policies of the OTS relating to mutual
holding companies. In recent years, the U.S. Congress has proposed major
overhauls to the structure of the thrift industry that include eliminating the
federal savings association charter, which is the charter the Association
currently operates under. These proposals also have created uncertainty
concerning the future of the mutual form of ownership. In addition, since the
Mutual Holding Company Reorganization in 1993, the Boards of Directors of the
Mutual Holding Company and the Association have realized a need to create
additional liquidity for the Association Shares and believe the Holding
Company and the Association can effectively deploy the additional equity
capital raised in the Conversion and Reorganization. In light of the
foregoing, the Boards of Directors of the Mutual Holding Company and the
Association believe that it is in the best interests of such companies and
their respective members and stockholders to undertake the Conversion and
Reorganization.
THE OFFERINGS
The Plan requires that the purchase price of the Conversion Stock must be
based on the appraised pro forma market value of the Conversion Stock, as
determined on the basis of an independent valuation. The Primary Parties have
retained RP Financial to make such valuation. RP Financial has advised the
Primary Parties in its
15
<PAGE>
opinion the estimated pro forma market value of the Association and the Mutual
Holding Company on a combined basis was $15,037,594 as of June 20, 1997.
Because the holders of the Public Association Shares will continue to hold the
same aggregate percentage ownership interest in the Holding Company as they
currently hold in the Association (before giving effect to the payment of cash
in lieu of issuing fractional Exchange Shares, any exercise of dissenters'
rights and any shares of Conversion Stock purchased by the Association's
stockholders in the Offering or by the ESOP thereafter), the Appraisal was
multiplied by the Mutual Holding Company's percentage interest in the
Association (i.e., 53.2%) to determine the midpoint of the valuation
($8,000,000), and the minimum and maximum of the valuation were set at 15%
below and above the midpoint, respectively, resulting in a range of $6,800,000
to $9,200,000. The Boards of Directors of the Primary Parties determined that
the Conversion Stock would be sold at $10.00 per share, resulting in a range
of 680,000 to 920,000 shares of Conversion Stock being offered. Upon
consummation of the Conversion and Reorganization, the Conversion Stock and
the Exchange Shares will represent approximately 53.2% and 46.8%,
respectively, of the Holding Company's total outstanding shares.
The Boards of Directors of the Primary Parties also established the formula
for determining the Exchange Ratio. Based upon such formula and the Offering
Price Range, the Exchange Ratio ranged from a minimum of 1.5283 to a maximum
of 2.0678 Exchange Shares for each Public Association Share, with a midpoint
of 1.7981. Based upon these Exchange Ratios, the Holding Company expects to
issue between 598,195 and 809,323 Exchange Shares to the holders of Public
Association Shares outstanding immediately prior to the consummation of the
Conversion and Reorganization. The Offering Price Range and the Exchange Ratio
may be amended with the approval of the OTS, if required, or if necessitated
by subsequent developments in the financial condition of any of the Primary
Parties or market conditions generally. In the event the Appraisal is updated
to below $12,781,955 or above $19,887,218, such updated Appraisal will be
filed with the SEC by post-effective amendment.
The following table sets forth, based upon the minimum, midpoint, maximum
and 15% above the maximum of the Offering Price Range, the following: (i) the
total number of shares of Conversion Stock and Exchange Shares to be issued in
the Conversion and Reorganization, (ii) the percentage of the total Common
Stock represented by the Conversion Stock and the Exchange Shares, (iii) the
total shares of Common Stock to be outstanding upon consummation of the
Conversion and Reorganization, and (iv) the Exchange Ratio. The table assumes
that no holder of Public Association Shares exercises dissenters' rights and
that there is no cash paid in lieu of issuing fractional Exchange Shares.
