<PAGE>
As filed with the Securities and Exchange Commission on August 27, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MYSTIC FINANCIAL, INC.
(exact name of registrant as specified in its certificate of incorporation)
DELAWARE 6035 04-1609100
(state or other (Primary Standard (IRS Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
c/o MEDFORD CO-OPERATIVE BANK
60 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
(617) 395-2800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------------
ROBERT H. SURABIAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MEDFORD CO-OPERATIVE BANK
60 HIGH STREET
MEDFORD, MASSACHUSETTS 02155
(617) 395-2800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------
Copies to:
RICHARD A. SCHABERG, ESQ.
THACHER PROFFITT & WOOD
1500 K STREET, N.W.
WASHINGTON, D.C. 20005
(202) 347-8400
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO 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 /
---
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered(1) Offering Price Per Share(2) Aggregate Offering Price (2) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 2,711,125 $10.00 $27,111,250 $8,215.53
$.01 par Value
===================================================================================================================================
</TABLE>
(1) Includes the maximum number of shares that may be issued in connection with
this offering.
(2) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION 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 SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
MYSTIC FINANCIAL, INC.
Cross Reference Sheet showing location in the Prospectus of information required
by Items of Form S-1:
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND CAPTION LOCATION OR HEADINGS IN PROSPECTUS
- --------------------------------------- ----------------------------------
<S> <C>
1. Forepart of the Outside Front Cover Page
Registration Statement
and Outside Front Cover
Page of Prospectus
2. Inside Front and Inside Front and Outside Back Cover Pages
Outside Back Cover Pages
of Prospectus
3. Summary Information, Summary; Risk Factors
Risk Factors and [Ratio
of Earnings to Fixed
Charges--could not find]
4. Use of Proceeds Use of Proceeds
5. Determination of The Conversion -- Stock Pricing and Number of
Offering Price Shares to be Issued
6. Dilution Not Applicable
7. Selling Security Not Applicable
Holders
8. Plan of Distribution Outside Front Cover Page; The Conversion --
Subscription Rights -- Subscription Offering --
Direct Community Offering -- Syndicated Community
Offering -- Plan of Distribution and Financial
Advisory Arrangements
9. Description of Certain Restrictions on Acquisition of the Company
Securities to be and the Bank; Description of Capital Stock of the
Registered Company; Description of Capital Stock of the Bank
10. Interests of Named Not Applicable
Experts and Counsel
11. Information with Outside Front Cover Page; Selected Financial and
Respect to the Other Data of the Bank; Mystic Financial, Inc.;
Registrant Medford Co-operative Bank; Dividend Policy; Market
for the Common Stock; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business of the Company; Business of
the Bank; Regulation; Management of the Company;
Management of the Bank; The Conversion;
Description of Capital Stock of the Company;
Description of Capital Stock of the Bank;
Financial Statements
12. Disclosure of Not Applicable
Commission Position on
Indemnification for
Securities Act Liabilities
</TABLE>
<PAGE>
PROSPECTUS
[LOGO]
MYSTIC FINANCIAL, INC.
(PROPOSED HOLDING COMPANY FOR MEDFORD CO-OPERATIVE BANK)
UP TO 2,357,500 SHARES OF COMMON STOCK
Mystic Financial, Inc., a Delaware corporation ("Mystic" or the "Company"),
the proposed holding company for Medford Co-operative Bank (the "Bank"), is
offering up to 2,357,500 shares of its common stock, par value $.01 per share
(the "Common Stock") in connection with the conversion of the Bank from a
Massachusetts chartered mutual co-operative bank to a Massachusetts chartered
stock co-operative bank and the issuance of the Bank's capital stock to Mystic
pursuant to the Bank's plan of conversion (the "Plan" or "Plan of Conversion").
The simultaneous conversion of the Bank to stock form, the issuance of the
Bank's stock to the Company and the offer and sale of the Common Stock by the
Company are herein referred to as the "Conversion." The shares of Common Stock
are being offered in a subscription offering pursuant to subscription rights in
the following order of priority: (i) to the Bank's qualifying deposit account
holders as of March 31, 1996 with a $50 minimum deposit as of that date
("Eligible Account Holders") (ii) to the Bank's tax-qualified employee stock
ownership plan (as defined in the Plan of Conversion) (the "ESOP") and (iii) to
the Bank's qualifying deposit account holders as of March 31, 1997 with a $50
minimum deposit as of that date, who are not otherwise Eligible Account Holders
("Supplemental Eligible Account Holders") (the "Subscription Offering").
Concurrent with or at any time during or after the Subscription Offering, the
board of directors of the Company may elect to offer those shares not subscribed
for in the Subscription Offering to the general public, with preference given to
persons residing in the communities of Medford, Malden, Everett, Stoneham,
Arlington, Winchester, Somerville, Melrose, Lexington and Bedford,
Massachusetts, the Bank's primary market area, through a direct community
offering (the "Direct Community Offering") with further preference being given
to borrowers of the Bank as of the date of this Prospectus who reside or do
business in those communities and subject to the Company's right to reject
orders in the Direct Community Offering in whole or in part. It is anticipated
that shares not subscribed for in the Subscription Offering and Direct Community
Offering, if any, will be offered to certain members of the general public in a
Syndicated Community Offering (the "Syndicated Community Offering"). The
Subscription Offering, Direct Community Offering and Syndicated Community
Offering are herein referred to collectively as the "Offerings." THE BANK HAS
NEVER ISSUED STOCK IN THE PAST, AND NO ASSURANCES CAN BE GIVEN THAT AN
ESTABLISHED AND LIQUID MARKET FOR THE COMMON STOCK WILL DEVELOP. See "Market for
Common Stock."
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER
THE DISCUSSION UNDER "SPECIAL CONSIDERATIONS."
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FDIC, THE CO-OPERATIVE CENTRAL BANK OR ANY OTHER GOVERNMENT
AGENCY. THESE SHARES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE MASSACHUSETTS DIVISION OF BANKS, THE SECURITIES
AND EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR THE SHARE INSURANCE FUND OF THE CO-OPERATIVE
CENTRAL BANK, NOR HAS ANY OF THE FOREGOING PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
PURCHASE ESTIMATED FEES ESTIMATED NET
PRICE (2) AND EXPENSES(3) CONVERSION PROCEEDS
<S> <C> <C> <C>
Per Share(1)............. $ 10.00 $ 0.38 $ 9.62
Minimum Total............ $17,425,000 $714,884 $16,710,116
Midpoint Total........... $20,500,000 $782,780 $19,717,220
Maximum Total............ $23,575,000 $850,676 $22,724,324
Maximum, as Adjusted(4).. $27,111,250 $928,756 $26,182,494
===============================================================================
</TABLE>
(1) The price per share will be fixed at $10.00 (the "Purchase Price").
Estimated fees and expenses per share and estimated net conversion proceeds per
share are based on the midpoint of the "Current Valuation Range," as defined
below.
(2) Determined in accordance with an independent appraisal prepared by R.P.
Financial, L.C. ("R.P. Financial") as of August 15, 1997 and updated as of
[________________, 1997], which states that the estimated pro forma market value
of the Common Stock was within a range from $17,425,000 to $23,575,000 (the
"Current Valuation Range"), with a midpoint of $20,500,000. The final aggregate
purchase price will be determined at the time of closing of the offering and is
subject to change due to changing market conditions and other factors. The
aggregate purchase price of the Common Stock sold in the Conversion will not be
below $17,425,000 and will not exceed $23,575,000 or $27,111,250 (15% above the
maximum of the Current Valuation Range, the "Super-Maximum") unless subscribers
and other purchasers are offered the opportunity to change or withdraw their
orders. See "Use of Proceeds," "Capitalization," "Pro Forma Data" and "The
Conversion--Stock Pricing and Number of Shares to be Issued."
(3) Includes estimated printing, postage, legal, accounting, marketing and
miscellaneous expenses which will be incurred in connection with the Conversion.
Actual proceeds may vary from estimated amounts. Assumes the sale of 2,050,000
shares with respect to the per share data. See "Use of Proceeds."
(4) The "Maximum, as adjusted" or the "Super-Maximum" gives effect to an
increase in the number of shares which could occur without a resolicitation of
subscribers or any right of cancellation if the Current Valuation Range were to
increase by up to 15% above the maximum of the Current Valuation Range to
reflect regulatory considerations or changes in market and financial conditions.
THE DATE OF THIS PROSPECTUS IS ____________________________, 1997.
____________________
TRIDENT SECURITIES, INC.
<PAGE>
[INSERT MAP HERE]
ii
<PAGE>
SUMMARY
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information and consolidated financial statements
contained elsewhere herein. Certain terms in this summary are defined elsewhere
herein.
MYSTIC FINANCIAL, INC.
Mystic is a Delaware corporation recently organized by the Bank for
the purpose of acquiring all of the capital stock of the Bank to be issued in
the Conversion. Immediately following the Conversion, the only significant
assets of the Company will be the capital stock of the Bank, the Company's loan
to the ESOP and the net proceeds of the Offerings retained by the Company. The
Company will purchase all of the capital stock of the Bank to be issued upon the
Conversion in exchange for 50% of the net Conversion proceeds ($8.6 million at
the midpoint of the Current Valuation Range) with the remaining net proceeds to
be retained by the Company to be used for general business activities, including
a loan by the Company directly to the ESOP to enable the ESOP to purchase up to
8% of the Common Stock issued in connection with the Conversion. Initially, the
net proceeds are expected to be invested by the Company and the Bank primarily
in short- and medium-term investments and debt securities and to reduce the
Bank's borrowings from the Federal Home Loan Bank of Boston (the "FHLB"). See
"Use of Proceeds" and "The Conversion--General." The business of the Company
will consist initially of the business of the Bank. See "Business" and
"Regulation--Holding Company Regulation."
The Company's executive offices are located at the administrative
office of the Bank at 60 High Street, Medford, Massachusetts 02155. The
Company's telephone number is (617) 395-2800.
MEDFORD CO-OPERATIVE BANK
The Bank is a Massachusetts chartered mutual co-operative bank founded
in 1886 with four offices in Medford, which is located 8 miles north of Boston,
Massachusetts. The Bank's deposits have been federally insured since 1986 and
are currently insured by the Bank Insurance Fund ("BIF") of the Federal Deposit
Insurance Corporation (the "FDIC") and the Share Insurance Fund of the Co-
operative Central Bank. The Bank has been a member of the Co-operative Central
Bank since 1932 and a member of the FHLB since 1988.
The business of the Bank primarily consists of attracting savings
deposits from the general public and investing such deposits in loans secured by
one- to four- family residential real estate located in its market area,
commercial loans secured by assets and commercial real estate of businesses
located in its market area and investment securities, including U.S. Government
and Agency securities and interest-earning deposits. The Bank also makes
consumer loans, including home equity loans, automobile loans and savings
passbook loans. The Bank offers both fixed-rate and adjustable-rate loans and
emphasizes the origination of residential real estate mortgage loans and
commercial loans with adjustable interest rates. The Bank also makes other
short term (one to three year) interest rate sensitive investments which allow
the Bank to monitor the interest rate risk, maturities and repricing intervals
of its assets and liabilities.
At June 30, 1997, the Bank had total assets of $149.7 million,
deposits of $129.3 million and net worth of $11.9 million, giving the Bank a
regulatory Tier 1 leverage capital ratio of 8.1%. Also at June 30, 1997, the
Bank's capital ratios exceeded all regulatory capital requirements.
Financial highlights of the Bank include the following:
Business strategy -- The Bank's business strategy is to operate as a
well capitalized, profitable and independent community bank dedicated
to financing home ownership and small business and consumer needs in
its market area and providing quality service to its customers. The
Bank has implemented this strategy by: (i) monitoring the needs of
customers and providing quality
iii
<PAGE>
service; (ii) emphasizing consumer-oriented banking by originating
residential mortgage loans and consumer loans, and by offering various
deposit accounts and other financial services and products; (iii)
recently increasing its emphasis on commercial banking and lending by
originating loans and taking deposits for small businesses and
providing greater services in its commercial loan department; (iv)
maintaining high asset quality through conservative underwriting; and
(v) producing stable earnings.
Asset Composition and Quality -- The Bank has consistently focused on
maintaining asset quality by originating primarily one- to four-family
residential mortgage loans and investing in high quality liquid
investments. At June 30, 1997, one- to four-family residential real
estate loans comprised 78.7% of net loans outstanding, and 64.8% of
the Bank's one- to four-family residential real estate loans had
adjustable interest rates. Unlike many New England financial
institutions, the Bank did not experience significant asset quality
problems during the recession of the early 1990s. More recently, the
Bank's non-performing assets, including non-performing loans and real
estate acquired by foreclosure, have declined from 1.37% of total
assets at June 30, 1993 to 0.24% of total assets at June 30, 1997. See
"Business -- Lending Activities," "--Non-Performing Assets, Asset
Classification and Allowances for Losses" and "-- Investment
Activities."
Capital Position --The Bank's capital ratios are in excess of current
regulatory capital requirements. At June 30, 1997, the Bank's
regulatory Tier I leverage capital ratio was 8.1% of adjusted total
average assets, its Tier I risk-based capital was 13.3% of risk-
weighted assets and its total risk-based capital equaled 14.4% of
risk-weighted assets. As a result of the Conversion, the Bank will
increase such regulatory capital to levels substantially above
regulatory requirements. For a description of the Bank's capital
ratios on a pro forma basis, see "Pro Forma Data."
The brief description of the Bank in these financial highlights should
be considered in
the context of the more detailed descriptions in this Prospectus, including
"Special Considerations."
THE CONVERSION
As a mutual institution, the Bank has no stockholders. Conversion of
the Bank to a stock co-operative bank is being accomplished by simultaneously
(i) amending its charter to authorize the issuance of shares of capital stock
and otherwise to conform to the requirements of a stock institution, (ii)
issuing the Bank's capital stock to the newly formed Delaware corporation,
Mystic, and (iii) offering and selling the Common Stock in the Subscription
Offering and, if necessary, the Direct Community Offering and/or the Syndicated
Community Offering, as described below.
BUSINESS PURPOSES
The board of directors and management of the Bank believe that the
stock form is the preferred structure (as opposed to mutual form) of
organization for a financial institution, as evidenced in part by the decline in
the number of mutual thrift institutions from over 12,500 in 1929 to just over
800 today.
The Bank believes that converting to the stock form of organization
will allow the Bank to compete more effectively with local community banks and
thrift institutions (most of which are stock-owned) and with statewide and
regional banks (all of which are stock-owned), by, among other things,
increasing its access to capital markets. The Bank believes that by combining
quality service and products with a local ownership base, its customers and
community members who become stockholders will be more inclined to continue to
do business with, and perhaps bring additional business to the Bank.
Furthermore, since the Bank finds itself competing with local and
regional banks not only for customers, but also for employees, the Bank believes
that the stock form of organization will better afford it
iv
<PAGE>
the opportunity to attract and retain employees and management through various
stock benefit plans like the ESOP, which are generally not available to mutual
financial institutions. See "Business Purposes."
USE OF PROCEEDS
The Company intends to contribute 50% of the net proceeds ($8.6
million at the midpoint of the Current Valuation Range) from the Offerings to
the Bank. Those Conversion proceeds will be added to the general funds of the
Bank and used for general corporate purposes, including the origination of
loans, funding the construction and/or the acquisition costs of establishing new
branch locations, enhancing the Bank's liquidity ratios and enhancing future
access to capital markets. The balance of the funds will be retained as the
Company's initial capitalization, with a portion of those funds being loaned to
the ESOP to fund its purchase of Common Stock in the Offerings or, if necessary,
to purchase shares of Common Stock through open-market purchases following
completion of the Offerings. The Company may use the funds it retains to
support future expansion of operations or diversification into other banking-
related businesses and for other business or investment purposes, although
management has no current plans regarding such activities. Subject to
applicable limitations, the Company may also use available funds to repurchase
shares of Common Stock and for the payment of dividends. It is expected that in
the interim, all or part of the net proceeds will be invested in U.S. Government
and Agency securities and other short-term investments and to reduce borrowings
from the FHLB. See "Use of Proceeds."
SUBSCRIPTION OFFERING
Mystic is offering up to 2,357,500 shares (or up to 2,711,125 shares
at the Super-Maximum) of the Common Stock in the Subscription Offering. Each
Eligible Account Holder is receiving nontransferable subscription rights to
subscribe for up to $300,000 of the Common Stock with a maximum purchase
limitation of $600,000 of the Common Stock together with associates or groups
acting in concert with such Eligible Account Holder. In the event of an
oversubscription, shares will be allocated among subscribers in accordance with
their subscription priorities and the Plan of Conversion. The Bank's ESOP is
receiving nontransferable subscription rights on a second priority basis to
subscribe for shares in the aggregate up to 8% of the Common Stock. Each
Supplemental Eligible Account Holder is receiving nontransferable subscription
rights on a third priority basis to subscribe for up to $300,000 of the Common
Stock with a maximum purchase limitation of $600,000 of the Common Stock
together with associates or persons acting in concert with such Supplemental
Eligible Account Holder. See "The Conversion -- Subscription Offering."
DIRECT COMMUNITY OFFERING
Concurrent with or at any time during or after the Subscription
Offering, the board of directors of the Company may elect to offer those shares
not subscribed for in the Subscription Offering, if any, to the general public,
with preference given to persons residing in the communities of Medford, Malden,
Everett, Stoneham, Arlington, Winchester, Somerville, Melrose, Lexington and
Bedford, Massachusetts, the Bank's primary market area, in the Direct Community
Offering with further preference being given to borrowers of the Bank as of the
date of this Prospectus who reside or do business in those communities and
subject to the Bank's right to reject orders in the Direct Community Offering in
whole or in part. Purchasers in the Direct Community Offering together with
their associates, and groups acting in concert with such purchasers, are each
eligible to purchase up to $600,000 of the Common Stock. Purchase orders
received during the Direct Community Offering will be filled up to a maximum of
2% of the total number of shares of Common Stock to be issued and sold, and any
remaining shares will then be allocated among unfilled purchase orders on an
equal number of shares basis, subject to the Company's right to reject orders
for Common Stock in whole or in part. The Direct Community Offering is expected
to terminate on the same date as the Subscription Offering but may be extended
by the Company for up to an additional 45 days, or such longer period as the
Commissioner of Banks of the Commonwealth of Massachusetts (the "Commissioner")
may approve. If the Conversion is not completed within 45 days of the
completion of the Subscription Offering, and the Commissioner consents to an
extension of time to complete the Conversion, subscribers will be given the
right to increase, decrease or rescind their subscriptions.
v
<PAGE>
SYNDICATED COMMUNITY OFFERING
As a final step in the Conversion, if necessary, shares not purchased
in the Subscription Offering or Direct Community Offering, if any, will be
offered for sale in the Syndicated Community Offering to certain members of the
general public and/or through a syndicate of registered broker-dealers to be
formed and managed by Trident Securities, Inc. ("Trident Securities") acting as
agent, to assist the Company in the sale of the Common Stock.
NON-TRANSFERABILITY OF SUBSCRIPTION RIGHTS
Applicable state and federal regulations provide that, prior to the
completion of the Conversion, no person shall transfer or enter into any
agreement or understanding to transfer the legal or beneficial ownership of the
subscription rights under the Plan or the shares of Common Stock to be issued
upon their exercise. PERSONS VIOLATING SUCH PROHIBITION MAY LOSE THEIR RIGHT TO
SUBSCRIBE FOR STOCK IN THE CONVERSION AND MAY BE SUBJECT TO SANCTIONS BY THE
COMMISSIONER, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR THE FDIC.
EACH PERSON EXERCISING SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT HIS
OR HER PURCHASE OF COMMON STOCK IS SOLELY FOR THE PURCHASER'S OWN ACCOUNT AND
THAT THERE IS NO AGREEMENT OR UNDERSTANDING REGARDING THE SALE OR TRANSFER OF
SUCH SHARES.
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
or Supplemental Eligible Account Holder, including, in each case, all persons on
a joint account, may purchase shares of Common Stock with an aggregate purchase
price of more than $300,000, (ii) no 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 $300,000, 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 $600,000
of Common Stock issued in the Conversion. THIS MAXIMUM PURCHASE LIMITATION MAY
BE INCREASED CONSISTENT WITH FDIC AND MASSACHUSETTS REGULATIONS IN THE SOLE
DISCRETION OF THE COMPANY AND THE 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: persons seeking to combine or pool their 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. When persons act together for such purpose, their group is deemed to
have acquired their stock. The term "associate" of a person is defined in the
Plan of Conversion to mean: (i) any corporation or organization (other than the
Bank or a majority-owned subsidiary of the Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse who has the same home as such person. The Company and
the Bank may presume that certain persons are acting in concert based upon,
among other things, joint account relationships and the fact that such persons
have filed joint Schedules 13D with the SEC with respect to other companies.
POTENTIAL BENEFITS OF CONVERSION TO MANAGEMENT
ESOP. The Company and the Bank have adopted an ESOP to become
effective on the effective date of the Conversion. The ESOP intends to purchase
an aggregate of 8% of the shares of Common Stock issued in the Conversion. For
additional information, see "Management of the Bank -- Certain Benefit Plans and
Agreements -- Employee Stock Ownership Plan and Trust."
vi
<PAGE>
Employment Agreements. Effective upon the Conversion, the Company and
the Bank each will enter into employment agreements with certain of their
respective officers that will provide for benefits and cash payments to be made
to such officers in the event of a change in control of the Company or the Bank.
The aggregate payments that would be made to the executive officers of the
Company named in the Company's employment agreements, assuming termination of
employment following a change in control under the circumstances described in
those agreements based on current salary levels, would be approximately
$1,267,000. The aggregate payments that would be made to the officers of the
Bank named in the Bank's employment agreements, assuming termination of
employment following a change in control of the Bank based on current salary
levels, would be approximately $503,000. These provisions may have the effect of
increasing the cost of acquiring the Company and the Bank, thereby discouraging
future attempts to take over the Company or the Bank. See "Management of the
Bank -- Certain Benefit Plans and Agreements -- Employment Agreements Between
the Company and Two Senior Executives" and "-- Employment Agreements Between the
Bank and Two Commercial Lending Officers."
Option Plan. No earlier than one year after the consummation of the
Conversion, the Company intends to submit for stockholder approval a stock
option and incentive plan for the benefit of the officers, key employees and
directors of the Company and the Bank (the "Option Plan"), pursuant to which the
Company intends to reserve a number of authorized but unissued shares of Common
Stock equal to an aggregate of 10% of the Common Stock issued in the Conversion
for issuance pursuant to stock options. The value of any options granted under
the Option Plan will be determined based on the increase, if any, in the market
value of the Common Stock compared to the exercise price of the options. The
exercise price of any options granted under the Option Plan will not be less
than the fair market value of a share of Common Stock on the date of grant.
Provided the Option Plan is implemented more than one year after completion of
the Conversion, it is expected that the Option Plan will provide for the
accelerated vesting of awards to occur upon a change in control of the Company
or the Bank. A majority of stockholders present and voting at any annual or
special meeting considering the approval of the Option Plan must approve the
Option Plan before it can be implemented by the Company. It is expected that
all awards under the Option Plan will vest over a period of time at a rate not
greater than 20% per year.
While the Company does not currently intend to implement the Option
Plan within one year following completion of the Conversion, FDIC regulations
provide that if the Option Plan is implemented within one year following
completion of the Conversion, no individual officer or employee may receive more
than 25% of the options granted, and non-employee directors may not receive more
than 5% individually or more than 30% in the aggregate of the options granted.
See "Management of the Bank --Future Stock Benefit Plans -- Option Plan."
Restricted Stock Plan. In addition, no earlier than one year after
the consummation of the Conversion, the Company intends to submit for
stockholder approval a restricted stock plan ("Restricted Stock Plan") for the
benefit of the officers, key employees and directors of the Company and the
Bank. When implemented, the Restricted Stock Plan is expected to purchase a
number of shares of Common Stock either from the Company or in the open market
equal to an aggregate of 4% of the Common Stock issued in the Conversion.
Whether such shares will be purchased in the open market or from the Company,
and the timing of all such purchases, will depend on the market and other
conditions and the alternative uses of capital available to the Company. The
actual value of any awards made under the Restricted Stock Plan will depend
upon, among other factors, the market value of the Common Stock at the time of
award and upon payment. At the minimum, midpoint, maximum and 15% above the
maximum of the Current Valuation Range, the reduction to stockholders' equity to
fund the Restricted Stock Plan would be $697,000, $820,000, $943,000 and $1.1
million, respectively, assuming purchases were made in the market at the $10.00
per share Purchase Price. All awards under the Restricted Stock Plan will be
payable over a period or time, at a rate not greater than 20% per year. A
majority of stockholders present and voting at any annual or special meeting
considering approval of the Restricted Stock Plan must approve the Restricted
Stock Plan before it can be implemented by the Company. It is expected that the
Plan will provide for the accelerated vesting of awards to occur upon a change
in control of the Company or the Bank.
vii
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Consistent with applicable regulations, if the Restricted Stock Plan
is implemented within one year following completion of the Conversion (which
timing is not currently contemplated), no employee will receive grants exceeding
25% of the shares available under the Restricted Stock Plan, and no non-employee
director will receive grants individually exceeding 5% of the shares available
under the Restricted Stock Plan or 30% in the aggregate of the awards granted.
See "Management of the Bank --Future Stock Benefit Plans -- Restricted Stock
Plan."
INDEPENDENT APPRAISAL AND PURCHASE PRICE
R.P. Financial, a firm experienced in valuing banking institutions,
has made an independent appraisal of the estimated aggregate pro forma market
value of the Common Stock. The Current Valuation Range in R.P. Financial's
appraisal as of August 15, 1997 and updated as of ___________, 1997, is from
$17,425,000 to $23,575,000, with a midpoint of $20,500,000. Such appraisal is
not intended and must not be construed as a recommendation of any kind as to the
advisability of purchasing such shares. The appraisal considered a number of
factors and was based upon estimates derived from those factors, all of which
are subject to change from time to time. In preparing the valuation, R.P.
Financial relied upon and assumed the accuracy and completeness of financial and
statistical information provided by the Bank. R.P. Financial did not verify the
consolidated financial statements provided or independently value the assets of
the Bank.
The Company has determined to issue and sell the Common Stock at a
purchase price of $10.00 per share. The aggregate actual purchase price for all
of the Common Stock will be consistent with the independent appraisal of the
estimated aggregate pro forma market value of the Company immediately after the
Conversion. Depending upon market financial conditions prior to completion of
the Conversion, the actual number of shares being issued in the Conversion may
be increased or decreased from the maximum of 2,357,500 shares being offered
hereby. Any material change in the Current Valuation Range would require the
approval of the Commissioner and the FDIC. Purchasers will be given the right to
increase, decrease or rescind their orders in the event that the aggregate
purchase price is below $17,425,000 (the low end of the Current Valuation Range)
or more than the Super-Maximum of $27,111,250 (15% above the high end of the
Current Valuation Range). See "The Conversion -- Stock Pricing and Number of
Shares to be Issued."
DIVIDENDS
The 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 per share of $10.00. The first
quarterly cash dividend is expected to be declared and paid during the first
full quarter following the consummation of the Conversion. 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 Company, capital requirements, regulatory limitations, the Bank's and the
Company's financial condition and results of operations, tax considerations and
general economic conditions. In order to pay such cash dividends, however, the
Company must have available cash either from the net proceeds raised in the
Offerings and retained by the Company, dividends received from the Bank or
earnings on Company assets. There are certain limitations on the payment of
dividends from the Bank to the Company. See "Regulation --Massachusetts Banking
Laws and Supervision." 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 "Dividends."
MARKET FOR COMMON STOCK
The Bank, as a mutual co-operative bank, has never issued capital
stock and consequently there is no established market for the Common Stock at
this time. Accordingly, there can be no assurance that an active public trading
market for the Company's Common Stock will develop or be maintained in the
foreseeable future. However, Trident Securities has agreed to act as a market
maker for the Company's Common Stock following consummation of the Conversion
and the Company has applied to list the common stock on the
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Nasdaq National Market under the symbol "MYST." There can be no assurance,
however, that the Company will meet the Nasdaq National Market listing
requirements. Accordingly, purchasers of Common Stock should have a long-term
investment intent and recognize that the absence of an active and liquid trading
market may make it difficult to sell the Common Stock, and may have an adverse
effect on the price. See "Special Considerations -- Limited Market for Common
Stock" and "Market for Common Stock."
Trident Securities will consult with, advise and assist the Company in
the distribution of shares in the Subscription Offering. Trident Securities will
also act as marketing advisor and represent the Company as placement agent on a
best efforts basis in the sale of the Common Stock in the Direct Community
Offering. Members of its staff will conduct training sessions for directors,
officers and employees of the Bank regarding the offering process. Trident will
also provide assistance in the establishment and supervision of the Stock
Information Center. If the Subscription Offering and Direct Community Offering
are extended beyond ______________, 1997 (the "Expiration Date"), Trident
Securities may make sales to the general public and/or assemble and manage a
syndicate of selected dealers to assist the Company in the sale of the Common
Stock during the Syndicated Community Offering.
The engagement of Trident Securities by the Bank and the work
performed thereunder (including any due diligence investigation) should not be
construed by prospective investors as constituting an endorsement of or
recommendation to purchase the shares of Common Stock by Trident Securities or a
verification of the accuracy or completeness of the information contained in
this Prospectus. Trident Securities has not prepared or delivered a fairness or
similar opinion regarding the terms of the Offerings or the prices at which the
Common Stock may trade.
SPECIAL CONSIDERATIONS
Special attention should be given by prospective investors to the
factors discussed under "Special Considerations," including, (i) anticipated low
return on equity following the Conversion, (ii) the potential for delay in
consummating the Conversion in order to obtain regulatory approval, (iii) the
growth of the Bank's commercial and commercial real estate loan portfolio, (iv)
the possible dilutive effect of stock based compensation plans which may be
implemented at a later date, (v) regulatory environment, (vi) anti-takeover
provisions and voting control of management, (vii) the potentially adverse
impact of interest rates and economic conditions on the banking industry and the
Bank and (viii) the limited market for the Common Stock.
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<PAGE>
SUMMARY OVERVIEW
The following is intended to be a condensed overview of the foregoing
information and does not purport to be complete. It must be read in conjunction
with other information contained in this Prospectus. Terms used in the summary
are defined elsewhere herein.
<TABLE>
<S> <C>
Securities Offered and Purchase Price ...... The Company is offering up to 2,357,500 shares of
Common Stock (subject to adjustment) at a Purchase
Price of $10.00 per share. See "The Conversion --
Stock Pricing and Number of Shares to be Issued."
Subscription Offering ...................... The Company is offering nontransferable subscription
rights on a first priority basis to Eligible Account
Holders, each of whom has the right to subscribe for
the purchase of up to $300,000 of Common Stock. On a
second priority basis, to the extent any shares of
Common Stock are available after satisfying subscriptions
of Eligible Account Holders, the Bank's ESOP has the right
to subscribe for up to 8% of the total number of shares
of Common Stock offered in the Conversion. On a third priority
basis, to the extent any shares of Common Stock are available
after satisfying the subscriptions of the Eligible Account
Holders and the ESOP, each Supplemental Eligible Account
Holder has the right to subscribe for the purchase of up
to $300,000 of Common Stock. See "The Conversion--Subscription
Offering."
Direct Community Offering .................. To the extent any shares of Common Stock are available after
satisfying the subscriptions of Eligible Account Holders,
the ESOP and the Supplemental Eligible Account Holders in
the Subscription Offering, shares of Common Stock are being
offered by the Company to the general public, with preference
given to persons who are residents of the communities of Medford,
Malden, Everett, Stoneham, Arlington, Winchester, Somerville, \
Melrose, Lexington and Bedford, Massachusetts with further
preference being given to borrowers of the Bank as of the date of
this Prospectus who reside or do business in the Bank's local
community. Purchasers in the Direct Community Offering are each
eligible to purchase up to $300,000 of Common Stock, and together
with their associates and groups acting in concert, are each
eligible to purchase up to $600,000 of Common Stock. See "The
Conversion -- Direct Community Offering."
Syndicated Community Offering ............. As a final step in the Conversion, if necessary, shares not
purchased in the Subscription Offering or Direct Community Offering,
if any, will be offered for sale in the Syndicated Community Offering
to certain members of the general public and/or through a syndicate of
registered brokers-dealers to be formed and managed by Trident Securities
acting as agent, to assist the Company in the sale of the Common Stock.
</TABLE>
x
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<TABLE>
<S> <C>
Independent Appraisal ...................... The Bank has retained R.P. Financial to prepare an appraisal of the
estimated pro forma market value of the Common Stock. The Purchase
Price of $10.00 per share and the range in the number of shares being
offered in the Subscription and Direct Community Offerings have been
determined by the Bank's board of directors based upon the appraisal.
R.P. Financial has advised the Company, in its opinion dated as of
August 15, 1997 and updated as of _____________, 1997, that the
Current Valuation Range ranged from $17,425,000 to $23,575,000 with
a mid-point of $20,500,000. Pursuant to the Plan of Conversion, the
Company may issue additional shares of Common Stock in an aggregate
dollar amount of up to 15% above the high end of the Current Valuation
Range for an aggregate of up to $27,111,250 in gross Conversion
proceeds without a resolicitation. R.P. Financial's estimated
valuation should not be considered a recommendation as to the
advisability of purchasing shares of Common Stock, and there can
be no assurance that persons who purchase shares in the Conversion
will thereafter be able to sell the shares at comparable prices
consistent with such valuation. See "The Conversion -- Stock
Pricing and Number of Shares to be Issued."
Exercise of Subscription Rights ........... Delivery of forms to order Common Stock offered in the Subscription
Offering and the Direct Community Offering will be preceded or
accompanied by a Prospectus. Any person receiving an order form who
desires to purchase shares must do so prior to the Expiration Date by
delivering to the Company a properly executed order form together with
full payment. Once tendered, subscription orders cannot be revoked
or modified without the consent of the Company. Orders will not be
accepted via facsimile. See "The Conversion -- Subscription
Offering -- Use of Order Forms."
Payment for Shares ........................ Payment for subscriptions may be made (i) in cash (if delivered in
person); (ii) by check, bank draft or money order; or (iii) by
authorization of withdrawal from deposit accounts maintained at the
Bank. Payment for shares will not be accepted by wire transfer.
See "The Conversion -- Subscription Offering -- Payment for Shares."
Purchase Limitations ...................... A maximum of $600,000 in Common Stock may be purchased in the aggregate
in all categories in the Conversion by any person together with any
associate or group acting in concert with such person. This maximum
purchase limitation does not apply to the ESOP, which may purchase up
to 8% of the shares issued in the Conversion. A minimum of 25 shares
of Common Stock must be purchased by any person purchasing any shares
</TABLE>
xi
<PAGE>
<TABLE>
<S> <C>
in the Conversion to the extent sufficient shares are available.
See "Summary -- Purchase Limitations."
Nontransferability of Subscription Rights ... The subscription rights of Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders are nontransferable. Persons
violating the prohibition against transferring such rights may lose the
right to subscribe for Common Stock in the Conversion and may be subject
to sanctions by the Commissioner, the SEC or the FDIC. See "The
Conversion -- Subscription Rights."
Expiration Date for the Subscription Offering. The Expiration Date for the Subscription Offering is 3:30 p.m. Eastern
Standard Time on _____________, 1997, unless extended by the Bank. See
"The Conversion -- Subscription Offering."
Expiration Date for the Direct Community
Offering .................................. The Expiration Date for the Direct Community Offering is 3:30 p.m. Eastern
Standard Time on _____________, 1997, unless extended by the Bank. See
"The Conversion -- Direct Community Offering."
Market for Stock ........................... As a mutual institution, the Bank has never issued capital stock and,
consequently, there is no existing market for the Common Stock.
The Company has applied to have the Common Stock quoted on the Nasdaq
National Market under the symbol "MYST." See "Market for Common Stock."
Dividend Policy ............................ The Company's board of directors currently anticipates declaring and
paying cash dividends on the Common Stock at an initial rate of
approximately 2%, or $0.20 per share of the aggregate Purchase
Price, commencing during the first full quarter following consummation
of the Conversion.
Special Considerations ..................... A purchase of the Common Stock involves a substantial degree of risk.
Prospective investors should carefully consider the matters set forth
under "Special Considerations." The shares of Common Stock offered hereby
are not insured by the FDIC, the Share Insurance Fund of the Co-
operative Central Bank or any other government agency.
No Board Recommendations ................... The Bank's board of directors does not make any recommendations to
depositors or other potential investors regarding whether
such persons should purchase the Common Stock. An investment in the
Common Stock must be made pursuant to each investor's evaluation of
his or her best interests.
Stock Information Center .................... If you have any questions regarding the Conversion, call the Stock
Information Center at (617) _____________.
</TABLE>
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<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The following table sets forth selected financial data concerning the
Bank at the dates and for the periods indicated. The following data is qualified
in its entirety by the detailed information and consolidated financial
statements appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT JUNE 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Total assets................. $149,653 $131,366 $124,966 $121,063 $115,799
Loans, net................... 114,568 94,760 80,217 77,988 80,284
Investment securities/(1)/
Available for sale......... 3,819 1,568 1,463 1,422 --
Held to maturity........... 17,504 16,926 25,051 25,152 --
Held for investment........ -- -- -- -- 16,160
Deposits..................... 129,303 119,634 113,825 110,665 106,179
Borrowings................... 7,532 -- -- -- --
Total surplus................ 11,940 10,949 10,366 9,683 8,864
ASSET QUALITY DATA:
Non-performing loans......... 365 622 868 839 1,127
Allowance for loan losses.... 977 742 757 749 746
Foreclosed real estate....... -- -- 104 270 460
NUMBER OF:
Mortgage loans outstanding.. 1,384 1,329 1,236 1,290 1,406
Deposit accounts............ 18,809 18,465 17,753 17,016 16,562
Full-service offices........ 3 3 2 2 2
NUMBER OF EMPLOYEES:
Full-time.................... 44 42 40 38 34
Part-time.................... 22 22 15 14 9
- -----------------------------
</TABLE>
(1) Effective June 30, 1994, the Bank adopted Statement of Financial
Accounting Standards No. 115 ("SFAS No. 115") which requires the
classification of the Bank's investment securities as "trading
securities," "held to maturity" or "available for sale." All of the
Bank's equity securities are classified as "available for sale." At
June 30, 1993 all of the Bank's investment securities were held for
investment and carried at amortized cost.
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<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
STATEMENT OF INCOME DATA:
Interest and dividend income........... $9,899 $8,928 $8,165 $7,784 $8,176
Interest expense......................... ------ ------ ------ ------ ------
4,911 4,569 3,885 3,474 3,960
------ ------ ------ ------ ------
Net interest income.................... 4,988 4,359 4,280 4,310 4,216
Provision for loan losses.............. 272 100 100 152 300
------ ------ ------ ------ ------
Net interest income after provision
for loan losses........................ 4,716 4,259 4,180 4,158 3,916
Other income........................... 882 658 536 543 531
Operating expenses..................... 4,330 3,878 3,576 3,144 2,931
------ ------ ------ ------ ------
Income before income taxes............. 1,268 1,039 1,140 1,557 1,516
Provision for income taxes............. 527 440 480 658 657
------ ------ ------ ------ ------
Income before cumulative effect of
change in accounting principle......... 741 599 660 899 859
Cumulative effect of change in..... -- -- -- -- 221
accounting for income taxes.. ------ ------ ------ ------ ------
Net income................................ $ 741 $ 599 $ 660 $ 899 $1,080
====== ====== ====== ====== ======
</TABLE>
xiv
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED JUNE 30,
----------------------------------------
1997 1996 1995 1994 1993
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING RATIOS:
Interest rate spread/(1)/....................................... 3.63% 3.48% 3.57% 3.67% 3.78%
Net interest margin/(2)/........................................ 3.84 3.67 3.73 3.81 3.93
Return on average assets........................................ 0.54 0.48 0.55 0.75 0.97
Return on average equity........................................ 6.40 5.53 6.46 9.61 12.98
Operating expenses as a percentage
of average total assets......................................... 3.15 3.08 2.97 2.62 2.63
Efficiency ratio/(3)/........................................... 73.76 77.30 74.25 64.78 61.79
ASSET QUALITY RATIOS:
Non-performing loans as a percent
of net loans.................................................... 0.32 0.66 1.08 1.08 1.40
Non-performing assets as a percent
of total assets................................................. 0.24 0.47 0.78 0.92 1.37
Allowance for loan losses as a
percent of non-performing loans................................. 267.67 119.29 87.21 89.27 66.19
Net charge-offs to average
loans, net...................................................... 0.04 0.13 0.12 0.19 0.24
CAPITAL RATIOS:
Average equity to average assets................................ 8.42 8.60 8.47 7.81 7.46
Regulatory Tier I leverage capital
ratio........................................................... 8.08 8.51 8.30 8.00 7.65
Total surplus to total assets................................... 7.98 8.33 8.30 8.00 7.65
</TABLE>
- ----------------------------
(1) Interest rate spread represents the difference between weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
(3) Operating expenses divided by the sum of net interest income and other
income.
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<PAGE>
SPECIAL CONSIDERATIONS
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE FOLLOWING FACTORS,
AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE DECIDING
TO MAKE AN INVESTMENT IN THE SHARES OF COMMON STOCK. WHEN USED IN THIS
PROSPECTUS, THE WORDS OR PHRASES "WILL LIKELY RESULT," "ARE EXPECTED TO," "WILL
CONTINUE," "IS ANTICIPATED," "ESTIMATE," "PROJECT," "BELIEVE" OR SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE COMPANY
WISHES TO CAUTION READERS THAT ALL FORWARD-LOOKING STATEMENTS ARE NECESSARILY
SPECULATIVE AND NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE, AND TO ADVISE READERS THAT
VARIOUS RISKS AND UNCERTAINTIES, INCLUDING REGIONAL AND NATIONAL ECONOMIC
CONDITIONS, CHANGES IN LEVELS OF MARKET INTEREST RATES, CREDIT RISKS OF LENDING
ACTIVITIES, AND COMPETITIVE AND REGULATORY FACTORS, COULD AFFECT THE COMPANY'S
FINANCIAL PERFORMANCE AND COULD CAUSE THE COMPANY'S ACTUAL RESULTS FOR FUTURE
PERIODS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED. THE RISKS
HIGHLIGHTED HEREIN SHOULD NOT BE ASSUMED TO BE THE ONLY THINGS THAT COULD AFFECT
FUTURE PERFORMANCE OF THE COMPANY.
ANTICIPATED LOW RETURN ON EQUITY FOLLOWING CONVERSION
For the year ended June 30, 1997, the Bank's return on average equity
was 6.40%. On a pro forma basis, for the year ended June 30, 1997, assuming the
sale of the midpoint of 2,050,000 shares of Common Stock in the Conversion at
the beginning of the year, the Bank's return on equity would have been 3.69%.
With a relatively high capital position as a result of the Conversion, and with
the possible difficulty in finding good quality loans in which to invest, it is
unlikely that the Company will be able to immediately generate earnings to
support its higher level of capital. In addition, the expenses associated with
the ESOP, the Restricted Stock Plan and possible branching costs, along with
other post-Conversion expenses and the expenses associates with having publicly
traded stock, are expected to contribute to increased operating expenses (in
comparison to past results of operations). As a result, it is expected that the
Company's return on equity initially will be lower than historical levels and
will be below industry norms for stock banks. Consequently, investors expecting
a return on equity which will meet or exceed industry standards for the
foreseeable future should carefully evaluate and consider the risk of a subpar
return on equity.
POSSIBLE DELAYS IN CONSUMMATION OF THE CONVERSION
Consummation of the Conversion is contingent upon the receipt of
approvals of the Commissioner and the FDIC. The Bank's Plan of Conversion was
approved by the Commissioner on ____________ ___, 1997, and was approved by the
Bank's depositors on ___________, 1997. The FDIC, pursuant to its rule requiring
state-chartered banks to provide notice to the FDIC of their intention to
convert to stock form and prohibiting consummation of such a conversion unless
the FDIC provides a notice of non-objection with respect to the transaction, has
provided to the Bank a letter dated ___________ __, 1997 indicating that,
subject to the satisfaction of certain conditions, the FDIC plans to issue such
notice of non-objection in connection with the Conversion. The conditions are
that: (i) the Bank must receive final approval from the Commissioner and (ii)
the Bank must advise the FDIC of the results of the Offerings and deliver an
updated appraisal taking those results into account, discussing any material
developments during the subscription period, and explaining any rejected stock
orders. If the FDIC concludes that the updated appraisal presents a fair value
of the Bank and that the Bank has adequately justified any rejected stock
orders, it will issue a letter of non-objection to the Conversion.
Accordingly, consummation of the Conversion may be significantly
delayed or terminated in the event such approvals have not been received by the
Bank. If such approvals are not obtained, all subscription funds held will be
returned with interest, and all withdrawal authorizations will be terminated.
GROWTH OF THE BANK'S COMMERCIAL LOAN AND COMMERCIAL REAL ESTATE LOAN PORTFOLIO
Since 1995, the Bank's lending activities have increasingly emphasized
commercial and commercial real estate loans to small businesses in its market
area. At June 30, 1997, the Bank's total loan portfolio included commercial
loans of $3.7 million, or 3.2% of net loans and commercial real estate loans of
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<PAGE>
$17.8 million or 15.6% of net loans. Commercial loans accounted for 10.7% and
8.6% of the Bank's total loan originations during the fiscal years 1997 and
1996, respectively, and commercial real estate loans accounted for 23.6% and
15.8% of the Bank's total loan originations during the fiscal years 1997 and
1996, respectively. Additionally, because the Bank has originated most of its
current commercial and commercial real estate loans within the past three to
five years, the commercial and commercial real estate loan portfolio is
unseasoned, and there can be no guarantee as to the long-term performance of
such loans.
The Bank attempts to collateralize all of its commercial loans with
real estate or tangible commercial assets. Loans secured by commercial real
estate properties generally involve a higher degree of risk than the single-
family mortgages traditionally emphasized by banking institutions engaged in
residential real estate lending. Because payments on loans secured by
commercial real estate properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject, to a greater extent, to adverse conditions in the real estate market or
the economy. Commercial and commercial real estate loans may also involve
relatively large loan balances to single borrowers or groups of related
borrowers. The repayment of commercial loans is typically dependent on the
successful operation and income stream of the borrower. Such loans can be
significantly affected by economic conditions. In addition, commercial and
commercial real estate lending generally requires substantially greater
oversight efforts compared to residential real estate lending.
POSSIBLE DILUTIVE EFFECT OF FUTURE STOCK BENEFIT PLANS
In the future, the Company intends to implement the Restricted Stock
Plan and the Option Plan for the benefit of certain officers, directors and
employees of the Bank and the Company. It is not currently anticipated that
such plans would be implemented during the first year following the date of the
consummation of the Conversion. When a decision is made to implement the
Restricted Stock Plan and/or the Option Plan, such plans must be approved by a
majority of the Company's shareholders and the Commissioner. The maximum number
of shares which would be issued under the proposed Restricted Stock Plan and
Stock Option Plan would not exceed 4% and 10%, respectively, of the stock to be
issued in the Conversion.
REGULATORY ENVIRONMENT
The Bank is subject to extensive regulation, supervision and
examination by the Commissioner and the FDIC. Such regulation and supervision
establishes a comprehensive framework of activities in which a bank may engage
and is intended primarily for the protection of depositors and the deposit
insurance fund which is administered by the FDIC. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities. Any change in such regulation, whether
by the Commissioner, the FDIC or the U.S. Congress, could have a significant
impact on the Bank and its operations. In response to an increase in the number
of financial institution failures in the early 1990s, Congress passed
legislation which has significantly increased the regulation of financial
institutions through, among other things, the imposition of higher capital
requirements and restrictions on activities and an increase in the penalties
that may be imposed on financial institutions for regulatory violations. See
"Regulation."
ANTI-TAKEOVER PROVISIONS AND VOTING CONTROL OF MANAGEMENT
It is the present intention of the board of directors of Mystic to
remain an independent, locally-owned financial institution. The Certificate of
Incorporation and bylaws of the Company provide, among other things, for
restrictions on the acquisition of more than 10% of the Company's outstanding
Common Stock following consummation of the Conversion. In addition, the
Certificate of Incorporation prohibits an owner of Common Stock in excess of 10%
of the then-outstanding shares to vote those shares held in excess of the 10%
limit.
Also, the Certificate of Incorporation requires an affirmative vote of
at least 80% of outstanding shares for certain business combinations. The
Certificate of Incorporation also authorizes the issuance of serial preferred
stock, the rights and preferences of which may be designated by the board of
directors without stockholder approval. Additionally, the board of directors is
divided into three classes, each class serving a
2
<PAGE>
staggered term and containing approximately one-third of the members of the
board of directors. The classified board of directors is intended to provide for
continuity of the board of directors and make it more difficult and time
consuming for a stockholder group to use its voting power to gain control of the
board of directors without consent of the incumbent board of directors. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Also, the bylaws of the Company provide that special meetings of
stockholders of the Company may be called only by the Chairperson of the board,
the President or by resolution of at least three-fourths of the directors then
in office. Moreover, stockholder action by written consent in lieu of a meeting
is not permitted. These and other provisions are designed to encourage or may
have the effect of encouraging any prospective acquiror to negotiate directly
with the board of directors. These provisions may discourage non- negotiated
takeover attempts which certain stockholders may deem to be in their interest
and may tend to perpetuate existing management.
In addition, directors and executive officers of the Bank expect to
purchase approximately 7.06% at the minimum of the Current Valuation Range, or
5.22% at the maximum of the Current Valuation Range, of the shares of Common
Stock issued in the Conversion assuming such shares are available to satisfy
their subscriptions. Such purchases will be made for investment and not with a
view to re-sale and will be subject to a restriction that the shares not be sold
for a period of one year following the date of purchase except in certain
circumstances. See "The Conversion -- Restrictions on Transferability by
Directors and Officers." In addition, the Bank's executive officers will
control approximately ____% of the stock issued in the Conversion through the
ESOP (assuming that one annual allocation has been made under the ESOP) assuming
the rates of compensation paid in fiscal 1997 to executive officers were used to
determine ESOP awards. Under the terms of the ESOP, the unallocated shares will
be voted by the independent ESOP trustee in the same proportions as the
allocated shares. Voting control by management and directors over shares
purchased in the Conversion or acquired under the ESOP could, based upon the
assumptions set forth above, total approximately 9.38% at the minimum of the
Current Valuation Range, or approximately 7.54%, at the maximum of the Current
Valuation Range, of the shares issued in the Conversion. Such voting control
could, together with additional stockholder support, defeat stockholder
proposals requiring an 80% super-majority vote. As a result, these provisions
may discourage proxy contests and other takeover attempts that certain
stockholders may deem to be in their best interests and may tend to perpetuate
existing management of the Company. See "Certain Restrictions on Acquisition
of the Company and the Bank" for more information concerning anti-takeover
provisions and management's voting control.
POTENTIALLY ADVERSE IMPACT OF INTEREST RATES AND ECONOMIC AND INDUSTRY
CONDITIONS
The Banking Industry. The results of operations of banking
institutions are materially affected by general economic conditions, the
monetary and fiscal policies of the federal government and the regulatory
policies of governmental authorities and other factors that affect market rates
of interest. The results of operations of banking institutions depend to a large
extent on their level of "net interest income," which is the difference between
interest income on interest-earning assets, such as loans and investments, and
interest expense on interest-bearing liabilities, such as deposits and
borrowings. A significant portion of the assets of most banking institutions
consists of long-term residential mortgages and loans with shorter terms to
maturity. The repricing periods of these assets are generally not as short as
those of the banking institution's interest-bearing liabilities. As a result,
the yield on interest-earning assets of most banking institutions has adjusted
to changes in interest rates at a slower rate than the cost of their interest-
bearing liabilities. Banking institutions in recent years have experienced
significant fluctuations in net interest income due to rapidly changing interest
rates and to differences in the repricing characteristics of their interest-
earning assets and interest-bearing liabilities. Because most banking
institutions continue to hold assets which reprice more slowly than their
liabilities, any significant increase in interest rates would be expected to
have an adverse impact on net interest income.
The Bank. The results of operations of the Bank are affected by the
same factors as those described above with respect to banking institutions
generally. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Asset/Liability Management" and "Business -- Lending
Activities."
3
<PAGE>
LIMITED MARKET FOR COMMON STOCK
The Bank, as a mutual co-operative bank, has never issued capital
stock and consequently there is no established market for the Common Stock at
this time. Accordingly, there can be no assurance that an active public trading
market for the Company's Common Stock will develop or be maintained in the
foreseeable future. However, Trident Securities has agreed to act as a market
maker for the Company's Common Stock following consummation of the Conversion
and the Company has applied to list the Common Stock on the Nasdaq National
Market under the symbol "MYST." There can be no assurance, however, that the
Company will meet the Nasdaq National Market listing requirements. Accordingly,
purchasers of Common Stock should have a long-term investment intent and
recognize that the absence of an active and liquid trading market may make it
difficult to sell the Common Stock, and may have an adverse effect on the price.
See "Market for Common Stock."
MYSTIC FINANCIAL, INC.
Mystic was recently organized at the direction of the board of
directors of the Bank for the purpose of acquiring all of the capital stock of
the Bank to be issued in the Conversion. The Company has received approval from
the Federal Reserve Board ("FRB") to become a bank holding company and, upon
completion of the Conversion, will be subject to regulation by the FRB. See
"The Conversion--General" and "Regulation--Holding Company Regulation." Upon
consummation of the Conversion, the Company will have no significant assets
other than the shares of the Bank's capital stock acquired in the Conversion and
an amount equal to approximately 50% of the net proceeds of the Conversion,
including the loan to the ESOP, and will have no significant liabilities. The
Company intends to use a portion of the net proceeds it retains to loan to the
ESOP funds to enable the ESOP to purchase up to 8% of the stock issued in
connection with the Conversion. See "Use of Proceeds." The management of
Mystic is set forth under "Management of the Company." Initially, the Company
will neither own nor lease any property, but will instead use the premises,
equipment and furniture of the Bank. At the present time, the Company does not
intend to employ any persons other than certain officers who are currently
officers of the Bank but will utilize the support staff of the Bank from time to
time.
Management believes that the holding company structure will provide
the Company additional flexibility to diversify its business activities through
existing or newly formed subsidiaries, or through acquisitions of or mergers
with other financial institutions and financial services related companies.
Presently, there are no current arrangements, understandings or agreements
regarding any such opportunities. However, subsequent to the Conversion, the
Company will be in a position, subject to regulatory limitations and the
Company's financial position, to take advantage of any such acquisition and
expansion opportunities that may arise. The initial activities of the Company
are anticipated to be funded by the proceeds to be retained by the Company,
income thereon and through dividends from the Bank.
The Company's executive office is located at the administrative
offices of the Bank, 60 High Street, Medford, Massachusetts 02155. Its
telephone number is (617) 395-2800.
MEDFORD CO-OPERATIVE BANK
The Bank is a Massachusetts chartered mutual co-operative bank founded
in 1886 with three full-service offices and one educational branch office in
Medford, Massachusetts. The Bank's deposits have been federally insured since
1986 and are currently insured by the BIF of the FDIC and the Share Insurance
Fund of the Co-operative Central Bank. The Bank has been a member of the Co-
operative Central Bank since 1932 and a member of the FHLB since 1988. The Bank
is subject to comprehensive examination, supervision and regulation by the
Commissioner and the FDIC. This regulation is intended primarily for the
protection of depositors and borrowers.
4
<PAGE>
The Bank's offices are located at 60 High Street, 430 High Street, 201
Salem Street and 489 Winthrop Street, Medford, Massachusetts, and its main
office telephone number is (617) 395-2800. The Bank considers its primary market
area to be the Massachusetts communities of Medford, Malden, Everett, Stoneham,
Arlington, Winchester, Somerville, Melrose, Lexington and Bedford, which are
located in eastern Middlesex County, Massachusetts.
The Bank has an active subsidiary, Mystic Securities Corporation,
which was established for the sole purpose of acquiring and holding investment
securities. All securities held by Mystic Securities Corporation are
investments which are permissible for banks to hold under Massachusetts law.
The business of the Bank primarily consists of attracting savings
deposits from the general public and investing such deposits in mortgage loans
secured by one- to four- family residential real estate located in its market
area, commercial loans secured by assets and commercial real estate of
businesses located in its market area and investment securities, including U. S.
Government and Federal Agency securities, equity securities and interest-earning
deposits. The Bank also makes consumer loans, including home equity loans,
automobile, passbook and other consumer loans. The Bank offers both fixed-rate
and adjustable-rate loans and emphasizes the origination of residential real
estate mortgage loans and commercial loans with adjustable interest rates. The
Bank also makes other short-term (one to three year) interest sensitive
investments which allow the Bank to monitor the interest rate, maturities and
repricing intervals of its assets and liabilities.
The Bank's business strategy is to operate as a well-capitalized,
profitable and independent community bank dedicated to financing home ownership
and small business and consumer needs in its market area and providing quality
service to its customers. The Bank has implemented this strategy by: (i)
monitoring the needs of customers and providing quality service; (ii)
emphasizing consumer-oriented banking by originating residential mortgage loans
and consumer loans, and by offering various deposit accounts and other financial
services and products; (iii) recently increasing its emphasis on commercial
banking and lending by originating loans for small businesses and providing
greater services in its commercial and commercial real estate loan department,
(iv) maintaining high asset quality through conservative underwriting standards;
and (v) producing stable earnings.
DIVIDENDS
Payment of dividends on the Common Stock will be subject to
determination and declaration by the board of directors of the Company and the
availability of funds therefor. The Company's board of directors currently
anticipates declaring and paying cash dividends on the Common Stock at an
initial annual rate of approximately $0.20 per share per year (or 2% based on
the $10.00 Purchase Price per share), commencing the first full quarter
following consummation of the Conversion. Any dividend policy of the Company,
however, will also depend upon the Company's debt and equity structure, earnings
and financial condition, need for capital in connection with possible future
acquisitions and other factors, including economic conditions, regulatory
restrictions and tax considerations. No assurance can be given that dividends
will be declared or as to the amount and frequency of dividends, if declared.
The only funds available to the Company for the payment of dividends
will be cash and cash equivalents held at the holding company level, dividends
paid by the Bank to the Company, and borrowings. The Bank will be prohibited
from paying cash dividends to the Company to the extent that any such payment
would reduce the Bank's capital below required capital levels or would impair
the liquidation account to be established for the benefit of the Bank's Eligible
Account Holders and Supplemental Eligible Account Holders at the time of the
Conversion. See "The Conversion--Effect of Conversion to Stock Form on
Depositors and Borrowers of the Bank--Liquidation Account."
5
<PAGE>
BUSINESS PURPOSES
General. The Bank, as a mutual co-operative bank, does not have
stockholders and has no authority to issue capital stock. By converting to the
stock form of organization, the Bank will be structured in the form used by
commercial banks, most business entities and a growing number of savings
institutions. The Conversion will be important to the future growth and
performance of the Bank by providing a larger capital base on which the Bank may
operate, enhancing future access to capital markets, providing the ability to
attract and retain qualified management through stock-based compensation
programs, enhancing the Bank's and the Company's ability to diversify into other
financial services related activities and enhancing the Bank's and the Company's
ability to render services to the public.
The board of directors and management of the Bank believe that the
stock form of organization is a preferred form (as opposed to the mutual form)
of organization for a financial institution. The Board and management recognize
the decline in the number of mutual thrift institutions from over 12,500 in 1929
to just over 800 today.
The Bank believes that converting to the stock form of organization
will allow the Bank to more efficiently compete with local community banks and
thrift institutions, most of which are stock owned, and with statewide, regional
and super-regional banks, all of which are stock owned. The Bank believes that
by combining quality service and products with a local ownership base its
customers and community members who become stockholders will be more inclined to
do business with the Bank.
Additionally, the Bank has, from time to time, experienced the need
for additional liquidity, due in part to the expansion of the commercial and
commercial real estate loan department and the need for funds to originate such
loans. Recently, the Bank has utilized borrowings from the FHLB and has engaged
in selected loan sales as a source of liquidity. The Bank believes that the
capital-raising power of a stock form company would help to meet the need for
additional liquidity.
Furthermore, because the Bank competes with local, regional and super-
regional banks not only for customers, but also for employees, it believes that
the stock form of organization will better afford the Bank the opportunity to
attract and retain employees and management through various stock benefit plans
like the ESOP.
Finally, the Board considers having access to the capital markets an
important option for the Bank. While immediately following the Conversion the
Bank will be well capitalized, the Bank's capital could decrease as a result of
unforeseen circumstances affecting the economic viability of the Bank's market
area. The protection of this additional capital against such an economic
downturn is seen by management as a key benefit of the Conversion.
After the Conversion, the Company will have a substantially increased
capital position. Based on the Company's pro forma capital at June 30, 1997 of
$29.2 million and annualized pro forma net income of $1,063,000 (based on the
mid-point of the Current Valuation Range), the Company would have a pro forma
reported return on stockholders' equity of 3.69%, which in the opinion of
management is not an acceptable long-term return. See "Pro Forma Data." With
the possible difficulty of finding good quality loans to originate and because
the Company intends to control its growth, unacceptable returns likely will
exist for the foreseeable future. Management expects to manage capital through
the payment of regular cash dividends, the possible payments of special
dividends, and the implementation of stock repurchases, depending upon capital
levels and regulatory and market limitations and subject to the discretion of
the board of directors. Management and the board of directors recognize their
responsibility to stockholders; however, they are also concerned with continuing
to operate a safe, sound and viable community financial institution.
Convenience and Needs Considerations. Management and the board of
directors believe that the mutual to stock conversion through the Subscription
and Direct Community Offering process is in the best interests of the various
communities that the Bank serves because following the Conversion it is
anticipated that a significant portion of the Common Stock will be owned by
local residents desiring to share in the ownership
6
<PAGE>
of a local community financial institution. Because the Bank will have a higher
level of capital after the Conversion, it is also believed that local
stockholders, along with all stockholders, may share in the Bank's future
profitability through possible regular cash dividends or, if deemed prudent by
management and the board of directors, the possibility of payment of periodic
special dividends. See "Dividends." Furthermore, should the price of the Common
Stock increase following the Conversion, recognizing the chance that the price
could decline or remain the same, stockholders will share in the success of the
local institution through capital appreciation.
The Bank has endeavored to be a good corporate and community citizen
through the years. Community investment and involvement have been a large part
of the Bank's history and tradition and a key reason for its success. Programs
such as the first-time homebuyer seminars and loans to provide housing for low
and moderate income borrowers have been a recent emphasis and have helped the
Bank earn the highest possible Community Reinvestment Act ("CRA") performance
rating of "Outstanding."
The Bank looks forward to continuing its community investment by
offering services such as Savings Bonds, the "Save for America" program -- a
banking program for elementary school students, the student-operated branch at
Medford High School -- one of the first such programs in the state, and the
"School-Link" program -- after-school program designed to promote interaction
between the students, schools, and students' families, all of which will
continue to benefit the children of the Bank's community.
In an effort to further assure that it meets the lending needs of its
communities, the Bank participates in a CRA bank consortium in cooperation with
six other local banks. The consortium meets on CRA issues to offer more
effective CRA support and improve CRA performance in their communities through
home buying seminars, offering credit counseling programs and programs to help
low-income homeowners with the repair and rehabilitation of their homes and
neighborhoods.
Remaining a good corporate citizen is an essential responsibility of
any community financial institution, and the Bank will continue to pursue new
avenues to assist the communities it serves. However, playing such a role can
also be a very costly proposition for a small institution, which is subject to
increasing competitive pressures and economic uncertainty. The Bank's board of
directors and management feel that in times of rising interest rates or economic
difficulties, the Bank will be in a better position to continue and build its
community support efforts due to the capital cushion provided through funds
received in the Conversion.
Because management will focus its Conversion stock marketing efforts
on the community it serves, the Bank anticipates that a significant portion of
the shares offered will be purchased by local residents and businesses. As a
result, it is hoped that these local stockholders will take an active role in
suggesting additional ways in which the Bank could better support community
needs.
USE OF PROCEEDS
An amount equal to 50% of the net proceeds from the sale of the Common
Stock ($8.6 million at the midpoint of the Current Valuation Range) will be
added to the general funds of the Bank and used for general corporate purposes,
including the origination of loans, funding the construction and/or acquisition
costs of establishing new branch locations, enhancing the Bank's liquidity
ratios and enhancing future access to capital markets. The balance of the funds
will be retained as the Company's initial capitalization, with a portion of
those funds being loaned to the ESOP to fund its purchase of Common Stock in the
Offerings or, if necessary, to purchase shares of Common Stock through open-
market purchases following completion of the Offerings. The Company may use the
funds it retains to support future expansion of operations or diversification
into other banking-related businesses and for other business or investment
purposes, although management has no current plans regarding such activities.
Subject to applicable limitations, the Company may also use available funds to
repurchase shares of Common Stock and for the payment of dividends. It is
expected that in the interim, all or part of the net proceeds will be invested
in U.S. Government and Agency securities and other short-term investments and
used to reduce FHLB borrowings.
7
<PAGE>
The Bank has structured an array of commercial services administered
and run by the Bank's commercial loan department which are designed to give
business owners borrowing opportunities for modernization, inventory, equipment,
construction, consolidation, real estate, working capital, vehicle purchases and
the refinancing of existing corporate debt. In the past two years, the Bank has
made a major commitment to small business commercial lending. The Bank has
worked to develop a niche of making commercial loans to companies which have
from $500,000 to $15 million in sales and has recently become an approved lender
of the Small Business Administration. The Bank has expanded its commercial
lending department with the addition of two senior officers with considerable
commercial lending expertise and has developed a support staff to run the
commercial loan department. Conversion proceeds are expected to be deployed to
fund the Bank's traditional one- to four-family residential lending, as well as
the expanded commercial lending activities.
Although the Bank opened a new office at 201 Salem Street in December
1995, which has been successful, especially on the commercial lending front, the
Bank's lending and deposit gathering activities are limited by the fact that it
currently operates from only three full service locations and one student-run
educational branch located at Medford High School. Accordingly, the Bank is
pursuing establishing one or more other branch locations either de novo, or by
purchasing an existing deposit base and/or location. The Bank has performed
feasibility studies of certain locations, and is considering a plan to establish
a new branch at one of these locations. Although there can be no assurance that
the Bank's branching efforts will be successful, the Bank expects to apply a
portion of the Conversion proceeds to fund the construction and/or acquisition
of one or more additional branch locations. Expansion beyond four offices will
facilitate expanded services and increased loan originations within the Bank's
existing underwriting standards.
The total number of shares of the Common Stock to be issued in the
Conversion cannot be stated with certainty at this time, because it will depend
upon the estimated pro forma market value of the Common Stock at the time of
sale. See "The Conversion -- Stock Pricing and Number of Shares to be Issued."
However, the net proceeds to the Company would be approximately $17,257,000
based upon the assumptions that (i) 2,050,000 shares of Common Stock are sold at
a purchase price per share of $10.00 for an aggregate of $20,500,000 (the
midpoint of the Current Valuation Range), (ii) the Conversion expenses are
$782,780 in the aggregate and (iii) ESOP and Restricted Stock Plan purchases
are $1,640,000 and $820,000, respectively.
THE ACTUAL NET PROCEEDS MAY BE MORE OR LESS THAN THE ESTIMATED AMOUNT
BECAUSE THE TOTAL PROCEEDS FROM THE SALE OF THE COMMON STOCK MAY BE
SIGNIFICANTLY MORE OR LESS THAN THE MIDPOINT OF THE CURRENT VALUATION RANGE AND
BECAUSE ACTUAL CONVERSION EXPENSES MAY BE MORE OR LESS THAN THOSE CURRENTLY
EXPECTED. The following table indicates the total gross proceeds, estimated
Conversion expenses and estimated net proceeds, assuming the Common Stock is
sold at the minimum, midpoint and maximum of the Current Valuation Range, and at
the Super-Maximum (which is 15% above the maximum of the Current Valuation Range
and is the highest amount of Common Stock that may be sold without further
solicitation of subscribers).
<TABLE>
<CAPTION>
SUPER
MINIMUM OF MIDPOINT OF MAXIMUM OF MAXIMUM OF
1,742,500 SHARES 2,050,000 SHARES 2,357,500 SHARES 2,711,125 SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
----------------- ----------------- ----------------- -----------------
(In thousands)
<S> <C> <C> <C> <C>
Gross proceeds................. $17,425 $20,500 $23,575 $27,111
Estimated conversion expenses.. (715) (783) (851) (929)
Less: ESOP Stock Purchases..... (1,394) (1,640) (1,886) (2,169)
Less: Restricted Stock Plan (697) (820) (943) (1,084)
Purchases.................. ------- ------- ------- -------
Estimated net proceeds......... $14,619 $17,257 $19,895 $22,929
======= ======= ======= =======
</TABLE>
8
<PAGE>
MARKET FOR COMMON STOCK
The Bank, as a mutual co-operative bank, has never issued capital
stock and consequently there is no established market for the Common Stock at
this time. Accordingly, there can be no assurance that an active public trading
market for the Company's Common Stock will develop or be maintained in the
foreseeable future. However, Trident Securities has agreed to act as a market
maker for the Company's Common Stock following consummation of the Conversion
and the Company has applied to list the Common Stock on the Nasdaq National
Market under the symbol "MYST." There can be no assurance, however, that the
Company will meet the Nasdaq National Market listing requirements. Accordingly,
purchasers of Common Stock should have a long-term investment intent and
recognize that the absence of an active and liquid trading market may make it
difficult to sell the Common Stock, and may have an adverse effect on the price.
9
<PAGE>
SHARES TO BE PURCHASED BY MANAGEMENT
PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth, for each director of the Bank, for the
executive officers of the Bank as a group and for all directors and officers as
a group (including their associates) certain information as to the number of
shares of Common Stock which they have advised the Bank that they intend to
purchase. For purposes of the following table, it has been assumed that
2,050,000 shares of Common Stock will be offered at $10.00 per share, the
midpoint of the Current Valuation Range (see "The Conversion--Stock Pricing and
Number of Shares to be Issued") and that sufficient shares will be available to
satisfy subscriptions in all categories.
<TABLE>
<CAPTION>
NAME TOTAL
- ---- SHARES OF AGGREGATE PURCHASE
COMMON TOTAL PRICE OF
STOCK PERCENTAGE PROPOSED PURCHASES
--------- ----------- ------------------
<S> <C> <C> <C>
Julie Bernardin 1,000 0.05% $ 10,000
John A. Hackett 5,000 0.24% 50,000
Richard M. Kazanjian 20,000 0.98% 200,000
John J. McGlynn 9,000 0.44% 90,000
Dennis Raimo 2,000 0.10% 20,000
Robert B. Risman 10,000 0.49% 100,000
Lorraine P. Silva 10,000 0.49% 100,000
Robert H. Surabian 60,000 2.92% 600,000
All other executive officers 6,000 0.29% 60,000
(4 persons) as a group............. ------- ---- ----------
Total shares to be purchased by 123,000 6.00% $1,230,000
directors and executive officers.. ======= ==== ==========
</TABLE>
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization, including deposits, of
the Bank as of June 30, 1997 and the pro forma capitalization of the Company as
of that date after giving effect to the sale of the Common Stock in the
Conversion, based upon the assumptions that the shares of the Common Stock are
sold at the minimum, midpoint, maximum and super-maximum of the Current
Valuation Range, and that the expenses of the Conversion are as set forth under
"Use of Proceeds." Any change in the Current Valuation Range would require the
approval of the Commissioner. Purchasers will be given the right to change or
cancel their orders in the event that the aggregate purchase price is below
$17,425,000 or more than $27,111,250 (i.e., more than 15% above the maximum of
the Current Valuation Range of $23,575,000.) A MATERIAL CHANGE IN THE NUMBER OF
SHARES TO BE ISSUED IN THE CONVERSION MAY MATERIALLY AFFECT SUCH PRO FORMA
CAPITALIZATION. SEE "USE OF PROCEEDS" AND "THE CONVERSION-- STOCK PRICING AND
NUMBER OF SHARES TO BE ISSUED."
<TABLE>
<CAPTION>
PRO FORMA CAPITALIZATION OF
THE COMPANY BASED ON THE SALE OF
---------------------------------------------------------------------------
CAPITALIZATION OF THE 1,742,500 2,050,000 2,357,500 2,711,125
BANK AT SHARES SHARES SHARES SHARES AT
JUNE 30, 1997 AT MINIMUM AT MIDPOINT AT MAXIMUM SUPER-MAXIMUM
-------------- -------------- -------------- ------------ -------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits/(1)/.............. $129,303 $ 129,303 $ 129,303 $ 129,303 $ 129,303
FHLB advances.............. 7,532 7,532 7,532 7,532 7,532
-------- ---------- ---------- ---------- ----------
Total deposits and borrowed $136,835 $ 136,835 $ 136,835 $ 136,835 $ 136,835
funds..................... ======== ========== ========== ========== ==========
Stockholders' equity:
Preferred stock, $0.01
par
value; authorized -
1,000,000
shares; assumed
outstanding -
none..................... $ -- $ -- $ -- $ -- $ --
Common Stock, $0.01 par
value; authorized -
5,000,000
shares; shares to be
outstanding - as shown
in column heading/(2)/. -- 17 21 24 27
Additional paid-in
capital/(3)/.............. -- 16,693 19,696 22,700 26,155
Retained earnings/(5)/..... 11,940 11,940 11,940 11,940 11,940
Less:
Common Stock to be
acquired
by ESOP/(4)/............ --- (1,394) (1,640) (1,886) (2,169)
Common Stock acquired
by Restricted Stock
Plan/(6)/.............. --- (697) (820) (943) (1,084)
-------- ---------- ---------- ---------- ----------
Total stockholders'
equity................. $ 11,940 $ 26,559 $ 29,197 $ 31,835 $ 34,869
======== ========== ========== ========== ==========
Total capitalization $148,775 $ 163,394 $ 166,032 $ 168,670 $ 171,704
======== ========== ========== ========== ==========
</TABLE>
(1) Withdrawals from deposit accounts for the purchase of the Common Stock
have not been reflected in these adjustments. Any withdrawals will
reduce pro forma capitalization by the amount of such withdrawals.
(2) The number of shares of Common Stock to be issued in the Conversion
will be determined on the basis of the final appraisal and may be
increased or decreased. See "The Conversion--Stock Pricing and Number
of Shares to be Issued."
(3) Based upon the estimated net proceeds from the sale of Common Stock
less the par value of shares sold. Estimated expenses are $714,884,
$782,780, $850,676 and $928,756, respectively. See "Use of Proceeds."
(4) Assumes that 8% of the Common Stock will be acquired by the ESOP with
funds borrowed by the ESOP from the Company. The Bank intends to make
annual contributions to the ESOP over a ten-year period in an amount at
least equal to the principal and interest requirement (which interest
rate shall be at the prime rate) of the debt. See "Management of the
Company -- Certain Benefit Plans and Agreements -- Employee Stock
Ownership Plan and Trust" for additional information.
(5) Includes net unrealized gain on securities available for sale, net of
tax effects. The surplus of the Bank will be substantially restricted
after the Conversion. See "The Conversion-- Effect of Conversion to
Stock Form on Depositors and Borrowers of the Bank - Liquidation
Account."
(6) The Company intends to adopt the Restricted Stock Plan and submit such
plan to stockholders at a special or annual meeting of stockholders to
be held not earlier than one year after the completion of the
Conversion. If the Restricted Stock Plan is approved by stockholders,
the Company intends to contribute sufficient funds to the trust created
under the Restricted Stock Plan to enable the trust to purchase a
number of shares of Common Stock equal to 4% of the Common Stock sold
in the Offerings. The shares are reflected as a reduction of
stockholders' equity. The issuance of authorized but unissued shares of
Common Stock pursuant to the Restricted Stock Plan in the amount of 4%
of the Conversion Stock would dilute the voting interests of existing
stockholders by approximately 3.7%. See "Pro Forma Data" and
"Management of the Bank - Future Stock Benefit Plans - Restricted Stock
Plan."
11
<PAGE>
PRO FORMA DATA
The following table sets forth the actual and, after giving effect to
the Conversion for the period and at the date indicated, pro forma income from
operations, stockholders' equity and other data of the Bank prior to the
Conversion and of the Company following the Conversion. Pro forma income and
related data have been calculated for the year ended June 30, 1997 as if the
Common Stock to be issued in the Conversion had been sold at the beginning of
the respective periods, and the estimated net proceeds had been invested at
5.82% at the beginning of the respective periods. The foregoing yield
approximates the yield on the one-year U.S. Treasury bill at June 30, 1997. The
pro forma after-tax yield is assumed to be 3.43% for the periods, based on the
current effective tax rate of 41%. Historical and pro forma per share amounts
have been calculated by dividing historical and pro forma amounts by the
indicated number of shares of Common Stock. No effect has been given in the pro
forma stockholders' equity calculations for the assumed earnings on the net
proceeds. The pro forma income and related data set forth below reflect accruals
to be made by the Bank with regard to the ESOP. See "Management of the Bank--
Certain Benefit Plans and Agreements." Both fixed Conversion expenses of
$313,500 and the Conversion expenses of Trident Securities have been subtracted
when figuring net proceeds. Trident Securities' expenses are assumed to equal
to 2.4% of the Common Stock sold in the Offerings less shares purchased by the
ESOP (assumed to be 8% of the Common Stock) and by directors and officers of the
Bank (see "Shares to Be Purchased by Management Pursuant to Subscription
Rights") plus an estimated $44,000 in fixed expenses.
THE PRO FORMA NET INCOME AMOUNTS DERIVED FROM THE ASSUMPTIONS SET FORTH
HEREIN SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL RESULTS OF OPERATIONS
OF THE BANK THAT WOULD HAVE BEEN ATTAINED FOR THE YEAR ENDED JUNE 30, 1997, IF
THE CONVERSION HAD BEEN ACTUALLY CONSUMMATED AT THE BEGINNING OF SUCH PERIOD,
AND THE ASSUMPTIONS REGARDING INVESTMENT YIELDS SHOULD NOT BE CONSIDERED
INDICATIVE OF THE ACTUAL YIELDS EXPECTED TO BE ACHIEVED DURING ANY FUTURE
PERIOD.
THE STOCKHOLDERS' EQUITY AND RELATED DATA PRESENTED HEREIN ARE NOT
INTENDED TO REPRESENT THE FAIR MARKET VALUE OF THE COMMON STOCK, OR THE CURRENT
VALUE OF ASSETS OR LIABILITIES, OR THE AMOUNTS, IF ANY, THAT WOULD BE AVAILABLE
FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF LIQUIDATION. FOR ADDITIONAL
INFORMATION REGARDING THE LIQUIDATION ACCOUNT, SEE "THE CONVERSION-- EFFECTS OF
CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE BANK--LIQUIDATION
ACCOUNT." SUCH PRO FORMA DATA MAY BE MATERIALLY AFFECTED BY A CHANGE IN THE
NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION AND BY OTHER FACTORS. SEE "THE
CONVERSION--STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED."
12
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED JUNE 30, 1997
-------------------------------------------------------
MINIMUM MID-POINT MAXIMUM SUPER-MAXIMUM
1,742,500 2,050,000 2,357,500 2,711,125
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE(2)
---------- ---------- ---------- -------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds(1)........................................... $ 17,425 $ 20,500 $ 23,575 $ 27,111
Less: Total expenses........................................ (715) (783) (851) (929)
---------- ---------- ---------- ----------
Estimated net proceeds(3)................................... 16,710 19,717 22,724 26,182
Less: ESOP Stock Purchases(4)............................... (1,394) (1,640) (1,886) (2,169)
Less: Restricted Stock Plan purchases(5).................... (697) (820) (943) (1,084)
---------- ---------- ---------- ----------
Estimated net cash proceeds................................ $ 14,619 $ 17,257 $ 19,895 $ 22,929
========== ========== ========== ==========
Consolidated net income:
Historical.................................................. $ 741 $ 741 $ 741 $ 741
Pro forma income on net proceeds............................ 502 593 683 787
Pro forma ESOP adjustment(4)(6)............................. (148) (174) (200) (230)
Pro forma Restricted Stock Plan adjustment(5).............. (82) (97) (111) (128)
---------- ---------- ---------- ----------
Pro forma net income...................................... $ 1,013 $ 1,063 $ 1,113 $ 1,170
========== ========== ========== ==========
Per share net income:
Historical................................................. 0.46 0.39 0.34 0.29
Pro forma income on net proceeds........................... 0.31 0.31 0.31 0.31
Pro forma ESOP adjustment(4)(6)............................ (0.09) (0.09) (0.09) (0.09)
Pro forma Restricted Stock Plan adjustment(5).............. (0.05) (0.05) (0.05) (0.05)
---------- ---------- ---------- ----------
Pro forma net income per share.............................. 0.63 0.56 0.51 0.46
========== ========== ========== ==========
Stockholders' equity:
Historical................................................. $ 11,940 $ 11,940 $ 11,940 11,940
Estimated net proceeds.................................... 16,710 19,717 22,724 26,182
Less: Common Stock acquired by ESOP(4).................... (1,394) (1,640) (1,886) (2,169)
Less: Common Stock acquired by Restricted Stock
Plan(5).................................................. (697) (820) (943) (1,084)
---------- ---------- ---------- ----------
Pro forma stockholders' equity................ $ 26,559 $ 29,197 $ 31,835 $ 34,869
========== ========== ========== ==========
Stockholder's equity per share:
Historical................................................ 6.85 5.82 5.06 4.40
Estimated net proceeds.................................... 9.59 9.62 9.64 9.66
Less: Common Stock acquired by ESOP(4).................... (0.8) (0.8) (0.8) (0.8)
Less: Common Stock acquired by Restricted Stock
Plan(5).................................................. (0.4) (0.4) (0.4) (0.4)
---------- ---------- ---------- -------------
Pro forma Stockholders' equity per share...... 15.24 14.24 13.5 12.86
========== ========== ========== ==========
Pro forma pricing ratios:
Offering price as a percentage of pro forma
stockholders' equity per share................... 65.62% 70.22% 74.07% 77.76%
Offering price as a multiple of pro forma net
earnings per share............................... 15.87x 17.86x 19.61x 21.74x
</TABLE>
- -------------------------
(1) The effect of the liquidation account is not included in these computations.
For additional information concerning the liquidation account, see "The
Conversion--Effect of Conversion to Stock Form on Depositors and Borrowers
of the Bank--Liquidation Account." The amounts shown do not reflect the
federal income tax consequences of the potential restoration to income of
the bad debt reserves for income tax purposes, which would be required in
the event of liquidation.
(2) The Company reserves the right to issue up to a total of 2,711,125 shares at
$10.00 per share, or 15% above the maximum of the Current Valuation Range.
Any increase in the number of shares to be issued which causes the gross
proceeds of the Offerings to exceed $23,575,000 (maximum of the Current
Valuation Range) would be subject to approval of the Commissioner. Unless
otherwise required by the Commissioner, subscribers will not be given the
right to modify their subscriptions unless the aggregate purchase price of
the Common Stock is increased to exceed $27,111,250 (i.e., 15% above the
maximum of the Current Valuation Range.)
(3) Withdrawals from deposit accounts for the purchase of stock have not been
reflected in these adjustments. Management estimates that approximately 20%
of all subscription orders may utilize funds currently on deposit at the
Bank. See "Use of Proceeds."
(4) Assumes 8% of the shares to be sold in the Conversion are purchased by the
ESOP under all circumstances, and that the funds used to purchase such
shares are borrowed from the Company. The approximate amount expected to be
borrowed by the ESOP is reflected in this table as a reduction of capital.
Although repayment of such debt will be secured solely by the shares
purchased by the ESOP, the Bank expects to make discretionary contributions
to the ESOP in an amount at least equal to the principal and interest
payments on the ESOP debt. Pro forma net income has been adjusted to give
effect to such contributions, based upon a fully amortizing debt with a ten-
year term. Since the Company will be providing the ESOP loan, only
principal payments on the ESOP loan are reflected as employee compensation
and benefits expense. The provisions of SOP 93-6 have been applied for
shares to be acquired by the ESOP and for purposes of computing earnings per
share. See "Management of the Bank -- Certain Benefit Plans and Agreements
-- Employee Stock Ownership Plan and Trust."
(5) Assumes a number of issued and outstanding shares of Common Stock equal to
4% of the Common Stock to be sold in the Conversion will be purchased by the
Restricted Stock Plan. The dollar amount of the Common Stock possibly to be
purchased by the Restricted Stock Plan is based on the price per share in
the Conversion and represents unearned compensation and is reflected as a
reduction of capital. Such amount does not reflect possible increases or
decreases in the value of such stock relative to the price per share in the
Conversion. As the Bank accrues compensation expenses to reflect the
vesting of such shares pursuant to the Restricted Stock Plan, the charge
against capital will be reduced accordingly. In the event the shares issued
under the Restricted Stock Plan consist of shares of Common Stock newly
issued at the price per share in the Conversion, the per share financial
condition and results of operations of the Company would be proportionately
reduced and to that extent the interests of existing stockholders would be
diluted by approximately 4%. See "Management of the Bank -- Certain
13
<PAGE>
Benefit Plans and Agreements" and, regarding possible dilution of
proportionate voting rights and book value and income per share, "Special
Considerations -- Possible Dilutive Effect of Future Stock Benefit Plans."
(6) The Bank intends to record compensation expense related to the ESOP in
accordance with SOP 93-6. As a result, to the extent the value of the
Common Stock appreciates over time, compensation expense related to the ESOP
will increase. SOP 93-6 also changes the earnings per share and
stockholder's equity per share computations for leveraged ESOPs to include
as outstanding only shares that have been committed to be released to
participants. For purposes of the preceding table, it was assumed that the
number of ESOP shares committed to be released at June 30, 1997 was equal to
the percentage of principal repaid in the ESOP loan during the first year.
14
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of Medford Co-
operative Bank for each of the fiscal years ended June 30, 1997, 1996 and 1995
have been audited by Wolf & Company, P.C., independent certified public
accountants, whose report thereon appears elsewhere herein. The Consolidated
Statements of Income should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations included elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans....................................... $8,397 $7,115 $6,323
Interest and dividends on investment securities.................. 1,208 1,364 1,358
Interest on federal funds sold................................... 294 449 484
------ ------ ------
Total interest and dividend income........................... 9,899 8,928 8,165
------ ------ ------
INTEREST EXPENSE:
Deposits......................................................... 4,700 4,569 3,885
FHLB borrowings.................................................. 211 -- --
------ ------ ------
Total interest expense....................................... 4,911 4,569 3,885
------ ------ ------
Net interest income................................................ 4,988 4,359 4,280
Provision for loan losses.......................................... 272 100 100
------ ------ ------
Net interest income, after provision for loan losses............... 4,716 4,259 4,180
------ ------ ------
OTHER INCOME (CHARGES):
Customer service fees............................................ 536 512 410
Loan servicing and other loan fees............................... 56 52 59
Gain on sale of mortgage loans................................... 8 8 6
Write-down of mortgage loans held for sale....................... -- (41) --
Gain on sale of securities available for sale, net............... 168 4 --
Rental income, net of expenses................................... 29 44 45
Co-operative Central Bank Share Insurance Fund special dividend.. 44 44 --
Miscellaneous.................................................... 41 35 16
------ ------ ------
Total other income........................................... 882 658 536
------ ------ ------
OPERATING EXPENSES:
Salaries and employee benefits................................... 2,734 2,486 2,113
Occupancy and equipment expenses................................. 412 321 247
Data processing expenses......................................... 207 179 175
FDIC insurance expense........................................... 8 7 251
Foreclosed real estate, net...................................... -- (5) 77
Other general and administrative expenses........................ 969 890 713
------ ------ ------
Total operating expenses..................................... 4,330 3,878 3,576
------ ------ ------
Income before income taxes......................................... 1,268 1,039 1,140
Provision for income taxes......................................... 527 440 480
------ ------ ------
Net income......................................................... $ 741 $ 599 $ 660
====== ====== ======
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The business of the Bank consists of attracting deposits from the
general public and using these funds to originate various types of loans
primarily in eastern Middlesex County, Massachusetts, including mortgage loans
secured by one- to four-family residences, commercial loans secured by general
business assets, commercial real estate loans secured by commercial property,
and to invest in U.S. Government and Federal Agency and other securities. To a
lesser extent, the Bank engages in various forms of consumer and home equity
lending. The Bank's profitability depends primarily on its net interest income,
which is the difference between the interest income it earns on its loans and
investment portfolio and its cost of funds, which consists mainly of interest
paid on deposits and on borrowings from the FHLB. Net interest income is
affected by the relative amounts of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on these balances. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.
The Bank's profitability is also affected by the level of other
(noninterest) income and operating expenses. Other income consists primarily of
service fees, loan servicing and other loan fees and gains on sales of
investment securities. Operating expenses consist of salaries and benefits,
occupancy related expenses, and other general operating expenses.
The operations of the Bank, and banking institutions in general, are
significantly influenced by general economic conditions and related monetary and
fiscal policies of financial institution's regulatory agencies. Deposit flows
and the cost of funds are influenced by interest rates on competing investments
and general market rates of interest. Lending activities are affected by the
demand for financing real estate and other types of loans, which in turn are
affected by the interest rates at which such financing may be offered and other
factors affecting loan demand and the availability of funds.
BUSINESS STRATEGY
The Bank's business strategy is to operate as a well-capitalized,
profitable and independent community bank dedicated to financing home ownership,
small business and consumer needs in its market area and providing quality
service to its customers. The Bank has implemented this strategy by: (i)
monitoring the needs of customers and providing quality service; (ii)
emphasizing consumer-oriented banking by originating residential mortgage loans
and consumer loans, and by offering various deposit accounts and other financial
services and products; (iii) recently increasing its emphasis on commercial
banking and lending by originating loans for small businesses and providing
greater services in its commercial and commercial real estate loan department;
(iv) maintaining high asset quality through conservative underwriting; and (v)
producing stable earnings.
ASSET/LIABILITY MANAGEMENT
A principal operating objective of the Bank is to produce stable
earnings by achieving a favorable interest rate spread that can be sustained
during fluctuations in prevailing interest rates. Since the Bank's principal
interest-earning assets have longer terms to maturity than its primary source of
funds, i.e., deposit liabilities, increases in general interest rates will
generally result in an increase in the Bank's cost of funds before the yield on
its asset portfolio adjusts upward. The Bank has sought to reduce its exposure
to adverse changes in interest rates by attempting to achieve a closer match
between the periods in which its
16
<PAGE>
interest-bearing liabilities and interest-earning assets can be expected to
reprice through the origination of adjustable-rate mortgages and loans with
shorter terms and the purchase of other shorter term interest-earning assets.
The term "interest rate sensitivity" refers to those assets and
liabilities which mature and reprice periodically in response to fluctuations in
market rates and yields. As noted above, one of the principal goals of the
Bank's asset/liability program is to maintain and match the interest rate
sensitivity characteristics of the asset and liability portfolios.
In order to properly manage interest rate risk, the Bank's board of
directors has established an Asset/Liability Management Committee ("ALCO") made
up of members of management to monitor the difference between the Bank's
maturing and repricing assets and liabilities and to develop and implement
strategies to decrease the "negative gap" between the two. The primary
responsibilities of the committee are to assess the Bank's asset/liability mix,
recommend strategies to the Board that will enhance income while managing the
Bank's vulnerability to changes in interest rates and report to the Board the
results of the strategies used.
Since the early 1980s, the Bank has stressed the origination of
adjustable-rate residential mortgage loans and adjustable-rate home equity
loans. The Bank regularly sells fixed rate loans with terms in excess of 15
years. Since 1995, the Bank has also emphasized commercial loans with short-
term maturities or repricing intervals as well as commercial real estate
mortgages with short-term repricing intervals. In addition, the Bank has used
borrowings from the FHLB to match-fund the maturity or repricing interval of
several larger commercial real estate mortgages. At June 30, 1997, the Bank's
loan portfolio included $58.4 million of adjustable-rate one-to four-family
mortgage loans, $16.9 million of adjustable-rate commercial real estate loans,
$3.7 million of adjustable-rate or short-term commercial loans, and $1.6 million
of adjustable-rate home equity loans. Together, these loans represent 70.4% of
the Bank's net loans at June 30, 1997. See "Business-Lending Activities."
In the future, in managing its interest rate sensitivity, the Bank
intends to continue to stress the origination of adjustable-rate mortgages and
loans with shorter maturities and the maintenance of a consistent level of
short-term securities. See "Use of Proceeds."
INTEREST RATE SENSITIVITY ANALYSIS
The matching of assets and liabilities may be analyzed by examining
the extent to which such assets and liabilities are "interest rate sensitive"
and by monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that period. The interest rate sensitivity gap
is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and the amount of interest-
bearing liabilities maturing or repricing within that same time period. A gap
is considered positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate sensitive liabilities, and is considered negative
when the amount of interest rate sensitive liabilities exceeds the amount of
interest rate sensitive assets. Generally, during a period of rising interest
rates, a negative gap would adversely affect net interest income while a
positive gap would result in an increase in net interest income, while
conversely, during a period of falling interest rates, a negative gap would
result in an increase in net interest income and a positive gap would negatively
affect net interest income.
The following table sets forth the amounts of interest-earning assets
and interest-bearing liabilities outstanding at June 30, 1997 which are expected
to mature or reprice in each of the time periods shown. In the table,
investment securities held to maturity are presented at amortized cost; other
interest-earning assets include marketable equity securities, FHLB stock, due
from Co-operative Central Bank, federal
17
<PAGE>
funds sold and other short-term investments; fixed rate one-to four-family loans
are assumed to have an average life of 12 years; adjustable rate one-to four-
family loans, commercial real estate loans, and commercial loans do not include
any amortization or prepayment amounts. Money market accounts, NOW accounts,
regular and other deposits are allocated in accordance with FDIC guidelines for
interest rate risk management.
<TABLE>
<CAPTION>
AT JUNE 30, 1997
--------------------------------------------------------
OVER ONE OVER
THROUGH THREE OVER
ONE YEAR THREE THROUGH SEVEN
OR LESS YEARS SEVEN YEARS YEARS TOTAL
------- -------- ----------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment securities held to maturity........ $ 9,493 $ 8,011 $ -- $ -- $ 17,504
Other interest-earning assets................. 7,618 -- -- -- 7,618
Adjustable-rate one- to four- family loans.... 13,841 12,940 31,668 -- 58,449
Fixed rate one- to four- family loans......... 2,792 5,583 10,585 12,794 31,754
Commercial real estate loans.................. 3,320 10,264 3,097 1,166 17,847
Commercial loans.............................. 2,290 486 901 -- 3,677
Home equity loans............................. 1,564 -- -- -- 1,564
Consumer loans................................ 64 482 312 797 1,655
--------- -------- ------- --------- --------
Total interest-earning assets................ 40,982 37,766 46,563 14,757 140,068
--------- -------- ------- --------- --------
INTEREST-BEARING LIABILITIES:
Certificates of deposit....................... 48,316 10,475 344 -- 59,135
Money market accounts......................... 6,489 -- -- -- 6,489
NOW accounts.................................. 1,498 2,996 5,992 7,489 17,975
Regular and other deposits.................... 3,400 6,800 13,600 16,994 40,794
FHLB borrowings............................... 2,125 2,355 2,287 765 7,532
--------- -------- ------- --------- --------
Total interest-bearing liabilities........... 61,828 22,626 22,223 25,248 131,925
--------- -------- ------- --------- --------
Interest rate sensitivity gap............................ ($20,846) $ 15,140 $24,340 ($10,491) $ 8,143
========= ======== ======= ========= ========
Cumulative interest rate sensitivity gap................. ($20,846) ($5,706) $18,634 $ 8,143 $ 8,143
========= ======== ======= ========= ========
Cumulative ratio of interest-earning assets to
interest-bearing liabilities............................ 66.3% 93.2% 117.5% 106.2% 106.2%
Ratio of cumulative interest rate sensitivity
gap to total assets..................................... (13.9)% (3.8)% 12.5% 5.4% 5.4%
</TABLE>
Management believes the current one-year gap of negative 13.9%
presents a risk to the net interest income should a sustained increase occur in
the current level of interest rates. If interest rates increase, the Bank's
negative one-year gap should cause the net interest margin to decrease. A
conservative interest rate risk-gap policy provides a stable net interest income
margin. Accordingly, management emphasizes a structured schedule of investment
securities with greater emphasis on maturities and repricings within one year.
It is possible that the actual interest rate sensitivity of the Bank's assets
and liabilities could vary significantly from the information set forth in the
table due to market and other factors.
Certain shortcomings are inherent in the method of analysis presented
above. Although certain assets and liabilities may have similar maturity or
periods of repricing, they may react in different degrees to changes in the
market interest rates. The interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
rates on other types of assets and liabilities may lag behind changes in market
interest rates. Certain assets, such as adjustable-rate mortgages, generally
have features which restrict changes in
18
<PAGE>
interest rates on a short-term basis and over the life of the asset. In the
event of a change in interest rates, prepayments and early withdrawal levels
would likely deviate significantly from those assumed in calculating the table.
Additionally, an interest rate increase may make it more difficult for borrowers
to service their debt, thereby increasing the credit risk in the Bank's loan
portfolio.
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
The following tables set forth certain information relating to the
Bank's average balance sheet and reflect the average yield on assets and average
cost of liabilities for the periods indicated and the average yields earned and
rates paid for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average monthly balances of assets and
liabilities, respectively, for the periods presented. Average balances are
derived from daily balances. Loans on nonaccrual status are included in the
average balances of loans shown in the table. Interest earned on loan
portfolios is net of reserves for uncollected interest. The investment
securities in the following table are presented at amortized cost.
19
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------------------------------------------------------------------
1997 1996 1995
--------------------------- --------------------------- ---------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED YIELD/ AVERAGE EARNED YIELD/ AVERAGE EARNED YIELD/
BALANCE OR PAID RATE BALANCE OR PAID RATE BALANCE OR PAID RATE
------- -------- -------- ------- -------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS:
Total loans, net........................ $103,223 $8,397 8.13% $ 86,651 $7,115 8.21% $ 78,398 $6,323 8.07%
Investments......................... 20,686 1,208 5.84% 23,306 1,364 5.85% 26,452 1,358 5.13%
Other earning assets/(1)/................ 5,896 294 4.99% 8,836 449 5.08% 9,762 484 4.96%
-------- ------ -------- ------ -------- ------
Total interest-earning assets....... 129,805 9,899 7.63% 118,793 8,928 7.52% 114,612 8,165 7.12%
-------- ------ -------- ------ -------- ------
Cash and due from banks.............. 2,188 1,627 1,089
Other assets......................... 5,638 5,445 4,904
-------- -------- --------
Total assets........................ $137,631 $125,865 $120,605
======== ======== ========
INTEREST-BEARING LIABILITIES:
Regular and other deposits.......... $ 40,419 $1,114 2.76% $ 39,818 $1,121 2.82% $ 44,451 $1,304 2.93%
Now accounts........................ 15,710 281 1.79% 14,681 286 1.95% 14,175 313 2.21%
Money market deposits............... 6,070 157 2.59% 6,154 157 2.55% 6,557 161 2.46%
Certificates of deposit............. 57,223 3,148 `5.50% 52,340 3,005 44,216 2,107
-------- ------ -------- ------ -------- ------
Total interest-bearing deposits........ 119,422 4,700 3.94% 112,993 4,569 4.04% 109,399 3,885 3.55%
FHLB borrowings 3,289 211 6.42% -- -- -- -- -- --
-------- ------ -------- ------ -------- ------
Total interest-bearing liabilities........ 122,711 4,911 4.00% 112,993 4,569 4.04% 109,399 3,885 3.55%
------ ------ ------
Demand deposit accounts.................. 3,056 1,756 721
Other liabilities.................... 277 288 268
-------- -------- --------
Total liabilities................... 126,044 115,037 110,388
Surplus................................... 11,587 10,828 10,217
-------- -------- --------
Total liabilities and surplus......... $137,631 $125,865 $120,605
======== ======== ========
Net interest income....................... $4,988 $4,359 $4,280
====== ====== ======
Interest rate spread...................... 3.63% 3.48% 3.57%
Net interest margin....................... 3.84% 3.67% 3.73%
Interest-earning assets/interest-bearing 1.06x 1.05x 1.05x
liabilities..............................
- -----------------
</TABLE>
(1) At June 30, 1997, other earning assets included Bank Investment Fund
Liquidity Fund, FHLB overnight deposits, federal funds sold, the Co-
operative Central Reserve Fund and FHLB Ideal Way Account.
20
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes
in interest income and interest expense of the Bank for the periods indicated.
For each category of interest-earning asset and interest-bearing liability,
information is provided on changes attributable to: (i) changes in volume
(changes in volume multiplied by old rate); and (ii) changes in rates (change in
rate multiplied by old volume). Changes in rate-volume (changes in rate
multiplied by the changes in volume) are allocated between changes in rate and
changes in volume.
<TABLE>
<CAPTION>
-------------------------------------------------------------
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30,
1997 VS 1996 1996 VS 1995
INCREASE (DECREASE) INCREASE (DECREASE)
-------------------------------------------------------------
RATE VOLUME TOTAL RATE VOLUME TOTAL
----------- ------ ----- ----- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans, net.................. $ (69) $1,351 $1,282 $ 114 $ 678 $792
Investments................. (2) (154) (156) 178 (172) 6
Other earnings assets....... (8) (147) (155) 12 (47) (35)
----- ------ ------ ------ ----- ----
Total.............. (79) 1,050 971 304 459 763
----- ------ ------ ------ ----- ----
INTEREST EXPENSE:
Deposits.................... (119) 250 131 551 133 684
Borrowed funds.............. -- 211 211 -- -- --
----- ------ ------ ------ ----- ----
Total...................... (119) 461 342 551 133 684
----- ------ ------ ------ ----- ----
Change in net interest income.. $ 40 $ 589 $ 629 ($247) $ 326 $ 79
===== ====== ------ ====== ===== ====
</TABLE>
RESULTS OF OPERATIONS
The Bank's operating results depend primarily upon its net interest income,
which is the difference between the interest income earned on its interest-
bearing assets (loans and investment securities), and the interest expense paid
on its interest-bearing liabilities (deposits and FHLB borrowings). Operating
results are also significantly affected by provisions for loan losses, other
income and operating expenses. Each of these factors is significantly affected
not only by the Bank's policies, but, to varying degrees, by general economic
and competitive conditions and by policies of state and federal regulatory
authorities.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND 1996.
The Bank's total assets increased by $18.3 million or 13.9% to $149.7
million at June 30, 1997 from $131.4 million at June 30, 1996. The Bank's asset
growth reflected the increased emphasis on the origination and retention of
residential mortgage loans, commercial real estate loans and commercial loans
during 1997. Net loans were $114.6 million or 76.6% of total assets at June 30,
1997 as compared to $94.8 million or 72.1% of total assets at June 30, 1996,
representing an increase of $19.8 million or 20.9%. The increase in loans was
funded through FHLB borrowings and increased deposits. Investment securities
held by the Bank increased by $2.8 million or 15.3% to $21.3 million in 1997
from $18.5 million in 1996. Total deposits increased by $9.7 million or 8.1% to
$129.3 million at June 30, 1997 from $119.6 million at June 30, 1996. Deposits
21
<PAGE>
increased due to new accounts established at the Bank's new branch opened in
November 1995 as well as increases in commercial deposits resulting from the
Bank's emphasis on expanding its commercial banking services. Total borrowings
were $7.5 million at June 30, 1997 compared to no borrowings at June 30, 1996.
Total surplus increased by $1.0 million or 9.1% to $11.9 million at June 30,
1997 from $10.9 million at June 30, 1996 as a result of net income of $741,000
and an increase in the net unrealized gain on securities available for sale of
$250,000.
COMPARISON OF THE OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1997 AND 1996.
Net Income. The Bank's net income for the year ended June 30, 1997 was
$741,000 as compared to $599,000 for the year ended June 30, 1996. This
$142,000 or 23.7% increase in net income during the period was the result of an
increase of $457,000 in net interest income after provision for loan losses and
an increase of $224,000 in other income, partially offset by an increase of
$452,000 in operating expenses. The Bank's expansion of its lending activities
accounted for the increase in net interest income, while its operating expenses
increased due to the opening of a new branch in November 1995 and the expansion
of its commercial loan and commercial real estate departments during 1997. The
return on average assets for the year ended June 30, 1997 was 0.54% compared to
0.48% for the year ended June 30, 1996.
Interest Income. Total interest and dividend income increased by $971,000
or 10.9% to $9.9 million for the year ended June 30, 1997 from $8.9 million for
the year ended June 30, 1996. The increase in interest income was a result of a
higher level of loan originations and a greater mix of higher yielding
commercial and commercial real estate loans funded by FHLB borrowings and
increased deposits.
Interest Expense. Interest expense increased by $342,000 or 7.5% to $4.9
million for the year ended June 30, 1997 from $4.6 million for the year ended
June 30, 1996. The reason for the increase in interest expense was the increase
in the overall deposit balances as well as the increase in FHLB borrowings.
Net Interest Income. Net interest income for the year ended June 30, 1997
was $5.0 million as compared to $4.4 million for the year ended June 30, 1996.
