Registration No. 333-29031
Filed with the Securities and Exchange Commission on June 25, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pre-Effective Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CITIZENS BANCORP
(Exact name of registrant as specified in its charter)
Indiana 6712 35-2017500
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code No.) Identification No.)
incorporation or
organization)
60 South Main Street Fred W. Carter
P.O. Box 635 Citizens Savings Bank
Frankfort, Indiana 46041 of Frankfort
(765) 654-8533 60 South Main Street
P.O. Box 635
Frankfort, Indiana 46041
(765) 654-8533
Copy to:
Claudia V. Swhier, Esq.
Barnes & Thornburg
1313 Merchants Bank Building
11 South Meridian Street
Indianapolis, Indiana 46204
-----------------
Approximate date of commencement of proposed sale to the public: As
promptly 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: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Proposed Proposed Maximum Amount of
Title of each Class of Amount to be Maximum Offering Aggregate Offering Registration
Securities to be Registered Registered Price Per Unit Price (1) Fee
<S> <C> <C> <C> <C>
Common Stock, without par value 1,058,000 $10.00 $10,580,000 $3,206.06 (2)
========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) Previously filed with Form S-1 Registration Statement
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
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>
<TABLE>
<CAPTION>
CROSS-REFERENCE SHEET
Item in Form S-1 Caption in Prospectus
<S> <C> <C>
1. Forepart of Registration Statement and Outside Forepart of Registration Statement and Outside
Front Cover Page of Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages of
Prospectus Prospectus
3. Summary Information, Risk Factors, and Ratio of "QUESTIONS AND ANSWERS ABOUT
Earnings to Fixed Charges THE STOCK OFFERING"; "SUMMARY"; "RISK
FACTORS"
4. Use of Proceeds "USE OF PROCEEDS"
5. Determination of Offering Price "THE CONVERSION - Stock Pricing"
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution "SUMMARY"; "THE CONVERSION - Subscription
Offering," "- Community Offering," "-Agent,"
"- Selected Dealers"
9. Description of Securities to be Registered "DESCRIPTION OF CAPITAL STOCK"
10. Interests of Named Experts and Counsel Not Applicable
11. Information with Respect to Registrant
(a) Description of Business "CITIZENS BANCORP"; "CITIZENS SAVINGS
BANK OF FRANFORT", "BUSINESS OF CITIZENS"
(b) Description of Property "BUSINESS OF CITIZENS - Properties"
(c) Legal Proceedings "BUSINESS OF CITIZENS - Legal Proceedings"
(d) Market Price of and Dividends on the "MARKET FOR THE COMMON STOCK;"
Registrant's Common Equity and Related "DIVIDENDS;" "PROPOSED PURCHASES
Stockholder Matters BY DIRECTORS AND EXECUTIVE OFFICERS";
"DESCRIPTION OF CAPITAL STOCK"
(e) Financial Statements "FINANCIAL STATEMENTS"; "PRO FORMA DATA"
(f) Selected Financial Data "SELECTED CONSOLIDATED FINANCIAL
DATA OF CITIZENS SAVINGS BANK
OF FRANKFORT AND SUBSIDIARY"
(g) Supplementary Financial Information Not Applicable
(h) Management's Discussion and Analysis of "MANAGEMENT'S DISCUSSION AND
Financial Condition and Results of Operations ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF CITIZENS
SAVINGS BANK OF FRANKFORT"
(i) Changes in and Disagreements with Accountants Not Applicable
on Accounting and Financial Disclosure
(j) Directors and Executive Officers "MANAGEMENT OF CITIZENS BANCORP";
"MANAGEMENT OF CITIZENS SAVINGS BANK
OF FRANKFORT"
(k) Executive Compensation "EXECUTIVE COMPENSATION
AND RELATED TRANSACTIONS OF CITIZENS"
(l) Security Ownership of Certain Beneficial "PROPOSED PURCHASES BY DIRECTORS AND
Owners and Management EXECUTIVE OFICERS"
(m) Certain Relationships and Related Transactions "EXECUTIVE COMPENSATION AND RELATED
TRANSACTIONS OF CITIZENS -
- Transactions with Certain Related Persons"
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
</TABLE>
<PAGE>
PROSPECTUS
Up to 920,000 Shares of Common Stock
Citizens Bancorp
P.O. Box 635
Frankfort, Indiana 46041
(765) 654-8533
================================================================================
Citizens Savings Bank of Frankfort is converting from the mutual form
to the stock form of organization. As part of the conversion, Citizens Savings
Bank of Frankfort will become a wholly-owned subsidiary of Citizens Bancorp,
which was formed in June, 1997. Upon the completion of the conversion, Citizens
Bancorp will own all of the shares of Citizens Savings Bank of Frankfort. The
common stock of Citizens Bancorp is being offered to the public under the terms
of a Plan of Conversion which must be approved by a majority of the votes
eligible to be cast by members of Citizens Savings Bank of Frankfort and by the
Office of Thrift Supervision. The offering will not go forward if Citizens
Savings Bank of Frankfort does not receive these approvals and Citizens Bancorp
does not sell at least the minimum number of shares.
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated the market value of the
converted Citizens Savings Bank of Frankfort to be between $6,800,000 to
$9,200,000, which establishes the number of shares to be offered. Subject to
Office of Thrift Supervision approval, an additional 15% above the maximum
number of shares may be offered. Based on these estimates, we are making the
following offering of shares of common stock.
o Price Per Share: $10
o Number of Shares
Minimum/Maximum: 680,000 to 920,000
o Conversion Expenses
Minimum/Maximum: $433,400 to $466,600
o Net Proceeds to Citizens Bancorp
Minimum/Maximum: $6,366,600 to $8,733,400
o Net Proceeds per share to Citizens Bancorp
Minimum/Maximum: $9.36 to $9.49
Please refer to Risk Factors beginning on page 11 of this document.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, the Office of Thrift
Supervision, nor any state securities regulator has approved or disapproved
these securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Trident Securities, Inc. will use its best efforts to help Citizens Bancorp sell
at least the minimum number of shares but does not guarantee this number will be
sold. All funds received from subscribers will be held in a savings account at
Citizens Savings Bank of Frankfort until the completion or termination of the
Conversion.
For information on how to subscribe, call the Stock Information Center at (765)
659-5708.
TRIDENT SECURITIES, INC.
Prospectus dated August ___, 1997
<PAGE>
TABLE OF CONTENTS
Page
Questions and Answers..................................................... 1
Prospectus Summary........................................................ 3
Selected Consolidated Financial Data of Citizens
Savings Bank of Frankfort and Subsidiary............................. 5
Recent Developments of Citizens Savings Bank of Frankfort................. 8
Risk Factors.............................................................. 11
Proposed Purchases by Directors and Executive Officers.................... 14
Citizens Bancorp.......................................................... 14
Citizens Savings Bank of Frankfort........................................ 14
Market Area............................................................... 15
Use of Proceeds........................................................... 15
Dividends................................................................. 16
Market for the Common Stock............................................... 16
Competition............................................................... 17
Capitalization............................................................ 17
Pro Forma Data............................................................ 19
The Conversion............................................................ 23
Management's Discussion and Analyis of Financial
Condition and Results of Operations of
Citizens Savings Bank of Frankfort..................................... 34
Business of Citizens...................................................... 45
Management of Citizens Bancorp............................................ 61
Management of Citizens.................................................... 61
Executive Compensation and Related Transactions of Citizens.............. 62
Regulation................................................................ 67
Taxation.................................................................. 73
Restrictions on Acquisition of the Holding Company........................ 74
Description of Capital Stock.............................................. 79
Transfer Agent............................................................ 80
Registration Requirements................................................. 80
Legal and Tax Matters..................................................... 80
Experts................................................................... 80
Additional Information.................................................... 80
Index to Financial Statements............................................. F-1
Glossary.................................................................. G-1
This document contains forward-looking statements which involve risks
and uncertainties. Citizens Bancorp's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors" beginning on page 1 of this Prospectus.
Please see the Glossary beginning on page G-1 for the meaning of
capitalized terms that are used in this Prospectus.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: How can I benefit from the offering?
A: The offering means that you will have the chance to become a
shareholder of our newly formed holding company, Citizens Bancorp,
which will allow you to share in our future as an indirect owner of a
federal stock savings bank. The stock offering will increase our
capital and the amount of funds available to us for lending and
investment activities. This will give us greater flexibility to
diversify operations and expand into other geographic markets if we
choose to do so. As a stock savings association operating through a
holding company structure, we will have the ability to plan and develop
long-term growth and improve our future access to the capital markets.
If our earnings are sufficient in the future, you might also receive
dividends and benefit from the long-term appreciation of our stock
price.
Q: How do I purchase the stock?
A: You must complete and return the Stock Order Form to us together with
your payment, on or before September ___, 1997.
Q: How much stock may I purchase?
A: The minimum purchase is 25 shares (or $250). The maximum purchase is
10,000 shares (or $100,000) for any individual person or persons
ordering through a single account. In certain instances, your purchase
may be grouped together with purchases by other persons who are
associated with you and, in that event, the aggregate purchases may not
exceed 30,000 shares. For purposes of these limitations, joint account
holders may not collectively exceed the 10,000 and 30,000 share limits.
We may decrease or increase the maximum purchase limitation without
notifying you. If the offering is oversubscribed, shares will be
allocated based upon a formula.
Q: What happens if there are not enough shares to fill all orders?
A: You might not receive any or all of the shares you want to purchase. If
there is an oversubscription, the stock will be offered on a priority
basis to the following persons:
o Persons who had a deposit account with us on December 31, 1995
will have priority with respect to the first 920,000 shares of
common stock. Citizens Bancorp's employee stock ownership plan
will have priority with respect to any shares in excess of
920,000. Any remaining shares will be offered to:
o The employee stock ownership plan of Citizens Bancorp. Any
remaining shares will be offered to:
o Persons who had a deposit account with us on June 30, 1997.
Any remaining shares will be offered to:
o Other depositors of ours, as of July 25, 1997.
If the above persons do not subscribe for all of the shares, the
remaining shares will be offered to certain members of the general
public with preference given to people who live in Clinton County,
Indiana.
Q: What particular factors should I consider when deciding whether or not
to buy the stock?
A: Because of the small size of the offering, there likely will not be an
active market for the shares, which may make it difficult to resell any
shares you may own. Also, before you decide to purchase stock, you
should read the Risk Factors section on pages 11-13 of this document.
Q: As a depositor of Citizens Savings Bank of Frankfort, what will happen
if I do not purchase any stock?
A: You presently have voting rights while we are in the mutual form;
however, once we convert to the stock form you will lose your voting
rights unless you purchase stock. Even if you do purchase stock, your
voting rights will depend on the amount of stock that you own and not
on your deposit account at Citizens. You are not required to purchase
stock. Your deposit account, certificate accounts and any loans you may
have with us will not be affected.
-1-
<PAGE>
Q: Who can help answer any other questions I may have about the stock
offering?
A: In order to make an informed investment decision, you should read this
entire document. This section highlights selected information and may
not contain all of the information that is important to you. In
addition, you should contact:
Stock Information Center
Citizens Savings Bank of Frankfort
P.O. Box 635
Frankfort, Indiana 46041
(765) 659-5708
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<PAGE>
SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
stock offering fully, you should read carefully this entire document, including
the consolidated financial statements and the notes to the consolidated
financial statements of Citizens Savings Bank of Frankfort. References in this
document to "we", "us", "our" and "Citizens" refer to Citizens Savings Bank of
Frankfort. In certain instances where appropriate, "us" or "our" refers
collectively to Citizens Bancorp and Citizens Savings Bank of Frankfort.
References in this document to "the Holding Company" refer to Citizens Bancorp.
The Companies
Citizens Bancorp
P.O. Box 635
Frankfort, Indiana 46041
(765) 654-8533
Citizens Bancorp is not an operating company and has not engaged in any
significant business to date. It was formed in June, 1997, as an Indiana
corporation to be the holding company for Citizens Savings Bank of Frankfort.
The holding company structure will provide greater flexibility in terms of
operations, expansion and diversification. See page 14.
Citizens Savings Bank of Frankfort
P.O. Box 635
Frankfort, Indiana 46041
(765) 654-8533
We are a community- and customer-oriented federal mutual savings bank.
We provide financial services to individuals, families and small business.
Historically, we have emphasized residential mortgage lending, primarily one- to
four-family mortgage loans. We have a subsidiary engaged in real estate
development activities. On March 31, 1997, we had total assets of $45.2 million,
deposits of $37.3 million, and retained income of $5.6 million. See pages 14 to
15.
The Stock Offering
Citizens Bancorp is offering for sale between 680,000 and 920,000
shares of its common stock at $10 per share. This offering may be increased to
1,058,000 shares without further notice to you if market or financial conditions
change prior to the completion of this stock offering or if additional shares of
stock are needed to fill the order of our employee stock ownership plan.
Stock Purchases
Citizens Bancorp will offer shares of its common stock to our
depositors who held deposit accounts as of certain dates. The shares will be
offered first in a Subscription Offering and any remaining shares may be offered
in a Community Offering. See pages 26 to 29.
Subscription Rights
You may not sell or assign your subscription rights. Any transfer of
subscription rights is prohibited by law. All persons exercising their
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 shares.
The Offering Range and Determination of the Price Per Share
The offering range is based on an independent appraisal of the pro
forma market value of the common stock by Keller & Company, Inc., an appraisal
firm experienced in appraisals of savings associations. Keller & Company, Inc.
has estimated that, in its opinion, as of May 22, 1997 the aggregate pro forma
market value of the common stock ranged between $6.8 million and $9.2 million
(with a mid-point of $8 million). The pro forma market value of the shares is
our market value after taking into account the sale of shares in this offering.
The appraisal was based in part
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<PAGE>
upon our financial condition and operations and the effect of the additional
capital raised by the sale of common stock in this offering. The $10.00 price
per share was determined by our board of directors and is the price most
commonly used in stock offerings involving conversions of mutual savings
associations. The independent appraisal will be updated prior to the completion
of the Conversion. If the pro forma market value of the common stock changes to
either below $6.8 million or above $10.58 million, we will notify you and
provide you with the opportunity to modify or cancel your order. See pages 32 to
33.
Termination of the Offering
The Subscription Offering will terminate at 12:00 noon, Frankfort time,
on September ___, 1997. The Community Offering, if any, may terminate at any
time without notice but no later than November ___, 1997, without approval by
the OTS.
Benefits to Management from the Offering
Our full-time employees will participate in our employee stock
ownership plan, which is a form of retirement plan that will purchase shares of
Citizens Bancorp's common stock. We also intend to implement a management
recognition and retention plan and a stock option plan following completion of
the Conversion, which will benefit our officers and directors. If we adopt the
management recognition and retention plan, our officers and directors will be
awarded shares of common stock without paying cash for the shares. However, the
recognition and retention plan and stock option plan may not be adopted until at
least six months after the Conversion and are subject to shareholder approval
and compliance with OTS regulations. See pages 65 to 66.
Use of the Proceeds Raised from the Sale of Common Stock
Citizens Bancorp intends to use a portion of the proceeds from the
stock offering to make a loan to our employee stock ownership plan to fund its
purchase of 8% of the common stock issued in the Conversion. Citizens Bancorp
will use 50% of the proceeds that remain after it makes this loan and after it
pays expenses incurred in connection with the Conversion to purchase all of the
capital stock to be issued by Citizens Savings Bank of Frankfort. Citizens
Bancorp will retain the balance of the proceeds as a source of funds for the
payment of dividends to shareholders or to repurchase shares of common stock in
the future. See pages 15 to 16.
Dividends
Management of Citizens Bancorp has not yet made a decision regarding
the payment of dividends. Citizens Bancorp will consider a policy of paying cash
dividends on its common stock following the Conversion. See page 16.
Market for the Common Stock
Citizens Bancorp intends to list the Common Stock over-the-counter
through the OTC "Electronic Bulletin Board." Since the size of the offering is
relatively small, it is unlikely that an active and liquid trading market for
the shares will develop and be maintained. Investors should have a long-term
investment intent. If you purchase shares, you may not be able to sell them when
you want to at a price that is equal to or more than the price you paid. See
pages 16 to 17.
Important Risks in Owning the Holding Company's Common Stock
Before you decide to purchase stock in the offering, you should read
the Risk Factors section on pages 11 to 13 of this document.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF
CITIZENS SAVINGS BANK OF FRANKFORT AND SUBSIDIARY
The following tables set forth selected consolidated financial data of
Citizens Savings Bank of Frankfort and its subsidiary at and for the periods
indicated. The information for each of the five fiscal years ended June 30, 1992
through June 30, 1996 is derived from our audited financial statements. The
information as of March 31, 1997 and for the nine months ended March 31, 1997
and 1996 is unaudited but, in the opinion of management, includes all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of this information. The following information is only a summary
and should be read in conjunction with our consolidated financial statements and
notes (including consolidated data from operations of our subsidiary) beginning
on page F-1.
<TABLE>
<CAPTION>
AT JUNE 30,
AT MARCH 31, -----------------------------------------------------
1997 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Summary of Selected Consolidated Financial Condition Data:
Total assets................................................. $45,153 $44,235 $39,727 $38,523 $34,460 $36,758
Loans receivable, net (1).................................... 37,216 34,391 29,275 26,141 23,436 23,191
Cash on hand and in other institutions (2)................... 4,251 3,308 4,310 7,210 6,962 9,632
Investment securities available for sale..................... 159 3,003 2,832 2,677 1,652 2,209
Cash surrender value of life insurance contract.............. 1,066 1,035 991 943 885 ---
FHLB advances................................................ 2,000 3,000 1,500 --- --- ---
Deposits..................................................... 37,255 35,600 33,175 34,037 30,136 32,811
Retained income.............................................. 5,564 5,320 4,841 4,435 4,154 3,823
Unrealized loss on investment securities
available for sale........................................ --- (51) (49) (50) --- ---
</TABLE>
(1) Net of allowance for loan losses, deferred fees and escrow.
(2) Includes certificates of deposit in other financial institutions.
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<TABLE>
<CAPTION>
NINE MONTHS
ENDED MARCH 31, YEAR ENDED JUNE 30,
------------------ -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Selected Consolidated Operating Data:
Total interest income ...................................... $ 2,620 $ 2,365 $ 3,186 $ 2,742 $ 2,424 $ 2,563 $ 2,973
Total interest expense ..................................... 1,362 1,231 1,653 1,370 1,273 1,423 1,921
------- ------- ------- ------- ------- ------- -------
Net interest income ..................................... 1,258 1,134 1,533 1,372 1,151 1,140 1,052
Provision for loan losses .................................. 32 63 80 32 12 19 12
------- ------- ------- ------- ------- ------- -------
Net interest income after
provision for loan losses ............................. 1,226 1,071 1,453 1,340 1,139 1,121 1,040
Other income:
Fees and service charges ................................ 105 114 152 151 120 97 92
Other ................................................... (1) 69 94 70 77 139 42
------- ------- ------- ------- ------- ------- -------
Total other income .................................... 104 183 246 221 197 236 134
Other expense:
Salaries and employee benefits .......................... 352 305 415 387 331 319 252
Occupancy expense ....................................... 84 82 118 109 105 102 108
Data processing expense ................................. 80 75 101 105 98 94 85
Federal insurance premiums .............................. 253 57 77 75 71 66 76
Other ................................................... 192 187 256 248 258 237 232
------- ------- ------- ------- ------- ------- -------
Total other expense .................................... 961 706 967 924 863 818 753
------- ------- ------- ------- ------- ------- -------
Income before income taxes ................................. 369 548 732 637 473 539 421
Income taxes ............................................... 125 192 253 231 166 207 158
------- ------- ------- ------- ------- ------- -------
Income before cumulative effect of
change in accounting principle .......................... 244 356 479 406 307 332 263
Cumulative effect of change in
accounting for income taxes ............................. -- -- -- -- (26) -- --
Net income .............................................. $ 244 $ 356 $ 479 $ 406 $ 281 $ 332 $ 263
======= ======= ======= ======= ======= ======= =======
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MARCH 31, YEAR ENDED JUNE 30,
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(In thousands)
Supplemental Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate spread during period............... 3.71% 3.76% 3.75% 3.69% 3.14% 3.29% 2.62%
Net yield on interest-earning assets (1) (2)..... 3.99 3.99 3.99 3.92 3.38 3.56 3.00
Return on assets (2) (3)......................... .72 1.15 1.15 1.07 .77 .94 .72
Return on equity (2) (4)......................... 6.05 9.56 9.52 8.89 6.58 8.30 7.15
Equity to assets (5)............................. 12.32 12.09 11.91 12.06 11.38 12.05 10.40
Average interest-earning assets to average
interest-bearing liabilities.................. 106.22 105.37 105.61 105.84 106.54 106.20 106.84
Non-performing assets to total assets (5)........ .45 .53 .50 .35 .61 1.02 1.27
Allowance for loan losses to total loans
outstanding (5)............................... .46 .37 .40 .16 .19 .16 .12
Allowance for loan losses to
non-performing loans (5)...................... 84.12 53.41 62.51 33.19 20.89 10.92 5.79
Net (charge-offs) recoveries to average
total loans outstanding ...................... .004 .04 .04 (.12) (.004) (.03) (.05)
Other expenses to average assets (2)(6)......... 2.82 2.28 2.32 2.44 2.38 2.33 2.06
Number of full service offices (5)............... 1 1 1 1 1 1 1
</TABLE>
(1) Net interest income divided by average interest-earning assets.
(2) Information for nine months ended March 31, 1997 and 1996, has been
annualized. Interim results are not necessarily indicative of the results
of operations for an entire year.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) At end of period.
(6) Other expenses divided by average total assets.
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<PAGE>
RECENT DEVELOPMENTS OF CITIZENS SAVINGS BANK OF FRANKFORT
The following table sets forth selected consolidated financial
condition data for Citizens Savings Bank of Frankfort at June 30, 1997 and June
30, 1996, and selected consolidated operating data for the three months and
twelve months ended June 30, 1997 and 1996. Information at June 30, 1997 and for
the three and twelve months ended June 30, 1997 is unaudited but, in the opinion
of management, includes all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of this information. The information
set forth below does not purport to be complete and should be read in
conjunction with, and is qualified in its entirety by our financial statements
and related notes beginning on page F-1:
At June 30, At June 30,
Selected consolidated financial condition data: 1997 1996
----------- -----------
(In Thousands)
Total amount of:
Assets $46,353 $44,235
Loans receivable, net 38,435 34,391
Cash on hand and in other institutions 4,125 3,308
Investment securities available for sale 161 3,003
Cash surrender value of life insurance contract 1,076 1,035
FHLB advances 4,000 3,000
Deposits 36,355 35,600
Unrealized gain (loss) on investment securities
available for sale --- (51)
Retained income 5,691 5,320
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
June 30, June 30,
------------------ ----------------------
Selected consolidated operating data: 1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Total interest income $889 $821 $3,509 $3,186
Total interest expense 452 422 1,814 1,653
---- ---- ------ -------
Net interest income 437 399 1,695 1,533
Provision for loan losses 51 17 83 80
---- ---- ------ -------
Net interest income after provision
for loan losses 386 382 1,612 1,453
Other income 55 63 159 246
Other expense 256 261 1,217 967
---- ---- ------ -------
Income before income taxes 185 184 554 732
Income taxes 58 61 183 253
---- ---- ------ -------
Net income $127 $123 $ 371 $ 479
==== ==== ====== =======
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
At or for the At or for the
Three Months Ended Twelve Months Ended
June 30, June 30,
------------------- ---------------------
1997 1996 1997 1996
------ ------ ------ ------
Selected Financial Ratios and Other data:
<S> <C> <C> <C> <C>
Interest rate spread (average during period) (1)..................... 3.84% 3.73% 3.75% 3.75%
Net yield on interest-earning assets (1)(2).......................... 4.13 3.99 4.02 3.99
Return on assets (ratio of net income to
average total assets) (1)......................................... 1.11 1.13 .82 1.15
Return on equity (ratio of net income to
average total equity) (1)......................................... 9.00 9.40 6.81 9.52
Equity-to-assets, at end of period................................... 12.28 11.91 12.28 11.91
Average interest-earning assets to average
interest-bearing liabilities (1).................................. 106.71 106.24 106.31 105.61
Non-performing assets to total assets, at end of period (3).......... .74 .50 .74 .50
Allowance for loan losses to total loans outstanding................. .55 .40 .55 .40
Net (charge-offs) recoveries to average total loans outstanding...... (.03) --- (.03) .04
Ratio of other expenses to average assets (1)........................ 2.24 2.42 2.67 2.32
</TABLE>
(1) Ratios are annualized.
(2) Net interest income divided by average interest-earning assets.
(3) Non-performing assets consist of non-accruing loans, accruing loans 90
days or more past due, restructured loans and real estate owned.
Financial Condition at June 30, 1997 Compared to Financial Condition at June 30,
1996
Our total consolidated assets increased by $2.2 million, or 4.8%, to
$46.4 million at June 30, 1997 from $44.2 million at June 30, 1996. Net loans
receivable increased $4.0 million, or 11.8%, while investment securities
decreased $2.8 million and FHLB advances increased $1.0 million. We funded the
increased loans primarily with the increase in our interest-bearing deposits of
$755,000, the sale of our investment securities and with the additional FHLB
advance. Capital increased $371,000, or 7.0%, to $5.7 million in 1997 from $5.3
million in 1996.
Results of Operations for the Three Months Ended June 30, 1997 and 1996
Net Income. Net income increased $4,000, or 3.3%, to $127,000 for the
three-month period ended June 30, 1997 from $123,000 for the same period in
1996. The relatively small increase in net income was impacted by the $34,000
increase in our Provisions for Loan Losses during this period.
Net Interest Income. Net interest income increased $38,000, or 9.5%, to
$437,000 for the 3-month period ended June 30, 1997, from $399,000 for the
comparable period in 1996. This increase was due primarily to an increase of
$4.0 million in net loans receivable to $38.4 million for the year ended June
30, 1997. Also, our interest rate spread increased to 3.8% for 1997 as compared
to 3.7% for the same period in 1996.
Provisions for Loan Losses. Our provisions for loan losses for the
three months ended June 30, 1997 and for the comparable period in 1996 were
$51,000 and $17,000, respectively, an increase of $34,000. We had chargeoffs of
$12,000 in consumer loans during the three months ended June 30, 1997 and did
not have any chargeoffs in the comparable period in 1996. We increased our loan
loss provisions primarily in recognition of the increase in consumer loan losses
occurring in the nation, regionally and locally as well as to give consideration
to individually large multi-family and non-residential real estate loans.
Other Income. Our other income decreased approximately $8,000, or
12.7%, for the 3-month period ended June 30, 1997 as compared to the comparable
period in 1996. This decrease was due primarily to the decrease in the net
profit of our wholly-owned subsidiary, Citizens Loan and Service Corporation
("CLSC"), and to decreases in our fee income during this period.
Other Expense. Our non-interest expense decreased $5,000, or 1.9%, to
$256,000 in 1997 from $261,000 in 1996. This decrease was due largely to the
reduction in our FDIC insurance premium beginning in January, 1997.
Income Tax Expense. Our income tax expense decreased $3,000, or 4.9%,
from $61,000 in 1996 to $58,000 in 1997.
-9-
<PAGE>
Comparison of Operating Results for Fiscal Years Ended June 30, 1997 and 1996
Net Income. Net income decreased $108,000, or 22.5%, to $371,000 in
1997 from $479,000 for 1996. This decrease primarily resulted from our
recognition of the one-time, non-recurring SAIF special assessment in the amount
of $211,000, ($127,000 net of tax) and the sale of an investment at a loss of
approximately $60,000. We chose to sell the investment in order to use the
proceeds to pay down FHLB advances and to increase overall liquidity. These
expenses were offset by an increase of $162,000 in our net interest income to
$1.7 million for 1997 from $1.5 million for 1996. Excluding the SAIF assessment
and the loss on the sale of investments, net income would have increased
$55,000, or 11.5%, to $534,000 for the twelve months ending June 30, 1997 from
$479,000 in 1996.
Net Interest Income. Our net interest income increased $162,000, or
10.6%, to $1.7 million in 1997 from $1.5 million in 1996. This increase
primarily resulted from the growth in net loans receivable of $4.0 million, or
11.6%, to $38.4 million in 1997 from $34.4 million in 1996.
Provisions for Loan Losses. Our provisions for loan losses for 1997 and
1996 were $83,000 and $80,000, respectively. We increased our provision for 1997
to recognize the increase in consumer loan losses being experienced by financial
institutions nationally, regionally and locally as well as the risks associated
with individually large multi-family and nonresidential real estate loans. We
had no chargeoffs in fiscal year 1996 and we experienced $12,000 in recoveries.
We had chargeoffs of $12,000 in fiscal year 1997. Our allowances for loan loss
as of June 30, 1997 were $212,000.
Other Income. Our other income decreased approximately $87,000, or
35.4%, in 1997 as compared to 1996. This decrease resulted from the sale of an
investment security at a loss of approximately $60,000, a decrease in fees and
service charges and decreases in other miscellaneous income.
Other Expense. Our other expenses increased $250,000 or 25.9% to $1.2
million in 1997 from $967,000 in 1996. The increase was primarily attributable
to an increase of $47,000 in salaries and benefits, an increase of $196,000 in
SAIF insurance premiums and a $9,000 increase in occupancy expense relating to
the installation of new computers, a "Loan Doc Prep" software package and a
Local Area Network (LAN).
Income Tax Expense. Our income tax expense decreased $70,000, or 27.7%,
to $183,000 at June 30, 1997 from $253,000 at June 30, 1996. The decrease
resulted primarily from our reduced profits in 1997 caused by our recognition of
the one-time, non-recurring SAIF special assessment in the amount of $211,000
($127,000 net of tax) and our sale of an investment at a loss of approximately
$60,000.
-10-
<PAGE>
RISK FACTORS
In addition to the other information in this document, you should
consider carefully the following risk factors in evaluating an investment in the
Common Stock.
Lack of Active Market for Common Stock
Due to the small size of the offering, it is highly unlikely that an
active trading market will develop and be maintained. If an active market does
not develop, you may not be able to sell your shares promptly or perhaps at all,
or sell your shares at a price equal to or above the price you paid for the
shares. The Common Stock may not be appropriate as a short-term investment. See
"Market for the Common Stock."
Decreased Return on Average Equity and Increased Expenses Immediately After
Conversion
Return on average equity (net income divided by average equity) is a
ratio commonly used to compare the performance of a savings association to its
peers. For the nine-month periods ended March 31, 1997, and 1996, our returns on
average equity (on an annualized basis) were 6.05% and 9.56%, respectively. A
lower return on equity could reduce the trading price of our shares. As a result
of the Conversion, our equity will increase substantially. Our expenses also
will increase because of the costs associated with our employee stock ownership
plan ("ESOP"), management recognition and retention plan ("RRP"), and the costs
of being a public company. Because of the increases in our equity and expenses,
our return on equity is likely to decrease as compared to our performance in
previous years. Initially, Citizens intends to use a portion of the proceeds of
this offering to repay some or all of its short-term obligations owed to the
Federal Home Loan Bank of Indianapolis ("FHLB of Indianapolis"). Citizens may
also use some of the proceeds to purchase loan participations and
mortgage-backed securities on the secondary market and, on an interim basis, to
invest in U.S. government securities and federal agency securities which
generally have lower yields than residential mortgage loans. See "Use of
Proceeds."
Potential Impact of Changes in Interest Rates and the Current Interest Rate
Environment
Our ability to make a profit, like that of most financial institutions,
substantially depends upon our net interest income, which is the difference
between the interest income we earn on our interest-earning assets (such as
mortgage loans) and the interest expense we pay on our interest-bearing
liabilities (such as deposits). Approximately 70 percent of our mortgage loans
have rates of interest which are fixed for the term of the loan ("fixed rate")
and are originated with terms of 15 or 20 years, while deposit accounts have
significantly shorter terms to maturity. Because our interest-earning assets
generally have fixed rates of interest and have longer effective maturities than
our interest-bearing liabilities, the yield on our interest earning assets
generally will adjust more slowly to changes in interest rates than the cost of
our interest-bearing liabilities. As a result, our net interest income will be
adversely affected by material and prolonged increases in interest rates. In
addition, rising interest rates may adversely affect our earnings because there
might be a lack of customer demand for loans. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Citizens Savings
Bank of Frankfort -- Asset/Liability Management."
Changes in interest rates also can affect the average life of loans and
mortgage-backed securities. Historically lower interest rates in recent periods
have resulted in increased prepayments of loans and mortgage-backed securities,
as borrowers refinanced their mortgages in order to reduce their borrowing cost.
Under these circumstances, we are subject to reinvestment risk to the extent
that we are not able to reinvest such prepayments at rates which are comparable
to the rates on the prepaid loans or securities.
Nonresidential Real Estate and Multi-Family Lending
As of March 31, 1997, we had nonresidential real estate and
multi-family loans of $846,000 and $1.6 million, respectively, or 2.3% and 4.2%,
respectively, of our total loan portfolio as of that date. Although
nonresidential real estate and multi-family loans provide higher interest rates
and shorter terms, these loans have higher credit risks than one- to four-family
residential loans. Nonresidential real estate and multi-family loans often
involve large loan balances to single borrowers or groups of related borrowers.
In addition, payment experience on loans secured by such properties is typically
dependent on the successful operation of the properties and thus may be subject
to a greater extent to adverse conditions in the real estate market or in the
general economy. Accordingly, the nature of the loans makes them more difficult
for management to monitor and evaluate. Although none of our nonresidential real
estate and multi-family loans was non-performing as of March 31, 1997, if
-11-
<PAGE>
borrowers under these types of loans develop problems, we may be required to
increase by a significant amount our allowance for loan losses because of the
relatively large size of these loans. This, in turn, may result in significant
reductions in our net income. See "Business of Citizens--Lending Activities."
Dependence on President and Possible New Management
Our successful operations depend to a considerable degree on our
President, Fred W. Carter, who is 65 years of age. We have entered into a
three-year employment agreement with Mr. Carter. The employment agreement
requires certain payments to Mr. Carter if he is terminated by us or by an
entity that acquires us without "just cause," or if Mr. Carter terminates the
employment agreement "for cause." The loss of Mr. Carter's services could
adversely affect us. While the board of directors is seeking to attract and
retain additional management either as a successor or supplement to Mr. Carter,
there is no assurance that such individuals will be attracted or retained. If
such individuals are retained, their participation in our management could
result in changes to our operating strategy which could affect our
profitability. See "Management of Citizens Savings Bank of Frankfort" and
"Executive Compensation and Related Transactions of Citizens-- Employment
Contract."
Potential Impact of Future Changes in or the Discontinuance of the Business of
Citizens' Subsidiary
Our service corporation subsidiary, CLSC, has historically engaged in
purchasing and subdividing large tracts of land and selling the subdivided
tracts. We utilize the sale of CLSC's properties to provide an additional source
of income. During the fiscal years ended June 30, 1996, 1995 and 1994, we
realized net income (loss) of $24,000, $2,000, and $(163), respectively, from
the operations of CLSC. During the nine months ended March 31, 1997, net income
from the operations of CLSC was $6,000. Also at March 31, 1997, we had an
investment in CLSC of $465,000 and loans outstanding to CLSC of $575,000.
Although savings associations are presently permitted under federal law to
invest in service corporations that engage in real estate development, future
legislation may require us either to convert to a state or national commercial
bank charter or to divest of our investments in subsidiaries with real estate
holdings. In either case, we may be required to divest of our investment in
CLSC, possibly on terms which could result in a loss to us, and a future
reduction in our earnings. See "Regulation." In addition, our earnings are
affected by the activities of CLSC, which are in turn affected by underlying
economic factors such as interest rates, levels of unemployment and the general
health of the local and national economy. See "Business of Citizens--Service
Corporation Subsidiary."
Intent to Remain Independent
We have operated as an independent community oriented savings
association since 1916. It is our intention to continue to operate as an
independent community oriented savings association following the Conversion.
Accordingly, you are urged not to subscribe for shares of our Common Stock if
you are anticipating a quick sale by us. See "Business of Citizens."
<PAGE>
Anti-Takeover Provisions and Statutory Provisions That Could Discourage Hostile
Acquisitions of Control
Provisions in the Holding Company's articles of incorporation, the
corporation law of the state of Indiana, and certain federal regulations may
make it difficult and expensive to pursue a tender offer, change in control or
takeover attempt which we oppose. As a result, shareholders who might desire to
participate in such a transaction may not have an opportunity to do so. Such
provisions will also render the removal of the current board of directors or
management of the Holding Company, or the appointment of new directors to the
Board, more difficult. For example, the Holding Company's Bylaws provide that
directors must be residents of Clinton County, Indiana, must have maintained a
deposit or loan relationship with us for at least 12 months and, with respect to
a non-employee director, must have served as a member of a civic or community
organization in Clinton County for at least 12 months in the 5-year period prior
to being nominated to the Board. Further restrictions include: restrictions on
the acquisition of the Holding Company's equity securities and limitations on
voting rights; the classification of the terms of the members of the board of
directors; certain provisions relating to meetings of shareholders; denial of
cumulative voting by shareholders in the election of directors; the issuance of
preferred stock and additional shares of Common Stock without shareholder
approval; and super majority provisions for the approval of certain business
combinations. These provisions may reduce the trading price of our stock. See
"Restrictions on Acquisition of the Holding Company."
Possible Voting Control by Directors and Officers
Our directors and executive officers intend to subscribe for 170,000
shares of Common Stock which, at the midpoint of the Estimated Valuation Range,
would constitute 21.25% of the outstanding shares. When aggregated with the
shares of Common Stock our officers and directors may acquire through the Stock
Option Plan and RRP, our officers and directors would own approximately 282,000
shares of Common Stock, or 35.3% of the outstanding shares at the midpoint of
the Estimated Valuation Range. This ownership of Common Stock by our management
-12-
<PAGE>
could make it difficult to obtain majority support for shareholder proposals
which are opposed by management. In addition, our management would be able to
block the approval of transactions or actions (i.e., business combinations and
amendment to our articles of incorporation and bylaws) requiring the approval of
80% of the shareholders under the Holding Company's articles of incorporation if
additional shares are issued to them pursuant to the RRP and/or the Stock Option
Plan. See "Proposed Purchases by Directors and Executive Officers," "Executive
Compensation and Related Transactions of Citizens," "Description of Capital
Stock," and "Restrictions on Acquisition of the Holding Company."
Possible Dilutive Effect of RRP and Stock Options
If the Conversion is completed and shareholders approve the RRP and
Stock Option Plan, we intend to issue shares to our officers and directors
through these plans. If the shares for the RRP are issued from our authorized
but unissued stock, your ownership percentage could be diluted by up to
approximately 3.9%. If the shares for the Stock Option Plan are issued from our
authorized by unissued stock, your ownership percentage could be diluted by up
to approximately 3.3% at the midpoint of the Estimated Valuation Range. In
either case, the trading price of our Common Stock may be reduced. See "Pro
Forma Data" and "Executive Compensation and Related Transactions of Citizens."
Financial Institution Regulation and Future of the Thrift Industry
We are subject to extensive regulation, supervision, and examination by
the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). A bill has been introduced in the Congress that would
consolidate the OTS with the Office of the Comptroller of the Currency. If this
statute is approved we could be forced to become a state or national commercial
bank, and become subject to regulation by a different government agency. If we
become a commercial bank, our investment authority and the ability of the
Holding Company to engage in diversified activities, including the real estate
development activities of CLSC, may be limited or prohibited, which could affect
our profitability. It is impossible at this time to predict the impact of any
such legislation on our operations. See "Regulation."
Restrictions on Repurchase of Shares
During the first year following the Conversion, the Holding Company may
not generally repurchase its shares except in unusual circumstances as permitted
by the OTS. During each of the second and third years following the Conversion,
the Holding Company may repurchase up to 5% of its outstanding shares. During
those periods, if we decide that repurchases above those limits would be a good
use of funds, we would not be able to do so, without obtaining OTS approval.
There is no assurance that OTS approval would be given. See "The Conversion --
Restrictions on Repurchase of Stock by the Holding Company."
Competition
We experience strong competition in our local market area in both
originating loans and attracting deposits, primarily from commercial banks,
thrifts and credit unions. Such competition may limit our growth in the future.
See "Competition."
Geographic Concentration of Loans
Nearly all of our real estate mortgage loans are secured by properties
located in Indiana, mostly in Clinton County. A weakening in the local real
estate market or in the local or national economy, or a reduction in the
workforce at the manufacturing facilities in the area could result in an
increase in the number of borrowers who default on their loans and a reduction
in the value of the collateral securing the loans, which could reduce our
earnings.
Risk of Delayed Offering
Although we expect to complete the Conversion within the time periods
indicated in this Prospectus, it is possible that adverse market, economic or
other factors could significantly delay the completion of the Conversion, which
could significantly increase our Conversion costs. In this case, however, you
would have the right to modify or rescind your subscription and to have your
subscription funds returned to you promptly, with interest. See "The
Conversion."
Income Tax Consequences of Subscription Rights
If the Internal Revenue Service were to determine that the subscription
rights offered to you in connection with the Conversion have an ascertainable
value, your exercise of your subscription rights could result in the recognition
of taxable income. In the opinion of Keller & Company, Inc. ("Keller"), however,
the subscription rights do not have an ascertainable fair market value. See "The
Conversion -- Principal Effects of Conversion - Tax Effects."
-13-
<PAGE>
PROPOSED PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the approximate purchases of Common
Stock by each director and executive officer and their Associates in the
Conversion. All shares will be purchased for investment purposes and not for
purposes of resale. The table assumes that 800,000 shares (the midpoint of the
Estimated Value Range) of the Common Stock will be sold at $10.00 per share and
that sufficient shares will be available to satisfy subscriptions.
<TABLE>
<CAPTION>
Aggregate Total
Price of Shares Proposed
Intended to be Subscribed Percent
Name Position Purchases For (1) of Shares
<S> <C> <C> <C> <C>
Robert F. Ayres Director $ 50,000 5,000 .625%
Fred W. Carter Director, President and 200,000 20,000 2.5
Chief Executive Officer
Perry W. Lewis Director 200,000 20,000 2.5
John J. Miller Director 300,000 20,000 3.75
Billy J. Wray Director 200,000 20,000 2.5
Ralph C. Hinshaw Advisory Director 200,000 20,000 2.5
Rawl V. Ransom Advisory Director 100,000 10,000 1.25
All Other Executive 450,000 25,000 5.63
Officers ---------- ------- -----
All Directors and $1,700,000 170,000 21.25%
Executive Officers ========== ======= =====
as a group (10 persons)(2)
</TABLE>
(1) Does not include shares subject to stock options which may be granted
under the Stock Option Plan, or shares which may be awarded under the
RRP.
(2) Assuming that all shares awarded under the RRP are purchased on the
open market and upon (i) the full vesting of the restricted stock
awards to directors and executive officers contemplated under the RRP
and (ii) the exercise in full of all options expected to be granted to
directors and executive officers under the Stock Option Plan, all
directors and executive officers as a group would beneficially own
265,200 shares (39.0%), 282,000 shares (35.3%), 298,800 shares (32.5%),
and 318,100 shares (30.1%) upon sales at the minimum, midpoint,
maximum, and 15% above the maximum of the Estimated Valuation Range,
respectively. See "Executive Compensation and Related Transactions of
Citizens -- RRP," "-- Stock Option Plan."
CITIZENS BANCORP
The Holding Company was formed in June, 1997 as an Indiana corporation
to be the holding company for Citizens. The Holding Company has not engaged in
any significant business to date and, for that reason, its financial statements
are not included herein. The Holding Company has received approval from the OTS
to become a savings and loan holding company through the acquisition of all of
the capital stock of Citizens to be issued upon completion of the Conversion.
The Holding Company will initially receive 50% of the net Conversion
proceeds, after providing for the loan to the Holding Company's ESOP to permit
the ESOP to purchase shares in the Conversion. The holding company structure
will provide the Holding Company with greater flexibility than Citizens to
diversify its business activites, either through newly-formed subsidiaries or
through acquisitions. The Holding Company has no present plans regarding
diversification, acquisitions or expansion, however. The Holding Company
initially will not conduct any active business and does not intend to employ any
persons other than its officers, although it may utilize our support staff from
time to time.
The office of the Holding Company is located at 60 South Main Street,
P.O. Box 635, Frankfort, Indiana, 46041. The telephone number is (765) 654-8533.
CITIZENS SAVINGS BANK OF FRANKFORT
We were originally organized as a state-chartered building and loan
association in 1916 and have operated since then as an independent,
community-oriented savings association. In 1997, we converted to a federal
charter, retaining our name "Citizens Savings Bank of Frankfort." We currently
conduct our business from a full-service office located in Frankfort, which is
located in Clinton County, Indiana. We believe that we have developed a solid
reputation among our loyal customer base because of our commitment to personal
service and our strong support of the local community. We offer a variety of
lending, deposit and other financial services to our retail and commercial
customers.
-14-
<PAGE>
We attract deposits from the general public and originate mortgage
loans, most of which are secured by one- to four-family residential real
property in Clinton County. We also offer multi-family loans, construction
loans, non-residential real estate loans, home equity loans and consumer loans,
including single-pay loans, loans secured by deposits, and installment loans. We
derive most of our funds for lending from deposits of our customers, which
consists primarily of certificates of deposit, demand accounts and savings
accounts.
We have maintained a relatively strong capital position by focusing on
residential real estate mortgage lending in Clinton County, Indiana. At March
31, 1997, we had total assets of $45.2 million, deposits of $37.3 million and
retained income of $5.6 million, or 12.3% of assets. For the fiscal year ended
June 30, 1996, we had net income of $479,000, a return on assets of 1.2% and a
return on equity of 9.5%. We have historically experienced very few asset
quality problems in our total loan portfolio, and at March 31, 1997, our ratio
of non-performing assets to total assets was .45%. During the fiscal year ended
June 30, 1996, we recovered $12,000 of loans previously charged off and did not
charge off any additional loans.
MARKET AREA
Our primary market area is Clinton County, Indiana. Frankfort, the county
seat of Clinton County, is located in central Indiana, approximately 48 miles
northwest of Indianapolis and 23 miles southeast of Lafayette, Indiana.
According to the U.S. Bureau of Census, the city of Frankfort had a population
of 14,754, and Clinton County had a population of 30,974, at the time of the
1990 census.
According to the Indiana Department of Workforce Development, the total
work force in Clinton County was 15,470 as of January, 1997. As of the same
date, 14,960 persons were employed, resulting in an unemployment rate for
Clinton County of approximately 3.3%. As of the same date, the unemployment rate
for Indiana was 3.4%, and the nationwide unemployment rate was 5.0%. According
to the Bureau of the Census-County Business Patterns, approximately 31.1% of the
jobs in Citizens' market area were in the manufacturing sector, approximately
27.5% of the jobs were in the services industry and approximately 18.5% were in
the wholesale/retail sector. Other significant employer groups in Citizens'
market area include agriculture/mining and construction, each with approximately
7% of the work force.
Clinton County's largest employers are Mallory Controls and Federal
Mogul, each with approximately700 employees, and Frito-Lay, which employs
approximately 1,300 persons in two plants.
According to the Data Users Center and the CACI Sourcebook, average per
capita income for residents of Clinton County totaled $14,535 for 1996, compared
to $16,738 for the United States and $15,275 for Indiana. The 1996 average per
capita income for Clinton County residents, however, increased nearly 23% from
the average per capita income of $11,849 for 1990. Median household income for
residents of Clinton County totaled $32,305 for 1996, compared to $26,148 for
1990. Median household income for the United States and Indiana totaled $34,530
and $32,816, respectively, for 1996.
According to the United States Department of Commerce and the CACI
Sourcebook, median housing values for Clinton County and Frankfort in 1990 were
$40,700 and $36,100, respectively. This compares to the national and state
medians of $79,100 and $53,500, respectively.
<PAGE>
USE OF PROCEEDS
The Holding Company will retain 50% of the net proceeds from the
offering, after taking into account a loan to the ESOP, and will use the balance
of the proceeds to purchase all of the capital stock issued by Citizens in
connection with the Conversion. A portion of the net proceeds to be retained by
the Holding Company will be loaned to our employee stock plan to fund its
purchase of 8% of the shares of the Holding Company sold in the Conversion. On a
short-term basis, the balance of the net proceeds retained by the Holding
Company initially may be invested in short-term investments. The Holding Company
may also use the proceeds as a source of funds for the payment of dividends to
shareholders or for the repurchase of shares of Common Stock. The Holding
Company will not take any action in furtherance of an extraordinary capital
distribution during the year following the Conversion.
Citizens intends to use a portion of the net proceeds that it receives
from the Holding Company to make adjustable- and fixed-rate mortgage loans,
nonresidential real estate loans and consumer loans to the extent there is
demand for such loans and subject to market conditions. Citizens may also use a
portion of the net proceeds to fund the purchase of 4% of the shares for the RRP
which we anticipate will be adopted by our Board following the Conversion,
subject to shareholder approval, and to repay some or all of its borrowings from
the FHLB of Indianapolis. We anticipate that the balance of the proceeds will be
used to purchase loan participations and possibly mortgage-backed securities in
the secondary market. On an interim basis, we may use some of the net proceeds
to invest in U.S. government securities and other federal agency securities. See
"Business of Citizens -- Investments and Mortgage-Backed Securities."
-15-
<PAGE>
The following table shows estimated gross and net proceeds based upon
shares of Common Stock being sold in the Conversion at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range.
<TABLE>
<CAPTION>
15% Above
Minimum, Midpoint, Maximum, Maximum,
680,000 800,000 920,000 1,058,000
Shares Shares Shares Shares
Sold at Price Sold at Price Sold at Price Sold at Price
of $10.00 of $10.00 of $10.00 of $10.00(2)
---------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Gross Proceeds......................... $6,800 $8,000 $9,200 $10,580
Less:
Estimated Underwriting Commissions
and Other Expenses(1) (2)........... 433 450 467 486
------ ------ ------ -------
Estimated net Conversion
proceeds(1)......................... $6,367 $7,550 $8,733 $10,094
====== ====== ====== =======
</TABLE>
(1) In calculating estimated net Conversion proceeds, it has been assumed that
no sales will be made through selected dealers, that all shares are sold in
the Subscription Offering, that executive officers and directors of
Citizens and their Associates purchase 170,000 shares of Common Stock in
the Conversion, and that the ESOP acquires 8% of the shares of Common Stock
issued in the Conversion.
(2) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to
15% to reflect changes in market and financial conditions following the
commencement of the Subscription Offering and the Community Offering, if
any.
The actual net proceeds may differ from the estimated net proceeds
calculated above for various reasons, including variances in the actual amount
of legal and accounting expenses incurred in connection with the Conversion,
commissions paid for sales made through other dealers, and the actual number of
shares of Common Stock sold in the Conversion. Any variance in the actual net
proceeds from the estimates provided in the table above is not expected to be
material.
DIVIDENDS
Although no decision has been made yet regarding the payment of
dividends, the Holding Company may consider a policy of paying cash dividends on
the Common Stock following the Conversion. Dividends, when and if paid, will be
subject to determination and declaration by the Board of Directors in its
discretion, which will take into account the Holding Company's consolidated
financial condition and results of operations, tax considerations, industry
standards, economic conditions, capital levels, regulatory restrictions on
dividend payments by us to the Holding Company, general business practices and
other factors. See "Regulation -- Savings Association Regulatory Capital" and
"-- Dividend Limitations."
The Holding Company is not subject to OTS regulatory restrictions on
the payment of dividends to its shareholders although the source of such
dividends will depend in part upon the receipt of dividends from us. The Holding
Company is subject, however, to the requirements of Indiana law, which generally
limit the payment of dividends to amounts that will not affect the ability of
the Holding Company, after the dividend has been distributed, to pay its debts
in the ordinary course of business and will not exceed the difference between
the Holding Company's total assets and total liabilities plus preferential
amounts payable to shareholders with rights superior to those of the holders of
Common Stock.
In addition to the foregoing, the portion of our earnings which has
been appropriated for bad debt reserves and deducted for federal income tax
purposes cannot be used by us to pay cash dividends to the Holding Company
without the payment of federal income taxes by us at the then current income tax
rate on the amount deemed distributed, which would include the amount of any
federal income taxes attributable to the distribution. See "Taxation -- Federal
Taxation" and Note 9 to the Consolidated Financial Statements. The Holding
Company does not contemplate any distribution by us that would result in a
recapture of our bad debt reserve or otherwise create federal tax liabilities.
<PAGE>
MARKET FOR THE COMMON STOCK
The Holding Company has never issued Common Stock to the public.
Consequently, there is no established market for the Common Stock. The Holding
Company intends to list the Common Stock over-the-counter through the OTC
"Electronic Bulletin Board," and the Holding Company intends to request that
Trident Securities Inc. ("Trident Securities") undertake to match offers to buy
and offers to sell the Common Stock. There can be no assurance that timely or
accurate quotations will be available on the OTC "Electronic Bulletin Board." In
addition, the existence of a public trading market will depend upon the presence
in the market of both willing buyers and willing sellers at any given time. The
-16-
<PAGE>
presence of a sufficient number of buyers and sellers at any given time is a
factor over which neither the Holding Company nor any broker or dealer has
control. Due to the relatively small number of shares of Common Stock being
offered in the Conversion and the concentration of ownership, it is unlikely
that an active or liquid trading market for the Common Stock will be developed
and be maintained. Further, the absence of an active and liquid trading market
may make it difficult to sell the Common Stock and may have an adverse effect on
the price of the Common Stock. Purchasers should consider the potentially
illiquid and long-term nature of their investment in the shares offered hereby.
The aggregate price of the Common Stock is based upon an independent
appraisal of the pro forma market value of the Common Stock. However, there can
be no assurance that an investor will be able to sell the Common Stock purchased
in the Conversion at or above the Purchase Price.
COMPETITION
We originate most of our loans to and accept most of our deposits from
residents of Clinton County, Indiana. We are subject to competition from various
financial institutions, including state and national banks, state and federal
savings associations, credit unions, and certain nonbanking consumer lenders
that provide similar services in Clinton County with significantly larger
resources than are available to us. In total, there are five other financial
institutions located in Clinton County. We also compete with money market funds
with respect to deposit accounts and with insurance companies with respect to
individual retirement accounts.
The primary factors influencing competition for deposits are interest
rates, service and convenience of office locations. We compete for loan
originations primarily through the efficiency and quality of the services that
we provide borrowers and through interest rates and loan fees charged.
Competition is affected by, among other things, the general availability of
lendable funds, general and local economic conditions, current interest rate
levels, and other factors that we cannot readily predict.
CAPITALIZATION
The following table presents our historical capitalization at March 31,
1997, and the pro forma consolidated capitalization of the Holding Company as of
that date, giving effect to the sale of Common Stock offered by this Prospectus
based on the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, and subject to the other assumptions set forth below.
The pro forma data set forth below may change significantly at the time the
Holding Company completes the Conversion due to, among other factors, a change
in the Estimated Valuation Range or a change in the current estimated expenses
of the Conversion. If the Estimated Valuation Range changes so that between
680,000 and 1,058,000 shares are not sold in the Conversion, subscriptions will
be returned to subscribers who do not affirmatively elect to continue their
subscriptions during the offering at the revised Estimated Valuation Range.
-17-
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Holding Company
Capitalization Based on Sale of
680,000 800,000 920,000 1,058,000
Shares Shares Shares Shares
Sold at Sold at Sold at Sold at
Citizens Price of Price of Price of Price of
Historical $10.00 $10.00 $10.00 $10.00 (6)
---------- ------ ------ ------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1)..................................... $37,255 $37,255 $37,255 $37,255 $37,255
Federal Home Loan Bank advances.................. $ 2,000 $ --- $ --- $ --- $ ---
Capital and retained earnings:
Preferred stock, without par
value, 2,000,000 shares
authorized, none issued....................... $ --- $ --- $ --- $ --- $ ---
Common Stock, without par
value, 5,000,000 shares
authorized; indicated number
of shares assumed outstanding (2) ............ --- 6,367 7,550 8,733 10,094
Additional paid in capital..................... --- --- --- --- ---
Retained earnings and net unrealized losses
on securities available for sale (3)......... 5,564 5,564 5,564 5,564 5,564
Common Stock acquired by ESOP(4) ................ --- (544) (640) (736) (846)
Common Stock acquired by the RRP (5)........... --- (272) (320) (368) (423)
-------- ------- ------- ------- -------
Total capital and retained earnings.............. $ 5,564 $11,115 $12,154 $13,193 $14,388
======== ======= ======= ======= =======
</TABLE>
(1) Excludes accrued interest. Withdrawals from deposit accounts for the
purchase of Common Stock are not reflected. Such withdrawals will reduce
pro forma deposits by the amount thereof.
(2) The number of shares to be issued in the Conversion may be increased or
decreased based on market and financial conditions prior to the completion
of the Conversion. Assumes estimated expenses of $433,400, $450,000,
$466,600 and $485,600 at the minimum, midpoint, maximum and adjusted
maximum of the Estimated Valuation Range, respectively. See "Use of
Proceeds."
(3) Retained earnings are substantially restricted. See Note 9 to Citizens'
Consolidated Financial Statements. See also "The Conversion -- Principal
Effects of Conversion -- Effect on Liquidation Rights." Retained earnings
do not reflect the federal income tax consequences of the restoration to
income of Citizens' special bad debt reserve for income tax purposes which
would be required in the unlikely event of a liquidation or if a
substantial portion of retained earnings were otherwise used for a purpose
other than absorption of bad debt losses and will be required as to
post-1987 reserves under a recently enacted law. See "Taxation -- Federal
Taxation." Equity capital includes retained earnings decreased by net
unrealized losses on securities available for sale.
(4) Assumes purchases by the ESOP of a number of shares equal to 8% of the
shares issued in the Conversion. The funds used to acquire the ESOP shares
will be borrowed from the Holding Company. See "Use of Proceeds." Citizens
intends to make contributions to the ESOP sufficient to service and
ultimately retire its debt. The Common Stock acquired by the ESOP is
reflected as a reduction of shareholders' equity. See "Executive
Compensation and Related Transactions of Citizens -- Employee Stock
Ownership Plan and Trust."
<PAGE>
(5) Assuming the receipt of shareholder approval at the Holding Company's first
meeting of shareholders, the Holding Company intends to implement the RRP.
Assuming such implementation, the RRP will purchase an amount of shares
equal to 4% of the Common Stock sold in the Conversion for issuance to
directors and officers of the Holding Company and Citizens. Such shares may
be purchased from authorized but unissued shares or on the open market. The
Holding Company currently intends that the RRP will purchase the shares on
the open market. Under the terms of the RRP, assuming it is adopted within
one year of the Conversion, shares will vest at the rate of 20% per year.
The Common Stock to be purchased by the RRP represents unearned
compensation and is, accordingly, reflected as a reduction to pro forma
shareholders' equity. As shares of the Common Stock granted pursuant to the
RRP vest, a corresponding reduction in the charge against capital will
occur. In the event that authorized but unissued shares are acquired, the
interests of existing shareholders will be diluted. Assuming that 800,000
shares of Common Stock, the midpoint of the Estimated Valuation Range, are
issued in the Conversion and that all awards under the RRP are from
authorized but unissued shares, the Holding Company estimates that the per
share book value for the Common Stock would be diluted $.60 per share, or
3.85% on a pro forma basis as of March 31, 1997. The dilution would be $.64
per share (3.85%) and $.57 per share (3.85%) at the minimum and maximum
levels, respectively, of the Estimated Valuation Range on a pro forma basis
as of March 31, 1997.
(6) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to
15% to reflect changes in market and financial conditions following the
commencement of the Subscription Offering and Community Offering, if any.
-18-
<PAGE>
PRO FORMA DATA
The following table sets forth the pro forma combined consolidated net
income of the Holding Company for the nine months ended March 31, 1997 and for
the year ended June 30, 1996 as though the Conversion offering had been
consummated at the beginning of those periods, respectively, and the investable
net proceeds had been invested at 6.02% for the nine months ended March 31, 1997
and 5.74% for the year ended June 30, 1996 (the "risk free" interest rate
available on 1-year U.S. Treasury Bills as of these respective periods end). The
pro forma after-tax return for the Holding Company on a consolidated basis is
assumed to be 3.61% for the nine months ended March 31, 1997 and 3.44% for the
year ended June 30, 1996, after giving effect to (i) the yield on investable net
proceeds from the Conversion offering and (ii) adjusting for taxes using a
federal statutory tax rate of 34% and a net state statutory income tax rate of
6%. Historical and per share amounts have been calculated by dividing historical
amounts and pro forma amounts by the indicated number of shares of Common Stock
assuming that such number of shares had been outstanding during each of the
entire periods.
Book value represents the difference between the stated amount of
consolidated assets and consolidated liabilities of the Holding Company computed
in accordance with generally accepted accounting principles. Book value does not
necessarily reflect current market value of assets and liabilities, or the
amounts, if any, that would be available for distribution to shareholders in the
event of liquidation. See "The Conversion -- Principal Effects of Conversion --
Effect on Liquidation Rights." Book value also does not reflect the federal
income tax consequences of the restoration to income of our special bad debt
reserves for income tax purposes, which would be required in the unlikely event
of liquidation or if a substantial portion of retained earnings were otherwise
used for a purpose other than abosorption of bad debt losses. See "Taxation --
Federal Taxation." Pro forma book value includes only net proceeds from the
Conversion offering as though it occurred as of the indicated dates and does not
include earnings on the proceeds for the periods then ended.
The pro forma net income derived from the assumptions set forth above
should not be considered indicative of the actual results of operations of the
Holding Company that would have been attained for any period if the Conversion
had been actually consummated at the beginning of such periods and the
assumptions regarding investment yields should not be considered indicative of
the actual yield expected to be achieved during any future period. The pro forma
book values at the dates indicated should not be considered as reflecting the
potential trading value of the Holding Company's stock. There can be no
assurance that an investor will be able to sell the Common Stock purchased in
the Conversion at prices within the range of the pro forma book values of the
Common Stock or at or above the Purchase Price.
-19-
<PAGE>
<TABLE>
<CAPTION>
680,000 Shares 800,000 Shares 920,000 Shares
Sold at Sold at Sold at
$10.00 Per Share $10.00 Per Share $10.00 Per Share
Nine Months Year Nine Months Year Nine Months Year
ended ended ended ended ended ended
3/31/97 6/30/96 3/31/97 6/30/96 3/31/97 6/30/96
------- ------- ------- ------- ------- -------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds........................... $ 6,800 $ 6,800 $ 8,000 $ 8,000 $ 9,200 $ 9,200
Less offering expenses .................. (433) (433) (450) (450) (467) (467)
------- ------- ------- -------- ------- -------
Estimated net conversion proceeds (2) ... 6,367 6,367 7,550 7,550 8,733 8,733
Less:
Common Stock acquired
by ESOP (3) ........................ (544) (544) (640) (640) (736) (736)
Common Stock acquired
by the RRP (4) ..................... (272) (272) (320) (320) (368) (368)
------- ------- ------- -------- ------- -------
Investable net proceeds ................. $ 5,551 $ 5,551 $ 6,590 $ 6,590 $ 7,629 $ 7,629
======= ======= ======= ======== ======= =======
Consolidated net income:
Historical ............................ $ 244 $ 479 $ 244 $ 479 $ 244 $ 479
Pro forma income on investable
net proceeds (5) ..................... 150 191 179 227 207 263
Pro forma ESOP adjustment (3) ......... (24) (33) (29) (38) (33) (44)
Pro forma RRP adjustment (4) ............ (24) (33) (29) (38) (33) (44)
------- ------- ------- -------- ------- -------
Pro forma net income .................. $ 346 $ 604 $ 365 $ 630 $ 385 $ 654
======= ======= ======= ======== ======= =======
Consolidated earnings per share (7)(8):
Historical ............................ $ 0.39 $ 0.76 $ 0.33 $ 0.65 $ 0.29 $ 0.56
Pro forma income on investable
net proceeds ......................... 0.24 0.31 0.24 0.31 0.24 0.31
Pro forma ESOP adjustment (3) ......... (0.04) (0.05) (0.04) (0.05) (0.04) (0.05)
Pro forma RRP adjustment (4) .......... (0.04) (0.05) (0.04) (0.05) (0.04) (0.05)
------- ------- ------- -------- ------- -------
Pro forma earnings per share .......... $ 0.55 $ 0.97 $ 0.49 $ 0.86 $ 0.45 $ 0.77
======= ======= ======= ======== ======= =======
Consolidated book value (6) :
Historical ............................ $ 5,564 $ 5,269 $ 5,564 $ 5,269 $ 5,564 $ 5,269
Estimated net conversion proceeds (2) . 6,367 6,367 7,550 7,550 8,733 8,733
Less:
Common Stock acquired
by ESOP (3) ........................ (544) (544) (640) (640) (736) (736)
Common Stock acquired
by the RRP (4) ..................... (272) (272) (320) (320) (368) (368)
------- ------- ------- -------- ------- -------
Pro forma book value .................. $ 11,115 $ 10,820 $ 12,154 $ 11,859 $ 13,193 $ 12,898
======= ======= ======= ======== ======= =======
Consolidated book value per share(8):
Historical ............................ $ 8.18 $ 7.75 $ 6.96 $ 6.59 $ 6.05 $ 5.73
Estimated net conversion proceeds
per share ............................ 9.36 9.36 9.44 9.44 9.49 9.49
Less:
Common Stock acquired
by the ESOP (3) .................... (0.80) (0.80) (0.80) (0.80) (0.80) (0.80)
Common Stock acquired
by the RRP (4) ..................... (0.40) (0.40) (0.40) (0.40) (0.40) (0.40)
------- ------- ------- -------- ------- -------
Pro forma book value per share ........ $ 16.34 $ 15.91 $ 15.20 $ 14.83 $ 14.34 $ 14.02
======= ======= ======= ======== ======= =======
Offering price as a percentage of pro
forma book value per share ............ 61.22% 62.89% 65.78% 67.46% 69.73% 71.38%
======= ======= ======= ======== ======= =======
Ratio of offering price to pro forma
earnings per share .................... 19.61x 10.31x 22.22x 11.63x 24.39x 12.98x
======= ======= ======= ======== ======= =======
Number of shares used in
calculating EPS (7) ................... 631,040 631,040 742,400 742,400 853,760 853,760
======= ======= ======= ======== ======= =======
Number of shares used in
calculating book value per share ...... 680,000 680,000 800,000 800,0000 920,000 921,000
======= ======= ======= ======== ======= =======
</TABLE>
<PAGE>
1,058,000 Shares (1)
Sold at
$10.00 Per Share
Nine Months Year
ended ended
3/31/97 6/30/96
------- -------
Gross proceeds........................... $ 10,580 $ 10,580
Less offering expenses .................. (486) (486)
--------- ---------
Estimated net conversion proceeds (2) ... 10,094 10,094
Less:
Common Stock acquired
by ESOP (3) ........................ (846) (846)
Common Stock acquired
by the RRP (4) ..................... (423) (423)
--------- ---------
Investable net proceeds ................. $ 8,825 $ 8,825
========= =========
Consolidated net income:
Historical ............................ $ 244 $ 479
Pro forma income on investable
net proceeds (5) ..................... 239 304
Pro forma ESOP adjustment (3) ......... (38) (51)
Pro forma RRP adjustment (4) ............ (38) (51)
--------- ---------
Pro forma net income .................. $ 407 $ 681
========= =========
Consolidated earnings per share (7)(8):
Historical ............................ $ 0.25 $ 0.49
Pro forma income on investable
net proceeds ......................... 0.24 0.32
Pro forma ESOP adjustment (3) ......... (0.04) (0.05)
Pro forma RRP adjustment (4) .......... (0.04) (0.05)
--------- ---------
Pro forma earnings per share .......... $ 0.41 $ 0.71
========= =========
Consolidated book value (6) :
Historical ............................ $ 5,564 $ 5,269
Estimated net conversion proceeds (2) . 10,094 10,094
Less:
Common Stock acquired
by ESOP (3) ........................ (846) (846)
Common Stock acquired
by the RRP (4) ..................... (423) (423)
--------- ---------
Pro forma book value .................. $ 14,389 $ 14,094
========= =========
Consolidated book value per share(8):
Historical ............................ $ 5.26 $ 4.98
Estimated net conversion proceeds
per share ............................ 9.54 9.54
Less:
Common Stock acquired
by the ESOP (3) .................... (0.80) (0.80)
Common Stock acquired
by the RRP (4) ..................... (0.40) (0.40)
--------- ---------
Pro forma book value per share ........ $ 13.60 $ 13.32
========= =========
Offering price as a percentage of pro
forma book value per share ............ 73.53% 75.07%
========= =========
Ratio of offering price to pro forma
earnings per share .................... 27.03x 14.08x
========= =========
Number of shares used in
calculating EPS (7) ................... 981,824 981,824
========= =========
Number of shares used in
calculating book value per share ...... 1,058,000 1,058,000
========= =========
(Footnotes on following page.)
-20-
<PAGE>
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
commencement of the Subscription Offering and the Community Offering,
if any.
(2) See "Use of Proceeds" for assumptions utilized to determine the
investable net proceeds of the sale of Common Stock.
(3) It is assumed that 8% of the shares of Common Stock issued in the
Conversion will be purchased by the ESOP. The funds used to acquire the
ESOP shares will be borrowed by the ESOP from the Holding Company (see
"Use of Proceeds"). Citizens intends to make annual contributions to
the ESOP in an amount at least equal to the principal and interest
requirements on the debt. Citizens' total annual expense in payment of
the ESOP debt is based upon 10 equal annual installments of principal
with an assumed tax benefit of 40%. The pro forma net income assumes:
(i) Citizens' total contributions are equivalent to the debt service
requirement for the year, and (ii) the effective tax rate applicable to
the debt was 40%. Expense for the ESOP will be based on the number of
shares committed to be released to participants for the year at the
average market value of the shares during the year. Accordingly,
Citizens' total annual expense in payment of the ESOP for such years
may be higher than that discussed above. The loan to the ESOP is
reflected as a reduction of shareholders' equity.
(4) Assuming the receipt of shareholder approval at the Holding Company's
first meeting of shareholders, the Holding Company intends to implement
the RRP. Assuming such implementation, the RRP will purchase an amount
of shares equal to 4% of the Common Stock sold in the Conversion for
issuance to directors and officers of the Holding Company and Citizens.
Such shares may be purchased from authorized but unissued shares or on
the open market. The Holding Company currently intends that the RRP
will purchase the shares on the open market, and the estimated net
Conversion proceeds have been reduced for the purchase of the shares in
determining estimated proceeds available for investment. Under the
terms of the RRP, if it is adopted within one year of the Conversion,
shares will vest at the rate of 20% per year. A tax benefit of 40% has
been assumed. The Common Stock to be purchased by the RRP represents
unearned compensation and is, accordingly, reflected as a reduction to
pro forma shareholders' equity. As shares of the Common Stock granted
pursuant to the RRP vest, a corresponding reduction in the charge
against capital will occur. In the event that authorized but unissued
shares are acquired by the RRP, the interests of existing shareholders
will be diluted. Assuming that 800,000 shares of Common Stock are
issued in the Conversion, the midpoint of the Estimated Valuation
Range, and that all awards under the RRP are from authorized but
unissued shares, the Holding Company estimates that the per share book
value for the Common Stock would be diluted $.60 per share, or 3.85% on
a pro forma basis as of March 31, 1997. The dilution would be $.64 per
share (3.85%) and $.57 per share (3.85%) at the minimum and maximum
levels, respectively, of the Estimated Valuation Range on a pro forma
basis as of March 31, 1997.
(5) Assuming investable net proceeds had been invested since the beginning
of the period at 6.02% for the nine months ended March 31, 1997 and
5.74% for the year ended June 30, 1996 (the "risk free" interest rate
available on 1-year U.S. Treasury Bills as of these respective dates)
and an assumed effective tax rate of 40%.
(6) Book value represents the excess of assets over liabilities. The effect
of the liquidation account is not reflected in these computations. (For
additional information regarding the liquidation account, see "The
Conversion -- Principal Effects of Conversion -- Effect on Liquidation
Rights.")
(7) The number of shares used in calculating earnings per share was
calculated using the indicated number of shares sold reduced by the
assumed number of ESOP shares that would be unallocated at the end of
the first allocation period. Allocation of ESOP shares is assumed to
occur on the first day of the fiscal year.
<PAGE>
(8) Assuming the receipt of shareholder approval at the Holding Company's
first meeting of shareholders to be held at least six months following
the Conversion, the Holding Company intends to implement the Stock
Option Plan. Assuming such implementation, Common Stock in an aggregate
amount equal to 10% of the shares issued in the Conversion will be
reserved for issuance by the Holding Company upon the exercise of the
stock options granted under the Stock Option Plan. No effect has been
given to the shares of Common Stock reserved for issuance under the
Stock Option Plan. Upon the exercise of stock options granted under the
Stock Option Plan, the interest of existing shareholders will be
diluted. The Holding Company estimates that the per share book value
for the Common Stock would be diluted $.51 per share, or 3.26% on a pro
forma basis as of March 31, 1997, assuming the issuance of 800,000
shares in the Conversion, the midpoint of the Estimated Valuation
Range, and the exercise of 80,000 options at an exercise price of
$10.00 per share. This dilution further assumes that the shares will be
issued from authorized, but unissued, shares. The dilution would be
$.71 per share (4.24%) and $.38 per share (2.57%) at the minimum and
maximum levels, respectively, of the Estimated Valuation Range on a pro
forma basis as of March 31, 1997.
-21-
<PAGE>
Regulatory Capital Compliance
The following table compares our historical and pro forma regulatory
capital levels as of March 31, 1997 to our capital requirements after giving
effect to the Conversion.
<TABLE>
<CAPTION>
At March 31, 1997
Pro Forma Capital Based on Sale of
680,000 Shares 800,000 Shares 920,000 Shares 1,058,000 Shares
Citizens Sold at Price of Sold at Price of Sold at Price of Sold at Price of
Historical $10.00 $10.00 $10.00 $10.00
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
Equity capital based upon
generally accepted
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
accounting principles........ $5,564 12.6% $8,476 19.2% $9,019 20.4% $9,563 21.6% $10,188 23.0%
====== === ====== ==== ====== ==== ====== ==== ======== ====
Tangible capital :
Historical or
pro forma.................. $4,529 10.2% $7,441 16.8% $7,984 18.0% $8,528 19.3% $ 9,153 20.7%
Required..................... 664 1.5 736 1.5 754 1.5 772 1.5 793 1.5
------ --- ------ ---- ------ ---- ------ ---- -------- ----
Excess..................... $3,865 8.7% $6,704 15.3% $7,230 16.5% $7,755 17.8% $ 8,360 19.2%
====== === ====== ==== ====== ==== ====== ==== ======== ====
Core capital :
Historical or
pro forma ................. $4,529 10.2% $7,441 16.8% $7,984 18.0% $8,528 19.3% $ 9,153 20.7%
Required..................... 1,328 3.0 1,472 3.0 1,508 3.0 1,544 3.0 1,585 3.0
------ --- ------ ---- ------ ---- ------ ---- -------- ----
Excess..................... $3,201 7.2% $5,968 13.8% $6,476 15.0% $6,983 16.3% $ 7,567 17.7%
====== === ====== ==== ====== ==== ====== ==== ======== ====
Risk-based capital:
Historical or
pro forma ................. $4,701 17.9% $7,613 27.7% $8,156 29.4% $8,700 31.1% $ 9,325 33.0%
Required..................... 2,098 8.0 2,200 8.0 2,219 8.0 2,238 8.0 2,260 8.0
------ --- ------ ---- ------ ---- ------ ---- -------- ----
Excess..................... $2,603 9.9% $5,413 19.7% $5,937 21.4% $6,462 23.1% $ 7,065 25.0%
====== === ====== ==== ====== ==== ====== ==== ======== ====
</TABLE>
- ----------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
commencement of the Subscription Offering and the Community Offering,
if any.
(2) Tangible and core capital levels are shown as a percentage of total
assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
(3) Pro forma risk-based capital amounts and percentages assume net
proceeds have been invested in 20% risk-weighted assets. Computation of
ratios are based on historical adjusted total assets of $44,262,000 and
risk-weighted assets of $26,221,000.
(4) Historical tangible and core capital represent equity capital minus the
investment in Citizens Loan and Service Corp. of $1,043,000, which is
non-includable for regulatory capital purposes, plus non-withdrawable
deposit accounts of $8,000 which are includable. THE CONVERSION
-22-
<PAGE>
THE BOARDS OF DIRECTORS OF CITIZENS AND THE HOLDING COMPANY AND THE OTS
HAVE APPROVED THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY OUR MEMBERS AT A
SPECIAL MEETING OF MEMBERS, AND SUBJECT TO THE SATISFACTION OF CERTAIN OTHER
CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL, HOWEVER, DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE OTS.
General
On April 9, 1997, our Board of Directors adopted a Plan of Conversion
(the "Plan") pursuant to which we will convert from a federal mutual savings
bank to a federal stock savings bank, and become a wholly-owned subsidiary of
the Holding Company. The Conversion will include adoption of the proposed
Federal Stock Charter and Bylaws which will authorize the issuance of capital
stock by us. Under the Plan, our capital stock is being sold to the Holding
Company and the Common Stock of the Holding Company is being offered to our
customers and then to the public. The Plan has also been approved by the OTS,
subject to approval of the Plan by our members. A Special Meeting of Members
(the "Special Meeting") has been scheduled for that purpose on September ___,
1997. The approval of the Plan by the OTS does not constitute a recommendation
or endorsement of the Plan by the OTS.
We have mailed to each person eligible to vote at the Special Meeting a
proxy statement (the "Proxy Statement"). The Proxy Statement contains
information concerning the business purposes of the Conversion and the effects
of the Plan and the Conversion on voting rights, liquidation rights, the
continuation of our business and existing savings accounts, FDIC insurance and
loans. The Proxy Statement also describes the manner in which the Plan may be
amended or terminated.
The following is a summary of all of the material aspects of the Plan,
the Subscription Offering, and the Community Offering. The Plan should be
consulted for a more detailed description of its terms.
Reasons for Conversion
As a stock institution, we will be structured in the form used by
commercial banks, most business entities, and a growing number of savings
associations. Converting to the stock form is intended to have a positive effect
on our future growth and performance by: (i) affording our depositors and
employees the opportunity to become shareholders of the Holding Company and
thereby participate more directly in our future and the Holding Company's
future; (ii) providing the Holding Company with the flexibility to grow through
mergers and acquisitions by permitting the offering of equity participations to
the shareholders of acquired companies; (iii) providing substantially increased
net worth and equity capital for investment in our business, thus enabling
management to pursue new and additional lending and investment opportunities and
to expand operations; and (iv) providing future access to capital markets
through the sale of stock of the Holding Company in order to generate additional
capital to accommodate or promote future growth. We believe that the increased
capital and operating flexibility will enhance our competitiveness with other
types of financial services organizations. Although our current members will,
upon Conversion, lose the voting and liquidation rights they presently have as
members (except to the limited extent of their rights in the liquidation account
established in the Conversion), they are being offered a priority right to
purchase shares in the Conversion and thereby obtain voting and liquidation
rights in the Holding Company.
The net proceeds to us from the sale of Common Stock offered hereby,
after retention by the Holding Company of 50% of the net proceeds after taking
into consideration the loan to the ESOP, will increase our existing net worth
and thus provide an even stronger capital base to support our lending and
investment activities. Although our regulatory capital at March 31, 1997,
exceeded our regulatory capital requirements, our Board of Directors believes
that it is desirable to increase regulatory capital in view of the competitive
and changing financial conditions in which we operate and the higher levels of
capital required by the OTS, and to enable us to take advantage of new
opportunities that may arise. In addition, the Conversion will provide us with
new opportunities to attract and retain talented and experienced personnel by
offering stock incentive programs.
Our Board of Directors believes that the Conversion to a holding
company structure is the best way to enable us to diversify our business
activities should we choose to do so. Currently, there are no plans, written or
oral, for the Holding Company to engage in any material activities apart from
holding our shares of stock that it acquires in connection with the Conversion,
although the Board may determine to further expand the Holding Company's
activities after the Conversion.
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The additional Common Stock of the Holding Company being authorized in
the Conversion will be available for future acquisitions (although the Holding
Company has no current discussions, arrangements or agreements with respect to
any acquisition) and for issuance and sale to raise additional equity capital,
subject to market conditions and generally without shareholder approval. The
Holding Company's ability to raise additional funds through the sale of debt
securities to the public or institutional investors should also be enhanced by
the increase in its equity capital base provided by the Conversion. Although the
Holding Company currently has no plans with respect to future issuances of
equity or debt securities, the more flexible operating structure provided by the
Holding Company and the stock form of ownership is expected to assist us in
competing aggressively with other financial institutions in our market area.
The Conversion will also permit our members who subscribe for shares of
Common Stock to become shareholders of the Holding Company, thereby allowing
members to indirectly own stock in the financial institution in which they
maintain deposit accounts. Such ownership may encourage shareholders to promote
us to others, thereby further contributing to our growth.
Principal Effects of Conversion
General. Each savings depositor in a mutual savings bank such as
Citizens has both a savings account and a pro rata ownership in the net worth of
that institution, based upon the balance in his or her savings account. This
ownership interest has no tangible market value separate from the savings
account. Upon conversion to stock form, the ownership of our net worth will be
represented by the outstanding shares of stock to be owned by the Holding
Company. Certificates are issued to evidence ownership of the capital stock.
These stock certificates are transferable and, therefore, the shares may be
transferred with no effect on any account the seller may hold with us.
Continuity. While the Conversion is being accomplished, our normal
business of accepting deposits and making loans will be continued without
interruption. After the Conversion, we will continue to provide services for
account holders and borrowers under current policies carried on by our present
management and staff.
Our directors at the time of Conversion will continue to serve as our
directors after the Conversion until the expiration of their current terms, and
thereafter, if reelected. All of our executive officers at the time of
Conversion will retain their positions after the Conversion.
Effect on Deposit Accounts. Under the Plan, each of our depositors at
the time of the Conversion will automatically continue as a depositor after the
Conversion, and each deposit account will remain the same with respect to
deposit balance, interest rate and other terms. Each account will also continue
to be insured by the FDIC in exactly the same way as before. Depositors will
continue to hold their existing certificates, passbooks and other evidence of
their accounts.
Effect on Loans of Borrowers. None of our loans will be affected by the
Conversion. The amount, interest rate, maturity and security for each loan will
be unchanged.
Effect on Voting Rights of Members. Currently in our mutual form, our
depositor members have voting rights and may vote for the election of directors.
Following the Conversion, depositors will cease to have voting rights. All
voting rights in Citizens will be vested in the Holding Company as our sole
shareholder. Voting rights in the Holding Company will be vested exclusively in
its shareholders, with one vote for each share of Common Stock. Neither the
Common Stock to be sold in the Conversion nor the capital stock of Citizens will
be insured by the FDIC or by any other government entity.
Effect on Liquidation Rights. Current federal regulations and the Plan
of Conversion provide for the establishment of a "liquidation account" by us for
the benefit of our deposit account holders with balances of no less than $50.00
on December 31, 1995 ("Eligible Account Holders"), and our deposit account
holders with balances of no less than $50.00 on June 30, 1997 ("Supplemental
Eligible Account Holders"), who continue to maintain their accounts with us
after the Conversion. The liquidation account will be credited with our net
worth as reflected in the latest statement of financial condition in the final
prospectus used in the Conversion. Each Eligible Account Holder and Supplemental
Eligible Account Holder will, with respect to each deposit account held, have a
related inchoate interest in a portion of the balance of the liquidation
account. This inchoate interest is referred to in the Plan as a "subaccount
balance." In the event of a complete liquidation of us after the Conversion (and
only in such event), Eligible Account Holders and Supplemental Eligible Account
Holders would be entitled to a distribution from the liquidation account in an
amount equal to the then current adjusted subaccount balance then held, before
any liquidation distribution would be made to the Holding Company as our sole
shareholder. We believe that a liquidation of Citizens is unlikely.
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Each Eligible Account Holder will have a subaccount balance in the
liquidation account for each deposit account held as of December 31, 1995 (the
"Eligibility Record Date"). Each Supplemental Eligible Account Holder will have
a subaccount balance in the liquidation account for each deposit account held as
of June 30, 1997 (the "Supplemental Eligibility Record Date"). Each initial
subaccount balance will be the amount determined by multiplying the total
opening balance in the liquidation account by a fraction, the numerator of which
is the amount of the qualifying deposit (a deposit of at least $50 as of
December 31, 1995, or June 30, 1997, respectively) of such deposit account, and
the denominator of which is the total of all qualifying deposits on that date.
If the amount in the deposit account on any subsequent annual closing date of
Citizens is less than the balance in such deposit account on any other annual
closing date, or the balance in such account on the Eligibility Record Date or
the Supplemental Eligibility Record Date, as the case may be, this interest in
the liquidation account will be reduced by an amount proportionate to any such
reduction, and will not thereafter be increased despite any subsequent increase
in the related deposit account. An Eligible Account Holder's, as well as a
Supplemental Eligible Account Holder's, interest in the liquidation account will
cease to exist if the deposit account is closed. The liquidation account will
never increase and will be correspondingly reduced as the interests in the
liquidation account are reduced or cease to exist. In the event of liquidation,
any assets remaining after the above liquidation rights of Eligible Account
Holders and Supplemental Eligible Account Holders are satisfied will be
distributed to the Holding Company as our sole shareholder.
A merger, consolidation, sale of bulk assets, or similar combination or
transaction in which we are not the surviving entity would not be considered to
be a "liquidation" under which distribution of the liquidation account could be
made, provided the surviving institution is an FDIC-insured institution. In such
a transaction, the liquidation account would be assumed by the surviving
institution. The OTS has stated that the consummation of a transaction of the
type described in the preceding sentence in which the surviving entity is not an
FDIC-insured institution would be reviewed on a case-by-case basis to determine
whether the transaction should constitute a "complete liquidation" requiring
distribution of any then-remaining balance in the liquidation account.
The creation and maintenance of the liquidation account will not
restrict the use of or application of any of the net worth accounts, except that
we may not declare or pay a cash dividend on or repurchase our capital stock if
the effect of such dividend or repurchase would be to cause our net worth to be
reduced below the aggregate amount then required for the liquidation account.
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Tax Effects. We intend to proceed with the Conversion on the basis of
an opinion from our special counsel, Barnes & Thornburg, Indianapolis, Indiana,
as to certain tax matters that are material to the Conversion. The opinion is
based, among other things, on certain representations made by us, including the
representation that the exercise price of the subscription rights to purchase
the Common Stock will be approximately equal to the fair market value of the
stock at the time of the completion of the Conversion. With respect to the
subscription rights, we have received an opinion of Keller which, based on
certain assumptions, concludes that the subscription rights to be received by
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members do not have any economic value at the time of distribution or the time
the subscription rights are exercised, whether or not a Community Offering takes
place, and Barnes & Thornburg's opinion is given in reliance thereon. Barnes &
Thornburg's opinion provides substantially as follows:
1. Our change in form from a mutual savings bank to a stock savings bank
will qualify as a reorganization under Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended (the "Code") and no gain or
loss will be recognized to us in either our mutual form or our stock
form by reason of the Conversion.
2. No gain or loss will be recognized by the converted savings association
upon receipt of money from the Holding Company for the converted
savings association's capital stock, and no gain or loss will be
recognized by the Holding Company upon the receipt of money for Common
Stock of the Holding Company.
3. The basis of the assets of the converted savings bank will be the same
as the basis in our hands prior to the Conversion.
4. The holding period of the assets of the converted savings bank will
include the period during which the assets were held by us in our
mutual form prior to Conversion.
5. No gain or loss will be realized by our deposit account holders, upon
the constructive issuance to them of withdrawable deposit accounts of
the converted savings association immediately after the Conversion,
interests in the liquidation account, and/or on the distribution to
them of nontransferable subscription rights to purchase Common Stock.
6. The basis of an account holder's deposit accounts in the converted
savings bank after the Conversion will be the same as the basis of his
or her deposit accounts with us prior to the Conversion.
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7. The basis of each account holder's interest in the liquidation account
will be zero. The basis of the non-transferable subscription rights
will be zero.
8. The basis of the Holding Company Common Stock to its shareholders will
be the actual purchase price ($10.00) thereof, and a shareholder's
holding period for Common Stock acquired through the exercise of
subscription rights will begin on the date on which the subscription
rights are exercised.
9. No taxable income will be realized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members as a result of
the exercise of the nontransferable subscription rights.
10. The converted savings association in its stock form will succeed to and
take into account our earnings and profits or deficit in earnings and
profits, in our mutual form, as of the date of Conversion.
The opinion also concludes in effect that:
1. No taxable income will be realized by us on the issuance of
subscription rights to eligible subscribers to purchase shares of
Common Stock at fair market value.
2. The converted savings bank will succeed to and take into account the
dollar amounts of those accounts of Citizens in its mutual form which
represent bad debt reserves in respect of which Citizens in its mutual
form has taken a bad debt deduction for taxable years on or before the
date of the transfer.
3. The creation of the liquidation account will have no effect on our
taxable income, deductions, or additions to bad debt reserves or
distributions to shareholders under Section 593 of the Code.
Barnes & Thornburg has also issued an opinion stating in essence that
the Conversion will not be a taxable transaction to the Holding Company or to us
under any Indiana tax statute imposing a tax on income, and that our depositors
and borrowers will be treated under such laws in a manner similar to the manner
in which they will be treated under federal income tax law.
The opinions of Barnes & Thornburg and Keller, unlike a letter ruling
issued by the Internal Revenue Service, are not binding on the Service and the
conclusions expressed herein may be challenged at a future date. The Service has
issued favorable rulings for transactions substantially similar to the proposed
Conversion, but any such ruling may not be cited as precedent by any taxpayer
other than the taxpayer to whom the ruling is addressed. We do not plan to apply
for a letter ruling concerning the transactions described herein.
Offering of Common Stock
Under the Plan of Conversion, up to 920,000 shares of Common Stock are
being offered for sale, initially through the Subscription Offering (subject to
a possible increase to 1,058,000 shares). See "-- Subscription Offering." The
Plan of Conversion requires, with certain exceptions, that a number of shares
equal to at least 680,000 be sold in order for the Conversion to be effective.
Shares may also be offered to the public in a Community Offering which will
commence after the Subscription Offering terminates, but only if fewer than
680,000 shares are subscribed for in the Subscription Offering. The Community
Offering may expire at any time when orders for at least 680,000 shares have
been received in the Subscription Offering and Community Offering, but no later
than November ___, 1997, unless extended by us and the Holding Company. The
offering may be extended, subject to OTS approval, until 24 months following the
members' approval of the Plan of Conversion, or until September ___, 1999. The
actual number of shares to be sold in the Conversion will depend upon market and
financial conditions at the time of the Conversion, provided that no fewer than
680,000 shares or more than 1,058,000 shares will be sold in the Conversion. The
per share price to be paid by purchasers in the Community Offering, if any, for
any remaining shares will be $10.00, the same price paid by subscribers in the
Subscription Offering. See "-- Stock Pricing."
The Subscription Offering expires at 12:00 noon, Frankfort time, on
September ___, 1997. OTS regulations and the Plan of Conversion require that we
complete the sale of Common Stock within 45 days after the close of the
Subscription Offering. This 45-day period expires on November ___, 1997. In the
event we are unable to complete the sale of Common Stock within this 45-day
period, we may request an extension of this time period from the OTS. No single
extension granted by the OTS, however, may exceed 90 days. No assurance can be
given that an extension would be granted if requested. The OTS has, however,
granted extensions due to the inability of mutual financial institutions to
complete a stock offering as a result of the development of adverse conditions
in the stock market. If an extension is granted, we will promptly notify
subscribers of the granting of the extension of time and will promptly return
subscriptions unless subscribers affirmatively elect to continue their
subscriptions during the period of extension. Such extensions may not be made
beyond September ___, 1999.
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As permitted by OTS regulations, the Plan of Conversion provides that
if, for any reason, purchasers cannot be found for an insignificant residue of
unsubscribed shares of the Common Stock, our Board of Directors will seek to
make other arrangements for the sale of the remaining shares. Such other
arrangements will be subject to the approval of the OTS. If such other purchase
arrangements cannot be made, the Plan of Conversion will terminate. In the event
that the Conversion is not effected, we will remain a mutual savings bank, all
subscription funds will be promptly returned to subscribers with interest earned
thereon at our passbook rate, which is currently 3.25% per annum, or 3.30%
Annual Percentage Yield ("APY") (except for payments to have been made through
withdrawal authorizations which will have continued to earn interest at the
contractual account rates), and all withdrawal authorizations will be canceled.
Subscription Offering
In accordance with OTS regulations, nontransferable rights to subscribe
for the purchase of the Holding Company's Common Stock have been granted under
the Plan of Conversion to the following persons in the following order of
priority: (1) our Eligible Account Holders; (2) the ESOP; (3) our Supplemental
Eligible Account Holders; and (4) our depositors other than Eligible Account
Holders and Supplemental Eligible Account Holders, at the close of business on
July 25, 1997, the voting record date for the Special Meeting ("Other Members").
All subscriptions received will be subject to the availability of Common Stock
after satisfaction of all subscriptions of all persons having prior rights in
the Subscription Offering, and to the maximum and minimum purchase limitations
set forth in the Plan of Conversion (and described below). The December 31,
1995, date for determination of Eligible Account Holders and the June 30, 1997
date for determination of Supplemental Eligible Account Holders were selected in
accordance with federal regulations applicable to the Conversion.
Category I: Eligible Account Holders. Each Eligible Account Holder will
receive, without payment therefor, nontransferable subscription rights to
subscribe for up to10,000 shares of the Common Stock for each deposit account
held on December 31, 1995; provided, however, that no Eligible Account Holder
may purchase alone or with his or her Associates (as defined in the Plan, and
including relatives living in the same household) and persons acting in concert,
more than 30,000 shares of Common Stock.
If sufficient shares are not available in this Category I, shares will
be allocated in a manner that will allow each Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
allocation consist of the lesser of 100 shares or the amount subscribed for.
Thereafter, unallocated shares will be allocated to subscribing Eligible Account
Holders in the proportion that the amounts of their respective qualifying
deposits bear to the total amount of qualifying deposits of all subscribing
Eligible Account Holders.
The "qualifying deposits" of an Eligible Account Holder is the amount
of the deposit balances (provided such aggregate balance is not less than
$50.00) in his or her deposit accounts, including demand deposits, as of the
close of business on December 31, 1995. Subscription rights received by
directors and officers in this category based upon their increased deposits in
Citizens during the year preceding December 31, 1995, are subordinated to the
subscription rights of other Eligible Account Holders. Notwithstanding the
foregoing, shares of Common Stock with a value in excess of $9,200,000, the
maximum of the Estimated Valuation Range, may be sold to the ESOP before
satisfying the subscriptions of Eligible Account Holders.
Category II: The ESOP. The ESOP will receive, without payment therefor,
non-transferable subscription rights to purchase up to 10% of the total number
of shares of Common Stock offered in the Conversion on behalf of participants,
provided that shares remain available after satisfying the subscription rights
of Eligible Account Holders up to the maximum of the Estimated Valuation Range
as described above. The ESOP currently intends to purchase 8% of the shares sold
in the Conversion. If the ESOP is unable to purchase all or part of the shares
of Common Stock for which it subscribes, the ESOP may purchase such shares on
the open market or may purchase authorized but unissued shares of the Holding
Company. Any purchase by the ESOP of authorized but unissued shares could dilute
the interests of the Holding Company's shareholders.
Category III: Supplemental Eligible Account Holders. Each Supplemental
Eligible Account Holder will receive, without payment therefor, nontransferable
subscription rights to subscribe for up to 10,000 shares of the Common Stock for
each deposit account held on June 30, 1997; provided, however, that no
Supplemental Eligible Account Holder may purchase alone or with his or her
Associates (as defined in the Plan, and including relatives living in the same
household) and persons acting in concert, more than 30,000 shares of Common
Stock. Such subscription rights will be applicable only to such shares as remain
available after the subscriptions of the Eligible Account Holders and the ESOP
have been satisfied. Any subscription rights received by a person as a result of
his or her status as an Eligible Account Holder will reduce to the extent
thereof the subscription rights granted to such person as a result of his or her
status as a Supplemental Eligible Account Holder.
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If sufficient shares are not available in this Category III, shares
will be allocated in a manner that will allow each Supplemental Eligible Account
Holder, to the extent possible, to purchase a number of shares sufficient to
make his or her allocation consist of the lesser of 100 shares or the amount
subscribed for. Thereafter, unallocated shares will be allocated to subscribing
Supplemental Eligible Account Holders in the proportion that the amounts of
their respective qualifying deposits bear to the total amount of qualifying
deposits of all subscribing Supplemental Eligible Account Holders.
The "qualifying deposits" of a Supplemental Eligible Account Holder is
the amount of the deposit balances (provided such aggregate balance is not less
than $50) in his or her deposit accounts, including demand deposits, as of the
close of business on June 30, 1997.
Category IV: Other Members. The Other Members of Citizens will receive,
without payment therefor, nontransferable subscription rights to subscribe for
up to 10,000 shares of the Common Stock for each deposit account held as of July
25, 1997; provided, however, that no Other Member may purchase alone or with his
or her Associates (as defined in the Plan, and including relatives living in the
same household) and persons acting in concert, more than 30,000 shares of Common
Stock. Such subscription rights will be applicable only to such shares as remain
available after the subscriptions of Eligible Account Holders and Supplemental
Eligible Account Holders have been satisfied.
If sufficient shares are not available in this Category IV, shares will
be allocated pro rata among subscribing Other Members in the same proportion
that the number of shares subscribed for by each Other Member bears to the total
number of shares subscribed for by all Other Members.
Timing of Offering and Method of Payment. The Subscription Offering
will expire at 12:00 noon, Frankfort time, on September ___, 1997 (the
"Expiration Date"). The Expiration Date may be extended by Citizens and the
Holding Company for successive 90-day periods, subject to OTS approval, to
September ___, 1999.
Subscribers must, before the Expiration Date, or such date to which the
Expiration Date may be extended, return Order Forms to us, properly completed,
together with checks or money orders in an amount equal to the Purchase Price
($10.00 per share) multiplied by the number of shares for which subscription is
made. Payment for stock purchases can also be accomplished through authorization
on the order form of withdrawals from accounts with us (including a certificate
of deposit but excluding IRA accounts). We have the right to reject any orders
transmitted by facsimile and any payments made by wire transfer. The
beneficiaries of IRA accounts are deemed to have the same subscription rights as
other depositors. However, the IRA accounts maintained with us do not permit
investment in the Common Stock. A depositor interested in using his or her IRA
funds to purchase Common Stock must do so through a self-directed IRA account.
Since we do not offer such accounts, we will allow such a depositor to make a
trustee-to-trustee transfer of the IRA funds on deposit with us that he wishes
to invest. There will be no early withdrawal or IRS interest penalties for such
transfers. The new trustee would hold the Common Stock in a self-directed
account in the same manner that we now hold the depositor's IRA funds. An annual
administrative fee would be payable to the new trustee.
Depositors interested in using funds in a Citizens IRA to purchase
Common Stock should contact us at (765) 659-5708 as soon as possible so that the
necessary forms may be forwarded for execution and returned prior to the
Expiration Date of the Subscription Offering.
Until completion or termination of the Conversion, subscribers who
elect to make payment through authorization of withdrawal from accounts with us
will not be permitted to reduce the deposit balance in any such accounts below
the amount required to purchase the shares for which they subscribed. In such
cases interest will continue to be credited on deposits authorized for
withdrawal until the completion of the Conversion. Interest at the passbook
rate, which is currently 3.25% per annum, for an APY of 3.30%, will be paid on
amounts submitted by check. Authorized withdrawals from certificate accounts for
the purchase of Common Stock will be permitted without the imposition of early
withdrawal penalties or loss of interest. However, withdrawals from certificate
accounts that reduce the balance of such accounts below the required minimum for
specific interest rate qualification will cause the cancellation of the
certificate accounts at the effective date of the Conversion, and the remaining
balance will earn interest at the passbook savings rate. Stock subscriptions
received and accepted by us are final. Subscriptions may be withdrawn only in
the event that we extend the Expiration Date of the Subscription Offering as
described above.
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Members in Non-Qualified States or Foreign Countries. We will make
reasonable efforts to comply with the securities laws of all states in the
United States in which persons entitled to subscribe for stock pursuant to the
Plan reside. However, no person will be offered or sold or receive any stock
pursuant to the Subscription Offering if such person resides in a foreign
country or resides in a state in the United States with respect to which all of
the following apply: (i) a small number of persons otherwise eligible to
subscribe for shares of Common Stock reside in such state; (ii) the granting of
subscription rights or the offer or sale of Common Stock to such persons would
require us or the Holding Company or our respective officers and directors,
under the securities laws of such state, to register as a broker, dealer,
salesman or selling agent, or to register or otherwise qualify the Common Stock
for sale in such state; and (iii) such registration, qualification or filing in
our judgment or in the judgment of the Holding Company would be impracticable or
unduly burdensome for reasons of cost or otherwise.
To assist in the Subscription Offering and the Community Offering, if
any, the Holding Company has established a Stock Information Center that you may
contact at (765) 659-5708. Callers to the Stock Information Center will be able
to request a Prospectus and other information relating to the offering.
Community Offering
To the extent shares remain available for purchase after filling all
orders received in the Subscription Offering, we may offer shares of the Common
Stock in a Community Offering to the general public, with preference given to
residents of Clinton County. The right of any person to purchase shares in the
Community Offering is subject to our right to accept or reject such purchase in
whole or in part. We may terminate the Community Offering as soon as we have
received orders for at least the minimum number of shares available for purchase
in the Conversion.