<TABLE>
<CAPTION>
CONVERSION STOCK TO EXCHANGE SHARES TO TOTAL SHARES OF
BE ISSUED BE ISSUED COMMON STOCK
-------------------- -------------------- TO BE
AMOUNT PERCENT AMOUNT PERCENT OUTSTANDING EXCHANGE RATIO
----------- -------- ---------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Minimum................. 680,000 53.2% 598,195 46.8% 1,278,195 1.5283
Midpoint................ 800,000 53.2% 703,759 46.8% 1,503,759 1.7981
Maximum................. 920,000 53.2% 809,323 46.8% 1,729,323 2.0678
15% above Maximum....... 1,058,000 53.2% 930,721 46.8% 1,988,721 2.3779
</TABLE>
RP Financial's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares.
RP Financial did not independently verify the Consolidated Financial
Statements and other information provided by the Association and the Mutual
Holding Company, nor did RP Financial value independently the assets or
liabilities of the Association. The valuation considers the Association and
the Mutual Holding Company as going concerns and should not be considered as
an indication of the liquidation value of the Association and the Mutual
Holding Company. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons purchasing
Conversion Stock or receiving Exchange Shares in the Conversion and
Reorganization will thereafter be able to sell such shares at prices at or
above the Purchase Price or in the range of the foregoing valuation of the pro
forma market value thereof.
16
<PAGE>
As part of the Conversion and Reorganization, the Holding Company is
offering up to 920,000 shares of Common Stock (i.e., Conversion Stock) at a
Purchase Price of $10.00 per share in the Subscription Offering. As described
in more detail below, nontransferable rights to subscribe for the Conversion
Stock in the Subscription Offering have been granted to certain persons
according to certain preference categories and, subject to the prior rights of
holders of Subscription Rights, the Holding Company is also offering shares of
Conversion Stock in the Community Offering to members of the general public.
In the event of an oversubscription in the Subscription and Community
Offering, up to 138,000 additional shares may be issued to reflect changes in
market and financial conditions and to cover additional subscriptions. The
Primary Parties may reject, in whole or in part, orders received in the
Community Offering in their sole discretion.
Subscription Offering. In accordance with the OTS's regulations,
subscription rights have been granted pursuant to the Subscription Offering
under the Plan to the following persons (collectively, the "Eligible
Subscribers") in the following order of priority: (1) Eligible Account Holders
(depositors with aggregate account balances of $50 or more on deposit at the
Association as of March 31, 1996); (2) Employee Stock Benefit Plans (which
would include the ESOP but not include the 1997 MRP); (3) Supplemental
Eligible Account Holders (depositors with aggregate account balances of $50 or
more on deposit at the Association, other than officers or directors of the
Mutual Holding Company or the Association or any of their associates, as of
, 1997); (4) Other Members (depositors and certain borrowers as of ,
1997, the voting record date, who are not Eligible Account Holders or
Supplemental Eligible Holders); (5) directors, officers and employees of the
Mutual Holding Company and the Association; and (6) the Public Stockholders.
Subscription Rights are nontransferable and have been granted to Eligible
Subscribers without charge. No Eligible Subscriber is required to purchase any
shares of Conversion Stock in the Subscription Offering. All subscriptions
received will be subject to the availability of Conversion Stock after
satisfaction of subscriptions of all Eligible Subscribers having prior rights
in the Subscription Offering and to the maximum purchase limitations and other
terms and conditions set forth in the Plan and described below.
Expiration Date for the Subscription Offering. The Subscription Offering
will expire at 12:00 Noon, Central Time, on , 1997, unless extended by the
Holding Company with the approval of the OTS, if necessary. Such extensions
may not be extended beyond , 199 . Subscription rights which have not been
exercised prior to the Expiration Date will become void.
The Primary Parties will not execute orders until at least the minimum
number of shares of Conversion Stock (680,000 shares) have been subscribed for
or otherwise sold. If all shares have not been subscribed for or sold within
45 days after the Expiration Date, unless such period is extended with the
consent of the OTS, all funds delivered to the Holding Company pursuant to the
Subscription Offering will be returned promptly to the subscribers with
interest and all withdrawal authorizations will be canceled. If an extension
beyond the 45-day period following the Expiration Date is granted, the Holding
Company will notify subscribers of the extension of time and subscribers will
be resolicited and permitted to modify or cancel their subscriptions.