The $629,000 or 14.4% increase can be attributed to a combination of the
$971,000 increase in interest and dividend income and the $342,000 increase in
interest expense on deposits and FHLB borrowings. The average yield on
interest-earning assets increased 11 basis points to 7.63% for the year ended
June 30, 1997 from 7.52% for the year ended June 30, 1996, while the average
cost of interest-bearing liabilities decreased by 4 basis points to 4.00% for
the year ended June 30, 1997 from 4.04% for the year ended June 30, 1996. As a
result, the net interest spread increased to 3.63% for the year ended June 30,
1997 from 3.48% for the year ended June 30, 1996.
Provision for Loan Losses. The provision for loan losses was $272,000 for
the year ended June 30, 1997 as compared to $100,000 for the year ended June 30,
1996. The provision was increased in part because of the larger number of high-
balance commercial loans. At June 30, 1997, the balance of the allowance for
loan losses was $977,000 or 0.9% of total loans. During the year ended June 30,
1997, $57,000 was charged against the allowance for loan losses while $20,000 in
recoveries was credited to the allowance for loan losses. At June 30, 1996, the
balance of the allowance for loan losses was $742,000 or 0.8% of total loans.
During the year ended June 30, 1996, $138,000 was charged against the allowance
for loan losses while $23,000 in recoveries was credited to the allowance for
loan losses.
Other Income. Non-interest income or other income was $882,000 for the year
ended June 30, 1997 compared to $658,000 for the year ended June 30, 1996. The
$224,000 or 34% increase was primarily the result of a $164,000 increase in gain
on sales of investment securities and a decrease in the writedown of mortgage
loans held for sale of $41,000.
Operating Expenses. Non-interest expense or operating expense increased to
$4.3 million for the year ended June 30, 1997 from $3.9 million for the year
ended June 30, 1996. The increase of $452,000 or 11.7%
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<PAGE>
mainly resulted from an increase of $248,000 in salaries and employee benefits
and an increase of $91,000 in occupancy and equipment expenses, resulting from
the opening of a new branch office in November 1995 and the expansion of the
commercial and commercial real estate loan department. Other general and
administrative expenses increased by $79,000 over the prior year. Annual
operating expenses are also expected to increase in future periods due to the
increased cost of operating as a stock institution. See "Special
Considerations -- Anticipated Low Return on Equity Following Conversion." The
Bank may experience slightly higher deposit insurance premiums due to recent
Congressional action to require all FDIC insured financial institutions to fund
the Financing Corporation ("FICO") bond obligations that financed the resolution
of failed savings institutions. See "Special Considerations - Regulatory
Environment" and "Regulation."
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1996 AND 1995.
The Bank's total assets increased by $6.4 million or 5.1% to $131.4 million
at June 30, 1996, from $125.0 million at June 30, 1995. Net loans were $80.2
million or 64.2% of total assets at June 30, 1995 as compared to $94.8 million
or 72.1% of total assets at June 30, 1996, representing an increase of $14.6
million or 18.1%. The Bank's net loan growth reflects its increased emphasis on
the origination of residential mortgage loans, commercial real estate loans and
commercial loans. Investment securities held by the Bank decreased from $26.5
million in 1995 to $18.5 million in 1996. The proceeds from maturing securities
were in part allocated to fund the increased volume of loan production. Total
deposits increased by $5.8 million or 5.1% from $113.8 million at June 30, 1995
to $119.6 million at June 30, 1996. Total surplus increased by 5.6% to $10.9
million at June 30, 1996 as a result of net income of $599,000 offset by an
increase in the net unrealized loss on securities available for sale of $16,000.
COMPARISON OF THE OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996 AND 1995.
Net Income. The Bank's net income for the year ended June 30, 1996 was
$599,000 as compared to $660,000 for the year ended June 30, 1995. This $61,000
decrease in net income during the period was the result of an increase of
$302,000 of operating expenses, partially offset by an increase of $79,000 in
net interest income after provision for loan losses and an increase of $122,000
in other income. The Bank opened a new branch in November 1995 and expanded its
commercial loan and commercial real estate departments during 1996 resulting in
the increased operating expense. The return on average assets for the year
ended June 30, 1996 was .48% compared to .55% for the year ended June 30, 1995.
Interest Income. Total interest and dividend income increased by $763,000
or 9.3% to $8.9 million for the year ended June 30, 1996 from $8.2 million for
the year ended June 30, 1995. The increase in interest income was in part the
result of loan originations funded by maturing lower yield investment
securities.
Interest Expense. Interest expense increased by $684,000 or 17.6% to $4.6
million for the year ended June 30, 1996 from $3.9 million for the year ended
June 30, 1995. The primary reason for the increase in interest expense was the
increase in the general level of interest rates, driving an increase in the
rollover rates for certificates of deposit, coupled with the increase in the
overall deposit balances.
Net Interest Income. Net interest income for the year ended June 30, 1995
was $4.3 million as compared to $4.4 million for the year ended June 30, 1996,
an increase of 1.8%. The $79,000 increase can be attributed to a combination of
the $763,000 increase in interest and dividend income and the $684,000 increase
in interest expense on deposits. The average yield on interest-earning assets
increased by 40 basis points to 7.52% for the year ended June 30, 1996 from
7.12% for the year ended June 30, 1995, while the average cost on interest-
bearing liabilities increased by 49 basis points to 4.04% for the year ended
June 30, 1996 from 3.55% for the year ended June 30, 1995. As a result, the net
interest spread declined from 3.57% for the year ended June 30, 1995 to 3.48%
for the year ended June 30, 1996.
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<PAGE>
Provision for Loan Losses. The provision for loan losses was $100,000 for
each of the years ended June 30, 1996 and 1995. At June 30, 1996, the balance
of the allowance for loan losses was $742,000 or 0.8% of total loans. During
the year ended June 30, 1996, $138,000 was charged against the allowance for
loan losses while $23,000 in recoveries was credited to the allowance for loan
losses. At June 30, 1995, the balance of the allowance for loan losses was
$757,000 or 0.9% of total loans. During the year ended June 30, 1995, $119,000
was charged against allowance for loan losses while $27,000 in recoveries was
credited to the allowance for loan losses.
Other Income. Other income was $658,000 for the year ended June 30, 1996 as
compared to $536,000 for the year ended June 30, 1995. The $122,000 increase
was primarily the result of a $102,000 increase in customer services fees, as
the Bank increased fees charged for certain services while also increasing the
number of deposit accounts on which fees could be charged. The Bank also
received a special dividend of $44,000 from the Co-operative Central Bank during
the year ended June 30, 1996. Offsetting the increases in other income for the
year ended June 30, 1996 was a writedown of $41,000 on mortgage loans held for
sale.
Operating Expenses. Operating expenses increased to $3.9 million for the
year ended June 30, 1996 from $3.6 million for the year ended June 30, 1995 The
increase of $302,000 or 8.4% mainly resulted from an increase of $373,000 in
salaries and employee benefits and an increase of $74,000 in occupancy and
equipment expenses, resulting from the opening of a new branch office in
November 1995 and the expansion of the commercial and commercial real estate
loan department. Other general and administrative expenses increased by
$177,000 over the prior year. These increases were offset by a $244,000
decrease in FDIC insurance expense and an $82,000 decrease in losses from
foreclosed real estate.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds consist of deposits, borrowings,
repayment and prepayment of loans, sales and participations of loans, maturities
of investments and interest-bearing deposits, and funds provided from
operations. While scheduled repayments of loans and maturities of investment
securities are predictable sources of funds, deposit flows and loan prepayments
are greatly influenced by the general level of interest rates, economic
conditions, and competition. The Bank uses its liquidity resources primarily to
fund existing and future loan commitments, to fund net deposit outflows, to
invest in other interest-earning assets, to maintain liquidity and to meet
operating expenses.
The Bank is required to maintain adequate levels of liquid assets. This
guideline, which may be varied depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowings. The
Bank has historically maintained a level of liquid assets in excess of
regulatory requirements. The Bank's liquidity ratio at June 30, 1997 was 18.0%.
The Bank began using FHLB borrowings in 1997 to augment its liquidity as its
loan originations increased from 1996. The Bank also sold $5.4 million of
adjustable-rate residential mortgage loans to improve its level of liquid assets
in 1997.
A major portion of the Bank's liquidity consists of cash and cash
equivalents, short-term U.S. Government and Federal Agency obligations, and
corporate bonds. The level of these assets is dependent upon the Bank's
operating, investing, lending and financing activities during any given period.
The primary investing activities of the Bank include origination of loans
and purchase of investment securities. During the year ended June 30, 1997,
loan originations totaled $44.7 million while purchases of investment securities
and FHLB stock totaled $16.4 million. These investments were funded primarily
from loan repayments of $15.1 million, investment security maturities of $13.9
million, net deposit increases of $9.7 million, and borrowings of $7.6 million.
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<PAGE>
Liquidity management is both a daily and long-term function of management.
If the Bank requires funds beyond its ability to generate them internally, the
Bank believes it could borrow additional funds from the FHLB. At June 30, 1997,
the Bank had borrowings of $7.5 million from the FHLB.
At June 30, 1997, the Bank had $4.4 million in outstanding commitments to
originate loans. The Bank anticipates that it will have sufficient funds
available to meet its current loan origination commitments. Certificates of
deposit which are scheduled to mature in one year or less totaled $48.3 million
at June 30, 1997. Based upon historical experience, management believes that a
significant portion of such deposits will remain with the Bank.
At June 30, 1997, the Bank exceeded all of its regulatory capital
requirements. For further information regarding the Bank's regulatory capital
at June 30, 1997 and on a pro forma basis see "Regulation--Federal Banking
Regulations--Capital Requirements."
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related data presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and results of operations in terms
of historical dollars without considering changes in the relative purchasing
power of money over time because of inflation. Unlike most industrial
companies, virtually all of the assets and liabilities of the Bank are monetary
in nature. As a result, interest rates have a more significant impact on the
Bank's performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
In June of 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 is effective for fiscal years beginning after
December 15, 1997. Accounting principles generally require all recognized
revenue, expenses, gains and losses to be included in net income. Various FASB
statements, however, require companies to report certain changes in assets and
liabilities as a separate component of the equity section of the balance sheet
such as unrealized gains and losses on available for sale securities. This such
item, along with net income, is a component of comprehensive income.
It is required under SFAS 130 that all items of comprehensive income are to
be reported in a "financial statement" that is displayed with the same
prominence as other financial statements. Additionally, SFAS 130 requires the
classification of items comprising other comprehensive income by their nature,
and the accumulated balance of other comprehensive income must be displayed
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. Management will adopt this new disclosure
requirement beginning in fiscal year 1999.
Also, in June of 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," ("SFAS 131"). SFAS 131 is effective for financial statements for
periods beginning after December 15, 1997. SFAS 131 establishes standards for
the way that public companies report information about operating segments in
annual financial statements and selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
SFAS 131 also requires companies to report information about the way that
the operating segments were determined, the product and services provided by the
operating segments, differences between the measurements
25
<PAGE>
used in reporting segment information and those used by the company in its
general purpose financial statements, and changes in the measurement of segment
amounts from period to period. Management has not yet determined the impact that
adoption of SFAS 131 will have on its financial statement presentation.
YEAR 2000
The Company and the Bank are aware of the issues associated with the
programming code in existing computer systems as the millennium (year 2000)
approaches. The "year 2000" problem is pervasive and complex as virtually every
computer operation will be affected in some way by the rollover of the two digit
year value to 00. The issue is whether computer systems will properly recognize
date sensitive information when the year changes to 2000. System that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company and the Bank are utilizing both internal and external resources
to identify, correct or reprogram, and test the systems for the year 2000
compliance. It is anticipated that all reprogramming efforts will be completed
by December 31, 1998, allowing adequate time for testing. To date,
confirmations have been received from the Company's primary processing vendors
that plans are being developed to address processing of transactions in the year
2000. Management has not yet assessed the year 2000 compliance expense and
related potential affect on the Company's or the Bank's earnings.
BUSINESS
THE COMPANY
Prior to the Conversion, the Company will not transact any material
business. Following the Conversion, in addition to directing, planning and
coordinating the business activities of the Bank, the Company will invest the
proceeds of the Conversion which are retained by it. See "Use of Proceeds."
Upon consummation of the Conversion, the Company will have no significant assets
other than the shares of the Bank's capital stock acquired in the Conversion,
the loan receivable held with respect to its loan to the ESOP and that portion
of the net proceeds of the Conversion retained by it, and will have no
significant liabilities. Cash flow to the Company will be dependent upon
investment earnings from the net proceeds retained by it, payments on the ESOP
loan and any dividends received from the Bank. Initially, the Company will
neither own nor lease any property, but will instead use the premises, equipment
and furniture of the Bank. At the present time, the Company does not intend to
employ any persons other than its officers (who are not anticipated to be
separately compensated by the Company), but will utilize the support staff of
the Bank from time to time. Additional employees will be hired as appropriate
to the extent the Company expands its business in the future In the future, the
Company will consider using some of the proceeds of the Conversion retained by
it to expand its operations in its existing primary market and other nearby
areas by acquiring other financial institutions which could be merged with the
Bank or operated as separate subsidiaries. Presently, there are no agreements
or understandings for expansion of the Company's operations.
THE BANK
The business of the Bank primarily consists of attracting savings deposits
from the general public and investing such deposits in mortgage loans secured by
single-family residential real estate, commercial real estate, commercial assets
and investment securities, including U.S. Government and Federal Agency
securities, equity securities and interest-earning deposits. The Bank also makes
consumer loans, including home equity loans, automobile, passbook and other
consumer loans. The Bank offers both fixed-rate and adjustable-rate loans and
emphasizes the origination of residential real estate mortgage loans and
commercial loans with adjustable interest
26
<PAGE>
rates. The Bank also makes other short term (one to three years) interest
sensitive investments which allow the Bank to monitor the interest rate risk,
maturities and repricing intervals of its assets and liabilities.
The Bank's principal sources of income are interest and fees on loans
and other investments, and the Bank's principal expenses are interest paid on
deposit accounts and general operating expenses.
MARKET AREA
The Bank's main office and three branch offices are located in
Medford, Middlesex County, Massachusetts. The city of Medford, containing
approximately 60,000 residents, is located approximately seven miles from
downtown Boston in the northern suburbs of Boston, bounded by the towns of
Malden, Everett, Somerville, Stoneham, Winchester and Arlington. The City of
Medford is easily accessible from downtown Boston via Interstate 93 and is
accessible via other state roads connecting the communities within the Route 128
corridor surrounding Boston. As an established metropolitan suburb, Medford
consists mostly of developed single- and multi-family properties within a
network of well-maintained neighborhoods. The city of Medford represents the
primary market area for deposit and loan generation as most of the Bank's
depositors and loan customers live in the areas surrounding the Bank's office
locations. The Bank considers its primary market area to be the communities of
Medford, Malden, Everett, Stoneham, Arlington, Winchester, Somerville, Melrose,
Lexington and Bedford, Massachusetts. The economic base of the Bank's market
area is diversified and includes a number of financial service institutions,
industrial and manufacturing companies, hospitals and other health care
facilities and educational institutions. The major employers in the Medford area
are Tufts University, Lawrence Memorial Hospital, the City of Medford and Meadow
Glen Mall, with approximately 1,600, 1,300, 1,200 and 1,000 employees each,
respectively. Management believes that the housing vacancy rate in Medford is
very low. The majority of the Bank's lending and deposit activity has
historically been in Medford, although the commercial loan department has been
largely responsible for expanded business throughout eastern Middlesex County.
Middlesex County, located in eastern Massachusetts to the north and west of the
city of Boston, is part of the Boston metropolitan area. Based on 1997 Bureau
of Labor Statistics, the median household income for Middlesex County was
$49,414.
LENDING ACTIVITIES
The Bank originates loans through its four offices located in Medford,
Massachusetts. The principal lending activities of the Bank are the origination
of conventional mortgage loans for the purpose of purchasing or refinancing
owner-occupied, one- to four-family residential properties in its designated
community reinvestment area, consisting of the Massachusetts communities of
Medford, Malden, Everett, Stoneham, Arlington, Winchester, Somerville, Melrose,
Lexington and Bedford, and the origination of commercial loans secured by
commercial real estate and commercial assets within eastern Middlesex County. To
a lesser extent, the Bank also originates consumer loans including home equity
and passbook loans.
In the past two years, the Bank has made a major commitment to small
business commercial lending. The Bank has expanded its commercial lending
department with the addition of two senior officers with considerable commercial
lending expertise and has developed a support staff to run the commercial loan
department.
The Bank's ten largest loans, outstanding as of June 30, 1997, ranged
from $500,000 to $1.2 million.
27
<PAGE>
Loan Portfolio. The following table presents selected data relating
to the composition of the Bank's loan portfolio by type of loan on the dates
indicated.
<TABLE>
<CAPTION>
---------------------------------------------------------
AT JUNE 30,
---------------------------------------------------------
1997 1996 1995
----------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage loans.... $ 90,203 78.7% $82,459 87.0% $73,458 91.6%
Commercial real estate loans.. 17,847 15.6 8,280 8.7 3,909 4.9
Commercial loans.............. 3,677 3.2 1,715 1.8 415 0.5
Consumer loans................ 1,655 1.4 1,781 1.9 1,832 2.3
Home equity loans............. 1,564 1.4 1,176 1.2 1,248 1.6
Construction loans............ 976 0.9 285 0.4 358 0.4
-------- ----- ------- ----- ------- -----
Total loans................... 115,922 101.2 95,696 101.0 81,220 101.3
Less:
Deferred loan origination
fees....................... 37 -- 60 0.1 111 0.1
Unadvanced principal.......... 340 0.3 134 0.1 135 0.2
Allowance for loan
-------- ----- -------- ----- ------- -----
losses...................... 977 0.9 742 0.8 757 1.0
-------- ----- ------- ----- ------- -----
Loans, net.................... $114,568 100.0% $94,760 100.0% $80,217 100.0%
======== ===== ======= ===== ======= =====
</TABLE>
One- to Four-Family Residential Real Estate Lending. The primary
emphasis of the Bank's lending activity is the origination of conventional
mortgage loans on one- to four-family residential dwellings located in the
Bank's primary market area. As of June 30, 1997, loans on one- to four-family
residential properties accounted for 78.7% of the Bank's loan portfolio.
The Bank's mortgage loan originations are for terms of up to 30 years,
amortized on a monthly basis with interest and principal due each month.
Residential real estate loans often remain outstanding for significantly shorter
periods than their contractual terms as borrowers may refinance or prepay loans
at their option, without penalty. Conventional residential mortgage loans
granted by the Bank customarily contain "due-on-sale" clauses which permit the
Bank to accelerate the indebtedness of the loan upon transfer of ownership of
the mortgaged property.
The Bank makes conventional mortgage loans and uses standard Federal
National Mortgage Association ("FNMA") documents, to allow for the sale of
qualifying loans in the secondary mortgage market. The Bank's lending policies
generally limit the maximum loan-to-value ratio on mortgage loans secured by
owner-occupied properties to 95% of the lesser of the appraised value or
purchase price of the property, with the condition that private mortgage
insurance is required on loans with a loan-to-value ratio in excess of 80%.
Since the early 1980s the Bank has offered adjustable-rate mortgage
loans with terms of up to 30 years. Adjustable-rate loans offered by the Bank
include loans which reprice every one or three years and provide for an interest
rate which is based on the interest rate paid on U.S. Treasury securities of a
corresponding term, plus a margin of up to 250 basis points, or 2.5%.
Additionally, the Bank offers an adjustable-rate loan product with an interest
rate fixed for seven years which then reprices annually for its remaining term
thereafter. The Bank currently offers adjustable-rate loans with initial rates
below those which would prevail under the foregoing computations, based upon the
Bank's determination of market factors and competitive rates for adjustable-rate
loans in its market area. For adjustable-rate loans, borrowers are qualified at
the initial rate.
28
<PAGE>
Historically, the Bank has retained all adjustable-rate mortgages it
originates. However, in recent years, in order to generate liquidity, the Bank
has sold some of these loans. The Bank's adjustable-rate mortgages include
limits on increases or decreases of the interest rate of the loan. The interest
rate may increase or decrease by 2% per year and 5% over the life of the loan
for the Bank's one-year adjustable rate mortgages and by 3% per adjustment
period and 6% over the life of the loan for the Bank's three-year adjustable
rate mortgages. The Bank also offers an adjustable rate mortgage on which the
rate is fixed for the first seven years; thereafter, the loan converts to a one-
year adjustable-rate mortgage. The retention of adjustable-rate mortgage loans
in the Bank's loan portfolio helps reduce the Bank's exposure to increases in
interest rates. However, there are unquantifiable credit risks resulting from
potential increased costs to the borrower as a result of the repricing of
adjustable-rate mortgage loans. During periods of rising interest rates, the
risk of default on adjustable-rate mortgage loans may increase due to the upward
adjustment of interest cost to the borrower.
During the year ended June 30, 1997, the Bank originated $24.1 million
in adjustable-rate mortgage loans and $4.3 million in fixed-rate mortgage loans.
Of the fixed-rate loans originated, the Bank sold $2.1 million of fixed-rate
loans with terms of greater than 15 years and retained $2.2 million of fixed-
rate loans, substantially all of which had terms of 15 years or less.
Approximately 6% of all loan originations during fiscal 1997 were refinancings
of loans already in the Bank's loan portfolio. At June 30, 1997, the Bank's loan
portfolio included $58.4 million in adjustable-rate one- to four-family
residential mortgage loans or 51.0% of the Bank's net loan portfolio, and $31.8
million in fixed-rate one- to four-family residential mortgage loans, or 27.7%
of the Bank's net loan portfolio.
The Bank engages in a limited amount of construction lending usually
for the construction of single family residences. Most are
construction/permanent loans to the future occupants, structured to become
permanent loans upon the completion of construction. All construction loans are
secured by first liens on the property. Loan proceeds are disbursed as
construction progresses and inspections warrant. Loans involving construction
financing present a greater risk than loans for the purchase of existing homes,
since collateral values and construction costs can only be estimated at the time
the loan is approved. Due to the small amount of construction loans in the
Bank's portfolio, the risk in this area is limited.
Commercial Real Estate Loans. At June 30, 1997, the Bank's commercial
real estate loan portfolio consisted of 25 loans, totaling $17.8 million, or
15.6% of net loans. The Bank's largest loan is a commercial real estate loan
with an outstanding balance of $1.2 million at June 30, 1997 secured by a
commercial office building in Bedford, Massachusetts. Commercial real estate
loans are administered by the commercial loan department as described below
under "Commercial Loans."
In May 1995, the Bank hired a commercial loan officer with over 20
years of experience in commercial lending in the Boston market area for the
purpose of expanding the commercial lending program of the Bank. In 1996, the
Bank added a second commercial loan officer with over 15 years of experience
with commercial lending in the Bedford/Lexington area. With the help of these
two officers, the Bank is originating commercial real estate loans and
commercial loans to satisfy the working capital and short-term financing needs
of established local businesses.
Commercial real estate lending entails additional risks compared with
one- to four-family residential lending. Because payments on loans secured by
commercial real estate properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject, to a greater extent, to adverse conditions in the real estate market or
the economy. Also, commercial real estate loans typically involve large loan
balances to single borrowers or groups of related borrowers and the payment
experience on such loans is typically dependent on the successful operation of a
real estate project and/or the collateral value of the commercial real estate
securing the loan. See "Special Considerations--Growth of the Bank's Commercial
Loan and Commercial Real Estate Loan Portfolio."
29
<PAGE>
Commercial Loans. In the past two years, the Bank has made a major
commitment to small business commercial lending. The Bank has worked to develop
a niche of making commercial loans to companies which have from $500,000 to $15
million in sales and has recently become an approved lender of the Small
Business Administration. At June 30, 1997, the Bank's commercial loan portfolio
consisted of 78 loans, totaling $3.7 million, or 3.2% of net loans.
Commercial loans are expected to comprise a growing portion of the
Bank's loan portfolio in the future. Unless otherwise structured as a mortgage
on commercial real estate, such loans generally are limited to terms of five
years or less. Substantially all such commercial loans have variable interest
rates tied to the prime rate as reported in the Wall Street Journal. Whenever
possible, the Bank collateralizes these loans with a lien on commercial real
estate, or alternatively, with a lien on business assets and equipment and the
personal guarantees from principals of the borrower.
Commercial business loans are generally considered to involve a higher
degree of risk than residential mortgage loans because the collateral may be in
the form of intangible assets and/or inventory subject to market obsolescence.
Commercial loans may also involve relatively large loan balances to single
borrowers or groups of related borrowers, with the repayment of such loans
typically dependent on the successful operation and income stream of the
borrower. Such risks can be significantly affected by economic conditions. In
addition, commercial business lending generally requires substantially greater
oversight efforts compared to residential real estate lending.
Home Equity Loans. The Bank also originates home equity loans which
are loans secured by available equity based on the appraised value of owner-
occupied one- to four-family residential property. Home equity loans will be
made for up to 75% of the appraised value of the property (less the amount of
the first mortgage). Home equity loans are offered at adjustable rates. The
adjustable interest rate is prime minus 1% for the first year and prime plus 1%
thereafter above the prime rate as reported in the Wall Street Journal and have
terms of ten years or less. At June 30, 1997, the Bank had $1.6 million in home
equity loans with unused credit available to existing borrowers of $1.6 million.
Consumer Loans. The Bank's consumer loans consist of share secured
loans, and other consumer loans, including automobile loans and credit card
loans. At June 30,1997, the consumer loan portfolio totaled $1.7 million or
1.4% of total loans. Consumer loans are generally offered for terms of up to
five years at fixed interest rates. Consumer loans generally do not exceed
$20,000 individually.
The Bank makes share secured loans up to 90% of the amount of the
depositor's savings account balance. The interest rate on the loan is 4% higher
than the rate being paid on the account. The Bank also makes other consumer
loans, which may or may not be secured. The terms of such loans usually depend
on the collateral.
The Bank makes loans for automobiles, both new and used, directly to
the borrowers. The loans are generally limited to 90% of the purchase price or
the retail value listed by the National Automobile Dealers Book. The terms of
the loans are determined by the age and condition of the collateral. Collision
insurance policies are required on all these loans.
The Bank makes unsecured credit card loans up to $5,000 at fixed rates
of interest. At June 30, 1997, the Bank had 686 unsecured credit card loans
totaling $407,000.
Consumer loans are generally originated at higher interest rates than
residential mortgage loans but also tend to have a higher credit risk than
residential loans due to the loan being unsecured or secured by rapidly
depreciable assets. Despite these risks, the Bank's level of consumer loan
delinquencies generally has been low. No assurance can be given, however, that
the Bank's delinquency rate on consumer loans will continue to remain low in the
future, or that the Bank will not incur future losses on these activities.
30
<PAGE>
Loan Commitments. The Bank generally makes loan commitments to
borrowers not exceeding 60 days. At June 30, 1997, the Bank had $4.4 million in
loan commitments outstanding, all for the origination of one- to four-family
residential real estate loans, home equity loans, commercial loans and
commercial real estate loans.
Loan Solicitation and Loan Fees. Loan originations are derived from a
number of sources, including the Bank's existing customers, referrals, realtors,
advertising and "walk-in" customers at the Bank's office. Additionally, the
Bank has two residential loan originators, both of whom actively cover the local
community, working with local real estate brokers and agents to identify and
contact potential new customers.
Upon receipt of a loan application from a prospective borrower, a
credit report and verifications are ordered to verify specific information
relating to the loan applicant's employment, income and credit standing. For all
mortgage loans, an appraisal of real estate intended to secure the proposed loan
is obtained from an independent appraiser who has been approved by the Bank's
board of directors. Fire and casualty insurance are required on all loans
secured by improved real estate. Insurance on other collateral is required
unless waived by the loan committee. The board of directors of the Bank has the
responsibility and authority for the general supervision over the loan policies
of the Bank. The Board has established written lending policies for the Bank.
All residential and commercial real estate mortgages and commercial business
loans must be ratified by the Bank's board of directors. In addition, certain
designated officers of the Bank have authority to approve loans not exceeding
specified levels, while the board of directors must approve loans in excess of
(a) $300,000 for commercial real estate loans; (b) $100,000 for commercial
loans; (c) loans over the current FNMA limit for residential mortgage loans; and
(d) $20,000 for consumer loans.
Interest rates charged by the Bank on all loans are primarily
determined by competitive loan rates offered in its market area and interest
rate costs of the source of funding for the loan. The Bank generally charges an
origination fee on new mortgage loans. The origination fees, net of direct
origination costs, are deferred and amortized into income over the life of the
loan. At June 30, 1997, the amount of net deferred loan origination fees was
$37,000.
Loan Maturities. The following table sets forth certain information
at June 30, 1997 regarding the dollar amount of loans maturing in the Bank's
portfolio based on their contractual terms to maturity, including scheduled
repayments of principal. Demand loans and loans having no stated schedule of
repayments and no stated maturity are reported as due in one year or less.
<TABLE>
<CAPTION>
AT JUNE 30, 1997
-------------------------------------------------------
RESIDENTIAL COMMERCIAL
MORTGAGE REAL ESTATE COMMERCIAL CONSUMER TOTAL
LOANS LOANS LOANS LOANS LOANS
-------- ----------- ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Total loans scheduled to mature:
In one year or less............. $ 1,625 $ -- $1,103 $ 57 $ 2,785
After 1 year through 5 years.... 2,405 121 1,888 871 5,285
Beyond five years............... 88,713 17,726 686 727 107,852
------- ------- ------ ------ --------
Total............................. $92,743 $17,847 $3,677 $1,655 $115,922
======= ======= ====== ====== ========
Loan balance by type scheduled
to mature after one year:
Fixed-rate...................... $31,621 $ 1,221 $1,032 $1,396 $ 35,270
Adjustable-rate................. 61,122 16,626 2,645 259 80,652
</TABLE>
31
<PAGE>
For purposes of this schedule, home equity loans and construction loans have
been included in residential mortgage loans.
Originations and Sales of Loans. The Bank is a qualified
seller/servicer for FNMA. Beginning in 1987, the Bank began to sell a portion of
its fixed-rate loans with terms in excess of 15 years to FNMA. All of the
Bank's sales to FNMA have been made with servicing retained on the loans. At
June 30, 1997, the Bank was servicing $10.6 million in loans for FNMA.
Depending upon market conditions, the Bank retains a portion of its fixed rate
loans from time to time. In addition, the Bank has also sold loans to other
private investors. At June 30, 1997, the Bank was servicing $5.2 million of such
loans.
Originations for the year ended June 30, 1997 have increased due to
the addition of a mortgage loan originator and a second commercial lending
officer. Loan sales were reduced during the same period as the Bank borrowed
from the FHLB to fund loan originations. Historically, the Bank has not
purchased loans. However, the Bank may in the future consider making limited
loan purchases, including purchases of commercial loans and commercial real
estate loans. The Bank has also entered into two participation agreements with
local banks for two of its larger commercial real estate loans. The following
table sets forth information with respect to originations and sales of loans
during the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
(In thousands)
Beginning balance........................... $ 94,760 $80,217 $77,988
-------- ------- -------
Mortgage originations..................... 28,423 24,712 8,807
Consumer loan originations................ 959 1,033 1,545
Commercial real estate loan originations.. 10,573 5,357 --
Commercial loan originations.............. 4,771 2,908 445
-------- ------- -------
Total loans originated.................. 44,726 34,010 10,797
-------- ------- -------
Less:
Amortization and payoffs.................. 15,055 16,561 7,812
Provision for loan losses.................. 272 100 100
Transfers to foreclosed real estate....... -- 83 298
Total loans sold.......................... 8,750 1,598 358
Loan participations sold................... 841 1,125 --
-------- ------- -------
Ending balance.............................. $114,568 $94,760 $80,217
======== ======= =======
</TABLE>
Non-Performing Assets, Asset Classification and Allowances for Losses.
Management and the Security Committee of the board of directors perform a
monthly review of all delinquent loans and loans are placed on a non-accrual
status when loans are 90 days past due or, in the opinion of management, the
collection of principal and interest are doubtful. One of the primary tools
used to manage and control problem loans is the Bank's "Watch-List," a listing
of all loans or commitments larger than $25,000, that are considered to have
characteristics that could result in loss to the Bank if not properly
supervised. The list is managed by the Senior Lending Officer for Commercial
Loans, Senior Loan Officer for Mortgage Lending, Chief Financial Officer, Chief
Executive Officer, and Mortgage Servicing Officer (the "Watch-List Committee"),
who meet periodically to discuss the status of the loans on the Watch List and
to add or delete loans from the list. The Directors can request that a loan
relationship be placed on Watch-List status.
Real estate acquired by the Bank as a result of foreclosure is
classified as real estate owned until such time as it is sold. When such
property is acquired, it is recorded at the lower of the unpaid principal
balance or its fair value. Any required write-down of the loan to its fair value
is charged to the allowance for loan losses.
32
<PAGE>
The following table sets forth the Bank's problem assets and loans at
the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------
1997 1996 1995
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Loans 30-89 days past due
(not included in non-performing loans).................... $1,708 $1,265 $1,769
====== ====== ======
Loans 30-89 days past due as a percent of net loans.. 1.49% 1.33% 2.21%
Non-performing loans (90 days past due)....................... 365 622 868
Foreclosed real estate......................................... -- -- 104
------ ------ ------
Total non-performing assets..................... $ 365 $ 622 $ 972
====== ====== ======
Non-performing loans as a percent of net loans................. 0.32% 0.66% 1.08%
Non-performing assets as a percent of total assets............. 0.24% 0.47% 0.78%
</TABLE>
During the year ended June 30, 1997, gross interest income of $29,000,
would have been recorded on loans accounted for on a non-accrual basis if the
loans had been current throughout the period. No interest on such loans was
included in income during the respective periods. At June 30, 1997, management
was not aware of any loans not currently classified as non-accrual, 90 days past
due or restructured but which may be so classified in the near future because of
concerns over the borrower's ability to comply with repayment terms.
Federal regulations require each banking institution to classify its
asset quality on a regular basis. In addition, in connection with examinations
of such banking institutions, federal and state examiners have authority to
identify problem assets and, if appropriate, classify them. An asset is
classified substandard if it is determined to be inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral
pledged, if any. As a general rule, the Bank will classify a loan as substandard
if the Bank can no longer rely on the borrower's income as the primary source
for repayment of the indebtedness and must look to secondary sources such as
guarantors or collateral. An asset is classified as doubtful if full collection
is highly questionable or improbable. An asset is classified as loss if it is
considered uncollectible, even if a partial recovery could be expected in the
future. The regulations also provide for a special mention designation,
described as assets which do not currently expose a banking institution to a
sufficient degree of risk to warrant classification but do possess credit
deficiencies or potential weaknesses deserving management's close attention.
Assets classified as substandard or doubtful require a banking institution to
establish general allowances for loan losses. If an asset or portion thereof is
classified as a loss, a banking institution must either establish specific
allowances for loan losses in the amount of the portion of the asset classified
as a loss, or charge off such amount. Examiners may disagree with a banking
institution's classifications and amounts reserved. If a banking institution
does not agree with an examiner's classification of an asset, it may appeal this
determination to the Regional Director of the FDIC. At June 30, 1997, the Bank
had no assets classified as special mention, doubtful or loss, and $1.4 million
in assets designated as substandard.
In originating loans, the Bank recognizes that credit losses will
occur 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. It is management's policy to maintain an adequate
general allowance for loan losses based on, among other things, the Bank's and
the industry's historical loan loss experience, evaluation of economic
conditions and regular reviews of delinquencies and loan portfolio quality.
Further, after properties are acquired following loan defaults, additional
losses may occur with respect to such properties while the Bank is holding them
for sale. The Bank increases its allowances for loan losses and losses on real
estate owned by charging provisions for losses against the Bank's income.
Specific reserves are also recognized against specific assets when management
believes it is warranted.
33
<PAGE>
In the past few years, there has been a greater level of scrutiny by
regulatory authorities of the loan portfolios of financial institutions
undertaken as part of the examination of the institution by federal or state
regulators. Results of recent examinations indicate that these regulators may be
applying more conservative criteria in evaluating real estate market values,
requiring significantly increased provisions for potential loan losses. While
the Bank believes it has established its existing allowances for loan losses in
accordance with GAAP there can be no assurance that regulators, in reviewing the
Bank's loan portfolio, will not request the Bank to increase its allowance for
loan losses, thereby negatively affecting the Bank's financial condition and
earnings. Alternately, there can be no assurance that increases in the Bank's
allowance for loan losses will occur.
The FDIC has adopted a policy statement regarding maintenance of an
adequate allowance for loan and lease losses and an effective loan review
system. This policy includes an arithmetic formula for checking the
reasonableness of an institution's allowance for loan loss estimate compared to
the average loss experience of the industry as a whole. Examiners will review an
institution's allowance for loan losses and compare it against the sum of (i)
50% of the portfolio that is classified doubtful; (ii) 15% of the portfolio that
is classified as substandard; and (iii) estimated credit losses for the portions
of the portfolio that have not been classified (including those loans designated
as special mention). This amount is considered neither a "floor" nor a "safe
harbor" of the level of allowance for loan losses an institution should
maintain, but examiners will view a shortfall relative to the amount as an
indication that they should review management's policy on allocating these
allowances to determine whether it is reasonable based on all relevant factors.
<TABLE>
<CAPTION>
The following table analyzes activity in the Bank's allowance for loan losses for the periods
indicated.
YEARS ENDED JUNE 30,
------------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
(Dollars in thousands)
Average loans, net............................................................................. $103,223 $86,651 $78,398
======== ======= =======
Period-end total loans......................................................................... $114,568 $94,760 $80,217
======== ======= =======
Allowance for loan losses at beginning of period.................................... $ 742 $ 757 $ 749
Provision charged to operations..................................................... 272 100 100
Plus recoveries..................................................................... 20 23 27
Loans charged-off................................................................... (57) (138) (119)
-------- ------- -------
Allowance for loan losses at end of period.......................................... $ 977 $ 742 $ 757
======== ======= =======
Ratios:
Allowance for loan losses to period end net loans................................... 0.85% 0.78% 0.94%
Allowance for loan losses to non-performing loans................................... 267.67% 119.29% 87.21%
Net charge-offs to average loans, net............................................... 0.04% 0.13% 0.12%
Net charge-offs to allowance for loan losses........................................ 3.79% 15.50% 12.15%
</TABLE>
34
<PAGE>
The following table sets forth a 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. These
allocations are not necessarily indicative of future losses and do not restrict
the use of the allowance to absorb losses in any other loan category.
<TABLE>
<CAPTION>
AT JUNE 30,
------------------------------------------------------------------------
1997 1996 1995
-------------------- --------------------- ----------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ ----------- ------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate - mortgage:
Residential......................... $542 77.8% $542 86.2% $614 90.5%
Commercial.......................... 338 15.4 120 8.7 100 4.8
Commercial loans...................... 75 3.2 50 1.8 -- 0.5
Consumer and home equity.............. 22 2.8 30 3.1 43 3.8
Construction.......................... -- 0.8 -- 0.2 -- 0.4
---- ----- ---- ----- ---- -----
Total allowance for loan losses....... $977 100.0% $742 100.0% $757 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
INVESTMENT ACTIVITIES
General. The Bank is required to maintain an amount of liquid assets
appropriate for its level of net savings withdrawals and current borrowings. It
has generally been the Bank's policy to maintain a liquidity portfolio in excess
of regulatory requirements. At June 30, 1997, the Bank's liquidity ratio was
18%. Liquidity levels may be increased or decreased depending upon the yields
on investment alternatives, management's judgment as to the attractiveness of
the yields then available in relation to other opportunities, management's
expectations of the level of yield that will be available in the future and
management's projections as to the short-term demand for funds to be used in the
Bank's loan origination and other activities.
Interest income from investments in various types of liquid assets
provides a significant source of revenue for the Bank. As the New England
economy experienced a severe downturn in the late 1980's, the Bank chose to
invest excess liquidity in its investment portfolio. The Bank invests in U.S.
Treasury and Federal Agency securities, bank certificates of deposits, equity
securities, corporate debt securities and overnight federal funds. The balance
of investment securities maintained by the Bank in excess of regulatory
requirements reflects management's historical objective of maintaining liquidity
at a level that assures the availability of adequate funds, taking into account
anticipated cash flows and available sources of credit, for meeting withdrawal
requests and loan commitments and making other investments. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
The Bank purchases securities through a primary dealer of U.S.
Government obligations or such other securities dealers authorized by the board
of directors and requires that the securities be delivered to a safekeeping
agent before the funds are transferred to the broker or dealer. The Bank
purchases investment securities pursuant to an investment policy established by
the board of directors.
Investment securities are recorded on the books of the Bank in
accordance with GAAP. The Bank does not purchase investment securities for
trading. Effective June 30, 1994, the Bank implemented SFAS No. 115. Available
for sale securities are reported at fair value with unrealized gains or losses
reported as a separate component of net worth, net of tax effects. Held-to-
maturity securities are carried at amortized cost. Substantially all purchases
of investment securities conform to the Bank's interest rate risk policy. The
following table sets forth the Bank's investment securities at the dates
indicated.
35
<PAGE>
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------------------------
1997 1996
---------------------- ---------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- -------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Securities available for sale:
Marketable equity securities.. $ 3,543 $ 3,819 $ 1,639 $ 1,568
------- ------- ------- -------
Securities held to maturity:
U.S. Government and Federal
Agency obligations........... 14,976 14,908 16,899 16,767
Other bonds and obligations... 2,528 2,523 27 27
------- ------- ------- -------
Total........................ 17,504 17,431 16,926 16,794
------- ------- ------- -------
Total................... $21,047 $21,250 $18,565 $18,362
======= ======= ======= =======
</TABLE>
The following table sets forth the scheduled maturities, carrying
values and average yields for the Bank's debt securities held to maturity at
June 30, 1997.
<TABLE>
<CAPTION>
JUNE 30, 1997
ONE YEAR OR LESS ONE TO FIVE YEARS TOTAL
---------------------- ----------------------- -----------------------
AVERAGE AVERAGE AVERAGE
CARRYING VALUE YIELD CARRYING VALUE YIELD CARRYING VALUE YIELD
-------------- ------- -------------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and Federal $4,990 5.20% $ 9,986 6.10% $14,976 5.80%
Agency obligations..........
-- -- 2,528 6.23 2,528 6.23
Other bonds and obligations.. ------ ------- -------
Total....................... $4,990 5.20% $12,514 6.12% $17,504 5.85%
====== ======= =======
</TABLE>
DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS
General. Deposits are the primary source of the Bank's funds for
lending and other investment purposes. In addition to deposits, the Bank derives
funds from principal repayments and interest payments on loans and investments
as well as other sources arising from operations in the production of net
earnings. Loan repayments and interest payments are a relatively stable source
of funds, while deposit inflows and outflows are significantly influenced by
general interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in the availability of funds from
other sources, or on a longer term basis for general business purposes.
Deposits. Deposits are attracted principally from within the Bank's
primary market area through the offering of a broad selection of deposit
instruments, including checking accounts, passbook savings, NOW accounts, demand
deposits, money market accounts and certificates of deposit. Deposit account
terms vary, with the principal differences being the minimum balance required,
the time periods the funds must remain on deposit and the interest rate.
36
<PAGE>
The Bank's policies are designed primarily to attract deposits from
local residents and businesses rather than to solicit deposits from areas
outside its primary market. The Bank does not accept deposits from brokers due
to the volatility and rate sensitivity of such deposits. Interest rates paid,
maturity terms, service fees and withdrawal penalties are established by the
Bank on a periodic basis. Determination of rates and terms are predicated upon
funds acquisition and liquidity requirements, rates paid by competitors, growth
goals and federal regulations.
During the past two years, there has been a significant increase in
demand deposit accounts, resulting from the increase in commercial customers
during this time period.
The following table sets forth the various types of deposit accounts
at the Bank and the balances in these accounts at the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Savings deposits......... $ 40,794 31.6% $ 40,019 33.5% $ 40,399 35.4%
NOW accounts............. 17,975 13.9 15,480 12.9 14,275 12.5
Money market deposits.... 6,489 5.0 6,366 5.3 5,755 5.1
Demand deposits.......... 4,910 3.8 4,103 3.4 1,883 1.7
Certificates of deposit.. 59,135 45.7 53,666 44.9 51,513 45.3
-------- ---- -------- ---- -------- ----
Total deposits...... $129,303 100.0% $119,634 100.0% $113,825 100.0%
======== ======= ======== ======= ======== =======
</TABLE>
For more information on the Bank's deposit accounts, see Note 7 of Notes to
Consolidated Financial Statements.
The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity at June 30, 1997.
<TABLE>
<CAPTION>
MATURITY PERIOD CERTIFICATES OF DEPOSIT RATE
----------------- ----------------------- ------
(Dollars in thousands)
<S> <C> <C>
0-12 months $7,695 5.41%
1-2 years 1,072 5.87
2-3 years 346 6.00
over 3 years 106 6.25
------
Total........ $9,219 5.50%
======
</TABLE>
Borrowings. Savings deposits historically have been the primary
source of funds for the Bank's lending and investment activities and for its
general business activities. The Bank is authorized, however, to use advances
from the FHLB to supplement its supply of lendable funds and to meet liquidity
requirements. Due to recent lending activity and demand for liquidity, the Bank
has utilized this borrowing power, and has received advances from the FHLB.
Advances from the FHLB are secured by the Bank's stock in the FHLB, the Bank's
deposits at the FHLB and a portion of the Bank's mortgage loans and investment
securities. The Bank had FHLB advances of $7.5 million outstanding at June 30,
1997.
The FHLB functions as a central reserve bank providing credit for
savings institutions and certain other financial institutions. As a member, the
Bank is required to own capital stock in the FHLB and is authorized to apply for
advances on the security of such stock and certain of its home mortgages and
other assets (principally, securities which are obligations of, or guaranteed by
the United States) provided certain standards related to creditworthiness have
been met.
37
<PAGE>
COMPETITION
The Bank experiences competition both in attracting and retaining
savings deposits and in the making of mortgage, commercial and other loans.
Direct competition for savings deposits primarily comes from larger commercial
banks and other savings institutions located in or near the Bank's primary
market area which often have significantly greater financial and technological
resources than the Bank. Additional significant competition for savings deposits
comes from credit unions, money market funds and brokerage firms.
With regard to lending competition in the local market area, the Bank
experiences the most significant competition from the same institutions
providing deposit services, most of whom have placed an emphasis on real estate
lending as a line of business. In addition, the Bank competes with local and
regional mortgage companies, independent mortgage brokers and credit unions in
originating mortgage and non-mortgage loans. The primary factors in competing
for loans are interest rates and loan origination fees and the range of services
offered by the various financial institutions.
Competition from other financial institutions operating in the Bank's
local community includes a number of both large and small commercial banks and
savings institutions. As of June 30, 1997, the Bank's market share was
approximately 14.5% of overall financial institution deposits in the City of
Medford. The Bank has experienced growth in deposits in recent years primarily
due to an increased emphasis on marketing products and services. However,
competition remains high in the marketplace.
PROPERTIES
The following table sets forth certain information at June 30, 1997
regarding the Bank's office facilities, which are owned by the Bank, with the
exception of the High School Educational Branch, which is leased at no cost, and
certain other information relating to its property at that date.
<TABLE>
<CAPTION>
YEAR COMPLETED SQUARE FOOTAGE NET BOOK VALUE
-------------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Main Office: 60 High Street
Medford, MA 02155 1931 7,000 $1,180
West Medford Office: 430 High Street
Medford, MA 02155 1970 2,500 $ 45
Salem Street Office: 201 Salem Street
Medford, MA 02155 1995 3,500 $ 947
High School
Educational Branch: 489 Winthrop Street 1986 500 $ - 0 -
Medford, MA 02155
</TABLE>
The Bank also owns an office building adjacent to its main office,
located at 66 High Street, Medford, MA 02155, which had a net book value of
$1.8 million at June 30, 1997. The Bank uses a portion of the top floor of this
building to house a portion of its administrative and clerical services and
leases the remaining space to third-party tenants.
At June 30, 1997, the net book value of the Bank's computer equipment
and other furniture, fixtures and equipment at its existing offices totaled
$524,000. For more information, see Note 5 of the Notes to Consolidated
Financial Statements.
38
<PAGE>
EMPLOYEES
At June 30, 1997, the Bank had 44 full-time and 22 part-time
employees. None of the Bank's employees is represented by a collective
bargaining agreement. Management of the Bank believes that it enjoys good
relations with its personnel.
LEGAL PROCEEDINGS
Although the Bank, from time to time, is involved in various legal
proceedings in the normal course of business, there are no material legal
proceedings to which the Bank, its directors or its officers is a party or to
which any of its property is subject.
39
<PAGE>
MANAGEMENT OF THE COMPANY
DIRECTORS OF THE COMPANY
The board of directors of the Company will initially be comprised of
the existing members of the Bank's board of directors, with Mr. McGlynn serving
as Chairman of the Board. The board of directors of the Company is divided into
three classes, each of which contains approximately one-third of the board of
directors. The directors are elected by the stockholders of the Company for
staggered three year terms, or until their successors are elected and qualified.
One class of directors, consisting of Messrs. McGlynn, Risman and Surabian, has
a term of office expiring at the first annual meeting of stockholders following
the Conversion; the second class, consisting of Ms. Silva, Mr. Hackett and Ms.
Bernardin, has a term of office expiring at the second annual meeting of
stockholders; and the third class, consisting of Messrs. Kazanjian and Raimo,
has a term of office expiring at the third annual meeting of stockholders. The
biographical information of each Director is set forth under "Management of the
Bank - Directors." It is currently intended that directors of the Company will
receive no additional fees for their services as Directors of the Company.
However, subsequent to the Conversion, the Boards of the Company and the Bank
intend to study the level and structure of compensation paid to financial
institutions and, upon a review of such study, may revise the amounts of fees
paid to Board members and frequency of Board and Committee meetings. See
"Management of the Bank -Directors' Compensation" for a discussion of fees paid
to the directors of the Bank.
EXECUTIVE OFFICERS OF THE COMPANY
The following individuals are executive officers of the Company and
hold the offices set forth below opposite their names. The biographical
information for each executive officer is set forth under "Management of the
Bank - Directors" and "- Executive Officers who are not Directors."
NAME POSITION(S) HELD WITH THE COMPANY
- ---- ---------------------------------
Robert H. Surabian President and Chief Executive Officer
Ralph W. Dunham Executive Vice President, Chief Financial Officer and
Treasurer
Lorraine P. Silva Secretary
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation, retirement or removal by the board of directors.
Since the formation of the Company, none of the executive officers, directors or
other personnel has received remuneration from the Company. It is currently
expected that, unless and until the Company becomes actively involved in
business activities separate from those conducted by the Bank, no separate
compensation will be paid to the directors and employees of the Company.
However, directors of the Company or the Bank who are not employees of the
Company or the Bank or any of their subsidiaries may be entitled to participate
in the Stock Option Plan and Restricted Stock Plan expected to be established by
the Company at least one year following completion of the Conversion. See
"Management of the Bank." The Company will also guarantee certain obligations of
the Bank to the Bank's executive officers, employees and directors, as described
below. Information concerning the principal occupations, employment and
compensation of the directors and the officers of the Company during the last
five years is set forth under "Management of the Bank -- Biographical
Information."
40
<PAGE>
MANAGEMENT OF THE BANK
DIRECTORS
The following table sets forth certain information with respect to the
persons who are directors of the Bank. There are no arrangements or
understandings between the Bank and any person pursuant to which such person has
been elected as a director. The term of each director is three years and terms
are staggered so that only one-third of the directors is elected each year.
Upon completion of the Conversion, each director will continue to serve as a
director of the Bank. Following the Conversion, directors will be elected by
the stockholder rather than by mutual shareholders.
<TABLE>
<CAPTION>
CURRENT
DIRECTOR TERM
DIRECTORS AGE(1) POSITION SINCE EXPIRES
- --------- ------ -------- ----- -------
<S> <C> <C> <C> <C>
Julie Bernardin 54 Director 1994 1998
John A. Hackett 57 Director 1983 1998
Richard M. Kazanjian 61 Director 1984 1999
John J. McGlynn 75 Chairman of Board 1966 1997
of Directors
Dennis M. Raimo 35 Director 1994 1999
Robert B. Risman 66 Director 1959 1997
Lorraine P. Silva 66 Director 1983 1998
Robert H. Surabian 61 President, Chief Executive 1967 1997
Officer and Director
</TABLE>
- ---------------------
(1) At June 30, 1997.
BIOGRAPHICAL INFORMATION
Set forth below is certain information regarding the directors and
executive officers of the Bank. Unless otherwise indicated, each director and
executive officer has held his current occupation for the last five years.
John J. McGlynn is the Chairman of the board of directors of the Bank.
Mr. McGlynn was elected Chairman of the Board in 1992. Mr. McGlynn is the
retired Commissioner of the Public Employee Retirement Administration for the
Commonwealth of Massachusetts and a former member of the Pension Reserves
Investment Management Board.
Robert H. Surabian is the President and Chief Executive Officer and a
Director of the Bank. He has been the President of the Bank since 1979 and was
named Chief Executive Officer in 1991.
Julie Bernardin is a Principal at J.B. Consulting, Medford,
Massachusetts, which provides management and organizational consulting services,
including career counseling and small business consulting.
John A. Hackett is the President and owner of J.J. Ruddy Insurance
Agency, Inc., Medford, Massachusetts, which he has owned for 35 years.
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<PAGE>
Richard M. Kazanjian is a Principal of Consolidated Realty Trust,
Medford, MA, a General Partner in Wellington Realty, Medford, MA, and a part-
owner and consultant for Graphic Solutions, Medford, MA.
Dennis M. Raimo is a certified public accountant and is a Partner, the
Treasurer and a Director of the firm of Della Pelle, Quigley, Raimo & Co., P.C.,
Medford, Massachusetts. His firm provides consulting, tax advice, audit and
general accounting services to small and medium-sized businesses.
Robert B. Risman has been the owner of Risman Real Estate, Medford,
Massachusetts, since 1959, which provides residential sales and property
management services.
Lorraine P. Silva is the current Clerk of the Bank. Ms. Silva was
employed by the Bank for 28 years and has been retired since 1988.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Thomas G. Burke, age 50, has been a Senior Vice President and
Commercial Loan Officer of the Bank since 1995. He is responsible for all
commercial lending and supervision of the commercial loan department. Mr. Burke
was employed at Medford Savings Bank from 1990 to 1995, where he was a Vice
President and a Commercial Loan Officer.
Ralph W. Dunham, age 41, has been an Executive Vice President since
1997 and the Chief Financial Officer of the Bank since 1988. As Chief Financial
Officer, he is responsible for the overall financial management of the Bank.
Mr. Dunham is an attorney and a certified public accountant.
Deborah A. McNeill, age 42, is a Senior Vice President since 1996 and
the Treasurer of the Bank since 1993. She has been an employee of the Bank for
23 years. Her present duties include directing and coordinating the operation
of the accounting and operations departments.
Henry T. Sampson, Jr., age 49, has been a Senior Vice President since
1992 and the Chief Residential Loan Officer of the Bank since 1993. Mr. Sampson
is responsible for all non-commercial lending and supervision of the lending
department.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors conducts its business through meetings of the
Board and its committees. Regular meetings of the board of directors are held on
a monthly basis. The board of directors held 12 regular and 7 special meetings
during the fiscal year ended June 30, 1997. No director attended fewer than 75%
of the meetings of the board of directors and committees on which such director
served during this period.
The Board's Security Committee consists of Directors Surabian, Hackett
and McGlynn. This Committee meets weekly and reviews loan applications, loan
collateral, loan commitments, appraisal reports on real estate and interest
rates on loan and deposit accounts. Mr. Surabian serves as Chairperson.
The Board's Finance Committee consists of Directors Silva, Raimo,
Bernardin and Kazanjian. This Committee is responsible for the review of the
annual audit with the Bank's outside auditors and to report on any substantive
issues thereon to the Board. The Committee also reviews internal audits of Bank
operations conducted by an accounting firm which conducts internal audits. The
Committee meets monthly to review internal financial reports and also meets to
provide recommendations to the Board on the Bank's annual budget. Ms. Silva
serves as Chairperson.
The Board's Loan Audit Committee consists of Directors Risman and
Kazanjian. This Committee is responsible for reviewing loan files and certain
loan policies and procedures. Mr. Risman serves as Chairperson.
-42-
<PAGE>
The Board's Compensation Committee consists of Directors Hackett,
McGlynn, Raimo and Silva. This Committee provides advice and recommendations to
the Board in areas of employee salaries and directors' compensation. Mr.
Hackett serves as Chairperson.
As part of its recently adopted Post-Conversion Supervision Policy,
the Board has established procedures to monitor management's implementation of
the Bank's Plan of Conversion, including the sound deployment of the Conversion
proceeds. Following the Conversion, the Board will appoint a post-conversion
supervision committee to evaluate the Bank's deployment of conversion proceeds
and monitor activities as a stock company. See "Regulation -- Massachusetts
Banking Laws and Supervision -- Post-Conversion Oversight."
It is expected that after the Conversion, the Bank's full Board will
act as a nominating committee for selecting the management nominees for election
as directors in accordance with the Bank's Bylaws as a stock co-operative bank.
It is also expected that the board of directors of the Company will establish
similar committees that will serve the same functions for the Company and its
board of directors.
DIRECTORS' COMPENSATION
Fee Arrangements. Members of the Bank's board of directors receive
fees of $600 per Board Meeting, and fees ranging from $650 to $885 per month for
each committee attended. The Chairman of the Board also receives a $6,000
annual retainer. Total directors' fees for fiscal 1997 were $90,300 and total
committee fees were $67,140. It is initially anticipated that directors of the
Company will not receive compensation for their services as such but will
participate in the Option Plan and Restricted Stock Plan expected to be
implemented by the Company.
EXECUTIVE COMPENSATION
Compensation Decisions. Decisions regarding the Company's executive
compensation will be made by the Company's Compensation Committee, exclusive of
those directors employed by the Company. Under this structure, no interlocks
will exist between members of the compensation committee and employees of the
Company.
Cash Compensation. The following table sets forth the cash
compensation paid by the Bank for services rendered in all capacities during the
fiscal year ended June 30, 1997 to the President and Chief Executive Officer of
the Bank and each other executive officer of the Bank whose annual salary and
bonus for such fiscal year was in excess of $100,000 (each, a "Named Executive
Officer").
-43-
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
- --------------------------------------------------------------------------------------------------------------
LONG-TERM
NAME AND PRINCIPAL FISCAL OTHER ANNUAL INCENTIVE PLAN ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION (2) PAYOUTS (3) COMPENSATION (4)
------------------- ------ --------- --------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Surabian, 1997 $148,896 $37,500 __ __ $4,700
President and Chief
Executive Officer
Ralph W. Dunham, 1997 93,600 9,400 __ __ 4,700
Chief Financial Officer,
Executive Vice President
and Treasurer
</TABLE>
(1) Under Annual Compensation, the column titled "Salary" includes the Named
Executive Officer's base salary including all payroll deductions for health
insurance under the Bank's health insurance plan and pre-tax contributions
to the Bank's 401(k) Plan. The column titled "Bonus" includes a stipend of
$17,500 to be paid annually for a ten year period by the Bank to the Chief
Executive Officer to cover premiums due on a [term] life insurance policy
owned by the Chief Executive Officer. The Chief Executive Officer pays all
taxes required on these payments which are reported on the IRS Form W-2
issued to the Officer. Directors' fees are not paid to the Chief Executive
Officer who is a member of the Bank's board of directors.
(2) For the fiscal year ended June 30, 1997, there were no: (a) perquisites with
an aggregate value for each Named Executive Officer in excess of the lesser
of $50,000 or 10% of the total of the Officer's salary and bonus for the
year; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term incentive
plans prior to settlement or maturation; or (d) preferential discounts on
stock.
(3) During the fiscal year ended June 30, 1997, the Bank did not maintain any
restricted stock, stock option or other long-term incentive compensation
plans.
(4) Includes matching contributions made by the Bank to the 401(k) Plan on each
Named Executive Officer's behalf.
CERTAIN BENEFIT PLANS AND AGREEMENTS
General. Currently, the Bank contributes to tax-qualified savings and
retirement plans for the benefit of its eligible employees. In addition, the
Bank maintains group medical, dental, hospitalization, disability and life
insurance coverages for its personnel. It is anticipated that the Bank will
continue to provide these benefits to eligible employees after the Conversion is
completed.
In connection with the Conversion, the Company has adopted an ESOP for
the benefit of its eligible employees and those of its affiliates, such as the
Bank, which has adopted this plan. The ESOP, described below, will become
effective upon the effective date of the Bank's Conversion.
The Company has also approved employment agreements to be entered into
between the Company and two senior executive officers who also serve the Bank in
the same respective capacities. Similarly, the Bank has also approved
employment agreements for two commercial loan officers. These employment
agreements, described below, will become effective on the effective date of the
Bank's Conversion.
Basis for Awards of Benefits and Compensation. The respective boards
of directors of the Company and the Bank have evaluated and approved the terms
of the employment agreements and other benefits described below. In its review
of the benefits and compensation of the executive officers and the terms of the
employment agreements, the Boards have considered a number of factors, including
among others, the ability, performance, service and experience of these officers
and executives as well as the various legal and regulatory requirements
regarding the levels of compensation which may be paid to employees of a
depository institution.
Retirement Plans. The Bank is a participant in the retirement plans
sponsored by the Co operative Banks Employees Retirement Association ("CBERA").
Two plans are provided: a defined contribution plan (the "401(k) Plan"), under
which employee contributions are matched by contributions from the Bank, and
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<PAGE>
a defined benefit retirement plan ("Pension Plan") that is funded solely by
employer contributions made by the Bank. Employees of the Bank are eligible to
participate in these Plans after attaining age 21 and completing one year of
service (defined as a 12-month period commencing on the date of hire during
which the employee has worked at least 1,000 hours).
401(k) Plan. The 401(k) Plan permits eligible employees to save for
retirement by making pre-tax and post-tax contributions to the Plan of up to ten
percent (10%) of the annual salary paid to them by the Bank. Pre-tax
contributions made by participants are eligible to be "matched" by employer
contributions made by the Bank on each participating employee's behalf. Post-
tax contributions are not eligible for Bank matching contributions. Under the
401(k) Plan, the Bank will make a 50% "matching" contribution for each pre-tax
contribution made by a participant up to 5% of the participant's total annual
salary. An employee will always be 100% vested in any pre-tax or post-tax
contributions he makes to the 401(k) Plan and will become incrementally vested
in any matching contributions made on his behalf at a rate of 20% for each year
of service with the Bank, with initial vesting to begin after two years of
service and full vesting to occur after six years of service or upon earlier
disability, death or attainment of normal retirement age. Distributions may be
made at the election of a participant in either a single lump sum payment or
installments, as provided in the Plan.
Pension Plan. The Pension Plan provides a benefit for all eligible
Bank employees, including the Named Executive Officers listed in the Executive
Compensation Table, equal to the sum of : (a) the participant's accrued benefit
under the applicable Prior Plan determined as of December 31, 1988 plus (b) one
percent (1%) of the participant's "Final Average Compensation" (defined to mean
a participant's highest compensation averaged over three years) plus (c) one-
half of one percent (0.5%) of the participant's Final Average Compensation in
excess of covered compensation multiplied by the participant's benefit service
after December 31, 1988. A participant will become incrementally vested in
their accrued benefit under the Pension Plan at a rate of 20% each year
beginning after two years of service with the Bank, with full vesting to occur
after six years of service or earlier termination of employment due to
disability, death or attainment of normal retirement age. The Pension Plan is
funded by the Bank on an actuarial basis and all assets are held in trust by the
trustee.
The following table illustrates the annual benefit payable upon normal
retirement at age 65, in the form of a single life annuity, with no offset for
Social Security benefits, under the Pension Plan at various levels of
compensation and years of service under the Plan:
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------
FINAL AVERAGE
COMPENSATION 10 15 20 25
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 50,000 $ 7,500 $11,250 $15,000 $18,750
75,000 11,250 16,875 22,500 28,125
100,000 15,000 22,500 30,000 37,500
125,000 18,750 28,125 37,500 46,875
150,000(1) 22,500 33,750 45,000 56,250
175,000(1) 26,250 39,375 52,500 65,625
200,000(1) 30,000 45,000 60,000 75,000
- ---------------
</TABLE>
(1) These are hypothetical benefits based on the Pension Plan's normal
retirement benefit formula. The benefits shown above do not reflect an
offset for Social Security benefits and there are no other offsets. For
the Pension Plan year ended December 31, 1996, the compensation for
calculating benefits could not exceed $150,000. This compensation
limitation will be adjusted for subsequent years pursuant to Internal
Revenue Code (the "Code") provisions.
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<PAGE>
The following table sets forth the years of credited service
determined as of December 31, 1996, the end of the 1996 plan year, for each
Named Executive Officer listed in the Executive Compensation Table. The accrued
benefit of each Named Executive Officer under the Pension Plan is determined on
the basis of each Officer's "Years of Credited Service," shown below, and his
"Final Average Compensation," as defined above. Each Named Executive Officer's
"Final Average Compensation" will include the amounts listed under the "Salary"
and "Bonus" columns of the Executive Compensation Table.
YEARS OF CREDITED SERVICE
-------------------------
YEARS MONTHS
----- ------
Mr. Surabian 18 1
Mr. Dunham 8 9
Employee Stock Ownership Plan and Trust. The Company has established,
and the Bank has adopted, for the benefit of eligible employees, an ESOP and
related trust to become effective upon completion of the Conversion. Employees
of the Bank or the Company who have attained age 21 and have completed one year
of service will be eligible to become participants in the ESOP. The ESOP intends
to purchase eight percent (8%) of the Common Stock issued in the Conversion. As
part of the Conversion and in order to fund the ESOP's purchase of the Common
Stock to be issued in the Conversion, the Bank or the Company expects to
contribute to the ESOP sufficient funds to pay the par value of the Common Stock
to be purchased and the ESOP intends to borrow funds from the Company equal to
the balance of the aggregate purchase price of the Common Stock. Although
contributions to the ESOP will be discretionary, the Company or the Bank intends
to make annual contributions to the ESOP in an aggregate amount at least equal
to the principal and interest requirements on the debt. It is expected that
this loan will be for a term of up to 10 years, will bear interest at the rate
of 8% per annum, and will call for level annual payments of principal and
interest designed to amortize the loan over its term. It is anticipated that
the loan will also permit partial pre-payments. The Company and the Bank may
make additional annual contributions to the ESOP to the maximum extent
deductible for federal income tax purposes.
Shares purchased by the ESOP will initially be pledged as collateral
for the loan, and will be held in a suspense account until released for
allocation among participants in the ESOP as the loan is repaid. The pledged
shares will be released annually from the suspense account in an amount
proportional to the repayment of the ESOP loan for each plan year. The released
shares will be allocated among the accounts of participants on the basis of the
participant's compensation for the year of allocation. Benefits generally become
vested at the rate of 20% per year with vesting to begin after an employee's
completion of three years of service and full vesting to occur after seven years
of service. Participants also become immediately vested upon termination of
employment due to death, retirement at age 65 or older, permanent disability or
upon the occurrence of a change of control. Forfeitures will be reallocated
among remaining participating employees, in the same proportion as
contributions. Vested benefits may be paid in a single sum or installment
payments and are payable upon death, retirement at age 65 or older, disability
or separation from service.
In connection with the establishment of the ESOP, a Committee of the
Company's board of directors will be appointed to administer the ESOP (the "ESOP
Committee"). An unrelated corporate trustee for the ESOP will be appointed prior
to the Conversion and will continue thereafter. The ESOP Committee may instruct
the trustee regarding investment of funds contributed to the ESOP. The ESOP
trustee, subject to its fiduciary duty, must vote all allocated shares held in
the ESOP in accordance with the instructions of the participating employees.
Under the ESOP, unallocated shares will be voted in a manner calculated to most
accurately reflect the instructions it has received from participants regarding
the allocated stock as long as such vote is in accordance with the provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
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<PAGE>
The ESOP may purchase additional shares of Common Stock in the future,
in the open market or otherwise, and may do so either on a leveraged basis with
borrowed funds or with cash dividends, periodic employer contributions or other
cash flow. Whether such purchases will be made and the terms and conditions of
any such purchases will be determined by the ESOP's fiduciaries taking into
account such factors as they consider relevant at the time, including their
judgment as to the attractiveness of the Common Stock as an investment, the
price at which Common Stock may be purchased and, in the case of leveraged
purchases, the terms and conditions on which borrowed funds are available and
the willingness of the Company or the Bank to offer purchase money financing or
guarantee purchase money financing offered by third parties.
EMPLOYMENT AGREEMENTS
Employment Agreements between the Company and Two Senior Executives.
The board of directors of the Company has authorized the Company to enter into
Employment Agreements with each of Mr. Robert H. Surabian and Mr. Ralph W.
Dunham (the "Senior Executives"), on behalf of both the Company and the Bank, to
become effective upon consummation of the Conversion. These Employment
Agreements establish the respective duties and compensation of the Senior
Executives and are intended to ensure that the Company and the Bank will be able
to maintain a stable and competent senior executive management team after the
Conversion. The continued success of the Company and the Bank depends to a
significant degree on the skills and competence of these Senior Executives.
The Employment Agreements to be entered into between the Company and
Messrs. Surabian and Dunham will each have a three year term. The term of the
Employment Agreement between the Company and Mr. Surabian will be automatically
extended on a daily basis so that the remaining term of this Agreement will
always be three years unless written notice of non-renewal is given by the Board
or the Senior Executive. The Company's Employment Agreement with Mr. Dunham
provides that, commencing on the Agreement's first anniversary date and
continuing each anniversary date thereafter, the Board may, with the Senior
Executive's concurrence, extend the Employment Agreement for an additional year,
so that the remaining term will be three years, after conducting a performance
evaluation of the Senior Executive. Both Employment Agreements provide that
each Senior Executive's base salary will be reviewed annually. It is
anticipated that this review will be performed by non-employee members of the
Board, and each Senior Executive's base salary may be adjusted on the basis of
his job performance and the overall performance of the Company and the Bank.
The base salaries for Messrs. Surabian and Dunham commencing as of July 1, 1997,
were $153,363.00 and $96,408.00, respectively. In addition to the base salary,
the Employment Agreements provide for, among other things, entitlement to
participation in pension, savings, incentive and welfare benefit plans and
eligibility for fringe benefits applicable to executive personnel such as fees
for club and organization memberships deemed appropriate by the Company and the
Senior Executive. The Employment Agreements provide for termination by the
Company at any time for cause as defined in the Employment Agreements.
In the event of the termination of the Senior Executive's employment
with the Company and the Bank for reasons other than for cause, death or
disability, or in the event of the Senior Executive's resignation from the
Company and the Bank for reasons permitted under the Employment Agreements (such
as following a change in control), the Senior Executive would be entitled to a
lump sum cash payment in an amount equal to the present value of the remaining
base salary payments due for the remaining term of the Agreement. However, in
the event a Senior Executive's employment terminates following a change in
control of the Company (as described below), for purpose of computing the lump
sum severance amount payable, the remaining term of each Executive's Employment
Agreement will be deemed to be three years. The Agreements also provide for the
Company (or the Bank, if applicable) to continue the Senior Executive's life,
health and disability insurance coverages for the remaining term of the
Employment Agreement. In addition to the foregoing severance benefits, the
Company's Employment Agreement with Mr. Surabian provides for him to receive all
bonus payments and additional contributions or benefits he would have earned
under any employee benefit plan of the Company or the Bank during the remaining
term of his Employment Agreement as well as the payments that would have been
made under any incentive compensation plan during the remaining term of
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<PAGE>
the Employment Agreement. If permitted by applicable law, provision will also be
made for the cash out of stock options, appreciation rights or restricted stock
as if Mr. Surabian was fully vested. Reasons specified as grounds for
resignation by the Senior Executives for purposes of the Employment Agreements
include: failure to elect or re-elect the Senior Executive to his offices;
failure to vest in him the functions, duties or authority associated with such
offices; any material breach of contract by the Company or the Bank which is not
cured within 30 days after written notice thereof; and, following a "change in
control" (as defined in the Employment Agreements), demotion, loss of title,
office or significant authority or responsibility, any reduction in any element
of compensation or benefits, any adverse change or location of the principal
place of employment or working conditions or resignation for any other reason.
In general, for purposes of the Employment Agreements, the ESOP and any stock
benefit plans to be maintained by the Company or the Bank, a "change in control"
will generally be deemed to occur when a person or group of persons acting in
concert acquires beneficial ownership of 25% or more of any class of equity
security of the Company or the Bank, upon stockholder approval of a merger or
consolidation or a change of the majority of the board of directors of the
Company or the Bank, or liquidation or sale of substantially all the assets of
the Company or the Bank. Based on current compensation and benefit costs, cash
payments to be made in the event of a change of control of the Bank or the
Company pursuant to the terms of the Employment Agreements would be
approximately $1,267,000 of which approximately $876,000 would be payable to Mr.
Surabian and $391,000 would be payable to Mr. Dunham. However, the actual amount
to be paid under the Employment Agreements in the event of a change in control
of the Company or the Bank cannot be estimated at this time because the actual
amount is based on the compensation and benefit costs applicable to these
individuals and other factors existing at the time of the change in control
which cannot be determined at this time.
Payments to the Senior Executives under the Company's Employment
Agreements may be paid by either the Bank or the Company and thus will not be
duplicative; the Employment Agreements provide that the Company will guarantee
that all payments to the Senior Executives will be made as provided under the
Employment Agreements. The Senior Executives would be entitled to reimbursement
of certain costs incurred in interpreting or enforcing the Employment
Agreements.
Cash and benefits paid to each Senior Executive under the Employment
Agreements together with payments under other benefit plans following a change
in control of the Company or the Bank may constitute an "excess parachute"
payment under Section 280G of the Code, resulting in the imposition of a 20%
excise tax on the recipient and the denial of the deduction for such excess
amounts to the Company and the Bank. The Company's Employment Agreements
include a provision indemnifying each Senior Executive on an after-tax basis for
any "golden parachute" excise taxes.
Employment Agreements between the Bank and Two Commercial Lending
Officers. The board of directors of the Bank has authorized the Bank to enter
into Employment Agreements with each of Mr. Thomas G. Burke and Mr. John
O'Donnell, who both currently serve the Bank as Commercial Loan Officers ("Loan
Officers"), to become effective upon consummation of the Conversion. The
purpose of these Employment Agreements is to secure the Loan Officers' continued
availability and attention to the Bank's affairs, relieved of distractions
arising from the possibility of a corporate change in control.
Both Agreements have three year terms that may be extended by the
Bank's board of directors, after a performance review of the Loan Officer, for
an additional year. The base salaries for Messrs. Burke and O'Donnell
commencing as of July 1, 1997, were $88,580 and $79,310, respectively. In
addition to the base salary, the Employment Agreements provide for, among other
things, eligibility for participation in the Bank's employee pension, savings,
incentive and welfare benefit plans. The Employment Agreements provide for
termination by the Bank at any time for cause as defined in the Employment
Agreements.
In the event that a Loan Officer's employment with the Bank is
terminated for reasons other than for cause, death or disability or in the event
that the Loan Officer resigns from employment with the Bank following a "change
in control" (as defined above), the Officer would be entitled to a lump sum cash
payment
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<PAGE>
in an amount equal to the present value of the remaining base salary payments
due for the remaining term of the Agreement, as severance pay. In the event that
severance is payable to a Loan Officer due to his termination of employment
following a change in control of the Bank, for purpose of computing the lump sum
severance amount payable, the remaining term of each Officer's Employment
Agreement will be deemed to be three years. The Agreements also provide for the
Bank to continue the Loan Officer's life, health and disability insurance
coverages for the remaining term of the Employment Agreement, as an additional
severance benefit.
Based on current compensation and benefit costs applicable to the Loan
Officers expected to be covered by the Employment Agreements, cash payments to
be made in the event of a change of control of the Bank would be approximately
$503,000. However, the actual amount to be paid under these Agreements in the
event of a change of control of the Bank or the Company cannot be estimated at
this time because it will be based on the compensation and benefit costs
applicable to the Loan Officers and other factors existing at the time of the
change of control which cannot be determined at this time.
FUTURE STOCK BENEFIT PLANS
In addition to the above-described benefit plans, in the future, but
not in the first year following consummation of the Conversion, the Company and
the Bank are expected to consider implementation of an Option Plan and a
Restricted Stock Plan. The significant terms and conditions of these future
stock benefit programs are described below.
Option Plan. At least one year following the Conversion, the Company
anticipates establishing an Option Plan for the benefit of officers, key
employees and directors of the Company and the Bank. The Option Plan will be
subject to stockholder approval. An amount of Common Stock equal to 10% of the
shares of Common Stock to be issued in the Conversion is expected to be reserved
for issuance under the Option Plan. No determinations have been made by the
board of directors as to the specific terms of the Option Plan or the amount of
awards to be granted thereunder. While the Company does not currently intend to
implement the Option Plan within one year following completion of the
Conversion, FDIC regulations provide that if the Option Plan is implemented
within one year following completion of the Conversion, no individual officer or
employee may receive more than 25% of the options granted, and non-employee
directors may not receive more than 5% individually or more than 30% in the
aggregate of the options granted.
The Company's primary purpose of implementing the Option Plan will be
to attract and retain officers, key employees and directors of outstanding
competence and experience and to provide these individuals with a proprietary
interest in the Company as an incentive to contribute to the success of the
Company and its subsidiaries. Although the terms of the Option Plan have not
yet been determined, it is expected that the Plan will provide for the grant of:
(i) options to purchase the Company's Common Stock intended to qualify as
incentive stock options under Section 422 of the Code ("Incentive Stock
Options") and (ii) options that do not so qualify ("Non-Statutory Stock
Options").
Due to the requirements of Section 422 of the Code, Incentive Stock
Options may only be granted to employees of the Company or the Bank. Non-
Statutory Stock Options may be granted to both employees and non-employee
directors under the Plan. The terms and conditions of options granted to
employees of the Company or the Bank will be determined by a committee of the
Company's board of directors appointed to administer the Option Plan, in its
discretion. The terms of all options granted to non-employee directors will be
made pursuant to the formula contained in the Option Plan document which will be
submitted to the Company's stockholders for approval. It is expected that the
exercise price for any stock option granted under the Plan will in no event be
less than the fair market value of a share of the underlying Common Stock on the
date of grant. Options will generally become exercisable in 20% increments
beginning on the first anniversary of the grant date with full vesting to occur
on the fifth anniversary of such date or upon the earlier disability or death of
the optionee. It is also expected that the Option Plan will provide for the
accelerated vesting of option grants upon a "change in control" of the Company
or the Bank (as such term is defined for
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purposes of the Employment Agreements). Unless sooner terminated, the Option
Plan expected to be implemented by the Company will remain in effect for a
period of ten years.
Restricted Stock Plan. No earlier than one year following the
Conversion, the Company also intends to establish a Restricted Stock Plan as a
method of providing officers, key employees and directors of the Company and the
Bank with a proprietary interest in the Company in a manner designed to
encourage such persons to remain with the Company and the Bank. It is
anticipated that the Restricted Stock Plan would cover both eligible officers
and employees of the Company and the Bank and non-employee directors of the
Company and the Bank. The Restricted Stock Plan is subject to stockholder
approval.
Subject to stockholder approval, the Company expects to contribute
funds to the Restricted Stock Plan to enable the Restricted Stock Plan's trust
to acquire, in the aggregate, an amount up to 4% of the shares of Common Stock
issued in the Conversion. Shares used to fund the Restricted Stock Plan may be
acquired through open market purchases, if permitted, or from authorized but
unissued shares. No determinations have been made as to the specific terms of
the Restricted Stock Plan or the amount of awards thereunder. Although no
specific award determinations have been made, the Company anticipates that, if
stockholder approval is obtained, it will provide awards to eligible officers,
employees and directors to the extent permitted by applicable regulations.
While the Company does not currently intend to implement the Restricted Stock
Plan within one year following completion of the Conversion, FDIC regulations
provide that if the Restricted Stock Plan is implemented within one year
following completion of the Conversion, no individual employee may receive more
than 25% of the shares of any plan, and that non-employee directors may not
receive more than 5% of the shares individually or 30% in the aggregate for all
directors.
It is expected that the Restricted Stock Plan adopted would be
administered by a Committee of the board of directors (the "Restricted Stock
Plan Committee"). This Committee would determine the terms and conditions of
all awards made to employees of the Company or the Bank participating in the
Restricted Stock Plan. It is anticipated that awards to non-employee directors
under the Restricted Stock Plan and the material terms and conditions thereof,
will be specified in a plan document that will be submitted to the Company's
stockholders for approval. Under the Restricted Stock Plan, awards are expected
to be granted in the form of shares of Common Stock held by the Restricted Stock
Plan. The Board intends to appoint an independent fiduciary to serve as trustee
of the trust to be established pursuant to the Restricted Stock Plan. The
Restricted Stock Plan is expected to provide for the vesting of awards granted
thereunder in the manner specified by the Restricted Stock Plan Committee
generally at a rate of no more than 20% per year. It is also expected that in
the event of an award recipient's death, grants would become 100% vested, and,
in the event of disability, grants would become 100% vested upon the termination
of employment of an officer or employee, or upon termination of service as a
director. It is also expected that the Restricted Stock Plan will provide for
awards to become automatically 100% vested upon a "change in control" of the
Company or the Bank, as described above.
When shares become vested in accordance with the Restricted Stock
Plan, participants will recognize income equal to the fair market value of the
Common Stock at that time. The amount of income recognized by the participants
may be a deductible expense for tax purposes for the Company. When shares
become vested and are actually distributed in accordance with the Restricted
Stock Plan, the participants will also receive amounts equal to any accrued
dividends with respect thereto. Prior to vesting, recipients of grants may
direct the voting of the shares awarded to them. Shares not subject to grants
will be voted by the trustee of the Restricted Stock Plan in proportion to the
directions provided with respect to shares subject to grants. Vested shares
will be distributed to recipients as soon as practicable following the day on
which they are vested.
In the event that additional authorized but unissued shares are
acquired by the Restricted Stock Plan after the Conversion, the interests of
existing stockholders will be diluted. See, "Special Considerations -- Possible
Dilutive Effective of Future Stock Benefit Plans."
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CERTAIN TRANSACTIONS
In the ordinary course of business, the Bank makes loans to its
directors and officers and parties related to them. The Federal Reserve's
"Regulation O" generally prohibits loans above the greater of $25,000 or 5% of
the Bank's capital and surplus (up to $500,000) to directors and officers and
their affiliates, unless such loans are approved in advance by a disinterested
majority of the board of directors. As a matter of policy, loans to directors
of the Bank, as well as other affiliated persons or entities, currently are made
in the ordinary course of business and on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, do not involve more than the normal
risk of collectability or present other unfavorable features, and are approved
by a disinterested majority of the board of directors.
In addition to these provisions of federal law, Massachusetts law
requires that loans by a co-operative bank to its officers and directors be made
on non-preferential terms and receive the prior approval of a disinterested
majority of the board of directors. Further, loans by a co-operative bank to its
own officers may not exceed $20,000 for general purposes; $75,000 for
educational purposes; and $275,000 for residential home mortgage purposes. All
loans by a co-operative bank to its officers and directors must be reported
annually to the Commissioner. At June 30, 1997, total loans to directors and
officers of the Bank greater than $60,000 on an individual basis amounted to
approximately $1.67 million.
REGULATION
GENERAL
As a co-operative bank chartered by the Commonwealth of Massachusetts,
the Bank is subject to extensive regulation under state law with respect to many
aspects of its banking activities; this state regulation is administered by the
Commissioner. In addition, as a bank whose deposits are insured by the FDIC
under the BIF, the Bank is subject to deposit insurance assessments by the FDIC,
and the FDIC has examination and supervisory authority over the Bank, with a
broad range of enforcement powers. Finally, the Bank is required to maintain
reserves against deposits according to a schedule established by the Federal
Reserve System. These laws and regulations have been established primarily for
the protection of depositors and the deposit insurance funds, not bank
stockholders.
The following references to the laws and regulations under which the
Bank is regulated are brief summaries thereof, do not purport to be complete and
are qualified in their entirety by reference to such laws and regulations.
MASSACHUSETTS BANKING LAWS AND SUPERVISION
Massachusetts co-operative banks such as the Bank are regulated and
supervised by the Commissioner. The Commissioner is required to regularly
examine each state-chartered bank. The approval of the Commissioner is required
to establish or close branches, to merge with another bank, to form a bank
holding company, to issue stock or to undertake many other activities. Any
Massachusetts bank that does not operate in accordance with the regulations,
policies and directives of the Commissioner is subject to sanctions. The
Commissioner may under certain circumstances suspend or remove directors or
officers of a bank who have violated the law, conducted a bank's business in a
manner which is unsafe, unsound or contrary to the depositors' interests, or
been negligent in the performance of their duties.
All Massachusetts-chartered co-operative banks are required to be
members of the Co-operative Central Bank and are subject to its assessments. The
Co-operative Central Bank maintains the Share Insurance Fund, a private deposit
insurer, which insures all deposits in member banks in excess of FDIC deposit
insurance
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limits. In addition, the Co-operative Central Bank acts as a source of liquidity
to its members in supplying them with low-cost funds, and purchasing certain
qualifying obligations from them.
Major changes in Massachusetts law in 1982 and 1983 substantially
expanded the powers of co-operative banks, and made their powers virtually
identical to those of state-chartered commercial banks. The powers which
Massachusetts-chartered co-operative banks can exercise under these laws are
summarized below.
Lending Activities. A Massachusetts chartered co-operative bank may
make a wide variety of mortgage loans. Fixed-rate loans, adjustable-rate loans,
variable-rate loans, participation loans, graduated payment loans, construction
loans, condominium and co-operative loans, second mortgage loans and other types
of loans may be made in accordance with applicable regulations. Mortgage loans
may be made on real estate in Massachusetts or in another New England state if
the bank making the loan has an office there or under certain other
circumstances. In addition, certain mortgage loans may be made on improved real
estate located anywhere in the United States. Commercial loans may be made to
corporations and other commercial enterprises with or without security. With
certain exceptions, such loans may be made without geographic limitation.
Consumer and personal loans may be made with or without security and without
geographic limitation. Loans to individual borrowers generally will be limited
to 20% of the total of the Bank's capital accounts and stockholders' equity.
Investments Authorized. Massachusetts-chartered co-operative banks
have broad investment powers under Massachusetts law, including so-called
"leeway" authority for investments that are not otherwise specifically
authorized. The investment powers authorized under Massachusetts law are
restricted by federal law to permit, in general, only investments of the kinds
that would be permitted for national banks. The Bank has authority to invest in
all of the classes of loans and investments that are permitted by its existing
loan and investment policies.
Payment of Dividends. A co-operative bank may only pay dividends on
its capital stock if such payment would not impair the bank's capital stock and
surplus account. No dividends may be paid to stockholders of a bank if such
dividends would reduce stockholders' equity of the bank below the amount of the
liquidation account required by Massachusetts conversion regulations.
Branches. With the approval of the Commissioner, bank branches may be
established in any city or town in Massachusetts; in addition, co-operative
banks may operate automated teller machines at any of their offices or, with the
Commissioner's approval, anywhere in Massachusetts. Sharing of ATMs or
"networking" is also permitted with the Commissioner's approval. Massachusetts
chartered co-operative banks may also operate ATMs outside of Massachusetts if
permitted to do so by the law of the jurisdiction in which the ATM is located.
Interstate Acquisitions. In 1996, the Massachusetts legislature
passed a new interstate banking statute in anticipation of the June 1, 1997
effective date of the federal interstate banking law. Pursuant to this statute,
an out-of-state bank may (subject to various regulatory approvals and to
reciprocity in its home state) establish and maintain bank branches in
Massachusetts by (i) merging with a Massachusetts bank that has been in
existence for at least three years, (ii) acquiring a branch or branches of a
Massachusetts bank without acquiring the entire bank, or (iii) opening such
branches de novo. Massachusetts banks' ability to exercise similar interstate
banking powers in other states depends upon the laws of the other states. For
example, according to the law of the bordering state of New Hampshire, out-of-
state banks may acquire New Hampshire banks by merger, but may not establish de
novo branches in New Hampshire.
Other Powers. Massachusetts-chartered co-operative banks may also
lease machinery and equipment, act as trustee or custodian for tax qualified
retirement plans, establish trust departments and act as professional trustee or
fiduciary, provide payroll services for their customers, issue or participate
with others
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in the issuance of mortgage-backed securities and establish mortgage banking
companies and discount securities brokerage operations. Some of these activities
require the prior approval of the Commissioner.
Post-conversion Oversight. The Commissioner will continue to oversee
the Bank following the Conversion on a number of matters specifically relating
to the Conversion. For example, the Bank has agreed to submit written quarterly
progress reports to the Division for three years following the Conversion which
detail the implementation of the Bank's conversion business plan's objectives
and goals.
FEDERAL BANKING REGULATIONS
Capital Requirements. Under FDIC regulations, state-chartered banks
that are not members of the Federal Reserve System ("state non-member banks"),
such as the Bank, are required to comply with minimum leverage capital
requirements. For an institution determined by the FDIC to not be anticipating
or experiencing significant growth and to have well diversified risk, including
no undue interest rate risk exposure, excellent asset quality, high liquidity,
good earnings and to be in general a strong banking organization, rated
composite 1 under the Uniform Financial Institutions Ranking System (the CAMELS
rating system) established by the Federal Financial Institutions Examination
Council, the minimum capital leverage requirement is a ratio of Tier 1 capital
to total assets of 3%. For all other institutions, the minimum leverage capital
ratio is 3% plus an additional "cushion" amount of at least 100 to 200 basis
points. Tier 1 capital is the sum of common stockholders' equity, noncumulative
perpetual preferred stock (including any related surplus) and minority
investments in certain subsidiaries, less most intangible assets.
The FDIC has also adopted risk-based capital guidelines to which the
Bank is subject. The guidelines establish a systematic analytical framework
designed to make regulatory capital requirements sensitive to differences in
risk profiles among banking organizations. The FDIC guidelines require state
non-member banks to maintain certain levels of regulatory capital in relation to
regulatory risk-weighted assets. The ratio of such regulatory capital to
regulatory risk-weighted assets is referred to as the Bank's "risk-based capital
ratio." Risk-based capital ratios are determined by allocating assets and
specified off-balance sheet items to four risk-weighted categories ranging from
0% to 100%, with higher levels of capital being required for the categories
perceived as representing greater risk. Under the FDIC's risk-weighting system,
cash and securities backed by the full faith and credit of the U.S. government
are given a 0% risk weight. Mortgage-backed securities that qualify under the
Secondary Mortgage Enhancement Act, including those issued, or fully guaranteed
as to principal and interest, by the FNMA or the Federal Home Loan Mortgage
Corporation ("FHLMC"), are assigned a 20% risk weight. Single-family first
mortgages not more than 90 days past due with loan-to-value ratios under 80%,
multi-family mortgages (maximum 36 dwelling units) with loan-to-value ratios
under 80% and average annual occupancy rates over 80%, and certain qualifying
loans for the construction of one- to four-family residences pre-sold to home
purchasers, are assigned a risk weight of 50%. Consumer loans and commercial
real estate loans, repossessed assets and assets more than 90 days past due, as
well as all other assets not specifically categorized, are assigned a risk
weight of 100%.
State non-member banks must maintain a minimum ratio of qualifying
total capital to risk-weighted assets of at least 8%, of which at least one-half
must be Tier 1 capital. Qualifying total capital consists of Tier 1 capital plus
Tier 2 or supplementary capital items, which include allowances for loan losses
in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock,
preferred stock with a maturity of over 20 years, and certain other capital
instruments. The includable amount of Tier 2 capital cannot exceed the amount of
the institution's Tier 1 capital. Qualifying total capital is further reduced
by the amount of the bank's investments in banking and finance subsidiaries that
are not consolidated for regulatory capital purposes, reciprocal cross-holdings
of capital securities issued by other banks and certain other deductions.
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA")
required each federal banking agency to revise its risk-based capital standards
for insured institutions to ensure that those standards take adequate account of
interest-rate risk ("IRR"), concentration of credit risk, and the risk of
nontraditional
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activities, as well as to reflect the actual performance and expected risk of
loss on multi-family residential loans. In August 1995, the FDIC, along with the
other federal banking agencies, adopted a regulation providing that the agencies
will take account of the exposure of a bank's capital and economic value to the
risks of changes in interest rates in assessing a bank's capital adequacy.
According to the agencies, applicable considerations include the quality of the
bank's interest rate risk management process, the overall financial condition of
the bank, and the level of other risks at the bank for which capital is needed.
Institutions with significant interest rate risk may be required to hold
additional capital. The agencies also issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy. The agencies have determined not to proceed
with a previously issued proposal to develop a supervisory framework for
measuring interest rate risk and to require an explicit capital component for
interest rate risk.
The following table shows the Bank's leverage ratio, its Tier 1 risk-
based capital ratio, and its total risk-based capital ratio, at June 30, 1997.
<TABLE>
<CAPTION>
AT JUNE 30, 1997
-----------------------------------------------------------------------------------------
PRO CAPITAL
HISTORICAL PERCENT OF FORMA PERCENT OF PERCENT OF
CAPITAL ASSETS/(1)/ CAPITAL/(1)/ ASSETS/(1)/ REQUIREMENT ASSETS/(2)/
-------------------------- ----------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Regulatory Tier 1
leverage capital.......... $11,761 8.1% $19,277 12.14% $4,762 4.00%
Tier 1 risk-based capital.. 11,761 13.3 19,277 12.14 7,216 4.00
Total risk-based capital... 12,738 14.4 20,251 22.45 7,216 8.00
</TABLE>
(1) Based on the midpoint of the Current Valuation Range.
(2) For purpose of calculating Regulatory Tier 1 leverage capital, assets are
based on adjusted total average assets. In calculating Tier 1 risked-based
capital and total risk-based capital, assets are based on total risk-
weighted assets.
As the preceding table shows, the Bank exceeded the minimum capital
adequacy requirements at the date indicated.
Enforcement. The FDIC has extensive enforcement authority over
insured co-operative banks, including the Bank. This enforcement authority
includes, among other things, the ability to assess civil money penalties, to
issue cease and desist orders and to remove directors and officers. In general,
these enforcement actions may be initiated in response to violations of laws and
regulations and to unsafe or unsound practices.
The FDIC has authority under federal law to appoint a conservator or
receiver for an insured bank under certain circumstances. The FDIC is required,
with certain exceptions, to appoint a receiver or conservator for an insured
state bank if that bank was "critically undercapitalized" on average during the
calendar quarter beginning 270 days after the date on which the bank became
"critically undercapitalized." For this purpose, "critically undercapitalized"
means having a ratio of tangible capital to total assets of less than 2%. See
"--Prompt Corrective Action." The FDIC may also appoint a conservator or
receiver for a state bank on the basis of the institution's financial condition
or upon the occurrence of certain events, including: (i) insolvency (whereby the
assets of the bank are less than its liabilities to depositors and others); (ii)
substantial dissipation of assets or earnings through violations of law or
unsafe or unsound practices; (iii) existence of an unsafe or unsound condition
to transact business; (iv) likelihood that the bank will be unable to meet the
demands of its depositors or to pay its obligations in the normal course of
business; and (v) insufficient capital, or the incurring or likely incurring of
losses that will deplete substantially all of the institution's capital with no
reasonable prospect of replenishment of capital without federal assistance.
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Deposit Insurance. The FDIC has adopted a risk-based deposit
insurance assessment system. The FDIC assigns an institution to one of three
capital categories based on the institution's financial information, as of the
reporting period ending seven months before the assessment period, consisting of
(1) well capitalized, (2) adequately capitalized or (3) undercapitalized, and
one of three supervisory subcategories within each capital group. The
supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation provided to the FDIC by the institution's primary federal
regulator and information that the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds. An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned. Assessment rates for BIF deposits
currently range from 0 basis points to 27 basis points. The Bank's assessment
rate is currently 0 basis points. The FDIC is authorized to raise the
assessment rates in certain circumstances, including to maintain or achieve the
designated reserve ratio of 1.25%, which requirement the BIF currently meets.
The FDIC has exercised its authority to raise rates in the past and may raise
insurance premiums in the future. If such action is taken by the FDIC, it could
have an adverse effect on the earnings of the Bank. In addition, recent
legislation requires BIF-insured institutions like the Bank to assist in the
payment of FICO bonds.
Under the Deposit Insurance Funds Act of 1996 (the "Funds Act"), the
assessment base for the payments on the FICO bonds was expanded to add,
beginning January 1, 1997, the deposits of BIF-insured institutions, such as the
Bank. Until December 31, 1999, or such earlier date on which the last savings
association ceases to exist, the rate of assessment for BIF-assessable deposits
shall be one-fifth of the rate imposed on SAIF-assessable deposits. The annual
rate of assessments for the payments on the FICO bonds for the semi-annual
period beginning on January 1, 1997 was 0.0130% for BIF-assessable deposits and
0.0648% for SAIF-assessable deposits and for the semi-annual period beginning on
July 1, 1997 was 0.0126% for BIF-assessable deposits and 0.0630% for SAIF-
assessable deposits.
Under the Federal Deposit Insurance Act (the "FDI Act"), insurance of
deposits may be terminated by the FDIC upon a finding that the institution has
engaged in unsafe or unsound practices, is in an unsafe or unsound condition to
continue operations or has violated any applicable law, regulation, rule, order
or condition imposed by the FDIC or the Division. The management of the Bank
does not know of any practice, condition or violation that might lead to
termination of deposit insurance.
Transactions with Affiliates and Insiders of the Bank. Transactions
between an insured bank, such as the Bank, and any of its affiliates is governed
by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is
any company or entity which controls, is controlled by or is under common
control with the bank. Generally, Sections 23A and 23B (i) limit the extent to
which the bank or its subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of such institution's capital stock and
surplus, and limit all such transactions with all affiliates to an amount equal
to 20% of such capital stock and surplus and (ii) require that all such
transactions be on terms that are consistent with safe and sound banking
practices. In addition, any purchase of assets or services by a bank from an
affiliate must be on terms that are substantially the same, or at least as
favorable, to the institution as those that would be provided to a non-
affiliate. The term "covered transaction" includes the making of loans, purchase
of assets, issuance of guarantees and similar other types of transactions.
Further, most loans by a bank to its affiliate must be supported by collateral
in amounts ranging from 100 to 130 percent of the loan amounts.
Banks are also subject to the restrictions contained in Section 22(h)
of the Federal Reserve Act and the Federal Reserve Board's Regulation O
thereunder on loans to executive officers, directors and principal stockholders.
Under Section 22(h), loans to a director, an executive officer or a greater than
10% stockholder of a bank as well as certain affiliated interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
person and affiliated interests, the loans-to-one-borrower limit applicable to
national banks (generally 15% of the institution's unimpaired capital and
surplus), and all loans to all such persons in the aggregate may not exceed the
institution's unimpaired capital and unimpaired surplus. Regulation O also
prohibits the making of loans in an amount greater than $25,000 or 5% of capital
and surplus but in any event
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over $500,000, to directors, executive officers and greater than 10%
stockholders of a bank, and their respective affiliate, unless such loans are
approved in advance by a majority of the board of directors of the bank with any
"interested" director not participating in the voting. Further, Regulation O
requires that loans to directors, executive officers and principal stockholders
be made on terms substantially the same as those that are offered in comparable
transactions to other persons. Regulation O also prohibits a depository
institution from paying the overdrafts over $1,000 of any of its executive
officers or directors unless they are paid pursuant to written pre-authorized
extension of credit or transfer of funds plans.
State chartered non-member banks are further subject to the
requirements and restrictions of 12 U.S.C. (S) 1972 on certain tying
arrangements and extensions of credit by correspondent banks. Specifically, this
statute (i) prohibits a depository institution from extending credit to or
offering any other service, or fixing or varying the consideration for such
extension of credit or service, on the condition that the customer obtain some
additional service from the institution or certain of its affiliates or not
obtain services of a competitor of the institution, subject to certain
exceptions, and (ii) also prohibits extensions of credit to executive officers,
directors, and greater than 10% stockholders of a depository institution by any
other institution which has a correspondent banking relationship with the
institution, unless such extension of credit is on substantially the same terms
as those prevailing at the time for comparable transactions with other persons
and does not involve more than the normal risk of repayment or present other
unfavorable features.
Real Estate Lending Policies. Under FDIC regulations which became
effective March 19, 1993, state-chartered nonmember banks must adopt and
maintain written policies that establish appropriate limits and standards for
extensions of credit that are secured by liens or interest in real estate or are
made for the purpose of financing permanent improvements to real estate. These
policies must establish loan portfolio diversification standards, prudent
underwriting standards, including loan-to-value limits, that are clear and
measurable, loan administration procedures and documentation, approval and
reporting requirements. The real estate lending policies must reflect
consideration of the Interagency Guidelines for Real Estate Lending Policies
(the "Interagency Guidelines") that have been adopted by the federal bank
regulators.
The Interagency Guidelines, among other things, call upon a depository
institution to establish internal loan-to-value limits for real estate loans
that are not in excess of the following supervisory limits: (i) for loans
secured by raw land, the supervisory loan-to-value limit is 65% of the value of
the collateral; (ii) for land development loans (i.e., loans for the purpose of
improving unimproved property prior to the erection of structures), the
supervisory limit is 75%; (iii) for loans for the construction of commercial,
multi-family or other nonresidential property, the supervisory limit is 80%;
(iv) for loans for the construction of one- to four-family properties, the
supervisory limit is 85%; and (v) for loans secured by other improved property
(e.g., farmland, completed commercial property and other income-producing
property including non owner occupied, one- to four-family property), the limit
is 85%. Although no supervisory loan-to-value limit has been established for
owner-occupied, one to four-family and home equity loans, the Interagency
Guidelines state that for any such loan with a loan-to-value ratio that equals
or exceeds 90% at origination, an institution should require appropriate credit
enhancement in the form of either mortgage insurance or readily marketable
collateral.
Safety and Soundness Standards. Pursuant to the requirements of
FDICIA, as amended by the Riegle Community Development and Regulatory
Improvement Act of 1994, each federal banking agency, including the FDIC, has
adopted guidelines establishing general standards relating to internal controls,
information and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, asset quality, earnings, and compensation,
fees and benefits. In general, the guidelines require, among other things,
appropriate systems and practices to identify and manage the risks and exposures
specified in the guidelines. The guidelines prohibit excessive compensation as
an unsafe and unsound practice and describe compensation as excessive when the
amounts paid are unreasonable or disproportionate to the services performed by
an executive officer, employee, director, or principal shareholder. In
addition, the FDIC adopted regulations to require a bank that is given notice by
the FDIC that it is not satisfying any of such safety and soundness standards to
submit a compliance plan to the FDIC. If, after being so notified, a bank fails
to submit
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an acceptable compliance plan or fails in any material respect to implement an
accepted compliance plan, the FDIC may issue an order directing corrective and
other actions of the types to which a significantly undercapitalized institution
is subject under the "prompt corrective action" provisions of FDICIA. If a bank
fails to comply with such an order, the FDIC may seek to enforce such an order
in judicial proceedings and to impose civil monetary penalties.
Prompt Corrective Action. FDICIA also established a system of prompt
corrective action to resolve the problems of undercapitalized institutions. The
FDIC, as well as the other federal banking regulators, adopted regulations
governing the supervisory actions that may be taken against undercapitalized
institutions. The regulations establish five categories, consisting of "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." The FDIC's regulations
defines the five capital categories as follows: Generally, an institution will
be treated as "well capitalized" if its ratio of total capital to risk-weighted
assets is at least 10%, its ratio of core capital to risk-weighted assets is at
least 6%, its ratio of core capital to total assets is at least 5%, and it is
not subject to any order or directive by the FDIC to meet a specific capital
level. An institution will be treated as "adequately capitalized" if its ratio
of total capital to risk-weighted assets is at least 8%, its ratio of core
capital to risk-weighted assets is at least 4%, and its ratio of core capital to
total assets is at least 4% (3% if the bank receives the highest rating on the
CAMELS financial institutions rating system) and it is not a well-capitalized
institution. An institution that has total risk-based capital of less than 8%,
Tier 1 risk-based-capital of less than 4% or a leverage ratio that is less than
4% (or less than 3% if the institution is rated a composite "1" under the CAMELS
rating system) would be considered to be "undercapitalized." An institution that
has total risk-based capital of less than 6%, core capital of less than 3% or a
leverage ratio that is less than 3% would be considered to be "significantly
undercapitalized," and an institution that has a tangible capital to assets
ratio equal to or less than 2% would be deemed to be "critically
undercapitalized." At June 30, 1997 and June 30, 1996, the Bank was categorized
as "well capitalized."
The severity of the action authorized or required to be taken under
the prompt corrective action regulations increases as a bank's capital
deteriorates within the three undercapitalized categories. All banks are
prohibited from paying dividends or other capital distributions or paying
management fees to any controlling person if, following such distribution, the
bank would be undercapitalized. The FDIC is required to monitor closely the
condition of an undercapitalized bank and to restrict the growth of its assets.
An undercapitalized bank is required to file a capital restoration plan within
45 days of the date the bank receives notice that it is within any of the three
undercapitalized categories, and the plan must be guaranteed by any parent
holding company. The aggregate liability of a parent holding company is limited
to the lesser of: (i) an amount equal to the five percent of the bank's total
assets at the time it became "undercapitalized," and (ii) the amount which is
necessary (or would have been necessary) to bring the bank into compliance with
all capital standards applicable with respect to such bank as of the time it
fails to comply with the plan. If a bank fails to submit an acceptable plan, it
is treated as if it were "significantly undercapitalized." Banks that are
significantly or critically undercapitalized are subject to a wider range of
regulatory requirements and restrictions.
