As filed with the Securities and Exchange Commission on August 6, 1997
Registration No. 333-30051
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
(INCLUDING EXHIBITS)
OREGON TRAIL FINANCIAL CORP.
(Exact name of registrant as specified in charter)
Oregon 6035 91-1829481
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
2055 FIRST STREET
BAKER CITY, OREGON 97814
(541) 523-6327
(Address and telephone number of principal executive offices)
John F. Breyer, Jr., Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
Suite 470 East 1300 I Street,
N.W.
Washington, D.C. 20005
(Name and address of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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Calculation of Registration Fee
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Title of Each Class of Securities Proposed Maximum Proposed Offering Proposed Maximum Amount of
Being Registered Amount Being Price(1) Aggregate Offering Registration Fee
Registered(1) Price(1)
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Common Stock, $0.01 Par Value 4,694,875 $10.00 $46,948,750 $14,227(2)
Participation interests 240,000 -- -- (3)
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(1) Estimated solely for purposes of calculating the registration fee. As
described in the Prospectus, the actual number of shares to be issued and sold
are subject to adjustment based upon the estimated pro forma market value of the
registrant and market and financial conditions.
(2) $13,266 was previously paid.
(3) The securities of Oregon Trail Financial Corp. to be purchased by the
Pioneer Bank, A Federal Savings Bank 401(k) Plan are included in the amount
shown for Common Stock. Accordingly, pursuant to Rule 457(h) of the Securities
Act of 1933, as amended, no separate fee is required for the participation
interests. Pursuant to such rule, the amount being registered has been
calculated on the basis of the number of shares of Common Stock that may be
purchased with the current assets of such Plan.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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Cross Reference Sheet showing the location in the Prospectus
of the Items of Form S-1
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1. Forepart of the Registration Forepart of the Registration Statement;
Statement and Outside Front Outside Front Cover Page
Cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back
Cover Pages of Prospectus Cover Page
3. Summary Information, Risk Factors Prospectus Summary; Risk Factors
and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Use of Proceeds; Capitalization
5. Determination of Offering Price Market for Common Stock
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution The Conversion
9. Description of Securities to be Description of Capital Stock
Registered
10. Interests of Named Experts and Legal and Tax Opinions; Experts
Counsel
11. Information with Respect to the
Registrant
(a) Description of Business Business of the Holding Company;
Business of the Savings Bank
(b) Description of Property Business of the Savings Bank -- Properties
(c) Legal Proceedings Business of the Savings Bank -- Legal
Proceedings
(d) Market Price of and Dividends Outside Front Cover Page; Market for
on the Registrant's Common Equity Common Stock; Dividend Policy
and Related Stockholder Matters
(e) Financial Statements Financial Statements; Pro Forma Data
(f) Selected Financial Data Selected Financial and Other Data
(g) Supplementary Financial *
Information
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(h) Management's Discussion and Management's Discussion and Analysis of
Analysis of Financial Condition Financial Condition and Results of Operations
and Results of Operations
(i) Changes in and Disagreements *
with Accountants on Accounting
and Financial Disclosure
(j) Directors and Executive Management of the Holding Company; Management of
Officers the Savings Bank
(k) Executive Compensation Management of the Holding Company; Management of
the Savings Bank -- Benefits -- Executive Compensation
(l) Security Ownership of Certain *
Beneficial Owners and Management
(m) Certain Relationships and Management of the Savings Bank -- Transactions with
Related Transactions the Savings Bank
12. Disclosure of Commission Position Part II - Item 17
on Indemnification for Securities
Act Liabilities
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*Item is omitted because answer is negative or item inapplicable.
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PROSPECTUS SUPPLEMENT
OREGON TRAIL FINANCIAL CORP.
PIONEER BANK, FSB
PROFIT SHARING 401(K) PLAN
This Prospectus Supplement relates to the offer and sale to participants
("Participants") in the Pioneer Bank, FSB Profit Sharing 401(k) Plan ("Plan" or
"401(k) Plan") of participation interests and shares of Oregon Trail Financial
Corp. common stock, par value $.01 per share ("Common Stock"), as set forth
herein.
In connection with the proposed conversion of Pioneer Bank, FSB ("Savings
Bank" or "Employer") from a federally chartered mutual savings bank to a
federally chartered stock savings bank, a holding company, Oregon Trail
Financial Corp. ("Holding Company"), has been formed. The simultaneous
conversion of the Savings Bank to stock form, the issuance of the Savings Bank's
common stock to the Holding Company and the offer and sale of the Holding
Company's Common Stock to the public are herein referred to as the "Conversion."
Applicable provisions of the 401(k) Plan permit the investment of the Plan
assets in Common Stock of the Holding Company at the direction of a Plan
Participant. This Prospectus Supplement relates to the election of a Participant
to direct the purchase of Common Stock in connection with the Conversion.
The Prospectus dated ______, 1997 of the Holding Company ("Prospectus")
which is attached to this Prospectus Supplement includes detailed information
with respect to the Conversion, the Common Stock and the financial condition,
results of operation and business of the Savings Bank and the Holding Company.
This Prospectus Supplement, which provides detailed information with respect to
the Plan, should be read only in conjunction with the Prospectus. Terms not
otherwise defined in this Prospectus Supplement are defined in the Plan or the
Prospectus.
A PARTICIPANT'S ELIGIBILITY TO PURCHASE COMMON STOCK IN THE CONVERSION
THROUGH THE PLAN IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE
SHARES OF COMMON STOCK IN THE CONVERSION AND THE MAXIMUM AND MINIMUM LIMITATIONS
SET FORTH IN THE PLAN OF CONVERSION. SEE "THE CONVERSION" AND "-- LIMITATIONS ON
PURCHASES OF SHARES" IN THE PROSPECTUS.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS" IN THE PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is ______, 1997.
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No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Holding Company, the Savings Bank or the Plan. This Prospectus
Supplement does not constitute an offer to sell or solicitation of an offer to
buy any securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus Supplement and the Prospectus nor any sale made hereunder shall
under any circumstances create any implication that there has been no change in
the affairs of the Savings Bank or the Plan since the date hereof, or that the
information herein contained or incorporated by reference is correct as of any
time subsequent to the date hereof. This Prospectus Supplement should be read
only in conjunction with the Prospectus that is attached herein and should be
retained for future reference.
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TABLE OF CONTENTS
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PAGE
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The Offering
Securities Offered.......................................................
Election to Purchase Common Stock in the Conversion......................
Value of Participation Interests.........................................
Method of Directing Transfer.............................................
Time for Directing Transfer..............................................
Irrevocability of Transfer Direction.....................................
Direction to Purchase Common Stock After the Conversion..................
Purchase Price of Common Stock...........................................
Nature of a Participant's Interest in the Holding Company Common Stock...
Voting and Tender Rights of Common Stock.................................
Description of the Plan
Introduction.............................................................
Eligibility and Participation............................................
Contributions Under the Plan.............................................
Limitations on Contributions.............................................
Investment of Contributions..............................................
The Employer Stock Fund..................................................
Benefits Under the Plan..................................................
Withdrawals and Distributions from the Plan..............................
Administration of the Plan...............................................
Reports to Plan Participants.............................................
Plan Administrator.......................................................
Amendment and Termination................................................
Merger, Consolidation or Transfer........................................
Federal Income Tax Consequences..........................................
Restrictions on Resale...................................................
Legal Opinions..................................................................
Investment Form.................................................................
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THE OFFERING
SECURITIES OFFERED
The securities offered hereby are participation interests in the Plan
and up to ______ shares, at the actual purchase price of $10.00 per share, of
Common Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan. The Holding Company is the issuer of the Common
Stock. Only employees and former employees of the Savings Bank and their
beneficiaries may participate in the Plan. Information with regard to the Plan
is contained in this Prospectus Supplement and information with regard to the
Conversion and the financial condition, results of operation and business of the
Savings Bank and the Holding Company is contained in the attached Prospectus.
The address of the principal executive office of the Savings Bank is 2055 First
Street, Baker City, Oregon 97814. The Savings Bank's telephone number is (541)
523-6327.
ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION
In connection with the Savings Bank's Conversion, each Participant in
the 401(k) Plan may direct the trustees of the Plan (collectively, the
"Trustees") to transfer up to ___% of a Participant's beneficial interest in the
assets of the Plan to a newly created Employer Stock Fund and to use such funds
to purchase Common Stock issued in connection with the Conversion. Amounts
transferred may include salary deferral, Employer matching and profit sharing
contributions. The Employer Stock Fund will consist of investments in the Common
Stock made on or after the effective date of the Conversion. Funds not
transferred to the Employer Stock Fund will be invested at the Participant's
discretion in the other investment options available under the Plan. See
"DESCRIPTION OF THE PLAN -- INVESTMENT OF CONTRIBUTIONS" below. A PARTICIPANT'S
ABILITY TO TRANSFER FUNDS TO THE EMPLOYER STOCK FUND IN THE CONVERSION IS
SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE SHARES OF COMMON
STOCK IN THE CONVERSION. FOR GENERAL INFORMATION AS TO THE ABILITY OF THE
PARTICIPANTS TO PURCHASE SHARES IN THE CONVERSION, SEE "THE CONVERSION -- THE
SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS" IN THE
ATTACHED PROSPECTUS.
VALUE OF PARTICIPATION INTERESTS
The assets of the Plan are valued on an ongoing basis and each
Participant is informed of the value of his or her beneficial interest in the
Plan on a _______ basis. This value represents the market value of past
contributions to the Plan by the Savings Bank and by the Participants and
earnings thereon, less previous withdrawals, and transfers from the Savings
Fund.
METHOD OF DIRECTING TRANSFER
The last page of this Prospectus Supplement is an investment form to
direct a transfer to the Employer Stock Fund ("Investment Form"). If a
Participant wishes to transfer funds to the Employer Stock Fund to purchase
Common Stock issued in connection with the Conversion, the
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Participant should indicate that decision in Part 2 of the Investment Form. If a
Participant does not wish to make such an election, he or she does not need to
take any action.
TIME FOR DIRECTING TRANSFER
THE DEADLINE FOR SUBMITTING A DIRECTION TO TRANSFER AMOUNTS TO THE
EMPLOYER STOCK FUND IN ORDER TO PURCHASE COMMON STOCK ISSUED IN CONNECTION WITH
THE CONVERSION IS _____, 1997. The Investment Form should be returned to
___________ at the Savings Bank no later than the close of business on such
date.
IRREVOCABILITY OF TRANSFER DIRECTION
A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Conversion shall be
irrevocable. Participants, however, will be able to direct the sale of Common
Stock, as explained below.
DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION
After the Conversion, a Participant will be able to direct that a
certain percentage of such Participant's interests in the trust assets ("Trust")
be transferred to the Employer Stock Fund and invested in Common Stock, or to
the other investment funds available under the Plan. Alternatively, a
Participant may direct that a certain percentage of such Participant's interest
in the Employer Stock Fund be transferred from the Employer Stock Fund to other
investment funds available under the Plan. Participants will be permitted to
direct that future contributions made to the Plan by or on their behalf be
invested in Common Stock. Following the initial election, the allocation of a
Participant's interest in the Employer Stock Fund may be changed by the
Participant on a _______ basis. Special restrictions may apply to transfers
directed by those Participants who are executive officers, directors and
principal stockholders of the Holding Company who are subject to the provisions
of Section 16(b) of the Securities and Exchange Act of 1934, as amended
("Exchange Act").
PURCHASE PRICE OF COMMON STOCK
The funds transferred to the Employer Stock Fund for the purchase of
Common Stock in connection with the Conversion will be used by the Trustees to
purchase shares of Common Stock. The price paid for such shares of Common Stock
will be the same price as is paid by all other persons who purchase shares of
Common Stock in the Conversion.
NATURE OF A PARTICIPANT'S INTEREST IN THE HOLDING COMPANY STOCK
The Holding Company Stock purchased for an account of a Participant
will be held in the name of the Trustees of the Plan in the Employer Stock Fund.
Any earnings, losses or expenses with respect to the Holding Company Stock,
including dividends and appreciation or depreciation
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in value, will be credited or debited to the account and will not be credited to
or borne by any other accounts.
VOTING AND TENDER RIGHTS OF COMMON STOCK
The Trustees generally will exercise voting and tender rights
attributable to all Common Stock held by the Trust as directed by Participants
with an interest in the Employer Stock Fund. With respect to each matter as to
which holders of Common Stock have the right to vote, each Participant will be
allocated a number of voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund. The percentage of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
or negative on each matter shall be the same percentage of the total number of
voting instruction rights that are exercised in either the affirmative or
negative, respectively.
DESCRIPTION OF THE PLAN
INTRODUCTION
The Savings Bank adopted the Plan effective April 1, 1996 as an
amendment and restatement of the Savings Bank's prior retirement plan. The Plan
is a cash or deferred arrangement established in accordance with the requirement
under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as
amended ("Code").
The Savings Bank intends that the Plan, in operation, will comply with
the requirements under Section 401(a) and Section 401(k) of the Code. The
Savings Bank will adopt any amendments to the Plan that may be necessary to
ensure the qualified status of the Plan under the Code and applicable Treasury
Regulations. The Savings Bank has received a determination from the Internal
Revenue Service ("IRS") that the Plan is qualified under Section 401(a) of the
Code and that it satisfies the requirements for a qualified cash or deferred
arrangement under Section 401(k) of the Code.
EMPLOYEE RETIREMENT INCOME SECURITY ACT. The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As
such, the Plan is subject to all of the provisions of Title I (Protection of
Employee Benefit Rights) and Title II (Amendments to the Internal Revenue Code
Relating to Retirement Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by their terms do not apply to an
individual account plan (other than a money purchase pension plan). The Plan is
not subject to Title IV (Plan Termination Insurance) of ERISA. Neither the
funding requirements contained in Title IV of ERISA nor the plan termination
insurance provisions contained in Title IV will be extended to Participants or
beneficiaries under the Plan.
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APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL
RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS
OR HER BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF
EMPLOYMENT WITH THE SAVINGS BANK. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE
IMPOSED ON WITHDRAWALS MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2,
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THIS PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE SAVINGS BANK OR
AFTER TERMINATION OF EMPLOYMENT.
REFERENCE TO FULL TEXT OF PLAN. THE FOLLOWING STATEMENTS ARE SUMMARIES
OF THE MATERIAL PROVISIONS OF THE PLAN. THEY ARE NOT COMPLETE AND ARE QUALIFIED
IN THEIR ENTIRETY BY THE FULL TEXT OF THE PLAN, WHICH IS FILED AS AN EXHIBIT TO
THE REGISTRATION STATEMENT FILED WITH THE SEC. COPIES OF THE PLAN ARE AVAILABLE
TO ALL EMPLOYEES BY FILING A REQUEST WITH THE PLAN ADMINISTRATOR. EACH EMPLOYEE
IS URGED TO READ CAREFULLY THE FULL TEXT OF THE PLAN.
ELIGIBILITY AND PARTICIPATION
Any employee of the Savings Bank is eligible to participate and will
become a Participant in the Plan following completion of six months of service
with the Savings Bank. The Plan fiscal year is period April 1 through March 31
("Plan Year"). Directors who are not employees of the Savings Bank are not
eligible to participate in the Plan.
During 1996, approximately _____ employees participated in the Plan.
CONTRIBUTIONS UNDER THE PLAN
PARTICIPANT CONTRIBUTIONS. Each Participant in the Plan is permitted to
elect to reduce such Participant's Compensation (as defined below) pursuant to a
salary reduction agreement and have that amount contributed to the Plan on such
Participant's behalf. Such amounts are credited to the Participant's deferral
contributions account. For purposes of the Plan, "Compensation" means a
Participant's total amount of earnings reportable W-2 wages for federal income
tax withholding purposes plus a Participant's elective deferrals pursuant to a
salary reduction agreement under the Plan or any elective deferrals to a Section
125 plan. Due to recent statutory changes, the annual Compensation of each
Participant taken into account under the Plan is limited to $160,000 (as
adjusted under applicable Code provisions). A Participant may elect to modify
the amount contributed to the Plan under the participant's salary reduction
agreement during the Plan Year. Deferral contributions are generally transferred
by the Savings Bank to the Trustees of the Plan on a periodic basis.
EMPLOYER CONTRIBUTIONS. The Savings Bank currently matches employee
deferral contributions on a discretionary basis. Additional contributions may
also be made on a discretionary basis in proportion to each Participant's
Compensation.
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LIMITATIONS ON CONTRIBUTIONS
LIMITATIONS ON ANNUAL ADDITIONS AND BENEFITS. Pursuant to the
requirements of the Code, the Plan provides that the amount of contributions
allocated to each Participant's Account during any Plan Year may not exceed the
lesser of 25% of the Participant's "Section 415 Compensation" for the Plan Year
or $30,000 (as adjusted under applicable Code provisions). A Participant's
"Section 415 Compensation" is a Participant's Compensation, excluding any amount
contributed to the Plan under a salary reduction agreement or any employer
contribution to the Plan or to any other plan or deferred compensation or any
distributions from a plan of deferred compensation. In addition, annual
additions are limited to the extent necessary to prevent the limitations for the
combined plans of the Savings Bank from being exceeded. To the extent that these
limitations would be exceeded by reason of excess annual additions to the Plan
with respect to a Participant, the excess must be reallocated to the remaining
Participants who are eligible for an allocation of Employer contributions for
the Plan Year.
LIMITATION ON 401(K) PLAN CONTRIBUTIONS. The annual amount of deferred
compensation of a Participant (when aggregated with any elective deferrals of
the Participant under any other employer plan, a simplified employee pension
plan or a tax-deferred annuity) may not exceed $9,500 (as adjusted under
applicable Code provisions). Contributions in excess of this limitation ("excess
deferrals") will be included in the Participant's gross federal income tax
purposes in the year they are made. In addition, any such excess deferral will
again be subject to federal income tax when distributed by the Plan to the
Participant, unless the excess deferral (together with any income allocable
thereto) is distributed to the Participant not later than the first April 15th
following the close of the taxable year in which the excess deferral is made.
Any income on the excess deferral that is distributed not later than such date
shall be treated, for federal income tax purposes, as earned and received by the
Participant in the taxable year in which the excess deferral is made.
LIMITATION ON PLAN CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES.
Sections 401(k) and 401(m) of the Code limit the amount of deferred compensation
contributed to the Plan in any Plan Year on behalf of Highly Compensated
Employees (defined below) in relation to the amount of deferred compensation
contributed by or on behalf of all other employees eligible to participate in
the Plan. Specifically, the actual deferral percentage for a Plan Year (i.e.,
the average of the ratios, calculated separately for each eligible employee in
each group, by dividing the amount of salary reduction contributions credited to
the salary reduction contribution account of such eligible employee by such
employee's compensation for the Plan Year) of the Highly Compensated Employees
may not exceed the greater of (a) 125% of the actual deferred percentage of all
other eligible employees, or (b) the lesser of (i) 200% of the actual deferred
percentage of all other eligible employees, or (ii) the actual deferral
percentage of all other eligible employees plus two percentage points. In
addition, the actual contribution percentage for a Plan Year (i.e., the average
of the ratios calculated separately for each eligible employee in each group, by
dividing the amount of employer contributions credited to the Matching
contributions account of such eligible employee by each eligible employee's
compensation for the Plan Year) of the Highly Compensated Employees may not
exceed the greater of (a) 125% of the actual
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contribution percentage of all other eligible employees, or (b) the lesser of
(i) 200% of the actual contributions percentage of all other eligible employees,
or (ii) the actual contribution percentage of all other eligible employees plus
two percentage points.
In general, a Highly Compensated Employee includes any employee who,
during the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner
(i.e., owns directly or indirectly more than 5% of the stock of the Employer, or
stock possessing more than 5% of the total combines voting power of all stock of
the Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted under applicable Code provisions)
and, if elected by the Savings Bank, was in the top paid group of employees for
such Plan Year.
In order to prevent disqualification of the Plan, any amounts
contributed by Highly Compensated Employees that exceed the average deferral
limitation in any Plan Year ("excess contributions"), together with any income
allocable thereto, must be distributed to such Highly Compensated Employees
before the close of the following Plan Year. However, the Savings Bank will be
subject to a 10% excise tax on any excess contributions unless such excess
contributions, together with any income allocable thereto, either are
recharacterized or are distributed before the close of the first 2 1/2 months
following the Plan Year to which such excess contributions relate. In addition,
in order to avoid disqualification of the Plan, any contributions by Highly
Compensated Employees that exceed the average contribution limitation in any
Plan Year ("excess aggregate contributions") together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the 10% excise tax will be imposed on
the Savings Bank with respect to any excess aggregate contributions, unless such
amounts, plus any income allocable thereto, are distributed within 2 1/2 months
following the close of the Plan Year in which they arose.
TOP-HEAVY PLAN REQUIREMENTS. If, for any Plan Year, the Plan is a
Top-Heavy Plan (as defined below), then (i) the Savings Bank may be required to
make certain minimum contributions to the Plan on behalf of non-key employees
(as defined below), and (ii) certain additional restrictions would apply with
respect to the combination of annual additions to the Plan and projected annual
benefits under any defined plan maintained by the Savings Bank.
In general, the Plan will be regarded as a "Top-Heavy Plan" for any
Plan Year, if as of the last day of the preceding Plan Year, the aggregate
balance of the accounts of all Participants who are key Employees exceeds 60% of
the aggregate balance of the Accounts of the Participants. "Key Employees"
generally include any employee, who at any time during the Plan Year or any
other the four preceding Plan Years, if (1) an officer of the Savings Bank
having annual compensation in excess of $60,000 who is in administrative or
policy-making capacity, (2) one of the ten employees having annual compensation
in excess of $30,000 and owing, directly or indirectly, the largest interest in
the employer, (3) a 5% owner of the employer (i.e., owns directly or indirectly
more than 5% of the stock of the employer, or stock possessing more than 5% of
the total combined voting power of all stock of the employer), or (4) a 1% of
owner of the employer having compensation in excess of $150,000.
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INVESTMENT OF CONTRIBUTIONS
All amounts credited to Participant's Accounts under the Plan are held
in the Trust which is administered by the Trustees. The Trustees are appointed
by the Savings Bank's Board of Directors. The Plan provides that a Participant
may direct the Trustees to invest all or a portion of his or her Accounts in
various managed investment portfolios, as described below. A Participant may
periodically elect to change his or her investment directions with respect to
both past contributions and for more additions to the Participant's accounts
invested in these investment alternatives.
Under the Plan, the Accounts of Participant held in the Trust will be
invested by the Trustees at the direction of the Participant in the following
portfolios:
INVESTMENT FUND A -
INVESTMENT FUND B -
INVESTMENT FUND C -
INVESTMENT FUND D -
INVESTMENT FUND E -
INVESTMENT FUND F - The Employer Stock Fund which invests in
common stock of the Holding Company.
A Participant may elect, to have both past and future contributions and
additions to the Participant's Account invested either in the Employer Stock
Fund or in any of the other portfolios listed above. Any amounts credited to a
Participant's Accounts for which investment directions are not given will be
invested in Investment Fund __.
The net gain (or loss) in the Accounts from investments (including
interest payments, dividends, realized and unrealized gains and losses on
securities, and expenses paid from the Trust) are determined on a _________
basis. For purposes of such allocation, all assets of the Trust are valued at
their fair market value.
THE EMPLOYER STOCK FUND
The Employer Stock Fund will consist of investments in Common Stock
made on and after the effective date of the Conversion. In connection with the
Conversion, pursuant to the attached Investment Form, Participants will be able
to change their investments at a time other than the normal election intervals.
Any cash dividends paid on Common Stock held in the Employer Stock Fund will be
credited to a cash dividend subaccount for each Participant
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investing in the Employer Stock Fund. The Trustees will, to the extent
practicable, use all amounts held by it in the Employer Stock Fund (except the
amounts credited to cash dividend subaccounts) to purchase shares of Common
Stock. It is expected that all purchases will be made at prevailing market
prices. Under certain circumstances, the Trustees may be required to limit the
daily volume of shares purchased. Pending investment in Common Stock, assets
held in the Employer Stock Fund will be placed in bank deposits and other
short-term investments.
When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale. A Participant's Account will be adjusted to reflect changes in the value
of shares of Common Stock resulting from stock dividends, stock splits and
similar changes.
To the extent dividends are not paid on Common Stock held in the
Employer Stock Fund, the return on any investment in the Employer Stock Fund
will consist only of the market value appreciation of the Common Stock
subsequent to its purchase. Following the Conversion, the Board of the Holding
Company may consider a policy of paying dividends on the Common Stock, however,
no decision has been made by the Board of the Holding Company regarding the
amount or timing of dividends, if any.
As of the date of this Prospectus Supplement, none of the shares of
Common Stock have been issued or are outstanding and there is no established
market for the Common Stock. Accordingly, there is no record of the historical
performance of the Employer Stock Fund.
INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN RISK FACTORS
ASSOCIATED WITH INVESTMENTS IN COMMON STOCK OF THE HOLDING COMPANY. FOR A
DISCUSSION OF THESE RISK FACTORS, SEE "RISK FACTORS" ON PAGES 1 THROUGH __ IN
THE PROSPECTUS.
BENEFITS UNDER THE PLAN
VESTING. A Participant, has at all times a fully vested, nonforfeitable
interest in all of his or her deferred contributions and the earnings thereon
under the Plan. A Participant is 100% vested in his or her matching
contributions account and employer discretionary contributions after the
completion of six years of service under the Plan's vesting schedule (20% per
year beginning with the completion of two years of service).
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL
RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS
OR HER BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59
1/2 UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF
WHETHER SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE SAVINGS
BANK.
S-8
<PAGE>
DISTRIBUTION UPON RETIREMENT, DISABILITY OR TERMINATION OF EMPLOYMENT.
Payment of benefits to a Participant who retires, incurs a disability, or
otherwise terminates employment generally shall be made in a lump sum cash
payment. At the request of the Participant, the distribution may include an
in-kind distribution of Common Stock of the Holding Company credited to the
Participant's Account. A Participant whose total vested account balance equals
or exceeds $3,500 at the time of termination, may elect, in lieu of a lump sum
payments, to be paid in annual installments over a period not exceeding the life
expectancy of the Participant or the joint life expectancies of the Participant
and his or her designated beneficiary. Benefits payments ordinarily shall be
made not later than 60 days following the end of the Plan Year in which occurs
later of the Participant's: (i) termination of employment; (ii) attainment of
age 65; or (iii) tenth anniversary of commencement of participation in the Plan;
but in no event later than April 1 following the calendar year in which the
Participant attains age 70 1/2 (if the Participant is retired). However, if the
vested portion of the Participant's Account balances exceeds $3,500, no
distribution shall be made from the Plan prior to the Participant's attaining
age 65 unless the Participant consents to an earlier distribution. Special rules
may apply to the distribution of Common Stock of the Holding Company to those
Participants who are executive officers, directors and principal shareholders of
the Holding Company who are subject to the provisions of Section 16(b) of the
Exchange Act.
DISTRIBUTION UPON DEATH. A Participant who dies prior to the benefit
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse, shall have his or her benefits paid to the surviving
spouse in a lump sum, or if the payment of his or her benefits had commenced
before his or her death, in accordance with the distribution method in effect at
his or her death. With respect to an unmarried Participant, and in the case of a
married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary, payments of benefits to the
beneficiary of a deceased Participant shall be made in the form of a lump sum
payment in cash or in Common Stock, or if the payment of his or her benefit had
commenced before his or her death, in accordance with the distribution method if
effect at death.
NONALIENATION OF BENEFITS. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
ADMINISTRATION OF THE PLAN
TRUSTEES. The Trustees with respect to Plan assets are currently Dan L.
Webber, Jerry F. Aldape, William H. Winegar and Nadine J. Johnson.
S-9
<PAGE>
Pursuant to the terms of the Plan, the Trustees receive and hold
contributions to the Plan in trust and have exclusive authority and discretion
to manage and control the assets of the Plan pursuant to the terms of the Plan
and to manage, invest and reinvest the Trust and income therefrom. The Trustees
have the authority to invest and reinvest the Trust and may sell or otherwise
dispose of Trust investments at any time and may hold trust funds uninvested.
The Trustees have authority to invest the assets of the Trust in "any type of
property, investment or security" as defined under ERISA.
The Trustees have full power to vote any corporate securities in the
Trust in person or by proxy; provided, however, that the Participants will
direct the Trustees as to voting and tendering of all Common Stock held in the
Employer Stock Fund.
The Trustees receive no compensation for their services. The expenses
of the Trustees are paid out of the Trust except to the extent such expenses and
compensation are paid by the Savings Bank.
The Trustees must render at least annual reports to the Savings Bank
and to the Participants in such form and containing such information that the
Trustees deem necessary.
REPORTS TO PLAN PARTICIPANTS
The administrator will furnish to each Participant a statement at least
____________ showing (i) the balance in the Participant's Account as of the end
of that period, (ii) the amount of contributions allocated to such Participant's
Account for that period, and (iii) the adjustments to such Participant's Account
to reflect earnings or losses (if any).
PLAN ADMINISTRATOR
The Savings Bank currently serves as the Plan Administrator. The Plan
Administrator is responsible for the administration of the Plan, interpretation
of the provisions of the Plan, prescribing procedures for filing applications
for benefits, preparation and distribution of information explaining the Plan,
maintenance of plan records, books of account and all other data necessary for
the proper administration of the Plan, and preparation and filing of all returns
and reports relating to the Plan which are required to be filed with the U.S.
Department of Labor and the IRS, and for all disclosures required to be made to
Participants, beneficiaries and others under Sections 104 and 105 of ERISA.
AMENDMENT AND TERMINATION
The Savings Bank may terminate the Plan at any time. If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee who ceases to be a Participant shall have a fully vested interest
in his or her Account. The Savings Bank reserves the right to make, from time to
time, any amendment or amendments to the Plan which do not
S-10
<PAGE>
cause any part of the Trust to be used for, or diverted to, any purpose other
than the exclusive benefit of the Participants or their beneficiaries.
MERGER, CONSOLIDATION OR TRANSFER
In the event of the merger or consolidation of the Plan with another
plan, or the transfer of the Trust to another plan, the Plan requires that each
Participant (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT
INTENDED TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN. THE
SUMMARY IS NECESSARILY GENERAL IN NATURE AND DOES NOT PURPORT TO BE COMPLETE.
MOREOVER, STATUTORY PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR
INTERPRETATIONS, AND THEIR APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES.
FINALLY, THE CONSEQUENCES UNDER APPLICABLE STATE AND LOCAL INCOME TAX LAWS MAY
NOT BE THE SAME AS UNDER THE FEDERAL INCOME TAX LAWS.
PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT
TO ANY DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE
PLAN.
The Plan has received a determination from the IRS that it is qualified
under Section 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code. A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings of the Plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Savings Bank expects to timely
adopt any amendments to the Plan that may be necessary to maintain the qualified
status of the Plan under the Code. Following such an amendment, the Plan will be
submitted to the IRS for a determination that the Plan, as amended, continues to
qualify under Sections 401(a) and 501(a) of the Code and that it continues to
satisfy the requirements for a qualified cash or deferred arrangement under
Section 401(k) of the Code.
Assuming that the Plan is administered in accordance with the
requirements of the Code, participation in the Plan under existing federal
income tax laws will have the following effects:
S-11
<PAGE>
(a) Amounts contributed to a Participant's 401(k) account and the
investment earnings are actually distributed or withdrawn from the Plan. Special
tax treatment may apply to the taxable portion of any distribution that includes
Common Stock or qualified as a "Lump Sum Distribution" (as described below).
(b) Income earned on assets held by the Trust will not be taxable to
the Trust.
LUMP SUM DISTRIBUTION. A distribution from the Plan to a Participant or
the beneficiary of a Participant will qualify as a "Lump Sum Distribution" if it
is made: (i) within a single taxable year of the Participant or beneficiary;
(ii) on account of the Participant's death or separation from service, or after
the Participant attains age 59 1/2; and (iii) consists of the balance to the
credits of the Participant under the Plan and all other profit sharing plans, if
any, maintained by the Savings Bank. The portion of any Lump Sum Distribution
that is required to be included in the Participant's or beneficiary's taxable
income for federal income tax purposes ("total taxable amount") consists of the
entire amount of such Lump Sum Distribution less the amount of after-tax
contributions, if any, made by the Participant to any other profit sharing plans
maintained by the Savings Bank which is included in such distribution.
AVERAGING RULES. The portion of the total taxable amount of a Lump Sum
Distribution ("ordinary income portion") will be taxable generally as ordinary
income for federal income tax purposes. However, for distributions occurring
prior to January 1, 2000, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in the Plan or any other profit sharing plan maintained by the Employer), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging"). The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59 1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule. The special five-year averaging rule has been
repealed for distributions occurring after December 31, 1999. Under a special
grandfather rule, individuals who turned 50 by 1986 may elect to have their Lump
Sum Distribution taxed under either the five-year averaging rule (if available)
or the prior law ten-year averaging rule. Such individuals also may elect to
have that portion of the Lump Sum Distribution attributable to the Participant's
pre-1974 participation in the Plan taxed at a flat 20% rate as gain from the
sale of a capital asset.
COMMON STOCK INCLUDED IN LUMP SUM DISTRIBUTION. If a Lump Sum
Distribution includes Common Stock, the distribution generally will be taxed in
the manner described above, except that the total taxable amount will be reduced
by the amount of any net unrealized appreciation with respect to such Common
Stock, i.e., the excess of the value of such Common Stock at the time of the
distribution over its cost to the Plan. The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain or loss on its
subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net
S-12
<PAGE>
unrealized appreciation. Any gain on a subsequent sale or other taxable
disposition of such Common Stock, to the extent of the amount of net unrealized
appreciation at the time of distribution, will be considered long-term capital
gain regardless of the holding period of such Common Stock. Any gain on a
subsequent sale or other taxable disposition of the Common Stock in excess of
the amount of net unrealized appreciation at the time of distribution will be
considered either short-term capital gain or long-term capital gain depending
upon the length of the holding period of the Common Stock. The recipient of a
distribution may elect to include the amount of any net unrealized appreciation
in the total taxable amount of such distribution to the extent allowed by the
regulations by the IRS.
DISTRIBUTIONS: ROLLOVERS AND DIRECT TRANSFERS TO ANOTHER QUALIFIED PLAN
OR TO AN IRA. Pursuant to a change in the law, effective January 1, 1993,
virtually all distributions from the Plan may be rolled over to another
qualified Plan or to an individual retirement account ("IRA") without regard to
whether the distribution is a Lump Sum Distribution or Partial Distribution.
Effective January 1, 1993, Participants have the right to elect to have the
Trustees transfer all or any portion of an "eligible rollover distribution"
directly to another plan qualified under Section 401(a) of the Code or to an
IRA. If the Participant does not elect to have an "eligible rollover
distribution" transferred directly to another qualified plan of to an IRA, the
distribution will be subject to a mandatory federal withholding tax equal to 20%
of the taxable distribution. An "eligible rollover distribution" means any
amount distributed from the Plan except: (1) a distribution that is (a) one of a
series of substantially equal periodic payments made (not less frequently than
annually) over the Participant's life of the joint life of the Participant and
the Participant's designated beneficiary, or (b) for a specified period of ten
years or more; (2) any amount that is required to be distributed under the
minimum distribution rules; and (3) any other distributions excepted under
applicable federal law. The tax law change described above did not modify the
special tax treatment of Lump Sum Distributions, that are not rolled over or
transferred, i.e., forward averaging, capital gains tax treatment and the
nonrecognition of net unrealized appreciation, discussed earlier.
ADDITIONAL TAX ON EARLY DISTRIBUTIONS. A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled over into an IRA or another qualified plan or the
distribution is (i) made to a beneficiary (or to the estate of a Participant) on
or after the death of the Participant, (ii) attributable to the Participant's
being disabled within the meaning of Section 72(m)(7) of the Code, (iii) part of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of the Participant and his or her
beneficiary, (iv) made to the Participant after separation from service on
account of early retirement under the Plan after attainment of age 55, (v) made
to pay medical expenses to the extent deductible for federal income tax
purposes, (vi) pursuant to a qualified domestic relations order, or (vii) made
to effect the distribution of excess contributions or excess deferrals.
S-13
<PAGE>
THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT
INTENDED TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.
RESTRICTIONS ON RESALE
Any person receiving shares of the Common Stock under the Plan who is
an "affiliate" of the Savings Bank or the Holding Company as the term
"affiliate" is used in Rules 144 and 405 under the Securities Act of 1933, as
amended ("Securities Act") (e.g., directors, officers and substantial
shareholders of the Savings Bank) may reoffer or resell such shares only
pursuant to a registration statement filed under the Securities Act (the Holding
Company and the Savings Bank having no obligation to file such registration
statement) or, assuming the availability thereof, pursuant to Rule 144 or some
other exemption from the registration requirements of the Securities Act. Any
person who may be an "affiliate" of the Savings Bank or the Holding Company may
wish to consult with counsel before transferring any Common Stock owned by him
or her. In addition, Participants are advised to consult with counsel as to the
applicability of the reporting and short-swing profit liability rules of Section
16 of the Exchange Act which may affect the purchase and sale of the Common
Stock where acquired or sold under the Plan or otherwise.
LEGAL OPINIONS
The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Savings Bank's Conversion from a
federally chartered mutual savings bank to a federally chartered stock savings
bank and the concurrent formation of the Holding Company.
S-14
<PAGE>
Investment Form
(Employer Stock Fund)
PIONEER BANK, FSB
PROFIT SHARING 401(K) PLAN
Name of Participant:______________________________________
Social Security Number:___________________________________
1. INSTRUCTIONS. In connection with the proposed conversion of Pioneer
Bank, FSB ("Savings Bank") to a stock savings bank and the simultaneous
formation of a holding company ("Conversion"), participants in the Pioneer Bank,
FSB Profit Sharing 401(k) Plan ("Plan") may elect to direct the investment of up
to ___% of their ___________, 1997 account balances into the Employer Stock Fund
("Employer Stock Fund"). Amounts transferred at the direction of Participants
into the Employer Stock Fund will be used to purchase shares of the common stock
of Oregon Trail Financial Corp. ("Common Stock"), the proposed holding company
for the Savings Bank. A PARTICIPANT'S ELIGIBILITY TO PURCHASE SHARES OF COMMON
STOCK IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE SHARES OF
COMMON STOCK IN THE CONVERSION AND THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH
IN THE PLAN CONVERSION. SEE THE PROSPECTUS FOR ADDITIONAL INFORMATION.
You may use this form to direct a transfer of funds credited to your
account to the Employer Stock Fund, to purchase Common Stock in the Conversion.
To direct such a transfer to the Employer Stock Fund, you should complete this
form and return it to ___________ at the Savings Bank, NO LATER THAN THE CLOSE
OF BUSINESS ON ______, 1997. The Savings Bank will keep a copy of this form and
return a copy to you. (If you need assistance in completing this form, please
contact ___________.
2. TRANSFER DIRECTION. I hereby direct the Plan Administrator to
transfer $__________ (in increments of $10) from my Plan account to the Employer
Stock Fund to be applied to the purchase of Common Stock in the Conversion.
Please transfer this amount from the following investments in the amounts
indicated:
3. EFFECTIVENESS OF DIRECTION. I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan and the terms
and conditions of the Conversion. I acknowledge that I have received a copy of
the Prospectus and the Prospectus Supplement.
__________________________________ __________________________________
Signature Date
* * * * *
4. ACKNOWLEDGEMENT OF RECEIPT. This Investment Form was received by the
Plan Administrator and will become effective on the date noted below.
__________________________________ __________________________________
Plan Administrator Date
S-15
<PAGE>
PROSPECTUS OREGON TRAIL FINANCIAL CORP.
(PROPOSED HOLDING COMPANY FOR PIONEER BANK, A FEDERAL SAVINGS BANK)
UP TO 4,082,500 SHARES OF COMMON STOCK
$10.00 PURCHASE PRICE PER SHARE
Oregon Trail Financial Corp. ("Holding Company"), an Oregon
corporation, is offering between 3,017,500 and 4,082,500 shares of its common
stock, $.01 par value per share ("Common Stock"), in connection with the
conversion of Pioneer Bank, a Federal Savings Bank ("Savings Bank") from a
federally chartered mutual savings bank to a federally chartered capital stock
savings bank and the simultaneous issuance of all of the Savings Bank's
outstanding capital stock to the Holding Company. The simultaneous conversion of
the Savings Bank to stock form, the issuance of all of its outstanding capital
stock to the Holding Company, and the offer and sale of the Common Stock by the
Holding Company hereby are undertaken pursuant to a plan of conversion ("Plan"
or "Plan of Conversion") and are referred to herein as the "Conversion."
Pursuant to the Plan of Conversion, nontransferable rights to subscribe
for the Common Stock ("Subscription Rights") have been granted, in order of
priority, to (i) depositors with $50.00 or more on deposit at the Savings Bank
as of December 31, 1995 ("Eligible Account Holders"), (ii) the Savings Bank's
employee stock ownership plan ("ESOP"), a tax-qualified employee benefit plan,
(iii) depositors with $50.00 or more on deposit at the Savings Bank as of June
30, 1997 ("Supplemental Eligible Account Holders"), and (iv) depositors of the
Savings Bank as of July 31, 1997 ("Voting Record Date") ("Other Members"),
subject to the priorities and purchase limitations set forth in the Plan of
Conversion ("Subscription Offering"). SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE.
PERSONS SELLING OR OTHERWISE TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON
STOCK IN THE SUBSCRIPTION OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF
ANOTHER PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER
SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE OF THRIFT SUPERVISION ("OTS") OR
ANOTHER AGENCY OF THE U.S. GOVERNMENT. See "THE CONVERSION -- The Subscription,
Direct Community and Syndicated Community Offerings" and "-- Limitations on
Purchases of Shares." Concurrently, but subject to the prior rights of holders
of Subscription Rights, the Holding Company is offering the Common Stock for
sale to members of the general public through a direct community offering
("Direct Community Offering") with preference given to natural persons who are
permanent residents of Baker, Union, Wallowa, Malheur, Harney and Grant
Counties, Oregon ("Local Community"). The Subscription Offering and the Direct
Community Offering are referred to herein as the "Subscription and Direct
Community Offering." It is anticipated that shares of Common Stock not
subscribed for or purchased in the Subscription and Direct Community Offering
will be offered to eligible members of the general public on a best efforts
basis by a selling group of broker-dealers managed by Charles Webb & Company
("Webb"), a division of Keefe, Bruyette & Woods, Inc. ("Keefe, Bruyette"), in a
syndicated offering ("Syndicated Community Offering"). The Subscription and
Direct Community Offering and the Syndicated Community Offering are referred to
collectively as the "Offerings." The Holding Company and the Savings Bank
reserve the right, in their absolute discretion, to accept or reject, in whole
or in part, any or all orders in the Direct Community Offering or Syndicated
Community Offering either at the time of receipt of an order or as soon as
practicable following the termination of the Offerings. If an order is rejected
in part, the purchaser does not have the right to cancel the remainder of the
order.
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES
OF COMMON STOCK, CALL THE STOCK INFORMATION CENTER AT
(541) 523-0362 AND ASK FOR A WEBB REPRESENTATIVE.
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD
BE CONSIDERED BY EACH PROSPECTIVE INVESTOR,
SEE "RISK FACTORS" BEGINNING ON PAGE 1.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE SAVINGS
ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OTS, THE FDIC OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY
OTHER AGENCY OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
(COVER CONTINUED ON FOLLOWING PAGE)
CHARLES WEBB & COMPANY,
A DIVISION OF KEEFE, BRUYETTE & WOODS, INC.
The date of this Prospectus is
_____, 1997.
<PAGE>
<TABLE>
<CAPTION>
Estimated Underwriting
Purchase Commissions and Estimated Net
Price(1) Other Fees and Expenses(2) Proceeds(3)
<S> <C> <C> <C>
Minimum Price Per Share.................................. $10.00 $0.28 $9.72
- -------------------------------------------------------------------------------------------------------------------------------
Midpoint Price Per Share................................. $10.00 $0.26 $9.74
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share.................................. $10.00 $0.24 $9.76
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share, as adjusted(4).................. $10.00 $0.23 $9.77
- -------------------------------------------------------------------------------------------------------------------------------
Minimum Total(5)......................................... $30,175,000 $843,000 $29,332,000
- -------------------------------------------------------------------------------------------------------------------------------
Midpoint Total(6)........................................ $35,500,000 $917,000 $34,583,000
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Total(7)......................................... $40,825,000 $991,000 $39,834,000
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(4)(8)......................... $46,948,750 $1,075,000 $45,873,750
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by
Keller & Company, Inc. ("Keller") as of July 29, 1997, which states
that the estimated aggregate pro forma market value of the Holding
Company and the Savings Bank as converted ranged from $30,175,000 to
$40,825,000, with a midpoint of $35,500,000 ("Estimated Valuation
Range"). See "THE CONVERSION -- Stock Pricing and Number of Shares to
be Issued."
(2) Includes estimated expenses to the Holding Company and the Savings Bank
arising from the Conversion, including fees to be paid to Webb in
connection with the Offerings. Such fees may be deemed to be
underwriting fees and Webb may be deemed to be an underwriter. Actual
expenses, and thus net proceeds, may be more or less than estimated
amounts. The Holding Company and the Savings Bank have agreed to
indemnify Webb against certain liabilities, including liabilities that
might arise under the Securities Act of 1933, as amended ("Securities
Act"). See "USE OF PROCEEDS" and "THE CONVERSION -- Plan of
Distribution for the Subscription, Direct Community and Syndicated
Community Offerings."
(3) Actual net proceeds can vary substantially from the estimated amounts
depending upon actual expenses and the relative number of shares sold
in the Offerings. See "USE OF PROCEEDS" and "PRO FORMA DATA."
(4) Gives effect to an increase in the number of shares that could be sold
in the Offerings due to an increase in the pro forma market value of
the Holding Company and the Savings Bank as converted up to 15% above
the maximum of the Estimated Valuation Range, without the
resolicitation of subscribers or any right of cancellation. The ESOP
shall have a first priority right to subscribe for such additional
shares up to an aggregate of 8% of the Common Stock issued in the
Conversion. The issuance of such additional shares will be conditioned
on a determination by Keller that such issuance is compatible with its
determination of the estimated pro forma market value of the Holding
Company and the Savings Bank as converted. See "THE CONVERSION -- Stock
Pricing and Number of Shares to be Issued."
(5) Assumes the issuance of 3,017,500 shares at $10.00 per share.
(6) Assumes the issuance of 3,550,000 shares at $10.00 per share.
------
(7) Assumes the issuance of 4,082,500 shares at $10.00 per share.
------
(8) Assumes the issuance of 4,694,875 shares at $10.00 per share.
------
Except for the ESOP, which is expected to purchase 8% of the Common
Stock issued in the Conversion, subject to the approval of the OTS, NO ELIGIBLE
ACCOUNT HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER OR OTHER MEMBER MAY
SUBSCRIBE IN THEIR CAPACITY AS SUCH IN THE SUBSCRIPTION OFFERING FOR SHARES OF
COMMON STOCK HAVING AN AGGREGATE PURCHASE PRICE OF MORE THAN $200,000 (20,000
SHARES BASED ON THE PURCHASE PRICE); NO PERSON MAY PURCHASE IN THE DIRECT
COMMUNITY OFFERING, IF ANY, OR THE SYNDICATED COMMUNITY OFFERING, IF ANY, SHARES
OF COMMON STOCK HAVING AN AGGREGATE PURCHASE PRICE OF MORE THAN $200,000 (20,000
SHARES BASED ON THE PURCHASE PRICE); NO PERSON (INCLUDING ALL PERSONS ON A JOINT
ACCOUNT) EITHER ALONE OR TOGETHER WITH ASSOCIATES OF OR PERSONS ACTING IN
CONCERT WITH SUCH PERSON, MAY PURCHASE IN THE AGGREGATE MORE THAN THE OVERALL
MAXIMUM PURCHASE LIMITATION OF 1% OF THE TOTAL NUMBER OF SHARES OF COMMON STOCK
ISSUED IN THE CONVERSION (EXCLUSIVE OF ANY SHARES ISSUED PURSUANT TO AN INCREASE
IN THE ESTIMATED VALUATION RANGE OF UP TO 15%). Under certain circumstances, the
maximum purchase limitation may be increased or decreased at the sole discretion
of the Savings Bank and the Holding Company. The minimum purchase is 25 shares.
See "THE CONVERSION -- The Subscription, Direct Community and Syndicated
Community Offerings," "-- Limitations on
<PAGE>
Purchases of Shares" and "-- Procedure for Purchasing Shares in the Subscription
and Direct Community Offering" for other purchase and sale limitations.
THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, PACIFIC TIME, ON
_________ __, 1997 ("EXPIRATION DATE"), UNLESS EXTENDED BY THE SAVINGS BANK AND
THE HOLDING COMPANY FOR UP TO __ DAYS TO _______ __, 1997. SUCH EXTENSION MAY BE
GRANTED WITHOUT ADDITIONAL NOTICE TO SUBSCRIBERS. THE DIRECT COMMUNITY OFFERING
IS ALSO EXPECTED TO TERMINATE AT NOON, PACIFIC TIME, ON ________ __, 1997 OR AT
A DATE THEREAFTER, HOWEVER, IN NO EVENT LATER THAN ________ __, 1997. The
Holding Company must receive at an office of the Savings Bank the accompanying
original Stock Order Form and a fully executed Certification Form (collectively,
the "Stock Order Form") (facsimile copies and photocopies will not be accepted)
along with full payment (or appropriate instructions authorizing a withdrawal
from a deposit account at the Savings Bank) of $10.00 per share ("Purchase
Price") for all shares subscribed for or ordered by the Expiration Date. Payment
for shares of Common Stock by wire transfer will not be accepted. Funds so
received will be placed in segregated accounts created for this purpose at the
Savings Bank, and interest will be paid at the Savings Bank's passbook rate
(2.75% per annum as of the date hereof) from the date payment is received until
the Conversion is consummated or terminated. These funds will be otherwise
unavailable to the depositor until such time. Payments authorized by withdrawals
from deposit accounts will continue to earn interest at the contractual rate
until the Conversion is consummated or terminated, although such funds will be
unavailable for withdrawal until the Conversion is consummated or terminated.
Shares of Common Stock issued in the Conversion are not deposit liabilities,
will not earn interest, and will not be insured by the FDIC, the SAIF or any
other government agency. ORDERS SUBMITTED ARE IRREVOCABLE UNTIL THE CONSUMMATION
OR TERMINATION OF THE CONVERSION. If the Conversion is not consummated within 45
days after the last day of the Subscription and Direct Community Offering (which
date will be no later than ________ __, 1997) and the OTS consents to an
extension of time to consummate the Conversion, subscribers will be notified in
writing of the time period within which the subscriber must notify the Savings
Bank of his or her intention to increase, decrease or rescind his or her
subscription. If an affirmative response to any such resolicitation is not
received by the Holding Company or the Savings Bank from subscribers, such
orders will be rescinded and all funds will be returned promptly with interest.
If such period is not extended or, in any event, if the Conversion is not
consummated by __________ __, 1997, all subscription funds will be promptly
returned, together with accrued interest, and all withdrawal authorizations
terminated.
The Savings Bank and the Holding Company have engaged Webb as their
financial advisor and to assist the Holding Company in the sale of the Common
Stock in the Offerings. Neither Webb nor any other registered broker-dealer is
obligated to take or purchase any shares of Common Stock in the Offerings. See
"THE CONVERSION -- Plan of Distribution for the Subscription, Direct Community
and Syndicated Community Offerings."
Prior to the Offerings, the Holding Company has not issued any capital
stock and accordingly there has been no market for the shares offered hereby.
There can be no assurance that an active and liquid trading market for the
Common Stock will develop or, if developed, will be maintained. See "RISK
FACTORS -- Absence of Prior Market for the Common Stock." The Holding Company
has received conditional approval to list the Common Stock on the Nasdaq
National Market under the symbol "OTFC." Keefe, Bruyette has advised the Holding
Company that it intends to act as a market maker for the Common Stock following
the Conversion. See "MARKET FOR COMMON STOCK."
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK
BAKER CITY, OREGON
[Map depicting State of Oregon and the counties of
Grant, Harney, Wallowa, Union, Baker and Malheur in which the
Savings Bank maintains an office ]
THE CONVERSION IS CONTINGENT UPON APPROVAL OF THE SAVINGS BANK'S PLAN OF
CONVERSION BY AT LEAST A MAJORITY OF THE SAVINGS BANK'S ELIGIBLE VOTING MEMBERS,
THE SALE OF AT LEAST 3,017,500 SHARES OF COMMON STOCK PURSUANT TO THE PLAN OF
CONVERSION, AND RECEIPT OF ALL APPLICABLE REGULATORY APPROVALS.
<PAGE>
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED OR GUARANTEED BY THE FDIC, THE SAIF OR ANY OTHER GOVERNMENT
AGENCY.
PROSPECTUS SUMMARY
THE INFORMATION SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH AND
IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) PRESENTED ELSEWHERE IN THIS
PROSPECTUS. THE PURCHASE OF COMMON STOCK IS SUBJECT TO CERTAIN RISKS. SEE "RISK
FACTORS."
OREGON TRAIL FINANCIAL CORP.
The Holding Company was organized on June 9, 1997 under Oregon law at
the direction of the Savings Bank to acquire all of the capital stock that the
Savings Bank will issue upon its conversion from the mutual to stock form of
ownership. The Holding Company has engaged only in organizational activities to
date. The Holding Company has applied for OTS approval to become a savings and
loan holding company through the acquisition of 100% of the capital stock of the
Savings Bank. Immediately following the Conversion, the only significant assets
of the Holding Company will be the outstanding capital stock of the Savings
Bank, 50% of the net investable proceeds of the Offerings (see table under "PRO
FORMA DATA") as permitted by the OTS to be retained by it, and a note receivable
from the ESOP evidencing a loan to enable the ESOP to purchase 8% of the Common
Stock issued in the Conversion. Funds retained by the Holding Company will be
used for general business activities. See "USE OF PROCEEDS." Upon Conversion,
the Holding Company will be classified as a unitary savings and loan holding
company subject to OTS regulation. See "REGULATION -- Savings and Loan Holding
Company Regulations." The main office of the Holding Company is located at 2055
First Street, Baker City, Oregon 97814 and its telephone number is (541)
523-6327.
PIONEER BANK, A FEDERAL SAVINGS BANK
Chartered in 1901, the Savings Bank is a federal mutual savings bank
headquartered in Baker City, Oregon. As a result of the Conversion, the Savings
Bank will convert to a federal capital stock savings bank and will become a
wholly-owned subsidiary of the Holding Company. The Savings Bank is regulated by
the OTS, its primary regulator, and by the FDIC, the insurer of its deposits.
The Savings Bank's deposits have been federally-insured since 1934 and are
currently insured by the FDIC under the SAIF. The Savings Bank has been a member
of the Federal Home Loan Bank ("FHLB") System since 1934. At March 31, 1997, the
Savings Bank had total assets of $204.2 million, total deposits of $179.2
million and total equity of $21.0 million on a consolidated basis.
The Savings Bank is a community oriented financial institution whose
principal business is attracting retail deposits from the general public and
using these funds to originate one- to- four family residential mortgage loans
and consumer loans within its primary market area. At March 31, 1997, one- to-
four family loans totalled $101.8 million, or 72.0%, of total loans receivable.
The Savings Bank has also been active in the origination of home equity and
second mortgage loans and at March 31, 1997, such loans were $17.5 million, or
12.4%, of total loans receivable. As a result of a perceived local demand for
non-mortgage lending products, management's concern as to the Savings Bank's
level of interest rate risk and a perception of minimal anticipated growth in
residential loan demand within the Savings Bank's market primary area resulting
from strong competition primarily from mortgage brokers and larger financial
institutions (See "RISK FACTORS -- Competition"), the Savings Bank began
supplementing its traditional lending activities in 1996 with the development of
commercial business loans, agricultural loans and the purchase of
dealer-originated automobile contracts. The Savings Bank has hired experienced
commercial lending officers familiar with the Savings Bank's primary market area
in an attempt to develop commercial business and agricultural lending and to
expand the purchase of dealer-originated automobile contracts to include the
purchase of dealer-originated contracts secured by recreational vehicles,
trailers, motorcycles
(i)
<PAGE>
and other vehicles. As a result of these activities, at March 31, 1997 the
Savings Bank had agricultural loans of $2.5 million, commercial business loans
of $4.1 million and automobile loans of $2.1 million (including $389,000 of
purchased dealer-originated contracts). See "RISK FACTORS -- Recent Growth in,
Unseasoned Nature of Agricultural, Commercial Business and Indirect Automobile
Lending," "-- Certain Lending Risks -- Risks of Agricultural Lending," "--
Interest Rate Risk" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Asset and Liability Management."
In addition to its lending activities, the Savings Bank invests excess
liquidity in short and intermediate term U.S. Government and government agency
securities and mortgage-backed and related securities issued by U.S. Government
agencies. Investment securities and mortgage-backed and related securities,
which constituted 25.0% of total assets at March 31, 1997, had an amortized cost
of $51.2 million at March 31, 1997. See "BUSINESS OF THE SAVINGS BANK --
Investment Activities."
The Savings Bank conducts its operations from its main office and one
branch office located in Baker City, Oregon, and six additional branch offices
located in Burns (Harney County), Enterprise (Wallowa County), John Day (Grant
County), La Grande (two offices; Union County) and Ontario (Malheur County),
Oregon. See "BUSINESS OF THE SAVINGS BANK -- Properties." The main office is
located at 2055 First Street, Baker City, Oregon 97814, and its telephone number
is (541) 523-6327.
THE CONVERSION
The Savings Bank proposes to convert from a federally chartered mutual
savings bank to a federally chartered capital stock savings bank and become a
wholly-owned subsidiary of the Holding Company by issuing all of its capital
stock to the Holding Company in exchange for 50% of the net investable proceeds
of the Offerings. Simultaneously, the Holding Company will sell its Common Stock
in the Offerings. The Conversion has been approved by the OTS, subject to
approval by the Savings Bank's members at a special meeting to be held on
September 23, 1997. AFTER CONSUMMATION OF THE CONVERSION, DEPOSITORS OF THE
SAVINGS BANK WILL HAVE NO VOTING RIGHTS IN THE HOLDING COMPANY UNLESS THEY
BECOME STOCKHOLDERS.
The Plan of Conversion requires that the aggregate purchase price of
the Common Stock to be issued in the Conversion be based upon an independent
appraisal of the estimated pro forma market value of the Holding Company and the
Savings Bank, as converted. Keller has advised the Savings Bank that in its
opinion, at July 29, 1997, the aggregate estimated pro forma market value of the
Holding Company and the Savings Bank, as converted, ranged from $30,175,000 to
$40,825,000, with a midpoint of $35,500,000, or from 3,017,500 shares to
4,082,500 shares, with a midpoint of 3,550,000 shares, assuming a $10.00 per
share Purchase Price. The appraisal of the pro forma market value of the Holding
Company and the Savings Bank, as converted is based on a number of factors and
should not be considered a recommendation to buy shares of the Common Stock or
any assurance that after the Conversion shares of Common Stock will be able to
be resold at or above the Purchase Price. The appraisal will be updated or
confirmed prior to consummation of the Conversion.
The Board of Directors and management believe that the Conversion is in
the best interests of the Savings Bank, its members and the communities it
serves. The capital raised in the Conversion is intended to support the Savings
Bank's current lending and investment activities and may also support possible
future expansion and diversification of operations, although there are no
current specific plans, arrangements or understandings, written or oral,
regarding any such expansion or diversification. The Conversion is also expected
to afford the Savings Bank's members and others the opportunity to become
stockholders of the Holding Company and participate more directly in, and
contribute to, any future growth of the Holding Company and the Savings Bank.
The Conversion will also enable the Holding Company and the Savings Bank to
raise additional capital in the public equity or debt markets should the need
arise, although there are no current specific plans, arrangements or
understandings, written or oral, regarding any such financing activities. See
"THE CONVERSION -- Purposes of Conversion."
(ii)
<PAGE>
THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS
The Holding Company is offering up to 4,082,500 shares of Common Stock
at $10.00 per share to holders of Subscription Rights in the following order of
priority: (i) Eligible Account Holders; (ii) the Savings Bank's ESOP; (iii)
Supplemental Eligible Account Holders; and (iv) Other Members. In the event the
number of shares offered in the Conversion is increased above the maximum of the
Estimated Valuation Range, the Savings Bank's ESOP shall have a first priority
right to purchase any such shares exceeding the maximum of the Estimated
Valuation Range up to an aggregate of 8% of the Common Stock. Concurrently, and
subject to the prior rights of holders of Subscription Rights, any shares of
Common Stock not subscribed for in the Subscription Offering are being offered
in the Direct Community Offering to the general public with preference being
given to natural persons who are permanent residents of the Local Community. The
Holding Company and the Savings Bank have engaged Webb to consult with and
advise the Holding Company and the Savings Bank in the Offerings, and Webb has
agreed to use its best efforts to assist the Holding Company with the
solicitation of subscriptions and purchase orders for shares of Common Stock in
the Offerings. Webb is not obligated to take or purchase any shares of Common
Stock in the Offerings. If all shares of Common Stock to be issued in the
Conversion are not sold through the Subscription and Direct Community Offering,
then the Holding Company expects to offer the remaining shares in the Syndicated
Community Offering managed by Webb, which would occur as soon as practicable
following the close of the Subscription and Direct Community Offering but may
commence during the Subscription and Direct Community Offering, subject to the
prior rights of subscribers in the Subscription Offering and to the right of the
Holding Company to accept or reject orders in the Direct Community Offering and
the Syndicated Community Offering in whole or in part. All shares of Common
Stock will be sold at the same price per share in the Syndicated Community
Offering as in the Subscription and Direct Community Offering. ORDERS SUBMITTED
ARE IRREVOCABLE UNTIL THE CONSUMMATION OR TERMINATION OF THE CONVERSION. See
"USE OF PROCEEDS," "PRO FORMA DATA" and "THE CONVERSION -- Stock Pricing and
Number of Shares to be Issued." The Subscription Offering will expire at ____
_.m., Pacific Time, on ________ __, 1997, unless extended by the Savings Bank
and the Holding Company for up to __ days. The Direct Community Offering and
Syndicated Community Offering, if any, are also expected to terminate at ____
_.m., Pacific Time, on ________ __, 1997, and may terminate on a date
thereafter, however, in no event later than ________ __, 1997.
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING COMMON STOCK
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date, in accordance with Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), no Prospectus will
be mailed later than five days or hand delivered any later than two days prior
to the Expiration Date. Execution of the Order Form will confirm receipt or
delivery of a Prospectus in accordance with Rule 15c2-8. Order Forms will be
distributed only with a Prospectus. Neither the Holding Company, the Savings
Bank nor Webb is obligated to deliver a Prospectus and an Order Form by any
means other than the U.S. Postal Service.
To ensure that Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members are properly identified as to their stock purchase
priorities, such parties must list all deposit accounts on the Order Form giving
all names on each deposit account and/or loan and the account and/or loan
numbers at the applicable eligibility date.
Full payment by check, cash (except by mail), money order, bank draft
or withdrawal authorization (payment by wire transfer will not be accepted) must
accompany an original Order Form. THE HOLDING COMPANY IS NOT OBLIGATED TO ACCEPT
ORDERS SUBMITTED ON PHOTOCOPIED OR TELECOPIED STOCK ORDER FORMS. ORDERS CANNOT
AND WILL NOT BE ACCEPTED WITHOUT THE EXECUTION OF THE CERTIFICATION FORM
APPEARING ON THE REVERSE SIDE OF THE STOCK ORDER FORM. See "THE CONVERSION --
Procedure for Purchasing Shares in the Subscription and Direct Community
Offering."
(iii)
<PAGE>
PURCHASE LIMITATIONS
With the exception of the ESOP, which is expected to subscribe for 8%
of the shares of Common Stock issued in the Conversion, the Plan of Conversion
provides for the following purchase limitations: (i) No Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member, including, in each case,
all persons on a joint account, may purchase shares of Common Stock with an
aggregate purchase price of more than $200,000, (ii) no person, either alone or
together with associates of or persons acting in concert with such person, may
purchase in the Direct Community Offering, if any, or in the Syndicated
Community Offering, if any, shares of Common Stock with an aggregate purchase
price of more than $200,000, and (iii) no person (including all persons on a
joint account), either alone or together with associates of or persons acting in
concert with such person, may purchase in the aggregate more than the overall
maximum purchase limitation of 1% of the total number of shares of Common Stock
issued in the Conversion (exclusive of any shares issued pursuant to an increase
in the Estimated Valuation Range of up to 15%). THIS MAXIMUM PURCHASE LIMITATION
MAY BE INCREASED CONSISTENT WITH OTS REGULATIONS IN THE SOLE DISCRETION OF THE
HOLDING COMPANY AND THE SAVINGS BANK SUBJECT TO ANY REQUIRED REGULATORY
APPROVAL. The minimum purchase is 25 shares.
The term "acting in concert" is defined in the Plan of Conversion to
mean: (i) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. The Holding Company and the Savings Bank may presume that certain
persons are acting in concert based upon, among other things, joint account
relationships and the fact that such persons have filed joint Schedules 13D with
the Securities and Exchange Commission ("SEC") with respect to other companies.
The term "associate" of a person is defined in the Plan of Conversion to mean:
(i) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
director or officer of the Savings Bank or any of its parents or subsidiaries.
THE HOLDING COMPANY AND THE SAVINGS BANK MAY PRESUME THAT CERTAIN PERSONS ARE
ACTING IN CONCERT BASED UPON, AMONG OTHER THINGS, JOINT ACCOUNT RELATIONSHIPS
AND THE FACT THAT SUCH PERSONS HAVE FILED JOINT SCHEDULES 13D WITH THE SEC WITH
RESPECT TO OTHER COMPANIES.
Stock orders received either through the Direct Community Offering or
the Syndicated Community Offering, if held, may be accepted or rejected, in
whole or in part, at the discretion of the Holding Company and the Savings Bank.
See "THE CONVERSION -- Limitations on Purchases of Shares." If an order is
rejected in part, the purchaser does not have the right to cancel the remainder
of the order. In the event of an oversubscription, shares will be allocated in
accordance with the Plan of Conversion. See "THE CONVERSION -- The Subscription,
Direct Community and Syndicated Community Offerings."
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
The Purchase Price in the Subscription Offering is a uniform price
established by the Board of Directors for all subscribers, including members of
the Holding Company's and the Savings Bank's Boards of Directors, their
management and tax-qualified employee plans. The number of shares to be offered
at the Purchase Price is based upon an independent appraisal of the aggregate
pro forma market value of the Holding Company and the Savings Bank, as
converted. The aggregate pro forma market value was estimated by Keller to range
from $30,175,000 to $40,825,000 as of July 29, 1997, or from 3,017,500 to
4,082,500 shares based on the Purchase Price. See "THE CONVERSION -- Stock
Pricing and Number of Shares to be Issued." The appraisal of the pro forma value
of the Holding Company and the Savings Bank, as converted, will be updated or
confirmed at the completion of the Offerings. The maximum of the Estimated
Valuation Range may be increased by up to 15% and the number of shares of Common
Stock to be issued in the
(iv)
<PAGE>
Conversion may be increased to 4,694,875 shares due to material changes in the
financial condition or results of operations of the Savings Bank or changes in
market conditions or general financial, economic or regulatory conditions. No
resolicitation of subscribers will be made and subscribers will not be permitted
to modify or cancel their subscriptions unless the gross proceeds from the sale
of the Common Stock are less than the minimum or more than 15% above the maximum
of the current Estimated Valuation Range. THE APPRAISAL IS NOT INTENDED TO BE
AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE
ADVISABILITY OF PURCHASING COMMON STOCK IN THE OFFERINGS NOR CAN ASSURANCE BE
GIVEN THAT PURCHASERS OF THE COMMON STOCK IN THE OFFERINGS WILL BE ABLE TO SELL
SUCH SHARES AFTER CONSUMMATION OF THE CONVERSION AT A PRICE THAT IS EQUAL TO OR
ABOVE THE PURCHASE PRICE. Furthermore, the pro forma stockholders' equity is not
intended to represent the fair market value of the Common Stock and may be
greater than amounts that would be available for distribution to stockholders in
the event of liquidation.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock are estimated to
range from $29.3 million to $39.8 million, or to $45.9 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion. The Holding Company has received conditional
OTS approval to purchase all of the capital stock of the Savings Bank to be
issued in the Conversion in exchange for 50% of the net investable proceeds of
the Offerings. This will result in the Holding Company retaining approximately
$12.9 million to $17.5 million of the net proceeds, or up to $20.1 million if
the Estimated Valuation Range is increased by 15%, and the Savings Bank
receiving an equal amount. See "PRO FORMA DATA."
Receipt of 50% of the net investable proceeds of the sale of the Common
Stock will increase the Savings Bank's capital and will support the expansion of
the Savings Bank's existing business activities, including agricultural and
commercial business lending and the purchase of dealer-originated contracts
secured by automobiles, recreational vehicles, trailers, motorcycles and other
vehicles. The Savings Bank will use the funds contributed to it for general
corporate purposes, including, initially, lending and investment in short-term
U.S. Government and government agency obligations.
A portion of the net proceeds retained by the Holding Company will be
used for a loan by the Holding Company to the ESOP to enable it to purchase 8%
of the shares of Common Stock issued in the Conversion. Such loan would fund the
entire purchase price of the ESOP shares ($3,266,000 at the maximum of the
Estimated Valuation Range) and would be repaid principally from the Savings
Bank's contributions to the ESOP and from dividends payable on the Common Stock
held by the ESOP. The remaining proceeds retained by the Holding Company
initially will be invested primarily in short-term U.S. Government and
government agency obligations. Such proceeds will be available for additional
contributions to the Savings Bank in the form of debt or equity, to support
future growth and diversification activities, as a source of dividends to the
stockholders of the Holding Company and for future repurchases of Common Stock
(including possible repurchases to fund the MRP or to provide shares to be
issued upon exercise of stock options) to the extent permitted under Oregon law
and OTS regulations. The Holding Company will consider exploring opportunities
to use such funds to expand operations through acquiring or establishing
additional branch offices and the acquisition of other financial institutions.
Currently, there are no specific plans, arrangements, agreements or
understandings, written or oral, regarding any such activities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. The Holding
Company has received conditional approval to have the Common Stock listed on the
Nasdaq National Market System under the symbol "OTFC." Keefe, Bruyette has
indicated its intention to act as a market maker in the Common Stock following
the consummation of the Conversion, depending on trading volume and subject to
compliance with applicable laws and regulatory requirements. Furthermore, Webb
has agreed to use its best efforts to assist the Holding Company in obtaining
additional market makers for the Common Stock.
(v)
<PAGE>
No assurance can be given that an active and liquid trading market for the
Common Stock will develop. Further, no assurance can be given that purchasers
will be able to sell their shares at or above the Purchase Price after the
Conversion. See "RISK FACTORS -- Absence of Prior Market for the Common Stock"
and "MARKET FOR COMMON STOCK."
DIVIDEND POLICY
The Holding Company's Board of Directors anticipates declaring and
paying quarterly cash dividends on the Common Stock at an annual rate of 2%, or
$0.20 per share per year based on the Purchase Price. The first quarterly cash
dividend is expected to be declared during the quarter ending March 31, 1998 and
paid during the quarter ending June 30, 1998. In addition, the Board of
Directors may determine to pay periodic special cash dividends in addition to,
or in lieu of, regular cash dividends. Declarations and payments of any
dividends (regular and special) by the Board of Directors will depend upon a
number of factors, including the amount of the net proceeds retained by the
Holding Company, capital requirements, regulatory limitations, the Savings
Bank's and the Holding Company's financial condition and results of operations,
tax considerations and general economic conditions. In order to pay such cash
dividends, however, the Holding Company must have available cash either from the
net proceeds raised in the Offerings and retained by the Holding Company,
dividends received from the Savings Bank or earnings on Holding Company assets.
There are certain limitations on the payment of dividends from the Savings Bank
to the Holding Company. See "REGULATION -- Federal Regulation of Savings Banks
- -- Limitations on Capital Distributions." No assurances can be given that any
dividends will be declared or, if declared, what the amount of dividends will be
or whether such dividends, if commenced, will continue. See "DIVIDEND POLICY."
OFFICERS' AND DIRECTORS' COMMON STOCK PURCHASES AND BENEFICIAL OWNERSHIP
Officers and directors of the Savings Bank (23 persons) are expected to
subscribe for an aggregate of approximately $2.1 million of Common Stock, or
6.0% and 5.1% of the shares based on the minimum and maximum of the Estimated
Valuation Range, respectively. See "SHARES TO BE PURCHASED BY MANAGEMENT
PURSUANT TO SUBSCRIPTION RIGHTS." In addition, purchases by the ESOP,
allocations under the Oregon Trail Financial Corp. 1997 Management Recognition
Plan and Trust ("MRP"), and the exercise of stock options issued under the
Oregon Trail Financial Corp. 1997 Stock Option Plan ("Stock Option Plan"), will
increase the number of shares beneficially owned by officers, directors and
employees. Allocations under the MRP will be at no cost to recipients. Stock
options are valuable only to the extent that they are exercisable and to the
extent that the market price for the underlying share of Common Stock exceeds
the exercise price. An option effectively eliminates the market risk of holding
the underlying security since the option holder pays no consideration for the
option until it is exercised. Therefore, the option holder may, within the
limits of the term of the option, wait to exercise the option until the market
price exceeds the exercise price. Assuming (i) the receipt of stockholder
approval for the MRP and the Stock Option Plan, (ii) the open market purchase of
shares on behalf of the MRP, (iii) the purchase by the ESOP of 8% of the Common
Stock sold in the Offerings, and (iv) the exercise of stock options equal to 10%
of the number of shares of Common Stock issued in the Conversion, directors,
officers and employees of the Holding Company and the Savings Bank would have
voting control, on a fully diluted basis, of 26.3% and 24.7% of the Common
Stock, based on the issuance of Common Stock at the minimum and maximum of the
Estimated Valuation Range, respectively. See "RISK FACTORS -- Anti-takeover
Considerations - - Voting Control by Insiders." The MRP and Stock Option Plan
are subject to approval by the stockholders of the Holding Company at a meeting
to be held no earlier than six months following consummation of the Stock
Conversion.
RISK FACTORS
See "RISK FACTORS" beginning on page 1 for a discussion of certain
risks related to the Offerings that should be considered by all prospective
investors.
(vi)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
THE FOLLOWING TABLES SET FORTH CERTAIN INFORMATION CONCERNING THE
CONSOLIDATED FINANCIAL POSITION AND RESULTS OF OPERATIONS OF THE SAVINGS BANK
AND ITS SUBSIDIARIES AT THE DATES AND FOR THE PERIODS INDICATED. THIS
INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION CONTAINED IN THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
PRESENTED ELSEWHERE IN THIS PROSPECTUS. INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1996 IS UNAUDITED, BUT, IN THE OPINION OF MANAGEMENT, CONTAINS ALL
ADJUSTMENTS (NONE OF WHICH WERE OTHER THAN NORMAL RECURRING ENTRIES) NECESSARY
FOR A FAIR PRESENTATION OF THE RESULTS OF SUCH PERIOD. THE SAVINGS BANK CHANGED
ITS FISCAL YEAR END FROM JUNE 30 TO MARCH 31 SUBSEQUENT TO JUNE 30, 1996.
<TABLE>
<CAPTION>
At March 31, At June 30,
----------------------------------------
1997 1996 1995 1994 1993
----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(In thousands)
FINANCIAL CONDITION DATA:
Total assets................................... $204,213 $203,457 $205,400 $196,736 $193,334
Loans receivable, net.......................... 138,881 132,347 124,440 112,101 97,562
Loans held-for-sale............................ 428 -- -- -- --
Investment securities held-to-maturity......... 2,763 2,609 21,657 22,735 19,888
Investment securities available-for-sale....... 15,906 19,950 2,902 2,780 --
Mortgage-backed and related securities
held-for-trading............................. -- 2,569 3,786 3,668 --
Mortgage-backed and related securities
available for sale........................... 19,745 19,451 -- -- --
Mortgage-backed and related securities
held-to-maturity............................. 15,302 17,011 42,245 46,441 55,827
Cash, federal funds sold and overnight
interest-bearing deposits ................... 4,975 3,416 4,844 4,867 15,897
Deposit accounts............................... 179,158 176,619 172,569 177,107 175,617
Borrowings..................................... 2,231 4,082 12,161 1,896 2,195
Total equity................................... 21,026 20,004 17,812 15,477 12,966
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
--------------------- ---------------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands)
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Interest income................................ $12,030 $11,960 $16,012 $14,807 $14,621 $15,192
Interest expense............................... 5,553 6,134 8,057 7,083 6,534 7,649
------- ----- ------- ------- ------- -------
Net interest income ........................... 6,477 5,826 7,955 7,724 8,087 7,543
Provision (credit) for loan losses............. 216 91 115 67 (90) 175
------- -------- -------- -------- -------- --------
Net interest income
after provision for loan losses............... 6,261 5,735 7,840 7,657 8,177 7,368
Gains from sale of securities.................. -- 34 34 -- 59 48
Other income................................... 661 563 677 1,141 629 919
Other expenses(1).............................. 5,075 3,647 5,009 5,027 4,602 4,507
------- ------- ------- ------- ------- -------
Income before income taxes..................... 1,847 2,685 3,542 3,771 4,263 3,828
Provision for income taxes .................... 749 1,033 1,363 1,512 1,616 1,470
-------- ------- ------- ------- ------- -------
Net income..................................... $ 1,098 $ 1,652 $ 2,179 $ 2,259 $ 2,647 $ 2,358
======= ======= ======= ======= ======= =======
</TABLE>
(vii)
<PAGE>
<TABLE>
<CAPTION>
At March 31, At June 30,
--------------------------------------
1997 1996 1995 1994 1993
----------------- ---- ---- ---- ----
SELECTED OTHER DATA:
<S> <C> <C> <C> <C> <C>
Number of:
Real estate loans outstanding................. 2,381 2,493 2,527 2,545 2,602
Deposit accounts.............................. 29,455 30,524 30,136 28,839 28,360
Full-service offices.......................... 7 7 7 7 7
</TABLE>
<TABLE>
<CAPTION>
At or For
Nine Months Ended
March 31, Year Ended June 30,
--------------------- ----------------------------------
1997 1996 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS(2):
PERFORMANCE RATIOS:
Return on average assets(3) .................. 0.72% 1.06% 1.06% 1.12% 1.35% 1.24%
Return on average equity(4)................... 7.09 11.67 11.40 13.59 18.57 20.00
Interest rate spread(6)....................... 3.90 3.45 3.56 3.61 3.95 3.87
Net interest margin(7)........................ 4.40 3.87 3.97 3.94 4.22 4.07
Average interest-earning assets
to average interest-bearing
liabilities.................................. 113.20 110.33 110.64 109.27 107.88 104.88
Noninterest expense as a
percent of average total assets.............. 2.50 1.76 2.43 2.49 2.34 2.37
Efficiency ratio(8)........................... 73.31 57.60 58.58 57.14 51.92 54.07
ASSET QUALITY RATIOS:
Nonaccrual and 90 days or more
past due loans as a percent
of total loans, net.......................... 0.14 0.10 0.12 0.05 0.04 0.13
Nonperforming assets as a
percent of total assets...................... 0.10 0.06 0.10 0.03 0.03 0.07
Allowance for losses as a
percent of gross
loans receivable............................. 0.52 0.41 0.41 0.37 0.36 0.52
Allowance for losses as a
percent of nonperforming
loans........................................ 381.58 424.80 331.90 679.10 982.93 389.23
Net charge-offs to average
outstanding loans............................ 0.03 0.02 0.02 0.01 0.02 0.01
CAPITAL RATIOS:
Total equity-to-assets ratio(5)............... 10.30 8.68 9.83 8.67 7.87 6.71
Average equity to average assets.............. 10.14 9.11 9.26 8.25 7.25 6.19
</TABLE>
(1) Includes FDIC SAIF assessment of $1.1 million during the nine months ended
March 31, 1997.
(2) Annualized, where appropriate, for the nine months ended March 31, 1997
and 1996.
(3) Net earnings divided by average total assets.
(4) Net earnings divided by average equity.
(5) Average total equity divided by average total assets.
(6) Difference between weighted average yield on interest-earning assets and
weighted average rate on interest-bearing liabilities.
(7) Net interest income as a percentage of average interest-earning assets.
(8) Other expenses divided by the sum of net interest income and other income.
Efficiency ratio without FDIC SAIF assessment was 56.75% for the nine
months ended March 31, 1997.
(viii)
<PAGE>
RISK FACTORS
BEFORE INVESTING IN SHARES OF THE COMMON STOCK OFFERED HEREBY, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS PRESENTED BELOW, IN ADDITION TO
MATTERS DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
RECENT GROWTH IN, UNSEASONED NATURE OF AGRICULTURAL, COMMERCIAL BUSINESS
AND INDIRECT AUTOMOBILE LENDING
The Savings Bank's lending strategy involves a shift from a primary focus on
residential lending to a community banking approach. As part of the expansion of
its community banking activities, the Savings Bank intends to increase its
efforts to originate commercial business loans, agricultural loans and indirect
automobile loans. The Savings Bank's community banking strategy may take a
period of time to implement fully and may require the incurrence of additional
expenses to originate the desired volume of non-residential loans. There can be
no assurances that the Savings Bank will meet its objective in increasing the
size of its non-mortgage loan portfolio. Factors that may effect the ability of
the Savings Bank to increase its originations of such loans include the demand
for such loans, interest rates and the state of the local and national economy.
In implementing this strategy, the Savings Bank has increased recently its risk
profile relative to traditional thrift institutions by significantly increasing
its commercial banking activities during the nine months ended March 31, 1997.
Given the relatively low market interest rates and generally favorable economic
conditions in the Savings Bank's primary market area during that time period, a
substantial portion of these loans are unseasoned because they have been
originated recently and have not been subject to unfavorable economic
conditions, although the borrowers are generally established persons and
entities who have experienced less favorable economic conditions in the past. No
assurances can be given that a downturn in the local economy will not have a
material adverse effect on the quality of the non-mortgage loan portfolio,
thereby resulting in material delinquencies and even losses to the Savings Bank.
See "BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Agricultural
Lending," "-- Commercial Business Lending" and "-- Consumer and Other Lending."
As a result of the Savings Bank's increased risk profile, management increased
the provision for loan losses from $91,000 for the nine months ended March 31,
1996 to $216,000 for the nine months ended March 31, 1997. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATIONS - - Comparison of
Operating Results for the Nine Months Ended March 31, 1997 and 1996." A
significant increase in originations of commercial business, agricultural and
indirect automobile loans would be a material factor in management's ongoing
evaluation of the adequacy of the allowance for loan losses and may, in
management's judgment, warrant additional provisions for loan losses in future
periods, which could have a material adverse effect on net income. See "BUSINESS
OF THE SAVINGS BANK -- Lending Activities -- Allowance for Loan Losses."
CERTAIN LENDING RISKS
RISKS OF AGRICULTURAL LENDING. At March 31, 1997, agricultural loans totalled
$2.5 million, or 1.7% of the Savings Bank's total loans portfolio. Agricultural
lending involves a greater degree of risk than residential real estate loans.
Payments on agricultural real estate loans depend primarily on the successful
operation and management of the farm to produce cash flows sufficient to service
the loan. The success of the farm may be affected by many factors outside the
control of the farm borrower, including adverse weather conditions that limit
crop yields (such as hail, drought and floods), declines in market prices for
agricultural products and the impact of government regulations (including
changes in price supports, subsidies and environmental regulations). In
addition, many farms are dependent on a limited number of key individuals whose
injury or death may significantly affect the successful operation of the farm.
Generally, most of the Savings Bank's loans are agricultural operating loans
that are not secured by real estate. Agricultural operating loans entail greater
risk than do mortgage loans, particularly in the case of loans that are
unsecured or secured by assets such as cattle or crops. In such cases, any
repossessed collateral for a defaulted loan may not provide an adequate source
of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In connection with the adoption of
its community banking strategy, the Savings Bank intends, subject to market
conditions, to continue to expand its agricultural lending
1
<PAGE>
activities. The primary crops in the Savings Bank's market area are wheat,
barley, mint, onions, potatoes, corn and alfalfa. See "BUSINESS OF THE SAVINGS
BANK -- Lending Activities -- Agricultural Lending."
RISKS OF CONSUMER LENDING. At March 31, 1997, the Savings Bank had $25.4
million outstanding in consumer loans, representing 18.0% of total loans. Of the
$25.4 million, $7.9 million represented loans other than home equity and second
mortgage loans. Consumer loans may entail greater credit risk than do
single-family residential mortgage loans, particularly in the case of loans
secured by assets that depreciate rapidly, such as mobile homes, automobiles,
boats and recreational vehicles. Repossessed collateral for a defaulted consumer
loan may not provide an adequate source of repayment of the outstanding loan and
the remaining deficiency often does not warrant further substantial collection
efforts against the borrower. In addition, consumer loan collections are
dependent on the borrower's continuing financial stability and, thus, are more
likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy. This is particularly applicable in the case of unsecured loans. At
March 31, 1997, the Savings Bank had $1.6 million, or 1.1% of total loans in
unsecured consumer loans. Furthermore, the application of various federal and
state laws, including federal and state bankruptcy and insolvency laws, may
limit the amounts recovered on such loans. Consumer loans may also give rise to
claims and defenses by the borrower against the Savings Bank as the holder of
the loan, and a borrower may be able to assert claims and defenses that it has
against the seller of the underlying collateral. See "BUSINESS OF THE SAVINGS
BANK -- Lending Activities -- Consumer and Other Lending."
RISKS OF COMMERCIAL BUSINESS LENDING. Because payments on commercial business
loans are often dependent on successful operation of the business involved,
repayment of such loans may be subject to a greater extent to adverse conditions
in the economy. The Savings Bank seeks to minimize these risks through its
underwriting guidelines, which require that the loan be supported by adequate
cash flow of the borrower, profitability of the business, collateral and
personal guarantees of the individuals in the business. In addition, the Savings
Bank limits this type of lending to its primary market area and to borrowers
with which it has prior experience or who are otherwise well known to the
Savings Bank. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities - -
Commercial Business Lending."
CONCENTRATION OF CREDIT RISK AND DEPENDANCE ON AGRICULTURE
At March 31, 1997, management estimated that more than 90% of the Savings
Bank's loan portfolio consisted of loans made to borrowers and secured by real
estate, either as primary or secondary collateral, located in its primary market
area. This concentration of credit risk could be expected to have a material
adverse effect on the Savings Bank's financial condition and results of
operations to the extent there is a deterioration in that county's economy and
real estate values. Unemployment rates in the primary market area are
considerably higher than both state and national unemployment rates and have
increased consistently over the past few years. According to data compiled by
the Oregon Area Labor Department, the unemployment rate of the primary market
area rose from 8.1% in 1995 to 10.0% in 1996 and the state unemployment rate
rose from 4.8% in 1995 to 5.9% in 1996, while the national unemployment rate
declined from 5.6% in 1995 to 5.0% in 1996. This risk is further exacerbated in
the case of agricultural loans, commercial real estate loans and commercial
business loan portfolios, which are generally more sensitive to economic
downturns than the one- to four-family loan portfolio because their repayment
often depends primarily on the successful operation of the underlying business
entity. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities."
Furthermore, the economy of the Savings Bank's primary market area depends
heavily on the state of its agriculture based economy. Historically, the
agricultural industry has been subject to more frequent and more severe
recessionary periods which would be expected to have a material adverse effect
on the ability of the Savings Bank's borrowers to meet their financial
obligations. See "BUSINESS OF THE SAVINGS BANK -- Market Area."
2
<PAGE>
INTEREST RATE RISK
GENERAL. Like all financial institutions, the Savings Bank's financial
condition and operations are influenced significantly by general economic
conditions, the related monetary and fiscal policies of the federal government
and government regulations. Deposit flows and the cost of funds are influenced
by interest rates of competing investments and general market interest rates.
Lending activities are affected by the demand for mortgage financing and for
consumer and other types of loans, which in turn is affected by the interest
rates at which such financing may be offered and by other factors affecting the
supply of housing and the availability of funds. The Savings Bank's
profitability, like that of most financial institutions, depends largely on its
net interest income, which is the difference between the interest income
received from its interest-earning assets and the interest expense incurred in
connection with its interest-bearing liabilities. To mitigate the impact of
changes in interest rates, the Savings Bank has sought to improve the match
between asset and liability maturities or repricing periods and rates by
emphasizing the origination and purchase of adjustable-rate mortgage ("ARM")
loans and shorter term agricultural, commercial business, and consumer loans.
POTENTIAL ADVERSE IMPACT ON RESULTS OF OPERATIONS. The Savings Bank's results
of operations would be adversely affected by a material prolonged increase in
market interest rates. At March 31, 1997, assuming, for example, an
instantaneous 200 basis point increase in market interest rates, the Savings
Bank's net portfolio value ("NPV") (the present value of expected cash flows
from assets, liabilities and off-balance sheet contracts) would decrease by
approximately $4.8 million, or 22.5%. See "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset and Liability
Management."
POTENTIAL ADVERSE IMPACT ON FINANCIAL CONDITION. Changes in the level of
interest rates also affect the volume of loans originated or purchased by the
Savings Bank and, thus, the amount of loan and commitment fees, as well as the
market value of the Savings Bank's investment securities and other
interest-earning assets. Changes in interest rates also can affect the average
life of loans. Decreases in interest rates may result in increased prepayments
of loans, as borrowers refinance to reduce borrowing costs. Under these
circumstances, the Savings Bank is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are comparable
to the rates on the maturing loans or securities. Moreover, volatility in
interest rates also can result in disintermediation, or the flow of funds away
from savings institutions into direct investments, such as U.S. Government and
corporate securities and other investment vehicles which, because of the absence
of federal insurance premiums and reserve requirements, generally pay higher
rates of return than savings institutions.
At March 31, 1997, out of total gross loans of $141.4 million in the Savings
Bank's portfolio, $66.9 million were ARM loans, the majority of which reprice
every year. Furthermore, the Savings Bank's ARM loans contain periodic and
lifetime interest rate adjustment limits which, in a rising interest rate
environment, may prevent such loans from repricing to market interest rates.
While management anticipates that ARM loans will better offset the adverse
effects of an increase in interest rates as compared to fixed-rate mortgages,
the increased mortgage payments required of ARM borrowers in a rising interest
rate environment could potentially cause an increase in delinquencies and
defaults. The Savings Bank has not historically had an increase in such
delinquencies and defaults on ARM loans, but no assurance can be given that such
delinquencies or defaults would not occur in the future. The marketability of
the underlying property also may be adversely affected in a high interest rate
environment. Moreover, the Savings Bank's ability to originate or purchase ARM
loans may be affected by changes in the level of interest rates and by market
acceptance of the terms of such loans. In a relatively low interest rate
environment, as currently exists, borrowers generally tend to favor fixed-rate
loans over ARM loans to hedge against future increases in interest rates.
COMPETITION
The Savings Bank has faced, and will continue to face strong competition both
in making loans and attracting deposits. Many of the financial institutions in
the Savings Bank's primary market area are significantly larger than the Savings
Bank and have greater financial resources and compete with the Savings Bank in
varying degrees.
3
<PAGE>
Competition for loans principally comes from commercial banks, thrift
institutions, credit unions, mortgage brokers, mortgage banking companies and
insurance companies. Historically, commercial banks, thrift institutions and
credit unions have been the Savings Bank's most direct competition for deposits.
The Savings Bank also competes with short-term money market funds and with other
financial institutions, such as brokerage firms and insurance companies, for
deposits. The strong competition for residential mortgage loans was a major
factor in the Savings Bank's decision to pursue agricultural and commercial
business lending and the purchase of dealer-originated automobile contracts.
Furthermore, in competing for loans, the Savings Bank may be forced to offer
lower loan interest rates periodically. Conversely, in competing for deposits,
the Savings Bank may be forced to offer higher deposit interest rates
periodically. Either case or both cases could adversely affect net interest
income. See "BUSINESS OF THE SAVINGS BANK -- Competition."
RETURN ON EQUITY AFTER CONVERSION
Return on equity (net income for a given period divided by average equity
during that period) is a ratio used by many investors to compare the performance
of a particular financial institution to its peers. The Savings Bank's return on
equity for the nine months ended March 31, 1997 was, and the Holding Company's
post-Conversion return on equity will be, less than the average return on equity
for publicly traded thrift institutions and their holding companies. See
"SELECTED CONSOLIDATED FINANCIAL INFORMATION" for numerical information
regarding the Savings Bank's historical return on equity and "CAPITALIZATION"
for a discussion of the Holding Company's estimated pro forma consolidated
capitalization as a result of the Conversion. In order for the Holding Company
to achieve a return on equity comparable to the historical levels of the Savings
Bank, the Holding Company either would have to increase net income or reduce
stockholders' equity, or both, commensurate with the increase in equity
resulting from the Conversion. Reductions in equity could be achieved by, among
other things, the payment of regular or special cash dividends (although no
assurances can be given as to their payment or, if paid, their amount and
frequency), the repurchase of shares of Common Stock subject to applicable
regulatory restrictions, or the acquisition of branch offices, other financial
institutions or related businesses (neither the Holding Company nor the Savings
Bank has any present plans, arrangements, or understandings, written or oral,
regarding any repurchase or acquisitions). See "DIVIDEND POLICY" and "USE OF
PROCEEDS." Achievement of increased net income levels will depend on several
important factors outside management's control, such as general economic
conditions, including the level of market interest rates, competition and
related factors, among others. In addition, the expenses associated with the
ESOP and the MRP (see "-- New Expenses Associated with ESOP and MRP") are
expected to contribute initially to reduced earnings levels. Subject to market
conditions, initially the Savings Bank intends to deploy the net proceeds of the
Offerings to support its core lending activities to increase earnings per share
and book value per share, without assuming undue risk, with the goal of
achieving a return on equity comparable to the average for publicly traded
thrift institutions and their holding companies. This goal will likely take a
number of years to achieve and no assurances can be given that this goal can be
attained. Consequently, for the foreseeable future, investors should not expect
a return on equity which will meet or exceed the average return on equity for
publicly traded thrift institutions, many of which are not newly converted
institutions and have had time to deploy their conversion capital.
NEW EXPENSES ASSOCIATED WITH ESOP AND MRP
The Savings Bank will recognize additional material employee compensation and
benefit expenses assuming the ESOP and the MRP are implemented. The actual
aggregate amount of these new expenses cannot be currently predicted because
applicable accounting practices require that they be based on the fair market
value of the shares of Common Stock when the expenses are recognized, which
would occur when shares are committed to be released in the case of the ESOP and
over the vesting period of awards made to recipients in the case of the MRP.
These expenses have been reflected in the pro forma financial information under
"PRO FORMA DATA" assuming the Purchase Price ($10.00 per share) as fair market
value. Actual expenses, however, will be based on the fair market value of the
Common Stock at the time of recognition, which may be higher or lower than the
Purchase Price. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Impact of Accounting Pronouncements and Regulatory
Policies -- Accounting for Employee Stock
4
<PAGE>
Ownership Plans," "-- Accounting for Stock-Based Compensation," "MANAGEMENT OF
THE SAVINGS BANK - - Benefits -- Employee Stock Ownership Plan" and "-- Benefits
- -- Management Recognition Plan."
ANTI-TAKEOVER CONSIDERATIONS
PROVISIONS IN THE HOLDING COMPANY'S GOVERNING INSTRUMENTS AND OREGON
AND FEDERAL LAW. Certain provisions included in the Holding Company's Articles
of Incorporation and in the Oregon Business Corporation Act ("OBCA") will assist
the Holding Company in maintaining its independence as a separate, publicly
owned corporation. These provisions may discourage potential takeover attempts,
particularly those which have not been negotiated with the Board of Directors.
As a result, these provisions may preclude takeover attempts which certain
stockholders may deem to be in their interest and perpetuate existing
management. These provisions restrict, among other things, acquisitions of more
than 10% of the Holding Company's outstanding voting stock for a period of five
years from the date the Conversion is consummated. In addition, the Articles of
Incorporation provide for the election of directors to staggered terms of three
years and for their removal without cause only upon the vote of holders of 80%
of the outstanding voting shares, provisions for approval of certain business
combinations and provisions allowing the Board to consider non-monetary factors
in evaluating a business combination or a tender or exchange offer. The Articles
of Incorporation of the Holding Company also contain provisions regarding the
timing and content of stockholder proposals and nominations. Certain provisions
of the Articles of Incorporation of the Holding Company cannot be amended by
stockholders unless an 80% stockholder vote is obtained. See "CERTAIN
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
The Holding Company's Articles of Incorporation provide that for a period of
five years from the effective date of the completion of the Conversion of the
Savings Bank from mutual to stock form, no person shall directly or indirectly
offer to acquire or acquire beneficial ownership of more than 10% of any class
of equity security of the Holding Company, unless such offer or acquisition
shall have been approved in advance by a two-thirds vote of the Continuing
Directors, as defined in the Articles of Incorporation. This provision does not
apply to any employee stock benefit plan of the Holding Company or the Savings
Bank, such as the ESOP or the MRP. In addition, for a period for five years from
the completion of the Conversion of the Savings Bank, and notwithstanding any
provision to the contrary in the Articles of Incorporation or in the Bylaws of
the Holding Company, where any person directly or indirectly acquires beneficial
ownership of more than 10% of any class of equity security of the Holding
Company in violation of the provisions of the Articles of Incorporation, the
securities beneficially owned in excess of 10% shall not be counted as shares
entitled to vote, shall not be voted by any person or counted as voting shares
in connection with any matter submitted to the stockholders for a vote, and
shall not be counted as outstanding for purposes of determining a quorum or the
affirmative vote necessary to approve any matter submitted to the stockholders
for a vote.
The Articles of Incorporation further provide that if, at any time after five
years from the effective date of the completion of the Conversion, any person
shall acquire the beneficial ownership of more than 10% of any class of equity
security of the Holding Company without the prior approval by a two-thirds vote
of the Continuing Directors, as defined in Articles of Incorporation, then, with
respect to each vote in excess of 10%, the record holders of voting stock of the
Holding Company beneficially owned by such person shall be entitled to cast only
one-hundredth of one vote with respect to each vote in excess of 10% of the
voting power of the outstanding shares of voting stock of the Holding Company
which such record holders would otherwise be entitled to cast without giving
effect to the provision and the aggregate voting power of such record holders
shall be allocated proportionately among such record holders. For a further
discussion of the provisions of the Holding Company's Articles of Incorporation,
see "CERTAIN RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
In connection with a proxy solicitation that is opposed by the Board of
Directors, the Holding Company could assert the above-described anti-takeover
provisions of its Articles of Incorporation to cancel any voting rights related
to those shares owned by any person in excess of 10% of the outstanding shares
of Common Stock of the Holding Company. If the Board of Directors elected to
assert this provision, it would be able to deter takeover attempts or certain
other transactions which have not been negotiated with and approved by its Board
of Directors.
5
<PAGE>
The Board of Directors believes that these provisions are in the best interest
of the Savings Bank and Holding Company and its stockholders. See "CERTAIN
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY -- Change of Control --
Restrictions on Acquisitions of Securities" and "-- Purpose and Takeover
Defensive Effects of the Holding Company's Articles of Incorporation and
Bylaws."
VOTING CONTROL BY INSIDERS. Directors and officers of the Savings Bank and the
Holding Company (and their associates) expect to purchase 209,000 shares of
Common Stock, or 6.0% and 5.1% of the shares issued in the Offerings at the
minimum and the maximum of the Estimated Valuation Range, respectively.
Directors and officers are also expected to control indirectly the voting of
approximately 8% of the shares of Common Stock issued in the Conversion through
the ESOP (assuming shares have been allocated under the ESOP). Under the terms
of the ESOP, the unallocated shares will be voted by the ESOP trustees in the
same proportion as the votes cast by participants with respect to the allocated
shares. Four, current, officers of the Savings Bank will serve as the ESOP
trustees.
At a meeting of stockholders to be held no earlier than six months following
the consummation of the Conversion, the Holding Company expects to seek approval
of the Holding Company's MRP, which is a non-tax- qualified restricted stock
plan for the benefit of key employees and directors of the Holding Company and
the Savings Bank. The Holding Company expects to acquire common stock of the
Holding Company on behalf of the MRP in an amount equal to 4% of the Common
Stock issued in the Conversion, or 120,700 and 163,300 shares at the minimum and
the maximum of the Estimated Valuation Range, respectively. These shares will be
acquired either through open market purchases through a trust established in
conjunction with the MRP or from authorized but unissued shares of Common Stock.
A committee of the Board of Directors of the Holding Company will administer the
MRP, the members of which would also serve as trustees of the MRP trust, if
formed. Under the terms of the MRP, the MRP committee or the MRP trustees, will
have the power to vote unallocated and unvested shares. In addition, the Holding
Company intends to reserve for future issuance pursuant to the Stock Option Plan
a number of authorized shares of Common Stock equal to 10% of the Common Stock
issued in the Conversion (301,750 and 408,250 shares at the minimum and the
maximum of the Estimated Valuation Range, respectively). The Holding Company
also intends to seek approval of the Stock Option Plan at a meeting of
stockholders to be held no earlier than six months following the consummation of
the Conversion.
Assuming (i) the implementation of the MRP and the Stock Option Plan, (ii) the
open market purchase of shares on behalf of the MRP, (iii) the purchase by the
ESOP of 8% of the Common Stock sold in the Offerings, and (iv) the exercise of
stock options equal to 10% of the number of shares of Common Stock issued in the
Conversion, directors, officers and employees of the Holding Company and the
Savings Bank would have voting control, on a fully diluted basis, of an
additional 26.3% and 24.7% of the Common Stock, based on the issuance of the
minimum and maximum of the Estimated Valuation Range, respectively. Management's
potential voting control alone, as well as together with additional stockholder
support, might preclude or make more difficult takeover attempts that certain
stockholders deem to be in their best interest and might tend to perpetuate
existing management.
PROVISIONS OF EMPLOYMENT AND SEVERANCE AGREEMENTS, SEVERANCE PLAN AND DIRECTORS
PLAN. The employment and severance agreements of Dan L. Webber, President and
Chief Executive Officer of the Holding Company and the Savings Bank, and other
senior officers of the Holding Company and the Savings Bank provide for cash
severance payments and/or the continuation of health, life and disability
benefits in the event of their termination of employment following a change in
control of the Holding Company or the Savings Bank. Assuming a change of control
occurred as of March 31, 1997, the aggregate value of the severance benefits
available to these executive officers under the agreements would have been
approximately $779,000. In addition, assuming that a change in control had
occurred at March 31, 1997 and the termination of all eligible employees, the
maximum aggregate payment due under the Severance Plan would be approximately
$911,000. Furthermore, assuming a change in control had occurred at March 31,
1997, the aggregate amount payable under the Pioneer Bank Directors Plan
("Directors Plan") to the Savings Bank's directors and directors emeriti would
be approximately $348,000. These agreements and plans may have the effect of
increasing the costs of acquiring the Holding Company, thereby discouraging
future attempts to take over the Holding Company or the Savings Bank. See
"MANAGEMENT OF
6
<PAGE>
THE SAVINGS BANK -- Benefits," "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY."
POSSIBLE DILUTIVE EFFECT OF BENEFIT PROGRAMS
The MRP intends to acquire an amount of Common Stock of the Holding Company
equal to 4% of the shares issued in the Conversion. Such shares of Common Stock
of the Holding Company may be acquired by the Holding Company in the open market
or from authorized but unissued shares of Common Stock of the Holding Company.
In the event that the MRP acquires authorized but unissued shares of Common
Stock from the Holding Company, the voting interests of existing stockholders
will be diluted and net income per share and stockholders' equity per share will
be decreased. See "PRO FORMA DATA" and "MANAGEMENT OF THE SAVINGS BANK - -
Benefits -- Management Recognition Plan." The MRP is subject to approval by the
Holding Company's stockholders.
The Stock Option Plan will provide for options for up to a number of shares of
Common Stock of the Holding Company equal to 10% of the shares issued in the
Conversion. Such shares may be authorized but unissued shares of Common Stock of
the Holding Company and, upon exercise of the options, will result in the
dilution of the voting interests of existing stockholders and may decrease net
income per share and stockholders' equity per share. See "MANAGEMENT OF THE
SAVINGS BANK -- Benefits -- 1997 Stock Option Plan." The Stock Option Plan is
subject to approval by the Holding Company's stockholders.
If the ESOP is not able to purchase 8% of the shares of Common Stock issued in
the Offerings, the ESOP may purchase newly issued shares from the Holding
Company. In such event, the voting interests of existing stockholders will be
diluted and net income per share and stockholders' equity per share will be
decreased. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Employee Stock
Ownership Plan."
ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK
The Holding Company has never issued capital stock and, consequently, there is
no existing market for the Common Stock. Although the Holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market under the symbol "OTFC," there can be no assurance that an active and
liquid trading market for the Common Stock will develop, or once developed, will
continue. Furthermore, there can be no assurance that purchasers will be able to
sell their shares at or above the Purchase Price. See "MARKET FOR COMMON STOCK."
POSSIBLE INCREASE IN ESTIMATED PRICE RANGE AND NUMBER OF SHARES ISSUED
The Estimated Valuation Range may be increased up to 15% to reflect material
changes in the financial condition or results of operations of the Savings Bank
or changes in market conditions or general financial, economic or regulatory
conditions following the commencement of the Offerings. If the Estimated
Valuation Range is increased, it is expected that the Holding Company would
increase the Estimated Price Range so that up to 4,694,875 shares of Common
Stock at the Purchase Price would be issued for an aggregate price of up to
$46,948,750. This increase in the number of shares would decrease a subscriber's
pro forma net income per share and stockholders' equity per share, increase the
Holding Company's pro forma consolidated stockholders' equity and net income,
and increase the Purchase Price as a percentage of pro forma stockholders'
equity per share and net earnings per share. See "PRO FORMA DATA."
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
If the Subscription Rights granted to Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members of the Savings Bank are deemed to
have an ascertainable value, receipt of such rights may be a taxable event
(either as capital gain or ordinary income), to those Eligible Account Holders,
Supplemental Eligible
7
<PAGE>
Account Holders or Other Members who receive and/or exercise the Subscription
Rights in an amount equal to such value. Additionally, the Savings Bank could be
required to recognize a gain for tax purposes on such distribution. Whether
Subscription Rights are considered to have ascertainable value is an inherently
factual determination. The Savings Bank has been advised by Keller that such
rights have no value; however, Keller's conclusion is not binding on the
Internal Revenue Service ("IRS"). See "THE CONVERSION -- Effects of Conversion
to Stock Form on Depositors and Borrowers of the Savings Bank -- Tax Effects."
OREGON TRAIL FINANCIAL CORP.
The Holding Company was organized on June 9, 1997 under Oregon law at the
direction of the Savings Bank to acquire all of the capital stock that the
Savings Bank will issue upon its conversion from the mutual to stock form of
ownership. The Holding Company has applied for OTS approval to become a savings
and loan holding company through the acquisition of 100% of the capital stock of
the Savings Bank. Prior to the Conversion, the Holding Company will not engage
in any material operations. After the Conversion, the Holding Company will be
classified as a unitary savings and loan holding company subject to regulation
by the OTS, and its principal business will be the ownership of the Savings
Bank. Immediately following the Conversion, the only significant assets of the
Holding Company will be the capital stock of the Savings Bank, 50% of the net
investable proceeds of the Offerings as permitted by the OTS to be retained by
it, and a note receivable from the ESOP evidencing a loan to enable the ESOP to
purchase 8% of the Common Stock issued in the Conversion. See "BUSINESS OF THE
HOLDING COMPANY."
The holding company structure will permit the Holding Company to expand the
financial services currently offered through the Savings Bank. Management
believes that the holding company structure and retention of a portion of the
proceeds of the Offerings will, should it decide to do so, facilitate the
expansion and diversification of its operations. The holding company structure
will also enable the Holding Company to repurchase its stock without adverse tax
consequences, subject to applicable regulatory restrictions, including waiting
periods. There are no present plans, arrangements, agreements, or
understandings, written or oral, regarding any such activities or repurchases.
See "REGULATION -- Savings and Loan Holding Company Regulations."
PIONEER BANK, A FEDERAL SAVINGS BANK
Chartered in 1901, the Savings Bank is a federal mutual savings bank
headquartered in Baker City, Oregon. As a result of the Conversion, the Savings
Bank will convert to a federal capital stock savings bank and will become a
wholly-owned subsidiary of the Holding Company. The Savings Bank is regulated by
the OTS, its primary regulator, and by the FDIC, the insurer of its deposits.
The Savings Bank's deposits have been federally-insured since 1934 and are
currently insured by the FDIC under the SAIF. The Savings Bank has been a member
of the Federal Home Loan Bank ("FHLB") System since 1934. At March 31, 1997, the
Savings Bank had total assets of $204.2 million, total deposits of $179.2
million and total equity of $21.0 million on a consolidated basis.
The Savings Bank is a community oriented financial institution whose principal
business is attracting retail deposits from the general public and using these
funds to originate one- to- four family residential mortgage loans and consumer
loans within its primary market area. At March 31, 1997, one- to- four family
loans totalled $101.8 million, or 72.0%, of total loans receivable. The Savings
Bank has also been active in the origination of home equity and second mortgage
loans and at March 31, 1997, such loans were $17.5 million, or 12.4%, of total
loans receivable. As a result of a perceived local demand for non-mortgage
lending products, as well as management's concern as to the Savings Bank's level
of interest rate risk and a perception of minimal anticipated growth in
residential loan demand within the Savings Bank's market primary area resulting
from strong competition primarily from mortgage brokers and larger financial
institutions (see "RISK FACTORS -- Competition"), the Savings Bank began
supplementing its traditional lending activities in 1996 with the development of
commercial business loans, agricultural loans and the purchase of
dealer-originated automobile contracts. The Savings Bank has hired experienced
commercial lending officers familiar with the Savings Bank's primary market area
in an attempt to develop commercial business and agricultural lending and to
expand the purchase of dealer-originated automobile
8
<PAGE>
contacts to include the purchase of dealer-originated contracts secured by
recreational vehicles, trailers, motorcycles and other vehicles. As a result of
these activities, at March 31, 1997 the Savings Bank had agricultural loans of
$2.5 million, commercial business loans of $4.1 million and automobile loans of
$2.1 million (including $371,000 of dealer-originated automobile contracts). See
"RISK FACTORS -- Recent Growth in, Unseasoned Nature of Agricultural, Commercial
Business and Indirect Automobile Lending," "-- Certain Lending Risks -- Risks of
Agricultural Lending," "-- Interest Rate Risk" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset and Liability
Management."
The Savings Bank's business strategy is to operate as a well-capitalized,
profitable and independent financial institution dedicated to a
community-oriented approach that emphasizes management involvement with
customers and the community at large, local decision-making and quality customer
service. Management believes that it can best serve an important segment of the
marketplace and enhance the long-term value of the Holding Company by operating
independently and continuing with and expanding its community-oriented approach,
especially in light of recent consolidations of financial institutions in the
Savings Bank's primary market area.
In addition to its lending activities, the Savings Bank invests excess
liquidity in short and intermediate term U.S. Government and government agency
securities, and mortgage-backed and related securities issued by U.S. Government
agencies. Investment securities and mortgage-backed and related securities,
which constituted 25.0% of total assets at March 31, 1997, had an amortized cost
of $51.2 million at March 31, 1997. See "BUSINESS OF THE SAVINGS BANK --
Investment Activities."
The Savings Bank conducts its operations from its main office and one branch
office located in Baker City, Oregon, and six branch offices located in Burns
(Harney County), Enterprise (Wallowa County), John Day (Grant County), La Grande
(two offices; Union County) and Ontario (Malheur County), Oregon. See "BUSINESS
OF THE SAVINGS BANK -- Properties." The main office is located at 2055 First
Street, Baker City, Oregon 97814, and its telephone number is (541) 523-6327.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are estimated
to range from $29.3 million to $39.8 million, or up to $45.9 million if the
Estimated Valuation Range is increased by 15%. See "PRO FORMA DATA" for the
assumptions used to arrive at such amounts. The Holding Company has received
conditional OTS approval to purchase all of the capital stock of the Savings
Bank to be issued in the Conversion in exchange for 50% of the net investable
proceeds of the Offerings. This will result in the Holding Company retaining
approximately $12.9 million to $17.5 million of net proceeds, or up to $20.1
million if the Estimated Valuation Range is increased by 15%, and the Savings
Bank receiving an equal amount. See "PRO FORMA DATA."
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities. The Savings Bank will use the funds
contributed to it for general corporate purposes, including, initially, lending
(including agricultural and commercial business lending), the purchase of
dealer-originated automobile contracts and dealer-originated contracts secured
by recreational vehicles, trailers, motorcycles and other vehicles, and
investment in short-term U.S.
Government and government agency obligations.
In connection with the Conversion and the establishment of the ESOP, the
Holding Company intends to loan the ESOP the amount necessary to purchase 8% of
the shares of Common Stock sold in the Conversion. The Holding Company's loan to
fund the ESOP may range from $2,414,000 to $3,266,000 based on the sale of
3,017,500 shares to the ESOP (at the minimum of the Estimated Valuation Range)
and 4,082,500 shares (at the maximum of the Estimated Valuation Range),
respectively, at $10.00 per share. If 15% above the maximum of the Estimated
Valuation Range, or 4,694,875 shares, are sold in the Conversion, the Holding
Company's loan to the ESOP would be approximately $3,755,900 (based on the
9
<PAGE>
sale of 350,198 shares to the ESOP). It is anticipated that the ESOP loan will
have a 10-year term with interest payable at the prime rate as published in THE
WALL STREET JOURNAL on the closing date of the Conversion. The loan will be
repaid principally from the Savings Bank's contributions to the ESOP and from
any dividends paid on shares of Common Stock held by the ESOP.
The remaining net proceeds retained by the Holding Company initially will be
invested primarily in short-term U.S. Government and government agency
obligations. Such proceeds will be available for additional contributions to the
Savings Bank in the form of debt or equity, to support future diversification or
acquisition activities, as a source of dividends to the stockholders of the
Holding Company and for future repurchases of Common Stock to the extent
permitted under Oregon law and federal regulations. The Holding Company will
consider exploring opportunities to use such funds to expand operations through
acquiring or establishing additional branch offices or acquiring other financial
institutions. Currently, there are no specific plans, arrangements, agreements
or understandings, written or oral, regarding any diversification activities.
Following consummation of the Conversion, the Board of Directors will have the
authority to adopt plans for repurchases of Common Stock, subject to statutory
and regulatory requirements. Since the Holding Company has not yet issued stock,
there currently is insufficient information upon which an intention to
repurchase stock could be based. The facts and circumstances upon which the
Board of Directors may determine to repurchase stock in the future would include
but are not limited to: (i) market and economic factors such as the price at
which the stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, the ability to increase the book value
and/or earnings per share of the remaining outstanding shares, and the ability
to improve the Holding Company's return on equity; (ii) the avoidance of
dilution to stockholders by not having to issue additional shares to cover the
exercise of stock options or to fund employee stock benefit plans; and (iii) any
other circumstances in which repurchases would be in the best interests of the
Holding Company and its stockholders. Any stock repurchases will be subject to a
determination by the Board of Directors that both the Holding Company and the
Savings Bank will be capitalized in excess of all applicable regulatory
requirements after any such repurchases and that capital will be adequate,
taking into account, among other things, the level of nonperforming and
classified assets, the Holding Company's and the Savings Bank's current and
projected results of operations and asset/liability structure, the economic
environment and tax and other regulatory considerations. For a discussion of the
regulatory limitations applicable to stock repurchases and current OTS policy
with respect thereto, see "THE CONVERSION -- Restrictions on Repurchase of
Stock."
DIVIDEND POLICY
GENERAL
The Holding Company's Board of Directors anticipates declaring and paying
quarterly cash dividends on the Common Stock at an annual rate of 2%, or $0.20
per share per year based on the Purchase Price. The first quarterly cash
dividend is expected to be declared during the quarter ending March 31, 1998 and
paid during the quarter ending June 30, 1998. In addition, the Board of
Directors may determine to pay periodic special cash dividends in addition to,
or in lieu of, regular cash dividends. Declarations or payments of any dividends
(regular and special) will be subject to determination by the Holding Company's
Board of Directors, which will take into account the amount of the net proceeds
retained by the Holding Company, the Holding Company's financial condition,
results of operations, tax considerations, capital requirements, industry
standards, economic conditions and other factors, including the regulatory
restrictions that affect the payment of dividends by the Savings Bank to the
Holding Company discussed below. Under Oregon law, the Holding Company will be
permitted to pay cash dividends after the Conversion either out of surplus or,
if there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. In order to pay such cash
dividends, however, the Holding Company must have available cash either from the
net proceeds raised in the Offerings and retained by the Holding Company,
dividends received from the Savings Bank or earnings on Holding Company assets.
No assurances can
10
<PAGE>
be given that any dividends, either regular or special, will be declared or, if
declared, what the amount of dividends will be or whether such dividends, if
commenced, will continue.
CURRENT RESTRICTIONS
Dividends from the Holding Company may depend, in part, upon receipt of
dividends from the Savings Bank because the Holding Company initially will have
no source of income other than dividends from the Savings Bank and earnings from
the investment of the net proceeds from the Offerings retained by the Holding
Company. OTS regulations require the Savings Bank to give the OTS 30 days'
advance notice of any proposed declaration of dividends to the Holding Company,
and the OTS has the authority under its supervisory powers to prohibit the
payment of dividends to the Holding Company. The OTS imposes certain limitations
on the payment of dividends from the Savings Bank to the Holding Company which
utilize a three-tiered approach that permits various levels of distributions
based primarily upon a savings association's capital level. The Savings Bank
currently meets the criteria to be designated a Tier 1 association, as
hereinafter defined, and consequently could at its option (after prior notice to
and no objection made by the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year.
Under Oregon law, the Holding Company is generally limited to paying
dividends in an amount equal to the excess of its net assets (total assets minus
total liabilities) over its statutory capital or, if no such excess exists, to
its net profits for the current and/or immediately preceding fiscal year.
The Holding Company has committed to the OTS not to make any tax-free
distributions to stockholders in the form of a return of capital, or take any
action in contemplation of any such distributions, within the first year
following the consummation of the Conversion.
TAX CONSIDERATIONS
In addition to the foregoing, retained earnings of the Savings Bank
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by the Savings Bank to pay cash dividends to the Holding Company
without the payment of federal income taxes by the Savings Bank at the then
prevailing 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 of Notes to the Consolidated Financial
Statements included elsewhere herein. The Holding Company does not contemplate
any distribution by the Savings Bank that would result in a recapture of the
Savings Bank's bad debt reserve or create the above-mentioned federal tax
liabilities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock and, consequently,
there is no existing market for the Common Stock. Although the Holding Company
has received conditional approval to list the Common Stock on the Nasdaq
National Market System under the symbol "OTFC," there can be no assurance that
the Holding Company will meet Nasdaq National Market System listing
requirements, which include a minimum market capitalization, at least two market
makers and a minimum number of record holders. Keefe, Bruyette has indicated its
intention to act as a market maker for the Holding Company's Common Stock
following consummation of the Conversion and will assist the Holding Company in
seeking to encourage at least one additional market maker to establish and
maintain a market in the Common Stock. Making a market involves maintaining bid
and ask quotations and being
11
<PAGE>
able, as principal, to effect transactions in reasonable quantities at those
quoted prices, subject to various securities laws and other regulatory
requirements. The Holding Company anticipates that prior to the completion of
the Conversion it will be able to obtain the commitment from at least one
additional broker-dealer to act as market maker for the Common Stock.
Additionally, the development of a liquid public market depends on the existence
of willing buyers and sellers, the presence of which is not within the control
of the Holding Company, the Savings Bank or any market maker. There can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue. The number of active buyers and
sellers of the Common Stock at any particular time may be limited. Under such
circumstances, investors in the Common Stock could have difficulty disposing of
their shares on short notice and should not view the Common Stock as a
short-term investment. Furthermore, there can be no assurance that purchasers
will be able to sell their shares at or above the Purchase Price or that
quotations will be available on the Nasdaq National Market System as
contemplated.
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<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the
Savings Bank at March 31, 1997, and the pro forma consolidated capitalization of
the Holding Company after giving effect to the assumptions set forth under "PRO
FORMA DATA," based on the sale of the number of shares of Common Stock at the
minimum, midpoint, maximum and maximum, as adjusted, of the Estimated Valuation
Range. The shares that would be issued at the maximum, as adjusted, of the
Estimated Valuation Range would be subject to receipt of OTS approval of an
updated appraisal confirming such valuation. A CHANGE IN THE NUMBER OF SHARES TO
BE ISSUED IN THE CONVERSION WOULD MATERIALLY AFFECT PRO FORMA CONSOLIDATED
CAPITALIZATION.
<TABLE>
<CAPTION>
Holding Company
Pro Forma Consolidated Capitalization
Based Upon the Sale of
3,017,500 3,550,000 4,082,500 4,694,875
Capitalization Shares at Shares at Shares at Shares at
as of $10.00 $10.00 $10.00 $10.00
March 31, 1997 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits(3)............................. $179,158 $179,158 $179,158 $179,158 $179,158
FHLB of Seattle advances................ 800 800 800 800 800
Securities sold under
agreements to repurchase............... 1,431 1,431 1,431 1,431 1,431
-------- -------- -------- -------- --------
Total deposits and
borrowed funds......................... $181,389 $181,389 $181,389 $181,389 $181,389
======== ======== ======== ======== ========
Stockholders' equity:
Preferred stock:
250,000 shares, $.01
par value per share,
authorized; none issued
or outstanding..................... $ -- $ -- $ -- $ -- $ --
Common Stock:
8,000,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(4)..................... -- 30 36 41 47
Additional paid-in capital........... -- 29,302 34,547 39,793 45,827
Retained earnings(5)................. 21,148 21,148 21,148 21,148 21,148
Unrealized loss on securities
available for sale, net of tax...... (122) (122) (122) (122) (122)
Less:
Common Stock acquired
by ESOP(6)........................ -- 2,414 2,840 3,266 3,756
Common Stock to be acquired
by MRP(7)......................... -- 1,207 1,420 1,633 1,878
--------- -------- -------- -------- --------
Total stockholders' equity.............. $ 21,026 $ 46,737 $ 51,349 $ 55,961 $ 61,266
======== ======== ======== ======== ========
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
13
<PAGE>
- ---------------
(1) Does not reflect the possible increase in the Estimated Valuation Range to
reflect material changes in the financial condition or results of
operations of the Savings Bank or changes in market conditions or general
financial, economic and regulatory conditions, or the issuance of
additional shares under the Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
in the event the aggregate number of shares of Common Stock issued in the
Conversion is 15% above the maximum of the Estimated Valuation Range. See
"PRO FORMA DATA" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of Common Stock are not
reflected. Such withdrawals will reduce pro forma deposits by the amounts
thereof.
(4) The Savings Bank's authorized capital will consist solely of 1,000 shares
of common stock, par value $1.00 per share, 1,000 shares of which will be
issued to the Holding Company, and 9,000 shares of preferred stock, no par
value per share, none of which will be issued in connection with the
Conversion.
(5) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Savings Bank will be prohibited
from paying any dividend that would reduce its regulatory capital below
the amount in the liquidation account, which will be established for the
benefit of the Savings Bank's Eligible Account Holders and Supplemental
Eligible Account Holders at the time of the Conversion and adjusted
downward thereafter as such account holders reduce their balances or cease
to be depositors. See "THE CONVERSION -- Effects of Conversion to Stock
Form on Depositors and Borrowers of the Savings Bank -- Liquidation
Account."
(6) Assumes that 8% of the Common Stock sold in the Conversion will be
acquired by the ESOP in the Conversion with funds borrowed from the
Holding Company. Under generally accepted accounting principles ("GAAP"),
the amount of Common Stock to be purchased by the ESOP represents unearned
compensation and is, accordingly, reflected as a reduction of capital. As
shares are released to ESOP participants' accounts, a corresponding
reduction in the charge against capital will occur. Since the funds are
borrowed from the Holding Company, the borrowing will be eliminated in
consolidation and no liability will be reflected in the consolidated
financial statements of the Holding Company. See "MANAGEMENT OF THE
SAVINGS BANK -- Benefits -- Employee Stock Ownership Plan."
(7) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed MRP, of a number of shares equal to 4% of the shares of
Common Stock issued in the Conversion at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range. The issuance
of an additional 4% of the shares of Common Stock for the MRP from
authorized but unissued shares of Holding Company Common Stock would
dilute the ownership interest of stockholders by 3.85%. The shares are
reflected as a reduction of stockholders' equity. See "RISK FACTORS --
Possible Dilutive Effect of Benefit Programs," "PRO FORMA DATA" and
"MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition
Plan." The MRP is subject to stockholder approval, which is expected to be
sought at a meeting to be held no earlier than six months following
consummation of the Conversion.
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<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents the Savings Bank's historical and pro
forma capital position relative to its capital requirements at March 31, 1997.
The amount of capital infused into the Savings Bank for purposes of the
following table is 50% of the net proceeds of the Offerings. For purpose of the
table below, the amount expected to be borrowed by the ESOP and the cost of the
shares expected to be acquired by the MRP are deducted from pro forma regulatory
capital. For a discussion of the assumptions underlying the pro forma capital
calculations presented below, see "USE OF PROCEEDS," "CAPITALIZATION" and "PRO
FORMA DATA." The definitions of the terms used in the table are those provided
in the capital regulations issued by the OTS. For a discussion of the capital
standards applicable to the Savings Bank, see "REGULATION -- Federal Regulation
of Savings Banks -- Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1997
15% above
Minimum of Estimated Midpoint of Estimated Maximum of Estimated Maximum of Estimated
Valuation Range Valuation Range Valuation Range Valuation Range
3,017,500 Shares 3,550,000 Shares 4,082,500 Shares 4,694,875 Shares
March 31, 1997 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
------------------ --------------------- ------------------------ ------------------- ---------------
Percent of Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted Adjusted
Total Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
------ ----------- ------ ----------- ------ ----------- ------ ----------- ------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital............. $ 21,026 10.3% $ 32,071 14.9% $ 34,058 15.7% $ 36,044 16.4% $ 38,329 17.3%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
Tangible capital......... $ 20,911 10.2% $ 31,956 14.8% $ 33,943 15.6% $ 35,929 16.4% $ 38,214 17.3%
Tangible capital requirement 3,061 1.5 3,229 1.5 3,259 1.5 3,286 1.5 3,323 1.5
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Excess................... $ 17,850 8.7% $ 28,727 13.3% $ 30,684 14.1% $ 32,643 14.9% $ 34,891 15.8%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
Core capital............. $ 20,911 10.2% $ 31,956 14.8% $ 33,943 15.6% $ 35,929 16.4% $ 38,214 17.3%
Core capital requirement(2) 6,123 3.0 6,458 3.0 6,517 3.0 6,577 3.0 6,645 3.0
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Excess................... $ 14,788 7.2% $ 25,498 11.8% $ 27,426 12.6% $ 29,352 13.4% $ 31,569 14.3%
======== === ======== ==== ======== ==== ======== ==== ======== ====
Total capital(3)......... $ 21,636 21.2% $ 32,681 31.5% $ 34,668 33.2% $ 36,654 35.0% $ 38,939 37.0%
Risk-based
capital requirement..... 8,174 8.0 8,311 8.0 8,343 8.0 8,375 8.0 8,411 8.0
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Excess................... $ 13,462 13.2% $ 24,370 23.5% $ 26,325 25.2% $ 28,279 27.0% $30,528 29.0%
======== ==== ======== ==== ======== ==== ======== ==== ======= ====
</TABLE>
- -------------------
(1) Based upon total adjusted assets of $204.2 million at March 31, 1997 and
$214.5 million, $216.3 million, $218.2 million and $220.3 million at the
minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
Valuation Range, respectively, for purposes of the tangible and core
capital requirements, and upon risk-weighted assets of $102.2 million at
March 31, 1997 and $104.2 million, $104.6 million, $105.0 million and
$105.0 million at the minimum, midpoint, maximum, and maximum, as
adjusted, of the Estimated Valuation Range, respectively, for purposes of
the risk-based capital requirement.
(2) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements
which would require a core capital ratio of 3% of total adjusted assets
for thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts.
(3) Percentage represents total core and supplementary capital divided by
total risk-weighted assets. Assumes net proceeds are invested in assets
that carry a 20% risk-weighting.
15
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the Common Stock must be sold at a price
equal to the estimated pro forma market value of the Holding Company and the
Savings Bank as converted, based upon an independent valuation. The Estimated
Valuation Range as of July 29, 1997 is from a minimum of $30,175,000 to a
maximum of $40,825,000 with a midpoint of $35,500,000 or, at a price per share
of $10.00, a minimum number of shares of 3,017,500, a maximum number of shares
of 4,082,500 and a midpoint number of shares of 4,082,500. The actual net
proceeds from the sale of the Common Stock cannot be determined until the
Conversion is completed. However, net proceeds set forth on the following table
are based upon the following assumptions: (i) Webb will receive fees of
$454,000, $381,000, $528,000 and $612,000 at the minimum, midpoint, maximum and
15% above the Estimated Valuation Range, respectively, assuming all shares are
sold to investors residing in Oregon (see "THE CONVERSION -- Plan of
Distribution for the Subscription, Direct Community and Syndicated Community
Offerings); (ii) all of the Common Stock will be sold in the Subscription and
Direct Community Offerings; and (iii) Conversion expenses, excluding the fees
paid to Webb, will total approximately $460,000 at each of the minimum,
midpoint, maximum and 15% above the Estimated Valuation Range. Actual expenses
may vary from this estimate, and the fees paid will depend upon the percentages
and total number of shares sold in the Subscription, Direct Community and
Syndicated Community Offerings and other factors.
The pro forma consolidated net income of the Savings Bank for the nine
months ended March 31, 1997 and the year ended June 30, 1996 have been
calculated as if the Conversion had been consummated at the beginning of the
respective periods and the estimated net proceeds received by the Holding
Company and the Savings Bank had been invested at 5.92% and 5.55% at the
beginning of the respective periods, which represent the yield on the one-year
U.S. Treasury Bill as of March 31, 1997 and June 30, 1996, respectively.
Although OTS regulations require the use of the arithmetic average of the
average yield on all interest-earning assets and the average rate paid on all
deposits in computing investment returns on net proceeds, the yield on the
one-year U.S. Treasury Bill is used because management believes it more
appropriately reflects a market rate of return. As discussed under "USE OF
PROCEEDS," the Holding Company expects to retain 50% of the net proceeds of the
Offerings from which it will fund the ESOP loan. A pro forma after-tax return of
3.64% is used for both the Holding Company and the Savings Bank for the periods,
after giving effect to an incremental combined federal and state income tax rate
of 38.5% for both periods. Historical and pro forma per share amounts have been
calculated by dividing historical and pro forma amounts by the number of shares
of Common Stock indicated in the footnotes to the table. Per share amounts have
been computed as if the Common Stock had been outstanding at the beginning of
the respective periods or at March 31, 1997 or June 30, 1996, but without any
adjustment of per share historical or pro forma stockholders' equity to reflect
the earnings on the estimated net proceeds.
The following tables summarize the historical net income and retained
earnings of the Savings Bank and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the dates
indicated, based on the minimum, midpoint and maximum of the Estimated Valuation
Range and based on a 15% increase in the maximum of the Estimated Valuation
Range. No effect has been given to: (i) the shares to be reserved for issuance
under the Holding Company's Stock Option Plan, which is expected to be voted
upon by stockholders at a meeting to be held no earlier than six months
following consummation of the Conversion; (ii) withdrawals from deposit accounts
for the purpose of purchasing Common Stock in the Conversion; (iii) the issuance
of shares from authorized but unissued shares to the MRP, which is expected to
be voted upon by stockholders at a meeting to be held no earlier than six months
following consummation of the Conversion; or (iv) the establishment of a
liquidation account for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits --
1997 Stock Option Plan" and "THE CONVERSION -- Stock Pricing and Number of
Shares Issued." Shares of Common Stock may be purchased with funds on deposit at
the Savings Bank, which will reduce deposits by the amounts of such purchases.
Accordingly, the net amount of funds available for investment will be reduced by
the amount of deposit withdrawals used to fund stock purchases.
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE CONVERSION AT THE DATE ON WHICH THE CONVERSION ACTUALLY
OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE RESULTS OF OPERATIONS.
STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE BETWEEN THE STATED AMOUNTS OF
CONSOLIDATED ASSETS AND LIABILITIES OF THE HOLDING COMPANY COMPUTED IN
ACCORDANCE WITH GAAP. STOCKHOLDERS' EQUITY HAS NOT BEEN INCREASED OR DECREASED
TO REFLECT THE DIFFERENCE BETWEEN THE CARRYING VALUE OF LOANS AND OTHER ASSETS
AND MARKET VALUE. STOCKHOLDERS' EQUITY IS NOT INTENDED TO REPRESENT FAIR MARKET
VALUE NOR DOES IT REPRESENT AMOUNTS THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO
STOCKHOLDERS IN THE EVENT OF LIQUIDATION.
16
<PAGE>
<TABLE>
<CAPTION>
At or For the Nine Months Ended March 31, 1997
------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
3,017,500 3,550,000 4,082,500 4,694,875(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds..............................$ 30,175 $ 35,500 $ 40,825 $45,949
Less: estimated expenses.................... (643) (917) (991) (1,075)
-------- -------- -------- --------
Estimated net proceeds...................... 29,332 34,583 39,834 45,874
Less: Common Stock acquired by ESOP ........ (2,414) (2,840) (3,266) (3,756)
Less: Common Stock to be acquired by MRP ... (1,207) (1,420) (1,633) (1,878)
-------- -------- -------- --------
Net investable proceeds................$ 25,711 $ 30,323 $ 34,935 $ 40,240
======== ======== ======== ========
Consolidated net income:
Historical.................................$ 1,098 $ 1,098 $ 1,098 $ 1,098
Pro forma income on net proceeds(2)........ 702 826 954 1,099
Pro forma ESOP adjustments(3).............. (254) (298) (343) (395)
Pro forma MRP adjustments(4)............... (111) (131) (151) (173)
-------- -------- -------- --------
Pro forma net income.....................$ 1,435 $ 1,497 $ 1,558 $ 1,629
======== ======== ======== ========
Consolidated net income per share (5)(6):
Historical.................................$ 0.39 $ 0.33 $ 0.29 $ 0.25
Pro forma income on net proceeds........... 0.25 0.25 0.25 0.25
Pro forma ESOP adjustments(3).............. (0.09) (0.09) (0.09) (0.09)
Pro forma MRP adjustments(4)............... (0.04) (0.04) (0.04) (0.04)
-------- -------- -------- --------
Pro forma net income per share...........$ 0.51 $ 0.45 $ 0.41 $ 0.37
======== ======== ======== ========
Consolidated stockholders' equity (book value):
Historical.................................$ 21,026 $ 21,026 $ 21,026 $ 21,026
Estimated net proceeds..................... 29,332 34,583 39,834 45,874
Less: Common Stock acquired by ESOP........ (2,414) (2,840) (3,266) (3,756)
Less: Common Stock to be acquired by MRP(4) (1,207) (1,420) (1,633) (1,878)
-------- -------- -------- --------
Pro forma stockholders' equity(7)........$ 46,737 $ 51,350 $ 55,961 $ 61,266
======== ======== ======== ========
Consolidated stockholders' equity per share(6)(8):
Historical(6)..............................$ 6.97 $ 5.92 $ 5.15 $ 4.48
Estimated net proceeds..................... 9.72 9.74 9.75 9.77
Less: Common Stock acquired by ESOP........ (0.80) (0.80) (0.80) (0.80)
Less: Common Stock to be acquired by MRP(4) (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma stockholders' equity per
share(9)............................. $ 15.49 $ 14.46 $ 13.71 $ 13.05
======== ======== ======== ========
Purchase Price as a percentage of pro forma
stockholders' equity per share............. 64.56% 69.16% 72.94% 76.63%
======== ======== ======== ========
Purchase Price as a multiple of pro forma
net income per share (annualized).......... 14.71x 16.67x 18.29x 20.27x
===== ===== ===== =====
</TABLE>
(FOOTNOTES ON SECOND FOLLOWING PAGE)
17
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
3,017,500 3,550,000 4,082,500 4,694,875(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds..............................$ 30,175 $ 35,500 $ 40,825 $ 46,949
Less: estimated expenses.................... (843) (917) (991) (1,075)
-------- -------- -------- --------
Estimated net proceeds...................... 29,332 34,583 39,834 45,874
Less: Common Stock acquired by ESOP......... (2,414) (2,840) (3,266) (3,756)
Less: Common Stock to be acquired by MRP.... (1,207) (1,420) (1,633) (1,878)
-------- -------- -------- --------
Net investable proceeds................$ 25,711 $ 30,323 $ 34,935 $ 40,240
======== ======== ======== ========
Consolidated net income:
Historical.................................$ 2,179 $ 2,179 $ 2,179 $ 2,179
Pro forma income on net proceeds(2)........ 878 1,035 1,192 1,373
Pro forma ESOP adjustments(3).............. (338) (398) (458) (526)
Pro forma MRP adjustments(4)............... (148) (175) (201) (231)
-------- -------- -------- --------
Pro forma net income.....................$ 2,571 $ 2,641 $ 2,712 $ 2,795
======== ======== ======== ========
Consolidated net income per share (5)(6):
Historical.................................$ 0.78 $ 0.66 $ 0.56 $ 0.50
Pro forma income on net proceeds........... 0.31 0.31 0.31 0.31
Pro forma ESOP adjustments(3).............. (0.12) (0.12) (0.12) (0.12)
Pro forma MRP adjustments(4)............... (0.05) (0.05) (0.05) (0.05)
------- -------- -------- --------
Pro forma net income per share........... $ 0.92 $ 0.80 $ 0.71 $ 0.64
======= ======== ======== ========
Consolidated stockholders' equity (book value):
Historical.................................$ 20,004 $ 20,004 $ 20,004 $ 20,004
Estimated net proceeds..................... 29,332 34,583 39,834 45,874
Less: Common Stock acquired by ESOP........ (2,414) (2,840) (3,266) (3,756)
Less: Common Stock to be acquired by MRP(4) (1,207) (1,420) (1,633) (1,878)
-------- -------- -------- --------
Pro forma stockholders' equity(7)........$ 45,715 $ 50,327 $ 54,939 $ 60,244
======== ======== ======== ========
Consolidated stockholders' equity per share(6)(8):
Historical(6)..............................$ 6.63 $ 5.63 $ 4.90 $ 4.26
Estimated net proceeds..................... 9.72 9.74 9.76 9.77
Less: Common Stock acquired by ESOP........ (0.80) (0.80) (0.80) (0.80)
Less: Common Stock to be acquired by MRP(4) (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma stockholders' equity per
share(9)............................ $ 15.15 $ 14.17 $ 13.46 $ 12.83
======== ======== ======== ========
Purchase Price as a percentage of pro forma
stockholders' equity per share............. 66.01% 70.57% 74.29% 77.94%
===== ===== ===== =====
Purchase Price as a multiple of pro forma
net income per share....................... 10.87x 12.50x 14.08x 15.63x
===== ===== ===== =====
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
18
<PAGE>
- -------------------
(1) Gives effect to the sale of an additional 612,375 shares in the
Conversion, which may be issued to cover an increase in the pro forma
market value of the Holding Company and the Savings Bank as converted,
without the resolicitation of subscribers or any right of cancellation.
The issuance of such additional shares will be conditioned on a
determination by Keller that such issuance is compatible with its
determination of the estimated pro forma market value of the Holding
Company and the Savings Bank as converted. See "THE CONVERSION -- Stock
Pricing and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Stock in the Conversion. Since funds on
deposit at the Savings Bank may be withdrawn to purchase shares of Common
Stock (which will reduce deposits by the amount of such purchases), the
net amount of funds available to the Savings Bank for investment following
receipt of the net proceeds of the Offerings will be reduced by the amount
of such withdrawals.
(3) It is assumed that 8% of the shares of Common Stock offered in the
Conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP (at an interest rate equal to the
prime rate as published in THE WALL STREET JOURNAL on the closing date of
the Conversion, which rate is currently 8.50%) from the net proceeds from
the Offerings retained by the Holding Company. The amount of this
borrowing has been reflected as a reduction from gross proceeds to
determine estimated net investable proceeds. The Savings Bank intends to
make contributions to the ESOP in amounts at least equal to the principal
and interest requirement of the debt. As the debt is paid down,
stockholders' equity will be increased. The Savings Bank's payment of the
ESOP debt is based upon equal installments of principal over a 7-year
period, assuming a combined federal and state income tax rate of 38.5%.
Interest income earned by the Holding Company on the ESOP debt offsets the
interest paid by the Savings Bank on the ESOP loan. No reinvestment is
assumed on proceeds contributed to fund the ESOP. The ESOP expense
reflects adoption of Statement of Position ("SOP") 93-6, which will
require recognition of expense based upon shares committed to be released
and the exclusion of unallocated shares from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the $10.00
per share Purchase Price. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits
-- Employee Stock Ownership Plan."