Community Offering. Subject to the minimum purchase limitation set forth in
the Plan and to the availability of shares of the Conversion Stock after
satisfaction of all subscriptions of Eligible Account Holders, Employee Stock
Benefit Plans, Supplemental Eligible Account Holders, Other Members,
directors, officers and employees and Public Stockholders, the remaining
shares of the Conversion Stock will be offered in the Community Offering to
natural persons who reside in Missouri and to whomever else the Prospectus is
delivered ("Other Purchasers"), giving preference to natural persons residing
in the Missouri counties of St. Louis City, St. Louis, Jefferson, St. Charles
and Franklin ("Preferred Other Purchasers") in a manner designed to achieve
the widest possible distribution of Conversion Stock. The Community Offering
may commence concurrently with or as soon as practicable after completion of
the Subscription Offering and must be completed within 45 days after
completion of the Subscription Offering, unless extended with the approval of
the OTS.
Other purchasers, together with associates of and persons acting in concert
with such persons, may purchase up to the number of shares of Conversion Stock
that when combined with Exchange Shares received aggregate 62,500 shares of
Common Stock. THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF CONVERSION STOCK IN
THE
17
<PAGE>
COMMUNITY OFFERING CATEGORY IS SUBJECT TO THE RIGHT OF THE PRIMARY PARTIES, IN
THEIR SOLE DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS IN WHOLE OR IN PART
EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING
THE EXPIRATION DATE.
THE SUBSCRIPTION OFFERING HAS COMMENCED AS OF THE DATE OF MAILING OF THIS
PROXY STATEMENT. THE PROSPECTUS PROVIDED HEREWITH EXPLAINS THE TERMS OF THE
SUBSCRIPTION AND COMMUNITY OFFERING, INCLUDING HOW TO ORDER AND PAY FOR
SHARES, AND DESCRIBES THE BUSINESS OF THE MUTUAL HOLDING COMPANY, THE
ASSOCIATION AND THE HOLDING COMPANY, AND SHOULD BE READ BY ALL PERSONS WHO
WISH TO CONSIDER SUBSCRIBING FOR COMMON STOCK.
EFFECTS OF THE CONVERSION AND REORGANIZATION
General. Prior to the Conversion and Reorganization, each depositor in the
Association has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the Mutual Holding Company based upon
the balance in his account, which interest may only be realized in the event
of a liquidation of the Mutual Holding Company. This ownership interest,
however, is tied to the depositor's account and has no tangible market value
separate from such deposit account. A depositor who reduces or closes his or
her account receives a portion or all of the balance in the account but
nothing for his ownership interest in the net worth of the Mutual Holding
Company, which is lost to the extent that the balance in the account is
reduced.
Consequently, the depositors of the Association normally have no way to
realize the value of their ownership interest in the Mutual Holding Company,
which has realizable value only in the unlikely event that the Mutual Holding
Company is liquidated. In such event, the depositors of record at that time,
as owners, would share pro rata in any residual surplus and reserves of the
Mutual Holding Company after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of
the net worth of the Holding Company. The Common Stock of the Holding Company
is separate and apart from deposit accounts and cannot be and is not insured
by the FDIC or any other governmental agency. Certificates are issued to
evidence ownership of the permanent stock. The stock certificates are
transferable, and therefore the stock may be sold or traded if a purchaser is
available with no effect on any account the seller may hold in the
Association.
Continuity. While the Conversion and Reorganization is being accomplished,
the normal business of the Association of accepting deposits and making loans
will continue without interruption. The Association will continue to be
subject to regulation by the OTS and the FDIC. After the Conversion and
Reorganization, the Association will continue to provide services for
depositors and borrowers under current policies by its present management and
staff.