The FDIC has a broad range of grounds under which it may appoint a
receiver or conservator for an insured depositary bank. If one or more grounds
exist for appointing a conservator or receiver for a bank, the FDIC may require
the bank to issue additional debt or stock, sell assets, be acquired by a
depository bank holding company or combine with another depository bank. Under
FDICIA, the FDIC is required to appoint a receiver or a conservator for a
critically undercapitalized bank within 90 days after the bank becomes
critically undercapitalized or to take such other action that would better
achieve the purposes of the prompt corrective action provisions. Such
alternative action can be renewed for successive 90-day periods. However, if
the bank continues to be critically undercapitalized on average during the
quarter that begins 270 days after it first became critically undercapitalized,
a receiver must be appointed, unless the FDIC makes certain findings that the
bank is viable.
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Community Reinvestment. Under the Community Reinvestment Act ("CRA"),
as implemented by FDIC regulations, a bank savings association has a continuing
and affirmative obligation consistent with its safe and sound operation to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the FDIC, in connection with its examination of a bank, to assess the
bank's record of meeting the credit needs of its community and to take such
record into account in its evaluation of certain applications by such bank. The
CRA also requires all institutions to make public disclosure of their CRA
ratings. The Bank received a "Outstanding" CRA rating in its most recent
examination.
In April 1995, the FDIC and the other federal banking agencies adopted
amendments revising their CRA regulations. Among other things, the amended CRA
regulations substitute for the prior process-based assessment factors a new
evaluation system that would rate an institution based on its actual performance
in meeting community needs. In particular, the proposed system would focus on
three tests: (a) a lending test, to evaluate the institution's record of making
loans in its service areas; (b) an investment test, to evaluate the
institution's record of investing in community development projects, affordable
housing, and programs benefitting low or moderate income individuals and
businesses; and (c) a service test, to evaluate the institution's delivery of
services through its branches, ATMs, and other offices. Small banks would be
assessed pursuant to a streamlined approach focusing on a lesser range of
information and performance standards. The term "small bank" is defined as
including banks with less than $250 million in assets or an affiliate of a
holding company with banking and thrift assets of less than $1 billion, which
would include the Bank.
HOLDING COMPANY REGULATION
Federal Regulation. Following the consummation of the Conversion, the
Company will be subject to examination, regulation and periodic reporting under
the Bank Holding Company Act (the "BHCA"), as administered by the FRB. The FRB
has adopted capital adequacy guidelines for bank holding companies on a
consolidated basis substantially similar to those of the FDIC for the Bank. On
a pro forma basis after the Conversion, the Company's pro forma total capital
and Tier 1 capital ratios will exceed these minimum capital requirements.
The Company will be required to obtain the prior approval of the FRB
to acquire all, or substantially all, of the assets of any bank or bank holding
company. Prior FRB approval will be required for the Company to acquire direct
or indirect ownership or control of any voting securities of any bank or bank
holding company if, after giving effect to such acquisition, it would, directly
or indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company.
The Company will be required to give the FRB prior written notice of
any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, will be equal to 10% or more of the Company's consolidated net worth.
The FRB may disapprove such a purchase or redemption if it determines that the
proposal would constitute an unsafe and unsound practice, or would violate any
law, regulation, FRB order or directive, or any condition imposed by, or written
agreement with, the FRB. Such notice and approval is not required for a bank
holding company that would be treated as "well capitalized" under applicable
regulations of the FRB, that has received a composite "1" or "2" rating at its
most recent bank holding company inspection by the FRB, and that is not the
subject of any unresolved supervisory issues.
The status of the Company as a registered bank holding company under
the BHCA does not exempt it from certain federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.
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In addition, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of any company engaged in,
non-banking activities. One of the principal exceptions to this prohibition is
for activities found by the FRB to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. Some of the principal
activities that the FRB has determined by regulation to be so closely related to
banking as to be a proper incident thereto are: (i) making or servicing loans;
(ii) performing certain data processing services; (iii) providing discount
brokerage services; (iv) acting as fiduciary, investment or financial advisor,
(v) leasing personal or real property; (vi) making investments in corporations
or projects designed primarily to promote community welfare; and (vii) acquiring
a savings and loan association.
Under FIRREA, depository institutions are liable to the FDIC for
losses suffered or anticipated by the FDIC in connection with the default of a
commonly controlled depository institution or any assistance provided by the
FDIC to such an institution in danger of default. This law would have potential
applicability if the Company ever acquired as a separate subsidiary a depository
institution in addition to the Bank. There are no current plans for such an
acquisition.
Subsidiary banks of a bank holding company are subject to certain
quantitative and qualitative restrictions imposed by the Federal Reserve Act on
any extension of credit to, or purchase of assets from, or letter of credit on
behalf of, the bank holding company or its subsidiaries, and on the investment
in or acceptance of stocks or securities of such holding company or its
subsidiaries as collateral for loans. In addition, provisions of the Federal
Reserve Act and FRB regulations limit the amounts of, and establish required
procedures and credit standards with respect to, loans and other extensions of
credit to officers, directors and principal shareholders of the Bank, the
Company, any subsidiary of the Company and related interests of such persons.
Moreover, banks are prohibited from engaging in certain tie-in arrangements
(with the bank's parent holding company or any of the holding company's
subsidiaries) in connection with any extension of credit, lease or sale of
property or furnishing of services.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB System, which consists of 12 regional
Federal Home Loan Banks subject to supervision and regulation by the Federal
Housing Finance Board ("FHFB"). The Federal Home Loan Banks provide a central
credit facility primarily for member institution. As a member of the FHLB, the
Bank is required to acquire and hold shares of capital stock in the FHLB in an
amount at least equal to 1% of the aggregate unpaid principal of its home
mortgage loans, home purchase contracts, and similar obligations at the
beginning of each year, or 1/20 of its advances (borrowings) from the FHLB,
whichever is greater. The Bank was in compliance with this requirement with an
investment in FHLB stock at June 30, 1997, of $857,800.
The FHLB serves as a reserve or central bank for its member
institutions within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It offers
advances to members in accordance with policies and procedures established by
the FHFB and the board of directors of the FHLB. Long-term advances may only be
made for the purpose of providing funds for residential housing finance.
FEDERAL RESERVE SYSTEM
Pursuant to regulations of the FRB, a bank must maintain average daily
reserves equal to 3% on the first $54 million of net transaction accounts, plus
10% on the remainder. This percentage is subject to adjustment by the FRB.
Because required reserves must be maintained in the form of vault cash or in a
non-interest bearing account at a Federal Reserve Bank, the effect of the
reserve requirement is to reduce the amount of the institution's interest-
earning assets. Effective December 19, 1995, the amount above which the 10%
reserve requirement applies will be lowered to $52 million, thereby increasing
reserve requirements for
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banks with transaction account balances in excess of that threshold. As of June
30, 1997, the Bank met its reserve requirements.
FEDERAL SECURITIES LAWS
The Company has filed with the SEC a registration statement under the
Securities Act for the registration of the Common Stock to be issued pursuant to
the Conversion. Upon completion of the Conversion, the Company's Common Stock
will be registered with the SEC under the Exchange Act. The Company will then
be subject to the information, proxy solicitation, insider trading restrictions
and other requirements under the Exchange Act.
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 the Common Stock purchased by persons who are not affiliates of the
Company may be resold without registration. Shares purchased by an affiliate of
the Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Company meets the current public information
requirements of Rule 144 under the Securities Act, each affiliate of the 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 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 Company to permit affiliates to have their shares
registered for sale under the Securities Act under certain circumstances.
TAXATION
FEDERAL TAXATION
General. The Company and the Bank will file consolidated federal
income tax returns and report their income on the basis of a taxable year ending
June 30 using the accrual method of accounting and will be subject to federal
income taxation in the same manner as other corporations with some exceptions.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to the
Bank or the Company.
Recent Tax Legislation Regarding Tax Bad Debt Reserves. Prior to the
enactment, on August 20, 1996, of the Small Business Job Protection Act of 1996
(the "Small Business Act"), for federal income tax purposes, thrift institutions
such as the Bank, which met certain definitional tests primarily relating to
their assets and the nature of their business, were permitted to establish tax
reserves for bad debts and to make annual additions thereto, which additions
could, within specified limitations, be deducted in arriving at their taxable
income. The Bank's deduction with respect to "qualifying loans," which are
generally loans secured by certain interests in real property, could be computed
using an amount based on a six-year moving average of the Bank's actual loss
experience (the "Experience Method"), or a percentage equal to 8% of the Bank's
taxable income (the "PTI Method"), computed without regard to this deduction and
with additional modifications and reduced by the amount of any permitted
addition to the non-qualifying reserve.
Under the Small Business Act, the PTI Method was repealed and the
Bank, as a "small bank" (one with assets having an adjusted basis of $500
million or less), is required to use the Experience Method of computing
additions to its bad debt reserve for taxable years beginning with the Bank's
taxable year beginning July 1, 1996. In addition, the Bank is required to
recapture (i.e., take into taxable income) over a six-year period, beginning
with the Bank's taxable year beginning July 1, 1996, the excess of the balance
of its bad debt reserves (other than the supplemental reserve) as of June 30,
1996 over the greater of (a) the balance of its "base year reserve," i.e., its
reserves as of June 30, 1988 or (b) an amount that would have been the balance
of such
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reserves as of June 30, 1996 had the Bank always computed the additions to its
reserves using the Experience Method. However, such recapture requirements were
suspended for each of the two successive taxable years beginning July 1, 1996 in
which the Bank originates a minimum amount of certain residential loans during
such years that is not less than the average of the principal amounts of such
loans made by the Bank during its six taxable years preceding July 1, 1996. The
Small Business Act will result in no tax liability. Since the Bank has already
provided a deferred income tax liability for financial reporting purposes on its
bad debt reserves since June 1988, there will be no adverse impact to the Bank's
financial condition or results of operations from the enactment of this
legislation.
Distributions. To the extent that the Bank makes "nondividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the Bank's base year reserve and then from its
supplemental reserve for losses on loans, and an amount based on the amount
distributed will be included in the Bank's taxable income. Nondividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation. However, dividends paid out of
the Bank's current or accumulated earnings and profits, as calculated for
federal income tax purposes, will not constitute nondividend distributions and,
therefore, will not be included in the Bank's income.
The amount of additional taxable income created from a nondividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the nondividend distribution would be includable in gross income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate. The Bank does not intend to pay dividends that would result in a
recapture of any portion of its tax bad debt reserve.
Corporate Alternative Maximum Tax. The Code imposes a tax on
alternative minimum taxable income ("AMTI") at a rate of 20%. Only 90% of AMTI
can be offset by net operating losses. AMTI is also adjusted by determining the
tax treatment of certain items in a manner that negates the deferral of income
resulting from the regular tax treatment of those items. Thus, the Bank's AMTI
is increased by an amount equal to 75% of the amount by which the Bank's
adjusted current earnings exceeds its AMTI (determined without regard to this
adjustment and prior to reduction for net operating losses). In addition, 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 modifications)
over $2.0 million is imposed on corporations, including the Bank, whether or not
an Alternative Maximum Tax ("AMT") is paid. The Bank does not expect to be
subject to the AMT. The Bank was not subject to an environmental tax liability
for the year ended June 30, 1996.
Dividends-Received Deduction and Other Matters. The Company may
exclude from its income 100% of dividends received from the Bank as a member of
the same affiliated group of corporations. The corporate dividends-received
deduction is generally 70% in the case of dividends received from unaffiliated
corporations with which the Company and the Bank will not file a consolidated
tax return, except that if the Company or the Bank owns more than 20% of the
stock of a corporation distributing a dividend, then 80% of any dividends
received may be deducted. Under President Clinton's fiscal year 1998 budget
proposal, as submitted to Congress on February 6, 1997, the 70% dividends-
received deduction would be reduced to 50% with respect to dividends paid after
enactment of any such legislation.
STATE TAXATION
Prior to July, 1995, the Bank was subject to an annual Massachusetts
excise (income) tax equal to 12.54% of its pre-tax income. In 1995, legislation
was enacted to reduce the Massachusetts bank excise (income) tax rate and to
allow Massachusetts-based financial institutions to apportion income earned in
other states. Further, this legislation expands the applicability of the tax to
non-bank entities and out-of-state financial institutions. The Massachusetts
excise tax rate for co-operative banks is currently 11.32% of federal taxable
income, adjusted for certain items. It is anticipated that this rate will be
gradually reduced over the next few
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years so that the Bank's tax rate will become 10.5% by March 31, 2000. Taxable
income includes gross income as defined under the provisions of the Code, plus
interest from bonds, notes and evidences of indebtedness of any State, including
Massachusetts, less deductions, but not the credits, allowable under the
provisions of the Code. No deductions, however, are allowed for dividends
received until July 1, 1999. In addition, carryforwards and carrybacks of net
operating losses are not allowed.
The Bank's active subsidiary, Mystic Securities Corporation, was
established solely for the purpose of acquiring and holding investments which
are permissible for banks to hold under Massachusetts law. Mystic Securities
Corporation is classified with the Massachusetts Department of Revenue as a
"security corporation" under Massachusetts law, qualifying it to take advantage
of the low 1.32% income tax rate on gross income applicable to companies that
are so classified. The Company also qualifies as a "security corporation" under
Massachusetts law, and will likewise be taxed at the rate of 1.32%.
For additional information regarding taxation, see Note 9 of the Notes
to Consolidated Financial Statements.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Company is authorized to issue 6,000,000 shares of capital stock
divided into two classes consisting of 5,000,000 shares of Common Stock and
1,000,000 shares of serial preferred stock, par value $0.01 per share (the
"Preferred Stock"). The Company currently expects to issue 2,050,000 shares of
its Common Stock in the Conversion, subject to adjustment. The Company does not
intend to issue any shares of serial Preferred Stock in the Conversion, nor are
there any present plans to issue Preferred Stock following the Conversion.
Except for shares issued in connection with the Conversion and in connection
with the Option Plan and Restricted Stock Plan, the Company presently does not
have plans to issue Common Stock. Each share of the 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 non-assessable. See "Capitalization." THE
CAPITAL STOCK OF THE COMPANY WILL REPRESENT NON-WITHDRAWABLE CAPITAL AND WILL
NOT BE INSURED BY THE FDIC.
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COMMON STOCK
Dividends. The 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 Company is subject to limitations which are imposed
by law and applicable regulation. See "Dividends" and "Regulation." The holders
of Common Stock of the Company will be entitled to receive and share equally in
such dividends as may be declared by the board of directors of the Company out
of funds legally available therefor. If the Company issues Preferred Stock, the
holders thereof may have a priority over the holders of the Common Stock with
respect to dividends.
Voting Rights. Upon Conversion, the holders of Common Stock of the
Company will possess exclusive voting rights in the Company, except to the
extent that outstanding shares of serial Preferred Stock may or may not have
voting rights. They will elect the Company's board of directors and act on such
other matters as are required to be presented to them under Delaware law or the
Company's Certificate of Incorporation or as are otherwise presented to them by
the board of directors. Each share of the Common Stock will have the same
relative rights and will be identical in all respects with every other share of
its Common Stock. Each holder of the Common Stock will be entitled to one vote
for each share held of record on all matters submitted to a vote of holders of
its Common Stock. The Company's proposed stock charter provides, however, that
there will not be cumulative voting for the first five years following the
Conversion. Except as
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discussed in "Certain Restrictions on Acquisition of the Company and the Bank,"
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 Company
issues Preferred Stock, holders of the Preferred Stock may also possess voting
rights. Certain matters require an 80% or two-thirds shareholder vote. See
"Certain Restrictions on Acquisition of the Company and the Bank."
As a Massachusetts state mutual co-operative bank, corporate powers
and control of the Bank are vested in its board of directors, who elect the
officers of the Bank and who fill any vacancies on the board of directors as it
exists upon Conversion. Currently, depositors of the Bank elect the Bank's board
of directors. Subsequent to Conversion, voting rights will be vested
exclusively in the owners of the shares of capital stock of the Bank, which
owner will be the Company, and voted at the direction of the Company's board of
directors. Consequently, the holders of the Common Stock will not have direct
control of the Bank.
Liquidation. In the event of any liquidation, dissolution or winding
up of the Bank, the Company, as holder of the Bank's capital stock, would be
entitled to receive, after payment or provision for payment of all debts and
liabilities of the Bank (including all deposit accounts and accrued interest
thereon) and after distribution of the balance in the special liquidation
account to Eligible Account Holders and Supplemental Eligible Account Holders
(see "The Conversion -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Bank -- Liquidation Account"), all assets of the Bank available
for distribution. In the event of liquidation, dissolution or winding up of the
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 Company available for distribution in cash or in kind after
payment or provision for payment of (i) all debts and liabilities of the Bank
(including all savings accounts and accrued interest thereon); (ii) any accrued
dividend claims; (iii) liquidation preferences upon serial preferred stock which
may be issued in the future; and (iv) any interests in the liquidation account.
If Preferred Stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of the liquidation or dissolution of
the Company.
Preemptive Rights; Redemption. Holders of the Common Stock will be
entitled to the payment of dividends when, as and if declared by the board of
directors and paid out of the earnings of the Company, if any, and subject to
federal and state regulatory restrictions. See "--Serial Preferred Stock" for
certain information regarding dividend rights and preferences of serial
Preferred Stock. Holders of the Common Stock will not be entitled to preemptive
rights with respect to additional shares of Common Stock that may be issued. The
Common Stock will not be subject to redemption. Upon receipt by the Company of
the Purchase Price, each share of its Common Stock will be fully paid and non-
assessable.
Except in connection with the Conversion and in connection with the
Option Plan and Restricted Stock Plan, the Company has no present plans,
proposals, arrangements or understandings to issue additional authorized shares
of its Common Stock. In the future, the authorized but unissued and unreserved
shares of the Common Stock will be available for general corporate purposes,
including, but not limited to, possible issuance as stock dividends, in
connection with mergers or acquisitions, under a cash dividend reinvestment or
stock purchase plan, in a public or private offering, or under any employee
stock ownership or option plan. Normally, no stockholder approval would be
required for the issuance of these shares, except as required to approve a
transaction in which additional authorized shares of Common Stock are to be
issued.
Indemnification and Limit on Liability. The Company's Certificate of
Incorporation contains provisions which limit the liability of directors,
officers and employees of the Company and indemnify such individuals. Such
provisions provide that each person who was or is made a party or is threatened
to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director or officer of the Company shall
be indemnified and held harmless by the Company to the fullest extent authorized
by the Delaware General Corporate Law (the "DGCL") against all expense,
liability and loss reasonably incurred. Under certain circumstances, the right
to indemnification shall include the right to be paid by the Company the
expenses
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incurred in defending any such proceeding in advance of its final disposition.
In addition, a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages except for liability for any
breach of the duty of loyalty, for acts or omissions not in good faith or which
involve intentional misconduct or knowing violation of the law, under Section
174 of the DGCL, or from any transaction from which the director derived an
improper personal benefit.
SERIAL PREFERRED STOCK
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion. After the Conversion, the board of directors of the
Company will be authorized to issue, subject to Commissioner approval, shares of
serial Preferred Stock in series and to fix the voting powers, designation,
preferences and relative, participation, optional, conversion or other special
rights of the shares of each such series and any qualifications, limitations or
restrictions thereof. Such stock may be issued with such preferences and
designations as the board of directors may from time to time determine. Any
serial preferred stock issued may rank prior to the Common Stock as to dividend
rights, liquidation preferences or both and may have full or limited voting
rights. The board of directors of the Company has no present plans, proposals,
arrangements or understandings to issue serial preferred stock.
OTHER CHARACTERISTICS
See "Dividends" and "Taxation" with respect to restrictions on the
payment of cash dividends; and "The Conversion -- Restrictions on
Transferability by Directors and Officers" relating to certain restrictions on
the transferability of shares purchased by officers and directors; and "Certain
Restrictions on Acquisition of the Company and the Bank" for information
regarding restrictions on acquiring capital stock of the Company.
CERTAIN RESTRICTIONS ON ACQUISITION OF THE COMPANY AND THE BANK
GENERAL
The Bank's Plan of Conversion provides for the conversion of the Bank
from the mutual to the stock form of organization and, in connection therewith,
a new stock charter and bylaws to be adopted by depositors of the Bank. The Plan
also provides for the concurrent formation of a holding company. See "The
Conversion -- General." As described below, certain provisions in the Company's
Certificate of Incorporation and bylaws and in its management remuneration plans
and agreements entered into in connection with the Conversion, together with
provisions of Delaware law, may have anti-takeover effects. In the event that
the holding company form of organization is not utilized, the Bank's stock
charter and bylaws and management remuneration plans and agreements entered into
in connection with the Conversion may have anti-takeover effects as described
below. In addition, regulatory restrictions may make it difficult for persons or
companies to acquire control of either the Company or the Bank.
REGULATORY RESTRICTIONS ON ACQUISITION OF THE COMMON STOCK
Massachusetts Division of Banks Conversion Regulations. Regulations
issued by the Commissioner provide that for a period of three years following
the date of the completion of the Conversion, no person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than ten
percent (10%) of any class of any equity security of the Company without prior
written notice to the Company and the prior written approval of the
Commissioner. Where any person, directly or indirectly, acquires beneficial
ownership of more than ten percent (10%) of any class of any equity security of
the Company without prior written notice to the Company and the prior written
approval of the Commissioner, the securities beneficially owned by such person
in excess of ten percent (10%) 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
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as outstanding for purposes of determining the affirmative vote necessary to
approve any matter submitted to the stockholders for a vote. The Commissioner
may take any further action to enforce these regulatory restrictions as he deems
appropriate.
Change in Bank Control Act. In addition to the foregoing
restrictions, the acquisition of more than ten percent (10%) of the Common Stock
outstanding may, in certain circumstances, be subject to the provisions of the
Change in Bank Control Act. The FDIC has also adopted a regulation pursuant to
the Change in Bank Control Act which generally requires persons who at any time
intend to acquire control of an FDIC-insured state-chartered non-member bank,
including a converted co-operative bank such as the Bank, to provide 60 days
prior written notice and certain financial and other information to the FDIC.
The 60-day notice period does not commence until the information is deemed to be
substantially complete. Control for the purpose of this Act exists in situations
in which the acquiring party has voting control of at least twenty-five percent
(25%) of any class of the Bank's voting stock or the power to direct the
management or policies of the Bank. However, under FDIC regulations, control is
presumed to exist where the acquiring party has voting control of at least ten
percent (10%) of any class of the Bank's voting securities if (i) the Bank has a
class of voting securities which is registered under Section 12 of the Exchange
Act or (ii) the acquiring party would be the largest holder of a class of voting
shares of the Bank. The statute and underlying regulations authorize the FDIC to
disapprove a proposed acquisition on certain specified grounds. In some
circumstances, similar filings with the Commissioner may be required under the
Massachusetts Change in Bank Control Act.
FRB Regulations. Prior approval of the FRB would be required for any
acquisition of control of the Bank by any bank holding company under the BHCA
and approval by the Board of Bank Incorporation would be required under
Massachusetts law. Control for purposes of the BHCA would be based on, among
other things, a twenty-five percent (25%) voting stock test or on the ability of
the holding company otherwise to control the election of a majority of the board
of directors of the Bank. As part of such acquisition, the acquiring company
(unless already so registered) would be required to register as a bank holding
company under the BHCA. A bank holding company's business activities are limited
to those activities which the FRB determines to be closely related to banking
and a proper incident thereto. See "Regulation."
RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
The following discussion is a general summary of certain provisions of
the Company's Certificate of Incorporation and Bylaws and certain other
statutory and regulatory provisions relating to stock ownership and transfers,
the board of directors and business combinations, that might have a potential
"anti-takeover" effect. A number of provisions of the Company's Certificate of
Incorporation and bylaws deal with matters of corporate governance and certain
rights of stockholders. These provisions might have the effect of discouraging
future takeover attempts which are not approved by the board of directors but
which individual Company stockholders may deem to be in their best interests or
in which stockholders may receive substantial premiums for their shares over
then current market prices. As a result, stockholders who might desire to
participate in such transactions may not have an opportunity to do so. Such
provisions will also render the removal of the current board of directors or
management of the Company more difficult. The following description of certain
of the provisions of the Certificate of Incorporation and bylaws of the Company
is necessarily general and reference should be made in each case to such
Certificate of Incorporation and bylaws, which are incorporated herein by
reference. See "Additional Information" as to how to obtain a copy of these
documents.
Limitation on Voting Rights. The Certificate of Incorporation of the
Company provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit") be entitled or permitted to any vote in respect of each
share held in excess of the Limit. Any Person so prohibited who directly or
indirectly acquires or holds the beneficial ownership of more than ten percent
(10%) of the issued and outstanding voting stock in violation of Section 2 of
the Company's Certificate
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of Incorporation of any person so prohibited who directly or indirectly acquires
or holds the beneficial owner ship of more than ten percent (10%) of the issued
and outstanding voting stock in violation of Section 2 of the Company's
Certificate of Incorporation shall be subject to the provisions of Sections 3
and 4 of Article V of the Company's Certificate of Incorporation. Beneficial
ownership is determined pursuant to Rule 13d-3 of the General Rules and
Regulations promulgated pursuant to the Exchange Act and includes shares
beneficially owned by such person or any of his affiliates (as defined in the
Certificate of Incorporation), shares which such person or his affiliates have
the right to acquire pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options and
otherwise and shares as to which such person and his affiliates have sole or
shared investment or voting power, but shall not include shares beneficially
owned by the ESOP or any similar plan of the Company or the Bank or any trustee
with respect thereto (solely by reason of such trustee's capacity) be deemed to
beneficially own any shares held under any such plan. Neither does beneficial
ownership include shares that are subject to a revocable proxy and that are not
otherwise beneficially owned or deemed by the Company to be beneficially owned
by such person and his affiliates. No director of officer (or affiliate thereof)
of the Company shall, solely by reason or any of all of such directors or
officers acting in their capacities as such, be deemed to beneficially own any
shares beneficially owned by any other director or officer (or affiliate
thereof). The Certificate of Incorporation further provides that this provision
limiting voting rights may only be amended upon (i) the approval of a majority
of the directors of the Company, and (ii) the affirmative vote of the holders of
a majority of the total votes eligible to be cast by the holders of all
outstanding shares of capital stock entitled to vote thereon, and (iii) if the
amendment is proposed by or on behalf of an interested shareholder or a director
who is an Affiliate or Associate (as such terms are defined in the Company's
Certificate of Incorporation) of an interested shareholder, by the affirmative
vote of not less than a majority of the total votes eligible to be cast by
holders of all outstanding shares of capital stock entitled to vote thereon not
beneficially owned by an interested shareholder or an Affiliate or Associate
thereof.
Board of Directors. Subject to the rights of any holders of any series
of Preferred Stock that may be issued by the Corporation pursuant to a
resolution or resolutions of the board of directors providing for such issuance,
the directors of the Corporation are divided into three classes, each class
serving a staggered term, and each class containing as near as may be possible,
one-third of the entire number of the board, with the terms of office of one
class expiring each successive year. In accordance with state law, the size of
the board of directors is determined by the Company's bylaws or by resolution of
the board of directors but shall not be less than five (5) nor more than fifteen
(15). The Certificate of Incorporation and the bylaws provide that any vacancy
occurring in the board of directors, including a vacancy created by newly
created directorships resulting in an increase in the number of directors, shall
be filled for the remainder of the unexpired term exclusively by a majority vote
of the directors then in office, whether or not a quorum. The classified board
of directors is intended to provide for continuity of the board of directors and
to make it more difficult and time consuming for a stockholder group to use its
voting power to gain control of the board of directors without the consent of
the incumbent board of directors of the Company. The Certificate of
Incorporation of the Company provides that a director may be removed from the
board of directors prior to the expiration of his term only for cause, upon the
vote of 80% of the total votes eligible to be cast by the holders of all
outstanding shares of capital stock entitled to vote generally in the election
of directors at a meeting of shareholders expressly called for that purpose.
In the absence of these provisions, the vote of the holders of a
majority of the shares could remove the entire Board, with or without cause, and
replace it with persons of such holders' choice.
Cumulative Voting, Special Meetings and Action by Written Consent. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, the Company's bylaws provide that special meetings of
stockholders of the Company may be called only by the Chairperson of the Board,
the President or by resolution of at least three-fourths of the board of
directors then in office. The Certificate of Incorporation also provides that
any corporate action or consent to any action required or
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permitted to be taken by the stockholders of the Company may be taken only at an
annual or special meeting of shareholders and prohibits stockholder action by
written consent in lieu of a meeting.
Authorized Shares. The Certificate of Incorporation authorizes the
issuance of 6,000,000 shares of capital stock, of which 1,000,000 shares shall
be Preferred Stock and 5,000,000 shares shall be Common Stock. The Preferred
Stock and Common Stock are sometimes hereinafter collectively referred to as the
"capital stock."
The board of directors also has sole authority to determine the terms
of any one or more series of Preferred Stock, including voting rights,
conversion rates, whether stock shall be redeemable and liquidation preferences.
As a result of the ability to fix voting rights for a series of Preferred Stock,
the board of directors has the power, to the extent consistent with its
fiduciary duty, to issue a series of Preferred Stock to persons friendly to
management in order to attempt to block a post-tender offer merger or other
transaction by which a third party seeks control, and thereby assist management
to retain its position. The Company's board of directors currently has no plans
for the issuance of additional shares, other than the issuance of additional
shares pursuant to the terms of the Restricted Stock Plan and upon exercise of
stock options to be issued pursuant to the terms of the Option Plan. Although
the Company currently does not anticipate implementing the Option Plan or the
Restricted Stock Plan before one year following consummation of the Conversion,
if implemented prior to the first anniversary of the Conversion, each of the
plans will be presented to stockholders for approval at a meeting of
stockholders to be held no earlier than six months after completion of the
Conversion.
Stockholder Vote Required to Approve Business Combinations with
Principal. The Certificate of Incorporation requires the approval of the
holders of not less than 80% of the total number of votes eligible to be cast by
the holders of all of the Company's outstanding shares of voting stock, together
with the affirmative vote of at least 50% of the total number of votes eligible
to be cast by the holders of all outstanding shares of the voting stock not
beneficially owned by an Interested Shareholder (as defined below) involved or
any affiliate or associate thereof, voting together as a single class to approve
certain "Business Combinations," as defined therein, and related transactions.
Under Delaware law, absent this provision, Business Combinations, including
mergers, consolidations and sales of all or substantially all of the assets of a
corporation must, subject to certain exceptions, be approved by the vote of the
holders of only a majority of the outstanding shares of Common Stock of the
Company and any other affected class of stock. Under the Certificate of
Incorporation, at least 80% approval of stockholders is required in connection
with any transaction involving an Interested Stockholder except (i) in cases
where the proposed transaction has been approved in advance by a majority of the
disinterested directors then in office; or (ii) all of the conditions specified
in the subsections of the Company's Certificate of Incorporation, Article VIII,
Section 2, subsections (a) through (g) have been met.
Evaluation of Offers. The Certificate of Incorporation of the Company
further provides that the board of directors of the Company, when evaluating any
offer to the Company or to the shareholders of the Company from another party to
(a) purchase for cash, or exchange any securities or property for any
outstanding equity securities of the Company, (b) merge or consolidate the
Company with another corporation, or (c) purchase or otherwise acquire all or
substantially all of the properties and assets of the Company, shall, in
connection with the exercise of its judgment in determining what is in the best
interest of the Company and its shareholders, give due consideration not only to
the price or other consideration being offered, but also to all other relevant
factors including, without limitation, the financial and managerial resources
and future prospects of the other party, the possible effects on the business of
the Company and its subsidiaries and on the employees, customers, suppliers and
creditors of the Company and its subsidiaries, and the effects on the
communities in which the Company's and its subsidiaries' facilities are located.
By having these standards in the Certificate of Incorporation of the Company,
the board of directors may be in a stronger position to oppose such a
transaction if the board of directors concludes that the transaction would not
be in the best interests of the Company, even if the price offered is
significantly greater than the then market price of any equity security of the
Company.
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Amendment of Certificate of Incorporation and Bylaws. The Certificate
of Incorporation provides that certain provisions of the Certificate of
Incorporation may not be altered, amended, repealed or rescinded without the
affirmative vote of either (1) not less than a majority of the authorized number
of directors then in office and by (2) the affirmative vote of the holders of a
majority (or such greater proportion as may otherwise be required pursuant to
any specific provision of the Certificate of Incorporation) of the total votes
eligible to be cast by the holders of all outstanding shares of capital stock
entitled to vote thereon; provided, however, that if any such change relates to
Section 13 of Article X or Articles V, VI, VII or XI of the Certificate of
Incorporation, such change must be approved either (i) by not less than a
majority of the au thorized number of directors and, if one or more Interested
Shareholders (as defined in Article VIII of the Certificate of Incorporation)
exist, by not less than a majority of the disinterested directors (as defined in
Article VIII of the Certificate of Incorporation), or (ii) by the affirmative
vote of the holders of not less than two-thirds of the total votes eligible to
be cast by the holders of all outstanding shares of capital stock entitled to
vote thereon and, if the change is proposed by or on behalf of an interested
shareholder or a director who is an affiliate or associate (as such terms are
defined in Article VIII of the Certificate of Incorporation) of an interested
shareholder, by the affirmative vote of the holders of not less than a majority
of the total votes eligible to be cast by holders of all outstanding shares of
capital stock entitled to vote thereon not beneficially owned by an interested
shareholder or an affiliate or associate thereof.
Except as may otherwise be provided in the Certificate of
Incorporation, the Company reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in the
Certificate of Incorporation, and to add or insert any other provisions
authorized by the laws of the State of Delaware at the time in force, in the
manner now or hereafter prescribed by law, and all rights, preferences and
privileges of any nature conferred upon shareholders, directors or any other
persons whomsoever by and pursuant to the Certificate of Incorporation in its
present form or as hereafter amended are granted subject to the rights reserved
in Section 1 of the Company's Certificate of Incorporation.
Furthermore, the Company's Certificate of Incorporation provides that
provisions of the bylaws that contain supermajority voting requirements may not
be altered, amended, repealed or rescinded without a vote of the board or
holders of shares of capital stock entitled to vote thereon that is not less
than the supermajority specified in such provision. Absent these provisions,
the DGCL provides that a corporation's Certificate of Incorporation and bylaws
may be amended by the holders of a majority of the corporation's outstanding
capital stock. The Certificate of Incorporation also provides that the board of
directors is authorized to make, alter, amend, rescind or repeal any of the
Company's bylaws in accordance with the terms thereof, regardless of whether the
bylaw was initially adopted by the stockholders. However, this authorization
neither divests the stockholders of their right, nor limits their power to
adopt, amend, rescind or repeal any bylaw under the DGCL. These provisions
could have the effect of discouraging a tender offer or other takeover attempt
where the ability to make fundamental changes through bylaw amendments is an
important element of the takeover strategy of the acquiror.
Certain Bylaw Provisions. The bylaws of the Company also require that
except in the case of a nominee substituted as a result of the death,
incapacity, withdrawal or other inability to serve of a nominee, the board, or a
committee thereof, shall deliver written nominations to the Secretary at least
sixty (60) days prior to the date of the annual meeting. Provided the board of
directors, or committee thereof, makes such nominations, no nominations for
directors except those made by the board or such committee shall be voted upon
at the annual meeting of stockholders unless other nominations by stockholders
are made in accordance with the provisions of Section 11 of the Company's
bylaws. Nominations of individuals for election to the board of directors at an
annual meeting of stockholders may be made by any stockholder of record of the
corporation entitled to vote for the election of directors at such meeting who
provides timely notice in writing to the Secretary as set forth in Section 11 of
the Company's bylaws. To be timely, a stockholder's notice must be delivered to
or received by the Secretary not later than the following dates: (i) with
respect to an election of directors to be held at an annual meeting of
stockholders, sixty (60) days in advance of such meeting if such meeting is to
be held on a day which is within thirty (30) days preceding the anniversary of
the previous year's
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annual meeting, or ninety (90) days in advance of such meeting if such
meeting is to be held on or after the anniversary of the previous year's annual
meeting; and (ii) with respect to an election to be held at an annual meeting of
stockholders held at a time other than within the time periods set forth in the
immediately preceding clause (i), or at a special meeting of stockholders for
the election of directors, the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
stockholders.
The notice provision requires a stockholder who desires to raise new
business to provide certain information to the Company concerning the nature of
the new business, the proposing stockholder and the stockholder's interest in
the business matter. Similarly, a stockholder wishing to nominate any person for
election as a director must provide the Company with certain information
concerning the nominee and the proposing stockholder.
ANTI-TAKEOVER EFFECTS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
AND MANAGEMENT REMUNERATION ADOPTED IN CONVERSION
The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its board of directors. Certain
provisions of the employment agreements with officers, the Restricted Stock Plan
and the Option Plan expected to be established may provide for accelerated
benefits to participants in the event of a change in control of the Company or
the Bank or a tender or exchange offer for their stock. See "Management of the
Bank -- Employment Agreements," and "-- Certain Benefit Plans and Agreements."
The Company's board of directors believes that the provisions of the
Certificate of Incorporation, bylaws and management remuneration plans to be
established are in the best interests of the Company and its stockholders. An
unsolicited non-negotiated takeover proposal can seriously disrupt the business
and management of a corporation and cause it great expense. Accordingly, the
board of directors believes it is in the best interests of the Company and its
stockholders to encourage potential acquirors to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage non-negotiated takeover attempts. It is also the board of directors'
view that these provisions should not discourage persons from proposing a merger
or other transaction at a price that reflects the true value of the Company and
that otherwise is in the best interests of all stockholders.
DELAWARE CORPORATE LAW
The State of Delaware has a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the DGCL ("Section 203"), is
intended to discourage certain takeover practices by impeding the ability of a
hostile acquiror to engage in certain transactions with the target company.
In general, Section 203 provides that a "Person" (as defined therein)
who owns 15% or more of the outstanding voting stock of a Delaware corporation
(a "DGCL Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became a DGCL Interested Stockholder.
The term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements
of Section 203: (i) any business combination if, prior to the date a person
became a DGCL Interested Stockholder, the board of directors approved either the
business combination or the transaction which resulted in the stockholder
becoming a DGCL Interested Stockholder; (ii) any business combination involving
a person who acquired at least 85% of the outstanding voting stock in the
transaction in which he became a DGCL Interested Stockholder, excluding, for
purposes of determining the number of shares outstanding, shares owned by the
Company's
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directors who are also officers and certain employee stock plans; (iii) any
business combination with a DGCL Interested Stockholder that is approved by the
board of directors and by a two-thirds vote of the outstanding voting stock not
owned by the DGCL Interested Stockholder; and (iv) certain business combinations
that are proposed after the corporation had received other acquisition proposals
and which are approved or not opposed by a majority of certain continuing
members of the board of directors. A corporation may exempt itself from the
requirement of the statute by adopting an amendment to its Certificate of
Incorporation or Bylaws electing not to be governed by Section 203 of the DGCL.
At the present time, the board of directors does not intend to propose any such
amendment.
RESTRICTIONS IN THE BANK'S AMENDED CHARTER AND BYLAWS
Although the board of directors of the Bank is not aware of any effort
that might be made to obtain control of the Bank after the Conversion, the board
of directors believes that it is appropriate to adopt certain provisions
permitted by Massachusetts General Laws to protect the interests of the
converted Bank and its shareholders from any hostile takeover. Such provisions
may, indirectly, inhibit a change in control of the Company, as the Bank's sole
stockholder. See "Special Considerations -- Anti-Takeover Provisions and Voting
Control of Management."
The Bank's stock charter will contain a provision whereby without the
prior approval by a two-thirds vote of the Bank's board of directors, no person
shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10 percent of any class of any equity security of the
Bank. This limitation shall not apply to a transaction in which the Bank forms
a holding company without change in the respective beneficial ownership
interests of its stockholders other than pursuant to the exercise of any
dissenter and appraisal rights or the purchase of shares by underwriters in
connection with a public offering. In the event shares are acquired in
violation of this provision of the Bank's stock charter, all shares beneficially
owned by any person in excess of 10 percent shall be considered "excess shares"
and shall not be counted as shares entitled to vote and shall not be voted by
any person or counted as voting shares in connection with any matters submitted
to the stockholders for a vote.
THE CONVERSION
THE COMMISSIONER HAS GIVEN APPROVAL TO THE PLAN SUBJECT TO THE
SATISFACTION OF CERTAIN CONDITIONS IMPOSED BY THE COMMISSIONER IN HIS APPROVAL.
COMMISSIONER APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN.
GENERAL
The board of directors of the Bank adopted the Plan pursuant to which
the Bank would be converted from a Massachusetts chartered mutual co-operative
bank to a Massachusetts chartered stock co-operative bank. The Conversion will
be accomplished through the simultaneous adoption of a new stock charter and
bylaws to authorize the issuance of capital stock by the Bank to the Company.
Under the Plan, the Company is offering shares of the Common Stock in a
Subscription Offering to the Bank's Eligible Account Holders, the Bank's ESOP
and the Supplemental Eligible Account Holders.
Concurrent with or at any time during the Subscription Offering, the
board of directors of the Company may elect to offer those shares of Common
Stock not subscribed for in the Subscription Offering by the Eligible Account
Holders to the general public, with preference given to persons who are
residents of Medford, Malden, Everett, Stoneham, Arlington, Winchester,
Somerville, Melrose, Lexington and Bedford, Massachusetts in a Direct Community
Offering, with further preference being given to borrowers of the Bank who
reside or do business in those communities and subject to the Company's right to
reject orders in the Direct Community Offering in whole or in part.
Subscriptions for Common Stock received from members of the
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general public in the Direct Community Offering will be subject to availability
of shares of Common Stock for purchase after satisfaction of all subscriptions
in the Subscription Offering, to the maximum and minimum purchase limitations
set forth in the Plan and to the right of the Company to reject any such
subscriptions, in whole or in part.
Applicable conversion regulations require, with certain exceptions,
that all shares offered in the Conversion must be sold in order for the
Conversion to become effective. All Common Stock not sold in the Subscription
Offering is expected to be sold in the Direct Community Offering. Applicable
regulations require that the Direct Community Offering be completed within 45
days after completion of the Subscription Offering period unless such period is
extended by the Company with the approval of the regulatory authorities. If the
Direct Community Offering is determined not to be feasible, an occurrence that
is not currently anticipated, the board of directors of the Company and the Bank
will consult with the regulatory authorities to determine an appropriate
alternative method of selling all unsubscribed shares of Common Stock. The Plan
provides that the Conversion must be completed within 24 months after the date
of the approval of the Plan by the mutual depositors of the Bank.
At the board of directors' discretion, the Direct Community Offering
may be commenced concurrently with or at any time during the Subscription
Offering. The completion of the Subscription Offering and Direct Community
Offering, however, is subject to market conditions and other factors beyond the
Bank's control. As a final step in the Conversion, shares not subscribed for in
the Subscription Offering and the Direct Community Offering, if any, will be
offered to certain members of the general public in the Syndicated Community
Offering. No assurance can be given as to the length of time that will be
required to complete the Direct Community Offering or other sale of the Common
Stock. If delays are experienced, significant changes may occur in the estimated
pro forma market value of the Bank upon conversion together with corresponding
changes in the offering price and the net proceeds realized by the Company from
the sale of the Common Stock. The Bank would also incur substantial additional
printing, legal and accounting expenses in completing the Conversion. In the
event the Conversion is terminated, the Bank would be required to charge all
conversion expenses against current income.
EFFECT OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE BANK
Voting Rights. Depositors as such will have no voting rights in the
Bank after the Conversion and will therefore not be able to elect directors of
the Bank or vote on other corporate actions. (Currently these rights are
accorded to depositors of the Bank.) After the Conversion, voting rights will be
vested exclusively in the stockholders of the Company. Each holder of the
Company's Common Stock shall be entitled to vote on any matter to be considered
by the stockholders of the Company.
Savings Accounts and Loans. THE BANK'S SAVINGS ACCOUNTS, THE BALANCES
OF THE INDIVIDUAL ACCOUNTS AND THE EXISTING FDIC AND SHARE INSURANCE FUND
INSURANCE COVERAGE WILL NOT BE AFFECTED BY THE CONVERSION. Furthermore, the
Conversion will not affect the loan accounts, the balances of these accounts and
the obligations of the borrowers under their individual contractual arrangements
with the Bank.
Tax Aspects. The Bank has received an opinion of its counsel, Thacher
Proffitt & Wood, that for federal income tax purposes, among other matters: (i)
the Bank's change in form from mutual to stock ownership will constitute a
reorganization under section 368(a)(1)(F) of the Code and neither the Bank nor
the Company will recognize any gain or loss as a result of the Conversion; (ii)
no gain or loss will be recognized by the Bank or the Company upon the purchase
of the Bank's capital stock by the Company or by the Company upon the purchase
of its Common Stock in the Conversion; (iii) no gain or loss will be recognized
by Eligible Account Holders or by Supplemental Eligible Account Holders upon the
issuance to them of deposit accounts in the Bank in its stock form plus their
interests in the liquidation account in exchange for their deposit accounts
in the Bank; (iv) the tax basis of the depositors' deposit accounts in the Bank
immediately after the Conversion will be the same as the basis of their deposit
accounts immediately prior to the Conversion; (v) the tax basis of
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each Eligible Account Holder's and each Supplemental Eligible Account Holder's
interest in the liquidation account will be zero; (vi) no gain or loss will be
recognized by Eligible Account Holders or by Supplemental Eligible Account
Holders upon the distribution to them of nontransferable subscription rights to
purchase shares of the Common Stock, provided, that the amount to be paid for
the Common Stock is equal to the fair market value of such stock; and (vii) the
tax basis to the shareholders of the Common Stock of the Company purchased in
the Conversion pursuant to the subscription rights will be the amount paid
therefore and the holding period for the shares of Common Stock purchased by
such persons will begin on the date on which their subscription rights are
exercised.
Unlike private rulings, opinions of counsel are not binding on the IRS
and the IRS could disagree with conclusions reached therein. In the event of
such disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
Certain portions of the federal tax opinion are based upon the opinion
of R.P. Financial that subscription rights issued in connection with the
Conversion will have no value. In the opinion of R.P. Financial, which opinion
is not binding on the IRS, the subscription rights do not have any value, based
on the fact that such rights are acquired by the recipients without cost, are
nontransferable and of short duration, and afford the recipients the right only
to purchase the Common Stock at a price equal to its estimated fair market
value, which will be the same price as the Purchase Price for the unsubscribed
shares of Common Stock. If the subscription rights granted to Eligible Account
Holders or Supplemental Eligible Account Holders are deemed to have an
ascertainable value, such Eligible Account Holders or Supplemental Eligible
Account Holders could be taxed upon the receipt or exercise of the subscription
rights in an amount equal to such value, and the Bank could recognize gain on
such distribution. Eligible Account Holders and Supplemental Eligible Account
Holders are encouraged to consult with their own advisors as to the tax
consequences in the event that such subscription rights are deemed to have an
ascertainable tax value.
Liquidation Account. In the unlikely event of a complete liquidation
of the Bank, each holder of a deposit account in the Bank would receive his or
her pro rata share of any assets of the Bank remaining after payment of claims
of all creditors (including the claims of all depositors to the withdrawal value
of their accounts). His or her pro rata share of such remaining assets would be
the same proportion of such assets as the value of his deposit account was to
the total of the value of all deposit accounts in the Bank at the time of
liquidation.
The Plan of Conversion provides that, at the time of Conversion, a
Liquidation Account will be established on the Bank's books for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders who maintain
their deposit accounts in the Bank following the Conversion. The amount of the
Liquidation Account will be equal to the net worth of the Bank as of June 30,
1997. After the Conversion, each Eligible Account Holder and Supplemental
Eligible Account Holder will be entitled, in the event of a complete liquidation
of the Bank, to receive liquidating distributions of any assets remaining after
payment of all claims of creditors (including those of all depositors, to the
extent of deposit balances), but before any distributions are made on the Bank's
capital stock, from the Liquidation Account equal to their adjusted Subaccount
Balances (as defined below).
The initial Subaccount Balances for each Eligible Account Holder and
Supplemental Eligible Account Holder shall be determined by multiplying the
opening balance in the Liquidation Account by a fraction, the numerator of which
is the amount of Qualifying Deposits held by such Eligible Account Holder or
Supplemental Eligible Account Holder on the Eligibility Record Date or the
Supplemental Eligibility Record Date, and the denominator of which is the
aggregate amount of all Qualifying Deposits on such dates. For deposit accounts
in existence on both dates, separate Subaccount Balances shall be determined on
the basis of the Qualifying Deposits in such deposit accounts on such dates.
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If, however, on the last day of any fiscal year of the Bank commencing
after the Eligibility Record Date or Supplemental Eligibility Record Date, as
the case may be, the deposit balance in any deposit account of an Eligible
Account Holder or Supplemental Eligible Account Holder is less than either: (i)
the amount of Qualifying Deposits of such Eligible Account Holder or
Supplemental Eligible Account Holder on the Eligibility Record Date or
Supplemental Eligibility Record Date, as the case may be, or (ii) the deposit
balance in such deposit account at the close of business on the last day of any
previous fiscal year of the Bank commencing after the Eligibility Record Date or
the Supplemental Eligibility Record Date, then such Eligible Account Holder's or
Supplemental Eligible Account Holder's Subaccount Balance would be reduced in an
amount equal to the reduction in such deposit balance, and such Subaccount
Balance will cease to exist if such deposit account is closed. In addition, no
interest in the Liquidation Account would ever be increased despite any
subsequent increase in the deposit balances of any Eligible Account Holder or
Supplemental Eligible Account Holder. Any assets remaining after the above
liquidation rights of Eligible Account Holders and Supplemental Eligible Account
Holders are satisfied would be distributed to the stockholders of the Company.
A merger, consolidation, sale of bulk assets, or similar combination
or transaction in which the Bank is not the surviving entity would not be
considered to be a "liquidation" requiring a distribution of the Liquidation
Account. In such a transaction, the Liquidation Account would be assumed by the
surviving entity.
The creation and maintenance of the Liquidation Account will not
restrict the use or application of any of the capital accounts of the Bank,
except that the Bank may not declare a dividend to the Company if the effect of
such dividend would be to cause its retained earnings to be reduced below the
aggregate amount then required for the Liquidation Account.
SUBSCRIPTION RIGHTS
All persons entitled to purchase stock in the Subscription Offering
have received nontransferable subscription rights to purchase stock at no cost
to such persons. The amount of stock which these parties may purchase will be
determined, in part, by the total stock to be issued, and the availability of
stock for purchase under the categories set forth in the Plan. If the Direct
Community Offering, as described below, extends beyond 45 days following the
expiration of the Subscription Offering, subscribers will have the opportunity
to increase, decrease or rescind their orders to purchase stock submitted in the
Subscription Offering. Preference categories have been established for the
allocation of stock to the extent that said stock is available. These categories
are as follows:
CATEGORY 1 is reserved for the Bank's Eligible Account Holders (i.e.,
depositors at the Bank on March 31, 1996 with account balances of $50.00 or
more) who will each receive nontransferable subscription rights to purchase up
to $300,000 of Common Stock. Eligible Account Holders, together with associates
and/or with persons acting in concert, are limited to an aggregate maximum
purchase limitation of $600,000 of Common Stock. See "--Limitations on
Purchases of Shares." In the event that subscriptions for the Common Stock are
received from Eligible Account Holders in excess of the number of shares
available for subscription, the Common Stock available for purchase will be
allocated among the subscribing Eligible Account Holders so as to permit each
subscribing Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his or her total allocation of Common Stock
equal to the lesser of 100 shares or the number of shares subscribed by such
Eligible Account Holder. Any shares remaining after such allocation will be
allocated among the subscribing Eligible Account Holders whose subscriptions
remain unsatisfied proportionately, based on the amount of their respective
qualifying deposits as compared to total qualifying deposits of all Eligible
Account Holders whose subscriptions remain unsatisfied. If the amount so
allocated exceeds the amount subscribed for by any one or more Eligible Account
Holders, the excess shall be reallocated on the same principle (one or more
times as necessary) among those Eligible Account Holders whose subscriptions are
still not fully satisfied until all available shares have been allocated or all
subscriptions are satisfied. Subscription rights received by officers and
directors in this category based on their increased deposits
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in the Bank in the one-year period preceding March 31, 1996 are subordinated to
the subscription rights of other Eligible Account Holders.
CATEGORY 2 is reserved for the ESOP of the Bank, which shall receive
nontransferable subscription rights to purchase up to 8% of the Common Stock. It
is expected that the Bank's ESOP will subscribe for approximately 188,600
shares, or 8%, of the Common Stock at the maximum of the Current Valuation
Range. If, after the filling of subscriptions of Eligible Account Holders, a
sufficient number of shares are not available to fill the subscriptions by the
ESOP, the subscription by the ESOP shall be filled to the maximum extent
possible. If all the shares of Common Stock offered in the Subscription
Offering are purchased by Eligible Account Holders, then the ESOP will purchase
shares in the open market following consummation of the conversion. The ESOP
shall not be deemed to be an Associate or Affiliate of, or a Person Acting in
Concert with, any director or officer of the Company or the Bank.
Notwithstanding any provision contained herein to the contrary, the Bank may
make scheduled discretionary contributions to the ESOP; provided, that such
contributions do not cause the Bank to fail to meet its regulatory capital
requirements.
CATEGORY 3 is reserved for the Bank's Supplemental Eligible Account
Holders as of March 31, 1997 who will each receive nontransferable subscription
rights to purchase up to $300,000 of Common Stock. Supplemental Eligible
Account Holders, together with associates and/or persons acting in concert, are
limited to an aggregate maximum purchase limitation of $600,000 of Common Stock.
See "--Limitations on Purchases of Shares". In the event that subscriptions for
Common Stock are received from Supplemental Eligible Account Holders upon
exercise of Subscription Rights in excess of the number of Shares available for
subscription, the Common Stock available for purchase will be allocated among
the subscribing Supplemental Eligible Account Holders so as to permit each
subscribing Supplemental Eligible Account Holder, to the extent possible, to
purchase a number of Shares sufficient to make his total allocation of Common
Stock equal to the lesser of 100 Shares or the number of Shares subscribed for
by such Supplemental Eligible Account Holder. Any Shares remaining after such
allocation will be allocated among the subscribing Supplemental Eligible Account
Holders whose subscriptions remain unsatisfied proportionately, based on the
amount of their respective qualifying deposits as compared to total qualifying
deposits of all Supplemental Eligible Account Holders whose subscriptions remain
unsatisfied. If the amount so allocated exceeds the amount subscribed for by
any one or more Supplemental Eligible Account Holders, the excess shall be
reallocated on the same principle (one or more times as necessary) among those
Supplemental Eligible Account Holders whose subscriptions are still not fully
satisfied until all available shares have been allocated or all subscriptions
satisfied. Subscription rights received by officers and directors in this
category based on their increased deposits in the Bank in the one-year period
preceding March 31, 1997 are subordinated to the subscription rights of other
Supplemental Eligible Account Holders.
SUBSCRIPTION OFFERING
Expiration Date of Subscription Offering. The Subscription Offering
will expire at 3:30 p.m., Eastern Standard Time, on _______, 1997 unless
extended by the board of directors of the Bank. Such date and time are referred
to herein as the "Expiration Date." Subscription rights not exercised prior to
the Expiration Date may be void.
Orders will not be executed by the Bank until all shares of Common
Stock have been subscribed for or sold. If all shares have not been subscribed
for or sold within 45 days of the end of the Subscription Offering, or by
_______, 199__ (unless such period is extended with consent of the
Commissioner), all funds delivered to the Bank pursuant to the Subscription
Offering will be returned to the subscribers with interest, and all charges to
savings accounts will be rescinded.
Use of Order Forms. Rights to subscribe may be exercised only by
completion of order forms. Any person receiving an order form who desires to
subscribe for shares of stock must do so prior to the Expiration Date by
delivering (by mail or in person) to Mystic a properly executed and completed
order form,
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together with full payment for all shares for which the subscription is made.
Facsimiles of order forms will not be accepted as properly completed and
executed order forms. All checks or money orders must be made payable to the
order of "Mystic Financial, Inc." The order form must be received by the
Expiration Date. All subscription rights under the Plan will expire on the
Expiration Date, whether or not the Bank has been able to locate each person
entitled to such subscription rights. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT
BE REVOKED OR MODIFIED WITHOUT THE CONSENT OF THE BANK.
Each subscription right may be exercised only by the person to whom it
is issued and only for his or her own account. THE SUBSCRIPTION RIGHTS UNDER THE
PLAN ARE NONTRANSFERABLE. Each person subscribing for shares is required to
represent to the Bank that he or she is purchasing such shares for his or her
own account and that he or she has no agreement or understanding with any other
person for the sale or transfer of such shares.
In the event order forms: (i) are not delivered and are returned to
Mystic by the United States Postal Service or the Bank and/or the Company is
unable to locate the addressee, or (ii) are not returned or are received after
the Expiration Date, or (iii) are defectively filled out or executed, or (iv)
are not accompanied by the full required payment for the shares subscribed for
(including instances where a savings account or certificate balance from which
withdrawal is authorized is insufficient to fund the amount of such required
payment), the subscription rights for the person to whom such rights have been
granted will lapse as though such person failed to return the completed order
form within the time period specified. However, Mystic may waive any
irregularity on any order form or require the submission of corrected order
forms or the remittance of full payment for subscribed shares by such date as
Mystic may specify. The interpretation by Mystic of the terms and conditions of
the Plan and of the order form will be final.
Payment for Shares. Payment for all subscribed shares computed on the
basis of the Purchase Price will be required to accompany all completed order
forms for subscriptions to be valid. Payment for subscribed shares may be made
(i) in cash, if delivered in person, (ii) by check, bank draft or money order,
or (iii) by authorization of withdrawal from deposit accounts maintained with
the Bank. Wire transfers as payment for shares ordered for purchase will not be
permitted or accepted as proper payment. Appropriate means by which withdrawals
from deposit accounts may be authorized are provided in the order forms. Once
such a withdrawal has been authorized, none of the designated withdrawal amount
may be used by a subscriber for any purpose other than to purchase stock for
which subscription has been made while the Plan remains in effect. In the case
of payments authorized to be made through withdrawal from deposit accounts, all
sums authorized for withdrawal will continue to earn interest at the contract
rate until the date of consummation of the sale. In the case of payments made in
cash or by check or money order, such funds will be placed in a segregated
savings account established for each subscriber specifically for this purpose
(each federally insured up to the applicable $100,000 limit and insured by the
Share Insurance Fund of the Co-operative Central Bank for amounts in excess of
$100,000), and interest will be paid at the passbook rate then offered from the
date payment is received until the Conversion is completed or terminated.
Interest penalties for early withdrawal applicable to certificate accounts will
not apply to withdrawals authorized for the purchase of shares; however, if a
partial withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate evidencing the remaining
balance will earn interest at the passbook rate subsequent to the withdrawal. An
executed order form, once received by Mystic, may not be modified, amended or
rescinded without the consent of Mystic, unless the Conversion is not completed
within 45 days of the termination of the Subscription Offering.
The ESOP may subscribe for shares by submitting its order form for the
purchase of the shares during the Subscription Offering and by making payment
for the shares on the date of the closing. The ESOP will obtain a loan for the
purchase of shares from the Company.
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Shares Purchased. Subscribers will be notified of the number of
shares for which their subscriptions have been accepted by mail promptly on
completion of the sale of all the Common Stock. Certificates representing shares
of Common Stock will be delivered to subscribers promptly thereafter.
DIRECT COMMUNITY OFFERING
Concurrently with or at any time during or after the Subscription
Offering, the board of directors of the Company may elect to offer shares of the
Common Stock in a Direct Community Offering to the extent such shares remain
available after satisfaction of all orders received in the Subscription
Offering. The Company intends to give preference to orders received in the
Direct Community Offering from borrowers of the Bank who reside or do business
in the Bank's local community, which is defined as the communities of Medford,
Malden, Everett, Stoneham, Arlington, Winchester, Somerville, Melrose, Lexington
and Bedford, Massachusetts. THE DIRECT COMMUNITY OFFERING MAY EXPIRE AS EARLY AS
3:30 P.M., EASTERN STANDARD TIME ON ________________, 199___, UNLESS EXTENDED
UNTIL NOT LATER THAN _______, 199__. THE RIGHT OF ANY PERSON TO PURCHASE SHARES
IN THE DIRECT COMMUNITY OFFERING IS SUBJECT TO THE RIGHT OF THE COMPANY TO
ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART. MYSTIC PRESENTLY INTENDS TO
TERMINATE THE DIRECT COMMUNITY OFFERING AS SOON AS IT HAS RECEIVED ORDERS FOR AT
LEAST THE MINIMUM NUMBER OF SHARES OFFERED.
Purchasers in the Direct Community Offering are each eligible to
purchase up to $300,000 of Common Stock, and together with their associates and
groups acting in concert, are each eligible to purchase up to $600,000 of Common
Stock.
If all of the Common Stock is subscribed for in the Subscription
Offering, no Common Stock will be available for purchase in the Direct Community
Offering, and all funds submitted pursuant to the Direct Community Offering will
be promptly refunded. 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, provided however, that orders received in the Direct Community Offering
shall first be filled up to a maximum of 2% of the shares being offered. If the
Direct Community Offering extends beyond 45 days following the expiration of the
Subscription Offering, subscribers will have the right to increase, decrease or
rescind subscriptions for shares previously submitted.
Except as noted below, cash and checks received in the Direct
Community Offering will be placed in segregated savings accounts (each federally
insured up to the applicable $100,000 limit and insured by the Share Insurance
Fund of the Co-operative Central Bank for amounts in excess of $100,000)
established specifically for this purpose. Interest will be paid on orders made
by check or in cash at the passbook rate then offered, from the date the payment
is received by the Bank until the consummation of the Conversion. In the event
that the Conversion is not consummated for any reason, all funds submitted
pursuant to the Direct Community Offering will be promptly refunded with
interest as described above.
SYNDICATED COMMUNITY OFFERING
As a final step in the Conversion, the Plan of Conversion provides
that, if necessary, all shares of Common Stock not purchased in the Direct
Community Offering, if any, will be offered for sale in the Syndicated Community
Offering to the general public and/or through a syndicate of registered broker-
dealers to be formed and managed by Trident Securities acting as agent to assist
the Bank in the sale of the Common Stock. The Bank has the right to reject
orders, in whole or in part, in their sole discretion in the Syndicated
Community Offering. Neither Trident Securities nor any registered broker-dealer
shall have any obligation to take or purchase any shares of the Common Stock in
the Syndicated Community Offering.
Common Stock sold in the Syndicated Community Offering will be sold at
the Purchase Price and hence will be sold at the same price as all other shares
in the Offerings. See "--Stock Pricing and Number of Shares to be Issued."
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No person together with any associate or group of persons acting in
concert will be permitted to subscribe in the Syndicated Community Offering for
more than $600,000 in the Offering. Selected dealers will receive a fee of up to
7% of the amount of Common Stock sold by the selected dealers in the Syndicated
Community Offering payable by the Company. Such fee will be at a stated rate
(at a particular sales level) and will be negotiated on a case-by-case basis.
Selected dealers may only solicit indications of interest from their
customers to place orders for shares. Such selected dealers shall subsequently
contact their customers who indicated an interest and seek their confirmation as
to their intent to purchase. Those indicating an intent to purchase shall
execute order forms and forward them to their selected dealer or authorize the
selected dealer to execute such forms. The selected dealer will acknowledge
receipt of the order to its customer in writing on the following business day
and will debit such customer's account on the fifth business day after the
customer has confirmed his intent to purchase ("debit date") and on or before
Noon of the next business day following the debit date will send order forms and
funds to the Bank for deposit in a segregated account. Purchasers' funds are not
required to be in their accounts with selected dealers until the debit date.
The Syndicated Community Offering may terminate on
___________________, 199___ and will terminate no later than _______, 199__,
unless extended by the Bank with the approval of the Commissioner and the FDIC.
See "--Stock Pricing and Number of Shares to be Issued" for a discussion of
rights of subscribers, if any, in the event an extension is granted.
PLAN OF DISTRIBUTION AND FINANCIAL ADVISORY ARRANGEMENTS
The Bank has retained Trident Securities to consult with and advise
the Bank and, to assist the Bank, on a best efforts basis, in the distribution
of shares in the Offerings. Trident Securities is a broker-dealer registered
with the SEC and a member of the National Association of Securities Dealers,
Inc. ("NASD"). Trident Securities will assist the Company in the Offerings as
follows: (i) it will act as marketing advisor with respect to the Offerings and
will represent the Company as placement agent on a best efforts basis in the
sale of the Common Stock in the Direct Community Offering and Syndicated
Community Offering; (ii) members of its staff will conduct training sessions for
directors, officers and employees of the Bank regarding the Offerings process;
and (iii) it will provide assistance in the establishment and supervision of the
Stock Information Center, including training staff to properly record and
tabulate orders for the purchase of Common Stock and to appropriately respond to
customer inquiries. Trident Securities has agreed to act as a market maker for
the Company's Common Stock following consummation of the Conversion.
For rendering its services, Trident Securities will receive a
management fee of .40% and a commission equal to 2% of the aggregate value of
Common Stock sold in the Offerings, excluding shares purchased by the ESOP,
directors and officers and their associates.
If the Offering is extended beyond the Expiration Date, Trident
Securities may make sales to the general public and/or assemble and manage a
syndicate of selected dealers to assist the Bank in the sale of the Common Stock
during a Syndicated Community Offering. See "--Syndicated Community Offering."
Under the federal securities laws, Trident Securities and the selected dealers
may be deemed to be underwriters.
The Bank has agreed to reimburse Trident Securities for its reasonable
out-of-pocket expenses, including but not limited to travel, communications,
legal fees and postage (up to an aggregate of $44,000) and to indemnify Trident
Securities against certain claims or liabilities, including certain liabilities
under the Securities Act of 1933, as amended. Total underwriting fees to Trident
Securities are expected to be between $399,224 and $535,016 at the minimum and
the maximum, respectively, of the Current Valuation Range. See "Pro Forma Data"
for the assumptions used to determine these estimates.
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Sales of Common Stock will be made primarily by registered
representatives affiliated with Trident Securities or by the broker-dealers
managed by Trident Securities. In addition, subject to applicable law, executive
officers of the Bank may participate in the solicitation of offers to purchase
Common Stock. Other employees of the Bank may participate in the Offerings in
clerical capacities, providing administrative support in effecting sales
transactions or answering questions of a mechanical nature. Questions relating
to the proper execution or nature of the investment, will be directed to
registered representatives. Such other employees have been instructed not to
solicit offers to purchase Common Stock or provide advice regarding the purchase
of Common Stock. Subject to applicable state law, the Bank will rely on Rule
3a4-1 under the Exchange Act, and sales of Common Stock will be conducted with
the requirements of Rule 3a4-1, so as to permit officers and current full and
part-time Bank employees to participate in the sale of Common Stock. No officer,
director or employee of the Bank will be compensated in connection with his
participation by the payment of commissions or other remuneration based either
directly or indirectly on the transactions in the Common Stock.
The Common Stock will be offered principally by the distribution of
this Prospectus and through the efforts of management of the Bank. A conspicuous
legend that the Common Stock is not a federally-insured or guaranteed deposit
account appears on the Common Stock certificate and on all offering documents
used in connection with the Offerings. Any person purchasing the Common Stock
from the Bank's office will be required to sign an acknowledgment that the
Common Stock is not a federally-insured or guaranteed instrument and that the
purchaser has received a Prospectus and understands the investment risks
involved.
In addition, certain executive officers of the Bank will participate
in the Offerings and may contact potential offerees. It is expected that the
President and Chief Executive Officer of the Bank and members of the Bank's
board of directors will contact certain depositors as well as others to discuss
the Offerings. None of the Bank's employees or directors who participate in the
Offerings will receive any special compensation or other remuneration for such
activities.
None of the Bank's personnel participating in the Offerings are
registered or licensed as a broker or dealer or an agent of a broker or dealer.
The Bank's personnel will assist in the above described sales activities
pursuant to an exemption from registration as a broker or dealer provided by
Rule 3a4-1 promulgated under the Exchange Act, which generally provides that an
"associated person of an issuer" of securities shall not be deemed a broker
solely by reason of participation in the sale of securities of such issuer if
the associated person meets certain conditions. Such conditions include, but are
not limited to, that the associated person participating in the sale of an
issuer's securities not be compensated in connection therewith at the time of
participation, that such person not be associated with a broker or dealer and
that such person observe certain limitations on his participation in the sale of
securities. For purposes of this exemption, "associated person of an issuer" is
defined to include any person who is a director, officer or employee of the
issuer or a company that controls, is controlled by or is under common control
with the issuer.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
R.P. Financial, which is experienced in the evaluation and appraisal
of business entities, including banking institutions involved in the conversion
process, has been retained by the Bank to prepare an appraisal of the estimated
pro forma market value of the Common Stock. R.P. Financial will receive a fee
not to exceed $20,000 for its appraisal, plus reasonable selected travel
expenses. The Bank has agreed to indemnify R.P. Financial, and R.P. Financial's
directors, officers and other employees, to the maximum extent permitted by law
and hold R.P. Financial harmless from any losses, actions, claims, damages,
expenses or liabilities related to or arising out of any acts or decisions made
by R.P. Financial in good faith and believed to be in the best interest of the
Bank.
The appraisal contains an analysis of a number of factors including,
but not limited to, the Bank's financial condition and operating trends, the
competitive environment within which the Bank operates,
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operating trends of certain banking institutions and savings and loan holding
companies, relevant economic conditions, both nationally and in Massachusetts,
which affect the operations of banking institutions and stock market values of
certain institutions. In addition, R.P. Financial has advised the Bank that it
has considered and will consider the effect of the additional capital raised by
the sale of the Common Stock on the estimated pro forma market value of such
shares.
R.P. Financial has determined that as of August 15, 1997 and updated
as of _______________, 1997, the estimated pro forma market value of the Common
Stock was $20,500,000. The Bank has determined to offer the shares of the
Common Stock at a purchase price of $10.00 per share and, by dividing the price
per share into the estimated aggregate value, initially plans to offer up to
2,357,500 shares at the maximum of the Current Valuation Range. R.P. Financial
has established a Current Valuation Range of $17,425,000 to $23,575,000 for this
offering to allow for fluctuations in the aggregate value of the stock due to
changes in the market and other factors from the time of commencement of the
Subscription Offering until completion of the Direct Community Offering.
Should it be determined at the close of the offering that the
aggregate pro forma market value of the Common Stock is higher or lower than
$20,500,000 but is nonetheless within the Current Valuation Range of $17,425,000
to $23,575,000, the Bank will make an appropriate adjustment by raising or
lowering by 15.0% the total number of shares being offered (within a range from
1,742,500 shares to 2,357,500 shares). Unless permitted by the Bank or otherwise
required by the Commissioner, no resolicitation of subscribers and other
purchasers will be made because of any such change in the number of shares to be
issued unless the aggregate purchase price of the Common Stock is below the low
end of the Current Valuation Range or is more than $27,111,250 or $2,711,125
shares (the Super-Maximum of the Current Valuation Range), in which case
subscribers and other purchasers will be offered the opportunity to change or
withdraw their orders. THE ESTABLISHMENT OF ANY NEW PRICE RANGE MAY BE EFFECTED
WITHOUT A RESOLICITATION OF VOTES FROM THE BANK'S DEPOSITORS TO APPROVE THE
CONVERSION.
The appraisal is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing the Common
Stock. In preparing the valuation, R.P. Financial has relied upon and assumed
the accuracy and completeness of financial and statistical information provided
by the Bank. R.P. Financial did not independently verify the financial
statements and other information provided by the Bank, nor did R.P. Financial
value independently the assets and liabilities of the Bank. The valuation
considers the Bank only as a going concern and should not be considered as an
indication of the liquidation value of the Bank. Moreover, because such
valuation is necessarily based upon estimates and projections of a number of
matters, all of which are subject to change from time to time, no assurance can
be given that persons purchasing the Common Stock will thereafter be able to
sell such shares at prices within the Current Valuation Range.
LIMITATIONS ON PURCHASES OF SHARES
The Plan provides for certain additional limitations to be placed upon
the purchase of shares by eligible subscribers and others in the Conversion.
Each subscriber must subscribe for a minimum of 25 shares; provided, that if the
Purchase Price of 25 shares exceeds $500, the minimum number of shares will be
reduced accordingly. Additionally, no person by himself or herself or with an
associate or a group of persons acting in concert shall purchase shares of
Common Stock with an aggregate Purchase Price of more than $600,000, except for
the ESOP of the Bank, which intends to purchase 8% of the total shares offered
in the Conversion. Officers and directors and their associates may not purchase,
in the aggregate, more than 30% of the shares offered pursuant to the
Conversion. For purposes of the Plan, the directors are not deemed to be acting
in concert solely by reason of their membership on the Bank's board of
directors.
The term "officer" is defined in the Plan to mean the president, vice
presidents, clerk and the treasurer of the Bank. The term "acting in concert"
is defined in the Plan of Conversion to mean: persons seeking to combine or
pool their voting or other interests in the securities of an issuer for a common
purpose
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pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. When persons act together for such
purpose, their group is deemed to have acquired their stock. The term
"associate" of a person is defined in the Plan of Conversion to mean: (i) any
corporation or organization (other than the Bank or a majority-owned subsidiary
of the Bank) of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity (excluding tax-qualified employee plans); and
(iii) any relative or spouse of such person, or any relative of such spouse, who
either has the same home as such person or who is a director or officer of the
Bank or any of its parents or subsidiaries. The Company and the Bank may presume
that certain persons are acting in concert based upon, among other things, joint
account relationships and the fact that such person have filed joint Schedules
13D with the SEC with respect to other companies.
The Common Stock will be freely transferable, except for shares
purchased by officers and directors of the Bank. (For restrictions on stock
purchased by officers and directors, see "--Restrictions on Transferability by
Directors and Officers," below.)
The Bank will make reasonable efforts to comply with the securities
laws of all states in the United States in which persons entitled to subscribe
for Common Stock pursuant to the Plan reside. However, no such person will be
offered or receive any stock under the Plan who resides in a foreign country or
in a state of the United States with respect to which all of the following
apply: (a) a small number of persons otherwise eligible to subscribe for shares
under the Plan reside in such country or state; (b) the granting of subscription
rights or offer or sale of shares of stock of the Company to such persons would
require the Company, under the securities laws of such state, to register as a
broker or dealer or to register or otherwise qualify its securities for sale in
such state; and (c) such registration or qualification would be impracticable
for reasons of cost or otherwise.
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS
Shares purchased by directors or officers of the Bank shall be subject
to the restriction that said shares shall not be sold for a period of one year
after completion of the Conversion, except in the event of the death of the
stockholder or in any exchange of such shares in connection with a merger or
acquisition of the Company approved by the Commissioner. Accordingly, shares of
stock issued by the Company to directors and officers shall bear a legend giving
appropriate notice of the restriction imposed upon it, and, in addition, the
Company will give appropriate instructions to the transfer agent for the
Company's stock with respect to the applicable restriction for transfer of any
restricted stock. Any shares issued to directors and officers as a stock
dividend, stock split or otherwise with respect to restricted stock shall be
subject to the same restrictions.
Shares purchased by an affiliate of the Company will be subject to the
resale restrictions of Rule 144 under the Securities Act. If the Company meets
the current public information requirements of Rule 144 under the Securities
Act, each affiliate of the 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 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 Company to permit
affiliates to have their shares registered for sale under the Securities Act
under certain circumstances.
-80-
<PAGE>
INTERPRETATION AND AMENDMENT OF THE PLAN
To the extent permitted by law, all interpretations of the Plan by the
Bank will be final; however, such interpretations have no binding effect on the
Commissioner. The Plan provides that, if deemed necessary or desirable by the
board of directors, the Plan may be substantively amended by a two-thirds vote
of the board of directors as a result of comments from regulatory authorities or
otherwise, prior to the vote of the Bank's depositors and at any time thereafter
with the concurrence of the Commissioner, except that in the event the
regulations under which the Plan was adopted are liberalized subsequent to
approval of the Plan by the Commissioner, the board of directors may amend the
Plan to conform to the regulations without further approval of the depositors,
to the extent permitted by law.
CONDITIONS AND TERMINATION
Completion of the Conversion requires the sale of all shares of the
Common Stock within 24 months following approval of the Plan by the mutual
depositors of the Bank. If this condition is not satisfied, the Plan will be
terminated and the Bank will continue its business in the mutual form of
organization. The Plan may be terminated by the board of directors at any time
with the approval of the Commissioner.
LEGAL AND TAX OPINIONS
The legality of the Common Stock and the federal income tax
consequences of the Conversion will be passed upon for the Bank by Thacher
Proffitt & Wood, Washington, D.C. Thacher Proffitt & Wood has consented to the
reference herein to their opinion. Foley, Hoag & Eliot, LLP, Boston,
Massachusetts has passed upon certain legal matters for Trident Securities.
EXPERTS
The consolidated financial statements of Medford Co-operative Bank and
its subsidiaries as of June 30, 1997 and 1996 and for each of the years in the
three-year period ended June 30, 1997, have been included herein and elsewhere
in the Prospectus in reliance upon the report of Wolf & Company, P.C.,
independent certified public accountants appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
R.P. Financial has consented to the publication herein of the summary
of its letters to Medford Co-operative Bank, setting forth its opinion as to the
estimated pro forma market value of the Common Stock and the value of
subscription rights in the Subscription Offering and to the use of its name and
the statements with respect to R.P. Financial appearing herein.
-81-
<PAGE>
ADDITIONAL INFORMATION
The Bank has filed with the Commissioner an Application for
Conversion. This document omits certain information contained in such
application. The Application for Conversion and the exhibits and financial
statements that are part thereof may be inspected at the offices of the
Massachusetts Division of Banks, 100 Cambridge Street, Boston, Massachusetts
02202.
The Company has filed with the SEC a Registration Statement on Form S-
1 (File No. 333-_____) under the Securities Act with respect to the Common Stock
offered hereby. 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. 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, and at the regional offices of the SEC at 75 Park Place,
Fourteenth Floor, New York, New York 10007 and Room 3190, John C. Kluczynski
Building, 230 South Dearborn Street, Chicago, Illinois 60604. Copies of such
material can be obtained by mail from the SEC at prescribed rates from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Such information is also available on the SEC's Electronic Data
Gathering Analysis and Retrieval ("EDGAR") System. In addition, the SEC
maintains a Worldwide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC, including the Company. The address for the SEC's Worldwide
Website is "http://www.sec.gov." The statements contained in this Prospectus as
to the contents of any contract or other document filed as an exhibit to the
registration statement are, of necessity, a brief description thereof and are
not necessarily complete; each such statement is qualified by reference to such
contract or document.
In connection with the Conversion, the Company will register its
Common Stock with the SEC under Section 12(g) of the Exchange Act, and, upon
such registration, the Company and the holders of its stock will become subject
to the proxy solicitation rules, reporting requirements and restrictions on
stock purchases and sales by directors, officers and greater than 10%
shareholders, the annual and periodic reporting and certain other requirements
of the Exchange Act. Under the Plan of Conversion, the Company has undertaken
that it will not terminate such registration for a period of at least three
years following the Conversion.
-82-
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheets as of June 30, 1997 and 1996 F-2
Consolidated Statements of Income for each of the years
in the three-year period ended June 30, 1997 F-3
Consolidated Statements of Changes in Surplus for
each of the years in the three-year period ended
June 30, 1997 F-4
Consolidated Statements of Cash Flows for
each of the years in the three-year period ended
June 30, 1997 F-5
Notes to Consolidated Financial Statements F-7
</TABLE>
_________________
The financial statements for Mystic Financial, Inc. have been omitted because
Mystic Financial, Inc. has not yet issued any stock, has no liabilities, and has
not conducted any business other than of an organizational nature.
All schedules have been omitted either because they are not required, not
applicable, or are included in the notes to consolidated financial statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Medford Co-operative Bank
We have audited the consolidated balance sheets of Medford Co-operative Bank and
subsidiaries as of June 30, 1997 and 1996, and the related consolidated
statements of income, changes in surplus and cash flows for each of the years in
the three-year period ended June 30, 1997. These consolidated financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Medford Co-operative
Bank and subsidiaries as of June 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1997 in conformity with generally accepted accounting principles.
Boston, Massachusetts
July 29, 1997
F-1
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30,
----------------------
1997 1996
---------- ---------
(In Thousands)
<S> <C> <C>
Cash and due from banks $ 3,953 $ 5,032
Federal funds sold 2,075 1,683
Short-term investments 197 2,056
---------- ---------
Total cash and cash equivalents 6,225 8,771
Certificates of deposit - 1,000
Securities available for sale, at fair value (Note 2) 3,819 1,568
Securities held to maturity, at amortized cost (Note 2) 17,504 16,926
Federal Home Loan Bank stock, at cost 858 788
Loans, net of allowance for loan losses of $977 and
$742, respectively (Note 3) 114,568 94,760
Mortgage loans held for sale, net 210 1,132
Banking premises and equipment, net (Note 5) 2,697 2,538
Real estate held for investment, net (Note 6) 1,840 1,894
Accrued interest receivable 870 822
Due from Co-operative Central Bank 669 669
Other assets (Note 9) 393 498
---------- ---------
$149,653 $131,366
========== =========
LIABILITIES AND SURPLUS
Deposits (Note 7) $129,303 $119,634
Federal Home Loan Bank borrowings (Note 8) 7,532 -
Mortgagors' escrow accounts 386 338
Accrued interest payable 249 195
Accrued expenses and other liabilities 243 250
---------- ---------
Total liabilities 137,713 120,417
---------- ---------
Commitments and contingencies (Notes 10 and 15)
Surplus (Notes 11 and 15) 11,761 11,020
Net unrealized gain (loss) on securities available
for sale, net of tax effects (Notes 2 and 9) 179 (71)
---------- ---------
Total surplus 11,940 10,949
---------- ---------
$149,653 $131,366
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------
1997 1996 1995
-------- ------- ------
(In Thousands)
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 8,397 $7,115 $6,323
Interest and dividends on investment securities 1,208 1,364 1,358
Other interest 294 449 484
-------- ------ ------
Total interest and dividend income 9,899 8,928 8,165
-------- ------ ------
Interest expense:
Deposits 4,700 4,569 3,885
Federal Home Loan Bank borrowings 211 - -
-------- ------ ------
Total interest expense 4,911 4,569 3,885
-------- ------ ------
Net interest income 4,988 4,359 4,280
Provision for loan losses (Note 3) 272 100 100
-------- ------ ------
Net interest income, after provision for loan losses 4,716 4,259 4,180
-------- ------ ------
Other income (charges):
Customer service fees 536 512 410
Loan servicing and other loan fees 56 52 59
Gain on sales of mortgage loans 8 8 6
Writedown of mortgage loans held for sale - (41) -
Gain on sales of securities available for sale, net (Note 2) 168 4 -
Rental income, net of expenses (Note 6) 29 44 45
Co-operative Central Bank Share
Insurance Fund special dividend 44 44 -
Miscellaneous 41 35 16
-------- ------ ------
Total other income 882 658 536
-------- ------ ------
Operating expenses:
Salaries and employee benefits (Note 13) 2,734 2,486 2,113
Occupancy and equipment expenses (Note 5) 412 321 247
Data processing expenses 207 179 175
FDIC insurance expense 8 7 251
Foreclosed real estate, net (Note 4) - (5) 77
Other general and administrative expenses 969 890 713
-------- ------ ------
Total operating expenses 4,330 3,878 3,576
-------- ------ ------
Income before income taxes 1,268 1,039 1,140
Provision for income taxes (Note 9) 527 440 480
-------- ------ ------
Net income $ 741 $ 599 $ 660
======== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SURPLUS
YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Net
Unrealized
Gain (loss)
on Securities
Available Total
Surplus For Sale Surplus
----------- -------------- ----------
(In Thousands)
<S> <C> <C> <C>
Balance at June 30, 1994 $ 9,761 $ (78) $ 9,683
Net income 660 - 660
Decrease in net unrealized loss on
securities available for sale - 23 23
----------- -------------- ----------
Balance at June 30, 1995 10,421 (55) 10,366
Net income 599 - 599
Increase in net unrealized loss on
securities available for sale - (16) (16)
----------- -------------- ----------
Balance at June 30, 1996 11,020 (71) 10,949
Net income 741 - 741
Change in net unrealized gain (loss) on
securities available for sale,
net of tax effects - 250 250
----------- -------------- ----------
Balance at June 30, 1997 $11,761 $ 179 $11,940
=========== ============== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------
1997 1996 1995
-------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 741 $ 599 $ 660
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 272 100 100
Net amortization (accretion) of investment securities (4) 8 63
Amortization of deferred loan fees (14) (28) (18)
(Gain) loss on sale of loans 18 - (1)
Net (gain) loss on sales of foreclosed real estate - (7) 30
Provision for losses on foreclosed real estate - - 26
Gain on sales of securities available for sale (168) (4) -
Depreciation expense 266 213 186
Deferred income tax provision (benefit) (87) 18 8
Mortgage loans originated for sale (2,467) (2,772) (358)
Principal balance of mortgage loans sold 3,389 1,598 358
Writedown of mortgage loans held for sale - 41 -
(Increase) decrease in accrued interest receivable (48) 26 (55)
(Increase) decrease in other assets 95 46 (24)
Increase in accrued interest payable 54 2 38
Increase (decrease) in accrued expenses and
other liabilities (7) 34 (20)
-------- -------- -------
Net cash provided (used) by operating
activities 2,040 (126) 993
-------- -------- -------
Cash flows from investing activities:
Net (increase) decrease in certificates of deposit 1,000 (150) 1,650
Proceeds from maturities of securities held to maturity 12,916 16,017 8,014
Purchase of securities held to maturity (13,490) (7,899) (7,976)
Purchase of securities available for sale (2,834) (137) (18)
Proceeds from sales of securities available for sale 1,098 20 -
Purchase of Federal Home Loan Bank stock (70) - -
Loans originated, net of payments received (25,427) (14,697) (2,704)
Proceeds from sales of loans 5,343 - 95
Proceeds from sales of foreclosed real estate - 194 408
Purchases of banking premises and equipment (369) (932) (371)
Additions to real estate held for investment (2) - (2)
Refund of construction costs on real estate held
for investment paid in prior years - - 31
-------- -------- -------
Net cash used by investing activities (21,835) (7,584) (873)
-------- -------- -------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------
1997 1996 1995
-------- -------- ---------
(In Thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits 9,669 5,810 3,159
Proceeds from borrowings 7,550 - -
Repayment of borrowings (18) - -
Net increase (decrease) in mortgagors' escrow
accounts 48 (29) 42
------- -------- --------
Net cash provided by financing
activities 17,249 5,781 3,201
------- ------- --------
Net change in cash and cash equivalents (2,546) (1,929) 3,321
Cash and cash equivalents at beginning of year 8,771 10,700 7,379
------- ------- --------
Cash and cash equivalents at end of year $ 6,225 $ 8,771 $10,700
======= ======= ========
Supplemental information:
Interest paid $ 4,857 $ 4,566 $ 3,847
Income taxes paid 693 375 485
Transfer from loans to foreclosed real estate - 83 298
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended June 30, 1997, 1996 and 1995
l. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and business
The consolidated financial statements include the accounts of Medford Co-
operative Bank and its wholly-owned subsidiaries, Mystic Securities Corp.,
which was organized during 1997, and engages in the purchase and sale of
investment securities and Mystic Investment Inc. which is inactive. All
significant intercompany accounts have been eliminated in consolidation.
The Bank provides a variety of financial services to individuals and small
businesses through its four offices in Medford, Massachusetts. Its primary
deposit products are checking, savings and term certificate accounts, and
its primary lending products are residential and commercial mortgage loans,
commercial and consumer loans.
Use of estimates
In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet date and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowance for loan
losses and the valuation reserve for deferred tax assets.
Reclassifications
Certain amounts have been reclassified in the 1996 and 1995 consolidated
financial statements to conform to the 1997 presentation.
Cash equivalents
Cash equivalents include amounts due from banks, federal funds sold and
short-term investments with original maturities of three months or less.
Short-term investments
Short-term investments are carried at cost, which approximates fair value,
and consist of money market funds and interest-bearing deposits in the Bank
Investment Fund-Liquidity Fund.
F-7
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Certificates of deposit
Certificates of deposit mature within one year and are carried at cost,
which approximates fair value.
Investment securities
Investments in debt securities that management has the positive intent and
ability to hold to maturity are classified as "held to maturity" and carried
at amortized cost. Investments classified as "available for sale" are
carried at fair value, with unrealized gains and losses reported as a
separate component of surplus, net of tax effects where applicable.
Purchase premiums and discounts are amortized to earnings by a method which
approximates the interest method over the terms of the investments. Gains
and losses on the sale of securities are recorded on the trade date using
the specific identification method.
Loans
The Bank grants mortgage, commercial and consumer loans to customers. A
substantial portion of the loan portfolio consists of mortgage loans in the
Greater Boston area. The ability of the Bank's debtors to honor their
contracts is dependent upon the local real estate market and economy in this
area.
Loans, as reported, have been reduced by amounts due to borrowers on
incomplete loans, net deferred loan fees and the allowance for loan losses.
Interest on loans is not accrued on loans which are identified as impaired
or loans which are ninety days or more past due. Interest income previously
accrued on such loans is reversed against current period interest income.
Interest income on all non-accrual loans is recognized only to the extent of
interest payments received.
Net deferred loan fees are amortized as an adjustment of the related loan
yields using the interest method.
Allowance for loan losses
The allowance for loan losses is established through a provision for loan
losses charged to earnings and is maintained at a level considered adequate
to provide for reasonably foreseeable loan losses.
F-8
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for loan losses (concluded)
The provision and the level of the allowance are evaluated on a regular
basis by management and are based upon management's periodic review of the
collectibility of the loans in light of known and inherent risks in the
nature and volume of the loan portfolio, adverse situations that may affect
the borrower's ability to repay, estimated value of any underlying
collateral and prevailing economic conditions.
The allowance is an estimate and ultimate losses may vary from current
estimates and future additions to the allowance may be necessary. As
adjustments become necessary, they are reported in earnings for the periods
in which they become known. Loan losses are charged against the allowance
when management believes the collectibility of the loan balance is unlikely.
Subsequent recoveries, if any, are credited to the allowance.
The Bank adopted Statement of Financial Accounting Standards ("SFAS") No.
114, "Accounting by Creditors for Impairment of a Loan," on July 1, 1995.
Under SFAS No. 114, a loan is considered impaired when, based on current
information and events, it is probable that a creditor will be unable to
collect the scheduled payments of principal or interest when due according
to the contractual terms of the loan agreement. Impairment is measured on a
loan by loan basis by either the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's obtainable
market price, or the fair value of the collateral if the loan is collateral
dependent. All of the Bank's loans which have been identified as impaired
have been measured by the fair value of existing collateral.
SFAS No. 114 is not applicable to large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment, and loans
that are measured at fair value. Accordingly, the Bank has not applied SFAS
No. 114 to its consumer loans which are collectively evaluated for
impairment.
SFAS No. 114 also limits the classification of loans as in-substance
foreclosures to situations where the creditor actually receives physical
possession of the debtor's assets. The adoption of SFAS No. 114 had no
effect on the Bank's assessment of the overall adequacy of the allowance for
loan losses. The restatement of previously issued financial statements to
conform with SFAS No. 114 is expressly prohibited.
Mortgage loans held for sale
Mortgage loans held for sale are carried at the lower of cost or market.
F-9
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORECLOSED REAL ESTATE
Foreclosed real estate is held for sale and carried at the lower of cost or
fair value less estimated costs to sell. Troubled loans are transferred to
foreclosed real estate upon completion of formal foreclosure proceedings.
Real estate properties acquired through foreclosure are initially recorded
at fair value at the date of foreclosure. Costs relating to the development
and improvement of property are capitalized, whereas costs relating to
holding property are expensed.
Valuations are periodically performed by management, and an allowance for
losses is established through a charge to earnings if the carrying value of
a property exceeds its fair value less estimated costs to sell.
BANKING PREMISES AND EQUIPMENT AND REAL ESTATE HELD FOR INVESTMENT
Land is carried at cost. Buildings, equipment and improvements are stated
at cost, less accumulated depreciation, computed on the straight-line method
over the estimated useful lives of the assets.
It is general practice to charge the cost of maintenance and repairs to
earnings when incurred; major expenditures for improvements are capitalized
and depreciated.
PENSION PLAN
It is the Bank's policy to fund pension plan costs in the year of accrual.
INCOME TAXES
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets
or liabilities are expected to be realized or settled. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
accordingly through the provision for income taxes. The Bank's base amount
of its federal income tax reserve for loan losses is a permanent difference
for which there is no recognition of a deferred tax liability. However, the
loan loss allowance maintained for financial reporting purposes is a
temporary difference with allowable recognition of a related deferred tax
asset, if it is deemed realizable.
F-10
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
RECENT ACCOUNTING PRONOUNCEMENT
In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." The accounting and reporting standards of
this Statement are based on a financial components approach that focuses on
control, whereby after a transfer of financial assets, an entity recognizes
only financial and servicing assets it controls and liabilities it has
incurred. Liabilities incurred will be initially recognized at fair value,
if practicable. Financial assets are derecognized when control has been
surrendered, and liabilities are derecognized when extinguished. The
determination of whether control over a financial asset has been surrendered
is based on meeting specific criteria as defined in the Statement.
The Bank adopted the Statement on January 1, 1997 for transfers and
servicing of financial assets and extinguishments of liabilities. In
December 1996, the FASB voted to defer for one year the provisions of the
Statement that relate to secured borrowings and collateral.
F-11
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities with
gross unrealized gains and losses is as follows:
<TABLE>
<CAPTION>
June 30, 1997
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Available for Sale
- ------------------
Marketable equity securities:
Co-operative Bank
Investment Fund One $ 1,500 $ - $ (78) $ 1,422
Other equity securities 2,043 403 (49) 2,397
----------- ---------- ---------- --------
Total $ 3,543 $403 $(127) $ 3,819
=========== ========== ========== ========
Held to Maturity
- ----------------
U.S. Government and
federal agency obligations $14,976 $ 13 $ (81) $14,908
Other bonds 2,528 - (5) 2,523
----------- ---------- ---------- --------
Total $17,504 $ 13 $ (86) $17,431
=========== ========== =========== ========
</TABLE>
F-12
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
June 30, 1996
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Available for Sale
- ------------------
Marketable equity securities:
Co-operative Bank
Investment Fund One $ 1,500 $ - $ (89) $ 1,411
Other equity securities 139 20 (2) 157
----------- ---------- ----------- --------
Total $ 1,639 $ 20 $ (91) $ 1,568
=========== ========== =========== ========
Held to Maturity
- ----------------
U.S. Government and
federal agency obligations $ 16,899 $ 21 $ (153) $ 16,767
Other bonds 27 - - 27
----------- ---------- ----------- --------
Total $ 16,926 $ 21 $ (153) $ 16,794
=========== ========== =========== ========
</TABLE>
F-13
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INVESTMENT SECURITIES (CONCLUDED)
The amortized cost and estimated fair value of debt securities held to maturity
by contractual maturity is as follows:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
----------------------- ---------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ----------- --------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Within 1 year $ 5,002 $ 4,973 $ 8,003 $ 8,021
Over 1 year to 5 years 12,502 12,458 8,923 8,773
------- -------- -------- -------
Total $17,504 $17,431 $16,926 $16,794
======= ======== ======== =======
</TABLE>
During the years ended June 30, 1997 and 1996, proceeds from sales of securities
available for sale amounted to $1,098,000 and $20,000, respectively. Gross
realized gains amounted to $172,000 and $4,000, respectively. Gross realized
losses for 1997 were $4,000. There were no sales of securities during the year
ended June 30, 1995.
F-14
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LOANS
A summary of the balances of loans follows:
<TABLE>
<CAPTION>
June 30,
-----------------------
1997 1996
--------- --------
(In Thousands)
<S> <C> <C>
Mortgage loans on real estate:
Residential $ 90,203 $82,459
Commercial 17,847 8,280
Construction 976 285
Home equity lines of credit 1,564 1,176
--------- --------
110,590 92,200
Less: Due to borrowers on incomplete loans (340) (134)
Net deferred loan fees (37) (60)
--------- --------
110,213 92,006
--------- --------
Other loans:
Personal 1,203 1,271
Commercial 2,672 1,333
Commercial lines of credit 1,005 382
Share secured 244 252
Home improvement 208 258
--------- --------
5,332 3,496
--------- --------
Total loans 115,545 95,502
Less allowance for loan losses (977) (742)
--------- --------
Loans, net $114,568 $94,760
========= ========
</TABLE>
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------
1997 1996 1995
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 742 $ 757 $ 749
Provision for loan losses 272 100 100
Recoveries 20 23 27
Charge-offs (57) (138) (119)
------- -------- --------
Balance at end of year $ 977 $ 742 $ 757
======= ======== ========
</TABLE>
F-15
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LOANS (CONCLUDED)
At June 30, 1997, the recorded investment in impaired loans (see Note 1)
totaled $365,000 with no valuation allowance. At June 30, 1996, the
recorded investment in impaired loans totaled $622,000 with no valuation
allowance. No additional funds are committed to be advanced in connection
with impaired loans.
For the years ended June 30, 1997 and 1996, the average recorded investment
in impaired loans amounted to $589,000 and $867,000, respectively. The Bank
recognized $31,000 and $51,000, respectively, of interest income on impaired
loans, during the period that they were impaired, on a cash basis.
At June 30, 1997 and 1996, non-accrual loans amounted to $365,000 and
$622,000, respectively. Accordingly, $26,000 and $11,000 of accrued
interest receivable applicable to these loans was not recognized at June 30,
1997 and 1996, respectively.
On a fee basis, the Bank services loans it has originated and sold to
others. At June 30, 1997 and 1996, such loans amounted to approximately
$15,842,000 and $9,440,000, respectively. All loans serviced for others
were sold without recourse provisions.
4. FORECLOSED REAL ESTATE
There was no foreclosed real estate at June 30, 1997 and 1996.
An analysis of the allowance for losses on foreclosed real estate is as
follows:
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------
1997 1996 1995
------ ------ -------
(In Thousands)
<S> <C> <C> <C>
Balance at beginning of year $ - $ 16 $ -
Provision for losses on foreclosed real estate - - 26
Charge-offs - (16) (10)
------ ------ -------
Balance at end of year $ - $ - $ 16
====== ====== =======
</TABLE>
F-16
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FORECLOSED REAL ESTATE (CONCLUDED)
Net (gains) losses applicable to foreclosed real estate include the
following:
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------
1997 1996 1995
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Net (gain) loss on sales of foreclosed real estate $ - $ (7) $ 30
Provision for losses on foreclosed real estate - - 26
Operating expenses, net of rental income - 2 21
------ ------ -------
$ - $ (5) $ 77
====== ====== =======
</TABLE>
5. BANKING PREMISES AND EQUIPMENT
A summary of the cost and accumulated depreciation of banking premises and
equipment and their estimated useful lives follows:
<TABLE>
<CAPTION>
June 30, Estimated
------------------------
1997 1996 Useful Lives
---------- ---------- -------------
(In Thousands)
<S> <C> <C> <C>
Banking premises:
Land $ 242 $ 242
Buildings and improvements 2,434 2,583 10 - 40 years
Equipment 1,498 1,495 3 - 10 years
---------- ---------
4,174 4,320
Less accumulated depreciation (1,477) (1,782)
---------- ---------
$ 2,697 $ 2,538
========== =========
</TABLE>
Depreciation expense for the years ended June 30, 1997, 1996 and 1995
amounted to $210,000, $157,000 and $129,000, respectively.
F-17
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. REAL ESTATE HELD FOR INVESTMENT
Real estate held for investment represents property adjacent to the Bank's
main office which is primarily leased as commercial retail and office space.
The Bank occupies a portion of the building for its own activities. A
summary of the cost and accumulated depreciation and estimated useful life
is as follows:
<TABLE>
<CAPTION>
June 30, Estimated
-----------------
1997 1996 Useful Life
------- ------- -----------
(In Thousands)
<S> <C> <C> <C>
Land $ 34 $ 34
Building 2,226 2,224 40 years
------- -------
2,260 2,258
Less accumulated depreciation (420) (364)
------- -------
$1,840 $1,894
======= =======
</TABLE>
Depreciation expense for the years ended June 30, 1997, 1996 and 1995
amounted to $56,000, $56,000 and $57,000, respectively.
The following is a schedule of minimum future rental income on noncancelable
leases:
<TABLE>
<CAPTION>
Year Ending
June 30, (In Thousands)
-----------
<S> <C>
1998 $104
1999 95
2000 24
------
$223
======
</TABLE>
The provisions of the lease agreements provide that the tenants are
responsible for utilities and certain repairs. Certain of the
leases also contain provisions that the tenants are responsible for a
percentage of real estate taxes and certain other costs.
Rental income for the years ended June 30, 1997, 1996 and 1995 amounted to
approximately $135,000, $148,000 and $149,000, respectively.
F-18
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. DEPOSITS
A summary of deposit balances by type is as follows:
<TABLE>
<CAPTION>
June 30,
-----------------------------
1997 1996
-------------- -----------
(In Thousands)
<S> <C> <C>
NOW accounts $ 17,975 $ 15,480
Demand deposits 4,910 4,103
Regular and other deposits 40,794 40,019
Money market deposits 6,489 6,366
-------------- -----------
Total non-certificate accounts 70,168 65,968
-------------- -----------
Term certificates less than $100,000 49,916 46,207
Term certificates of $100,000 or more 9,219 7,459
-------------- -----------
Total certificate accounts 59,135 53,666
-------------- -----------
Total deposits $ 129,303 $119,634
============== ===========
</TABLE>
A summary of certificate accounts by maturity, is as follows:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------------------ -----------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
---------- -------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Within 1 year $48,316 5.46% $37,283 5.31%
Over 1 year to 3 years 10,475 5.89 15,836 5.61
Over 3 years to 5 years 344 6.15 547 6.62
---------- ----------
$59,135 5.54% $53,666 5.41%
========== ==========
</TABLE>
F-19
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. FEDERAL HOME LOAN BANK BORROWINGS
Federal Home Loan Bank borrowings at June 30, 1997 consist of the following:
<TABLE>
<CAPTION>
Interest
Maturity Rate Amount
----------------------------------- -------- -----------
(In Thousands)
<S> <C> <C>
July 2, 1997 5.58% $1,000
April 16, 1998 6.22 1,100
December 6, 1999 5.99 1,200
May 5, 2000 6.69 1,100
December 4, 2001 6.12 1,200
March 25, 2002 6.90 950
Amortizing advance, due on
August 14, 2006, requiring
monthly payments of $7,793
including interest 6.97 982
---------
$7,532
=========
</TABLE>
The following is a summary of maturities of borrowings at June 30, 1997:
<TABLE>
<CAPTION>
Year Ending
June 30, (In Thousands)
------------
<S> <C>
1998 $2,125
1999 27
2000 2,328
2001 31
2002 2,183
Thereafter 838
----------
$7,532
==========
</TABLE>
F-20
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEDERAL HOME LOAN BANK BORROWINGS (CONCLUDED)
The Bank also has an available line of credit of $2,515,000 with the Federal
Home Loan Bank of Boston ("FHLB") at an interest rate that adjusts daily.
Borrowings under the line are limited to 2% of the Bank's total assets. All
borrowings from the Federal Home Loan Bank of Boston are secured by a
blanket lien on qualified collateral, defined principally as 75% of the
carrying value of first mortgage loans on owner-occupied residential
property and 90% of the market value of U.S. government and federal agency
securities.
9. INCOME TAXES
Allocation of federal and state income taxes between current and deferred
portions is as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1997 1996 1995
------ ----- -----
(In Thousands)
<S> <C> <C> <C>
Current tax provision:
Federal $ 444 $ 300 $ 330
State 170 122 142
------ ----- -----
Total current 614 422 472
------ ----- -----
Deferred tax provision (benefit):
Federal (65) 4 5
State (22) 14 3
------ ----- -----
Total deferred (87) 18 8
------ ----- -----
Total provision $ 527 $ 440 $ 480
====== ===== =====
</TABLE>
The reasons for the differences between the statutory federal income tax
rate and the effective tax rates are summarized as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
Increase (decrease) resulting from:
State taxes, net of federal tax
benefit 7.7 8.6 8.4
Other, net (0.1) (0.2) (0.3)
------ ----- -----
Effective tax rates 41.6% 42.4% 42.1%
====== ===== =====
</TABLE>
F-21
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES (CONTINUED)
The components of the net deferred tax asset included in other assets are as
follows:
<TABLE>
<CAPTION>
June 30,
---------------------
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Deferred tax asset:
Federal $ 350 $ 286
State 121 99
------- -------
471 385
Valuation reserve on asset (24) (24)
------- -------
447 361
------- -------
Deferred tax liability:
Federal (111) (20)
State (12) (7)
------- -------
(123) (27)
------- -------
Net deferred tax asset $ 324 $ 334
======= =======
</TABLE>
The tax effects of each type of income and expense item that give rise to
deferred taxes are as follows:
<TABLE>
<CAPTION>
June 30,
-----------------------
1997 1996
------- --------
(In Thousands)
<S> <C> <C>
Allowance for loan losses $ 409 $ 302
Net unrealized gain on securities
available for sale (97) -
Other 36 56
------- ---------
348 358
Valuation reserve (24) (24)
------- ---------
Net deferred tax asset $ 324 $ 334
======= =========
</TABLE>
F-22
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES (CONCLUDED)
A summary of the change in the net deferred tax asset is as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------
1997 1996 1995
------ ------ -----
(In Thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 334 $ 352 $ 360
Deferred tax (provision) benefit 87 (18) (8)
Deferred tax on unrealized gain on
securities available for sale (97) - -
----- ----- -----
Balance at end of year $ 324 $ 334 $ 352
===== ===== =====
</TABLE>
The change in the valuation reserve is as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------
1997 1996 1995
----- ------ -----
(In Thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 24 $ 33 $ 30
Unrecognized current year tax benefits - - 3
Recognition of prior years' benefits - (9) -
----- ----- -----
Balance at end of year $ 24 $ 24 $ 33
===== ===== =====
</TABLE>
The federal income tax reserve for loan losses at the Bank's base year
amounted to approximately $2,665,000. If any portion of the reserve is used
for purposes other than to absorb the losses for which established,
approximately 150% of the amount actually used (limited to the amount of the
reserve) would be subject to taxation in the fiscal year in which used. As
the Bank intends to use the reserve only to absorb loan losses, a deferred
income tax liability of approximately $1,090,000 has not been provided.