(4) In calculating the pro forma effect of the MRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the MRP at the beginning of the period presented in open
market purchases at the Purchase Price, that 20% of the amount contributed
was an amortized expense during such period, and that the combined federal
and state income tax rate is 38.5%. The issuance of authorized but
unissued shares of the Common Stock instead of open market purchases would
dilute the voting interests of existing stockholders by approximately
3.85% and pro forma net income per share would be $ 0.54, $ 0.49, $ 0.45
and $ 0.41 at the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range for the nine months ended March 31, 1997,
respectively, and $ 0.94, $ 0.83, $ 0.75 and $ 0.68 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range for the year ended June 30, 1996, respectively, and pro forma
stockholders' equity per share would be $ 15.28, $ 14.29, $ 13.56 and $
12.93 at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range at March 31, 1997, respectively, and $ 14.95, $
14.02, $ 13.32 and $ 12.72 at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range at June 30, 1996,
respectively. Shares issued under the MRP vest 20% per year and, for
purposes of this table, compensation expense is recognized on a
straight-line basis over each vesting period. In the event the fair market
value per share is greater than $10.00 per share on the date shares are
awarded under the MRP, total MRP expense would increase. The total
estimated MRP expense was multiplied by 20% (the total percent of shares
for which expense is recognized in the first year) resulting in pre-tax
MRP expense of $ 181,050, $ 213,000, $ 244,950 and $ 281,693 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the nine months ended March 31, 1997, respectively,
and $ 241,400, $ 284,000, $ 326,600 and $ 375,590 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range for the year ended June 30, 1996, respectively. No effect has been
given to the
19
<PAGE>
shares reserved for issuance under the proposed Stock Option Plan. If
stockholders approve the Stock Option Plan following the Conversion, the
Holding Company will have reserved for issuance under the Stock Option
Plan authorized but unissued shares of Common Stock representing an amount
of shares equal to 10% of the shares sold in the Conversion. If all of the
options were to be exercised utilizing these authorized but unissued
shares rather than treasury shares which could be acquired, the voting and
ownership interests of existing stockholders would be diluted by
approximately 9.1%. Assuming stockholder approval of the Stock Option Plan
and that all options were exercised at the end of the nine months ended
March 31, 1997 and the year ended June 30, 1996, respectively, at an
exercise price of $10.00 per share, pro forma net earnings per share would
be $0.47, $0.41, $0.37 and $0.34, respectively, for the nine months ended
March 31, 1997, and $0.83, $0.73, $0.65 and $0.58, respectively, for the
year ended June 30, 1996, and pro forma stockholders' equity per share
would be $14.08, $13.15, $12.46 and $11.86, respectively, for the nine
months ended March 31, 1997, and $13.77, $12.89, $ 12.23 and $11.67,
respectively, for the year ended June 30, 1996 at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range. See
"MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1997 Stock Option Plan" and
"-- Benefits -- Management Recognition Plan" and "RISK FACTORS -- Possible
Dilutive Effect of Benefit Programs."
(5) Per share amounts are based upon shares outstanding of 2,801,965,
3,296,429, 3,790,893 and 4,359,527 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range for the nine months
ended March 31, 1997, respectively and 2,810,585, 3,306,571, 3,802,557 and
4,372,941 for the year ended June 30, 1996, respectively, which includes
the shares of Common Stock sold in the Conversion less the number of
shares assumed to be held by the ESOP not committed to be released within
the first year following the Conversion.
(6) Historical per share amounts have been computed as if the shares of Common
Stock expected to be issued in the Conversion had been outstanding at the
beginning of the period or on the date shown, but without any adjustment
of historical net income or historical retained earnings to reflect the
investment of the estimated net proceeds of the sale of shares in the
Conversion, the additional ESOP expense or the proposed MRP expense, as
described above.
(7) "Book value" represents the difference between the stated amounts of the
Savings Bank's assets and liabilities. The amounts shown do not reflect
the liquidation account which will be established for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders in the
Conversion, or the federal income tax consequences of the restoration to
income of the Savings Bank's special bad debt reserves for income tax
purposes which would be required in the unlikely event of liquidation. See
"THE CONVERSION -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Savings Bank" and "TAXATION." The amounts shown for book
value do not represent fair market values or amounts distributable to
stockholders in the unlikely event of liquidation.
(8) Per share amounts are based upon shares outstanding of 3,017,500,
3,550,000, 4,082,500 and 4,694,875 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively.
(9) Does not represent possible future price appreciation or depreciation of
the Common Stock.
20
<PAGE>
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information as to the
approximate purchases of Common Stock by each director and executive officer of
the Savings Bank, including their associates, as defined by applicable
regulations. No individual has entered into a binding agreement with respect to
such intended purchases, and, therefore, actual purchases could be more or less
than indicated below. Directors and officers of the Savings Bank and their
associates may not purchase in excess of 31% of the shares sold in the
Conversion. For purposes of the following table, it has been assumed that
sufficient shares will be available to satisfy subscriptions in all categories.
Directors, officers and employees will pay the same price for the shares for
which they subscribe as the price that will be paid by all other subscribers.
<TABLE>
<CAPTION>
Percent of Percent of
Shares at Shares at
Minimum of Maximum of
Name and Anticipated Number of Anticipated Dollar Estimated Estimated
Position Shares Purchased (1) Amount Purchased Valuation Range Valuation Range
-------- ------------------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Dan L. Webber 12,500 $125,000 0.41% 0.31%
President and Chief
Executive Officer
Jerry F. Aldape 10,000 100,000 0.29 0.24
Senior Vice President/Support
Services and Corporate Secretary
Nadine J. Johnson 2,500 25,000 0.07 0.06
Vice President and
Treasurer/Controller
John Gentry 15,000 150,000 0.42 0.37
Chairman of the Board
Albert H. Durgan 10,000 100,000 0.29 0.24
Director
Edward H. Elms 15,000 150,000 0.42 0.37
Director
John A. Lienkaemper 27,000 270,000 0.76 0.66
Director
Charles Rouse 20,000 200,000 0.56 0.49
Director
Stephen R. Whittemore 20,000 200,000 0.56 0.49
Director
Other officers (14 persons) 77,000 770,000 2.17 1.89
-------- ------------ ----- -----
Total 209,000 $2,090,000 5.95% 5.12%
======= ========== ==== ====
</TABLE>
(1) Excludes any shares awarded pursuant to the ESOP and MRP and options to
acquire shares pursuant to the Stock Option Plan. For a description of
the number of shares to be purchased by the ESOP and intended awards
under the MRP and Stock Option Plan, see "MANAGEMENT OF THE SAVINGS
BANK -- Benefits -- Employee Stock Ownership Plan," "-- Benefits --
1997 Stock Option Plan" and "-- Benefits -- Management Recognition
Plan."
21
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THE FOLLOWING CONSOLIDATED STATEMENT OF INCOME OF PIONEER BANK, A
FEDERAL SAVINGS BANK AND SUBSIDIARIES FOR THE NINE MONTHS ENDED MARCH 31, 1997
HAS BEEN AUDITED BY DELOITTE & TOUCHE LLP, PORTLAND, OREGON, INDEPENDENT
AUDITORS, WHOSE REPORT THEREON APPEARS ELSEWHERE IN THIS PROSPECTUS. THE
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
HAVE BEEN AUDITED BY COOPERS & LYBRAND L.L.P., WHOSE REPORT THEREON APPEARS
ELSEWHERE IN THIS PROSPECTUS. THESE STATEMENTS SHOULD BE READ IN CONJUNCTION
WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE
HEREIN.
<TABLE>
<CAPTION>
Nine Months Years
Ended March 31, Ended June 30,
1997 1996 1995
-------------------- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest and fees on loans receivable.............. $8,916,375 $11,154,250 $9,680,067
Securities:
Mortgage-backed and related securities........... 2,058,194 3,123,102 3,361,726
U.S. Government and government agencies.......... 901,456 1,550,094 1,622,604
Other interest and dividends..................... 154,212 184,659 142,166
----------- ----------- -----------
Total interest income........................ 12,030,237 16,012,105 14,806,563
----------- ----------- -----------
INTEREST EXPENSE:
Deposits........................................... 5,484,996 7,579,041 6,789,749
Securities sold under agreements to repurchase..... 36,329 44,795 50,477
FHLB of Seattle advances........................... 31,578 432,896 242,843
----------- ----------- -----------
Total interest expense....................... 5,552,903 8,056,732 7,083,069
----------- ----------- -----------
Net interest income.......................... 6,477,334 7,955,373 7,723,494
PROVISION FOR LOAN LOSSES........................... 216,063 115,397 66,548
----------- ----------- -----------
Net interest income after provision for loan losses. 6,261,271 7,839,976 7,656,946
----------- ----------- -----------
OTHER INCOME:
Service charges on deposit accounts................ 482,713 520,346 505,613
Loan servicing fees................................ 49,932 64,905 82,978
Net gain (loss) on trading securities.............. (2,151) (71,274) 279,545
Other income....................................... 130,217 196,913 272,262
----------- ----------- -----------
Total non interest income.................... 660,711 710,890 1,140,398
----------- ----------- -----------
OTHER EXPENSES:
Employee compensation and benefits................. 2,168,413 2,685,328 2,848,950
Special SAIF assessment............................ 1,146,387 -- --
Supplies, postage, and telephone................... 284,567 361,913 299,742
Depreciation....................................... 271,012 299,611 243,569
Occupancy and equipment............................ 231,803 273,109 347,585
FDIC insurance premium............................. 209,188 402,572 409,707
Customer account................................... 187,021 272,919 239,307
Advertising........................................ 172,606 202,292 151,137
Professional fees.................................. 125,413 138,832 105,516
Other.............................................. 278,309 372,254 381,265
----------- ----------- -----------
Total other expenses......................... 5,074,719 5,008,830 5,026,778
----------- ----------- -----------
Income before income taxes................... 1,847,263 3,542,036 3,770,566
PROVISION FOR INCOME TAXES.......................... 749,669 1,362,907 1,511,724
----------- ----------- -----------
NET INCOME.......................................... $ 1,097,594 $ 2,179,129 $ 2,258,842
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Management's discussion and analysis of financial condition and results
of operations is intended to assist in understanding the financial condition and
results of operations of the Savings Bank. The information contained in this
section should be read in conjunction with the Consolidated Financial Statements
and accompanying Notes thereto and the other sections contained in this
Prospectus.
OPERATING STRATEGY
The Savings Bank's results of operations depend primarily on net
interest income, which is the difference between the income earned on its
interest-earning assets, such as loans and investments, and the cost of its
interest-bearing liabilities, consisting of deposits, repurchase agreements and
FHLB-Seattle borrowings. The Savings Bank's net income is also affected by,
among other things, fee income, provisions for loan losses, operating expenses
and income tax provisions. The Savings Bank's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government legislation and
policies concerning monetary and fiscal affairs, housing and financial
institutions and the attendant actions of the regulatory authorities.
The Savings Bank operates, and intends to continue to operate, as a
community oriented financial institution devoted to serving the needs of its
customers. The Savings Bank's business consists primarily of attracting retail
deposits from the general public and using those funds to originate one- to
four-family residential and consumer loans in its primary market area. To a
lesser but growing extent, the Savings Bank also originates agricultural loans,
commercial business loans and indirect automobile loans. See "BUSINESS OF THE
SAVINGS BANK -- Lending Activities."
As a result of management's concern regarding the Savings Bank's level
of interest rate risk, management's perception of minimal anticipated growth in
residential loan demand within its market area resulting from strong competition
primarily from mortgage brokers and larger financial institutions (see "RISK
FACTORS -- Competition"), and a local demand for agricultural, commercial
business and indirect dealer automobile loans, the Savings Bank determined to
reduce its interest rate risk by increasing the Savings Bank's credit risk
through the origination of agricultural, commercial and, recently, indirect
dealer automobile loans. Management's strategy to balance interest rate risk
with credit risk was enhanced by the experience of its Vice President and Chief
Lending Officer, Don S. Reay, who was hired in September 1995. In addition, the
Savings Bank hired three additional officers from a large commercial bank, two
of whom have extensive commercial lending and agricultural lending experience
and one of whom has indirect dealer lending and commercial lending experience.
With over 25 years of commercial lending experience in the Savings Bank's
primary market area, Mr. Reay and the other commercial lending personnel have
brought several lending relationships to the Savings Bank. Consequently, in July
1996, the Savings Bank began originating commercial business loans, in October
1996 agricultural loans and the purchase of dealer-originated automobile
contracts began in January 1997. Subject to market conditions and other factors,
the Savings Bank intends to expand the purchase of dealer-originated contracts
to include contracts secured by recreational vehicles, trailers, motorcycles and
other vehicles. As a result of these lending activities, at March 31, 1997 the
Savings Bank had agricultural loans of $2.5 million, commercial business loans
of $4.1 million and automobile loans of $2.1 million. While such loans generally
have shorter terms to maturity and carry higher rates of interest, which
mitigate the Savings Bank's exposure to interest rate risk, there are certain
credit risks associated with such loans that are greater than the risk
associated with one- to four-family residential mortgage loans. Difficulty in
estimating collateral values accurately, greater sensitivity of borrowers to
changing economic conditions, among other things, are major factors that
contribute to this higher risk. The Savings Bank's agricultural and indirect
automobile lending activities also have added risk in that the Savings Bank
lacks significant prior history with such lending. See "RISK FACTORS -- Recent
Growth in, Unseasoned Nature of Agricultural, Commercial Business and
23
<PAGE>
Indirect Automobile Lending," "-- Certain Lending Risks -- Risks of Agricultural
Lending," "-- Interest Rate Risk" and "-- Asset and Liability Management." In
addition to mitigating interest rate risk by originating agricultural and
commercial business loans and purchasing dealer-originated automobile contracts,
since January 1997 the Savings Bank also has attempted to mitigate interest rate
risk by selling all conforming fixed rate residential mortgage loans with
maturities of over 15 years. See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Loan Originations, Sales and Purchases."
Subject to market conditions and the Savings Bank's underwriting
guidelines, the Savings Bank expects to continue to emphasize commercial banking
activities to provide a larger array of loan products to meet the financial
needs of customers in its primary market area other than the need for
residential mortgage financing. Currently, the Savings Bank's Board of Directors
has established a maximum dollar limit of $10 million on outstanding
agricultural loans (exclusive of any unused portions of commitments to extend
agricultural credit). However, there can be no assurances that the Savings Bank
will meet its objectives in increasing the size of its agricultural, commercial
business and indirect dealer automobile loan portfolio. Factors that may affect
the ability of the Savings Bank to increase its originations in this area
include the demand for such loans, interest rates and the local and national
economic conditions.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1997 AND JUNE 30, 1996
Total assets of the Savings Bank were $204.2 million at March 31, 1997
and $203.5 million at June 30, 1996. This slight increase resulted primarily
from growth in the loan portfolio, which was funded primarily by maturities of
investment securities and retained earnings.
Loans receivable, net, were $138.9 million at March 31, 1997 compared
to $132.3 million at June 30, 1996, a 5.0% increase. A substantial portion of
the Savings Bank's loan portfolio is secured by real estate, either as primary
or secondary collateral, located in its primary market area. There are certain
risks associated with this credit concentration. See "RISK FACTORS --
Concentration of Credit Risk." In addition, the period between June 30, 1996 and
March 31, 1997 saw a continuing trend in the growth of the consumer and
commercial business loan portfolios as the Savings Bank emphasized the
origination of loans with shorter maturities for asset and liability management
purposes (see "-- Asset and Liability Management"), as well as the development
of an agricultural loan portfolio that amounted to $2.5 million at March 31,
1997.
Loans held-for-sale were $428,000 at March 31, 1997. No loans were
classified as held-for-sale at June 30, 1996. To mitigate interest rate risk,
the Savings Bank occasionally classifies fixed rate one- to- four family
mortgage loans that conform to secondary market standards and with terms of 15
years or more as held for sale. The Savings Bank generally sells such loans and
the related servicing rights to private investors. See "-- Asset and Liability
Management."
Cash and cash equivalents were $5.0 million at March 31, 1997 compared
to $3.4 million at June 30, 1996. The increase between June 30, 1996 and March
31, 1997 primarily reflects the increase in deposits and the proceeds from
maturing securities.
Trading securities totaled $2.6 million at June 30, 1996. There were no
trading securities at March 31, 1997. Effective March 31, 1997, the Savings Bank
reclassified, under SFAS No. 115 guidelines, $2.4 million of trading securities
(at fair value) to available-for-sale as management had not purchased such
securities with the principal intent of selling them in the near term. See Note
1 of Notes to Consolidated Financial Statements. Trading of investment
securities is not part of the Savings Bank's operating strategy.
Available-for-sale securities were $35.7 million at March 31, 1997,
compared to $39.4 million at June 30, 1996. This decrease primarily resulted
from maturities and the redemption prior to maturity of $5.0 million of callable
U.S. government agency obligations, as well as maturities of mortgage-backed and
related securities. These
24
<PAGE>
decreases were primarily offset by the transfer of trading securities to
available-for-sale classification and the purchase during April and May 1997 of
$8.0 million of intermediate term FNMA obligations and $2.0 of intermediate term
FHLB agency securities.
Held-to-maturity securities declined to $15.3 million at March 31, 1997
from $17.0 million at June 30, 1996 because of principal reductions on
mortgage-backed and related securities.
Premises and equipment, net, increased to $4.6 million at March 31,
1997 from $4.4 million at June 30, 1996 primarily as a result of construction in
process associated with the construction of the Island City branch office.
Outstanding commitments to complete construction amounted to $725,000 at March
31, 1997, and construction was completed on June 9, 1997 for a total cost of
$1.1 million. See "BUSINESS OF THE SAVINGS BANK -- Properties" and Note 5 of
Notes to Consolidated Financial Statements.
Total deposits were $179.2 million at March 31, 1997, compared to
$176.6 million at June 30, 1996. Management attributes the increase primarily to
seasonal deposit flows (i.e., deposit balances are typically higher immediately
before the April 15th federal income tax deadline) and an attempt to attract
core deposits.
FHLB of Seattle advances decreased to $800,000 at March 31, 1997 from
$2.7 million at June 30, 1996 as deposit growth and funds generated from
maturing securities and retained earnings were sufficient to meet liquidity
needs. Subject to market conditions, the Savings Bank intends to engage in
"wholesale leveraging" by investing FHLB of Seattle advances in investment
securities of the type in which the Savings Bank currently invests, with the
goal of recognizing income on the difference between the interest rate paid on
the advances and the interest rate earned on the securities. Accordingly, FHLB
advances could be expected to increase to approximately $25 million to support
such "wholesale leveraging," which may commence prior to the consummation of the
Conversion. To the extent any such FHLB advances would be outstanding before the
consummation of the Conversion, the Savings Bank may use a portion of the net
proceeds to repay them. See "USE OF PROCEEDS," "BUSINESS OF THE SAVINGS BANK --
Investment Activities" and "-- Deposit Activities and Other Sources of Funds --
Borrowings."
Advances from borrowers for taxes and insurance decreased to $678,000
at March 31, 1997 from $1.4 million at June 30, 1996 as a result of timing
differences in annual mortgage escrow payments.
Total equity increased to $21.0 million at March 31, 1997 from $20.0
million at June 30, 1996.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 1997
AND 1996
GENERAL. Subsequent to June 30, 1996, the Savings Bank changed its
fiscal year end from June 30 to March 31. To assist in the analysis of the
results of operations for the nine months ended March 31, 1997, the results of
operations for such period have been compared to the results of operations for
the nine months ended March 31, 1996, rather than the year ended June 30, 1996.
See "SELECTED CONSOLIDATED FINANCIAL INFORMATION" for summary numerical
information regarding the results of operations for the nine months ended March
31, 1996.
NET INCOME. Net income was $1.1 million for the nine months ended March
31, 1997, compared to $1.7 million for the nine months ended March 31, 1996.
This 35.3% decline, resulted primarily from an increase in other expenses and,
to a lesser extent, an increase in the provision for loan losses. The increase
in other expenses was primarily the result of the legislatively-mandated,
one-time assessment levied by the FDIC on all SAIF-insured institutions to
recapitalize the SAIF. Without this assessment, which amounted to $1.1 million
($707,000 after tax), net income would have been $1.8 million for the nine
months ended March 31, 1997.
NET INTEREST INCOME. Net interest income increased 12.1% to $6.5
million for the nine months ended March 31, 1997 from $5.8 million for the nine
months ended March 31, 1996 primarily as a result of a decrease in interest
expense. Interest income was $12.0 million for both the nine months ended March
31, 1997 and 1996.
25
<PAGE>
Interest expense decreased 8.2% from $6.1 million for the nine months ended
March 31, 1996 to $5.6 million for the nine months ended March 31, 1997
primarily as a result of a decrease in the average cost of all interest-bearing
liabilities. The average cost of deposits decreased from 4.43% for the nine
months ended March 31, 1996 to 4.27% for the nine months ended March 31, 1997,
primarily as a result of a lower average rate paid on all deposits, other than
passbook accounts. The Savings Bank has been able to maintain its deposit base
without resorting to aggressive deposit pricing. The average rate paid on
securities sold under agreements to repurchase decreased from 3.58% for the nine
months ended March 31, 1996 to 3.47% for the nine months ended March 31, 1997,
primarily as a result of a general decline in interest rates. The average rate
paid on FHLB of Seattle advances decreased from 6.08% for the nine months ended
March 31, 1996 to 4.88% for the nine months ended March 31, 1997, as a result of
the repayment of higher cost longer term advances. Interest rate spread
increased to 3.90% for the nine months ended March 31, 1997 from 3.45% for the
nine months ended March 31, 1996.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered by
management as adequate to provide for known and inherent risks in the loan
portfolio, including management's continuing analysis of factors underlying the
quality of the loan portfolio. These factors include changes in portfolio size
and composition, actual loan loss experience, current and anticipated economic
conditions, detailed analysis of individual loans for which full collectibility
may not be assured, and determination of the existence and realizable value of
the collateral and guarantees securing the loans. See "BUSINESS OF THE SAVINGS
BANK -- Lending Activities -- Nonperforming Assets and Delinquencies" and Note 1
of Notes to Consolidated Financial Statements.
The provision for loan losses was $216,000 for the nine months ended
March 31, 1997 compared to $91,000 for the same period in 1996. Management
deemed the increase in the provision for loan losses necessary in light of the
increase in the relative level of estimated losses caused by the growth of the
loan portfolio, particularly in agricultural, commercial business and consumer
loans, which are inherently riskier than one- to- four family mortgage loans.
See "RISK FACTORS -- Recent Growth in, Unseasoned Nature of Agricultural,
Commercial Business and Indirect Automobile Lending." Management deemed the
allowance for loan losses adequate at March 31, 1997.
OTHER INCOME. Other income was $661,000 for the nine months ended March
31, 1997, compared to $597,000 for the nine months ended March 31, 1996. This
10.7% increase resulted primarily from a general increase in the Savings Bank's
service charge and fee schedule.
OTHER EXPENSES. Other expenses were $5.1 million for the nine months
ended March 31, 1997, compared to $3.6 million for the same period in 1996. This
increase resulted primarily from the FDIC special assessment on all SAIF-insured
institutions to recapitalize the SAIF. The Savings Bank's assessment amounted to
$1.1 million, pre-tax, and was accrued during the quarter ended September 30,
1996. Prior to the SAIF recapitalization, the Savings Bank's total annual
deposit insurance premiums amounted to 0.23% of assessable deposits. Effective
January 1, 1997, the rate decreased to 0.065% of assessable deposits. See
"REGULATION -- Federal Regulation of the Savings Bank -- Federal Deposit
Insurance Corporation" and Note 10 of Notes to the Consolidated Financial
Statements. Other expenses also increased as a result of increases in occupancy,
compensation and marketing expenses. Occupancy expenses increased from $206,000
for the nine months ended March 31, 1996 to $232,000 for the same period in 1997
as a result of remodeling expenses of two branch facilities. Compensation
expenses increased from $2.0 million for the nine months ended March 31, 1996 to
$2.2 million for the same period in 1997 as a result of the hiring of new
employees. Marketing expenses increased from $107,000 for the nine months ended
March 31, 1996 to $173,000 for the same period in 1997 as a result of general
increases in marketing expenses. The general growth of the Savings Bank and
inflation also resulted in normal increases in the various other categories of
other expenses. The Savings Bank anticipates that other expenses will increase
in subsequent periods following the consummation of the Conversion as a result
of increased costs associated with operating as a public company and increased
compensation expense as a result of the adoption of the ESOP and, if approved by
the Holding Company's stockholders, the MRP. See "RISK FACTORS -- Return on
Equity After Conversion," and "-- New Expenses Associated With ESOP and MRP."
26
<PAGE>
INCOME TAXES. The provision for income taxes was $749,000 for the nine
months ended March 31, 1997 compared to $1.0 million for the nine months ended
March 31, 1996 as a result of lower income before income taxes.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
NET INCOME. Net income was $2.2 million for the year ended June 30,
1996 compared to $2.3 million a year earlier. This 4.3% decline resulted
primarily from an increase in the provision for loan losses and a decrease in
other income that together more than offset an increase in net interest income.
NET INTEREST INCOME. Net interest income was $8.0 million for the year
ended June 30, 1996, compared to $7.7 million for the year ended June 30, 1995,
a 3.9% increase. The increase in interest income from $14.8 million in 1995 to
$16.0 million in 1996 more than offset the increase in interest expense from
$7.1 million in 1995 to $8.1 million in 1996. The increase in interest income
resulted primarily from an increase in the average yield on interest-earning
assets from 7.56% in 1995 to 8.02% in 1996 and, to a lesser extent, to an
increase in the average balance of interest earning assets from $195.8 million
in 1995 to $199.7 million in 1996. Both the average balance (from $118.7 million
in 1995 to $129.0 million in 1996) and the average yield earned (from 8.16% in
1995 to 8.65% in 1996) on loans receivable, net, increased as a result of growth
in one- to- four family mortgage loans, growth in higher yielding commercial
business and consumer loans and the upward repricing of approximately $44.8
million of ARM loans tied to the Eleventh District Cost of Funds Index ("COFI"),
a lagging index. The increase in interest expense was primarily the result of an
increase in the average cost of deposits and an increase in the average cost of
FHLB of Seattle advances. The average cost of deposits increased from 3.92% in
1995 to 4.40% in 1996 as lower cost passbook and NOW accounts were replaced by
higher cost certificates of deposit. The average cost of FHLB of Seattle
advances increased from 5.18% in 1995 to 6.21% in 1996 as longer term advances
were used to meet liquidity needs as the average balance of deposits decreased
from $173.0 million in 1995 to $172.2 million in 1996.
Interest rate spread declined from 3.61% in 1995 to 3.56% in 1996.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $115,000
for the year ended June 30, 1996, compared to $67,000 for the year ended June
30, 1995. Management increased the provision for loan losses primarily to
replenish the allowance for loan losses depleted by the charge-off, during 1996,
of $41,000 of outstanding credit card balances as a result of management's
evaluation of the risk of uncollectibility of certain outstanding credit card
balances. Management replenished the allowance for loan losses in order to
maintain the allowance for loan losses at a level it deemed adequate. See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Allowance for Loan
Losses."
OTHER INCOME. Other income was $711,000 for the year ended June 30,
1996, compared to $1.1 million for the year ended June 30, 1995. Service charges
on deposit accounts increased from $506,000 in 1995 to $520,000 in 1996 as the
Savings Bank collected insufficient funds fees and other account service charges
more aggressively. Loan servicing fees decreased from $83,000 in 1995 to $65,000
in 1996 as a result of the origination of no fee loan products during 1996. Net
losses on trading securities of $71,000 were realized in 1996, as opposed to net
gains of $280,000 in 1995. During the nine months ended March 31, 1997, the
Savings Bank reclassified all trading securities and available-for-sale
securities. See "-- Comparison of Financial Condition at March 31, 1997 and June
30, 1996."
OTHER EXPENSES. Other expenses were $5.0 million for the years ended
June 30, 1996 and 1995. Employee compensation and benefits decreased from $2.8
million in 1995 to $2.7 million in 1996 as a result of normal attrition.
Occupancy and equipment expense decreased from $348,000 in 1995 to $273,000 in
1996 as a result of the implementation of cost controls. Supplies, postage and
telephone increased from $300,000 in 1995 to $362,000 in 1996 primarily as a
result of increased telephone costs associated with an upgrade in the data
processing communications equipment. Depreciation expense increased from
$244,000 in 1995 to $300,000 in 1996 as a result of the depreciation of new
furniture, fixtures and equipment associated with the remodeling of the Ontario
branch. The Savings Bank hired an outside marketing consultant in 1996 to
analyze and offer suggestions to improve the
27
<PAGE>
Savings Bank's competitive position in its primary market area, which resulted
in an increase in advertising expense from $151,000 in 1995 to $202,000 in 1996.
INCOME TAXES. The provision for income taxes was $1.4 million for the
year ended June 30, 1996, compared to $1.5 million for the year ended June 30,
1995 as a result of lower income before income taxes.
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS/COST
The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities and average yields and
costs. Such yields and costs for the periods indicated are derived by dividing
income or expense by the average balances of assets or liabilities,
respectively, for the periods presented. Average balances are derived from
monthly balances. Management does not believe that the use of month-end balances
instead of daily balances has caused any material inconsistencies in the
information presented.
28
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended March 31,
----------------------------------------------------------
1997 1996
--------------------------- -----------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1).......... $135,768 $ 8,916 8.75% $128,305 $ 8,284 8.59%
Mortgage-backed and related securities 36,942 2,058 7.42 43,580 2,378 7.26
Investment securities.............. 17,181 860 6.67 20,788 1,122 7.18
FHLB of Seattle stock.............. 2,672 154 7.69 2,477 135 7.25
Federal funds sold and overnight
interest-earning deposits......... 3,584 42 1.55 5,078 43 1.12
--------- ------- --------- -------
Total interest-earning assets.... 196,147 12,030 8.17 200,228 11,962 7.95
--------- ------- --------- -------
Non-interest-earning assets......... 7,161 6,607
--------- ---------
Total-assets...................... 203,318 12,030 206,835
--------- ------- ---------
Interest-bearing liabilities:
Passbook accounts.................. 24,245 525 2.89 25,640 555 2.88
Money market accounts.............. 15,195 404 3.54 14,242 396 3.70
NOW accounts....................... 27,102 318 1.56 28,470 422 1.97
Certificates of deposit............ 104,480 4,238 5.40 103,971 4,365 5.59
--------- ------- --------- -------
Total deposits................... 171,022 5,485 4.27 172,323 5,738 4.43
--------- ------- --------- -------
Securities sold under agreements
to repurchase..................... 1,396 36 3.47 1,215 33 3.58
FHLB of Seattle advances........... 862 32 4.88 7,939 363 6.08
--------- ------- --------- -------
Total interest-bearing liabilities 173,280 5,553 4.27 181,477 6,134 4.50
---------------- --------- -------
Non-interest-bearing liabilities.... 9,418 6,522
--------- ---------
Total liabilities................ 182,698 187,999
--------- ---------
Retained earnings................... 20,610 18,836
--------- ---------
Total liabilities and retained earnings$203,308 $206,835
======== ========
Net interest income................. $ 6,477 $ 5,828
======= =======
Interest rate spread................ 3.90% 3.45%
Net interest margin................. 4.40% 3.87%
Ratio of average interest-earning
assets to average interest-
bearing liabilities................ 113.20% 110.33%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------------
1996 1995
- --------------------------------- ------------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets: $128,986 $11,154 8.65% $118,674 $9,680 8.16%
Loans receivable, net (1).......... 42,660 3,123 7.32 47,731 3,362 7.04
Mortgage-backed and related securities 20,673 1,445 6.99 22,945 1,530 6.67
Investment securities.............. 2,500 185 7.39 2,329 142 6.10
FHLB of Seattle stock..............
Federal funds sold and overnight 4,850 105 2.17 4,162 92 2.22
interest-earning deposits......... --------- -------- --------- --------
199,669 16,012 8.02 195,841 14,806 7.56
Total interest-earning assets.... 1 --------- -------- --------- --------
6,635 5,743
Non-interest-earning assets......... --------- ---------
206,304 201,584
Total-assets...................... --------- ---------
Interest-bearing liabilities: 25,446 735 2.89 30,985 895 2.89
Passbook accounts.................. 14,469 530 3.67 14,140 483 3.42
Money market accounts.............. 28,170 532 1.89 31,134 704 2.26
NOW accounts....................... 104,156 5,782 5.55 96,740 4,707 4.87
Certificates of deposit............ --------- -------- --------- -------
172,241 7,579 4.40 172,999 6,789 3.92
Total deposits................... --------- -------- --------- -------
Securities sold under agreements 1,260 45 3.56 1,537 50 3.28
to repurchase.....................
6,965 433 6.21 4,686 243 5.18
FHLB of Seattle advances........... --------- -------- --------- -------
180,466 8,057 4.46 179,222 7,082 3.95
Total interest-bearing liabilities --------- -------- --------- -------
6,777 5,736
Non-interest-bearing liabilities.... --------- ---------
187,243 184,958
Total liabilities................ --------- ---------
19,061 16,626
Retained earnings................... --------- ---------
$206,304 $201,584
Total liabilities and retained earning ======== ========
$ 7,955 $7,724
Net interest income................. ======= ======
3.56% 3.61%
Interest rate spread................
3.98% 3.94%
Net interest margin.................
Ratio of average interest-earning
assets to average interest- 110.64% 109.27%
bearing liabilities................
</TABLE>
(1) Does not include interest on loans 90 days or more past due.
Includes loans originated for sale
29
<PAGE>
YIELDS EARNED AND RATES PAID
The following table sets forth for the periods and at the dates
indicated, the weighted average yields earned on the Savings Bank's assets, the
weighted average interest rates paid on the Savings Bank's liabilities, together
with the net yield on interest-earning assets.
<TABLE>
<CAPTION>
At Nine Months Ended Year
March 31, March 31, Ended June 30,
1997 1997 1996 1996 1995
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Weighted average yield on:
Loans receivable........................... 8.77% 8.75% 8.59% 8.65% 8.16%
Mortgage-backed and related securities..... 7.28 7.42 7.26 7.32 7.04
Investment securities...................... 6.54 6.67 7.18 6.99 6.67
FHLB of Seattle stock...................... 7.25 7.69 7.25 7.39 6.10
Federal funds sold and overnight
interest-bearing deposits................. 1.22 1.55 1.12 2.17 2.22
All interest-earning assets................ 8.11 8.17 7.95 8.02 7.56
Weighted average rate paid on:
Passbook savings accounts.................. 2.89 2.89 2.89 2.89 2.89
NOW accounts............................... 1.56 1.56 1.97 1.89 2.26
Money market accounts...................... 3.53 3.54 3.70 3.67 3.42
Certificate accounts....................... 5.44 5.40 5.59 5.55 4.87
Securities sold under agreements
to repurchase............................. 3.50 3.47 3.58 3.56 3.28
FHLB advances.............................. 5.70 4.88 6.08 6.21 5.18
All interest-bearing liabilities........... 4.25 4.27 4.50 4.46 3.95
Interest rate spread (spread between weighted average rate on all
interest-earning assets and all interest-
bearing liabilities)....................... 3.86% 3.90% 3.45% 3.56% 3.61%
Net interest margin (net interest income
(expense) as a percentage of average
interest-earning assets)................... 4.31% 4.40% 3.87% 3.97% 3.94%
</TABLE>
30
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth the effects of changing rates and
volumes on net interest income of the Savings Bank. Information is provided with
respect to (i) effects on interest income attributable to changes in volume
(changes in volume multiplied by prior rate); (ii) effects on interest income
attributable to changes in rate (changes in rate multiplied by prior volume);
and (iii) the net change attributable to the combined impact of volume and rate.
<TABLE>
<CAPTION>
Nine Months Ended March 31, Year Ended June 30,
1997 Compared to Nine Months 1996 Compared to Year
Ended March 31, 1996 Ended June 30, 1995
Increase (Decrease) Increase (Decrease)
Due to Due to
Rate/ Rate/
Rate Volume Volume Total Rate Volume Volume Total
---- ------ ------ ----- ---- ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1)............... $154 $481 $ 12 $647 $582 $841 $ 51 $1,474
Mortgage-backed and related
securities........................ 52 (362) (11) (321) 134 (357) (14) (237)
Investment securities.............. (80) (194) 18 (256) 73 (152) (7) (86)
FHLB of Seattle stock.............. 8 11 1 20 30 10 2 42
Federal funds sold and overnight
interest-bearing deposits......... 16 (13) (6) (3) (2) 15 -- 13
------- ------- ----- -------- ------- ------ ------ -------
Total net change in income
on interest-earning assets......... 150 (77) 14 87 817 357 32 1,206
-------------- --- ------- ------ ------ ----- ------
Interest-bearing liabilities:
Passbook accounts.................. -- (30) -- (30) -- (160) -- (160)
NOW accounts....................... (17) 26 (2) 7 35 11 1 47
Money market accounts.............. (88) (20) 6 (102) (115) (67) 11 (171)
Certificate accounts............... (148) 21 (1) (128) 658 361 50 1,069
Securities sold under agreements
to repurchase..................... (1) 5 -- 4 4 (9) (1) (6)
FHLB advances...................... (72) (323) 85 (310) 48 118 23 189
------- ------- ---- ------- ------ ------ ---- ------
Total net change in expense
on interest-bearing liabilities.... (326) (321) 88 (559) 630 254 84 968
------- ------- ---- ------- ------ ------ ---- ------
Net change in net interest income...$ 476 $ 244 $(74) $ 646 $ 187 $ 103 $(52) $ 238
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Year Ended June 30,
1995 Compared to Year
Ended June 30, 1994
Increase (Decrease)
Due to
Rate/
Rate Volume Volume Total
---- ------ ------ -----
Interest-earning assets:
Loans receivable (1).............. $(544) $1,219 $ (75) $602
Mortgage-backed and related
securities....................... (20) (212) 1 (231)
Investment securities............. (46) 144 (5) 93
FHLB of Seattle stock............. (94) 17 (7) (84)
Federal funds sold and overnight
interest-bearing deposits........ 7 (195) (4) (192)
---- -------- ------ ------
Total net change in income
on interest-earning assets........ (697) 973 (88) 188
------- ------ ------ -----
Interest-bearing liabilities:
Passbook accounts................. 3 (97) -- (94)
NOW accounts...................... 96 (22) (5) 69
Money market accounts............. (60) (98) 7 (151)
Certificate accounts.............. 218 272 14 504
Securities sold under agreements
to repurchase.................... 7 (20) (2) (15)
FHLB advances..................... -- 35 242 277
-------- ------ ----- ------
Total net change in expense
on interest-bearing liabilities... 264 70 256 590
------- ------ ----- ------
Net change in net interest income.. $ (961) $ 903 $(344) $(402)
======= ===== ====== ======
(1) Does not include interest on loans 90 days or more past due. Includes
loans originated for sale.
31
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The Savings Bank's principal financial objective is to achieve long-term
profitability while reducing its exposure to fluctuating market interest rates.
The Savings Bank has sought to reduce the exposure of its earnings to changes in
market interest rates by attempting to manage the mismatch between asset and
liability maturities and interest rates. The principal element in achieving this
objective is to increase the interest-rate sensitivity of the Savings Bank's
interest-earning assets by retaining for its portfolio loans with interest rates
subject to periodic adjustment to market conditions (including commercial
business, agricultural and consumer loans) and, since January 1997, selling
conforming fixed-rate one- to- four family mortgage loans with maturities of
over 15 years. In addition, the Savings Bank maintains an investment portfolio
of U.S. Government and government agency securities with contractual maturities
of generally between one and ten years. The Savings Bank relies on retail
deposits as its primary source of funds. Management believes retail deposits,
compared to brokered deposits, reduce the effects of interest rate fluctuations
because they generally represent a more stable source of funds. As part of its
interest rate risk management strategy, the Savings Bank promotes transaction
accounts and certificates of deposit with terms up to six years.
In order to encourage institutions to reduce their interest rate risk, the OTS
adopted a rule incorporating an interest rate risk component into the risk-based
capital rules. Using data compiled by the FHLB-Seattle, the Savings Bank
receives a report which measures interest rate risk by modeling the change in
NPV over a variety of interest rate scenarios. This procedure for measuring
interest rate risk was developed by the OTS to replace the "gap" analysis (the
difference between interest-earning assets and interest-bearing liabilities that
mature or reprice within a specific time period). NPV is the present value of
expected cash flows from assets, liabilities and off- balance sheet contracts.
The calculation is intended to illustrate the change in NPV that will occur in
the event of an immediate change in interest rates with no effect given to any
steps that management might take to counter the effect of that interest rate
movement. Under proposed OTS regulations, an institution with a greater than
"normal" level of interest rate risk will be subject to a deduction from total
capital for purposes of calculating its risk-based capital. An institution with
a "normal" level of interest rate risk is defined as one whose "measured
interest rate risk" is less than 2.0%. Institutions with assets of less than
$300 million and a risk-based capital ratio of more than 12.0%, like the Savings
Bank, are exempt. Based on the Savings Bank's regulatory capital levels at March
31, 1997, the Savings Bank believes that, if the proposed regulation was
implemented at that date, the regulation would not have had a material adverse
effect on the Savings Bank's regulatory capital compliance.
The following table is provided by the FHLB-Seattle and sets forth the change
in the Savings Bank's NPV at March 31, 1997, based on FHLB-Seattle assumptions,
that would occur in the event of an immediate change in interest rates, with no
effect given to any steps that management might take to counteract that change.
Basis Point ("bp") Estimated Change in
Change in Rates Net Portfolio Value
(Dollars in thousands)
400 $(11,491) (53.54)%
300 (8,013) (37.34)
200 (4,824) (22.48)
100 (2,169) (10.11)
0 -- --
(100) 1,346 6.27
(200) 1,786 8.32
(300) 3,202 14.92
(400) 5,083 23.68
32
<PAGE>
The above table illustrates, for example, that an instantaneous 200
basis point increase in market interest rates at March 31, 1997 would reduce the
Savings Bank's NPV by approximately $4.8 million, or 22.5%, at that date.
Certain assumptions utilized by the FHLB-Seattle in assessing the
interest rate risk of savings associations within its region were utilized in
preparing the preceding table. These assumptions relate to interest rates, loan
prepayment rates, deposit decay rates, and the market values of certain assets
under differing interest rate scenarios, among others.
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the method of analysis presented in the foregoing
table. In the event of a change in interest rates, expected rates of prepayments
on loans and early withdrawals from certificates could deviate significantly
from those assumed in calculating the table. The model assumes a parallel change
in rates, whereas actual market interest rates would not necessarily react in a
parallel manner. Further, call provisions of certain securities, which shorten
the actual term to maturity if exercised, are not taken into account in the
model.
LIQUIDITY AND CAPITAL RESOURCES
The Savings Bank's primary sources of funds are customer deposits,
securities sold under agreements to repurchase, proceeds from principal and
interest payments on and the sale of loans, maturing securities and FHLB
advances. While maturities and scheduled amortization of loans are a predictable
source of funds, deposit flows, mortgage prepayments and maturing securities,
cash flows and anticipated maturities of mortgage-backed bonds and agency
securities all of which are greatly influenced by general interest rates,
economic conditions and competition.
The Savings Bank must maintain an adequate level of liquidity to ensure
the availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. The Savings Bank generally maintains sufficient cash
and short-term investments to meet short-term liquidity needs. At March 31,
1997, cash and cash equivalents totaled $5.0 million, or 2.4% of total assets.
The Savings Bank also maintained, an uncommitted credit facility with the
FHLB-Seattle, which provided for immediately available advances up to an
aggregate amount of $$40.8 million, under which $800,000 was outstanding at
March 31, 1997.
OTS regulations require savings institutions to maintain an average
daily balance of liquid assets (cash and eligible investments) equal to at least
5.0% of the average daily balance of its net withdrawable deposits and
short-term borrowings. In addition, short-term liquid assets currently must
constitute 1.0% of the sum of net withdrawable deposit accounts plus short-term
borrowings. The Savings Bank's actual short- and long-term liquidity ratios at
March 31, 1997 were 2.7% and 8.3%, respectively.
The Savings Bank's primary investing activity is the origination of
one- to- four family mortgage loans within its primary market area. During the
nine months ended March 31, 1997 and the years ended June 30, 1996 and 1995, the
Savings Bank originated $9.0 million, $17.4 million and $16.5 million of such
loans, respectively. At March 31, 1997, the Savings Bank had commitments to
extend credit totaling $11.2 million and undisbursed loans in process totaling
$769,000. The Savings Bank anticipates that it will have sufficient funds
available to meet current loan commitments. Certificates of deposit that are
scheduled to mature in less than one year from March 31, 1997 totaled $77.4
million. Historically, the Savings Bank has been able to retain a significant
amount of its deposits as they mature.
OTS regulations require the Savings Bank to maintain specific amounts
of regulatory capital. As of March 31, 1997, the Savings Bank complied with all
regulatory capital requirements as of that date with tangible, core and
risk-based capital ratios of 10.3%, 10.2% and 21.2%, respectively. For a
detailed discussion of regulatory capital requirements, see "REGULATION --
Federal Regulation of Savings Banks -- Capital Requirements." See also
"HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE."
33
<PAGE>
IMPACT OF ACCOUNTING PRONOUNCEMENTS AND REGULATORY POLICIES
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN. See Note 1 of Notes
to the Consolidated Financial Statements for a discussion of Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." The Savings Bank
adopted SFAS No. 114 and SFAS No. 118 effective July 1, 1995, and their adoption
did not have a material effect on the Savings Bank's financial condition or
results of operations.
ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP PLANS. In November 1993 the
American Institute of Certified Public Accountants issued SOP 93-6, which
requires an employer to record compensation expense in an amount equal to the
fair value of shares committed to be released to employees from an employee
stock ownership plan and to exclude unallocated shares from earnings per share
computations. The effect of SOP 93-6 on net income and book value per share in
future periods cannot be predicted due to the uncertainty of the fair value of
the shares at the time they will be committed to be released. See "RISK FACTORS
- -- New Expenses Associated With ESOP and MRP" and "PRO FORMA DATA."
DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES. In December
1994 the Accounting Standards Executive Committee issued SOP 94-6, "Disclosure
of Certain Significant Risks and Uncertainties." This SOP applies to financial
statements prepared in conformity with GAAP by all nongovernmental entities. The
disclosure requirements in SOP 94-6 focus primarily on risks and uncertainties
that could significantly affect the amounts reported in the financial statements
in the near-term functioning of the reporting entity. The risks and
uncertainties discussed in SOP 94-6 stem from the nature of the entity's
operations, from the necessary use of estimates in the preparation of the
entity's financial statements and from significant concentrations in certain
aspects of the entity's operations. SOP 94-6 is effective for financial
statements issued for fiscal years ending after December 15, 1995 and did not
have a material impact on the financial condition or results of operations of
the Savings Bank.
ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS No. 123, "Accounting for
Stock-Based Compensation," establishes financial accounting and reporting
standards for stock-based employee compensation plans. This statement encourages
all entities to adopt a new method of accounting to measure compensation cost of
all employee stock compensation plans based on the estimated fair value of the
award at the date it is granted. Companies are, however, allowed to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting, which generally does not result in compensation expense
recognition for most plans. Companies that elect to remain with the existing
accounting method are required to disclose in a footnote to the financial
statements pro forma net income and, if presented, earnings per share, as if
this statement had been adopted. The accounting requirements of this statement
are effective for transactions entered into in fiscal years that begin after
December 15, 1995; however, companies are required to disclose information for
awards granted in their first fiscal year beginning after December 15, 1994.
Management expects to use the intrinsic value method upon consummation of the
Conversion and the adoption of stock based benefit plans.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and is to be applied
prospectively. Earlier or retroactive application is not permitted.
SFAS No. 125 provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities. The
standards are based on consistent application of a financial-components approach
that focuses on control period. Under the approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
SFAS No. 125 provides consistent standards distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings.
34
<PAGE>
SFAS No. 125 amends SFAS No. 122. Adoption of this statement on January
1, 1997 did not have a material impact on the Savings Bank's financial position
or results of operations.
EARNINGS PER SHARE. SFAS No. 128, "Earnings Per Share," issued in
February 1997, establishes standards for computing and presenting earnings per
share ("EPS") and applies to entities with publicly-held common stock or
potential common stock. It replaces the presentation of primary EPS with a
presentation of basic EPS and requires the dual presentation of basic and
diluted EPS on the face of the income statement. This statement is effective for
financial statements issued for periods after December 15, 1997 including
interim periods; earlier applications not permitted. This statement requires
restatement of all prior period EPS data presented.
COMPREHENSIVE INCOME. SFAS No. 130, "Reporting Comprehensive Income,"
issued in July 1997, establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. It requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
presented with the same prominence as other financial statements. SFAS No. 130
requires that companies (i) classify items of other comprehensive income by
their nature in a financial statement and (ii) display the accumulated balance
of other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the statement of financial condition.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comprehensive purposes is required.
EFFECT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related financial data
presented herein have been prepared in accordance with GAAP, which require the
measurement of financial position and operating results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time due to inflation. The primary impact of inflation is reflected in the
increased cost of the Savings Bank's operations. Unlike most industrial
companies, virtually all the assets and liabilities of a financial institution
are monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
35
<PAGE>
RECENT DEVELOPMENTS
THE FOLLOWING TABLES SET FORTH CERTAIN INFORMATION CONCERNING THE
CONSOLIDATED FINANCIAL POSITION AND RESULTS OF OPERATIONS OF THE SAVINGS BANK AT
THE DATES AND FOR THE PERIODS INDICATED. INFORMATION AT JUNE 30, 1997 AND FOR
THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996 ARE UNAUDITED, BUT, IN THE OPINION
OF MANAGEMENT, CONTAIN ALL ADJUSTMENTS (NONE OF WHICH WERE OTHER THAN NORMAL
RECURRING ENTRIES) NECESSARY FOR A FAIR PRESENTATION OF THE RESULTS OF SUCH
PERIODS. THE SELECTED OPERATIONS DATA FOR THE THREE MONTHS ENDED JUNE 30, 1997
ARE NOT NECESSARILY INDICATIVE OF THE RESULTS OF OPERATION FOR THE ENTIRE FISCAL
YEAR. THIS INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO PRESENTED ELSEWHERE IN THIS PROSPECTUS.
THE SAVINGS BANK CHANGED ITS FISCAL YEAR END FROM JUNE 30 TO MARCH 31 SUBSEQUENT
TO JUNE 30, 1996.
At At
June 30, March 31,
1997 1997
-------------- --------
(In thousands)
SELECTED FINANCIAL CONDITION DATA:
Total assets............................... $219,573 $204,213
Loans receivable, net ..................... 141,852 138,881
Loans held-for-sale........................ 356 428
Investment securities held-to-maturity..... 2,815 2,763
Investment securities available-for-sale... 22,974 15,906
Mortgage-backed and related securities
available-for-sale........................ 25,212 19,745
Mortgage-backed and related securities
held-to-maturity.......................... 13,884 15,302
Cash, federal funds sold and
overnight interest-bearing deposits....... 5,548 4,975
Deposit accounts........................... 182,581 179,158
Borrowings................................. 6,218 2,231
Total equity............................... 22,135 21,026
Three Months
Ended June 30,
1997 1996
(In thousands)
SELECTED OPERATING DATA:
Interest income...................................... $4,113 $4,053
Interest expense..................................... 1,934 1,923
----- -----
Net interest income.................................. 2,179 2,130
Provision for loan losses............................ 31 10
----- -----
Net interest income after provision for loan losses.. 2,148 2,120
Other income......................................... 275 116
Other expenses....................................... 1,359 1,379
----- -----
Income before income taxes........................... 1,064 857
Provision for income taxes........................... 409 330
----- ----
Net income........................................... $ 655 $ 527
===== =====
36
<PAGE>
At or For the
Three Months
Ended June 30,
1997 1996
SELECTED FINANCIAL RATIOS(1):
PERFORMANCE RATIOS:
Return on average assets(2)...................... 1.22% 1.03%
Return on average equity(3)...................... 12.06 10.67
Interest rate spread(4).......................... 3.85 3.86
Net interest margin(5)........................... 4.16 4.30
Average interest-earning assets to average
interest-bearing liabilities.................... 109.94 111.70
Noninterest expense as a percent
of average total assets......................... 0.63 0.67
Efficiency ratio(6).............................. 56.09 61.67
ASSET QUALITY RATIOS:
Nonaccrual and 90 days or more past due
loans as a percent of total loans, net.......... 0.17 0.12
Nonperforming assets as a
percent of total assets......................... 0.12 0.10
Allowance for losses as a percent
of gross loans receivable....................... 0.52 0.41
Allowance for losses as a percent
of nonperforming loans.......................... 303.38 331.90
Net charge offs to average outstanding loans..... 0.01 0.01
CAPITAL RATIOS:
Total equity to total assets(7).................. 10.08 9.83
Equity to assets at end of period................ 10.14 9.26
(1) Annualized, where appropriate.
(2) Net earnings divided by average total assets.
(3) Net earnings divided by average total equity.
(4) Difference between weighted average yield on interest-earning assets
and weighted average cost of interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning assets.
(6) Other expenses divided by the sum of net interest income and other
income.
(7) Average total equity divided by average total assets.
37
<PAGE>
REGULATORY CAPITAL
The table below sets forth the Savings Bank's capital position relative to its
OTS capital requirements at the date indicated. The definitions of the terms
used in the table are those provided in the capital regulations issued by the
OTS. See "REGULATION -- Federal Regulation of the Savings Bank -- Capital
Requirements."
At June 30, 1997
Percent of Adjusted
Amount Total Assets(1)
(In thousands)
Tangible capital......................... $21,576 9.85%
Tangible capital requirement............. 3,285 1.50
------- ----
Excess................................... $18,291 8.35%
======= ====
Core capital............................. $21,576 9.85%
Core capital requirement(2).............. 6,570 3.00
------- ----
Excess................................... $15,006 6.85%
======= ====
Risk-based capital(3).................... $22,324 16.71%
Risk-based capital requirement........... 9.090 8.00
------- -----
Excess................................... $13,234 8.71%
======= =====
- -----------------------
(1) Based on total adjusted assets of $219.0 million for purposes of the
tangible and core capital requirements, and risk-weighted assets of
$133.6 million for purposes of the risk-based capital requirement.
(2) The current OTS core capital requirement for savings associations is 3%
of total adjusted assets. The OTS has proposed core capital
requirements that would require a core capital ratio of 3% of total
adjusted assets for thrifts that receive the highest supervisory rating
for safety and soundness and a core capital ratio of 4% to 5% for all
other thrifts.
(3) Percentage represents total core and supplementary capital divided by
total risk-weighted assets.
NON-PERFORMING ASSETS AND DELINQUENCIES
At June 30, 1997, the Savings Bank had $247,000 of loans accounted for on a
non-accrual basis ($226,000 in one- to- four family mortgage loans and $21,000
in consumer loans) compared to $190,000 at March 31, 1997. At June 30, 1997 and
March 31, 1997, the Savings Bank had no accruing loans which were contractually
past due 90 days or more, no restructured loans and no foreclosed real estate.
At June 30, 1997, other repossessed assets totaled $13,000, compared to $10,000
at March 31, 1997.
The allowance for loan losses was $748,000 at June 30, 1997. Charge-offs for
the three months ended June 30, 1997 were $10,000, compared to $16,000 for the
three months ended June 30, 1996. There were no recoveries for the three months
ended June 30, 1997, compared to $500 for the three months ended June 30, 1996.
38
<PAGE>
The following table sets forth the breakdown of the allowance for loan losses
by category at June 30, 1997.
Percent of
Loans in Each
Category to
Amount Total Loans
(In thousands)
Mortgage loans:
One- to- four family................... $347 75.53%
Non-mortgage loans...................... 181 0.58
Commercial business loans............... 120 0.47
Agricultural loans...................... 72 2.96
Credit cards............................ 23 2.47
Loans secured by deposit accounts....... 5 17.99
---- ------
Total allowance for loan losses....... $748 100.00%
==== ======
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND MARCH 31, 1997
Total assets were $219.6 million at June 30, 1997 and $204.2 million at
March 31, 1997. This increase resulted primarily from growth in the loan
portfolio and investment securities available-for-sale, which was funded
primarily by maturities of securities held-to-maturity, increased deposits,
increased FHLB borrowings and retained earnings.
Loans receivable, net, were $141.8 million at June 30, 1997 compared to
$138.9 million at March 31, 1997, a 2.1% increase. A substantial portion of the
Savings Bank's loan portfolio is secured by real estate, either as primary or
secondary collateral, located in its primary market area. There are certain
risks associated with this credit concentration. See "RISK FACTORS --
Concentration of Credit Risk." In addition, the period between March 31, 1997
and June 30, 1997 saw a continuing trend in the growth of the consumer and
commercial business loan portfolios as the Savings Bank emphasized the
origination of loans with shorter maturities for asset and liability management
purposes (see "-- Asset and Liability Management"), as well as the development
of an agricultural loan portfolio that amounted to $3.5 million at June 30,
1997, compared to $2.5 million at March 31, 1997.
Loans held-for-sale were $356,000 at June 30, 1997 and $428,000 at
March 31, 1997. To mitigate interest rate risk, the Savings Bank occasionally
classifies fixed rate one- to- four family mortgage loans that conform to
secondary market standards and with terms of 15 years or more as held for sale.
The Savings Bank generally sells such loans and the related servicing rights to
private investors. See "-- Asset and Liability Management."
Cash and cash equivalents were $5.5 million at June 30, 1997 and $5.0
million at March 31, 1997. The increase between March 31, 1997 and June 30, 1997
primarily reflects the increase in deposits and the proceeds from maturing
securities.
Available-for-sale securities were $48.2 million at June 30, 1997,
compared to $35.7 million at March 31, 1997. This increase primarily resulted
from the purchase of $10.0 million of medium-term U.S. government agency
securities and $5.0 million of long-term adjustable rate mortgage backed
securities. These purchases were offset partially by $3.0 million of callable
U.S. government agency securities that were redeemed prior to maturity.
Held-to-maturity securities were $16.7 million at June 30, 1997,
compared to $18.1 million at March 31, 1997. This decrease resulted from
principal reductions on mortgage-backed and related securities.
Total deposits were $182.6 million at June 30, 1997, compared to $179.2
million at March 31, 1997. This increase was primarily the result of increases
in checking account deposits of $2.5 million and increases in certificates
39
<PAGE>
of deposit of $1.0. Management attributes the increase in checking account
balances to seasonal increases in teachers salaries paid in May for the entire
summer.
FHLB of Seattle advances increased to $5.0 million at June 30, 1997
from $800,000 at March 31, 1997 to fund "wholesale leveraging" activities.
Subject to market conditions, the Savings Bank intends to engage in "wholesale
leveraging" by investing FHLB of Seattle advances in investment securities of
the type in which the Savings Bank currently invests, with the goal of
recognizing income on the difference between the interest rate paid on the
advances and the interest rate earned on the securities. Accordingly, FHLB
advances could be expected to increase to approximately $25 million to support
such "wholesale leveraging," which may commence prior to the consummation of the
Conversion. To the extent any such FHLB advances would be outstanding before the
consummation of the Conversion, the Savings Bank may use a portion of the net
proceeds to repay them. See "USE OF PROCEEDS," "BUSINESS OF THE SAVINGS BANK --
Investment Activities" and "-- Deposit Activities and Other Sources of Funds --
Borrowings."
Total equity increased to $22.1 million at June 30, 1997 from $21.0
million at March 31, 1997.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND
1996
NET INCOME. Net income was $655,000 for the three months ended June 30,
1997, compared to $527,000 for the three months ended June 30, 1996. This 24.3%
increase resulted primarily from an increase in other income.
NET INTEREST INCOME. Net interest income increased 2.3% to $2.2 million
for the three months ended June 30, 1997 from $2.1 million for the three months
ended June 30, 1996. Interest income was $4.1 million for both the three months
ended June 30, 1997 and 1996. Interest expense was $1.9 million for both the
three months ended June 30, 1997 and 1996. Interest rate spread increased to
3.85% for the three months ended June 30, 1997 from 3.86% for the three months
ended June 30, 1996 primarily as a result of a decrease in the cost of funds
attributable to a higher ratio of checking accounts to total deposits.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered by
management as adequate to provide for known and inherent risks in the loan
portfolio, including management's continuing analysis of factors underlying the
quality of the loan portfolio. These factors include changes in portfolio size
and composition, actual loan loss experience, current and anticipated economic
conditions, detailed analysis of individual loans for which full collectibility
may not be assured, and determination of the existence and realizable value of
the collateral and guarantees securing the loans. See "BUSINESS OF THE SAVINGS
BANK -- Lending Activities -- Nonperforming Assets and Delinquencies" and Note 1
of Notes to Consolidated Financial Statements.
The provision for loan losses was $31,000 for the three months ended
June 30, 1997 compared to $10,000 for the same period in 1996. Management deemed
the increase in the provision for loan losses necessary in light of the increase
in the relative level of estimated losses caused by the growth of the loan
portfolio, particularly in the higher risk areas of agricultural, commercial
business and consumer loans. See "RISK FACTORS -- Recent Growth in, Unseasoned
Nature of Agricultural, Commercial Business and Indirect Automobile Lending."
Management deemed the allowance for loan losses adequate at June 30, 1997.
OTHER INCOME. Other income was $275,000 for the three months ended June
30, 1997, compared to $116,000 for the three months ended June 30, 1996. This
increase resulted primarily from a $30,000 increase in service charges
attributable to a more aggressive service charge collection policy during 1997
and a $52,000 gain on the sale of the La Grande office building in 1997. In
addition, there was a $19,000 loss on the sale of repossessed assets during 1996
and no comparable change in 1997.
OTHER EXPENSES. Other expenses were $1.4 million for both the three
months ended June 30, 1997 and 1996. The Savings Bank anticipates that other
expenses will increase in subsequent periods following the
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consummation of the Conversion as a result of increased costs associated with
operating as a public company and increased compensation expense as a result of
the adoption of the ESOP and, if approved by the Holding Company's stockholders,
the MRP. See "RISK FACTORS -- Return on Equity After Conversion," and "-- New
Expenses Associated With ESOP and MRP."
INCOME TAXES. The provision for income taxes was $409,000 for the three
months ended June 30, 1997, compared to $330,000 for the three months ended June
30, 1996 as a result of higher income before income taxes.
BUSINESS OF THE HOLDING COMPANY
GENERAL
The Holding Company was organized as an Oregon business corporation at
the direction of the Savings Bank on June 9, 1997 for the purpose of becoming a
holding company for the Savings Bank upon completion of the Conversion. As a
result of the Conversion, the Savings Bank will be a wholly-owned subsidiary of
the Holding Company and all of the issued and outstanding capital stock of the
Savings Bank will be owned by the Holding Company.
BUSINESS
Prior to the Conversion, the Holding Company has not and will not
engage in any significant activities other than of an organizational nature.
Upon completion of the Conversion, the Holding Company's sole business activity
will be the ownership of the outstanding capital stock of the Savings Bank. In
the future, the Holding Company may acquire or organize other operating
subsidiaries, although there are no current plans, arrangements, agreements or
understandings, written or oral, to do so.
Initially, the Holding Company will neither own nor lease any property
but will instead use the premises, equipment and furniture of the Savings Bank
with the payment of appropriate rental fees, as required by applicable law and
regulations.
Since the Holding Company will only hold the outstanding capital stock
of the Savings Bank upon consummation of the Conversion, the competitive
conditions applicable to the Holding Company will be the same as those
confronting the Savings Bank. See "BUSINESS OF THE SAVINGS BANK -- Competition."
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BUSINESS OF THE SAVINGS BANK
GENERAL
The Savings Bank operates, and intends to continue to operate, as a
community oriented financial institution devoted to serving the needs of its
customers. The Savings Bank's business consists primarily of attracting retail
deposits from the general public and using those funds to originate real estate
loans, consumer loans and more recently an increasing amount of agricultural,
commercial business and indirect automobile loans. See "-- Lending Activities."
MARKET AREA
The Savings Bank's primary market area encompasses those regions
surroundings its offices in Baker, Grant, Harney, Malheur, Union, Wallowa and
Wheeler Counties in Oregon and Payette and Washington Counties in Idaho. The
Savings Bank's home office is located in Baker City, Oregon with branches in
Ontario, John Day, Burns, Enterprise and two locations in La Grande. One of the
La Grande branches was relocated on June 9, 1997 to nearby Island City.
The principal industries of the market area are agriculture and timber
products. The Savings Bank's market area is largely rural, with most of the
farms and ranches being relatively small and family owned. The local economies
are also dependent on retail trade with lumber, recreation and tourism providing
substantial contributions. Major employers in the market area include Boise
Cascade, Ore-Ida, Grande Ronde Hospital, Holy Rosary Hospital, Snake River
Correctional Institute, Powder River Correctional Facility, U.S. Forest Service
and Bureau of Land Management, Oregon Department of Transportation, Treasure
Valley Community College, Eastern Oregon University, local school districts and
local government.
Unemployment rates in the market area are considerably higher than both
state and national unemployment rates and have increased consistently over the
past few years. According to data compiled by the Oregon Area Labor Department,
the unemployment rate of the primary market area rose from 8.1% in 1995 to 10.0%
in 1996 and the state unemployment rate rose from 4.8% in 1995 to 5.9% in 1996,
while the national unemployment rate declined from 5.6% in 1995 to 5.0% in 1996.
The market area is characterized as having average growth rates in population
and household levels, while having lower than average levels of income and
housing values, with the cost of living being close to the national average but
remaining significantly less than in major metropolitan areas.
The Savings Bank faces strong competition from many financial
institutions for deposits and loan originations, many of whom are significantly
larger than the Savings Bank. See "-- Competition" and "RISK FACTORS --
Competition."
LENDING ACTIVITIES
GENERAL. The Savings Bank's loan portfolio totaled $139.0 million at
March 31, 1997, representing 68.0% of total assets at that date. It is the
Savings Bank's policy to concentrate its lending within its primary market area.
Historically, the Savings Bank's primary lending activity has been the
origination of one- to- four family residential mortgage loans and at March 31,
1997, $101.8 million, or 72.0%, of the total loan portfolio, consisted of one-
to- four family, residential mortgage loans. Other loans secured by real estate
include commercial, multi-family and residential real estate loans, which
amounted to $4.8 million, or 3.4% and $1.8 million, or 1.3%, respectively, of
the total loan portfolio at March 31, 1997. To a lesser extent, the Savings Bank
makes mortgage loans for the purpose of constructing primarily single-family
residences. At March 31, 1997, construction loans totaled $853,000, or 1.0% of
the total loan portfolio.
As a result of management's perception of minimal anticipated growth in
residential loan demand within the Savings Bank's primary market area and a
local demand for agricultural, commercial business and consumer
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loans, the Savings Bank has significantly increased its origination of
agricultural, indirect dealer automobile and commercial business loans since
July 1996. Commercial business loans include agricultural operating loans and
equipment loans. At March 31, 1997, commercial business loans amounted to $4.1
million, or 2.9%, of the Savings Bank's total loan portfolio and agricultural
loans amounted to $2.5 million, or 1.7% of the total loan portfolio, the
majority of which consisted of agricultural operating loans.
Historically, the Savings Bank has been active in the origination of
consumer loans, which primarily consist of home equity loans, secured and
unsecured and, to a lesser extent, automobile loans, credit card loans, home
improvement loans, mobile home loans and loans secured by savings deposits.
Consumer loans amounted to $25.4 million, or 18.0%, of the total loan portfolio
at March 31, 1997. More recently, the Savings Bank has increased its purchase of
dealer-originated automobile contracts. See "RISK FACTORS -- Recent Growth in,
Unseasoned Nature of Agricultural, Commercial Business and Indirect Automobile
Lending" and "-- Certain Lending Risks -- Risks of Agricultural Lending."
Subject to market conditions and other factors, the Savings Bank intends to
expand its purchase of dealer-originated automobile contracts to include
contracts secured by recreational vehicles, trailers, motorcycles and other
vehicles.
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LOAN PORTFOLIO ANALYSIS. The following table sets forth the composition
of the Savings Bank's loan portfolio (excluding loans held-for-sale) at the
dates indicated. The Savings Bank had no concentration of loans exceeding 10% of
total gross loans other than as disclosed below.
<TABLE>
<CAPTION>
At June 30,
At March 31, 1997 1996 1995 1994 1993
------------------ ---------------- ------------------ -------------------- ----------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
One-to-four-family............ $101,792 71.99% $101,199 74.71% $93,436 72.95% $84,385 73.08% $73,578 73.26%
Multi-family.................. 1,844 1.30 1,927 1.42 1,935 1.51 2,060 1.78 1,441 1.43
Commercial.................... 4,768 3.37 4,724 3.49 5,166 4.03 3,840 3.33 3,528 3.51
Construction.................. 853 0.60 1,745 1.29 1,798 1.40 3,114 2.70 2,006 2.00
Land.......................... 223 0.16 14 0.01 15 0.01 32 0.03 46 0.05
--------- ------- --------- ----- -------- ------ -------- ------ -------- -------
Total mortgage loans......... 109,480 77.42 109,609 80.92 102,350 79.90 93,431 80.92 80,599 80.25
-------- ------ ------- ----- ------- ----- -------- ------ -------- -------
Consumer Loans:
Home equity and second
mortgage.................... 17,514 12.39 12,751 9.41 12,120 9.46 10,837 9.39 9,860 9.82
Credit card................... 844 0.60 791 0.58 712 0.56 426 0.37 263 0.26
Automobile(1)................. 2,064 1.46 1,405 1.04 1,507 1.18 1,382 1.19 1,216 1.21
Loans secured by deposit
accounts..................... 731 0.52 593 0.44 589 0.46 626 0.54 703 0.70
Unsecured..................... 1,611 1.14 4,580 3.38 4,404 3.44 3,720 3.22 3,037 3.02
Other......................... 2,627 1.85 2,587 1.91 3,585 2.80 3,297 2.86 3,543 3.53
--------- ---- -------- ------ ------ ------- -------- ------ -------- -------
Total consumer loans......... 25,391 17.96 22,707 16.76 22,917 17.90 20,288 17.57 18,622 18.54
---------- ------ --------- ----- ------- ------- -------- ------ -------- -------
Commercial business loans .... 4,066 2.88 3,142 2.32 2,822 2.20 1,749 1.51 1,214 1.21
---------- ------ ---------- ------ ------- ------- -------- ------ -------- -------
Agricultural loans ........... 2,466 1.74 -- -- -- -- -- -- -- --
--------- ------- ------- -- ---- ----- ---- ----- ----- -----
Total loans................. 141,403 100.00% 135,458 100.00% 128,089 100.00% 115,468 100.00% 100,435 100.00%
====== ====== ====== ====== ======
Less:
Undisbursed portion of loans
in process................... 769 1,585 2,145 2,039 1,614
Net deferred loan fees........ 1,028 985 1,049 925 753
Allowance for loan losses.... 725 541 455 403 506
--------- ---------- --------- ---------- ---------
Total loans receivable, net.. $138,881 $132,347 $124,440 $112,101 $97,562
======== ======== ======== ======== =======
</TABLE>
(1) Includes dealer-originated automobile contracts of $389,000 at March 31,
1997.
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ONE- TO- FOUR FAMILY REAL ESTATE LENDING. Historically, the Savings Bank has
concentrated its lending activities on the origination of loans secured by first
mortgage loans on existing one- to- four family residences located in its
primary market area. At March 31, 1997, $101.8 million, or 72.0% of the Savings
Bank's total loan portfolio, consisted of such loans, with an average loan
balance of $43,000. The Savings Bank originated $9.0 million, $17.4 million and
$16.5 million of one- to- four family residential mortgage loans during the nine
months ended March 31, 1997 and the years ended June 30, 1996 and 1995,
respectively. One- to- four family originations were 52.9% of total loan
originations during the year ended June 30, 1996 as compared to 31.1% of total
originations for the nine months ended March 31, 1997.
Generally, the Savings Bank's fixed-rate one- to- four family mortgage loans
have maturities of 15 to 30 years and are fully amortizing with monthly payments
sufficient to repay the total amount of the loan with interest by the end of the
loan term. Generally, they are originated under terms, conditions and
documentation which permit them to be sold to private investors. Since January
1997, loans with fixed rates and maturities of 15 years or more are generally
sold in the secondary market. See "-- Loan Originations, Sales and Purchases."
The Savings Bank's fixed-rate loans customarily include "due on sale" clauses,
which give the Savings Bank the right to declare a loan immediately due and
payable in the event the borrower sells or otherwise disposes of the real
property subject to the mortgage and the loan is not paid.
At March 31, 1997, $53.5 million, or 37.8% of the total loans before net items
were fixed rate one- to four-family loans and $48.3 million, or 34.2%, were
adjustable rate one-to-four family mortgage ("ARM") loans. The Savings Bank
currently offers an ARM product for its portfolio which adjusts on the
anniversary date of the origination based on the one year Treasury constant
maturity index. The Savings Bank's ARMs are typically based on a 30-year
amortization schedule. The Savings Bank offers discounted or "teaser" ARM loans
where the initial interest rate is 1.5 to 2.0 percentage points below the
prevailing interest rate. The Savings Bank, however, qualifies the borrowers on
its ARM loans based on the fully indexed rate. The Savings Bank's current ARM
loans do not provide for negative amortization and generally provide for annual
and lifetime interest rate adjustment limits of 2% and 6%, respectively.
At March 31, 1997, $35.3 million or 52.8% of the Savings Bank's total ARM loans
had interest rates that adjusted annually based on the COFI. The COFI is a
lagging index which, together with the periodic and overall interest rate caps,
may cause the yield on such loans to adjust more slowly than the cost of
interest-bearing liabilities especially in a rapidly rising rate environment. In
November 1995, the Savings Bank discontinued using the COFI index and began
using the one year Treasury constant maturity index.
Borrower demand for ARM loans versus fixed-rate mortgage loans is a function of
the level of interest rates, the expectations of changes in the level of
interest rates and the difference between the initial interest rates and fees
charged for each type of loan. The relative amount of fixed-rate mortgage loans
and ARM loans that can be originated at any time is largely determined by the
demand for each in a competitive environment.
The retention of ARM loans in the Savings Bank's loan portfolio helps reduce
the Savings Bank's exposure to changes in interest rates. There are, however,
unquantifiable credit risks resulting from the potential of increased costs due
to changed rates to be paid by the customer. It is possible that during periods
of rising interest rates the risk of default on ARM loans may increase as a
result of repricing and the increased payments required by the borrower. See
"RISK FACTORS -- Interest Rate Risk." In addition, although ARM loans allow the
Savings Bank to increase the sensitivity of its asset base to changes in the
interest rates, the extent of this interest sensitivity is limited by the annual
and lifetime interest rate adjustment limits. Because of these considerations,
the Savings Bank has no assurance that yields on ARM loans will be sufficient to
offset increases in the Savings Bank's cost of funds. The Savings Bank believes
these risks, which have not had a material adverse effect on the Savings Bank to
date, generally are less than the risks associated with holding fixed-rate loans
in portfolio during a rising interest rate environment.
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The Savings Bank generally requires title insurance insuring the status of its
lien on all loans where real estate is the primary source of security. The
Savings Bank also requires that fire and casualty insurance (and, if
appropriate, flood insurance) be maintained in an amount at least equal to 80%
of the value of improvements.
The Savings Bank's one- to- four family residential mortgage loans typically do
not exceed 80% of the lower of cost or appraised value of the security property.
Pursuant to underwriting guidelines adopted by the Savings Bank's Board of
Directors, the Savings Bank can lend up to 95% of the lower of cost or appraised
value of the property securing a one- to- four family residential loan; however,
the Savings Bank generally obtains private mortgage insurance on the portion of
the principal amount that exceeds 80% of the appraised value of the security
property.
AGRICULTURAL LENDING. Agriculture is the major industry in the
Savings Bank's market area and the Savings Bank has been making agricultural
loans to satisfy the demand of its market area. The Savings Bank has
particularly emphasized agricultural operating loans during the past year and
intends subject to market conditions to continue such emphasis. In 1996, the
Savings Bank began originating a significant number of loans to finance
agriculture production and the expense of farming and agricultural related
operations. Also, the Savings Bank has made agricultural loans for the purchase
of farmland and equipment and loans secured by agricultural real estate. At
March 31, 1997, agricultural loans amounted to $2.5 million, or 1.7%, of the
total loan portfolio. The Savings Bank has sought to limit its agricultural
lending to borrowers with a strong capital base, sufficient management depth,
proven ability to operate through agricultural business cycles, reliable cash
flow and a willingness to provide the Savings Bank with the necessary financial
reporting.
Agricultural operating loans are made to finance farm operating
expenses (i.e., acquisition of seed, fertilizer, livestock and feed, among other
things) together with, in some cases, family living expenses, over the course of
a growing season and typically are made in amounts of $500,000 or less. However,
the Savings Bank's largest agricultural operating loan at March 31, 1997 had a
commitment of $1.3 million ($744,000 outstanding) and was provided to finance a
cattle ranching operation. This loan was performing in accordance with its terms
at March 31, 1997. Agricultural operating loans generally are made in amounts of
up to 80% of the borrower's anticipated income (not including the value of the
breeding herd in the case of cattle loans) and are secured by a blanket lien on
all crops, livestock, equipment, accounts and products and proceeds thereof. The
variables that effect income during the year are cattle production, the cost of
feed and related expenses and the price to be received or in the case of crops
the acreage of the farm, the crop to be planted, the crop yield and the expected
price to be received for harvested crops. The interest rate is adjusted monthly
based on the prime rate, as published in THE WALL STREET JOURNAL, plus a
negotiated margin of up to 2%. Because such loans are made to finance a farm's
annual operations, they are written on a one-year renewable basis, and renewal
is dependent upon timely repayment of then outstanding advances. The Savings
Bank carefully monitors these loans and prepares monthly variance reports on the
income and expenses. To meet the seasonal operating needs of a farm, borrowers
may qualify for single payment notes, revolving lines of credit or non-revolving
lines of credit.
In underwriting agricultural operating loans, the Savings Bank
considers the cash flow of the borrower based upon the farm or ranch operations
expected income stream as well as the value of collateral used to secure the
loan. Collateral generally consists of cattle or cash crops produced by the
farm, such as grain, grass seed, peas, sugar beets, mint, onions, potatoes, corn
and alfalfa. In addition to considering cash flow and obtaining a blanket
security interest in the farm's cash crop, the Savings Bank may also
collateralize an operating loan with the farm's operating equipment, breeding
stock, real estate, and federal agricultural program payments to the borrower.
The Savings Bank also originates loans to finance the purchase of farm
equipment and expects to pursue this type of lending in the future. Loans to
purchase farm equipment are made for terms of up to seven years. Most such loans
carry rates which adjust at least annually based on a rate equal to the prime
rate, as published in THE WALL STREET JOURNAL, plus a negotiated margin of
between 1% and 3%.
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Payments on an agricultural real estate loan depend to a large degree on the
results of operations of the related farm, and repayment is also subject to
adverse economic or weather conditions as well as market prices for agricultural
products, which can be highly volatile and are outside the control of the farm
borrower, among other things.
In addition to disease, weather presents one of the greatest risks as hail,
drought, floods, or other conditions, can severely limit or destroy crop yields
and thus impair loan repayments and the value of the underlying collateral. This
risk can be reduced substantially by the farmer with multi-peril crop insurance
which can guarantee set yields to provide certainty of repayment. Because of its
highs cost to the borrower, the Savings Bank encourages but generally does not
require multi-peril crop insurance. Grain and livestock prices also present a
risk as prices may decline prior to sale resulting in a failure to cover
production costs. These risks may be reduced by the use of future set price
contracts, which fixes in advance the price that the farmer will receive for the
harvested crops.
Another risk is the uncertainty of government support programs and
other regulations. Many farmers rely on the income, in part, from support
programs to make loan payments and may default on their loans if these programs
are discontinued or significantly changed. If the support programs were modified
or discontinued, the farmer could produce some income from crop growth on the
idle acreage, albeit, at an amount presumably lower than the support payments.
In addition, the value of collateral securing agricultural real estate
loans may be affected in the coming years by the gradual release of farmland
from the federal government's Conservation Reserve Program, which began in the
mid-1980's and pays farmers to keep their land out of farming production for a
ten-year period. Because such farmland is being released gradually over a ten
year period which began in 1995 and because of the anticipated high economic
costs associated with preparing such farmland for active cultivation that may
discourage renewed farming thereon, management does not anticipate that release
of this land will have any significant effect on the value of its current
collateral.
Finally, many farms are dependent on a limited number of key
individuals whose injury or death may result in an inability to operate the farm
successfully. Therefore, consideration is given to succession, life insurance
and business continuation plans during underwriting.
CONSTRUCTION LENDING. On a limited basis, the Savings Bank also offers
construction loans to qualified borrowers for construction of single-family
residences in the Savings Bank's primary market area. Typically, the Savings
Bank limits its construction lending to a local builder for the construction of
a single-family dwelling where a permanent purchase commitment has been obtained
or individuals are building their primary residences. Generally, the Savings
Bank does not lend to contractors for housing construction where the house is
not presold. Construction loans generally have a six-month term with only
interest being paid during the term of the loan, and convert at the end of six
months to permanent financing and are underwritten in accordance with the same
standards as the Savings Bank's mortgages on existing properties. Construction
loans generally have a maximum loan-to-value ratio of 80%. Borrowers must
satisfy all credit requirements which would apply to the Savings Bank's
permanent mortgage loan financing for the subject property.
Construction financing generally is considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction costs proves to be
inaccurate, the Savings Bank may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate, the Savings Bank may be confronted, at or prior
to the maturity of the loan, with a project having a value which is insufficient
to assure full repayment. The ability of a developer to sell developed lots or
completed dwelling units will depend on, among other things, demand, pricing,
availability of comparable properties and economic conditions. The Savings Bank
has sought to minimize this risk by limiting
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<PAGE>
construction lending to qualified borrowers in the Savings Bank's market area
and by limiting the aggregate amount of outstanding construction loans. At March
31, 1997, construction loans amounted to $853,000, or 1.0%, of the loan
portfolio.
MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING. The multi-family
residential loan portfolio consists primarily of loans secured by small
apartment buildings and the commercial real estate loan portfolio includes loans
to finance the construction or acquisition of small office buildings, retail
stores, car dealerships and agricultural land. Such loans generally range in
size from $50,000 to $750,000 and the largest was $643,000 at March 31, 1997. At
March 31, 1997, the Savings Bank had $1.8 million of multi-family residential
and $4.8 million of commercial real estate loans, which amounted to 1.3% and
3.4%, respectively of the total loan portfolio at such date. Multi-family and
commercial real estate loans are generally underwritten with loan-to-value
ratios of up to 75% of the lesser of the appraised value or the purchase price
of the property. Such loans generally are made at the prime rate, as published
in THE WALL STREET JOURNAL, for 15 to 20 year terms and they adjust at a rate
equal to this prime rate plus a negotiated margin of 1% to 2%. Because of the
inherently greater risk involved in this type of lending, the Savings Bank
generally limits its multi-family and commercial real estate lending to
borrowers within its market area with which it has had prior experience.
Agricultural real estate loans primarily are secured by first liens on
farmland or buildings thereon located in the Savings Bank's market area,
primarily to the service the needs of the Savings Bank's existing customers.
Such loans are made in amounts of $50,000 to $250,000 with the largest loan of
$82,000 at March 31, 1997. Loans are generally written in amounts up to 50% to
75% of the tax assessed or appraised value of the property for terms of between
10 to 20 years. Such loans have interest rates that generally adjust at least
annually at a rate equal to the prime rate, as published in THE WALL STREET
JOURNAL, plus a negotiated margin of between 1% and 2%. In originating an
agricultural real estate loan, the Savings Bank considers the debt service
coverage of the borrower's cash flow and the appraised value of the underlying
property, as well as the Savings Bank's experience with and knowledge of the
borrower.
Multi-family residential and commercial real estate lending entails
significant additional risks as compared with single-family residential property
lending. Multi-family residential and commercial real estate loans typically
involve large loan balances to single borrowers or groups of related borrowers.
The payment experience on such loans typically is dependent on the successful
operation of the real estate project. These risks can be significantly impacted
by supply and demand conditions in the market for office, retail and residential
space, and, as such, may be subject to a greater extent to adverse conditions in
the economy generally. To minimize these risks, the Savings Bank generally
limits itself to its market area or to borrowers with which it has prior
experience or who are otherwise well known to the Savings Bank. In addition, in
the case of commercial mortgage loans made to a partnership or a corporation,
the Savings Bank seeks, whenever possible, to obtain personal guarantees and
annual financial statements of the principals of the partnership or corporation.
The Savings Bank reviews all commercial real estate loans in excess of $200,000
on an annual basis to ensure that the loan meets current underwriting standards.
In addition, the Savings Bank underwrites commercial real estate loans at a rate
of interest significantly above that carried on the loan at the time of
origination to evaluate the borrower's ability to meet principal and interest
payments on the loan in the event of upward adjustments to the interest rate on
the loan.
CONSUMER AND OTHER LENDING. The Savings Bank originates a variety of consumer
loans. Such loans generally have shorter terms to maturity and higher interest
rates than mortgage loans. At March 31, 1997, the Savings Bank's consumer loans
totaled approximately $25.4 million, or 18.0% of the Savings Bank's total loans.
The Savings Bank's consumer loans consist primarily of secured and unsecured
consumer loans, automobile loans, boat loans, recreational vehicle loans, home
improvement and equity loans and deposit account loans. The growth of the
consumer loan portfolio in recent years has consisted primarily of an increase
in home equity loans, which the Savings Bank has more aggressively marketed.
Recently the Savings Bank has significantly increased its origination of
indirect dealer automobile loans, as discussed below.
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<PAGE>
In recent periods, the Savings Bank has emphasized the origination of consumer
loans, and, in particular, automobile loans due to their shorter terms and
higher yields than residential mortgage loans. Consumer loans accounted for
30.4% of the Savings Bank's total loan originations in the nine-months ended
March 31, 1997, and 23.2% and 27.7% in fiscal 1996 and 1995, respectively. The
Savings Bank anticipates that it will continue to be an active originator of
automobile and other consumer loans. Factors that may affect the ability of the
Savings Bank to increase its originations in this area include the demand for
such loans, interest rates and the state of the local and national economy.
The Savings Bank offers open-ended "preferred" lines of credit on either a
secured or unsecured basis to both customers and non-customers. Secured lines of
credit are generally secured by a second mortgage on the borrower's primary
residence. Secured lines of credit have an interest rate that is two percentage
points above the prime lending rate, as published in THE WALL STREET JOURNAL,
while the rate on unsecured lines is three percentage points above this prime
lending rate. In both cases, the rate adjusts monthly. The Savings Bank offers a
maximum line of credit of $50,000, however, the majority of the approved lines
of credit at March 31, 1997 were less than $25,000. The Savings Bank requires
repayment of at least 2% of the unpaid principal balance monthly. At March 31,
1997, approved lines of credit totaled $8.9 million, of which 4.8 million was
outstanding.
The Savings Bank offers closed-end, fixed-rate home equity loans that are made
on the security of primary residences. Loans normally do not exceed 80% of the
appraised or tax assessed value of the residence, less the outstanding principal
of the first mortgage, and have terms of up to 15 years requiring monthly
payments of principal and interest. At March 31, 1997, home equity loans and
second mortgage loans amounted to $17.5 million, or 12.4%, of total loans.
At March 31, 1997, the Savings Bank's automobile loan portfolio amounted to
$2.1 million, or 1.5% of consumer loans at such date. Since January 1997, a
substantial portion of the Savings Bank's automobile loans have been originated
indirectly by a network of approximately five automobile dealers located in the
Baker and La Grande market areas. Indirect automobile loans accounted for
approximately 15% of the Savings Bank's total consumer loan originations during
the three months ended March 31, 1997. The applications for such loans are taken
by employees of the dealer, the loans are written on the dealer's contract
pursuant to the Savings Bank's underwriting standards using the dealer's loan
documents with terms substantially similar to the Savings Bank's. All indirect
loans must be approved by specific loan officers of the Savings Bank who have
experience with this type of lending. In addition to indirect automobile
lending, the Savings Bank also originates automobile loans directly. Subject to
market conditions and other factors, the Savings Bank intends to expand its
purchase of dealer-originated contracts to include contracts secured by
recreational vehicles, trailers, motorcycles, and other vehicles.
Indirect automobile lending may involve greater risks than direct automobile
lending, such as dealer fraud. To mitigate these risks, the Savings Bank has
limited its indirect automobile lending relationships to dealerships that are
established and well known in its market area. However, if a dealership were to
enter into bankruptcy, the Savings Bank may be unable to obtain clear title to
the automobiles because the floor plan lender, who originated a loan to the
dealer to enable the dealer to purchase the automobiles from the manufacturer or
another party, would not assign its lien to the Savings Bank.
The maximum term for the Savings Bank's automobile loans is 72 months. The
Savings Bank may lend up to 100% of the purchase price of the new or used
automobile. The Savings Bank requires all borrowers to maintain automobile
insurance, including collision, fire and theft, with a maximum allowable
deductible and with the Savings Bank listed as loss payee.
The Savings Bank's consumer loans also include unsecured loans and loans
secured by deposit accounts and loans to purchase recreational vehicles, motor
homes, boats and credit card loans. The Savings Bank generally will lend up to
100% of the purchase price of vehicles other than automobiles.
49
<PAGE>
At March 31, 1997, unsecured consumer loans amounted to $1.6 million, or 1.1%
of total loans. These loans are made for a maximum of 36 months or less with
fixed rates of interest and are offered primarily to existing customers of the
Savings Bank.
The Savings Bank also offers credit card loans through its
participation as a VISA card issuer. The Savings Bank began offering credit
cards in December 1992. Management believes that providing credit card services
to its customers helps the Savings Bank remain competitive by offering customers
an additional service. The Savings Bank does not actively solicit credit card
business beyond its customer base and market area and has not engaged in mailing
of pre-approved credit cards. The rate currently charged by the Savings Bank on
its credit card loans is the prime rate, as published in THE WALL STREET
JOURNAL, plus 7%, and the Savings Bank is permitted to change the interest rate
quarterly. Processing of bills and payments is contracted to an outside
servicer. At March 31, 1997, the Savings Bank had a commitment to fund an
aggregate of $3.5 million of credit card loans, which represented the aggregate
credit limit on credit cards, and had $844,000 of credit card loans outstanding,
representing 0.6% of its total loan portfolio. The Savings Bank intends to
continue credit card lending and estimates that at current levels of credit card
loans, it makes a small monthly profit net of service expenses and write-offs.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or secured by rapidly
depreciating assets such as automobiles and other vehicles. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. The remaining deficiency often does
not warrant further substantial collection efforts against the borrower beyond
obtaining a deficiency judgment. In addition, consumer loan collections are
dependent on the borrower's continuing financial stability, and thus are more
likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy. Furthermore, the application of various federal and state laws,
including federal and state bankruptcy and insolvency laws, may limit the amount
that can be recovered on such loans. At March 31, 1997, the Savings Bank had
$23,000 of consumer loans accounted for on a nonaccrual basis.
COMMERCIAL BUSINESS LENDING. The Savings Bank originates commercial
business loans to small and medium sized businesses in its primary market area.
Commercial business loans are generally made to finance the purchase of seasonal
inventory needs, new or used equipment, and for short-term working capital. Such
loans are generally secured by equipment, accounts receivable and inventory,
although commercial business loans are sometimes granted on an unsecured basis.
Such loans are made for terms of five years or less, depending on the purpose of
the loan and the collateral, with loans to finance operating expenses made for
one year or less, with interest rates that adjust at least annually at a rate
equal to the prime rate, as published in THE WALL STREET JOURNAL, plus a margin
of between 1% and 3% percentage points. At March 31, 1997, the commercial
business loans amounted to $4.1 million, or 2.9%, of the total loan portfolio.
At March 31, 1997, the largest outstanding commercial business loan
was a $160,000 loan to an oil dealership for equipment and a line of credit. The
real estate underlying the oil dealership's facility is not collateral on this
loan. Such loan was performing according to its terms at March 31, 1997. Most of
the Savings Bank's commercial business loans range in size from $5,000 to
$250,000.
The Savings Bank is an approved Small Business Administration ("SBA") lender
and at March 31, 1997, had one SBA loan for $131,000. The Savings Bank intends
to continue to originate these loans in amounts up to $250,000 to local
businesses within its market area.
The Savings Bank underwrites its commercial business loans on the
basis of the borrower's cash flow and ability to service the debt from earnings
rather than on the basis of underlying collateral value, and the Savings Bank
seeks to structure such loans to have more than one source of repayment. The
borrower is required to provide the Savings Bank with sufficient information to
allow the Savings Bank to make its lending determination. In most instances,
this information consists of at least three years of financial statements, a
statement of projected cash flows,
50
<PAGE>
current financial information on any guarantor and any additional information on
the collateral. Generally, for loans with balances exceeding $100,000, the
Savings Bank requires that borrowers and guarantors provide updated financial
information at least annually.
The Savings Bank's commercial business loans may be structured as term
loans or as lines of credit. Commercial business term loans are generally made
to finance the purchase of assets and have maturities of five years or less.
Commercial business lines of credit are typically made for the purpose of
providing working capital and are usually approved with a term of between six
months and one year.
Commercial business loans are often larger and may involve greater
risk than other types of lending. Because payments on such loans are often
dependent on successful operation of the business involved, repayment of such
loans may be subject to a greater extent to adverse conditions in the economy.
The Savings Bank seeks to minimize these risks through its underwriting
guidelines, which require that the loan be supported by adequate cash flow of
the borrower, profitability of the business, collateral and personal guarantees
of the individuals in the business. In addition, the Savings Bank limits this
type of lending to its market area and to borrowers with which it has prior
experience or who are otherwise well known to the Savings Bank.
MATURITY OF LOAN PORTFOLIO. The following table sets forth certain information
at March 31, 1997 regarding the dollar amount of loans maturing in the Savings
Bank's portfolio based on their contractual terms to maturity, but does not
include scheduled payments or potential prepayments. Demand loans, loans having
no stated schedule of repayments and no stated maturity, and overdrafts are
reported as becoming due within one year. Loan balances do not include
undisbursed loan proceeds, unearned discounts, unearned income and allowance for
loan losses.
<TABLE>
<CAPTION>
After After
One Year 3 Years 5 Years
Within Through Through Through Over
One Year 3 Years 5 Years 10 Years Ten Years Total
-------- ------- ------- -------- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One-to four-family..................... $11 $311 $1,315 $7,985 $92,170 $101,792
Multi-family........................... -- 12 -- 698 1,134 1,844
Commercial............................. 19 123 385 1,453 2,788 4,768
Construction........................... 853 -- -- -- -- 853
Land................................... -- -- -- 157 66 223
---- ---- ------ ------- ------- --------
883 446 1,700 10,293 96,158 109,480
--- --- ----- ------ ------ -------
Consumer loans:
Home equity and second mortgage........ 78 1,474 2,494 6,505 6,963 17,514
Automobile............................. 14 541 1,098 378 33 2,064
Credit card............................ 159 313 170 202 -- 844
Loans secured by deposit accounts...... 205 492 34 -- -- 731
Unsecured.............................. 25 259 246 1,002 79 1,611
Other.................................. 68 438 516 678 927 2,627
---- ------ ------ ------ ------ -------
549 3,517 4,558 8,765 8,002 25,391
--- ----- ----- ----- ----- ------
Commercial business loans............... 1,578 662 1,826 -- -- 4,066
Agricultural loans...................... 2,427 39 -- -- -- 2,466
----- -- -------- --------- ---------- --------
Total.............................. $5,437 $4,664 $8,084 $19,058 $104,160 $141,403
====== ====== ====== ======= ======== ========
</TABLE>
51
<PAGE>
The following table sets forth the dollar amount of all loans due after
March 31, 1998, which have fixed interest rates and have floating or adjustable
interest rates.
Fixed Floating or
Rates Adjustable Rates
(In thousands)
Mortgage loans:
One-to four-family...................... $53,942 $47,841
Multi-family........................... 491 1,353
Commercial............................. 1,468 3,281
Construction........................... -- --
Land................................... 223 --
------- -------
56,124 52,475
------ ------
Consumer loans:
Home equity and second mortgage........ 9,882 7,554
Automobile............................. 2,024 26
Credit card............................ -- 685
Loans secured by deposit accounts...... 526 --
Unsecured.............................. 137 1,449
Other.................................. 2,268 289
------- -------
14,837 10,003
------ ------
Commercial business loans............... -- 2,488
Agricultural loans...................... -- 39
-------- --------
Total............................... $70,961 $65,005
======= =======
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of a loan is substantially less
than its contractual terms because of prepayments. In addition, due-on-sale
clauses on loans generally give the Savings Bank the right to declare loans
immediately due and payable in the event, among other things, that the borrower
sells the real property subject to the mortgage and the loan is not repaid. The
average life of mortgage loans tends to increase, however, when current mortgage
loan market rates are substantially higher than rates on existing mortgage loans
and, conversely, decrease when rates on existing mortgage loans are
substantially higher than current mortgage loan market rates. Furthermore,
management believes that a significant number of the Savings Bank's residential
mortgage loans are outstanding for a period less than their contractual terms
because of the transitory nature of many of the borrowers who reside in its
primary market area.
LOAN SOLICITATION AND PROCESSING. The Savings Bank's lending activities
are subject to the written, non-discriminatory, underwriting standards and loan
origination procedures established by the Savings Bank's Board of Directors and
management. The customary sources of loan originations are realtors, walk-in
customers, referrals and existing customers. The Savings Bank also advertises
its loan products by radio and newspaper. The Savings Bank does not employ
commissioned loan originators.
In its marketing, the Savings Bank emphasizes its community ties,
customized personal service and an efficient underwriting and approval process.
The Savings Bank uses professional fee appraisers. The Savings Bank generally
requires hazard, title and, to the extent applicable, flood insurance on all
security property.
Mortgage loan applications are initiated, underwritten and
preliminarily approved by loan officers before they are recommended for final
review and approval. All one- to- four family and commercial real estate loans
in excess of $135,000 but less than $175,000 (or between $200,000 and $250,000
in the case of commercial business loans) must be approved by the Executive
Board Loan Committee, which consists of the Savings Bank's President, Senior
Vice President of Customer Services and either the La Grande Branch Manager or
Loan Center Manager. Loans over those amounts
52
<PAGE>
and less than $1 million require the approval of the Board Loan Committee, which
consists of three members of the Board of Directors, and loans over $1 million
require the unanimous approval of the Board of Directors.
LOAN ORIGINATIONS, SALES AND PURCHASES. Historically, the Savings
Bank's primary lending activity has been the origination of one- to four-family
residential mortgage loans. During the nine months ended March 31, 1997,
however, the Savings Bank has increased substantially its origination of
consumer, commercial business and agricultural loans. During the nine months
ended March 31, 1997, consumer loans increased by $2.7 million (11.8%),
commercial business loans by $924,000 (29.4%), and agricultural loans by $2.5
million (no agricultural loans were outstanding as of March 31, 1996). See "RISK
FACTORS -- Recent Growth in, Unseasoned Nature of Agricultural, Commercial
Business and Indirect Automobile Lending."
Beginning in January 1997, the Savings Bank began selling conforming
conventional fixed-rate one- to four-family residential mortgage loans with
maturities of over 15 years, servicing released to private investors. A large
portion of the Savings Bank's residential mortgage loans do not conform to
secondary market sales guidelines because of excess acreage, drinking wells
located on the property, and other characteristics common to properties located
in the Savings Bank's primary market area. The Savings Bank generally sells
these loans without recourse. In most instances, sales of fixed rate loans are
made against forward commitments, which alleviates the Savings Bank's exposure
to pipeline risk. Pipeline risk is the risk that the value of the loan will
decline during the period between the time the loan is originated and the time
of sale because of changes in market interest rates. By retaining the servicing,
the Savings Bank receives fees for performing the traditional services of
processing payments, accounting for loan funds, and collecting and paying real
estate taxes, hazard insurance and other loan-related items, such as private
mortgage insurance. At March 31, 1997, the Savings Bank's servicing portfolio
was $1.4 million. In addition, the Savings Bank retains certain amounts in
escrow for the benefit of investors. The Savings Bank is able to invest these
funds but is not required to pay interest on them. At March 31, 1997, such
escrow balances totaled $78,000.
53
<PAGE>
The following table sets forth total loans originated, purchased, sold
and repaid during the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended Year
March 31, Ended June 30,
1997 1996 1996 1995
(In thousands)
<S> <C> <C> <C> <C>
Loans originated:
Mortgage loans:
One-to four family ........................ $8,966 $11,932 $17,416 $16,508
Multi-family............................... -- -- 514 --
Commercial................................. -- 325 908 123
Construction............................... 2,216 2,856 3,958 6,800
Land....................................... 173 27 27 --
Consumer.................................... 8,769 5,548 7,642 9,854
Commercial business loans................... 8,698 1,367 2,484 2,316
Agricultural loan........................... 2,346 -- -- --
------ ------ ------ ------
Total loans originated................... 28,822 22,055 32,949 35,601
Loans purchased:
One-to four family mortgage................. 183 47 256 145
Dealer-originated automobile contracts...... 389 -- -- --
------ ------ ------ ------
Total loans purchased................... 572 47 256 145
Loans sold:
Total whole loans sold..................... 1,149 652 759 1,470
------- -------- -------- ---------
Total loans sold........................ 1,149 652 759 1,470
Loan principal repayments.................... 21,711 16,712 24,539 21,937
-------- -------- -------- ---------
Net increase in loans receivable, net........ $6,534 $4,738 $7,907 $12,339
====== ====== ====== =======
</TABLE>
LOAN COMMITMENTS. The Savings Bank issues commitments for mortgage
loans conditioned upon the occurrence of certain events. Such commitments are
made in writing on specified terms and conditions and are honored for up to 45
days from approval, depending on the type of transaction. At March 31, 1997, the
Savings Bank had loan commitments of $11.2 million. See Note 13 of Notes to the
Consolidated Financial Statements.
LOAN FEES. In addition to interest earned on loans, the Savings Bank
receives income from fees in connection with loan originations, loan
modification, late payments and for miscellaneous service related to its loan.
Income from these activities varies from period to period depending upon the
volume and type of loans made and competitive conditions.
The Savings Bank charges loan origination fees which are calculated as
a percentage of the amount borrowed. In accordance with applicable accounting
procedures, loan origination fees and discount points in excess of loan
origination costs are deferred and recognized over the contractual remaining
lives of the related loans on a level yield basis. Discounts and premiums on
loans purchased are accredit and amortized in the same manner. The Savings Bank
recognized $144,000, $195,000 and $158,000 of deferred loan fees during the nine
months ended March 31, 1997 and the years ended June 30, 1996 and 1995,
respectively, in connection with loan refinancings, payoffs, sales and ongoing
amortization of outstanding loans.
NONPERFORMING ASSETS AND DELINQUENCIES. Generally, all payments on the
Savings Bank's loans are due on the first day of the month but borrowers are
allowed to pay up to the 16th day of the month before the Savings Bank initiates
collection procedures. When a borrower fails to make a required payment on a
loan, the Savings Bank
54
<PAGE>
attempts to cure the deficiency by contacting the borrower and seeking the
payment. Contacts are generally made 16 days after the due date. In most cases,
deficiencies are cured promptly. If a delinquency continues, additional contact
is made through a telephone call around the 20th day. While the Savings Bank
generally prefers to work with borrowers to resolve such problems, the Savings
Bank will institute foreclosure or other proceedings after the 90th day of
delinquency, as necessary, to minimize any potential loss.
Loans are placed on nonaccrual status when the loan becomes
contractually past due 90 days or more. Interest payments received on nonaccrual
loans are applied to principal if collection of principal is doubtful or
reflected as interest income on a cash basis. Loans may be reinstated to accrual
status when current and collectibility of principal and interest is no longer
doubtful.
The Savings Bank's Board of Directors is informed monthly of the status
of all loans delinquent more than 30 days, all loans in foreclosure and all
foreclosed and repossessed property owned by the Savings Bank.
The following table sets forth information with respect to the Savings
Bank's nonperforming assets and restructured loans at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At June 30,
------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis:
Mortgage loans:
One-to four-family.............................. $ 167 $ 111 $ 47 $ 15 $128
Consumer loans................................... 23 52 20 26 2
----- ----- ----- ----- -----
Total....................................... 190 163 67 41 130
Accruing loans which are contractually
past due 90 days or more......................... -- -- -- -- --
----- ----- ----- ----- -----
Total....................................... -- -- -- -- --
Total of nonaccrual and 90 days past due loans.... 190 163 67 41 130
Foreclosed real estate............................ -- 13 -- -- --
Other repossessed assets.......................... 10 34 -- 18 --
------ ------ ------ ------ ------
Total nonperforming assets................... $ 200 $ 210 $ 67 $ 59 $ 130
===== ===== ===== ===== =====
Restructured loans................................ $ -- $ -- $ -- $ 18 $ --
====== ====== ====== ===== ======
Nonaccrual and 90 days or more past due loans
as a percentage of loans receivable, net....... 0.14% 0.12% 0.05% 0.04% 0.13%
Nonaccrual and 90 days or more past due
loans as a percentage of total assets............ 0.09% 0.08% 0.03% 0.02% 0.07%
Nonperforming assets as a
percentage of total assets....................... 0.10% 0.10% 0.03% 0.03% 0.07%
Loans receivable, net............................. $138,881 $132,347 $124,440 $112,101 $ 97,562
Total assets...................................... $204,213 $203,457 $205,400 $196,736 $193,334
</TABLE>
55
<PAGE>
Interest income that would have been recorded for the nine months ended
March 31, 1997 and the year ended June 30, 1996 had nonaccruing loans been
current in accordance with their original terms, and the amount of interest
included in interest income on such loans for such periods was, in both cases,
immaterial.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS. See Note 1 of Notes to
Consolidated Financial Statements regarding the Savings Bank's accounting for
foreclosed real estate. At March 31, 1997, the Savings Bank had no foreclosed
real estate.
ASSET CLASSIFICATION. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention" and monitored by the Savings Bank.
The aggregate amounts of the Savings Bank's classified and special
mention assets, and of the Savings Bank's general and specific loss allowances
at the dates indicated, were as follows:
At March 31, At June 30,
1997 ---------------
1996 1995
---------- --- ----
(In thousands)
Loss.................................. $ 7 $ -- $ 4
Doubtful.............................. 22 11 8
Substandard assets.................... 796 905 912
Special mention....................... 838 582 287
General loss allowances............... 718 541 451
Specific loss allowances.............. 7 -- 4
At March 31, 1997, substandard assets consisted of 24 one-to-four
family mortgage loans, eight secured consumer loans, two unsecured consumer
loans and six VISA credit card accounts..
At March 31, 1997, special mention assets consisted of 16 one-to-four
family mortgage loans, 13 secured consumer loans, three unsecured consumer loans
and 14 VISA credit card accounts..
ALLOWANCE FOR LOAN LOSSES. The Savings Bank has established a
systematic methodology for the determination of provisions for loan losses. The
methodology is set forth in a formal policy and takes into consideration the
need for an overall general valuation allowance as well as specific allowances
that are tied to individual loans.
56
<PAGE>
In originating loans, the Savings Bank recognizes that losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan, general economic conditions and, in the case of a secured loan, the
quality of the security for the loan. The Savings Bank increases its allowance
for loan losses by charging provisions for loan losses against the Savings
Bank's income.
Allowances for losses on specific problem loans and real estate owned
are charged to earnings when it is determined that the value of these loans and
properties, in the judgement of management, is impaired. In addition to specific
reserves, the Savings Bank also maintains general provisions for loan losses
based on evaluating known and inherent risks in the loan portfolio, including
management's continuing analysis of the factors and trends underlying the
quality of the loan portfolio. These factors include changes in the size and
composition of the loan portfolio, actual loan loss experience, current and
anticipated economic conditions, detailed analysis of individual loans for which
full collectibility may not be assured, and determination of the existence and
realizable value of the collateral and guarantees securing the loans. The
ultimate recovery of loans is susceptible to future market factors beyond the
Savings Bank's control, which may result in losses or recoveries differing
significantly from those provided in the consolidated financial statement. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the Savings bank's valuation allowance on loans and
real estate owned. Generally, a provision for losses is charged against income
quarterly to maintain the allowance for loan losses.
At March 31, 1997, the Savings Bank had an allowance for loan losses of
$725,000. Management believes that the amount maintained in the allowances at
March 31, 1997 will be adequate to absorb losses inherent in the portfolio.
Although management believes that it uses the best information available to make
such determinations, future adjustments to the allowance for loan losses may be
necessary and results of operations could be significantly and adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations. Furthermore, while the Savings Bank believes it has
established its existing allowance for loan losses in accordance with GAAP,
there can be no assurance that regulators, in reviewing the Savings Bank's loan
portfolio, will not request the Savings Bank to increase significantly its
allowance for loan losses. In addition, because future events affecting
borrowers and collateral cannot be predicted with certainty, there can be no
assurance that the existing allowance for loan losses is adequate or that
substantial increases will not be necessary should the quality of any loans
deteriorate as a result of the factors discussed above. Any material increase in
the allowance for loan losses may adversely affect the Savings Bank's financial
condition and results of operations.
57
<PAGE>
The following table sets forth an analysis of the Savings Bank's
allowance for possible loan losses for the periods indicated.
<TABLE>
<CAPTION>
Nine Months
Ended
March 31, Year Ended June 30,
1997 1996 1996 1995 1994 1993
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Allowance at beginning of period........... $541 $455 $455 $403 $506 $382
---- ---- ---- ---- ---- ----
Provision (credit) for loan losses......... 216 91 115 67 (90) 175
Recoveries:
Mortgage loans:
Multi-family............................. -- 9 12 5 4 --
Consumer loans:
Credit card.............................. 4 1 1 -- -- --
Other.................................... 3 -- 1 -- 8 --
----- ------ ----- ------ ----- ------
Total recoveries........................ 7 10 14 5 12 --
----- ----- ----- ----- ----- ------
Charge-offs:
Mortgage loans:
Multi-family............................. 5 -- -- -- 21 37
Consumer loans:
Credit card.............................. 26 25 41 -- 1 --
Automobile............................... -- -- -- -- -- 2
Unsecured................................ -- -- -- -- -- 10
Other.................................... 8 -- 2 20 3 2
----- ------ ----- ----- ----- -----
Total charge-offs....................... 39 25 43 20 25 51
----- ----- ----- ----- ----- -----
Net charge-offs......................... (32) (15) (29) (15) (13) (51)
------ ------ ------ ------ ------ ------
Allowance at end of period............. $725 $531 $541 $455 $403 $506
==== ==== ==== ==== ==== ====
Allowance for loan losses as a
percentage of total loans
outstanding at the end of the period...... 0.52% 0.41% 0.41% 0.37% 0.36% 0.52%
======= ======= ======= ======= ======= =======
Net charge-offs as a percentage
of average loans outstanding
during the period........................ 0.02% 0.01% 0.02% 0.01% 0.01% 0.05%
======= ======= ======= ======= ======= =======
Allowance for loan losses as
a percentage of nonperforming
loans at end of period....................381.58% 424.80% 331.90% 679.10% 982.93% 389.23%
====== ====== ====== ====== ====== ======
</TABLE>
For additional discussion regarding the provisions for loan losses in
recent periods, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Results of Operations -- Comparison of Operating
Results for the Nine Months Ended March 31, 1997 and the Year Ended June 30,
1996 -- Provision for Loan Losses," "-- Results of Operations -- Comparison of
Operating Results for the Years Ended June 30, 1996 and 1995 -- Provision for
Loan Losses."
58
<PAGE>
The following table sets forth the breakdown of the allowance for loan losses
by loan category at the dates indicated. Management believes that the allowance
can be allocated by category only on an approximate basis. The allocation of the
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any other
category.
<TABLE>
<CAPTION>
At
March 31, At June 30,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------ ----------------- -------------- ---------------- -----------------
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Category in Category in Category in Category in Category
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Mortgage loans:
One-to four-family........ $357 77.42% $354 80.92% $284 $79.90% $244 80.92% $232 80.25%
Non-mortgage loans......... 173 16.84 174 18.06 162 19.08 155 18.54 270 19.05
Commercial business........ 105 2.88 -- -- -- -- -- -- -- --
Agricultural loans......... 61 1.74 -- -- -- -- -- -- -- --
Credit cards.............. 24 0.60 9 0.58 5 0.56 -- -- -- --
Loans secured by deposit
accounts................. 5 0.52 4 0.44 4 0.46 4 0.54 4 0.70
----- ------- ----- ------- ----- ------- ----- ------- ----- -------
Total allowance
for loan losses...... $725 100.00% $541 100.00% $455 100.00% $403 100.00% $506 100.00%
==== ====== ==== ====== ==== ====== ==== ====== ==== ======
</TABLE>
59
<PAGE>
INVESTMENT ACTIVITIES
The Savings Bank is permitted under federal law to invest in various
types of liquid assets, including U.S. Treasury obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
FHLB-Seattle, certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds. Subject to various restrictions, the
Savings Bank may also invest a portion of its assets in commercial paper and
corporate debt securities. Savings institutions like the Savings Bank are also
required to maintain an investment in FHLB stock. The Savings Bank is required
under federal regulations to maintain a minimum amount of liquid assets. See
"REGULATION" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
The Savings Bank purchases investment securities with excess liquidity
arising when investable funds exceed loan demand. The Savings Bank's investment
securities purchases have been limited to U.S. Government and government agency
securities with contractual maturities of between one and ten years and
mortgage-backed and related securities issued by the FNMA, FHLMC and GNMA with
maturities of up to 30 years.
At March 31, 1997, the Savings Bank held securities classified as
available-for-sale and held-to-maturity under SFAS 115. There were no trading
securities at March 31, 1997. During the nine months ended March 31, 1997, the
Savings Bank reclassified, under SFAS No. 115 guidelines, $2.4 million of
trading securities (at fair value) to available-for-sale as management had not
purchased such securities with the principal intent of selling them in the near
term. See Note 1 of Notes to Consolidated Financial Statements. Trading of
investment securities is not part of the Savings Bank's operating strategy.
The Savings Bank's investment policies generally limit investments to
U.S. Government and government agency securities, municipal bonds, certificates
of deposits, marketable corporate debt obligations, mortgage-backed and related
securities and certain types of mutual funds. The Savings Bank's investment
policy does not permit engaging directly in hedging activities or purchasing
high risk mortgage derivative products or non-investment grade corporate bonds.
Investments are made based on certain considerations, which include the interest
rate, yield, settlement date and maturity of the investment, the Savings Bank's
liquidity position, and anticipated cash needs and sources (which in turn
include outstanding commitments, upcoming maturities, estimated deposits and
anticipated loan amortization and repayments). The effect that the proposed
investment would have on the Savings Bank's credit and interest rate risk and
risk-based capital is also considered.
At March 31, 1997, the Savings Bank did not have any securities which
had an aggregate book value in excess of 10% of the Savings Bank's retained
earnings at that date.
60
<PAGE>
The following table sets forth the amortized cost and fair value of the
Savings Bank's securities, by accounting classification and by type of security,
at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At June 30,
---------------------------------------------------------
1997 1996 1995
----------------------- ----------------------------- -------------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value(1) Total Value(1) Total Value(1) Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Held to Maturity:
U.S. Government agency obligations........... $ -- --% $ -- --% $19,232 28.21%
Mortgage-backed and related securities....... 15,302 30.03 17,011 28.84 42,245 61.98
------- ----- ------- ----- ------- -----
Total held to maturity securities.............. 15,302 30.03 17,011 28.84 61,477 90.19
Available for Sale:
U.S. Government agency obligations............. 15,857 31.12 19,900 33.74 2,903 4.26
Mortgage-backed and related securities......... 19,745 38.75 19,451 32.98 -- --
Other.......................................... 50 0.10 50 0.08 -- --
------- ------ ------- ------ ------- ----
Total available for sale securities.......... 35,652 69.97 39,401 66.80 2,903 4.26
Trading:
Mortgage-backed and related securities......... -- -- 2,569 4.36 3,786 5.55
---- ---- -------- ------- -------- -------
Total.......................................... $50,954 100.00% $58,981 100.00% $68,166 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
(1) The market value of the Savings Bank's investment portfolio amount to
$51.0 million, $58.8 million and $68.6 million at March 31, 1997 and
June 30, 1996 and 1995, respectively. At March 31, 1997, the market
value of the principal components of the Savings Bank's investment
securities portfolio was as follows: U.S. Government securities, $15.9
million; mortgage-backed and related securities, $35.1 million.
The following table sets forth the maturities and weighted average
yields of the debt and mortgage-backed and related securities in the Savings
Bank's investment securities portfolio at March 31, 1997.
<TABLE>
<CAPTION>
Less Than One to Five to Over Ten
One Year Five Years Ten Years Years
Amount Yield Amount Yield Amount Yield Amount Yield Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity:
Mortgage-backed and related securities..... $ -- --% $ -- --% $ -- --% $15,302 6.89% $15,302
Available for Sale:
U.S. Government agency obligations......... -- 9,831 6.29 6,025 6.70 -- -- 15,856
Mortgage-backed and related securities..... -- 262 6.65 254 6.53 19,230 8.13 19,746
Other...................................... -- 50 8.38 -- -- -- -- 50
------- ------- ------ ------ ------
Total available for sale securities.... -- 10,143 6,279 19,230 35,652
------
Total....................................... $ -- $10,143 $6,279 $34,532 $50,954
======= ======= ====== ======= =======
</TABLE>
61
<PAGE>
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
GENERAL. Deposits are the major external source of funds for the
Savings Bank's lending and other investment activities. In addition, the Savings
Bank also generates funds internally from loan principal repayments and
prepayments and maturing investment securities. Scheduled loan repayments are a
relatively stable source of funds, while deposit inflows and outflows and loan
prepayments are influenced significantly by general interest rates and money
market conditions. Borrowings from the FHLB-Seattle and repurchase agreements
may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources. Presently, the Savings Bank has no
other borrowing arrangements.
DEPOSIT ACCOUNTS. A substantial number of the Savings Bank's depositors
reside in Oregon. The Savings Bank's deposit products include a broad selection
of deposit instruments, including NOW accounts, demand deposit accounts, money
market accounts, regular passbook savings, statement savings accounts and term
certificate accounts. Deposit account terms vary with the principal difference
being the minimum balance deposit, early withdrawal penalties and the interest
rate. The Savings Bank reviews its deposit mix and pricing weekly. The Savings
Bank does not utilize brokered deposits, nor has it aggressively sought jumbo
certificates of deposit. The Savings Bank has also begun to seek business
checking accounts in connection with its community banking activities.
The Savings Bank believes it is competitive in the type of accounts and
interest rates it offers on its deposit products. The Savings Bank does not seek
to pay the highest deposit rates but a competitive rate. The Savings Bank
determines the rates paid based on a number of conditions, including rates paid
by competitors, rates on U.S. Treasury securities, rates offered on various
FHLB-Seattle lending programs, and the deposit growth rate the Savings Bank is
seeking to achieve.
In the unlikely event the Savings Bank is liquidated after the
Conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to the Holding Company as the sole
stockholder of the Savings Bank.
62
<PAGE>
The following table sets forth information concerning the Savings
Bank's time deposits and other interest-bearing deposits at March 31, 1997.
<TABLE>
<CAPTION>
Weighted
Average Percentage
Interest Minimum of Total
Rate Term Category Amount Balance Deposits
(In thousands)
<S> <C> <C> <C> <C> <C>
- --% N/A Non-interest-bearing $ 6,282 $ 10 3.51%
1.56 N/A NOW accounts 27,261 10 15.22
3.53 N/A Money market accounts 16,785 1,000 9.37
2.89 N/A Passbook savings accounts 24,005 5 13.40
Certificates of Deposit
6.18 3-5 years Fixed-term, fixed-rate 18,623 1,000 10.39
6.24 2 1/2 years Fixed-term, fixed-rate 3,026 1,000 1.69
4.60 3 1/2 years Fixed-term, fixed-rate 2,718 1,000 1.52
5.41 1 1/2 years Fixed-term, fixed-rate 469 1,000 0.26
4.27 91 day Fixed-term, fixed-rate 1,930 1,000 1.08
4.84 182 day Fixed-term, fixed-rate 9,819 1,000 5.48
7.25 3 year Fixed-term, fixed-rate 5,739 1,000 3.20
5.50 15 month Fixed-term, fixed-rate 6,060 1,000 3.38
5.14 1 year Fixed-term, variable-rate 27,634 1,000 15.42
5.50 2 1/2 year Fixed-term, variable-rate 13,256 1,000 7.40
4.60 18 month Fixed-term, adjustable- rate 1,693 5 0.94
5.98 6 year Fixed-term, adjustable-rate 748 0 0.42
5.23 Varies Various term, fixed-rate 3,478 1,000 1.94
5.62 Varies Jumbo certificates 9,633 100,000 5.38
--------- -------
TOTAL $179,158 100.00%
======== ======
</TABLE>
The following table indicates the amount of the Savings Bank's jumbo
certificates of deposit by time remaining until maturity as of March 31, 1997.
Jumbo certificates of deposit have principal balances of $100,000 or more and
generally have negotiable interest rates.
Certificates
Maturity Period of Deposits
(In thousands)
Three months or less......................... $1,960
Over three through six months................ 2,633
Over six through twelve months............... 2,679
Over twelve months........................... 2,361
-----
Total.................................... $9,633
=====
63
<PAGE>
DEPOSIT FLOW. The following table sets forth the balances (inclusive of
interest credited) and changes in dollar amounts of deposits in the various
types of accounts offered by the Savings Bank between the dates indicated.
<TABLE>
<CAPTION>
At March 31, At June 30,
-------------------------------------------------
1997 1996 1995
------ -------- ---------- --------------------- -----------------
Percent Percent Percent
of Increase of Increase of
Amount Total (Decrease) Amount Total Decrease Amount Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing..................$ 6,282 3.51% $1,388 $ 4,894 2.77% $ 990 $ 3,904 2.26%
NOW checking.......................... 27,261 15.22 735 26,526 15.02 (728) 27,254 15.79
Passbook savings accounts............. 24,004 13.40 (964) 24,969 14.14 (1,582) 26,551 15.39
Money market deposit.................. 16,785 9.37 1,900 14,885 8.43 1,357 13,528 7.84
Fixed-rate certificates which mature:
Within 1 year....................... 77,440 43.22 7,624 69,816 39.53 7,647 62,169 36.03
After 1 year, but within 3 years.... 19,258 10.75 (6,097) 25,354 14.36 (3,294) 28,648 16.60
After 3 years, but within 5 years... 6,652 3.71 (619) 7,271 4.12 745 6,526 3.78
Certificates maturing thereafter.... 1,476 0.82 (1,428) 2,904 1.63 (1,085) 3,989 2.31
---------------- ------- --------- ------- ------- --------- -------
Total............................$179,158 100.00% $2,539 $176,619 100.00% $4,050 $172,569 100.00%
======== ====== ====== ======== ====== ====== ======== ======
</TABLE>
TIME DEPOSITS BY RATES. The following table sets forth the amount of
time deposits in the Savings Bank categorized by rates at the dates indicated.
At
March 31, At June 30,
1997 1996 1995
(In thousands)
2.00 - 3.99%........ $ 952 $ 979 $ 12,936
4.00 - 4.99%........ 21,618 25,383 22,112
5.00 - 5.99%........ 58,210 53,156 44,758
6.00 - 6.99%........ 16,342 16,475 9,868
7.00% and over...... 7,704 9,352 11,658
--------- --------- ---------
Total............... $104,826 $105,345 $101,332
======== ======== ========
TIME DEPOSITS BY MATURITIES. The following table sets forth the amount
of time deposits in the Savings Bank categorized by maturities at March 31,
1997.
<TABLE>
<CAPTION>
Amount Due
After After
One to Two to Three
Less Than Two Three to Four After
One Year Years Years Years 4 Years Total
-------- ----- ----- ----- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
2.00 - 3.99%..... $ 824 $ 37 $ 12 $ 79 $ -- $ 952
4.00 - 4.99%..... 18,593 2,063 403 304 255 21,618
5.00 - 5.99%..... 42,582 4,861 8,012 884 1,871 58,210
6.00 - 6.99%..... 8,811 1,565 1,759 1,689 2,518 16,342
7.00% and over... 6,630 243 303 516 12 7,704
-------- ------- -------- ------- --------- ---------
Total............ $77,440 $8,769 $10,489 $3,472 $ 4,656 $104,826
======= ====== ======= ====== ======== ========
</TABLE>
64
<PAGE>
DEPOSIT ACTIVITY. The following table set forth the deposit activity
of the Savings Bank for the periods
indicated.
<TABLE>
<CAPTION>
Nine Months Ended Year
March 31, Ended June 30,
1997 1996 1996 1995
(In thousands)
<S> <C> <C> <C> <C>
Beginning balance............... $176,619 $172,569 $172,569 $177,107
-------- -------- -------- --------
Net withdrawals
before interest credited...... (2,946) (477) (3,529) (11,328)
Interest credited............... 5,485 5,739 7,579 6,790
-------- -------- -------- --------
Net increase (decrease)
in deposits................... 2,539 5,262 4,050 (4,538)
--------- --------- --------- ----------
Ending balance.................. $179,158 $177,831 $176,619 $172,569
======== ======== ======== ========
</TABLE>
BORROWINGS. The Savings Bank utilizes advances from the FHLB-Seattle to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The FHLB-Seattle functions as a central reserve bank providing
credit for savings associations and certain other member financial institutions.
As a member of the FHLB- Seattle, the Savings Bank is required to own capital
stock in the FHLB-Seattle and is authorized to apply for advances on the
security of such stock and certain of its mortgage loans and other assets
(principally securities that are obligations of, or guaranteed by, the U.S.
Government) provided certain creditworthiness standards have been met. Advances
are made pursuant to several different credit programs. Each credit program has
its own interest rate and range of maturities. Depending on the program,
limitations on the amount of advances are based on the financial condition of
the member institution and the adequacy of collateral pledged to secure the
credit. The Savings Bank is currently authorized to borrow from the FHLB up to
an amount equal to 20% of total assets. The Savings Bank intends to increase the
amount of its FHLB advances in order to fund certain investments as part of its
asset/liability management. For additional information concerning the Savings
Bank's proposed increase in borrowings, See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison of
Financial Condition at March 31, 1997 and June 30, 1996."
The Savings Bank also uses retail repurchase agreements due generally
within one day as a source of funds. At March 31, 1997, retail repurchase
agreements totaling $1.4 million with an average interest rate of 3.5% for the
nine months ended March 31, 1997 and were secured by a pledge of certain FNMA
and FHLMC mortgage-backed and related securities with a book value of $2.0
million. See Note 7 of the Notes to the Consolidated Financial Statements.
65
<PAGE>
The following table sets forth certain information regarding borrowings
by the Savings Bank at the end of and during the periods indicated:
<TABLE>
<CAPTION>
At or For the
Nine Months
Ended At or For the
March 31, Year Ended June 30,
------------------------ -------------------
1997 1996 1996 1995
------ ------ ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Maximum amount of borrowings outstanding at any month end:
Securities sold under agreements
to repurchase................................ $1,459 $1,432 $1,432 $1,956
FHLB advances................................... 2,850 9,100 9,100 11,000
Approximate average short-term borrowings outstanding with respect to:
Securities sold under agreements
to repurchase................................ 1,396 1,215 1,260 1,537
FHLB advances................................. 861 7,939 6,965 4,686
Approximate weighted average rate paid on:
Securities sold under agreements
to repurchase................................ 3.50% 3.57% 3.56% 3.28%
FHLB advances................................... 4.88 6.08 6.21 5.18
</TABLE>
COMPETITION
The Savings Bank faces strong competition in its primary market area
for the attraction of savings deposits (its primary source of lendable funds)
and in the origination of loans. Its most direct competition for savings
deposits has historically come from commercial banks, credit unions, other
thrifts operating in its market area. As of March 31, 1997, there were five
commercial banks and two other thrifts operating in the Savings Bank's primary
market area. Particularly in times of high interest rates, the Savings Bank has
faced additional significant competition for investors' funds from short-term
money market securities and other corporate and government securities. The
Savings Bank's competition for loans comes from commercial banks, thrift
institutions, credit unions and mortgage bankers. Such competition for deposits
and the origination of loans may limit the Savings Bank's growth in the future.
See "RISK FACTORS -- Competition."
SUBSIDIARY ACTIVITIES
The Savings Bank has two subsidiaries, Pioneer Development Corporation
("PDC") and Pioneer Bank Investment Corporation ("PBIC"). PDC's primary interest
is to purchase land sale contracts. PBIC's primary interest is to hold the
Savings Bank's non-conforming assets. At March 31, 1997, the Savings Bank's
equity investment in PDC and PBIC was $1.6 million and $70,000, respectively,
including loans to PDC and PBIC with outstanding balances of $515,000 and
$140,000, respectively, at March 31, 1997.
Federal savings associations generally may invest up to 3% of their
assets in service corporations, provided that at least one-half of any amount in
excess of 1% is used primarily for community, inner-city and community
development projects. The Savings Bank's investment in its subsidiaries did not
exceed these limits at March 31, 1997.
66
<PAGE>
PROPERTIES
The following table sets forth certain information regarding the
Savings Bank's offices at March 31, 1997, all of which are owned.
Approximate
Location Year Opened Square Footage Deposits
(In thousands)
MAIN OFFICE:
2055 First Street 1979 10,700 $54,839
Baker City, Oregon 97814
BRANCH OFFICES:
La Grande Branch 1975 6,758 43,188
1215 Adams Avenue
La Grande, Oregon 97850
La Grande Branch 1988 3,655 9,889
1601 Adams Avenue
La Grande, Oregon 97850
Ontario Branch 1960 3,700 26,334
225 SW Fourth Avenue
Ontario, Oregon 97914
John Day Branch 1973 2,420 13,226
150 West Main Street
John Day, Oregon 97845
Burns Branch 1975 2,567 12,246
77 W. Adams Street
Burns, Oregon 97720
Enterprise Branch 1976 3,360 19,396
205 West Main Street
Enterprise, Oregon 97828
The Savings Bank constructed a new office at 3106 Island Avenue, Island
City (La Grande), Oregon, and relocated its existing office at 1601 Adams
Avenue, La Grande, Oregon, to that location on June 9, 1997. The property at
1601 Adams Avenue is under contract of sale.
The Savings Bank uses the services of an in-house data processing
system monitored by its Senior Vice President/Support Services. At March 31,
1997, the Savings Bank had seven proprietary automated teller machines four of
which were located in existing branches. At March 31, 1997, the net book value
of the Savings Bank's office properties and the Savings Bank's fixtures,
furniture and equipment was $4.6 million or 2.3% of total assets.
67
<PAGE>
PERSONNEL
As of March 31, 1997, the Savings Bank had 93 full-time and six
part-time employees, none of whom is represented by a collective bargaining
unit. The Savings Bank believes its relationship with its employees is good.
LEGAL PROCEEDINGS
Periodically, there have been various claims and lawsuits involving the
Savings Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Savings Bank holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Savings Bank's business. The Savings Bank is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Savings Bank.
MANAGEMENT OF THE HOLDING COMPANY
Directors shall be elected by the stockholders of the Holding Company
for staggered three-year terms, or until their successors are elected and
qualified. The Holding Company's Board of Directors consists of seven persons
divided into three classes, each of which contains approximately one third of
the Board. One class, consisting of Messrs. Dan L. Webber, John A. Lienkaemper
and John Gentry, has a term of office expiring at the first annual meeting of
stockholders; a second class, consisting of Messrs. Albert H. Durgan and Edward
H. Elms, has a term of office expiring at the second annual meeting of
stockholders; and a third class, consisting of Messrs. Stephen R. Whittemore and
Charles Rouse, has a term of office expiring at the third annual meeting of
stockholders.
The executive officers of the Holding Company are elected annually and
hold office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:
Name Position
John Gentry Chairman of the Board
Dan L. Webber President and Chief Executive Officer
Jerry F. Aldape Senior Vice President, Chief Financial Officer and
Corporate Secretary
Nadine Johnson Treasurer
Since the formation of the Holding Company, none of the executive
officers, directors or other personnel have received remuneration from the
Holding Company. For information concerning the principal occupations,
employment and compensation of the directors and executive officers of the
Holding Company during the past five years, see "MANAGEMENT OF THE SAVINGS BANK
- -- Biographical Information."
MANAGEMENT OF THE SAVINGS BANK
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Savings Bank is presently composed of six
members who are elected for terms of three years, approximately one third of
whom are elected annually in accordance with the Bylaws of the Savings Bank. The
executive officers of the Savings Bank are elected annually by the Board of
Directors and serve at the Board's discretion. The following table sets forth
information with respect to the Directors and executive officers of the Savings
Bank.
68
<PAGE>
DIRECTORS
<TABLE>
<CAPTION>
Current
Director Term
Name Age (1) Position with Savings Bank Since Expires
- ---- ------- -------------------------- ------- -------
<S> <C> <C> <C> <C>
John Gentry 49 Chairman of the Board 1992 1998
John A. Lienkaemper 60 Director 1979 1998
Albert H. Durgan 66 Director 1985 1999
Edward H. Elms 49 Director 1986 1999
Stephen R. Whittemore 47 Director 1983 2000
Charles Rouse 51 Director 1991 2000
</TABLE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Name Age (1) Position with Savings Bank
<S> <C> <C>
Dan L. Webber 56 President and Chief Executive Officer
Jerry F. Aldape 48 Senior Vice President/Support Services and Corporate Secretary
Nadine J. Johnson 48 Vice President and Treasurer/Controller
</TABLE>
(1) As of March 31, 1997.
BIOGRAPHICAL INFORMATION
Set forth below is information regarding the Directors and
executive officers of the Savings Bank. Unless otherwise stated, each Director
and executive officer has held his current occupation for the last five years.
There are no family relationships among or between the Directors or executive
officers.
JOHN GENTRY has been President and General Manager of Gentry Ford
Sales, Inc., an automobile dealership located in Ontario, Oregon, since 1985.
Prior to that time, he served as Vice President of that company between 1972 and
1985. Mr. Gentry is a member of the Ontario Chamber of Commerce and the Ontario
Optimist Club. He is a past president of the Oregon Auto Dealers Association and
the Ontario Chamber of Commerce and has previously served on the Ontario Golf
Board and the City Budget Committee.
JOHN A. LIENKAEMPER has been a consultant and U.S. Safety Coordinator
for The Loewen Group, which owns and operates funeral homes, cemeteries, and
crematories, since 1993. Prior to that, Mr. Lienkaemper was a consultant for
Malletta-Verton Partnership, a funeral home operator, from 1989 to 1993. Prior
to 1989, he owned and operated Lienkaemper Chapels located in Nyssa, Ontario and
Vale, Oregon. He is a member of the Lions Club; the Al Kadar Shrine Temple,
Portland, Oregon; the Coast Guard Auxiliary, Ontario, Oregon; Ontario Executive
Group; and the St. Paul Lutheran Church.
ALBERT H. DURGAN is retired from the Savings Bank after 34 years of
service. He served as President of the Savings Bank from 1986 to 1992. He was a
member of the Baker City Rotary Club and the Salvation Army Advisory Council. He
is the past Chairman of the Oregon League of Financial Institutions and a former
member of the University of Oregon Alumni Board.
EDWARD H. ELMS has been the owner of P&E Distributing Company, a
beverage distributor, located in Baker City, Oregon, for 28 years and the
co-owner of Heritage Chevrolet, a car dealership, Baker City, Oregon, since
1996. He is a member of the Baker City Rotary Club, the Baker City Chamber of
Commerce, the Baker City Public Works
69
<PAGE>
Advisory Counsel, the Baker City Elks Lodge, the National Auto Dealers
Association, the Oregon Auto Dealers Association and the Rocky Mountain Elk
Foundation.
STEPHEN R. WHITTEMORE has been the owner of BesTruss, an engineered
roof systems company, since 1996 and has been a partner in Wallowa Lake Tram
since 1983. Prior to that, he was the owner of La Grande Lumber Company, a
distributor of building materials, from 1971 to 1996.
CHARLES ROUSE has been self-employed as a property developer and
manager since 1995. Prior to that, he was the owner of Rouse's Home Furnishings,
Baker City, Oregon, from 1985 to 1995. Mr. Rouse is past Chairman of the Oregon
Trail Preservation Fund Committee and the Baker City Retail Business Recruitment
Committee, Secretary of the Oregon Trail Advisory Council and Chairman of its
Facilities Subcommittee, and a member of the Baker City Progress Board.
DAN L. WEBBER has served as the Savings Bank's President and Chief
Executive Officer since 1993. Prior to his employment with the Savings Bank, Mr.
Webber was a Regional Senior Vice President of Pacific First Bank, Seattle,
Washington, from 1983 to 1992. He is a member of the Historic Baker City Board
of Directors, the Salvation Army Advisory Board, the Baker City Progress Board
and Chairman of the Oregon Savings League.
JERRY F. ALDAPE has served as the Savings Bank's Senior Vice President
since 1994 and Corporate Secretary since 1997. Prior to his employment with the
Savings Bank, Mr. Aldape was Controller/Financial Advisor/Consultant/Personnel
Officer with Insight Distributing, Inc., Sandpoint, Idaho, from 1993 to 1994.
From 1992 to 1993, Mr. Aldape was Personnel Manager and Director of
Non-instructional Services with the Bonner County School District #82,
Sandpoint, Idaho. He was a member the Board of Directors of the Festival at
Sandpoint, the Bonner County Crisis Line and is a member of the Baker/Malheur
Counties Regional Strategies, the Baker City Rotary Club, Pheasants Forever and
Trouts Unlimited.
NADINE J. JOHNSON has served as the Savings Bank's Vice President,
Treasurer/Controller since 1995. Prior to her employment with the Savings Bank,
Ms. Johnson was the Director of Finance with the Oregon Special Olympics,
Portland, Oregon, from 1994 to 1995. From 1989 to 1994, she was an Accounting
Manager with Bank America Business Credit, San Diego, California. Ms. Johnson is
former Chairman of the Finance Committee of the Baker County Community
Development Corp., Finance Coordinator of the Blue Mountain Area Oregon Special
Olympics and former Regional Supervisor of the Southern California Region of
United States Pony Club.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Savings Bank is conducted through meetings and
activities of the Board of Directors and its committees. During the nine months
ended March 31, 1997, the Board of Directors held 9 regular meetings. No
director attended fewer than 75% of the total meetings of the Board of Directors
and of committees on which such director served.
The Personnel Committee, consisting of Directors Rouse (Chairman),
Lienkaemper, Durgan, Whittemore and Elms, is responsible for all personnel
issues, including recommending compensation levels for all employees and senior
management to the Board of Directors. The Personnel Committee meets at least
twice a year and met three times during the nine months ended March 31, 1997.
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The Audit Committee, consisting of Directors Whittemore (Chairman),
Lienkaemper, Elms, Rouse and Mr. Donald F. Guyer, Director Emeritus of the
Savings Bank, receives and reviews all reports prepared by the Savings Bank's
external auditor and the internal audit function. The Audit Committee generally
meets at least four times a year and met four times during the nine months ended
March 31, 1997.
The Compliance/Internal Audit Committee, consisting of Messrs. Aldape
(Chairman), Webber, Reay and Ms. Johnson, and other officers of the Savings Bank
oversees compliance and the internal audit function. The Compliance/Internal
Audit Committee meets at least quarterly and met seven times during the nine
months ended March 31, 1997.
The full Board of Directors acts as a Nominating Committee for the
annual selection of management's nominees for election as directors. The full
Board of Directors met once in its capacity as Nominating Committee during the
nine months ended March 31, 1997.
The Savings Bank also maintains standing Asset/Liability Management,
Investment, Asset Classification, Community Reinvestment Act ("CRA"), Property,
Appraiser Review, Pricing, Donation, EDP Steering and Retirement Trustees
Committees.
DIRECTORS' COMPENSATION
FEES. Currently, directors receive a fee of $1,075 per month and an
additional $125 per month for service on the Board of Directors of PDC. The
Chairman of the Board of the Savings Bank receives an additional directors' fee
of $50 per month. Directors' fees (including fees paid to Directors Emeriti)
totalled $97,000 for the nine months ended March 31, 1997. Following
consummation of the Conversion, directors' fees will continue to be paid by the
Savings Bank to members for service on its Board of Directors. Beginning in the
fourth calendar quarter of 1997, directors of the Holding Company will receive
directors' fees of $1,000 per quarter and the Chairman of the Board of Directors
of the Holding Company will receive a director fee of $1,250 per quarter.
DIRECTOR'S EMERITUS PLAN. The Savings Bank maintains the Directors Plan
which confers director emeritus status on a director who retires at or after
attaining age 70 with 10 or more years of service. Under the Directors Plan, a
director emeritus receives a fee equal to the greater of $800 or 65% of the fee
payable to regular Board members for attendance at monthly Board meetings. The
fee is payable for the life of the director emeritus. An additional feature of
the Directors Plan provides that, in the event of a change in control of the
Holding Company or the Savings Bank (as defined in the Directors Plan), each
active director would be treated as a director emeritus on the effective date of
the change of control. Within 30 days of such date, each director emeritus would
receive a payment equal to seven times the annual fees payable to the director
at the effective time of the change in control. Assuming a change in control had
occurred at March 31, 1997, the aggregate amount payable under the Plan to all
directors would be approximately $348,000.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following information is furnished for
Mr. Webber for the nine months ended March 31, 1997.
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ANNUAL COMPENSATION(1)
<TABLE>
<CAPTION>
NAME AND OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION(2)
<S> <C> <C> <C> <C> <C>
Dan L. Webber 1996 $74,619 $9,750 $ -- $5,625
President and Chief
Executive Officer
</TABLE>
(1) Compensation information for the years ended June 30, 1995 and 1994 has
been omitted as the Savings Bank was not a public company nor a
subsidiary thereof at such time.