The Community Offering may expire at any time when orders for at least
680,000 shares have been received in the Subscription Offering and Community
Offering (but no later than November ___, 1997, unless extended by us and the
Holding Company). Persons wishing to purchase stock in the Community Offering,
if conducted, should return the Order Form to us, properly completed, together
with a check or money order in the amount equal to the Purchase Price ($10.00
per share) multiplied by the number of shares which that person desires to
purchase. Order Forms will be accepted until the completion of the Community
Offering. However, as noted above, we may terminate the Community Offering as
soon as we receive orders for at least the minimum number of shares available
for purchase in the Conversion.
The maximum number of shares of Common Stock which may be purchased in the
Community Offering by any person (including such person's Associates) or persons
acting in concert is 10,000 in the aggregate. A member who, together with his
Associates and persons acting in concert, has subscribed for shares in the
Subscription Offering may subscribe for a number of additional shares in the
Community Offering that does not exceed the lesser of (i) 10,000 shares or (ii)
the number of shares which, when added to the number of shares subscribed for by
the member (and his Associates and persons acting in concert) in the
Subscription Offering, would not exceed 30,000. We reserve the right to reject
any orders received in the Community Offering in whole or in part.
If all the Holding Company Common Stock offered in the Subscription
Offering is subscribed for, no Holding Company Common Stock will be available
for purchase in the Community Offering. Purchase orders received during the
Community Offering will be filled up to a maximum of 2% of the total number of
shares of Common Stock issued in the Conversion, with any remaining unfilled
purchase orders to be allocated on an equal number of shares basis. If the
Community Offering extends beyond 45 days following the expiration of the
Subscription Offering, subscribers will have the right to increase, decrease or
rescind subscriptions for stock previously submitted. All sales of Holding
Company Common Stock in the Community Offering will be at the same price per
share as the sales of Holding Company Common Stock in the Subscription Offering.
Cash and checks received in the Community Offering will be placed in a
special savings account with us, and will earn interest at the passbook rate,
which is currently 3.25% per annum, for an APY of 3.30%, from the date of
deposit until completion or termination of the Conversion. In the event that the
Conversion is not consummated for any reason, all funds submitted pursuant to
the Community Offering will be promptly refunded with interest as described
above.
Delivery of Certificates
Certificates representing shares issued in the Subscription Offering
and in the Community Offering, if any, pursuant to Order Forms will be mailed to
the persons entitled to them at the last addresses of such persons appearing on
the books of Citizens or to such other addresses as may be specified in properly
completed Order Forms as soon as practicable following consummation of the
Conversion. Any certificates returned as undeliverable will be held by the
Holding Company until claimed by the person legally entitled to them or
otherwise disposed of in accordance with applicable law.
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<PAGE>
Agent
To assist us and the Holding Company in marketing the Common Stock, we
have retained the services of Trident Securities as our exclusive agent. Trident
Securities is a broker-dealer registered with the Securities and Exchange
Commission (the "SEC") and a member of the National Association of Securities
Dealers, Inc. (the "NASD"). Trident Securities will assist us in the Conversion
as follows: (1) in training and educating our employees regarding the mechanics
and regulatory requirements of the conversion process; (2) in keeping records of
all stock subscriptions; (3) in obtaining proxies from our members with respect
to the Special Meeting; and (4) in assisting with the Community Offering. For
providing these services, we have agreed to pay Trident Securities commissions
in an amount equal to 1.5% of the aggregate dollar amount of shares of Common
Stock sold in the Conversion other than shares sold to executive officers and
directors and their Associates or to the ESOP. Trident Securities will also be
reimbursed for out-of-pocket expenses, which are not to exceed $10,000 without
our consent (excluding certain reimbursable expenses), and for legal fees, which
are not to exceed $30,000 (excluding reimbursable expenses), without our
consent. Offers and sales in the Community Offering will be on a best efforts
basis and, as a result, Trident Securities is not obligated to purchase any
shares of the Common Stock. Trident Securities intends to make a market in the
Common Stock, although it is under no obligation to do so.
We have also agreed to indemnify Trident Securities, under certain
circumstances, against liabilities and expenses (including legal fees) arising
out of Trident Securities' engagement by us, including liabilities under the
Securitities Act of 1933 (the "1933 Act").
Selected Dealers
Trident Securities may enter into an agreement with certain dealers
chosen by Citizens and Trident Securities (together, the "Selected Dealers") to
assist in the sale of shares in the Community Offering. Selected Dealers will
receive commissions at an agreed upon rate for all shares sold by such Selected
Dealers. During the Community Offering, Selected Dealers may only solicit
indications of interest from their customers to place orders with us as of a
certain date (the "Order Date") for the purchase of shares of Common Stock. When
and if the Holding Company, Citizens and Trident Securities believe that enough
indications of interest and orders have been received in the Subscription
Offering and the Community Offering, if any, to consummate the Conversion,
Trident Securities will request, as of the Order Date, Selected Dealers to
submit orders to purchase shares for which they have previously received
indications of interest from the customers. Selected Dealers will send
confirmations of the orders to such customers on the next business day after the
Order Date. Selected Dealers will debit the accounts of their customers on the
date which will be three business days from the Order Date (the "Settlement
Date"). On the Settlement Date, funds received by Selected Dealers will be
remitted to us. It is anticipated that the Conversion will be consummated on the
Settlement Date. However, if consummation is delayed after payment has been
received by us from Selected Dealers, funds will earn interest at the passbook
rate, which is currently 3.25% per annum, for an APY of 3.30%, until the
completion of the offering. Funds will be returned promptly in the event the
Conversion is not consummated.
<PAGE>
Limitations on Common Stock Purchases
The Plan includes a number of limitations on the number of shares of
Common Stock which may be purchased during the Conversion. These are summarized
below:
(1) No fewer than 25 shares may be purchased by any person purchasing shares
of Common Stock in the Conversion (provided that sufficient shares are
available).
(2) No subscribing member may purchase more than 10,000 shares of Common
Stock with respect to each deposit account held as of December 31, 1995, June
30, 1997 or July 25, 1997, as applicable. For this purpose, joint account
holders collectively may not exceed the 10,000 share limit. Notwithstanding
the foregoing sentences, no Eligible Account Holder, Supplemental Eligible
Account Holder or Other Member, by himself or herself, or with an Associate
or group of persons acting in concert, may purchase more than 30,000 shares
of Common Stock in the Conversion (except for the ESOP which may purchase up
to 10% of the total number of shares of Common Stock offered in the
Conversion). The maximum number of shares of Common Stock which may be
purchased in the Community Offering, if any, by any person (including such
person's Associates) or persons acting in concert is 10,000 in the aggregate.
A member who, together with his Associates and persons acting in concert, has
subscribed for shares in the Subscription Offering may subscribe for a number
of additional shares in the Community Offering that does not exceed the
lesser of (i) 10,000 shares or (ii) the number of shares which, when added to
the number of shares subscribed for by the member (and his Associates and
persons acting in concert) in the Subscription Offering, would not exceed
30,000. Citizens' and the Holding Company's Boards of Directors may, however,
in their sole discretion, increase the maximum purchase limitation set forth
above up to 9.99% of the shares of Common Stock sold in the Conversion,
provided that orders for shares exceeding 5% of the shares of Common Stock
sold in the Conversion may not exceed, in the aggregate, 10% of the shares
sold in the Conversion. If the Boards of Directors decide to increase the
purchase limitation, all persons who subscribe for the maximum number of
shares of Common Stock offered in the Conversion will be, and certain other
large subscribers in the sole discretion of the Holding Company and Citizens
may be, given the opportunity to increase their subscriptions accordingly,
subject to the rights and preferences of any person who has priority
subscription rights. The overall purchase limitation may be reduced in the
sole discretion of the Boards of Directors of the Holding Company and
Citizens.
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<PAGE>
(3) No more than 35% of the shares of Common Stock may be purchased in the
Conversion by directors and officers of Citizens and the Holding Company and
their Associates.
OTS regulations define "acting in concert" as (i) knowing participation
in a joint activity or interdependent conscious parallel action towards a common
goal whether or not pursuant to an express agreement, or (ii) a combination or
pooling of voting or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise.
The term "Associate" of a person is defined to mean (i) any corporation
or organization (other than Citizens or its subsidiaries or the Holding Company)
of which such person is a director, officer, partner or 10% shareholder; (ii)
any trust or other estate in which such person has a substantial beneficial
interest or serves as trustee or in a similar fiduciary capacity; provided,
however that such term shall not include any employee stock benefit plan of the
Holding Company or Citizens in which such a 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 relative of such spouse, who either
has the same home as such person or who is a director or officer of Citizens or
its subsidiaries or the Holding Company. Directors are not treated as Associates
of one another solely because of their board membership. Compliance with the
foregoing limitations does not necessarily constitute compliance with other
regulatory restrictions on acquisitions of the Common Stock. For a further
discussion of limitations on purchases of the Common Stock during and subsequent
to Conversion, see "-- Restrictions on Sale of Stock by Directors and Officers,"
"-- Restrictions on Purchase of Stock by Directors and Officers Following
Conversion," and "Restrictions on Acquisition of the Holding Company."
Restrictions on Repurchase of Stock by the Holding Company
Repurchases of its shares by the Holding Company will be restricted for
a period of three years from the date of the Conversion. OTS regulations
currently prohibit the Holding Company from repurchasing any of its shares
within one (1) year following the Conversion except in exceptional
circumstances. So long as we continue to meet certain capitalization
requirements, the Holding Company may repurchase shares in an open-market
repurchase program (which cannot exceed 5% of its outstanding shares in a
twelve-month period except in exceptional circumstances) during the second and
third year following the Conversion by giving appropriate prior notice to the
OTS. The OTS has authority to waive these restrictions under certain
circumstances. Unless repurchases are permitted under the foregoing regulations,
the Holding Company may not, for a period of three years from the date of the
Conversion, repurchase any of its capital stock from any person, except in the
event of an offer to purchase by the Holding Company on a pro rata basis from
all of its shareholders which is approved in advance by the OTS, except in
exceptional circumstances established to the satisfaction of the OTS, or except
for purchases of shares required to fund the RRP.
Further, the Holding Company may not repurchase any of its capital
stock if the effect of such purchase would be to cause our net worth to be
reduced below the amount required for the liquidation account. The Holding
Company may use some of the net proceeds received from the sale of the Common
Stock offered by this Prospectus to repurchase such Common Stock, subject to OTS
requirements.
Under Indiana law, the Holding Company will be precluded from
repurchasing its equity securities if, after giving effect to such repurchase,
the Holding Company would be unable to pay its debts as they become due or the
Holding Company's assets would be less than its liabilities and obligations to
preferential shareholders.
Restrictions on Sale of Stock by Directors and Officers
All shares of the Common Stock purchased by directors and officers of
Citizens or the Holding Company in the Conversion will be subject to the
restriction that such shares may not be sold or otherwise disposed of for value
for a period of one year following the date of purchase, except for any
disposition of such shares (i) following the death of the original purchaser or
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<PAGE>
(ii) by reason of an exchange of securities in connection with a merger or
acquisition approved by the applicable regulatory authorities. Sales of shares
of the Common Stock by the Holding Company's directors and officers will also be
subject to certain insider trading and other transfer restrictions under the
federal securities laws. See "Regulation -- Federal Securities Laws" and
"Description of Capital Stock."
Each certificate for such restricted shares will bear a legend
prominently stamped on its face giving notice of the restrictions on transfer,
and instructions will be issued to the Holding Company's transfer agent to the
effect that any transfer within such time period of any certificate or record
ownership of such shares other than as provided above is a violation of the
restriction. Any shares of Common Stock issued pursuant to a stock dividend,
stock split or otherwise with respect to restricted shares will be subject to
the same restrictions on sale.
Restrictions on Purchase of Stock by Directors and Officers Following Conversion
OTS regulations provide that for a period of three years following the
Conversion, without prior written approval of the OTS, neither directors nor
officers of Citizens or the Holding Company nor their Associates may purchase
shares of the Common Stock of the Holding Company, except from a dealer
registered with the SEC. This restriction does not, however, apply to negotiated
transactions involving more than one percent of the Holding Company's
outstanding Common Stock, to shares purchased pursuant to stock option or other
incentive stock plans approved by the Holding Company's shareholders, or to
shares purchased by employee benefit plans maintained by the Holding Company
which may be attributable to individual officers or directors. Restrictions on
Transfer of Subscription Rights and Common Stock
Prior to the completion of the Conversion, OTS regulations and the Plan
of Conversion prohibit any person with subscription rights, including our
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members, from transferring or entering into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the Plan or the shares of Common Stock to be issued upon their exercise.
Such rights may be exercised only by the person to whom they are granted and
only for his or her account. Each person exercising such subscription rights
will be required to certify that he or she is purchasing shares solely for his
or her own account and that he or she has no agreement or understanding
regarding the sale or transfer of such shares. The 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 Common Stock prior to
the completion of the Conversion. We will pursue any and all legal and equitable
remedies in the event we become aware of the transfer of subscription rights and
will not honor orders known by us to involve the transfer of such rights. In
addition, persons who violate the purchase limitations may be subject to
sanctions and penalties imposed by the OTS.
Stock Pricing
The aggregate purchase price of the Holding Company Common Stock being
sold in the Conversion will be based on the appraised aggregate pro forma market
value of the Common Stock, as determined by an independent valuation. We
retained Keller & Company, Inc. ("Keller"), which is experienced in the
valuation and appraisal of financial institutions, including savings
associations involved in the conversion process, to prepare an appraisal. Keller
will receive a fee of $15,000 for its appraisal, including out-of-pocket
expenses. Keller has also prepared a business plan for us for a fee of $4,000.
We have agreed to indemnify Keller, under certain circumstances, against
liabilities and expenses (including legal fees) arising out of Keller's
engagement by us.
Keller has prepared an appraisal that establishes the Estimated
Valuation Range of the pro forma market value of the Common Stock as of May 22,
1997 from a minimum of $6,800,000 to a maximum of $9,200,000, with a midpoint of
$8,000,000. A copy of the appraisal is on file and available for inspection at
the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552 and the
Central Regional Office of the OTS, 200 West Madison, Suite 1300, Chicago,
Illinois 60606. The appraisal has also been filed as an exhibit to the Holding
Company's Registration Statement with the SEC, and may be reviewed at the SEC's
public reference facilities. See "Additional Information." The appraisal
involved a comparative evaluation of our operating and financial statistics with
those of other financial institutions. The appraisal also took into account such
other factors as the market for savings associations generally, prevailing
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<PAGE>
economic conditions, both nationally and in Indiana, which affect the operations
of savings associations, the competitive environment within which we operate,
and the effect of our becoming a subsidiary of the Holding Company. No detailed
individual analysis of the separate components of Citizens' and the Holding
Company's assets and liabilities was performed in connection with the
evaluation. The Board of Directors reviewed with management Keller's methods and
assumptions and accepted Keller's appraisal as reasonable and adequate. The
Holding Company, in consultation with Trident Securities, has determined to
offer the Common Stock in the Conversion at a price of $10.00 per share. The
Holding Company's decision regarding the Purchase Price was based solely on its
determination that $10.00 per share is a customary purchase price in conversion
transactions. The Estimated Valuation Range may be increased or decreased to
reflect market and financial conditions prior to the completion of the
Conversion.
Promptly after the completion of the Subscription Offering and the
Community Offering, if any, Keller will confirm to us that, to the best of
Keller's knowledge and judgment, nothing of a material nature has occurred which
would cause Keller to conclude that the amount of the aggregate proceeds
received from the sale of the Common Stock in the Conversion was incompatible
with its estimate of our total pro forma market value at the time of the sale.
If, however, the facts do not justify such a statement, a new Estimated
Valuation Range and price per share may be set. Under such circumstances, the
Holding Company will be required to resolicit subscriptions. In that event,
subscribers would have the right to modify or rescind their subscriptions and to
have their subscription funds returned promptly with interest and holds on funds
authorized for withdrawal from deposit accounts would be released or reduced;
provided that if our pro forma market value upon Conversion has increased to an
amount which does not exceed $10,580,000 (15% above the maximum of the Estimated
Valuation Range), the Holding Company and Citizens do not intend to resolicit
subscriptions unless it is determined after consultation with the OTS that a
resolicitation is required.
Depending upon market and financial conditions, the number of shares
issued may be more or less than the range in number of shares shown above. A
change in the number of shares to be issued in the Conversion will not affect
subscription rights, which are based on the 800,000 shares being offered in the
Subscription Offering. In the event of an increase in the maximum number of
shares being offered, persons who exercise their maximum subscription rights
will be notified of such increase and of their right to purchase additional
shares. Conversely, in the event of a decrease in the maximum number of shares
being offered, persons who exercise their maximum subscription rights will be
notified of such decrease and of the concomitant reduction in the number of
shares for which subscriptions may be made. In the event of a resolicitation,
subscribers will be afforded the opportunity to increase, decrease or maintain
their previously submitted order. The Holding Company will be required to
resolicit if the price per share is changed such that the total aggregate
purchase price is not within the minimum and 15% above the maximum of the
Estimated Valuation Range.
THE INDEPENDENT VALUATION IS NOT INTENDED AND MUST NOT BE CONSTRUED AS
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF VOTING TO APPROVE THE
CONVERSION OR OF PURCHASING THE SHARES OF THE COMMON STOCK. MOREOVER, BECAUSE
SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER
OF MATTERS (INCLUDING CERTAIN ASSUMPTIONS AS TO THE AMOUNT OF NET PROCEEDS AND
THE EARNINGS THEREON), ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO
ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING SHARES IN THE CONVERSION WILL
THEREAFTER BE ABLE TO SELL THE SHARES AT PRICES RELATED TO THE FOREGOING
VALUATION OF THE PRO FORMA MARKET VALUE.
Number of Shares to be Issued
It is anticipated that the total offering of Common Stock (the number
of shares of Common Stock issued in the Conversion multiplied by the Purchase
Price of $10.00 per share) will be within the current minimum and 15% above the
maximum of the Estimated Valuation Range. Unless otherwise required by the OTS,
no resolicitation of subscribers will be made and subscribers will not be
permitted to modify or cancel their subscriptions so long as the change in the
number of shares to be issued in the Conversion, in combination with the
Purchase Price, results in an offering within the minimum and 15% above the
maximum of the Estimated Valuation Range.
An increase in the total number of shares of Common Stock to be issued
in the Conversion would decrease both a subscriber's ownership interest and the
Holding Company's pro forma net worth and net income on a per share basis while
increasing (assuming no change in the per share price) pro forma net income and
net worth on an aggregate basis. A decrease in the number of shares to be issued
in the Conversion would increase both a subscriber's ownership interest and the
Holding Company's pro forma net worth and net income on a per share basis while
decreasing (assuming no change in the per share price) pro forma net income and
net worth on an aggregate basis. For a presentation of the effects of such
changes, see "Pro Forma Data."
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<PAGE>
Interpretation and Amendment of the Plan
To the extent permitted by law, all interpretations of the Plan by
Citizens and the Holding Company will be final. The Plan provides that, if
deemed necessary or desirable by the Boards of Directors of the Holding Company
and Citizens, the Plan may be substantively amended by the Boards of Directors,
as a result of comments from regulatory authorities or otherwise, with the
concurrence of the OTS. Moreover, if the Plan of Conversion is so amended,
subscriptions which have been received prior to such amendment will not be
refunded unless otherwise required by the OTS.
Conditions and Termination
Completion of the Conversion requires the approval of the Plan by the
affirmative vote of not less than a majority of the total number of votes of
members eligible to be cast at the Special Meeting and the sale of all shares of
the Common Stock within 24 months following approval of the Plan by the members.
If these conditions are not satisfied, the Plan will be terminated and we will
continue business in the mutual form of organization. The Plan may be terminated
by the Boards of Directors of Citizens and the Holding Company at any time prior
to the Special Meeting and, with the approval of the OTS, by such Boards of
Directors at any time thereafter. Furthermore, OTS regulations and the Plan of
Conversion require that the Holding Company complete the sale of Common Stock
within 45 days after the close of the Subscription Offering. The OTS may grant
an extension of this time period if necessary, but no assurance can be given
that an extension would be granted. See "-- Offering of Common Stock."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF CITIZENS SAVINGS BANK OF FRANKFORT
General
Citizens Bancorp was recently formed as an Indiana corporation on June
10, 1997, for the purpose of issuing the Common Stock and owning all of the
capital stock of Citizens issued in the Conversion. As a newly formed
corporation, the Holding Company has no operating history. All information in
this section should be read in conjunction with the consolidated financial
statements and notes thereto included within this document.
Our principal business has historically consisted of attracting
deposits from the general public and making loans secured by residential real
estate. Our earnings primarily depend upon our net interest income, which is the
difference between our interest income and interest expense. Interest income is
a function of the balances of loans and investments outstanding during a given
period and the yield earned on such loans and investments. Interest expense is a
function of the amount of deposits and borrowings outstanding during the same
period and interest rates paid on such deposits and borrowings. Our earnings are
also affected by provisions for loan losses, service charges, operating expenses
and income taxes.
Our earnings are also affected by the activities of our service
corporation subsidiary, CLSC, which engages in real estate development
activities. CLSC's activities are significantly affected by underlying economic
factors, such as interest rates, levels of unemployment and the general health
of the local and national economy. See "Business of Citizens -- Service
Corporation Subsidiary."
We also are affected by prevailing economic conditions, as well as
govenment policies and regulations concerning, among other things, monetary and
fiscal affairs, housing and financial institutions. See "Regulation." Deposit
flows are influenced by a number of factors, including interest rates paid on
competing investments, account maturities and level of personal income and
savings within our market. In addition, deposit growth is affected by how
customers perceive the stability of the financial services industry amid various
current events such as regulatory changes, failures of other financial
institutions and financing of the deposit insurance fund. Lending activities are
influenced by the demand for and supply of housing lenders, the availability and
cost of funds and various other items. Sources of funds for our lending
activities include deposits, payments on loans, borrowings and income provided
from operations.
Current Business Strategy
Our business strategy is to operate a well-capitalized, profitable and
independent community savings bank dedicated primarily to residential lending
with an emphasis on personal service. We have sought to implement this strategy
by (i) emphasizing the origination of one- to four-family residential mortgage
loans in our market area, (ii) investing in high-quality investment securities
and loans, and (iii) maintaining acceptable levels of capital.
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<PAGE>
The highlights of our business strategy are as follows:
o Profitability. Although no assurance can be made regarding
future profitability, we have been profitable in each of the
past five fiscal years. We had net income of $479,000 in
fiscal 1996, $406,000 in fiscal 1995, and $281,000 in fiscal
1994. Our net income for the nine months ended March 31, 1997,
was $244,000. Our average return on average assets for the
five years ended June 30, 1996, was 0.9%. Our returns on
average assets for the year ended June 30, 1996, and the nine
months ended March 31, 1997 (on an annualized basis) were
1.15% and .7%, respectively. Our net income for the nine
months ended March 31, 1997 would have been $371,000, and our
annualized return on average assets would have been 1.1% if
not for our recognition during that period of the one-time,
non-recurring special assessment of approximately $211,000
($127,000 net of tax) to replenish the Savings Association
Insurance Fund ("SAIF") of the FDIC. See "--Comparison of
Operation Results for the Nine Months ended March 31, 1997 and
1996."
o Asset Quality. Due largely to our conservative loan
underwriting standards, we have been successful in maintaining
a high level of asset quality. At March 31, 1997, only
$205,000, or 0.45% of our total assets were included in
nonperforming assets. At the same date, $253,000, or .7% of
our total assets were delinquent more than 60 days but less
than 90 days. See "Business of Citizens--Non-Performing and
Problem Assets."
o Capital Position. At March 31, 1997, we exceeded all of our
regulatory capital requirements, and our equity capital was
$5.6 million, or 12.3% of total assets. Assuming net proceeds
at the midpoint of the Estimated Valuation Range, our pro
forma equity to assets ratio (excluding $4.1 million of net
proceeds to be retained by the Holding Company), at such date,
would have been 18.6%.
Asset/Liability Management
We are also subject to interest rate risk to the degree that our
interest-bearing liabilities, primarily deposits with short- and medium-term
maturities, mature or reprice at different rates than our interest-earning
assets. We believe it is critical to manage the relationship between interest
rates and the effect on our net portfolio value ("NPV"). This approach
calculates the difference between the present value of expected cash flows from
assets and the present value of expected cash flows from liabilities, as well as
cash flows from off-balance sheet contracts. We manage assets and liabilities
within the context of the marketplace, regulatory limitations and within limits
established by our Board of Directors on the amount of change in NPV which is
acceptable given certain interest rate changes.
The OTS issued a regulation, which uses a net market value methodology
to measure the interest rate risk exposure of savings associations. Under this
OTS regulation, an institution's "normal" level of interest rate risk in the
event of an assumed change in interest rates is a decrease in the institution's
NPV in an amount not exceeding 2% of the present value of its assets. Savings
associations with over $300 million in assets or less than a 12% risk-based
capital ratio are required to file OTS Schedule CMR. Data from Schedule CMR is
used by the OTS to calculate changes in NPV (and the related "normal" level of
interest rate risk) based upon certain interest rate changes (discussed below).
Associations which do not meet either of the filing requirements are not
required to file OTS Schedule CMR, but may do so voluntarily. As we do not meet
either of these requirements, we are not required to file Schedule CMR, although
we do so voluntarily. Under the regulation, associations which must file are
required to take a deduction (the interest rate risk capital component) from
their total capital available to calculate their risk based capital requirement
if their interest rate exposure is greater than "normal." The amount of that
deduction is one-half of the difference between (a) the institution's actual
calculated exposure to a 200 basis point interest rate increase or decrease
(whichever results in the greater pro forma decrease in NPV) and (b) its
"normal" level of exposure which is 2% of the present value of its assets.
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<PAGE>
Presented below, as of March 31, 1997, is an analysis performed by the
OTS of our interest rate risk as measured by changes in NPV for instantaneous
and sustained parallel shifts in the yield curve, in 100 basis point increments,
up and down 400 basis points. At March 31, 1997, 2% of the present value of our
assets was approximately $931,000. Because the interest rate risk of a 200 basis
point increase in market rates (which was greater than the interest rate risk of
a 200 basis point decrease) was $1.1 million at March 31, 1997, we would have
been required to deduct $84,000 from our total capital available to calculate
our risk based capital requirement if we had been subject to the OTS' reporting
requirements under this methodology. Our exposure to interest rate risk results
from the concentration of fixed rate mortgage loans in our portfolio.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of Present Value of Assets
In Rates $ Amount $ Change % Change NPV Ratio Change
- ---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+ 400 bp * $4,592 $(2,337) (34)% 10.62% (427)bp
+ 300 bp 5,215 (1,714) (25)% 11.82% (307)bp
+ 200 bp 5,830 (1,099) (16)% 12.97% (192)bp
+ 100 bp 6,416 (513) (7)% 14.02% (87)bp
0 bp 6,929 --- --- % 14.89% --- bp
- 100 bp 7,274 345 5 % 15.44% 55 bp
- 200 bp 7,304 375 5 % 15.41% 52 bp
- 300 bp 7,218 289 4 % 15.17% 28 bp
- 400 bp 7,255 326 5 % 15.15% 26 bp
</TABLE>
* Basis points.
As with any method of measuring interest rate risk, the methods of
analysis presented above have certain short comings. For example, although
certain assets and liabilities may have similar maturities or periods to
repricing, they may react in different degrees to changes in market interest
rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Additionally, certain
assets, such as adjustable-rate loans, have features which restrict changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of a change in interest rates, expected rates of prepayments on loans
and early withdrawals from certificates could likely deviate significantly from
those assumed in calculating the table.
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<PAGE>
Average Balances and Interest Rates and Yields
The following tables present at March 31, 1997, and for the nine-month
periods ended March 31, 1997, and 1996, and the fiscal years ended June 30,
1996, 1995 and 1994, the average daily balances of each category of our
interest-earning assets and interest-bearing liabilities, and the interest
earned or paid on such amounts.
<TABLE>
<CAPTION>
At March 31, Nine Months Ended March 31,
1997 1997 1996
------------------- ----------------------------- -----------------------------
Average Average Average Average
Balance Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
------- ---------- ------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning deposits.......... $ 3,928 5.97% $ 3,435 $ 129 5.02% $ 3,193 $ 144 6.00%
FHLB stock......................... 332 7.85 332 19 7.84 332 20 8.03
Investment securities
available for sale (1)........... 159 6.39 1,936 92 6.31 2,979 132 5.91
Loans receivable (2)............... 37,630 8.61 36,362 2,380 8.73 31,397 2,069 8.79
-------- -------- ------ -------- -----
Total interest-earning assets.... 42,049 8.35 42,065 2,620 8.30 37,901 2,365 8.32%
======== ======== ========
Interest-bearing liabilities:
Deposits........................... 37,255 4.52 36,325 1,227 4.50 34,169 1,149 4.48%
FHLB advances...................... 2,000 5.87 3,275 135 5.49 1,800 82 6.05
-------- -------- ------ -------- -----
Total interest-bearing liabilities 39,255 4.59 39,600 1,362 4.59 35,969 1,231 4.56%
-------- -------- ------ -------- -----
Net interest-earning assets........... $ 2,794 $ 2,465 $ 1,932
======== ======== ========
Net interest income (expenses)........ $1,258 $1,134
====== ======
Interest rate spread (3).............. 3.76% 3.71% 3.76%
==== ==== ====
Net yield on weighted average
interest-earning assets (4)........ ---% 3.99% 3.99%
==== ==== ====
Average interest-earning
assets to average interest-bearing
liabilities........................ 107.12% 106.22% 105.37%
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
Average Average Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
(Dollars in thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits............ $ 3,109 $ 182 5.85% $ 3,713 $ 181 4.89% $ 6,640 $ 251 3.79%
FHLB stock........................... 332 26 7.91 332 23 7.06 332 19 5.83
Investment securities
available for sale (1)............. 3,001 174 5.81 2,832 154 5.43 2,470 108 4.35
Loans receivable (2)................. 31,980 2,804 8.77 28,121 2,384 8.48 24,564 2,046 8.33
------- ------ -------- ------ -------- -----
Total interest-earning assets...... 38,422 3,186 8.29 34,998 2,742 7.84% 34,006 2,424 7.13
====== ====== ======== ===== ======== =====
Interest-bearing liabilities:
Deposits............................. 34,456 1,539 4.47 32,605 1,341 4.12 31,917 1,273 3.99
FHLB advances........................ 1,923 114 5.94 462 29 6.24 --- --- ---
------- ------ -------- ------ -------- -----
Total interest-bearing liabilities. 36,379 1,653 4.54 33,067 1,370 4.15 31,917 1,273 3.99
------- ------ -------- ------ -------- -----
Net interest-earning assets............. $ 2,043 $ 1,931 $ 2,089
======= ======== ========
Net interest income..................... $1,533 $1,372 $1,151
====== ====== ======
Interest rate spread (3)................ 3.75% 3.69% 3.14%
==== ==== ====
Net yield on weighted average
interest-earning assets (4).......... 3.99% 3.92% 3.38%
==== ==== ====
Average interest-earning assets
to average interest-bearing
liabilities..................... 105.61% 105.84% 106.54%
====== ====== ======
</TABLE>
(1) Includes securities available for sale at amortized cost prior to SFAS
No. 115 adjustments.
(2) Total loans less loans in process. Average balances include non-accrual
loans.
(3) Interest rate spread is calculated by subtracting weighted average
interest rate cost from weighted average interest rate yield for the
period indicated.
(4) The net yield on weighted average interest-earning assets is calculated
by dividing net interest income by weighted average interest-earning
assets for the period indicated. No net yield amount is presented at
March 31, 1997, because the computation of net yield is applicable only
over a period rather than at a specific date.
-37-
<PAGE>
Interest Rate Spread
Our results of operations have been determined primarily by net
interest income and, to a lesser extent, fee income, miscellaneous income and
general and administrative expenses. Our net interest income is determined by
the interest rate spread between the yields we earn on interest-earning assets
and the rates we pay on interest-bearing liabilities, and by the relative
amounts of interest-earning assets and interest-bearing liabilities.
The following table sets forth the weighted average effective interest
rate that we earned on our loan and investment portfolios, the weighted average
effective cost of our deposits and advances, the interest rate spread, and net
yield on weighted average interest-earning assets for the periods and as of the
dates shown. Average balances are based on average monthly balances. Our
management believes that the use of month-end average balances instead of daily
average balances has not caused any material difference in the information
presented.
<TABLE>
<CAPTION>
Nine Months Ended
At March 31, March 31, Year Ended June 30,
1997 1997 1996 1996 1995 1994
------------------------------------------------------------------------------
Weighted average interest rate earned on:
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits.................... 5.97% 5.02% 6.00% 5.85% 4.89% 3.79%
FHLB stock................................... 7.85 7.84 8.03 7.91 7.06 5.83
Investment securities........................ 6.39 6.31 5.91 5.81 5.43 4.35
Loans receivable............................. 8.61 8.73 8.79 8.77 8.48 8.33
Total interest-earning assets.............. 8.35 8.30 8.32 8.29 7.84 7.13
Weighted average interest rate cost of:
Deposits..................................... 4.52 4.50 4.48 4.47 4.12 3.99
FHLB advances................................ 5.87 5.49 6.05 5.94 6.24 ---
Total interest-bearing liabilities......... 4.59 4.59 4.56 4.54 4.15 3.99
Interest rate spread (1)........................ 3.76% 3.71% 3.76% 3.75% 3.69% 3.14%
==== ==== ==== ==== ==== ====
Net yield on weighted average
interest-earning assets (2).................. ---% 3.99% 3.99% 3.99% 3.92% 3.38%
==== ==== ==== ==== ==== ====
</TABLE>
- ----------
(1) Interest rate spread is calculated by subtracting combined weighted
average interest rate cost from combined weighted average interest rate
earned for the period indicated. Interest rate spread figures must be
considered in light of the relationship between the amounts of
interest-earning assets and interest-bearing liabilities.
(2) The net yield on weighted average interest-earning assets is calculated
by dividing net interest income by weighted average interest-earning
assets for the period indicated. No net yield figure is presented at
March 31, 1997 because the computation of net yield is applicable only
over a period rather than at a specific date.
-38-
<PAGE>
The following table describes the extent to which changes in interest rates
and changes in volume of interest-related assets and liabilities have affected
our interest income and expense during the periods indicated. For each category
of interest-earning asset and interest-bearing liability, information is
provided on changes attributable to (1) changes in rate (changes in rate
multiplied by old volume) and (2) changes in volume (changes in volume
multiplied by old rate). Changes attributable to both rate and volume which
cannot be segregated have been allocated proportionally to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>
Increase (Decrease) in Net Interest Income
----------------------------------------------------
Total
Due to Due to Net
Rate Volume Change
(In thousands)
<S> <C> <C> <C>
Nine months ended March 31, 1997
compared to nine months ended March 31, 1996
Interest-earning assets:
Interest-bearing deposits.................................. $ (30) $ 15 $ (15)
FHLB stock................................................. --- --- ---
Investment securities...................................... 13 (54) (41)
Loans receivable........................................... (23) 334 311
------- ---- -----
Total.................................................... (40) 295 255
------- ---- -----
Interest-bearing liabilities:
Deposits................................................... 5 73 78
FHLB advances.............................................. (13) 66 53
------- ---- -----
Total.................................................... (8) 139 131
------- ---- -----
Net change in net interest income............................ $ (32) $156 $ 124
======= ==== =====
Year ended June 30, 1996 compared
to year ended June 30, 1995
Interest-earning assets:
Interest-bearing deposits.................................. $ 32 $ (32) $ ---
FHLB stock................................................. 3 --- 3
Investment securities...................................... 11 10 21
Loans receivable........................................... 84 336 420
------- ---- -----
Total.................................................... 130 314 444
------- ---- -----
Interest-bearing liabilities:
Deposits................................................... 118 79 197
FHLB advances.............................................. (2) 87 85
------- ---- -----
Total.................................................... 116 166 282
------- ---- -----
Net change in net interest income............................ $ 14 $ 148 $ 162
======= ==== =====
Year ended June 30, 1995 compared
to year ended June 30, 1994
Interest-earning assets:
Interest-bearing deposits.................................. $ 60 $ (130) $ (70)
FHLB stock................................................. 4 --- 4
Investment securities...................................... 29 17 46
Loans receivable........................................... 38 300 338
------- ---- -----
Total.................................................... 131 187 318
------- ---- -----
Interest-bearing liabilities:
Deposits................................................... 42 27 69
FHLB advances.............................................. --- 28 28
------- ---- -----
Total.................................................... 42 55 97
------- ---- -----
Net change in net interest income............................ $ 89 $ 132 $ 221
======= ==== =====
</TABLE>
-39-
<PAGE>
Financial Condition at March 31, 1997 Compared to Financial Condition at June
30, 1996
Total consolidated assets increased by $918,000, or 2.1% to $45.2
million at March 31, 1997 from $44.2 million at June 30, 1996. Our loan
portfolio increased $2.8 million and our investment securities decreased $2.8
million. The increase in the loan portfolio was funded primarily by an increase
in interest-bearing deposits of $1.7 million and by the sale of investments.
Financial Condition at June 30, 1996 Compared to Financial Condition at June 30,
1995
Total consolidated assets increased by $4.5 million, or 11.4%, to $44.2
million at June 30, 1996 from $39.7 million at June 30, 1995. The increase in
assets for the period was primarily attributable to the growth in our loan
portfolio of $5.1 million. This increase in loan volume was primarily due to
increased loan demand generated by economic growth in our market area, and a
more aggressive loan origination program. Loan growth was funded mainly from an
increase in deposits of approximately $2.4 million and an increase in Federal
Home Loan Bank advances of $1.5 million.
The increase in the loan portfolio was comprised primarily of mortgage
loans which increased approximately $4.0 million.
Comparison of Operating Results for the Nine Months Ended March 31, 1997 and
1996
Net Income. Net income decreased $112,000, or 31.5%, to $244,000 for
the nine-month period ended March 31, 1997 from $356,000 for the same period in
1996. The decrease primarily resulted from the recognition of the one-time,
non-recurring special assessment in the amount of approximately $211,000
($127,000 net of tax) to replenish the SAIF and from the sale of an investment
at a loss of approximately $60,000. This decrease in net income was offset by an
increase of $124,000 in our net interest income from $1.1 million for 1997 to
$1.25 million for 1996. Excluding the SAIF assessment and the loss on the sale
of investments, net income would have increased $52,000, or 14.6%, to
approximately $408,000 for the nine months ended March 31, 1997 from $356,000
for the nine months ended March 31, 1996.
Net Interest Income. Net interest income is the most significant
component of our income from operations. Net interest income is the difference
between interest we receive on our interest-earning assets (primarily loans and
investments) and interest we pay on our interest-bearing liabilities (primarily
deposits and borrowed funds). Net interest income depends on the volume of and
rates earned on assets and the volume of and rates paid on interest-bearing
liabilities. Our net interest income increased $124,000, or 10.9%, to $1.3
million for the nine-months ended March 31, 1997 from $1.1 million for the
comparable period in 1996. This increase was due primarily to the growth of
average interest-earning assets to $42.0 million in 1997 from $37.9 million in
1996.
The increase in our average interest-earning assets of $4.2 million
reflects an increase of approximately $5.0 million in average loans, an increase
in interest-earning deposits of $242,000 and a decrease of approximately $1.0
million in investments.
Our interest rate spread decreased during the nine-month period ended
March 31, 1997 as compared to the comparable period in 1996 to 3.71% from 3.76%,
and our net interest margin remained the same.
<PAGE>
Provisions for Loan Losses. Our provisions for loan losses for the
nine-month period in 1997 and the comparable period in 1996 were $32,000 and
$63,000, respectively. We increased the loss provisions in 1996 to recognize the
increase in construction loans and the increase in consumer loan losses
occurring in the nation, regionally and locally as well as to recognize the
increase in the size of our consumer loan portfolio. The increase in the
provision, also was made to give consideration to the added risks of
individually large nonresidential and multi-family real estate loans.
Historically we have emphasized our loss experience over other factors
in establishing the provision for loan losses. We review the allowance for loan
losses in relation to (i) our past loan loss experience, (ii) known and inherent
risks in our portfolio, (iii) adverse situations that may affect the borrowers'
ability to repay, (iv) the estimated value of any underlying collateral and (v)
current economic conditions. Our allowances for loan losses as of March 31, 1997
and 1996 were $172,000 and $121,000 respectively.
Other Income. Our other income decreased approximately $79,000, or 43%,
during the nine-month period in 1997 as compared to the comparable period in
1996. This decrease resulted from the sale of an investment security at a loss
of $60,000, a decrease in fees and service charges of $9,000 and a decrease in
other income of $10,000. We chose to sell the available-for-sale security in
order to use the proceeds to pay down FHLB advances and increase overall
liquidity.
Other Expense. Our other expense increased $255,000, or 36.1%, to
$961,000 in 1997 from $706,000 in 1996. The increase was primarily attributable
to an increase of $47,000 in salaries and benefits and to the payment of the
one-time SAIF assessment of $211,000. Prior to the one-time SAIF assessment, our
premium was .23%, which was reduced to .06% subsequent to the special
assessment.
-40-
<PAGE>
Income Tax Expense. Our income tax expense decreased $67,000, or 34.9%,
from $192,000 in 1996 to $125,000 in 1997. The decrease was the result of the
decrease in our net income before taxes.
Comparison of Operating Results For Fiscal Years Ended June 30, 1996 and 1995
Net Income. Net income increased $73,000, or 18.0%, to $479,000 for
1996 from $406,000 for 1995. The increase was primarily due to the increase in
the size of our loan portfolio and the increase in our net interest income.
Net Interest Income. Our net interest income increased $161,000, or
11.7%, to $1.5 million in 1996 from $1.4 million in 1995. This increase was due
primarily to the growth of average interest earning assets to $38.4 million in
1996 from $35.0 million in 1995. In addition, our interest rate spread increased
to 3.75% in 1996 from 3.7% in 1995 and our net interest margin increased to 4.0%
in 1996 from 3.9% in 1995.
The increase in our average interest-earning assets of $3.4 million
reflects an increase of $3.9 million in average loans, an increase in
investments of $169,000 and a decrease in interest-bearing deposits of $604,000.
Our interest rate spread and net interest margin increased in 1996
compared to 1995. This was due to the increase in the yield on average
interest-earning assets to 8.3% in 1996 from 7.8% in 1995, while
interest-bearing liabilities increased to 4.5% in 1996 from 4.2% in 1995.
The yield on our average interest-earning assets increased in 1996 due
to an increase in the yield of both loans and investments. Generally positive
economic conditions resulted in sustained loan demand, which resulted in an
increase in the yield on our average interest-earning assets.
The increase in the cost of our average interest-bearing liabilities
was due primarily to increases in the cost of our interest-bearing deposits, to
4.5% in 1996 from 4.1% in 1995. This was partially offset by the decrease in the
cost of short-term borrowings to 5.9% in 1996 from 6.2% in 1995.
Provisions for Loan Losses. Our provisions for loan losses for 1996 and
1995 were $80,000 and $32,000, respectively. The increase of $48,000 in 1996 was
made to increase our allowance commensurate with an increase in residential
mortgage, construction and consumer lending. We did not charge off any amounts
during 1996 and we experienced a $12,000 recovery during that period. The
$37,000 charge off in 1995 was partially offset by a $2,000 recovery. Our
allowances for loan loss for 1996 and 1995 were $138,000 and $46,000
respectively.
Other Income. Our other income increased approximately $25,000, or
11.3%, in 1996 as compared to 1995. This increase was primarily the result of a
profit of $24,000 in 1996 from CLSC, our wholly-owned service corporation.
Other Expense. Our other expense increased $43,000, or 4.7%, to
$967,000 in 1996 from $924,000 in 1995. The increase was primarily attributable
to an increase of $28,000 in salaries and benefits, primarily due to hiring an
additional loan officer, and a $9,000 increase in occupancy in connection with
the installation of new computers, a "Loan Doc Prep" software package and a
Local Area Network (LAN).
Income Tax Expense. Our income tax expense increased $22,000, or 9.5%,
to $253,000 in 1996 from $231,000 in 1995. The increase was the result of the
increased net income earned in 1996.
-41-
<PAGE>
Comparison of Operating Results For Fiscal Years Ended June 30, 1995 and 1994
Net Income. Net income increased $125,000, or 44.5%, to $406,000 for
1995 from $281,000 for 1994. The increase was primarily due to the increase in
our loan portfolio, the increase in our net interest income and an increase in
our net interest margin from 3.4% in 1994 to 3.9% in 1995.
Net Interest Income. Our net interest income increased $221,000, or
19.2%, to $1.4 million in 1995 from $1.2 million in 1994. This increase was due
primarily to the growth of average interest earning assets to $35 million in
1995 from $34 million in 1994 and to the increase in our net interest margin to
3.9% in 1995 from 3.4% in 1994.
The increase in our average interest-earning assets of $992,000
reflects an increase of $3.6 million in loans offset by a decrease of $2.9
million in interest-bearing deposits.
Our interest rate spread increased from 3.1% in 1994 to 3.7% in 1995,
and our net interest margin increased from 3.4% in 1994 to 3.9% in 1995. This
increase was due to the increase in the yield on average interest-earning assets
to 7.8% in 1995 from 7.1% in 1994, while the interest-bearing liabilities only
increased to 4.2% in 1995 from 4.0% in 1994.
The yield on our average interest-earning assets increased in 1995 due
to an increase in the yield of both loans and investments. Strong economic
conditions resulted in continued demand for loans, which resulted in an increase
in the yield on our average interest-earning assets.
The increase in the cost of our average interest-bearing liabilities
was due primarily to increases in the cost of our interest-bearing deposits to
4.1% in 1995 from 4.0% in 1994. During 1995, we also obtained from the Federal
Home Loan Bank an advance in the amount of $1.5 million with an average rate of
6.2%.
Provisions for Loan Losses. Our provisions for loan losses for 1995 and
1994 were $32,000 and $12,000, respectively. The increase of $20,000 was due to
the increase in net charge offs experienced in 1995 as well as to consider the
increase in the size of our loan portfolio. Our allowances for loan losses for
1995 and 1994 were $46,000 and $49,000 respectively.
Other Income. Our other income increased approximately $24,000, or
12.2%, in 1995 as compared to 1994. This increase was primarily the result of an
increase in fee income.
Other Expense. Our other expense increased $61,000, or 7.1%, to
$924,000 in 1995 from $863,000 in 1994. The increase was primarily attributable
to an increase of $25,000 in salaries and benefits, of which approximately
$10,000 was attributable to increased supplemental retirement expense that was
more than offset by income. Additionally, an increase of approximately $28,000
in expenses associated with deferred loan fees was included in employee salaries
and benefits.
Income Tax Expense. Our income tax expense increased $65,000, or 39.2%,
to $231,000 in 1995 from $166,000 in 1994. The increase was the result of the
increased net income earned in 1995.
<PAGE>
Liquidity and Capital Resources
Our primary sources of funds are deposits, borrowings and the proceeds
from principal and interest payments on loans. While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates, economic
conditions and competition.
Our primary investing activity is the origination of loans. During the
years ended June 30, 1996, 1995 and 1994 we originated total loans in the
amounts of $15.4 million, $11.4 million and $11.1 million, respectively. We
purchased loans totaling $64,000 and $311,000 in the fiscal years ended June 30,
1996 and 1994, respectively. Loan principal repayments totaled $10.3 million,
$8.3 million and $8.6 million during the respective periods.
During the nine-month periods ended March 31, 1997 and 1996, we
originated loans of $13.0 million and $10.7 million, respectively. Loan
principal repayments totaled $10.0 million and $7.5 million, respectively,
during these periods.
During the years ended June 30, 1996, 1995, and 1994, we purchased
securities in the amounts of $169,000, $154,000 and $1,107,000, respectively. We
did not receive any proceeds for the sale of securities during 1996, 1995 or
1994. During the nine-month period ended March 31, 1997, however, we sold
approximately $2.9 million of securities for a loss of approximately $60,000.
We had outstanding loan commitments of $265,000 and unused lines of
credit of approximately $2.5 million at March 31, 1997. We anticipate that we
will have sufficient funds from loan repayments and from our ability to borrow
additional funds from the FHLB of Indianapolis to meet our current commitments.
The unused lines represent available borrowings under existing home equity lines
of credit. Certificates of deposit scheduled to mature in one year or less at
March 31, 1997 totaled $14.3 million. We believe that a significant portion of
such deposits will remain with us based upon historical deposit flow data and
our competitive pricing in our market area.
Liquidity management is both a daily and long-term function of our
management strategy. In the event that we should require funds beyond our
ability to generate them internally, additional funds are available through the
use of FHLB advances. We had outstanding FHLB advances in the amount of $2.0
million at March 31, 1997.
The following is a summary of our cash flows, which are of three major
types. Cash flows from operating activities consist primarily of net income
generated by cash. Investing activities generate cash flows through the
origination and principal collection on loans as well as purchases and sales of
securities. Investing activities will generally result in negative cash flows
when we experience loan growth. Cash flows from financing activities include
savings deposits, withdrawals and maturities and changes in borrowings. The
following table summarizes cash flows for each of the nine-month periods ended
March 31, 1997 and 1996 and each year in the three-year period ended June 30,
1996.
-42-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
------------------------- ------------------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Operating activities .......................... $ 250 $ 350 $ 518 $ 494 $ 221
Investing activities:
Purchases of
investment securities .................... (36) (136) (169) (154) (1,107)
Sales of investment securities ............. 2,945 -- -- -- --
Principal collected on loans ............... 9,990 7,475 10,279 8,263 8,643
Loans originated ........................... (12,966) (10,724) (15,419) (11,434) (11,061)
Loans sold ................................. 91 -- -- -- --
Loans purchased ............................ -- -- (64) -- (311)
Change in land held
for development .......................... 30 (52) (3) (682) --
Purchases of equipment ..................... (16) (40) (69) (25) (39)
Financing activities:
Increase/(decrease) in NOW,
MMDA and passbook deposits ............... 100 596 460 (1,991) 2,599
Increase in certificates
of deposit ............................... 1,555 1,343 1,965 1,129 1,303
Advances from FHLB ......................... 11,500 3,500 4,500 6,000 --
Payments to FHLB ........................... (12,500) (3,000) (3,000) (4,500) --
-------- -------- -------- -------- --------
Net increase/(decrease) in cash
and cash equivalents ....................... $ 943 $ (688) $ (1,002) $ (2,900) $ 248
======== ======== ======== ======== ========
</TABLE>
Federal regulations require FHLB-member savings associations to
maintain an average daily balance of liquid assets equal to a monthly average of
not less than a specified percentage of their net withdrawable savings deposits
plus short-term borrowings. Liquid assets include cash, certain time deposits,
certain bankers' acceptances, specified U.S. government, state or federal agency
obligations, certain corporate debt securities, commercial paper, certain mutual
funds, certain mortgage-related securities, and certain first lien residential
mortgage loans. This liquidity requirement may be changed from time-to-time by
the OTS to any amount within the range of 4% to 10%, and is currently 5%,
although the OTS has proposed a reduction of the percentage to 4%. Also, a
savings association currently must maintain short-term liquid assets
constituting at least 1% of its average daily balance of net withdrawable
deposit accounts and current borrowings, although the OTS has proposed
eliminating this requirement. Monetary penalties may be imposed for failure to
meet these liquidity requirements. As of March 31, 1997, we had liquid assets of
$2.9 million, and a regulatory liquidity ratio of 7.6%, all of which constituted
short-term investments.
-43-
<PAGE>
Pursuant to OTS capital regulations, savings associations must
currently meet a 1.5% tangible capital requirement, a 3% leverage ratio (or core
capital) requirement, and a total risk-based capital to risk-weighted assets
ratio of 8%. At March 31, 1997, our tangible capital ratio was 10.2%, our core
capital ratio was 10.2%, and our risk-based capital to risk-weighted assets
ratio was 17.9%. Therefore, at March 31, 1997, our capital levels exceeded all
applicable regulatory capital requirements currently in effect. The following
table provides the minimum regulatory capital requirements and our capital
ratios as of March 31, 1997:
<TABLE>
<CAPTION>
At March 31, 1997
OTS Requirement Citizens' Capital Level
% of % of Amount
Capital Standard Assets Amount Assets(1) Amount of Excess
- ---------------- ------ ------ --------- ------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Tangible capital......... 1.5% $ 664 10.2% $4,529 $3,865
Core capital (2)......... 3.0 1,328 10.2 4,529 3,201
Risk-based capital....... 8.0 2,098 17.9 4,701 2,603
</TABLE>
(1) Tangible and core capital levels are shown as a percentage of total
assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
(2) The OTS has proposed and is expected to adopt a core capital
requirement for savings associations comparable to that adopted by the
OCC for national banks. The new regulation, as proposed, would require
at least 3% of total adjusted assets for savings associations that
received the highest supervisory rating for safety and soundness, and
4% to 5% for all other savings associations. The final form of such new
OTS core capital requirement may differ from that which has been
proposed. We expect to be in compliance with such new requirements. See
"Regulation -- Savings Association Regulatory Capital."
For definitions of tangible capital, core capital and risk-based
capital, see "Regulation -- Savings Association Regulatory Capital."
As of March 31, 1997, management is not aware of any current
recommendations by regulatory authorities which, if they were to be implemented,
would have, or are reasonably likely to have, a material adverse effect on our
liquidity, capital resources or results of operations.
<PAGE>
Current Accounting Issues
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." In October 1994, the FASB issued SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosure," which amends SFAS No. 114 to allow a creditor to use existing
methods for recognizing interest income on impaired loans. SFAS No.114, as
amended by SFAS No. 118 as to certain income recognition provisions and
financial statement disclosure requirements, is applicable to all creditors and
to all loans that are individually and specifically evaluated for impairment,
uncollateralized as well as collateralized, except those loans that are
accounted for at fair value or at the lower of cost or fair value. This
Statement requires that the expected loss of interest income on nonperforming
loans be taken into account when calculating loan loss reserves and that
specified impaired loans be measured based upon the present value of expected
future cash flows discounted at the loan's effective interest rate or, as an
alternative, at the loan's observable market price or fair value of the
collateral if the loan is collateral dependent. Our loans that may be affected
by these accounting standards are our multi-family loans, which are evaluated
based on discounted cash flows, and our collateral dependent loans, where our
current procedures for evaluating impairment result in carrying such loans at
the lower of cost or fair value. We adopted SFAS No. 114 on July 1, 1995,
without a significant detrimental effect on our overall consolidated financial
position or results of operations.
In November 1993, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 93-6, "Employer's Accounting
for Employee Stock Ownership Plans." The SOP, among other things, changed the
measure of compensation expense recorded by employers from the cost of employee
stock ownership plan shares allocated to employees during the period to the fair
value of employee stock ownership plan shares allocated. Assuming the
acquisition of shares of stock by the ESOP, the application of SOP 93-6 is
likely to result in fluctuations in compensation expense due to changes in the
fair value of the stock.
In May, 1995, the FASB issued SFAS No. 122 "Accounting for Mortgage
Servicing Rights," which requires us to recognize as separate assets rights to
service mortgage loans for others, regardless of how we acquired those servicing
rights. An institution that acquires mortgage servicing rights through either
the purchase or origination of mortgage loans and sells those loans with
servicing rights retained would allocate some of the cost of the loans to the
mortgage servicing rights.
SFAS No. 122 requires that capitalized mortgage servicing rights and
capitalized excess servicing rights be assessed for impairment. Impairment is
measured based on fair value.
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<PAGE>
SFAS No. 122 was effective for years beginning after December 15, 1995
(July 1, 1996, as to Citizens), for transactions in which an entity acquires
mortgage servicing rights and to impairment evaluations of all capitalized
mortgage servicing rights and capitalized excess servicing receivables whenever
acquired. Retroactive application was prohibited. The provisions of SFAS No. 122
were adopted without material effect.
In October, 1995, the FASB issued SFAS No. 123 entitled "Accounting for
Stock-Based Compensation." SFAS No. 123 establishes a fair value based method of
accounting and disclosing the amount of stock-based compensation paid to
employees. Historically, Accounting Principles Board ("APB") Opinion No. 25
"Accounting for Stock Issued to Employees" has measured compensation cost using
the method based on the award's intrinsic value. Those electing to remain with
the accounting in APB Opinion No. 25 must make pro forma disclosures of net
income and, when presented, earnings per share, as if the fair value based
method of accounting defined in SFAS 123 had been applied. The disclosure
provisions of SFAS No. 123 will be adopted by management upon completion of the
Conversion. We do not believe that adoption of SFAS No. 123 disclosure
provisions will have a material adverse effect on our consolidated financial
position or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
of Financial Assets, Servicing Rights and Extinguishment of Liabilities," that
provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities. SFAS No. 125 superseded
portions of SFAS No. 122. SFAS No. 125 introduces an approach to accounting for
transfers of financial assets that provides a means of dealing with more complex
transactions in which the seller disposes of only a partial interest in the
assets, retains rights or obligations, makes use of special purpose entities in
the transaction, or otherwise has continuing involvement with the transferred
assets. The new accounting method provides that the carrying amount of the
financial assets transferred be allocated to components of the transaction based
on their relative fair values. Transactions subject to the provisions of SFAS
No. 125 include, among others, transfers involving repurchase agreements,
securitizations of financial assets, loan participations and transfers of
receivables with recourse. An entity that undertakes an obligation to service
financial assets recognizes either a servicing asset or liability for the
servicing contract. A servicing asset or liability that is purchased or assumed
is initially recognized at its fair value. Servicing assets and liabilities are
amortized in proportion to and over the period of estimated net servicing income
or net servicing loss and are subject to subsequent assessments for impairment
based on fair value. SFAS No. 125 provides that a liability is removed from the
balance sheet only if the debtor either pays the creditor and is relieved of its
obligation for the liability or is legally released from being the primary
obligor. SFAS No. 125 is effective for applicable transactions occurring after
December 31, 1996, and is to be applied prospectively. Retroactive application
is not permitted. We do not believe that adoption of SFAS No. 125 will have a
material adverse effect on our financial position or results of operations.
Impact of Inflation
The consolidated financial statements presented herein have been prepared
in accordance with generally accepted accounting principles. These principles
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.
Our primary assets and liabilities are monetary in nature. As a result,
interest rates have a more significant impact on our performance than the
effects of general levels of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services, since such prices are affected by inflation. In a period
of rapidly rising interest rates, the liquidity and maturities structures of our
assets and liabilities are critical to the maintenance of acceptable performance
levels.
The principal effect of inflation, as distinct from levels of interest
rates, on earnings is in the area of noninterest expense. Such expense items as
employee compensation, employee benefits and occupancy and equipment costs may
be subject to increases as a result of inflation. An additional effect of
inflation is the possible increase in the dollar value of the collateral
securing loans that we have made. We are unable to determine the extent, if any,
to which properties securing our loans have appreciated in dollar value due to
inflation.
BUSINESS OF CITIZENS
General
We were organized as a state-chartered building and loan association in
1916 and currently conduct our business from one full-service office located in
Frankfort, Indiana. Our principal business consists of attracting deposits from
the general public and originating fixed-rate and adjustable-rate loans secured
primarily by first mortgage liens on one- to four-family real estate. Our
deposit accounts are insured up to applicable limits by the SAIF of the FDIC.
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We believe that we have developed a solid reputation among our loyal
customer base because of our commitment to personal service and because of
strong support of the local community. We offer a number of consumer and
commercial financial services. These services include: (i) residential real
estate loans; (ii) multi-family loans; (iii) construction loans; (iv)
nonresidential real estate loans; (v) home equity loans (vi) single-pay loans;
(vii) installment loans; (viii) automobile loans; (ix) NOW accounts; (x) money
market demand accounts ("MMDAs") (xi) passbook savings accounts; (xii)
certificates of deposit and (xiii) individual retirement accounts.
Lending Activities
We have historically concentrated our lending activities on the
origination of loans secured by first mortgage liens for the purchase,
construction or refinancing of one- to four-family residential real property.
One- to four-family residential mortgage loans continue to be the major focus of
our loan origination activities, representing 79% of our total loan portfolio at
March 31, 1997. We also offer multi-family mortgage loans, construction loans,
nonresidential real estate loans, and consumer loans. Mortgage loans secured by
multi-family properties and nonresidential real estate totaled approximately
4.2% and 2.2%, respectively, of our total loan portfolio at March 31, 1997.
Construction loans totaled approximately 2.7% of our total loans as of March 31,
1997.
Consumer loans constituted approximately 14.3% of our total loan portfolio at
March 31, 1997.
Loan Portfolio Data. The following table sets forth the composition of our
loan portfolio by loan type and security type as of the dates indicated,
including a reconciliation of gross loans receivable after consideration of the
allowance for loan losses and loans in process.
<PAGE>
<TABLE>
<CAPTION>
At March 31, At June 30,
1997 1996 1995 1994 1993 1992
Percent Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amountof Total Amountof Total
(Dollars in thousands)
TYPE OF LOAN Real estate mortgage loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential............... $29,402 79.00% $26,240 76.30% $22,287 76.13% $20,677 79.10% $18,704 79.81% $18,267 78.77%
Non-residential........... 846 2.28 695 2.02 635 2.17 647 2.47 514 2.19 613 2.65
Multi-family.............. 1,563 4.20 1,596 4.64 1,680 5.74 1,665 6.37 1,680 7.17 1,579 6.81
Construction loans:.......... 991 2.66 870 2.53 356 1.22 --- --- --- --- --- ---
Consumer loans:
Single pay................ 1,825 4.90 2,110 6.14 1,795 6.13 558 2.13 361 1.54 303 1.31
Installment .............. 1,493 4.01 1,288 3.74 1,068 3.65 836 3.20 674 2.88 752 3.24
Share .................... 15 .04 63 .18 7 .02 5 .02 47 .20 138 .59
Home equity............... 2,003 5.38 1,949 5.67 1,973 6.74 1,863 7.13 1,549 6.61 1,517 6.54
Home improvement.......... 9 .03 11 .03 14 .04 22 .08 44 .19 97 .42
------- ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Gross loans
receivable......... $38,147 102.50% $34,822 101.25% $29,815 101.84% $26,273 100.50% $23,573 100.59% $23,266 100.33%
======= ====== ======= ====== ======= ====== ======= ====== ======= ====== ======= ======
TYPE OF SECURITY
Residential real estate ..... $33,997 91.35% $30,860 89.73% $26,043 88.96% $23,248 88.93% $20,594 87.88% $20,191 87.07%
Non-residential.............. 1,108 2.98 1,072 3.12 1,116 3.81 647 2.47 514 2.19 613 2.65
Multi-family real estate..... 1,563 4.20 1,596 4.64 1,681 5.74 1,665 6.37 1,680 7.17 1,579 6.81
Deposits..................... 116 .31 165 .48 82 .28 50 .19 110 .47 207 .89
Auto ...................... 1,025 2.76 832 2.42 691 2.36 513 1.96 374 1.59 390 1.68
Other security............... 220 .59 214 .62 121 .41 66 .25 220 .94 173 .75
Unsecured ................... 118 .31 83 .24 81 .28 84 .33 81 .35 113 .48
------- ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Gross loans receivable.. 38,147 102.50 34,822 101.25 29,815 101.84 26,273 100.50 23,573 100.59 23,266 100.33
======= ====== ======= ====== ======= ====== ======= ====== ======= ====== ======= ======
Deduct:
Deferred loan fees........... 103 .28 95 .28 86 .29 76 .28 52 .23 48 .21
Allowance for loan losses.... 172 .46 138 .40 46 .16 49 .19 38 .16 27 .12
Loans in process............. 656 1.76 197 .57 407 1.39 7 .03 47 .20 --- ---
------- ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Net loans receivable...... $37,216 100.00% $34,392 100.00% $29,276 100.00% $26,141 100.00% $23,436 100.00% $23,191 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ====== ======= ======
Mortgage Loans (1):
Adjustable-rate...........$ 9,798 30.67% $ 9,241 32.30%$ 9,319 37.68% $ 7,849 33.96%$ 8,357 39.77%$ 9,295 45.20%
Fixed-rate................ 22,153 69.33 19,368 67.70 15,410 62.32 15,266 66.04 12,657 60.23 11,270 54.80
------- ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total................... $31,951 100.00% $28,609 100.00% $24,729 100.00% $23,115 100.00% $21,014 100.00% $20,565 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
(1) Balances in this category include escrows and reserves for uncollected
interest.
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The following table sets forth certain information at June 30, 1996,
regarding the dollar amount of loans maturing in our loan portfolio based on the
contractual terms to maturity. Demand loans having no stated schedule of
repayments and no stated maturity and overdrafts are reported as due in one year
or less. This schedule does not reflect the effects of possible prepayments or
enforcement of due-on-sale clauses. We expect prepayments will cause actual
maturities to be shorter.
<TABLE>
<CAPTION>
Balance Due During Years Ended June 30,
Outstanding at 2000 2002 2007 2012
June 30, to to to and
1996 1997 1998 1999 2001 2006 2011 following
------- ------ ---- ----- ---- ------ ------- -------
(In thousands)
Real estate mortgage loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential loans.................. $26,240 $ 33 $ 18 $ 104 $263 $2,890 $14,114 $ 8,818
Multi-family loans.................... 1,596 --- --- --- --- 245 1,351 ---
Non-residential loans.............. 695 --- --- --- 38 83 574 ---
Construction loans.................... 870 870 --- --- --- --- --- ---
Installment loans.................... 1,288 59 266 365 488 110 --- ---
Single pay loans...................... 2,110 1,748 167 96 99 --- --- ---
Loans secured by deposits............. 63 48 15 --- --- --- --- ---
Home equity loans..................... 1,949 --- --- --- --- --- --- 1,949
Home improvement loans................ 11 --- --- 3 8 --- --- ---
------- ------ ---- ----- ---- ------ ------- -------
Total............................ $34,822 $2,758 $466 $ 568 $896 $3,328 $16,039 $10,767
======= ====== ==== ===== ==== ====== ======= =======
</TABLE>
The following table sets forth, as of June 30, 1996, the dollar amount
of all loans due after one year that have fixed interest rates and floating or
adjustable interest rates.
<TABLE>
<CAPTION>
Due After June 30, 1997
Fixed Rates Variable Rates Total
(In thousands)
Real estate mortgage loans:
<S> <C> <C> <C>
Residential loans.............. $19,221 $ 6,986 $26,207
Multi-family loans............. --- 1,596 1,596
Non-residential loans.......... 41 654 695
Construction loans................ --- --- ---
Installment loans................. 1,229 --- 1,229
Single pay loans.................. 202 160 362
Loans secured by deposits......... 15 --- 15
Home equity loans................. --- 1,949 1,949
Home improvement loans............ 11 --- 11
------- ------- -------
Total.......................... $20,719 $11,345 $32,064
======= ======= =======
</TABLE>
<PAGE>
One- to Four-Family Residential Loans. Our primary lending activity
consists of the origination of one- to four-family residential mortgage loans
secured by property located in our primary market area. We generally originate
one- to four-family residential mortgage loans in amounts up to 95% of the
lesser of the appraised value or purchase price, with private mortgage insurance
required on loans with a loan-to-value ratio in excess of 80%. The cost of such
insurance is factored into the Annual Percentage Rate on such loans. We
originate and retain fixed rate loans which provide for the payment of principal
and interest over a 15- or 20-year period, or balloon loans having terms of up
to 20 years with principal and interest payments calculated using a 30-year
amortization period.
We also offer adjustable-rate mortgage ("ARM") loans. The interest rate
on ARM loans is indexed to the one-year U.S. Treasury securities yields adjusted
to a constant maturity. We may offer discounted initial interest rates on ARM
loans, but we require that the borrower qualify for the ARM loan at the
fully-indexed rate (the index rate plus the margin). A substantial portion of
the ARM loans in our portfolio at March 31, 1997 provide for maximum rate
adjustments per year and over the life of the loan of 1% and 6%, respectively.
Our residential ARMs are amortized for terms up to 25 years.
ARM loans decrease the risk associated with changes in interest rates
by periodically repricing, but involve other risks because as interest rates
increase, the underlying payments by the borrower increase, thus increasing the
potential for default by the borrower. At the same time, the marketability of
the underlying collateral may be adversely affected by higher interest rates.
Upward adjustment of the contractual interest rate is also limited by the
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maximum periodic and lifetime interest rate adjustment permitted by the loan
documents, and, therefore, is potentially limited in effectiveness during
periods of rapidly rising interest rates. At March 31, 1997, approximately 29%
of our one- to four-family residential loans had adjustable rates of interest.
All of the one- to four-family residential mortgage loans that we
originate include "due-on-sale" clauses, which give us the right to declare a
loan immediately due and payable in the event that, among other things, the
borrower sells or otherwise disposes of the real property subject to the
mortgage and the loan is not repaid. However, we occasionally permit assumptions
of existing residential mortgage loans on a case-by-case basis.
At March 31, 1997, approximately $29.4 million, or 79% of our portfolio
of loans, consisted of one- to four-family residential loans. Approximately
$95,000, or .32% of total residential loans, were included in non-performing
assets as of that date. See "--Non-Performing and Problem Assets."
Multi-Family Loans. At March 31, 1997, approximately $1.6 million, or
4.2% of our total loan portfolio, consisted of mortgage loans secured by
multi-family dwellings (those consisting of more than four units). Our
multi-family loans are generally written as one-year adjustable rate loans
indexed to the one-year U.S. Treasury rate or to our internal loan rate which we
establish from time-to-time. We write multi-family loans with maximum
Loan-to-Value ratios of 80%. Our largest multi-family loan as of March 31, 1997
was $841,000 and was secured by an apartment complex in Frankfort. On the same
date, there were no multi-family loans included in non-performing assets.
Multi-family loans, like nonresidential real estate loans, involve a
greater risk than do residential loans. See "-- Nonresidential Real Estate
Loans" below.
Construction Loans. We offer construction loans with respect to
residential and nonresidential real estate and, in certain cases, to builders or
developers constructing such properties on a speculative basis (i.e., before the
builder/developer obtains a commitment from a buyer). At March 31, 1997,
approximately $991,000, or 2.7% of our total loan portfolio, consisted of
construction loans. The largest construction loan at March 31, 1997, totaling
$180,000, was secured by a single-family residence near Frankfort. None of our
construction loans were included in non-performing assets on that date.
Construction loans are generally written as six-month, fixed-rate loans
with interest calculated on the amount disbursed under the loan and payable
monthly. We generally require an 80% Loan-to-Value Ratio for our construction
loans. Inspections are made prior to any disbursement under a construction loan,
and we do not normally charge commitment fees for construction loans.
While providing us with a comparable, and in some cases higher, yield
than a conventional mortgage loan, construction loans involve a higher level of
risk. For example, if a project is not completed and the borrower defaults, we
may have to hire another contractor to complete the project at a higher cost.
Also, a project may be completed, but may not be salable, resulting in the
borrower defaulting and our taking title to the project.
Nonresidential Real Estate Loans. Our nonresidential real estate loans
are secured by churches, office buildings, and other commercial properties. We
generally originate non-residential real estate loans as one-year adjustable
rate loans indexed to the one-year U.S. Treasury securities yield adjusted to a
constant maturity, and are written for maximum terms of 20 years with maximum
Loan-to-Value ratios of 75%. At March 31, 1997, our largest nonresidential loan
was $161,000 and was secured by a manufacturing facility in Frankfort. At March
31, 1997, approximately $846,000, or 2.3% of our total loan portfolio, consisted
of nonresidential real estate loans. On the same date, there were no
nonresidential real estate loans included in non-performing assets.
Loans secured by nonresidential real estate generally are larger than
one- to four-family residential loans and involve a greater degree of risk.
Nonresidential real estate loans often involve large loan balances to single
borrowers or groups of related borrowers. Payments on these loans depend to a
large degree on results of operations and management of the properties and may
be affected to a greater extent by adverse conditions in the real estate market
or the economy in general. Accordingly, the nature of the loans makes them more
difficult for management to monitor and evaluate.
Consumer Loans. Our consumer loans, consisting primarily of home equity
loans, personal installment loans and "single pay" loans aggregated
approximately $5.3 million at March 31, 1997, or 14.3% of our total loan
portfolio. We consistently originate consumer loans to meet the needs of our
customers and to assist in meeting our asset/liability management goals. All of
our consumer loans, except loans secured by deposits, are fixed-rate loans with
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<PAGE>
terms that vary from six months (for unsecured installment loans) to 60 months
(for home improvement loans and loans secured by new automobiles). At March 31,
1997, 97.8% of our consumer loans were secured by collateral. Our loans secured
by deposits are made up to 90% of the original account balance and, at March 31,
1997, accrued at a rate of 8.5%. This rate may change but will always be at
least 1% over the underlying passbook or certificate of deposit rate. Interest
on loans secured by deposits is paid semi-annually.
We also offer home equity lines of credit and home improvement loans
secured by real estate. The interest rate on a home equity line of credit is
ordinarily tied to the prime rate with a margin of positive 2.0% and a maximum
interest rate of 18%. We do not always hold a first mortgage on our home equity
lines of credit, although we do hold a first mortgage with respect to
approximately 90% of such loans in our portfolio. We ordinarily offer fixed-rate
home improvement loans secured by real estate with a term not to exceed five
years. We restrict the amount that a customer may borrow under an equity line of
credit to $100,000, subject to the general restriction applicable to all second
mortgage loans that limits the amount we may loan to a borrower to an amount
that, when added to any existing mortgage loans, does not exceed 80% of the
appraised value of the collateral property.
At March 31, 1997, we had outstanding approximately $2.0 million of
home equity loans, with unused lines of credit totaling approximately $2.5
million. Home equity loans in the amount of $51,000 were included in
non-performing assets on that date.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured or are secured by
rapidly depreciable assets, such as automobiles. Further, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At March 31, 1997, consumer loans amounting to $70,000 were included
in non-performing assets. See "-- Non-Performing and Problem Assets."
Single-Pay Loans. We offer single-pay loans, which are short-term loans
secured by real estate, automobiles or other types of collateral that are
payable with a single payment rather than by installment. Typically, single-pay
loans secured by real estate are written with terms of one year or less, while
single-pay loans secured by other types of collateral are written for terms of
90 days to six months. Of the approximately $1.8 million of single-pay loans in
our portfolio as of March 31, 1997, approximately $950,000 were secured by
residential mortgages and $137,000 were secured by land. The remaining
approximately $700,000 of loans in this category were consumer loans, typically
secured by automobiles or subordinate liens on real estate. At March 31, 1997,
we had one delinquent single-pay loan in the amount of $1,000 in our portfolio.
Origination, Purchase and Sale of Loans. We historically have
originated our mortgage loans pursuant to our own underwriting standards which
do not conform with the standard criteria of the Federal Home Loan Mortgage
Corporation ("FHLMC") or the Federal National Mortgage Association ("FNMA")
because we do not require current property surveys in most cases. We may begin
originating fixed-rate residential mortgage loans for sale to the FHLMC on a
servicing-retained basis in the future. In the event that we originate loans for
sale to the FHLMC in the secondary market, such loans will be originated in
accordance with the guidelines established by the FHLMC and will be sold
promptly after they are originated.
We confine our loan origination activities primarily to Clinton County.
At March 31, 1997, we had one loan totaling approximately $74,000 secured by
property located outside of Indiana. Our loan originations are generated from
referrals from existing customers, real estate brokers, and newspaper and
periodical advertising. Loan applications are underwritten and processed at our
office.
Our loan approval process is intended to assess the borrower's ability
to repay the loan, the viability of the loan and the adequacy of the value of
the property that will secure the loan. To assess the borrower's ability to
repay, we study the employment and credit history and information on the
historical and projected income and expenses of our mortgagors. All mortgage
loans are approved by our Loan Committee. Consumer loans up to $15,000 may be
approved by a Loan Officer. Consumer loans for more than $15,000 must be
approved by the senior loan officer or the President.
We generally require appraisals on all real property securing our loans
and require an attorney's opinion and a valid lien on the mortgaged real estate.
Appraisals for all real property securing mortgage loans are performed by
independent appraisers who are state-licensed. We require fire and extended
coverage insurance in amounts at least equal to the principal amount of the loan
and also require flood insurance to protect the property securing its interest
if the property is in a flood plain. We also generally require private mortgage
insurance for all residential mortgage loans with Loan-to-Value Ratios of
greater than 80%. We require escrow accounts for insurance premiums and taxes
for loans that require private mortgage insurance.
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<PAGE>
Our underwriting standards for consumer loans are intended to protect
against some of the risks inherent in making consumer loans. Borrower character,
paying habits and financial strengths are important considerations.
The following table shows our loan origination and repayment activity
during the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans Originated:
Real estate mortgage loans:
Residential loans ........................ $ 7,344 $ 6,055 $ 8,738 $ 5,748 $ 7,216
Nonresidential loans ..................... 202 111 175 190 108
Multi-family loans ....................... 102 -- -- 56 48
Construction loans ......................... 1,559 1,183 1,603 356 --
Installment loans .......................... 973 746 1,076 961 767
Single pay loans ........................... 1,933 1,940 2,834 3,063 1,582
Loans secured by deposits .................. 5 27 63 6 5
Home equity loans .......................... 848 662 930 1,054 1,335
Home improvement loans ..................... -- -- -- -- --
-------- -------- -------- -------- --------
Total originations ..................... 12,966 10,724 15,419 11,434 11,061
Loans purchased ............................ -- -- 64 -- 311
Reductions:
Principal loan repayments .................. (9,990) (7,475) (10,279) (8,263) (8,643)
Loans sold ................................. (91) -- -- -- --
Transfers from loans to real estate owned .. -- -- -- -- --
-------- -------- -------- -------- --------
Total reductions ....................... (10,081) (7,475) (10,279) (8,263) (8,643)
Decrease in other items (1) ................ (60) (23) (88) (37) (24)
-------- -------- -------- -------- --------
Net increase (decrease) .................... $ 2,825 $ 3,226 $ 5,116 $ 3,134 $ 2,705
======== ======== ======== ======== ========
</TABLE>
(1) Other items consist of amortization of deferred loan origination costs
and the provision for losses on loans.
Our residential loan originations during the year ended June 30, 1996
totaled $8.7 million, compared to $5.7 million and $7.2 million in the years
ended June 30, 1995 and 1994, respectively.
Origination and Other Fees. We realize income from late charges,
checking account service charges, and fees for other miscellaneous services. We
currently charge origination fees on our mortgage loans of 1% of the loan
amount, up to $100,000, and .5% of the amount of the loan that exceeds $100,000.
We also may charge points on a mortgage loan as consideration for a lower
interest rate, although we do so infrequently. Late charges are generally
assessed if payment is not received within a specified number of days after it
is due. The grace period depends on the individual loan documents.
Non-Performing and Problem Assets
After a mortgage loan becomes 15 days past due, we deliver a
delinquency notice to the borrower. When loans are 30 to 60 days in default, we
send additional delinquency notices and make personal contact by telephone with
the borrower to establish acceptable repayment schedules. When loans become 60
days in default, we again contact the borrower, this time in person, to
establish acceptable repayment schedules. When a mortgage loan is 90 days
delinquent, we will have either entered into a workout plan with the borrower or
referred the matter to our attorney for collection. Management is authorized to
commence foreclosure proceedings for any loan upon making a determination that
it is prudent to do so.
We review mortgage loans on a regular basis and place such loans on a
non-accrual status when they become 90 days delinquent. Generally, when loans
are placed on a non-accrual status, unpaid accrued interest is written off, and
further income is recognized only to the extent received.
Non-performing Assets. At March 31, 1997, $205,000, or .45% of our
total assets, were non-performing (non-performing loans and non-accruing loans)
compared to $222,000, or .50%, of our total assets at June 30, 1996. At March
31, 1997, residential loans and consumer loans accounted for $95,000 and
$70,000, respectively, of non-performing assets. We had no Real Estate Owned
("REO") properties as of March 31, 1997.
-50-
<PAGE>
The table below sets forth the amounts and categories of our
non-performing assets (non-performing loans, foreclosed real estate and troubled
debt restructurings) for the last three years. It is our policy that all earned
but uncollected interest on all loans be reviewed monthly to determine if any
portion thereof should be classified as uncollectible for any loan past due in
excess of 90 days. Delinquent loans that are 90 days or more past due are
considered non-performing assets.
<TABLE>
<CAPTION>
At March 31, At June 30,
1997 1996 1995 1994
---- ---- ---- ----
(Dollars in thousands)
Non-performing assets:
<S> <C> <C> <C> <C>
Non-performing loans................... $165 $181 $ 98 $196
Troubled debt restructurings........... 40 41 42 40
---- ---- ---- ----
Total non-performing loans........... 205 222 140 236
Foreclosed real estate................. --- --- --- ---
---- ---- ---- ----
Total non-performing assets.......... $205 $222 $140 $236
==== ==== ==== ====
Non-performing loans to total loans....... 0.55% 0.64% 0.48% 0.90%
==== ==== ==== ====
Non-performing assets to total assets..... 0.45% 0.50% 0.35% 0.61%
==== ==== ==== ====
</TABLE>
Interest on loans was $3,000, $4,000, $2,000 and $6,000 less than would
have been reported for the nine months ended March 31, 1997 and the years ended
June 30, 1996, 1995 and 1994, respectively, if the non-performing loans
summarized above had been current in accordance with their original terms.
At March 31, 1997, we held loans delinquent from 30 to 59 days totaling
approximately $391,000. Other than these loans and the other delinquent loans
disclosed elsewhere in this section, we were not aware of any other loans, the
borrowers of which were experiencing financial difficulties.
-51-
<PAGE>
Delinquent Loans. The following table sets forth certain information at
March 31, 1997, and at June 30, 1996, 1995, and 1994, relating to delinquencies
in Citizens's portfolio. Delinquent loans that are 90 days or more past due are
considered non-performing assets.
<TABLE>
<CAPTION>
At March 31, 1997 At June 30, 1996
------------------------------------------------- ------------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
-------------------- ------------------------- ----------------------- -----------------------
Principal Principal Principal Principal
Number Balance of Number Balance of Number Balance of Number Balance of
of Loans Loans of Loans Loans of Loans Loans of Loans Loans of
-------- ----- -------- ----- -------- ----- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
mortgage loans.......... 4 $125 4 $ 95 7 $158 8 $ 89
Nonresidential
mortgage loans.......... --- --- --- --- --- --- --- ---
Multi-family
mortgage loans.......... --- --- --- --- --- --- --- ---
Installment loans.......... --- --- 5 18 6 16 8 35
Single pay loans........... --- --- 1 1 4 24 2 12
Loans secured
by deposit.............. --- --- --- --- --- --- --- ---
Home equity loans.......... 5 128 5 51 1 6 3 45
Home improvement loans..... --- --- --- --- --- --- --- ---
--- ---- -- ---- -- ---- -- ----
Total................... 9 $253 15 $165 18 $204 21 $181
= ==== == ==== == ==== == ====
Delinquent loans to
total loans............. 1.12% 1.12%
==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At June 30, 1995 At June 30, 1994
------------------------------------------------- ------------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
-------------------- ------------------------- ----------------------- -----------------------
Principal Principal Principal Principal
Number Balance of Number Balance of Number Balance of Number Balance of
of Loans Loans of Loans Loans of Loans Loans of Loans Loans of
-------- ----- -------- ----- -------- ----- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
mortgage loans.......... 6 $133 3 $41 8 $199 10 $134
Nonresidential
mortgage loans.......... --- --- --- --- --- --- 1 27
Multi-family
mortgage loans.......... --- --- --- --- --- --- --- ---
Installment loans.......... 5 25 3 9 3 7 7 18
Single pay loans........... 1 2 3 27 --- --- --- ---
Loans secured
by deposit.............. --- --- --- --- --- --- --- ---
Home equity loans.......... 1 10 2 21 --- --- 3 15
Home improvement loans..... --- --- --- --- --- --- 1 2
-- ---- -- ----- -- ---- -- ----
Total................... 13 $170 11 $ 98 11 $206 22 $196
== ==== == ===== == ==== == ====
Delinquent loans to
total loans............. .91% 1.54%
=== ====
</TABLE>
-52-
<PAGE>
Classified assets. Federal regulations and our Asset Classification
Policy provide for the classification of loans and other assets such as debt and
equity securities considered by the OTS to be of lesser quality as
"substandard," "doubtful" or "loss" assets. An asset is considered "substandard"
if it is inadequately protected by the current net worth and paying capacity of
the obligor or of the collateral pledged, if any. "Substandard" assets include
those characterized by the "distinct possibility" that the institution will
sustain "some loss" if the deficiencies are not corrected. Assets classified as
"doubtful" have all of the weaknesses inherent in those classified
"substandard," with the added characteristic that the weaknesses present make
"collection or liquidation in full," on the basis of currently existing facts,
conditions, and values, "highly questionable and improbable." Assets classified
as "loss" are those considered "uncollectible" and of such little value that
their continuance as assets without the establishment of a specific loss reserve
is not warranted.
An insured institution is required to establish general allowances for
loan losses in an amount deemed prudent by management for loans classified
substandard or doubtful, as well as for other problem loans. General allowances
represent loss allowances which have been established to recognize the inherent
risk associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets. When an insured
institution classifies problem assets as "loss," it is required either to
establish a specific allowance for losses equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's determination
as to the classification of its assets and the amount of its valuation
allowances is subject to review by the OTS which can order the establishment of
additional general or specific loss allowances.
At March 31, 1997, the aggregate amount of our classified assets, and
of our general and specific loss allowances were as follows:
At March 31, 1997
-----------------
(In thousands)
Substandard assets............................ $119
Doubtful assets............................... ---
Loss assets................................... ---
----
Total classified assets................... $119
====
General loss allowances....................... $172
Specific loss allowances...................... ---
----
Total allowances.......................... $172
====
We regularly review our loan portfolio to determine whether any loans
require classification in accordance with applicable regulations.
Allowance for Loan Losses
The allowance for loan losses is maintained through the provision for
loan losses, which is charged to earnings. The provision for loan losses is
determined in conjunction with our review and evaluation of current economic
conditions (including those of our lending area), changes in the character and
size of the loan portfolio, loan delinquencies (current status as well as past
and anticipated trends) and adequacy of collateral securing loan delinquencies,
historical and estimated net charge-offs, and other pertinent information
derived from a review of the loan portfolio. In our opinion, our allowance for
loan losses is adequate to absorb probable losses inherent in the loan portfolio
at March 31, 1997. However, there can be no assurance that regulators, when
reviewing our loan portfolio in the future, will not require increases in our
allowances for loan losses or that changes in economic conditions will not
adversely affect our loan portfolio.
-53-
<PAGE>
Summary of Loan Loss Experience. The following table analyzes changes
in the allowance during the past three fiscal years ended June 30, 1996, and the
nine-month periods ended March 31, 1997, and March 31, 1996.
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period.............. $138 $ 46 $ 46 $ 49 $ 38
Charge-offs:
Residential mortgage loans............. --- --- --- --- ---
Nonresidential mortgage loans.......... --- --- --- --- ---
Multi-family loans..................... --- --- --- --- ---
Construction loans.......................... --- --- --- --- ---
Installment loans...................... --- --- --- (11) (6)
Single pay loans....................... --- --- --- (26) ---
Loans secured by deposits.............. --- --- --- --- ---
Home equity loans...................... --- --- --- --- ---
Home improvement loans................. --- --- --- --- ---
---- ---- ---- ----- -----
Total charge-offs.................... --- --- --- (37) (6)
---- ---- ---- ----- -----
Recoveries:
Residential mortgage..................... --- 2 2 --- ---
Single pay............................... 2 1 1 --- 1
Installment.............................. --- 9 9 2 4
---- ---- ---- ----- -----
Total recoveries..................... 2 12 12 2 5
---- ---- ---- ----- -----
Net (charge-offs) recoveries................ 2 12 12 (35) (1)
Provision for losses on loans............... 32 63 80 32 12
---- ---- ---- ----- -----
Balance end of period.................... $172 $121 $138 $ 46 $ 49
==== ==== ==== ===== =====
Allowance for loan losses as a percent of
total loans outstanding.................. 0.46% 0.37% 0.40% 0.16% 0.19%
Ratio of net (charge-offs) recoveries
to average loans outstanding............. .004 .04 .04 (.12) (.004)
</TABLE>
Allocation of Allowance for Loan Losses. The following table presents
an analysis of the allocation of Citizens' allowance for loan losses at the
dates indicated. The allocation of the allowance to each category is not
necessarily indicative of future loss in any particular category and does not
restrict our use of the allowance to absorb losses in other categories.
<TABLE>
<CAPTION>
At March 31, At June 30,
1997 1996 1996 1995 1994
Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans
in each in each in each in each in each
category category category category category
to total to total to total to total to total
Amount loans Amount loans Amount loans Amount loans Amount loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of
period applicable to:
Real estate mortgage loans:
Residential............... $64 77.08% $41 75.25% $49 75.35% $15 74.75% $14 78.71%
Nonresidential............ 2 2.22 1 2.07 1 2.00 --- 2.13 --- 2.46
Multi-family.............. 3 4.10 2 4.86 3 4.58 1 5.64 1 6.34
Construction loans.......... 17 2.60 10 2.39 11 2.50 2 1.19 --- ---
Installment loans........... 49 3.91 36 3.57 41 3.70 11 3.58 17 3.18
Loans secured by deposits... --- .04 --- .08 --- .18 --- .02 --- .02
Home equity loans........... 6 5.25 6 5.70 6 5.60 6 6.62 5 7.09
Home improvement loans...... --- .02 --- .04 --- .03 --- .05 --- .08
Single pay loans............ 31 4.78 25 6.04 27 6.06 11 6.02 12 2.12
---- ------ ---- ------ ---- ------ --- ------ --- ------
Total....................... $172 100.00% $121 100.00% $138 100.00% $46 100.00% $49 100.00%
==== ====== ==== ====== ==== ====== === ====== === ======
</TABLE>
-54-
<PAGE>
Investments
Investments. Our investment portfolio consists of equity interests in
pooled investment trusts, and FHLB stock. At March 31, 1997, approximately
$491,000, or 1.1%, of our total assets consisted of such investments. We also
had $3.9 million in interest-earning deposits as of that date.
The following table sets forth the amortized cost and the market value
of our investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At June 30,
1997 1996 1995 1994
Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- ----- ---- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for Sale:
Equity interests in pooled
investment trusts................ $159 $159 $3,087 $3,003 $2,913 $2,832 $2,759 $2,677
FHLB stock............................ 332 332 332 332 332 332 332 332
---- ---- ------ ------ ------ ------ ------ ------
Total investments................ $491 $491 $3,419 $3,335 $3,245 $3,164 $3,091 $3,009
==== ==== ====== ====== ====== ====== ====== ======
</TABLE>
The following table sets forth the amount of investment securities
(excluding FHLB stock) which mature during each of the periods indicated and the
weighted average yields for each range of maturities at March 31, 1997.
<TABLE>
<CAPTION>
Amount at March 31, 1997 which matures in
One Year One Year Five Years After
or Less to Five Years to Ten Years Ten Years
Amortized Average Amoritzed Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield Cost Yield
---- ----- ---- ----- ---- ----- ---- -----
(Dollars in thousands)
Equity interests in
<S> <C> <C> <C> <C> <C> <C> <C> <C>
pooled investment trusts......... $159 6.39% $--- ---% $--- ---% $--- ---%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<PAGE>
Sources of Funds
General. Deposits have traditionally been our primary source of funds
for use in lending and investment activities. In addition to deposits, we derive
funds from scheduled loan payments, investment maturities, loan prepayments,
retained earnings, income on earning assets and borrowings. While scheduled loan
payments and income on earning assets are relatively stable sources of funds,
deposit inflows and outflows can vary widely and are influenced by prevailing
interest rates, market conditions and levels of competition. The deposits shown
below include approximately $4.4 million in public funds deposited by various
state, county and local governments which may fluctuate depending upon
prevailing interest rates and the rates offered by our competitors. Borrowings
from the FHLB of Indianapolis may be used in the short-term to compensate for
reductions in deposits or deposit inflows at less than projected levels.
Deposits. We attract deposits principally from within Clinton County
through the offering of a broad selection of deposit instruments, including
fixed-rate passbook accounts, NOW accounts, variable rate money market accounts,
fixed-term certificates of deposit, individual retirement accounts and savings
accounts. We do not actively solicit or advertise for deposits outside of
Clinton County, and substantially all of our depositors are residents of that
county. Deposit account terms vary, with the principal differences being the
minimum balance required, the amount of time the funds remain on deposit and the
interest rate. We do not pay broker fees for any deposits we receive.
We establish the interest rates paid, maturity terms, service fees and
withdrawal penalties on a periodic basis. Determination of rates and terms are
predicated on funds acquisition and liquidity requirements, rates paid by
competitors, growth goals, and applicable regulations. We rely, in part, on
customer service and long-standing relationships with customers to attract and
retain our deposits. We also closely price our deposits to the rates offered by
our competitors.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and other prevailing interest rates and
competition. The variety of deposit accounts that we offer has allowed us to be
competitive in obtaining funds and to respond with flexibility to changes in
consumer demand. We have become more susceptible to short-term fluctuations in
deposit flows as customers have become more interest rate conscious. We manage
the pricing of our deposits in keeping with our asset/liability management and
profitability objectives. Based on our experience, we believe that our passbook,
-55-
<PAGE>
NOW and MMDAs are relatively stable sources of deposits. However, the ability to
attract and maintain certificates of deposit, and the rates we pay on these
deposits, have been and will continue to be significantly affected by market
conditions.
An analysis of our deposit accounts by type, maturity, and rate at
March 31, 1997, is as follows:
<TABLE>
<CAPTION>
Minimum Balance at Weighted
Opening March 31, % of Average
Type of Account Balance 1997 Deposits Rate
- --------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Withdrawable:
<S> <C> <C> <C> <C>
Fixed rate, passbook accounts......... $ 50 $6,665 17.90% 3.22%
Variable rate, money market........... 2,500 3,130 8.40 3.30
NOW accounts.......................... 50 4,133 11.09 2.16
------- ------
Total withdrawable.................. 13,928 37.39 2.92
Certificates (original terms):
3 months or less...................... 1,000 1,448 3.89 5.15
6 months.............................. 1,000 5,090 13.66 5.04
12 months............................. 1.000 923 2.48 4.77
13 months............................. 5,000 2,047 5.49 5.34
18 months............................. 1,000 583 1.57 4.93
23 months............................. 5,000 4,457 11.96 5.90
30 months ............................ 1,000 1,162 3.12 5.26
36 months............................. 1,000 939 2.52 5.12
Other certificates.................... 1,000 3,462 9.29 5.99
------- ------
Total certificates....................... 20,111 53.98 5.43
IRA's:
Variable rate, money market........... 50 198 0.53 3.30
6 months.............................. 1,000 33 0.09 4.48
12 months............................. 1.000 166 0.44 4.73
18 months............................. 1,000 33 0.09 4.91
23 months............................. 1,000 1,387 3.72 5.81
36 months............................. 1,000 1,261 3.39 5.14
Other certificates.................... 1,000 138 0.37 5.99
------- ------
Total IRA's.............................. 3,216 8.63 5.32
------- ------
Total deposits........................... $37,255 100.00% 4.52%
======= ====== ====
</TABLE>
The following table sets forth by various interest rate categories the
composition of our time deposits at the dates indicated:
<TABLE>
<CAPTION>
At March 31, At June 30,
1997 1996 1995 1994
------- ------- ------- -------
(In thousands)
<C> <C> <C> <C> <C>
3.00 to 3.99%............................... $ --- $ --- $ 219 $ 5,454
4.00 to 4.99%............................... 4,191 5,173 6,588 6,187
5.00 to 5.99%............................... 15,388 10,629 7,000 3,869
6.00 to 6.99%............................... 3,425 5,283 4,349 1,199
7.00 to 7.99%............................... 120 484 866 790
8.00 to 8.99%............................... 5 5 587 981
------- ------- ------- -------
Total.................................... $23,129 $21,574 $19,609 $18,480
======= ======= ======= =======
</TABLE>
-56-
<PAGE>
The average amount of and average interest rate paid on, the following
deposits categories which were in excess of ten percent of average total
deposits are as follows:
<TABLE>
<CAPTION>
Nine months ended Years ended June 30,
March 31, 1997 1996 1995 1994
Average Average Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid Balance Rate Paid
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook accounts $ 6,653 3.22% $ 6,867 3.25% $ 7,523 3.24% $ 7,601 3.24%
NOW accounts 4,081 2.16 3,843 2.06 3,773 2.37 3,576 2.36
Money market accounts 3,286 3.30 3,233 3.30 3,389 3.30 3,956 3.00
Time deposit accounts 22,305 5.44 20,513 5.47 17,920 5.45 16,785 4.73
</TABLE>
The following table represents, by various interest rate categories, the
amounts of time deposits maturing during each of the three years following March
31, 1997. Matured certificates, which have not been renewed as of March 31,
1997, have been allocated based upon certain rollover assumptions.
<TABLE>
<CAPTION>
Amounts at March 31, 1997
One Year Two Three Greater Than
or Less Years Years Three Years
(In thousands)
<C> <C> <C> <C> <C>
3.00 to 3.99%............................... $ --- $ --- $ --- $ ---
4.00 to 4.99%............................... 3,833 358 --- ---
5.00 to 5.99%............................... 8,633 5,021 1,400 333
6.00 to 6.99%............................... 1,799 202 179 1,246
7.00 to 7.99%............................... --- 20 --- 100
8.00 to 8.99%............................... --- --- --- 5
------- ------ ------ ------
Total.................................... $14,265 $5,601 $1,579 $1,684
======= ====== ====== ======
</TABLE>
The following table indicates the amount of our other certificates of
deposit of $100,000 or more by time remaining until maturity as of March 31,
1997.
At March 31, 1997
Maturity Period (In thousands)
Three months or less................................ $2,505
Greater than three months through six months........ 2,250
Greater than six months through twelve months....... ---
Over twelve months.................................. 499
------
Total.......................................... $5,254
======
-57-
<PAGE>
The following table sets forth the dollar amount of savings deposits in
the various types of deposits that we offer at the dates indicated, and the
amount of increase or decrease in such deposits as compared to the previous
period.
<TABLE>
<CAPTION>
DEPOSIT ACTIVITY
Balance Increase Balance Increase
at (Decrease) at (Decrease)
March 31, % of from June 30, % of from
1997 Deposits 1996 1996 Deposits 1995
------- ------ ------ ------- ------ ------
(Dollars in thousands)
Withdrawable:
<S> <C> <C> <C> <C> <C> <C>
Fixed rate, passbook accounts..... $6,665 17.90% $(33) $6,698 18.82% $(195)
Variable rate, money market....... 3,130 8.40 99 3,031 8.51 263
NOW accounts...................... 4,133 11.09 59 4,074 11.44 488
------- ------ ------ ------- ------ ------
Total withdrawable.............. 13,928 37.39 125 13,803 38.77 556
Certificates (original terms):
3 months.......................... 1,448 3.89 (1,414) 2,862 8.04 1,300
6 months.......................... 5,090 13.66 2,547 2,543 7.14 395
12 months......................... 923 2.48 (20) 943 2.65 (29)
13 months......................... 2,047 5.49 37 2,010 5.65 36
18 months......................... 583 1.57 282 301 0.85 63
23 months......................... 4,457 11.96 773 3,684 10.35 1,189
30 months ........................ 1,162 3.12 (168) 1,330 3.74 (466)
36 months......................... 939 2.52 (300) 1,239 3.48 (265)
Other certificates................ 3,462 9.29 (293) 3,755 10.54 (328)
------- ------ ------ ------- ------ ------
Total certificates................... 20,111 53.98 1,444 18,667 52.44 1,895
IRA's
Variable rate, money market....... 198 0.53 (26) 224 0.63 (95)
6 months.......................... 33 0.09 (3) 36 0.10 1
12 months......................... 166 0.44 3 163 0.46 (91)
18 months......................... 33 0.09 33 --- --- ---
23 months......................... 1,387 3.72 441 946 2.66 523
30 months......................... --- --- --- --- --- (6)
36 months ........................ 1,261 3.39 (368) 1,629 4.58 (326)
Other certificates................ 138 0.37 6 132 0.36 (32)
------- ------ ------ ------- ------ ------
Total IRA's....................... 3,216 8.63 86 3,130 8.79 (26)
------- ------ ------ ------- ------ ------
Total deposits....................... $37,255 100.00% $1,655 $35,600 100.00% $2,425
======= ====== ====== ======= ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balance Increase Balance
at (Decrease) at
June 30, % of from June 30, % of
1995 Deposits 1994 1994 Deposits
------- ------ ----- ------- ------
Withdrawable:
<S> <C> <C> <C> <C> <C>
Fixed rate, passbook accounts..... $6,893 20.78% $(1,278) $8,171 24.01%
Variable rate, money market....... 2,768 8.34 (401) 3,169 9.31
NOW accounts...................... 3,586 10.81 (120) 3,706 10.89
------- ------ ----- ------- ------
Total withdrawable.............. 13,247 39.93 (1,799) 15,046 44.21
Certificates (original terms):
3 months.......................... 1,562 4.71 (686) 2,248 6.61
6 months.......................... 2,148 6.47 (1,116) 3,264 9.59
12 months......................... 972 2.93 (338) 1,310 3.85
13 months......................... 1,974 5.95 1,974 --- ---
18 months......................... 238 0.72 (162) 400 1.17
23 months......................... 2,495 7.52 2,213 282 0.83
30 months ........................ 1,796 5.41 (500) 2,296 6.75
36 months......................... 1,504 4.53 (253) 1,757 5.16
Other certificates................ 4,083 12.31 (235) 4,318 12.68
------- ------ ----- ------- ------
Total certificates................... 16,772 50.55 897 15,875 46.64
IRA's
Variable rate, money market....... 319 0.97 (192) 511 1.50
6 months.......................... 35 0.11 (4) 39 0.11
12 months......................... 254 0.76 (102) 356 1.05
18 months......................... --- --- --- --- ---
23 months......................... 423 1.28 423 --- ---
30 months......................... 6 0.02 --- 6 0.02
36 months ........................ 1,955 5.89 (179) 2,134 6.27
Other certificates................ 164 0.49 94 70 0.20
------- ------ ----- ------- ------
Total IRA's....................... 3,156 9.52 40 3,116 9.15
------- ------ ----- ------- ------
Total deposits....................... $33,175 100.00% $(862) $34,037 100.00%
======= ====== ===== ======= ======
</TABLE>
-58-
<PAGE>
Total deposits at March 31, 1997 were approximately $37.3 million,
compared to approximately $34.0 million at June 30, 1994. Our deposit base is
somewhat dependent upon the manufacturing sector of Clinton County's economy.