F-23
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
Loan commitments
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and advance
funds under lines of credit and credit card loans. These instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the accompanying consolidated financial
statements.
The Bank's exposure to credit loss is represented by the contractual amount
of these instruments. The Bank uses the same credit policies in making
commitments as it does for on-balance-sheet instruments. A summary of
financial instruments outstanding whose contract amounts represent credit
risk is as follows:
<TABLE>
<CAPTION>
June 30,
-------------------
1997 1996
-------------------
(In Thousands)
<S> <C> <C>
Commitments to grant mortgage loans $2,146 $2,449
Commitments to grant commercial loans 2,267 470
Unadvanced funds on home equity lines of credit 1,649 1,157
Unadvanced funds on credit card loans 1,260 1,266
Unadvanced funds on commercial lines of credit 2,031 618
</TABLE>
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. The commitments for lines of
credit and credit card loans may expire without being drawn upon; therefore,
the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a case-
by-case basis. The commitments for mortgage loans and home equity lines of
credit are collateralized by real estate. Commercial loans and lines of
credit are secured by various assets of the borrowers. Credit card loans are
generally unsecured.
F-24
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
COMMITMENTS AND CONTINGENCIES (concluded)
CONTINGENCIES
Various legal claims arise from time to time in the normal course of
business which, in the opinion of management, will have no material effect
on the Bank's consolidated financial position.
11. MINIMUM REGULATORY CAPITAL REQUIREMENTS
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 consolidated 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 (set forth in the
table below) of total and Tier I capital (as defined) to average assets (as
defined). Management believes, as of June 30, 1997, that the Bank meets all
capital adequacy requirements to which it is subject.
F-25
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MINIMUM REGULATORY CAPITAL REQUIREMENTS (CONCLUDED)
As of June 30, 1997 and 1996, the Federal Deposit Insurance Corporation
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 following table. There are no conditions or events that
management believes have changed the Bank's category. The Bank's actual capital
amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
Minimum
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------------------- -------------------- ---------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ----------- ------ ---------- -------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1997:
Total Capital
(to Risk Weighted Assets) $12,738 14.4% $7,073 8.0% $8,842 10.0%
Tier I Capital
(to Risk Weighted Assets) 11,761 13.3 3,537 4.0 5,305 6.0
Tier I Capital
(to Average Assets) 11,761 8.1 5,820 - 4.0 - 7,274 5.0
7,274 5.0
As of June 30, 1996:
Total Capital
(to Risk Weighted Assets) 11,691 16.4 5,688 8.0 7,110 10.0
Tier I Capital
(to Risk Weighted Assets) 10,949 15.4 2,844 4.0 4,266 6.0
Tier I Capital
(to Average Assets) 10,949 8.5 5,146 4.0 - 6,433 5.0
6,433 5.0
</TABLE>
F-26
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. RELATED PARTY TRANSACTIONS
At June 30, 1997 and 1996, total loans to directors and officers of the Bank
greater than $60,000 on an individual basis amounted to approximately
$1,667,000 and $1,521,000, respectively. During the years ended June 30,
1997 and 1996, total principal additions were $198,000 and $207,000,
respectively, and total principal payments were $52,000 and $41,000,
respectively.
13. PENSION PLAN
The Bank provides pension benefits for its employees through membership in
Plan C of the Defined Benefit Plan of the Co-operative Banks Employees
Retirement Association. The plan is a multi-employer plan where the
contributions by each bank are not restricted to provide benefits to the
employees of the contributing bank. Each employee reaching the age of 21
and having completed 1,000 hours of service in one consecutive twelve-month
period beginning with such employee's date of employment automatically
becomes a participant in the retirement plan. A participant in the plan is
not vested until they have performed two years of service, at which time
they become 20% vested. Participants become 100% vested when credited with
six years of service.
Total pension expense for the years ended June 30, 1997, 1996 and 1995
amounted to approximately $104,000, $107,000 and $127,000, respectively.
In addition to the defined benefit plan, the Bank has a savings and
retirement plan which qualifies under Section 401(k) of the Internal Revenue
Code. The plan provides for voluntary contributions by participating
employees ranging from one percent to ten percent of their compensation,
subject to certain limitations. The Bank matches 50% of an employee's
voluntary contribution up to ten percent of the employee's compensation.
Total expense under the Section 401(k) plan for the years ended June 30,
1997, 1996 and 1995 amounted to approximately $58,000, $49,000 and $46,000,
respectively.
F-27
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires disclosure of estimated fair values of all financial instruments
where it is practicable to estimate such values. In cases where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. Accordingly, the derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
of the Bank.
The following methods and assumptions were used by the Bank in estimating
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts of cash, federal funds
-------------------------
sold and short-term investments approximate fair values.
Certificates of deposit: The carrying amounts of certificates of
-----------------------
deposit approximate their fair values.
Investment securities: Fair values for investment securities, excluding
---------------------
Federal Home Loan Bank stock, are based on quoted market prices. The
carrying value of Federal Home Loan Bank stock approximates fair value
based on the redemption provisions of the Federal Home Loan Bank.
Loans receivable: For variable-rate loans that reprice frequently and
----------------
with no significant change in credit risk, fair values are based on
carrying values. Fair values for loans held for sale are based on
quoted market prices. Fair values for all other loans are estimated
using discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms to borrowers of similar
credit quality. Fair values for non-performing loans are estimated
using underlying collateral values.
Deposit liabilities: Fair values for interest and non-interest
-------------------
checking, passbook savings, and certain types of money market accounts
are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for term
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities.
F-28
<PAGE>
MEDFORD CO-OPERATION BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONCLUDED)
Federal Home Loan Bank borrowings: Fair values for borrowings are estimated
---------------------------------
using discounted cash flow analysis based on the Bank's current incremental
borrowing rates for similar types of borrowing arrangements.
Accrued interest: The carrying amounts of accrued interest approximate
----------------
fair value.
Off-balance-sheet instruments: Fair values for off-balance-sheet lending
-----------------------------
commitments are based of fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the counterparties' credit standing and are not material.
The estimated fair values, and related carrying amounts, of the Bank's financial
instruments are as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------
1997 1996
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 6,225 $ 6,225 $ 8,771 $ 8,771
Certificates of deposit - - 1,000 1,000
Securities available for sale 3,819 3,819 1,568 1,568
Securities held to maturity 17,504 17,431 16,926 16,794
Federal Home Loan Bank stock 858 858 788 788
Loans, net 114,568 114,898 94,760 93,530
Mortgage loans held for sale, net 210 210 1,132 1,132
Accrued interest receivable 870 870 822 822
Financial liabilities:
Deposits 129,303 129,516 119,634 119,814
Federal Home Loan Bank borrowings 7,532 7,534 - -
Accrued interest payable 249 249 195 195
</TABLE>
F-29
<PAGE>
MEDFORD CO-OPERATIVE BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
15. CONVERSION TO STOCK FORM OF OWNERSHIP
On June 11, 1997, the Board of Directors of the Bank adopted a plan of
conversion pursuant to which the Bank will convert from a state chartered
mutual co-operative bank to a state chartered stock co-operative bank, all
of the outstanding common stock of which will be acquired by Mystic
Financial, Inc., (the "Company"), a holding company formed expressly for
such purpose, in exchange for a portion of the net conversion proceeds. All
of the stock to be issued in the conversion is being offered to eligible
account holders in a subscription offering pursuant to subscription rights
in order of priority as set forth in the plan of conversion. The Bank plans
to establish an Employee Stock Ownership Plan ("ESOP") for the benefit of
eligible employees, to become effective upon the conversion. The ESOP
intends to purchase up to 8% of the common stock issued in the conversion
from the proceeds of a loan from the Company. The Bank expects to make
annual contributions adequate to fund the repayment of any indebtedness of
the ESOP.
Effective upon the conversion, the Company intends to enter into employment
agreements with two senior executives and the Bank intends to enter into
employment agreements with two commercial loan officers. The agreements
will include, among other things, provisions for minimum annual compensation
and certain lump-sum severance payments in the event of a "change in
control."
Conversion costs will be deferred and deducted from the proceeds of the
shares sold in the Conversion. If the Conversion is not completed, all
costs incurred will be charged to expense. At June 30, 1997, no significant
cost had been incurred.
The Plan provides for the establishment, upon the completion of the
conversion, of a special "liquidation account" for the benefit of account
holders in an amount equal to the retained earnings of the Bank as of the
date of its latest balance sheet contained in the final prospectus used in
connection with the conversion. Each account holder, if he were to continue
to maintain his deposit account at the Bank, would be entitled, on a
complete liquidation of the Bank after the conversion, to an interest in the
liquidation account prior to any payment to the stockholders of the Bank.
Upon completion of the conversion, the Bank's retained earnings will be
substantially restricted with respect to payment of dividends to
stockholders due to the liquidation account.
The Bank may not declare or pay dividends on its stock if such declaration
and payment would violate statutory or regulatory requirements.
F-30
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL OR ENTITY HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERINGS MADE HEREBY, AND, IF GIVEN OR
MADE, ANY SUCH OTHER INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MYSTIC
FINANCIAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES OFFERED HEREBY, OR ANY OTHER SECURITIES, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED 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 MYSTIC FINANCIAL, INC. SINCE ANY OF THE DATES AS OF WHICH
INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE HEREOF.
-------------------
Table of Concents
SUMMARY.................................................................... iii
SUMMARY OVERVIEW........................................................... x
SELECTED FINANCIAL AND OTHER DATA..........................................xiii
SPECIAL CONSIDERATIONS..................................................... 1
MYSTIC FINANCIAL, INC...................................................... 4
MEDFORD CO-OPERATIVE BANK.................................................. 4
DIVIDENDS.................................................................. 5
BUSINESS PURPOSES.......................................................... 6
USE OF PROCEEDS............................................................ 7
MARKET FOR COMMON STOCK.................................................... 9
SHARES TO BE PURCHASED BY MANAGEMENT
PURSUANT TO SUBSCRIPTION RIGHTS........................................... 10
CAPITALIZATION............................................................. 11
PRO FORMA DATA............................................................. 12
CONSOLIDATED STATEMENTS OF INCOME.......................................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 16
BUSINESS................................................................... 26
MANAGEMENT OF THE COMPANY.................................................. 40
MANAGEMENT OF THE BANK..................................................... 41
REGULATION................................................................. 51
TAXATION................................................................... 60
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY................................ 62
CERTAIN RESTRICTIONS ON ACQUISITION OF THE
COMPANY AND THE BANK...................................................... 64
THE CONVERSION............................................................. 70
LEGAL AND TAX OPINIONS..................................................... 81
EXPERTS.................................................................... 81
ADDITIONAL INFORMATION..................................................... 82
CONSOLIDATED FINANCIAL STATEMENTS.......................................... F-1
================================================================================
UP TO
2,357,500 SHARES OF
COMMON STOCK
MYSTIC
FINANCIAL, INC.
(Proposed Holding
Company for Medford
Co-operative Bank)
-----------------------
PROSPECTUS
----------------------
TRIDENT SECURITIES, INC.
, 1997
--------- --
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Massachusetts Commissioner of Banks registration fee(2)... 5,000
SEC registration fee(2)................................... 8,215
NASD filing fee(3)........................................ 1,600
NASDAQ National Market Listing Fee(2)..................... 7,185
Printing, postage and mailing............................. 45,000
Legal fees and expenses................................... 150,000
Accounting fees and expenses.............................. 35,000
Appraiser's fees and expenses (including business plan)... 25,000
Marketing fees, selling commissions, and
underwriter's expenses (including counsel fees)(3)....... 469,280
Conversion agent fees and expenses........................ 6,500
Certificate printing...................................... 2,000
Blue Sky fees and expenses (including fees of counsel).... 8,000
Miscellaneous............................................. 20,000
---------
TOTAL..................................................... $782,780
========
- -----------------
(1) All expenses are estimated except where otherwise indicated.
(2) Actual expenses based upon the registration of 2,711,125 shares at $10.00
per share.
(3) Based upon the sale of midpoint shares of Conversion Stock at $10.00 per
share.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL"), inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such person against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such
II-1
<PAGE>
threatened, pending or completed action or suit if such person acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and provided further that (unless a court of
competent jurisdiction otherwise provides) such person shall not have been
adjudged liable to the corporation. Any such indemnification may be made only
as authorized in each specific case upon a determination by the stockholders or
disinterested directors or by independent legal counsel in a written opinion
that indemnification is proper because the indemnitee has met the applicable
standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him, and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
Article IX of the Certificate of Incorporation of Mystic Financial, Inc.
(the "Company") provides that a director shall not be personally liable to the
Company or its stockholders for damages for breach of his fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is expressly prohibited by the DGCL. Article X, Section 1 of the
Company's Certificate of Incorporation requires the Company, among other things,
to indemnify to the fullest extent permitted by the DGCL, any person who is or
was or has agreed to become a director or officer of the Company, who was or is
made a party to, or is threatened to be made a party to, or has become a witness
in, any threatened, pending or completed action, suit or proceeding, including
actions or suits by or in the right of the Company, by reason of such agreement
or service or the fact that such person is, was or has agreed to serve as a
director, officer, employee or agent of another corporation or organization at
the request of the Company.
Article X, Section 11 also empowers the Company to purchase and maintain
insurance to protect itself and its directors and officers, and those who were
or have agreed to become directors or officers, against any liability,
regardless of whether or not the Company would have the power to indemnify those
persons against such liability under the law or the provisions set forth in the
Certificate of Incorporation. The Company is also authorized by its Certificate
of Incorporation to enter into individual indemnification contracts with
directors and officers. Medford Co-operative Bank currently maintains and the
Company expects to purchase directors' and officers' liability insurance
consistent with the provisions of the Certificate of Incorporation as soon as
practicable.
The Company expects to enter into employment agreements with certain
executive officers, which agreements are expected to require that the Company
will obtain a directors' and officers' liability policy for the benefit of such
officers or that the Company will indemnify such officers to the fullest extent
provided by law.
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not Applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) LIST OF EXHIBITS. (Filed herewith unless otherwise noted)
1.1 Engagement Letter dated June 4, 1997 between Medford Co-operative Bank
and Trident Securities, Inc.
1.2 Draft Form of Agency Agreement (to be filed by amendment) between
Medford Co-operative Bank and Trident Securities, Inc.
2.1 Plan of Conversion for Medford Co-operative Bank (including the
Stock Charter and Bylaws of Medford Co-operative Bank)
3.1 Certificate of Incorporation of Mystic Financial, Inc.
3.2 Bylaws of Mystic Financial, Inc.
4.1 Draft Stock Certificate of Mystic Financial, Inc.
5.1 Form of Opinion of Thacher Proffitt & Wood Regarding Legality of
Shares to be Issued
8.1 Form of Opinion of Thacher Proffitt & Wood Regarding Federal Taxation
10.1 Employee Stock Ownership Plan of Mystic Financial, Inc.
10.2 Form of Employment Agreement between Medford Co-operative Bank
and Robert H. Surabian
10.3 Form of Employment Agreement between Medford Co-operative Bank
and Ralph W. Dunham
10.4 Form of Employment Agreement between Medford Co-operative Bank
and John O'Donnell
10.5 Form of Employment Agreement between Medford Co-operative Bank
and Thomas G. Burke
21.1 Subsidiaries of the Registrant
23.1 Consent of Wolf & Company, P.C.
23.2 Consent of Thacher Proffitt & Wood (included in Exhibits 5.1 and 8.1)
23.3 Consent and Subscription Rights Opinion of R.P. Financial, Inc.
24.1 Powers of Attorney (Included in Signature Page of this
Registration Statement)
27.1 Financial Data Schedule
99.1 Appraisal Report of R.P. Financial, Inc.
99.2 Draft Marketing Materials in Connection with the Offerings
(to be filed by amendment)
(b) FINANCIAL STATEMENT SCHEDULES.
II-3
<PAGE>
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
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;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table 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 of 1933, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(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.
II-4
<PAGE>
The undersigned Registrant hereby undertakes to furnish stock certificates
to or in accordance with the instructions of the respective purchasers of the
Common Stock, so as to make delivery to each purchaser promptly following the
closing under the Plan of Conversion.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Medford,
Commonwealth of Massachusetts on August 27, 1997.
MYSTIC FINANCIAL, INC.
/s/ Robert H. Surabian
---------------------------------
By: Robert H. Surabian
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert H. Surabian, as their true and
lawful attorney-in-fact in any and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities to sign the Form S-1 Registration Statement and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the U.S. Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or either one of his or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, and any rules and regulations promulgated thereunder, this Registration
Statement, has been signed by the following persons in the capacities and on the
dates indicated.
Name Title Date
---- ----- ----
/s/ Robert H. Surabian President, Chief Executive August 27, 1997
- -------------------------- Officer and Director
Robert H. Surabian
/s/ John J. McGlynn Director and Chairman August 27, 1997
- -------------------------- of the Board
John J. McGlynn
/s/ Ralph W. Dunham Chief Financial Officer, August 27, 1997
- -------------------------- Executive Vice President and
Ralph W. Dunham Treasurer
/s/ Lorraine P. Silva Secretary August 27, 1997
- --------------------------
Lorraine P. Silva
II-8
<PAGE>
/s/ Julie Bernardin
- -------------------------- Director August 27, 1997
Julie Bernardin
/s/ John A. Hackett Director August 27, 1997
- --------------------------
John A. Hackett
/s/ Richard M. Kazanjian Director August 27, 1997
- --------------------------
Richard M. Kazanjian
/s/ Dennis Raimo Director August 27, 1997
- --------------------------
Dennis Raimo
/s/ Robert B. Risman Director August 27, 1997
- --------------------------
Robert B. Risman
II-9
<PAGE>
TABLE OF CONTENTS
LIST OF EXHIBITS (FILED HEREWITH UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<C> <S> <C>
1.1 Engagement Letter dated June 4, 1997 between Medford Co-
operative Bank and Trident Securities, Inc.
1.2 Draft Form of Agency Agreement between Medford Co-
operative Bank and Trident Securities, Inc.*
2.1 Plan of Conversion for Medford Co-operative Bank (including
the Stock Charter and Bylaws of Medford Co-operative Bank)
3.1 Certificate of Incorporation of Mystic Financial, Inc.
3.2 Bylaws of Mystic Financial, Inc.
4.1 Draft Stock Certificate of Mystic Financial, Inc.
5.1 Form of Opinion of Thacher Proffitt & Wood Regarding Legality
of Shares to be Issued
8.1 Form of Opinion of Thacher Proffitt & Wood Regarding
Federal Taxation
10.1 Employee Stock Ownership Plan of Mystic Financial, Inc.
10.2 Form of Employment Agreement between Medford Co-
operative Bank and Robert H. Surabian
10.3 Form of Employment Agreement between Medford Co-
operative Bank and Ralph W. Dunham
10.4 Form of Employment Agreement between Medford Co-
operative Bank and John O'Donnell
10.5 Form of Employment Agreement between Medford Co-
operative Bank and Thomas G. Burke
21.1 Subsidiaries of the Registrant
23.1 Consent of Wolf & Company, P.C.
23.2 Consent of Thacher Proffitt & Wood (included in Exhibits 5.1
and 8.1)
23.3 Consent and Subscription Rights Opinion of R.P. Financial,
Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<C> <S> <C>
24.1 Powers of Attorney (Included in Signature Page of this
Registration Statement)
27.1 Financial Data Schedule
99.1 Appraisal Report of R.P. Financial, Inc.
99.2 Draft Marketing Materials in Connection with the Offerings*
</TABLE>
* TO BE FILED BY AMENDMENT
<PAGE>
[LETTERHEAD OF TRIDENT SECURITIES, INC.]
May 12, 1997
Board of Directors
Medford Co-Operative Bank
60 High Street
Medford, Massachusetts 02155
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Medford Co-Operative Bank, Medford,
Massachusetts (the "Bank") concerning our investment banking services in
connection with the conversion of the Bank from a mutual to a capital stock form
of organization.
Trident is prepared to assist the Bank in connection with the offering of its
shares of common stock during the subscription offering and community offering
as such terms are defined in the Bank's Plan of Conversion. The specific terms
of the services contemplated hereunder shall be set forth in a definitive sales
agency (the "Agreement") between Trident and the Bank to be executed on the
date the offering circular/prospectus is declared effective by the appropriate
regulatory authorities. The price of the shares during the subscription offering
and community offering will be the price established by the Bank's Board of
Directors, based upon an independent appraisal as approved by the appropriate
regulatory authorities, provided such price is mutually acceptable to Trident
and the Bank.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the Bank
in the sale of its common stock during the subscription offering and community
offering. Additionally, Trident may enter into agreements with other National
Association of Securities Dealers, Inc., ("NASD") member firms to act as
selected dealers, assisting in the sale of the common stock. Trident and the
Bank will determine the selected dealers to assist the Bank during the community
offering. At the appropriate time, Trident in conjunction with its counsel, will
conduct an examination of the relevant documents and records of the Bank as
Trident deems necessary and appropriate. The Bank will make all documents,
records and other information deemed necessary by Trident or its counsel
available to them upon request.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Bank:
1. A management fee in the amount of forty basis points (.40%) of the
aggregate dollar amount of capital stock sold in both the subscription
offering and community offering.
2. A commission equal to two percent (2.00%) of the aggregate dollar amount of
capital stock sold in the subscription offering, excluding any shares of
capital stock sold to the Bank's directors, executive officers and the
employee stock ownership plan. Additionally,
<PAGE>
Board of Directors
May 12, 1997
Page 2
commissions will be excluded on those shares sold to "associates" of the
Bank's directors and executive officers. The term "associates" as used
herein shall have the same meaning as that found in the Bank's Plan of
Conversion.
3. A commission equal to two percent (2.00%) of the aggregate dollar amount of
capital stock sold by Trident in the community offering (as defined in the
offering circular) excluding shares sold by other NASD member firms under
selected dealer's agreements.
4. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall be the agreed upon commission to be paid
to the selected dealer(s) which aggregate commission shall not exceed four
and one-half percent (4.50%).
5. The foregoing fees and commissions are to be payable to Trident at closing
as defined in the Agreement to be entered into between the Bank and
Trident.
6. Trident shall be reimbursed for reasonable and allocable expenses incurred
by them, including legal fees, whether or not the Agreement is consummated.
Trident's out-of-pocket expenses and its legal fees will not exceed $44,000
unless the conversion is delayed for more than six months from the date of
this letter. In such case, Trident will be entitled to additional
reimbursement in an amount that is mutually acceptable to the Bank and
Trident. The Bank will forward to Trident a check in the amount of $10,000
as an advance payment to defray the allocable expenses of Trident.
It further is understood that the Bank will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either Trident's attorneys or the
attorneys relating to any required state securities law filings, telephone
charges, air freight, rental equipment, supplies, transfer agent charges, fees
relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the Bank
warrants that: (a) the Bank has not privately placed any securities within the
last 18 months; (b) there have been no material dealings within the last 12
months between the Bank and any NASD member or any person related to or
associated with any such member; (c) none of the officers or directors of the
Bank has any affiliation with the NASD; (d) except as contemplated by this
engagement letter with Trident, the Bank has no financial or management
consulting contracts outstanding with any other person; (e) the Bank has not
granted Trident a right of first refusal with respect to the underwriting of any
future offering of the Bank stock; and (f) there has been no intermediary
between Trident and the Bank in connection with the public offering of the
Bank's shares, and no person is being compensated in any manner for providing
such service.
The Bank agrees to indemnify and hold harmless Trident and each person, if any,
who controls the firm against all losses, claims, damages or liabilities, joint
or several and all legal or other expenses reasonably incurred by them in
connection with the investigation or defense thereof (collectively, "Losses"),
to which they may become subject under the securities laws or under the common
law, that arise out of or are based upon the conversion or the engagement
hereunder of Trident unless it
<PAGE>
Board of Directors
May 12, 1997
Page 3
is determined by final judgment of a court having jurisdiction over the matter
that such Losses are primarily a result of Trident's bad faith, willful
misconduct or negligence. If the foregoing indemnification is unavailable for
any reason, the Bank agrees to contribute to such Losses in the proportion that
its financial interest in the conversion bears to that of the indemnified
parties. If the Agreement is entered into with respect to the common stock to be
issued in the conversion, the Agreement will provide for indemnification, which
will be in addition to any rights that Trident or any other indemnified party
may have at common law or otherwise. The indemnification provision of this
paragraph will be superseded by the indemnification provisions of the Agreement
entered into by the Bank and Trident.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (6) above with regard to the obligation to reimburse
Trident for allocable expenses to be incurred prior to the execution of the
Agreement and the indemnity described in the preceding paragraph. While Trident
and the Bank agree in principle to the contents hereof and propose to proceed
promptly, and in good faith, to work out the arrangements with respect to the
proposed offering, any legal obligations between Trident and the Bank shall be
only as set forth in a duly executed Agreement. Such Agreement shall be in form
and content satisfactory to Trident and the Bank, as well as their counsel, and
Trident's obligations thereunder shall be subject to, among other things, there
being in Trident's opinion no material adverse change in the condition or
obligations of the Bank or no market conditions which might render the sale of
the shares by the Bank hereby contemplated inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident both copies of this letter, along with the advance payment
of $10,000. Trident will then sign and return a fully-executed copy to you for
your files. This proposal is open for your acceptance for a period of thirty
(30) days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ R. Lee Burrows, Jr.
-----------------------
R. Lee Burrows, Jr.
Managing Director
Agreed and accepted to this 4th day
of June, 1997
MEDFORD CO-OPERATIVE BANK
By: /s/ Robert H. Surabian
----------------------
Robert H. Surabian
President
<PAGE>
Exhibit 2.1
AMENDED
PLAN OF CONVERSION
FOR
MEDFORD CO-OPERATIVE BANK
1. Introduction.
This Amended Plan of Conversion (the "Plan") provides for the conversion of
the Medford Co-operative Bank (the "Co-operative Bank" or the "Bank") from a
state-chartered mutual to a state-chartered capital stock institution. The
business purposes of the Conversion are to provide the Co-operative Bank with
equity capital which will enable it to increase its reserves and net worth to
support future growth and branching, to enhance the ability to acquire and
retain highly qualified employees and to increase its ability to render services
to the public.
The Board of Directors of the Bank currently contemplates that all of the
stock of the Bank shall be held by a business corporation (the "Holding
Company") organized under the laws of the State of Delaware and that the Holding
Company will issue and sell its capital stock pursuant to this Plan. The use of
the Holding Company, if so utilized, would provide greater organizational
flexibility.
For these reasons, the Board of Directors, on June 11, 1997 and August 13,
1997, unanimously adopted this Plan to convert the Co-operative Bank from a
mutual form of organization to a stock form of organization.
The savings accounts of the Co-operative Bank's savers will not be affected
by the Conversion provided for in this Plan. Each savings account holder in the
converted Bank, prior to conversion, shall receive, without payment, a
withdrawable savings account or accounts in the converted Bank equal in
withdrawable amount to the withdrawable value of such account holder's savings
account or accounts in the Co-operative Bank prior to conversion. All savings
accounts in the Co-operative Bank following the Conversion will continue to be
insured by the Federal Deposit Insurance Corporation (the "FDIC") and the Share
Insurance Fund of the Co-operative Central Bank to the maximum amount permitted
by law. The stock to be issued in the Conversion, however, will not be insured
by the FDIC or any other insurer. The Co-operative Bank, as chartered in the
stock form following the Conversion, will succeed to all of the presently
existing rights, interests, duties and obligations of the Co-operative Bank to
the extent provided by law, including, but not limited to, all of its rights to
and interests in its assets and properties, both real and personal.
This Plan, which has been adopted by the Co-operative Bank's Board of
Directors by a unanimous vote, must also be approved by the affirmative vote of
two-thirds of the Shareholders present and voting at a meeting of the
Shareholders called to consider the Plan. Prior to the submission of this Plan
to the Shareholders for their consideration, the Plan must be approved by the
Commissioner of Banks of the Commonwealth of Massachusetts (the "Commissioner")
and reviewed without objection by the FDIC.
<PAGE>
2. Definitions.
As used in this Plan, the following terms have the meanings indicated
below:
Acting in Concert. The term "Acting in Concert" is defined to mean: (a)
-----------------
knowing participation in a joint activity or interdependent conscious parallel
action towards a common goal whether or not pursuant to an express agreement; or
(b) a combination or pooling of voting or other interest 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
Company and the Co-operative 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. When Persons act together for such a common purpose, their
group is deemed to have acquired their stock.
Actual Purchase Price. The term "Actual Purchase Price" means the per
---------------------
share price at which the Conversion Stock is ultimately sold in accordance with
the terms hereof.
Affiliate. An Affiliate of, or a person "affiliated" with, a specified
---------
person, is a person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.
Aggregate Purchase Price. The term "Aggregate Purchase Price" means the
------------------------
total sum paid for all Shares of Conversion Stock.
Associate. The term "Associate," when used to indicate a relationship with
---------
any person, means (a) any corporation or organization (other than the Co-
operative Bank or a majority-owned subsidiary of the Co-operative Bank) of which
such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (b)
any trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as director or in a similar fiduciary
capacity, and (c) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or officer of
the Co-operative Bank or any of its parents or subsidiaries. The Company and
the Co-operative Bank may presume that certain persons are acting in concert
based upon, among other things, joint account relationships and the fact that
such person have filed joint Schedules 13D with the SEC with respect to other
companies.
Bank Personnel. The term "Bank Personnel" means directors, officers and
--------------
employees of the Co-operative Bank.
Broker-Dealer. The term "Broker-Dealer" means any person who engages
-------------
either for all or part of such person's time, directly or indirectly, as agent,
broker or principal, in the business of offering, buying, selling or otherwise
dealing or trading in securities issued by another person.
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<PAGE>
Conversion. The term "Conversion" means the change in the form of the Co-
----------
operative Bank from the mutual form to the capital stock form by the adoption of
an amendment to the Charter of the Co-operative Bank in accordance with the
regulations of the Commissioner.
Conversion Stock or Shares. The terms "Conversion Stock" and "Shares" mean
--------------------------
the stock initially issued by the Co-operative Bank upon Conversion.
Direct Community Offering. The term "Direct Community Offering" means the
-------------------------
offering of Conversion Stock to the Local Community with preference given to
borrowers of the Co-operative Bank residing or doing business in the Local
Community.
Division. The term "Division" means the Division of Banks of the
--------
Commonwealth of Massachusetts.
Eligible Account Holder. The term "Eligible Account Holder" means any
-----------------------
person holding a Qualifying Deposit in the Co-operative Bank as of the
Eligibility Record Date.
Eligibility Record Date. The term "Eligibility Record Date" means March
-----------------------
31, 1996, the record date set by the Co-operative Bank for determining Eligible
Account Holders.
Holding Company. The term "Holding Company" means a corporation to be
---------------
organized under the laws of the State of Delaware.
Independent Appraiser. The term "Independent Appraiser" means the firm
---------------------
employed by the Co-operative Bank to make the estimated pro forma valuation of
the Co-operative Bank which will be used as the basis for determining the price
of the Conversion Stock.
Local Community. The term "Local Community" means the Massachusetts cities
---------------
and towns of Medford, Malden, Everett, Stoneham, Arlington, Winchester,
Somerville, Melrose, Lexington and Bedford.
Officer. The term "Officer" means the president, vice presidents, clerk,
-------
and the treasurer of the Co-operative Bank.
Person. The term "Person" means an individual, a corporation, a
------
partnership, an association, a joint-stock company, a trust, any unincorporated
organization, or a government or political subdivision thereof.
Plan. The term "Plan" means this Plan of Conversion as adopted by the
----
Board of Directors of the Co-operative Bank and approved by the Commissioner.
Prospectus. The term "Prospectus" means the prospectus by which the Common
----------
Stock of the Holding Company is being offered.
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<PAGE>
Purchase Price. The term "Purchase Price" means the price of the
--------------
Conversion Stock, as offered in the Conversion.
Qualifying Deposit. The term "Qualifying Deposit" means deposit accounts
------------------
of all types offered by the Co-operative Bank including, but not limited to, NOW
account deposits, certificates of deposit, demand deposits, money market
deposits and deposits made pursuant to IRA/Keogh Plans. It does not include
repurchase agreements. Deposits of less than $50 will not constitute Qualifying
Deposits.
SEC. The term "SEC" means the Securities and Exchange Commission.
---
Shareholders. The term "Shareholders" means depositors of the Bank.
------------
Special Meeting. The term "Special Meeting" means the meeting of the
---------------
Shareholders of the Co-operative Bank called for the specific purpose of
submitting the Plan to such Shareholders for approval.
Subscription Offering. The term "Subscription Offering" means the offering
---------------------
of Conversion Stock, through nontransferable Subscription Rights issued to
Eligible Account Holders, the Tax Qualified Employee Stock Benefit Plan and
Supplemental Eligible Account Holders.
Supplemental Eligibility Record Date. The term "Supplemental Eligibility
------------------------------------
Record Date" means March 31, 1997, the record date set by the Co-operative Bank
for determining Supplemental Eligible Account Holders.
Supplemental Eligible Account Holder. The term "Supplemental Eligible
------------------------------------
Account Holder" means any person (other than an Eligible Account Holder) holding
a Qualifying Deposit in the Co-operative Bank as of the Supplemental
Eligibility Record Date.
Syndicated Community Offering. The term "Syndicated Community Offering"
-----------------------------
means the offering of Conversion Stock of Shares not subscribed for in the
Subscription Offering, if any, to certain members of the general public and/or
through a syndicate of registered broker-dealers.
Tax-Qualified Employee Stock Benefit Plan. The term "Tax-Qualified
-----------------------------------------
Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan of the Bank, such as an employee stock ownership plan, or
other plan, which, with its related trust, meets the requirements to be
"qualified" under section 401 of the Internal Revenue Code of 1986, as amended.
3. Procedure for Conversion.
After adoption of the Plan by the Board of Directors of the Co-operative
Bank, the Plan will be submitted, together with all other requisite material in
an application for conversion (the "Application"), to the Commissioner for his
approval and to the FDIC to determine whether it has objections, based on safety
and soundness considerations, to the Conversion. References herein to approval
of the Commissioner shall also refer to the issuance of a letter of "non-
objection" from
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<PAGE>
the FDIC. The Co-operative Bank must also apply to the Internal Revenue Service
for a tax ruling or receive an opinion from counsel which provides that the
Conversion would not result in a taxable reorganization of the Co-operative Bank
under the Internal Revenue Code of 1986, as amended.
Following a determination by the Commissioner that the Application is
complete, the Co-operative Bank will publish a form of notice provided or
approved by the Commissioner in newspapers having general circulation in each
community in which an office of the Co-operative Bank is located, or in such
other locations as may be satisfactory to the Commissioner. Such notice shall
also be posted in each office of the Co-operative Bank.
The Commissioner will review the Bank's Application. If the Commissioner
finds the Conversion fair to depositors, that the Co-operative Bank's deposits
will be adequately insured, that other banks will not be adversely affected and
that the public's access to credit within the Co-operative Bank's community will
not be adversely affected, he shall approve the Plan.
After approval of the Conversion by the Commissioner, the Plan will be
submitted to the Shareholders at a Special Meeting called to consider the Plan.
Approval of two-thirds of the Shareholders present and voting at the meeting is
required.
If the Shareholders approve the Plan, and the Commissioner authorizes the
sale of Conversion Stock pursuant to this Plan, the Co-operative Bank will sell
the Conversion Stock as provided herein. Upon such approval, the Conversion
Stock to be issued pursuant to this Plan will be offered to Eligible Account
Holders, the Tax-Qualified Employee Stock Benefit Plan and Supplemental Eligible
Account Holders as set forth in Section 5 of this Plan. If feasible, any
Conversion Stock remaining after such purchases will then be sold to the general
public through a Direct Community Offering as provided in Section 6 of this
Plan. The sale of all Conversion Stock ordered in the Subscription Offering
will be consummated simultaneously on the date the Direct Community Offering is
completed, or, if there is no Direct Community Offering, as soon as practicable
following expiration of the Subscription Rights provided for in this Plan.
The Board of Directors of the Bank intends to take all necessary steps to
form the Holding Company. The Bank will be a wholly-owned subsidiary of the
Holding Company unless the Holding Company is eliminated in the Conversion.
If the Holding Company is utilized, upon Conversion the Bank will issue its
capital stock to the Holding Company, and the Holding Company will issue and
sell the Common Stock in accordance with this Plan. The Holding Company will
make timely applications for any requisite regulatory approvals, including an
application to register as a bank holding company, and the filing of a
Registration Statement on Form S-1 to register the securities with the SEC.
Upon the issuance of the Common Stock, the Holding Company will purchase
from the Bank all of the capital stock of the Bank to be issued by the Bank in
the Conversion in exchange for the Conversion proceeds that are not permitted to
be retained by the Holding Company. The Bank believes that the Conversion
proceeds will provide economic strength to the Holding
-5-
<PAGE>
Company and the Bank for the future in a highly competitive and regulated
environment and would facilitate possible expansion through acquisition of
financial service organizations, possible diversification into other related
businesses and for other business and investment purposes, including the
possible payment of dividends and possible future repurchase of the Common Stock
as permitted by the FDIC and the Division. The above activities may also be
engaged in by the Bank if the Holding Company is eliminated.
The Board of Directors of the Bank may determine for any reason at any time
prior to the issuance of the Common Stock not to utilize a holding company form
of organization in the Conversion. If the Board of Directors of the Bank
determines not to complete the Conversion utilizing a holding company form of
organization, the capital stock of the Bank will be issued and sold in
accordance with the Plan. In such case, the Holding Company's Registration
Statement on Form S-1 will be withdrawn from the SEC, the Bank will take steps
necessary to complete the conversion from the mutual to the stock form of
organization, including filing any necessary documents with the FDIC and the
Division, and will issue and sell the Common Stock in accordance with this Plan.
In such event, any subscriptions or orders received for Common Stock of the
Holding Company shall be deemed to be subscriptions or orders for Common Stock
of the Bank, and the Bank shall take such steps as permitted or required by the
FDIC, the Division and the SEC.
4. Number of Shares and Purchase Price of Conversion Stock.
An Independent Appraiser shall be employed by the Co-operative Bank to
provide it with an independent valuation of the estimated pro forma market value
of the Co-operative Bank as required by regulations of the Commissioner. The
Directors of the Co-operative Bank shall thoroughly review and analyze the
methodology and fairness of the independent appraisal. The valuation will be
made by a written report to the Co-operative Bank, contain the factors upon
which the valuation was made and conform to procedures adopted by the
Commissioner. The valuation shall contain an estimated range of aggregate
prices for the Conversion Stock, which range shall reflect the anticipated pro
forma market value of the Co-operative Bank. The maximum price shall be no more
than 15 percent above the estimated pro forma market value, and the minimum
price shall be no more than 15 percent below the estimated pro forma market
value. All Shares to be sold in the Conversion shall be sold at a uniform price
per Share. The Independent Appraiser shall evaluate the pro forma market value
of the Co-operative Bank, which value shall be included in the Prospectus (as
described in Section 8 of this Plan) filed with the Commissioner. The
Independent Appraiser shall also present to the Co-operative Bank at the close
of the Subscription Offering a valuation of the pro forma market value of the
Co-operative Bank. The aggregate Purchase Price of the Conversion Stock to be
sold by the Co-operative Bank shall be adjusted to reflect any required changes
in the pro forma market value of the Co-operative Bank. If, as a result of such
adjustment, the aggregate Purchase Price is not within the subscription price
range, the Co-operative Bank shall obtain an amendment to the Commissioner's
approval. If appropriate, the Commissioner will condition his approval by
requiring a resolicitation of depositors and/or order forms.
-6-
<PAGE>
The price per share for each share of Conversion Stock when multiplied by
the number of shares of Conversion Stock, shall be equivalent to the pro forma
market value of the Co-operative Bank in accordance with the valuation furnished
to the Co-operative Bank by the Independent Appraiser.
The total number of shares of Conversion Stock which will be issued in
connection with the Conversion will be determined by the Board of Directors of
the Co-operative Bank immediately prior to the commencement of the Subscription
Offering; provided, that the board of directors of the Co-operative Bank may
elect to increase or decrease the number of shares of Conversion Stock to be
offered in the Subscription and Direct Community Offering depending upon market
and financial conditions at the time of the close of the Direct Community
Offering or in the event the initial estimate of the pro forma market value of
the Co-operative Bank is materially increased or decreased by the Independent
Appraiser.
5. Subscription Rights of Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plan and Supplemental Eligible Account Holders
A. Category No. 1: Eligible Account Holders
(a) Each Eligible Account Holder shall receive, as first priority and
without payment, non-transferable Subscription Rights to purchase shares of
Conversion Stock in the amount up to $300,000 worth of Shares offered in the
Conversion.
(b) In the event that subscriptions for Conversion Stock are received from
Eligible Account Holders upon exercise of Subscription Rights pursuant to
paragraph (a) in excess of the number of Shares available for subscription, the
Conversion Stock available for purchase will be allocated among the subscribing
Eligible Account Holders so as to permit each subscribing Eligible Account
Holder, to the extent possible, to purchase a number of Shares sufficient to
make his total allocation of Conversion Stock equal to the lesser of 100 Shares
or the number of Shares subscribed for by such Eligible Account Holder. Any
Shares remaining after such allocation will be allocated among the subscribing
Eligible Account Holders whose subscriptions remain unsatisfied in the
proportion which the amount of each Eligible Account Holder's Qualifying Deposit
bears to the total amount of the Qualifying Deposits of all Eligible Account
Holders whose subscriptions remain unsatisfied. If the amount so allocated
exceeds the amount subscribed for by any one or more Eligible Account Holders,
the excess shall be reallocated on the same principle (one or more times as
necessary) among those Eligible Account Holders whose subscriptions are still
not fully satisfied until all available Shares have been allocated or all
subscriptions are satisfied.
(c) Subscription Rights held by Eligible Account Holders who are also
Directors or Officers of the Co-operative Bank or their Associates, will be
subordinated to those of other Eligible Account Holders to the extent they are
attributable to increased deposits during the one-year period preceding the
Eligibility Record Date.
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<PAGE>
B. Category No. 2: Tax-Qualified Employee Stock Benefit Plan
The Tax-Qualified Employee Stock Benefit Plan of the Bank shall receive,
without payment, as a second priority after the filling of the subscriptions of
Eligible Account Holders, non-transferable Subscription Rights to purchase up to
8% of the shares of Conversion Stock issued in the Conversion. If, after the
filling of subscriptions of Eligible Account Holders, a sufficient number of
shares are not available to fill the subscriptions by such plan, the
subscription by such plan shall be filled to the maximum extent possible. If
all the shares of Common Stock offered in the Subscription Offering are
purchased by Eligible Account Holders, then the ESOP will purchase shares in the
open market following consummation of the Conversion. A Tax-Qualified Employee
Stock Benefit Plan shall not be deemed to be an Associate or Affiliate of, or a
Person Acting in Concert with, any Director of Officer of the Holding Company or
the Bank. Notwithstanding any provision contained herein to the contrary, the
Bank may make scheduled discretionary contributions to a Tax-Qualified Employee
Stock Benefit Plan; provided, that such contributions do not cause the Bank to
fail to meet its regulatory capital requirements.
C. Category No. 3: Supplemental Eligible Account Holders
(a) Each Supplemental Eligible Account Holder shall receive, as third
priority and without payment, nontransferable subscription rights to subscribe
for shares of Conversion Stock equal to an amount up to $300,000 worth of Shares
offered in the Conversion.
(b) In the event that subscriptions for Conversion Stock are received from
Supplemental Eligible Account Holders upon exercise of Subscription Rights
pursuant to paragraph (a) in excess of the number of Shares available for
subscription, the Conversion Stock available for purchase will be allocated
among the subscribing Supplemental Eligible Account Holders so as to permit each
subscribing Supplemental Eligible Account Holder, to the extent possible, to
purchase a number of Shares sufficient to make his total allocation of
Conversion Stock equal to the lesser of 100 Shares or the number of Shares
subscribed for by such Supplemental Eligible Account Holder. Any Shares
remaining after such allocation will be allocated among the subscribing
Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in
the proposition which the amount of each Supplemental Eligible Account Holder's
Qualified Deposit bears to the total of the Qualifying Deposits of all
Supplemental Eligible Account Holders whose subscriptions remain unsatisfied.
If the amount so allocated exceeds the amount subscribed for by any one or more
Supplemental Eligible Account Holders, the excess shall be reallocated (one or
more times as necessary) among those Supplemental Eligible Account Holders whose
subscriptions are still not fully satisfied on the same principle until all
available Shares have been allocated or all subscriptions satisfied.
(c) Subscription Rights held by Supplemental Eligible Account Holders
who are also Directors or Officers of the Co-operative Bank or their Associates,
will be subordinated to those of other Supplemental Eligible Account Holders to
the extent they are attributable to increased deposits during the one-year
period preceding the Eligibility Record Date.
-8-
<PAGE>
6. Direct Community Offering.
If feasible, Conversion Stock which remains unsubscribed after the exercise
of Subscription Rights pursuant to the Subscription Offering (Section 5) shall
be offered for sale to the general public through a Direct Community Offering.
The Direct Community Offering, if any, may commence simultaneously with the
Subscription Offering or may commence during or after the commencement of the
Subscription Offering, as the Board so determines. The right to subscribe for
shares of Conversion Stock in the Direct Community Offering is subject to the
right of the Bank to accept or reject such subscriptions in whole or in part.
Stock being sold in the Direct Community Offering will be offered and sold in a
manner that will achieve the widest distribution of the Conversion Stock. In
making the Direct Community Offering, the Co-operative Bank will give preference
to borrowers of the Co-operative Bank residing or doing business in the Local
Community and then to natural persons residing in the Local Community. Orders
accepted in the Direct Community Offering shall be filled up to a maximum of 2%
per order 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.
If any Conversion Stock remains unsold after the close of the Subscription
and Direct Community Offerings, the Co-operative Bank may use the services of
broker-dealers to sell such unsold shares in a Syndicated Community Offering.
7. Limitations on Purchases.
With the exception of the Tax-Qualified Employee Stock Benefit Plan, 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 or Supplemental Eligible Account
Holder, including, in each case, all persons on a joint account, may purchase
shares of Common Stock with an aggregate Purchase Price of more than $300,000
(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 $300,000, 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 $600,000 of Common Stock issued
in the Conversion. This maximum purchase limitation may be increased consistent
with FDIC and Division regulations in the sole discretion of the Holding Company
and the Bank subject to any required regulatory approval. The minimum purchase
is 25 shares.
8. Manner of Exercising Rights; Order Forms.
Upon authorization of the sale of Conversion Stock by the Commissioner:
(a) Promptly after the Commissioner has approved the Prospectus referred
to in paragraph (b) of this Section 8, order forms approved by the Commissioner
for the exercise of the
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<PAGE>
Subscription Rights provided for in this Plan will be sent to all such persons
at their last known address appearing in the records of the Co-operative Bank.
(b) Each order form will be preceded or accompanied by a Prospectus which
must be approved by the Commissioner. Such Prospectus shall describe the Co-
operative Bank and the Conversion Stock being offered and will contain all the
information required by the Commissioner and all applicable laws and regulations
as necessary to enable the recipients of the order forms to make informed
investment decisions regarding the purchase of Conversion Stock. The Co-
operative Bank may, in lieu of mailing a Prospectus to each Eligible Account
Holder and Supplemental Eligible Account Holder, mail a notice and information
statement to each such person with a request form to be returned to the Co-
operative Bank by a reasonable date certain to request subscription materials.
(c) The order forms will contain or will be accompanied by, among other
things, the following:
(i) An explanation of the rights and privileges granted under this
Plan to each class of persons granted Subscription Rights pursuant to Section 5
of this Plan with respect to the purchase of Conversion Stock;
(ii) A specified time by which order forms must be received by the
Co-operative Bank for purposes of exercising the Subscription Rights of Eligible
Account Holders and Supplemental Eligible Account Holders under this Plan, as
provided in Section 10 of this Plan;
(iii) A statement that the Aggregate Purchase Price at which the
Conversion Stock will ultimately be purchased in the Conversion has not been
determined as of the date of mailing of the order form, but that such price will
be within the range of prices which will be stated in the order form;
(iv) The amount which must be returned with the order form to
subscribe for Conversion Stock. Such amount will be equal to the Purchase Price
multiplied by the number of Shares subscribed for in accordance with the terms
of this Plan;
(v) Instructions concerning how to indicate on such order form the
extent to which the recipient elects to exercise Subscription Rights under this
Plan, the name or names in which the Shares subscribed for are to be registered,
the address to which certificates representing such Shares are to be sent and
the alternative methods of payment for Conversion Stock which will be permitted;
(vi) Specifically designated blank spaces for dating and signing
the order form;
(vii) An acknowledgment that the recipient of the order form has
received, prior to signing the order form, the Prospectus referred to in
paragraph (b) of this Section 8;
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<PAGE>
(viii) A statement that the Subscription Rights provided for in this
Plan are nontransferable, will be void after the specified time referred to in
paragraph (c)(ii) above and can be exercised only by delivery of the order form,
properly completed and executed, to the Co-operative Bank, together with the
full required payment (in the manner specified in Section 9 of this Plan) for
the number of Shares subscribed for prior to such specified time; and
(ix) Provision for certification to be executed by the recipient of
the order form to the effect that, as to any Shares which the recipient elects
to purchase, such recipient is purchasing such Shares for his own account only
and has no present agreement or understanding regarding any subsequent sale or
transfer of such Shares.
9. Payment for Conversion Stock.
(a) Full payment for all Shares subscribed for must be received by the Co-
operative Bank, together with properly completed and executed order forms
therefor, prior to the expiration time, which will be specified on the order
forms, unless such date is extended by the Co-operative Bank. Faxes of order
forms will not be accepted as properly completed and executed order forms.
(b) If it is determined that the Aggregate Purchase Price should be
greater than the amount stated in the order forms, upon compliance with such
requirements as may be imposed by the Commissioner (which may include
resolicitation of votes for approval of this Plan by Shareholders of the Co-
operative Bank) each person who subscribed for Shares will be permitted to
withdraw his Subscription and have his payment for Shares returned to him in
whole or in part, with interest, or to make payment to the Co-operative Bank of
the additional amount necessary to pay for the Shares subscribed for by him at
the Actual Purchase Price in the manner and within the time prescribed by the
Cooperative Bank.
(c) If the Aggregate Purchase Price is outside the range of prices
established by the Independent Appraiser referred to in Section 4 of this Plan
and set forth in the Prospectus referred to in Section 8 of this Plan, the Co-
operative Bank will apply for an amendment to the Commissioner's approval of
this Plan and comply with such requirements as the Commissioner may then
establish.
(d) Payment for Shares ordered for purchase by Eligible Account Holders
and Supplemental Eligible Account Holders will be permitted to be made in any of
the following manners:
(i) In cash, if delivered in person;
(ii) By check, bank draft or money order, provided that checks will
only be accepted subject to collection;
(iii) By appropriate authorization of withdrawal from any savings
account, NOW account, certificate of deposit or money market deposit in the Co-
operative Bank. The order forms will contain appropriate means by which
authorization of such withdrawals may be made.
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<PAGE>
For purposes of determining the withdrawable balance of such accounts, such
withdrawals will be deemed to have been made upon receipt of appropriate
authorization therefor, but interest at the rates applicable to the accounts
from which the withdrawals have been deemed to have been made will be paid by
the Co-operative Bank on the amounts deemed to have been withdrawn until the
date on which the Conversion is consummated, at which date the authorized
withdrawal will actually be made. Such withdrawals may be made upon receipt of
order forms authorizing such withdrawals, but interest will be paid by the Co-
operative Bank on the amounts withdrawn as if such amounts had remained in the
accounts from which they were withdrawn until the date upon which the sales of
Conversion Stock pursuant to exercise of Subscription Rights are actually
consummated. Interest will be paid by the Co-operative Bank at not less than the
rate per annum being paid by the Co-operative Bank on its passbook accounts at
the time the Subscription Offering commences, on payments for Conversion Stock
received in the Subscription Offering in cash or by check or negotiable order of
withdrawal from the date payment is received until consummation or termination
of the Conversion. The Co-operative Bank shall be entitled to invest all amounts
paid for subscriptions in the Subscription Offering for its own account until
completion or termination of the Conversion.
(iv) Wire transfers as payment for Shares ordered for purchase will
not be permitted or accepted as proper payment.
(e) Payments for the purchase of Conversion Stock in the Subscription
Offering will be permitted through authorization of withdrawals from certificate
accounts at the Co-operative Bank without early withdrawal penalties. If the
remaining balances of the certificate accounts after such withdrawals are less
than the minimum qualifying balances under applicable regulations, the
certificates evidencing the accounts will be canceled upon consummation of the
Conversion, and the remaining balances will thereafter earn interest at the rate
provided for in the certificates in the event of cancellation.
10. Expiration of Purchase Rights; Undelivered, Defective or Late Order Forms;
Insufficient Payment.
(a) All Subscription Rights provided for in this Plan, including, without
limitation the Subscription Rights of all persons whose order forms are returned
by the United States Post Office as undeliverable, will expire at 3:30 p.m.
Massachusetts time, on a specified date which shall be not less than the
twentieth day following the date on which order forms are first sent to Eligible
Account Holders, provided that the Co-operative Bank shall have the power to
extend such expiration time in its discretion.
(b) In those cases in which the Co-operative Bank is unable to locate
particular persons granted Subscription Rights under this Plan, and cases in
which order forms (1) are returned as undeliverable by the United States Post
Office, (2) are not received back by the Co-operative Bank or are received by
the Co-operative Bank after the expiration date specified thereon, (3) are
defectively filled out or executed or (4) are not accompanied by the full
required payment for the Conversion Stock subscribed for (including cases in
which deposit accounts from which withdrawals are authorized are insufficient to
cover the amount of the required payment), the
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<PAGE>
Subscription Rights of the person to whom such rights have been granted will
lapse as though such person failed to return the completed order form within the
time period specified thereon.
(c) The Co-operative Bank may, but will not be obligated to, waive any
irregularity on any order forms or require the submission of corrected order
forms or the remittance of full payment for Shares subscribed for by such date
as it may specify, and all interpretations by the Co-operative Bank of terms and
conditions of this Plan and of the order forms will be final.
11. Persons in Nonqualified States or in Foreign Countries.
Subject to the following sentence, the Holding Company will make reasonable
efforts to comply with the securities laws of all states of the United States in
which Eligible Account Holders and Supplemental Eligible Account Holders
entitled to subscribe for Conversion Stock pursuant to this Plan reside.
However, no such person will be offered any Subscription Rights or sold any
Conversion Stock under this Plan who resides in a foreign country or who resides
in a state of the United States with respect to which the Co-operative Bank
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise. No payments will be made in lieu
of the granting of Subscription Rights to such persons.
12. Voting Rights after Conversion.
Following Conversion, voting rights with respect to the Co-operative Bank
will be held and exercised exclusively by the holders of the capital stock of
the Co-operative Bank.
13. Establishment of a Liquidation Account.
(a) For purposes of granting a priority claim to the assets of the Co-
operative Bank in the event of a complete liquidation thereof to Eligible
Account Holders and Supplemental Eligible Account Holders who continue to
maintain deposit accounts at the Co-operative Bank, the Co-operative Bank will,
at the time of Conversion, establish a "Liquidation Account" in an amount equal
to the net worth of the Co-operative Bank set forth in its latest statement of
financial condition contained in its final Prospectus. The function of the
Liquidation Account is to establish a priority on liquidation and, except as
provided for in this Section 13, shall not operate to restrict the use or
application of any of the net worth accounts of the Co-operative Bank.
(b) Each Eligible Account Holder and Supplemental Eligible Account Holder
will have a separate inchoate interest in the Liquidation Account for each
deposit account making up a Qualifying Deposit. Such inchoate interests are
referred to herein as "Subaccount Balances." For deposit accounts in existence
on the Eligibility Record Date and the Supplemental Eligibility Record Date,
separate Subaccount Balances shall be determined on the basis of the Qualifying
Deposits in such deposit accounts on each such date.
(c) Each initial Subaccount Balance in the Liquidation Account shall be
an amount determined by multiplying the amount in the Liquidation Account by a
fraction the numerator of which is the closing balance in the Eligible Account
Holder's and Supplemental Eligible Account
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<PAGE>
Holder's account and the denominator of which is the total amount of all
Qualifying Deposits of Eligible Account Holders and Supplemental Account Holders
on the corresponding record date. Each initial Subaccount Balance in the
Liquidation Account shall never be increased, but will be subject to downward
adjustment as follows. If the balance in the deposit account to which a
Subaccount Balance relates, at the close of business on any annual closing date
of the Co-operative Bank subsequent to the corresponding record date, is less
than the lesser of the deposit balance in such account at the close of business
on any other annual closing date subsequent to the Eligibility Record Date or
Supplemental Eligibility Record Date, or the amount of the Qualifying Deposit as
of the Eligibility Record Date or Supplemental Eligible Record Date, the
Subaccount Balance for such deposit account shall be adjusted by reducing such
Subaccount Balance in an amount proportionate to the reduction in such account
balance. If any account is closed, its related Subaccount Balance shall be
reduced to zero upon such closing.
(d) In event of a complete liquidation of the converted Co-operative Bank
(and only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder shall receive from the Liquidation Account a liquidation
distribution equal to the current amount in each of his Subaccount Balances,
before any liquidation distribution may be made to any holders of the conversion
stock of the converted Co-operative Bank. No merger, consolidation, purchase of
bulk assets with assumption of accounts and other liabilities, or similar
transaction, in which the converted Co-operative Bank is not the surviving
institution, will be deemed to be a complete liquidation for this purpose, and,
in any such transaction, the Liquidation Account shall be assumed by the
surviving institution.
14. Transfer of Deposit Account.
Each deposit account in the Co-operative Bank at the time of the Conversion
will constitute, without payment or further action by the account holder, a
deposit account in the converted Bank equivalent in withdrawable amount to the
withdrawable value, and subject to the same terms and conditions (except as to
voting and liquidation rights) as such deposit account in the Co-operative Bank
at the time of the Conversion.
15. Restriction on Transfer of Conversion Stock of Officers and Directors.
(a) All capital stock purchased by Officers or Directors of the Co-
operative Bank on original issue pursuant to this Plan (by subscription or
otherwise) will be subject to the restriction that nosuch Shares shall be sold
for a period of one year following the date of purchase of such Shares, except
in the event of the death or substantial disability (as determined by the
Commissioner) of the Officer or Director to whom such Shares were initially sold
under the terms of this Plan or upon the written approval of the Commissioner.
(b) With respect to all Conversion Stock subject to restriction on
subsequent disposition pursuant to the above paragraph, each of the following
provisions shall apply:
(i) Each certificate representing such Shares shall bear the
following legend prominently stamped on its face giving notice of such
restriction on transfer:
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The shares represented by this certificate may not be sold by the
registered holder hereof for a period of not less than one year from
the date of issuance hereof, except in the event of the death of the
registered holder or substantial disability (as determined by the
Commissioner) of the Officer or Director to whom such Shares were
initially sold under the terms of this Plan or upon the written
approval of the Commissioner.
(ii) Instructions will be given to the transfer agent for the
converted Co-operative Bank and the Holding Company not to recognize or effect
any transfer of any certificates representing such Shares, or any change of
record ownership thereof in violation of such restriction on transfer;
(iii) Any capital stock of the Holding Company issued in respect
of a stock dividend, stock split or otherwise in respect of ownership of
outstanding Shares subject to restrictions on transfer hereunder will be subject
to the same restrictions as are applicable to the Conversion Stock in respect of
which such Shares are issued.
16. Restriction on Stock Purchases by Officers and Directors of the Converted
Bank.
For a period of three years following the Conversion, no Officer or
Director of the converted Co-operative Bank or any of their Associates shall,
without the prior written approval of the Commissioner, purchase capital stock
of the Co-operative Bank or the Holding Company from the Co-operative Bank or
the Holding Company.
17. Amendment and Termination of the Plan.
This Plan may be substantively amended by the Board of Directors of the Co-
operative Bank in its sole discretion as a result of comments from regulatory
authorities or otherwise, at any time prior to the date material is sent to the
Shareholders in connection with the meeting called to consider this Plan, and at
any time thereafter with the concurrence of the Commissioner. This Conversion
may be terminated by the Directors of the Co-operative Bank at any time prior to
the meeting of the Shareholders called to consider this Plan and at any time
thereafter with the concurrence of the Commissioner.
18. Time Period for Completion of Conversion.
The Conversion of the Co-operative Bank shall be completed within 24 months
from the date this Plan is approved by the Board of Directors of the Co-
operative Bank.
19. Expenses of Conversion.
The Co-operative Bank shall use its best efforts to assure that the
expenses incurred in connection with the Conversion shall be reasonable.
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20. Registration Under Securities Exchange Act of 1934.
The Holding Company shall register its Conversion Stock under the
Massachusetts General Laws and Section 12(g) of the Securities Exchange Act of
1934, as amended, concurrently with or promptly following the Conversion,
provided that either or both such registrations are required under applicable
law.
21. Market.
The Holding Company shall use its best efforts to encourage and assist two
or more market makers to establish and maintain a market for its Conversion
Stock promptly following Conversion. The Converted Bank shall also use its best
efforts to cause its Conversion Stock to be quoted on the Nasdaq Stock Market or
such other national exchange.
22. Conversion Stock Not Insured.
The Conversion Stock will not be covered by deposit insurance.
23. No Loans to Purchase Capital Stock.
The Co-operative Bank shall not loan funds or otherwise extend credit to
any person to purchase the capital stock of the Holding Company in connection
with the Conversion.
24. Restrictions on Acquisition of Bank.
Present Massachusetts regulations provide that for a period of three years
following completion of the Conversion, no Person, or group of Persons Acting In
Concert) 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
Bank without the prior approval of the Commissioner. However, approval is not
required for purchases directly from the Bank or the underwriters or selling
group acting on its behalf with a view towards public resale, or for purchases
not exceeding one percent per annum of the shares outstanding, or for the
acquisition of securities by one or more Tax-Qualified Employee Stock Benefit
Plans of the Bank, provided that the plan or plans do not have beneficial
ownership in the aggregate of more than 25% of any class of equity security of
the Bank. Civil penalties may be imposed by the Commissioner for willful
violation or assistance of any violation. Where any person directly or
indirectly, acquires beneficial ownership of more than ten percent of any class
of equity security of the Bank within such three-year period without the prior
approval of the Commissioner, stock of the Bank 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.
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25. Stock Charter and Bylaws.
As part of the Conversion, an amended Stock Charter and Bylaws will be
adopted to authorize the Bank to operate as a Massachusetts-chartered capital
stock co-operative bank. By approving the Plan, the Shareholders of the Bank
will thereby approve the amended Stock Charter and Bylaws. Prior to completion
of the Conversion, the proposed Stock Charter and Bylaws may be amended in
accordance with the provisions and limitations for amending the Plan under
Section 17 herein. The effective date of the adoption of the 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.
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EXHIBIT A
STOCK CHARTER
FOR
MEDFORD CO-OPERATIVE BANK
SECTION 1. CORPORATE TITLE. The full corporate title of the Bank is
"Medford Co-operative Bank."
SECTION 2. OFFICE. The main office of the Bank shall be located in the
City of Medford, County of Middlesex, Commonwealth of Massachusetts, or such
other location as the Board of Directors may lawfully designate, subject to the
written consent of the Commissioner and pursuant to the requirements of Chapter
167C, Section 2 of the Massachusetts General Laws.
SECTION 3. POWERS. The Bank is a capital stock co-operative chartered
under Chapter 170 of the Massachusetts General Laws and has and may exercise all
the express, implied and incidental powers conferred thereby and by all acts
amendatory thereof and supplemental thereto.
SECTION 4. DURATION. The duration of the Bank is perpetual.
SECTION 5. CAPITAL STOCK. The total number of shares of all classes of
the capital stock which the Bank has authority to issue is 4,000,000 of which
3,000,000 shall be common stock, par value $0.10 per share, and 1,000,000 shall
be serial preferred stock. The shares may be issued by the Bank from time to
time as approved by its Board of Directors, subject to applicable law, without
the approval of its stockholders except as otherwise provided in this Section 5.
The consideration for the issuance of the shares shall be paid in full before
their issuance and shall not be less than the stated value per share and
otherwise shall comply with all requirements set forth in Chapter 172, Section
24 Subsection C of the Massachusetts General Laws. Neither promissory notes nor
future services shall constitute payment or part payment for the issuance of
shares of the Bank. The consideration for the shares shall be cash, tangible or
intangible property, labor or services actually performed for the 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 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 surplus of the Bank which is
transferred to stated capital upon the issuance of the shares as a stock
dividend shall be deemed to be the consideration for their issuance.
A description of the different classes and series of the 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 of capital stock are
as follows:
A. COMMON STOCK. Except as provided in this Section 5 (or in any
supplementary sections hereto) the holders of the 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.
<PAGE>
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 or 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; but only when and as
declared by the Board of Directors.
Subject to Section 6 of this Charter in the event of any liquidation,
dissolution or winding up of the Bank, after there shall have been paid to or
set aside for the holders of any class having preference over the common stock
in the event of liquidation, dissolution or winding up the full preferential
amounts which they are respectively entitled, the holders of the common stock,
and of any class or series of stock entitled to participate therewith in whole
or in part, as to distribution of assets, shall be entitled after payment or
provision for payment of all debts and liabilities of the Bank, to receive the
remaining assets of the Bank available for distribution, in cash or in kind, in
proportion to their holdings.
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. SERIAL PREFERRED STOCK. Subject to the approval of the provisions of
any series of preferred stock by the Commissioner of Banks of the Commonwealth
of Massachusetts (the "Commissioner"), if required by law, the Board of
Directors of the Bank is authorized by resolution or resolutions from time to
time adopted, to provide for the issuance of serial preferred stock in series
and to fix and state the voting powers, designations, preferences and relative
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof, including,
but not limited to, determination of any of the following:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates 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 or dates, the payment date or dates 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 or prices at which, and the terms and conditions on which, such shares may
be redeemed;
(e) The amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Bank;
(f) Whether 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
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such fund and the manner of its application, including the price or prices 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 or of any other series of
the same or any other class or classes of stock of the Bank and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates 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 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. Any such resolution shall become effective when the Bank files
with the Secretary of State of the Commonwealth of Massachusetts a certificate
of establishment of preferred stock, signed under the penalties of perjury of
the president or any vice president and by the clerk, assistant clerk, secretary
or assistant secretary of the Bank, setting forth a copy of the resolution of
the Board of Directors.
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.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the Bank
shall not be entitled to preemptive rights with respect to shares of the Bank
which may be issued.
SECTION 7. LIQUIDATION ACCOUNT. The Bank shall establish and maintain a
liquidation account for the benefit of its deposit account holders as of March
31, 1996 ("Eligible Account Holders") and its deposit account holders as of
March 31, 1997 ("Supplemental Eligible Account Holders"). In the event of a
complete liquidation of the Bank it shall comply with such rules and regulations
of the Commissioner with respect to the amount and the priorities on liquidation
of each of the Bank's Eligible Account Holders's and Supplemental Eligible
Account Holder's inchoate interests in the liquidation account to the extent it
is still existence; provided, however, that an Eligible Account Holder's and
Supplemental Eligible Account Holder's inchoate interest in the liquidation
account shall not entitle such Eligible Account Holder or Supplemental Eligible
Account Holder to any voting rights at meetings of the Bank's stockholders.
SECTION 8. CERTAIN PROVISIONS APPLICABLE FOR THREE YEARS.
Notwithstanding anything contained in the Bank's charter or bylaws to the
contrary, for a period of three years from the date of consummation of the
conversion of the Bank from mutual to stock form, the following provisions shall
apply.
A. BENEFICIAL OWNERSHIP LIMITATION. Without the prior approval by a two-
thirds vote of the Bank's Board of Directors, no person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than 10
percent of any class of any equity security of the Bank. This
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limitation shall not apply to a transaction in which the Bank forms a holding
company without change in the respective beneficial ownership interests of its
stockholders other than pursuant to the exercise of any dissenter and appraisal
rights or the purchase of shares by underwriters in connection with a public
offering.
In the event shares are acquired in violation of this Section 8, all shares
beneficially owned by any person in excess of 10 percent shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the stockholders for a vote.
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in concert, a
corporation, a partnership, an association, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of the equity
securities of the Bank.
(2) The term "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value.
(3) The term "acquire" includes every type of acquisition, whether effected
by purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in a joint
activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangements,
whether written or otherwise.
B. CALL FOR SPECIAL MEETINGS. Special meeting of stockholders relating
to changes in control of the Bank or amendments to its charter shall be called
only by the Chairperson of the Board upon direction of a majority of the Board
of Directors.
SECTION 9. CERTAIN REQUIREMENTS FOR BUSINESS COMBINATIONS. In addition to
any affirmative vote required by law or this Charter, the vote of stockholders
of the Bank required to approve any Business Combination (as defined below)
shall be as set forth in this Section 9.
A. None of the following Business Combinations shall be consummated
without the affirmative vote of the holders of at least eighty percent (80%) of
the shares entitled to vote thereon ("Voting Stock"):
1. any merger or consolidation of the Bank with or into (i) any
Interested Shareholder or (ii) any other corporation or entity (whether or not
itself an Interested Shareholder) which is, or after each merger or
consolidation would be, an Affiliate of an Interested Shareholder;
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2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Shareholder or any Affiliate of any Interested Shareholder of assets
of the Bank having an aggregate Fair Market Value of $100,000 or more;
3. the issuance or transfer by the Bank (in one transaction or a
series of transactions) of any securities of the Bank to any Interested
Shareholder or any Affiliate of any Interested Shareholder in exchange for cash,
securities or other property (or a combination thereof) having an aggregate Fair
Market Value of $100,000 or more, other than the issuance of securities upon the
conversion of any class or series of stock or securities convertible into stock
of the Bank which were not acquired by such Interested Shareholder or such
Affiliate from the Bank;
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Bank proposed by or on behalf of an Interested Shareholder or
any Affiliate of any Interested Shareholder; or
5. any reclassification of securities (including any reverse stock
split), or any recapitalization of the Bank, or any merger or consolidation of
the Bank or any other transaction (whether or not with or into or otherwise
involving an Interested Shareholder) which in any such case (i) has the effect,
directly or indirectly of increasing the proportionate share of the outstanding
shares of any class or series of stock of the Bank which is directly or
indirectly beneficially owned by any Interested Shareholder or any Affiliate of
any Interested Shareholder or (ii) would have the effect of increasing such
proportionate share upon conversion of any class or series of stock or
securities convertible into stock of the Bank.
B. The provisions of paragraph A hereof shall not be applicable to any
Business Combination in respect of which the conditions specified in either of
the following subparagraphs 1 and 2 are met. Any such Business Combination
shall require the affirmative vote of only the holders of a majority of the
Voting Stock.
1. Such Business Combination shall have been approved by a majority
of the Disinterested Directors, or
2. All of the following conditions relating to minimum price and
consideration for stock shall have been met:
(a) Common Stock. The aggregate amount of the cash and the Fair
------------
Market Value as of the "Consummation Date" of any consideration other than cash
to be received by holders of the common stock of the Bank in such Business
Combination shall be at least equal to the higher of the following:
(i) the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid in order to acquire any shares
of such common stock beneficially owned by the Interested Shareholder which were
acquired beneficially by such
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Interested Shareholder within the two-year period immediately prior to the
Announcement Date or in the transaction in which it became an Interested
Shareholder, whichever is higher; or
(ii) the Fair Market Value per share of such common stock on the
Announcement Date or the Determination Date, whichever is higher; or
(b) Other Stock. The aggregate amount of the cash and the Fair Market
-----------
Value as of the Consummation Date of any consideration other than cash to be
received per share by holders of shares of any class or series of outstanding
Voting Stock other than common stock shall be at least equal to the highest of
the following (it being intended that the requirements of this subparagraph (b)
shall be required to be met with respect to every class and series of such
Voting Stock, whether or not the Interested Shareholder beneficially owns any
shares of a particular class or series of such Voting Stock):
(i) the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid in order to acquire any shares
of such class or series of Voting Stock beneficially owned by the Interested
Shareholder which were acquired beneficially by such Interested Shareholder
within the two-year period immediately prior to the Announcement Date or in the
transaction in which it became an Interested Shareholder, whichever is higher;
(ii) the highest preferential amount per share to which the holders
of shares of such class or series of Voting Stock are entitled in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the Bank;
or
(iii) the Fair Market Value per share of such class or series of
Voting Stock on the Announcement date or the determination Date, whichever is
higher; and
(c) Form of Consideration. The consideration to be received by
---------------------
holders of a particular class or series of outstanding Voting Stock shall be in
cash or in the same form as was previously paid in order to acquire beneficially
shares of such class or series of Voting Stock that are beneficially owned by
the Interested Shareholder and, if the Interested Shareholder beneficially owns
shares of any class or series of Voting Stock that were acquired with varying
forms of consideration, the form of consideration to be received by the holders
of such class or series of Voting Stock shall be either cash or the form used to
acquire beneficially the largest number of shares of such class or series of
Voting Stock beneficially acquired by it prior to the Announcement Date; and
(d) Prohibited Conduct. After the Determination Date, and prior to
------------------
the Consummation Date:
(i) except as approved by a majority of the Disinterested Directors,
there shall have been no failure to declare and pay at regular dates therefor
the full amount of any dividends (whether or not cumulative), payable on any
class or series having a preference over the common stock of the Bank as to
dividends, or upon liquidation;
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(ii) there shall have been no reduction in the annual rate of
dividends paid on the common stock of the Bank (except as necessary to reflect
any division of the common stock) except as approved by a majority of the
Disinterested Directors; and there shall have been an increase in such annual
rate of dividends as necessary to prevent any such reduction in the event of any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number of outstanding shares of the common stock, unless the failure so to
increase such annual rate was approved by a majority of the Disinterested
Directors;
(iii) an Interested Shareholder shall not have become the beneficial
owner of any additional shares of Voting Stock except as part of the transaction
in which it became an Interested Shareholder; and
(iv) after an Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the benefit,
directly or indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or tax credits or
other tax advantages provided by the corporation, whether in anticipation of or
in connection with such Business Combination or otherwise; and
(e) Informational Requirements. A proxy or information statement
--------------------------
describing the proposed Business Combination and complying with the then current
regulatory requirements shall be mailed to holders of Voting Stock at least 30
days prior to the shareholder vote on such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant to such
Act or subsequent provisions).
C. For the purpose of this Section 9:
1. The term "Business Combination" shall mean any transaction that
is referred to in any one or more subsections 1 through 5 of paragraph A hereof.
2. A "person" shall mean any individual, firm, corporation or other
entity.
3. "Interested Shareholder" shall mean any person (other than the
Bank) who or which:
a. is the beneficial owner, directly or indirectly, of more
than 10 percent of the combined voting power of the then outstanding shares of
Voting Stock;
b. is an Affiliate of the Bank and at any time within the two-
year period prior immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10 percent or more of the combined voting
power of the then outstanding shares of Voting Stock; or
c. is an assignee of or has otherwise succeeded to the
beneficial ownership of any shares of Voting Stock that were at any time within
the two-year period immediately prior to the date in question beneficially owned
by any Interested Shareholder, if such
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assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act of 1933.
4. A person shall be a "Beneficial Owner" of any Voting Stock:
a. which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly;
b. which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote or direct the vote
pursuant to any agreement, arrangement or understanding; or
c. which is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
5. For the purposes of determining whether a person is an Interested
Shareholder pursuant subparagraph 3 of this paragraph C, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of subparagraph 4 of this paragraph C.
6. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934.
7. "Subsidiary" means any corporation more than fifty percent (50%)
of whose outstanding stock having ordinary voting power in the election of
directors is owned, directly or indirectly, by the corporation or by a
Subsidiary thereof or by the corporation and one or more Subsidiaries thereof;
provided, however, that for the purposes of the definition of Interested
Shareholder set forth in subparagraph 3 of this paragraph C, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the Bank.
8. "Disinterested Director" means any member of the Board of
Directors of the Bank who is unaffiliated with, and not a nominee of, the
Interested Shareholder and was a member of the Board prior to the time that the
Interested Shareholder became an Interested Shareholder, and any successor of a
Disinterested Director who is unaffiliated with, and not a nominee of, the
Interested Shareholder and who is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
9. "Fair Market Value" means:
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a. in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if
such stock is not quoted on the Composite Tape on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such stock is not listed on any such
exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, of a share of such stock. Such price
shall be the higher of (1) the closing sales price or bid quotation with respect
to a share of such stock during the 30-day period preceding the date in question
on the National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as determined
by a majority of the Disinterested Directors in good faith; and (2) in the case
of stock of any class or series which is not traded on any United States
registered securities exchange nor in the over-the-counter market or in the case
of property other than cash or stock, the fair market value of such property on
the date in question as determined by a majority of the Disinterested Directors
in good faith.
10. In the event of any Business Combination in which the corporation
survives, the phrase "any consideration other than cash" as used in subparagraph
2.a. of paragraph B hereof shall include the shares of common stock and/or the
shares of any class or series of outstanding Voting Stock other than common
stock of the corporation retained by the holders of such shares.
11. "Announcement Date" means the date of first public announcement
of the proposed Business Combination.
12. "Consummation Date" means the date of consummation of a Business
Combination.
13. "Determination Date" means the date on which the Interested
Shareholder became an Interested Shareholder.
D. A majority of the Disinterested Directors of the Corporation shall
have the power and duty to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance with this
Section 9, including, without limitation, (i) whether a person is an Interested
Shareholder, (ii) the number of shares of Voting Stock beneficially owned by a
person, (iii) whether a person is an Affiliate or Associate of another person,
(iv) whether the requirements of paragraph B hereof have been met with respect
to any Business Combination, and (v) whether the assets which are the subject of
any Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the corporation or any subsidiary in any
Business Combination has, an aggregate Fair Market Value of $100,000 or more.
The good faith determination of a majority of the Disinterested Directors on
such matters shall be conclusive and binding for all purposes of this Section 9.
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E. Nothing contained in this Section 9 shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
F. This Section 9 may be amended only by the vote of holders of two-
thirds of the Voting Stock, unless the amendment is approved by a majority of
the Disinterested Directors, in which event it may be amended by the vote of
holders of a majority of the Voting Stock.
SECTION 10. STANDARDS FOR BOARD OF DIRECTORS EVALUATION OF OFFERS.
The Board of Directors of the Bank, when evaluating any offer of another person
(as defined in Section 9 hereof) to (i) make a tender or exchange offer for any
equity security of the Bank, (ii) merge or consolidate the Bank with another
institution, or (iii) purchase or otherwise acquire all or substantially all of
the properties and assets of the Bank, shall, in connection with the exercise of
its judgment in determining what is in the best interests of the Bank and its
stockholders, give due consideration to all relevant factors, including without
limitation the social and economic effects of acceptance of such offer on (a)
its depositors, borrowers and employees and on the communities in which the Bank
operates or is located and (b) the ability of the bank to fulfill the objectives
of a Massachusetts-charted co-operative bank under applicable statues and
regulations.
SECTION 11. DIRECTORS. The Bank shall be under the direction of a Board of
Directors. The number of directors, as stated in the Bank's Bylaws, shall not be
less than five or more than 15.
The Board of Directors or the stockholders may adopt, alter, amend or
repeal the Bylaws of the Bank. Such action by the Board of Directors shall
require the affirmative vote of at least two-thirds of the directors then in
office at a duly constituted meeting of the Board of Directors called expressly
for such purpose. Such action by the stockholders shall require the affirmative
vote of at least two-thirds of the total votes eligible to be cast by
stockholders at a duly constituted meeting of stockholders called expressly for
such purpose.
SECTION 12. AMENDMENT OF CHARTER. No amendment, addition,
alteration, change or repeal of this Charter shall be made, unless such is first
proposed by the Board of Directors of the Bank and thereafter approved by the
stockholders by a majority of the total votes eligible to be cast at a legal
meeting. Any amendment, addition, alteration, change or repeal so acted upon
shall be effective on the date it is filed with the Secretary of State of the
Commonwealth of Massachusetts or on such other date as the Secretary of State
may specify.
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EXHIBIT B
BYLAWS
OF
MEDFORD CO-OPERATIVE BANK
ARTICLE I
ORGANIZATION
------------
The name of this Bank shall be "Medford Co-operative Bank." Its main
office shall be in the City of Medford, Massachusetts, or such other location as
the Board of Directors may designate. The Bank shall conduct the business of a
co-operative bank and shall have and may exercise all the powers, privileges and
authority now or hereafter conferred by applicable law.
ARTICLE II
STOCKHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders
for election of directors and other purposes shall be held on the second
Wednesday in September at 5:00 p.m., commencing with September 10, 1998, at the
main office of the Bank, unless a different hour or place within Massachusetts
(or if permitted by applicable law, elsewhere in the United States) is fixed by
the Board of Directors. The purposes for which the annual meeting is to be
held, in addition to those prescribed by law, by the Charter or by these Bylaws,
may be specified by the Board of Directors. If no annual meeting has been held
on the date fixed above, a special meeting in lieu thereof may be held, or there
may be action by unanimous written consent of the stockholders on matters to be
voted on at the annual meeting, and such special meeting or written consent
shall have for the purposes of these Bylaws or otherwise all the force and
effect of an annual meeting.
SECTION 2. SPECIAL MEETINGS. Special meeting of the stockholders
for any purpose or purposes may be called at any time only by the chairperson of
the board or the president at the direction of a majority of the directors then
in office unless otherwise provided by law.
SECTION 3. NOTICE OF MEETINGS. A written notice of all regular and
special meetings of stockholders shall state the place, date, hour and purposes
of such meetings, and shall be given by the clerk or an assistant clerk (or
other person authorized by these Bylaws or by law) by mailing notice thereof, at
least seven days before the meeting, to each stockholder as of the record date
for the meeting. When any stockholders' meeting, either annual or special, is
adjourned for thirty (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 thirty
days or of the business to be transacted thereat, other than an announcement at
the meeting at which such adjournment is taken.
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SECTION 4. QUORUM. The holders of a majority of all stock issued,
outstanding, and entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If a quorum is not present, a
lesser number may adjourn the meeting from time to time and the meeting may be
held as adjourned 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 noticed. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 5. VOTING AND PROXIES. Stockholders shall have one vote for
each share of stock entitled to vote owned by them of record according to the
books of the Bank, and no vote for a fractional share. Stockholders may vote
either in person or by written proxy dated not more than six months before the
meeting named therein. Proxies shall be filed with the clerk of the meeting, or
of any adjournment thereof, before being voted. Except as otherwise limited
therein, proxies shall entitle the persons authorized thereby to vote at any
adjournment of such meeting, but they shall not be valid after final adjournment
of such meeting. A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to exercise
of the proxy the Bank receives a specific written notice to the contrary from
any one of them. A proxy purporting to be executed by or on behalf of a
stockholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden or proving invalidity shall rest on the challenger.
SECTION 6. ACTION OF MEETING. When a quorum is present, any matter
before the meeting shall be decided by vote of the holders of a majority of the
shares of stock voting on such matter, except where a larger vote is required by
law, by the Charter or by these Bylaws. Any election by stockholders shall be
determined by a plurality of the votes cast, except where a larger vote is
required by law, by the Charter or by these Bylaws. No ballot shall be required
for any election unless requested by a stockholder entitled to vote in the
election. The Bank shall not directly or indirectly vote any share of its own
stock, provided however, that no provision of these Bylaws shall be construed to
limit the voting rights and powers relating to shares of stock held pursuant to
a plan which is intended to be an "employee stock ownership plan" as defined in
section 409A of the Internal Revenue Code, as now or hereafter in effect.
ARTICLE III
DIRECTORS
---------
SECTION 1. POWERS. The business and affairs of the Bank shall be
managed by a Board of Directors who may exercise all the powers of the Bank
except as otherwise provided by law, by the Charter or by these Bylaws.
SECTION 2. COMPOSITION AND TERM. The Board of Directors shall be
composed of: (i) those persons serving as directors of the Bank immediately
prior to the effective date of these Bylaws until the respective expiration
dates of their terms and until their successors are elected and qualified; and
(ii) as such terms expire, those persons who are elected as directors from time
to time as provided herein. At least three-fourths of the directors shall be
citizens of the Commonwealth of
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Massachusetts and resident therein. Each director, when appointed or elected,
shall take an oath that he or she will faithfully perform the duties of his or
her office and that he or she is the owner, in his or her own right and free
from any lien or encumbrance, of the amount of stock required by this section.
The oath shall be taken before a Notary Public or Justice of the Peace, who is
not an officer of such corporation, and a record of the oath shall be made a
part of the records of such corporation. The Board of Directors shall consist of
not less than five (5) nor more than fifteen (15) individuals, the exact number
to be fixed from time to time by a two-thirds vote of the stockholders at an
annual meeting or special meeting in lieu thereof, and until determined by the
stockholders at the first annual meeting of the converted Bank shall consist of
eight (8) individuals. The Board of Directors shall be divided into three
classes as nearly equal in number as possible. The appropriate class of
directors shall be elected annually by the holders of the Bank's common and
voting preferred stock, if any. Except as otherwise provided in these Bylaws,
the members of each class shall be elected for a term of three years and until
their successors are elected and qualified.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw at the same place
as the annual meeting of stockholders, or the special meeting held in lieu
thereof, following such meeting of stockholders. The Board of Directors may
provide, by resolution, the time and place for the holding of regular meetings
without other notice than such resolution. The Board of Directors shall meet at
least once in each calendar month at a place or places fixed from time to time
by the Board of Directors.
SECTION 4. QUALIFICATION. Each director shall have such
qualifications as are required by applicable law. Each director shall own, in
his own right and free of any lien or encumbrance, common stock of such
corporation, have a par value, or a fair market value on the date the person
became a director, of not less than one thousand dollars. Any director who
ceases to be the owner of the required number of shares of stock, or who becomes
in any other manner disqualified, shall vacate his office forthwith.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairperson of the board,
the president, or a majority of the directors. The persons authorized to call
special meetings of the Board of Directors may fix the place for holding any
special meeting of the Board of Directors elected by such persons.
SECTION 6. NOTICE. Notice of any special meeting shall be given to
each director in person or by telephone or sent to his business or home address
by telegram at least 24 hours in advance of the meeting or by written notice
mailed to his business or home address at least 48 hours in advance of such
meeting. Such notice shall be deemed to be delivered when deposited in the mail
so addressed, with postage thereon prepaid if mailed, or when delivered to the
telegraph company if sent by telegram. Any director may waive notice of any
meeting by a writing filed with the clerk of the meeting. The attendance of a
director at a meeting shall constitute a waiver of notice of such meetings
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 or waiver of
notice of such meeting.
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SECTION 7. QUORUM. A majority of the number of directors then in
office 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. When any Board of Directors' meeting either regular 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 thereat, other than an announcement at the meeting at
which such adjournment is taken.
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 governing law,
by the Charter or by these Bylaws.
SECTION 9. ACTION BY CONSENT. 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 main office of the Bank
addressed to the chairperson of the board or the president. Unless otherwise
specified therein such resignation shall take effect upon receipt thereof by the
chairperson of the board or the president.
SECTION 11. REMOVAL. Any director may be removed, but only for
cause, at the special meeting of stockholders by the affirmative vote of at
least two-thirds (2/3) in number of shares of the stockholders present in person
or represented by proxy at such meeting and entitled to vote or the election of
such director; provided, however, that notice of intention to act upon such
matter shall have been given in the notice calling such meeting.
SECTION 12. VACANCIES. Any vacancy occurring on the Board of
Directors as a result of resignation, removal or death may be filled by the
affirmative vote of a majority of the remaining directors. A director elected to
fill such a vacancy shall be elected to serve until the next election of
directors by the stockholders. 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 until the next election of directors
by the stockholders.
SECTION 13. COMPENSATION. The members of the Board of Directors and
the members of either standing or special committees may be allowed such
compensation as the Board of Directors may determine.
SECTION 14. PRESUMPTION OF ASSENT. A director of the Bank who is
present at a meeting of the Board of Directors at which action on any 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 clerk of the meeting before the adjournment thereof or shall
forward such dissent by registered
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mail to the clerk of the Bank within five days after the date of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
SECTION 15. COMMITTEES. The Board of Directors, by vote of a
majority of the directors then in office, may elect from its number, not less
than three members in each case to serve as an Executive Committee. The Board of
Directors may also elect a Security Committee, an Audit Committee, Finance
Committee or other committees and may delegate thereto some or all of its powers
except those which by law, by the Charter, or by these Bylaws may not be
delegated. Except as the Board of Directors may otherwise determine, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the Board of Directors or in such rules, its business shall be
conducted so far as possible in the same manner as is provided by these Bylaws
for the Board of Directors. All members of such committees shall hold such
offices at the pleasure of the Board of Directors. The Board of Directors may
abolish any such committee at any time, subject to any applicable requirements
of law. Any committee to which the Board of Directors delegates any of its
powers or duties shall keep records of its meetings and shall report its action
to the Board of Directors. The Board of Directors shall have power to rescind
any action of any committee, but no such rescission shall have retroactive
effect.
SECTION 16. NOMINATING COMMITTEE. The chairperson of the board shall
appoint a nominating committee for selecting nominees for election as directors.
Except in the case of a management nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the President 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 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 president of the 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 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.
ARTICLE IV
OFFICERS
--------
SECTION 1. ENUMERATION. The officers of the Bank shall consist of a
president, a treasurer, a clerk or secretary, and such other officers, including
a chairperson of the board, one or more vice presidents and such other officers
as the Board of Directors may determine as necessary for the management of the
Bank.
SECTION 2. ELECTION. The clerk or secretary shall be elected by the
stockholders at their annual meeting or at a special meeting of the
stockholders. The chairperson of the board and the president shall be elected
by and from the Board of Directors. The Board of Directors shall elect the
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treasurer and such other officers as may be required or permitted by law or
these Bylaws. Other officers may be chosen by the Board of Directors at such
first meeting of the Board of Directors or at any other meeting.
SECTION 3. QUALIFICATION. No officer need be a stockholder. Any two
offices may be held by any person. The clerk shall be a resident of the
Commonwealth of Massachusetts unless the Bank has a resident agent appointed for
the purpose of service of process. Any officer may be required by the Board of
Directors to give bond for the faithful performance of his or her duties in such
amount and with such sureties as the Commissioner of Banks may determine.
SECTION 4. TENURE. Except as otherwise provided by law, by the
Charter or by these Bylaws, the president and treasurer shall hold office until
the first meeting of the Board of Directors following the next annual meeting of
stockholders and until their respective successors are chosen and qualified. The
clerk shall hold office until the next annual meeting of stockholders and until
his or her successor is chosen and qualified. All other officers shall hold
office until the first meeting of the Board of Directors following the next
annual meeting of stockholders and until their successors are chosen and
qualified, or for such shorter term as the Board of Directors may fix at the
time such officers are chosen. Any officer may resign by delivering his written
resignation to the Bank at its main office addressed to the president, clerk and
such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event. Election
or appointment of an officer, employee or agent shall not of itself create
contract rights. The Board of Directors may authorize the Bank to enter into an
employment contract with any officer in accordance with governing law or
regulation, but no such contract right shall impair the right of the Board of
Directors to remove any officer at any time in accordance with Section 5 of this
Article IV.
SECTION 5. REMOVAL. The Board of Directors may remove any officer
with or without cause by a vote of two-thirds of the entire number of directors
then in office; provided, however, that such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the persons
involved.
SECTION 6. VACANCIES. Any vacancy in any office may be filled for
the unexpired portion of the term by the Board of Directors.
SECTION 7. CHIEF EXECUTIVE OFFICER. The chief executive officer
shall, subject to the direction of the Board of Directors, have general
supervision and control of the Bank's business.
SECTION 8. PRESIDENT AND VICE PRESIDENTS. The president shall have
such powers and shall perform such duties as the Board of Directors may from
time to time designate and shall serve as the chief executive officer of the
Bank. Any vice president shall have such powers and shall perform such duties as
the Board of Directors may from time to time designate.
SECTION 9. TREASURER AND ASSISTANT TREASURERS. The treasurer shall,
subject to the direction of the Board of Directors and the Executive Committee,
have general charge of the financial affairs of the Bank and shall cause to be
kept accurate books of account. He or she shall
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have custody of all funds, services and valuable documents of the Bank, except
as the Board of Directors may otherwise provide. Any assistant treasurer shall
have such powers and perform such duties as the Board of Directors may from time
to time designate.
SECTION 10. CLERK AND ASSISTANT CLERKS. The clerk shall keep a
record of the meetings of stockholders and meetings of the Board of Directors.
In the absence of the clerk from any meeting of stockholders, an assistant clerk
if one be elected, otherwise a temporary clerk designated by the person
presiding at the meeting, shall perform the duties of the clerk.
SECTION 11. OTHER POWERS AND DUTIES. Subject to these Bylaws, each
officer of the Bank shall have in addition to the duties and powers specifically
set forth in these Bylaws, such duties and powers as are customarily incident to
his office, and such duties and powers as may be designated from time to time by
the Board of Directors.
ARTICLE V
CAPITAL STOCK
-------------
SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled
to a certificate of the capital stock of the Bank in such form as may from time
to time be prescribed by the Board of Directors. Such certificate shall be
signed by the president or a vice president and by the treasurer or an assistant
treasurer. Such signatures may be facsimile if the certificate is signed by a
transfer agent, or by a registrar, other than a director, officer or employee of
the Bank. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Bank with the same effect as if
he were such officer at the time of its issue.
SECTION 2. TRANSFERS. Subject to any restrictions on transfer,
shares of stock may be transferred on the books of the Bank by the surrender to
the Bank's transfer agent of the certificate therefor properly endorsed or
accompanied by a written assignment and power of attorney properly executed with
transfer stamps (if necessary) affixed, and with such proof of the authenticity
of signature as the transfer agent may reasonably require.
SECTION 3. RECORD HOLDERS. Except as may be otherwise required by
law, by the Charter or by these Bylaws, the Bank shall be entitled to treat the
record holder of stock as shown on its books as the owner of such stock for all
purposes, include the payment of dividends and the right to vote with respect
thereto, regardless of any transfer, pledge or other disposition of such stock,
until the shares have been transferred on the books of the Bank in accordance
with the requirements of these Bylaws. It shall be the duty of each stockholder
to notify the Bank of his post office address.
SECTION 4. RECORD DATE. The Board of Directors may fix in advance a
time of not more than sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend or the making of any
distribution to stockholders, or the last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record date
for
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determining the stockholders having the right to notice of and to vote at such
meeting, and any adjournment thereof, or the right to receive such dividend or
distribution or the right to give such consent or dissent. In such case only
stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the Bank after the record
date. Without fixing such record date the Board of Directors may for any of such
purposes close the transfer books for all or any part of such period. If no
record date is fixed and the transfer books are not closed, (a) the record date
for determining stockholders having the right to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, and (b) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors acts with respect thereto.
SECTION 5. REPLACEMENT OF CERTIFICATES. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
SECTION 6. ISSUANCE OF CAPITAL STOCK. The Board of Directors shall
have the authority, subject to applicable law, to issue or reserve for issue
from time to time the whole or any part of the capital stock of the Bank which
may be authorized from time to time, to such persons or organizations, for such
consideration whether cash, property, services or expenses, and on such terms as
the Board of Directors may determine, including without limitation the granting
of options, warrants, or conversion or other rights to subscribe to said capital
stock.
SECTION 7. DIVIDENDS. Subject to applicable law, the Charter and
these Bylaws, the Board of Directors may from time to time declare, and the Bank
may pay, dividends on the outstanding shares of its capital stock.
ARTICLE VI
CERTAIN OPERATING PROVISIONS
----------------------------
SECTION 1. WITHDRAWALS. Any notice by a depositor of his intention
to withdraw the whole or any part of his deposit or accounts filed with the Bank
pursuant to a requirement of notice under applicable provisions of law, shall be
null and void if the depositor does not, within twenty-one days after notice
from the Bank that funds are available for such withdrawal, withdraw the funds
made available for such purpose. Withdrawals may be made by presentation by the
depositor, his or her legally appointed representative, or another person, of
such instruments, in writing or otherwise, as may be from time to time approved
by the Board of Directors.
SECTION 2. TRANSFER. Deposits or accounts may be transferred by the
owner to one or more other persons, subject to applicable provisions of law, and
a charge therefor may be imposed as the Board of Directors from time to time may
prescribe, provided at such charge shall not exceed the maximum amount permitted
by law. No transfer shall be valid as against the Bank until recorded on the
books of the Bank.
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SECTION 3. LOANS AND INVESTMENTS. Funds of the Bank shall be loaned
or invested in such manner, upon such terms and conditions, in such amounts and
at such rates of interest, as from time to time may be authorized or approved by
the Board of Directors or appropriate officers of the Bank in accordance with
applicable provisions of law.
SECTION 4. ATTORNEYS. The president may appoint one or more
attorneys to examine titles to property offered as security for loans and to
prepare papers of a legal nature required in connection therewith. The Board of
Directors or the president may approve the appointment of the same or such other
attorneys in general or special matters, as from time to time the board or such
officer may deem necessary or advisable.
SECTION 5. EXECUTION OF INSTRUMENTS. All conveyances of real estates
and all assignments, extensions, discharges and releases in whole or in part of
mortgages, and all other instruments to which the Bank may be a party, shall be
executed by the president, the treasurer or by such other officer or officers as
from time to time may be authorized by the Board of Directors.
SECTION 6. CHARGES ON OVERDUE PAYMENT. The Board of Directors shall
fix the rate of charges to be imposed upon delinquent payments due the Bank
within the limits prescribed by law and shall determine the circumstances under
which and the periods in which such charges may be waived by the president, a
vice president, the treasurer or other officer authorized by the Board of
Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
------------------------
SECTION 1. FISCAL YEAR. Except as otherwise determined by the Board
of Directors, the fiscal year of the Bank shall be the twelve months ending June
30 of each year. The Bank shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by the Board of
Directors.
SECTION 2. SEAL. The Board of Directors shall have power to adopt
and alter the seal of the Bank.
SECTION 3. EXECUTION OF INSTRUMENTS. All deeds, leases, transfers,
contracts, bonds, notes and other obligations to be entered into by the Bank in
the ordinary course of its business without Board of Directors action may be
executed on behalf of the Bank by the president, any vice president, the
treasurer or any other officer, employee, or agent of the Bank as the Board of
Directors may authorize.
SECTION 4. INDEMNIFICATION. The Bank shall indemnify each director
or officer of the Bank to the fullest extent now or hereafter permitted by law
against all expenses (including attorneys' fees and disbursements), judgments,
fees and amounts paid in settlement actually and reasonably incurred by him or
her in connection with any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative in which he
or she is or
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is threatened to be made a party by reason of the fact that he or she is or was
a director, officer, employee or agent of the Bank or of a subsidiary of the
Bank, or is or was a director, custodian, administrator, committeeman or
fiduciary of any employee benefit plan established and maintained by the Bank or
by a subsidiary of the Bank, or is or was serving another enterprise in any such
capacity at the written request of the Bank. To the extent authorized at any
time by the Board of Directors of the Bank, the Bank may similarly indemnify
other persons against liability incurred in any capacity, or arising out of any
status, of the character described in the immediately preceding sentence. At the
discretion of the Board of Directors, any Indemnification hereunder may include
payment by the Bank of expenses incurred in defending a civil or criminal action
or proceeding in advance of the final disposition of such action or proceeding
upon receipt of an undertaking by the person indemnified to repay such payment
if he shall be adjudicated to be not entitled to indemnification under this
section or applicable laws. In no event, however, shall the Bank indemnify any
director, officer, or other person hereunder with respect to any matter as to
which he or she shall have been adjudicated in any proceeding not to have acted
in good faith in the reasonable belief that his action was in the best interests
of the Bank. The Bank may purchase and maintain insurance to protect itself and
any present or former director, officer or other person against any liability of
any character asserted against and incurred by the Bank or any such director,
officer or other person in any capacity, or arising out of any status, whether
or not the Bank would have the power to indemnify such person against such
liability by law or under the provisions of this Section 4. The provisions of
this Section 4 shall be applicable to persons who shall have ceased to be
directors or officers of the Bank, and shall inure to the benefit of the heirs,
executors and administrators of persons entitled to indemnify hereunder. Nothing
herein shall be deemed to limit the Bank's authority to indemnify any person
pursuant to any contract or otherwise.
SECTION 5. VOTING OF SECURITIES. Unless otherwise provided by the
Board of Directors, the president, any vice president or the treasurer may waive
notice of and act on behalf of the Bank, or appoint another person or persons to
act as proxy or attorney in fact for the Bank with or without discretionary
power and/or power of substitution, at any meeting of stockholders or
shareholders of any other organization, any of whose securities are held by the
Bank.
SECTION 6. RESIDENT AGENT. The Board of Directors may appoint a
resident agent upon whom legal process may be served in any action or proceeding
against the Bank. Said resident agent shall be either an individual who is a
resident of and has a business address in Massachusetts or a corporation
organized under the laws of any other state of the United States, which has
qualified to do business in, and has an office in, Massachusetts.
SECTION 7. BANK RECORDS. The original, or attested copies, of the
Charter, Bylaws and records of all meetings of the directors or stockholders and
the stock and transfer records, which shall contain the names of all
stockholders and the record address and the amount of stock held by each, shall
be kept in Massachusetts at the main office of the Bank, or at an office of its
transfer agent, clerk or resident agent.
SECTION 8. CHARTER. All references in these Bylaws to the Charter
shall be deemed to refer to the Charter of the Bank, as amended and in effect
from time to time.
B-10
<PAGE>
SECTION 9. AMENDMENTS. These Bylaws may be altered, amended or
repealed as provided in the Charter.
SECTION 10. EFFECTIVE DATE. These Bylaws shall become effective on
the date of the conversion of the Bank to a Massachusetts-chartered stock form
co-operative bank.
B-11
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
MYSTIC FINANCIAL, INC.
UNDER SECTION 102 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
NAME
............................................................................ 1
ARTICLE II
REGISTERED OFFICE AND AGENT
............................................................................ 1
ARTICLE III
PURPOSE
............................................................................ 1
ARTICLE IV
CAPITAL STOCK
Section 1. Shares, Classes and Series Authorized ........................... 1
Section 2. Designations, Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions Relating to the Capital Stock.... 2
ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
Section 1. Applicability of Article ....................................... 4
Section 2. Prohibitions Relating to Beneficial Ownership of Voting Stock .. 4
Section 3. Excess Shares .................................................. 4
Section 4. Powers of the Board of Directors ............................... 5
Section 5. Severability ................................................... 6
Section 6. Exclusions ..................................................... 6
i
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Page
----
ARTICLE VI
BOARD OF DIRECTORS
Section 1. Number of Directors ............................................ 6
Section 2. Classification of Board ........................................ 6
Section 3. Vacancies ...................................................... 7
Section 4. Removal of Directors ........................................... 7
Section 5. Evaluation of Acquisition Proposals ............................ 7
ARTICLE VII
ACTION BY SHAREHOLDERS WITHOUT A MEETING
............................................................................ 7
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS
Section 1. Higher Vote Required for Certain Business Combinations ......... 7
Section 2. When Higher Vote is Not Required ............................... 8
Section 3. Definitions .................................................... 11
Section 4. Powers of the Disinterested Directors .......................... 15
Section 5. Effect on Fiduciary Obligations of Interested Shareholders ..... 16
Section 6. Amendment, Repeal, Etc ......................................... 16
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
............................................................................ 16
ARTICLE X
INDEMNIFICATION
Section 1. Actions, Suits or Proceedings Other than by or in the Right
of the Corporation .......................................... 17
Section 2. Actions or Suits by or in the Right of the Corporation ......... 18
Section 3. Indemnification for Costs, Charges and Expenses of a
ii
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Page
----
Successful Party............................................. 19
Section 4. Indemnification for Expenses of a Witness ...................... 19
Section 5. Determination of Right to Indemnification ...................... 19
Section 6. Advancement of Costs, Charges and Expenses ..................... 20
Section 7. Procedure for Indemnification .................................. 20
Section 8. Settlement ..................................................... 21
Section 9. Other Rights; Continuation of Right to Indemnification;
Individual Contracts ........................................ 21
Section 10. Savings Clause ................................................ 22
Section 11. Insurance ..................................................... 22
Section 12. Definitions ................................................... 22
Section 13. Subsequent Amendment and Subsequent Legislation ............... 23
ARTICLE XI
AMENDMENTS
Section 1. Amendments of Certificate of Incorporation ..................... 24
Section 2. Amendments of Bylaws ........................................... 25
ARTICLE XII
NOTICES
........................................................................... 25
iii
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MYSTIC FINANCIAL, INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to
Section 102 of the General Corporation Law of the State of Delaware, does hereby
certify that this Certificate of Incorporation of Mystic Financial, Inc. was
duly adopted in accordance with the provisions of Section 102 of the General
Corporation Law of the State of Delaware, and further certifies as follows:
ARTICLE I
NAME
The name of the corporation is Mystic Financial, Inc. (the
"Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
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ARTICLE IV
CAPITAL STOCK
Section 1. Shares, Classes and Series Authorized. The total number
of shares of all classes of capital stock which the Corporation shall have
authority to issue is six million, (6,000,000) shares, of which one million
(1,000,000) shares shall be preferred stock, par value one cent ($.01) per share
(the "Preferred Stock"), and five million (5,000,000) shares shall be common
stock, par value one cent ($.01) per share (the "Common Stock"). The Preferred
Stock and Common Stock are sometimes hereinafter collectively referred to as the
"Capital Stock."