(2) Consists of employer 401(k) contributions.
EMPLOYMENT AGREEMENTS. In connection with the Conversion, the Holding
Company and the Savings Bank (collectively, the "Employers") will enter into
employment agreements ("Employment Agreements") with Messrs. Webber and Aldape
(individually, the "Executive") each for terms of 30 months, respectively. Under
the Employment Agreements, the initial salary levels for Messrs. Webber and
Aldape will be $101,460 and $70,176, respectively, which amounts will be paid by
the Savings Bank and may be increased at the discretion of the Board of
Directors or an authorized committee of the Board. On each anniversary of the
commencement date of the Employment Agreements, the term of each agreement may
be extended for an additional year at the discretion of the Board. The agreement
is terminable by the Employers at any time, by the Executive if the Executive is
assigned duties inconsistent with his initial position, duties, responsibilities
and status, or upon the occurrence of certain events specified by federal
regulations. In the event that an Executive's employment is terminated without
cause or upon the Executive's voluntary termination following the occurrence of
an event described in the preceding sentence, the Savings Bank would be required
to honor the terms of the agreement through the expiration of the current term,
including payment of current cash compensation and continuation of employee
benefits.
The Employment Agreements also provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, an Executive is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Holding Company
representing 25% or more of the combined voting power of the Holding Company's
then outstanding securities, (c) the membership of the Board of Directors
changes as the result of a contested election, or (d) shareholders of the
Holding Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Holding Company's assets, or a plan of partial or
complete liquidation.
The maximum value of the severance benefits under the Employment
Agreements is 2.99 times the Executive's average annual compensation during the
five-year period preceding the effective date of the change in control (the
"base amount"). The Employment Agreements provide that the value of the maximum
benefit may be distributed, at the Executive's election, (i) in the form of a
lump sum cash payment equal to 2.99 times the Executive's base amount or (ii) a
combination of a cash payment and continued coverage under the Employers'
health, life and disability programs for a 30-month period following the change
in control, the total value of which does not exceed 2.99 times the Executive's
base amount. Assuming that a change in control had occurred at March 31, 1997
and that each Executive elected to receive a lump sum cash payment, Messrs.
Webber and Aldape would be entitled to payments of approximately $254,000
and$175,000, respectively. Section 280G of the Internal Revenue Code of 1986, as
amended ("Code"), provides that severance payments that equal or exceed three
times the individual's base amount are deemed to be "excess parachute payments"
if they are contingent upon
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a change in control. Individuals receiving excess parachute payments are subject
to a 20% excise tax on the amount of such excess payments, and the Employers
would not be entitled to deduct the amount of such excess payments.
The Employment Agreements restrict each Executive's right to compete
against the Employers for a period of one year from the date of termination of
the agreement if an Executive voluntarily terminates employment, except in the
event of a change in control.
SEVERANCE AGREEMENTS. In connection with the Conversion, the Holding
Company and the Savings Bank will enter into severance agreements with three
senior officers of the Savings Bank who will not receive employment agreements.
On each anniversary of the commencement date of the severance agreements, the
term of each agreement may be extended for an additional year at the discretion
of the Board. It is anticipated that the severance agreements will have an
initial term of eighteen months.
The severance agreements will provide for severance payments and
continuation of employee benefits in the event of involuntary termination of
employment in connection with any change in control of the Employers in the same
manner as provided for in the employment agreements. Severance payments and
benefits also will be provided on a similar basis in connection with a voluntary
termination of employment where, subsequent to a change in control, an officer
is assigned duties inconsistent with his position, duties, responsibilities and
status immediately prior to such change in control. The term "change in control"
is defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Holding Company
representing 25% or more of the combined voting power of the Holding Company's
then outstanding securities, (c) the membership of the Board of Directors
changes as the result of a contested election, or (d) shareholders of the
Holding Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Holding Company's assets, or a plan of partial or
complete liquidation.
Assuming that a change in control had occurred at March 31, 1997, and
excluding any other benefits due under the severance agreements, the aggregate
value of the benefits payable under the severance agreements would have been
approximately $278,000.
EMPLOYEE SEVERANCE COMPENSATION PLAN. In connection with the
Conversion, the Board of Directors of the Savings Bank intends to adopt the
Pioneer Bank Employee Severance Compensation Plan to provide benefits to
eligible employees in the event of a change in control of the Holding Company or
the Savings Bank. Eligible employees are employees with a minimum of two years
of service with the Savings Bank. In general, all employees (except for officers
who enter into separate employment or severance agreements with the Holding
Company and the Savings Bank) will be eligible to participate in the Severance
Plan. Under the Severance Plan, in the event of a change in control of the
Holding Company or the Savings Bank, eligible employees, other than officers of
the Savings Bank, who are terminated or who terminate employment (but only upon
the occurrence of events specified in the Severance Plan) within 12 months of
the effective date of a change in control will be entitled to a payment based on
years of service with the Savings Bank with a minimum payment equal to four
weeks of compensation and a maximum payment equal to 26 weeks of compensation.
However, the maximum payment for any eligible employee would be equal to 26
weeks of their then current compensation. In addition, Vice Presidents of the
Savings Bank and Assistant Vice Presidents/Managers of the Savings Bank would be
eligible to receive a severance payment equal to 12 and nine months,
respectively, of their current compensation. Assuming that a change in control
had occurred at March 31, 1997 and the termination of all eligible employees,
the maximum aggregate payment due under the Severance Plan would be
approximately $911,000.
BENEFITS
GENERAL. The Savings Bank currently pays 100% of the premiums for
medical, life, dental and disability insurance benefits for all employees
who work at least 20 hours per week, subject to certain deductibles.
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401(K) PLAN. The Savings Bank maintains the Pioneer Bank, FSB Profit
Sharing 401(k) Plan ("401(k) Plan") for the benefit of eligible employees of the
Savings Bank. The 401(k) Plan is intended to be a tax-qualified plan under
Sections 401(a) and 401(k) of the Code. Employees of the Savings Bank who have
completed six months of employment are eligible to participate in the 401(k)
Plan. Participants may contribute from 1%-20% of their annual compensation to
the 401(k) Plan through a salary reduction election. The Savings Bank matches
participant contributions on a discretionary basis. In addition to employer
matching contributions, the Savings Bank may contribute a discretionary amount
to the 401(k) Plan in any plan year which is allocated to individual
participants in the proportion that their annual compensation bears to the total
compensation of all participants during the plan year. Participants are at all
times 100% vested in salary reduction contributions. With respect to employer
matching and discretionary employer contributions, participants vest in such
contributions at the rate of 20% per year beginning with the completion of two
years of participation with full vesting occurring after six years of
participation. For the nine months ended March 31, 1997, the Savings Bank
incurred total contribution-related expenses of $92,000 in connection with the
401(k) Plan.
Generally, the investment of 401(k) Plan assets is directed by plan
participants. In connection with the Conversion, the investment options
available to participants will be expanded to include the opportunity to direct
the investment of up to 50% of their 401(k) Plan account balance to purchase
shares of the Common Stock. A participant in the 401(k) Plan who elects to
purchase Common Stock in the Conversion through the 401(k) Plan will receive the
same subscription priority and be subject to the same individual purchase
limitations as if the participant had elected to make such purchase using other
funds. See "THE CONVERSION -- Limitations on Purchases of Shares."
DEFERRED COMPENSATION PLAN. The Savings Bank maintains a
non-tax-qualified deferred compensation plan for the benefit of a select group
of senior management personnel. Officers and employees who are designated as
plan participants may defer up to 100 percent of their base salary, bonuses,
commissions and amounts that would otherwise constitute excess contributions to
the Savings Bank's tax-qualified retirement plan. However, the maximum annual
deferral is limited to $100,000. In addition to employee deferrals, the Savings
Bank may make additional discretionary contributions on behalf of any
participant. All contributions are deemed invested at the direction of the
participant in a series of mutual funds and participants are deemed to earn
whatever income, gains and losses are attributable to such funds. However, the
employees have no direct interest in the underlying mutual funds, and all
benefits under the plan are payable from general assets of the Savings Bank or
from assets contributed to a "Rabbi" trust maintained in connection with the
plan. At termination of employment, the employee may receive benefits under the
plan in the form of a lump sum distribution or in a series of installment
payments over a period not exceeding 10 years.
EMPLOYEE STOCK OWNERSHIP PLAN. The Board of Directors has authorized
the adoption by the Savings Bank of an ESOP for employees of the Savings Bank to
become effective upon the completion of the Conversion. The ESOP is intended to
satisfy the requirements for an employee stock ownership plan under the Code and
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Employees of the Holding Company and the Savings Bank who have been credited
with at least six months of service will be eligible to participate in the ESOP.
In order to fund the purchase of up to 8% of the Common Stock to be
issued in the Conversion, it is anticipated that the ESOP will borrow funds from
the Holding Company. Such loan will equal 100% of the aggregate purchase price
of the Common Stock. The loan to the ESOP will be repaid principally from the
Savings Bank's contributions to the ESOP and dividends payable on Common Stock
held by the ESOP over the anticipated 7-year term of the loan. The interest rate
for the ESOP loan is expected to be the prime rate as published in THE WALL
STREET JOURNAL on the closing date of the Conversion. See "PRO FORMA DATA." To
the extent that the ESOP is unable to acquire 8% of the Common Stock issued in
the Conversion, such additional shares will be acquired following the Conversion
through open market purchases.
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In any plan year, the Savings Bank may make additional discretionary
contributions to the ESOP for the benefit of plan participants in either cash or
shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders or which
constitute authorized but unissued shares or shares held in treasury by Holding
Company. The timing, amount, and manner of such discretionary contributions will
be affected by several factors, including applicable regulatory policies, the
requirements of applicable laws and regulations, and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held
in a suspense account and released on a pro rata basis as the loan is repaid.
Discretionary contributions to the ESOP and shares released from the suspense
account will be allocated among participants on the basis of each participant's
proportional share of total compensation.
Forfeitures will be reallocated among the remaining plan participants.
Participants will vest in their accrued benefits under the ESOP at the
rate of 20% per year, beginning upon the completion of two years of
participation. A participant is fully vested at retirement, in the event of
disability or upon termination of the ESOP. Benefits are distributable upon a
participant's retirement, early retirement, death, disability, or termination of
employment. The Savings Bank's contributions to the ESOP are not fixed, so
benefits payable under the ESOP cannot be estimated.
It is anticipated that Messrs. Webber and Aldape, Hank Winegar, Systems
Engineer of the Savings Bank, and Ms. Johnson will be appointed by the Board of
Directors of the Savings Bank to serve as trustees of the ESOP. Under the ESOP,
the trustees must vote all allocated shares held in the ESOP in accordance with
the instructions of plan participants and unallocated shares and allocated
shares for which no instructions are received must be voted in the same ratio on
any matter as those shares for which instructions are given.
Pursuant to SOP 93-6, compensation expense for a leveraged ESOP is
recorded at the fair market value of the ESOP shares when committed to be
released to participants' accounts. See "PRO FORMA DATA" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Results of Operations -- Comparison of Operating Results for the Nine Months
Ended March 31, 1997 and 1996."
If the ESOP purchases newly issued shares from the Holding Company,
total stockholders' equity would neither increase nor decrease. However, on a
per share basis, stockholders' equity and per share net earnings would decrease
because of the increase in the number of outstanding shares.
The ESOP will be subject to the requirements of ERISA and the
regulations of the IRS and the Department of Labor issued thereunder. The
Savings Bank intends to request a determination letter from the IRS regarding
the tax-qualified status of the ESOP. Although no assurance can be given that a
favorable determination letter will be issued, the Savings Bank expects that a
favorable determination letter will be received by the ESOP.
1997 STOCK OPTION PLAN. The Board of Directors of the Holding Company
intends to adopt the Stock Option Plan and to submit the Stock Option Plan to
the stockholders for approval at a meeting held no earlier than six months
following consummation of the Conversion. Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares is
required prior to the implementation of the Stock Option Plan within one year of
the consummation of the Conversion. The Stock Option Plan will comply with all
applicable regulatory requirements. However, the Stock Option Plan will not be
approved or endorsed by the OTS.
The Stock Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Savings Bank, and to reward officers and key employees for outstanding
performance. The Stock Option Plan will provide for the grant of incentive stock
options ("ISOs") intended to comply with the requirements of Section 422 of the
Code and for nonqualified stock options ("NQOs"). Upon receipt of stockholder
approval of the Stock Option Plan, stock
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options may be granted to key employees of the Holding Company and its
subsidiaries, including the Savings Bank. Unless sooner terminated, the Stock
Option Plan will continue in effect for a period of ten years from the date the
Stock Option Plan is approved by stockholders.
A number of authorized shares of Common Stock equal to 10% of the
number of shares of Common Stock issued in connection with the Conversion will
be reserved for future issuance under the Stock Option Plan (408,250 shares
based on the issuance of 4,082,500 shares at the maximum of the Estimated
Valuation Range). Shares acquired upon exercise of options will be authorized
but unissued shares or treasury shares. In the event of a stock split, reverse
stock split, stock dividend, or similar event, the number of shares of Common
Stock under the Stock Option Plan, the number of shares to which any award
relates and the exercise price per share under any option may be adjusted by the
Board to reflect the increase or decrease in the total number of shares of
Common Stock outstanding.
The Stock Option Plan will be administered and interpreted by the Board
of Directors. Subject to applicable OTS regulations, the Board will determine
which nonemployee directors, officers and key employees will be granted options,
whether, in the case of officers and employees, such options will be ISOs or
NQOs, the number of shares subject to each option, and the exercisability of
such options. All options granted to nonemployee directors will be NQOs. The per
share exercise price of all options will equal at least 100% of the fair market
value of a share of Common Stock on the date the option is granted.
Under current OTS regulations, if the Stock Option Plan is implemented
within one year of the consummation of the Conversion, (i) no officer or
employees could receive an award of options covering in excess of 25%, (ii) no
nonemployee director could receive in excess of 5% and (iii) nonemployee
directors, as a group, could not receive in excess of 30% of the number of
shares reserved for issuance under the Stock Option Plan.
It is anticipated that all options granted under the Stock Option Plan
will be granted subject to a vesting schedule whereby the options become
exercisable over a specified period following the date of grant. Under OTS
regulations, if the Stock Option plan is implemented within the first year
following consummation of the Conversion the minimum vesting period will be five
years. All unvested options will be immediately exercisable in the event of the
recipient's death or disability. Unvested options also will be exercisable
following a change in control (as defined in the Stock Option Plan) of the
Holding Company or the Savings Bank to the extent authorized or not prohibited
by applicable law or regulations. OTS regulations currently provide that if the
Stock Option Plan is implemented prior to the first anniversary of the
Conversion, vesting may not be accelerated upon a change in control of the
Holding Company or the Savings Bank.
Each stock option that is awarded to an officer or key employee will
remain exercisable at any time on or after the date it vests through the earlier
to occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Committee. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
nonemployee director's service on the Board. All stock options are
nontransferable except by will or the laws of descent or distribution.
Under current provisions of the Code, the federal tax treatment of ISOs
and NQOs is different. With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates. A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
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requirements. With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company. However, upon the exercise of an NQO, the difference between
the fair market value of the Common Stock on the date of exercise and the option
exercise price generally will be treated as compensation to the optionee upon
exercise, and the Holding Company will be entitled to a compensation expense
deduction in the amount of income realized by the optionee.
Although no specific award determinations have been made at this time,
the Holding Company and the Savings Bank anticipate that if stockholder approval
is obtained it would provide awards to its directors, officers and employees to
the extent and under terms and conditions permitted by applicable regulations.
The size of individual awards will be determined prior to submitting the Stock
Option Plan for stockholder approval, and disclosure of anticipated awards will
be included in the proxy materials for such meeting.
MANAGEMENT RECOGNITION PLAN. Following the Conversion, the Board of
Directors of the Holding Company intends to adopt an MRP for officers,
employees, and nonemployee directors of the Holding Company and the Savings
Bank, subject to shareholder approval. The MRP will enable the Holding Company
and the Savings Bank to provide participants with a proprietary interest in the
Holding Company as an incentive to contribute to the success of the Holding
Company and the Savings Bank. The MRP will comply with all applicable regulatory
requirements. However, the MRP will not be approved or endorsed by the OTS.
Under current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares is required prior to the implementation of the MRP
within one year of the consummation of the Conversion.
The MRP expects to acquire a number of shares of Common Stock equal to
4% of the Common Stock issued in connection with the Conversion (163,300 shares
based on the issuance of 4,082,500 shares in the Conversion at the maximum of
the Estimated Valuation Range). Such shares will be acquired on the open market,
if available, with funds contributed by the Holding Company or the Savings Bank
to a trust which the Holding Company may establish in conjunction with the MRP
("MRP Trust") or from authorized but unissued shares or treasury shares of the
Holding Company.
The Board of Directors of the Holding Company will administer the MRP,
members of which will also serve as trustees of the MRP Trust, if formed. The
trustees will be responsible for the investment of all funds contributed by the
Holding Company or the Savings Bank to the MRP Trust. The Board of Directors of
the Holding Company may terminate the MRP at any time and, upon termination, all
unallocated shares of Common Stock will revert to the Holding Company.
Shares of Common Stock granted pursuant to the MRP will be in the form
of restricted stock payable ratably over a specified vesting period following
the date of grant. During the period of restriction, all shares will be held in
escrow by the Holding Company or by the MRP Trust. Under OTS regulations, if the
MRP is implemented within the first year following consummation of the
Conversion, the minimum vesting period will be five years. All unvested MRP
awards will vest in the event of the recipient's death or disability. Unvested
MRP awards will also vest following a change in control (as defined in the MRP)
of the Holding Company or the Savings Bank to the extent authorized or not
prohibited by applicable law or regulations. OTS regulations currently provide
that, if the MRP is implemented prior to the first anniversary of the
Conversion, vesting may not be accelerated upon a change in control of the
Holding Company or the Savings Bank.
A recipient of an MRP award in the form of restricted stock generally
will not recognize income upon an award of shares of Common Stock, and the
Holding Company will not be entitled to a federal income tax deduction, until
the termination of the restrictions. Upon such termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time and the Holding Company will be entitled to a deduction
in the same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions. In that
event, the
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Holding Company will be entitled to a deduction in such year and in the same
amount. Any gain or loss recognized by the recipient upon subsequent disposition
of the stock will be either a capital gain or capital loss.
Although no specific award determinations have been made at this time,
the Holding Company and the Savings Bank anticipate that if stockholder approval
is obtained it would provide awards to its directors, officers and employees to
the extent and under terms and conditions permitted by applicable regulations.
Under current OTS regulations, if the MRP is implemented within one year of the
consummation of the Conversion, (i) no officer or employees could receive
an award covering in excess of 25%, (ii) no nonemployee director could receive
in excess of 5% and (iii) nonemployee directors, as a group, could not receive
in excess of 30% of the number of shares reserved for issuance under the MRP.
The size of individual awards will be determined prior to submitting the MRP for
stockholder approval, and disclosure of anticipated awards will be included in
the proxy materials for such meeting.
TRANSACTIONS WITH THE SAVINGS BANK
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons (unless the loan or
extension of credit is made under a benefit program generally available to all
other employees and does not give preference to any insider over any other
employee) and must not involve more than the normal risk of repayment or present
other unfavorable features. The Savings Bank's policy is not to make any new
loans or extensions of credit to the Savings Bank's executive officers and
directors at different rates or terms than those offered to the general public.
In addition, loans made to a director or executive officer in an amount that,
when aggregated with the amount of all other loans to such person and his
related interests, are in excess of the greater of $25,000 or 5% of the Savings
Bank's capital and surplus (up to a maximum of $500,000) must be approved in
advance by a majority of the disinterested members of the Board of Directors.
See "REGULATION -- Federal Regulation of Savings Banks -- Transactions with
Affiliates." The aggregate amount of loans by the Savings Bank to its executive
officers and directors was $326,000 at March 31, 1997, or approximately 0.6% of
pro forma stockholders' equity (based on the issuance of the maximum of the
Estimated Valuation Range).
REGULATION
GENERAL
The Savings Bank is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer of
its deposits. The activities of federal savings institutions are governed by the
Home Owners' Loan Act, as amended ("HOLA") and, in certain respects, the Federal
Deposit Insurance Act ("FDIA") and the regulations issued by the OTS and the
FDIC to implement these statutes. These laws and regulations delineate the
nature and extent of the activities in which federal savings associations may
engage. Lending activities and other investments must comply with various
statutory and regulatory capital requirements. In addition, the Savings Bank's
relationship with its depositors and borrowers is also regulated to a great
extent, especially in such matters as the ownership of deposit accounts and the
form and content of the Savings Bank's mortgage documents. The Savings Bank must
file reports with the OTS and the FDIC concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other financial
institutions. There are periodic examinations by the OTS and the FDIC to review
the Savings Bank's compliance with various regulatory requirements. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such policies, whether by the OTS, the FDIC or Congress, could have a
material adverse impact on the Holding Company, the Savings Bank and their
operations. The Holding Company, as a savings and loan holding company, will
also be required to file certain
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reports with, and otherwise comply with the rules and regulations of, the OTS
and the Securities and Exchange Commission ("SEC").
FEDERAL REGULATION OF SAVINGS BANKS
OFFICE OF THRIFT SUPERVISION. The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the Treasury.
The OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
FEDERAL HOME LOAN BANK SYSTEM. The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to: supervise the FHLBs; ensure that the FHLBs
carry out their housing finance mission; ensure that the FHLBs remain adequately
capitalized and able to raise funds in the capital markets; and ensure that the
FHLBs operate in a safe and sound manner. The Savings Bank, as a member of the
FHLB-Seattle, is required to acquire and hold shares of capital stock in the
FHLB-Seattle in an amount equal to the greater of (i) 1.0% of the aggregate
outstanding principal amount of residential mortgage loans, home purchase
contracts and similar obligations at the beginning of each year, or (ii) 1/20 of
its advances (borrowings) from the FHLB-Seattle. The Savings Bank is in
compliance with this requirement with an investment in FHLB-Seattle stock of
$2.8 million at March 31, 1997. Among other benefits, the FHLB-Seattle provides
a central credit facility primarily for member institutions. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes advances to members in accordance with policies and
procedures established by the FHFB and the Board of Directors of the
FHLB-Seattle.
FEDERAL DEPOSIT INSURANCE CORPORATION. The FDIC is an independent
federal agency established originally to insure the deposits, up to prescribed
statutory limits, of federally insured banks and to preserve the safety and
soundness of the banking industry. The FDIC maintains two separate insurance
funds: the BIF and the SAIF. As insurer of the Savings Bank's deposits, the FDIC
has examination, supervisory and enforcement authority over all savings
associations.
The Savings Bank's deposit accounts are insured by the FDIC under the
SAIF to the maximum extent permitted by law. The Savings Bank pays deposit
insurance premiums to the FDIC based on a risk-based assessment system
established by the FDIC for all SAIF-member institutions. Under applicable
regulations, institutions are assigned to one of three capital groups that are
based solely on the level of an institution's capital ("well capitalized,"
"adequately capitalized" or "undercapitalized"), which are defined in the same
manner as the regulations establishing the prompt corrective action system under
the FDIA as discussed below. The matrix so created results in nine assessment
risk classifications, with rates that until September 30, 1996 ranged from 0.23%
for well capitalized, financially sound institutions with only a few minor
weaknesses to 0.31% for undercapitalized institutions that pose a substantial
risk of loss to the SAIF unless effective corrective action is taken. The
Savings Bank's assessments expensed for the nine months ended March 31, 1997
equaled $1.4 million (including the FDIC SAIF assessment of $1.1 million).
Pursuant to the Deposit Insurance Fund ("DIF") Act, which was enacted
on September 30, 1996, the FDIC imposed a special assessment on each depository
institution with SAIF-assessable deposits which resulted in the SAIF achieving
its designated reserve ratio. In connection therewith, the FDIC reduced the
assessment schedule for SAIF members, effective January 1, 1997, to a range of
0% to 0.27%, with most institutions, including the Savings Bank, paying 0%. This
assessment schedule is the same as that for the BIF, which reached its
designated reserve ratio in 1995. In addition, since January 1, 1997, SAIF
members are charged an assessment of 0.065% of SAIF-assessable deposits for the
purpose of paying interest on the obligations issued by the Financing
Corporation ("FICO") in the 1980s to help fund the thrift industry cleanup.
BIF-assessable deposits will be charged an assessment to help pay interest on
the FICO bonds at a rate of approximately .013% until the earlier of December
31, 1999 or the date upon
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which the last savings association ceases to exist, after which time the
assessment will be the same for all insured deposits.
The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date. The DIF Act contemplates the
development of a common charter for all federally chartered depository
institutions and the abolition of separate charters for national banks and
federal savings associations. It is not known what form the common charter may
take and what effect, if any, the adoption of a new charter would have on the
operation of the Savings Bank.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Savings Bank.
LIQUIDITY REQUIREMENTS. Under OTS regulations, each savings institution
is required to maintain an average daily balance of liquid assets (cash, certain
time deposits and savings accounts, bankers' acceptances, and specified U.S.
Government, state or federal agency obligations and certain other investments)
equal to a monthly average of not less than a specified percentage (currently
5.0%) of its net withdrawable accounts plus short-term borrowings. OTS
regulations also require each savings institution to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently 1.0%)
of the total of its net withdrawable savings accounts and borrowings payable in
one year or less. Monetary penalties may be imposed for failure to meet
liquidity requirements. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
PROMPT CORRECTIVE ACTION. Each federal banking agency is required to
implement a system of prompt corrective action for institutions that it
regulates. The federal banking agencies have promulgated substantially similar
regulations to implement this system of prompt corrective action. Under the
regulations, an institution shall be deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-based
capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not
subject to specified requirements to meet and maintain a specific capital level
for any capital measure; (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of
4.0% or more and a leverage ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a total risk-based capital ratio that is less than
8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a leverage
ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a
leverage ratio that is less than 3.0%; and (v) "critically undercapitalized" if
it has a ratio of tangible equity to total assets that is equal to or less than
2.0%.
A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity. The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.
An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized,
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significantly undercapitalized or critically undercapitalized. Immediately upon
becoming undercapitalized, an institution shall become subject to various
mandatory and discretionary restrictions on its operations.
At March 31, 1997, the Savings Bank was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.
STANDARDS FOR SAFETY AND SOUNDNESS. The FDIA requires the federal
banking regulatory agencies to prescribe, by regulation, standards for all
insured depository institutions relating to: (i) internal controls, information
systems and internal audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate risk exposure; (v) asset growth; and (vi)
compensation, fees and benefits. The federal banking agencies recently adopted
final regulations and Interagency Guidelines Prescribing Standards for Safety
and Soundness ("Guidelines"). The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at insured depository institutions before capital becomes impaired. If the OTS
determines that the Savings Bank fails to meet any standard prescribed by the
Guidelines, the agency may require the Savings Bank to submit to the agency an
acceptable plan to achieve compliance with the standard. OTS regulations
establish deadlines for the submission and review of such safety and soundness
compliance plans.
QUALIFIED THRIFT LENDER TEST. All savings associations are required to
meet a qualified thrift lender ("QTL") test to avoid certain restrictions on
their operations. A savings institution that fails to become or remain a QTL
shall either become a national bank or be subject to the following restrictions
on its operations: (i) the association may not make any new investment or engage
in activities that would not be permissible for national banks; (ii) the
association may not establish any new branch office where a national bank
located in the savings institution's home state would not be able to establish a
branch office; (iii) the association shall be ineligible to obtain new advances
from any FHLB; and (iv) the payment of dividends by the association shall be
subject to the statutory and regulatory dividend restrictions applicable to
national banks. Also, beginning three years after the date on which the savings
institution ceases to be a QTL, the savings institution would be prohibited from
retaining any investment or engaging in any activity not permissible for a
national bank and would be required to repay any outstanding advances to any
FHLB. In addition, within one year of the date on which a savings association
controlled by a company ceases to be a QTL, the company must register as a bank
holding company and become subject to the rules applicable to such companies. A
savings institution may requalify as a QTL if it thereafter complies with the
QTL test.
Currently, the QTL test requires that either an institution qualify as
a domestic building and loan association under the Code or that 65% of an
institution's "portfolio assets" (as defined) consist of certain housing and
consumer-related assets on a monthly average basis in nine out of every 12
months. Assets that qualify without limit for inclusion as part of the 65%
requirement are loans made to purchase, refinance, construct, improve or repair
domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards. In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by Federal Home Loan Mortgage Corporation or
FNMA. Portfolio assets consist of total assets minus the sum of (i) goodwill and
other intangible assets, (ii) property used by the savings institution to
conduct its business, and (iii) liquid assets up to 20% of the institution's
total assets. At March 31, 1997, the qualified thrift investments of the Savings
Bank were approximately 87.5% of its portfolio assets.
CAPITAL REQUIREMENTS. Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital. Savings associations must meet all of the standards in order
to comply with the capital requirements. The Holding Company is not subject to
any minimum capital requirements.
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OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital is
defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and nonincludable subsidiaries. An institution
that fails to meet the core capital requirement would be required to file with
the OTS a capital plan that details the steps they will take to reach
compliance. In addition, the OTS's prompt corrective action regulation provides
that a savings institution that has a leverage ratio of less than 4% (3% for
institutions receiving the highest CAMEL examination rating) will be deemed to
be "undercapitalized" and may be subject to certain restrictions. See "--
Federal Regulation of Savings Banks -- Prompt Corrective Action."
As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. The OTS has proposed that only those savings associations rated
a composite one (the highest rating) under the CAMEL rating system for savings
associations will be permitted to operate at or near the regulatory minimum
leverage ratio of 3%. All other savings associations will be required to
maintain a minimum leverage ratio of 4% to 5%. The OTS will assess each
individual savings association through the supervisory process on a case-by-case
basis to determine the applicable requirement. No assurance can be given as to
the final form of any such regulation, the date of its effectiveness or the
requirement applicable to the Savings Bank.
Savings associations also must maintain "tangible capital" not less
than 1.5% of the Savings Bank's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights.
Each savings institution must maintain total risk-based capital equal
to at least 8% of risk-weighted assets. Total risk-based capital consists of the
sum of core and supplementary capital, provided that supplementary capital
cannot exceed core capital, as previously defined. Supplementary capital
includes (i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt and mandatory convertible
subordinated debt, (ii) maturing capital instruments such as subordinated debt,
intermediate-term preferred stock and mandatory convertible subordinated debt,
subject to an amortization schedule, and (iii) general valuation loan and lease
loss allowances up to 1.25% of risk-weighted assets.
The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not included
for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due. Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight. Consumer, commercial, home equity and residential construction loans are
assigned a 100% risk weight, as are nonqualifying residential mortgage loans and
that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio. The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned to that category.
These products are then totalled to arrive at total risk-weighted assets.
Off-balance sheet items are included in risk-weighted assets by converting them
to an approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital
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for purposes of calculating their risk-based capital requirements. A savings
association's interest rate risk is measured by the decline in the net portfolio
value of its assets (i.e., the difference between incoming and outgoing
discounted cash flows from assets, liabilities and off-balance sheet contracts)
that would result from a hypothetical 200 basis point increase or decrease in
market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS. A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's total
capital in calculating compliance with its risk-based capital requirement. Under
the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. A savings association with assets of less than
$300 million and risk-based capital ratios in excess of 12% is not subject to
the interest rate risk component, unless the OTS determines otherwise. The rule
also provides that the Director of the OTS may waive or defer an association's
interest rate risk component on a case-by-case basis. Under certain
circumstances, a savings association may request an adjustment to its interest
rate risk component if it believes that the OTS-calculated interest rate risk
component overstates its interest rate risk exposure. In addition, certain
"well-capitalized" institutions may obtain authorization to use their own
interest rate risk model to calculate their interest rate risk component in lieu
of the OTS-calculated amount. The OTS has postponed the date that the component
will first be deducted from an institution's total capital.
See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE" for a
table that sets forth in terms of dollars and percentages the OTS tangible, core
and risk-based capital requirements, the Savings Bank's historical amounts and
percentages at March 31, 1997 and pro forma amounts and percentages based upon
the assumptions stated therein.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Savings Bank to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends. The regulation utilizes a three-tiered approach which permits various
levels of distributions based primarily upon a savings association's capital
level.
A Tier 1 savings association has capital in excess of its fully
phased-in capital requirement (both before and after the proposed capital
distribution). A Tier 1 savings association may make (without application but
upon prior notice to, and no objection made by, the OTS) capital distributions
during a calendar year up to 100% of its net income to date during the calendar
year plus one-half its surplus capital ratio (i.e., the amount of capital in
excess of its fully phased-in requirement) at the beginning of the calendar year
or the amount authorized for a Tier 2 association. Capital distributions in
excess of such amount require advance notice to the OTS. A Tier 2 savings
association has capital equal to or in excess of its minimum capital requirement
but below its fully phased-in capital requirement (both before and after the
proposed capital distribution). Such an association may make (without
application) capital distributions up to an amount equal to 75% of its net
income during the previous four quarters depending on how close the association
is to meeting its fully phased-in capital requirement. Capital distributions
exceeding this amount require prior OTS approval. A Tier 3 savings association
has capital below the minimum capital requirement (either before or after the
proposed capital distribution). A Tier 3 savings association may not make any
capital distributions without prior approval from the OTS.
The Savings Bank currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year.
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LOANS TO ONE BORROWER. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of the Savings Bank's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such loan
is secured by readily-marketable collateral, which is defined to include certain
financial instruments and bullion. The OTS by regulation has amended the loans
to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower in
additional amounts under circumstances limited essentially to loans to develop
or complete residential housing units. At March 31, 1997, the Savings Bank's
limit on loans to one borrower was $3.2 million. At March 31, 1997, the Savings
Bank's largest aggregate committed loan relationship to one borrower was $1.3
million, of which $900,000 was outstanding.
ACTIVITIES OF ASSOCIATIONS AND THEIR SUBSIDIARIES. When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide the
information each agency may, by regulation, require. Savings associations also
must conduct the activities of subsidiaries in accordance with existing
regulations and orders.
The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
TRANSACTIONS WITH AFFILIATES. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA. Generally, Sections 23A and 23B: (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions. Any loan or extension of credit by the Savings Bank to an
affiliate must be secured by collateral in accordance with Section 23A.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B. Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve Board, as is currently the case with respect to all
FDIC- insured banks. The Savings Bank has not been significantly affected by the
rules regarding transactions with affiliates.
The Savings Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder. Among other things, these regulations generally require
that such loans be made on terms and conditions substantially the same as those
offered to unaffiliated individuals and not involve more than the normal risk of
repayment. Generally, Regulation O also places individual and aggregate limits
on the amount of loans the Savings Bank may make to such persons based, in part,
on the Savings Bank's capital position, and requires
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certain board approval procedures to be followed. The OTS regulations, with
certain minor variances, apply Regulation O to savings institutions.
COMMUNITY REINVESTMENT ACT. Under the federal CRA, all
federally-insured financial institutions have a continuing and affirmative
obligation consistent with safe and sound operations to help meet all the credit
needs of its delineated community. The CRA does not establish specific lending
requirements or programs nor does it limit an institution's discretion to
develop the types of products and services that it believes are best suited to
meet all the credit needs of its delineated community. The CRA requires the
federal banking agencies, in connection with regulatory examinations, to assess
an institution's record of meeting the credit needs of its delineated community
and to take such record into account in evaluating regulatory applications to
establish a new branch office that will accept deposits, relocate an existing
office, or merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution, among others. The
CRA requires public disclosure of an institution's CRA rating. The Savings Bank
received a "satisfactory" rating as a result of its latest evaluation.
REGULATORY AND CRIMINAL ENFORCEMENT PROVISIONS. The OTS has primary
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful actions likely to have an adverse effect on
an insured institution. Formal enforcement action may range from the issuance of
a capital directive or cease and desist order to removal of officers or
directors, receivership, conservatorship or termination of deposit insurance.
Civil penalties cover a wide range of violations and can amount to $27,500 per
day, or $1.1 million per day in especially egregious cases. Under the FDIA, the
FDIC has the authority to recommend to the Director of the OTS that enforcement
action be taken with respect to a particular savings institution. If action is
not taken by the Director, the FDIC has authority to take such action under
certain circumstances. Federal law also establishes criminal penalties for
certain violations.
SAVINGS AND LOAN HOLDING COMPANY REGULATIONS
HOLDING COMPANY ACQUISITIONS. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof. They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any savings association not a subsidiary of such savings and loan
holding company, unless the acquisition is approved by the OTS.
HOLDING COMPANY ACTIVITIES. As a unitary savings and loan holding
company, the Holding Company generally is not subject to activity restrictions
under the HOLA. If the Holding Company acquires control of another savings
association as a separate subsidiary other than in a supervisory acquisition, it
would become a multiple savings and loan holding company. There generally are
more restrictions on the activities of a multiple savings and loan holding
company than on those of a unitary savings and loan holding company. The HOLA
provides that, among other things, no multiple savings and loan holding company
or subsidiary thereof which is not an insured association shall commence or
continue for more than two years after becoming a multiple savings and loan
association holding company or subsidiary thereof, any business activity other
than: (i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
insured institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by regulation as of March 5,
1987 to be engaged in by multiple holding companies or (vii) those activities
authorized by the Federal Reserve Board as permissible for bank holding
companies, unless the OTS by regulation, prohibits or limits such activities for
savings and loan holding companies. Those activities described in (vii) above
also must be approved by the OTS prior to being engaged in by a multiple savings
and loan holding company.
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QUALIFIED THRIFT LENDER TEST. The HOLA provides that any savings and
loan holding company that controls a savings association that fails the QTL
test, as explained under "-- Federal Regulation of Savings Banks -- Qualified
Thrift Lender Test," must, within one year after the date on which the
association ceases to be a QTL, register as and be deemed a bank holding company
subject to all applicable laws and regulations.
TAXATION
FEDERAL TAXATION
GENERAL. The Holding Company and the Savings Bank will report their
income on a fiscal year basis using the accrual method of accounting and will be
subject to federal income taxation in the same manner as other corporations with
some exceptions, including particularly the Savings Bank's reserve for bad debts
discussed below. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to the Savings Bank or the Holding Company.
BAD DEBT RESERVE. Historically, savings institutions such as the
Savings Bank which met certain definitional tests primarily related to their
assets and the nature of their business ("qualifying thrift") were permitted to
establish a reserve for bad debts and to make annual additions thereto, which
may have been deducted in arriving at their taxable income. The Savings Bank's
deductions with respect to "qualifying real property loans," which are generally
loans secured by certain interest in real property, were computed using an
amount based on the Savings Bank's actual loss experience, or a percentage equal
to 8% of the Savings Bank's taxable income, computed with certain modifications
and reduced by the amount of any permitted additions to the non-qualifying
reserve. Due to the Savings Bank's loss experience, the Savings Bank generally
recognized a bad debt deduction equal to 8% of taxable income.
In August 1996, the provisions repealing the current thrift bad debt
rules were passed by Congress as part of "The Small Business Job Protection Act
of 1996." The new rules eliminate the 8% of taxable income method for deducting
additions to the tax bad debt reserves for all thrifts for tax years beginning
after December 31, 1995. These rules also require that all institutions
recapture all or a portion of their bad debt reserves added since the base year
(last taxable year beginning before January 1, 1988). The Savings Bank has
previously recorded a deferred tax liability equal to the bad debt recapture and
as such the new rules will have no effect on the net income or federal income
tax expense. For taxable years beginning after December 31, 1995, the Savings
Bank's bad debt deduction will be determined under the experience method using a
formula based on actual bad debt experience over a period of years or, if the
Savings Bank is a "large" association (assets in excess of $500 million) on the
basis of net charge-offs during the taxable year. The new rules allow an
institution to suspend bad debt reserve recapture for the 1996 and 1997 tax
years if the institution's lending activity for those years is equal to or
greater than the institutions average mortgage lending activity for the six
taxable years preceding 1996 adjusted for inflation. For this purpose, only home
purchase or home improvement loans are included and the institution can elect to
have the tax years with the highest and lowest lending activity removed from the
average calculation. If an institution is permitted to postpone the reserve
recapture, it must begin its six year recapture no later than the 1998 tax year.
The unrecaptured base year reserves will not be subject to recapture as long as
the institution continues to carry on the business of banking. In addition, the
balance of the pre- 1988 bad debt reserves continue to be subject to provisions
of present law referred to below that require recapture in the case of certain
excess distributions to shareholders.
DISTRIBUTIONS. To the extent that the Savings Bank makes "nondividend
distributions" to the Holding Company, such distributions will be considered to
result in distributions from the balance of its bad debt reserve as of December
31, 1987 (or a lesser amount if the Savings Bank's loan portfolio decreased
since December 31, 1987) and then from the supplemental reserve for losses on
loans ("Excess Distributions"), and an amount based on the Excess Distributions
will be included in the Savings Bank's taxable income. Nondividend distributions
include distributions in excess of the Savings Bank's current and accumulated
earnings and profits, distributions in redemption of stock and distributions in
partial or complete liquidation. However, dividends paid out of the Savings
Bank's current or accumulated earnings and profits, as calculated for federal
income tax purposes, will not be
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considered to result in a distribution from the Savings Bank's bad debt reserve.
The amount of additional taxable income created from an Excess Distribution is
an amount that, when reduced by the tax attributable to the income, is equal to
the amount of the distribution. Thus, if, after the Conversion, the Savings Bank
makes a "nondividend distribution," then approximately one and one-half times
the Excess Distribution would be includable in gross income for federal income
tax purposes, assuming a 34% corporate income tax rate (exclusive of state and
local taxes). See "REGULATION" and "DIVIDEND POLICY" for limits on the payment
of dividends by the Savings Bank. The Savings Bank does not intend to pay
dividends that would result in a recapture of any portion of its tax bad debt
reserve.
CORPORATE ALTERNATIVE MINIMUM TAX. The Code imposes a tax on
alternative minimum taxable income ("AMTI") at a rate of 20%. The excess of the
tax bad debt reserve deduction using the percentage of taxable income method
over the deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI. In addition,
only 90% of AMTI can be offset by net operating loss carryovers. AMTI is
increased by an amount equal to 75% of the amount by which the Savings Bank's
adjusted current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses). For taxable years
beginning after December 31, 1986, and before January 1, 1996, an environmental
tax of 0.12% of the excess of AMTI (with certain modification) over $2.0 million
is imposed on corporations, including the Savings Bank, whether or not an
Alternative Minimum Tax is paid.
DIVIDENDS-RECEIVED DEDUCTION. The Holding Company may exclude from its
income 100% of dividends received from the Savings Bank as a member of the same
affiliated group of corporations. The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Savings Bank will not file a consolidated
tax return, except that if the Holding Company or the Savings Bank owns more
than 20% of the stock of a corporation distributing a dividend, then 80% of any
dividends received may be deducted.
AUDITS. The Savings Bank's federal income tax returns have not been
audited within the past five years.
STATE TAXATION
The Savings Bank is subject to an Oregon corporate excise tax at a
statutory rate of 6.6% of income. The Savings Bank's state income tax returns
have not been audited during the past five years.
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THE CONVERSION
THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO ITS APPROVAL BY
THE MEMBERS OF THE SAVINGS BANK ENTITLED TO VOTE THEREON AND TO THE SATISFACTION
OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL
DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION.
GENERAL
On February 25, 1997, the Board of Directors of the Savings Bank
unanimously adopted, and on July 22, 1997 subsequently amended, the Plan of
Conversion, pursuant to which the Savings Bank will be converted from a
federally chartered mutual savings bank to a federally chartered stock savings
bank to be held as a wholly-owned subsidiary of the Holding Company, a newly
formed Oregon corporation. THE FOLLOWING DISCUSSION OF THE PLAN OF CONVERSION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF CONVERSION, WHICH IS
ATTACHED AS EXHIBIT A TO THE SAVINGS BANK'S PROXY STATEMENT AND IS AVAILABLE TO
MEMBERS OF THE SAVINGS BANK UPON REQUEST. The Plan of Conversion is also filed
as an exhibit to the Registration Statement. See "ADDITIONAL INFORMATION." The
OTS has approved the Plan of Conversion subject to its approval by the members
of the Savings Bank entitled to vote on the matter at a Special Meeting called
for that purpose to be held on September 23, 1997, and subject to the
satisfaction of certain other conditions imposed by the OTS in its approval.
If the Board of Directors of the Savings Bank decides for any reason,
such as possible delays resulting from overlapping regulatory processing or
policies or conditions that could adversely affect the Savings Bank's or the
Holding Company's ability to consummate the Conversion and transact its business
as contemplated herein and in accordance with the Savings Bank's operating
policies, at any time prior to the issuance of the Common Stock, not to use the
holding company form of organization in implementing the Conversion, the Plan of
Conversion will be amended to not use the holding company form of organization
in the Conversion. In the event that such a decision is made, the Savings Bank
will promptly refund all subscriptions or orders received together with accrued
interest, will withdraw the Holding Company's registration statement from the
SEC and will take all steps necessary to complete the Conversion and proceed
with a new offering without the Holding Company, including filing any necessary
documents with the OTS. In such event, and provided there is no regulatory
action, directive or other consideration upon which basis the Savings Bank
determines not to complete the Conversion, the Savings Bank will issue and sell
the common stock of the Savings Bank. There can be no assurance that the OTS
would approve the Conversion if the Savings Bank decided to proceed without the
Holding Company. The following description of the Plan of Conversion assumes
that a holding company form of organization will be utilized in the Conversion.
In the event that a holding company form of organization is not utilized, all
other pertinent terms of the Plan of Conversion as described below will apply to
the Conversion of the Savings Bank from mutual to stock form of organization and
the sale of the Savings Bank's common stock.
The Conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the Savings
Bank. Pursuant to the Plan of Conversion, 3,017,500 to 4,082,500 shares of
Common Stock are being offered for sale by the Holding Company at the Purchase
Price of $10.00 per share. As part of the Conversion, the Savings Bank will
issue all of its newly issued common stock (1,000 shares) to the Holding Company
in exchange for 50% of the net proceeds from the sale of Common Stock by the
Holding Company.
The Plan of Conversion provides generally that: (i) the Savings Bank
will convert from a federally chartered mutual savings bank to a federally
chartered stock savings bank; (ii) the Common Stock will be offered by the
Holding Company in the Subscription Offering to persons having Subscription
Rights and in a Direct Community Offering to certain members of the general
public, with preference given to natural persons and trusts of natural persons
residing in the Local Community; (iii) if necessary, shares of Common Stock not
subscribed for in the Subscription and Direct Community Offering will be offered
to certain members of the general public in a Syndicated Community Offering
through a syndicate of registered broker-dealers pursuant to selected dealers
agreements; and (iv) the Holding Company will purchase all of the capital stock
of the Savings Bank to be issued
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in connection with the Conversion. The Conversion will be effected only upon
completion of the sale of at least $30,175,000 of Common Stock to be issued
pursuant to the Plan of Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of December 31, 1995); (ii) the Savings Bank's ESOP; (iii)
Supplemental Eligible Account Holders (depositors with $50.00 or more on deposit
as of June 30, 1997); and (iv) Other Members (depositors of the Savings Bank as
of July 31, 1997). Concurrent with the Subscription Offering and subject to the
prior rights of holders of Subscription Rights, the Holding Company is offering
the Common Stock for sale to certain members of the general public through a
Direct Community Offering.
Shares of Common Stock not subscribed for in the Subscription and
Direct Community Offering may be offered for sale in the Syndicated Community
Offering. Regulations require that the Syndicated Community Offering be
completed within 45 days after completion of the fully extended Subscription
Offering unless extended by the Savings Bank or the Holding Company with the
approval of the regulatory authorities. If the Syndicated Community Offering is
determined not to be feasible, the Board of Directors of the Savings Bank will
consult with the regulatory authorities to determine an appropriate alternative
method for selling the unsubscribed shares of Common Stock. The Plan of
Conversion provides that the Conversion must be completed within 24 months after
the date of the approval of the Plan of Conversion by the members of the Savings
Bank.
No sales of Common Stock may be completed, either in the Subscription,
Direct Community or Syndicated Community Offerings unless the Plan of Conversion
is approved by the members of the Savings Bank.
The completion of the Offerings, however, is subject to market
conditions and other factors beyond the Savings Bank's control. No assurance can
be given as to the length of time after approval of the Plan of Conversion at
the Special Meeting that will be required to complete the Direct Community or
Syndicated Community Offerings or other sale of the Common Stock. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of the Holding Company and the Savings Bank as converted, together with
corresponding changes in the net proceeds realized by the Holding Company from
the sale of the Common Stock. In the event the Conversion is terminated, the
Savings Bank would be required to charge all Conversion expenses against current
income.
Orders for shares of Common Stock will not be filled until at least
3,017,500 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Conversion is not
completed within 45 days after the last day of the fully extended Subscription
Offering and the OTS consents to an extension of time to complete the
Conversion, subscribers will be given the right to increase, decrease or rescind
their subscriptions. Unless an affirmative indication is received from
subscribers that they wish to continue to subscribe for shares, the funds will
be returned promptly, together with accrued interest at the Savings Bank's
passbook rate (2.75% per annum as of the date hereof) from the date payment is
received until the funds are returned to the subscriber. If such period is not
extended, or, in any event, if the Conversion is not completed, all withdrawal
authorizations will be terminated and all funds held will be promptly returned
together with accrued interest at the Savings Bank's passbook rate from the date
payment is received until the Conversion is terminated.
PURPOSES OF CONVERSION
The Board of Directors and management believe that the Conversion is in
the best interests of the Savings Bank, its members and the communities it
serves. The Savings Bank's Board of Directors has formed the Holding Company to
serve as a holding company, with the Savings Bank as its subsidiary, upon the
consummation of the Conversion. By converting to the stock form of organization,
the Holding Company and the Savings Bank will be structured in the form used by
holding companies of commercial banks and by a growing number of savings
institutions. Management of the Savings Bank believes that the Conversion offers
a number of advantages which will be important to the future growth and
performance of the Savings Bank. The capital raised in the Conversion
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is intended to support the Savings Bank's current lending and investment
activities and may also support possible future expansion and diversification of
operations, although there are no current specific plans, arrangements or
understandings, written or oral, regarding any such expansion or
diversification. The Conversion is also expected to afford the Savings Bank's
members and others the opportunity to become stockholders of the Holding Company
and participate more directly in, and contribute to, any future growth of the
Holding Company and the Savings Bank. The Conversion will also enable the
Holding Company and the Savings Bank to raise additional capital in the public
equity or debt markets should the need arise, although there are no current
specific plans, arrangements or understandings, written or oral, regarding any
such financing activities.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE SAVINGS
BANK
VOTING RIGHTS. Savings members and borrowers will have no voting rights
in the converted Savings Bank or the Holding Company and therefore will not be
able to elect directors of the Savings Bank or the Holding Company or to control
their affairs. Currently, these rights are accorded to savings members of the
Savings Bank. Subsequent to the Conversion, voting rights will be vested
exclusively in the Holding Company with respect to the Savings Bank and the
holders of the Common Stock as to matters pertaining to the Holding Company.
Each holder of Common Stock shall be entitled to vote on any matter to be
considered by the stockholders of the Holding Company. A stockholder will be
entitled to one vote for each share of Common Stock owned.
SAVINGS ACCOUNTS AND LOANS. The Savings Bank's savings accounts,
account balances and existing FDIC insurance coverage of savings accounts will
not be affected by the Conversion. Furthermore, the Conversion will not affect
the loan accounts, loan balances or obligations of borrowers under their
individual contractual arrangements with the Savings Bank.
TAX EFFECTS. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other things, the
opinion states that: (i) no gain or loss will be recognized to the Savings Bank
in its mutual or stock form by reason of the Conversion; (ii) no gain or loss
will be recognized to its account holders upon the issuance to them of accounts
in the Savings Bank immediately after the Conversion, in the same dollar amounts
and on the same terms and conditions as their accounts at the Savings Bank in
its mutual form plus interest in the liquidation account; (iii) the tax basis of
account holders' accounts in the Savings Bank immediately after the Conversion
will be the same as the tax basis of their accounts immediately prior to
Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account will be zero; (v) the tax basis of the Common Stock
purchased in the Conversion will be the amount paid and the holding period for
such stock will commence at the date of purchase; and (vi) no gain or loss will
be recognized to account holders upon the receipt or exercise of Subscription
Rights in the Conversion, except to the extent Subscription Rights are deemed to
have value as discussed below. Unlike a private letter ruling issued by the IRS,
an opinion of counsel is not binding on the IRS and the IRS could disagree with
the conclusions reached therein. In the event of such disagreement, no assurance
can be given that the conclusions reached in an opinion of counsel would be
sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. Keller, a financial consulting firm retained by the Savings
Bank, whose findings are not binding on the IRS, has issued a letter indicating
that the Subscription Rights do not have any value, based on the fact that such
rights are acquired by the recipients without cost, are nontransferable and of
short duration and afford the recipients the right only to purchase shares of
the Common Stock at a price equal to its estimated fair market value, which will
be the same price paid by purchasers in the Direct Community Offering for
unsubscribed shares of Common Stock. If the Subscription Rights are deemed to
have a fair market value, the receipt of such rights may only be taxable to
those Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members who exercise their Subscription Rights. The Savings Bank could also
recognize a gain on the distribution of such Subscription Rights. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members are
encouraged to consult with
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their own tax advisors as to the tax consequences in the event the Subscription
Rights are deemed to have a fair market value.
The Savings Bank has also received an opinion from Deloitte & Touche
LLP, Portland, Oregon, that, assuming the Conversion does not result in any
federal income tax liability to the Savings Bank, its account holders, or the
Holding Company, implementation of the Plan of Conversion will not result in any
Oregon income tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Deloitte & Touche LLP and the
letter from Keller are filed as exhibits to the Registration Statement. See
"ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Savings Bank in its present mutual form, each depositor in the Savings Bank
would receive a pro rata share of any assets of the Savings Bank remaining after
payment of claims of all creditors (including the claims of all depositors up to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
account to the total value of all deposit accounts in the Savings Bank at the
time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the Savings
Bank, including certificates of deposit ("Savings Account(s)"), shall not be
entitled to share in any residual assets in the event of liquidation of the
Savings Bank. However, pursuant to OTS regulations, the Savings Bank shall, at
the time of the Conversion, establish a liquidation account in an amount equal
to its total equity as of the date of the latest statement of financial
condition contained herein.
The liquidation account shall be maintained by the Savings Bank
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's "qualifying
deposit" in the Savings Account and the denominator is the total amount of the
"qualifying deposits" of all such holders. Such initial subaccount balance shall
not be increased, and it shall be subject to downward adjustment as provided
below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing day of the Savings Bank subsequent to December 31, 1995 or June
30, 1997 is less than the lesser of (i) the deposit balance in such Savings
Account at the close of business on any other annual closing date subsequent to
December 31, 1995 or June 30, 1997 or (ii) the amount of the "qualifying
deposit" in such Savings Account on December 31, 1995 or June 30, 1997, then the
subaccount balance for such Savings Account shall be adjusted by reducing such
subaccount balance in an amount proportionate to the reduction in such deposit
balance. In the event of a downward adjustment, such subaccount balance shall
not be subsequently increased, notwithstanding any increase in the deposit
balance of the related Savings Account. If any such Savings Account is closed,
the related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank (and only in
such event) each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk
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purchase of assets with assumptions of Savings Accounts and other liabilities or
similar transactions with another federally insured institution
in which the Savings Bank is not the surviving institution shall be considered
to be a complete liquidation. In any such transaction the liquidation account
shall be assumed by the surviving institution.
In the unlikely event the Savings Bank is liquidated after the
Conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to the Holding Company as the sole
stockholder of the Savings Bank.
THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS
SUBSCRIPTION OFFERING. In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Common Stock have been
issued to persons and entities entitled to purchase the Common Stock in the
Subscription Offering. The amount of the Common Stock which these parties may
purchase will be subject to the availability of the Common Stock for purchase
under the categories set forth in the Plan of Conversion. Subscription
priorities have been established for the allocation of stock to the extent that
the Common Stock is available. These priorities are as follows:
CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS. Each depositor with $50.00 or
more on deposit at the Savings Bank as of December 31, 1995 will receive
nontransferable Subscription Rights to subscribe for up to the greater of
$200,000 of Common Stock, one-tenth of one percent of the total offering of
Common Stock or 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Common Stock to be issued
by a fraction of which the numerator is the amount of the qualifying deposit of
the Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Eligible Account Holders. If the exercise of
Subscription Rights in this category results in an oversubscription, shares of
Common Stock will be allocated among subscribing Eligible Account Holders so as
to permit each Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make such person's total allocation equal 100
shares or the number of shares actually subscribed for, whichever is less.
Thereafter, unallocated shares will be allocated among subscribing Eligible
Account Holders proportionately, based on the amount of their respective
qualifying deposits as compared to total qualifying deposits of all Eligible
Account Holders. Subscription Rights received by officers and directors in this
category based on their increased deposits in the Savings Bank in the one year
period preceding December 31, 1995 are subordinated to the Subscription Rights
of other Eligible Account Holders.
CATEGORY 2: ESOP. The Plan of Conversion provides that the ESOP shall
receive nontransferable Subscription Rights to purchase up to 10% of the shares
of Common Stock issued in the Conversion. The ESOP intends to purchase 8% of the
shares of Common Stock issued in the Conversion. In the event the number of
shares offered in the Conversion is increased above the maximum of the Estimated
Valuation Range, the ESOP shall have a priority right to purchase any such
shares exceeding the maximum of the Estimated Valuation Range up to an aggregate
of 8% of the Common Stock.
CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each depositor with
$50.00 or more on deposit as of June 30, 1997 will receive nontransferable
Subscription Rights to subscribe for up to the greater of $200,000 of Common
Stock, one-tenth of one percent of the total offering of Common Stock or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of Subscription Rights in this category results in an oversubscription,
shares of Common Stock will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the number of shares actually subscribed for,
whichever is less. Thereafter, unallocated shares will be allocated among
subscribing Supplemental Eligible Account Holders proportionately, based on the
amount of their respective qualifying deposits as compared to total qualifying
deposits of all Supplemental Eligible Account Holders.
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CATEGORY 4: OTHER MEMBERS. Each depositor of the Savings Bank as of the
Voting Record Date (July 31, 1997) will receive nontransferable Subscription
Rights to purchase up to $200,000 of Common Stock in the Conversion to the
extent shares are available following subscriptions by Eligible Account Holders,
the Savings Bank's ESOP and Supplemental Eligible Account Holders. In the event
of an oversubscription in this category, the available shares will be allocated
proportionately based on the amount of the respective subscriptions.
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION
OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE
SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE OTS OR ANOTHER AGENCY OF THE U.S. GOVERNMENT. EACH
PERSON EXERCISING SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT HE OR SHE
IS PURCHASING SUCH SHARES SOLELY FOR HIS OR HER OWN ACCOUNT AND THAT HE OR SHE
HAS NO AGREEMENT OR UNDERSTANDING WITH ANY OTHER PERSON FOR THE SALE OR TRANSFER
OF SUCH SHARES. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT THE
CONSENT OF THE SAVINGS BANK AND THE HOLDING COMPANY.
The Holding Company and the Savings Bank will make reasonable attempts
to provide a Prospectus and related offering materials to holders of
Subscription Rights. However, the Subscription Offering and all Subscription
Rights under the Plan of Conversion will expire at ____ __.m., Pacific Time, on
the Expiration Date, whether or not the Savings Bank has been able to locate
each person entitled to such Subscription Rights. ORDERS FOR COMMON STOCK IN THE
SUBSCRIPTION OFFERING RECEIVED IN HAND BY THE SAVINGS BANK AFTER THE EXPIRATION
DATE WILL NOT BE ACCEPTED. The Subscription Offering may be extended by the
Holding Company and the Savings Bank up to ______ __ , 1997 without the OTS's
approval. OTS regulations require that the Holding Company complete the sale of
Common Stock within 45 days after the close of the Subscription Offering. If the
Direct Community Offering and the Syndicated Community Offerings are not
completed by _____ __, 1997 (or ______ __, 1997, if the Subscription Offering is
fully extended), all funds received will be promptly returned with interest at
the Savings Bank's passbook rate (2.75% per annum as of the date hereof) and all
withdrawal authorizations will be canceled or, if regulatory approval of an
extension of the time period has been granted, all subscribers and purchasers
will be given the right to increase, decrease or rescind their orders. If an
extension of time is obtained, all subscribers will be notified of such
extension and of the duration of any extension that has been granted, and will
be given the right to increase, decrease or rescind their orders. If an
affirmative response to any resolicitation is not received by the Holding
Company from a subscriber, the subscriber's order will be rescinded and all
funds received will be promptly returned with interest (or withdrawal
authorizations will be canceled). No single extension can exceed 90 days.
DIRECT COMMUNITY OFFERING. Concurrently with the Subscription Offering,
the Holding Company is offering shares of the Common Stock to certain members of
the general public in a Direct Community Offering, with preference given to
natural persons and trusts of natural persons residing in the Local Community.
Purchasers in the Direct Community Offering are eligible to purchase up to
$200,000 of Common Stock in the Conversion. In the event an insufficient number
of shares are available to fill orders in the Direct Community Offering, the
available shares will be allocated on a pro rata basis determined by the amount
of the respective orders. Orders for the Common Stock in the Direct Community
Offering will be filled to the extent such shares remain available after the
satisfaction of all orders received in the Subscription Offering. The Direct
Community Offering may terminate on or at any time subsequent to the Expiration
Date, but no later than 45 days after the close of the Subscription Offering,
unless extended by the Holding Company and the Savings Bank, with approval of
the OTS. Any extensions beyond 45 days after the close of the fully extended
Subscription Offering would require a resolicitation of orders, wherein
subscribers for the maximum numbers of shares of Common Stock would be, and
certain other large Subscribers in the discretion of the Holding Company and the
Savings Bank may be, given the opportunity to continue their orders, in which
case they will need to reconfirm affirmatively their subscriptions prior to the
expiration of the resolicitation offering or their subscription funds will be
promptly refunded with interest at the Savings Bank's passbook rate, or be
permitted to modify or cancel their orders. THE RIGHT OF ANY PERSON TO PURCHASE
SHARES IN THE DIRECT COMMUNITY OFFERING IS SUBJECT TO THE ABSOLUTE RIGHT OF THE
HOLDING COMPANY
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AND THE SAVINGS BANK TO ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART. IF
AN ORDER IS REJECTED IN PART, THE PURCHASER DOES NOT HAVE THE RIGHT TO CANCEL
THE REMAINDER OF THE ORDER. THE HOLDING COMPANY PRESENTLY INTENDS TO TERMINATE
THE DIRECT COMMUNITY OFFERING AS SOON AS IT HAS RECEIVED ORDERS FOR ALL SHARES
AVAILABLE FOR PURCHASE IN THE CONVERSION.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering.
SYNDICATED COMMUNITY OFFERING. The Plan provides that shares of Common
Stock not purchased in the Subscription and Direct Community Offering, if any,
may be offered for sale to certain members of the general public in a Syndicated
Community Offering through a syndicate of registered broker-dealers to be
managed by Webb acting as agent of the Holding Company. THE HOLDING COMPANY AND
THE SAVINGS BANK HAVE THE RIGHT TO REJECT ORDERS, IN WHOLE OR PART, IN THEIR
SOLE DISCRETION IN THE SYNDICATED COMMUNITY OFFERING. IF AN ORDER IS REJECTED IN
PART, THE PURCHASER DOES NOT HAVE THE RIGHT TO CANCEL THE REMAINDER OF THE
ORDER. Neither Webb nor any registered broker-dealer shall have any obligation
to take or purchase any shares of the Common Stock in the Syndicated Community
Offering; however, Webb has agreed to use its best efforts in the sale of shares
in the Syndicated Community Offering.
Stock sold in the Syndicated Community Offering will be sold at the
$10.00 Purchase Price, the same price as all other shares in the Offerings. See
"-- Stock Pricing and Number of Shares to be Issued." No person, together with
any associate or group of persons acting in concert, will be permitted to
subscribe in the Syndicated Community Offering for shares of Common Stock with
an aggregate purchase price of more than $200,000. See "-- Plan of Distribution
for the Subscription, Direct Community and Syndicated Community Offerings" for a
description of the commission to be paid to any selected dealers and to Webb.
Webb may enter into agreements with selected dealers to assist in the
sale of shares in the Syndicated Community Offering. During the Syndicated
Community Offering, selected dealers may only solicit indications of interest
from their customers to place orders with the Holding Company as of a certain
date ("Order Date") for the purchase of shares of Conversion Stock. When and if
Webb and the Holding Company believe that enough indications of interest and
orders have been received in the Subscription Offering, the Direct Community
Offering and the Syndicated Community Offering to consummate the Conversion,
Webb will request, as of the Order Date, selected dealers to submit orders to
purchase shares for which they have received indications of interest from their
customers. Selected dealers will send confirmations to such customers on the
next business day after the Order Date. Selected dealers may debit the accounts
of their customers on a date which will be three business days from the Order
Date ("Settlement Date"). Customers who authorize selected dealers to debit
their brokerage accounts are required to have the funds for payment in their
account on but not before the Settlement Date. On the Settlement Date, selected
dealers will remit funds to the account that the Holding Company established for
each selected dealer. Each customer's funds so forwarded to the Holding Company,
along with all other accounts held in the same title, will be insured by the
FDIC up to the applicable $100,000 legal limit. After payment has been received
by the Holding Company from selected dealers, funds will earn interest at the
Savings Bank's passbook rate (2.75% per annum as of the date hereof) until the
completion of the Offerings. At the consummation of the Conversion the funds
received in the Offerings will be used to purchase the shares of Common Stock
ordered. The shares of Common Stock issued in the Conversion cannot and will not
be insured by the FDIC or any other government agency. In the event the
Conversion is not consummated as described above, funds with interest will be
returned promptly to the selected dealers, who, in turn, will promptly credit
their customers' brokerage accounts.
The Syndicated Community Offering may close as early as ____ __.m.,
Pacific Time, on ________ __, 1997, the Expiration Date, or any date thereafter
at the discretion of the Holding Company. The Syndicated Community Offering will
terminate no more than 45 days following the Expiration Date, unless extended by
the Holding Company with any required regulatory approval, but in no case later
than ______ __, 1997. The Syndicated Community Offering may run concurrent to
the Subscription and Direct Community Offering or subsequent thereto.
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In the event the Savings Bank is unable to find purchasers from the
general public for all unsubscribed shares, other purchase arrangements will be
made by the Board of Directors of the Savings Bank, if feasible. Such other
arrangements will be subject to the approval of the OTS. The OTS may grant one
or more extensions of the offering period, provided that (i) no single extension
exceeds 90 days, (ii) subscribers are given the right to increase, decrease or
rescind their subscriptions during the extension period, and (iii) the
extensions do not go more than two years beyond the date on which the members
approved the Plan. If the Conversion is not consummated by ___________, 1997
(or, if the Offerings are fully extended, by ___________, 1997), either all
funds received will be returned with interest (and withdrawal authorizations
canceled) or, if the OTS has granted an extension of such period, all
subscribers will be given the right to increase, decrease or rescind their
subscriptions at any time prior to 20 days before the end of the extension
period. If an extension of time is obtained, all subscribers will be notified of
such extension and of their rights to modify their orders. If an affirmative
response to any resolicitation is not received by the Holding Company from a
subscriber, the subscriber's order will be rescinded and all funds received will
be promptly returned with interest (or withdrawal authorizations will be
canceled). No single extension can exceed 90 days.
PERSONS IN NON-QUALIFIED STATES. The Holding Company and the Savings
Bank will make reasonable efforts to comply with the securities laws of all
states in the United States in which persons entitled to subscribe for stock
pursuant to the Plan of Conversion reside. However, the Holding Company and the
Savings Bank are not required to offer stock in the Subscription Offering to any
person who resides in a foreign country or resides in a state of the United
States with respect to which (i) a small number of persons otherwise eligible to
subscribe for shares of Common Stock reside in such state or (ii) the Holding
Company or the Savings Bank determines that compliance with the securities laws
of such state would be impracticable for reasons of cost or otherwise, including
but not limited to a request or requirement that the Holding Company and the
Savings Bank or their officers, directors or trustees register as a broker,
dealer, salesman or selling agent, under the securities laws of such state, or a
request or requirement to register or otherwise qualify the Subscription Rights
or Common Stock for sale or submit any filing with respect thereto in such
state. Where the number of persons eligible to subscribe for shares in one state
is small, the Holding Company and the Savings Bank will base their decision as
to whether or not to offer the Common Stock in such state on a number of
factors, including the size of accounts held by account holders in the state,
the cost of reviewing the registration and qualification requirements of the
state (and of actually registering or qualifying the shares) or the need to
register the Holding Company, its officers, directors or employees as brokers,
dealers or salesmen.
PLAN OF DISTRIBUTION FOR THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED
COMMUNITY OFFERINGS
The Holding Company and the Savings Bank have retained Webb to consult
with and to advise the Savings Bank and the Holding Company, and to assist the
Holding Company on a best efforts basis, in the distribution of the shares of
Common Stock in the Subscription and Community Offering. The services that Webb
will provide include, but are not limited to (i) training the employees of the
Savings Bank who will perform certain ministerial functions in the Subscription
and Community Offering regarding the mechanics and regulatory requirements of
the stock offering process, (ii) managing the Stock Information Center by
assisting interested stock subscribers and by keeping records of all stock
orders, (iii) preparing marketing materials, and (iv) assisting in the
solicitation of proxies from the Savings Bank's members for use at the Special
Meeting. For its services, Webb will receive a management fee of $25,000 and a
success fee of 1.5% of the aggregate Purchase Price of the shares of Common
Stock sold in the Subscription and Direct Community Offerings excluding shares
purchased by the ESOP and officers and directors of the Savings Bank. In the
event that selected dealers are used to assist in the sale of shares of Common
Stock in the Community Offering, such dealers will be paid a fee of up to 5.5%
of the aggregate Purchase Price of the shares sold by such dealers. The Holding
Company and the Savings Bank have agreed to reimburse Webb for its out-of-pocket
expenses, and its legal fees up to a total of $35,000, and to indemnify Webb
against certain claims or liabilities, including certain liabilities under the
Securities Act, and will contribute to payments Webb may be required to make in
connection with any such claims or liabilities.
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Sales of shares of Common Stock will be made primarily by registered
representatives affiliated with Webb or by the broker-dealers managed by Webb. A
Stock Information Center will be established at the main office of the Savings
Bank. The Holding Company will rely on Rule 3a4-1 of the Exchange Act and sales
of Common Stock will be conducted within the requirements of such Rule, so as to
permit officers, directors and employees to participate in the sale of the
Common Stock in those states where the law so permits. No officer, director or
employee of the Holding Company or the Savings Bank will be compensated directly
or indirectly by the payment of commissions or other remuneration in connection
with his or her participation in the sale of Common Stock.
PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND DIRECT COMMUNITY
OFFERING
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no Prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
Stock Order Form will confirm receipt or delivery in accordance with Rule
15c2-8. Stock Order Forms will only be distributed with a Prospectus. The
Savings Bank will accept for processing only orders submitted on original Stock
Order Forms.
To purchase shares in the Subscription and Direct Community Offering,
the accompanying original Stock Order Form (facsimile copies and photocopies
will not be accepted) and a fully executed separate original Certification Form,
along with the required full payment for each share subscribed, or with
appropriate authorization for withdrawal of full payment from the subscriber's
deposit account with the Savings Bank (which may be given by completing the
appropriate blanks in the Stock Order Form), must be received by the Savings
Bank by Noon, Pacific Time, on the Expiration Date. Stock Order Forms and
Certification Forms that are not received by such time or are executed
defectively or are received without full payment (or appropriate withdrawal
instructions for full payment) are not required to be accepted. The Holding
Company and the Savings Bank have the right to waive or permit the correction of
incomplete or improperly executed Stock Order Forms, but do not represent that
they will do so. Pursuant to the Plan of Conversion, the interpretation by the
Holding Company and the Savings Bank of the terms and conditions of the Plan of
Conversion and of the Stock Order Form will be final. Once received, an executed
Stock Order Form or Certification Form may not be modified, amended or rescinded
without the consent of the Savings Bank, unless the Conversion has not been
consummated within 45 days after the end of the Subscription Offering, unless
such period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (December 31,
1995) and/or the Supplemental Eligibility Record Date (June 30, 1997) and/or the
Voting Record Date (July 31, 1997) must list all accounts on the Stock Order
Form giving all names in each account, the account number and the approximate
account balance as of such date.
Full payment for subscriptions may be made (i) in cash only if
delivered in person at an office of the Savings Bank, (ii) by check, bank draft,
or money order, or (iii) by authorization of withdrawal from deposit accounts
maintained with the Savings Bank. Appropriate means by which such withdrawals
may be authorized are provided on the Stock Order Form. No wire transfers will
be accepted and full payment is required. Interest will be paid on payments made
by cash, check, bank draft or money order at the Savings Bank's passbook rate
(2.75% per annum as of the date hereof) from the date payment is received until
the consummation or termination of the Conversion. If payment is made by
authorization of withdrawal from deposit accounts, the funds authorized to be
withdrawn from a deposit account will continue to accrue interest at the
contractual rates until consummation or termination of the Conversion (unless
the certificate matures after the date of receipt of the Stock Order Form but
prior to closing, in which case funds will earn interest at the passbook rate
from the date of maturity until consummation of the Conversion), but a hold will
be placed on such funds, thereby making them unavailable to the depositor until
consummation or termination of the Conversion. At the consummation of the
Conversion the funds received in the Offerings will be used to purchase the
shares of Common Stock ordered. THE SHARES ISSUED IN THE CONVERSION CANNOT AND
WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. In the event
that
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the Conversion is not consummated for any reason, all funds submitted will
be promptly refunded with interest as described above.
If a subscriber authorizes the Savings Bank to withdraw the amount of
the Purchase Price from his or her deposit account, the Savings Bank will do so
as of the effective date of Conversion. The Savings Bank will waive any
applicable penalties for early withdrawal from certificate accounts. If the
remaining balance in a certificate account is reduced below the applicable
minimum balance requirement at the time that the funds actually are transferred
under the authorization, the certificate will be canceled at the time of the
withdrawal, without penalty, and the remaining balance will earn interest at the
Savings Bank's passbook rate.
If the ESOP subscribes for shares during the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes, but rather may pay for such shares of Common Stock subscribed for at
the Purchase Price upon consummation of the Conversion, provided that there is
in force from the time of its subscription until such time, a loan commitment
from an unrelated financial institution or the Holding Company to lend to the
ESOP, at such time, the aggregate Purchase Price of the shares for which it
subscribed.
IRAs maintained in the Savings Bank do not permit investment in the
Common Stock. A depositor interested in using his or her IRA funds to purchase
Common Stock must do so through a self-directed IRA. Since the Savings Bank does
not offer such accounts, it will allow such a depositor to make a
trustee-to-trustee transfer of the IRA funds to a trustee offering a
self-directed IRA program with the agreement that such funds will be used to
purchase the Common Stock in the Offerings. There will be no early withdrawal or
IRS interest penalties for such transfers. The new trustee would hold the Common
Stock in a self-directed account in the same manner as the Savings Bank now
holds the depositor's IRA funds. An annual administrative fee may be payable to
the new trustee. Depositors interested in using funds in an Savings Bank IRA to
purchase Common Stock should contact the Stock Information Center at the Savings
Bank as soon as possible so that the necessary forms may be forwarded for
execution and returned prior to the Expiration Date. In addition, the provisions
of ERISA and IRS regulations require that officers, directors and 10%
shareholders who use self-directed IRA funds to purchase shares of Common Stock
in the Subscription and Direct Community Offering make such purchases for the
exclusive benefit of IRAs.
Certificates representing shares of Common Stock purchased, and any
refund due, will be mailed to purchasers at such address as may be specified in
a properly completed Stock Order Form or to the last address of such person(s)
appearing on the records of the Savings Bank as soon as practicable following
completion of the sale of all shares of Common Stock. Any certificates returned
as undeliverable will be disposed of in accordance with applicable law. Until
certificates for the Common Stock are available and delivered to subscribers and
purchasers, subscribers and purchasers may not be able to sell the shares of
Common Stock for which they subscribed or purchased.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
Federal regulations require that the aggregate purchase price of the
securities sold in connection with the Conversion be based upon an estimated pro
forma value of the Holding Company and the Savings Bank as converted (i.e.,
taking into account the expected receipt of proceeds from the sale of securities
in the Conversion), as determined by an independent appraisal. The Savings Bank
and the Holding Company have retained Keller to prepare an appraisal of the pro
forma market value of the Holding Company and the Savings Bank as converted, as
well as a business plan. Keller will receive a fee expected to total
approximately $22,000 for its appraisal services and assistance in the
preparation of a business plan, plus reasonable out-of-pocket expenses incurred
in connection with the appraisal not to exceed $800. The Savings Bank has agreed
to indemnify Keller under certain circumstances against liabilities and expenses
(including legal fees) arising out of, related to, or based upon the Conversion.
Keller has prepared an appraisal of the estimated pro forma market
value of the Holding Company and the Savings Bank as converted taking into
account the formation of the Holding Company as the holding company for the
Savings Bank. For its analysis, Keller undertook substantial investigations to
learn about the Savings Bank's
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business and operations. Management supplied financial information, including
annual financial statements, information on the composition of assets and
liabilities, and other financial schedules. In addition to this information,
Keller reviewed the Savings Bank's Form AC Application for Approval of
Conversion and the Holding Company's Form S-1 Registration Statement.
Furthermore, Keller visited the Savings Bank's facilities and had discussions
with the Savings Bank's management and its special conversion legal counsel,
Breyer & Aguggia. No detailed individual analysis of the separate components of
the Holding Company's or the Savings Bank's assets and liabilities was performed
in connection with the evaluation.
In estimating the pro forma market value of the Holding Company and the
Savings Bank as converted, as required by applicable regulatory guidelines,
Keller's analysis utilized three selected valuation procedures, the Price/Book
("P/B") method, the Price/Earnings ("P/E") method, and Price/Assets ("P/A")
method, all of which are described in its report. Keller placed the greatest
emphasis on the P/E and P/B methods in estimating pro forma market value. In
applying these procedures, Keller reviewed, among other factors, the economic
make-up of the Savings Bank's primary market area, the Savings Bank's financial
performance and condition in relation to publicly-traded institutions that
Keller deemed comparable to the Savings Bank, the specific terms of the offering
of the Holding Company's Common Stock, the pro forma impact of the additional
capital raised in the Conversion, conditions of securities markets in general,
and the market for thrift institution common stock in particular. Keller's
analysis provides an approximation of the pro forma market value of the Holding
Company and the Savings Bank as converted based on the valuation methods applied
and the assumptions outlined in its report. Included in its report were certain
assumptions as to the pro forma earnings of the Holding Company after the
Conversion that were utilized in determining the appraised value. These
assumptions included expenses of $914,000 at the midpoint of the Estimated
Valuation Range, an assumed after-tax rate of return on the net Conversion
proceeds of 3.64%, purchases by the ESOP of 8% of the Common Stock sold in the
Conversion and purchases in the open market by the MRP of a number of shares
equal to 4% of the Common Stock sold in the Conversion at the Purchase Price.
See "PRO FORMA DATA" for additional information concerning these assumptions.
The use of different assumptions may yield different results.
On the basis of the foregoing, Keller has advised the Holding Company
and the Savings Bank that, in its opinion, as of July 29, 1997, the aggregate
estimated pro forma market value of the Holding Company and the Savings Bank as
converted and, therefore, the Common Stock was within the valuation range of
$30,175,000 to $40,825,000 with a midpoint of $35,500,000. After reviewing the
methodology and the assumptions used by Keller in the preparation of the
appraisal, the Board of Directors established the Estimated Valuation Range
which is equal to the valuation range of $30,175,000 to $40,825,000 with a
midpoint of $35,500,000. Assuming that the shares are sold at $10.00 per share
in the Conversion, the estimated number of shares would be between 3,017,500 and
4,082,500 with a midpoint of 3,550,000. The Purchase Price of $10.00 was
determined by discussion among the Boards of Directors of the Savings Bank and
the Holding Company and Webb, taking into account, among other factors (i) the
requirement under OTS regulations that the Common Stock be offered in a manner
that will achieve the widest distribution of the stock, (ii) desired liquidity
in the Common Stock subsequent to the Conversion, and (iii) the expense of
issuing shares for purposes of Oregon franchise taxes. Since the outcome of the
Offerings relate in large measure to market conditions at the time of sale, it
is not possible to determine the exact number of shares that will be issued by
the Holding Company at this time. The Estimated Valuation Range may be amended,
with the approval of the OTS, if necessitated by developments following the date
of such appraisal in, among other things, market conditions, the financial
condition or operating results of the Savings Bank, regulatory guidelines or
national or local economic conditions.
Keller's appraisal report is filed as an exhibit to the Registration
Statement. See "ADDITIONAL INFORMATION."
If, upon completion of the Subscription Offering, at least the minimum
number of shares are subscribed for, Keller, after taking into account factors
similar to those involved in its prior appraisal, will determine its estimate
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of the pro forma market value of the Holding Company and the Savings Bank as
converted, as of the close of the Subscription Offering.
No sale of the shares will take place unless prior thereto Keller
confirms to the OTS that, to the best of Keller's knowledge and judgment,
nothing of a material nature has occurred that would cause it to conclude that
the actual total purchase price on an aggregate basis was incompatible with its
estimate of the total pro forma market value of the Holding Company and the
Savings Bank as converted at the time of the sale. If, however, the facts do not
justify such a statement, the Offerings or other sale may be canceled, a new
Estimated Valuation Range and price per share set and new Subscription, Direct
Community and Syndicated Community Offerings held. Under such circumstances,
subscribers would have the right to modify or rescind their subscriptions and to
have their subscription funds returned promptly with interest and holds on funds
authorized for withdrawal from deposit accounts would be released or reduced.
Depending upon market and financial conditions, the number of shares
issued may be more or less than the range in number of shares discussed herein.
In the event the total amount of shares issued is less than 3,017,500 or more
than 4,694,875 (15% above the maximum of the Estimated Valuation Range), for
aggregate gross proceeds of less than $30,175,000 or more than $46,948,750,
subscription funds will be returned promptly with interest to each subscriber
unless he indicates otherwise. In the event a new valuation range is established
by Keller, such new range will be subject to approval by the OTS.
If purchasers cannot be found for an insignificant residue of
unsubscribed shares from the general public, other purchase arrangements will be
made by the Boards of Directors of the Savings Bank and the Holding Company, if
possible. Such other purchase arrangements will be subject to the approval of
the OTS and may provide for purchases for investment purposes by directors,
officers, their associates and other persons in excess of the limitations
provided in the Plan of Conversion and in excess of the proposed director
purchases set forth herein, although no such purchases are currently intended.
If such other purchase arrangements cannot be made, the Plan of Conversion will
terminate.
In formulating its appraisal, Keller relied upon the truthfulness,
accuracy and completeness of all documents the Savings Bank furnished to it.
Keller also considered financial and other information from regulatory agencies,
other financial institutions, and other public sources, as appropriate. While
Keller believes this information to be reliable, Keller does not guarantee the
accuracy or completeness of such information and did not independently verify
the financial statements and other data provided by the Savings Bank and the
Holding Company or independently value the assets or liabilities of the Holding
Company and the Savings Bank. THE APPRAISAL BY KELLER IS NOT INTENDED TO BE, AND
MUST NOT BE INTERPRETED AS, A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY
OF VOTING TO APPROVE THE PLAN OF CONVERSION OR OF PURCHASING SHARES OF COMMON
STOCK. MOREOVER, BECAUSE THE APPRAISAL IS NECESSARILY BASED ON MANY FACTORS
WHICH CHANGE FROM TIME TO TIME, THERE IS NO ASSURANCE THAT PERSONS WHO PURCHASE
SUCH SHARES IN THE CONVERSION WILL LATER BE ABLE TO SELL SHARES THEREAFTER AT
PRICES AT OR ABOVE THE PURCHASE PRICE.
LIMITATIONS ON PURCHASES OF SHARES
The Plan of Conversion provides for certain limitations to be placed
upon the purchase of Common Stock by eligible subscribers and others in the
Conversion. Each subscriber must subscribe for a minimum of 25 shares. With the
exception of the ESOP, which is expected to subscribe for 8% of the shares of
Common Stock issued in the Conversion, the Plan of Conversion provides for the
following purchase limitations: (i) No Eligible Account Holder, Supplemental
Eligible Account Holder or Other Member, including, in each case, all persons on
a joint account, may purchase shares of Common Stock with an aggregate purchase
price of more than $200,000, (ii) no person (including all persons on a joint
account), either alone or together with associates of or persons acting in
concert with such person, may purchase in the Direct Community Offering, if any,
or in the Syndicated Community Offering, if any, shares of Common Stock with an
aggregate purchase price of more than $200,000, and (iii) no person, either
alone or together with associates of or persons acting in concert with such
person, may purchase in
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the aggregate more than the overall maximum purchase limitation of 1% of the
total number of shares of Common Stock issued in the Conversion (exclusive of
any shares issued pursuant to an increase in the Estimated Valuation Range of up
to 15%). For purposes of the Plan of Conversion, the directors are not deemed to
be acting in concert solely by reason of their Board membership. Pro rata
reductions within each Subscription Rights category will be made in allocating
shares to the extent that the maximum purchase limitations are exceeded.
The Savings Bank's and the Holding Company's Boards of Directors may,
in their sole discretion, increase the maximum purchase limitation set forth
above up to 9.99% of the shares of Common Stock sold in the Conversion, provided
that orders for shares which exceed 5% of the shares of Common Stock sold in the
Conversion may not exceed, in the aggregate, 10% of the shares sold in the
Conversion. The Savings Bank and the Holding Company do not intend to increase
the maximum purchase limitation unless market conditions are such that an
increase in the maximum purchase limitation is necessary to sell a number of
shares in excess of the minimum of the Estimated Valuation Range. If the Boards
of Directors decide to increase the purchase limitation above, persons who
subscribed for the maximum number of shares of Common Stock will be, and other
large subscribers in the discretion of the Holding Company and the Savings Bank
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 term "acting in concert" is defined in the Plan of Conversion to
mean (i) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. In general, a person who acts in concert with another party shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party.
The term "associate" of a person is defined in the Plan of Conversion
to mean (i) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
director or officer of the Savings Bank or any of its parents or subsidiaries.
For example, a corporation of which a person serves as an officer would be an
associate of such person and, therefore, all shares purchased by such
corporation would be included with the number of shares which such person could
purchase individually under the above limitations.
The term "officer" is defined in the Plan of Conversion to mean an
executive officer of the Savings Bank, including its Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents in
charge of principal business functions, Secretary and Treasurer.
Common Stock purchased pursuant to the Conversion will be freely
transferable, except for shares purchased by directors and officers of the
Savings Bank and the Holding Company and by NASD members. See "-- Restrictions
on Transferability by Directors and Officers and NASD Members."
RESTRICTIONS ON REPURCHASE OF STOCK
Pursuant to OTS regulations, OTS-regulated savings associations (and
their holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan. Furthermore,
repurchases of any common stock are prohibited if the effect thereof would cause
the association's regulatory capital to be reduced below (a) the amount required
for the
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liquidation account or (b) the regulatory capital requirements imposed by the
OTS. Repurchases are generally prohibited during the first year following
conversion. Upon ten days' written notice to the OTS, and if the OTS does not
object, an institution may make open market repurchases of its outstanding
common stock during years two and three following the conversion, provided that
certain regulatory conditions are met and that the repurchase would not
adversely affect the financial condition of the association. Any repurchases of
common stock by the Holding Company would be subject to these regulatory
restrictions unless the OTS would provide otherwise.
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS
Shares of Common Stock purchased in the Offerings by directors and
officers of the Holding Company may not be sold for a period of one year
following consummation of the Conversion, except in the event of the death of
the stockholder or in any exchange of the Common Stock in connection with a
merger or acquisition of the Holding Company. Shares of Common Stock received by
directors or officers through the ESOP or the MRP or upon exercise of options
issued pursuant to the Stock Option Plan or purchased subsequent to the
Conversion are not subject to this restriction. Accordingly, shares of Common
Stock issued by the Holding Company to directors and officers shall bear
a legend giving appropriate notice of the restriction and, in addition, the
Holding Company will give appropriate instructions to the transfer agent for the
Holding Company's Common Stock with respect to the restriction on transfers. Any
shares issued to directors and officers as a stock dividend, stock split or
otherwise with respect to restricted Common Stock shall be subject to the same
restrictions.
Purchases of outstanding shares of Common Stock of the Holding Company
by directors, executive officers (or any person who was an executive officer or
director of the Savings Bank after adoption of the Plan of Conversion) and their
associates during the three-year period following Conversion may be made only
through a broker or dealer registered with the SEC, except with the prior
written approval of the OTS. This restriction does not apply, however, to
negotiated transactions involving more than 1% of the Holding Company's
outstanding Common Stock or to the purchase of stock pursuant to the Stock
Option Plan.
The Holding Company has filed with the SEC a registration statement
under the Securities Act of 1933, as amended ("Securities Act") for the
registration of the Common Stock to be issued pursuant to the Conversion. The
registration under the Securities Act of shares of the Common Stock to be issued
in the Conversion does not cover the resale of such shares. Shares of Common
Stock purchased by persons who are not affiliates of the Holding Company may be
resold without registration. Shares purchased by an affiliate of the Holding
Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Holding Company meets the current public information
requirements of Rule 144 under the Securities Act, each affiliate of the Holding
Company who complies with the other conditions of Rule 144 (including those that
require the affiliate's sale to be aggregated with those of certain other
persons) would be able to sell in the public market, without registration, a
number of shares not to exceed, in any three-month period, the greater of (i) 1%
of the outstanding shares of the Holding Company or (ii) the average weekly
volume of trading in such shares during the preceding four calendar weeks.
Provision may be made in the future by the Holding Company to permit affiliates
to have their shares registered for sale under the Securities Act under certain
circumstances.
Under guidelines of the NASD, members of the NASD and their associates
are subject to certain restrictions on the transfer of securities purchased in
accordance with Subscription Rights and to certain reporting requirements upon
purchase of such securities.
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
The following discussion is a summary of the material provisions of
federal law and regulations and the OBCA, as well as the Articles of
Incorporation and Bylaws of the Holding Company, relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects. The description of these provisions is
necessarily general and reference should be made to the actual law
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and regulations and to the Articles of Incorporation and Bylaws of the Holding
Company. See "ADDITIONAL INFORMATION" as to how to obtain a copy of these
documents.
CONVERSION REGULATIONS
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to the Savings Bank (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
The Articles of Incorporation of the Holding Company essentially
extends the restrictive period for 10% acquisitions of Holding Company stock
from three to five years following completion of the Conversion. See "-- Change
of Control -- Restrictions on Acquisitions of Securities."
CHANGE OF CONTROL
Under the Change in Bank Control Act, no person may acquire control of
an insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition. In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS. Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "control factors," constitutes a rebuttable
determination of control under the regulations. Such control factors include the
acquiror being one of the two largest stockholders. The determination of control
may be rebutted by submission to the OTS, prior to the acquisition of stock or
the occurrence of any other circumstances giving rise to such determination, of
a statement setting forth facts and circumstances which would support a finding
that no control relationship will exist and containing certain undertakings. The
regulations provide that persons or companies which acquire beneficial ownership
exceeding 10% or more of any class of a savings association's stock must file
with the OTS a certification form that the holder is not in control of such
institution, is not subject to a rebuttable determination of control and will
take no action which would result in a determination or rebuttable determination
of control without prior notice to or approval of the OTS, as applicable. There
are also rebuttable presumptions in the regulations concerning whether a group
"acting in concert" exists, including presumed action in concert among members
of an "immediate family."
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The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.
ANTI-TAKEOVER PROVISIONS IN THE HOLDING COMPANY'S ARTICLES OF INCORPORATION AND
BYLAWS AND IN OREGON LAW
A number of provisions of the Holding Company's Articles of
Incorporation and Bylaws deal with matters of corporate governance and certain
rights of stockholders. The following discussion is a general summary of certain
provisions of the Holding Company's Articles of Incorporation and Bylaws and
regulatory provisions relating to stock ownership and transfers, the Board of
Directors and business combinations, which might be deemed to have a potential
"anti-takeover" effect. These provisions may have the effect of discouraging a
future takeover attempt which is not approved by the Board of Directors but
which individual Holding Company stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have an opportunity to do
so. Such provisions will also render the removal of the incumbent Board of
Directors or management of the Holding Company more difficult. The following
description of certain of the provisions of the Articles of Incorporation and
Bylaws of the Holding Company is necessarily general and reference should be
made in each case to such Articles of Incorporation and Bylaws, which are
incorporated herein by reference. See "ADDITIONAL INFORMATION" as to where to
obtain a copy of these documents.
AUTHORIZED SHARES OF CAPITAL STOCK. The Articles of Incorporation of
the Holding Company authorizes the issuance of up to 250,000 shares of preferred
stock ("Preferred Stock"). Preferred Stock with voting rights could be issued
and would then represent an additional class of stock required to approve any
proposed acquisition. This Preferred Stock, together with authorized but
unissued shares of the Holding Company's Common Stock (the Articles of
Incorporation also authorizes the issuance of up to 8,000,000 shares of Common
Stock), could represent additional capital required to be purchased by an
acquiror. Issuance of such additional shares may dilute the voting interest of
the Holding Company's stockholders. Issuance of voting Preferred Stock to
persons opposed to a proposed acquisition might prevent or deter an acquisition.
CLASSIFIED BOARD OF DIRECTORS AND REMOVAL OF DIRECTORS. Article XII of
the Articles of Incorporation of the Holding Company states that the Board of
Directors is to be divided into three classes which shall be as nearly equal in
number as possible. The directors of the Holding Company in each class will hold
office following their initial appointment to office for terms of one year, two
years and three years, respectively, and, upon reelection, will serve for
staggered three year terms. Each class currently consists of one third of the
number of directors. Each director will serve until his or her successor is
elected and qualified. Article XIII of the Articles of Incorporation of the
Holding Company provides that a director of the Holding Company may be removed
by the affirmative vote of the holders of at least 80% of the outstanding shares
entitled to vote at an election of directors. The requirement that directors may
be removed only upon an 80% vote makes it difficult for the stockholders of the
Holding Company to remove directors of the Holding Company, even if the
stockholders believe such removal would be beneficial to the Holding Company.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of the outstanding shares, to
force an immediate change in the composition of a majority of the Board of
Directors. Since the terms of only one-third of the incumbent directors expire
each year, at least two annual elections are required for the stockholders to
change a majority, whereas a majority of a non-classified Board may be changed
in one year. In the absence of the provisions of the Articles of Incorporation
classifying the Board, all of the directors would be elected each year. The
provision for a staggered Board of Directors affects every election of directors
and is not triggered by the occurrence of a particular event, such as a hostile
merger. Thus, a staggered Board of Directors makes it more difficult for
stockholders to change the majority of directors even when the only reason for
the change is the performance of such directors.
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STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH
INTERESTED SHAREHOLDER. Article XV of the Holding Company's Articles of
Incorporation provides that the Holding Company shall not engage in any
"business combination" with any "Interested Shareholder" for a period of three
years following the date that the shareholder became an "Interested
Shareholder," unless: (i) prior to that date the Board of Directors of the
Holding Company approved either the "business combination" or the transaction
which resulted in the shareholder becoming an "interested Shareholder," (ii)
upon consummation of the transaction which resulted in the shareholder becoming
an "Interested Shareholder," the "Interested Shareholder" owned at least 85% of
the voting stock of the Holding Company outstanding at the time the transaction
commenced (excluding those shares owned by persons who are directors and also
officers of the Holding Company and shares held by employee stock benefit plans
in which the employee participants do not have the right to determine
confidentially whether such shares will be tendered in a tender or exchange
offer), or (iii) on or subsequent to the date that the shareholder became an
"Interested Shareholder," the "business combination" is approved by the Board of
Directors of the Holding Company and authorized at an annual or special meeting
of shareholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock not owned by the "Interested
Shareholder."
For purposes of Article XV of the Articles of Incorporation, the term
"Interested Shareholder" is defined to include any individual, corporation,
partnership, unincorporated association or other entity is the owner of 15% or
more of the outstanding voting stock of the Holding Company or is an affiliate
or associate of a corporation that owns 15% or more of the outstanding voting
stock of the Holding Company and such person was the owner of 15% or more of the
outstanding voting stock of such corporation. The term "business combination,"
when used in reference to the Holding Company and any "Interested Shareholder"
of the Holding Company, means (i) any merger or plan of exchange of the Holding
Company or subsidiary thereof with the "Interested Shareholder" or any other
corporation if the merger or plan of exchange is caused by the "Interested
Shareholder" and as a result of the merger or plan of exchange, the provisions
of Article XV of the Articles of Incorporation are not applicable to the
surviving corporation, (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition, in one transaction or a series of transactions,
to or with an "Interested Shareholder," whether as part of a dissolution or
otherwise, of the assets of the Holding Company or any direct or indirect
majority-owned subsidiary thereof where the assets have an aggregate market
value equal to 10% or more of either the aggregate market value of all the
assets of the Holding Company on a consolidated basis or the aggregate market
value of all of the outstanding stock of the Holding Company, (iii) any
transaction which results in the issuance or transfer by the Holding Company or
by any direct or indirect majority-owned subsidiary thereof of any shares of the
Holding Company (except for certain exchanges or distributions made pro rata to
all of the same class of stock), (iv) any transaction involving the Holding
Company or any direct or indirect majority-owned subsidiary thereof which has
the effect, directly or indirectly, of increasing the proportionate share of any
class or series of shares, or securities convertible thereto, of the Holding
Company or any such subsidiary which is owned by the "Interested Shareholder,"
or (v) the receipt by the "Interested Shareholder" of the benefit, either direct
or indirect, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the Holding Company any direct or indirect
majority-owned subsidiary thereof.
RESTRICTIONS ON ACQUISITIONS OF SECURITIES. The Articles of
Incorporation provides that for a period of five years from the effective date
of the Conversion, no person may acquire directly or indirectly acquire the
beneficial ownership of more than 10% of any class of equity security of the
Holding Company, unless such offer or acquisition shall have been approved in
advance by a two-thirds vote of the Holding Company's Continuing Directors (as
defined in the Articles of Incorporation). This provision does not apply to any
employee stock benefit plan of the Holding Company. In addition, during such
five-year period, no shares beneficially owned in violation of the foregoing
percentage limitation, as determined by the Holding Company's Board of
Directors, shall be entitled to vote in connection with any matter submitted to
stockholders for a vote. Additionally, the Articles of Incorporation provides
for further restrictions on voting rights of shares owned in excess of 10% of
any class of equity security of the Holding Company beyond five years after the
Conversion of the Savings Bank. Specifically, the Articles of Incorporation
provides that if, at any time after five years from the Savings Bank's
conversion to stock form, any person acquires the beneficial ownership of more
than 10% of any class of equity security of the Holding Company, then, with
respect to each vote in excess of 10%, the record holders of voting stock of the
Holding Company beneficially owned by such person shall be entitled to cast only
one-hundredth of one vote with respect to each vote
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in excess of 10% of the voting power of the outstanding shares of voting stock
of the Holding Company which such record holders would otherwise be entitled to
cast without giving effect to the provision, and the aggregate voting power of
such record holders shall be allocated proportionately among such record
holders. An exception from the restriction is provided if the acquisition of
more than 10% of the securities received the prior approval by a two-thirds vote
of the Holding Company's "Continuing Directors." Under the Holding Company's
Articles of Incorporation, the restriction on voting shares beneficially owned
in violation of the foregoing limitations is imposed automatically. In order to
prevent the imposition of such restrictions, the Board of Directors must take
affirmative action approving in advance a particular offer to acquire or
acquisition. Unless the Board took such affirmative action, the provision would
operate to restrict the voting by beneficial owners of more than 10% of the
Holding Company's Common Stock in a proxy contest.
BOARD CONSIDERATION OF CERTAIN NONMONETARY FACTORS IN THE EVENT OF AN
OFFER BY ANOTHER PARTY. The Articles of Incorporation of the Holding Company
directs the Board of Directors, in evaluating a Business Combination or a tender
or exchange offer, to consider, in addition to the adequacy of the amount to be
paid in connection with any such transaction, certain specified factors and any
other factors the Board deems relevant, including (i) the social and economic
effects of the transaction on the Holding Company and its subsidiaries,
employees, depositors, loan and other customers, creditors and other elements of
the communities in which the Holding Company and its subsidiaries operate or are
located; (ii) the business and financial condition and earnings prospects of the
acquiring party or parties; and (iii) the competence, experience and integrity
of the acquiring party or parties and its or their management. By having the
standards in the Articles of Incorporation of the Holding Company, the Board of
Directors may be in a stronger position to oppose any proposed business
combination, tender or exchange offer 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.
PROVISIONS RELATING TO MEETINGS OF STOCKHOLDERS. The OBCA provides that
a special meeting of stockholders may be called by a corporation's board of
directors or by the holders of at least 10% of all votes entitled to be cast on
any issue to be considered at the proposed special meeting.
Article X of the Holding Company's Articles of Incorporation provides
that there will be no cumulative voting by stockholders for the election of the
Holding Company's directors. The absence of cumulative voting rights effectively
means that the holders of a majority of the shares voted at a meeting of
stockholders may, if they so choose, elect all directors of the Holding Company,
thus precluding a small group of stockholders from controlling the election of
one or more representatives to the Holding Company's Board of Directors.
RESTRICTION ON MAXIMUM NUMBER OF DIRECTORS AND FILLING OF VACANCIES ON
THE BOARD OF DIRECTORS. The OBCA requires that the board of directors of a
corporation shall consist of one or more members and that the number of
directors shall be set by a corporation's bylaws or articles of incorporation.
Article XII of the Holding Company's Articles of Incorporation provides that the
number of directors of the Holding Company (exclusive of directors, if any, to
be elected by the holders of any currently authorized but unissued shares of
Preferred Stock of the Holding Company) shall not be less than five or more than
25, as shall be provided from time to time in accordance with the Holding
Company's Bylaws. Its current Bylaws fix the number of directors at seven.
Additionally, the power to determine the number of directors within these
numerical limitations and the power to fill vacancies, whether occurring by
reason of an increase in the number of directors or by resignation, is vested in
the Board of Directors. The effect of such provisions may be to prevent a person
or entity from immediately acquiring control of the Holding Company through an
increase in the number of the Holding Company's directors and election of the
control person's or group's nominees to fill the newly created vacancies, thus
allowing existing management to continue in office.
ADVANCE NOTICE REQUIREMENTS FOR NOMINATION OF DIRECTORS AND
PRESENTATION OF NEW BUSINESS AT MEETINGS OF STOCKHOLDERS. Article XI of the
Articles of Incorporation of the Holding Company generally provides that any
stockholder desiring to make a nomination for the election of directors or a
proposal for new business at
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a meeting of stockholders must submit written notice not less than 30 nor more
than 60 days in advance of the meeting. Management believes that it is in the
best interests of the Holding Company and its stockholders to provide sufficient
time to enable management to disclose to stockholders information about a
dissident slate of nominations for directors. This advance notice requirement
may also give management time to solicit its own proxies in an attempt to defeat
any dissident slate of nominations, should management determine that doing so is
in the best interests of stockholders generally. Similarly, adequate advance
notice of shareholder proposals will give management time to study such
proposals and to determine whether to recommend to the stockholders that such
proposals be adopted. In certain instances, such provisions could make it more
difficult to oppose management's nominees or proposals, even if stockholders
believe such nominees or proposals are in their best interests.
SUPERMAJORITY VOTING REQUIREMENT FOR AMENDMENT OF CERTAIN PROVISIONS OF
THE ARTICLES OF INCORPORATION AND BYLAWS. Article XX of the Holding Company's
Articles of Incorporation provides that specified provisions contained in the
Articles of Incorporation may not be repealed or amended except upon the
affirmative vote of the holders of not less than 80% of the outstanding shares
of the Holding Company's stock entitled to vote generally in the election of
directors. This requirement exceeds the majority vote of the outstanding stock
that would otherwise be required by the OBCA for the repeal or amendment of such
provisions of the Articles of Incorporation. The specific provisions covered by
Article XX are (i) Article X governing the calling of special meetings of
stockholders and the absence of cumulative voting right, (ii) Article XI
requiring written notice to the Holding Company of nominations for the election
of directors and new business proposals, (iii) Article XII governing the number
of members of the Holding Company's Board of Directors, (iv) Article XIII
providing the mechanism for removing directors, (v) Article XIV governing the
acquisition of 10% or more of any class of equity security of the Holding
Company, (vi) Article XV governing the requirement for the approval of certain
business combinations involving "Related Persons," (vii) Article XVI governing
evaluation of business combinations; (viii) Article XVII pertaining to the
elimination of the liability of the directors to the Holding Company and its
stockholders for monetary damages, with certain exceptions, for breaches of
fiduciary duty, (ix) Article XVII providing for the indemnification of
directors, officers, employees, and agents of the Holding Company; and (x)
Article XIX and Article XX governing the required shareholder vote for amending
the Articles of Incorporation and Bylaws of the Holding Company. This latter
provision is intended to prevent the holders of less than 80% of the outstanding
stock of the Holding Company from circumventing any of the foregoing provisions
by amending the Articles of Incorporation to delete or modify one of such
provisions. Thus, the holders of more than 20% of the Holding Company's voting
stock may prevent amendments to the Holding Company's Articles of Incorporation
or Bylaws even if they were favored by the holders of a majority of the voting
stock.
PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF THE HOLDING COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS. The Board of Directors of the Savings Bank
believes that the provisions described above are prudent and will reduce the
Holding Company's vulnerability to takeover attempts and certain other
transactions which have not been negotiated with and approved by its Board of
Directors. These provisions will also assist the Savings Bank in the orderly
deployment of the Conversion proceeds into productive assets during the initial
period after the Conversion. The Board of Directors believes these provisions
are in the best interest of the Savings Bank and Holding Company and its
stockholders. In the judgment of the Board of Directors, the Holding Company's
Board will be in the best position to determine the true value of the Holding
Company and to negotiate more effectively for what may be in the best interests
of its stockholders. Accordingly, the Board of Directors believes that it is in
the best interest of the Holding Company and its stockholders to encourage
potential acquirors to negotiate directly with the Board of Directors of the
Holding Company and that these provisions will encourage such negotiations and
discourage hostile takeover attempts. It is also the view of the Board of
Directors that these provisions should not discourage persons from proposing a
merger or other transaction at a price reflective of the true value of the
Holding Company and which is in the best interest of all stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other hand, can be
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carefully planned and undertaken at an opportune time in order to obtain maximum
value of the Holding Company and its stockholders, with due consideration given
to matters such as the management and business of the acquiring corporation and
maximum strategic development of the Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
which is under different management and whose objective may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than the 300 thereby allowing for Exchange Act deregistration.
Despite the belief of the Savings Bank and the Holding Company as to
the benefits to stockholders of these provisions of the Holding Company's
Articles of Incorporation and Bylaws, these provisions may also have the effect
of discouraging a future takeover attempt which would not be approved by the
Holding Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so. Such provisions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board of Directors of the Savings Bank and the Holding Company, however,
have concluded that the potential benefits outweigh the possible disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Conversion, the Holding Company may adopt additional
provisions to the Holding Company's Articles of Incorporation or Bylaws
regarding the acquisition of its equity securities that would be permitted for
an Oregon business corporation. The Holding Company and the Savings Bank do not
presently intend to propose the adoption of further restrictions on the
acquisition of the Holding Company's equity securities.
The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Articles of Incorporation and Bylaws and Holding
Company, federal law and Oregon law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders
of the Holding Company may deem a potential acquisition to be in their best
interests, or deem existing management not to be acting in their best interests.
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
GENERAL
The Holding Company is authorized to issue 8,000,000 shares of Common
Stock having a par value of $.01 per share and 250,000 shares of Preferred Stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 4,082,500 shares of Common Stock and no shares of Preferred Stock in
the Conversion. Each share of the Holding Company's Common Stock will have the
same relative rights as, and will be identical in all respects with, each other
share of Common Stock. Upon payment of the Purchase Price for the common stock,
in accordance with the Plan of Conversion, all such stock will be duly
authorized, fully paid and nonassessable.
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY
THE FDIC.
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COMMON STOCK
DIVIDENDS. The Holding Company can pay dividends out of statutory
surplus or from certain net profits if, as and when declared by its Board of
Directors. The payment of dividends by the Holding Company is subject to
limitations which are imposed by law and applicable regulation. See "DIVIDEND
POLICY" and "REGULATION." The holders of Common Stock of the Holding Company
will be entitled to receive and share equally in such dividends as may be
declared by the Board of Directors of the Holding Company out of funds legally
available therefor. If the Holding Company issues Preferred Stock, the holders
thereof may have a priority over the holders of the Common Stock with respect to
dividends.
STOCK REPURCHASES. The Plan and OTS regulations place certain
limitations on the repurchase of the Holding Company's capital stock. See "THE
CONVERSION -- Restrictions on Repurchase of Stock" and "USE OF PROCEEDS."
VOTING RIGHTS. Upon Conversion, the holders of common stock of the
Holding Company will possess exclusive voting rights in the Holding Company.
They will elect the Holding Company's Board of Directors and act on such other
matters as are required to be presented to them under Oregon law or as are
otherwise presented to them by the Board of Directors. Except as discussed in
"CERTAIN RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder of
Common Stock will be entitled to one vote per share and will not have any right
to cumulate votes in the election of directors. If the Holding Company issues
Preferred Stock, holders of the Holding Company Preferred Stock may also possess
voting rights. Certain matters require a vote of 80% of the outstanding shares
entitled to vote thereon. See "CERTAIN RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY."
As a federally chartered mutual savings bank, corporate powers and
control of the Savings Bank are vested in its Board of Directors, who elect the
officers of the Savings Bank and who fill any vacancies on the Board of
Directors. Subsequent to Conversion, voting rights will be vested exclusively in
the owners of the shares of capital stock of the Savings Bank, all of which will
be owned by the Holding Company, and voted at the direction of the Holding
Company's Board of Directors. Consequently, the holders of the Common Stock will
not have direct control of the Savings Bank.
LIQUIDATION. In the event of any liquidation, dissolution or winding up
of the Savings Bank, the Holding Company, as holder of the Savings Bank's
capital stock would be entitled to receive, after payment or provision for
payment of all debts and liabilities of the Savings Bank (including all deposit
accounts and accrued interest thereon) and after distribution of the balance in
the special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders (see "THE CONVERSION -- Effects of Conversion to Stock
Form on Depositors and Borrowers of the Savings Bank -- Liquidation Account"),
all assets of the Savings Bank available for distribution. In the event of
liquidation, dissolution or winding up of the Holding Company, the holders of
its Common Stock would be entitled to receive, after payment or provision for
payment of all its debts and liabilities, all of the assets of the Holding
Company available for distribution. If Holding Company Preferred Stock is
issued, the holders thereof may have a priority over the holders of the Common
Stock in the event of liquidation or dissolution.
PREEMPTIVE RIGHTS. Holders of the Common Stock of the Holding Company
will not be entitled to preemptive rights with respect to any shares which may
be issued. The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the authorized Holding Company Preferred Stock
will be issued in the Conversion and there are no plans to issue Preferred
Stock. Such stock may be issued with such designations, powers, preferences and
rights as the Board of Directors may from time to time determine. The Board of
Directors can, without stockholder approval, issue Preferred Stock with voting,
dividend, liquidation and conversion rights which
108
<PAGE>
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.
RESTRICTIONS ON ACQUISITION
Acquisitions of the Holding Company are restricted by provisions in its
Articles of Incorporation and Bylaws and by the rules and regulations of various
regulatory agencies. See "REGULATION" and "CERTAIN RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY."
REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC
pursuant to Section 12(g) of the Exchange Act upon the completion of the
Conversion and will not deregister its Common Stock for a period of at least
three years following the completion of the Conversion. Upon such registration,
the proxy and tender offer rules, insider trading reporting and restrictions,
annual and periodic reporting and other requirements of the Exchange Act will be
applicable.
LEGAL AND TAX OPINIONS
The legality of the Common Stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C. The federal tax consequences of
the Offerings have been opined upon by Breyer & Aguggia and the Oregon tax
consequences of the Offerings have been opined upon by Deloitte & Touche LLP,
Portland, Oregon. Breyer & Aguggia and Deloitte & Touche LLP have consented to
the references herein to their opinions. Certain legal matters will be passed
upon for Webb by Elias, Matz, Tiernan & Herrick LLP, Washington, D.C.
EXPERTS
The consolidated financial statements of the Savings Bank as of March
31, 1997 and the nine months ended March 31, 1997 included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. The consolidated balance sheet of the Savings Bank as of June 30, 1996
and the consolidated statements of income, equity and cash flows for the years
ended June 30, 1996 and 1995 included in this Prospectus have been audited by
Coopers & Lybrand L.L.P., as stated in their report appearing herein, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Keller has consented to the publication herein of the summary of its
report to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the Holding Company and the Savings Bank, as converted and
its letter with respect to subscription rights and to the use of its name and
statements with respect to it appearing herein.
CHANGE IN ACCOUNTANTS
Prior to the fiscal year ended March 31, 1997, the Savings Bank's
consolidated financial statements were audited by Coopers & Lybrand LLP. Coopers
& Lybrand LLP was replaced and Deloitte & Touche LLP was engaged and continues
as the independent auditors of the Savings Bank. The decision to change auditors
was recommended by the Audit Committee on March 18, 1997, and was approved by
the Board of Directors. Accordingly, the Savings Bank's consolidated balance
sheet as of March 31, 1997 and related consolidated statements of income, equity
and cash flows for the nine months ended March 31, 1997, and included in this
Prospectus, were audited by Deloitte & Touche LLP and the consolidated balance
sheet as of June 30, 1996 and related consolidated statements of income, equity
and cash flows for the years ended June 30, 1996 and 1995, and included in this
Prospectus, were audited by Coopers & Lybrand LLP.
109
<PAGE>
For the fiscal years ended June 30, 1996 and 1995 and up to the date of
the replacement of Coopers & Lybrand LLP, there were no disagreements with
Coopers & Lybrand LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of Coopers & Lybrand LLP, would have caused it to
make a reference to the subject matter of the disagreement in connection with
its reports. The independent auditors' report on the consolidated financial
statements for the fiscal years ended June 30, 1996 and 1995, and included in
this Prospectus, did not contain an adverse opinion or a disclaimer of opinion,
and was not qualified or modified as to uncertainty, audit scope, or accounting
principles.
The Savings Bank has not consulted with Deloitte & Touche LLP during
its two most recent fiscal years nor during any subsequent interim period prior
to its engagement.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on
Form S-1 (File No. 333-30051) under the Securities Act with respect to the
Common Stock offered in the Conversion. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at its
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
may be obtained at prescribed rates from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement
also is available through the SEC's World Wide Web site on the Internet
(http://www.sec.gov).
The Savings Bank has filed with the OTS an Application for Approval of
Conversion, which includes proxy materials for the Savings Bank's Special
Meeting and certain other information. This Prospectus omits certain information
contained in such Application. The Application, including the proxy materials,
exhibits and certain other information that are a part thereof, may be
inspected, without charge, at the offices of the OTS, 1700 G Street, N.W.,
Washington, D.C. 20552 and at the office of the Regional Director of the OTS at
the West Regional Office of the OTS, Pacific Telesis Tower, 1 Montgomery Street,
Suite 400, San Francisco, California 94101.
Copies of the Holding Company's Articles of Incorporation and Bylaws
may be obtained by written request to the Savings Bank.
110
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PIONEER BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report - Deloitte & Touche LLP...................................................... F-1
Report of Independent Accountants - Coopers & Lybrand L.L.P. ............................................. F-2
Consolidated Balance Sheets as of March 31, 1997
and June 30, 1996 ....................................................................................... F-3
Consolidated Statements of Income for the
Nine Months Ended March 31, 1997
and the Years Ended June 30, 1996 and 1995 .............................................................. 22
Consolidated Statements of Equity for the
Nine Months Ended March 31, 1997 and for the
Years Ended June 30, 1996 and 1995 ...................................................................... F-4
Consolidated Statements of Cash Flows for
the Nine Months Ended March 31, 1997
and the Years Ended June 30, 1996 and 1995 .............................................................. F-5
Notes to Consolidated Financial Statements................................................................ F-7
</TABLE>
* * *
All schedules are omitted as the required information either is not
applicable or is included in the Consolidated Financial Statements or related
Notes.
Separate financial statements for the Holding Company have not been
included herein because the Holding Company, which has engaged in only
organizational activities to date, has no significant assets, liabilities
(contingent or otherwise), revenues or expenses.
111
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Pioneer Bank, a Federal Savings Bank
Baker City, Oregon
We have audited the accompanying consolidated balance sheet of Pioneer Bank, a
Federal Savings Bank, (the "Bank") and subsidiaries as of March 31, 1997, and
the related consolidated statement of income, equity and cash flows for the
nine-month period then ended. These consolidated financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Pioneer Bank, a Federal Savings
Bank, and subsidiaries as of March 31, 1997, and the results of their operations
and their cash flows for the nine-month period then ended, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Portland, Oregon
May 22, 1997
F-1
<PAGE>
[Coopers & Lybrand Letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Pioneer Bank, a Federal Savings Bank
Baker City, Oregon
We have audited the accompanying consolidated balance sheet of Pioneer Bank, a
Federal Savings Bank, and subsidiaries as of June 30, 1996, and the related
consolidated statements of income, equity and cash flows for the years ended
June 30, 1996 and 1995. These financial statements are the responsibility of
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, such financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Pioneer Bank, a
Federal Savings Bank, and subsidiaries as of June 30, 1996, and their
consolidated results of operations and cash flows for the years ended June 30,
1996 and 1995, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
COOPERS & LYBRAND LLP
Boise, Idaho
August 2, 1996
F-2
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Cash and due from banks $ 1,182,255 $ 825,106
Interest-bearing deposits 3,793,206 2,591,228
------------- -------------
Total cash and cash equivalents 4,975,461 3,416,334
Securities:
Available for sale, at fair value (amortized cost: $35,850,256
and $39,477,319) 35,651,533 39,401,276
Held to maturity, at amortized cost (fair value: $15,391,851
and $16,782,384) 15,302,393 17,010,617
Trading, at fair value -- 2,569,348
Loans receivable, net of allowance for loan losses of $725,089
and $540,986 138,880,914 132,347,110
Loans held for sale 428,200 --
Accrued interest receivable 1,324,637 1,336,025
Premises and equipment, net 4,640,848 4,373,200
Stock in Federal Home Loan Bank of Seattle, at cost 2,763,300 2,609,200
Other assets 245,380 393,932
------------- -------------
TOTAL ASSETS $ 204,212,666 $ 203,457,042
============= =============
LIABILITIES AND EQUITY
LIABILITIES:
Deposits:
Interest-bearing $ 68,049,713 $ 66,379,911
Noninterest-bearing 6,282,277 4,894,075
Time certificates 104,825,937 105,345,220
------------- -------------
Total deposits 179,157,927 176,619,206
Securities sold under agreements to repurchase 1,430,853 1,432,078
Accrued expenses and other liabilities 1,119,465 1,311,225
Advances from Federal Home Loan Bank of Seattle 800,000 2,650,000
Advances from borrowers for taxes and insurance 678,208 1,440,289
------------- -------------
Total liabilities 183,186,453 183,452,798
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 13 and 15)
EQUITY:
Retained earnings (substantially restricted) 21,148,510 20,050,916
Unrealized loss on securities available for sale, net of tax
of $76,095 in 1997 and $29,040 in 1996 (122,297) (46,672)
------------- -------------
Total equity 21,026,213 20,004,244
------------- -------------
TOTAL LIABILITIES AND EQUITY $ 204,212,666 $ 203,457,042
============= =============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
NINE-MONTH PERIOD ENDED MARCH 31, 1997 AND
YEARS ENDED JUNE 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Securities
Retained Available
Earnings for Sale Total
<S> <C> <C> <C>
BALANCE, JULY 1, 1994 $ 15,612,945 $ (135,829) $ 15,477,116
Net income 2,258,842 -- 2,258,842
Unrealized gain on securities available for sale,
net of tax -- 75,727 75,727
------------ ------------ ------------
BALANCE, JUNE 30, 1995 17,871,787 (60,102) 17,811,685
Net income 2,179,129 -- 2,179,129
Unrealized gain on securities available for sale,
net of tax -- 13,430 13,430
------------ ------------ ------------
BALANCE, JUNE 30, 1996 20,050,916 (46,672) 20,004,244
Net income 1,097,594 -- 1,097,594
Unrealized loss on securities available for sale,
net of tax -- (75,625) (75,625)
------------ ------------ ------------
BALANCE, MARCH 31, 1997 $ 21,148,510 $ (122,297) $ 21,026,213
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE-MONTH PERIOD ENDED MARCH 31, 1997 AND
YEARS ENDED JUNE 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,097,594 $ 2,179,129 $ 2,258,842
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 271,012 299,611 243,569
Amortization of deferred loan fees, net (195,002) (301,429) (184,965)
Provision for loan losses 216,063 115,397 66,548
Deferred income taxes (90,605) 33,562 223,100
Amortization and accretion of premiums and
discounts (21,680) (35,281) (18,395)
Federal Home Loan Bank of Seattle dividends (154,100) (184,400) (142,166)
Net unrealized (gain) loss on trading securities 2,151 71,274 (279,545)
Loss on sale of fixed assets 21,514 -- --
Other -- 1,859 10,681
Change in assets and liabilities:
Trading securities 180,675 1,165,434 161,053
Loans held for sale (428,200) -- --
Accrued interest receivable 11,388 (42,117) (36,712)
Other assets 148,552 22,981 (339,957)
Accrued expenses and other liabilities (54,435) (40,760) 92,988
------------ ------------ ------------
Net cash provided by operating activities 1,004,927 3,285,260 2,055,041
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations (27,245,000) (31,984,744) (34,464,721)
Loan principal repayments 21,284,824 24,538,000 22,416,000
Loans purchased (572,000) (256,000) (145,000)
Proceeds from maturity of securities available for sale 5,000,000 3,000,000 --
Principal repayments of securities available for sale 2,053,409 1,662,503 --
Purchase of securities available for sale (1,000,000) (4,000,000) --
Maturity of securities held to maturity -- 3,000,000 1,200,000
Principal repayments of securities held to maturity 1,667,726 4,323,112 4,258,665
Purchase of securities held to maturity -- -- (50,000)
Purchase of premises and equipment (560,174) (866,893) (1,018,174)
Proceeds from sale of premises and equipment -- 8,000 --
------------ ------------ ------------
Net cash provided by (used in)
investing activities 628,785 (576,022) (7,803,230)
------------ ------------ ------------
</TABLE>
(Continued)
F-5
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE-MONTH PERIOD ENDED MARCH 31, 1997 AND
YEARS ENDED JUNE 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net of withdrawals $ 2,538,721 $ 4,050,601 $ (4,537,941)
Increase (decrease) in securities sold under
agreements to repurchase (1,225) 270,593 (735,010)
Decrease in advances from borrowers for taxes
and insurance (762,081) (107,806) (2,345)
Proceeds from Federal Home Loan Bank of
Seattle advances 21,850,000 6,150,000 30,400,000
Repayment of Federal Home Loan Bank of
Seattle advances (23,700,000) (14,500,000) (19,400,000)
------------ ------------ ------------
Net cash provided by (used in)
financing activities (74,585) (4,136,612) 5,724,704
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,559,127 (1,427,374) (23,485)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 3,416,334 4,843,708 4,867,193
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR (PERIOD) $ 4,975,461 $ 3,416,334 $ 4,843,708
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year (period) for:
Interest on deposits and other borrowings $ 5,615,984 $ 8,087,606 $ 6,986,005
Income taxes 885,677 945,000 1,734,850
Noncash investing activities:
Transfer of loans to foreclosed real estate -- 46,539 16,789
Unrealized gain (loss) on securities available for
sale, net of tax (75,625) 13,430 75,727
Transfer of trading securities to available for
sale securities, at fair value 2,386,522 -- --
Loans originated for sale 1,577,000 759,754 991,273
Proceeds from sales of loans 1,148,800 759,754 991,273
</TABLE>
See notes to consolidated financial statements. (Concluded)
F-6
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE-MONTH PERIOD ENDED MARCH 31, 1997 AND
YEARS ENDED JUNE 30, 1996 AND 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business - Pioneer Bank, a Federal Savings Bank
(the "Bank"), is a federally chartered mutual savings bank engaged in the
business of accepting savings and demand deposits and providing mortgage,
consumer, commercial, commercial real estate loans, and to a lesser extent,
agricultural loans to its members and others.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Bank and its wholly-owned subsidiaries, Pioneer
Development Corporation and Pioneer Bank Investment Corporation. All
significant intercompany balances and transactions between the Bank and its
subsidiaries have been eliminated.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
assumptions that result in estimates that affect the reported amounts of
certain assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of related revenues and expenses during the reporting period.
Actual results could differ significantly from those estimates. Material
estimates that are particularly susceptible to change in the near term
relate to the determination of the allowance for loan losses.
Cash and Cash Equivalents - For purposes of classification in the
consolidated balance sheets and cash flows, the Bank considers all deposits
and investment securities with an original term to maturity of three months
or less to be cash equivalents. Cash equivalents consist of currency on
hand and due from banks and interest-bearing deposits with financial
institutions.
Securities - The Bank accounts for securities in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES.
Securities are classified as held to maturity where the Bank has the
ability and positive intent to hold them to maturity. Securities held to
maturity are carried at cost, adjusted for amortization of premiums and
accretion of discounts to maturity. Securities bought and held principally
for the purpose of sale in the near term are classified as trading
securities and are carried at fair value. Securities not classified as
trading, or as held to maturity, are classified as available for sale.
Unrealized holding gains and losses on securities available for sale are
excluded from earnings and are reported net of tax as a separate component
of equity until realized. Unrealized losses on securities resulting from an
other than temporary decline in fair value are recognized in earnings when
incurred. Realized and unrealized gains and losses are determined using the
specific identification method.
Loans Receivable - Loans are stated at unpaid principal less net deferred
loan origination fees. Interest income on loans is recognized based on the
principal and the stated interest rates and includes the amortization of
net deferred loan origination fees based on the level yield method over the
contractual life of the loans adjusted on a prospective basis for
prepayments and delinquencies. Net deferred loan origination fees on
loans held for sale are recognized in earnings when sold. Recognition of
interest
F-7
<PAGE>
income is discontinued and accrued interest is reversed when a loan is
placed on nonaccrual status. A loan is generally placed on nonaccrual
status when the loan becomes contractually past due more than 90 days.
Delinquent interest on loans past due 90 days or more is charged off or an
allowance established by a charge to income equal to all interest
previously accrued. Interest payments received on nonaccrual loans are
applied to principal if collection of principal is doubtful. Loans are
removed from nonaccrual status only when the loan is deemed current and
collectibility of principal and interest is no longer doubtful.
Loans Held for Sale - To mitigate interest rate sensitivity, from time to
time certain fixed rate loans are identified as held for sale in the
secondary market. Accordingly, such loans are classified as held for sale
in the consolidated balance sheets and are carried at the lower of
aggregate cost or net realizable value.
Allowance for Loan Losses - Allowances for losses on specific problem loans
and real estate owned are charged to earnings when it is determined that
the value of these loans and properties, in the judgment of management, is
impaired. In addition to specific reserves, the Bank also maintains general
provisions for loan losses based on evaluating known and inherent risks in
the loan portfolio, including management's continuing analysis of the
factors and trends underlying the quality of the loan portfolio. These
factors include changes in the size and composition of the loan portfolio,
actual loan loss experience, current and anticipated economic conditions,
detailed analysis of individual loans for which full collectibility may not
be assured, and determination of the existence and realizable value of the
collateral and guarantees securing the loans. The ultimate recovery of
loans is susceptible to future market factors beyond the Bank's control,
which may result in losses or recoveries differing significantly from those
provided in the consolidated financial statements.
The Bank accounts for impaired loans in accordance with SFAS No. 114,
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN, as amended by SFAS No.
118, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION
AND DISCLOSURES. These statements address the disclosure requirements and
allocations of the allowance for loan losses for certain impaired loans. A
loan within the scope of these statements is considered impaired when,
based on current information and events, it is probable that a creditor
will be unable to collect all amounts due according to the contractual
terms of the loan agreement, including scheduled interest payments. The
Bank excludes smaller balance homogeneous loans, including single
family residential and consumer loans, from the scope of this statement.
When a loan has been identified as being impaired, the amount of the
impairment is measured by using discounted cash flows, except when it is
determined that the sole source of repayment for the loan is the operation
or liquidation of the underlying collateral. In such case, impairment is
measured at current fair value of the collateral, reduced by estimated
selling costs. When the measurement of the impaired loan is less than the
recorded investment in the loan (including accrued interest, net deferred
loan fees or costs, and premium or discount), loan impairment is recognized
by establishing or adjusting an allocation of the allowance for loan
losses. The Bank generally considers these loans on a nonaccrual status
to be impaired. SFAS No. 114, as amended, does not change the timing of
charge-offs of loans to reflect the amount ultimately expected to be
collected. At March 31, 1997 and at June 30, 1996, respectively, the Bank
had no loans deemed to be impaired as defined by SFAS No. 114.
Loan Servicing Fees - Fees earned for servicing loans for the Federal Home
Loan Mortgage Corporation ("FHLMC") are reported as income when the related
mortgage loan payments are collected. Loan servicing costs are charged to
expense as incurred.
F-8
<PAGE>
Federal Home Loan Bank Stock - The Bank's investment in Federal Home Loan
Bank ("FHLB") of Seattle stock is carried at cost, which reasonably
approximates its fair value. As a member of the FHLB system, the Bank is
required to maintain a minimum level of investment in FHLB stock based on
specified percentages of its outstanding mortgages, total assets or FHLB
advances. At March 31, 1997, the Bank's minimum investment requirement was
approximately $1,432,400. The Bank may request redemption at par value of
any stock in excess of the amount the Bank is required to hold. Stock
redemptions are granted at the discretion of the FHLB of Seattle.
Foreclosed Real Estate - Real estate acquired through foreclosure is stated
at the lower of cost (principal balance of the former mortgage loan plus
costs of obtaining title and possession) or estimated fair value at the
time of foreclosure less estimated selling costs. Costs of development and
improvement of property are capitalized, and holding costs and market
adjustments are charged to expense as incurred. Foreclosed real estate is
included in other assets.
Premises and Equipment - Premises and equipment are stated at cost.
Depreciation is recognized on the straight-line method over the estimated
useful lives of the assets ranging from 3 to 40 years. Major renewals and
betterments are capitalized and repairs are expensed. Gains or losses from
disposals of premises and equipment are reflected in other expenses.
Income Taxes - The Bank uses the asset and liability method of accounting
for income taxes under which deferred tax assets and liabilities are
recognized for temporary differences between tax and financial reporting
bases of assets and liabilities based on enacted tax rates. A valuation
allowance is established to reduce deferred tax assets to the amount that
management believes will more likely than not be realized. The change in
the deferred tax assets and liabilities together with income taxes
currently payable are reflected as provision for income taxes in the
consolidated financial statements.
2. SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair
value of securities classified as available for sale and held to maturity
for the period ended March 31, 1997 and the year ended June 30, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
March 31, 1997 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
U.S. government and government
agency obligations:
Maturing after one year through five years $ 10,040,824 $ 1,710 $ (161,308) $ 9,881,226
Maturing after five years through ten years 6,194,550 4,065 (173,240) 6,025,375
------------ ------------ ------------ ------------
16,235,374 5,775 (334,548) 15,906,601
------------ ------------ ------------
Mortgage-backed and related securities:
GNMA maturing after one year through
five years 202,958 -- (14,751) 188,207
FHLMC maturing after one year through
five years 69,399 3,928 -- 73,327
GNMA maturing after five years through
ten years 273,387 -- (19,911) 253,476
GNMA maturing after ten years 12,670,647 454,965 (43,532) 13,082,080
FHLMC maturing after ten years 89,634 4,196 -- 93,830
FNMA maturing after ten years 6,308,857 17,290 (272,135) 6,054,012
------------ ------------ ------------ ------------
19,614,882 480,379 (350,329) 19,744,932
------------ ------------ ------------ ------------
Total available for sale $ 35,850,256 $ 486,154 $ (684,877) $ 35,651,533
============ ============ ============ ============
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
March 31, 1997 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held to maturity:
Mortgage-backed and related securities held to maturity:
GNMA maturing after ten years $13,216,550 $ 153,686 $ (24,777) $13,345,459
FNMA maturing after ten years 1,717,431 -- (29,603) 1,687,828
FHLMC maturing after ten years 368,412 -- (9,848) 358,564
----------- ----------- ----------- -----------
Total held to maturity $15,302,393 $ 153,686 $ (64,228) $15,391,851
=========== =========== =========== ===========
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
June 30, 1996 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
U.S. government and government agency
obligations:
Maturing within one year $ 5,000,453 $ 5,047 $ -- $ 5,005,500
Maturing after one year through five years 8,034,566 13,819 (163,385) 7,885,000
Maturing after five years through ten years 7,199,553 7,917 (147,730) 7,059,740
----------- ----------- ----------- -----------
20,234,572 26,783 (311,115) 19,950,240
----------- ----------- ----------- -----------
Mortgage-backed and related securities:
GNMA maturing after one year through
five years 47,721 -- (3,238) 44,483
FHLMC maturing after five years through
ten years 88,847 3,748 -- 92,595
GNMA maturing after five years through
ten years 531,239 -- (36,109) 495,130
GNMA maturing after ten years 11,686,335 510,949 (39,809) 12,157,475
FHLMC maturing after ten years 99,796 4,051 -- 103,847
FNMA maturing after ten years 6,788,809 24,121 (255,424) 6,557,506
----------- ----------- ----------- -----------
19,242,747 542,869 (334,580) 19,451,036
----------- ----------- ----------- -----------
Total available for sale $39,477,319 $ 569,652 $ (645,695) $39,401,276
=========== =========== =========== ===========
Held to maturity:
Mortgage-backed and related securities:
GNMA maturing after ten years $14,719,324 $ -- $ (216,889) $14,502,435
FNMA maturing after ten years 1,897,221 1,810 (9,952) 1,889,079
FHLMC maturing after ten years 394,072 -- (3,202) 390,870
----------- ----------- ----------- -----------
Total held to maturity $17,010,617 $ 1,810 $ (230,043) $16,782,384
=========== =========== =========== ===========
</TABLE>
Expected maturities of mortgage-backed and related securities will differ
from contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.
Mortgage-backed and related securities totaling $6,039,219 and $6,819,012
were pledged against public funds at March 31, 1997 and June 30, 1996,
respectively.
F-10
<PAGE>
3. LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
<S> <C> <C>
Mortgage loans:
One-to-four family $101,791,973 $101,198,727
Multi-family 1,844,098 1,927,310
Commercial 4,768,603 4,724,338
Construction 852,852 1,744,150
Land 222,733 14,249
------------ ------------
Total mortgage loans 109,480,259 109,608,774
------------ ------------
Consumer loans:
Unsecured 1,610,402 4,580,116
Home equity and second mortgage 17,514,040 12,751,043
Auto loans 2,064,403 1,404,888
Credit card 844,145 790,875
Loans secured by savings deposits 730,714 593,450
Other secured 2,627,025 2,586,527
------------ ------------
Total consumer loans 25,390,729 22,706,899
------------ ------------
Commercial business 4,066,100 3,142,111
Agricultural 2,466,095 --
------------ ------------
Total commercial business and agricultural 6,532,195 3,142,111
Total loans 141,403,183 135,457,784
Less:
Net deferred loan fees 1,028,465 984,623
Undisbursed portion of loans in process 768,715 1,585,065
Allowance for loan losses 725,089 540,986
------------ ------------
Total loans receivable, net $138,880,914 $132,347,110
============ ============
</TABLE>
The weighted average interest rate on loans at March 31, 1997 and June 30,
1996 was 8.77% and 8.74%, respectively.
The unpaid principal balance of loans serviced for the FHLMC, which is not
included in the consolidated financial statements, was $1,388,249 at March
31, 1997 and $2,574,564 at June 30, 1995.
F-11
<PAGE>
Allowance for loan loss activity is summarized as follows:
Nine-Month
Period Ended Year Ended Year Ended
March 31, June 30, June 30,
1997 1996 1995
Balance, beginning of year (period) $ 540,986 $ 455,059 $ 403,487
Provision for loan losses 216,063 115,397 66,548
Charge-offs (38,860) (59,202) (19,619)
Recoveries 6,900 29,732 4,643
--------- --------- ---------
$ 725,089 $ 540,986 $ 455,059
========= ========= =========
Nonaccrual loans were $190,124 and $163,000 at March 31, 1997 and June 30,
1996, respectively. Interest income that would have been recorded under the
original terms of nonaccrual loans totaled $15,511, $3,520 and $2,189 for
the nine-month period ended March 31, 1997 and for the years ended June 30,
1996 and 1995, respectively.
4. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows:
March 31, June 30,
1997 1996
Loans receivable $ 805,727 $ 739,185
Mortgage-backed and related securities 218,232 244,168
U.S. government and government agencies 300,678 352,672
---------- ----------
$1,324,637 $1,336,025
========== ==========
5. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
March 31, June 30,
1997 1996
Land $ 783,835 $ 783,835
Buildings and improvements 3,712,853 3,657,902
Furniture, fixtures and equipment 1,630,625 1,946,086
Construction in process 339,995 11,481
---------- ----------
6,467,308 6,399,304
Less accumulated depreciation 2,026,762 2,226,406
---------- ----------
4,440,546 4,172,898
Land held for development 200,302 200,302
---------- ----------
$4,640,848 $4,373,200
========== ==========
F-12
<PAGE>
6. DEPOSITS
Savings deposits are summarized as follows:
<TABLE>
<CAPTION>
At March 31, 1997 At June 30, 1996
------------------------------------- -------------------------------------
Weighted Weighted
Average Average
Interest Interest
Rate Balance Percent Rate Balance Percent
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing -- % $ 6,282,277 3.51% -- % $ 4,894,075 2.77%
NOW checking 1.56 27,260,167 15.22 1.51 26,525,915 15.02
Passbook savings accounts 2.89 24,004,738 13.40 2.89 24,969,160 14.14
Money market deposit 3.53 16,784,808 9.37 3.53 14,884,836 8.43
Fixed-rate certificates 5.44 104,825,937 58.50 5.61 105,345,220 59.64
------ ------------ ------ ------ ------------ ------
4.13% $179,157,927 100.00% 4.26% $176,619,206 100.00%
====== ============ ====== ====== ============ ======
</TABLE>
At March 31, 1997, fixed-rate certificates maturities are as follows:
Within one year $ 77,440,477
One year to two years 8,768,344
Two years to three years 10,488,973
Three years to four years 3,471,516
Four years to five years 3,180,550
Thereafter 1,476,077
------------
$104,825,937
============
The aggregate amount of fixed-rate certificates with a minimum denomination
of $100,000, was approximately $9,633,083 at March 31, 1997 and $9,272,076
at June 30, 1996. Deposit accounts in excess of $100,000 are not insured by
the Federal Deposit Insurance Corporation ("FDIC").
Interest expense on deposits is summarized as follows:
Nine-Month
Period Ended Year Ended Year Ended
March 31, June 30, June 30,
1997 1996 1995
NOW checking $ 317,950 $ 532,392 $ 704,491
Passbook savings accounts 525,987 735,392 895,462
Money market deposit 403,551 530,403 483,244
Fixed-rate certificates 4,237,508 5,780,854 4,706,552
---------- ---------- ----------
$5,484,996 $7,579,041 $6,789,749
========== ========== ==========
F-13
<PAGE>
7. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
Nine-Month
Period Ended Year Ended Year Ended
March 31, June 30, June 30,
1997 1996 1995
<S> <C> <C> <C>
Average balance $1,396,032 $1,259,696 $1,537,273
Maximum month end balance $1,458,603 $1,432,417 $1,956,279
Average interest rate at year (period) end 3.50% 3.53% 3.34%
Mortgage-backed and related securities pledged
as collateral for securities sold
under agreements to repurchase at year (period) end:
Amortized cost $2,047,781 $2,263,096 $2,613,356
Fair value $2,072,354 $2,295,440 $2,682,814
</TABLE>
The average balance is computed on a monthly average method. All agreements
mature the following business day. The Bank maintains control of the
securities pledged as collateral.
8. FHLB OF SEATTLE BORROWINGS
As a member of the FHLB of Seattle, the Bank maintains an available credit
line in the amount equal to 20% of total assets, less current outstanding
advances, subject to collateralization requirements. At March 31, 1997 and
June 30, 1996, FHLB of Seattle variable rate advances amounted to $800,000
and $2,650,000, respectively. All amounts outstanding are due within one
year.
Borrowings are collateralized in aggregate, as provided for in the
Advances, Security, and Deposit Agreement with the FHLB of Seattle, by
certain mortgages or deeds of trust, securities of the U.S. Government and
agencies thereof and cash on deposit with the FHLB of Seattle. At March 31,
1997, the minimum book value of eligible collateral pledged approximated
120% of borrowings.