Although Clinton County's manufacturing sector is relatively diversified and not
significantly dependent upon any industry, a loss of a material portion of the
manufacturing workforce could adversely affect our ability to attract deposits
due to the loss of personal income attributable to the lost manufacturing jobs
and the attendant loss in service industry jobs.
In the unlikely event of our liquidation after the Conversion, all
claims of creditors (including those of deposit account holders, to the extent
of their deposit balances) would be paid first followed by distribution of the
liquidation account to certain deposit account holders, with any assets
remaining thereafter distributed to the Holding Company as the sole shareholder
of Citizens. See "The Conversion -- Principal Effects of Conversion -- Effect on
Liquidation Rights."
Borrowings. We focus on generating high quality loans and then seek the
best source of funding from deposits, investments or borrowings. At March 31,
1997, we had borrowings in the amount of $2.0 million from the FHLB of
Indianapolis which bear fixed and variable interest rates and are due at various
dates through October, 1998. We are required to maintain eligible loans in our
portfolio of at least 170% of outstanding advances as collateral for advances
from the FHLB of Indianapolis. We do not anticipate any difficulty in obtaining
advances appropriate to meet our requirements in the future.
The following table presents certain information relating to our
borrowings at or for the nine months ended March 31, 1997 and 1996 and at or for
the years ended June 30, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
At or for the
Nine Months At or for the Year
Ended March 31, Ended June 30,
1997 1996 1996 1995 1994
-----------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
FHLB Advances:
Outstanding at end of period.................... $ 2,000 $2,000 $3,000 $1,500 $ ---
Average balance outstanding for period.......... 3,275 1,800 1,923 462 ---
Maximum amount outstanding at any
month-end during the period................... 5,000 2,000 3,000 1,500 ---
Weighted average interest rate
during the period............................. 5.49 % 6.05% 5.94 % 6.24% ---%
Weighted average interest rate
at end of period.............................. 5.87 5.93 5.82 5.87 ---
</TABLE>
Properties
The following table provides certain information with respect to our
office as of March 31, 1997:
<TABLE>
<CAPTION>
Net Book
Value of
Property, Approximate
Description Owned or Year Total Furniture & Square
and Address leased Opened Deposits Fixtures Footage
(Dollars in thousands)
<C> <C> <C> <C> <C> <C>
60 South Main Street Owned 1977 $37,255 $589 13,924
Frankfort, IN 46041
</TABLE>
We own computer and data processing equipment which we use for
transaction processing, loan origination, and accounting. The net book value of
our electronic data processing equipment was approximately $24,000 at March 31,
1997.
We operate one automated teller machine ("ATM"), which is located in
the vestibule of our office. Our ATM participates in the Cirrus(R) and
MagicLine(R) networks.
We have also contracted for the data processing and reporting services
of BISYS, Inc. in Houston, Texas. The cost of these data processing services is
approximately $8,500 per month.
We also have contracted with the FHLB of Indianapolis for item
processing for a fee of approximately $3,000 per month.
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<PAGE>
Service Corporation Subsidiary
OTS regulations permit federal savings associations to invest in the
capital stock, obligations or other specified types of securities of
subsidiaries (referred to as "service corporations") and to make loans to such
subsidiaries and joint ventures in which such subsidiaries are participants in
an aggregate amount not exceeding 2% of the association's assets, plus an
additional 1% of assets if the amount over 2% is used for specified community or
inner-city development purposes. In addition, federal regulations permit
associations to make specified types of loans to such subsidiaries (other than
special purpose finance subsidiaries) in which the association owns more than
10% of the stock, in an aggregate amount not exceeding 50% of the association's
regulatory capital if the association's regulatory capital is in compliance with
applicable regulations. A savings association that acquires a non-savings
association subsidiary, or that elects to conduct a new activity within a
subsidiary, must give the FDIC and the OTS at least 30 days advance written
notice. The FDIC may, after consultation with the OTS, prohibit specified
activities if it determines such activities pose a serious threat to the SAIF.
Moreover, a savings association must deduct from capital, for purposes of
meeting the core capital, tangible capital and risk-based capital requirements,
its entire investment in and loans to a subsidiary engaged in activities not
permissible for a national bank (other than exclusively agency activities for
its customers or mortgage banking subsidiaries).
We currently own one subsidiary, CLSC, which primarily engages in the
purchase and development of tracts of undeveloped land. Because CLSC engages in
activities that are not permissible for a national bank, OTS regulations
prohibit us from including our investment in CLSC in our calculation of
regulatory capital. CLSC purchases undeveloped land, constructs improvements and
infrastructure on the land, and then sells lots to builders, who construct homes
for sale to homebuyers. CLSC ordinarily receives payment when title is
transferred.
CLSC owns a 104-acre tract of contiguous land on which it is presently
developing 59 acres. CLSC intends to complete the development of the remainder
of the property in approximately ten years. The 59 acres that are presently
being developed will include 64 building lots known as the Southridge Addition,
and 89 building lots known as the Meadow Brook Addition. Both of these Additions
have been annexed into the Town of Frankfort. We purchased this land in 1989
intending to develop these housing additions. However, following enactment of
the Financial Institutions Reform Recovery and Enforcement Act of 1989, the FDIC
directed us to transfer our interest in these developments to CLSC, which we
did, effective June 30, 1994. Phase I of the development includes 33 completed
lots in the Southridge Addition, of which 21 lots have been sold and on which 19
houses have been completed, and 26 lots in the Meadow Brook Addition, of which 3
lots have been sold with houses presently under construction on those lots, one
of which is a "speculative house" that we financed. The Southridge lots have
been priced generally at $19,000 to $22,000 each, with completed homes selling
generally for $90,000 to $120,000, and the Meadow Brook lots have been priced
generally at $23,000 to $26,000 with completed homes expected to sell generally
for $100,000 to $150,000. CLSC intends to develop the remaining 31 lots in the
Southridge Addition beginning in 1998. Phase II and Phase III of the Meadow
Brook development, consisting of approximately 63 lots, are still in the design
stage. CLSC also intends to develop a 25-acre tract located in Frankfort, with
homes generally selling for $175,000 to $300,000. This project is in the early
stages of development.
CLSC intends ultimately to develop the remaining 20-acre parcel of
land, known as the Mann tract, that it presently owns. The development of this
land, which is part of the 104-acre tract discussed above, likely will not be
completed for approximately 10 years. The Mann tract is presently being leased
for farming purposes. CLSC has no present intentions to acquire additional land
for development purposes.
For the year ended June 30, 1996, CLSC earned a profit of $24,000 for
the year ended June 30, 1996, and $2,000 for the year ended June 30, 1995. CLSC
recorded a loss of $163 for the 1994 fiscal year. At March 31, 1997, Citizens
had an investment in CLSC of $465,000 and loans outstanding to CLSC of
approximately $575,000 with an interest rate set at the prime rate plus 1
percent. Our consolidated statements of income included elsewhere herein include
the operations of CLSC. All intercompany balances and transactions have been
eliminated in the consolidation.
Employees
As of March 31, 1997, we employed 11 persons on a full-time basis and 3
persons on a part-time basis. None of our employees is represented by a
collective bargaining group and we consider our employee relations to be good.
Citizens' employee benefits for full-time employees include, among
other things, a Pentegra Group (formerly known as Financial Institutions
Retirement Fund) defined benefit pension plan, a noncontributory,
multiple-employer comprehensive pension plan (the"Pension Plan"), and
hospitalization/major medical, long-term disability insurance and life
insurance.
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<PAGE>
We consider our employee benefits to be competitive with those offered
by other financial institutions and major employers in our area. See "Executive
Compensation and Related Transactions of Citizens."
Legal Proceedings
Although we are involved, from time to time, in various legal
proceedings in the normal course of business, there are no material legal
proceedings to which we presently are a party or to which any of our property is
subject.
MANAGEMENT OF CITIZENS BANCORP
Directors and Executive Officers of the Holding Company
The Board of Directors of the Holding Company consists of the same
individuals who serve as directors of Citizens. The Holding Company's Articles
of Incorporation and Bylaws require that directors be divided into three
classes, as nearly equal in number as possible. Each class of directors serves
for a three-year period, with approximately one-third of the directors elected
each year. The Holding Company's officers will be elected annually by its Board
of Directors and will serve at the Board's discretion. The terms of the present
directors expire at the Holding Company's first shareholders' meeting, which is
anticipated to be held in March, 1998. At that meeting, it is anticipated that
the directors will be nominated to serve for the following terms: the terms of
Perry W. Lewis and John J.Miller will expire in 1998, the terms of Robert F.
Ayres and Billy J. Wray will expire in 1999 and the term of Fred W. Carter will
expire in 2000. See "Management of Citizens Savings Bank of Frankfort."
The Holding Company's Bylaws provide that directors must (1) be
residents of Clinton County, Indiana, (2) have had a loan or deposit
relationship with us which they have maintained for twelve months prior to their
nomination to the Board, and (3) with respect to nonemployee directors, must
have served as a member of a civic or community organization based in Clinton
County for at least 12 months during the five years prior to their nomination to
the Board. See "Restrictions on Acquisition of the Holding Company -- Provisions
of the Holding Company's Articles and Bylaws."
The executive officers of the Holding Company are identified below.
Name Position with Holding Company
Fred W. Carter Chairman of the Board, President
and Chief Executive Officer
Stephen D. Davis Treasurer
Cindy S. Chambers Secretary
MANAGEMENT OF CITIZENS SAVINGS BANK OF FRANKFORT
Directors of Citizens
Our Board of Directors currently consists of five persons with an
additional two persons who serve as advisory directors. Advisory directors
receive directors' fees for Board meetings they attend, but do not vote on
matters presented to the Board. Each director holds office for a term of three
years, and one-third of the Board is elected at each annual meeting of our
members.
Our Board of Directors met 13 times during the fiscal year ended June
30, 1996. No director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and the Board's sole committee in the past 12
months.
Listed below are the current directors of Citizens:
Director of Position
Citizens Expiration with
Director Since of Term Citizens
Robert F. Ayres 1979 1999 Director
Fred W. Carter 1960-1966; 1997 Director, President and
1971 to Present Chief Executive Officer
Perry W. Lewis 1975 1998 Director
John J. Miller 1995 1998 Director
Billy J. Wray 1992 1999 Director
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<PAGE>
Presented below is certain information concerning the directors of Citizens:
Robert F. Ayres (age 72) served as Superintendent of Community Schools
of Frankfort from 1965 until his retirement in 1989. He previously served as a
high school principal, teacher and coach at Frankfort Senior High School, in
Frankfort.
Fred W. Carter (age 65) has served as President and Chief Executive
Officer of Citizens and CLSC since 1972, and has been an employee of Citizens
since 1966. Mr. Carter is the father of Cindy S. Chambers, Citizens' Secretary
and Customer Service Manager.
Perry W. Lewis (age 75) has served as the Chairman of Lewis Ford Sales,
Inc. in Frankfort since 1984.
John J. Miller (age 57) has served as President of Goodwin Funeral
Home, Inc. in Frankfort since 1979.
Billy J. Wray (age 65) is part owner of Premium Auto Center, Inc. (a
used-car dealership), in Lebanon, Indiana. He also owns interests in various
real estate developments around Frankfort.
We also have an advisory director program pursuant to which our former
directors may continue to serve as advisors to the Board of Directors upon their
retirement or resignation from the Board. Currently, Ralph C. Hinshaw and Rawl
V. Ransom serve as advisory directors. Mr. Hinshaw and Mr. Ransom receive $500
for each meeting that they attend. They receive no fees for meetings they do not
attend. See "Executive Compensation and Related Transactions of Citizens --
Compensation of Directors."
Executive Officers of Citizens Who Are Not Directors
Presented below is certain information regarding our executive officers
who are not directors:
Name Position
Cindy S. Chambers Secretary, Customer Service Manager
Stephen D. Davis Controller
Ralph C. Peterson, II Senior Loan Officer
Cindy S. Chambers (age 42) has served as Citizens' Corporate Secretary
since 1988 and as our Customer Service Manager since 1982. She is the daughter
of Fred W. Carter, Citizens' President and Chief Executive Officer.
Stephen D. Davis (age 40) has served as our Controller since 1989.
Ralph C. Peterson, II (age 49) has served as our Senior Loan Officer
since 1989.
Committees of the Boards of Directors of Citizens and the Holding Company
The Commercial Loan Committee is the only committee of our Board of
Directors and is comprised of Perry W. Lewis, Billy J. Wray and Fred W. Carter.
It meets on an as-needed basis to review and approve all commercial and large
multi-family loans.
<PAGE>
EXECUTIVE COMPENSATION AND RELATED TRANSACTIONS OF CITIZENS
Remuneration of Named Executive Officer
The following table sets forth information as to annual, long-term and
other compensation for services in all capacities to our President and Chief
Executive Officer for the fiscal year ended June 30, 1996. Other than Mr.
Carter, we had no other executive officers who earned over $100,000 in salary
and bonuses during that fiscal year.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Name and Principal Fiscal Other Annual All Other
Position Year Salary Bonus Compensation (4) Compensation
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fred Carter, President and 1996 $91,200 (1) $35,667 (2) -- $120 (3)
Chief Executive Officer
</TABLE>
(1) Includes $5,200 in fees received for service on Citizens Board of
Directors. Mr. Carter's annual salary has been increased to $95,000
effective January 1, 1997.
(2) For calendar year 1995, Mr. Carter received a bonus equal to 10% of the
profits of Citizens in excess of $426,000, after deducting certain
expenses incurred by Citizens. Beginning with calendar year 1996, Mr.
Carter receives a bonus equal to 10% of the profits of Citizens in
excess of $626,000 after deducting certain expenses incurred by
Citizens.
(3) This column includes amounts paid by Citizens for insurance premiums
with respect to a $10,000 term life insurance policy for the benefit of
Mr. Carter.
(4) Mr. Carter received certain perquisites, but the incremental cost of
providing such perquisites did not exceed the lesser of $50,000 or 10%
of his salary and bonus.
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<PAGE>
Employment Contract
We have entered into a three-year employment contract with Mr. Carter.
The contract with Mr. Carter, effective as of the effective date of the
Conversion, extends annually for an additional one-year term to maintain its
three-year term if our Board of Directors determines to so extend it, unless
notice not to extend is properly given by either party to the contract. Mr.
Carter receives an initial salary under the contract equal to his current salary
subject to increases approved by the Board of Directors. The contract also
provides, among other things, for participation in other fringe benefits and
benefit plans available to our employees. Mr. Carter may terminate his
employment upon 60 days' written notice to us. We may discharge Mr. Carter for
cause (as defined in the contract) at any time or in certain specified events.
If we terminate Mr. Carter's employment for other than cause or if Mr. Carter
terminates his own employment for cause (as defined in the contract), Mr. Carter
will receive his base compensation under the contract for an additional three
years if the termination follows a change of control in the Holding Company, and
for the balance of the contract if the termination does not follow a change in
control. In addition, during such period, Mr. Carter will continue to
participate in our group insurance plans and retirement plans, or receive
comparable benefits. Moreover, within a period of three months after such
termination following a change of control, Mr. Carter will have the right to
cause us to purchase any stock options he holds for a price equal to the fair
market value (as defined in the contract) of the shares subject to such options
minus their option price. If the payments provided for in the contract, together
with any other payments made to Mr. Carter by us, are deemed to be payments in
violation of the "golden parachute" rules of the Code, such payments will be
reduced to the largest amount which would not cause us to lose a tax deduction
for such payments under those rules. As of the date hereof, the cash
compensation which would be paid under the contract to Mr. Carter if the
contract were terminated either after a change of control of the Holding
Company, without cause by us, or for cause by Mr. Carter, would be $285,000. For
purposes of this employment contract, a change of control of the Holding Company
is generally an acquisition of control, as defined in regulations issued under
the Change in Bank Control Act and the Savings and Loan Holding Company Act.
The employment contract protects our confidential business information
and protects us from competition by Mr. Carter should he voluntarily terminate
his employment without cause or be terminated by us for cause.
Compensation of Directors
We pay our directors a monthly retainer of $300 plus $200 for each
month in which they attend one or more meetings. Rawl V. Ransom and Ralph C.
Hinshaw receive $500 per monthly meeting attended as advisory directors. Total
fees paid to our directors and advisory directors for the year ended June 30,
1996 were approximately $35,000.
Our directors and advisory directors may, pursuant to a deferred
compensation agreement, defer payment of some or all of their directors fees
into a retirement account. Under this agreement, deferred directors fees are to
be paid to a director beginning upon the first day of the month following the
director's seventieth (70th) birthday, and continuing in equal installments over
a 180-month period. A director may also receive his benefits in a lump sum in
the event of financial hardship. The agreement also provides for death and
disability benefits. At present, Mr. Carter is the only director who has
executed a deferred compensation agreement with Citizens.
Directors of the Holding Company and CLSC are not currently paid
directors' fees. The Holding Company may, if it believes it is necessary to
attract qualified directors or is otherwise beneficial to the Holding Company,
adopt a policy of paying directors' fees.
Benefits
Insurance Plans. Our officers and employees are covered by a
non-contributory disability and hospital insurance plan, and by a
non-contributory life insurance policy which pays benefits in the amount of 50
percent of salary in the event of the officer's or employee's death. This
coverage is provided pursuant to group plans sponsored by the Indiana League of
Savings Institutions Group Insurance Trust. We also provide hospitalization
coverage for Mr. Carter's family in addition to the coverage described above,
and have obtained a Supplemental Term Life Policy for Mr. Carter which provides
$10,000 in additional life insurance coverage.
Pension Plan. Our full-time employees are included in the Pension Plan.
Separate actuarial valuations are not made for individual employer members of
the Pension Plan. Our employees are eligible to participate in the plan once
they have attained the age of 21 and completed one year and at least 1,000 hours
of service for us. An employee's pension benefits are 100% vested after six
years of service.
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<PAGE>
The Pension Plan provides for monthly or lump sum retirement benefits
determined as a percentage of the employee's average salary (for the employee's
highest five consecutive years of salary) times his years of service. Salary
includes base annual salary as of each January 1, exclusive of overtime,
bonuses, fees and other special payments. Early retirement, disability, and
death benefits are also payable under the Pension Plan, depending upon the
participant's age and years of service. We expensed approximately $1,300 for the
Pension Plan during the fiscal year ended June 30, 1996.
The estimated base annual retirement benefits presented on a
straight-line basis payable at normal retirement age (65) under the Pension Plan
to persons in specified salary and years of service classifications are as
follows (benefits noted in the table are not subject to any offset).
<TABLE>
<CAPTION>
Years of Service
Highest 5-Year
Average
Compensation 15 20 25 30 35 40 45
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 40,000 $ 9,000 $12,000 $15,000 $18,000 $ 21,000 $ 24,000 $ 27,000
$ 60,000 $13,500 $18,000 $22,500 $27,000 $ 31,500 $ 36,000 $ 40,500
$ 80,000 $18,000 $24,000 $30,000 $36,000 $ 42,000 $ 48,000 $ 54,000
$100,000 $22,500 $30,000 $37,500 $45,000 $ 52,500 $ 60,000 $ 67,500
$120,000 $27,000 $36,000 $45,000 $54,000 $ 63,000 $ 72,000 $ 81,000
</TABLE>
Benefits are currently subject to maximum Code limitations of $120,000
per year. The years of service credited to Mr. Carter under the Pension Plan as
of December 31, 1996 were 30.
Executive Supplemental Retirement Agreement. We have also entered into
non-qualified Executive Supplemental Retirement Agreements with Fred W. Carter,
Stephen D. Davis and Cindy S. Chambers. Under these agreements, we have agreed
to pay benefits to the named executives, in addition to the benefits payable
under the Pension Plan, in an amount based upon 80% of the officer's highest
base compensation earned for any 12-month period prior to the officer's normal
retirement date, less any payments received by the officer from the Pension Plan
during any year. Benefits payable to Mr. Carter under his Supplemental
Retirement Agreement are to be based upon 80% of the highest base salary, plus
bonuses, paid to him by us for any 12-month period prior to his normal
retirement date.
We have purchased a universal insurance policy on the covered
individuals under which we paid a one-time premium and will receive an income
stream that we will use to fund these Supplemental Retirement Plans. The
insurance policy and the proceeds thereof will be assigned to a "rabbi trust"
that we will establish to secure the payment of benefits due to the covered
employees under the Supplemental Retirement Plans. Under this arrangement, the
assets of the rabbi trust will be irrevocably set aside and generally may be
used only for payment of benefits under the Supplemental Retirement Plans. The
only exception is that the assets of the rabbi trust must be used to satisfy
claims of the Holding Company's general creditors if the Holding Company were to
become insolvent. Under applicable Internal Revenue Service letter rulings, the
Supplemental Retirement Plans would not be deemed to be "funded" by the creation
of the rabbi trust and, thus, the covered individuals should not recognize as
taxable income any contributions to, or earnings of, the rabbi trust. Instead,
the covered individuals will be taxed on the actual receipt of amounts paid from
the rabbi trust. In addition, the rabbi trust should not cause the Supplemental
Retirement Plans to be treated as funded under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); therefore, as long as the
Supplemental Retirement Plans otherwise satisfy the requirements for "top hat
plans" under ERISA, they will be eligible for certain exemptions from the ERISA
reporting and disclosure requirements. __________________________________ will
act as trustee of the rabbi trust.
<PAGE>
Transactions With Certain Related Persons
We have followed a policy of offering to our directors, officers, and
employees real estate mortgage loans secured by their principal residence as
well as other loans. All of our loans to our directors, officers and employees
are made on substantially the same terms, including interest rates and
collateral as those prevailing at the time for comparable transactions, and do
not involve more than minimal risk of collectibility. Loans to directors,
executive officers and their associates totaled approximately $2.2 million, or
approximately 40% of consolidated retained earnings at March 31, 1997. This
amount includes two loans to our directors Billy J. Wray and John J. Miller,
neither of whom were directors or employees of Citizens when we originated the
loans. The first loan, in the original principal amount of approximately $1.5
million, was originated in October, 1991 to both Mr. Wray and Mr. Miller and is
secured by the 48-unit Clinton Estates apartment complex located in Frankfort.
We sold a $542,000 nonrecourse participation in this loan to reduce the loan
balance to within our lending limit. At March 31, 1997, this loan was current
with a balance of approximately $1,343,000, of which approximately $841,000 was
owed to us. The second loan, dated February, 1994, was a construction line of
credit in the original amount of $620,000 to Mr. Miller, secured by eight
condominiums and other real estate located in Tipton, Indiana. At March 31,
1997, this loan was also current with a balance of approximately $395,000. We
are not obligated to advance additional funds pursuant to this line of credit.
In our management's opinion, these loans are adequately collateralized.
-64-
<PAGE>
Current law authorizes us to make loans or extensions of credit to our
executive officers, directors, and principal shareholders on the same terms that
are available with respect to loans made to all of our employees. At present,
our loans to executive officers, directors, principal shareholders and employees
are made on the same terms generally available to the public. We may in the
future, however, adopt a program under which we may waive loan application fees
and closing costs with respect to loans made to such persons. Loans made to a
director or executive officer in excess of the greater of $25,000 or 5% of our
capital and surplus (up to a maximum of $500,000) must be approved in advance by
a majority of the disinterested members of the Board of Directors. Our policy
regarding loans to directors and all employees meets the requirements of current
law.
Employee Stock Ownership Plan and Trust
The Holding Company has established for our eligible employees an ESOP
effective July 1, 1997, subject to our conversion to stock form. Employees with
at least one year of employment with us and who have attained age 21 are
eligible to participate. As part of the Conversion, the ESOP intends to borrow
funds from the Holding Company and use those funds to purchase a number of
shares equal to 8% of the Common Stock to be issued in the Conversion.
Collateral for the loan will be the Common Stock purchased by the ESOP. The loan
will be repaid principally from our discretionary contributions to the ESOP over
a period of ten years. It is anticipated that the initial interest rate for the
loan will be approximately ____%. Shares purchased by the ESOP will be held in a
suspense account for allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense
accounts in an amount proportional to the repayment of the ESOP loan will be
allocated among ESOP participants on the basis of compensation in the year of
allocation. Participants in the ESOP will receive credit for service prior to
the effective date of the ESOP. Benefits generally become 100% vested after five
years of credited service. Prior to the completion of five years of credited
service, a participant who terminates employment for reasons other than death,
retirement, or disability will not receive any benefits under the ESOP.
Forfeitures will be reallocated among remaining participating employees upon the
earlier of the forfeiting participant's death or after the expiration of at
least three years from the date on which such participant's employment was
terminated. Benefits will be payable in the form of Common Stock or cash for
fractional shares upon death, retirement, early retirement, disability or
separation from service. Our contributions to the ESOP are not fixed, so
benefits payable under the ESOP cannot be estimated. In November 1993, the
American Institute of Certified Public Accountants (the "AICPA") issued
Statement of Position ("SOP") 93-6, which requires us to record compensation
expense in an amount equal to the fair market value of the shares released from
the suspense account.
In connection with the establishment of the ESOP, the Holding Company
will establish a committee of our employees to administer the ESOP.
______________ will serve as corporate trustee of the ESOP. The ESOP committee
may instruct the trustee regarding investment of funds contributed to the ESOP.
The ESOP trustee, subject to its fiduciary duty, must vote all allocated shares
held in the ESOP in accordance with the instructions of participating employees.
Under the ESOP, nondirected shares, and shares held in the suspense account,
will be voted in a manner calculated to most accurately reflect the instructions
it has received from participants regarding the allocated stock so long as such
vote is in accordance with the provisions of ERISA.
Stock Option Plan
At a meeting of the Holding Company's shareholders to be held at least
six months after the completion of the Conversion, the Board of Directors
intends to submit for shareholder approval the Stock Option Plan for directors
and officers of Citizens and of the Holding Company. If approved by the
shareholders, Common Stock in an aggregate amount equal to 10.0% of the shares
issued in the Conversion would be reserved for issuance by the Holding Company
upon the exercise of the stock options granted under the Stock Option Plan.
Assuming the issuance of 800,000 shares in the Conversion, an aggregate of
80,000 shares would be reserved for issuance under the Stock Option Plan. No
options would be granted under the Stock Option Plan until the date on which
shareholder approval is received. At that time, it is anticipated that options
for the following number of shares will be granted to the following directors,
executive officers and employees of Citizens and the Holding Company:
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<PAGE>
Percentage of Shares
Optionee Issued in Conversion
Fred W. Carter................................... 2.50%
Other Executive Officers as a group ............. 2.25
Directors ....................................... 3.00
Total........................................ 7.75%
It is anticipated that these options would be granted for terms of 10
years (in the case of incentive options) or 10 years and one day (in the case of
non-qualified options), and at an option price per share equal to the fair
market value of the shares on the date of grant of the stock options. If the
Stock Option Plan is adopted within one year following the Conversion, options
will become exercisable at a rate of 20% at the end of each twelve (12) months
of service with us after the date of grant, subject to early vesting in the
event of death or disability. Options granted under the Stock Option Plan are
adjusted for capital changes such as stock splits and stock dividends. Unless
the Holding Company decides to call an earlier special meeting of shareholders,
the date of grant of these options is expected to be the date of the Holding
Company's annual meeting of shareholders to be held at least six months after
the Conversion.
The Stock Option Plan would be administered by a Committee of
non-employee members of the Holding Company's Board of Directors. Options
granted under the Stock Option Plan to employees could be "incentive" stock
options designed to result in a beneficial tax treatment to the employee but no
tax deduction to the Holding Company. Non-qualified stock options could also be
granted under the Stock Option Plan, and will be granted to the non-employee
directors listed in the chart above. In the event an option recipient terminated
his or her employment or service as a director, the options would terminate
during certain specified periods.
RRP
At a meeting of the Holding Company's shareholders to be held at least
six months after the completion of the Conversion, the Board of Directors also
intends to submit the RRP for shareholder approval. The RRP will provide our
directors and officers with an ownership interest in the Holding Company in a
manner designed to encourage them to continue their service with us. Citizens
will contribute funds to the RRP from time to time to enable it to acquire an
aggregate amount of Common Stock equal to up to 4% of the shares of Common Stock
issued in the Conversion, either directly from the Holding Company or on the
open market. Four percent of the shares issued in the Conversion would amount to
27,000 shares, 32,000 shares, 36,800 or 42,320 shares at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively. In the event that additional authorized but unissued shares would
be acquired by the RRP after the Conversion, the interests of existing
shareholders would be diluted. If the RRP is adopted, our officers and directors
will be awarded Stock under the RRP without having to pay cash for the shares.
No awards under the RRP would be made until the date the RRP is
approved by the Holding Company's shareholders. At that time, it is anticipated
that awards of the following number of shares would be made to the following
directors and executive officers of the Holding Company and Citizens:
Percentage of Shares
Recipient of Issued in Conversion to be
Awards Awarded Under RRP
Fred W. Carter...................................... 1.0%
Other Executive Officers as a group ................ 0.9
Directors........................................... 1.2
Total........................................... 3.1%
Awards would be nontransferable and nonassignable, and during the
lifetime of the recipient could only be earned by and made to him or her. If the
RRP is adopted within one year following the Conversion, the shares which are
subject to an award would vest and be earned by the recipient at a rate of 20%
of the shares awarded at the end of each full twelve (12) months of service with
us after the date of grant of the award. Awards are adjusted for capital changes
such as stock dividends and stock splits. Notwithstanding the foregoing, awards
would be 100% vested upon termination of employment or service due to death or
disability. If employment or service were to terminate for other reasons, the
grantee's nonvested awards will be forfeited. If employment or service is
terminated for cause (as would be defined in the RRP), or if conduct would have
justified termination or removal for cause, shares not already delivered under
the RRP, whether or not vested, could be forfeited by resolution of the Board of
Directors of the Holding Company.
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When shares become vested and could actually be distributed in
accordance with the RRP, the participants would also receive amounts equal to
accrued dividends and other earnings or distributions payable with respect
thereto. When shares become vested under the RRP, the participant will recognize
income equal to the fair market value of the Common Stock earned, determined as
of the date of vesting, unless the recipient makes an election under ss. 83(b)
of the Code to be taxed earlier. The amount of income recognized by the
participant would be a deductible expense for tax purposes for the Holding
Company. Shares not yet vested under the RRP will be voted by the Trustee of the
RRP, taking into account the best interests of the recipients of the RRP awards.
REGULATION
General
As a federally chartered, SAIF-insured savings association, we are
subject to extensive regulation by the OTS and the FDIC. For example, we must
obtain OTS approval before we may engage in certain activities and must file
reports with the OTS regarding our activities and financial condition. The OTS
periodically examines our books and records and, in conjunction with the FDIC in
certain situations, has examination and enforcement powers. This supervision and
regulation are intended primarily for the protection of depositors and federal
deposit insurance funds. Our semi- annual assessment owed to the OTS, which is
based upon a specified percentage of assets, is approximately $7,800.
We are also subject to federal and state regulation as to such matters
as loans to officers, directors, or principal shareholders, required reserves,
limitations as to the nature and amount of our loans and investments, regulatory
approval of any merger or consolidation, issuance or retirements of our
securities, and limitations upon other aspects of banking operations. In
addition, our activities and operations are subject to a number of additional
detailed, complex and sometimes overlapping federal and state laws and
regulations. These include state usury and consumer credit laws, state laws
relating to fiduciaries, the Federal Truth-In-Lending Act and Regulation Z, the
Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting
Act, the Community Reinvestment Act, anti-redlining legislation and antitrust
laws.
The United States Congress is considering legislation that would
require all federal savings associations, such as Citizens, to either convert to
a national bank or a state-chartered bank by a specified date to be determined.
In addition, under the legislation, the Holding Company likely would not be
regulated as a savings and loan holding company but rather as a bank holding
company. This proposed legislation would abolish the OTS and transfer its
functions among the other federal banking regulators. Certain aspects of the
legislation remain to be resolved and, therefore, no assurance can be given as
to whether or in what form the legislation will be enacted or its effect on the
Holding Company and Citizens. Savings and Loan Holding Company Regulation
As the holding company for Citizens, the Holding Company will be
regulated as a "non-diversified savings and loan holding company" within the
meaning of the Home Owners' Loan Act of 1933, as amended ("HOLA"), and subject
to regulatory oversight of the Director of the OTS. As such, the Holding Company
is registered with the OTS and thereby subject to OTS regulations, examinations,
supervision and reporting requirements. As a subsidiary of a savings and loan
holding company, we are subject to certain restrictions in our dealings with the
Holding Company and with other companies affiliated with the Holding Company.
In general, the HOLA prohibits a savings and loan holding company,
without prior approval of the Director of the OTS, from acquiring control of
another savings association or savings and loan holding company or retaining
more than 5% of the voting shares of a savings association or of another holding
company which is not a subsidiary. The HOLA also restricts the ability of a
director or officer of the Holding Company, or any person who owns more than 25%
of the Holding Company's stock, from acquiring control of another savings
association or savings and loan holding company without obtaining the prior
approval of the Director of the OTS.
The Holding Company's Board of Directors presently intends to operate
the Holding Company as a unitary savings and loan holding company. There are
generally no restrictions on the permissible business activities of a unitary
savings and loan holding company.
Notwithstanding the above rules as to permissible business activities
of unitary savings and loan holding companies, if the savings association
subsidiary of such a holding company fails to meet the Qualified Thrift Lender
("QTL") test, then such unitary holding company would become subject to the
activities restrictions applicable to multiple holding companies. (Additional
restrictions on securing advances from the FHLB also apply.) See "--Qualified
Thrift Lender." At March 31, 1997, our asset composition was in excess of that
required to qualify us as a Qualified Thrift Lender.
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If the Holding Company were to acquire control of another savings
association other than through a merger or other business combination with
Citizens, the Holding Company would thereupon become a multiple savings and loan
holding company. Except where such acquisition is pursuant to the authority to
approve emergency thrift acquisitions and where each subsidiary savings
association meets the QTL test, the activities of the Holding Company and any of
its subsidiaries (other than Citizens or other subsidiary savings associations)
would thereafter be subject to further restrictions. The HOLA provides that,
among other things, no multiple savings and loan holding company or subsidiary
thereof which is not a savings association shall commence or continue for a
limited period of time after becoming a multiple savings and loan holding
company or subsidiary thereof, any business activity other than (i) furnishing
or performing management services for a subsidiary savings association, (ii)
conducting an insurance agency or escrow business, (iii) holding, managing, or
liquidating assets owned by or acquired from a subsidiary savings association,
(iv) holding or managing properties used or occupied by a subsidiary savings
associations, (v) acting as trustee under deeds of trust, (vi) those activities
previously directly authorized by the FSLIC by regulation as of March 5, 1987,
to be engaged in by multiple holding companies, or (vii) those activities
authorized by the Federal Reserve Board (the "FRB") as permissible for bank
holding companies, unless the Director of the OTS by regulation prohibits or
limits such activities for savings and loan holding companies. Those activities
described in (vii) above must also be approved by the Director of the OTS before
a multiple holding company may engage in such activities.
The Director of the OTS may also approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
associations in more than one state, if the multiple savings and loan holding
company involved controls a savings association which operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the laws of the state in which the association to be acquired is located
specifically permit associations to be acquired by state-chartered associations
or savings and loan holding companies located in the state where the acquiring
entity is located (or by a holding company that controls such state-chartered
savings associations). Also, the Director of the OTS may approve an acquisition
resulting in a multiple savings and loan holding company controlling savings
associations in more than one state in the case of certain emergency thrift
acquisitions.
Indiana law permits federal and state savings association holding
companies with their home offices located outside of Indiana to acquire savings
associations whose home offices are located in Indiana and savings association
holding companies with their principal place of business in Indiana ("Indiana
Savings Association Holding Companies") upon receipt of approval by the Indiana
Department of Financial Institutions. Moreover, Indiana Savings Association
Holding Companies may acquire savings associations with their home offices
located outside of Indiana and savings association holding companies with their
principal place of business located outside of Indiana upon receipt of approval
by the Indiana Department of Financial Institutions.
No subsidiary savings association of a savings and loan holding company
may declare or pay a dividend on its permanent or nonwithdrawable stock unless
it first gives the Director of the OTS 30 days advance notice of such
declaration and payment. Any dividend declared during such period or without
giving notice shall be invalid.
Federal Home Loan Bank System
We are a member of the FHLB of Indianapolis, which is one of twelve
regional FHLBs. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from funds deposited by
savings associations and proceeds derived from the sale of consolidated
obligations of the FHLB system. It makes loans to members (i.e., advances) in
accordance with policies and procedures established by the Board of Directors of
the FHLB. All FHLB advances must be fully secured by sufficient collateral as
determined by the FHLB. The Federal Housing Finance Board ("FHFB"), an
independent agency, controls the FHLB System, including the FHLB of
Indianapolis.
As a member, we are required to purchase and maintain stock in the FHLB
of Indianapolis in an amount equal to at least 1% of our aggregate unpaid
residential mortgage loans, home purchase contracts, or similar obligations at
the beginning of each year. At March 31, 1997, our investment in stock of the
FHLB of Indianapolis was $332,000. The FHLB imposes various limitations on
advances such as limiting the amount of certain types of real estate-related
collateral to 30% of a member's capital and limiting total advances to a member.
Interest rates charged for advances vary depending upon maturity, the cost of
funds to the FHLB of Indianapolis and the purpose of the borrowing.
The FHLBs are required to provide funds for the resolution of troubled
savings associations and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of FHLB dividends paid and could continue to do so
in the future. For the fiscal year ended June 30, 1996, dividends paid by the
FHLB of Indianapolis to us totaled approximately $26,000, for an annual rate of
7.9%.
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Insurance of Deposits
Deposit Insurance. The FDIC is an independent federal agency that
insures the deposits, up to prescribed statutory limits, of banks and thrifts
and safeguards the safety and soundness of the banking and thrift industries.
The FDIC administers two separate insurance funds, the Bank Insurance Fund (the
"BIF") for commercial banks and state savings banks and the SAIF for savings
associations such as Citizens and banks that have acquired deposits from savings
associations. The FDIC is required to maintain designated levels of reserves in
each fund. As of September 30, 1996, the reserves of the SAIF were below the
level required by law, primarily because a significant portion of the
assessments paid into the SAIF have been used to pay the cost of prior thrift
failures, while the reserves of the BIF met the level required by law in May,
1995. However, on September 30, 1996, provisions designed to recapitalize the
SAIF and eliminate the premium disparity between the BIF and SAIF were signed
into law. See "-- Assessments" below.
Assessments. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and members of the
SAIF. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to the target level
within a reasonable time and may decrease these rates if the target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments vary depending on the risk the
institution poses to its deposit insurance fund. An institution's risk level is
determined based on its capital level and the FDIC's level of supervisory
concern about the institution.
On September 30, 1996, President Clinton signed into law legislation
which included provisions designed to recapitalize the SAIF and eliminate the
significant premium disparity between the BIF and the SAIF. Under the new law,
we were charged a one-time special assessment equal to $.657 per $100 in
assessable deposits at March 31, 1995. We recognized this one-time assessment as
a non-recurring operating expense of $211,000 ($127,000 after tax) during the
three-month period ending September 30, 1996, and we paid this assessment on
November 27, 1996. The assessment was fully deductible for both federal and
state income tax purposes. Beginning January 1, 1997, our annual deposit
insurance premium was reduced from .23% to .0644% of total assessable deposits.
BIF institutions pay lower assessments than comparable SAIF institutions because
BIF institutions pay only 20% of the rate being paid by SAIF institutions on
their deposits with respect to obligations issued by the federally-chartered
corporation which provided some of the financing to resolve the thrift crisis in
the 1980's ("FICO"). The 1996 law also provides for the merger of the SAIF and
the BIF by 1999, but not until such time as bank and thrift charters are
combined. Until the charters are combined, savings associations with SAIF
deposits may not transfer deposits into the BIF system without paying various
exit and entrance fees, and SAIF institutions will continue to pay higher FICO
assessments. Such exit and entrance fees need not be paid if a SAIF institution
converts to a bank charter or merges with a bank, as long as the resulting bank
continues to pay applicable insurance assessments to the SAIF, and as long as
certain other conditions are met.
Savings Association Regulatory Capital
Currently, savings associations are subject to three separate minimum
capital-to-assets requirements: (i) a leverage limit, (ii) a tangible capital
requirement, and (iii) a risk-based capital requirement. The leverage limit
requires that savings associations maintain "core capital" of at least 3% of
total assets. Core capital is generally defined as common shareholders' equity
(including retained income), noncumulative perpetual preferred stock and related
surplus, certain minority equity interests in subsidiaries, qualifying
supervisory goodwill, purchased mortgage servicing rights and purchased credit
card relationships (subject to certain limits) less nonqualifying intangibles.
Under the tangible capital requirement, a savings association must maintain
tangible capital (core capital less all intangible assets except purchased
mortgage servicing rights which may be included after making the above-noted
adjustment in an amount up to 100% of tangible capital) of at least 1.5% of
total assets. Under the risk-based capital requirements, a minimum amount of
capital must be maintained by a savings association to account for the relative
risks inherent in the type and amount of assets held by the savings association.
The risk-based capital requirement requires a savings association to maintain
capital (defined generally for these purposes as core capital plus general
valuation allowances and permanent or maturing capital instruments such as
preferred stock and subordinated debt less assets required to be deducted) equal
to 8.0% of risk-weighted assets. Assets are ranked as to risk in one of four
categories (0-100%). A credit risk-free asset, such as cash, requires no
risk-based capital, while an asset with a significant credit risk, such as a
non-accrual loan, requires a risk factor of 100%. At March 31, 1997, we were in
compliance with all capital requirements imposed by law.
The OTS has promulgated a rule which sets forth the methodology for
calculating an interest rate risk component to be used by savings associations
in calculating regulatory capital. The OTS has delayed the implementation of
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this rule, however. The rule requires savings associations with "above normal"
interest rate risk (institutions whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move in
interest rates) to maintain additional capital for interest rate risk under the
risk-based capital framework. If the OTS were to implement this regulation, we
would be exempt from its provisions because we have less than $300 million in
assets and our risk-based capital ratio exceeds 12%. We nevertheless measure our
interest rate risk in conformity with the OTS regulation and, as of March 31,
1997, our interest rate risk was slightly outside the parameters set forth in
the regulation. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Citizens Savings Bank of Frankfort --
Asset/Liability Management."
If an association is not in compliance with the capital requirements,
the OTS is required to prohibit asset growth and to impose a capital directive
that may restrict, among other things, the payment of dividends and officers'
compensation. In addition, the OTS and the FDIC generally are authorized to take
enforcement actions against a savings association that fails to meet its capital
requirements. These actions may include restricting the operations activities of
the association, imposing a capital directive, cease and desist order, or civil
money penalties, or imposing harsher measures such as appointing a receiver or
conservator or forcing the association to merge into another institution.
Prompt Corrective Regulatory Action
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FedICIA") requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to institutions that do
not meet minimum capital requirements. For these purposes, FedICIA establishes
five capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. At March 31,
1997, we were categorized as "well capitalized," meaning that our total
risk-based capital ratio exceeded 10%, our Tier I risk-based capital ratio
exceeded 6%, our leverage ratio exceeded 5%, and we were not subject to a
regulatory order, agreement or directive to meet and maintain a specific capital
level for any capital measure.
The FDIC may order savings associations which have insufficient capital
to take corrective actions. For example, a savings association which is
categorized as "undercapitalized" would be subject to growth limitations and
would be required to submit a capital restoration plan, and a holding company
that controls such a savings association would be required to guarantee that the
savings association complies with the restoration plan. "Significantly
undercapitalized" savings associations would be subject to additional
restrictions. Savings associations deemed by the FDIC to be "critically
undercapitalized" would be subject to the appointment of a receiver or
conservator.
Dividend Limitations
An OTS regulation imposes limitations upon all "capital distributions"
by savings associations, including cash dividends, payments by an association to
repurchase or otherwise acquire its shares, payments to shareholders of another
institution in a cash-out merger and other distributions charged against
capital. The regulation establishes a three-tiered system of regulation, with
the greatest flexibility being afforded to well-capitalized associations. A
savings association which has total capital (immediately prior to and after
giving effect to the capital distribution) that is at least equal to its fully
phased-in capital requirements would be a Tier 1 institution ("Tier 1
Institution"). An association that has total capital at least equal to its
minimum capital requirements, but less than its capital requirements, would be a
Tier 2 institution ("Tier 2 Institution"). An institution having total capital
that is less than its minimum capital requirements would be a Tier 3 institution
("Tier 3 Institution"). However, an institution which otherwise qualifies as a
Tier 1 Institution may be designated by the OTS as a Tier 2 or Tier 3
Institution if the OTS determines that the institution is "in need of more than
normal supervision." We are currently a Tier 1 Institution.
A Tier 1 Institution may, after prior notice but without the approval
of the OTS, make capital distributions during a calendar year up to the greater
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" at the beginning of
the calendar year (the smallest excess over its capital requirements), or (b)
75% of its net income over the most recent four-quarter period. Any additional
amount of capital distributions would require prior regulatory approval.
Accordingly, at March 31, 1997, we had available approximately $1,362,000 for
distribution, without consideration of any capital infusion from the Conversion.
The OTS has proposed revisions to these regulations which would permit
savings associations to declare dividends in amounts which would assure that
they remain adequately capitalized following the dividend declaration. Savings
associations in a holding company system which are rated Camel 1 or 2 and which
are not in troubled condition would need to file a prior notice with the OTS
concerning such dividend declaration.
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Pursuant to the Plan of Conversion, we will establish a liquidation
account for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders. See "The Conversion -- Principal Effects of Conversion." We
will not be permitted to pay dividends to the Holding Company if our net worth
would be reduced below the amount required for the liquidation account. We must
also must file a notice with the OTS 30 days before declaring a dividend to the
Holding Company.
Limitations on Repurchase of Common Stock of Holding Company
OTS regulations currently prohibit the Holding Company from
repurchasing any of its shares within one year of the Conversion. So long as we
continue to meet certain capitalization requirements, the Holding Company may
repurchase shares in an open-market repurchase program (which cannot exceed 5%
of its outstanding shares in a twelve-month period) during the second and third
years following the Conversion by giving appropriate prior notice to the OTS.
The OTS has the authority to waive these restrictions under certain
circumstances. Unless repurchases are permitted under the foregoing regulations,
the Holding Company may not, for a period of three years from the date of the
Conversion, repurchase any of its capital stock from any person, except in the
event of an offer to purchase by the Holding Company on a pro rata basis from
all of its shareholders which is approved in advance by the OTS or except in
exceptional circumstances established to the satisfaction of the OTS.
Under Indiana law, the Holding Company will be precluded from
repurchasing its equity securities if, after giving effect to such repurchase,
the Holding Company would be unable to pay its debts as they become due or the
Holding Company's assets would be less than its liabilities and obligations to
preferred shareholders.
Limitations on Rates Paid for Deposits
Regulations promulgated by the FDIC pursuant to FedICIA place
limitations on the ability of insured depository institutions to accept, renew
or roll over deposits by offering rates of interest which are significantly
higher than the prevailing rates of interest on deposits offered by other
insured depository institutions having the same type of charter in the
institution's normal market area. Under these regulations, "well-capitalized"
depository institutions may accept, renew or roll such deposits over without
restriction, "adequately capitalized" depository institutions may accept, renew
or roll such deposits over with a waiver from the FDIC (subject to certain
restrictions on payments of rates) and "undercapitalized" depository
institutions may not accept, renew or roll such deposits over. The regulations
contemplate that the definitions of "well capitalized," "adequately capitalized"
and "undercapitalized" will be the same as the definition adopted by the
agencies to implement the corrective action provisions of FedICIA. We do not
believe that these regulations will have a materially adverse effect on our
current operations.
Safety and Soundness Standards
On February 2, 1995, the federal banking agencies adopted final safety
and soundness standards for all insured depository institutions. The standards,
which were issued in the form of guidelines rather than regulations, relate to
internal controls, information systems, internal audit systems, loan
underwriting and documentation, compensation and interest rate exposure. In
general, the standards are designed to assist the federal banking agencies in
identifying and addressing problems at insured depository institutions before
capital becomes impaired. If an institution fails to meet these standards, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan may result in enforcement
proceedings. The federal banking agencies have also published for comment
proposed asset quality and earning standards which, if adopted, would be added
to the safety and soundness guidelines.
Real Estate Lending Standards
OTS regulations require savings associations to establish and maintain
written internal real estate lending policies. Each association's lending
policies must be consistent with safe and sound banking practices and
appropriate to the size of the association and the nature and scope of its
operations. The policies must establish loan portfolio diversification
standards; establish prudent underwriting standards, including loan-to-value
limits, that are clear and measurable; establish loan administration procedures
for the association's real estate portfolio; and establish documentation,
approval, and reporting requirements to monitor compliance with the
association's real estate lending policies. The association's written real
estate lending policies must be reviewed and approved by the association's Board
of Directors at least annually. Further, each association is expected to monitor
conditions in its real estate market to ensure that its lending policies
continue to be appropriate for current market conditions.
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Loans to One Borrower
Under OTS regulations, we may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of our unimpaired capital
and surplus. Additional amounts may be lent, not in excess of 10% of unimpaired
capital and surplus, if such loans or extensions of credit are fully secured by
readily marketable collateral, including certain debt and equity securities but
not including real estate. In some cases, a savings association may lend up to
30 percent of unimpaired capital and surplus to one borrower for purposes of
developing domestic residential housing, provided that the association meets its
regulatory capital requirements and the OTS authorizes the association to use
this expanded lending authority. At March 31, 1997, we did not have any loans or
extensions of credit to a single or related group of borrowers in excess of our
lending limits. We do not believe that the loans-to-one-borrower limits will
have a significant impact on our business operations or earnings following the
Conversion.
Qualified Thrift Lender
Savings associations must meet a QTL test. If we maintain an
appropriate level of qualified thrift investments ("QTIs") (primarily
residential mortgages and related investments, including certain
mortgage-related securities) and otherwise qualify as a QTL, we will continue to
enjoy full borrowing privileges from the FHLB of Indianapolis. The required
percentage of QTIs is 65% of portfolio assets (defined as all assets minus
intangible assets, property used by the association in conducting its business
and liquid assets equal to 10% of total assets). Certain assets are subject to a
percentage limitation of 20% of portfolio assets. In addition, savings
associations may include shares of stock of the FHLBs, FNMA, and FHLMC as QTIs.
Compliance with the QTL test is determined on a monthly basis in nine out of
every twelve months. As of March 31, 1997, we were in compliance with our QTL
requirement, with approximately 88% of our assets invested in QTIs.
A savings association which fails to meet the QTL test must either
convert to a bank (but its deposit insurance assessments and payments will be
those of and paid to the SAIF) or be subject to the following penalties: (i) it
may not enter into any new activity except for those permissible for a national
bank and for a savings association; (ii) its branching activities shall be
limited to those of a national bank; (iii) it shall not be eligible for any new
FHLB advances; and (iv) it shall be bound by regulations applicable to national
banks respecting payment of dividends. Three years after failing the QTL test
the association must (i) dispose of any investment or activity not permissible
for a national bank and a savings association and (ii) repay all outstanding
FHLB advances. If such a savings association is controlled by a savings and loan
holding company, then such holding company must, within a prescribed time
period, become registered as a bank holding company and become subject to all
rules and regulations applicable to bank holding companies (including
restrictions as to the scope of permissible business activities). Acquisitions
or Dispositions and Branching
The Bank Holding Company Act specifically authorizes a bank holding
company, upon receipt of appropriate regulatory approvals, to acquire control of
any savings association or holding company thereof wherever located. Similarly,
a savings and loan holding company may acquire control of a bank. Moreover,
subject to the moratorium provisions concerning conversions of SAIF to BIF
members and vice versa, federal savings associations may acquire or be acquired
by any insured depository institution. Regulations promulgated by the FRB
restrict the branching authority of savings associations acquired by bank
holding companies. Savings associations acquired by bank holding companies may
be converted to banks if they continue to pay SAIF premiums, but as such they
become subject to branching and activity restrictions applicable to banks.
Subject to certain exceptions, commonly-controlled banks and savings
associations must reimburse the FDIC for any losses suffered in connection with
a failed bank or savings association affiliate. Institutions are commonly
controlled if one is owned by another or if both are owned by the same holding
company. Such claims by the FDIC under this provision are subordinate to claims
of depositors, secured creditors, and holders of subordinated debt, other than
affiliates.
The OTS has adopted regulations which permit nationwide branching to
the extent permitted by federal statute. Federal statutes permit federal savings
associations to branch outside of their home state if the association meets the
domestic building and loan test in ss.7701(a)(19) of the Code or the asset
composition test of ss.7701(c) of the Code. Branching that would result in the
formation of a multiple savings and loan holding company controlling savings
associations in more than one state is permitted if the law of the state in
which the savings association to be acquired is located specifically authorizes
acquisitions of its state-chartered associations by state-chartered associations
or their holding companies in the state where the acquiring association or
holding company is located. Moreover, Indiana banks and savings associations are
permitted to acquire other Indiana banks and savings associations and to
establish branches throughout Indiana.
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Finally, The Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Riegle-Neal Act") permits bank holding companies to acquire
banks in other states and, with state consent and subject to certain
limitations, allows banks to acquire out-of-state branches either through merger
or de novo expansion. The State of Indiana enacted legislation establishing
interstate branching provisions for Indiana state-chartered banks consistent
with those established by the Riegle-Neal Act (the "Indiana Branching Law"). The
Indiana Branching Law authorizes Indiana banks to branch interstate by merger or
de novo expansion, provided that such transactions are not permitted to
out-of-state banks unless the laws of their home states permit Indiana banks to
merge or establish de novo banks on a reciprocial basis. The Indiana Branching
Law became effective March 15, 1996.
Transactions with Affiliates
We are subject to Sections 22(h), 23A and 23B of the Federal Reserve
Act, which restrict financial transactions between banks and affiliated
companies. The statute limits credit transactions between a bank or savings
association and its executive officers and its affiliates, prescribes terms and
conditions for bank affiliate transactions deemed to be consistent with safe and
sound banking practices, and restricts the types of collateral security
permitted in connection with a bank's extension of credit to an affiliate.
Federal Securities Law
The shares of Common Stock of the Holding Company will be registered
with the SEC under the Securities Exchange Act of 1934, as amended (the "1934
Act"). The Holding Company will be subject to the information, proxy
solicitation, insider trading restrictions and other requirements of the 1934
Act and the rules of the SEC thereunder. After three years following our
conversion to stock form, if the Holding Company has fewer than 300
shareholders, it may deregister its shares under the 1934 Act and cease to be
subject to the foregoing requirements.
Shares of Common Stock held by persons who are affiliates of the
Holding Company may not be resold without registration unless sold in accordance
with the resale restrictions of Rule 144 under the 1933 Act. If the Holding
Company meets the current public information requirements under Rule 144, each
affiliate of the Holding Company who complies with the other conditions of Rule
144 (including those that require the affiliate's sale to be aggregated with
those of certain other persons) would be able to sell in the public market,
without registration, a number of shares not to exceed, in any three-month
period, the greater of (i) 1% of the outstanding shares of the Holding Company
or (ii) the average weekly volume of trading in such shares during the preceding
four calendar weeks.
Community Reinvestment Act Matters
Federal law requires that ratings of depository institutions under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes
both a four-unit descriptive rating -- outstanding, satisfactory, needs to
improve, and substantial noncompliance -- and a written evaluation of an
institution's performance. Each FHLB is required to establish standards of
community investment or service that its members must maintain for continued
access to long-term advances from the FHLBs. The standards take into account a
member's performance under the CRA and its record of lending to first-time home
buyers. The OTS has designated our record of meeting community credit needs as
outstanding, which is the highest available designation.
TAXATION
Federal Taxation
Historically, savings associations, such as Citizens, have been
permitted to compute bad debt deductions using either the bank experience method
or the percentage of taxable income method. However, for years beginning after
December 31, 1995, no savings association may use the percentage of taxable
income method of computing its allowable bad debt deduction for tax purposes.
Instead, all savings associations are required to compute their allowable
deduction using the experience method. As a result of the repeal of the
percentage of taxable income method, reserves taken after 1987 using the
percentage of taxable income method generally must be included in future taxable
income over a six-year period, although a two-year delay may be permitted for
associations meeting a residential mortgage loan origination test. Citizens will
recapture approximately $60,000 over a six-year period beginning with the June
30, 1997 federal tax return. In addition, the pre-1988 reserve, for which no
deferred taxes have been recorded, need not be recaptured into income unless (i)
the savings association no longer qualifies as a bank under the Code, or (ii)
the savings association pays out excess dividends or distributions.
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Depending on the composition of its items of income and expense, a
savings association may be subject to the alternative minimum tax. A savings
association must pay an alternative minimum tax on the amount (if any) by which
20% of alternative minimum taxable income ("AMTI"), as reduced by an exemption
varying with AMTI, exceeds the regular tax due. AMTI equals regular taxable
income increased or decreased by certain tax preferences and adjustments,
including depreciation deductions in excess of that allowable for alternative
minimum tax purposes, tax-exempt interest on most private activity bonds issued
after August 7, 1986 (reduced by any related interest expense disallowed for
regular tax purposes), the amount of the bad debt reserve deduction claimed in
excess of the deduction based on the experience method and 75% of the excess of
adjusted current earnings over AMTI (before this adjustment and before any
alternative tax net operating loss). AMTI may be reduced only up to 90% by net
operating loss carryovers, but alternative minimum tax paid can be credited
against regular tax due in later years.
For federal income tax purposes, we have been reporting our income and
expenses on the accrual method of accounting. Our federal income tax returns
have not been audited in recent years.
State Taxation
We are subject to Indiana's Financial Institutions Tax ("FIT"), which
is imposed at a flat rate of 8.5% on "adjusted gross income." "Adjusted gross
income," for purposes of FIT, begins with taxable income as defined by Section
63 of the Code and, thus, incorporates federal tax law to the extent that it
affects the computation of taxable income. Federal taxable income is then
adjusted by several Indiana modifications. Other applicable state taxes include
generally applicable sales and use taxes plus real and personal property taxes.
Our state income tax returns have not been audited in recent years.
For further information relating to the tax consequences of the
Conversion, see "The Conversion -- Principal Effects of Conversion -- Tax
Effects."
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
General
Although the Boards of Directors of Citizens and the Holding Company
are not aware of any effort that might be made to obtain control of the Holding
Company after the Conversion, the Boards of Directors believe that it is
appropriate to include certain provisions in the Holding Company's Articles of
Incorporation (the "Articles") to protect the interests of the Holding Company
and its shareholders from unsolicited changes in the control of the Holding
Company in circumstances that the Board of Directors of the Holding Company
concludes will not be in the best interests of Citizens, the Holding Company or
the Holding Company's shareholders.
Although the Holding Company's Board of Directors believes that the
restrictions on acquisition described below are beneficial to shareholders, the
provisions may have the effect of rendering the Holding Company less attractive
to potential acquirors, thereby discouraging future takeover attempts which
would not be approved by the Board of Directors but which certain shareholders
might deem to be in their best interest or pursuant to which shareholders might
receive a substantial premium for their shares over then current market prices.
These provisions will also render the removal of the incumbent Board of
Directors and of management more difficult. The Board of Directors has, however,
concluded that the potential benefits of these restrictive provisions outweigh
the possible disadvantages.
The following general discussion contains a summary of the material
provisions of the Articles, the Holding Company's Code of By-Laws (the
"By-Laws"), and certain other regulatory provisions, that may be deemed to have
an effect of delaying, deferring or preventing a change in the control of the
Holding Company. The following description of certain of these provisions is
general and not necessarily complete, and with respect to provisions contained
in the Articles and By-Laws, reference should be made in each case to the
document in question, each of which is part of our application for approval of
the Conversion or the Holding Company's Registration Statement filed with the
SEC. See "Additional Information."
Provisions of the Holding Company's Articles and By-Laws
Directors. Certain provisions in the Articles and By-Laws will impede
changes in majority control of the Board of Directors of the Holding Company.
The Articles provide that the Board of Directors of the Holding Company will be
divided into three classes, with directors in each class elected for three-year
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staggered terms. Therefore, it would take two annual elections to replace a
majority of the Holding Company's Board. Moreover, the Holding Company's
articles provide that directors of the Holding Company must be residents of
Clinton County, Indiana, must have had a loan or deposit relationship with us
which they have maintained for twelve (12) months prior to their nomination to
the Board, and, if nonemployee directors, must have served as a member of a
civic or community organization based in Clinton County, Indiana for at least
twelve (12) months during the five years prior to their nomination to the Board.
Therefore, the ability of a shareholder to attract qualified nominees to oppose
persons nominated by the Board of Directors may be limited.
The Articles also provide that the size of the Board of Directors shall
range between five and fifteen directors, with the exact number of directors to
be fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors of the Holding
Company.
The Articles provide that any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term only by a
majority vote of the directors then in office. Finally, the By-Laws impose
certain notice and information requirements in connection with the nomination by
shareholders of candidates for election to the Board of Directors or the
proposal by shareholders of business to be acted upon at an annual meeting of
shareholders.
The Articles provide that a director or the entire Board of Directors
may be removed only for cause and only by the affirmative vote of at least 80%
of the shares eligible to vote generally in the election of directors. Removal
for "cause" is limited to the grounds for termination in the OTS regulation
relating to employment contracts of federally-insured savings associations.
Restrictions on Call of Special Meetings. The Articles provide that a
special meeting of shareholders may be called only by the Chairman of the Board
of the Holding Company or pursuant to a resolution adopted by a majority of the
total number of directors of the Holding Company. Shareholders are not
authorized to call a special meeting.
No Cumulative Voting. The Articles provide that there shall be no
cumulative voting rights in the election of directors.
Authorization of Preferred Stock. The Articles authorize 2,000,000
shares of preferred stock, without par value. The Holding Company is authorized
to issue preferred stock from time to time in one or more series subject to
applicable provisions of law, and the Board of Directors is authorized to fix
the designations, powers, preferences and relative participating, optional and
other special rights of such shares, including voting rights (if any and which
could be as a separate class) and conversion rights. In the event of a proposed
merger, tender offer or other attempt to gain control of the Holding Company not
approved by the Board of Directors, it might be possible for the Board of
Directors to authorize the issuance of a series of preferred stock with rights
and preferences that would impede the completion of such a transaction. An
effect of the possible issuance of preferred stock, therefore, may be to deter a
future takeover attempt. The Board of Directors has no present plans or
understandings for the issuance of any preferred stock and does not intend to
issue any preferred stock except on terms which the Board of Directors deems to
be in the best interests of the Holding Company and its shareholders.
Limitations on 10% Shareholders. The Articles provide that: (i) no
person shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of equity security of the Holding
Company (provided that such limitation shall not apply to the acquisition of
equity securities by any one or more tax-qualified employee stock benefit plans
maintained by the Holding Company, if the plan or plans beneficially own no more
than 25% of any class of such equity security of the Holding Company); and that
(ii) shares beneficially owned in violation of the stock ownership restriction
described above shall not be entitled to vote and shall not be voted by any
person or counted as voting stock in connection with any matter submitted to a
vote of shareholders. For these purposes, a person (including management) who
has obtained the right to vote shares of the Common Stock pursuant to revocable
proxies shall not be deemed to be the "beneficial owner" of those shares if that
person is not otherwise deemed to be a beneficial owner of those shares.
Evaluation of Offers. The Articles of the Holding Company provide that
the Board of Directors of the Holding Company, when determining to take or
refrain from taking corporate action on any matter, including making or
declining to make any recommendation to the Holding Company's shareholders, may,
in connection with the exercise of its judgment in determining what is in the
best interest of the Holding Company, Citizens and the shareholders of the
Holding Company, give due consideration to all relevant factors, including,
without limitation, the social and economic effects of acceptance of such offer
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on the Holding Company's customers and Citizens' present and future account
holders, borrowers, employees and suppliers; the effect on the communities in
which the Holding Company and Citizens operate or are located; and the effect on
the ability of the Holding Company to fulfill the objectives of a holding
company and of us or future financial institution subsidiaries to fulfill the
objectives of a stock savings association under applicable statutes and
regulations. The Articles of the Holding Company also authorize the Board of
Directors to take certain actions to encourage a person to negotiate for a
change of control of the Holding Company or to oppose such a transaction deemed
undesirable by the Board of Directors including the adoption of so-called
shareholder rights plans. By having these standards and provisions in the
Articles of the Holding Company, the Board of Directors may be in a stronger
position to oppose such a transaction if the Board concludes that the
transaction would not be in the best interest of the Holding Company, even if
the price offered is significantly greater than the then market price of any
equity security of the Holding Company.
Procedures for Certain Business Combinations. The Articles require that
certain business combinations between the Holding Company (or any majority-owned
subsidiary thereof) and a 10% or greater shareholder either be approved (i) by
at least 80% of the total number of outstanding voting shares of the Holding
Company or (ii) by a majority of certain directors unaffiliated with such 10% or
greater shareholder or involve consideration per share generally equal to the
higher of (A) the highest amount paid by such 10% shareholder or its affiliates
in acquiring any shares of the Common Stock or (B) the "Fair Market Value"
(generally, the highest closing bid paid for the Common Stock during the thirty
days preceding the date of the announcement of the proposed business combination
or on the date the 10% or greater shareholder became such, whichever is higher).
Amendments to Articles and Bylaws. Amendments to the Articles must be
approved by a majority vote of the Holding Company's Board of Directors and also
by a majority of the outstanding shares of the Holding Company's voting shares;
provided, however, that approval by at least 80% of the outstanding voting
shares is required for certain provisions (i.e., provisions relating to number,
classification, and removal of directors; provisions relating to the manner of
amending the By-Laws; call of special shareholder meetings; criteria for
evaluating certain offers; certain business combinations; and amendments to
provisions relating to the foregoing). The provisions concerning limitations on
the acquisition of shares may be amended only by an 80% vote of the Holding
Company's outstanding shares unless at least two-thirds of the Holding Company's
Continuing Directors (directors of the Holding Company on June 10, 1997, or
directors recommended for appointment or election by a majority of such
directors) approve such amendments in advance of their submission to a vote of
shareholders (in which case only a majority vote of shareholders is required).
The By-Laws may be amended only by a majority vote of the total number
of directors of the Holding Company.
Purpose and Effects of the Anti-Takeover Provisions of the Holding
Company Articles and By-Laws. The Holding Company's Board of Directors believes
that the provisions described above are prudent and will reduce the Holding
Company's vulnerability to takeover attempts and certain other transactions
which have not been negotiated with and approved by its Board of Directors.
These provisions will also assist in the orderly deployment of the Conversion
proceeds into productive assets during the initial period after the Conversion.
The Board of Directors believes these provisions are in the best interest of
Citizens and the Holding Company and its shareholders. In the judgment of the
Board of Directors, the Holding Company's Board of Directors will be in the best
position to determine the true value of the Holding Company and to negotiate
more effectively for what may be in the best interests of the Holding Company
and its shareholders. The Board of Directors believes that these provisions will
encourage potential acquirors to negotiate directly with the Board of Directors
of the Holding Company and discourage hostile takeover attempts. It is also the
view of the Board of Directors that these provisions should not discourage
persons from proposing a merger or other transaction at prices reflecting the
true value of the Holding Company and which is in the best interests of all
shareholders.
Attempts to take over financial institutions and their holding
companies have recently increased. Takeover attempts that have not been
negotiated with and approved by the Board of Directors present to shareholders
the risk of a takeover on terms that may be less favorable than might otherwise
be available. A transaction that is negotiated and approved by the Board of
Directors, on the other hand, can be carefully planned and undertaken at an
opportune time to obtain maximum value for the Holding Company and its
shareholders, with due consideration given to matters such as the management and
business of the acquiring corporation and maximum strategic development of the
Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it to undertake defensive measures at a
great expense. Although a tender offer or other takeover attempt may be made at
a price substantially above then current market prices, such offers are
sometimes made for less than all of the outstanding shares of a target company.
As a result, shareholders may be presented with the alternative of partially
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liquidating their investment at a time that may be disadvantageous, or retaining
their investment in an enterprise which is under different management and whose
objective may not be similar to that of the remaining shareholders. The
concentration of control, which could result from a tender offer or other
takeover attempt, could also deprive the Holding Company's remaining
shareholders of the benefits of certain protective provisions of the 1934 Act,
if the number of beneficial owners becomes less than 300 and the Holding Company
terminates its registration under the 1934 Act.
Despite the belief of the Holding Company's Board of Directors in the
benefits to shareholders of the foregoing provisions, the provisions may also
have the effect of discouraging future takeover attempts which would not be
approved by the Board of Directors, but which certain shareholders might deem to
be in their best interest or pursuant to which shareholders might receive a
substantial premium for their shares over then current market prices. As a
result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so. These provisions will also render the removal
of the incumbent Board of Directors and of management more difficult. The Board
of Directors has, however, concluded that the potential benefits of these
restrictive provisions outweigh the possible disadvantages.
Other Restrictions on Acquisition of the Holding Company and Citizens
State Law. Several provisions of the Indiana Business Corporation Law,
as amended (the "IBCL"), could affect the acquisition of shares of the Common
Stock or otherwise affect the control of the Holding Company. Chapter 43 of the
IBCL prohibits certain business combinations, including mergers, sales of
assets, recapitalizations, and reverse stock splits, between corporations such
as the Holding Company (assuming that it has over 100 shareholders) and an
interested shareholder, defined as the beneficial owner of 10% or more of the
voting power of the outstanding voting shares, for five years following the date
on which the shareholder obtained 10% ownership unless the acquisition was
approved in advance of that date by the board of directors. If prior approval is
not obtained, several price and procedural requirements must be met before the
business combination can be completed. These requirements are similar to those
contained in the Holding Company Articles and described in " -- Provisions of
the Holding Company's Articles and By-Laws -- Procedures for Certain Business
Combinations." In general, the price requirements contained in the IBCL may be
more stringent than those imposed in the Holding Company Articles. However, the
procedural restraints imposed by the Holding Company Articles are somewhat
broader than those imposed by the IBCL. Also, the provisions of the IBCL may
change at some future date, but the relevant provisions of the Holding Company
Articles may only be amended by an 80% vote of the shareholders of the Holding
Company.
In addition, the IBCL contains provisions designed to assure that
minority shareholders have some say in their future relationship with Indiana
corporations in the event that a person made a tender offer for, or otherwise
acquired, shares giving that person more than 20%, 33 1/3%, and 50% of the
outstanding voting securities of corporations having 100 or more shareholders
(the "Control Share Acquisitions Statute"). Under the Control Share Acquisitions
Statute, if an acquiror purchases those shares at a time that the corporation is
subject to the Control Share Acquisitions Statute, then until each class or
series of shares entitled to vote separately on the proposal, by a majority of
all votes entitled to be cast by that group (excluding shares held by officers
of the corporation, by employees of the corporation who are directors thereof
and by the acquiror), approves in a special or annual meeting the rights of the
acquiror to vote the shares which take the acquiror over each level of ownership
as stated in the statute, the acquiror cannot vote these shares. An Indiana
corporation otherwise subject to the Control Share Acquisitions Statute may
elect not to be covered by the statute by so providing in its Articles of
Incorporation or By-Laws. The Holding Company, however, will be subject to this
statute following the Conversion because of its desire to discourage
non-negotiated hostile takeovers by third parties.
The IBCL specifically authorizes Indiana corporations to issue options,
warrants or rights for the purchase of shares or other securities of the
corporation or any successor in interest of the corporation. These options,
warrants or rights may, but need not be, issued to shareholders on a pro rata
basis.
The IBCL specifically authorizes directors, in considering the best
interest of a corporation, to consider the effects of any action on
shareholders, employees, suppliers, and customers of the corporation, and
communities in which offices or other facilities of the corporation are located,
and any other factors the directors consider pertinent. As described above, the
Holding Company Articles contain a provision having a similar effect. Under the
IBCL, directors are not required to approve a proposed business combination or
other corporate action if the directors determine in good faith that such
approval is not in the best interest of the corporation. In addition, the IBCL
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states that directors are not required to redeem any rights under or render
inapplicable a shareholder rights plan or to take or decline to take any other
action solely because of the effect such action might have on a proposed change
of control of the corporation or the amounts to be paid to shareholders upon
such a change of control. The IBCL explicitly provides that the different or
higher degree of scrutiny imposed in Delaware and certain other jurisdictions
upon director actions taken in response to potential changes in control will not
apply. The Delaware Supreme Court has held that defensive measures in response
to a potential takeover must be "reasonable in relation to the threat posed".
In taking or declining to take any action or in making any
recommendation to a corporation's shareholders with respect to any matter,
directors are authorized under the IBCL to consider both the short-term and
long-term interests of the corporation as well as interests of other
constituencies and other relevant factors. Any determination made with respect
to the foregoing by a majority of the disinterested directors shall conclusively
be presumed to be valid unless it can be demonstrated that such determination
was not made in good faith.
Because of the foregoing provisions of the IBCL, the Board will have
flexibility in responding to unsolicited proposals to acquire the Holding
Company, and accordingly it may be more difficult for an acquiror to gain
control of the Holding Company in a transaction not approved by the Board.
Federal Limitations. For three years following the Conversion, OTS
regulations prohibit any person (including entities), without the prior approval
of the OTS, from offering to acquire or acquiring more than 10% of any class of
equity security, directly or indirectly, of a converted savings association or
its holding company. This restriction does not apply to the acquisition by any
one or more tax-qualified employee stock benefit plans maintained by Citizens or
the Holding Company, provided that the plan or plans do not have beneficial
ownership in the aggregate of more than 25% of any class of equity security of
the Holding Company. For these purposes, a person (including management) who has
obtained the right to vote shares of the Common Stock pursuant to revocable
proxies shall not be deemed to be the "beneficial owner" of those shares if that
person is not otherwise deemed to be a beneficial owner of those shares.
The Change in Bank Control Act provides that no "person," acting
directly or indirectly, or through or in concert with one or more persons, other
than a company, may acquire control of a savings association or a savings and
loan holding company unless at least 60 days prior written notice is given to
the OTS and the OTS has not objected to the proposed acquisition.
The Savings and Loan Holding Company Act also prohibits any "company,"
directly or indirectly or acting in concert with one or more other persons, or
through one or more subsidiaries or transactions, from acquiring control of an
insured savings institution without the prior approval of the OTS. In addition,
any company that acquires such control becomes a "savings and loan holding
company" subject to registration, examination and regulation as a savings and
loan holding company by the OTS.
<PAGE>
The term "control" for purposes of the Change in Bank Control Act and
the Savings and Loan Holding Company Act includes the power, directly or
indirectly, to vote more than 25% of any class of voting stock of the savings
association or to control, in any manner, the election of a majority of the
directors of the savings association. It also includes a determination by the
OTS that such company or person has the power, directly or indirectly, to
exercise a controlling influence over or to direct the management or policies of
the savings association.
OTS regulations also set forth certain "rebuttable control
determinations" which arise (i) upon an acquisition of more than 10% of any
class of voting stock of a savings association; or (ii) upon an acquisition of
more than 25% of any class of voting or nonvoting stock of a savings
association; provided that, in either case, the acquiror is subject to any of
eight enumerated "control factors," which are: (1) the acquiror would be one of
the two largest holders of any class of voting stock of the association; (2) the
acquiror would hold more than 25% of the total shareholders' equity of the
association; (3) the acquiror would hold more than 35% of the combined debt
securities and shareholders' equity of the savings association; (4) the acquiror
is a party to any agreement pursuant to which the acquiror possesses a material
economic stake in the savings association or which enables the acquiror to
influence a material aspect of the management or policies of the association;
(5) the acquiror would have the ability, other than through the holding of
revocable proxies, to direct the votes of more than 25% of a class of the voting
stock or to vote in the future more than 25% of such voting stock upon the
occurrence of a future event; (6) the acquiror would have the power to direct
the disposition of more than 25% of the association's voting stock in a manner
other than a widely dispersed or public offering; (7) the acquiror and/or his
representative would constitute more than one member of the association's board
of directors; or (8) the acquiror would serve as an executive officer or in a
similar policy-making position with the association. For purposes of determining
percentage share ownership, a person is presumed to be acting in concert with
certain specified persons and entities, including members of the person's
immediate family, whether or not those family members share the same household
with the person.
The regulations also specify the criteria which the OTS uses to
evaluate control applications. The OTS is empowered to disapprove an acquisition
of control if it finds, among other things, that (i) the acquisition would
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substantially lessen competition, (ii) the financial condition of the acquiring
person might jeopardize the institution or its depositors, or (iii) the
competency, experience, or integrity of the acquiring person indicates that it
would not be in the interest of the depositors, the institution, or the public
to permit the acquisition of control by such person.
DESCRIPTION OF CAPITAL STOCK
The Holding Company is authorized to issue 5,000,000 shares of Common
Stock, without par value, all of which have identical rights and preferences,
and 2,000,000 shares of preferred stock, without par value. The Holding Company
expects to issue up to 1,058,000 shares of Common Stock and no shares of
preferred stock in the Conversion. The Holding Company has received an opinion
of its counsel that the shares of Common Stock issued in the Conversion will be
validly issued, fully paid, and not liable for further call or assessment. This
opinion was filed with the SEC as an exhibit to the Holding Company's
Registration Statement under the 1933 Act.
Shareholders of the Holding Company will have no preemptive rights to
acquire additional shares of Common Stock which may be subsequently issued. The
Common Stock will represent nonwithdrawable capital, will not be of an insurable
type and will not be federally insured by the FDIC or any government entity.
Under Indiana law, the holders of the Common Stock will possess
exclusive voting power in the Holding Company, unless preferred stock is issued
and voting rights are granted to the holders thereof. Each shareholder will be
entitled to one vote for each share held on all matters voted upon by
shareholders, subject to the limitations discussed under the caption
"Restrictions on Acquisition of the Holding Company." Shareholders may not
cumulate their votes in the election of the Board of Directors. Holders of
Common Stock will be entitled to payment of dividends as may be declared from
time to time by the Holding Company's Board of Directors.
In the unlikely event of the liquidation or dissolution of the Holding
Company, the holders of the Common Stock will be entitled to receive after
payment or provision for payment of all debts and liabilities of the Holding
Company, all assets of the Holding Company available for distribution, in cash
or in kind. See "The Conversion -- Principal Effects of Conversion -- Effect on
Liquidation Rights." If preferred stock is issued subsequent to the Conversion,
the holders thereof may have a priority over the holders of Common Stock in the
event of liquidation or dissolution.
The Board of Directors of the Holding Company will be authorized to
issue preferred stock in series and to fix and state the voting powers,
designations, preferences and relative, participating, optional or other special
rights of the shares of each such series and the qualifications, limitations and
restrictions thereof. Preferred stock may rank prior to the Common Stock as to
dividend rights, liquidation preferences, or both, and may have full or limited
voting rights. The holders of preferred stock will be entitled to vote as a
separate class or series under certain circumstances, regardless of any other
voting rights which such holders may have.
Except as discussed elsewhere herein, the Holding Company has no
specific plans for the issuance of the additional authorized shares of Common
Stock or for the issuance of any shares of preferred stock. In the future, the
authorized but unissued and unreserved shares of Common Stock will be available
for general corporate purposes including, but not limited to, possible issuance
as stock dividends or stock splits, in future mergers or acquisitions, under a
cash dividend reinvestment and stock purchase plan, or in future underwritten or
other public or private offerings. The authorized but unissued shares of
preferred stock will similarly be available for issuance in future mergers or
acquisitions, in future underwritten public offerings or private placements or
for other general corporate purposes. Except as described above or as otherwise
required to approve the transaction in which the additional authorized shares of
Common Stock or authorized shares of preferred stock would be issued, no
shareholder approval will be required for the issuance of these shares.
Accordingly, the Holding Company's Board of Directors without shareholder
approval can issue preferred stock with voting and conversion rights which could
adversely affect the voting power of the holders of Common Stock.
The offering and sale of Common Stock in the Conversion will be
registered under the 1933 Act. The subsequent sale or transfer of Common Stock
is governed by the 1934 Act, which requires that sales or exchanges of subject
securities be made pursuant to an effective registration statement or qualified
for an exemption from registration requirements of the 1933 Act. Similarly, the
securities laws of the various states also require generally the registration of
shares offered for sale unless there is an applicable exemption from
registration.
The Holding Company, as a newly organized corporation, has never issued
capital stock, and, accordingly, there is no market for the Common Stock. See
"Market for the Common Stock." See "Restrictions on Acquisition of the Holding
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Company -- Provisions of the Holding Company's Articles and By-Laws" for a
description of certain provisions of the Holding Company's Articles and By-Laws
which may affect the ability of the Holding Company's shareholders to
participate in certain transactions relating to acquisitions of control of the
Holding Company. Also, see "Dividends" for a description of certain matters
relating to the possible future payment of dividends on the Common Stock.
TRANSFER AGENT
Fifth Third Bank will act as transfer agent and registrar for the
Common Stock. Fifth Third Bank's phone number is (513) 579-5320 or (800)
837-2755.
REGISTRATION REQUIREMENTS
Upon the Conversion, the Holding Company's Common Stock will be
registered pursuant to Section 12(g) of the 1934 Act and may not be deregistered
for a period of at least three years following the Conversion. As a result of
the registration under the 1934 Act, certain holders of Common Stock will be
subject to certain reporting and other requirements imposed by the 1934 Act. For
example, beneficial owners of more than 5% of the outstanding Common Stock will
be required to file reports pursuant to Section 13(d) or Section 13(g) of the
1934 Act, and officers, directors and 10% shareholders of the Holding Company
will generally be subject to reporting requirements of Section 16(a) and to the
liability provisions for profits derived from purchases and sales of Holding
Company Common Stock occurring within a six-month period pursuant to Section
16(b) of the 1934 Act. In addition, certain transactions in Common Stock, such
as proxy solicitations and tender offers, will be subject to the disclosure and
filing requirements imposed by Section 14 of the 1934 Act and the regulations
promulgated thereunder.
LEGAL AND TAX MATTERS
Barnes & Thornburg, 11 South Meridian Street, Indianapolis, Indiana
46204, special counsel to Citizens, will pass upon the legality and validity of
the shares of Common Stock being issued in the Conversion. Barnes & Thornburg
has issued an opinion concerning certain federal and state income tax aspects of
the Conversion and that the Conversion, as proposed, constitutes a tax-free
reorganization under federal and Indiana law. Barnes & Thornburg have consented
to the references herein to their opinions. Certain legal matters related to
this offering will be passed upon for Trident Securities by Baker & Daniels, 300
North Meridian Street, Indianapolis, Indiana 46204.
EXPERTS
Our consolidated financial statements at June 30, 1996 and 1995, and
for each of the three years in the period ended June 30, 1996 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young, LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
Keller has consented to the publication of the summary herein of its
appraisal report as to the estimated pro forma market value of the Common Stock
of the Holding Company to be issued in the Conversion, to the reference to its
opinion relating to the value of the subscription rights, and to the filing of
the appraisal report as an exhibit to the registration statement filed by the
Holding Company under the 1933 Act.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a registration statement
under the 1933 Act with respect to the Common Stock offered hereby. As permitted
by the rules and regulations of the SEC, this Prospectus does not contain all
the information set forth in the registration statement. Such information can be
inspected and copied at the SEC's public reference facilities located at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Offices in
New York (Seven World Trade Center, 13th Floor, New York, New York 00048) and
Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511) and copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. This information can also be found on the SEC's
website, located at www.sec.gov.
Citizens has filed with the OTS an Application for Conversion from a
federal mutual savings bank to a federal stock savings bank, and the Holding
Company has filed with the OTS an Application to become a savings and loan
holding company. This Prospectus omits certain information contained in such
Applications. The Applications may be inspected at the offices of the OTS, 1700
G Street, N.W., Washington, D.C. 20552 and at the Central Regional Office of the
OTS, 200 West Madison, Suite 1300, Chicago, Illinois 60606.
-80-
<PAGE>
Citizens Savings Bank of Frankfort
Index to Consolidated Financial Statements
Contents
Report of Independent Auditors........................................ F-2
Consolidated Statements of Condition - March 31, 1997 (unaudited)
and June 30, 1996 and 1995................................... F-3
Consolidated Statements of Income - Nine months ended March 31, 1997
and 1996 (unaudited) and years ended June 30, 1996,
1995 and 1994 ............................................... F-4
Consolidated Statements of Changes in Retained
Income Nine months ended March
31, 1997 (unaudited) and the years ended
June 30, 1996, 1995 and 1994 ................................ F-5
Consolidated Statements of Cash Flows - Nine months ended
March 31, 1997 and
1996 (unaudited) and the years ended
June 30, 1996, 1995 and 1994 ............................... F-6
Notes to Consolidated Financial Statements ........................... F-7
All schedules are omitted because the required information is not applicable or
is included in the financial statements and related notes.
The financial statements of the Holding Company have been omitted because of the
Holding Company has not issued any stock, has no assets, no liabilities and has
not conducted any business other than of an organizational nature.
F-1
<PAGE>
Ernst & Young LLP One Indiana Square Phone: 317 671 7000
Suite 3400 Fax: 317 681 7216
Indianapolis, Indiana
Report of Independent Auditors
Board of Directors
Citizens Savings Bank of Frankfort
We have audited the accompanying consolidated statements of condition of
Citizens Savings Bank of Frankfort and subsidiary as of June 30, 1996 and 1995,
and the related consolidated statements of income and retained income and cash
flows for each of the three years in the period ended June 30, 1996. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial 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 consolidated financial position of Citizens Savings
Bank of Frankfort and subsidiary at June 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1996, in conformity with generally accepted accounting
principles.
As described in Note 8 to the consolidated financial statements, the Bank
changed its method of accounting for income taxes effective July 1, 1993.
August 16, 1996
F-2
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Consolidated Statements of Condition
<TABLE>
<CAPTION>
March 31 June 30
1997 1996 1995
-------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Assets
Cash on hand and in other institutions $322,976 $655,488 $777,048
Interest-bearing deposits 3,927,787 2,652,686 3,532,891
Investment securities available for sale 158,853 3,003,242 2,832,047
Stock in Federal Home Loan Bank
of Indianapolis 331,600 331,600 331,600
Loans receivable, net 37,216,332 34,391,405 29,275,181
Land held for development 1,042,676 1,072,800 1,069,458
Cash surrender value of
life insurance contract 1,065,508 1,034,553 991,009
Property and equipment 588,892 603,464 575,193
Other assets 498,364 490,058 342,735
--------------------------------------------------------
Total assets $45,152,988 $44,235,296 $39,727,162
========================================================
Liabilities and Retained Income
Deposits $37,254,858 $35,600,140 $33,175,007
Federal Home Loan Bank advances 2,000,000 3,000,000 1,500,000
Other liabilitiies 333,962 366,157 260,195
--------------------------------------------------------
Total liabilities 39,588,820 38,966,297 34,935,202
Commitments and contingencies --- --- ---
Retained income - substantially restricted 5,564,168 5,319,852 4,840,922
Unrealized loss on investment
securities available for sale, net of tax --- (50,853) (48,962)
--------------------------------------------------------
5,564,168 5,268,999 4,791,960
--------------------------------------------------------
Total liabilities and retained income $45,152,988 $44,235,296 $39,727,162
========================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Consolidated Statements of Income
<TABLE>
<CAPTION>
Nine months ended March 31 Year ended June 30
1997 1996 1996 1995 1994
-------------------------------------------------------------------------
(Unaudited)
Interest income:
<S> <C> <C> <C> <C> <C>
Interest on loans $2,379,618 $2,069,266 $2,803,774 $2,383,591 $2,045,736
Other interest income 240,329 295,711 382,453 358,661 378,080
-------------------------------------------------------------------------
2,619,947 2,364,977 3,186,227 2,742,252 2,423,816
Interest expense:
Interest on deposits 1,227,014 1,148,894 1,538,886 1,341,925 1,273,229
Interest on borrowings 134,852 81,731 114,253 28,812 ---
-------------------------------------------------------------------------
1,361,866 1,230,625 1,653,139 1,370,737 1,273,229
-------------------------------------------------------------------------
Net interest income 1,258,081 1,134,352 1,533,088 1,371,515 1,150,587
Provision for loan losses 32,000 63,000 80,000 32,000 12,000
-------------------------------------------------------------------------
Net interest income
after provision for loan losses 1,226,081 1,071,352 1,453,088 1,339,515 1,138,587
Other income:
Fees and service charges 105,152 114,298 152,379 151,726 120,440
Loss on sale of investments (60,244) --- --- --- ---
Other 59,391 68,734 94,097 69,731 76,850
-------------------------------------------------------------------------
104,299 183,032 246,476 221,457 197,290
Other expense:
Salaries and employee benefits 351,710 304,683 414,730 387,245 330,924
Occupancy expense 83,750 82,311 117,967 109,842 105,049
Data processing expense 80,387 75,002 101,675 104,619 97,932
Federal insurance premium 252,960 56,946 76,868 75,078 71,468
Other 192,195 186,835 256,137 247,470 257,935
-------------------------------------------------------------------------
961,002 705,777 967,377 924,254 863,308
-------------------------------------------------------------------------
Income before income taxes 369,378 548,607 732,187 636,718 472,569
Income taxes 125,062 192,027 253,257 230,549 165,976
-------------------------------------------------------------------------
Income before cumulative
effect of change
in accounting principle 244,316 356,580 478,930 406,169 306,593
Cumulative effect of change in
accounting for income taxes --- --- --- --- 25,972
-------------------------------------------------------------------------
Net income $244,316 $356,580 $478,930 $406,169 $280,621
=========================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Consolidated Statements of Changes in Retained Income
<TABLE>
<CAPTION>
Retained Unrealized loss on
income - investment securities
substantially available for sale, Total retained
restricted net of tax income
-------------------------------------------------------------
<S> <C> <C> <C>
Balance as of July 1, 1993 $4,154,132 --- $4,154,132
Net income 280,621 --- 280,621
-------------------------------------------------------------
Balance as of June 30, 1994 4,434,753 --- 4,434,753
Net income 406,169 --- 406,169
Net change in unrealized loss on
investment securities available for
sale, net of tax --- (48,962) (48,962)
-------------------------------------------------------------
Balance as of June 30, 1995 4,840,922 (48,962) 4,791,960
Net income 478,930 --- 478,930
Net change in unrealized loss on
investment securities available for
sale, net of tax --- (1,891) (1,891)
-------------------------------------------------------------
Balance as of June 30, 1996 5,319,852 (50,853) 5,268,999
Net income (Unaudited) 244,316 --- 244,316
Net change in
unrealized loss on
investment securities available for
sale, net of tax (Unaudited) --- 50,853 50,853
-------------------------------------------------------------
Balance as of March 31, 1997
(Unaudited) $5,564,168 $ --- $5,564,168
=============================================================
</TABLE>
F-5
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended March 31 Year ended June 30
1997 1996 1996 1995 1994
-------------------------------------------------------------------------
(Unaudited)
Operating activities
<S> <C> <C> <C> <C> <C>
Net income $244,316 $356,580 $478,930 $406,169 $280,621
Adjustments to reconcile
net income to net cash provided
by operating activities:
Provision for loan losses 32,000 63,000 80,000 32,000 12,000
Depreciation and amortization 33,901 29,783 48,055 39,148 43,841
Deferred federal income
tax credit (35,509) (56,069) (74,473) (21,753) (15,204)
Increase in other assets (8,306) (104,526) (140,525) (78,522) (77,389)
Increase (decrease) in
other liabilities (16,195) 61,423 126,311 116,650 (22,990)
-------------------------------------------------------------------------
Net cash provided by
operating activities 250,207 350,191 518,298 493,692 220,879
Investing activities
Purchases of investment securities (36,451) (136,285) (169,304) (153,930) (1,107,427)
Proceeds from sale of
investment securities 2,945,410 --- --- --- ---
Principal collected on loans 9,989,574 7,474,558 10,279,567 8,262,649 8,642,816
Loans originated (12,966,000) (10,724,000) (15,419,000) (11,433,731) (11,060,024)
Loans purchased --- --- (64,000) --- (310,500)
Proceeds from sale of loans 91,000 --- --- --- ---
(Increase) decrease in land held
for development 30,124 (51,598) (3,342) (681,907) ---
Purchases of equipment (15,993) (39,830) (69,117) (24,516) (39,025)
-------------------------------------------------------------------------
Net cash provided (used)
by investing activities 37,664 (3,477,155) (5,445,196) (4,031,435) (3,874,160)
Financing activities
Increase (decrease) in NOW,
MMDA and passbook deposits 99,562 595,529 460,126 (1,990,873) 2,598,578
Increase in certificates of deposit 1,555,156 1,343,341 1,965,007 1,128,535 1,303,180
Advances from Federal
Home Loan Bank 11,500,000 3,500,000 4,500,000 6,000,000 ---
Payments to Federal
Home Loan Bank (12,500,000) (3,000,000) (3,000,000) (4,500,000) ---
-------------------------------------------------------------------------
Net cash provided by
financing activities 654,718 2,438,870 3,925,133 637,662 3,901,758
-------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 942,589 (688,094) (1,001,765) (2,900,081) 248,477
Cash and cash equivalents
at beginning of period 3,308,174 4,309,939 4,309,939 7,210,020 6,961,543
-------------------------------------------------------------------------
Cash and cash equivalents
at end of period $4,250,763 $3,621,845 $3,308,174 $4,309,939 $7,210,020
=========================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Citizens Savings
Bank ("Bank") of Frankfort, Indiana, and its wholly owned subsidiary, Citizens
Loan and Service Corporation ("Service Corp."). The Bank operates as a
traditional savings bank in Clinton County. The Service Corp. develops land for
residential housing. All significant intercompany accounts and transactions have
been eliminated.
Interim Financial Information
The unaudited consolidated financial information as of, and for the nine months
ended, March 31, 1997 and 1996, has been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation have been included. Operating
results for the nine-month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended June 30, 1997.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in other institutions and
interest-bearing deposits. Interest-bearing deposits are available on demand.
Investment Securities
At June 30, 1996 and 1995, investment securities, which consist of equity
interests in pooled investment trusts, are classified as available-for-sale and
carried at fair value with the unrealized loss as a separate component of
equity, net of tax. At June 30, 1996 and 1995, the cost basis of investment
securities was $3,087,450 and $2,913,124, respectively and the unrealized loss
was $84,208 and $81,077, respectively. Gains and losses on the sale of these
securities are based on the specific cost of the individual security being sold.
At March 31, 1997, the Bank's investment in equity interests in pooled
investment trusts are classified as available-for-sale with cost equaling fair
value.
Management determines the
appropriate classification of investment securities at the time of purchase.
Securities classified as held to maturity are those which management has the
positive intent and ability to hold until the scheduled maturity. Securities
classified as held to maturity are stated at amortized cost. Securities
classified as available for sale are those which may be sold for liquidity
purposes, or other reasons, prior to reaching scheduled maturity.
Stock in Federal Home Loan Bank of Indianapolis
Stock in the Federal Home Loan Bank of Indianapolis is stated at cost and the
amount of stock held is determined by regulation.
Loans Receivable
The Bank has a first mortgage lien on all property securing loans classified as
residential and commercial real estate mortgage loans. Further, a portion of
certain mortgage loan balances is insured by private or government guaranty
insurance policies. Interest income is computed monthly based upon the principal
amount of the loans outstanding. The Bank discontinues the accrual of interest
on loans when, in management's opinion, the collection of all or a portion of
interest has become doubtful. Mortgage loans are placed on non-accrual status
when they become 90 days delinquent. When a loan is placed on nonaccrual, the
Bank charges all previously accrued and unpaid interest against income. Loan
origination and commitment fees and certain direct loan origination costs are
deferred and amortized as an adjustment of yield over the contractual life of
the related loans.
F-7
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (Continued)
Allowance for Loan Losses
The allowance for loan losses is maintained at a level believed adequate by
management to absorb losses in the loan portfolio. Management's determination of
the adequacy of the allowance is based on an evaluation of the portfolio
including consideration of past loan loss experience, current economic
conditions, volume, growth and composition of the loan portfolio, and other
relevant factors. The allowance is increased by provisions for loan losses
charged against income and reduced by net charge-offs.
In 1995, Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114") and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures" ("SFAS 118"), an amendment to SFAS 114,
were adopted. Any allowance for loan losses related to troubled loans identified
for evaluation in accordance with SFAS 114 is based on estimated discounted cash
flows using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans. Consumer loans and
one-to-four family residential loans are collectively evaluated for impairment
as homogeneous loan groups which are outside the scope of SFAS 114. Under SFAS
118, no interest income on loans determined to be impaired is accrued. Interest
income on such loans is recognized only upon cash receipt. SFAS 114 and SFAS 118
have not had a significant impact on results of operations in 1996 or 1995.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives (5 to 40 years) of the related assets.
Use of Estimates
Preparation of financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications
Certain elements of the 1995 and 1994 consolidated financial statements have
been reclassified to conform with the presentation herein.
F-8
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
2. Loans Receivable
Loans receivable consist of the following:
<TABLE>
<CAPTION>
March 31 June 30
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
Real estate mortgage loans: (Unaudited)
One-to four-family residential $29,401,637 $26,239,965 $22,287,040
Commercial 2,409,705 2,290,739 2,315,329
Construction loans 991,000 870,000 355,706
Installment loans 5,330,142 5,358,258 4,849,329
Loans secured by deposits 15,000 62,559 7,368
--------------------------------------------------
38,147,484 34,821,521 29,814,772
Less:
Allowance for loan losses 172,198 138,606 46,416
Deferred loan fees 102,771 94,665 86,156
Undisbursed portion of loan proceeds 656,183 196,845 407,019
--------------------------------------------------
931,152 430,116 539,591
--------------------------------------------------
$37,216,332 $34,391,405 $29,275,181
==================================================
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
March 31 June 30
1997 1996 1996 1995 1994
-----------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $138,606 $46,416 $46,416 $ 49,267 $ 38,263
Provision for losses 32,000 63,000 80,000 32,000 12,000
Charge-offs - - - (36,721) (5,637)
Recoveries 1,592 12,190 12,190 1,870 4,641
------------------------------------------------------------------------
Balance at end of year $172,198 $121,606 $138,606 $ 46,416 $ 49,267
========================================================================
</TABLE>
At March 31, 1997 and June 30, 1996 the Bank had loan commitments of
approximately $265,000 (unaudited) and $611,000, respectively. The $265,000 in
loan commitments are fixed rate commitments at 8.25%.
The Bank's loan portfolio consists primarily of loans originated in its
principal market area of Frankfort, Indiana, Clinton County and its contiguous
counties. The economy of the Bank's market area primarily includes some
diversified industries and agriculture. At March 31, 1997, and for the nine
months then ended (unaudited), the Bank had no loans considered to be impaired
under SFAS 114. At June 30, 1996, and for the year then ended, the Bank had no
loans considered to be impaired under SFAS 114. Advances from the Federal Home
Loan Bank of Indianapolis are secured by a floating lien on the Bank's
one-to-four family residential mortgage loans (see Note 7).
F-9
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
3. Loans to Related Parties
The Bank has granted loans to certain of its directors, officers and their
associates. Related party loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated parties and do not involve more than
normal risk of collectibility. The aggregate dollar amounts of these loans were
$2,250,000 (unaudited) at March 31, 1997 and $1,644,000 and $1,525,000 at June
30, 1996 and 1995, respectively. During the nine months ended March 31, 1997,
related party loans were increased $809,000 (unaudited) by loan advances and
reduced $203,000 (unaudited) by loan repayments. During 1996, related party
loans were increased $535,000 by loan advances and reduced $416,000 by loan
repayments.
4. Land Held for Development
The Bank, through its Service Corp., holds approximately 59 acres of land for
the development of a three phase residential housing addition in Frankfort. In
January 1992, the Bank received regulatory approval of a plan to develop this
land. During the nine months ended March 31, 1997 and during fiscal 1996, 1995
and 1994, approximately $56,000 (unaudited) $240,000, $654,000 and $0 was
expended to create the infrastructure for the development and provide further
improvements to the first and second phase of the project. During the nine
months ended March 31, 1997 and during fiscal 1996 approximately $98,000
(unaudited) and $270,000 was received from the sale of lots in the development
resulting in gains from sale of these lots of $12,000 (unaudited) and $33,000.
The Service Corp. owns an additional 45 acres of land for future development.
5. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
March 31 June 30
1997 1996 1995
-------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Land $137,307 $137,307 $ 137,307
Office building 647,154 647,154 647,154
Furniture, fixtures and equipment 311,151 295,158 241,561
1,095,612 1,079,619 1,026,022
Less accumulated depreciation 506,720 476,155 450,829
------------------------------------------------
$588,892 $603,464 $575,193
================================================
</TABLE>
F-10
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
6. Deposits
Deposits consist of the following:
<TABLE>
<CAPTION>
March 31 June 30
1997 1996 1995
--------------------------------------------------------------------------
Average Average Average
Interest Interest Interest
Type Amount Rate Amount Rate Amount Rate
- -----------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Savings accounts:
<S> <C> <C> <C> <C> <C> <C>
Fixed rate, passbook $ 6,665,523 3.22% $ 6,698,172 3.25% $ 6,893,754 3.24%
Variable rate, money market 3,327,585 3.30 3,252,183 3.30 3,086,973 3.30
------------ ------------ ------------
9,993,108 3.24 9,950,355 3.27 9,980,727 3.25
Negotiable order of withdrawal
(NOW) accounts 4,132,925 2.16 4,076,132 2.06 3,585,634 2.37
Certificate accounts (original term):
3 months or less 1,447,548 5.15 456,505 4.90 1,561,726 5.76
6 months 5,123,009 5.04 2,129,690 4.56 2,183,016 4.58
12 months 1,088,151 4.77 1,105,698 4.88 1,225,702 4.67
13 months 2,046,713 5.34 2,009,878 5.59 1,973,966 5.55
18 months 615,945 4.93 301,032 5.08 237,923 4.13
23 months 5,843,717 5.88 4,629,213 6.10 2,918,100 6.13
30 months 1,162,372 5.26 1,330,297 4.97 1,801,943 4.49
36 months 2,200,941 5.13 2,868,783 4.94 3,458,851 4.88
Other certificates 3,600,430 5.99 6,742,557 5.77 4,247,419 6.44
------------ ------------ ------------
23,128,825 5.44 21,573,653 5.47 19,608,646 5.45
------------ ------------ ------------
$37,254,858 4.52% $35,600,140 4.47% $33,175,007 4.46%
==========================================================================
</TABLE>
The following table presents interest expense on deposits for the nine months
ended March 31, 1997 and 1996 (unaudited) and for the years ended June 30, 1996,
1995 and 1994.
<TABLE>
<CAPTION>
For the Nine Months For the Year
Ended March 31, Ended June 30,
1997 1996 1996 1995 1994
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Fixed rate, passbooks $161,838 $165,221 $224,314 $230,077 $252,205
Variable rate, money markets 66,593 80,898 79,569 84,406 86,427
NOWs 81,920 59,538 107,232 105,566 121,539
Certificates 916,663 843,237 1,127,771 921,876 813,058
-------------------------------------------------------------------------
Total interest on deposits $1,227,014 $1,148,894 $1,538,886 $1,341,925 $1,273,229
=========================================================================
</TABLE>
F-11
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
6. Deposits (continued)
The average interest rates represent the weighted average interest rates in
effect at March 31, 1997 and June 30, 1996 and 1995. Accrued interest payable,
which relates primarily to certificate accounts, totaled $53,000 (unaudited) at
March 31, 1997 and $39,000 at June 30, 1996 and 1995 and is included in other
liabilities. Cash paid for interest was $1,213,000 and $1,130,000 (unaudited)
for the nine months ended March 31, 1997 and 1996 and was $1,539,000,
$1,341,000, and $1,283,000 for the years ended June 30, 1996, 1995 and 1994,
respectively. Deposit accounts with balances in excess of $100,000 totaled
$6,596,000 with a weighted average interest rate of 4.65% as of June 30, 1996.
Deposits over $100,000 are not federally insured.
Contractual maturities of certificates of deposit were:
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
----------------------------------------------- -------------------------------------------
Year ended Certificates All other Certificates All other
June 30, over $100,000 Certificates Total over $100,000 Certificates Total
---------------------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
1997 $2,810,147 $2,933,169 $5,743,316 $3,801,300 $9,972,930 $13,774,230
1998 2,450,000 7,627,615 10,077,615 200,000 3,957,393 4,157,393
1999 200,000 4,281,908 4,481,908 100,000 1,685,798 1,785,798
2000 --- 1,279,876 1,279,876 100,000 690,018 790,018
2001 200,000 653,610 853,610 100,000 499,295 599,295
Thereafter 109,356 583,145 692,500 104,227 362,692 466,919
---------------------------------------------------------------------------------------------
$5,769,503 $17,359,323 $23,128,825 $4,405,527 $17,168,126 $21,573,653
=============================================================================================
</TABLE>
7. Advances from Federal Home Loan Bank of Indianapolis
Advances from the Federal Home Loan Bank of Indianapolis totaling $3,000,000 at
June 30, 1996 bear fixed and variable interest rates and are due at various
dates through October 1998. The Bank is required to maintain eligible loans in
its portfolio of at least 170% of outstanding advances as collateral for
advances from the Federal Home Loan Bank of Indianapolis.
The following table presents certain information relating to advances at
or for the nine months ended March 31, 1997 and 1996 and at or for the years
ended June 30, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
At or for the
Nine Months At or for the Year
Ended March 31, Ended June 30,
1997 1996 1996 1995 1994
----------------------------------------------------------------
(unaudited) (unaudited)
FHLB Advances:
<S> <C> <C> <C> <C> <C>
Outstanding at end of period............... $2,000,000 $2,000,000 $3,000,000 $1,500,000 $ ---
Average balance outstanding for period..... 3,275,000 1,800,000 1,923,000 462,000 ---
Maximum amount outstanding at any
month-end during the period.............. 5,000,000 2,000,000 3,000,000 1,500,000 ---
Weighted average interest rate
during the period..................... 5.49% 6.05% 5.94% 6.24% ---%
Weighted average interest rate
at end of period...................... 5.87 5.93 5.82 5.87 ---
</TABLE>
F-12
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
7. Advances from Federal Home Loan Bank of Indianapolis (continued)
Advances outstanding are scheduled to mature as follows:
March 31, June 30,
1997 1996
Year ended June 30, Amount Amount
-------------------------------------------------------------------
(unaudited)
1997 $1,000,000 $2,000,000
1998 --- ---
1999 $1,000,000 1,000,000
-------------------------------------
$2,000,000 $3,000,000
=====================================
8. Income Taxes
Effective July 1, 1993, the Bank changed its method of accounting for income
taxes from the deferred method to the liability method required by SFAS 109,
"Accounting for Income Taxes." As permitted, prior year's financial statements
were not restated. The cumulative effect of adopting SFAS 109 (computed as of
July 1, 1993) was to decrease net income for the year ended June 30, 1994 by
$25,972. Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
Nine months ended
March 31, Year ended June 30
1997 1996 1996 1995 1994
(unaudited) (unaudited)
Federal:
<S> <C> <C> <C> <C> <C>
Current $124,870 $193,530 $255,830 $196,285 $138,145
Deferred (31,558) (44,264) (58,491) (17,119) (9,448)
-----------------------------------------------------------------
93,312 149,266 197,339 179,166 128,697
State:
Current 35,701 54,565 71,900 56,017 43,035
Deferred (3,951) (11,804) (15,982) (4,634) (5,756)
-----------------------------------------------------------------
31,750 42,761 55,918 51,383 37,279
-----------------------------------------------------------------
Income tax expense $125,062 $192,027 $253,257 $230,549 $165,976
=================================================================
</TABLE>
Federal income taxes vary from the amount computed using the corporate statutory
rate due principally to income on the cash surrender value of a life insurance
policy (see Note 10).
F-13
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
8. Income Taxes (continued)
The reconciliation of income tax computed at the federal statutory rate to the
Bank's effective income tax rate is as follows:
<TABLE>
<CAPTION>
Nine months ended
March 31, Year ended June 30
----------------------------------------------------------------
1997 1996 1996 1995 1994
----------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Tax rate at federal statutory rate 34.0% 34.0% 34.0% 34.0% 34.0%
State franchise tax, net of
federal benefit 6.4 6.5 6.4 5.8 6.0
Income on cash surrender value of
life insurance policy (6.3) (6.1) (5.9) (5.0) (8.0)
Other (.2) .6 .1 1.4 3.1
----------------------------------------------------------------
Effective tax rate 33.9% 35.0% 34.6% 36.2% 35.1%
================================================================
</TABLE>
Deferred federal income taxes relate primarily to differing financial reporting
and income tax recognition principles regarding the allowance for loan losses,
investment security loss provisions and loan origination fees and costs. The
components of the Bank's net deferred tax asset included in other assets are as
follows:
<TABLE>
<CAPTION>
March 31, June 30
-------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------
(unaudited)
Deferred tax assets:
<S> <C> <C> <C>
Deferred loan origination fees $124,560 $118,904 $ 111,442
Unrealized loss on investment --- 35,698 34,458
Officer supplemental retirement plan 92,562 67,681 38,347
Allowance for loan losses 73,184 58,908 19,727
Other 11,429 15,621 7,747
------------------------------------------------------
301,735 296,812 211,721
Deferred tax liabilities:
FHLB stock dividend (27,132) (27,132) (27,132)
Deferred loan origination costs (80,883) (78,680) (74,826)
Percentage bad debt deduction (58,915) (58,915) (58,915)
Other (13,840) (13,116) (7,592)
------------------------------------------------------
(180,770) (177,843) (168,465)
------------------------------------------------------
Net deferred tax asset $120,965 $118,969 $ 43,256
======================================================
</TABLE>
The Bank and its wholly owned subsidiary file a consolidated federal income tax
return. The Bank paid $260,209 (unaudited) in the nine months ended March 31,
1997 and $248,646, $168,539 and $181,180 of federal and state income taxes in
1996, 1995 and 1994, respectively.
F-14
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
9. Retained Income
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Management believes that the Bank meets all
capital adequacy requirements to which it is subject.
Pursuant to the Financial Institutions Reform Recovery and Enforcement Act of
1989 (FIRREA), as implemented by a rule promulgated by the Office of Thrift
Supervision ("OTS"), savings institutions must meet three separate minimum
capital-to-assets requirements: (i) a risk-based capital requirement of 8% of
risk-weighted assets, (ii) a leverage ratio of 3% core capital to total assets
and (iii) a tangible capital requirement of 1.5% tangible core capital to total
assets. The following table summarizes, the Bank's capital requirements under
FIRREA and its actual capital and capital ratios.
<TABLE>
<CAPTION>
Capital Actual
Requirements Capital Amount
% $ % $ of Excess
---------------------------------------------------------------------------------
March 31, 1997 (unaudited):
<S> <C> <C> <C> <C> <C>
Risk-based 8.0% $2,098,000 17.9% $4,701,000 $ 2,603,000
Leverage 3.0 1,328,000 10.2 4,529,000 3,201,000
Tangible 1.5 664,000 10.2 4,529,000 3,865,000
June 30, 1996:
Risk-based 8.0% $2,072,000 16.8% $4,343,000 $ 2,271,000
Leverage 3.0 1,298,000 9.6 4,204,000 2,906,000
Tangible 1.5 649,000 9.6 4,204,000 3,555,000
June 30, 1995:
Risk-based 8.0% $1,816,000 16.6% $3,773,000 $ 1,957,000
Leverage 3.0 1,164,000 9.6 3,726,000 2,562,000
Tangible 1.5 582,000 9.6 3,726,000 3,144,000
</TABLE>
At March 31, 1997 and at June 30, 1996 and 1995, the Bank, through its Service
Corp., had approximately $1,043,000 (unaudited), $1,073,000 and $1,069,000,
respectively, invested in land held for development. Since enactment of FIRREA,
regulatory capital rules require a reduction of regulatory capital for such an
investment. The amount of regulatory capital reduction was 100% as of March 31,
1997 and June 30, 1996 and 1995. The reductions were partially offset by
non-withdrawable deposits includable in regulatory capital of $8,000
(unaudited), $8,000 and $3,000 at March 31, 1997, June 30, 1996 and June 30,
1995, respectively.
F-15
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
9. Retained Income (continued)
Pursuant to the Federal Deposit Insurance Corporation Improvement Act Prompt
Corrective Action regulations, for all periods presented, including the nine
months ended March 31, 1997 (unaudited), the Office of Thrift Supervision
categorized the Bank as "well-capitalized" under the regulatory framework for
prompt corrective action. To be categorized as well-capitalized the Bank must
maintain a total risk-based (as defined) ratio of 10%, a Tier 1 risk-based (as
defined) ratio of 6%, and a Tier 1 leverage (as defined) ratio of 5%. The Bank's
ratios were as follows:
<TABLE>
<CAPTION>
Total risk-based Tier 1 risk-based Tier 1 leveraged
<S> <C> <C> <C>
March 31, 1997 (unaudited) 17.9% 17.3% 10.2%
June 30, 1996 16.8% 16.2% 9.6%
June 30, 1995 16.6% 16.4% 9.6%
</TABLE>
Citizens has qualified under provisions of the Internal Revenue Code which
permit it to deduct from taxable income a provision for bad debts which differs
from the provision for such losses charged against income. Accordingly, retained
income includes income of approximately $1,349,000 for which no provision for
federal income taxes has been made. If, in the future, this portion of retained
income is used for any purpose other than to absorb loan losses, federal income
taxes may be imposed at the then applicable rates.
10. Employee Benefits
Substantially all full-time employees are covered by a defined benefit pension
plan administered by the Financial Institutions Retirement Fund (FIRF), a
multi-employer, industry sponsored plan. Plan information is not available for
the Bank as an individual entity within the multi-employer group. Pension
expense consisting primarily of plan administration costs amounted to
approximately $13,000 and $1,300 (unaudited) for the nine months ended March 31,
1997 and 1996 and $1,300, $16,400 and $27,300 for the years ended June 30, 1996,
1995 and 1994, respectively.
In addition to the above plan, the Bank adopted a supplemental non-qualified
pension plan during 1993 that provides certain officers with defined pension
benefits in excess of those provided in the qualified plan. To fund the plan,
the Bank purchased single premium life insurance contracts on the participating
employees. The carrying value of this investment, representing the cash
surrender value of the policies, was $1,065,000 and $1,025,000 (unaudited) at
March 31, 1997 and 1996 and $1,035,000 and $991,000 at June 30, 1996 and 1995,
respectively. During the nine months ended March 31, 1997 and 1996 and during
the years ended June 30, 1996, 1995 and 1994, $58,500 and $50,800 (unaudited),
$69,000, $47,400 and $29,600, respectively, were charged to expense under this
plan.
F-16
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
11. Fair Value of Financial Instruments
Statement No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Statement No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Bank.
The following methods and assumptions were used by the Bank in estimating its
fair value disclosures for financial instruments:
Cash and interest bearing deposits: The carrying amounts reported in the
balance sheet for cash and short-term investments approximate those assets'
fair values.
Investment securities available for sale: Fair values for investment
securities are based on quoted market prices, where available. If quoted
market prices are not available, fair values are based on quoted market
prices of comparable instruments.
Stock in Federal Home Loan Bank of Indianapolis: The amount of stock held
in the Federal Home Loan Bank is determined by regulation and is stated at
cost which approximates market.
Loans receivable: For variable-rate loans that reprice frequently, fair
values are based on carrying values. The fair values for all other loans
are estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality.
Deposit liabilities: The fair values disclosed for demand deposits,
including interest-bearing and noninterest-bearing accounts, passbook
savings, and certain types of money market accounts are, by definition,
equal to the amount payable on demand at the reporting date (i.e., their
carrying amounts). Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.
Federal Home Loan Bank advances: The carrying amounts approximate their
fair values.
F-17
<PAGE>
Citizens Savings Bank of Frankfort and Subsidiary
Notes to Consolidated Financial Statements (continued)
11. Fair Value of Financial Instruments (continued)
The estimated fair values of the Bank's financial instruments at June 30, 1996
are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
----------------------------------
Assets:
<S> <C> <C>
Cash on hand and in other institutions $655,488 $655,488
Interest bearing deposits 2,652,686 2,652,686
Investment securities available for sale 3,003,242 3,003,242
Stock in Federal Home Loan Bank of Indianapolis 331,600 331,600
Loans receivable 34,391,405 33,131,000
Liabilities:
Deposits 35,600,140 35,701,000
Federal Home Loan Bank advances 3,000,000 3,000,000
</TABLE>
12. Plan of Conversion (Unaudited)
On April 9, 1997, the Board of Directors adopted a Plan of Conversion ("Plan"),
whereby the Bank will convert from a federally-chartered mutual savings bank to
a federally-chartered capital stock savings bank. The Plan is subject to
approval by the regulatory authorities and members at a special meeting.
Pursuant to the Plan, non-transferable subscription rights to purchase shares of
stock of the savings Bank will be offered first to eligible account holders of
the Bank, then to an ESOP to be formed, then to supplemental eligible account
holders of the Bank, and then to the extent that stock is available, to certain
other members as of a specified dates, and then to members of the general public
wit hpreference given to residents of Clinton County. The capital stock will be
offered at $10.00 per share. The exact number of shares to be offered will be
determined by the Board of Directors based upon an appraisal to be made by an
independent appraisal firm. At least the minimum number of shares offered in the
conversion must be sold.
The plan provides that when the conversion is completed, a "liquidation account"
will be established in an amount equal to the regulatory capital of the Bank as
of the latest practicable date prior to consummation of the conversion. The
liquidation account is established to provide a limited priority claim to the
assets of the Bank to qualifying depositors ("eligible account holders") who
continue to maintain deposits in the Bank after conversion. In the unlikely
event of a complete liquidation of the Bank, and only in such an event, eligible
account holders would receive from the liquidation account, a liquidation
distribution based on their proportionate share of the total remaining
qualifying deposits.
The Bank may pay dividends on its stock after the conversion if its regulatory
capital would not thereby be reduced below the amount then required for the
aforementioned liquidation account and if such dividends are otherwise permitted
under applicable regulations. In general, regulations permit dividends within
guidelines based on current levels of net income and capital.
The OTS also has authority to prohibit an institution from paying dividends if,
in its opinion, the payment of dividends would constitute an unsafe or unsound
practice in light of the financial condition of the institution.
Costs of the conversion will be deducted from the proceeds of sale of common
stock and recorded as a reduction of common stock. If the conversion is not
completed, such costs will be charged to expense. No conversion costs had been
incurred as of March 31, 1997.
F-18
<PAGE>
GLOSSARY
1933 Act Securities Act of 1933, as amended
1934 Act Securities Exchange Act of 1934, as amended
APY Annual Percentage Yield
Associate The term "Associate," when used to indicate
a relationship with any person, means: (i)
Any corporation or organization (other than
the applicant or a majority-owned subsidiary
of the applicant) of which such person is an
officer or partner or is, directly or
indirectly, the beneficial owner of 10
percent or more of any class of equity
securities,
(ii) Any trust or other estate in which such
person has a substantial beneficial interest
or as to which such person serves as trustee
or in a similar fiduciary capacity, except
that, for the purposes ofss.563b.3(c)(6),
(c)(7), (c)(9), and (d)(4), it does not
include any tax-qualified employee stock
benefit plan or non-tax-qualified employee
stock benefit plan in which a person has a
substantial beneficial interest or serves as
a trustee or in a similar fiduciary
capacity, and that, for the purposes
ofss.563b.3(c)(8), it does not include any
tax-qualified employee stock benefit plan,
and
(iii) Any relative or spouse of such person,
or any relative of such spouse, who has the
same home as such person or who is a
director or officer of the applicant or any
of its parents or subsidiaries.
ATM Automated Teller Machine
BIF Bank Insurance Fund of the FDIC
Citizens Citizens Savings Bank of Frankfort
CLSC Citizens Loan and Service Corporation, a
wholly-owned subsidiary of Citizens Savings
Bank of Frankfort
Code The Internal Revenue Code of 1986, as
amended
Community Offering Offering for sale to members of the general
public of any shares of Common Stock not
subscribed for in the Subscription Offering,
with preference given to residents of
Clinton County, Indiana
<PAGE>
Common Stock Up to 1,058,000 shares of Common Stock, with
no par value, offered by Citizens Bancorp in
connection with the Conversion
Conversion Simultaneous conversion of Citizens Savings
Bank of Frankfort to stock form, the
issuance of Citizens' outstanding capital
stock to Citizens Bancorp and Citizens
Bancorp's offer and sale of Common Stock
Eligible Account Holders Savings account holders of Citizens with
account balances of at least $50 as of the
close of business on December 31, 1995
ERISA Employee Retirement Income Security Act of
1974, as amended
ESOP The Citizens Bancorp Employee Stock
Ownership Plan and Trust
Estimated Valuation Range Estimated pro forma market value of the
Common Stock ranging from $6,800,000 to
$9,200,000
Expiration Date 12:00 noon, Frankfort Time, on September
___, 1997
FASB Financial Accounting Standards Board
G-1
<PAGE>
FDIC Federal Deposit Insurance Corporation
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FedICIA Federal Deposit Insurance Corporation
Improvement Act of 1991, as amended
Holding Company Citizens Bancorp
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
Keller Keller & Company, Inc.
MMDA Money Market Demand Account
NASD National Association of Securities Dealers,
Inc.
Nasdaq System National Association of Securities Dealers
Automated Quotation System
NOW account Negotiable Order of Withdrawal Account
NPV Net portfolio value
OCC Office of the Comptroller of the Currency
Order Form Form for ordering stock accompanied by a
certification concerning certain matters
Other Members Savings account holders (other than Eligible
Account Holders and Supplemental Eligible
Account Holders) who are entitled to vote at
the Special Meeting due to the existence of
a savings account on the Voting Record Date
for the Special Meeting
OTS Office of Thrift Supervision
Pension Plan Multiple-employer, noncontributory defined
benefit retirement plan adopted by Citizens
for its full-time employees through Pentegra
Group (formerly known as Financial
Institutions Retirement Fund)
Plan or Plan of Conversion Plan of Citizens Savings Bank of Frankfort
to convert from a federally chartered mutual
savings bank to a federally chartered stock
savings bank and the issuance of all of
Citizens' outstanding capital stock to
Citizens Bancorp and the issuance of
Citizens Bancorp's Common Stock to the
public
Purchase Price $10.00 per share price of the Common Stock
QTI Qualified thrift investment
QTL Qualified thrift lender
REO Real Estate Owned
RRP Management Recognition and Retention Plan to
be submitted for approval at a meeting of
the Holding Company's shareholders to be
held at least six months after the
completion of the Conversion
SAIF Savings Association Insurance Fund of the
FDIC
SEC Securities and Exchange Commission
Special Meeting Special Meeting of members of Citizens
called for the purpose of approving the Plan
G-2
<PAGE>
Stock Option Plan The Citizens Bancorp Stock Option Plan for
directors and officers
Subscription Offering Offering of non-transferable rights to
subscribe for the Common Stock, in order of
priority, to Eligible Account Holders, the
ESOP, Supplemental Eligible Account Holders
and Other Members
Supplemental Eligible Depositors of Citizens Savings Bank of
Account Holders Frankfort who are not Eligible Account
Holders, with account balances of at least
$50 on June 30, 1997
Trident Securities Trident Securities, Inc.
Voting Record Date The close of business on July 25, 1997, the
date for determining members entitled to
vote at the special Meeting.
G-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution(1).
Blue Sky Legal Services and Registration Fees $ 15,000
OTS Filing Fees $ 8,400
NASD Filing Fee $ 1,558
Securities and Exchange Commission Registration Fee $ 3,206
NASDAQ Small Cap Market Listing Fee $ 1,000
Legal Services and Disbursements - Issuer's counsel $100,000
Accounting Services $ 75,000
Appraisal fees and expenses $ 15,000
Business plan fees and expenses $ 4,000
Conversion agent fees and expenses $ 6,000
Printing costs $ 55,000
Postage and mailing $ 20,000
Commissions and other offering fees (2) $ 88,950
Expenses of Sales Agents
(Including Counsel Fees and Disbursements) $ 45,000
Advertising $ 2,000
Transfer agent fees $ 2,000
Other expenses $ 7,886
--------
TOTAL (3) $450,000
========
(1) Costs represented by salaries and wages of regular employees and
officers of the Registrant are excluded.
(2) Assumes that the Common Stock is sold for $8,000,000, the midpoint of
the Estimated Valuation Range, that no shares of stock will be sold
through brokers, that all shares are sold in the Subscription Offering,
and that executive officers and directors of the Registrant and of
Citizens Savings Bank of Frankfort and their Associates and the
Citizens Bancorp Employee Stock Ownership Plan acquire 204,000 shares.
(3) All the above items, except the Registration, OTS and NASD Filing Fees,
are estimated.
Item 14. Indemnification of Directors and Officers.
Section 21 of the Indiana Business Corporation Law, as amended (the "BCL"),
grants to each corporation broad powers to indemnify directors, officers,
employees or agents against expenses incurred in certain proceedings if the
conduct in question was found to be in good faith and was reasonably believed to
be in the corporation's best interests. This statute provides, however, that
this indemnification should not be deemed exclusive of any other indemnification
rights provided by the articles of incorporation, by-laws, resolution or other
authorization adopted by a majority vote of the voting shares then issued and
outstanding. Section 10.05 and Article 13 of the Articles of Incorporation of
the Registrant state as follows:
Section 10.05. Limitation of Liability and Reliance on Corporate Records
and Other Information.
Clause 10.051. General Limitation. No Director, member of any committee
of the Board of Directors, or of another committee appointed by the Board,
Officer, employee or agent of the Corporation ("Corporate Person") shall be
liable for any loss or damage if, in taking or omitting to take any action
causing such loss or damage, either (1) such Corporate Person acted (A) in
good faith, (B) with the care an ordinarily prudent person in a like
position would have exercised under similar circumstances, and (C) in a
manner such Corporate Person reasonably believed was in the best interests
of the Corporation, or (2) such Corporate Person's breach of or failure to
act in accordance with the standards of conduct set forth in Clause
10.051(1) above (the "Standards of Conduct") did not constitute willful
misconduct or recklessness.
Clause 10.052. Reliance on Corporate Records and Other Information. Any
"Corporate Person" shall be fully protected, and shall be deemed to have
complied with the Standards of Conduct, in relying in good faith, with
respect to any information contained therein, upon (1) the Corporate
Records, or (2) information, opinions, reports or statements (including
financial statements and other financial data) prepared or presented by (A)
one or more other Corporate Persons whom such Corporate Person reasonably
believes to be competent in the matters presented, (B) legal counsel,
public accountants or other persons as to matters that such Corporate
Person reasonably believes are within such person's professional or expert
competence, (C) a committee of the Board of Directors or other committee
appointed by the Board of Directors, of which such Corporate Person is not
a member, if such Corporate Person reasonably believes such committee of
the Board of Directors or such appointed committee merits confidence, or
(D) the Board of Directors, if such Corporate Person is not a Director and
reasonably believes that the Board merits confidence.
<PAGE>
ARTICLE 13
Indemnification
Section 13.01. General. The Corporation shall, to the fullest extent to
which it is empowered to do so by the Act, or any other applicable laws, as
from time to time in effect, 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 and whether formal or informal, by reason of the fact that he
is or was a Director, Officer, employee or agent of the Corporation, or
who, while serving as such Director, Officer, employee or agent of the
Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, whether for profit or not, against expenses (including
counsel fees), judgments, settlements, penalties and fines (including
excise taxes assessed with respect to employee benefit plans) actually or
reasonably incurred by him in accordance with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably
believed, in the case of conduct in his official capacity, was in the best
interest of the Corporation, and in all other cases, was not opposed to the
best interests of the Corporation, and, with respect to any criminal action
or proceeding, he either had reasonable cause to believe his conduct was
lawful or no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not meet the prescribed standard of conduct.
Section 13.02. Authorization of Indemnification. To the extent that a
Director, Officer, employee or agent of the Corporation has been
successful, on the merits or otherwise, in the defense of any action, suit
or proceeding referred to in Section 13.01 of this Article, or in the
defense of any claim, issue or matter therein, the Corporation shall
indemnify such person against expenses (including counsel fees) actually
and reasonably incurred by such person in connection therewith. Any other
indemnification under Section 13.01 of this Article (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case, upon a determination that indemnification of the Director, Officer,
employee or agent is permissible in the circumstances because he has met
the applicable standard of conduct. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of
Directors who were not at the time parties to such action, suit or
proceeding; or (2) if a quorum cannot be obtained under subdivision (1), by
a majority vote of a committee duly designated by the Board of Directors
(in which designation Directors who are parties may participate),
consisting solely of two or more Directors not at the time parties to such
action, suit or proceeding; or (3) by special legal counsel: (A) selected
by the Board of Directors or its committee in the manner prescribed in
subdivision (1) or (2), or (B) if a quorum of the Board of Directors cannot
be obtained under subdivision (1) and a committee cannot be designated
under subdivision (2), selected by a majority vote of the full Board of
Directors (in which selection Directors who are parties may participate);
or (4) by the Shareholders, but shares owned by or voted under the control
of Directors who are at the time parties to such action, suit or proceeding
may not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as
to reasonableness of expenses shall be made by those entitled under
subsection (3) to select counsel.
Section 13.03. Good Faith Defined. For purposes of any determination
under Section 13.01 of this Article 13, a person shall be deemed to have
acted in good faith and to have otherwise met the applicable standard of
conduct set forth in Section 13.01 if his action is based on information,
opinions, reports, or statements, including financial statements and other
financial data, if prepared or presented by (1) one or more Officers or
employees of the Corporation or another enterprise whom he reasonably
believes to be reliable and competent in the matters presented; (2) legal
counsel, public accountants, appraisers or other persons as to matters he
reasonably believes are within the person's professional or expert
competence; or (3) a committee of the Board of Directors of the Corporation
or another enterprise of which the person is not a member if he reasonably
believes the committee merits confidence. The term "another enterprise" as
used in this Section 13.03 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent.
The provisions of this Section 13.03 shall not be deemed to be exclusive or
to limit in any way the circumstances in which a person may be deemed to
have met the applicable standards of conduct set forth in Section 13.01 of
this Article 13.
<PAGE>
Section 13.04. Payment of Expenses in Advance. Expenses incurred in
connection with any civil or criminal action, suit or proceeding may be
paid for or reimbursed by the Corporation in advance of the final
disposition of such action, suit or proceeding, as authorized in the
specific case in the same manner described in Section 13.02 of this
Article, upon receipt of a written affirmation of the Director, Officer,
employee or agent's good faith belief that he has met the standard of
conduct described in Section 13.01 of this Article and upon receipt of a
written undertaking by or on behalf of the Director, Officer, employee or
agent to repay such amount if it shall ultimately be determined that he did
not meet the standard of conduct set forth in this Article 13, and a
determination is made that the facts then known to those making the
determination would not preclude indemnification under this Article 13.
Section 13.05. Provisions Not Exclusive. The indemnification provided
by this Article shall not be deemed exclusive of any other rights to which
a person seeking indemnification may be entitled under these Articles of
Incorporation, the Corporation's Code of By-Laws, any resolution of the
Board of Directors or Shareholders, any other authorization, whenever
adopted, after notice, by a majority vote of all Voting Stock then
outstanding, or any contract, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a Director, Officer, employee
or agent, and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 13.06. Vested Right to Indemnification. The right of any
individual to indemnification under this Article shall vest at the time of
occurrence or performance of any event, act or omission giving rise to any
action, suit or proceeding of the nature referred to in Section 13.01 of
this Article 13 and, once vested, shall not later be impaired as a result
of any amendment, repeal, alteration or other modification of any or all of
these provisions. Notwithstanding the foregoing, the indemnification
afforded under this Article shall be applicable to all alleged prior acts
or omissions of any individual seeking indemnification hereunder,
regardless of the fact that such alleged acts or omissions may have
occurred prior to the adoption of this Article. To the extent such prior
acts or omissions cannot be deemed to be covered by this Article 13, the
right of any individual to indemnification shall be governed by the
indemnification provisions in effect at the time of such prior acts or
omissions.
Section 13.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer,
employee or agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability
asserted against or incurred by the individual in that capacity or arising
from the individual's status as a Director, Officer, employee or agent,
whether or not the Corporation would have power to indemnify the individual
against the same liability under this Article.
Section 13.08. Additional Definitions. For purposes of this Article,
references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in
which the predecessor's existence ceased upon consummation of the
transaction.
For purposes of this Article, serving an employee benefit plan at the
request of the Corporation shall include any service as a Director,
Officer, employee or agent of the Corporation which imposes duties on, or
involves services by such Director, Officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries. A
person who acted in good faith and in a manner he reasonably believed to be
in the best interests of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best interest of the Corporation" referred to in this Article.
<PAGE>
For purposes of this Article, "party" includes any individual who is or
was a plaintiff, defendant or respondent in any action, suit or proceeding,
or who is threatened to be made a named defendant or respondent in any
action, suit or proceeding.
For purposes of this Article, "official capacity," when used with
respect to a Director, shall mean the office of director of the
Corporation; and when used with respect to an individual other than a
Director, shall mean the office in the Corporation held by the Officer or
the employment or agency relationship undertaken by the employee or agent
on behalf of the Corporation. "Official capacity" does not include service
for any other foreign or domestic corporation or any partnership, joint
venture, trust, employee benefit plan, or other enterprise, whether for
profit or not.
Section 13.09. Payments a Business Expense. Any payments made to any
indemnified party under this Article under any other right to
indemnification shall be deemed to be an ordinary and necessary business
expense of the Corporation, and payment thereof shall not subject any
person responsible for the payment, or the Board of Directors, to any
action for corporate waste or to any similar action.
<PAGE>
Under the Act, an Indiana corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another enterprise, against any
liability asserted against him or incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of the Act.
The Registrant has purchased insurance designed to protect and indemnify the
Registrant and its officers and directors in case they are required to pay any
amounts arising from certain claims, including claims under the Securities Act
of 1933, which might be made against the officers and directors by reason of any
actual or alleged act, error, omission, misstatement, misleading statement,
neglect, or breach of duty while acting in their respective capacities as
officers or directors of the Registrant.
Item 15. Recent Sales of Unregistered Securities.
Because the Registrant was only recently incorporated to act as a holding
company upon the completion of the offering registered by means of this
Registration Statement, the Registrant has not yet issued any shares of its
capital stock or other securities.
Item 16. Exhibits and Financial Statement Schedules.
(a) The exhibits furnished with this Registration Statement are
listed beginning on page E-l.
(b) No financial statement schedules are required.
<PAGE>
Item 17. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii)To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high 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% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table on 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. (b) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) 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.
(2) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of an action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Frankfort,
State of Indiana, on July 23, 1997.
CITIZENS BANCORP
By /s/ Fred W. Carter
-------------------------------
Fred W. Carter
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive
Officer and Director:
/s/ Fred W. Carter President and )
-------------------------- Chief Executive Officer )
Fred W. Carter )
)
)
)
(2) Principal Financial )
and Accounting )
Officer: )
)
)
/s/ Stephen D. Davis Controller )
------------------------- )
Stephen D. Davis )
)
)
(3) The Board of Directors: )
)
)
ROBERT F. AYRES Director ) July 23, 1997
)
)
FRED W. CARTER Director )
)
)
PERRY W. LEWIS Director )
)
)
JOHN J. MILLER Director )
)
)
BILLY J. WRAY Director )
)
)
By: /s/ Fred W. Carter
---------------------------
Fred W. Carter
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
1 Form of Agency Agreement to be entered into among Registrant,
Citizens Savings Bank of Frankfort, and Trident Securities, Inc.*
2 Plan of Conversion*
3 (1) Registrant's Articles of Incorporation*
(2) Registrant's Code of By-Laws*
4 Form of Stock Certificate*
5 Opinion of Barnes & Thornburg re legality of securities being
registered*
8 (1) Opinion of Barnes & Thornburg re tax matters*
(2) Opinion of Keller & Company, Inc. re economic value of
Subscription Rights*
10(1) Letter Agreements entered into between Registrant and Keller &
Company, Inc. relating to appraisal and business plan*
(2) Citizens Bancorp Stock Option Plan
(3) Citizens Savings Bank of Frankfort Recognition and Retention Plan
and Trust
(4) Citizens Bancorp Employee Stock Ownership Plan and Trust
Agreement*
(5) Employment Agreement between Citizens Savings Bank of Frankfort
and Fred W. Carter
(6) Director Deferred Compensation Agreement -- Fred W. Carter*; First
Amendment thereto
(7) Executive Supplemental Retirement Agreement and First Amendment
thereto -- Fred W. Carter*; Second Amendment thereto
(8) Executive Supplemental Retirement Agreement and First Amendment
thereto -- Stephen D. Davis*; Second Amendment thereto
(9) Executive Supplemental Retirement Agreement and First Amendment
thereto -- Cindy S. Chambers*; Second Amendment thereto
(10) Exempt Loan and Share Purchase Agreement between Trust under
Citizens Bancorp Employee Stock Ownership Plan and Trust Agreement
and Citizens Bancorp*
21 Subsidiaries of the Registrant*
23(1) Consent of Keller & Company, Inc.*
(2) Consent of Ernst & Young, LLP
(3) Consent of Barnes & Thornburg (included in Exhibit 5)*
24 Power of Attorney included on page S-6 of the Registration
Statement*
99(1) Appraisal Report of Keller & Company, Inc.
(2) Stock Order Form
- -------------
*Previously filed
E-1
<PAGE>
===========================================================================
No person has been authorized to give any information or to make any
representation other than as contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having
been authorized by the Holding Company or Citizens. This Prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
security other than the shares of Common Stock 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. Neither the delivery of this Prospectus nor any sale
hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof.
Citizens Bancorp
(Proposed Holding Company for
Citizens Savings Bank of Frankfort)
Up to 920,000 Shares
Common Stock
(without par value)
SUBSCRIPTION AND
COMMUNITY OFFERING
PROSPECTUS
TRIDENT SECURITIES, INC.
August ____, 1997
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED
Until __________________, _________, all dealers effecting transactions in
the registered securities, whether or not participating in this
distribution, may be required to deliver a prospectus. This is in addition
to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
===========================================================================
Exhibit 10(2)
CITIZENS BANCORP
STOCK OPTION PLAN
1. Purpose. The purpose of the Citizens Bancorp Stock Option Plan (the
"Plan") is to provide to directors, officers and other key employees of Citizens
Bancorp (the "Holding Company") and its majority-owned and wholly-owned
subsidiaries (individually a "Subsidiary" and collectively the "Subsidiaries"),
including, but not limited to, Citizens Savings Bank of Frankfort upon its
conversion to stock form ("Citizens"), who are materially responsible for the
management or operation of the business of the Holding Company or a Subsidiary
and have provided valuable services to the Holding Company or a Subsidiary, a
favorable opportunity to acquire Common Stock, without par value ("Common
Stock"), of the Holding Company, thereby providing them with an increased
incentive to work for the success of the Holding Company and its Subsidiaries
and better enabling each such entity to attract and retain capable directors and
executive personnel.
2. Administration of the Plan. The Plan shall be administered,
construed and interpreted by a committee (the "Committee") consisting of at
least two members of the Board of Directors of the Holding Company, each of whom
is a "Non-Employee Director" within the meaning of the definition of that term
contained in Reg. ss. 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"). The members of the Committee shall be
designated from time to time by the Board of Directors of the Holding Company.
The decision of a majority of the members of the Committee shall constitute the
decision of the Committee, and the Committee may act either at a meeting at
which a majority of the members of the Committee is present or by a written
consent signed by all members of the Committee. The Committee shall have the
sole, final and conclusive authority to determine, consistent with and subject
to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom options or successive
options shall be granted under the Plan;
(b) the time when options shall be granted hereunder;
(c) the number of shares of Common Stock to be covered under each
option;
(d) the option price to be paid upon the exercise of each option;
(e) the period within which each such option may be exercised;
(f) the extent to which an option is an incentive stock option or a
non-qualified stock option; and
(g) the terms and conditions of the respective agreements by which
options granted shall be evidenced.
The Committee shall also have authority to prescribe, amend, waive, and rescind
rules and regulations relating to the Plan, to accelerate the vesting of any
stock options made hereunder (subject to Office of Thrift and Supervision
regulations), to make amendments or modifications in the terms and conditions
(including exercisability) of the options relating to the effect of termination
of employment of the optionee (subject to the last sentence of Section 9
hereof), to waive any restrictions or conditions applicable to any option or the
exercise thereof, and to make all other determinations necessary or advisable in
the administration of the Plan.
3. Eligibility. The Committee may, consistent with the purposes of the
Plan, grant options to officers and other key employees and directors or
directors emeritus (whether or not also employees) of the Holding Company or of
a Subsidiary who in the opinion of the Committee are from time to time
materially responsible for the management or operation of the business of the
Holding Company or of a Subsidiary and have provided valuable services to the
Holding Company or a Subsidiary; provided, however, that in no event may any
employee who owns (after application of the ownership rules in ss. 425(d) of the
Internal Revenue Code of 1986, as amended (the "Code")) shares of stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Holding Company or any of its Subsidiaries be granted an
incentive stock option hereunder unless at the time such option is granted the
option price is at least 110% of the fair market value of the stock subject to
- 1 -
<PAGE>
the option and such option by its terms is not exercisable after the expiration
of five (5) years from the date such option is granted. Subject to the
provisions of Section 7 hereof, an individual who has been granted an option
under the Plan (an "Optionee"), if he is otherwise eligible, may be granted an
additional option or options if the Committee shall so determine.
4. Stock Subject to the Plan. There shall be reserved for issuance upon
the exercise of options granted under the Plan, shares of Common Stock of the
Holding Company equal to 10% of the total number of shares of Common Stock
issued by the Holding Company upon the conversion of Citizens from mutual to
stock form, which may be authorized but unissued shares or treasury shares of
the Holding Company. Subject to Section 7 hereof, the shares for which options
may be granted under the Plan shall not exceed that number. If any option shall
expire or terminate or be surrendered for any reason without having been
exercised in full, the unpurchased shares subject thereto shall (unless the Plan
shall have terminated) become available for other options under the Plan.
5. Terms of Options. Each option granted under the Plan shall be
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem appropriate in
each case:
(a) Option Price. The price to be paid for shares of stock
upon the exercise of each option shall be determined by the Committee
at the time such option is granted, but such price in no event shall be
less than the fair market value, as determined by the Committee
consistent with Treas. Reg. ss. 20.2031-2 and any requirements of ss.
422A of the Code, of such stock on the date on which such option is
granted.
(b) Period for Exercise of Option. An option shall not be
exercisable after the expiration of such period as shall be fixed by
the Committee at the time of the grant thereof, but such period in no
event shall exceed ten (10) years and one day from the date on which
such option is granted; provided, that incentive stock options granted
hereunder shall have terms not in excess of ten (10) years and options
issued to directors or directors emeritus of the Holding Company or its
Subsidiaries who are not employees of the Holding Company or its
Subsidiaries ("Outside Directors") shall be for a period of ten (10)
years and one day from the date of grant thereof. Options shall be
subject to earlier termination as hereinafter provided.
(c) Exercise of Options. The option price of each share of
stock purchased upon exercise of an option shall be paid in full at the
time of such exercise. Payment may be in (i) cash, (ii) if the Optionee
may do so in conformity with Regulation T (12 C.F.R. ss. 220.3(e)(4))
without violating ss. 16(b) or ss. 16(c) of the 1934 Act, pursuant to a
broker's cashless exercise procedure, by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Holding Company the total option price in cash
and, if desired, the amount of any taxes to be withheld from the
Optionee's compensation as a result of any withholding tax obligation
of the Holding Company or any of its Subsidiaries, as specified in such
notice, or (iii) beginning on a date which is three years following
Citizens' conversion from mutual to stock form and with the approval of
the Committee, by tendering whole shares of the Holding Company's
Common Stock owned by the Optionee and cash having a fair market value
equal to the cash exercise price of the shares with respect to which
the option is being exercised. For this purpose, any shares so tendered
by an Optionee shall be deemed to have a fair market value equal to the
mean between the highest and lowest quoted selling prices for the
shares on the date of exercise of the option (or if there were no sales
on such date the weighted average of the means between the highest and
lowest quoted selling prices for the shares on the nearest date before
and the nearest after the date of exercise of the option as prescribed
by Treas. Reg. ss. 20-1031-2), as reported in The Wall Street Journal
or a similar publication selected by the Committee. The Committee shall
have the authority to grant options exercisable in full at any time
during their term, or exercisable in such installments at such times
during their term as the Committee may determine; provided, however,
that options shall not be exercisable during the first six (6) months
- 2 -
<PAGE>
of their term, and provided further that options shall become
exercisable at the rate of 20% per year beginning on the anniversary of
the date of grant of such options. Installments not purchased in
earlier periods shall be cumulated and be available for purchase in
later periods. Subject to the other provisions of this Plan, an option
may be exercised at any time or from time to time during the term of
the option as to any or all whole shares which have become subject to
purchase pursuant to the terms of the option or the Plan, but not at
any time as to fewer than one hundred (100) shares unless the remaining
shares which have become subject to purchase are fewer than one hundred
(100) shares. An option may be exercised only by written notice to the
Holding Company, mailed to the attention of its Secretary, signed by
the Optionee (or such other person or persons as shall demonstrate to
the Holding Company his or their right to exercise the option),
specifying the number of shares in respect of which it is being
exercised, and accompanied by payment in full in either cash or by
check in the amount of the aggregate purchase price therefor, by
delivery of the irrevocable broker instructions referred to above, or,
if the Committee has approved the use of the stock swap feature
provided for above, followed as soon as practicable by the delivery of
the option price for such shares.
(d) Certificates. The certificate or certificates for the
shares issuable upon an exercise of an option shall be issued as
promptly as practicable after such exercise. An Optionee shall not have
any rights of a shareholder in respect to the shares of stock subject
to an option until the date of issuance of a stock certificate to him
for such shares. In no case may a fraction of a share be purchased or
issued under the Plan, but if, upon the exercise of an option, a
fractional share would otherwise be issuable, the Holding Company shall
pay cash in lieu thereof.
(e) Termination of Option. If an Optionee (other than an
Outside Director) ceases to be an employee of the Holding Company and
the Subsidiaries for any reason other than retirement, permanent and
total disability (within the meaning of ss. 22(e)(3) of the Code), or
death, any option granted to him shall forthwith terminate. Leave of
absence approved by the Committee shall not constitute cessation of
employment. If an Optionee (other than an Outside Director) ceases to
be an employee of the Holding Company and the Subsidiaries by reason of
retirement, any option granted to him may be exercised by him in whole
or in part within three (3) years after the date of his retirement, to
the extent the option was otherwise exercisable at the date of his
retirement; provided, however, that if such employee remains a director
or director emeritus of the Holding Company, the option granted to him
may be exercised by him in whole or in part until the later of (a)
three (3) years after the date of his retirement, or (b) six months
after his service as a director or director emeritus of the Holding
Company terminates. (The term "retirement" as used herein means such
termination of employment as shall entitle such individual to early or
normal retirement benefits under any then existing pension plan of the
Holding Company or a Subsidiary.) If an Optionee (other than an Outside
Director) ceases to be an employee of the Holding Company and the
Subsidiaries by reason of permanent and total disability (within the
meaning of ss. 22(e)(3) of the Code), any option granted to him may be
exercised by him in whole or in part within one (1) year after the date
of his termination of employment by reason of such disability whether
- 3 -
<PAGE>
or not the option was otherwise exercisable at the date of such
termination. Options granted to Outside Directors shall cease to be
exercisable six (6) months after the date such Outside Director is no
longer a director or director emeritus of the Holding Company and its
Subsidiaries for any reason other than death or disability. If an
Optionee who is an Outside Director ceases to be a director or a
director emeritus of the Holding Company or its Subsidiaries by reason
of disability, any option granted to him may be exercised in whole or
in part within one (1) year after the date the Optionee ceases to be a
director or a director emeritus by reason of such disability, whether
or not the option was otherwise exercisable at such date. In the event
of the death of an Optionee while in the employ or service as a
director or director emeritus of the Holding Company or a Subsidiary,
or, if the Optionee is not an Outside Director, within three (3) years
after the date of his retirement (or, if later, six months following
his termination of service as a director or director emeritus of the
Holding Company) or within one (1) year after the termination of his
employment by reason of permanent and total disability (within the
meaning of ss. 22(e)(3) of the Code), or, if the Optionee is an Outside
Director, within six (6) months after he is no longer a director or
director emeritus of the Holding Company or its Subsidiaries for
reasons other than disability or, within one (1) year after the
termination of his service by reason of disability, any option granted
to him may be exercised in whole or in part at any time within one (1)
year after the date of such death by the executor or administrator of
his estate or by the person or persons entitled to the option by will
or by applicable laws of descent and distribution until the expiration
of the option term as fixed by the Committee, whether or not the option
was otherwise exercisable at the date of his death. Notwithstanding the
foregoing provisions of this subsection (e), no option shall in any
event be exercisable after the expiration of the period fixed by the
Committee in accordance with subsection (b) above.
(f) Nontransferability of Option. No option may be transferred
by the Optionee otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, and during the lifetime of the
Optionee options shall be exercisable only by the Optionee or his
guardian or legal representative.
(g) No Right to Continued Service. Nothing in this Plan or in
any agreement entered into pursuant hereto shall confer on any person
any right to continue in the employ or service of the Holding Company
or its Subsidiaries or affect any rights the Holding Company, a
Subsidiary, or the shareholders of the Holding Company may have to
terminate his service at any time.
(h) Maximum Incentive Stock Options. The aggregate fair market
value of stock with respect to which incentive stock options (within
the meaning of ss. 422A of the Code) are exercisable for the first time
by an Optionee during any calendar year under the Plan or any other
plan of the Holding Company or its Subsidiaries shall not exceed
$100,000. For this purpose, the fair market value of such shares shall
be determined as of the date the option is granted and shall be
computed in such manner as shall be determined by the Committee,
consistent with the requirements of ss. 422A of the Code.
(i) Agreement. Each option shall be evidenced by an agreement
between the Optionee and the Holding Company which shall provide, among
other things, that, with respect to incentive stock options, the
Optionee will advise the Holding Company immediately upon any sale or
transfer of the shares of Common Stock received upon exercise of the
option to the extent such sale or transfer takes place prior to the
later of (a) two (2) years from the date of grant or (b) one (1) year
from the date of exercise.
(j) Investment Representations. Unless the shares subject to
an option are registered under applicable federal and state securities
laws, each Optionee by accepting an option shall be deemed to agree for
himself and his legal representatives that any option granted to him
and any and all shares of Common Stock purchased upon the exercise of
the option shall be acquired for investment and not with a view to, or
for the sale in connection with, any distribution thereof, and each
notice of the exercise of any portion of an option shall be accompanied
by a representation in writing, signed by the Optionee or his legal
representatives, as the case may be, that the shares of Common Stock
are being acquired in good faith for investment and not with a view to,
or for sale in connection with, any distribution thereof (except in
case of the Optionee's legal representatives for distribution, but not
for sale, to his legal heirs, legatees and other testamentary
beneficiaries). Any shares issued pursuant to an exercise of an option
may bear a legend evidencing such representations and restrictions.
6. Incentive Stock Options and Non-Qualified Stock Options. Options
granted under the Plan may be incentive stock options under ss. 422A of the Code
or non-qualified stock options, provided, however, that Outside Directors shall
be granted only non-qualified stock options. All options granted hereunder will
be clearly identified as either incentive stock options or non-qualified stock
options. In no event will the exercise of an incentive stock option affect the
right to exercise any non-qualified stock option, nor shall the exercise of any
non-qualified stock option affect the right to exercise any incentive stock
option. Nothing in this Plan shall be construed to prohibit the grant of
incentive stock options and non-qualified stock options to the same person,
provided, further, that incentive stock options and non-qualified stock options
shall not be granted in a manner whereby the exercise of one non-qualified stock
option or incentive stock option affects the exercisability of the other.
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7. Adjustment of Shares. In the event of any change after the effective
date of the Plan in the outstanding stock of the Holding Company by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
of shares, exchange of shares, merger or consolidation, liquidation,
extraordinary distribution (consisting of cash, securities, or other assets), or
any other change after the effective date of the Plan in the nature of the
shares of stock of the Holding Company, the Committee shall determine what
changes, if any, are appropriate in the number and kind of shares reserved under
the Plan, and the Committee shall determine what changes, if any, are
appropriate in the option price under and the number and kind of shares covered
by outstanding options granted under the Plan. Any determination of the
Committee hereunder shall be conclusive.
8. Tax Withholding. Whenever the Holding Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the Holding
Company shall have the right to require the Optionee or his or her legal
representative to remit to the Holding Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares, and whenever under
the Plan payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any federal, state and/or local withholding tax
requirements. If permitted by the Committee and pursuant to procedures
established by the Committee, an Optionee may make a written election to have
shares of Common Stock having an aggregate fair market value, as determined by
the Committee, consistent with the requirements of Treas. Reg. ss. 20.2031-2,
sufficient to satisfy the applicable withholding taxes, withheld from the shares
otherwise to be received upon the exercise of a non-qualified option.
9. Amendment. Subject to Section 13, the Board of Directors of the
Holding Company may amend the Plan from time to time and, with the consent of
the Optionee, the terms and provisions of his option, except that without the
approval of the holders of at least a majority of the shares of the Holding
Company voting in person or by proxy at a duly constituted meeting or
adjournment thereof:
(a) the number of shares of stock which may be reserved for
issuance under the Plan may not be increased except as provided in
Section 7 hereof;
(b) the period during which an option may be exercised may not
be extended beyond ten (10) years and one day from the date on which
such option was granted; and
(c) the class of persons to whom options may be granted under
the Plan shall not be modified materially.
No amendment of the Plan, however, may, without the consent of the
Optionees, make any changes in any outstanding options theretofore granted under
the Plan which would adversely affect the rights of such Optionees.
10. Termination. The Board of Directors of the Holding Company may
terminate the Plan at any time and no option shall be granted thereafter. Such
termination, however, shall not affect the validity of any option theretofore
granted under the Plan. In any event, no incentive stock option may be granted
under the Plan after the date which is ten (10) years from the effective date of
the Plan.
11. Successors. This Plan shall be binding upon the successors and
assigns of the Holding Company.
12. Governing Law. The terms of any options granted hereunder and the
rights and obligations hereunder of the Holding Company, the Optionees and their
successors in interest shall, except to the extent governed by federal law, be
governed by Indiana law.
13. Government and Other Regulations. The obligations of the Holding
Company to issue or transfer and deliver shares under options granted under the
Plan shall be subject to compliance with all applicable laws, governmental rules
and regulations (including Officer of Thrift and Supervision regulations), and
administrative action. In particular, grants of stock options under the Plan
shall comply with the requirements of 12. C.F.R. ss. 563b.3(g)(4)(vi), to the
extent applicable to such grants.
14. Effective Date. The Plan shall become effective on the date it is
approved by the holders of at least a majority of the shares of the Holding
Company entitled to vote at a duly constituted meeting or adjournment thereof.
The options granted pursuant to the Plan may not be exercised until the Board of
Directors of the Holding Company has been advised by counsel that such approval
has been obtained and all other applicable legal requirements have been met.
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CITIZENS SAVINGS BANK OF FRANKFORT
RECOGNITION AND RETENTION PLAN AND TRUST
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Citizens Savings Bank of Frankfort hereby establishes the Recognition
and Retention Plan (the "Plan") and Trust (the "Trust") upon the terms and
conditions hereinafter stated in this Recognition and Retention Plan and Trust
Agreement (the "Agreement").
1.02 The Trustee, which initially shall be _______________________________,
hereby accepts this Trust and agrees to hold the Trust assets existing on the
date of this Agreement and all additions and accretions thereto upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain directors and executive officers
in key positions by providing such persons with a proprietary interest in the
Holding Company (as hereinafter defined) as compensation for their contributions
to the Holding Company and to the Bank and its Affiliates (as hereinafter
defined) and as an incentive to make such contributions and to promote the
Holding Company's and the Bank's growth and profitability 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. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" means the Holding Company and those subsidiaries or
affiliates of the Holding Company or the Bank which, with the consent of the
Board, agree to participate in this Plan.
3.02 "Bank" means Citizens Savings Bank of Frankfort and its successors,
whether in mutual or stock form.
3.03 "Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or, if none, his estate.
3.04 "Board" means the Board of Directors of the Bank.
3.05 "Committee" means the Stock Compensation Committee of the Board of
Directors of the Holding Company. At all times during its administration of this
Plan, the Committee shall consist of two or more directors of the Holding
Company, each of whom shall be a "Non-Employee Director" within the meaning of
the definition of that term contained in Regulation 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act").
3.06 "Common Stock" means shares of the common stock, without par value, of
the Holding Company.
3.07 "Conversion" shall mean the conversion of the Bank from the mutual to
stock form of organization and the simultaneous acquisition of the Bank by the
Holding Company.
3.08 "Director" means a member of the Board of Directors of the Bank or the
Holding Company.
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3.09 "Director Emeritus" shall mean an honorary, non-voting member of the
Board of Directors of the Bank or the Holding Company.
3.10 "Disability" means any physical or mental impairment which qualifies
an Employee or Director for disability benefits under the applicable long-term
disability plan maintained by the Bank or an Affiliate, or, if no such plan
applies, which would qualify such Employee or Director for disability benefits
under the long-term disability plan maintained by the Bank, if such Employee or
Director were covered by that Plan.
3.11 "Employee" means any person who is currently employed by the Bank or
an Affiliate, including officers.
3.12 "Holding Company" shall mean Citizens Bancorp.
3.13 "Outside Director" means a member of the Board of Directors of the
Bank or the Holding Company, who is not also an Employee.
3.14 "Plan Shares" means shares of Common Stock held in the Trust and
issued or issuable to a Recipient pursuant to the Plan.
3.15 "Plan Share Award" or "Award" means a right granted under this Plan to
earn Plan Shares.
3.16 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.03 and 5.04.
3.17 "Recipient" means an Employee or Outside Director who receives a Plan
Share Award under the Plan.
3.18 "Trustee" means that person(s) or entity nominated by the Committee
and approved by the Board pursuant to Sections 4.01 and 4.02 to hold legal title
to the Plan assets for the purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in this and
other Sections of the Plan. The interpretation and construction by the Committee
of any provisions of the Plan or of any Plan Share Award granted hereunder shall
be final and binding. The Committee shall act by vote or written consent of a
majority of its members. Subject to the express provisions and limitations of
the Plan, the Committee may adopt such rules, regulations and procedures as it
deems appropriate for the conduct of its affairs. If permitted by applicable
law, the Committee, with the consent of Recipients, may change the vesting
schedule for Awards after the date of grant thereof. The Committee shall
recommend to the Board one or more persons or entities to act as Trustee in
accordance with the provisions of this Plan and Trust and the terms of Article
VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee shall
be appointed or approved by, and will serve at the pleasure of, the Board of
Directors of the Holding Company. The Board of Directors of the Holding Company
may in its discretion from time to time remove members from, or add members to,
the Committee, and may remove, replace or add Trustees.
4.03 Limitation on Liability. Neither a Director nor the Committee nor the
Trustee shall be liable for any determination made in good faith with respect to
the Plan or any Plan Shares or Plan Share Awards granted under it. If a Director
or the Committee or any Trustee 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 Bank
shall indemnify such person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Bank and its Affiliates and, with respect to any criminal action or proceeding,
if he had no reasonable cause to believe his conduct was unlawful. The
indemnification of officers and directors of the Bank pursuant to this Section
4.03 shall be subject to 12 C.F.R. ss. 545.121.
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ARTICLE V
CONTRIBUTION; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Bank shall be permitted to
contribute to the Trust an amount sufficient to purchase up to 4% of the shares
of Common Stock issued by the Holding Company in connection with the Conversion.
Such amounts shall be paid to the Trustee no later than the date required to
purchase shares of Common Stock for Awards made under this Plan. No
contributions by Employees or Outside Directors shall be permitted.
5.02 Initial Investment. Any amounts held by the Trust until such amounts
are invested in accordance with Section 5.03, shall be invested by the Trustee
in such interest-bearing account or accounts at the Bank as the Trustee shall
determine to be appropriate.
5.03 Investment of Trust Assets; Creation of Plan Share Reserve. As soon as
practicable following the first shareholder meeting of the Holding Company
following the Conversion ("First Shareholder Meeting Date"), the Trustee shall
invest all of the Trust's assets exclusively in the number of shares of Common
Stock, designated by the Bank as subject to Awards made under the Plan, which
may be purchased directly from the Holding Company, on the open market, or from
any other source; provided, however that the Trust shall not invest in an amount
of Common Stock greater than 4.0% of the shares of the Common Stock sold in the
Conversion, which shall constitute the "Plan Share Reserve" and provided,
further that if the Trustee is required to purchase such shares on the open
market or from the Holding Company for an amount per share greater than the
price per share at which shares were trading on the date the contributions
therefor were made to the Trust, the Bank shall have the discretion to reduce
the number of shares to be awarded and purchased. The Trust may hold cash in
interest-bearing accounts pending investment in Common Stock for periods of not
more than one year after deposit. The Trustee, in accordance with applicable
rules and regulations and Section 5.01 hereof, shall purchase shares of Common
Stock in the open market and/or shall purchase authorized but unissued shares of
the Common Stock from the Holding Company sufficient to acquire the requisite
percentage of shares. Any earnings received or distributions paid with respect
to Common Stock held in the Plan Share Reserve shall be held in an
interest-bearing account. Any earnings received or distributions paid with
respect to Common Stock subject to a Plan Share Award shall be held in an
interest-bearing account on behalf of the individual Recipient.
5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.03
after acquisition by the Trustee of such shares, or the decision of the
Committee to return Plan Shares to the Holding Company, the Plan Share Reserve
shall be reduced by the number of Plan Shares so allocated or returned. Any
shares subject to an Award which may not be earned because of a forfeiture by
the Recipient pursuant to Section 7.01 shall be returned (added) to the Plan
Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Employees and Outside Directors are eligible to receive
Plan Share Awards provided in Section 6.02.
6.02 Allocations. The Committee may determine which of the Employees and
Outside Directors referenced in Section 6.01 above will be granted Plan Share
Awards and the number of Plan Shares covered by each Award, including grants
effective upon the First Shareholder Meeting Date, provided, however, that the
number of Plan Shares covered by such Awards may not exceed the number of Plan
Shares in the Plan Share Reserve immediately prior to the grant of such Awards,
and provided further, that in no event shall any Awards be made which will
violate the Charter, Articles of Incorporation, Bylaws or Plan of Conversion of
the Holding Company or the Bank or any applicable federal or state law or
regulation and provided further that Awards may not be granted at any time in
which the Bank fails to meet its applicable minimum capital requirements. In the
event Plan Shares are forfeited for any reason and unless the Committee decides
to return the Plan Shares to the Holding Company, the Committee may, from time
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to time, determine which of the Employees or Outside Directors referenced in
Section 6.01 above will be granted additional Plan Share Awards to be awarded
from forfeited Plan Shares. In selecting those Employees or Outside Directors to
whom Plan Share Awards will be granted and the number of Plan Shares covered by
such Awards, the Committee shall consider the position and responsibilities of
the eligible Employees or Outside Directors, the length and value of their
services to the Bank and its Affiliates, the compensation paid to such Employees
or Outside Directors, and any other factors the Committee may deem relevant.
6.03 Form of Allocation. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, 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 stock certificates for Plan Share
Awards shall be registered in the name of the Recipient until forfeited or
transferred by the Recipient after such Award has been earned. The Committee
shall maintain records as to all grants of Plan Share Awards under the Plan.
6.04 Allocations Not Required. Notwithstanding anything to the contrary in
Sections 6.01 and 6.02, no Employee or Outside 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 Employees or Outside Directors
as a group have such a right. The Committee may, with the approval of the Board
(or, if so directed by the Board, shall) return all Common Stock in the Plan
Share Reserve not yet allocated to the Holding Company at any time, and cease
issuing Plan Share Awards.
6.05. Distribution Election Before Plan Shares Are Earned. Notwithstanding
anything contained in the Plan to the contrary, an Employee or an Outside
Director who has received an allocation of Plan Shares in accordance with
Article VI may request in writing that the Committee authorize the distribution
to him or her of all or a portion of the Plan Shares awarded before the date on
which the Plan Shares become earned in accordance with Article VII. The decision
as to whether to distribute to any Employee or Outside Director who requests
distribution shall be made by the Committee, in its sole discretion. In
addition, the distribution shall be subject to the following parameters:
(a) The Committee shall be required to make a separate determination
for each request received by an Employee or Outside Director for
distribution.
(b) Any Plan Shares awarded shall be required to have a legend on the
Plan Shares confirming that the Plan Shares are subject to
restriction and transfer in accordance with the terms set forth
in the Plan. This legend may not be removed until the date that
the Plan Shares become earned in accordance with Article VII.
(c) The Plan Shares distributed shall be voted by the Trustee in
accordance with Section 7.04 until the date that the Plan Shares
are earned.
(d) Any cash dividends or other cash distributions paid with respect
to the Plan Shares before the date that the Plan Shares are
earned shall be paid to the Trustee to be held for the Employee
or Outside Director, whichever is applicable, until the date that
the Plan Shares are earned.
(e) At the date on which the Plan Shares are earned, the Trustee may
withhold from any cash dividends or other cash distributions held
on behalf of such Employee or Outside Director the amount needed
to cover any applicable withholding and employment taxes arising
at the time that the Plan Shares are earned. If the amount of
such cash dividends or distributions is insufficient, the Trustee
may require the Employee or Outside Director to pay to the
Trustee the amount required to be withheld as a condition of
removing the legend on the Plan Shares.
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ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Plan Shares subject to an Award shall be earned by
a Recipient at the rate of twenty percent (20%) of the aggregate
number of Shares covered by the Award at the end of each full
twelve months of consecutive service with the Bank or an
Affiliate after the date of grant of the Award. If the term of
service of a Recipient terminates as an Employee, as a Director
and as a Director Emeritus 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 Subsection (b) below or in Section 4.01 hereof), the Recipient
shall forfeit the right to earn any Shares subject to the Award
which have not theretofore been earned.
In determining the number of Plan Shares which are earned,
fractional shares shall be rounded down to the nearest whole
number, provided that such fractional shares shall be aggregated
and earned, on the fifth anniversary of the date of grant.
(b) Exception for Terminations due to Death and Disability.
Notwithstanding the general rule contained in Section 7.01(a)
above, all Plan Shares subject to a Plan Share Award held by a
Recipient whose term of service as an Employee and as a Director
or Director Emeritus with the Holding Company, Bank or an
Affiliate terminates due to death or Disability shall be deemed
earned as of the Recipient's last day of service with the Holding
Company, Bank or an Affiliate as a result of such death or
Disability. If the Recipient's service as an Employee and as a
Director or Director Emeritus terminates due to Disability within
one year of the effective date of the Conversion, the Shares
earned by the Recipient may not be disposed of by the Recipient
during the one-year period following the Conversion, and stock
certificate legends to that effect may be placed on the stock
certificates for any such shares.
(c) Revocation for Misconduct. Notwithstanding anything hereinafter
to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof,
previously awarded under this Plan, to the extent Plan Shares
have not been delivered thereunder to the Recipient, whether or
not yet earned, in the case of an Employee who is discharged from
the employ of the Holding Company, Bank or an Affiliate 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 or, in the case of an Outside
Director or Director Emeritus, who is removed from the Board of
Directors of the Bank and the Holding Company or an Affiliate for
cause (as hereinafter defined), or who is discovered after
termination of service as an Outside Director or Director
Emeritus to have engaged in conduct which would have justified
removal 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, regulation (other than
traffic violations or similar offenses) or order which results in
a loss to the Holding Company, Bank or any Affiliate or in a
final cease and desist order.
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7.02 Accrual of Dividends. Whenever Plan Shares are paid to a Recipient or
Beneficiary under Section 7.03, such Recipient or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends or cash distributions and a number of shares of Common Stock
or other assets equal to any stock dividends and any other assets distributions
declared and paid with respect to a share of Common Stock between the date the
Plan Shares are being distributed and the date the Plan Shares were granted.
There shall also be distributed an appropriate amount of net earnings, if any,
of the Trust with respect to any cash dividends or cash distributions so paid
out. Until the Plan Shares are vested and distributed to any such Recipient or
Beneficiary, such dividends, distributions and net earnings thereon, if any,
shall be retained by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Plan Shares shall be
distributed to the Recipient or his Beneficiary, as the case may
be, as soon as practicable after they have been earned.
(b) Form of Distribution. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of
Common Stock. One share of Common Stock shall be given for each
Plan Share earned and payable. Payments representing accumulated
cash dividends and cash or other distributions (and earnings
thereon) shall be made in cash or in the form of such non-cash
distributions.
(c) Withholding. The Trustee may withhold from any payment or
distribution made under this Plan sufficient amounts of cash or
shares of Common Stock to cover any applicable withholding and
employment taxes, and if the amount of such payment is
insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be
withheld as a condition of delivering the Plan Shares.
Alternatively, a Recipient may pay to the Trustee that amount of
cash necessary to be withheld in taxes in lieu of any withholding
of payments or distribution under the Plan. The Trustee shall pay
over to the Holding Company, the Bank or Affiliate which employs
or employed such Recipient any such amount withheld from or paid
by the Recipient or Beneficiary.
(d) Cessation of Payment. The Trustee shall cease payment of benefits
to Recipients or, if applicable, their Beneficiaries in the event
of the Bank's insolvency. The Bank shall be considered insolvent
for purposes of this RRP if the Bank is unable to pay its debts
as they become due or if a receiver is appointed for the Bank
under applicable law. If payments cease by reason of this
subsection, payments will be resumed, with appropriate make-up
payments, once the Bank ceases to be insolvent but only to the
extent the payments were not made directly by the Bank or its
Affiliates.
7.04 Voting of Plan Shares. All shares of Common Stock held by the Trust
shall be voted by the Trustee, taking into account the best interests of the
Plan Share Award recipients.
<PAGE>
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and Trust and the applicable directions, rules, regulations,
procedures and policies established by the Committee pursuant to the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that,
subject to the provisions of this Plan, the Trustee shall have complete
authority and discretion with respect to the management, control and investment
of the Trust, and that the Trustee shall invest all assets of the Trust, except
those attributable to cash dividends paid with respect to Plan Shares, in Common
Stock to the fullest extent practicable, and except to the extent that the
Trustee determines that the holding of monies in cash or cash equivalents is
necessary to meet the obligation of the Trust. Neither the Holding Company, the
Bank, nor any Affiliate shall exercise any direct or indirect control or
influence over the time when, or the prices at which, the Trustee may purchase
such shares, the number of shares to be purchased, the manner in which the
shares are to be purchased, or the broker (if any) through whom the purchases
may be executed. In performing its duties, the Trustee shall have the power to
do all things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
Common Stock without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The
investment authorized herein and in paragraph (b) constitutes the
only investment of the Trust, and in making such investment, the
Trustee is authorized to purchase Common Stock from the Holding
Company or an Affiliate or from any other source and such Common
Stock so purchased may be outstanding, newly issued, or treasury
shares.
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(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of
deposit (including those issued by the Bank), securities of any
open-end or closed-end management investment company or investment
trust registered under the Investment Company Act of 1940, whether
or not the Trustee or any affiliate of the Trustee is being
compensated for providing services to the investment company or
trust as investment advisor or otherwise, obligations of the
United States government or its agencies or such other investments
as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records
shall be maintained showing that such security is an asset of the
Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the
Plan and Trust and to hold cash pending investment.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services
or representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his or her Beneficiary as a
consequence of a dispute as to the disposition thereof, whether
in a segregated account or held in common with other assets of
the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust, which shall be available
at all reasonable times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person determined by the
Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust assets
shall be allocated, in accordance with a reasonable procedure adopted by the
Committee, to bookkeeping accounts for Recipients or to the general account of
the Trust, depending on the nature and allocation of the assets generating such
earnings, gains and losses. In particular, any earnings on cash dividends or
distributions received with respect to shares of Common Stock shall be allocated
to accounts for Recipients, if such shares are the subject of outstanding Plan
Share Awards, or otherwise to the Plan Share Reserve. Recipients (or their
Beneficiaries) shall not be entitled to any such allocations until the Plan
Share Awards to which they relate are vested and distributed to those Recipients
(or their Beneficiaries).
8.05 Expenses. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
borne by the Bank or the Holding Company.
8.06 Indemnification. The Bank shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustee's powers and the discharge of its duties
hereunder, unless the same shall be due to its negligence or willful misconduct.
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ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan Shares
available for issuance pursuant to the Plan Share Awards (which, as of the
effective date of this Plan, shall not exceed 4% of the shares of the Holding
Company's Common Stock issued in the Conversion), and the number of shares to
which any Plan Share Award relates shall be proportionately adjusted for any
increase or decrease in the total number of outstanding shares of Common Stock
issued subsequent to the effective date of the Plan resulting from any stock
dividend or split, recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, extraordinary cash or
non-cash distribution, or other similar capital adjustment, or other increase or
decrease in such shares effected without receipt or payment of consideration, by
the Committee.
9.02 Amendment and Termination of Plan. The Board may, by resolution, at any
time amend or terminate the Plan. The power to amend or terminate shall include
the power to direct the Trustee to return to the Holding Company all or any part
of the assets of the Trust, including shares of Common Stock held in the Plan
Share Reserve, as well as shares of Common Stock and other assets subject to
Plan Share Awards but not yet earned by the Employees or Directors to whom they
are allocated. However, the termination of the Trust shall not affect a
Recipient's right to the distribution of Common Stock relating to Plan Share
Awards already earned, including earnings thereon, in accordance with the terms
of this Plan and the grant by the Committee.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall not
be transferable by a Recipient other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, 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 6.03. The assets of the RRP, prior to the distribution of
Plan Shares to a Recipient or his or her Beneficiary, shall be subject to the
claims of creditors of the Bank. Unless Plan Shares are distributed in
accordance with Section 6.05 or 7.03 to a Recipient or his or her Beneficiary,
such Recipient or, if applicable, Beneficiary shall not have any right in or
claim to any specific assets of the RRP or Trust and shall only be an unsecured
creditor of the Bank, nor shall the Holding Company or the Bank be subject to
any claim for benefits hereunder.
9.04 Employment Rights. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustee, 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, or of any Outside Director to
continue in the service of, the Bank, the Holding Company or any Affiliate
thereof.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plan Shares are actually distributed to him.
9.06 Governing Laws. The Plan and Trust shall be governed by the laws of
the State of Indiana, except to the extent governed by federal law, including
regulations of the Office of Thrift Supervision. In particular, grants of Plan
Share Awards under the Plan shall comply with the requirements of 12 C.F.R. ss.
563b.3(g)(4)(vi) to the extent applicable thereto.
9.07 Effective Date. This Plan shall be effective as of the date of its
approval by the shareholders of the Holding Company.
9.08 Term of Plan. This Plan shall remain in effect until the earlier of
(1) 21 years from the effective date of its adoption, (2) termination by the
Board, or (3) the distribution of all assets of the Trust. Termination of the
Plan shall not affect any Plan Share Awards previously granted, and such Awards
shall remain valid and in effect until they have been earned and paid, or by
their terms expire or are forfeited.
9.09 Tax Status of Trust. It is intended that the trust established hereby
be treated as a grantor trust of the Bank under the provisions of Section 671,
et seq., of the Internal Revenue Code of 1986, as amended.
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<PAGE>
9.10. Compensation. The Trustee shall be entitled to receive fair and
reasonable compensation for its services hereunder, as agreed to by the Trustee
and the Bank, and shall also be entitled to be reimbursed for all reasonable
out-of-pocket expenses, including, but not by way of limitation, legal,
actuarial and accounting expenses and all costs and expenses incurred in
prosecuting or defending any action concerning the Plan or the Trust or the
rights or responsibilities of any person hereunder, brought by or against the
Trustee. Such reasonable compensation and expenses shall be paid by the Bank or
the Holding Company.
9.11. Resignation of Trustee. The Trustee may resign at any time by giving
sixty (60) calendar days' prior written notice to the Bank, and the Trustee may
be removed, with or without cause, by the Bank on sixty (60) calendar days'
prior written notice to the Trustee. Such prior written notice may be waived by
the party entitled to receive it. Upon any such resignation or removal becoming
effective, the Trustee shall render to the Bank a written account of its
administration of the Plan and the Trust for the period since the last written
accounting and shall do all necessary acts to transfer the assets of the Trust
to the successor Trustee or Trustees.
IN WITNESS WHEREOF, the Holding Company and the Bank have caused this Plan
and Trust Agreement to be executed by their duly authorized officers as of the
___ day of ____________, 1997.
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<PAGE>
Citizens Bancorp
By ____________________________
Fred W. Carter, President
Attest: ____________________________
Cindy S. Chambers, Secretary
Citizens Savings Bank of Frankfort
By ____________________________
Fred W. Carter, President
Attest: ____________________________
Cindy S. Chambers, Secretary
IN WITNESS WHEREOF, I, ______________________________________ execute this
agreement for and on behalf of the Trustee, accepting and binding the Trustee to
undertake and perform the obligations and duties of the Trustee hereunder and
consenting to the foregoing Plan and Trust Agreement.
--------------------------------
By
---------------------------,
---------------------------
-10-
EMPLOYMENT AGREEMENT
This Agreement, made and dated as of ________, 1997, by and between
Citizens Savings Bank of Frankfort, A federal savings bank ("Employer"), and
Fred W. Carter, a resident of Clinton County, Indiana ("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by Employer as its President and has made
valuable contributions to the profitability and financial strength of Employer;
WHEREAS, Employer desires to encourage Employee to continue to make
valuable contributions to Employer's business operations and not to seek or
accept employment elsewhere;
WHEREAS, Employee desires to be assured of a secure minimum
compensation from Employer for his services over a defined term;
WHEREAS, Employer desires to assure the continued services of Employee
on behalf of Employer on an objective and impartial basis and without
distraction or conflict of interest in the event of an attempt by any person to
obtain control of Employer or Citizens Bancorp (the "Holding Company"), the
Indiana corporation which owns all of the issued and outstanding capital stock
of Employer;
WHEREAS, Employer recognizes that when faced with a proposal for a
change of control of Employer or the Holding Company, Employee will have a
significant role in helping the Boards of Directors assess the options and
advising the Boards of Directors on what is in the best interests of Employer,
the Holding Company, and its shareholders, and it is necessary for Employee to
be able to provide this advice and counsel without being influenced by the
uncertainties of his own situation;
WHEREAS, Employer desires to provide fair and reasonable benefits to
Employee on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Employee will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer, except as otherwise provided herein.
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<PAGE>
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of
Employee by Employer as its President, Employer and Employee, each intending to
be legally bound, covenant and agree as follows:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Employer employs Employee as Employer's President, and Employee
accepts such employment.
2. Employee agrees to serve as Employer's President and to perform
such duties in that office as may reasonably be assigned to him by Employer's
Board of Directors; provided, however, that such duties shall be performed in or
from the offices of Employer currently located at Frankfort, Indiana, and shall
be of the same character as those previously performed by Employee and generally
associated with the office held by Employee. Employee shall not be required to
be absent from the location of the principal executive offices of Employer on
travel status or otherwise more than 45 days in any calendar year. Employer
shall not, without the written consent of Employee, relocate or transfer
Employee to a location more than 30 miles from his primary office. Employee
shall render services to Employer as President in substantially the same manner
and to substantially the same extent as Employee rendered his services to
Employer before the date hereof. While employed by Employer, Employee shall
devote substantially all his business time and efforts to Employer's business
during regular business hours and shall not engage in any other related
business. Employer shall nominate the Employee to successive terms as a member
of Employer's Board of Directors and shall use its best efforts to elect and
re-elect Employee as a member of such Board.
3. The term of this Agreement shall begin on the date of completion of
the conversion of Employer from mutual to stock form (the "Effective Date") and
shall end on the date which is three years following such date; provided,
however, that such term shall be extended automatically for an additional year
on each anniversary of the Effective Date if Employer's Board of Directors
determines by resolution that the performance of the Employee has met the
Board's requirements and standards and that this Agreement should be extended
prior to such anniversary of the Effective Date, unless either party hereto
gives written notice to the other party not to so extend within ninety (90) days
prior to such anniversary, in which case no further automatic extension shall
occur and the term of this Agreement shall end two years subsequent to the
anniversary as of which the notice not to extend for an additional year is given
(such term, including any extension thereof shall herein be referred to as the
"Term").
4. Employee shall receive an annual salary of ("Base Compensation")
payable at regular intervals in accordance with Employer's normal payroll
practices now or hereafter in effect. Employer may consider and declare from
time to time increases in the salary it pays Employee and thereby increases in
his Base Compensation. Prior to a Change of Control, Employer may also declare
decreases in the salary it pays Employee if the operating results of Employer
are significantly less favorable than those for the fiscal year ending June 30,
1996, and Employer makes similar decreases in the salary it pays to other
executive officers of Employer. After a Change in Control, Employer shall
consider and declare salary increases based upon the following standards:
2
<PAGE>
Inflation;
Adjustments to the salaries of other senior management personnel; and
Past performance of Employee and the contribution which Employee makes
to the business and profits of Employer during the Term.
Any and all increases or decreases in Employee's salary pursuant to this section
shall cause the level of Base Compensation to be increased or decreased by the
amount of each such increase or decrease for purposes of this Agreement. The
increased or decreased level of Base Compensation as provided in this section
shall become the level of Base Compensation for the remainder of the Term of
this Agreement until there is a further increase or decrease in Base
Compensation as provided herein.
5. So long as Employee is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all present and future
employee benefit, retirement, and compensation plans generally available to
employees of Employer, consistent with his Base Compensation and his position as
President of Employer, including, without limitation, Employer's or the Holding
Company's pension plan, Stock Option Plan, Recognition and Retention Plan and
Trust, Employee Stock Ownership Plan, and hospitalization, disability and group
life insurance plans, each of which Employer agrees to continue in effect on
terms no less favorable than those currently in effect as of the date hereof (as
permitted by law) during the Term of this Agreement unless prior to a Change of
Control the operating results of Employer are significantly less favorable than
those for the fiscal year ending June 30, 1996, and unless (either before or
after a Change of Control) changes in the accounting, legal, or tax treatment of
such plans would adversely affect Employer's operating results or financial
condition in a material way, and the Board of Directors of Employer or the
Holding Company concludes that modifications to such plans need to be made to
avoid such adverse effects.
6. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall receive reimbursement from Employer for all reasonable
business expenses incurred in the course of his employment by Employer, upon
submission to Employer of written vouchers and statements for reimbursement.
Employee shall attend, upon the prior approval of Employer's Board of Directors,
those professional meetings, conventions, and/or similar functions that he deems
appropriate and useful for purposes of keeping abreast of current developments
in the industry and/or promoting the interests of Employer. So long as Employee
is employed by Employer pursuant to the terms of this Agreement, Employer shall
continue in effect vacation policies applicable to Employee no less favorable
from his point of view than those written vacation policies in effect on the
date hereof. So long as Employee is employed by Employer pursuant to this
Agreement, Employee shall be entitled to office space and working conditions no
less favorable than were in effect for him on the date hereof.
7. Subject to the respective continuing obligations of the parties,
including but not limited to those set forth in subsections 9(A), 9(B), 9(C) and
9(D) hereof, Employee's employment by Employer may be terminated prior to the
expiration of the Term of this Agreement as follows:
3
<PAGE>
(A) Employer, by action of its Board of Directors and upon written
notice to Employee, may terminate Employee's employment with
Employer immediately for cause. For purposes of this
subsection 7(A), "cause" shall be defined as (i) personal
dishonesty, (ii) incompetence, (iii) willful misconduct, (iv)
breach of fiduciary duty involving personal profit, (v)
intentional failure to perform stated duties, (vi) willful
violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist
order, or (vii) any material breach of any provision of this
Agreement.
(B) Employer, by action of its Board of Directors may terminate
Employee's employment with Employer without cause at any time;
provided, however, that the "date of termination" for purposes
of determining benefits payable to Employee under subsection
8(B) hereof shall be the date which is 60 days after Employee
receives written notice of such termination.
(C) Employee, by written notice to Employer, may terminate his
employment with Employer immediately for cause. For purposes
of this subsection 7(C), "cause" shall be defined as (i) any
action by Employer's Board of Directors to remove the Employee
as President of Employer, except where the Employer's Board of
Directors properly acts to remove Employee from such office
for "cause" as defined in subsection 7(A) hereof, (ii) any
action by Employer's Board of Directors to materially limit,
increase, or modify Employee's duties and/or authority as
President of Employer, (iii) any failure of Employer to obtain
the assumption of the obligation to perform this Agreement by
any successor or the reaffirmation of such obligation by
Employer, as contemplated in section 20 hereof; or (iv) any
material breach by Employer of a term, condition or covenant
of this Agreement.
(D) Employee, upon sixty (60) days written notice to Employer, may
terminate his employment with Employer without cause.
(E) Employee's employment with Employer shall terminate in the
event of Employee's death or disability. For purposes hereof,
"disability" shall be defined as Employee's inability by
reason of illness or other physical or mental incapacity to
perform the duties required by his employment for any
consecutive One Hundred Eighty (180) day period, provided that
notice of any termination by Employer because of Employee's
"disability" shall have been given to Employee prior to the
full resumption by him of the performance of such duties.
8. In the event of termination of Employee's employment with Employer
pursuant to section 7 hereof, compensation shall continue to be paid by Employer
to Employee as follows:
(A) In the event of termination pursuant to subsection 7(A) or
7(D), compensation provided for herein (including Base
Compensation) shall continue to be paid, and
4
<PAGE>
Employee shall continue to participate in the employee
benefit, retirement, and compensation plans and other
perquisites as provided in sections 5 and 6 hereof, through
the date of termination specified in the notice of
termination. Any benefits payable under insurance, health,
retirement and bonus plans as a result of Employee's
participation in such plans through such date shall be paid
when due under those plans. The date of termination specified
in any notice of termination pursuant to subsection 7(A) shall
be no later than the last business day of the month in which
such notice is provided to Employee.
(B) In the event of termination pursuant to subsection 7(B) or
7(C), compensation provided for herein (including Base
Compensation) shall continue to be paid, and Employee shall
continue to participate in the employee benefit, retirement,
and compensation plans and other perquisites as provided in
sections 5 and 6 hereof, through the date of termination
specified in the notice of termination. Any benefits payable
under insurance, health, retirement and bonus plans as a
result of Employee's participation in such plans through such
date shall be paid when due under those plans. In addition,
Employee shall be entitled to continue to receive from
Employer his Base Compensation at the rates in effect at the
time of termination (1) for three additional l2-month periods
if the termination follows a Change of Control or (2) for the
remaining Term of the Agreement if the termination does not
follow a Change of Control. In addition, during such periods,
Employer will maintain in full force and effect for the
continued benefit of Employee each employee welfare benefit
plan and each employee pension benefit plan (as such terms are
defined in the Employee Retirement Income Security Act of
1974, as amended) in which Employee was entitled to
participate immediately prior to the date of his termination,
unless an essentially equivalent and no less favorable benefit
is provided by a subsequent employer of Employee. If the terms
of any employee welfare benefit plan or employee pension
benefit plan of Employer do not permit continued participation
by Employee, Employer will arrange to provide to Employee a
benefit substantially similar to, and no less favorable than,
the benefit he was entitled to receive under such plan at the
end of the period of coverage. For purposes of this Agreement,
a "Change of Control" shall mean an acquisition of "control"
of the Holding Company or of Employer within the meaning of 12
C.F.R.ss.574.4(a) (other than a change of control resulting
from a trustee or other fiduciary holding shares of Common
Stock under an employee benefit plan of the Holding Company or
any of its subsidiaries).
(C) In the event of termination pursuant to subsection 7(E),
compensation provided for herein (including Base Compensation)
shall continue to be paid, and Employee shall continue to
participate in the employee benefit, retirement, and
compensation plans and other perquisites as provided in
sections 5 and 6 hereof, (i) in the event of Employee's death,
through the date of death, or (ii) in the event of Employee's
disability, through the date of proper notice of disability as
required by subsection 7(E). Any benefits payable under
insurance, health, retirement and bonus plans as a
5
<PAGE>
result of Employer's participation in such plans through such
date shall be paid when due under those plans.
(D) Employer will permit Employee or his personal
representative(s) or heirs, during a period of three months
following Employee's termination of employment by Employer for
the reasons set forth in subsections 7(B) or (C), if such
termination follows a Change of Control, to require Employer,
upon written request, to purchase all outstanding stock
options previously granted to Employee under any Holding
Company stock option plan then in effect whether or not such
options are then exercisable at a cash purchase price equal to
the amount by which the aggregate "fair market value" of the
shares subject to such options exceeds the aggregate option
price for such shares. For purposes of this Agreement, the
term "fair market value" shall mean the higher of (1) the
average of the highest asked prices for Holding Company shares
in the over-the-counter market as reported on the NASDAQ
system if the shares are traded on such system for the 30
business days preceding such termination, or (2) the average
per share price actually paid for the most highly priced 1% of
the Holding Company shares acquired in connection with the
Change of Control of the Holding Company by any person or
group acquiring such control.
9. In order to induce Employer to enter into this Agreement, Employee
hereby agrees as follows:
(A) While Employee is employed by Employer and for a period of
three years after termination of such employment for reasons
other than those set forth in subsections 7(B) or (C) of this
Agreement, Employee shall not divulge or furnish any trade
secrets (as defined in IND. CODEss. 24-2-3-2) of Employer or
any confidential information acquired by him while employed by
Employer concerning the policies, plans, procedures or
customers of Employer to any person, firm or corporation,
other than Employer or upon its written request, or use any
such trade secret or confidential information directly or
indirectly for Employee's own benefit or for the benefit of
any person, firm or corporation other than Employer, since
such trade secrets and confidential information are
confidential and shall at all times remain the property of
Employer.
(B) For a period of three years after termination of Employee's
employment by Employer for reasons other than those set forth
in subsections 7(B) or (C) of this Agreement, Employee shall
not directly or indirectly provide banking or bank-related
services to or solicit the banking or bank-related business of
any customer of Employer at the time of such provision of
services or solicitation which Employee served either alone or
with others while employed by Employer in any city, town,
borough, township, village or other place in which Employee
performed services for Employer while employed by it, or
assist any actual or potential competitor of Employer to
provide
6
<PAGE>
banking or bank-related services to or solicit any such
customer's banking or bank-related business in any such place.
(C) While Employee is employed by Employer and for a period of one
year after termination of Employee's employment by Employer
for reasons other than those set forth in subsections 7(B) or
(C) of this Agreement, Employee shall not, directly or
indirectly, as principal, agent, or trustee, or through the
agency of any corporation, partnership, trade association,
agent or agency, engage in any banking or bank-related
business which competes with the business of Employer as
conducted during Employee's employment by Employer within a
radius of twenty-five (25) miles of Employer's main office.
(D) If Employee's employment by Employer is terminated for reasons
other than those set forth in subsections 7(B) or (C) of this
Agreement, Employee will turn over immediately thereafter to
Employer all business correspondence, letters, papers,
reports, customers' lists, financial statements, credit
reports or other confidential information or documents of
Employer or its affiliates in the possession or control of
Employee, all of which writings are and will continue to be
the sole and exclusive property of Employer or its affiliates.
If Employee's employment by Employer is terminated during the Term of this
Agreement for reasons set forth in subsections 7(B) or (C) of this Agreement,
Employee shall have no obligations to Employer with respect to trade secrets,
confidential information or noncompetition under this section 9.
10. Any termination of Employee's employment with Employer as
contemplated by section 7 hereof, except in the circumstances of Employee's
death, shall be communicated by written "Notice of Termination" by the
terminating party to the other party hereto. Any "Notice of Termination"
pursuant to subsections 7(A), 7(C) or 7(E) shall indicate the specific
provisions of this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such
termination.
11. If Employee is suspended and/or temporarily prohibited from
participating in the conduct of Employer's affairs by a notice served under
section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. ss.
1818(e)(3) or (g)(1)), Employer's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, Employer shall (i) pay Employee all
or part of the compensation withheld while its obligations under this Agreement
were suspended and (ii) reinstate (in whole or in part) any of its obligations
which were suspended.
12. If Employee is removed and/or permanently prohibited from
participating in the conduct of Employer's affairs by an order issued under
section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. ss.
1818(e)(4) or (g)(1)), all obligations of Employer under this
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<PAGE>
Agreement shall terminate as of the effective date of the order, but vested
rights of the parties to the Agreement shall not be affected.
13. If Employer is in default (as defined in section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of Employer or Employee.
14. All obligations under this Agreement shall be terminated except to
the extent determined that the continuation of the Agreement is necessary for
the continued operation of Employer: (i) by the Director of the Office of Thrift
Supervision or his or her designee (the "Director"), at the time the Federal
Deposit Insurance Corporation enters into an agreement to provide assistance to
or on behalf of Employer under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act; or (ii) by the Director at the time the Director
approves a supervisory merger to resolve problems related to operation of
Employer or when Employer is determined by the Director to be in an unsafe and
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
15. Anything in this Agreement to the contrary notwithstanding, in the
event that the Employer's independent public accountants determine that any
payment by the Employer to or for the benefit of the Employee, whether paid or
payable pursuant to the terms of this Agreement, would be non-deductible by the
Employer for federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then the amount payable to or for
the benefit of the Employee pursuant to this Agreement shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this section 15, the "Reduced
Amount" shall be the amount which maximizes the amount payable without causing
the payment to be non-deductible by the Employer because of Section 280G of the
Code. Any payments made to Employee pursuant to this Agreement or otherwise, are
subject to and conditional upon their compliance with 12 U.S.C. ss.1828(k) and
any regulations promulgated thereunder, to the extent applicable to such
parties.
16. If a dispute arises regarding the termination of Employee pursuant
to section 7 hereof or as to the interpretation or enforcement of this Agreement
and Employee obtains a final judgment in his favor in a court of competent
jurisdiction or his claim is settled by Employer prior to the rendering of a
judgment by such a court, all reasonable legal fees and expenses incurred by
Employee in contesting or disputing any such termination or seeking to obtain or
enforce any right or benefit provided for in this Agreement or otherwise
pursuing his claim shall be paid by Employer, to the extent permitted by law.
17. Should Employee die after termination of his employment with
Employer while any amounts are payable to him hereunder, this Agreement shall
inure to the benefit of and be enforceable by Employee's executors,
administrators, heirs, distributees, devisees and legatees and all amounts
payable hereunder shall be paid in accordance with the terms of this Agreement
to Employee's devisee, legatee or other designee or, if there is no such
designee, to his estate.
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18. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employee: Fred W. Carter
808 Maple Drive
Frankfort, Indiana 46041
If to Employer: Citizens Savings Bank of Frankfort
60 South Main Street
P.O. Box 635
Frankfort, Indiana 46041
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
19. The validity, interpretation, and performance of this Agreement
shall be governed by the laws of the State of Indiana, except as otherwise
required by mandatory operation of federal law.
20. Employer shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Employer, by agreement in form and substance
satisfactory to Employee to expressly assume and agree to perform this Agreement
in the same manner and same extent that Employer would be required to perform it
if no such succession had taken place. Failure of Employer to obtain such
agreement prior to the effectiveness of any such succession shall be a material
intentional breach of this Agreement and shall entitle Employee to terminate his
employment with Employer pursuant to subsection 7(C) hereof. As used in this
Agreement, "Employer" shall mean Employer as hereinbefore defined and any
successor to its business or assets as aforesaid.
21. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by Employee and Employer. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of dissimilar provisions or conditions at the same or any prior
subsequent time. No agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
22. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement which shall remain in full force and effect.
23. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
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<PAGE>
24. This Agreement is personal in nature and neither party hereto
shall, without consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder except as provided in section 17 and section 20
above. Without limiting the foregoing, Employee's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in section 17 hereof, and in the
event of any attempted assignment or transfer contrary to this paragraph,
Employer shall have no liability to pay any amounts so attempted to be assigned
or transferred.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed and delivered as of the day and year first above set forth.
CITIZENS SAVINGS BANK OF FRANKFORT
By:
-----------------------------
Stephen D. Davis, Controller
"Employer"
-----------------------------
Fred W. Carter
"Employee"
The undersigned, Citizens Bancorp, sole shareholder of Employer, agrees
that if it shall be determined for any reason that any obligations on the part
of Employer to continue to make any payments due under this Agreement to
Employee is unenforceable for any reason, Citizens Bancorp, agrees to honor the
terms of this Agreement and continue to make any such payments due hereunder to
Employee pursuant to the terms of this Agreement.
Citizens Bancorp
By:
---------------------------
Stephen D. Davis, Treasurer
10
FIRST AMENDMENT OF THE
DIRECTOR DEFERRED COMPENSATION AGREEMENT OF
FRED W. CARTER
This First Amendment, dated as of the 23rd day of July, 1997, hereby
amends the Director Deferred Compensation Agreement between Fred W. Carter and
Citizens Savings Bank of Frankfort dated as of January 1, 1993 (the
"Agreement").
Effective as of the date hereof, the words "(except vested rights)"
shall be deleted from Section 11.1(2) of the Agreement, and the word "Director"
in Section 11.1(5)(i) and (ii) shall be replaced with the phrase "Director of
the Office of Thrift Supervision, or his successor in interest" in each place it
appears.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year written above.
-----------------------------------
Fred W. Carter
CITIZENS SAVINGS BANK OF FRANKFORT
By:
-----------------------------------
Stephen D. Davis, Controller
-1-
SECOND AMENDMENT OF THE
EXECUTIVE SUPPLEMENTAL RETIREMENT AGREEMENT OF
FRED W. CARTER
This Second Amendment, dated as of the 23rd day of July, 1997, hereby
amends the Executive Supplemental Retirement Agreement between Fred W. Carter
and Citizens Savings Bank of Frankfort dated as of January 1, 1993, as amended
prior to the date hereof (the "Agreement").
Effective as of the date hereof, the term "Executive" in Sections
10.1(5)(i) and (ii) shall be replaced with the phrase "Director of the Office of
Thrift Supervision or his successor in interest" in each place it appears.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year written above.
----------------------------------
Fred W. Carter
CITIZENS SAVINGS BANK OF FRANKFORT
By:
----------------------------------
Stephen D. Davis, Controller
-1-
SECOND AMENDMENT OF THE
EXECUTIVE SUPPLEMENTAL RETIREMENT AGREEMENT OF
STEVE DAVIS
This Second Amendment, dated as of the 23rd day of July, 1997, hereby
amends the Executive Supplemental Retirement Agreement between Steve Davis and
Citizens Savings Bank of Frankfort dated as of January 1, 1993, as amended prior
to the date hereof (the "Agreement").
Effective as of the date hereof, the term "Executive" in Sections
10.1(5)(i) and (ii) shall be replaced with the phrase "Director of the Office of
Thrift Supervision or his successor in interest" in each place it appears.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year written above.
----------------------------
Steve Davis
CITIZENS SAVINGS BANK OF FRANKFORT
By:
-------------------------
Fred W. Carter, President
-1-
SECOND AMENDMENT OF THE
EXECUTIVE SUPPLEMENTAL RETIREMENT AGREEMENT OF
CINDY CHAMBERS
This Second Amendment, dated as of the 23rd day of July, 1997, hereby
amends the Executive Supplemental Retirement Agreement between Cindy Chambers
and Citizens Savings Bank of Frankfort dated as of January 1, 1993, as amended
prior to the date hereof (the "Agreement").
Effective as of the date hereof, the term "Executive" in Sections
10.1(5)(i) and (ii) shall be replaced with the phrase "Director of the Office of
Thrift Supervision or his successor in interest" in each place it appears.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year written above.
---------------------------
Cindy Chambers
CITIZENS SAVINGS BANK OF FRANKFORT
By:
-------------------------
Fred W. Carter, President
-1-
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 16, 1996 on the consolidated financial statements
of Citizens Savings Bank of Frankfort and subsidiary, in the Registration
Statement (Form S-1) and related Prospectus of Citizens Bancorp dated July 25,
1997.
/s/ Ernst & Young, LLP
Indianapolis, Indiana
July 23, 1997
CONVERSION VALUATION APPRAISAL REPORT
Prepared For:
Citizens Savings Bank
of Frankfort
and
Citizens Bancorp
Frankfort Indiana
As Of:
May 22, 1997
Prepared By:
KELLER & COMPANY, INC
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 46017
(614) 766-1426
KELLER & COMPANY, INC
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
Prepared For:
Citizens Savings Bank
of Frankfort
and
Citizens Bancorp
Frankfort Indiana
As Of:
May 22, 1997
Prepared By:
Michael R. Keller
President
<PAGE>
KELLER & COMPANY, INC
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 46017
(614) 766-1426
(614) 766-1459 FAX
June 11, 1997
Board of Directors
Citizens Savings Bank of Frankfort
60 South Main Street
Frankfort, IN 46041
Gentlemen:
We hereby submit an independent appraisal of the pro forma market value of the
to-be-issued stock of Citizens Bancorp (the "Corporation"), which is the newly
formed holding company of Citizens Savings Bank of Frankfort, Frankfort, Indiana
("Citizens" or the "Bank"). The Corporation will hold all of the shares of the
common stock of the Bank. Such stock is to be issued in connection with the
Bank's conversion from a federally chartered mutual savings bank to a federally
chartered stock savings bank in accordance with the Bank's Plan of Conversion.
This appraisal was prepared and provided to the Bank in accordance with the
conversion requirements and regulations of the Office of Thrift Supervision of
the United States Department of the Treasury.
Keller & Company, Inc. is an independent financial institution consulting firm
that serves both banks and thrift institutions. The firm is a full-service
consulting organization, as described in more detail in Exhibit A, specializing
in market studies, business and strategic plans, stock valuations, conversion
appraisals, and fairness opinions for thrift institutions and banks. The firm
has affirmed its independence in this transaction with the preparation of its
Affidavit of Independence, a copy of which is included as Exhibit C.