Section 2. Designations, Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions Relating to the Capital Stock. The following is a
statement of the designations, powers, preferences and rights in respect of the
classes of the Capital Stock, and the qualifications, limitations or
restrictions thereof, and of the authority with respect thereto expressly vested
in the Board of Directors of the Corporation (the "Board of Directors"):
(a) Preferred Stock. The Preferred Stock may be issued from time to
---------------
time in one or more series, the number of shares and any designation of each
series and the powers, preferences and rights of the shares of each series, and
the qualifications, limitations or restrictions thereof, to be as stated and
expressed in a resolution or resolutions providing for the issue of such series
adopted by the Board of Directors, subject to the limitations prescribed by law.
The Board of Directors in any such resolution or resolutions is expressly
authorized to state for each such series:
(i) the voting powers, if any, of the holders of stock of such
series in addition to any voting rights affirmatively required by law;
(ii) the rights of shareholders in respect of dividends, including,
without limitation, the rate or rates per annum and the time or times at
which (or the formula or other method pursuant to which such rate or rates
and such time or times may be determined) and conditions upon which the
holders of stock of such series shall be entitled to receive dividends and
other distributions, and whether any such dividends shall be cumulative or
non-cumulative and, if cumulative, the terms upon which such dividends
shall be cumulative;
(iii) whether the stock of each such series shall be redeemable by the
Corporation at the option of the Corporation or the holder thereof, and, if
redeemable, the terms and conditions upon which the stock of such series
may be redeemed;
2
<PAGE>
(iv) the amount payable and the rights or preferences to which the
holders of the stock of such series shall be entitled upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(v) the terms, if any, upon which shares of stock of such series
shall be convertible into, or exchangeable for, shares of stock of any
other class or classes or of any other series of the same or any other
class or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any; and
(vi) any other designations, preferences, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, so far as they are not inconsistent
with the provisions of this Certificate of Incorporation and to the full
extent now or hereafter permitted by the laws of the State of Delaware.
All shares of the Preferred Stock of any one series shall be identical
to each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon, if
cumulative, shall be cumulative.
Subject to any limitations or restrictions stated in the resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting a series, the Board of Directors may by resolution or resolutions
likewise adopted increase (but not above the total number of authorized shares
of that class) or decrease (but not below the number of shares of the series
then outstanding) the number of shares of the series subsequent to the issue of
shares of that series; and in case the number of shares of any series shall be
so decreased, the shares constituting the decrease shall resume that status that
they had prior to the adoption of the resolution originally fixing the number of
shares constituting such series.
(b) Common Stock. All shares of Common Stock shall be identical to
------------
each other in every respect. The shares of Common Stock shall entitle the
holders thereof to one vote for each share on all matters on which shareholders
have the right to vote. The holders of Common Stock shall not be permitted to
cumulate their votes for the election of directors.
Subject to the preferences, privileges and powers with respect to each
class or series of Capital Stock having any priority over the Common Stock, and
the qualifications, limitations or restrictions thereof, the holders of the
Common Stock shall have and possess all rights pertaining to the Capital Stock.
No holder of shares of Common Stock shall be entitled as such, as a
matter of preemptive right, to subscribe for, purchase or otherwise acquire any
part of any new or additional issue of stock of any class or series whatsoever
of the Corporation, or of securities convertible into
3
<PAGE>
stock of any class or series whatsoever of the Corporation, or of any warrants
or other instruments evidencing rights or options to subscribe for, purchase or
otherwise acquire such stock or securities, whether now or hereafter authorized
or whether issued for cash or other consideration or by way of dividend.
ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
Section 1. Applicability of Article. The provisions of this
Article V shall become effective upon (i) the consummation of the conversion of
Medford Co-operative Bank, a co-operative bank organized under the laws of the
United States (the "Bank"), from a mutual to a stock co-operative bank, which
conversion shall be effective upon the filing of the Bank's Stock Charter with
the Commissioner of Banks of Massachusetts, and (ii) the concurrent acquisition
by the Corporation of all of the outstanding capital stock of the Bank (the
"Effective Date").
Section 2. Prohibitions Relating to Beneficial Ownership of Voting
Stock. No Person (other than the Corporation, any Subsidiary, or any pension,
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation or by a member of a controlled group of corporations or trades or
businesses of which the Corporation is a member for the benefit of the employees
of the Corporation and/or any Subsidiary, or any trust or custodial arrangement
established in connection with any such plan) shall directly or indirectly
acquire or hold the beneficial ownership of more than ten percent (10%) of the
issued and outstanding Voting Stock of the Corporation. Any Person so
prohibited who directly or indirectly acquires or holds the beneficial ownership
of more than ten percent (10%) of the issued and outstanding Voting Stock in
violation of this Section 2 shall be subject to the provisions of Sections 3 and
4 of this Article V, below. All terms used in this Article V and not otherwise
defined herein shall have the meanings ascribed to such terms in Section 3 of
Article VIII, below.
Section 3. Excess Shares. If, notwithstanding the foregoing
prohibition, a Person shall, voluntarily or involuntarily, become or attempt to
become the purported beneficial owner (the "Purported Owner") of shares of
Voting Stock in excess of ten percent (10%) of the issued and outstanding shares
of Voting Stock, the number of shares in excess of ten percent (10%) shall be
deemed to be "Excess Shares," and in no event shall any record owner or
beneficial owner of such Excess Shares be entitled or permitted to vote such
Excess Shares.
The restrictions set forth in this Article V shall be noted
conspicuously on all certificates evidencing ownership of Voting Stock.
4
<PAGE>
Section 4. Powers of the Board of Directors.
(a) The Board of Directors may, to the extent permitted by law, from
time to time establish, modify, amend or rescind, by Bylaw or otherwise,
regulations and procedures not inconsistent with the express provisions of this
Article V for the orderly application, administration and implementation of the
provisions of this Article V. Such procedures and regulations shall be kept on
file with the Secretary of the Corporation and with the Transfer Agent, shall be
made available for inspection by the public and, upon request, shall be mailed
to any holder of Voting Stock of the Corporation.
(b) When it appears that a particular Person has become a Purported
Owner of Excess Shares in violation of Section 2 of this Article V, or of the
rules and regulations of the Board of Directors with respect to this Article V,
and that the provisions of this Article V require application, interpretation,
or construction, then a majority of the directors of the Corporation shall have
the power and duty to interpret all of the terms and provisions of this
Article V, and to determine on the basis of information known to them after
reasonable inquiry all facts necessary to ascertain compliance with this Article
V, including, without limitation, (i) the number of shares of Voting Stock
beneficially owned by any Person or Purported Owner, (ii) whether a Person or
Purported Owner is an Affiliate or Associate of, or is acting in concert with,
any other Person or Purported Owner, (iii) whether a Person or Purported Owner
has an agreement, arrangement or understanding with any other Person or
Purported Owner as to the voting or disposition of any shares of the Voting
Stock, (iv) the application of any other definition or operative provision of
this Article V to the given facts, or (v) any other matter relating to the
applicability or effect of this Article V.
The Board of Directors shall have the right to demand that any Person
who is reasonably believed to be a Purported Owner of Excess Shares (or who
holds of record Voting Stock beneficially owned by any Person reasonably
believed to be a Purported Owner in excess of such limit) supply the Corporation
with complete information as to (i) the record owner(s) of all shares of Voting
Stock beneficially owned by such Person or Purported Owner and (ii) any other
factual matter relating to the applicability or effect of this Article V as may
reasonably be requested of such Person or Purported Owner.
Any applications, interpretations, constructions or any other
determinations made by the Board of Directors pursuant to this Article V, in
good faith and on the basis of such information and assistance as was then
reasonably available for such purpose, shall be conclusive and binding upon the
Corporation and its shareholders and neither the Corporation nor any of its
shareholders shall have the right to challenge any such construction,
application or determination.
5
<PAGE>
Section 5. Severability. In the event any provision (or portion
thereof) of this Article V shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Article V shall remain in full force and effect, and shall be construed as
if such invalid, prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of this
Corporation and its shareholders that each such remaining provision (or portion
thereof) of this Article V remain, to the fullest extent permitted by law,
applicable and enforceable as to all shareholders, including Purported Owners,
if any, notwithstanding any such finding.
Section 6. Exclusions. This Article V shall not apply to (a) any
offer or sale with a view towards public resale made exclusively by the
Corporation to any underwriter or underwriters acting on behalf of the
Corporation, or to the selling group acting on such underwriter's or
underwriters' behalf, in connection with a public offering of the Common Stock;
or (b) any reclassification of securities (including any reverse stock split),
or recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction or
reorganization that does not have the effect, directly or indirectly, of
changing the beneficial ownership interests of the Corporation's shareholders,
other than pursuant to the exercise of any dissenters' and appraisal rights,
except as a result of immaterial changes due to fractional share adjustments,
which changes do not exceed, in the aggregate, one percent (1%) of the issued
and outstanding shares of such class of equity or convertible securities.
ARTICLE VI
BOARD OF DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be as determined by the Bylaws of the Corporation or by
resolution of the Board of Directors, but shall not be less than five (5) nor
more than fifteen (15).
Section 2. Classification of Board. Subject to the rights of any
holders of any series of Preferred Stock that may be issued by the Corporation
pursuant to a resolution or resolutions of the Board of Directors providing for
such issuance, the directors of the Corporation shall be divided into three
classes with respect to term of office, each class to contain, as near as may be
possible, one-third of the entire number of the Board, with the terms of office
of one class expiring each successive year. At each annual meeting of
shareholders, the successors to the class of directors whose term expires at
that time shall be elected by the shareholders to serve until the annual meeting
of shareholders held three years next following and until their successors shall
be elected and qualified.
6
<PAGE>
In the event of any intervening changes in the authorized number of
directors, the Board of Directors shall designate the class or classes to which
the increases or decreases in directorships shall be apportioned and may
designate one or more directorships as directorships of another class in order
more nearly to achieve equality of number of directors among the classes;
provided, however, that no such apportionment or redesignation shall shorten the
term of any incumbent director.
Unless and to the extent that the Bylaws so provide, elections of
directors need not be by written ballot.
Section 3. Vacancies. Subject to the limitations prescribed by law
and this Certificate of Incorporation, all vacancies in the office of director,
including vacancies created by newly created directorships resulting from an
increase in the number of directors, shall be filled only by a vote of a
majority of the directors then holding office, whether or not a quorum, and any
director so elected shall serve for the remainder of the full term of the class
of directors in which the new directorship was created or the vacancy occurred
and until his successor shall be elected and qualified.
Section 4. Removal of Directors. Any or all of the directors may be
removed at any time, but only for cause, and any such removal shall require the
vote, in addition to any vote required by law, of not less than eighty percent
(80%) of the total votes eligible to be cast by the holders of all outstanding
shares of Capital Stock entitled to vote generally in the election of directors
at a meeting of shareholders expressly called for that purpose. For purposes of
this Section 4, conduct worthy of removal for "cause" shall mean (a) conduct as
a director of the Corporation or any subsidiary of the Corporation, which
conduct involves willful material misconduct, breach of fiduciary duty involving
personal pecuniary gain or gross negligence in the performance of duties or,
(b) conduct, whether or not as a director of the Corporation or a subsidiary of
the Corporation, which conduct involves dishonesty or breach of fiduciary duty
and is punishable by imprisonment for a term exceeding one year under state or
federal law.
Section 5. Evaluation of Acquisition Proposals. The Board of
Directors of the Corporation, when evaluating any offer to the Corporation or to
the shareholders of the Corporation from another party to (a) purchase for cash,
or exchange any securities or property for any outstanding equity securities of
the Corporation, (b) merge or consolidate the Corporation with another
corporation, or (c) purchase or otherwise acquire all or substantially all of
the proper ties and assets of the Corporation, shall, in connection with the
exercise of its judgment in determining what is in the best interest of the
Corporation and its shareholders, give due consideration not only to the price
or other consideration being offered, but also to all other relevant factors
including, without limitation, the financial and managerial resources and future
prospects of the other party, the possible effects on the business of the
Corporation and its subsidi-
7
<PAGE>
aries and on the employees, customers, suppliers and creditors of the
Corporation and its subsidiaries, and the effects on the communities in which
the Corporation's and its subsidiaries' facilities are located.
ARTICLE VII
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Shareholders may not authorize any corporate action or consent to any
action except at a special or annual meeting of shareholders. Shareholders are
expressly denied any right they may otherwise have to act by written consent
without a meeting.
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS
Section 1. Higher Vote Required for Certain Business Combinations.
In addition to any affirmative vote required by law, by this Certificate of
Incorporation, or by the provisions of any series of Preferred Stock that may at
the time be outstanding, and except as otherwise expressly provided for in
Section 2 of this Article VIII, any Business Combination, as hereinafter
defined, shall require the affirmative vote of not less than eighty percent
(80%) of the total number of votes eligible to be cast by the holders of all
outstanding shares of Voting Stock, voting together as a single class (it being
understood that for purposes of this Article VIII each share of the Voting Stock
shall have the number of votes granted to it pursuant to Article IV of this
Certificate of Incorporation or in any resolution or resolutions of the Board of
Directors for issuance of shares of Preferred Stock), together with the
affirmative vote of at least fifty percent (50%) of the total number of votes
eligible to be cast by the holders of all outstanding shares of the Voting Stock
not beneficially owned by the Interested Shareholder involved or any Affiliate
or Associate thereof, voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
Section 2. When Higher Vote is Not Required. The provisions of
Section 1 of this Article VIII shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as is required by law or any other provision of this
Certificate of Incorporation, if the Business Combination shall have been
approved by a majority of the Disinterested Directors then in office or all of
the conditions specified in the following subsections (a) through (g) are met:
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(a) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-
management compensation, and other expenses, including, but not limited to,
costs of newspaper advertisements, printing expenses and attorneys' fees)
paid by the Interested Shareholder for any shares of Common Stock acquired
by it (A) within the two year period immediately prior to the Announcement
Date, or (B) in the transaction in which it became an Interested
Shareholder, whichever is higher, plus interest compounded annually from
the Determination Date through the Consummation Date at the prime rate of
interest of Citibank, N.A. (or other major bank headquartered in New York
City selected by a majority of the Disinterested Directors then in office)
from time to time in effect in New York City, less the aggregate amount of
any cash dividends paid and the Fair Market Value of any dividends paid,
other than in cash, per share of Common Stock from the Determination Date
through the Consummation Date in an amount up to but not exceeding the
amount of such interest payable per share of Common Stock; or
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as of
the Consummation Date of consideration other than cash to be received per share
by holders of shares of any class or series of outstanding Voting Stock, other
than Common Stock, in such Business Combination shall be at least equal to the
highest of the following (such requirement being applicable to each such class
or series of outstanding Voting Stock, whether or not the Interested Shareholder
has previously acquired any shares of such class or series of Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-
management compensation, and other expenses, including, but not limited to,
costs of newspaper advertisements, printing expenses and attorneys' fees)
paid by the Interested Shareholder for any shares of such class or series
of Voting Stock acquired by it (A) within the two year period immediately
prior to the Announcement Date, or (B) in the transaction in which it
became an Interested Shareholder, whichever is higher, plus interest
compounded annually from the Determination Date through the Consummation
Date at the prime rate of interest of Citibank, N.A. (or other major bank
headquartered in New York City selected by a majority of the Disinterested
Directors then in office) from time to time in effect in New York City,
less the aggregate amount of any cash dividends paid, and the Fair Market
Value of any
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dividends paid other than in cash, per share of such class or series of
Voting Stock from the Determination Date through the Consummation Date in
an amount up to but not exceeding the amount of such interest payable per
share of such class or series of Voting Stock;
(ii) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; or
(iii) the Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher.
(c) The consideration to be received by holders of any particular
class or series of outstanding Voting Stock (including Common Stock) in such
Business Combination shall be in cash or in the same form as the Interested
Shareholder has previously paid for shares of such class or series of Voting
Stock. If the Interested Shareholder has paid for shares of any class or series
of Voting Stock with varying forms of consideration, the form of consideration
for such class or series of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class or series of Voting Stock
previously acquired by it.
(d) The holders of all outstanding shares of Voting Stock not
beneficially owned by the Interested Shareholder immediately prior to the
Consummation Date shall be entitled to receive in such Business Combination cash
or other consideration for their shares in compliance with subsections (a), (b)
and (c) of this Section 2.
(e) After the Determination Date and prior to the Consummation Date:
(i) except as approved by a majority of the Disinterested Directors
then in office, there shall have been no failure to declare and pay, or set
aside for payment, at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding Preferred Stock;
(ii) there shall have been (A) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Disinterested Directors then in office, and (B) an increase in such annual rate
of dividends as necessary to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar transaction that
has the effect of reducing the number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate is approved by a majority of
the Disinterested Directors then in office; and
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(iii) such Interested Shareholder shall not have become the beneficial
owner of any additional shares of Voting Stock except as part of the transaction
that results in such Interested Shareholder becoming an Interested Shareholder
or as the result of a stock dividend paid by the Corporation.
(f) After the Determination Date, the Interested Shareholder shall
not have received the benefit, directly or indirectly (except proportionately as
a shareholder), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax ad vantages provided by or through
the Corporation, whether in anticipation of or in connection with such Business
Combination or otherwise.
(g) A proxy or information statement describing the proposed
Business Combination in accordance with the requirements of the Securities
Exchange Act of 1934, as amended, whether or not the Corporation is then subject
to such requirements, and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations) shall be mailed
to shareholders of the Corporation at least thirty (30) days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions). The first page of such proxy or in formation statement
shall prominently display the recommendation, if any, that a majority of the
Disinterested Directors then in office may choose to make to the holders of
Voting Stock regarding the proposed Business Combination. Such proxy or
information statement shall also contain, if a majority of the Disinterested
Directors then in office so requests, an opinion of a reputable investment
banking firm (which firm shall be engaged solely on behalf of the shareholders
of the Corporation other than the Interested Shareholder and shall be selected
by a majority of the Disinterested Directors then in office, furnished with all
information it reasonably requests, and paid a reasonable fee for its services
by the Corporation upon the Corporation's receipt of such opinion) as to the
fairness (or lack of fairness) of the terms of the proposed Business Combination
from the point of view of the holders of Voting Stock other than the Interested
Shareholder.
Section 3. Definitions. For purposes of this Article VIII, the
following terms shall have the following meanings:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, as in effect on the date of
filing by the Secretary of State of the State of Delaware of this Certificate of
Incorporation, whether or not the Corporation was then subject to such rule.
(b) "Announcement Date" shall mean the date of the first public
announcement of the proposal of the Business Combination.
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(c) A Person shall be deemed the "beneficial owner," or to have
"beneficial ownership," of any shares of Voting Stock that:
(i) such Person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; or
(ii) such Person or any or its Affiliates or Associates has (A) the
right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (but a Person shall not be deemed to be the beneficial owner
of any voting stock solely by reason of an agreement, arrangement or
understanding with the Corporation to effect a Business Combination) or
upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote, or to direct the vote of,
pursuant to any agreement, arrangement or understanding; or
(iii) is beneficially owned, directly or indirectly, by any other
Person with which such first mentioned Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares of Voting Stock;
provided, however, that no director or officer of the Corporation (nor any
Affiliate or Associate of any such director or officer) shall, solely by reason
of any or all of such directors or officers acting in their capacities as such,
be deemed, for any purposes hereof, to beneficially own any Voting Stock of the
Corporation beneficially owned by any other such director or officer (or any
Affiliate or Associate thereof).
(d) The term "Business Combination" shall mean any transaction that
is referred to in any one or more of the following paragraphs (i) through (vi):
(i) any merger or consolidation of the Corporation or any Subsidiary
(other than a merger pursuant to Section 253 of the General Corporation Law
of the State of Delaware) with (A) any Interested Shareholder, or (B) any
other corporation (whether or not such other corporations is itself an
Interested Shareholder) which is, or after such merger or consolidation
would be, an Affiliate or Associate of any Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Shareholder or any Affiliate or Associate of any Interested
Shareholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value equal to five percent (5%) or more of
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the total assets of the Corporation or the Subsidiary in question, as of
the end of its most recent fiscal year ending prior to the time the
determination is being made; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder having an aggregate
Fair Market Value equal to twenty percent (20%) or more of the aggregate
Fair Market Value of all of the outstanding Capital Stock other than on a
pro rata basis to all holders of Voting Stock and other than in connection
with the exercise or conversion of securities issued pro rata that are
exercisable for, or convertible into, securities of the Corporation or any
Subsidiary of the Corporation; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder;
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
or series of equity or convertible securities of the Corporation or any
Subsidiary that is directly or indirectly owned by any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder,
except as a result of immaterial changes due to fractional share
adjustments, which changes do not exceed, in the aggregate, 1% of the
issued and outstanding shares of such class or series of equity or
convertible securities; or
(vi) the acquisition by the Corporation or a Subsidiary of any
securities of an Interested Shareholder.
(e) "Consummation Date" shall mean the date of the consummation of
the Business Combination.
(f) "Determination Date" shall mean the date on which the Interested
Shareholder became an Interested Shareholder.
(g) "Disinterested Director" shall mean any member of the Board of
Directors of the Corporation who is not affiliated with the Interested
Shareholder and who either was a member of the Board of Directors prior to the
Determination Date, or was recommended for election by a majority of the
Disinterested Directors in office at the time such director was nominated
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for election.
(h) "Fair Market Value" shall mean (I) in the case of stock, the
highest closing price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange listed stocks, or, if such stock is not quoted on the Composite Tape,
the New York Stock Exchange, or, if such stock is not listed on such Exchange,
on the principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended, on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of Securities Dealers
Automated Quotation System or any system then in use, or if no such quotation is
available, the fair market value on the date in question of a share of such
stock as determined in good faith by a majority of the Disinterested Directors
then in office, in each case with respect to any class of stock, appropriately
adjusted for any dividend or distribution in shares of such stock or any stock
split or reclassification of outstanding shares of such stock into a greater
number of shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares of such stock;
and (ii) in the case of property other than cash or stock, the fair market value
of such property on the date in question as determined in good faith by a
majority of the Disinterested Directors then in office.
(I) References to "highest per share price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any dividend
or distribution in shares of such stock or any stock split or reclassification
of outstanding shares of such stock into a greater number of shares of such
stock or any combination or reclassification of outstanding shares of such stock
into a smaller number of shares of such stock.
(j) "Interested Shareholder" shall mean any Person (other than the
Corporation, any Subsidiary, or any pension, profit-sharing, stock bonus or
other compensation plan maintained by the Corporation or by a member of a
controlled group of corporations or trades or businesses of which the
corporation is a member for the benefit of employees of the Corporation and/or
any Subsidiary, or any trust or custodial arrangement established in connection
with any such plan) who or which:
(I) is the beneficial owner of ten percent (10%) or more of the
Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two year period immediately prior to the date in question was the beneficial
owner of ten percent (10%) or more of the then outstanding Voting Stock; or
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(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock that were at any time within the two year period immediately prior
to the date in question beneficially owned by any other Interested Shareholder,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933, as amended.
In determining whether a Person is an Interested Shareholder pursuant
to this subsection (j), the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through application of subsection
(c) of this Section 3 but shall not include any other shares of Voting Stock
that may be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
(k) "Person" shall mean any corporation, partnership, trust,
unincorporated organization or association, syndicate, any other entity or a
natural person, together with any Affiliate or Associate of such person or any
other person acting in concert with such person (which shall include, without
limitation, persons seeking to combine or pool their voting or other interests
in the Voting Stock for a common purpose, pursuant to any contract,
understanding, relationship, agreement or otherwise, but shall not include the
directors or officers of the Corporation acting solely in their capacities as
such).
(l) "Subsidiary" shall mean any corporation of which a majority of
any class or series of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in subsection (j) of this Section 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each class or
series of voting securities is owned, directly or indirectly, by the
Corporation.
(m) "Voting Stock" shall mean all of the outstanding shares of
Capital Stock entitled to vote generally in the election of directors.
Section 4. Powers of the Disinterested Directors. When it appears
that a particular Person may be an Interested Shareholder and that the
provisions of this Article VIII need to be applied or interpreted, then a
majority of the directors of the Corporation who would qualify as Disinterested
Directors shall have the power and duty to interpret all of the terms and
provisions of this Article VIII, and to determine on the basis of information
known to them after reasonable inquiry all facts necessary to ascertain
compliance with this Article VIII, including, without limitation, (a) whether a
Person is an Interested Shareholder, (b) the number of shares of Voting Stock
beneficially owned by any Person, (c) whether a Person is an Affiliate or
Associate of another, (d) the Fair Market Value of (I) the assets that are the
subject of any Business Combination, (ii) the securities to be issued or
transferred by the Corporation or any Subsidiary in any Business Combination,
(iii) the consideration other than cash to be received by holders of shares of
any class or series of Common Stock or Voting Stock other than Common Stock in
any
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Business Combination, (iv) the outstanding Capital Stock, or (v) any other item
the Fair Market Value of which requires determination pursuant to this Article
VIII, and (e) whether all of the applicable conditions set forth in Section 2 of
this Article VIII have been met with respect to any Business Combination.
Any constructions, applications, or determinations made by the Board
of Directors pursuant to this Article VIII, in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose, shall be conclusive and binding upon the Corporation and its
shareholders, and neither the Corporation nor any of its shareholders shall have
the right to challenge any such construction, application or determination.
Any vote of Disinterested Directors permitted by this Article VIII
shall only be valid if, at the time such vote is taken, there are a total of at
least three (3) Disinterested Directors on the Board of Directors.
Section 5. Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article VIII shall be construed to
relieve any Interested Shareholder from any fiduciary obligations imposed by
law.
Section 6. Amendment, Repeal, Etc. Notwithstanding any other
provisions of this Certificate of Incorporation or the Bylaws (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or the Bylaws of the Corporation), in addition to
any affirmative vote required by applicable law and any voting rights granted to
or held by holders of Preferred Stock, any amendment, alteration, repeal or
rescission of any provision of this Article VIII must be approved by either (I)
a majority of the authorized number of directors and, if one or more Interested
Shareholders exist, by a majority of the Disinterested Directors, or (ii) by the
affirmative vote of not less than eighty percent (80%) of the total number of
votes eligible to be cast by the holders of all outstanding shares of the Voting
Stock, voting together as a single class, together with the affirmative vote of
not less than fifty percent (50%) of the total number of votes eligible to be
cast by the holders of all outstanding shares of the Voting Stock not
beneficially owned by any Interested Shareholder or Affiliate or Associate
thereof, voting together as a single class.
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except to the
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extent such exemption from liability or limitation thereof is expressly
prohibited by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended.
A director of the Corporation shall, in the performance of his duties,
be fully protected from liability in relying in good faith upon the records of
the corporation and upon such information, opinions, reports or statements
presented to the corporation by any of the corporation's officers or employees,
or committees of the board of directors, or by any other person as to matters
the director believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
corporation.
Any amendment, termination or repeal of this Article IX or any
provisions hereof shall not adversely affect or diminish in any way any right or
protection of a director of the Corporation existing with respect to any act or
omission occurring prior to the time of the final adoption of such amendment,
termination or repeal.
In addition to any requirements of law or of any other provisions of
this Certificate of Incorporation, the affirmative vote of the holders of not
less than eighty percent (80%) of the total number of votes eligible to be cast
by the holders of all outstanding shares of Capital Stock entitled to vote
thereon shall be required to amend, alter, rescind or repeal any provision of
this Article IX.
ARTICLE X
INDEMNIFICATION
Section 1. Actions, Suits or Proceedings Other than by or in the
Right of the Corporation. To the fullest extent permitted by the General
Corporation Law of the State of Delaware, the Corporation shall indemnify any
person who is or was or has agreed to become a director or officer of the
Corporation who was or is made a party to or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was or has
agreed to become a director or officer of the Corporation, or is or was serving
or has agreed to serve at the written request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been taken
or omitted in such capacity, and the Corporation may indemnify any other person
who is or was or has agreed to become an employee or agent of the Corporation
who was or is made a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the
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Corporation) by reason of the fact that he or she is or was or has agreed to
become an employee or agent of the Corporation, or is or was serving or has
agreed to serve at the written request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been taken
or omitted in such capacity, against costs, charges, expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her or on his or her behalf in connection with
such action, suit or proceeding and any appeal therefrom, if he or she acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in, or not opposed to, the best interests of the Corporation and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
or her conduct was unlawful. Notwithstanding anything contained in this Article
X, the Corporation shall not be obligated to indemnify any director, officer,
employee or agent in connection with an action, suit or proceeding, or part
thereof, initiated by such person against the Corporation unless such action,
suit or proceeding, or part thereof, was authorized or consent ed to by the
Board of Directors.
Section 2. Actions or Suits by or in the Right of the Corporation.
To the fullest extent permitted by the General Corporation Law of the State of
Delaware, the Corporation shall indemnify any person who is or was or has agreed
to become a director or officer of the Corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was or has agreed to become a director
or officer of the Corporation, or is or was serving or has agreed to serve at
the written request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
or by reason of any action alleged to have been taken or omitted in such
capacity, and the Corporation may indemnify any other person who is or was or
has agreed to become an employee or agent of the Corporation who was or is made
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was or has
agreed to become an employee or agent of the Corporation, or is or was serving
or has agreed to serve at the written request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been taken
or omitted in such capacity, against costs, charges and expenses (including
attorneys' fees) actually and reasonably incurred by him or her or on his or her
behalf in connection with the defense or settlement of such action or suit and
any appeal therefrom, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the
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best interests of the Corporation, except no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such costs, charges and
expenses which the Court of Chancery or such other court shall deem proper.
Notwithstanding anything contained in this Article X, the Corporation shall not
be obligated to indemnify any director, officer, employee or agent in connection
with an action or suit, or part thereof, initiated by such person against the
Corporation unless such action or suit, or part thereof, was authorized or
consented to by the Board of Directors.
Section 3. Indemnification for Costs, Charges and Expenses of a
Successful Party. To the extent that a director, officer, employee or agent of
the Corporation has been successful, on the merits or otherwise (including,
without limitation, the dismissal of an action without prejudice), in defense of
any action, suit or proceeding referred to in Section 1 or 2 of this Article X,
or in defense of any claim, issue or matter therein, such person shall be
indemnified against all costs, charges and expenses (including attorneys' fees)
actually and reasonably incurred by such person or on such person's behalf in
connection therewith.
Section 4. Indemnification for Expenses of a Witness. To the extent
that any person who is or was or has agreed to become a director or officer of
the Corporation is made a witness to any action, suit or proceeding to which he
or she is not a party by reason of the fact that he or she was, is or has agreed
to become a director or officer of the Corporation, or is or was serving or has
agreed to serve as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the
written request of the Corporation, such person shall be indemnified against all
costs, charges and expenses actually and reasonably incurred by such person or
on such person's behalf in connection therewith.
To the extent that any person who is or was or has agreed to become an
employee or agent of the Corporation is made a witness to any action, suit or
proceeding to which he or she is not a party by reason of the fact that he or
she was, is or has agreed to become an employee or agent of the Corporation, or
is or was serving or has agreed to serve as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, at the written request of the Corporation, such person may be
indemnified against all costs, charges and expenses actually and reasonably
incurred by such person or on such person's behalf in connection therewith.
Section 5. Determination of Right to Indemnification. Any
indemnification under Section 1 or 2 of this Article X (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer,
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employee or agent is proper under the circumstances because he or she has met
the applicable standard of conduct set forth in Section 1 or 2 of this Article
X. Any indemnification under Section 4 of this Article X (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper under the circumstances. At the election of the Board of
Directors, such determinations shall be made (a) by the Board of Directors
acting by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if a quorum of disinterested
directors so directs or if such a quorum is not obtainable, by independent legal
counsel in a written opinion, or (c) by the shareholders. To obtain
indemnification under this Article X, any person referred to in Section 1, 2, 3
or 4 of this Article X shall submit to the Corporation a written request,
including therewith such documents as are reasonably available to such person
and are reasonably necessary to determine whether and to what extent such person
is entitled to indemnification.
Section 6. Advancement of Costs, Charges and Expenses. Costs,
charges and expenses (including attorneys' fees) incurred by or on behalf of a
director or officer in defending a civil or criminal action, suit or proceeding
referred to in Section 1 or 2 of this Article X shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding;
provided, however, that the payment of such costs, charges and expenses incurred
by or on behalf of a director or officer in advance of the final disposition of
such action, suit or proceeding shall be made only upon receipt of a written
undertaking by or on behalf of the director or officer to repay all amounts so
advanced in the event that it shall ultimately be determined that such director
or officer is not entitled to be indemnified by the Corporation as authorized in
this Article X or by law. No security shall be required for such undertaking
and such undertaking shall be accepted without reference to the recipient's
financial ability to make repayment. The majority of the directors who were
not parties to such action, suit or proceeding may, upon approval of such
director or officer of the Corporation, authorize the Corporation's counsel to
represent such person, in any action, suit or proceeding, whether or not the
Corporation is a party to such action, suit or proceeding.
Section 7. Procedure for Indemnification. Any indemnification under
Section 1, 2, 3 or 4 of this Article X or advancement of costs, charges and
expenses under Section 6 of this Article X shall be made promptly, and in any
event within sixty (60) days (except indemnification to be determined by
shareholders which will be determined at the next annual meeting of
shareholders), upon the written request of the director, officer, employee or
agent. The right to indemnification or advancement of expenses as granted by
this Article X shall be enforceable by the director, officer, employee or agent
in any court of competent jurisdiction, if the Corporation denies such request,
in whole or in part, or if no disposition of such request is made within sixty
(60) days of the request. Such person's costs, charges and expenses incurred in
connection with successfully establishing his or her right to indemnification or
advancement, to the extent
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successful, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advancement of costs, charges and expenses under Section 6 of this
Article X where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 1 or 2 of this Article X, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, its independent legal counsel and its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in Section 1 or 2 of this
Article X, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel and
its shareholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 8. Settlement. The Corporation shall not be obligated to
reimburse the costs, charges and expenses of any settlement to which it has not
agreed. If in any action, suit or proceeding (including any appeal) within the
scope of Section 1 or 2 of this Article X, the person to be indemnified shall
have unreasonably failed to enter into a settlement thereof offered or assented
to by the opposing party or parties in such action, suit or proceeding, then,
notwithstanding any other provision of this Article X, the indemnification
obligation of the Corporation to such person in connection with such action,
suit or proceeding shall not exceed the total of the amount at which settlement
could have been made and the expenses incurred by or on behalf of such person
prior to the time such settlement could reasonably have been effected.
Section 9. Other Rights; Continuation of Right to Indemnification;
Individual Contracts. The indemnification and advancement of costs, charges and
expenses provided by or granted pursuant to this Article X shall not be deemed
exclusive of any other rights to which those persons seeking indemnification or
advancement of costs, charges and expenses may be entitled under law (common or
statutory) or any Bylaw, agreement, policy of indemnification insurance or vote
of shareholders or disinterested directors or otherwise, both as to action in
his or her official capacity and as to action in any other capacity while
holding office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
legatees, heirs, distributees, executors and administrators of such person.
Nothing contained in this Article X shall be deemed to prohibit the Corporation
from entering into, and the Corporation is specifically authorized to enter
into, agreements with directors, officers, employees and agents providing
indemnification rights and procedures different from those set forth herein. All
rights to indemnification under this Article X shall be deemed to be a contract
between the Corporation and each director, officer, employee or agent of the
Corporation who serves or served in such capacity (or at the written request of
the Corporation, in the capacity of director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise) at
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any time while this Article X is in effect.
Section 10. Savings Clause. If this Article X or any portion shall
be invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify each director or officer, and may
indemnify each employee or agent, of the Corporation as to any costs, charges,
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Corporation), to the full extent permitted by any applicable
portion of this Article X that shall not have been invalidated and to the full
extent permitted by applicable law.
Section 11. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was a
director, officer, employee or agent of the Corporation or who is or was serving
at the written request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any costs, charges or expenses, liability or loss incurred
by such person in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify such person
against such costs, charges or expenses, liability or loss under the Certificate
of Incorporation or applicable law; provided, however, that such insurance is
available on acceptable terms as determined by a vote of a majority of the
Board. To the extent that any director, officer, employee or agent is reimbursed
by an insurance company under an indemnification insurance policy for any costs,
charges, expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement to the fullest extent permitted by any applicable portion of this
Article X, the Bylaws, any agreement, the policy of indemnification insurance or
otherwise, the Corporation shall not be obligated to reimburse the person to be
indemnified in connection with such proceeding.
Section 12. Definitions. For purposes of this Article X, the
following terms shall have the following meanings:
(a) "The Corporation" shall include any constituent corporation
(including any constituent of a constituent) absorbed by way of an acquisition,
consolidation, merger or otherwise, which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employee or agent so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the written request of such constituent corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article X with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued;
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(b) "Other enterprises" shall include employee benefit plans,
including, but not limited to, any employee benefit plan of the Corporation;
(c) "Director or officer" of the Corporation shall include any
partner or trustee who is or was or has agreed to serve at the written request
of the Corporation as a partner or trustee of another corporation, partnership,
joint venture, trust or other enterprise;
(d) "Serving at the written request of the Corporation" shall
include any service that imposes duties on, or involves services by a director,
officer, employee or agent of the Corporation with respect to an employee
benefit plan, its participants or beneficiaries, including acting as a fiduciary
thereof;
(e) "Fines" shall include any penalties and any excise or similar
taxes assessed on a person with respect to an employee benefit plan;
(f) A person shall be deemed to have acted in "good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful,"
if his or her action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him or her by
the officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the Corporation
or another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Corporation or
another enterprise; and
(g) A person shall be deemed to have acted in a manner "not opposed
to the best interests of the Corporation," as referred to in Sections 1 and 2 of
this Article X if such person acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan.
Section 13. Subsequent Amendment and Subsequent Legislation. Neither
the amendment, termination or repeal of this Article X or of relevant provisions
of the General Corporation Law of the State of Delaware or any other applicable
laws, nor the adoption of any provision of this Certificate of Incorporation or
the Bylaws of the Corporation or of any statute inconsistent with this Article X
shall eliminate, affect or diminish in any way the rights of any director,
officer, employee or agent of the Corporation to indemnification under the
provisions of this Article X with respect to any action, suit or proceeding
arising out of, or relating to, any actions, transactions or facts occurring
prior to the final adoption of such amendment, termination or repeal.
23
<PAGE>
If the General Corporation Law of the State of Delaware is amended to
expand further the indemnification permitted to directors, officers, employees
or agents of the Corporation, then the Corporation shall indemnify such persons
to the fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended.
ARTICLE XI
AMENDMENTS
Section 1. Amendments of Certificate of Incorporation. In addition
to any affirmative vote required by applicable law and any voting rights granted
to or held by holders of Preferred Stock, any alteration, amendment, repeal or
rescission (collectively, any "Change") of any provision of this Certificate of
Incorporation must be approved by a majority of the directors of the Corporation
then in office and by the affirmative vote of the holders of a majority (or such
greater proportion as may otherwise be required pursuant to any specific
provision of this Certificate of Incorporation) of the total votes eligible to
be cast by the holders of all outstanding shares of Capital Stock entitled to
vote thereon; provided, however, that if any such Change relates to Section 13
of Article X or Articles V, VI, VII or XI of this Certificate of Incorporation,
such Change must be approved either (I) by not less than a majority of the
authorized number of directors and, if one or more Interested Shareholders (as
defined in Article VIII hereof) exist, by not less than a majority of the
Disinterested Directors (as defined in Article VIII hereof), or (ii) by the
affirmative vote of the holders of not less than two-thirds of the total votes
eligible to be cast by the holders of all outstanding shares of Capital Stock
entitled to vote thereon and, if the Change is proposed by or on behalf of an
Interested Shareholder or a director who is an Affiliate or Associate (as such
terms are defined in Article VIII hereof) of an Interested Shareholder, by the
affirmative vote of the holders of not less than a majority of the total votes
eligible to be cast by holders of all outstanding shares of Capital Stock
entitled to vote thereon not beneficially owned by an Interested Shareholder or
an Affiliate or Associate thereof. Subject to the foregoing, the Corporation
reserves the right to amend this Certificate of Incorporation from time to time
in any and as many respects as may be desired and as may be lawfully contained
in an original certificate of incorporation filed at the time of making such
amendment.
Except as may otherwise be provided in this Certificate of
Incorporation, the Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and to add or insert herein any other provisions
authorized by the laws of the State of Delaware at the time in force, in the
manner now or hereafter prescribed by law, and all rights, preferences and
privileges of any nature conferred upon shareholders, directors or any other
persons whomsoever by and pursuant to this
24
<PAGE>
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the rights reserved in this Section 1.
Section 2. Amendments of Bylaws. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors of the
Corporation is expressly authorized to make, alter, amend, rescind or repeal
from time to time any of the Bylaws of the Corporation in accordance with the
terms thereof; provided, however, that any Bylaw made by the Board may be
altered, amended, rescinded, or repealed by the holders of shares of Capital
Stock entitled to vote thereon at any annual meeting or at any special meeting
called for that purpose. Notwithstanding the foregoing, any provision of the
Bylaws that contains a supermajority voting requirement shall only be altered,
amended, rescinded, or repealed by a vote of the Board or holders of shares of
Capital Stock entitled to vote thereon that is not less than the supermajority
specified in such provision.
ARTICLE XII
NOTICES
The name and mailing address of the incorporator of this Corporation
is:
Medford Co-operative Bank
60 High Street
Medford, Massachusetts 02155
25
<PAGE>
Medford Co-operative Bank has caused this Certificate of Incorporation
to be signed by Robert H. Surabian, President of Medford Co-operative Bank and
attested to by Lorraine P. Silva, Clerk of Medford Co-operative Bank, this
30th day of July, 1997.
Medford Co-operative bank
By: /s/ Robert H. Surabian
-----------------------------------
Robert H. Surabian
(SEAL) President
Attest:
/s/ Lorraine P. Silva
- ---------------------------
Lorraine P. Silva
Clerk
26
<PAGE>
Exhibit 3.2
BYLAWS
OF
MYSTIC FINANCIAL, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
OFFICES
<S> <C> <C>
Section 1. Registered Office............................................. 1
Section 2. Additional Offices............................................ 1
<CAPTION>
ARTICLE II
STOCKHOLDERS
<S> <C> <C>
Section 1. Place of Meetings............................................. 1
Section 2. Annual Meetings............................................... 1
Section 3. Special Meetings.............................................. 1
Section 4. Notice of Meetings............................................ 1
Section 5. Waiver of Notice.............................................. 2
Section 6. Fixing of Record Date......................................... 2
Section 7. Quorum........................................................ 2
Section 8. Conduct of Meetings........................................... 3
Section 9. Voting; Proxies............................................... 3
Section 10. Inspectors of Election........................................ 4
Section 11. Procedure for Nominations..................................... 4
Section 12. Substitution of Nominees...................................... 5
Section 13. New Business.................................................. 5
<CAPTION>
ARTICLE III
CAPITAL STOCK
<S> <C> <C>
Section 1. Certificates of Stock......................................... 7
Section 2. Transfer Agent and Registrar.................................. 7
Section 3. Registration and Transfer of Shares........................... 7
Section 4. Lost, Destroyed and Mutilated Certificates.................... 8
Section 5. Holder of Record.............................................. 8
</TABLE>
ARTICLE IV
BOARD OF DIRECTORS
1
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Responsibilities; Number of Directors......................... 8
Section 2. Qualifications................................................ 8
Section 3. Regular and Annual Meetings................................... 8
Section 4. Special Meetings.............................................. 9
Section 5. Notice of Meetings; Waiver of Notice.......................... 9
Section 6. Conduct of Meetings........................................... 9
Section 7. Quorum and Voting Requirements................................ 9
Section 8. Informal Action by Directors.................................. 10
Section 9. Resignation................................................... 10
Section 10. Vacancies..................................................... 10
Section 11. Compensation.................................................. 10
Section 12. Amendments Concerning the Board............................... 10
<CAPTION>
ARTICLE V
COMMITTEES
<S> <C> <C>
Section 1. Standing Committees........................................... 11
Section 2. Executive Committee........................................... 11
Section 3. Audit Committee............................................... 11
Section 4. Other Committees.............................................. 12
<CAPTION>
ARTICLE VI
OFFICERS
<S> <C> <C>
Section 1. Number........................................................ 12
Section 2. Term of Office and Removal.................................... 13
Section 3. Age Limitation of Officers.................................... 13
Section 4. President..................................................... 13
Section 5. Vice Presidents............................................... 13
Section 6. Secretary..................................................... 14
Section 7. Treasurer..................................................... 14
Section 8. Other Officers and Employees.................................. 14
Section 9. Compensation of Officers and Others........................... 14
<CAPTION>
ARTICLE VII
<S> <C>
DIVIDENDS................................ 14
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE VIII
<S> <C>
AMENDMENTS................................ 14
</TABLE>
3
<PAGE>
BYLAWS
OF
MYSTIC FINANCIAL, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of Mystic
Financial, Inc. (the "Corporation") in the State of Delaware shall be in the
City of Wilmington, County of New Castle.
Section 2. Additional Offices. The Corporation may also have offices
and places of business at such other places, within or without the State of
Delaware, as the Board of Directors (the "Board") may from time to time
designate or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders of the
Corporation shall be held at such place, within or without the State of
Delaware, as may be fixed by the Board and designated in the notice of meeting.
If no place is so fixed, such meetings shall be held at the principal
administrative office of the Corporation.
Section 2. Annual Meetings. The annual meeting of stockholders of the
Corporation for the election of directors and the transaction of any other
business which may properly come before such meeting shall be held each year on
a date and at a time to be designated by the Board.
Section 3. Special Meetings. Special meetings of stockholders, for
any purpose, may be called at any time only by the Chairperson of the Board, the
President, or by resolution of at least three-fourths of the directors then in
office. Special meetings shall be held on the date and at the time and place as
may be designated by the Board. At a special meeting, no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of meeting.
Section 4. Notice of Meetings. Except as otherwise required by law,
written notice stating the place, date and hour of any meeting of stockholders
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered to each
<PAGE>
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stockholder of record entitled to vote at such meeting, either personally or by
mail not less than ten (10) nor more than sixty (60) days before the date of
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the U.S. mail, with postage thereon prepaid, addressed to the
stockholder at his or her address as it appears on the stock transfer books or
records of the Corporation as of the record date prescribed in Section 6 of this
Article II, or at such other address as the stockholder shall have furnished in
writing to the Secretary. Notice of any special meeting shall indicate that the
notice is being issued by or at the direction of the person or persons calling
such meeting. When any meeting of stockholders, either annual or special, is
adjourned to another time or place, no notice of the adjourned meeting need be
given, other than an announcement at the meeting at which such adjournment is
taken giving the time and place to which the meeting is adjourned; provided,
however, that if the adjournment is for more than thirty (30) days, or, if after
adjournment, the Board fixes a new record date for the adjourned meeting, notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 5. Waiver of Notice. Notice of any annual or special meeting
need not be given to any stockholder who submits a signed waiver of notice of
any meeting, in person or by proxy or by his or her duly authorized attorney-in-
fact, whether before or after the meeting. The attendance of any stockholder at
a meeting, in person or by proxy, shall constitute a waiver of notice by such
stockholder, except where a stockholder attends a meeting for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 6. Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or stock holders entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or in order to
make a determination of stockholders for any other proper purpose, the Board
shall fix a date as the record date for any such determination of stockholders,
which date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board. Such date in any case shall be not more
than sixty (60) days and, in the case of a meeting of stockholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this Section 6, such determination shall, unless otherwise provided
by the Board, also apply to any adjournment thereof. If no record date is fixed,
(a) the record date for determining stockholders entitled to notice of or vote
at a meeting of stockholders shall be at the close of business on the day next
preceding the day on which the notice is given, or, if notice is waived, at the
close of business on the day next pre ceding the day on which the meeting is
held, and (b) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
<PAGE>
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Section 7. Quorum. The holders of record of a majority of the total
number of votes eligible to be cast in the election of directors generally by
the holders of the outstanding shares of the capital stock of the Corporation
entitled to vote thereat, represented in person or by proxy, shall constitute a
quorum for the transaction of business at a meeting of stockholders, except as
otherwise provided by law, these Bylaws or the Certificate of Incorporation. If
less than a majority of such total number of votes is represented at a meeting,
a majority of the number of votes so represented may adjourn the meeting from
time to time without further notice, provided, that if such adjournment is for
more than thirty (30) days, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting. At such adjourned
meeting at which a quorum is present, any business may be transacted that might
have been transacted at the meeting as originally called. When a quorum is once
present to organize a meeting of stockholders, such quorum is not broken by the
subsequent withdrawal of any stockholders.
Section 8. Conduct of Meetings. The Chairperson of the Board or the
President shall serve as chairperson at all meetings of the stockholders or, if
the Chairperson of the Board or the President is absent or otherwise unable to
so serve, such other person as shall be appointed by a majority of the entire
Board shall serve as chairperson at any meeting of stockholders held in such
absence. The Secretary or, in his or her absence, such other person as the
chairperson of the meeting shall appoint, shall serve as secretary of the
meeting. The chairperson of the meeting shall conduct all meetings of the
stockholders in accordance with the best interests of the Corporation and shall
have the authority and discretion to establish reasonable procedural rules for
the conduct of such meetings, including such regulation of the manner of voting
and the conduct of discussion as he or she shall deem appropriate.
Section 9. Voting; Proxies. Each stockholder entitled to vote at any
meeting may vote either in person or by proxy. Unless otherwise specified in
the Certificate of Incorporation or in a resolution, or resolutions, of the
Board providing for the issuance of preferred stock, each stockholder entitled
to vote shall be entitled to one vote for each share of capital stock registered
in his or her name on the transfer books or records of the Corporation. Each
stockholder entitled to vote may authorize another person or persons to act for
him or her by proxy. All proxies shall be in writing, signed by the stockholder
or by his or her duly authorized attorney-in-fact, and shall be filed with the
Secretary before being voted. No proxy shall be valid after three (3) years
from the date of its execution unless otherwise provided in the proxy. The
attendance at any meeting by a stockholder who shall have previously given a
proxy applicable thereto shall not, as such, have the effect of revoking the
proxy. The Corporation may treat any duly executed proxy as not revoked and in
full force and effect until it receives a duly executed instrument revoking it,
or a duly executed proxy bearing a later date. If ownership of a share of
voting stock of the Corporation stands in the name of two or more persons, in
the absence of written directions to the Corporation to the contrary, any one or
more of such stockholders may cast all votes to which such ownership is
entitled. If an attempt is made to cast conflicting votes by the several
persons in
<PAGE>
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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 stock and
present at such meeting. If such conflicting votes are evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or any person voting the shares, or a beneficiary, if any, may
apply to the Court of Chancery or such other court as may have jurisdiction to
appoint an additional person to act with the persons so voting the shares, which
shall then be voted as determined by a majority of such persons and the person
appointed by the Court. Except for the election of directors or as otherwise
provided by law, the Certificate of Incorporation or these Bylaws, at all
meetings of stockholders, all matters shall be determined by a vote of the
holders of a majority of the number of votes eligible to be cast by the holders
of the outstanding shares of capital stock of the Corporation present and
entitled to vote thereat. Directors shall, except as otherwise required by law,
these Bylaws or the Certificate of Incorporation, be elected by a plurality of
the votes cast by each class of shares entitled to vote at a meeting of
stockholders, present and entitled to vote in the election.
Section 10. Inspectors of Election. In advance of any meeting of
stockholders, the Board shall appoint one or more persons, other than officers,
directors or nominees for office, as inspectors of election to act at such
meeting or any adjournment thereof. Such appointment shall not be altered at
the meeting. If inspectors of election are not so appointed, the chairperson of
the meeting shall make such appointment at the meeting. If any person appointed
as inspector fails to appear or fails or refuses to act at the meeting, the
vacancy so created may be filled by appointment by the Board in advance of the
meeting or at the meeting by the chairperson of the meeting. The duties of the
inspectors of election shall include determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, receiving votes,
ballots or consents, hearing and deciding all challenges and questions arising
in connection with the right to vote, counting and tabulating all votes, ballots
or consents, determining the results and doing such acts as are proper to the
conduct of the election or the vote with fairness to all stockholders. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them. Each inspector shall be entitled
to a reasonable compensation for his or her services, to be paid by the
Corporation.
Section 11. Procedure for Nominations. Subject to the provisions
hereof, the Board, or a committee thereof, shall select nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death, incapacity, withdrawal or other inability to serve of a nominee, the
Board, or a committee thereof, shall deliver written nominations to the
Secretary at least sixty (60) days prior to the date of the annual meeting.
Provided the Board, or committee thereof, makes such nominations, no nominations
for directors except those made by the Board or such committee shall be voted
upon at the annual meeting of stockholders unless other nominations by
stockholders are made in accordance with the provisions of this Section 11.
Nominations of in dividuals for election to the Board at an annual meeting of
stockholders may be made by any
<PAGE>
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stockholder of record of the Corporation entitled to vote for the election of
directors at such meet ing who provides timely notice in writing to the
Secretary as set forth in this Section 11. To be timely, a stockholder's notice
must be delivered to or received by the Secretary not later than the following
dates: (i) with respect to an election of directors to be held at an annual
meeting of stockholders, sixty (60) days in advance of such meeting if such
meeting is to be held on a day which is within thirty (30) days preceding the
anniversary of the previous year's annual meeting, or ninety (90) days in
advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect to an
election to be held at an annual meeting of stockholders held at a time other
than within the time periods set forth in the immediately preceding clause (i),
or at a special meeting of stockholders for the election of directors, the close
of business on the tenth (10th) day following the date on which notice of such
meeting is first given to stockholders. For purposes of this Section 11, notice
shall be deemed to first be given to stockholders when disclosure of such date
of the meeting of stockholders is first made in a press release reported to Dow
Jones News Services, Associated Press or comparable national news service, or in
a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of
1934, as amended. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) such
person's written consent to serve as a director, if elected, and (iv) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission (whether or not the Corporation is
then subject to such rules); and (b) as to the stockholder giving the notice (i)
the name and address of such stockholder, (ii) the class and number of shares of
the Corporation which are owned of record by such stockholder and the dates upon
which he or she acquired such shares, (iii) a description of all arrangements or
understandings between the stockholder and nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder and (iv) the identification of any person employed,
retained or to be compensated by the stockholder submitting the nomination or by
the person nominated, or any person acting on his or her behalf to make
solicitations or recommendations to stockholders for the purpose of assisting in
the election of such director, and a brief description of the terms of such
employment, retainer or arrangement for compensation. At the request of the
Board, any person nominated by the Board for election as a director shall
furnish to the Secretary that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee together with
the required written consent. No person shall be elected as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 11.
The chairperson of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not properly brought before the
meeting in accordance with the
<PAGE>
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provisions hereof, and, if he should so determine, he shall declare to the
meeting that such nomination was not properly brought before the meeting and
shall not be considered.
Section 12. Substitution of Nominees. In the event that a person is
validly designated as a nominee in accordance with Section 11 of this Article II
and shall thereafter become unwilling or unable to stand for election to the
Board, the Board or a committee thereof may designate a substitute nominee upon
delivery, not fewer than five (5) days prior to the date of the meeting for the
election of such nominee, of a written notice to the Secretary setting forth
such information regarding such substitute nominee as would have been required
to be delivered to the Secretary pursuant to Section 11 of this Article II had
such substitute nominee been initially pro posed as a nominee. Such notice
shall include a signed consent to serve as a director of the Corporation, if
elected, of each such substituted nominee.
Section 13. New Business. Any new business to be taken up at the
annual meeting at the request of the President or by resolution of at least
three-fourths of the directors then in office shall be stated in writing and
filed with the Secretary at least fifteen (15) days before the date of the
annual meeting, and all business so stated, proposed and filed shall be
considered at the annual meeting, but, except as provided in this Section 13, no
other proposal shall be acted upon at the annual meeting. Any proposal offered
by any stockholder may be made at the annual meeting and the same may be
discussed and considered, but unless properly brought before the meeting such
proposal shall not be acted upon at the meeting. For a proposal to be properly
brought before an annual meeting by a stockholder, the stockholder must be a
stockholder of record and have given timely notice thereof in writing to the
Secretary. To be timely, a stockholder's notice must be delivered to or
received by the Secretary not later than the following dates: (i) with respect
to an annual meeting of stockholders, sixty (60) days in advance of such meeting
if such meeting is to be held on a day which is within thirty (30) days
preceding the anniversary of the previous year's annual meeting, or ninety (90)
days in advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect to an
annual meeting of stockholders held at a time other than within the time periods
set forth in the immediately preceding clause (i), the close of business on the
tenth (10th) day following the date on which notice of such meeting is first
given to stockholders. For purposes of this Section 13, notice shall be deemed
to first be given to stockholders when disclosure of such date of the meeting of
stockholders is first made in a press release reported to Dow Jones News
Services, Associated Press or comparable national news service, or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended. A stockholder's notice to the Secretary shall set forth as to the
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting; (b)
the name and address of the stockholder proposing such business; (c) the class
and number of shares of the Corporation which are owned of record by the
stockholder and the dates upon which he or she acquired such shares;
<PAGE>
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(d) the identification of any person employed, retained, or to be compensated by
the stockholder submitting the proposal, or any person acting on his or her
behalf, to make solicitations or recommendations to stockholders for the purpose
of assisting in the passage of such proposal, and a brief description of the
terms of such employment, retainer or arrangement for compensation; and (e) such
other information regarding such proposal as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission or required to be delivered to the Corporation pursuant to
the proxy rules of the Securities and Exchange Commission (whether or not the
Corporation is then subject to such rules). This provision shall not prevent
the consideration and approval or disapproval at an annual meeting of reports of
officers, directors and committees of the Board or the management of the
Corporation, but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided. This
provision shall not constitute a waiver of any right of the Corporation under
the proxy rules of the Securities and Exchange Commission or any other rule or
regulation to omit a stockholder's proposal from the Corporation's proxy
materials.
The chairperson of the meeting shall, if the facts warrant, determine and
declare to the meeting that any new business was not properly brought before the
meeting in accordance with the provisions hereof, and, if the chairperson should
so determine, the chairperson shall declare to the meeting that such new
business was not properly brought before the meeting and shall not be
considered.
ARTICLE III
CAPITAL STOCK
Section 1. Certificates of Stock. Certificates representing shares of
stock shall be in such form as shall be determined by the Board. Each
certificate shall state that the Corporation will furnish to any stockholder
upon request and without charge a statement of the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each class or series of stock and the qualifications or restrictions
of such preferences and/or rights, or shall set forth such statement on the
certificate itself. The certificates shall be numbered in the order of their
issue and entered in the books of the Corporation or its transfer agent or
agents as they are issued. Each certificate shall state the registered holder's
name and the number and class of shares and shall be signed by President and the
Secretary or any Assistant Secretary, and may, but need not, bear the seal of
the Corporation or a facsimile thereof. Any or all of the signatures on the
certificates may be facsimiles. In case any officer who shall have signed any
such certificate shall cease to be such officer of the Corporation, whether
because of death, resignation or otherwise, before such certificate shall have
been delivered by the Corporation, such certificate may nevertheless be adopted
by the Corporation and be issued and delivered as though
<PAGE>
-8-
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
Section 2. Transfer Agent and Registrar. The Board shall have the
power to appoint one or more Transfer Agents and Registrars for the transfer and
registration of certificates of stock of any class and may require that stock
certificates be countersigned and registered by one or more of such Transfer
Agents and Registrars.
Section 3. Registration and Transfer of Shares. Subject to the
provisions of the Certificate of Incorporation of the Corporation, the name of
each person owning a share of the capital stock of the Corporation shall be
entered on the books of the Corporation together with the number of shares held
by him or her, the numbers of the certificates covering such shares and the
dates of issue of such certificates. Subject to the provisions of the
Certificate of Incorporation of the Corporation, the shares of stock of the
Corporation shall be transferable on the books of the Corporation by the holders
thereof in person, or by their duly authorized attorneys or legal
representatives, on surrender and cancellation of certificates for a like number
of shares, accom panied by an assignment or power of transfer endorsed thereon
or attached thereto, duly executed, with such guarantee or proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require and with proper evidence of payment of any applicable transfer taxes.
Subject to the provisions of the Certificate of Incorporation of the
Corporation, a record shall be made of each transfer.
Section 4. Lost, Destroyed and Mutilated Certificates. The holder of
any shares of stock of the Corporation shall immediately notify the Corporation
of any loss, theft, destruction or mutilation of the certificates therefor. The
Corporation may issue, or cause to be issued, a new certificate of stock in the
place of any certificate theretofore issued by it alleged to have been lost,
stolen or destroyed upon evidence satisfactory to the Corporation of the loss,
theft or destruction of the certificate and, in the case of mutilation, the
surrender of the mutilated certificate. The Corporation may, in its
discretion, require the owner of the lost, stolen or destroyed certificate, or
his or her legal representatives, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on account of the
alleged loss, theft, destruction or mutilation of any such certificate and the
issuance of such new certificate, or may refer such owner to such remedy or
remedies as he or she may have under the laws of the State of Delaware.
Section 5. Holder of Record. Subject to the provisions of the
Certificate of Incorporation of the Corporation, the Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder thereof in fact and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
<PAGE>
-9-
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Responsibilities; Number of Directors. The business and
affairs of the Corporation shall be under the direction of the Board. The Board
shall consist of not less than five (5) nor more than fifteen (15) directors
(other than directors elected by the holders of shares of any series of
preferred stock). Within the foregoing limits, the number of directors shall be
determined only by resolution of the Board. A Chairperson of the Board shall be
appointed annually by the duly elected members of the board of directors. A
minimum of two (2) directors shall be persons other than officers or employees
of the Corporation or its subsidiaries and shall not have a relationship which,
in the opinion of the Board (exclusive of such persons), could interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. No more than two directors shall be officers or employees of the
Corporation or its subsidiaries.
Section 2. Qualifications. Each director shall be at least twenty-one
(21) years of age and be a resident of the Commonwealth of Massachusetts.
Section 3. Regular and Annual Meetings. An annual meeting of the
Board for the election of officers shall be held, without notice other than
these Bylaws, immediately after, and at the same place as, the annual meeting of
the stockholders, or, with notice, at such other time or place as the Board may
fix by resolution. The Board may provide, by resolution, the time and place,
within or without the State of Delaware, for the holding of regular meetings of
the Board without notice other than such resolution.
Section 4. Special Meetings. Special meetings of the Board may be
called for any purpose at any time by or at the request of the Chairperson of
the Board or the President. Special meetings of the Board shall also be called
by the Secretary upon the written request, stating the purpose or purposes of
the meeting, of at least sixty percent (60%) of the directors then in office,
but in any event not less than five (5) directors. The persons authorized to
call special meetings of the Board shall give notice of such meetings in the
manner prescribed by these Bylaws and may fix any place, within or without the
Corporation's regular business area, as the place for holding any special
meeting of the Board called by such persons. No business shall be conducted at
a special meeting other than that specified in the notice of meeting.
Section 5. Notice of Meetings; Waiver of Notice. Except as otherwise
provided in Section 3 of this Article IV, at least twenty-four (24) hours notice
of meetings shall be given to each director if given in person or by telephone,
telegraph, telex, facsimile or other electronic transmission, and at least five
(5) days notice of meetings shall be given if given in writing and delivered by
courier or by postage prepaid mail. The purpose of any special meeting shall be
stated
<PAGE>
-10-
in the notice. Such notice shall be deemed given when sent or given to any mail
or courier service or company providing electronic transmission service. Any
director may waive notice of any meet ing by submitting a signed waiver of
notice with the Secretary, whether before or after the meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 6. Conduct of Meetings. Meetings of the Board shall be
presided over by the Chairperson of the Board or the President or such other
director or officer as the Chairperson of the Board shall designate, and, in the
absence or incapacity of the President or the Chairperson of the Board, the
presiding officer shall be the then senior member of the Board in terms of
length of service on the Board (which length of service shall include length of
service on the Board of Directors of Medford Co-operative Bank and any
predecessors thereto). The Sec retary or, in his absence, a person appointed by
the President, Chairperson of the Board (or other presiding person), shall act
as secretary of the meeting. The President, Chairperson of the Board (or other
person presiding) shall conduct all meetings of the Board in accordance with the
best interests of the Corporation and shall have the authority and discretion to
establish reasonable procedural rules for the conduct of Board meetings. At the
discretion of the President or the Chairperson of the Board, any one or more
directors may participate in a meeting of the Board or a committee of the Board
by means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at any such
meeting.
Section 7. Quorum and Voting Requirements. A quorum at any meeting of
the Board shall consist of not less than a majority of the directors then in
office or such greater number as shall be required by law, these Bylaws or the
Certificate of Incorporation, but not less than one-third (1/3) of the total
number. If less than a required quorum is present, the majority of those
directors present shall adjourn the meeting to another time and place without
further notice. At such adjourned meeting at which a quorum shall be
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, a majority vote of the directors
present at a meeting, if a quorum is present, shall constitute an act of the
Board.
Section 8. Informal Action by Directors. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board, or of any committee thereof,
may be taken without a meeting if all members of the Board or such committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or such committee.
Section 9. Resignation. Any director may resign at any time by
sending a written
<PAGE>
-11-
notice of such resignation to the principal office of the Corporation addressed
to the President or Chairperson of the Board. Unless otherwise specified
therein, such resignation shall take effect upon receipt thereof.
Section 10. Vacancies. To the extent not inconsistent with the
Certificate of Incorporation and subject to the limitations prescribed by law
and the rights of holders of Preferred Stock, vacancies in the office of
director, including vacancies created by newly created director ships resulting
from an increase in the number of directors, shall be filled only by a vote of a
majority of the directors then holding office, whether or not a quorum, at any
regular or special meeting of the Board called for that purpose. Subject to the
rights of holders of Preferred Stock, no person shall be so elected a director
unless nominated by the Nominating Committee. Subject to the rights of holders
of Preferred Stock, any director so elected shall serve for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until his or her successor shall be elected and
qualified.
Section 11. Compensation. From time to time, as the Board deems
necessary, the Board shall fix the compensation of directors, and officers of
the Corporation in such one or more forms as the Board may determine.
Section 12. Amendments Concerning the Board. The number and other
restrictions and qualifications for directors of the Corporation as set forth in
these Bylaws may be altered only by a vote, in addition to any vote required by
law, of two-thirds of the entire Board or by the affirmative vote of the holders
of record of not less than eighty percent (80%) of the total votes eligible to
be cast by holders of all outstanding shares of capital stock of the Corporation
enti tled to vote generally in the election of directors at a meeting of the
stockholders called for that purpose.
ARTICLE V
COMMITTEES
Section 1. Standing Committees. At each annual meeting of the Board,
the Nominating Committee of the board of directors may designate from their own
number, by resolution adopted by a majority of the entire Board, the following
committees:
(a) Executive Committee
(b) Audit Committee
which shall be standing committees of the Board. The Board shall appoint a
director to fill any
<PAGE>
-12-
vacancy on any committee of the Board. The members of the committees shall
serve at the pleasure of the Board.
Section 2. Executive Committee. The Executive Committee of the Board,
if constituted, shall consist of at least four (4) members, as shall be
appointed by Board resolution or these Bylaws. The President and Chairperson of
the Board shall be members of the Executive Committee. Three (3) members of the
Executive Committee, at least two (2) of whom must be non-officer directors, or
such other number of members as the Board may establish by resolution, shall
constitute a quorum for the transaction of business. The vote of a majority of
members present at any meeting including the presiding member, who shall be
eligible to vote, shall consti tute the action of the Executive Committee.
The Chairperson of the Board, with the approval of the Board of Directors,
shall designate the officer or director to serve as chairperson of the Executive
Committee. In the absence of the chairperson of the Executive Committee, the
committee shall designate, from among its membership present, a person to
preside at any meeting held in such absence. The Executive Committee shall
designate, from its membership or otherwise, a secretary who shall report to the
Board at its next regular meeting all proceedings and actions taken by the
Executive Committee. The Executive Committee shall meet as necessary at the call
of the President or at the call of a majority of the members of the Executive
Committee.
The Executive Committee shall, to the extent not inconsistent with law,
these Bylaws, the Certificate of Incorporation or resolutions adopted by the
Board, exercise all the powers and authority of the Board in the management of
the business and affairs of the Corporation in the intervals between the
meetings of the Board.
Section 3. Audit Committee. The Audit Committee shall consist of at
least three (3) members whose background and experience are financial and/or
business management related, none of whom shall be an officer or salaried
employee of the Corporation or its subsidiaries, an attorney who receives a fee
or other compensation for legal services rendered to the Corporation or any
other individual having a relationship which, in the opinion of the Board, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. At any regular meeting of the Board, any
director who is otherwise eligible to serve on the Audit Committee may be
elected to fill a vacancy that has occurred on the Audit Committee. The Board
shall designate one member of the committee to serve as chairperson of the
committee. The Audit Committee shall meet annually, at the call of the
chairperson of the committee and may hold such additional meetings as the
chairperson of the committee may deem necessary, to examine, or cause to be
examined, the records and affairs of the Corporation to determine its true
financial condition, and shall present a report of examination to the Board at
the Board's next regular meeting following the meeting of the Audit Committee.
The committee shall appoint, from its membership or
<PAGE>
-13-
otherwise, a secretary who shall cause to be kept written minutes of all
meetings of the committee. The Audit Committee shall make, or cause to be made,
such other examinations as it may deem advisable or whenever so directed by the
Board and shall report thereon in writing at a regular meeting of the Board.
The Audit Committee shall make recommendations to the Board in relation to the
employment of accountants and independent auditors and arrange for such other
assistance as it may deem necessary or desirable. The Audit Committee shall
review and evaluate the procedures and performance of the Corporation's internal
auditing staff. A quorum shall consist of at least one-third of the members of
the committee, and in no event less than two (2) members of the committee.
Section 4. Other Committees. The Board may by resolution authorize
such other committees as from time to time it may deem necessary or appropriate
for the conduct of the business of the Corporation. The members of each
committee so authorized shall be appointed by the Board from members of the
Board. Each such committee shall exercise such powers as may be assigned by the
Board to the extent not inconsistent with law, these Bylaws, the Certificate of
Incorporation or resolutions adopted by the Board.
ARTICLE VI
OFFICERS
Section 1. Number. The Board shall, at each annual meeting, elect a
Chief Executive Officer, a President, a Secretary and such other officers as the
Board from time to time may deem necessary or the business of the Corporation
may require. Any number of offices may be held by the same person except that
no person may simultaneously hold the offices of President and Secretary.
The election of all officers shall be by the Board. If such election is
not held at the meeting held annually for the election of officers, such
officers may be so elected at any subsequent regular meeting or at a special
meeting called for that purpose, in the same manner above provided. Each person
elected shall have such authority, bear such title and perform such duties as
provided in these Bylaws and as the Board may prescribe from time to time. All
officers elected or ap pointed by the Board shall assume their duties
immediately upon their election and shall hold office at the pleasure of the
Board. Whenever a vacancy occurs among the officers, it may be filled at any
regular or special meeting called for that purpose, in the same manner as above
provided.
Section 2. Term of Office and Removal. Each officer shall serve until
his or her successor is elected and duly qualified, the office is abolished or
he or she is removed. Except for the Chief Executive Officer and the President,
any officer may be removed at any regular meeting of the Board with or without
cause by the Board. The Board may remove the Chief Executive
<PAGE>
-14-
Officer and the President at any time, with or without cause, only by a vote of
two-thirds of the non-officer directors then holding office at any regular or
special meeting of the Board called for that purpose.
Section 3. President. The President shall be the Chief Executive
Officer of the Corporation and shall, subject to the direction of the Board,
oversee all the major activities of the Corporation and its subsidiaries and be
responsible for assuring that the policy decisions of the Board are implemented
as formulated. The President or Chairperson of the Board shall preside at all
meetings of the stockholders and at all meetings of the Board and of the
Executive Committee and make recommendations to the Board regarding appointments
to all committees. The President shall be responsible, in consultation with
such officers and members of the Board the President deems appropriate, for
planning the growth of the Corporation. The President shall be responsible for
stockholder relations and relations with investment bankers or other similar
financial institutions and shall be empowered to designate officers of the
Corporation and its subsidiaries to assist in such activities. The President
shall be principally responsible for exploring and reporting to the Board all
opportunities for mergers, acquisitions and new business. The President, under
authority given to the President shall have the authority to sign instruments in
the name of the Corporation. The President shall have general supervision and
direction of all of the Corporation's officers and personnel, subject to and
consistent with policies enunciated by the Board. The President shall have such
other powers as may be assigned to the President by the Board or its committees.
Section 4. Vice Presidents. Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents may be appointed by the Board to perform such
duties as may be prescribed by these Bylaws, the Board, or the President as
permitted by the Board.
Section 5. Secretary. The Secretary shall attend all meetings of the
Board and of the stockholders and shall record, or cause to be recorded, all
votes and minutes of all proceedings of the Board and of the stockholders in a
book or books to be kept for that purpose. The Secretary shall perform such
executive and administrative duties as may be assigned by the Board, Chairperson
of the Board, or the President. The Secretary shall have charge of the seal of
the Corporation, shall submit such reports and statements as may be required by
law or by the Board, shall conduct all correspondence relating to the Board and
its proceedings and shall have such other powers and duties as are generally
incident to the office of Secretary and as may be assigned to him or her by the
Board, Chairperson of the Board or the President.
Section 6. Treasurer. The Treasurer shall be responsible for the
maintenance of adequate systems and records. The Treasurer shall see that all
expenditures are made in accordance with procedures duly established from time
to time by the Board. The Treasurer shall make such reports as may be required
by the Board or as are required by law.
<PAGE>
-15-
Section 7. Chief Financial Officer. The Chief Financial Officer of
the Corporation shall keep a record of all assets, liabilities, receipts,
disbursements and other financial transactions and shall see that all
expenditures are made in accordance with procedures duly established from time
to time by the Board. The Chief Financial Officer shall make such reports as may
be required by the Board or as are required by law.
Section 8. Other Officers and Employees. Other officers and employees
appointed by the Board shall have such authority and shall perform such duties
as may be assigned to them, from time to time, by the Board or the President.
Section 9. Compensation of Officers and Others. The compensation of
all officers, employees and agents shall be fixed from time to time by the
Board, or by any committee or officer authorized by the Board to do so.
ARTICLE VII
DIVIDENDS
The Board shall have the power, subject to the provisions of law and the
requirements of the Certificate of Incorporation, to declare and pay dividends
out of surplus (or, if no surplus exists, out of net profits of the Corporation,
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year, except where there is an impairment of capital stock), to pay such
dividends to the stockholders in cash, in property or in shares of the capital
stock of the Corporation and to fix the date or dates for the payment of such
dividends.
ARTICLE VIII
AMENDMENTS
These Bylaws, except as provided by applicable law or the Certificate of
Incorporation, or as otherwise set forth in these Bylaws, may be amended or
repealed at any regular meeting of the entire Board by the vote of two-thirds of
the Board; provided, however, that (a) a notice specifying the change or
amendment shall have been given at a previous regular meeting and entered in the
minutes of the Board; (b) a written statement describing the change or amendment
shall be made in the notice mailed to the directors of the meeting at which the
change or amendment shall be acted upon; and (c) any Bylaw made by the Board may
be altered, amended, rescinded or repealed by the holders of shares of capital
stock entitled to vote thereon at any annual meeting or at any special meeting
called for that purpose in accordance with the percentage requirements set forth
in the Certificate of Incorporation and/or these Bylaws. Notwithstanding the
foregoing, any provision of these Bylaws that contains a supermajority voting
requirement shall only be altered,
<PAGE>
-16-
amended, rescinded or repealed by a vote of the Board or holders of capital
stock entitled to vote thereon that is not less than the supermajority specified
in such provision.
<PAGE>
EXHIBIT 4.1
MYSTIC FINANCIAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF
COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
MYSTIC FINANCIAL, INC.
(the "Corporation"), a corporation formed under the laws of the State of
Delaware. The shares represented by this certificate are transferable only on
the stock transfer books of the Corporation by the holder of record hereof, or
by his duly authorized attorney or legal representative, upon the surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
The shares represented by this certificate are not insured by the Federal
Deposit Insurance Corporation or any other government agency.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signature of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
Dated:
By: By:
Lorraine P. Silva Robert H. Surabian
Secretary President and Chief
Executive Officer
<PAGE>
MYSTIC FINANCIAL, INC.
The shares represented by this certificate are issued subject to all the
provisions of the Certificate of Incorporation and Bylaws of MYSTIC FINANCIAL,
INC. (the "Corporation"), as from time to time amended (copies of which are on
file at the principal office of the Corporation), to all of which the holder by
acceptance hereof assents. The following description constitutes a summary of
certain provisions of, and is qualified in its entirety by reference to, the
Certificate of Incorporation.
The Certificate of Incorporation of the Corporation contains certain
provisions, applicable upon the effective date of the conversion of Medford Co-
operative Bank (the "Bank") from a Massachusetts chartered mutual co-operative
bank to a Massachusetts chartered stock co-operative bank under the name Medford
Co-operative Bank and the concurrent acquisition by the Corporation of all of
the outstanding capital stock of the Bank, that restrict persons from directly
or indirectly acquiring or holding, or attempting to acquire or hold, the
beneficial ownership of in excess of 10% of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors
("Voting Stock"). The Certificate of Incorporation contains a provision
pursuant to which shares in excess of 10% of the Voting Stock of the Corporation
are considered "excess shares" and in no event shall the record owner or
beneficial owner of excess shares be entitled or permitted to vote such excess
shares. These restrictions are not applicable to underwriters in connection
with a public offering of the common stock, certain reorganization transactions
described in the Certificate of Incorporation or to acquisitions of Voting Stock
by the Corporation, any majority-owned subsidiary of the Corporation or any
pension, profit-sharing, stock bonus or other compensation plan maintained by
the Corporation or by a member of a controlled group of corporations or trades
or businesses of which the Corporation is a member for the benefit of the
employees of the Corporation and for any subsidiary, or any trust or custodial
arrangement established in connection with any such plan.
The Certificate of Incorporation of the Corporation contains provisions
providing that the affirmative vote of the holders of at least 80% of the Voting
Stock of the Corporation may be required to approve certain business
combinations and other transactions with persons who directly or indirectly
acquire or hold the beneficial ownership of in excess of 10% of the Voting Stock
of the Corporation.
The Corporation will furnish to any stockholder upon written request and
without charge, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
its transfer agent and registrar.
_________________________
The following abbreviations when used in the inscription on the face of
this certificate shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT.............Custodian...........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship and under Uniform Gifts to Minors Act.................
not as tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list
For value received,______________________________________hereby sell, assign
and transfer unto_____________________________________________shares of Common
Stock evidenced by this Certificate, and do hereby irrevocably constitute and
appoint ___________________________ as Attorney, to transfer the said shares on
the books of the herein named Corporation with full power of substitution.
Date:___________________
_______________________________________________________
Signature
_______________________________________________________
Signature
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the Certificate, in every particular,
without alteration or enlargement, or any
change whatsoever.
_________________________
<PAGE>
RESTRICTION
In connection with any certificates for the shares of common stock of
Mystic Financial, Inc. (the "Corporation") issuable to the directors and
executive officers and associates of such persons of the Corporation and Medford
Co-operative Bank, each of such certificates shall bear the following
restrictive legends:
The shares, or any interest therein, represented by this certificate
may not be sold or otherwise disposed of, directly or indirectly, by
the registered holder hereof for a period of one year from the date of
issuance hereof, except in the event of the death of the registered
holder.
These shares are beneficially owned by an affiliate or a person deemed
to be a control person and, so long as they are beneficially owned by
an affiliate or control person, may not be sold, offered for sale,
pledged or hypothecated except (i) in conjunction with an effective
registration statement as to such securities under the Securities Act
of 1933, as amended; (ii) pursuant to the terms of Rule 144 under said
Act except that the holding period requirement of Rule 144 need not be
met; or (iii) pursuant to an opinion of counsel satisfactory to the
Corporation that such registration or compliance is not required.
* * *
In connection with any certificates for the shares of common stock of the
Corporation issuable to persons who are members of the National Association of
Securities Dealers, Inc., persons associated with a member, persons who are in
the immediate family to whose support the member contributes, directly or
indirectly, or an account in which a member or person associated with a member
has a beneficial interest, each of such certificates shall bear the following
restrictive legend:
The shares represented by this certificate may not be sold,
transferred or hypothecated by the registered holder hereof for a
period of three months from the date of issuance printed hereon.
<PAGE>
EXHIBIT 5.1
August __, 1997
Mystic Financial, Inc.
c/o Medford Co-operative Bank
60 High Street
Medford, MA 02155
Ladies and Gentlemen:
We have acted as special counsel to Mystic Financial, Inc., a Delaware
corporation (the "Corporation"), in connection with the proposed registration
under the Securities Act of 1933, as amended, by the Corporation of an aggregate
of 2,711,125 shares of Common Stock, par value $.01 per share (the "Shares"), of
the Corporation, and the related preparation and filing by the Corporation with
the Securities and Exchange Commission of a Registration Statement on Form S-1
(the "Registration Statement"). In rendering the opinion set forth below, we do
not express any opinion concerning law other than the federal law of the United
States and the corporate law of the State of Delaware.
We have examined originals or copies, certified or otherwise identified, of
such documents, corporate records and other instruments, and have examined such
matters of law, as we have deemed necessary or advisable for purposes of
rendering the opinion set forth below. As to matters of fact, we have examined
and relied upon the representations of the Corporation contained in the
Registration Statement and, where we have deemed appropriate, representations or
certificates of officers of the Corporation or public officials. We have
assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as copies. In
making our examination of any documents, we have assumed that all parties, other
than the Corporation, had the corporate power and authority to enter into and
perform all obligations thereunder, and, as to such parties, we have also
assumed the due authorization by all requisite
<PAGE>
Mystic Financial, Inc.
August ___, 1997
Page 2.
action, the due execution and delivery of such documents, and the validity and
binding effect and enforceability thereof.
Based on the foregoing, we are of the opinion that the Shares to be issued
and sold by the Corporation, have been duly authorized and, when issued and sold
as contemplated in the Registration Statement of Mystic Financial, Inc. and the
Plan of Conversion of Medford Co-operative Bank will be validly issued and
outstanding, fully paid and non-assessable.
In rendering the opinion set forth above, we have not passed upon and do
not purport to pass upon the application of securities or "blue-sky" laws of any
jurisdiction (except federal securities laws).
This opinion is given solely for the benefit of the Corporation and
investors who purchase shares pursuant to the Registration Statement, and may
not be relied upon by any other person or entity, nor quoted in whole or in
part, or otherwise referred to in any document without our express written
consent.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm under the heading "Legal Matters" in
the prospectus which is part of such Registration Statement.
Very truly yours,
Thacher Proffitt & Wood
By
Richard A. Schaberg
<PAGE>
EXHIBIT 8.1
(212) 912-7633 August , 1997
Medford Co-operative Bank
60 High Street
Medford, MA 02155
Dear Sirs:
You have requested our opinion regarding certain federal income tax
consequences of the proposed conversion of Medford Co-operative Bank (the
"Bank") from a state-chartered mutual institution to a state-chartered capital
stock institution (the "Conversion"), the sale of all of the outstanding capital
stock of the Bank to Mystic Financial Inc. (the "Holding Company"), a business
corporation organized under the laws of the State of Delaware, and the sale by
the Holding Company of up to 2,357,500 shares of its common stock, par value of
$.01 per share (the "Common Stock") to the Bank's Eligible Account Holders, Tax
Qualified Employee Stock Benefit Plan, Supplemental Eligible Account Holders and
to certain other parties, pursuant to the Plan of Conversion for Medford Co-
operative Bank adopted by the Board of Directors of the Bank on June 11, 1997
(the "Plan"). These and related transactions are described in the Plan, as
submitted to the Commissioner, the SEC and the FDIC in connection with the
Conversion. We are rendering this opinion pursuant to Section 3 of the Plan. All
capitalized terms used but not defined in this letter shall have the meanings
set forth in the Plan.
In connection with the opinions expressed below, we have examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of the Plan and of such corporate records of the Bank and the
Holding Company as we have deemed appropriate. We have also relied, without
independent verification, upon the July 24, 1997 letter of the Bank and the
Holding Company to Thacher Proffitt & Wood containing certain representations.
We have assumed that the Bank, the Holding Company and other parties will act in
accordance with the Plan, and that the representations made by the Bank and the
Holding Company in the foregoing letter are true. In addition, we have made such
investigations of law as we have deemed appropriate to form a basis for the
opinions expressed below.
<PAGE>
Medford Co-operative Bank
August , 1997
Page 2.
Based on and subject to the foregoing, it is our opinion that, for federal
income tax purposes, under current law:
1. The Bank's change in form from mutual to stock ownership will
constitute a reorganization under section 368(a)(1)(F) of the Internal Revenue
Code of 1986, and neither the Bank nor the Holding Company will recognize any
gain or loss as a result of the Conversion.
2. No gain or loss will be recognized by the Bank or the Holding Company
upon the purchase of the Bank's capital stock by the Holding Company in the
Conversion, or by the Holding Company upon the sale of shares of Common Stock
pursuant to the Plan.
3. No gain or loss will be recognized by Eligible Account Holders or
Supplemental Eligible Account Holders upon the issuance to them of deposit
accounts in, and interests in the liquidation account of, the Bank in its stock
form in exchange for their deposit accounts in the Bank in its mutual form.
4. The tax basis of the depositors' deposit accounts in the Bank in its
stock form immediately after the Conversion will be the same as the basis of
their deposit accounts in the Bank in its mutual form immediately prior to the
Conversion.
5. The tax basis of each Eligible Account Holder's and each Supplemental
Eligible Account Holder's interest in the liquidation account of the Bank will
be zero.
6. No gain or loss will be recognized by Eligible Account Holders or by
Supplemental Eligible Account Holders upon the distribution to them of
nontransferable subscription rights to purchase shares of the Common Stock,
provided that the amount to be paid for the Common Stock pursuant to such
subscription rights is equal to the fair market value of such stock.
7. The tax basis to the stockholders of the shares of Common Stock
purchased in the Conversion pursuant to the subscription rights will be the
amount paid therefor, and the holding period for such shares of Common Stock
will begin on the date on which such subscription rights are exercised.
In rendering opinion 6, above, and our opinion regarding the tax basis of
shares of Common Stock in 7, above, we have relied, without independent
verification, on the opinion of R.P. Financial, Inc. that the nontransferable
subscription rights have no value.
Except as set forth above, we express no opinion to any party as to the tax
consequences, whether federal, state, local or foreign, of the Conversion or of
any transaction related thereto or contemplated by the Plan. This opinion is
given solely for the benefit of the parties to the Plan and Eligible Account
Holders, Supplemental Eligible Account Holders and other investors who purchase
shares pursuant to the Plan, and may not be relied upon by any other party or
entity or referred to in any document without our express written consent. We
consent to the filing of this opinion with the Commissioner and the FDIC as an
exhibit to the Plan.
<PAGE>
Medford Co-operative Bank
August , 1997
Page 3.
Very truly yours,
THACHER PROFFITT & WOOD
By:
--------------------------------
Albert J. Cardinali
<PAGE>
Exhibit 10.1
Mystic Financial, Inc.
Employee Stock Ownership Plan
Adopted on ________, 1997
Effective _________, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
---------
DEFINITIONS
-----------
<S> <C> <C>
Section 1.1 Account........................................................1
Section 1.2 Affiliated Employer............................................1
Section 1.3 Allocation Compensation........................................1
Section 1.4 Board..........................................................2
Section 1.5 Beneficiary....................................................2
Section 1.6 Change in Control..............................................2
Section 1.7 Code...........................................................2
Section 1.8 Committee......................................................2
Section 1.9 Computation Period.............................................2
Section 1.10 Disability.....................................................2
Section 1.11 Domestic Relations Order.......................................2
Section 1.12 Effective Date.................................................3
Section 1.13 Eligibility Computation Period.................................3
Section 1.14 Eligible Employee..............................................3
Section 1.15 Eligible Participant...........................................3
Section 1.16 Employee.......................................................3
Section 1.17 Employer.......................................................3
Section 1.18 Employment Commencement Date...................................3
Section 1.19 ERISA..........................................................3
Section 1.20 ESOP Contribution..............................................3
Section 1.21 Fair Market Value..............................................3
Section 1.22 Family Member..................................................4
Section 1.23 Financed Share.................................................4
Section 1.24 Five Percent Owner.............................................4
Section 1.25 Forfeitures....................................................4
Section 1.26 Former Participant.............................................4
Section 1.27 General Investment Account.....................................5
Section 1.28 Highly Compensated Employee....................................5
Section 1.29 Hour of Service................................................6
Section 1.30 Investment Account.............................................6
Section 1.31 Investment Fund................................................6
Section 1.32 Loan Repayment Account.........................................7
Section 1.33 Loan Repayment Contribution....................................7
Section 1.34 Maternity or Paternity Leave...................................7
Section 1.35 Military Service...............................................7
Section 1.36 Named Fiduciary................................................7
Section 1.37 Officer........................................................7
Section 1.38 OneYear Break in Service.......................................7
Section 1.39 Participant....................................................7
Section 1.40 Plan...........................................................7
Section 1.41 Plan Administrator.............................................7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1.42 Plan Year......................................................8
Section 1.43 Qualified Domestic Relations Order.............................8
Section 1.44 Qualified Participant..........................................8
Section 1.45 Retirement.....................................................8
Section 1.46 Share..........................................................8
Section 1.47 Share Acquisition Loan.........................................8
Section 1.48 Share Investment Account.......................................8
Section 1.49 Tender Offer...................................................8
Section 1.50 Total Compensation.............................................8
Section 1.51 Trust..........................................................9
Section 1.52 Trust Agreement................................................9
Section 1.53 Trust Fund.....................................................9
Section 1.54 Trustee........................................................9
Section 1.55 Valuation Date.................................................9
Section 1.56 Vesting Computation Period.....................................9
Section 1.57 Year of Eligibility Service....................................9
Section 1.58 Year of Vesting Service........................................9
ARTICLE II
----------
<CAPTION>
PARTICIPATION
-------------
<S> <C> <C>
Section 2.1 Eligibility for Participation..................................10
Section 2.2 Commencement of Participation..................................10
Section 2.3 Termination of Participation...................................10
ARTICLE III
-----------
<CAPTION>
SPECIAL PROVISIONS
------------------
<S> <C> <C>
Section 3.1 Military Service...............................................11
Section 3.2 Maternity or Paternity Leave...................................11
Section 3.3 Adjustments to Years of Eligibility Service....................12
Section 3.4 Leave of Absence...............................................12
Section 3.5 Family and Medical Leave.......................................13
ARTICLE IV
----------
<CAPTION>
CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED
-------------------------------------------
<S> <C> <C>
Section 4.1 Contributions by Participants Not Permitted....................13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE V
---------
CONTRIBUTIONS BY THE EMPLOYER
-----------------------------
<S> <C> <C>
Section 5.1 In General.....................................................13
Section 5.2 Loan Repayment Contributions...................................13
Section 5.3 ESOP Contributions.............................................14
Section 5.4 Time and Manner of Payment.....................................14
ARTICLE VI
----------
<CAPTION>
SHARE ACQUISITION LOANS
-----------------------
<S> <C> <C>
Section 6.1 In General.....................................................15
Section 6.2 Collateral; Liability for Repayment............................15
Section 6.3 Loan Repayment Account.........................................16
Section 6.4 Release of Financed Shares.....................................16
Section 6.5 Restrictions on Financed Shares................................17
ARTICLE VII
-----------
ALLOCATION OF CONTRIBUTIONS
---------------------------
<S> <C> <C>
Section 7.1 Allocation Among Eligible Participants.........................18
Section 7.2 Allocation of Released Shares or Other Property................18
Section 7.3 Allocation of ESOP Contributions...............................18
ARTICLE VIII
------------
<CAPTION>
LIMITATIONS ON ALLOCATIONS
--------------------------
<S> <C> <C>
Section 8.1 Optional Limitations on Allocations of Contributions...........18
Section 8.2 General Limitations on Contributions...........................19
ARTICLE IX
----------
<CAPTION>
VESTING
-------
<S> <C> <C>
Section 9.1 Vesting........................................................23
Section 9.2 Vesting on Death, Disability, Retirement or Change in Control..23
Section 9.3 Forfeitures on Termination of Employment.......................23
Section 9.4 Amounts Credited Upon ReEmployment.............................23
Section 9.5 Allocation of Forfeitures......................................24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE X
---------
THE TRUST FUND
--------------
<S> <C> <C>
Section 10.1 The Trust Fund................................................24
Section 10.2 Investments...................................................24
Section 10.3 Diversification of Investments................................25
Section 10.4 Use of Commingled Trust Funds.................................26
Section 10.5 Management and Control of Assets..............................26
ARTICLE XI
----------
<CAPTION>
VALUATION OF INTERESTS IN THE TRUST FUND
----------------------------------------
<S> <C> <C>
Section 11.1 Establishment of Investment Accounts..........................27
Section 11.2 Share Investment Accounts.....................................27
Section 11.3 General Investment Accounts...................................27
Section 11.4 Valuation of Investment Accounts..............................27
Section 11.5 Annual Statements.............................................28
ARTICLE XII
-----------
<CAPTION>
SHARES
------
<S> <C> <C>
Section 12.1 Specific Allocation of Shares.................................28
Section 12.2 Dividends.....................................................28
Section 12.3 Voting Rights.................................................29
Section 12.4 Tender Offers.................................................31
ARTICLE XIII
------------
<CAPTION>
PAYMENT OF BENEFITS
-------------------
<S> <C> <C>
Section 13.1 In General....................................................33
Section 13.2 Designation of Beneficiaries..................................33
Section 13.3 Distributions to Participants and Former Participants.........34
Section 13.4 Manner of Payment.............................................37
Section 13.5 Put Options...................................................38
Section 13.6 Right of First Refusal........................................38
Section 13.7 Minimum Required Distributions................................39
Section 13.8 Direct Rollover of Eligible Rollover Distributions............41
Section 13.9 Valuation of Shares Upon Settlement to a Participant..........42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE XIV
-----------
CHANGE IN CONTROL
-----------------
<S> <C> <C>
Section 14.1 Definition of Change in Control...............................42
Section 14.2 Vesting on Change of Control..................................44
Section 14.3 Repayment of Loan.............................................44
Section 14.4 Plan Termination After Change in Control......................45
Section 14.5 Amendment of Article XIV......................................45
ARTICLE XV
----------
<CAPTION>
ADMINISTRATION
--------------
<S> <C> <C>
Section 15.1 Named Fiduciaries.............................................45
Section 15.2 Plan Administrator............................................45
Section 15.3 Committee Responsibilities....................................47
Section 15.4 Claims Procedure..............................................48
Section 15.5 Claims Review Procedure.......................................49
Section 15.6 Allocation of Fiduciary Responsibilities
and Employment of Advisors....................................49
Section 15.7 Other Administrative Provisions...............................50
ARTICLE XVI
-----------
<CAPTION>
AMENDMENT, TERMINATION AND TAX QUALIFICATION
--------------------------------------------
<S> <C> <C>
Section 16.1 Amendment and Termination by Mystic Financial, Inc............51
Section 16.2 Amendment or Termination Other Than by Mystic Financial, Inc..51
Section 16.3 Conformity to Internal Revenue Code...........................51
Section 16.4 Contingent Nature of Contributions............................52
ARTICLE XVII
------------
<CAPTION>
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
--------------------------------------
<S> <C> <C>
Section 17.1 In General....................................................52
Section 17.2 Definition of Top Heavy Plan..................................53
Section 17.3 Determination Date............................................53
Section 17.4 Cumulative Accrued Benefits...................................53
Section 17.5 Key Employees.................................................54
Section 17.6 Required Aggregation Group....................................55
Section 17.7 Permissible Aggregation Group.................................55
Section 17.8 Special Requirements During Top Heavy Plan Years..............55
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE XVIII
-------------
MISCELLANEOUS PROVISIONS
------------------------
<S> <C> <C>
Section 18.1 Governing Law.................................................56
Section 18.2 No Right to Continued Employment..............................57
Section 18.3 Construction of Language......................................57
Section 18.4 Headings......................................................57
Section 18.5 Merger with Other Plans.......................................57
Section 18.6 Nonalienation of Benefits.....................................57
Section 18.7 Procedures Involving Domestic Relations Orders................58
Section 18.8 Leased Employees..............................................58
Section 18.9 Status as an Employee Stock Ownership Plan....................59
</TABLE>
<PAGE>
MYSTIC FINANCIAL, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
Article I
---------
Definitions
-----------
The following definitions shall apply for the purposes of the Plan,
unless a different meaning is clearly indicated by the context:
Section 1.1 Account means an account established for each Participant
-------
to which is allocated such Participant's share, if any, of all Financed Shares
and other property that are re leased from the Loan Repayment Account in
accordance with section 6.4, together with his share, if any, of any ESOP
Contributions that may be made by the Employer.
Section 1.2 Affiliated Employer means any corporation which is a
-------------------
member of a controlled group of corporations (as defined in section 414(b) of
the Code) that includes the Employer; any trade or business (whether or not
incorporated) that is under common control (as defined in section 414(c) of the
Code) with the Employer; any organization (whether or not incorporated) that is
a member of an affiliated service group (as defined in section 414(m) of the
Code) that includes the Employer; any leasing organization (as defined in
section 414(n) of the Code) to the extent that any of its employees are required
pursuant to section 414(n) of the Code to be treated as employees of the
Employer; and any other entity that is required to be aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
Section 1.3 Allocation Compensation during any period means the
-----------------------
compensation taken into account in determining the allocation of benefits and
contributions among Participants and consists of the aggregate compensation
received by an Employee from the Employer with respect to such period as
reported to the Internal Revenue Service as wages for such period pursuant to
section 6041(a) of the Code, plus the amount by which such Employee's
compensation with respect to such period has been reduced pursuant to a
compensation reduction agreement under the terms of any of the following plans
which may be maintained by the Employer:
(a) a qualified cash or deferred arrangement described in section
401(k) of the Code;
(b) a salary reduction simplified employee pension plan described
in section 408(k) of the Code;
<PAGE>
-2-
(c) a tax deferred annuity plan described in section 403(b) of the
Code; or
(d) a cafeteria plan described in section 125 of the Code.
In no event, however, shall an Employee's Allocation Compensation for any
calendar year include any compensation in excess of $150,000. The $150,000
limitation set forth in the preceding sentence shall be indexed in accordance
with regulations prescribed under section 401(a)(17) of the Code. If there are
less than twelve (12) months in the Plan Year, the $150,000 limitation (as
adjusted) shall be prorated by multiplying such limitation by a fraction, the
numerator of which is the number of months in the Plan Year and the denominator
of which is twelve (12). For purposes of applying the foregoing limitations to
any person who is a Five Percent Owner or who is one of the ten Highly
Compensated Employees with the highest Total Compensation (determined prior to
the application of this sentence), any Allocation Compensation paid to the
spouse of such person or to any lineal descendant of such person who has not
attained age 19 on or before the last day of such calendar year shall be deemed
to have been paid to such person and, in such case, the dollar limitation on
compensation in section 401(a)(17) of the Code shall be allocated among such
persons in proportion to the Allocation Compensation actually paid to each
person.
Section 1.4 Board means the Board of Directors of Mystic Financial,
-----
Inc.
Section 1.5 Beneficiary means the person or persons designated by a
-----------
Participant or Former Participant or other person entitled to a benefit under
the Plan, or otherwise determined to be entitled to a benefit under the Plan.
If more than one person is designated, each shall have an equal share unless the
person making the designation directed otherwise. The word "person" includes an
individual, a trust, an estate or any other person that is permitted to be named
as a Beneficiary.
Section 1.6 Change in Control means an event described in section
-----------------
14.1.
Section 1.7 Code means the Internal Revenue Code of 1986, as
----
amended (including the corresponding provisions of any succeeding law).
Section 1.8 Committee means the Committee described in section
---------
15.3.
Section 1.9 Computation Period means an Eligibility Computation
------------------
Period or a Vesting Computation Period.
Section 1.10 Disability means a condition of total incapacity,
----------
mental or physical, for further performance of duty with the Employer, which the
Plan Administrator shall have deter mined, on the basis of competent medical
evidence, is likely to be permanent.
Section 1.11 Domestic Relations Order means a judgment, decree or
------------------------
order (including the approval of a property settlement) that is made pursuant to
a state domestic relations or community property law and relates to the
provision of child support, alimony payments, or
<PAGE>
-3-
marital property rights to a spouse, child or other dependent of a Participant
or Former Participant.
Section 1.12 Effective Date means [_______, 1997].
--------------
Section 1.13 Eligibility Computation Period means, with respect to
------------------------------
any person, (a) the 12-consecutive month period beginning on such person's
Employment Commencement Date and (b) each 12-consecutive month period that
begins on an anniversary of such person's Employment Commencement Date.
Section 1.14 Eligible Employee means an Employee who is eligible for
-----------------
participation in the Plan in accordance with Article II.
Section 1.15 Eligible Participant means, for any Plan Year, an
--------------------
Employee who is or was a Participant during all or part of such Plan Year;
provided, however, that no Employee shall be an Eligible Participant for the
Plan Year that includes the effective date of the transaction pursuant to which
the Medford Co-Operative Bank becomes a wholly owned subsidiary of Mystic
Financial, Inc. if he terminates employment with the Employer prior to such
effective date.
Section 1.16 Employee means any person, including an officer, who is
--------
employed by the Employer.
Section 1.17 Employer means Mystic Financial, Inc. and any successor
--------
thereto and any Affiliated Employer which, with the prior written approval of
the Board of Directors of Mystic Financial, Inc. and subject to such terms and
conditions as may be imposed by the Board of Directors of Mystic Financial,
Inc., shall adopt this Plan.
Section 1.18 Employment Commencement Date means the date on which a
----------------------------
person first performs an Hour of Service, except that if an Employee separates
from service with the Employer, incurs a One-Year Break in Service and
subsequently returns to service with the Employer, his Employment Commencement
Date shall be the date on which he first performs an Hour of Service following
the One-Year Break in Service.
Section 1.19 ERISA means the Employee Retirement Income Security Act
-----
of 1974, as amended from time to time (including the corresponding provisions of
any succeeding law).
Section 1.20 ESOP Contribution means Shares or amounts of money
-----------------
contributed to the Plan by the Employer in accordance with section 5.3.
Section 1.21 Fair Market Value on any date means:
-----------------
(a) with respect to a Share:
<PAGE>
-4-
(i) the final quoted sale price on the date in question (or,
if there is no reported sale on such date, on the last preceding date
on which any reported sale occurred) as reported in the principal
consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange
on which like Shares are listed or admitted to trading; or
(ii) if like Shares are not listed or admitted to trading on
any such exchange, the closing bid quotation with respect to a Share
on such date on the National Association of Securities Dealers
Automated Quotation System, or, if no such quotation is provided, on
another similar system, selected by the Committee, then in use; or
(iii) if sections 1.21(a)(i) and (ii) are not applicable, the
fair market value of a Share as determined by an appraiser independent
of the Employer and experienced and expert in the field of corporate
appraisal.
(b) with respect to property other than Shares, the fair market
value determined in the manner determined by the Trustee.
Section 1.22 Family Member means, with respect to any person, such
-------------
person's spouse and lineal ascendants or descendants and the spouses of such
lineal ascendants or descendants.
Section 1.23 Financed Share means: (a) a Share that has been
--------------
purchased with the proceeds of a Share Acquisition Loan, that has been allocated
to the Loan Repayment Account in accordance with section 6.3 and that has not
been released in accordance with section 6.4; or (b) a Share that constitutes a
dividend paid with respect to a Share described in section 1.23(a), that has
been allocated to the Loan Repayment Account in accordance with section 6.3 and
that has not been released in accordance with section 6.4.
Section 1.24 Five Percent Owner means, for any Plan Year, a person
------------------
who, during such Plan Year, owned (or was considered as owning for purposes of
section 318 of the Code): (a) more than 5% of the value of all classes of
outstanding stock of the Employer; or (b) stock possessing more than 5% of the
combined voting power of all classes of outstanding stock of the Employer.
Section 1.25 Forfeitures means the amounts forfeited by Participants
-----------
and Former Participants on termination of employment prior to full vesting,
pursuant to section 9.3, less amounts credited because of re-employment,
pursuant to section 9.4.