Financial data pertaining to the weighted average cost, the level of FHLB
of Seattle borrowings and the related interest expense are summarized as
follows:
<TABLE>
<CAPTION>
Nine-Month
Period Ended Year Ended Year Ended
March 31, June 30, June 30,
1997 1996 1995
<S> <C> <C> <C>
Weighted average interest rate at year (period) end 5.70% 5.85% 6.38%
Weighted monthly average interest rate during
the year (period) 4.88% 6.21% 5.18%
Monthly average FHLB of Seattle borrowings $ 861,513 $ 6,965,657 $ 4,686,076
Maximum FHLB borrowings at any month end $ 2,850,000 $ 9,100,000 $ 11,000,000
</TABLE>
F-14
<PAGE>
9. INCOME TAXES
A reconciliation of the tax provision based on statutory corporate tax
rates on pre-tax income and the provision shown in the accompanying
consolidated statements of income is summarized as follows:
<TABLE>
<CAPTION>
Nine-Month Period Ended Year Ended Year Ended
March 31, 1997 June 30, 1996 June 30, 1995
--------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes at statutory rate $ 628,000 34.0% $1,204,292 34.0% $1,281,992 34.0%
State income taxes at statutory rate, net of
related federal tax effect 85,000 4.6 143,351 4.0 164,245 4.4
Other, net 36,669 2.0 15,264 0.5 65,487 1.7
---------- ---- ---------- ---- ---------- ----
$ 749,669 40.6% $1,362,907 38.5% $1,511,724 40.1%
========== ==== ========== ==== ========== ====
</TABLE>
Provision for income taxes is summarized as follows:
Nine-Month
Period Ended Year Ended Year Ended
March 31, June 30, June 30,
1997 1996 1995
Current provision:
Federal $ 694,114 $ 1,100,602 $ 1,066,924
State 146,160 228,743 221,700
----------- ----------- -----------
840,274 1,329,345 1,288,624
Deferred provision (benefit) (90,605) 33,562 223,100
----------- ----------- -----------
$ 749,669 $ 1,362,907 $ 1,511,724
=========== =========== ===========
The components of net deferred income tax assets and liabilities are
summarized as follows:
March 31, June 30,
1997 1996
Deferred tax assets:
Deferred loan fees $ 211,293 $ 293,714
Unrealized securities losses 120,556 79,070
Vacation accrual 75,208 65,973
Other 142,179 141,924
----------- -----------
Total deferred tax assets 549,236 580,681
----------- -----------
Deferred tax liabilities:
FHLB stock dividends (692,720) (660,825)
Accumulated depreciation (65,342) (84,824)
Allowance for loan losses (260,379) (394,842)
----------- -----------
Total deferred tax liabilities (1,018,441) (1,140,491)
----------- -----------
Net deferred tax liability $ (469,205) $ (559,810)
=========== ===========
F-15
<PAGE>
For the fiscal year ended June 30, 1996 and years prior, the Bank
determined bad debt expense to be deducted from taxable income based on 8%
of taxable income before such deduction or based on the experience method
as provided by the Internal Revenue Code ("IRC"). In August 1996, the
provision in the IRC allowing the 8% of taxable income deduction was
repealed. Accordingly, the Bank is required to use the experience method to
record bad debt expense for the current period and prospectively, and must
also recapture the excess reserve accumulated from use of the 8% method
ratably over a six-taxable-year period for all years subsequent to 1987.
The income tax provision from 1987 to 1996 included an amount for the tax
effect of such reserves. During the nine-month period ended March 31, 1997,
the Bank recaptured approximately $260,000 of bad debt deductions taken in
prior periods. At March 31, 1997, remaining bad debt deductions to be
recaptured approximated $1,300,000.
As a result of the bad debt deductions taken in years prior to 1988,
retained earnings include accumulated earnings of approximately $2,500,000,
on which federal income taxes have not been provided. If, in the future,
this portion of retained earnings is used for any purpose other than to
absorb losses on loans or on property acquired through foreclosure, federal
income taxes may be imposed at the then prevailing corporate tax rates. The
Bank does not contemplate that such amounts will be used for any purpose
which would create a federal income tax liability; therefore, no provision
has been made.
10. REGULATORY MATTERS AND CAPITAL REQUIREMENTS
Regulatory Capital - 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.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier I
capital to risk weighted assets, of Tier I capital to total assets, and
tangible capital to tangible assets (set forth in the table below).
Management believes that as of March 31, 1997, the Bank meets all capital
adequacy requirements to which it is subject as of March 31, 1997.
As of March 31, 1997, the most recent notification from the Office of
Thrift Supervision ("OTS") categorized the Bank as "well capitalized" under
the regulatory framework for prompt corrective action. To be categorized as
"well capitalized," the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table below.
There are no conditions or events, since the notification, that management
believes have changed the institution's category.
F-16
<PAGE>
The Bank's actual and required capital amounts and ratios are presented in
the table below:
<TABLE>
<CAPTION>
Categorized as
"Well Capitalized" Under
For Capital Adequacy Prompt Correction
Actual Purposes Action Provision
---------------------- --------------------- --------------------------
As of March 31, 1997 Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(To risk weighted assets) $ 21,635,599 21.2% $ 8,173,920 8.0 % $ 10,217,400 10.0%
Core or Tier I Capital
(To risk weighted assets) $ 20,910,510 20.5% N/A N/A $ 6,130,440 6.0%
Core Capital
(To total assets) $ 20,910,510 10.2% $ 6,122,909 3.0 % $ 10,198,733 5.0%
Tangible Capital
(To tangible assets) $ 20,910,510 10.3% $ 3,061,454 1.5 % N/A N/A
</TABLE>
<TABLE>
<CAPTION>
To Be Categorized as
"Well Capitalized" Under
For Capital Adequacy Prompt Correction
Actual Purposes Action Provision
------------------------- ---------------------- ------------------------
As of June 30, 1996 Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(To risk weighted assets) $ 20,382,222 21.45% $ 7,602,800 8.00% $ 9,503,500 10.00%
Core or Tier I Capital
(To risk weighted assets) $ 19,841,236 20.87% N/A N/A $ 5,702,100 6.00%
Core Capital
(To total assets) $ 19,841,236 9.76% $ 6,098,741 3.00% $ 10,164,700 5.00%
Tangible Capital
(To tangible assets) $ 19,841,236 9.76% $ 3,049,370 1.50% N/A N/A
</TABLE>
The following table is a reconciliation of the Bank's capital, calculated
according to generally accepted accounting principles (GAAP), to regulatory
tangible and risk-based capital at March 31, 1997:
Equity $ 21,026,213
Unrealized securities losses 122,297
Equity of non-includable subsidiaries (238,000)
------------
Tangible capital 20,910,510
General valuation allowance 725,089
------------
Total capital $ 21,635,599
============
Regulatory Matters - On August 23, 1993, the OTS issued a regulation which
would add an interest rate risk component to the risk-based capital
standards (the "final IRR rule"). Institutions with a greater than normal
interest rate risk exposure will be required to take a deduction from the
total capital available to meet their risk-based capital requirement. That
deduction is equal to one-half of the difference between the institution's
actual measured exposure and the normal level of exposure as defined by the
regulation. Although no such deduction was required as a result of the
Bank's most recent regulatory examination, a deduction may be required as a
result of future examinations. The final IRR rule has been postponed and it
is not practicable to determine when it will become effective.
F-17
<PAGE>
At periodic intervals, the OTS and the FDIC routinely examine the Bank as
part of their legally prescribed oversight of the thrift industry. Based on
these examinations, the regulators can direct that the Bank's financial
statements be adjusted in accordance with their findings. A future
examination by the OTS or the FDIC could include a review of certain
transactions or other amounts reported in the Bank's 1997 financial
statements. In view of the uncertain regulatory environment in which the
Bank operates, the extent, if any, to which a forthcoming regulatory
examination may ultimately result in adjustments to the 1997 financial
statements cannot presently be determined.
On September 30, 1996, the United States Congress passed and the President
signed into law the omnibus appropriations package, including the Bank
Insurance Fund/Savings Association Insurance Fund (BIF/SAIF) and Regulatory
Burden Relief packages. Included in this legislation was a requirement for
SAIF-insured institutions to recapitalize the SAIF insurance fund through a
one-time special assessment to be paid within 60 days of the first of the
month following enactment. As the Bank is insured by the SAIF, this
assessment resulted in a pre-tax charge to other expenses for the
nine-month period ended March 31, 1997 of $1,146,387 based on the March 31,
1995 SAIF deposit assessment base of $174,488,122.
11. EMPLOYEE BENEFIT PLAN
The Bank and its subsidiaries sponsor a contributory defined contribution
plan pursuant to Section 401(k) of the IRC covering substantially all
employees. Under the plan, the Bank made contributions limited to 6.67% of
participating employees' salaries. Contributions and Plan administration
expenses aggregated to $94,622, $133,886, and $119,704 for the nine-month
period ended March 31, 1997 and the years ended June 30, 1996 and 1995,
respectively.
12. TRANSACTIONS WITH AFFILIATES
Loans - Certain directors and executive officers of the Bank and
subsidiaries are customers of, and have had transactions with, the Bank in
the ordinary course of business, and the Bank expects to have similar
transactions in the future.
An analysis of activity with respect to loans receivable from directors and
executive officers of the Bank and its subsidiaries for the nine-month
period ended March 31, 1997 and the years ended June 30, 1996 and 1995 is
summarized as follows:
Nine-Month
Period Ended Year Ended Year Ended
March 31, June 30, June 30,
1997 1996 1995
Beginning balance $ 204,451 $ 414,472 $ 506,744
Additions 133,125 203,700 64,320
Reductions (11,523) (413,721) (156,592)
--------- --------- ---------
Ending balance $ 326,053 $ 204,451 $ 414,472
========= ========= =========
At March 31, 1997, all loans to directors and executive officers of the
Bank and its subsidiaries were current.
F-18
<PAGE>
13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
AND CONCENTRATIONS OF CREDIT RISK
The Bank is a party to certain financial instruments with off-balance sheet
risk to meet the financing needs of customers. Commitments to extend credit
are $11,164,041 and $7,613,627 at March 31, 1997 and June 30, 1996,
respectively.
Included in the $11,164,041 and $7,613,627 total commitments to extend
credit are fixed rate loan commitments of $1,123,000 and $3,305,000 at
March 31, 1997 and June 30, 1996, respectively. The ranges of interest
rates for these loan commitments are 7.75% to 9.50% for both years.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee by the customer. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
The Bank evaluates creditworthiness on an individual customer basis.
The Bank originates residential real estate loans and, to a lesser extent,
commercial and consumer loans. Greater than 90% of all loans in the Bank's
portfolio are secured by properties located in communities of eastern
Oregon.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
A summary of book value and estimated fair value of financial instruments
is summarized as follows:
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
------------------------ ------------------------
Balance Balance
Sheet Estimated Sheet Estimated
(Dollars in Thousands) Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 4,975 $ 4,975 $ 3,416 $ 3,416
Securities 50,954 51,043 58,981 58,753
Loans held for sale 428 428 -- --
Loans receivable, net of allowance
for loan losses 138,881 140,592 132,347 133,072
FHLB stock 2,763 2,763 2,609 2,609
Financial liabilities:
Demand and savings deposits 74,332 74,332 71,274 71,274
Time certificates of deposit 104,826 105,168 105,345 106,280
Securities sold under agreements
to repurchase 1,431 1,431 1,432 1,432
FHLB advances 800 800 2,650 2,650
</TABLE>
Financial assets and liabilities other than investment securities are not
traded in active markets. Estimated fair values require subjective
judgments and are approximate. The above estimates of fair value are not
necessarily representative of amounts that could be realized in actual
market transactions, nor of the underlying value of the Bank. Changes in
the following methodologies and assumptions could significantly affect the
estimates.
F-19
<PAGE>
Financial Assets - The estimated fair value approximates the book value of
cash and cash equivalents. For securities, the fair value is based on
quoted market prices. The fair value of loans is estimated by discounting
future cash flows using current rates at which similar loans would be made.
The fair value of loans held for sale and FHLB stock approximates the
carrying amounts.
Financial Liabilities - The estimated fair value of demand and savings
deposits, securities sold under agreements to repurchase, and FHLB advances
approximates carrying amounts. The fair value of time certificates of
deposit is estimated by discounting the future cash flows using current
rates offered on similar instruments. The value of long-term relationships
with depositors is not reflected.
Off-Balance Sheet Financial Instruments - Commitments to extend credit
represent all off-balance-sheet financial instruments. The fair value of
these commitments is not significant. See Note 13 to the consolidated
financial statements.
15. CONTINGENCIES
The Bank is a defendant in legal proceedings arising in the normal course
of business. In the opinion of management, the disposition of litigation
will not have a material effect on the Bank's financial position, results
of operations, or liquidity.
16. CONVERSION TO CAPITAL STOCK FORM OF OWNERSHIP
The Board of Directors of the Bank adopted a Plan of Conversion on May 22,
1997, to convert from a federal chartered mutual savings bank to a federal
capital stock savings bank with the concurrent formation of a holding
company, subject to approval by the regulatory authorities and members of
the Bank. The conversion is expected to be accomplished through amendment
of the Bank's federal mutual charter and the sale of the holding company's
common stock in an amount equal to the consolidated pro forma market value
of the holding company and the Bank after given effect to the conversion. A
subscription of the shares of common stock will be offered initially to the
Bank's depositors, employee benefit plans and to certain other eligible
subscribers. It is anticipated that any shares not purchased in the
subscription offering will be offered in a community offering, and then any
remaining shares offered to the general public in a syndicated community
offering.
At the time of the conversion, the Bank will establish a liquidation
account in an amount equal to its capital as of the last date of the
consolidated statement of financial condition appearing in the final
prospectus. The liquidation account will be maintained for the benefit of
eligible account holders who continue to maintain their accounts at the
Bank after the conversion. The liquidation account will be reduced annually
to the extent that eligible account holders have reduced their qualifying
deposits as of each anniversary date. Subsequent increases will not restore
an eligible account holder's interest in the liquidation account. In the
event of a complete liquidation of the Bank, each eligible account holder
will be entitled to receive a distribution from the liquidation account in
an amount proportionate to the current adjusted qualifying balances for
accounts then held.
Conversion costs incurred through March 31, 1997 amounted to $2,917.
The conversion costs are being accounted for as a prepaid expense. When
the conversion is complete, these costs will be netted against the
proceeds and included in paid-in capital. If the conversion is
terminated, such costs will be immediately expensed.
F-20
<PAGE>
Subsequent to the conversion, the Bank may not declare or pay cash
dividends on or repurchase any of its shares of common stock if the effect
thereof would cause stockholders' equity to be reduced below applicable
regulatory capital maintenance requirements or is such declaration and
payment would otherwise violate regulatory requirements.
* * * * * *
F-21
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by Oregon Trail Financial Corp. or Pioneer Bank, a Federal Savings
Bank. This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby to any person or in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus nor any sale hereunder
shall under any circumstances create any implication that there has been no
change in the affairs of Oregon Trail Financial Corp. or Pioneer Bank, a Federal
Savings Bank since any of the dates as of which information is furnished herein
or since the date hereof.
Table of Contents Page
Prospectus Summary............................................
Selected Consolidated Financial Information
Risk Factors..................................................
Oregon Trail Financial Corp...................................
Pioneer Bank, a Federal Savings Bank..........................
Use of Proceeds...............................................
Dividend Policy...............................................
Market for Common Stock.......................................
Capitalization................................................
Historical and Pro Forma Regulatory Capital Compliance
Pro Forma Data................................................
Shares to be Purchased by Management Pursuant
to Subscription Rights......................................
Pioneer Bank, a Federal Savings Bank and Subsidiary
Consolidated Statements of Income............................
Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................
Recent Developments...........................................
Business of the Holding Company...............................
Business of the Savings Bank..................................
Management of the Holding Company.............................
Management of the Savings Bank................................
Regulation....................................................
Taxation......................................................
The Conversion................................................
Restrictions on Acquisition of the Holding Company
Description of Capital Stock of the Holding Company
Registration Requirements.....................................
Legal and Tax Opinions........................................
Experts.......................................................
Change in Accountants.........................................
Additional Information........................................
Index to Consolidated Financial Statements
UNTIL THE LATER OF _______, 1997, OR __ DAYS AFTER COMMENCEMENT OF THE
SYNDICATED COMMUNITY OFFERING OF COMMON STOCK, IF ANY, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
OREGON TRAIL FINANCIAL CORP.
[Logo]
(Proposed Holding Company for
Pioneer Bank, A Federal Savings Bank)
3,017,500 to 4,082,500 Shares of
Common Stock
PROSPECTUS
CHARLES WEBB & COMPANY, INC.,
a Division of Keefe, Bruyette & Woods, Inc.
________ __, 1997
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution(1)
Legal fees and expenses.....................................$150,000
Securities Marketing Firm legal fees........................ 35,000
EDGAR, printing, postage, copying and mailing.............. 110,000
Appraisal/business plan fees and expenses.................. 22,800
Accounting fees............................................. 85,000
Securities marketing fees...................................455,000(1)
Data processing fees and expenses........................... 7,500
SEC filing fee.............................................. 13,266
OTS filing fee.............................................. 8,400
Blue sky legal fees and expenses............................ 5,000
Other expenses.............................................. 25,034
--------
Total....................................................$917,000
========
- ------------
(1) Webb will receive a fee of 1.5% of stock sold, excluding ESOP shares (8%)
and insider purchases totaling $2.2 million. Amount shown is based on
midpoint of Estimated Valuation Range.
Item 14. Indemnification of Officers and Directors
Indemnification of Officers and Directors of Oregon Trail Financial
Corp.
Article XVIII of the Articles of Incorporation of Oregon Trail
Financial Corp. requires indemnification of directors, officers and
employees to the fullest extent permitted by Oregon law.
Sections 60.387 to 60.414 of the Oregon Business Corporation Act
define areas for indemnity coverage, as follows:
60.387 DEFINITIONS FOR 60.387 TO 60.414. As used in ORS 60.387 to 60.414:
(1) "Corporation" includes any domestic or foreign predecessor entity of a
corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is or was
serving at the corporations' request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. A director is
considered to be serving an employee benefit plan at the corporation's request
if the director's duties to the corporation also impose duties on or otherwise
involve services by the director to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
(3) "Expenses" include counsel fees.
(4) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to an employee
benefit plan or reasonable expenses incurred with respect to a proceeding.
(5) "Officer" means an individual who is or was an officer of a
corporation or an individual who, while an officer of a corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. An officer is
considered to be serving an employee benefit plan at the corporation's request
if the officer's duties to the corporation also impose duties on or include
services by the officer to the employee benefit plan or to participants in or
beneficiaries of the plan. "Officer" includes, unless the context requires
otherwise, the estate or personal representative of an officer.
(6) "Party" includes an individual who was, is or is threatened to be made
a named defendant or respondent in a proceeding.
II-1
<PAGE>
(7) "Proceeding" means any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
60.391 AUTHORITY TO INDEMNIFY DIRECTORS. (1) Except as provided in
subsection (4) of this section, a corporation may indemnify an individual made a
party to a proceeding because the individual is or was a director against
liability incurred in the proceeding if:
(a) The conduct of the individual was in good faith;
(b) The individual reasonably believed that the individual's conduct was
in the best interests of the corporation, or at least not opposed to its best
interests; and
(c) In the case if any criminal proceeding, the individual had no
reasonable cause to believe the individual's conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of paragraph (b) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation; or
(b) In connection with any other proceeding charging improper personal
benefit to the director in which the director was adjudged liable on the basis
that personal benefit was improperly received by the director.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with a proceeding.
60.394 MANDATORY INDEMNIFICATION. Unless limited by its articles of
incorporation, a corporation shall indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the director was a party because of being a director of the corporation
against reasonable expenses incurred by the director in connection with the
proceeding.
60.397 ADVANCE FOR EXPENSES. (1) A corporation may pay for or reimburse
the reasonable expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if:
(a) The director furnishes the corporation a written affirmation of the
director's good faith belief that the director has met the standard of conduct
described in ORS 60.391; and
(b) The director furnishes the corporation a written undertaking, executed
personally or on the director's behalf, to repay the advance if it is ultimately
determined that the director did not meet the standard of conduct.
(2) The undertaking required by paragraph (b) of subsection (1) of this
section must be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial ability to make
repayment.
(3) Any authorization of payments under this section may be made by
provision in the articles of incorporation, or bylaws, by a resolution of the
shareholders or the board of director or by contract.
60.401 COURT-ORDERED INDEMNIFICATION. Unless the corporation's articles of
incorporation provide otherwise, a director of the corporation who is a party to
a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court after giving any notice the court considers necessary may
order indemnification if it determines:
(1) The director is entitled to mandatory indemnification under ORS
60.394, in which case the court shall also order the corporation to pay the
director's reasonable expenses incurred to obtain court-ordered indemnification;
or
(2) The director is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not the director met the
standard of conduct set forth in ORS 60.391 or as adjudged liable as described
in ORS 60.391(4), whether the liability is based on a judgment, settlement or
proposed settlement or otherwise.
II-2
<PAGE>
60.404 DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION. (1) A
corporation may not indemnify a director under ORS 60.391 unless authorized in
the specific case after a determination has been made that indemnification of
the director is permissible in the circumstances because the director has met
the standard of conduct set forth in ORS 60.391.
(2) A determination that indemnification of a director is permissible
shall be made:
(a) By the board of directors by majority vote of a quorum consisting of
directors not at the time parties to the proceeding;
(b) If a quorum cannot be obtained under paragraph (a) of this subsection,
by a majority vote of a committee duly designated by the board of directors
consisting solely of two or more directors not at the time parties to the
proceeding. However, directors who are parties to the proceeding may participate
in designation of the committee;
(c) By special legal counsel selected by the board of directors or its
committee in the manner prescribed in paragraph (a) or (b) of this subsection
or, if a quorum of the board of directors cannot be obtained under paragraph (a)
of this subsection and a committee cannot be designated under paragraph (b) of
this subsection, the special legal counsel shall be selected by majority vote of
the full board of directors, including directors who are parties to the
proceeding; or
(d) By the shareholders.
(3) 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 the
reasonableness of expenses shall be made by those entitled under paragraph (c)
of subsection (2) of this section to select counsel.
60.407 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS. Unless a
corporation's articles of incorporation provide otherwise:
(1) An officer of the corporation is entitled to mandatory indemnification
under ORS 60.394, and is entitled to apply for court-ordered indemnification
under ORS 60.401, in each case to the same extent as a director under ORS 60.394
and 60.401.
(2) The corporation may indemnify and advance expenses under ORS 60.387 to
60.411 to an officer, employee or agent of the corporation to the same extent as
to a director.
60.411 INSURANCE. A corporation may purchase and maintain insurance on
behalf of an individual against liability asserted against or incurred by the
individual who is or was a director, officer, employee or agent of the
corporation or who, while a 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 foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. The corporation may purchase and maintain the insurance even if the
corporation has no power to indemnify the individual against the same liability
under ORS 60.391 to 60.394.
60.414 APPLICATION OF ORS 60.387 TO 60.411. (1) The indemnification and
provisions for advancement of expenses provided by ORS 60.387 to 60.411 shall
not be deemed exclusive of any other rights to which directors, officers,
employees or agents may be entitled under the corporation's articles of
incorporation or bylaws, any agreement, general or specific action of its board
of directors, vote of shareholders or otherwise, 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. Specifically and not by way of limitation, a corporation shall have the
power to make or agree to make any further indemnification, including
advancement of expenses, of:
(a) Any director as authorized by the articles of incorporation, any
bylaws approved, adopted or ratified by the shareholders or any resolution or
agreement approved, adopted or ratified, before or after such indemnification or
agreement is made, by the shareholders, provided that no such indemnification
shall indemnify any director from or on account of acts or omissions for which
liability could not be eliminated under ORS 60.047(2)(d); and
(b) Any officer, employee or agent who is not a director as authorized by
its articles of incorporation or bylaws, general or specific action of its board
of directors or agreement. Unless the articles of incorporation, or any such
agreement or resolution provide otherwise, any determination as to any further
indemnify under this paragraph shall be made in accordance with ORS 60.404.
II-3
<PAGE>
(2) If articles of incorporation limit indemnification or advance of
expenses, any indemnification and advance of expenses are valid only to the
extent consistent with the articles of incorporation.
(3) ORS 60.387 to 60.411 does not limit a corporation's power to pay or
reimburse expenses incurred by a director in connection with the director's
appearance as a witness in a proceeding at a time when the director has not been
made a named defendant or respondent to a proceeding. (Last amended by Ch. 883,
L. '91, eff. 9-29-91.)
Item 15. Recent Sales of Unregistered Securities.
Not Applicable
Item 16. Exhibits and Financial Statement Schedules:
The financial statements and exhibits filed as part of this
Registration Statement are as follows:
(a) List of Exhibits
1.1 -- Form of proposed Agency Agreement among Oregon Trail Financial
Corp., Pioneer Bank, a Federal Savings Bank and Charles Webb & Co. (a)
1.2 -- Engagement Letter between Pioneer Bank, a Federal Savings Bank and
Charles Webb & Co. (a)
2 -- Plan of Conversion of Pioneer Bank, a Federal Savings Bank (attached
as an exhibit to the Proxy Statement included herein as Exhibit 99.5)
3.1 -- Articles of Incorporation of Oregon Trail Financial Corp. (a)
3.2 -- Bylaws of Oregon Trail Financial Corp. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities
registered (a)
8.1 -- Federal Tax Opinion of Breyer & Aguggia
8.2 -- State Tax Opinion of Deloitte & Touche LLP
8.3 -- Opinion of Keller & Company, Inc. as to the value of subscription
rights (a)
10.1 -- Proposed Form of Employment Agreement For Certain Executive Officers
(a)
10.2 -- Proposed Form of Severance Agreement For Certain Senior Officers (a)
10.3 -- Proposed Form of Employee Stock Ownership Plan (a)
10.4 -- Pioneer Bank, a Federal Savings Bank 401(k) Plan
10.5 -- Proposed Form of Pioneer Bank, a Federal Savings Bank Employee
Severance Compensation Plan (a)
10.6 -- Pioneer Bank Director Emeritus Plan
16 -- Letter Regarding Change in Accountants
21 -- Subsidiaries of Oregon Trail Financial Corp. (a)
II-4
<PAGE>
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Coopers & Lybrand LLP
23.3 -- Consent of Breyer & Aguggia (contained in opinion included as
Exhibit 5) (a)
23.4 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion (contained
in opinion included as Exhibit 8.1)
23.5 -- Consent of Keller & Company, Inc. (a)
24 -- Power of Attorney (contained in signature page to the Registration
Statement) (a)
99.1 -- Order and Certification Form (contained in the marketing materials
included as Exhibit 99.2) (a)
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Appraisal Agreement with Keller & Company, Inc. (a)
99.4 -- Appraisal Report of Keller & Company, Inc.
99.5 -- Proxy Statement for Special Meeting of Members of Pioneer Bank, a
Federal Savings Bank
- ---------------------
(a) Previously filed.
Financial Statements and Schedules
PIONEER BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARY
Pages
Independent Auditors' Report - Deloitte & Touche LLP....................... F-1
Report of Independent Accountants - Coopers & Lybrand LLP.................. F-2
Consolidated Balance Sheets as of March 31, 1997
and June 30, 1996 ........................................................ F-3
Consolidated Statements of Income for the
Nine Months Ended March 31, 1997
and the Years Ended June 30, 1996 and 1995 ............................... 22
Consolidated Statements of Equity for the
Nine Months Ended March 31, 1997 and for the
Years Ended June 30, 1996 and 1995 ....................................... F-4
Consolidated Statements of Cash Flows for
the Nine Months Ended March 31, 1997
and the Years Ended June 30, 1996 and 1995 ............................... F-5
Notes to Consolidated Financial Statements................................. F-7
All schedules are omitted because the required information is either
not applicable or is included in the financial statements or related notes.
II-5
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, as amended ("Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") (and, where
applicable, each filing of any employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Amended Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in Baker
City, Oregon on the 6th day of August, 1997.
OREGON TRAIL FINANCIAL CORP.
By: /s/Dan L. Webber
Dan L. Webber
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures Title Date
/s/Dan L. Webber President and Chief Executive August 6, 1997
- --------------------------
Dan L. Webber Officer
(Principal Executive Officer)
/s/ Jerry F. Aldape* Senior Vice President, Chief August 6, 1997
- -------------------------- Financial Officer and Secretary
Jerry F. Aldape (Principal Financial Officer)
/s/ Nadine J. Johnson* Vice President and Treasurer/ August 6, 1997
- -------------------------- Controller
Nadine J. Johnson (Principal Accounting Officer)
/s/ John Gentry* Chairman of the Board August 6, 1997
- --------------------------
John Gentry
/s/ Albert H. Durgen* Director August 6, 1997
- --------------------------
Albert H. Durgen
/s/ Edward H. Elms* Director August 6, 1997
- --------------------------
Edward H. Elms
/s/ John A. Lienkaemper* Director August 6, 1997
- --------------------------
John A. Lienkaemper
/s/ Charles Rouse* Director August 6, 1997
- --------------------------
Charles Rouse
/s/ Stephen R. Whittemore* Director August 6, 1997
- --------------------------
Stephen R. Whittemore
* By power of attorney dated June 25, 1997.
<PAGE>
As filed with the Securities and Exchange Commission on August 6, 1997
Registration No. 333-30051
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
OREGON TRAIL FINANCIAL CORP.
(Exact name of registrant as specified in charter)
Oregon 6035 91-1829481
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
2055 FIRST STREET
BAKER CITY, OREGON 97814
(541) 523-6327
(Address and telephone number of principal executive offices)
John F. Breyer, Jr., Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
Suite 470 East 1300 I Street, N.W.
Washington, D.C. 20005
(Name and address of agent for service)
<PAGE>
INDEX TO EXHIBITS
1.1 -- Form of proposed Agency Agreement among Oregon Trail Financial
Corp., Pioneer Bank, a Federal Savings Bank and Charles Webb & Co.
(a)
1.2 -- Engagement Letter between Pioneer Bank, a Federal Savings Bank and
Charles Webb & Co. (a)
2 -- Plan of Conversion of Pioneer Bank, a Federal Savings Bank
(attached as an exhibit to the Proxy Statement included herein as
Exhibit 99.5)
3.1 -- Articles of Incorporation of Oregon Trail Financial Corp. (a)
3.2 -- Bylaws of Oregon Trail Financial Corp. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities
registered (a)
8.1 -- Federal Tax Opinion of Breyer & Aguggia
8.2 -- State Tax Opinion of Deloitte & Touche LLP
8.3 -- Opinion of Keller & Company, Inc. as to the value of subscription
rights (a)
10.1 -- Proposed Form of Employment Agreement For Certain Executive
Officers (a)
10.2 -- Proposed Form of Severance Agreement For Certain Senior Officers
(a)
10.3 -- Proposed Form of Employee Stock Ownership Plan (a)
10.4 -- Pioneer Bank, a Federal Savings Bank 401(k) Plan
10.5 -- Proposed Form of Pioneer Bank, a Federal Savings Bank Employee
Severance Compensation Plan (a)
10.6 -- Pioneer Bank Director Emeritus Plan
16 -- Letter Regarding Change in Accountants
21 -- Subsidiaries of Oregon Trail Financial Corp. (a)
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Coopers & Lybrand LLP
23.3 -- Consent of Breyer & Aguggia (contained in opinion included as
Exhibit 5) (a)
23.4 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion
(contained in opinion included as Exhibit 8.1)
23.5 -- Consent of Keller & Company, Inc. (a)
24 -- Power of Attorney (contained in signature page to the Registration
Statement) (a)
99.1 -- Order and Certification Form (contained in the marketing materials
included as Exhibit 99.2) (a)
<PAGE>
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Appraisal Agreement with Keller & Company, Inc. (a)
99.4 -- Appraisal Report of Keller & Company, Inc.
99.5 -- Proxy Statement for Special Meeting of Members of Pioneer Bank, a
Federal Savings Bank
- ---------------------
(a) Previously filed.
<PAGE>
EXHIBIT 8.1
FEDERAL TAX OPINION OF BREYER & AGUGGIA
<PAGE>
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Breyer & Aguggia Telephone (202) 737-7900
ATTORNEYS AT LAW Facsimile (202) 737-7979
July 29, 1997
Boards of Directors
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
2055 First Street
Baker City, Oregon 97814
Re: Certain Federal Income Tax Consequences Relating to
Proposed Holding Company Conversion of Pioneer Bank,
a Federal Savings Bank
Gentlemen and Ladies:
In accordance with your request, set forth herein is the opinion of
this firm relating to certain federal income tax consequences of (i) the
proposed conversion of Pioneer Bank, a Federal Savings Bank (the "Savings Bank")
from a federally-chartered mutual savings bank to a federally-chartered stock
savings bank (the "Converted Savings Bank") (the "Stock Conversion") and (ii)
the concurrent acquisition of 100% of the outstanding capital stock of the
Converted Savings Bank by a parent holding company formed at the direction of
the Board of Directors of the Savings Bank and to be known as Oregon Trail
Financial Corp. (the "Holding Company").
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate, including but
not limited to, the Plan of Conversion as adopted by the Savings Bank's Board of
Directors on February 25, 1997 (the "Plan"); the federal mutual charter and
bylaws of the Savings Bank; the certificate of incorporation and bylaws of
Holding Company; the Affidavit of Representations dated July 25, 1997 provided
to us by the Savings Bank and the Holding Company (the "Affidavit"), and the
Prospectus (the "Prospectus") included in the Registration Statement on Form S-1
filed with the Securities and Exchange Commission ("SEC") on June 25, 1997 (the
"Registration Statement"). In such examination, we have assumed, and have not
independently verified, the genuineness of all signatures on original documents
where due execution and delivery are requirements to the effectiveness thereof.
Terms used but not defined herein, whether capitalized or not, shall have the
same meaning as defined in the Plan.
<PAGE>
Boards of Directors Breyer & Aguggia
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
July 29, 1997
Page 2
BACKGROUND
Based solely upon our review of such documents, and upon such
information as the Savings Bank has provided to us (which we have not attempted
to verify in any respect), and in reliance upon such documents and information,
we set forth herein a general summary of the relevant facts and proposed
transactions, qualified in its entirety by reference to the documents cited
above.
The Savings Bank is a federally-chartered mutual savings bank which is
in the process of converting to a federally-chartered stock savings bank. The
Savings Bank was initially organized in 1901. The Savings Bank is also a member
of the Federal Home Loan Bank System and its deposits are federally insured
under the Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation. The Savings Bank conducts its operations from its main
office and one branch office located in Baker City, Oregon, and six additional
branch offices in neighboring communities.
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and originating permanent loans secured by
first mortgages on one- to four-family residential properties. At March 31,
1997, the Savings Bank had total assets of $204.3 million, total deposits of
$179.2 million and total equity of $21.1 million.
As a federally-chartered mutual savings bank, the Savings Bank has no
authorized capital stock. Instead, the Savings Bank, in mutual form, has a
unique equity structure. A savings depositor of the Savings Bank is entitled to
payment of interest on his account balance as declared and paid by the Savings
Bank, but has no right to a distribution of any earnings of the Savings Bank
except for interest paid on his deposit. Rather, such earnings become retained
earnings of the Savings Bank.
However, a savings depositor does have a right to share pro rata, with
respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Savings Bank is ever liquidated. Savings
depositors and certain borrowers are members of the Savings Bank and thereby
have voting rights in the Savings Bank. Each savings depositor is entitled to
cast votes in proportion to the size of their account balances or fraction
thereof held in a withdrawable deposit account of the Savings Bank, and each
borrower member (hereinafter "borrower") is entitled to one vote in addition to
the votes (if any) to which such person is entitled in such borrower's capacity
as a savings depositor of the Savings Bank. All of the interests held by a
savings depositor in the Savings Bank cease when such depositor closes his
accounts with the Savings Bank.
<PAGE>
Boards of Directors Breyer & Aguggia
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
July 29, 1997
Page 3
The Holding Company was incorporated on June 9, 1997 under the laws of
the State of Oregon as a general business corporation in order to act as a
savings institution holding company. The Holding Company has an authorized
capital structure of eight million shares of common stock and 250,000 shares of
preferred stock.
PROPOSED TRANSACTION
Management of the Savings Bank believes that the Stock Conversion
offers a number of advantages which will be important to the future growth and
performance of the Converted Savings Bank in that it is intended to (i) provide
substantially increased capital for investment in its business to expand the
operations of the Converted Savings Bank; (ii) provide future access to capital
markets; (iii) enhance the ability to diversify its operations into new business
activities; and (iv) afford depositors and others the opportunity to become
stockholders of the Converted Savings Bank and thereby participate more directly
in any future growth of the Converted Savings Bank.
Accordingly, pursuant to the Plan, the Savings Bank will undergo the
Stock Conversion whereby it will be converted from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank. As part of the Stock
Conversion, the Savings Bank will amend its existing mutual savings bank charter
and bylaws to read in the form of a Federal Stock Charter and Bylaws. The
Converted Savings Bank will then issue to the Holding Company shares of the
Converted Savings Bank's common stock, representing all of the shares of capital
stock to be issued by the Converted Savings Bank in the Conversion, in exchange
for payment by the Holding Company of 50% of the net proceeds realized by the
Holding Company from such sale of its Common Stock, less amounts necessary to
fund the Employee Stock Ownership Plan of the Savings Bank, or such other
percentage as the Office of Thrift Supervision ("OTS") may authorize or require.
Also pursuant to the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering and, if necessary, a Direct
Community Offering. The aggregate purchase price at which all shares of Common
Stock will be offered and sold pursuant to the Plan and the total number of
shares of Common Stock to be offered in the Conversion will be determined by the
Boards of Directors of the Savings Bank and the Holding Company on the basis of
the estimated pro forma market value of the Converted Savings Bank as a
subsidiary of the Holding Company. The estimated pro forma market value will be
determined by an independent appraiser. Pursuant to the Plan, all such shares
will be issued and sold at a uniform price per share. The Stock Conversion,
including the sale of newly issued shares of the stock of
<PAGE>
Boards of Directors Breyer & Aguggia
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
July 29, 1997
Page 4
the Converted Savings Bank to the Holding Company, will be deemed effective
concurrently with the closing of the sale of the Common Stock.
Under the Plan and in accordance with regulations of the OTS, the
shares of Common Stock will first be offered through the Subscription Offering
pursuant to nontransferable subscription rights on the basis of preference
categories in the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans of the Savings
Bank;
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered in the Direct Community Offering in the following order
of priority:
(a) Natural persons who are permanent residents of Baker, Union,
Wallawa, Malheur, Harney and Grant Counties, Oregon; and
(b) The general public.
Any shares of Common Stock not subscribed for in the Direct Community
Offering may be offered to certain members of the general public on a best
efforts basis by a selling group of broker dealers in a Syndicated Community
Offering.
The Plan also provides for the establishment of a Liquidation Account
by the Converted Savings Bank for the benefit of all Eligible Account Holders
and any Supplemental Eligible Account Holders in an amount equal to the net
worth of the Savings Bank as of the date of the latest statement of financial
condition contained in the final prospectus issued in connection with the
Conversion. The establishment of the Liquidation Account will not operate to
restrict the use or application of any of the net worth accounts of the
Converted Savings Bank. The account holders will have an inchoate interest in a
proportionate amount of the Liquidation Account with respect to each savings
account held and will be paid by the Converted Savings Bank in event of
liquidation prior to any liquidation distribution being made with respect to
capital stock.
Following the Stock Conversion, voting rights in the Converted Savings
Bank shall be vested in the sole holder of stock in the Converted Savings Bank,
which will be the Holding
<PAGE>
Boards of Directors Breyer & Aguggia
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
July 29, 1997
Page 5
Company. Voting rights in the Holding Company after the Stock Conversion will be
vested in the holders of the Common Stock.
The Stock Conversion will not interrupt the business of the Savings
Bank. The Converted Savings Bank will continue to engage in the same business as
the Savings Bank immediately prior to the Stock Conversion, and the Converted
Savings Bank will continue to have its savings accounts insured by the SAIF.
Each depositor will retain a withdrawable savings account or accounts equal in
dollar amount to, and on the same terms and conditions as, the withdrawable
account or accounts at the time of Stock Conversion except to the extent funds
on deposit are used to pay for Common Stock purchased in the Stock Conversion.
All loans of the Savings Bank will remain unchanged and retain their same
characteristics in the Converted Savings Bank.
The Plan must be approved by the OTS and by an affirmative vote of at
least a majority of the total votes eligible to be cast at a meeting of the
Savings Bank's members called to vote on the Plan.
Immediately prior to the Conversion, the Savings Bank will have a
positive net worth determined in accordance with generally accepted accounting
principles.
OPINION
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Stock Conversion will constitute a reorganization within
the meaning of Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended (the "Code"), and no gain or loss
will be recognized to either the Savings Bank or the Converted
Savings Bank as a result of the Stock Conversion (see Rev.
Rul. 80- 105, 1980-1 C.B. 78).
2. The assets of the Savings Bank will have the same basis in the
hands of the Converted Savings Bank as in the hands of the
Savings Bank immediately prior to the Stock Conversion
(Section 362(b) of the Code).
3. The holding period of the assets of the Savings Bank to be
received by the Converted Savings Bank will include the period
during which the assets were held by the Savings Bank prior to
the Stock Conversion (Section 1223(2) of the Code).
<PAGE>
Boards of Directors Breyer & Aguggia
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
July 29, 1997
Page 6
4. No gain or loss will be recognized by the Converted Savings
Bank on the receipt of money from the Holding Company in
exchange for shares of common stock of the Converted Savings
Bank (Section 1032(a) of the Code). The Holding Company will
be transferring solely cash to the Converted Savings Bank in
exchange for all the outstanding capital stock of the
Converted Savings Bank and therefore will not recognize any
gain or loss upon such transfer. (Section 351(a) of the Code;
see Rev. Rul. 69-357, 1969-1 C.B. 101).
5. No gain or loss will be recognized by the Holding Company upon
receipt of money from stockholders in exchange for shares of
Common Stock (Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account
Holders and Supplemental Eligible Account Holders of the
Savings Bank upon the issuance of them of deposit accounts in
the Converted Savings Bank in the same dollar amount and on
the same terms and conditions in exchange for their deposit
accounts in the Savings Bank held immediately prior to the
Stock Conversion (Section 1001(a) of the Code; Treas. Reg.
ss.1.1001-1(a)).
7. The tax basis of the Eligible Account Holders' and
Supplemental Eligible Account Holders' savings accounts in the
Converted Savings Bank received as part of the Stock
Conversion will equal the tax basis of such account holders'
corresponding deposit accounts in the Savings Bank surrendered
in exchange therefor (Section 1012 of the Code).
8. Gain or loss, if any, will be realized by the deposit account
holders of the Savings Bank upon the constructive receipt of
their interest in the liquidation account of the Converted
Savings Bank and on the nontransferable subscription rights to
purchase stock of the Holding Company in exchange for their
proprietary rights in the Savings Bank. Any such gain will be
recognized by the Savings Bank deposit account holders, but
only in an amount not in excess of the fair market value of
the liquidation account and subscription rights received.
(Section 1001 of the Code; Paulsen v. Commissioner, 469 U.S.
131 (1985); Rev. Rul. 69-646, 1969-2 C.B. 54.)
9. The basis of each account holder's interest in the Liquidation
Account received in the Stock Conversion and to be established
by the Converted Savings Bank pursuant to the Stock Conversion
will be equal to the value, if any, of that interest.
<PAGE>
Boards of Directors Breyer & Aguggia
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
July 29, 1997
Page 7
10. No gain or loss will be recognized upon the exercise of a
subscription right in the Stock Conversion. (Rev. Rul. 56-572,
1956-2 C.B. 182).
11. The basis of the Common Stock acquired in the Stock Conversion
will be equal to the purchase price of such stock, increased,
in the case of such stock acquired pursuant to the exercise of
subscription rights, by the fair market value, if any, of the
subscription rights exercised (Section 1012 of the Code).
12. The holding period of the Common Stock acquired in the Stock
Conversion pursuant to the exercise of subscription rights
will commence on the date on which the subscription rights are
exercised (Section 1223(6) of the Code). The holding period of
the Common Stock acquired in the Community Offering will
commence on the date following the date on which such stock is
purchased (Rev. Rul. 70- 598, 1970-2 C.B. 168; Rev. Rul.
66-97, 1966-1 C.B. 190).
SCOPE OF OPINION
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
federal, state, local, foreign or other tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion. This opinion is not binding on the Internal Revenue
Service and there can be no assurance, and none is hereby given, that the
Internal Revenue Service will not take a position contrary to one or more of the
positions reflected in the foregoing opinion, or that our opinion will be upheld
by the courts if challenged by the Internal Revenue Service.
Regarding the valuation of subscription rights, we understand that the
Savings Bank has received the opinion of Keller & Company, Inc. to the effect
that the subscription rights have no ascertainable market value. We express no
opinion regarding the valuation of the subscription rights.
<PAGE>
Boards of Directors Breyer & Aguggia
Pioneer Bank, a Federal
Savings Bank
Oregon Trail Financial Corp.
July 29, 1997
Page 8
CONSENTS
We hereby consent to the filing of this opinion with the OTS as an
exhibit to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and
the OTS as exhibits to the Registration Statement and the Savings Bank's
Application for Conversion on Form AC ("Form AC"), respectively, and the
reference on our firm in the Prospectus, which is a part of both the
Registration Statement and the Form AC, under the headings "THE CONVERSION --
Effect of Conversion to Stock Form on Depositors and Borrowers of the Savings
Bank -- Tax Effects" and "LEGAL AND TAX OPINIONS."
Very truly yours,
/s/Breyer & Aguggia
BREYER & AGUGGIA
<PAGE>
EXHIBIT 8.2
STATE TAX OPINION OF DELOITTE & TOUCHE LLP
<PAGE>
Deloitte &
Touche LLP
[Logo] ----------------------------------------------------
Suite 3900 Telephone: (503) 222-1341
111 S.W. Fifth Avenue Facsimile: (503) 224-2172
Portland, Oregon 97204-3698
July 29, 1997
Boards of Directors
Pioneer Bank, a Federal Savings Bank
Oregon Trail Financial Corp.
2055 First Street
Baker City, OR 97814
RE: Certain Oregon Income Tax Consequences Relating to Proposed Holding
Company Conversion of Pioneer Bank, a Federal Savings Bank
Based solely upon information contained in the Documents, and the FACTS and
REPRESENTATIONS and the federal tax OPINIONS rendered in the document attached,
as prepared by Breyer & Aguggia, Attorneys at Law, it is our opinion that the
laws of the state of Oregon will, for income tax purposes, treat the Conversion
as a tax-free reorganization pursuant to Section 368(a)(1)(F) of the Code in an
identical manner as it is treated by the Internal Revenue Service for federal
income tax purposes. ORS 317.010(10) provides that a corporation's Oregon
taxable income shall consist of the taxpayer's taxable income, as defined in the
Code, with certain adjustments not relevant here. Further, ORS 316.013 and ORS
316.022 provide that the Oregon taxable income of an individual shall be the
taxpayer's federal adjusted gross income, as defined in the Code, with certain
adjustments not relevant here.
Finally, we hereby consent to the filing of this opinion as an exhibit to Form
AC or similar filings of the Association filed with the OTS, the filing of this
opinion as an exhibit to the Application H-(e) (1)-S of the Holding Company to
be filed with the OTS, the filing of this opinion as an exhibit to the Holding
Company's Registration Statement on Form S-1 ("Form S-1") to be filed with the
Securities Exchange Commission, and to reference to our firm in the prospectus
contained in the Form AC, Form S-1 and documents related to this opinion.
Very truly yours,
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
<PAGE>
EXHIBIT 10.4
STANDARDIZED ADOPTION AGREEMENT
The Employer named below hereby establishes a Cash or Deferred Profit-Sharing
for eligible Employees as provided in this Adoption Agreement and the
accompanying Basic Prototype Plan and Trust Basic Plan Document #04.
- -------------------------------------------------------------------------------
1. EMPLOYER INFORMATION
NOTE: If multiple Employers are adopting the Plan, complete this section
based on the lead Employer. Additional Employers may adopt this Plan by
attaching executed signature pages to the back of the Employer's
Adoption Agreement.
(A) NAME AND ADDRESS:
Pioneer Bank, FSB
P.O. Box 846
Baker City, OR 97814
(B) TELEPHONE NUMBER: (541) 523-6327
(C) TAX ID NUMBER:
(D) FORM OF BUSINESS:
[ ] (i) Sole Proprietor
[ ] (ii) Partnership
[X] (iii) Corporation
[ ] (iv) "S" Corporation (formerly known as
Subchapter S)
[ ] (v) Other:
(E) NAME OF PLAN: Pioneer Bank, FBS Profit Sharing 401(k) Plan
(F) THREE-DIGIT PLAN NUMBER FOR ANNUAL RETURN/REPORT: #001
<PAGE>
INSTRUCTIONS
- ------------------------------------------------------------------------------
2. EFFECTIVE DATE
(A) If this is a new plan, enter the month, day and year for
which the Plan is effective.
(B) If this is an amendment and restatement of an existing plan,
enter the month, day and year for which the amended Plan is
effective. Unless you indicate otherwise, the effective date
of this amended Plan is the first day of the plan year in
which you are adopting this Agreement. Note that the effective
date for changes required by the Tax Reform Act of 1986 is the
first day of the 1987 plan year or original effective date of
your current plan, whichever is later. Also, for an amended
plan, be sure to enter the original effective date in the
first blank space.
3. DEFINITIONS
(A) Unless you check otherwise, compensation will be based on the
amount paid to the participant during the entire plan year.
Option (ii) is relevant when employees become eligible to
participate on dates other than the first day of the plan year
and the Employer wants to allocate a Discretionary
Contribution based only on their compensation earned from the
date they enter the Plan. For those participants who enter the
Plan on the first day of the plan year, this section is not
applicable.
(B) The entry date is the date on which an employee commences
participation after having met the eligibility requirements in
Item 4.
2
<PAGE>
STANDARDIZED ADOPTION AGREEMENT
2. EFFECTIVE DATE
(A) THIS IS A NEW PLAN HAVING AN EFFECTIVE DATE OF .
(B) THIS IS AN AMENDED PLAN.
(i) The effective date of the original Plan was July 1,
1959 (Amended & restated 1-1-94).
The effective date of the amended Plan is 4-1-96 .
NOTE: The effective date of the amended Plan for the Tax Reform Act of 1986
required changes is the first day of the 1987 Plan Year. Sections 7(f)
and 12 herein shall be effective as of the first day of the 1989 Plan
Year. Any prior amendments to the Plan which were intended to have
effect after December 31, 1986 will continue to be in effect only until
the effective date of this amended and restated Plan.
3. DEFINITIONS
(A) "COMPENSATION" Shall include all items as set forth in
paragraph 1.12 of Basic Plan Document #04.
[ ] (i) For purposes of Discretionary
Contributions, Compensation shall include
all amounts for the Plan Year during which
the Employee was eligible to participate.
[X] (ii) For purposes of Discretionary
Contributions, Compensation will only
include amounts for the period during which
the Employee was eligible to participate.
(B) "ENTRY DATE"
[X] (i) The first day of the month coinciding with
or following the date on which an
Employee meets the eligibility requirements.
[ ] (ii) The earlier of the first day of the
Plan Year or the first day of the seventh
month of the Plan Year coinciding with or
following the date on which an Employee
meets the eligibility requirements.
[ ] (iii) The first day of the Plan Year, or
the first day of the fourth month, or the
first day of the seventh month or the first
day of the tenth month, of the Plan Year
coinciding with or following the date on
which an Employee meets the eligibility
requirements.
3
<PAGE>
INSTRUCTIONS
(C) This section allows the Employer to select a method
for counting hours of service. Hours of service are
generally counted to determine whether participants
are credited with a "year of service." A year of
service normally requires 1,000 hours of service and
is often important in determining an employee's
eligibility, vesting percentage and the right to
receive a contribution. Under option (i), actual
hours are counted. An employee is credited with an
hour of service for each hour he or she is paid or
entitled to payment from the Employer. An employee is
entitled to payment for hours during vacation,
sickness, holiday, disability, layoff, jury duty,
military duty, leave of absence, or any period for
which back pay is awarded.
The Employer may wish to simplify administration by
selecting option (ii) or option (iii). These
alternatives are termed "equivalences" and allow an
employer to credit an equivalent number of hours
under the method chosen rather than count the actual
hours. However, this may result in the crediting of
additional hours to employees and the inclusion of
part-time employees who may otherwise have been
ineligible.
(D) The limitation year is the period used to determine
maximum allocations (Section 415 Limitations) under
this plan and any other plan maintained by the
Employer. It is usually the same as the plan year. In
the case of multiple plans, all plans must have the
same limitation year.
(E) The Employer may choose to determine if net profits
are required in order for Employer contributions to
be made under the plan. Item 7(a) permits the
Employer to identify which Employer contribution
types are subject to the net profit requirement.
(F) The plan year is the 12-month accounting year of the
Plan. While not mandated, it is customary that the
plan year is the same as the Employer's fiscal year,
or that it is based on the calendar year, to coincide
with the time period for non-discrimination testing.
The Employer should speak with a tax advisor to
determine the appropriate plan year for the Plan.
(G) This is the earliest age for distribution in
accordance with a Qualified Domestic Relations Order.
It is the date on which the order is deemed to be
"qualified" as defined in the Plan. If "shall" is
selected, the alternate payee will be allowed to take
payment once the order is approved by the Plan
Administrator. Generally, if "shall not" is selected,
payment to the alternate payee will not be allowed
until the participant incurs a distributable event or
reaches age 50, whichever occurs first.
(H) The safe-harbor provisions of paragraph 8.7 in the
Plan Document permit distributions only in a lump sum
or installments without the option for an annuity.
They will generally apply to this plan. However, if
the safe-harbor provisions do not apply (for example,
if the predecessor plan was subject to the Qualified
Joint and Survivor Annuity rules), the Qualified
Joint and Survivor Annuity rules applies. In
addition, if a predecessor plan had an annuity option
available and a participant elects such options under
this plan, the Qualified Joint and Survivor rules
apply. It is defined in the Plan as 50% survivor
annuity payable during the lives of the participant
and spouse.
(I) If the Employer is not integrating Discretionary
Contributions with Social Security, option (i) must
be selected (also select Item 7(e)). If integration
is chosen, the Employer should select a taxable wage
base from options (ii), (iii) or (iv), and Item 7(f)
must be selected.
4
<PAGE>
STANDARDIZED ADOPTION AGREEMENT
(C) "HOURS OF SERVICE" Shall be determined on the basis of the
method selected below. Only one method may be selected. The
method selected shall be applied to all Employees covered
under the Plan as follows:
[X] (i) On the basis of actual hours for which
an Employee is paid or entitled to
payment.
[ ] (ii) On the basis of days worked.
An Employee shall be credited with ten (10)
Hours of Service if under paragraph 1.41 of
the Basic Plan Document #04 such Employee
would be credited with at least one (1) Hour
of Service during the day.
[ ] (iii) On the basis of weeks worked.
An Employee shall be credited with
forty-five (45) Hours of Service if under
paragraph 1.41 of the Basic Plan Document
#04 such Employee would be credited with at
least one (1) Hour of Service during the
week.
(D) "LIMITATION YEAR" The Limitation Year shall be the Plan Year
unless another year is specified here:
(E) "NET PROFIT"
[X] (i) Not acceptable (profits will not be
required for any contributions to the Plan).
[ ] (ii) As defined in paragraph 1.48 of the Basic
Plan Document #04.
(F) "PLAN YEAR" The 12-consecutive-month period commencing on
January 1 and ending on December 31 .
(G) "QUALIFIED EARLY RETIREMENT AGE" For purposes of making
distributions under the provisions of a Qualified Domestic
Relations Order, the Plan's Qualified Early Retirement Age
with regard to the Participant against whom the order is
entered [X] shall [ ] shall not be the date the order is
determined to be qualified. If "shall" is elected, this will
only allow payout to the alternate payee(s).
(H) "QUALIFIED JOINT AND SURVIVOR ANNUITY" The safe-harbor
provisions of paragraph 8.7 of the Basic Plan Document #04 are
applicable. If the Plan is not safe-harbored under paragraph
8.7 of the Basic Plan Document, the survivor annuity shall be
50% of the annuity payable during the lives of the Participant
and Spouse.
(I) "TAXABLE WAGE BASE"
[X] (i) Not Applicable -- Plan is not integrated
with Social Security.
[ ] (ii) The maximum earnings considered wages for
such Plan Year under Code Section
3121(a).
[ ] (iii) __________% (not more than 100%) of
the amount considered wages for such Plan
Year under Code Section 3121(a).
[ ] (iv) $_____________, provided that such amount
is not in excess of the amount
determined under paragraph 3(i)(ii) above.
NOTE: Using less than the maximum at (ii) may result in a
change in the allocation formula in Section 7.
5
<PAGE>
INSTRUCTIONS
(J) Different definitions of service may be used for
eligibility, allocations, and vesting computation
periods. For eligibility and vesting computation
periods, the Employer may choose the elapsed time
method or the hours of service method.
Under option (i), the Employer chooses the method to
be used to determine years of service for
eligibility. The first choice allows the Employer to
define a year of service as completion of a specific
number of hours of service, provided that not more
than 1,000 hours are required. If nothing is
specified, 1,000 hours will be assumed.
The second choice is the elapsed time method, which
dispenses with the normal requirement that hours
worked be counted. Under the elapsed time method,
participants will complete a year of service if they
are credited with 12 consecutive months of service
beginning on their date of hire. The elapsed time
method is more liberal than the hours of service
method. Since actual hours are not counted, all
employees (including part-time employees) must be
included in the Plan.
Under option (ii), the Employer chooses the hours of
service required to determine who may share in any
Discretionary Contribution allocation. Not more than
501 hours may be required.
Option (iii) involves the same choice as option (i).
The choice elected here need not match that in option
(i).
4. ELIGIBILITY REQUIREMENTS
This is a standardized plan which provides for AUTOMATIC inclusion of
employees of affiliated employers in the Plan. Determining an
employer's affiliation to other companies is important since all
employees of a controlled group or of an affiliated service group are
treated as if employed by a single employer. The Employer should speak
with legal counsel for assistance in making this determination.
(A) This section allows the Employer to impose a service
requirement (up to 1 year) for eligibility.
If option (i) or (iii) is selected, part-time employees will
be eligible under the Plan because there can be no hours of
service requirement under either choice.
If option (i) or (iii) is selected, Item 3(j)(i)(2) must be
chosen.
(B) Indicate whether or not an age requirement (not to exceed 21)
is elected.
6
<PAGE>
STANDARIZED ADOPTION AGREEMENT
(J) "YEAR OF SERVICE"
(i) For Eligibility Purposes: (Choose one)
[ ] (1) The 12-consecutive-month period
during which an Employee is credited
with (not more
than 1,000) Hours of Service.
[X] (2) Elapsed Time
If no answer is specified, the Hours of Service
method will be used.
(ii) For Allocation Accrual Purposes: The 12-consecutive
month period during which an Employee is credited
with 500 (not more than 1,000) Hours of Service. (For
Plan years beginning in 1990 and thereafter, if a
number greater than 501 is specified, it will be
deemed to be 501).
(iii) For Vesting Purposes: (Choose one)
[X] (1) The 12-consecutive-month period
during which an Employee is credited
with 500 (not more than
1,000) Hours of Service.
[ ] (2) Elapsed Time
If no answer is specified, the Hours of Service
method will be used.
4. ELIGIBILITY REQUIREMENTS
(A) SERVICE:
[ ] (i) The Plan shall have no service requirement.
[ ] (ii) The Plan shall cover only Employees having
completed at least one Year of
Service.
[X] (iii) The Plan shall cover only Employees having
completed at least six months
(less than 12).
NOTE: If the eligibility period selected is less than one
year, an Employee will not be required to complete
any specified number of Hours of Service to receive
credit for such period.
(B) AGE:
[X] (i) The Plan shall have no minimum age
requirement.
[ ] (ii) The Plan shall cover only Employees having
attained age _____ (not more than age 21).
7
<PAGE>
INSTRUCTIONS
(C) This section allows the Employer to define who is eligible to
become a plan participant. The Employer may include all
employees who satisfy the requirements of 4(a) and 4(b) by
selecting (i). The Employer may elect to exclude union
employees under (ii) and/or non-resident aliens with no U.S.
income under (iii).
(D) The Employer may allow those employed on the effective date to
immediately participate in the Plan without satisfying any
eligibility requirements. To accomplish this, check (ii) and
(iii).
If this is a new plan, options (ii) and (iii) permit an
employee who is not excluded under 4(c)(ii) or 4(c)(iii) and
is employed on the Plan's effective date to participate
immediately, even if different standards are selected for
future employees.
8
<PAGE>
STANDARIZED ADOPTION AGREEMENT
(C) CLASSIFICATION:
The Plan shall cover all Employees who have met the age and
service requirements, with the following exceptions:
[X] (i) No exceptions.
[ ] (ii) The Plan shall exclude Employees
included in a unit of Employees covered by a
collective bargaining agreement between the
Employer and Employee Representatives, if
retirement benefits were the subject of good
faith bargaining and if two percent or less
of the Employees who are covered pursuant to
that agreement are professionals as defined
in Regulations Section 1.410(b)-9. For this
purpose, the term "Employee Representative"
does not include any organization more than
half of whose members are Employees who are
owners, officers, or executives of the
Employer.
[ ] (iii) The Plan shall exclude Employees who
are non-resident aliens [within the meaning
of Code Section 7701(b)(1)(B)] and who
receive no earned income [within the meaning
of Code Section 911(d)(2)] from the Employer
which constitutes income from sources within
the United States [within the meaning of
Code Section 861(a)(3)].
(D) EMPLOYEES ON EFFECTIVE DATE:
[X] (i) Not Applicable. All Employees will be
required to satisfy both the age and
Service requirements specified above.
[ ] (ii) Employees employed on the Plan's Effective
Date do not have to satisfy the
Service requirements specified above.
[ ] (iii) Employees employed on the Plan's
Effective Date do not have to satisfy the
age requirements specified above.
9
<PAGE>
INSTRUCTIONS
5. RETIREMENT AGES
(A) The Plan provides two options for normal retirement age: (i),
an age-only option or (ii), an age and plan participation
option. Normal retirement age may not exceed age 65. Since a
participant will become fully vested upon attainment of normal
retirement age, it may be desirable to require a specified
period of plan participation in addition to an age
requirement. The maximum participation requirement that the
Plan may impose is 5 years.
(B) An early retirement age is not available under this plan
unless it was provided for in a predecessor plan.
6. EMPLOYEE CONTRIBUTIONS
(A) Elective Deferrals (i.e., pre-tax contributions) may be made
up to a specified percentage (not more than 20%) as selected
by the Employer. The Employer may choose to require a minimum
percentage (not more than 2%) that employees must defer under
the Plan.
(B) The Employer may choose to allow employee after-tax Voluntary
Contributions.
10
<PAGE>
STANDARIZED ADOPTION AGREEMENT
5. RETIREMENT AGES
(A) NORMAL RETIREMENT AGE: If the Employer imposes a requirement
that Employees retire upon reaching a specified age, the
Normal Retirement Age selected below may not exceed the
Employer-imposed mandatory retirement age.
[ ] (i) Normal Retirement Age shall be
(not to exceed age 65).
[X] (ii) Normal Retirement Age shall be the
later of attaining age 65 (not to exceed age
65) or the 5th (not to exceed the 5th)
anniversary of the first day of the first
Plan Year in which the Participant commenced
participation in the Plan.
(B) EARLY RETIREMENT AGE:
Early Retirement Age shall not be applicable unless the
Employer attached a form to this Adoption Agreement certifying
that Early Retirement Age is a benefit which has accrued under
the predecessor Plan which cannot be cut back under Code
Section 411(d)(6).
6. EMPLOYEE CONTRIBUTIONS
[X] (A) Participants shall be permitted to make Elective
Deferrals in any amount from 1 % (not more than 2%)
up to 20 % (not more than 20%) of their Compensation.
If (a) is applicable, Participants shall be permitted
to amend their Salary Savings Agreements to change
the contribution percentage in accordance with the
procedures established by the Plan Administrator.
[ ] (B) Participants shall be permitted to make after tax
Voluntary Contributions.
NOTE: The Average Deferral Percentage Test will apply to
contributions under (a) above. The Average
Contribution Percentage Test will apply to
contributions under (b) and may apply to (a).
11
<PAGE>
INSTRUCTIONS
7. EMPLOYER CONTRIBUTIONS AND ALLOCATION THEREOF
(A) The Employer may indicate if any contributions to the Plan
will be contingent upon net profits.
This choice should correspond to Item 3(e).
(B) Elective Deferral Contributions will be deposited by the
Employer to the Plan in the amount indicated on the
participant's Enrollment Agreement. These amounts deferred
from participants' pay. The Employer may elect to suspend such
contributions for a specified period under options (i), (ii)
or (iii) if the participant terminates his or her Agreement.
If option (ii) is chosen, no suspension period will apply,
since this plan provides for daily valuation.
12
<PAGE>
STANDARIZED ADOPTION AGREEMENT
7. EMPLOYER CONTRIBUTIONS AND ALLOCATION THEREOF
NOTE: The Employer shall make contributions to the Plan in
accordance with the formula or formulas selected below. The
Employer's contribution shall be subject to the limitations
contained in Articles III and X. For this purpose, a
contribution for a Plan Year shall be limited for the
Limitation Year which ends with or within such Plan Year.
Also, the integrated allocation formulas below are for Plan
Years beginning in 1989 and later. The Employer's allocation
for earlier years shall be as specified in its Plan prior to
amendment for the Tax Reform Act of 1986.
(A) CURRENT OR ACCUMULATED NET PROFITS ARE REQUIRED FOR:
[ ] (i) Matching Contributions.
[ ] (ii) Qualified Non-Elective Contributions.
[ ] (iii) Discretionary Contributions.
If no answer is specified, Current or Accumulated Net Profits
will not be required.
NOTE: Elective Deferrals can always be contributed
regardless of profits.
(B) SALARY SAVINGS AGREEMENT:
The Employer shall contribute and allocate to each
Participant's account an amount equal to the amount withheld
from the Compensation of such Participant pursuant to his or
her Salary Savings Agreement.
An Employee who has terminated his or her election under the
Salary Savings Agreement other than for hardship reasons may
not make another Elective Deferral:
[X] (i) until the first day of the next Plan Year.
[ ] (ii) until the first day of the next valuation
period.
[ ] (iii) for a period of month(s) (not
to exceed 12 months).
If no option is specified, option (ii) will apply.
13
<PAGE>
INSTRUCTIONS
(C) The Employer must complete this section if Matching
Contributions are to be made under the Plan.
These contributions are made in conjunction with a
participant's Elective Deferral Contributions. Under option
(i), the Employer indicates the matching percentage and, if
applicable, the maximum dollar amount or percentage of
compensation that will be matched. Under option (ii), the
Employer may elect, from year to year, if a match will be made
and, if so, which portion of the participant's Elective
Deferral Contributions will be matched. Under option (iii),
the Employer may allocate Matching Contributions on a tiered
basis. Under option (iv), Matching Contributions may be a flat
dollar amount.
In Section (v), the Employer elects whether to make Matching
Contributions on behalf of all eligible participants or only
those eligible participants who are Non-Highly Compensated
employees.
An Employer may elect to have Matching Contributions treated
as "qualified". "Qualified Matching Contributions" are fully
vested when contributed, subject to withdrawal restrictions,
and used to satisfy the non-discrimination rules specified in
the Plan.
In (vii), the Employer must choose the time period upon which
Matching Contributions will be calculated. This selection is
for computation purposes only. The actual contributions do not
have to be sent to PMFS according to this schedule.
14
<PAGE>
STANDARIZED ADOPTION AGREEMENT
[ ] (C) MATCHING EMPLOYER CONTRIBUTION [See paragraphs (g), (h) and
(i)]:
[ ] (i) Percentage Match: The Employer shall
contribute and allocate to each eligible
Participant's account an amount equal to %
of the amount contributed and allocated in
accordance with paragraph 7(b) above. The
Employer shall not match Participant
Elective Deferrals as provided above in
excess of $ or in excess of % of the
Participant's Compensation.
[X] (ii) Discretionary Match: The Employer shall
contribute and allocate to each eligible
Participant's account a percentage of the
Participant's Elective Deferral contributed
and allocated in accordance with paragraph
7(b) above. The Employer shall not match
Participant Elective Deferrals in excess of
$ or in excess of 3.33 % of the
Participant's Compensation.
[ ] (iii) Tiered Match: The Employer shall
contribute and allocate to each
Participant's account an amount equal to %
of the first % of the Participant's
Compensation, and % of the next %
of the Participant's Compensation.
NOTE: Percentages specified in (iii) above may not increase
as the percentage of Participant's contribution
increases.
[ ] (iv) Flat Dollar Match: The Employer shall
contribute and allocate to each
Participant's account $ if the Participant
defers at least 1% of Compensation.
[X] (v) Eligibility for Match: Matching
contributions will be made to [X] all
Employees eligible to participate [ ] only
to Non-Highly Compensated Employees eligible
to participate.
[ ] (vi) Qualified Match: Employer Matching
Contributions will be treated as Qualified
Matching Contributions to the extent
specified by the Employer at the time the
Matching Employer Contributions are made.
[X] (vii) Matching Contribution Computation Period:
The time period upon which matching
contributions will be based shall be:
[ ] (A) weekly
[ ] (B) bi-weekly
[ ] (C) semi-monthly
[X] (D) monthly
[ ] (E) quarterly
[ ] (F) semi-annually
[ ] (G) annually
15
<PAGE>
INSTRUCTIONS
(D) The Employer may choose to make Qualified Non-Elective
Contributions to Non-Highly Compensated employees only. These
are contributions made by the Employer, which the participant
may not elect to receive in cash, until distributed from the
Plan. These contributions are fully vested, subject to
withdrawal restrictions, and may not be distributed prior to
death, disability, separation from service, or attainment of
age 59-1/2. All or a portion of the contributions may be taken
into account when performing the ADP and/or ACP tests.
(E) Check this box if the Employer wishes to make non-integrated
Discretionary Contributions. (This choice must correspond to
Item 3(i).) These contributions will be allocated in
proportion to all eligible participants' compensation, whether
or not they have elected to contribute to the Plan. These
contributions need not be fully vested when contributed. If
you check 7(e), you cannot check 7(f).
(F) Check this box if the Employer wishes to make Discretionary
Contributions which are integrated with Social Security. (This
choice must correspond to Item 3(ii), (iii) or (iv).) If you
check 7(f), you cannot check 7(e).
16
<PAGE>
STANDARIZED ADOPTION AGREEMENT
[X] (D) QUALIFIED NON-ELECTIVE EMPLOYER CONTRIBUTION - [See paragraphs (g),
(h) and (i)] These contributions are fully vested when contributed.
The Employer shall have the right to make an additional discretionary
contribution which shall be allocated to each eligible Employee in
proportion to his or her Compensation as a percentage of the
Compensation of all eligible Employees. This part of the Employer's
contribution and the allocation thereof shall be unrelated to any
Employee contributions made hereunder. The amount of Qualified
non-Elective Contributions taken into account for purposes of meeting
the ADP for ACP test requirements is the amount necessary to meet both
the ADP and ACP tests. Qualified non-Elective Contributions will be
made to only non-Highly Compensated Employees eligible to participate.
[X] (E) ADDITIONAL EMPLOYER CONTRIBUTION OTHER THAN QUALIFIED NON-ELECTIVE
CONTRIBUTIONS - Non-Integrated [See paragraphs (g), (h) and (i)].
The Employer shall have the right to make an additional discretionary
contribution which shall be allocated to each eligible Employee in
proportion to his or her Compensation as a percentage of the
Compensation of all eligible Employees. This part of the Employer's
contribution and the allocation thereof shall be unrelated to any
Employee contributions made hereunder.
[ ] (F) ADDITIONAL EMPLOYER CONTRIBUTION - Integrated Allocation Formula [See
paragraphs (g), (h) and (i)].
The Employer's contribution for the Plan Year plus any forfeitures
(only if they are real-located to Participants under Section 9 herein),
shall be allocated to the accounts of eligible Participants as set
forth in the Basic Plan Document #04 of paragraph 5.3.
NOTE: Only one plan maintained by the Employer may be integrated
with Social Security.
17
<PAGE>
INSTRUCTIONS
(G) Any amounts, other than excess deferrals, in excess of the
annual additions limit (the lesser of 25% of compensation or
$30,000) may either be placed in suspense for the
participant's future benefit (option (i) or, by choosing
option (ii), reallocated to other participants provided they
do not have any excess amounts (spillover method as defined in
Article X of the Basic Plan Document).
(H) The Employer may choose whether all participants (option (i))
or only eligible non-key employees (option (ii)) will receive
the minimum top-heavy contribution during the years in which
the Plan is top-heavy.
(I) When applying the Aggregate Limit while performing the ADP and
ACP tests, any excesses will be corrected by reducing the ACP
for the affected Highly Compensated Employees.
18
<PAGE>
STANDARIZED ADOPTION AGREEMENT
(G) ALLOCATION OF EXCESS AMOUNTS (ANNUAL ADDITIONS)
Excess deferrals which result in an Excess Amount shall be
returned to the Participant. In the event that the allocation
formula of other contributions results in an Excess Amount,
such excess shall be:
[ ] (i) placed in a suspense account accruing no
gains or losses for the benefit of the
Participant.
NOTE: For every Limitation Year, or part thereof, that a
suspense account exists, the Employer will be
subjected to a ten-percent penalty on the monies held
in the suspense account.
[ ] (ii) reallocated as additional Employer
contributions to all other Participants to
the extent that they do not have any Excess
Amount.
If no answer is specified, the suspense account method will be
used.
(H) MINIMUM EMPLOYER CONTRIBUTION UNDER TOP-HEAVY PLANS:
For any Plan Year during which the Plan is Top-Heavy, the sum
of the contributions and forfeitures as allocated to eligible
Employees under paragraphs 7(d), 7(e), 7(f), and 9 of this
Adoption Agreement shall not be less than the amount required
under paragraph 14.2 of the Basic Plan Document #04. Top-Heavy
minimums will be allocated to:
[ ] (i) all eligible Participants.
[X] (ii) only eligible non-Key Employees who are
Participants.
(I) RETURN OF EXCESS CONTRIBUTIONS AND/OR EXCESS AGGREGATE
CONTRIBUTIONS:
In the event that one or more Highly Compensated Employees is
subject to both the ADP and ACP tests and the sum of such
tests exceeds the Aggregate Limit, the limit will be satisfied
by reducing the ACP of the affected Highly Compensated
Employees.
19
<PAGE>
INSTRUCTIONS
8. ALLOCATIONS TO TERMINATED EMPLOYEES
(A) Discretionary contributions are not allocated to participants
who terminate during the year without meeting the hours of
service requirement specified in 3(j)(ii). However, the
Employer may elect to allocate to participants who terminate
during the year as a result of retirement, disability, death,
or other termination of employment.
(B) This is the same as (a), except that it applies only to plan
years beginning prior to 1990.
20
<PAGE>
STANDARDIZED ADOPTION AGREEMENT
8. ALLOCATIONS TO TERMINATED EMPLOYEES
(A) For Plan Years beginning in 1990 and thereafter, the Employer
will allocate Employer related contributions to any
Participant who is credited with more than 500 Hours of
Service or is employed on the last day of the Plan Year
without regard to the number of Hours of Service.
The Employer will also allocate Employer related contributions
to any Participant who terminates during the Plan Year without
accruing the necessary Hours of Service if they terminate as a
result of:
[X] (i) retirement
[X] (ii) disability
[X] (iii) death
[X] (iv) other termination
(B) If applicable, for Plan Years beginning prior to 1990:
[ ] (i) For Plan Years beginning prior to
1990, the Employer will not allocate
Employer related contributions to any
Participant who terminates employment during
the Plan Year.
[X] (ii) The Employer will allocate Employer related
contributions to Employees who terminate
during the Plan Year as a result of:
[X] (1) retirement
[X] (2) disability
[X] (3) death
[X] (4) other termination provided
that the Participant has
completed a Year of Service
[X] (5) other termination
21
<PAGE>
INSTRUCTIONS
9. ALLOCATION OF FORFEITURES
(A) If all contribution amounts are fully vested, option (i) is
chosen. If contribution amounts are not fully vested, the
Employer must specify how forfeitures are to be applied.
Forfeitures of matching contributions can either be
reallocated to participants in the same manner as the
Employer's Discretionary Contributions (option (ii)), applied
to reduce the Employer's contribution (option (iii)), or used
to offset administrative plan expenses (option (iv)).
(B) If the Employer checked 9(a)(ii), (iii) or (iv), the Employer
must specify when the forfeitures will be applied.
(C) If any forfeitures occur prior to five consecutive one-year
breaks in service, the Employer must indicate the order in
which the financial resources will be used to reinstate
forfeited amounts. This applies only if a former participant
is rehired within five consecutive one-year breaks in service
and the buy-back provision is elected.
(D) The Employer must indicate how forfeited excess aggregate
contributions will be treated.
These excess amounts may be used to reduce employer
contributions or reallocated to Non-Highly Compensated
Employees in the proportion that their compensation bears to
the total compensation of all plan participants. These
forfeitures cannot be allocated to Highly Compensated
Employees.
22
<PAGE>
STANDARIZED ADOPTION AGREEMENT
9. ALLOCATION FORFEITURES
NOTE: Subsections (a), (b) and (c) below apply to forfeitures of
amounts other than Excess Aggregate
Contributions.
(A) ALLOCATION ALTERNATIVES:
[ ] (i) Not Applicable. All contributions are
always fully vested.
[ ] (ii) Forfeitures shall be allocated to
Participants in the same manner as the
Employer's contribution.
[X] (iii) Forfeitures shall be applied to reduce
the Employer's contribution for such Plan
Year.
[ ] (iv) Forfeitures shall be applied to
offset administrative expenses of the Plan.
If forfeitures exceed these expenses, (iii)
above shall apply.
(B) DATE FOR REALLOCATION:
NOTE: If no distribution has been made to a former
Participant, sub-section (i) below will apply to such
Participant even if the Employer elects (ii) or (iii)
below as its normal administrative policy.
[ ] (i) Forfeitures will be reallocated at the
end of the Plan Year during which the former
Participant incurs his or her fifth
consecutive one year Break In Service.
[ ] (ii) Forfeitures will be reallocated
immediately (as of the next Valuation Date).
[X] (iii) Forfeitures will be reallocated as of
the end of the Plan Year in which the
Participant separates from service.
[ ] (iv) Forfeitures will be reallocated at
the end of the Plan Year during which the
former Participant incurs his or her (1st,
2nd, 3rd, or 4th) consecutive one year Break
In Service.
(C) RESTORATION OF FORFEITURES:
If amounts are forfeited prior to five consecutive one year
Breaks in Service, the Funds for restoration of account
balances will be obtained from the following resources in the
order indicated (fill in 1 and 2 in the following boxes to
indicate order):
[1] (i) Current year's forfeitures.
[2] (ii) Additional Employer contribution.
If no answer is specified, the order will be (i) and (ii).
(D) FORFEITURES OF EXCESS AGGREGATE CONTRIBUTIONS SHALL BE:
[X] (i) Applied to reduce Employer contributions.
[ ] (ii) Allocated, after all other
forfeitures under the Plan, to the Matching
Contribution account of each Non-Highly
Compensated Participant who made Elective
Deferrals in the ratio which each such
Participant's Compensation for the Plan Year
bears to the total Compensation of all
Participants for such Plan Year. Such
forfeitures cannot be allocated to the
account of any Highly Compensated Employee.
Forfeitures of Excess Aggregate Contributions will be so
applied at the end of the Plan Year in which they occur.
23
<PAGE>
INSTRUCTIONS
10. CASH OPTION
The Employer may elect in (a) to provide participants with the option
to defer all or a portion of a cash bonus, or indicate in (b) that this
is not applicable. If (a) is checked and a participant fails to make an
election, such bonus will be paid in cash.
11. LIMITATIONS ON ALLOCATIONS
If the Employer has never maintained another plan, check the first box
and proceed to Item 12. If the Employer has maintained or now maintains
another plan, check the second box and complete (a) and/or (b) and (c).
(A) If the Employer maintains another defined contribution plan,
in (a) check option (i) the provisions of Article X of the
Basic Plan Document will apply. If option (ii) applies, the
Employer's attorney must attach appropriate language.
24
<PAGE>
STANDARIZED ADOPTION AGREEMENT
10. CASH OPTION
[X] (A) The Employer may permit a Participant to elect to defer to the
Plan, an amount not to exceed 20 % of any Employer paid cash bonus made
for such Participant for any year. A participant must file an election
to defer such contribution at least fifteen (15) days prior to the end
of the Plan Year. If the Employee fails to make such an election, the
entire Employer paid cash bonus to which the Participant would be
entitled shall be paid as cash and not to the Plan. Amounts deferred
under this section shall be treated for all purposes as Elective
Deferrals. Notwithstanding the above, the election to defer must be
made before the bonus is made available to the Participants.
[ ] (B) NOT APPLICABLE.
If no answer is specified, option (b) will apply.
11. LIMITATIONS ON ALLOCATIONS
[X] This is the only Plan the Employer maintains or ever
maintained; therefore, this section is not applicable.
[ ] The Employer does maintain or has maintained another plan
(including a Welfare Benefit Fund or an individual medical
account [as defined in Code Section 415(1)(2)], under which
amounts are treated as Annual Additions) and has completed the
proper sections below.
Complete (a), (b) and (c) only if the Employer maintains or ever
maintained another qualified plan, including a Welfare Benefit Fund or
an individual medical account [as defined in Code Section 415(1)(2)],
in which any Participant in this plan is (or was) a participant or
could possibly become a participant.
(A) If the Participant is covered under another qualified Defined
Contribution Plan maintained by the Employer, other than a
Master or Prototype Plan:
[ ] (i) the provisions of Article X of the
Basic Plan Document #04 will apply, as if
the other plan were a Master or Prototype
Plan.
[ ] (ii) Attach provisions stating the method
under which the plans will limit total
Annual Additions to the Maximum Permissible
Amount, and will properly reduce any Excess
Amounts, in a manner that precludes Employer
discretion.
If no answer is specified, option (i) will apply.
25
<PAGE>
INSTRUCTIONS
(B) If the Employer maintains or has ever maintained a defined
benefit plan, (b) requires an attachment as described. This
must be addressed, even if the Plan was terminated and/or
assets were distributed.
(C) If the Employer has adopted another defined contribution or
defined benefit plan and the Plan is (or plans are) top-heavy,
the Employer must indicate which plan will provide the minimum
top-heavy contribution.
26
<PAGE>
STANDARIZED ADOPTION AGREEMENT
(B) If a Participant is or ever has been a participant in a
Defined Benefit Plan maintained by the Employer:
Attach provisions which will satisfy the 1.0 limitation of
Code Section 415(e). Such language must preclude Employer
discretion. The Employer must also specify the interest and
mortality assumptions used in determining Present Value in the
Defined Benefit Plan.
(C) The minimum contribution or benefit required under Code
Section 416 relating to Top-Heavy Plans shall be satisfied by:
[ ] (i) this Plan.
[ ] (ii)
(Name of other qualified plan of the
Employer).
[ ] (iii) Attach provisions stating the method
under which the minimum contribution and
benefit provisions of Code Section 416 will
be satisfied. If a Defined Benefit Plan is
or was maintained, an attachment must be
provided showing interest and mortality
assumptions used in the Top-Heavy Ratio.
If no answer is specified, option (i) will apply.
27
<PAGE>
INSTRUCTIONS
12. VESTING
(A) The Employer must select a vesting schedule to determine how
quickly a participant gains "ownership" rights in certain
account balances. The Employer can select immediate vesting
(option (i)), or one of the other applicable schedules
(options (ii) through (viii)).
Different schedules may be elected for different types of
contributions.
28
<PAGE>
STANDARIZED ADOPTION AGREEMENT
12. VESTING
Contributions under paragraph 7(b), 7(c)(vi) and 7(d) are always fully
vested. Employer contributions shall be subject to the vesting table
selected by the Employer below. A Participant shall receive credit for
a Year of Service as specified at 3(j)(iii) of this Adoption Agreement.
(A) VESTING SCHEDULES:
NOTE: The vesting schedules below only apply to a
Participant who has at least one Hour of Service
during or after the 1989 Plan Year. If applicable,
Participants who separated from Service prior to the
1989 Plan Year will remain under the vesting schedule
as in effect in the Plan prior to amendment for the
Tax Reform Act of 1986.
[ ] (i) Full and immediate Vesting.
YEARS OF SERVICE
1 2 3 4 5 6 7
- - - - - - -
[ ] (ii) % 100%
[ ] (iii) % % 100%
--- ---
[X] (iv) 0 % 20% 40% 60% 80% 100%
---
[ ] (v) % % 20% 40% 60% 80% 100%
--- ---
[ ] (vi) 10% 20% 30% 40% 60% 80% 100%
[ ] (vii) % % % % 100%
[ ] (viii) % % % % % % 100%
--- --- --- --- --- --- -----
NOTE: The percentages selected (viii) may not be less for
any year than the percentages shown at schedule (v).
Contributions will vest as provided below:
Vesting
Option Selected Type of Employer Contribution
(iv) 7(c) Employer Match on Salary Savings
(iv) 7(e) or (f) Employer Discretionary
29
<PAGE>
INSTRUCTIONS
(B) The Employer must choose which vesting schedule will apply if
the Plan is Top-Heavy.
(C) The Employer may choose to disregard certain service. A
participant's vested benefit is based on total years of
service, not on years of plan participation.
13. SERVICE WITH PREDECESSOR ORGANIZATION
List predecessor business of the Employer, if service for eligibility
and vesting will be included.
14-17. ROLLOVER/TRANSFER CONTRIBUTIONS, HARDSHIP WITHDRAWALS, PARTICIPANT
LOANS, INSURANCE POLICIES
The Employer may offer special features and benefits by making the
appropriate selections.
30
<PAGE>
STANDARIZED ADOPTION AGREEMENT
(B) TOP-HEAVY VESTING
For any Plan Year in which this Plan is Top-Heavy, the
following minimum vesting rules will apply:
(i) Schedules (v), (vi), and (viii) above will
automatically shift to schedule (iv).
(ii) Schedule (vii) above will automatically
shift to schedule (iii).
(C) SERVICE DISREGARDED FOR VESTING:
[X] (i) No service will be disregarded.
[ ] (ii) Service prior to the Effective Date
of this Plan or a predecessor plan shall be
disregarded when computing a Participant's
vested and nonforfeitable interest.
[ ] (iii) Service prior to a Participant
having attained age 18 shall be disregarded
when computing a Participant's vested and
nonforfeitable interest.
13. SERVICE WITH PREDECESSOR ORGANIZATION
For purposes of satisfying the Service requirements for eligibility,
Hours of Service shall include Service with the following predecessor
organization(s):
(These hours will also be used for vesting purposes.)
N/A
14. ROLLOVER/TRANSFER CONTRIBUTIONS
(A) Rollover Contributions, including Direct Rollovers, as
described at paragraph 1.69 of the Basic Plan Document #04,
[X] shall [ ] shall not be permitted to be made to the Plan.
If permitted, Employees [X] may [ ] may not make Rollover
Contributions prior to meeting the eligibility requirements
for participation in the Plan.
(B) Transfer Contributions, as described at paragraph 4.4 of the
Basic Plan Document #04 [X] shall [ ] shall not be permitted
to be made to the Plan. If permitted, Employees [X] may [ ]
may not Transfer Contributions prior to meeting the
eligibility requirements for participation in the Plan.
NOTE: Even if available, the Employer may refuse to accept such contributions
if its Plan meets the safe-harbor rules of paragraph 8.7 of the Basic
Plan Document #04.
31
<PAGE>
INSTRUCTIONS
NOTE Item 15: The criteria for hardship withdrawals are set forth
in the Plan Document and are limited to medical expenses,
purchase of a principal residence, payment of tuition and
related educational expenses, and avoiding mortgage
foreclosure or eviction. If hardship withdrawals are
authorized, the Employer must decide if they are limited to
Elective Deferrals.
NOTE Item 16: Whether or not to permit loans to participants should
be determined after reviewing the requirements of the final
Department of Labor (DOL) regulations as well as the potential
tax implications under Section 72(p) of the Internal Revenue
Code.
18. INVESTMENT DIRECTION
The Employer must decide who will be responsible for directing the
investment of Plan assets. If participants direct the investment of all
contributions, then (b) is selected.
NOTE To the extent Employee investment direction was previously
allowed, it shall continue to be allowed.
32
<PAGE>
STANDARIZED ADOPTION AGREEMENT
15. HARDSHIP WITHDRAWALS
Hardship withdrawals, as provided for in paragraph 6.9 of the Basic
Plan Document #04, [X] are [ ] are not permitted. If permitted,
Hardship withdrawals [X] shall [ ] shall not be limited to Elective
Deferrals.
16. PARTICIPANT LOANS
Participant loans, as provided for in paragraph 13.8 of the Basic Plan
Document #04, [X] are [ ] not permitted. If permitted, repayments of
principal and interest shall be repaid to the Participant's segregated
account.
17. INSURANCE POLICIES
The insurance provisions of paragraph 13.9 of the Basic Plan Document
#04 [X] shall [ ] shall not be applicable.
18. INVESTMENT DIRECTION
[ ] (A) EMPLOYER INVESTMENT DIRECTION
Employer investment direction provisions, as set forth in
Article XIII of the Basic Plan Document #04, shall be
applicable as to the following:
[ ] (i) All monies.
[ ] (ii) Employer Discretionary and Matching Monies.
[ ] (iii) Employer Discretionary Monies excluding
Matching Monies.
[ ] (iv) Employer Matching Monies only.
[X] (B) EMPLOYER INVESTMENT DIRECTION
Employee investment direction provisions, as set forth in
Article XIII of the Basic Plan Document #04, shall be
applicable to all monies not directed by Employer.
If no answer is specified, Employee Investment Direction will apply.
NOTE: Each of the mutual funds in which the Plan may invest carries its own
fees and expenses, which may include management fees, Rule 12b-1 fees
and/or other fees and expenses, which are described in detail in each
Fund's prospectus. Employees who invest in one or more of these mutual
funds will, as shareholders of those mutual funds, bear their pro-rata
portion of each fund's fees and expenses and may also pay a sales
charge or contingent deferred sales charge in connection with their
purchase of fund shares. Employer acknowledges that Prudential
Securities Incorporated (PSI) and Pruco Securities Corporation (Prusec)
may be deemed to benefit from advisory and other fees paid to its
affiliates in connection with the management and operation of the
mutual funds in which the Employee may invest, from sales charges and
contingent deferred sales charges imposed as described in the
prospectus and from fees paid by The Prudential Insurance Company of
America in connection with the Guaranteed Interest Account.
33
<PAGE>
INSTRUCTIONS
19. EARLY PAYMENT OPTION
The Employer may allow early distributions at age 59-1/2 without
separation from service by choosing (a), or at normal retirement age
without separation from service by selecting (b). If these options have
been permitted in the past, the Employer must continue to allow them.
20. DISTRIBUTION OPTIONS
The Employer must decide when and in what form distributions will be
made to a participant. Annuity options are not available unless they
were available under a predecessor plan.
34
<PAGE>
STANDARDIZED ADOPTION AGREEMENT
19. EARLY PAYMENT OPTION
(A) A Participant who has attained age 59-1/2 and who has not
separated from Service [X] may [ ] may not obtain a
distribution of his or her vested Employer contributions.
(B) A Participant who has attained the Plan's Normal Retirement
Age and who has not separated from Service [X] may [ ] may not
receive a distribution of his or her vested account balance.
NOTE: If the Participant has had the right to withdraw his or her
account balance in the past, this right may not be taken away.
Notwithstanding the above, to the contrary, required minimum
distributions will be paid. For timing of distribution see
item 20 below.
20. DISTRIBUTION OPTIONS
(A) TIMING OF DISTRIBUTIONS:
In cases of termination, benefits shall be paid:
[ ] (i) As soon as administratively feasible
following the close of the Plan Year during
which a distribution is requested or is
otherwise payable.
[X] (ii) As soon as administratively feasible,
following the date on which a distribution
is requested or is otherwise payable.
[ ] (iii) Only after the Participant has
achieved the Plan's Normal Retirement Age,
or Early Retirement Age, if applicable.
If no answer is specified, option (ii) will apply.
(B) OPTIONAL FORMS OF PAYMENT:
[X] (i) Lump Sum.
[X] (ii) Installment Payments.
[X] (iii) Other form(s)* as specified:
Forms which include joint and survivor annuity of 50%
If no answer is specified, option (i) will apply.
*Annuities are only available in either a nonsafe-harbored
Plan which does not meet the provisions of paragraph 8.7 of
Basic Plan Document #04 or in a Plan which previously offered
annuities as an optional form of payment.
35
<PAGE>
INSTRUCTIONS
21. SPONSOR CONTACT
The Employer may contact a Prudential Representative with any questions
regarding this Prototype Plan Document.
22. SIGNATURES
(A) Employer--The date signed should be on or before the last day
of the fiscal year for which the Plan is effective.
NOTE: Make certain all affiliated employers who are adopting the
Plan execute signature pages and attach them to the Adoption
Agreement.
36
<PAGE>
STANDARIZED ADOPTION AGREEMENT
21. SPONSOR CONTACT
The Sponsor of this Prototype Plan is Prudential Mutual Fund
Management, Inc., One Seaport Plaza, New York, New York 10292. Any
questions regarding this Prototype Plan document may be directed to
your Prudential Representative. You may also call (800) 848-4015.
22. SIGNATURES
Due to the significant tax ramifications, the Sponsor recommends that
before you execute this Adoption Agreement, you contact your attorney
or tax advisor.
The adopting Employer understands that there are fees for each account
under the Plan. The Basic Plan Document contains a pre-dispute
arbitration clause found in Article XIII, Section 13.7 Arbitration.
(A) EMPLOYER:
Name and address of Employer if different than specified in
Section 1 above.
IF EMPLOYER INVESTMENT DIRECTION APPLICABLE, NAME(S) OF
INDIVIDUAL(S) AUTHORIZED TO ISSUE INVESTMENT AND
ADMINISTRATIVE INSTRUCTIONS TO THE PLAN SPONSOR OR AFFILIATE:
This Adoption Agreement and the corresponding provisions of
the Plan and Trust Basic Plan Document #04 were adopted by the
Employer the 21st day of March , 1996 .
Signed for the Employer by: /s/ Dan L. Webber
Title: President/CEO
Signature: Dan L. Webber
THE EMPLOYER UNDERSTANDS THAT ITS FAILURE TO PROPERLY COMPLETE
THE ADOPTION AGREEMENT MAY RESULT IN DISQUALIFICATION OF ITS
PLAN.
37
<PAGE>
INSTRUCTIONS
(B) Trustee -- The date signed is the date of acceptance by the
Trustee.
NOTE: You cannot appoint Prudential Securities, Prudential Mutual
Fund Services, Prudential Insurance Company of America, or
your Prudential Representative as the Trustee.
Please be advised that the Prudential Bank & Trust Company
charges an annual fee when appointed as Trustee. Please obtain
the current fee schedule from your Prudential Representative.
(C) Prudential Mutual Fund Management -- The date signed is the
date of acceptance by Prudential Mutual Fund Services on
behalf of Prudential Mutual Fund Management.
38
<PAGE>
STANDARIZED ADOPTION AGREEMENT
EMPLOYER'S RELIANCE: An Employer who maintains or has ever maintained
or who later adopts any Plan [including, after December 31, 1985, a
Welfare Benefit Fund, as defined in Section 419(e) of the Code, which
provides post-retirement medical benefits allocated to separate
accounts for Key Employees, as defined in Section 419A(d)(3)] or an
individual medical account, as defined in Code Section 415(1)(2) in
addition to this Plan may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under Section 401 of the Code. If the Employer who
adopts or maintains multiple Plans wishes to obtain reliance that such
Plan(s) are qualified, application for a determination letter should be
made to the appropriate Key District Director of Internal Revenue. The
Employer understands that its failure to properly complete the Adoption
Agreement may result in disqualification of its plan.
The Employer may not rely on the opinion letter issued by the National
Office of the Internal Revenue Service as evidence that this Plan is
qualified under 401 of the Code unless the terms of the Plan, as herein
adopted or amended, that pertain to the requirements of Code Sections
401(a)(4), 401(a)(17), 401(l), 401(a)(5), 410(b) and 414(s), as amended
by the Tax Reform Act of 1986, or later laws, (a) are made effective
retroactively to the first day of the first Plan Year beginning after
December 31, 1988 (or such later date on which these requirements first
become effective with respect to this Plan); or (b) are made effective
no later than the first day on which the Employer is no longer
entitled, under regulations, to rely on a reasonable, good faith
interpretation of these requirements, and the prior provisions of the
Plan constitute such an interpretation.
The Adoption Agreement may only be used in conjunction with Basic Plan
Document #04.
[X] (B) TRUSTEE:
<TABLE>
<S> <C>
[ ] Prudential Bank & Trust Company NOTE: There is an annual trustee fee
One Ravinia Drive charged under the Plan if Prudential
Atlanta, GA 30346 Bank & Trust Company is appointed as
Trustee.
</TABLE>
[X] The Trustee will be the following individuals:
/s/ Dan L. Webber /s/ Jerry F. Aldape
/s/ Wm. H. Winegar /s/ Nadine J. Johnson
The assets of the Fund shall be invested in accordance with paragraph
13.3 of the Basic Plan Document #04 as a Trust. As such, the Employer's
Plan as contained herein was accepted by the Trustee the 21st day of
March , 19 96 .
Signed for the Trustee by:
Signature /s/ Dan L. Webber Signature /s/ Jerry F. Aldape
------------------------ -------------------
Dan L. Webber Jerry F. Aldape
Signature /s/ William H. Winegar Signature /s/ Nadine J. Johnson
------------------------ ---------------------
William H. Winegar Nadine J. Johnson
(C) PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
The Employer's Agreement and the corresponding provisions of the Plan
and Trust Basic Plan Document #04 were accepted by Prudential Mutual
Fund Management, Inc. the day of , 19 .
Signed for the Employer by:
Title:
Signature:
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<PAGE>
401(K) PLAN DOCUMENT
THE PRUARRAY PROTOTYPE PLAN AND
TRUST AND IRS OPINION LETTERS
PRUARRAY 401(K) PLAN
[Logo Appears Here]
<PAGE>
ARTICLE I-DEFINITIONS1.1 ACTUAL DEFERRAL PERCENTAGE
The ratio (expressed as a percentage and calculated separately for each
Participant) of:
(A) the amount of Employer contributions [as defined at (c) and (d)]
actually paid over to the Fund on behalf of such Participant for the
Plan Year to
(B) the Participant's Compensation for such Plan Year (unless otherwise
specified by the Employer in the Adoption Agreement. Compensation will
include all amounts earned from the Employer and actually paid during
the Plan Year).
Employer contributions on behalf of any Participant shall include:
(C) any Elective Deferrals made pursuant to the Participant's deferral
election, including Excess Elective Deferrals, but excluding Elective
Deferrals that are either taken into account in the Contribution
Percentage test (provided the ADP test is satisfied both with and
without exclusion of these Elective Deferrals) or are returned as
excess Annual Additions; and
(D) at the election of the Employer, Qualified Non-Elective
Contributions and Qualified Matching Contributions.
For purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Elective Deferrals shall be treated as
a Participant on whose behalf no Elective Deferrals are made.
1.2 ADOPTION AGREEMENT
The document attached to this Plan by which an Employer elects to establish a
qualified retirement plan and trust under the terms of this Prototype Plan and
Trust.
1.3 AGGREGATE LIMIT-THE SUM OF:
(A) 125 percent of the greater of the ADP of the Non-Highly Compensated
Employees for the Plan Year or the ACP of Non-Highly Compensated
Employees under the Plan subject to Code Section 401(m) for the Plan
Year beginning with or within the Plan Year of the cash or deferred
arrangement as described in Code Section 401(k) or Code Section
402(h)(1)(B), and
(B) the lesser of 200% or 2% plus the lesser of such ADP or ACP.
Alternatively, the aggregate limit can be determined by substituting "the lesser
of 200% or 2 percent plus" for "125% of" in (a) above, and substituting "125%
of" for "the lesser of 200% or 2% plus" in (b) above.
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<PAGE>
1.4 ANNUAL ADDITIONS
The sum of the following amounts credited to a Participant's account for the
Limitation Year:
(A) Employer Contributions;
(B) Employee Contributions (under article (V);
(C) Forfeitures;
(D) Amounts allocated after March 31, 1984, to an individual medical
account, as defined in Code Section 415(1)(2), which is part of a
pension or annuity plan maintained by the Employer (these amounts are
treated as Annual Additions to a Defined Contribution Plan, though they
arise under a Defined Benefit Plan); and
(E) Amounts derived from contributions paid or accrued after 1985, in
taxable years ending after 1985, which are either attributable to
post-retirement medical benefits allocated to the account of a Key
Employee, or to a Welfare Benefit Fund maintained by the Employer, are
also treated as Annual Additions to a Defined Contribution Plan. For
purposes of this paragraph, an Employee is a Key Employee if he or she
meets the requirements of paragraph 1.43 at any time during the Plan
Year or any preceding Plan Year. Welfare Benefit Fund is defined at
paragraph 1.89.
(F) Allocations under a Simplified Employee Pension Plan.
Excess amounts applied in a Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year, pursuant to the
provisions of Article X.
1.5 ANNUITY STARTING DATE
The first day of the first period for which an amount s paid as an annuity or in
any other form.
1.6 APPLICABLE CALENDAR YEAR
The First Distribution Calendar Year, and in the event of the recalculation of
life expectancy, such succeeding calendar year. If payments commence in
accordance with paragraph 7.4(e) before the Required Beginning Date, the
Applicable Calendar Year is the Year such payments commence. If distribution is
in the form of an immediate annuity purchased after the Participant's death with
the Participant's remaining interest, the Applicable Calendar Year is the year
of purchase.
1.7 APPLICABLE LIFE EXPECTANCY
Used in determining the required minimum distribution. The life expectancy (or
joint and last survivor expectancy) calculated using the attained age of the
Participant (or Designated Beneficiary) as of the Participant's (or Designated
Beneficiary's) birthday in the Applicable Calendar Year reduced by one for each
calendar year which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the Applicable Life
42
<PAGE>
Expectancy shall be the life expectancy as so recalculated. The life expectancy
of a non-Spouse Beneficiary may not be recalculated.
1.8 AVERAGE CONTRIBUTION PERCENTAGE (ACP)
The average of the Contribution Percentages for each Highly Compensated Employee
and for each Non-Highly Compensated Employee.
1.9 AVERAGE DEFERRAL PERCENTAGE (ADP)
The average of the Actual Deferral Percentages for each Highly Compensated
Employee and for each Non-Highly Compensated Employee.
1.10 BREAK IN SERVICE
If the Hour counting method has been chosen by the Employer in the Adoption
Agreement, a Break In Service is a 12-consecutive month period during which an
Employee fails to complete more than 500 Hours of Service. If the Elapsed Time
method has been chosen by the Employer in the Adoption Agreement, a Break in
Service is a period of severance of at least 12 consecutive months.
1.11 CODE
The Internal Revenue Code of 1986, including any amendments.
1.12 COMPENSATION
Unless otherwise specified by the Employer in the Adoption Agreement,
Compensation shall include all amounts earned from the Employer and actually
paid during the Plan Year.
(A) Code Section 3401(a) Wages. Compensation is defined as wages within
the meaning of Code Section 3401(a) for the purposes of Federal income
mx withholding at the source bur determined without regard to any rules
that limit the remuneration included in wages based on the nature or
location of the employment or the serv ices performed [such as the
exception for agricultural labor in Code Section 3401(a)(2)].
(B) Code Section 415 Compensation. For purposes of applying the
limitations of Article X and Top-Heavy minimums, the definition or
Compensation shall be Code Section 415 Compensation defined as follows:
a Participant's Earned Income, wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includible in
gross income [including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits and
reimbursements or other expense allowances under a nonaccountable plan
(as described in Regulation 1.62-2(c))], and excluding the following:
43
<PAGE>
(1) Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income for
the taxable year in which contributed, or Employer
contributions under a Simplified Employee Pension Plan or any
distributions from a plan of deferred compensation,
(2) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by
the Employee either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture,
(3) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
Salary Reduction Agreement) towards the purchase of an annuity
described in Code Section 403(b) (whether or not the amounts
are actually excludible from the gross income of the
Employee).
For purposes of applying the limitations of Article X, Compensation for a
Limitation Year is the Compensation actually paid or made available during such
Limitation year. Notwithstanding the preceding sentence, Compensation for a
Participant in a Defined Contribution Plan who is permanently and totally
disabled [as defined in Code Section 22(e)(3)] is the Compensation such
Participant would have received for the Limitation Year if the Participant had
been paid at the rate of Compensation paid immediately before becoming
permanently and totally disabled. Such imputed Compensation for the disabled
Participant may be taken into account only if the participant is not a Highly
Compensated Employee [as defined in Code Section 414(q)] and contributions made
on behalf of such Participant are nonforfeitable when made.
If the Employer fails to pick the determination period in the Adoption
Agreement, the Plan Year shall be used. Unless otherwise specified by the
Employer in the Adoption Agreement, Compensation shall be determined as provided
in Code Section 3401(a) (as defined in this paragraph 1.1 2(a)). In
nonstandardized Adoption Agreement 002, the Employer may choose to eliminate or
exclude categories of Compensation which do not violate the provisions of Code
Sections 401(a)(4), 414(s) the regulations thereunder and Revenue Procedure
89-65.
Beginning with 1989 Plan Years, the annual Compensation of each Participant
which may be taken into account for determining all benefits provided under the
Plan (including benefits under article XIV) for any Plan Year shall not exceed
$200,000, as adjusted under Code Section 415(d). For Plan Years beginning on or
after January 1, 1994, the annual Compensation of each Participant taken into
account for determining all benefits provided under the Plan for any Plan Year
shall not exceed $150,000, as adjusted for increases in the cost-of-living in
accordance with Code Section 401(a)(17). The cost-of-living adjustment in effect
for a calendar year applies to any determination period beginning in such
calendar year.
44
<PAGE>
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Code Section 414(q)(6) shall apply, except in applying
such rules, the term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not attained age 19
before the end of the Plan Year. If, as a result of the application of such
rules the adjusted annual Compensation limitation is exceeded, then (except for
purposes of determining the portion of Compensation up to the integration level
if this Plan provides for permitted disparity), the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this section prior to the application of this
limitation.
If a Plan has a Plan year that contains fewer than 12 Calendar Months, then the
annual compensation limit for that period is an amount equal to the annual
compensation as adjusted for the calendar year in which the compensation period
begins, multiplied by a fraction the numerator of which is the number or full
months in the short determination period and the denominator of which is 12. If
compensation for any prior plan year is taken into account in determining an
employee's contributions or benefits for the current year, the compensation for
such prior year is subject to the applicable annual compensation limit in effect
for that prior year. For this purpose, for years beginning before January 1,
1990, the applicable annual compensation limit is $200,000.
Compensation shall not include deferred compensation other than contributions
through a salary reduction agreement to a cash or deferred plan under Code
Section 401(k), a Simplified Employee Pension Plan under Code Section
402(h)(1)(B), a cafeteria plan under Code Section 125 or a tax-deferred annuity
under Code Section 403(b). Unless elected otherwise by the Employer in the
Adoption Agreement, these deferred amounts will be considered as Compensation
for Plan purposes. These deferred amounts are not counted as Compensation for
purposes of Articles X and XIV except for Code Sections 401(k) and 401(m)
testing. When applicable to a Self-Employed Individual, Compensation shall mean
Earned Income.
1.13 CONTRIBUTION PERCENTAGE
The ratio (expressed as a percentage and calculated separately for each
Participant) of:
(A) the Participant's Contribution Percentage Amounts [as defined at
(c)-(f)] for the Plan Year, to
(B) the Participant's Compensation for such Plan Year. Unless otherwise
specified by the Employer in the Adoption Agreement, Compensation will
include all amounts earned from the Employer and actually paid during
the Plan Year.
Contribution Percentage Amounts on behalf of any Participant shall include:
(C) the amount of Employee Voluntary Contributions, Matching
Contributions, and Qualified Matching Contributions (to the extent not
taken into account for purposes of the ADP test) made under the Plan on
behalf of the Participant for the Plan Year,
45
<PAGE>
(D) forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's account which shall be
taken into account in the year in which such forfeiture is allocated,
(E) at the election of the Employer, Qualified Non-Elective
Contributions, and
(F) the Employer also may elect to use Elective Deferrals in the
Contribution Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and continues to be met
following the exclusion of those Elective Deferrals that are used to
meet the ACP test.
Contribution Percentage Amounts shall not include Matching Contributions,
whether or not Qualified, that are forfeited either to correct Excess Aggregate
Contributions or because the contributions to which they relate are Excess
Deferrals, Excess Contributions, or Excess Aggregate Contributions.
1.14 DEFINED BENEFIT PLAN
A Plan under which a Participant's benefit is determined by a formula contained
in the Plan and no individual accounts are maintained for Participants.
1.15 DEFINED BENEFIT (PLAN) FRACTION
A fraction, the numerator of which is the sum of the Participant's Projected
Annual Benefits under all the Defined Benefit Plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the Limitation Year under Code
Sections 415(b) and (d) or 140 percent of the Highest Average Compensation,
including any adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after 1986, in one or more Defined
Benefit Plans maintained by the Employer which were in existence on May 6, 1986,
the denominator of this fraction will not be less than 125 percent of the sum of
the annual benefits under such plans which the Participant had accrued as of the
close of the last Limitation Year beginning before 1987, disregarding any
changes in the terms and conditions of the Plan after May 5, 1986. The preceding
sentence applies only if the Defined Benefit Plans individually and in the
aggregate satisfied the requirements of Section 415 for all Limitation Years
beginning before 1987.
1.16 DEFINED CONTRIBUTION DOLLAR LIMITATION
Thirty thousand dollars ($30,000) or, if greater, one-fourth of the defined
benefit dollar limitation set forth in Code Section 415(b)(1) as in effect for
the Limitation Year.
1.17 DEFINED CONTRIBUTION PLAN
A Plan under which individual accounts are maintained for each Participant to
which all contributions, forfeitures, investment income and gains or losses, and
expenses are credited or
46
<PAGE>
deducted. A Participant's benefit under such Plan is based solely on the fair
market value of his or her account balance.
1.18 DEFINED CONTRIBUTION (PLAN) FRACTION
A Fraction, the numerator of which is the sum of the Annual Additions to the
Participant's account under all the Defined Contribution Plans (whether or not
terminated) maintained by the Employer for the current and all prior limitation
Years (including the Annual Additions attributable to the Participant's
nondeductible Employee contributions to all Defined Benefit Plans, whether or
not terminated, maintained by the Employer, and the Annual Additions
attributable to all Welfare Benefit Funds, as defined in paragraph 1.89 and
individual medical accounts, as defined in Code Section 415(1)(2) maintained by
the Employer), and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years of service with the
Employer (regardless of whether a Defined Contribution Plan was maintained by
the Employer). The maximum aggregate amount in the Limitation Year is the lesser
of 125 percent of the dollar limitation determined under Code Sections 415(b)
and (d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after 1986, in one or more Defined Contribution Plans
maintained by the Employer which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this fraction will be
permanently subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of the
last Limitation Year beginning before 1987, and disregarding any changes in the
terms and conditions of the Plan made after May 6, 1986, but using the Section
415 limitation applicable to the first Limitation Year beginning on or after
January 1, 1987. The Annual Addition for any Limitation Year beginning before
1987 shall not be re-computed to treat all Employee Contributions as Annual
Additions.
1.19 DESIGNATED BENEFICIARY
The individual who is designated as the beneficiary under the Plan in accordance
with Code Section 401(a)(9) and the regulations thereunder.
1.20 DISABILITY
An illness or injury of a potentially permanent nature, expected to last for a
continuous period of not less than 12 months, certified by a physician selected
by or satisfactory to the Employer, which prevents the Employee from engaging in
any occupation for wage or profit for which the Employee is reasonably fitted by
training, education or experience.
1.21 DISTRIBUTION CALENDAR YEAR
A calendar year for which a minimum distribution is required.
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<PAGE>
1.22 EARLY RETIREMENT AGE
The age set by the Employer in the Adoption Agreement (but not less than 55),
which is the earliest age at which a Participant may retire and receive his or
her benefits under the Plan.
1.23 EARNED INCOME
Net earnings from self-employment in the trade or business with respect to which
the Plan is established, determined without regard to items not included in
gross income and the deductions allocable to such items, provided that personal
services of the individual are a material income-producing factor. Earned income
shall be reduced by contributions made by an Employer to a qualified plan to the
extent deductible under Code Section 404. For tax years beginning after 1989,
net earnings shall be determined taking into account the deduction for one-half
of self-employment taxes allowed to the Employer under Code Section 164(f) to
the extent deductible.
1.24 EFFECTIVE DATE
The date on which the Employer's retirement plan or amendment to such plan
becomes effective. Unless otherwise specified in the Adoption Agreement, the
effective date shall be the first day of the Plan Year during which the Adoption
Agreement is executed by the Employer. For amendments reflecting statutory and
regulatory changes post Tax Reform Act of 1986, the Effective Date will be the
date upon which such amendment is first administratively applied.
1.25 ELECTION PERIOD
The period which begins on the first day of the Plan Year in which the
Participant attains age 35 and ends on the date of the Participant's death. If a
Participant separates from service prior to the first day of the Plan Year in
which age 35 is attained, the Election Period shall begin on the date of
separation, with respect to the account balance as of the date of separation.
1.26 ELECTIVE DEFERRAL
Employer contributions made to the Plan at the election of the Participant, in
lieu of cash Compensation. Elective Deferrals shall also include contributions
made pursuant to a Salary Savings Agreement or other deferral mechanism, such as
a cash option contribution. With respect to any taxable year, a Participant's
Elective Deferral is the sum of all Employer contributions made on behalf of
such Participant pursuant to an election to defer under any qualified cash or
deferred arrangement as described in Code Section 401(k), any simplified
employee pension cash or deferred arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation plan under Code Section 457,
any plan as described under Code Section 501(c)(18), and any Employer
contributions made on the behalf of a Participant for the purchase of an annuity
contract under Code Section 403(b) pursuant to a Salary Savings Agreement.
Elective Deferrals shall not include any deferrals properly distributed as
Excess Annual Additions.
1.27 ELIGIBLE PARTICIPANT
Any Employee who is eligible to make a Voluntary Contribution, or an Elective
Deferral (if the Employer takes such contributions into account in the
calculation of the Contribution Percentage), or to receive a Matching
Contribution (including forfeitures) or a Qualified Matching
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Contribution. If a voluntary Contribution or Elective Deferral is required as a
condition of participation in the Plan, any Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as an
Eligible Participant even though no Voluntary Contributions or Elective
Deferrals are made.
1.28 EMPLOYEE
Any person employed by the Employer (including Self-Employed Individuals and
partners), all Employees of a member of an affiliated service group [as defined
in Code Section 414(m)], Employees of a controlled group of corporations [as
defined in Code Section 414(b)], all Employees of any incorporated or
unincorporated trade or business which is under common control [as defined in
Code Section 414(c)], leased Employees [as defined in Code Section 414(n)] and
any Employee required to be aggregated by Code Section 414(o). All such
Employees shall be treated as employed by a single Employer.
1.29 EMPLOYER
The Self-Employed Individual, partnership, corporation or other organization
which adopts this Plan, including any firm that succeeds the Employer and adopts
this Plan. For purposes of Article X, Limitations on Allocations, Employer shall
mean the Employer that adopts this Plan, and all members of a controlled group
of corporations [as defined in Code Section 414(b) as modified by Code Section
415(h)], all commonly controlled trades or businesses [as defined in Code
Section 414(c) as modified by Code Section 415(h)] or affiliated service groups
[as defined in Code Section 414(m)] of which the adopting Employer is a part,
and any other entity required to be aggregated with the Employer pursuant to
regulations under Code Section 414(o).
1.30 ENTRY DATE
The date on which an Employee commences participation in the Plan as determined
by the Employer in the Adoption Agreement. Unless the Employer specifies
otherwise in the Adoption Agreement, entry into the Plan shall be on the first
day of the Plan Year or the first day of the seventh month of the Plan Year
coinciding with or following the date on which an Employee meets the eligibility
requirements.
1.31 EXCESS AGGREGATE CONTRIBUTIONS The excess, with respect to any Plan
Year, of:
(A) the aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such Plan Year, over
(B) the maximum Contribution Percentage Amounts permitted by the ACP
test (determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution Percentages
beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to paragraph 1.33 and then determining Excess Contributions
pursuant to paragraph 1.33.
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1.32 EXCESS AMOUNT
The excess of the Participant's Annual Additions for the Limitation Year over
the Maximum Permissible Amount.
1.33 EXCESS CONTRIBUTION
With respect to any Plan Year, the excess of:
(A) the aggregate amount of Employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such
Plan Year, over
(B) the maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with the highest
of such percentages).
1.34 EXCESS ELECTIVE DEFERRALS
Those Elective Deferrals that are includible in a Participant's gross income
under Code Section 402(g) to the extent such Participant's Elective Deferrals
for a taxable year exceed the dollar limitation under such Code Section. Excess
Elective Deferrals shall be treated as Annual Additions under the Plan, unless
such amounts are distributed no later than the first April 15 following the
close of the Participant's taxable year.
1.35 FAMILY MEMBER
The Employee's Spouse, any lineal descendants and ascendants and the Spouse of
such lineal descendants and ascendants.
1.36 FIRST DISTRIBUTION CALENDAR YEAR
For distributions beginning before the Participant's death, the First
Distribution Calendar Year is the calendar year immediately preceding the
calendar year which contains the Participant's Required Beginning Date. For
distributions beginning after the Participant's death, the First Distribution
Calendar Year is the calendar year in which distributions are required to begin
pursuant to paragraph 7.10.
1.37 FUND
All contributions received by the Trustee under this Plan and Trust, investments
thereof and earnings and appreciation thereon.
1.38 HARDSHIP
An immediate and heavy financial need of the Employee where such Employee lacks
other available resources.
1.39 HIGHEST AVERAGE COMPENSATION
The average Compensation for the three consecutive Nears of Service with the
Employer that produces the highest average. A Year of Service with the Employer
is the 12-consecutive-month period defined in the Adoption Agreement.
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1.40 HIGHLY COMPENSATED EMPLOYEE
Any Employee who performs service for the Employer during the determination year
and who, during the immediate prior year:
(A) received Compensation from the Employer in excess of $75,000 [as
adjusted pursuant to Code Section 415(d)]; or
(B) received Compensation from the Employer in excess of $50,000 [as
adjusted pursuant to Code Section 415(d)] and was a member of the
Top-Paid Group for such year; or
(C) was an officer of the Employer and received Compensation during
such year that is greater than 50 percent of the dollar limitation in
effect under Code Section 415(b)(1)(A).
Notwithstanding (a), (b) and (c), an Employee who was not Highly Compensated
during the preceding Plan Year shall not be treated as a Highly Compensated
Employee with respect to the current Plan Year, unless such Employee is a member
of the 100 Employees paid the greatest Compensation during the year for which
such determination is being made.
(D) Employees who are five percent (5%) Owners at any time during the
immediate prior year or determination year.
Highly Compensated Employees include Highly Compensated active Employees and
Highly Compensated former Employees.
1.41 HOUR OF SERVICE
(A) Hour Counting Method:
(1) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These
hours shall be credited to the Employee for the computation
period in which the duties are performed; and
(2) Each hour for which an Employee is paid. Or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence. No more than 501
Hours of Service shall be credited under this paragraph for
any single continuous period (whether or not such period
occurs in a single computation period). Hours under this
paragraph shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference; and
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(3) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Employer.
The same Hours of Service shall not be credited both under
paragraph (a) or paragraph (b), as the case may be and under
this paragraph (c). These hours shall be credited to the
Employee for the computation period or periods to which the
award or agreement pertains rather than the computation period
in which the award, agreement or payment is made.
(4) Hours of Service shall be credited for employment with the
Employer and with other members of an affiliated service group
las defined in Code Section 414(m)], a controlled group of
corporations [as defined in Code Section 414(b)], or a group
of trades or businesses under common control [as defined in
Code Section 414(c)] of which the adopting Employer is a
member, and any other entity required to be aggregated with
the Employer pursuant to Code Section 414(o) and the
regulations thereunder. Hours of Service shall also be
credited for any individual considered an Employee for
purposes of this Plan under Code Section 414(n) or Code
Section 414(o) and the regulations thereunder.
(5) Solely for purposes of determining whether a Break In
Service, as defined in paragraph 1.10, for participation and
vesting purposes has occurred in a computation period, an
individual who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which
would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be
determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence by reason of the
pregnancy of the individual, by reason of a birth of a child
of the individual, by reason of the placement of a child with
the individual in connection with the adoption of such child
by such individual, or for purposes of caring for such child
for a period beginning immediately following such birth or
placement. The Hours of Service credited under this paragraph
shall be credited in the computation period in which the
absence begins if the crediting is necessary to prevent a
Break in Service in that period, or in all other cases, in the
following computation period. No more than 501 hours will be
credited under this paragraph.
(6) Unless specified otherwise in the Adoption Agreement, the
Hours of Service Method shall be used. Also, unless specified
otherwise in the Adoption Agreement, Hours of Service shall be
determined on the basis of actual hours for which an Employee
is paid or entitled to payment.
(B) Elapsed Time Method:
(1) For purposes of this section, Hour of Service shall mean
each hour for which an Employee is paid or entitled to payment
for the performance of duties for the Employer.
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(2) Break In Service is a period of severance of at least 12
consecutive months.
(3) Period of severance is a continuous period of time during
which the Employee is not employed by the Employer. Such
period begins on the date the Employee retires, quits or is
discharged, or if earlier, the 12 month anniversary of the
date on which the Employee was otherwise first absent from
service.
(4) In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive-month
period beginning on the first anniversary of the first date of
such absence shall not constitute a Break In Service. For
purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence (i) by reason of the
pregnancy of the individual, (ii) by reason of the birth of a
child of the individual, (iii) by reason of the placement of a
child with the individual in connection with the adoption of
such child by such individual, or (iv) for purposes of caring
for such child for a period beginning immediately following
such birth or placement.
(5) Each Employee will share in Employer contributions for the
period beginning on the date the Employee commences
participation under the Plan and ending on the date on which
such Employee severs employment with the Employer or is no
longer a member of an eligible class of Employees.
(6) If the Employer is a member of an affiliated service group
(under Section 414(m)), a controlled group of corporations
(under Section 414(b)), a group of trades or businesses under
common control (under Section 414(c)) or any other entity
required to be aggregated with the Employer pursuant to
Section 414(o), service will be credited for any employment
for any period of time for any other member of such group.
Service will also be credited for any individual required
under section 414(n) or Section (414)(o) to be considered an
Employee of any Employer aggregated under Section 414(b), (c),
or (m).
1.42 KEY EMPLOYEE
Any Employee or former Employee (and the beneficiaries of such employee) who at
any time during the determination period was an officer of the Employer if such
individual's annual compensation exceeded 50% of the dollar limitation under
Code Section 415(b)(1)(A) (the defined benefit maximum annual benefit); an owner
(or considered an owner under Code Section 318) of one of the ten largest
interests in the employer if such individual's compensation exceeded 100% of the
dollar limitation under Code Section 415(c)(1)(A); a 5% owner of the Employer,
or a 1% owner of the Employer who has an annual compensation of more than
$150,000. For purposes of determining who is a Key Employee, annual compensation
shall mean Compensation as defined for Article X, but including amounts deferred
through a Salary Reduction Agreement to a cash or deferred plan under Code
Section 401(k), a Simplified Employee Pension Plan under Code Section 408(k), a
cafeteria plan under Code Section 125 or a tax-deferred annuity under Code
Section 403(b). The determination period is the Plan Year
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containing the Determination Date and the four preceding Plan Years. The
determination of who is a Key Employee will be made in accordance with Code
Section 416(i)(1) and the regulations thereunder.
1.43 LEASED EMPLOYEE
Any person (other than an Employee of the recipient) who, pursuant to an
agreement between the recipient and any other person ("leasing organization"),
has performed services for the recipient [or for the recipient and related
persons determined in accordance with Code Section 414(n)(6)] on a substantially
full-time basis for a period of at least one year, and such services are of a
type historically performed by Employees in the business field of the recipient
Employer.
1.44 LIMITATION YEAR
The Plan Year as designated by the Employer in the Adoption Agreement for
purposes of determining the maximum Annual Addition to a Participant's account.
All qualified plans maintained by the Employer must use the same Limitation
Year. If the Limitation Year is amended to a different 12-consecutive-month
period, the new Limitation Year must begin on a date within the Limitation Year
in which the amendment is made.
1.45 MASTER OR PROTOTYPE PLAN
A plan, the form of which is the subject of a favorable opinion letter from the
Internal Revenue Service.
1.46 MATCHING CONTRIBUTION
An Employer contribution made to this or any other Defined Contribution Plan on
behalf of a Participant on account of an Employee Voluntary Contribution made by
such Participant, or on account of a Participant's Elective Deferral, under a
Plan maintained by the Employer.
1.47 MAXIMUM PERMISSIBLE AMOUNT
The maximum Annual Addition that may be contributed or allocated to a
Participant's account under the plan for any limitation Year shall not exceed
the lesser of:
(A) the Defined Contribution Dollar Limitation, or
(B) 25% of the Participant's Compensation for the Limitation Year.
The compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits [within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)] which is otherwise treated as an annual Addition under
Code Section 415(l)(1) or 419(d)(2). If a short Limitation Year is created
because of an amendment changing the Limitation Year to a different
12-consecutive-month period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the following fraction:
number of months in the short Limitation Year divided by 12.
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1.48 NET PROFIT
The current and accumulated operating earnings of the Employer before Federal
and State income taxes, excluding nonrecurring or unusual items of income, and
before contributions to this and any other qualified plan of the Employer.
Unless otherwise specified in the Adoption Agreement, profits will not be
required for Profit-Sharing contributions to the Plan.
1.49 NORMAL RETIREMENT AGE
The age, set by the Employer in the Adoption Agreement, at which a Participant
may retire and receive his or her benefits under the Plan. Unless otherwise
specified in the Adoption Agreement, the Normal Retirement Age shall be 65.
1.50 OWNER-EMPLOYEE
A sole proprietor, or a partner owning more than 10% of either the capital or
profits interest of the partnership.
1.51 PAIRED PLANS
Two or more Plans maintained by the Sponsor designed so that a single or any
combination of Plans adopted by an Employer will meet the antidiscrimination
rules, the contribution and benefit limitations, and the Top-Heavy provisions of
the Code.
1.52 PARTICIPANT
Any Employee who has met the eligibility requirements and is participating in
the Plan.
1.53 PARTICIPANT'S BENEFIT
The account balance as of the last valuation Date in the calendar year
immediately preceding the Distribution Calendar Year (valuation calendar year)
increased by the amount of any contributions or forfeitures allocated to the
account balance as of the dates in the valuation calendar year after the
Valuation Date and decreased by distributions made in the valuation calendar
year after the Valuation Date. A special exception exists for the second
distribution Calendar Year. For purposes of this paragraph, if any portion of
the minimum distribution for the First Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning Date, the
amount of the minimum distribution made in the second distribution calendar year
shall be treated as if it had been made in the immediately preceding
Distribution Calendar Year.
1.54 PERMISSIVE AGGREGATION GROUP
Used for Top-Heavy testing purposes, it is the Required Aggregation Group of
plans plus any other plan or plans of the Employer which, when considered as a
group with the Required Aggregation Group, would continue to satisfy the
requirements of Code Sections 401(a)(4) and 410.
1.55 PLAN
The Employer's retirement plan as embodied herein and in the Adoption Agreement.
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1.56 PLAN ADMINISTRATOR
The Employer.
1.57 PLAN YEAR
The 12-consecutive-month period designated by the Employer in the Adoption
Agreement. If no such period is designated, the Plan Year shall be the
Employer's taxable year.
1.58 PRESENT VALUE
Used for Top-Heavy test and determination purposes, when determining the Present
Value of accrued benefits, with respect to any Defined Benefit Plan maintained
by the Employer, interest and mortality rates shall be determined in accordance
with the provisions of the respective plan. If applicable, interest and
mortality assumptions will be specified in Section 11 of the Adoption Agreement.
1.59 PROJECTED ANNUAL BENEFIT
Used to test the maximum benefit which may be obtained from a combination of
retirement plans, it is the annual retirement benefit (adjusted to an actuarial
equivalent straight life annuity if such benefit is expressed in a form other
than a straight life annuity or Qualified Joint and Survivor Annuity) to which
the Participant would be entitled under the terms of a Defined Benefit Plan or
plans, assuming:
(A) the Participant will continue employment until Normal Retirement
Age under the plan (or current age, if later), and
(B) the Participant's Compensation for the current Limitation Year and
all other relevant factors used to determine benefits under the plan
will remain constant for all future Limitation Years.
1.60 QUALIFIED DEFERRED COMPENSATION PLAN
Any pension, profit-sharing, stock bonus, or other plan which meets the
requirements of Code Section 401 and includes a trust exempt from tax under Code
Section 501(a) or any annuity plan described in (Code Section 403(a).
An Eligible Retirement Plan is an individual retirement account (IRA) as
described in Section 408(a) of the Code, an individual retirement annuity (IRA)
as described in Section 408(b) of the Code, an annuity plan as described in
Section 403(a) of the Code, or a qualified trust as described in section 401(a)
of the Code, which accepts Eligible Rollover Distributions. However, in the case
of an Eligible Rollover Distribution to a surviving Spouse, an Eligible
Retirement Plan is an individual retirement account or individual retirement
annuity.
1.61 QUALIFIED DOMESTIC RELATIONS ORDER
A QDRO is a signed Domestic Relations Order issued by a State Court, which
creates, recognizes or assigns to an alternate payee(s) the right to receive all
or part of a Participant's Plan benefit and which meets the requirements of Code
Section 414(p). An alternate payee is a Spouse,
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former Spouse, child, or other dependent who is treated as a beneficiary under
the Plan as a result of the QDRO.
1.62 QUALIFIED EARLY RETIREMENT AGE
For purposes of paragraph 8.9, Qualified Early Retirement Age is the latest of:
(A) the earliest date, under the Plan, on which the Participant may
elect to receive retirement benefits, or
(B) the first day of the 120th month beginning before the Participant
reaches Normal Retirement Age, or
(C) the date the Participant begins participation.
1.63 QUALIFIED JOINT AND SURVIVOR ANNUITY
An immediate annuity for the life of the Participant with a survivor annuity for
the life of the Participant's Spouse which is at least one-half of but not more
than the amount of the annuity payable during the joint lives of the Participant
and the Participant's Spouse. The exact amount of the Survivor Annuity is to be
specified by the Employer in the Adoption Agreement. If not designated by the
Employer, the Survivor Annuity will be 1/2 of the amount paid to the Participant
during his or her lifetime. The Qualified Joint and Survivor Annuity will be the
amount of benefit which can be provided by the Participant's Vested Account
Balance.
1.64 QUALIFIED MATCHING CONTRIBUTION
Matching Contributions which when made are subject to the distribution and
nonforfeitability requirements under Code Section 401(k).
1.65 QUALIFIED NON-ELECTIVE CONTRIBUTIONS
Contributions (other than Matching Contributions or Qualified Matching
Contributions) made by the Employer and allocated to Participants' accounts that
the Participants may not elect to receive in cash until distributed from the
Plan; that are nonforfeitable when made; and that are distributable only in
accordance with the distribution provisions that are applicable to Elective
Deferrals and Qualified Matching Contributions.
1.66 QUALIFIED VOLUNTARY CONTRIBUTION
A tax-deductible Voluntary Employee Contribution. These contributions may no
longer be made to the Plan.
1.67 REQUIRED AGGREGATION GROUP
Used for Top-Heavy testing purposes, it consists of:
(A) each qualified plan of the Employer in which at least one Key
Employee participates or participated at any time during the
determination period (regardless of whether the plan has terminated),
and
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(B) any other qualified plan of the Employer which enables a plan
described in (a) to meet the requirements of Code Sections 401(a)(4) or
410.
1.68 REQUIRED BEGINNING DATE
The date on which a Participant is required to take his or her first minimum
distribution under the Plan. The rules are set forth at paragraph 7.5
1.69 ROLLOVER CONTRIBUTION
A contribution made by a Participant of an amount distributed to such
Participant from another Qualified Deferred Compensation Plan in accordance with
Code Sections 402(a)(5), (6), and (7). An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the
Participant except that an Eligible Rollover Distribution does not include:
(A) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the Participant or the joint lives (or joint
life expectancies) of the Participant and the Participant's Designated
Beneficiary, or for a specified period of ten years or more;
(B) any distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and
(C) the portion of any distribution which is nor includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
A Direct Rollover is a payment by the plan to the Eligible Retirement Plan
specified by the Participant.
1.70 SALARY SAVINGS AGREEMENT
An agreement between the Employer and a participating Employee where the
Employee authorizes the Employer to withhold a specified percentage of his or
her Compensation for deposit to the Plan on behalf of such Employee.
1.71 SELF-EMPLOYED INDIVIDUAL
An individual who has Earned Income for the taxable year from the trade or
business for which the Plan is established including an individual who would
have had Earned Income but for the fact that the trade or business had no Net
Profit for the taxable year.
1.72 SERVICE
The period of current or prior employment with the Employer. If the Employer
maintains a plan of a predecessor employer, Service for such predecessor shall
be treated as Service for the Employer.
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1.73 SERVICE COMPANY
Prudential Mutual Fund Services, Inc., or its successor serving from time to
time.
1.74 SHAREHOLDER EMPLOYEE
An Employee or Officer who owns [or is considered is owning within the meaning
of Code Section 318(a)(1)], on any day during the taxable year of an electing
small business corporation (S Corporation), more than 5% of such corporation's
outstanding stock.
1.75 SIMPLIFIED EMPLOYEE PENSION PLAN
An individual retirement account which meets the requirements of Code Section
408(k) and to which the Employer makes contributions pursuant to a written
formula. These plans are considered for contribution imitation and Top-Heavy
testing purposes.
1.76 SPONSOR
Shall be Prudential Mutual Fund Management, Inc.
1.77 SPOUSE (SURVIVING SPOUSE)
The Spouse or Surviving Spouse of the Participant, provided that a former Spouse
will be treated as the Spouse or Surviving Spouse and a current Spouse will not
be treated as the Spouse or Surviving Spouse to the extent provided under a
Qualified Domestic Relations Order as described in Code Section 414(p).
1.78 SUPER TOP-HEAVY PLAN
A Plan described at paragraph 1.81 under which the Top-Heavy Ratio [as defined
at paragraph 1.82] exceeds 90%.
1.79 TAXABLE WAGE BASE
For plans with an allocation formula which takes into account the Employer's
contribution under the Federal Insurance Contributions Act (FICA); the
contribution and benefit base in effect under Section 230 of the Social Security
Act at the beginning of the Plan Year; or the amount elected by the Employer in
the Adoption Agreement.
1.80 TOP-HEAVY DETERMINATION DATE
For any Plan Year subsequent to the first Plan Year, tile last day of the
preceding Plan Year. For the first Plan Year of the Plan, the last day of that
year.
1.81 TOP-HEAVY PLAN
For any Plan Year beginning after 1983, the Employer's Plan is Top-Heavy if any
of the following conditions exist:
(A) If the Top-Heavy Ratio for the Employer's Plan exceeds 60% and this
Plan is not part of any required Aggregation Group or Permissive
Aggregation Group of Plans.
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(B) If the Employer's plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the group of plans exceeds 60%.
(C) If the Employer's plan is a part of a Required Aggregation Group
and part of a Permissive Aggregation Group of plans and the Top-Heavy
Ratio for the Permissive Aggregation Group exceeds 60%.
1.82 TOP-HEAVY RATIO
(A) If the Employer maintains one or more Defined Contribution plans
(including any Simplified Employee Pension Plan) and the Employer has
not maintained any Defined Benefit Plan which during the 5-year period
ending on the Determination Date(s) has or has had accrued benefits.
the Top-Heavy Ratio for this Plan alone or for the Required or
Permissive Aggregation Group as appropriate, is a fraction,
(1) the numerator of which is the sum of the account balances
of all Key Employees as of the Determination Date(s)
[including any part of any account balance distributed in the
5-year period ending on the Determination Date(s)], and
(2) the denominator of which is the sum of all account
balances [including any part of any account balance
distributed in the 5-year period ending on the Determination
Date(s)], both computed in accordance with Code Section 416
and the regulations thereunder.
Both the numerator and denominator of the Top-Heavy Ratio are increased to
reflect any contribution not actually made as of the Determination Date, but
which is required to be taken into account on that date under Code Section 416
and the regulations thereunder.
(B) If the Employer maintains one or more Defined Contribution Plans
(including any Simplified Employee Pension Plan) and the Employer
maintains or has maintained one or more Defined Benefit Plans which
during the 5-year period ending on the Determination Date(s) has or has
had any accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of account balances under the aggregated
Defined Contribution Plan or Plans for all Key Employees, determined in
accordance with (a) above, and the Present Value of accrued benefits
under the aggregated Defined Benefit Plan or Plans for all Key
Employees as of the Determination Date(s), and the denominator of which
is the sum of the account balances under the aggregated Defined
Contribution Plan or Plans for all Participants, determined in
accordance with (a) above, and the Present Value of accrued benefits
under the Defined Benefit Plan or Plans for all Participants as of the
Determination Date(s), all determined in accordance with Code Section
416 and the regulations thereunder. The accrued benefits under a
Defined Benefit Plan in both the
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numerator and denominator of the Top-Heavy Ratio are increased for any
distribution of an accrued benefit made in the 5-year period ending on
the Determination Date.
(C) For purposes of (a) and (b) above, the value of account balances
and the Present Value of accrued benefits will be determined as of the
most recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in Code
Section 416 and the regulations thereunder for the first and second
plan years of a Defined Benefit Plan. The account balances and accrued
benefits of a participant (1) who is not a Key Employee but who was a
Key Employee in a prior year, or (2) who has not been credited with at
least one Hour of Service with any Employer maintaining the Plan at any
time during the 5-year period ending on the Determination Date will be
disregarded. The calculation of the Top-Heavy Ratio and the extent to
which distributions, rollovers, and transfers are taken into account
will be made in accordance with Code Section 416 and the regulations
thereunder. Qualified Voluntary Employee Contributions will not be
taken into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and accrued benefits
will be calculated with reference to the Determination Dates that fall
within the same calendar year. The accrued benefit of a Participant
other than a Key Employee shall be determined under (1) the method, if
any, that uniformly applies for accrual purposes under all Defined
Benefit Plans maintained by the Employer, or (2) if there is no such
method, as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule of Code Section
411(b)(1)(C).
1.83 TOP-PAID GROUP
The group consisting of the top 20% of Employees when ranked on the basis of
Compensation paid during such year. For purposes of determining the number of
Employees in the group (but not who is in it), the following Employees shall be
excluded:
(A) Employees who have not completed 6 months of Service.
(B) Employees who normally work less than 17 1/2 hours per week.
(C) Employees who normally do not work more than 6 months during any
year.
(D) Employees who have not attained age 21.
(E) Employees included in a collective bargaining unit, covered by an
agreement between employee representatives and the Employer, where
retirement benefits were the subject of good faith bargaining and
provided that 90% or more of the Employer's Employees are covered by
the agreement.
(F) Employees who are nonresident aliens and who receive no earned
income which constitutes income from sources within the United States.
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1.84 TRANSFER CONTRIBUTION
A nontaxable transfer of a Participant's benefit directly from a Qualified
Deferred Compensation Plan to this Plan.
1.85 TRUSTEE
The individual(s) or institution appointed by the Employer in the Adoption
Agreement.
1.86 VALUATION DATE
The last business day of each Plan Year or such other date consistent with the
operational cycle of the Service Company, as agreed to by the Employer and the
Service Company on which Participant accounts are revalued in accordance with
Article V hereof. For Top-Heavy purposes, the date selected by the Employer as
of which the Top-Heavy Ratio is calculated.
The value of mutual funds and other marketable investments shall be determined
using the most recent price quoted on a national securities exchange or over the
counter market. The value of investments for which there is no market shall be
determined in the sole judgement of the Employer or issuer, and neither the
Trustee nor Service Company shall have responsibility with respect to the
valuation of such assets.
1.87 VESTED ACCOUNT BALANCE
The aggregate value of the Participant's Vested Account Balances derived from
Employer and Employee contributions (including Rollovers), whether vested before
or upon death, including the proceeds of insurance contracts, if any, on the
Participant's life. The provisions of Article VIII shall apply to a Participant
who is vested in amounts attributable to Employer contributions, Employee
contributions, or both, at the time of death or distribution.
1.88 VOLUNTARY CONTRIBUTION
An Employee contribution made to the Plan by or on behalf of a Participant that
is included in the Participant's gross income in the year in which made and that
is maintained under a separate account to which earnings and losses are
allocated.
1.89 WELFARE BENEFIT FUND
Any fund that is part of a plan of the Employer, or has the effect of a plan,
through which the Employer provides welfare benefits to Employees or their
beneficiaries. For these purposes, Welfare Benefits means any benefit other than
those with respect to which Code Section 83(h) (relating to transfers of
property in connection with the performance of services), Code Section 404
(relating to deductions for contributions to an Employee's trust or annuity and
Compensation under a deferred payment plan), and Code Section 404A (relating to
certain foreign deferred compensation plans) apply. A "Fund" is any social club,
voluntary employee benefit association, supplemental unemployment benefit trust
or qualified group legal service organization described in Code Section
501(c)(7), (9), (17) or (20); any trust, corporation, or other organization not
exempt from income tax; or to the extent provided in regulations, any account
held for an Employer by any person.