Our appraisal is based on the assumption that the data provided to us by
Citizens and the material provided by the independent auditor, Ernst & Young
LLP, Indianapolis, Indiana, are both accurate and complete. We did not proceed
to verify the financial statements provided to us, nor did we conduct
independent valuations of the Bank's assets and liabilities. We have also used
information from other public sources, but we cannot assure the accuracy of such
material.
<PAGE>
Board of Directors
Citizens Savings Bank of Frankfort
June 11, 1997
Page 2
In the preparation of this appraisal, we held discussions with the management of
Citizens, with the law firm of Barnes & Thornburg, Indianapolis, Indiana, the
Bank's conversion counsel, and with Ernst & Young LLP. Further, we viewed the
Bank's local economy and primary market area.
This valuation must not be considered as a recommendation as to the purchase of
stock in the Corporation, and we can provide no guarantee or assurance that any
person who purchases shares of the Corporation's stock in this conversion will
be able to later sell such shares at a price equivalent to the price designated
in this appraisal.
Our valuation will be updated as required and will give consideration to any new
developments in the Bank's operation that have an impact on operations or
financial condition. Further, we will give consideration to any changes in
general market conditions and to specific changes in the market for
publicly-traded thrift institutions. Based on the material impact of any such
changes on the pro forma market value of the Bank as determined by this firm, we
will make necessary adjustments to the Bank's appraised value in such appraisal
update.
It is our opinion that as of May 22, 1997, the pro forma market value or
appraised value of the Corporation was $8,000,000. Further, a range for this
valuation is from a minimum of $6,800,000 to a maximum of $9,200,000, with a
super-maximum of $10,580,000.
Very truly yours,
KELLER & COMPANY, INC.
/s/ Michael R. Keller
Michael R. Keller
President
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION 1
I. Description of Citizens Savings Bank of Frankfort
General 4
Performance Overview 8
Income and Expense 10
Yields and Costs 16
Interest Rate Sensitivity 18
Lending Activities 20
Non-Performing Assets 24
Investments 26
Deposit Activities 27
Borrowings 28
Subsidiaries 28
Office Properties 28
Management 29
II. Description of Primary Market Area 30
III. Comparable Group Selection
Introduction 36
General Parameters
Merger/Acquisition 37
Mutual Holding Companies 38
Trading Exchange 38
IPO Date 39
Geographic Location 39
Asset Size 40
Balance Sheet Parameters
Introduction 41
Cash and Investments to Assets 41
Mortgage-Backed Securities to Assets 42
One- to Four-Family Loans to Assets 42
Total Net Loans to Assets 43
Total Net Loans and Mortgage-Backed Securities to Assets 43
Borrowed Funds to Assets 43
Equity to Assets 44
Performance Parameters
Introduction 45
<PAGE>
TABLE OF CONTENTS (cont.)
PAGE
III. Comparable Group Selection (cont.)
Performance Parameters (cont.)
Return on Average Assets 45
Return on Average Equity 46
Net Interest Margin 46
Operating Expenses to Assets 47
Noninterest Income to Assets 47
Asset Quality Parameters
Introduction 48
Nonperforming Assets to Asset Ratio 48
Repossessed Assets to Assets 48
Allowance for Loan Loss to Assets 49
The Comparable Group 49
Summary of Comparable Group Institutions 50
IV. Analysis of Financial Performance 53
V. Market Value Adjustments
Earnings Performance 56
Market Area 60
Financial Condition 60
Dividend Payments 62
Subscription Interest 62
Liquidity of Stock 63
Management 64
Marketing of the Issue 64
VI. Valuation Methods 66
Price to Book Value Ratio Method 67
Price to Earnings Method 68
Price to Net Assets Method 69
Valuation Conclusion 70
<PAGE>
LIST OF EXHIBITS
NUMERICAL PAGE
EXHIBITS
1 Consolidated Statements of Condition
at March 31, 1997 and June 30, 1996 71
2 Consolidated Statements of Condition
at June 30, 1992 through 1995 72
3 Consolidated Statements of Income for the
Nine Months ended March 31, 1997 and
1996 and for the Year Ended June 30, 1996 73
4 Consolidated Statements of Income,
Years Ended June 30, 1992 through 1995 74
5 Selected Consolidated Financial Condition Data 75
6 Income and Expense Trends 76
7 Normalized Earnings Trends 77
8 Performance Indicators 78
9 Volume/Rate Analysis 79
10 Yield and Cost Trends 80
11 Interest Rate Sensitivity of Net Portfolio Value 81
12 Loan Portfolio Composition 82
13 Loan Maturity Schedule 83
14 Loan Originations 84
15 Delinquent Loans 85
16 Nonperforming Assets 86
17 Classified Assets 87
18 Allowance for Loan Losses 88
19 Investment Portfolio Composition 89
20 Mix of Deposits 90
21 Deposit Activity 91
22 Borrowed Funds Activity 92
23 List of Key Officers and Directors 93
24 Key Demographic Data and Trends 94
25 Key Housing Data 95
26 Major Sources of Employment by Industry Group 96
27 Unemployment Rates 97
28 Market Share of Deposits 98
29 National Interest Rates by Quarter 99
30 Thrift Stock Prices and Pricing Ratios 100
31 Key Financial Data and Ratios 111
32 Recently Converted Thrift Institutions 123
33 Acquisitions and Pending Acquisitions 124
34 Thrift Stock Prices and Pricing Ratios -
Mutual Holding Companies 125
<PAGE>
LIST OF EXHIBITS (cont.)
NUMERICAL PAGE
EXHIBITS
35 Key Financial Data and Ratios -
Mutual Holding Companies 126
36 Balance Sheets Parameters -
Comparable Group Selection 127
37 Operating Performance and Asset Quality Parameters -
Comparable Group Selection 130
38 Balance Sheet Ratios -
Final Comparable Group 134
39 Operation Performance and Asset Quality Ratios
Final Comparable Group 135
40 Balance Sheet Totals - Final Comparable Group 136
41 Market Area Comparison - Final Comparable Group 137
42 Balance Sheet - Asset Composition
Most Recent Quarter 138
43 Balance Sheet - Liability and Equity
Most Recent Quarter 139
44 Income and Expense Comparison
Trailing Four Quarters 140
45 Income and Expense Comparison as a Percent of
Average Assets - Trailing Four Quarters 141
46 Yields, Costs & Earnings Ratios
Trailing Four Quarters 142
47 Dividends, Reserves and Supplemental Data 143
48 Market Pricings and Financial Ratios - Stock Prices
Comparable Group 144
49 Valuation Analysis and Conclusions 145
50 Pro Forma Minimum Valuation 146
51 Pro Forma Mid-Point Valuation 147
52 Pro Forma Maximum Valuation 148
53 Pro Forma Superrange Valuation 149
54 Summary of Valuation Premium or Discount 150
<PAGE>
ALPHABETICAL EXHIBITS PAGE
A Background and Qualifications 152
B RB 20 Certification 155
C Affidavit of Independence 156
<PAGE>
INTRODUCTION
Keller & Company, Inc., an independent appraisal firm for financial
institutions, has prepared this Conversion Appraisal Report ("Report") which
provides the pro forma market value of the to-be-issued common stock of Citizens
Bancorp. (the "Corporation"), an Indiana corporation, formed as a holding
company to own all of the to-be-issued shares of common stock of Citizens
Savings Bank of Frankfort ("Citizens" or the "Bank"). The stock is to be issued
in connection with the Bank's Application for Approval of Conversion from a
federally chartered mutual savings bank to a federally chartered stock savings
bank. The Application is being filed with the Office of Thrift Supervision
("OTS") of the Department of the Treasury and the Securities and Exchange
Commission ("SEC"). In accordance with the Bank's conversion, there will be a
simultaneous issuance of all the Bank's stock to the Corporation, which will be
formed by the Bank. Such Application for Conversion has been reviewed by us,
including the Prospectus and related documents, and discussed with the Bank's
management and the Bank's conversion counsel, Barnes & Thornburg, Indianapolis,
Indiana.
This conversion appraisal was prepared based on the guidelines provided
by OTS entitled "Guidelines for Appraisal Reports for the Valuation of Savings
Institutions Converting from the Mutual to Stock Form of Organization," in
accordance with the OTS application requirements of Regulation ss.563b and the
OTS's Revised Guidelines for Appraisal Reports, and represents a full appraisal
report. The Report provides detailed exhibits based on the Revised Guidelines
and a discussion on each of the fourteen factors that need to be considered. Our
valuation will be updated in accordance with the Revised Guidelines and will
consider any changes in market conditions for thrift institutions.
The pro forma market value is defined as the price at which the stock
of the Corporation after conversion would change hands between a typical willing
buyer and a
1
<PAGE>
Introduction (cont.)
typical willing seller when the former is not under any compulsion to buy and
the latter is not under any compulsion to sell, and with both parties having
reasonable knowledge of relevant facts in an arms-length transaction. The
appraisal assumes the Bank is a going concern and that the shares issued by the
Corporation in the conversion are sold in non- control blocks.
In preparing this conversion appraisal, we have reviewed the audited
financial statements for the five fiscal years ended June 30, 1992 through 1996,
unaudited financials for the nine months ended March 31, 1997, and discussed
them with Citizens' management and with Citizens' independent auditors, Ernst &
Young LLP, Indianapolis, Indiana. We have also discussed and reviewed with
management other financial matters. We have reviewed the Corporation's
preliminary Form S-1 and the Bank's preliminary Form AC and discussed them with
management and with the Bank's conversion counsel.
We have visited Citizens' home office and have traveled the surrounding
area. We have studied the economic and demographic characteristics of the Bank's
primary market area of Clinton County relative to Indiana and the United States.
We have also examined the competitive financial institution environment within
which Citizens operates, giving consideration to the area's key characteristics,
both positive and negative.
We have given consideration to the market conditions for securities in
general and for publicly-traded thrift stocks in particular. We have examined
the performance of selected publicly-traded thrift institutions and compared the
performance of Citizens to those selected institutions.
2
<PAGE>
Introduction (cont.)
Our valuation is not intended to represent and must not be interpreted
to be a recommendation of any kind as to the desirability of purchasing the
to-be-outstanding shares of common stock of the Corporation. Giving
consideration to the fact that this appraisal is based on numerous factors that
can change over time, we can provide no assurance that any person who purchases
the stock of the Corporation in this mutual-to-stock conversion will
subsequently be able to sell such shares at prices similar to the pro forma
market value of the Corporation as determined in this conversion appraisal.
3
<PAGE>
I. DESCRIPTION OF CITIZENS SAVINGS BANK OF FRANKFORT
GENERAL
Citizens Savings Bank of Frankfort, Frankfort, Indiana, was organized
in 1916 as an Indiana savings and loan association. The Bank recently converted
to a federal savings bank, retaining its name of Citizens Savings Bank of
Frankfort.
Citizens conducts its business from its home office in Frankfort,
Indiana, and has no branch offices. The Bank's primary market area consists of
Clinton County with Frankfort being the county seat and the largest community in
the county. Citizens' deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC") in the Savings Association
Insurance Fund ("SAIF"). The Bank is also subject to certain reserve
requirements of the Board of Governors of the Federal Reserve Bank (the "FRB").
Citizens is a member of the Federal Home Loan Bank (the "FHLB") of Indianapolis
and is regulated by the OTS, and by the FDIC. As of March 31, 1997, Citizens had
assets of $45,153,000, deposits of $37,255,000 and equity of $5,564,000.
Citizens is a community-oriented institution which has been principally
engaged in the business of serving the financial needs of the public in
Frankfort City and throughout its primary market area of Clinton County.
Citizens has been actively and consistently involved in the origination of
residential mortgage loans for the purchase of one- to four-family dwellings,
comprising 68.7 percent of its loan originations during the nine months ended
March 31, 1997, and 67.1 percent of its loan originations during the fiscal year
ended June 30, 1996. At March 31, 1997, 79.0 percent of its net loans consisted
of residential real estate loans on one- to four-family dwellings, not including
residential construction loans of 2.7 percent, for a combined total of 81.7
percent, compared to a smaller 78.8 percent at June 30, 1992, with the primary
source of its funds being retail
4
<PAGE>
General (cont.)
deposits from residents in its local communities. The Bank is also an originator
of multifamily loans, non-residential real estate loans, land loans and also
offers numerous consumer loans on a less active basis. Consumer loans include
automobile loans, secured and unsecured personal loans, loans on savings
accounts, home improvements loans and home equity loans. Non-residential real
estate loans represented a 2.3 percent share of the Bank's net loans at March
31, 1997, and multifamily loans represented 4.2 percent of gross loans with most
multifamily loans comprised of participation loans.
The Bank had $4.7 million or 10.5 percent of its assets in cash,
interest-bearing deposits and investments including FHLB stock. The Bank had no
mortgage-backed securities. Deposits and retained earnings have been the primary
sources of funds for the Bank's lending and investment activities with FHLB
advances having also served as an additional source of funds.
The management of Citizens is aware of the emphasis being placed on
matching the maturities of assets and liabilities and monitoring the Bank's
interest rate sensitivity position and market value of portfolio equity. The
Bank understands the nature of interest rate risk and the potential earnings
impact during times of rapidly changing rates, either rising or falling.
Citizens also recognizes the need and importance of attaining a competitive net
interest margin due to its more modest levels of fee and other income.
The Bank's gross amount of stock to be sold in the conversion will be
$8,000,000 or 800,000 shares at $10 per share based on the midpoint of the
appraised value, with net conversion proceeds of $7,550,000 reflecting
conversion expenses of $450,000. The actual cash proceeds to the Bank of $3.8
million will represent fifty percent of the net
5
<PAGE>
General (cont.)
conversion proceeds, including the ESOP of $640,000, and will be invested
primarily in mortgage loans, multifamily participation loans and consumer loans
and initially invested in short term investments. The Bank may also use the
proceeds to expand services, expand operations or other financial service
organizations, diversification into other businesses, or for any other purposes
authorized by law. The Holding Company will use its proceeds to fund the ESOP
and to invest in short- and intermediate-term U.S.
government and federal agency securities.
Citizens has seen modest overall deposit growth over the past five
fiscal years with deposits increasing a modest 8.5 percent from June 30, 1992,
to June 30, 1996, or an average of 2.1 percent per year. Deposits increased a
stronger 4.6 percent for the nine months ended March 31, 1997, or 6.2 percent,
annualized. The Bank anticipates moderate growth in the future. The Bank has
focused on increasing its residential real estate loan portfolio during the past
five years, reducing its level of cash and investments, reducing nonperforming
assets, monitoring its earnings and increasing its capital to assets ratio.
Equity to assets increased from 10.40 percent of assets at June 30, 1992, to
11.91 percent at June 30, 1996, and then increased further to 12.32 percent at
March 31, 1997.
Citizens' primary lending strategy has been to originate and retain
both adjustable-rate and fixed-rate residential mortgage loans with a greater
share of fixed-rate mortgage loans with a higher level of residential
construction loans and a larger share of consumer loans.
Citizens' share of one- to four-family mortgage loans, excluding
construction loans, has seen almost no change, increasing from 78.8 percent of
gross loans at June 30, 1992, to 79.0 percent as of March 31, 1997. Construction
loans increased from zero at June 30, 1992 to 2.7 percent at March 31, 1997.
Non-residential real estate loans decreased from 2.7 percent of gross loans at
June 30, 1992, to 2.3 percent at March 31, 1997.
6
<PAGE>
General (cont.)
Multifamily loans decreased from 6.8 percent in 1992 to 4.2 percent at March 31,
1997. The increase in construction loans was offset by the Bank's decrease in
non-residential real estate loans and multifamily loans. The Bank's share of
consumer loans witnessed an increase from 12.1 percent at June 30, 1992, to 14.4
percent at March 31, 1997.
Management's internal strategy has also included continued emphasis on
maintaining an adequate and appropriate allowance for loan losses relative to
loans and nonperforming assets in recognition of the more stringent requirements
within the industry to establish and maintain a higher level of general
valuation allowances and also in recognition of the Bank's planned increase in
lending. At June 30, 1994, Citizens had $49,000 in its loan loss allowance or
0.19 percent of net loans, which increased to $172,000 and represented a higher
0.46 percent of gross net at March 31, 1997.
Interest income from loans and investments has been the basis of
earnings with the net interest margin being the key determinant of net earnings.
With a dependence on net interest margin for earnings, current management will
focus on maintaining the Bank's net interest margin without undertaking
excessive credit risk and will not pursue any significant change in its interest
rate risk position.
7
<PAGE>
PERFORMANCE OVERVIEW
Citizens' financial position over the past five fiscal years of June
30, 1992, through June 30, 1996, and for the nine months ended March 31, 1997,
is highlighted through the use of selected financial data in Exhibit 5. Citizens
has focused on strengthening its equity position, controlling its overhead
ratio, increasing its savings and loan levels, and strengthening its net
interest margin. Citizens has experienced a moderate rise in assets from 1992 to
1996 with a modest rate of increase in deposits with a greater than average
increase in equity over the past five fiscal years. Due to the moderate growth,
the resultant impact has been a moderate increase in the Bank's equity to assets
ratio from 1992 to 1996.
Citizens witnessed a total increase in assets of $8.4 million or 22.8
percent for the period of June 30, 1992, to March 31, 1997, representing an
average annual increase in assets of 4.8 percent. For the year ended June 30,
1996, assets increased $4.5 million or a strong 11.3 percent. Of the past five
fiscal periods, the Bank experienced its largest dollar rise in assets in fiscal
year 1996 due primarily to a rise in deposits. This increase was greater than
the $4.0 million increase in 1994 but less than the 11.8 percent increase in
1994. There was a minimal rise in assets in fiscal 1995 and a $2.3 million
decrease or 6.3 percent in 1993.
The Bank's net loan portfolio, including mortgage loans and
non-mortgage loans, increased from $23.2 million at June 30, 1992, to $37.2
million at March 31, 1997, and represented a total increase of $14.0 million, or
60.3 percent. The average annual increase during that period was 12.7 percent.
That increase was the result of higher levels of loan originations of one- to
four-family loans, including construction loans. For the fiscal year ended June
30, 1996, loans increased $5.1 million or 17.5 percent and another $2.8 million
or 8.2 percent for the nine months ended March 31, 1997.
Citizens has pursued obtaining funds through deposit growth in
accordance with the demand for loans and has also made use of FHLB advances in
the past two fiscal years. The Bank's competitive rates for savings in its local
market in conjunction with its focus on services have been the sources of
attracting retail deposits. Deposits actually decreased
8
<PAGE>
Performance Overview (cont.)
from 1992 to 1993, followed by a strong increase of 12.9 percent in fiscal year
1994, a modest decrease in 1995 and then an increase of 7.3 percent in 1996, and
an increase of 4.6 percent for the nine months ended March 31, 1997, with an
average annual rate of increase of 2.8 percent from June 30, 1992, to March 31,
1997. The Bank's strongest fiscal year deposit growth was in 1994, when deposits
increased $3.9 million or 12.9 percent.
Citizens has been able to increase its equity each fiscal year from
1992 through 1996 and for the nine months ended March 31, 1997, even after the
one-time SAIF assessment of $211,000 before taxes. At June 30, 1992, the Bank
had equity (GAAP basis) of $3.8 million representing a 10.40 percent equity to
assets ratio, increasing to $5.3 million at June 30, 1996, and representing an
11.91 percent equity to assets ratio and then rising to $5.6 million at March
31, 1997, representing a higher 12.32 percent equity to assets ratio. The rise
in the equity to assets ratio is the result of the Bank's stronger earnings
performance in 1993 through 1996. Equity increased 45.5 percent from June 30,
1992, to March 31, 1997, representing an average annual increase of 9.6 percent.
9
<PAGE>
INCOME AND EXPENSE
Exhibit 6 presents selected operating data for Citizens, reflecting the
Bank's income and expense trends. This table provides selected audited income
and expense figures in dollars for the fiscal years of 1992 through 1996 and
unaudited income and expense figures for the nine months ended March 31, 1996
and 1997.
Citizens has witnessed an overall increase in its dollar level of
interest income from June 30, 1992, through June 30, 1996, ranging from a high
level of $3.2 million in 1996 to a low level of $2.4 million in 1994. The five
year increase from 1992 to 1996 was 7.2 percent, or an average increase of 1.8
percent per year. This overall trend was a combination of decreases in 1993 and
1994 followed by strong increases in 1995 and 1996. In fiscal year 1996,
interest income increased $444,000, or 16.2 percent to $3.2 million. For the
nine months ended March 31, 1997, interest income was $2.6 million or $3.5
million annualized and represented a 10.8 percent increase over the nine months
ended March 31, 1996. The overall increase in interest income was due primarily
to the Bank's increase in loan volume.
The Bank's interest expense experienced a declining trend from fiscal
year 1992 to 1994, followed by increases in 1995 and 1996. Interest expense
decreased $648,000, or 33.7 percent, from 1992 to 1994, compared to a decrease
in interest income of $549,000, or 18.5 percent, for the same time period.
Interest expense then increased $97,000 or 7.6 percent from 1994 to 1995,
compared to an increase in interest income of $318,000 or 13.1 percent. Such
increase in interest expense was more than offset by the increase in interest
income and resulted in an increase in annual net interest income of $221,000 for
the fiscal year ended June 30, 1995, and an increase in net interest margin. For
the year ended June 30, 1996, interest expense increased $283,000 or 20.7
percent compared to an increase in interest income of a larger $444,000 or 16.2
percent and resulted in a further rise in net interest margin.
The Bank has made provisions for loan losses in each of the past five
fiscal years of 1992 through 1996 and during the nine months ended March 31,
1997. The
10
<PAGE>
Income and Expense (cont.)
amounts of those provisions were determined in recognition of the Bank's level
of nonperforming assets, lending activity, charge-offs and repossessed assets.
The loan loss provisions were $12,000 in 1992, $19,000 in 1993, $12,000 in 1994,
$32,000 in 1995, $80,000 in 1996, and $32,000 in the nine months ended March 31,
1997. The impact of these loan loss provisions has been to provide Citizens with
a general valuation allowance of $172,000 at March 31, 1997, or 0.46 percent of
gross loans and 83.9 percent of nonperforming assets.
Total other income or noninterest income indicated modest levels in
fiscal years 1992 to 1996, and for the nine months ended March 31, 1997. The
highest level of noninterest income was in fiscal year 1996 at $246,000 or 0.56
percent of assets, and the lowest level was $134,000 in 1992, representing 0.36
percent of assets. The average noninterest income level for the past five fiscal
years was $206,800 or 0.53 percent of average assets using actual noninterest
income. For the nine months ended March 31, 1997, noninterest income was 0.48
percent of assets, annualized. Noninterest income consists primarily of service
charges, other fees and subsidiary net income.
The Bank's general and administrative expenses or noninterest expenses
increased from $753,000 for the fiscal year of 1992 to $967,000 for the fiscal
year ended June 30, 1996. The dollar increase in noninterest expenses was
$214,000 from 1992 to 1996, representing an average annual increase of $42,800
or 5.0 percent. The average annual increase in other expenses was due to the
Bank's normal rise in overhead expenses. On a percent of average assets basis,
normal operating expenses increased from 2.06 percent of average assets for the
fiscal year ended June 30, 1992, to 2.32 percent for the fiscal year ended June
30, 1996. Noninterest expenses increased to 3.00 percent for the nine months
ended March 31, 1997, due to the cost of the one-time SAIF assessment of
$211,000, and excluding the one-time SAIF assessment would increase to 2.42
percent of average assets, which was higher than the current industry average of
2.33 percent.
11
<PAGE>
Income and Expense (cont.)
The net earnings position of Citizens has indicated profitable
performance in each of the past five fiscal years ended June 30, 1992 through
1996. The annual net income figures for the past five fiscal years of 1992,
1993, 1994, 1995 and 1996 have been $263,000, $332,000, $281,000, $406,000 and
$479,000, representing returns on average assets of 0.72 percent, 0.94 percent,
0.77 percent, 1.07 percent, and 1.15 percent, respectively. The average return
on assets for the past five fiscal years was 0.93 percent. Net income was
$244,000 for the nine months ended March 31, 1997, due to the one-time SAIF
assessment and representing a 0.72 percent return on average assets.
Exhibit 7 provides the Bank's normalized earnings or core earnings for
fiscal years 1994 to 1996 and for the twelve months ended March 31, 1997. The
Bank's normalized earnings eliminate any nonrecurring income and expense items.
There was a downward expense adjustment of $211,000 in the twelve months ended
March 31, 1997, to reflect the one-time SAIF assessment and an upward income
adjustment of $60,000 to reflect the loss on sale of securities. In fiscal year
1994, there was a reduction in expenses of $39,000 to reflect a $26,000 after
tax accounting adjustment.
The key performance indicators comprised of selected operating ratios,
asset quality ratios and capital ratios are shown in Exhibit 8 to reflect the
results of performance. The Bank's return on assets increased from 0.72 percent
in fiscal year 1992 to its highest level of 1.15 percent in fiscal year 1996,
and then down to 0.72 percent for the nine months ended March 31, 1997.
The Bank's average net interest rate spread strengthened from 2.62
percent in fiscal year 1992 to 3.29 percent in fiscal year 1993, then decreased
in 1994 to 3.14 percent followed by an increase in 1995 to 3.69 percent, an
increase in 1996 to 3.75 percent, and then a decrease for the nine months ended
March 31, 1997, to 3.71 percent. The Bank's net interest margin indicated a
similar trend, increasing from 3.00 percent in fiscal year 1992 to 3.56 percent
in fiscal year 1993, then decreasing to 3.38 percent in fiscal 1994,
12
<PAGE>
Income and Expense (cont.)
increasing to 3.92 percent in 1995, increasing to 3.99 percent for the year
ended June 30, 1996 and then remaining at 3.99 percent for the nine months ended
March 31, 1997. Citizens' net interest rate spread increased 67 basis points in
1993 to 3.29 percent from 2.62 percent in 1992, decreased 15 basis points in
1994 to 3.14 percent and then increased 55 basis points to 3.69 percent in 1995.
Net interest rate spread then increased 6 basis points to 3.75 percent for
fiscal year 1996 and decreased 4 basis points to 3.71 percent for the nine
months ended March 31, 1997. The Bank's net interest margin followed a similar
trend, increasing 56 basis points to 3.56 percent in 1993, decreasing 20 basis
points to 3.36 percent in 1994 and then increasing 36 basis points to 3.92
percent by 1995. Net interest margin decreased 7 basis points to 3.99 percent in
fiscal 1996 and then remained at 3.99 percent for the nine months ended March
31, 1997.
The Bank's return on average equity increased from 1992 to 1993, then
decreased in 1994, followed by increases in 1995 and 1996. The return on average
equity increased from 7.15 percent in 1992 to 8.30 percent in fiscal year 1993,
and then went down to 6.58 percent in fiscal year 1994. The return on equity
then increased to 8.89 percent in fiscal year 1995, then increased to 9.52
percent in fiscal year 1996 and decreased to 6.05 percent for the nine months
ended March 31, 1997.
The Bank's ratio of noninterest expenses to average assets increased
significantly from 1992 to 1993 and then increased modestly in 1994 and 1995
before decreasing in fiscal year 1996. For the nine months ended March 31, 1997,
the ratio increased to 3.00 percent due to the one-time SAIF assessment and
increased to 2.42 percent excluding the one-time SAIF assessment. Another key
noninterest expense ratio reflecting efficiency of operation is the ratio of
noninterest expenses to net interest income and noninterest income referred to
as the "efficiency ratio." The industry norm is 64.0 percent. The Bank had an
efficiency ratio of 54.3 percent in 1996, reflective of higher income with a
lower ratio reflective of higher efficiency. The Bank's ratio of
interest-earning assets to interest-
13
<PAGE>
Income and Expense (cont.)
bearing liabilities decreased from 106.84 percent in 1992 to 105.61 percent in
1996 and then increased to 106.23 percent at March 31, 1997.
Earnings performance can be affected by an institution's asset quality
position. The ratio of nonperforming assets to total assets is a key indicator
of asset quality. Citizens has indicated moderate nonperforming asset ratios
from 1992 to 1996. Nonperforming assets consist of loans delinquent 90 days or
more, nonaccruing loans and repossessed assets. The ratio of nonperforming
assets to total assets was 1.27 percent at June 30, 1992, and decreased to 0.35
percent by June 30, 1995. The ratio then increased to 0.50 percent in 1996, and
to 0.45 percent at March 31, 1997. The Bank's allowance for loan losses was
20.76 percent of nonperforming loans at June 30, 1994, and was a higher 83.9
percent at March 31, 1997. As a percentage of gross loans, Citizens' allowance
for loan losses increased from 0.12 percent in 1992, to 0.46 percent at March
31, 1997.
Exhibit 9 provides the changes in net interest income due to rate and
volume changes for the past two fiscal years of 1995 and 1996 and for the nine
months ended March 31, 1997. In fiscal year 1995, net interest income increased
$221,000, due to an increase in interest income of $318,000 partially offset by
a $97,000 increase in interest expense. The increase in interest income was due
to an increase due to a change in volume of $187,000 accented by an increase due
to change in rate of $131,000. The increase in interest expense was due to an
increase due to rate of $42,000 accented by an increase due to a change in
volume of $55,000.
In fiscal year 1996, net interest income increased $162,000, due to a
$444,000 increase in interest income partially offset by a $282,000 increase in
interest expense. The increase in interest income was due to a $314,000 increase
due to volume accented by a $130,000 increase due to rate. The increase in
interest expense was due to a $166,000 increase due to volume accented by a
$116,000 increase due to rate.
14
<PAGE>
Income and Expense (cont.)
For the nine months ended March 31, 1997, net interest income increased
$124,000 due to a $255,000 increase in interest income partially offset by a
$131,000 increase in interest expense. The increase in interest income was due
to a $295,000 increase due to volume reduced by a $40,000 decrease due to rate.
The increase in interest expense was due to a $139,000 increase due to volume
reduced by an $8,000 decrease due to rate.
15
<PAGE>
YIELDS AND COSTS
The overview of yield and cost trends for the fiscal years ended June
30, 1994 to 1996, the nine months ended March 31, 1996 and 1997, and at March
31, 1997, can be seen in Exhibit 10, which offers a summary of key yields on
interest-earning assets and costs of interest-bearing liabilities.
Citizens' weighted average yield on its loan portfolio increased 44
basis points from fiscal year 1994 to 1996, from 8.33 percent to 8.77 percent,
then decreased to 8.73 percent for the nine months ended March 31, 1997, and to
8.61 percent at March 31, 1997. The yield on investment securities increased 146
basis points from 4.35 percent in 1994 to 5.81 percent in 1996. The yield then
increased to 6.31 percent for the nine months ended March 31, 1997, and to 6.39
percent at March 31, 1997. Other interest-bearing deposits indicated an increase
in their yield of 206 basis points from 3.79 percent in 1994 to 5.85 percent in
1996, then decreased to 5.02 percent for the nine months ended March 31, 1997,
and then up to 5.97 percent at March 31, 1997. The yield on FHLB stock increased
208 basis from 5.83 percent in 1994 to 7.91 percent in 1996, then decreased to
7.84 percent for the nine months ended March 31, 1997 and was a similar 7.85
percent at March 31, 1997. The combined weighted average yield on all
interest-earning assets increased 116 basis points to 8.29 percent from June 30,
1994 to June 30, 1996, and then increased to 8.30 percent for the nine months
ended March 31, 1997, and to 8.35 percent at March 31, 1997.
Citizens' weighted average cost of interest-bearing liabilities
increased 16 basis points to 4.15 percent from fiscal year 1994 to 1995, which
was less than the Bank's 71 basis point increase in yield, resulting in the
increase in the Bank's interest rate spread of 55 basis points from 3.14 percent
to 3.69 percent from 1994 to 1995. The Bank's average cost of interest-bearing
liabilities then increased from 1995 to 1996 by 39 basis points to 4.54 percent
compared to a 45 basis point increase in yield on interest-earning assets. The
result was an increase in the Bank's interest rate spread of 6 basis points to
3.75 percent for fiscal year 1996. For the nine months ended March 31, 1997, the
Bank's cost of
16
<PAGE>
Yields and Costs (cont.)
interest-bearing liabilities increased another 5 basis points compared to a one
basis point increase in yield resulting in a 4 basis point decrease in interest
rate spread to 3.71 percent. The cost of funds remained at 4.59 percent at March
31, 1997, compared to 5 basis points increase in yield to 8.35 percent. As a
result, the net interest rate spread increased 5 basis points to 3.76 percent at
March 31, 1997. The Bank's net interest margin increased from 3.38 percent in
fiscal year 1994 to 3.92 percent in fiscal year 1995, to 3.99 percent for the
year ended June 30, 1996, and remained at 3.99 percent for the nine months ended
March 31, 1997.
17
<PAGE>
INTEREST RATE SENSITIVITY
Citizens has controlled its interest rate sensitivity position due to
its strong level of originations of adjustable-rate mortgage loans. Due to its
higher share of adjustable-rate mortgage loans, the Bank has maintained a lower
level of liquid assets and has no mortgage-backed securities. Citizens is aware
of the thrift industry's historically higher interest rate risk exposure in the
past, which caused a negative impact on earnings and market value of portfolio
equity as a result of significant fluctuations in interest rates, specifically
rising rates. Such exposure was due to the disparate rate of maturity and/or
repricing of assets relative to liabilities commonly referred to as an
institution's "gap". The larger an institution's gap, the greater the risk
(interest rate risk) of earnings loss due to a decrease in net interest margin
and a decrease in market value of equity or portfolio loss. In response to the
potential impact of interest rate volatility and negative earnings impact, many
institutions have taken steps in the 1990s to minimize their gap position. This
frequently results in a decline in the institution's net interest margin and
overall earnings performance.
The Bank measures its interest rate risk through the use of its net
portfolio value ("NPV") of the expected cash flows from interest-earning assets
and interest-bearing liabilities and any off-balance sheet contracts. The NPV
for the Bank is calculated on a quarterly basis by OTS as well as the change in
the NPV for the Bank under rising and falling interest rates. Such changes in
NPV under changing rates is reflective of the Bank's interest rate risk
exposure.
There are other factors which have a measurable influence on interest
rate sensitivity. Such key factors to consider when analyzing interest rate
sensitivity include the loan payoff schedule, accelerated principal payments,
deposit maturities, interest rate caps on adjustable-rate mortgage loans, and
deposit withdrawals.
18
<PAGE>
Interest Rate Sensitivity (cont.)
Exhibit 11 provides the Bank's NPV as of March 31, 1997, and the change
in the Bank's NPV under rising and declining interest rates. Such calculations
are provided by OTS, and the focus of this exposure table is a 200 basis point
change in interest rates either up or down.
The Bank's change in its NPV at March 31, 1997, based on a rise in
interest rates of 200 basis points was a 16.0 percent decrease, representing a
dollar decrease in equity value of $1,099,000. In contrast, based on a decline
in interest rates of 200 basis points, the Bank's NPV was estimated to increase
5.0 percent or $375,000 at March 31, 1997. The Bank's exposure at March 31,
1997, increased to a 34.0 percent decrease under a 400 basis point rise in
rates, and the NPV is estimated to increase 5.0 percent based on a 400 basis
point decrease in rates.
The Bank is aware of its moderately negative interest rate risk
exposure under rapidly rising rates and moderately negative exposure under
falling rates. Due to Citizens' recognition of the need to control its interest
rate exposure, the Bank has been relatively active in the origination and
purchase of adjustable-rate loans.
19
<PAGE>
LENDING ACTIVITIES
Citizens has focused its lending activity on the origination of
conventional mortgage loans secured by one- to four-family dwellings. Exhibit 12
provides a summary of Citizens' loan portfolio, by loan type, at June 30, 1992
through 1996 and at March 31, 1997.
Residential loans secured by one- to four-family dwellings excluding
residential construction loans was the primary loan type representing a strong
79.0 percent of the Bank's net loans as of March 31, 1997. This share has seen a
minimal increase from 78.8 percent at June 30, 1992. The second largest real
estate loan type as of March 31, 1997, was multifamily loans which comprised 4.2
percent of net loans compared to a larger 6.8 percent as of June 30, 1992. The
third key real estate loan type was construction loans, which represented 2.7
percent of net loans as of March 31, 1997, compared to a smaller zero at June
30, 1992. Non-residential loans were the fourth largest real estate loan type at
March 31, 1997, with 2.3 percent of net loans compared to a larger 2.6 percent
in 1992 and making it the third largest real estate loan category in 1992.
Basically all of the Bank's construction loans are single-family residential
loans. These four real estate loan categories represented 85.6 percent of net
loans at March 31, 1997, compared to a larger 87.9 percent of net loans at June
30, 1992.
Consumer loans were the other group of loans at March 31, 1997, and
represented 14.4 percent of net loans compared to 12.1 percent at June 30, 1992.
Consumer loans were the second largest overall loan type at March 31, 1997, and
also the second largest loan type in 1992. The Bank originates savings account
loans, automobile loans, home improvement loans, home equity loans and other
secured and unsecured personal loans, both installment and single pay type
loans. The overall mix of loans has witnessed minimal change from fiscal
year-end 1992 to March 31, 1997, with the Bank having decreased its share of
non-residential and multifamily loans to offset its increase in consumer and
construction loans.
20
<PAGE>
Lending Activities (cont.)
The emphasis of Citizens' lending activity is the origination of
conventional mortgage loans secured by one- to four-family residences. Such
residences are located in Citizens' primary market area of Clinton County. The
Bank also originates interim construction loans on single-family residences
primarily to individual owners and to developers and residential land loans. At
March 31, 1997, 79.0 percent of Citizens' net loans consisted of loans secured
by one- to four-family residential properties, excluding construction loans.
Construction loans represented another 2.7 percent of net loans.
The Bank originates one-year adjustable-rate mortgage loans, ("ARMs").
The interest rates on ARMs are indexed to the weekly average yield on the
one-year U.S. Treasury Securities adjusted to a constant maturity. ARMs have a
maximum rate adjustment of 1.0 percent at each adjustment period and a 6.0
percent maximum adjustment over the life of the loan with payments based on up
to a 25 year amortization period. The Bank's ARMs are not convertible into
fixed-rate loans and do not have prepayment penalties. ARM loans may have
initial interest rates that are discounted.
The majority of ARMs have terms of up to 25 years, and fixed rate loans
have normal terms of up to 20 years with a maximum amortization period of 30
years. The Bank normally retains all of its fixed rate loans. Currently, the
majority of Citizens' mortgage loans are fixed-rate loans, which represented
64.6 percent of net loans at June 30, 1996, with ARMs representing 35.4 percent
of net loans. Most of Citizens' consumer loans were ARMs, representing 59.1
percent of net loans at June 30, 1996. At March 31, 1997, a higher 69.3 percent
of mortgage loans were fixed-rate and 50.7 percent were ARMs.
The original loan to value ratio for conventional mortgage loans to
purchase or refinance one-to four-family dwellings generally does not exceed 80
percent at Citizens,
21
<PAGE>
Lending Activities (cont.)
even though the Bank will grant loans with up to a 95 percent loan-to-value
ratio, with private mortgage insurance required for loans in excess of 80
percent loan-to-value ratio.
Citizens has also been an originator of nonresidential loans, and has
originated and purchased participations in multifamily loans. The Bank will
continue to make nonresidential and originate and purchase participations in
multifamily loans. The Bank had a total of $846,000 in nonresidential real
estate loans at March 31, 1997, or 2.3 percent of net loans, compared to
$613,000 or 2.7 percent of net loans at June 30, 1992. Nonresidential real
estate loans are normally one-year adjustable rate loans indexed to the one-year
U.S. Treasury securities yield adjusted to a constant maturity with a maximum
term of 20 years and a maximum loan-to-value ratio of 75.0 percent. The major
portion of nonresidential real estate loans are secured by office buildings,
churches and other commercial properties. Multifamily loans have decreased
slightly from $1,579,000 at June 30, 1992, to $1,563,000 at March 31, 1997, and
their share of loans has decreased from 6.8 percent to 4.2 percent over the same
time period.
Citizens has been relatively active in consumer lending in the past and
its dollar level of consumer loans has increased from $2.8 million in 1992 to
$5.3 million at March 31, 1997. Consumer loans originated consist primarily of
automobile loans, savings account loans, home improvement loans, home equity
loans and personal loans, which represented a combined total of 14.4 percent of
net loans at March 31, 1997, up from 12.1 percent in 1992.
Exhibit 13 provides a breakdown and summary of Citizens' loans by
maturity and also shows the Bank's mix of loans between adjustable-rate and
fixed-rate, indicating a predominance of fixed-rate loans. At June 30, 1996,
64.6 percent of the Bank's total loans were fixed-rate and 35.4 percent were
adjustable-rate. With most loans being fixed-rate, it is evident that a
relatively small 4.5 percent of one- to four-family residential mortgage loans
and 13.5 percent of total loans reprice in five years or less.
22
<PAGE>
Lending Activities (cont.)
As indicated in Exhibit 14, Citizens experienced strong increases in
its one-to four-family loan, construction loan and single pay consumer loan
categories from fiscal year 1994 to 1996. Total loan originations in fiscal year
1996 were $15.4 million compared to $11.1 million in fiscal year 1994, with
fiscal year 1995 indicating $11.4 million, reflective of a reduction in one-to
four-family loan originations and a rise in consumer loans. The increase in
one-to four-family residential loan originations from 1994 to 1996, including
construction loans, constituted a $3.1 million increase with total loan
originations increasing $4.4 million due to the increase in one- to four-family
loans, construction loans and selected consumer loans. Loan originations for the
purchase of one- to four-family residences, including construction loans,
represented 65.2 percent of total loan originations in fiscal year 1994,
compared to a smaller 53.4 percent in fiscal year 1995 and 67.1 percent in
fiscal year 1996. Overall, loan originations exceeded principal repayments and
other reductions in fiscal 1994 by $2.7 million, exceeded reductions in fiscal
year 1995 by $3.1 million, and exceeded reductions in fiscal 1996 by $5.1
million. For the nine months ended March 31, 1997, loan originations totaled
$13.0 million or $17.3 million annualized. One- to four-family loans, including
construction loans, represented a larger 68.7 percent of total loan originations
with construction loans having increased their share to 12.0 percent from 10.4
percent in 1996. Loan originations continued to exceed principal repayments by
$2.8 million for the nine months ended March 31, 1997.
23
<PAGE>
NONPERFORMING ASSETS
Citizens understands asset quality risk and the direct relationship of
such risk to delinquent loans and nonperforming assets including real estate
owned. The quality of assets has been a key concern to financial institutions
throughout many regions of the country. A number of financial institutions have
been confronted with rapid increases in their levels of nonperforming assets and
have been forced to recognize significant losses and set aside major valuation
allowances. A sharp increase in nonperforming assets has historically been
related to specific regions of the country and has frequently been associated
with higher risk loans, including nonresidential real estate loans. Citizens has
witnessed some volatility in its nonperforming assets and has made a concerted
effort to reduce its historically higher level of nonperforming assets over the
past five years.
Exhibit 15 provides a summary of Citizens' delinquent loans at March
31, 1997, and at June 30, 1994 to 1996, indicating a moderate level of
delinquent loans. Loans delinquent 90 days or more totaled $165,000 at March 31,
1997, and represented 0.43 percent of gross loans at March 31, 1997, with
delinquent loans of 60-89 days totaling $253,000 or 0.66 percent of gross loans
for a combined total of $418,000 or 1.10 percent of gross loans. A significant
95.5 percent of delinquent loans are secured by one- to four-family dwellings.
At June 30, 1994, delinquent loans were a higher 1.54 percent of total loans.
Citizens reviews each loan when it becomes delinquent 60 days or more,
to assess its collectibility and to initiate direct contact with the borrower.
The Bank sends the borrower a late payment notice when the loan becomes
delinquent 15 days or more. The Bank then initiates both written and oral
communication with the borrower if the loan remains delinquent 30 days or more.
When the loan becomes delinquent at least 90 days, the Bank will proceed to
structure a workout plan or refer the loan to their attorney to pursue
foreclosure proceedings. The Bank does not normally accrue interest on loans
past due 90 days or more. Most loans delinquent 90 days or more are placed on a
non-accrual status, and at that point in time, the Bank may contact an attorney
to pursue foreclosure procedures. The decision to foreclose is made by the board
of directors. Citizens had no real estate owned as of March 31, 1997.
24
<PAGE>
Nonperforming Assets (cont.)
Exhibit 16 provides a summary of Citizens' nonperforming assets at June
30, 1994 through 1996 and at March 31, 1997. Nonperforming assets consist of
non-accrual loans, loans delinquent 90 days or more, troubled debt
restructurings and repossessed assets. The Bank has historically carried a lower
than average level of nonperforming assets when compared to its peer group and
the thrift industry in general. Citizens' level of nonperforming assets ranged
from a high of $236,000 or 0.61 percent of total assets at June 30, 1994, to a
low of $140,000 or 0.35 percent of assets at June 30, 1995. At March 31, 1997,
the Bank had nonperforming assets totaling $205,000 or 0.45 percent of assets.
Citizens' level of nonperforming assets is higher than its level of
classified assets. The Bank's level of classified assets was $119,000 or 0.26
percent of assets at March 31, 1997 (reference Exhibit 17). The Bank's
classified assets consisted of $119,000 in substandard assets with no assets
classified as doubtful or loss.
Exhibit 18 shows Citizens' allowance for loan losses for fiscal years
1994 through 1996, and for the nine months ended March 31, 1996 and 1997,
indicating the activity and the resultant balances. Citizens has witnessed a
moderate increase in its balance of allowance for loan losses from $49,000 in
1994 to $172,000 at March 31, 1997, with provisions of $12,000 in 1994, $32,000
in 1995, $80,000 in 1996 and $32,000 in the nine months ended March 31, 1997.
The Bank had net charge-offs of $1,000 in 1994 and $35,000 in 1995 and net
recoveries of $12,000 in 1996 and $2,000 in the nine months ended March 31,
1997. The Bank's ratio of allowance for loan losses to gross loans increased
from 0.19 percent at June 30, 1994 to 0.46 percent at March 31, 1997. Allowance
for loan losses to nonperforming assets were 83.9 percent at March 31, 1997.
25
<PAGE>
INVESTMENTS
The investment and securities portfolio of Citizens has been comprised
of equity securities and FHLB stock. Exhibit 19 provides a summary of Citizens'
investment portfolio at June 30, 1994 through 1996 and at March 31, 1997.
Investments were $491,000 at March 31, 1997, compared to $3.4 million at June
30, 1996, and $3.0 million at June 30, 1994. The primary component of
investments at March 31, 1997 was FHLB stock, representing 67.6 percent,
followed by equity securities representing 32.4 percent, for a combined total of
100.0 percent. The securities portfolio had a weighted average yield of 7.38
percent. The Bank also had interest-bearing deposits of $3.9 million with a
yield of 5.97 percent at March 31, 1997.
26
<PAGE>
DEPOSIT ACTIVITIES
The change in the mix of deposits from June 30, 1994, to March 31, 1997
is provided in Exhibit 20. There has been a modest change in both total deposits
and in the deposit mix during this period. Certificates of deposit, including
IRA accounts, witnessed an increase in their share of deposits, rising from 55.8
percent of deposits at June 30, 1994, to 61.2 percent of deposits at June 30,
1996, and then to 62.6 percent at March 31, 1997. The major component of
certificates had rates between 5.0 percent and 5.99 percent and represented 66.5
percent of certificates at March 31, 1997. At June 30, 1994, the major component
of certificates was the 4.00 percent to 4.99 percent category with a 33.5
percent share of certificates. Passbook savings accounts decreased in dollar
amount from $8.2 million to $6.7 million, and their share of deposits decreased
from 24.0 percent to 17.9 percent from June 30, 1994, to March 31, 1997,
respectively. NOW and demand accounts indicated an increase in their share of
deposits from 10.9 percent at June 30, 1994, to 11.1 percent at March 31, 1997.
Money market accounts had a decrease in their share from 9.3 percent at June 30,
1994, to 8.4 percent at March 31, 1997.
Exhibit 21 shows the Bank's deposit activity for the three years ended
June 30, 1994 to 1996 and the nine months ended March 31, 1997. Including
interest credited, Citizens experienced net increases in deposits in fiscal
years 1994 and 1996 and in the nine months ended March 31, 1997, and a decrease
in fiscal 1995. In fiscal year 1994, there was a net increase in deposits of
$3.9 million or 12.9 percent, followed by a $862,000 decrease or 2.5 percent in
1995. In fiscal year 1996, an increase in deposits of $2.4 million resulted in a
7.3 percent increase in deposits followed by a $1.7 million increase or 4.6
percent for the nine months ended March 31, 1997.
27
<PAGE>
BORROWINGS
Citizens has relied on retail deposits as its primary source of funds
but has also made use of FHLB advances during the past two fiscal years ended
June 30, 1996, and in the nine months ended March 31, 1997. Exhibit 22 shows the
Bank's FHLB advances activity during the past three fiscal years and in the nine
months ended March 31, 1996 and 1997. The Bank's balance of FHLB advances was
zero at June 30, 1994, and increased to $3.0 million June 30, 1996, and then
decreased to $2.0 million at March 31, 1997. The cost of these advances was 5.87
percent at March 31, 1997.
SUBSIDIARIES
Citizens has one wholly-owned subsidiary, Citizens Loan and Service
Corp. ("CLSC"), which is engaged in the purchase and development of tracts of
land for single-family dwellings. CLSC is currently developing a 59 acre parcel
and owns another 105 acre parcel for future development over the next ten years.
Citizens had an investment of $465,000 in CLSC and loans outstanding to CLSC of
$570,000. CLSC had a profit of $24,000 for the fiscal year ended June 30, 1996.
OFFICE PROPERTIES
Citizens has one office, its home office, located in downtown
Frankfort. Citizens owns its home office, which provides off-street parking and
a stand-alone drive-in window facility. The Bank's investment in its office
premises, including furniture, fixtures and equipment, totaled $589,000 or 1.30
percent of assets at March 31, 1997.
28
<PAGE>
MANAGEMENT
The president, chief executive officer, and managing officer of
Citizens is Fred W. Carter Mr. Carter joined the Bank in 1966 and has held
numerous positions over the past thirty-one years. Mr. Carter became a director
in 1960, serving until 1966 and then stepped down from the board until 1971,
when he once again was placed on the board, serving until present. He became
president and chief executive officer in 1972 (reference Exhibit 23).
29
<PAGE>
II. DESCRIPTION OF PRIMARY MARKET AREA
Citizens' primary market area encompasses the city of Frankfort and
those outer communities surrounding its office, including Colfax, Kirklin,
Michigantown, Mulberry and Rossville, and all of Clinton County, Indiana ("the
market area"). The Bank's home office is located in Frankfort, Indiana.
The market area is characterized by slightly lower than average levels
of household income, lower housing values and a lower unemployment level. The
market area's strongest employment categories are manufacturing, services and
wholesale/retail trade with a lower level of residents employed in the
transportation and utilities category. Leading industries for the market area
include food processing and manufacturing, automotive parts and accessories,
specialized electronic components, plumbing supplies and printing inks. The
market area is also characterized by a strong agricultural industry with 800
farms totaling 247,000 acres producing respectably high yields. Three major
railroads also service the market area and specifically Frankfort, the largest
being Norfolk Southern.
Exhibit 24 provides a summary of key demographic data and trends for
the market area, Indiana and the United States for the periods of 1990, 1996,
and 2001. The market area showed a higher increase in population than Indiana
but lower than the United States from 1990 to 1996. Overall, the period of 1990
to 1996 was characterized by a moderate increase of 6.1 percent in the market
area population, which increased from 30,974 to 32,862 residents, compared to an
increase in population of 5.6 percent in Indiana and a rise in the national
population level by 6.7 percent. During the period of 1996 through 2001,
population is projected to continue to rise in the market area by a smaller 4.6
percent, increasing to 34,372 residents, while population is expected to
increase in Indiana by 4.3 percent, and in the United States by 5.1 percent.
30
<PAGE>
Description of Primary Market Area (cont.)
In conformance with its rising trend in population, the market area
witnessed moderate increases in households of 6.5 percent and a projected 4.8
percent, from 1990 to 1996 and from 1996 to 2001, respectively. These increases
are slightly larger than Indiana's increases in households of 6.0 percent and
4.4 for the same two time periods. The United States continued to have moderate
increases, growing by 6.8 percent from 1990 to 1996, and a projected 5.1 percent
from 1996 to 2001. From 1990 to 1996, the market area increased its households
from 11,450 to 12,198. By the year 2001, the market area is projected to have
12,784 households.
The market area had somewhat lower per capita income levels than both
Indiana and the United States in 1990 and in 1996. In 1990, the market area had
an average per capita income of $11,849. Indiana had a higher per capita income
of $13,149, and the United States also had a higher per capita income of
$12,313. From 1990 to 1996, the market area's increase in per capita income, was
greater than the increase in Indiana, but smaller than the average increase in
the United States. The market area increased its per capita income level by 22.7
percent to $14,535 in 1996, Indiana increased its per capita income by 16.2
percent to $15,275, while the United States had an increase in its per capita
income of 35.9 percent to $16,738.
Median household income figures for the market area were slightly lower
than Indiana and the United States, but by 1996 had increased to a level similar
to the median household income in Indiana and are projected to surpass Indiana's
household income by the year 2001. In 1990, the average median household income
for the market area was $26,148. The median household income levels for Indiana
and the United States were $28,797 and $28,525, respectively. From 1990 to 1996,
the market area's median household income increased by 23.5 percent to $32,305.
Indiana's median household income level grew by a smaller 14.0 percent to
$32,816 and the United States had an increase in its median household income
level by a larger 21.1 percent to $34,530. By the year 2001, Indiana and the
United States are projected to witness declines in their median
31
<PAGE>
Description of Primary Market Area (cont.)
household income levels to $30,900 and $33,189, respectively, with the market
area increasing slightly to $32,773, an increase of 1.4 percent.
Exhibit 25 provides a summary of key housing data for the market area,
Indiana, and the United States. Citizens' market area had a 72.0 percent rate of
owner-occupancy, slightly higher than the 70.2 percent owner-occupancy rate for
Indiana and noticeably higher than the 64.2 percent for the United States in
1990. As a result, the market area supported a lower rate of renter-occupied
housing 28.0 percent compared to 29.8 percent for Indiana and a higher 35.8
percent for the United States.
The market area's median housing value of $40,700 in 1990 was
considerably lower than both Indiana and the United States. Indiana's median
housing value of $53,500 is 31.4 percent higher than the market area's median
housing value. The United States' $79,098 median housing value is 94.3 percent
greater than that of the market area. The average median rent of the market area
is surpassed by the median rent of Indiana and the United States. The market
area had a median rent of $326, which was lower than Indiana's and the United
States' median rents of $374.
The major business source of employment by industry group, based on
number of employees for the market area was the manufacturing industry
responsible for 31.1 percent of jobs in 1990 which was higher than Indiana at
25.1 percent and also higher than the United States at 19.2 percent (reference
Exhibit 26), even though the outlying area is dominated by agriculture. The
major employer in Indiana and the United States was the services industry
responsible for a 32.7 percent and a 34.0 percent share of total employment in
1990, respectively. The services industry was the second major employer in the
market area at 27.5 percent. The wholesale/retail trade was the third major
employer in the market area at 18.5 percent, compared to a higher 21.4 percent
in Indiana and 27.5 percent in the United States. The construction group,
finance, insurance and real estate group, transportation/utilities group, and
the agriculture/mining group combined to 22.9
32
<PAGE>
Description of Primary Market Area (cont.)
percent of employment in the market area, with agriculture/mining and
construction both contributing a strong 7.1 percent. The combined figure is
compared to 16.2 percent of employment in Indiana, and 19.3 percent in the
United States for the same groups.
The strong presence of the manufacturing industry in Clinton County is
partially related to Frito-Lay plant, which employs over 1,200 persons. Federal
Mogul and Mallory Controls also have large levels of employment. The following
list provides some of the leading employers in the market area.
Employer Product/Service Number of Employees
Frito-Lay Snack food production 1,230
Federal Mogul Oil seal production 700
Mallory Controls Precision electronic controls 670
Exide Battery production 455
Government (city/county) Officials/Maintenance 378
Frankfort School System Education 365
Zachary Confection Candy specialties 331
Wesley Manor Retirement community 211
Crellin Injection molded plastics 200
The unemployment rate is another key economic indicator. Exhibit 27
shows the average unemployment rates in the market area, Indiana, and the United
States in 1994, 1995 and 1996. The market area has historically been
characterized by a lower unemployment rate than Indiana and the United States.
The market area had consistent decreases in its unemployment rate from 3.8
percent in 1994 to 3.7 percent in 1995. Indiana had a decrease in its
unemployment rate from 4.9 percent to 4.7 percent and the United States'
unemployment rate decreased from 6.1 percent to 5.6 percent in that same time
period. In 1996, the unemployment rate decreased further in the market area,
Indiana and the United States. The market area had the lowest unemployment at
3.3 percent, compared to the Indiana at 4.1 percent and the United States at 5.0
percent.
33
<PAGE>
Description of Primary Market Area (cont.)
Exhibit 28 provides deposit data for banks, thrifts and credit unions
in Clinton County. Citizens' deposit base in Clinton County was $35.6 million at
June 30, 1996, or 49.4 percent of the $72.0 million total thrift deposits but a
much smaller 9.8 percent share of total deposits which totaled $362.0 million.
The market area is clearly dominated by the banking industry. Total deposits
were $362.1 million with 78.9 percent in bank deposits, compared to a much lower
$72.0 million or 19.9 percent of deposits for thrifts, and $4.5 million or 1.2
percent in deposits held by credit unions. It is evident from the size of both
thrift deposits and bank deposits that Clinton County has a moderate deposit
base with the Bank having a strong level of market penetration of all thrift
deposits, but a moderate level of market penetration for total deposits.
Exhibit 29 provides interest rate data for each quarter for the years
1993 through 1996, and for the first quarter of 1997. The interest rates tracked
are the Prime Rate, as well as 90-Day and One-Year Treasury Bills and the
Thirty-Year Treasury Bond. In 1993 rates experienced slight volatility until the
last two quarters, which indicated the beginning of a rising trend. This rising
trend continued throughout all of 1994 and into the first quarter of 1995 with
prime at 9.00 percent. However, throughout the rest of 1995, interest rates saw
dramatic decreases, as the prime rate fell to its 1994 year end level of 8.50
percent. Such decrease in the prime rate continued through the first quarter of
1996 as it fell to 8.25 percent and then remained at 8.25 percent through the
end of 1996. Rates on 90-day T-bills, decreased in 1996 as did long term
treasury bonds with one-year Treasury Bills increasing modestly in 1996. Near
the end of the first quarter of 1997, the prime rate rose to 8.50 percent, while
90-day rates decreased to 4.95 percent. One-Year T-bill rates increased to 5.95
percent and Thirty-Year Bond yields also increased to 7.06 percent.
34
<PAGE>
SUMMARY
To summarize, Citizens' market area represents an area with a growing
population and moderate upward change in the number of households during the
mid-1990s. The market area has evidenced lower historical per capita income and
median household income compared to Indiana, but the market's median household
income level is projected to surpass that of Indiana by 2001. The market area
has a much lower median housing value and median rent than Indiana and the
United States. Further, the market area has a moderately competitive financial
institution market dominated by banks with a total deposit base of approximately
$362.1 million for all of Clinton County.
35
<PAGE>
III. COMPARABLE GROUP SELECTION
Introduction
The selection of an appropriate group of publicly-traded thrift
institutions, hereinafter referred to as the "comparable group" is integral to
the valuation of the Corporation. This section identifies the comparable group
and describes each parameter used in the selection of each institution in the
group, resulting in a comparable group based on such specific and detailed
parameters, current financials and recent trading prices. The various
characteristics of the selected comparable group provide the primary basis for
making the necessary adjustments to the Corporation's pro forma value relative
to the comparable group. There is also a recognition and consideration of
financial comparisons with all publicly-traded, SAIF-insured thrifts in the
United States and all publicly-traded, SAIF-insured thrifts in the Midwest and
Indiana.
Exhibits 30 and 31 present Thrift Stock Prices and Pricing Ratios and
Key Financial Data and Ratios, respectively, both individually and in aggregate,
for the universe of 332 publicly-traded, SAIF-insured thrifts in the United
States ("all thrifts"), excluding mutual holding companies, used in the
selection of the comparable group and other financial comparisons. Exhibits 30
and 31 also subclassify all thrifts by region, including the 155 publicly-traded
Midwest thrifts ("Midwest thrifts") and the 23 publicly-traded thrifts in
Indiana ("Indiana thrifts"), and by trading exchange. Exhibit 32 presents
prices, pricing ratios and price trends for the 38 SAIF-insured thrifts
completing their conversions between July 1, 1996, and May 22, 1997.
The selection of the comparable group was based on the establishment of
both general and specific parameters using balance sheet, operating and asset
quality characteristics of Citizens as determinants for defining those
parameters. The determination of parameters was also based on the uniqueness of
each parameter as a normal indicator of a thrift institution's operating
philosophy and perspective. The parameters established and
36
<PAGE>
Introduction (cont.)
defined are considered to be both reasonable and reflective of Citizens' basic
operation. Inasmuch as the comparable group must consist of at least ten
institutions, the parameters relating to asset size and geographic location have
been expanded as necessary in order to fulfill this requirement.
GENERAL PARAMETERS
Merger/Acquisition
The comparable group will not include any institution that is in the
process of a merger or acquisition due to the price impact of such a pending
transaction. The thrift institutions that were potential comparable group
candidates but were not considered due to their involvement in a
merger/acquisition or a potential merger/acquisition include the following:
Institution State
CB Bancorp, Inc. Indiana
Gateway Bancorp, Inc. Kentucky
SJS Bancorp Michigan
Suburban Bancorporation, Inc. Ohio
FCB Financial Corporation Wisconsin
No thrift institution in Citizens' market area is currently involved in
merger/acquisition activity or has been recently so involved, as indicated in
Exhibit 33.
37
<PAGE>
Mutual Holding Companies
The comparable group will not include any mutual holding companies.
Mutual holding companies typically demonstrate higher price to book valuation
ratios that are the result of their minority ownership structure that are
inconsistent with those of conventional, publicly-traded institutions. Exhibit
34 presents pricing ratios and Exhibit 35 presents key financial data and ratios
for the 21 publicly-traded, SAIF-insured mutual holding companies in the United
States. The following thrift institutions were potential comparable group
candidates, but were not considered due to their mutual holding company form:
Institution State
Jacksonville Savings Bank, MHC Illinois
Webster City Federal Savings Bank, MHC Iowa
Guaranty Federal SB, MHC Missouri
Pulaski Bank, Savings Bank, MHC Missouri
Wayne Savings & Loan Co., MHC Ohio
Trading Exchange
It is necessary that each institution in the comparable group be listed
on one of the three major stock exchanges, the New York Stock Exchange, the
American Stock Exchange, or the over-the-counter ("OTC") and listed on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"). Such a listing indicates that an institution's stock has
demonstrated trading activity and is responsive to normal market conditions,
which are requirements for listing. Of the 353 publicly-traded, SAIF-insured
institutions, including 21 mutual holding companies, 14 are traded on the New
York Stock Exchange, 18 are traded on the American Stock Exchange and 321 are
listed on NASDAQ.
38
<PAGE>
IPO Date
Another general parameter for the selection of the comparable group is
the initial public offering ("IPO") date, which must be at least four quarterly
periods prior to the trading date of May 22, 1997, used in this report, in order
to insure at least four consecutive quarters of reported data as a
publicly-traded institution. The resulting parameter is a required IPO date
prior to December 31, 1995.
Geographic Location
The geographic location of an institution is a key parameter due to the
impact of various economic and thrift industry conditions on the performance and
trading prices of thrift institution stocks. Although geographic location and
asset size are the two parameters that have been developed incrementally to
fulfill the comparable group requirements, the geographic location parameter has
definitely eliminated regions of the United States distant to Citizens,
including the western and southwestern states, the southeastern states and the
New England states.
The geographic location parameter consists of Indiana, its surrounding
states of Illinois, Kentucky, Michigan, and Ohio, as well as the states of Iowa,
Missouri and Wisconsin, for a total of eight states. To extend the geographic
parameter beyond those states could result in the selection of similar thrift
institutions with regard to financial conditions and operating characteristics,
but with different pricing ratios due to their geographic regions. The result
could then be an unrepresentative comparable group with regard to price relative
to the parameters and, therefore, an inaccurate value.
39
<PAGE>
Asset Size
Asset size was another key parameter used in the selection of the
comparable group. The range of total assets for any potential comparable group
institution was $250 million or less, due to the greater similarity of asset mix
and operating strategies of institutions in this asset range compared to
Citizens, with assets of approximately $45 million. Such an asset size parameter
was necessary to obtain a comparable group of at least ten institutions.
In connection with asset size, we did not consider the number of
offices or branches in selecting or eliminating candidates since this
characteristic is directly related to operating expenses, which are recognized
as an operating performance parameter.
SUMMARY
Exhibits 36 and 37 show the 34 institutions considered as comparable
group candidates after applying the general parameters, with the shaded lines
denoting the institutions ultimately selected for the comparable group using the
balance sheet, performance and asset quality parameters established in this
section.
40
<PAGE>
BALANCE SHEET PARAMETERS
Introduction
The balance sheet parameters focused on seven balance sheet ratios as
determinants for selecting a comparable group, as presented in Exhibit 36. The
balance sheet ratios consist of the following:
1. Cash and Investments/Assets
2. Mortgage-Backed Securities/Assets
3. One- to Four-Family Loans/Assets
4. Total Net Loans/Assets
5. Total Net Loans and Mortgage-Backed Securities/Assets
6. Borrowed Funds/Assets
7. Equity/Assets
The parameters enable the identification and elimination of thrift
institutions that are distinctly and functionally different from Citizens with
regard to asset and liability mix. The balance sheet parameters also distinguish
institutions with a significantly different capital position from Citizens. The
ratio of deposits to assets was not used as a parameter as it is directly
related to and affected by an institution's equity and borrowed funds ratios,
which are separate parameters.
Cash and Investments to Assets
Citizens' level of cash, interest-bearing deposits and investments to
assets was 9.8 percent at March 31, 1997, and reflects the Bank's lower level of
cash and investments than national and regional averages. The Bank's investments
consist primarily of time deposits and interest-bearing deposits in banks and
equity securities. During its last five fiscal years, Citizens' ratio of cash
and investments to assets has ranges from a high of 28.9 percent in 1992 to a
low of 14.3 percent in 1996, averaging 22.4 percent. It should be noted that
41
<PAGE>
Cash and Investments to Assets (cont.)
Federal Home Loan Bank stock is not included in cash and investments, but rather
is part of other assets in order to be consistent with reporting requirements
and sources of statistical and comparative analysis.
The parameter range for cash and investments is broad due to the
volatility of this parameter and to prevent the elimination of otherwise good
potential comparable group candidates. The range has been defined as 35.0
percent or less of assets with a midpoint of 17.5 percent.
Mortgage-Backed Securities to Assets
At March 31, 1997, Citizens had no mortgage-backed securities in its
portfolio and has not owned such securities during its past four fiscal years.
The regional average ratio of mortgage-backed securities to assets was 9.1
percent and the national average was 11.4 percent. Recognizing both the Bank's
absence of mortgage-backed securities and the fact that many institutions
purchase mortgage-backed securities as an alternative to lending relative to
cyclical loan demand and prevailing interest rates, this parameter is moderately
broad at 25.0 percent or less of assets and a midpoint of 12.5 percent.
One- to Four-Family Loans to Assets
Citizens' lending activity is focused on the origination of residential
mortgage loans secured by one- to four-family dwellings, which constituted 79.7
percent of the Bank's gross loans at March 31, 1997, including residential
construction loans. One- to four-family loans represented 67.1 percent of the
Bank's total assets at March 31, 1997, which is somewhat above industry
averages. The parameter for this characteristic requires any comparable group
institution to have from 50.0 percent to 85.0 percent of its assets in one- to
four-family loans with a midpoint of 67.5 percent.
42
<PAGE>
Total Net Loans to Assets
At March 31, 1997, Citizens had a ratio of total net loans to assets of
82.4 percent and a five fiscal year average of 70.1 percent, which is modestly
higher than the national average of 66.9 percent and similar to the regional
average of 69.7 percent. The parameter for the selection of the comparable group
is from 50.0 percent to 95.0 percent with a midpoint of 72.5 percent. The wider
range is simply due to the fact that, as the referenced national and regional
averages indicate, many institutions purchase a greater volume of investment
securities and/or mortgage-backed securities as a cyclical alternative to
lending, but may otherwise be similar to Citizens.
Total Net Loans and Mortgage-Backed Securities to Assets
As discussed previously, Citizens was absent mortgage-backed
securities, so its combined ratio of total net loans and mortgage-backed
securities to assets was also 82.4 percent. Recognizing the industry and
regional ratios of 11.4 percent and 9.1 percent, respectively, of
mortgage-backed securities to assets, the parameter range for the comparable
group in this category is 60.0 percent to 97.0 percent, with a midpoint of 78.5
percent.
Borrowed Funds to Assets
Citizens had FHLB advances of $2.0 million at March 31, 1997,
representing a modest 4.4 percent of assets. At the end of its two most recent
fiscal years ended June 30, 1996 and 1995, the Bank had FHLB advances of 6.8
percent and 3.8 percent of assets, respectively. At the end of its fiscal years
ended June 30, 1994, 1993 and 1992, the Bank was absent FHLB advances, resulting
in a five fiscal year average of 2.1 percent. The use of borrowed funds by some
thrift institutions indicates an alternative to retail deposits and may provide
a source of term funds for lending.
43
<PAGE>
Borrowed Funds to Assets (cont.)
The public demand for longer term funds increased in 1995 and the first
half of 1996 due to the higher cost of deposits. The result was competitive
rates on longer term Federal Home Loan Bank advances, and an increase in
borrowed funds by many institutions as an alternative to higher cost, long term
certificates. That trend has moderated somewhat in 1997, but residual balances
of longer term borrowings remain for many institutions. The ratio of borrowed
funds to assets, therefore, does not typically indicate higher risk or more
aggressive lending, but primarily an alternative to retail deposits.
The range of borrowed funds to total assets is 30.0 percent or less
with a midpoint of 15.0 percent, similar to national average of 14.5 percent.
Equity to Assets
Citizens' equity to assets ratio as of March 31, 1997, was 12.3
percent. After conversion, based on the midpoint value of $8,000,000 and net
proceeds to the Bank of approximately $3.8 million, Citizens' equity is
projected to stabilize in the area of 19.0 percent to 20.0 percent, with a pro
forma equity of approximately 23.0 percent for the Corporation. Based on those
historical and pro forma equity ratios, we have defined the equity ratio
parameter to be 8.0 percent to 20.0 percent with a midpoint ratio of 14.0
percent.
44
<PAGE>
PERFORMANCE PARAMETERS
Introduction
Exhibit 38 presents five parameters identified as key indicators of
Citizens' earnings performance and the basis for such performance. The primary
performance indicator is the Bank's return on average assets ("ROAA"). The
second performance indicator is the Bank's return on average equity ("ROAE"). To
measure the Bank's ability to generate net interest income, we have used net
interest margin. The supplemental source of income for the Bank is noninterest
income, and the parameter used to measure this factor is noninterest income to
assets. The final performance indicator that has been identified is the Bank's
ratio of operating expenses, also referred to as noninterest expenses, to
assets, a key factor in distinguishing different types of operations,
particularly institutions that are aggressive in secondary market activities,
which often results in much higher operating costs and overhead ratios.
Return on Average Assets
The key performance parameter is the ROAA. As a result of the special
SAIF assessment realized in the third quarter of 1996, categorized as a
non-recurring expense item, Citizens' ROAA will reflect core income, rather than
net income, and will be compared to the core ROAA of candidate comparable group
institutions. The Bank's core ROAA was 1.12 percent for the twelve months ended
March 31, 1997, based on core earnings after taxes, as detailed in Section I of
this report and presented in Exhibit 7. The Bank's ROAA over the past five
fiscal years, based on net earnings, has ranged from a low of 0.72 percent in
1992 to a high of 1.15 percent in 1996 with an average ROAA of 0.93 percent.
Considering the historical and current earnings performance of
Citizens, the range for the ROAA parameter based on core or normalized income
has been defined as 0.60 percent to a high of 1.45 percent with a midpoint of
1.03 percent.
45
<PAGE>
Return on Average Equity
The ROAE, also using core income, has been used as a secondary
parameter to eliminate any institutions with an unusually high or low ROAE that
is inconsistent with the Bank's position. This parameter does not provide as
much meaning for a newly converted thrift institution as it does for established
stock institutions, due to the newness of the capital structure of the newly
converted thrift and the inability to accurately reflect a mature ROAE for the
newly converted thrift relative to other stock institutions.
The pro forma consolidated ROAE for the Bank and the Corporation for
the year following conversion is projected to be approximately 3.99 percent
based on the midpoint valuation. Prior to conversion, the Bank's ROAE was 9.22
percent for the twelve months ended March 31, 1997, based on core income, with a
five year average net ROAE of 8.09 percent. The parameter range for the
comparable group, based on core income, is from 3.0 percent to 15.0 percent with
a midpoint of 9.0 percent.
Net Interest Margin
Citizens had a net interest margin of 3.80 percent based on the twelve
month period ended March 31, 1997. The Bank's range of net interest margin for
the past five fiscal years has been from a low of 3.00 percent in 1992 to a high
of 3.99 percent in 1996 with an average of 3.57 percent.
The parameter range for the selection of the comparable group is from a
low of 3.00 percent to a high of 4.50 percent with a midpoint of 3.75 percent.
46
<PAGE>
Operating Expenses to Assets
Net of non-recurring items, Citizens had a 2.30 percent ratio of
operating expenses to average assets ratio for the twelve months ended March 31,
1997, based on core expense adjustments, as previously discussed. For its five
most recent fiscal years, the Bank's operating expenses have been stable and
generally similar to its most recent twelve months, ranging from a low of 2.06
percent in 1992 to a high of 2.44 percent in 1995 with an average of 2.31
percent, similar to its current ratio and also similar to the current industry
average of 2.33 percent.
The operating expense to assets parameter, net of non-recurring
expenses, for the selection of the comparable group is from a low of 1.50
percent to a high of 3.00 percent with a midpoint of 2.25 percent.
Noninterest Income to Assets
For its most recent four quarters, Citizens experienced a modestly
lower than average dependence on noninterest income as a source of additional
income, net of non-recurring items as discussed in Section 1 and presented in
Exhibit 7. The Bank's noninterest income to average assets was 0.38 percent for
the twelve months ended March 31, 1997, which is below the industry average of
0.43 percent for the most recent four quarters. Citizens' ratio of noninterest
income to average assets, excluding non-recurring items, has been generally
stable and consistent during its past five fiscal years, with its ratio for its
trailing four quarters, ranging from 0.66 percent in 1993 to 0.36 percent in
1992, and averaging 0.54 percent.
The range for this parameter for the selection of the comparable group
is 0.80 percent or less of average assets, with a midpoint of 0.40 percent.
47
<PAGE>
ASSET QUALITY PARAMETERS
Introduction
The final set of financial parameters used in the selection of the
comparable group are asset quality parameters, also shown in Exhibit 38. The
purpose of these parameters is to insure that any thrift institution in the
comparable group has an asset quality position similar to that of Citizens. The
three defined asset quality parameters are the ratios of nonperforming assets to
total assets, repossessed assets to total assets and allowance for loan losses
to total assets at the end of the most recent period.
Nonperforming Assets to Assets Ratio
Citizens' ratio of nonperforming assets to assets was 0.45 percent at
March 31, 1997, which is lower than the national average of 0.80 percent and the
Midwest regional average of 0.61 percent, and lower than its ratio of 0.50
percent at June 30, 1996. For the five fiscal years ended June 30, 1992 to 1996,
the Bank's ratio decreased from a high of 1.27 percent at June 30, 1992, to a
low of 0.35 percent at June 30, 1995, with a five year average of 0.75 percent.
The parameter range for nonperforming assets to assets has been defined
as 1.25 percent of assets or less with a midpoint of 0.63 percent.
Repossessed Assets to Assets
Citizens was absent repossessed assets at March 31, 1997, and at June
30, 1992 through 1996. National and regional averages were 0.58 percent and 0.50
percent, respectively, at March 31, 1997.
48
<PAGE>
Repossessed Assets to Assets (cont.)
The range for the repossessed assets to total assets parameter is 0.50
percent of assets or less with a midpoint of 0.25 percent.
Allowance for Loans Losses to Assets
Citizens had an allowance for loan losses of $172,000, representing a
loan loss allowance to total assets ratio of 0.38 percent at March 31, 1997,
which is higher than its ratio of 0.31 percent at June 30, 1996. For its last
three fiscal years, the Bank's allowance for loan losses averaged 0.25 percent
of assets from a low of 0.12 percent in 1994 to a high of 0.31 percent in 1996.
The loan loss allowance to assets parameter range used for the
selection of the comparable group was a minimum required ratio of 0.15 percent
of assets.
THE COMPARABLE GROUP
With the application of the parameters previously identified and
applied, the final comparable group represents ten institutions identified in
Exhibits 39, 40 and 41. The comparable group institutions range in size from
$78.4 million to $234.3 million with an average asset size of $123.1 million and
have an average of 3.2 offices per institution compared to Citizens with assets
of $45.2 million and one office. One of the comparable group institutions was
converted in 1993, three in 1994, and six in 1995.
Exhibit 42 presents a comparison of Citizens' market area demographic
data with those of each of the institutions in the comparable group.
49
<PAGE>
SUMMARY OF COMPARABLE GROUP INSTITUTIONS
Classic Bancshares, Ashland, Kentucky, is the holding company for
Ashland Federal Savings Bank. The Bank currently has three full-services offices
and serves residents of Boyd and Greenup Counties. The Bank had assets of $128.4
million and equity of 19.2 million at the end of its most recent quarter, and
reported a core ROAA of 0.71 percent and a core ROAE of 3.40 percent for its
trailing four quarters.
Community Investors Bancorp, Inc., Bucyrus, Ohio, is the holding
company for First Federal Savings and Loan Bank of Bucyrus. The Association
serves its Crawford County, Ohio, market with three offices, two in Bucyrus and
one in New Washington. As of its most recent quarter, the Association had assets
of $97.4 million and equity of $11.2 million, and reported a core ROAA of 0.99
percent and a core ROAE of 8.18 percent.
First Bancshares, Inc., Mountain Grove, Missouri, is a unitary savings
and loan holding company for the First Home Savings Bank, with three full
service branches in Marshfield, Ava and Gainesville, Missouri. The Bank has
assets of $160.0 million, equity of $23.0 million and reported a core ROAA of
1.12 percent and a core ROAE of 7.33 percent for its most recent four quarters.
Fort Thomas Financial Corporation, Fort Thomas, Kentucky, is the
holding company for Fort Thomas Savings Bank, FSB, with two offices in Campbell
County, Kentucky, part of the greater Cincinnati area. At the end of its most
recent quarter, the Bank had assets of $94.7 million and equity of $15.2
million, and reported a core ROAA of 0.77 percent and a core ROAE of 3.83
percent for the trailing four quarters.
Horizon Financial Services Corporation, Oskaloosa, Iowa, is the holding
company for Horizon Federal Savings Bank, which currently operates three
full-service offices. Horizon Federal has total assets of $78.4 million and
equity of $8.2 million, and indicated a core ROAA of 0.60 percent and a core
ROAE of 5.41 percent in its most recent four quarters.
50
<PAGE>
Summary of Comparable Group Institutions (cont.)
Kentucky First Bancorp, Inc., Cynthiana, Kentucky, is the holding
company for First Federal Savings Bank of Cynthiana, chartered in 1888. The Bank
operates two offices in Cynthiana and serves Harrison, Pendleton and Scott
Counties with a lending focus on residential mortgages. At the end of its most
recent quarter, the Bank had assets of $88.9 million and equity of $14.3
million, and reported a core ROAA of 1.07 percent and a core ROAE of 5.23
percent for its most recent four quarters.
MFB Corp., Mishawaka, Indiana, is the holding company for Mishawaka
Federal Savings. Mishawaka Federal operates four offices in Mishawaka and
surrounding St. Joseph County. At the end of its most recent quarter, Mishawaka
Federal had total assets of $234.3 million and total equity of $34.0 million,
and for its most recent four quarters, the Bank reported a core ROAA of 0.85
percent and a core ROAE of 5.10 percent.
Northeast Indiana Bancorp, Inc., Huntington, Indiana, is the holding
company for First Federal Savings Bank. The bank serves Huntington County,
Indiana, through three full-service offices in the city of Huntington, about 25
miles southwest of Fort Wayne. At the end of its most recent quarter, First
Federal had assets of $172.9 million and equity of $26.2 million, and reported a
core ROAA of 1.22 percent and a core ROAE of 7.06 percent for its most recent
four quarters.
StateFed Financial Corp., Des Moines, Iowa, is the holding company for
State Federal Savings and Loan Association of Des Moines, operating two offices
in Polk County, Iowa. The Association has total assets of $85.2 million and
equity of $15.0 million, and reported a core ROAA of 1.29 percent and a core
ROAE of 6.99 percent for its most recent four quarters.
51
<PAGE>
Summary of Comparable Group Institutions (cont.)
Three Rivers Financial Corporation, Three Rivers, Michigan, is the
holding company for First Savings Bank, which operates four full service banking
offices in Three Rivers, Schoolcraft and Union, Michigan. At the end of its most
recent quarter, the Association had assets of $91.2 million and equity of $12.5
million, and reported a core ROAA of 0.83 percent and a core ROAE of 5.71
percent for its most recent four quarters.
52
<PAGE>
IV. ANALYSIS OF FINANCIAL PERFORMANCE
This section reviews and compares the financial performance of Citizens
to all thrifts, regional thrifts, Indiana thrifts and the ten institutions
constituting Citizens' comparable group, as selected and described in the
previous section. The comparative analysis focuses on financial condition,
earning performance and pertinent ratios as shown in Exhibits 43 through 48.
As presented in Exhibits 42 and 43, at March 31, 1997, Citizens' total
equity of 12.32 percent of assets was lower than the 14.45 percent for the
comparable group, the 12.86 for all thrifts and the 14.16 percent ratio for
Midwest thrifts, but slightly higher than the 12.30 percent ratio for Indiana
thrifts. The Bank had a 82.42 percent share of net loans in its asset mix,
considerably higher than the comparable group at 73.65 percent, and also much
higher than all thrifts at 66.76 percent, Midwest thrifts at 69.68 percent and
Indiana thrifts at 71.03 percent. Citizens' share of net loans, higher than
industry and regional averages, is the result of its absence of mortgage-backed
securities and lower level of cash and investments. The comparable group had a
4.53 percent share of mortgage-backed securities, and a higher 18.66 percent
share of cash and investments compared to the Bank, with a 9.77 percent ratio of
cash and investments to assets. All thrifts had 11.37 percent of assets in
mortgage-backed securities and 17.83 percent in cash and investments. Citizens'
share of deposits of 82.51 percent was significantly higher than the comparable
group and the three geographic categories, reflecting the Bank's low level of
FHLB advances. The comparable group had deposits of 67.48 percent and borrowings
of 16.89 percent. All thrifts averaged a 71.15 percent share of deposits and
14.52 percent of borrowed funds, while Midwest thrifts had a 70.08 percent share
of deposits and a 14.41 percent share of borrowed funds. Indiana thrifts
averaged a 70.10 percent share of deposits and a 16.51 percent share of borrowed
funds. Citizens was absent goodwill and other intangibles, compared to 0.25
percent for the comparable group, 0.24 percent for all thrifts, 0.19 percent for
Midwest thrifts and 0.07 percent for Indiana thrifts.
53
<PAGE>
Analysis of Financial Performance (cont.)
Operating performance indicators are summarized in Exhibits 44 and 45
and provide a synopsis of key sources of income and key expense items for
Citizens in comparison to the comparable group, all thrifts, and regional
thrifts for the trailing four quarters.
As shown in Exhibit 46, for the twelve months ended March 31, 1997,
Citizens had a yield on average interest-earning assets higher than the
comparable group and also higher than the three geographical categories. The
Bank's yield on interest-earning assets was 7.97 percent compared to the
comparable group at 7.75 percent, all thrifts at 7.68 percent, Midwest thrifts
also at 7.68 percent and Indiana thrifts at 7.89 percent.
The Bank's cost of funds for the twelve months ended March 31, 1997,
was lower than the comparable group and also lower than all thrifts, Midwest
thrifts and Indiana thrifts. Citizens had an average cost of interest-bearing
liabilities of 4.67 percent compared to 4.90 percent for the comparable group,
4.85 percent for all thrifts, 4.96 percent for Midwest thrifts and 4.99 percent
for Indiana thrifts. The Bank's interest income and interest expense ratios
resulted in an interest rate spread of 3.30 percent, which was higher than the
comparable group at 2.86 percent, and higher than all thrifts at 2.83 percent,
Midwest thrifts at 2.72 percent and Indiana thrifts at 2.89 percent. Citizens
demonstrated a net interest margin of 3.80 percent for the twelve months ended
March 31, 1997, based on average interest-earning assets, which was higher than
the comparable group at 3.60 percent. All thrifts averaged a lower 3.41 percent
net interest margin for the trailing four quarters, as did Midwest thrifts at
3.38 percent and Indiana thrifts at 3.45 percent.
Citizens' major source of income is interest earnings, as is evidenced
by the operations ratios presented in Exhibit 45. The Bank made a $49,000
provision for loan losses during the twelve months ended March 31, 1997,
representing 0.11
54
<PAGE>
Analysis of Financial Performance (cont.)
percent of average assets. The comparable group indicated a provision
representing a similar 0.09 percent of average assets, with all thrifts at 0.14
percent, Midwest thrifts at 0.10 percent and Indiana thrifts at 0.17 percent.
The Bank's non-interest income was $167,000 or 0.38 percent of average
assets for the twelve months ended March 31, 1997, net of the non-recurring loss
on the sale of assets in the amount of $60,000. Such non-interest income was
higher than the comparable group at 0.24 percent, but lower than all thrifts and
Midwest thrifts, both at 0.43 percent, and Indiana thrifts at 0.46 percent. For
the twelve months ended March 31, 1997, Citizens' operating expense ratio, net
of non-recurring expense, was 2.30 percent, higher than the comparable group and
Midwest thrifts, but lower than all thrifts and Indiana thrifts. Nonrecurring
expense during the most recent four quarters consisted primarily of the 67.5
basis point SAIF special assessment realized in the third quarter of 1996,
generally in the range of 0.40 percent to 0.55 percent of average assets for
most institutions. Net of such non-recurring expense, the comparable group's
operating expense ratio was 2.19 percent, while all thrifts averaged 2.33
percent, Midwest thrifts averaged 2.20 percent and Indiana thrifts averaged 2.31
percent. Citizens' SAIF assessment of $211,000 constituted 0.48 percent of
average assets.
The overall impact of Citizens' income and expense ratios is reflected
in the Bank's core income and return on assets. The Bank had an ROAA, based on
core income, of 1.12 percent for the twelve months ended March 31, 1997. For its
most recent four quarters, the comparable group had a lower ROAA of 0.95 percent
based on core income. All thrifts averaged a lower core ROAA of 0.78 percent,
while Midwest thrifts and Indiana thrifts averaged 0.90 percent and 0.85
percent, respectively.
55
<PAGE>
V. MARKET VALUE ADJUSTMENTS
This is a conclusive section where adjustments are made to determine
the pro forma market value or appraised value of the Corporation based on a
comparison of Citizens with the comparable group. These adjustments will take
into consideration such key items as earnings performance, market area,
financial condition, dividend payments, subscription interest, liquidity of the
stock to be issued, management, and market conditions or marketing of the issue.
It must be noted, however, that all of the institutions in the comparable group
have their differences, and as a result, such adjustments become necessary.
EARNINGS PERFORMANCE
In analyzing earnings performance, consideration was given to the level
of net interest income, the level and volatility of interest income and interest
expense relative to changes in market area conditions and to changes in overall
interest rates, the quality of assets as it relates to the presence of problem
assets which may result in adjustments to earnings, the level of current and
historical classified assets and real estate owned, the level of valuation
allowances to support any problem assets or nonperforming assets, the level and
volatility of non-interest income, and the level of non-interest expenses.
As discussed earlier, the Bank's historical business philosophy has
focused on maintaining its net interest income and net earnings level, reducing
its level of nonperforming assets, maintaining a reasonable level of interest
sensitive assets relative to interest sensitive liabilities and thereby
improving its sensitivity measure and its overall interest rate risk,
maintaining an adequate level of loan loss reserves to reduce the impact of any
unforeseen losses, and closely monitoring and striving to reduce its level of
overhead expenses. The Bank's current philosophy will continue to focus on
maintaining or further reducing its non-performing assets, reducing its overhead
expenses and maintaining its net interest spread and net interest margin, and
increasing its net income and return on assets.
56
<PAGE>
Earnings Performance (cont.)
Earnings are often related to an institution's ability to generate
loans. The Bank was an active originator of mortgage loans in fiscal years 1994,
1995 and 1996, with 1996 indicating the highest level of origination activity
and 1994 indicating the lowest. During the nine months ended March 31, 1997,
originations of $13.0 million, or $17.3 million annualized, indicated an
annualized increase of $1.9 million or 12.1 percent over the Bank's fiscal year
ended June 30, 1996, with approximately $1.5 million of the annualized increase
consisting of one- to four-family mortgage loans, including construction loans.
Most of the balance of the annualized increase was in the categories of
installment loans and home equity loans, with annualized originations of
non-residential and multifamily real estate loans being only modestly higher
than fiscal 1996. Total originations of $15.4 million during the twelve months
ended June 30, 1996, were 34.9 percent higher than the $11.4 million in fiscal
year 1995 and 39.4 percent higher than the $11.1 million in fiscal year 1994. In
addition to loans originated, Citizens purchased loan participations of $311,000
in fiscal year 1994 and $61,000 in fiscal year 1996. The Bank's net increase in
loans outstanding for the nine months ended March 31, 1997, of $2.8 million or
$3.8 million annualized, was moderately lower, on a annualized basis, than the
$5.1 million increase in fiscal year 1996, due to the higher level of principal
repayments, but higher than the $3.1 million increase in fiscal year 1995 and
the $2.7 million increase in fiscal year 1994. From June 30, 1992, to March 31,
1997, Citizens experienced a 64.0 percent increase in gross loans receivable, an
average annualized increase of 13.5 percent. The greatest increase of 16.8
percent was in fiscal year 1996, followed by a 15.0 percent increase during the
nine months ended March 31, 1997, annualized. The Bank's higher levels of both
originations and repayments in fiscal year 1996 and for the nine months ended
March 31, 1997, relate to moderating interest rates beginning in late 1995. The
Bank's focus in fiscal years 1994, 1995 and 1996, and for the nine months ended
March 31, 1997, annualized, was on the origination of permanent one- to
four-family mortgage loans, with that loan category constituting 65.2 percent,
50.3 percent, 56.7 percent and 56.7 percent of total origination in those four
periods, respectively. In those four periods, the second largest category of
originations was commercial loans, constituting 14.3 percent, 26.8 percent, 18.4
percent and 14.9 percent in fiscal years 1994, 1995 and 1996, and for the nine
months ended March 31, 1997, annualized.
57
<PAGE>
Earnings Performance (cont.)
The impact of the Bank's primary lending efforts has been to generate a
yield on average interest-earning assets of 7.97 percent for Citizens for the
twelve months ended March 31, 1997, compared to 7.75 percent for the comparable
group, 7.68 percent for all thrifts and an identical 7.68 percent for Midwest
thrifts. The Bank's level of interest income to average assets was 7.82 percent
for the twelve months ended March 31, 1997, which was also higher than the
comparable group at 7.52 percent, all thrifts at 7.39 percent and Midwest
thrifts at 7.42 percent for their most recent four quarters. Citizens' cost of
interest-bearing liabilities of 4.67 percent for the twelve months ended March
31, 1997, was lower than the comparable group at 4.90 percent, lower than all
thrifts at 4.85 percent and lower than Midwest thrifts at 4.96 percent.
The Bank's net interest margin of 3.80 percent, based on average
interest-earning assets for the twelve months ended March 31, 1997, was higher
than the comparable group at 3.60 percent and higher than all thrifts at 3.41
percent. Citizens' net interest spread of 3.30 percent for the twelve months
ended March 31, 1997, was higher than the comparable group at 2.86 percent, all
thrifts at 2.83 percent and Midwest thrifts at 2.72 percent.
Net of non-recurring items, the Bank's ratio of noninterest income to
average assets was 0.38 percent for the twelve months ended March 31, 1997,
higher than the comparable group at 0.24 percent, but lower than all thrifts and
Midwest thrifts, both at 0.43 percent of average assets. The Bank has indicated
recent noninterest income higher than the comparable group and its recent
operating expenses have also been higher than the comparable group and Midwest
thrifts, although slightly lower than all thrifts. For the twelve months ended
March 31, 1997, Citizens had an operating expenses to assets ratio of 2.30
percent, net of any non-recurring expense, compared to a lower 2.19 percent for
the comparable group, 2.33 percent for all thrifts and 2.20 percent for Midwest
thrifts.
For the twelve months ended March 31, 1997, Citizens generated higher
levels of noninterest income, higher levels of noninterest expenses, and a
higher net interest
58
<PAGE>
Earnings Performance (cont.)
margin relative to its comparable group. As a result, the Bank's core income
level for its twelve months ended March 31, 1997, was modestly higher than its
comparable group for the four most recent quarters, and also higher than all
thrifts and Midwest thrifts during that time period. Based on net earnings, the
Bank had a return on average assets of 0.72 percent in fiscal year 1992, 0.94
percent in fiscal year 1993, 0.77 percent in fiscal year 1994, 1.07 percent in
fiscal year 1995, 1.15 percent in fiscal year 1996 and 1.12 percent for the
twelve months ended March 31, 1997, based on core earnings. For its most recent
four quarters, the comparable group had a lower core ROAA of 0.95 percent, while
all thrifts indicated an even lower 0.78 percent. The Bank's core or normalized
earnings, as shown in Exhibit 7, were higher than its net earnings due to both
the SAIF special assessment realized in the third quarter of 1996 and a
non-recurring loss on the sale of assets, as previously discussed.
Citizens' earnings stream will continue to be dependent on both the
overall trends in interest rates and, to a somewhat lesser extent, on the
consistency and reliability of its moderate level of non-interest income, the
latter indicating a decrease for the twelve months ended March 31, 1997,
compared to the four most recent fiscal years.. The Bank's cost of
interest-bearing liabilities will continue to adjust as deposits reprice. Upward
pressure on savings costs is likely through the end of 1997, based on current
rates and projections, although the rate of increase, as well as the actual
rates, may moderate somewhat in 1998 and 1999. It has also been recognized that
although Citizens' current ROAA is higher than that of its comparable group for
the most recent four quarters, the Bank also experienced a modestly increasing
trend in its ROAA since 1994. The Bank's net interest margin and net interest
spread for the twelve months ended March 31, 1997, however, are lower than at
June 30, 1995 and 1996. In recognition of the foregoing earnings related
factors, a minimum upward adjustment has been made to Citizens' pro forma market
value for earnings performance.
59
<PAGE>
MARKET AREA
Citizens' primary market area for retail deposits consists of Clinton
County, Indiana, including the city of Frankfort, the location of the Bank's
home office, and the communities surrounding its office. As discussed in Section
II, this market area has evidenced a rate of population growth higher than
Indiana and the comparable group markets, but lower than the United States. In
1994, 1995 and 1996, the market area indicated lower unemployment than both
Indiana and the United States. The unemployment rate in Citizens' market area
counties averaged 3.3 percent in 1996, compared to 4.1 percent for Indiana and
5.0 percent for the United States. The per capita income in Citizens' market
area is lower than the state average as well as the national average and the
comparable group average. The median household income in the Bank's market area
is lower than the comparable group, Indiana and the United States. The market
area is also characterized by median housing values considerably lower than the
comparable group, Indiana and the United States. The market area is generally
agricultural, with the manufacturing sector being the major business and
employment sector, followed by the services sector and then the wholesale/retail
sector. The level of financial competition in the Bank's market area is
moderate, but dominated by the banking industry, with Citizens having
approximately half of the thrift deposits. Following a decrease in deposits in
1995 compared to 1994, Citizens had net increases in deposits in fiscal year
1996 and for the twelve months ended March 31, 1997, as deposits exceeded
withdrawals in those two periods. In recognition of all these factors, we
believe that a minimum downward adjustment is warranted for the Bank's market
area.
FINANCIAL CONDITION
The financial condition of Citizens is discussed in Section I and shown
in Exhibits 1, 2, 5, 15, 16 and 17, and is compared to the comparable group in
Exhibits 40, 42 and 43. The Bank's total equity ratio before conversion was
12.32 percent at March 31, 1997, which was lower than the comparable group at
14.45 percent, all thrifts at 12.86 percent and Midwest thrifts at 14.16
percent. With a conversion at the midpoint, the Corporation's pro
60
<PAGE>
Financial Condition (cont.)
forma equity to assets ratio will increase to approximately 23.0 percent, and
the Bank's pro forma equity to assets ratio will increase to approximately 20.0
percent.
The Bank's mix of assets indicates some areas of significant variation
from its comparable group. Citizens had a higher share of net loans at 82.42
percent of total assets at March 31, 1997, compared to the comparable group at
73.65 percent and all thrifts at 66.78 percent. The Bank was absent of
mortgage-backed securities compared to 4.53 percent for the comparable group and
11.37 percent for all thrifts. The Bank's 82.51 percent share of deposits was
higher than that of the comparable group at 67.48, reflecting Citizens' much
lower 4.43 percent balance of borrowed funds, compared to the comparable group
at 16.89 percent.
The Bank was absent both repossessed assets and goodwill, compared to
modest shares of 0.14 percent and 0.25 percent, respectively, for the comparable
group. All thrifts indicated repossessed assets of 0.58 percent and goodwill and
other intangible assets of 0.24 percent. The financial condition of Citizens is
also affected by its lower level of nonperforming assets at 0.45 percent of
assets at March 31, 1997, compared to a higher 0.71 percent for the comparable
group. It should be recognized, however, that the Bank's historical ratio of
nonperforming assets to total assets decreased from 1.27 percent at June 30,
1992, to 0.50 at June 30, 1996, averaging 0.75 percent for those five years,
before decreasing to its March 31, 1997 level of 0.45 percent.
The Bank had a lower share of high risk real estate loans at 5.34
percent compared to 12.35 percent for the comparable group and 12.94 percent for
all thrifts. Citizens had $172,000 in allowances for loan losses or a lower
82.90 percent of nonperforming assets at March 31, 1997, compared to the
comparable group's higher 142.14 percent, with Midwest thrifts at 146.48 percent
and all thrifts at 90.83 percent. The Bank's ratio is reflective of its
historically lower levels of general valuation allowances. Citizens has also
61
<PAGE>
Financial Condition (cont.)
experienced moderate levels of interest rate risk, as reflected by its exposure
under conditions of rising interest rates. Overall, we believe that no
adjustment is warranted for Citizens' current financial condition.
DIVIDEND PAYMENTS
Citizens has not committed to pay an initial cash dividend. The future
payment of cash dividends will be dependent upon such factors as earnings
performance, capital position, growth level, and regulatory limitations. All ten
institutions in the comparable group pay cash dividends for an average dividend
yield of 2.23 percent.
Currently, only some thrifts are committing to initial cash dividends,
similar to the absence of such dividend commitments in 1995 and 1996. In our
opinion, however, no adjustment to the pro forma market value is warranted at
this time related to dividend payments.
SUBSCRIPTION INTEREST
The general interest in thrift conversion offerings was often difficult
to gauge in 1995. Based upon recent offerings, subscription and community
interest weakened significantly in early 1995, but regained some strength by the
second half of the year. In the first half of 1996, interest in new issues was
mixed, with the number of conversions decreasing from the same period in 1995.
The second half of 1996 suggests renewed interest in thrift conversion
offerings. Overall, such interest appears to be directly related to the
62
<PAGE>
Subscription Interest (cont.)
financial performance and condition of the thrift institution converting and the
strength of the local economy, as well as general market conditions and
aftermarket price trends.
Citizens will focus its offering to depositors and residents in the
market area. The board of directors and officers anticipate purchasing
approximately $1.4 million or approximately 17.5 percent of the conversion stock
based on the appraised midpoint valuation. Citizens will form an 8.0 percent
ESOP, which plans to purchase stock in the initial offering. Additionally, the
Prospectus restricts to $100,000 the amount of conversion stock that may be
purchased by a single account holder, or by such persons and associates acting
in concert.
The Bank has secured the services of Trident Securities, Inc.
("Trident") to assist the Bank in the marketing and sale of the conversion
stock. Based on the size of the offering, current market conditions, local
market interest and the terms of the offering, we believe that a moderate
downward adjustment is warranted for the Bank's anticipated subscription
interest.
LIQUIDITY OF THE STOCK
Citizens will offer its shares through concurrent subscription and
community offerings with the assistance of Trident. If necessary, Trident will
conduct a syndicated community offering upon the completion of the subscription
and community offering. Citizens will pursue at least two market makers for the
stock. The Bank's offering is 54.9 percent smaller in size than the comparable
group and 80.7 percent smaller than the average of Indiana thrifts, resulting in
this offering being less liquid. Therefore, we believe that a moderate downward
adjustment to the pro forma market value is warranted at this time relative to
the liquidity of the stock.
63
<PAGE>
MANAGEMENT
The president and chief executive officer of Citizens is Fred W.