Section 1.26 Former Participant means a Participant whose
------------------
participation in the Plan has terminated pursuant to section 2.3.
<PAGE>
-5-
Section 1.27 General Investment Account means an Investment Account
--------------------------
established and maintained in accordance with Article XI.
Section 1.28 Highly Compensated Employee means, for any Plan Year,
---------------------------
an Employee who:
(a) at any time during such Plan Year or the immediately preceding
Plan Year was a Five Percent Owner; or
(b) is a member of the group consisting of the 100 Employees and
persons employed by any Affiliated Employer who received the greatest Total
Compensation for such Plan Year and during such Plan Year:
(i) received Total Compensation for such Plan Year in excess
of $75,000 (or such higher amount as may be permitted under section
414(q) of the Code); or
(ii) received Total Compensation for such Plan Year that was
in excess of both (A) $50,000 (or such higher amount as may be
permitted under section 414(q) of the Code) and (B) the Total
Compensation for such Plan Year of at least 80% of the Employees and
persons employed by any Affiliated Employer for such Plan Year; or
(iii) was an Officer of the Employer or any Affiliated Employer
and received Total Compensation for such Plan Year in excess of 50% of
the amount in effect under section 415(b)(1)(A) of the Code for such
Plan Year; or
(c) during the immediately preceding Plan Year:
(i) received Total Compensation for such Plan Year in excess
of $75,000 (or such higher amount as may be permitted under section
414(q) of the Code); or
(ii) received Total Compensation for such Plan Year that was
in excess of both (A) $50,000 (or such higher amount as may be
permitted under section 414(q) of the Code) and (B) the Total
Compensation for such Plan Year of at least 80% of the Employees and
persons employed by any Affiliated Employer for such Plan Year; or
(iii) was an Officer of the Employer or any Affiliated Employer
and received Total Compensation for such Plan Year in excess of 50% of
the amount in effect under section 415(b)(1)(A) of the Code for such
Plan Year.
<PAGE>
-6-
The determination of who is a Highly Compensated Employee will be made in
accordance with section 414(q) of the Code and the regulations thereunder. For
purposes of applying any provisions of the Plan applicable to Highly Compensated
Employees, any person who is a Family Member of a Five Percent Owner or one of
the ten Highly Compensated Employees with the highest Total Compensation for a
Plan Year shall not be treated as a separate person for such Plan Year, and any
Total Compensation or Allocation Compensation paid to such person for such Plan
Year, as well as his share of allocations of contributions or Shares under this
Plan, shall be attributed to the Five Percent Owner or Highly Compensated
Employee and, in such case, the provisions of the Plan shall apply to each
person as based on the ratio of his Total Compensation or Allocation
Compensation to the sum of the Total Compensation or Allocation Compensation of
all persons treated as one person with him.
Section 1.29 Hour of Service means:
---------------
(a) Each hour for which a person is paid, or entitled to payment,
for the performance of duties for the Bank or any Affiliated Employer.
These hours shall be credited to the person for the Computation Period or
Computation Periods in which the duties are performed; and
(b) Each hour for which a person is paid, or entitled to payment, by
the Bank or any Affiliated 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
section 1.29(b) for any single continuous period (whether or not such
period occurs in a single Computation Period). Hours under this section
1.29(b) shall be calculated and credited pursuant to section 2530.200b-2 of
the Department of Labor's regulations (or any successor regulation), which
are incorporated herein by reference; and
(c) Each hour for which back pay, irrespective of any mitigation of
damages, is either awarded or agreed to by the Bank or any Affiliated
Employer. The same Hours of Service shall not be credited both under
section 1.29(a) or (b), as the case may be, and under this section 1.29(c).
Hours under this section 1.29(c) shall be credited to the person for the
Computation Period or Computation Periods to which the award or agreement
pertains, rather than the Computation Period in which the award, agreement
or payment is made.
Section 1.30 Investment Account means either a General Investment
------------------
Account or a Share Investment Account.
Section 1.31 Investment Fund means any one of the three or more
---------------
funds as may be established from time to time by the Committee which, together
with any and all Shares and other investments held under the Plan, constitute
the Trust Fund.
<PAGE>
-7-
Section 1.32 Loan Repayment Account means an account established and
----------------------
maintained in accordance with section 6.3.
Section 1.33 Loan Repayment Contribution means amounts of money
---------------------------
contributed to the Plan by the Employer in accordance with section 5.2.
Section 1.34 Maternity or Paternity Leave means a person's absence
----------------------------
from work for the Employer and all Affiliated Employers: (a) by reason of the
pregnancy of such person; (b) by reason of the birth of a child of such person;
(c) by reason of the placement of a child with the person in connection with the
adoption of such child by such person; or (d) for purposes of caring for a child
of such person immediately following the birth of the child or the placement of
the child with such person.
Section 1.35 Military Service means service in the armed forces of
----------------
the United States. It may also include, if and to the extent that the Board so
provides and if all Participants and Former Participants in like circumstances
are similarly treated, special service for the government of the United States
and other public service.
Section 1.36 Named Fiduciary means any person, committee,
---------------
corporation or organization as described in section 15.1.
Section 1.37 Officer means an employee who is an administrative
-------
executive in regular and continued service with the Employer or any Affiliated
Employer; provided, however, that at no time shall more than the lesser of (a)
50 employees or (b) the greater of: (i) 3 employees or (ii) 10% of all employees
be treated as Officers. The determination of whether an employee is to be
considered an Officer shall be made in accordance with section 416(i) of the
Code.
Section 1.38 One-Year Break in Service means, with respect to any
-------------------------
person: (a) for purposes of eligibility to participate, an Eligibility
Computation Period during which such person is credited with fewer than 501
Hours of Service and (b) for purposes of vesting, a Vesting Computation Period
during which such person is credited with fewer than 501 Hours of Service.
Section 1.39 Participant means any person who has satisfied the
-----------
eligibility requirements set forth in section 2.1, who has become a Participant
in accordance with section 2.2, and whose participation has not terminated under
section 2.3.
Section 1.40 Plan means the Mystic Financial, Inc. Employee Stock
----
Ownership Plan, as amended from time to time.
Section 1.41 Plan Administrator means any person, committee,
------------------
corporation or organization designated in section 15.2, or appointed pursuant to
section 15.2, to perform the responsibilities of that office.
<PAGE>
-8-
Section 1.42 Plan Year means the period commencing on the Effective
---------
Date and ending on December 31, 1997 and each calendar year thereafter.
Section 1.43 Qualified Domestic Relations Order means a Domestic
----------------------------------
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Participant or Former Participant and of each person given rights
under such Domestic Relations Order, (ii) the amount or percentages of the
Participant's or Former Participant's benefits under this Plan to be paid to
each person covered by such Domestic Relations Order, (iii) the number of
payments or the period to which such Domestic Relations Order applies, and (iv)
the name of this Plan; and (b) does not require the payment of a benefit in a
form or amount that is (i) not otherwise provided for under the Plan, or (ii)
inconsistent with a previous Qualified Domestic Relations Order.
Section 1.44 Qualified Participant means a Participant who has
---------------------
attained age 55 and who has been a Participant in the Plan for at least 10
years.
Section 1.45 Retirement means: (a) any termination of participation
----------
in the Plan at or after attainment of age 65; and (b) any retirement under an
applicable qualified defined benefit plan of the Employer as in effect from time
to time with entitlement to a normal or early retirement allowance.
Section 1.46 Share means a share of any class of stock issued by the
-----
Employer or any Affiliated Employer; provided, however, that such share is a
"qualifying employer security" within the meaning section 409(l) of the Code and
section 407(d)(5) of ERISA.
Section 1.47 Share Acquisition Loan means a loan obtained by the
----------------------
Trustee in accordance with Article VI.
Section 1.48 Share Investment Account means an Investment Account
------------------------
established and maintained in accordance with Article XI.
Section 1.49 Tender Offer means a tender offer made to holders of
------------
any one or more classes of Shares generally, or any other offer, made to holders
of any one or more classes of Shares generally, to purchase, exchange, redeem or
otherwise transfer Shares, whether for cash or other consideration.
Section 1.50 Total Compensation during any period means an
------------------
employee's aggregate total compensation paid by the Employer and any Affiliated
Employer with respect to such period and reportable for federal income tax
purposes pursuant to section 6041(a) of the Code. In addition, solely for
purposes of identifying those employees who are Highly Compensated Employees,
each employee's Total Compensation shall include any amounts by which the
employee's compensation paid by the Employer or any Affiliated Employer has been
reduced pursuant to a compensation reduction agreement under the terms of any
qualified cash or deferred arrangement described in section 401(k) of the Code,
any salary reduction simplified employee pension plan described in section
408(k) of the Code, any tax deferred annuity plan described in section 403(b)
of the Code, or any cafeteria plan described in section 125 of the Code.
<PAGE>
-9-
In no event, however, shall an employee's Total Compensation for any calendar
year include any compensation in excess of $150,000 (or such higher amount as
may be permitted under section 401(a)(17) of the Code). For purposes of
applying the foregoing limitations to any person who is a Five Percent Owner or
who is one of the ten Highly Compensated Employees with the highest Total
Compensation (determined prior to the application of this sentence), any Total
Compensation paid to the spouse of such person or to any lineal descendant of
such person who has not attained age 19 on or before the last day of such
calendar year, shall be deemed to have been paid to such person.
Section 1.51 Trust means the legal relationship created by the Trust
-----
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The
Trust may be referred to as the "Mystic Financial, Inc. Employee Stock Ownership
Plan Trust."
Section 1.52 Trust Agreement means the agreement between Mystic
---------------
Financial, Inc. and the Trustee therein named or its successors pursuant to
which the Trust Fund shall be held in trust.
Section 1.53 Trust Fund means the corpus (consisting of
----------
contributions paid over to the Trustee, and investments thereof), and all
earnings, appreciations or additions thereof and thereto, held by the Trustee
under the Trust Agreement in accordance with the Plan, less any depreciation
thereof and any payments made therefrom pursuant to the Plan.
Section 1.54 Trustee means the Trustee of the Trust Fund from time
-------
to time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is re placed by a successor Trustee appointed in
accordance with the terms of the Trust Agreement.
Section 1.55 Valuation Date means the last business day of March,
--------------
June, September and December.
Section 1.56 Vesting Computation Period means, with respect to any
--------------------------
person, the 12-month period beginning on such person's Employment Commencement
Date and each Plan Year beginning after such Employment Commencement Date.
Section 1.57 Year of Eligibility Service means, with respect to any
---------------------------
person, an Eligibility Computation Period during which such person receives
credit for at least 1,000 Hours of Service.
Section 1.58 Year of Vesting Service means, with respect to any
-----------------------
person, a Vesting Computation Period during which such person receives credit
for at least 1,000 Hours of Service. If an Employee has credit for 1,000 Hours
of Service in the Vesting Computation Period that includes his Employment
Commencement Date and 1,000 Hours of Service in the first Vesting Computation
Period that begins after his Employment Commencement Date, he shall receive
credit for two Years of Vesting Service even if such periods overlap.
<PAGE>
-10-
Article II
----------
Participation
-------------
Section 2.1 Eligibility for Participation.
-----------------------------
(a) Only Eligible Employees may be or become Participants in the
Plan. An Employee shall be an Eligible Employee if he is a common-law employee
of an Employer, has completed at least one Year of Eligibility Service, attained
age twenty-one (21), and is not excluded under section 2.1(b).
(b) An Employee is not an Eligible Employee if he:
(i) is an Employee who has waived any claim to participation in the
Plan; or
(ii) is an Employee or in a unit of Employees covered by a collective
bargaining agreement with the Employer where retirement benefits were the
subject of good faith bargaining, unless such agreement expressly provides
that Employees such as he be covered under the Plan; or
(iii) is a "leased employee" as defined in section 18.8(a).
Section 2.2 Commencement of Participation.
-----------------------------
Every Employee who is an Eligible Employee on the Effective Date shall
automatically become a Participant on the Effective Date. An Employee who
becomes an Eligible Employee after the Effective Date shall automatically become
a Participant on the first day of the month following the month in which he
becomes an Eligible Employee.
Section 2.3 Termination of Participation.
----------------------------
Participation in the Plan shall cease, and a Participant shall become
a Former Participant, upon termination of employment with the Employer, death,
Disability or Retirement, failure to return to work upon the expiration of a
leave of absence granted by the Employer pursuant to section 3.4 or becoming an
Employee who is excluded under section 2.1(b) or distribution of the entire
vested interest in his Account.
<PAGE>
-11-
Article III
-----------
Special Provisions
------------------
Section 3.1 Military Service.
----------------
In the case of a termination of employment of any Employee to enter
directly into Military Service, the entire period of his absence shall be
treated, for purposes of vesting and eligibility for participation (but not,
except as required by law, for purposes of eligibility to share in allocations
of contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. In the event of the re-employment of
such person by the Employer within a period of not more than six months:
(a) after he becomes entitled to release or discharge, if he has
entered into the armed forces; or
(b) after such service terminates, if he has entered into other
service defined as Military Service;
such period, also, shall be deemed to be Military Service.
Section 3.2 Maternity or Paternity Leave.
----------------------------
(a) Subject to section 3.2(c), in the event of an Employee's absence
from work in the service of the Employer and all Affiliated Employers for a
period:
(i) that commences on or after October 1, 1985;
(ii) for which the person is not paid or entitled to payment by the
Employer or any Affiliated Employer; and
(iii) that constitutes Maternity or Paternity Leave;
then the rules of section 3.2(b) shall apply.
(b) In cases of absence described in section 3.2(a), solely for
purposes of determining whether a One-Year Break in Service has occurred, the
person shall be credited for the period of an absence described in section
3.2(a) with the number of Hours of Service equal to the lesser of:
(i) (A) the number of Hours of Service that would have been
credited to the person if he had continued working for the Employer during
the period of such absence, or (B) if the number of Hours of Service
prescribed under
<PAGE>
-12-
section 3.2(b)(i)(A) cannot be determined, 8 Hours of Service for each
working day during the period of absence; or
(ii) 501 Hours of Service.
Such credit shall be given during the Computation Period during which such
absence began, if necessary to prevent a One-Year Break in Service from
occurring during such Computation Period, and in all other cases, such
credit shall be given during the immediately following Computation Period.
(c) Notwithstanding anything in the Plan to the contrary, this
section 3.2 shall not apply unless the person furnishes to the Plan
Administrator such information as the Plan Administrator may reasonably require
in order to establish (i) that the person's absence is one described in section
3.2(a), and (ii) the number of working days during such absence.
Section 3.3 Adjustments to Years of Eligibility Service.
-------------------------------------------
The Years of Eligibility Service of an Employee who returns to the
employment of the Employer or any Affiliated Employer following a separation
from service shall include his Years of Eligibility Service prior to such
separation from service, and such an Employee shall be readmitted to
participation immediately upon his return to service if he is then an Eligible
Employee; provided, however, that if such separation from service includes a
One-Year Break in Service, such prior Years of Eligibility Service shall not be
included until he has completed one Year of Eligibility Service following his
return to service, and upon completion of such one Year of Eligibility Service,
he shall be readmitted to participation in the Plan with retroactive effect to
the date of his return to employment, if he is then an Eligible Employee, but he
shall not participate in any ESOP Contributions or Loan Repayment Contributions
allocated during the interim period.
Section 3.4 Leave of Absence.
----------------
In the event of temporary absence from work in the service of the
Employer and all Affiliated Employers for any period for which a Participant
shall have been granted a leave of absence by the Employer, the entire period of
his absence shall be treated for purposes of vesting and eligibility for
participation (but not for purposes of eligibility to share in the allocation of
contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. Absence from work for a period
greater than, or failure to return to work upon the expiration of, the period of
leave of absence granted by the Employer shall terminate participation in the
Plan as of the date on which such period ended. In granting leaves of absence
for purposes of the Plan, all Employees in like circumstances shall be similarly
treated.
<PAGE>
-13-
Section 3.5 Family and Medical Leave.
------------------------
In the event of absence for a period recognized a family and medical
leave under the federal Family and Medical Leave Act of 1992, the period of such
absence shall be recognized for purposes of vesting and eligibility to
participant to the full extent required by law.
Article IV
----------
Contributions by Participants Not Permitted
-------------------------------------------
Section 4.1 Contributions by Participants Not Permitted.
-------------------------------------------
Participants shall not be required, nor shall they be permitted, to
make contributions to the Plan.
Article V
---------
Contributions by the Employer
-----------------------------
Section 5.1 In General.
----------
Subject to the limitations of Article VIII, for each Plan Year, the
Employer shall contribute to the Plan the amount, if any, determined by the
Board, but in no event less than the amount described in section 5.2(a). The
amount contributed for any Plan Year shall be treated as a Loan Repayment
Contribution, an ESOP Contribution, or a combination thereof, in accordance with
the provisions of this Article V.
Section 5.2 Loan Repayment Contributions.
----------------------------
For each Plan Year, a portion of the Employer's contributions, if any,
to the Plan for such Plan Year equal to the sum of:
(a) the minimum amount required to be added to the Loan Repayment
Account in order to provide adequate funds for the payment of the principal
and interest then required to be repaid under the terms of any outstanding
Share Acquisition Loan obtained by the Trustee; plus
<PAGE>
-14-
(b) the additional amount, if any, designated by the Committee to be
applied to the prepayment of principal or interest under the terms of any
outstanding Share Acquisition Loan obtained by the Trustee;
shall be treated as a Loan Repayment Contribution for such Plan Year. A Loan
Repayment Contribution for a Plan Year shall be allocated to the Loan Repayment
Account and shall be applied by the Trustee, in the manner directed by the
Committee, to the payment of accrued interest and to the reduction of the
principal balance of any Share Acquisition Loan obtained by the Trustee that is
outstanding on the date on which the Loan Repayment Contribution is made. To the
extent that a Loan Repayment Contribution for a Plan Year results in a release
of Financed Shares in accordance with section 6.4, such Shares shall be
allocated among the Accounts of Eligible Participants for such Plan Year in
accordance with section 7.2.
Section 5.3 ESOP Contributions.
------------------
In the event that the amount of the Employer's contributions to the
Plan for a Plan Year exceeds the amount of the Loan Repayment Contributions for
such Plan Year, such excess shall be treated as an ESOP Contribution and shall
be allocated among the Accounts of the Eligible Participants for such Plan Year
in accordance with section 7.3.
Section 5.4 Time and Manner of Payment.
--------------------------
(a) Payment of contributions made pursuant to this Article V shall
be made:
(i) in cash, in the case of a Loan Repayment Contribution; and
(ii) in cash, in Shares or in a combination of cash and Shares, in
the case of an ESOP Contribution.
(b) Contributions made pursuant to this Article V for a Plan Year
shall be paid to the Trust Fund on or before the due date (including any
extensions thereof) of the Employer's federal income tax return for its taxable
year during which such Plan Year ends. All such contributions shall be
allocated to the Accounts of the Eligible Participants, in the case of an ESOP
Contribution, or to the Loan Repayment Account, in the case of a Loan Repayment
Contribution, as soon as is practicable following the payment thereof to the
Trust Fund.
<PAGE>
-15-
Article VI
----------
Share Acquisition Loans
-----------------------
Section 6.1 In General.
----------
The Committee may, with the prior approval of the Board, direct the
Trustee to obtain a Share Acquisition Loan on behalf of the Plan, the proceeds
of which shall be applied on the earliest practicable date:
(a) to purchase Shares; or
(b) to make payments of principal or interest, or a combination of
principal and interest, with respect to such Share Acquisition Loan; or
(c) to make payments of principal and interest, or a combination of
principal and interest, with respect to a previously obtained Share
Acquisition Loan that is then outstanding.
Any such Share Acquisition Loan shall be obtained on such terms and conditions
as the Committee may approve; provided, however, that such terms and conditions
shall provide for the payment of interest at no more than a reasonable rate and
shall permit such Share Acquisition Loan to satisfy the requirements of section
4975(d)(3) of the Code and section 408(b)(3) of ERISA.
Section 6.2 Collateral; Liability for Repayment.
-----------------------------------
(a) The Committee may direct the Trustee to pledge, at the time a
Share Acquisition Loan is obtained, the following assets of the Plan as
collateral for such Share Acquisition Loan:
(i) any Shares purchased with the proceeds of such Share Acquisition
Loan and any earnings attributable thereto;
(ii) any Financed Shares then pledged as collateral for a prior Share
Acquisition Loan which is repaid with the proceeds of such Share
Acquisition Loan and any earnings attributable thereto; and
(iii) pending the application thereof to purchase Shares or repay a
prior Share Acquisition Loan, the proceeds of such Share Acquisition Loan
and any earnings attributable thereto.
Except as specifically provided in this section 6.2(a), no assets of the Plan
shall be pledged as collateral for the repayment of any Share Acquisition Loan.
<PAGE>
-16-
(b) No person entitled to payment under a Share Acquisition Loan
shall have any right to the assets of the Plan except for:
(i) Financed Shares that have been pledged as collateral for such
Share Acquisition Loan pursuant to section 6.2(a);
(ii) Loan Repayment Contributions made pursuant to section 5.2; and
(iii) earnings attributable to Financed Shares described in
section 6.2(b)(i) and to Loan Repayment Contributions described in
section 6.2(b)(ii).
Except in the event of a default or a refinancing pursuant to which an existing
Share Acquisition Loan is repaid, the aggregate amount of all payments of
principal and interest made by the Trustee with respect to all Share Acquisition
Loans obtained on behalf of the Plan shall at no time exceed the aggregate
amount of all Loan Repayment Contributions theretofore made plus the aggregate
amount of all earnings (other than dividends paid in the form of Shares)
attributable to Financed Shares and to such Loan Repayment Contributions.
(c) Any Share Acquisition Loan shall be without recourse against
the Plan and Trust.
Section 6.3 Loan Repayment Account.
----------------------
In the event that one or more Share Acquisition Loans shall be
obtained, a Loan Repayment Account shall be established under the Plan. The
Loan Repayment Account shall be credited with all Shares acquired with the
proceeds of a Share Acquisition Loan, all Loan Repayment Contributions and all
earnings (including dividends paid in the form of Shares) or appreciation
attributable to such Shares and Loan Repayment Contributions. The Loan
Repayment Account shall be charged with all payments of principal and interest
made by the Trustee with respect to any Share Acquisition Loan, all Shares
released in accordance with section 6.4 and all losses, depreciation or expenses
attributable to Shares or to other property credited thereto. The Financed
Shares, as well as any earnings thereon, shall be allocated to such Loan
Repayment Account and shall be accounted for separately from all other amounts
contributed under the Plan.
Section 6.4 Release of Financed Shares.
--------------------------
As of the last day of each Plan Year during which a Share Acquisition
Loan is outstanding, a portion of the Financed Shares purchased with the
proceeds of such Share Acquisition Loan and allocated to the Loan Repayment
Account shall be released. The number of Financed Shares released in any such
Plan Year shall be equal to the amount determined according to one of the
following methods:
<PAGE>
-17-
(a) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to
the Loan Repayment Account immediately before the release is effected;
multiplied by (ii) a fraction, the numerator of which is the aggregate
amount of the principal and interest payments (other than payments made
upon the refinancing of a Share Acquisition Loan as contemplated by section
6.1(c)) made with respect to such Share Acquisition Loan during such Plan
Year, and the denominator of which is the aggregate amount of all principal
and interest remaining to be paid with respect to such Share Acquisition
Loan as of the first day of such Plan Year; or
(b) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to
the Loan Repayment Account immediately before the release is effected;
multiplied by (ii) a fraction, the numerator of which is the aggregate
amount of the principal payments (other than payments made upon the
refinancing of a Share Acquisition Loan as contemplated by section 6.1(c))
made with respect to such Share Acquisition Loan during such Plan Year, and
the denominator of which is the aggregate amount of all of principal
remaining to be paid with respect to such Share Acquisition Loan as of the
first day of such Plan Year; provided, however, that the method described
in this section 6.4(b) may be used only if the Share Acquisition Loan does
not extend for a period in excess of 10 years after the date of origination
and only to the extent that principal payments on such Share Acquisition
Loan are made at least as rapidly as under a loan of like principal amount
with a like interest rate and term requiring level amortization of
principal and interest.
The method to be used shall be specified in the documents governing the Share
Acquisition Loan or, if not specified therein, prescribed by the Committee, in
its discretion. In the event that property other than, or in addition to,
Financed Shares shall be held in the Loan Repayment Account and pledged as
collateral for a Share Acquisition Loan, then the property to be released
pursuant to this section 6.4 shall be property having a Fair Market Value
determined by applying the method to be used to the Fair Market Value of all
property pledged as collateral for such Share Acquisition Loan; provided,
however, that no property other than Financed Shares shall be released pursuant
to this section 6.4 unless all Financed Shares have previously been released.
Section 6.5 Restrictions on Financed Shares.
-------------------------------
Except to the extent required under any applicable law, rule or
regulation, no Shares purchased with the proceeds of a Share Acquisition Loan
shall be subject to a put, call or other option, or to any buy-sell or similar
arrangement, while held by the Trustee or when distributed from the Plan. The
provisions of this section 6.5 shall continue to apply in the event that this
Plan shall cease to be an employee stock ownership plan, within the meaning of
section 4975(e)(7) of the Code.
<PAGE>
-18-
Article VII
-----------
Allocation of Contributions
---------------------------
Section 7.1 Allocation Among Eligible Participants.
--------------------------------------
Subject to the limitations of Article VIII, ESOP Contributions for a
Plan Year made in accordance with section 5.3 and Financed Shares and other
property that are released from the Loan Repayment Account for a Plan Year in
accordance with section 6.4 shall be allocated among the Eligible Participants
for such Plan Year, in the manner provided in this Article VII.
Section 7.2 Allocation of Released Shares or Other Property.
-----------------------------------------------
Subject to the limitations of Article VIII, in the event that Financed
Shares or other property are released from the Loan Repayment Account for a Plan
Year in accordance with section 6.4, such released Shares or other property
shall be allocated among the Accounts of the Eligible Participants for the Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation Compensation of all Eligible Participants for
the portion of the Plan Year during which they were Participants.
Section 7.3 Allocation of ESOP Contributions.
--------------------------------
Subject to the limitations of Article VIII, in the event that the
Employer makes an ESOP Contribution for a Plan Year, such ESOP Contribution
shall be allocated among the Accounts of the Eligible Participants for such Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation Compensation of all Eligible Participants for
the portion of such Plan Year during which they were Eligible Participants.
Article VIII
------------
Limitations on Allocations
--------------------------
Section 8.1 Optional Limitations on Allocations of Contributions.
----------------------------------------------------
If, for any Plan Year, the application of sections 7.2 and 7.3 would
result in more than one-third of the number of Shares or of the amount of money
or property to be allocated thereunder being allocated to the Accounts of
Eligible Participants for such Plan Year who are also
<PAGE>
-19-
Highly Compensated Employees for such Plan Year, then the Committee may, but
shall not be required to, direct that this section 8.1 shall apply in lieu of
sections 7.2 and 7.3. If the Committee gives such a direction, then the
Committee shall impose a maximum dollar limitation on the amount of Allocation
Compensation that may be taken into account for each Eligible Participant. The
dollar limitation which shall be imposed shall be the limitation which produces
the result that the aggregate Allocation Compensation taken into account for
Eligible Participants who are Highly Compensated Employees, constitutes exactly
one-third of the aggregate Allocation Compensation taken into account for all
Eligible Participants. In determining whether more than one-third of the number
of Shares or of the amount of money or property to be allocated under the Plan
for a Plan Year would be allocated to the Highly Compensated Employees, any
allocation to be made to the Account of a Family Member of a Highly Compensated
Employee who is either a Five Percent Owner or one of the ten Highly Compensated
Employees with the highest Total Compensation, shall be treated as an allocation
to such Highly Compensated Employee.
Section 8.2 General Limitations on Contributions.
------------------------------------
(a) No amount shall be allocated to a Participant's Account under this
Plan for any Limitation Year, to the extent that such an allocation would result
in an Annual Addition of an amount greater than the lesser of (i) $30,000 (or
such other amount as is permissible under section 415(c)(1)(A) of the Code, or
(ii) 25% of the Participant's Total Compensation for such Limitation Year.
(b) In the case of a Participant who may be entitled to benefits under
any qualified defined benefit plan (whether or not terminated) now in effect or
ever maintained by the Employer, such Participant's Annual Additions under this
Plan shall, in addition to the limitations provided under section 8.2(a), be
further limited so that the sum of the Participant's Defined Contribution Plan
Fraction plus his Defined Benefit Plan Fraction does not exceed 1.0 for any
Limitation Year; provided, however, that for any Limitation Year ending prior to
January 1, 1983, the sum of his Defined Contribution Plan Fraction plus his
Defined Benefit Plan Fraction shall not exceed 1.4; and provided further, that
this limitation shall only apply if and to the extent that the benefits under
the Employer's Retirement Plan or any other defined contribution plan are not
limited so that such sum is not exceeded.
(c) For purposes of this section 8.2, the following special
definitions shall apply:
(i) Annual Addition means the sum of the following amounts allocated
---------------
on behalf of a Participant for a Limitation Year:
(A) all contributions by the Employer (including contributions
made under a salary reduction agreement pursuant to sections 401(k),
408(k) or 403(b) of the Code) under any qualified defined contribution
plan (other than this Plan) maintained by the Employer, as well as the
Participant's allocable share, if any, of any forfeitures under such
plans; plus
<PAGE>
-20-
(B) (I) for Limitation Years that began prior to January 1, 1987, the
lesser of (1) 50% of the Participant's voluntary nondeductible
contributions to all qualified defined contribution plans maintained by the
Employer, or (2) the amount by which the Participant's nondeductible
voluntary contributions to such plans exceeds 6% of his Total Compensation;
and (II) for Limitation Years that begin after December 31, 1986, all of
the Par ticipant's voluntary nondeductible contributions to such plans;
plus
(C) all ESOP Contributions under this Plan; plus
(D) except as hereinafter provided in this section 8.2(c)(i), a
portion of the Employer's Loan Repayment Contributions to the Plan for such
Limitation Year which bears the same proportion to the total amount of the
Employer's Loan Repayment Contributions for the Limitation Year that the
number of Shares (or the Fair Market Value of property other than Shares)
allocated to the Participant's Account pursuant to section 7.2 or 8.1,
whichever is applicable, bears to the aggregate number of Shares (or Fair
Market Value of property other than Shares) so allocated to all
Participants for such Limitation Year.
Notwithstanding section 8.2(c)(i)(D), if, for any Limitation Year, the aggregate
amount of ESOP Contributions allocated to the Accounts of the individuals who
are Highly Compensated Employees for such Limitation Year, when added to such
Highly Compensated Employees' allocable share of any Loan Repayment
Contributions for such Limitation Year, does not exceed one-third of the total
of all ESOP Contributions and Loan Repayment Contributions for such Limitation
Year, then that portion, if any, of the Loan Repayment Contributions for such
Limitation Year that is applied to the payment of interest on a Share
Acquisition Loan shall not be included as an Annual Addition. In determining
whether more than one-third of the number of Shares or of the amount of money or
property to be allocated under the Plan for a Plan Year would be allocated to
the Highly Compensated Employees, any allocation to be made to the Account of a
Family Member of a Highly Compensated Employee who is either a Five Percent
Owner or one of the ten Highly Compensated Employees with the highest Total
Compensation, shall be treated as an allocation to such Highly Compensated
Employee. In no event shall any Financed Shares, any dividends or other earnings
thereon, any proceeds of the sale thereof or any portion of the value of the
foregoing be included as an Annual Addition.
(ii) Employer means Mystic Financial, Inc. and all members of a
--------
controlled group of corporations, as defined in section 414(b) of the Code, as
modified by section 415(h) of the Code, all commonly controlled trades or
businesses, as defined in section 414(c) of the Code, as modified by section
415(h) of the Code, all affiliated service groups, as defined in section 414(m)
of the Code, of which Mystic Financial, Inc. is a member, as well as any leasing
organization, as defined
<PAGE>
-21-
in section 18.8, that employs any person who is considered an employee
under section 18.8 and any other entity that is required to be aggregated
with the Employer pursuant to regulations under section 414(o) of the Code.
(iii) Defined Benefit Plan Fraction means, for any Participant for
-----------------------------
any Limitation Year, a fraction, the numerator of which is the Projected
Annual Benefit (determined as of the end of such Limitation Year) of the
Participant under any qualified defined benefit plans (whether or not
terminated) maintained by the Employer for the current and all prior
Limitation Years, and the denominator of which is as follows: (A) for
Limitation Years ending prior to January 1, 1983, the lesser of (I) the
dollar limitation in effect under section 415(b)(1) (A) of the Code for
such Limitation Year, or (II) the amount which may be taken into account
under section 415(b)(1)(B) of the Code with respect to such Participant for
such Limitation Year; and (B) in all other cases, the lesser of (I)
(except as provided in section 17.8(b) for a Top Heavy Plan Year) the
product of 1.25 multiplied by the dollar limitation in effect under section
415(b)(1)(A) of the Code for such Limitation Year, or (II) the product of
1.4 multiplied by the amount which may be taken into account under section
415(b)(1)(B) of the Code with respect to such Participant for such
Limitation Year.
(iv) Defined Contribution Plan Fraction means, for any Participant
----------------------------------
for any Limitation Year, a fraction (A) the numerator of which is the sum
of such Participant's Annual Additions (determined as of the end of such
Limitation Year) under this Plan and any other qualified defined
contribution plans (whether or not terminated) maintained by the Employer
for the current and all prior Limitation Years, and (B) the denominator of
which is as follows: (I) for Limitation Years ending prior to January 1,
1983, the sum of the lesser of the following amounts for such Limitation
Year and for each prior Limitation Year during which such Participant was
employed by the Employer: (1) the Maximum Permissible Amount for such
Limitation Year (without regard to section 415(c)(6) of the Code), or (2)
the amount which may be taken into account under section 415(c)(1)(B) of
the Code with respect to such Participant for such Limitation Year; and
(II) in all other cases, the sum of the lesser of the following amounts for
such Limitation Year and for each prior Limitation during which such
Participant was employed by the Employer: (1) (except as provided in
section 17.8(b) for a Top Heavy Plan Year) the product of 1.25 multiplied
by the Maximum Permissible Amount for such Limitation Year (determined
without regard to section 415(c)(6) of the Code), or (2) the product of 1.4
multiplied by the amount which may be taken into account under section
415(c)(1)(B) of the Code (or section 415(c)(7) of the Code, if applicable)
with respect to such Participant for such Limitation Year; provided,
however, that the Plan Administrator may, at his election, adopt the
transition rule set forth in section 415(e)(6) of the Code in making the
computation set forth in this section 8.2(c)(iv). If the sum of a
Participant's Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction exceeded 1.0 as of September 30, 1983, then such Participant's
Defined Contribution Plan Fraction shall be determined under
<PAGE>
-22-
regulations to be prescribed by the Secretary of the Treasury so that the
sum of the fractions does not exceed 1.0.
(v) Limitation Year means the Plan Year; provided, however, that if
---------------
the Employer changes the Limitation Year, the new Limitation Year shall
begin on a date within the Limitation Year in which the amendment is made.
(vi) Maximum Permissible Amount means (A) $25,000 (or such higher
--------------------------
amount as may be permitted under section 415(d) of the Code because of cost
of living increases) for Limitation Years beginning prior to January 1,
1983, and (B) the greater of (I) $30,000, or (II) 25% of the dollar
limitation in effect under section 415(b)(1)(A) of the Code for Limitation
Years beginning on or after January 1, 1983.
(vii) Projected Annual Benefit means a Participant's annual
------------------------
retirement benefit (adjusted to the actuarial equivalent of a straight life
annuity if expressed in a form other than a straight life or qualified
joint and survivor annuity) under any qualified defined benefit plan
maintained by the Employer, whether or not terminated, assuming that the
Participant will continue employment until the later of current age or
normal retirement age under such plan, and that the Participant's Total
Compensation for the Limitation Year and all other relevant factors used to
determine benefits under such plan will remain constant for all future
Limitation Years.
(d) When a Participant's Annual Addition to this Plan must be
reduced to satisfy the limitations of section 8.2(a) or (b), such reduction
shall be applied first to ESOP Contributions; and second, if necessary, to
Shares allocated as a result of a Loan Repayment Contribution which are included
as an Annual Addition in such order as shall result in the smallest reduction in
the number of Shares allocable to the Participant's Account. The amount by which
any Participant's Annual Addition to this Plan is reduced shall be allocated in
accordance with Articles V and VII as a contribution by the Employer in the next
succeeding Limitation Year.
(e) Prior to determining a Participant's actual Total Compensation
for a Limitation Year, the Employer may determine the limitations under this
section 8.2 for a Participant on the basis of a reasonable estimation of the
Participant's Total Compensation for the Limitation Year that is uniformly
determined for all Participants who are similarly situated. As soon as it is
administratively feasible after the end of the Limitation Year, the limitations
of this section 8.2 shall be determined on the basis of the Participant's actual
Total Compensation for the Limitation Year.
<PAGE>
-23-
ARTICLE IX
----------
VESTING
-------
Section 9.1 Vesting.
-------
Subject to the provisions of section 9.2, the balance credited to each
Employee's Account shall become vested in accordance with the following
schedule:
<TABLE>
<CAPTION>
Years of Vested
Vesting Service Percentage
--------------- ----------
<S> <C>
less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
</TABLE>
Section 9.2 Vesting on Death, Disability, Retirement or Change in
-----------------------------------------------------
Control.
- -------
Any previously unvested portion of the remainder of the balance
credited to the Account of a Participant or of a person who is a Former
Participant solely because he is excluded from participation under section
2.1(b) shall become fully vested in him immediately upon attainment of age 65,
or, if earlier, upon the termination of his participation by reason of death,
Disability, Retirement or upon the occurrence of a Change in Control of the
Employer.
Section 9.3 Forfeitures on Termination of Employment.
----------------------------------------
Upon the termination of employment of a Participant or Former
Participant for any reason other than death, Disability, Retirement, that
portion of the balance credited to his Account which is not vested at the date
of such termination shall be forfeited as of the last Valuation Date for the
Plan Year in which such termination of employment occurs. The proceeds of such
forfeitures, less amounts, if any, required to be credited because of re-
employment pursuant to section 9.4, shall be treated as Forfeitures and shall be
disposed of as provided in section 9.5.
Section 9.4 Amounts Credited Upon Re-Employment.
-----------------------------------
If an Employee forfeited any amount of the balance credited to his
Account upon his termination of employment with the Employer, and is re-employed
prior to the occurrence of five consecutive One-Year Breaks in Service, then:
<PAGE>
-24-
(i) an amount equal to the Fair Market Value of the Shares forfeited,
determined as of the date of forfeiture; and
(ii) the amount credited to his General Investment Account that was
forfeited, determined as of the date of forfeiture;
shall be credited back to his Account from the proceeds of forfeitures which are
redeemed pursuant to section 9.3 during the Plan Year in which he is re-
employed, unless such proceeds are insufficient, in which case the Employer
shall make an additional contribution in the amount of such deficiency.
Section 9.5 Allocation of Forfeitures.
-------------------------
Any Forfeitures that occur during a Plan Year shall be used to reduce
the contributions required of the Employer under the Plan and shall be treated
as Loan Repayment Contributions and ESOP Contributions in the proportions
designated by the Committee in accordance with Article V.
ARTICLE X
---------
THE TRUST FUND
--------------
Section 10.1 The Trust Fund.
--------------
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall vest such powers
in the Trustee as to invest ment, control and disbursement of the Trust Fund,
and such other provisions not inconsistent with the Plan, including provision
for the appointment of one or more "investment managers" within the meaning of
section 3(38) of ERISA to manage and control (including acquiring and disposing
of) all or any of the assets of the Trust Fund, as the Board may from time to
time authorize. Except as required by ERISA, no bond or other security shall be
required of any Trustee at any time in office.
Section 10.2 Investments.
-----------
Except to the extent provided to the contrary in section 10.3, the
Trust Fund shall be invested in:
(a) Shares;
<PAGE>
-25-
(b) such Investment Funds as may be established from time to time by
the Committee; and
(c) such other investments as may be permitted under the Trust
Agreement;
in such proportions as shall be determined by the Committee or, if so provided
under the Trust Agreement, as directed by one or more investment managers or by
the Trustee, in its discretion; provided, however, that the investments of the
Trust Fund shall consist primarily of Shares. Notwithstanding the immediately
preceding sentence, the Trustee may temporarily invest the Trust Fund in short-
term obligations of, or guaranteed by, the United States Government or an agency
thereof, or may retain uninvested, or sell investments to provide, amounts of
cash required for purposes of the Plan.
Section 10.3 Diversification of Investments.
------------------------------
(a) Notwithstanding section 10.2, each Qualified Participant may:
(i) during the first 90 days of each of the first four Plan Years to
begin after the Plan Year in which he first becomes a Qualified
Participant, elect that such percentage of the balance credited to his
Account as he may specify, but in no event more than 25% of the balance
credited to his Account, be invested in one or more of the Investment
Funds; and
(ii) during the first 90 days of the fifth Plan Year to begin after
the Plan Year in which he first becomes a Qualified Participant or of any
Plan Year thereafter, elect that such percentage of the balance credited to
his Account as he may specify, but in no event more than 50% of the balance
credited to his Account, be invested in one or more of the Investment
Funds.
For purposes of an election under this section 10.3, the balance credited to a
Participant's Account shall be the balance credited to his Account determined as
of the last Valuation Date to occur in the Plan Year immediately preceding the
Plan Year in which such election is made.
(b) An election made under section 10.3(a) shall be made in writing,
in the form and manner prescribed by the Plan Administrator, and shall be filed
with the Plan Administrator during the election period specified in section
10.3(a). As soon as is practicable following the end of the election period
during which such election is made, the Plan Administrator shall take such
actions as are necessary to cause the specified percentage of the balance
credited to the Account of the Qualified Participant making the election to be
invested in the specified Investment Funds. Any investments made pursuant to
this section 10.3 shall be specifically allocated to the General Investment
Account of the Qualified Participant for whom they are made.
<PAGE>
-26-
(c) An election made under section 10.3(a) may be changed or revoked
at any time during the election period described in section 10.3(a) during which
it is initially made, during any subsequent election period described in section
10.3(a) or, upon at least 15 days' advance written notice given in the form and
manner prescribed by the Plan Administrator, as of the first day of any calendar
quarter of any Plan Year that begins after the Participant first becomes a
Qualified Participant. In no event, however, shall any election under this
section 10.3 result in more than 25% of the balance credited to the
Participant's Account being invested at the direction of the Participant, if
such election is made during a Plan Year to which section 10.3(a)(i) applies, or
result in more than 50% of the balance credited to the Participant's Account
being invested at the direction of the Participant, if such election is made
during the Plan Year to which section 10.3(a)(ii) applies or thereafter.
Section 10.4 Use of Commingled Trust Funds.
-----------------------------
Subject to the provisions of the Trust Agreement, amounts held in the
Trust Fund may be invested in:
(a) any commingled or group trust fund described in section 401(a) of
the Code and exempt under section 501(a) of the Code; or
(b) any common trust fund exempt under section 584 of the Code
maintained exclusively for the collective investment of the assets of
trusts that are exempt under section 501(a) of the Code;
provided that the trustee of such commingled, group or common trust fund is a
bank or trust company.
Section 10.5 Management and Control of Assets.
--------------------------------
All assets of the Plan shall be held by the Trustee in trust for the
exclusive benefit of Participants, Former Participants and their Beneficiaries.
No part of the corpus or income of the Trust Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, Former
Participants and their Beneficiaries, and for defraying reasonable
administrative expenses of the Plan and Trust Fund. No person shall have any
interest in or right to any part of the earnings of the Trust Fund, or any
rights in, to or under the Trust Fund or any part of its assets, except to the
extent expressly provided in the Plan.
<PAGE>
-27-
ARTICLE XI
----------
VALUATION OF INTERESTS IN THE TRUST FUND
----------------------------------------
Section 11.1 Establishment of Investment Accounts.
------------------------------------
The Plan Administrator shall establish, or cause to be established,
for each person for whom an Account is maintained a Share Investment Account and
a General Investment Account. Such Share Investment Accounts and General
Investment Accounts shall be maintained in accordance with this Article XI.
Section 11.2 Share Investment Accounts.
-------------------------
The Share Investment Account established for a person in accordance
with section 11.1 shall be credited with: (a) all Shares allocated to such
person's Account; (b) all Shares purchased with amounts of money or property
allocated to such person's Account; (c) all dividends paid in the form of Shares
with respect to Shares credited to his Account; and (d) all Shares purchased
with amounts credited to such person's General Investment Account. Such Share
Investment Account shall be charged with all Shares that are sold or exchanged
to acquire other investments or to provide cash and with all Shares that are
distributed in kind.
Section 11.3 General Investment Accounts.
---------------------------
The General Investment Account that is established for a person in
accordance with section 11.1 shall be credited with: (a) all amounts, other
than Shares, allocated to such person's Account; (b) all dividends paid in a
form other than Shares with respect to Shares credited to such person's Share
Investment Account; (c) the proceeds of any sale of Shares credited to such
person's Share Investment Account; and (d) any earnings attributable to amounts
credited to such person's General Investment Account. Such General Investment
Account shall be charged with all amounts credited thereto that are applied to
the purchase of Shares, any losses or depreciation attributable to amounts
credited thereto, any expenses allocable thereto and any distributions of
amounts credited thereto.
Section 11.4 Valuation of Investment Accounts.
--------------------------------
(a) The Plan Administrator shall determine, or cause to be determined,
the aggregate value of each person's Share Investment Account as of each
Valuation Date by multiplying the number of Shares credited to such Share
Investment Account on such Valuation Date by the Fair Market Value of a Share on
such Valuation Date.
<PAGE>
-28-
(b) As of each Valuation Date, the Accounts of each Participant shall
be separately adjusted to reflect their proportionate share of any appreciation
or depreciation in the fair market value of the Investment Funds, any income
earned by the Investment Funds and any expenses incurred by the Investment
Funds, as well as any contributions, withdrawals or distributions and investment
transfers not posted as of the last Valuation Date.
Section 11.5 Annual Statements.
-----------------
There shall be furnished, by mail or otherwise, at least once in each
Plan Year to each person who would then be entitled to receive all or part of
the balance credited to any Account if the Plan were then terminated, a
statement of his interest in the Plan as of such date as shall be selected by
the Plan Administrator, which statement shall be deemed to have been accepted as
correct and be binding on such person unless the Plan Administrator receives
written notice to the contrary within 30 days after the statement is mailed or
furnished to such person.
ARTICLE XII
-----------
SHARES
------
Section 12.1 Specific Allocation of Shares.
-----------------------------
All Shares purchased under the Plan shall be specifically allocated to
the Share Investment Accounts of Participants, Former Participants and their
Beneficiaries in accordance with section 11.2, with the exception of Financed
Shares, which shall be allocated to the Loan Repayment Account.
Section 12.2 Dividends.
---------
(a) Dividends paid with respect to Shares held under the Plan shall be
credited to the Loan Repayment Account, if paid with respect to Financed Shares.
Such dividends shall be: (i) applied to the payment of principal and accrued
interest with respect to any Share Acquisition Loan, if paid in cash; or (ii)
held in the Loan Repayment Account as Financed Shares for release in accordance
with section 6.4, if paid in the form of Shares.
(b) Dividends paid with respect to Shares allocated to a person's
Share Investment Account shall be credited to such person's Share Investment
Account. Cash dividends credited to a person's General Investment Account shall
be, at the direction of the Board, either: (i) held in such General Investment
Account and invested in accordance with sections 10.2 and 11.3; (ii) distributed
immediately to such person; (iii) distributed to such person within 90 days of
the close of the Plan Year in which such dividends were paid; or (iv) used to
make payments
<PAGE>
-29-
of principal or interest on a Share Acquisition Loan; provided, however, that
the Fair Market Value of Financed Shares released from the Loan Repayment
Account equals or exceeds the amount of the dividend.
Section 12.3 Voting Rights.
-------------
(a) Each person shall direct the manner in which all voting rights
appurtenant to Shares allocated to his Share Investment Account will be
exercised, provided that such Shares were allocated to his Share Investment
Account as of the applicable record date. Such person shall, for such purpose,
be deemed a "named fiduciary" within the meaning of section 402(a)(2) of ERISA.
Such a direction shall be given by completing and filing with the inspector of
elections, the Trustee or such other person who shall be independent of the
Employer as the Committee shall designate, at least 10 days prior to the date of
the meeting of holders of Shares at which such voting rights will be exercised,
a written direction in the form and manner prescribed by the Committee. The
inspector of elections, the Trustee or such other person designated by the
Committee shall tabulate the directions given on a strictly confidential basis,
and shall provide the Committee with only the final results of the tabulation.
The final results of the tabulation shall be followed by the Committee in
directing the Trustee as to the manner in which such voting rights shall be
exercised. The Plan Administrator shall make a reasonable effort to furnish, or
cause to be furnished, to each person for whom a Share Investment Account is
maintained all annual reports, proxy materials and other information known by
the Plan Administrator to have been furnished by the issuer of the Shares, or by
any solicitor of proxies, to the holders of Shares.
(b) To the extent that any person shall fail to give instructions
with respect to the exercise of voting rights appurtenant to Shares allocated to
his Share Investment Account:
(i) the Trustee shall, with respect to each matter to be voted upon:
(A) cast a number of affirmative votes equal to the product of (I) the
number of allocated Shares for which no written instructions have been
given, multiplied by (II) a fraction, the numerator of which is the number
of allocated Shares for which affirmative votes will be cast in accordance
with written instructions given as provided in section 12.3(a) and the
denominator of which is the aggregate number of affirmative and negative
votes which will be cast in accordance with written instructions given as
aforesaid, and (B) cast a number of negative votes equal to the excess (if
any) of (I) the number of allocated Shares for which no written
instructions have been given over (II) the number of affirmative votes
being cast with respect to such allocated Shares pursuant to section
12.3(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, vote the allocated Shares for which no written
instructions have been given in the manner described in section 12.3(b)(i),
it shall vote such Shares in such manner as it, in its discretion, may
determine to be in the best interests of the persons to whose Share
Investment Accounts such Shares have been allocated.
<PAGE>
-30-
(c) (i) The voting rights appurtenant to Financed Shares shall be
exercised as follows with respect to each matter as to which holders of Shares
may vote:
(A) a number of votes equal to the product of (I) the total number of
votes appurtenant to Financed Shares allocated to the Loan Repayment
Account on the applicable record date; multiplied by (II) a fraction, the
numerator of which is the total number of affirmative votes cast by
Participants, Former Participants and the Beneficiaries of deceased Former
Participants with respect to such matter pursuant to section 12.3(a) and
the denominator of which is the total number of affirmative and negative
votes cast by Participants, Former Participants and the Beneficiaries of
deceased Former Participants, shall be cast in the affirmative; and
(B) a number of votes equal to the excess of (I) the total number of
votes appurtenant to Financed Shares allocated to the Loan Repayment
Account on the applicable record date, over (II) the number of affirmative
votes cast pursuant to section 12.3(c)(i)(A) shall be cast in the negative.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(i) shall be applied separately with respect to each class
of Shares.
(ii) If voting rights are to be exercised with respect to Financed
Shares as provided in section 12.3(c)(i)(A) and (B) at a time when there are no
Shares allocated to the Share Investment Accounts of Participants, Former
Participants and the Beneficiaries of deceased Former Participants, then the
voting rights appurtenant to Financed Shares shall be exercised as follows with
respect to each matter as to which holders of Shares may vote:
(A) Each person who is a Participant on the applicable record date
and who was a Participant on the last day of the Plan Year ending on or
immediately prior to such record date will be granted a number of votes
equal to the quotient, rounded to the nearest integral number, of (I) such
Participant's Allocation Compensation for the Plan Year ending on or
immediately prior to such record date (or for the portion of such Plan Year
during which he was a Participant); divided by (II) $1,000.00; and
(B) a number of votes equal to the product of (I) the total number of
Financed Shares allocated to the Loan Repayment Account on the applicable
record date; multiplied by (II) a fraction, the numerator of which is the
total number of votes that are cast in the affirmative with respect to such
matter pursuant to section 12.3(c)(ii)(A) and the denominator of which is
the total number of votes that are cast either in the affirmative or in the
negative with respect to such matter pursuant to section 12.3(c)(ii)(A),
shall be cast in the affirmative; and
(C) a number of votes equal to the excess of (I) the total number of
Financed Shares allocated to the Loan Repayment Account on the applicable
record
<PAGE>
-31-
date, over (II) the number of affirmative votes cast with respect to such
matter pursuant to section 12.3(c)(ii)(B), shall be cast in the negative.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(ii) shall be applied separately with respect to each class
of Shares.
Section 12.4 Tender Offers.
-------------
(a) Each person shall direct whether Shares allocated to his Share
Investment Account will be delivered in response to any Tender Offer. Such
person shall, for such purpose, be deemed a "named fiduciary" within the meaning
of section 402(a)(2) of ERISA. Such a direc tion shall be given by completing
and filing with the Trustee or such other person who shall be independent of the
Employer as the Committee shall designate, at least 10 days prior to the latest
date for exercising a right to deliver Shares pursuant to such Tender Offer, a
written direction in the form and manner prescribed by the Committee. The
Trustee or other person designated by the Committee shall tabulate the
directions given on a strictly confidential basis, and shall provide the
Committee with only the final results of the tabulation. The final results of
the tabulation shall be followed by the Committee in directing the number of
Shares to be delivered. The Plan Administrator shall make a reasonable effort
to furnish, or cause to be furnished, to each person for whom a Share Investment
Account is maintained, all information known by the Plan Administrator to have
been furnished by the issuer or by or on behalf of any person making such Tender
Offer, to the holders of Shares in connection with such Tender Offer.
(b) To the extent that any person shall fail to give instructions
with respect to Shares allocated to his Share Investment Account:
(i) the Trustee shall (A) tender or otherwise offer for purchase,
exchange or redemption a number of such Shares equal to the product of (I)
the number of allocated Shares for which no written instructions have been
given, multiplied by (II) a fraction, the numerator of which is the number
of allocated Shares tendered or otherwise offered for purchase, exchange or
redemption in accordance with written instructions given as provided in
section 12.4(a) and the denominator of which is the aggregate number of
allocated Shares for which written instructions have been given as
aforesaid, and (B) withhold a number of Shares equal to the excess (if any)
of (I) the number of allocated Shares for which no written instructions
have been given over (II) the number of Shares being tendered or otherwise
offered pursuant to section 12.4(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, exercise the tender or other rights appurtenant to
allocated Shares for which no written instructions have been given in the
manner described in section 12.4(b)(i), it shall tender, or otherwise
offer, or withhold such Shares in such manner as it, in its discretion, may
determine to be in the best interests of the persons to whose Share
Investment Accounts such Shares have been allocated.
<PAGE>
-32-
(c) In the case of any Tender Offer, any Financed Shares held in the
Loan Repayment Account shall be dealt with as follows:
(i) If such Tender Offer occurs at a time when there are no Shares
allocated to the Share Investment Accounts of Participants, Former
Participants and the Beneficiaries of deceased Former Participants, then
the disposition of the Financed Shares shall be determined as follows:
(A) each person who is a Participant on the applicable record
date and who was a Participant on the last day of the Plan Year ending
on or immediately prior to such record date will be granted a number
of tender rights equal to the quotient, rounded to the nearest
integral number, of (I) such Participant's Allocation Compensation for
the Plan Year ending on or immediately prior to such record date (or
for the portion of such Plan Year during which he was a Participant),
divided by (II) $1,000.00; and
(B) on the last day for delivering Shares or otherwise responding
to such Tender Offer, a number of Shares equal to the product of (I)
the total number of Financed Shares allocated to the Loan Repayment
Account on the last day of the effective period of such Tender Offer;
multiplied by (II) a fraction, the numerator of which is the total
number of tender rights exercised in favor of the delivery of Shares
in response to the Tender Offer pursuant to section 12.4(c)(i)(A) and
the denominator of which is the total number of tender rights that are
exercisable in response to the Tender Offer pursuant to section
12.4(c)(i)(A), shall be delivered in response to the Tender Offer; and
(C) a number of Shares equal to the excess of (I) the total
number of Financed Shares allocated to the Loan Repayment Account on
the last day of the effective period of such Tender Offer; over (II)
the number of Shares to be delivered in response to the Tender Offer
pursuant to section 12.4(c)(i)(B), shall be withheld from delivery.
(ii) If such Tender Offer occurs at a time when the voting rights
appurtenant to such Financed Shares are to be exercised in accordance with
section 12.3(c)(i), then:
(A) on the last day for delivering Shares or otherwise responding
to such Tender Offer, a number of Financed Shares equal to the product
of (I) the total number of Financed Shares allocated to the Loan
Repayment Account on the last day of the effective period of such
Tender Offer; multi plied by (II) a fraction, the numerator of which
is the total number of Shares delivered from the Share Investment
Accounts of Participants, Former Participants and the Beneficiaries of
deceased Former Participants in response to such Tender Offer pursuant
to section 12.4(a), and the deno-
<PAGE>
-33-
minator of which is the total number of Shares allocated to the Share
Investment Accounts of Participants, Former Participants and
Beneficiaries of deceased Former Participants immediately prior to the
last day for delivering Shares or otherwise responding to such Tender
Offer, shall be delivered; and
(B) a number of Financed Shares equal to the excess of (I) the
total number of Financed Shares allocated to the Loan Repayment
Account on the last day for delivering Shares or otherwise responding
to such Tender Offer; over (II) the number of Financed Shares to be
delivered pursuant to section 12.4(c)(ii)(A), shall be withheld from
delivery.
To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.4(c) shall be applied separately with respect to each class of
Shares.
ARTICLE XIII
------------
PAYMENT OF BENEFITS
-------------------
Section 13.1 In General.
----------
The balance credited to a Participant's or Former Participant's
Account under the Plan shall be paid only at the times, to the extent, in the
manner and to the persons provided in this Article XIII.
Section 13.2 Designation of Beneficiaries.
----------------------------
(a) Subject to section 13.2(b), any person entitled to a benefit under
the Plan may designate a Beneficiary to receive any amount to which he is
entitled that remains undistributed on the date of his death. Such person shall
designate his Beneficiary (and may change or revoke any such designation) in
writing in the form and manner prescribed by the Plan Administrator. Such
designation, and any change or revocation thereof, shall be effective only if
received by the Plan Administrator prior to such person's death and shall become
irrevocable upon such person's death.
(b) A Participant or Former Participant who is married shall
automatically be deemed to have designated his spouse as his Beneficiary,
unless, prior to the time such designation would, under section 13.2(a), become
irrevocable:
(i) the Participant or Former Participant designates an additional or
a different Beneficiary in accordance with this section 13.2; and
<PAGE>
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(ii) (A) the spouse of such Participant or Former Participant
consents to such designation in a writing that acknowledges the effect of
such consent and is witnessed by a Plan representative or a notary public;
or (B) the spouse of such Participant or Former Participant has previously
consented to such designation by signing a written waiver of any right to
consent to any designation made by the Participant or Former Participant,
and such waiver acknowledged the effect of the waiver and was witnessed by
a Plan representative or a notary public; or (C) it is established to the
satisfaction of a Plan representative that the consent required under
section 13.2(b)(ii)(A) may not be obtained because such spouse cannot be
located or because of other circumstances permitted under regulations
issued by the Secretary of the Treasury.
(c) In the event that a Beneficiary entitled to payments hereunder
shall die after the death of the person who designated him but prior to
receiving payment of his entire interest in the Account of the person who
designated him, then such Beneficiary's interest in the Account of such person,
or any unpaid balance thereof, shall be paid as provided in section 13.3 to the
Beneficiary who has been designated by the deceased Beneficiary, or if there is
none, to the executor or administrator of the estate of such deceased
Beneficiary, or if no such executor or administrator is appointed within such
time as the Plan Administrator, in his sole discretion, shall deem reasonable,
to such one or more of the spouse and descendants and blood relatives of such
deceased Beneficiary as the Plan Administrator may select. If a person entitled
to a benefit under the Plan and any of the Beneficiaries designated by him shall
die in such circumstances that there shall be substantial doubt as to which of
them shall have been the first to die, for all purposes of the Plan, the person
who made the Beneficiary designation shall be deemed to have survived such
Beneficiary.
(d) If no Beneficiary survives the person entitled to the benefit
under the Plan or if no Beneficiary has been designated by such person, such
benefit shall be paid to the executor or administrator of the estate of such
person, or if no such executor or administrator is appointed within such time as
the Plan Administrator, in his sole discretion, shall deem reasonable, to such
one or more of the spouse and descendants and blood relatives of such deceased
person as the Plan Administrator may select.
Section 13.3 Distributions to Participants and Former Participants.
-----------------------------------------------------
(a)(i) Subject to the provisions of section 13.7 with respect to
required minimum distributions, the vested portion of the balance credited to a
Participant's or a Former Participant's Account shall be distributed to him
commencing as of the last Valuation Date to occur in the Plan Year in which the
Participant or Former Participant terminates employment with the Employer or
attains age 65, whichever is later; unless the Participant or Former Participant
elects otherwise pursuant to section 13.3(a)(ii), and the payment, or first in a
series of payments, is actually made within sixty days following such Valuation
Date.
<PAGE>
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(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment with the Employer
terminates, elect that his vested interest in his Account be paid commencing as
of any earlier or later Valuation Date after his termination of employment, but
in no event later than the last Valuation Date to occur in the calendar year in
which the Participant or Former Participant attains age 70 1/2, in which case
the payment, or first in a series of payments, shall be made within sixty days
following such Valuation Date.
(b)(i) Subject to section 13.3(b)(ii), the vested portion of the
balance credited to the Account of a Participant or Former Participant will be
paid to him, commencing as of the Valuation Date determined under section
13.3(a), in substantially equal annual installments over a fixed period equal to
the greater of:
(A) five years; or
(B) if the vested portion of the balance credited to the Account of
the Participant or Former Participant, determined as of the Valuation Date
determined under section 13.3(a), is greater than $500,000 (or such larger
amount as may be prescribed by the Secretary of the Treasury pursuant to
section 409(o) of the Code), the sum of five years plus the lesser of (I)
five additional years, or (II) one additional year for each $100,000 (or
fraction thereof) by which the vested portion of the balance credited to
the Participant's or Former Participant's Account exceeds $500,000 (or such
larger amount as may be prescribed by the Secretary of the Treasury
pursuant to section 409(o) of the Code).
(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment terminates, elect
that the vested portion of the balance credited to his Account be paid,
commencing as of the Valuation Date determined under section 13.3(a):
(A) in substantially equal annual installments over a fixed period
not to exceed the lesser of (I) 10 years, or (II) the life expectancy of
the Participant or Former Participant, or, if his Beneficiary is a natural
person, the joint life and last survivor expectancy of the Participant or
Former Participant and his Beneficiary; or
(B) subject to section 13.4, in a lump sum payment.
(C) If any person entitled to a benefit under the Plan dies before
his entire benefit has been distributed to him, then the remainder of such
benefit shall be paid to the Beneficiary designated by him under section 13.2
either:
(i) in a lump sum distribution as of the Valuation Date next
following the date of his death, and the amount thereof shall be based upon
the vested portion of the balance credited to his Account as of such
Valuation Date; or
<PAGE>
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(ii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to section
13.3(b)(ii)(B) is in effect for him, in a lump sum distribution as of the
Valuation Date specified in such election, or, if earlier, as of the latest
Valuation Date that would permit payment to be made within five years after
the Participant's or Former Participant's death, and the amount thereof
shall be based upon the vested portion of the balance credited to his
Account as of such Valuation Date; or
(iii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to section
13.3(b)(ii)(A) is in effect for him:
(A) over the period and at the times set forth in such
election, if distribution has begun prior to the Participant's or
Former Participant's death; or
(B) commencing at the time set forth in such election and over
the period set forth in such election (or, if less, over a period
equal to the life expectancy of the Beneficiary of the deceased
Participant or Former Participant), if the deceased Participant's or
Former Participant's spouse is his Beneficiary and distribution has
not begun prior to the deceased Participant's or Former Participant's
death; or
(C) commencing on the date specified in such election (or, if
earlier, the last Valuation Date that will permit payment to begin
within one year after the deceased Participant's or Former
Participant's death) and over the period set forth in such election
(or, if less, over a period equal to the life expectancy of the
Beneficiary of the deceased Participant or Former Participant), if the
deceased Participant's or Former Participant's Beneficiary is a
natural person other than his spouse and distribution has not begun
prior to the deceased Participant's or Former Participant's death;
and the amount thereof shall be based upon the vested portion of the
balance credited to his Account as of the Valuation Dates as of which
payments are determined; or
(iv) upon written application of the Beneficiary made in such form
and manner as the Plan Administrator may prescribe, at another time or in
another manner permitted under section 13.3(a) or (b), subject to the
following limitations:
(A)(I) If such Beneficiary is a natural person other than the
spouse of the deceased Participant or Former Participant whose vested
Account is being distributed, a distribution that commences within one
year after such deceased Participant's or Former Participant's death
shall be made over a
<PAGE>
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fixed period that does not exceed the life expectancy of such Beneficiary
when distribution commences.
(II) If such Beneficiary is the spouse of the deceased
Participant or Former Participant whose vested Account is being
distributed, a distribution that commences no later than the later of: (1)
the date on which the deceased Participant or Former Participant would have
attained age 70 1/2 had he lived; or (2) the first anniversary of the death
of such deceased Participant or Former Participant; shall be made over a
fixed period that does not exceed the life expectancy of such Beneficiary
when distribution commences.
(III) In all other cases where the spouse of the deceased
Participant or Former Participant whose vested Account is being distributed
is not the Beneficiary, payment must be completed within five years after
the death of such deceased Participant or Former Participant.
(B) In cases where distribution has commenced prior to the
death of the deceased Participant or Former Participant whose vested
Account is being distributed, distribution must be completed as least as
rapidly as under the method in effect prior to such deceased Participant's
or Former Participant's death.
Section 13.4 Manner of Payment.
-----------------
(a) Subject to section 13.4(b), payments of distributions made
pursuant to section 13.3 or section 13.7 shall be paid, in accordance with the
written direction of the person requesting the payment, in whole Shares, in
cash, or in a combination of cash and whole Shares. Such written direction shall
be given in such form and manner as the Plan Administrator may prescribe. If no
such direction is given, then payment shall be made in the maximum number of
whole Shares that may be acquired with the amount of the payment, plus, if
necessary, an amount of money equal to any remaining amount of the payment that
is less than the Fair Market Value of a whole Share.
(b) No distribution of a lump sum payment shall be made in cash to the
extent that the making of such distribution, when combined with all other
distributions to be made in cash as of the same Valuation Date, would require
the sale of Shares constituting 1% or more of all outstanding Shares; provided,
however, that this section 13.4(b) shall not apply to or in respect of a
Participant or Former Participant:
(i) following such Participant's or Former Participant's termination
of employment with the Employer on account of his Retirement or Disability;
or
<PAGE>
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(ii) following such Participant's or Former Participant's 65th
birthday; or
(iii) following the death of such Participant or Former Participant.
Section 13.5 Put Options.
-----------
(a) Except as provided otherwise in section 13.5(b), each Participant
or Former Participant to whom Shares are distributed under the Plan, each
Beneficiary of a deceased Participant or Former Participant, including the
estate of a deceased Participant or Former Participant, to whom Shares are
distributed under the Plan, and each person to whom such a Participant, Former
Participant or Beneficiary gives Shares that have been distributed under the
Plan shall have the right to require the Employer to purchase from him all or
any portion of such Shares. A person shall exercise such right by delivering to
the Employer a written notice, in such form and manner as the Employer may by
written notice to such person prescribe, setting forth the number of Shares to
be purchased by the Employer, the number of the stock certificate evidencing
such person's ownership of such Shares, and the effective date of purchase.
Such notice shall be given, and the effective date of the purchase specified
therein shall be, no later than the last day of the fifteenth calendar month to
begin after the date on which the Shares to be purchased by the Employer were
distributed from the Plan. As soon as practicable following its receipt of such
notice, the Employer shall take such actions as are necessary to purchase the
Shares specified in such notice at a price per Share equal to the Fair Market
Value of a Share determined as of the effective date of the purchase.
(b) The Employer shall have no obligation to purchase any Share (i)
pursuant to a notice given, or on an effective date of purchase, after the last
day of the fifteenth calendar month to begin after the date on which such Share
was distributed from the Plan; (ii) following the earliest date on which Shares
are publicly traded on an established market; or (iii) if the Employer is a
"bank" within the meaning of section 581 of the Code and is prohibited by law
from redeeming or purchasing its own securities.
Section 13.6 Right of First Refusal.
----------------------
(a) For any period during which Shares are not publicly traded on any
established market, no person who owns Shares that were distributed from the
Plan, other than a person to whom such Shares were sold in compliance with this
section 13.6, shall sell such Shares to any person other than the Employer
without first offering to sell such Shares to the Employer (or person designated
by the Employer) in accordance with this section 13.6.
(b) In the event that a person to whom this section 13.6 applies shall
receive and desire to accept from a person other than the Employer a bona fide
offer to purchase Shares to which this section 13.6 applies, he shall furnish to
the Employer a written notice which shall:
<PAGE>
-39-
(i) include a copy of such offer to purchase;
(ii) offer to sell to the Employer the Shares subject to such offer
to purchase at a price per Share that is equal to the greater of:
(A) the price per Share specified in such offer to purchase;
or
(B) the Fair Market Value of a Share as of the date of
purchase;
and otherwise upon the same terms and conditions as those specified in such
offer to purchase; and
(iii) include an indication of his intention to accept such offer to
purchase if the Employer does not accept his offer to sell.
(c) The Employer shall have the right to purchase the Shares
covered by the offer to sell contained in a notice given pursuant to section
13.6(b), on the terms and conditions specified in such notice, by written notice
given to the party making the offer to sell not later than the fourteenth day
after the notice described in section 13.6(b) is given. If the Employer does not
give such a notice during the prescribed fourteen day period, then the person
owning such Shares may accept the offer to purchase described in the notice.
Section 13.7 Minimum Required Distributions.
------------------------------
(a) Required minimum distributions of a Participant's or Former
Participant's Account shall commence no later than:
(i) if the Participant or Former Participant attained age 70 1/2
prior to January 1, 1988 and was not a Five Percent Owner at any time
during the Plan Year ending in the calendar year in which he attained age
70 1/2, during any of the four preceding Plan Years or during any
subsequent years, the later of (A) the calendar year in which he attains or
attained age 70 1/2 or (B) the calendar year in which he terminates
employment with the Employer; or
(ii) if the Participant or Former Participant attained age 70 1/2
prior to January 1, 1988 and is or was a Five Percent Owner at any time
during the Plan Year ending in the calendar year in which he attained age
70 1/2, or during any of the four preceding Plan Years or during any
subsequent years, the later of (A) the calendar year in which he attains
age 70 1/2 or (B) the calendar year in which he first becomes a Five
Percent Owner; or
(iii) in all other cases, the calendar year in which the Participant
or Former Participant attains age 70 1/2.
<PAGE>
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(b) The required minimum distributions contemplated by section
13.7(a) shall be made as follows:
(i) The minimum required distribution to be made for the calendar
year for which the first minimum distribution is required shall be no later
than April 1st of the immediately following calendar year and shall be
equal to the quotient obtained by dividing (A) the vested balance credited
to the Participant's or Former Participant's Account as of the last
Valuation Date to occur in the calendar year immediately preceding the
calendar year in which the first minimum distribution is required (adjusted
to account for any additions thereto or subtractions therefrom after such
Valuation Date but on or before December 31st of such calendar year); by
(B) the Participant's or Former Participant's life expectancy (or, if his
Beneficiary is a natural person, the joint life and last survivor
expectancy of him and his Beneficiary); and
(ii) the minimum required distribution to be made for each calendar
year following the calendar year for which the first minimum distribution
is required shall be made no later than December 31st of the calendar year
for which the distribution is required and shall be equal to the quotient
obtained by dividing (A) the vested balance credited to the Participant's
or Former Participant's Account as of the last Valuation Date to occur in
the calendar year prior to the calendar year for which the distribution is
required (adjusted to account for any additions thereto or subtractions
therefrom after such Valuation Date but on or before December 31st of such
calendar year and, in the case of the distribution for the calendar year
immediately following the calendar year for which the first minimum
distribution is required, reduced by any distribution for the prior
calendar year that is made in the current calendar year); by (B) the
Participant's or Former Participant's life expectancy (or, if his
Beneficiary is a natural person, the joint life and last survivor
expectancy of him and his Beneficiary).
For purposes of this section 13.7, the life expectancy of a Participant or
Former Participant (or the joint life and last survivor expectancy of a
Participant or Former Participant and his designated Beneficiary) for the
calendar year in which the Participant or Former Participant attains age 70 1/2
shall be determined on the basis of Tables V and VI, as applicable, of section
1.72-9 of the Income Tax Regulations as of the Participant's or Former
Participant's and Beneficiary's birthday in such year. Such life expectancy or
joint life and last survivor expectancy for any subsequent year shall be equal
to the excess of (1) the life expectancy or joint life and last survivor
expectancy for the year in which the Participant or Former Participant attains
age 70 1/2, over (2) the number of whole years that have elapsed since the
Participant or Former Participant attained age 70 1/2.
(c) Payment of the distributions required to be made to a Participant
or Former Participant under this section 13.7 shall be made in accordance with
section 13.4.
<PAGE>
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Section 13.8 Direct Rollover of Eligible Rollover Distributions.
--------------------------------------------------
(a) A Distributee may elect, at the time and in the manner
prescribed by the Plan Administer, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.
(b) The following rules shall apply with respect to Direct
Rollovers made pursuant to this section 13.8:
(i) A Participant may only elect to make a Direct Rollover of an
Eligible Rollover Distribution if such Eligible Rollover Distribution (when
combined with other Eligible Rollover Distributions made or to be made in
the same calendar year) is reasonably expected to be at least $200;
(ii) If a Participant elects a Direct Rollover of a portion of an
Eligible Rollover Distribution, that portion must be equal to at least
$500; and
(iii) A Participant may not divide his or her Eligible Rollover
Distribution into separate distributions to be transferred to two or more
Eligible Retirement Plans.
(c) For purposes of this section 13.8 and any other applicable
section of the Plan, the following definitions shall have the following
meanings:
(i) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
(ii) "Distributee" means an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's spouse or former spouse who is the alternate payee under a
Qualified Domestic Relations Order are considered Distributees with regard
to the interest of the spouse or former spouse.
(iii) "Eligible Retirement Plan" means an individual retirement
account described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) or the Code, an annuity plan described
in section 403(a) of the Code, or a qualified trust described in section
401(a) of the Code that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to
the current or former spouse who is the alternative payee under a Qualified
Domestic Relations Order or to a surviving spouse, an Eligible Retirement
Plan is an individual retirement account or individual retirement annuity.
(iv) "Eligible Rollover Distribution" means any distribution of all
or any portion of the balance to the credit of the Distributee, except that
an Eligible
<PAGE>
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Rollover Distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee or the
joint lives (or joint life expectancies) of the Distributee's designated
Beneficiary, or for a specified period of ten (10) years or more; any
distribution to the extent such distribution is required under section
401(a)(9) of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
Section 13.9 Valuation of Shares Upon Settlement to a Participant.
----------------------------------------------------
Notwithstanding any contrary provision in this Article XIII, in the
event that all or a portion of a payment of a distribution to a Participant is
to be made in cash, such Participant shall only be entitled to receive the
proceeds of the Shares allocated to his Account that are sold in connection with
such distribution and which are valued as of the date of such sale.
ARTICLE XIV
-----------
CHANGE IN CONTROL
-----------------
Section 14.1 Definition of Change in Control.
-------------------------------
A Change in Control of the Employer shall be deemed to have occurred
upon the happening of any of the following events:
(a) the occurrence of any event upon which any "person" (as such term
is used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended ("Exchange Act")), other than (A) a trustee or other fiduciary
holding securities under an employee benefit plan maintained for the
benefit of employees of Mystic Financial, Inc.; (B) a corporation owned,
directly or indirectly, by the stockholders of Mystic Financial, Inc. in
substantially the same proportions as their ownership of stock of Mystic
Financial, Inc.; or (C) any group constituting a person in which employees
of Mystic Financial, Inc. are substantial members, becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities issued by Mystic Financial, Inc.
representing 25% or more of the combined voting power of all of Mystic
Financial, Inc.'s then outstanding securities; or
(b) the occurrence of any event upon which the individuals who on the
date the Plan is adopted are members of the Board, together with
individuals whose election by the Board or nomination for election by
Mystic Financial, Inc.'s
<PAGE>
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stockholders was approved by the affirmative vote of at least two-thirds of
the members of the Board then in office who were either members of the
Board on the date this Plan is adopted or whose nomination or election was
previously so approved, cease for any reason to constitute a majority of
the members of the Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors
of Mystic Financial, Inc. (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) the shareholders of Mystic Financial, Inc. approve either:
(i) a merger or consolidation of Mystic Financial, Inc. with
any other corporation, other than a merger or consolidation following
which both of the following conditions are satisfied:
(A) either (1) the members of the Board of Mystic
Financial, Inc. immediately prior to such merger or
consolidation constitute at least a majority of the members of
the governing body of the institution resulting from such
merger or consolidation; or (2) the shareholders of Mystic
Financial, Inc. own securities of the institution resulting
from such merger or consolidation representing 80% or more of
the combined voting power of all such securities then
outstanding in substantially the same proportions as their
ownership of voting securities of Mystic Financial, Inc. before
such merger or consolidation; and
(B) the entity which results from such merger or
consolidation expressly agrees in writing to assume and perform
Mystic Financial, Inc.'s obligations under the Plan; or
(ii) a plan of complete liquidation of Mystic Financial, Inc.
or an agreement for the sale or disposition by Mystic Financial, Inc.
of all or substantially all of its assets; and
(d) any event that would be described in section 14.1(c)(i), or
(ii) if "Medford Co-Operative Bank" were substituted for "Mystic Financial,
Inc." therein; and
In no event, however, shall the transaction by which Medford Co-Operative Bank
converts from a mutual cooperative bank to a stock cooperative bank, or any
transaction by which a company wholly owned by Medford Co-Operative Bank becomes
the parent company of Medford Co-Operative Bank be deemed a Change in Control.
<PAGE>
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Section 14.2 Vesting on Change of Control.
----------------------------
Upon the effective date of a Change in Control, the Account of each person who
would then, upon termination of the Plan, be entitled to a benefit, shall be
fully vested and nonforfeitable.
Section 14.3 Repayment of Loan.
-----------------
(a) Upon a Change in Control described in section 14.1(c) (or which
would be described in section 14.1(c) if "Medford Co-Operative Bank" were
substituted for "Mystic Financial, Inc." thereunder), the Committee shall direct
the Trustee to sell a sufficient number of Shares to repay any outstanding Share
Acquisition Loan in full. The proceeds of such sale shall be used to repay such
Share Acquisition Loan. After repayment of the Share Acquisition Loan, all
remaining Shares which had been unallocated (or the proceeds thereof, if
applicable) shall be allocated among the accounts of all Participants who were
employed by an Employer on the effective date of such Change in Control. Such
allocation of Shares or proceeds shall be credited as of the date on which the
Change in Control occurs to the Accounts of each Participant who has not had a
termination of participation under section 2.3 as of such date (each, an
"Affected Participant"), in proportion to their Allocation Compensation, for the
period, beginning on the January 1 immediately preceding the date on which the
Change in Control occurs and ending on the date on which the Change in Control
occurs. If any amount cannot be allocated to an Affected Participant in the year
of such Change in Control as a result of the limitations of section 415 of the
Code, the amounts will be allocated in subsequent years to those persons who
were Affected Participants and who continue to be Participants in the Plan until
finally distributed to Affected Participants.
(b) In the event that the application of section 415 of the Code
prevents the allocation of all of the Shares or other assets released from the
Loan Repayment Account as provided in section 14.3(a) as of the effective date
of the Change in Control, each Affected Participant shall be entitled to receive
a supplemental benefit payment directly from the Employer. The supplemental
benefit payment to each Affected Participant shall be an amount equal to the
excess of:
(i) the total amount of Shares or other property that would be
allocated to such Affected Participant's Account under section 14.3(a) if
section 415 of the Code did not apply; over
(ii) the total of Shares or other property actually allocated to such
Affected Participant's Account under section 14.3(a).
Such payment (without offset for any allocations which may occur under this Plan
subsequent to the Change in Control) shall be made as soon as practicable, but
in any event within ten (10) business days, after the effective date of the
Change in Control. This section 14.3(b) shall be treated as a separate, non-
qualified "excess benefit plan" within the meaning of section 3(34) of ERISA and
shall be interpreted, administered and enforced in a manner consistent with this
<PAGE>
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intention. To the extent that any Affected Participant is entitled to the same
or a similar payment under any other non-qualified plan, program or arrangement
of the Employer, any payment under this section 14.3(b) shall be coordinated
with the payments under such other non-qualified programs, plan or arrangements
in such manner as shall be determined by the Committee to be necessary to
prevent the duplication of benefits.
Section 14.4 Plan Termination After Change in Control.
----------------------------------------
After repayment of the loan and allocation of shares or proceeds as provided in
section 14.2, the Plan shall be terminated and all amounts shall be distributed
as soon as practicable.
Section 14.5 Amendment of Article XIV.
------------------------
Article XIV of the Plan may not be amended after a Change in Control of the
Employer unless required by the Internal Revenue Service as a condition to the
continued treatment of the Plan as a tax-qualified plan under section 401(a) of
the Code.
ARTICLE XV
----------
ADMINISTRATION
--------------
Section 15.1 Named Fiduciaries.
-----------------
The term "Named Fiduciary" shall mean (but only to the extent of the
responsibilities of each of them) the Plan Administrator, the Committee, the
Board and the Trustee. This Article XV is intended to allocate to each Named
Fiduciary the responsibility for the prudent execution of the functions assigned
to him or it, and none of such responsibilities or any other responsibility
shall be shared by two or more of such Named Fiduciaries. Whenever one Named
Fiduciary is required by the Plan or Trust Agreement to follow the directions of
another Named Fiduciary, the two Named Fiduciaries shall not be deemed to have
been assigned a shared responsibility, but the responsibility of the Named
Fiduciary giving the directions shall be deemed his sole responsibility, and the
responsibility of the Named Fiduciary receiving those directions shall be to
follow them insofar as such instructions are on their face proper under
applicable law.
Section 15.2 Plan Administrator.
------------------
There shall be a Plan Administrator, who shall be the Senior Human
Resources Officer of Mystic Financial, Inc., or such Employee or officer as may
be designated by the Board, as hereinafter provided, and who shall, subject to
the responsibilities of the Committee and the Board, have the responsibility for
the day-to-day control, management, operation and administra-
<PAGE>
-46-
tion of the Plan (except trust duties). The Plan Administrator shall have the
following responsibilities:
(a) To maintain records necessary or appropriate for the
administration of the Plan;
(b) To give and receive such instructions, notices, information,
materials, reports and certifications to the Trustee as may be necessary or
appropriate in the administration of the Plan;
(c) To prescribe forms and make rules and regulations consistent
with the terms of the Plan and with the interpretations and other actions
of the Committee;
(d) To require such proof of age or evidence of good health of an
Employee, Participant or Former Participant or the spouse of either, or of
a Beneficiary as may be necessary or appropriate in the administration of
the Plan;
(e) To prepare and file, distribute or furnish all reports, plan
descriptions, and other information concerning the Plan, including, without
limitation, filings with the Secretary of Labor and communications with
Participants, Former Participants and other persons, as shall be required
of the Plan Administrator under ERISA;
(f) To determine any question arising in connection with the Plan,
and the Plan Administrator's decision or action in respect thereof shall be
final and conclusive and binding upon the Employer, the Trustee,
Participants, Former Participants, Beneficiaries and any other person
having an interest under the Plan provided, however, that any question
relating to inconsistency or omission in the Plan, or interpretation of the
provisions of the Plan, shall be referred to the Committee by the Plan
Administrator and the decision of the Committee in respect thereof shall be
final;
(g) Subject to the provisions of section 15.5, to review and
dispose of claims under the Plan filed pursuant to section 15.4 and appeals
filed pursuant to section 15.5;
(h) If the Plan Administrator shall determine that by reason of
illness, senility, insanity, or for any other reason, it is undesirable to
make any payment to a Participant, Former Participant, Beneficiary or any
other person entitled thereto, to direct the application of any amount so
payable to the use or benefit of such person in any manner that he may deem
advisable or to direct in his discretion the withholding of any payment
under the Plan due to any person under legal disability until a
representative competent to receive such payment in his behalf shall be
appointed pursuant to law;
<PAGE>
-47-
(i) To discharge such other responsibilities or follow such
directions as may be assigned or given by the Committee or the Board; and
(j) To perform any duty or take any action which is allocated to
the Plan Administrator under the Plan.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Plan Administrator may
resign only by giving at least 30 days' prior written notice of resignation to
the Committee, and such resignation shall be effective on the date specified in
such notice.
Section 15.3 Committee Responsibilities.
--------------------------
There shall be a Committee consisting of not less than three persons,
who may, but need not be officers of the Company and who shall be appointed by
the Board and serve at the pleasure of the Board. The Committee shall, subject
to the responsibilities of the Board, have the following responsibilities:
(a) To review the performance of the Plan Administrator;
(b) To hear and decide appeals, pursuant to the claims procedure
contained in section 15.5 of the Plan, taken from the decisions of the Plan
Administrator;
(c) To hear and decide questions, including interpretation of the
Plan, as may be referred to the Committee by the Plan Administrator;
(d) To review the performance of the Trustee and such investment
managers as may be appointed in, or pursuant to, the Trust Agreement with
respect to investing, managing and controlling the assets of the Plan;
(e) To the extent required by ERISA, to establish a funding policy
and method consistent with the objectives of the Plan and the requirements
of ERISA, and to review such policy and method at least annually;
(f) To report and make recommendations to the Board regarding
changes in the Plan, including changes in the operation and management of
the Plan and removal and replacement of the Trustee and such investment
managers as may be appointed in or pursuant to the Trust Agreement;
(g) To designate an Alternate Plan Administrator to serve in the
event that the Plan Administrator is absent or otherwise unable to
discharge his responsibilities;
<PAGE>
-48-
(h) To remove and replace the Plan Administrator or Alternate, or
both of them, and to fill a vacancy in either office;
(i) To the extent provided under and subject to the provisions of
the Trust Agreement, to appoint "investment managers" as defined in
section 3(38) of ERISA to manage and control (including acquiring and
disposing of) any or all of the assets of the Plan;
(j) With the prior approval of the Board, to direct the Trustee to
obtain one or more Share Acquisition Loans;
(k) To develop and provide procedures and forms necessary to enable
Participants to give voting and tendering directions on a confidential
basis;
(l) To discharge such other responsibilities or follow such
directions as may be assigned or given by the Board; and
(m) To perform any duty or take any action which is allocated to
the Committee under the Plan.
The Committee shall have the power and authority necessary or appropriate to
carry out its responsibilities.
Section 15.4 Claims Procedure.
----------------
Any claim relating to benefits under the Plan shall be filed with the
Plan Administrator on a form prescribed by him. If a claim is denied in whole
or in part, the Plan Administrator shall give the claimant written notice of
such denial, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was based;
(c) Any additional material or information necessary for the
claimant to perfect his claim and an explanation of why such material or
information is needed; and
(d) An explanation of the Plan's procedure for review of the denial
of the claim.
In the event that the claim is not granted and notice of denial of a claim is
not furnished by the 30th day after such claim was filed, the claim shall be
deemed to have been denied on that day for the purpose of permitting the
claimant to request review of the claim.
<PAGE>
-49-
Section 15.5 Claims Review Procedure.
-----------------------
Any person whose claim filed pursuant to section 15.4 has been denied
in whole or in part by the Plan Administrator may request review of the claim by
the Committee, upon a form prescribed by the Plan Administrator. The claimant
shall file such form (including a statement of his position) with the Committee
no later than 60 days after the mailing or delivery of the written notice of
denial provided for in section 15.4, or, if such notice is not provided, within
60 days after such claim is deemed denied pursuant to section 15.4. The
claimant shall be permitted to review pertinent documents. A decision shall be
rendered by the Committee and communicated to the claimant not later than 30
days after receipt of the claimant's written request for review. However, if
the Committee finds it necessary, due to special circumstances (for example, the
need to hold a hearing), to extend this period and so notifies the claimant in
writing, the decision shall be rendered as soon as practicable, but in no event
later than 120 days after the claimant's request for review. The Committee's
decision shall be in writing and shall specifically set forth:
(a) The reasons for the decision; and
(b) The pertinent Plan provisions on which the decision is based.
Any such decision of the Committee shall be binding upon the claimant and the
Employer and the Plan Administrator shall take appropriate action to carry out
such decision.
Section 15.6 Allocation of Fiduciary Responsibilities
and Employment of Advisors.
--------------------------
Any Named Fiduciary may:
(a) Allocate any of his or its responsibilities (other than trustee
responsibilities) under the Plan to such other person or persons as he or
it may designate, provided that such allocation and designation shall be in
writing and filed with the Plan Administrator;
(b) Employ one or more persons to render advice to him or it with
regard to any of his or its responsibilities under the Plan; and
(c) Consult with legal counsel, who may also be legal counsel to
the Employer.
<PAGE>
-50-
Section 15.7 Other Administrative Provisions.
-------------------------------
(a) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in section 15.5 prior to
initiating any claim for judicial review.
(b) No bond or other security shall be required of the Plan
Administrator, a member of the Committee or any officer or Employee of the
Employer to whom fiduciary responsibilities are allocated by a Named Fiduciary,
except as may be required by ERISA.
(c) Subject to any limitation on the application of this
section 15.7(c) pursuant to ERISA, neither the Plan Administrator, nor a member
of the Committee, nor any officer or Employee of the Employer to whom fiduciary
responsibilities are allocated by a Named Fiduciary, shall be liable for any act
of omission or commission by himself or by another person, except for his own
individual willful and intentional malfeasance.
(d) The Plan Administrator or the Committee may, except with
respect to actions under section 15.5, shorten, extend or waive the time (but
not beyond 60 days) required by the Plan for filing any notice or other form
with the Plan Administrator or the Committee, or taking any other action under
the Plan.
(e) The Plan Administrator or the Committee may direct that the
costs of services provided pursuant to section 15.6, and such other reasonable
expenses as may be incurred in the administration of the Plan, shall be paid out
of the funds of the Plan unless the Employer shall pay them.
(f) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to the
Plan.
(g) Any action taken or omitted by any fiduciary with respect to
the Plan, including any decision, interpretation, claim denial or review on
appeal, shall be conclusive and binding on all interested parties and shall be
subject to judicial modification or reversal only to the extent it is determined
by a court of competent jurisdiction that such action or omission was arbitrary
and capricious and contrary to the terms of the Plan.
<PAGE>
-51-
ARTICLE XVI
-----------
AMENDMENT, TERMINATION AND TAX QUALIFICATION
--------------------------------------------
Section 16.1 Amendment and Termination by Mystic Financial, Inc.
--------------------------------------------------
The Employer expects to continue the Plan indefinitely, but
specifically reserves the right, in its sole discretion, at any time, by
appropriate action of the Board, to amend, in whole or in part, any or all of
the provisions of the Plan and to terminate the Plan at any time. Subject to
the provisions of section 16.2, no such amendment or termination shall permit
any part of the Trust Fund to be used for or diverted to purposes other than for
the exclusive benefit of Participants, Former Participants, Beneficiaries or
other persons entitled to benefits, and no such amendment or termination shall
reduce the accrued benefit of any Participant, Former Participant, Beneficiary
or other person who may be entitled to benefits, without his consent. In the
event of a termination or partial termination of the Plan, or in the event of a
complete discontinuance of the Employer's contributions to the Plan, the
Accounts of each affected person shall forthwith become nonforfeitable and shall
be payable in accordance with the provisions of Article XIII.
Section 16.2 Amendment or Termination Other Than
by Mystic Financial, Inc.
-----------------------------------
In the event that a corporation or trade or business other than
Mystic Financial, Inc. shall adopt this Plan, such corporation or trade or
business shall, by adopting the Plan, empower Mystic Financial, Inc. to amend or
terminate the Plan, insofar as it shall cover employees of such corporation or
trade or business, upon the terms and conditions set forth in section 16.1;
provided, however, that any such corporation or trade or business may, by action
of its board of directors or other governing body, amend or terminate the Plan,
insofar as it shall cover employees of such corporation or trade or business, at
different times and in a different manner. In the event of any such amendment or
termination by action of the board of directors or other governing body of such
a corporation or trade or business, a separate plan shall be deemed to have been
established for the employees of such corporation or trade or business, and the
assets of such plan shall be segregated from the assets of this Plan at the
earliest practicable date and shall be dealt with in accordance with the
documents governing such separate plan.
Section 16.3 Conformity to Internal Revenue Code.
-----------------------------------
The Employer has established the Plan with the intent that the Plan
and Trust will at all times be qualified under section 401(a) and exempt under
section 501(a) of the Code and with the intent that contributions under the Plan
will be allowed as deductions in computing the net income of the Employer for
federal income tax purposes, and the provisions of the Plan and Trust Agreement
shall be construed to effectuate such intentions. Accordingly, notwithstanding
anything to the contrary hereinbefore provided, the Plan and the Trust Agreement
may be
<PAGE>
-52-
amended at any time without prior notice to Participants, Former Participants,
Beneficiaries or any other persons entitled to benefits, if such amendment is
deemed by the Board to be necessary or appropriate to effectuate such intent.
Section 16.4 Contingent Nature of Contributions.
----------------------------------
(a) All ESOP Contributions to the Plan are conditioned upon the
issuance by the Internal Revenue Service of a determination that the Plan and
Trust are qualified under section 401(a) of the Code and exempt under section
501(a) of the Code. If the Employer applies to the Internal Revenue Service for
such a determination within 90 days after the date on which it files its federal
income tax return for its taxable year that includes the last day of the Plan
Year in which the Plan is adopted, and if the Internal Revenue Service issues a
determination that the Plan and Trust are not so qualified or exempt, all ESOP
Contributions made by the Employer prior to the date of receipt of such a
determination may, at the election of the Employer, be returned to the Employer
within one year after the date of such determination.
(b) All ESOP Contributions and Loan Repayment Contributions to the
Plan are made upon the condition that such ESOP Contributions and Loan Repayment
Contributions will be allowed as a deduction in computing the net income of the
Employer for federal income tax purposes. To the extent that any such deduction
is disallowed, the amount disallowed may, at the election of the Employer, be
returned to the Employer within one year after the deduction is disallowed.
(c) Any contribution to the Plan made by the Employer as a result
of a mistake of fact may, at the election of the Employer, be returned to the
Employer within one year after such contribution is made.
ARTICLE XVII
------------
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
--------------------------------------
Section 17.1 In General.
----------
As of the Determination Date for each Plan Year, the Plan
Administrator shall determine whether the Plan is a Top Heavy Plan in accordance
with the provisions of this Article XVII. If, as of such Determination Date, the
Plan is a Top Heavy Plan, then the Plan Year immediately following such
Determination Date shall be a Top Heavy Plan Year and the special provisions of
this Article XVII shall be in effect; provided, however, that if, as of the
Determination Date for the Plan Year in which the Effective Date occurs, the
Plan is a Top Heavy Plan, such Plan Year shall be a Top Heavy Plan Year, and the
provisions of this Article XVII shall be given retroactive effect for such Plan
Year.
<PAGE>
-53-
Section 17.2 Definition of Top Heavy Plan.
----------------------------
(a) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as
of a Determination Date: (i) it is not a member of a Required Aggregation
Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key
Employees exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all
Employees (excluding former Key Employees), former Employees (excluding former
Key Employees and other former Employees who have not performed any services for
the Employer or any Affiliated Employer during the immediately preceding five
Plan Years), and their Beneficiaries.
(b) Subject to section 17.2(c), the Plan is a Top Heavy Plan if, as
of a Deter mination Date: (i) the Plan is a member of a Required Aggregation
Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key
Employees under all plans that are members of the Required Aggregation Group
exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees
(excluding former Key Employees), former Employees (excluding former Key
Employees and other former Employees who have not performed any services for the
Employer or any Affiliated Employer during the immediately preceding five Plan
Years), and their Beneficiaries under all plans that are members of the
Required Aggregation Group.
(c) Notwithstanding sections 17.2(a) and 17.2(b), the Plan is not a
Top Heavy Plan if, as of a Determination Date: (i) the Plan is a member of a
Permissible Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued
Benefits of all Key Employees under all plans that are members of the
Permissible Aggregation Group does not exceed 60% of (B) the sum of the
Cumulative Accrued Benefits of all Employees (excluding former Key Employees),
former Employees (excluding former Key Employees and other former Employees who
have not performed any services for the Employer or any Affiliated Employer
during the immediately preceding five Plan Years), and their Beneficiaries under
all plans that are members of the Permissible Aggregation Group.
Section 17.3 Determination Date.
------------------
The Determination Date for the Plan Year in which the Effective Date
occurs shall be the last day of such Plan Year, and the Determination Date for
each Plan Year beginning after the Plan Year in which the Effective Date occurs
shall be the last day of the preceding Plan Year. The Determination Date for any
other qualified plan maintained by the Employer for a plan year shall be the
last day of the preceding plan year of each such plan, except that in the case
of the first plan year of such plan, it shall be the last day of such first plan
year.
Section 17.4 Cumulative Accrued Benefits.
---------------------------
(a) An individual's Cumulative Accrued Benefits under this Plan as
of a Determination Date are equal to the sum of:
<PAGE>
-54-
(i) the balance credited to such individual's Account under this
Plan as of the most recent Valuation Date preceding the Determination Date;
(ii) the amount of any ESOP Contributions or Loan Repayment
Contributions made after such Valuation Date but on or before the
Determination Date; and
(iii) the amount of any distributions of such individual's Cumulative
Accrued Benefits under the Plan during the five year period ending on the
Deter mination Date.
For purposes of this section 17.4(a), the computation of an individual's
Cumulative Accrued Benefits, and the extent to which distributions, rollovers
and transfers are taken into account, will be made in accordance with section
416 of the Code and the regulations thereunder.
(b) For purposes of this Plan, the term "Cumulative Accrued
Benefits" with respect to any other qualified plan, shall mean the cumulative
accrued benefits determined for purposes of section 416 of the Code under the
provisions of such plans.
(c) For purposes of determining the top heavy status of a Required
Aggregation Group or a Permissible Aggregation Group, the Cumulative Accrued
Benefits under this Plan and the Cumulative Accrued Benefits under any other
plan shall be determined as of the Determination Date that falls within the same
calendar year as the Determination Dates for all other members of such Required
Aggregation Group or Permissible Aggregation Group.
Section 17.5 Key Employees.
-------------
(a) For purposes of the Plan, the term Key Employee means any
employee or former employee of the Employer or any Affiliated Employer who is at
any time during the current Plan Year or was at any time during the immediately
preceding four Plan Years:
(i) a Five Percent Owner;
(ii) a person who would be described in section 1.24 if the number
"1%" were substituted for the number "5%" in section 1.24 and who has an
annual Total Compensation from the Employer and any Affiliated Employer of
more than $150,000;
(iii) an Officer of the Employer or any Affiliated Employer who has
an annual Total Compensation greater than 50% of the amount in effect under
section 415(b)(1)(A) of the Code for any such Plan Year; or
(iv) one of the ten persons owning the largest interests in the
Employer and having an annual Total Compensation from the Employer or any
Affiliated
<PAGE>
-55-
Employer in excess of the dollar limitation in effect under section
415(c)(1)(A) of the Code for such Plan Year.
(b) For purposes of section 17.5(a):
(i) for purposes of section 17.5(a)(iii), in the event the Employer
or any Affiliated Employer has more officers than are considered Officers,
the term Key Employee shall mean those officers, up to the maximum number,
with the highest annual compensation in any one of the five consecutive
Plan Years ending on the Determination Date; and
(ii) for purposes of section 17.5(a)(iv), if two or more persons
have equal ownership interests in the Employer, each such person shall be
considered as having a larger ownership interest than any such person with
a lower annual compensation from the Employer or any Affiliated Employer.
(c) For purposes of section 17.5(a): (i) a person's compensation
from Affiliated Employers shall be aggregated, but his ownership interests in
Affiliated Employers shall not be aggregated; (ii) an employee shall only be
deemed to be an officer if he has the power and responsibility of a person who
is an officer within the meaning of section 416 of the Code; and (iii) the term
Key Employee shall also include the Beneficiary of a deceased Key Employee.
Section 17.6 Required Aggregation Group.
--------------------------
For purposes of this Article XVII, a Required Aggregation Group shall
consist of (a) this Plan; (b) any other qualified plans maintained by the
Employer and any Affiliated Employers that cover Key Employees; and (c) any
other qualified plans that are required to be aggregated for purposes of
satisfying the requirements of sections 401(a)(4) or 410(b) of the Code.
Section 17.7 Permissible Aggregation Group.
-----------------------------
For purposes of this Article XVII, a Permissible Aggregation Group
shall consist of (a) the Required Aggregation Group and (b) any other qualified
plans maintained by the Employer and any Affiliated Employers; provided,
however, that the Permissible Aggregation Group must satisfy the requirements of
sections 401(a)(4) and 410(b) of the Code.
Section 17.8 Special Requirements During Top Heavy Plan Years.
------------------------------------------------
(a) Notwithstanding any other provision of the Plan to the
contrary, for each Top Heavy Plan Year, in the case of a Participant (other than
a Key Employee) on the last day of such Top Heavy Plan Year who is not also a
participant in another qualified plan which satisfies the minimum contribution
and benefit requirements of section 416 of the Code with respect to such
<PAGE>
-56-
Participant, the sum of the ESOP Contributions and Loan Repayment Contributions
made with respect to such Participant, when expressed as a percentage of his
Total Compensation for such Top Heavy Plan Year, shall not be less than 3% of
such Participant's Total Compensation for such Top Heavy Plan Year or, if less,
the highest combined rate, expressed as a percentage of Total Compensation at
which ESOP Contributions and Loan Repayment Contributions were made on behalf of
a Key Employee for such Top Heavy Plan Year. The Employer shall make an
additional contribution to the Account of each Participant to the extent
necessary to satisfy the foregoing requirement.
(b) For any Top Heavy Plan Year, the number "1.0" shall be
substituted for the number "1.25" in sections 8.2(c)(iii) and 8.2(c)(iv), except
that:
(i) this section 17.8(b) shall not apply to any individual for a
Top Heavy Plan Year that is not a Super Top Heavy Plan Year if the
requirements of section 17.8(a) would be satisfied for such Super Top Heavy
Plan Year if the number "4%" were substituted for the number 3% in
section 17.8(a); and
(ii) this section 17.8(b) shall not apply to an individual for a Top
Heavy Plan Year if, during such Top Heavy Plan Year, there are no ESOP
Contributions or Loan Repayment Contributions allocated to such individual
under this Plan, there are no contributions under any other qualified
defined contribution plan maintained by the Employer, and there are no
accruals for such individual under any qualified defined benefit plan
maintained by the Employer.
For purposes of this section 17.8(b), the term Super Top Heavy Plan Year means a
Top Heavy Plan Year in which the Plan would meet the definitional requirements
of sections 17.2(a) or 17.2(b) if the term "90%" were substituted for the term
"60%" in sections 17.2(a), 17.2(b) and 17.2(c).
ARTICLE XVIII
-------------
MISCELLANEOUS PROVISIONS
------------------------
Section 18.1 Governing Law.
-------------
The Plan shall be construed, administered and enforced according to
the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by federal law.
<PAGE>
-57-
Section 18.2 No Right to Continued Employment.
--------------------------------
Neither the establishment of the Plan, nor any provisions of the Plan
or of the Trust Agreement establishing the Trust Fund nor any action of the Plan
Administrator, the Committee or the Trustee, shall be held or construed to
confer upon any Employee any right to a continuation of employment by the
Employer. The Employer reserves the right to dismiss any Employee or otherwise
deal with any Employee to the same extent as though the Plan had not been
adopted.
Section 18.3 Construction of Language.
------------------------
Wherever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine and the neuter. Any reference to an Article or section number shall
refer to an Article or section of the Plan, unless otherwise indicated.
Section 18.4 Headings.
--------
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and
the text of the Plan, the text shall control.
Section 18.5 Merger with Other Plans.
-----------------------
The Plan shall not be merged or consolidated with, nor transfer its
assets or liabilities to, any other plan unless each Participant, Former
Participant, Beneficiary and other person entitled to benefits, would (if that
plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he would
have been entitled to receive if the Plan had terminated immediately before the
merger, consolidation or transfer.
Section 18.6 Non-alienation of Benefits.
--------------------------
(a) Except as provided in section 18.6(b), the right to receive a
benefit under the Plan shall not be subject in any manner to anticipation,
alienation or assignment, nor shall such right be liable for or subject to
debts, contracts, liabilities or torts. Should any Participant, Former
Participant or other person attempt to anticipate, alienate or assign his
interest in or right to a benefit, or should any person claiming against him
seek to subject such interest or right to legal or equitable process, all the
interest or right of such Participant or Former Participant or other person
entitled to benefits in the Plan shall cease, and in that event such interest or
right shall be held or applied, at the direction of the Plan Administrator, for
or to the benefit of such
<PAGE>
-58-
Participant or Former Participant, or other person or his spouse, children or
other dependents in such manner and in such proportions as the Plan
Administrator may deem proper.
(b) This section 18.6 shall not prohibit the Plan Administrator
from recognizing a Domestic Relations Order that is determined to be a Qualified
Domestic Relations Order in accordance with section 18.7.