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1.90 YEAR OF SERVICE
If the Hour Counting Method has been chosen by the Employer in the Adoption
Agreement, a Year of Service is a 12-consecutive-month period during which an
Employee is credited with not less than 1,000 (or such lesser number as
specified by the Employer in the Adoption Agreement) Hours of Service. If the
Elapsed Time Method has been chosen by the Employer in the Adoption Agreement,
an Employee will receive credit for the aggregate of all time period(s),
commencing with the Employee's first day of employment or reemployment and
ending on the date a Break In Service begins. The first day of employment or
reemployment is the first day the Employee performs an Hour of Service. An
Employee will also receive credit for any period of severance of less than 12
consecutive months. Fractional periods of a year will be expressed in terms of
days.
ARTICLE II - ELIGIBILITY REQUIREMENTS
2.1 PARTICIPATION
Unless otherwise specified in the Adoption Agreement, the Plan shall cover all
Employees having completed at least one Year of Service and who have attained
age 21. Employees who meet the eligibility requirements in the Adoption
Agreement on the Effective Date of the Plan shall become Participants as oft he
Effective Date of the Plan. Unless stated to the contrary in the Adoption
Agreement, all Employees employed on the Effective Date of the Plan may
participate, even if they have not satisfied the Plan's specified eligibility
requirements. Other Employees shall become Participants on the Entry Date
coinciding with or immediately following the date on which they meet the
eligibility requirements. The Employee must satisfy the eligibility requirements
specified in the Adoption Agreement and be employed on the Entry Date to become
a Participant in the Plan. In the event an Employee who is not a member of the
eligible class of Employees becomes a member of the eligible class, such
Employee shall participate immediately if such Employee has satisfied the
minimum age and service requirements and would have previously become a
Participant had he or she been in the eligible class. A former Participant shall
again become a Participant upon returning to the employ of the Employer. For
this purpose, Participant's Compensation and Service shall be considered from
date of rehire.
2.2 CHANGE IN CLASSIFICATION OF EMPLOYMENT
If a Participant is transferred to an ineligible class of Employees, or is
otherwise reclassified as an ineligible Employee, any contribution or allocation
of forfeitures which would otherwise be made for him hereunder for the Plan Year
of such transfer or reclassification shall be made. No contribution or
allocation of forfeitures for or by him shall be made, however, for any
subsequent Plan Year prior to the Plan Year in which he again becomes a
Participant.
2.3 COMPUTATION PERIOD
To determine Years of Service and Breaks in Service for purposes of eligibility,
the 12-consecutive-month period shall commence on the date on which an Employee
first performs an Hour of Service for the Employer and each anniversary thereof,
such that the succeeding 12-consecutive-month period commences with the
Employee's first anniversary of employment and so on. If, however, the period so
specified is one year or less, the succeeding
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12-consecutive-month period shall commence on the first day of the Plan Year
prior to the anniversary of the date they first performed an Hour of Service,
regard less of whether the Employee is entitled to be credited with 1,000 (or
such lesser number as specified by the Employer in the Adoption Agreement) Hours
of Service during their first employment year.
2.4 EMPLOYMENT RIGHTS
Participation in the Plan shall not confer upon a Participant any employment
rights, nor shall it interfere with the Employer's right to terminate the
employment of any Employee at any time.
2.5 SERVICE WITH CONTROLLED GROUPS
All Years of Service with other members of a controlled group of corporations
[as defined in Code Section 414(b)], trades or businesses under common control
[as defined in Code Section 414(c)], or members of an affiliated service group
[as defined in Code Section 414(m)] shall be credited for purposes of
determining an Employee's eligibility to participate.
2.6 OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more Owner-Employees
who control both the business for which this Plan is established and one or more
other trades or businesses, this Plan and the Plan established for other trades
or businesses must, when looked at as a single Plan, satisfy Code Sections
401(a) and (d) for the Employees of this and all other trades or businesses.
If the Plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the Employees of the other
trades or businesses must be included in a Plan which satisfies Code Sections
401(a) and (d) and which provides contributions and benefits not less favorable
than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled, and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him or her under the most favorable plan of the trade or
business which is not controlled.
For purposes of the preceding sentences, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(A) own the entire interest in an unincorporated trade or business, or
(B) in the case of a partnership own more than 50% of either the
capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner- Employee, or two or
more Owner-Employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such
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Owner-Employee, or such two or more Owner-Employees, are considered to
control within the meaning of the preceding sentence.
2.7 LEASED EMPLOYEES
Any leased Employee shall be treated as an Employee of the recipient Employer;
however, contributions or benefits provided by the leasing organization which
are attributable to services performed for the recipient Employer shall be
treated as provided by the recipient Employer. A leased Employee shall not be
considered an Employee of the recipient if such Employee is covered by a money
purchase pension plan providing:
(A) a nonintegrated Employer contribution rate of at least 10% of
Compensation [as defined in Code Section 415(c)(3) but including
amounts contributed by the Employer pursuant to a Salary Reduction
Agreement, which are excludible from the Employee's gross income under
a cafeteria plan covered by Code Section 125, a cash or deferred
profit-sharing plan under Section 401(k) of the Code, a Simplified
Employee Pension Plan under Code Section 402(h)(1)(B) and a
tax-sheltered annuity under Code Section 403(b)];
(B) immediate participation; and
(C) full and immediate vesting.
This exclusion is only available if Leased Employees do not constitute more than
twenty percent (20%) of the recipients Non-Highly Compensated Work Force.
2.8 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant in
the Plan is erroneously omitted and discovery of such omission is not made until
after a contribution for the year has been made, the omitted Employee shall be
included in the next valuation. The Employer shall make any additional
contribution with respect to the omitted Employee which may be deemed necessary.
Such contribution shall be made regardless of whether it is deductible in whole
or in part in any taxable year under applicable provisions of the Code. The
Employee shall receive credit under the terms of the Plan for any period during
which he or she should have been included as a Participant.
2.9 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall be removed from the ineligible Employee's Account
and treated as a forfeiture.
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ARTICLE III - EMPLOYER CONTRIBUTIONS
3.1 AMOUNT
The Employer intends to make periodic contributions to the Plan in accordance
with the formula or formulas selected in the Adoption Agreement. However, the
Employer's contribution for any Plan Year shall be subject to the limitations on
allocations contained in Article X.
3.2 EXPENSES AND FEES
The Employer shall also be authorized to reimburse the Fund for all expenses and
fees incurred in the administration of the Plan or Trust and paid out of the
assets of the Fund. Such expenses shall include, but shall not be limited to,
fees for professional services, printing and postage. Commissions may not be
reimbursed.
3.3 RESPONSIBILITY FOR CONTRIBUTIONS
The Trustee shall not be required to determine if the Employer has made a
contribution or if the amount contributed is in accordance with the Adoption
Agreement or the Code. The Employer shall have sole responsibility in this
regard. The Trustee shall be accountable solely for contributions actually
received by it, within the limits of Article XI.
3.4 RETURN OF CONTRIBUTIONS
Contributions made to the Fund by the Employer shall be irrevocable, except as
provided below:
(A) Any contribution forwarded to the Trustee because of a mistake of
fact, provided that the contribution is returned to the Employer within
one year of the contribution.
(B) In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is
adopted, or such later date as the Secretary of the Treasury may
prescribe.
(c) Contributions forwarded to the Trustee are presumed to be
deductible and are conditioned on their deductibility. Contributions
which are determined to not be deductible will be returned to the
Employer.
3.5 FORM OF CONTRIBUTION
Except as contemplated in paragraphs 4.3 and 4.4, no contribution shall be made
in property other than United States currency or such other property as is
acceptable to the Service Company.
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ARTICLE IV - EMPLOYEE CONTRIBUTIONS
4.1 VOLUNTARY CONTRIBUTIONS
Unless otherwise specified in the Adoption Agreement, an Employee may not make
Voluntary Contributions to the Plan established hereunder. If permitted, they
will be made in a uniform and nondiscriminatory manner. Such contributions are
subject to the limitations on Annual Additions and are subject to
antidiscrimination testing.
4.2 QUALIFIED VOLUNTARY CONTRIBUTIONS
A Participant may no longer make Qualified Voluntary Contributions to the Plan.
Amounts already contributed may not remain in the Trust Fund. The Participant
must withdraw the Qualified Voluntary Contribution amounts already contributed
by making a written application to the Plan Administrator.
4.3 ROLLOVER CONTRIBUTION
Unless provided otherwise in the Adoption Agreement, a Participant and an
Employee in an eligible class of Employees who have both not met the eligibility
requirements for participation in the Plan may make a Rollover Contribution to
any Defined Contribution Plan established hereunder of all or any part of an
amount distributed or distributable to him or her from a Qualified Deferred
Compensation Plan, provided:
(A) the amount distributed to the Participant is deposited in the Plan
no later than the sixtieth day after such distribution was received by
the Participant,
(B) the amount distributed is not one of a series of substantially
equal periodic payments made for the life (or life expectancy of the
Participant or the joint lives (or joint life expectancies) of the
Participant and the Participant's Designated Beneficiary, or for a
specified period of ten years or more;
(C) the amount distributed is not required under Section 401(a)(9) of
the Code;
(D) if the amount distributed included property, such property is
rolled over, or if sold, the proceeds of such property may be rolled
over;
(E) the amount distributed is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
In addition if the Adoption Agreement allows Rollover Contributions, the Plan
will also accept any Eligible Rollover Distribution (as defined at paragraph
1.69) directly to the Plan.
Rollover Contributions, which relate to distributions prior to January 1, 1993,
must be made in accordance with paragraphs (a) through (e) and additionally meet
the requirements of paragraph (f):
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(F) the distribution from the Qualified Deferred Compensation Plan
constituted the Participant's entire interest in such Plan and was
distributed within one taxable year to the Participant:
(1) on account of separation from Service, a Plan termination,
or in the case of a profit-sharing or stock bonus plan, a
complete discontinuance of contributions under such plan
within the meaning of Code Section 402(a)(6)(A), or
(2) in one or more distributions which constitute a qualified
lump sum distribution within the meaning of Code Section
402(e)(4)(A), determined without reference to subparagraphs
(B) and (H),
Such Rollover Contribution may also be made through an Individual Retirement
Account qualified under Code Section 408 where the IRA was used as a conduit
from the Qualified Deferred Compensation Plan, the Rollover Contribution is made
in accordance with the rules provided under paragraphs (a) through (e), and the
Rollover Contribution does not include any regular IRA contributions, or
earnings thereon, which the Participant may have made to the IRA. Rollover
Contributions which relate to distributions prior to January 1, 1993, may be
made through an IRA in accordance with paragraphs (a) through (f) and additional
requirements as provided in the previous sentence. The Trustee shall not be held
responsible for determining the tax-free status of any Rollover Contribution
made under this Plan.
4.4 TRANSFER CONTRIBUTION
Unless provided otherwise in the Adoption Agreement, a Participant and an
Employee in an eligible class of Employees who has not met the eligibility
requirements for participation in the Plan, may, subject to the provisions of
paragraph 4.5, also arrange for the direct transfer of his or her benefit from a
Qualified Deferred Compensation Plan to this Plan. For accounting and
recordkeeping purposes, Transfer Contributions shall be identical to Rollover
Contributions.
In the event the Employer accepts a Transfer Contribution from a Plan in which
the Employee was directing the investments of his or her account, the Employer
may continue to permit the Employee to direct his or her investments in
accordance with paragraph 13.7 with respect only to such Transfer Contribution.
Notwithstanding the above, the Employer may refuse to accept such Transfer
Contributions.
Notwithstanding anything to the contrary, if a Participant changes
classification of employment between eligible and ineligible classes, then the
Employer may transfer said Participant's account balance between the appropriate
plans maintained by the Employer, so long as such transfer will not result in an
illegal cutback in benefits in violation of Code Section 411(d)(6).
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4.5 EMPLOYER APPROVAL OF TRANSFER CONTRIBUTIONS
The Employer maintaining a Safe-Harbor Profit Sharing Plan in accordance with
the provisions of paragraph 8.7, acting in a nondiscriminatory manner, may in
its sole discretion refuse to allow Transfer Contributions to its profit-sharing
plan, if such contributions are directly or indirectly being transferred from a
Defined Benefit Plan, a money purchase pension plan (including a target benefit
plan), a stock bonus plan, or another profit-sharing plan which would otherwise
provide for a life annuity form of payment to the Participant.
4.6 ELECTIVE DEFERRALS
A Participant may enter into a Salary Savings Agreement with the Employer,
authorizing the Employer to withhold a portion of such Participant's
Compensation not to exceed $7,000 per calendar year as adjusted under Code
Section 415(d) or, if lesser, the percentage of Compensation specified in the
Adoption Agreement and to deposit such amount to the Plan. No Participant shall
be permitted to have Elective Deferrals made under this Plan or any other
qualified plan maintained by the Employer, during any taxable year, in excess of
the dollar limitation contained in Code Section 402(g) in effect at the
beginning of such taxable year. Thus, the $7,000 limit may be reduced if a
Participant contributes pre-tax contributions to qualified plans of this or
other Employers. Any such contribution shall be credited to the Employee's
Salary Savings Account. Unless otherwise specified in the adoption Agreement, a
Participant may amend his or her Salary Savings Agreement to increase, decrease
or terminate the percentage upon 30 days, written notice to the Employer. If a
Participant terminates his or her agreement, such Participant shall not be
permitted to put a new Salary Savings Agreement into effect until the first pay
period in the next Plan Year, unless otherwise stated in the Adoption Agreement.
The Employer may also amend or terminate said agreement on written notice to the
Participant. If a Participant has not authorized the Employer to withhold at the
maximum rate and desires to increase the total withheld for a Plan Year, such
Participant may authorize the Employer upon 30 days, notice to withhold a
supplemental amount up to 100% of his or her Compensation for one or more pay
periods. In no event may the sum of the amounts withheld under the Salary
Savings Agreement plus the supplemental withholding exceed 25% of a
Participant's Compensation for a Plan Year. Elective Deferrals shall be
deposited in the Trust no later than the date described in Section 2510.3-102 of
the Department of Labor Regulations.
4.7 DIRECT ROLLOVER OF BENEFITS
Notwithstanding any provision of the plan to the contrary that would otherwise
limit a Participant's election under this Paragraph, for distributions made on
or after January 1, 1993, a Participant may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan specified by
the Participant in a Direct Rollover. Any portion of a distribution which is not
paid directly to an Eligible Retirement Plan shall be distributed to the
Participant. For purposes of this Paragraph, a Surviving Spouse or a spouse or
former spouse who is an alternate payee under a Qualified Domestic Relations
Order as defined in Section 414(p) of the Code, will be permitted to elect to
have any Eligible Rollover Distribution paid directly to an individual
retirement account (IRA), an individual retirement annuity (IRA) or another
qualified retirement Plan.
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The plan provisions otherwise applicable to distributions continue to apply to
Rollover and Transfer Contributions.
ARTICLE V - PARTICIPANT ACCOUNTS
5.1 SEPARATE ACCOUNTS
The Employer shall establish a separate bookkeeping account for each
Participant, showing the total value of his or her interest in the Fund. Each
Participant's account shall be separated for bookkeeping purposes into the
following sub-accounts:
(A) Employer Contributions.
(1) Matching Contributions.
(2) Qualified Matching Contributions.
(3) Qualified Non-Elective Contributions.
(4) Discretionary Contributions.
(5) Elective Deferrals.
(B) Voluntary Contributions (and additional amounts including required
contributions and, if applicable, either repayments of loans previously
defaulted on and treated as "deemed distributions" on which a tax
report has been issued, and amounts paid out upon a separation from
service which have been included in income and which are repaid after
being rehired by the Employer).
(C) Transfer Contributions.
(D) Rollover Contributions.
5.2 ADJUSTMENTS TO PARTICIPANT ACCOUNTS
As of each Valuation Date of the Plan, the Employer shall add to each account:
(A) the Participant's share of the Employer's contribution and
forfeitures as determined in the Adoption Agreement,
(B) any Elective Deferrals, Voluntary, Rollover or Transfer
Contributions made by the Participant,
(C) any repayment of amounts previously paid out to a Participant upon
a separation from Service and repaid by the Participant since the last
Valuation Date, and
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(D) the Participant's proportionate share of any investment earnings
and increase in the fair market value of the Fund since the last
Valuation Date, as determined at paragraph 5.4.
The Employer shall deduct from each account:
(E) any withdrawals or payments made from the Participant's account
since the last Valuation Date, and
(F) the Participant's proportionate share of any decrease in the fair
market value of the Fund since the last Valuation Date, as determined
at paragraph 5.4.
5.3 ALLOCATING EMPLOYER CONTRIBUTION
The Employer's contribution shall be allocated to Participants in accordance
with the allocation formula selected by the Employer in the Adoption Agreement,
and the minimum contribution and allocation requirements for Top-Heavy Plans.
Unless otherwise specified in the Adoption Agreement, the Plan will not be
integrated with Social Security. Beginning with the 1990 Plan Year and
thereafter for plans on Standardized Adoption Agreement 001, Participants who
are credited with more than 500 Hours of Service or are employed on the last day
of the Plan Year must receive a full allocation of Employer contributions. In
Nonstandardized Adoption Agreement 002, Employer contributions shall be
allocated to the accounts of Participants employed by the Employer on the last
day of the Plan Year, unless indicated otherwise in the Adoption Agreement. In
the case of a non-Top-Heavy, Nonstandardized Plan, Participants must also have
completed a Year of Service, unless otherwise specified in the Adoption
Agreement. For Nonstandardized Adoption Agreement 002, the Employer may only
apply the last day of the Plan Year and Year of Service requirements if the Plan
satisfies the requirements of Code Sections 401(a)(26) and 410(b) and the
regulations thereunder, including the exception for 401(k) plans. If, when
applying the last day and Year of Service requirements, the Plan fails to
satisfy the aforementioned requirements, additional Participants will be
eligible to receive an allocation of Employer Contributions until the
requirements are satisfied. Participants who are credited with a Year of
Service, but not employed at Plan Year-End, are the first category of additional
Participants eligible to receive an allocation. If the requirements are still
not satisfied, Participants credited with more than 500 Hours of Service and
employed at Plan Year-End are the next category of Participants eligible to
receive an allocation. Finally, if necessary to satisfy the said requirements,
any Participant credited with more than 500 Hours of Service will be eligible
for an allocation of Employer Contributions. The Service requirement is not
applicable with respect to any Plan Year during which the Employer's Plan is
Top-Heavy.
In the event the Employer selects an integrated allocation formula, the
Employer's contribution will be allocated in accordance with the following
method, unless otherwise specified in the Adoption Agreement:
(A) First, to the extent contributions and forfeitures are sufficient,
all Participants will receive an allocation equal to 3% of their
Compensation.
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(B) Next, any remaining Employer Contributions and forfeitures will be
allocated to Participants who have Compensation in excess of the
Taxable Wage Base (excess Compensation). Each such Participant will
receive an allocation in the ratio that his or her excess compensation
bears to the excess Compensation of all Participants. Participants may
only receive an allocation of 3% of excess Compensation.
(C) Next, any remaining Employer contributions and forfeitures will be
allocated to all Participants in the ratio that their Compensation plus
excess Compensation bears to the total Compensation plus excess
Compensation of all Participants. Participants may only receive an
allocation of up to 2.7% of their Compensation plus excess
Compensation, under this allocation method. If the Taxable Wage Base as
defined in Section 3 of the Adoption Agreement is less than the
maximum, but more than the greater of $10,000 or 20% of the maximum,
then the 2.7% must be reduced. If the amount specified is greater than
80% but less than 100% of the maximum Taxable Wage Base, the 2.7% must
be reduced to 2.4%. If the amount specified is greater than the greater
of $10,000 or 20% of the maximum Taxable Wage Base, but not more than
80%, 2.7% must be reduced to 1.3%.
(D) Next, any remaining Employer contributions and forfeitures will be
allocated to all Participants (whether or not they received an
allocation under the preceding paragraphs) in the ratio that each
Participant's Compensation bears to all Participants' Compensation.
If the Plan is not Top-Heavy, subparagraphs (a) and (b) above may be disregarded
and 5.7%, 5.4% or 4.3% may be substituted for 2.7%, 2.4% or 1.3% where it
appears in (c) above.
5.4 ALLOCATING INVESTMENT EARNINGS AND LOSSES
A Participant's share of investment earnings and any increase or decrease in the
fair market value of the Fund shall be based on the proportionate value of all
active accounts (other than accounts with segregated investments) as of the last
Valuation Date less withdrawals since the last Valuation Date. If applicable,
segregated accounts may be allocated earnings, up through the date of
segregation, under the above method, at the Plan Administrator's discretion. If
Employer and/or Employee contributions are made monthly, quarterly, or on some
other systematic basis, the adjusted value of such accounts for allocation of
investment income and gains or losses shall include one-half the contributions
for such period. If Employer and/or Employee contributions are not made on a
systematic basis, it is assumed that they are made at the end of the valuation
period and therefore will not receive an allocation of investment earnings and
gains or losses for such period. Notwithstanding the above, if contributions are
made on a nonsystematic basis, at the Plan Administrator's discretion, such
contributions will be credited with an allocation of the actual investment
earnings and gains and losses from the actual date of deposit of each such
contribution until the end of the period. In no event shall this election of
allocating gains and losses be used to discriminate. Finally, the Plan
Administrator may elect to disregard nonsystematic contributions made during the
year, altogether, and allocate earnings exclusively on the basis of all active
accounts (other than accounts with segregated investments) as of the last
Valuation Date less withdrawals since the last valuation Date, or, if
applicable, take into
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consideration any systematic contributions, as provided above. Accounts with
segregated investments shall receive only the income or loss on such segregated
investments.
5.5 PARTICIPANT STATEMENTS
The Employer shall periodically (not less often than annually), prepare a
statement for each Participant showing the additions to and subtractions from
his or her account since the last such statement and the fair market value of
his or her account as of the date for which the statement is prepared.
ARTICLE VI - RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 NORMAL RETIREMENT BENEFITS
A Participant shall be entitled to receive the balance held in his or her
account from Employer contributions upon attaining Normal Retirement Age or at
such earlier dates as the provisions of this Article VI may allow. If the
Participant elects to continue working past his or her Normal Retirement Age, he
or she will continue as an active Plan Participant and no distribution shall be
made to such Participant until his or her actual retirement date, unless the
Employer elects otherwise in the Adoption Agreement, or a minimum distribution
is required by law. Settlement shall be made in the normal form, or if elected,
in one of the optional forms of payment provided below.
6.2 EARLY RETIREMENT BENEFITS
If the Employer so provides in the Adoption Agreement, an Early Retirement
Benefit will be available to individuals who meet the age and Service
requirements. An individual who meets the Early Retirement Age requirements and
separates from Service will become fully vested, regardless of any vesting
schedule which otherwise might apply. If a Participant separates from Service
before satisfying the age requirements, but after having satisfied the Service
requirement, the Participant will be entitled to elect an Early Retirement
Benefit upon satisfaction of the age requirement.
6.3 BENEFITS ON TERMINATION OF EMPLOYMENT
(A) If a Participant terminates employment prior to Normal Retirement
Age, such Participant shall be entitled to receive the vested balance
held in his or her account payable at Normal Retirement Age in the
normal form, or if elected, in one of the optional forms of payment
provided hereunder. If applicable, the Early Retirement Benefit
provisions may be elected. Notwithstanding the preceding sentence, a
former Participant may, if allowed in the Adoption Agreement, make
application to the Employer requesting early payment of any deferred
vested and nonforfeitable benefit due.
(B) If a Participant terminates employment, and the value of that
Participant's Vested Account Balance derived from Employer and Employee
contributions is not greater than $3,500, the Participant may receive a
lump sum distribution of the value of the entire vested portion of such
account balance and the non-vested portion will be treated as a
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forfeiture. The Employer shall continue to follow their consistent
policy, as may be established, regarding immediate cash-outs of Vested
Account Balances of $3,500 or less. For purposes of this Article, if
the value of a Participant's Vested Account Balance is zero, the
Participant shall be deemed to have received a distribution of such
Vested Account Balance immediately following termination. Likewise, if
the Participant is reemployed prior to incurring 5 consecutive 1-year
Breaks In Service, he or she will be deemed to have immediately repaid
such distribution. For Plan Years beginning prior to 1989, a
Participant's Vested Account Balance shall not include Qualified
Voluntary Contributions. Notwithstanding the above, if the Employer
maintains or has maintained a policy of not distributing any amounts
until the Participant's Normal Retirement Age, the Employer can
continue to uniformly apply such policy.
(C) If a Participant terminates employment with a Vested Account
Balance derived from Employer and Employee contributions in excess of
$3,500, and elects (with his or her Spouse's consent, if required) to
receive 100% of the value of his or her Vested Account Balance in a
lump sum, the non-vested portion will be treated as a forfeiture. The
Participant (and his or her Spouse, if required) must consent to any
distribution, when the Vested Account Balance described above exceeds
$3,500 or if at the time of any prior distribution it exceeded $3,500.
For purposes of this paragraph, for Plan Years beginning prior to 1989,
a Participant's Vested Account Balance shall not include Qualified
Voluntary Contributions.
(D) Distribution of less than 100% of the Participant's Vested Account
Balance shall be permitted upon termination of employment.
(E) If a Participant who is not 100% vested receives or is deemed to
receive a distribution pursuant to this paragraph and resumes
employment covered under this Plan, the Participant shall have the
right to repay to the Plan the full amount of the distribution
attributable to Employer contributions on or before the earlier of the
date that the Participant incurs 5 consecutive 1-year Breaks in Service
following the date of distribution or five years after the first date
on which the Participant is subsequently reemployed. In such event, the
Participant's account shall be restored to the value thereof at the
time the distribution was made and may further be increased by the
Plan's income and investment gains and/or losses on the undistributed
amount from the date of distribution to the date of repayment.
(F) A Participant shall also have the option to postpone payment of his
or her Plan benefits until the first day of April following the
calendar year in which he or she attains age 70 1/2. Any balance of a
Participant's account resulting from his or her Employee contributions
not previously withdrawn, if any, may be withdrawn by the Participant
immediately following separation from Service.
(G) If a Participant ceases to be an active Employee as a result of a
Disability as defined at paragraph 1.21, such Participant shall be able
to make an application for a disability
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retirement benefit payment. The Participant's account balance will be
deemed "immediately distributable" as set forth in paragraph 6.4, and
will be fully vested pursuant to paragraph 9.2.
6.4 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS
(A) An account balance is immediately distributable if any part of the
account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained if not
deceased) the later of the Normal Retirement Age or age 62.
(B) If the value of a Participant's vested account balance derived from
Employer and Employee Contributions exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the Participant and his or her Spouse (or
where either the Participant or the Spouse has died, the survivor) must
consent to any distribution of such account balance. The consent of the
Participant and the Spouse shall be obtained in writing within the
90-day period ending on the annuity starting date, which is the first
day of the first period for which an amount is paid as an annuity or
any other form. The Plan Administrator shall notify the Participant and
the Participant's Spouse of the right to defer any distribution until
the Participant's account balance is no longer immediately
distributable. Such notification shall include a general description of
the material features, and an explanation of the relative values of,
the optional forms of benefit available under the plan in a manner that
would satisfy the notice requirements of Code Section 417(a)(3), and
shall be provided no less than 30 days and no more than 90 days prior
to the annuity starting date.
(C) Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a qualified Joint and
Survivor Annuity, while the account balance is immediately
distributable. Furthermore, if payment in the form of a Qualified Joint
and Survivor Annuity is not required with respect to the Participant
pursuant to paragraph 8.7 of the Plan, only the Participant need
consent to the distribution of an account balance that is immediately
distributable. Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that a
distribution is required to satisfy Code Section 401(a)(9) or Code
Section 415. In addition, upon termination of this Plan, if the Plan
does not offer an annuity option (purchased from a commercial
provider), the Participant's account balance may, without the
Participant's consent, be distributed to the Participant or transferred
to another Defined Contribution Plan [other than an employee stock
ownership plan as defined in Code Section 4975(e)(7)] within the same
controlled group.
(D) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after 1988, the Participant's vested account
balance shall not include amounts attributable to Qualified Voluntary
Contributions.
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(E) If a distribution is one to which Code Section 401(a)(11) and 417
do not apply, such distribution may commence less than 30 days after
the notice required under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at least 30
days after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
6.5 NORMAL FORM OF PAYMENT
The normal form of payment for a profit-sharing plan satisfying the requirements
of paragraph 8.7 hereof shall be a lump sum with no option for annuity payments.
For all other plans, the normal form of payment hereunder shall be a Qualified
Joint and Survivor Annuity as provided under article VIII. A Participant whose
Vested Account Balance derived from Employer and Employee contributions exceeds
$3,500, or if at the time of any prior distribution it exceeded $3,500, shall
(with the consent of his or her Spouse) have the right to receive his or her
benefit in a lump sum or in monthly, quarterly, semiannual or annual payments
from the Fund over any period not extending beyond the life expectancy of the
Participant and his or her Beneficiary. For purposes of this paragraph, for Plan
Years prior to 1989, a Participant's Vested Account Balance shall not include
Qualified Voluntary Contributions. The normal form of payment shall be
automatic, unless the Participant files a written request with the Employer
prior to the date on which the benefit is automatically payable, electing a lump
sum or installment payment option. No amendment to the Plan may eliminate one of
the optional distribution forms listed above.
6.6 COMMENCEMENT OF BENEFITS
(A) Unless the Participant elects otherwise, distribution of benefits
will begin no later than the 60th day after the close of the Plan Year
in which the latest of the following events occurs:
(1) The Participant attains age 65 (or normal retirement age
if earlier),
(2) The 10th anniversary of the year in which the Participant
commenced participation in the Plan, or
(3) The Participant terminates Service with the Employer.
(B) Notwithstanding the foregoing, the failure of a Participant and
Spouse (if necessary) to consent to a distribution while a benefit is
immediately distributable, within the meaning of paragraph 6.4 hereof,
shall be deemed an election to defer commencement of payment of any
benefit sufficient to satisfy this paragraph.
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6.7 CLAIMS PROCEDURES
Upon retirement, death or other severance of employment, the Participant or his
or her representative may make application to the Employer, requesting payment
of benefits due and the manner of payment. If no application for benefits is
made, the Employer shall automatically pay any vested benefit due hereunder in
the normal form at the time prescribed at paragraph 6.4. If an application for
benefits is made, the Employer shall accept, reject or modify such request and
shall notify the Participant in writing, setting forth the response of the
Employer, and in the case of a denial or modification, the Employer shall:
(A) state the specific reason or reasons for the denial;
(B) provide specific reference to pertinent Plan provisions on which
the denial is based;
(C) provide a description of any additional material or information
necessary for the Participant or his or her representative to perfect
the claim and an explanation of why such material or information is
necessary; and
(D) explain the Plan's claim review procedure as contained in this
Plan.
In the event the request is rejected or modified, the Participant or his or her
representative may, within 60 days following receipt by the Participant or
representative of such rejection or modification, submit a written request for
review by the Employer of its initial decision. Within 60 days following such
request for review, the Employer shall render its final decision in writing to
the Participant or representative, stating specific reasons for such decision.
If the Participant or representative is not satisfied with the Employer's final
decision, the Participant or representative can institute an action in a Federal
court of competent jurisdiction; for this purpose, process would be served on
the Employer.
6.8 IN-SERVICE WITHDRAWALS
An Employee may withdraw all or any part of the fair market value of his or her
Voluntary Contributions, Qualified Voluntary Contributions or Rollover
Contributions, upon written request to the Employer. Transfer Contributions,
which originate from a Plan meeting the safe-harbor provisions of paragraph 8.7,
may also be withdrawn, by an Employee, upon written request to the Employer.
Transfer Contributions not meeting the safe-harbor provisions may only be
withdrawn upon retirement, death, disability, termination or termination of the
Plan, and will be subject to Spousal consent requirements contained in Code
Sections 411(a)(11) and 417. No such withdrawals are permitted from a money
purchase plan until the participant reaches Normal Retirement Age. Such request
shall include the Employee's address, Social Security number, birth date, and
amount of the withdrawal. If at the time a distribution of Qualified Voluntary
Contributions is received the Participant has not attained age 59-1/2 and is not
disabled, as defined at Code Section 22(e)(3), the Participant will be subject
to a Federal income tax penalty, unless the distribution is rolled over to a
qualified plan or individual retirement plan within 60 days of the date of
distribution. A Participant may withdraw all or any part of the fair market
value of his or her pre-1987 Voluntary Contributions with or without withdrawing
the earnings
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attributable thereto. Post-1986 Voluntary Contributions may only be withdrawn
along with a portion of the earnings thereon. The amount of the earnings to be
withdrawn is determined by using the formula: DA [1-(V divided by V + E)]],
where DA is the distribution amount, V is the amount of Voluntary Contributions
and V+E is the amount of Voluntary Contributions plus the earnings attributable
thereto. A Participant withdrawing his or her other contributions prior to
attaining age 59-1/2 will be subject to a Federal tax penalty to the extent that
the withdrawn amounts are includible in income. Any Participant in a
profit-sharing plan may, if permitted by the Employer in the Adoption Agreement,
withdraw all or any part of the fair market value of any of such vested
contributions, plus the investment earnings thereon, after attaining age 59-1/2
without separating from Service. Such Employer contributions may not have been
used to satisfy the antidiscrimination test of Code Section 401(k). Such
distributions shall not be eligible for redeposit to the Fund. A withdrawal
under this paragraph shall not prohibit such Participant from sharing in any
future Employer Contribution he or she would otherwise be eligible to share in.
A request to withdraw amounts pursuant to this paragraph must, if applicable, be
consented to by the Participant's Spouse. The consent shall comply with the
requirements of paragraph 6.4 relating to immediate distributions.
6.9 HARDSHIP WITHDRAWAL
Unless otherwise specified by the Employer in the Adoption Agreement, a
Participant may not request a hardship withdrawal prior to attaining age 59-1/2.
If permitted and the Participant has not attained age 59-1/2, the Participant
may be subject to a Federal income tax penalty. Such request shall be in writing
to the Employer, who shall have sole authority to authorize a hardship
withdrawal, pursuant to the rules below. Hardship withdrawals may include
Elective Deferrals, regardless of when contributed, and any earnings accrued and
credited thereon as of the last day of the Plan Year ending before July 1, 1989,
and Employer-related contributions including but not limited to Employer
Matching Contributions, plus the investment earnings thereon to the extent
vested. Qualified Matching Contributions, Qualified Non-Elective Contributions
and Elective Deferrals reclassified as Voluntary Contributions plus the
investment earnings thereon are only available for hardship withdrawal prior to
age 59-1/2 to the extent that they were credited to the Participant's Account as
of the last day of the Plan Year ending prior to July 1, 1989. The Plan
Administrator may limit withdrawals to Elective Deferrals and the earnings
thereon as stipulated above. Hardship withdrawals are subject to the Spousal
consent requirements contained in Code Sections 401(a)(11) and 417. Only the
following reasons are valid to obtain hardship withdrawal:
(A) Medical expenses [within the meaning of Code Section 213(d)]
incurred or necessary for the medical care of the Participant, his or
her Spouse, children and other dependents;
(B) The purchase (excluding mortgage payments) of the principal
residence for the Participant;
(C) Payment of tuition and related educational expenses for the next
twelve (12) months of post-secondary education for the Participant, his
or her Spouse, children or other dependents; or
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(D) The need to prevent eviction of the Employee from or a foreclosure
on the mortgage of the Employee's principal residence.
Furthermore, the following conditions must be met in order for a withdrawal to
be authorized:
(E) The Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by
the Employer;
(F) All plans maintained by the Employer, other than flexible benefit
plans under Code Section 125 providing for current benefits, provide
that the Employee's Elective Deferrals and Voluntary Contributions will
be suspended for twelve months after the receipt of the hardship
distribution;
(G) The distribution is not in excess of the amount of the immediate
and heavy financial need [(a) through (d) above], including amounts
necessary to pay any Federal, State or local income tax or penalties
reasonably anticipated to result from the distribution; and
(H) All plans maintained by the Employer provide that an Employee may
not make Elective Deferrals for the Employee's taxable year immediately
following the taxable year of the hardship distribution in excess of
the applicable limit under Code Section 402(g) for such taxable year,
less the amount of such Employee's pre-tax contributions for the
taxable year of the hardship distribution.
If a distribution is made at a time when a Participant has a nonforfeitable
right to less than 100% of the account balance derived from Employer
contributions and the Participant may increase the nonforfeitable percentage in
the account:
(I) A separate account will be established for the Participant's
interest in the Plan as of the time of the distribution, and
(J) At any relevant time the Participant's nonforfeitable portion of
the separate account will be equal to an amount ("X") determined by the
formula:
X = P [AB + (R X D)] - (R X D)
For purposes of applying the formula: "P" is the nonforfeitable percentage at
the relevant time, "AB" the account balance at the relevant time, "D" is the
amount of the distribution and "R" is the ratio of the account balance at the
relevant time to the account balance after distribution.
6.10 ORDER OF WITHDRAWALS
Unless the Participant directs otherwise, withdrawals shall be made:
(A) First, from amounts attributable to Voluntary Contributions;
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(B) Second, from amounts attributable to Rollover Contributions;
(C) Third, from amounts attributable to Transfer Contributions;
(D) Fourth, from amounts attributable to Elective Deferrals;
(E) Fifth, from amounts attributable to Qualified Non-Elective
Contributions;
(F) Sixth, from amounts attributable to Qualified Matching
Contributions;
(G) Seventh, from amounts attributable to Vested Matching
Contributions; and
(H) Eighth, from amounts attributable to Vested Discretionary
Contributions.
ARTICLE VII - DISTRIBUTION REQUIREMENTS
7.1 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
All distributions made under the terms of this Plan must comply with the
provisions of Article VIII, including, if applicable, the safe harbor provisions
thereunder.
7.2 MINIMUM DISTRIBUTION REQUIREMENTS
All distributions required under this Article shall be determined and made in
accordance with the minimum distribution requirements of Code Section 401(a)(9)
and the regulations thereunder, including the minimum distribution incidental
benefit rules found at Regulations Section 1.401(a)(9)-2. The entire interest of
a Participant must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date. Life expectancy and joint and last
survivor life expectancy are computed by using the expected return multiples
found in Tables V and VI of Regulations Section 1.72-9.
In determining required distributions under the Plan, Participants and/or their
Spouse (Surviving Spouse) shall have the right to have their life expectancy
recalculated annually. Whether the Participant only or both the Participant and
Spouse's lives shall be recalculated shall be determined by the Participant.
7.3 LIMITS ON DISTRIBUTION PERIODS
As of the First Distribution Calendar Year, distributions if not made in a
single-sum may only be made over one of the following periods (or a combination
thereof):
(A) The life of the Participant,
(B) The life of the Participant and a Designated Beneficiary,
(C) A period certain not extending beyond the life expectancy of the
participant, or
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(D) A period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
7.4 REQUIRED DISTRIBUTIONS ON OR AFTER THE REQUIRED BEGINNING DATE
(A) If a Participant's benefit is to be distributed over (1) a period
not extending beyond the life expectancy of the Participant or the
joint life and last survivor expectancy of the Participant and the
Participant's Designated Beneficiary or (2) a period not extending
beyond the life expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the First Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's benefit by
the Applicable Life Expectancy.
(B) For calendar years beginning before 1989, if the Participant's
Spouse is not the Designated Beneficiary, the method of distribution
selected must have assured that at least 50% of the Present Value of
the amount available for distribution was to be paid within the life
expectancy of the Participant.
(C) For calendar years beginning after 1988, the amount to be
distributed each year, beginning with distributions for the First
Distribution Calendar Year, shall not be less than the quotient
obtained by dividing the Participant's benefit by the lesser of (1) the
Applicable Life Expectancy or (2) if the Participant's Spouse is not
the Designated Beneficiary, the applicable divisor determined from the
table set forth in Q&A-4 of Regulations Section 1.401(a)(9)-2.
Distributions after the death of the Participant shall be distributed
using the Applicable Life Expectancy as the relevant divisor, without
regard to Regulations Section 1.401(a)(9)-2.
(D) The minimum distribution required for the Participant's First
Distribution Calendar Year must he made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar
years, including the minimum distribution for the Distribution Calendar
Year in which the Participant's Required Beginning Date occurs, must be
made on or before December 31 of that Distribution Calendar Year.
(E) If the Participant's benefit is distributed in the form of an
annuity purchased from an insurance company, distributions thereunder
shall be made in accordance with the requirements of Code Section
401(a)(9) and the Regulations thereunder.
(F) For purposes of determining the amount of the required distribution
for each Distribution Calendar Year, the account balance to be used is
the account balance determined as of the last valuation preceding the
Distribution Calendar Year. This balance will be increased by the
amount of any contributions or forfeitures allocated to the account
balance after the Valuation Date in such preceding calendar year. Such
balance will also be decreased by distributions made after the
Valuation Date in such preceding calendar year.
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(G) For purposes of subparagraph 7.4(f), if any portion of the minimum
distribution for the First Distribution Calendar Year is made in the
Second Distribution Calendar Year on or before the Required Beginning
Date, the amount of the minimum distribution made in the Second
Distribution Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
7.5 REQUIRED BEGINNING DATE
(A) General Rule. The Required Beginning Date of a Participant is the
first day of April of the calendar year following the calendar year in
which the Participant attains age 70 1/2.
(B) Transitional Rules. The Required Beginning Date of a Participant
who attains age 70 1/2 before 1988 shall be determined in accordance
with (1) or (2) below:
(1) Non-5-percent owners. The Required Beginning Date of a
Participant who is not a 5-percent owner is the first day of
April of the calendar year following the calendar year in
which the later of retirement or attainment of age 70 1/2
occurs. In the case of a Participant who is not a 5-percent
owner who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, the Required Beginning Date is
April 1, 1990.
(2) 5-percent owners. The Required Beginning Date of a
Participant who is a 5-percent owner during any year beginning
after 1979 is the first day of April following the later of:
(I) the calendar year in which the Participant
attains age 70 1/2, or
(II) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a 5-percent owner, or the calendar year in
which the Participant retires.
(C) A Participant is treated as a 5-percent owner for purposes of this
paragraph if such Participant is a 5-percent owner as defined in Code
Section 416(i) (determined in accordance with Code Section 416 but
without regard to whether the Plan is Top-Heavy) at any time during the
Plan Year, ending with or within the calendar year in which such owner
attains age 66 1/2 or any subsequent Plan Year.
(D) Once distributions have begun to a 5-percent owner under this
paragraph, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
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7.6 TRANSITIONAL RULE
(A) Notwithstanding the other requirements of this article and subject
to the requirements of Article VIII, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee, including a
5-percent owner, may be made in accordance with all of the following
requirements (regardless of when such distribution commences):
(1) The distribution by the Trust is one which would not have
disqualified such Trust under Code Section 401(a)(9) as in
effect prior to amendment by the Deficit Reduction Act of
1988.
(2) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the
Trust is being distributed or, if the Employee is deceased, by
a beneficiary of such Employee.
(3) Such designation was in writing, was signed by the
Employee or the beneficiary, and was made before 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee or
the beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made,
and in the case of any distribution upon the Employee's death,
the beneficiaries of the Employee listed in order of priority.
(B) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
(C) For any distribution which commences before 1984, but continues
after 1983, the Employee or the beneficiary, to whom such distribution
is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method
of distribution was specified in writing and the distribution satisfies
the requirements in subparagraphs (a)(1) and (5) above.
(D) If a designation is revoked, any subsequent distribution must
satisfy the requirements of Code Section 401(a)(9) and the regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Trust must by the end of the
calendar year following the calendar year in which the revocation
occurs distribute the total amount not yet distributed which would have
been required to be distributed, to satisfy Code Section 401(a)(9) and
the regulations thereunder, but for the Section 242(b)(2) election of
the Tax Equity and Fiscal Responsibility Act of 1982. For calendar
years beginning after 1988, such distributions must meet the minimum
distribution incidental benefit requirements in Section 1.401(a)(9)-2
of the Income Tax Regulations.
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Any changes in the designation will be considered to be a revocation of
the designation. However, the mere substitution or addition of another
beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long
as such substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or
indirectly (for example, by altering the relevant measuring life). In
the case in which an amount is transferred or rolled over from one plan
to another plan, the rules in Q&A J-2 and Q&A J-3 of the regulations
shall apply.
7.7 DESIGNATION OF BENEFICIARY FOR DEATH BENEFIT
Each Participant shall file a written designation of beneficiary with the
Employer upon qualifying for participation in this Plan. Such designation shall
remain in force until revoked by the Participant by filing a new beneficiary
form with the Employer. The Participant may elect to have a portion of his or
her account balance invested in an insurance contract. If an insurance contract
is purchased under the Plan, the Trustee must be named as beneficiary under the
terms of the contract. However, the Participant shall designate a beneficiary to
receive the proceeds of the contract after settlement is received by the
Trustee. Under a profit-sharing plan satisfying the requirements of paragraph
8.7, the Designated Beneficiary shall be the Participant's Surviving Spouse, if
any, unless such Spouse properly consents otherwise.
7.8 NONEXISTENCE OF BENEFICIARY
Any portion of the amount payable hereunder which is not disposed of because of
the Participant's or former Participant's failure to designate a beneficiary, or
because all of the Designated Beneficiaries predeceased the Participant, shall
be paid to his or her Spouse. If the Participant had no Spouse at the time of
death, payment shall be made to the personal representative of his or her estate
in a lump sum.
7.9 DISTRIBUTION BEGINNING BEFORE DEATH
If the Participant dies after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
7.10 DISTRIBUTION BEGINNING AFTER DEATH
If the Participant dies before distribution of his or her interest begins,
distribution of the Participant's entire interest shall be completed by December
31 of the calendar year containing the fifth anniversary of the Participant's
death, except to the extent that n election is made to receive distributions in
accordance with (a) or (b) below:
(A) If any portion of the Participant's interest is payable to a
Designated Beneficiary, distributions may be made over the life or over
a certain period not greater than the life expectancy of the Designated
Beneficiary commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Participant died;
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(B) If the Designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to begin in accordance with
(a) above shall not be earlier than the later of (1) December 31 of the
calendar year immediately following the calendar year in which the
participant died or (2) December 31 of the calendar year in which the
Participant would have attained age 70 1/2.
If the Participant has not made an election pursuant to this paragraph 7.10 by
the time of his or her death, the Participant's Designated Beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the participant. If the Participant has no
Designated Beneficiary, or if the Designated Beneficiary does not elect a method
of distribution, then distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
For purposes of this paragraph, if the Surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of this
paragraph, with the exception of paragraph (b) therein, shall be applied as if
the Surviving Spouse were the Participant. For the purposes of this paragraph
and paragraph 7.9, distribution of a Participant's interest is considered to
begin on the Participant's Required Beginning Date (or, if the preceding
sentence is applicable, the date distribution is required to begin to the
Surviving Spouse). If distribution in the form of an annuity described in
paragraph 7.4(e) irrevocably commences to the Participant before the Required
Beginning Date, the date distribution is considered to begin is the date
distribution actually commences.
For purposes of paragraph 7.9 and this paragraph, if an amount is payable to
either a minor or an individual who has been declared incompetent, the benefits
shall be paid to the legally appointed guardian for the benefit of said minor or
incompetent individual, unless the court which appointed the guardian has
ordered otherwise.
7.11 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
(A) Notwithstanding any other provision of the Plan, Excess Elective
Deferrals plus any income and minus any loss allocable thereto shall be
distributed no later than April 15, 1988, and each April 15 thereafter,
to Participants to whose accounts Excess Elective Deferrals were
allocated for the preceding taxable year, and who claim Excess Elective
Deferrals for such taxable year. Excess Elective Deferrals shall be
treated as Annual Additions under the plan, unless such amounts are
distributed no later than the first April 15 following the close of the
Participant's taxable year. A Participant is deemed to notify the Plan
Administrator of any Excess Elective Deferrals that arise by taking
into account only those Elective Deferrals made to this Plan and any
other plans of this Employer.
(B) Furthermore, a Participant who participates in another plan
allowing Elective Deferrals may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the
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Participant, by notifying the Plan Administrator of the amount of the
Excess Elective Deferrals to be assigned. The Participant's claim shall
be in writing; shall be submitted to the Plan Administrator not later
than March 1 of each year; shall specify the amount of the
Participant's Excess Elective Deferrals for the preceding taxable year;
and shall be accompanied by the Participant's written statement that if
such amounts are not distributed, such Excess Elective Deferrals, when
added to amounts deferred under other plans or arrangements described
in Code Sections 401(k), 408(k) [Simplified Employee Pensions] or
403(b) [annuity programs for public schools and charitable
organizations] will exceed the $7,000 limit as adjusted under Code
Section 415(d), imposed on the Participant by Code Section 402(g) for
the year in which the deferral occurred.
(C) Excess Elective Deferrals shall be adjusted for any income or loss
up to the end of the taxable year during which such excess was
deferred. Income or loss will be calculated under the method used to
calculate investment earnings and losses elsewhere in the Plan or any
other reasonable method. Whichever method is selected shall be used for
all Participants and for all corrective distributions made from the
Plan for the Plan Year.
(D) If the Participant receives a return of his or her Elective
Deferrals, the amount of such contributions which are returned must be
brought into the Employee's taxable income.
7.12 DISTRIBUTIONS OF EXCESS CONTRIBUTIONS
(A) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were allocated
for the preceding Plan Year. If such excess amounts are distributed
more than 2 1/2 months after the last day of the Plan Year in which
such excess amounts arose, a ten (10) percent excise tax will be
imposed on the Employer maintaining the Plan with respect to such
amounts. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess
Contributions of Participants who are subject to the Family Member
aggregation rules of Code Section 414(q)(6) shall be allocated among
the Family Members in proportion to the Elective Deferrals (and amounts
treated as Elective Deferrals) of each Family Member which is combined
to determine the Average Deferral Percentage.
(B) Excess Contributions (including the amounts recharacterized) shall
be treated as Annual Additions under the Plan.
(C) Excess Contributions shall be adjusted for any income or loss up to
the end of the Plan Year. Income or loss will be calculated under the
method used to calculate investment earnings and losses elsewhere in
the Plan.
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(D) Excess Contributions shall be distributed from the Participant s
Elective Deferral account and Qualified Matching Contribution account
(if applicable) in proportion to the Participant's Elective Deferrals
and Qualified Matching Contributions (to the extent used in the ADP
test) for the Plan Year. Excess Contributions shall be distributed from
the Participant's Qualified NonElective Contribution account only to
the extent that such Excess Contributions exceed the balance in the
Participant's Elective Deferral account and Qualified Matching
Contribution account.
7.13 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
(A) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose
accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated
to Participants who are subject to the Family Member aggregation rules
of Code Section 414(q)(6) in the manner prescribed by the regulations.
If such Excess Aggregate Contributions are distributed more than 2 1/2 months
after the last day of the Plan Year in which such excess amounts arose, a ten
(10) percent excise tax will be imposed on the Employer maintaining the Plan
with respect to those amounts. Excess Aggregate Contributions shall be treated
as Annual Additions under the plan.
(B) Excess Aggregate Contributions shall be adjusted for any income or
loss up to the end of the Plan Year. The income or loss allocable to
Excess Aggregate Contributions is the sum of income or loss for the
Plan Year allocable to the Participant's Voluntary Contribution
account, Matching Contribution account (if any, and if all amounts
therein are not used in the ADP test) and, if applicable, Qualified
Non-Elective Contribution account and Elective Deferral account. Income
or loss will be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
(C) Forfeitures of Excess Aggregate Contributions may either be
reallocated to the accounts of non Highly Compensated Employees or
applied to reduce Employer contributions, as elected by the employer in
the Adoption Agreement.
(D) Excess Aggregate Contributions shall be forfeited if such amount is
not vested. If vested, such excess shall be distributed in the
following order:
(1) First, from the Participant's Voluntary Contribution
account;
(2) Second, from the Participant's Matching Contribution
account; and
(3) Third, from the Participant's Qualified Matching
Contribution account (if applicable).
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ARTICLE VIII - JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 APPLICABILITY OF PROVISIONS
The provisions of this Article shall apply to any Participant who is credited
with at least one Hour of Service with the Employer on or after August 23, 1984,
and such other Participants as provided in paragraph 8.8.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY
Unless an optional form of benefit is selected pursuant to a Qualified Election
within the 90-day period ending on the Annuity Starting Date, a married
Participant's Vested Account Balance will be paid in the form of a Qualified
Joint and Survivor Annuity and an unmarried Participant's Vested Account Balance
will be paid in the form of a life annuity. The Participant may elect to have
such annuity distributed upon attainment of the Early Retirement Age under the
Plan.
8.3 PAYMENT OF QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY
Unless an optional form of benefit has been selected within the Election Period
pursuant to a Qualified Election, if a Participant dies before benefits have
commenced, then the Participant's Vested Account Balance shall be paid in the
form of an annuity for the life of the Surviving Spouse. The Surviving Spouse
may elect to have such annuity distributed within a reasonable period after the
Participant's death.
A Participant who does not meet the age 35 requirement set forth in the Election
Period as of the end of any current Plan Year may make a special Qualified
Election to waive the Qualified Pre-Retirement Survivor Annuity for the period
beginning on the date of such election and ending on the first day of the Plan
Year in which the Participant will attain age 35. Such election shall not be
valid unless the Participant receives a written explanation of the Qualified
Pre-Retirement Survivor Annuity in such terms as are comparable to the
explanation required under paragraph 8.5. Qualified Pre-Retirement Survivor
Annuity coverage will be automatically reinstated as of the first day of the
Plan Year in which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this Article.
8.4 QUALIFIED ELECTION
A Qualified Election is an election to either waive a Qualified Joint and
Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity. Any such
election shall not be effective unless:
(A) the Participant's Spouse consents in writing to the election;
(B) the election designates a specific beneficiary, including any class
of beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent);
(C) the Spouse's consent acknowledges the effect of the election; and
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(D) the Spouse's consent is witnessed by a Plan representative or
notary public.
Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity
shall not be effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any further spousal consent). If
it is established to the satisfaction of the Plan Administrator that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a Qualified
Election. Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall be
effective only with respect to such Spouse. A consent that permits designations
by the Participant without any requirement of further consent by such Spouse
must acknowledge that the Spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that the
Spouse voluntarily elects to relinquish either or both of such rights. A
revocation of a prior waiver may be made by a Participant without the consent of
the Spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this provision shall
he valid unless the Participant has received notice as provided in paragraphs
8.5 and 8.6 below.
8.5 NOTICE REQUIREMENTS FOR QUALIFIED JOINT AND SURVIVOR ANNUITY
In the case of a Qualified Joint and Survivor Annuity, the Plan Administrator
shall, no less than 30 days and no more than 90 days prior to the Annuity
Starting date, provide each Participant a written explanation of:
(A) the terms and conditions of a Qualified Joint and Survivor Annuity;
(B) the Participant's right to make and the effect of an election to
waive the Qualified Joint and Survivor Annuity form of benefit;
(C) the rights of a Participant's Spouse; and
(D) the right to make, and the effect of, a revocation of a previous
election to waive the Qualified Joint and Survivor Annuity.
8.6 NOTICE REQUIREMENTS FOR QUALIFIED PRE RETIREMENT SURVIVOR ANNUITY
In the case of a Qualified Pre-Retirement Survivor Annuity as described in
paragraph 8.3, the Plan Administrator shall provide each Participant within the
applicable period for such Participant a written explanation of the Qualified
Pre-Retirement Survivor Annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of paragraph
8.5 applicable to a Qualified Joint and Survivor Annuity. The applicable period
for a Participant is whichever of the following periods ends last:
(A) the period beginning with the first day of the Plan Year in which
the Participant attains age 39 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age 35;
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(B) a reasonable period ending after the individual becomes a
Participant;
(C) a reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from Service in the
case of a Participant who separates from Service before attaining age
35.
For purposes of applying the preceding paragraph, a reasonable period ending
after the events described in (b) and (c) is the end of the two-year period
beginning one year prior to the date the applicable event occurs, and ending one
year after that date. In the case of a Participant who separates from Service
before the Plan Year in which age 35 is attained, notice shall be provided
within the two-year period beginning one year prior to separation and ending one
year after separation. If such a Participant subsequently returns to employment
with the Employer, the applicable period for such Participant shall be
redetermined.
8.7 SPECIAL SAFE-HARBOR EXCEPTION FOR CERTAIN PROFIT-SHARING PLANS
(A) This paragraph shall apply to a Participant in a profit-sharing
plan, and to any distribution made on or after the first day of the
first plan year beginning after 1988, from or under a separate account
attributable solely to Qualified Voluntary contributions, as maintained
on behalf of a Participant in a money purchase pension plan (including
a target benefit plan) if the following conditions are satisfied:
(1) the Participant does not or cannot elect payments in the
form of a life annuity; and
(2) on the death of a Participant, the Participant's Vested
Account Balance will be paid to the Participant's Surviving
Spouse, but if there is no Surviving Spouse, or if the
Surviving Spouse has consented in a manner conforming to a
Qualified Election, then to the Participant's Designated
Beneficiary.
The Surviving Spouse may elect to have distribution of the Vested Account
Balance commence within the 90 day period following the date of the
Participant's death. The account balance shall be adjusted for gains or losses
occurring after the Participant's death in accordance with the provisions of the
Plan governing the adjustment of account balances for other types of
distributions. These safe-harbor rules shall not be operative with respect to a
Participant in a profit-sharing plan if that plan is a direct or indirect
transferee of a Defined Benefit Plan, money purchase plan, a target benefit
plan, stock bonus plan, or profit sharing plan which is subject to the survivor
annuity requirements of Code Section 401(a)(11) and Code Section 417, and would
therefore have a Qualified Joint and Survivor Annuity as its normal form of
benefit.
(B) The Participant may waive the spousal death benefit described in
this paragraph at any time, provided that no such waiver shall be
effective unless it satisfies the conditions
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(described in paragraph 8.4) that would apply to the Participant's
waiver of the Qualified Pre-Retirement Survivor Annuity.
(C) If this paragraph 8.7 is operative, then all other provisions of
this Article other than paragraph 8.8 are inoperative.
8.8 TRANSITIONAL JOINT AND SURVIVOR ANNUITY RULES
Special transition rules apply to Participants who were not receiving benefits
on August 23, 1984.
(A) Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the previous
paragraphs of this Article, must be given the opportunity to elect to
have the prior paragraphs of this Article apply if such Participant is
credited with at least one Hour of Service under this Plan or a
predecessor Plan in a Plan Year beginning on or after January 1, 1976,
and such Participant had at least 10 Years of Service for vesting
purposes when he or she separated from Service.
(B) Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one Hour of Service under this Plan or a
predecessor Plan on or after September 2, 1974, and who is not
otherwise credited with any Service in a Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his or her
benefits paid in accordance with paragraph 8.9.
(C) The respective opportunities to elect [as described in (a) and (b)
above] must be afforded to the appropriate Participants during the
period commencing on August 23, 1984 and ending on the date benefits
would otherwise commence to said Participants.
8.9 AUTOMATIC JOINT AND SURVIVOR ANNUITY AND EARLY SURVIVOR ANNUITY
Any Participant who has elected pursuant to paragraph 8.8(b) and any Participant
who does not elect under paragraph 8.8(a) or who meets the requirements of
paragraph 8.8(a), except that such Participant does not have at least 10 years
of vesting Service when he or she separates from Service, shall have his or her
benefits distributed in accordance with all of the following requirements if
benefits would have been payable in the form of a life annuity.
(A) Automatic Joint and Survivor Annuity. If benefits in the form of a
life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after
Normal Retirement Age, or
(2) dies on or after Normal Retirement Age while still
working for the Employer, or
(3) begins to receive payments on or after the Qualified
Early Retirement Age, or
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(4) separates from Service on or after attaining Normal
Retirement (or the Qualified Early Retirement Age) and after
satisfying the eligibility requirements for the payment of
benefits under the Plan, and thereafter dies before beginning
to receive such benefits, then such benefits will be received
under this Plan in the form of a Qualified Joint and Survivor
Annuity, unless the Participant has elected otherwise during
the Election Period. The Election Period must begin at least 6
months before the Participant attains Qualified Early
Retirement Age and end not more than 90 days before the
commencement of benefits. Any election will be in writing and
may be changed by the Participant at any time.
(B) Election of Early Survivor Annuity. A Participant who is employed
after attaining the Qualified Early Retirement Age will be given the
opportunity to elect, during the Election Period, to have a survivor
annuity payable on death. If the Participant elects the survivor
annuity, payments under such annuity must not be less than the payments
which would have been made to the Spouse under the Qualified Joint and
Survivor Annuity if the Participant had retired on the day before his
or her death. Any election under this provision will be in writing and
may be changed by the Participant at any time. The Election Period
begins on the later of:
(1) the 90th day before the Participant attains the Qualified
Early Retirement Age, or
(2) the date on which participation begins, and ends on the
date the Participant terminates employment.
8.10 ANNUITY CONTRACTS
Any annuity contract distributed under this Plan must be nontransferable. The
terms of any annuity contract purchased and distributed by the Plan to a
Participant or Spouse shall comply with the requirements of this Plan.
ARTICLE IX - VESTING
9.1 EMPLOYEE CONTRIBUTIONS
A Participant shall always have a 100% vested and nonforfeitable interest in his
or her Elective Deferrals, Voluntary Contributions, Qualified Voluntary
Contributions, Rollover Contributions, and Transfer Contributions plus the
earnings thereon. No forfeiture of Employer-related contributions (including any
minimum contributions made under paragraph 14.2) will occur solely as a result
of an Employee's withdrawal of any Employee contributions.
9.2 EMPLOYER CONTRIBUTIONS
A Participant shall acquire a vested and nonforfeitable interest in his or her
account attributable to Employer contributions in accordance with the table
selected in the Adoption Agreement, provided that if a Participant is not
already fully vested, he or she shall become so upon attaining Normal Retirement
Age, Early Retirement Age, on death prior to normal retirement, on
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retirement due to Disability, or on termination of the Plan. If no table is
selected in the Adoption Agreement, an Employee shall acquire a vested and
nonforfeitable interest in his or her account attributable to Employer
contributions in accordance with the following percentages: 20% after 2 Years of
Service; 20% additional for each of the following Years of Service; reaching
100% after 6 Years of Service with the Employer.
9.3 COMPUTATION PERIOD
The computation period for purposes of determining years of Service and Breaks
in Service for purposes of computing a Participant's nonforfeitable right to his
or her account balance derived from Employer contributions shall be the Plan
Year. In the event a Former Participant with no vested interest in his or her
Employer contribution account requalifies for participation in the Plan after
incurring a Break in Service, such Participant shall be credited for vesting
with all pre-break and post-break Service.
9.4 REQUALIFICATION PRIOR TO FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE
The account balance of such Participant shall consist of any undistributed
amount in his or her account as of the date of re-employment plus any future
contributions added to such account plus the investment earnings on the account.
The vested account balance of such Participant shall be determined by
multiplying the Participant's account balance (adjusted to include any
distribution or redeposit made under paragraph 6.3) by such Participant's vested
percentage. All Service of the Participant, both prior to and following the
break, shall be counted when computing the Participant's vested percentage.
9.5 REQUALIFICATION AFTER FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE
If such Participant is not fully vested upon re-employment, a new account shall
be established for such Participant to separate his or her deferred vested and
nonforfeitable account, if any, from the account to which new allocations will
be made. The Participant's deferred account to the extent remaining shall be
fully vested and shall continue to share in earnings and losses of the Fund.
When computing the Participant's vested portion of the new account, all
pre-break and post-break Service shall be counted. However, notwithstanding this
provision, no such former Participant who has had five consecutive one year
Breaks in Service shall acquire a larger vested and nonforfeitable interest in
his or her prior account balance as a result of requalification hereunder.
9.6 CALCULATING VESTED INTEREST
A Participant's vested and nonforfeitable interest shall be calculated by
multiplying the fair market value of his or her account attributable to Employer
contributions on the Valuation Date preceding distribution by the decimal
equivalent of the vested percentage as of his or her termination date. The
amount attributable to Employer contributions for purposes of the calculation
includes amounts previously paid out pursuant to paragraph 6.3 and nor repaid if
the non-vested portion has not been forfeited. The Participant's vested and
nonforfeitable interest, once calculated above, shall be reduced to reflect
those amounts previously paid out to the Participant and not repaid by the
Participant. The Participant's vested and nonforfeitable interest
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so determined shall continue to share in the investment earnings and any
increase or decrease in the fair market value of the Fund up to the Valuation
Date preceding or coinciding with payment.
9.7 FORFEITURES
Any balance in the account of a Participant who has separated from Service to
which he or she is not entitled under the foregoing provisions shall be
forfeited and applied as provided in the Adoption Agreement. A forfeiture may
only occur if the Participant has received a distribution from the Plan or if
the Participant has incurred five consecutive one-year Breaks in Service.
Furthermore, a Highly Compensated Employee's Matching Contributions may be
forfeited, even if vested, if the contributions to which they relate are Excess
Deferrals, Excess Contributions or Excess Aggregate Contributions.
9.8 AMENDMENT OF VESTING SCHEDULE
No amendment to the Plan shall have the effect of decreasing a Participant's
vested interest determined without regard to such amendment as of the later of
the date such amendment is adopted or the date it becomes effective. Further, if
the vesting schedule of the Plan is amended, or the Plan is amended in any way
that directly or indirectly affects the computation of any Participant's
nonforfeitable percentage, or if the Plan is deemed amended by an automatic
change to or from a Top-Heavy vesting schedule, each Participant with at least
three Years of Service with the Employer may elect, within a reasonable period
after the adoption of the amendment, to have his or her nonforfeitable
percentage computed under the Plan without regard to such amendment. For
Participants who do not have at least one Hour of Service in any Plan Year
beginning after 1988, the preceding sentence shall be applied by substituting
"Five Years of Service" for "Three Years of Service" where such language
appears. The period during which the election may be made shall commence with
the date the amendment is adopted and shall end on the later of:
(A) 60 days after the amendment is adopted;
(B) 60 days after the amendment becomes effective; or
(C) 60 days after the Participant is issued written notice of the
amendment by the Employer or the Trustee. If the Trustee is asked to so
notify, the Fund will be charged for the costs thereof.
No amendment to the Plan shall be effective to the extent that it has the effect
of decreasing a Participant's accrued benefit. Notwithstanding the preceding
sentence, a Participant's account balance may be reduced to the extent permitted
under Section 412(c)(8) of the Code (relating to financial hardships). For
purposes of this paragraph, a Plan amendment which has the effect of decreasing
a Participant's account balance or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment, shall be
treated as reducing an accrued benefit.
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9.9 SERVICE WITH CONTROLLED GROUPS
All Years of Service with other members of a controlled group of corporations
las defined in Code Section 414(b)], trades or businesses under common control
[as defined in Code Section 414(c)], or members of an affiliated service group
[as defined in Code Section 414(m)] shall be considered for purposes of
determining a Participant's nonforfeitable percentage.
ARTICLE X - LIMITATIONS ON ALLOCATIONS AND ANTIDISCRIMINATION
TESTING
10.1 PARTICIPATION IN THIS PLAN ONLY
If the Participant does not participate in and has never participated in another
qualified plan, a Welfare Benefit Fund (as defined in paragraph 1.89) or an
individual medical account, as defined in Code Section 415(1)(2), or a
Simplified Employee Pension Plan, as defined in Code Section 408(k), maintained
by the adopting Employer, which provides an Annual Addition as defined in
paragraph 1.4, the amount of Annual Additions which may be credited to the
Participant's account for any Limitation Year will not exceed the lesser of the
Maximum Permissible Amount or any other limitation contained in this Plan. If
the Employer contribution that would otherwise be contributed or allocated to
the Participant's account would cause the Annual Additions for the Limitation
Year to exceed the Maximum Permissible Amount, the amount contributed or
allocated will be reduced so that the Annual Additions for the Limitation Year
will equal the Maximum Permissible Amount. Prior to determining the
Participant's actual Compensation for the Limitation Year, the Employer may
determine the Maximum Permissible Amount for a Participant on the basis of a
reasonable estimate of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated. As soon as is
administratively feasible after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year will be determined on the basis of
the Participant's actual Compensation for the Limitation Year.
10.2 DISPOSITION OF EXCESS ANNUAL ADDITIONS
If, pursuant to paragraph 10.1 or as a result of the allocation of forfeitures,
there is an Excess Amount, the excess will be disposed of under one of the
following methods as determined in the Adoption Agreement. If no election is
made in the Adoption Agreement, then method "(a)" below shall apply.
(A) Suspense Account Method
(1) Any Elective Deferrals and nondeductible Employee
Voluntary Contributions, to the extent they would reduce the
Excess Amount, will be returned to the Participant;
(2) If after the application of paragraph (1) an Excess Amount
still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
contributions
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(including any allocation of forfeitures) for such Participant
in the next Limitation Year, and each succeeding Limitation
Year if necessary;
(3) If after the application of paragraph (1) an Excess Amount
still exists, and the Participant is not covered by the Plan
at the end of the Limitation Year, the Excess Amount will be
held unallocated in a suspense account. The suspense account
will be applied to reduce future Employer contributions
(including allocation of any forfeitures) for all remaining
Participants in the next Limitation Year, and each succeeding
Limitation Year if necessary;
(4) If a suspense account is in existence at any time during
the Limitation Year pursuant to this paragraph, it will not
participate in the allocation of investment gains and losses.
If a suspense account is in existence at any time during a
particular Limitation Year, all amounts in the suspense
account must be allocated and reallocated to Participants'
accounts before any Employer contributions or any Employee
Contributions may be made to the Plan for that Limitation
Year. Excess amounts may not be distributed to Participants or
former Participants.
(B) Spillover Method
(1) Any Elective Deferrals and nondeductible Employee
Voluntary Contributions, to the extent they would reduce the
Excess Amount, will be returned to the Participant.
(2) Any Excess Amount which would be allocated to the account
of an individual Participant under the Plan's allocation
formula will be reallocated to other Participants in the same
manner as other Employer contributions. No such reallocation
shall be made to the extent that it will result in an Excess
Amount being created in such Participant's own account.
(3) To the extent that amounts cannot be reallocated under (1)
above, the suspense account provisions of (a) above will
apply.
10.3 PARTICIPATION IN THIS PLAN AND ANOTHER QUALIFIED MASTER AND PROTOTYPE
DEFINED CONTRIBUTION PLAN, WELFARE BENEFIT FUND, INDIVIDUAL MEDICAL ACCOUNT OR
SIMPLIFIED EMPLOYEE PENSION PLAN MAINTAINED BY THE EMPLOYERThe Annual Additions
which may be credited to a Participant's account under this Plan for any
Limitation Year will not exceed the Maximum Permissible Amount reduced by the
Annual Additions credited to a Participant's account under the other qualified
Master or Prototype Defined Contribution Plans, Welfare Benefit Funds, and
individual medical accounts as defined in Code Section 415(1)(2), or Simplified
Employee Pension Plan, maintained by the Employer, which provides an Annual
Addition as defined in paragraph 1.4 for the same Limitation Year. If the Annual
Additions, with respect to the Participant under other Defined Contribution
Plans and Welfare Benefit Funds maintained by the Employer, are less than the
Maximum Permissible
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Amount and the Employer contribution that would otherwise be contributed or
allocated to the Participant's account under this Plan would cause the Annual
Additions for the Limitation Year to exceed this limitation, the amount
contributed or allocated will be reduced so that the Annual Additions under all
such plans and funds for the Limitation Year will equal the Maximum Permissible
Amount. If the Annual Additions with respect to the Participant under such other
Defined Contribution Plans and Welfare Benefit Funds in the aggregate are equal
to or greater than the Maximum Permissible Amount, no amount will be contributed
or allocated to the Participant's account under this Plan for the Limitation
Year. Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount for a
Participant in the manner described in paragraph 10.1. As soon as
administratively feasible after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year will be determined on the basis of
the Participant's actual Compensation for the Limitation Year.
10.4 DISPOSITION OF EXCESS ANNUAL ADDITIONS UNDER TWO PLANS
If, pursuant to paragraph 10.3 or as a result of forfeitures, a Participant's
Annual Additions under this Plan and such other plans would result in an Excess
Amount for a Limitation Year, the Excess Amount will be deemed to consist of the
Annual Additions last allocated, except that Annual Additions attributable to a
Simplified Employee Pension Plan will be deemed to have been allocated first,
followed by Annual Additions attributable to a Welfare Benefit Fund or
Individual Medical Account as defined in Code Section 415(1)(2), regardless of
the actual allocation date. If an Excess Amount was allocated to a Participant
on an allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the product of:
(A) the total Excess Amount allocated as of such date, times
(B) the ratio of
(1) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under the Plan, to
(2) the total Annual Additions allocated to the Participant
for the Limitation Year as of such date under this and all
the other qualified Master or Prototype Defined Contribution
Plans.
Any Excess Amount attributed to this Plan will be disposed of in the manner
described in paragraph 10.2.
10.5 PARTICIPATION IN THIS PLAN AND ANOTHER DEFINED CONTRIBUTION PLAN WHICH IS
NOT A QUALIFIED MASTER OR PROTOTYPE PLANIf the Participant is covered under
another qualified Defined Contribution Plan maintained by the Employer which is
not a qualified Master or Prototype Plan,Annual Additions which may be credited
to the Participant's account under this Plan for any Limitation Year will be
limited in
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accordance with paragraphs 10.3 and 10.4 as though the other plan were a Master
or Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
10.6 PARTICIPATION IN THIS PLAN AND A DEFINED BENEFIT PLAN
If the Employer maintains, or at any time maintained, a qualified Defined
Benefit Plan covering any Participant in this Plan, the sum of the Participant's
Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will not
exceed 1.0 in any Limitation Year. For any Plan Year during which the Plan is
Top-Heavy, the Defined Benefit and Defined Contribution Plan Fractions shall be
calculated in accordance with Code Section 416(h). The Annual Additions which
may be credited to the Participant's account under this Plan for any Limitation
Year will be limited in accordance with the provisions set forth in the Adoption
Agreement.
10.7 AVERAGE DEFERRAL PERCENTAGE (ADP) TEST
With respect to any Plan Year, the Average Deferral Percentage for Participants
who are Highly Compensated Employees and the Average Deferral Percentage for
Participants who are Non-Highly Compensated Employees must satisfy one of the
following tests:
(A) Basic Test - The Average Deferral Percentage for Participants who
are Highly Compensated Employees for the Plan Year is not more than
1.25 times the Average Deferral Percentage for Participants w ho are
Non-Highly Compensated Employees for the same Plan Year, or
(B) Alternative Test - The Average Deferral Percentage for Participants
who are Highly Compensated Employees for the Plan Year does not exceed
the average Deferral Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year by more than percentage
points provided that the Average Deferral Percentage for Participants
who are Highly Compensated Employees is not more than 2.0 times the
Average Deferral Percentage for Participants who are non-Highly
Compensated Employees.
10.8 SPECIAL RULES RELATING TO APPLICATION OF ADP TEST
(A) The Actual Deferral Percentage for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Non-Elective Contributions or
Qualified Matching Contributions, or both, if treated as Elective
Deferrals, for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Code Section
401(k), which are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both) were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements
which have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a
single arrangement.
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(B) In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b), only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Actual Deferral
Percentage of Employees as if all such plans were a single plan. For
Plan Years beginning after 1989, plans may be aggregated in order to
satisfy Code Section 401(k) only if they have the same Plan Year.
(C) For purposes of determining the Actual Deferral Percentage of a
Participant who is a 5-percent owner or one of the ten most highly paid
Highly Compensated Employees, the Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both, if treated as Elective Deferrals for purposes of the ADP test)
and Compensation of such Participant shall include the Elective
Deferrals (and, if applicable, Qualified Non-Elective Contributions and
Qualified Matching Contributions, or both) for the Plan Year of Family
Members as defined in paragraph 1.36 of this Plan. Family Members, with
respect to such Highly Compensated Employees, shall be disregarded as
separate Employees in determining the ADP both for Participants who are
Non-Highly Compensated Employees and for Participants who are Highly
Compensated Employees. In the event of repeal of the family aggregation
rules under Code Section 414(q)(6), all applications of such rules
under this Plan will cease as of the effective date of such repeal.
(D) For purposes of determining the ADP test, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which contributions
relate.
(E) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(F) The determination and treatment of the Actual Deferral Percentage
amounts of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
10.9 AVERAGE CONTRIBUTION PERCENTAGE (ACP) TEST
If the Employer makes Matching Contributions or if the Plan allows Employees to
make Voluntary Contributions, the Plan must meet additional nondiscrimination
requirements provided under Code Section 401(m). If Employee Contributions
(including any Elective Deferrals recharacterized as Voluntary Contributions)
are made pursuant to this Plan, then in addition to the ADP test referenced in
paragraph 10.7, the Average Contribution Percentage test is also applicable. The
Average Contribution Percentage for Participants who are Highly Compensated
Employees for each Plan Year and the Average Contribution Percentage for
Participants who are Non-Highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
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(A) Basic Test - The Average Contribution Percentage for Participants
who are Highly Compensated Employees for the Plan Year shall not exceed
the Average Contribution Percentage for Participants who are Non-Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(B) Alternative Test -The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Participants who are Non-Highly Compensated
Employees for the same Plan Year multiplied by two (2), provided that
the Average Contribution Percentage for Participants who are Highly
Compensated Employees does not exceed the Average Contribution
Percentage for Participants who are Non-Highly Compensated Employees by
more than two (2) percentage points.
10.10 SPECIAL RULES RELATING TO APPLICATION OF ACP TEST
(A) If one or more Highly Compensated Employees participate in both a
cash or deferred arrangement and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to either or both tests exceeds
the Aggregate Limit, then the ADP or ACP of those Highly Compensated
Employees who also participate in a cash or deferred arrangement will
be reduced (beginning with such Highly Compensated Employee whose ADP
or ACP is the highest) as set forth in the Adoption Agreement, so that
the limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amounts is reduced shall be treated
as an Excess Aggregate Contribution. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections required to
meet the ADP and ACP tests. Multiple use does not occur if both the ADP
and ACP of the Highly Compensated Employees does not exceed 1.25
multiplied by the ADP and ACP of the Non-Highly Compensated Employees.
(B) For purposes of this Article, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to
have Contribution Percentage Amounts allocated to his or her account
under two or more plans described in Code Section 401(a), or
arrangements described in Code Section 401(k) that are maintained by
the Employer, shall be determined as if the total of such Contribution
Percentage Amounts was made under each Plan. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements ending
with or within the same calendar year shall be treated as a single
arrangement.
(C) In the event that this Plan satisfies the requirements of Code
Sections 401(a)(4), 401(m), or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Contribution
Percentage of Employees as if all such plans were a single plan. For
plan years beginning after 1989,
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plans may be aggregated in order to satisfy Code Section 401(m) only if
the aggregated plans have the same Plan Year.
(D) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most highly
paid, Highly Compensated Employees, the Contribution Percentage Amounts
and Compensation of such Participant shall include the Contribution
Percentage Amounts and Compensation for the Plan Year of Family Members
as defined in paragraph 1.36 of this Plan. Family Members, with respect
to Highly Compensated Employees, shall be disregarded as separate
Employees in determining the Contribution Percentage both for
Participants who are Non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees. In the event of
repeal of the family aggregation rules under Code Section 414(q)(6),
all applications of such rules under this Plan will cease as of the
effective date of such repeal.
(E) For purposes of determining the Contribution Percentage test,
Employee Contributions are considered to have been made in the Plan
Year in which contributed to the trust. Matching Contributions and
Qualified Non-Elective Contributions will be considered made for a Plan
Year if made no later than the end of the twelvemonth period beginning
on the day after the close of the Plan Year.
(F) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(G) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(H) Qualified Matching Contributions and Qualified Non-Elective
Contributions used to satisfy the ADP test may not be used to satisfy
the ACP test.
ARTICLE XI - ADMINISTRATION
11.1 PLAN ADMINISTRATOR
The Employer shall be the named fiduciary and Plan Administrator. These duties
shall include:
(A) appointing the Plan's attorney, accountant, actuary, or any other
party needed to administer the Plan;
(B) directing the Trustee with respect to payments from the Fund;
(C) communicating with Employees regarding their participation and
benefits under the Plan, including the administration of all claims
procedures;
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(D) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other governmental agency;
(E) reviewing and approving any financial reports, investment reviews,
or other reports prepared by any party appointed by the Employer under
paragraph (a);
(F) establishing a funding policy and investment objectives consistent
with the purposes of the Plan and the Employee Retirement Income
Security Act of 1974; and
(G) construing and resolving any question of Plan interpretation. The
Plan Administrator's interpretation of Plan provisions including
eligibility and benefits under the Plan is final, and, unless it can be
shown to be arbitrary and capricious, will not be subject to "de novo"
review.
11.2 TRUSTEE
The Trustee shall only be responsible for maintaining the trust account(s) in
accordance with applicable laws on behalf of the Employer. The Trustee's duties
shall include:
(A) receiving contributions under the terms of the Plan, but not
determining the amount or enforcing the payment thereof;
(B) making distributions from the Fund in accordance with written
instructions received from an authorized representative of the
Employer;
(C) keeping accurate and detailed records of all contributions,
receipts, investments, distributions, disbursements and all other
transactions with respect to each account (in the case of Employee
Investment Direction) or the Fund (in the case of Employer Investment
Direction). Periodically (not less than annually), the Trustee shall
provide a transcript of all activity in the account or in the Fund
(which may consist of regularly issued statements from the Service
Company). In the case of Employee Investment Direction, each such
transcript will be provided to the Participant. In the case of Employer
Investment Direction, each such transcript will be provided to the
Employer. Each such transcript shall be the sole accounting required of
the Trustee. Unless the Participant or Employer files a written
objection to the transcript within 60 days following the date it is
furnished, he or she shall be deemed to have consented to the
accounting, and the trustee and Service Company shall be forever
released and discharged from all liability and accountability to anyone
with respect to its acts, transactions, duties, obligations or
responsibilities as shown in, or reflected by, the transcript; and
(D) employing such agents, attorneys or other professionals as the
trustee may deem necessary or advisable in the performance of its
duties.
The Trustee's duties shall be limited to those described above. The Employer
shall be responsible for any other administrative duties required under the Plan
or by applicable law.
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11.3 ADMINISTRATION FEES AND EXPENSES
All reasonable costs, charges and expenses incurred by the Trustee and Service
Company in connection with the administration of the Fund and all reasonable
costs, charges and expenses incurred by the Plan Administrator in connection
with the administration of the Plan (including fees for legal services rendered
to the trustee and Service Company or Plan Administrator) may be paid by the
Employer, but if not paid by the Employer when due, shall be paid from the Fund.
Such reasonable compensation to the Trustee and Service Company as may be agreed
upon from time to time between the Employer and the Trustee and Service Company,
and such reasonable compensation to the Plan Administrator as may be agreed upon
from time to time between the Employer and Plan Administrator and the
compensation of the Service Company in accordance with its fee schedule as in
effect at the applicable time, may be paid by the Employer, but if not paid by
the Employer when due shall be paid by the Fund. The Trustee and Service Company
shall have the right to liquidate trust assets to cover its fees.
Notwithstanding the foregoing, no compensation other than reimbursement for
expenses shall be paid to a Plan Administrator who is the Employer or a
full-time Employee of the Employer. In the event any part of the Trust becomes
subject to tax, all taxes incurred will be paid from the Fund, unless the Plan
Administrator advises the Trustee not to pay such tax.
11.4 DUTIES AND INDEMNIFICATION
(A) The Trustee shall have the authority and discretion to manage and
govern the Fund to the extent provided in this instrument, but does not
guarantee the Fund in any manner against investment loss or
depreciation in asset value, or guarantee the adequacy of the Fund to
meet and discharge all or any liabilities of the Plan.
(B) The Trustee shall not be liable for the making, retention or sale
of any investment or reinvestment made by it, as herein provided, or
for any loss to, or diminution of the Fund, or for any other loss or
damage which may result from the discharge of its duties hereunder,
except to the extent it is judicially determined that the Trustee has
failed to exercise the care, skill, prudence and diligence under the
circumstances then prevailing which a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character with like aims.
(C) The Employer warrants that all directions issued to the Trustee by
it or the Plan Administrator will be in accordance with the terms of
the Plan and not contrary to the provisions of the Employee Retirement
Income Security Act of 1974 and regulations issued thereunder.
(D) The Trustee shall not be answerable for any action taken pursuant
to any direction, consent, certificate, or other paper or document on
the belief that the same is genuine and signed by the proper person.
All directions by the Employer, Participant or the Plan Administrator
shall be given in a manner and form prescribed by the Trustee and
approved by the Service Company. The Employer shall deliver to the
trustee certificates evidencing the individual or individuals
authorized to act as set forth in the Adoption
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Agreement or as the Employer may subsequently inform the Trustee in
writing and shall deliver to the Trustee specimens of their signatures.
(E) The duties and obligations of the Trustee shall be limited to those
expressly imposed upon it by this instrument or subsequently agreed
upon by the parties. Responsibility for administrative duties required
under the Plan or applicable law not expressly imposed upon or agreed
to by the Trustee shall rest solely with the Employer.
(F) The Trustee shall be indemnified and saved harmless by the Employer
from and against any and all liability to which the Trustee may be
subjected, including all expenses reasonably incurred in its defense,
for any action or failure to act resulting from compliance with the
instructions of the Employer, the employees or agents of the Employer,
the Plan Administrator, or any other fiduciary to the Plan, and for any
liability arising from the actions or non actions of any predecessor
Trustee or fiduciary or other fiduciaries of the Plan.
(G) The Trustee shall not be responsible in any way for the application
of any payments it is directed to make or for the adequacy of the Fund
to meet and discharge any and all liabilities under the Plan.
(H) With respect to non-mutual fund investments, the Trustee in
administering the Trust Fund is authorized and empowered to exercise
generally any of the powers which a trustee might customarily exercise
in connection with investments held by the Trust Fund and to do all
other acts that the Trustee may deem necessary or proper to carry out
any of the powers and duties set forth in this Article XI.
11.5 SPECIAL PROVISIONS CONCERNING THE SERVICE COMPANY
(A) To the full extent permitted under ERISA, the Code, any other
applicable Federal or State law, the regulations, rules and
interpretations thereunder, and subject to any written instrument
executed by the Trustee and the Service Company allocating
responsibilities between them, all ministerial functions assigned to
the Trustee under the Plan shall be delegated to the Service Company.
All instructions required to be given to the Trustee under the Plan
will be effective if given to the Service Company in the manner
prescribed by the Service Company. To the extent the Service Company is
performing a function assigned to the Trustee under the Plan, the
Service Company shall have the benefit of all of the limitations of the
scope of the Trustee's duties and liabilities, all rights of
indemnification granted to the Trustee and all other protections of any
nature afforded the Trustee under the Plan.
(B) It is understood and agreed that while the Service Company will
perform certain ministerial duties (such as custodial, reporting,
recording, and bookkeeping functions) with
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respect to Plan assets, such duties do not involve the exercise of any
discretionary authority or other authority to manage or control Plan
assets.
(C) With respect to any transaction which the Service Company is
directed to engage in, the Employer, the Trustee, the Named Investment
Fiduciary and the person directing the transaction shall be responsible
for making sure that the transaction does not violate any applicable
provision of law or disqualify the Plan under the Code, and the Service
Company shall have no responsibility therefor.
(D) The Employer and, where the Service Company is following the
directions or instructions of a Participant, the Trustee, Plan
Administrator or the Named Investment Fiduciary, such Participant, the
Trustee, Plan Administrator or the Named Investment Fiduciary (as the
case may be) shall at all times fully indemnify and save harmless the
Service Company from any liability which may arise in connection with
this Plan, except liability arising from the gross negligence or
willful misconduct of the Service Company. For purposes of this Section
11.5, "liability" shall include, without limitation, taxes, expenses,
claims, damages, actions, suits, attorneys fees, expenses of litigation
or preparation for threatened litigation, and any other charges. The
Service Company shall be liable for its own gross negligence or willful
misconduct in the performance of the duties expressly assumed by it
under the Plan.
ARTICLE XII - TRUST FUND
12.1 THE FUND
The Fund shall consist of all contributions made under Article III and Article
IV of the Plan and the investment thereof and earnings thereon. All
contributions and the earnings thereon less payments made under the terms of the
Plan shall constitute the Fund. The Fund shall be administered as provided in
this document.
12.2 CONTROL OF PLAN ASSETS
The assets of the Fund or evidence of ownership shall be held by the Trustee
under the terms of the Plan and Trust. If the assets represent amounts
transferred from another trustee under a former plan, the Trustee named
hereunder shall not be responsible for the propriety of any investment under the
former plan.
12.3 EXCLUSIVE BENEFIT RULES
No part of the Fund shall be used for, or diverted to, purposes other than for
the exclusive benefit of Participants, former Participants with a vested
interest, and the beneficiary or beneficiaries of deceased Participants having a
vested interest in the Fund at death.
12.4 ASSIGNMENT AND ALIENATION OF BENEFITS
No right or claim to, or interest in, any part of the Fund, or any payment from
the Fund, shall be assignable, transferable, or subject to sale, mortgage,
pledge, hypothecation, commutation, anticipation, garnishment, attachment,
execution or levy of any kind. The Trustee shall not
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recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate,
commute or anticipate the same, except to the extent required by law. The
preceding sentences shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to be a Qualified
Domestic Relations Order, as defined in Code Section 414(p), or any domestic
relations order entered before January 1, 1985, which the Plan attorney and Plan
Administrator deem to be qualified.
12.5 DETERMINATION OF QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)
A Domestic Relations Order shall specifically state all of the following in
order to be deemed a Qualified Domestic Relations Order ("QDRO"):
(A) The name and last known mailing address (if any) of the Participant
and of each alternate payee covered by the QDRO. However, if the QDRO
does not specify the current mailing address of the alternate payee,
but the Plan Administrator has independent knowledge of that address,
the QDRO will still be valid.
(B) The dollar amount or percentage of the Participant's benefit to be
paid by the Plan to each alternate payee, or the manner in which the
amount or percentage will be determined.
(C) The number of payments or period for which the order applies.
(D) The specific plan (by name) to which the Domestic Relations Order
applies.
The Domestic Relations Order shall not be deemed a QDRO if it requires the Plan
to provide:
(E) any type or form of benefit, or any option not already provided for
in the Plan;
(F) increased benefits, or benefits in excess of the Participant's
vested rights;
(G) payment of a benefit earlier than allowed by the Plan's earliest
retirement provisions or in the case of a profit-sharing plan, prior to
the allowability of in-service withdrawals, or
(H) payment of benefits to an alternate payee which are required to be
paid to another alternate payee under another QDRO.
Promptly, upon receipt of a Domestic Relations Order ("Order") which may or may
not be "Qualified," the Plan Administrator shall notify the Participant and any
alternate payee(s) named in the Order of such receipt, and include a copy of
this paragraph 12.5. The Plan Administrator shall then forward the Order to the
Plan's legal counsel for an opinion as to whether or not the Order is in fact
"Qualified" as defined in Code Section 414(p). Within a reasonable time after
receipt of the Order, not to exceed 60 days, the Plan's legal counsel shall make
a determination
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as to its "Qualified" status, and the Participant and any alternate payee(s)
shall be promptly notified in writing of the determination.
If the "Qualified" status of the Order is in question, there will be a delay in
any payout to any payee, including the Participant, until the status is
resolved. In such event, the Plan Administrator shall segregate the amount that
would have been payable to the alternate payee(s) if the Order had been deemed a
QDRO. If the Order is not Qualified, or the status is not resolved (for example,
it has been sent back to the Court for clarification or modification) within 18
months beginning with the date the first payment would have to be made under the
Order, the Plan Administrator shall pay the segregated amounts plus interest to
the person(s) who would have been entitled to the benefits had there been no
Order. If a determination as to the Qualified status of the Order is made after
the 18 month period described above, then the Order shall only be applied on a
prospective basis. If the Order is determined to be a QDRO, the Participant and
alternate payee(s) shall again be notified promptly after such determination.
Once an Order is deemed a QDRO, the Plan Administrator shall pay to the
alternate payee(s) all the amounts due under the QDRO, including segregated
amounts plus interest which may have accrued during a dispute as to the Order's
qualification.
Unless specified otherwise in the Adoption Agreement the earliest retirement age
with regard to the Participant against whom the order is entered shall be the
date the order is determined to be qualified. This will only allow payouts to
alternate payee(s) and not the Participant.
ARTICLE XIII - INVESTMENTS
13.1 FIDUCIARY STANDARDS
The Trustee shall invest and reinvest income in the same Fund in accordance with
the investment objectives established by the Employer, provided that:
(A) such investments are prudent under the Employee Retirement Income
Security Act of 1974 and the regulations promulgated thereunder,
(B) such investments are sufficiently diversified or otherwise insured
or guaranteed to minimize the risk of large losses, and
(C) such investments are similar to those which would be purchased by
another professional money manager for a like plan with similar
investment objectives.
13.2 NO INVESTMENT DISCRETION
The Plan Sponsor and the trustee shall have no discretion to direct any
investments of the Trust and are authorized solely to make and hold investments
only as directed pursuant to Section 13.3.
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13.3 INVESTMENT DIRECTIONS
(A) Responsibility for directing the Trustee with respect to the
investment of the Trust Fund shall be allocated to the Employer, or a
named fiduciary appointed by the Employer for that purpose (the "Named
Investment Fiduciary"), the Participants, or any investment manager (an
"Investment Manager"), who meets the requirements of Section 3(38) of
the Employee Retirement Income Security Act of 1974 (ERISA) appointed
by the Named Investment Fiduciary, all as provided in the Plan
(including the Adoption Agreement). To the extent investment
responsibility is allocated to the Participant, the Designated
Beneficiary of a deceased Participant shall discharge the
responsibility subsequent to the Participant's death, and any reference
to the Participant in any provision of the Plan pertaining to
investment directions shall in such event be construed as a reference
to the Designated Beneficiary.
(B) Investment directions shall be given in a manner and form
prescribed by the Trustee and shall be subject to such limitations,
including limitations as to the frequency with which any standing
investment instructions may be changed and funds may be moved among
investment choices, as the Employer or other Named Investment Fiduciary
shall prescribe. If Investment responsibility is allocated to
Participants, to the extent permitted by the Trustee, investment
directions may be given directly to the Service Company in a manner and
form prescribed by the Service Company.
(C) Cash for which no investments are directed shall be automatically
invested in such investment or investments as the Employer or other
Named Investment Fiduciary shall select from the investments the
Service Company makes available for that purpose unless and until the
person responsible for giving directions directs otherwise. Such
automatic investment shall be made at regular intervals and pursuant to
procedures provided by the Service Company (which procedures may,
without limitation, provide for more frequent intervals only if
reinvested balances exceed a stated amount). Absent a contrary
direction in accordance with the preceding provisions of Section 13.2,
the Service Company is hereby directed to make such automatic
investments.
Notwithstanding other provisions of the Plan to the contrary, if another
qualified plan is amended and restated in the form of this Plan, the Employer or
the named investment fiduciary shall have the power to prescribe rules regarding
the investment of the assets held under the other qualified plan until such time
as any resulting reconciliation of Participant Accounts is completed and the
assets may be reinvested in investments permitted under Section 13.4 of the
Plan.
13.4 PERMITTED INVESTMENTS
Except as Section 13.9 may apply, all amounts held in the Trust Fund under the
Plan shall be invested in mutual fund shares and annuities which are offered
through the Service Company, and such other investments as shall be accepted in
writing by the Service Company for availability under the Plan.
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All dividends, including capital gain dividends, paid by any mutual fund shall
be reinvested in full, and fractional shares of the mutual fund paying the
dividend in the manner specified in the prospectus of the mutual fund, and such
dividends shall he credited to the Trust Fund.
Each of the mutual funds in which the Plan may invest carries its own fees and
expenses, which may include management fees, Rule 12b-1 fees and/or other fees
and expenses, which are described in detail in each fund's prospectus.
Participants who invest in these mutual funds will, as shareholders of those
funds, bear their prorate portion of each fund's fees and expenses. Employer
acknowledges that Prudential Mutual Fund Distributors (PMFD) and Prudential
Securities Incorporated (PSI) may act as distributor of each fund's shares and
that PSI, PMFD and Prusec Securities Corporation (Prusec) are subsidiaries of
The Prudential Insurance Company of America (Prudential) (through which the
Guaranteed Interest Account is offered) and are each affiliated with the Funds
as described in each fund's prospectus. Employer acknowledges that Prudential,
PMFD, PSI and Prusec are not fiduciaries to the Plan, have no obligation to the
Plan or the Participants and are acting solely in their own interest. Employer
further acknowledges that Prudential, PMFD, PSI and Prusec may be deemed to
benefit from advisory and other fees paid to it or its affiliates in connection
with the management and operation of the mutual funds in which the Participants
may invest, from sales charges and contingent deferred sales charges imposed as
described in the prospectus and from fees paid to The Prudential Insurance
Company of America in connection with the Guaranteed Interest Account.
13.5 SHAREHOLDER RIGHTS
The Trustee shall exercise any rights of a shareholder (including voting rights)
with respect to any securities held, but only in accordance with the
instructions of the Participant or the Designated Beneficiary of a deceased
Participant subject to and except as permitted by any applicable rules of the
Securities and Exchange Commission and any national securities exchange.
13.6 LIQUIDATION OF ASSETS
If the Trustee must liquidate assets in order to make distributions, transfer
assets, or pay fees, expenses or taxes assessed against all or a part of the
Fund, and the Trustee is not instructed as to the liquidation of such assets,
assets will be liquidated in accordance with the rules and procedures
customarily followed by the Service Company, which rules shall be formulated in
a manner to eliminate the potential for exercise of discretion by the Service
Company in the liquidation of assets and shall be applied consistently with
respect to all similarly situated plans in the form of the Prototype Plan;
provided that if a contribution is being made to an affected subaccount as of
the date the Trustee would otherwise be liquidating assets pursuant to this
section, the Trustee may withdraw the necessary amount of cash and invest the
remainder of the contribution in investments in the same proportion as would
have resulted had the withdrawal not been made. The Trustee is expressly
authorized to liquidate assets in order to satisfy the Trust Fund's obligation
to pay the Trustee's compensation if such compensation is not paid on a timely
basis.
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13.7 ARBITRATION
This Plan requires that certain controversies be arbitrated as provided below.
In this regard it is to be noted that:
(A) Arbitration is final and binding on the parties.
(B) The parties are waiving their right to seek remedies in court,
including the right to jury trial.
(C) Pre-arbitration discovery is generally more limited than and
different from court proceedings.
(D) The arbitrator's award is not required to include factual findings
or legal reasoning, and any party's right to appeal or to seek
modification of rulings by the arbitrators is strictly limited.
(E) The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.
Unless the following procedure for the resolution of controversies is not
enforceable under ERISA, any controversy arising out of or relating to the Plan,
or with respect to transactions of any kind executed by, through or with the
Service Company or otherwise pertaining to the Plan shall be settled by
arbitration. The arbitration may be before either the National Association of
Securities Dealers, Inc. (NASD), or the New York Stock Exchange, Inc., as
Employer/Employee, as the case may be, may elect and shall be governed by the
laws of the State of New York. If Employer/Employee does not make the above
election by registered mail addressed to PSI at its main office within 5
business days after demand by PSI that Employer/Employee make such election,
then PSI shall have the right to elect the arbitration tribunal of its choice.
Notice preliminary to, in conjunction with or incident to arbitration may be
sent to Employer/Employee by mail, and personal service is hereby waived.
Judgement upon any award rendered by the arbitrators may be entered in any court
having jurisdiction thereof, without notice to Employer/Employee.
No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any pre-dispute arbitration agreement against any person who has
initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until (i) the class certification is denied; or
(ii) the class is decertified; or (iii) the customer is excluded from the class
by the court. Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this agreement except to the extent
stated herein.
13.8 PARTICIPANT LOANS
Unless otherwise specified in the Adoption Agreement, Participant Loans will not
be permitted. If permitted by the Adoption Agreement, a Participant may make
application to the Employer
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requesting a loan from the Fund. Loans shall be made available to all
Participants on a reasonably equivalent basis and shall not be made available to
Highly Compensated Employees who are Participants in amounts greater than made
available to all other Participants. The Employer will administer all
Participant Loans unless the trustee otherwise agrees in writing to accept these
duties. Loan administration duties shall include, but are not limited to the
following: approving or disapproving loan applications from Participants, loan
origination and closing; providing proper disclosures to Participant borrowers
under applicable Federal and State lending laws; notifying Participant borrowers
of default; and collecting current and past due payments on such loans. The
Employer will notify the Trustee of any loan to be made from the Fund. The
Trustee will reflect the amount of each such loan and its repayments on records
of the Fund. Any loan granted hereunder shall be made subject to the following
rules:
(A) No loan when aggregated with any outstanding Participant Loan(s),
shall exceed the lesser of (i) $50,000 reduced by the excess, if any,
of the highest outstanding balance of loans during the one-year period
ending on the day before the loan is made, over the outstanding balance
of loans from the Plan on the date the loan is made, or (ii) one-half
of the fair market value of a Participant's vested account balance
built up from Employer Contributions, Voluntary Contributions and
Rollover Contributions. For the purpose of the above limitation, all
loans from all plans of the Employer and other members of a group of
Employers described in Code Sections 414(b), 414(c), and 414(m) are
aggregated. An assignment or pledge of any portion of the Participant's
interest in the Plan and a loan, pledge or assignment with respect to
any insurance contract purchased under the Plan, will be treated as a
loan under this paragraph.
(B) All applications must be made on forms provided by the Employer and
must be signed by the Participant.
(C) Any loan granted hereunder shall bear interest at a rate reasonable
at the time of application, considering the purpose of the loan and the
rate being charged by representative commercial banks in the local area
for a similar loan, unless the Employer sets forth a different method
for determining loan interest rates in its loan procedures. The loan
agreement shall also provide that the payment of principal and interest
be amortized in level payments not less frequently than quarterly.
(D) The term of such loan shall not exceed five years, except in the
case of a loan for the purpose of acquiring any house, apartment,
condominium or mobile home (not used on a transient basis) which is
used or is to be used within a reasonable time as the principal
residence of the Participant. The term of such loan shall be determined
by the Employer considering the maturity dates quoted by representative
commercial banks in the local area for a similar loan.
(E) The principal and interest paid by a Participant on his or her loan
shall be credited to the Fund in the same manner as for any other Plan
investment. Loans will be treated as segregated investments of the
individual Participants.
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(F) If a Participant's loan application is approved by the Employer,
such Participant shall be required to sign a note, loan agreement and
assignment of one-half of his or her interest in the Fund as collateral
for the loan. The Participant, except in the case of a profit-sharing
plan satisfying the requirements of paragraph 8.7, must obtain the
consent of his or her Spouse, if any, within the 90 day period before
the time his or her account balance is used as security for the loan. A
new consent is required if the account balance is used for any
renegotiation, extension, renewal or other revision of the loan,
including an increase in the amount thereof. The consent must be
written, must acknowledge the effect of the loan, and must be witnessed
by a plan representative or notary public. Such consent shall
thereafter be binding with respect to the consenting Spouse or any
subsequent Spouse.
(G) If a valid Spousal consent has been obtained, then, notwithstanding
any other provision of this Plan, the portion of the Participant's
vested account balance used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance
payable at the time of death or distribution, but only if the reduction
is used as repayment of the loan. If less than 100% of the
Participant's vested account balance (determined without regard to the
preceding sentence) is payable to the surviving Spouse, then the
account balance shall be adjusted by first reducing the Vested Account
Balance by the amount of the security used as repayment of the loan,
and then determining the benefit payable to the Surviving Spouse.
(H) The Employer may also require additional collateral in order to
adequately secure the loan.
(I) A Participant's loan shall immediately become due and payable if
such Participant terminates employment for any reason or fails to make
a principal and/or interest payment as provided in the loan agreement.
If such Participant terminates employment, the Employer shall
immediately request payment of principal and interest on the loan. If
the Participant refuses payment following termination, the Employer
shall reduce the Participant's vested account balance by the remaining
principal and interest on his or her loan. If the Participant's vested
account balance is less than the amount due, the Employer shall take
whatever steps are necessary to collect the balance due directly from
the Participant. However, no foreclosure on the Participant's note or
attachment of the Participant's account balance will occur until a
distributable event occurs in the Plan.
(J) No loans will be made to Owner-Employees (as defined in paragraph
1.50) or Shareholder Employees (as defined in paragraph 1.74), unless
an exemption from the prohibited transactions rules is first obtained
from the Department of Labor.
(K) If a Participant requests a loan, the funds to be loaned will be
taken from the subaccount or subaccounts specified by the Participant
or, in the absence of such a specification, form the subaccounts in the
order specified in Section 6.10 pertaining to
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withdrawals. If specific assets of the Trust Fund are allocable to
individual Participants' Accounts, such assets equal in value to the
amount of the loan shall be sold at the direction of the Participant to
provide the funds to be loaned.
13.9 INSURANCE POLICIES
Unless otherwise specified in the Adoption Agreement, the insurance provisions
of this Section 13.9 shall not be applicable. If agreed upon by the Trustee and
approved by the Employer in the Adoption Agreement, Employees may elect the
purchase of life insurance policies under the Plan. If elected, the maximum
annual premium for a whole life policy shall not exceed 50% of the aggregate
cumulative Employer contributions allocated to the account of a Participant.
Whole life policies are policies with both nondecreasing death benefits and
nonincreasing premiums. The maximum annual premium for term contracts or
universal life policies and all other policies which are not whole life shall
not exceed 25% of aggregate Employer contributions allocated to the account of a
Participant. The maximum annual premiums for a Participant with both a whole
life and a term contract or universal life policies shall be limited to one-half
of the whole life premiums plus the term premium, but shall not exceed 25% of
the aggregate Employer contributions allocated to the account of a Participant.
It may also be elected to have policies purchased on behalf of a Participant's
spouse, their dependents, or any individual in whom the Participant has an
insurable interest. If any policy is maintained on the joint lives of a
Participant and another individual, it may not be maintained under the Plan
should the other individual predecease the Participant. Any policies purchased
under this Plan shall be held subject to the following rules:
(A) The Trustee shall be applicant and owner of any policies issued.
(B) All policies or contracts purchased shall be endorsed as
nontransferable, and must provide that proceeds will be payable to the
Trustee: however, the Trustee shall be required to pay over all
proceeds of the contracts to the Participant's Designated Beneficiary
in accordance with the distribution provisions of this Plan. Under no
circumstances shall the Trust retain any part of the proceeds.
(C) Each Participant shall be entitled to designate a beneficiary under
the terms of any contract issued; however, such designation will be
given to the Trustee which must be the named beneficiary on any policy.
Such designation shall remain in force, until revoked by the
Participant, by filing a new beneficiary form with the Trustee. A
Participant's Spouse will be the Designated Beneficiary of the proceeds
in all circumstances, unless a Qualified Election has been made in
accordance with paragraph 8.4. The beneficiary of a deceased
Participant shall receive, in addition to the proceeds of the
Participant's policy or policies, the amount credited to such
Participant's investment account.
(D) A Participant who is uninsurable or insurable at substandard rates
may elect to receive a reduced amount of insurance, if available, or
may waive the purchase of any insurance.
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(E) At the discretion of the Participant, any dividends or credits
earned on a life insurance contract shall either be allocated to the
Participant's account in the Fund, applied in reduction of any premiums
thereon, or if no premiums are due, applied to increase the proceeds of
the life insurance contract.
(F) If Employer contributions are inadequate to pay all premiums on all
insurance policies, the Trustee may, at the option of the Employer,
utilize other amounts remaining in each Participant's account to pay
the premiums on his or her respective policy or policies, allow the
policies to lapse, reduce the policies to a level at which they may be
maintained, or borrow against the policies on a prorated basis,
provided that the borrowing does not discriminate in favor of the
policies on the lives of Officers, Shareholders, and Highly Compensated
Employees.
(G) On retirement or termination of employment of a Participant, the
Employer shall direct the Trustee to cash surrender the Participant's
policy and credit the proceeds to his or her account for distribution
under the terms of the Plan. However, before so doing, the Trustee
shall first offer to distribute the policy to the Participant as a part
of the benefit distribution. If a Participant on whose life an
insurance policy is held under the Plan does not make a timely
direction regarding the policy under this Section (g), the Participant
shall be deemed to have directed that the policy be converted into cash
to be distributed in the manner in which the balance of the
Participant's account is to be distributed. All distributions resulting
from the application of this paragraph shall be subject to the Joint
and Survivor Annuity Rules of Article VIII, if applicable.
(H) The Employer shall be solely responsible for seeing that these
insurance provisions are administered properly and that if there is any
conflict between the provisions of this Plan and any insurance
contracts issued that the terms of this Plan will control.
ARTICLE XIV - TOP HEAVY PROVISIONS
14.1 APPLICABILITY OF RULES
If the Plan is or becomes Top-Heavy in any Plan Year beginning after 1983, the
provisions of this Article will supersede any conflicting provisions in the Plan
or Adoption Agreement.
14.2 MINIMUM CONTRIBUTION
Notwithstanding any other provision in the Employer's Plan, for any Plan Year in
which the Plan is Top-Heavy or Super Top-Heavy, the aggregate Employer
contributions and forfeitures allocated behalf of any Participant (without
regard to any Social Security contribution) under this Plan and any other
Defined Contribution Plan of the Employer shall be lesser of 3% of such
Participant's Compensation or the largest percentage of Employer contributions
and forfeitures, as a percentage of the Key Employee's annual Compensation
allocated on behalf of any Key Employee for that year.
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Each Participant who is employed by the Employer on the last day of the Plan
Year shall be entitled to receive an allocation of the Employer's minimum
contribution for such Plan Year. The minimum allocation applies, even though
under other Plan provisions the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year,
because the Participant fails to make Mandatory Contributions to the Plan, the
Participant's Compensation is less than a stated amount, or the Participant
fails to complete 1,000 Hours of Service (or such lesser number designated by
the Employer in the Adoption Agreement) during the Plan Year. A Paired
profit-sharing plan designated to provide the minimum Top Heavy contribution
must do so regardless of profits. An Employer may make the minimum Top-Heavy
contribution available to all Participants or just non-Key Employees.
For purposes of computing the minimum allocation, Compensation shall mean
Compensation as defined in the second paragraph of paragraph 1.12 of the Plan.
The Top-Heavy minimum contribution does not apply to any Participant to the
extent the Participant is covered under any other plan(s) of the Employer, and
the Employer has provided in Section 11 of the Adoption Agreement that the
minimum allocation or benefit requirements applicable to Top-Heavy Plans will be
met in the other plan(s).
If a Key Employee makes an Elective Deferral or has an allocation of Matching
Contributions made to his or her account, atop-Heavy minimum will be required
for Non-Key Employees who are Participants, however, neither Elective Deferrals
by nor Matching Contributions to Non-Key Employees may be taken into account for
purposes of satisfying the Top-Heavy minimum contribution requirement.
14.3 MINIMUM VESTING
For any Plan Year in which this Plan is Top-Heavy, the minimum vesting schedule
elected by the Employer in the Adoption Agreement will automatically apply to
the Plan. If the vesting schedule selected by the Employer in the Adoption
Agreement is less liberal than the allowable schedule, the schedule will
automatically be modified. If the vesting schedule under the Employer's Plan
shifts in or out of the Top-Heavy schedule for any Plan Year, such shift is an
amendment to the vesting schedule and the election in paragraph 9.8 of the Plan
applies. The minimum vesting schedule applies to all accrued benefits within the
meaning of Code Section 411(a)(7), except those attributable to Employee
contributions, including benefits accrued before the effective date of Code
Section 416 and benefits accrued before the Plan became Top-Heavy. Further, no
reduction in vested benefits may occur in the event the Plan's status as
Top-Heavy changes for any Plan Year. However, this paragraph does not apply to
the account balances of any Employee who does not have an Hour of Service after
the Plan initially becomes Top-Heavy, and such Employees account balance
attributable to Employer contributions and forfeitures will be determined
without regard to this paragraph.
14.4 LIMITATIONS ON ALLOCATIONS
In any Plan Year in which the Top-Heavy Ratio exceeds 90% (i.e., the Plan
becomes Super Top- Heavy), the denominators of the Defined Benefit Fraction (as
defined in paragraph 1.15) and
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Defined Contribution Fraction (as defined in paragraph 1.18) shall be computed
by using 100% of the dollar limitation instead of 125%.
ARTICLE XV - AMENDMENT AND TERMINATION
15.1 AMENDMENT BY SPONSOR
The Sponsor may amend any or all provisions of this Plan and Trust at any time
without obtaining the approval or consent of any Employer which has adopted this
Plan and Trust provided that no amendment shall authorize or permit any part of
the corpus or income of the Fund to be used for or diverted to purposes other
than for the exclusive benefit of Participants and their beneficiaries, or
eliminate an optional form of distribution. In the case of a mass- submitter
plan, the mass-submitter shall amend the Plan on behalf of the Sponsor.
15.2 AMENDMENT BY EMPLOYER
The Employer may amend any option in the Adoption Agreement, and may include
language as permitted in the Adoption Agreement,
(A) to satisfy Code Section 415, or
(B) to avoid duplication of minimums under Code Section 416, because of
the required aggregation of multiple plans.
The Employer may add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the Plan
to be treated as an individually designed plan for which the Employer must
obtain a separate determination letter.
If the Employer amends the Plan and Trust other than as provided above, the
Employer s Plan shall no longer participate in this Prototype Plan and will be
considered an individually designed plan.
15.3 TERMINATION
Employers shall have the right to terminate their Plans upon 60 days, notice in
writing to the Trustee. If the Plan is terminated, partially terminated, or if
there is a complete discontinuance of contributions under a profit-sharing plan
maintained by the Employer, all amounts credited to the accounts of Participants
shall vest and become nonforfeitable. In the event of a partial termination,
only those who are affected by such partial termination shall be fully vested.
In the event of termination, the Employer shall direct the Trustee with respect
to the distribution of accounts to or for the exclusive benefit of Participants
or their beneficiaries. The Trustee shall dispose of the Fund in accordance with
the written directions of the Plan Administrator, provided that no liquidation
of assets and payment of benefits (or provision therefor) shall actually be made
by the Trustee until after it is established by the Employer in a manner
satisfactory to the Trustee; that the applicable requirements, if any, of ERISA
and the Internal Revenue Code governing the termination of employee benefit
plans, have been or are being, complied with; or that appropriate
authorizations, waivers, exemptions, or variances have been, or are being,
obtained.
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15.4 QUALIFICATION OF EMPLOYER'S PLAN
If the adopting Employer fails to attain or retain Internal Revenue Service
qualification, such Employer's Plan shall no longer participate in this
Prototype Plan and will be considered an individually designed plan.
15.5 MERGERS AND CONSOLIDATIONS
(A) In the case of any merger or consolidation of the Employer's Plan
with, or transfer of assets or liabilities of the Employer's Plan to,
any other plan, Participants in the Employer's Plan shall be entitled
to receive benefits immediately after the merger, consolidation or
transfer which are equal to or greater than the benefits they would
have been entitled to receive immediately before the merger,
consolidation or transfer if the Plan had then terminated.
(B) Any corporation into which the Trustee or any successor trustee may
be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Trustee or any
successor trustee may be a party, or any Corporation to which all or
substantially all the trust business of the Trustee or any successor
trustee may be transferred, shall be the successor of such Trustee
without the filing of any instrument or performance of any further act,
before any court.
15.6 RESIGNATION AND REMOVAL
The Trustee may resign by written notice to the Employer which shall be
effective 60 days after delivery. The Employer may discontinue its participation
in this Prototype Plan and Trust effective upon 60 days, written notice to the
Sponsor. In such event the Employer shall, prior to the effective date thereof,
amend the Plan to eliminate any reference to this Prototype Plan end Trust and
appoint a successor trustee or arrange for another funding agent. The Trustee
shall deliver the Fund to its successor on the effective date of the resignation
or removal, or as soon thereafter as practicable, provided that this shall not
waive any lien the Trustee may have upon the Fund for its compensation or
expenses. If the Employer fails to amend the Plan and appoint a successor
trustee or other funding agent within the said 60 days, or such longer period as
the Trustee may specify in writing, the Plan shall be deemed individually
designed and the Employer shall be deemed the successor trustee. The Employer
must then obtain its own determination letter.
15.7 QUALIFICATION OF PROTOTYPE
The Sponsor intends that this Prototype Plan will meet the requirements of the
Code as a qualified Prototype Retirement Plan and Trust. Should the Commissioner
of Internal Revenue or any delegate of the Commissioner at any time determine
that the Plan and Trust fails to meet the requirements of the Code, the Sponsor
will amend the Plan and Trust to maintain its qualified status.
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ARTICLE XVI - GOVERNING LAW
Construction, validity and administration of the Prototype Plan and Trust, and
any Employer Plan and Trust as embodied in the Prototype document and
accompanying Adoption Agreement, shall be governed by Federal law to the extent
applicable and to the extent not applicable by the laws of the
State/Commonwealth in which the principal office of the Sponsor is located.
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INTERNAL REVENUE SERVICE
Plan Description: Prototype Non-standardized Profit Sharing Plan with CODA
FFN: 50296321903-001 Case: 9400380 EIN: 13-3408212
BPD: 03 Plan: 001 Letter Serial No: D256803b
PRUDENTIAL MUTUAL FUND MANAGEMENT INC.
1 SEAPORT PLAZA
NEW YORK, NY 10292
DEPARTMENT OF THE TREASURY
Washington, D.C. 20224
Person to Contact: Mr. Dua
Telephone Number: (202) 622-8380
Refer Reply to: CP:EP:Q:3
Date: 03/11/94
Dear Applicant:
In our opinion, the amendment to the form of the plan identified above does not
in and of itself adversely affect the plan's acceptability under Section 401 of
the Internal Revenue Code. This opinion relates only to the amendment to the
form of the plan. It is not an opinion as to the acceptability of any other
amendment or of the form of the plan as a whole, or as to the effect of other
Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one or
more employees who are covered by this plan, other than a specified paired
within the meaning of Section 7 of Rev. Proc. 89-9,1989-1 C.B. 780; or (2) after
December 31, 1985, the employer maintains a welfare benefit fund defined in Code
Section 419(e), which provides post retirement medical benefits allocated to
separate accounts for key employees as defined in Code section 419A(d)(3).
An employer that has adopted a standardized plan may not rely on this opinion
letter with respect to: (1) whether any amendment or series of amendments to the
plan satisfies the nondiscrimination requirements of section 1.401(a)(4)5(a) of
the regulations, except with respect to the plan amendments granting past
service that meet the safe harbor described in section 1.401(a)(4)-5(a)(5) and
are not part of a pattern of amendments that significantly discriminates in
favor of a highly compensated employees; or (2) whether the plan satisfies the
effective availability requirement of section 1.401(a)(4)-4(c) of the
regulations with respect to any benefits, right or feature.
An employer that has adopted a standardized plan as an amendment to a plan other
than a standardized plan may not rely on this opinion letter with respect to
whether a benefit, right or other feature that is prospectively eliminated
satisfies the current availability requirements of section 1.401(a)-4 of the
regulations.
The employer may request a determination (1) as to whether the plan, considered
with all related qualified plans and, if appropriate, welfare benefit funds,
satisfies the requirements of Code section 401(a)(16) as to limitations on
benefits and contributions in Code section 415; (2) regarding the
nondiscriminatory effect of grants of past service; and (3) with respect to
whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for purposes of section
401(a) of the code unless the terms of the plan, as adopted or amended, that
pertain to the requirements of sections 401(a)(4), 401(a)(5), 401(a)(17),
401(1), 401(b) and 401(s) of the Code, as amended by the Tax Reform Act of 1986
or subsequent legislation, (a) are made effective retroactively to the first day
of the first
<PAGE>
Prudential Mutual Fund Management Inc
FFN: 50296321903-001
Page 2
plan year beginning after December 31, 1988 (or such other date on which these
requirements first became effective with respect to this plan); or (b) are made
effective no later than the first day on which the employer is no longer
entitled, under regulations, to rely on a reasonable, good faith interpretation
of these requirements, and the prior provisions of the plan constitute such an
interpretation.
This letter with respect to the amendment to the form of the plan does no affect
the applicability to the plan of the continued, interim and extended reliance
provisions of section 13 and 17.03 of Rev. Proc. 89-9, 1989-1 C.B. 780. The
applicability of such provisions may be determined by reference to the initial
opinion letter issued with respect to the plan.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
Job Services
Chief Employee Plans Qualifications Branch
<PAGE>
INTERNAL REVENUE SERVICE
Plan Description: Prototype Non-standardized Profit Sharing Plan with CODA
FFN: 50296321903-001 Case: 9400380 EIN: 13-3408212
BPD: 03 Plan: 001 Letter Serial No: D256803b
PRUDENTIAL MUTUAL FUND MANAGEMENT INC.
1 SEAPORT PLAZA
NEW YORK, NY 10292
DEPARTMENT OF THE TREASURY
Washington, D.C. 20224
Person to Contact: Mr. Dua
Telephone Number: (202) 622-8380
Refer Reply to: CP:EP:Q:3
Date: 03/11/94
Dear Applicant:
In our opinion, the amendment to the form of the plan identified above does not
in and of itself adversely affect the plan's acceptability under Section 401 of
the Internal Revenue Code. This opinion relates only to the amendment to the
form of the plan. It is not an opinion as to the acceptability of any other
amendment or of the form of the plan as a whole, or as to the effect of other
Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
An employer who adopts the amended form of the plan after the date of the
amendment should apply for a determination letter by filing an application with
the Key District Director of the Internal Revenue on Form 5307, Short Form
Application for Determination for Employee Benefit Plan.
This letter with respect to the amendment to the form of the plan does not
affect the applicability to the plan of the continued, interim and extended
reliance provisions of sections 13 and 17.03 of Rev. Proc. 89-9, 1989-1 C.B.
780. The applicability of such provisions may be determined by reference to the
initial opinion letter issued with respect to the plan.
If you, the Sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plans' adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
Job Services
Chief Employees Plan Qualifications Branch
<PAGE>
EXHIBIT 10.6
PIONEER BANK DIRECTOR EMERITUS PLAN
<PAGE>
Exhibit 10.6
PIONEER BANK
DIRECTOR'S PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.0 Pioneer Bank hereby establishes this Plan upon the terms and conditions
hereinafter stated.
1.1 The Committee hereby accepts its appointment hereunder upon the terms
and conditions hereafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.0 The purpose of this Plan is to reward and retain Directors of experience and
ability in key positions of responsibility by providing such Directors with a
benefit upon their retirement from the Board, and as compensation for their past
services to the Bank and as an inventive to perform such services in the future.
2.1 As a condition of the receipt of benefits under this Plan, a Director
Emeritus shall, following his or her Retirement Date, (i) be available to advise
and consult with the management of the Bank, and may attend meetings at his or
her discretion; (ii) represent and promote the interests of the Bank in its
primary market area and, from time to time, provide management of the Bank with
advice on business opportunities that are consistent with the Bank's then
current business plan; (iii) at the request of the Board, serve on a committee
of the Board; (iv) refrain from business activities which are competitive with
or contrary to the interests of the Bank; and (v) accrue or be reimbursed for
expenses incurred during the course of their role as Director Emeritus with the
prior approval of the Board. Notwithstanding anything in the Plan to the
contrary, the Committee may, in its sole discretion, suspend the payments of
benefits to a Director Emeritus who fails to satisfy conditions (i) - (iv)
during any period when benefits are otherwise payable under the plan.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with initial capital
letter, shall have the meanings set forth below unless the context clearly
indicates otherwise. Wherever appropriate, the masculine pronoun shall include
the feminine pronoun and the singular shall include the plural.
"Bank" means Pioneer Bank, Baker City, Oregon.
1
<PAGE>
"Benefit Period" means the life of the Director.
"Board" means the Board of Directors of Pioneer Bank.
"Change in Control" means an event deemed to occur when (a) an offeror other
than the Company purchases shares of the common stock of the Company or the Bank
pursuant to a tender or exchange offer for such shares; (b) any person (as such
term is used in sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) is or becomes the beneficial owner, directly or indirectly, of securities
of the Company or the Bank representing 25% or more of the combined voting power
of the Company's or the Bank's then outstanding securities; (c) the membership
of the board of directors of the Company or the Bank changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Plan) do not constitute a majority of the board of directors
of the Company or the Bank at the end of such period; or (d) shareholders of the
Company or the Bank approve a merger, consolidation, sale or disposition of all
or substantially all of the Company's or the Bank's assets, or a plan of partial
or complete liquidation. A Change in Control shall not include the acquisition
of the Bank by the Company.
"Change in Control Payment" means, on any date, an amount equal to the present
value of eighty-four (84) months of the Monthly Director Compensation received
by a Director immediately prior to the effective date of the Change in Control.
Additionally, in the case of a Director Emeritus, a Change in Control payment
shall mean,on any date, an amount equal to the present value of eighty-four (84)
months of the Director Emeritus' benefit, determined according to Section 5.1
and Appendix A, received immediately prior to the effective day of the Change in
Control. For purposes of determining the discounted present value of any Change
in Control Payment, the discount rate shall be the applicable federal rate (as
published by the Internal Revenue Service) for an obligation of comparable
duration for the month in which the Change in Control Payment is made.
"Committee" means a committee appointed by the Board pursuant to Article IV
hereof.
"Company" shall mean any state-chartered corporation which acquires the Bank in
connection with a transaction described in 12 C.F.R. Part 563b.
"Director" means a member of the Board who is designated in Appendix A (attached
hereto) as a participant in the Plan.
"Director Emeritus" means a Director who terminates service on the Board on
a Retirement Date.
"Effective Date" shall mean February 25, 1997, the date of adoption of this Plan
by the Board.
2
<PAGE>
"Monthly Director Compensation" means, on any date, the monthly compensation
payable to a Director by the Bank (or its subsidiaries) for service as a member
of the Board, but excluding compensation in the form of stock options,
appreciation rights, restricted property or other special forms of remuneration.
Monthly Director Compensation shall include the additional compensation payable
to a Director who is also an employee of the Bank or the Company where such
compensation is included in such Director's regular employee compensation.
"Plan" means this Pioneer Bank Director's Plan.
"Retirement Date" means the earlier to occur of (i) the date on which a Director
terminates his or her service on the Board, other than by reason of his or her
Termination for Cause, on or after the date the Director has attained age
seventy (70) and completed at least ten (10) years of service as a member of the
Board; or (ii) the effective date of a Change in Control.
"Termination for Cause" means termination of service as a Director because of a
Director's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or a willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses).
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.1 Role and Powers of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of not less than two (2)
Directors and shall initially consist of the full Board of Directors. In the
absence at any time of a duly appointed Committee, the Plan shall be
administered by the Board. The Committee shall have all powers allocated to it
in this and other Sections of the Plan. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion to 1) interpret the Plan;
2) prescribe, amend, and rescind rules and regulations relating to the Plan; and
3) make other determinations necessary or advisable for the administration of
the Plan; provided, however, that each interpretation, rule, decision, or
determination of the Committee made pursuant to this section 4.1 shall be
subject to prior review and approval by the Board. The Committee shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. Subject to review and approval by the Board, the
interpretation and construction by the Committee of any provisions of the Plan
shall be final and binding. The Committee shall act by vote or written consent
of a majority of its members, and shall report its actions and decisions with
respect to the Plan to the Board at appropriate times, but in no event less than
one (1) time per calendar year.
4.2. Role of the Board. The members of the Committee shall be appointed or
approved by, and will serve at the pleasure of, the Board. The Board may in its
discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with
3
<PAGE>
respect to the Plan which the Committee is authorized to take, and may reverse
or override any action taken or decision made by the Committee under or with
respect to the Plan.
4.3 Limitation on Liability. No member of the Board or the Committee shall be
liable for any determination made in good faith with respect to the Plan or the
benefits payable hereunder. If a member of the Board or the Committee is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him or her in such
capacity under or with respect to the Plan, the Bank shall indemnify such member
against expenses (including attorney's fees), judgements, fines, and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in the best interest of the Bank and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
ARTICLE V
BENEFITS
5.1 Retirement Date. Subject to Section 5.3, beginning with the month next
following a Director's Retirement Date and continuing thereafter for the
applicable Benefit Period, there shall be paid to the Director Emeritus a
monthly benefit of sixty-five percent (65%), but not less than eight hundred
dollars ($800.00), of the Monthly Director Compensation received by a voting
member of the Board on such Retirement Date, payable in accordance with the
customary payment practices of the bank; provided, however, that in the case of
a Director Emeritus described in Section 5.6 of the Plan, the monthly benefit
shall be the amount specified in Appendix A (attached hereto) with respect to
such Director Emeritus.
5.2 Death Benefits. Upon the death of a Director Emeritus listed in Appendix A
(attached hereto) who is receiving benefits pursuant to Section 5.1 and Appendix
A, such payments shall continue to the Director Emeritus' surviving spouse until
the first to occur of (i) the first day of the month which is six (6) months
after the Director Emeritus' death; or (ii) the date of death of the Director
Emeritus' surviving spouse. In the event that a Director Emeritus' spouse
predeceases the Director Emeritus, the Bank shall have no obligation under
Sections 5.1 or 5.2 of this Plan in the event of the Director Emeritus'
subsequent death. Upon the death of an active Director, the Bank shall have no
further obligation, except as outlined in Section 5.3 of this Plan.
5.3 Change in Control. For purposes of this Plan, the effective date of a Change
in Control shall be deemed the Retirement Date of each Director then serving on
the Board. Within thirty (30) days of the effective date of a Change in Control,
each Director (or in the event of the Director's death prior to payment, the
Director's surviving spouse) shall receive a lump sum payment equal to the
applicable Change in Control Payment. Notwithstanding anything herein to the
contrary, a Director who dies within twelve (12) months of the effective date of
a Change in Control shall receive the same Change in Control Payment the
Director would have received had he or she been serving on the Board on such
date.
4
<PAGE>
Within thirty (30) days of the effective date of a Change in Control, each
person serving as a Director Emeritus immediately prior to such date (or, in the
event of the Director Emeritus' death prior to payment, the Director Emeritus'
surviving spouse) shall receive a lump sum payment equal to the applicable
Change in Control payment. Notwithstanding anything herein to the contrary,
there shall be payable to the surviving spouse of a Director Emeritus who dies
within twelve (12) months of the effective date of a Change in Control, the same
Change in Control Payment the Director Emeritus would have received had the
Director Emeritus been serving in such capacity on such date; provided, however,
that the Change in Control Payment shall be in lieu of benefits otherwise
payable under Section 5.2 and the Change in Control Payment shall be reduced by
any amount of any payments received by the Director Emeritus' surviving spouse
under Section 5.2 prior to the effective date of the Change in Control.
Upon receipt of a payment made pursuant to this Section 5.3, the Bank shall have
no further obligation to the Director Emeritus (or his or her surviving spouse)
under Section 5.1.
5.4 Source of Benefits. The benefits payable under the Plan shall constitute an
unfunded, unsecured promise by the Bank to provide such benefits in the future,
as and to the extent such benefits become payable, and no person shall, by
virtue of this Plan, have any interest in such assets (other than as an
unsecured creditor of the Bank).
5.5 Termination for Cause. Notwithstanding anything herein to the contrary, no
benefits shall be payable hereunder to a Director or his or her surviving spouse
in the event of the Director's Termination for Cause.
5.6 Transition. The Plan is intended as a formal statement of the policies of
the Board regarding Director Emeritus status as set forth in prior resolutions
of the Board. By adopting this Plan, it is the intention of the Board to
supersede all such prior resolutions relating to Director Emeritus status;
provided, however, that each person serving as a Director Emeritus of the Bank
as of the Effective Date and designated as such in Appendix A (attached hereto)
shall be treated as a Director Emeritus for all purposes under this Plan with
benefits payable in accordance with Sections 5.1 and 5.2, and Appendix A and,
provided further, that the Retirement Date of a Director Emeritus described in
this Section 5.6 shall be the date of the Director Emeritus' termination of
service as a member of the Board.
ARTICLE VI
ASSIGNMENT
6.1 Except as otherwise provided by this Plan, it is agreed that neither a
Director, Director Emeritus, nor his or her surviving spouse shall have any
right to commute, sell, assign, transfer, encumber, pledge, or otherwise convey
the right to receive benefits hereunder, which benefits and the rights thereto
are expressly declared to be nonassignable and nontransferable.
5
<PAGE>
ARTICLE VII
NO RETENTION OF SERVICES
7.1 This Plan shall not be deemed to constitute a contract, express or
implied, for future services by an Director.
ARTICLE VIII
RIGHTS OF THE DIRECTORS
8.1 The rights of a Director or Director Emeritus (or his or her surviving
spouse) under this Plan shall be solely those of an unsecured creditor of the
Bank.
ARTICLE IX
MISCELLANEOUS
9.1 Amendment and Termination of Plan. The Board may, by resolution, at any time
amend or terminate the Plan, provided that no such action shall adversely affect
any Director or his or her surviving spouse who has become entitled to receive
any benefits under the Plan, without such person's written consent.
9.2 Governing Law. The Plan shall be governed and construed under the laws of
the State of Oregon determined without regard to the choice of law principles
thereof.
9.3 Successor to the Bank. The Bank, or the Company acting on behalf of the
Bank, shall require any successor or assignee, whether direct or indirect, by
purchase, merger, consolidation, or otherwise, to all or substantially all the
business or assets of the Bank, expressly and unconditionally to assume and
agree to perform the Bank's obligation under this Agreement, in the same manner
and to the same extent that the Bank would be required to perform if no such
succession or assignment had taken place.
AS ADOPTED BY THE PIONEER BANK
BOARD OF DIRECTORS ON FEBRUARY 25, 1997
6
<PAGE>
PIONEER BANK
DIRECTOR RETIREMENT PLAN
APPENDIX A
For purposes of the Plan, the following members of the Board of Directors of
Pioneer Bank are designated as participants in the Plan as of February 25, 1997,
the Effective Date:
Edward H. Elms
Chuck Rouse
John Gentry
John Lienkaemper
Albert H. Durgan
Steven Whittemore
*Ivan P. Patrick, Director Emeritus
*Carl Davis, Director Emeritus
*W. S. Thomas, Director Emeritus
*Donald R. Guyer, Director Emeritus
*The Director's Emeritus listed above in this Appendix A will receive a monthly
benefit of $800.00 for the duration of the Benefit Period (life of the
Director).
**Bruce Kirkpatrick, Director Emeritus
**The Director's Emeritus listed in this Appendix A will receive a monthly
benefit of $900.00 from January 1, 1997 through December 31, 1997. Effective
January 1, 1998, the Director Emeritus will receive a monthly benefit of $800.00
for the duration of the Benefit Period (life of the Director).
The benefits outlined in the Plan with regard to current Director's Emeritus
listed above in this Appendix A shall constitute all benefits owing and payable
to the Director's Emeritus.
7
<PAGE>
<PAGE>
EXHIBIT 16
LETTER REGARDING CHANGE IN ACCOUNTANTS
[COOPERS & LYBRAND LETTERHEAD]
August 6, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the disclosures made by Oregon Trial Financial Corp. contained in
the Form S-1, File no. 333-30051, under the caption "Change in Accountants." We
agree with the statements concerning our Firm in such Form S-1.
Very truly yours,
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
EXHIBIT 23.1
CONSENT OF DELOITTE & TOUCHE LLP
<PAGE>
Deloitte &
Touche LLP
[Logo] ----------------------------------------------------
Suite 3900 Telephone: (503) 222-1341
111 S.W. Fifth Avenue Facsimile: (503) 224-2172
Portland, Oregon 97204-3698
Deloitte & Touche LLP Letterhead
INDEPENDENT AUDITORS' CONSENT
The Boards of Directors
Oregon Trail Financial Corp.
Pioneer Bank, a Federal Savings Bank
Baker City, Oregon
We consent to the use in this Amendment No. 1 to the Registration Statement on
Form S-1 on behalf of Oregon Trail Financial Corp. of our report dated May 22,
1997, relating to the consolidated financial statements of Pioneer Bank, a
Federal Savings Bank, and subsidiaries as of March 31, 1997 and for the
nine-month period then ended, which appear in such amended Registration
Statement. We also consent to the reference to us under the headings "Legal and
Tax Opinions" and "Experts" contained in the Prospectus, which is a part of such
amended Registration Statement.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Portland, Oregon
August 6, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF COOPERS & LYBRAND LLP
<PAGE>
Coopers & Lybrand LLP Letterhead
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Pre-Effective Amendment No. 1 to the Registration
Statement of Oregon Trail Financial Corp. on Form S-1 of our report dated August
2, 1996, on our audits of the consolidated financial statements of Pioneer Bank,
a Federal Savings Bank, and subsidiaries as of June 30, 1996 and for the years
ended June 30, 1996 and 1995. We also consent to the reference to our firm under
the caption "Experts."
/s/Coopers & Lybrand LLP
COOPERS & LYBRAND LLP
Boise, Idaho
August 6, 1997
<PAGE>
EXHIBIT 99.4
APPRAISAL REPORT OF KELLER & COMPANY, INC.
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
Prepared for
Pioneer Bank,
A Federal Savings Bank
and
Oregon Trail Financial Corp.
Baker City, Oregon
As Of:
June 4, 1997
Prepared By:
Keller & Company, Inc.
555 Metro Place North
Dublin, Ohio 43017
(614) 766-1426
KELLER & COMPANY
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
Prepared for
Pioneer Bank,
A Federal Savings Bank
and
Oregon Trail Financial Corp.
Baker City, Oregon
As Of:
June 4, 1997
Prepared By:
Michael R. Keller
President
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION 1
I. Description of Pioneer Bank, a Federal Savings Bank
General 4
Performance Overview 8
Income and Expense 10
Yields and Costs 16
Interest Rate Sensitivity 17
Lending Activities 19
Non-Performing Assets 23
Investments 25
Deposit Activities 25
Borrowings 26
Subsidiaries 27
Office Properties 27
Management 27
II. Description of Primary Market Area 29
III. Comparable Group Selection
Introduction 35
General Parameters
Merger/Acquisition 36
Mutual Holding Companies 36
Trading Exchange 37
IPO Date 38
Geographic Location 38
Asset Size 39
Balance Sheet Parameters
Introduction 40
Cash and Investments to Assets 40
Mortgage-Backed Securities to Assets 41
One- to Four-Family Loans to Assets 42
Total Net Loans to Assets 42
Total Net Loans and Mortgage-Backed Securities to Assets 43
Borrowed Funds to Assets 43
Equity to Assets 44
Performance Parameters
Introduction 44
<PAGE>
TABLE OF CONTENTS (cont.)
PAGE
III. Comparable Group Selection (cont.)
Performance Parameters (cont.)
Return on Average Assets 45
Return on Average Equity 45
Net Interest Margin 46
Operating Expenses to Assets 46
Noninterest Income to Assets 46
Asset Quality Parameters
Introduction 47
Nonperforming Assets to Asset Ratio 47
Repossessed Assets to Assets 48
Loans Loss Reserves to Assets 48
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 61
Dividend Payments 62
Subscription Interest 63
Liquidity of Stock 64
Management 64
Marketing of the Issue 65
VI. Valuation Methods 66
Price to Book Value Ratio Method 67
Price to Earnings Method 68
Price to Net Assets Method 69
Valuation Conclusion 71
<PAGE>
LIST OF EXHIBITS
NUMERICAL PAGE
EXHIBITS
1 Consolidated Statement of Financial
Condition at March 31, 1997 and
at June 30, 1996 72
2 Consolidated Statement of Financial
Condition at June 30, 1992 through 1995 73
3 Consolidated Statements of Income for
the Nine Months Ended March 31, 1997
and the Year Ended June 30, 1996 74
4 Consolidated Statements of Income for
the Years Ended June 30, 1993 through 1995 75
5 Selected Consolidated Financial Condition Data 76
6 Income and Expense Trends 77
7 Normalized Earnings Trend 78
8 Performance Indicators 79
9 Volume/Rate Analysis 80
10 Yield and Cost Trends 81
11 Interest Rate Sensitivity of Net Portfolio Value 82
12 Loan Portfolio Composition 83
13 Loan Maturity Schedule 84
14 Loan Originations 85
15 Nonperforming Assets 86
16 Classified Assets 87
17 Allowance for Loan Losses 88
18 Investment Portfolio Composition 89
19 Mix of Deposits 90
20 Deposit Activity 91
21 Borrowed Funds Activity 92
22 Offices of Pioneer Bank 93
23 List of Key Officers and Directors 94
24 Key Demographic Data and Trends 95
25 Key Housing Data 96
26 Major Sources of Employment by Industry Group 97
27 Unemployment Rates 98
28 Market Share of Deposits 99
29 National Interest Rates by Quarter 100
30 Thrift Stock Prices and Pricing Ratios 101
<PAGE>
LIST OF EXHIBITS (cont.)
NUMERICAL PAGE
EXHIBITS
31 Key Financial Data and Ratios 112
32 Recently Converted Thrift Institutions 124
33 Acquisitions and Pending Acquisitions 125
34 Thrift Stock Prices and Pricing Ratios -
Mutual Holding Companies 126
35 Key Financial Data and Ratios -
Mutual Holding Companies 127
36 Balance Sheets Parameters -
Comparable Group Selection 128
37 Operating Performance and Asset Quality Parameters -
Comparable Group Selection 131
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 Valuation Analysis and Conclusions 144
49 Market Pricings and Financial Ratios - Stock Price
Comparable Group 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 151
B RB 20 Certification 154
C Affidavit of Independence 155
<PAGE>
Keller & Company, Inc.