Carter, who has held that position since 1972 and has been an employee of the
Bank since 1966. Mr. Carter's first term as a director of Citizens was from 1960
to 1966, after which he was again elected to the board in 1971. His current
board term expires in 1997.
Mr. Carter and management of Citizens have been able to increase
lending activity and deposits, as well as the Bank's equity level and equity
ratio, over the past few years and the Bank's asset quality has improved since
1992, although the Bank's interest rate risk is moderately higher than average.
With the exception of fiscal year 1994, earnings have increased steadily in each
fiscal year since 1992 and the Bank's return on assets increased to 1.15 percent
in fiscal year 1996, compared to a lower 0.72 percent in fiscal year 1992, and
is currently higher than the comparable group and industry averages. Net
interest margin has historically been and currently is higher than both the
comparable group average and the industry averages. The Bank's level of
non-interest expense is currently higher than the comparable group and Midwest
thrifts, but slightly lower than all thrifts and indicates an increase of 11.7
percent from June 30, 1992, to March 31, 1997, or 2.5 percent per year. It is
our opinion that a minimum upward adjustment to the pro forma market value is
warranted for management.
MARKETING OF THE ISSUE
The response to a newly issued thrift institution stock is more
difficult to predict, due to the volatility of new thrift stocks. Further, with
each conversion, there is a high level of uncertainty with regard to the stock
market particularly thrift institution stocks and interest rate trends. The
impact of recent increases in interest rates has made it more difficult for more
thrift institutions to strengthen their earnings and resulted in downward market
prices. Recent conflicts of opinion on interest rate trends and the recent rise
in interest rates have resulted in some significant stock volatility.
64
<PAGE>
Marketing of the Issue (cont.)
The necessity to build a new issue discount into the stock price of a
converting thrift has prevailed in the thrift industry in recognition of higher
uncertainty among investors as a result of the thrift industry's dependence on
interest rate trends. We believe that a new issue discount applied to the price
to book valuation approach continues and is considered to be reasonable and
necessary in the pricing of the Corporation, and we have made a maximum downward
adjustment to the Corporation's pro forma market value in recognition of the new
issue discount.
65
<PAGE>
VI. VALUATION METHODS
Under normal stock market conditions, the most frequently used method
for determining the pro forma market value of common stock for thrift
institutions by this firm is the price to book value ratio method. The focus on
the price to book value method is due to the volatility of earnings in the
thrift industry. As earnings in the thrift industry improved in late 1993, 1994,
1995 and 1996, there has been more emphasis placed on the price to earnings
method, but the price to book value method continues to be the primary valuation
method. These two pricing methods have both been used in determining the pro
forma market value of the Corporation.
In recognition of the volatility and variance in earnings due to
fluctuations in interest rates, the continued differences in asset and liability
repricing and the frequent disparity in value between the price to book approach
and the price to earnings approach, a third valuation method has been used, the
price to net assets method. The price to net assets method is used less often
for valuing ongoing institutions; however, this method becomes more useful in
valuing converting institutions when the equity position and earnings
performance of the institutions under consideration are different.
In addition to the pro forma market value, we have defined a valuation
range with the minimum of the range being 85.0 percent of the pro forma market
value, the maximum of the range being 115.0 percent of the pro forma market
value, and a super maximum being 115.0 percent of the maximum. The pro forma
market value or appraised value will also be referred to as the "midpoint
value".
66
<PAGE>
PRICE TO BOOK VALUE METHOD
The price to book value method focuses on a thrift institution's
financial condition, and does not give as much consideration to the
institution's performance as measured by net earnings. Therefore, this method is
sometimes considered less meaningful for institutions that do provide a
consistent earnings trend. Due to the earnings volatility of many thrift stocks,
the price to book value method is frequently used by investors who rely on an
institution's financial condition rather than earnings performance.
Consideration was given to the adjustments to Citizens' pro forma
market value discussed in Section V. Minimum upward adjustments were as made for
earnings performance and management of the Bank. A minimum downward adjustment
was made for the Bank's market area and moderate downward adjustments were made
for the Bank's subscription interest and the liquidity of the stock. A maximum
downward adjustment was made for the marketing of the issue. No adjustments were
made for financial condition or dividend payments.
Exhibit 49 shows the average and median price to book value ratios for
the comparable group which were 99.32 percent and 99.45 percent, respectively.
The total comparable group indicated a fairly narrow range, from a low of 93.12
percent (Horizon Financial Services Corp.) to a high of 107.16 percent
(Community Investors Bancorp). This variance cannot be attributed to any one
factor such as the institution's equity ratio or earnings performance. Excluding
the low and the high in this group, the price to book value range narrowed very
modestly from a low of 95.21 percent to a high of 104.24 percent.
Taking into consideration all of the previously mentioned items in
conjunction with the adjustments made in Section V, we have determined a pro
forma price to book value ratio of 65.83 percent at the midpoint, ranging from a
low of 61.18 percent at the minimum to a high of 73.53 percent at the super
maximum for the Corporation.
67
<PAGE>
Price to Book Value Method (cont.)
The Corporation's price to book value ratio of 65.83 is strongly
influenced by the Bank's earnings performance, its local market and subscription
interest in thrift stocks. Further, the Corporation's equity to assets after
conversion will be approximately 23.00 percent compared to 14.45 percent for the
comparable group. Based on this price to book value ratio and the Bank's equity
of $5,564,000 at March 31, 1997, the indicated pro forma market value for the
Bank using this approach is $8,001,944 at the midpoint (reference Exhibit 48).
PRICE TO EARNINGS METHOD
The focal point of this method is the determination of the earnings
base to be used and secondly, the determination of an appropriate price to
earnings multiple. The recent earnings position of Citizens indicates after tax
net earnings for the twelve months ended March 31, 1997, of $367,000. Exhibit 7
indicates the derivation of the Bank's core or normalized earnings of $494,000
for the twelve months ended March 31, 1997. To arrive at the pro forma market
value of the Bank by means of the price to earnings method, we deemed net
earnings to be not meaningful, due primarily to the non-recurring expense
related to the SAIF special assessment realized in the third quarter of 1996,
and used the core earnings base of $494,000.
In determining the price to core earnings multiple, we reviewed the
range of price to core earnings multiples for the comparable group and all
publicly-traded thrifts. The average price to core earnings multiple for the
comparable group was 16.65, while the median was 15.99. The comparable group's
price to core earnings multiple was lower than the average for all
publicly-traded, SAIF-insured thrifts of 19.90, but slightly higher than their
median of 16.00. The range in the price to core earnings multiple for the
comparable group was from a low of 11.42 (Community Investors Bancorp) to a high
of 23.94 (Fort Thomas Financial Corp.). The primary range in the price to core
earnings
68
<PAGE>
Price to Earnings Method (cont.)
multiple for the comparable group, excluding the high and low ranges, was from a
low price to core earnings multiple of 13.27 to a high of 21.93 times earnings
for eight of the ten institutions in the group.
Consideration was given to the adjustments to the Corporation's pro
forma market value discussed in Section V. In recognition of these adjustments,
we have determined a price to core earnings multiple of 12.86 at the midpoint,
based on Citizens' core earnings of $494,000 for twelve months ended March 31,
1997. Based on the Bank's core earnings base of $494,000 (reference Exhibit 48),
the pro forma market value of the Corporation using the price to earnings method
is $8,003,083 at the midpoint.
PRICE TO NET ASSETS METHOD
The final valuation method is the price to net assets method. This
method is not as frequently used due to the fact that it does not focus as much
on an institution's equity position or earnings performance. Exhibit 48
indicates that the average price to net assets ratio for the comparable group
was 14.35 percent and the median was 14.52 percent. The range in the price to
net assets ratios for the comparable group varied from a low of 9.77 percent
(Horizon Financial Services Corp.) to a high of 16.91 percent (StateFed
Financial Corp.). It narrows very modestly with the elimination of the two
extremes in the group to a low of 12.34 percent and a high of 16.13 percent.
Based on the adjustments made previously for Citizens, it is our
opinion that an appropriate price to net assets ratio for the Corporation is
15.18 percent at the midpoint, which is slightly higher than the comparable
group at 14.35 percent and ranges from a low of 13.20 percent at the minimum to
19.15 percent at the super maximum. Based on the Bank's March 31, 1997, asset
base of $45,153,000, the indicated pro forma market value of the Corporation
using the price to net assets method is $7,998,053 at the midpoint (reference
Exhibit 48).
69
<PAGE>
VALUATION CONCLUSION
Exhibit 54 provides a summary of the valuation premium or discount for
each of the valuation ranges when compared to the comparable group based on each
of the valuation approaches. At the midpoint value, the price to book value
ratio of 65.83 percent for the Corporation represents a discount of 33.72
percent relative to the comparable group and decreases to 25.96 percent at the
super maximum. The price to core earnings multiple of 12.86 for the Corporation
at the midpoint value indicates a discount of 22.77 percent, decreasing to 4.77
percent at the super maximum. The price to assets ratio at the midpoint
represents a premium of 5.76 percent, increasing to a premium of 33.45 percent
at the super maximum.
It is our opinion that as of May 22, 1997, the pro forma market value
of the Corporation is $8,000,000 at the midpoint, representing 800,000 shares at
$10.00 per share. The pro forma valuation range of the Corporation is from a
minimum of $6,800,000 or 680,000 shares at $10.00 per share to a maximum of
$9,200,000 or 920,000 shares at $10.00 per share, with such range being defined
as 15 percent below the appraised value to 15 percent above the appraised value.
The super maximum is $10,580,000 or 1,058,000 shares at $10.00 per share
(reference Exhibits 50 to 53).
The appraised value of Citizens Savings Bank of Frankfort as of May
22, 1997, is $8,000,000 at the midpoint.
70
<PAGE>
CITIZENS SAVINGS BANK AND SUBSIDIARY
FRANKFORT, INDIANA
Consolidated Statements of Condition
At March 31, 1997 and June 30, 1996
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
-------------------- -----------------------
ASSETS
<S> <C> <C>
Cash on hand and in other institutions $ 322,976 $ 655,488
Interest-bearing deposits 3,927,787 2,652,686
Investment securities available for sale 158,853 3,003,242
Stock in Federal Home Loan Bank of Indianapolis 331,600 331,600
Loans receivable 37,216,332 34,391,405
Land held for development 1,042,676 1,072,800
Cash surrender value of life insurance contract 1,065,508 1,034,553
Property and equipment 588,892 603,464
Other assets 498,364 490,058
-------------------- -----------------------
Total Assets $ 45,152,988 $ 44,235,296
==================== =======================
LIABILITIES AND RETAINED INCOME
Deposits $ 37,254,858 $ 35,600,140
Federal Home Loan Bank advances 2,000,000 3,000,000
Other liabilities 333,962 366,157
-------------------- -----------------------
Total liabilities 39,588,820 38,966,297
Retained income - substantially restricted 5,564,168 5,319,852
Unrealized loss on investment securities
available for sale, net of tax -- (50,853)
-------------------- -----------------------
5,564,168 5,268,999
-------------------- -----------------------
Total liabilities and retained income $ 45,152,988 $ 44,235,296
==================== =======================
</TABLE>
Source: Citizens Savings Bank of Frankfort's Audited and Unaudited Financial
Statements
<PAGE>
EXHIBIT 2
CITIZENS SAVINGS BANK AND SUBISIDIARY
FRANKFORT, INDIANA
Consolidated Statements of Condition
At June 30, 1992 through 1995
<TABLE>
<CAPTION>
1995 1994 1993 1992
-------------- --------------- -------------- --------------
ASSETS
<S> <C> <C> <C> <C>
Cash on hand and in other institutions $ 777,048 $ 1,460,984 $ 377,328 $ 307,078
Interest-bearing deposits 3,532,891 5,749,036 6,584,215 9,324,541
Investment securities available for sale 2,832,047 2,677,382 1,651,923 991,746
Stock in Federal Home Loan Bank of Indianapolis 331,600 331,600 331,600 331,600
Mortgage-backed securities -- -- -- 1,217,736
Loans receivable 29,275,181 26,140,672 23,435,550 23,190,982
Land held for development 1,069,458 387,551 -- --
Cash surrender value of life insurance contract 991,009 942,597 -- --
Property and equipment 575,193 585,252 579,482 614,486
Other assets 342,735 247,616 1,500,375 779,555
-------------- --------------- -------------- --------------
Total Assets $ 39,727,162 $ 38,522,690 $ 34,460,473 $ 36,757,724
============== =============== ============== ==============
LIABILITIES AND RETAINED INCOME
Deposits $ 33,175,007 $ 34,037,345 30,135,587 32,811,380
Federal Home Loan Bank advances 1,500,000 -- -- --
Other liabilities 260,195 100,289 170,754 123,838
-------------- --------------- -------------- --------------
Total liabilities 34,935,202 34,137,634 30,306,341 32,935,218
Retained income - substantially restricted 4,840,922 4,434,753 4,154,132 3,822,506
Unrealized loss on investment securities
available for sale, net of tax (48,962) (49,697) -- --
-------------- --------------- -------------- --------------
4,791,960 4,385,056 4,154,132 3,822,506
-------------- --------------- -------------- --------------
Total liabilities and retained income $ 39,727,162 $ 38,522,690 $ 34,460,473 $ 36,757,724
============== =============== ============== ==============
</TABLE>
Source: Citizens Savings Bank of Frankfort's Audited and Unaudited Financial
Statements
<PAGE>
EXHIBIT 3
CITIZENS SAVINGS BANK AND SUBSIDIARY
FRANKFORT, INDIANA
Consolidated Statements of Income
For the nine months ended March 31, 1997 and 1996, and
For the year ended June 30, 1996
<TABLE>
<CAPTION>
For the nine months Year ended
ended March 31, June 30,
1997 1996 1996
--------------- --------------- --------------
(Unaudited)
Interest income:
<S> <C> <C> <C>
Interest on loans $ 2,379,618 $ 2,069,266 $ 2,803,774
Other interest income 240,329 295,711 382,453
--------------- --------------- --------------
Total interest income 2,619,947 2,364,977 3,186,227
Interest expense:
Interest on deposits 1,227,014 1,148,894 1,538,886
Interest on borrowings 134,852 81,731 114,253
--------------- --------------- --------------
Total interest expense 1,361,866 1,230,625 1,653,139
--------------- --------------- --------------
Net interest income 1,258,081 1,134,352 1,533,088
Provision for loan losses 32,000 63,000 80,000
--------------- --------------- --------------
Net interest income after provision
for loan losses 1,226,081 1,071,352 1,453,088
Other income:
Fees and service charges 105,152 114,298 152,379
Loss on sale of investments (60,244) -- --
Other 59,391 68,734 94,097
--------------- --------------- --------------
Total other income 104,299 183,032 246,476
Other expenses:
Salaries and employee benefits 351,710 304,683 414,730
Occupancy expense 83,750 82,311 117,967
Data processing expense 80,387 75,002 101,675
Federal insurance premium 252,960 56,946 76,868
Other 192,195 186,835 256,137
--------------- --------------- --------------
Total other expenses 961,002 705,777 967,377
--------------- --------------- --------------
Income before income taxes 369,378 548,607 732,187
Income taxes 125,062 192,027 253,257
--------------- --------------- --------------
Net income $ 244,316 $ 356,580 $ 478,930
=============== =============== ==============
</TABLE>
Source: Citizens Savings Bank of Frankfort's Audited and Unaudited Financial
Statements
<PAGE>
EXHIBIT 4
CITIZENS SAVINGS BANK AND SUBSIDIARY
FRANKFORT, INDIANA
Consolidated Statements of Income
Years ended June 30, 1992 through 1995
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------------------------------------------------
1995 1994 1993 1992
-------------- -------------- --------------- ----------------
Interest income:
<S> <C> <C> <C> <C>
Interest on loans $ 2,383,591 $ 2,045,736 $ 2,138,047 $ 2,276,987
Other interest income 358,661 378,080 424,709 696,211
-------------- -------------- --------------- ----------------
Total interest income 2,742,252 2,423,816 2,562,756 2,973,198
Interest expense:
Interest on deposits 1,341,925 1,273,229 1,422,862 1,911,777
Interest on borrowings 28,812 -- -- 9,603
-------------- -------------- --------------- ----------------
Total interest expense 1,370,737 1,273,229 1,422,862 1,921,380
Net interest income 1,371,515 1,150,587 1,139,894 1,051,818
Provision for loan losses 32,000 12,000 19,000 12,000
-------------- -------------- --------------- ----------------
Net interest income after provision
for loan losses 1,339,515 1,138,587 1,120,894 1,039,818
Other income:
Fees and service charges 151,726 120,440 96,781 92,039
Gain on sale of investments and mortgage-
backed securities -- -- 75,610 16,827
Other 69,731 76,850 63,266 25,483
-------------- -------------- --------------- ----------------
Total other income 221,457 197,290 235,657 134,349
Other expenses:
Salaries and employee benefits 387,245 330,924 318,986 252,004
Occupancy expense 109,842 105,049 101,794 108,042
Data processing expense 104,619 97,932 94,243 84,828
Federal insurance premium 75,078 71,468 65,776 75,678
Other 247,470 257,935 237,486 232,134
-------------- -------------- --------------- ----------------
Total other expenses 924,254 863,308 818,285 752,686
-------------- -------------- --------------- ----------------
Income before income taxes 636,718 472,569 538,266 421,481
Income taxes 230,549 165,976 206,640 158,205
-------------- -------------- --------------- ----------------
Income before cumulative effect of
change in accounting principle 406,169 306,593 331,626 263,276
Cumulative effect of change in accounting
for income taxes -- (25,972) -- --
-------------- -------------- --------------- ----------------
Net income $ 406,169 $ 280,621 $ 331,626 $ 263,276
============== ============== =============== ================
</TABLE>
Source: Citizens Savings Bank of Frankfort's Audited and Unaudited Financial
Statements
<PAGE>
EXHIBIT 5
Selected Consolidated Financial Condition
Data At March 31, 1997, and at June 30, 1992
through 1996
<TABLE>
<CAPTION>
March 31, June 30,
--------------
------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------------- ------------------------------------------------------------------
(Unaudited) (In thousands)
Summary of Financial Condition:
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 45,153 $ 44,235 $ 39,727 $ 38,523 $ 34,460 $ 36,758
Loans receivable 37,216 34,392 29,276 26,141 23,436 23,191
Cash on hand and in other institutions(1) 323 655 777 1,461 377 307
Investment securities available for sale 159 3,003 2,832 2,677 1,652 2,209
Cash surrender value
of life insurance contract 1,066 1,035 991 943 885 -0-
FHLB advances 2,000 3,000 1,500 -0- -0- -0-
Deposits 37,255 35,600 33,175 34,037 30,136 32,811
Retained income 5,564 5,320 4,841 4,435 4,154 3,823
Unrealized loss on investment
securities available for sale -0- (51) (49) (50) -0- -0-
</TABLE>
(1) Includes certificates of deposit in other financial institutions.
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 6
Income and Expense Trends
For the Nine Months Ended March 31, 1997 and 1996 and
For the Fiscal Years Ended June 30, 1992 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
--------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------- --------
Summary of Operating Data: (Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income $ 2,620 $ 2,365 $ 3,186 $ 2,742 $ 2,424 $ 2,563 $ 2,973
Total interest expense 1,362 1,231 1,653 1,370 1,273 1,423 1,921
-------- -------- -------- -------- -------- --------- --------
Net interest income 1,258 1,134 1,533 1,372 1,151 1,140 1,052
Provisions for loan losses 32 63 80 32 12 19 12
-------- -------- -------- -------- -------- --------- --------
Net interest income after
provision for loan losses 1,226 1,071 1,453 1,340 1,139 1,121 1,040
Other income:
Fees and service charges 105 114 152 151 120 97 92
Other (1) 69 94 70 77 139 42
-------- -------- -------- -------- -------- --------- --------
Total other income 104 183 246 221 197 236 134
Other expenses:
Salaries and employee benefits 352 305 415 387 331 319 252
Occupancy expense 84 82 118 109 105 102 108
Data processing expense 80 75 101 105 98 94 85
Federal insurance premiums 253 57 77 75 71 66 76
Other 192 187 256 248 258 237 232
-------- -------- -------- -------- -------- --------- --------
Total other expenses 961 706 967 924 863 818 753
-------- -------- -------- -------- -------- --------- --------
Income before income tax 369 548 732 637 473 539 421
Income tax expense 125 192 253 231 166 207 158
-------- -------- -------- -------- -------- --------- --------
Accounting change (26)
Net income $ 244 $ 356 $ 479 $ 406 $ 281 $ 332 $ 263
======== ======== ======== ======== ======== ========= ========
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 7
Normalized Earnings Trend
For the Twelve Months Ended March 31, 1997, and
For the Fiscal Years Ended June 30, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Twelve months
Ended Fiscal years ended
March 31, June 30,
--------------------------------------
1997 1996 1995 1994
--------- ---------- ---------- ------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Net income after taxes $ 367 $ 479 $ 406 $ 281
Net income before taxes and effect
of accounting adjustments 553 732 637 473
Income adjustments
Loss on sale of securities 60 --- --- ---
Expense adjustments
Effect of change in accounting --- --- --- (39)
SAIF assessment (211) --- --- ---
Normalized earnings before taxes 824 732 637 512
Taxes 330 (1) 253 (1) 231 (1) 205 (1)
----------- ---------- ---------- ------------
Normalized earnings after taxes $ 494 $ 479 $ 406 $ 307
=========== ========== ========== ============
</TABLE>
(1) Based on tax rate of 40.00 percent
Source: Citizens Savings Bank's audited and unaudited financial statements
<PAGE>
EXHIBIT 8
Performance Indicators
For The Nine Months Ended March 31, 1997 and 1996 and
For the Fiscal Years Ended June 30, 1992 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Years ended June 30,
------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ---------- ---------- ----------- ---------- --------
Supplemental Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate spread during period 3.71% 3.76% 3.75% 3.69% 3.14% 3.29% 2.62%
Net yield on interest-earning assets(1)(2) 3.99% 3.99% 3.99% 3.92% 3.38% 3.56% 3.00%
Return on assets (2) (3) 0.72% 1.15% 1.15% 1.07% 0.77% 0.94% 0.72%
Return on equity (2) (4) 6.05% 9.56% 9.52% 8.89% 6.58% 8.30% 7.15%
Equity to assets (5) 12.32% 12.09% 11.91% 12.06% 11.38% 12.05% 10.40%
Average interest-earning assets to average
interest-bearing liabilities 106.22% 105.37% 105.61% 105.84% 106.54% 106.20% 106.84%
Non-performing assets to total assets (5) 0.45% 0.53% 0.50% 0.35% 0.61% 1.02% 1.27%
Allowance for loan losses to total loans
outstanding (5) 0.46% 0.37% 0.40% 0.16% 0.19% 0.16% 0.12%
Allowance for loan losses to non-performing
loans (5) 84.12% 53.41% 62.51% 33.19% 20.89% 10.92% 5.79%
Net charge-offs to average total loans
outstanding 0.004% 0.04% 0.04% (0.12)% (0.004)% (0.03)% (0.05)%
Other expenses to average assets (2)(6) 2.82% 2.28% 2.32% 2.44% 2.38% 2.33% 2.06%
</TABLE>
(1) Net interest income divided by average interest-earning assets.
(2) Information for nine months ended March 31, 1997 and 1996, has been
annualized. Interim results are not necessarily indicative of the result of
operations for an entire year.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) At end of period.
(6) Other expenses divided by average total assets.
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 9
Volume/Rate Analysis
For the Nine Months Ended March 31, 1997 and 1996 and
For the Fiscal Years Ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year ended June 30,
----------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995 1995 vs. 1994
---------------------------------------------------------------- -----------------------------
Increase Increase Increase
(Decrease) Total (Decrease) Total (Decrease) Total
Due to Increase Due to Increase Due to Increase
------------------ --------------------- ------------------
Volume Rate (Decrease) Volume Rate (Decrease)Volume Rate (Decrease)
-------- -------- ------- ---------- --------- --------- --------- ------- ---------
(In thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits $ 15 $ (30) $ (15) $ (32) $ 32 $ 0 $ (130) $ 60 $ (70)
FHLB stock 0 0 0 0 3 3 0 4 4
Investment securities (54) 13 (41) 10 11 21 17 29 46
Loans receivable 334 (23) 311 336 84 420 300 38 338
------ -------- --------- ---------- --------- --------- --------- --------- ------
Total $ 295 $ (40) $ 255 $ 314 $ 130 $ 444 $ 187 $ 131 $ 318
====== ======== ========= ========== ========= ========= ========= ========= ======
Interest-bearing liabilities:
Deposits $ 73 $ 5 $ 78 $ 79 $ 118 $ 197 $ 27 $ 42 $ 69
FHLB advances 66 (13) 53 87 (2) 85 28 -- 28
------ -------- --------- ---------- --------- --------- --------- --------- ------
Total $ 139 $ (8) $ 131 $ 166 $ 116 $ 282 $ 55 $ 42 $ 97
====== ======== ========= ========== ========= ========= ========= ========= ======
Net change in net interest income $ 156 $ (32) $ 124 $ 148 $ 14 $ 162 $ 132 $ 89 $ 221
====== ======== ========= ========== ========= ========= ========= ========= ======
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 10
<TABLE>
<CAPTION>
At Nine Months Ended
March 31, March 31, Year ended June 30,
----------------------- ------------------------------------
1997 1997 1996 1996 1995 1994
----------- ----------- --------- ---------- ---------- ----------
Average Average Average Average Average Average
Rate Rate Rate Rate Rate Rate
----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits 5.97% 5.02% 6.00% 5.85% 4.89% 3.79%
FHLB stock 7.85% 7.84% 8.03% 7.91% 7.06% 5.83%
Investments securities 6.39% 6.31% 5.91% 5.81% 5.43% 4.35%
Loans receivable 8.61% 8.73% 8.79% 8.77% 8.48% 8.33%
----------- ----------- --------- ---------- ---------- -------
Total interest-earning assets 8.35% 8.30% 8.32% 8.29% 7.84% 7.13%
Deposits 4.52% 4.50% 4.48% 4.47% 4.12% 3.99%
FHLB advances 5.87% 5.49% 6.05% 5.94% 6.24% -0-%
----------- ----------- --------- ---------- ---------- -------
Total interest-bearing liabilities 4.59% 4.59% 4.56% 4.54% 4.15% 3.99%
3.76% 3.71% 3.76% 3.75% 3.69% 3.14%
=========== =========== ========= ========== ========== =======
-0-% 3.99% 3.99% 3.99% 3.92% 3.38%
=========== =========== ========= ========== ========== =======
</TABLE>
Interest rate spread is calculated by substacting combined weighted average
interest rate cost from combined weighted avarage interest rate earned for the
period indicated. Interest rate spread figures must be considered in light of
the relationship between the amounts of interest-earning assets and
interest-bearing liabilities.
The net yield on weighted average interest-earning assets is calculated by
dividing net interest income by weighted average interest-earning assets for the
period indicated. No net yield figure is presented at March 31, 1997, because
the computation of net yield is applicable only over a period rather than at a
specific date.
<PAGE>
EXHIBIT 11
Interest Rate Sensitivity of Net Portfolio Value (NPV)
At March 31, 1997
At March 31, 1997
----------------------------
Assumed Board
Change in Limit
Interest Rates % Change $ Change % Change
(Basis Points) in NPV in NPV in NPV
----------------- -------------- ------------ ------------
(In Thousands)
+400 -45 $ (2,337) (34)
+300 -35 (1,714) (25)
+200 -25 (1,099) (16)
+100 -20 (513) (7)
0 0 0 0
-100 -20 345 5
-200 -25 375 5
-300 -35 289 4
-400 -45 326 5
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 12
Loan Portfolio Composition At March 31, 1997, and at June 30, 1992 through
1996
<TABLE>
<CAPTION>
At March 31, At June 30,
--------------------- ----------------------------------------------------------------
1997 1996 1995 1994
--------------------- --------------------- --------------------- --------------------
Amount Percent Amount Percent Amount Percent Amount Percent
----------- --------- ---------- ---------- --------------------- ---------- ---------
(Dollars in thousands)
Type of Loan:
Real estate mortgage loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $ 29,402 79.00% $ 26,240 76.30% $ 22,287 76.13% $20,677 79.10%
Nonresidential 846 2.28% 695 2.02% 635 2.17% 647 2.47%
Multi-family 1,563 4.20% 1,596 4.64% 1,680 5.74% 1,665 6.37%
Construction loans: 991 2.66% 870 2.53% 356 1.22% -- --
Consumer loans:
Single pay 1,825 4.90% 2,110 6.14% 1,795 6.13% 558 2.13%
Installment 1,493 4.01% 1,288 3.74% 1,068 3.65% 836 3.20%
Share 15 0.04% 63 0.18% 7 0.02% 5 0.02%
Home equity 2,003 5.38% 1,949 5.67% 1,973 6.74% 1,863 7.13%
Home improvement 9 0.03% 11 0.03% 14 0.04% 22 0.08%
-------- ------ ------- ------ ------- ------ ------ -------
Gross loans receivable $ 38,147 102.50% $ 34,822 101.25% $ 29,815 101.84% $26,273 100.50%
Types of Security:
Residential real estate $ 33,997 91.35% $ 30,861 89.73% $ 26,043 88.96% $23,248 88.93%
Nonresidential 1,108 2.98% 1,072 3.12% 1,116 3.81% 647 2.47%
Multi-family real estate 1,563 4.20% 1,596 4.64% 1,681 5.74% 1,665 6.37%
Deposits 116 0.31% 165 0.48% 82 0.28% 50 0.19%
Auto 1,025 2.76% 832 2.42% 691 2.36% 513 1.96%
Other security 220 0.59% 214 0.62% 121 0.41% 66 0.25%
Unsecured 118 0.31% 82 0.24% 81 0.28% 84 0.33%
-------- ------ ------- ------ ------- ------ ------ -------
Gross loans receivable $ 38,147 102.50% $ 34,822 101.25% $ 29,815 101.84% $26,273 100.50%
Deduct:
Deferred loan fees $ 103 0.28% 95 0.28% 86 0.29% 76 0.28%
Allowance for loan losses 172 0.46% 138 0.40% 46 0.16% 49 0.19%
Loans in process 656 1.76% 197 0.57% 407 1.39% 7 0.03%
-------- ------ ------- ------ ------- ------ ------ -------
Net loans receivable $ 37,216 100.00% $ 34,392 100.00% $ 29,276 100.00% $26,141 100.00%
Mortgage Loans:
Adjustable-rate $ 9,798 30.67$ 9,241 32.30$ 9,319 37.6$% 7,849 33.96$
Fixed-rate 22,153 69.33% 19,368 67.70% 15,410 62.32% 15,266 66.04%
-------- ------ ------- ------ ------- ------ ------ -------
Total $ 31,951 100.00% $ 28,609 100.00% $ 24,729 100.00% $23,115 100.00%
</TABLE>
At June 30,
------------------------------------------
1993 1992
-------------------- --------------------
Amount Percent Amount Percent
---------- --------- ---------- ---------
Type of Loan:
Real estate mortgage loans:
Residential $ 18,704 79.81% $ 18,267 78.77%
Nonresidential 514 2.19% 613 2.64%
Multi-family 1,680 7.17% 1,579 6.81%
Construction loans: -- -- -- --
Consumer loans:
Single pay 361 1.54% 303 1.31%
Installment 674 2.88% 752 3.24%
Share 47 0.20% 138 0.60%
Home equity 1,549 6.61% 1,517 6.54%
Home improvement 44 0.19% 97 0.42%
------- ------ ------- ------
Gross loans receivable $ 23,573 100.59% $ 23,266 100.33%
Types of Security:
Residential real estate $ 20,594 87.88% $ 20,191 87.07%
Nonresidential 514 2.19% 613 2.64%
Multi-family real estate 1,680 7.17% 1,579 6.81%
Deposits 110 0.47% 207 0.89%
Auto 374 1.59% 390 1.68%
Other security 220 0.94% 174 0.76%
Unsecured 81 0.35% 112 0.48%
------- ------ ------- ------
Gross loans receivable $ 23,573 100.59% $ 23,266 100.33%
Deduct:
Deferred loan fees 52 0.23% 48 0.21%
Allowance for loan losses 38 0.16% 27 0.12%
Loans in process 47 0.20% -- --
------- ------ ------- ------
Net loans receivable $ 23,436 100.00% $ 23,191 100.00%
Mortgage Loans:
Adjustable-rate 8,357 39.77$ 9,295 45.20%
Fixed-rate 12,657 60.23% 11,270 54.80%
------- ------ ------- ------
Total $ 21,014 100.00% $ 20,565 100.00%
<PAGE>
EXHIBIT 13
Loan Maturity Schedule
At June 30, 1996
<TABLE>
<CAPTION>
Due During Years Ended June 30,
-----------------------------------------------------------------------------------------
2000 2002 2007
and through through
1997 1998 1999 2001 2006 2011
--------- ------------ ------------- ------------- ------------- -------------
(In Thousands)
Real estate mortgage loans:
<S> <C> <C> <C> <C> <C> <C>
Residential loans $ 33 $ 18 $ 104 $ 263 $ 2,890 $ 14,114
Multi-family loans -- -- -- -- 245 1,351
Nonresidential loans -- -- -- 38 83 574
Construction loans 870 -- -- -- -- --
Installment loans 59 266 365 488 110 --
Single pay loans 1,748 167 96 99 -- --
Loans secured by
deposits 48 15 -- -- -- --
Home equity loans -- -- -- -- -- --
Home improvement
loans -- -- 3 8 -- --
--------- ------------ ------------- ------------- ------------- -------------
Total $ 2,758 $ 466 $ 568 $ 896 $ 3,328 $ 16,039
========= ============ ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Due After June 30, 1997
----------------------------------------------------------------------------
Fixed Rates Variable Rates Total
(In thousands)
Real estate mortgage loans:
<S> <C> <C> <C>
Residential loans $ 19,221 $ 6,986 $ 26,207
Multi-family loans -- 1,596 1,596
Nonresidential loans 41 654 695
Construction loans -- -- --
Installment loans 1,229 -- 1,229
Single pay loans 202 160 362
Loans secured by
deposits 15 -- 15
Home equity loans -- 1,949 1,949
Home improvement
loans 11 -- 11
------------ ------------- -------------
Total $ 20,719 $ 11,345 $ 32,064
============ ============= =============
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 14
Loan Originations
For The Nine Months Ended March 31, 1997 and 1996, and
For the Years Ended June 30, 1994 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Years ended June 30,
---------------------------- -------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ---------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans originated:
Real estate mortgage loans:
Residential loans $ 7,344 $ 6,055 $ 8,738 $ 5,748 $ 7,216
Nonresidential loans 202 111 175 190 108
Multi-family loans 102 -- -- 56 48
Construction loans 1,559 1,183 1,603 356 --
Installment loans 973 746 1,076 961 767
Single pay loans 1,933 1,940 2,834 3,063 1,582
Loans secured by deposits 5 27 63 6 5
Home equity loans 848 662 930 1,054 1,335
Home improvement loans -- -- -- -- --
------------- ------------- ---------- ---------- -----------
Total originations 12,966 10,724 15,419 11,434 11,061
Loans purchased -- -- 64 -- 311
Reductions:
Principal loan repayments (9,990) (7,475) (10,279) (8,263) (8,643)
Loans sold (91) -- -- -- --
------------- ------------- ---------- ---------- -----------
Transfers from loans to real
estate owned -- -- -- -- --
------------- ------------- ---------- ---------- -----------
Total reductions (10,081) (7,475) (10,279) (8,263) (8,643)
Decrease in other items (1) (60) (23) (88) (37) $ (24)
------------- ------------- ---------- ---------- -----------
Net increase (decrease) 2,825 3,226 5,116 3,134 2,705
============= ============= ========== ========== ===========
</TABLE>
(1) Other items consist of amortization of deferred loan origination costs and
the provision for losses on loans.
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 15
Delinquent Loans
For the Nine Months Ended March 31, 1997 and
At June 30, 1994 through 1996
<TABLE>
<CAPTION>
At March 31, 1997 At June 30, 1996 At June 30, 1995
--------------------------- -------------------------- ---------------------------
90 Days 90 Days 90 Days
60-89 Days or More 60-89 Days or More 60-89 Days or More
------------ ------------- ------------ ------------ ------------- ------------
Principal Principal Principal Principal Principal Principal
Balance of Balance of Balance of Balance of Balance of Balance of
Loans Loans Loans Loans Loans Loans
------------ ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage loans $25 $ 95 $ 158 $ 89 $ 133 $ 41
Nonresidential mortgage loans -- -- -- -- -- --
Multi-family mortgage loans -- -- -- -- -- --
Installment loans -- 18 16 35 25 9
Single pay loans -- 1 24 12 2 27
Loans secured by deposit -- -- -- -- -- --
Home equity loans 128 51 6 45 10 21
Home improvement loans -- -- -- -- -- --
------------ ------------- ------------ ------------ ------------- ------------
Total $253 $165 $ 204 $ 181 $ 170 $ 98
</TABLE>
At June 30, 1994
---------------------------
90 Days
60-89 Days or More
------------- ------------
Principal Principal
Balance of Balance of
Loans Loans
------------- ------------
Residential mortgage loans $ 199 $ 134
Nonresidential mortgage loans -- 27
Multi-family mortgage loans -- --
Installment loans 7 18
Single pay loans -- --
Loans secured by deposit -- --
Home equity loans -- 15
Home improvement loans -- 2
------------- ------------
Total $ 206 $ 196
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 16
Nonperforming Assets
At March 31, 1997 and
At June 30, 1994 through 1996
<TABLE>
<CAPTION>
At March 31, At June 30,
---------------- --------------------------------------------
1997 1996 1995 1994
---------------- ------------ ------------ -------------
(Unaudited) (In Thousands)
Non-performing assets:
<S> <C> <C> <C> <C>
Non-performing loans $ 165 $ 181 $ 98 $ 196
Troubled debt restructurings 40 41 42 40
---------------- ------------ ------------ -------------
Total non-performing loans 205 222 140 236
Foreclosed real estate -- -- -- --
---------------- ------------ ------------ -------------
Total non-performing assets $ 205 $ 222 $ 140 $ 236
================ ============ ============ =============
Non-performing loans to total loans 0.55% 0.64% 0.48% 0.90%
================ ============ ============ =============
Non-performing assets to total assets 0.45% 0.50% 0.35% 0.61%
================ ============ ============ =============
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 17
Classified Assets
At March 31, 1997
At March 31,
1997
-----------------
(Unaudited)
(In thousands)
Substandard assets $ 119
Doubtful assets --
Loss assets --
-------------
Total classified assets $ 119
=============
General loss allowances $ 172
Specific loss allowances --
-------------
Total allowances $ 172
=============
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 18
Allowance for Loan Losses
For the Nine Months Ended March 31, 1996 and 1997, and
For the Years Ended June 30, 1994 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
---------------------------------------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 138 $ 46 $ 46 $ 49 $ 38
Charge-offs
Residential mortgage loans --- --- --- --- ---
Nonresidential loans --- --- --- --- ---
Multifamily loans --- --- --- --- ---
Construction loans --- --- --- --- ---
Installment loans --- --- --- (11) (6)
Single pay loans --- --- --- (26) ---
Loans secured by deposits --- --- --- --- ---
Home equity loans --- --- --- --- ---
Home improvement loans --- --- --- --- ---
----------
Total charge-offs --- --- --- (37) (6)
---------- ---------- ---------- ---------- ----------
Recoveries: 2 12 12 2 5
---------- ---------- ---------- ---------- ----------
Net (charge-offs) recoveries 2 12 12 (35) (1)
Provision for losses on loans 32 63 80 32 12
============ ============ ============= ============ ============
Balance at end of period $ 172 $ 121 $ 138 $ 46 $ 49
============ ============ ============= ============ ============
Allowance for loan losses as a
percent of total loans outstanding 0.46% 0.37% 0.40% 0.16% 0.19%
============ ============ ============= ============ ============
Ratio of net (charge-offs) recoveries
to average loans outstanding 0.004% 0.04% 0.04% (0.12)% (0.004)%
============ ============ ============= ============ ============
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 19
Investment Portfolio Composition
At March 31, 1997, and
At June 30, 1994 through 1996
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------
At March 31, 1997 1996 1995 1994
--------------------- --------------------- --------------------- ---------------------
Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value
---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
(Unaudited) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
Equity interests in pooled
investment trusts $ 159 $ 159 $ 3,087 $ 3,003 $ 2,913 $ 2,832 $ 2,759 $ 2,677
FHLB stock 332 332 332 332 332 332 332 332
---------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Total investment$ 491 $ 491 $ 3,419 $ 3,335 $ 3,245 $ 3,164 $ 3,091 $ 3,009
========== ========== ========== ========== ========= ========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 20
Mix of Deposits
At March 31, 1997, and at June 30, 1994 through 1996
<TABLE>
<CAPTION>
March 31, June 30,
------------------ --------------------------------------------------------------
1997 1996 1995 1994
------------------ ------------------- ----------------- --------------------
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Withdrawable:
Fixed rate passbook accounts $ 6,665 17.90% $ 6,698 18.82% $ 6,893 20.78% $ 8,171 24.01%
Variable rate, money market 3,130 8.40% 3,031 8.51% 2,768 8.34% 3,169 9.31%
NOW accounts 4,133 11.09% 4,074 11.44% 3,586 10.81% 3,706 10.89%
------- ------ ------- ------ ------- ------ ------- ------
Total withdrawable $13,928 37.39% $13,803 38.77% $13,247 39.93% $15,046 44.21%
======= ====== ======= ====== ======= ====== ======= ======
Certificate (original terms):
3 month $ 1,448 3.89% $ 2,862 8.04% $ 1,562 4.71% $ 2,248 6.60%
6 month 5,090 13.66% 2,543 7.14% 2,148 6.47% 3,264 9.59%
12 month 923 2.48% 943 2.65% 972 2.93% 1,310 3.85%
13 month 2,047 5.49% 2,010 5.65% 1,974 5.95% 0 0.00%
18 month 583 1.57% 301 0.85% 238 0.72% 400 1.17%
23 month 4,457 11.96% 3,684 10.35% 2,495 7.52% 282 0.83%
30 month 1,162 3.12% 1,330 3.74% 1,796 5.41% 2,296 6.75%
36 month 939 2.52% 1,239 3.48% 1,504 4.53% 1,757 5.16%
Other certificates 3,462 9.29% 3,755 10.54% 4,083 12.31% 4,318 12.69%
------- ------ ------- ------ ------- ------ ------- ------
Total certificates 20,111 53.98% 18,667 52.44% 16,772 50.55% 15,875 46.64%
------- ------ ------- ------ ------- ------ ------- ------
IRA's
Variable rate, money market 198 0.53% 224 0.63% 319 0.96% 511 1.50%
6 months 33 0.09% 36 0.10% 35 0.11% 39 0.11%
12 months 166 0.44% 163 0.46% 254 0.77% 356 1.05%
18 months 33 0.09% 0 0.00% 0 0.00% 0 0.00%
23 months 1,387 3.72% 946 2.66% 423 1.28% 0 0.00%
30 months 0 0.00% 0 0.00% 6 0.02% 6 0.02%
36 months 1,261 3.39% 1,629 4.58% 1,955 5.89% 2,134 6.27%
Other certificates 138 0.37% 132 0.36% 164 0.49% 70 0.20%
------- ------ ------- ------ ------- ------ ------- ------
Total IRA's 3,216 8.63% 3,130 8.79% 3,156 9.52% 3,116 9.15%
------- ------ ------- ------ ------- ------ ------- ------
Total deposits $37,255 100.00% $35,600 100.00% $33,175 100.00% $34,037 100.00%
======= ======= ======= =======
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 21
Deposit Activity
At March 31, 1997, and at June 30, 1994 through 1996
<TABLE>
<CAPTION>
March 31, June 30,
----------------------- ----------------------------------------------------------------------
1997 1996 1995 1994
--------------------- ----------------------- ---------------------- ----------------------
Increase Increase Increase Increase
Amount (Decrease) Amount (Decrease) Amount (Decrease) Amount (Decrease)
----------------------- ----------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Opening balance $ 35,600 $ 33,175 $ 34,037 $ 30,136
Withdrawable:
Fixed rate passbook accounts 6,665 (33) $ 6,698 (195) $ 6,893 (1,278) $ 8,171 1,596
Variable rate, money market 3,130 99 3,031 263 2,768 (401) 3,169 1
NOW accounts 4,133 59 4,074 488 3,586 (120) 3,706 485
----------- --------- ----------- ---------- ----------- ---------- ---------- ----------
Total withdrawable $ 13,928 125 $ 13,803 556 $ 13,247 (1,799) $ 15,046 2,082
=========== ========= =========== ========== =========== ========== ========== ==========
Certificate (original terms):
3 month 1,448 (1,414) $ 2,862 1,300 $ 1,562 (686) $ 2,248 2,131
6 month 5,090 2,547 2,543 395 2,148 (1,116) 3,264 (685)
12 month 923 (20) 943 (29) 972 (338) 1,310 (948)
13 month 2,047 37 2,010 36 1,974 1,974 0 0
18 month 583 282 301 63 238 (162) 400 (83)
23 month 4,457 773 3,684 1,189 2,495 2,213 282 282
30 month 1,162 (168) 1,330 (466) 1,796 (500) 2,296 (337)
36 month 939 (300) 1,239 (265) 1,504 (253) 1,757 (2,506)
Other certificates 3,462 (293) 3,755 (328) 4,083 (235) 4,318 850
----------- --------- ----------- ---------- ----------- ---------- ---------- ----------
Total certificates $ 20,111 $ 1,444 $ 18,667 $ 1,895 $ 16,772 $ 897 $ 15,875 $ (1,296)
----------- --------- ----------- ---------- ----------- ---------- ---------- ----------
IRA's
Total IRA's 3,216 86 3,130 (26) 3,156 40 3,116 3,115
----------- --------- ----------- ---------- ----------- ---------- ---------- ----------
Ending balance $ 37,255 1,655 $ 35,600 2,425 $ 33,175 (862) $ 34,037 3,901
=========== =========== =========== ==========
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 22
Borrowed Funds Activity
At of For the Nine Months Ended March 31, 1997 and 1996 and
At or For The Years Ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
At or for the
Nine Months At or for the Year
Ended March 31, Ended June 30,
------------------------ ------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
FHLB Advances:
<S> <C> <C> <C> <C> <C>
Outstanding at end of period $2,000 $2,000 $3,000 $1,500 --
Average balance outstanding for period 3,275 1,800 1,923 462
Maximum amount outstanding at any
month-end during the period 5,000 2,000 3,000 1,500 --
Weighted average interest rate
during the period 5.49% 6.05% 5.94% 6.24% --
Weighted average interest rate at end
of period 5.87% 5.93% 5.82% 5.87% --
</TABLE>
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 23
LIST OF KEY OFFICERS AND DIRECTORS
At March 31, 1997
<TABLE>
<CAPTION>
Director Term
Name Position(s) Held with the Bank Age (1) Since Expires
- ----------------------- ----------------------------------------------- ------- ----------------------- -------
<S> <C> <C> <C> <C>
Fred W. Carter President, Chief Executive Officer and Director 65 1960-1966; 1971-present 1997
Robert F. Ayres Director 72 1971 1998
Perry W. Lewis Director 75 1979 1997
John J. Miller Director 57 1975 1998
Billy J. Wray Director 65 1995 1999
Cindy S. Chambers Secretary, Customer Service Manager 42 -- --
Stephen D. Davis Controller 40 -- --
Ralph C. Peterson, II Senior Loan Officer 49 -- --
</TABLE>
(1) At October 31, 1996
Source: Citizens Bancorp's Prospectus
<PAGE>
EXHIBIT 24
Key Demographic Data and Trends
Market Area, Indiana and the United States
1990, 1996 and 2001
<TABLE>
<CAPTION>
Population 1990 1996 % Chg. 2001 % Chg.
----------- ----------- --- ----------- ---
<S> <C> <C> <C> <C> <C>
Market Area 30,974 32,862 6.1% 34,372 4.6%
Indiana 5,544,159 5,853,633 5.6% 6,103,911 4.3%
United States 248,709,873 265,294,885 6.7% 278,802,003 5.1%
Households
- ----------
Market Area 11,450 12,198 6.5% 12,784 4.8%
Indiana 2,065,355 2,188,529 6.0% 2,284,274 4.4%
United States 91,947,410 98,239,161 6.8% 103,293,062 5.1%
Per Capita Income
- -----------------
Market Area $ 11,849 $ 14,535 22.7% --- ---
Indiana 13,149 15,275 16.2% --- ---
United States 12,313 16,738 35.9% --- ---
Median Household Income
- -----------------------
Market Area $ 26,148 $ 32,305 23.5% $ 32,773 1.4%
Indiana 28,797 32,816 14.0% 30,900 (5.8)%
United States 28,525 34,530 21.1% 33,189 (3.9)%
</TABLE>
Source: Data Users Center and CACI
<PAGE>
EXHIBIT 25
Key Housing Data
Market Area, Indiana and the United States
1990
Occupied Housing Units
Market Area 11,450
Indiana 2,065,355
United States 91,947,410
Occupancy Rate
Market Area
Owner-Occupied 72.0%
Renter-Occupied 28.0%
Indiana
Owner-Occupied 70.2%
Renter-Occupied 29.8%
United States
Owner-Occupied 64.2%
Renter-Occupied 35.8%
Median Housing Values
Market Area $ 40,700
Indiana 53,500
United States 79,098
Median Rent
Market Area $ 326
Indiana 374
United States 374
Source: U.S. Department of Commerce and CACI Sourcebook
<PAGE>
EXHIBIT 26
Major Sources of Employment by Industry Group
Market Area, Indiana and the United States
1990
Market United
Industry Group Area Indiana States
------------- ----------- ------
Agriculture/Mining 7.1% 2.9% 1.3%
Construction 7.1% 5.6% 4.8%
Manufacturing 31.1% 25.1% 19.2%
Transportation/Utilities 4.2% 6.6% 5.9%
Wholesale/Retail 18.5% 21.4% 27.5%
Finance, Insurance, & Real Estate 4.5% 5.7% 7.3%
Services 27.5% 32.7% 34.0%
Source: Bureau of the Census County Business Patterns
<PAGE>
EXHIBIT 27
Unemployment Rates
Market Area, Indiana and the United States
1994, 1995 and 1996
Location 1994 1995 1996
- ------------- ------------- ------------ ------------
Market Area 3.8% 3.7% 3.3%
Indiana 4.9% 4.7% 4.1%
United States 6.1% 5.6% 5.0%
Source: Indiana Department of Workforce Development
<PAGE>
EXHIBIT 28
Market Share of Deposits
Clinton County
June 30, 1996
Market
Area's Citizens' Citizens'
Deposits Share Share
($000) ($000) (%)
-------------- -------------- -----------
Banks $ 285,511 --- ---
Thrifts 72,019 $ 35,603 49.4%
Credit Unions 4,544 --- ---
-------------- -------------- -----------
$ 362,074 $ 35,603 9.8%
Source: Sheshunoff
<PAGE>
EXHIBIT 29
National Interest Rates by Quarter
1993-1996
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1993 1993 1993 1993
Prime Rate 6.00% 6.00% 6.00% 6.00%
90-Day Treasury Bills 2.93% 3.07% 2.96% 3.05%
1-Year Treasury Bills 3.27% 3.43% 3.35% 3.58%
30-Year Treasury Bills 6.92% 6.67% 6.03% 6.35%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1994 1994 1994 1994
Prime Rate 6.25% 7.25% 7.75% 8.50%
90-Day Treasury Bills 3.54% 4.23% 5.14% 5.66%
1-Year Treasury Bills 4.40% 5.49% 6.13% 7.15%
30-Year Treasury Bills 7.11% 7.43% 7.82% 7.88%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1995 1995 1995 1995
Prime Rate 9.00% 9.00% 8.75% 8.50%
90-Day Treasury Bills 5.66% 5.58% 5.40% 5.06%
1-Year Treasury Bills 6.51% 5.62% 5.45% 5.14%
30-Year Treasury Bills 7.43% 6.71% 5.69% 5.97%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1996 1996 1996 1996
Prime Rate 8.25% 8.25% 8.25% 8.25%
90-Day Treasury Bills 5.18% 5.25% 5.16% 5.07%
1-Year Treasury Bills 5.43% 5.91% 5.38% 5.57%
30-Year Treasury Bills 6.73% 7.14% 6.47% 6.67%
1st Qtr.
1997
Prime Rate 8.50%
90-Day Treasury Bills 4.95%
1-Year Treasury Bills 5.95%
30-Year Treasury Bills 7.06%
Source: The Wall Street Journal
<PAGE>
30
KELLER & COMPANY
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 22, 1997
<TABLE>
<CAPTION>
PER SHARE
-------------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Incorporat AL NASDAQ 17.500 18.500 8.500 0.00 28.44 14.33 143.97 0.46
PLE Pinnacle Bancshares Inc. AL AMSE 21.875 22.625 4.000 1.16 -2.78 17.34 224.32 0.74
SRN Southern Banc Company Inc. AL AMSE 14.750 15.125 11.375 3.51 8.26 14.42 85.33 0.53
SCBS Southern Community Bancshar AL NASDAQ 14.125 14.250 13.000 2.73 2.73 13.54 61.64 NA
SZB SouthFirst Bancshares Inc. AL AMSE 14.750 16.000 10.625 2.61 7.27 15.82 113.15 0.50
FFBH First Federal Bancshares of AR NASDAQ 18.875 20.375 10.000 7.09 -3.21 16.79 106.16 NA
HCBB HCB Bancshares Inc. AR NASDAQ 13.000 13.000 12.625 NA NA NA NA NA
FTF Texarkana First Financial C AR AMSE 17.375 17.500 10.000 2.96 2.21 14.70 91.71 3.45
AHM Ahmanson & Company (H.F.) CA NYSE 41.250 44.875 2.688 14.58 0.30 19.05 484.09 0.88
AFFFZ America First Financial Fun CA NASDAQ 37.000 37.625 14.500 21.31 7.25 28.43 363.20 1.60
BPLS Bank Plus Corp. CA NASDAQ 10.125 14.000 5.000 1.25 -23.58 8.88 180.58 0.00
BVCC Bay View Capital Corp. CA NASDAQ 45.250 57.250 11.250 -3.72 -20.26 29.63 469.48 0.62
BYFC Broadway Financial Corp. CA NASDAQ 10.875 11.250 9.000 1.16 6.10 14.27 133.04 0.25
CFHC California Financial Holdin CA NASDAQ 29.250 29.500 5.909 0.43 1.52 19.22 275.94 0.44
CENF CENFED Financial Corp. CA NASDAQ 28.500 31.818 4.545 0.00 -8.80 20.05 392.92 0.32
CSA Coast Savings Financial CA NYSE 41.375 48.750 1.625 4.75 -13.12 23.45 473.15 0.00
DSL Downey Financial Corp. CA NYSE 20.000 22.500 1.321 7.69 -7.69 14.98 205.15 0.30
FSSB First FS&LA of San Bernardi CA NASDAQ 9.250 14.500 6.875 0.00 -11.90 13.68 315.79 0.00
FED FirstFed Financial Corp. CA NYSE 27.125 28.000 1.125 14.81 0.46 18.48 391.06 0.00
GLN Glendale Federal Bank FSB CA NYSE 24.875 589.500 5.250 10.56 -10.36 15.31 306.00 0.00
GDW Golden West Financial CA NYSE 66.500 74.250 3.875 6.61 -7.32 42.19 673.38 0.41
GWF Great Western Financial CA NYSE 47.250 48.625 3.950 17.39 1.89 17.55 310.97 1.00
HTHR Hawthorne Financial Corp. CA NASDAQ 10.375 35.500 2.250 9.21 -11.70 12.37 318.71 0.00
HEMT HF Bancorp Inc. CA NASDAQ 13.625 14.500 8.188 4.81 -1.80 12.87 156.71 0.00
HBNK Highland Federal Bank FSB CA NASDAQ 20.750 24.000 11.000 -2.35 -11.70 15.70 210.41 0.00
MBBC Monterey Bay Bancorp Inc. CA NASDAQ 15.875 18.250 8.750 -0.78 -11.81 15.01 130.17 0.10
PFFB PFF Bancorp Inc. CA NASDAQ 15.000 16.938 10.375 5.26 -4.00 14.09 134.55 0.00
PROV Provident Financial Holding CA NASDAQ 16.375 17.188 10.125 11.97 -3.68 17.06 119.94 NA
QCBC Quaker City Bancorp Inc. CA NASDAQ 19.000 20.500 7.500 4.83 1.33 18.20 204.28 0.00
REDF RedFed Bancorp Inc. CA NASDAQ 14.000 15.438 7.750 12.00 -9.31 10.37 126.84 0.00
SGVB SGV Bancorp Inc. CA NASDAQ 13.125 13.875 7.750 5.00 1.94 12.41 170.69 0.00
WES Westcorp CA NYSE 17.125 23.875 3.703 19.13 -12.74 12.29 130.92 0.40
FFBA First Colorado Bancorp Inc. CO NASDAQ 17.500 18.875 3.189 7.69 2.94 11.60 91.18 0.35
EGFC Eagle Financial Corp. CT NASDAQ 27.000 30.750 6.198 -2.70 -7.69 22.91 332.04 0.92
FFES First Federal of East Hartf CT NASDAQ 24.875 28.500 4.000 4.74 -3.86 23.00 367.95 0.60
MIDC MidConn Bank CT NASDAQ 23.125 24.875 4.000 1.09 -3.65 18.13 185.91 0.60
NTMG Nutmeg Federal S&LA CT NASDAQ 7.375 8.000 4.645 5.36 5.36 7.14 128.61 0.08
WBST Webster Financial Corporati CT NASDAQ 38.375 41.000 3.864 1.99 -2.85 23.72 467.11 0.70
IFSB Independence Federal Saving DC NASDAQ 8.375 10.250 0.250 -1.47 -6.94 13.25 203.63 0.22
BANC BankAtlantic Bancorp Inc. FL NASDAQ 13.750 13.750 0.178 11.11 10.89 8.23 149.47 0.12
BKUNA BankUnited Financial Corp. FL NASDAQ 9.750 12.750 2.320 1.30 -3.70 7.33 164.25 0.00
FFFG F.F.O. Financial Group Inc. FL NASDAQ 4.250 10.000 0.563 -2.86 13.33 2.46 37.96 0.00
FFLC FFLC Bancorp Inc. FL NASDAQ 27.500 27.750 12.750 9.45 17.02 22.16 153.10 0.42
FFPB First Palm Beach Bancorp In FL NASDAQ 29.250 30.000 14.000 7.34 8.33 21.04 311.07 0.50
OCWN Ocwen Financial Corporation FL NASDAQ 31.000 34.750 20.250 -1.20 -10.79 8.40 98.86 NA
CCFH CCF Holding Company GA NASDAQ 15.750 16.375 10.750 -3.08 -3.08 14.38 100.51 0.70
EBSI Eagle Bancshares GA NASDAQ 16.500 19.000 1.875 1.54 -1.49 12.74 146.34 0.58
FSTC First Citizens Corporation GA NASDAQ 25.750 26.750 2.955 10.75 21.18 15.18 162.02 0.43
FGHC First Georgia Holding Inc. GA NASDAQ 8.000 8.250 0.815 -3.03 23.08 4.08 48.19 0.05
FLFC First Liberty Financial Cor GA NASDAQ 21.125 22.500 2.667 -3.43 -3.98 11.87 161.56 0.37
FLAG FLAG Financial Corp. GA NASDAQ 12.500 15.000 3.200 5.26 1.01 10.25 109.02 0.34
SFNB Security First Network Bank GA NASDAQ 7.375 41.500 6.625 -15.71 -22.37 4.60 13.17 0.00
CASH First Midwest Financial Inc IA NASDAQ 15.500 17.500 8.833 -6.06 -6.77 15.18 130.93 0.33
GFSB GFS Bancorp Inc. IA NASDAQ 13.500 14.000 5.500 0.00 25.58 10.33 89.24 0.20
HZFS Horizon Financial Svcs Corp IA NASDAQ 18.000 18.000 10.375 5.88 1.41 19.33 184.16 0.32
MFCX Marshalltown Financial Corp IA NASDAQ 15.250 16.750 8.500 -1.61 2.52 14.06 90.05 0.00
MIFC Mid-Iowa Financial Corp. IA NASDAQ 8.250 8.500 2.474 3.13 -2.94 6.71 73.73 0.08
MWBI Midwest Bancshares Inc. IA NASDAQ 29.500 30.250 11.750 -1.67 10.28 27.68 399.05 0.56
FFFD North Central Bancshares In IA NASDAQ 15.500 16.625 8.071 3.33 -0.80 14.59 59.34 0.25
PMFI Perpetual Midwest Financial IA NASDAQ 19.250 22.000 10.000 -1.28 0.00 17.71 208.56 0.30
SFFC StateFed Financial Corporat IA NASDAQ 18.250 19.750 10.500 -2.67 1.39 19.00 107.94 0.40
ABCL Alliance Bancorp Inc. IL NASDAQ 28.500 31.250 9.000 2.70 -6.56 22.93 246.19 0.10
AVND Avondale Financial Corp. IL NASDAQ 13.125 18.500 11.500 -19.85 -28.08 14.88 180.25 0.00
</TABLE>
<PAGE>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- --------
FFDB FirstFed Bancorp Incorporat 23.03 122.12 12.16 13.78
PLE Pinnacle Bancshares Inc. 17.36 126.15 9.75 11.64
SRN Southern Banc Company Inc. 64.13 102.29 17.29 27.31
SCBS Southern Community Bancshar NA 104.32 22.92 NA
SZB SouthFirst Bancshares Inc. NM 93.24 13.04 86.76
FFBH First Federal Bancshares of NA 112.42 17.78 NA
HCBB HCB Bancshares Inc. NA NA NA NA
FTF Texarkana First Financial C 13.16 118.20 18.95 10.73
AHM Ahmanson & Company (H.F.) 32.74 216.54 8.52 16.24
AFFFZ America First Financial Fun 8.17 130.14 10.19 6.93
BPLS Bank Plus Corp. NM 114.02 5.61 NM
BVCC Bay View Capital Corp. 25.14 152.72 9.64 15.13
BYFC Broadway Financial Corp. NM 76.21 8.17 51.79
CFHC California Financial Holdin 20.17 152.19 10.60 13.06
CENF CENFED Financial Corp. 15.66 142.14 7.25 10.71
CSA Coast Savings Financial 61.75 176.44 8.74 18.55
DSL Downey Financial Corp. 24.10 133.51 9.75 14.18
FSSB First FS&LA of San Bernardi NM 67.62 2.93 NM
FED FirstFed Financial Corp. 29.17 146.78 6.94 14.66
GLN Glendale Federal Bank FSB 73.16 162.48 8.13 18.70
GDW Golden West Financial 10.33 157.62 9.88 8.53
GWF Great Western Financial 71.59 269.23 15.19 24.61
HTHR Hawthorne Financial Corp. 33.47 83.87 3.26 28.04
HEMT HF Bancorp Inc. NM 105.87 8.69 50.46
HBNK Highland Federal Bank FSB 36.40 132.17 9.86 20.75
MBBC Monterey Bay Bancorp Inc. 49.61 105.76 12.20 27.37
PFFB PFF Bancorp Inc. 100.00 106.46 11.15 26.32
PROV Provident Financial Holding NA 95.98 13.65 NA
QCBC Quaker City Bancorp Inc. 31.15 104.40 9.30 16.81
REDF RedFed Bancorp Inc. 155.56 135.00 11.04 23.33
SGVB SGV Bancorp Inc. 57.07 105.76 7.69 22.25
WES Westcorp 15.02 139.34 13.08 68.50
FFBA First Colorado Bancorp Inc. 22.15 150.86 19.19 16.36
EGFC Eagle Financial Corp. 15.17 117.85 8.13 11.44
FFES First Federal of East Hartf 16.26 108.15 6.76 10.19
MIDC MidConn Bank 23.60 127.55 12.44 16.29
NTMG Nutmeg Federal S&LA 25.43 103.29 5.73 19.41
WBST Webster Financial Corporati 21.44 161.78 8.22 43.61
IFSB Independence Federal Saving 36.41 63.21 4.11 17.09
BANC BankAtlantic Bancorp Inc. 14.32 167.07 9.20 17.63
BKUNA BankUnited Financial Corp. 42.39 133.02 5.94 18.40
FFFG F.F.O. Financial Group Inc. 17.00 172.76 11.20 12.50
FFLC FFLC Bancorp Inc. 29.26 124.10 17.96 20.07
FFPB First Palm Beach Bancorp In NM 139.02 9.40 195.00
OCWN Ocwen Financial Corporation NA 369.05 31.36 NA
CCFH CCF Holding Company 71.59 109.53 15.67 47.73
EBSI Eagle Bancshares 19.19 129.51 11.28 14.35
FSTC First Citizens Corporation 10.10 169.63 15.89 10.22
FGHC First Georgia Holding Inc. 27.59 196.08 16.60 22.22
FLFC First Liberty Financial Cor 16.90 177.97 13.08 14.67
FLAG FLAG Financial Corp. NM 121.95 11.47 83.33
SFNB Security First Network Bank NM 160.33 56.00 NM
CASH First Midwest Financial Inc 16.15 102.11 11.84 10.99
GFSB GFS Bancorp Inc. 16.07 130.69 15.13 12.98
HZFS Horizon Financial Svcs Corp 23.38 93.12 9.77 16.98
MFCX Marshalltown Financial Corp 52.59 108.46 16.94 27.73
MIFC Mid-Iowa Financial Corp. 13.31 122.95 11.19 NA
MWBI Midwest Bancshares Inc. 17.15 106.58 7.39 10.77
FFFD North Central Bancshares In 16.67 106.24 26.12 14.49
PMFI Perpetual Midwest Financial 128.33 108.70 9.23 37.75
SFFC StateFed Financial Corporat 16.90 96.05 16.91 13.52
ABCL Alliance Bancorp Inc. 28.50 124.29 11.58 16.57
AVND Avondale Financial Corp. NM 88.21 7.28 NM
<PAGE>
<TABLE>
<CAPTION>
PER SHARE
-------------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BFFC Big Foot Financial Corp. IL NASDAQ 15.625 15.750 12.313 6.84 11.61 14.28 83.61 NA
CBCI Calumet Bancorp Inc. IL NASDAQ 38.000 38.750 10.333 8.57 7.80 35.23 220.97 0.00
CBSB Charter Financial Inc. IL NASDAQ 17.625 18.000 6.361 2.92 11.02 13.22 93.55 0.26
CNBA Chester Bancorp Inc. IL NASDAQ 14.625 15.375 12.625 -1.68 -3.31 14.50 65.30 NA
CBK Citizens First Financial Co IL. AMSE 16.500 16.500 9.500 5.60 7.32 15.91 97.05 NA
CSBF CSB Financial Group Inc. IL NASDAQ 12.500 12.500 8.810 6.52 20.99 12.78 50.96 0.00
DFIN Damen Financial Corp. IL NASDAQ 14.250 14.750 11.000 1.79 -0.87 14.12 70.04 0.24
EGLB Eagle BancGroup Inc. IL NASDAQ 15.188 16.250 10.500 1.67 -4.33 16.28 134.52 NA
FBCI Fidelity Bancorp Inc. IL NASDAQ 19.500 20.875 9.500 4.00 2.63 17.74 174.07 0.26
FFBI First Financial Bancorp Inc IL NASDAQ 16.375 16.500 9.000 2.34 -0.76 17.50 224.21 0.00
FMBD First Mutual Bancorp Inc. IL NASDAQ 15.000 16.000 11.125 1.69 -3.23 16.60 113.48 0.31
FFDP FirstFed Bancshares IL NASDAQ 17.750 18.250 8.000 1.43 1.43 16.36 183.11 0.40
GTPS Great American Bancorp IL NASDAQ 16.000 16.500 11.875 1.59 0.39 18.36 78.35 0.40
HMLK Hemlock Federal Financial C IL NASDAQ 13.188 13.250 12.500 2.43 NA NA NA NA
HBEI Home Bancorp of Elgin Inc. IL NASDAQ 16.000 16.000 11.813 8.47 6.67 14.39 51.17 NA
HMCI HomeCorp Inc. IL NASDAQ 21.750 22.750 5.000 2.35 2.35 18.78 298.06 0.00
KNK Kankakee Bancorp Inc. IL AMSE 27.000 28.750 13.625 -2.70 0.00 25.74 241.08 0.42
MAFB MAF Bancorp Inc. IL NASDAQ 40.063 41.750 2.727 4.74 0.79 24.46 310.33 0.35
NBSI North Bancshares Inc. IL NASDAQ 19.250 20.125 11.000 0.65 10.00 16.94 115.96 0.42
PFED Park Bancorp Inc. IL NASDAQ 14.750 16.125 10.188 1.72 -3.68 15.87 73.20 NA
PSFI PS Financial Inc. IL NASDAQ 14.000 14.250 11.625 5.16 2.28 14.88 34.42 NA
SWBI Southwest Bancshares IL NASDAQ 19.000 20.500 7.833 0.66 -3.80 15.19 140.81 0.74
SPBC St. Paul Bancorp Inc. IL NASDAQ 29.375 29.375 3.066 9.05 12.44 17.16 196.36 0.39
STND Standard Financial Inc. IL NASDAQ 23.125 23.625 9.125 2.21 12.80 16.74 153.59 0.34
SFSB SuburbFed Financial Corp. IL NASDAQ 25.000 25.000 6.667 4.71 12.36 21.23 323.41 0.32
WCBI Westco Bancorp IL NASDAQ 23.250 23.375 7.667 5.68 8.77 18.89 121.34 0.54
FBCV 1ST Bancorp IN NASDAQ 30.750 33.250 3.990 -5.38 6.96 31.19 391.51 0.39
AMFC AMB Financial Corp. IN NASDAQ 14.563 15.000 9.750 10.96 5.91 14.29 87.69 NA
ASBI Ameriana Bancorp IN NASDAQ 15.500 16.375 2.750 0.00 -3.13 13.38 123.37 0.58
ATSB AmTrust Capital Corp. IN NASDAQ 12.125 12.500 7.750 5.43 2.11 13.72 134.92 0.05
CBCO CB Bancorp Inc. IN NASDAQ 34.000 34.000 7.125 3.82 18.78 17.21 194.92 0.00
FFWC FFW Corp. IN NASDAQ 26.000 26.750 12.500 1.96 4.00 22.75 227.32 0.60
FFED Fidelity Federal Bancorp IN NASDAQ 8.500 14.773 1.534 9.68 -2.86 5.17 100.51 0.70
FISB First Indiana Corporation IN NASDAQ 19.625 24.300 1.642 0.64 -18.23 13.51 140.99 0.46
HFGI Harrington Financial Group IN NASDAQ 11.375 11.750 9.750 1.11 10.98 7.57 158.24 0.00
HBFW Home Bancorp IN NASDAQ 20.125 20.875 12.500 0.00 2.55 17.43 124.96 0.20
HBBI Home Building Bancorp IN NASDAQ 20.500 22.000 10.000 -6.82 -2.38 19.88 150.18 0.30
HOMF Home Federal Bancorp IN NASDAQ 26.750 28.000 2.148 3.88 -2.73 16.54 195.78 0.37
HWEN Home Financial Bancorp IN NASDAQ 15.500 15.500 9.875 3.33 10.71 15.12 81.17 NA
INCB Indiana Community Bank SB IN NASDAQ 17.000 19.000 11.000 2.26 1.49 12.27 99.05 3.36
IFSL Indiana Federal Corporation IN NASDAQ 25.500 27.250 4.000 0.00 -2.86 15.03 171.10 0.72
</TABLE>
<PAGE>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- --------
BFFC Big Foot Financial Corp. NA 109.42 18.69 NA
CBCI Calumet Bancorp Inc. 17.43 107.86 17.20 14.39
CBSB Charter Financial Inc. 21.76 133.32 18.84 17.11
CNBA Chester Bancorp Inc. NA 100.86 22.40 NA
CBK Citizens First Financial Co NA 103.71 17.00 NA
CSBF CSB Financial Group Inc. 55.68 95.85 24.04 38.28
DFIN Damen Financial Corp. 30.32 100.92 20.35 23.36
EGLB Eagle BancGroup Inc. NA 93.29 11.29 NA
FBCI Fidelity Bancorp Inc. 22.41 109.92 11.20 15.98
FFBI First Financial Bancorp Inc NM 93.57 7.30 16.88
FMBD First Mutual Bancorp Inc. 115.38 90.36 13.22 48.39
FFDP FirstFed Bancshares 59.17 108.50 9.69 23.99
GTPS Great American Bancorp 100.00 87.15 20.42 42.11
HMLK Hemlock Federal Financial C NA NA NA NA
HBEI Home Bancorp of Elgin Inc. NA 111.19 31.27 NA
HMCI HomeCorp Inc. 67.97 115.81 7.30 20.33
KNK Kankakee Bancorp Inc. 18.88 104.90 11.20 14.36
MAFB MAF Bancorp Inc. 17.05 163.79 12.91 12.72
NBSI North Bancshares Inc. 37.75 113.64 16.60 27.50
PFED Park Bancorp Inc. NA 92.94 20.15 NA
PSFI PS Financial Inc. NA 94.09 40.67 NA
SWBI Southwest Bancshares 19.39 125.08 13.49 13.97
SPBC St. Paul Bancorp Inc. 23.88 171.18 14.96 15.96
STND Standard Financial Inc. 33.04 138.14 15.06 21.41
SFSB SuburbFed Financial Corp. 25.77 117.76 7.73 15.82
WCBI Westco Bancorp 19.21 123.08 19.16 14.81
FBCV 1ST Bancorp 33.79 98.59 7.85 205.00
AMFC AMB Financial Corp. NA 101.91 16.61 NA
ASBI Ameriana Bancorp 21.53 115.84 12.56 14.76
ATSB AmTrust Capital Corp. 27.56 88.37 8.99 44.91
CBCO CB Bancorp Inc. 20.73 197.56 17.44 17.71
FFWC FFW Corp. 13.33 114.29 11.44 10.88
FFED Fidelity Federal Bancorp 56.67 164.41 8.46 31.48
FISB First Indiana Corporation 15.96 145.26 13.92 NA
HFGI Harrington Financial Group 22.30 150.26 7.19 15.17
HBFW Home Bancorp 28.35 115.46 16.11 17.97
HBBI Home Building Bancorp 66.13 103.12 13.65 27.33
HOMF Home Federal Bancorp 14.15 161.73 13.66 12.27
HWEN Home Financial Bancorp NA 102.51 19.10 NA
INCB Indiana Community Bank SB 113.33 138.55 17.16 35.42
IFSL Indiana Federal Corporation 23.39 169.66 14.90 16.56
<PAGE>
<TABLE>
<CAPTION>
PER SHARE
-------------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN Logansport Financial Corp. IN NASDAQ 14.000 15.000 11.125 3.70 7.69 12.41 63.12 3.40
MARN Marion Capital Holdings IN NASDAQ 23.000 23.000 14.250 7.92 9.52 21.99 95.40 0.80
MFBC MFB Corp. IN NASDAQ 19.500 19.750 10.500 1.30 4.00 19.59 135.08 0.22
NEIB Northeast Indiana Bancorp IN NASDAQ 15.500 15.750 11.250 6.90 8.77 14.87 98.07 0.31
PFDC Peoples Bancorp IN NASDAQ 21.750 23.000 5.375 -4.40 8.75 18.86 124.27 0.59
PERM Permanent Bancorp Inc. IN NASDAQ 24.000 24.250 9.750 9.09 9.09 19.24 198.27 0.25
RIVR River Valley Bancorp IN NASDAQ 14.250 15.500 13.250 -5.00 -6.56 14.37 116.22 NA
SOBI Sobieski Bancorp Inc. IN NASDAQ 15.000 16.000 10.000 3.45 7.14 17.52 104.10 0.07
FFSL First Independence Corp. KS NASDAQ 10.875 12.250 5.438 -2.25 -3.33 11.41 108.65 0.21
LARK Landmark Bancshares Inc. KS NASDAQ 19.875 19.875 9.750 4.61 6.00 18.11 123.78 0.40
MCBS Mid Continent Bancshares In KS NASDAQ 25.750 27.000 9.750 1.98 -3.06 19.46 189.54 0.40
CKFB CKF Bancorp Inc. KY NASDAQ 20.000 20.750 11.375 -2.44 11.11 16.59 64.93 1.44
CLAS Classic Bancshares Inc. KY NASDAQ 14.000 14.625 10.375 10.89 2.75 14.48 97.06 0.13
FFKY First Federal Financial Cor KY NASDAQ 19.250 22.000 3.063 -3.75 -8.33 12.16 89.38 0.49
FLKY First Lancaster Bancshares KY NASDAQ 15.250 16.250 13.125 0.00 -1.61 14.44 42.19 NA
FTSB Fort Thomas Financial Corp. KY NASDAQ 10.125 17.750 9.250 -7.95 -22.12 10.19 63.33 4.25
FKKY Frankfort First Bancorp Inc KY NASDAQ 10.750 15.875 9.750 7.50 4.88 9.93 37.91 4.36
GWBC Gateway Bancorp Inc. KY NASDAQ 17.000 17.000 11.000 7.94 15.25 15.96 61.17 0.40
GTFN Great Financial Corporation KY NASDAQ 32.750 34.750 13.875 3.56 -4.38 19.83 213.32 0.48
HFFB Harrodsburg First Fin Banco KY NASDAQ 15.375 19.000 12.375 0.82 -10.87 15.27 53.43 0.55
KYF Kentucky First Bancorp Inc. KY AMSE 10.875 15.250 10.750 -1.14 -8.42 10.86 67.41 3.50
ANA Acadiana Bancshares Inc. LA AMSE 18.750 19.250 11.690 6.38 7.14 16.70 95.81 NA
CZF CitiSave Financial Corp LA AMSE 20.000 20.000 12.750 3.23 44.14 12.95 77.89 2.35
GSLA GS Financial Corp. LA NASDAQ 13.875 14.188 13.375 0.00 NA NA NA NA
ISBF ISB Financial Corporation LA NASDAQ 23.750 26.125 12.938 7.95 -0.52 17.45 134.11 0.35
MERI Meritrust Federal SB LA NASDAQ 32.250 37.500 13.500 -0.70 -0.70 23.34 295.27 0.65
TSH Teche Holding Co. LA AMSE 17.750 17.875 11.375 12.70 11.81 15.23 114.47 0.50
AFCB Affiliated Community Bancor MA NASDAQ 27.500 27.500 16.060 8.37 6.28 20.29 204.25 0.54
BFD BostonFed Bancorp Inc. MA AMSE 15.375 17.125 10.000 1.65 -3.15 15.02 157.82 0.20
FAB FirstFed America Bancorp In MA AMSE 14.625 15.250 13.625 6.36 -1.68 NA NA NA
ANBK American National Bancorp MD NASDAQ 14.875 14.875 4.639 6.25 16.67 12.86 136.67 0.06
EQSB Equitable Federal Savings B MD NASDAQ 33.750 35.500 11.250 0.00 7.14 23.88 477.73 0.00
FCIT First Citizens Financial Co MD. NASDAQ 26.750 28.625 0.375 4.90 22.99 14.39 235.68 0.00
FFWM First Financial-W. Maryland MD NASDAQ 35.000 35.000 7.167 12.00 6.06 19.85 167.64 0.48
HRBF Harbor Federal Bancorp Inc. MD NASDAQ 17.375 18.750 9.750 9.45 0.00 16.09 125.09 0.40
MFSL Maryland Federal Bancorp MD NASDAQ 38.250 38.250 4.329 6.99 0.00 29.67 351.54 0.69
WSB Washington Savings Bank, FS MD AMSE 5.000 6.917 0.281 1.26 -9.09 5.06 60.81 0.65
WHGB WHG Bancshares Corp. MD NASDAQ 13.875 14.750 10.875 0.00 0.00 14.00 63.97 NA
MCBN Mid-Coast Bancorp Inc. ME NASDAQ 19.500 20.250 8.095 5.41 2.63 21.61 251.28 0.51
BWFC Bank West Financial Corp. MI NASDAQ 13.500 13.500 8.500 12.50 18.68 12.62 82.43 0.28
CFSB CFSB Bancorp Inc. MI NASDAQ 22.750 23.375 3.169 2.25 10.98 13.55 177.61 0.50
DNFC D & N Financial Corp. MI NASDAQ 17.750 18.875 2.500 0.71 -1.39 10.56 183.80 0.00
FLGS Flagstar Bancorp Inc. MI NASDAQ 13.750 14.375 13.000 NA NA NA NA NA
MSBF MSB Financial Inc. MI NASDAQ 21.000 21.750 10.750 0.00 1.20 19.94 120.04 0.50
MSBK Mutual Savings Bank FSB MI NASDAQ 7.438 25.500 3.000 8.19 10.19 9.31 155.01 0.00
OFCP Ottawa Financial Corp. MI NASDAQ 21.250 22.750 10.250 -6.59 12.58 15.07 170.42 0.35
SJSB SJS Bancorp MI NASDAQ 26.500 26.563 10.810 0.95 6.53 17.66 167.57 0.43
THR Three Rivers Financial Corp MI AMSE 14.500 15.250 11.375 1.75 0.87 15.23 110.70 0.33
BDJI First Federal Bancorporatio MN NASDAQ 18.500 19.250 10.625 0.00 0.00 17.18 153.76 0.00
FFHH FSF Financial Corp. MN NASDAQ 17.500 18.250 7.750 6.06 6.06 15.87 118.67 0.50
HMNF HMN Financial Inc. MN NASDAQ 21.750 23.750 9.313 11.54 -7.45 18.71 131.36 0.00
MIVI Mississippi View Holding Co MN NASDAQ 14.250 15.625 8.500 1.79 -2.56 15.55 85.20 0.24
QCFB QCF Bancorp Inc. MN NASDAQ 20.000 20.500 11.000 5.26 8.11 18.98 104.92 0.00
WEFC Wells Financial Corp. MN NASDAQ 14.000 16.000 9.000 -3.45 -10.40 14.20 99.75 0.00
CMRN Cameron Financial Corp MO NASDAQ 16.750 17.000 10.688 1.52 2.29 16.92 73.71 0.28
CAPS Capital Savings Bancorp, In MO NASDAQ 13.750 14.750 6.125 1.85 -5.17 10.89 125.76 0.21
CBES CBES Bancorp Inc. MO NASDAQ 16.500 17.500 12.625 3.13 -2.94 17.08 92.90 NA
CNSB CNS Bancorp Inc. MO NASDAQ 15.500 17.500 11.000 -1.59 0.00 14.73 59.34 NA
FBSI First Bancshares Inc. MO NASDAQ 20.125 20.750 10.250 1.90 -1.83 19.80 137.96 0.20
FTNB Fulton Bancorp Inc. MO NASDAQ 19.375 19.375 12.500 6.90 18.32 14.47 57.85 NA
GSBC Great Southern Bancorp Inc. MO NASDAQ 16.875 18.000 1.146 -2.17 -0.74 7.35 81.94 0.39
HFSA Hardin Bancorp Inc. MO NASDAQ 14.500 15.500 11.000 7.41 5.45 15.37 120.27 0.40
JSBA Jefferson Savings Bancorp MO NASDAQ 29.000 30.750 13.250 0.87 -3.33 23.22 260.90 0.34
JOAC Joachim Bancorp Inc. MO NASDAQ 14.875 15.250 11.500 1.71 6.25 13.59 46.89 0.50
LXMO Lexington B&L Financial Cor MO NASDAQ 14.625 15.750 9.500 3.54 2.63 15.17 54.92 NA
MBLF MBLA Financial Corp. MO NASDAQ 21.250 26.000 12.750 4.94 4.94 21.51 159.41 0.40
NASB North American Savings Bank MO NASDAQ 43.500 46.250 2.500 -5.95 10.83 23.42 327.44 0.63
NSLB NS&L Bancorp Inc. MO NASDAQ 16.500 17.250 11.750 -0.75 3.13 16.36 82.10 0.50
PCBC Perry County Financial Corp MO NASDAQ 19.000 21.500 12.375 1.33 10.14 18.06 98.60 0.40
RFED Roosevelt Financial Group MO NASDAQ 23.250 23.625 2.167 2.76 3.33 9.91 176.19 0.64
SMFC Sho-Me Financial Corp. MO NASDAQ 33.625 33.750 9.375 13.98 19.03 20.99 200.44 0.00
SMBC Southern Missouri Bancorp I MO. NASDAQ 17.250 17.500 8.875 11.29 6.15 15.85 101.16 0.50
</TABLE>
<PAGE>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- --------
LOGN Logansport Financial Corp. 20.00 112.81 22.18 15.56
MARN Marion Capital Holdings 18.70 104.59 24.11 15.44
MFBC MFB Corp. 28.68 99.54 14.44 19.50
NEIB Northeast Indiana Bancorp 16.85 104.24 15.81 14.35
PFDC Peoples Bancorp 16.23 115.32 17.50 11.95
PERM Permanent Bancorp Inc. 54.55 124.74 12.10 25.00
RIVR River Valley Bancorp NA 99.16 12.26 NA
SOBI Sobieski Bancorp Inc. 51.72 85.62 14.41 26.32
FFSL First Independence Corp. 22.66 95.31 10.01 14.70
LARK Landmark Bancshares Inc. 20.70 109.75 16.06 16.29
MCBS Mid Continent Bancshares In 14.71 132.32 13.59 12.94
CKFB CKF Bancorp Inc. 22.99 120.55 30.80 23.26
CLAS Classic Bancshares Inc. 43.75 96.69 14.42 26.42
FFKY First Federal Financial Cor 17.99 158.31 21.54 15.04
FLKY First Lancaster Bancshares NA 105.61 36.15 NA
FTSB Fort Thomas Financial Corp. 34.91 99.36 15.99 21.54
FKKY Frankfort First Bancorp Inc 41.35 108.26 28.36 29.05
GWBC Gateway Bancorp Inc. 32.69 106.52 27.79 NA
GTFN Great Financial Corporation 22.59 165.15 15.35 23.06
HFFB Harrodsburg First Fin Banco 26.51 100.69 28.78 20.78
KYF Kentucky First Bancorp Inc. 20.14 100.14 16.13 15.76
ANA Acadiana Bancshares Inc. NA 112.28 19.57 NA
CZF CitiSave Financial Corp 50.00 154.44 25.68 33.33
GSLA GS Financial Corp. NA NA NA NA
ISBF ISB Financial Corporation 28.96 136.10 17.71 21.40
MERI Meritrust Federal SB 20.74 151.03 11.94 12.86
TSH Teche Holding Co. 21.65 116.55 15.51 15.57
AFCB Affiliated Community Bancor 15.36 135.53 13.46 13.41
BFD BostonFed Bancorp Inc. 24.02 102.36 9.74 17.67
FAB FirstFed America Bancorp In NA NA NA NA
ANBK American National Bancorp 53.12 115.67 10.88 19.32
EQSB Equitable Federal Savings B 19.07 141.33 7.06 11.14
FCIT First Citizens Financial Co 24.54 185.89 11.35 16.41
FFWM First Financial-W. Maryland 21.74 176.32 20.88 16.13
HRBF Harbor Federal Bancorp Inc. 32.18 107.99 13.89 20.44
MFSL Maryland Federal Bancorp 19.13 128.92 10.88 13.19
WSB Washington Savings Bank, FS 17.24 98.81 8.22 11.90
WHGB WHG Bancshares Corp. NA 99.11 21.69 NA
MCBN Mid-Coast Bancorp Inc. 20.97 90.24 7.76 13.00
BWFC Bank West Financial Corp. 23.28 106.97 16.38 26.47
CFSB CFSB Bancorp Inc. 18.96 167.90 12.81 14.04
DNFC D & N Financial Corp. 16.90 168.09 9.66 12.50
FLGS Flagstar Bancorp Inc. NM NA NA NA
MSBF MSB Financial Inc. 16.80 105.32 17.49 13.29
MSBK Mutual Savings Bank FSB 46.49 79.89 4.80 NM
OFCP Ottawa Financial Corp. 30.36 141.01 12.47 18.01
SJSB SJS Bancorp 80.30 150.06 15.81 31.55
THR Three Rivers Financial Corp 23.02 95.21 13.10 15.59
BDJI First Federal Bancorporatio 35.58 107.68 12.03 17.96
FFHH FSF Financial Corp. 23.97 110.27 14.75 19.02
HMNF HMN Financial Inc. 21.75 116.25 16.56 18.59
MIVI Mississippi View Holding Co 24.57 91.64 16.73 16.76
QCFB QCF Bancorp Inc. 13.70 105.37 19.06 11.17
WEFC Wells Financial Corp. 21.54 98.59 14.04 13.73
CMRN Cameron Financial Corp 20.94 99.00 22.72 16.75
CAPS Capital Savings Bancorp, In 18.09 126.26 10.93 12.39
CBES CBES Bancorp Inc. NA 96.60 17.76 NA
CNSB CNS Bancorp Inc. NA 105.23 26.12 NA
FBSI First Bancshares Inc. 17.06 101.64 14.59 13.69
FTNB Fulton Bancorp Inc. NA 133.90 33.49 NA
GSBC Great Southern Bancorp Inc. 16.07 229.59 20.59 14.18
HFSA Hardin Bancorp Inc. 28.43 94.34 12.06 17.47
JSBA Jefferson Savings Bancorp 36.71 124.89 11.12 14.72
JOAC Joachim Bancorp Inc. 59.50 109.46 31.72 38.14
LXMO Lexington B&L Financial Cor NA 96.41 26.63 NA
MBLF MBLA Financial Corp. 21.68 98.79 13.33 16.60
NASB North American Savings Bank 12.18 185.74 13.28 11.82
NSLB NS&L Bancorp Inc. 37.50 100.86 20.10 28.45
PCBC Perry County Financial Corp 23.75 105.20 19.27 14.62
RFED Roosevelt Financial Group 211.36 234.61 13.20 13.92
SMFC Sho-Me Financial Corp. 20.26 160.20 16.78 17.24
SMBC Southern Missouri Bancorp I 23.96 108.83 17.05 16.91
<PAGE>
<TABLE>
<CAPTION>
PER SHARE
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Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CFTP Community Federal Bancorp MS NASDAQ 17.250 20.000 12.250 -5.48 -13.21 16.13 48.12 0.30
FFBS FFBS BanCorp Inc. MS NASDAQ 22.500 24.250 12.000 2.27 2.27 17.01 82.62 0.50
MGNL Magna Bancorp Inc. MS NASDAQ 22.875 23.000 0.844 32.61 15.82 9.61 100.56 0.53
EFBC Empire Federal Bancorp Inc. MT NASDAQ 13.125 14.438 12.500 0.96 -7.49 15.35 41.64 NA
GBCI Glacier Bancorp Inc. MT NASDAQ 24.125 25.250 1.495 -0.52 0.52 11.65 121.87 0.64
UBMT United Financial Corp. MT NASDAQ 19.375 22.500 5.625 0.65 -1.90 19.94 88.06 0.91