The directors and officers of the Association at the time of the Conversion
and Reorganization will continue to serve as directors and officers of the
Association after the Conversion and Reorganization. The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the Mutual Holding Company and the Association, and
they generally will retain their positions in the Holding Company after the
Conversion and Reorganization.
Effect on Public Association Shares. Under the Plan, upon consummation of
the Conversion and Reorganization, the Public Association Shares shall be
converted into Common Stock based upon the Exchange Ratio without any further
action on the part of the holder thereof. Upon surrender of the Public
Association Shares, Common Stock will be issued in exchange for such shares.
Upon consummation of the Conversion and Reorganization, the Public
Stockholders of the Association, a federally chartered savings association,
will become stockholders of the Holding Company, a Delaware corporation.
18
<PAGE>
Effect on Deposit Accounts. Under the Plan, each depositor in the
Association at the time of the Conversion and Reorganization will
automatically continue as a depositor after the Conversion and Reorganization,
and each such deposit account will remain the same with respect to deposit
balance, interest rate and other terms, except to the extent that funds in the
account are withdrawn to purchase Conversion Stock to be issued in the
Offering. Each such account will be insured by the FDIC to the same extent as
before the Conversion and Reorganization. Depositors will continue to hold
their existing certificates, passbooks and other evidences of their accounts.
Effect on Loans. No loan outstanding from the Association will be affected
by the Conversion and Reorganization, and the amount, interest rate, maturity
and security for each loan will remain as they were contractually fixed prior
to the Conversion and Reorganization.
Effect on Voting Rights of Members. At present, all depositors and certain
borrowers of the Association are members of, and have voting rights in, the
Mutual Holding Company as to all matters requiring membership action. Upon
completion of the Conversion and Reorganization, depositors and borrowers will
cease to be members and will no longer be entitled to vote at meetings of the
Mutual Holding Company (which will cease to exist). Upon completion of the
Conversion and Reorganization, all voting rights in the Association will be
vested in the Holding Company as the sole stockholder of the Association.
Exclusive voting rights with respect to the Holding Company will be vested in
the holders of Common Stock. Depositors of and borrowers from the Association
will not have voting rights in the Holding Company after the Conversion and
Reorganization, except to the extent that they become stockholders of the
Holding Company.
Tax Effects. Consummation of the Conversion and Reorganization is expressly
conditioned upon prior receipt of either a ruling or an opinion of counsel or
of a certified public accounting firm with respect to federal tax laws, and
either a ruling or an opinion with respect to Missouri income tax laws, to the
effect that consummation of the transactions contemplated hereby will not
result in a taxable reorganization under the provisions of the applicable
codes or otherwise result in any adverse tax consequences to the Mutual
Holding Company, the Association, the Holding Company or to account holders
receiving subscription rights, except to the extent, if any, that subscription
rights are deemed to have fair market value on the date such rights are
issued. This condition may not be waived by the Primary Parties.
KPMG Peat Marwick LLP has issued an opinion to the Holding Company, the
Association and the Mutual Holding Company to the effect that, for federal
income tax purposes: (1) the converted Mutual Holding Company's merger with
and into the Association, with the Association being the surviving
institution, will qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, (2) no gain or loss will be recognized by the
Association upon the receipt of the assets of the Mutual Holding Company in
such merger, (3) the merger of Interim with and into the Association, with the
Association being the surviving institution, will qualify as a reorganization
within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Code, (4) no gain or loss will be recognized by Interim upon the transfer of
its assets to the Association, (5) no gain or loss will be recognized by the
Association upon the receipt of the assets of Interim, (6) no gain or loss
will be recognized by the Holding Company upon the receipt of Association
common stock solely in exchange for Common Stock, (7) no gain or loss will be
recognized by the Public Stockholders upon the receipt of Common Stock solely
in exchange for their Public Association Shares, (8) the basis of the Common
Stock to be received by the Public Stockholders will be the same as the basis
of the Public Association Shares surrendered in exchange therefor, before
giving effect to any payment of cash in lieu of fractional shares, (9) the
holding period of the Common Stock to be received by the Public Stockholders
will include the holding period of the Public Association Shares, provided
that the Public Association Shares were held as a capital asset on the date of
the exchange, and (10) no gain or loss will be recognized by Eligible Account
Holders and Supplemental Eligible Account Holders upon distribution to them of
subscription rights to purchase shares of Conversion Stock, provided that the
amount paid for the Conversion Stock is equal to the fair market value of the
Conversion Stock.