555 Metro Place North
Suite 524
Dublin, Ohio 43017
(614) 766-1426
(614) 766-1459 FAX
June 20, 1997
Board of Directors
Pioneer Bank, A Federal Savings Bank
2055 First Street
Baker City, OR 97814
Gentlemen:
We hereby submit an independent appraisal of the pro forma market value of the
to-be-issued stock of Oregon Trail Financial Corp. (the "Corporation"), which is
the newly formed holding company of Pioneer Bank, A Federal Savings Bank, Baker
City, Oregon ("Pioneer" 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 Pioneer
and the material provided by the independent auditor, Deloitte & Touche LLP,
Portland, Oregon, 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
Pioneer Bank, A Federal Savings Bank
June 20, 1997
Page 2
In the preparation of this appraisal, we held discussions with the management of
Pioneer, with the law firm of Breyer & Aguggia, Washington, DC, the Bank's
conversion counsel, and with Deloitte & Touche 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 June 4, 1997, the pro forma market value or
appraised value of the Corporation was $33,100,000. Further, a range for this
valuation is from a minimum of $28,135,000 to a maximum of $38,065,000, with a
super-maximum of $43,774,750.
Very truly yours,
KELLER & COMPANY, INC.
/s/Michael R. Keller
Michael R. Keller
President
<PAGE>
INTRODUCTION
Keller & Company, Inc., is an independent appraisal firm for financial
institutions, and prepared this Conversion Appraisal Report ("Report") to
provide the pro forma market value of the to-be-issued common stock of Oregon
Trail Financial Corp. (the "Corporation"), an Oregon corporation, formed as a
holding company to own all of the to-be-issued shares of common stock of Pioneer
Bank, a Federal Savings Bank, Baker City, Oregon, ("Pioneer" 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 and loan association to a
federally chartered stock savings and loan association. 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, Breyer & Aguggia, Washington, D.C.
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 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
1
<PAGE>
Introduction (cont.)
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, 1993 through 1996,
and March 31, 1997, and discussed them with Pioneer's management, with Pioneer's
independent auditors, KMPG Peat Marwick, Billings, Oregon. Pioneer changed its
audit year from June 30 to March 31 subsequent to June 30, 1996. 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 Pioneer's home office and numerous branch offices and have
traveled the surrounding area. We have studied the economic and demographic
characteristics of the primary market area and analyzed the Bank's primary
market area relative to Oregon and the United States. We have also examined the
competitive savings and loan environment within which Pioneer 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 Pioneer 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 PIONEER BANK, A FEDERAL SAVINGS BANK
GENERAL
Pioneer Bank, a Federal Savings Bank, Baker City, Oregon, was chartered in
1901 as an Oregon mutual savings and loan association with the name East Oregon
Building and Loan Association. The Bank converted to a federal mutual savings
and loan association in 1934, changing its name to East Oregon Federal Savings
and Loan Association. In 1952, the Bank changed its name to Pioneer Federal
Savings and Loan Association, which subsequently changed in 1991 to its current
name, Pioneer Bank, a Federal Savings Bank.
Pioneer conducts its business from its home office in Baker City, Oregon,
and its six branch offices, one in Ontario, John Day, Burns, Enterprise and two
branches in La Grande. The Bank will be opening a new branch in Island City and
then closing one of its branches in La Grande. The Bank's primary market area
includes those regions surrounding its offices in Baker, Grant, Harney, Malheur,
Union, Wallowa and Wheeler Counties in Oregon and Payette and Washington
Counties in Idaho. Pioneer's 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").
Pioneer is a member of the Federal Home Loan Bank (the "FHLB") of Seattle and is
regulated by the OTS, and by the FDIC. As of March 31, 1997, Pioneer had assets
of $204,213 deposits of $179,158 and equity of $21,026,000.
Pioneer is a community-oriented institution which has been principally
engaged in the business of serving the financial needs of the public in its
local communities and throughout its market area. Pioneer has been historically
actively involved in the origination of residential mortgage loans for the
purchase of one- to four-family dwellings, comprising 52.9 percent of its loan
originations during the fiscal year ended June 30, 1996, excluding construction
loans, and 46.4 percent of its loan originations during the fiscal year ended
June 30, 1995. The Bank has also been active in the origination of
4
<PAGE>
General (cont.)
consumer loans, which represented 23.2 percent of total originations in fiscal
year 1996 and 27.7 percent in fiscal year 1995. For the nine months ended March
31, 1997, one-to four-family loans represented a smaller 30.7 percent of total
originations with consumer loans representing 31.4 percent and commercial
business loans representing 29.8 percent. At March 31, 1997, 72.0 percent of its
gross loans consisted of residential real estate loans on one- to four-family
dwellings, not including residential construction loans, compared to a larger
73.3 percent at June 30, 1993, with the primary source of its funds being retail
deposits from residents in its local communities. The Bank is also an originator
of multifamily loans, commercial real estate loans, construction and land loans
and also offers various consumer loans, commercial business loans and
agricultural loans. Consumer loans include automobile loans, credit card loans,
loans on savings accounts, home equity and second mortgage loans, and secured
and unsecured loans. Consumer loans represented a strong 18.0 percent share of
the Bank's total loans at March 31, 1997.
The Bank had $23.6 million, or 11.5 percent of its assets in cash and
investments including FHLB stock. The Bank had an additional $35.1 million, or
17.2 percent of its assets, in mortgage-backed securities, with the combined
total of cash and investment securities, mortgage-backed securities and
interest-bearing deposits being $58.7 million or 28.7 percent of assets.
Deposits, FHLB advances and retained earnings have been the sources of funds for
the Bank's lending and investment activities.
The management of Pioneer 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. Pioneer
also recognizes the need and importance of attaining a competitive net interest
margin.
5
<PAGE>
General (cont.)
The Bank's gross amount of stock to be sold in the conversion will be
$33,100,000 or 3,310,000 shares at $10 per share based on the midpoint of the
appraised value, with net conversion proceeds of $32,216,000 reflecting
conversion expenses of $884,000. The actual cash proceeds to the Bank of $16.1
million will represent fifty percent of the net conversion proceeds, including
the ESOP of $2,648,000, and will be invested in consumer loans, commercial
business loans and agricultural 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 initially invest in short- and
intermediate-term government securities.
Pioneer has seen minimal deposit growth over the past five fiscal periods
with deposits increasing only 2.0 percent from June 30, 1993, to March 31, 1997,
or an average of 0.5 percent per year. The Bank anticipates very modest growth
in the future with an actual decrease in deposits as a result of the conversion
due to depositors withdrawing savings to purchase stock. The Bank has focused on
increasing its loan portfolio during the past five fiscal periods, while
decreasing its level of investments and mortgage-backed securities, monitoring
its earnings and increasing its capital to assets ratio. Equity to assets
increased from 6.71 percent of assets at June 30, 1993, to 10.34 percent at
March 31, 1997.
Pioneer's primary lending strategy has been to originate and retain both
adjustable-rate and fixed-rate residential mortgage loans combined with a
moderate level of multifamily loans, commercial real estate loans, consumer
loans, commercial business loans and agricultural loans.
Pioneer's share of one- to four-family mortgage loans has decreased
modestly from 73.3 percent of gross loans at June 30, 1993, to 72.0 percent as
of March 31, 1997. Multifamily loans, decreased from 1.4 percent of gross loans
at June 30, 1993, to 1.3 percent at March 31, 1997. Commercial real estate loans
decreased from 3.5 percent of
6
<PAGE>
General (cont.)
gross loans at June 30, 1993, to 3.4 percent at Mach 31, 1997. The Bank's share
of consumer loans also witnessed a decrease from 18.5 percent at June 30, 1993
to 18.0 percent at March 31, 1997. The decreases in these loans categories were
offset by the Bank's increase in commercial business loans from 1.2 percent at
June 30, 1993, to 2.9 percent at March 31, 1997. Further, the Bank introduced
agricultural loans in fiscal 1997, which represented 1.7 percent of gross loans
at March 31, 1997, compared to zero at June 30, 1993.
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 the resultant higher levels of allowances currently
maintained in the industry. At June 30, 1993, Pioneer had $506,000 in its loan
loss allowance or 0.50 percent of gross loans, which increased to $725,000 and
represented a similar 0.51 percent of gross loans outstanding at March 31, 1997.
Interest income from loans and investments has been the basis of earnings
with the net interest income being the key determinant of net earnings. With a
dependence on net interest margin for earnings, current management will focus on
strengthening 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
Pioneer's financial position over the past five fiscal periods ended June
30, 1993, through March 31, 1997, is highlighted through the use of selected
financial data in Exhibit 5. Pioneer has focused on strengthening its equity
position, controlling its overhead ratio, increasing its loan levels, and
maintaining its net interest margin. Pioneer has experienced a modest rise in
assets from June 30, 1993 to March 31, 1997, a smaller rate of increase in
deposits with an average increase in equity over the past five fiscal years. Due
to the Bank's modest growth, the resultant impact has been a moderate increase
in the Bank's equity to assets ratio from June 30, 1993 to March 31, 1997.
Pioneer witnessed a total increase in assets of $10.9 million or 5.6
percent for the period of June 30, 1993, to March 31, 1997, representing an
average annual increase in assets of 1.5 percent. For the nine months ended
March 31, 1997, assets increased $756,000 or 0.4 percent. Of those fiscal
periods, the Bank experienced its largest dollar rise in assets of $8.7 million
in fiscal year 1995, which represented a 4.4 percent increase in assets funded
primarily by a rise in borrowed funds. This increase was succeeded by a $1.9
million or 0.9 percent decrease in assets in fiscal year 1996.
The Bank's net loan portfolio, including mortgage loans, consumer loans,
commercial business loans and agricultural loans increased from $97.6 million at
June 30, 1993, to $138.9 million at March 31, 1997, and represented a total
increase of $41.3 million, or 42.3 percent. The average annual increase during
that period was 11.28 percent. That increase was primarily the result of higher
levels of loan originations of one-to four-family loans, consumer loans and
commercial business loans. For the fiscal period ended March 31, 1997, loans
increased $6.5 million or 4.9 percent.
Pioneer has pursued obtaining funds through deposit growth in accordance
with the demand for loans and has also made use of FHLB advances during the past
five fiscal periods. The Bank's competitive rates for savings in its local
market in conjunction with its focus on service have been the sources of retail
deposits. Deposits increased a modest
8
<PAGE>
Performance Overview (cont.)
0.9 percent from 1993 to 1994, followed by a 2.6 percent decrease in fiscal year
1995, a modest increase of 2.3 percent in fiscal 1996, and a 1.4 percent
increase in fiscal 1997 with an average annual rate of increase of 0.5 percent
from June 30, 1993, to March 31, 1997. The Bank's strongest fiscal year deposit
growth was in fiscal year 1996, when deposits increased $4.1 million or 2.3
percent.
Pioneer has been able to increase its equity each fiscal year from 1993
through 1997. At June 30, 1993, the Bank had equity (GAAP basis) of $13.0
million representing a 6.71 percent equity to assets ratio, increasing to $21.0
million at March 31, 1997, and representing a 10.30 percent equity to assets
ratio. The moderate rise in the equity to assets ratio is the result of the
Bank's steady earnings performance in 1993 through 1997 combined with a modest
rise in assets. Equity increased 62.2 percent from June 30, 1993, through March
31, 1997, representing an average annual increase of 16.6 percent.
9
<PAGE>
INCOME AND EXPENSE
Exhibit 6 presents selected operating data for Pioneer, reflecting the
Bank's income and expense trends. This table provides selected audited income
and expense figures in dollars for the fiscal periods ended June 30, 1993
through 1996 and for the nine months ended March 31, 1996 and 1997.
Pioneer has witnessed an increase in its dollar level of interest income
from June 30, 1993, through March 31, 1997, ranging from a high of $16.0 million
in 1996 to a low of $14.6 million in 1994, and with a three year increase from
1993 to 1996 of 5.4 percent, or an average increase of 1.8 percent per year.
This overall trend was a combination of a modest decrease from 1993 to 1994
followed by a modest increase in 1995 and then a moderate increase in 1996 and
basically no change in the nine months ended March 31, 1997, annualized. In
fiscal year 1996, interest income increased $1.2 million to $16.0 million. In
the nine months ended March 31, 1997, interest income was $12.0 million or
similar to the $12.0 million in the nine months ended March 31, 1996, and
representing $16.0 million, annualized.
The Bank's interest expense experienced a similar trend from fiscal year
1993 to 1996. Interest expense decreased $1,115,000, or 14.6 percent, from 1993
to 1994, compared to a decrease in interest income of $571,000, or 3.8 percent,
for the same time period. Interest expense then increased $549,000 or 8.4
percent from 1994 to 1995, compared to an increase in interest income of
$186,000 or 1.3 percent. Such increase in interest income was more than offset
by the increase in interest expense, resulting in a moderate decrease in annual
net interest income to $7,724,000 for the fiscal year ended June 30, 1995, and a
decrease in net interest margin. Interest expense continued to increase in
fiscal 1996 by $974,000, or 13.8 percent, compared to a $1,205,000 increase in
interest income, resulting in a rise in net interest income. Net interest income
increased from $7,543,000 in 1993 to its highest level of $8,087,000 in 1994,
and then decreased slightly
10
<PAGE>
Income and Expense (cont.)
to $7,955,000 in 1996. For the nine months ended March 31, 1997, net interest
income was $6,477,000 or $8,636,000, annualized, and representing an increase
from fiscal year 1996.
The Bank has made provisions for loan losses in four of the past five
fiscal periods of 1993 through 1997 with a credit recognized in 1994. The
amounts of those provisions were determined in recognition of the Bank's level
of increased lending activity, greater focus on higher risk consumer and
commercial business loans including agricultural loans, nonperforming assets,
charge-offs and repossessed assets and current industry norms. The loan loss
provisions were $175,000 in 1993, $67,000 in 1994, $115,000 in 1996 and $216,000
in 1997 with a credit of $90,000 in 1994. The impact of these loan loss
provisions has been to provide Pioneer with a general valuation allowance of
$725,000 at March 31, 1997, or 0.52 percent of gross loans.
Total other income or noninterest income indicated noticeable volatility
in fiscal periods 1993 to 1997, with an overall declining trend from 1993 to
1996. The Bank indicated higher levels of noninterest income in fiscal years
1993 and 1995. The highest level of noninterest income was in fiscal year 1995
at $1,141,000 or 0.56 percent of assets, and the lowest level at $661,000 was in
the nine months ended March 31, 1997, representing 0.32 percent of assets. The
Bank's higher levels of noninterest income are the result of gains from the sale
of securities in 1995 and higher loan origination fees recognized in 1993. The
decrease in noninterest income from 1993 to 1996 was due almost entirely to the
loan origination fees no longer being recognized in other income. The average
noninterest income level for the past five fiscal periods was $833,600 or 0.42
percent of average assets using actual noninterest income. Noninterest income
was 0.35 percent in 1996 and 0.43 percent for the nine months ended March 31,
1997, annualized. Noninterest income consists primarily of fees and service
charges.
The Bank's general and administrative expenses or noninterest expenses
increased from $4,507,000 for the fiscal year of 1993 to $5,009,000 for the
fiscal year ended June
11
<PAGE>
Income and Expense (cont.)
30, 1996. Noninterest expenses were $5,075,000 for the nine months ended March
31, 1997, which included the $1.1 million one-time SAIF assessment recognized as
of September 30, 1996. Excluding the one-time SAIF assessment, noninterest
expenses were $3,975,000 for the nine months ended March 31, 1997, or $5,300,000
on an annualized basis. The dollar increase in noninterest expenses was $502,000
from 1993 to 1996, representing an average annual increase of $167,333 or 3.5
percent. The average annual increase in other expenses was due to the Bank's
normal rise in overhead expenses. On a percent of assets basis, operating
expenses increased from a low 2.34 percent of assets for the fiscal year ended
June 30, 1994, to a high of 2.50 percent for the nine months ended March 31,
1997, which was similar to the Bank's ratio in fiscal 1995 of 2.49 percent which
are both higher than current industry averages of approximately 2.29 percent.
When one excludes the one-time SAIF assessment, the noninterest expense to
average assets ratio decreases to 2.30 percent for the nine months ended March
31, 1997, annualized.
The net earnings position of Pioneer has indicated profitable performance
in each of the past four fiscal years ended June 30, 1993 through 1996 and for
the nine months ended March 31, 1997. The annual net income figures for the past
five fiscal periods of 1993, 1994, 1995, 1996 and 1997 have been $2,358,000,
$2,647,000, $2,259,000, $2,179,000 and $1,098,000 representing returns on
average assets of 1.24 percent, 1.35 percent, 1.12 percent, 1.06 percent and
0.78 percent, respectively. The average return on assets for the past five
fiscal periods was 1.11 percent.
Exhibit 7 provides the Bank's normalized earnings or core earnings for the
twelve months ended March 31, 1997 and for the fiscal years 1995 and 1996. The
Bank's normalized earnings eliminate any nonrecurring income and expense items.
There was no adjustment in 1996 but a downward adjustment in 1995 to eliminate a
$280,000 gain on the sale of securities. For the twelve months ended March 31,
1997, there was an upward adjustment of $1,146,000 to adjust for the one-time
SAIF assessment.
12
<PAGE>
Income and Expense (cont.)
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 1.24 percent
in fiscal year 1993 to its highest level of 1.35 percent in fiscal year 1994,
decreasing to 1.12 percent in fiscal year 1995, then down to 1.06 percent in
1996 and to its lowest level of 0.72 percent in the nine months ended March 31,
1997, due to the impact of the one-time SAIF assessment. Excluding the one-time
SAIF assessment, the Bank's return on average assets increases to 1.16 percent
for the nine months ended March 31, 1997, annualized.
The Bank's average net interest rate spread strengthened from 3.87 percent
in fiscal year 1993 to 3.95 percent in fiscal year 1994, then declined during
the next two fiscal years to 3.56 percent in 1996, its lowest level over the
past four years. For the nine months ended March 31, 1997, net interest rate
spread increased to 3.90 percent. The Bank's net interest margin indicated a
similar trend, increasing from 4.07 percent in fiscal year 1993 to 4.22 percent
in fiscal year 1994, then decreasing to 3.94 percent in fiscal 1995, but then
increasing to 3.97 percent for the fiscal year 1996. For the nine months ended
March 31, 1997, the Bank's net interest margin continued to increase to 4.40
percent. Pioneer's net interest rate spread increased 8 basis points in 1994 to
3.95 percent from 3.87 percent in 1993 and then decreased 34 basis points in
1995 to 3.61 percent as the result of a decrease in yield. Net interest rate
spread decreased another 5 basis points to 3.56 percent for fiscal year 1996 and
then increased 34 basis points to 3.90 percent for the nine months ended March
31, 1997. The Bank's net interest margin followed a basically similar trend,
increasing 15 basis points to 4.22 percent in 1994 and then decreasing 28 basis
points to 3.94 percent in 1995. Net interest margin then increased 3 basis
points to 3.97 percent in 1996 and continued to increase another 43 basis points
to 4.40 percent for the nine months ended March 31, 1997.
The Bank's return on average equity decreased from 1993 through 1996 and
continued to decrease in the nine months ended March 31, 1997. The return on
average equity decreased from 20.0 percent in 1993, to 18.57 percent in fiscal
year 1994, then
13
<PAGE>
Income and Expense (cont.)
down to 13.59 percent in fiscal year 1995. The return on equity decreased to
11.40 percent in fiscal year 1996, and decreased further to 7.09 percent for the
nine months ended March 31, 1997.
Pioneer's ratio of interest-earning assets to interest-bearing liabilities
increased gradually from 104.88 percent at June 30, 1993, to 110.64 percent at
June 30, 1996 and then to 113.20 percent at March 31, 1997.
Another key noninterest expense ratio reflecting efficiency of operation
is the ratio of noninterest expenses to net interest income plus noninterest
income referred to as the "efficiency ratio". The industry norm is 60.0 percent.
The Bank has been characterized with a higher level of efficiency over the past
four years reflected in its lower efficiency ratio, which increased from 54.07
percent in 1993 to 58.58 percent in 1996. The efficiency ratio increased to
73.31 percent for the nine months ended March 31, 1997, due to the impact of the
one-time SAIF assessment and decreases to 55.04 percent when one excludes the
one-time SAIF assessment.
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. Pioneer witnessed a minimal change in its nonperforming asset
ratio from June 30, 1993 to March 31, 1997. Nonperforming assets consist of
loans delinquent 90 days or more, nonaccruing loans and repossessed assets. The
ratio of nonperforming assets to total assets was 0.07 percent at June 30, 1993,
and decreased to 0.03 percent at June 30, 1994. The ratio then increased to 0.10
percent in 1996, and remained at 0.10 percent at March 31, 1997. The Bank's
allowance for loan losses was 389.23 percent of nonperforming loans at June 30,
1993, and a similar but lower 381.58 percent at March 31, 1997. As a percentage
of gross loans, Pioneer's allowance for loan losses was 0.52 percent in 1993,
0.36 percent in 1994, 0.37 percent in 1995, 0.46 percent in 1996 and 0.52
percent at March 31, 1997.
14
<PAGE>
Income and Expense (cont.)
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 decreased
$402,000, due to an increase in interest expense of $590,000 reduced by a
$188,000 increase in interest income. The increase in interest income was due to
an increase due to a change in volume of $973,000 reduced by decreases due to
rate of $697,000, and due to both rate and volume of $88,000. The increase in
interest expense was due to an increase due to rate of $264,000 accented by
increases due to a change in volume of $70,000, and due to both rate and volume
of $256,000.
In fiscal year 1996, net interest income increased $238,000, due to a
$1,206,000 increase in interest income partially offset by an $968,000 increase
in interest expense. The increase in interest income was due to a $357,000
increase due to volume accented by a $30,000 increase due to rate and a $32,000
increase due to a combination of rate and volume. The increase in interest
expense was due to a $254,000 increase due to volume accented by a $630,000
increase due to rate and an additional $84,000 due to both rate and volume.
In the nine months ended March 31, 1997, net interest income increased
$646,000 due to an $87,000 increase in interest income accented by a $559,000
decrease in interest expense. The increase in interest income was attributable
to a $150,000 increase due to rate and a $14,000 increase due to both rate and
volume reduced by a $77,000 decrease due to volume. The decrease in interest
expense was due to a $326,000 decrease due to rate accented by a $321,000
decrease due to volume but partially offset by an $88,000 increase due to rate
and volume.
15
<PAGE>
YIELDS AND COSTS
The overview of yield and cost trends for the years ended June 30, 1995
and 1996, for 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.
Pioneer's weighted average yield on its loans receivable increased 49
basis points from fiscal year 1995 to 1996, from 8.16 percent to 8.65 percent,
then increased 10 basis points to 8.75 percent for the nine months ended March
31, 1997, and increased another 2 basis points to 8.77 percent at March 31,
1997. The yield on mortgage-backed securities increased 28 basis points from
fiscal year 1995 to 1996 from 7.04 percent to 7.32 percent then increased 10
basis points to 7.42 percent for the nine months ended March 31, 1997, and then
decreased 14 basis points to 7.28 percent at March 31, 1997. The yield on
investment securities increased 90 basis points from 6.09 percent in 1995 to
6.99 percent in 1996 and then decreased to 6.67 percent for the nine months
ended March 31, 1997, and decreased another 13 basis points to 6.54 percent at
March 31, 1997. FHLB stock indicated an increase in its yield of 129 basis
points from 6.10 percent in 1995 to 7.39 percent in 1996 and then increased to
7.69 percent for the nine months ended March 31, 1997. The combined weighted
average yield on all interest-earning assets increased 46 basis points to 8.02
percent from 1995 to 1996. The yield on interest-earning assets then increased
15 basis points to 8.17 percent for the nine months ended March 31, 1997, before
decreasing to 8.11 percent at March 31, 1997.
Pioneer's weighted average cost of interest-bearing liabilities increased
51 basis points to 4.46 percent from fiscal year 1995 to 1996, which was greater
than the Bank's 46 basis point increase in yield, resulting in the decline in
the Bank's interest rate spread of 5 basis points from 3.61 percent to 3.56
percent from 1995 to 1996. The Bank's average cost of interest-bearing
liabilities then decreased for the nine months ended March 31, 1997 by 19 basis
points to 4.27 percent compared to a 15 basis point increase in yield on
interest-earning assets. The result was an increase in the Bank's interest rate
spread of 34 basis points to 3.90 percent for the nine months ended March 31,
1997. The Bank's
16
<PAGE>
Yields and Costs (cont.)
cost of funds continued to decrease to 4.25 percent at March 31, 1997, or 2
basis points which was more than offset by a 6 basis point decrease in yield to
8.11 percent resulting in a 4 basis point decrease in net interest rate spread
to 3.86 percent at March 31, 1997. The Bank's net interest margin increased 3
basis points from 3.94 percent in fiscal year 1995 to 3.97 percent in fiscal
year 1996. The net interest margin continued to increase to 4.40 percent for the
nine months ended March 31, 1997.
INTEREST RATE SENSITIVITY
Pioneer has monitored its interest rate sensitivity position with its
focus on the origination of both adjustable rate and fixed-rate mortgage loans
by maintaining a higher level of short term loans. Pioneer recognized the thrift
industry's significant interest rate risk exposure in the 1980's, 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 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 1990's 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 the FHLB of Seattle and the
OTS as well as the change in the NPV for the Bank under rising and falling
interest rates. Such change in NPV under changing rates is one indicator of the
Bank's interest rate risk exposure. The Bank also uses its sensitivity measure
as calculated by the FHLB and the OTS each quarter.
17
<PAGE>
Interest Rate Sensitivity (cont.)
There are other factors which have a measurable influence on interest rate
sensitivity. Such key factors to consider when analyzing interest rate
sensitivity include level of liquidity, the loan payoff schedule, accelerated
principal payments, deposit maturities, interest rate caps on adjustable-rate
mortgage loans, and deposit withdrawals.
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 the FHLB, and the focus of this exposure table is a 200 basis points
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 22.48 percent decrease, representing a
dollar decrease in equity value of $4,024,000. In contrast, based on a decline
in interest rates of 200 basis points, the Bank's NPV was estimated to increase
8.32 percent or $1,786,000 at March 31, 1997. The Bank's exposure at March 31,
1997, increases to a 53.34 percent decrease under a 400 basis point rise in
rates, and the NPV is estimated to increase 23.68 percent based on a 400 basis
point decrease in rates. The Bank's sensitivity measure was a negative 225 basis
points at March 31, 1997.
The Bank is aware of its moderate interest rate risk exposure under
rapidly rising rates and modestly positive exposure under falling rates. Due to
Pioneer's recognition of the need to control its interest rate exposure, the
Bank has been focusing on adjustable rate loans and the sale of its fixed-rate
mortgage loans.
18
<PAGE>
LENDING ACTIVITIES
Pioneer 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 Pioneer's loan portfolio, by loan type, at June 30, 1993
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 72.0
percent of the Bank's gross loans as of March 31, 1997. This share has seen a
modest decrease from 73.3 percent at June 30, 1993. The second largest real
estate loan type as of March 31, 1997, was commercial real estate loans which
comprised 3.4 percent of gross loans compared to a slightly larger 3.5 percent
as of June 30, 1993. The commercial real estate loan category was also the
second largest real estate loan type in 1993. The third key real estate loan
type was multifamily loans, which represented 1.3 percent of gross loans as of
March 31, 1997, compared to a slightly larger 1.4 percent at June 30, 1993.
Multifamily loans were the fourth largest real estate loan type at June 30,
1993. These three real estate loan categories represented 76.7 percent of gross
loans at March 31, 1997, compared to a larger 78.2 percent of gross loans at
June 30, 1993. Construction loans were the fourth real estate loan category and
represented a modest 0.6 percent of gross loans at March 31, 1997, compared to a
much larger 2.0 percent at June 30, 1993, when they were the third largest real
estate loan category.
Consumer loans were the second largest overall loan type at March 31,
1997, and also at June 30, 1993, surpassing all but one- to four-family loans.
The Bank originates savings account loans, credit card loans, automobile loans,
home equity and second mortgage loans and other secured and unsecured loans.
Consumer loans represented a relatively strong 18.0 percent of gross loans
at March 31, 1997, compared to 18.5 percent at June 30, 1993. The largest
consumer loan type was
19
<PAGE>
Lending Activities (cont.)
home equity and second mortgage loans representing 12.4 percent of gross loans
at March 31, 1997, and 69.0 percent of consumer loans compared to 9.8 percent of
gross loans at June 30, 1993, and 52.9 percent of consumer loans.
Commercial business loans and agricultural loans are two additional loan
categories representing 2.9 percent and 1.7 percent of gross loans at March 31,
1997, respectively. The Bank had a smaller 1.2 percent of gross loans in
commercial business loans and no agricultural loans at June 30, 1993.
The Bank's overall mix of loans has witnessed only modest change from June
30, 1993, to March 31, 1997, with the Bank's share of mortgage loans and
consumer loans having decreased to be offset by increases in commercial business
loans and agricultural loans.
The emphasis of Pioneer's lending activity is the origination of
conventional mortgage loans secured by one- to four-family residences. Such
residences are located in Pioneer's market area, which includes Baker, Grant,
Harney, Malheur, Union, Wallowa and Wheeler Counties in Oregon and Payette and
Washington Counties in Idaho. The Bank also originates interim construction
loans on single-family residences primarily to local builders with such loans
normally converting to permanent loans after six months. At March 31, 1997, 72.0
percent of Pioneer's gross loans consisted of loans secured by one- to
four-family residential properties, excluding construction loans. Construction
loans represented another 0.6 percent of gross loans.
The Bank originates only one type of adjustable-rate mortgage loan,
("ARMs") with an adjustment/maturity period of one year. ARMs are originated for
the Bank's portfolio. The interest rates on ARMs are indexed to the one year
Treasury constant maturity index. The Bank does offer "teaser" ARMs where the
initial rate is 1.5 percentage points to 2.0 percentage points below the
prevailing interest rate. The Bank's ARMs have a maximum
20
<PAGE>
Lending Activities (cont.)
annual rate adjustment of 2.0 percent and a 6.0 percent maximum adjustment over
the life of the loan. The Bank's current ARMs do not provide for negative
amortization.
The majority of ARMs have amortization periods of 30 years, and fixed-rate
loans have terms of 15 to 30 years. The Bank retains its ARMs, and since January
1997, the Bank has generally sold its fixed-rate mortgage loans with maturities
of 15 years or more. Historically, the majority of Pioneer's mortgage loans and
total loans have been fixed-rate loans, which represented 52.2 percent of total
loans due after March 31, 1998.
The original loan to value ratio for conventional mortgage loans to
purchase or refinance one-to four-family dwellings is generally no more than 80
percent at Pioneer. The Bank can lend up to 95 percent of the lower of the cost
or appraised value.
Pioneer has also been an originator of commercial real estate loans, and
has been less active in multifamily loans in the past. The Bank will continue to
make multifamily and commercial real estate loans. The Bank had a total of $4.8
million in commercial real estate loans at March 31, 1997, or 3.4 percent of
gross loans, compared to $3.5 million or 3.5 percent of gross loans at June 30,
1993. Multifamily loans have increased from $1.4 million or 1.4 percent of gross
loans at June 30, 1993, to $1.8 million or a lesser 1.3 percent of gross loans
at March 31, 1997. The major portion of commercial real estate loans are secured
by small office buildings, car dealerships, farms and agricultural land, retail
stores and other commercial properties.
Pioneer has been relatively active in consumer lending. Consumer loans
originated consist primarily of automobile loans, home equity and second
mortgage loans, credit card loans, savings account loans, and other secured and
unsecured personal loans, which represented a combined total of $25.4 million or
18.0 percent of gross loans at March 31, 1997, up from $18.6 million or 18.5
percent at June 30, 1993.
Pioneer has also been an originator of commercial business loans, which
totaled $4.1 million at March 31, 1997, and in the nine months ended March 31,
1997, the Bank
21
<PAGE>
Lending Activities (cont.)
began to actively originate agricultural loans, which totaled $2.5 million at
March 31, 1997.
Exhibit 13 provides a maturity breakdown of Pioneer's loans and a summary
of Pioneer's fixed- and adjustable-rate loans. At March 31, 1997, 52.2 percent
of the Bank's total loans due after March 31, 1998, were fixed-rate and 47.8
percent were adjustable-rate. With regard to mortgage loans, a similar 53.0
percent of one- to four-family residential mortgage loans due after March 31,
1998, are fixed rate and a higher 56.7 percent of home equity and second
mortgage loans due after March 31, 1998, are fixed rate.
As indicated in Exhibit 14, Pioneer experienced a decrease in both its
one-to four-family loan originations and total loan originations from fiscal
years 1994 to 1996. Total loan originations in fiscal year 1996 were $32.9
million compared to $44.9 million in fiscal year 1994, with fiscal year 1995
indicating $35.6 million in total loan originations. The decrease in one-to
four-family residential loan originations from 1994 to 1996 constituted 74.3
percent of the $12.0 million aggregate decrease in total loan originations from
1994 to 1996 with that overall decrease also due to decreases in construction
and consumer loans. Loan originations for the purchase of one- to four-family
residences, excluding construction loans, represented 58.6 percent of total loan
originations in fiscal year 1994, compared to a much lower 46.4 percent in
fiscal year 1995, and 52.9 percent in 1996. Overall, loan originations and
purchases exceeded loan principal repayments and loans sold in fiscal year 1995
by $12.3 million, and exceeded reductions in fiscal 1996 by $7.9 million. For
the nine months ended March 31, 1997, loan originations and purchases totaled
$29.6 million or $39.2 million on an annualized basis. One- to four-family loans
represented a lower 30.7 percent of total originations with the decrease
primarily offset by consumer loans and agricultural loans, which represented
30.4 percent and 22.0 percent, respectively, of total loan originations in the
nine months ended March 31, 1997.
22
<PAGE>
NONPERFORMING ASSETS
Pioneer 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 often been related to
specific regions of the country and has frequently been associated with higher
risk loans, including purchased nonresidential real estate loans. Pioneer has
not been faced with such problems and has made a concerted effort to control its
nonperforming assets.
Pioneer initiates contact with a borrower if the loan becomes delinquent
16 days or more by sending the borrower a late payment notice. A second notice
is mailed 30 days thereafter, if necessary. The Bank initiates both written and
oral communication with the borrower if the loan remains delinquent. When the
loan becomes delinquent at least 90 days, the Bank will consider foreclosure
proceedings. The Bank does not normally accrue interest on loans past due 90
days or more. Any loans delinquent 90 days or more are placed on a non-accrual
status, and at that point in time, the Bank considers the possibility of
pursuing foreclosure. Pioneer had only $10,000 in repossessed assets as of March
31, 1997, and $44,000 in repossessed assets at June 30, 1996.
The Bank's level of nonperforming assets has increased from $130,000 or
0.07 percent of assets at June 30, 1993, to $200,000 or 0.10 percent of assets
at March 31, 1997. Nonperforming assets consist of loans 90 days or more past
due, nonaccruing loans, foreclosed real estate and other repossessed assets.
23
<PAGE>
Nonperforming Assets (cont.)
Pioneer's level of nonperforming assets is much lower than its level of
classified assets. The Bank's level of classified assets was $825,000 or 0.40
percent of assets at March 31, 1997 (reference Exhibit 16). The Bank's
classified assets consisted of $796,000 in substandard assets, $22,000 in assets
classified as doubtful and $7,000 in assets classified as loss. The Bank's
classified assets were a greater $924,000 or 0.45 percent of assets at June 30,
1995.
Exhibit 17 shows Pioneer's allowance for loan losses at June 30, 1993
through 1996, and at March 31, 1997, indicating the activity and the resultant
balances. Pioneer has witnessed an increase in its balance of allowance for loan
losses from $506,000 at June 30, 1993 to $725,000 at March 31, 1997. The Bank
had provision for loan losses of $175,000 in 1993, $67,000 in 1995, $115,000 in
1996 and $216,000 in the nine months ended March 31, 1997, with a credit of
$90,000 in 1994. The Bank had net charge-offs of $51,000 in 1993, $13,000 in
1994, $15,000 in 1995, $29,000 in 1996 and $32,000 in the nine months ended
March 31, 1997. The Bank's ratio of allowance for loan losses to total loans
decreased from 0.52 percent at June 30, 1993, to 0.41 percent at June 30, 1996,
due to the Bank's strong increase in loans. This ratio then increased to 0.52
percent at March 31, 1997.
24
<PAGE>
INVESTMENTS
The investment and securities portfolio of Pioneer has been comprised of
U.S. government and federal agency securities, mortgage-backed securities, and
other investments. Exhibit 18 provides a summary of Pioneer's investment
portfolio at June 30, 1995 and 1996 and at March 31, 1997. Investment securities
totaled $51.0 million at March 31, 1997, compared to $68.2 million at June 30,
1995. The primary component of investment securities at June 30, 1994, was
mortgage-backed securities, representing 62.0 percent of investments, followed
by U.S. government and federal agency securities, representing 28.2 percent of
investments. At March 31, 1997, the primary component of investments continued
to be mortgage-backed securities, representing 68.8 percent of total investments
followed by U.S. government and federal agency securities, representing 31.1
percent of total investments. The investment securities portfolio had a weighted
average yield of 6.54 percent, and the mortgage-backed securities had a weighted
average yield of 7.28 percent at March 31, 1997.
The Bank had mortgage-backed securities totaling $35.0 million at March
31, 1997, which decreased from $42.2 million at June 30, 1995. The Bank's
mortgage-backed securities consist of FNMA, FHLMC and GNMA securities.
DEPOSIT ACTIVITIES
The mix of deposits at March 31, 1997, is provided in Exhibit 19. NOW
accounts, passbook savings, money market accounts and non-interest bearing
accounts represented 41.5 percent of deposits at March 31, 1997, NOW accounts
comprising 36.7 percent of this group and passbook savings representing 32.3
percent. Passbook savings, NOW accounts, money market accounts and non-interest
bearing accounts totaled $74.3 million and certificates including accrued
interest totaled $104.8 million. The largest category of certificates based on
term were the certificates maturing in one year or less, which represented 43.2
percent of total deposits, followed by certificates with terms of 13 to 36
25
<PAGE>
Deposit Activities (cont.)
months which represented 10.75 percent of deposits, followed by longer term 37
to 60 month certificates which represented 3.7 percent of deposits.
Exhibit 20 shows the Bank's deposit activity for the two years ended June
30, 1995 and 1996 and for the nine months ended March 31, 1996 and 1997.
Including interest credited, Pioneer experienced a net decrease in deposits in
fiscal year 1995 and a net increase in 1996. In fiscal year 1995, there was a
net decrease in deposits of $4.5 million or 2.6 percent of deposits, followed by
a $4.1 million net increase or 2.3 percent in 1996. In the nine months ended
March 31, 1997, there was a net increase in deposits of $2.5 million or 1.4
percent compared to a net increase of $5.3 million or 3.0 percent in the nine
months ended March 31, 1996.
BORROWINGS
Pioneer has relied on retail deposits as its primary source of funds but
has also used FHLB advances and other borrowed funds during the past five fiscal
periods ended March 31, 1997. The Bank's other borrowed funds, excluding FHLB
advances, consist of securities sold under agreements to repurchase. The Bank
had average FHLB advances totaling $861,000 at March 31, 1997, with an average
rate of 4.88 percent and a larger $4.7 million at June 30, 1995, at a cost of
5.18 percent (reference Exhibit 21). The Bank had an average amount of
securities sold under agreements to repurchase of $1.4 million at March 31,
1997, with an average cost of 3.50 percent compared to an average of $1.5
million at June 30, 1995, with an average cost of 3.28 percent.
26
<PAGE>
SUBSIDIARIES
Pioneer has two wholly-owned subsidiaries, Pioneer Development Corporation
("PDC") and Pioneer Bank Investment Corporation ("PBIC"). The primary purpose of
PDC is to purchase land contracts, while PBIC's primary purpose is to hold the
Bank's non-conforming assets. The Bank's investment in PDC was $1.6 million and
a much lesser $70,000 in PBIC.
OFFICE PROPERTIES
Pioneer has six offices, its home office located in downtown Baker City
and branches in Ontario, John Day, Burns, Enterprise with two branches in La
Grande (reference Exhibit 22). The Bank will soon be opening a new branch in
Island City just outside of La Grande and will close one of its La Grande
branches (1601 Adams Avenue), which is under contract. The Bank has been
focusing on remodeling and improving its offices to ensure their convenience to
customers. The Bank has ATMs at four of its offices and has three additional
ATMs at retail facilities. The Bank uses an in-house data processing system to
provide better service to its customers. The Bank's investment in its office
premises and equipment totaled $4.6 million or 2.2 percent of assets at March
31, 1997.
MANAGEMENT
The president, chief executive officer, and managing officer of Pioneer is
Dan L. Webber. Mr. Webber joined the Bank in 1992 and became president and chief
executive officer in 1993. Prior to his employment with Pioneer, Mr. Webber was
regional vice president of Pacific First Bank. The senior vice president/support
services of the Bank is Jerry F. Aldape, who has been with the Bank since 1994
and served as senior vice president/support services and secretary since 1995.
Prior to working at Pioneer, Mr. Aldape was Controller/Financial Advisor with
Insight Distributing, Inc., Sandpoint, Idaho.
27
<PAGE>
Management (cont.)
The senior vice president/customer services is Don S. Reay, who has served in
that capacity since 1995. Prior to joining the Bank, Mr. Reay was an officer
with First Interstate Bank in Eastern Oregon from 1966 to 1995 (reference
Exhibit 23).
28
<PAGE>
II. DESCRIPTION OF PRIMARY MARKET AREA
Pioneer's market area encompasses those regions surrounding its offices in
Baker, Grant, Harney, Malheur, Union and Wallowa Counties, Oregon ("the market
area"). The Bank's home office is located in Baker City, Oregon with branches in
La Grande, Ontario, John Day, Burns and Enterprise, and a branch being moved
from La Grande to Island City. Its primary market area is comprised of the
market area counties mentioned above.
Pioneer's market area trends and economic performance have been very
dependent on the overall economic trends in its market area. The principal
industry of the market area is agriculture, with lumber, recreation and tourism
also providing substantial contributions. Unemployment rates in the market area
are considerably higher than both state and national unemployment rates and have
increased consistently over the past few years. The market area is characterized
as having average growth rates in population and household levels, while having
lower than average levels of income and housing values with the cost of living
being close to the national average but remaining significantly less than in
major metropolitan areas. Pioneer is located in close proximity to major
transportation networks such as I-84, the Union Pacific Railroad and the Amtrak
Pioneer Line.
Exhibit 25 provides a summary of key demographic data and trends for the
market area, Oregon and the United States for the periods of 1990, 1996, and
2001. Overall, the period of 1990 to 1996 was characterized by a rise in the
market area population level by 6.9 percent from 86,777 residents to 92,754
residents. Population in Oregon increased by a higher 12.4 percent, while the
national population level increased by 6.7 percent. During the period of 1996
through 2001, population is projected to continue to rise in the market area by
5.2 percent to 97,533 residents. Oregon's population is expected to rise by 8.8
percent, while the national population is expected to increase by a lower 5.1
percent.
In conformance with its increasing trend in population, the market area
witnessed increases in households (families) of 7.1 percent from 1990 to 1996,
from 33,258
29
<PAGE>
Description of Primary Market Area (cont.)
households to 35,616 households. By the year 2001, the market area's households
are projected to increase by 5.4 percent to 37,523. Households in Oregon and in
the United States increased by 13.0 percent and 6.8 percent, respectively, from
1990 to 1996. By the year 2001, Oregon's households are expected to increase by
9.1 percent, while the United States' number of households is projected to grow
by 5.1 percent.
The market area had lower per capita income levels than Oregon and the
United States in 1990 and 1996. In 1990, the market area had a per capita income
level of $10,580, while Oregon had a per capita income level of $11,306, and the
United States had a per capita income level of $12,313. From 1990 to 1996,
Oregon had the largest increase in per capita income, followed by the national
average and then by the market area average. The market area had a per capita
income level of $12,749 in 1996, which was a 20.5 percent increase from 1990. In
1996, the market area's per capita income level was 23.7 percent lower than the
per capita income level in Oregon of $16,717, and 23.8 percent lower than the
national per capita income of $16,738.
In 1990, the median household income level in the market area was
moderately lower than Oregon's median household income, and still lower than the
United States' median household income. The market area's median household
income of $21,841 was 14.4 percent lower than Oregon's median household income
of $25,509, and 23.4 percent lower than the United States' median household
income level of $28,525. From 1990 to 1996, median household income in the
market area grew by 22.1 percent, increasing to $26,659, compared to Oregon's
median household income growth of 31.7 percent to $33,603 and the United States'
increase in median household income by 21.1 percent to $34,530. By the year
2001, the United States is projected to decline in median household income by
3.9 percent, to $33,189, as Pioneer's market area will have a modest 2.0 percent
increase to $27,195, and Oregon's median household income increases by 4.4
percent to $35,070.
30
<PAGE>
Description of Primary Market Area (cont.)
Exhibit 26 provides a summary of key housing data for the market area,
Oregon, and the United States. Pioneer's market area had a 66.6 percent rate of
owner-occupancy in 1990, which is higher than the 63.1 percent owner-occupancy
rate for Oregon and the 64.2 percent owner-occupancy for the United States. As a
result, the market area supports a lower rate of renter-occupied housing of 33.4
percent, compared to higher rates in Oregon and the United States of 36.9 and
35.8 percent, respectively.
The market area median housing value of $44,259 is much lower than
Oregon's median housing value of $66,800 and lower still than the United States'
median housing value of $79,098. The average median rent of the market area is
$296, which is lower than the $408 median rent for Oregon, and also lower than
the United States, which has a median rent value of $374.
The major business source of employment by industry group, based on number
of employees for the market area was the services industry, which was
responsible for 32.2 percent of the jobs in 1990, which was lower than Oregon at
36.2 percent and also lower than the United States at 34.0 percent. (Reference,
Exhibit 27). The wholesale/retail industry was the second major employer in the
market area and in Oregon providing 20.1 percent and 22.8 percent of employment,
respectively. The services industry was the largest employer in the United
States with 34.0 percent followed by wholesale/retail at 27.5 percent. The
agriculture group was the third major source of employment in the market area at
18.4 percent, substantially higher than the 5.2 percent for Oregon and 1.3
percent for the United States at 19.2. The manufacturing group was also a
substantial contributor to employment at 15.0 percent, compared to 17.7 percent
for Oregon and 19.2 percent for the United States. The construction group,
finance, insurance and real estate group and the transportation/utilities group
combined to provide 14.3 percent of the jobs in the market area, 18.1 percent of
jobs in Oregon, and 18.0 percent in the United States.
31
<PAGE>
Description of Primary Market Area (cont.)
Top Industries and Employers by Number of Employed Persons
Industry Number Employed
-------- ---------------
Boise Cascade (Union County) 800
Retail trade (Baker City) 723
Union County School Districts 680
Grande Ronde Hospital (Union County) 400
Manufacturing, durable goods (Baker City) 394
State of Oregon Offices (Union County) 365
Union Pacific Railroad (Union County) 350
Eastern Oregon State College (Union County) 320
Agriculture, forestry and fisheries (Baker City) 309
The unemployment rate is another key economic indicator. Exhibit 28 shows
the average unemployment rates in the market area, Oregon, and the United States
in 1994, 1995 and 1996. Unemployment rates in the market area have historically
been characterized as being higher than both the state and national unemployment
rates. The market area data was not available in 1994. Oregon's unemployment
rate decreased from 5.4 percent in 1994 to 4.8 percent in 1995, and the United
States' unemployment rate decreased from 6.1 percent to 5.6 percent in that same
time period. From 1995 to 1996, unemployment increased from 8.1 percent to 10.0
percent in the market area, also increasing to 5.9 percent in Oregon but
decreasing to 5.0 percent nationally.
Exhibit 29 provides deposit data for banks, thrifts and credit unions in
Baker, Grant, Harney, Malheur, Union and Wallowa Counties. Pioneer's deposit
base in the market area was $176.7 million or 66.3 percent of the $266.6 million
total thrift deposits but a much smaller 19.4 percent share of total market area
deposits which totaled $912.6 million. The market area is dominated by the
banking industry. Total bank deposits were
32
<PAGE>
Description of Primary Market Area (cont.)
$597.1 million representing 65.4 percent of total deposits, compared to a lower
$266.6 million or 29.2 percent of deposits for thrifts, and a moderate $48.8
million or 5.3 percent of total deposits held by credit unions. It is evident
from the size of both thrift deposits and bank deposits that the market area has
a moderate deposit base with the Bank having a major share of market penetration
of all thrift deposits, but a much smaller level of market penetration of total
deposits.
Exhibit 30 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, One-Year and Thirty-Year Treasury Bills. 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 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 where it remained throughout 1996. Rates on T-bills, however, witnessed
increasing volatility in 1996, with 90-Day Bills decreasing after the second
quarter, and One-Year and 30-Year rates demonstrating a seesaw trend throughout
the year. The first quarter of 1997 saw an increase in the Prime Rate to 8.50
percent, while rates on 90-Day Bills decreased to 4.95 percent. One-Year and
Thirty-Year rates both witnessed increases in the first quarter of 1997, to 5.95
percent and 7.06 percent, respectively.
SUMMARY
To summarize, the market area represents an area with growing population
and number of households during the mid 1990s. The market area displayed a lower
per capita income than Oregon and the United States in 1996, and the market
area's median household income in 1996 was well below Oregon's median household
income as well as the income level for the United States. The market area had a
median housing value and average median rent level that was lower than Oregon
and the United States. Further, the
33
<PAGE>
Description of Primary Market Area (cont.)
market area has a competitive financial institution market dominated by banks
with a deposit base that exceeds $912.6 million for all of the market area and a
higher share of credit union deposits than most small to moderate size community
markets.
34
<PAGE>
III. COMPARABLE GROUP SELECTION
Introduction
Integral to the valuation of Oregon Trail Financial Corp. is the selection
of an appropriate group of publicly-traded thrift institutions, hereinafter
referred to as the "comparable group". 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 Western
region and in Oregon.
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 330 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 37 publicly-traded thrifts in
the western United States ("Western thrifts") and the 2 publicly-traded thrifts
in Oregon ("Oregon thrifts"), and by trading exchange. Exhibit 32 presents
prices, pricing ratios and price trends for all SAIF-insured thrifts completing
their conversions between July 1, 1996, and June 4, 1997
The selection of the comparable group was based on the establishment of
both general and specific parameters using financial, operating and asset
quality characteristics of Pioneer 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 defined are
considered to be both reasonable and reflective of Pioneer's basic operation. In
as
35
<PAGE>
Introduction (cont.)
much 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 following thrift institution was a potential comparable group
candidate but was not considered due to its involvement in a merger/acquisition
or a potential merger/acquisition:
Institution State
----------- -----
FCB Financial Corp. Wisconsin
No thrift institution in Pioneer's city, county or market area is
currently involved in merger/acquisition activity or have been recently so
involved, as indicated in Exhibit 33.
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 35 presents
pricing ratios and Exhibit 36 presents key financial data and ratios for all
publicly-traded, SAIF-insured mutual holding companies
36
<PAGE>
Mutual Holding Companies (cont.)
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
----------- -----
Webster City Federal Savings Bank, MHC Iowa
Guaranty Federal SB, MHC Missouri
Pulaski Bank, Savings Bank, MHC Missouri
Riverview Savings Bank, MHC Washington
Trading Exchange
It is necessary that each institution in the comparable group be listed on
one of the two major stock exchanges, the New York Stock Exchange or the
American Stock Exchange, or traded 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 351 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 319 are
listed on NASDAQ.
37
<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 June 4, 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 Pioneer, including
the Mid-Atlantic states, the Southeastern states and the New England states.
The geographic location parameter consists of Oregon, its surrounding
states of Washington, Idaho, California and Nevada, as well as the states of
Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, New Mexico, South Dakota,
Texas and Wisconsin, for a total of sixteen states. In the case of Pioneer, the
geographic parameter was extended moderately due to the small universe of
potential comparable group candidates in Oregon and its contiguous states. We
are confident that the states surveyed for comparable group candidates
constitute demographic and economic regions and markets sufficiently similar to
Pioneer market area. The selection process will be further refined by the
definition and application of the specific parameters established in this
section.
38
<PAGE>
Asset Size
Asset size was another key parameter used in the selection of the
comparable group. The maximum total assets for any comparable group institution
considered was $400 million, due to the typically different operating
strategies, expansion capabilities, liquidity of stock and acquisition appeal of
larger institutions when compared to Pioneer, with assets of approximately $204
million. Such an asset size parameter was necessary to obtain a comparable group
of at least ten institutions within the geographic regions designated above.
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 40 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.
39
<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 Pioneer with
regard to asset mix. The balance sheet parameters also distinguish institutions
with a significantly different capital position from Pioneer. 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
Pioneer's level of cash and investments to assets was 10.2 percent at
March 31, 1997, and reflects the Bank's level of investments lower than national
and regional averages. The Bank's cash and investments consist primarily of U.S.
government and federal agency securities and deposits in other institutions. It
should be noted that 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
40
<PAGE>
Cash and Investments to Assets (cont.)
statistical and comparative analysis. At the close of its last five fiscal
periods, Pioneer's ratio of cash and investments to assets averaged 14.4
percent, from a high of 17.2 percent at June 30, 1993, to a low of 10.2 percent
at March 31, 1997.
In order to prevent the elimination of otherwise good potential comparable
group candidates, the parameter range for cash and investments is broad due to
the volatility of this parameter and recognizing that mortgage-backed
securities, often eligible for regulatory liquidity, afford additional
investment choices for many institutions. The range has been defined as 4.0
percent to 35.0 percent of total assets, with additional reference to the
mortgage-backed securities parameter.
Mortgage-Backed Securities to Assets
At March 31, 1997, Pioneer's ratio of mortgage-backed securities to assets
was 17.2 percent, moderately higher than both the regional average of 9.1
percent and the national average of 11.4 percent. The Bank's five fiscal period
average ratio is 21.7 percent of total assets, higher than its current ratio,
with its ratio of mortgage-backed securities to assets decreasing steadily since
June 30, 1993, 28.5 percent to 17.2 percent. Many institutions purchase
mortgage-backed securities as an alternative to lending relative to cyclical
loan demand and prevailing interest rates, supplementing its loan portfolio.
This parameter is, therefore, moderately broad at 40.0 percent or less of assets
and a midpoint of 20.0 percent, which similar to its five fiscal period average
and its current ratio, and provides relativity between this parameter and the
previous cash and investments parameter.
41
<PAGE>
One- to Four-Family Loans to Assets
Pioneer's lending activity is focused on the origination of residential
mortgage loans secured by one- to four-family dwellings. One- to four-family
loans, including construction loans, represented 49.7 percent of the Bank's
assets at March 31, 1997, which is only modestly lower than industry averages.
The parameter for this characteristic requires any comparable group institution
to have from 30.0 percent to 75.0 percent of its assets in one- to four-family
loans with a midpoint of 52.5 percent.
Total Net Loans to Assets
At March 31, 1997, Pioneer had a ratio of total net loans to assets of
68.2 percent and a lower five fiscal period average of 60.4 percent, the former
being similar to the national and regional averages of 66.8 percent and 69.7
percent, respectively. It should be noted that the Bank's steady five fiscal
period increase in its dollar level of net loans receivable, as well as its
ratio of net loans to assets, generally corresponds to its five fiscal period
decrease in mortgage-backed securities, as discussed above. The parameter for
the selection of the comparable group is from 45.0 percent to 90.0 percent with
a midpoint of 67.5 percent. The wider range is simply due to the fact that, as
the referenced national and regional averages indicate, many larger
institutions, including Pioneer, purchase a greater volume of investment
securities and/or mortgage-backed securities as a cyclical alternative to
lending.
42
<PAGE>
Total Net Loans and Mortgage-Backed Securities to Assets
As discussed previously, Pioneer's shares of mortgage-backed securities to
assets and total net loans to assets were 17.2 percent and 68.2 percent,
respectively, for a combined share of 85.4 percent. Recognizing the industry and
regional ratios of 11.4 percent and 9.1 percent, respectively, of
mortgage-backed securities to assets, as well as the Bank's lower level of
investment securities, the parameter range for the comparable group in this
category is 60.0 percent to 95.0 percent, with a midpoint of 77.5 percent.
Borrowed Funds to Assets
At March 31, 1997, Pioneer had FHLB advances of $800,000 or 0.4 percent of
total assets, as well as $1.4 million of securities sold under agreements to
repurchase (reverse repurchase agreements), for total borrowings of $2.2 million
or 1.1 percent of total assets. That total was lower than its borrowings of
balance of $4.1 million or 2.0 percent of total assets at June 30, 1996, and
also lower than its five fiscal period average of 2.0 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.
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 assets is 33.0 percent or less with a
midpoint of 16.5 percent, similar to the national average of 14.5 percent.
43
<PAGE>
Equity to Assets
Pioneer's total equity to assets ratio as of March 31, 1997, was 11.30
percent. After conversion, based on the midpoint value of $33,100,000 and net
proceeds to the Bank of approximately $16.1 million, Pioneer's equity is
projected to stabilize in the area of 16.5 percent. Based on those 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.
PERFORMANCE PARAMETERS
Introduction
Exhibit 37 presents five parameters identified as key indicators of
Pioneer's 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.
44
<PAGE>
Return on Average Assets
The key performance parameter is the ROAA. Pioneer's most recent ROAA was
0.80 percent for the twelve months ended March 31, 1997, based on net earnings
after taxes and 1.18 percent based on core earnings after taxes, as detailed in
Item I of this report and presented in Exhibit 7. The Bank's ROAA over the past
five fiscal periods, based on net earnings, has ranged from a low of 0.78
percent for the nine months ended March 31, 1997 to a high of 1.35 percent in
1994 with an average ROAA of 1.11 percent and moderate fluctuation since 1993.
For the four quarters following conversion in the third quarter of 1997,
Pioneer's ROAA is projected to average approximately 1.00 percent.
Considering the historical, current and projected earnings performance of
Pioneer, the range for the ROAA parameter based on net income has been defined
as 0.80 percent to a high of 1.50 percent with a midpoint of 1.15 percent.
Return on Average Equity
The ROAE 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 consolidated ROAE for the Bank and the Corporation on a pro forma
basis at the time of conversion will be 4.39 percent based on the midpoint
valuation. Prior to conversion, the Bank's ROAE was 8.16 percent for the twelve
months ended March 31, 1997, based on net income, and 11.91 percent based on
core income, with a five fiscal period average net ROAE of 14.26 percent. The
parameter range for the comparable group, based on net income, is from 3.0
percent to 18.0 percent with a midpoint of 10.5 percent.
45
<PAGE>
Net Interest Margin
Pioneer had a net interest margin of 4.29 percent based on the twelve
months ended March 31, 1997, indicating an increase from 3.97 percent in fiscal
year 1996. The Bank's range of net interest margin for the past four fiscal
years has been from a low of 3.64 percent in 1995 to a high of 4.22 percent in
1994 with an average of 3.98 percent.
The parameter range for the selection of the comparable group is from a
low of 3.00 percent to a high of 4.60 percent with a midpoint of 3.80 percent.
Operating Expenses to Assets
Pioneer had an average operating expense to average assets ratio of 2.57
percent for the twelve months ended March 31, 1997, net of the one time SAIF
assessment of $1.1 million realized in the third quarter of 1996. The Bank's
operating expenses have been reasonably stable in recent years, ranging from a
low of 2.37 percent in fiscal year 1993 to a high of 2.57 percent for the nine
months ended March 31, 1997, with a five fiscal period average of 2.45 percent,
modestly higher than the current industry average of 2.33 percent.
The operating expense to assets parameter for the selection of the
comparable group is from a low of 1.60 percent to a high of 3.00 percent with a
midpoint of 2.30 percent, similar to Pioneer's five year average.
Noninterest Income to Assets
Pioneer has experienced a generally average dependence on noninterest
income as a source of additional income, with a majority of that income
consisting of service charges on deposit accounts. The Bank's noninterest income
to average assets was 0.37 percent for the twelve months ended March 31, 1997,
which is similar to the industry average of
46
<PAGE>
Noninterest Income to Assets (cont.)
0.43 percent for that period. Pioneer's noninterest income for the past five
fiscal periods has fluctuated from a high of 0.62 percent of average assets in
fiscal year 1993 to a low of 0.35 percent in fiscal years 1994 and 1996 with an
average ratio of 0.45 percent.
The range for this parameter for the selection of the comparable group is
0.75 percent or less of average assets with a midpoint of 0.38 percent, similar
to the national average of 0.43 percent.
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 39. The
purpose of these parameters is to insure that any thrift institution in the
comparable group has an asset quality position reasonably similar to that of
Pioneer. The three defined asset quality parameters are the ratios of
nonperforming assets to total assets, repossessed assets to total assets and
loan loss reserves to total assets at the end of the most recent period.
Nonperforming Assets to Assets Ratio
Pioneer had a much lower 0.10 ratio of nonperforming assets to total
assets at March 31, 1997, compared to the national average of 0.80 percent, the
Western regional average of 0.61 percent and the Oregon average of 0.69 percent.
The Bank's most recent five fiscal period average ratio of nonperforming assets
to total assets is 0.07 percent, from 0.03 percent in fiscal years 1994 and 1995
to a high of 0.10 percent at June 30, 1996, and at March 31, 1997.
47
<PAGE>
Non-performing Assets to Assets Ratio (cont.)
The parameter range for nonperforming assets to assets has been defined as
1.00 percent of assets or less with a midpoint of 0.50 percent.
Repossessed Assets to Assets
Pioneer had $10,000 of repossessed assets at March 31, 1997, which is less
than one tenth of one percent of total assets and, therefore, not meaningful.
The Bank had a zero balance of repossessed assets at June 30, 1994, 1995 and
1996, with a small balance of $4,000 at June 30, 1993, resulting in a five
fiscal period average also less than one tenth of one percent. National and
regional averages were 0.58 percent and 0.50 percent, respectively, at March 31,
1997.
The range for the repossessed assets to total assets parameter is 0.15
percent of assets or less with a midpoint of 0.08 percent.
Loans Loss Reserves to Assets
Pioneer had a loan loss reserve or allowance for loan losses of $725,000,
representing a loan loss allowance to total assets ratio of 0.35 percent at
March 31, 1997, which is higher than its ratio of 0.27 percent at June 30, 1995.
The loan loss allowance to assets parameter range used for the selection
of the comparable group focused on a minimum required ratio of 0.15 percent of
assets.
48
<PAGE>
THE COMPARABLE GROUP
With the application of the parameters previously identified and applied,
the final comparable group represents ten institutions identified in Exhibits
38, 39 and 40. The comparable group institutions range in size from $69.8
million to $370.2 million with an average asset size of $184.5 million and have
an average of 5.7 offices per institution compared to Pioneer with assets of
$204.2 million and seven offices. Two of the comparable group institutions were
converted in 1993, four in 1994 and four in 1995.
Exhibit 41 presents a comparison of Pioneer's market area demographic data
with that of each of the institutions in the comparable group.
49
<PAGE>
SUMMARY OF COMPARABLE GROUP INSTITUTIONS
First Bancshares, Inc., Mountain Grove, Missouri, is a unitary savings and
loan holding company for the First Home Savings Bank, with six full service
branches in Marshfield, Ava and Gainesville, Missouri. The Bank had assets of
$160.0 million and equity of $23.0 million at the end of its most recent quarter
and had a core ROAA of 1.12 percent and a core ROAE of 7.33 percent for its most
recent four quarters.
First Midwest Financial, Inc., Storm Lake, Iowa, is the holding company
for First Federal Savings Bank of the Midwest, which serves Buena Vista County,
Iowa, with twelve full service offices. With assets of $370.2 million and equity
of $42.9 million, the Bank reported a core ROAA of 0.97 percent and a core ROAE
of 8.40 percent for its most recent four quarters.
FSF Financial Corp., Hutchinson, Minnesota, is the holding company for
First State Federal Savings and Loan Association. The Association conducts
business from eleven offices located in McLeod, Dakota, Meeker, Sibley, Carver,
Stearns and Wright Counties, Minnesota. At the end of its most recent quarter,
the Association has assets of $367.2 million and equity of $43.2 million, and
reported a core ROAA of 0.82 percent and a core ROAE of 6.13 percent for its
trailing four quarters.
GFSB Bancorp, Inc., Gallup, New Mexico, is the holding company for Gallup
Federal Savings Bank, serving McKinley County, New Mexico, from its single
office. At the end of its most recent quarter, the Bank had assets of $86.9
million, equity of $14.2 million and reported a core ROAA of 0.93 percent and a
core ROAE of 4.89 percent for its trailing four quarters.
Hardin Bancorp, Hardin, Missouri, is the holding company for Hardin
Federal Savings Bank, which operates three full service offices in Ray and Clay
Counties, Missouri. At the end of its most recent quarter, Hardin Federal had
total assets of $103.4 million and total equity of $13.2 million, and for its
most recent four quarters, the Bank reported a core ROAA of 0.81 percent and a
core ROAE of 4.14 percent.
50
<PAGE>
Summary of Comparable Group Institutions (cont.)
Landmark Bancshares, Inc., Dodge City, Kansas, is the holding company for
Landmark Federal Savings Bank. Landmark Federal is a community bank serving
Dodge City and southwest and central Kansas, including the counties of Barton,
Finney and Rush, from five full service offices. With assets of $223.8 million
and equity of $32.8 million, the Bank reported a core ROAA of 1.04 percent and a
core ROAE of 6.69 percent for its most recent four quarters.
Mississippi View Holding Company, Little Falls, Minnesota, is the holding
company for Community Federal Savings and Loan Association of Little Falls,
which serves Morrison, Todd, Cass and Stearns Counties, Minnesota, from its
single office. The Association had total assets of $69.8 million and equity of
$12.8 million at the end of its most recent quarter, and reported a core ROAA of
1.01 percent and a core ROAE of 5.54 percent for its most recent four quarters.
Northwest Equity Corporation, Amery, Wisconsin, is the unitary thrift
holding company for Northwest Savings Bank, a community oriented institution
with three offices serving Polk County. The Bank had assets of $96.5 million and
equity of $11.8 million at the close of its most recent quarter and reported a
core ROAA of 0.97 percent and a core ROAE of 7.47 percent for its trailing four
quarters.
Southern Missouri Bancorp, Inc., Poplar Bluff, Missouri, is the holding
company for Southern Missouri Savings Bank, which has eight full service offices
in Poplar Bluff, Van Buren, Dexter, Malden, Kennett, Doniphan and Ellington,
Missouri. At the close of its most recent quarter, the Bank had assets of $165.7
million, equity of $26.0 million and had a core ROAA of 1.01 percent and a core
ROAE of 6.29 percent for its most recent four quarters.
51
<PAGE>
Summary of Comparable Group Institutions (cont.)
Wells Financial Corp., Wells, Minnesota, is the holding company for Wells
Federal Bank. The Bank has seven full service offices located in Blue Earth,
Faribault, Freeborn, Martin and Nicollet Counties, southwest of Minneapolis. The
Bank had assets of $91.8 million and equity of $11.7 million at the close of its
most recent quarter and reported an ROAA of 1.00 percent and an ROAE of 6.91
percent for its trailing four quarters.
52
<PAGE>
IV. ANALYSIS OF FINANCIAL PERFORMANCE
This section reviews and compares the financial performance of Pioneer to
all thrifts, regional thrifts, Oregon thrifts and the ten institutions
constituting Pioneer's comparable group, as selected and described in the
previous section. The comparative analysis focuses on financial condition,
earning performance and pertinent ratios as presented in Exhibits 42 through 47.
As presented in Exhibits 42 and 43, at March 31, 1997, Pioneer's total
equity of 10.30 percent of assets was lower than the 14.18 percent for the
comparable group, the 12.86 percent for all thrifts, the 14.16 percent for
Western thrifts, and the 12.30 percent ratio for Oregon thrifts. The Bank had a
68.22 percent share of net loans in its asset mix, similar to the comparable
group at 67.85 percent, and also similar to all thrifts at 66.78 percent,
Western thrifts at 69.68 percent and Oregon thrifts at 71.03 percent. Pioneer's
share of net loans, similar to industry averages, is primarily the result of its
higher level mortgage-backed securities of 17.16 percent and its lower level of
cash and investments of 10.23. The comparable group had a lower 10.35 percent
share of mortgage-backed securities and a higher 19.45 percent share of cash and
investments. All thrifts had 13.37 percent of assets in mortgage-backed
securities and 17.83 percent in cash and investments. Pioneer's share of
deposits of 87.73 percent was significantly higher than the comparable group and
the three geographic categories, reflecting the Bank's lower 1.09 percent share
of borrowed funds and modestly lower than average ratio of equity to assets. The
comparable group had deposits of 68.22 percent and borrowings of 16.62 percent.
All thrifts averaged a 71.15 percent share of deposits and 14.52 percent of
borrowed funds, while Western thrifts had a 70.08 percent share of deposits and
a 14.41 percent share of borrowed funds. Oregon thrifts averaged a 70.10 percent
share of deposits and a 16.51 percent share of borrowed funds. Pioneer was
absent of goodwill and intangible assets, compared to 0.14 percent for the
comparable group, 0.24 percent for all thrifts, 0.19 percent for Western thrifts
and 0.07 percent for Oregon 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 Pioneer in
comparison to the comparable group, all thrifts, regional thrifts and Oregon
thrifts for the trailing four quarters.
As shown in Exhibit 46, for the twelve months ended March 31, 1997,
Pioneer 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 8.01 percent compared to the
comparable group at 7.60 percent, all thrifts and Western thrifts at 7.68
percent and Oregon 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 the three geographical categories. Pioneer
had an average cost of interest-bearing liabilities of 4.16 percent compared to
4.94 percent for the comparable group, 4.85 percent for all thrifts, 4.96
percent for Western thrifts and 4.99 for Oregon thrifts. The Bank's interest
income and interest expense ratios resulted in an interest rate spread of 3.85
percent, which was higher than the comparable group at 2.67 percent all thrifts
at 2.83 percent, Western thrifts at 2.72 percent and Oregon thrifts at 2.89
percent. Pioneer demonstrated a net interest margin of 4.29 percent for the
twelve months ended March 31, 1997, based on average interest-earning assets,
which was higher than the comparable group ratio of 3.37 percent. All thrifts
also averaged a lower 3.41 percent net interest margin for the trailing four
quarters, as did Western thrifts at 3.38 percent and Oregon thrifts at 3.45
percent.
Pioneer's major source of income is interest earnings, as is evidenced by
the operations ratios presented in Exhibit 45. The Bank made a $240,000
provision for loan losses during the twelve months ended March 31, 1997,
representing 0.12 percent of average assets and reflecting the Bank's objective
to strengthen its reserves for
54
<PAGE>
Analysis of Financial Performance (cont.)
loan losses in accordance with general industry norms. The comparable group
indicated a provision representing 0.05 percent of assets, with all thrifts at
0.14 percent, Western thrifts at 0.10 percent and Oregon thrifts at 0.17
percent.
The Bank's non-interest income was $775,000 or 0.37 percent of average
assets for the twelve months ended March 31, 1997. Such non-interest income was
modestly higher than the comparable group at 0.32 percent, but lower than all
thrifts and Western thrifts at 0.43 percent, and Oregon thrifts at 0.46. For the
twelve months ended March 31, 1997, Pioneer's operating expense ratio was 2.56
percent, higher than the comparable group and the three geographical averages.
The comparable group's operating expense ratio was 2.02 percent, while all
thrifts averaged 2.33 percent, Western thrifts averaged 2.20 percent and Oregon
thrifts averaged 2.31 percent.
The overall impact of Pioneer's income and expense ratios is reflected in
the Bank's net income and return on assets. For the twelve months ended March
31, 1997, the Bank had an ROAA of 0.80 percent based on net income and a higher
ROAA of 1.18 percent based on core income. For its most recent four quarters,
the comparable group had a lower net ROAA of 0.72 percent, and also had a lower
ROAA of 0.97 percent based on core income. All thrifts averaged a net ROAA of
0.53 percent, while Western thrifts averaged 0.67 percent and Oregon thrifts
averaged 0.64 percent. All thrifts indicated a core ROAA of 0.78 percent, while
Western thrifts and Oregon thrifts averaged a core ROAA of 0.90 percent and 0.85
percent, respectively, compared to Pioneer's core ROAA of 1.18 percent.
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 Pioneer 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, maintaining its lower ratio of
nonperforming assets, increasing its 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 general
valuation allowances to reduce the impact of any unforeseen losses, and closely
monitoring and improving its higher level of overhead expenses. The Bank's
current philosophy will continue to focus on maintaining its net interest spread
and net interest margin, increasing its net income, return on assets and return
on equity, generating additional non-interest income, and increasing its level
of interest sensitive assets relative to interest sensitive liabilities.
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 to 1996
and during the nine months ended March 31, 1997, annualized, with the highest
annual volume of loans originated in fiscal year 1994. During the nine months
ended March 31, 1997, annualized, originations of $38.9 million exceeded the
originations of $32.9 million in fiscal year 1996 by $6.0 million, with
significant increases in the categories of consumer loans and commercial
business loans and a small increase in land loans and decreases in all other
categories including one- to four-family residential mortgage loans.
Originations during the twelve months ended June 30, 1995 and 1994 were $35.6
million and $44.9 million, respectively. Although total originations in fiscal
year 1994 exceeded those for the nine months ended March 31, 1997, annualized,
consumer loan originations were a modest $1.2 million higher and commercial
business loan originations were a very significant $10.0 million higher in the
more recent period, offset by a considerable decrease in the origination of one-
to four-family residential mortgage loans.
Pioneer experienced a $5.0 million decrease in principal repayment levels
from fiscal year 1994 to fiscal year 1995, followed by a $2.9 million increase
from fiscal year 1995 to fiscal year 1996. In all three fiscal years, however,
originations exceeded principal repayments, resulting in net increases of $14.5
million, $12.3 million and $7.9 million in outstanding loans in fiscal years
1994, 1995 and 1996, respectively. For the nine months ended March 31, 1997,
annualized, loans receivable increased $8.8 million. The Bank's focus has
historically been on the origination of one- to four-family mortgage loans, with
that loan category constituting 58.6 percent, 46.4 percent, 52.9 percent of
total origination in fiscal years 1994, 1995 and 1996, respectively. In those
three periods, the second largest category of originations was consumer loans,
with construction loans being the third largest category. During the nine months
ended March 31, 1997, however, Pioneer's largest category of loan originations
was consumer loans at $9.2 million, followed closely by one- to four-family
residential mortgage loans at $9.0 million and commercial business
57
<PAGE>
Earnings Performance (cont.)
loans at $8.7 million, with construction loans at a much lower $2.2 million. The
impact of these primary lending efforts, with an increased emphasis on consumer
and commercial business loans, has been to generate a yield on average
interest-earning assets of 8.01 percent for the twelve months ended March 31,
1997, compared to 7.60 percent for the comparable group and 7.68 percent for all
thrifts and for Western thrifts. The Bank's ratio of interest income to average
assets was 7.80 percent for the twelve months ended March 31, 1997, which was
higher than the comparable group at 7.41 percent, all thrifts at 7.39 percent
and Western thrifts at 7.42 percent for their most recent four quarters.
Enhancing its higher yield, Pioneer's cost of interest-bearing liabilities
of 4.16 percent for the twelve months ended March 31, 1997, was lower than the
comparable group at 4.94 percent and also lower than all thrifts at 4.85 percent
and Western thrifts at 4.96 percent. As a result, the Bank's net interest margin
of 4.29 percent, based on average interest-earning assets for the twelve months
ended March 31, 1997, was higher than the comparable group at 3.37 percent and
also higher than all thrifts at 3.41 percent. Pioneer's net interest spread of
3.85 percent for the twelve months ended March 31, 1997, was higher than the
comparable group at 2.67 percent, all thrifts at 2.83 percent and Western
thrifts at 2.72 percent.
The Bank's ratio of noninterest income to assets was 0.38 percent for the
twelve months ended March 31, 1997, slightly higher than the comparable group at
0.32 percent, but lower than all thrifts and Western thrifts, both at 0.43
percent. As previously noted, the majority of Pioneer's non-interest income
consisted of fees on deposit accounts. The Bank has indicated noninterest income
slightly higher than the comparable group, but its operating expenses have also
been higher than the comparable group, all thrifts and Western thrifts. For the
twelve months ended March 31, 1997, Pioneer had an operating expenses to assets
ratio of 2.57 percent compared to a lower 2.02 percent for the comparable group,
2.33 percent for all thrifts and 2.20 percent for Western thrifts, with those
ratios not including the one time SAIF assessment realized in the third quarter
of 1996 by all SAIF-insured thrift institutions.
58
<PAGE>
Earnings Performance (cont.)
For the twelve months ended March 31, 1997, Pioneer generated slightly
higher noninterest income, a higher ratio of noninterest expenses, and a higher
net interest margin relative to its comparable group. As a result of that higher
net interest margin, notwithstanding its higher operating expenses, the Bank's
net income was higher than its comparable group for the twelve months ended
March 31, 1997. Based on net earnings, the Bank had a return on average assets
of 1.24 percent in fiscal year 1993, 1.35 percent in fiscal year 1994, 1.12
percent in fiscal year 1995, 1.06 percent in fiscal year 1996 and 0.79 percent
for the twelve months ended March 31, 1997. For its most recent four quarters,
the comparable group had a lower net ROAA of 0.72 percent, while all thrifts
indicated an even lower 0.53 percent. The Bank's core or normalized earnings, as
shown in Exhibit 7, were $2,368,000, indicating a higher 1.15 percent core
return on assets for the most recent twelve months ended March 31, 1997. That
core ROAA was also higher than the comparable group at 0.97 percent and all
thrifts at 0.78 percent.
Pioneer's earnings stream will continue to be dependent on the overall
trends in interest rates, with additional reliance on its non-interest income,
with net interest income for the twelve months ended March 31, 1997, only
modestly higher than in fiscal year 1996. From fiscal year 1993 to the twelve
months ended March 31, 1997, moreover, net interest income increased a modest
$1.3 million or an average annual increase of 4.6 percent. It is anticipated
that the Bank's cost of interest-bearing liabilities will indicate a modest
upward trend as deposits continue to move toward medium term instruments and
slowly reprice at higher rates. This upward pressure on savings costs is likely
to continue based on current rates, although the rate of increase may subside
somewhat during the next few years. As previously stated, has also been
recognized that although Pioneer's current net interest margin is higher than
that of its comparable group for the most recent four quarters, the Bank has
experienced a consistent downward trend in its ROAA and only a very modest
increase in its net interest margin and net interest spread since June 30, 1994.
In recognition of the foregoing earnings related factors, a minimum upward
adjustment has been made to Pioneer's pro forma market value for earnings
performance.
59
<PAGE>
MARKET AREA
Pioneer's primary market area consists of Baker, Grant, Harney, Malheur,
Union and Wallowa Counties, Oregon, and Payette and Washington Counties, Idaho.
As discussed in Section II, this market area has evidenced modest growth in both
population and households since 1990, but has experienced considerably higher
unemployment levels compared to the comparable group markets, Oregon and the
United States. The unemployment rate in Pioneer's market area counties averaged
10.0 percent in 1996, compared to 5.9 percent in Oregon and 5.0 percent in the
United States. Per capita income and median household income in the Bank's
market area are approximately 20.0 percent lower than the comparable group and
state averages. The market area is also characterized by much lower median
housing values than the comparable group, Oregon and the United States. The
market area is generally rural and agricultural, with the services sectors
indicating the highest share of market area employment, followed by the
wholesale/retail sector, the agriculture and mining sector and the manufacturing
sector. The level of financial competition in the Bank's market area is moderate
and dominated by the banking industry. Pioneer had a net increase in deposits in
fiscal year 1994 and 1996 and a net decrease in 1995, as withdrawals exceeded
deposits and interest credited. From June 30, 1996, to March 31, 1997, deposits
increased by a modest 1.44 percent or 1.92 percent annualized. In recognition of
all these factors, we believe that a maximum downward adjustment is warranted
for the Bank's market area.
60
<PAGE>
FINANCIAL CONDITION
The financial condition of Pioneer 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
10.30 percent at March 31, 1997, which was higher than the comparable group at
14.18 percent, Western thrifts at 14.16 percent and all thrifts at 12.86
percent. With a conversion at the midpoint, the Corporation's pro forma equity
to assets ratio will increase to 20.84 percent, and the Bank's pro forma equity
to assets ratio will increase to approximately 16.5 percent.
The Bank's mix of assets indicates some areas of significant variation
from its comparable group. Pioneer had a similar share of net loans at 68.22
percent of total assets at March 31, 1997, compared to the comparable group at
67.85 percent and all thrifts at 66.78 percent. The Bank's share of cash and
investments, however, was a significantly lower 10.23 percent compared to 19.45
percent for the comparable group and 17.83 percent for all thrifts. Pioneer's
ratio of mortgage-backed securities to total assets was 17.16 percent, higher
than both the comparable group at 10.35 percent and all thrifts at 11.37
percent. The Bank had a 87.73 percent share of deposits and a 1.09 percent share
of borrowed funds, compared to the comparable group's 68.22 percent of deposits
and 16.62 percent of borrowed funds.
The Bank was absent goodwill and had less than one tenth of one percent in
repossessed real estate compared to percentages of 0.14 and 0.04 of goodwill and
repossessed real estate, respectively, for the comparable group. All thrifts
indicated goodwill of 0.24 percent and repossessed real estate of 0.58 percent.
The financial condition of Pioneer is further affected by its low 0.10 percent
of nonperforming assets at March 31, 1997, compared to 0.44 percent for the
comparable group. The Bank also had 0.10 in nonperforming assets at June 30,
1996, and indicated ratios of nonperforming assets to total assets of 0.03
percent, 0.03 percent and 0.07 percent in fiscal years 1995, 1994 and 1993,
respectively, evidencing a stable trend since 1993.
61
<PAGE>
Financial Condition (cont.)
The Bank had a lower share of high risk real estate loans at 3.35 percent
compared to 10.41 percent for the comparable group and 12.94 percent for all
thrifts. Pioneer had $725,000 in allowances for loan losses, in spite of its
very low level of nonperforming assets at the end of its two most recent fiscal
years. The comparable group had a ratio of reserves to nonperforming assets of
128.35 percent, compared to Pioneer at 362.50 percent, with all thrifts at 90.83
percent and Western thrifts at 146.48 percent. Pioneer has experienced moderate
levels of interest rate risk, as reflected by its exposure under conditions of
rising interest rates. Overall, we believe that a no adjustment is warranted for
Pioneer's current financial condition.
DIVIDEND PAYMENTS
Pioneer has not indicated its intention 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. Nine of the ten institutions in the comparable group pay cash
dividends for an average dividend yield of 2.28 percent for those nine
institutions and an average dividend yield of 2.05 percent for the ten
institutions in the comparable group.
Currently, many thrifts are not committing to initial cash dividends,
compared to such a dividend commitment in the past. In our opinion, no
adjustment to the pro forma market value is warranted at this time related to
dividend payments.
62
<PAGE>
SUBSCRIPTION INTEREST
The general interest in thrift conversion offerings was often difficult to
gauge in 1995. Based upon new 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 some renewed interest in thrift conversion
offerings. Overall, however, such interest appears to be directly related to the
financial performance and condition of the thrift institution converting, the
strength of the local economy, general market conditions and aftermarket price
trends.
Pioneer will direct its offering primarily to depositors and residents in
its market area. The board of directors and officers anticipate purchasing
approximately $2.2 million or 6.6 percent of the conversion stock based on the
appraised midpoint valuation. Pioneer will form an 8.0 percent ESOP, which plans
to purchase stock in the initial offering. Additionally, the Prospectus
restricts to 20,000 shares, based on the $10.00 per share purchase price, the
total number of shares in the conversion that may be purchased by a single
person, or by persons and associates acting in concert as part of either the
subscription offering or the direct community offering.
The Bank has secured the services of Charles Webb & Company, a division of
Keefe, Bruyette & Woods, Inc. ("KBW") 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.
63
<PAGE>
LIQUIDITY OF THE STOCK
Pioneer will offer its shares through concurrent subscription and
community offerings with the assistance of KBW. If necessary, KBW will conduct a
syndicated community offering upon the completion of the subscription and
community offering. Pioneer will pursue two market makers for the stock. The
size of Bank's offering is considerably below the national and state averages,
but similar in size to that of the comparable group. It is likely that the stock
of Pioneer will be somewhat less liquid than thrift stocks nationally and in its
Western market area. Nevertheless, we believe that no adjustment to the pro
forma market value is warranted at this time relative to the liquidity of the
stock.
MANAGEMENT
The president and chief executive officer of Pioneer is Dan L. Webber. Mr.
Webber has served in his current position since 1993. Prior to his employment
with the Bank, Mr. Webber was a regional senior vice president of Pacific First
Bank, Seattle, Washington, from 1983 to 1992.
The senior vice president/support services and corporate secretary of
Pioneer is Jerry F. Aldape, who has served in his current position since 1994.
Prior to that time, Mr. Aldape was controller of Insight Distributing, Inc.,
Sandpoint, Idaho.
The senior vice president/customer services and chief lending officer of
Pioneer is Donald S. Reay. Mr. Reay has held his current position since 1995,
prior to which he was vice president and manager with First Interstate Bank of
Oregon, La Grande, Oregon, where he was employed from 1966 to 1995.
None of the three senior executive officers of Pioneer is a member of the
Bank's board of directors.
The management of Pioneer have made a concerted effort to maintain the
Bank's deposits and market share, and to strengthen lending activity and asset
quality. Pioneer has been able to strengthen its equity level and increase its
equity ratio over the past few years and its asset quality has been consistently
favorable since 1993. Net interest spread and net interest margin are currently
higher than the comparable group, although they have
64
<PAGE>
Management (cont.)
declined modestly since 1994, and net income is higher than both the comparable
group and industry averages. The Bank's non-interest expenses are currently
higher than the comparable group, and also higher than all thrifts and Western
thrifts. 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. Further,
the impact of the difference in a thrift's premium level on deposits compared to
BIF-insured institutions is another key concern, along with the one time
assessment of SAIF-insured thrifts to increase the capitalization of the SAIF
insurance fund.
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 the Bank's pro forma market
value discussed in Section V. Minimum upward adjustments were made for earnings
performance and management. A moderate downward adjustment was made for
subscription interest and maximum downward adjustments were made for the Bank's
market area and for the marketing of the issue. No adjustments were made for the
Bank's financial condition, dividend payments or the liquidity of the Bank's
stock.
Exhibit 48 shows the average and median price to book value ratios for the
comparable group which were 103.37 percent and 105.08 percent, respectively. The
total comparable group indicated a fairly narrow range, from a low of 95.15
percent (Hardin Bancorp, Inc.) to a high of 110.44 percent (Landmark Bancshares,
Inc.). 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 minimally from a low
of 95.96 percent to a high of 110.34 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 67.18 percent at the midpoint, and ranging
from a low of 62.56 percent at the minimum to a high of 74.81 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 67.18 is influenced by the
Bank's earnings performance, as well as its local and regional market and the
subscription interest in thrift stocks. The Bank's equity to assets after
conversion will be approximately 16.50 percent compared to a lower 14.18 percent
for the comparable group. Based on this price to book value ratio and the Bank's
equity of $21,026,000 at March 31, 1997, the indicated pro forma market value
for the Bank using this approach is $33,103,184 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 Pioneer is displayed in Exhibit 3,
indicating after tax net earnings for the twelve months ended March 31, 1997, of
$1,625,000. Exhibit 7 indicates the derivation of the Bank's higher core or
normalized earnings of $2,368,000 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 used the net and core earnings base of $2,368,000.
In determining the appropriate price to earnings multiple for the Bank, we
reviewed the range of price to net earnings and core earnings multiples for the
comparable group and all publicly-traded thrifts. The average price to net
earnings multiple for the comparable group was 22.34, while the median was
22.54. The average price to core earnings multiple was 16.09 and the median
multiple was 15.65. The comparable group's price to net earnings multiple was
lower than the average for all publicly-traded, SAIF-insured thrifts of 30.16,
and similar to their median of 22.64. The price to core earnings multiple for
all thrifts was also higher than the comparable group with an average at 20.01
times core earnings and a median at 16.00 times core earnings. The range in the
price to net earnings multiple for the comparable group was from a low of 12.41
(First Midwest
68
<PAGE>
Price to Earnings Method (cont.)
Financial, Inc.) to a high of 20.83 (GFSB Bancorp, Inc.). The primary range in
the price to net earnings multiple for the comparable group, excluding the high
and low ranges, was from a low price to earnings multiple of 13.04 to a high of
18.75 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 an identical price to net earnings multiple and price to core
earnings multiple of 10.86 at the midpoint, based on Pioneer's core earnings of
$2,368,000 for twelve months ended March 31, 1997. The price to earnings
multiple is from 9.57 times earnings at the minimum of the valuation range to
13.62 times earnings at the supermaximum.
Based on such the Bank's core earnings base of $2,368,000 (reference
Exhibits 48 and 49), the pro forma market value of the Corporation using the
price to earnings method is $33,098,596 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 49 indicates that
the average price to net assets ratio for the comparable group was 14.93 percent
and the median was 14.31 percent. The range in the price to net assets ratios
for the comparable group varied from a low of 12.16 percent (Hardin Bancorp,
Inc.) to a high of 17.98 percent (GFSB Bancorp, Inc.). It narrows only slightly
with the elimination of the two extremes in the group to a low of 12.22 percent
and a high of 17.61 percent.
69
<PAGE>
Price to Assets Method (cont.)
Based on the adjustments made previously for Pioneer, it is our opinion
that an appropriate price to net assets ratio for the Corporation is 14.00
percent at the midpoint, which is modestly lower than the comparable group at
14.93 and ranges from a low of 12.15 percent at the minimum to 17.73 percent at
the super maximum.
Based on the Bank's March 31, 1997, asset base of $204,213,000, the
indicated pro forma market value of the Corporation using the price to net
assets method is $33,101,002 at the midpoint (reference Exhibit 48).
70
<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 67.18 percent for the Corporation represents a discount of 35.01
percent relative to the comparable group and decreases to 27.63 percent at the
super maximum. The price to core earnings multiple of 10.86 for the Corporation
at the midpoint value indicates a discount of 32.49 percent, decreasing to a
discount of 15.34 percent at the super maximum. The price to assets ratio at the
midpoint represents a discount of 6.25 percent, changing to a premium of 18.69
percent at the super maximum.
It is our opinion that as of June 4, 1997, the pro forma market value of
the Corporation is $33,100,000 at the midpoint, representing 3,310,000 shares at
$10.00 per share. The valuation range for this stock is from a minimum of
$28,135,000 or 2,813,500 shares at $10.00 per share to a maximum of $38,065,000
or 3,806,500 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 $43,774,750 or 4,377,475 shares at $10.00 per share (reference
Exhibits 48 to 53). The appraised value of Pioneer Bancorp, Inc. as of June 4,
1997, is $33,100,000.
71
<PAGE>
EXHIBITS
<PAGE>
NUMERICAL
EXHIBITS
<PAGE>
EXHIBIT 1
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
BAKER CITY, OREGON
Consolidated Balance Sheets
At March 31, 1997 and June 30, 1996
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS Cash and cash equivalents:
Cash and due from banks $ 1,182,255 $ 825,106
Interest-bearing cash deposits 3,793,206 2,591,228
------------- -------------
Total cash and cash equivalents 4,975,461 3,416,334
Securities:
Trading, at fair value (amortized cost: $2,699,451
at June 30, 1996) -- 2,569,348
Available for sale, at fair value (amortized cost:
$35,850,256 and $39,477,319) 35,651,533 39,401,276
Held to maturity, at amortized cost: (fair value:
$15,391,851 and $16,782,384) 15,302,393 17,010,617
------------- -------------
Total securities 50,953,926 58,981,241
Loans held for sale 428,200 --
Loans receivable, net 138,880,914 132,347,110
Interest receivable 1,324,637 1,336,025
Stock in FHLB of Seattle, at cost 2,763,300 2,609,200
Premises and equipment, net 4,640,848 4,373,200
Other assets 245,380 393,932
------------- -------------
Total assets $ 204,212,666 $ 203,457,042
============= =============
LIABILITIES
Deposits:
Interest-bearing $ 68,049,713 $ 66,368,417
Noninterest-bearing 6,282,277 4,905,571
Time Certificates 104,825,937 105,345,218
------------- -------------
Total deposits 179,157,927 176,619,206
Securities sold under agreements to repurchase 1,430,853 1,432,078
Accrued expenses and other liabilities 1,119,465 1,311,225
Advances from Federal Home Loan Bank of Seattle 800,000 2,650,000
Advances from borrowers for taxes and insurance 678,208 1,440,289
------------- -------------
Total liabilities 183,186,453 183,452,798
EQUITY
Retained earnings 21,148,510 20,050,916
Unrealized loss on securities available for sale, net of tax (122,297) (46,672)
------------- -------------
Total equity 21,026,213 20,004,244
------------- -------------
Total liabilities and equity $ 204,212,666 $ 203,457,042
============= =============
</TABLE>
Source: Pioneer Bank's audited financial statements
72
<PAGE>
EXHIBIT 2
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
BAKER CITY, OREGON
Consolidated Statement of Financial Condition
At June 30, 1993 through 1995
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents:
Cash $ 815,831 $ 987,760 $ 15,910,081
Interest bearing deposits 4,027,877 3,879,433 297,000
------------- ------------- -------------
Total cash and cash equivalents 4,843,708 4,867,193 16,207,081
Securities:
Investment securities 25,920,706 27,957,072 17,546,970
Mortgage-backed securities 42,245,161 45,383,744 55,829,860
------------- ------------- -------------
Total securities 68,165,867 73,340,816 73,376,830
Loans receivable, net 124,439,853 112,101,466 99,929,652
Real estate owned -- -- 4,056
Federal Home Loan Bank stock, at cost 2,424,800 2,282,700 2,056,900
Properties and equipment, net 3,815,397 2,809,188 2,834,536
Prepaid and other assets 1,710,821 1,334,152 1,457,233
------------- ------------- -------------
Total assets $ 205,400,446 $ 196,735,515 $ 195,866,288
============= ============= =============
LIABILITIES
Deposits $ 172,568,605 $ 177,106,546 $ 177,824,040
Securities sold under agreements to repurchase 1,161,485 1,896,495 --
Advances from borrowers for taxes and insurance 1,548,095 1,550,440 1,543,872
Federal Home Loan Bank borrowings 11,000,000 -- --
Other Liabilities 1,310,576 704,918 3,532,843
------------- ------------- -------------
Total liabilities 187,588,761 181,258,399 182,900,755
STOCKHOLDERS' EQUITY
Retained earnings $ 17,871,787 $ 15,612,945 $ 12,965,533
Unrealized loss on securities available for sale, net of
deferred taxes of $37,198 and $84,515 in 1995 and 1994
respectively (60,102) (135,829) --
------------- ------------- -------------
Total equity 17,811,685 15,477,116 12,965,533
------------- ------------- -------------
Total liabilities and equity $ 205,400,446 $ 196,735,515 $ 195,866,288
============= ============= =============
</TABLE>
Source: Pioneer Bank's audited financial statements
73
<PAGE>
EXHIBIT 3
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
BAKER CITY, OREGON
Consolidated Statements of Income
For the nine months ended March 31, 1997, and
For the year ended June 30, 1996
<TABLE>
<CAPTION>
For the nine months Year ended
ended March 31, June 30,
1997 1996
------------ ------------
<S> <C> <C>
Interest income:
Loans receivable $ 8,916,375 $ 11,154,250
Securities:
U.S. Treasury and Government agencies 901,456 1,550,094
Mortgage-backed and related 2,058,194 3,123,102
Other interest and dividends 154,212 184,659
------------ ------------
Total interest income 12,030,237 16,012,105
Interest expense:
Deposits 5,484,996 7,579,041
Securities sold under agreements to repurchase 36,329 44,795
FHLB advances 31,578 432,896
------------ ------------
Total interest expense 5,552,903 8,056,732
------------ ------------
Net interest income 6,477,334 7,955,373
Provision for loan losses 216,063 115,397
------------ ------------
Net interest income after provision for loan losses 6,261,271 7,839,976
Other income:
Service charges on deposit accounts 482,713 520,346
Loan servicing fees 49,932 64,905
Net gain (loss) on trading securities (2,151) (71,274)
Other income 130,217 196,913
------------ ------------
Total noninterest income 660,711 710,890
Other expenses 5,074,719 5,008,830
------------ ------------
Income before income taxes 1,847,263 3,542,036
Provision for income taxes 749,669 1,362,907
------------ ------------
Net income $ 1,097,594 $ 2,179,129
============ ============
</TABLE>
Source: Pioneer Bank's audited financial statements
74
<PAGE>
EXHIBIT 4
PIONEER BANK, A FEDERAL SAVINGS BANK, AND SUBSIDIARIES
BAKER CITY, OREGON
Consolidated Statements of Income
For the years ended June 30, 1993 through 1995
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Interest income:
Loans receivable:
Mortgage loans $ 7,600,305 $ 7,088,166 $ 6,968,953
Consumer and other loans 2,079,762 1,992,319 2,083,467
Mortgage-backed securities 3,361,726 3,591,267 4,595,793
Investment securities 1,622,604 1,701,497 1,216,063
Other interest earning assets 142,166 247,437 120,771
------------ ------------ ------------
Total interest income 14,806,563 14,620,686 14,985,047
------------ ------------ ------------
Interest expense:
Deposits 6,789,749 6,466,860 7,648,637
Securities sold under agreements to repurchase 50,477 66,363 --
Other borrowed funds -- -- --
Federal Home Loan Bank borrowings 242,843 -- --
------------ ------------ ------------
Total interest expense 7,083,069 6,533,223 7,648,637
------------ ------------ ------------
Net interest income 7,723,494 8,087,463 7,336,410
Provision for loan losses 66,548 (90,138) 48,205
------------ ------------ ------------
Net interest income after provision
for loan losses 7,656,946 8,177,601 7,288,205
------------ ------------ ------------
Noninterest income:
Service charges on deposit accounts 505,613 502,310 591,237
Loan origination and commitment fees 82,978 264,297 480,499
Net unrealized gain (loss) on trading securities 279,545 (338,374) 12,459
Other income 272,262 259,644 99,443
------------ ------------ ------------
Total noninterest income 1,140,398 687,877 1,183,638
------------ ------------ ------------
Noninterest expense 5,026,778 4,602,516 4,643,425
Income before income taxes 3,770,566 4,262,962 3,828,418
Provision for income taxes 1,511,724 1,615,550 1,470,550
------------ ------------ ------------
Net income $ 2,258,842 $ 2,647,412 $ 2,357,868
============ ============ ============
</TABLE>
Source: Pioneer Bank's audited financial statements
75
<PAGE>
EXHIBIT 5
Selected Consolidated Financial Condition Data
At March 31, 1997, and
At June 30, 1993 through 1996
<TABLE>
<CAPTION>
March 31, June 30,
-------- --------------------------------------------------------
1997 1996 1995 1994 1993
-------- --------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Summary of Financial Condition:
Total assets $204,213 $203,457 $205,400 $196,736 $193,334
Loans receivable, net 138,881 132,347 124,440 112,101 97,562
Loans held-for-sale 428 0 0 0 0
Investment securities held-to-maturity 2,763 2,609 21,657 22,735 19,888
Investment securities available-for-sale 15,906 19,950 2,902 2,780 0
Mortgage-backed securities
held-for-trading 0 2,569 3,786 3,668 0
Mortgage-backed securities
available for sale 19,745 19,451 0 0 0
Mortgage-backed securities
held to maturity 15,302 17,011 42,245 46,441 55,827
Cash, federal funds sold and overnight
interest-bearing deposits 4,975 3,416 4,844 4,867 15,897
Deposit accounts 179,158 176,619 172,569 177,107 175,617
Borrowings 2,231 4,082 12,161 1,896 2,195
Total Equity 21,026 20,004 17,812 15,477 12,966
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
76
<PAGE>
EXHIBIT 6
Income and Expense Trends
For the Nine Months Ended March 31, 1996 and 1997 and
For the Fiscal Years Ended June 30, 1993 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
-------------------- ---------------------------------------------
1997 1996 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
Summary of Operating Data: (Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Total interest income $ 12,030 $ 11,960 $ 16,012 $ 14,807 $ 14,621 $ 15,192
Total interest expense 5,553 6,134 8,057 7,083 6,534 7,649
-------- -------- -------- -------- -------- --------
Net interest income 6,477 5,826 7,955 7,724 8,087 7,543
Provisions for loan losses 216 91 115 67 (90) 175
-------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses 6,261 5,735 7,840 7,657 8,177 7,368
Gains (losses) from sale of securities 0 34 34 0 59 48
Other income 661 563 677 1,141 629 919
Other expenses(1) 5,075 3,647 5,009 5,027 4,602 4,507
-------- -------- -------- -------- -------- --------
Income before income taxes 1,847 2,685 3,542 3,771 4,263 3,828
Provision for income taxes 749 1,033 1,363 1,512 1,616 1,470
-------- -------- -------- -------- -------- --------
Net income $ 1,098 $ 1,652 $ 2,179 $ 2,259 $ 2,647 $ 2,358
======== ======== ======== ======== ======== ========
</TABLE>
(1) Includes FDIC SAIF assessment of $1.1 million during the nine months ended
March 31, 1997.
Source: Oregon Trail Financial Corp.'s Prospectus
77
<PAGE>
EXHIBIT 7
Normalized Earnings Trend
For the Twelve Months Ended March 31, 1997, and
For the Fiscal Years Ended June 30, 1995 and 1996
<TABLE>
<CAPTION>
Twelve
months Fiscal years ended
Ended June 30,
March 31, ---------------------------
1997 1996 1995
------- ------- -------
(Dollars In Thousands)
<S> <C> <C> <C>
Net income after taxes $ 1,625 $ 2,179 $ 2,259
Net income before taxes but after effect
of accounting adjustments 2,704 3,542 3,770
Income adjustments
Gain on sale of securities -- -- (280)
Expense adjustments
SAIF assessment (1,146) -- --
Normalized earnings before taxes 3,850 3,542 3,490
Taxes 1,482 1,363 1,344(1)
------- ------- -------
Normalized earnings after taxes $ 2,368 $ 2,179 $ 2,146
======= ======= =======
</TABLE>
(1) Based on tax rate of 38.5 percent.
Source: Pioneer Bank's audited and unaudited financial statements
78
<PAGE>
EXHIBIT 8
Performance Indicators
At or For The Nine Months Ended March 31, 1996 and 1997 and
For the Fiscal Years Ended June 30, 1993 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Years ended June 30,
------------------- ---------------------------------------------
1997 1996 1996 1995 1994 1993
------ ------ ------ ------ ------ ------
Performance Ratios: (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Return on average assets 0.72% 1.06% 1.06% 1.12% 1.35% 1.24%
Return on average equity 7.09% 11.67% 11.40% 13.59% 18.57% 20.00%
Interest rate spread 3.90% 3.45% 3.56% 3.61% 3.95% 3.87%
Net interest margin 4.40% 3.87% 3.97% 3.94% 4.22% 4.07%
Average interest-earning assets to average
interest-bearing liabilities 113.20% 110.33% 110.64% 109.27% 107.88% 104.88%
Noninterest expense as a percent of
average total assets 2.50% 1.76% 2.43% 2.49% 2.34% 2.37%
Efficiency ratio 73.31% 57.60% 58.58% 57.14% 51.92% 54.07%
Asset Quality Ratios:
Nonaccrual and 90 days or more past due
loans as a percent of total loans, net 0.14% 0.10% 0.12% 0.05% 0.04% 0.13%
Nonperforming assets as a percent of
total assets 0.10% 0.06% 0.10% 0.03% 0.03% 0.07%
Allowance for loan losses as a percent
of gross loans receivable 0.52% 0.41% 0.41% 0.37% 0.36% 0.52%
Allowance for loan losses as a percent
of nonperforming loans 381.58% 424.80% 331.90% 679.10% 982.93% 389.23%
Net charge-offs to average
outstanding loans 0.03% 0.02% 0.02% 0.01% 0.02% 0.01%
Capital Ratios:
Total equity-to-assets ratio 10.30% 8.68% 9.83% 8.67% 7.87% 6.71%
Average equity to average assets 10.14% 9.11% 9.26% 8.25% 7.25% 6.19%
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
79
<PAGE>
EXHIBIT 9
Volume/Rate Analysis
For the Nine Months Ended March 31, 1996 and 1997 and
For the Fiscal Years Ended June 30, 1994 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1997 vs. 1996
-----------------------------------------
Increase
(Decrease)
Due to
----------------------------- Total
Rate Increase
Volume Rate Volume (Decrease)
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $ 481 $ 154 $ 12 $ 647
Mortgage-backed securities (362) 52 (11) (321)
Investment securities (194) (80) 18 (256)
FHLB stock 11 8 1 20
Federal funds sold and overnight
Interest-bearing deposits (13) 16 (6) (3)
------- ------- ------- -------
Total $ (77) $ 150 $ 14 $ 87
======= ======= ======= =======
Interest-bearing liabilities:
Passbook accounts $ (30) $ 0 -- $ (30)
NOW accounts 26 (17) (2) 7
Money market accounts (20) (88) 6 (102)
Certificate accounts 21 (148) (1) (128)
Securities sold under agreements
to repurchase 5 (1) -- 4
FHLB advances (323) (72) 85 (310)
------- ------- ------- -------
Total $ (321) $ (326) $ 88 $ (559)
======= ======= ======= =======
Net change in net interest income $ 244 $ 476 $ (74) $ 646
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
---------------------------------------- ----------------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Due to
----------------------------- Total ----------------------------- Total
Rate Increase Rate Increase
Volume Rate Volume (Decrease) Volume Rate Volume (Decrease)
------- ------- ------- -------- ------- ------- ------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $ 841 $ 582 $ 51 $ 1,474 $ 1,219 $ (544) $ (73) $ 602
Mortgage-backed securities (357) 134 (14) (237) (212) (20) 1 (231)
Investment securities (152) 73 (7) (86) 144 (46) (5) 93
FHLB stock 10 30 2 42 17 (94) (7) (84)
Federal funds sold and overnight
Interest-bearing deposits 15 (2) -- 13 (195) 7 (4) (192)
------- ------- ------- ------- ------- ------- ------- -------
Total $ 357 $ 817 $ 32 $ 1,206 $ 973 $ (697) $ (88) $ 188
======= ======= ======= ======= ======= ======= ======= =======
Interest-bearing liabilities:
Passbook accounts $ (160) $ 0 $ -- $ (160) $ (97) $ 3 $ -- $ (94)
NOW accounts 11 35 1 47 (22) 96 (5) 69
Money market accounts (67) (115) 11 (171) (98) (60) 7 (151)
Certificate accounts 361 658 50 1,069 272 218 14 504
Securities sold under agreements
to repurchase (9) 4 (1) (6) (20) 7 (2) (15)
FHLB advances 118 48 23 189 35 0 242 277
------- ------- ------- ------- ------- ------- ------- -------
Total $ 254 $ 630 $ 84 $ 968 $ 70 $ 264 $ 256 $ 590
======= ======= ======= ======= ======= ======= ======= =======
Net change in net interest income $ 103 $ 187 $ (52) $ 238 $ 903 $ (961) $ (344) $ (402)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(1) Does not inclued interest on loans 90 days or more past due. Includes
loans originated for sale.
Source: Oregon Trail Financial Corp.'s Prospectus
80
<PAGE>
EXHIBIT 10
Yield and Cost Trends
At March 31, 1997 and
For the Nine Months Ended March 31, 1996 and 1997, and
For the Fiscal Years Ended June 30, 1995 and 1996
<TABLE>
<CAPTION>
Nine Months Ended
At March 31, Year ended June 30,
March 31, --------------------- ---------------------
1997 1997 1996 1996 1995
-------- ------- ------- ------- -------
Average Average Average Average Average
Rate Rate Rate Rate Rate
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Weighted average interest rate earned on:
Loans receivable 8.77% 8.75% 8.59% 8.65% 8.16%
Mortgage-backed securities 7.28% 7.42% 7.26% 7.32% 7.04%
Investments securities 6.54% 6.67% 7.18% 6.99% 6.67%
FHLB stock 7.25% 7.69% 7.25% 7.39% 6.10%
Federal funds sold and overnight
interest-bearing deposits 1.22% 1.55% 1.12% 2.17% 2.22%
---- ---- ---- ---- ----
Total interest-earning assets 8.11% 8.17% 7.95% 8.02% 7.56%
Weighted average interest rate cost of:
Passbook savings accounts 2.89% 2.89% 2.89% 2.89% 2.89%
Interest bearing NOW accounts 1.56% 1.56% 1.97% 1.89% 2.26%
Money market accounts 3.53% 3.54% 3.70% 3.67% 3.42%
Certificate accounts 5.44% 5.40% 5.59% 5.55% 4.87%
Securities sold under agreements
to repurchase 3.50% 3.47% 3.58% 3.56% 3.28%
FHLB advances 5.70% 4.88% 6.08% 6.21% 5.18%
---- ---- ---- ---- ----
Total interest-bearing liabilities 4.25% 4.27% 4.50% 4.46% 3.95%
Net interest spread(1) 3.86% 3.90% 3.45% 3.56% 3.61%
==== ==== ==== ==== ====
Net interest margin(2) 4.31% 4.40% 3.87% 3.97% 3.94%
==== ==== ==== ==== ====
</TABLE>
(1) Spread between weighted average yield on all interest-earning asset and all
interest-bearing liabilities.
(2) Net interest income (expense) as a percentage of average interest-earning
assets
Source: Oregon Trail Financial Corp.'s Prospectus
81
<PAGE>
EXHIBIT 11
Interest Rate Sensitivity of Net Portfolio Value (NPV)
At March 31, 1997
<TABLE>
<CAPTION>
At March 31, 1997
---------------------------------
Assumed
Change in
Interest Rates $ Change % Change
(Basis Points) in NPV in NPV
-------------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C>
+400 $(11,491) (53.54)%
+300 (8,013) (37.34)%
+200 (4,824) (22.48)%
+100 (2,169) (10.11)%
0 0 0.00%
-100 1,346 6.27%
-200 1,786 8.32%
-300 3,202 14.92%
-400 5,083 23.68%
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
82
<PAGE>
EXHIBIT 12
Loan Portfolio Composition
At March 31, 1997, and at June 30, 1993 through 1996
<TABLE>
<CAPTION>
At March 31, At June 30,
---------------------- ----------------------------------------------------
1997 1996 1995
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
----------- --------- ----------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Type of Loan:
Mortgage Loans:
One-to-four family $ 101,792 71.99% $ 101,199 74.71% $ 93,436 72.95%
Multi-family 1,844 1.30% 1,927 1.42% 1,935 1.51%
Commercial 4,768 3.37% 4,724 3.49% 5,166 4.03%
Construction 853 0.60% 1,745 1.29% 1,798 1.40%
Land 222 0.16% 14 0.01% 15 0.01%
----------- ------ ----------- ------ ----------- ------
Total mortgage loans 109,480 77.42% 109,609 80.92% 102,350 79.90%
Consumer loans:
Home equity and second mortgage 17,514 12.39% 12,751 9.41% 12,120 9.46%
Credit card 844 0.60% 791 0.58% 712 0.56%
Auto loans (1) 2,064 1.46% 1,405 1.04% 1,507 1.18%
Loans secured by deposit
accounts 731 0.52% 593 0.44% 589 0.46%
Unsecured 1,611 1.14% 4,580 3.38% 4,404 3.44%
Other 2,627 1.85% 2,586 1.91% 3,585 2.80%
----------- ------ ----------- ------ ----------- ------
Total consumer loans 25,391 17.96% 22,707 16.77% 22,917 17.90%
Commercial business loans 4,066 2.88% 3,142 2.32% 2,822 2.20%
Agricultural loans 2,466 1.74% -- -- -- --
----------- ------ ----------- ------ ----------- ------
Total Loans 141,403 100.00% 135,458 100.00% 128,089 100.00%
====== ====== ======
Less:
Undisbursed portion of
loans in process $ 769 $ 1,584 $ 2,145
Net deferred loan fees 1,028 985 1,049
Allowance for loan losses 725 541 455
----------- ----------- -----------
Total loans receivable, net $ 138,881 $ 132,348 $ 124,440
=========== =========== ===========
</TABLE>
Loan Portfolio Composition (continued)
At March 31, 1997, and at June 30, 1993 through 1996
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------
1994 1993
---------------------- ----------------------
Amount Percent Amount Percent
----------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Type of Loan:
Mortgage Loans:
One-to-four family $ 84,385 73.08% $ 73,578 73.26%
Multi-family 2,060 1.78% 1,441 1.43%
Commercial 3,840 3.33% 3,528 3.51%
Construction 3,114 2.70% 2,006 2.00%
Land 32 0.03% 46 0.05%
----------- ------ ----------- ------
Total mortgage loans 93,431 80.92% 80,599 80.25%
Consumer loans:
Home equity and second mortgage 10,837 9.39% 9,860 9.82%
Credit card 426 0.37% 263 0.26%
Auto loans (1) 1,382 1.20% 1,216 1.21%
Loans secured by deposit
accounts 626 0.54% 703 0.70%
Unsecured 3,720 3.22% 3,037 3.02%
Other 3,297 2.86% 3,543 3.53%
----------- ------ ----------- ------
Total consumer loans 20,288 17.58% 18,622 18.54%
Commercial business loans 1,749 1.51% 1,214 1.21%
Agricultural loans -- -- -- --
----------- ------ ----------- ------
Total Loans 115,468 100.00% 100,435 100.00%
====== ======
Less:
Undisbursed portion of
loans in process $ 2,039 $ 1,614
Net deferred loan fees 925 753
Allowance for loan losses 403 506
----------- -----------
Total loans receivable, net $ 112,101 $ 97,562
=========== ===========
</TABLE>
(1) Includes dealer-originated automobile contracts of $389,000 at March 31,
1997.
Source: Oregon Trail Financial Corp.'s Prospectus
83
<PAGE>
EXHIBIT 13
Loan Maturity Schedule
At March 31, 1997
<TABLE>
<CAPTION>
One Year 3 Years 5 Years
Within Through Through Through Over Ten
One Year 3 Years 5 Years 10 Years Years Total
-------- -------- -------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
One-to four-family $ 11 $ 311 $ 1,315 $ 7,985 $ 92,170 $101,792
Multifamily -- 12 -- 698 $ 1,134 1,844
Commercial loans 19 123 385 1,453 2,788 4,768
Construction loans 853 -- -- -- -- 853
Land loans -- -- -- 157 66 223
-------- -------- -------- -------- -------- --------
Total Mortgage Loans $ 883 $ 446 $ 1,700 $ 10,293 $ 96,158 $109,480
Consumer Loans:
Home equity and second mortgage 78 1,474 2,494 6,505 6,963 17,514
Automobile 14 541 1,098 378 33 2,064
Credit card 159 313 170 202 -- 844
Loans secured by deposits 205 492 34 -- -- 731
Unsecured 25 259 246 1,002 79 1,611
Other 68 438 516 678 927 2,627
-------- -------- -------- -------- -------- --------
Total Consumer Loans $ 549 $ 3,517 $ 4,558 $ 8,765 $ 8,002 $ 25,391
Commercial business loans 1,578 662 1,826 -- -- 4,066
Agricultural loans 2,427 39 -- -- -- 2,466
-------- -------- -------- -------- -------- --------
Total $ 5,437 $ 4,664 $ 8,084 $ 19,058 $104,160 $141,403
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Fixed Floating or
Rates Adjustable Rates
-------- ----------------
<S> <C> <C>
Mortgage Loans: (In thousands)
One-to four-family $ 53,942 $ 47,841
Multifamily 491 1,353
Commercial loans 1,468 3,281
Construction loans -- --
Land loans 223 --
-------- --------
Total Mortgage Loans $ 56,124 $ 52,475
Consumer Loans:
Home equity and second mortgage 9,882 7,554
Automobile 2,024 26
Credit card -- 685
Loans secured by deposits 526 --
Unsecured 137 1,449
Other 2,268 289
-------- --------
Total Consumer Loans $ 14,837 $ 10,003
Commercial business loans -- 2,488
Agricultural loans -- 39
-------- --------
Total $ 70,961 $ 65,005
======== ========
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
84
<PAGE>
EXHIBIT 14
Loan Originations
For The Nine Months Ended March 31, 1996 and 1997, and
For the Years Ended June 30, 1995 and 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Years ended June 30,
-------------------------- --------------------------
1997 1996 1996 1995
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Loans originated:
Mortgage loans:
One-to-four family $ 8,966 $11,932 $17,416 $16,508
Multi-family loans 0 0 514 0
Commercial loans 0 325 908 123
Construction loans 2,216 2,856 3,958 6,800
Land 173 27 27 0
Consumer loans 8,769 5,548 7,642 9,854
Commercial business loans 2,346 1,367 2,484 2,316
Agricultural loans 6,352 0 0 0
------- ------- ------- -------
Total loans originated 28,822 22,055 32,949 35,601
Loans purchased:
One-to-four family mortgage 183 47 256 145
Dealer-originated automobile
contracts 389 -- -- --
------- ------- ------- -------
Total loans purchased 572 47 256 145
Loans sold:
Total whole loans sold 1,149 652 759 1,470
------- ------- ------- -------
Total loans sold 1,149 652 759 1,470
Loan principal repayments 21,711 16,712 24,539 21,937
Net increase (decrease)
in loans receivable, net $ 6,534 $ 4,738 $ 7,907 $12,339
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
85
<PAGE>
EXHIBIT 15
Nonperforming Assets
At March 31, 1997 and
At June 30, 1993 through 1996
<TABLE>
<CAPTION>
At March 31, At June 30,
------------ ----------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis:
Mortgage loans
One-to-four family $167 $111 $ 47 $ 15 $128
Consumer loans 23 52 20 26 2
---- ---- ---- ---- ----
Total 190 163 67 41 130
Accruing loans which are contractually
past due 90 days or more -- -- -- -- --
---- ---- ---- ---- ----
Total of nonaccrual and
90 days past due loans 190 163 67 41 130
Foreclosed real estate 0 13 0 0 0
Other repossessed assets 10 34 0 18 0
---- ---- ---- ---- ----
Total non-performing assets $200 $210 $134 $ 59 $260
==== ==== ==== ==== ====
Restructured loans $-- $-- $-- $ 18 $--
==== ==== ==== ==== ====
Nonaccrual and 90 days or more past
due loans as a percent of loans
receivable, net 0.14% 0.12% 0.05% 0.04% 0.13%
Nonaccrual and 90 days or more past
due loans as a percent of
total assets 0.09% 0.08% 0.03% 0.02% 0.07%
Nonperforming assets as a percent
of total assets 0.10% 0.10% 0.03% 0.03% 0.07%
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
86
<PAGE>
EXHIBIT 16
Classified Assets
At March 31, 1997, and at June 30, 1995 and 1996
<TABLE>
<CAPTION>
At March 31, At June 30,
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Loss assets $ 7 $ 0 $ 4
Doubtful assets 22 11 8
Substandard assets 796 905 912
Special mention 838 582 287
---- ---- ----
Total classified assets 1663 1498 1211
==== ==== ====
General loss allowances 718 541 451
Specific loss allowances 7 0 4
---- ---- ----
Total allowances $725 $541 $455
==== ==== ====
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
87
<PAGE>
EXHIBIT 17
Allowance for Loan Losses
For the Nine Months Ended March 31, 1996 and 1997, and
For the Years Ended June 30, 1993 through 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
------------------ --------------------------------------------
1997 1996 1996 1995 1994 1993
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $ 541 $ 455 $ 455 $ 403 $ 506 $ 382
Provision for loan losses 216 91 115 67 (90) 175
Recoveries:
Multifamily loans 0 9 12 5 4 0
Credit card loans 4 1 1 0 0 0
Other 3 0 1 0 8 0
----- ----- ----- ----- ----- -----
Total recoveries 7 10 14 5 12 0
Charge-offs:
Multifamily loans 5 0 0 0 21 37
Automobile loans 0 0 0 0 0 2
Credit card loans 26 25 41 0 1 0
Unsecured loans 0 0 0 0 0 10
Other 8 0 2 20 3 2
----- ----- ----- ----- ----- -----
Total charge-offs 39 25 43 20 25 51
Net charge-offs (32) (15) (29) (15) (13) (51)
----- ----- ----- ----- ----- -----
Balance at end of period $ 725 $ 531 $ 541 $ 455 $ 403 $ 506
===== ===== ===== ===== ===== =====
Allowance for loan losses as a percent
of total loans outstanding at the
end of the period 0.52% 0.41% 0.41% 0.37% 0.36% 0.52%
Net charge-offs as a percent of average
loans outstanding during the period 0.02% 0.01% 0.02% 0.01% 0.01% 0.05%
Allowance for loan losses as a percent
of nonperforming loans at end of period 381.58% 424.80% 331.90% 679.10% 982.93% 389.23%
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
88
<PAGE>
EXHIBIT 18
Investment Portfolio Composition
At March 31, 1997, and
At June 30, 1995 and 1996
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------
At March 31, 1997 1996 1995
------------------- ------------------- -------------------
Carrying % of Carrying % of Carrying % of
Value(1) Total Value(1) Total Value(1) Total
------- ------ ------- ------ ------- ------
(Unaudited) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Held to maturity:
U.S. Government agency obligations $ 0 -- $ 0 -- $19,232 28.21%
Mortgage-backed and related securities 15,302 30.03% 17,011 28.84% 42,245 61.98%
------- ------ ------- ------ ------- ------
Total held to maturity securities 15,302 30.03% 17,011 28.84% 61,477 90.19%
Available for Sale:
U.S. Government agency obligations 15,857 31.12% 19,900 33.74% 2,903 4.26%
Mortgage-backed and related securities 19,745 38.75% 19,451 32.98% 0 0.00%
Other 50 0.10% 50 0.08% 0 0.00%
------- ------ ------- ------ ------- ------
Total available for sale securities 35,652 69.97% 39,401 66.80% 2,903 4.26%
Trading:
Mortgage-backed and related securities -- -- 2,569 4.36% 3,786 5.55%
------- ------ ------- ------ ------- ------
Total Portfolio $50,954 100.00% $58,981 100.00% $68,166 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
(1) The market value of the Savings Bank's investment portfolio amounts to
$51.0 million, $58.8 million and $68.6 million at March 31, 1997, and June
30, 1996 and 1995, respectively. At March 31, 1997, the market value of
the principal components of the Savings Bank's investment securities
portfolio was as follows: U.S. Government securities, $15.9 million;
mortgage-backed securities, $35.1 million.
Source: Oregon Trail Financial Corp.'s Prospectus
89
<PAGE>
EXHIBIT 19
Mix of Deposits
At March 31, 1997, and at June 30, 1995 and 1996
<TABLE>
<CAPTION>
March 31, June 30,
--------------------- --------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
--------------------- --------------------- ---------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing $ 6,282 3.51% $ 4,894 2.77% $ 3,904 2.26%
NOW checking 27,261 15.22% 26,526 15.02% 27,254 15.79%
Passbook savings accounts 24,005 13.40% 24,969 14.14% 26,551 15.39%
Money market deposit accounts 16,785 9.37% 14,885 8.43% 13,528 7.84%
Fixed-rate certificates which
mature in the year ending:
Within one year 77,440 43.22% 69,816 39.53% 62,169 36.03%
After 1 year but within 3 years 19,257 10.75% 25,354 14.36% 28,648 16.60%
After 3 years but within 5 years 6,652 3.71% 7,271 4.12% 6,526 3.78%
Certificates maturing thereafter 1,476 0.82% 2,904 1.63% 3,989 2.31%
-------- ------ -------- ------ -------- ------
Total deposit $179,158 100.00% $176,619 100.00% $172,569 100.00%
======== ====== ======== ========
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
90
<PAGE>
EXHIBIT 20
Deposit Activity
For the Nine Months Ended March 31, 1996 and 1997 and
For the Years Ended June 30, 1995 and 1996
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year ended June 30,
------------------------------ ------------------------------
1997 1996 1996 1995
--------- --------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Beginning balance $ 176,619 $ 172,569 $ 172,569 $ 177,107
Net deposits (withdrawals)
before interest credited (2,946) (477) (3,529) (11,328)
Interest credited 5,485 5,739 7,579 6,790
--------- --------- --------- ---------
Net increase (decrease)
in deposits 2,539 5,262 4,050 (4,538)
--------- --------- --------- ---------
Ending balance $ 179,158 $ 177,831 $ 176,619 $ 172,569
========= ========= ========= =========
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
91
<PAGE>
EXHIBIT 21
Borrowed Funds Activity
At of For the Nine Months Ended March 31, 1996 and 1997 and
For The Years Ended June 30, 1995 and 1996
<TABLE>
<CAPTION>
At or for the At or
Nine Months For the Year
Ended March 31, Ended June 30,
------------------------ -------------------------
1997 1996 1996 1995
------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Maximum amount of borrowings
outstanding at any month end:
Securities sold under agreements
to repurchase $ 1,459 $ 1,432 $ 1,432 $ 1,956
FHLB advances 2,850 9,100 9,100 11,000
Approximate average short-term
borrowings outstanding with respect to:
Securitties sold under agreements
to repurchase $ 1,396 $ 1,215 $ 1,260 $ 1,537
FHLB advances 861 7,939 6,965 4,686
Approximate weighted average
rate paid on:
Securities sold under agreements
to repurchase 3.50% 3.57% 3.56% 3.28%
FHLB advances 4.88% 6.08% 6.21% 5.18%
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
92
<PAGE>
EXHIBIT 22
OFFICES OF PIONEER BANK
BAKER CITY, OREGON
<TABLE>
<CAPTION>
Year Square Total
Description/Address Opened Footage Deposits
- ------------------- -------- ------- --------
(In thousands)
<S> <C> <C> <C>
Main Office:
2055 First Street 1980 10,700 $ 54,839
Baker City, Oregon 97814
Branch Offices:
La Grande Branch 1975 6,758 43,188
1215 Adams Avenue
La Grande, Oregon 97850
La Grande Branch 1983 3,655 9,889
1601 Adams Avenue
La Grande, Oregon 97850
Ontario Branch 1961 3,700 26,334
225 SW Fourth Avenue
Ontario, Oregon 97914
John Day Branch 1973 2,420 13,226
150 West Main Street
John Day, Oregon 97845
Burns Branch 1975 2,567 12,246
77 West Adams Street
Burns, Oregon 97720
Enterprise Branch 1976 3,360 19,396
205 West Main Street
Enterprise, Oregon 97828
</TABLE>
Source: Oregon Trail Financial Corp.'s Prospectus
93
<PAGE>
EXHIBIT 23
LIST OF KEY OFFICERS AND DIRECTORS
March 31, 1997
<TABLE>
<CAPTION>
Term Director
Name Expires Age(1) Position(s) Held with the Bank Since
- ------------------------ --------------- ------------ ------------------------------------------- ----------------------
<S> <C> <C> <C>
John Gentry 1998 49 Chairman of the Board 1992
John A. Lienkaemper 1998 60 Director 1980
Albert H. Durgan 1999 66 Director 1986
Edward H. Elms 1999 49 Director 1987
Stephen R. Whittemore 2000 47 Director 1984
Charles Rouse 2000 51 Director 1992
Dan L. Webber --- 56 President and CEO ---
Jerry F. Aldape --- 48 Senior VP/Support Services and ---
Corporate Secretary
Don S. Reay --- 50 Senior VP/Customer Services and ---
Chief Lending Officer
Nadine J. Johnson --- 48 Vice President and Treasurer/ ---
Controller
</TABLE>
(1) As of March 31, 1997.
Source: Oregon Trail Financial Corp.'s Prospectus
94
<PAGE>
EXHIBIT 24
Key Demographic Data and Trends
Market Area, Oregon and the United States
1990, 1996 and 2001
<TABLE>
<CAPTION>
1990 1996 % Chg. 2001 % Chg.
---- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Population
Market Area 86,777 92,754 6.9% 97,533 5.2%
Oregon 2,842,321 3,195,362 12.4% 3,477,756 8.8%
United States 248,709,873 265,294,885 6.7% 278,802,003 5.1%
Households
Market Area 33,258 35,616 7.1% 37,523 5.4%
Oregon 1,103,313 1,246,792 13.0% 1,359,653 9.1%
United States 91,947,410 98,239,161 6.8% 103,293,062 5.1%
Per Capita Income
Market Area $ 10,580 $ 12,749 20.5% -- --
Oregon 11,306 16,717 47.9% -- --
United States 12,313 16,738 35.9% -- --
Median Household Income
Market Area $ 21,841 $ 26,659 22.1% $ 27,195 2.0%
Oregon 25,509 33,603 31.7% 35,070 4.4%
United States 28,525 34,530 21.1% 33,189 (3.9)%
</TABLE>
Source: Data Users Center and CACI
95
<PAGE>
EXHIBIT 25
Key Housing Data
Market Area, Oregon and the United States
1990
<TABLE>
<CAPTION>
<S> <C>
Occupied Housing Units
Market Area 33,258
Oregon 1,103,313
United States 91,947,410
Occupancy Rate
Market Area
Owner-Occupied 66.6%
Renter-Occupied 33.4%
Oregon
Owner-Occupied 63.1%
Renter-Occupied 36.9%
United States
Owner-Occupied 64.2%
Renter-Occupied 35.8%
Median Housing Values
Market Area $ 44,259
Oregon 66,800
United States 79,098
Median Rent
Market Area $ 296
Oregon 408
United States 374
</TABLE>
Source: U.S. Department of Commerce and CACI Sourcebook
96
<PAGE>
EXHIBIT 26
Major Sources of Employment by Industry Group
Market Area, Oregon and the United States
1990
<TABLE>
<CAPTION>
Market United
Industry Group Area Oregon States
- -------------- ------ ------ ------
<S> <C> <C> <C>
Agriculture/Mining 18.4% 5.2% 1.3%
Construction 5.1% 5.6% 4.8%
Manufacturing 15.0% 17.7% 19.2%
Transportation/Utilities 5.8% 6.5% 5.9%
Wholesale/Retail 20.1% 22.8% 27.5%
Finance, Insurance, & Real Estate 3.4% 6.0% 7.3%
Services 32.2% 36.2% 34.0%
</TABLE>
Source: Bureau of the Census, County Business Patterns
97
<PAGE>
EXHIBIT 27
Unemployment Rates
Market Area, Oregon and the United States
1994, 1995 and 1996
<TABLE>
<CAPTION>
Location 1994 1995 1996
- ------------- ---- ---- ----
<S> <C> <C>
Market Area N/A 8.1% 10.0%
Oregon 5.4% 4.8% 5.9%
United States 6.1% 5.6% 5.0%
</TABLE>
Source: Oregon Area Labor Department
98
<PAGE>
EXHIBIT 28
Market Share of Deposits
Baker, Grant, Harney, Malheur, Union and Wallowa Counties
June 30, 1996
<TABLE>
<CAPTION>
Market
Area's Pioneer's Pioneer's
Deposits Share Share
($000) ($000) (%)
-------- ---------- ----------
<S> <C> <C> <C>
Banks $597,138 -- --
Thrifts 266,644 $ 176,671 66.3%
Credit Unions 48,827 --
-------- ---------- ----------
$912,609 $ 176,671 19.4%
</TABLE>
Source: Sheshunoff
99
<PAGE>
EXHIBIT 29
National Interest Rates by Quarter
1993-1996
<TABLE>
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1993 1993 1993 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
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%
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1994 1994 1994 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
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%
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1995 1995 1995 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
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%
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1996 1996 1996 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
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%
<CAPTION>
1st Qtr.