WSTR WesterFed Financial Corp. MT NASDAQ 19.875 21.750 11.375 5.30 -4.22 18.44 167.97 0.42
CFNC Carolina Fincorp Inc. NC NASDAQ 14.375 15.250 13.000 1.77 0.00 13.91 58.70 NA
CENB Century Bancorp Inc. NC NASDAQ 68.250 71.000 62.000 -0.36 4.60 73.45 245.37 NA
COOP Cooperative Bankshares Inc. NC NASDAQ 21.000 22.500 3.467 -1.75 1.20 17.49 233.63 0.00
SOPN First Savings Bancorp Inc. NC NASDAQ 19.375 21.000 13.500 -1.90 0.65 18.04 73.34 0.79
GSFC Green Street Financial Corp NC NASDAQ 17.375 18.875 12.125 0.72 -0.71 14.64 40.57 NA
HFNC HFNC Financial Corp. NC NASDAQ 17.375 22.063 13.125 -3.47 -20.11 9.23 49.03 5.19
KSAV KS Bancorp Inc. NC NASDAQ 22.000 22.000 11.625 4.76 11.39 21.00 151.91 1.20
MBSP Mitchell Bancorp Inc. NC NASDAQ 16.625 16.750 10.190 3.91 10.83 15.17 35.02 NA
NSBC NewSouth Bancorp, Inc. NC NASDAQ 24.250 24.250 20.250 8.99 NA NA NA NA
PDB Piedmont Bancorp Inc. NC AMSE 10.313 19.125 9.250 -4.07 -1.78 7.31 43.09 7.44
SSB Scotland Bancorp Inc NC AMSE 15.750 16.750 11.625 -0.79 2.44 13.74 37.46 NA
SSFC South Street Financial Corp NC NASDAQ 16.250 17.000 12.125 4.84 4.00 14.64 53.11 NA
SSM Stone Street Bancorp Inc. NC AMSE 25.750 27.250 16.250 3.00 -2.37 20.72 57.80 NA
UFRM United Federal Savings Bank NC NASDAQ 10.500 11.250 1.750 0.00 29.23 6.70 88.11 0.20
CFB Commercial Federal Corporat NE NYSE 34.125 39.000 1.083 -0.36 -7.14 18.99 320.67 0.27
EBCP Eastern Bancorp NH NASDAQ 25.625 26.375 3.000 3.54 0.49 17.86 235.29 0.56
NHTB New Hampshire Thrift Bncshr NH NASDAQ 14.125 15.000 1.750 9.71 20.21 11.46 153.35 0.50
FBER 1st Bergen Bancorp NJ NASDAQ 14.000 15.125 9.000 3.70 -4.27 13.76 83.67 NA
COFD Collective Bancorp Inc. NJ NASDAQ 42.313 43.375 1.351 6.45 14.36 18.89 269.85 1.00
FSPG First Home Bancorp Inc. NJ NASDAQ 18.500 19.375 1.898 0.68 8.82 12.36 187.65 0.38
FMCO FMS Financial Corporation NJ NASDAQ 20.250 20.750 1.500 0.00 -1.22 14.59 231.97 0.20
IBSF IBS Financial Corp. NJ NASDAQ 15.000 16.250 7.312 -7.69 -3.49 11.45 67.20 0.46
LVSB Lakeview Financial NJ NASDAQ 30.000 33.500 7.335 6.19 -0.83 19.91 209.19 0.24
LFBI Little Falls Bancorp Inc. NJ NASDAQ 13.375 14.000 9.500 0.94 -4.46 14.29 110.52 0.11
OCFC Ocean Financial Corp. NJ NASDAQ 32.375 32.375 19.625 12.61 8.37 27.30 153.20 NA
PBCI Pamrapo Bancorp Inc. NJ NASDAQ 20.500 26.125 2.563 6.49 2.50 16.43 128.32 0.93
</TABLE>
<PAGE>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- --------
CFTP Community Federal Bancorp 26.14 106.94 35.85 21.84
FFBS FFBS BanCorp Inc. 23.20 132.28 27.23 18.29
MGNL Magna Bancorp Inc. 17.33 238.03 22.75 14.66
EFBC Empire Federal Bancorp Inc. NA 85.50 31.52 NA
GBCI Glacier Bancorp Inc. 14.71 207.08 19.80 13.11
UBMT United Financial Corp. 20.39 97.17 22.00 16.70
WSTR WesterFed Financial Corp. 24.54 107.78 11.83 17.75
CFNC Carolina Fincorp Inc. NA 103.34 24.49 NA
CENB Century Bancorp Inc. NA 92.92 27.82 NA
COOP Cooperative Bankshares Inc. NM 120.07 8.99 84.00
SOPN First Savings Bancorp Inc. 20.83 107.40 26.42 17.15
GSFC Green Street Financial Corp NA 118.68 42.83 NA
HFNC HFNC Financial Corp. 32.18 188.24 35.44 24.13
KSAV KS Bancorp Inc. 17.19 104.76 14.48 12.29
MBSP Mitchell Bancorp Inc. NA 109.59 47.47 NA
NSBC NewSouth Bancorp, Inc. NA NA NA NA
PDB Piedmont Bancorp Inc. NM 141.08 23.93 26.44
SSB Scotland Bancorp Inc NA 114.63 42.04 NA
SSFC South Street Financial Corp NA 111.00 30.60 NA
SSM Stone Street Bancorp Inc. NA 124.28 44.55 NA
UFRM United Federal Savings Bank 58.33 156.72 11.92 26.25
CFB Commercial Federal Corporat 17.68 179.70 10.64 12.45
EBCP Eastern Bancorp 31.25 143.48 10.89 20.34
NHTB New Hampshire Thrift Bncshr 30.71 123.25 9.21 19.89
FBER 1st Bergen Bancorp NA 101.74 16.73 NA
COFD Collective Bancorp Inc. 17.27 224.00 15.68 14.29
FSPG First Home Bancorp Inc. 11.42 149.68 9.86 10.39
FMCO FMS Financial Corporation 14.89 138.79 8.73 9.83
IBSF IBS Financial Corp. 42.86 131.00 22.32 25.00
LVSB Lakeview Financial 11.95 150.68 14.34 17.14
LFBI Little Falls Bancorp Inc. 47.77 93.60 12.10 25.24
OCFC Ocean Financial Corp. NA 118.59 21.13 NA
PBCI Pamrapo Bancorp Inc. 21.13 124.77 15.98 15.30
<PAGE>
<TABLE>
<CAPTION>
PER SHARE
-------------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSB PennFed Financial Services NJ NASDAQ 24.875 25.250 9.063 9.34 7.57 21.21 259.78 0.14
PULS Pulse Bancorp NJ NASDAQ 18.250 19.125 4.000 0.69 -1.35 13.14 168.55 0.70
SFIN Statewide Financial Corp. NJ NASDAQ 16.125 17.500 11.250 4.88 1.57 13.21 141.96 0.30
WYNE Wayne Bancorp Inc. NJ NASDAQ 16.750 18.000 10.750 3.88 -0.74 16.57 113.82 NA
WWFC Westwood Financial Corporat NJ NASDAQ 19.875 20.250 10.250 7.43 10.42 15.06 162.52 NA
AABC Access Anytime Bancorp, Inc NM NASDAQ 5.625 10.417 1.750 2.27 7.14 6.34 93.21 0.00
GUPB GFSB Bancorp Inc. NM NASDAQ 17.250 17.500 12.875 -1.43 7.81 16.88 103.56 0.75
AFED AFSALA Bancorp Inc. NY NASDAQ 13.875 14.250 11.313 8.29 2.78 15.66 104.66 NA
ALBK ALBANK Financial Corporatio NY NASDAQ 38.500 38.875 9.167 5.84 7.69 25.10 272.76 0.54
ALBC Albion Banc Corp. NY NASDAQ 18.500 19.500 10.500 2.07 11.69 23.62 265.21 0.31
ASFC Astoria Financial Corporati NY NASDAQ 40.375 43.125 12.688 8.75 -0.31 27.51 361.98 0.44
CNY Carver Bancorp Inc. NY AMSE 9.750 10.750 6.250 -2.50 -1.27 14.76 183.00 0.00
FIBC Financial Bancorp Inc. NY NASDAQ 17.500 18.500 8.500 9.38 -3.45 14.99 154.03 0.33
HAVN Haven Bancorp Inc. NY NASDAQ 33.750 36.000 10.000 8.65 10.20 23.13 399.06 0.60
LISB Long Island Bancorp Inc. NY NASDAQ 34.500 39.250 12.090 0.36 -10.10 21.62 239.98 0.50
NYB New York Bancorp Inc. NY NYSE 32.625 33.500 1.617 14.98 8.75 9.81 193.83 0.57
PEEK Peekskill Financial Corp. NY NASDAQ 13.875 15.250 11.125 2.78 -7.50 14.58 57.01 0.36
PKPS Poughkeepsie Savings Bank F NY NASDAQ 6.500 26.750 0.875 18.18 13.04 5.76 68.37 0.10
RELY Reliance Bancorp Inc. NY NASDAQ 24.875 26.000 8.875 10.86 16.37 17.56 218.39 0.57
SFED SFS Bancorp Inc. NY NASDAQ 17.375 18.000 11.000 4.90 5.30 17.26 132.84 0.18
TPNZ Tappan Zee Financial Inc. NY NASDAQ 16.125 16.375 11.250 12.17 7.50 13.84 79.42 0.20
YFCB Yonkers Financial Corporati NY NASDAQ 15.250 15.750 9.310 -1.61 12.96 13.68 89.44 NA
ASBP ASB Financial Corp. OH NASDAQ 11.750 18.250 11.375 2.17 -2.08 10.62 63.56 5.40
CAFI Camco Financial Corp. OH NASDAQ 18.250 19.286 4.525 2.82 14.96 14.96 154.31 0.47
COFI Charter One Financial OH NASDAQ 46.313 49.500 3.281 8.97 -4.01 20.53 302.99 0.90
CTZN CitFed Bancorp Inc. OH NASDAQ 34.250 37.250 6.167 2.05 -5.19 21.59 341.02 0.26
CIBI Community Investors Bancorp OH NASDAQ 19.000 19.250 10.750 9.35 9.35 17.73 153.96 0.34
DCBI Delphos Citizens Bancorp In OH NASDAQ 13.875 14.500 11.750 5.71 -1.77 14.89 52.52 NA
EMLD Emerald Financial Corp. OH NASDAQ 15.000 15.000 7.750 10.09 25.00 8.73 116.29 0.30
EFBI Enterprise Federal Bancorp OH NASDAQ 17.750 18.000 11.250 16.39 16.39 15.74 127.66 1.25
FFDF FFD Financial Corp. OH NASDAQ 13.500 14.000 10.000 1.89 -2.70 14.51 58.63 NA
FFYF FFY Financial Corp. OH NASDAQ 25.875 26.250 12.250 0.49 2.99 19.50 138.32 0.65
FFOH Fidelity Financial of Ohio OH NASDAQ 14.125 14.625 3.112 14.14 10.78 12.03 91.72 0.22
FDEF First Defiance Financial OH NASDAQ 13.000 14.063 5.790 2.97 0.00 12.41 57.95 0.30
FFBZ First Federal Bancorp Inc. OH NASDAQ 17.500 19.000 3.125 -7.89 2.94 8.38 121.96 0.23
FFHS First Franklin Corporation OH NASDAQ 18.500 18.750 3.500 4.23 15.63 16.93 191.99 0.32
FFSW FirstFederal Financial Svcs OH NASDAQ 41.000 41.000 2.232 13.89 9.33 16.02 296.43 0.48
GFCO Glenway Financial Corp. OH NASDAQ 24.750 25.750 15.419 19.28 23.75 23.06 245.52 0.66
HHFC Harvest Home Financial Corp OH NASDAQ 11.000 13.750 8.750 -4.35 8.64 11.11 88.89 3.40
HVFD Haverfield Corporation OH NASDAQ 24.500 25.000 5.165 4.26 30.67 15.04 179.22 0.55
HCFC Home City Financial Corp. OH NASDAQ 13.250 14.250 12.000 -3.64 -5.36 16.05 71.66 NA
INBI Industrial Bancorp OH NASDAQ 12.250 16.000 9.875 -4.74 -3.92 11.41 61.71 0.28
LONF London Financial Corporatio OH NASDAQ 15.000 17.500 9.750 -6.25 -1.64 14.63 73.64 NA
MRKF Market Financial Corporatio OH NASDAQ 12.375 12.938 12.250 -1.98 NA 14.59 42.18 NA
METF Metropolitan Financial Corp OH NASDAQ 13.000 13.250 10.500 18.18 20.93 8.73 228.91 NA
MFFC Milton Federal Financial Co OH. NASDAQ 13.375 17.125 10.000 -4.46 -6.96 12.22 76.80 3.04
OHSL OHSL Financial Corp. OH NASDAQ 23.250 24.250 11.500 0.00 6.90 21.00 190.25 0.79
PFFC Peoples Financial Corp. OH NASDAQ 15.000 16.000 10.875 0.00 0.84 16.18 60.15 NA
PSFC Peoples-Sidney Financial Co OH. NASDAQ 12.875 13.625 12.563 NA NA NA NA NA
PTRS Potters Financial Corp. OH NASDAQ 20.063 20.250 9.000 5.59 2.23 21.39 240.17 0.32
PVFC PVF Capital Corp. OH NASDAQ 19.000 19.000 4.316 5.56 16.03 10.77 153.34 0.00
SFSL Security First Corp. OH NASDAQ 21.750 21.750 1.625 19.18 22.54 11.88 126.87 0.44
SBCN Suburban Bancorporation Inc OH NASDAQ 18.750 19.375 10.500 8.70 15.38 18.02 150.47 0.60
WOFC Western Ohio Financial Corp OH NASDAQ 21.250 24.375 14.750 -3.41 -1.16 23.21 173.03 1.00
WEHO Westwood Homestead Fin. Cor OH NASDAQ 13.000 14.500 10.375 1.96 -5.45 14.15 45.70 NA
WFCO Winton Financial Corp. OH NASDAQ 13.000 15.000 3.750 -10.34 5.72 11.06 154.66 0.43
FFWD Wood Bancorp Inc. OH NASDAQ 16.375 17.250 8.000 -2.96 3.97 13.91 109.54 0.31
KFBI Klamath First Bancorp OR NASDAQ 18.125 18.625 12.500 7.41 16.46 15.39 68.64 0.28
</TABLE>
<PAGE>
PRICING RATIOS
--------------------------------------
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
-------- -------- -------- --------
PFSB PennFed Financial Services 18.29 117.28 9.58 12.13
PULS Pulse Bancorp 17.22 138.89 10.83 11.27
SFIN Statewide Financial Corp. 21.79 122.07 11.36 12.60
WYNE Wayne Bancorp Inc. NA 101.09 14.72 NA
WWFC Westwood Financial Corporat NA 131.97 12.23 NA
AABC Access Anytime Bancorp, Inc NM 88.72 6.03 NM
GUPB GFSB Bancorp Inc. 25.75 102.19 16.66 20.54
AFED AFSALA Bancorp Inc. NA 88.60 13.26 NA
ALBK ALBANK Financial Corporatio 19.54 153.39 14.11 15.65
ALBC Albion Banc Corp. 84.09 78.32 6.98 19.68
ASFC Astoria Financial Corporati 23.20 146.76 11.15 15.07
CNY Carver Bancorp Inc. NM 66.06 5.33 NM
FIBC Financial Bancorp Inc. 21.88 116.74 11.36 12.96
HAVN Haven Bancorp Inc. 15.27 145.91 8.46 10.23
LISB Long Island Bancorp Inc. 24.64 159.57 14.38 20.78
NYB New York Bancorp Inc. 14.50 332.57 16.83 14.12
PEEK Peekskill Financial Corp. 24.34 95.16 24.34 18.75
PKPS Poughkeepsie Savings Bank F 50.00 112.85 9.51 NA
RELY Reliance Bancorp Inc. 22.01 141.66 11.39 14.21
SFED SFS Bancorp Inc. 27.15 100.67 13.08 15.65
TPNZ Tappan Zee Financial Inc. 27.33 116.51 20.30 19.66
YFCB Yonkers Financial Corporati NA 111.48 17.05 NA
ASBP ASB Financial Corp. 28.66 110.64 18.49 19.92
CAFI Camco Financial Corp. 16.74 121.99 11.83 12.85
COFI Charter One Financial 16.54 225.59 15.29 12.94
CTZN CitFed Bancorp Inc. 20.15 158.64 10.04 13.98
CIBI Community Investors Bancorp 18.81 107.16 12.34 12.58
DCBI Delphos Citizens Bancorp In NA 93.18 26.42 NA
EMLD Emerald Financial Corp. 19.74 171.82 12.90 15.63
EFBI Enterprise Federal Bancorp 20.88 112.77 13.90 18.49
FFDF FFD Financial Corp. NA 93.04 23.03 NA
FFYF FFY Financial Corp. 22.50 132.69 18.71 16.27
FFOH Fidelity Financial of Ohio 31.39 117.41 15.40 18.83
FDEF First Defiance Financial 30.23 104.75 22.43 23.21
FFBZ First Federal Bancorp Inc. 22.15 208.83 14.35 16.36
FFHS First Franklin Corporation 71.15 109.27 9.64 16.67
FFSW FirstFederal Financial Svcs 21.03 255.93 13.83 22.16
GFCO Glenway Financial Corp. 26.33 107.33 10.08 14.73
HHFC Harvest Home Financial Corp 47.83 99.01 12.37 22.00
HVFD Haverfield Corporation 27.84 162.90 13.67 15.12
HCFC Home City Financial Corp. NA 82.55 18.49 NA
INBI Industrial Bancorp 27.22 107.36 19.85 15.51
LONF London Financial Corporatio NA 102.53 20.37 NA
MRKF Market Financial Corporatio NA 84.82 29.34 NA
METF Metropolitan Financial Corp NA 148.91 5.68 NA
MFFC Milton Federal Financial Co 31.10 109.45 17.42 23.46
OHSL OHSL Financial Corp. 22.57 110.71 12.22 15.82
PFFC Peoples Financial Corp. NA 92.71 24.94 NA
PSFC Peoples-Sidney Financial Co NA NA NA NA
PTRS Potters Financial Corp. 27.48 93.80 8.35 12.70
PVFC PVF Capital Corp. 13.19 176.42 12.39 7.66
SFSL Security First Corp. 18.59 183.08 17.14 14.80
SBCN Suburban Bancorporation Inc 25.68 104.05 12.46 17.69
WOFC Western Ohio Financial Corp 44.27 91.56 12.28 31.25
WEHO Westwood Homestead Fin. Cor NA 91.87 28.45 NA
WFCO Winton Financial Corp. 12.38 117.54 8.41 10.66
FFWD Wood Bancorp Inc. 16.54 117.72 14.95 12.89
KFBI Klamath First Bancorp 31.25 117.77 26.41 21.32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WFSG Wilshire Financial Services OR NASDAQ 13.750 18.000 13.500 1.85 -19.71 8.48 145.06 NA
CVAL Chester Valley Bancorp Inc. PA NASDAQ 17.500 19.000 3.103 -2.78 5.42 12.72 148.56 0.34
CMSB Commonwealth Bancorp Inc. PA NASDAQ 15.000 16.000 5.790 10.09 -2.44 12.50 130.68 NA
FSBI Fidelity Bancorp Inc. PA NASDAQ 20.250 21.705 3.415 10.00 -2.09 14.82 212.83 0.29
FBBC First Bell Bancorp Inc. PA NASDAQ 14.750 17.375 11.875 0.00 -5.60 10.63 104.22 3.35
FKFS First Keystone Financial PA NASDAQ 22.000 22.500 10.250 3.53 1.73 18.12 256.25 0.10
SHEN First Shenango Bancorp Inc. PA NASDAQ 25.000 25.750 12.750 3.09 0.00 20.79 194.33 0.48
GAF GA Financial Inc. PA AMSE 16.000 17.250 10.250 3.23 -2.29 14.94 79.73 0.21
HARL Harleysville Savings Bank PA NASDAQ 22.000 23.000 2.828 7.32 10.00 12.82 201.41 0.35
LARL Laurel Capital Group Inc. PA NASDAQ 21.500 22.500 3.627 0.00 10.26 14.51 139.21 0.41
MLBC ML Bancorp Inc. PA NASDAQ 16.500 17.750 6.219 4.76 -5.04 13.03 188.17 0.38
PVSA Parkvale Financial Corporat PA NASDAQ 27.000 29.500 2.150 0.93 4.85 17.91 239.53 0.49
PBIX Patriot Bank Corp. PA NASDAQ 16.375 16.750 10.258 2.34 7.38 12.70 139.25 0.28
PWBC PennFirst Bancorp Inc. PA NASDAQ 13.500 15.915 4.019 -0.92 0.00 12.77 180.58 0.86
PWBK Pennwood Bancorp Inc. PA NASDAQ 15.000 15.000 9.000 1.69 4.35 15.30 78.56 NA
PHFC Pittsburgh Home Financial C PA NASDAQ 15.000 15.500 9.500 5.26 2.56 13.71 119.51 NA
PRBC Prestige Bancorp Inc. PA NASDAQ 15.875 16.125 9.750 2.42 8.55 16.11 137.88 NA
PFNC Progress Financial Corporat PA NASDAQ 8.750 18.750 0.750 2.18 -1.41 5.52 104.97 0.06
SVRN Sovereign Bancorp Inc. PA NASDAQ 13.375 14.000 0.837 8.08 7.00 6.60 147.31 0.07
THRD TF Financial Corporation PA NASDAQ 17.000 19.250 9.750 -4.90 -8.72 18.51 157.65 0.34
WVFC WVS Financial Corporation PA NASDAQ 23.500 27.250 13.000 -3.09 -8.74 20.50 161.11 2.30
YFED York Financial Corp. PA NASDAQ 19.250 19.750 4.301 4.05 4.05 13.99 166.02 0.57
AMFB American Federal Bank FSB SC NASDAQ 30.000 30.250 0.625 7.14 4.35 10.64 118.44 0.54
CFCP Coastal Financial Corp. SC NASDAQ 24.750 25.750 1.918 6.45 2.59 8.49 139.35 0.44
FFCH First Financial Holdings In SC NASDAQ 26.000 28.250 4.000 2.97 -7.14 15.57 253.23 0.68
FSFC First Southeast Financial C SC NASDAQ 10.750 20.250 9.125 8.17 -2.27 7.80 76.29 10.26
PALM Palfed, Inc. SC NASDAQ 16.125 18.500 3.500 -3.01 8.86 10.07 124.23 0.09
SCCB S. Carolina Community Bancs SC NASDAQ 17.750 20.500 12.625 -4.05 -6.58 17.11 65.90 0.60
HFFC HF Financial Corp. SD NASDAQ 19.500 20.500 5.500 0.00 8.33 16.51 187.23 0.35
TWIN Twin City Bancorp TN NASDAQ 18.000 19.250 10.500 -6.49 -0.69 15.82 122.43 0.64
BNKU Bank United Corp. TX NASDAQ 31.625 33.000 22.500 9.05 1.61 18.01 348.23 NA
CBSA Coastal Bancorp Inc. TX NASDAQ 26.250 28.250 9.875 13.51 1.45 19.35 574.16 0.40
ETFS East Texas Financial Servic TX NASDAQ 17.125 18.750 11.000 -2.84 -6.16 19.69 103.48 0.20
FBHC Fort Bend Holding Corp. TX NASDAQ 26.500 27.500 10.375 0.95 12.46 22.41 358.85 0.28
JXVL Jacksonville Bancorp Inc. TX NASDAQ 14.500 15.750 7.141 7.41 -3.33 13.27 84.90 NA
BFSB Bedford Bancshares Inc. VA NASDAQ 20.250 20.500 10.250 2.53 6.58 17.43 115.11 0.46
CNIT CENIT Bancorp Inc. VA NASDAQ 43.500 46.000 10.875 1.16 -3.33 30.58 430.98 0.90
CFFC Community Financial Corp. VA NASDAQ 22.000 23.500 4.250 -2.22 0.00 18.04 130.99 0.50
ESX Essex Bancorp Inc. VA AMSE 1.250 19.250 0.750 -13.07 -16.67 0.12 170.59 0.00
FFFC FFVA Financial Corp. VA NASDAQ 24.750 25.000 8.250 13.79 0.00 16.99 121.62 0.42
GSLC Guaranty Financial Corp. VA NASDAQ 9.625 11.000 6.313 -1.28 0.00 7.20 82.41 0.10
LIFB Life Bancorp Inc. VA NASDAQ 20.625 21.000 8.313 7.84 4.43 15.42 142.98 0.44
VABF Virginia Beach Fed. Financi VA NASDAQ 10.844 11.375 1.625 8.44 -2.53 8.29 122.16 0.17
VFFC Virginia First Financial Co VA. NASDAQ 21.375 21.750 1.250 47.41 39.02 11.35 140.80 0.10
CASB Cascade Financial Corp. WA NASDAQ 16.250 17.500 2.662 1.56 -4.41 10.59 171.50 0.00
FWWB First SB of Washington Banc WA NASDAQ 21.125 22.125 12.375 6.96 0.60 15.11 92.45 0.20
IWBK InterWest Bancorp Inc. WA NASDAQ 33.500 36.250 8.478 17.03 -7.59 14.81 220.93 0.54
STSA Sterling Financial Corp. WA NASDAQ 17.500 17.500 1.878 12.90 6.06 10.98 280.93 0.00
WFSL Washington Federal Inc. WA NASDAQ 25.375 27.500 1.566 10.33 -5.58 14.10 122.02 0.86
AADV Advantage Bancorp Inc. WI NASDAQ 38.000 41.250 10.600 -3.80 6.29 27.93 316.08 0.34
ABCW Anchor BanCorp Wisconsin WI NASDAQ 43.750 47.000 9.800 0.43 1.16 25.73 411.45 0.48
FCBF FCB Financial Corp. WI NASDAQ 22.000 23.500 10.000 6.67 -1.12 19.11 109.17 0.69
FTFC First Federal Capital Corp. WI NASDAQ 29.500 31.000 1.449 12.38 2.61 15.97 251.31 0.64
FFHC First Financial Corp. WI NASDAQ 27.750 28.625 1.330 7.25 -1.33 11.14 159.52 0.54
FNGB First Northern Capital Corp WI NASDAQ 19.250 20.250 3.063 -1.28 10.00 16.09 139.82 0.61
HALL Hallmark Capital Corp. WI NASDAQ 19.375 19.500 9.875 6.90 6.90 19.82 283.65 0.00
MWFD Midwest Federal Financial WI NASDAQ 19.750 24.500 4.167 -1.25 9.72 10.66 123.74 0.31
NWEQ Northwest Equity Corp. WI NASDAQ 14.750 14.750 6.875 7.27 8.26 13.82 103.86 0.28
RELI Reliance Bancshares Inc. WI NASDAQ 8.000 10.125 6.500 4.92 12.28 8.89 18.52 NA
SECP Security Capital Corporatio WI NASDAQ 91.375 92.000 25.000 5.03 7.82 59.17 396.28 0.83
STFR St. Francis Capital Corp. WI NASDAQ 29.500 32.250 12.625 1.72 8.26 23.89 293.15 0.44
AFBC Advance Financial Bancorp WV NASDAQ 14.000 14.500 12.750 3.70 0.00 14.75 95.51 NA
FOBC Fed One Bancorp WV NASDAQ 18.875 19.500 5.358 3.42 6.34 17.07 141.74 0.57
CRZY Crazy Woman Creek Bancorp WY NASDAQ 13.125 14.250 10.000 -0.94 -2.78 14.42 51.78 0.35
TRIC Tri-County Bancorp Inc. WY NASDAQ 20.500 20.500 11.375 0.00 9.33 21.63 141.23 0.40
</TABLE>
<PAGE>
WFSG Wilshire Financial Services NA 162.15 9.48 NA
CVAL Chester Valley Bancorp Inc. 20.35 137.58 11.78 13.78
CMSB Commonwealth Bancorp Inc. NA 120.00 11.48 NA
FSBI Fidelity Bancorp Inc. 19.29 136.64 9.51 12.20
FBBC First Bell Bancorp Inc. 14.60 138.76 14.15 12.50
FKFS First Keystone Financial 16.54 121.41 8.59 11.22
SHEN First Shenango Bancorp Inc. 17.01 120.25 12.86 NA
GAF GA Financial Inc. 20.00 107.10 20.07 18.18
HARL Harleysville Savings Bank 17.19 171.61 10.92 12.09
LARL Laurel Capital Group Inc. 14.93 148.17 15.44 11.94
MLBC ML Bancorp Inc. 13.52 126.63 8.77 15.42
PVSA Parkvale Financial Corporat 16.98 150.75 11.27 11.34
PBIX Patriot Bank Corp. 31.49 128.94 11.76 20.73
PWBC PennFirst Bancorp Inc. 18.00 105.72 7.48 12.16
PWBK Pennwood Bancorp Inc. NA 98.04 19.09 NA
PHFC Pittsburgh Home Financial C NA 109.41 12.55 NA
PRBC Prestige Bancorp Inc. NA 98.54 11.51 NA
PFNC Progress Financial Corporat 21.34 158.51 8.34 16.20
SVRN Sovereign Bancorp Inc. 21.93 202.65 9.08 NA
THRD TF Financial Corporation 21.52 91.84 10.78 15.45
WVFC WVS Financial Corporation 14.42 114.63 14.59 11.69
YFED York Financial Corp. 20.05 137.60 11.59 15.91
AMFB American Federal Bank FSB 22.73 281.95 25.33 18.29
CFCP Coastal Financial Corp. 21.71 291.52 17.76 19.80
FFCH First Financial Holdings In 19.40 166.99 10.27 12.94
FSFC First Southeast Financial C NM 137.82 14.09 15.14
PALM Palfed, Inc. NM 160.13 12.98 23.04
SCCB S. Carolina Community Bancs 32.87 103.74 26.93 25.36
HFFC HF Financial Corp. 18.22 118.11 10.41 13.36
TWIN Twin City Bancorp 25.35 113.78 14.70 18.00
BNKU Bank United Corp. 25.30 175.60 9.08 NA
CBSA Coastal Bancorp Inc. 17.98 135.66 4.57 11.46
ETFS East Texas Financial Servic 43.91 86.97 16.55 24.46
FBHC Fort Bend Holding Corp. 29.12 118.25 7.38 16.36
JXVL Jacksonville Bancorp Inc. NA 109.27 17.08 NA
BFSB Bedford Bancshares Inc. 16.74 116.18 17.59 12.98
CNIT CENIT Bancorp Inc. 21.32 142.25 10.09 15.43
CFFC Community Financial Corp. 16.67 121.95 16.80 13.02
ESX Essex Bancorp Inc. NM NM 0.73 NM
FFFC FFVA Financial Corp. 21.34 145.67 20.35 17.55
GSLC Guaranty Financial Corp. 22.38 133.68 11.68 18.51
LIFB Life Bancorp Inc. 20.63 133.75 14.43 16.24
VABF Virginia Beach Fed. Financi 57.07 130.81 8.88 21.69
VFFC Virginia First Financial Co 11.88 188.33 15.18 24.85
CASB Cascade Financial Corp. 24.62 153.45 9.48 18.47
FWWB First SB of Washington Banc 24.56 139.81 22.85 21.78
IWBK InterWest Bancorp Inc. 18.93 226.20 15.16 14.57
STSA Sterling Financial Corp. 125.00 159.38 6.23 21.60
WFSL Washington Federal Inc. 13.36 179.96 20.80 12.03
AADV Advantage Bancorp Inc. 37.62 136.05 12.02 15.70
ABCW Anchor BanCorp Wisconsin 15.51 170.03 10.63 11.95
FCBF FCB Financial Corp. 22.45 115.12 20.15 18.64
FTFC First Federal Capital Corp. 18.32 184.72 11.74 15.28
FFHC First Financial Corp. 20.11 249.10 17.40 14.68
FNGB First Northern Capital Corp 24.68 119.64 13.77 16.45
HALL Hallmark Capital Corp. 16.01 97.75 6.83 12.19
MWFD Midwest Federal Financial 16.60 185.27 15.96 16.46
NWEQ Northwest Equity Corp. 18.91 106.73 14.20 15.86
RELI Reliance Bancshares Inc. NA 89.99 43.20 NA
SECP Security Capital Corporatio 21.01 154.43 23.06 17.57
STFR St. Francis Capital Corp. 19.41 123.48 10.06 16.48
AFBC Advance Financial Bancorp NA 94.92 14.66 NA
FOBC Fed One Bancorp 20.30 110.57 13.32 13.88
CRZY Crazy Woman Creek Bancorp 25.24 91.02 25.35 20.19
TRIC Tri-County Bancorp Inc. 20.30 94.78 14.52 16.02
<PAGE>
<TABLE>
<CAPTION>
ALL THRIFTS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE 20.242 23.783 8.418 3.57 2.67 16.08 159.90 0.59 29.60 128.80 15.46 20.52
MEDIAN 17.750 19.250 9.500 2.73 1.57 15.19 134.55 0.39 22.01 117.01 13.77 16.36
HIGH 91.375 589.500 62.000 47.41 44.14 73.45 673.38 10.26 211.36 369.05 56.00 205.00
LOW 1.250 6.917 0.178 -19.85 -28.08 0.12 13.17 0.00 8.17 63.21 0.73 6.93
AVERAGE FOR STATE
IN 19.340 20.590 8.340 2.34 3.47 16.26 144.18 0.67 33.198 ##### 14.428 30.399
AVERAGE BY REGION
MIDWEST 19.843 21.272 8.817 2.69 3.93 16.43 144.23 0.59 30.88 122.37 16.23 20.02
NEW ENGLAND 21.591 23.148 6.840 4.14 1.10 18.11 248.36 0.52 22.42 121.35 9.23 18.53
MID ATLANTIC 20.406 22.143 7.327 4.33 3.01 15.84 173.20 0.47 23.85 129.70 12.77 15.15
SOUTHEAST 19.054 21.503 9.049 3.01 3.14 14.47 119.91 0.98 26.22 143.26 19.81 27.76
SOUTHWEST 20.411 21.784 11.024 4.73 6.60 16.40 190.39 0.58 28.56 125.99 14.38 19.15
WEST 22.963 41.316 7.017 6.20 -4.59 16.66 226.81 0.32 39.77 136.06 12.35 21.58
AVERAGE BY EXCHANGE
NYSE 35.225 95.288 2.624 11.01 -4.70 19.21 348.92 0.38 35.00 191.42 10.77 21.05
AMEX 15.397 17.690 9.767 1.56 2.10 14.03 111.01 1.39 26.33 110.08 17.46 23.48
OTC/NASDAQ 20.067 21.819 8.521 3.45 2.96 16.10 156.65 0.55 29.52 127.82 15.49 20.34
</TABLE>
<PAGE>
EXHIBIT 31
KELLER & COMPANY
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 22, 1997
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
------------------------------------- --------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Incorporated AL 176,496 17,559 16,045 0.56 0.93 5.44 9.10
PLE Pinnacle Bancshares Inc. AL 199,602 15,433 14,932 0.59 0.87 7.43 11.08
SRN Southern Banc Company Inc. AL 104,978 17,735 17,550 0.14 0.50 0.79 2.78
SCBS Southern Community Bancshares AL 70,106 15,399 15,399 NA NA NA NA
SZB SouthFirst Bancshares Inc. AL 92,910 12,988 12,988 0.04 0.16 0.29 1.13
FFBH First Federal Bancshares of A AR 519,765 82,221 82,221 0.79 1.13 5.17 7.39
HCBB HCB Bancshares Inc. AR 180,417 13,992 12,537 NA NA NA NA
FTF Texarkana First Financial Cor AR 168,094 26,945 26,945 1.39 1.71 7.87 9.71
AHM Ahmanson & Company (H.F.) CA 48,697,126 2,398,942 2,100,055 0.37 0.65 7.06 12.37
AFFFZ America First Financial Fund CA 2,183,062 180,742 178,180 1.42 1.73 19.32 23.50
BPLS Bank Plus Corp. CA 3,294,647 161,993 161,663 -0.34 -0.04 -6.80 -0.86
BVCC Bay View Capital Corp. CA 3,044,610 192,134 182,614 0.38 0.63 6.09 10.22
BYFC Broadway Financial Corp. CA 118,763 13,652 13,652 -0.28 0.16 -2.39 1.32
CFHC California Financial Holding CA 1,315,052 91,537 91,150 0.53 0.81 7.95 12.17
CENF CENFED Financial Corp. CA 2,263,399 115,523 115,318 0.49 0.71 9.62 14.04
CSA Coast Savings Financial CA 8,797,075 435,918 429,950 0.16 0.50 3.19 9.99
DSL Downey Financial Corp. CA 5,484,473 400,503 394,616 0.45 0.76 5.75 9.62
FSSB First FS&LA of San Bernardino CA 103,674 4,492 4,329 -1.18 -1.18 -24.70 -24.76
FED FirstFed Financial Corp. CA 4,129,737 195,150 192,654 0.24 0.48 5.27 10.34
GLN Glendale Federal Bank FSB CA 15,393,708 986,434 925,338 0.30 0.62 4.66 9.72
GDW Golden West Financial CA 38,530,009 2,413,892 2,413,892 1.02 1.24 16.20 19.61
GWF Great Western Financial CA 42,877,903 2,585,070 2,308,054 0.25 0.69 4.10 11.07
HTHR Hawthorne Financial Corp. CA 837,975 44,124 44,124 0.77 0.54 14.36 10.05
HEMT HF Bancorp Inc. CA 984,455 80,837 66,136 -0.10 0.16 -1.09 1.87
HBNK Highland Federal Bank FSB CA 480,192 35,825 35,825 0.29 0.50 3.90 6.70
MBBC Monterey Bay Bancorp Inc. CA 422,380 45,372 41,598 0.28 0.52 2.19 4.02
PFFB PFF Bancorp Inc. CA 2,535,767 265,526 262,545 0.12 0.45 0.96 3.68
PROV Provident Financial Holdings CA 608,705 86,577 86,577 0.23 0.12 1.66 0.87
QCBC Quaker City Bancorp Inc. CA 780,843 69,571 69,483 0.32 0.57 3.46 6.21
REDF RedFed Bancorp Inc. CA 908,660 74,296 74,216 0.12 0.47 1.67 6.40
SGVB SGV Bancorp Inc. CA 399,776 29,059 28,536 0.15 0.37 1.67 4.26
WES Westcorp CA 3,405,772 319,778 318,869 0.93 0.21 9.50 2.09
FFBA First Colorado Bancorp Inc. CO 1,509,514 192,089 189,396 0.92 1.24 6.16 8.26
EGFC Eagle Financial Corp. CT 1,512,036 104,312 78,520 0.60 0.79 8.16 10.87
FFES First Federal of East Hartfor CT 974,693 60,939 60,939 0.44 0.69 7.03 11.18
MIDC MidConn Bank CT 363,176 35,422 30,046 0.53 0.66 5.54 6.85
NTMG Nutmeg Federal S&LA CT 93,298 5,632 5,632 0.32 0.40 5.11 6.51
WBST Webster Financial Corporation CT 5,583,619 283,537 238,566 0.36 0.70 6.50 12.75
IFSB Independence Federal Savings DC 260,649 16,963 14,788 0.11 0.24 1.73 3.66
BANC BankAtlantic Bancorp Inc. FL 2,773,085 152,605 124,207 0.91 0.71 14.31 11.07
BKUNA BankUnited Financial Corp. FL 1,453,152 98,903 86,176 0.45 0.62 5.58 7.72
FFFG F.F.O. Financial Group Inc. FL 320,031 20,760 20,760 0.70 0.99 10.98 15.45
FFLC FFLC Bancorp Inc. FL 358,538 51,892 51,892 0.69 1.01 4.28 6.25
FFPB First Palm Beach Bancorp Inc. FL 1,558,235 105,404 102,676 -0.01 0.05 -0.09 0.66
OCWN Ocwen Financial Corporation FL 2,649,471 225,156 225,156 NA NA NA NA
CCFH CCF Holding Company GA 86,940 12,445 12,445 0.27 0.42 1.49 2.37
EBSI Eagle Bancshares GA 666,166 57,999 57,999 0.59 0.80 6.63 8.97
FSTC First Citizens Corporation GA 257,288 24,109 18,962 2.04 2.03 19.36 19.20
FGHC First Georgia Holding Inc. GA 147,094 12,468 11,382 0.63 0.77 7.69 9.28
FLFC First Liberty Financial Corp. GA 1,248,033 91,661 82,007 0.84 0.90 11.40 12.30
FLAG FLAG Financial Corp. GA 222,072 20,883 20,883 -0.06 0.14 -0.70 1.51
SFNB Security First Network Bank GA 108,791 40,064 39,401 -25.70 -25.34 -62.95 -62.07
CASH First Midwest Financial Inc. IA 370,177 42,911 37,971 0.75 0.98 6.51 8.45
GFSB GFS Bancorp Inc. IA 88,154 10,197 10,197 0.98 1.20 8.41 10.24
HZFS Horizon Financial Svcs Corp. IA 78,368 8,225 8,225 0.43 0.60 3.87 5.41
MFCX Marshalltown Financial Corp. IA 127,107 19,845 19,845 0.33 0.63 2.14 4.04
MIFC Mid-Iowa Financial Corp. IA 123,572 11,238 11,224 0.91 1.19 9.84 12.89
MWBI Midwest Bancshares Inc. IA 139,006 9,642 9,642 0.47 0.74 6.77 10.69
FFFD North Central Bancshares Inc. IA 203,497 50,039 50,039 1.70 1.97 6.29 7.28
PMFI Perpetual Midwest Financial IA 397,780 33,786 33,786 0.09 0.26 0.98 2.88
SFFC StateFed Financial Corporatio IA 85,282 15,012 15,012 1.04 1.29 5.61 6.99
ABCL Alliance Bancorp Inc. IL 1,313,141 122,313 NA 0.44 0.74 5.07 8.51
AVND Avondale Financial Corp. IL 635,447 52,459 52,459 -0.72 -1.34 -7.09 -13.28
BFFC Big Foot Financial Corp. IL 210,086 35,890 35,890 NA NA NA NA
CBCI Calumet Bancorp Inc. IL 494,557 78,845 78,845 1.12 1.35 6.91 8.36
CBSB Charter Financial Inc. IL 394,815 55,807 48,966 0.96 1.21 5.95 7.51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
------------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Incorporated 11/19/91 NASDAQ 1,225,922 15.32
PLE Pinnacle Bancshares Inc. 12/17/86 AMSE 889,823 19.24
SRN Southern Banc Company Inc. 10/05/95 AMSE 1,230,313 17.69
SCBS Southern Community Bancshares 12/23/96 NASDAQ 1,137,350 15.43
SZB SouthFirst Bancshares Inc. 02/14/95 AMSE 821,100 11.70
FFBH First Federal Bancshares of A 05/03/96 NASDAQ 4,896,063 90.58
HCBB HCB Bancshares Inc. 05/07/97 NASDAQ NA NA
FTF Texarkana First Financial Cor 07/07/95 AMSE 1,832,805 30.24
AHM Ahmanson & Company (H.F.) 10/25/72 NYSE 100,595,547 3659.16
AFFFZ America First Financial Fund NA NASDAQ 6,010,589 187.08
BPLS Bank Plus Corp. NA NASDAQ 18,245,265 189.29
BVCC Bay View Capital Corp. 05/09/86 NASDAQ 6,485,080 330.74
BYFC Broadway Financial Corp. 01/09/96 NASDAQ 892,688 9.60
CFHC California Financial Holding 04/01/83 NASDAQ 4,765,793 138.21
CENF CENFED Financial Corp. 10/25/91 NASDAQ 5,760,489 174.12
CSA Coast Savings Financial 12/23/85 NYSE 18,592,567 736.73
DSL Downey Financial Corp. 01/01/71 NYSE 26,734,002 515.59
FSSB First FS&LA of San Bernardino 02/02/93 NASDAQ 328,296 3.20
FED FirstFed Financial Corp. 12/16/83 NYSE 10,560,402 248.17
GLN Glendale Federal Bank FSB 10/01/83 NYSE 50,305,615 1157.03
GDW Golden West Financial 05/29/59 NYSE 57,218,464 3590.46
GWF Great Western Financial NA NYSE 137,885,310 5584.36
HTHR Hawthorne Financial Corp. NA NASDAQ 2,629,275 26.95
HEMT HF Bancorp Inc. 06/30/95 NASDAQ 6,281,875 80.09
HBNK Highland Federal Bank FSB NA NASDAQ 2,282,137 53.06
MBBC Monterey Bay Bancorp Inc. 02/15/95 NASDAQ 3,244,908 53.95
PFFB PFF Bancorp Inc. 03/29/96 NASDAQ 18,845,625 270.91
PROV Provident Financial Holdings 06/28/96 NASDAQ 5,075,215 76.76
QCBC Quaker City Bancorp Inc. 12/30/93 NASDAQ 3,822,475 74.54
REDF RedFed Bancorp Inc. 04/08/94 NASDAQ 7,163,735 101.19
SGVB SGV Bancorp Inc. 06/29/95 NASDAQ 2,342,176 29.86
WES Westcorp 05/01/86 NYSE 26,013,956 377.20
FFBA First Colorado Bancorp Inc. 01/02/96 NASDAQ 16,555,197 277.30
EGFC Eagle Financial Corp. 02/03/87 NASDAQ 4,553,801 128.64
FFES First Federal of East Hartfor 06/23/87 NASDAQ 2,649,011 67.55
MIDC MidConn Bank 09/11/86 NASDAQ 1,953,469 38.58
NTMG Nutmeg Federal S&LA NA NASDAQ 725,421 5.44
WBST Webster Financial Corporation 12/12/86 NASDAQ 11,953,507 419.87
IFSB Independence Federal Savings 06/06/85 NASDAQ 1,280,030 10.24
BANC BankAtlantic Bancorp Inc. 11/29/83 NASDAQ 18,552,530 234.23
BKUNA BankUnited Financial Corp. 12/11/85 NASDAQ 8,847,184 92.90
FFFG F.F.O. Financial Group Inc. 10/13/88 NASDAQ 8,430,181 34.25
FFLC FFLC Bancorp Inc. 01/04/94 NASDAQ 2,341,862 58.55
FFPB First Palm Beach Bancorp Inc. 09/29/93 NASDAQ 5,009,337 139.01
OCWN Ocwen Financial Corporation NA NASDAQ 26,799,511 777.19
CCFH CCF Holding Company 07/12/95 NASDAQ 865,000 14.06
EBSI Eagle Bancshares 04/01/86 NASDAQ 4,552,200 70.56
FSTC First Citizens Corporation 03/01/86 NASDAQ 1,588,012 40.10
FGHC First Georgia Holding Inc. 02/11/87 NASDAQ 3,052,319 23.27
FLFC First Liberty Financial Corp. 12/06/83 NASDAQ 7,724,780 164.15
FLAG FLAG Financial Corp. 12/11/86 NASDAQ 2,036,990 25.46
SFNB Security First Network Bank NA NASDAQ 8,260,023 84.67
CASH First Midwest Financial Inc. 09/20/93 NASDAQ 2,827,323 49.12
GFSB GFS Bancorp Inc. 01/06/94 NASDAQ 987,842 11.36
HZFS Horizon Financial Svcs Corp. 06/30/94 NASDAQ 425,540 7.45
MFCX Marshalltown Financial Corp. 03/31/94 NASDAQ 1,411,475 21.35
MIFC Mid-Iowa Financial Corp. 10/14/92 NASDAQ 1,675,988 13.41
MWBI Midwest Bancshares Inc. 11/12/92 NASDAQ 348,339 9.75
FFFD North Central Bancshares Inc. 03/21/96 NASDAQ 3,429,455 54.44
PMFI Perpetual Midwest Financial 03/31/94 NASDAQ 1,907,278 37.67
SFFC StateFed Financial Corporatio 01/05/94 NASDAQ 790,123 14.62
ABCL Alliance Bancorp Inc. 07/07/92 NASDAQ 5,333,830 154.68
AVND Avondale Financial Corp. 04/07/95 NASDAQ 3,525,325 59.93
BFFC Big Foot Financial Corp. 12/20/96 NASDAQ 2,512,750 34.55
CBCI Calumet Bancorp Inc. 02/20/92 NASDAQ 2,238,147 79.73
CBSB Charter Financial Inc. 12/29/95 NASDAQ 4,220,258 70.69
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
------------------------------------- --------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CNBA Chester Bancorp Inc. IL 142,487 31,636 31,636 0.58 0.92 4.33 6.84
CBK Citizens First Financial Corp IL 271,614 39,766 39,766 0.27 0.57 1.89 3.93
CSBF CSB Financial Group Inc. IL 47,996 12,033 11,342 0.44 0.65 1.62 2.39
DFIN Damen Financial Corp. IL 227,400 45,840 45,840 0.71 0.89 3.08 3.85
EGLB Eagle BancGroup Inc. IL 170,531 20,636 20,636 -0.20 0.11 -1.64 0.94
FBCI Fidelity Bancorp Inc. IL 486,010 49,521 49,391 0.52 0.75 4.85 6.93
FFBI First Financial Bancorp Inc. IL 93,156 7,269 7,269 -0.02 0.45 -0.26 5.63
FMBD First Mutual Bancorp Inc. IL 424,597 56,948 43,820 0.14 0.37 0.76 1.94
FFDP FirstFed Bancshares IL 552,558 49,379 47,065 0.16 0.43 1.81 4.87
GTPS Great American Bancorp IL 137,898 29,172 29,172 0.25 0.61 1.00 2.42
HMLK Hemlock Federal Financial Cor IL 164,493 30,076 30,076 NA NA NA NA
HBEI Home Bancorp of Elgin Inc. IL 358,695 100,839 100,839 0.30 0.81 1.38 3.67
HMCI HomeCorp Inc. IL 336,447 21,196 21,196 0.11 0.38 1.86 6.13
KNK Kankakee Bancorp Inc. IL 342,379 36,554 34,218 0.61 0.77 5.99 7.65
MAFB MAF Bancorp Inc. IL 3,236,449 255,110 221,484 0.78 1.08 10.30 14.28
NBSI North Bancshares Inc. IL 120,011 17,533 17,533 0.45 0.64 2.93 4.18
PFED Park Bancorp Inc. IL 177,981 38,597 38,597 0.77 1.06 4.01 5.51
PSFI PS Financial Inc. IL 75,118 32,476 32,476 NA NA NA NA
SWBI Southwest Bancshares IL 371,563 40,081 40,081 0.74 1.04 6.81 9.52
SPBC St. Paul Bancorp Inc. IL 4,484,882 391,900 390,683 0.68 1.00 7.62 11.18
STND Standard Financial Inc. IL 2,488,854 271,257 270,870 0.47 0.70 4.16 6.15
SFSB SuburbFed Financial Corp. IL 407,800 26,769 26,654 0.33 0.54 4.94 8.08
WCBI Westco Bancorp IL 309,921 48,250 48,250 1.10 1.40 7.05 9.01
FBCV 1ST Bancorp IN 273,090 21,759 21,277 0.24 0.04 2.94 0.47
AMFC AMB Financial Corp. IN 93,643 15,260 15,260 0.70 0.88 3.73 4.67
ASBI Ameriana Bancorp IN 402,163 43,630 43,589 0.60 0.87 5.41 7.83
ATSB AmTrust Capital Corp. IN 71,031 7,222 7,145 0.29 0.19 2.91 1.91
CBCO CB Bancorp Inc. IN 226,553 20,008 20,008 1.02 1.19 10.70 12.47
FFWC FFW Corp. IN 158,441 15,854 15,854 0.89 1.10 8.73 10.78
FFED Fidelity Federal Bancorp IN 250,285 12,865 12,865 0.16 0.29 2.98 5.39
FISB First Indiana Corporation IN 1,481,157 141,974 140,163 0.90 1.03 9.66 11.07
HFGI Harrington Financial Group IN 515,360 24,647 24,647 0.34 0.48 7.37 10.32
HBFW Home Bancorp IN 327,789 45,713 45,713 0.56 0.89 3.78 6.04
HBBI Home Building Bancorp IN 46,804 5,649 5,649 0.20 0.50 1.48 3.77
HOMF Home Federal Bancorp IN 663,658 56,079 54,256 1.03 1.18 12.42 14.20
HWEN Home Financial Bancorp IN 39,443 7,347 7,347 0.57 0.81 3.61 5.11
INCB Indiana Community Bank SB IN 91,329 11,312 11,312 0.17 0.50 1.29 3.92
IFSL Indiana Federal Corporation IN 818,924 71,920 67,573 0.67 0.95 7.45 10.52
LOGN Logansport Financial Corp. IN 79,298 15,585 15,585 1.17 1.51 5.27 6.80
MARN Marion Capital Holdings IN 174,415 40,202 40,202 1.32 1.59 5.71 6.87
MFBC MFB Corp. IN 234,290 33,987 33,987 0.56 0.85 3.38 5.10
NEIB Northeast Indiana Bancorp IN 172,874 26,213 26,213 1.04 1.22 6.00 7.06
PFDC Peoples Bancorp IN 283,242 42,999 42,999 1.10 1.45 7.15 9.42
PERM Permanent Bancorp Inc. IN 412,967 40,064 39,667 0.24 0.51 2.37 5.11
RIVR River Valley Bancorp IN 138,325 17,099 16,833 NA NA NA NA
SOBI Sobieski Bancorp Inc. IN 79,080 12,181 12,181 0.28 0.57 1.64 3.28
FFSL First Independence Corp. KS 109,230 11,474 11,474 0.50 0.76 4.28 6.54
LARK Landmark Bancshares Inc. KS 223,799 32,750 32,750 0.84 1.04 5.42 6.69
MCBS Mid Continent Bancshares Inc. KS 371,169 37,279 37,279 1.03 1.17 9.21 10.54
CKFB CKF Bancorp Inc. KY 60,197 14,254 14,254 1.30 1.29 5.08 5.05
CLAS Classic Bancshares Inc. KY 128,361 19,151 16,094 0.43 0.71 2.05 3.40
FFKY First Federal Financial Corp. KY 372,300 50,640 47,556 1.25 1.49 8.98 10.72
FLKY First Lancaster Bancshares KY 40,448 13,850 13,850 1.15 1.41 3.52 4.31
FTSB Fort Thomas Financial Corp. KY 94,681 15,236 15,236 0.50 0.77 2.48 3.83
FKKY Frankfort First Bancorp Inc. KY 128,328 33,611 33,611 0.64 0.92 2.31 3.34
GWBC Gateway Bancorp Inc. KY 65,806 17,166 17,166 0.82 1.14 3.26 4.50
GTFN Great Financial Corporation KY 3,002,142 279,107 266,946 0.74 0.71 7.42 7.13
HFFB Harrodsburg First Fin Bancorp KY 108,187 28,514 28,514 1.03 1.35 3.73 4.90
KYF Kentucky First Bancorp Inc. KY 88,923 14,326 14,326 0.80 1.07 3.95 5.23
ANA Acadiana Bancshares Inc. LA 261,687 45,616 45,616 0.50 0.84 3.35 5.61
CZF CitiSave Financial Corp LA 74,942 12,457 12,457 0.51 0.77 3.00 4.51
GSLA GS Financial Corp. LA 135,339 24,735 24,735 NA NA NA NA
ISBF ISB Financial Corporation LA 938,968 114,414 97,011 0.69 0.92 4.57 6.15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
------------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CNBA Chester Bancorp Inc. 10/08/96 NASDAQ 2,182,125 31.64
CBK Citizens First Financial Corp 05/01/96 AMSE 2,798,829 42.68
CSBF CSB Financial Group Inc. 10/09/95 NASDAQ 941,850 10.71
DFIN Damen Financial Corp. 10/02/95 NASDAQ 3,246,717 46.67
EGLB Eagle BancGroup Inc. 07/01/96 NASDAQ 1,267,705 19.97
FBCI Fidelity Bancorp Inc. 12/15/93 NASDAQ 2,791,978 55.84
FFBI First Financial Bancorp Inc. 10/04/93 NASDAQ 415,488 6.86
FMBD First Mutual Bancorp Inc. 07/05/95 NASDAQ 3,741,670 56.59
FFDP FirstFed Bancshares 07/01/92 NASDAQ 3,017,606 53.56
GTPS Great American Bancorp 06/30/95 NASDAQ 1,759,976 29.04
HMLK Hemlock Federal Financial Cor 04/02/97 NASDAQ NA NA
HBEI Home Bancorp of Elgin Inc. 09/27/96 NASDAQ 7,009,250 105.14
HMCI HomeCorp Inc. 06/22/90 NASDAQ 1,128,779 23.99
KNK Kankakee Bancorp Inc. 01/06/93 AMSE 1,420,168 38.70
MAFB MAF Bancorp Inc. 01/12/90 NASDAQ 10,429,130 406.74
NBSI North Bancshares Inc. 12/21/93 NASDAQ 1,034,950 20.44
PFED Park Bancorp Inc. 08/12/96 NASDAQ 2,431,441 37.08
PSFI PS Financial Inc. 11/27/96 NASDAQ 2,182,125 28.64
SWBI Southwest Bancshares 06/24/92 NASDAQ 2,638,812 50.80
SPBC St. Paul Bancorp Inc. 05/18/87 NASDAQ 22,840,102 625.25
STND Standard Financial Inc. 08/01/94 NASDAQ 16,204,235 370.67
SFSB SuburbFed Financial Corp. 03/04/92 NASDAQ 1,260,957 28.37
WCBI Westco Bancorp 06/26/92 NASDAQ 2,554,113 56.19
FBCV 1ST Bancorp 04/07/87 NASDAQ 697,538 21.62
AMFC AMB Financial Corp. 04/01/96 NASDAQ 1,067,919 14.75
ASBI Ameriana Bancorp 03/02/87 NASDAQ 3,259,706 50.53
ATSB AmTrust Capital Corp. 03/28/95 NASDAQ 526,479 6.38
CBCO CB Bancorp Inc. 12/28/92 NASDAQ 1,162,279 27.60
FFWC FFW Corp. 04/05/93 NASDAQ 697,010 18.65
FFED Fidelity Federal Bancorp 08/31/87 NASDAQ 2,490,110 22.41
FISB First Indiana Corporation 08/02/83 NASDAQ 10,505,257 193.03
HFGI Harrington Financial Group NA NASDAQ 3,256,738 35.82
HBFW Home Bancorp 03/30/95 NASDAQ 2,623,213 53.45
HBBI Home Building Bancorp 02/08/95 NASDAQ 311,660 6.54
HOMF Home Federal Bancorp 01/23/88 NASDAQ 3,389,770 92.79
HWEN Home Financial Bancorp 07/02/96 NASDAQ 485,926 7.29
INCB Indiana Community Bank SB 12/15/94 NASDAQ 922,039 15.21
IFSL Indiana Federal Corporation 02/04/87 NASDAQ 4,786,236 125.04
LOGN Logansport Financial Corp. 06/14/95 NASDAQ 1,256,375 16.65
MARN Marion Capital Holdings 03/18/93 NASDAQ 1,828,242 40.22
MFBC MFB Corp. 03/25/94 NASDAQ 1,734,517 34.26
NEIB Northeast Indiana Bancorp 06/28/95 NASDAQ 1,762,727 26.44
PFDC Peoples Bancorp 07/07/87 NASDAQ 2,279,328 51.28
PERM Permanent Bancorp Inc. 04/04/94 NASDAQ 2,082,858 42.18
RIVR River Valley Bancorp 12/20/96 NASDAQ 1,190,250 16.37
SOBI Sobieski Bancorp Inc. 03/31/95 NASDAQ 759,632 11.20
FFSL First Independence Corp. 10/08/93 NASDAQ 1,005,294 12.06
LARK Landmark Bancshares Inc. 03/28/94 NASDAQ 1,807,996 33.90
MCBS Mid Continent Bancshares Inc. 06/27/94 NASDAQ 1,958,250 49.45
CKFB CKF Bancorp Inc. 01/04/95 NASDAQ 927,175 16.69
CLAS Classic Bancshares Inc. 12/29/95 NASDAQ 1,322,500 15.37
FFKY First Federal Financial Corp. 07/15/87 NASDAQ 4,165,353 83.31
FLKY First Lancaster Bancshares 07/01/96 NASDAQ 958,812 14.86
FTSB Fort Thomas Financial Corp. 06/28/95 NASDAQ 1,495,086 16.82
FKKY Frankfort First Bancorp Inc. 07/10/95 NASDAQ 3,385,000 35.97
GWBC Gateway Bancorp Inc. 01/18/95 NASDAQ 1,075,754 16.41
GTFN Great Financial Corporation 03/31/94 NASDAQ 14,073,290 434.51
HFFB Harrodsburg First Fin Bancorp 10/04/95 NASDAQ 2,024,756 32.14
KYF Kentucky First Bancorp Inc. 08/29/95 AMSE 1,319,194 15.17
ANA Acadiana Bancshares Inc. 07/16/96 AMSE 2,731,250 51.21
CZF CitiSave Financial Corp 07/14/95 AMSE 962,207 18.76
GSLA GS Financial Corp. 04/01/97 NASDAQ NA NA
ISBF ISB Financial Corporation 04/07/95 NASDAQ 7,001,260 171.53
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
------------------------------------- --------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MERI Meritrust Federal SB LA 228,591 18,068 18,068 0.60 0.97 7.86 12.70
TSH Teche Holding Co. LA 393,556 52,365 52,365 0.73 1.00 5.08 6.93
AFCB Affiliated Community Bancorp MA 1,054,997 103,049 102,408 0.93 1.07 9.44 10.83
BFD BostonFed Bancorp Inc. MA 941,007 83,755 80,870 0.48 0.65 4.27 5.81
FAB FirstFed America Bancorp Inc. MA 971,497 47,731 47,731 NA NA NA NA
ANBK American National Bancorp MD 492,506 44,356 44,356 0.22 0.59 2.16 5.90
EQSB Equitable Federal Savings Ban MD 286,637 14,325 14,325 0.41 0.71 8.08 13.73
FCIT First Citizens Financial Corp MD 693,803 42,368 42,368 0.52 0.77 8.66 12.93
FFWM First Financial-W. Maryland MD 364,726 43,182 43,182 1.01 1.36 8.36 11.25
HRBF Harbor Federal Bancorp Inc. MD 219,462 28,224 28,224 0.43 0.68 3.22 5.10
MFSL Maryland Federal Bancorp MD 1,128,483 95,261 93,980 0.58 0.84 7.02 10.17
WSB Washington Savings Bank, FSB MD 256,632 21,349 21,349 0.51 0.74 6.15 8.91
WHGB WHG Bancshares Corp. MD 98,458 21,551 21,551 0.55 0.89 2.39 3.83
MCBN Mid-Coast Bancorp Inc. ME 57,838 4,975 4,975 0.40 0.64 4.42 7.05
BWFC Bank West Financial Corp. MI 147,019 22,508 22,508 0.75 0.62 4.24 3.53
CFSB CFSB Bancorp Inc. MI 834,252 63,639 63,639 0.75 1.00 9.48 12.72
DNFC D & N Financial Corp. MI 1,528,468 88,772 87,789 0.62 0.84 10.85 14.62
FLGS Flagstar Bancorp Inc. MI 1,045,094 62,445 62,445 1.63 1.63 29.42 29.42
MSBF MSB Financial Inc. MI 75,630 12,564 12,564 1.20 1.49 6.05 7.55
MSBK Mutual Savings Bank FSB MI 662,536 39,800 39,800 0.10 0.01 1.65 0.18
OFCP Ottawa Financial Corp. MI 858,934 75,947 60,785 0.43 0.73 4.48 7.63
SJSB SJS Bancorp MI 153,767 16,201 16,201 0.20 0.51 1.87 4.67
THR Three Rivers Financial Corp. MI 91,165 12,540 12,490 0.57 0.83 3.91 5.71
BDJI First Federal Bancorporation MN 107,716 12,036 12,036 0.31 0.65 2.58 5.35
FFHH FSF Financial Corp. MN 367,312 43,225 43,225 0.64 0.82 4.76 6.13
HMNF HMN Financial Inc. MN 553,021 78,770 78,770 0.75 0.91 4.89 5.93
MIVI Mississippi View Holding Co. MN 69,755 12,735 12,735 0.68 1.01 3.74 5.54
QCFB QCF Bancorp Inc. MN 149,637 27,070 27,070 1.36 1.66 7.17 8.76
WEFC Wells Financial Corp. MN 201,886 28,737 28,737 0.64 1.01 4.47 7.11
CMRN Cameron Financial Corp MO 197,693 45,381 45,381 1.12 1.38 4.47 5.52
CAPS Capital Savings Bancorp, Inc. MO 237,915 20,607 20,607 0.64 0.92 7.20 10.27
CBES CBES Bancorp Inc. MO 95,219 17,510 17,510 0.77 0.96 5.14 6.41
CNSB CNS Bancorp Inc. MO 98,104 24,344 24,344 0.54 0.78 2.33 3.35
FBSI First Bancshares Inc. MO 160,048 22,971 22,938 0.91 1.12 5.96 7.33
FTNB Fulton Bancorp Inc. MO 99,464 24,875 24,875 NA NA NA NA
GSBC Great Southern Bancorp Inc. MO 679,153 60,899 60,899 1.36 1.54 14.07 15.89
HFSA Hardin Bancorp Inc. MO 103,354 13,210 13,210 0.50 0.81 3.17 5.14
JSBA Jefferson Savings Bancorp MO 1,296,929 106,299 80,965 0.30 0.70 3.97 9.29
JOAC Joachim Bancorp Inc. MO 35,656 10,334 10,334 0.51 0.78 1.74 2.68
LXMO Lexington B&L Financial Corp. MO 59,748 16,505 16,505 0.90 1.18 2.98 3.91
MBLF MBLA Financial Corp. MO 209,783 28,313 28,313 0.66 0.85 4.90 6.32
NASB North American Savings Bank MO 738,692 52,836 51,005 1.15 1.18 16.09 16.57
NSLB NS&L Bancorp Inc. MO 58,089 11,574 11,574 0.50 0.74 2.31 3.45
PCBC Perry County Financial Corp. MO 79,714 14,602 14,602 0.78 1.03 4.14 5.45
RFED Roosevelt Financial Group MO 7,508,309 469,558 NA 0.12 0.90 2.00 15.56
SMFC Sho-Me Financial Corp. MO 304,496 29,055 29,055 0.91 1.08 8.65 10.28
SMBC Southern Missouri Bancorp Inc MO 165,688 25,958 25,958 0.71 1.01 4.44 6.29
CFTP Community Federal Bancorp MS 206,049 69,066 69,066 1.43 1.70 4.29 5.11
FFBS FFBS BanCorp Inc. MS 128,676 24,984 24,984 1.18 1.49 6.04 7.62
MGNL Magna Bancorp Inc. MS 1,383,130 132,245 127,914 1.40 1.65 14.34 16.89
EFBC Empire Federal Bancorp Inc. MT 107,938 39,778 39,778 NA NA NA NA
GBCI Glacier Bancorp Inc. MT 552,372 52,813 51,329 1.39 1.56 14.71 16.51
UBMT United Financial Corp. MT 107,723 24,398 24,398 1.09 1.34 4.68 5.74
WSTR WesterFed Financial Corp. MT 932,440 102,364 80,865 0.60 0.84 4.43 6.16
CFNC Carolina Fincorp Inc. NC 108,680 25,760 25,760 NA NA NA NA
CENB Century Bancorp Inc. NC 99,948 29,920 29,920 NA NA NA NA
COOP Cooperative Bankshares Inc. NC 348,498 26,095 26,095 -0.89 0.12 -10.54 1.38
SOPN First Savings Bancorp Inc. NC 271,121 66,710 66,710 1.39 1.68 5.46 6.59
GSFC Green Street Financial Corp. NC 174,365 62,904 62,904 1.40 1.69 4.28 5.18
HFNC HFNC Financial Corp. NC 842,917 158,736 158,736 1.06 1.38 3.61 4.71
KSAV KS Bancorp Inc. NC 100,754 13,930 13,921 0.92 1.21 6.46 8.44
MBSP Mitchell Bancorp Inc. NC 33,894 14,684 14,684 NA NA NA NA
NSBC NewSouth Bancorp, Inc. NC 254,863 19,155 19,155 NA NA NA NA
PDB Piedmont Bancorp Inc. NC 118,519 20,100 20,100 -0.31 0.76 -1.31 3.20
SSB Scotland Bancorp Inc NC 68,924 25,285 25,285 1.47 1.77 4.07 4.89
SSFC South Street Financial Corp. NC 238,791 60,761 60,761 0.77 1.03 4.38 5.90
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
------------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MERI Meritrust Federal SB NA NASDAQ 774,176 27.48
TSH Teche Holding Co. 04/19/95 AMSE 3,438,000 56.30
AFCB Affiliated Community Bancorp 10/19/95 NASDAQ 5,165,166 122.67
BFD BostonFed Bancorp Inc. 10/24/95 AMSE 5,962,502 90.18
FAB FirstFed America Bancorp Inc. 01/15/97 AMSE NA NA
ANBK American National Bancorp 10/31/95 NASDAQ 3,603,646 46.85
EQSB Equitable Federal Savings Ban 09/19/93 NASDAQ 600,000 16.95
FCIT First Citizens Financial Corp 12/17/86 NASDAQ 2,943,820 77.09
FFWM First Financial-W. Maryland 02/11/92 NASDAQ 2,175,659 71.80
HRBF Harbor Federal Bancorp Inc. 08/12/94 NASDAQ 1,754,420 28.51
MFSL Maryland Federal Bancorp 06/02/87 NASDAQ 3,210,150 119.58
WSB Washington Savings Bank, FSB NA AMSE 4,220,206 22.16
WHGB WHG Bancshares Corp. 04/01/96 NASDAQ 1,539,059 21.93
MCBN Mid-Coast Bancorp Inc. 11/02/89 NASDAQ 230,171 4.37
BWFC Bank West Financial Corp. 03/30/95 NASDAQ 1,783,475 20.51
CFSB CFSB Bancorp Inc. 06/22/90 NASDAQ 4,697,037 99.81
DNFC D & N Financial Corp. 02/13/85 NASDAQ 8,315,821 150.72
FLGS Flagstar Bancorp Inc. NA NASDAQ NA NA
MSBF MSB Financial Inc. 02/06/95 NASDAQ 630,036 13.07
MSBK Mutual Savings Bank FSB 07/17/92 NASDAQ 4,274,154 29.38
OFCP Ottawa Financial Corp. 08/19/94 NASDAQ 5,040,187 105.21
SJSB SJS Bancorp 02/16/95 NASDAQ 917,622 23.63
THR Three Rivers Financial Corp. 08/24/95 AMSE 823,540 11.84
BDJI First Federal Bancorporation 04/04/95 NASDAQ 700,566 12.96
FFHH FSF Financial Corp. 10/07/94 NASDAQ 3,095,310 53.39
HMNF HMN Financial Inc. 06/30/94 NASDAQ 4,209,826 84.39
MIVI Mississippi View Holding Co. 03/24/95 NASDAQ 818,743 12.49
QCFB QCF Bancorp Inc. 04/03/95 NASDAQ 1,426,200 27.28
WEFC Wells Financial Corp. 04/11/95 NASDAQ 2,023,860 30.36
CMRN Cameron Financial Corp 04/03/95 NASDAQ 2,682,196 42.92
CAPS Capital Savings Bancorp, Inc. 12/29/93 NASDAQ 1,891,800 26.01
CBES CBES Bancorp Inc. 09/30/96 NASDAQ 1,024,958 17.23
CNSB CNS Bancorp Inc. 06/12/96 NASDAQ 1,653,125 26.04
FBSI First Bancshares Inc. 12/22/93 NASDAQ 1,160,135 22.62
FTNB Fulton Bancorp Inc. 10/18/96 NASDAQ 1,719,250 30.73
GSBC Great Southern Bancorp Inc. 12/14/89 NASDAQ 8,288,147 144.01
HFSA Hardin Bancorp Inc. 09/29/95 NASDAQ 859,360 13.32
JSBA Jefferson Savings Bancorp 04/08/93 NASDAQ 4,970,949 141.67
JOAC Joachim Bancorp Inc. 12/28/95 NASDAQ 760,437 10.65
LXMO Lexington B&L Financial Corp. 06/06/96 NASDAQ 1,087,900 16.59
MBLF MBLA Financial Corp. 06/24/93 NASDAQ 1,316,002 27.14
NASB North American Savings Bank 09/27/85 NASDAQ 2,255,956 77.27
NSLB NS&L Bancorp Inc. 06/08/95 NASDAQ 707,582 11.59
PCBC Perry County Financial Corp. 02/13/95 NASDAQ 808,486 15.97
RFED Roosevelt Financial Group 01/23/87 NASDAQ 42,614,943 926.88
SMFC Sho-Me Financial Corp. 07/01/94 NASDAQ 1,519,125 44.81
SMBC Southern Missouri Bancorp Inc 04/13/94 NASDAQ 1,637,913 26.62
CFTP Community Federal Bancorp 03/26/96 NASDAQ 4,282,339 76.55
FFBS FFBS BanCorp Inc. 07/01/93 NASDAQ 1,557,445 34.65
MGNL Magna Bancorp Inc. 03/13/91 NASDAQ 13,754,266 251.02
EFBC Empire Federal Bancorp Inc. 01/27/97 NASDAQ 2,592,100 33.05
GBCI Glacier Bancorp Inc. 03/30/84 NASDAQ 4,532,437 111.04
UBMT United Financial Corp. 09/23/86 NASDAQ 1,223,312 23.85
WSTR WesterFed Financial Corp. 01/10/94 NASDAQ 5,551,172 111.72
CFNC Carolina Fincorp Inc. 11/25/96 NASDAQ 1,851,500 26.85
CENB Century Bancorp Inc. 12/23/96 NASDAQ 407,330 28.31
COOP Cooperative Bankshares Inc. 08/21/91 NASDAQ 1,491,698 31.33
SOPN First Savings Bancorp Inc. 01/06/94 NASDAQ 3,696,944 72.55
GSFC Green Street Financial Corp. 04/04/96 NASDAQ 4,298,125 74.68
HFNC HFNC Financial Corp. 12/29/95 NASDAQ 17,192,500 313.76
KSAV KS Bancorp Inc. 12/30/93 NASDAQ 663,263 13.60
MBSP Mitchell Bancorp Inc. 07/12/96 NASDAQ 967,897 15.49
NSBC NewSouth Bancorp, Inc. 04/08/97 NASDAQ NA NA
PDB Piedmont Bancorp Inc. 12/08/95 AMSE 2,750,800 29.91
SSB Scotland Bancorp Inc 04/01/96 AMSE 1,840,000 28.52
SSFC South Street Financial Corp. 10/03/96 NASDAQ 4,496,500 72.51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
------------------------------------- --------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SSM Stone Street Bancorp Inc. NC 105,491 37,806 37,806 1.69 1.97 4.76 5.55
UFRM United Federal Savings Bank NC 270,180 20,532 20,532 0.22 0.47 2.81 6.03
CFB Commercial Federal Corporatio NE 6,901,835 408,641 363,640 0.64 0.91 10.78 15.29
EBCP Eastern Bancorp NH 865,818 65,728 62,390 0.38 0.59 4.95 7.69
NHTB New Hampshire Thrift Bncshrs NH 313,038 23,401 19,830 0.34 0.51 4.60 6.82
FBER 1st Bergen Bancorp NJ 252,294 41,485 41,485 0.42 0.75 2.51 4.45
COFD Collective Bancorp Inc. NJ 5,517,588 386,155 349,285 0.94 1.14 13.47 16.30
FSPG First Home Bancorp Inc. NJ 508,243 33,482 32,880 0.90 0.99 13.88 15.16
FMCO FMS Financial Corporation NJ 553,599 34,817 34,092 0.65 0.98 9.89 14.96
IBSF IBS Financial Corp. NJ 740,027 126,057 126,057 0.52 0.87 2.67 4.48
LVSB Lakeview Financial NJ 481,646 45,837 36,651 1.37 0.95 13.65 9.52
LFBI Little Falls Bancorp Inc. NJ 303,384 39,241 36,114 0.26 0.49 1.78 3.43
OCFC Ocean Financial Corp. NJ 1,387,836 247,297 247,297 -0.05 0.94 -0.28 5.61
PBCI Pamrapo Bancorp Inc. NJ 367,360 47,027 46,633 0.84 1.19 5.60 7.86
PFSB PennFed Financial Services In NJ 1,252,387 94,273 77,734 0.57 0.84 7.06 10.45
PULS Pulse Bancorp NJ 515,936 40,229 40,229 0.72 1.07 8.42 12.54
SFIN Statewide Financial Corp. NJ 677,384 63,019 62,891 0.51 0.87 5.10 8.80
WYNE Wayne Bancorp Inc. NJ 245,435 35,732 35,732 0.36 0.87 2.31 5.53
WWFC Westwood Financial Corporatio NJ 105,095 9,740 8,585 0.42 0.75 4.67 8.35
AABC Access Anytime Bancorp, Inc. NM 106,492 7,246 7,246 -0.59 -0.23 -11.75 -4.64
GUPB GFSB Bancorp Inc. NM 86,911 14,166 14,166 0.74 0.93 3.86 4.89
AFED AFSALA Bancorp Inc. NY 152,254 21,087 21,035 NA NA NA NA
ALBK ALBANK Financial Corporation NY 3,496,331 321,701 279,054 0.81 1.01 8.71 10.83
ALBC Albion Banc Corp. NY 66,316 5,905 5,905 0.09 0.38 0.93 3.90
ASFC Astoria Financial Corporation NY 7,689,409 584,392 486,235 0.52 0.77 6.53 9.62
CNY Carver Bancorp Inc. NY 423,512 34,150 32,694 -0.44 -0.03 -5.05 -0.30
FIBC Financial Bancorp Inc. NY 269,197 26,192 26,058 0.52 0.89 5.15 8.79
HAVN Haven Bancorp Inc. NY 1,727,798 100,154 99,743 0.63 0.90 10.30 14.67
LISB Long Island Bancorp Inc. NY 5,814,296 523,853 518,807 0.62 0.73 6.40 7.57
NYB New York Bancorp Inc. NY 3,174,997 160,619 160,619 1.33 1.36 24.71 25.36
PEEK Peekskill Financial Corp. NY 182,594 46,706 46,706 1.07 1.38 3.71 4.78
PKPS Poughkeepsie Savings Bank FSB NY 861,136 72,470 72,470 0.21 0.47 2.50 5.62
RELY Reliance Bancorp Inc. NY 1,926,800 154,907 108,598 0.56 0.84 6.67 10.00
SFED SFS Bancorp Inc. NY 168,841 21,933 21,933 0.46 0.82 3.52 6.23
TPNZ Tappan Zee Financial Inc. NY 121,841 21,228 21,228 0.72 1.01 3.92 5.46
YFCB Yonkers Financial Corporation NY 284,401 43,492 43,492 0.83 1.13 4.56 6.22
ASBP ASB Financial Corp. OH 109,414 17,217 17,217 0.60 0.86 3.01 4.31
CAFI Camco Financial Corp. OH 472,430 45,789 42,125 0.73 0.86 8.15 9.55
COFI Charter One Financial OH 14,040,397 951,493 885,093 0.97 1.23 14.29 18.12
CTZN CitFed Bancorp Inc. OH 2,937,269 185,987 165,668 0.55 0.79 8.43 12.14
CIBI Community Investors Bancorp OH 97,446 11,221 11,221 0.67 0.99 5.53 8.18
DCBI Delphos Citizens Bancorp Inc. OH 107,072 30,350 30,350 NA NA NA NA
EMLD Emerald Financial Corp. OH 588,634 44,174 43,419 0.70 0.89 8.86 11.25
EFBI Enterprise Federal Bancorp OH 256,704 31,646 31,611 0.71 0.79 5.12 5.69
FFDF FFD Financial Corp. OH 85,286 21,102 21,102 0.77 1.06 3.22 4.46
FFYF FFY Financial Corp. OH 598,667 84,390 84,390 0.89 1.26 5.34 7.53
FFOH Fidelity Financial of Ohio OH 513,079 67,274 59,127 0.61 0.96 3.86 6.07
FDEF First Defiance Financial OH 546,060 116,954 116,954 0.78 1.06 3.39 4.59
FFBZ First Federal Bancorp Inc. OH 191,686 14,678 14,661 0.74 1.00 9.61 13.08
FFHS First Franklin Corporation OH 226,235 19,949 19,808 0.14 0.61 1.57 6.64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
------------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SSM Stone Street Bancorp Inc. 04/01/96 AMSE 1,825,050 45.17
UFRM United Federal Savings Bank 07/01/80 NASDAQ 3,066,314 29.51
CFB Commercial Federal Corporatio 12/31/84 NYSE 21,523,481 726.42
EBCP Eastern Bancorp 11/17/83 NASDAQ 3,679,834 91.08
NHTB New Hampshire Thrift Bncshrs 05/22/86 NASDAQ 2,041,274 25.26
FBER 1st Bergen Bancorp 04/01/96 NASDAQ 3,015,300 42.21
COFD Collective Bancorp Inc. 02/07/84 NASDAQ 20,446,519 789.75
FSPG First Home Bancorp Inc. 04/20/87 NASDAQ 2,708,426 48.41
FMCO FMS Financial Corporation 12/14/88 NASDAQ 2,386,483 46.54
IBSF IBS Financial Corp. 10/13/94 NASDAQ 11,012,246 162.79
LVSB Lakeview Financial 12/22/93 NASDAQ 2,302,465 63.61
LFBI Little Falls Bancorp Inc. 01/05/96 NASDAQ 2,745,180 37.06
OCFC Ocean Financial Corp. 07/03/96 NASDAQ 9,059,124 250.83
PBCI Pamrapo Bancorp Inc. 11/14/89 NASDAQ 2,862,924 56.18
PFSB PennFed Financial Services In 07/15/94 NASDAQ 4,821,000 113.29
PULS Pulse Bancorp 09/18/86 NASDAQ 3,061,048 54.72
SFIN Statewide Financial Corp. 10/02/95 NASDAQ 4,771,486 70.38
WYNE Wayne Bancorp Inc. 06/27/96 NASDAQ 2,156,383 35.04
WWFC Westwood Financial Corporatio 06/07/96 NASDAQ 646,672 10.67
AABC Access Anytime Bancorp, Inc. 08/08/86 NASDAQ 1,142,549 7.00
GUPB GFSB Bancorp Inc. 06/30/95 NASDAQ 839,208 14.69
AFED AFSALA Bancorp Inc. 10/01/96 NASDAQ 1,454,750 19.64
ALBK ALBANK Financial Corporation 04/01/92 NASDAQ 12,818,539 466.27
ALBC Albion Banc Corp. 07/26/93 NASDAQ 250,051 4.63
ASFC Astoria Financial Corporation 11/18/93 NASDAQ 21,242,610 764.73
CNY Carver Bancorp Inc. 10/25/94 AMSE 2,314,275 22.27
FIBC Financial Bancorp Inc. 08/17/94 NASDAQ 1,747,686 29.06
HAVN Haven Bancorp Inc. 09/23/93 NASDAQ 4,329,624 139.09
LISB Long Island Bancorp Inc. 04/18/94 NASDAQ 24,228,267 801.06
NYB New York Bancorp Inc. 01/28/88 NYSE 16,380,511 475.03
PEEK Peekskill Financial Corp. 12/29/95 NASDAQ 3,203,121 44.44
PKPS Poughkeepsie Savings Bank FSB 11/19/85 NASDAQ 12,594,725 75.57
RELY Reliance Bancorp Inc. 03/31/94 NASDAQ 8,822,769 208.44
SFED SFS Bancorp Inc. 06/30/95 NASDAQ 1,270,997 20.65
TPNZ Tappan Zee Financial Inc. 10/05/95 NASDAQ 1,534,062 21.86
YFCB Yonkers Financial Corporation 04/18/96 NASDAQ 3,179,750 48.49
ASBP ASB Financial Corp. 05/11/95 NASDAQ 1,721,412 19.80
CAFI Camco Financial Corp. NA NASDAQ 3,061,520 55.11
COFI Charter One Financial 01/22/88 NASDAQ 46,338,721 2,033.11
CTZN CitFed Bancorp Inc. 01/23/92 NASDAQ 8,613,086 302.53
CIBI Community Investors Bancorp 02/07/95 NASDAQ 632,946 10.92
DCBI Delphos Citizens Bancorp Inc. 11/21/96 NASDAQ 2,038,719 27.01
EMLD Emerald Financial Corp. NA NASDAQ 5,061,600 58.21
EFBI Enterprise Federal Bancorp 10/17/94 NASDAQ 2,010,828 31.92
FFDF FFD Financial Corp. 04/03/96 NASDAQ 1,454,750 20.37
FFYF FFY Financial Corp. 06/28/93 NASDAQ 4,328,219 110.37
FFOH Fidelity Financial of Ohio 03/04/96 NASDAQ 5,593,969 72.72
FDEF First Defiance Financial 10/02/95 NASDAQ 9,423,354 129.57
FFBZ First Federal Bancorp Inc. 07/13/92 NASDAQ 1,571,716 29.08
FFHS First Franklin Corporation 01/26/88 NASDAQ 1,178,343 21.80
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
------------------------------------- --------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFSW FirstFederal Financial Svcs OH 1,088,132 87,906 77,673 1.02 0.84 13.05 10.76
GFCO Glenway Financial Corp. OH 280,813 26,841 26,421 0.38 0.68 3.97 7.14
HHFC Harvest Home Financial Corp. OH 83,103 10,386 10,386 0.27 0.55 1.89 3.91
HVFD Haverfield Corporation OH 341,664 28,675 28,675 0.49 0.91 5.80 10.69
HCFC Home City Financial Corp. OH 68,235 14,061 14,061 NA NA NA NA
INBI Industrial Bancorp OH 333,846 61,729 61,729 0.73 1.27 3.84 6.69
LONF London Financial Corporation OH 37,937 7,537 7,537 0.74 1.08 3.51 5.10
MRKF Market Financial Corporation OH 56,343 19,493 19,493 NA NA NA NA
METF Metropolitan Financial Corp. OH 807,054 30,780 27,596 NA NA NA NA
MFFC Milton Federal Financial Corp OH 178,757 26,349 26,349 0.53 0.72 3.04 4.14
OHSL OHSL Financial Corp. OH 229,812 25,369 25,369 0.60 0.86 5.10 7.28
PFFC Peoples Financial Corp. OH 89,687 24,128 24,128 0.48 0.80 2.16 3.64
PSFC Peoples-Sidney Financial Corp OH 93,734 9,516 9,516 NA NA NA NA
PTRS Potters Financial Corp. OH 116,921 10,411 10,411 0.31 0.68 3.47 7.54
PVFC PVF Capital Corp. OH 356,251 25,019 25,019 1.05 1.38 15.56 20.48
SFSL Security First Corp. OH 634,761 59,435 58,407 1.07 1.35 10.96 13.81
SBCN Suburban Bancorporation Inc. OH 221,926 25,895 25,895 0.50 0.72 4.10 5.94
WOFC Western Ohio Financial Corp. OH 400,059 53,659 50,573 0.31 0.43 2.04 2.89
WEHO Westwood Homestead Fin. Corp. OH 129,956 40,224 40,224 0.55 0.83 2.25 3.39
WFCO Winton Financial Corp. OH 307,174 21,962 21,469 0.72 0.88 9.77 12.04
FFWD Wood Bancorp Inc. OH 163,498 20,763 20,763 1.00 1.23 7.51 9.24
KFBI Klamath First Bancorp OR 683,830 139,752 139,752 0.89 1.29 3.75 5.42
WFSG Wilshire Financial Services OR 1,098,088 64,206 NA NA NA NA NA
CVAL Chester Valley Bancorp Inc. PA 305,187 26,131 26,131 0.63 0.92 7.01 10.26
CMSB Commonwealth Bancorp Inc. PA 2,236,008 213,930 164,274 0.57 0.71 5.44 6.77
FSBI Fidelity Bancorp Inc. PA 327,896 22,823 22,823 0.53 0.84 7.57 12.04
FBBC First Bell Bancorp Inc. PA 709,011 72,295 72,295 1.19 1.40 7.19 8.44
FKFS First Keystone Financial PA 314,637 22,251 22,251 0.52 0.77 6.79 10.01
SHEN First Shenango Bancorp Inc. PA 400,915 42,900 42,900 0.84 1.12 7.02 9.37
GAF GA Financial Inc. PA 670,342 115,723 115,723 1.08 1.19 5.13 5.64
HARL Harleysville Savings Bank PA 332,558 21,160 21,160 0.69 0.98 10.72 15.27
LARL Laurel Capital Group Inc. PA 208,577 21,736 21,736 1.12 1.43 10.56 13.48
MLBC ML Bancorp Inc. PA 1,959,847 135,704 NA 0.74 0.65 9.73 8.57
PVSA Parkvale Financial Corporatio PA 972,597 72,710 72,106 0.71 1.06 9.85 14.68
PBIX Patriot Bank Corp. PA 594,055 48,042 48,042 0.45 0.63 4.21 5.80
PWBC PennFirst Bancorp Inc. PA 706,237 49,946 45,563 0.42 0.64 5.83 8.73
PWBK Pennwood Bancorp Inc. PA 47,929 9,334 9,334 0.61 0.96 3.52 5.53
PHFC Pittsburgh Home Financial Cor PA 236,998 27,182 26,863 0.58 0.81 4.34 6.11
PRBC Prestige Bancorp Inc. PA 126,833 14,821 14,821 0.27 0.57 2.09 4.43
PFNC Progress Financial Corporatio PA 400,366 20,857 18,271 0.45 0.55 8.48 10.45
SVRN Sovereign Bancorp Inc. PA 10,286,606 512,498 401,703 0.48 0.74 9.48 14.59
THRD TF Financial Corporation PA 644,368 69,863 60,876 0.54 0.75 4.47 6.23
WVFC WVS Financial Corporation PA 279,894 35,612 35,612 1.06 1.32 8.18 10.14
YFED York Financial Corp. PA 1,157,356 97,558 97,558 0.59 0.76 7.24 9.30
AMFB American Federal Bank FSB SC 1,306,915 117,473 109,551 1.11 1.36 13.28 16.35
CFCP Coastal Financial Corp. SC 484,610 29,536 29,536 0.91 0.99 14.76 16.15
FFCH First Financial Holdings Inc. SC 1,602,018 98,518 98,518 0.55 0.83 8.83 13.37
FSFC First Southeast Financial Cor SC 334,751 34,239 34,239 0.01 0.90 0.09 7.30
PALM Palfed, Inc. SC 655,707 53,161 53,161 0.06 0.56 0.70 6.94
SCCB S. Carolina Community Bancshr SC 46,412 12,048 12,048 0.82 1.10 3.01 4.03
HFFC HF Financial Corp. SD 561,287 51,602 51,471 0.59 0.81 6.43 8.80
TWIN Twin City Bancorp TN 104,488 13,499 13,499 0.57 0.79 4.42 6.08
BNKU Bank United Corp. TX 11,002,625 568,897 556,380 1.16 1.14 19.58 19.19
CBSA Coastal Bancorp Inc. TX 2,852,767 97,603 82,444 0.26 0.41 7.90 12.27
ETFS East Texas Financial Services TX 111,689 21,250 21,250 0.33 0.64 1.73 3.42
FBHC Fort Bend Holding Corp. TX 295,080 18,428 17,080 0.29 0.51 4.31 7.64
JXVL Jacksonville Bancorp Inc. TX 218,349 34,127 34,127 0.88 1.20 5.43 7.41
BFSB Bedford Bancshares Inc. VA 131,506 18,835 18,835 1.05 1.33 7.11 9.05
CNIT CENIT Bancorp Inc. VA 706,797 50,149 45,861 0.51 0.70 7.13 9.75
CFFC Community Financial Corp. VA 166,664 22,958 22,958 1.04 1.31 7.50 9.44
ESX Essex Bancorp Inc. VA 179,930 15,125 14,919 -3.47 -1.76 -61.15 -31.06
FFFC FFVA Financial Corp. VA 549,771 71,342 69,764 1.08 1.33 7.31 9.00
GSLC Guaranty Financial Corp. VA 123,526 10,786 10,786 0.38 0.43 6.21 7.02
LIFB Life Bancorp Inc. VA 1,407,861 151,799 147,147 0.70 0.86 6.32 7.73
VABF Virginia Beach Fed. Financial VA 607,370 41,210 41,210 0.15 0.40 2.26 5.94
VFFC Virginia First Financial Corp VA 817,313 65,891 63,605 1.38 0.68 16.99 8.41
CASB Cascade Financial Corp. WA 352,321 21,754 21,754 0.46 0.58 7.47 9.43
FWWB First SB of Washington Bancor WA 977,075 147,866 135,853 1.05 1.19 5.71 6.48
IWBK InterWest Bancorp Inc. WA 1,771,523 118,792 116,053 0.82 1.11 12.21 16.43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
------------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FFSW FirstFederal Financial Svcs 03/31/86 NASDAQ 3,670,767 132.61
GFCO Glenway Financial Corp. 11/30/90 NASDAQ 1,143,769 25.88
HHFC Harvest Home Financial Corp. 10/10/94 NASDAQ 934,857 10.75
HVFD Haverfield Corporation 03/19/85 NASDAQ 1,906,349 43.37
HCFC Home City Financial Corp. 12/30/96 NASDAQ 952,200 12.85
INBI Industrial Bancorp 08/01/95 NASDAQ 5,410,000 68.30
LONF London Financial Corporation 04/01/96 NASDAQ 515,160 9.02
MRKF Market Financial Corporation 03/27/97 NASDAQ 1,335,725 16.86
METF Metropolitan Financial Corp. NA NASDAQ 3,525,635 38.78
MFFC Milton Federal Financial Corp 10/07/94 NASDAQ 2,327,436 31.71
OHSL OHSL Financial Corp. 02/10/93 NASDAQ 1,207,932 28.69
PFFC Peoples Financial Corp. 09/13/96 NASDAQ 1,491,012 22.74
PSFC Peoples-Sidney Financial Corp 04/28/97 NASDAQ NA NA
PTRS Potters Financial Corp. 12/31/93 NASDAQ 486,830 9.74
PVFC PVF Capital Corp. 12/30/92 NASDAQ 2,323,338 38.92
SFSL Security First Corp. 01/22/88 NASDAQ 5,003,099 94.43
SBCN Suburban Bancorporation Inc. 09/30/93 NASDAQ 1,474,932 25.81
WOFC Western Ohio Financial Corp. 07/29/94 NASDAQ 2,312,088 49.71
WEHO Westwood Homestead Fin. Corp. 09/30/96 NASDAQ 2,843,375 38.74
WFCO Winton Financial Corp. 08/04/88 NASDAQ 1,986,153 24.86
FFWD Wood Bancorp Inc. 08/31/93 NASDAQ 1,492,636 24.26
KFBI Klamath First Bancorp 10/05/95 NASDAQ 9,961,898 175.58
WFSG Wilshire Financial Services 12/19/96 NASDAQ 7,570,000 109.77
CVAL Chester Valley Bancorp Inc. 03/27/87 NASDAQ 2,054,310 35.44
CMSB Commonwealth Bancorp Inc. 06/17/96 NASDAQ 17,110,825 258.80
FSBI Fidelity Bancorp Inc. 06/24/88 NASDAQ 1,540,653 30.99
FBBC First Bell Bancorp Inc. 06/29/95 NASDAQ 6,802,750 108.84
FKFS First Keystone Financial 01/26/95 NASDAQ 1,227,875 26.71
SHEN First Shenango Bancorp Inc. 04/06/93 NASDAQ 2,063,010 45.90
GAF GA Financial Inc. 03/26/96 AMSE 8,407,650 125.06
HARL Harleysville Savings Bank 08/04/87 NASDAQ 1,651,140 33.85
LARL Laurel Capital Group Inc. 02/20/87 NASDAQ 1,498,302 31.46
MLBC ML Bancorp Inc. 08/11/94 NASDAQ 10,415,278 160.13
PVSA Parkvale Financial Corporatio 07/16/87 NASDAQ 4,060,363 110.64
PBIX Patriot Bank Corp. 12/04/95 NASDAQ 4,266,146 60.79
PWBC PennFirst Bancorp Inc. 06/13/90 NASDAQ 3,911,030 53.78
PWBK Pennwood Bancorp Inc. 07/15/96 NASDAQ 610,128 8.62
PHFC Pittsburgh Home Financial Cor 04/01/96 NASDAQ 1,983,019 29.50
PRBC Prestige Bancorp Inc. 06/27/96 NASDAQ 919,873 14.72
PFNC Progress Financial Corporatio 07/17/83 NASDAQ 3,814,180 33.37
SVRN Sovereign Bancorp Inc. 08/12/86 NASDAQ 69,831,757 837.98
THRD TF Financial Corporation 07/13/94 NASDAQ 4,087,386 72.55
WVFC WVS Financial Corporation 11/29/93 NASDAQ 1,737,250 44.73
YFED York Financial Corp. 02/01/84 NASDAQ 6,971,191 128.10
AMFB American Federal Bank FSB 01/19/89 NASDAQ 11,034,585 297.93
CFCP Coastal Financial Corp. 09/26/90 NASDAQ 3,477,522 76.51
FFCH First Financial Holdings Inc. 11/10/83 NASDAQ 6,326,275 154.99
FSFC First Southeast Financial Cor 10/08/93 NASDAQ 4,388,000 44.43
PALM Palfed, Inc. 12/15/85 NASDAQ 5,278,237 85.77
SCCB S. Carolina Community Bancshr 07/07/94 NASDAQ 704,233 13.38
HFFC HF Financial Corp. 04/08/92 NASDAQ 2,997,831 58.65
TWIN Twin City Bancorp 01/04/95 NASDAQ 853,484 16.22
BNKU Bank United Corp. 08/09/96 NASDAQ 31,595,596 932.07
CBSA Coastal Bancorp Inc. NA NASDAQ 4,968,591 127.94
ETFS East Texas Financial Services 01/10/95 NASDAQ 1,079,285 19.16
FBHC Fort Bend Holding Corp. 06/30/93 NASDAQ 822,301 20.35
JXVL Jacksonville Bancorp Inc. 04/01/96 NASDAQ 2,571,968 38.26
BFSB Bedford Bancshares Inc. 08/22/94 NASDAQ 1,142,425 21.99
CNIT CENIT Bancorp Inc. 08/06/92 NASDAQ 1,639,989 71.75
CFFC Community Financial Corp. 03/30/88 NASDAQ 1,272,348 26.40
ESX Essex Bancorp Inc. 07/18/90 AMSE 1,054,736 1.71
FFFC FFVA Financial Corp. 10/12/94 NASDAQ 4,520,552 94.93
GSLC Guaranty Financial Corp. NA NASDAQ 1,499,008 16.49
LIFB Life Bancorp Inc. 10/11/94 NASDAQ 9,846,840 164.93
VABF Virginia Beach Fed. Financial 11/01/80 NASDAQ 4,972,022 51.58
VFFC Virginia First Financial Corp 01/01/78 NASDAQ 5,804,661 85.62
CASB Cascade Financial Corp. 09/16/92 NASDAQ 2,054,352 34.92
FWWB First SB of Washington Bancor 11/05/95 NASDAQ 10,569,082 194.21
IWBK InterWest Bancorp Inc. NA NASDAQ 8,018,431 258.59
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
------------------------------------- --------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STSA Sterling Financial Corp. WA 1,557,216 86,835 77,389 0.19 0.43 3.33 7.62
WFSL Washington Federal Inc. WA 5,788,992 668,802 602,502 1.65 1.83 14.26 15.76
AADV Advantage Bancorp Inc. WI 1,021,439 90,246 83,602 0.35 0.86 3.81 9.33
ABCW Anchor BanCorp Wisconsin WI 1,884,983 117,887 115,568 0.76 0.98 11.78 15.31
FCBF FCB Financial Corp. WI 268,528 47,008 47,008 0.91 1.09 5.09 6.09
FTFC First Federal Capital Corp. WI 1,530,237 97,258 91,151 0.74 0.86 11.29 13.11
FFHC First Financial Corp. WI 5,808,506 405,696 393,829 0.93 1.26 12.76 17.30
FNGB First Northern Capital Corp. WI 617,899 71,117 71,117 0.60 0.88 5.07 7.48
HALL Hallmark Capital Corp. WI 409,287 28,606 28,606 0.45 0.59 6.32 8.28
MWFD Midwest Federal Financial WI 201,070 17,318 16,642 1.09 1.09 12.37 12.42
NWEQ Northwest Equity Corp. WI 96,518 11,827 11,827 0.76 0.97 5.88 7.47
RELI Reliance Bancshares Inc. WI 46,836 22,474 NA 1.76 1.88 3.09 3.30
SECP Security Capital Corporation WI 3,646,981 578,156 578,156 1.16 1.38 7.17 8.56
STFR St. Francis Capital Corp. WI 1,578,969 127,852 112,495 0.60 0.70 6.44 7.59
AFBC Advance Financial Bancorp WV 103,578 15,998 15,998 0.37 0.66 3.65 6.49
FOBC Fed One Bancorp WV 346,214 40,196 38,295 0.69 0.98 5.81 8.25
CRZY Crazy Woman Creek Bancorp WY 52,042 14,490 14,490 1.00 1.25 3.36 4.20
TRIC Tri-County Bancorp Inc. WY 85,975 13,167 13,167 0.77 0.99 5.16 6.66
</TABLE>
<TABLE>
<CAPTION>
CAPITAL ISSUES
------------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STSA Sterling Financial Corp. NA NASDAQ 5,543,007 94.92
WFSL Washington Federal Inc. 11/17/82 NASDAQ 47,444,480 1,079.36
AADV Advantage Bancorp Inc. 03/23/92 NASDAQ 3,231,583 130.07
ABCW Anchor BanCorp Wisconsin 07/16/92 NASDAQ 4,581,347 202.72
FCBF FCB Financial Corp. 09/24/93 NASDAQ 2,459,614 45.50
FTFC First Federal Capital Corp. 11/02/89 NASDAQ 6,089,044 170.49
FFHC First Financial Corp. 12/24/80 NASDAQ 36,411,443 951.25
FNGB First Northern Capital Corp. 12/29/83 NASDAQ 4,419,335 83.97
HALL Hallmark Capital Corp. 01/03/94 NASDAQ 1,442,950 25.97
MWFD Midwest Federal Financial 07/08/92 NASDAQ 1,624,874 28.64
NWEQ Northwest Equity Corp. 10/11/94 NASDAQ 929,267 11.27
RELI Reliance Bancshares Inc. 04/19/96 NASDAQ 2,528,499 18.33
SECP Security Capital Corporation 01/03/94 NASDAQ 9,202,932 791.45
STFR St. Francis Capital Corp. 06/21/93 NASDAQ 5,386,193 158.89
AFBC Advance Financial Bancorp 01/02/97 NASDAQ 1,084,450 15.18
FOBC Fed One Bancorp 01/19/95 NASDAQ 2,442,595 43.97
CRZY Crazy Woman Creek Bancorp 03/29/96 NASDAQ 1,005,100 13.82
TRIC Tri-County Bancorp Inc. 09/30/93 NASDAQ 608,749 11.26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALL THRIFTS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE 1,291,109 97,439 90,890 0.53 0.78 5.16 7.48 5,879,471 149.21
MEDIAN 313,838 35,858 35,612 0.60 0.86 5.08 7.09 2,459,614 42.18
HIGH 48,697,126 2,585,070 2,413,892 2.04 2.03 29.42 29.42 ########## 5,584.36
LOW 33,894 4,492 4,329 -25.70 -25.34 -62.95 -62.07 230,171 1.71
AVERAGE FOR STATE
IN 305,833 31,720 31,318 0.64 0.85 5.27 6.91 2,133,731 40.42
AVERAGE BY REGION
MIDWEST 787,478 73,001 68,739 0.63 0.86 5.34 7.28 4,475,100 106.65
NEW ENGLAND 931,369 90,953 90,029 0.66 0.81 5.86 7.29 6,980,608 119.90
MID ATLANTIC 613,840 58,711 55,421 0.61 0.92 5.51 8.14 3,784,249 84.83
SOUTHEAST 1,117,294 78,750 67,754 0.27 0.51 5.46 7.91 6,631,725 129.51
SOUTHWEST 575,899 53,761 45,059 0.69 0.90 5.53 7.30 3,594,039 62.57
WEST 5,041,454 303,302 284,509 0.37 0.65 2.92 6.47 14,248,839 490.93
AVERAGE BY EXCHANGE
NYSE 17,739,264 1,030,495 960,769 0.57 0.74 9.12 12.55 46,580,986 1,707.02
AMEX 291,285 34,387 34,007 0.38 0.76 0.02 3.52 2,454,866 35.71
OTC/NASDAQ 812,681 70,718 65,432 0.54 0.78 5.37 7.56 4,724,243 103.87
</TABLE>
<PAGE>
EXHIBIT 32
KELLER & COMPANY
Columbus, Ohio
614-766-1426
RECENTLY CONVERTED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS
<TABLE>
<CAPTION>
IPO CLOSING RATIOS CURRENT RATIOS
----------------------------------------- --------------------------------
Price/ Price/ Price/ Price/
Price/ Book Tang. Bk.Price/ Price/ Book Tang. Bk.Price/
IPO Earnings Value Value Assets Earnings Value Value Assets
Date (X) (%) (%) (%) (X) (%) (%) (%)
---------------------------------- -------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLKY First Lancaster Bancshares KY 07/01/96 18.50 74.70 74.67 21.30 23.83 105.61 105.61 36.15
EGLB Eagle BancGroup Inc. IL 07/01/96 100.10 58.40 58.45 7.90 37.97 93.29 93.29 11.29
HWEN Home Financial Bancorp IN 07/02/96 11.40 68.00 68.04 13.10 22.79 102.51 102.51 19.10
OCFC Ocean Financial Corp. NJ 07/03/96 13.40 71.20 71.18 13.90 19.27 118.59 118.59 21.13
MBSP Mitchell Bancorp Inc. NC 07/12/96 NA 70.00 70.04 25.80 24.45 109.59 109.59 47.47
PWBK Pennwood Bancorp Inc. PA 07/15/96 14.50 67.50 67.54 12.80 17.05 98.04 98.04 19.09
ANA Acadiana Bancshares Inc. LA 07/16/96 NA 71.90 71.93 12.70 15.12 112.28 112.28 19.57
BNKU Bank United Corp. TX 08/09/96 NA NA NA NA 11.29 175.60 179.59 9.08
PFED Park Bancorp Inc. IL 08/12/96 26.20 66.70 66.66 14.50 19.41 92.94 92.94 20.15
PFFC Peoples Financial Corp. OH 09/13/96 28.60 64.30 64.30 16.00 26.79 92.71 92.71 24.94
HBEI Home Bancorp of Elgin Inc. IL 09/27/96 24.90 72.60 72.64 18.70 28.57 111.19 111.19 31.27
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 NA 73.80 73.83 22.70 23.21 91.87 91.87 28.45
CBES CBES Bancorp Inc. MO 09/30/96 13.20 61.10 61.06 10.60 15.28 96.60 96.60 17.76
AFED AFSALA Bancorp Inc. NY 10/01/96 13.70 71.70 71.73 9.90 16.52 88.60 88.83 13.26
SSFC South Street Financial Corp. NC 10/03/96 26.10 76.30 76.32 21.20 23.90 111.00 111.00 30.60
CNBA Chester Bancorp Inc. IL 10/08/96 18.80 72.10 72.10 13.90 20.31 100.86 100.86 22.40
FTNB Fulton Bancorp Inc. MO 10/18/96 14.60 72.50 72.53 16.70 34.60 133.90 133.90 33.49
DCBI Delphos Citizens Bancorp Inc. OH 11/21/96 14.60 72.20 72.23 18.80 12.85 93.18 93.18 26.42
CFNC Carolina Fincorp Inc. NC 11/25/96 17.20 77.00 76.98 16.40 19.97 103.34 103.34 24.49
PSFI PS Financial Inc. IL 11/27/96 17.20 71.90 71.93 29.00 17.50 94.09 94.09 40.67
WFSG Wilshire Financial Services OR 12/19/96 NA NA NA NA 8.81 162.15 NA 9.48
RIVR River Valley Bancorp IN 12/20/96 15.20 73.00 72.96 12.10 11.49 99.16 100.71 12.26
BFFC Big Foot Financial Corp. IL 12/20/96 33.10 72.70 72.67 11.40 NA 109.42 109.42 18.69
SCBS Southern Community Bancshares AL 12/23/96 14.50 74.40 74.39 15.00 17.66 104.32 104.32 22.92
CENB Century Bancorp Inc. NC 12/23/96 18.90 72.10 72.11 20.00 14.58 92.92 92.92 27.82
HCFC Home City Financial Corp. OH 12/30/96 13.70 71.20 71.20 14.60 16.56 82.55 82.55 18.49
AFBC Advance Financial Bancorp WV 01/02/97 16.80 71.10 71.09 10.60 NA 94.92 94.92 14.66
RSLN Roslyn Bancorp Inc. NY 01/13/97 9.30 72.00 71.98 21.00 NA 121.63 122.23 26.23
FAB FirstFed America Bancorp Inc. MA 01/15/97 13.60 72.00 72.02 10.70 NA NA NA NA
EFBC Empire Federal Bancorp Inc. MT 01/27/97 21.50 68.10 68.09 23.00 NA 85.50 85.50 31.52
MRKF Market Financial Corporation OH 03/27/97 26.20 71.10 71.07 22.70 NA 84.82 84.82 29.34
GSLA GS Financial Corp. LA 04/01/97 38.70 63.80 63.75 28.40 NA NA NA NA
HMLK Hemlock Federal Financial Corp IL 04/02/97 37.50 71.60 71.62 12.40 NA NA NA NA
PLSK Pulaski Savings Bank, MHC NJ 04/03/97 18.20 103.20 103.15 5.70 NA NA NA NA
SKBO First Carnegie Deposit, MHC PA 04/04/97 117.30 98.80 98.80 7.10 NA NA NA NA
NSBC NewSouth Bancorp, Inc. NC 04/08/97 22.10 78.70 78.65 18.40 NA NA NA NA
PSFC Peoples-Sidney Financial Corp. OH 04/28/97 11.50 71.20 71.24 17.00 NA NA NA NA
HCBB HCB Bancshares Inc. AR 05/07/97 29.00 72.00 71.95 13.40 NA NA NA NA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRICES AND CHANGE FROM IPO DATE
-------------------------------------------------------
1 Day 1 Week 1 Mo.
IPO After After After
Price IPO % IPO % IPO %
($) ($) Change ($) Change ($) Change
--------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FLKY First Lancaster Bancshares 10.00 13.50 35.00 13.38 33.75 13.75 37.50
EGLB Eagle BancGroup Inc. 10.00 11.25 12.50 11.25 12.50 11.13 11.25
HWEN Home Financial Bancorp 10.00 10.25 2.50 9.88 (1.25) 10.50 5.00
OCFC Ocean Financial Corp. 20.00 21.25 6.25 20.13 0.63 21.00 5.00
MBSP Mitchell Bancorp Inc. 10.00 NA NA 10.63 6.25 11.00 10.00
PWBK Pennwood Bancorp Inc. 10.00 9.50 (5.00) 9.13 (8.75) 9.63 (3.75)
ANA Acadiana Bancshares Inc. 12.00 12.00 0.00 11.75 (2.08) 12.38 3.13
BNKU Bank United Corp. NA 22.88 NA 24.00 NA 24.13 NA
PFED Park Bancorp Inc. 10.00 10.25 2.50 10.44 4.38 10.50 5.00
PFFC Peoples Financial Corp. 10.00 10.88 8.75 11.50 15.00 12.75 27.50
HBEI Home Bancorp of Elgin Inc. 10.00 11.81 18.13 12.50 25.00 12.63 26.25
WEHO Westwood Homestead Fin. Corp. 10.00 10.75 7.50 10.63 6.25 10.50 5.00
CBES CBES Bancorp Inc. 10.00 12.63 26.25 13.44 34.38 13.25 32.50
AFED AFSALA Bancorp Inc. 10.00 11.38 13.75 11.31 13.13 11.56 15.63
SSFC South Street Financial Corp. 10.00 NA NA 12.50 25.00 12.38 23.75
CNBA Chester Bancorp Inc. 10.00 12.94 29.38 12.63 26.25 12.63 26.25
FTNB Fulton Bancorp Inc. 10.00 12.50 25.00 12.88 28.75 14.75 47.50
DCBI Delphos Citizens Bancorp Inc. 10.00 12.13 21.25 12.13 21.25 12.06 20.63
CFNC Carolina Fincorp Inc. 10.00 13.00 30.00 13.00 30.00 13.63 36.25
PSFI PS Financial Inc. 10.00 11.64 16.41 11.69 16.88 12.50 25.00
WFSG Wilshire Financial Services NA 14.25 NA 14.75 NA 16.63 NA
RIVR River Valley Bancorp 10.00 13.69 36.88 13.88 38.75 15.00 50.00
BFFC Big Foot Financial Corp. 10.00 12.31 23.13 12.50 25.00 13.88 38.75
SCBS Southern Community Bancshares 10.00 13.00 30.00 13.75 37.50 13.50 35.00
CENB Century Bancorp Inc. 50.00 62.63 25.25 66.00 32.00 65.13 30.25
HCFC Home City Financial Corp. 10.00 NA NA 12.50 25.00 13.50 35.00
AFBC Advance Financial Bancorp 10.00 12.88 28.75 12.94 29.38 14.00 40.00
RSLN Roslyn Bancorp Inc. 10.00 15.00 50.00 15.94 59.38 16.00 60.00
FAB FirstFed America Bancorp Inc. 10.00 13.63 36.25 14.13 41.25 14.88 48.75
EFBC Empire Federal Bancorp Inc. 10.00 13.25 32.50 13.50 35.00 13.75 37.50
MRKF Market Financial Corporation 10.00 12.94 29.38 12.25 22.50 12.63 26.25
GSLA GS Financial Corp. 10.00 13.38 33.75 13.75 37.50 14.00 40.00
HMLK Hemlock Federal Financial Corp 10.00 12.88 28.75 12.88 28.75 13.00 30.00
PLSK Pulaski Savings Bank, MHC 10.00 11.50 15.00 12.00 20.00 11.86 18.59
SKBO First Carnegie Deposit, MHC 10.00 11.63 16.25 13.00 30.00 12.88 28.75
NSBC NewSouth Bancorp, Inc. 15.00 20.25 35.00 22.00 46.67 23.88 59.17
PSFC Peoples-Sidney Financial Corp. 10.00 12.56 25.63 12.88 28.75 NA NA
HCBB HCB Bancshares Inc. 10.00 12.63 26.25 12.75 27.50 NA NA
</TABLE>
<PAGE>
EXHIBIT 33
KELLER & COMPANY
Columbus, Ohio
614-766-1426
ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF CITIZENS SAVINGS BANK OF FRANKFORT
NONE
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF MAY 22, 1997
<TABLE>
<CAPTION>
PER SHARE
* *
Latest All Time All Time Monthly Quarterly Book 12 Month
Price High Low Change Change Value Assets Div.