19
<PAGE>
KPMG Peat Marwick LLP has also issued an opinion to the Holding Company and
the Association to the effect that there are no material adverse Missouri
income tax consequences as a result of the Conversion and Reorganization.
In the opinion of RP Financial, which opinion is not binding on the IRS, the
subscription rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration, and afford the recipients the right only to purchase the Conversion
Stock at a price equal to its estimated fair market value, which will be the
same price as the Purchase Price for the unsubscribed shares of Conversion
Stock. If the subscription rights granted to eligible subscribers are deemed
to have an ascertainable value, receipt of such rights likely would be taxable
only to those eligible subscribers who exercise the subscription rights
(either as a capital gain or ordinary income) in an amount equal to such
value, and the Primary Parties could recognize gain on such distribution.
Eligible subscribers are encouraged to consult with their own tax advisor as
to the tax consequences in the event that such subscription rights are deemed
to have an ascertainable value.
Unlike private rulings, an opinion is not binding on the IRS and the IRS
could disagree with conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
Effect on Liquidation Rights. In the unlikely event of a complete
liquidation of the Mutual Holding Company in its present mutual form, each
depositor of the Association would receive his or her pro rata share of any
assets of the Mutual Holding Company remaining after payment of claims of all
creditors. Each depositor's pro rata share of such remaining assets would be
in the same proportion as the value of his or her deposit account was to the
total value of all deposit accounts in the Association at the time of
liquidation. After the Conversion and Reorganization, each depositor, in the
event of a complete liquidation of the Association, would have a claim as a
creditor of the same general priority as the claims of all other general
creditors of the Association. However, except as described below, his or her
claim would be solely in the amount of the balance in his or her deposit
account plus accrued interest. He or she would not have an interest in the
value or assets of the Association or the Holding Company above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders
in an amount equal to the amount of any dividends waived by the Mutual Holding
Company plus the greater of (1) the Association's retained earnings of
$8,067,000 at March 31, 1993, the date of the latest statement of financial
condition contained in the final offering circular utilized in the Mutual
Holding Company Reorganization, or (2) 53.2% of the Association's total
stockholders' equity as reflected in its latest balance sheet contained in the
final Prospectus utilized in the Offering. As of the date of this Prospectus,
the initial balance of the liquidation account would be $ . Each Eligible
Account Holder and Supplemental Eligible Account Holder, if he were to
continue to maintain his deposit account at the Association, would be
entitled, upon a complete liquidation of the Association after the Conversion
and Reorganization, to an interest in the liquidation account prior to any
payment to the Holding Company as the sole stockholder of the Association.
Each Eligible Account Holder and Supplemental Eligible Account Holder would
have an initial interest in such liquidation account for each deposit account,
including passbook accounts, transaction accounts such as checking accounts,
money market deposit accounts and certificates of deposit, held in the
Association at the close of business on March 31, 1996 or , 1997, as the
case may be. Each Eligible Account Holder and Supplemental Eligible Account
Holder will have a pro rata interest in the total liquidation balance of each
such deposit account on the March 31, 1996 Eligibility Record Date (or the
, 1997 Supplemental Eligibility Record Date, as the case may be) bore to
the balance of all deposit accounts in the Association on such date.