1997
----
<S> <C>
Prime Rate 8.50%
90-Day Treasury Bills 4.95%
1-Year Treasury Bills 5.95%
30-Year Treasury Bills 7.06%
</TABLE>
Source: The Wall Street Journal
100
<PAGE>
EXHIBIT 30
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
===========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Incorporated AL NASDAQ 17.750 18.500 8.500 -4.05 23.48 14.33
PLE Pinnacle Bancshares Inc. AL AMSE 22.000 22.625 4.000 0.57 -0.56 17.34
SRN Southern Banc Company Inc. AL AMSE 14.375 15.125 11.375 0.88 0.88 14.42
SCBS Southern Community Bancshares AL NASDAQ 14.000 14.250 13.000 0.00 5.66 13.54
SZB SouthFirst Bancshares Inc. AL AMSE 15.000 16.000 10.625 8.11 9.09 15.82
FFBH First Federal Bancshares of AR AR NASDAQ 19.250 20.375 10.000 1.32 0.65 16.79
HCBB HCB Bancshares Inc. AR NASDAQ 13.000 13.250 12.625 NA NA NA
FTF Texarkana First Financial Corp AR AMSE 17.625 17.625 10.000 2.17 3.68 14.70
AHM Ahmanson & Company (H.F.) CA NYSE 41.500 44.875 2.688 5.06 0.30 19.05
AFFFZ America First Financial Fund CA NASDAQ 38.000 38.000 14.500 25.62 16.48 28.43
BPLS Bank Plus Corp. CA NASDAQ 10.500 14.000 5.000 3.70 -20.75 8.88
BVCC Bay View Capital Corp. CA NASDAQ 25.063 28.625 5.625 1.26 -11.09 14.82
BYFC Broadway Financial Corp. CA NASDAQ 10.750 11.250 9.000 0.00 3.61 14.27
CFHC California Financial Holding CA NASDAQ 29.375 29.500 5.909 -0.42 0.86 19.22
CENF CENFED Financial Corp. CA NASDAQ 29.000 31.818 4.545 3.57 -5.48 20.05
CSA Coast Savings Financial CA NYSE 44.000 48.750 1.625 5.07 -5.63 23.45
DSL Downey Financial Corp. CA NYSE 20.500 22.500 1.321 6.29 -7.42 14.98
FSSB First FS&LA of San Bernardino CA NASDAQ 9.250 14.500 6.875 0.00 -2.63 13.68
FED FirstFed Financial Corp. CA NYSE 27.875 28.375 1.125 14.95 5.69 18.48
GLN Glendale Federal Bank FSB CA NYSE 26.000 589.500 5.250 4.52 -0.48 15.31
GDW Golden West Financial CA NYSE 68.250 74.250 3.875 1.30 -0.18 42.19
GWF Great Western Financial CA NYSE 48.750 48.750 3.950 14.37 10.80 17.55
HTHR Hawthorne Financial Corp. CA NASDAQ 11.375 35.500 2.250 19.74 3.41 12.37
HEMT HF Bancorp Inc. CA NASDAQ 13.500 14.500 8.188 -2.70 1.89 12.87
HBNK Highland Federal Bank FSB CA NASDAQ 21.500 24.000 11.000 2.38 -4.97 15.70
MBBC Monterey Bay Bancorp Inc. CA NASDAQ 15.875 18.250 8.750 -0.78 -10.56 15.01
PFFB PFF Bancorp Inc. CA NASDAQ 15.313 16.938 10.375 6.53 -5.41 14.09
PROV Provident Financial Holdings CA NASDAQ 16.000 17.188 10.125 3.23 0.76 17.06
QCBC Quaker City Bancorp Inc. CA NASDAQ 16.000 16.400 6.000 3.90 4.58 14.56
REDF RedFed Bancorp Inc. CA NASDAQ 14.375 15.438 7.750 5.50 2.68 10.37
SGVB SGV Bancorp Inc. CA NASDAQ 12.875 13.875 7.750 -2.83 -7.21 12.41
WES Westcorp CA NYSE 16.875 23.875 3.703 4.65 -4.93 12.29
FFBA First Colorado Bancorp Inc. CO NASDAQ 17.875 18.875 3.189 11.72 4.38 11.60
EGFC Eagle Financial Corp. CT NASDAQ 28.000 30.750 6.198 2.28 -5.08 22.91
<CAPTION>
PER SHARE PRICING RATIOS
=================== =========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Incorporated AL NASDAQ 143.97 0.46 23.36 123.87 12.33 13.98
PLE Pinnacle Bancshares Inc. AL AMSE 224.32 0.74 17.46 126.87 9.81 11.70
SRN Southern Banc Company Inc. AL AMSE 85.33 0.53 62.50 99.69 16.85 26.62
SCBS Southern Community Bancshares AL NASDAQ 61.64 NA NA 103.40 22.71 NA
SZB SouthFirst Bancshares Inc. AL AMSE 113.15 0.50 NM 94.82 13.26 88.24
FFBH First Federal Bancshares of AR AR NASDAQ 106.16 NA NA 114.65 18.13 NA
HCBB HCB Bancshares Inc. AR NASDAQ NA NA NA NA NA NA
FTF Texarkana First Financial Corp AR AMSE 91.71 3.45 13.35 119.90 19.22 10.88
AHM Ahmanson & Company (H.F.) CA NYSE 484.09 0.88 32.94 217.85 8.57 16.34
AFFFZ America First Financial Fund CA NASDAQ 363.20 1.60 8.39 133.66 10.46 7.12
BPLS Bank Plus Corp. CA NASDAQ 180.58 0.00 NM 118.24 5.81 NM
BVCC Bay View Capital Corp. CA NASDAQ 234.74 0.31 27.85 169.12 10.68 16.93
BYFC Broadway Financial Corp. CA NASDAQ 133.04 0.25 NM 75.33 8.08 51.19
CFHC California Financial Holding CA NASDAQ 275.94 0.44 20.26 152.84 10.65 13.11
CENF CENFED Financial Corp. CA NASDAQ 392.92 0.32 15.93 144.64 7.38 10.90
CSA Coast Savings Financial CA NYSE 473.15 0.00 65.67 187.63 9.30 19.73
DSL Downey Financial Corp. CA NYSE 205.15 0.30 24.70 136.85 9.99 14.54
FSSB First FS&LA of San Bernardino CA NASDAQ 315.79 0.00 NM 67.62 2.93 NM
FED FirstFed Financial Corp. CA NYSE 391.06 0.00 29.97 150.84 7.13 15.07
GLN Glendale Federal Bank FSB CA NYSE 306.00 0.00 76.47 169.82 8.50 19.55
GDW Golden West Financial CA NYSE 673.38 0.41 10.60 161.77 10.14 8.75
GWF Great Western Financial CA NYSE 310.97 1.00 73.86 277.78 15.68 25.39
HTHR Hawthorne Financial Corp. CA NASDAQ 318.71 0.00 36.69 91.96 3.57 30.74
HEMT HF Bancorp Inc. CA NASDAQ 156.71 0.00 NM 104.90 8.61 50.00
HBNK Highland Federal Bank FSB CA NASDAQ 210.41 0.00 37.72 136.94 10.22 21.50
MBBC Monterey Bay Bancorp Inc. CA NASDAQ 130.17 0.10 49.61 105.76 12.20 27.37
PFFB PFF Bancorp Inc. CA NASDAQ 134.55 0.00 102.09 108.68 11.38 26.86
PROV Provident Financial Holdings CA NASDAQ 119.94 NA NA 93.79 13.34 NA
QCBC Quaker City Bancorp Inc. CA NASDAQ 163.42 0.00 32.65 109.89 9.79 17.58
REDF RedFed Bancorp Inc. CA NASDAQ 126.84 0.00 159.72 138.62 11.33 23.96
SGVB SGV Bancorp Inc. CA NASDAQ 170.69 0.00 55.98 103.75 7.54 21.82
WES Westcorp CA NYSE 130.92 0.40 14.80 137.31 12.89 67.50
FFBA First Colorado Bancorp Inc. CO NASDAQ 91.18 0.35 22.63 154.09 19.60 16.71
EGFC Eagle Financial Corp. CT NASDAQ 332.04 0.92 15.73 122.22 8.43 11.86
</TABLE>
101
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
=========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFES First Federal of East Hartford CT NASDAQ 25.375 28.500 4.000 5.73 -1.46 23.00
NTMG Nutmeg Federal S&LA CT NASDAQ 7.375 8.000 4.645 -6.35 0.00 7.35
WBST Webster Financial Corporation CT NASDAQ 40.875 41.250 3.864 9.36 3.81 23.72
IFSB Independence Federal Savings DC NASDAQ 8.875 10.250 0.250 4.41 -1.39 13.39
BANC BankAtlantic Bancorp Inc. FL NASDAQ 13.875 14.125 0.178 9.90 5.11 8.23
BKUNA BankUnited Financial Corp. FL NASDAQ 9.875 12.750 2.320 11.27 -1.25 7.33
FFFG F.F.O. Financial Group Inc. FL NASDAQ 4.500 10.000 0.563 2.86 20.00 2.46
FFLC FFLC Bancorp Inc. FL NASDAQ 26.750 28.250 12.750 0.70 0.47 22.16
FFPB First Palm Beach Bancorp Inc. FL NASDAQ 29.750 30.000 14.000 7.69 1.28 21.04
OCWN Ocwen Financial Corporation FL NASDAQ 29.500 34.750 20.250 -4.84 -13.87 8.40
CCFH CCF Holding Company GA NASDAQ 16.125 16.375 10.750 -0.77 -0.77 14.38
EBSI Eagle Bancshares GA NASDAQ 16.141 19.000 1.875 1.68 -2.18 12.74
FSTC First Citizens Corporation GA NASDAQ 24.750 26.750 2.955 6.45 0.00 15.18
FGHC First Georgia Holding Inc. GA NASDAQ 7.500 8.250 0.815 -8.40 0.00 4.08
FLFC First Liberty Financial Corp. GA NASDAQ 21.250 22.500 2.667 -2.30 -3.41 11.87
FLAG FLAG Financial Corp. GA NASDAQ 12.750 15.000 3.200 2.00 0.00 10.25
SFNB Security First Network Bank GA NASDAQ 5.500 41.500 5.500 -31.25 -42.11 3.79
CASH First Midwest Financial Inc. IA NASDAQ 16.000 17.500 8.833 4.92 -5.88 15.18
GFSB GFS Bancorp Inc. IA NASDAQ 14.250 14.250 5.500 5.56 28.09 10.33
HZFS Horizon Financial Svcs Corp. IA NASDAQ 19.250 19.250 10.375 13.24 13.24 19.33
MFCX Marshalltown Financial Corp. IA NASDAQ 15.000 16.750 8.500 -4.00 2.56 14.06
MIFC Mid-Iowa Financial Corp. IA NASDAQ 9.000 9.000 2.474 22.03 5.88 6.71
MWBI Midwest Bancshares Inc. IA NASDAQ 31.500 31.500 11.750 4.13 17.76 27.68
FFFD North Central Bancshares Inc. IA NASDAQ 15.500 16.625 8.071 -1.59 0.00 14.59
PMFI Perpetual Midwest Financial IA NASDAQ 19.250 22.000 10.000 -0.97 -4.94 17.71
SFFC StateFed Financial Corporation IA NASDAQ 18.875 19.750 10.500 4.86 2.69 19.00
ABCL Alliance Bancorp Inc. IL NASDAQ 29.719 31.250 9.000 7.10 -3.74 22.93
AVND Avondale Financial Corp. IL NASDAQ 13.500 18.500 11.500 0.93 -25.00 14.88
BFFC Big Foot Financial Corp. IL NASDAQ 15.875 16.000 12.313 8.55 15.45 14.28
CBCI Calumet Bancorp Inc. IL NASDAQ 38.875 38.875 10.333 10.28 7.24 35.23
CBSB Charter Financial Inc. IL NASDAQ 17.875 18.000 6.361 0.00 12.60 13.22
CNBA Chester Bancorp Inc. IL NASDAQ 14.625 15.375 12.625 0.00 -0.85 14.50
CBK Citizens First Financial Corp. IL AMSE 16.000 16.750 9.500 8.47 3.23 15.91
COVB CoVest Bancshares Inc. IL NASDAQ 18.750 18.750 8.000 4.17 4.87 16.36
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFES First Federal of East Hartford CT NASDAQ 367.95 0.60 16.58 110.33 6.90 10.40
NTMG Nutmeg Federal S&LA CT NASDAQ 129.09 0.08 29.50 100.34 5.71 21.69
WBST Webster Financial Corporation CT NASDAQ 467.11 0.70 22.84 172.32 8.75 46.45
IFSB Independence Federal Savings DC NASDAQ 205.27 0.00 30.60 66.28 4.32 13.65
BANC BankAtlantic Bancorp Inc. FL NASDAQ 149.47 0.12 14.45 168.59 9.28 17.79
BKUNA BankUnited Financial Corp. FL NASDAQ 164.25 0.00 42.93 134.72 6.01 18.63
FFFG F.F.O. Financial Group Inc. FL NASDAQ 37.96 0.00 18.00 182.93 11.85 13.24
FFLC FFLC Bancorp Inc. FL NASDAQ 153.10 0.42 28.46 120.71 17.47 19.53
FFPB First Palm Beach Bancorp Inc. FL NASDAQ 311.07 0.50 NM 141.40 9.56 198.33
OCWN Ocwen Financial Corporation FL NASDAQ 98.86 NA NA 351.19 29.84 NA
CCFH CCF Holding Company GA NASDAQ 100.51 0.70 73.30 112.13 16.04 48.86
EBSI Eagle Bancshares GA NASDAQ 146.34 0.58 18.77 126.70 11.03 14.04
FSTC First Citizens Corporation GA NASDAQ 162.02 0.43 9.71 163.04 15.28 9.82
FGHC First Georgia Holding Inc. GA NASDAQ 48.19 0.05 25.86 183.82 15.56 20.83
FLFC First Liberty Financial Corp. GA NASDAQ 161.56 0.37 17.00 179.02 13.15 14.76
FLAG FLAG Financial Corp. GA NASDAQ 109.02 0.34 NM 124.39 11.70 85.00
SFNB Security First Network Bank GA NASDAQ 9.44 0.00 NM 145.12 58.26 NM
CASH First Midwest Financial Inc. IA NASDAQ 130.93 0.33 16.67 105.40 12.22 11.43
GFSB GFS Bancorp Inc. IA NASDAQ 89.24 0.20 16.96 137.95 15.97 13.70
HZFS Horizon Financial Svcs Corp. IA NASDAQ 184.16 0.32 25.00 99.59 10.45 18.16
MFCX Marshalltown Financial Corp. IA NASDAQ 90.05 0.00 51.72 106.69 16.66 27.27
MIFC Mid-Iowa Financial Corp. IA NASDAQ 73.73 0.08 14.52 134.13 12.21 NA
MWBI Midwest Bancshares Inc. IA NASDAQ 399.05 0.56 18.31 113.80 7.89 11.50
FFFD North Central Bancshares Inc. IA NASDAQ 59.34 0.25 16.67 106.24 26.12 14.49
PMFI Perpetual Midwest Financial IA NASDAQ 208.56 0.30 128.33 108.70 9.23 37.75
SFFC StateFed Financial Corporation IA NASDAQ 107.94 0.40 17.48 99.34 17.49 13.98
ABCL Alliance Bancorp Inc. IL NASDAQ 246.19 0.10 29.72 129.61 12.07 17.28
AVND Avondale Financial Corp. IL NASDAQ 180.25 0.00 NM 90.73 7.49 NM
BFFC Big Foot Financial Corp. IL NASDAQ 83.61 NA NA 111.17 18.99 NA
CBCI Calumet Bancorp Inc. IL NASDAQ 220.97 0.00 17.83 110.35 17.59 14.73
CBSB Charter Financial Inc. IL NASDAQ 93.55 0.26 22.07 135.21 19.11 17.35
CNBA Chester Bancorp Inc. IL NASDAQ 65.30 NA NA 100.86 22.40 NA
CBK Citizens First Financial Corp. IL AMSE 97.05 NA NA 100.57 16.49 NA
COVB CoVest Bancshares Inc. IL NASDAQ 183.11 0.40 62.50 114.61 10.24 25.68
</TABLE>
102
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CSBF CSB Financial Group Inc. IL NASDAQ 12.000 12.500 8.810 3.23 15.66 12.78
DFIN Damen Financial Corp. IL NASDAQ 14.500 15.000 11.000 3.57 0.00 14.12
EGLB Eagle BancGroup Inc. IL NASDAQ 15.250 16.250 10.500 1.24 -3.94 16.28
FBCI Fidelity Bancorp Inc. IL NASDAQ 18.750 20.875 9.500 0.00 -4.76 17.74
FFBI First Financial Bancorp Inc. IL NASDAQ 15.500 16.500 9.000 -3.13 -6.06 17.50
FMBD First Mutual Bancorp Inc. IL NASDAQ 14.750 16.000 11.125 5.36 -5.60 16.60
GTPS Great American Bancorp IL NASDAQ 15.750 16.500 11.875 0.00 -4.55 18.36
HMLK Hemlock Federal Financial Corp IL NASDAQ 13.250 13.250 12.500 1.92 NA NA
HBEI Home Bancorp of Elgin Inc. IL NASDAQ 16.063 16.125 11.813 3.63 8.90 14.39
HMCI HomeCorp Inc. IL NASDAQ 14.250 15.167 3.333 1.79 6.88 12.52
KNK Kankakee Bancorp Inc. IL AMSE 28.500 28.750 13.625 2.24 4.11 25.74
MAFB MAF Bancorp Inc. IL NASDAQ 41.375 42.313 2.727 2.16 2.16 24.46
NBSI North Bancshares Inc. IL NASDAQ 19.500 20.125 11.000 0.00 5.41 16.94
PFED Park Bancorp Inc. IL NASDAQ 14.500 16.125 10.188 -1.69 -5.69 15.87
PSFI PS Financial Inc. IL NASDAQ 13.750 14.250 11.625 1.85 0.00 14.88
SWBI Southwest Bancshares IL NASDAQ 20.500 20.500 7.833 6.49 3.12 15.19
SPBC St. Paul Bancorp Inc. IL NASDAQ 32.250 32.250 3.066 15.18 20.56 17.16
STND Standard Financial Inc. IL NASDAQ 23.875 23.938 9.125 3.24 17.18 16.74
SFSB SuburbFed Financial Corp. IL NASDAQ 24.875 25.000 6.667 6.99 9.79 21.23
WCBI Westco Bancorp IL NASDAQ 23.625 23.625 7.667 5.00 9.88 18.89
FBCV 1ST Bancorp IN NASDAQ 30.750 33.250 3.990 -6.82 1.65 31.19
AMFC AMB Financial Corp. IN NASDAQ 15.000 15.000 9.750 5.26 8.11 14.29
ASBI Ameriana Bancorp IN NASDAQ 16.000 16.375 2.750 2.40 -1.54 13.38
ATSB AmTrust Capital Corp. IN NASDAQ 12.000 12.500 7.750 4.35 4.35 13.72
CBCO CB Bancorp Inc. IN NASDAQ 33.750 34.250 7.125 3.05 3.05 17.21
FFWC FFW Corp. IN NASDAQ 26.000 26.750 12.500 -0.95 2.46 22.75
FFED Fidelity Federal Bancorp IN NASDAQ 9.000 14.773 1.534 20.00 -10.00 5.17
FISB First Indiana Corporation IN NASDAQ 20.375 24.300 1.642 5.84 -9.85 13.51
HFGI Harrington Financial Group IN NASDAQ 11.500 11.750 9.750 6.98 9.52 7.57
HBFW Home Bancorp IN NASDAQ 20.250 20.875 12.500 0.62 2.53 17.43
HBBI Home Building Bancorp IN NASDAQ 21.000 22.000 10.000 2.44 0.00 19.88
HOMF Home Federal Bancorp IN NASDAQ 26.750 28.000 2.148 4.90 -1.83 16.54
HWEN Home Financial Bancorp IN NASDAQ 15.750 15.750 9.875 1.61 5.88 15.12
INCB Indiana Community Bank SB IN NASDAQ 15.000 19.000 11.000 -6.25 -14.29 12.27
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SBF CSB Financial Group Inc. IL NASDAQ 50.96 0.00 54.55 93.90 23.55 37.50
FIN Damen Financial Corp. IL NASDAQ 70.04 0.24 30.85 102.69 20.70 23.77
GLB Eagle BancGroup Inc. IL NASDAQ 134.52 NA NA 93.67 11.34 NA
BCI Fidelity Bancorp Inc. IL NASDAQ 174.07 0.26 21.55 105.69 10.77 15.37
FBI First Financial Bancorp Inc. IL NASDAQ 224.21 0.00 NM 88.57 6.91 15.98
MBD First Mutual Bancorp Inc. IL NASDAQ 113.48 0.31 113.46 88.86 13.00 47.58
TPS Great American Bancorp IL NASDAQ 78.35 0.40 98.44 85.78 20.10 41.45
MLK Hemlock Federal Financial Corp IL NASDAQ NA NA NA NA NA NA
BEI Home Bancorp of Elgin Inc. IL NASDAQ 51.17 NA NA 111.63 31.39 NA
MCI HomeCorp Inc. IL NASDAQ 198.71 0.00 71.25 113.82 7.17 20.07
NK Kankakee Bancorp Inc. IL AMSE 241.08 0.42 19.93 110.72 11.82 15.16
AFB MAF Bancorp Inc. IL NASDAQ 310.33 0.35 17.61 169.15 13.33 13.13
BSI North Bancshares Inc. IL NASDAQ 115.96 0.42 38.24 115.11 16.82 27.86
FED Park Bancorp Inc. IL NASDAQ 73.20 NA NA 91.37 19.81 NA
SFI PS Financial Inc. IL NASDAQ 34.42 NA NA 92.41 39.95 NA
WBI Southwest Bancshares IL NASDAQ 140.81 0.74 20.92 134.96 14.56 15.07
PBC St. Paul Bancorp Inc. IL NASDAQ 196.36 0.39 26.22 187.94 16.42 17.53
TND Standard Financial Inc. IL NASDAQ 153.59 0.34 34.11 142.62 15.54 22.11
FSB SuburbFed Financial Corp. IL NASDAQ 323.41 0.32 25.64 117.17 7.69 15.74
CBI Westco Bancorp IL NASDAQ 121.34 0.54 19.52 125.07 19.47 15.05
BCV 1ST Bancorp IN NASDAQ 391.51 0.39 33.79 98.59 7.85 205.00
MFC AMB Financial Corp. IN NASDAQ 87.69 NA NA 104.97 17.11 NA
SBI Ameriana Bancorp IN NASDAQ 123.37 0.58 22.22 119.58 12.97 15.24
TSB AmTrust Capital Corp. IN NASDAQ 134.92 0.05 27.27 87.46 8.89 44.44
BCO CB Bancorp Inc. IN NASDAQ 194.92 0.00 20.58 196.11 17.31 17.58
FWC FFW Corp. IN NASDAQ 227.32 0.60 13.33 114.29 11.44 10.88
FED Fidelity Federal Bancorp IN NASDAQ 100.51 0.70 60.00 174.08 8.95 33.33
ISB First Indiana Corporation IN NASDAQ 140.99 0.46 16.57 150.81 14.45 NA
FGI Harrington Financial Group IN NASDAQ 158.24 0.00 22.55 151.92 7.27 15.33
BFW Home Bancorp IN NASDAQ 124.96 0.20 28.52 116.18 16.21 18.08
BBI Home Building Bancorp IN NASDAQ 150.18 0.30 67.74 105.63 13.98 28.00
OMF Home Federal Bancorp IN NASDAQ 195.78 0.37 14.15 161.73 13.66 12.27
WEN Home Financial Bancorp IN NASDAQ 81.17 NA NA 104.17 19.40 NA
NCB Indiana Community Bank SB IN NASDAQ 99.05 3.36 100.00 122.25 15.14 31.25
</TABLE>
103
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IFSL Indiana Federal Corporation IN NASDAQ 26.500 27.250 4.000 7.07 -2.75 15.03
LOGN Logansport Financial Corp. IN NASDAQ 13.250 15.000 11.125 0.00 -1.85 12.41
MARN Marion Capital Holdings IN NASDAQ 22.500 23.250 14.250 3.45 2.27 21.99
MFBC MFB Corp. IN NASDAQ 19.375 19.750 10.500 -0.64 0.73 19.59
NEIB Northeast Indiana Bancorp IN NASDAQ 15.500 15.750 11.250 14.81 8.77 14.87
PFDC Peoples Bancorp IN NASDAQ 22.750 23.000 5.375 0.00 -1.09 18.86
PERM Permanent Bancorp Inc. IN NASDAQ 25.500 25.500 9.750 8.51 13.33 19.24
RIVR River Valley Bancorp IN NASDAQ 14.750 15.500 13.250 1.72 -3.28 14.37
SOBI Sobieski Bancorp Inc. IN NASDAQ 14.750 16.000 10.000 1.72 5.36 17.52
FFSL First Independence Corp. KS NASDAQ 11.375 12.250 5.438 4.60 -7.14 11.41
LARK Landmark Bancshares Inc. KS NASDAQ 20.000 20.000 9.750 3.90 6.67 18.11
MCBS Mid Continent Bancshares Inc. KS NASDAQ 25.813 27.000 9.750 -0.96 3.25 19.46
CKFB CKF Bancorp Inc. KY NASDAQ 19.250 20.750 11.375 1.32 2.67 16.59
CLAS Classic Bancshares Inc. KY NASDAQ 14.625 14.750 10.375 8.33 6.36 14.48
FFKY First Federal Financial Corp. KY NASDAQ 19.250 22.000 3.063 -3.75 -3.75 12.16
FLKY First Lancaster Bancshares KY NASDAQ 15.250 16.250 13.125 0.00 -4.69 14.44
FTSB Fort Thomas Financial Corp. KY NASDAQ 10.125 17.750 9.250 -7.95 -13.83 10.19
FKKY Frankfort First Bancorp Inc. KY NASDAQ 11.000 15.875 9.750 10.00 4.76 9.93
GWBC Gateway Bancorp Inc. KY NASDAQ 16.875 17.000 11.000 1.50 17.39 15.96
GTFN Great Financial Corporation KY NASDAQ 33.750 34.750 13.875 2.27 5.06 19.83
HFFB Harrodsburg First Fin Bancorp KY NASDAQ 15.000 19.000 12.375 -1.64 -4.76 15.27
KYF Kentucky First Bancorp Inc. KY AMSE 10.875 15.250 10.625 -1.14 -8.42 10.86
ANA Acadiana Bancshares Inc. LA AMSE 19.250 19.250 11.690 6.94 10.00 16.70
CZF CitiSave Financial Corp LA AMSE 20.000 20.000 12.750 1.27 45.45 12.95
GSLA GS Financial Corp. LA NASDAQ 14.250 14.250 13.375 1.79 NA NA
ISBF ISB Financial Corporation LA NASDAQ 22.500 26.125 12.938 -4.26 -10.45 17.45
MERI Meritrust Federal SB LA NASDAQ 36.250 37.500 13.500 2.84 2.11 23.34
TSH Teche Holding Co. LA AMSE 17.875 17.875 11.375 10.00 19.17 15.23
AFCB Affiliated Community Bancorp MA NASDAQ 24.500 24.625 12.848 22.50 21.89 16.23
BFD BostonFed Bancorp Inc. MA AMSE 16.750 17.125 10.000 11.67 1.52 15.02
FAB FirstFed America Bancorp Inc. MA AMSE 14.625 15.250 13.625 0.86 0.00 14.03
ANBK American National Bancorp MD NASDAQ 14.250 14.875 4.639 -1.72 9.62 13.08
EQSB Equitable Federal Savings Bank MD NASDAQ 34.000 35.500 11.250 -3.20 3.82 24.91
FCIT First Citizens Financial Corp. MD NASDAQ 27.750 28.625 0.375 6.22 26.14 14.39
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IFSL Indiana Federal Corporation IN NASDAQ 171.10 0.72 24.31 176.31 15.49 17.21
LOGN Logansport Financial Corp. IN NASDAQ 63.12 3.40 18.93 106.77 20.99 14.72
MARN Marion Capital Holdings IN NASDAQ 95.40 0.80 18.29 102.32 23.58 15.10
MFBC MFB Corp. IN NASDAQ 135.08 0.22 28.49 98.90 14.34 19.38
NEIB Northeast Indiana Bancorp IN NASDAQ 98.07 0.31 16.85 104.24 15.81 14.35
PFDC Peoples Bancorp IN NASDAQ 124.27 0.59 16.98 120.63 18.31 12.50
PERM Permanent Bancorp Inc. IN NASDAQ 198.27 0.25 57.95 132.54 12.86 26.56
RIVR River Valley Bancorp IN NASDAQ 116.22 NA NA 102.64 12.69 NA
SOBI Sobieski Bancorp Inc. IN NASDAQ 104.10 0.07 50.86 84.19 14.17 25.88
FFSL First Independence Corp. KS NASDAQ 108.65 0.21 23.70 99.69 10.47 15.37
LARK Landmark Bancshares Inc. KS NASDAQ 123.78 0.40 20.83 110.44 16.16 16.39
MCBS Mid Continent Bancshares Inc. KS NASDAQ 189.54 0.40 14.75 132.65 13.62 12.97
CKFB CKF Bancorp Inc. KY NASDAQ 64.93 1.44 22.13 116.03 29.65 22.38
CLAS Classic Bancshares Inc. KY NASDAQ 97.06 0.13 45.70 101.00 15.07 27.59
FFKY First Federal Financial Corp. KY NASDAQ 89.38 0.49 17.99 158.31 21.54 15.04
FLKY First Lancaster Bancshares KY NASDAQ 42.19 NA NA 105.61 36.15 NA
FTSB Fort Thomas Financial Corp. KY NASDAQ 63.33 4.25 34.91 99.36 15.99 21.54
FKKY Frankfort First Bancorp Inc. KY NASDAQ 37.91 4.36 42.31 110.78 29.02 29.73
GWBC Gateway Bancorp Inc. KY NASDAQ 61.17 0.40 32.45 105.73 27.59 NA
GTFN Great Financial Corporation KY NASDAQ 213.32 0.48 23.28 170.20 15.82 23.77
HFFB Harrodsburg First Fin Bancorp KY NASDAQ 53.43 0.55 25.86 98.23 28.07 20.27
KYF Kentucky First Bancorp Inc. KY AMSE 67.41 3.50 20.14 100.14 16.13 15.76
ANA Acadiana Bancshares Inc. LA AMSE 95.81 NA NA 115.27 20.09 NA
CZF CitiSave Financial Corp LA AMSE 77.89 2.35 50.00 154.44 25.68 33.33
GSLA GS Financial Corp. LA NASDAQ NA NA NA NA NA NA
ISBF ISB Financial Corporation LA NASDAQ 134.11 0.35 27.44 128.94 16.78 20.27
MERI Meritrust Federal SB LA NASDAQ 295.27 0.65 21.32 155.31 12.28 13.23
TSH Teche Holding Co. LA AMSE 114.49 0.50 21.80 117.37 15.61 15.68
AFCB Affiliated Community Bancorp MA NASDAQ 163.40 0.43 17.01 150.96 14.99 14.85
BFD BostonFed Bancorp Inc. MA AMSE 157.82 0.20 26.17 111.52 10.61 19.25
FAB FirstFed America Bancorp Inc. MA AMSE 112.52 NA NA 104.24 13.00 NA
ANBK American National Bancorp MD NASDAQ 139.86 0.09 37.50 108.94 10.19 16.38
EQSB Equitable Federal Savings Bank MD NASDAQ 491.53 0.00 16.35 136.49 6.92 10.21
FCIT First Citizens Financial Corp. MD NASDAQ 235.68 0.00 25.46 192.84 11.77 17.02
</TABLE>
104
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HRBF Harbor Federal Bancorp Inc. MD NASDAQ 18.000 18.750 9.750 9.09 5.11 16.09
MFSL Maryland Federal Bancorp MD NASDAQ 39.750 40.000 4.329 12.77 6.00 29.67
WSB Washington Savings Bank, FSB MD AMSE 4.875 6.917 0.281 -1.28 -4.88 5.06
WHGB WHG Bancshares Corp. MD NASDAQ 14.250 14.750 10.875 2.70 4.59 14.00
MCBN Mid-Coast Bancorp Inc. ME NASDAQ 19.500 20.250 8.095 5.41 2.63 21.61
BWFC Bank West Financial Corp. MI NASDAQ 13.500 14.250 8.500 8.00 14.89 12.62
CFSB CFSB Bancorp Inc. MI NASDAQ 23.250 23.250 2.881 16.25 25.49 12.32
DNFC D & N Financial Corp. MI NASDAQ 18.125 18.875 2.500 4.32 0.00 10.56
FLGS Flagstar Bancorp Inc. MI NASDAQ 15.875 15.875 13.000 20.95 NA NA
MSBF MSB Financial Inc. MI NASDAQ 22.000 22.000 10.750 1.15 4.76 19.94
MSBK Mutual Savings Bank FSB MI NASDAQ 8.125 25.500 3.000 14.04 16.07 9.31
OFCP Ottawa Financial Corp. MI NASDAQ 21.000 22.750 10.250 0.60 6.33 15.07
SJSB SJS Bancorp MI NASDAQ 26.500 26.625 10.810 0.00 3.92 17.66
THR Three Rivers Financial Corp. MI AMSE 15.000 15.250 11.375 6.19 -0.83 15.23
BDJI First Federal Bancorporation MN NASDAQ 18.750 19.250 10.625 1.35 1.35 17.18
FFHH FSF Financial Corp. MN NASDAQ 16.625 18.250 7.750 0.00 -2.92 15.87
HMNF HMN Financial Inc. MN NASDAQ 21.250 23.750 9.313 6.25 -9.57 18.71
MIVI Mississippi View Holding Co. MN NASDAQ 15.000 15.625 8.500 0.00 0.84 15.55
QCFB QCF Bancorp Inc. MN NASDAQ 21.000 21.000 11.000 7.69 12.00 18.98
WEFC Wells Financial Corp. MN NASDAQ 14.500 16.000 9.000 3.57 -3.33 14.20
CMRN Cameron Financial Corp MO NASDAQ 16.750 17.000 10.688 5.51 1.52 16.92
CAPS Capital Savings Bancorp Inc. MO NASDAQ 17.500 18.250 6.125 35.92 25.00 10.89
CBES CBES Bancorp Inc. MO NASDAQ 16.500 17.500 12.625 0.00 -4.35 17.08
CNSB CNS Bancorp Inc. MO NASDAQ 15.500 17.500 11.000 -0.80 -11.43 14.73
FBSI First Bancshares Inc. MO NASDAQ 19.000 20.750 10.250 -1.30 -1.30 19.80
FTNB Fulton Bancorp Inc. MO NASDAQ 20.125 20.125 12.500 8.05 9.52 14.47
GSBC Great Southern Bancorp Inc. MO NASDAQ 16.938 18.000 1.146 -1.09 -1.81 7.35
HFSA Hardin Bancorp Inc. MO NASDAQ 14.625 15.500 11.000 0.86 1.74 15.37
JSBA Jefferson Savings Bancorp MO NASDAQ 28.875 30.750 13.250 1.76 1.76 23.22
JOAC Joachim Bancorp Inc. MO NASDAQ 14.875 15.250 11.500 1.71 6.25 13.59
LXMO Lexington B&L Financial Corp. MO NASDAQ 14.500 15.750 9.500 0.87 0.87 15.17
MBLF MBLA Financial Corp. MO NASDAQ 23.250 26.000 12.750 13.41 15.53 21.51
NASB North American Savings Bank MO NASDAQ 44.500 46.250 2.500 4.71 15.02 24.35
NSLB NS&L Bancorp Inc. MO NASDAQ 16.500 17.250 11.750 0.00 1.93 16.36
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HRBF Harbor Federal Bancorp Inc. MD NASDAQ 125.09 0.40 33.33 111.87 14.39 21.18
MFSL Maryland Federal Bancorp MD NASDAQ 351.54 0.69 19.88 133.97 11.31 13.71
WSB Washington Savings Bank, FSB MD AMSE 60.81 0.10 16.81 96.34 8.02 11.61
WHGB WHG Bancshares Corp. MD NASDAQ 63.97 NA NA 101.79 22.28 NA
MCBN Mid-Coast Bancorp Inc. ME NASDAQ 251.28 0.51 20.97 90.24 7.76 13.00
BWFC Bank West Financial Corp. MI NASDAQ 82.43 0.28 23.28 106.97 16.38 26.47
CFSB CFSB Bancorp Inc. MI NASDAQ 161.47 0.45 21.14 188.72 14.40 16.03
DNFC D & N Financial Corp. MI NASDAQ 183.80 0.00 17.26 171.64 9.86 12.76
FLGS Flagstar Bancorp Inc. MI NASDAQ NA NA NA NA NA NA
MSBF MSB Financial Inc. MI NASDAQ 120.04 0.50 17.60 110.33 18.33 13.92
MSBK Mutual Savings Bank FSB MI NASDAQ 155.01 0.00 50.78 87.27 5.24 NM
OFCP Ottawa Financial Corp. MI NASDAQ 170.42 0.35 30.00 139.35 12.32 17.80
SJSB SJS Bancorp MI NASDAQ 167.57 0.43 80.30 150.06 15.81 31.55
THR Three Rivers Financial Corp. MI AMSE 110.70 0.33 23.81 98.49 13.55 16.13
BDJI First Federal Bancorporation MN NASDAQ 153.76 0.00 36.06 109.14 12.19 18.20
FFHH FSF Financial Corp. MN NASDAQ 118.67 0.50 22.77 104.76 14.01 18.07
HMNF HMN Financial Inc. MN NASDAQ 131.36 0.00 21.25 113.58 16.18 18.16
MIVI Mississippi View Holding Co. MN NASDAQ 85.20 0.24 25.86 96.46 17.61 17.65
QCFB QCF Bancorp Inc. MN NASDAQ 104.92 0.00 14.38 110.64 20.02 11.73
WEFC Wells Financial Corp. MN NASDAQ 99.75 0.00 22.31 102.11 14.54 14.22
CMRN Cameron Financial Corp MO NASDAQ 73.71 0.28 20.94 99.00 22.72 16.75
CAPS Capital Savings Bancorp Inc. MO NASDAQ 125.76 0.21 23.03 160.70 13.92 15.77
CBES CBES Bancorp Inc. MO NASDAQ 92.90 NA NA 96.60 17.76 NA
CNSB CNS Bancorp Inc. MO NASDAQ 59.34 NA NA 105.23 26.12 NA
FBSI First Bancshares Inc. MO NASDAQ 137.96 0.20 16.10 95.96 13.77 12.93
FTNB Fulton Bancorp Inc. MO NASDAQ 57.85 NA NA 139.08 34.79 NA
GSBC Great Southern Bancorp Inc. MO NASDAQ 81.94 0.39 16.13 230.45 20.67 14.23
HFSA Hardin Bancorp Inc. MO NASDAQ 120.27 0.40 28.68 95.15 12.16 17.62
JSBA Jefferson Savings Bancorp MO NASDAQ 260.90 0.34 36.55 124.35 11.07 14.66
JOAC Joachim Bancorp Inc. MO NASDAQ 46.89 0.50 59.50 109.46 31.72 38.14
LXMO Lexington B&L Financial Corp. MO NASDAQ 54.92 NA NA 95.58 26.40 NA
MBLF MBLA Financial Corp. MO NASDAQ 159.41 0.40 23.72 108.09 14.59 18.16
NASB North American Savings Bank MO NASDAQ 305.41 0.67 11.59 182.75 14.57 11.87
NSLB NS&L Bancorp Inc. MO NASDAQ 82.10 0.50 37.50 100.86 20.10 28.45
</TABLE>
105
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PCBC Perry County Financial Corp. MO NASDAQ 19.875 21.500 12.375 4.61 4.61 18.06
RFED Roosevelt Financial Group MO NASDAQ 23.750 23.750 2.167 1.33 4.40 9.91
SMFC Sho-Me Financial Corp. MO NASDAQ 34.375 34.375 9.375 9.13 16.53 20.99
SMBC Southern Missouri Bancorp Inc. MO NASDAQ 17.000 17.500 8.875 7.94 6.25 15.85
CFTP Community Federal Bancorp MS NASDAQ 17.438 20.000 12.250 -5.10 -12.81 16.13
FFBS FFBS BanCorp Inc. MS NASDAQ 23.000 24.250 12.000 4.55 4.55 17.01
MGNL Magna Bancorp Inc. MS NASDAQ 23.313 23.750 0.844 33.22 26.02 9.61
EFBC Empire Federal Bancorp Inc. MT NASDAQ 13.000 14.438 12.500 0.00 -5.45 15.35
GBCI Glacier Bancorp Inc. MT NASDAQ 17.000 17.000 0.997 6.25 4.08 7.77
UBMT United Financial Corp. MT NASDAQ 19.500 22.500 5.625 0.00 0.00 19.94
WSTR WesterFed Financial Corp. MT NASDAQ 19.938 21.750 11.375 3.57 -4.49 18.44
CFNC Carolina Fincorp Inc. NC NASDAQ 14.375 15.250 13.000 -0.86 -4.96 13.91
CENB Century Bancorp Inc. NC NASDAQ 68.500 71.000 62.000 0.74 -3.52 73.45
COOP Cooperative Bankshares Inc. NC NASDAQ 21.000 22.500 3.467 0.00 2.44 17.49
SOPN First Savings Bancorp Inc. NC NASDAQ 21.250 21.250 13.500 8.28 6.25 18.04
GSFC Green Street Financial Corp. NC NASDAQ 17.625 18.875 12.125 0.71 -1.40 14.64
HFNC HFNC Financial Corp. NC NASDAQ 17.500 22.063 13.125 -1.41 -19.08 9.23
KSAV KS Bancorp Inc. NC NASDAQ 22.000 22.000 11.625 7.32 2.33 21.00
MBSP Mitchell Bancorp Inc. NC NASDAQ 16.250 16.750 10.190 0.00 5.69 15.17
NSBC NewSouth Bancorp, Inc. NC NASDAQ 24.375 24.375 20.250 3.72 NA NA
PDB Piedmont Bancorp Inc. NC AMSE 10.125 19.125 9.250 -4.71 -4.71 7.31
SSB Scotland Bancorp Inc NC AMSE 15.875 16.750 11.625 2.42 -3.79 13.74
SSFC South Street Financial Corp. NC NASDAQ 16.250 17.000 12.125 2.36 -1.52 14.64
SSM Stone Street Bancorp Inc. NC AMSE 26.125 27.250 16.250 1.46 -3.70 20.72
UFRM United Federal Savings Bank NC NASDAQ 11.000 11.250 1.750 -2.22 33.33 6.70
CFB Commercial Federal Corporation NE NYSE 34.750 39.000 1.083 -0.36 -3.81 18.99
EBCP Eastern Bancorp NH NASDAQ 26.250 26.375 3.000 3.96 5.00 17.86
NHTB New Hampshire Thrift Bncshrs NH NASDAQ 15.000 15.125 1.750 1.69 23.71 11.46
FBER 1st Bergen Bancorp NJ NASDAQ 13.875 15.125 9.000 2.78 -4.31 13.76
COFD Collective Bancorp Inc. NJ NASDAQ 43.750 44.000 1.351 3.55 5.74 18.89
FSPG First Home Bancorp Inc. NJ NASDAQ 18.625 19.375 1.898 0.68 -1.32 12.36
FMCO FMS Financial Corporation NJ NASDAQ 19.750 20.750 1.500 -2.47 0.00 14.59
IBSF IBS Financial Corp. NJ NASDAQ 14.875 16.250 7.312 -0.83 -2.25 11.45
LVSB Lakeview Financial NJ NASDAQ 29.875 33.500 7.335 9.63 -10.15 19.91
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PCBC Perry County Financial Corp. MO NASDAQ 98.60 0.40 24.84 110.05 20.16 15.29
RFED Roosevelt Financial Group MO NASDAQ 176.19 0.64 215.91 239.66 13.48 14.22
SMFC Sho-Me Financial Corp. MO NASDAQ 200.44 0.00 20.71 163.77 17.15 17.63
SMBC Southern Missouri Bancorp Inc. MO NASDAQ 101.16 0.50 23.61 107.26 16.81 16.67
CFTP Community Federal Bancorp MS NASDAQ 48.12 0.30 26.42 108.11 36.24 22.07
FFBS FFBS BanCorp Inc. MS NASDAQ 82.62 0.50 23.71 135.21 27.84 18.70
MGNL Magna Bancorp Inc. MS NASDAQ 100.56 0.53 17.66 242.59 23.18 14.94
EFBC Empire Federal Bancorp Inc. MT NASDAQ 41.64 NA NA 84.69 31.22 NA
GBCI Glacier Bancorp Inc. MT NASDAQ 81.25 0.43 15.60 218.79 20.92 13.93
UBMT United Financial Corp. MT NASDAQ 88.06 0.91 20.53 97.79 22.14 16.81
WSTR WesterFed Financial Corp. MT NASDAQ 167.97 0.42 24.61 108.12 11.87 17.80
CFNC Carolina Fincorp Inc. NC NASDAQ 58.70 NA NA 103.34 24.49 NA
CENB Century Bancorp Inc. NC NASDAQ 245.37 NA NA 93.26 27.92 NA
COOP Cooperative Bankshares Inc. NC NASDAQ 233.63 0.00 NM 120.07 8.99 105.00
SOPN First Savings Bancorp Inc. NC NASDAQ 73.34 0.79 22.85 117.79 28.97 18.81
GSFC Green Street Financial Corp. NC NASDAQ 40.57 NA NA 120.39 43.44 NA
HFNC HFNC Financial Corp. NC NASDAQ 49.03 5.19 32.41 189.60 35.69 24.31
KSAV KS Bancorp Inc. NC NASDAQ 151.91 1.20 17.19 104.76 14.48 12.29
MBSP Mitchell Bancorp Inc. NC NASDAQ 35.02 NA NA 107.12 46.40 NA
NSBC NewSouth Bancorp, Inc. NC NASDAQ NA NA NA NA NA NA
PDB Piedmont Bancorp Inc. NC AMSE 43.09 7.44 NM 138.51 23.50 25.96
SSB Scotland Bancorp Inc NC AMSE 37.46 NA NA 115.54 42.38 NA
SSFC South Street Financial Corp. NC NASDAQ 53.11 NA NA 111.00 30.60 NA
SSM Stone Street Bancorp Inc. NC AMSE 57.80 NA NA 126.09 45.20 NA
UFRM United Federal Savings Bank NC NASDAQ 88.11 0.20 61.11 164.18 12.48 27.50
CFB Commercial Federal Corporation NE NYSE 320.67 0.27 18.01 182.99 10.84 12.68
EBCP Eastern Bancorp NH NASDAQ 235.29 0.56 32.01 146.98 11.16 20.83
NHTB New Hampshire Thrift Bncshrs NH NASDAQ 153.35 0.50 32.61 130.89 9.78 21.13
FBER 1st Bergen Bancorp NJ NASDAQ 83.67 NA NA 100.84 16.58 NA
COFD Collective Bancorp Inc. NJ NASDAQ 269.85 1.00 17.86 231.60 16.21 14.78
FSPG First Home Bancorp Inc. NJ NASDAQ 187.65 0.37 11.50 150.69 9.93 10.46
FMCO FMS Financial Corporation NJ NASDAQ 231.97 0.20 14.52 135.37 8.51 9.59
IBSF IBS Financial Corp. NJ NASDAQ 67.20 0.46 42.50 129.91 22.14 24.79
LVSB Lakeview Financial NJ NASDAQ 209.19 0.24 11.90 150.05 14.28 17.07
</TABLE>
106
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LFBI Little Falls Bancorp Inc. NJ NASDAQ 13.125 14.000 9.500 -0.94 -4.55 14.29
OCFC Ocean Financial Corp. NJ NASDAQ 31.625 32.375 19.625 4.12 4.55 27.30
PBCI Pamrapo Bancorp Inc. NJ NASDAQ 20.500 26.125 2.563 7.89 1.86 16.43
PFSB PennFed Financial Services Inc NJ NASDAQ 24.438 25.250 9.063 -1.26 -2.25 21.21
PULS Pulse Bancorp NJ NASDAQ 18.250 19.125 4.000 -2.01 1.39 13.14
SFIN Statewide Financial Corp. NJ NASDAQ 16.750 17.500 11.250 6.35 -0.74 13.21
WYNE Wayne Bancorp Inc. NJ NASDAQ 17.750 18.000 10.750 5.97 3.65 16.57
WWFC Westwood Financial Corporation NJ NASDAQ 21.000 21.000 10.250 15.07 7.69 15.42
AABC Access Anytime Bancorp, Inc. NM NASDAQ 5.750 10.417 1.750 4.55 9.52 6.34
GUPB GFSB Bancorp Inc. NM NASDAQ 18.625 18.625 12.875 6.43 14.62 16.88
AFED AFSALA Bancorp Inc. NY NASDAQ 13.500 14.250 11.313 0.00 1.89 15.66
ALBK ALBANK Financial Corporation NY NASDAQ 37.500 38.875 9.167 -2.60 3.09 25.10
ALBC Albion Banc Corp. NY NASDAQ 19.500 19.875 10.500 7.59 16.42 23.62
ASFC Astoria Financial Corporation NY NASDAQ 41.500 43.125 12.688 5.40 -1.19 27.51
CNY Carver Bancorp Inc. NY AMSE 10.125 10.750 6.250 1.25 2.53 14.76
FIBC Financial Bancorp Inc. NY NASDAQ 17.250 18.500 8.500 2.99 -3.85 14.99
HAVN Haven Bancorp Inc. NY NASDAQ 33.750 36.000 10.000 -0.37 2.27 23.13
LISB Long Island Bancorp Inc. NY NASDAQ 34.750 39.250 12.090 -3.14 -6.71 21.62
NYB New York Bancorp Inc. NY NYSE 32.750 33.500 1.617 10.08 1.95 9.81
PEEK Peekskill Financial Corp. NY NASDAQ 13.875 15.250 11.125 1.83 -6.72 14.58
PKPS Poughkeepsie Financial Corp. NY NASDAQ 6.625 26.750 0.875 15.22 9.27 5.76
RELY Reliance Bancorp Inc. NY NASDAQ 24.375 26.000 8.875 1.56 11.43 17.56
SFED SFS Bancorp Inc. NY NASDAQ 16.625 18.000 11.000 -3.62 -2.92 17.26
TPNZ Tappan Zee Financial Inc. NY NASDAQ 17.375 17.375 11.250 9.45 19.83 13.84
YFCB Yonkers Financial Corporation NY NASDAQ 15.500 15.750 9.310 5.08 16.98 13.68
ASBP ASB Financial Corp. OH NASDAQ 11.750 18.250 11.375 0.00 2.17 10.62
CAFI Camco Financial Corp. OH NASDAQ 18.500 19.286 4.525 2.78 15.63 14.96
COFI Charter One Financial OH NASDAQ 47.500 49.500 3.281 2.98 1.88 20.53
CTZN CitFed Bancorp Inc. OH NASDAQ 36.750 37.250 6.167 8.89 7.30 21.59
CIBI Community Investors Bancorp OH NASDAQ 19.000 19.500 10.750 9.35 8.57 17.73
DCBI Delphos Citizens Bancorp Inc. OH NASDAQ 14.000 14.500 11.750 3.70 1.82 14.89
EMLD Emerald Financial Corp. OH NASDAQ 14.625 15.000 7.750 7.34 28.57 8.73
EFBI Enterprise Federal Bancorp OH NASDAQ 19.000 19.125 11.250 17.83 25.62 15.74
FFDF FFD Financial Corp. OH NASDAQ 13.375 14.000 10.000 -2.73 -0.93 14.51
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LFBI Little Falls Bancorp Inc. NJ NASDAQ 110.52 0.11 46.87 91.85 11.88 24.76
OCFC Ocean Financial Corp. NJ NASDAQ 153.20 NA NA 115.84 20.64 NA
PBCI Pamrapo Bancorp Inc. NJ NASDAQ 128.32 0.93 21.13 124.77 15.98 15.30
PFSB PennFed Financial Services Inc NJ NASDAQ 259.78 0.14 17.97 115.22 9.41 11.92
PULS Pulse Bancorp NJ NASDAQ 168.55 0.70 17.22 138.89 10.83 11.27
SFIN Statewide Financial Corp. NJ NASDAQ 141.96 0.30 22.64 126.80 11.80 13.09
WYNE Wayne Bancorp Inc. NJ NASDAQ 113.82 NA NA 107.12 15.59 NA
WWFC Westwood Financial Corporation NJ NASDAQ 167.35 NA NA 136.19 12.55 NA
AABC Access Anytime Bancorp, Inc. NM NASDAQ 93.21 0.00 NM 90.69 6.17 NM
GUPB GFSB Bancorp Inc. NM NASDAQ 103.56 0.75 27.80 110.34 17.98 22.17
AFED AFSALA Bancorp Inc. NY NASDAQ 104.66 NA NA 86.21 12.90 NA
ALBK ALBANK Financial Corporation NY NASDAQ 272.76 0.54 19.04 149.40 13.75 15.24
ALBC Albion Banc Corp. NY NASDAQ 265.21 0.31 88.64 82.56 7.35 20.74
ASFC Astoria Financial Corporation NY NASDAQ 361.98 0.44 23.85 150.85 11.46 15.49
CNY Carver Bancorp Inc. NY AMSE 183.00 0.00 NM 68.60 5.53 NM
FIBC Financial Bancorp Inc. NY NASDAQ 154.03 0.33 21.56 115.08 11.20 12.78
HAVN Haven Bancorp Inc. NY NASDAQ 399.06 0.60 15.27 145.91 8.46 10.23
LISB Long Island Bancorp Inc. NY NASDAQ 239.98 0.50 24.82 160.73 14.48 20.93
NYB New York Bancorp Inc. NY NYSE 193.83 0.57 14.56 333.84 16.90 14.18
PEEK Peekskill Financial Corp. NY NASDAQ 57.01 0.36 24.34 95.16 24.34 18.75
PKPS Poughkeepsie Financial Corp. NY NASDAQ 68.37 0.10 50.96 115.02 9.69 NA
RELY Reliance Bancorp Inc. NY NASDAQ 218.39 0.57 21.57 138.81 11.16 13.93
SFED SFS Bancorp Inc. NY NASDAQ 132.84 0.18 25.98 96.32 12.52 14.98
TPNZ Tappan Zee Financial Inc. NY NASDAQ 79.42 0.20 29.45 125.54 21.88 21.19
YFCB Yonkers Financial Corporation NY NASDAQ 89.44 NA NA 113.30 17.33 NA
ASBP ASB Financial Corp. OH NASDAQ 63.56 5.40 28.66 110.64 18.49 19.92
CAFI Camco Financial Corp. OH NASDAQ 154.31 0.47 16.97 123.66 11.99 13.03
COFI Charter One Financial OH NASDAQ 302.99 0.90 16.96 231.37 15.68 13.27
CTZN CitFed Bancorp Inc. OH NASDAQ 341.02 0.26 21.62 170.22 10.78 15.00
CIBI Community Investors Bancorp OH NASDAQ 153.96 0.34 18.81 107.16 12.34 12.58
DCBI Delphos Citizens Bancorp Inc. OH NASDAQ 52.52 NA NA 94.02 26.66 NA
EMLD Emerald Financial Corp. OH NASDAQ 116.29 0.30 19.24 167.53 12.58 15.23
EFBI Enterprise Federal Bancorp OH NASDAQ 127.66 1.25 22.35 120.71 14.88 19.79
FFDF FFD Financial Corp. OH NASDAQ 58.63 NA NA 92.18 22.81 NA
</TABLE>
107
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFYF FFY Financial Corp. OH NASDAQ 26.125 26.375 12.250 -0.48 3.98 19.50
FFOH Fidelity Financial of Ohio OH NASDAQ 15.000 15.000 3.112 14.29 22.45 12.03
FDEF First Defiance Financial OH NASDAQ 13.750 14.250 5.790 10.00 4.76 12.41
FFBZ First Federal Bancorp Inc. OH NASDAQ 17.500 19.000 3.125 -5.41 0.00 8.38
FFHS First Franklin Corporation OH NASDAQ 20.500 20.500 3.500 20.59 20.59 16.93
FFSW FirstFederal Financial Svcs OH NASDAQ 35.000 35.000 1.786 19.05 15.89 12.82
GFCO Glenway Financial Corp. OH NASDAQ 24.750 25.750 15.419 17.86 10.00 23.06
HHFC Harvest Home Financial Corp. OH NASDAQ 10.500 13.750 8.750 -8.70 -4.55 11.11
HVFD Haverfield Corporation OH NASDAQ 25.984 25.984 5.165 3.94 15.48 15.04
HCFC Home City Financial Corp. OH NASDAQ 13.250 14.250 12.000 1.92 -5.36 16.05
INBI Industrial Bancorp OH NASDAQ 12.750 16.000 9.875 -0.97 -0.97 11.41
LONF London Financial Corporation OH NASDAQ 15.000 17.500 9.750 -3.23 -1.64 14.63
MRKF Market Financial Corporation OH NASDAQ 12.750 12.938 12.250 3.03 NA 14.59
METF Metropolitan Financial Corp. OH NASDAQ 14.125 14.250 10.500 13.00 25.56 8.73
MFFC Milton Federal Financial Corp. OH NASDAQ 14.125 17.125 10.000 2.73 2.73 12.22
OHSL OHSL Financial Corp. OH NASDAQ 23.750 24.250 11.500 2.15 7.95 21.00
PFFC Peoples Financial Corp. OH NASDAQ 15.625 16.000 10.875 0.00 3.31 16.18
PSFC Peoples-Sidney Financial Corp. OH NASDAQ 13.000 13.625 12.563 0.00 NA NA
PTRS Potters Financial Corp. OH NASDAQ 20.250 21.000 9.000 0.00 1.25 21.39
PVFC PVF Capital Corp. OH NASDAQ 18.000 19.000 4.316 -2.70 7.46 10.77
SFSL Security First Corp. OH NASDAQ 21.750 22.000 1.625 17.57 22.54 11.88
SBCN Suburban Bancorporation Inc. OH NASDAQ 18.000 19.375 10.500 -0.69 1.41 18.02
WOFC Western Ohio Financial Corp. OH NASDAQ 21.000 24.375 14.750 -2.33 -4.55 23.21
WEHO Westwood Homestead Fin. Corp. OH NASDAQ 13.250 14.500 10.375 1.92 -4.50 14.15
WFCO Winton Financial Corp. OH NASDAQ 13.000 15.000 3.750 -10.34 0.00 11.06
FFWD Wood Bancorp Inc. OH NASDAQ 16.000 17.250 8.000 -5.19 1.59 13.91
KFBI Klamath First Bancorp OR NASDAQ 18.875 19.000 12.500 7.09 17.05 15.39
WFSG Wilshire Financial Services OR NASDAQ 14.750 18.000 13.500 4.42 -10.61 8.48
CVAL Chester Valley Bancorp Inc. PA NASDAQ 19.250 19.750 3.103 10.00 11.92 12.72
CMSB Commonwealth Bancorp Inc. PA NASDAQ 14.938 16.000 5.790 1.27 -6.64 12.50
FSBI Fidelity Bancorp Inc. PA NASDAQ 21.000 21.705 3.415 8.71 -3.25 14.82
FBBC First Bell Bancorp Inc. PA NASDAQ 14.875 17.375 11.875 -1.65 -6.30 10.63
FKFS First Keystone Financial PA NASDAQ 22.750 22.750 10.250 4.60 2.25 18.12
SHEN First Shenango Bancorp Inc. PA NASDAQ 24.250 25.750 12.750 -2.51 -2.02 20.79
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFYF FFY Financial Corp. OH NASDAQ 138.32 0.65 22.72 133.97 18.89 16.43
FFOH Fidelity Financial of Ohio OH NASDAQ 91.72 0.22 33.33 124.69 16.35 20.00
FDEF First Defiance Financial OH NASDAQ 57.95 0.30 31.98 110.80 23.73 24.55
FFBZ First Federal Bancorp Inc. OH NASDAQ 121.96 0.23 22.15 208.83 14.35 16.36
FFHS First Franklin Corporation OH NASDAQ 191.99 0.32 78.85 121.09 10.68 18.47
FFSW FirstFederal Financial Svcs OH NASDAQ 237.15 0.38 22.44 273.01 14.76 23.97
GFCO Glenway Financial Corp. OH NASDAQ 245.52 0.66 26.33 107.33 10.08 14.73
HHFC Harvest Home Financial Corp. OH NASDAQ 88.89 3.40 45.65 94.51 11.81 21.00
HVFD Haverfield Corporation OH NASDAQ 179.22 0.55 29.53 172.77 14.50 16.04
HCFC Home City Financial Corp. OH NASDAQ 71.66 NA NA 82.55 18.49 NA
INBI Industrial Bancorp OH NASDAQ 61.71 0.28 28.33 111.74 20.66 16.14
LONF London Financial Corporation OH NASDAQ 73.64 NA NA 102.53 20.37 NA
MRKF Market Financial Corporation OH NASDAQ 42.18 NA NA 87.39 30.23 NA
METF Metropolitan Financial Corp. OH NASDAQ 228.91 NA NA 161.80 6.17 NA
MFFC Milton Federal Financial Corp. OH NASDAQ 76.80 3.04 32.85 115.59 18.39 24.78
OHSL OHSL Financial Corp. OH NASDAQ 190.25 0.79 23.06 113.10 12.48 16.16
PFFC Peoples Financial Corp. OH NASDAQ 60.15 NA NA 96.57 25.98 NA
PSFC Peoples-Sidney Financial Corp. OH NASDAQ NA NA NA NA NA NA
PTRS Potters Financial Corp. OH NASDAQ 240.17 0.32 27.74 94.67 8.43 12.82
PVFC PVF Capital Corp. OH NASDAQ 153.34 0.00 12.50 167.13 11.74 7.26
SFSL Security First Corp. OH NASDAQ 126.87 0.44 18.59 183.08 17.14 14.80
SBCN Suburban Bancorporation Inc. OH NASDAQ 150.47 0.60 24.66 99.89 11.96 16.98
WOFC Western Ohio Financial Corp. OH NASDAQ 173.03 1.00 43.75 90.48 12.14 30.88
WEHO Westwood Homestead Fin. Corp. OH NASDAQ 45.70 NA NA 93.64 28.99 NA
WFCO Winton Financial Corp. OH NASDAQ 154.66 0.43 12.38 117.54 8.41 10.66
FFWD Wood Bancorp Inc. OH NASDAQ 109.54 0.31 16.16 115.03 14.61 12.60
KFBI Klamath First Bancorp OR NASDAQ 68.64 0.28 32.54 122.64 27.50 22.21
WFSG Wilshire Financial Services OR NASDAQ 145.06 NA NA 173.94 10.17 NA
CVAL Chester Valley Bancorp Inc. PA NASDAQ 148.56 0.34 22.38 151.34 12.96 15.16
CMSB Commonwealth Bancorp Inc. PA NASDAQ 130.68 NA NA 119.50 11.43 NA
FSBI Fidelity Bancorp Inc. PA NASDAQ 212.83 0.29 20.00 141.70 9.87 12.65
FBBC First Bell Bancorp Inc. PA NASDAQ 104.22 3.35 14.73 139.93 14.27 12.61
FKFS First Keystone Financial PA NASDAQ 256.25 0.10 17.11 125.55 8.88 11.61
SHEN First Shenango Bancorp Inc. PA NASDAQ 194.33 0.48 16.50 116.64 12.48 NA
</TABLE>
108
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAF GA Financial Inc. PA AMSE 16.250 17.250 10.250 2.36 1.56 14.94
HARL Harleysville Savings Bank PA NASDAQ 22.000 23.000 2.828 7.32 3.53 12.82
LARL Laurel Capital Group Inc. PA NASDAQ 21.375 22.500 3.627 0.29 -0.58 14.51
MLBC ML Bancorp Inc. PA NASDAQ 17.750 17.750 6.219 5.19 2.16 13.03
PVSA Parkvale Financial Corporation PA NASDAQ 28.000 29.500 2.150 7.69 5.66 17.91
PBIX Patriot Bank Corp. PA NASDAQ 15.938 16.750 10.258 2.00 1.19 12.70
PWBC PennFirst Bancorp Inc. PA NASDAQ 14.000 15.915 4.019 3.70 3.70 12.77
PWBK Pennwood Bancorp Inc. PA NASDAQ 15.000 15.000 9.000 9.09 4.35 15.30
PHFC Pittsburgh Home Financial Corp PA NASDAQ 14.875 15.500 9.500 0.85 0.85 13.71
PRBC Prestige Bancorp Inc. PA NASDAQ 15.625 16.125 9.750 -3.10 4.17 16.11
PFNC Progress Financial Corporation PA NASDAQ 9.000 18.750 0.750 5.88 4.29 5.52
SVRN Sovereign Bancorp Inc. PA NASDAQ 13.500 14.000 0.837 8.00 6.40 6.60
THRD TF Financial Corporation PA NASDAQ 17.625 19.250 9.750 2.17 -6.00 18.51
WVFC WVS Financial Corporation PA NASDAQ 24.000 27.250 13.000 -9.43 -5.88 20.50
YFED York Financial Corp. PA NASDAQ 20.000 20.000 4.301 9.59 10.34 13.99
AMFB American Federal Bank FSB SC NASDAQ 31.000 31.000 0.625 4.20 7.36 10.64
CFCP Coastal Financial Corp. SC NASDAQ 21.625 21.875 1.439 22.70 13.07 6.37
FFCH First Financial Holdings Inc. SC NASDAQ 26.500 28.250 4.000 6.00 -1.85 15.57
FSFC First Southeast Financial Corp SC NASDAQ 10.875 20.250 9.125 7.41 1.16 7.80
PALM Palfed, Inc. SC NASDAQ 16.750 18.500 3.500 0.00 17.54 10.07
SCCB S. Carolina Community Bancshrs SC NASDAQ 19.000 20.500 12.625 8.57 -1.30 17.11
HFFC HF Financial Corp. SD NASDAQ 19.375 20.500 5.500 -1.27 -0.64 16.51
TWIN Twin City Bancorp TN NASDAQ 18.500 19.500 10.500 -3.90 0.00 15.82
BNKU Bank United Corp. TX NASDAQ 35.375 36.250 22.500 13.65 12.30 18.01
CBSA Coastal Bancorp Inc. TX NASDAQ 27.000 28.250 9.875 12.50 1.89 19.35
ETFS East Texas Financial Services TX NASDAQ 17.250 18.750 11.000 2.22 -5.48 19.69
FBHC Fort Bend Holding Corp. TX NASDAQ 26.500 27.500 10.375 1.92 13.98 22.41
JXVL Jacksonville Bancorp Inc. TX NASDAQ 14.750 15.750 7.141 1.72 1.72 13.27
BFSB Bedford Bancshares Inc. VA NASDAQ 19.750 20.500 10.250 0.00 2.60 17.43
CNIT CENIT Bancorp Inc. VA NASDAQ 45.000 46.000 10.875 4.65 1.12 30.58
CFFC Community Financial Corp. VA NASDAQ 22.500 23.500 4.250 -2.17 1.12 18.04
ESX Essex Bancorp Inc. VA AMSE 1.250 19.250 0.750 -16.67 -35.50 0.12
FFFC FFVA Financial Corp. VA NASDAQ 25.000 25.250 8.250 13.64 3.09 16.99
GSLC Guaranty Financial Corp. VA NASDAQ 9.625 11.000 6.313 2.67 -1.28 7.20
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAF GA Financial Inc. PA AMSE 79.73 0.21 20.31 108.77 20.38 18.47
HARL Harleysville Savings Bank PA NASDAQ 201.41 0.35 17.19 171.61 10.92 12.09
LARL Laurel Capital Group Inc. PA NASDAQ 139.21 0.41 14.84 147.31 15.35 11.88
MLBC ML Bancorp Inc. PA NASDAQ 188.17 0.38 14.55 136.22 9.43 16.59
PVSA Parkvale Financial Corporation PA NASDAQ 239.53 0.49 17.61 156.34 11.69 11.76
PBIX Patriot Bank Corp. PA NASDAQ 139.25 0.28 30.65 125.50 11.45 20.17
PWBC PennFirst Bancorp Inc. PA NASDAQ 180.58 0.86 18.67 109.63 7.75 12.61
PWBK Pennwood Bancorp Inc. PA NASDAQ 78.56 NA NA 98.04 19.09 NA
PHFC Pittsburgh Home Financial Corp PA NASDAQ 119.51 NA NA 108.50 12.45 NA
PRBC Prestige Bancorp Inc. PA NASDAQ 137.88 NA NA 96.99 11.33 NA
PFNC Progress Financial Corporation PA NASDAQ 104.97 0.06 21.95 163.04 8.57 16.67
SVRN Sovereign Bancorp Inc. PA NASDAQ 147.31 0.07 22.13 204.55 9.16 NA
THRD TF Financial Corporation PA NASDAQ 157.65 0.34 22.31 95.22 11.18 16.02
WVFC WVS Financial Corporation PA NASDAQ 161.11 2.30 14.72 117.07 14.90 11.94
YFED York Financial Corp. PA NASDAQ 166.02 0.57 20.83 142.96 12.05 16.53
AMFB American Federal Bank FSB SC NASDAQ 118.44 0.54 23.48 291.35 26.17 18.90
CFCP Coastal Financial Corp. SC NASDAQ 104.52 0.33 25.15 339.48 20.69 23.51
FFCH First Financial Holdings Inc. SC NASDAQ 253.23 0.68 19.78 170.20 10.46 13.18
FSFC First Southeast Financial Corp SC NASDAQ 76.28 10.26 NM 139.42 14.26 15.32
PALM Palfed, Inc. SC NASDAQ 124.23 0.09 NM 166.34 13.48 23.93
SCCB S. Carolina Community Bancshrs SC NASDAQ 65.90 0.60 35.19 111.05 28.83 27.14
HFFC HF Financial Corp. SD NASDAQ 187.23 0.35 18.11 117.35 10.35 13.27
TWIN Twin City Bancorp TN NASDAQ 122.43 0.64 26.06 116.94 15.11 18.50
BNKU Bank United Corp. TX NASDAQ 348.23 NA NA 196.42 10.16 NA
CBSA Coastal Bancorp Inc. TX NASDAQ 574.16 0.40 18.49 139.53 4.70 11.79
ETFS East Texas Financial Services TX NASDAQ 103.48 0.20 44.23 87.61 16.67 24.64
FBHC Fort Bend Holding Corp. TX NASDAQ 358.85 0.28 29.12 118.25 7.38 16.36
JXVL Jacksonville Bancorp Inc. TX NASDAQ 84.90 NA NA 111.15 17.37 NA
BFSB Bedford Bancshares Inc. VA NASDAQ 115.11 0.46 16.32 113.31 17.16 12.66
CNIT CENIT Bancorp Inc. VA NASDAQ 430.98 0.90 22.06 147.16 10.44 15.96
CFFC Community Financial Corp. VA NASDAQ 130.99 0.50 17.05 124.72 17.18 13.31
ESX Essex Bancorp Inc. VA AMSE 170.59 0.00 NM NM 0.73 NM
FFFC FFVA Financial Corp. VA NASDAQ 121.62 0.42 21.55 147.15 20.56 17.73
GSLC Guaranty Financial Corp. VA NASDAQ 82.41 0.10 22.38 133.68 11.68 18.51
</TABLE>
109
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFB Life Bancorp Inc. VA NASDAQ 22.750 23.125 8.313 19.74 15.92 15.42
VABF Virginia Beach Fed. Financial VA NASDAQ 11.000 11.375 1.625 6.02 0.00 8.29
VFFC Virginia First Financial Corp. VA NASDAQ 21.875 21.875 1.250 58.37 40.00 11.35
CASB Cascade Financial Corp. WA NASDAQ 19.875 21.000 2.662 13.57 21.37 10.59
FWWB First SB of Washington Bancorp WA NASDAQ 20.938 22.125 12.375 -0.89 6.02 15.11
IWBK InterWest Bancorp Inc. WA NASDAQ 34.750 36.250 8.478 17.80 -0.89 14.81
STSA Sterling Financial Corp. WA NASDAQ 18.500 18.500 1.878 10.45 8.82 10.98
WFSL Washington Federal Inc. WA NASDAQ 25.406 27.500 1.566 3.70 -2.28 14.10
AADV Advantage Bancorp Inc. WI NASDAQ 38.125 41.250 10.600 1.67 7.39 27.93
ABCW Anchor BanCorp Wisconsin WI NASDAQ 43.750 47.000 9.800 0.57 -6.42 25.73
FCBF FCB Financial Corp. WI NASDAQ 24.750 24.750 10.000 17.16 8.79 19.11
FTFC First Federal Capital Corp. WI NASDAQ 30.188 31.000 1.449 8.79 5.00 15.97
FFHC First Financial Corp. WI NASDAQ 28.250 28.625 1.330 5.12 7.11 11.14
FNGB First Northern Capital Corp. WI NASDAQ 20.250 20.250 3.063 6.58 6.58 16.09
HALL Hallmark Capital Corp. WI NASDAQ 19.625 19.750 9.875 10.56 2.61 19.82
MWFD Midwest Federal Financial WI NASDAQ 19.000 24.500 4.167 -1.30 5.56 10.66
NWEQ Northwest Equity Corp. WI NASDAQ 14.625 15.000 6.875 0.00 8.33 13.82
RELI Reliance Bancshares Inc. WI NASDAQ 7.875 10.125 6.500 3.28 10.53 8.89
SECP Security Capital Corporation WI NASDAQ 91.500 92.000 25.000 1.74 9.58 59.17
STFR St. Francis Capital Corp. WI NASDAQ 29.625 32.250 12.625 2.16 -2.87 23.89
AFBC Advance Financial Bancorp WV NASDAQ 14.000 14.500 12.750 3.70 -0.45 14.75
FOBC Fed One Bancorp WV NASDAQ 20.625 21.000 5.358 10.00 7.84 17.07
CRZY Crazy Woman Creek Bancorp WY NASDAQ 13.625 14.250 10.000 1.87 0.00 14.42
TRIC Tri-County Bancorp Inc. WY NASDAQ 20.500 20.500 11.375 3.80 10.81 21.63
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFB Life Bancorp Inc. VA NASDAQ 142.98 0.44 22.75 147.54 15.91 17.91
VABF Virginia Beach Fed. Financial VA NASDAQ 122.16 0.17 57.89 132.69 9.00 22.00
VFFC Virginia First Financial Corp. VA NASDAQ 140.80 0.10 12.15 192.73 15.54 25.44
CASB Cascade Financial Corp. WA NASDAQ 171.50 0.00 30.11 187.68 11.59 22.59
FWWB First SB of Washington Bancorp WA NASDAQ 92.45 0.20 24.35 138.57 22.65 21.59
IWBK InterWest Bancorp Inc. WA NASDAQ 220.93 0.54 19.63 234.64 15.73 15.11
STSA Sterling Financial Corp. WA NASDAQ 280.93 0.00 132.14 168.49 6.59 22.84
WFSL Washington Federal Inc. WA NASDAQ 122.02 0.86 13.37 180.18 20.82 12.04
AADV Advantage Bancorp Inc. WI NASDAQ 316.08 0.34 37.75 136.50 12.06 15.75
ABCW Anchor BanCorp Wisconsin WI NASDAQ 411.45 0.48 15.51 170.03 10.63 11.95
FCBF FCB Financial Corp. WI NASDAQ 109.17 0.69 25.26 129.51 22.67 20.97
FTFC First Federal Capital Corp. WI NASDAQ 251.31 0.64 18.75 189.03 12.01 15.64
FFHC First Financial Corp. WI NASDAQ 159.52 0.54 20.47 253.59 17.71 14.95
FNGB First Northern Capital Corp. WI NASDAQ 139.82 0.61 25.96 125.85 14.48 17.31
HALL Hallmark Capital Corp. WI NASDAQ 283.65 0.00 16.22 99.02 6.92 12.34
MWFD Midwest Federal Financial WI NASDAQ 123.74 0.31 15.97 178.24 15.35 15.83
NWEQ Northwest Equity Corp. WI NASDAQ 103.86 0.28 18.75 105.82 14.08 15.73
RELI Reliance Bancshares Inc. WI NASDAQ 18.52 NA NA 88.58 42.52 NA
SECP Security Capital Corporation WI NASDAQ 396.28 0.83 21.03 154.64 23.09 17.60
STFR St. Francis Capital Corp. WI NASDAQ 293.15 0.44 19.49 124.01 10.11 16.55
AFBC Advance Financial Bancorp WV NASDAQ 95.51 NA NA 94.92 14.66 NA
FOBC Fed One Bancorp WV NASDAQ 141.74 0.57 22.18 120.83 14.55 15.17
CRZY Crazy Woman Creek Bancorp WY NASDAQ 51.78 0.35 26.20 94.49 26.31 20.96
TRIC Tri-County Bancorp Inc. WY NASDAQ 141.23 0.40 20.30 94.78 14.52 16.02
</TABLE>
110
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
<CAPTION>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
PER SHARE
==========================================================
Latest All Time All Time Monthly Quarterly Book
Price High Low Change Change Value
State Exchange ($) ($) ($) (%) (%) ($)
----- -------- ---- ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 20.370 23.715 8.390 4.09 3.26 15.94
MEDIAN 18.063 19.250 9.500 2.78 2.11 15.15
HIGH 91.500 589.500 62.000 58.37 45.45 73.45
LOW 1.250 6.917 0.178 -31.25 -42.11 0.12
AVERAGE FOR STATE
OR 16.813 18.500 13.000 5.76 3.22 11.94
AVERAGE BY REGION
MIDWEST 20.088 21.362 8.800 3.99 4.15 16.37
NEW ENGLAND 21.825 22.725 6.803 5.71 5.20 17.32
MID ATLANTIC 20.396 22.020 7.330 3.45 2.49 15.80
SOUTHEAST 19.195 21.566 9.020 3.63 1.88 14.41
SOUTHWEST 20.946 22.101 11.024 5.24 9.17 16.40
WEST 22.680 40.364 6.811 5.31 0.24 16.06
AVERAGE BY EXCHANGE
NYSE 36.125 95.338 2.624 6.59 -0.37 19.21
AMEX 15.625 17.708 9.761 2.15 1.94 14.03
OTC/NASDAQ 20.161 21.728 8.491 4.14 3.47 15.96
<CAPTION>
PER SHARE PRICING RATIOS
=================== ==========================================
12 Month Price/ Price/ Price/ Price/Core
Assets Div. Earnings Bk. Value Assets Earnings
State Exchange ($) ($) (X) (%) (%) (X)
----- -------- ------ ------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL THRIFTS 157.89 0.59 30.16 130.98 15.68 20.97
AVERAGE 133.58 0.37 22.64 117.54 14.28 16.55
MEDIAN 673.38 10.26 215.91 351.19 58.26 205.00
HIGH 9.44 0.00 8.39 66.28 0.73 7.12
LOW
AVERAGE FOR STATE 106.85 0.28 32.540 148.290 18.835 22.210
OR
AVERAGE BY REGION 142.93 0.59 31.33 124.52 16.45 20.27
MIDWEST 236.99 0.50 23.71 124.00 9.71 19.94
NEW ENGLAND 173.70 0.45 23.71 130.30 12.76 15.16
MID ATLANTIC 119.19 0.98 26.78 145.36 20.10 28.80
SOUTHEAST 190.40 0.58 29.20 129.19 14.65 19.35
SOUTHWEST 218.27 0.31 41.18 140.55 12.65 22.12
WEST
AVERAGE BY EXCHANGE 348.92 0.38 36.16 195.67 10.99 21.37
NYSE 111.09 1.35 26.57 110.94 17.39 23.75
AMEX 154.58 0.55 30.07 130.08 15.73 20.79
OTC/NASDAQ
</TABLE>
111
<PAGE>
EXHIBIT 31
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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 0.44 0.80 3.10 5.57
SZB SouthFirst Bancshares Inc. AL 92,910 12,988 12,988 0.04 0.16 0.29 1.13
FFBH First Federal Bancshares of AR 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 Corp 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
<CAPTION>
CAPITAL ISSUES
==================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
FFDB FirstFed Bancorp Incorporated AL 11/19/91 NASDAQ 1,225,922 15.32
PLE Pinnacle Bancshares Inc. AL 12/17/86 AMSE 889,823 19.24
SRN Southern Banc Company Inc. AL 10/05/95 AMSE 1,230,313 17.69
SCBS Southern Community Bancshares AL 12/23/96 NASDAQ 1,137,350 15.43
SZB SouthFirst Bancshares Inc. AL 02/14/95 AMSE 821,100 11.70
FFBH First Federal Bancshares of AR AR 05/03/96 NASDAQ 4,896,063 90.58
HCBB HCB Bancshares Inc. AR 05/07/97 NASDAQ NA NA
FTF Texarkana First Financial Corp AR 07/07/95 AMSE 1,832,805 30.24
AHM Ahmanson & Company (H.F.) CA 10/25/72 NYSE 100,595,547 3659.16
AFFFZ America First Financial Fund CA NA NASDAQ 6,010,589 187.08
BPLS Bank Plus Corp. CA NA NASDAQ 18,245,265 189.29
BVCC Bay View Capital Corp. CA 05/09/86 NASDAQ 12,970,160 330.74
BYFC Broadway Financial Corp. CA 01/09/96 NASDAQ 892,688 9.60
CFHC California Financial Holding CA 04/01/83 NASDAQ 4,765,793 138.21
CENF CENFED Financial Corp. CA 10/25/91 NASDAQ 5,760,489 174.12
CSA Coast Savings Financial CA 12/23/85 NYSE 18,592,567 736.73
DSL Downey Financial Corp. CA 01/01/71 NYSE 26,734,002 515.59
FSSB First FS&LA of San Bernardino CA 02/02/93 NASDAQ 328,296 3.20
FED FirstFed Financial Corp. CA 12/16/83 NYSE 10,560,402 248.17
GLN Glendale Federal Bank FSB CA 10/01/83 NYSE 50,305,615 1157.03
GDW Golden West Financial CA 05/29/59 NYSE 57,218,464 3590.46
GWF Great Western Financial CA NA NYSE 137,885,310 5584.36
HTHR Hawthorne Financial Corp. CA NA NASDAQ 2,629,275 26.95
HEMT HF Bancorp Inc. CA 06/30/95 NASDAQ 6,281,875 80.09
HBNK Highland Federal Bank FSB CA NA NASDAQ 2,282,137 53.06
MBBC Monterey Bay Bancorp Inc. CA 02/15/95 NASDAQ 3,244,908 53.95
PFFB PFF Bancorp Inc. CA 03/29/96 NASDAQ 18,845,625 270.91
PROV Provident Financial Holdings CA 06/28/96 NASDAQ 5,075,215 76.76
QCBC Quaker City Bancorp Inc. CA 12/30/93 NASDAQ 4,778,094 74.54
REDF RedFed Bancorp Inc. CA 04/08/94 NASDAQ 7,163,735 101.19
SGVB SGV Bancorp Inc. CA 06/29/95 NASDAQ 2,342,176 29.86
</TABLE>
112
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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 Hartford CT 974,693 60,939 60,939 0.44 0.69 7.03 11.18
NTMG Nutmeg Federal S&LA CT 93,645 5,781 5,781 0.31 0.38 5.02 6.31
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 262,753 17,141 15,023 0.15 0.33 2.22 4.92
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 0.91 11.34 12.24
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 79,581 33,804 33,272 -27.53 -28.20 -68.26 -69.94
CASH First Midwest Financial Inc. IA 370,177 42,911 37,971 0.75 0.97 6.51 8.40
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 Corporation IA 85,282 15,012 15,012 1.04 1.29 5.61 6.99
ABCL Alliance Bancorp Inc. IL 1,313,141 122,313 120,706 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
<CAPTION>
CAPITAL ISSUES
==================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
WES Westcorp CA 05/01/86 NYSE 26,013,956 377.20
FFBA First Colorado Bancorp Inc. CO 01/02/96 NASDAQ 16,555,197 277.30
EGFC Eagle Financial Corp. CT 02/03/87 NASDAQ 4,553,801 128.64
FFES First Federal of East Hartford CT 06/23/87 NASDAQ 2,649,011 67.55
NTMG Nutmeg Federal S&LA CT NA NASDAQ 725,421 5.08
WBST Webster Financial Corporation CT 12/12/86 NASDAQ 11,953,507 419.87
IFSB Independence Federal Savings DC 06/06/85 NASDAQ 1,280,030 9.60
BANC BankAtlantic Bancorp Inc. FL 11/29/83 NASDAQ 18,552,530 234.23
BKUNA BankUnited Financial Corp. FL 12/11/85 NASDAQ 8,847,184 92.90
FFFG F.F.O. Financial Group Inc. FL 10/13/88 NASDAQ 8,430,181 34.25
FFLC FFLC Bancorp Inc. FL 01/04/94 NASDAQ 2,341,862 58.55
FFPB First Palm Beach Bancorp Inc. FL 09/29/93 NASDAQ 5,009,337 139.01
OCWN Ocwen Financial Corporation FL NA NASDAQ 26,799,511 777.19
CCFH CCF Holding Company GA 07/12/95 NASDAQ 865,000 14.06
EBSI Eagle Bancshares GA 04/01/86 NASDAQ 4,552,200 70.56
FSTC First Citizens Corporation GA 03/01/86 NASDAQ 1,588,012 40.10
FGHC First Georgia Holding Inc. GA 02/11/87 NASDAQ 3,052,319 23.27
FLFC First Liberty Financial Corp. GA 12/06/83 NASDAQ 7,724,780 164.15
FLAG FLAG Financial Corp. GA 12/11/86 NASDAQ 2,036,990 25.46
SFNB Security First Network Bank GA NA NASDAQ 8,426,425 67.41
CASH First Midwest Financial Inc. IA 09/20/93 NASDAQ 2,827,323 49.12
GFSB GFS Bancorp Inc. IA 01/06/94 NASDAQ 987,842 11.36
HZFS Horizon Financial Svcs Corp. IA 06/30/94 NASDAQ 425,540 7.45
MFCX Marshalltown Financial Corp. IA 03/31/94 NASDAQ 1,411,475 21.35
MIFC Mid-Iowa Financial Corp. IA 10/14/92 NASDAQ 1,675,988 13.41
MWBI Midwest Bancshares Inc. IA 11/12/92 NASDAQ 348,339 9.75
FFFD North Central Bancshares Inc. IA 03/21/96 NASDAQ 3,429,455 54.44
PMFI Perpetual Midwest Financial IA 03/31/94 NASDAQ 1,907,278 37.67
SFFC StateFed Financial Corporation IA 01/05/94 NASDAQ 790,123 14.62
ABCL Alliance Bancorp Inc. IL 07/07/92 NASDAQ 5,333,830 154.68
AVND Avondale Financial Corp. IL 04/07/95 NASDAQ 3,525,325 59.93
</TABLE>
113
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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
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
COVB CoVest Bancshares Inc. IL 552,558 49,379 47,065 0.16 0.43 1.81 4.83
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
GTPS Great American Bancorp IL 137,898 29,172 29,172 0.25 0.61 1.00 2.42
HMLK Hemlock Federal Financial Corp 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
<CAPTION>
CAPITAL ISSUES
==================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BFFC Big Foot Financial Corp. IL 12/20/96 NASDAQ 2,512,750 34.55
CBCI Calumet Bancorp Inc. IL 02/20/92 NASDAQ 2,238,147 79.73
CBSB Charter Financial Inc. IL 12/29/95 NASDAQ 4,220,258 70.69
CNBA Chester Bancorp Inc. IL 10/08/96 NASDAQ 2,182,125 31.64
CBK Citizens First Financial Corp. IL 05/01/96 AMSE 2,798,829 42.68
COVB CoVest Bancshares Inc. IL 07/01/92 NASDAQ 3,017,606 53.56
CSBF CSB Financial Group Inc. IL 10/09/95 NASDAQ 941,850 10.71
DFIN Damen Financial Corp. IL 10/02/95 NASDAQ 3,246,717 46.67
EGLB Eagle BancGroup Inc. IL 07/01/96 NASDAQ 1,267,705 19.97
FBCI Fidelity Bancorp Inc. IL 12/15/93 NASDAQ 2,791,978 55.84
FFBI First Financial Bancorp Inc. IL 10/04/93 NASDAQ 415,488 6.86
FMBD First Mutual Bancorp Inc. IL 07/05/95 NASDAQ 3,741,670 56.59
GTPS Great American Bancorp IL 06/30/95 NASDAQ 1,759,976 29.04
HMLK Hemlock Federal Financial Corp IL 04/02/97 NASDAQ NA NA
HBEI Home Bancorp of Elgin Inc. IL 09/27/96 NASDAQ 7,009,250 105.14
HMCI HomeCorp Inc. IL 06/22/90 NASDAQ 1,693,169 23.99
KNK Kankakee Bancorp Inc. IL 01/06/93 AMSE 1,420,168 38.70
MAFB MAF Bancorp Inc. IL 01/12/90 NASDAQ 10,429,130 406.74
NBSI North Bancshares Inc. IL 12/21/93 NASDAQ 1,034,950 20.44
PFED Park Bancorp Inc. IL 08/12/96 NASDAQ 2,431,441 37.08
PSFI PS Financial Inc. IL 11/27/96 NASDAQ 2,182,125 28.64
SWBI Southwest Bancshares IL 06/24/92 NASDAQ 2,638,812 50.80
SPBC St. Paul Bancorp Inc. IL 05/18/87 NASDAQ 22,840,102 625.25
STND Standard Financial Inc. IL 08/01/94 NASDAQ 16,204,235 370.67
SFSB SuburbFed Financial Corp. IL 03/04/92 NASDAQ 1,260,957 28.37
WCBI Westco Bancorp IL 06/26/92 NASDAQ 2,554,113 56.19
FBCV 1ST Bancorp IN 04/07/87 NASDAQ 697,538 21.62
AMFC AMB Financial Corp. IN 04/01/96 NASDAQ 1,067,919 14.75
ASBI Ameriana Bancorp IN 03/02/87 NASDAQ 3,259,706 50.53
ATSB AmTrust Capital Corp. IN 03/28/95 NASDAQ 526,479 6.38
CBCO CB Bancorp Inc. IN 12/28/92 NASDAQ 1,162,279 27.60
</TABLE>
114
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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
<CAPTION>
CAPITAL ISSUES
==================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
FFWC FFW Corp. IN 04/05/93 NASDAQ 697,010 18.65
FFED Fidelity Federal Bancorp IN 08/31/87 NASDAQ 2,490,110 22.41
FISB First Indiana Corporation IN 08/02/83 NASDAQ 10,505,257 193.03
HFGI Harrington Financial Group IN NA NASDAQ 3,256,738 35.82
HBFW Home Bancorp IN 03/30/95 NASDAQ 2,623,213 53.45
HBBI Home Building Bancorp IN 02/08/95 NASDAQ 311,660 6.54
HOMF Home Federal Bancorp IN 01/23/88 NASDAQ 3,389,770 92.79
HWEN Home Financial Bancorp IN 07/02/96 NASDAQ 485,926 7.29
INCB Indiana Community Bank SB IN 12/15/94 NASDAQ 922,039 15.21
IFSL Indiana Federal Corporation IN 02/04/87 NASDAQ 4,786,236 125.04
LOGN Logansport Financial Corp. IN 06/14/95 NASDAQ 1,256,375 16.65
MARN Marion Capital Holdings IN 03/18/93 NASDAQ 1,828,242 40.22
MFBC MFB Corp. IN 03/25/94 NASDAQ 1,734,517 34.26
NEIB Northeast Indiana Bancorp IN 06/28/95 NASDAQ 1,762,727 26.44
PFDC Peoples Bancorp IN 07/07/87 NASDAQ 2,279,328 51.28
PERM Permanent Bancorp Inc. IN 04/04/94 NASDAQ 2,082,858 42.18
RIVR River Valley Bancorp IN 12/20/96 NASDAQ 1,190,250 16.37
SOBI Sobieski Bancorp Inc. IN 03/31/95 NASDAQ 759,632 11.20
FFSL First Independence Corp. KS 10/08/93 NASDAQ 1,005,294 12.06
LARK Landmark Bancshares Inc. KS 03/28/94 NASDAQ 1,807,996 33.90
MCBS Mid Continent Bancshares Inc. KS 06/27/94 NASDAQ 1,958,250 49.45
CKFB CKF Bancorp Inc. KY 01/04/95 NASDAQ 927,175 16.69
CLAS Classic Bancshares Inc. KY 12/29/95 NASDAQ 1,322,500 15.37
FFKY First Federal Financial Corp. KY 07/15/87 NASDAQ 4,165,353 83.31
FLKY First Lancaster Bancshares KY 07/01/96 NASDAQ 958,812 14.86
FTSB Fort Thomas Financial Corp. KY 06/28/95 NASDAQ 1,495,086 16.82
FKKY Frankfort First Bancorp Inc. KY 07/10/95 NASDAQ 3,385,000 35.97
GWBC Gateway Bancorp Inc. KY 01/18/95 NASDAQ 1,075,754 16.41
GTFN Great Financial Corporation KY 03/31/94 NASDAQ 14,073,290 434.51
HFFB Harrodsburg First Fin Bancorp KY 10/04/95 NASDAQ 2,024,756 32.14
KYF Kentucky First Bancorp Inc. KY 08/29/95 AMSE 1,319,194 15.17
</TABLE>
115
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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
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 979,736 122,154 122,154 -0.29 0.43 -2.88 4.38
ANBK American National Bancorp MD 505,318 45,315 45,315 0.28 0.65 2.88 6.68
EQSB Equitable Federal Savings Bank MD 296,002 15,002 15,002 0.48 0.76 9.36 14.87
FCIT First Citizens Financial Corp. MD 693,803 42,368 42,368 0.52 0.77 8.66 12.93
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 1,519,099 82,989 NA NA NA NA NA
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
<CAPTION>
CAPITAL ISSUES
==================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
ANA Acadiana Bancshares Inc. LA 07/16/96 AMSE 2,731,250 51.21
CZF CitiSave Financial Corp LA 07/14/95 AMSE 962,207 18.76
GSLA GS Financial Corp. LA 04/01/97 NASDAQ NA NA
ISBF ISB Financial Corporation LA 04/07/95 NASDAQ 7,001,260 171.53
MERI Meritrust Federal SB LA NA NASDAQ 774,176 27.48
TSH Teche Holding Co. LA 04/19/95 AMSE 3,437,530 56.29
AFCB Affiliated Community Bancorp MA 10/19/95 NASDAQ 6,456,458 122.67
BFD BostonFed Bancorp Inc. MA 10/24/95 AMSE 5,962,502 90.18
FAB FirstFed America Bancorp Inc. MA 01/15/97 AMSE 8,707,152 118.63
ANBK American National Bancorp MD 10/31/95 NASDAQ 3,613,011 51.94
EQSB Equitable Federal Savings Bank MD 09/10/93 NASDAQ 602,200 20.02
FCIT First Citizens Financial Corp. MD 12/17/86 NASDAQ 2,943,820 77.09
HRBF Harbor Federal Bancorp Inc. MD 08/12/94 NASDAQ 1,754,420 28.51
MFSL Maryland Federal Bancorp MD 06/02/87 NASDAQ 3,210,150 119.58
WSB Washington Savings Bank, FSB MD NA AMSE 4,220,206 22.16
WHGB WHG Bancshares Corp. MD 04/01/96 NASDAQ 1,539,059 21.93
MCBN Mid-Coast Bancorp Inc. ME 11/02/89 NASDAQ 230,171 4.37
BWFC Bank West Financial Corp. MI 03/30/95 NASDAQ 1,783,475 20.51
CFSB CFSB Bancorp Inc. MI 06/22/90 NASDAQ 5,166,741 99.81
DNFC D & N Financial Corp. MI 02/13/85 NASDAQ 8,315,821 150.72
FLGS Flagstar Bancorp Inc. MI NA NASDAQ NA NA
MSBF MSB Financial Inc. MI 02/06/95 NASDAQ 630,036 13.07
MSBK Mutual Savings Bank FSB MI 07/17/92 NASDAQ 4,274,154 29.38
OFCP Ottawa Financial Corp. MI 08/19/94 NASDAQ 5,040,187 105.21
SJSB SJS Bancorp MI 02/16/95 NASDAQ 917,622 23.63
THR Three Rivers Financial Corp. MI 08/24/95 AMSE 823,540 11.84
BDJI First Federal Bancorporation MN 04/04/95 NASDAQ 700,566 12.96
FFHH FSF Financial Corp. MN 10/07/94 NASDAQ 3,095,310 53.39
HMNF HMN Financial Inc. MN 06/30/94 NASDAQ 4,209,826 84.39
MIVI Mississippi View Holding Co. MN 03/24/95 NASDAQ 818,743 12.49
QCFB QCF Bancorp Inc. MN 04/03/95 NASDAQ 1,426,200 27.28
</TABLE>
116
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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 689,246 54,952 53,164 1.21 1.18 16.83 16.39
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
<CAPTION>
CAPITAL ISSUES
==================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
WEFC Wells Financial Corp. MN 04/11/95 NASDAQ 2,023,860 30.36
CMRN Cameron Financial Corp MO 04/03/95 NASDAQ 2,682,196 42.92
CAPS Capital Savings Bancorp Inc. MO 12/29/93 NASDAQ 1,891,800 26.01
CBES CBES Bancorp Inc. MO 09/30/96 NASDAQ 1,024,958 17.23
CNSB CNS Bancorp Inc. MO 06/12/96 NASDAQ 1,653,125 26.04
FBSI First Bancshares Inc. MO 12/22/93 NASDAQ 1,160,135 22.62
FTNB Fulton Bancorp Inc. MO 10/18/96 NASDAQ 1,719,250 30.73
GSBC Great Southern Bancorp Inc. MO 12/14/89 NASDAQ 8,288,147 144.01
HFSA Hardin Bancorp Inc. MO 09/29/95 NASDAQ 859,360 13.32
JSBA Jefferson Savings Bancorp MO 04/08/93 NASDAQ 4,970,949 141.67
JOAC Joachim Bancorp Inc. MO 12/28/95 NASDAQ 760,437 10.65
LXMO Lexington B&L Financial Corp. MO 06/06/96 NASDAQ 1,087,900 16.59
MBLF MBLA Financial Corp. MO 06/24/93 NASDAQ 1,316,002 27.14
NASB North American Savings Bank MO 09/27/85 NASDAQ 2,256,754 85.76
NSLB NS&L Bancorp Inc. MO 06/08/95 NASDAQ 707,582 11.59
PCBC Perry County Financial Corp. MO 02/13/95 NASDAQ 808,486 15.97
RFED Roosevelt Financial Group MO 01/23/87 NASDAQ 42,614,943 926.88
SMFC Sho-Me Financial Corp. MO 07/01/94 NASDAQ 1,519,125 44.81
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 NASDAQ 1,637,913 26.62
CFTP Community Federal Bancorp MS 03/26/96 NASDAQ 4,282,339 76.55
FFBS FFBS BanCorp Inc. MS 07/01/93 NASDAQ 1,557,445 34.65
MGNL Magna Bancorp Inc. MS 03/13/91 NASDAQ 13,754,266 251.02
EFBC Empire Federal Bancorp Inc. MT 01/27/97 NASDAQ 2,592,100 33.05
GBCI Glacier Bancorp Inc. MT 03/30/84 NASDAQ 6,798,656 111.04
UBMT United Financial Corp. MT 09/23/86 NASDAQ 1,223,312 23.85
WSTR WesterFed Financial Corp. MT 01/10/94 NASDAQ 5,551,172 111.72
CFNC Carolina Fincorp Inc. NC 11/25/96 NASDAQ 1,851,500 26.85
CENB Century Bancorp Inc. NC 12/23/96 NASDAQ 407,330 28.31
COOP Cooperative Bankshares Inc. NC 08/21/91 NASDAQ 1,491,698 31.33
SOPN First Savings Bancorp Inc. NC 01/06/94 NASDAQ 3,696,944 72.55
GSFC Green Street Financial Corp. NC 04/04/96 NASDAQ 4,298,125 74.68
</TABLE>
117
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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
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 Corporation 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 Inc 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 Corporation NJ 107,981 9,950 8,818 0.45 0.82 4.76 8.68
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
<CAPTION>
CAPITAL ISSUES
================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
HFNC HFNC Financial Corp. NC 12/29/95 NASDAQ 17,192,500 313.76
KSAV KS Bancorp Inc. NC 12/30/93 NASDAQ 663,263 13.60
MBSP Mitchell Bancorp Inc. NC 07/12/96 NASDAQ 967,897 15.49
NSBC NewSouth Bancorp, Inc. NC 04/08/97 NASDAQ NA NA
PDB Piedmont Bancorp Inc. NC 12/08/95 AMSE 2,750,800 29.91
SSB Scotland Bancorp Inc NC 04/01/96 AMSE 1,840,000 28.52
SSFC South Street Financial Corp. NC 10/03/96 NASDAQ 4,496,500 72.51
SSM Stone Street Bancorp Inc. NC 04/01/96 AMSE 1,825,050 45.17
UFRM United Federal Savings Bank NC 07/01/80 NASDAQ 3,066,314 29.51
CFB Commercial Federal Corporation NE 12/31/84 NYSE 21,523,481 726.42
EBCP Eastern Bancorp NH 11/17/83 NASDAQ 3,679,834 91.08
NHTB New Hampshire Thrift Bncshrs NH 05/22/86 NASDAQ 2,041,274 25.26
FBER 1st Bergen Bancorp NJ 04/01/96 NASDAQ 3,015,300 42.21
COFD Collective Bancorp Inc. NJ 02/07/84 NASDAQ 20,446,519 789.75
FSPG First Home Bancorp Inc. NJ 04/20/87 NASDAQ 2,708,426 48.41
FMCO FMS Financial Corporation NJ 12/14/88 NASDAQ 2,386,483 46.54
IBSF IBS Financial Corp. NJ 10/13/94 NASDAQ 11,012,246 162.79
LVSB Lakeview Financial NJ 12/22/93 NASDAQ 2,302,465 63.61
LFBI Little Falls Bancorp Inc. NJ 01/05/96 NASDAQ 2,745,180 37.06
OCFC Ocean Financial Corp. NJ 07/03/96 NASDAQ 9,059,124 250.83
PBCI Pamrapo Bancorp Inc. NJ 11/14/89 NASDAQ 2,862,924 56.18
PFSB PennFed Financial Services Inc NJ 07/15/94 NASDAQ 4,821,000 113.29
PULS Pulse Bancorp NJ 09/18/86 NASDAQ 3,061,048 54.72
SFIN Statewide Financial Corp. NJ 10/02/95 NASDAQ 4,771,486 70.38
WYNE Wayne Bancorp Inc. NJ 06/27/96 NASDAQ 2,156,383 35.04
WWFC Westwood Financial Corporation NJ 06/07/96 NASDAQ 645,241 12.90
AABC Access Anytime Bancorp, Inc. NM 08/08/86 NASDAQ 1,142,549 7.00
GUPB GFSB Bancorp Inc. NM 06/30/95 NASDAQ 839,208 14.69
AFED AFSALA Bancorp Inc. NY 10/01/96 NASDAQ 1,454,750 19.64
ALBK ALBANK Financial Corporation NY 04/01/92 NASDAQ 12,818,539 466.27
ALBC Albion Banc Corp. NY 07/26/93 NASDAQ 250,051 4.63
</TABLE>
118
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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 Financial Corp. 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 3.53 6.26
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
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
<CAPTION>
CAPITAL ISSUES
================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASFC Astoria Financial Corporation NY 11/18/93 NASDAQ 21,242,610 764.73
CNY Carver Bancorp Inc. NY 10/25/94 AMSE 2,314,275 22.27
FIBC Financial Bancorp Inc. NY 08/17/94 NASDAQ 1,747,686 29.06
HAVN Haven Bancorp Inc. NY 09/23/93 NASDAQ 4,329,624 139.09
LISB Long Island Bancorp Inc. NY 04/18/94 NASDAQ 24,228,267 801.06
NYB New York Bancorp Inc. NY 01/28/88 NYSE 16,380,511 475.03
PEEK Peekskill Financial Corp. NY 12/29/95 NASDAQ 3,203,121 44.44
PKPS Poughkeepsie Financial Corp. NY 11/19/85 NASDAQ 12,594,725 75.57
RELY Reliance Bancorp Inc. NY 03/31/94 NASDAQ 8,822,769 208.44
SFED SFS Bancorp Inc. NY 06/30/95 NASDAQ 1,270,997 20.65
TPNZ Tappan Zee Financial Inc. NY 10/05/95 NASDAQ 1,534,062 21.86
YFCB Yonkers Financial Corporation NY 04/18/96 NASDAQ 3,179,750 48.49
ASBP ASB Financial Corp. OH 05/11/95 NASDAQ 1,721,412 19.80
CAFI Camco Financial Corp. OH NA NASDAQ 3,061,520 55.11
COFI Charter One Financial OH 01/22/88 NASDAQ 46,338,721 2033.11
CTZN CitFed Bancorp Inc. OH 01/23/92 NASDAQ 8,613,086 302.53
CIBI Community Investors Bancorp OH 02/07/95 NASDAQ 632,946 10.92
DCBI Delphos Citizens Bancorp Inc. OH 11/21/96 NASDAQ 2,038,719 27.01
EMLD Emerald Financial Corp. OH NA NASDAQ 5,061,600 58.21
EFBI Enterprise Federal Bancorp OH 10/17/94 NASDAQ 2,010,828 31.92
FFDF FFD Financial Corp. OH 04/03/96 NASDAQ 1,454,750 20.37
FFYF FFY Financial Corp. OH 06/28/93 NASDAQ 4,328,219 110.37
FFOH Fidelity Financial of Ohio OH 03/04/96 NASDAQ 5,593,969 72.72
FDEF First Defiance Financial OH 10/02/95 NASDAQ 9,423,354 129.57
FFBZ First Federal Bancorp Inc. OH 07/13/92 NASDAQ 1,571,716 29.08
FFHS First Franklin Corporation OH 01/26/88 NASDAQ 1,178,343 21.80
FFSW FirstFederal Financial Svcs OH 03/31/87 NASDAQ 4,588,459 132.61
GFCO Glenway Financial Corp. OH 11/30/90 NASDAQ 1,143,769 25.88
HHFC Harvest Home Financial Corp. OH 10/10/94 NASDAQ 934,857 10.75
HVFD Haverfield Corporation OH 03/19/85 NASDAQ 1,906,349 43.37
HCFC Home City Financial Corp. OH 12/30/96 NASDAQ 952,200 12.85
</TABLE>
119
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
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 2.28 3.23
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 64,206 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 Corporation 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
<CAPTION>
CAPITAL ISSUES
================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
INBI Industrial Bancorp OH 08/01/95 NASDAQ 5,410,000 68.30
LONF London Financial Corporation OH 04/01/96 NASDAQ 515,160 9.02
MRKF Market Financial Corporation OH 03/27/97 NASDAQ 1,335,725 16.86
METF Metropolitan Financial Corp. OH NA NASDAQ 3,525,635 38.78
MFFC Milton Federal Financial Corp. OH 10/07/94 NASDAQ 2,327,436 31.71
OHSL OHSL Financial Corp. OH 02/10/93 NASDAQ 1,207,932 28.69
PFFC Peoples Financial Corp. OH 09/13/96 NASDAQ 1,491,012 22.74
PSFC Peoples-Sidney Financial Corp. OH 04/28/97 NASDAQ NA NA
PTRS Potters Financial Corp. OH 12/31/93 NASDAQ 486,830 9.74
PVFC PVF Capital Corp. OH 12/30/92 NASDAQ 2,323,338 38.92
SFSL Security First Corp. OH 01/22/88 NASDAQ 5,003,099 94.43
SBCN Suburban Bancorporation Inc. OH 09/30/93 NASDAQ 1,474,932 25.81
WOFC Western Ohio Financial Corp. OH 07/29/94 NASDAQ 2,312,088 49.71
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 NASDAQ 2,843,375 38.74
WFCO Winton Financial Corp. OH 08/04/88 NASDAQ 1,986,153 24.86
FFWD Wood Bancorp Inc. OH 08/31/93 NASDAQ 1,492,636 24.26
KFBI Klamath First Bancorp OR 10/05/95 NASDAQ 9,961,898 175.58
WFSG Wilshire Financial Services OR 12/19/96 NASDAQ 7,570,000 109.77
CVAL Chester Valley Bancorp Inc. PA 03/27/87 NASDAQ 2,054,310 35.44
CMSB Commonwealth Bancorp Inc. PA 06/17/96 NASDAQ 17,110,825 258.80
FSBI Fidelity Bancorp Inc. PA 06/24/88 NASDAQ 1,540,653 30.99
FBBC First Bell Bancorp Inc. PA 06/29/95 NASDAQ 6,802,750 108.84
FKFS First Keystone Financial PA 01/26/95 NASDAQ 1,227,875 26.71
SHEN First Shenango Bancorp Inc. PA 04/06/93 NASDAQ 2,063,010 45.90
GAF GA Financial Inc. PA 03/26/96 AMSE 8,407,650 125.06
HARL Harleysville Savings Bank PA 08/04/87 NASDAQ 1,651,140 33.85
LARL Laurel Capital Group Inc. PA 02/20/87 NASDAQ 1,498,302 31.46
MLBC ML Bancorp Inc. PA 08/11/94 NASDAQ 10,415,278 160.13
PVSA Parkvale Financial Corporation PA 07/16/87 NASDAQ 4,060,363 110.64
PBIX Patriot Bank Corp. PA 12/04/95 NASDAQ 4,266,146 60.79
PWBC PennFirst Bancorp Inc. PA 06/13/90 NASDAQ 3,911,030 53.78
</TABLE>
120
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<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>
PWBK Pennwood Bancorp Inc. PA 47,929 9,334 9,334 0.61 0.96 3.52 5.53
PHFC Pittsburgh Home Financial Corp 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 Corporation 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 Corp 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 Bancshrs 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
<CAPTION>
CAPITAL ISSUES
================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
PWBK Pennwood Bancorp Inc. PA 07/15/96 NASDAQ 610,128 8.62
PHFC Pittsburgh Home Financial Corp PA 04/01/96 NASDAQ 1,983,019 29.50
PRBC Prestige Bancorp Inc. PA 06/27/96 NASDAQ 919,873 14.72
PFNC Progress Financial Corporation PA 07/18/83 NASDAQ 3,814,180 33.37
SVRN Sovereign Bancorp Inc. PA 08/12/86 NASDAQ 69,831,757 837.98
THRD TF Financial Corporation PA 07/13/94 NASDAQ 4,087,386 72.55
WVFC WVS Financial Corporation PA 11/29/93 NASDAQ 1,737,250 44.73
YFED York Financial Corp. PA 02/01/84 NASDAQ 6,971,191 128.10
AMFB American Federal Bank FSB SC 01/19/89 NASDAQ 11,034,585 297.93
CFCP Coastal Financial Corp. SC 09/26/90 NASDAQ 4,636,696 76.51
FFCH First Financial Holdings Inc. SC 11/10/83 NASDAQ 6,326,275 154.99
FSFC First Southeast Financial Corp SC 10/08/93 NASDAQ 4,388,231 44.43
PALM Palfed, Inc. SC 12/15/85 NASDAQ 5,278,237 85.77
SCCB S. Carolina Community Bancshrs SC 07/07/94 NASDAQ 704,233 13.38
HFFC HF Financial Corp. SD 04/08/92 NASDAQ 2,997,831 58.65
TWIN Twin City Bancorp TN 01/04/95 NASDAQ 853,484 16.22
BNKU Bank United Corp. TX 08/09/96 NASDAQ 31,595,596 932.07
CBSA Coastal Bancorp Inc. TX NA NASDAQ 4,968,591 127.94
ETFS East Texas Financial Services TX 01/10/95 NASDAQ 1,079,285 19.16
FBHC Fort Bend Holding Corp. TX 06/30/93 NASDAQ 822,301 20.35
JXVL Jacksonville Bancorp Inc. TX 04/01/96 NASDAQ 2,571,968 38.26
BFSB Bedford Bancshares Inc. VA 08/22/94 NASDAQ 1,142,425 21.99
CNIT CENIT Bancorp Inc. VA 08/06/92 NASDAQ 1,639,989 71.75
CFFC Community Financial Corp. VA 03/30/88 NASDAQ 1,272,348 26.40
ESX Essex Bancorp Inc. VA 07/18/90 AMSE 1,054,736 1.71
FFFC FFVA Financial Corp. VA 10/12/94 NASDAQ 4,520,552 94.93
GSLC Guaranty Financial Corp. VA NA NASDAQ 1,499,008 16.49
LIFB Life Bancorp Inc. VA 10/11/94 NASDAQ 9,846,840 164.93
VABF Virginia Beach Fed. Financial VA 11/01/80 NASDAQ 4,972,022 51.58
VFFC Virginia First Financial Corp. VA 01/01/78 NASDAQ 5,804,661 85.62
CASB Cascade Financial Corp. WA 09/16/92 NASDAQ 2,054,352 34.92
</TABLE>
121
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
==================================== ================================
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------- ------ ------------ ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FWWB First SB of Washington Bancorp WA 977,075 147,866 135,853 1.05 1.19 5.71 6.48
IWBK InterWest Bancorp Inc. WA 1,771,523 118,792 116,053 0.82 1.11 12.21 16.43
STSA Sterling Financial Corp. WA 1,557,216 86,835 77,389 0.19 0.43 3.33 7.62
WFSL Washington Federal Inc. WA 5,788,992 668,802 602,502 1.65 1.83 14.26 15.76
AADV Advantage Bancorp Inc. WI 1,021,439 90,246 83,602 0.35 0.86 3.81 9.33
ABCW Anchor BanCorp Wisconsin WI 1,884,983 117,887 115,568 0.76 0.98 11.78 15.31
FCBF FCB Financial Corp. WI 268,528 47,008 47,008 0.91 1.09 5.09 6.09
FTFC First Federal Capital Corp. WI 1,530,237 97,258 91,151 0.74 0.86 11.29 13.11
FFHC First Financial Corp. WI 5,808,506 405,696 393,829 0.93 1.26 12.76 17.30
FNGB First Northern Capital Corp. WI 617,899 71,117 71,117 0.60 0.88 5.07 7.48
HALL Hallmark Capital Corp. WI 409,287 28,606 28,606 0.45 0.59 6.32 8.28
MWFD Midwest Federal Financial WI 201,070 17,318 16,642 1.09 1.09 12.37 12.42
NWEQ Northwest Equity Corp. WI 96,518 11,827 11,827 0.76 0.97 5.88 7.47
RELI Reliance Bancshares Inc. WI 46,836 22,474 NA 1.76 1.88 3.09 3.30
SECP Security Capital Corporation WI 3,646,981 578,156 578,156 1.16 1.38 7.17 8.56
STFR St. Francis Capital Corp. WI 1,578,969 127,852 112,495 0.60 0.70 6.44 7.59
AFBC Advance Financial Bancorp WV 103,578 15,998 15,998 0.37 0.66 3.65 6.49
FOBC Fed One Bancorp WV 346,214 40,196 38,295 0.69 0.98 5.81 8.25
CRZY Crazy Woman Creek Bancorp WY 52,042 14,490 14,490 1.00 1.25 3.36 4.20
TRIC Tri-County Bancorp Inc. WY 85,975 13,167 13,167 0.77 0.99 5.16 6.66
<CAPTION>
CAPITAL ISSUES
================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
FWWB First SB of Washington Bancorp WA 11/01/95 NASDAQ 10,569,082 194.21
IWBK InterWest Bancorp Inc. WA NA NASDAQ 8,018,431 258.59
STSA Sterling Financial Corp. WA NA NASDAQ 5,543,007 94.92
WFSL Washington Federal Inc. WA 11/17/82 NASDAQ 47,444,480 1079.36
AADV Advantage Bancorp Inc. WI 03/23/92 NASDAQ 3,231,583 130.07
ABCW Anchor BanCorp Wisconsin WI 07/16/92 NASDAQ 4,581,347 202.72
FCBF FCB Financial Corp. WI 09/24/93 NASDAQ 2,459,614 45.50
FTFC First Federal Capital Corp. WI 11/02/89 NASDAQ 6,089,044 170.49
FFHC First Financial Corp. WI 12/24/80 NASDAQ 36,411,443 951.25
FNGB First Northern Capital Corp. WI 12/29/83 NASDAQ 4,419,335 83.97
HALL Hallmark Capital Corp. WI 01/03/94 NASDAQ 1,442,950 25.97
MWFD Midwest Federal Financial WI 07/08/92 NASDAQ 1,624,874 28.64
NWEQ Northwest Equity Corp. WI 10/11/94 NASDAQ 929,267 11.27
RELI Reliance Bancshares Inc. WI 04/19/96 NASDAQ 2,528,499 18.33
SECP Security Capital Corporation WI 01/03/94 NASDAQ 9,202,932 791.45
STFR St. Francis Capital Corp. WI 06/21/93 NASDAQ 5,386,193 158.89
AFBC Advance Financial Bancorp WV 01/02/97 NASDAQ 1,084,450 15.18
FOBC Fed One Bancorp WV 01/19/95 NASDAQ 2,442,595 43.97
CRZY Crazy Woman Creek Bancorp WY 03/29/96 NASDAQ 1,005,100 13.82
TRIC Tri-County Bancorp Inc. WY 09/30/93 NASDAQ 608,749 11.26
</TABLE>
122
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF JUNE 4, 1997
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
===================================== ===================================
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- -------- ------ ------------ ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 1,298,034 98,073 91,543 0.52 0.76 5.03 7.36
MEDIAN 311,480 35,779 34,926 0.60 0.85 5.02 7.05
HIGH 48,697,126 2,585,070 2,413,892 2.04 2.03 24.71 25.36
LOW 33,894 4,492 4,329 -27.53 -28.20 -68.26 -69.94
AVERAGE FOR STATE
OR 890,959 101,979 101,979 0.89 1.29 3.75 5.42
AVERAGE BY REGION
MIDWEST 830,667 75,620 71,517 0.66 0.88 5.52 7.37
NEW ENGLAND 847,794 89,830 86,974 0.62 0.76 4.70 5.72
MID ATLANTIC 489,348 53,124 51,091 0.60 0.92 4.83 7.60
SOUTHEAST 1,065,762 74,326 62,392 0.23 0.45 5.41 7.87
SOUTHWEST 1,028,424 76,809 72,227 0.48 0.72 4.74 7.07
WEST 5,091,106 306,894 287,868 0.36 0.62 3.14 6.61
AVERAGE BY EXCHANGE
NYSE 17,739,264 1,030,495 960,769 0.57 0.74 9.12 12.55
AMEX 291,697 38,109 37,728 0.34 0.74 -0.12 3.56
OTC/NASDAQ 817,082 70,990 65,813 0.53 0.77 5.26 7.45
<CAPTION>
CAPITAL ISSUES
====================================================
Number of Mkt. Value
IPO Shares of Shares
State Date Exchange Outstg. ($M)
----- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 5,955,841 149.70
MEDIAN 2,501,430 42.20
HIGH 137,885,310 5,584.36
LOW 230,171 1.71
AVERAGE FOR STATE
OR 8,765,949 142.68
AVERAGE BY REGION
MIDWEST 4,711,217 114.07
NEW ENGLAND 7,769,903 121.01
MID ATLANTIC 3,597,387 71.90
SOUTHEAST 6,194,150 116.94
SOUTHWEST 4,620,073 111.43
WEST 14,667,649 495.68
AVERAGE BY EXCHANGE
NYSE 46,580,986 1,707.02
AMEX 2,767,457 39.86
OTC/NASDAQ 4,790,930 104.20
</TABLE>
123
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
EXHIBIT 32
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>
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 38.13 93.67 93.67 11.34
HWEN Home Financial Bancorp IN 07/02/96 11.40 68.00 68.04 13.10 23.16 104.17 104.17 19.40
OCFC Ocean Financial Corp. NJ 07/03/96 13.40 71.20 71.18 13.90 18.82 115.84 115.84 20.64
MBSP Mitchell Bancorp Inc. NC 07/12/96 NA 70.00 70.04 25.80 23.90 107.12 107.12 46.40
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 15.52 115.27 115.27 20.09
BNKU Bank United Corp. TX 08/09/96 NA NA NA NA 12.63 196.42 200.88 10.16
PFED Park Bancorp Inc. IL 08/12/96 26.20 66.70 66.66 14.50 19.08 91.37 91.37 19.81
PFFC Peoples Financial Corp. OH 09/13/96 28.60 64.30 64.30 16.00 27.90 96.57 96.57 25.98
HBEI Home Bancorp of Elgin Inc. IL 09/27/96 24.90 72.60 72.64 18.70 28.68 111.63 111.63 31.39
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 NA 73.80 73.83 22.70 23.66 93.64 93.64 28.99
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 16.07 86.21 86.43 12.90
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 35.94 139.08 139.08 34.79
DCBI Delphos Citizens Bancorp Inc. OH 11/21/96 14.60 72.20 72.23 18.80 12.96 94.02 94.02 26.66
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 17.19 92.41 92.41 39.95
WFSG Wilshire Financial Services OR 12/19/96 NA NA NA NA 9.46 173.94 173.94 10.17
RIVR River Valley Bancorp IN 12/20/96 15.20 73.00 72.96 12.10 11.90 102.64 104.24 12.69
BFFC Big Foot Financial Corp. IL 12/20/96 33.10 72.70 72.67 11.40 NA 111.17 111.17 18.99
SCBS Southern Community Bancshares AL 12/23/96 14.50 74.40 74.39 15.00 17.50 103.40 103.40 22.71
CENB Century Bancorp Inc. NC 12/23/96 18.90 72.10 72.11 20.00 14.64 93.26 93.26 27.92
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 123.40 124.02 26.61
FAB FirstFed America Bancorp Inc. MA 01/15/97 13.60 72.00 72.02 10.70 NA 104.24 104.24 13.00
EFBC Empire Federal Bancorp Inc. MT 01/27/97 21.50 68.10 68.09 23.00 NA 84.69 84.69 31.22
MRKF Market Financial Corporation OH 03/27/97 26.20 71.10 71.07 22.70 NA 87.39 87.39 30.23
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>
RECENTLY CONVERTED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS (continued)
<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 KY 10.00 13.50 35.00 13.38 33.75 13.75 37.50
EGLB Eagle BancGroup Inc. IL 10.00 11.25 12.50 11.25 12.50 11.13 11.25
HWEN Home Financial Bancorp IN 10.00 10.25 2.50 9.88 (1.25) 10.50 5.00
OCFC Ocean Financial Corp. NJ 20.00 21.25 6.25 20.13 0.63 21.00 5.00
MBSP Mitchell Bancorp Inc. NC 10.00 NA NA 10.63 6.25 11.00 10.00
PWBK Pennwood Bancorp Inc. PA 10.00 9.50 (5.00) 9.13 (8.75) 9.63 (3.75
ANA Acadiana Bancshares Inc. LA 12.00 12.00 0.00 11.75 (2.08) 12.38 3.13
BNKU Bank United Corp. TX NA 22.88 NA 24.00 NA 24.13 NA
PFED Park Bancorp Inc. IL 10.00 10.25 2.50 10.44 4.38 10.50 5.00
PFFC Peoples Financial Corp. OH 10.00 10.88 8.75 11.50 15.00 12.75 27.50
HBEI Home Bancorp of Elgin Inc. IL 10.00 11.81 18.13 12.50 25.00 12.63 26.25
WEHO Westwood Homestead Fin. Corp. OH 10.00 10.75 7.50 10.63 6.25 10.50 5.00
CBES CBES Bancorp Inc. MO 10.00 12.63 26.25 13.44 34.38 13.25 32.50
AFED AFSALA Bancorp Inc. NY 10.00 11.38 13.75 11.31 13.13 11.56 15.63
SSFC South Street Financial Corp. NC 10.00 NA NA 12.50 25.00 12.38 23.75
CNBA Chester Bancorp Inc. IL 10.00 12.94 29.38 12.63 26.25 12.63 26.25
FTNB Fulton Bancorp Inc. MO 10.00 12.50 25.00 12.88 28.75 14.75 47.50
DCBI Delphos Citizens Bancorp Inc. OH 10.00 12.13 21.25 12.13 21.25 12.06 20.63
CFNC Carolina Fincorp Inc. NC 10.00 13.00 30.00 13.00 30.00 13.63 36.25
PSFI PS Financial Inc. IL 10.00 11.64 16.41 11.69 16.88 12.50 25.00
WFSG Wilshire Financial Services OR NA 14.25 NA 14.75 NA 16.63 NA
RIVR River Valley Bancorp IN 10.00 13.69 36.88 13.88 38.75 15.00 50.00
BFFC Big Foot Financial Corp. IL 10.00 12.31 23.13 12.50 25.00 13.88 38.75
SCBS Southern Community Bancshares AL 10.00 13.00 30.00 13.75 37.50 13.50 35.00
CENB Century Bancorp Inc. NC 50.00 62.63 25.25 66.00 32.00 65.13 30.25
HCFC Home City Financial Corp. OH 10.00 NA NA 12.50 25.00 13.50 35.00
AFBC Advance Financial Bancorp WV 10.00 12.88 28.75 12.94 29.38 14.00 40.00
RSLN Roslyn Bancorp Inc. NY 10.00 15.00 50.00 15.94 59.38 16.00 60.00
FAB FirstFed America Bancorp Inc. MA 10.00 13.63 36.25 14.13 41.25 14.88 48.75
EFBC Empire Federal Bancorp Inc. MT 10.00 13.25 32.50 13.50 35.00 13.75 37.50
MRKF Market Financial Corporation OH 10.00 12.94 29.38 12.25 22.50 12.63 26.25
GSLA GS Financial Corp. LA 10.00 13.38 33.75 13.75 37.50 14.00 40.00
HMLK Hemlock Federal Financial Corp IL 10.00 12.88 28.75 12.88 28.75 13.00 30.00
PLSK Pulaski Savings Bank, MHC NJ 10.00 11.50 15.00 12.00 20.00 11.86 18.59
SKBO First Carnegie Deposit, MHC PA 10.00 11.63 16.25 13.00 30.00 12.88 28.75
NSBC NewSouth Bancorp, Inc. NC 15.00 20.25 35.00 22.00 46.67 23.88 59.17
PSFC Peoples-Sidney Financial Corp. OH 10.00 12.56 25.63 12.88 28.75 13.25 32.50
HCBB HCB Bancshares Inc. AR 10.00 12.63 26.25 12.75 27.50 13.00 30.00
</TABLE>
124
<PAGE>
EXHIBIT 33
KELLER & COMPANY
Columbus, Ohio
614-766-1426
ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF PIONEER BANK, F.S.B.
NONE
125
<PAGE>
EXHIBIT 34
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF JUNE 4, 1997
<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>
PFSL Pocahontas FS&LA, MHC AR NASDAQ 19.000 20.000 9.500 7.04 -0.33 14.61 229.15 0.85
CMSV Community Savings, MHC FL NASDAQ 22.250 22.375 10.000 1.14 12.66 15.57 138.66 0.83
FFFL Fidelity Bankshares Inc., MHC FL NASDAQ 18.750 20.000 9.091 -1.32 2.04 12.08 137.00 0.75
HARB Harbor Federal Savings Bk, MH FL NASDAQ 36.250 38.500 11.875 0.69 -4.61 18.30 222.69 1.25
FFSX First Fed SB of Siouxland, MH IA NASDAQ 21.500 35.000 8.239 -6.52 7.50 13.32 163.71 0.46
WCFB Webster City Federal SB, MHC IA NASDAQ 14.750 14.750 8.813 0.85 7.27 10.45 44.36 0.80
JXSB Jacksonville Savings Bank, MH IL NASDAQ 16.250 18.000 10.000 1.56 -1.52 13.26 128.78 0.40
LFED Leeds Federal Savings Bk, MHC MD NASDAQ 18.000 19.000 9.875 1.41 -1.37 13.21 81.60 0.69
GFED Guaranty Federal SB, MHC MO NASDAQ 17.250 17.250 8.000 16.95 46.81 8.68 62.73 0.34
PULB Pulaski Bank, Savings Bk, MHC MO NASDAQ 17.625 20.000 10.500 -3.42 5.22 11.04 84.92 0.95
FSLA First Savings Bank, MHC NJ NASDAQ 24.750 24.750 5.072 15.12 16.47 13.00 141.39 0.37
FSNJ First Savings Bk of NJ, MHC NJ NASDAQ 25.375 25.375 10.750 4.64 5.73 16.18 188.82 0.50
PLSK Pulaski Savings Bank, MHC NJ NASDAQ 12.750 13.500 11.500 7.51 NA NA NA NA
SBFL SB of the Finger Lakes, MHC NY NASDAQ 15.375 17.000 8.125 -0.81 2.50 11.27 119.23 0.40
WAYN Wayne Savings & Loan Co. MHC OH NASDAQ 26.250 27.250 11.255 -2.78 0.96 15.22 166.84 0.89
SKBO First Carnegie Deposit, MHC PA NASDAQ 13.125 13.500 11.625 1.94 NA NA NA NA
GDVS Greater Delaware Valley SB,MH PA NASDAQ 12.875 14.000 9.250 -0.96 17.05 8.37 72.94 0.36
HARS Harris Savings Bank, MHC PA NASDAQ 20.375 22.625 12.750 0.62 -5.23 13.71 173.18 0.58
NWSB Northwest Savings Bank, MHC PA NASDAQ 14.250 15.750 7.375 -3.39 -5.00 8.30 85.45 0.32
PERT Perpetual Bank, MHC SC NASDAQ 26.500 27.750 20.250 -3.64 1.92 19.81 163.28 1.20
RVSB Riverview Savings Bank, MHC WA NASDAQ 20.250 24.000 8.828 1.25 22.05 10.36 92.86 0.20
ALL MUTUAL HOLDING COMPANIES
AVERAGE 19.690 21.446 10.127 1.80 6.85 12.99 131.45 0.64
MEDIAN 18.750 20.000 9.875 0.85 2.50 13.21 137.00 0.58
HIGH 36.250 38.500 20.250 16.95 46.81 19.81 229.15 1.25
LOW 12.750 13.500 5.072 -6.52 -5.23 8.30 44.36 0.20
<CAPTION>
PRICING RATIOS
=======================================
Price/ Price/ Price/ Price/Core
Earnings Bk. Value Assets Earnings
State Exchange (X) (%) (%) (X)
----- -------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR NASDAQ 14.73 130.05 8.29 12.75
CMSV Community Savings, MHC FL NASDAQ 27.13 142.90 16.05 17.80
FFFL Fidelity Bankshares Inc., MHC FL NASDAQ 38.27 155.22 13.69 23.73
HARB Harbor Federal Savings Bk, MH FL NASDAQ 18.78 198.09 16.28 14.27
FFSX First Fed SB of Siouxland, MH IA NASDAQ 32.09 161.41 13.13 18.22
WCFB Webster City Federal SB, MHC IA NASDAQ 31.38 141.15 33.25 NA
JXSB Jacksonville Savings Bank, MH IL NASDAQ 50.78 122.55 12.62 23.55
LFED Leeds Federal Savings Bk, MHC MD NASDAQ 28.13 136.26 22.06 20.22
GFED Guaranty Federal SB, MHC MO NASDAQ 57.50 198.73 27.50 35.20
PULB Pulaski Bank, Savings Bk, MHC MO NASDAQ 36.72 159.65 20.75 25.18
FSLA First Savings Bank, MHC NJ NASDAQ 36.40 190.38 17.50 20.63
FSNJ First Savings Bk of NJ, MHC NJ NASDAQ NM 156.83 13.44 56.39
PLSK Pulaski Savings Bank, MHC NJ NASDAQ NA NA NA NA
SBFL SB of the Finger Lakes, MHC NY NASDAQ 192.19 136.42 12.90 109.82
WAYN Wayne Savings & Loan Co. MHC OH NASDAQ 55.85 172.47 15.73 24.31
SKBO First Carnegie Deposit, MHC PA NASDAQ NA NA NA NA
GDVS Greater Delaware Valley SB,MH PA NASDAQ NM 153.82 17.65 53.65
HARS Harris Savings Bank, MHC PA NASDAQ 55.07 148.61 11.77 22.15
NWSB Northwest Savings Bank, MHC PA NASDAQ 25.00 171.69 16.68 16.96
PERT Perpetual Bank, MHC SC NASDAQ 23.45 133.77 16.23 16.99
RVSB Riverview Savings Bank, MHC WA NASDAQ 23.82 195.46 21.81 18.75
ALL MUTUAL HOLDING COMPANIES
AVERAGE 43.96 158.18 17.23 29.48
MEDIAN 32.09 155.22 16.23 21.39
HIGH 192.19 198.73 33.25 109.82
LOW 14.73 122.55 8.29 12.75
</TABLE>
126
<PAGE>
EXHIBIT 35
KELLER & COMPANY
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF JUNE 4, 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>
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, MHC FL 1,104,924 90,783 87,377 0.93 1.21 11.15 14.59
FFSX First Fed SB of Siouxland, MHC 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, MHC IL 163,830 16,872 16,872 0.28 0.59 2.49 5.20
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 192,501 12,697 NA 0.23 0.58 3.07 7.76
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,MHC 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 245,671 29,806 29,806 0.81 1.15 6.89 9.73
RVSB Riverview Savings Bank, MHC WA 224,385 25,022 22,693 0.92 1.17 8.38 10.66
ALL MUTUAL HOLDING COMPANIES
AVERAGE 547,099 51,880 51,319 0.50 0.77 4.54 7.28
MEDIAN 250,057 27,399 28,603 0.51 0.73 4.44 6.91
HIGH 1,997,563 194,098 182,275 1.01 1.34 11.15 14.59
LOW 93,160 12,697 14,686 -0.33 0.12 -4.33 1.20
</TABLE>
KEY FINANCIAL DATA AND RATIOS (continued)
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF JUNE 4, 1997
<TABLE>
<CAPTION>
CAPITAL ISSUES
------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
------ -------- --------- ----------
<S> <C> <C> <C> <C>
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, MHC 01/06/94 NASDAQ 4,961,690 181.72
FFSX First Fed SB of Siouxland, MHC 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, MHC 04/21/95 NASDAQ 1,272,140 22.90
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,MHC 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 38.37
RVSB Riverview Savings Bank, MHC 10/26/93 NASDAQ 2,416,301 43.49
ALL MUTUAL HOLDING COMPANIES
AVERAGE 4,659,775 89.14
MEDIAN 3,064,131 43.49
HIGH 23,376,000 359.41
LOW 1,272,140 22.90
</TABLE>
127
<PAGE>
EXHIBIT 36
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PIONEER BANK, A FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: CA CO ID IA KS MN MO MT
NM OR SD TX WA WI WY
IPO Date: <= 12/31/95
Asset size: <= $400,000,000
<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>
PIONEER BANK, F.S.B. -- 204,213 10.23 17.16 49.64 68.22 85.38 1.09 10.30
DEFINED PARAMETERS FOR Prior to 4.00- 30.00- 45.00- 60.00- 8.00-
INCLUSION IN COMPARABLE GROUP 12/31/95 <$400,000 35.00 <40.00 75.00 90.00 95.00 <33.00 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
CRZY Crazy Woman Creek Bancorp WY 03/29/96 52,042 32.92 12.20 38.43 53.00 65.20 17.31 27.84
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
MIVI Mississippi View Holding Co. MN 03/24/95 69,755 27.24 7.08 47.24 63.12 70.20 0.00 18.26
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
PCBC Perry County Financial Corp. MO 02/13/95 79,714 NA NA 13.12 15.55 NA 3.14 18.32
SFFC StateFed Financial Corporation IA 01/05/94 85,282 15.44 0.00 51.57 79.29 79.29 22.28 17.60
TRIC Tri-County Bancorp Inc. WY 09/30/93 85,975 36.71 20.20 32.64 41.20 61.40 26.87 15.31
GUPB GFSB Bancorp Inc. NM 06/30/95 86,911 8.97 37.73 33.20 51.81 89.53 18.93 16.30
GFSB GFS Bancorp Inc. IA 01/06/94 88,154 8.66 3.63 57.92 86.31 89.95 21.53 11.57
NWEQ Northwest Equity Corp. WI 10/11/94 96,518 7.55 7.84 56.53 81.06 88.90 22.54 12.25
HFSA Hardin Bancorp Inc. MO 09/29/95 103,354 26.66 18.59 42.57 52.80 71.39 18.38 12.78
FSSB First FS&LA of San Bernardino CA 02/02/93 103,674 16.13 7.60 41.79 70.52 78.12 0.00 4.33
AABC Access Anytime Bancorp, Inc. NM 08/08/86 106,492 9.25 42.21 22.92 45.23 87.44 0.00 6.80
BDJI First Federal Bancorporation MN 04/04/95 107,716 40.91 8.05 24.13 47.70 55.75 11.78 11.17
UBMT United Financial Corp. MT 09/23/86 107,723 42.67 20.64 19.58 33.06 53.70 4.64 22.65
FFSL First Independence Corp. KS 10/08/93 109,230 17.51 16.17 52.44 64.33 80.50 20.60 10.50
ETFS East Texas Financial Services TX 01/10/95 111,689 32.76 18.67 38.30 46.38 65.05 0.00 19.03
</TABLE>
128
<PAGE>
EXHIBIT 36
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PIONEER BANK, A FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: CA CO ID IA KS MN MO MT
NM OR SD TX WA WI WY
IPO Date: <= 12/31/95
Asset size: <= $400,000,000
<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>
BYFC Broadway Financial Corp. CA 01/09/96 118,763 NA NA 45.01 83.20 NA 0.00 11.50
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
MWBI Midwest Bancshares Inc. IA 11/12/92 139,006 17.80 20.01 45.34 59.42 79.44 17.27 6.94
QCFB QCF Bancorp Inc. MN 04/03/95 149,637 NA NA 19.26 39.07 NA 10.59 18.09
FBSI First Bancshares Inc. MO 12/22/93 160,048 15.63 0.53 60.46 80.95 81.48 13.84 14.35
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
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 18.45 3.70 30.35 73.72 77.43 12.31 8.61
WEFC Wells Financial Corp. MN 04/11/95 201,886 8.86 0.00 70.17 89.67 89.67 12.88 14.23
FFFD North Central Bancshares Inc. IA 03/21/96 203,497 13.46 0.00 57.40 83.01 83.01 9.48 24.59
MBLF MBLA Financial Corp. MO 06/24/93 209,783 35.72 8.16 49.18 55.33 63.50 39.05 13.50
LARK Landmark Bancshares Inc. KS 03/28/94 223,799 24.11 9.44 48.95 64.79 74.23 17.29 14.63
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
FBHC Fort Bend Holding Corp. TX 06/30/93 295,080 NA NA 25.25 47.75 NA 5.53 6.25
SMFC Sho-Me Financial Corp. MO 07/01/94 304,496 9.39 0.87 64.08 87.10 87.96 26.62 9.54
CASB Cascade Financial Corp. WA 09/16/92 352,321 6.79 9.32 48.15 80.90 90.22 26.11 6.17
FFHH FSF Financial Corp. MN 10/07/94 367,312 33.66 0.02 40.41 64.22 64.24 30.34 11.77
</TABLE>
129
<PAGE>
EXHIBIT 36
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PIONEER BANK, A FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: CA CO ID IA KS MN MO MT
NM OR SD TX WA WI WY
IPO Date: <= 12/31/95
Asset size: <= $400,000,000
<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>
PIONEER BANK, -- 204,213 10.23 17.16 49.64 68.22 85.38 1.09 10.30
-----------------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to4. 4.00- 30.00- 45.00- 60.00- 8.00-
INCLUSION IN COMPARABLE GROUP 12/31/95 <$400,000 35.00 <40.00 75.00 90.00 95.00 <33.00 20.00
-----------------------------------------------------------------------------------------------------------------------------
CASH First Midwest Financial Inc. IA 09/20/93 370,177 22.02 7.66 31.83 66.49 74.15 23.79 11.59
MCBS Mid Continent Bancshares Inc. KS 06/27/94 371,169 30.04 8.58 45.35 54.42 63.00 25.59 10.04
PMFI Perpetual Midwest Financial IA 03/31/94 397,780 17.49 4.67 32.74 74.65 79.32 16.94 8.49
SGVB SGV Bancorp Inc. CA 06/29/95 399,776 6.04 19.74 56.25 72.10 91.84 21.43 7.27
</TABLE>
130
<PAGE>
EXHIBIT 37
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
PIONEER BANK, A FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
Most Recent Four Quarters
General Parameters:
States: CA CO ID IA KS MN MO MT
NM OR SD TX WA WI WY
IPO Date: <= 12/31/95
Asset size: <= $400,000,000
<CAPTION>
OPERATING PERFORMANCE
=============================================================================
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/
Assets ROAA ROAE Margin(2) Assets(3) Assets
IPO Date ($000) (%) (%) (%) (%) (%)
-------- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PIONEER BANK,
A FEDERAL SAVINGS BANK -- 204,213 1.15 11.62 4.29 2.57 0.38
-------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to 0.80- 3.00- 3.00- 1.60-
INCLUSION IN COMPARABLE GROUP 12/31/95 <400,000 1.50 18.00 4.60 3.00 <0.75
===================================================================================================================
JOAC Joachim Bancorp Inc. MO 12/28/95 35,656 0.78 2.68 4.13 2.90 0.15
CRZY Crazy Woman Creek Bancorp WY 03/29/96 52,042 1.25 4.20 3.86 2.05 0.14
NSLB NS&L Bancorp Inc. MO 06/08/95 58,089 0.74 3.45 3.16 2.32 0.35
- --------------------------------------------------------------------------------------------------------------------------
MIVI Mississippi View Holding Co. MN 03/24/95 69,755 1.01 5.54 3.80 2.42 0.27
- --------------------------------------------------------------------------------------------------------------------------
HZFS Horizon Financial Svcs Corp. IA 06/30/94 78,368 0.60 5.41 3.44 2.60 0.42
PCBC Perry County Financial Corp. MO 02/13/95 79,714 1.03 5.45 2.85 1.17 0.05
SFFC StateFed Financial Corporation IA 01/05/94 85,282 1.29 6.99 3.64 1.53 0.08
TRIC Tri-County Bancorp Inc. WY 09/30/93 85,975 0.99 6.66 3.28 1.86 0.16
- --------------------------------------------------------------------------------------------------------------------------
GUPB GFSB Bancorp Inc. NM 06/30/95 86,911 0.93 4.89 3.33 1.92 0.07
- --------------------------------------------------------------------------------------------------------------------------
GFSB GFS Bancorp Inc. IA 01/06/94 88,154 1.20 10.24 3.52 1.77 0.14
- --------------------------------------------------------------------------------------------------------------------------
NWEQ Northwest Equity Corp. WI 10/11/94 96,518 0.97 7.47 3.92 2.48 0.42
HFSA Hardin Bancorp Inc. MO 09/29/95 103,354 0.81 5.14 3.02 1.95 0.26
- --------------------------------------------------------------------------------------------------------------------------
FSSB First FS&LA of San Bernardino CA 02/02/93 103,674 -1.18 -24.76 3.54 4.36 0.90
AABC Access Anytime Bancorp, Inc. NM 08/08/86 106,492 -0.23 -4.64 2.69 3.18 0.64
BDJI First Federal Bancorporation MN 04/04/95 107,716 0.65 5.35 3.39 2.71 0.53
UBMT United Financial Corp. MT 09/23/86 107,723 1.34 5.74 3.70 2.09 0.63
<CAPTION>
ASSET QUALITY
==========================
NPA/ REO/ Reserves/
Assets Assets Assets
(%) (%) (%)
--- --- ---
<S> <C> <C> <C> <C>
PIONEER BANK,
A FEDERAL SAVINGS BANK 0.10 NM 0.36
---------------------------------------------------------------
DEFINED PARAMETERS FOR
INCLUSION IN COMPARABLE GROUP <1.00 <0.15 >0.15
===============================================================
JOAC Joachim Bancorp Inc. MO 0.68 0.35 0.21
CRZY Crazy Woman Creek Bancorp WY 0.23 0.00 0.55
NSLB NS&L Bancorp Inc. MO 0.06 0.00 0.07
- ----------------------------------------------------------------------
MIVI Mississippi View Holding Co. MN 0.25 0.05 1.24
- ----------------------------------------------------------------------
HZFS Horizon Financial Svcs Corp. IA 1.02 0.46 0.37
PCBC Perry County Financial Corp. MO 0.05 0.00 0.03
SFFC StateFed Financial Corporation IA 1.89 0.00 0.30
TRIC Tri-County Bancorp Inc. WY 0.05 0.04 0.48
- ----------------------------------------------------------------------
GUPB GFSB Bancorp Inc. NM 0.15 0.00 0.36
- ----------------------------------------------------------------------
GFSB GFS Bancorp Inc. IA 1.54 0.03 0.71
- ----------------------------------------------------------------------
NWEQ Northwest Equity Corp. WI 0.91 0.08 0.50
HFSA Hardin Bancorp Inc. MO 0.37 0.10 0.15
- ----------------------------------------------------------------------
FSSB First FS&LA of San Bernardino CA 2.31 1.28 1.05
AABC Access Anytime Bancorp, Inc. NM 1.59 0.08 0.43
BDJI First Federal Bancorporation MN 0.31 0.21 0.39
UBMT United Financial Corp. MT 0.42 0.39 0.07
</TABLE>
131
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
PIONEER BANK, A FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
Most Recent Four Quarters
General Parameters:
States: CA CO ID IA KS MN MO MT
NM OR SD TX WA WI WY
IPO Date: <= 12/31/95
Asset size: <= $400,000,000
<CAPTION>
OPERATING PERFORMANCE
==============================================================================
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/
Assets ROAA ROAE Margin(2) Assets(3) Assets
IPO Date ($000) (%) (%) (%) (%) (%)
-------- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PIONEER BANK,
A FEDERAL SAVINGS BANK -- 204,213 1.15 11.62 4.29 2.57 0.38
------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to 0.80- 3.00- 3.00- 1.60-
INCLUSION IN COMPARABLE GROUP 12/31/95 <400,000 1.50 18.00 4.60 3.00 <0.75
==================================================================================================================
FFSL First Independence Corp. KS 10/08/93 109,230 0.76 6.54 2.91 1.91 0.21
ETFS East Texas Financial Services TX 01/10/95 111,689 0.64 3.42 3.11 2.24 0.21
BYFC Broadway Financial Corp. CA 01/09/96 118,763 0.16 1.32 4.67 4.15 0.30
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
MWBI Midwest Bancshares Inc. IA 11/12/92 139,006 0.74 10.69 2.93 1.85 0.20
QCFB QCF Bancorp Inc. MN 04/03/95 149,637 1.66 8.76 4.11 1.83 0.45
- --------------------------------------------------------------------------------------------------------------------------
FBSI First Bancshares Inc. MO 12/22/93 160,048 1.12 7.33 3.54 1.89 0.27
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 165,688 1.01 6.29 3.19 1.96 0.35
- --------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------
WEFC Wells Financial Corp. MN 04/11/95 201,886 1.01 7.11 3.42 2.05 0.46
- --------------------------------------------------------------------------------------------------------------------------
FFFD North Central Bancshares Inc. IA 03/21/96 203,497 1.97 7.28 4.40 2.10 0.96
MBLF MBLA Financial Corp. MO 06/24/93 209,783 0.85 6.32 2.13 0.71 0.01
- --------------------------------------------------------------------------------------------------------------------------
LARK Landmark Bancshares Inc. KS 03/28/94 223,799 1.04 6.69 3.12 1.62 0.24
- --------------------------------------------------------------------------------------------------------------------------
CAPS Capital Savings Bancorp Inc. MO 12/29/93 237,915 0.92 10.27 3.24 2.14 0.46
<CAPTION>
ASSET QUALITY
=========================
NPA/ REO/ Reserves
Assets Assets Assets
(%) (%) (%)
--- --- ---
<S> <C> <C> <C>
PIONEER BANK,
A FEDERAL SAVINGS BANK 0.10 NM 0.36
---------------------------------------------------------------
DEFINED PARAMETERS FOR
INCLUSION IN COMPARABLE GROUP <1.00 <0.15 >0.15
===============================================================
FFSL First Independence Corp. KS 0.90 0.01 0.63
ETFS East Texas Financial Services TX 0.25 0.07 0.25
BYFC Broadway Financial Corp. CA 2.42 1.03 1.01
MIFC Mid-Iowa Financial Corp. IA 0.13 0.00 0.23
MFCX Marshalltown Financial Corp. IA 0.00 0.00 0.09
MWBI Midwest Bancshares Inc. IA 0.82 0.00 0.50
QCFB QCF Bancorp Inc. MN NA 0.05 NA
- ----------------------------------------------------------------------
FBSI First Bancshares Inc. MO 0.32 0.04 0.29
SMBC Southern Missouri Bancorp Inc. MO 0.61 0.07 0.41
- ----------------------------------------------------------------------
CMRN Cameron Financial Corp MO 0.60 0.00 0.81
MWFD Midwest Federal Financial WI 0.14 0.00 0.75
- ----------------------------------------------------------------------
WEFC Wells Financial Corp. MN 0.30 0.01 0.32
- ----------------------------------------------------------------------
FFFD North Central Bancshares Inc. IA 0.22 0.07 0.99
MBLF MBLA Financial Corp. MO 0.25 0.00 0.27
- ----------------------------------------------------------------------
LARK Landmark Bancshares Inc. KS 0.60 0.00 0.37
- ----------------------------------------------------------------------
CAPS Capital Savings Bancorp Inc. MO 0.26 0.03 0.30
</TABLE>
132
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
PIONEER BANK, A FEDERAL SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
Most Recent Four Quarters
General Parameters:
States: CA CO ID IA KS MN MO MT
NM OR SD TX WA WI WY
IPO Date: <= 12/31/95
Asset size: <= $400,000,000
<CAPTION>
OPERATING PERFORMANCE
=============================================================================
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/
Assets ROAA ROAE Margin(2) Assets(3) Assets
IPO Date ($000) (%) (%) (%) (%) (%)
-------- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PIONEER BANK,
A FEDERAL SAVINGS BANK -- 204,213 1.15 11.62 4.29 2.57 0.38
------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to 0.80- 3.00- 3.00- 1.60-
INCLUSION IN COMPARABLE GROUP 12/31/95 <400,000 1.50 18.00 4.60 3.00 <0.75
==================================================================================================================
FBHC Fort Bend Holding Corp. TX 06/30/93 295,080 0.51 7.64 2.87 2.88 0.94
SMFC Sho-Me Financial Corp. MO 07/01/94 304,496 1.08 10.28 3.33 1.91 0.41
CASB Cascade Financial Corp. WA 09/16/92 352,321 0.58 9.43 2.81 2.14 0.29
- --------------------------------------------------------------------------------------------------------------------------
FFHH FSF Financial Corp. MN 10/07/94 367,312 0.82 6.13 3.09 2.04 0.37
CASH First Midwest Financial Inc. IA 09/20/93 370,177 0.97 8.40 3.25 1.91 0.40
- --------------------------------------------------------------------------------------------------------------------------
MCBS Mid Continent Bancshares Inc. KS 06/27/94 371,169 1.17 10.54 2.74 2.67 1.85
PMFI Perpetual Midwest Financial IA 03/31/94 397,780 0.26 2.88 2.78 2.32 0.35
SGVB SGV Bancorp Inc. CA 06/29/95 399,776 0.37 4.26 2.68 2.04 0.23
<CAPTION>
ASSET QUALITY
==========================
NPA/ REO/ Reserves/
Assets Assets Assets
(%) (%) (%)
--- --- ---
<S> <C> <C> <C>
PIONEER BANK,
A FEDERAL SAVINGS BANK 0.10 NM 0.36
--------------------------------------------------------------
DEFINED PARAMETERS FOR
INCLUSION IN COMPARABLE GROUP <1.00 <0.15 >0.15
==============================================================
FBHC Fort Bend Holding Corp. TX NA NA 0.46
SMFC Sho-Me Financial Corp. MO 0.09 0.00 0.61
CASB Cascade Financial Corp. WA 0.59 0.30 0.84
- ---------------------------------------------------------------------
FFHH FSF Financial Corp. MN 0.10 0.02 0.22
CASH First Midwest Financial Inc. IA 0.79 0.02 0.65
- ---------------------------------------------------------------------
MCBS Mid Continent Bancshares Inc. KS 0.19 0.07 0.10
PMFI Perpetual Midwest Financial IA 0.41 0.02 0.71
SGVB SGV Bancorp Inc. CA 0.61 0.18 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.