Section 18.7 Procedures Involving Domestic Relations Orders.
----------------------------------------------
Upon receiving a Domestic Relations Order, the Plan Administrator
shall segregate in a separate account or in an escrow account or separately
account for the amounts payable to any person pursuant to such Domestic
Relations Order, pending a determination whether such Domestic Relations Order
constitutes a Qualified Domestic Relations Order, and shall give notice of the
receipt of the Domestic Relations Order to the Participant or Former Participant
and each other person affected thereby. If, within 18 months after receipt of
such Domestic Relations Order, the Plan Administrator, a court of competent
jurisdiction or another appropriate authority determines that such Domestic
Relations Order constitutes a Qualified Domestic Relations Order, the Plan
Administrator shall direct the Trustee to pay the segregated amounts (plus any
interest thereon) to the person or persons entitled thereto under the Qualified
Domestic Relations Order. If it is determined that the Domestic Relations Order
is not a Qualified Domestic Relations Order or if no determination is made
within the prescribed 18-month period, the segregated amounts shall be
distributed as though the Domestic Relations Order had not been received, and
any later determination that such Domestic Relations Order constitutes a
Qualified Domestic Relations Order shall be applied only with respect to
benefits that remain undistributed on the date of such determination. The Plan
Administrator shall be authorized to establish such reasonable administrative
procedures as he deems necessary or appropriate to administer this section 18.7.
This section 18.7 shall be construed and administered so as to comply with the
requirements of section 401(a)(13) of the Code.
Section 18.8 Leased Employees.
----------------
(a) Subject to section 18.8(b), a leased employee shall be treated
as an Employee for purposes of the Plan. For purposes of this section 18.8, the
term "leased employee" means any person (i) who would not, but for the
application of this section 18.8, be an Employee and (ii) who pursuant to an
agreement between the Employer and any other person ("leasing organization") has
performed for the Employer (or for the Employer and related persons determined
in accordance with section 414(n)(6) of the Code), on a substantially full-time
basis for a period of at least one year, services of a type historically
performed by employees in the business field of the Employer.
(b) For purposes of the Plan:
<PAGE>
-59-
(i) contributions or benefits provided to the leased employee by
the leasing organization which are attributable to services performed for
the Employer shall be treated as provided by the Employer; and
(ii) section 18.8(a) shall not apply to a leased employee if:
(A) the number of leased employees performing services for
the Employer does not exceed 20% of the number of the Employer's
Em ployees who are not Highly Compensated Employees; and
(B) such leased employee is covered by a money purchase
pension plan providing (I) a nonintegrated contribution rate of at
least 10% of the leased employee's compensation; (II) immediate
participation; (III) full and immediate vesting; and (IV) coverage
for all of the employees of the leasing organization (other than
employees who perform substantially all of their services for the
leasing organization).
Section 18.9 Status as an Employee Stock Ownership Plan.
------------------------------------------
It is intended that the Plan constitute an "employee stock ownership
plan," as defined in section 4975(e)(7) of the Code and section 407(d)(6) of
ERISA. The Plan shall be construed and administered to give effect to such
intent.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
______________, 1997, by and between MYSTIC FINANCIAL, INC., a publicly-held
business corporation organized and operating under the laws of the State of
Delaware and having an office at 60 High Street, Medford, Massachusetts 02155
("Company") and ROBERT H. SURABIAN, an individual residing at 35 Hollywood Road,
Winchester, Massachusetts 01890 ("Executive"). Any reference to "Bank" herein
shall mean Medford Co-Operative Bank, a wholly-owned subsidiary of the Company,
or any successor thereto.
W I T N E S S E T H :
-------------------
WHEREAS, Executive currently serves the Company in the capacity of
President and Chief Executive Officer and also serves as President and Chief
Executive Officer of the Bank; and
WHEREAS, Executive also currently serves as a member of the Board of
Directors of the Company ("Board") and as a member of the Board of Directors of
the Bank ("Bank Board"); and
WHEREAS, effective as of the date of this Agreement, the Bank has
converted from a state-chartered mutual cooperative bank to a state chartered
capital stock cooperative bank and has become the wholly-owned subsidiary of the
Company; and
WHEREAS, the Company desires to assure for itself and for the Bank the
continued availability of Executive's services and the ability of Executive to
perform such services with a minimum of personal distraction in the event of a
pending or threatened Change of Control (as hereinafter defined); and
WHEREAS, Executive is willing to continue to serve the Company and the
Bank on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company and Executive hereby
agree as follows:
SECTION 1. EMPLOYMENT.
----------
The Company agrees to continue to employ Executive, and Executive
hereby agrees to such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
<PAGE>
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
-------------------------------------------------
PERIOD.
- ------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
three (3) years beginning on the date of this Agreement and ending on the third
(3rd) anniversary date of this Agreement (each, an "Anniversary Date"), plus
such extensions, if any, as are provided pursuant to section 2(b).
(b) Except as provided in section 2(c), beginning on the date of this
Agreement, the Employment Period shall automatically be extended for one (1)
additional day each day, unless either the Company or Executive elects not to
extend the Agreement further by giving written notice to the other party, in
which case the Employment Period shall end on the third (3rd) anniversary of the
date on which such written notice is given. For all purposes of this Agreement,
the term "Remaining Unexpired Employment Period" as of any date shall mean the
period beginning on such date and ending on: (i) if a notice of non-extension
has been given in accordance with this section 2(b), the third (3rd) anniversary
of the date on which such notice is given; and (ii) in all other cases, the
third (3rd) anniversary of the date as of which the Remaining Unexpired
Employment Period is being determined. Upon termination of Executive's
employment with the Company for any reason whatsoever, any daily extensions
provided pursuant to this section 2(b), if not previously discontinued, shall
automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the Company
at any time from terminating Executive's employment during the Employment Period
with or without notice for any reason; provided, however, that the relative
rights and obligations of the Company and Executive in the event of any such
termination shall be determined under this Agreement.
(d) Nothing in this Agreement shall be deemed to prohibit the
Executive at any time from terminating his employment during the Employment
Period with or without notice for any reason; provided, however, that the
relative rights and obligations of the Company and Executive in the event of any
such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
------
Executive shall serve as President and Chief Executive Officer of the
Company and as President and Chief Executive Officer of the Bank, having such
power, authority and responsibility and performing such duties as are prescribed
by or under the By-Laws of the Company and the Bank and as are customarily
associated with such positions. Executive shall devote his full business time
and attention (other than during weekends, holidays, approved vacation periods,
and periods of illness or approved leaves of absence) to the business and
affairs of the Company and the Bank and shall use his best efforts to advance
the interests of the Company and the Bank.
Page 2 of 20
<PAGE>
SECTION 4. CASH COMPENSATION.
-----------------
In consideration for the services to be rendered by Executive
hereunder, the Company shall pay (or shall cause the Bank to pay) to him a
salary at an initial annual rate of ONE HUNDRED AND FIFTY-THREE THOUSAND, THREE
HUNDRED AND SIXTY-THREE DOLLARS ($153,363.00), payable in approximately equal
installments in accordance with the Company's or Bank's customary payroll
practices for senior officers. The Board shall review Executive's annual rate
of salary at such times during the Employment Period as it deems appropriate,
but not less frequently than once every twelve months, and may, in its
discretion, approve an increase in the Executive's annual rate of salary. In
addition to salary, Executive may receive other cash compensation from the
Company or the Bank for services hereunder at such times, in such amounts and on
such terms and conditions as the Board, or the Bank Board, as applicable, may
determine from time to time.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
-----------------------------------
During the Employment Period, Executive shall be treated as an
employee of the Company and the Bank and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long-term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company or the Bank, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and programs and
consistent with the Company's and Bank's customary practices. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
SECTION 6. INDEMNIFICATION AND INSURANCE.
-----------------------------
(a) During the Employment Period and for a period of six (6) years
thereafter, the Company shall cause Executive to be covered by and named as an
insured under any policy or contract of insurance obtained by it or the Bank to
insure its directors and officers against personal liability for acts or
omissions in connection with service as an officer or director of the Company or
the Bank or service in other capacities at the request of the Company or the
Bank. The coverage provided to Executive pursuant to this section 6 shall be of
the same scope and on the same terms and conditions as the coverage (if any)
provided to other officers or directors of the Company and the Bank.
(b) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six (6) years thereafter, the Company
shall indemnify Executive against and hold him harmless from any costs,
liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company, the Bank, or any subsidiary or affiliate
thereof.
Page 3 of 20
<PAGE>
SECTION 7. OUTSIDE ACTIVITIES.
------------------
Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he may disclose to and as
may be approved by the Board (which approval shall not be unreasonably
withheld); provided, however, that such service shall not materially interfere
with the performance of his duties under this Agreement. Executive may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided, however, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Company and generally applicable to
all similarly situated executives. Executive may also serve as an officer or
director of the Bank on such terms and conditions as the Company and the Bank
may mutually agree upon, and such service shall not be deemed to materially
interfere with Executive's performance of his duties hereunder or otherwise
result in a material breach of this Agreement. If Executive is discharged or
suspended, or is subject to any regulatory prohibition or restriction including
but not limited to those set forth in section 26(b)(iii) hereof, with respect to
participation in the affairs of the Bank, he shall continue to perform services
for the Company in accordance with this Agreement but shall not directly or
indirectly provide services to or participate in the affairs of the Bank in a
manner inconsistent with the terms of such discharge or suspension or any
applicable regulatory order.
SECTION 8. WORKING FACILITIES AND EXPENSES.
-------------------------------
Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other location
within Middlesex County at which the Company shall maintain its principal
executive offices, or at such other location as the Company and Executive may
mutually agree upon. The Company shall provide or cause the Bank to provide the
Executive at his principal place of employment with a private office,
secretarial services, and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, all expenses associated with his business use of an
automobile, fees for memberships in such clubs and organizations as Executive
and the Company shall mutually agree are necessary and appropriate for business
purposes, and his travel and entertainment expenses incurred in connection with
the performance of his duties under this Agreement, in each case upon
presentation to the Company of an itemized account of such expenses in such form
as the Company may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
-------------------------------------------------
(a) Executive shall be entitled to the severance benefits described in
section 9(b) herein in the event that his employment with the Company or the
Bank terminates during the Employment Period under any of the following
circumstances:
(i) Executive's voluntary resignation from employment with the Company
within ninety (90) days following:
Page 4 of 20
<PAGE>
(A) the failure of the Board to appoint or re-appoint or elect or
re-elect Executive to the position stated in section 3 of this
Agreement (or a more senior office of the Company) or the failure of
the Bank Board to appoint or re-appoint or elect or re-elect Executive
to the position stated in section 3 of this Agreement (or a more
senior position of the Bank);
(B) if the Executive is a member of the Board as of the date of
this Agreement, the failure of the stockholders of the Company or the
Bank to elect or re-elect Executive to the Board or a member of the
Bank Board, or the failure of the Board or the Bank Board (or the
nominating committee thereof) to nominate Executive for such election
or re-election;
(C) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Company or the Bank, as
the case may be, of its material failure, whether by amendment of the
Company's organization certificate or By-Laws, or the Bank's state
charter or By-Laws, action of the Board, Bank Board or the Company's
stockholders or otherwise, to vest in Executive the functions, duties,
or responsibilities prescribed in section 3 of this Agreement, unless,
during such thirty (30) day period, such failure is cured in a manner
determined by Executive, in his discretion, to be satisfactory; or
(D) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Company or the Bank, as
the case may be, of its material breach of any term, condition or
covenant contained in this Agreement (including, without limitation
any reduction of Executive's rate of base salary in effect from time
to time and any change in the terms and conditions of any compensation
or benefit program in which Executive participates which, either
individually or together with other changes, has a material adverse
effect on the aggregate value of his total compensation package),
unless, during such thirty (30) day period, such failure is cured in a
manner determined by Executive, in his discretion, to be satisfactory;
or
(ii) subject to the provisions of section 10, the termination of
Executive's employment with the Company for any other reason not described
in section 9(a) other than a termination of the Executive's employment for
"cause";
then, the Company shall provide (or cause the Bank or pay and provide) the
benefits and pay to Executive the amounts described in section 9(b).
(b) Upon the termination of Executive's employment with the Company
under circumstances described in section 9(a) of this Agreement, the Company
shall pay and provide (or cause the Bank to pay and provide) to Executive (or,
in the event of his death, to his estate):
Page 5 of 20
<PAGE>
(i) the portion, if any, of the compensation earned by the Executive
through the date of the termination of his employment with the Company
which remains unpaid as of such date, such payment to be made at the time
and in the manner prescribed by law applicable to the payment of wages but
in no event later than thirty (30) days after the Executive's termination
of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained by the Company and the Bank for their
officers and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long-term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for
Executive, for the Remaining Unexpired Employment Period, coverage
equivalent to the coverage to which he would have been entitled under such
plans (as in effect on the date of his termination of employment, or, if
his termination of employment occurs after a Change of Control, on the date
of such Change of Control, whichever benefits are greater), if he had
continued working for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation achieved during that
portion of the Employment Period which is prior to Executive's
termination of employment with the Company;
(iv) within thirty (30) days following his termination of employment
with the Company, a lump sum payment, in an amount equal to the present
value of the salary that Executive would have earned if he had continued
working for the Company during the Remaining Unexpired Employment Period at
the highest annual rate of salary achieved during that portion of the
Employment Period which is prior to Executive's termination of employment
with the Company, where such present value is to be determined using a
discount rate equal to the applicable short-term federal rate prescribed
under section 1274(d) of the Internal Revenue Code of 1986 ("Code"),
compounded using the compounding period corresponding to the Company's
regular payroll periods for its officers, such lump sum to be paid in lieu
of all other payments of salary provided for under this Agreement in
respect of the period following any such termination;
(v) within thirty (30) days following his termination of employment
with the Company, a lump sum payment in an amount equal to the excess, if
any, of:
(A) the present value of the aggregate benefits to which he would
be entitled under any and all qualified and non-qualified defined
benefit pension plans maintained by, or covering employees of, the
Company or the Bank, if he were 100% vested thereunder and had
continued working for the Company and the Bank during the Remaining
Unexpired
Page 6 of 20
<PAGE>
Employment Period, such benefits to be determined as of the date of
termination of employment by adding to the service actually recognized
under such plans an additional period equal to the Remaining Unexpired
Employment Period and by adding to the compensation recognized under
such plans for the year in which termination of employment occurs all
amounts payable under sections 9(b)(i), (iv), (vii), (viii) and (ix);
over
(B) the present value of the benefits to which he is actually
entitled under such defined benefit pension plans as of the date of
his termination;
where such present values are to be determined using the mortality tables
prescribed under section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly equal to the annualized rate of interest prescribed by
the Pension Benefit Guaranty Corporation for the valuation of immediate
annuities payable under terminating single-employer defined benefit plans
for the month in which Executive's termination of employment occurs
("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of employment
with the Company, a lump sum payment in an amount equal to the present
value of the additional employer contributions (or if greater in the case
of a leveraged employee stock ownership plan or similar arrangement, the
additional assets allocable to him through debt service, based on the fair
market value of such assets at termination of employment) to which he would
have been entitled under any and all qualified and non-qualified defined
contribution plans maintained by, or covering employees of, the Company or
the Bank, as if he were 100% vested thereunder and had continued working
for the Company and the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of compensation achieved during that
portion of the Employment Period which is prior to the Executive's
termination of employment with the Company, and making the maximum amount
of employee contributions, if any, required under such plan or plans, such
present value to be determined on the basis of a discount rate, compounded
using the compounding period that corresponds to the frequency with which
employer contributions are made to the relevant plan, equal to the
Applicable PBGC Rate;
(vii) within thirty (30) days following his termination of employment
with the Company, the payments that would have been made to Executive under
any cash bonus or long-term or short-term cash incentive compensation plan
maintained by, or covering employees of, the Company or the Bank if he had
continued working for the Company and the Bank during the Remaining
Unexpired Employment Period and had earned the maximum bonus or incentive
award in each calendar year that ends during the Remaining Unexpired
Employment Period, such payments to be equal to the product of:
Page 7 of 20
<PAGE>
(A) the maximum percentage rate at which an award was ever
available to Executive under such incentive compensation plan;
multiplied by
(B) the salary that would have been paid to Executive during each
such calendar year at the highest annual rate of salary achieved
during that portion of the Employment Period which is prior to
Executive's termination of employment with the Company;
(viii) at the election of the Executive made within thirty (30) days
following his termination of employment with the Company, upon the
surrender of options or appreciation rights issued to Executive under any
stock option and appreciation rights plan or program maintained by, or
covering employees of, the Company or the Bank, a lump sum payment in an
amount equal to the product of:
(A) the excess of (I) the fair market value of a share of stock
of the same class as the stock subject to the option or appreciation
right, determined as of the date of termination of employment, over
(II) the exercise price per share for such option or appreciation
right, as specified in or under the relevant plan or program;
multiplied by
(B) the number of shares with respect to which options or
appreciation rights are being surrendered.
For purposes of this section 9(b)(viii), Executive shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees
of, the Company or the Bank, even if he is not vested under such plan or
program; and
(ix) at the election of the Executive made within thirty (30) days
fol lowing Executive's termination of employment with the Company, upon the
surrender of any shares awarded to Executive under any restricted stock
plan maintained by, or covering employees of, the Company or the Bank, a
lump sum payment in an amount equal to the product of:
(A) the fair market value of a share of stock of the same class
of stock granted under such plan, determined as of the date of
Executive's termination of employment; multiplied by
(B) the number of shares which are being surrendered.
For purposes of this section 9(b)(ix), Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by,
or covering employees of, the Company or the Bank, even if he is not vested
under such plan.
Page 8 of 20
<PAGE>
The Company and Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to Executive's efforts, if any, to
mitigate damages. The Company and Executive further agree that the Company may
condition the payments and benefits (if any) due under sections 9(b)(iii), (iv),
(v), (vi) and (vii) on the receipt of Executive's resignation from any and all
positions which he holds as an officer, director or committee member with
respect to the Company, the Bank or any subsidiary or affiliate of either of
them.
SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
-------------------------------------------------
In the event that Executive's employment with the Company shall
terminate during the Employment Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes of
this Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease and desist order, or any material breach of this Agreement, in each
case as measured against standards generally prevailing at the relevant
time in the savings and community banking industry;
(b) Executive's voluntary resignation from employment with the Company
for reasons other than those specified in section 9(a);
(c) Executive's death; or
(d) a determination that Executive is eligible for long-term
disability benefits under the Company's or Bank's long-term disability
insurance program or, if there is no such program, under the federal Social
Security Act;
then the Company shall have no further obligations under this Agreement, other
than the payment to Executive (or, in the event of his death, to his estate) of
the portion, if any, of the salary earned by the Executive through the date of
his termination of employment with the Company which remains unpaid as of such
date and the provision of such other benefits, if any, to which he is entitled
as a former employee under the employee benefit plans and programs and
compensation plans and programs maintained by, or covering employees of, the
Company or the Bank.
(e) For purposes of section 10(a), no act or failure to act, on the
part of Executive, shall be considered "willful" unless it is done, or omitted
to be done, by Executive in bad faith or without reasonable belief that
Executive's action or omission was in the best interests of the Company and its
affiliates. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the written advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good
Page 9 of 20
<PAGE>
faith and in the best interests of the Company. The cessation of employment of
Executive shall not be deemed to be for "cause" within the meaning of section
10(a) unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of three-fourths of the non-
employee members of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to Executive and Executive is given
an opportunity, together with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, Executive is guilty of the conduct
described in section 10(a) above, and specifying the particulars thereof in
detail.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
-------------------------------------------------
(a) A Change of Control of the Company ("Change of Control") shall be
deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a transaction that
would result in the reorganization, merger or consolidation of the Company,
respectively, with one or more other persons, other than a transaction
following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended "Exchange Act") in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Company; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of the
Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by
the stockholders of the Company of any transaction which would result in
such an acquisition;
Page 10 of 20
<PAGE>
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation
or dissolution;
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board of the Company do not belong to
any of the following groups:
(A) individuals who were members of the Board of the Company on
the date of this Agreement; or
(B) individuals who first became members of the Board of the
Company after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Company by affirmative vote of three-quarters of the members of
such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of the Company to
serve as a member of the Board of the Company, but only if
nominated for election by affirmative vote of three-quarters of
the members of the Board of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Company; or
(v) any event which would be described in section 11(a)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein or any event that results in a "Change of Control of the Bank"
within the meaning of the "Change in Bank Control Act" and the rules and
regulations promulgated by the Federal Deposit Insurance Agency ("FDIC") or
the Massachusetts Division of Banks as of the date hereof.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 11(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
Page 11 of 20
<PAGE>
(b) In the event of a Change of Control, Executive shall be entitled
to the payments and benefits contemplated by section 9(b) in the event of his
termination employment with the Company under any of the circumstances described
in section 9(a) of this Agreement or under any of the following circumstances:
(i) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following his demotion, loss of title, office
or significant authority or responsibility, or following any reduction in
any element of his package of compensation and benefits;
(ii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following any relocation of his principal
place of employment or any change in working conditions at such principal
place of employment which Executive, in his reasonable discretion,
determines to be embarrassing, derogatory or otherwise adverse;
(iii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following the failure of any successor to the
Company in the Change of Control to include Executive in any compensation
or benefit program maintained by it or covering any of its executive
officers, unless Executive is already covered by a substantially similar
plan of the Company which is at least as favorable to him; or
(iv) resignation, voluntary or otherwise, for any reason whatsoever
following the effective date of the Change of Control.
SECTION 12. TAX INDEMNIFICATION.
-------------------
(a) This section 12 shall apply if Executive's employment is
terminated upon or following (i) a Change of Control (as defined in section 11
of this Agreement); or (ii) a change "in the ownership or effective control" of
the Company or the Bank or "in the ownership of a substantial portion of the
assets" of the Company or the Bank within the meaning of section 280G of the
Code. If this section 12 applies, then, if for any taxable year, Executive
shall be liable for the payment of an excise tax under section 4999 of the Code
with respect to any payment in the nature of compensation made by the Company,
the Bank or any direct or indirect subsidiary or affiliate of the Company or the
Bank to (or for the benefit of) Executive, it shall be the sole obligation and
responsibility of the Company to pay to Executive an amount equal to X, deter-
mined under the following formula:
E x P
X = ------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
Page 12 of 20
<PAGE>
where
E = the rate at which the excise tax is assessed under section 4999
of the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section 12;
FI = the highest marginal rate of income tax applicable to Executive
under the Code for the taxable year in question;
SLI = the sum of the highest marginal rates of income tax applicable
to Executive under all applicable state and local laws for the
taxable year in question; and
M = the highest marginal rate of Medicare tax applicable to
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement, or otherwise,
and on which an excise tax under section 4999 of the Code will be assessed,
the payment determined under this section 12(a) shall be made to Executive on
the earlier of (i) the date the Company, the Bank or any direct or indirect
subsidiary or affiliate of the Company or the Bank is required to withhold such
tax, or (ii) the date the tax is required to be paid by Executive.
(b) Notwithstanding anything in this section 12 to the contrary, in
the event that Executive's liability for the excise tax under section 4999 of
the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in section 12(a), Executive or the Company, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally determined, an appropriate amount, plus interest, such that the
payment made under section 12(a), when increased by the amount of the payment
made to Executive under this section 12(b) by the Company, or when reduced by
the amount of the payment made to the Company under this section 12(b) by
Executive, equals the amount that should have properly been paid to Executive
under section 12(a). The interest paid under this section 12(b) shall be
determined at the rate provided under section 1274(b)(2)(B) of the Code. To
confirm that the proper amount, if any, was paid to Executive under this section
12, Executive shall furnish to the Company a copy of each tax return which
reflects a liability for an excise tax payment made by the Company, at least 20
days before the date on which such return is required to be filed with the
Internal Revenue Service.
SECTION 13. CONFIDENTIALITY.
---------------
Unless he obtains the prior written consent of the Company, Executive
shall keep confidential and shall refrain from using for the benefit of himself,
or any person or entity other than the Company or any entity which is a
subsidiary of the Company or of which the Company
Page 13 of 20
<PAGE>
is a subsidiary, any material document or information obtained from the Company,
or from its parent or subsidiaries, in the course of his employment with any of
them concerning their properties, operations or business (unless such document
or information is readily ascertainable from public or published information or
trade sources or has otherwise been made available to the public through no
fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); provided, however, that nothing in this section 13
shall prevent Executive, with or without the Company's consent, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding to the extent
that such participation or disclosure is required under applicable law.
SECTION 14. SOLICITATION.
------------
Executive hereby covenants and agrees that, for a period of one (1)
year following his termination of employment with the Company, he shall not,
without the written consent of the Company, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Company, the Bank
or any affiliate, as of the date of this Agreement, of either of them, to
terminate his or her employment and accept employment or become affiliated
with, or provide services for compensation in any capacity whatsoever to,
any savings bank, cooperative bank, credit union, savings and loan
association, bank, bank company, savings and loan company, or other
institution engaged in the business of accepting deposits and making loans,
having its principal place of business in Middlesex County, as of the date
of this Agreement;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, cooperative bank, credit
union, savings and loan association, bank, bank company, savings and loan
company, or other institution engaged in the business of accepting deposits
and making loans, having its principal place of business in Middlesex
County, as of the date of this Agreement, that is intended, or that a
reasonable person acting in like circumstan ces would expect, to have the
effect of causing any officer or employee of the Company, the Bank, or any
affiliate, as of the date of this Agreement, of either of them, to
terminate his employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any
savings bank, cooperative bank, credit union, savings and loan association,
bank, bank company, savings and loan company, or other institution
engaged in the business of accepting deposits and making loans, having its
principal place of business in Middlesex County, as of the date of this
Agreement; or
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances
Page 14 of 20
<PAGE>
would expect, to have the effect of causing any customer of the Company to
terminate an existing business or commercial relationship with the Company.
SECTION 15. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
-----------------------------------------------
The termination of Executive's employment during the term of this
Agreement or thereafter, whether by the Company or by Executive, shall have no
effect on the rights and obligations of the parties hereto under the Company's
or Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Company or the Bank from time to time.
SECTION 16. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company and its successors and assigns, including any successor by merger
or consolidation or a statutory receiver or any other person or firm or
corporation to which all or substantially all of the assets and business of the
Company may be sold or otherwise transferred. Failure of the Company to obtain
from any successor its express written assumption of the Company's obligations
hereunder at least sixty (60) days in advance of the scheduled effective date of
any such succession shall be deemed a material breach of this Agreement.
SECTION 17. NOTICES.
-------
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
Mr. Robert H. Surabian
35 Hollywood Road
Winchester, Massachusetts 01890
Page 15 of 20
<PAGE>
If to the Company:
Mystic Financial, Inc.
60 High Street
Medford, Massachusetts 02155
Attention: Board of Directors -- Non-Employee Directors
--------------------------------------------
with a copy to:
Thacher Proffitt & Wood
1500 K Street, N.W., Suite 200
Washington, D.C. 20005
Attention: Richard A. Schaberg, Esq.
------------------------
SECTION 18. INDEMNIFICATION FOR ATTORNEYS' FEES.
-----------------------------------
The Company shall indemnify, hold harmless and defend Executive
against reasonable costs, including legal fees, incurred by him in connection
with or arising out of any action, suit or proceeding in which he may be
involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement; provided, however, that Executive shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Company's obligations hereunder shall be conclusive evidence of Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.
SECTION 19. SEVERABILITY.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 20. WAIVER.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against whom
its enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Page 16 of 20
<PAGE>
SECTION 21. COUNTERPARTS.
------------
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 22. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and to be performed entirely
within the Commonwealth of Massachusetts.
SECTION 23. HEADINGS AND CONSTRUCTION.
-------------------------
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
SECTION 24. ENTIRE AGREEMENT; MODIFICATIONS.
-------------------------------
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or rep resentations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 25. NON-DUPLICATION.
---------------
In the event that Executive shall perform services for the Bank or any
other direct or indirect subsidiary of the Company, any compensation or benefits
provided to Executive by such other employee shall be applied to offset the
obligations of the Company hereunder, it being intended that this Agreement set
forth the aggregate compensation and benefits payable to Executive for all
services to the Company and all of its direct or indirect subsidiaries,
including the Bank.
SECTION 26. REQUIRED REGULATORY PROVISIONS.
------------------------------
(a) Notwithstanding anything herein contained to the contrary, any
payments to Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. (S)1828(k), and any
regulations promulgated thereunder.
(b) Notwithstanding anything herein to the contrary, any payments to
the Executive by the Bank, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with the following laws, rules
and regulations applicable to the Bank:
Page 17 of 20
<PAGE>
(i) In no event shall the aggregate amount of compensation payable by
the Bank to the Executive under section 9(b) hereof (exclusive of amounts
described in section 9(b)(i), (viii) and (ix)) exceed 2.99 times the
Executive's average annual total compensation for the last five consecutive
calendar years to end prior to his termination of employment with the
Company and the Bank (or for his entire period of employment with the
Company and the Bank if less than five calendar years).
(ii) All payments to the Executive by the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI
Act"), 12 U.S.C. (S)1828(k), and any regulations promulgated thereunder.
(iii) Notwithstanding anything herein contained to the contrary, if
the Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank pursuant to a
notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
(S)1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service of such notice, unless stayed
by appropriate proceedings. If the charges in such notice are dismissed,
the Bank, in its discretion, may (A) pay to the Executive all or part of
the compensation withheld while the Bank's obligations hereunder were
suspended and (B) reinstate, in whole or in part, any of the obligations
which were suspended.
(iv) Notwithstanding anything herein contained to the contrary, if the
Executive is removed and/or permanently prohibited from participating in
the conduct of the Bank's affairs by an order issued under section 8(e)(4)
or 8(g)(1) of the FDI Act, 12 U.S.C. (S)1818(e)(4) or (g)(1), all
prospective obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights and obligations of
the Bank and the Executive shall not be affected.
(v) Notwithstanding anything herein contained to the contrary, if the
Bank is in default (within the meaning of section 3(x)(1) of the FDI Act,
12 U.S.C. (S)1813(x)(1), all prospective obligations of the Bank under this
Agreement shall terminate as of the date of default, but vested rights and
obligations of the Bank and the Executive shall not be affected.
(vi) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Bank hereunder shall be terminated, except
to the extent that a continuation of this Agreement is necessary for the
continued operation of the Bank: (A) by the Commissioner of the
Massachusetts Division of Banks or his designee or the FDIC, at the time
the FDIC enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in section 13(c) of the FDI Act, 12
U.S.C. (S)1823(c); (B) by the Commissioner of the Massachusetts Division of
Banks or his designee at the time the Commissioner or his designee approves
a supervisory merger to resolve problems related to the
Page 18 of 20
<PAGE>
operation of the Bank or when the Bank is determined by the Commissioner to
be in an unsafe or unsound condition. The vested rights and obligations of
the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement. If, and
to the extent, the Bank is unable to satisfy payments due under this Agreement
as the result of compliance with any of the foregoing laws, rules and
regulations, the Company shall be responsible for satisfying all such
obligations.
SECTION 27. COMPANY AND AFFILIATES.
----------------------
The Company may satisfy its obligations under this Agreement either
directly or indirectly through one or more direct or indirect subsidiaries or
affiliates. The Executive agrees that this Agreement requires that the
Executive make his services available to the Company, the Bank and their
respective direct or indirect subsidiaries or affiliates as determined by the
respective Boards of Directors of the Company and the Bank within the terms and
conditions set forth in this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and Executive has hereunto set his hand, all as of the day and year
first above written.
-------------------------------------------
ROBERT H. SURABIAN
ATTEST: MYSTIC FINANCIAL, INC.
By
---------------------------
Secretary By
-----------------------------------------
Name:
Title:
[Seal]
Page 19 of 20
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came ROBERT H. SURABIAN, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that he resides at the address set forth in said instrument,
and that he signed his name to the foregoing instrument.
-------------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came _____________________________, to me known, who, being by me
duly sworn, did depose and say that he resides at
_____________________________________________________, that he is a member of
the Board of Directors of MYSTIC FINANCIAL, INC., the Delaware corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such seal; that
it was so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
-------------------------------------
Notary Public
Page 20 of 20
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
______________, 1997, by and between MYSTIC FINANCIAL, INC., a publicly-held
business corporation organized and operating under the laws of the State of
Delaware and having an office at 60 High Street, Medford, Massachusetts 02155
("Company") and RALPH W. DUNHAM, an individual residing at 8 Peach Tree Path,
Andover, Massachusetts 01810 ("Executive"). Any reference to "Bank" herein
shall mean Medford Co-Operative Bank, a wholly-owned subsidiary of the Company,
or any successor thereto.
W I T N E S S E T H :
-------------------
WHEREAS, Executive currently serves the Company and the Bank in the
capacity of Executive Vice President and Chief Financial Officer; and
WHEREAS, effective as of the date of this Agreement, the Bank has
converted from a state-chartered mutual cooperative bank to a state chartered
capital stock cooperative bank and has become the wholly-owned subsidiary of the
Company; and
WHEREAS, the Company desires to assure for itself and for the Bank the
continued availability of Executive's services and the ability of Executive to
perform such services with a minimum of personal distraction in the event of a
pending or threatened Change of Control (as hereinafter defined); and
WHEREAS, Executive is willing to continue to serve the Company and the
Bank on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company and Executive hereby
agree as follows:
SECTION 1. EMPLOYMENT.
----------
The Company agrees to continue to employ Executive, and Executive
hereby agrees to such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
-------------------------------------------------
PERIOD.
- ------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The
<PAGE>
Employment Period shall be for an initial term of three (3) years beginning on
the date of this Agreement. Upon the first anniversary of the date of this
Agreement (an "Anniversary Date"), and on each Anniversary Date occurring
thereafter, the Board of Directors of the Holding Company ("Board") shall review
the terms of this Agreement and the Executive's performance of services
hereunder and may, in the absence of objection from the Executive, approve an
extension of the Employment Agreement pursuant to a resolution duly adopted by
the members of the Board.
(b) For all purposes of this Agreement, the term "Remaining Unexpired
Employment Period" as of any date shall mean the period beginning on such date
and ending on the Anniversary Date on which the Employment Period (as it may be
extended pursuant to section 2(a) of this Agreement) is then scheduled to
expire.
(c) Nothing in this Agreement shall be deemed to prohibit the Company
at any time from terminating the Executive's employment during the Employment
Period with or without notice for any reason; provided, however, that the
relative rights and obligations of the Company and the Executive in the event of
any such termination shall be determined under this Agreement.
(d) Nothing in this Agreement shall be deemed to prohibit the
Executive at any time from terminating his employment during the Employment
Period with or without notice for any reason; provided, however, that the
relative rights and obligations of the Company and the Executive in the event of
any such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
------
Executive shall serve as the Executive Vice President and Chief
Financial Officer of the Company and as the Executive Vice President and Chief
Financial Officer of the Bank, having such power, authority and responsibility
and performing such duties as are prescribed by or under the By-Laws of the
Company and the Bank and as are customarily associated with such positions.
Executive shall devote his full business time and attention (other than during
weekends, holidays, approved vacation periods, and periods of illness or
approved leaves of absence) to the business and affairs of the Company and the
Bank and shall use his best efforts to advance the interests of the Company and
the Bank.
SECTION 4. CASH COMPENSATION.
-----------------
In consideration for the services to be rendered by Executive
hereunder, the Company shall pay (or shall cause the Bank to pay) to him a
salary at an initial annual rate of NINETY-SIX THOUSAND, FOUR HUNDRED AND EIGHT
DOLLARS ($96,408.00), payable in approximately equal installments in accordance
with the Company's or Bank's customary payroll practices for senior officers.
The Board shall review Executive's annual rate of salary at such times during
the Employment Period as it deems appropriate, but not less frequently than once
every twelve months, and may, in its discretion, approve an increase in the
Executive's annual rate of salary. In addition to salary, Executive may receive
other cash compensation from the Company or the Bank for services hereunder at
such times, in such amounts and on such terms and conditions as the Board of
Directors of the Company ("Board"),
-Page 2 of 19-
<PAGE>
or the Board of Directors of the Bank ("Bank Board"), as applicable, may
determine from time to time.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
-----------------------------------
During the Employment Period, Executive shall be treated as an
employee of the Company and the Bank and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long-term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company or the Bank, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and programs and
consistent with the Company's and Bank's customary practices. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
SECTION 6. INDEMNIFICATION AND INSURANCE.
-----------------------------
(a) During the Employment Period and for a period of six (6) years
thereafter, the Company shall cause Executive to be covered by and named as an
insured under any policy or contract of insurance obtained by it or the Bank to
insure its directors and officers against personal liability for acts or
omissions in connection with service as an officer or director of the Company or
the Bank or service in other capacities at the request of the Company or the
Bank. The coverage provided to Executive pursuant to this section 6 shall be of
the same scope and on the same terms and conditions as the coverage (if any)
provided to other officers or directors of the Company and the Bank.
(b) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six (6) years thereafter, the Company
shall indemnify Executive against and hold him harmless from any costs,
liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company, the Bank, or any subsidiary or affiliate
thereof.
SECTION 7. OUTSIDE ACTIVITIES.
------------------
Executive shall be permitted to serve as a member of the boards of
directors of non-competing business, community and charitable organizations;
provided that service by the Executive on such boards shall be subject to the
approval of the Board of the Company (which approval shall not be unreasonably
withheld); and, provided, further, that such service shall not materially
interfere with the Executive's performance of his duties under this Agreement.
In addition, during the Employment Period, the Executive may engage in the
personal business and investment activities set forth in Appendix A hereto;
provided, that such activities do not materially interfere with the performance
of his duties hereunder; and, provided, further, that such activities are not
prohibited under any code of conduct or investment or securities trading policy
-Page 3 of 19-
<PAGE>
established by the Company and generally applicable to all similarly situated
executives. Executive may also serve as an officer or director of the Bank on
such terms and conditions as the Company and the Bank may mutually agree upon,
and such service shall not be deemed to materially interfere with Executive's
performance of his duties hereunder or otherwise result in a material breach of
this Agreement. If Executive is discharged or suspended, or is subject to any
regulatory prohibition or restriction including but not limited to those set
forth in section 27(b)(iii) hereof, with respect to participation in the affairs
of the Bank, he shall continue to perform services for the Company in accordance
with this Agreement but shall not directly or indirectly provide services to or
participate in the affairs of the Bank in a manner inconsistent with the terms
of such discharge or suspension or any applicable regulatory order.
SECTION 8. WORKING FACILITIES AND EXPENSES.
-------------------------------
Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other location
within Middlesex County at which the Company shall maintain its principal
executive offices, or at such other location as the Company and Executive may
mutually agree upon. The Company shall provide or cause the Bank to provide the
Executive at his principal place of employment with a private office,
secretarial services, and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, fees for memberships in such clubs and organizations as
Executive and the Company shall mutually agree are necessary and appropriate for
business purposes, and his travel and entertainment expenses incurred in
connection with the performance of his duties under this Agreement, in each case
upon presentation to the Company of an itemized account of such expenses in such
form as the Company may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
-------------------------------------------------
(a) Executive shall be entitled to the severance benefits described in
section 9(b) herein in the event that his employment with the Company or the
Bank terminates during the Employment Period under any of the following
circumstances:
(i) Executive's voluntary resignation from employment with the Company
within ninety (90) days following:
(A) the failure of the Board to appoint or re-appoint or elect or
re-elect Executive to the position stated in section 3 of this
Agreement (or a more senior office of the Company) or the failure of
the Bank Board to appoint or re-appoint or elect or re-elect Executive
to the position stated in section 3 of this Agreement (or a more
senior position of the Bank);
(B) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Company or the Bank, as
the case may be, of its material failure, whether by amendment of the
Company's organization certificate or By-Laws, or the Bank's state
charter
-Page 4 of 19-
<PAGE>
or By-Laws, action of the Board, Bank Board or the Company's
stockholders or otherwise, to vest in Executive the functions, duties,
or responsibilities prescribed in section 3 of this Agreement, unless,
during such thirty (30) day period, such failure is cured in a manner
determined by Executive, in his discretion, to be satisfactory; or
(C) the expiration of a thirty (30) day period following the date
on which Executive gives written notice to the Company or the Bank, as
the case may be, of its material breach of any term, condition or
covenant contained in this Agreement (including, without limitation
any reduction of Executive's rate of base salary in effect from time
to time and any change in the terms and conditions of any compensation
or benefit program in which Executive participates which, either
individually or together with other changes, has a material adverse
effect on the aggregate value of his total compensation package),
unless, during such thirty (30) day period, such failure is cured in a
manner determined by Executive, in his discretion, to be satisfactory;
or
(ii) subject to the provisions of section 10, the termination of
Executive's employment with the Company for any other reason not described
in section 9(a) other than a termination of the Executive's employment for
"cause";
then, the Company shall provide (or cause the Bank or pay and provide) the
benefits and pay to Executive the amounts described in section 9(b).
(b) Upon the termination of Executive's employment with the Company
under circumstances described in section 9(a) of this Agreement, the Company
shall pay and provide (or cause the Bank to pay and provide) to Executive (or,
in the event of his death, to his estate):
(i) the portion, if any, of the compensation earned by the Executive
through the date of his termination of employment with the Company which
remains unpaid as of such date, such payment to be made at the time and in
the manner prescribed by law applicable to the payment of wages but in no
event later than thirty (30) days after the Executive's termination of
employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and pro grams maintained by the Company and the Bank for their
officers and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long-term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for
Executive, for the Remaining Unexpired Employment Period, coverage
equivalent to the coverage to which he would have been entitled under such
plans (as in effect on the date of his termination of employment, or, if
his
-Page 5 of 19-
<PAGE>
termination of employment occurs after a Change of Control, on the date of
such Change of Control, whichever benefits are greater), if he had
continued working for the Company during the Remaining Unexpired Employment
Period at the highest annual rate of compensation achieved during that
portion of the Employment Period which is prior to Executive's termination
of employment with the Company; and
(iv) within thirty (30) days following his termination of employment
with the Company, a lump sum payment, in an amount equal to the present
value of the salary that Executive would have earned if he had continued
working for the Company during the Remaining Unexpired Employment Period at
the highest annual rate of salary achieved during that portion of the
Employment Period which is prior to Executive's termination of employment
with the Company, where such present value is to be determined using a
discount rate equal to the applicable short-term federal rate prescribed
under section 1274(d) of the Internal Revenue Code of 1986 ("Code"),
compounded using the compounding period corresponding to the Company's
regular payroll periods for its officers, such lump sum to be paid in lieu
of all other payments of salary provided for under this Agreement in
respect of the period following any such termination; provided, however,
that in the event the Executive's employment with the Company terminates
following a Change in Control (as such term is defined in section 11(a)
hereof) under any of the circumstances described in either section 9(a) or
section 11(b) hereof then, for purposes of calculating the lump sum amount
payable to the Executive under this subsection 9(b)(iv), the "Remaining
Unexpired Employment Period" shall be deemed to be a thirty-six consecutive
month period;
The Company and Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to Executive's efforts, if any, to
mitigate damages. The Company and Executive further agree that the Company may
condition the payments and benefits (if any) due under section 9(b)(iii) and
(iv) on the receipt of Executive's resignation from any and all positions which
he holds as an officer, director or committee member with respect to the
Company, the Bank or any subsidiary or affiliate of either of them.
SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
-------------------------------------------------
In the event that Executive's employment with the Company shall
terminate during the Employment Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes of
this Agreement shall mean personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic
-Page 6 of 19-
<PAGE>
violations or similar offenses) or final cease and desist order, or any
material breach of this Agreement, in each case as measured against
standards generally prevailing at the relevant time in the savings and
community banking industry;
(b) Executive's voluntary resignation from employment with the Company
for reasons other than those specified in section 9(a);
(c) Executive's death; or
(d) a determination that Executive is eligible for long-term
disability benefits under the Company's or Bank's long-term disability
insurance program or, if there is no such program, under the federal Social
Security Act;
then the Company shall have no further obligations under this Agreement, other
than the payment to Executive (or, in the event of his death, to his estate) of
the portion, if any, of the salary earned by the Executive through the date of
his termination of employment with the Company which remains unpaid as of such
date and the provision of such other benefits, if any, to which he is entitled
as a former employee under the employee benefit plans and programs and
compensation plans and programs maintained by, or covering employees of, the
Company or the Bank.
(e) For purposes of section 10(a), no act or failure to act, on the
part of Executive, shall be considered "willful" unless it is done, or omitted
to be done, by Executive in bad faith or without reasonable belief that
Executive's action or omission was in the best interests of the Company and its
affiliates. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the written advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.
The cessation of employment of Executive shall not be deemed to be for "cause"
within the meaning of section 10(a) unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of three-fourths of the non-employee members of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to Executive and Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that, in the good faith opinion of the Board,
Executive is guilty of the conduct described in section 10(a) above, and
specifying the particulars thereof in detail.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
-------------------------------------------------
(a) A Change of Control of the Company ("Change of Control") shall be
deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a transaction that
would result in the reorganization, merger or consolidation of the Company,
respectively, with one or more other persons, other than a transaction
following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning
-Page 7 of 19-
<PAGE>
of Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended "Exchange Act" ) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Company; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(ii) the acquisition of all or substantially all of the assets of the
Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by
the stockholders of the Company of any transaction which would result in
such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation
or dissolution;
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board do not belong to any of the
following groups:
(A) individuals who were members of the Board of the Company on
the date of this Agreement; or
(B) individuals who first became members of the Board of the
Company after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Company by affirmative vote of three-quarters of the members of
such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of the Company to
serve as a member of the Board of the Company, but only if
nominated for election by affirmative vote of three-quarters of
the members of the Board of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
-Page 8 of 19-
<PAGE>
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Company; or
(v) any event which would be described in section 11(a)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein or any event that results in a "Change of Control of the Bank"
within the meaning of the "Change in Bank Control Act" and the rules and
regulations promulgated by the Federal Deposit Insurance Agency ("FDIC") or
the Massachusetts Division of Banks as of the date hereof.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 11(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change of Control, Executive shall be entitled
to the payments and benefits contemplated by section 9(b) in the event of his
termination of employment with the Company under any of the circumstances
described in section 9(a) of this Agreement or under any of the following
circumstances:
(i) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following his demotion, loss of title, office
or significant authority or responsibility, or following any reduction in
any element of his package of compensation and benefits;
(ii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following any relocation of his principal
place of employment or any change in working conditions at such principal
place of employment which Executive, in his reasonable discretion,
determines to be embarrassing, derogatory or otherwise adverse;
(iii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following the failure of any successor to the
Company in the Change of Control to include Executive in any compensation
or benefit program maintained by it or covering any of its executive
officers, unless Executive is already covered by a substantially similar
plan of the Company which is at least as favorable to him; or
(iv) resignation, voluntary or otherwise, for any reason whatsoever
following the effective date of the Change of Control.
-Page 9 of 19-
<PAGE>
SECTION 12. TAX INDEMNIFICATION.
-------------------
(a) This section 12 shall apply if Executive's employment is
terminated upon or following (i) a Change of Control (as defined in section 11
of this Agreement); or (ii) a change "in the ownership or effective control" of
the Company or the Bank or "in the ownership of a substantial portion of the
assets" of the Company or the Bank within the meaning of section 280G of the
Code. If this section 12 applies, then, if for any taxable year, Executive
shall be liable for the payment of an excise tax under section 4999 of the
Internal Revenue Code of 1986, as amended ("Code") with respect to any payment
in the nature of compensation made by the Company, the Bank or any direct or
indirect subsidiary or affiliate of the Company or the Bank to (or for the
benefit of) Executive, it shall be the sole obligation and responsibility of the
Company to pay to Executive an amount equal to X, determined under the following
formula:
X = E x P
---------------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under section 4999
of the Code;
P = the amount with respect to which such excise tax is assessed,
determined without regard to this section 12;
FI = the highest marginal rate of income tax applicable to Executive
under the Code for the taxable year in question;
SLI = the sum of the highest marginal rates of income tax applicable
to Executive under all applicable state and local laws for the
taxable year in question; and
M = the highest marginal rate of Medicare tax applicable to
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement, or otherwise,
and on which an excise tax under sec tion 4999 of the Code will be assessed,
the payment determined under this section 12(a) shall be made to Executive on
the earlier of (i) the date the Company, the Bank or any direct or indirect
subsidiary or affiliate of the Company or the Bank is required to withhold such
tax, or (ii) the date the tax is required to be paid by Executive.
(b) Notwithstanding anything in this section 12 to the contrary, in
the event that Executive's liability for the excise tax under section 4999 of
the Code for a taxable year is subsequently determined to be different than
the amount determined by the formula (X + P) x E, where X, P and E have the
meanings provided in section 12(a), Executive or the Company, as the case may
be, shall pay to the other party at the time that the amount of such excise tax
is finally
-Page 10 of 19-
<PAGE>
determined, an appropriate amount, plus interest, such that the payment made
under section 12(a), when increased by the amount of the payment made to
Executive under this section 12(b) by the Company, or when reduced by the amount
of the payment made to the Company under this section 12(b) by Executive, equals
the amount that should have properly been paid to Executive under section 12(a).
The interest paid under this section 12(b) shall be determined at the rate
provided under section 1274(b)(2)(B) of the Code. To confirm that the proper
amount, if any, was paid to Executive under this section 12, Executive shall
furnish to the Company a copy of each tax return which reflects a liability for
an excise tax payment made by the Company, at least 20 days before the date on
which such return is required to be filed with the Internal Revenue Service.
SECTION 13. CONFIDENTIALITY.
---------------
Unless he obtains the prior written consent of the Company, Executive
shall keep confidential and shall refrain from using for the benefit of himself,
or any person or entity other than the Company or any entity which is a
subsidiary of the Company or of which the Company is a subsidiary, any material
document or information obtained from the Company, or from its parent or
subsidiaries, in the course of his employment with any of them concerning their
properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 13 shall prevent Executive, with
or without the Company's consent, from participating in or disclosing documents
or information in connection with any judicial or administrative investigation,
inquiry or proceeding to the extent that such participation or disclosure is
required under applicable law.
SECTION 14. SOLICITATION.
------------
Executive hereby covenants and agrees that, for a period of one (1)
year following his termination of employment with the Company, he shall not,
without the written consent of the Company, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Company, the Bank
or any affiliate, as of the date of this Agreement, of either of them, to
terminate his or her employment and accept employment or become affiliated
with, or provide services for compensation in any capacity whatsoever to,
any savings bank, cooperative bank, credit union, savings and loan
association, bank, bank company, savings and loan company, or other
institution engaged in the business of accepting deposits and making loans,
having its principal place of business in Middlesex County, as of the date
of this Agreement;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, cooperative bank, credit
union, savings and loan association, bank, bank company, savings and loan
company, or other institution engaged in the business of accepting deposits
and making loans,
-Page 11 of 19-
<PAGE>
having its principal place of business in Middlesex County, as of the date
of this Agreement that is intended, or that a reasonable person acting in
like circumstances would expect, to have the effect of causing any officer
or employee of the Company, the Bank, or any affiliate, as of the date of
this Agreement, of either of them, to terminate his employment and accept
employment or become affiliated with, or provide services for compensation
in any capacity whatsoever to, any savings bank, cooperative bank, credit
union, savings and loan association, bank, bank company, savings and loan
company, or other institution engaged in the business of accepting deposits
and making loans, having its principal business in Middlesex County, as of
the date of this Agreement; or
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of
the Company to terminate an existing business or commercial relationship
with the Company.
SECTION 15. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
-----------------------------------------------
The termination of Executive's employment during the term of this
Agreement or thereafter, whether by the Company or by Executive, shall have no
effect on the rights and obligations of the parties hereto under the Company's
or Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Company or the Bank from time to time.
SECTION 16. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributees, and
the Company and its successors and as signs, including any successor by merger
or consolidation or a statutory receiver or any other person or firm or
corporation to which all or substantially all of the assets and business of the
Company may be sold or otherwise transferred. Failure of the Company to obtain
from any successor its express written assumption of the Company's obligations
hereunder at least sixty (60) days in advance of the scheduled effective date of
any such succession shall be deemed a material breach of this Agreement.
SECTION 17. NOTICES.
-------
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
-Page 12 of 19-
<PAGE>
If to Executive:
Mr. Ralph W. Dunham
8 Peach Tree Path
Andover, Massachusetts 01810
If to the Company:
Mystic Financial, Inc.
60 High Street
Medford, Massachusetts 02155
Attention: Board of Directors -- Non-Employee Directors
--------------------------------------------
with a copy to:
Thacher Proffitt & Wood
1500 K Street, N.W., Suite 200
Washington, D.C. 20005
Attention: Richard A. Schaberg, Esq.
------------------------
SECTION 18. RESOLUTIONS OF DISPUTES.
-----------------------
If any dispute arising out of, under, or in connection with, this
Agreement cannot be settled through negotiation by the parties hereto, the
Company and the Executive hereby agree that such dispute shall be settled
through mediation in accordance with the Commercial Mediation Rules of the
American Arbitration Association in a proceeding to be held in Boston,
Massachusetts. Except as provided in section 19 hereof, the payment of all
costs, fees and expenses, including all attorneys' fees and expenses, incurred
by each party in any mediation proceeding shall be the responsibility of such
party.
SECTION 19. INDEMNIFICATION FOR ATTORNEYS' FEES.
-----------------------------------
The Company shall indemnify, hold harmless and defend Executive
against reasonable attorneys' fees and expenses, incurred by him in connection
with or arising out of any mediation proceeding in which he may be involved, as
a result of his efforts, in good faith, to defend or enforce the terms of this
Agreement; provided, however, the Company's obligation hereunder shall not be
triggered unless the Executive shall have substantially prevailed on the merits
pursuant to the order of the mediator in a mediation proceeding or in a
settlement arising out of such proceeding. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement of
the Company's obligations hereunder shall be conclusive evidence of Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.
-Page 13 of 19-
<PAGE>
SECTION 20. SEVERABILITY.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 21. WAIVER.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against whom
its enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 22. COUNTERPARTS.
------------
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 23. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and to be performed entirely
within the Commonwealth of Massachusetts.
SECTION 24. HEADINGS AND CONSTRUCTION.
-------------------------
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
SECTION 25. ENTIRE AGREEMENT; MODIFICATIONS.
-------------------------------
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 26. NON-DUPLICATION.
---------------
In the event that Executive shall perform services for the Bank or any
other direct or indirect subsidiary of the Company, any compensation or benefits
provided to Executive by such other employee shall be applied to offset the
obligations of the Company hereunder, it being intended that this Agreement set
forth the aggregate compensation and benefits payable to
-Page 14 of 19-
<PAGE>
Executive for all services to the Company and all of its direct or indirect
subsidiaries, including the Bank.
SECTION 27. REQUIRED REGULATORY PROVISIONS.
------------------------------
(a) Notwithstanding anything herein contained to the contrary, any
payments to Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. (S)1828(k), and any
regulations promulgated thereunder.
(b) Notwithstanding anything herein to the contrary, any payments to
the Executive by the Bank, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with the following laws, rules
and regulations applicable to the Bank:
(i) In no event shall the aggregate amount of compensation payable by
the Bank to the Executive under section 9(b) hereof (exclusive of amounts
described in section 9(b)(i)) exceed 2.99 times the Executive's average
annual total compensation for the last five consecutive calendar years to
end prior to his termination of employment with the Company and the Bank
(or for his entire period of employment with the Company and the Bank if
less than five calendar years).
(ii) All payments to the Executive by the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI
Act"), 12 U.S.C. (S)1828(k), and any regulations promulgated thereunder.
(iii) Notwithstanding anything herein contained to the contrary, if
the Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank pursuant to a
notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
(S)1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service of such notice, unless stayed
by appropriate proceedings. If the charges in such notice are dismissed,
the Bank, in its discretion, may (A) pay to the Executive all or part of
the compensation withheld while the Bank's obligations hereunder were
suspended and (B) reinstate, in whole or in part, any of the obligations
which were suspended.
(iv) Notwithstanding anything herein contained to the contrary, if the
Executive is removed and/or permanently prohibited from participating in
the conduct of the Bank's affairs by an order issued under section 8(e)(4)
or 8(g)(1) of the FDI Act, 12 U.S.C. (S)1818(e)(4) or (g)(1), all
prospective obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights and obligations of
the Bank and the Executive shall not be affected.
-Page 15 of 19-
<PAGE>
(v) Notwithstanding anything herein contained to the contrary, if the
Bank is in default (within the meaning of section 3(x)(1) of the FDI Act,
12 U.S.C. (S)1813(x)(1), all prospective obligations of the Bank under this
Agreement shall terminate as of the date of default, but vested rights and
obligations of the Bank and the Executive shall not be affected.
(vi) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Bank hereunder shall be terminated, except
to the extent that a continuation of this Agreement is necessary for the
continued operation of the Bank: (A) by the Commissioner of the
Massachusetts Division of Banks or his designee or the FDIC, at the time
the FDIC enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in section 13(c) of the FDI Act, 12
U.S.C. (S)1823(c); (B) by the Commissioner of the Massachusetts Division of
Banks or his designee at the time the Commissioner or his designee approves
a supervisory merger to resolve problems related to the operation of the
Bank or when the Bank is determined by the Commissioner to be in an unsafe
or unsound condition. The vested rights and obligations of the parties
shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement. If, and
to the extent, the Bank is unable to satisfy payments due under this Agreement
as the result of compliance with any of the foregoing laws, rules and
regulations, the Company shall be responsible for satisfying all such
obligations.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-Page 16 of 19-
<PAGE>
SECTION 28. COMPANY AND AFFILIATES.
----------------------
The Company may satisfy its obligations under this Agreement either
directly or indirectly through one or more direct or indirect subsidiaries or
affiliates. The Executive agrees that this Agreement requires that the
Executive make his services available to the Company, the Bank and their
respective direct or indirect subsidiaries or affiliates as determined by the
respective Boards of Directors of the Company and the Bank within the terms and
conditions set forth in this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and Executive has hereunto set his hand, all as of the day and year
first above written.
------------------------------------
RALPH W. DUNHAM
ATTEST: MYSTIC FINANCIAL, INC.
By
----------------------------
Secretary By
---------------------------------
Name:
Title:
[Seal]
-Page 17 of 19-
<PAGE>
APPENDIX A
PERMISSIBLE PERSONAL BUSINESS AND INVESTMENT ACTIVITIES
-------------------------------------------------------
The parties hereto agree the Executive may engage in the following
activities during the Employment Period pursuant to section 7 hereof:
1. The Executive may engage in any legal, certified public accounting,
investment, or other activities which do not materially interfere with the
duties of the Executive described herein and which do not represent a
conflict of interest with the Company or the Bank.
2. The Executive shall also be permitted to take Continuing Professional
Education courses necessary to meet applicable licensing requirements to
maintain current professional licenses as an attorney and professional
certified public accountant.
-Page 18 of 19-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came RALPH W. DUNHAM, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that he resides at the address set forth in said instrument,
and that he signed his name to the foregoing instrument.
------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came __________________________________, to me known, who, being by
me duly sworn, did depose and say that he resides at
_________________________________________________________, that he is a member
of the Board of Directors of MYSTIC FINANCIAL, INC., the Delaware corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such seal; that
it was so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
------------------------------
Notary Public
-Page 19 of 19-
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
_____________, 1997, by and between MEDFORD CO-OPERATIVE BANK, a state chartered
stock cooperative bank organized and operating under the laws of the
Commonwealth of Massachusetts and having an office at 60 High Street Medford,
Massachusetts 02155 ("Bank") and JOHN O'DONNELL, an individual residing at 14
Knollcrest Drive, Andover, Massachusetts 01810 ("Commercial Loan Officer").
W I T N E S S E T H :
-------------------
WHEREAS, Commercial Loan Officer currently serves the Bank in the
capacity of Vice President/Loan Origination Manager; and
WHEREAS, effective as of the date of this Agreement, the Bank has
converted from a state-chartered mutual cooperative bank to a state-chartered
stock institution and has become the wholly-owned subsidiary of Mystic
Financial, Inc. a publicly-held Delaware corporation ("Holding Company"); and
WHEREAS, the Bank desires to assure for itself the continued
availability of the Commercial Loan Officer's services on the terms and
conditions hereinafter set forth; and
WHEREAS, the Commercial Loan Officer is willing to continue to serve
the Bank on such terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Bank and the Commercial Loan
Officer hereby agree as follows:
SECTION 1. EMPLOYMENT.
----------
The Bank agrees to continue to employ the Commercial Loan Officer, and
the Commercial Loan Officer hereby agrees to such continued employment, during
the period and upon the terms and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
-------------------------------------------------
PERIOD.
- ------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
three (3) years beginning on the date of this Agreement. Upon the first
anniversary of the date of this Agreement (an "Anniversary Date"), and on each
Anniversary Date occurring thereafter, the Board of Directors of the Bank
("Board") shall review the terms of this Agreement and the Commercial Loan
Officer's performance of services hereunder and may, in the absence of objection
from the Commercial Loan Officer,
<PAGE>
approve an extension of the Employment Agreement pursuant to a resolution duly
adopted by the members of the Board.
(b) For all purposes of this Agreement, the term "Remaining Unexpired
Employment Period" as of any date shall mean the period beginning on such date
and ending on the Anniversary Date on which the Employment Period (as it may be
extended pursuant to section 2(a) of this Agreement) is then scheduled to
expire.
(c) Nothing in this Agreement shall be deemed to prohibit the Bank at
any time from terminating the Commercial Loan Officer's employment during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Bank and the Commercial Loan Officer
in the event of any such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
------
The Commercial Loan Officer shall serve as Vice President of the Bank,
having such power, authority and responsibility and performing such duties as
are prescribed by or under the By-Laws of the Bank and as are customarily
associated with such position. The Commercial Loan Officer shall devote his
full business time and attention (other than during holidays, approved vacation
periods, and periods of illness or approved leave of absence) to the business
and affairs of the Bank and shall use his best efforts to advance the interests
of the Bank.
SECTION 4. ANNUAL SALARY.
-------------
In consideration for the services to be rendered by the Commercial
Loan Officer hereunder, the Bank shall pay to him a salary at an initial annual
rate of SEVENTY-NINE THOUSAND, THREE HUNDRED AND TEN DOLLARS ($79,310.00),
payable in approximately equal installments in accordance with the Bank's
customary payroll practices for senior Commercial Loan Officers. The Board
shall review the Commercial Loan Officer's annual rate of salary at such times
as it deems appropriate, but not less frequently than once every twelve months,
and may, in its discretion, approve an increase in such annual rate of salary.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
-----------------------------------
During the Employment Period, the Commercial Loan Officer shall be
treated as an employee of the Bank and shall be eligible to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long-term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover similarly
situated employees of, the Bank, in accordance with the terms and conditions of
such employee benefit plans and programs and compensation plans and programs and
consistent with the Bank's customary practices.
Page 2 of 12-
<PAGE>
SECTION 6. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
-------------------------------------------------
(a) The Commercial Loan Officer shall be entitled to the severance
benefits described in section 6(b) in the event that (i) his employment is
terminated by the Bank during the Employment Period for any reason other than
for "cause" as defined in section 7(b) or (ii) the Commercial Loan Officer
voluntarily resigns following a "Change of Control" (as such term is defined in
section 10(a) hereof) in the manner set forth in section 10(b) hereof.
(b) Upon the termination of the Commercial Loan Officer's employment
at the Bank under the circumstances described in section 6(a)(i) or (ii) of this
Agreement, the Bank shall have no further obligations under this Agreement,
other than to pay or to provide the Commercial Loan Officer with:
(i) the compensation he has earned, but which is unpaid, as of the
date of the termination of his employment with the Bank, such payment to be
made at the time and in the manner prescribed by law applicable to the
payment of wages but in no event later than thirty (30) days after
termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained by the Bank for employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long-term disability
coverages under the plans and programs maintained by the Bank for similarly
situated employees until the earlier to occur of: (A) the date the
Commercial Loan Officer first becomes eligible for such benefit coverages
under plans or programs maintained by a subsequent employer or (B) the date
the Remaining Unexpired Employment Period terminates;
(iv) within thirty (30) days following his termination of employment
with the Bank, a lump sum payment, in an amount equal to the present value
of the salary that the Commercial Loan Officer would have earned if he had
continued working for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of salary achieved during that portion of
the Employment Period which is prior to the Commercial Loan Officer's
termination of employment with the Bank, where such present value is to be
determined using a discount rate equal to the applicable short-term federal
rate prescribed under section 1274(d) of the Internal Revenue Code of 1986
("Code"), compounded using the compounding period corresponding to the
Bank's regular payroll periods for its officers, such lump sum to be paid
in lieu of all other payments of salary provided for under this Agreement
in respect of the period following any such termination; provided, however,
that in the event the Officer's employment with the Bank terminates
following a Change of Control (as such term is defined in section 10(a)
hereof) under the circumstances described in section 6(a)(ii), then, for
purposes of calculating the lump sum amount payable to the Officer under
this subsection
Page 3 of 12-
<PAGE>
6(b)(iv), the "Remaining Unexpired Employment Period" shall be deemed to be
a thirty-six consecutive month period.
.
SECTION 7. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.
---------------------------------------------
Except as provided below, the Bank (and its affiliates) will have no
liability to Commercial Loan Officer in the event that the Commercial Loan
Officer's employment with the Bank shall terminate during the Employment Period
on account of:
(a) a voluntary resignation by the Commercial Loan Officer, other than
a voluntary resignation by the Commercial Loan Officer that occurs within
ninety (90) days after the effective date of a Change of Control;
(b) a determination that the Commercial Loan Officer is eligible for
long-term disability benefits under the Bank's long-term disability
insurance program or, if there is no such program, under the federal Social
Security Act;
(c) the death of the Commercial Loan Officer; or
(d) the discharge of the Commercial Loan Officer for "cause," which,
for purposes of this Agreement shall mean personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease and desist order issued in response to conduct of the Commercial Loan
Officer determined to be substantially deleterious to the Bank, or any
material breach of this Agreement, in each case as measured against
standards generally prevailing at the relevant time in the savings and
community banking industry;
then the Bank (and its affiliates) shall have no further obligations under this
Agreement, other than the payment to the Commercial Loan Officer (or, in the
event of his death, to his estate) of his earned but unpaid salary as of the
date of the termination of his employment, and the provision of such other
benefits, if any, to which he is entitled as a former employee under the
employee benefit plans and programs and compensation plans and programs
maintained by, or covering employees of, the Bank.
(e) For purposes of section 7(d), no act or failure to act, on the
part of the Commercial Loan Officer, shall be considered "willful" unless it is
done, or omitted to be done, by the Officer in bad faith or without reasonable
belief that the Officer's action or omission was in the best interests of the
Bank and its affiliates. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the written
advice of counsel for the Bank shall be conclusively presumed to be done, or
omitted to be done, by the Commercial Loan Officer in good faith and in the best
interests of the Bank. The cessation of employment of the Commercial Loan
Officer shall not be deemed to be for "cause" within the meaning of section 7(d)
unless and until there shall have been delivered to the Officer a copy of
Page 4 of 12-
<PAGE>
a resolution duly adopted by the affirmative vote of three-fourths of the non-
employee members of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Commercial Loan Officer and
the Officer is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, Officer is
guilty of the conduct described in section 7(d) above, and specifying the
particulars thereof in detail.
SECTION 8. COVENANT NOT TO COMPETE.
-----------------------
In the event that the Commercial Loan Officer's employment with the
Bank terminates prior to the expiration of the Employment Period, then for a
period of one (1) year following the date of his termination of employment with
the Bank (or, if less, for the Remaining Unexpired Employment Period), the
Commercial Loan Officer shall not, without the written consent of the Bank,
become an officer, employee, consultant, director or trustee of any competitor
(as herein defined) if in this capacity he would be working for a competitor
originating commercial loans or residential mortgage loans in Middlesex County
or in any other county where a main or a branch office of the Bank is located on
the date of the Commercial Loan Officer's termination of employment. For this
purpose, a "competitor" is any savings bank, cooperative bank, credit union,
savings and loan association, savings and loan holding company, bank or bank
holding company, or any direct or indirect subsidiary or affiliate of any such
entity. This section 8 shall not apply if the Commercial Loan Officer's
employment is terminated without cause or due to death, or a voluntary or
involuntary termination following a "Change of Control" as defined in section
10(a) hereof.
SECTION 9. CONFIDENTIALITY.
---------------
Unless he obtains the prior written consent of the Bank, the
Commercial Loan Officer shall keep confidential and shall refrain from using for
the benefit of himself, or any person or entity other than the Bank or any
entity which is a subsidiary of the Bank or of which the Bank is a subsidiary,
any material document or information obtained from the Bank, or from its parent
or subsidiaries, in the course of his employment with any of them concerning
their properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 9 shall prevent the Commercial
Loan Officer, with or without the Bank's consent, from participating in or
disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is required under applicable law.
SECTION 10. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
-------------------------------------------------
(a) A Change of Control of the Bank ("Change of Control") shall be
deemed to have occurred upon the happening of any of the following events:
Page 5 of 12-
<PAGE>
(i) approval by the stockholders of the Bank of a transaction that
would result in the reorganization, merger or consolidation of the Bank,
respectively, with one or more other persons, other than a transaction
following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended "Exchange Act" ) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Bank; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets of the
Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 25% or more of the outstanding securities of the
Bank entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the stockholders of the
Bank of any transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Bank, or approval
by the stockholders of the Bank of a plan for such liquidation or
dissolution;
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board do not belong to any of the
following groups:
(A) individuals who were members of the Board of the Bank on the
date of this Agreement; or
(B) individuals who first became members of the Board of the Bank
after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Bank by affirmative vote of three-quarters of the members of such
Board, or of a nominating committee thereof, in office at the
time of such first election; or
Page 6 of 12-
<PAGE>
(II) upon election by the stockholders of the Bank to serve
as a member of the Board of the Bank, but only if nominated for
election by affirmative vote of three-quarters of the members of
the Board of the Bank, or of a nominating committee thereof, in
office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Bank; or
(v) any event which would be described in section 10(a)(i), (ii),
(iii) or (iv) if the term "Mystic Financial, Inc." (the "Company") were
substituted for the term "Bank" therein or any event that results in a
"Change of Control of the Bank" within the meaning of the "Change in Bank
Control Act" and the rules and regulations promulgated by the Federal
Deposit Insurance Agency ("FDIC") or the Massachusetts Division of Banks as
of the date hereof.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Bank, the Company, or a
subsidiary of either of them, by the Bank, the Company, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 10(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change of Control, the Commercial Loan Officer
shall be entitled to the payments and benefits contemplated by section 6(b) in
the event his employment with the Bank terminates due to his voluntary
resignation within ninety (90) days following the effective date of the Change
of Control.
SECTION 11. SOLICITATION.
------------
The Commercial Loan Officer hereby covenants and agrees that, during
and after his termination of employment with the Bank, he shall not, without the
written consent of the Bank, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Bank, the Holding
Company or any affiliate, as of the date of this Agreement, of either of
them to terminate his employment and accept employment or become affiliated
with, or provide services for compensation in any capacity whatsoever to,
any savings bank, cooperative bank, credit union, savings and loan
association, bank, bank holding company, savings and loan holding company,
or other institution engaged in the business of accepting deposits and
making loans;
Page 7 of 12-
<PAGE>
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, cooperative bank,
credit union, savings and loan association, bank, bank holding company,
savings and loan holding company, or other institution engaged in the
business of accepting deposits and making loans, of either of them that is
intended, or that a reasonable person acting in like circumstances would
expect, to have the effect of causing any officer or employee of the Bank,
the Holding Company or any affiliate as of the date of this Agreement, of
either of them to terminate his employment and accept employment or become
affiliated with, or provide services for compensation in any capacity
whatsoever to, any savings bank, cooperative bank, credit union, savings
and loan association, bank, bank holding company, savings and loan holding
company, or other institution engaged in the business of accepting deposits
and making loans;
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of
the Bank to terminate an existing business or commercial relationship with
the Bank.
provided, however, subsections 10(b) and (c) shall terminate upon the first one-
year anniversary of the Commercial Loan Officer's termination of employment with
the Bank; and, provided, further, that such provisions, when in effect shall
only apply to any savings bank, cooperative bank, credit union, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits and making loans
and having its principal office located in Middlesex County.
SECTION 12. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
-----------------------------------------------
The termination of the Commercial Loan Officer's employment during the
term of this Agreement or thereafter, whether by the Bank or by the Commercial
Loan Officer, shall have no effect on the rights and obligations of the parties
hereto under the Bank's qualified or non-qualified retirement, pension, savings,
thrift, profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Bank from time to time.
SECTION 13. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement will inure to the benefit of and be binding upon the
Commercial Loan Officer, his legal representatives and testate or intestate
distributees, and the Bank and its successors and assigns, including any
successor by merger or consolidation or any other person or firm or corporation
to which all or substantially all of the assets and business of the Bank may be
sold or otherwise transferred.
Page 8 of 12-
<PAGE>
SECTION 14. NOTICES.
-------
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to the Commercial Loan Officer:
Mr. John O'Donnell
14 Knollcrest Drive
Andover, Massachusetts 01810
If to the Bank:
Medford Co-Operative Bank
60 High Street
Medford, Massachusetts 02155
Attention: Mr. Robert H. Surabian
----------------------
with a copy to:
Thacher Proffitt & Wood
1500 K Street, N.W., Suite 200
Washington, DC 20005
Attention: Richard A. Schaberg, Esq.
------------------------
SECTION 15. SEVERABILITY.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 16. WAIVER.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against whom
its enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Page 9 of 12-
<PAGE>
SECTION 17. COUNTERPARTS.
------------
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 18. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and to be performed entirely
within the Commonwealth of Massachusetts.
SECTION 19. HEADINGS AND CONSTRUCTION.
-------------------------
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
SECTION 20. ENTIRE AGREEMENT; MODIFICATIONS.
-------------------------------
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 21. REQUIRED REGULATORY PROVISIONS.
------------------------------
The following provisions are included for the purposes of complying
with various laws, rules and regulations applicable to the Bank:
(a) Notwithstanding anything herein contained to the contrary, any
payments to the Commercial Loan Officer by the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI
Act"), 12 U.S.C. (S)1828(k), and any regulations promulgated thereunder.
(b) Notwithstanding anything herein contained to the contrary, if the
Commercial Loan Officer is suspended from office and/or temporarily
prohibited from participating in the conduct of the affairs of the Bank
pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI
Act, 12 U.S.C. (S)1818(e)(3) or 1818(g)(1), the Bank's obligations under
this Agreement shall be suspended as of the date of service of such notice,
unless stayed by appropriate proceedings. If the charges in such notice
are dismissed, the Bank, in its discretion, may (I) pay to the Commercial
Loan Officer all or part of the compensation withheld while the Bank's
obligations hereunder were suspended and (ii) reinstate, in whole or in
part, any of the obligations which were suspended.
Page 10 of 12-
<PAGE>
(c) Notwithstanding anything herein contained to the contrary, if the
Commercial Loan Officer is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. (S)1818(e)(4) or
(g)(1), all prospective obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights and
obligations of the Bank and the Commercial Loan Officer shall not be
affected.
(d) Notwithstanding anything herein contained to the contrary, if the
Bank is in default (within the meaning of section 3(x)(1) of the FDI Act,
12 U.S.C. (S)1813(x)(1)), all prospective obligations of the Bank under
this Agreement shall terminate as of the date of default, but vested rights
and obligations of the Bank and the Commercial Loan Officer shall not be
affected.
(e) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Bank hereunder shall be terminated, except
to the extent that a continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Commissioner of the
Massachusetts Division of Banks or his designee or the Federal Deposit
Insurance Corporation ("FDIC"), at the time the FDIC enters into an
agreement to provide assistance to or on behalf of the Bank under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C. (S)1823(c);
(ii) by the Commissioner or his designee at the time such Commissioner or
his designee approves a supervisory merger to resolve problems related to
the operation of the Bank or when the Bank is determined by the
Commissioner to be in an unsafe or unsound condition. The vested rights
and obligations of the parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed
and the Commercial Loan Officer has hereunto set his hand, all as of the day and
year first above written.
--------------------------------------
JOHN O'DONNELL
ATTEST: MEDFORD CO-OPERATIVE BANK
By
----------------------------
Secretary By
------------------------------------
Name:
Title:
[Seal]
Page 11 of 12-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came JOHN O'DONNELL, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that he resides at the address set forth in said instrument,
and that he signed his name to the foregoing instrument.
-------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came _____________________________________________________ to me
known, who, being by me duly sworn, did depose and say that he resides at
______________________________________________, that he is a member of the Board
of Directors of MEDFORD CO-OPERATIVE BANK, the savings bank described in and
which executed the foregoing instrument; that he knows the seal of said savings
bank; that the seal affixed to said instrument is such seal; that it was so
affixed by order of the Board of Directors of said savings bank; and that he
signed his name thereto by like order.
-------------------------------
Notary Public
Page 12 of 12-
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
_____________, 1997, by and between MEDFORD CO-OPERATIVE BANK, a state chartered
stock cooperative bank organized and operating under the laws of the
Commonwealth of Massachusetts and having an office at 60 High Street Medford,
Massachusetts 02155 ("Bank") and THOMAS G. BURKE, an individual residing at 457
William Street, Stoneham, Massachusetts 02180 ("Commercial Loan Officer").
W I T N E S S E T H :
-------------------
WHEREAS, Commercial Loan Officer currently serves the Bank in the
capacity of Senior Vice President/Loan Origination Manager; and
WHEREAS, effective as of the date of this Agreement, the Bank has
converted from a state-chartered mutual cooperative bank to a state-chartered
stock institution and has become the wholly-owned subsidiary of Mystic
Financial, Inc. a publicly-held Delaware corporation ("Holding Company"); and
WHEREAS, the Bank desires to assure for itself the continued
availability of the Commercial Loan Officer's services on the terms and
conditions hereinafter set forth; and
WHEREAS, the Commercial Loan Officer is willing to continue to serve
the Bank on such terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Bank and the Commercial Loan
Officer hereby agree as follows:
SECTION 1. EMPLOYMENT.
----------
The Bank agrees to continue to employ the Commercial Loan Officer, and
the Commercial Loan Officer hereby agrees to such continued employment, during
the period and upon the terms and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
-------------------------------------------------
PERIOD.
- ------
(a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
three (3) years beginning on the date of this Agreement. Upon the first
anniversary of the date of this Agreement (an "Anniversary Date"), and on each
Anniversary Date occurring thereafter, the Board of Directors of the Bank
("Board") shall review the terms of this Agreement and the Commercial Loan
Officer's performance of
<PAGE>
services hereunder and may, in the absence of objection from the Commercial Loan
Officer, approve a one-year extension of the Employment Agreement pursuant to a
resolution duly adopted by the members of the Board.
(b) For all purposes of this Agreement, the term "Remaining Unexpired
Employment Period" as of any date shall mean the period beginning on such date
and ending on the Anniversary Date on which the Employment Period (as it may be
extended pursuant to section 2(a) of this Agreement) is then scheduled to
expire.
(c) Nothing in this Agreement shall be deemed to prohibit the Bank at
any time from terminating the Commercial Loan Officer's employment during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Bank and the Commercial Loan Officer
in the event of any such termination shall be determined under this Agreement.
SECTION 3. DUTIES.
------
The Commercial Loan Officer shall serve as Senior Vice President of
the Bank, having such power, authority and responsibility and performing such
duties as are prescribed by or under the By-Laws of the Bank and as are
customarily associated with such position. The Commercial Loan Officer shall
devote his full business time and attention (other than during holidays,
approved vacation periods, and periods of illness or approved leave of absence)
to the business and affairs of the Bank and shall use his best efforts to
advance the interests of the Bank.
SECTION 4. ANNUAL SALARY.
-------------
In consideration for the services to be rendered by the Commercial
Loan Officer hereunder, the Bank shall pay to him a salary at an initial annual
rate of EIGHTY-EIGHT THOUSAND, FIVE HUNDRED AND EIGHTY DOLLARS ($88,580.00),
payable in approximately equal installments in accordance with the Bank's
customary payroll practices for senior Commercial Loan Officers. The Board
shall review the Commercial Loan Officer's annual rate of salary at such times
as it deems appropriate, but not less frequently than once every twelve months,
and may, in its discretion, approve an increase in such annual rate of salary.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
-----------------------------------
During the Employment Period, the Commercial Loan Officer shall be
treated as an employee of the Bank and shall be eligible to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long-term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover similarly
situated employees of, the Bank, in accordance with the terms and conditions
-Page 2 of 13-
<PAGE>
of such employee benefit plans and programs and compensation plans and programs
and consistent with the Bank's customary practices.
SECTION 6. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
-------------------------------------------------
(a) The Commercial Loan Officer shall be entitled to the severance
benefits described in section 6(b) in the event that (i) his employment is
terminated by the Bank during the Employment Period for any reason other than
for "cause" as defined in section 7(b) or (ii) the Commercial Loan Officer
voluntarily resigns following a "Change in Control" (as such term is defined in
section 10(a) hereof) in the manner set forth in section 10(b) hereof.
(b) Upon the termination of the Commercial Loan Officer's employment
at the Bank under the circumstances described in section 6(a)(i) or (ii) of this
Agreement, the Bank shall have no further obligations under this Agreement,
other than to pay or to provide the Commercial Loan Officer with:
(i) the compensation he has earned, but which is unpaid, as of the
date of the termination of his employment with the Bank, such payment to be
made at the time and in the manner prescribed by law applicable to the
payment of wages but in no event later than thirty (30) days after
termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained by the Bank for employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long-term disability
coverages under the plans and programs maintained by the Bank for similarly
situated employees until the earlier to occur of: (A) the date the
Commercial Loan Officer first becomes eligible for such benefit coverages
under plans or programs maintained by a subsequent employer or (B) the date
the Remaining Unexpired Employment Period terminates;
(iv) within thirty (30) days following his termination of employment
with the Bank, a lump sum payment, in an amount equal to the present value
of the salary that the Commercial Loan Officer would have earned if he had
continued working for the Bank during the Remaining Unexpired Employment
Period at the highest annual rate of salary achieved during that portion of
the Employment Period which is prior to the Commercial Loan Officer's
termination of employment with the Bank, where such present value is to be
determined using a discount rate equal to the applicable short-term federal
rate prescribed under section 1274(d) of the Internal Revenue Code of 1986
("Code"), compounded using the compounding period corresponding to the
Bank's regular payroll periods for its officers, such lump sum to be paid
in lieu of all other payments of salary provided for under this Agreement
in respect of the period following any such termination; provided, however,
that in the event the Officer's employment with the Bank terminates
following a Change of Control (as such term is defined in section 10(a)
hereof)
-Page 3 of 13-
<PAGE>
under the circumstances described in section 6(a)(ii), then, for purposes
of calculating the lump sum amount payable to the Officer under this
subsection 6(b)(iv), the "Remaining Unexpired Employment Period" shall be
deemed to be a thirty-six consecutive month period.
SECTION 7. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.
---------------------------------------------
Except as provided below, the Bank (and its affiliates) will have no
liability to Commercial Loan Officer in the event that the Commercial Loan
Officer's employment with the Bank shall terminate during the Employment Period
on account of:
(a) a voluntary resignation by the Commercial Loan Officer, other than
a voluntary resignation by the Commercial Loan Officer that occurs within
ninety (90) days after the effective date of a Change of Control;
(b) a determination that the Commercial Loan Officer is eligible for
long-term disability benefits under the Bank's long-term disability
insurance program or, if there is no such program, under the federal Social
Security Act;
(c) the death of the Commercial Loan Officer; or
(d) the discharge of the Commercial Loan Officer for "cause," which,
for purposes of this Agreement shall mean personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, conviction of a felony, willful violation
of any banking law, rule or regulation or final cease and desist order, or
any material breach of this Agreement, in each case as measured against
standards generally prevailing at the relevant time in the savings and
community banking industry;
then the Bank (and its affiliates) shall have no further obligations under this
Agreement, other than the payment to the Commercial Loan Officer (or, in the
event of his death, to his estate) of his earned but unpaid salary as of the
date of the termination of his employment, and the provision of such other
benefits, if any, to which he is entitled as a former employee under the
employee benefit plans and programs and compensation plans and programs
maintained by, or covering employees of, the Bank.
(e) For purposes of section 7(d), no act or failure to act, on the
part of the Commercial Loan Officer, shall be considered "willful" unless it is
done, or omitted to be done, by the Officer in bad faith or without reasonable
belief that the Officer's action or omission was in the best interests of the
Bank and its affiliates. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the written
advice of counsel for the Bank shall be conclusively presumed to be done, or
omitted to be done, by the Commercial Loan Officer in good faith and in the best
interests of the Bank. The cessation of employment of the Commercial Loan
Officer shall not be deemed to be for "cause" within the meaning of section 7(d)
unless and until there shall have been delivered to the Officer a copy of a
resolution duly adopted by the affirmative vote of three-fourths of the non-
employee members
-Page 4 of 13-
<PAGE>
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Commercial Loan Officer and the Officer is
given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, Officer is guilty of the
conduct described in section 7(d) above, and specifying the particulars thereof
in detail.
SECTION 8. COVENANT NOT TO COMPETE.
-----------------------
In the event of that the Commercial Loan Officer's employment with the
Bank terminates prior to the expiration of the Employment Period, then for a
period of one (1) year following the date of his termination of employment with
the Bank (or, if less, for the Remaining Unexpired Employment Period), the
Commercial Loan Officer shall not, without the written consent of the Bank,
become an officer, employee, consultant, director or trustee of any competitor
(as herein defined) if in this capacity he would be working for a competitor
originating commercial loans or residential mortgage loans in Middlesex County
or in any other county where a main or a branch office of the Bank is located on
the date of the Commercial Loan Officer's termination of employment. For this
purpose, a "competitor" is any savings bank, cooperative bank, credit union,
savings and loan association, savings and loan holding company, bank or bank
holding company, or any direct or indirect subsidiary or affiliate of any such
entity. This section 8 shall not apply if the Commercial Loan Officer's
employment is terminated without cause or due to death, or a voluntary or
involuntary termination following a "Change of Control" as defined in section
10(a) hereof.
SECTION 9. CONFIDENTIALITY.
---------------
Unless he obtains the prior written consent of the Bank, the
Commercial Loan Officer shall keep confidential and shall refrain from using for
the benefit of himself, or any person or entity other than the Bank or any
entity which is a subsidiary of the Bank or of which the Bank is a subsidiary,
any material document or information obtained from the Bank, or from its parent
or subsidiaries, in the course of his employment with any of them concerning
their properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 9 shall prevent the Commercial
Loan Officer, with or without the Bank's consent, from participating in or
disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is required under applicable law.
SECTION 10. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
-------------------------------------------------
(a) A Change of Control of the Bank ("Change of Control") shall be
deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Bank of a transaction that
would result in the reorganization, merger or consolidation of the Bank,
respectively, with one or more other persons, other than a transaction
following which:
-Page 5 of 13-
<PAGE>
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended "Exchange Act" ) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Bank; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets of the
Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 25% or more of the outstanding securities of the
Bank entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the stockholders of the
Bank of any transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Bank, or approval
by the stockholders of the Bank of a plan for such liquidation or
dissolution;
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board do not belong to any of the
following groups:
(A) individuals who were members of the Board of the Bank on the
date of this Agreement; or
(B) individuals who first became members of the Board of the Bank
after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Bank by affirmative vote of three-quarters of the members of such
Board, or of a nominating committee thereof, in office at the
time of such first election; or
(II) upon election by the stockholders of the Bank to serve
as a member of
-Page 6 of 13-
<PAGE>
the Board of the Bank, but only if nominated for election by
affirmative vote of three-quarters of the members of the Board of
the Bank, or of a nominating committee thereof, in office at the
time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Bank; or
(v) any event which would be described in section 10(a)(i), (ii),
(iii) or (iv) if the term "Mystic Financial, Inc." (the "Company") were
substituted for the term "Bank" therein or any event that results in a
"Change of Control of the Bank" within the meaning of the "Change in Bank
Control Act" and the rules and regulations promulgated by the Federal
Deposit Insurance Agency ("FDIC") or the Massachusetts Division of Banks as
of the date hereof.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Bank, the Company, or a
subsidiary of either of them, by the Bank, the Company, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 10(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change of Control, the Commercial Loan Officer
shall be entitled to the payments and benefits contemplated by section 6(b) in
the event his employment with the Bank terminates due to his voluntary
resignation within ninety (90) days following the effective date of the Change
of Control.
SECTION 11. SOLICITATION.
------------
The Commercial Loan Officer hereby covenants and agrees that, during
and after his termination of employment with the Bank, he shall not, without the
written consent of the Bank, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to
have the effect of causing any officer or employee of the Bank, the Holding
Company or any affiliate, as of the date of this Agreement, of either of
them to terminate his employment and accept employment or become affiliated
with, or provide services for compensation in any capacity whatsoever to,
any savings bank, cooperative bank, credit union, savings and loan
association, bank, bank holding company, savings and loan holding company,
or other institution engaged in the business of accepting deposits and
making loans;
(b) provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, cooperative bank, credit
union,
-Page 7 of 13-
<PAGE>
savings and loan association, bank, bank holding company, savings and loan
holding company, or other institution engaged in the business of accepting
deposits and making loans, of either of them that is intended, or that a
reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee of the Bank, the Holding Company
or any affiliate as of the date of this Agreement, of either of them to
terminate his employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any
savings bank, cooperative bank, credit union, savings and loan association,
bank, bank holding company, savings and loan holding company, or other
institution engaged in the business of accepting deposits and making loans;
(c) solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of
the Bank to terminate an existing business or commercial relationship with
the Bank;
provided, however, subsections 10(b) and (c) shall terminate upon the first one-
year anniversary of the Commercial Loan Officer's termination of employment with
the Bank; and, provided, further, that such provisions, when in effect shall
only apply to any savings bank, cooperative bank, credit union, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits and making loans
and having its principal office located in Middlesex County.
SECTION 12. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
-----------------------------------------------
The termination of the Commercial Loan Officer's employment during the
term of this Agreement or thereafter, whether by the Bank or by the Commercial
Loan Officer, shall have no effect on the rights and obligations of the parties
hereto under the Bank's qualified or non-qualified retirement, pension, savings,
thrift, profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Bank from time to time.
SECTION 13. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement will inure to the benefit of and be binding upon the
Commercial Loan Officer, his legal representatives and testate or intestate
distributees, and the Bank and its successors and assigns, including any
successor by merger or consolidation or any other person or firm or corporation
to which all or substantially all of the assets and business of the Bank may be
sold or otherwise transferred.
SECTION 14. NOTICES.
-------
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in
-Page 8 of 13-
<PAGE>
writing and shall be deemed to have been given at such time as it is delivered
personally, or five (5) days after mailing if mailed, postage prepaid, by
registered or certified mail, return receipt requested, addressed to such party
at the address listed below or at such other address as one such party may by
written notice specify to the other party:
If to the Commercial Loan Officer:
Mr. Thomas G. Burke
457 William Street
Stoneham, Massachusetts 02180
If to the Bank:
Medford Co-Operative Bank
60 High Street
Medford, Massachusetts 02155
Attention: Mr. Robert H. Surabian
----------------------
with a copy to:
Thacher Proffitt & Wood
1500 K Street, N.W., Suite 200
Washington, DC 20005
Attention: Richard A. Schaberg, Esq.
------------------------
SECTION 15. SEVERABILITY.
------------
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 16. WAIVER.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be
made in writing, designated as a waiver, and signed by the party against whom
its enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
-Page 9 of 13-
<PAGE>
SECTION 17. COUNTERPARTS.
------------
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 18. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and to be performed entirely
within the Commonwealth of Massachusetts.
SECTION 19. HEADINGS AND CONSTRUCTION.
-------------------------
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
SECTION 20. ENTIRE AGREEMENT; MODIFICATIONS.
-------------------------------
This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
SECTION 21. REQUIRED REGULATORY PROVISIONS.
------------------------------
The following provisions are included for the purposes of complying
with various laws, rules and regulations applicable to the Bank:
(a) Notwithstanding anything herein contained to the contrary, any
payments to the Commercial Loan Officer by the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI
Act"), 12 U.S.C. (S)1828(k), and any regulations promulgated thereunder.
(b) Notwithstanding anything herein contained to the contrary, if the
Commercial Loan Officer is suspended from office and/or temporarily
prohibited from participating in the conduct of the affairs of the Bank
pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI
Act, 12 U.S.C. (S)1818(e)(3) or 1818(g)(1), the Bank's obligations under
this Agreement shall be suspended as of the date of service of such notice,
unless stayed by appropriate proceedings. If the charges in such notice
are dismissed, the Bank, in its discretion, may (I) pay to the Commercial
Loan Officer all or part of the compensation withheld while the Bank's
obligations hereunder were suspended and (ii) reinstate, in whole or in
part, any of the obligations which were suspended.
-Page 10 of 13-
<PAGE>
(c) Notwithstanding anything herein contained to the contrary, if the
Commercial Loan Officer is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. (S)1818(e)(4) or
(g)(1), all prospective obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights and
obligations of the Bank and the Commercial Loan Officer shall not be
affected.
(d) Notwithstanding anything herein contained to the contrary, if the
Bank is in default (within the meaning of section 3(x)(1) of the FDI Act,
12 U.S.C. (S)1813(x)(1)), all prospective obligations of the Bank under
this Agreement shall terminate as of the date of default, but vested rights
and obligations of the Bank and the Commercial Loan Officer shall not be
affected.
(e) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Bank hereunder shall be terminated, except
to the extent that a continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Commissioner of the
Massachusetts Division of Banks or his designee or the Federal Deposit
Insurance Corporation ("FDIC"), at the time the FDIC enters into an
agreement to provide assistance to or on behalf of the Bank under the
authority contained in section 13(c) of the FDI Act, 12 U.S.C. (S)1823(c);
(ii) by the Commissioner or his designee at the time such Commissioner or
his designee approves a supervisory merger to resolve problems related to
the operation of the Bank or when the Bank is determined by the
Commissioner to be in an unsafe or unsound condition. The vested rights
and obligations of the parties shall not be affected.
-Page 11 of 13-
<PAGE>
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed
and the Commercial Loan Officer has hereunto set his hand, all as of the day and
year first above written.
-----------------------------------
THOMAS G. BURKE
ATTEST: MEDFORD CO-OPERATIVE BANK
By
---------------------------
Secretary By
--------------------------------
Name:
Title:
[Seal]
-Page 12 of 13-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came THOMAS G. BURKE, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that he resides at the address set forth in said instrument,
and that he signed his name to the foregoing instrument.
-----------------------------------
Notary Public
COMMONWEALTH OF MASSACHUSETTS )
: SS.:
COUNTY OF MIDDLESEX )
On this ________ day of ____________________, 1997, before me
personally came________________________________ to me known, who, being by me
duly sworn, did depose and say that he resides at
______________________________________________, that he is a member of the Board
of Directors of MEDFORD CO-OPERATIVE BANK, the savings bank described in and
which executed the foregoing instrument; that he knows the seal of said savings
bank; that the seal affixed to said instrument is such seal; that it was so
affixed by order of the Board of Directors of said savings bank; and that he
signed his name thereto by like order.
-----------------------------------
Notary Public
-Page 13 of 13-
<PAGE>
Exhibit 21.1
Exhibit 21.1 Subsidiaries of the Registrant
There are currently no subsidiaries of Mystic Financial, Inc. (the
"Registrant"). Following the conversion of Medford Co-operative Bank (the
"Bank") from mutual to stock form and the issuance and sale of the authorized
common stock of the Bank to the Registrant, the Bank will be a wholly-owned
subsidiary of the Registrant. The Bank is a state chartered mutual co-operative
bank. In addition, by acquiring the Bank, the Registrant will own the two
subsidiaries of the Bank, Mystic Investments, Inc. and Mystic Security
Corporation, both of which are incorporated in the Commonwealth of
Massachusetts.
<PAGE>
EXHIBIT 23.1
One International Place
[LOGO] WOLF & COMPANY, P.C. Boston Massachusetts 02110-9801
Certified Public Accountants (617)439-9700 fax: (617)439-0476
and Business Consultants
1441 Main Street
Springfield, Massachusetts 01103
(413)747-9042 fax:(413)733-1990
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement on Form S-1 and
Prospectus of Mystic Financial, Inc. (proposed holding company for Medford
Co-operative Bank) of our report dated July 29, 1997, on the consolidated
balance sheets of Medford Co-operative Bank as of June 30, 1997 and 1996, and
the related consolidated statements of income, changes in surplus and cash flows
for each of the years in the three-year period ended June 30, 1997 and to the
use of our name and the statements with respect to us, as appearing under the
heading "Experts" in the Prospectus.
Wolf & Company, P.C.
Boston, Massachusetts
August 27, 1997
Member of Associated Regional Accounting Firms and TGI International
<PAGE>
EXHIBIT 23.3
August 22, 1997
Board of Directors
Medford Co-operative Bank
60 High Street
Medford, Massachusetts 02155
Gentlemen:
We hereby consent to the use of our firm's name in the Form S-1
Registration Statement (the "Form S-1"), and Amendments thereto, as filed with
the Securities and Exchange Commission by Mystic Financial, Inc. (the "Holding
Company") for permission to convert Medford Co-operative Bank (the "Bank") from
a mutual co-operative bank to a stock co-operative bank, organization into
holding company structure and offering of shares of the Holding Company. We
also consent to references to our valuation opinions and appraisal reports of
the Bank and references to our opinion regarding the value of subscription
rights and the estimated pro forma market value of the Common Stock being filed
with the Form S-1 and Amendments thereto. We further consent to the filing of
the aforementioned valuation opinions and appraisal as Exhibits to the Form S-1
and Amendments thereto. We further consent to the reference to our firm under
the caption "Experts" in such Prospectus included in the Form S-1 and
Amendments thereto.
Very truly yours,
RP FINANCIALS, LC.
/s/ James J. Oren
James J. Oren
Vice President
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------------
Financial Services Industry Consultants
August 26, 1997
Board of Directors
Medford Co-operative Bank
60 High Street
Medford, Massachusetts 02155
Re: Plan of Conversion: Subscription Rights
Medford Co-operative Bank
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Conversion adopted by the Board of
Directors of Medford Co-operative Bank ("Medford" or the "Bank") whereby the
Bank will convert from a Massachusetts mutual co-operative bank to a stock
co-operative bank incorporated under the laws of the Commonwealth of
Massachusetts and issue all of the Bank's outstanding capital stock to Mystic
Financial, Inc. (the "Holding Company"). Simultaneously, the Holding Company
will issue shares of common stock.
We understand that in accordance with the Plan of Conversion,
subscription rights to purchase shares of Common Stock in the Holding Company
are to be issued to: (1) Eligible Account Holders; (2) the ESOP; and (3)
Supplemental Eligible Account Holders. Based solely upon our observation that
the subscription rights will be available to such parties without cost, will be
legally non-transferable and of short duration, and will afford such parties the
right only to purchase shares of Common Stock at the same price as will be paid
by members of the general public in the Direct Community Offering, but without
undertaking any independent investigation of state or federal law or the
position of the Internal Revenue Service with respect to this issue, we are of
the belief that, pursuant to our valuation of the subscription rights:
(1) the subscription rights will have no ascertainable market value; and,
(2) the price at which the subscription rights are exercisable will not
be more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and
regulatory environment, the stock market, interest rates, and other external
forces (such as natural disasters or significant world events) may occur from
time to time, often with great unpredictability and may materially impact the
value of thrift stocks as a whole or the Holding Company's value alone.
Accordingly, no assurance can be given that persons who subscribe to shares of
common stock in the conversion will thereafter be able to buy or sell such
shares at the same price paid in the Subscription Offering.
Sincerely,
/s/ James J. Oren
James J. Oren
Vice President
- --------------------------------------------------------------------------------
WASHINGTON HEADQUARTERS
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 3,953
<INT-BEARING-DEPOSITS> 197
<FED-FUNDS-SOLD> 2,075
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,819
<INVESTMENTS-CARRYING> 17,504
<INVESTMENTS-MARKET> 17,431
<LOANS> 115,545
<ALLOWANCE> 977
<TOTAL-ASSETS> 149,653
<DEPOSITS> 129,303
<SHORT-TERM> 0
<LIABILITIES-OTHER> 878
<LONG-TERM> 7,532
0
0
<COMMON> 0
<OTHER-SE> 11,940
<TOTAL-LIABILITIES-AND-EQUITY> 149,653
<INTEREST-LOAN> 8,397
<INTEREST-INVEST> 1,208
<INTEREST-OTHER> 294
<INTEREST-TOTAL> 9,899
<INTEREST-DEPOSIT> 4,700
<INTEREST-EXPENSE> 4,911
<INTEREST-INCOME-NET> 4,988
<LOAN-LOSSES> 272
<SECURITIES-GAINS> 168
<EXPENSE-OTHER> 4,330
<INCOME-PRETAX> 1,268
<INCOME-PRE-EXTRAORDINARY> 1,268
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 741
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.84
<LOANS-NON> 365
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 742
<CHARGE-OFFS> 57
<RECOVERIES> 20
<ALLOWANCE-CLOSE> 977
<ALLOWANCE-DOMESTIC> 977
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
CONVERSION APPRAISAL REPORT
MYSTIC FINANCIAL, INC.
PROPOSED HOLDING COMPANY FOR
MEDFORD CO-OPERATIVE BANK
MEDFORD, MASSACHUSETTS
Dated as of:
August 15, 1997
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
August 15, 1997
Board of Directors
Medford Co-operative Bank
60 High Street
Medford, Massachusetts 02155
Gentlemen:
At your request, we have completed and hereby provide an independent appraisal
("Appraisal") of the estimated pro forma market value of the common stock which
is to be issued in connection with the mutual-to-stock conversion of Medford Co-
operative Bank, Medford, Massachusetts ("Medford" or the "Bank"). The common
stock issued in connection with the Bank's conversion will simultaneously be
acquired by a holding company, Mystic Financial, Inc. ("Mystic Financial" or the
"Holding Company"). The conversion involves the issuance of shares of common
stock to depositors, the Bank's employee stock ownership plan ("ESOP"), members
of the local community and the public at large.
This appraisal is furnished pursuant to the requirements of the Code of Federal
Regulations 563b.7 and has been prepared in accordance with the "Guidelines for
Appraisal Reports for the Valuation of Savings and Loan Associations Converting
from Mutual to Stock Form of Organization" of the Office of Thrift Supervision
("OTS"), which have been adopted in practice by the Federal Deposit Insurance
Corporation ("FDIC"), including the most recent revisions as of October 21,
1994, and applicable regulatory interpretations thereof.
Description of Reorganization
- -----------------------------
The Board of Directors of the Bank has adopted a Plan of Conversion
pursuant to which the Bank will convert from a Massachusetts chartered mutual
co-operative bank to a Massachusetts chartered stock co-operative bank and issue
all of its outstanding shares to the Holding Company. The Holding Company will
sell in Subscription and Community offerings Holding Company stock in the amount
equal to the appraised value of the Bank. Immediately following the conversion,
the only significant assets of the Holding Company will be the capital stock of
the Bank and the net conversion proceeds remaining after purchase of the Bank's
common stock by the Holding Company. The Holding Company will use 50 percent of
the net conversion proceeds to purchase the Bank's common stock. A portion of
the remaining 50 percent of the net conversion proceeds will be used to fund a
loan to the ESOP with the remainder to be used as general working capital.
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm serving the
financial services industry nationwide that, among other things, specializes in
financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The background and experience of RP Financial is detailed
in Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting the Bank in the preparation of its business plan, we are
independent of the Bank and the other parties engaged by the Bank to assist in
the stock conversion process.
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
RP Financial, LC.
Board of Directors
August 15, 1997
Page 2
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed Medford's application for Approval
of Conversion, including the Proxy Statement, as filed with the FDIC and the
Massachusetts Division of Banks and the Holding Company's Form S-1 registration
statement as filed with the Securities Exchange Commission. We have conducted a
financial analysis of the Bank that has included due diligence related
discussions with the Bank's management; Wolf & Company, P.C., the Bank's
independent auditor; Thacher Proffitt & Wood, the Bank's conversion counsel; and
Trident Securities, Inc., which has been retained by the Bank as a financial and
marketing advisor in connection with the Holding Company's stock offering. All
conclusions set forth in the appraisal were reached independently from such
discussions. In addition, where appropriate, we have considered information
based on other available published sources that we believe are reliable. While
we believe the information and data gathered from all these sources are
reliable, we cannot guarantee the accuracy and completeness of such information.
We have investigated the competitive environment within which the Bank operates
and have assessed the Bank's relative strengths and weaknesses. We have kept
abreast of the changing regulatory and legislative environment and analyzed the
potential impact on the Bank and the industry as a whole. We have analyzed the
potential effects of conversion on the Bank's operating characteristics and
financial performance as they relate to the pro forma market value of Medford.
We have reviewed the economy in the Bank's primary market area and have compared
the Bank's financial performance and condition with selected publicly-traded
institutions with similar characteristics as the Bank's, as well as all
publicly-traded savings institutions. We have reviewed conditions in the
securities markets in general and in the market for savings institution stocks
in particular, including the market for existing savings institution issues and
the market for initial public offerings by savings institutions.
Our appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Bank and its independent auditors are truthful, accurate and complete.
We did not independently verify the financial statements and other information
provided by the Bank and its independent auditors, nor did we independently
value the assets or liabilities of the Bank. The valuation considers the Bank
only as a going concern and should not be considered as an indication of the
liquidation value of Medford.