If, however, on any March 31 annual closing date of the Association,
commencing March 31, 1998, the amount in any deposit account is less than the
amount in such deposit account on March 31, 1996 or , 1997, as the case
may be, or any other annual closing date, then the interest in the liquidation
account relating to such deposit account would be reduced by the proportion of
any such reduction, and such interest will cease
20
<PAGE>
to exist if such deposit account is closed. In addition, no interest in the
liquidation account would ever be increased despite any subsequent increase in
the related deposit account. Any assets remaining after the above liquidation
rights of Eligible Account Holders and Supplemental Eligible Account Holders
are satisfied would be distributed to the Holding Company as the sole
stockholder of the Association.
Effect on Existing Compensation Plans. Upon consummation of the Plan, the
rights and obligations of the Association under Association's 1993 Stock
Option and Incentive Plan will be assumed by the Holding Company, and shares
of Common Stock will be issued (or reserved for issuance) pursuant to such
plan in substitution for Association Shares.
HOW TO OBTAIN ADDITIONAL INFORMATION
The Prospectus being delivered herewith contains, among other things,
audited consolidated financial statements of the Association for the past
three years; management's discussion and analysis of the Association's
financial condition and operations; a description of the Association's
lending, savings, investment and borrowing activities; compensation and other
benefits provided to directors and officers of the Association and the Holding
Company; and information regarding and additional information about the
Holding Company, the Conversion and Reorganization, the Exchange and the
Offering.
The Association is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the OTS. Such reports, proxy statements and other information can be
inspected at the principal office of the OTS at 1700 G Street, N.W.,
Washington, D.C. 20552.
The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Conversion Stock and
Exchange Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information regarding the Holding Company and the Common Stock
offered hereby, reference is hereby made to such Registration Statement and
such exhibits, which can be inspected without charge at the office of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of which can be
obtained from the SEC at prescribed rates. Such materials may also be
available at the SEC's web site at "http://www.sec.gov." Copies of the
Registration Statement, including RP Financial's appraisal report, are also
available for inspection at the office of the Association at 4131 South Grand
Boulevard, St. Louis, Missouri 63118-3464. Inquiries concerning such
inspections can be made to the Association at (314) 352-3199.
The Mutual Holding Company has filed an Application for Conversion with the
OTS with respect to the Conversion and Reorganization. This Prospectus omits
certain information contained in that application. The application may be
examined at the principal office of the OTS, 1700 G Street, N.W., Washington,
D.C. 20552, and at the Midwest Regional Office of the OTS located at 122 West
John Carpenter Freeway, Suite 600, Irving, Texas 75039.
Copies of the Association's proposed stock charter and copies of the Holding
Company's certificate of incorporation and bylaws, are available for
inspection at each of the offices of the Association and may be obtained by
writing to the Association at 4131 South Grand Boulevard, St. Louis, Missouri
63118-3464, by telephoning the Stock Information Center at (314) 352-3199 or
by returning the enclosed postage prepaid request card.
YOUR VOTE IS VERY IMPORTANT TO US. Please take a moment now to complete and
return your proxy card in the postage-paid envelope provided. You may still
attend the Special Meeting and vote in person even though you have voted your
proxy. Failure to vote may have the same effect as voting against the
Conversion and Reorganization.
21
<PAGE>
IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY. PLEASE
SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.
----------------
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
THE SHARES OF COMMON STOCK OFFERED IN THE CONVERSION AND REORGANIZATION ARE
NOT DEPOSITS OR ACCOUNTS AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
22
<PAGE>
LOGO
REVOCABLE PROXY
FIRST MISSOURI FINANCIAL, M.H.C.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST MISSOURI
FINANCIAL, M.H.C.
The undersigned hereby acknowledges prior receipt of the Notice of Special
Meeting of Members ("Special Meeting") and the Proxy Statement (including a
copy of the Prospectus delivered therewith and incorporated therein by
reference) describing the matters set forth below, and indicating the date,
time and place of the Special Meeting and hereby appoints the Board of
Directors of First Missouri Financial, M.H.C., or any of them, the Proxy of the
undersigned, each with full power of substitution, to cast all votes which the
undersigned is entitled to vote at the Special Meeting and at any adjournment
or adjournments thereof, on the matters referred to below in the manner
specified on the reverse side hereof.