</TABLE>
133
<PAGE>
EXHIBIT 38
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
FINAL COMPARABLE GROUP
BALANCE SHEET RATIOS
<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>
PIONEER BANK, F.S.B. -- 204,213 10.23 17.16 49.64 68.22 85.38 1.09 10.30
------------------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to 4.00- 30.00- 45.00- 60.00- 8.00-
INCLUSION IN COMPARABLE GROUP 12/31/95 <$400,000 35.00 <40.00 75.00 90.00 95.00 <33.00 20.00
==============================================================================================================================
MIVI Mississippi View Holding Co. MN 03/24/95 69,755 27.24 7.08 47.24 63.12 70.20 0.00 18.26
GUPB GFSB Bancorp Inc. NM 06/30/95 86,911 8.97 37.73 33.20 51.81 89.53 18.93 16.30
NWEQ Northwest Equity Corp. WI 10/11/94 96,518 7.55 7.84 56.53 81.06 88.90 22.54 12.25
HFSA Hardin Bancorp Inc. MO 09/29/95 103,354 26.66 18.59 42.57 52.80 71.39 18.38 12.78
FBSI First Bancshares Inc. MO 12/22/93 160,048 15.63 0.53 60.46 80.95 81.48 13.84 14.35
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
WEFC Wells Financial Corp. MN 04/11/95 201,886 8.86 0.00 70.17 89.67 89.67 12.88 14.23
LARK Landmark Bancshares Inc. KS 03/28/94 223,799 24.11 9.44 48.95 64.79 74.23 17.29 14.63
FFHH FSF Financial Corp. MN 10/07/94 367,312 33.66 0.02 40.41 64.22 64.24 30.34 11.77
CASH First Midwest Financial Inc. IA 09/20/93 370,177 22.02 7.66 31.83 66.49 74.15 23.79 11.59
AVERAGE 184,545 19.45 10.35 47.45 67.85 78.20 16.62 14.18
MEDIAN 162,868 20.91 7.75 45.21 64.50 76.21 17.84 14.29
HIGH 370,177 33.66 37.73 70.17 89.67 89.67 30.34 18.26
LOW 69,755 7.55 0.00 31.83 51.81 64.24 0.00 11.59
</TABLE>
134
<PAGE>
EXHIBIT 39
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
FINAL COMPARABLE GROUP
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
Most Recent Four Quarters
<CAPTION>
OPERATING PERFORMANCE
======================================================
Net Operating Noninterest
Total Core Core Interest Expenses/ Income/
Assets ROAA ROAE Margin(2) Assets(3) Assets
IPO Date ($000) (%) (%) (%) (%) (%)
-------- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
PIONEER BANK, F.S.B. -- 204,213 1.15 11.62 4.29 2.57 0.38
-------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to 0.80- 3.00- 3.00- 1.60-
INCLUSION IN COMPARABLE GROUP 12/31/95 <400,000 1.50 18.00 4.60 3.00 <0.75
-------------------------------------------------------------------------------------------------------------------
MIVI Mississippi View Holding Co. MN 03/24/95 69,755 1.01 5.54 3.80 2.42 0.27
GUPB GFSB Bancorp Inc. NM 06/30/95 86,911 0.93 4.89 3.33 1.92 0.07
NWEQ Northwest Equity Corp. WI 10/11/94 96,518 0.97 7.47 3.92 2.48 0.42
HFSA Hardin Bancorp Inc. MO 09/29/95 103,354 0.81 5.14 3.02 1.95 0.26
FBSI First Bancshares Inc. MO 12/22/93 160,048 1.12 7.33 3.54 1.89 0.27
SMBC Southern Missouri Bancorp Inc. MO 04/13/94 165,688 1.01 6.29 3.19 1.96 0.35
WEFC Wells Financial Corp. MN 04/11/95 201,886 1.01 7.11 3.42 2.05 0.46
LARK Landmark Bancshares Inc. KS 03/28/94 223,799 1.04 6.69 3.12 1.62 0.24
FFHH FSF Financial Corp. MN 10/07/94 367,312 0.82 6.13 3.09 2.04 0.37
CASH First Midwest Financial Inc. IA 09/20/93 370,177 0.97 8.40 3.25 1.91 0.40
AVERAGE 184,545 0.97 6.50 3.37 2.02 0.31
MEDIAN 162,868 0.99 6.49 3.29 1.96 0.31
HIGH 370,177 1.12 8.40 3.92 2.48 0.46
LOW 69,755 0.81 4.89 3.02 1.62 0.07
<CAPTION> ASSET QUALITY
==========================
NPA/ REO/ Reserves/
Assets Assets Assets
(%) (%) (%)
--- --- ---
<C> <C> <C>
<S> 0.10 NM 0.36
PIONEER BANK, F.S.B.
---------------------------------------------------------------
DEFINED PARAMETERS FOR <1.00 <0.15 >0.15
INCLUSION IN COMPARABLE GROUP
---------------------------------------------------------------
MIVI Mississippi View Holding Co. MN 0.25 0.05 1.24
GUPB GFSB Bancorp Inc. NM 0.15 0.00 0.36
NWEQ Northwest Equity Corp. WI 0.91 0.08 0.50
HFSA Hardin Bancorp Inc. MO 0.37 0.10 0.15
FBSI First Bancshares Inc. MO 0.32 0.04 0.29
SMBC Southern Missouri Bancorp Inc. MO 0.61 0.07 0.41
WEFC Wells Financial Corp. MN 0.30 0.01 0.32
LARK Landmark Bancshares Inc. KS 0.60 0.00 0.37
FFHH FSF Financial Corp. MN 0.10 0.02 0.22
CASH First Midwest Financial Inc. IA 0.79 0.02 0.65
AVERAGE 0.44 0.04 0.45
MEDIAN 0.35 0.03 0.37
HIGH 0.91 0.10 1.24
LOW 0.10 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.
</TABLE>
135
<PAGE>
Exhibit 40
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
COMPARABLE GROUP CHARACTERISTICS AND BALANCE SHEET TOTALS
<CAPTION>
Most Recent Quarter
----------------------------
Total
Number Conversion Total Int. Earning Net
of (IPO) Assets Assets Loans
Offices Exchange Date ($000) ($000) ($000)
------- -------- ---- ------ ------ ------
SUBJECT
<S> <C> <C> <C> <C> <C> <C>
PIONEER BANK, FSB Baker City OR 7 NA NA 204,213 198,500 139,309
COMPARABLE GROUP
FBSI First Bancshares, Inc. Mountain Grove MO 6 NASDAQ 12/22/93 160,048 150,874 129,552
CASH First Midwest Financial, Inc. Storm Lake IA 12 NASDAQ 09/20/93 370,177 357,672 246,140
FFHH FSF Financial Corp. Hutchinson MN 11 NASDAQ 10/07/94 367,312 354,163 235,885
GUPB GFSB Bancorp, Inc. Gallup NM 1 NASDAQ 06/30/95 86,911 83,440 45,026
HFSA Hardin Bancorp, Inc. Hardin MO 3 NASDAQ 09/29/95 103,354 98,510 54,568
LARK Landmark Bancshares, Inc. Dodge City KS 5 NASDAQ 03/28/94 223,799 217,123 144,996
MIVI Mississippi View Holding Company Little Falls MN 1 NASDAQ 03/24/95 69,755 69,075 44,027
NWEQ Northwest Equity Corporation Amery WI 3 NASDAQ 10/11/94 96,518 90,362 78,239
SMBC Southern Missouri Bancorp, Inc. Poplar Bluff MO 8 NASDAQ 04/13/94 165,688 160,076 105,382
WEFC Wells Financial Corp. Wells MN 7 NASDAQ 04/11/95 201,886 199,259 181,037
Average 5.7 184,545 178,055 126,485
Median 5.5 162,868 155,475 117,467
High 12.0 370,177 357,672 246,140
Low 1.0 69,755 69,075 44,027
<CAPTION>
Most Recent Quarter
-------------------------------
Goodwill
and Total Total
Intang. Deposits Equity
($000) ($000) ($000)
-------- ------ ------
SUBJECT
<S> <C> <C> <C>
PIONEER BANK, FSB Baker City OR 0 179,158 21,026
COMPARABLE GROUP
FBSI First Bancshares, Inc. Mountain Grove MO 33 114,242 22,971
CASH First Midwest Financial, Inc. Storm Lake IA 4,940 235,521 42,911
FFHH FSF Financial Corp. Hutchinson MN 0 210,091 43,225
GUPB GFSB Bancorp, Inc. Gallup NM 0 55,285 14,166
HFSA Hardin Bancorp, Inc. Hardin MO 0 70,201 13,210
LARK Landmark Bancshares, Inc. Dodge City KS 0 149,398 32,750
MIVI Mississippi View Holding Company Little Falls MN 0 55,943 12,735
NWEQ Northwest Equity Corporation Amery WI 0 62,440 11,827
SMBC Southern Missouri Bancorp, Inc. Poplar Bluff MO 0 124,309 25,958
WEFC Wells Financial Corp. Wells MN 0 144,938 28,737
Average 497 122,237 24,849
Median 0 119,276 24,465
High 4,940 235,521 43,225
Low 0 55,285 11,827
</TABLE>
136
<PAGE>
EXHIBIT 41
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
COMPARABLE GROUP MARKET AREA COMPARISON
<CAPTION>
1990 1990 1990
1990-1996 1990 Median Median 1990 High
Population Per Capita Household Housing Median School
1996 Growth Income Income Value Rent Graduates
Population (%) ($) ($) ($) ($) (%)
---------- --- --- --- --- --- ---
SUBJECT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pioneer Bank, F.S.B. OR 92,754 6.9 10,580 21,841 44,259 296 78.3
COMPARABLE GROUP
FBSI First Bancshares, Inc. MO 66,455 8.9 9,633 19,183 35,705 243 72.4
CASH First Midwest Financial, Inc. IA 20,404 0.4 11,828 25,757 41,400 218 82.1
FFHH FSF Financial Corp. MN 647,520 12.1 21,449 50,202 82,225 416 84.6
GUPB GFSB Bancorp, Inc. NM 66,633 9.8 6,628 17,468 40,700 294 64.5
HFSA Hardin Bancorp, Inc. MO 182,748 4.2 14,828 33,428 65,236 416 71.7
LARK Landmark Bancshares, Inc. KS 68,879 3.9 11,285 25,052 42,479 342 72.3
MIVI Mississippi View Holding Company MN 27,292 4.9 20,083 42,761 64,435 392 77.9
NWEQ Northwest Equity Corporation WI 37,147 6.8 12,167 25,900 53,600 254 78.0
SMBC Southern Missouri Bancorp, Inc. MO 40,498 4.5 10,436 18,056 36,275 183 56.8
WEFC Welles Financial Corp. MN 164,798 6.3 11,473 25,579 50,431 331 78.6
Average 132,237 6.2 12,981 28,339 51,249 309 73.9
Median 66,544 5.6 11,651 25,668 46,455 313 75.2
High 647,520 12.1 21,449 50,202 82,225 416 84.6
Low 20,404 0.4 6,628 17,468 35,705 183 56.8
<CAPTION>
1990
1990 Below
College Poverty
Graduates Level
(%) (%)
--- ---
SUBJECT
<S> <C> <C> <C>
Pioneer Bank, F.S.B. OR 10.1 12.1
COMPARABLE GROUP
FBSI First Bancshares, Inc. MO 10.2 15.5
CASH First Midwest Financial, Inc. IA 15.2 8.7
FFHH FSF Financial Corp. MN 21.4 4.8
GUPB GFSB Bancorp, Inc. NM 7.9 27.4
HFSA Hardin Bancorp, Inc. MO 13.6 14.1
LARK Landmark Bancshares, Inc. KS 14.0 14.1
MIVI Mississippi View Holding Company MN 15.7 4.5
NWEQ Northwest Equity Corporation WI 11.4 11.8
SMBC Southern Missouri Bancorp, Inc. MO 8.6 25.0
WEFC Welles Financial Corp. MN 17.2 4.7
Average 13.5 13.1
Median 13.8 13.0
High 21.4 27.4
Low 7.9 4.5
</TABLE>
137
<PAGE>
EXHIBIT 42
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
BALANCE SHEET
ASSET COMPOSITION - MOST RECENT QUARTER
<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>
SUBJECT
PIONEER BANK, F.S.B. 204,213 10.23 17.16 68.22 0.36 NM 0.00 4.39 3.35
COMPARABLE GROUP
FBSI First Bancshares Inc. 160,048 15.63 0.53 80.95 0.29 0.04 0.02 2.82 12.16
CASH First Midwest Financial Inc. 370,177 22.02 7.66 66.49 0.65 0.02 1.33 2.48 28.14
FFHH FSF Financial Corp. 367,312 33.66 0.02 64.22 0.22 0.02 0.00 2.07 11.45
GUPB GFSB Bancorp Inc. 86,911 8.97 37.73 51.81 0.36 0.00 0.00 1.50 12.15
HFSA Hardin Bancorp Inc. 103,354 26.66 18.59 52.80 0.15 0.10 0.00 1.85 2.15
LARK Landmark Bancshares Inc. 223,799 24.11 9.44 64.79 0.37 0.00 0.00 1.57 3.47
MIVI Mississippi View Holding Co. 69,755 27.24 7.08 63.12 1.24 0.05 0.00 2.51 3.94
NWEQ Northwest Equity Corp. 96,518 7.55 7.84 81.06 0.50 0.08 0.00 3.46 11.23
SMBC Southern Missouri Bancorp Inc. 165,688 19.81 14.58 63.60 0.41 0.07 0.00 1.93 11.95
WEFC Wells Financial Corp. 201,886 8.86 0.00 89.67 0.32 0.01 0.00 1.41 7.47
Average 184,545 19.45 10.35 67.85 0.45 0.04 0.14 2.16 10.41
Median 162,868 20.91 7.75 64.50 0.36 0.03 0.00 2.00 11.34
High 370,177 33.66 37.73 89.67 1.24 0.10 1.33 3.46 28.14
Low 69,755 7.55 0.00 51.81 0.15 0.00 0.00 1.41 2.15
ALL THRIFTS (330)
Average 1,291,109 17.83 11.37 66.78 0.58 0.58 0.24 2.66 12.94
WESTERN THRIFTS (37)
Average 659,718 17.42 9.06 69.68 0.50 0.50 0.19 2.55 12.46
OREGON THRIFTS (2)
Average 305,833 17.21 8.75 71.03 0.54 0.15 0.07 3.36 10.40
<CAPTION>
=========================================
Interest Interest Capitalized
Non-Perf. Earning Bearing Loan
Assets Assets Liabilities Servicing
(%) (%) (%) (%)
--- --- --- ---
<S> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 0.10 97.20 85.75 0.00
COMPARABLE GROUP
FBSI First Bancshares Inc. 0.32 94.27 82.10 0.00
CASH First Midwest Financial Inc. 0.79 96.62 87.12 0.00
FFHH FSF Financial Corp. 0.10 96.42 86.72 0.01
GUPB GFSB Bancorp Inc. 0.15 96.01 79.45 0.00
HFSA Hardin Bancorp Inc. 0.37 95.31 82.76 0.00
LARK Landmark Bancshares Inc. 0.60 97.02 83.22 0.00
MIVI Mississippi View Holding Co. 0.25 99.03 80.49 0.00
NWEQ Northwest Equity Corp. 0.91 93.62 86.47 0.00
SMBC Southern Missouri Bancorp Inc. 0.61 96.61 81.52 0.00
WEFC Wells Financial Corp. 0.30 98.70 84.90 0.04
Average 0.44 96.36 83.47 0.00
Median 0.35 96.52 82.99 0.00
High 0.91 99.03 87.12 0.04
Low 0.10 93.62 79.45 0.00
ALL THRIFTS (330)
Average 0.80 94.91 83.56 0.12
WESTERN THRIFTS (37)
Average 0.61 95.66 82.78 0.10
OREGON THRIFTS (2)
Average 0.69 95.60 85.02 0.05
</TABLE>
138
<PAGE>
EXHIBIT 43
KELLER & COMPANY
Columbus, Ohio
614-766-1426
<TABLE>
BALANCE SHEET COMPARISON
LIABILITIES AND EQUITY - MOST RECENT QUARTER
<CAPTION>
As a Percent of Assets
=================================================================
FASB 115
Total Total Total Total Other Preferred Common Unrealized
Liabilities Equity Deposits Borrowings Liabilities Equity Equity Gain (Loss)
($000) ($000) (%) (%) (%) (%) (%) (%)
------ ------ --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 183,186 21,026 87.73 1.09 0.88 -- -- (0.06)
COMPARABLE GROUP
FBSI First Bancshares Inc. 137,077 22,971 71.38 13.84 0.42 0.00 14.35 (0.02)
CASH First Midwest Financial Inc. 327,266 42,911 63.62 23.79 0.99 0.00 11.59 (0.01)
FFHH FSF Financial Corp. 324,087 43,225 57.20 30.34 0.69 0.00 11.77 (0.18)
GUPB GFSB Bancorp Inc. 72,745 14,166 63.61 18.93 1.16 0.00 16.30 0.35
HFSA Hardin Bancorp Inc. 90,144 13,210 67.92 18.38 0.91 0.00 12.78 (0.23)
LARK Landmark Bancshares Inc. 191,049 32,750 66.76 17.29 1.32 0.00 14.63 0.08
MIVI Mississippi View Holding Co. 57,020 12,735 80.20 0.00 1.54 0.00 18.26 1.22
NWEQ Northwest Equity Corp. 84,691 11,827 64.69 22.54 0.51 0.00 12.25 (0.01)
SMBC Southern Missouri Bancorp Inc. 139,730 25,958 75.03 8.17 1.14 0.00 15.67 (0.11)
WEFC Wells Financial Corp. 173,149 28,737 71.79 12.88 1.10 0.00 14.23 0.15
Average 159,696 24,849 68.22 16.62 0.98 0.00 14.18 0.12
Median 138,404 24,465 67.34 17.84 1.04 0.00 14.29 (0.01)
High 327,266 43,225 80.20 30.34 1.54 0.00 18.26 1.22
Low 57,020 11,827 57.20 0.00 0.42 0.00 11.59 (0.23)
ALL THRIFTS (330)
Average 1,193,670 97,439 71.15 14.52 1.47 0.07 12.79 (0.01)
WESTERN THRIFTS (37)
Average 598,841 60,876 70.08 14.41 1.35 0.02 14.14 (0.01)
OREGON THRIFTS (2)
Average 274,113 31,720 70.10 16.51 1.09 0.00 12.30 (0.07)
<CAPTION>
========================================================
Reg. Reg. Reg.
Retained Total Tangible Core Tangible Risk-Based
Earnings Equity Equity Capital Capital Capital
(%) (%) (%) (%) (%) (%)
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 10.36 10.30 10.36 10.24 10.24 21.30
COMPARABLE GROUP
FBSI First Bancshares Inc. 7.99 14.35 14.33 11.70 11.70 19.45
CASH First Midwest Financial Inc. 2.50 11.59 10.40 9.50 9.50 NA
FFHH FSF Financial Corp. 5.26 11.77 11.77 10.60 10.60 22.79
GUPB GFSB Bancorp Inc. 8.15 16.30 16.30 NA NA 36.76
HFSA Hardin Bancorp Inc. 6.48 12.78 12.78 11.19 11.19 31.22
LARK Landmark Bancshares Inc. 8.25 14.63 14.63 12.16 12.16 31.05
MIVI Mississippi View Holding Co. 9.52 18.26 18.26 15.74 15.74 31.72
NWEQ Northwest Equity Corp. 3.95 12.25 12.25 8.12 NA NA
SMBC Southern Missouri Bancorp Inc. 7.19 15.67 15.67 12.61 12.61 25.79
WEFC Wells Financial Corp. 6.52 14.23 14.23 10.57 10.57 18.07
Average 6.58 14.18 14.06 11.35 11.76 27.11
Median 6.85 14.29 14.28 11.19 11.45 28.42
High 9.52 18.26 18.26 15.74 15.74 36.76
Low 2.50 11.59 10.40 8.12 9.50 18.07
ALL THRIFTS (330)
Average 5.95 12.86 12.61 11.20 11.02 22.91
WESTERN THRIFTS (37)
Average 6.72 14.16 13.85 12.05 12.07 23.78
OREGON THRIFTS (2)
Average 6.30 12.30 12.24 11.10 11.10 22.08
</TABLE>
139
<PAGE>
KELLER & COMPANY EXHIBT 44
Columbus, Ohio
614-766-1426
INCOME AND EXPENSE COMPARISON
TRAILING FOUR QUARTERS
($000)
<TABLE>
<CAPTION>
Net Gain Total Goodwill Net
Interest Interest Interest Provision (Loss) Non-Int. & Intang. Real Est.
Income Expense Income for Loss on Sale Income Amtz. Expense
-------- -------- -------- --------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 16,082 7,476 8,606 240 0 775 0 0
COMPARABLE GROUP
FBSI First Bancshares Inc. 11,305 6,231 5,074 64 159 431 14 (90)
CASH First Midwest Financial Inc. 27,200 15,874 11,326 100 51 1,474 275 5
FFHH FSF Financial Corp. 25,465 14,952 10,513 90 42 1,369 0 0
GUPB GFSB Bancorp Inc. 5,722 3,141 2,581 21 14 57 0 0
HFSA Hardin Bancorp Inc. 6,684 3,915 2,769 34 (2) 267 0 (5)
LARK Landmark Bancshares Inc. 15,510 9,002 6,508 175 295 546 0 0
MIVI Mississippi View Holding Co. 5,145 2,528 2,617 1 13 187 0 (15)
NWEQ Northwest Equity Corp. 7,287 3,934 3,353 62 62 404 0 (57)
SMBC Southern Missouri Bancorp Inc. 11,348 6,310 5,038 79 40 580 0 (79)
WEFC Wells Financial Corp. 14,847 8,160 6,687 180 73 930 0 0
Average 13,051 7,405 5,647 81 75 625 29 (24)
Median 11,327 6,271 5,056 72 47 489 0 (3)
High 27,200 15,874 11,326 180 295 1,474 275 5
Low 5,145 2,528 2,581 1 (2) 57 0 (90)
ALL THRIFTS (330)
Average 95,204 57,770 37,434 2,889 903 6,889 688 461
WESTERN THRIFTS (37)
Average 49,442 29,722 19,720 668 (48) 4,074 270 (85)
OREGON THRIFTS (2)
Average 23,440 13,326 10,114 838 385 1,751 7 31
</TABLE>
INCOME AND EXPENSE COMPARISON (continued)
TRAILING FOUR QUARTERS
($000)
<TABLE>
<CAPTION>
Net Net Inc.
Total Non- Income Before
Non-Int. Recurring Before Income Extraord. Extraord. Net Core
Expense Expense Taxes Taxes Items Items Income Income
-------- -------- -------- --------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 5,291 1,146 2,704 1,079 1,625 0 1,625 2,368
COMPARABLE GROUP
FBSI First Bancshares Inc. 2,828 640 2,132 764 1,368 0 1,368 1,681
CASH First Midwest Financial Inc. 6,889 1,266 4,596 1,883 2,713 0 2,713 3,503
FFHH FSF Financial Corp. 7,130 1,031 3,673 1,439 2,234 0 2,234 2,878
GUPB GFSB Bancorp Inc. 1,505 250 876 298 578 0 578 731
HFSA Hardin Bancorp Inc. 1,821 441 738 274 464 0 464 752
LARK Landmark Bancshares Inc. 3,427 937 2,811 1,036 1,775 0 1,775 2,193
MIVI Mississippi View Holding Co. 1,687 363 765 291 474 0 474 701
NWEQ Northwest Equity Corp. 2,242 350 1,165 474 691 0 691 878
SMBC Southern Missouri Bancorp Inc. 3,152 779 1,648 499 1,149 0 1,149 1,629
WEFC Wells Financial Corp. 4,074 1,217 2,219 959 1,260 0 1,260 2,003
Average 3,476 727 2,062 792 1,271 0 1,271 1,695
Median 2,990 710 1,890 632 1,205 0 1,205 1,655
High 7,130 1,266 4,596 1,883 2,713 0 2,713 3,503
Low 1,505 250 738 274 464 0 464 701
ALL THRIFTS (330)
Average 25,422 6,181 10,806 3,069 7,736 (8) 7,728 11,120
WESTERN THRIFTS (37)
Average 13,169 2,837 7,086 2,435 4,651 (17) 4,634 6,517
OREGON THRIFTS (2)
Average 6,841 1,304 3,287 1,150 2,137 0 2,137 2,722
</TABLE>
140
<PAGE>
KELLER & COMPANY EXHIBIT 45
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
Interest Interest Interest Provision (Loss) Non-Int. & Intang. Real Est.
Income Expense Income for Loss on Sale Income Amtz. Expense
(%) (%) (%) (%) (%) (%) (%) (%)
-------- -------- -------- --------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 7.80 3.63 4.17 0.12 0.00 0.38 0.00 0.00
COMPARABLE GROUP
FBSI First Bancshares Inc. 7.54 4.15 3.38 0.04 0.11 0.29 0.01 (0.06)
CASH First Midwest Financial Inc. 7.56 4.41 3.15 0.03 0.01 0.41 0.08 0.00
FFHH FSF Financial Corp. 7.29 4.28 3.01 0.03 0.01 0.39 0.00 0.00
GUPB GFSB Bancorp Inc. 7.30 4.01 3.29 0.03 0.02 0.07 0.00 0.00
HFSA Hardin Bancorp Inc. 7.16 4.19 2.97 0.04 (0.00) 0.29 0.00 (0.01)
LARK Landmark Bancshares Inc. 7.32 4.25 3.07 0.08 0.14 0.26 0.00 0.00
MIVI Mississippi View Holding Co. 7.39 3.63 3.76 0.00 0.02 0.27 0.00 (0.02)
NWEQ Northwest Equity Corp. 8.05 4.35 3.71 0.07 0.07 0.45 0.00 (0.06)
SMBC Southern Missouri Bancorp Inc. 7.05 3.92 3.13 0.05 0.02 0.36 0.00 (0.05)
WEFC Wells Financial Corp. 7.48 4.11 3.37 0.09 0.04 0.47 0.00 0.00
Average 7.41 4.13 3.28 0.05 0.04 0.32 0.01 (0.02)
Median 7.36 4.17 3.22 0.04 0.02 0.32 0.00 (0.00)
High 8.05 4.41 3.76 0.09 0.14 0.47 0.08 0.00
Low 7.05 3.63 2.97 0.00 (0.00) 0.07 0.00 (0.06)
ALL THRIFTS (330)
Average 7.39 4.11 3.28 0.14 0.08 0.43 0.03 (0.00)
WESTERN THRIFTS (37)
Average 7.42 4.15 3.27 0.10 0.08 0.43 0.02 (0.01)
OREGON THRIFTS (2)
Average 7.59 4.27 3.32 0.17 0.11 0.46 0.01 0.00
</TABLE>
INCOME AND EXPENSE COMPARISON (continued)
AS A PERCENTAGE OF AVERAGE ASSETS
TRAILING FOUR QUARTERS
<TABLE>
<CAPTION>
Net Net Inc.
Total Non- Income Before
Non-Int. Recurring Before Income Extraord. Extraord. Net Core
Expense Expense Taxes Taxes Items Items Income Income
(%) (%) (%) (%) (%) (%) (%) (%)
-------- -------- -------- --------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 2.57 0.56 1.31 0.52 0.79 0.00 0.79 1.15
COMPARABLE GROUP
FBSI First Bancshares Inc. 1.89 0.43 1.42 0.51 0.91 0.00 0.91 1.12
CASH First Midwest Financial Inc. 1.91 0.35 1.28 0.52 0.75 0.00 0.75 0.97
FFHH FSF Financial Corp. 2.04 0.29 1.05 0.41 0.64 0.00 0.64 0.82
GUPB GFSB Bancorp Inc. 1.92 0.32 1.12 0.38 0.74 0.00 0.74 0.93
HFSA Hardin Bancorp Inc. 1.95 0.47 0.79 0.29 0.50 0.00 0.50 0.81
LARK Landmark Bancshares Inc. 1.62 0.44 1.33 0.49 0.84 0.00 0.84 1.04
MIVI Mississippi View Holding Co. 2.42 0.52 1.10 0.42 0.68 0.00 0.68 1.01
NWEQ Northwest Equity Corp. 2.48 0.39 1.29 0.52 0.76 0.00 0.76 0.97
SMBC Southern Missouri Bancorp Inc. 1.96 0.48 1.02 0.31 0.71 0.00 0.71 1.01
WEFC Wells Financial Corp. 2.05 0.61 1.12 0.48 0.64 0.00 0.64 1.01
Average 2.02 0.43 1.15 0.43 0.72 0.00 0.72 0.97
Median 1.95 0.43 1.12 0.45 0.73 0.00 0.73 0.99
High 2.48 0.61 1.42 0.52 0.91 0.00 0.91 1.12
Low 1.62 0.29 0.79 0.29 0.50 0.00 0.50 0.81
ALL THRIFTS (330)
Average 2.33 0.47 0.87 0.33 0.53 (0.00) 0.53 0.78
WESTERN THRIFTS (37)
Average 2.20 0.44 1.02 0.36 0.67 (0.00) 0.67 0.90
OREGON THRIFTS (2)
Average 2.31 0.43 0.98 0.34 0.64 0.00 0.64 0.84
</TABLE>
141
<PAGE>
EXHIBIT 46
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>
SUBJECT
PIONEER BANK, F.S.B 8.01 4.16 3.85 4.29 0.79 1.15 7.97 11.62
FBSI First Bancshares Inc. 7.88 5.05 2.83 3.54 0.91 1.12 5.96 7.33
CASH First Midwest Financial Inc. 7.80 5.05 2.75 3.25 0.75 0.97 6.51 8.40
FFHH FSF Financial Corp. 7.50 4.98 2.52 3.09 0.64 0.82 4.76 6.13
GUPB GFSB Bancorp Inc. 7.37 5.03 2.34 3.33 0.74 0.93 3.86 4.89
HFSA Hardin Bancorp Inc. 7.28 5.03 2.25 3.02 0.50 0.81 3.17 5.14
LARK Landmark Bancshares Inc. 7.44 5.15 2.29 3.12 0.84 1.04 5.42 6.69
MIVI Mississippi View Holding Co. 7.48 4.50 2.98 3.80 0.68 1.01 3.74 5.54
NWEQ Northwest Equity Corp. 8.52 4.99 3.53 3.92 0.76 0.97 5.88 7.47
SMBC Southern Missouri Bancorp Inc. 7.18 4.75 2.43 3.19 0.71 1.01 4.44 6.29
WEFC Wells Financial Corp. 7.59 4.85 2.74 3.42 0.64 1.01 4.47 7.11
Average 7.60 4.94 2.67 3.37 0.72 0.97 4.82 6.50
Median 7.49 5.01 2.63 3.29 0.73 0.99 4.62 6.49
High 8.52 5.15 3.53 3.92 0.91 1.12 6.51 8.40
Low 7.18 4.50 2.25 3.02 0.50 0.81 3.17 4.89
ALL THRIFTS (330)
Average 7.68 4.85 2.83 3.41 0.53 0.78 5.16 7.48
WESTERN THRIFTS (37)
Average 7.68 4.96 2.72 3.38 0.67 0.90 5.47 7.44
OREGON THRIFTS (2)
Average 7.89 4.99 2.89 3.45 0.64 0.85 5.27 6.91
</TABLE>
* Based on average interest-earning assets.
142
<PAGE>
EXHIBIT 47
KELLER & COMPANY
Columbus, Ohio
614-766-1426
DIVIDENDS, RESERVES AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
DIVIDENDS
-----------------------------------------
12 Month 12 Month
12 Month Common Current Dividend
Preferred Div./ Dividend Payout
Dividends Share Yield Ratio
($000) ($) (%) (%)
--------- -------- -------- --------
<S> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. NA NA NA NA
COMPARABLE GROUP
FBSI First Bancshares Inc. 0 0.20 1.05 16.95
CASH First Midwest Financial Inc. 0 0.34 2.25 34.02
FFHH FSF Financial 0 0.50 3.01 68.49
Corp.
GUPB GFSB Bancorp 0 0.75 2.15 111.94
Inc.
HFSA Hardin Bancorp 0 0.40 2.74 78.43
Inc.
LARK Landmark Bancshares Inc. 0 0.40 2.00 41.67
MIVI Mississippi View Holding Co. 0 0.16 1.07 41.38
NWEQ Northwest Equity Corp. 0 0.43 3.28 35.90
SMBC Southern Missouri Bancorp Inc. 0 0.50 2.94 69.44
WEFC Wells Financial 0 0.00 0.00 0.00
Corp.
Average 0 0.37 2.05 49.82
Median 0 0.40 2.20 41.53
High 0 0.75 3.28 111.94
Low 0 0.00 0.00 0.00
ALL THRIFTS (330)
Average 237 0.39 1.33 45.20
WESTERN THRIFTS (37)
Average 43 0.50 1.82 70.30
OREGON THRIFTS (2)
Average 0 0.61 1.98 85.32
</TABLE>
<TABLE>
<CAPTION>
RESERVES AND SUPPLEMENTAL DATA - MOST RECENT PERIOD
-------------------------------------------------------------------------------
Net
Reserves/ Reserves/ Chargeoffs/ Provisions/ 1 Year Total
Gross Non-Perf. Average Net Repricing Effective Assets/
Loans Assets Loans Chargeoffs Gap Tax Rate Employee
(%) (%) (%) (%) (%) (%) ($000)
--------- --------- ----------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
PIONEER BANK, F.S.B. 0.51 362.50 0.02 750.00 NA 39.90 2,183
COMPARABLE GROUP
FBSI First Bancshares Inc. 0.35 88.44 0.02 285.71 NA 38.29 2,581
CASH First Midwest Financial Inc. 0.97 81.68 0.02 230.77 NA 40.64 3,739
FFHH FSF Financial 0.34 216.04 0.03 157.89 8.82 39.73 4,081
Corp.
GUPB GFSB Bancorp 0.69 NA 0.44 32.65 NA 38.27 NA
Inc.
HFSA Hardin Bancorp 0.29 41.58 0.04 166.67 -9.14 37.29 5,742
Inc.
LARK Landmark Bancshares Inc. 0.57 62.24 0.04 366.67 2.37 40.65 4,973
MIVI Mississippi View Holding Co. 1.93 488.70 0.11 0.00 NA 42.95 3,322
NWEQ Northwest Equity Corp. 0.61 32.36 -0.04 NM -3.88 41.65 2,839
SMBC Southern Missouri Bancorp Inc. 0.64 37.60 0.00 NM NA 31.06 3,853
WEFC Wells Financial 0.36 106.53 0.02 562.50 NA 42.15 NA
Corp.
Average 0.68 128.35 0.07 225.36 -0.46 39.27 3,891
Median 0.59 81.68 0.03 198.72 -0.76 40.19 3,796
High 1.93 488.70 0.44 562.50 8.82 42.95 5,742
Low 0.29 32.36 -0.04 0.00 -9.14 31.06 2,581
ALL THRIFTS (330)
Average 0.64 90.83 0.09 114.79 -2.62 24.71 4,248
WESTERN THRIFTS (37)
Average 0.71 146.48 0.07 174.80 -4.74 31.05 4,023
OREGON THRIFTS (2)
Average 0.75 165.64 0.11 138.52 -10.03 34.72 3,953
</TABLE>
143
<PAGE>
EXHIBIT 48
KELLER & COMPANY
Columbus, Ohio
614-766-1426
VALUATION ANALYSIS AND CONCLUSIONS
Pioneer Bank, FSB/Oregon Trail Financial Corp.
Stock Prices as of June 4, 1997
<TABLE>
<CAPTION>
Valuation assumptions: Comparable Group All Thrifts
Symbol Value Average Median Average Median
------ -------------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Post conv. price to earnings P/E 14.37 22.34 22.54 30.16 22.64
Post conv. price to book value P/B 67.18% 103.37% 105.08% 130.98% 117.54%
Post conv. price to assets P/A 14.00% 14.93% 14.31% 15.68% 14.28%
Post conv. price to core earnings P/E 10.86 16.09 15.65 20.01 16.00
Pre conversion earnings ($) Y $ 1,625,000 For the twelve months ended March 31, 1997.
Pre conversion book value ($) B $ 21,026,000 At March 31, 1997.
Pre conversion assets ($) A $ 204,213,000 At March 31, 1997.
Pre conversion core earnings ($) $ 2,368,000 For the twelve months ended March 31, 1997.
Conversion expense ($) X $ 883,760
Proceeds not reinvested ($) Z $ 826,000 ESOP
ESOP borrowings ($) E $ 2,648,000
ESOP cost of borrowings, net (%) S 5.23%
ESOP term of borrowings (yrs.) T 10
RRP amount ($) M $ 1,324,000
RRP expense ($) N $ 264,800
Tax rate (%) TAX 38.50%
Investment rate of return, net (%) R 3.64%
Investment rate of return, pretax (%) 5.92%
<CAPTION>
Formulae to indicate value after conversion:
<S> <C> <C> <C>
1. P/E method: Value = P/E(Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) = $ 33,098,596
-------------------------------------
1-(P/E)R
2. P/B method: Value = P/B(B-X-E-M) = $ 33,103,184
------------
1-P/B
3. P/A method: Value = P/A(A-X) = $ 33,101,002
--------
1-P/A
<CAPTION>
VALUATION CORRELATION AND CONCLUSIONS:
Number of Price TOTAL
Shares Per Share VALUE
------ --------- -----
<S> <C> <C> <C>
Appraised value - midrange 3,310,000 $10.00 $ 33,100,000
Minimum - 85% of midrange 2,813,500 $10.00 $ 28,135,000
Maximum - 115% of midrange 3,806,500 $10.00 $ 38,065,000
Superrange - 115% of maximum 4,377,475 $10.00 $ 43,774,750
</TABLE>
144
<PAGE>
EXHIBIT 49
KELLER & COMPANY
Columbus, Ohio
614-766-1426
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
Stock Prices as of June 4, 1997
<TABLE>
<CAPTION>
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>
PIONEER BANK, F.S.B.
Appraised value - midpoint 33.10 10.00 0.70 14.89 14.37 67.18 14.00 67.18 10.86
Minimum of range 28.14 10.00 0.78 15.98 12.80 62.56 12.15 62.56 9.57
Maximum of range 38.07 10.00 0.63 14.07 15.98 71.06 15.77 71.06 12.18
Superrange maximum 43.77 10.00 0.56 13.37 17.72 74.81 17.73 74.81 13.62
ALL THRIFTS (330)
Average 162.79 20.37 0.85 15.94 30.16 130.98 15.68 135.63 20.01
Median 43.17 18.06 0.82 15.15 22.64 117.54 14.28 120.17 16.00
OREGON THRIFTS (2)
Average 149.85 16.81 0.58 11.94 32.54 148.29 18.84 148.29 20.74
Median 149.85 16.81 0.58 11.94 32.54 148.29 18.84 148.29 20.74
COMPARABLE GROUP (10)
Average 26.38 16.60 0.77 16.06 22.34 103.37 14.93 104.76 16.09
Median 24.78 16.31 0.73 15.70 22.54 105.08 14.31 105.29 15.65
COMPARABLE GROUP
FBSI First Bancshares Inc. 21.71 19.00 1.18 19.80 16.10 95.96 13.77 96.11 13.27
CASH First Midwest Financial Inc. 45.24 16.00 0.96 15.18 16.67 105.40 12.22 119.14 12.41
FFHH FSF Financial Corp. 50.91 16.63 0.73 15.87 22.77 104.76 14.01 104.76 18.75
GUPB GFSB Bancorp Inc. 14.98 18.63 0.67 16.88 27.80 110.34 17.98 110.34 20.83
HFSA Hardin Bancorp Inc. 12.57 14.63 0.51 15.37 28.68 95.15 12.16 95.15 18.67
LARK Landmark Bancshares Inc. 36.16 20.00 0.96 18.11 20.83 110.44 16.16 110.44 15.37
MIVI Mississippi View Holding Co. 12.28 15.00 0.58 15.55 25.86 96.46 17.61 96.46 17.94
NWEQ Northwest Equity Corp. 13.59 14.63 0.78 13.82 18.75 105.82 14.08 105.82 13.04
SMBC Southern Missouri Bancorp Inc. 27.84 17.00 0.72 15.85 23.61 107.26 16.81 107.26 15.93
WEFC Wells Financial Corp. 28.56 14.50 0.65 14.20 22.31 102.11 14.54 102.11 14.71
</TABLE>
<TABLE>
<CAPTION>
Dividends Financial Ratios
Div./ Dividend Payout Equity/ Core Core
Share Yield Ratio Assets ROAA ROAE
($) (%) (%) (%) (%) (%)
-------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
PIONEER BANK, F.S.B.
Appraised value - midpoint 0.00 0.00 0.00 20.84 0.97 4.68
Minimum of range 0.00 0.00 0.00 19.42 0.95 4.89
Maximum of range 0.00 0.00 0.00 22.20 0.99 4.45
Superrange maximum 0.00 0.00 0.00 23.70 1.00 4.22
ALL THRIFTS (330)
Average 0.50 1.75 63.77 12.92 0.76 7.36
Median 0.34 1.83 37.56 10.50 0.85 7.05
OREGON THRIFTS (2)
Average 0.14 0.79 48.28 13.15 1.29 5.42
Median 0.14 0.79 48.28 13.15 1.29 5.42
COMPARABLE GROUP (10)
Average 0.37 2.05 49.82 14.18 0.97 6.50
Median 0.40 2.20 41.53 14.29 0.99 6.49
COMPARABLE GROUP
FBSI First Bancshares Inc. 0.20 1.05 16.95 14.35 1.12 7.33
CASH First Midwest Financial Inc. 0.34 2.25 34.02 11.59 0.97 8.40
FFHH FSF Financial Corp. 0.50 3.01 68.49 11.77 0.82 6.13
GUPB GFSB Bancorp Inc. 0.75 2.15 111.94 16.30 0.93 4.89
HFSA Hardin Bancorp Inc. 0.40 2.74 78.43 12.78 0.81 5.14
LARK Landmark Bancshares Inc. 0.40 2.00 41.67 14.63 1.04 6.69
MIVI Mississippi View Holding Co. 0.16 1.07 41.38 18.26 1.01 5.54
NWEQ Northwest Equity Corp. 0.43 3.28 35.90 12.25 0.97 7.47
SMBC Southern Missouri Bancorp Inc. 0.50 2.94 69.44 15.67 1.01 6.29
WEFC Wells Financial Corp. 0.00 0.00 0.00 14.23 1.01 7.11
</TABLE>
145
<PAGE>
EXHIBIT 50
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Pioneer Bank, FSB/Oregon Trail Financial Corp.
At the MINIMUM of the Range
<TABLE>
<CAPTION>
<S> <C>
1. Gross Conversion Proceeds
Minimum market value $ 28,135,000
Less: Estimated conversion expenses 815,260
Net conversion proceeds $ 27,319,740
2. Generation of Additional Income
Net conversion proceeds $ 27,319,740
Less: Proceeds not invested (1) 740,000
Total conversion proceeds invested $ 26,579,740
Investment rate 3.64%
Earnings increase - return on proceeds invested $ 967,715
Less: Estimated cost of ESOP borrowings 117,717
Less: Amortization of ESOP borrowings, net of taxes 138,424
Less: RRP expense, net of taxes 138,424
Net earnings increase $ 573,150
<CAPTION>
3. Comparative Earnings
Regular Core
------------- ---------
<S> <C> <C>
Before conversion - 12 months ended 03/31/97 $ 1,625,000 2,368,000
Net earnings increase 573,150 573,150
After conversion $ 2,198,150 2,941,150
<CAPTION>
<S> <C>
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 21,026,000
Conversion proceeds 23,943,540
After conversion $ 44,969,540
5. Comparative Net Assets
Before conversion - 03/31/97 $ 204,213,000
Conversion proceeds 27,319,740
After conversion $ 231,532,740
</TABLE>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
146
<PAGE>
EXHIBIT 51
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Pioneer Bank, FSB/Oregon Trail Financial Corp.
At the MIDPOINT of the Range
<TABLE>
<CAPTION>
<S> <C>
1. Gross Conversion Proceeds
Midpoint market value $ 33,100,000
Less: Estimated conversion expenses 883,760
Net conversion proceeds $ 32,216,240
2. Generation of Additional Income
Net conversion proceeds $ 32,216,240
Less: Proceeds not invested (1) 826,000
Total conversion proceeds invested $ 31,390,240
Investment rate of return 3.64%
Earnings increase - return on proceeds invested $ 1,142,856
Less: Estimated cost of ESOP borrowings 138,490
Less: Amortization of ESOP borrowings, net of taxes 162,852
Less: RRP expense, net of taxes 162,852
Net earnings increase $ 678,661
<CAPTION>
3. Comparative Earnings
Regular Core
------------- ---------
<S> <C> <C>
Before conversion - 12 months ended 03/31/97 $ 1,625,000 2,368,000
Net earnings increase 678,661 678,661
After conversion $ 2,303,661 3,046,661
<CAPTION>
<S> <C>
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 21,026,000
Conversion proceeds 28,244,240
After conversion $ 49,270,240
5. Comparative Net Assets
Before conversion - 03/31/97 $ 204,213,000
Conversion proceeds 32,216,240
After conversion $ 236,429,240
</TABLE>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
147
<PAGE>
EXHIBIT 52
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Pioneer Bank, FSB/Oregon Trail Financial Corp.
At the MAXIMUM of the Range
<TABLE>
<CAPTION>
<S> <C>
1. Gross Conversion Proceeds
Maximum market value $ 38,065,000
Less: Estimated conversion expenses 952,300
Net conversion proceeds $ 37,112,700
2. Generation of Additional Income
Net conversion proceeds $ 37,112,700
Less: Proceeds not invested (1) 1,652,000
Total conversion proceeds invested $ 35,460,700
Investment rate 3.64%
Earnings increase - return on proceeds invested $ 1,291,053
Less: Estimated cost of ESOP borrowings 159,264
Less: Amortization of ESOP borrowings, net of taxes 187,280
Less: RRP expense, net of taxes 187,280
Net earnings increase $ 757,230
<CAPTION>
3. Comparative Earnings
Regular Core
------------- ---------
<S> <C> <C>
Before conversion - 12 months ended 03/31/97 $ 1,625,000 2,368,000
Net earnings increase 757,230 757,230
After conversion $ 2,382,230 3,125,230
<CAPTION>
<S> <C>
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 21,026,000
Conversion proceeds 32,544,900
After conversion $ 53,570,900
5. Comparative Net Assets
Before conversion - 03/31/97 $ 204,213,000
Conversion proceeds 37,112,700
After conversion $ 241,325,700
</TABLE>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
148
<PAGE>
EXHIBIT 53
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Pioneer Bank, FSB/Oregon Trail Financial Corp.
At the SUPERRANGE Maximum
<TABLE>
<CAPTION>
<S> <C>
1. Gross Conversion Proceeds
Superrange market value $ 43,774,750
Less: Estimated conversion expenses 1,031,060
Net conversion proceeds $ 42,743,690
2. Generation of Additional Income
Net conversion proceeds $ 42,743,690
Less: Proceeds not invested (1) 2,664,000
Total conversion proceeds invested $ 40,079,690
Investment rate 3.64%
Earnings increase - return on proceeds invested $ 1,459,221
Less: Estimated cost of ESOP borrowings 183,154
Less: Amortization of ESOP borrowings, net of taxes 215,372
Less: RRP expense, net of taxes 215,372
Net earnings increase $ 845,324
<CAPTION>
3. Comparative Earnings
Regular Core
------------- ---------
<S> <C> <C>
Before conversion - 12 months ended 03/31/97 $ 1,625,000 2,368,000
Net earnings increase 845,324 845,324
After conversion $ 2,470,324 3,213,324
<CAPTION>
<S> <C>
4. Comparative Net Worth (2)
Before conversion - 03/31/97 $ 21,026,000
Conversion proceeds 37,490,720
After conversion $ 58,516,720
5. Comparative Net Assets
Before conversion - 03/31/97 $ 204,213,000
Conversion proceeds 42,743,690
After conversion $ 246,956,690
</TABLE>
(1) Represents ESOP borrowings and fixed assets.
(2) ESOP borrowings and RRP are omitted from net worth.
149
<PAGE>
EXHIBIT 54
KELLER & COMPANY
Columbus, Ohio
614-766-1426
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
<TABLE>
<CAPTION>
Premium or (discount)
from comparable group.
------------------------
Pioneer Average Median
------- ------- ------
<S> <C> <C> <C>
Midpoint:
Price/earnings 14.37 x (35.68)% (36.25)%
Price/book value 67.18 % * (35.01)% (36.07)%
Price/assets 14.00 % (6.25)% (2.16)%
Price/tangible book value 67.18 % (35.87)% (36.19)%
Price/core earnings 10.86 x (32.49)% (30.58)%
Minimum of range:
Price/earnings 12.80 x (42.70)% (43.21)%
Price/book value 62.56 % * (39.48)% (40.46)%
Price/assets 12.15 % (18.63)% (15.08)%
Price/tangible book value 62.56 % (40.28)% (40.58)%
Price/core earnings 9.57 x (40.55)% (38.88)%
Maximum of range:
Price/earnings 15.98 x (28.47)% (29.11)%
Price/book value 71.06 % * (31.26)% (32.38)%
Price/assets 15.77 % 5.62% 10.23%
Price/tangible book value 71.06 % (32.17)% (32.51)%
Price/core earnings 12.18 x (24.31)% (22.17)%
Super maximum of range:
Price/earnings 17.72 x (20.67)% (21.38)%
Price/book value 74.81 % * (27.63)% (28.81)%
Price/assets 17.73 % 18.69% 23.87%
Price/tangible book value 74.81 % (28.59)% (28.95)%
Price/core earnings 13.62 x (15.34)% (12.95)%
</TABLE>
* Represents pricing ratio associated with primary valuation method.
150
<PAGE>
ALPHABETICAL
EXHIBITS
<PAGE>
EXHIBIT A
KELLER & COMPANY, INC.
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614)-766-1426
(614)-766-1459 FAX
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.
151
<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.
152
<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.
153
<PAGE>
EXHIBIT B
KELLER & COMPANY, INC.
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614)-766-1426
(614)-766-1459 FAX
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 20, 1997 /s/Michael R. Keller
- ------------------------------ -------------------------------------
Date Michael R. Keller
154
<PAGE>
EXHIBIT C
KELLER & COMPANY, INC.
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614)-766-1426
(614)-766-1459 FAX
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, Oregon Trail Financial
Corp., Baker City, Oregon in the amount of $17,000 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 13th day of June,
1997.
/s/Lori A. Kessen
--------------------
NOTARY PUBLIC
[SEAL] LORI A. KESSEN
NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION EXPIRES AUG. 10, 2000
155
<PAGE>
EXHIBIT 99.5
PROXY STATEMENT FOR SPECIAL MEETING OF MEMBERS
OF PIONEER BANK, A FEDERAL SAVINGS BANK
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK
2055 FIRST STREET
BAKER CITY, OREGON 97814
(541) 523-6327
NOTICE OF SPECIAL MEETING OF MEMBERS
TO BE HELD ON SEPTEMBER 23, 1997
Notice is hereby given that a special meeting ("Special Meeting") of
members of Pioneer Bank, a Federal Savings Bank ("Savings Bank") will be held at
the Sunridge Inn Best Western, 480 Campbell Street , Baker City, Oregon, on
Tuesday, September 23, 1997, at 11:30 a.m., Pacific Time. Business to be taken
up at the Special Meeting shall be:
(1) To approve an Amended Plan of Conversion adopted by the Board of
Directors on February 25, 1997 to convert the Savings Bank from a federally
chartered mutual savings bank to a federally chartered capital stock savings
bank, to be held as a wholly-owned subsidiary of a new holding company, Oregon
Trail Financial Corp., including the adoption of a Federal Stock Charter and
Bylaws for the Savings Bank, pursuant to the laws of the United States and the
rules and regulations of the Office of Thrift Supervision; and
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice, the Board of Directors
is not aware of any other matters that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those
members of the Savings Bank at the close of business on July 31, 1997, and who
continue as members until the Special Meeting, and should the Special Meeting
be, from time to time, adjourned to a later time, until the final adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
JERRY F. ALDAPE
SECRETARY
Baker City, Oregon
__________, 1997
PLEASE SIGN AND RETURN PROMPTLY EACH PROXY CARD YOU RECEIVE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ASSURE NECESSARY REPRESENTATION AT THE SPECIAL
MEETING, BUT WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU SO DESIRE. THE
PROXY IS SOLICITED ONLY FOR THIS SPECIAL MEETING (AND ANY ADJOURNMENTS THEREOF)
AND WILL NOT BE USED FOR ANY OTHER MEETING. YOU MAY REVOKE YOUR WRITTEN PROXY BY
WRITTEN INSTRUMENT DELIVERED TO JERRY F. ALDAPE, SECRETARY, PIONEER BANK, A
FEDERAL SAVINGS BANK, AT THE ABOVE ADDRESS AT ANY TIME PRIOR TO OR AT THE
SPECIAL MEETING.
<PAGE>
PIONEER BANK, A FEDERAL SAVINGS BANK
2055 FIRST STREET
BAKER CITY, OREGON 97814
(541) 523-6327
PROXY STATEMENT
__________, 1997
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF
DIRECTORS OF PIONEER BANK, A FEDERAL SAVINGS BANK FOR USE AT A SPECIAL MEETING
OF MEMBERS TO BE HELD ON TUESDAY, SEPTEMBER 23, 1997, AND ANY ADJOURNMENT OF
THAT MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING NOTICE OF SPECIAL
MEETING. YOUR BOARD OF DIRECTORS AND MANAGEMENT URGE YOU TO VOTE FOR THE PLAN OF
CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A special meeting of members ("Special Meeting") of Pioneer Bank, a
Federal Savings Bank ("Savings Bank") will be held at the Sunridge Inn Best
Western, 480 Campbell Street, Baker City, Oregon, on Tuesday, September 23,
1997, at 11:30 a.m., Pacific Time, for the purpose of considering and voting
upon an Amended Plan of Conversion from Federal Mutual Savings Bank to Federal
Stock Savings Bank and Formation of a Holding Company ("Plan of Conversion"),
which, if approved by a majority of the total votes of the members eligible to
be cast, will permit the Savings Bank to convert from a federally chartered
mutual savings bank to a federally chartered capital stock savings bank, to be
held as a subsidiary of Oregon Trail Financial Corp. ("Holding Company"), a
newly organized Oregon corporation formed by the Savings Bank. The conversion of
the Savings Bank and the acquisition of control of the Savings Bank by the
Holding Company are collectively referred to herein as the "Conversion."
Members entitled to vote on the Plan of Conversion are members of the
Savings Bank as of July 31, 1997 ("Voting Record Date") who continue as members
until the Special Meeting, and should the Special Meeting be, from time to time,
adjourned to a later time, until the final adjournment thereof. The Conversion
requires the approval of not less than a majority of the total votes eligible to
be cast at the Special Meeting.
The Plan of Conversion provides, among other things, that, after
receiving final authorization from the Office of Thrift Supervision ("OTS"), the
Savings Bank will offer for sale shares of common stock of the Holding Company
("Common Stock"), through the issuance of nontransferable subscription rights
("Subscription Rights"), first to depositors of the Savings Bank with $50.00 or
more on deposit as of December 31, 1995 ("Eligible Account Holders"), then to
the Savings Bank's employee stock ownership plan ("ESOP"), then to depositors of
the Savings Bank with $50.00 or more on deposit as of June 30, 1997
("Supplemental Eligible Account Holders"), then to depositors of the Savings
Bank as the Voting Record Date ("Other Members"), in a subscription offering
("Subscription Offering"), and then, if necessary, to certain members of the
general public in a direct community offering ("Direct Community Offering"). The
Subscription and Direct Community Offerings are referred to herein as the
"Subscription and Direct Community Offerings." It is anticipated that shares of
Common Stock not subscribed for in the Subscription and Direct Community
Offerings will be offered to the general public with the assistance of Charles
Webb & Co. ("Webb"), a division of Keefe, Bruyette & Woods, Inc., and, if
necessary, a syndicate of registered broker-dealers to be managed by Webb
pursuant to selected dealers' agreements in a syndicated offering ("Syndicated
Community Offering"). The Subscription, Direct Community and Syndicated
Community Offerings are referred to herein as the "Offerings."
1
<PAGE>
Adoption of a Federal Stock Charter ("Federal Stock Charter") and
Bylaws ("Bylaws") of the Savings Bank is an integral part of the Plan of
Conversion. Copies of the Plan of Conversion and the proposed Federal Stock
Charter and Bylaws for the Savings Bank are attached to this Proxy Statement as
exhibits. They provide, among other things, for the termination of voting rights
of members and of their rights to receive any surplus remaining after
liquidation of the Savings Bank. These rights, except for the rights of Eligible
Account Holders and Supplemental Eligible Account Holders in the liquidation
account, will vest exclusively in the holders of the stock in the Holding
Company and the Savings Bank. For further information, see "THE CONVERSION --
Effects of Conversion to Stock Form on Depositors and Borrowers of the Savings
Bank."
PIONEER BANK, A FEDERAL SAVINGS BANK
Chartered in 1901, the Savings Bank is a federal mutual savings bank
headquartered in Baker City, Oregon. As a result of the Conversion, the Savings
Bank will convert to a federal capital stock savings bank and will become a
wholly-owned subsidiary of the Holding Company. The Savings Bank is regulated by
the OTS, its primary regulator, and by the Federal Deposit Insurance Corporation
("FDIC"), the insurer of its deposits. The Savings Bank's deposits have been
federally-insured since 1934 and are currently insured by the FDIC under the
Savings Association Insurance Fund. The Savings Bank has been a member of the
Federal Home Loan Bank System since 1934. At March 31, 1997, the Savings Bank
had total assets of $204.2 million, total deposits of $179.2 million and total
equity of $21.0 million on a consolidated basis.
The Savings Bank is a community oriented financial institution whose
principal business is attracting retail deposits from the general public and
using these funds to originate one- to- four family residential mortgage loans
and consumer loans within its primary market area. At March 31, 1997, one- to-
four family loans totalled $101.8 million, or 72.0%, of total loans receivable.
The Savings Bank has also been active in the origination of home equity and
second mortgage loans and at March 31, 1997, such loans were $17.5 million, or
12.4%, of total loans receivable. As a result of a perceived local demand for
non-mortgage lending products, management's concern as to the Savings Bank's
level of interest rate risk and a perception of minimal anticipated growth in
residential loan demand within the Savings Bank's market primary area resulting
from strong competition primarily from mortgage brokers and larger financial
institutions, the Savings Bank began supplementing its traditional lending
activities in 1996 with the development of commercial business loans,
agricultural loans and the purchase of dealer-originated automobile contracts.
The Savings Bank has hired experienced commercial lending officers familiar with
the Savings Bank's primary market area in an attempt to develop commercial
business and agricultural lending and to expand the purchase of
dealer-originated automobile contracts to include the purchase of
dealer-originated contracts secured by recreational vehicles, trailers,
motorcycles and other vehicles. As a result of these activities, at March 31,
1997 the Savings Bank had agricultural loans of $2.5 million, commercial
business loans of $4.1 million and automobile loans of $2.1 million (including
$389,000 of purchased dealer-originated contracts).
In addition to its lending activities, the Savings Bank invests excess
liquidity in short and intermediate term U.S. Government and government agency
securities and mortgage-backed and related securities issued by U.S. Government
agencies. Investment securities and mortgage-backed and related securities,
which constituted 25.0% of total assets at March 31, 1997, had an amortized cost
of $51.2 million at March 31, 1997.
The Savings Bank conducts its operations from its main office and one
branch office located in Baker City, Oregon, and six additional branch offices
located in Burns (Harney County), Enterprise (Wallowa County), John Day (Grant
County), La Grande (two offices; Union County) and Ontario (Malheur County),
Oregon. The main office is located at 2055 First Street, Baker City, Oregon
97814, and its telephone number is (541) 523-6327.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The Savings Bank's Board of Directors has fixed the close of business
on July 31, 1997 as the record date for the determination of members entitled to
notice of and to vote at the Special Meeting. All holders of the Savings Bank's
savings or other authorized accounts are members of the Savings Bank under its
current charter. All members
2
<PAGE>
of record as of the close of business on the Voting Record Date who continue to
be members on the date of the Special Meeting or any adjournment thereof will be
entitled to vote at the Special Meeting or such adjournment.
Each eligible depositor member will be entitled at the Special Meeting
to cast one vote for each $100, or fraction thereof, of the aggregate withdrawal
value of all of the depositor's savings accounts in the Savings Bank as of the
Voting Record Date. No member is entitled to cast more than 1,000 votes. Any
number of members present and voting, represented in person or by proxy, at the
Special Meeting will constitute a quorum.
Approval of the Plan of Conversion will require the affirmative vote of
a majority of the total outstanding votes of the Savings Bank's members eligible
to be cast at the Special Meeting. As of the Voting Record Date for the Special
Meeting, there were approximately ____________ votes eligible to be cast.
PROXIES
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Enclosed is a proxy which may be used by any eligible member
to vote on the Plan of Conversion. All properly executed proxies received by
management will be voted in accordance with the instructions indicated thereon
by the members giving such proxies. If no instructions are given, such proxies
will be voted in favor of the Plan of Conversion. If any other matters are
properly presented at the Special Meeting and may properly be voted on, all
proxies will be voted on such matters in accordance with the best judgment of
the proxy holders named therein. If the enclosed proxy is returned, it may be
revoked at any time before it is voted by written notice to the Secretary of the
Savings Bank, by submitting a later dated proxy, or by attending and voting in
person at the Special Meeting. The proxies being solicited are only for use at
the Special Meeting and at any and all adjournments thereof and will not be used
for any other meeting. Management is not aware of any other business to be
presented at the Special Meeting.
The Savings Bank, as trustee for individual retirement accounts at the
Savings Bank, will vote in favor of the Plan of Conversion, unless the
beneficial owner executes and returns the enclosed proxy for the Special Meeting
or attends the Special Meeting and votes in person.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by representatives of Webb and by officers, directors
or regular employees of the Savings Bank, in person, by telephone or through
other forms of communication. Such persons will be reimbursed by the Savings
Bank for their reasonable out-of-pocket expenses incurred in connection with
such solicitation. If necessary, the Special Meeting may be adjourned to an
alternative date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF CONVERSION WILL NOT OBLIGATE
ANY VOTER TO PURCHASE ANY STOCK.
THE CONVERSION
THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO ITS APPROVAL BY
THE MEMBERS OF THE SAVINGS BANK ENTITLED TO VOTE THEREON AND TO THE SATISFACTION
OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL
DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION.
GENERAL
On February 25, 1997, the Board of Directors of the Savings Bank
unanimously adopted, and on July 22, 1997 subsequently amended, the Plan of
Conversion, pursuant to which the Savings Bank will be converted from a
federally chartered mutual savings bank to a federally chartered stock savings
bank to be held as a wholly-owned subsidiary of the
Holding Company, a
3
<PAGE>
newly formed Oregon corporation. THE FOLLOWING DISCUSSION OF THE PLAN OF
CONVERSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF CONVERSION,
WHICH IS ATTACHED HERETO AS EXHIBIT A.
If the Board of Directors of the Savings Bank decides for any reason,
such as possible delays resulting from overlapping regulatory processing or
policies or conditions that could adversely affect the Savings Bank's or the
Holding Company's ability to consummate the Conversion and transact its business
as contemplated herein and in accordance with the Savings Bank's operating
policies, at any time prior to the issuance of the Common Stock, not to use the
holding company form of organization in implementing the Conversion, the Plan of
Conversion will be amended to not use the holding company form of organization
in the Conversion. In the event that such a decision is made, the Savings Bank
will promptly refund all subscriptions or orders received together with accrued
interest, will withdraw the Holding Company's registration statement from the
SEC and will take all steps necessary to complete the Conversion and proceed
with a new offering without the Holding Company, including filing any necessary
documents with the OTS. In such event, and provided there is no regulatory
action, directive or other consideration upon which basis the Savings Bank
determines not to complete the Conversion, the Savings Bank will issue and sell
the common stock of the Savings Bank. There can be no assurance that the OTS
would approve the Conversion if the Savings Bank decided to proceed without the
Holding Company. The following description of the Plan of Conversion assumes
that a holding company form of organization will be utilized in the Conversion.
In the event that a holding company form of organization is not utilized, all
other pertinent terms of the Plan of Conversion as described below will apply to
the Conversion of the Savings Bank from mutual to stock form of organization and
the sale of the Savings Bank's common stock.
The Conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the Savings
Bank. Pursuant to the Plan of Conversion, 3,017,500 to 4,082,500 shares of
Common Stock are being offered for sale by the Holding Company at the Purchase
Price of $10.00 per share. As part of the Conversion, the Savings Bank will
issue all of its newly issued common stock (1,000 shares) to the Holding Company
in exchange for 50% of the net proceeds from the sale of Common Stock by the
Holding Company.
The Plan of Conversion provides generally that: (i) the Savings Bank
will convert from a federally chartered mutual savings bank to a federally
chartered stock savings bank; (ii) the Common Stock will be offered by the
Holding Company in the Subscription Offering to persons having Subscription
Rights and in a Direct Community Offering to certain members of the general
public, with preference given to natural persons and trusts of natural persons
residing in the Local Community; (iii) if necessary, shares of Common Stock not
subscribed for in the Subscription and Direct Community Offering will be offered
to certain members of the general public in a Syndicated Community Offering
through a syndicate of registered broker-dealers pursuant to selected dealers
agreements; and (iv) the Holding Company will purchase all of the capital stock
of the Savings Bank to be issued in connection with the Conversion. The
Conversion will be effected only upon completion of the sale of at least
$30,175,000 of Common Stock to be issued pursuant to the Plan of Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of December 31, 1995); (ii) the Savings Bank's ESOP; (iii)
Supplemental Eligible Account Holders (depositors with $50.00 or more on deposit
as of June 30, 1997); and (iv) Other Members (depositors of the Savings Bank as
of July 31, 1997). Concurrent with the Subscription Offering and subject to the
prior rights of holders of Subscription Rights, the Holding Company is offering
the Common Stock for sale to certain members of the general public through a
Direct Community Offering.
Shares of Common Stock not subscribed for in the Subscription and
Direct Community Offering may be offered for sale in the Syndicated Community
Offering. Regulations require that the Syndicated Community Offering be
completed within 45 days after completion of the fully extended Subscription
Offering unless extended by the Savings Bank or the Holding Company with the
approval of the regulatory authorities. If the Syndicated Community Offering is
determined not to be feasible, the Board of Directors of the Savings Bank will
consult with the regulatory
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authorities to determine an appropriate alternative method for selling the
unsubscribed shares of Common Stock. The Plan of Conversion provides that the
Conversion must be completed within 24 months after the date of the approval of
the Plan of Conversion by the members of the Savings Bank.
No sales of Common Stock may be completed, either in the Subscription,
Direct Community or Syndicated Community Offerings unless the Plan of Conversion
is approved by the members of the Savings Bank.
The completion of the Offerings, however, is subject to market
conditions and other factors beyond the Savings Bank's control. No assurance can
be given as to the length of time after approval of the Plan of Conversion at
the Special Meeting that will be required to complete the Direct Community or
Syndicated Community Offerings or other sale of the Common Stock. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of the Holding Company and the Savings Bank as converted, together with
corresponding changes in the net proceeds realized by the Holding Company from
the sale of the Common Stock. In the event the Conversion is terminated, the
Savings Bank would be required to charge all Conversion expenses against current
income.
Orders for shares of Common Stock will not be filled until at least
3,017,500 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Conversion is not
completed within 45 days after the last day of the fully extended Subscription
Offering and the OTS consents to an extension of time to complete the
Conversion, subscribers will be given the right to increase, decrease or rescind
their subscriptions. Unless an affirmative indication is received from
subscribers that they wish to continue to subscribe for shares, the funds will
be returned promptly, together with accrued interest at the Savings Bank's
passbook rate (2.75% per annum as of the date hereof) from the date payment is
received until the funds are returned to the subscriber. If such period is not
extended, or, in any event, if the Conversion is not completed, all withdrawal
authorizations will be terminated and all funds held will be promptly returned
together with accrued interest at the Savings Bank's passbook rate from the date
payment is received until the Conversion is terminated.
PURPOSES OF CONVERSION
The Board of Directors and management believe that the Conversion is in
the best interests of the Savings Bank, its members and the communities it
serves. The Savings Bank's Board of Directors has formed the Holding Company to
serve as a holding company, with the Savings Bank as its subsidiary, upon the
consummation of the Conversion. By converting to the stock form of organization,
the Holding Company and the Savings Bank will be structured in the form used by
holding companies of commercial banks and by a growing number of savings
institutions. Management of the Savings Bank believes that the Conversion offers
a number of advantages which will be important to the future growth and
performance of the Savings Bank. The capital raised in the Conversion is
intended to support the Savings Bank's current lending and investment activities
and may also support possible future expansion and diversification of
operations, although there are no current specific plans, arrangements or
understandings, written or oral, regarding any such expansion or
diversification. The Conversion is also expected to afford the Savings Bank's
members and others the opportunity to become stockholders of the Holding Company
and participate more directly in, and contribute to, any future growth of the
Holding Company and the Savings Bank. The Conversion will also enable the
Holding Company and the Savings Bank to raise additional capital in the public
equity or debt markets should the need arise, although there are no current
specific plans, arrangements or understandings, written or oral, regarding any
such financing activities.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE
SAVINGS BANK
VOTING RIGHTS. Savings members and borrowers will have no voting rights
in the converted Savings Bank or the Holding Company and therefore will not be
able to elect directors of the Savings Bank or the Holding Company or to control
their affairs. Currently, these rights are accorded to savings members of the
Savings Bank. Subsequent to the Conversion, voting rights will be vested
exclusively in the Holding Company with respect to the Savings Bank and the
holders of the Common Stock as to matters pertaining to the Holding Company.
Each holder
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of Common Stock shall be entitled to vote on any matter to be considered by the
stockholders of the Holding Company. A stockholder will be entitled to one vote
for each share of Common Stock owned.
SAVINGS ACCOUNTS AND LOANS. The Savings Bank's savings accounts,
account balances and existing FDIC insurance coverage of savings accounts will
not be affected by the Conversion. Furthermore, the Conversion will not affect
the loan accounts, loan balances or obligations of borrowers under their
individual contractual arrangements with the Savings Bank.
TAX EFFECTS. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other things, the
opinion states that: (i) no gain or loss will be recognized to the Savings Bank
in its mutual or stock form by reason of the Conversion; (ii) no gain or loss
will be recognized to its account holders upon the issuance to them of accounts
in the Savings Bank immediately after the Conversion, in the same dollar amounts
and on the same terms and conditions as their accounts at the Savings Bank in
its mutual form plus interest in the liquidation account; (iii) the tax basis of
account holders' accounts in the Savings Bank immediately after the Conversion
will be the same as the tax basis of their accounts immediately prior to
Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account will be zero; (v) the tax basis of the Common Stock
purchased in the Conversion will be the amount paid and the holding period for
such stock will commence at the date of purchase; and (vi) no gain or loss will
be recognized to account holders upon the receipt or exercise of Subscription
Rights in the Conversion, except to the extent Subscription Rights are deemed to
have value as discussed below. Unlike a private letter ruling issued by the IRS,
an opinion of counsel is not binding on the IRS and the IRS could disagree with
the conclusions reached therein. In the event of such disagreement, no assurance
can be given that the conclusions reached in an opinion of counsel would be
sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. Keller, a financial consulting firm retained by the Savings
Bank, whose findings are not binding on the IRS, has issued a letter indicating
that the Subscription Rights do not have any value, based on the fact that such
rights are acquired by the recipients without cost, are nontransferable and of
short duration and afford the recipients the right only to purchase shares of
the Common Stock at a price equal to its estimated fair market value, which will
be the same price paid by purchasers in the Direct Community Offering for
unsubscribed shares of Common Stock. If the Subscription Rights are deemed to
have a fair market value, the receipt of such rights may only be taxable to
those Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members who exercise their Subscription Rights. The Savings Bank could also
recognize a gain on the distribution of such Subscription Rights. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members are
encouraged to consult with their own tax advisors as to the tax consequences in
the event the Subscription Rights are deemed to have a fair market value.
The Savings Bank has also received an opinion from Deloitte & Touche
LLP, Portland, Oregon, that, assuming the Conversion does not result in any
federal income tax liability to the Savings Bank, its account holders, or the
Holding Company, implementation of the Plan of Conversion will not result in any
Oregon income tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Deloitte & Touche LLP and the
letter from Keller are filed as exhibits to the Registration Statement. See
"ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Savings Bank in its present mutual form, each depositor in the Savings Bank
would receive a pro rata share of any assets of the Savings Bank
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remaining after payment of claims of all creditors (including the claims of all
depositors up to the withdrawal value of their accounts). Each depositor's pro
rata share of such remaining assets would be in the same proportion as the value
of his deposit account to the total value of all deposit accounts in the Savings
Bank at the time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the Savings
Bank, including certificates of deposit ("Savings Account(s)"), shall not be
entitled to share in any residual assets in the event of liquidation of the
Savings Bank. However, pursuant to OTS regulations, the Savings Bank shall, at
the time of the Conversion, establish a liquidation account in an amount equal
to its total equity as of the date of the latest statement of financial
condition contained herein.
The liquidation account shall be maintained by the Savings Bank
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's "qualifying
deposit" in the Savings Account and the denominator is the total amount of the
"qualifying deposits" of all such holders. Such initial subaccount balance shall
not be increased, and it shall be subject to downward adjustment as provided
below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing day of the Savings Bank subsequent to December 31, 1995 or June
30, 1997 is less than the lesser of (i) the deposit balance in such Savings
Account at the close of business on any other annual closing date subsequent to
December 31, 1995 or June 30, 1997 or (ii) the amount of the "qualifying
deposit" in such Savings Account on December 31, 1995 or June 30, 1997, then the
subaccount balance for such Savings Account shall be adjusted by reducing such
subaccount balance in an amount proportionate to the reduction in such deposit
balance. In the event of a downward adjustment, such subaccount balance shall
not be subsequently increased, notwithstanding any increase in the deposit
balance of the related Savings Account. If any such Savings Account is closed,
the related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank (and only in
such event) each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk purchase of assets with assumptions of Savings Accounts and other
liabilities or similar transactions with another federally insured institution
in which the Savings Bank is not the surviving institution shall be considered
to be a complete liquidation. In any such transaction the liquidation account
shall be assumed by the surviving institution.
In the unlikely event the Savings Bank is liquidated after the
Conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to the Holding Company as the sole
stockholder of the Savings Bank.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with
or without conditions, or disapproves a plan of conversion pursuant to this part
may obtain review of such action by filing in the court of appeals of the United
States for the circuit in which the principal office or residence of such person
is located, or in the United States Court of Appeals for the District of
Columbia, a written petition praying that the final action of the OTS be
modified, terminated or set aside. Such petition must be filed within 30 days
after the publication of notice of such final action in the Federal Register, or
30 days after the mailing by the applicant of the notice to
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members as provided for in 12 C.F.R. ss.563b.6(c), whichever is later. The
further procedure for review is as follows: A copy of the petition is forthwith
transmitted to the OTS by the clerk of the court and thereupon the OTS files in
the court the record in the proceeding, as provided in Section 2112 of Title 28
of the United States Code. Upon the filing of the petition, the court has
jurisdiction, which upon the filing of the record is exclusive, to affirm,
modify, terminate, or set aside in whole or in part, the final action of the
OTS. Review of such proceedings is as provided in Chapter 7 of Title 5 of the
United States Code. The judgment and decree of the court is final, except that
they are subject to review by the United States Supreme Court upon certiorari as
provided in Section 1254 of Title 28 of the United States Code.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on
Form S-1 (File No. 333-30051) under the Securities Act of 1933, as amended, with
respect to the Common Stock offered in the Conversion. The accompanying
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Such information may be inspected at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Room 1100, Chicago,
Illinois 60661; and 75 Park Place, New York, New York 10007. Copies may be
obtained at prescribed rates from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement also is
available through the SEC's World Wide Web site on the Internet
(http://www.sec.gov).
The Savings Bank has filed with the OTS an Application for Approval of
Conversion. The accompanying Prospectus omits certain information contained in
such Application. The Application, including exhibits and certain other
information that are a part thereof, may be inspected, without charge, at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552 and at the
office of the Regional Director of the OTS at the OTS West Regional Office,
Pacific Telesis Tower, 1 Montgomery Street, Suite 400, San Francisco, California
94104.
Copies of the Holding Company's Articles of Incorporation and Bylaws
may be obtained by written request to the Savings Bank.
All persons eligible to vote at the Special Meeting should review both
this Proxy Statement and the accompanying Prospectus carefully. However, no
person is obligated to purchase any Common Stock. For additional information,
you may call the Stock Information Center at (541) 523-0362.
BY ORDER OF THE BOARD OF DIRECTORS
JERRY F. ALDAPE
SECRETARY
Baker City, Oregon
__________, 1997
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YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND THE PROSPECTUS AND, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTES
WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND
THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED
TO THE SECRETARY OF THE SAVINGS BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL
MEETING OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS IN THOSE
JURISDICTIONS IN WHICH IT IS LAWFUL TO MAKE SUCH OFFER.
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EXHIBIT A
PIONEER BANK, A FEDERAL SAVINGS BANK
BAKER CITY, OREGON
AMENDED PLAN OF CONVERSION
FROM FEDERAL MUTUAL SAVINGS BANK
TO FEDERAL STOCK SAVINGS BANK
AND FORMATION OF A HOLDING COMPANY
INTRODUCTION
I. General
It is the desire of the Board of Directors to attract new capital to
the Savings Bank to increase its net worth, to support future savings growth, to
increase the amount of funds available for other lending and investment, to
provide greater resources for the expansion of customer services and to
facilitate future expansion by the Savings Bank. In addition, the Board of
Directors intends to implement stock option plans and other stock benefit plans
as part of the Conversion in order to attract and retain qualified directors and
officers. It is the further desire of the Board of Directors to reorganize the
Savings Bank as the wholly owned subsidiary of a holding company to enhance
flexibility of operations, diversification of business opportunities and
financial capability for business and regulatory purposes and to enable the
Savings Bank to compete more effectively with other financial service
organizations. Accordingly, on February 25, 1997, the Board of Directors of
Pioneer Bank, A Federal Savings Bank ("Savings Bank"), after careful study and
consideration, adopted, and on July 22, 1997, subsequently amended, by unanimous
vote this Plan of Conversion ("Plan"), which provides for the conversion of the
Savings Bank from a federally chartered mutual savings bank to a federally
chartered stock savings bank and the concurrent formation of a holding company
for the Savings Bank ("Holding Company").
All capitalized terms contained in the Plan shall have the meanings
ascribed to them in Section II hereof.
Pursuant to the Plan, shares of Conversion Stock will be offered as
part of the Conversion in a Subscription Offering pursuant to nontransferable
Subscription Rights at a predetermined and uniform price first to the Savings
Bank's Eligible Account Holders, second to the Tax-Qualified Employee Stock
Benefit Plans, third to Supplemental Eligible Account Holders, and fourth to
Other Members of the Savings Bank. Concurrently with the Subscription Offering,
shares not subscribed for in the Subscription Offering will be offered as part
of the Conversion to the general public in a Direct Community Offering. Shares
remaining may then be offered to the general public in a Syndicated Community
Offering, an underwritten public offering or otherwise. The aggregate Purchase
Price of the Conversion Stock will be based upon an independent appraisal of the
Savings Bank and will reflect the estimated pro forma market value of the
Savings Bank as a subsidiary of the Holding Company.
The Conversion is subject to regulations of the Director of the OTS
(Part 563b of the Rules and Regulations Applicable to All Savings Associations)
as promulgated pursuant to Section 5(i) of the Home Owners' Loan Act.
Consummation of the Conversion is subject to the approval of this Plan
and the Conversion by the OTS and by the affirmative vote of Members of the
Savings Bank holding not less than a majority of the total votes eligible to be
cast at a special meeting of the Members to be called to consider the
Conversion.
No change will be made in the Board of Directors or management of the
Savings Bank as a result of the Conversion.
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II. Definitions
As used in this Plan, the terms set forth below have the following
meanings:
A. Acting in Concert: (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. A Person (as defined herein) who acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person who is also acting in concert with that other party, except that
any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee or a Person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
means (i) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank, or the Holding Company) of which
such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten 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 it does not include a 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 Savings Bank, any of its subsidiaries, or the Holding Company.
C. Capital Stock: Any and all authorized capital stock in the Savings
Bank, as converted.
D. Common Stock: Any and all authorized common stock in the Holding
Company subsequent to the Conversion.
E. Conversion: (i) Amendment of the Savings Bank's Charter and Bylaws
to authorize issuance of shares of Capital Stock by the Savings Bank and to
conform to the requirements of a Federal stock savings bank under the laws of
the United States and regulations of the OTS; (ii) issuance and sale of
Conversion Stock by the Holding Company in the Subscription Offering and Direct
Community Offering; and (iii) purchase by the Holding Company of the Capital
Stock of the Savings Bank to be issued in the Conversion immediately following
or concurrently with the close of the sale of all Conversion Stock.
F. Conversion Stock: Holding Company common stock to be issued and sold
by the Holding Company pursuant to the Plan.
G. Direct Community Offering: The offering for sale of Conversion Stock
to the public.
H. Eligibility Record Date: December 31, 1995.
I. Eligible Account Holder: Holder of a Qualifying Deposit in the
Savings Bank on the Eligibility Record Date.
J. FDIC: Federal Deposit Insurance Corporation.
K. Form AC Application: The application submitted to the OTS for
approval of the Conversion.
L. H-(e)1 Application: The application submitted to the OTS on OTS Form
H-(e)1 or Form H-(e)1-S, if applicable, for approval of the Holding Company's
acquisition of all of the Capital Stock of the Savings Bank.
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M. Holding Company: A corporation to be formed by the Savings Bank
under state law for the purpose of becoming a holding company through the
issuance and sale of its stock under the Plan, and concurrent acquisition of
100% of the Capital Stock of the Savings Bank to be issued pursuant to the Plan.
N. Holding Company Stock: Any and all authorized capital stock of the
Holding Company.
O. Local Community: Baker, Union, Wallowa, Malheur, Harney and Grant
counties, Oregon.
P. Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker, or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system or furnishes bona fide competitive bid and offer quotations on request
and (ii) is ready, willing and able to effect transactions in reasonable
quantities at his quoted prices with other brokers or dealers.
Q. Members: All Persons or entities who qualify as members of the
Savings Bank pursuant to its Charter and Bylaws prior to the Conversion.
R. Officer: An executive officer of the Savings Bank, which includes
the Chairman of the Board, President, Executive Vice President, Senior Vice
Presidents, Vice Presidents in charge of principal business functions, the
Secretary and the Treasurer as well as any other person performing similar
functions.
S. Order Forms: Forms to be used for the purchase of Conversion Stock
sent to Eligible Account Holders and other parties eligible to purchase
Conversion Stock in the Subscription Offering pursuant to the Plan.
T. Other Member: Holder of a Savings Account (other than Eligible
Account Holders and Supplemental Eligible Account Holders) as of the Record Date
and borrowers from the Savings Bank as provided in the Savings Bank's Federal
Mutual Charter who continue to be borrowers from the Savings Bank as of the
Record Date.
U. OTS: Office of Thrift Supervision of the United States Department of
the Treasury.
V. Person: An individual, corporation, partnership, association, joint
stock company, trusts of natural Persons, unincorporated organization or a
government or any political subdivision thereof.
W. Plan: This Plan of Conversion, which provides for the conversion of
the Savings Bank from a federally chartered mutual savings bank to a federally
chartered capital stock savings bank as a wholly owned subsidiary of the Holding
Company, as originally adopted by the Board of Directors or as amended in
accordance with the terms thereof.
X. Qualifying Deposit: The deposit balance in any Savings Account as of
the Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable; provided, however, that no Savings Account with a deposit balance of
less than $50 shall constitute a Qualifying Deposit.
Y. Record Date: Date which determines which Members are entitled to
vote at the Special Meeting.
Z. Registration Statement: The registration statement on Form S-1 or
other applicable forms filed by the Holding Company with the SEC for the purpose
of registering the Conversion Stock under the Securities Act of 1933, as
amended.
AA. Savings Account(s): Withdrawable deposit(s) in the Savings Bank,
including certificates of deposit, demand deposit accounts and
non-interest-bearing accounts.
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BB. Savings Bank: Pioneer Bank, A Federal Savings Bank, in its present
form as a federally chartered mutual savings bank.
CC. SEC: Securities and Exchange Commission.
DD. Special Meeting: The special meeting of Members called for the
purpose of considering the Plan for approval.
EE. Subscription Offering: The offering of Conversion Stock to Eligible
Account Holders, Tax- Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Members under the Plan.
FF. Subscription Rights: Non-transferable, non-negotiable, personal
rights of Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans,
Supplemental Eligible Account Holders and Other Members to purchase Conversion
Stock.
GG. Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding the approval of the Plan by the OTS.
HH. Supplemental Eligible Account Holder: Holder of a Qualifying
Deposit in the Savings Bank (other than an Officer or director or their
Associates) on the Supplemental Eligibility Record Date.
II. Syndicated Community Offering: The offering for sale by a syndicate
of broker-dealers to the general public of shares of Conversion Stock not
purchased in the Subscription Offering and the Direct Community Offering.
JJ. Tax Qualified Employee Stock Benefit Plan: Any defined benefit plan
or defined contribution plan of the Savings Bank or Holding Company, such as an
employee stock ownership plan, bonus plan, profit-sharing plan or other plan,
which, with its related trust meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code. A "non-tax-qualified employee stock
benefit plan" is any defined benefit plan or defined contribution plan that is
not so qualified.
III. Steps Prior to Submission of the Plan to the Members for Approval
Prior to submission of the Plan to the Members for approval, the
Savings Bank must receive approval from the OTS of the Form AC Application.
Prior to such regulatory approval:
A. The Board of Directors shall adopt the Plan by a vote of not less
than two-thirds of its entire membership.
B. The Savings Bank shall notify the Members of the adoption of the
Plan by publishing legal notice in a newspaper having a general circulation in
each community in which the Savings Bank maintains an office.
C. A press release relating to the proposed Conversion may be submitted
to the local media.
D. Copies of the Plan as adopted by the Board of Directors shall be
made available for inspection at each office of the Savings Bank.
E. The Savings Bank shall cause the Holding Company to be incorporated
under state law and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
F. As soon as practicable following the adoption of this Plan, the
Savings Bank shall file the Form AC Application, and the Holding Company shall
file the Registration Statement and the H-(e)1 Application. Upon
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filing the Form AC Application, the Savings Bank shall publish legal notice of
the filing of the Form AC Application in a newspaper having a general
circulation in each community in which the Savings Bank maintains an office
and/or by mailing a letter to each of its Members, and shall publish such other
notices of the Conversion as may be required in connection with the H-(e)1
Application and by the regulations and policies of the OTS.
G. The Savings Bank shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which shall
state that the Conversion will not result in any gain or loss for Federal income
tax purposes to the Savings Bank or its Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members. Receipt of a favorable opinion or
ruling is a condition precedent to completion of the Conversion.
IV. Meeting of Members
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the Savings Bank's Bylaws. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Savings Bank shall distribute proxy solicitation materials
to all Members and beneficial owners of accounts held in fiduciary capacities
where the beneficial owners possess voting rights, as of the Record Date. The
proxy solicitation materials shall include a copy of the proxy statement to be
used in connection with such solicitation ("Proxy Statement") and other
documents authorized for use by the regulatory authorities and may also include
a copy of the Plan and/or a prospectus ("Prospectus") as provided in Paragraph V
below. The Savings Bank shall also advise each Eligible Account Holder and
Supplemental Eligible Account Holder not entitled to vote at the Special Meeting
of the proposed Conversion and the scheduled Special Meeting, and provide a
postage prepaid card on which to indicate whether he wishes to receive the
Prospectus, if the Subscription Offering is not held concurrently with the proxy
solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy. The OTS shall be notified
promptly of the actions of the Members.
V. Summary Proxy Statement
The Proxy Statement furnished to Members may be in summary form,
provided that a statement is made in bold-face type that a more detailed
description of the proposed transaction may be obtained by returning an enclosed
postage prepaid card or other written communication requesting supplemental
information. Without prior approval of the OTS, the Special Meeting shall not be
held less than 20 days after the last day on which the supplemental information
statement is mailed to requesting Members. The supplemental information
statement may be combined with the Prospectus if the Subscription Offering is
commenced concurrently with or during the proxy solicitation of Members for the
Special Meeting.
VI. Offering Documents
The Holding Company may commence the Subscription Offering and,
provided that the Subscription Offering has commenced, may commence the Direct
Community Offering concurrently with or during the proxy solicitation of
Members. The Holding Company may close the Subscription Offering before the
Special Meeting, provided that the offer and sale of the Conversion Stock shall
be conditioned upon approval of the Plan by the Members at the Special Meeting.
The Savings Bank's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders (if applicable) and Other Members
to return to the Savings Bank by a reasonable certain date a postage prepaid
card or other written communication requesting receipt of a Prospectus with
respect to the Subscription Offering, provided that if the Prospectus is not
mailed concurrently with the proxy solicitation materials, the Subscription
Offering shall not be closed until the expiration of 30 days after the mailing
of the proxy solicitation materials. If the Subscription Offering is not
commenced within 45 days after the Special Meeting, the Savings Bank may
transmit, not more than 30 days prior to the commencement of the Subscription
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Offering, to each Eligible Account Holder, Supplemental Eligible Account Holder
and other eligible subscribers who had been furnished with proxy solicitation
materials a notice which shall state that the Savings Bank is not required to
furnish a Prospectus to them unless they return by a reasonable date certain a
postage prepaid card or other written communication requesting the receipt of
the Prospectus.
Prior to commencement of the Subscription Offering, the Direct
Community Offering and the Syndicated Community Offering, the Holding Company
shall file the Registration Statement. The Holding Company shall not distribute
the final Prospectus until the Registration Statement containing same has been
declared effective by the SEC and the Prospectus has been declared effective by
the OTS.
VII. Combined Subscription and Direct Community Offering
Instead of a separate Subscription Offering, all Subscription Rights
may be exercised by delivery of properly completed and executed Order Forms to
the Savings Bank or selling group utilized in connection with the Direct
Community Offering and the Syndicated Community Offering. If a separate
Subscription Offering is not held, orders for Conversion Stock in the Direct
Community Offering shall first be filled pursuant to the priorities and
limitations stated in Paragraph IX.C., below.
VIII. Consummation of the Conversion
After receipt of all orders for Conversion Stock, and concurrently with
the execution thereof, the amendment of the Savings Bank's Federal mutual
Charter and Bylaws to authorize the issuance of shares of Capital Stock and to
conform to the requirements of a Federal capital stock savings bank will be
declared effective by the OTS, the amended Charter and Bylaws approved by the
Members will become effective. At such time, the Conversion Stock will be issued
and sold by the Holding Company, the Capital Stock to be issued in the
Conversion will be issued and sold to the Holding Company, and the Savings Bank
will become a wholly owned subsidiary of the Holding Company. The Savings Bank
will issue to the Holding Company 1,000 shares of its common stock, representing
all of the shares of Capital Stock to be issued by the Savings Bank, and the
Holding Company will make payment to the Savings Bank of that portion of the
aggregate net proceeds realized by the Holding Company from the sale of the
Conversion Stock under the Plan as may be authorized or required by the OTS.
IX. Stock Offering
A. Number of Shares
The number of shares of Conversion Stock to be offered pursuant to the
Plan shall be determined initially by the Board of Directors of the Savings Bank
and the Board of Directors of the Holding Company in conjunction with the
determination of the Purchase Price (as that term is defined in Paragraph IX.B.
below). The number of shares to be offered may be subsequently adjusted by the
Board of Directors prior to completion of the offering.
B. Independent Evaluation and Purchase Price of Shares
All shares of Conversion Stock sold in the Conversion, including shares
sold in any Direct Community Offering, shall be sold at a uniform price per
share, referred to herein as the "Purchase Price." The Purchase Price shall be
determined by the Board of Directors of the Savings Bank and the Board of
Directors of the Holding Company immediately prior to the simultaneous
completion of all such sales contemplated by this Plan on the basis of the
estimated pro forma market value of the Savings Bank, as converted, at such
time. The estimated pro forma market value of the Savings Bank shall be
determined for such purpose by an independent appraiser on the basis of such
appropriate factors not inconsistent with the regulations of the OTS.
Immediately prior to the Subscription Offering, a subscription price range shall
be established which shall vary from 15% above to 15% below the average of the
minimum and maximum of the estimated price range. The maximum subscription price
(i.e., the per share amount to be remitted when subscribing for shares of
Conversion Stock) shall then be determined within the
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subscription price range by the Board of Directors of the Savings Bank. The
subscription price range and the number of shares to be offered may be revised
after the completion of the Subscription Offering with OTS approval without a
resolicitation of proxies or Order Forms or both.
C. Method of Offering Shares
Subscription Rights shall be issued at no cost to Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members pursuant to priorities established by this
Plan and the regulations of the OTS. In order to effect the Conversion, all
shares of Conversion Stock proposed to be issued in connection with the
Conversion must be sold and, to the extent that shares are available, no
subscriber shall be allowed to purchase less than 25 shares; provided, however,
that if the purchase price is greater than $20 per share, the minimum number of
shares which must be subscribed for shall be adjusted so that the aggregate
actual purchase price required to be paid for such minimum number of shares does
not exceed $500. The priorities established for the purchase of shares are as
follows:
1. Category 1: Eligible Account Holders
a. Each Eligible Account Holder shall receive,
without payment, Subscription Rights entitling such Eligible
Account Holder to purchase that number of shares of Conversion
Stock which is equal to the greater of the maximum purchase
limitation established for the Direct Community Offering,
one-tenth of one percent of the total offering or 15 times the
product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to
be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Eligible Account Holder and
the denominator is the total amount of Qualifying Deposits of
all Eligible Account Holders. If the allocation made in this
paragraph results in an oversubscription, shares of Conversion
Stock shall be allocated among subscribing Eligible Account
Holders so as to permit each such account holder, to the
extent possible, to purchase a number of shares of Conversion
Stock sufficient to make his total allocation equal to 100
shares of Conversion Stock or the total amount of his
subscription, whichever is less. Any shares of Conversion
Stock not so allocated shall be allocated among the
subscribing Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying Deposits
as compared to the total Qualifying Deposits of all Eligible
Account Holders.
b. Subscription Rights received by Officers and
directors of the Savings Bank and their Associates, as
Eligible Account Holders, based on their increased deposits in
the Savings Bank in the one-year period preceding the
Eligibility Record Date shall be subordinated to all other
subscriptions involving the exercise of Subscription Rights
pursuant to this Category.
2. Category 2: Tax-Qualified Employee Stock Benefit
Plans
a. Tax-Qualified Employee Stock Benefit Plans of the
Savings Bank shall receive, without payment, non-transferable
Subscription Rights to purchase in the aggregate up to 8% of
the Conversion Stock, including shares of Conversion Stock to
be issued in the Conversion as result of an increase in the
estimated price range after commencement of the Subscription
Offering and prior to the completion of the Conversion. The
Subscription Rights granted to Tax-Qualified Stock Benefit
Plans of the Savings Bank shall be subject to the availability
of shares of Conversion Stock after taking into account the
shares of Conversion Stock purchased by Eligible Account
Holders; provided, however, that in the event the number of
shares offered in the Conversion is increased to an amount
greater than the maximum of the estimated price range as set
forth in the Prospectus ("Maximum Shares"), the Tax-Qualified
Employee Stock Benefit Plans shall have a priority right to
purchase any such shares exceeding the Maximum Shares up to an
aggregate of 8% of the Conversion Stock. Tax-Qualified
Employee Stock Benefit Plans may use funds contributed or
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borrowed by the Holding Company or the Savings Bank and/or
borrowed from an independent financial institution to exercise
such Subscription Rights, and the Holding Company and the
Savings Bank may make scheduled discretionary contributions
thereto, provided that such contributions do not cause the
Holding Company or the Savings Bank to fail to meet any
applicable capital requirements.
3. Category 3: Supplemental Eligible Account Holders
a. In the event that the Eligibility Record Date is
more than 15 months prior to the date of the latest amendment
to the Form AC Application filed prior to OTS approval, then,
and only in that event, each Supplemental Eligible Account
Holder shall receive, without payment, Subscription Rights
entitling such Supplemental Eligible Account Holder to
purchase that number of shares of Conversion Stock which is
equal to the greater of the maximum purchase limitation
established for the Direct Community Offering, one-tenth of
one percent of the total offering or 15 times the product
(rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to
be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Supplemental Eligible Account
Holder and the denominator is the total amount of the
Qualifying Deposits of all Supplemental Eligible Account
Holders.
b. Subscription Rights received pursuant to this
category shall be subordinated to Subscription Rights granted
to Eligible Account Holders and Tax-Qualified Employee Stock
Benefit Plans.
c. Any Subscription Rights to purchase shares of
Conversion Stock received by an Eligible Account Holder in
accordance with Category Number 1 shall reduce to the extent
thereof the Subscription Rights to be distributed pursuant to
this Category.
d. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, shares of
Conversion Stock shall be allocated among the subscribing
Supplemental Eligible Account Holders as follows:
(1) Shares of Conversion Stock shall be
allocated so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to
purchase a number of shares of Conversion Stock
sufficient to make his total allocation (including
the number of shares of Conversion Stock, if any,
allocated in accordance with Category Number 1) equal
to 100 shares of Conversion Stock or the total amount
of his subscription, whichever is less.
(2) Any shares of Conversion Stock not
allocated in accordance with subparagraph (1) above
shall be allocated among the subscribing Supplemental
Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying
Deposits as compared to the total Qualifying Deposits
of all Supplemental Eligible Account Holders.
4. Category 4: Other Members
a. Other Members shall receive Subscription Rights to
purchase shares of Conversion Stock, after satisfying the
subscriptions of Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans and Supplemental Eligible Account
Holders pursuant to Category Nos. l, 2 and 3 above, subject to
the following conditions:
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(1) Each such Other Member shall be entitled
to subscribe for the greater of the maximum purchase
limitation established for the Direct Community
Offering or one-tenth of one percent of the total
offering.
(2) In the event of an oversubscription for
shares of Conversion Stock pursuant to Category No.
4, the shares of Conversion Stock available shall be
allocated among the subscribing Other Members pro
rata on the basis of the amounts of their respective
subscriptions.
D. Direct Community Offering and Syndicated Community Offering
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights set forth in Category Nos. 1 through 4
above may be sold by the Holding Company to Persons under such terms
and conditions as may be established by the Savings Bank's Board of
Directors with the concurrence of the OTS. The Direct Community
Offering may commence concurrently with or as soon as possible after
the completion of the Subscription Offering and must be completed
within 45 days after completion of the Subscription Offering, unless
extended with the approval of the OTS. No Person may purchase in the
Direct Community Offering shares of Conversion Stock with an aggregate
purchase price that exceeds $200,000. The right to purchase shares of
Conversion Stock under this Category is subject to the right of the
Savings Bank or the Holding Company to accept or reject such
subscriptions in whole or in part. In the event of an oversubscription
for shares in this Category, the shares available shall be allocated
among prospective purchasers pro rata on the basis of the amounts of
their respective orders. The offering price for which such shares are
sold to the general public in the Direct Community Offering shall be
the Purchase Price.
2. Orders received in the Direct Community Offering first
shall be filled up to a maximum of 2% of the Conversion Stock and
thereafter remaining shares shall be allocated on an equal number of
shares basis per order until all orders have been filled.
3. The Conversion Stock offered in the Direct Community
Offering shall be offered and sold in a manner that will achieve the
widest distribution thereof. Preference shall be given in the Direct
Community Offering to natural Persons and trusts of natural Persons
residing in the Local Community and then to natural Persons and trusts
of natural Persons residing in the counties contiguous to the Local
Community.
4. Subject to such terms, conditions and procedures as may be
determined by the Savings Bank and the Holding Company, all shares of
Conversion Stock not subscribed for in the Subscription Offering or
ordered in the Direct Community Offering may be sold by a syndicate of
broker-dealers to the general public in a Syndicated Community
Offering. Each order for Conversion Stock in the Syndicated Community
Offering shall be subject to the absolute right of the Savings Bank and
the Holding Company to accept or reject any such order in whole or in
part either at the time of receipt of an order or as soon as
practicable after completion of the Syndicated Community Offering. No
Person may purchase in the Syndicated Community Offering shares of
Conversion Stock with an aggregate purchase price that exceeds
$200,000. The Savings Bank and the Holding Company may commence the
Syndicated Community Offering concurrently with, at any time during, or
as soon as practicable after the end of the Subscription Offering
and/or Direct Community Offering, provided that the Syndicated
Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Savings
Bank and the Holding Company with the approval of the OTS.
5. If for any reason a Syndicated Community Offering of shares
of Conversion Stock not sold in the Subscription Offering and the
Direct Community Offering cannot be effected, or in the event that any
insignificant residue of shares of Conversion Stock is not sold in the
Subscription Offering, Direct
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Community Offering or Syndicated Community Offering, the Savings Bank
and the Holding Company shall use their best efforts to obtain other
purchasers for such shares in such manner and upon such conditions as
may be satisfactory to the OTS.
6. In the event a Direct Community Offering or Syndicated
Community Offering appears not feasible, the Savings Bank will
immediately consult with the OTS to determine the most viable
alternative available to effect the completion of the Conversion.
Should no viable alternative exist, the Savings Bank may terminate the
Conversion with the concurrence of the OTS.
E. Limitations Upon Purchases
The following additional limitations and exceptions shall be imposed
upon purchases of shares of Conversion Stock:
1. No Person, together with Associates of or Persons Acting in
Concert with such Person, may purchase in the aggregate more than the
overall maximum purchase limitation of 1% of the total number of shares
of Conversion Stock issued in the Conversion (exclusive of any shares
issued pursuant to an increase in the range of minimum and maximum
aggregate values within which the aggregate amount of Conversion Stock
issued in the Conversion will fall), except that Tax-Qualified Employee
Stock Benefit Plans may purchase up to 8% of the total Conversion Stock
issued and shares held or to be held by the Tax- Qualified Employee
Stock Benefit Plans and attributable to a Person shall not be
aggregated with other shares purchased directly by or otherwise
attributable to such Person.
2. Officers and directors and Associates thereof may not
purchase in the aggregate more than 31% of the shares issued in the
Conversion.
3. The Savings Bank's and Holding Company's Boards of
Directors will not be deemed to be Associates or a group of Persons
Acting in Concert with other directors or trustees solely as a result
of membership on the Board of Directors.
4. The Savings Bank's Board of Directors, with the approval of
the OTS and without further approval of Members, may, as a result of
market conditions and other factors, increase or decrease the purchase
limitation in paragraphs 1 and 4 above or the number of shares of
Conversion Stock to be sold in the Conversion. If the Savings Bank or
the Holding Company, as the case may be, increases the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in
the Conversion, the Savings Bank or the Holding Company, as the case
may be, is only required to resolicit Persons who subscribed for the
maximum purchase amount and may, in the sole discretion of the Savings
Bank or the Holding Company, as the case may be, resolicit certain
other large subscribers. If the Savings Bank or the Holding Company, as
the case may be, decreases the maximum purchase limitations or the
number of shares of Conversion Stock to be sold in the Conversion, the
orders of any Person who subscribed for the maximum purchase amount
shall be decreased by the minimum amount necessary so that such Person
shall be in compliance with the then maximum number of shares permitted
to be subscribed for by such Person.
Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or regulation. In
the event that such purchase limitations are violated by any Person (including
any Associate or group of Persons affiliated or otherwise Acting in Concert with
such Person), the Holding Company shall have the right to purchase from such
Person at the actual Purchase Price per share all shares acquired by such Person
in excess of such purchase limitations or, if such excess shares have been sold
by such Person, to receive from such Person the difference between the actual
Purchase Price per share paid for such excess shares and the price at which such
excess shares were sold by such Persons. This right of the Holding Company to
purchase such excess shares shall be assignable by the Holding Company.
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F. Restrictions On and Other Characteristics of the Conversion
Stock
1. Transferability. Conversion Stock purchased by Officers and
directors of the Savings Bank and officers and directors of the Holding
Company shall not be sold or otherwise disposed of for value for a
period of one year from the date of Conversion, except for any
disposition (i) following the death of the original purchaser or (ii)
resulting from an exchange of securities in a merger or acquisition
approved by the regulatory authorities having jurisdiction.
The Conversion Stock issued by the Holding Company to such
Officers and directors shall bear a legend giving appropriate notice of
the one-year holding period restriction. Said legend shall state as
follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this
certificate pursuant to Part 563b of the Rules and Regulations
of the Office of Thrift Supervision. These shares may not be
transferred prior thereto without a legal opinion of counsel
that said transfer is permissible under the provisions of
applicable laws and regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent of the Holding Company Stock with
respect to the foregoing restrictions. Any shares of Holding Company
Stock subsequently issued as a stock dividend, stock split or
otherwise, with respect to any such restricted stock, shall be subject
to the same holding period restrictions for such Persons as may be then
applicable to such restricted stock.
2. Subsequent Purchases by Officers and Directors. Without
prior approval of the OTS, if applicable, Officers and directors of the
Savings Bank and officers and directors of the Holding Company, and
their Associates, shall be prohibited for a period of three years
following completion of the Conversion from purchasing outstanding
shares of Holding Company Stock, except from a broker or dealer
registered with the SEC. Notwithstanding this restriction, purchases
involving more than 1% of the total outstanding shares of Holding
Company Stock and purchases made and shares held by a Tax-Qualified or
non-Tax- Qualified Employee Stock Benefit Plan which may be
attributable to such directors and officers may be made in negotiated
transactions without OTS permission or the use of a broker or dealer.
3. Repurchase and Dividend Rights. Pursuant to OTS
regulations, for a period of three years from the date of Conversion,
repurchases of Holding Company Stock by the Holding Company from any
Person are subject to certain restrictions, with the exception of (i) a
repurchase on a pro rata basis pursuant to an offer approved by the OTS
and made to all stockholders, (ii) the repurchase of qualifying shares
of a director or (iii) a purchase in the open market by a Tax-Qualified
Employee Stock Benefit Plan or a non- Tax-Qualified Employee Stock
Benefit Plan of the Savings Bank or the Holding Company in an amount
reasonable and appropriate to fund the plan. Repurchases during the
first year following the consummation of the Conversion are generally
prohibited unless "exceptional circumstances" are deemed to exist by
the OTS. However, upon 10 days' written notification to the District
Director and to the Chief Counsel, Corporate and Securities Division of
the OTS, if the District Director does not object, the Holding Company
may make open market repurchases of outstanding Holding Company Stock
during the second and third years following the consummation of the
Conversion, provided that (i) no more than 5% of the outstanding
Holding Company Stock is to be purchased during any twelve-month
period, (ii) the Savings Bank's ratio of regulatory capital to total
liabilities would not be reduced below 6%, and (iii) the repurchases
would not adversely affect the financial condition of the Savings Bank.
OTS regulations also provide that the Savings Bank may not
declare or pay a cash dividend on or repurchase any of its Capital
Stock if the result thereof would be to reduce the regulatory capital
of the Savings Bank below the amount required for the liquidation
account described in Paragraph XIII. Further,
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any dividend declared or paid on, or repurchase of, the Capital Stock
shall be in compliance with the rules and regulations of the OTS, or
other applicable regulations. The above limitations shall not preclude
payment of dividends on, or repurchases of, Capital Stock in the event
applicable Federal regulatory limitations are liberalized subsequent to
the Conversion.
4. Voting Rights. After the Conversion, holders of Savings
Accounts in and obligors on loans of the Savings Bank will not have
voting rights in the Savings Bank. Exclusive voting rights with respect
to the Holding Company shall be vested in the holders of Holding
Company Stock; holders of Savings Accounts in and obligors on loans of
the Savings Bank will not have any voting rights in the Holding Company
except and to the extent that such Persons become stockholders of the
Holding Company, and the Holding Company will have exclusive voting
rights with respect to the Savings Bank's Capital Stock.
G. Mailing of Offering Materials and Collation of Subscriptions
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days
nor more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Savings Bank. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion must be completed within 45 days after the last
day of the Subscription Offering, unless extended by the Holding Company with
the approval of the OTS.
H. Method of Payment
Payment for all shares of Conversion Stock may be made in cash, by
check or by money order, or if a subscriber has a Savings Account in the Savings
Bank such subscriber may authorize the Savings Bank to charge the subscriber's
Savings Account. The Holding Company shall pay interest at not less than the
passbook rate on all amounts paid in cash or by check or money order to purchase
shares of Conversion Stock in the Subscription Offering from the date payment is
received until the Conversion is completed or terminated. The Savings Bank is
not permitted knowingly to loan funds or otherwise extend any credit to any
Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Savings Bank to charge the subscriber's
Savings Account, the funds shall remain in the subscriber's Savings Account and
shall continue to earn interest, but may not be used by such subscriber until
the Conversion is completed or terminated, whichever is earlier. The withdrawal
shall be given effect only concurrently with the sale of all shares of
Conversion Stock proposed to be sold in the Conversion and only to the extent
necessary to satisfy the subscription at a price equal to the Purchase Price.
The Savings Bank shall allow subscribers to purchase shares of Conversion Stock
by withdrawing funds from certificate accounts held with the Savings Bank
without the assessment of early withdrawal penalties, subject to the approval,
if necessary, of the applicable regulatory authorities. In the case of early
withdrawal of only a portion of such account, the certificate evidencing such
account shall be canceled if the remaining balance of the account is less than
the applicable minimum balance requirement. In that event, the remaining balance
shall earn interest at the passbook rate. This
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waiver of the early withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order Form, along with evidence of a loan commitment from a
financial institution for the purchase of shares, if applicable, during the
Subscription Offering and by making payment for the shares on the date of the
closing of the Conversion.
I. Undelivered, Defective or Late Order Forms; Insufficient
Payment
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Savings Bank by the United States Postal Service (or the Holding
Company or Savings Bank is unable to locate the addressee); (ii) is not returned
to the Holding Company or Savings Bank, or is returned to the Holding Company or
Savings Bank after expiration of the date specified thereon; (iii) is
defectively completed or executed; or (iv) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to cover the
authorized withdrawal for the required payment), the Subscription Rights of the
Person to whom such rights have been granted shall not be honored and shall be
treated as though such Person failed to return the completed Order Form within
the time period specified therein. Alternatively, the Holding Company or Savings
Bank may, but shall not be required to, waive any irregularity relating to any
Order Form or require the submission of a corrected Order Form or the remittance
of full payment for the shares of Conversion Stock subscribed for by such date
as the Holding Company or Savings Bank may specify. Subscription orders, once
tendered, shall not be revocable. The Holding Company's and Savings Bank's
interpretation of the terms and conditions of the Plan and of the Order Forms
shall be final.
J. Members in Non-Qualified States or in Foreign Countries
The Holding Company shall make reasonable efforts to comply with the
securities laws of all states of the United States in which Persons entitled to
subscribe for shares of Conversion Stock pursuant to the Plan reside. However,
no such Person shall be offered or receive any such shares under the Plan who
resides in a foreign country or who resides in a state of the United States with
respect to which any of the following apply: (a) a small number of Persons
otherwise eligible to subscribe for shares of Conversion Stock reside in such
state; (b) the granting of Subscription Rights or offer or sale of shares of
Conversion Stock to such Persons would require the Holding Company to register,
under the securities laws of such state, as a broker or dealer or to register or
otherwise qualify its securities for sale in such state; or (c) such
registration or qualification would be impractical for reasons of cost or
otherwise.
X. Federal Stock Charter and Bylaws
As part of the Conversion, an amended Federal Stock Charter and Bylaws
will be adopted to authorize the Savings Bank to operate as a federal capital
stock savings bank. By approving the Plan, the Members of the Savings Bank will
thereby approve the amended Federal Stock Charter and Bylaws. Prior to
completion of the Conversion, the proposed Federal Stock Charter and Bylaws may
be amended in accordance with the provisions and limitations for amending the
Plan under Paragraph XVII below. The effective date of the adoption of the
Federal Stock Charter and Bylaws shall be the date of the issuance of the
Conversion Stock, which shall be the date of consummation of the Conversion.
XI. Post Conversion Filing and Market Making
In connection with the Conversion, the Holding Company shall register
the Conversion Stock with the SEC pursuant to the Securities Exchange Act of
1934, as amended, and shall undertake not to deregister such Conversion Stock
for a period of three years thereafter.
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The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the shares of its
stock. The Holding Company shall also use its best efforts to list its stock
through The Nasdaq Stock Market or on a national or regional securities
exchange.
XII. Status of Savings Accounts and Loans Subsequent to Conversion
All Savings Accounts shall retain the same status after Conversion as
these accounts had prior to Conversion. Each Savings Account holder shall
retain, without payment, a withdrawable Savings Account or accounts after the
Conversion, equal in amount to the withdrawable value of such holder's Savings
Account or accounts prior to Conversion. All Savings Accounts will continue to
be insured by the Savings Association Insurance Fund of the FDIC up to the
applicable limits of insurance coverage. All loans shall retain the same status
after the Conversion as they had prior to the Conversion. See Paragraph IX.F.4.
with respect to the termination of voting rights of Members.
XIII. Liquidation Account
After the Conversion, holders of Savings Accounts shall not be entitled
to share in any residual assets in the event of liquidation of the Savings Bank.
However, the Savings Bank shall, at the time of the Conversion, establish a
liquidation account in an amount equal to its total net worth as of the date of
the latest statement of financial condition contained in the final Prospectus.
The function of the liquidation account shall be to establish a priority on
liquidation and, except as provided in Paragraph IX.F.3 above, the existence of
the liquidation account shall not operate to restrict the use or application of
any of the net worth accounts of the Savings Bank.
The liquidation account shall be maintained by the Savings Bank
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder and/or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's Qualifying
Deposit in the Savings Account and the denominator is the total amount of the
Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders. Such initial subaccount balance shall not be increased, and it
shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the Eligibility Record Date is less than the
lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or the Supplemental Eligibility Record Date or (ii) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank, each
Eligible Account Holder and Supplemental Eligible Account Holder shall be
entitled to receive a liquidation distribution from the liquidation account in
the amount of the then current adjusted subaccount balance(s) for Savings
Account(s) then held by such holder before any liquidation distribution may be
made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Savings Accounts and other liabilities or similar transactions
with another Federally-insured institution
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<PAGE>
in which the Savings Bank is not the surviving institution shall be considered
to be a complete liquidation. In any such transaction, the liquidation account
shall be assumed by the surviving institution.
XIV. Regulatory Restrictions on Acquisition of Holding Company
A. OTS regulations provide that for a period of three years following
completion of the Conversion, no Person (i.e, individual, a group Acting in
Concert, a corporation, a partnership, an association, a joint stock company, a
trust, or any unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution or its holding company) shall directly, or
indirectly, offer to purchase or actually acquire the beneficial ownership of
more than 10% of any class of equity security of the Holding Company without the
prior approval of the OTS. However, approval is not required for purchases
directly from the Holding Company or the underwriters or selling group acting on
its behalf with a view towards public resale, or for purchases not exceeding 1%
per annum of the shares outstanding. Civil penalties may be imposed by the OTS
for willful violation or assistance of any violation. Where any Person, directly
or indirectly, acquires beneficial ownership of more than 10% of any class of
equity security of the Holding Company within such three-year period, without
the prior approval of the OTS, stock of the Holding Company beneficially owned
by such Person in excess of 10% shall not be counted as shares entitled to vote
and shall not be voted by any Person or counted as voting shares in connection
with any matter submitted to the stockholders for a vote. The provisions of this
regulation shall not apply to the acquisition of securities by Tax-Qualified
Employee Stock Benefit Plans provided that such plans do not have beneficial
ownership of more than 25% of any class of equity security of the Holding
Company.
B. The Holding Company may provide in its articles of incorporation a
provision that, for a specified period of up to five years following the date of
the completion of the Conversion, no Person shall directly or indirectly offer
to acquire or actually acquire the beneficial ownership of more than 10% of any
class of equity security of the Holding Company. Such provisions would not apply
to acquisition of securities by Tax-Qualified Employee Stock Benefit Plans
provided that such plans do not have beneficial ownership of more than 25% of
any class of equity security of the Holding Company. The Holding Company may
provide in its articles of incorporation for such other provisions affecting the
acquisition of its stock as shall be determined by its Board of Directors.
XV. Directors and Officers of the Converted Savings Bank
The Conversion is not intended to result in any change in the directors
or Officers. Each Person serving as a director of the Savings Bank at the time
of Conversion shall continue to serve as a member of the Savings Bank's Board of
Directors, subject to the Converted Savings Bank's charter and bylaws. The
Persons serving as Officers immediately prior to the Conversion will continue to
serve at the discretion of the Board of Directors in their respective capacities
as Officers of the Savings Bank. In connection with the Conversion, the Savings
Bank and the Holding Company may enter into employment agreements on such terms
and with such officers as shall be determined by the Boards of Directors of the
Savings Bank and the Holding Company.
XVI. Executive Compensation
The Savings Bank and the Holding Company may adopt, subject to any
required approvals, executive compensation or other benefit programs, including
but not limited to compensation plans involving stock options, stock
appreciation rights, restricted stock grants, employee recognition programs and
the like.
XVII. Amendment or Termination of Plan
If necessary or desirable, the Plan may be amended by a two-thirds vote
of the Savings Bank's Board of Directors, at any time prior to submission of the
Plan and proxy materials to the Members. At any time after submission of the
Plan and proxy materials to the Members, the Plan may be amended by a two-thirds
vote of the Board of Directors only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the
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Board of Directors at any time prior to the Special Meeting, and at any time
following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors may modify or terminate the Plan upon the
order of the regulatory authorities without a resolicitation of proxies or
another meeting of the Members.
In the event that mandatory new regulations pertaining to conversions
are adopted by the OTS prior to the completion of the Conversion, the Plan shall
be amended to conform to the new mandatory regulations without a resolicitation
of proxies or another meeting of Members. In the event that new conversion
regulations adopted by the OTS prior to completion of the Conversion contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another meeting of Members.
By adoption of the Plan, the Members authorize the Board of Directors
to amend and/or terminate the Plan under the circumstances set forth above.
XVIII. Expenses of the Conversion
The Holding Company and the Savings Bank shall use their best efforts
to assure that expenses incurred in connection with the Conversion shall be
reasonable.
XIX. Contributions to Tax-Qualified Plans
The Holding Company and/or the Savings Bank may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Savings Bank to fail to meet its regulatory
capital requirements.
* * *
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<PAGE>
EXHIBIT B
FEDERAL STOCK CHARTER
PIONEER BANK, A FEDERAL SAVINGS BANK
SECTION 1. CORPORATE TITLE. The full corporate title of the bank is
Pioneer Bank, A Federal Savings Bank ("Savings Bank").
SECTION 2. OFFICE. The home office shall be located in the City of
Baker City, in the State of Oregon.
SECTION 3. DURATION. The duration of the Savings Bank is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the Savings Bank is to
pursue any or all of the lawful objectives of a Federal savings and loan
association chartered under section 5 of the Home Owners' Loan Act and to
exercise all of the express, implied, and incidental powers conferred thereby
and by all acts amendatory thereof and supplemental thereto, subject to the
Constitution and laws of the United States as they are now in effect, or as they
may hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the Office of Thrift Supervision ("Office").
SECTION 5. CAPITAL STOCK. The total number of shares of all classes of
the capital stock that the Savings Bank has the authority to issue is 10,000 of
which 1,000 shares shall be common stock, of par value of $1.00 per share and of
which 9,000 shares shall be serial preferred stock having no par value. The
shares may be issued from time to time as authorized by the board of directors
without the approval of its shareholders except as otherwise provided in this
Section 5 or to the extent that such approval is required by governing law,
rule, or regulation. The consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the Savings Bank. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted to the Savings Bank), labor or
services actually performed for the Savings Bank, or any combination of the
foregoing. In the absence of actual fraud in the transaction, the value of such
property, labor, or services, as determined by the board of directors of the
Savings Bank, shall be conclusive. Upon payment of such consideration, such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, that part of the retained earnings of the Savings Bank that is
transferred to common stock or paid-in capital accounts upon the issuance of
shares as a stock dividend shall be deemed to be the consideration for their
issuance.
Except for shares issuable in connection with the conversion of the
Savings Bank from the mutual to stock form of capitalization, no shares of
common stock (including shares issuable upon conversion, exchange or exercise of
other securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons of the Savings Bank other than as part of a
general public offering or as qualifying shares to a director, unless their
issuance or the plan under which they would be issued has been approved by a
majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
to the cumulation of votes for the election of directors: PROVIDED, that this
restriction on voting separately by class or series shall not apply:
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(i) To any provision which would authorize the holders of
preferred stock, voting as a class or series, to elect some members of
the board of directors, less than a majority thereof, in the event of
default in the payment of dividends on any class or series of preferred
stock;
(ii) To any provision which would require the holders of
preferred stock, voting as a class or series, to approve the merger or
consolidation of the Savings Bank with another corporation or the sale,
lease, or conveyance (other than by mortgage or pledge) of properties
or business in exchange for securities of a corporation other than the
Savings Bank if the preferred stock is exchanged for securities of such
other corporation: PROVIDED, that no provision may require such
approval for transactions undertaken with the assistance or pursuant to
the direction of the Office or the Federal Deposit Insurance
Corporation;
(iii) To any amendment which would adversely change the
specific terms of any class or series of capital stock as set forth in
this Section 5 (or in any supplementary sections hereto), including any
amendment which would create or enlarge any class or series ranking
prior thereto in rights and preferences. An amendment which increases
the number of authorized shares of any class or series of capital
stock, or substitutes the surviving Savings Bank in a merger or
consolidation for the Savings Bank, shall not be considered to be such
an adverse change.
A description of the different classes and series, if any, of the
Savings Bank's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class of and
series, if any, of capital stock are as follows:
A. COMMON STOCK. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except as to the
cumulation of votes for the election of directors.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund, or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
Savings Bank, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the Savings Bank available for distribution remaining after: (i)
payment or provision for payment of the Savings Bank's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provision for distributions to
holders of any class or series of stock having preference over the common stock
in the liquidation, dissolution, or winding up of the Savings Bank. Each share
of common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. PREFERRED STOCK. The Savings Bank may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and issued
in series, with each series separately designated so as to distinguish the
shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
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(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding up of the
Savings Bank;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the Savings
Bank and, if so, the conversion price(s) or the rate(s) of exchange, and the
adjustments thereof, if any, at which such conversion or exchange may be made,
and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
Savings Bank shall file with the secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the
Savings Bank shall not be entitled to preemptive rights with respect to any
shares of the Savings Bank which may be issued.
SECTION 7. LIQUIDATION ACCOUNT. Pursuant to the requirements of the
Office's Regulations (12 CFR Subchapter D), the Savings Bank shall establish and
maintain a liquidation account for the benefit of its savings account holders as
of December 31, 1995 and June 30, 1997. In the event of a complete liquidation
of the Savings Bank, it shall comply with such regulations with respect to the
amount and the priorities on liquidation of each of the Savings Bank's eligible
savers' inchoate interest in the liquidation account, to the extent it is still
in existence: Provided, that an eligible savers' inchoate interest in the
liquidation account shall not entitle such eligible saver to any voting rights
at meetings of the Savings Bank's stockholders.
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SECTION 8. DIRECTORS. The Savings Bank shall be under the direction of
a Board of Directors. The authorized number of directors, as stated in the
Savings Bank's bylaws, shall not be fewer than five nor more than fifteen except
when a greater or lesser number is approved by the Director of the Office, or
his or her delegate.
SECTION 9. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is proposed by the Board of Directors of the Savings Bank,
approved by the shareholders by a majority of the votes eligible to be cast at a
legal meeting, unless a higher vote is otherwise required, and approved or
preapproved by the Office.
<TABLE>
<CAPTION>
<S> <C>
Attest: ___________________________________ By:_____________________________
Secretary Chief Executive Officer
Pioneer Bank, A Federal Savings Bank Pioneer Bank, A Federal Savings Bank
Attest: ___________________________________ By:_____________________________
Secretary Director
Office of Thrift Supervision Office of Thrift Supervision
Effective Date: _____________________________, 1997
</TABLE>
B-4
<PAGE>
EXHIBIT C
BYLAWS
PIONEER BANK, A FEDERAL SAVINGS BANK
ARTICLE I - HOME OFFICE
The home office of Pioneer Bank, A Federal Savings Bank ("Savings
Bank"), shall be located at 2055 First Street, in the City of Baker City, the
County of Baker, in the State of Oregon.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the Savings Bank or at such
other convenient place as the Board of Directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the
Savings Bank for the election of directors and for the transaction of any other
business of the Savings Bank shall be held annually within 150 days after the
end of the Savings Bank's fiscal year on the fourth Wednesday of July, if not a
legal holiday, and if a legal holiday, then on the next day following which is
not a legal holiday, at 2:00 p.m., Pacific Time, or at such other date and time
within such 150-day period as the Board of Directors may determine.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by the regulations of
the Office, may be called at any time by the Chairman of the Board, the
President, or a majority of the Board of Directors, and shall be called by the
Chairman of the Board, the President, or the Secretary upon the written request
of the holders of not less than one-tenth of all of the outstanding capital
stock of the Savings Bank entitled to vote at the meeting. Such written request
shall state the purpose or purposes of the meeting and shall be delivered to the
home office of the Savings Bank addressed to the Chairman of the Board, the
President, or the Secretary.
SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall
be conducted in accordance with the most current edition of Robert's Rules of
Order unless otherwise prescribed by regulations of the Office or these bylaws
or the Board of Directors adopts another written procedure for the conduct of
meetings. The Board of Directors shall designate, when present, either the
Chairman of the Board or President to preside at such meetings.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place,
day, and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 20 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Chairman of the Board, the President, or the Secretary, or the directors calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the Savings Bank as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall
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be not more than 60 days and, in case of a meeting of shareholders, not fewer
than 10 days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment.
SECTION 7. VOTING LISTS. At least 20 days before each meeting of
the shareholders, the officer or agent having charge of the stock transfer books
for shares of the Savings Bank shall make a complete list of the shareholders of
record entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held by each. This
list of shareholders shall be kept on file at the home office of the Savings
Bank and shall be subject to inspection by any shareholder at any time during
usual business hours for a period of 20 days prior to such meeting. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to inspection by any shareholder of record or any shareholder's
agent during the entire time of the meeting. The original stock transfer book
shall constitute PRIMA FACIE evidence of the shareholders entitled to examine
such list or transfer books or to vote at any meeting of shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the Board of Directors may
elect to follow the procedures prescribed in Section 552.6(d) of the Office's
regulations as now or hereafter in effect.
SECTION 8. QUORUM. A majority of the outstanding shares of the
Savings Bank entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum. If a quorum is present,
the affirmative vote of the majority of the share represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the Savings Bank's charter. Directors, however,
are elected by a plurality of the votes cast at an election of directors.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the identity
of the shareholder. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the Board of Directors. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS.
When ownership stands in the name of two or more persons, in the absence of
written directions to the Savings Bank to the contrary, at any meeting of the
shareholders of the Savings Bank any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such shares and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing
in the name of another corporation may be voted by any officer, agent, or proxy
as the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine. Shares
held by an administrator, executor, guardian, or conservator may be voted by
him, either in person or by proxy, without a transfer of such shares into his or
her name. Shares standing in the name of a trustee may be voted by him or her,
either in person
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or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his name. Shares held
in trust in an IRA or Keogh Account, however, may be voted by the Savings Bank
if no other instructions are received. Shares standing in the name of a receiver
may be voted by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer into his or her name
if authority to do so is contained in an appropriate order of the court or other
public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Savings Bank
nor shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
Savings Bank, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 12. CUMULATIVE VOTING. Unless otherwise provided in the
Savings Bank's charter, every shareholder entitled to vote at an election for
directors shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder for as many persons as there are directors to be
elected and for whose election the shareholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of shares shall equal or by
distributing such votes on the same principle among any number of candidates.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the Chairman of the Board or the President may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the Board of
Directors in advance of the meeting or at the meeting by the Chairman of the
Board or the President.
Unless otherwise prescribed by regulations of the Office, the
duties of such inspectors shall include: determining the number of shares and
the voting power of each share, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity and effect of proxies;
receiving votes, ballots, or consents; hearing and determining all challenges
and questions in any way arising in connection with the rights to vote; counting
and tabulating all votes or consents; determining the result; and such acts as
may be proper to conduct the election or vote with fairness to all shareholders.
SECTION 14. NOMINATING COMMITTEE. The Board of Directors shall act
as a nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Savings Bank. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the Secretary of the Savings Bank at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the Savings Bank. Ballots bearing the
names of all persons nominated by the nominating committee and by shareholders
shall be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.
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SECTION 15. NEW BUSINESS. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the Secretary of the
Savings Bank at least five days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and the same may
be discussed and considered, but unless stated in writing and filed with the
Secretary at least five days before the meeting, such proposal shall be laid
over for action at an adjourned, special, or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors, and committees; but in connection with such reports, no new
business shall be acted upon at such annual meeting unless stated and filed as
herein provided.
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required
to be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Savings
Bank shall be under the direction of its Board of Directors. The Board of
Directors shall annually elect a Chairman of the Board and a President from
among its members and shall designate, when present, either the Chairman of the
Board or the President to preside at its meetings.
SECTION 2. NUMBER AND TERM. The Board of Directors shall consist
of six members and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw following the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution. Directors may participate in a
meeting by means of a conference telephone or similar communications device
through which all persons participating can hear each other at the same time.
Participation by such means shall constitute presence in person for all
purposes.
SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Savings
Bank unless the Savings Bank is a wholly owned subsidiary of a holding company.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
President, or one-third of the directors. The persons authorized to call special
meetings of the Board of Directors may fix any place, within the Savings Bank's
normal lending territory, as the place for holding any special meeting of the
Board of Directors called by such persons.
Members of the Board of Directors may participate in special
meetings by means of conference telephone or similar communications equipment by
which all persons participating in the meeting can hear each other.
Such participation shall constitute presence in person for all purposes.
SECTION 6. NOTICE. Written notice of any special meeting shall be
given to each director at least 24 hours prior thereto when delivered personally
or by telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram,
or when the Savings Bank receives notice of delivery if electronically
transmitted. Any director may waive notice of any meeting by a writing filed
with the Secretary. The attendance of a director at a meeting
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shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in the notice of waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 6 of this Article III.
SECTION 8. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless a greater number is prescribed by regulation of
the Office or by these bylaws.
SECTION 9. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors.
SECTION 10. RESIGNATION. Any director may resign at any time by
sending a written notice of such resignation to the home office of the Savings
Bank addressed to the Chairman of the Board or the President. Unless otherwise
specified, such resignation shall take effect upon receipt by the Chairman of
the Board or the President. More than three consecutive absences from regular
meetings of the Board of Directors, unless excused by resolution of the Board of
Directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the Board of Directors.
SECTION 11. VACANCIES. Any vacancy occurring on the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected to serve only until the next election
of directors by the shareholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
directors by the shareholders.
SECTION 12. COMPENSATION. Directors, as such, may receive a stated
salary for their services. By resolution of the Board of Directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
actual attendance at each regular or special meeting of the Board of Directors.
Members of either standing or special committees may be allowed such
compensation for attendance at committee meetings as the Board of Directors may
determine.
SECTION 13. PRESUMPTION OF ASSENT. A director of the Savings Bank
who is present at a meeting of the Board of Directors at which action on any
Savings Bank matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes of
the meeting or unless he or she shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the Secretary of the Savings
Bank within five days after the date a copy of the minutes of the meeting is
received. Such right to dissent shall not apply to a director who voted in favor
of such action.
SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders
called expressly for that purpose, any director may be removed for cause by a
vote of the holders of a majority of the shares then entitled to vote at an
election of directors. If less than the entire board is to be removed, no one of
the directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this
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section shall apply, in respect to the removal of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class and
not to the vote of the outstanding shares as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
SECTION 1. APPOINTMENT. The Board of Directors, by resolution
adopted by a majority of the full board, may designate the chief executive
officer and two or more of the other directors to constitute an executive
committee. The designation of any committee pursuant to this Article IV and the
delegation of authority shall not operate to relieve the Board of Directors, or
any director, of any responsibility imposed by law or regulation.
SECTION 2. AUTHORITY. The executive committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority of
the Board of Directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the Board of
Directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the Savings Bank, or recommending to the shareholders a
plan of merger, consolidation, or conversion; the sale, lease, or other
disposition of all or substantially all of the property and assets of the
Savings Bank otherwise than in the usual and regular course of its business; a
voluntary dissolution of the Savings Bank; a revocation of any of the foregoing;
or the approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
SECTION 3. TENURE. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the Board of Directors following his or her
designation and until a successor is designated as a member of the executive
committee.
SECTION 4. MEETINGS. Regular meetings of the executive committee
may be held without notice at such times and places as the executive committee
may fix from time to time by resolution. Special meetings of the executive
committee may be called by any member thereof upon not less than one day's
notice stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the executive committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the executive committee need not
state the business proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the executive committee.
SECTION 7. VACANCIES. Any vacancy in the executive committee may
be filled by a resolution adopted by a majority of the full Board of Directors.
SECTION 8. RESIGNATIONS AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full Board of Directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the President or Secretary of the Savings Bank. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 9. PROCEDURE. The executive committee shall elect a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these bylaws. It shall keep regular minutes
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of its proceedings and report the same to the Board of Directors for its
information at the meeting held next after the proceedings shall have occurred.
SECTION 10. OTHER COMMITTEES. The Board of Directors may by
resolution establish an audit, loan, or other committee composed of directors as
they may determine to be necessary or appropriate for the conduct of the
business of the Savings Bank and may prescribe the duties, constitution, and
procedures thereof.
ARTICLE V - OFFICERS
SECTION 1. POSITIONS. The officers of the Savings Bank shall be a
President, one or more Vice Presidents, a Secretary, and a Treasurer or
Comptroller, each of whom shall be elected by the Board of Directors. The Board
of Directors may also designate the Chairman of the Board as an officer. The
offices of the Secretary and Treasurer or Comptroller may be held by the same
person and a Vice President may also be either the Secretary or the Treasurer or
Comptroller. The Board of Directors may designate one or more vice presidents as
Executive Vice President or Senior Vice President. The Board of Directors may
also elect or authorize the appointment of such other officers as the business
of the Savings Bank may require. The officers shall have such authority and
perform such duties as the Board of Directors may from time to time authorize or
determine. In the absence of action by the Board of Directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Savings Bank shall be elected annually at the first meeting of the Board of
Directors held after each annual meeting of the stockholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death, resignation, or
removal in the manner hereinafter provided. Election or appointment of an
officer, employee, or agent shall not of itself create contractual rights. The
Board of Directors may authorize the Savings Bank to enter into an employment
contract with any officer in accordance with regulations of the Office; but no
such contract shall impair the right of the Board of Directors to remove any
officer at any time in accordance with Section 3 of this Article V.
SECTION 3. REMOVAL. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Savings Bank will
be served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. REMUNERATION. The remuneration of the officers shall be
fixed from time to time by the Board of Directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. To the extent permitted by regulations of
the Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee, or agent of the Savings Bank to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Savings Bank. Such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
Savings Bank and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other
orders for the payment of money, notes, or other evidences of indebtedness
issued in the name of the Savings Bank shall be signed by one or more officers,
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employees, or agents of the Savings Bank in such manner as shall from time to
time be determined by the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Savings Bank not otherwise
employed shall be deposited from time to time to the credit of the Savings Bank
in any duly authorized depositories as the Board of Directors may select.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing
shares of capital stock of the Savings Bank shall be in such form as shall be
determined by the Board of Directors and approved by the Office. Such
certificates shall be signed by the Chief Executive Officer or by any other
officer of the Savings Bank authorized by the Board of Directors, attested by
the Secretary or an Assistant Secretary, and sealed with the corporate seal or a
facsimile thereof. The signatures of such officers upon a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar other than the Savings Bank itself or one of its employees. Each
certificate for shares of capital stock shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the Savings Bank. All certificates surrendered to the
Savings Bank for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares has been
surrendered and canceled, except that in the case of a lost or destroyed
certificate, a new certificate may be issued upon such terms and indemnity to
the Savings Bank as the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock
of the Savings Bank shall be made only on its stock transfer books. Authority
for such transfer shall be given only by the holder of record or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by a duly executed power of attorney and filed with the
Savings Bank. Such transfer shall be made only on surrender for cancellation of
the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Savings Bank shall be deemed by the Savings Bank
to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Savings Bank shall end on the 31st day of
March of each year. The appointment of accountants shall be subject to annual
ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the Savings Bank's charter and the
regulations and orders of the Office, the Board of Directors may, from time to
time, declare, and the Savings Bank may pay, dividends on its outstanding shares
of capital stock.
ARTICLE X - CORPORATE SEAL
The Board of Directors shall provide a Savings Bank seal which
shall be two concentric circles between which shall be the name of the Savings
Bank. The year of incorporation or an emblem may appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with
regulations of the Office and shall be effective after: (i) approval of the
amendment by a majority vote of the authorized Board of Directors, or by a
majority vote of the votes cast by the shareholders of the Savings Bank at any
legal meeting, and (ii) receipt of any applicable regulatory approval. When the
Savings Bank fails to meet its quorum requirements, solely due to vacancies on
the Board, then the affirmative vote of a majority of the sitting Board will be
required to amend the bylaws.
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REVOCABLE PROXY
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
OF
PIONEER BANK, A FEDERAL SAVINGS BANK
FOR THE SPECIAL MEETING OF MEMBERS
TO BE HELD ON SEPTEMBER 23, 1997
The undersigned member of Pioneer Bank, a Federal Savings Bank ("Savings
Bank") hereby appoints the Board of Directors, with full powers of substitution,
as attorneys-in-fact and agents for and in the name of the undersigned, to vote
such shares as the undersigned may be entitled to cast at the Special Meeting of
Members ("Meeting") of the Savings Bank to be held at the Sunridge Inn, Best
Western, 480 Campbell Street, Baker City, Oregon, on the date and time indicated
on the Notice of Special Meeting of Members, and at any adjournment thereof.
They are authorized to cast all votes to which the undersigned is entitled, as
follows:
[ ] FOR [ ] AGAINST
(1) To approve a Plan of Conversion adopted by the Board of Directors
on February 25, 1997, and subsequestly amended, to convert the
Savings Bank from a federally chartered mutual savings bank to a
federally chartered capital stock savings bank to be held as a wholly-
owned subsidiary of a new holding company, Oregon Trail Financial
Corp., including the adoption of a Federal Stock Charter and Bylaws
for the Savings Bank, pursuant to the laws of the United States and
the rules and regulations of the Office of Thrift Supervision.
NOTE: The Board of Directors is not aware of any other matter that may
come before the Meeting.
IMPORTANT: PLEASE SIGN DATE AND RETURN THIS PROXY IN THE PRE-ADDRESSED
ENVELOPE PROVIDED. VOTING FOR THE PLAN OF CONVERSION IN NO WAY OBLIGATES YOU
TO BUY ANY STOCK.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PROPOSITION
STATED IF NO CHOICE IS MADE HEREIN
Should the undersigned be present and elect to vote at said Meeting or
at any adjournment thereof and, after notification to the Secretary of the
Savings Bank at said Meeting of the member's decision to terminate this Proxy,
then the power of said attorney-in-fact or agents shall be deemed terminated and
of no further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting of
Members of the Savings Bank called on the date and time indicated on the Notice
of Special Meeting, and a Proxy Statement relating to said Meeting from the
Savings Bank, prior to the execution of this Proxy.
- -------------------------
Date
- -------------------------
Signature
- -------------------------
Signature
Note: Only one signature is required in the case of a joint account but all
account holders should sign, if possible. When signing as an attorney,
administrator, agent, corporate officer, executor, trustee, guardian or
other fiduciary capacity, indicate your full title.
<PAGE>