State Exchange ($) ($) ($) (%) (%) ($) ($) ($)
----- -------- ----- -------- ----------- ------- --------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR NASDAQ 17.875 20.000 9.500 0.70 -3.38 14.61 229.15 0.85
CMSV Community Savings, MHC FL NASDAQ 21.813 22.300 10.000 9.75 14.81 15.57 138.66 0.83
FFFL Fidelity Bankshares Inc., MHC FL NASDAQ 18.750 20.000 9.091 -1.96 2.74 12.08 137.00 0.75
HARB Harbor Federal Savings Bk, MH FL NASDAQ 36.000 38.500 11.875 2.86 1.41 18.30 222.69 1.25
FFSX First Fed SB of Siouxland, MH IA NASDAQ 24.000 35.000 8.239 10.77 19.01 13.32 163.71 0.43
WCFB Webster City Federal SB, MHC IA NASDAQ 14.500 14.750 8.813 -0.85 5.45 10.45 44.36 0.80
JXSB Jacksonville Savings Bank, MH IL NASDAQ 17.000 18.000 10.000 6.25 4.62 13.17 112.01 0.40
LFED Leeds Federal Savings Bk, MHC MD NASDAQ 18.250 19.000 9.875 -1.35 -3.95 13.21 81.60 0.69
GFED Guaranty Federal SB, MHC MO NASDAQ 17.000 17.000 8.000 21.43 41.67 8.68 62.73 0.34
PULB Pulaski Bank, Savings Bk, MHC MO NASDAQ 17.375 20.000 10.500 -11.46 3.73 11.04 84.92 0.95
FSLA First Savings Bank, MHC NJ NASDAQ 24.250 24.250 5.072 14.12 14.12 13.00 141.39 0.37
FSNJ First Savings Bk of NJ, MHC NJ NASDAQ 23.500 24.500 10.750 -1.05 -1.05 16.18 188.82 0.50
PLSK Pulaski Savings Bank, MHC NJ NASDAQ 13.125 13.500 11.500 12.90 NA NA NA NA
SBFL SB of the Finger Lakes, MHC NY NASDAQ 16.2500 17.000 8.125 7.44 16.07 11.27 119.23 0.40
WAYN Wayne Savings & Loan Co. MHC OH NASDAQ 25.500 27.250 11.255 -5.56 -4.67 15.22 166.84 0.89
SKBO First Carnegie Deposit, MHC PA NASDAQ 13.000 13.500 11.625 -1.89 NA NA NA NA
GDVS Greater Delaware Valley SB,MH PA NASDAQ 12.875 14.000 9.250 1.98 17.05 8.37 72.94 0.36
HARS Harris Savings Bank, MHC PA NASDAQ 20.406 22.625 12.750 -0.46 -6.72 13.71 173.18 0.58
NWSB Northwest Savings Bank, MHC PA NASDAQ 15.000 15.750 7.375 0.84 -4.00 8.30 85.45 0.32
PERT Perpetual Bank, MHC SC NASDAQ 26.500 27.750 20.250 3.92 1.92 19.69 148.21 1.20
RVSB Riverview Savings Bank, MHC WA NASDAQ 22.625 24.000 8.828 2.84 36.37 10.10 92.94 0.20
</TABLE>
PRICING RATIOS
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
(X) (%) (%) (X)
------- -------- ------ ---------
PFSL Pocahontas FS&LA, MHC 13.86 122.35 7.80 12.00
CMSV Community Savings, MHC 26.60 140.10 15.73 17.45
FFFL Fidelity Bankshares Inc., MHC 38.27 155.22 13.69 23.73
HARB Harbor Federal Savings Bk, MHC 18.65 196.72 16.17 14.17
FFSX First Fed SB of Siouxland, MHC 35.82 180.18 14.66 20.34
WCFB Webster City Federal SB, MHC 30.85 138.76 32.69 NA
JXSB Jacksonville Savings Bank, MHC 62.96 129.08 15.18 28.33
LFED Leeds Federal Savings Bk, MHC 28.52 138.15 22.37 20.51
GFED Guaranty Federal SB, MHC 56.67 195.85 27.10 34.69
PULB Pulaski Bank, Savings Bk, MHC 36.20 157.38 20.46 24.82
FSLA First Savings Bank, MHC 35.66 186.54 17.15 20.21
FSNJ First Savings Bk of NJ, MHC NM 145.24 12.45 52.22
PLSK Pulaski Savings Bank, MHC NA NA NA NA
SBFL SB of the Finger Lakes, MHC 203.13 144.19 13.63 116.07
WAYN Wayne Savings & Loan Co. MHC 54.26 167.54 15.28 23.61
SKBO First Carnegie Deposit, MHC NA NA NA NA
GDVS Greater Delaware Valley SB,MHC NM 153.82 17.65 53.65
HARS Harris Savings Bank, MHC 55.15 148.84 11.78 22.18
NWSB Northwest Savings Bank, MHC 26.32 180.72 17.55 17.86
PERT Perpetual Bank, MHC 26.24 134.59 17.88 19.49
RVSB Riverview Savings Bank, MHC 26.01 224.01 24.34 21.97
<TABLE>
<CAPTION>
ALL MUTUAL HOLDING COMPANIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE 19.790 21.369 10.127 3.39 8.17 12.96 129.78 0.64 45.60 159.96 17.56 30.18
MEDIAN 18.250 20.000 9.875 1.98 3.73 13.17 137.00 0.58 35.66 153.82 16.17 22.08
HIGH 36.000 38.500 20.250 21.43 41.67 19.69 229.15 1.25 203.13 224.01 32.69 116.07
LOW 12.875 13.500 5.072 -11.46 -6.72 8.30 44.36 0.20 13.86 122.35 7.80 12.00
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF MAY 22, 1997
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- -------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------- ----- ------------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR 373,262 23,796 23,796 0.58 0.67 9.54 11.02
CMSV Community Savings, MHC FL 682,314 76,604 76,604 0.64 0.96 5.44 8.19
FFFL Fidelity Bankshares Inc., MHC FL 926,891 81,755 81,076 0.39 0.61 4.04 6.43
HARB Harbor Federal Savings Bk, MH FL 1,104,924 90,783 87,377 0.93 1.21 11.15 14.59
FFSX First Fed SB of Siouxland, MH IA 462,829 37,650 37,316 0.43 0.73 5.19 8.87
WCFB Webster City Federal SB, MHC IA 93,160 21,943 21,943 1.01 1.34 4.44 5.85
JXSB Jacksonville Savings Bank, MH IL 142,514 16,758 16,670 0.24 0.54 2.03 4.54
LFED Leeds Federal Savings Bk, MHC MD 281,899 45,623 45,623 0.80 1.12 4.92 6.93
GFED Guaranty Federal SB, MHC MO 196,034 27,120 27,120 0.50 0.81 3.47 5.68
PULB Pulaski Bank, Savings Bk, MHC MO 177,827 23,114 23,114 0.56 0.83 4.39 6.49
FSLA First Savings Bank, MHC NJ 1,024,715 94,200 83,462 0.51 0.89 5.45 9.56
FSNJ First Savings Bk of NJ, MHC NJ 578,574 49,585 49,585 -0.33 0.21 -4.33 2.78
PLSK Pulaski Savings Bank, MHC NJ 158,827 12,263 12,263 0.17 0.54 2.21 7.22
SBFL SB of the Finger Lakes, MHC NY 212,821 20,121 20,121 0.07 0.12 0.72 1.20
WAYN Wayne Savings & Loan Co. MHC OH 250,057 22,811 22,811 0.28 0.65 2.97 6.91
SKBO First Carnegie Deposit, MHC PA 117,814 14,686 14,686 0.86 0.68 7.38 5.83
GDVS Greater Delaware Valley SB,MH PA 238,686 27,399 27,399 0.02 0.33 0.15 2.76
HARS Harris Savings Bank, MHC PA 1,943,327 153,804 132,694 0.24 0.59 2.66 6.48
NWSB Northwest Savings Bank, MHC PA 1,997,563 194,098 182,275 0.69 1.00 6.92 9.92
PERT Perpetual Bank, MHC SC 223,000 29,629 29,629 0.76 1.06 6.85 9.54
RVSB Riverview Savings Bank, MHC WA 224,473 24,391 21,980 0.97 1.15 8.87 10.53
</TABLE>
CAPITAL ISSUES
--------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
--------------------------------------------
PFSL Pocahontas FS&LA, MHC 04/05/94 NASDAQ 1,628,865 32.58
CMSV Community Savings, MHC 10/24/94 NASDAQ 4,920,612 96.57
FFFL Fidelity Bankshares Inc., MHC 01/07/94 NASDAQ 6,765,653 135.31
HARB Harbor Federal Savings Bk, MH 01/06/94 NASDAQ 4,961,690 181.72
FFSX First Fed SB of Siouxland, MH 07/13/92 NASDAQ 2,827,094 63.14
WCFB Webster City Federal SB, MHC 08/15/94 NASDAQ 2,100,000 29.93
JXSB Jacksonville Savings Bank, MH 04/21/95 NASDAQ 1,272,300 16.86
LFED Leeds Federal Savings Bk, MHC 05/02/94 NASDAQ 3,454,736 62.19
GFED Guaranty Federal SB, MHC 04/10/95 NASDAQ 3,125,000 40.23
PULB Pulaski Bank, Savings Bk, MHC 05/11/94 NASDAQ 2,094,000 40.31
FSLA First Savings Bank, MHC 07/10/92 NASDAQ 7,247,332 152.19
FSNJ First Savings Bk of NJ, MHC 01/09/95 NASDAQ 3,064,131 70.48
PLSK Pulaski Savings Bank, MHC 04/03/97 NASDAQ NA NA
SBFL SB of the Finger Lakes, MHC 11/11/94 NASDAQ 1,785,000 26.78
WAYN Wayne Savings & Loan Co. MHC 06/25/93 NASDAQ 1,498,775 36.72
SKBO First Carnegie Deposit, MHC 04/04/97 NASDAQ NA NA
GDVS Greater Delaware Valley SB,MH 03/03/95 NASDAQ 3,272,500 42.54
HARS Harris Savings Bank, MHC 01/25/94 NASDAQ 11,221,300 218.82
NWSB Northwest Savings Bank, MHC 11/07/94 NASDAQ 23,376,000 359.41
PERT Perpetual Bank, MHC 10/26/93 NASDAQ 1,504,601 36.49
RVSB Riverview Savings Bank, MHC 10/26/93 NASDAQ 2,415,359 38.43
<PAGE>
<TABLE>
<CAPTION>
ALL MUTUAL HOLDING COMPANIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE 543,405 51,816 49,407 0.49 0.76 4.50 7.21 4,659,734 88.46
MEDIAN 250,057 27,399 27,399 0.51 0.73 4.44 6.91 3,064,131 42.54
HIGH 1,997,563 194,098 182,275 1.01 1.34 11.15 14.59 23,376,000 359.41
LOW 93,160 12,263 12,263 -0.33 0.12 -4.33 1.20 1,272,300 16.86
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY MI MO OH WI
IPO Date: {less than or =) 12/31/95
Asset size: {less than or =) $250,000
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CITIZENS SAVINGS BANK
OF FRANKFORT -- 45,153 9.75 0.00 67.85 82.93 82.93 4.41 12.28
DEFINED PARAMETERS FOR Prior to less than or = less less than 40.00 - 50.00 - 60.00 - less than 8.00 -
INCLUSION IN COMPARABLE GROUP 12/31/95 $250,000 35.00 25.00 75.00 95.00 97.00 30.00 20.00
JOAC Joachim Bancorp Inc. MO 12/28/95 35,656 30.80 0.24 58.52 66.67 66.91 0.00 28.98
HBBI Home Building Bancorp IN 02/08/95 46,804 26.24 11.11 46.11 60.24 71.35 7.91 12.07
CSBF CSB Financial Group Inc. IL 10/09/95 47,996 NA NA 38.87 57.10 NA 0.00 25.07
NSLB NS&L Bancorp Inc. MO 06/08/95 58,089 33.27 8.65 48.75 55.06 63.71 5.16 19.92
CKFB CKF Bancorp Inc. KY 01/04/95 60,197 7.56 0.76 69.20 89.76 90.52 3.73 23.68
ATSB AmTrust Capital Corp. IN 03/28/95 71,031 17.78 6.05 38.43 70.98 77.03 17.12 10.17
MSBF MSB Financial Inc. MI 02/06/95 75,630 11.21 0.02 56.60 86.62 86.64 27.60 16.61
HZFS Horizon Financial Svcs Corp. IA 06/30/94 78,368 30.83 0.00 42.43 66.26 66.26 16.74 10.50
SOBI Sobieski Bancorp Inc. IN 03/31/95 79,080 5.80 17.93 58.32 72.96 90.90 8.98 15.40
LOGN Logansport Financial Corp. IN 06/14/95 79,298 15.44 9.96 50.55 71.75 81.71 4.41 19.65
PCBC Perry County Financial Corp. MO 02/13/95 79,714 NA NA 13.12 15.55 NA 3.14 18.32
HHFC Harvest Home Financial Corp. OH 10/10/94 83,103 NA NA 45.32 52.84 NA 17.69 12.50
SFFC StateFed Financial Corporation IA 01/05/94 85,282 15.44 0.00 51.57 79.29 79.29 22.28 17.60
GFSB GFS Bancorp Inc. IA 01/06/94 88,154 8.66 3.63 57.92 86.31 89.95 21.53 11.57
KYF Kentucky First Bancorp Inc. KY 08/29/95 88,923 18.29 24.18 42.09 54.92 79.11 21.45 16.11
THR Three Rivers Financial Corp. MI 08/24/95 91,165 20.16 9.88 43.34 65.95 75.83 19.02 13.76
INCB Indiana Community Bank SB IN 12/15/94 91,329 15.42 3.10 41.63 78.10 81.20 0.00 12.39
FFBI First Financial Bancorp Inc. IL 10/04/93 93,156 11.45 7.71 63.28 77.73 85.43 18.20 7.80
FTSB Fort Thomas Financial Corp. KY 06/28/95 94,681 7.26 0.83 66.13 88.96 89.79 10.25 16.09
NWEQ Northwest Equity Corp. WI 10/11/94 96,518 7.55 7.84 56.53 81.06 88.90 22.54 12.25
CIBI Community Investors Bancorp OH 02/07/95 97,446 20.56 2.00 60.87 76.05 78.06 13.99 11.52
HFSA Hardin Bancorp Inc. MO 09/29/95 103,354 26.66 18.59 42.57 52.80 71.39 18.38 12.78
HFFB Harrodsburg First Fin Bancorp KY 10/04/95 108,187 24.89 0.07 61.58 73.78 73.85 0.00 26.36
ASBP ASB Financial Corp. OH 05/11/95 109,414 23.43 8.40 44.29 64.77 73.17 2.19 15.74
PTRS Potters Financial Corp. OH 12/31/93 116,921 19.35 19.84 39.15 57.81 77.65 6.43 8.90
NBSI North Bancshares Inc. IL 12/21/93 120,011 30.27 5.95 55.01 61.74 67.69 23.16 14.61
MIFC Mid-Iowa Financial Corp. IA 10/14/92 123,572 28.27 16.77 37.21 52.65 69.42 20.23 9.09
MFCX Marshalltown Financial Corp. IA 03/31/94 127,107 14.44 34.49 42.77 49.15 83.64 0.00 15.61
FKKY Frankfort First Bancorp Inc. KY 07/10/95 128,328 6.05 0.00 82.75 92.35 92.35 5.94 26.19
CLAS Classic Bancshares Inc. KY 12/29/95 128,361 25.30 6.20 45.68 62.17 68.38 7.40 14.92
GTPS Great American Bancorp IL 06/30/95 137,898 23.52 0.00 36.41 70.18 70.18 0.00 21.15
MWBI Midwest Bancshares Inc. IA 11/12/92 139,006 17.80 20.01 45.34 59.42 79.44 17.27 6.94
BWFC Bank West Financial Corp. MI 03/30/95 147,019 24.44 1.32 60.90 71.41 72.73 15.69 15.31
FFWC FFW Corp. IN 04/05/93 158,441 17.13 11.26 42.19 69.33 80.59 27.28 10.01
FBSI First Bancshares Inc. MO 12/22/93 160,048 15.63 0.53 60.46 80.95 81.48 13.84 14.35
FFWD Wood Bancorp Inc. OH 08/31/93 163,498 15.03 2.83 58.95 80.38 83.20 14.45 12.70
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 165,688 19.81 14.58 43.18 63.60 78.18 8.17 15.67
NEIB Northeast Indiana Bancorp IN 06/28/95 172,874 10.49 0.00 58.28 87.52 87.52 29.24 15.16
MARN Marion Capital Holdings IN 03/18/93 174,415 8.34 0.02 51.50 84.51 84.53 4.72 23.05
MFFC Milton Federal Financial Corp. OH 10/07/94 178,757 23.43 9.83 58.44 63.87 73.70 8.77 14.74
FFBZ First Federal Bancorp Inc. OH 07/13/92 191,686 8.18 0.80 53.87 86.53 87.33 24.36 7.66
CMRN Cameron Financial Corp MO 04/03/95 197,693 10.78 0.01 56.06 84.78 84.79 12.77 22.96
MWFD Midwest Federal Financial WI 07/08/92 201,070 NA NA 30.35 73.72 NA 12.31 8.61
MBLF MBLA Financial Corp. MO 06/24/93 209,783 35.72 8.16 49.18 55.33 63.50 39.05 13.50
FFHS First Franklin Corporation OH 01/26/88 226,235 13.85 16.81 52.81 67.56 84.37 2.80 8.82
DFIN Damen Financial Corp. IL 10/02/95 227,400 35.83 21.32 35.33 40.30 61.62 27.04 20.16
OHSL OHSL Financial Corp. OH 02/10/93 229,812 21.68 5.08 44.31 71.26 76.34 12.32 11.04
MFBC MFB Corp. IN 03/25/94 234,290 22.60 1.66 62.87 74.40 76.06 14.73 14.51
CAPS Capital Savings Bancorp, Inc. MO 12/29/93 237,915 9.00 10.48 64.84 78.79 89.27 18.91 8.66
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
Most Recent Four Quarters
General Parameters:
States: IA IL IN KY MI MO OH WI
IPO Date: (less than or =) 12/31/95
Asset size: (less than or =) $250,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
*
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/
Assets ROAA ROAE Margin (2)Assets (3) Assets (3)
IPO Date ($000) (%) (%) (%) (%) (%)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CITIZENS SAVINGS BANK
OF FRANKFORT -- 45,153 1.12 9.22 3.80 2.29 0.38
DEFINED PARAMETERS FOR Prior to less than 0.60 - 3.00 - 3.00 - 1.50 - less than
INCLUSION IN COMPARABLE GROUP 12/31/95 250,000 1.45 15.00 4.50 3.00 0.80
JOAC Joachim Bancorp Inc. MO 12/28/95 35,656 0.78 2.68 4.13 2.90 0.15
HBBI Home Building Bancorp IN 02/08/95 46,804 0.50 3.77 3.46 2.41 0.23
CSBF CSB Financial Group Inc. IL 10/09/95 47,996 0.65 2.39 3.61 2.48 0.17
NSLB NS&L Bancorp Inc. MO 06/08/95 58,089 0.74 3.45 3.16 2.32 0.35
CKFB CKF Bancorp Inc. KY 01/04/95 60,197 1.29 5.05 3.75 1.80 0.09
ATSB AmTrust Capital Corp. IN 03/28/95 71,031 0.19 1.91 2.79 2.83 0.53
MSBF MSB Financial Inc. MI 02/06/95 75,630 1.49 7.55 5.08 3.12 0.44
HZFS Horizon Financial Svcs Corp. IA 06/30/94 78,368 0.60 5.41 3.44 2.60 0.42
SOBI Sobieski Bancorp Inc. IN 03/31/95 79,080 0.57 3.28 3.34 2.57 0.24
LOGN Logansport Financial Corp. IN 06/14/95 79,298 1.51 6.80 3.92 1.62 0.15
PCBC Perry County Financial Corp. MO 02/13/95 79,714 1.03 5.45 2.85 1.17 0.05
HHFC Harvest Home Financial Corp. OH 10/10/94 83,103 0.55 3.91 2.96 2.16 0.07
SFFC StateFed Financial Corporation IA 01/05/94 85,282 1.29 6.99 3.64 1.53 0.08
GFSB GFS Bancorp Inc. IA 01/06/94 88,154 1.20 10.24 3.52 1.77 0.14
KYF Kentucky First Bancorp Inc. KY 08/29/95 88,923 1.07 5.23 3.66 2.14 0.14
THR Three Rivers Financial Corp. MI 08/24/95 91,165 0.83 5.71 3.92 2.96 0.47
INCB Indiana Community Bank SB IN 12/15/94 91,329 0.50 3.92 4.39 3.90 0.95
FFBI First Financial Bancorp Inc. IL 10/04/93 93,156 0.45 5.63 2.96 2.47 0.49
FTSB Fort Thomas Financial Corp. KY 06/28/95 94,681 0.77 3.83 4.28 2.99 0.19
NWEQ Northwest Equity Corp. WI 10/11/94 96,518 0.97 7.47 3.92 2.48 0.42
CIBI Community Investors Bancorp OH 02/07/95 97,446 0.99 8.18 3.56 2.00 0.11
HFSA Hardin Bancorp Inc. MO 09/29/95 103,354 0.81 5.14 3.02 1.95 0.26
HFFB Harrodsburg First Fin Bancorp KY 10/04/95 108,187 1.35 4.90 3.60 1.56 0.09
ASBP ASB Financial Corp. OH 05/11/95 109,414 0.86 4.31 3.46 2.26 0.21
PTRS Potters Financial Corp. OH 12/31/93 116,921 0.68 7.54 3.27 2.58 0.26
NBSI North Bancshares Inc. IL 12/21/93 120,011 0.64 4.18 3.37 2.59 0.18
MIFC Mid-Iowa Financial Corp. IA 10/14/92 123,572 1.19 12.89 3.09 2.24 1.00
MFCX Marshalltown Financial Corp. IA 03/31/94 127,107 0.63 4.04 2.67 1.86 0.07
FKKY Frankfort First Bancorp Inc. KY 07/10/95 128,328 0.92 3.34 3.58 2.15 0.05
CLAS Classic Bancshares Inc. KY 12/29/95 128,361 0.71 3.40 3.14 2.07 0.11
GTPS Great American Bancorp IL 06/30/95 137,898 0.61 2.42 4.62 3.56 0.44
MWBI Midwest Bancshares Inc. IA 11/12/92 139,006 0.74 10.69 2.93 1.85 0.20
BWFC Bank West Financial Corp. MI 03/30/95 147,019 0.62 3.53 3.13 2.64 0.61
FFWC FFW Corp. IN 04/05/93 158,441 1.10 10.78 3.20 1.83 0.35
FBSI First Bancshares Inc. MO 12/22/93 160,048 1.12 7.33 3.54 1.89 0.27
FFWD Wood Bancorp Inc. OH 08/31/93 163,498 1.23 9.24 4.33 2.39 0.20
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 165,688 1.01 6.29 3.19 1.96 0.35
NEIB Northeast Indiana Bancorp IN 06/28/95 172,874 1.22 7.06 3.65 1.75 0.24
MARN Marion Capital Holdings IN 03/18/93 174,415 1.59 6.87 4.24 2.12 0.18
MFFC Milton Federal Financial Corp. OH 10/07/94 178,757 0.72 4.14 3.30 2.16 0.13
FFBZ First Federal Bancorp Inc. OH 07/13/92 191,686 1.00 13.08 3.95 2.44 0.45
CMRN Cameron Financial Corp MO 04/03/95 197,693 1.38 5.52 4.23 1.74 0.09
MWFD Midwest Federal Financial WI 07/08/92 201,070 1.09 12.42 4.10 2.93 0.83
MBLF MBLA Financial Corp. MO 06/24/93 209,783 0.85 6.32 2.13 0.71 0.01
FFHS First Franklin Corporation OH 01/26/88 226,235 0.61 6.64 2.81 1.94 0.22
DFIN Damen Financial Corp. IL 10/02/95 227,400 0.89 3.85 3.12 2.02 0.07
OHSL OHSL Financial Corp. OH 02/10/93 229,812 0.86 7.28 3.34 2.08 0.14
MFBC MFB Corp. IN 03/25/94 234,290 0.85 5.10 3.21 1.93 0.16
CAPS Capital Savings Bancorp, Inc. MO 12/29/93 237,915 0.92 10.27 3.24 2.14 0.46
</TABLE>
<PAGE>
ASSET QUALITY (1)
*
NPA/ REO/ Reserves/
Assets Assets Assets
(%) (%) (%)
-----------------------------
CITIZENS SAVINGS BANK
OF FRANKFORT 0.45 0.00 0.38
DEFINED PARAMETERS FOR less than less than greater than
INCLUSION IN COMPARABLE GROUP 1.25 0.50 0.15
JOAC Joachim Bancorp Inc. 0.68 0.35 0.21
HBBI Home Building Bancorp 0.52 0.00 0.17
CSBF CSB Financial Group Inc. 0.74 0.00 0.31
NSLB NS&L Bancorp Inc. 0.06 0.00 0.07
CKFB CKF Bancorp Inc. 1.48 0.31 0.18
ATSB AmTrust Capital Corp. 2.84 0.22 0.67
MSBF MSB Financial Inc. 1.02 0.00 0.50
HZFS Horizon Financial Svcs Corp. 1.02 0.46 0.37
SOBI Sobieski Bancorp Inc. 0.25 0.00 0.25
LOGN Logansport Financial Corp. 0.45 0.00 0.30
PCBC Perry County Financial Corp. 0.05 0.00 0.03
HHFC Harvest Home Financial Corp. 0.15 0.00 0.14
SFFC StateFed Financial Corporation 0.99 0.00 0.30
GFSB GFS Bancorp Inc. 1.54 0.03 0.71
KYF Kentucky First Bancorp Inc. 0.14 0.00 0.43
THR Three Rivers Financial Corp. 1.21 0.50 0.53
INCB Indiana Community Bank SB NA NA 0.56
FFBI First Financial Bancorp Inc. 0.27 0.13 0.54
FTSB Fort Thomas Financial Corp. 1.24 0.00 0.51
NWEQ Northwest Equity Corp. 1.53 0.08 0.50
CIBI Community Investors Bancorp 0.72 0.06 0.47
HFSA Hardin Bancorp Inc. NA NA NA
HFFB Harrodsburg First Fin Bancorp 0.47 0.00 0.27
ASBP ASB Financial Corp. 1.58 0.61 0.81
PTRS Potters Financial Corp. 0.83 0.00 1.93
NBSI North Bancshares Inc. 0.00 0.00 0.17
MIFC Mid-Iowa Financial Corp. 0.13 0.00 0.23
MFCX Marshalltown Financial Corp. 0.00 0.00 0.09
FKKY Frankfort First Bancorp Inc. 0.06 0.00 0.08
CLAS Classic Bancshares Inc. 0.91 0.30 0.62
GTPS Great American Bancorp 0.16 0.00 0.30
MWBI Midwest Bancshares Inc. 0.82 0.00 0.50
BWFC Bank West Financial Corp. 0.03 0.03 0.14
FFWC FFW Corp. 0.22 0.03 0.34
FBSI First Bancshares Inc. 0.32 0.04 0.29
FFWD Wood Bancorp Inc. 0.10 0.02 0.33
SMBC Southern Missouri Bancorp Inc. 1.10 0.07 0.41
NEIB Northeast Indiana Bancorp 0.49 0.00 0.62
MARN Marion Capital Holdings 0.76 0.00 1.16
MFFC Milton Federal Financial Corp. 0.32 0.00 0.30
FFBZ First Federal Bancorp Inc. 0.58 0.00 0.89
CMRN Cameron Financial Corp 0.60 0.00 0.81
MWFD Midwest Federal Financial NA NA 0.75
MBLF MBLA Financial Corp. 0.25 0.00 0.27
FFHS First Franklin Corporation 0.62 0.06 0.42
DFIN Damen Financial Corp. 0.20 0.00 0.15
OHSL OHSL Financial Corp. 0.33 0.00 0.22
MFBC MFB Corp. 0.03 0.00 0.15
CAPS Capital Savings Bancorp, Inc. 0.26 0.03 0.30
(1) Asset quality ratios reflect balance sheet totals at the end of the most
recent quarter.
(2) Based on average interest-earning assets.
(3) Net of non-recurring expense.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
FINAL COMPARABLE GROUP
BALANCE SHEET RATIOS
<TABLE>
<CAPTION>
Total
Cash & 1-4 Fam. Total Net Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CITIZENS SAVINGS BANK
OF FRANKFORT -- 45,153 9.75 0.00 67.85 82.93 82.93 4.41 12.28
DEFINED PARAMETERS FOR Prior to less than less than 40.00 - 50.00 - 60.00 - less than 8.00 -
INCLUSION IN COMPARABLE GROUP 12/31/95 $250,000 35.00 25.00 75.00 95.00 97.00 30.00 20.00
HZFS Horizon Financial Svcs Corp. IA 06/30/94 78,368 30.83 0.00 42.43 66.26 66.26 16.74 10.50
SFFC StateFed Financial Corporation IA 01/05/94 85,282 15.44 0.00 51.57 79.29 79.29 22.28 17.60
KYF Kentucky First Bancorp Inc. KY 08/29/95 88,923 18.29 24.18 42.09 54.92 79.11 21.45 16.11
THR Three Rivers Financial Corp. MI 08/24/95 91,165 20.16 9.88 43.34 65.95 75.83 19.02 13.76
FTSB Fort Thomas Financial Corp. KY 06/28/95 94,681 7.26 0.83 66.13 88.96 89.79 10.25 16.09
CIBI Community Investors Bancorp OH 02/07/95 97,446 20.56 2.00 60.87 76.05 78.06 13.99 11.52
CLAS Classic Bancshares Inc. KY 12/29/95 128,361 25.30 6.20 45.68 62.17 68.38 7.40 14.92
FBSI First Bancshares Inc. MO 12/22/93 160,048 15.63 0.53 60.46 80.95 81.48 13.84 14.35
NEIB Northeast Indiana Bancorp IN 06/28/95 172,874 10.49 0.00 58.28 87.52 87.52 29.24 15.16
MFBC MFB Corp. IN 03/25/94 234,290 22.60 1.66 62.87 74.40 76.06 14.73 14.51
AVERAGE 123,144 18.66 4.53 53.37 73.65 78.18 16.89 14.45
MEDIAN 96,064 19.23 1.25 54.93 75.23 78.58 15.73 14.71
HIGH 234,290 30.83 24.18 66.13 88.96 89.79 29.24 17.60
LOW 78,368 7.26 0.00 42.09 54.92 66.26 7.40 10.50
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
FINAL COMPARABLE GROUP
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
Most Recent Four Quarters
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
----------------------------------------------------------
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/
Assets ROAA ROAE Margin (2)Assets (3) Assets (3)
IPO Date ($000) (%) (%) (%) (%) (%)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CITIZENS SAVINGS BANK
OF FRANKFORT -- 45,153 1.12 9.22 3.80 2.29 0.38
DEFINED PARAMETERS FOR Prior to less than 0.60 - 3.00 - 3.00 - 1.50 - less than
INCLUSION IN COMPARABLE GROUP 12/31/95 250,000 1.45 15.00 4.50 3.00 0.80
HZFS Horizon Financial Svcs Corp. IA 06/30/94 78,368 0.60 5.41 3.44 2.60 0.42
SFFC StateFed Financial Corporation IA 01/05/94 85,282 1.29 6.99 3.64 1.53 0.08
KYF Kentucky First Bancorp Inc. KY 08/29/95 88,923 1.07 5.23 3.66 2.14 0.14
THR Three Rivers Financial Corp. MI 08/24/95 91,165 0.83 5.71 3.92 2.96 0.47
FTSB Fort Thomas Financial Corp. KY 06/28/95 94,681 0.77 3.83 4.28 2.99 0.19
CIBI Community Investors Bancorp OH 02/07/95 97,446 0.99 8.18 3.56 2.00 0.11
CLAS Classic Bancshares Inc. KY 12/29/95 128,361 0.71 3.40 3.14 2.07 0.11
FBSI First Bancshares Inc. MO 12/22/93 160,048 1.12 7.33 3.54 1.89 0.27
NEIB Northeast Indiana Bancorp IN 06/28/95 172,874 1.22 7.06 3.65 1.75 0.24
MFBC MFB Corp. IN 03/25/94 234,290 0.85 5.10 3.21 1.93 0.16
AVERAGE 123,144 0.95 5.82 3.60 2.19 0.22
MEDIAN 96,064 0.92 5.56 3.60 2.04 0.17
HIGH 234,290 1.29 8.18 4.28 2.99 0.47
LOW 78,368 0.60 3.40 3.14 1.53 0.08
</TABLE>
ASSET QUALITY (1)
NPA/ REO/ Reserves/
Assets Assets Assets
(%) (%) (%)
-----------------------------
CITIZENS SAVINGS BANK
OF FRANKFORT 0.45 0.00 0.38
DEFINED PARAMETERS FOR less than greater than
INCLUSION IN COMPARABLE GROUP 1.25 0.50 0.15
HZFS Horizon Financial Svcs Corp. IA 1.02 0.46 0.37
SFFC StateFed Financial Corporation IA 0.99 0.00 0.30
KYF Kentucky First Bancorp Inc. KY 0.14 0.00 0.43
THR Three Rivers Financial Corp. MI 1.21 0.50 0.53
FTSB Fort Thomas Financial Corp. KY 1.24 0.00 0.51
CIBI Community Investors Bancorp OH 0.72 0.06 0.47
CLAS Classic Bancshares Inc. KY 0.91 0.30 0.62
FBSI First Bancshares Inc. MO 0.32 0.04 0.29
NEIB Northeast Indiana Bancorp IN 0.49 0.00 0.62
MFBC MFB Corp. IN 0.03 0.00 0.15
AVERAGE 0.71 0.14 0.43
MEDIAN 0.82 0.02 0.45
HIGH 1.24 0.50 0.62
LOW 0.03 0.00 0.15
(1) Asset quality ratios reflect balance sheet totals at the end of the most
recent quarter.
(2) Based on average interest-earning assets.
(3) Net of non-recurring expense.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
COMPARABLE GROUP CHARACTERISTICS AND BALANCE SHEET TOTALS
<TABLE>
<CAPTION>
Most Recent Quarter
Total Goodwill
Number Conversion Total Int. Earning Net and
of (IPO) Assets Assets Loans Intang.
Offices Exchange Date ($000) ($000) ($000) ($000)
---------------------------------------------------------------------
SUBJECT
CITIZENS SAVINGS BANK
OF FRANKFORT 1 NA NA 45,153 42,049 37,216 0
COMPARABLE GROUP
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLAS Classic Bancshares, Inc. Ashland KY 3 NASDAQ 12/29/95 128,361 125,062 79,805 3,057
CIBI Community Investors Bancorp, Inc.Bucyrus OH 3 NASDAQ 02/07/95 97,446 95,867 74,110 0
FBSI First Bancshares, Inc. Mountain Grove MO 6 NASDAQ 12/22/93 160,048 150,874 129,552 33
FTSB Fort Thomas Financial CorporationFort Thomas KY 2 NASDAQ 06/28/95 94,681 90,484 84,231 0
HZFS Horizon Financial Services CorporOskaloosa IA 3 NASDAQ 06/30/94 78,368 74,207 51,923 0
KYF Kentucky First Bancorp, Inc. Cynthiana KY 2 AMSE 08/29/95 88,923 86,491 48,839 0
MFBC MFB Corp. Mishawaka IN 4 NASDAQ 03/25/94 234,290 225,053 174,307 0
NEIB Northeast Indiana Bancorp, Inc. Huntington IN 3 NASDAQ 06/28/95 172,874 168,782 151,296 0
SFFC StateFed Financial Corporation Des Moines IA 2 NASDAQ 01/05/94 85,282 79,984 67,621 0
THR Three Rivers Financial Corp. Three Rivers MI 4 AMSE 08/24/95 91,165 87,047 60,127 50
Average 3.2 123,144 118,385 92,181 314
Median 3.0 96,064 93,176 76,958 0
High 6.0 234,290 225,053 174,307 3,057
Low 2.0 78,368 74,207 48,839 0
</TABLE>
<TABLE>
<CAPTION>
Total Total
Deposits Equity
($000) ($000)
--------------------------
<S> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK
OF FRANKFORT 37,255 5,564
COMPARABLE GROUP
CLAS Classic Bancshares, Inc. Ashland KY 97,362 19,151
CIBI Community Investors Bancorp, Inc.Bucyrus OH 72,015 11,221
FBSI First Bancshares, Inc. Mountain Grove MO 114,242 22,971
FTSB Fort Thomas Financial CorporationFort Thomas KY 68,515 15,236
HZFS Horizon Financial Services CorporOskaloosa IA 56,434 8,225
KYF Kentucky First Bancorp, Inc. Cynthiana KY 54,566 14,326
MFBC MFB Corp. Mishawaka IN 163,322 33,987
NEIB Northeast Indiana Bancorp, Inc. Huntington IN 91,663 26,213
SFFC StateFed Financial Corporation Des Moines IA 50,662 15,012
THR Three Rivers Financial Corp. Three Rivers MI 59,997 12,540
Average 82,878 17,888
Median 70,265 15,124
High 163,322 33,987
Low 50,662 8,225
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
COMPARABLE GROUP MARKET AREA COMPARISON
<TABLE>
<CAPTION>
1990 1990 1990
1990-1996 1990 Median Median 1990 High
Population Per Capita Household Housing Median School
1996 Growth Income Income Value Rent Graduates
Population (%) ($) ($) ($) ($) (%)
- - - - - - -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
Citizens Savings Bank
of Frankfort IN 32,862 6.1 11,849 26,148 #### 326 76.9
COMPARABLE GROUP
CLAS Classic Bancshares, Inc. KY 88,859 1.1 11,658 24,114 44,513 304 69.8
CIBI Community Investors Bancorp OH 47,870 0.2 16,237 32,915 56,087 309 73.8
FBSI First Bancshares, Inc. MO 66,455 8.9 9,633 19,183 35,705 243 72.4
FTSB Ft. Thomas Financial Corp KY 866,222 1.2 18,004 34,401 72,243 304 75.6
HZFS Horizon Financial Services Corp. IA 21,869 1.6 11,303 24,119 36,410 209 74.8
KYF Kentucky First Bancorp, Inc. KY 53,611 2.8 11,034 24,536 56,151 298 72.2
MFBC MFB Corp. IN 257,533 0.8 16,003 34,165 50,751 325 76.1
NEIB Northeast Indiana Bancorp, Inc. IN 37,148 4.9 12,509 29,681 44,200 344 74.7
SFFC StateFed Financial Corporation IA 350,024 1.3 16,864 33,804 59,700 369 85.4
THR Three Rivers Financial Corp. MI 112,400 3.7 12,097 27,735 46,165 354 76.5
Average 190,199 2.7 13,534 28,465 50,193 306 75.1
Median 77,657 1.5 12,303 28,708 48,458 307 74.8
High 866,222 8.9 18,004 34,401 72,243 369 85.4
Low 21,869 0.2 9,633 19,183 35,705 209 69.8
</TABLE>
1990
1990 Below
College Poverty
Graduates Level
(%) (%)
- -
SUBJECT
Citizens Savings Bank
of Frankfort 18.7 11.4
COMPARABLE GROUP
CLAS Classic Bancshares, Inc. 17.0 13.8
CIBI Community Investors Bancorp 16.8 14.1
FBSI First Bancshares, Inc. 10.2 15.5
FTSB Ft. Thomas Financial Corp 23.7 13.3
HZFS Horizon Financial Services Corp. 13.1 13.0
KYF Kentucky First Bancorp, Inc. 15.8 12.4
MFBC MFB Corp. 19.2 9.7
NEIB Northeast Indiana Bancorp, Inc. 16.1 10.4
SFFC StateFed Financial Corporation 23.9 9.2
THR Three Rivers Financial Corp. 20.7 10.9
Average 17.7 12.2
Median 16.9 12.7
High 23.9 15.5
Low 10.2 9.2
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
BALANCE SHEET
ASSET COMPOSITION - MOST RECENT QUARTER
<TABLE>
<CAPTION>
As a Percent of Total Assets
Real
Total Cash & Net Loan Loss Estate Goodwill Other High Risk
Assets Invest. MBS Loans Reserves Owned & Intang. Assets R.E. Loans
($000) (%) (%) (%) (%) (%) (%) (%) (%)
---------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK 45,153 9.77 0.00 82.42 0.38 0.00 0.00 7.81 5.34
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 128,361 25.30 6.20 62.17 0.62 0.30 2.38 3.64 7.02
CIBI Community Investors Bancorp 97,446 20.56 2.00 76.05 0.47 0.06 0.00 1.32 5.23
FBSI First Bancshares Inc. 160,048 15.63 0.53 80.95 0.29 0.04 0.02 2.82 12.16
FTSB Fort Thomas Financial Corp. 94,681 7.26 0.83 88.96 0.51 0.00 0.00 2.95 18.09
HZFS Horizon Financial Svcs Corp. 78,368 30.83 0.00 66.26 0.37 0.46 0.00 2.21 7.49
KYF Kentucky First Bancorp Inc. 88,923 18.29 24.18 54.92 0.43 0.00 0.00 2.60 18.50
MFBC MFB Corp. 234,290 22.60 1.66 74.40 0.15 0.00 0.00 1.34 2.71
NEIB Northeast Indiana Bancorp 172,874 10.49 0.00 87.52 0.62 0.00 0.00 1.98 13.41
SFFC StateFed Financial Corporation 85,282 15.44 0.00 79.29 0.30 0.00 0.00 2.75 27.72
THR Three Rivers Financial Corp. 91,165 20.16 9.88 65.95 0.53 0.50 0.05 2.93 11.21
Average 123,144 18.66 4.53 73.65 0.43 0.14 0.25 2.46 12.35
Median 96,064 19.23 1.25 75.23 0.45 0.02 0.00 2.67 11.68
High 234,290 30.83 24.18 88.96 0.62 0.50 2.38 3.64 27.72
Low 78,368 7.26 0.00 54.92 0.15 0.00 0.00 1.32 2.71
ALL THRIFTS (332)
Average 1,291,109 17.83 11.37 66.78 0.58 0.58 0.24 2.66 12.94
MIDWEST THRIFTS (155)
Average 659,718 17.42 9.06 69.68 0.50 0.50 0.19 2.55 12.46
INDIANA THRIFTS (23)
Average 305,833 17.21 8.75 71.03 0.54 0.15 0.07 3.36 10.40
</TABLE>
Interest Interest Capitalized
Non-Perf. Earning Bearing Loan
Assets Assets LiabilitieServicing
(%) (%) (%) (%)
---------------------------------------
SUBJECT
CITIZENS SAVINGS BANK 0.45 93.13 86.94 0.00
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 0.91 97.43 86.86 0.00
CIBI Community Investors Bancorp 0.72 98.38 87.22 0.00
FBSI First Bancshares Inc. 0.32 94.27 82.10 0.00
FTSB Fort Thomas Financial Corp. 1.24 95.57 79.88 0.00
HZFS Horizon Financial Svcs Corp. 1.02 94.69 85.65 0.00
KYF Kentucky First Bancorp Inc. 0.14 97.27 81.85 0.00
MFBC MFB Corp. 0.03 96.06 82.72 0.00
NEIB Northeast Indiana Bancorp 0.49 97.63 83.01 0.00
SFFC StateFed Financial Corporation 0.99 93.79 80.25 0.00
THR Three Rivers Financial Corp. 1.21 95.48 83.67 0.00
Average 0.71 96.06 83.32 0.00
Median 0.82 95.81 82.87 0.00
High 1.24 98.38 87.22 0.00
Low 0.03 93.79 79.88 0.00
ALL THRIFTS (332)
Average 0.80 94.91 83.56 0.12
MIDWEST THRIFTS (155)
Average 0.61 95.66 82.78 0.10
INDIANA THRIFTS (23)
Average 0.69 95.60 85.02 0.05
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
BALANCE SHEET COMPARISON
LIABILITIES AND EQUITY - MOST RECENT QUARTER
<TABLE>
<CAPTION>
As a Percent of Assets
*
FASB 115
Total Total Total Total Other Preferred Common Unrealized
Liabilities Equity Deposits Borrowings LiabilitieEquity Equity Gain (Loss)
($000) ($000) (%) (%) (%) (%) (%) (%)
----------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK 39,589 5,564 82.51 4.43 0.74 -- -- 0.00
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 109,210 19,151 75.85 7.40 1.83 0.00 14.92 0.11
CIBI Community Investors Bancorp 86,225 11,221 73.90 13.99 0.59 0.00 11.52 0.01
FBSI First Bancshares Inc. 137,077 22,971 71.38 13.84 0.42 0.00 14.35 (0.02)
FTSB Fort Thomas Financial Corp. 79,445 15,236 72.36 10.25 1.30 0.00 16.09 (0.03)
HZFS Horizon Financial Svcs Corp. 70,143 8,225 72.01 16.74 0.76 0.00 10.50 (0.22)
KYF Kentucky First Bancorp Inc. 74,597 14,326 61.36 21.45 1.08 0.00 16.11 (0.03)
MFBC MFB Corp. 200,303 33,987 69.71 14.73 1.06 0.00 14.51 (0.13)
NEIB Northeast Indiana Bancorp 146,661 26,213 53.02 29.24 0.58 0.00 15.16 (0.02)
SFFC StateFed Financial Corporation 70,270 15,012 59.41 22.28 0.71 0.00 17.60 0.01
THR Three Rivers Financial Corp. 78,625 12,540 65.81 19.02 1.41 0.00 13.76 0.00
Average 105,256 17,888 67.48 16.89 0.97 0.00 14.45 (0.03)
Median 82,835 15,124 70.54 15.73 0.91 0.00 14.71 (0.02)
High 200,303 33,987 75.85 29.24 1.83 0.00 17.60 0.11
Low 70,143 8,225 53.02 7.40 0.42 0.00 10.50 (0.22)
ALL THRIFTS (332)
Average 1,193,670 97,439 71.15 14.52 1.47 0.07 12.79 (0.01)
MIDWEST THRIFTS (155)
Average 598,841 60,876 70.08 14.41 1.35 0.02 14.14 (0.01)
INDIANA THRIFTS (23)
Average 274,113 31,720 70.10 16.51 1.09 0.00 12.30 (0.07)
</TABLE>
<TABLE>
<CAPTION>
Reg. Reg. Reg.
Retained Total Tangible Core TangibleRisk-Based
Earnings Equity Equity Capital Capital Capital
(%) (%) (%) (%) (%) (%)
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK 12.32 12.32 12.32 10.03 10.03 17.93
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 1.54 14.92 12.84 11.77 11.77 NA
CIBI Community Investors Bancorp 6.37 11.52 11.52 10.40 10.40 20.36
FBSI First Bancshares Inc. 7.99 14.35 14.33 11.70 11.70 19.45
FTSB Fort Thomas Financial Corp. 9.30 16.09 16.09 14.66 14.66 29.90
HZFS Horizon Financial Svcs Corp. 4.70 10.50 10.50 7.90 7.90 14.59
KYF Kentucky First Bancorp Inc. 9.04 16.11 16.11 14.15 14.15 34.80
MFBC MFB Corp. 8.87 14.51 14.51 13.84 13.84 32.65
NEIB Northeast Indiana Bancorp 7.13 15.16 15.16 12.54 12.54 22.28
SFFC StateFed Financial Corporation 7.84 17.60 17.60 11.27 11.27 22.74
THR Three Rivers Financial Corp. 6.68 13.76 13.71 11.65 11.65 24.16
Average 6.95 14.45 14.24 11.99 11.99 24.55
Median 7.49 14.72 14.42 11.74 11.74 22.74
High 9.30 17.60 17.60 14.66 14.66 34.80
Low 1.54 10.50 10.50 7.90 7.90 14.59
ALL THRIFTS (332)
Average 5.95 12.86 12.61 11.20 11.02 22.91
MIDWEST THRIFTS (155)
Average 6.72 14.16 13.85 12.05 12.07 23.78
INDIANA THRIFTS (23)
Average 6.30 12.30 12.24 11.10 11.10 22.08
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
INCOME AND EXPENSE COMPARISON
TRAILING FOUR QUARTERS
($000)
<TABLE>
<CAPTION>
Net Gain Total Goodwill Net Total Non-
Interest Interest Interest Provision(Loss) Non-Int.& IntangReal Est.Non-Int.Recurring
Income Expense Income for Loss on Sale Income Amtz. Expense Expense Expense
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK 3,441 1,784 1,657 49 (60) 167 0 0 1,012 211
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 5,874 3,084 2,790 93 14 142 31 (2) 1,908 416
CIBI Community Investors Bancorp 7,197 3,897 3,300 140 0 109 0 121 1,872 461
FBSI First Bancshares Inc. 11,305 6,231 5,074 64 159 431 14 (90) 2,828 640
FTSB Fort Thomas Financial Corp. 7,486 3,738 3,748 171 0 181 0 (11) 2,682 375
HZFS Horizon Financial Svcs Corp. 5,714 3,265 2,449 131 136 330 0 70 1,948 331
KYF Kentucky First Bancorp Inc. 6,207 3,101 3,106 11 1 126 0 0 1,855 351
MFBC MFB Corp. 15,944 9,057 6,887 30 (10) 367 0 0 4,225 955
NEIB Northeast Indiana Bancorp 12,416 6,661 5,755 212 0 418 0 (6) 2,805 453
SFFC StateFed Financial Corporation 6,272 3,495 2,777 24 (23) 69 0 (171) 1,228 291
THR Three Rivers Financial Corp. 6,646 3,318 3,328 60 57 432 8 (22) 2,601 411
Average 8,506 4,585 3,921 94 33 261 5 (11) 2,395 468
Median 6,922 3,617 3,314 79 1 256 0 (4) 2,275 414
High 15,944 9,057 6,887 212 159 432 31 121 4,225 955
Low 5,714 3,084 2,449 11 (23) 69 0 (171) 1,228 291
ALL THRIFTS (332)
Average 95,204 57,770 37,434 2,889 903 6,889 688 461 25,422 6,181
MIDWEST THRIFTS (155)
Average 49,442 29,722 19,720 668 (48) 4,074 270 (85) 13,169 2,837
INDIANA THRIFTS (23)
Average 23,440 13,326 10,114 838 385 1,751 7 31 6,841 1,304
</TABLE>
<TABLE>
<CAPTION>
Net Net Inc.
Income Before
Before Income ExtraordExtraord. Net Core
Taxes Taxes Items Items Income Income
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK 553 186 367 0 367 494
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 529 134 395 0 395 656
CIBI Community Investors Bancorp 936 310 626 0 626 926
FBSI First Bancshares Inc. 2,132 764 1,368 0 1,368 1,681
FTSB Fort Thomas Financial Corp. 701 254 447 0 447 691
HZFS Horizon Financial Svcs Corp. 505 186 319 0 319 446
KYF Kentucky First Bancorp Inc. 1,016 320 696 0 696 923
MFBC MFB Corp. 2,034 809 1,225 0 1,225 1,852
NEIB Northeast Indiana Bancorp 2,703 1,038 1,665 0 1,665 1,959
SFFC StateFed Financial Corporation 1,280 450 830 0 830 1,034
THR Three Rivers Financial Corp. 745 247 499 0 499 729
Average 1,258 451 807 0 807 1,090
Median 976 315 661 0 661 925
High 2,703 1,038 1,665 0 1,665 1,959
Low 505 134 319 0 319 446
ALL THRIFTS (332)
Average 10,806 3,069 7,736 (8) 7,728 11,120
MIDWEST THRIFTS (155)
Average 7,086 2,435 4,651 (17) 4,634 6,517
INDIANA THRIFTS (23)
Average 3,287 1,150 2,137 0 2,137 2,722
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
INCOME AND EXPENSE COMPARISON
AS A PERCENTAGE OF AVERAGE ASSETS
TRAILING FOUR QUARTERS
<TABLE>
<CAPTION>
Net Gain Total Goodwill Net Total Non-
Interest Interest InterestProvision(Loss) Non-Int.& IntangReal Est.Non-Int.Recurring
Income Expense Income for Loss on Sale Income Amtz. Expense Expense Expense
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK 7.82 4.05 3.77 0.11 (0.14) 0.38 0.00 0.00 2.30 0.48
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 6.37 3.34 3.02 0.10 0.02 0.15 0.03 (0.00) 2.07 0.45
CIBI Community Investors Bancorp 7.70 4.17 3.53 0.15 0.00 0.12 0.00 0.13 2.00 0.49
FBSI First Bancshares Inc. 7.54 4.15 3.38 0.04 0.11 0.29 0.01 (0.06) 1.89 0.43
FTSB Fort Thomas Financial Corp. 8.34 4.16 4.17 0.19 0.00 0.20 0.00 (0.01) 2.99 0.42
HZFS Horizon Financial Svcs Corp. 7.63 4.36 3.27 0.17 0.18 0.44 0.00 0.09 2.60 0.44
KYF Kentucky First Bancorp Inc. 7.16 3.58 3.58 0.01 0.00 0.15 0.00 0.00 2.14 0.41
MFBC MFB Corp. 7.29 4.14 3.15 0.01 (0.00) 0.17 0.00 0.00 1.93 0.44
NEIB Northeast Indiana Bancorp 7.75 4.16 3.59 0.13 0.00 0.26 0.00 (0.00) 1.75 0.28
SFFC StateFed Financial Corporation 7.83 4.36 3.47 0.03 (0.03) 0.09 0.00 (0.21) 1.53 0.36
THR Three Rivers Financial Corp. 7.55 3.77 3.78 0.07 0.06 0.49 0.01 (0.03) 2.96 0.47
Average 7.52 4.02 3.50 0.09 0.03 0.24 0.01 (0.01) 2.19 0.42
Median 7.59 4.16 3.50 0.08 0.00 0.18 0.00 (0.00) 2.03 0.43
High 8.34 4.36 4.17 0.19 0.18 0.49 0.03 0.13 2.99 0.49
Low 6.37 3.34 3.02 0.01 (0.03) 0.09 0.00 (0.21) 1.53 0.28
ALL THRIFTS (332)
Average 7.39 4.11 3.28 0.14 0.08 0.43 0.03 (0.00) 2.33 0.47
MIDWEST THRIFTS (155)
Average 7.42 4.15 3.27 0.10 0.08 0.43 0.02 (0.01) 2.20 0.44
INDIANA THRIFTS (23)
Average 7.59 4.27 3.32 0.17 0.11 0.46 0.01 0.00 2.31 0.43
</TABLE>
<TABLE>
<CAPTION>
Net Net Inc.
Income Before
Before Income ExtraordExtraord. Net Core
Taxes Taxes Items Items Income Income
(%) (%) (%) (%) (%) (%)
-----------------------------------------------------
SUBJECT
<S> <C> <C> <C> <C> <C> <C> <C>
CITIZENS SAVINGS BANK 1.26 0.42 0.83 0.00 0.83 1.12
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 0.57 0.15 0.43 0.00 0.43 0.71
CIBI Community Investors Bancorp 1.00 0.33 0.67 0.00 0.67 0.99
FBSI First Bancshares Inc. 1.42 0.51 0.91 0.00 0.91 1.12
FTSB Fort Thomas Financial Corp. 0.78 0.28 0.50 0.00 0.50 0.77
HZFS Horizon Financial Svcs Corp. 0.67 0.25 0.43 0.00 0.43 0.60
KYF Kentucky First Bancorp Inc. 1.17 0.37 0.80 0.00 0.80 1.07
MFBC MFB Corp. 0.93 0.37 0.56 0.00 0.56 0.85
NEIB Northeast Indiana Bancorp 1.69 0.65 1.04 0.00 1.04 1.22
SFFC StateFed Financial Corporation 1.60 0.56 1.04 0.00 1.04 1.29
THR Three Rivers Financial Corp. 0.85 0.28 0.57 0.00 0.57 0.83
Average 1.07 0.37 0.69 0.00 0.69 0.94
Median 0.97 0.35 0.62 0.00 0.62 0.92
High 1.69 0.65 1.04 0.00 1.04 1.29
Low 0.57 0.15 0.43 0.00 0.43 0.60
ALL THRIFTS (332)
Average 0.87 0.33 0.53 (0.00) 0.53 0.78
MIDWEST THRIFTS (155)
Average 1.02 0.36 0.67 (0.00) 0.67 0.90
INDIANA THRIFTS (23)
Average 0.98 0.34 0.64 0.00 0.64 0.84
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
YIELDS, COSTS AND EARNINGS RATIOS
TRAILING FOUR QUARTERS
<TABLE>
<CAPTION>
Yield on Cost of Net Net
Int. Earning Int. Bearing Interest Interest Core Core
Assets Liabilities Spread Margin * ROAA ROAA ROAE ROAE
(%) (%) (%) (%) (%) (%) (%) (%)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK 7.97 4.67 3.30 3.80 0.83 1.12 6.85 9.22
CLAS Classic Bancshares Inc. 6.61 4.27 2.34 3.14 0.43 0.71 2.05 3.40
CIBI Community Investors Bancorp 7.77 4.78 2.99 3.56 0.67 0.99 5.53 8.18
FBSI First Bancshares Inc. 7.88 5.05 2.83 3.54 0.91 1.12 5.96 7.33
FTSB Fort Thomas Financial Corp. 8.55 5.29 3.26 4.28 0.50 0.77 2.48 3.83
HZFS Horizon Financial Svcs Corp. 8.02 4.96 3.06 3.44 0.43 0.60 3.87 5.41
KYF Kentucky First Bancorp Inc. 7.32 4.55 2.77 3.66 0.80 1.07 3.95 5.23
MFBC MFB Corp. 7.43 5.04 2.39 3.21 0.56 0.85 3.38 5.10
NEIB Northeast Indiana Bancorp 7.87 5.08 2.79 3.65 1.04 1.22 6.00 7.06
SFFC StateFed Financial Corporation 8.23 5.43 2.80 3.64 1.04 1.29 5.61 6.99
THR Three Rivers Financial Corp. 7.83 4.50 3.33 3.92 0.57 0.83 3.91 5.71
Average 7.75 4.90 2.86 3.60 0.70 0.95 4.27 5.82
Median 7.85 5.00 2.82 3.60 0.62 0.92 3.93 5.56
High 8.55 5.43 3.33 4.28 1.04 1.29 6.00 8.18
Low 6.61 4.27 2.34 3.14 0.43 0.60 2.05 3.40
ALL THRIFTS (332)
Average 7.68 4.85 2.83 3.41 0.53 0.78 5.16 7.48
MIDWEST THRIFTS (155)
Average 7.68 4.96 2.72 3.38 0.67 0.90 5.47 7.44
INDIANA THRIFTS (23)
Average 7.89 4.99 2.89 3.45 0.64 0.85 5.27 6.91
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
DIVIDENDS, RESERVES AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
DIVIDENDS RESERVES AND SUPPLEMENTAL DATA - MOST RECENT PERIOD
* *
12 Month 12 Month Net
12 Month Common Current Dividend Reserves/ Reserves/Chargeoffs/Provisions/
Preferred Div./ Dividend Payout Gross Non-Perf. Average Net
Dividends Share Yield Ratio Loans Assets Loans Chargeoffs
($000) ($) (%) (%) (%) (%) (%) (%)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
CITIZENS SAVINGS BANK NA NA NA NA 0.45 83.90 0.00 0.00
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 0 0.20 2.00 40.63 0.99 68.31 0.34 55.88
CIBI Community Investors Bancorp 0 0.40 2.11 33.66 0.62 65.53 0.10 115.79
FBSI First Bancshares Inc. 0 0.20 0.99 16.95 0.35 88.44 0.02 285.71
FTSB Fort Thomas Financial Corp. 0 4.25 2.47 NM 0.57 25.00 0.00 NM
HZFS Horizon Financial Svcs Corp. 0 0.32 1.78 41.56 0.56 36.63 0.10 92.31
KYF Kentucky First Bancorp Inc. 0 3.50 4.60 648.15 0.77 295.31 0.00 NM
MFBC MFB Corp. 0 0.30 1.64 32.35 0.20 529.85 0.00 NM
NEIB Northeast Indiana Bancorp 0 0.32 2.07 33.70 0.71 126.20 0.02 737.50
SFFC StateFed Financial Corporation 0 0.40 2.19 37.04 0.37 NA NA NA
THR Three Rivers Financial Corp. 0 0.35 2.48 52.38 0.80 44.02 0.00 NM
Average 0 1.02 2.23 104.05 0.59 142.14 0.06 257.44
Median 0 0.33 2.09 37.04 0.60 68.31 0.02 115.79
High 0 4.25 4.60 648.15 0.99 529.85 0.34 737.50
Low 0 0.20 0.99 16.95 0.20 25.00 0.00 55.88
ALL THRIFTS (332)
Average 237 0.39 1.33 45.20 0.64 90.83 0.09 114.79
MIDWEST THRIFTS (155)
Average 43 0.50 1.82 70.30 0.71 146.48 0.07 174.80
INDIANA THRIFTS (23)
Average 0 0.61 1.98 85.32 0.75 165.64 0.11 138.52
</TABLE>
1 Year Total
Repricing Effective Assets/
Gap Tax Rate Employee
(%) (%) ($000)
-----------------------------------
SUBJECT
CITIZENS SAVINGS BANK NA 33.60 3,225
COMPARABLE GROUP
CLAS Classic Bancshares Inc. NA 35.01 NA
CIBI Community Investors Bancorp NA 33.78 NA
FBSI First Bancshares Inc. NA 38.29 2,581
FTSB Fort Thomas Financial Corp. 20.22 34.12 4,983
HZFS Horizon Financial Svcs Corp. NA 37.24 2,903
KYF Kentucky First Bancorp Inc. NA 30.65 4,042
MFBC MFB Corp. NA 39.65 3,841
NEIB Northeast Indiana Bancorp NA 38.94 4,549
SFFC StateFed Financial Corporation NA 35.51 NA
THR Three Rivers Financial Corp. NA 33.58 NA
Average 20.22 35.68 3,817
Median 20.22 35.26 3,941
High 20.22 39.65 4,983
Low 20.22 30.65 2,581
ALL THRIFTS (332)
Average -2.62 24.71 4,248
MIDWEST THRIFTS (155)
Average -4.74 31.05 4,023
INDIANA THRIFTS (23)
Average -10.03 34.72 3,953
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
VALUATION ANALYSIS AND CONCLUSIONS
Citizens Bancorp/Citizens Savings Bank of Frankfort
Stock Prices as of May 22, 1997
<TABLE>
<CAPTION>
Valuation assumptions: Comparable Group All Thrifts
Symbol Value Average Median Average Median
---------- --------------------------------------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Post conv. price to earnings P/E 16.16 24.35 21.58 29.60 22.01
Post conv. price to book value P/B 65.83% 99.32% 99.45% 128.80% 117.01%
Post conv. price to assets P/A 15.18% 14.35% 14.52% 15.46% 13.77%
Post conv. price to core earnings P/E 12.86 16.65 15.99 19.90 16.00
Pre conversion earnings ($) Y $ 367,000 For the twelve months ended March 31, 1997.
Pre conversion book value ($) B $ 5,564,000 At March 31, 1997.
Pre conversion assets ($) A $45,153,000 At March 31, 1997.
Pre conversion core earnings ($) $ 494,000 For the twelve months ended March 31, 1997.
Conversion expense ($) X $ 450,000
Proceeds not reinvested ($) Z $ 640,000 ESOP shares.
ESOP borrowings ($) E $ 640,000
ESOP cost of borrowings, net (%) S 5.70%
ESOP term of borrowings (yrs.) T 10
RRP amount ($) M $ 320,000
RRP expense ($) N $ 64,000
Tax rate (%) TAX 40.00%
Investment rate of return, net (%) R 3.49%
Investment rate of return, pretax (%) 5.82%
</TABLE>
Formulae to indicate value after conversion:
1. P/E method: Value = P/E(Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N))
$ = 8,003,083 1-(P/E)R
2. P/B method: Value = P/B(B-X-E-M) = $ 8,001,944 1-P/B
3. P/A method: Value = P/A(A-X) = $ 7,998,053 1-P/A
VALUATION CORRELATION AND CONCLUSIONS:
Number of Price TOTAL
Shares Per Share VALUE
------------- ------------- -------------
Appraised value - midrange 800,000 $10.00 $ 8,000,000
Minimum - 85% of midrange 680,000 $10.00 $ 6,800,000
Maximum - 115% of midrange 920,000 $10.00 $ 9,200,000
Superrange - 115% of maximum 1,058,000 $10.00 $ 10,580,000
P/E reconciliation: Midpoint Minimum Maximum Supermax
Appraised value 8,000,000 6,800,000 9,200,000 10,580,000
Value from P/E 6,800,000 9,200,000 10,580,000
Value from P/E - CORE 8,000,000 6,800,000 9,200,000 10,580,000
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
Premium
or
(discount)
from
comparable
group.
--------------------------
Citizens Average Median
Midpoint:
Price/earnings 16.x6 (33.62)% (25.10)%
Price/book value 65.%3 * (33.72)% (33.81)%
Price/assets 15.%8 5.76% 4.56%
Price/tangible book value 65.%2 (34.96)% (34.07)%
Price/core earnings 12.x6 (22.77)% (19.54)%
Minimum of range:
Price/earnings 14.x4 (41.09)% (33.53)%
Price/book value 61.%8 * (38.40)% (38.48)%
Price/assets 13.%0 (8.02)% (9.07)%
Price/tangible book value 61.%8 (39.55)% (38.72)%
Price/core earnings 11.x1 (32.07)% (29.22)%
Maximum of range:
Price/earnings 17.x3 (26.78)% (17.38)%
Price/book value 69.%3 * (29.79)% (29.88)%
Price/assets 17.%7 18.98% 17.62%
Price/tangible book value 69.%3 (31.10)% (30.16)%
Price/core earnings 14.x1 (14.09)% (10.49)%
Super maximum of range:
Price/earnings 19.x9 (19.56)% (9.23)%
Price/book value 73.%3 * (25.96)% (26.06)%
Price/assets 19.%5 33.45% 31.93%
Price/tangible book value 73.%3 (27.34)% (26.35)%
Price/core earnings 15.x6 (4.77)% (0.79)%
* Represents pricing ratio associated with primary valuation method.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
Stock Prices as of May 22, 1997
Market Data Pricing Ratios
---------------------------------- ------------------------------------------
Book Price/ Price/ Price/
Market Price/ 12 Mo. Value/ Price/ Book Price/ Tang. Core
Value Share EPS Share Earnings Value Assets Bk. Val.Earnings
($M) ($) ($) ($) (X) (%) (%) (%) (%)
---------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CITIZENS SAVINGS BANK OF FRANKFORT
Appraised value - midpoint 8.00 10.00 0.62 15.19 16.16 65.83 15.18 65.82 12.86
Minimum of range 6.80 10.00 0.70 16.35 14.34 61.18 13.20 61.18 11.31
Maximum of range 9.20 10.00 0.56 14.34 17.83 69.73 17.07 69.73 14.31
Superrange maximum 10.58 10.00 0.51 13.60 19.59 73.53 19.15 73.53 15.86
ALL THRIFTS (332)
Average 158.43 20.24 0.86 16.08 29.60 128.80 15.46 133.39 19.90
Median 44.27 17.75 0.82 15.19 22.01 117.01 13.77 117.72 16.00
INDIANA THRIFTS (23)
Average 41.68 19.34 0.87 16.26 33.20 122.33 14.43 123.39 30.02
Median 27.32 19.50 0.72 15.12 22.85 114.29 14.41 114.29 16.96
COMPARABLE GROUP (10)
Average 17.73 15.99 0.74 16.11 24.35 99.32 14.35 101.20 16.65
Median 14.34 16.75 0.73 16.48 21.58 99.45 14.52 99.84 15.99
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 18.52 14.00 0.32 14.48 43.75 96.69 14.42 115.04 21.93
CIBI Community Investors Bancorp 12.03 19.00 1.01 17.73 18.81 107.16 12.34 107.16 11.42
FBSI First Bancshares Inc. 23.00 20.13 1.18 19.80 17.06 101.64 14.59 101.80 13.27
FTSB Fort Thomas Financial Corp. 14.33 10.13 0.29 10.19 34.91 99.36 15.99 99.36 23.94
HZFS Horizon Financial Svcs Corp. 7.66 18.00 0.77 19.33 23.38 93.12 9.77 93.12 16.51
KYF Kentucky First Bancorp Inc. 14.35 10.88 0.54 10.86 20.14 100.14 16.13 100.14 16.67
MFBC MFB Corp. 33.82 19.50 0.68 19.59 28.68 99.54 14.44 99.54 19.75
NEIB Northeast Indiana Bancorp 27.32 15.50 0.92 14.87 16.85 104.24 15.81 104.24 13.89
SFFC StateFed Financial Corporation 14.30 18.25 1.08 19.00 16.90 96.05 16.91 96.05 13.70
THR Three Rivers Financial Corp. 11.94 14.50 0.63 15.23 23.02 95.21 13.10 95.58 15.46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dividends Financial Ratios
------------------------- -------------------------
Div./ DividendPayout Equity/ Core Core
Share Yield Ratio Assets ROAA ROAE
($) (%) (%) (%) (%) (%)
------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
CITIZENS SAVINGS BANK OF FRANKFORT
Appraised value - midpoint 0.00 0.00 0.00 23.06 0.94 4.07
Minimum of range 0.00 0.00 0.00 21.57 0.92 4.26
Maximum of range 0.00 0.00 0.00 24.48 0.96 3.91
Superrange maximum 0.00 0.00 0.00 26.04 0.98 3.75
ALL THRIFTS (332)
Average 0.52 1.79 64.70 12.86 0.78 7.48
Median 0.35 1.84 37.95 10.49 0.86 7.09
INDIANA THRIFTS (23)
Average 0.61 1.98 85.32 12.30 0.85 6.91
Median 0.32 1.65 37.07 12.07 0.88 6.42
COMPARABLE GROUP (10)
Average 1.02 2.23 36.03 14.45 0.95 5.82
Median 0.33 2.09 35.37 14.72 0.92 5.56
COMPARABLE GROUP
CLAS Classic Bancshares Inc. 0.20 2.00 40.63 14.92 0.71 3.40
CIBI Community Investors Bancorp 0.40 2.11 33.66 11.52 0.99 8.18
FBSI First Bancshares Inc. 0.20 0.99 16.95 14.35 1.12 7.33
FTSB Fort Thomas Financial Corp. 4.25 2.47 NM 16.09 0.77 3.83
HZFS Horizon Financial Svcs Corp. 0.32 1.78 41.56 10.50 0.60 5.41
KYF Kentucky First Bancorp Inc. 3.50 4.60 NM 16.11 1.07 5.23
MFBC MFB Corp. 0.30 1.64 32.35 14.51 0.85 5.10
NEIB Northeast Indiana Bancorp 0.32 2.07 33.70 15.16 1.22 7.06
SFFC StateFed Financial Corporation 0.40 2.19 37.04 17.60 1.29 6.99
THR Three Rivers Financial Corp. 0.35 2.48 52.38 13.76 0.83 5.71
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Citizens Bancorp/Citizens Savings Bank of Frankfort
At the MINIMUM of the Range
1. Gross Conversion Proceeds
Minimum market value $6,800,000
Less: Estimated conversion expenses 433,400
Net conversion proceeds $6,366,600
2. Generation of Additional Income
Net conversion proceeds $6,366,600
Less: Proceeds not invested (1) 544,000
Total conversion proceeds invested $5,822,600
Investment rate 3.49%
Earnings increase - return on proceeds invested $ 203,325
Less: Estimated cost of ESOP borrowings 31,008
Less: Amortization of ESOP borrowings, net of taxes 32,640
Less: RRP expense, net of taxes 32,640
Net earnings increase $ 107,037
3. Comparative Earnings
Regular Core
-------- --------
Before conversion - 12 months ended 03/31/97 $367,000 494,000
Net earnings increase 107,037 107,037
After conversion $474,037 601,037
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 5,564,000
Conversion proceeds 5,550,600
After conversion $11,114,600
5. Comparative Net Assets
Before conversion - 03/31/97 $45,153,000
Conversion proceeds 6,366,600
After conversion $51,519,600
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Citizens Bancorp/Citizens Savings Bank of Frankfort
At the MIDPOINT of the Range
1. Gross Conversion Proceeds
Midpoint market value $8,000,000
Less: Estimated conversion expenses 450,000
Net conversion proceeds $7,550,000
2. Generation of Additional Income
Net conversion proceeds $7,550,000
Less: Proceeds not invested (1) 640,000
Total conversion proceeds invested $6,910,000
Investment rate of return 3.49%
Earnings increase - return on proceeds invested $ 241,297
Less: Estimated cost of ESOP borrowings 36,480
Less: Amortization of ESOP borrowings, net of taxes 38,400
Less: RRP expense, net of taxes 38,400
Net earnings increase $ 128,017
3. Comparative Earnings
Regular Core
------- -------
Before conversion - 12 months ended 03/31/97 $367,000 494,000
Net earnings increase 128,017 128,017
After conversion $495,017 622,017
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 5,564,000
Conversion proceeds 6,590,000
After conversion $12,154,000
5. Comparative Net Assets
Before conversion - 03/31/97 $45,153,000
Conversion proceeds 7,550,000
After conversion $52,703,000
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Citizens Bancorp/Citizens Savings Bank of Frankfort
At the MAXIMUM of the Range
1. Gross Conversion Proceeds
Maximum market value $9,200,000
Less: Estimated conversion expenses 466,600
Net conversion proceeds $8,733,400
2. Generation of Additional Income
Net conversion proceeds $8,733,400
Less: Proceeds not invested (1) 736,000
Total conversion proceeds invested $7,997,400
Investment rate 3.49%
Earnings increase - return on proceeds invested $ 279,269
Less: Estimated cost of ESOP borrowings 41,952
Less: Amortization of ESOP borrowings, net of taxes 44,160
Less: RRP expense, net of taxes 44,160
Net earnings increase $ 148,997
3. Comparative Earnings
Regular Core
----------- -------
Before conversion - 12 months ended 03/31/97 $ 367,000 494,000
Net earnings increase 148,997 148,997
After conversion $ 515,997 642,997
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 5,564,000
Conversion proceeds 7,629,400
After conversion $13,193,400
5. Comparative Net Assets
Before conversion - 03/31/97 $45,153,000
Conversion proceeds 8,733,400
After conversion $53,886,400
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Citizens Bancorp/Citizens Savings Bank of Frankfort
At the SUPERRANGE Maximum
1. Gross Conversion Proceeds
Superrange market value $10,580,000
Less: Estimated conversion expenses 485,600
Net conversion proceeds $10,094,400
2. Generation of Additional Income
Net conversion proceeds $10,094,400
Less: Proceeds not invested (1) 846,400
Total conversion proceeds invested $ 9,248,000
Investment rate 3.49%
Earnings increase - return on proceeds invested $ 322,940
Less: Estimated cost of ESOP borrowings 48,245
Less: Amortization of ESOP borrowings, net of taxes 50,784
Less: RRP expense, net of taxes 50,784
Net earnings increase $ 173,127
3. Comparative Earnings
Regular Core
----------- -------
Before conversion - 12 months ended 03/31/97 $ 367,000 494,000
Net earnings increase 173,127 173,127
After conversion $ 540,127 667,127
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 5,564,000
Conversion proceeds 8,824,800
After conversion $14,388,800
5. Comparative Net Assets
Before conversion - 03/31/97 $45,153,000
Conversion proceeds 10,094,400
After conversion $55,247,400
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
Premium
or
(discount)
from
comparable
group.
-----------------------------
Citizens Average Median
Midpoint:
Price/earnings 16.x6 (33.62)% (25.10)%
Price/book value 65.%3 * (33.72)% (33.81)%
Price/assets 15.%8 5.76% 4.56%
Price/tangible book value 65.%2 (34.96)% (34.07)%
Price/core earnings 12.x6 (22.77)% (19.54)%
Minimum of range:
Price/earnings 14.x4 (41.09)% (33.53)%
Price/book value 61.%8 * (38.40)% (38.48)%
Price/assets 13.%0 (8.02)% (9.07)%
Price/tangible book value 61.%8 (39.55)% (38.72)%
Price/core earnings 11.x1 (32.07)% (29.22)%
Maximum of range:
Price/earnings 17.x3 (26.78)% (17.38)%
Price/book value 69.%3 * (29.79)% (29.88)%
Price/assets 17.%7 18.98% 17.62%
Price/tangible book value 69.%3 (31.10)% (30.16)%
Price/core earnings 14.x1 (14.09)% (10.49)%
Super maximum of range:
Price/earnings 19.x9 (19.56)% (9.23)%
Price/book value 73.%3 * (25.96)% (26.06)%
Price/assets 19.%5 33.45% 31.93%
Price/tangible book value 73.%3 (27.34)% (26.35)%
Price/core earnings 15.x6 (4.77)% (0.79)%
* Represents pricing ratio associated with primary valuation method.
<PAGE>
KELLER & COMPANY, INC
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 46017
(614) 766-1426
(614) 766-1459
PROFILE OF THE FIRM
KELLER & COMPANY, INC. is a full service consulting firm to financial
institutions, serving clients throughout the United States from its office in
Dublin, Ohio. The firm consults primarily in the areas of regulatory and
compliance matters, financial analysis and strategic planning, stock valuations
and appraisals, mergers and acquisitions, mutual to stock conversions,
conversion/mergers and branching. Since its inception in 1985, KELLER & COMPANY
has provided a wide range of consulting services to over 100 financial
institutions including thrifts, banks, mortgage companies and holding companies.
KELLER & COMPANY is an affiliate member of the Community Bankers of America,
Community Bankers Association of Ohio, the Ohio League of Financial
Institutions, and the Tri State League of Financial Institutions.
Each of the firm's senior consultants has over eighteen years front line
experience and accomplishment in various areas of the financial institution and
real estate industries. Each consultant provides to clients distinct and diverse
areas of expertise. Specific services and projects have included financial
institution charter and deposit insurance applications, market studies,
institutional mergers and acquisitions, branch sales and acquisitions,
operations and performance analyses, business plans, strategic planning,
financial projections and modeling, stock valuations, fairness opinions,
conversion appraisals, capital plans, policy development and revision, lending,
underwriting and investment criteria, data processing and management information
systems, and incentive compensation programs.
It is the goal of KELLER & COMPANY to provide specific and ongoing services that
are pertinent and responsive to the needs of the individual client institution
within the changing industry environment, and to offer those services at
reasonable fees on a timely basis. In recent years, KELLER & COMPANY has become
one of the leading consulting firms in the nation.
<PAGE>
CONSULTANTS IN THE FIRM
MICHAEL R. KELLER has over twenty years experience as a consultant to the
financial institution industry. Immediately following his graduation from
college, he was employed by the Ohio Division of Financial Institutions, working
for two years in the northeastern Ohio district as an examiner of financial
institutions before pursuing graduate studies at the Ohio State University.
Mr. Keller later worked as an associate for a management consulting firm
specializing in services to financial institutions. During his eight years with
the firm, he specialized in mergers and acquisitions, branch acquisitions and
sales, branch feasibility studies, stock valuations, charter applications, and
site selection analyses. By the time of his departure, he had attained the
position of vice president, with experience in almost all facets of banking
operations.
Prior to forming Keller & Company, Mr. Keller also worked as a senior consultant
in a larger consulting firm. In that position, he broadened his activities and
experience, becoming more involved with institutional operations, business and
strategic planning, regulatory policies and procedures, conversion appraisals,
and fairness opinions. Mr. Keller established the firm in November 1985 to
better serve the needs of the financial institution industry.
Mr. Keller graduated from Wooster College with a B.A. in Economics in 1972, and
later received an M.B.A. in Finance in 1976 from the Ohio State University where
he took two courses in corporate stock valuations.
<PAGE>
Consultants in the Firm (cont.)
JOHN A. SHAFFER has over twenty years experience in banking, finance, real
estate lending, and development.
From 1971 to 1974, Mr. Shaffer was employed by a large real estate investment
trust as a lending officer, specializing in construction and development loans.
By 1974, having gained experience in loan underwriting, management and workout,
he joined Chemical Association of New York and was appointed Vice President for
Loan Administration of Chemical Mortgage Company in Columbus, Ohio. At Chemical,
he managed all commercial and residential loan servicing, administering a
portfolio in excess of $1 billion. His responsibilities also included the
analysis, management and workout of problem commercial loans and properties, and
the structuring, negotiation, acquisition and sale of loan servicing and
mortgage and equity securities.
Mr. Shaffer later formed an independent real estate and financial consulting
firm, serving corporate and institutional clients, and also investing in and
developing real estate. His primary activities have included the planning,
analysis, financing, implementation, and administration of real estate projects,
as well as financial projection and modeling, cost and profit analysis, loan
management, budgeting, cash flow management and project design.
Mr. Shaffer graduated from Syracuse University with a B.S. in Business
Administration, later receiving an M.B.A. in Finance and a Ph.D. in Economics
from New York University.
<PAGE>
EXHIBIT B
RB 20
CERTIFICATION
I HEREBY CERTIFY THAT I HAVE NOT BEEN THE SUBJECT OF ANY CRIMINAL,
CIVIL OR ADMINISTRATIVE JUDGMENTS, CONSENTS, UNDERTAKINGS OR ORDERS, OR
ANY PAST ADMINISTRATIVE PROCEEDINGS (EXCLUDING ROUTINE OR CUSTOMARY
AUDITS, INSPECTIONS AND INVESTIGATION) ISSUED BY ANY FEDERAL OR STATE
COURT, ANY DEPARTMENT, AGENCY, OR COMMISSION OF THE U.S. GOVERNMENT,
ANY STATE OR MUNICIPALITY, ANY SELF-REGULATORY TRADE OR PROFESSIONAL
ORGANIZATION, OR ANY FOREIGN GOVERNMENT OR GOVERNMENTAL ENTITY, WHICH
INVOLVE:
(I) COMMISSION OF A FELONY, FRAUD, MORAL TURPITUDE, DISHONESTY OR
BREACH OF TRUST;
(II) VIOLATION OF SECURITIES OR COMMODITIES LAWS OR REGULATIONS;
(III) VIOLATION OF DEPOSITORY INSTITUTION LAWS OR REGULATIONS;
(IV) VIOLATION OF HOUSING AUTHORITY LAWS OR REGULATIONS;
(V) VIOLATION OF THE RULES, REGULATIONS, CODES OR CONDUCT OR
ETHICS OF A SELF-REGULATORY TRADE OR PROFESSIONAL
ORGANIZATION;
(VI) ADJUDICATION OF BANKRUPTCY OR INSOLVENCY OR APPOINTMENT OF A
RECEIVER, CONSERVATOR, TRUSTEE, REFEREE, OR GUARDIAN.
I HEREBY CERTIFY THAT THE STATEMENTS I HAVE MADE HEREIN ARE TRUE, COMPLETE AND
CORRECT TO THE BEST OF MY KNOWLEDGE AND BELIEF.
CONVERSION APPRAISER
June 10, 1997 /s/ MICHAEL R. KELLER
- ------------------------------ -------------------------------------
DATE MICHAEL R. KELLER
159
<PAGE>
AFFIDAVIT OF INDEPENDENCE
STATE OF OHIO,
COUNTY OF FRANKLIN, ss:
I, Michael R. Keller, being first duly sworn hereby depose and say
that:
The fee which I received directly from the applicant, Citizens Bancorp,
Frankfort, Indiana in the amount of $15,000 for the performance of my appraisal
was not related to the value determined in the appraisal and that the
undersigned appraiser is independent and has fully disclosed any relationships
which may have a material bearing upon the question of my independence; and that
any indemnity agreement with the applicant has been fully disclosed.
Further, affiant sayeth naught.
/s/ MICHAEL R. KELLER
-------------------------
MICHAEL R. KELLER
Sworn to before me and subscribed in my presence this 10th day of June,
1997.
/s/ Lori A. Kessen
-------------------------
NOTARY PUBLIC
[NOTARY STAMP]
LORI A. KESSEN
NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION EXPIRES AUG. 10, 2000
Exhibit 99(2)
Citizens Savings Bank Stock
of Frankfort Order
Form
----------------------------------------
Note: Please read the Stock Order Form
Instructions and Guide on the back as
you complete this form.
----------------------------------------
DEADLINE: The Subscription Offering will expire at 12:00 p.m.,local
time, on September ___, 1997, unless extended. The
Community Offering, if made, will commence after the
completion of the Subscription Offering and may terminate
at any time thereafter, but not later than October ___,
1997, unless extended.
- --------------------------------------------------------------------------------
(1) Number of Shares Purchase Price (2) Total Payment Due
- -------------------- X $10.00 = ---------------------
The minimum number of shares that may be subscribed for is 25 shares. Members of
Citizens Savings Bank of Frankfort ("Citizens") may subscribe in the
Subscription Offering for a maximum of 10,000 shares per eligible account.
Notwithstanding the foregoing sentence, the maximum number of shares which may
be purchased in the Subscription Offering by any subscribing member (including
such person's Associates) or group acting in concert is 30,000 shares. A member
who, together with his/her Associates and persons acting in concert, has
subscribed for shares in the Subscription Offering, may subscribe for a number
of additional shares in the Community Offering that does not exceed the lesser
of (i) 10,000 shares, or (ii) the number of shares which, when added to the
number of shares subscribed for by the member in the Subscription Offering,
would not exceed 30,000. The maximum number of shares which may be purchased in
the Community Offering by any person (including such person's Associates) or
persons acting in concert is 10,000 in the aggregate. See the Stock Order Form
Instructions and Guide on the back.
Important Subscription
Method of Payment Offering Information
----------------- --------------------
(3) |_| Enclosed is a check, bank (5) a|_| Eligible Account Holder -- Check
draft or money order made here if you were a depositor of at
payable to Citizens Savings least $50.00 at Citizens on December
Bank of Frankfort 31, 1995. Enter information below
("Citizens") in the for all deposit accounts that you
amount of: had at Citizens on December 31,
1995.
(5) b |_|Supplemental Eligible Account
- ------------------ Cash can be used Holder -- Check here if you were
$ only if presented a depositor of at least $50.00 at
in person at one Citizens on June 30, 1997, but
of Citizens' are not an Eligible Account
offices. Holder. Enter information below
- ------------------ for all deposit accounts that you
had at Citizens on June 30, 1997.
<PAGE>
(5) c |_|Other Member -- Check here if you
(4) |_| The undersigned authorizes were a depositor at Citizens on
withdrawal from this (these) July 25, 1997, but are not an
account(s) at Citizens. Eligible Account Holder or
Please contact the Stock Supplemental Account Holder.
Information Center if you
wish to use your IRA for
stock purchase.
Account Number Amount Account Title Deposit Loan Account
(Names on Accounts) Account Account Number
- ------------------------- ------------------------------------------------
$ [ ] [ ]
$ [ ] [ ]
$ [ ] [ ]
Total Withdrawal $ [ ] [ ]
Amount
-------- ------------------------------------------------
There is no penalty for early withdrawals used for
stock payment.
Important Direct Community Offering Information
(6) a [ ] Check here if you are a resident of Clinton County, Indiana.
Stock Registration (See back under Stock Ownership Guide)
(7) Form of Stock Ownership:
[ ] Individual [ ] Joint tenants with right of survivorship
[ ] Tenants in common [ ] Uniform Gifts Transfer to Minors
[ ] Fiduciary (i.e., trust estate, etc.) [ ] Corporation or Partnership
[ ] Other __________________________________________________
<PAGE>
- --------------------------------------------------------------------------------
(8) Name(s) in which your stock Social Security No. or Tax ID No.
is to be registered
(Please Print Clearly)
- --------------------------------------------------------------------------------
Name(s) continued
- --------------------------------------------------------------------------------
Street Address City County State Zip Code
- --------------------------------------------------------------------------------
(9) Telephone Information Daytime Phone ( ) Evening Phone ( )
---------------------------------------------------
(10) NASD Affiliation. |_| Check here if you are a member of the National
Association of Securities Dealers, Inc. ("NASD"), a person associated with a
NASD member, a member of the immediate family of any such person to whose
support such person contributes, directly or indirectly, or the holder of an
account in which an NASD member or person associated with an NASD member has a
beneficial interest. To comply with conditions under which an exemption from the
NASD's Interpretation With Respect to Free-Riding and Withholding is available,
you agree, if you have checked the NASD Affiliation box, (i) not to sell,
transfer or hypothecate the stock for a period of three months following
issuance, and (ii) to report this subscription in writing to the applicable NASD
member within one day of payment therefor.
(11) Acknowledgement. To be effective, this fully completed Stock Order Form
must be actually received together with an executed from of certification, by
Citizens no later than September ____, 1997, otherwise this Stock Order Form and
all subscription rights will be void. All Stock Order Forms submitted in the
Subscription Offering must be actually received by Citizens no later than 12:00
p.m., local time, on September ____, 1997, unless extended. If there is a
Community Offering, it will begin after September ___, 1997, and may end at any
time but no later than October ___, 1997, unless extended. Completed Stock
Order Forms, together with the required payment or withdrawal authorization and
form of Certification, may be delivered to Citizens 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 ("Plan of
Conversion") of Citizens described in the accompanying Subscription and
Community Offering Prospectus dated July ____, 1997. The undersigned
acknowledges receipt of such Prospectus. If the Plan of Conversion is not
approved by the voting members of Citizens at a Special Meeting to be held on
September ___, 1997, or any adjournment thereof, all orders will be cancelled
and funds received as payment, with accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Citizens, this Stock Order Form may
not be modified, withdrawn or cancelled (unless the conversion is not completed
with 45 days of the completion of the Subscription Offering) without Citizens'
consent and if authorization to withdraw from deposit accounts at Citizens 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, the undersigned certifies that the Social
Security or Tax ID Number and the information provided in this Stock Order Form
are true, correct and complete, that he/she is not subject to back-up
withholding and that he/she is purchasing for his/her own account and that there
is no agreement or understanding regarding the transfer of his/her subscription
rights or the sale or transfer of these shares.
Applicable State and Federal regulations prohibit any person from
transferring or entering into any agreement directly or indirectly to transfer
the legal or beneficial ownership of subscription rights, or the underlying
securities to the account of another. Citizens will pursue any and all legal and
equitable remedies in the event it becomes aware of the transfer of subscription
rights and will not honor orders known by it to involve such transfer.
<PAGE>
The undersigned acknowledges that the common stock offered is not a savings
or deposit account and is not insured by the Savings Association Insurance Fund,
the Bank Insurance Fund, the Federal Deposit Insurance Corporation, or any other
government agency.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED BELOW AND ACCOMPANIED BY A
SIGNED AND DATED FORM OF CERTIFICATION.
- --------------------------------------------------------------------------------
(12) Signature Date Signature Date
- --------------------------------------------------------------------------------
FOR OFFICE USE ONLY STOCK INFORMATION CENTER
- ------------------------------------- Citizens Savings Bank
Date Received ______/______/______ of Frankfort
60 South Main Street
Category _______________ P.O. Box 635
Frankfort, Indiana 47041
- ------------------------------------- (765)659-5708
Order #__________ Deposit __________
Batch #__________ Date Input ____/____/____
- --------------------------------------------------------------------------------
<PAGE>
CITIZENS SAVINGS BANK OF FRANKFORT
-----------------------------------------------------------
SUBSCRIPTION AND DIRECT COMMUNITY OFFERING
STOCK ORDER FORM INSTRUCTIONS AND GUIDE
------------------------------------------------------------
- ---------------------
Stock Ownership Guide
- ---------------------
Individual
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership rights,
such as "Mrs.," "Mr.," "Dr.," "special account," "single person," etc.
Joint Tenants with Right of Survivorship
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
Tenants in Common
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.
Uniform Transfer to Minors
Stock may be held in the name of a custodian for a minor under the Uniform
Transfer to Minors Acts of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for Custodian
is "CUST," while the Uniform Transfer to Minors Act is "Unif Tran Min Act."
Standard U.S. Postal Service state abbreviation should be used to describe the
appropriate state. For example, stock held by John Doe as custodian for Susan
Doe under the Indiana Uniform Transfer to Minors Act will be abbreviated John
Doe, CUST Susan Doe Unif Tran Min Act, IN (use minor's social security number).
Fiduciaries
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
* The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation list the corporation's title
before the individual.
* The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
* A copy and description of the document governing the fiduciary
relationship, such as living trust agreement or court order. Without
documentation establishing a fiduciary relationship, your stock may not be
registered in a fiduciary capacity.
* The date of the document governing the relationship except that the date of
a trust created by a will need not be included in the description.
* The name of the maker, donor, or testator and the name of the beneficiary.
<PAGE>
An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee Under Agreement Dated 10-1-87 for Susan Doe.
You may mail your completed Stock Order Form in the envelope that has been
provided, or you may deliver your Stock Order Form to Citizens' office. If you
are purchasing in the Subscription Offering, your properly completed Stock Order
Form and executed Certification, together with payment in full (or withdrawal
authorization) at the Purchase Price, must be received by Citizens no later than
12:00 p.m. Frankfort, Indiana, time, on September ___, 1997. If there is a
Community Offering, it will commence after that time and may end at any time but
not later than October ___, 1997, unless extended. Stock Order Forms shall be
deemed received only upon actual receipt at Citizens' office.
If you need further assistance, please call the Stock Information Center at
(765) 659-5708. We will be pleased to help you with the completion of your Stock
Order Form or answer any questions you may have.
<PAGE>
Item Instructions
Items 1 and 2 -
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares purchased
by the Purchase Price of $10.00 per share. The minimum purchase is 25 shares.
Members of Citizens may subscribe in the Subscription Offering for a maximum of
10,000 shares per eligible account and/or eligible loan. Notwithstanding the
foregoing sentence, the maximum number of shares which may be purchased in the
Subscription Offering by any subscribing member (including such person's
Associates) or group acting in concert is 30,000 shares. A member who, together
with his/her Associates and persons acting in concert, has subscribed for shares
in the Subscription Offering may subscribe for a number of additional shares in
the Direct Community Offering that does not exceed the lesser of (i) 10,000
shares, or (ii) the number of shares which, when added to the number of shares
subscribed for by the member in the Subscription Offering, would not exceed
30,000. The maximum number of shares which may be purchased in the Direct
Community Offering by any person (including such person's Associates) or persons
acting in concert is 10,000 in the aggregate. Citizens reserves the right to
reject any order received in the Community Offering, in whole or in part.
Item 3 -
Payment for shares may be made in cash (only if delivered by you in person) or
by check, bank draft or money order made payable to Citizens. Your funds will
earn interest at Citizens' passbook rate until the conversion is completed or
terminated. DO NOT MAIL CASH TO PURCHASE STOCK! Please check this box if your
method of payment is by cash, check , bank draft or money order.
Item 4 -
If you pay for your stock by a withdrawal from a Citizens deposit account,
insert the account number(s) and the amount of your withdrawal authorization for
each account. The total amount withdrawn should equal the amount of your stock
purchase. There will be no penalty assessed for early withdrawals from
certificate accounts used for stock purchases. This form of payment may not be
used if your account is an Individual Retirement Account. Please contact the
Stock Information Center for information regarding purchases from an Individual
Retirement Account.
Item 5 -
a. Please check this box if you are a depositor of Citizens as of December 31,
1995 (Eligible Account Holder). You must list the full title and account numbers
of all accounts you had at these dates in order to ensure proper identification
of your subscription rights and to receive credit for your qualifying deposits.
b. Please check this box if you are a depositor of Citizens on June 30, 1997
(Supplemental Eligible Account Holder). You must list the name of all deposit
accounts you had on this date in order to ensure proper identification of your
subscription rights and to receive credit for your qualifying deposits.
c. Please check this box if you were a depositor on July 25, 1997, but are not
an Eligible Account Holder or Supplemental Eligible Account Holder. You must
list the full title and account numbers of all accounts that you had on July 25,
1997, in order to ensure proper identification of your subscription rights.
Item 6 -
Please check the box if you are a resident of Clinton County, Indiana.
Items 7, 8 and 9 -
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your common stock. Please
complete items 6, 7 and 8 as fully and accurately as possible, and be certain to
supply your social security number or tax identification number and your daytime
and evening telephone number(s). If you have any questions or concerns regarding
the registration of your stock, please consult your legal advisor. Stock
ownership must be registered in one of the ways described under "Stock Ownership
Guide."
Item 10 -
Please check this box if you are a member of the NASD or if this item otherwise
applies to you.
Items 11 and 12 -
Please sign and date the Stock Order Form where indicated. Review the Stock
Order form carefully before you sign, including the acknowledgement. Normally,
one signature is required. An additional signature is required only when payment
is to be made by withdrawal from a deposit account that requires multiple
signatures to withdraw funds. If you have any remaining questions, or if you
would like assistance in completing your Stock Order Form, you may call the
Stock Information Center. The Stock Information Center phone number is (765)
659-5708. The Stock Information Center is open between the hours of 9:00 a.m.
and 4:30 p.m., Monday through Wednesday, 9:00 a.m. to 12:00 noon p.m. on
Thursday, and 9:00 a.m. and 6:00 p.m. on Friday.
A valid stock order form must be signed and dated on the front of this
form.
<PAGE>
FORM OF CERTIFICATION
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR AN ACCOUNT AND IS
NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY CITIZENS SAVINGS BANK OF
FRANKFORT, 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 Regional Director, Ronald N. Karr at (312) 565-5300.
I further certify that, before purchasing the common stock, without par
value, of Citizens Bancorp, I received an offering circular (also known as the
prospectus).
The offering circular that I 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. Lack of Active Market for Common Stock (page 1)
2. Decreased Return on Average Equity and Increased Expenses
Immediately After Conversion (page 1)
3. Potential Impact of Changes in Interest Rates and Current
Interest Rate Environment (page 1)
4. Nonresidential Real Estate and Multi-Family Lending (page 1)
5 Dependence on President and Possible New Management (page 2)
6 Potential Impact of Future Changes in or the Discontinuance of
the Business of Citizens' Subsidiary (page 2)
7. Intent to Remain Independent (page 2)
8 Anti-Takeover Provisions and Statutory Provisions that Could
Discourage Hostile Acquisitions of Control (page 2)
9. Potential Voting Control by Directors and Officers (page 2)
10. Possible Dilutive Effect of RRP and Stock Options (page 3)
11. Financial Institution Regulation and Future of the Thrift
Industry (page 3)
12. Restrictions on Repurchase of Shares (page 3)
13. Competition (page 3)
14. Geographic Concentration of Loans (page 3)
15. Risk of Delayed Offering (page 3)
16. Income Tax Consequences of Subscription Rights (page 3).
Signature:___________________________________________
Date: _______________________________________________