(i) Approval of the Plan of Conversion and Reorganization, as amended from time
to time (the "Plan"), and a related Plan of Merger, providing for the
conversion of the Mutual Holding Company from mutual form to a federal
interim stock savings association ("Interim"), the simultaneous merger of
Interim with and into Equality Savings and Loan Association, F.A. (the
"Association"), the establishment of the Association as a wholly-owned
subsidiary of Equality Bancorp, Inc. (the "Holding Company"), the exchange
of the Association's shares of common stock held by the stockholders of the
Association other than the Mutual Holding Company for shares of Holding
Company common stock (the "Common Stock") under the terms of an exchange
ratio determined by the Board of Directors of the Mutual Holding Company,
the offering of Common Stock by the Holding Company in a subscription and
community offering, and related transactions (collectively, the "Conversion
and Reorganization");
(ii) Adjournment of the Special Meeting if necessary to permit further
solicitation of proxies in the event there are insufficient votes at the
time of the Special Meeting to approve the Conversion and Reorganization;
and
(iii) In their discretion, upon any other matters as may properly be brought
before the Special Meeting or any adjournment thereof. NOTE: The Board of
Directors is not aware of any other matter that may come before the
Special Meeting.
This Proxy will be voted as directed by the undersigned member. UNLESS
OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR APPROVAL OF THE CONVERSION AND
REORGANIZATION AND "FOR" ADJOURNMENT OF THE SPECIAL MEETING IF NECESSARY. If
any other business is presented at the Special Meeting, this Proxy shall be
voted in accordance with the recommendations of Management. This Proxy may be
revoked at any time before it is voted either by a written revocation of the
Proxy filed with the Secretary of First Missouri Financial, M.H.C. or by
submitting a later dated Proxy. The presence of a member at the Special Meeting
shall not revoke a Proxy unless a written notice of such revocation is filed
with the Secretary of the Special Meeting prior to the voting of such Proxy.
(IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON THE REVERSE SIDE)
VOTING FOR THE CONVERSION AND SIGNING THIS PROXY CARD DOES NOT OBLIGATE YOU TO
BUY ANY STOCK
(Continued and to be signed on reverse side)
<PAGE>
LOGO
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
(i) Approval of the Conversion and Reorganization
[_] FOR [_] AGAINST
(ii) Approval of the Adjournment, if necessary
[_] FOR [_] AGAINST
IMPORTANT: PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON. JOINT ACCOUNTS
NEED ONLY ONE SIGNATURE, BUT ALL ACCOUNT HOLDERS SHOULD SIGN IF POSSIBLE. WHEN
SIGNING AS AN ATTORNEY, ADMINISTRATOR, AGENT, CORPORATION, OFFICER, EXECUTOR,
TRUSTEE, GUARDIAN OR SIMILAR POSITION, PLEASE ADD YOUR FULL TITLE TO YOUR
SIGNATURE.
----------------------------------
Name(s)
----------------------------------
Signature(s)
Date: _____________________, 1997
----------------------------------
Address
----------------------------------
City State Zip
----------------------------------
Account Number
<PAGE>
REQUEST CARD FOR SUPPLEMENTAL MATERIALS
To receive copies of certain documents related to the conversion of First
Missouri Financial, M.H.C. to stock form, please place a check mark in the box
next to the document you would like to receive, complete the space for your
name and address below and return this postage-paid card to First Missouri
Financial, M.H.C. by , 1997.
[_] Equality Savings Bank Stock Charter
[_] Equality Bancorp, Inc. Certificate of Incorporation and Bylaws
- -----------------------------------------
Name
- -----------------------------------------
Address
<PAGE>
REQUEST CARD RETURN
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. ST. LOUIS, MISSOURI
POSTAGE WILL BE PAID BY ADDRESSEE
FIRST MISSOURI FINANCIAL, M.H.C.
4131 S. GRAND BOULEVARD
ST. LOUIS, MISSOURI 63118