Our appraised value is predicated on a continuation of the current operating
environment for the Bank and for all savings institutions. Changes in the local
and national economy, the legislative and regulatory environment, the stock
market, interest rates, and other external forces (such as natural disasters or
significant world events) may occur from time to time, often with great
unpredictability and may materially impact the value of savings institution
stocks as a whole or the Bank's value alone. It is our understanding Medford
intends to remain an independent institution and there are no current plans for
selling control of the Bank as a converted institution. To the extent that such
factors can be foreseen, they have been factored into our analysis.
Pro forma market value is defined as the price at which Medford's stock,
immediately upon completion of the conversion offering, would change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or sell and both having reasonable knowledge of relevant facts.
Valuation Conclusion
- --------------------
It is our opinion that, as of August 15, 1997, the aggregate pro forma market
value of the shares to be issued was $20,500,000 at the midpoint, equal to
2,050,000 shares offered at a per share value of $10.00. Pursuant to the
conversion guidelines, the 15 percent offering range indicates a minimum value
of $17,425,000 and a maximum value of $23,575,000. Based on the $10.00 per
share offering price, this valuation range equates
<PAGE>
RP Financial, LC.
Board of Directors
August 15, 1997
Page 3
to an offering of 1,742,500 shares at the minimum to 2,357,500 shares at the
maximum. In the event that the Bank's appraised value is subject to an increase,
up to 2,711,125 shares may be sold at an issue price of $10.00 per share, for an
aggregate market value of $27,111,250, without a resolicitation.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a recommendation of
any kind as to the advisability of purchasing shares of the common stock.
Moreover, because such valuation is necessarily based upon estimates and
projections of a number of matters, all of which are subject to change from time
to time, no assurance can be given that persons who purchase shares of common
stock in the conversion will thereafter be able to buy or sell such shares at
prices related to the foregoing valuation of the pro forma market value thereof.
RP Financial's valuation was determined based on the financial condition and
operations of the Bank as of June 30, 1997, the date of the financial data
included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any federal and
state securities laws and any report prepared by RP Financial shall not be used
as an offer or solicitation with respect to the purchase or sale of any
securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion regulations and
guidelines. These updates will consider, among other things, any developments
or changes in the Bank's financial performance and condition, management
policies, and current conditions in the equity markets for savings institution
shares. These updates may also consider changes in other external factors which
impact value including, but not limited to: various changes in the legislative
and regulatory environment, the stock market and the market for savings
institution stocks, and interest rates. Should any such new developments or
changes be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ James J. Oren
James J. Oren
Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
MEDFORD CO-OPERATIVE BANK
Medford, Massachusetts
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
-----------
Introduction 1.1
Strategic Overview 1.1
Balance Sheet Trends 1.4
Income and Expense Trends 1.7
Interest Rate Risk Management 1.9
Lending Activities and Strategy 1.10
Asset Quality 1.12
Funding Composition and Strategy 1.12
Subsidiary 1.13
Legal Proceedings 1.13
CHAPTER TWO MARKET AREA
-----------
Introduction 2.1
National Economic Factors 2.2
Market Area Demographics 2.4
Economy 2.5
Deposit Trends and Competition 2.6
Summary 2.8
CHAPTER THREE PEER GROUP ANALYSIS
-------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.7
Loan Composition 3.9
Credit Risk 3.11
Interest Rate Risk 3.11
Summary 3.12
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
MEDFORD CO-OPERATIVE BANK
Medford, Massachusetts
(continued)
PAGE
DESCRIPTION NUMBER
- ------------- ------
CHAPTER FOUR VALUATION ANALYSIS
------------
Introduction 4.1
Appraisal Guidelines 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.3
3. Asset Growth 4.4
4. Primary Market Area 4.4
5. Dividends 4.6
6. Liquidity of the Shares 4.7
7. Marketing of the Issue 4.7
A. The Public Market 4.7
B. The New Issue Market 4.11
C. The Acquisition Market 4.12
8. Management 4.15
9. Effect of Government Regulation and Regulatory Reform 4.15
Summary of Adjustments 4.15
Valuation Approaches 4.16
1. Price-to-Tangible Book ("P/TB") 4.17
1. Price-to-Earnings ("P/E") 4.18
3. Price-to-Assets ("P/A") 4.18
Valuation Conclusion 4.19
<PAGE>
RP Financial, LC.
LIST OF TABLES
MEDFORD CO-OPERATIVE BANK
MEDFORD, MASSACHUSETTS
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 HISTORICAL BALANCE SHEETS 1.5
1.2 Historical Income Statements 1.8
2.1 Major Employers 2.6
2.2 Market Area Unemployment Trends 2.6
2.3 Deposit Summary 2.7
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.8
3.4 Loan Portfolio Composition Comparative Analysis 3.10
3.5 Peer Group Credit Risk Comparative Analysis 3.13
3.6 Interest Rate Risk Comparative Analysis 3.14
4.1 Peer Group Comparative Market Area Analysis 4.5
4.2 Conversion Pricing Characteristics 4.12
4.3 Market Pricing Comparatives 4.13
4.4 Public Market Pricing 4.20
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Medford Co-operative Bank ("Medford" or the "Bank") is a state-chartered
mutual co-operative bank headquartered in Medford, Middlesex County,
Massachusetts. The Bank also operates three other branch offices in Medford.
The Bank considers its primary market for deposits to consist of the city of
Medford, in particular the areas surrounding the office locations, and to a
lesser extent the rest of Middlesex County. Lending activities are also
concentrated in the city of Medford, although additional lending activities (in
particular commercial lending), are performed in other areas of Middlesex County
(see Exhibit I-1). The Bank was chartered as a Massachusetts mutual co-
operative bank in 1886, and in 1986 obtained federal deposit insurance. The
Bank is currently a member of the Federal Home Loan Bank ("FHLB") system and is
regulated by the Massachusetts Division of Banks (the "Division"). The Bank's
deposits are insured up to the regulatory maximums by the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation ("FDIC"), and the Share
Insurance Fund of the Co-operative Central Bank of Massachusetts for deposit
accounts in excess of $100,000. As of June 30, 1997, the Bank maintained $149.7
million in assets, $129.3 million in deposits and $11.9 million in stockholders'
equity, equal to 8.0 percent of assets.
Mystic Financial, Inc. ("Mystic Financial" or the "Holding Company"), a
Delaware corporation, was recently organized to facilitate the conversion of
Medford. In the course of the conversion, the Holding Company will acquire all
of the capital stock that the Bank will issue upon its conversion from the
mutual to stock form of ownership. Going forward, Mystic Financial will own 100
percent of the Bank's stock, and the Bank will be Mystic Financial's sole
subsidiary. Approximately 50 percent of the net proceeds received from the sale
of common stock will be used to purchase all of the then to be issued and
outstanding capital stock of the Bank, with the balance of the proceeds being
retained by the Holding Company. At this time, no other activities are
contemplated for Mystic Financial other than the ownership of the Bank, a loan
to the newly-formed employee stock ownership plan ("ESOP") and investment of the
cash retained at the holding company in investment securities. In the future
Mystic Financial may acquire or organize other operating subsidiaries.
Strategic Discussion
--------------------
The Bank is a community-oriented financial institution dedicated to meeting
the borrowing, savings and financial services needs of its market area served.
The market area served by the Bank (the city of Medford, and to a lesser extent,
Middlesex County), has been experiencing relatively stable levels of population
and households in recent years. The economy and employment base is relatively
diversified into most economic sectors, including services and education.
Located within the Boston metropolitan statistical area ("MSA"), Medford faces
notable competition from a number of other community oriented banks and savings
banks, as
<PAGE>
RP Financial, LC.
Page 1.2
well as from larger regional financial institutions. In this operating
environment the Bank has pursued a strategy of increasing the asset base and
branch office network in order to more effectively compete.
Throughout its history, the Bank has generally pursued a traditional
operating strategy of mortgage lending secured by 1-4 family residential
properties in the city of Medford in eastern Middlesex County, Massachusetts,
more recently supplementing residential originations with increased commercial
real estate loans, commercial and industrial loans, construction loans and non-
mortgage loans. The Bank has recorded loan growth in recent years, reflecting
greater marketing activities, competitive pricing and a more diversified lending
approach, primarily in the area of commercial real estate and commercial and
industrial loans. Such loan growth has been facilitated through hiring
experienced commercial loan officers, developing a more customer-oriented
approach and developing business relations with real estate brokers and
businesses. The recent increase in loans receivable has been funded internally
through a reduction in cash and investments and externally through deposit
growth and FHLB advances. The Bank sells a portion of the 1-4 family loan
originations for interest rate risk management purposes. The Bank expects the
majority of its loan activity in the future to be within Middlesex County.
The Bank's emphasis on originating 1-4 family permanent mortgage loans in
local and familiar markets and strong underwriting criteria on loans originated
has resulted in recently improving credit quality measures. The Bank's
allowance for loan losses relative to loans is also comparatively higher by
industry standards, as the Bank has added to the allowance recently, primarily
in view of the recent rapid loan portfolio growth (the portfolio has grown 43
percent since June 30, 1995), increased proportion of higher risk weight loans
(an increase from 8 to 21 percent of the loan portfolio in the last 2 years
while total loans grew by 43 percent), and increased percent of loans outside
the markets served by the branch offices, primarily non-residential loans. The
ratio of non-performing assets ("NPAs"), consisting of real estate owned and
other repossessed assets, non-accruing loans, delinquent accruing loans and
restructured loans to assets has dropped steadily over the past two fiscal
years, and was 0.24 percent of assets as of June 30, 1997.
The Bank's lending strategies to limit exposure to interest rate risk have
involved originating adjustable rate residential mortgage loans ("ARMs"),
adjustable rate commercial real estate loans and shorter-term construction,
commercial business and consumer loans. Liability strategies have involved
attempts to lengthen the maturity of deposits, and FHLB advances utilized in
recent months to meet loan demand have been in general maturity-matched to
certain commercial real estate loans. The Bank's most popular loan product is a
7/1 ARM that is fixed for the first seven years; the fixed rate nature of this
product has a negative effect on the Bank's exposure to interest rate risk.
Medford's internally calculated one-year cumulative gap position as of June 30,
1997 was a negative 13.9 percent Medford anticipates the conversion proceeds
will facilitate improvement in the gap analysis as the net capital raised in the
conversion will increase the ratio of interest-
<PAGE>
RP Financial, LC.
Page 1.3
earning assets ("IEA") to interest-bearing liabilities ("IBL") and the proceeds
will increase the proportion of shorter-term or adjustable rate assets.
The Bank's main source of net income, the net interest margin, has remained
relatively stable over the past few years, with overall net interest income
increasing in step with the growth in assets. Core profitability has been
primarily affected by an increasing level of operating expenses that have been
incurred in connection with the Bank's growth in operations. Medford opened a
new branch office in 1995, requiring investment in fixed assets and personnel,
and the establishment of a commercial lending department in 1995 increased
personnel and other expenses. Further improvement in core profitability has
also been limited by competitive pricing of deposits to stimulate growth.
Future core profitability is projected to improve moderately with the
reinvestment benefit of the new capital raised, income benefits of recently
expanded products and services and growth in assets without a commensurate
increase in operating expenses.
Medford's Board of Directors has determined that a conversion to stock form
is an attractive business strategy for several reasons. First, the new
structure will provide the ability to diversify business activities, provide
greater flexibility in structuring acquisitions and increase the future access
to capital markets. Second, it will provide the capital necessary to improve
the overall competitive position of the Bank in its market area, with regard to
rates and services offered and ability to expand. Third, the conversion may
provide the opportunity for expanded local stock ownership which could enhance
the financial success of the Bank as local shareholders promote the Bank's
products and services. As disclosed in the prospectus, the proceeds from stock
conversion are anticipated to be invested as follows.
o Mystic Financial. Approximately 50 percent of the conversion proceeds
----------------
will be retained by Mystic Financial, with the balance to be invested
in the Bank. Such holding company funds are anticipated to be
invested initially into high-quality short- to intermediate-term
securities and a loan to the Bank's ESOP to fund stock purchases in
the conversion. The Holding Company funds will be utilized for
various corporate purposes, including funding expansion through
diversification or acquisition, stock repurchase programs, funding
stock purchases for the RSP and/or payment of regular or special
dividends, although there are no specific plans at present.
o Medford. The net proceeds infused into the Bank will be exchanged for
-------
all of the Bank's newly issued stock. The Bank's proceeds are
anticipated to initially be held in short-term cash and investments
until such funds are redeployed into lending and investment activities
consistent with the Bank's plan.
On a pro forma basis, Medford is expected to have a capital ratio above
both regulatory requirements and industry averages. The Board of Directors has
determined to pursue a strategy of controlled growth in order to maintain well-
capitalized status, with growth expected to be funded primarily through local
retail deposit growth and additional borrowings.
<PAGE>
RP Financial, LC.
Page 1.4
Balance Sheet Trends
--------------------
Table 1.1 shows key balance sheet items at the close of the last five
fiscal years. Medford's audited financial statements are incorporated by
reference as Exhibit I-2, while historical key operating ratios are presented in
Exhibit I-3. From June 30, 1993 through June 30, 1997, Medford exhibited annual
asset growth of 6.6 percent, with the asset growth channelled into increases in
loans receivable. A majority of the loan growth occurred subsequent to June 30,
1995, when the commercial real estate and commercial lending departments were
established and staffed. The Bank has not historically invested in mortgage-
backed securities ("MBS"), and the balance of cash and investments has fallen
since 1995, with funds utilized in the lending operations. Medford's annual
deposit growth totaled 5.1 percent, as the Bank has attracted new funds through
a combination of additional advertising and competitive rate offerings.
Borrowings, consisting of FHLB advances, have been used as a supplemental
funding source in fiscal 1997 to support lending operations.
The balance of loans receivable increased consistently since fiscal 1994,
although the balance increased at an annual rate of 20 percent since June 30,
1995, and the Bank has targeted a 75 percent loan-to-asset ratio. Since that
time, the Bank has been successful in expanding its residential loan origination
efforts in the local market, and has increased the level of commercial real
estate and commercial business loans. At June 30, 1997, loans receivable
totaled $114.8 million, or 76.7 percent of total assets. The composition of the
loan portfolio reflects the more recent diversified lending strategy, as 1-4
family permanent loans constituted $90.2 million, or 78.7 percent of the net
loan portfolio at June 30, 1997, a decline from 91.6 percent of the loan
portfolio as of two years earlier. At the same date, construction loans totaled
$1.0 million, or 0.9 percent of the loan portfolio. The largest expansion in
the loan portfolio has occurred in commercial real estate and commercial
business loans, which totaled $21.5 million, or 18.8 percent of the loan
portfolio, as Medford has targeted smaller commercial businesses in the market
area for lending opportunities. These loans are attractive for their higher
yields, shorter-terms, and higher average balances which require less personnel
for monitoring and servicing. Consumer loans totaled $3.2 million, or 2.8
percent of loans receivable, including $1.6 million of real estate related home
equity loans. The Bank's commercial real estate and commercial business loans
have been originated primarily with local businesses in Middlesex County.
The portfolio of cash and investment securities totaled $29.1 million, or
19.4 percent of assets, at June 30, 1997 (see Exhibit I-4). The cash and
investments portfolio consisted of cash and equivalents, including interest-
earning deposits in other financial institutions ($6.2 million), U.S. Government
and agency securities ($15.0 million), FHLB stock ($0.9 million), investment in
the Co-operative Central Bank ($0.7 million), equity securities ($3.8 million)
and other investments ($2.5 million). During fiscal 1996, the Bank used cash
flow from maturing investments or sales of investment securities to fund loan
originations, and the cash and investments portfolio declined to current levels
from $39.5 million at June 30, 1995. Management utilizes the portfolio of
<PAGE>
Table 1.1
Medford Co-operative Bank
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Year Ended June 30,
-----------------------------------------------------------------------------------
1993 1994 1995 1996
-----------------------------------------------------------------------------------
Amount Pct Amount Pct Amount Pct Amount
------- ------- -------- ------ ------- --------- --------
($000) (%) ($000) (%) ($000) (%) ($000)
Total Amount of:
<S> <C> <C> <C> <C> <C> <C> <C>
Assets $115,799 100.00% $121,063 100.00% $124,966 100.00% $131,366
Cash and Investments 30,137 26.02% 37,910 31.31% 39,522 31.63% 29,722
Loans Receivable (net) 80,284 69.33% 77,988 64.42% 80,217 64.19% 95,892
Real Estate Owned 460 0.40% 270 0.22% 104 0.08% 0
Deposits 106,179 91.69% 110,665 91.41% 113,825 91.08% 119,634
FHLB Advances 0 0.00% 0 0.00% 0 0.00% 0
Stockholders' Equity 8,864 7.65% 9,684 8.00% 10,367 8.30% 10,949
AFS Adjustment ----- ----- ----- ---- (55) -0.04% (71)
Loans Serviced for Others N/A N/A $9,970 $9,440
Loans/Deposits 75.61% 70.47% 70.47% 80.15%
<CAPTION>
6/30/95-
6/30/97
Annual
-------------------------------
1997 Growth Rate
-------------------------------------------
Pct Amount Pct Pct
--- ------ --- ---
(%) ($000) (%) (%)
Total Amount of:
<S> <C> <C> <C> <C>
Assets 100.00% $149,653 100.00% 6.62%
Cash and Investments 22.63% 29,075 19.43% -0.89%
Loans Receivable (net) 73.00% 114,779 76.70% 9.35%
Real Estate Owned 0.00% 0 0.00% -100.00%
Deposits 91.07% 129,303 86.40% 5.05%
FHLB Advances 0.00% 7,532 5.03% N/M
Stockholders' Equity 8.34% 11,940 7.98% 7.73%
AFS Adjustment -0.05% 179 0.12% N/A
Loans Serviced for Others $15,842
Loans/Deposits 88.77%
</TABLE>
Source: Medford's audited financial reports and RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.6
cash and investments for liquidity purposes and as part of the asset-
liability management strategy, as the investments portfolio consists of short-
to intermediate-term instruments. The Bank classifies the equity securities as
"available-for-sale", and as of June 30, 1997, an unrealized pretax gain of
$179,000 was tax adjusted and added to stated equity on the Bank's audited
financial statements. Going forward, the Bank intends to continue to purchase
generally low risk investments and the composition of the cash and investments
portfolio is not anticipated to change significantly, although the level will
initially increase on a post-conversion basis. Going forward, the Bank intends
to continue a focus on investment into whole loans, although MBS may be
purchased with available funds.
As noted previously, deposits have traditionally met most of the Bank's
funding needs, and all of the Bank's deposits are generated through its four
office locations. In the last several years, the Bank achieved growth in
deposits by attempting to be more visible in the local market area through
advertising and other marketing efforts and by offering competitive rates. This
strategy facilitated deposit growth, but also increased funding costs.
Currently, savings rates offered by Medford are generally in line with the local
competition, with certificates of deposits ("CDs") accounting for the majority
of total deposits. The Bank has a portfolio of core deposits totaling
approximately 54 percent of deposits, providing a base of stable lower costing
deposits for operations.
As stated previously, borrowings have also been used by the Bank in recent
periods for the purpose of funding certain loan originations. During fiscal
1997, the Bank borrowed approximately $7.5 million in short- to intermediate-
term advances from the FHLB of Boston to meet the demand for loans, and most of
the borrowings mature between 1997 and the year 2002. Going forward, the Bank
intends to continue using borrowings to support operations, although deposits
are expected to continue to comprise the majority of funding liabilities.
Positive earnings from fiscal 1993 to fiscal 1997 and a positive adjustment
for FAS 122 resulted in an increase in the Bank's capital ratio to $11.9
million, or 8.0 percent of assets, as of June 30, 1997. The Bank's capital
ratio declined from 8.3 percent as of June 30, 1996, due to the expansion of the
asset base. Medford is currently in compliance with respect to all of its fully
phased-in capital requirements. The addition of conversion proceeds will
enhance the Bank's capital position and strengthen Medford's competitive posture
within its market area.
<PAGE>
RP Financial, LC.
Page 1.7
Income and Expense Trends
-------------------------
Table 1.2 displays the Bank's earnings over the past five fiscal years and
reveals that earnings for the past five fiscal years have fluctuated between
0.48 and 0.77 percent of average assets, and totaled 0.54 percent for fiscal
1997, an increase from the lower level in fiscal 1996. The more recent lower
earnings have been attributable to higher operating expenses incurred in
connection with the opening of the new branch office in 1995 and establishment
of the commercial real estate and commercial lending departments in that same
year. The reinvestment of offering proceeds is expected to improve net income
in future periods.
Exhibit I-5 highlights the changes in the Bank's asset yields and cost of
funds over the past three fiscal years, which have influenced the level of net
interest income. Spreads widened by 15 basis points between fiscal 1996 and
1997, as the higher balances of higher yielding commercial real estate and
commercial business loans increased the Bank's asset yields by 11 basis points,
while the cost of funds declined by 4 basis points. These trends indicate that
the Bank has been successful improving the net interest margin. Despite balance
sheet repositioning, however, the Bank's net interest income is still influenced
by changes in interest rates.
Medford has historically derived income from non-interest sources, which
has provided some protection from changes in the net interest margin due to
interest rate fluctuations. For the most recent twelve month period, non-
interest operating income totaled $662,000, or 0.48 percent of average assets,
an 0.08 percent of average assets improvement from fiscal 1993. A majority of
this income results from the Bank's deposit base in the form of various fees and
charges on deposit accounts and transactions. A smaller portion of this income
is obtained from rental income on an office building owned by the Bank that is
adjacent to the main office building, and from other sources such as the Bank's
loan servicing operation. Going forward, the Bank anticipates that non-interest
income will remain primarily related to the deposit base, as other significant
income sources are not expected to be developed.
Medford's operating expenses have increased in the time period shown in
Table 1.2 due to the growth in the asset base and related operations, including
the new branch office and establishment of the commercial real estate and
commercial business loan departments in 1995. Despite the strong asset growth
and utilization of FHLB advances to partially fund such growth, the operating
expense ratio has increased to a higher level as a percent of average assets.
The Bank's operating expenses are expected to initially increase following the
conversion as a result of the following items. The ESOP and RSP purchases in
the offering and in the year following conversion, respectively, will increase
annual expenses. In addition, as a full stock institution, the Bank will incur
additional legal, accounting, printing/mailing and related costs.
<PAGE>
Table 1.2
Medford Co-operative Bank
Historical Income Statements
<TABLE>
<CAPTION>
For the Year Ended June 30
1993 1994 1995
-----------------------------------------------------------
Amount Pct(1) Amount Pct(1) Amount
------------------------------------------------------------
($000) (%) ($000) (%) ($000)
<S> <C> <C> <C> <C> <C>
Interest Income $8,176 7.34% $7,784 6.50% $8,165
Interest Expense (3,960) -3.56% (3,473) -2.90% (3,885)
------- ------ ------- ------ -------
Net Interest Income $4,216 3.79% $4,310 3.60% $4,280
Provision for Loan Losses (300) -0.27% (152) -0.13% (100)
------- ------ ------- ------ -------
Net Interest Income after Provisions $3,916 3.52% $4,158 3.47% $4,180
Other Operating Income $446 0.40% $505 0.42% $530
Operating Expense (2,930) -2.63% (3,144) -2.62% (3,575)
------ ------ ------- ------ -------
Net Operating Income $1,432 1.29% $1,519 1.27% $1,134
Gain(Loss) on Sale of Loans and Securities $45 0.04% $(2) -0.00% $6
Writedown on HFS Mortgage Loans 0 0.00% 0 0.00% 0
Massachusetts Thrift Fund Write-off 0 0.00% 0 0.00% 0
Co-operative Central Bank Share Ins. Fund Spec Div. 40 0.04% 40 0.03% 0
-- ----- -- ----- -
Net Non-Operating Income/Expense $84 0.08% $38 0.03% $6
Net Income Before Tax $1,516 1.36% $1,557 1.30% $1,140
Income Taxes (657) -0.59% (658) -0.55% (480)
----- ------ ----- ------ -----
Net Inc(Loss) Before Extraordinary Items $859 0.77% $899 0.75% $660
Cumulative Effect of Change in
Accounting For Income Taxes $221 0.20% $0 0.00% $0
---- ----- -- ----- --
Net Income (Loss) $1,080 0.97% $899 0.75 $660
Adjusted Earnings
- -----------------
Net Operating Income $1,432 1.29% $1,519 1.27% $1,134
Tax Effect (2) (620) -0.56% (642) -0.54% (478)
----- ------ ----- ------ -----
Adjusted Earnings $811 0.73% $877 0.73% $656
Memo:
Efficiency Ratio 62.85% 65.29% 74.34%
Effective Tax Rate 43.33% 42.27% 42.13%
<CAPTION>
1995 1996 1997
--------------------------------------------------------
Pct(1) Amount Pct(1) Amount Pct(1)
--------------------------------------------------------
(%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C>
Interest Income 6.81% $8,928 7.16% $9,899 7.21%
Interest Expense -3.24% (4,569) -3.66% (4,911) -3.58%
------ ------- ------ ------ ------
Net Interest Income 3.57% $4,360 3.49% $4,988 3.63%
Provision for Loan Losses -0.08% (100) -0.08% (272) -0.20%
------ ----- ------ ----- ------
Net Interest Income after Provisions 3.49% $4,260 3.41% $4,716 3.44%
Other Operating Income 0.44% $643 0.52% $662 0.48%
Operating Expense -2.98% (3,878) -3.11% (4,280) -3.12%
------ ------- ------ ------- ------
Net Operating Income 0.95% $1,024 0.82% $1,098 0.80%
Gain(Loss) on Sale of Loans and Securities 0.00% $12 0.01% $176 0.13%
Writedown on HFS Mortgage Loans 0.00% (41) -0.03% 0 0.00%
Massachusetts Thrift Fund Write-off 0.00% 0 0.00% (50) -0.04%
Co-operative Central Bank Share Ins. Fund Spec Div. 0.00% 44 0.04% 44 0.03%
----- -- ----- -- -----
Net Non-Operating Income/Expense 0.00% $15 0.01% $170 0.12%
Net Income Before Tax 0.95% $1,039 0.83% $1,268 0.92%
Income Taxes -0.40% (440) -0.35% (527) -0.38%
------ ----- ------ ----- -------
Net Inc(Loss) Before Extraordinary Items 0.55% $599 0.48% $741 0.54%
Cumulative Effect of Change in
Accounting For Income Taxes 0.00% 0 0.00% 0 0.00%
----- - ----- - -----
Net Income (Loss) 0.55% $599 0.48% $741 0.54%
Adjusted Earnings
Net Operating Income 0.95% $1,024 0.82% $1,098 0.80%
Tax Effect (2) -0.40% (434) -0.35% (456) -0.33%
------ ----- ------ ----- ------
Adjusted Earnings 0.55% $590 0.47% $642 0.47%
Memo:
Efficiency Ratio 77.53% 75.75%
Effective Tax Rate 42.36% 41.56%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Based on effective tax rate for each year.
Source: Medford's audited financial reports, RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.9
Provisions for loan losses have generally had a small impact on earnings in
recent years, although such provisions increased to $272,000, or 0.20 percent of
assets during the twelve months ended June 30, 1997, as Medford added to the
allowance for loan losses in recognition of the growth in higher risk loans such
as commercial real estate and commercial business loans and the overall growth
in the loan portfolio. The Bank is budgeting provisions of $50,000 per quarter
in the future in order to increase the allowance for loan losses ("ALL") ratio
as a percent of loans receivable. As of June 30, 1997 the ALL balance was equal
to $977,000, or 0.85 percent of net loans receivable and 267.67 percent of non-
performing loans, as compared to $757,000, or 0.94 percent of net loans and
87.21 percent of non-performing loans at fiscal year end 1995 (see Exhibit I-6).
Historically, non-operating gains and losses have been limited to gains or
losses on the sale of investment securities that were sold to fund loan
originations, and special dividends from the Bank's investment in the Co-
operative Central Bank (see Table 1.2). During the most recent twelve month
period, Medford reported net gains of $176,000, primarily from the sale of loans
in the secondary market, a level well in excess of prior periods. In addition,
the Bank incurred a loss of $50,000 on the expected final resolution of the
Bank's Massachusetts Thrift Fund investment (Medford has accrued an operating
loss of $20,000 for fiscal 1997 and expects to incur a loss of approximately
$30,000 as a result of the final resolution of the fund in late 1997).
Interest Rate Risk Management
-----------------------------
Medford attempts to manage exposure to interest rate fluctuations on both
the asset and liability side of the balance sheet, and has attempted to enhance
the interest sensitivity of its operations through several means, including:
(1) increasing the portfolio of ARMs held in the loan portfolio (both
residential and commercial real estate-related); (2) originating shorter-term
fixed-rate residential mortgages (10 to 15 year terms) for portfolio; (3)
holding short-term investment securities; (4) increasing the balance of short-
term to maturity commercial business loans and consumer loans; (5) extending
whenever possible the term to maturity of the certificate of deposit base; and,
(6) increasing the proportion of transaction accounts in the deposit base which
are considered to be less interest rate sensitive funds. Exhibit I-7 displays
the distribution of the Bank's fixed and adjustable rate loans.
Medford monitors its exposure to interest rate risk using an internal
calculation of the cumulative gap position for the Bank. As shown in Exhibit I-
8, according to the most recent calculation, the Bank's cumulative gap position
in the one-year time period was a negative 13.9 percent, indicating a level of
interest rate risk. Although this measure is within the Board-established
limits of the Bank, Medford is seeking to reduce exposure to interest rate risk,
and the reinvestment of conversion proceeds is expected to contribute to reduced
exposure.
<PAGE>
RP Financial, LC.
Page 1.10
Lending Activities and Strategy
-------------------------------
The Bank's historical lending activities emphasize the origination of 1-4
family mortgage loans (see Exhibits I-9 and I-10, loan composition and
maturity). In recent periods, Medford has also concentrated on loan portfolio
diversification by building portfolios of commercial real estate loans,
commercial business loans and non-mortgage loans in an effort to enhance overall
portfolio yields and expand the Bank's products and services offered.
Underscoring the change in portfolio composition, while gross loans increased
from $80.2 million at June 30, 1995 to $114.8 million at June 30, 1997, the
proportion of 1-4 family loans dropped from 91.6 percent of loans to 78.7
percent. The Bank's credit risk profile has increased over that time period
through limited seasoning on a large portion of the loan portfolio (primarily
the commercial real estate and commercial business portfolio), and increased
concentration of higher risk weight loans.
As of June 30, 1997, residential mortgage loans secured by 1-4 family
properties totaled $90.2 million, or 78.7 percent of total loans receivable.
The Bank originates both ARMs and fixed-rate residential mortgages with
essentially all loans underwritten to Federal National Mortgage Association
("FNMA") guidelines. Residential loans made by the Bank are generally
originated with maximum loan-to-value ("LTV") ratios of 95 percent, with loans
with LTV ratios in excess of 80 percent requiring private mortgage insurance
("PMI") coverage. Fixed-rate mortgages are offered with maturities of up to 30
years, with essentially all loans with maturities in excess of 15 years sold in
the secondary market (primarily to the FNMA), and loans with shorter terms held
in portfolio.
Approximately 65 percent of the Bank's 1-4 family residential mortgages
consisted of ARMs at June 30, 1997, which are retained for portfolio as part of
asset/liability management strategy. Medford offers ARMs with one- or three-
year adjustment periods that are indexed to the weekly average rate on the
corresponding U.S. Treasury securities, adjusted to a constant maturity. The
Bank's most popular adjustable mortgage is a 7/1 ARM with an interest rate that
is fixed for seven years which then reprices annually for the remaining term
thereafter. The majority of ARMs are originated with annual adjustment caps of
2.0 percent, lifetime adjustment caps of up to 5.0 percentage points, and are
originated at discounted rates.
Medford has recently increased the level of originations of commercial real
estate loans in order to diversify the loan portfolio and increase overall asset
yields. As of June 30, 1997, commercial real estate loans totaled $17.9
million, or 15.6 percent of loans receivable. The Bank's commercial real estate
portfolio consists primarily of loans secured by the buildings in which various
small businesses conduct their operations, such as small office buildings,
warehouses and office condos. Commercial real estate loans originated by
Medford are predominantly adjustable rate loans that generally have terms of up
to 20 years, and are indexed to the prime rate of interest or the U.S. Treasury
rate of a similar term as the adjustment period, with a rate review
<PAGE>
RP Financial, LC.
Page 1.11
conducted every 3-5 years. LTVs on income property loans typically do not exceed
80 percent. The Bank seeks to manage credit risk on such loans by lending
primarily on local property, to borrowers with whom management is familiar, and
obtaining personal guarantees. A portion of the commercial real estate loan
portfolio consists of loans with borrowers with whom the Bank's commercial loan
officers have had prior business relationships.
Construction loans totaled $1.0 million, or 0.9 percent of loans
receivable, at June 30, 1997, primarily for residential property. Most of the
construction loans are underwritten as construction/permanent loans to the
future occupants, structured to become permanent loans upon completion of the
construction. Construction loans are structured as interest-only during the
construction period, which generally equals six months. Construction/permanent
loans have maximum LTV ratios equal to the requirements of the permanent loans.
Medford also offers consumer loans, including home equity loans, which
totaled $3.2 million, or 2.8 percent of gross loans receivable, at June 30,
1997. The Bank offers a variety of types of consumer loans, including loans
secured by deposit accounts, automobile and secured and unsecured personal
loans. Consumer loans are generally offered for terms of up to five years at
fixed interest rates, and Medford will lend up to 90 percent of the depositor's
savings account balance, and up to 90 percent of the value of an automobile.
Home equity loans represent an area of growth for Medford in recent years, and
usually consist of equity loans for up to 75 percent of the appraised value of a
home, less the amount of the first mortgage. Home equity loans are offered at
both fixed and adjustable rates of interest, with the adjustable rate based on
the prime rate of interest.
Commercial business loans also represent an area of recent loan portfolio
diversification, as Medford strives to provide all financing needs for a
business customer (i.e. real estate loans and working capital or operating
loans). Since starting the commercial business loan department in 1995,
following the hiring of two experienced commercial loan officers, the Bank's
commercial business loans have grown from $0.4 million to $3.7 million as of
June 30, 1997. These loans are primarily made to local small businesses in
Middlesex County, and are attractive due to the higher yields and shorter
durations. The Bank has been able to increase the portfolio of such loans due
to personal contacts by Bank employees in the local communities. Commercial
business loans usually carry a floating rate indexed to the prime rate,
generally have a five year term, and are secured by assets such as inventory,
equipment or other assets and guaranteed by the principals. Medford has also
attempted to gain a deposit relationship with the commercial business borrowers;
this practice has helped build the deposit base recently.
<PAGE>
RP Financial, LC.
Page 1.12
As shown in Exhibit I-11, Medford's overall loan origination volume
increased from $10.8 million in 1995 to $44.7 million for the most recent twelve
months. The table highlights the Bank's increased emphasis on commercial real
estate and commercial business lending, with originations increasing from $0.4
million, or 4.1 percent, of loan originations in fiscal 1995 to $15.3 million,
or 34.3 percent of loan originations for fiscal 1997. Medford has not
historically purchased loans, and has sold loans in the secondary market,
primarily to FNMA.
Asset Quality
-------------
Exhibit I-12 displays Medford's NPAs from fiscal 1995 to 1997, and shows
that the level of NPAs has declined from 1.08 to 0.32 percent of total loans.
The Bank had no real estate owned ("REO") at June 30, 1997. As of June 30,
1997, the ratio of NPAs to assets equaled 0.24 percent of assets, a decline from
0.78 percent of assets at fiscal year end 1995. At June 30, 1997, NPAs totaled
$365,000 and consisted of both residential and commercial real estate loans on
non-accrual status. As of the same date, the Bank maintained valuation
allowances of $977,000, equal to 0.85 percent of loans receivable and 267.67
percent of NPAs. Medford had classified assets of $1,140,000 at June 30, 1997,
all of which were classified as substandard (see Exhibit I-13).
Funding Composition and Strategy
--------------------------------
Exhibit I-14 provides data pertaining to Medford's deposit composition at
fiscal year ends 1995 through 1997. Medford's deposits consist of CD accounts,
which totaled $59.1 million, or 45.7 percent of total deposits, and a base of
core deposits (passbook accounts, NOW accounts, non-interest checking accounts,
and MMDAs) which totaled $88.5 million, or 54.3 percent of total deposits.
Passbook accounts were the largest component of core deposits and totaled $40.8
million, or 31.6 percent of total deposits, at June 30, 1997, followed by NOW
accounts totaling $18.0 million, and money market deposits totaling $6.5
million. Going forward, the Bank intends to try to increase the deposit base to
fund anticipated increases in lending operations.
CDs accounted for approximately 45.7 percent of Medford's deposit base at
June 30, 1997. Approximately 43 percent of the CD portfolio was scheduled to
mature in one year or less. Jumbo CDs, which tend to be more rate sensitive
than lower balance CDs, accounted for $9.2 million, or 7.1 percent of deposits,
at June 30, 1997. The level of jumbo CDs in the Bank's CD portfolio is
significant in that jumbo CDs tend to be more rate sensitive than smaller
denomination CDs, increasing the Bank's interest rate risk to a degree.
Due to recent lending activity and the need for liquidity, the Bank has
utilized borrowings from the FHLB of Boston. These advances are secured by the
Bank's stock in the FHLB and a portion of Medford's
<PAGE>
RP Financial, LC.
Page 1.13
mortgage loans, and are generally maturity-matched with certain large commercial
real estate loans. As of June 30, 1997, the Bank had FHLB advances of $7.5
million outstanding with maturities primarily between 1997 and the year 2002.
Subsidiary Operations
---------------------
The Bank currently has two subsidiary operations. Mystic Investments, Inc.
is an inactive subsidiary with a small amount of cash as its only asset. This
subsidiary is expected to be liquidated in the near future prior to the
conversion transaction.
In 1997, the Bank formed Mystic Securities Corporation, a Massachusetts
securities corporation, and transferred approximately $2.4 million of marketable
equity securities and cash to the subsidiary operations. The marketable equity
securities primarily consisted of common stock investments in approximately 20
companies in a variety of industries. Income from Mystic Securities is eligible
for certain favorable state tax treatment pursuant to state tax laws, and
Medford intends to continue to use this investment vehicle in the future as part
of the investment strategy. As of July, 1997, the amount of securities held in
this subsidiary totaled approximately $2.5 million, with the entire balance
classified as AFS, and cash. Medford utilizes the services of a Boston-based
investment advisor, Asset Management Partners, Inc. to make investment
recommendations, and the President and Chief Financial Officer have the
authority to make investment decisions. Such investment decisions are then
ratified by the Bank's Board of Directors.
Legal Proceedings
-----------------
Other than the routine legal proceedings that occur in the Bank's ordinary
course of business, the Bank is not involved in litigation which is expected to
have a material impact on the Bank's financial condition or operations.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Medford conducts operations out of a headquarters office and three branch
offices in Medford, Middlesex County, Massachusetts. Exhibit I-1 details the
locations of the Bank's offices, while Exhibit II-1 details the general
characteristics of the Bank's offices. Middlesex County, located in eastern
Massachusetts to the north and west of the city of Boston, is part of the Boston
metropolitan statistical area ("MSA"). The city of Medford, containing
approximately 53,000 residents, is located in the northern suburbs of Boston,
bounded by the towns of Malden, Everett, Somerville, Stoneham, Winchester and
Arlington. As an older, inner suburb, Medford consists mostly of developed
properties within a network of neighborhoods. The city of Medford represents
the primary market area for deposit and loan generation as most of the Bank's
depositors and loan customers live in the areas surrounding the office
locations.
The local Medford market area (zip code 02155), is home to a primarily
residential area with a smaller portion of businesses and commercial
enterprises. A majority of the residential neighborhoods were developed a
number of years ago, resulting in relatively aged housing stock. Given the
residential nature of Medford, a portion of Medford residents work in other
cities within the MSA, including Boston, 8 miles to the south. The area has
reported relatively stable levels of population and households in recent years,
with the area experiencing a level of out-migration to outer suburbs, where
housing and land is less expensive and newer. Income levels in Medford are
relatively lower than the averages for Middlesex County.
Competition from other financial institutions operating in the Medford area
includes a number of both large and small commercial banks and one savings
institution. The Bank maintains a market share of approximately 14 percent of
overall financial institution deposits in Zip Code 02155. The other financial
institutions are both locally-owned community-oriented and subsidiaries of
larger regional institutions. The Bank has experienced growth in deposits in
recent years primarily due to an increased emphasis on marketing products and
services. However, competition remains high in the marketplace.
Future business and growth opportunities will be partially influenced by
economic and demographic characteristics of the market served, particularly the
future growth and stability of the regional economy, demographic growth trends,
and the nature and intensity of the competitive environment for financial
institutions. These factors have been briefly examined in the following pages
to help determine the growth potential that exists, the relative economic health
of the market area and the relative impact on value.
<PAGE>
RP Financial, LC.
Page 2.2
National Economic Factors
- -------------------------
Over the past year, national economic growth has been mixed. In early-April
1996 inflation concerns became more prominent as the result of a stronger than
expected March 1996 employment report; however, other economic indicators
suggested that the pace of economic growth was moderate and inflation was under
control. Inflation concerns were further heightened in late-April, as the result
of higher oil and commodity prices; although, wages, which account for most of
the inflation measures, did not signal that inflation was heating up.
Unemployment data for both May and June suggested a strong pace of economic
growth, with the stronger than expected job growth pushing interest rates
higher. However, other economic measures, such as consumer and producer prices,
reflected a more modest pace of economic growth.
The third quarter of 1996 started with a continuation of second quarter
trends, although mid-July Congressional testimony by the Federal Reserve
Chairman hinted of expectations that the economy would taper off slightly in the
second half of 1996. However, much of the economic data released during July and
August continued to indicate a fairly robust pace of economic growth. Such
economic data included a stronger than expected increase in July durable goods
orders, the consumer confidence index hitting a six year high and a decline in
the August unemployment rate. Comparatively, for the balance of the third
quarter, economic data, such as a decline in August durable goods orders and
smaller than expected increases in August retail sales and consumer prices,
suggested that the economy was cooling off. A slight increase in the September
unemployment rate further signaled a slowing economy.
Economic data released at the beginning of the fourth quarter generally
confirmed that the national economy was slowing. October unemployment remained
at 5.2 percent, although the number of new jobs being added to the economy was
lower compared to job growth recorded during the late-spring and the summer.
Third quarter GDP growth fell to a 2.2 percent annual rate, versus a comparative
4.7 percent rate in the second quarter. Wage data also indicated that inflation
was under control, as wages remained flat for production and nonsupervisory
workers in October, despite a $0.50 increase in the minimum wage rate that
became effective on October 1, 1996. While the November unemployment rate
climbed to 5.4 percent from 5.2 percent in October, inflation concerns were
heightened somewhat by an unexpectedly sharp $0.09 jump in average hourly
earnings. However, most of the economic data released at the close of 1996,
which included jobless claims rising to a five month high in November and a
decline in November durable goods orders, suggested that the economy was
sluggish and non-inflationary.
While fourth quarter GDP growth came in at a stronger than expected 4.7
percent annual growth rate (subsequently revised to 3.9 percent), most of the
economic data released during the beginning of the first
<PAGE>
RP Financial, LC.
Page 2.3
quarter of 1997 indicated a continuation of moderate economic growth. Such
measures as a 1.9 percent decline in December durable goods orders and a modest
uptick in the January 1997 unemployment rate to 5.4 percent, versus 5.3 percent
in December 1996, eased concerns that the economy was overheating. However, the
increase in the unemployment rate was attributable to more people who entered
the job force, and some markets have been experiencing labor shortages. In
congressional testimony at the end of February 1997, the Federal Reserve
Chairman indicated that he anticipated recent signs of lower job insecurity
among workers would lead to upward pressure in wages, which could possibly
trigger the Federal Reserve to boost interest rates. Signs of inflation became
more notable during March and April, with most economic indicators posting
month-to-month increases from January to February. Most notably, during February
industrial production increased 0.5 percent, housing starts rose 12.2 percent
and the sale of existing homes jumped 9.0 percent. Accelerating economic growth
was further indicated by a decline in the March unemployment rate to 5.2
percent, versus 5.3 percent for February, and a higher than expected rise in the
March "core" producer price index, which posted its largest increase in 18
months. The revised first quarter GDP growth rate, released in late May 1997,
was an annual rate of 5.9 percent, far exceeding analysts' projections, and gave
more evidence of the strong economy. The unemployment rate for April 1997
declined to 4.9 percent, also an indicator of a strong economy.
More recent economic data released in the second quarter of 1997 indicates
a continued expanding economy, as retail sales have increased modestly from the
prior quarter's level, and business inventories have also increased, which added
to the first quarter GDP growth figures. New home sales also remained steady
based on the latest data available. Automobile sales for May increased from
April levels, but remained below year-earlier levels. Overall, GDP growth for
the second quarter of 1997 is estimated at 2.0 to 2.5 percent, a significant
drop from the first quarter 1997 results.
Consistent with recent economic activity, interest rate trends have been
varied as well over the past year. Generally improving economic conditions and
indications that the Federal Reserve would not cut interest rates further
started an upward trend in interest during the first quarter of 1996. Interest
rates continued to edge higher during the second quarter of 1996, as the 30-year
U.S. Government bond yield climbed above 7.0 percent following the stronger than
expected May job growth reported in early-June. In early-July, the release of a
strong June employment report had a more severe effect on bond prices, as the
large drop in unemployment provided for one of the largest one day declines in
bond prices with the yield on the 30-year benchmark bond increasing from 6.93
percent to 7.18 percent. After trending lower for a brief period during early-
and mid-August, interest rates moved higher in late-August and early-September
as inflation concerns were raised by the stronger than expected economic growth.
<PAGE>
RP Financial, LC.
Page 2.4
The Federal Reserve's decision not to raise interest rates at its September
and October 1996 meetings, along with economic data providing indications of a
cooling economy, translated into a declining interest rate environment during
late-September and through most of October. Interest rates continued to edge
lower through November, as the October economic data suggested that inflationary
pressures were non-threatening. Bond prices declined slightly in early-December,
as investors focused on weakness in the dollar and rising oil prices. Concern
over Japanese investors slowing their buying of U.S. Treasury notes caused bond
prices to slide in mid-December, despite economic data which continued to
indicate mild inflation. Interest rates were somewhat trendless at the close of
1996, as the Federal Reserve elected not to change interest rates at its
December meeting.
With few inflationary signs, interest rates held steady at the beginning of
1997, which was followed by a mild easing in interest rates during the first
half of February. Indications of slowing economic growth and the Federal
Reserve's decision to leave rates unchanged at its early-February meeting
spurred the downward trend in interest rates. However, interest rates edged
higher in late-February, following renewed concerns by the Federal Reserve
Chairman over the sharp rise in the stock market during the past two years.
After stabilizing briefly, the strengthening economy and growing expectations of
a rate increase by the Federal Reserve propelled interest rates higher in late-
March 1997.
The Federal Reserve increased short-term interest rates by 0.25 percent in
late-March 1997, which was followed by a sharp sell-off in the bond market. For
the first time in six months, the rate on the 30-year benchmark bond moved above
7.0 percent. Inflation concerns pushed interest rates higher during the first
half of April 1997, which was followed by a slight decline in interest rates on
rumors of a national budget accord. Throughout the end of April and the month of
May 1997, interest rates continued to fluctuate in a moderately narrow range as
various economic indicators showed various signs of growth and/or stability in
the economy. The most recent revision to the inflation rate in May 1997 showed a
2.2 percent annual rate. Confidence in the nation's economy was relatively
strong through August 1997, reflecting little signs of inflation, continued
strong stock market performance and an overall positive business outlook, and as
of August 15, 1997 one- and thirty-year U.S. Government bonds were yielding 5.50
percent and 6.55 percent, respectively. Exhibit II-2 provides historical
interest rate trends from 1991 through August 15, 1997.
Market Area Demographics
- ------------------------
Demographic growth trends in the primary market area of Middlesex County
and zip code 02155 have been measured by changes in population, number of
households and median household income and other data,
<PAGE>
RP Financial, LC.
Page 2.5
with trends in those areas summarized by the data presented in Exhibit II-3.
Massachusetts and U.S. data is provided for comparative purposes, and trends in
this data provide some indication of future levels of business activities for
financial institutions.
The Bank's offices are located in a relatively small market area in terms
of population, as zip code 02155 reported a total population of approximately
53,000 as of 1997. Since 1980, the primary market area zip code has experienced
declines in population and households, and the decline in population and
households is projected to continue through the year 2002. Middlesex County has
reported slightly positive growth rates of population and housing in line with
statewide averages (0.2 and 0.4 percent, respectively). All of these figures,
however, trail the national averages of approximately a 1.0 percent annual
growth rate.
The market area zip code reported lower income levels in comparison to
statewide and national averages. Estimated per capita annual income for 1997 in
zip code 02155 was under $20,000, 17 percent less than the county-wide average
and slightly less than the state average. Median household income levels were
also lower than the county and state averages. Income distribution levels are
similar to per capita income figures, revealing that zip code 02155 has a higher
proportion of lower income households (below $100,000 annually), reflecting the
lower income nature of the area. Based on the declining population trends and
lower income levels, growth opportunities in the primary market area counties
can be expected to be limited, with growth achievable through increased market
share of local financial institution deposits.
Economy
- -------
Most of the Bank's deposit gathering activities and a substantial portion
of the lending operations are conducted in the city of Medford, and more
specifically zip code 02155. Employment in Medford is generally diversified,
containing employment in services, state and local government, wholesale and
retail trade and manufacturing. Table 2.1 below presents the major employers
within the city of Medford, and Exhibit II-4 presents additional data concerning
sources of personal income and employment sectors. Additional significant
employers include the Lawrence Memorial Hospital (health care), Medford Bank
(financial services), the Star Market (groceries), Ziff Communications
(publishing), Stop and Shop (convenience stores), Century Bank and Trust
(banking) and Mellon Trust (banking). As shown by this list of employers, the
Bank's primary market area of Medford City contains a relatively well
diversified employment base.
<PAGE>
RP Financial, LC.
Page 2.6
Table 2.1
Medford Co-operative Bank
Major Employers
<TABLE>
<CAPTION>
Employer Industry Employees
- -------- -------- ---------
<S> <C> <C>
Tufts University Education 1,600
Meadow Glen Mall Retailing 947
Harvard Community Health Plan Health Care 400
Anheuser Busch Beverages 277
B.J.s Wholesale Wholesale Store 209
Source: Local Area Chamber of Commerce.
</TABLE>
Table 2.2 displays unemployment data in the local market area as of May 1996 and
May 1997. The unemployment rates for both Middlesex County and zip code 02155
have remained below statewide averages, and the employment situation has
improved in the most recent twelve month period. This data reflects in part the
overall strong economy, but also the population declines which act to lower the
supply of available labor.
Table 2.2
Medford Co-operative Bank
Market Area Unemployment Trends
<TABLE>
<CAPTION>
Region May 1996 May 1997
- ------ -------- --------
<S> <C> <C>
United States 5.4% 4.7%
Massachusetts 4.1 3.8
Middlesex County 3.0 2.9
Medford City 3.7 3.5
Source: U.S. Bureau of Labor Statistics.
</TABLE>
Deposit Trends and Competition
- ------------------------------
The market area (defined as zip code 02155 for deposits), is characterized
by the presence of both locally-based and locally-owned financial institutions
and larger, regional institutions. Major competitors include financial
institutions such as Century Bank and Trust, Medford Bank, and U.S. Trust.
Table 2.3 displays deposit market trends for the Commonwealth of
Massachusetts and the primary market area from June 30, 1994 to June 30, 1996.
Overall, financial institution deposits showed an increase statewide, with
commercial banks showing growth while savings institutions lost deposits. This
trend of minimal increases in overall deposits, similar to the rest of the
nation, reflects in part disintermediation whereby banking
<PAGE>
Table 2.3
Medford Co-operative Bank
Deposit Summary
<TABLE>
<CAPTION>
As of June 30,
--------------------------------------------------------
1994 1996
-------------------------------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
------------------------------------------------------------------------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Commonwealth of Massachusetts $100,026,468 100.0% 1,968 $103,794,128 100.0% 1,910 1.9%
Commercial Banks/Savings Banks 96,622,982 96.6% 1,887 100,418,659 96.7% 1,829 1.9%
Savings Institutions 3,403,486 3.4% 81 3,375,469 3.3% 81 -0.4%
Middlesex County $21,020,752 100.0% 457 $21,627,384 100.0% 437 1.4%
Commercial Banks/Savings Banks 20,035,066 95.3% 439 20,579,433 95.2% 419 1.3%
Savings Institutions 985,686 4.7% 18 1,047,951 4.8% 18 3.1%
Medford Co-op. 111,129 0.5% 3 120,057 0.6% 4 3.9%
Zip Code 02155 $813,560 100.0% 18 $869,296 100.0% 20 3.4%
Commercial Banks/Savings Banks 801,202 98.5% 17 844,183 97.1% 19 2.6%
Savings Institutions 12,358 1.5% 1 25,113 2.9% 1 42.6%
Medford Co-op. 111,129 13.7% 3 120,057 13.8% 4 3.9%
</TABLE>
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.8
customers have also placed available funds into other types of financial
intermediaries such as mutual funds, investment firms, brokerage houses, and
insurance companies. Deposit trends in Middlesex County exhibited similar trends
as the state, however savings institutions reported overall higher growth than
commercial banks. In both comparative areas, however, commercial banks hold over
95 percent of financial institution deposits.
Deposit trends in zip code 02155 exhibited a stronger rate of deposit increase,
as total deposits increased by 3.4 percent annually over the two year period.
The increase in deposits was recorded by both commercial banks and savings
institutions. The relatively strong deposit growth may be from additional
emphasis placed on deposit raising activities by a number of the competitors,
and the increase in deposits is significant in light of the declining population
base. Medford, similar to the other local financial institutions, has recorded
increases in deposits over the time period shown in Table 2.3 at a rate slightly
higher than the zip code average, resulting in an increase in deposit market
share since June 30, 1994. Data available subsequent to June 30, 1996 reveals a
continued increase in deposit funds for the Bank. This increase in deposits
reveals success in raising additional retail deposit funds for business
operations.
Summary
- -------
The overall condition of the primary market area can be characterized as
relatively stable in terms of population and household base. The local economy
is relatively diversified. In order to support the Bank's desired level of
business operations, lending activities have been pursued in a larger
geographical area consisting of Middlesex County. Going forward, in view of the
local demographic and economic trends and the numbers and types of competitors
in the market area, the competition for deposits is expected to remain
substantial, which will result in Medford having to pay competitive deposit
rates to maintain local market share. The reinvestment of stock proceeds from
the conversion may mitigate to some extent the potentially higher funding costs
to attract deposits through anticipated loyalty of local shareholders and
referrals from local shareholders.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Medford's operations versus a group of
comparable public companies (the "Peer Group") selected from the universe of all
publicly-traded savings institutions. The primary basis of the pro forma market
valuation of the Bank is provided by these public companies. Factors affecting
Medford's pro forma market value such as financial condition, credit risk,
interest rate risk, and recent operating results can be readily assessed in
relation to the Peer Group. Current market pricing of the Peer Group, subject
to appropriate adjustments to account for differences between the Medford and
the Peer Group, will then be used as a basis for the valuation of the Bank's to-
be-issued common stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have excluded from the Peer Group all publicly-
traded subsidiary institutions of mutual holding companies, because their
pricing ratios are distorted by the minority issuance of their shares. We have
also excluded from the Peer Group those companies under acquisition and/or
companies whose market prices appear to be distorted by speculative factors or
unusual operating conditions. The universe of all publicly-traded institutions
is included as Exhibit III-1. Pricing characteristics of all thrift
institutions are included as Exhibit IV-1 (institutions excluded from the
calculation of averages are denoted with a footnote (8)).
Under ideal circumstances, the Peer Group would be comprised of a minimum
of ten publicly-traded Massachusetts savings banks or thrifts with capital,
earnings, asset sizes, balance sheet composition, risk profiles, operating
strategies and market areas comparable to the Bank. Since 10 such institutions
do not exist, it was necessary to expand the search beyond state boundaries and
with search criteria for smaller, moderately-capitalized institutions located in
other New England states. Thus, in the selection process we applied the two
primary "screens" to the universe of all public companies as follows:
o Screen #1. New England institutions with assets less than $450 million
-----------------------------------------------------------------------
and core ROA between 0.40 and 1.20 percent of average assets. Ten
-------------------------------------------------------------
companies met the criteria for this screen and all ten were included
in the Peer Group (see Exhibits III-2 and III-3).
o Screen #2. Institutions operating in the Bank's specific market area.
----------------------------------------------------------------------
One company, Medford Bank, met the criteria for this screen and was
included in the Peer Group (see Exhibits III-2 and III-3).
29
<PAGE>
RP Financial, LC.
Page 3.2
Table 3.1 lists key characteristics of the Peer Group companies. In
general, the Peer Group is comprised of relatively seasoned publicly-traded
institutions operating in Massachusetts or adjoining states with moderately a
higher average asset size. While the Peer Group is not exactly comparable to
the Bank, we believe that it provides a reasonable representation of publicly-
traded thrifts with operations comparable to those of the Bank and thus forms a
sound basis for valuation. A summary description of the key characteristics of
each of the Peer Group companies selected is detailed below.
o MEDFORD BANK OF MA. Medford Bank, the largest member of the Peer Group
with over $1.0 billion in assets, was selected due to its market area
location in Medford, Massachusetts. Medford Bank is thus a direct
competitor of Medford, and operates offices close to the Bank's offices in
the town of Medford. Medford Bank operates with a low operating expense
ratio and profitability higher than the Peer Group average. Medford Bank
also reported investment in commercial real estate loans and relatively low
levels of non-performing assets.
o EMERALD ISLAND BANCORP, INC. OF MA. Emerald Island, the holding company
for Hibernia Savings Bank, is a $425 million institution operating eight
offices in eastern Massachusetts within the Boston MSA. Emerald Island
converted to stock form in September 1986, and is a well-seasoned public
company. Emerald Island reported relatively high investment in MBS and
commercial real estate loans and higher asset quality than the Peer Group
as a whole.
o NEWMIL BANCORP. OF CT. Newmil Bancorp, a $323 million thrift, operates 13
offices in the New Milford, CT area. NewMil Bancorp, in addition to
satisfying the selection criteria, reported a net interest margin and
operating expenses above Peer Group averages, and the second highest
investment in commercial real estate loans.
o CENTRAL CO-OP. BANK OF MA. Central Co-op operates in close proximity to
the Bank's market area in the northern section of the Boston MSA. Central
Co-op is a $321 million institution operating 8 offices, and is also a
seasoned institution that converted in 1986. Central Co-op. operates with
a capital level higher than the Peer Group median, and a net interest
margin similar to the Bank's. Central Co-op maintains a similar level of
loan diversification into commercial real estate lending.
o NH THRIFT BANCSHARES OF NH. NH Thrift is $313 million thrift operating 10
branches in New London, New Hampshire. NH Thrift has a relatively low
capital level and the lowest profitability of the Peer Group members. NH
Thrift also maintained zero investment in MBS and the highest level of
investment in commercial business loans of all Peer Group members.
o NORTHEAST BANCORP OF ME. Northeast is one of two Maine institutions
included in the Peer Group, and operates eight offices in Maine. Northeast
reported a high investment in MBS and the highest use of borrowed funds of
all Peer Group members. Northeast also reported a relatively strong net
interest margin in comparison to other Peer Group members, and the highest
level of operating expenses.
o TOLLAND BANK OF CT. Tolland is the only Connecticut institution included
in the Peer Group, and operates seven offices in Connecticut. Tolland,
traded on the AMEX exchange, maintained profitability slightly below Peer
Group averages, and a loan portfolio diversified into commercial real
estate and consumer loans, with little investment in MBS. Tolland reported
the highest level of non-performing assets of all Peer Group companies.
30
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
August 26, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MDBK Medford Bank of Medford MA (3) OTC Eastern MA Thrift 1,073 16 12-31 03/86 30.00 136
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 425 8 12-31 09/86 21.00 47
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 323 13 06-30 02/86 13.00 50
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 321 M 8 03-31 10/86 19.50 38
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 313 M 10 12-31 05/86 16.75 34
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 248 M 8 06-30 08/87 14.75 19
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 238 7 12-31 12/86 15.50 24
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 189 5 12-31 05/93 23.50 28
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 125 M 4 04-30 12/87 18.62 17
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 94 2 09-30 03/96 17.00 25
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 60 2 03-31 11/89 25.00 6
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and Ret.=Retail
Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 08/26/97
<PAGE>
RP Financial, LC.
Page 3.4
o IPSWICH SB OF IPSWICH, MA. Ipswich SB is a $189 million asset company
operating out of five offices in Massachusetts. Ipswich SB diversifies its
earning assets by maintaining a relatively high proportion of MBS, and
utilizes borrowings to a higher degree than the Peer Group average.
Ipswich SB reported the highest net income of the Peer Group members, with
income supported by the net interest margin, operating expenses, and non-
operating income. Ipswich SB reported the second highest level of non-
performing assets of all Peer Group companies.
o MAYFLOWER CO-OP BANK OF MA. Mayflower has $125 million in assets and
operates out of four offices in Massachusetts. Mayflower converted in 1987
and thus is well seasoned in the marketplace. Operations are supported by
the second highest level of capital of the Peer Group members, and
profitability is affected by the net interest margin. Mayflower has a loan
portfolio with the most diversification into commercial real estate
lending.
o FALMOUTH CO-OP BANK OF MA. Falmouth represents the most recently converted
company in the Peer Group, having converted in March of 1996. Falmouth has
$94 million in assets and operates out of two offices in southeastern
Massachusetts. Falmouth operates with the highest capital position (due to
the recent conversion) and a loan portfolio concentrated in residential
lending. Falmouth reported the lowest level of non-performing assets of
all Peer Group companies.
o MID-COAST BANCORP OF ME. Mid-Coast, the second Maine company in the Peer
Group, is a $60 million institution operating from two office locations in
eastern Maine. Mid-Coast is a seasoned thrift, having converted in 1989,
and has the lowest market value of the Peer Group companies. Mid-Coast
reported a relatively high level of borrowings in comparison to other Peer
Group members, and relatively low level of earnings.
In aggregate, the Peer Group companies have an average capital ratio that
is lower than the industry average (9.58 percent of assets versus 11.76 percent
for the all SAIF average), and lower core profitability (0.79 percent versus
1.17 percent for all BIF-insured publicly-traded institutions). The Peer
Group's only moderately lower capital ratio combined with lower earnings results
in a lower core ROE of 9.37 percent versus 11.37 percent for the all BIF
average. In terms of pricing, the Peer Group on average trades at a lower
price/book ("P/B") multiple and a similar price/earnings ("P/E") multiple
relative to the industry (see the following table).
<TABLE>
<CAPTION>
As of August 15, 1997
-----------------------
Peer All BIF
Group Insured
---------- -----------
<S> <C> <C>
Equity-to-Assets 9.58% 11.76%
Return on Assets ("ROA")-Core 0.79% 1.17%
Return on Equity ("ROE")-Core 9.37% 11.37%
Market Capitalization ($Mil) $ 38.53 $336.00
Price-to-Tangible Book Ratio ("P/TB") 151.67% 166.67%
Price-to-Earnings Multiple ("P/E")-Core 16.31x 16.08x
Price-to-Assets Ratio ("P/A") 13.09% 17.72%
Source: Chapter IV tables.
</TABLE>
32
<PAGE>
RP Financial, LC.
Page 3.5
The following sections present a comparison of the Bank's financial
condition, income and expense trends, loan composition, interest rate risk and
credit risk versus the Peer Group. The conclusions drawn from the comparative
analysis are then factored into the valuation analysis discussed in the final
chapter.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for the Bank and the
Peer Group, reflecting the expected similarities and some differences given the
selection procedures outlined above. Information for Medford is as of June 30,
1997, and as of the latest available (June 30 or March 31) for the Peer Group.
The Bank's pre-conversion net worth of 8.0 percent was below the Peer Group's
average net worth ratio of 9.6 percent, although the Bank's capital level can be
expected to exceed the Peer Group average on a pro forma basis. The increase in
the Bank's capital on a pro forma basis can also be expected to reduce its ROE.
The Bank had no goodwill whereas the Peer Group on average had a balance of
goodwill. The Bank and all of the Peer Group companies were in compliance with
all fully phased-in regulatory capital requirements and were considered to be
well-capitalized by FDICIA standards.
In terms of asset composition, the Bank's ratio of loans to assets exceeded
the Peer Group's ratio (76.7 percent of assets versus 66.7 percent for the Peer
Group), while the Peer Group recorded a higher level of MBS (5.8 percent versus
zero for the Bank). The Bank maintains a lower balance of cash and investments
as part of its operating strategy, and the portfolio totaled 19.4 percent of
total assets. In contrast, the Peer Group maintained a higher ratio of cash and
investments (24.0 percent of assets). Following the conversion, the Bank's
level of cash and investments is expected to initially increase, pending the
Bank's deployment of the proceeds into loans. Overall, the Bank's IEA totaled
96.1 percent of assets, which was lower than the Peer Group's ratio of 96.5
percent.
While both the Bank and the Peer Group have relied on deposits as the
primary source of funds, the Peer Group on average has utilized borrowings to a
greater extent as reflected in the current deposits to assets ratios of 86.4
percent and 79.3 percent, respectively, and borrowings to assets ratios of 5.0
percent and 10.4 percent, respectively. Total interest-bearing liabilities
("IBL") maintained by the Bank and the Peer Group equaled 91.4 percent and 89.7
percent, respectively, with the Peer Group's lower ratio attributable to its
higher capital ratio. On a pro forma basis, the Bank's IBL ratio is expected to
decline as a result of the Bank's enhanced capital base and potential deposit
withdrawals to fund stock purchases.
33
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of June 30, 1997
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
Medford Co-operative Bk of MA
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 19.4 76.7 0.0 86.4 5.0 0.0 8.0 0.0 8.0 0.0
SAIF-Insured Thrifts 18.1 67.1 11.5 71.0 14.7 0.2 12.6 0.2 12.4 0.0
All Public Companies 18.8 66.2 11.5 71.4 14.4 0.2 12.5 0.3 12.2 0.0
Comparable Group Average 24.0 66.7 5.8 79.3 10.4 0.0 9.6 0.4 9.3 0.1
New England Companies 24.0 66.7 5.8 79.3 10.4 0.0 9.6 0.4 9.3 0.1
Comparable Group
----------------
New England Companies
---------------------
CEBK Central Co-Op. Bank of MA(1) 16.6 72.3 7.9 80.7 7.8 0.0 10.5 1.1 9.3 0.0
EIRE Emerald Island Bancorp, MA 15.7 67.9 13.0 85.2 7.2 0.0 7.1 0.0 7.1 0.0
FCB Falmouth Co-Op Bank of MA 40.8 53.9 3.4 74.9 0.8 0.0 23.9 0.0 23.9 0.0
IPSW Ipswich SB of Ipswich MA 14.3 72.8 9.8 80.7 12.1 0.0 5.7 0.0 5.7 0.0
MFLR Mayflower Co-Op. Bank of MA(1) 33.1 58.5 5.5 80.9 8.8 0.0 9.4 0.2 9.3 0.0
MDBK Medford Bank of Medford MA 36.8 52.7 7.1 76.9 13.6 0.0 9.0 0.6 8.4 0.0
MCBN Mid-Coast Bancorp of ME 13.2 83.1 0.0 71.0 20.0 0.0 8.6 0.0 8.6 0.0
NHTB NH Thrift Bancshares of NH(1) 13.3 81.5 0.0 84.5 7.3 0.0 7.5 1.1 6.3 0.0
NMSB Newmil Bancorp. of CT 39.9 51.4 4.7 85.2 4.0 0.0 9.8 0.0 9.8 0.0
NBN Northeast Bancorp of ME(1) 6.1 78.9 10.6 62.5 29.0 0.0 7.8 0.9 6.8 0.8
TBK Tolland Bank of CT 34.2 60.6 1.7 89.7 3.1 0.0 6.9 0.2 6.7 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
Medford Co-operative Bk of MA
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 13.92 -2.18 19.70 8.08 0.00 9.04 9.04 8.10 13.30 14.40
SAIF-Insured Thrifts 12.19 8.07 13.39 7.80 18.84 0.28 -0.56 10.99 11.07 23.11
All Public Companies 12.42 8.20 13.55 7.94 17.60 1.76 0.87 11.00 11.05 22.91
Comparable Group Average 11.23 4.88 14.21 10.87 8.28 11.14 10.34 7.48 9.36 17.09
New England Companies 11.23 4.88 14.21 10.87 8.28 11.14 10.34 7.48 9.36 17.09
Comparable Group
----------------
New England Companies
---------------------
CEBK Central Co-Op. Bank of MA(1) 3.22 -30.79 16.11 0.78 38.89 7.92 10.13 NM 9.42 16.22
EIRE Emerald Island Bancorp, MA 13.95 22.37 11.88 23.27 -41.83 21.33 21.33 NM 7.07 12.01
FCB Falmouth Co-Op Bank of MA 6.03 -19.56 36.77 7.46 -10.22 3.08 3.08 NM 24.16 44.13
IPSW Ipswich SB of Ipswich MA 25.45 NM 15.45 25.67 27.78 24.43 24.43 NM 5.66 12.57
MFLR Mayflower Co-Op. Bank of MA(1) 10.17 32.35 1.46 4.62 NM 8.45 8.92 NM 9.43 16.80
MDBK Medford Bank of Medford MA 7.96 1.26 13.05 2.41 53.61 9.19 11.60 8.54 8.54 16.03
MCBN Mid-Coast Bancorp of ME 8.52 4.45 9.67 2.87 41.47 3.30 3.30 8.34 8.34 14.69
NHTB NH Thrift Bancshares of NH(1) 23.98 16.71 24.83 33.23 -28.10 20.52 2.13 6.04 6.04 10.35
NMSB Newmil Bancorp. of CT 4.43 -4.82 14.49 6.22 -12.02 -0.54 -0.54 NM 10.25 19.85
NBN Northeast Bancorp of ME(1) 13.45 -10.52 16.11 5.49 48.15 3.72 6.28 7.00 7.00 12.20
TBK Tolland Bank of CT 6.36 37.38 -3.56 7.58 -34.89 21.20 23.13 NM 7.00 13.10
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.7
The growth rate section of Table 3.2 shows growth rates for key balance
sheet items. The growth rates for the Bank are for the year ended June 30, 1997
while growth rates for the Peer Group are for the latest trailing twelve months
available. The Bank reported an increase in assets of nearly 14 percent since
June 30, 1996, while the Peer Group reported asset growth equal to 11.2 percent.
The Bank's balance sheet expansion occurred in the area of loans receivable,
with cash and investments declining to fund additional increases in loans
receivable. Asset growth was support by growth in deposits, borrowings and
equity (the NM for borrowings indicates a growth rate above 100 percent). The
Peer Group funded asset growth through a combination of deposits and borrowings.
Capital growth rates for the Bank and the Peer Group were generally comparable
with the Bank increasing the net worth account at a slower rate than the Peer
Group.
Income and Expense Components
- -----------------------------
For the twelve months ended June 30, 1997, the Bank's net income amounted
to 0.54 percent of average assets, below the 0.79 percent average return posted
by the Peer Group (see Table 3.3). Net interest income was the primary
component of the Bank's and the Peer Group's earnings. The ratio of net
interest income was very similar for the Bank and Peer Group, 3.63 and 3.60
percent of average assets, respectively, although Medford reported lower levels
of both interest income and interest expense. The Peer Group's interest income
was supported by the greater loan portfolio diversification into higher yielding
commercial real estate, construction and consumer loans. The reinvestment of
the net conversion proceeds may serve to initially dilute the Bank's asset
yields due to current market rates on short- to intermediate-term investment
securities but the net interest margin should increase with an increase in the
IEA/IBL ratio.
In another key area of core earnings strength, the Bank operates with a
higher operating expense ratio than the Peer Group (3.12 percent versus 2.56
percent of assets for the Peer Group), which is attributable to its recent
office expansion and additional personnel hired to support the commercial
lending department and overall higher asset base. These features have inflated
the Bank's staffing requirements and compensation expenses, as evidenced by the
Bank's lower assets per employee ratio relative to the Peer Group median ($2.719
million and $3.021 million, respectively). Going forward, Medford's operating
expenses will be subject to increase related to operations as a publicly-held
company, stock plan expenses the expected growth in operations.
35
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended June 30, 1997
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
Medford Co-operative Bk of MA
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 0.54 7.21 3.58 3.63 0.20 3.43 0.00 0.00 0.48 0.48
SAIF-Insured Thrifts 0.58 7.37 4.09 3.28 0.14 3.14 0.12 0.00 0.32 0.44
All Public Companies 0.68 7.39 4.05 3.34 0.15 3.19 0.11 0.00 0.40 0.51
Comparable Group Average 0.79 7.40 3.81 3.60 0.16 3.43 0.04 -0.03 0.36 0.36
New England Companies 0.79 7.40 3.81 3.60 0.16 3.43 0.04 -0.03 0.36 0.36
Comparable Group
----------------
New England Companies
---------------------
CEBK Central Co-Op. Bank of MA(1) 0.89 7.28 3.65 3.63 0.00 3.63 0.00 -0.04 0.26 0.22
EIRE Emerald Island Bancorp, MA 0.85 7.75 4.40 3.35 0.08 3.27 0.00 -0.02 0.18 0.17
FCB Falmouth Co-Op Bank of MA 0.83 6.74 3.11 3.63 0.03 3.60 0.00 0.00 0.15 0.15
IPSW Ipswich SB of Ipswich MA 1.21 7.11 3.61 3.50 0.11 3.39 0.05 -0.06 0.52 0.51
MFLR Mayflower Co-Op. Bank of MA(1) 1.00 7.53 3.61 3.91 0.10 3.81 0.12 0.01 0.27 0.40
MDBK Medford Bank of Medford MA 1.08 6.93 3.73 3.20 0.02 3.18 0.01 0.01 0.26 0.28
MCBN Mid-Coast Bancorp of ME 0.43 8.08 4.30 3.78 0.13 3.65 0.08 -0.02 0.28 0.33
NHTB NH Thrift Bancshares of NH(1) 0.33 7.37 4.04 3.33 0.61 2.72 0.02 -0.09 0.60 0.52
NMSB Newmil Bancorp. of CT 0.83 7.29 3.48 3.81 0.13 3.68 0.04 0.01 0.39 0.44
NBN Northeast Bancorp of ME(1) 0.51 8.31 4.29 4.02 0.25 3.77 0.00 0.00 0.60 0.60
TBK Tolland Bank of CT 0.74 7.06 3.66 3.40 0.34 3.06 0.08 -0.15 0.39 0.32
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
Medford Co-operative Bk of MA
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 3.12 0.00 0.12 0.00 7.63 4.00 3.63 2,719 41.56
SAIF-Insured Thrifts 2.33 0.03 -0.29 0.00 7.40 4.64 2.76 4,586 37.06
All Public Companies 2.39 0.03 -0.24 0.00 7.44 4.59 2.85 4,532 36.70
Comparable Group Average 2.56 0.04 -0.01 0.00 7.69 4.25 3.44 3,021 35.06
New England Companies 2.56 0.04 -0.01 0.00 7.69 4.25 3.44 3,021 35.06
Comparable Group
----------------
New England Companies
---------------------
CEBK Central Co-Op. Bank of MA(1) 2.65 0.09 -0.02 0.00 7.55 4.12 3.43 3,566 19.52
EIRE Emerald Island Bancorp, MA 2.05 0.00 -0.07 0.00 8.00 4.75 3.25 3,795 35.37
FCB Falmouth Co-Op Bank of MA 2.54 0.00 0.06 0.00 6.86 4.14 2.72 3,351 34.30
IPSW Ipswich SB of Ipswich MA 2.51 0.00 0.39 0.00 7.38 3.91 3.47 3,265 31.83
MFLR Mayflower Co-Op. Bank of MA(1) 2.61 0.02 0.03 0.00 7.76 4.03 3.73 2,653 43.13
MDBK Medford Bank of Medford MA 1.66 0.12 0.11 0.00 7.19 4.12 3.07 4,206 39.94
MCBN Mid-Coast Bancorp of ME 2.93 0.00 -0.37 0.00 8.41 4.74 3.66 2,597 37.22
NHTB NH Thrift Bancshares of NH(1) 2.51 0.02 -0.25 0.00 7.71 4.41 3.30 2,631 29.17
NMSB Newmil Bancorp. of CT 2.74 0.00 0.05 0.00 7.63 3.92 3.71 2,411 42.02
NBN Northeast Bancorp of ME(1) 3.39 0.13 -0.01 0.00 8.71 4.71 4.00 2,046 38.12
TBK Tolland Bank of CT 2.57 0.06 -0.05 0.00 7.39 3.93 3.46 2,707 NM
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.9
Non-interest operating income made a higher contribution to the Bank's
earnings than the Peer Group's earnings, offsetting some of the disadvantage in
the operating expense area. For the trailing twelve months ended June 30, 1997,
the Bank recorded non-interest operating income of 0.48 percent of average
assets versus a level of 0.36 percent recorded by the Peer Group. Going
forward, the Bank anticipates that non-interest operating income will continue
to contribute similar levels to overall revenues.
When viewed together, net interest income, other operating income and
operating expenses provide insight into an institution's earnings strength,
since those sources of income and expense are typically the most prominent
components of earnings and are generally more predictable than losses and gains
realized from the sale of assets or other non-recurring activities. In this
regard, the Bank's efficiency ratio of 75.9 percent compares less favorably to
the Peer Group's ratio of 64.7 percent.
During the most recent fiscal year, Medford recorded non-operating income
of 0.12 percent of average assets, while the Peer Group as a whole recorded net
non-operating expense of 0.01 percent of average assets. Only two of the Peer
Group companies, NH Thrift Bancshares and Mid-Coast Bancorp, were affected by
the SAIF assessment charge to income during the quarter ended September 30,
1996. The Bank recorded non-operating income in the form of gains on the sale
of loans and income from the Co-operative Central Bank special dividend, offset
by a loss and a writedown on the Bank's investment in the Massachusetts Thrift
Fund. As a result, net non-operating items contributed a pre-tax increase to
earnings of 0.12 percent of average assets versus a loss of 0.01 percent of
average assets for the Peer Group. Loan loss provisions for the Peer Group and
Medford were similar at 0.16 and 0.20 percent of average assets, respectively.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of the Bank and the
Peer Group. An emphasis on residential lending was apparent in both the Bank's
and the Peer Group's loan portfolios, with 1-4 family permanent mortgage loans
and MBS accounting for 77.8 percent and 73.8 percent of the Bank's and the Peer
Group's total loan and MBS portfolios, respectively. Similar to the Bank,
several of the Peer Group sell loans in the secondary market with servicing
retained, thereby deriving fee income through loans serviced for others. The
Bank maintained a smaller portfolio of loans serviced for others.
The Peer Group's loan portfolio exhibited greater diversification into
higher risk weight loans than the Bank's loan portfolio. Commercial real estate
lending is the Bank's primary method of lending diversification, and such loans
comprised 15.4 percent of the total loan and MBS portfolio at June 30, 1997.
The Peer Group also achieved most of their loan portfolio diversification
through income property lending, totaling 16.1 percent of total loans and MBS.
Overall, however, the Peer Group's loan portfolio diversification was above that
of the
37
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of June 30, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
----------- ------ ------ ------ ------ ------ -------- ------ ---------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medford Co-operative Bk of MA 0.00 77.81 0.84 15.40 3.17 2.78 59.09 15,842 0
SAIF-Insured Thrifts 15.42 61.51 5.35 11.70 6.49 1.71 51.61 364,952 2,911
All Public Companies 15.19 60.46 4.84 13.29 6.08 1.96 52.14 441,519 3,417
Comparable Group Average 8.71 65.08 2.26 16.07 4.28 3.99 58.27 25,793 87
Comparable Group
----------------
CEBK Central Co-Op. Bank of MA(1) 5.51 75.85 0.49 16.13 1.35 0.60 62.17 13,646 0
EIRE Emerald Island Bancorp, MA 23.26 41.71 3.25 28.97 0.85 2.04 64.16 35,970 220
FCB Falmouth Co-Op Bank of MA 5.28 81.60 0.69 10.11 1.79 0.87 54.70 435 0
IPSW Ipswich SB of Ipswich MA 17.54 73.96 3.48 4.59 0.36 0.06 50.01 39,249 393
MFLR Mayflower Co-Op. Bank of MA(1) 9.66 64.45 4.97 14.83 3.10 3.11 60.31 30,141 63
MDBK Medford Bank of Medford MA 4.96 68.14 1.30 20.74 3.24 1.62 56.70 0 0
MCBN Mid-Coast Bancorp of ME 1.48 70.81 2.05 13.60 10.61 2.71 60.36 7,270 0
NHTB NH Thrift Bancshares of NH(1) 0.00 74.35 1.39 9.90 12.80 2.88 58.95 61,448 136
NMSB Newmil Bancorp. of CT 9.97 60.51 0.00 26.07 1.56 1.85 55.34 30,526 0
NBN Northeast Bancorp of ME(1) 15.15 55.86 4.76 12.45 5.71 7.41 60.98 60,075 127
TBK Tolland Bank of CT 2.97 48.67 2.46 19.41 5.75 20.73 57.25 4,961 15
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.11
Bank, as the Peer Group's commercial real estate, construction, consumer
and commercial business loans totaled 26.6 percent of total loans and MBS, while
Medford's combined level of these loan categories totaled only 22.2 percent.
Risk-weighted assets ratios for the Bank and the Peer Group were similar at 59.1
and 58.3 percent, respectively.
Credit Risk
- -----------
Medford's credit risk exposure appears to be lower than the Peer Group's
exposure based on the Bank's similar level of risk weight assets, lower level of
NPAs and higher reserve coverage ratios. As shown in Table 3.5, as of June 30,
1997, the Bank recorded NPAs of 0.24 percent of assets, lower than the Peer
Group average of 0.97 percent, and maintained a lower ratio of non-performing
loans ("NPLs") to loans of 0.32 percent versus 1.13 percent for the Peer Group.
Most of the Bank's and Peer Group's NPAs consist of non-accruing loans, although
the Peer Group reported a level of real estate owned. The Bank maintained a
lower level of loss reserves as a percent of loans receivable (0.85 percent
versus 1.38 percent for the Peer Group), but a higher ratio of reserves as a
percent of total NPAs.
Interest Rate Risk
- ------------------
Table 3.6 reflects the relative interest rate risk exposure of Medford and
the Peer Group. The Bank's lower capital level was the key factor contributing
to its lower IEA/IBL ratio relative to the Peer Group (105.1 percent versus
108.0 percent, respectively). The Bank's lower capital and IEA/IBL ratios
increases its funding costs relative to the Peer Group. However, the Bank's
capital ratio and IEA/IBL ratio will increase on a post-conversion basis. The
Bank maintained a higher ratio of non-interest earning assets, which is less
favorable from an interest rate risk perspective as it decreases the proportion
of assets repricing upward in a rising rate environment.
In the absence of available or comparable gap and rate shock analyses for
the Peer Group, the change in the quarterly net interest income ratio to average
assets for the Bank and the Peer Group has been examined in relation to the
change in market interest rates. As shown in Table 3.6, the Bank's net interest
margin has recently shown more sensitivity to changing market interest rates
than the Peer Group's average net interest margin. On a pro forma basis, the
Bank's higher capital position and reinvestment of proceeds in short- to
intermediate-term securities can be expected to lower exposure to changes in
interest rates.
39
<PAGE>
RP Financial, LC.
Page 3.12
Summary
- -------
Based on the above analysis and the criteria employed by in the Peer Group
selection process, the Peer Group appears to form a reasonable basis for
determining the pro forma market value of the Bank, subject to the adjustments
noted in the following section.
40
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of June 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
----------- ------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Medford Co-operative Bk of MA 0.00 0.24 0.32 0.85 267.67 267.67 57 0.05
SAIF-Insured Thrifts 0.29 0.78 0.84 0.82 177.46 128.34 378 0.15
All Public Companies 0.28 0.82 0.91 0.93 176.43 129.60 374 0.15
Comparable Group Average 0.20 0.97 1.13 1.38 192.18 166.25 78 0.04
Comparable Group
----------------
CEBK Central Co-Op. Bank of MA(1) 0.00 0.88 1.20 1.23 103.24 102.76 40 -0.01
EIRE Emerald Island Bancorp, MA 0.04 0.40 0.53 0.89 167.57 151.40 205 0.29
FCB Falmouth Co-Op Bank of MA 0.00 0.07 0.12 0.98 806.45 806.45 0 0.00
IPSW Ipswich SB of Ipswich MA 0.76 1.52 1.04 1.18 113.11 56.87 0 -0.06
MFLR Mayflower Co-Op. Bank of MA(1) 0.06 1.03 1.62 1.56 96.40 90.08 90 -0.12
MDBK Medford Bank of Medford MA 0.01 0.37 0.68 1.22 180.05 176.45 24 0.02
MCBN Mid-Coast Bancorp of ME 0.00 0.73 0.88 0.62 70.32 70.32 4 0.03
NHTB NH Thrift Bancshares of NH(1) 0.43 1.03 0.62 1.14 184.03 91.05 282 0.50
NMSB Newmil Bancorp. of CT 0.15 1.11 1.36 3.18 234.19 152.08 39 -0.64
NBN Northeast Bancorp of ME(1) 0.44 1.37 1.40 1.32 94.76 77.15 7 0.01
TBK Tolland Bank of CT 0.33 2.13 2.93 1.87 63.86 54.09 163 0.45
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of June 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
--------------------------
Non-Earn. Quarterly Change in Net Interest Income
Equity/ IEA/ Assets/ ---------------------------------------------------------
Institution Assets IBL Assets 6/30/97 03/31/97 12/31/96 09/30/96 06/30/96 03/31/96
----------- ------ ------ ------ ------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medford Co-operative Bk of MA 8.0 105.1 3.9 16 8 14 2 25 0
SAIF-Insured Thrifts 12.3 112.7 3.3 1 -0 0 -1 8 7
All Public Companies 12.2 112.6 3.4 0 0 1 -0 8 6
Comparable Group Average 9.3 108.0 3.5 -3 -1 8 -6 14 1
Comparable Group
----------------
CEBK Central Co-Op. Bank of MA(1) 9.3 109.4 3.2 NA -11 9 2 1 -3
EIRE Emerald Island Bancorp, MA 7.1 104.5 3.4 17 -4 14 5 -8 2
FCB Falmouth Co-Op Bank of MA 23.9 129.6 1.9 -17 4 23 -17 79 -23
IPSW Ipswich SB of Ipswich MA 5.7 104.4 3.1 -3 -10 48 -27 10 16
MFLR Mayflower Co-Op. Bank of MA(1) 9.3 108.2 2.9 NA 7 -12 -6 20 0
MDBK Medford Bank of Medford MA 8.4 106.8 3.4 -4 3 -3 -3 -7 5
MCBN Mid-Coast Bancorp of ME 8.6 105.9 3.7 0 -20 5 -2 30 5
NHTB NH Thrift Bancshares of NH(1) 6.3 103.3 5.2 NA 45 -0 -9 15 2
NMSB Newmil Bancorp. of CT 9.8 107.5 4.0 -18 6 -0 -16 31 -2
NBN Northeast Bancorp of ME(1) 6.8 104.5 4.4 NA -18 6 0 -14 5
TBK Tolland Bank of CT 6.7 104.0 3.5 4 -10 1 4 -7 1
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
------------
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of Medford from the mutual-to-stock form of ownership. The valuation
has been prepared utilizing the pro forma valuation methodology promulgated by
the OTS, most recently set forth in their 1994 valuation guidelines.
Appraisal Guidelines
--------------------
The OTS appraisal guidelines, originally released in October 1983, specify
the methodology for estimating the pro forma market value of an institution.
The methodology included: (1) selection of a peer group of comparable seasoned
publicly-traded institutions whose pricing is not distorted due to a variety of
factors; (2) a fundamental analysis of the subject company to the peer group;
and (3) a pro forma valuation analysis of the subject company based on the
market pricing of the peer group as of the date of valuation. The amended
valuation guidelines also limit the amount of a new issue discount which may be
incorporated into the valuation and thereby curtail the potential price
appreciation in the after-market.
RP Financial's valuation analysis complies with the October 1983 OTS
appraisal guidelines as revised on October 21, 1994, incorporating a
"fundamental analysis" relative to the Peer Group and a "technical analysis" of
final conversion pricing and trading levels of recently completed conversions
(given the emphasis of limiting after-market appreciation). It should be noted
that such analysis cannot possibly fully account for all the market forces which
impact after-market trading activity and pricing characteristics of a stock on a
given day.
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Bank's operations and financial
condition; (2) monitor the Bank's operations and financial condition relative to
the Peer Group to identify any fundamental changes; (3) monitor the external
factors affecting value including, but not limited to, local and national
economic conditions, interest rates, and the stock market environment, including
the market for thrift stocks; and (4) monitor pending initial and second step
conversion offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their
<PAGE>
RP Financial, LC.
Page 4.2
related impact on value, if any, over the course of the conversion process. RP
Financial will also prepare a final valuation update at the closing of the
conversion offering to determine if the preliminary range of value continues to
be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability), may materially impact the market value of all savings
institution stocks, including Medford, or Medford's value alone. To the extent
a change in factors impacting the Bank's value can be reasonably anticipated
and/or quantified, RP Financial has incorporated the estimated impact into its
analysis.
Valuation Analysis
------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
such differences between the Bank and the Peer Group and how those differences
affect the pro forma valuation. Emphasis is placed on the specific strengths
and weaknesses of the Bank relative to the Peer Group in such key areas as
financial condition, profitability, growth and viability of earnings, asset
growth, primary market area, dividends, liquidity of the issue, marketing of the
issue, management, and the effect of government regulations and/or regulatory
reform. We have also considered the market for savings institution stocks, and
in particular new issues, to assess the impact on value of Medford coming to
market at this time.
1. Financial Condition
-------------------
The financial strength of an institution is an important determinant in pro
forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Bank's financial strength can be summarized as follows:
o Overall A/L Composition. Permanent residential mortgage loans funded by
-----------------------
retail deposits were the primary components of both Medford's and the
Peer Group's balance sheets. The Bank maintains a higher proportion
of overall loans receivable than the Peer Group, offset by a lower
level of cash and investments and investment in MBS. Medford reported
a slightly lower level of diversification into higher credit risk
types of loans relative to the Peer Group, and the Bank has only
recently diversified the loan portfolio away from 1-4 family
residential mortgage loans. The Peer Group relied on borrowed funds
to a greater extent than the Bank, although retail deposits comprised
the major portion of the respective funding needs.
<PAGE>
RP Financial, LC.
Page 4.3
o Credit Risk. Medford maintains comparatively lower NPAs/assets and
-----------
NPLs/loans ratios, despite a similar credit risk profile and similar
risk-weighted assets ratio. Further, the Bank has a higher
loans/assets ratio than the Peer Group, and a significant portion of
the loan portfolio (in particular the commercial real estate and
commercial business loan portfolio), has been originated within the
past one to two years, resulting in a generally unseasoned non-
residential mortgage loan portfolio.
o Liquidity. Medford maintained a lower level of cash and investments
---------
than the Peer Group and a zero balance of MBS. The Bank's proportion
of cash and investments is likely to initially increase on a pro forma
basis. Borrowings were utilized to a higher degree by the Peer Group,
and both maintain ample borrowings capacity. The Bank's loans meet
secondary market standards for sale. Overall, Medford appears to have
less balance sheet liquidity than the Peer Group.
o Capital. While the Bank maintains a lower capital position in relation
-------
to the Peer Group, following the infusion of conversion proceeds, the
Bank's capital position is expected to exceed the Peer Group average.
As a result, the Bank is expected to have more leverage capacity than
the Peer Group. The Bank's pro forma return on equity ("ROE") is not
expected to exceed the Peer Group average due to lower profitability.
On balance, RP Financial applied a moderate downward adjustment for
financial condition.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are an important factor in determining pro forma market
value, as the level and risk characteristics of an institution's
earnings stream and the prospects and ability to generate future
earnings are typically heavily factored into an investment decision.
The historical income statements of Medford and the Peer Group were
generally reflective of traditional savings institution operating
strategies, with net interest income and operating expenses being the
major determinants of their respective core earnings. The specific
factors considered in the valuation include:
o Reported Earnings. The Bank reported net income of 0.54 percent of
-----------------
average assets for the most recent twelve month period versus earnings
of 0.79 percent for the Peer Group. The differential in reported
earnings is due to the Bank's higher operating expenses, offset by
higher non-operating income.
o Core Earnings. The Bank also maintains a less favorable core earnings
-------------
posture relative to the Peer Group, as reported earnings were
supported by income in the form of gains on the sale of loans. The
Bank operated with a similar level of net interest income, more
favorable non-interest operating income and less favorable operating
expenses than the Peer Group, along with a higher effective tax rate..
While redeployment of conversion proceeds into interest-earning assets
should enhance Medford's net interest income, operating expenses for
the Bank are expected to increase as well. On a pro forma basis,
Medford's core profitability is expected to remain below that of the
Peer Group.
o Interest Rate Risk. Medford's cumulative one year gap position
------------------
measures indicated relatively high exposure to rising interest rates.
Although gap data was not available for the Peer Group, other analyses
indicated a comparable advantage for the Peer Group. The pro forma
<PAGE>
RP Financial, LC.
Page 4.4
increase in the IEA/IBL ratio can be expected to reduce the Bank's
interest rate risk exposure, but the Bank is expected to remain at a
disadvantage.
o Credit Risk. Loss provisions had a higher impact on the earnings of
-----------
the Bank in comparison to the Peer Group. In terms of credit quality
related losses, the Bank maintained lower reserve coverage ratios as a
percent of loans receivable, but higher coverage ratios as a percent
of non-accruing loans and total NPAs. The Bank's recent efforts to
expand the non-residential portion of the loan portfolio exposes it to
potentially greater credit risk than the Peer Group, which adds a
higher risk of earnings volatility relative to the Peer Group with a
lower reserve position as a percent of total loans receivable.
o Earnings Growth Potential. Several factors were considered in
-------------------------
assessing earnings growth potential. Medford's recent loan demand has
been in excess of available funds, requiring the third party
borrowings and a liquidity reduction. Although the higher expected pro
forma capital position is expected to enable the Bank to continue on a
growth pattern, expectations of continued growth in operating expenses
and the uncertain cost of acquiring new deposit funds for lending
result in the Bank's earnings appearing to have less upside potential
than the Peer Group.
o Return on Equity. On a pro forma basis the Bank's pro forma return on
----------------
equity will be lower to the Peer Group average, as the lower pro forma
profitability is measured against a comparatively higher capital
position.
Overall, RP Financial made a moderate downward adjustment for
profitability, growth and viability of earnings.
3. Asset Growth
------------
The Bank's asset growth in recent periods has been higher than the Peer
Group's, which has been achieved in part by utilizing borrowed funds as deposit
growth has been insufficient. The Bank has been able to maintain the net
interest margin in recent periods, although there remains upward pressure on
funding costs due to the need to raise additional funds for lending operations.
The Bank intends to continue to grow in future periods, and is expected to have
adequate capital post-conversion to support such growth. We concluded that no
adjustment was warranted for the Bank's asset growth potential.
4. Primary Market Area
-------------------
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Summary demographic and deposit
market share data for the Bank and the Peer Group is included in Table 4.1. The
Bank's market area of Medford, and Middlesex County, Massachusetts is an urban
market that has been experiencing relatively stable levels of population and
households in recent years, while the Peer Group companies operate on average in
smaller, yet faster growing markets. The per capita income in the Bank's
<PAGE>
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Population Proj.
--------------------- Pop. 1990-97
Institution County 1990 1997 2002 % Change
- ----------------------------------------------------------------------------------------------------
(000) (000)
<S> <C> <C> <C> <C> <C>
Central Co-Op. Bank of MA Middlesex 1,398 1,418 1,431 1.4%
Emerald Island Bancorp, MA Norfolk 616 641 658 4.0%
Falmouth Co-Op Bank of MA Barnstable 187 205 218 9.9%
Ipswich Savings Bank of MA Essex 670 691 706 3.2%
Mayflower Co-Op. Bank of MA Plymouth 435 461 479 5.9%
Medford Savings Bank of MA Middlesex 1,398 1,418 1,431 1.4%
Mid-Coast Bancorp of ME Lincoln 30 31 32 3.4%
Newmil Bancorp of CT Litchfield 174 181 186 4.1%
Northeast Bancorp of ME Cumberland 243 253 260 4.1%
Tolland Bank of CT Tolland 129 131 132 1.7%
--- --- --- ----
Averages: 528 543 553 3.9%
Medians: 339 357 369 3.7%
Medford Co-Op Bank of MA Middlesex 1,398 1,418 1,431 1.4%
<CAPTION>
Per Capita Income
----------------- Deposit
1997-2002 % State Market
% Change Median Age Amount Average Share(1)
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Central Co-Op. Bank of MA 0.9% 35.6 23,587 116.1% 1.2%
Emerald Island Bancorp, MA 2.7% 36.8 24,273 119.5% 2.4%
Falmouth Co-Op Bank of MA 6.2% 40.7 18,311 90.2% 1.9%
Ipswich Savings Bank of MA 2.1% 36.0 21,025 103.5% 1.4%
Mayflower Co-Op. Bank of MA 3.8% 34.7 19,340 95.2% 2.7%
Medford Savings Bank of MA 0.9% 35.6 23,587 116.1% 3.7%
Mid-Coast Bancorp of ME 2.2% 39.8 17,383 108.3% 9.3%
Newmil Bancorp of CT 2.7% 37.8 20,735 98.9% 6.3%
Northeast Bancorp of ME 2.7% 35.9 19,494 121.5% 0.2%
Tolland Bank of CT 1.2% 33.7 18,231 86.9% 15.1%
---- ---- ------ ----- -----
2.6% 36.7 20,597 105.6% 4.4%
2.5% 35.95 20,115 105.9% 2.5%
Medford Co-Op Bank of MA 0.9% 35.6 $23,587 116.1% 0.6%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total county
deposits, excludes credit unions.
Sources: CACI, Inc, SNL Securities
<PAGE>
RP Financial, LC.
Page 4.6
market is above the average of the primary markets of the Peer Group members.
The Bank's competitive position is not dissimilar from the average position of
the Peer Group institutions in their primary market areas. On balance, RP
Financial concluded that no adjustment was warranted for market area.
5. Dividends
---------
As stated in Mystic Financial's offering circular, the Holding Company
intends to implement a cash dividend policy during the first full quarter
following consummation of the conversion at an estimated rate of 2.0 percent, or
$0.20 annually on an estimated $10.00 share price. The ability to pay a
dividend will be based on numerous factors including growth objectives,
financial condition, the amount of net proceeds retained by the Holding Company
in the conversion, investment opportunities available to the Holding Company and
the Bank, profitability, tax considerations, minimum capital requirements,
regulatory limitations, stock market characteristics and general economic
conditions.
Historically, savings institutions typically have not established dividend
policies at the time of their conversion to stock ownership. Newly converted
institutions, in general, have preferred to gain market seasoning, establish an
earnings track record and more fully invest the conversion proceeds before
establishing a dividend policy. However, during the late 1980s and early 1990s,
with negative publicity surrounding savings institutions, there was a tendency
for more institutions to initiate moderate dividend policies concurrent with
their conversion as a means of increasing the attractiveness of the stock
offering. Today, fewer institutions are compelled to initially establish
dividend policies at the time of their conversion offering to increase the
attractiveness of the stock issue as: (1) industry profitability has improved,
(2) the number of problem thrift institutions has declined, and (3) the stock
market cycle for thrift stocks is generally more favorable than in the early
1990s. At the same time, with ROE ratios under pressure, due to high equity
levels, well-capitalized institutions are subject to increased competitive
pressures to offer dividends and a number of institutions have instituted
special dividends.
As publicly-traded savings institution's capital levels and profitability
have improved and as weakened institutions have been resolved, the proportion of
institutions with cash dividend policies has increased. All eleven institutions
in the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.02 percent to 3.22 percent. The average dividend yield on
the stocks of the Peer Group institutions was 1.92 percent as of August 15,
1997, representing an average earnings payout ratio of 29.87 percent. As of
August 15, 1997, approximately 83 percent of all publicly-traded savings
institutions had adopted cash dividend policies (see Exhibit IV-1), exhibiting
an average yield of 2.03 percent and an average payout ratio of 40.23 percent.
The dividend paying institutions generally maintain higher than average
profitability ratios, facilitating
<PAGE>
RP Financial, LC.
Page 4.7
their ability to pay cash dividends, which supports a market pricing premium on
average relative to non-dividend paying institutions.
The Holding Company's ability following the completion of the conversion to
pay a dividend would appear to be similar relative to the Peer Group based on
higher pro forma capital, offset by lower post-conversion earnings. The
Company's stated intention to implement a dividend shortly after completion of
the conversion is a favorable comparison to the Peer Group companies and thus no
adjustment is warranted for this valuation factor.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, eight of which trade on the NASDAQ system and three that
trade on the AMEX. Typically, the number of shares outstanding and market
capitalization provides an indication of how much liquidity there will be in a
particular stock. The market capitalization of the Peer Group companies ranged
from $5.8 million to $136.2 million as of August 15, 1997, with an average
market value of $38.5 million. The shares outstanding of the Peer Group members
ranged from 0.9 million to 4.5 million, with average shares outstanding of
approximately 1.9 million. The Bank's pro forma market value is expected to be
less than the comparative Peer Group averages, although shares outstanding will
be similar. The Bank's stock is expected to be listed on the NASDAQ National
Market System, and accordingly, we anticipate the liquidity of the Bank's shares
will be similar to that of the Peer Group on average, and thus there has been no
valuation adjustment applied for this factor.
7. Marketing of the Issue
----------------------
We believe that three separate markets exists for savings institution
stocks coming to market such as Medford: (A) the after-market for public
companies, in which trading activity is regular and investment decisions are
made based upon financial condition, earnings, capital, ROE and dividends; (B)
the new issue market in which converting thrifts are evaluated on the basis of
the same factors but on a pro forma basis without the benefit of a stock trading
history and reporting quarterly operating results as a publicly-held company;
and (C) the acquisition market for savings institution franchises in
Massachusetts. All of these markets were considered in the valuation of the
Bank's conversion.
A. Public Market
-------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-
<PAGE>
RP Financial, LC.
Page 4.8
traded thrifts. In general, thrift stock values react to market stimuli such as
interest rates, inflation, perceived industry health, projected rates of
economic growth, regulatory issues and stock market conditions in general.
Exhibit IV-2 displays historical stock market trends for various indices and
includes historical stock price index values for thrifts and commercial banks.
Exhibit IV-3 displays historical stock price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. Expectations that the
Federal Reserve would not tighten interest rates at its July 1996 meeting
provided for a rally in the bond market in late-June, as the 30-year bond yield
moved back below 7.0 percent. The positive interest rate outlook also served to
boost the stock market in early-July, but the rally was cut short by a larger
than expected drop in June unemployment. Bond and stock prices tumbled
following the June unemployment report, as highlighted by a 115 point one-day
decline in the DJIA and an increase in the 30-year bond yield to 7.18 percent.
The release of second quarter earnings reports provided for a volatile stock
market in mid-July, especially among the technology stocks. Overall, the stock
market declined due to earnings disappointments, with a more severe decline
occurring in the technology driven NASDAQ Composite Index. At the same time
bond prices recovered, as the 30-year bond yield dropped below 7.0 percent
following statements by the Federal Reserve Chairman which indicated he expected
the economy to slow down in the second half of 1996. Stocks and bonds rallied
in late-July and early-August, as economic data indicated a healthy but
moderating economy. However, higher interest rates pushed stocks lower in late-
August, reflecting increasing expectations that the Federal Reserve would
tighten interest rates in September. The decline in the stock market was
reversed in early-September, as investors reacted positively to the inflation
data contained in the August employment report. Oil stocks sustained the upward
trend in the stock market in early-September, as renewed tension between the
U.S. and Iraq pushed crude oil prices to their highest level in five years.
Both bond and stock prices surged higher in mid-September, as most of the
economic data for August indicated that the economy was slowing down and
investors became more optimistic that the Federal Reserve would not raise
interest rates in September.
The Federal Reserve's decision not to raise interest rates at its
September 1996 meeting, and generally healthy third quarter earnings results
sustained the upward momentum in the stock market during the beginning of the
fourth quarter. Favorable inflation data and lower interest rates further
spurred the upward trend in the stock market prior to the election. Investors
were cheered by the "status quo" election results, as stocks rallied strongly
immediately following the election with the DJIA posting ten consecutive
advances through mid-November. Economic stability and a rising bond market
sustained the stock market rally through the end of November. For the entire
month of November, the DJIA increased 492.3 points, or 8.2 percent. Following
the rapid rise in the stock market during November, stocks retreated during the
first half of
<PAGE>
RP Financial, LC.
Page 4.9
December. Profit taking, concern about speculative excesses in the stock market
and higher interest rates all contributed to the decline in the stock market.
The stock market resumed an upward trend during the end of 1996 and
the first three weeks of 1997, with the DJIA establishing several new highs in
the process. Factors contributing to the rally in the stock market included the
Federal Reserve's decision to leave rates unchanged at its December meeting,
economic data which reflected moderate growth and low inflation, and favorable
fourth quarter earnings particularly in the technology sector. However, a
disappointing fourth quarter earnings report by IBM ignited a sell-off in the
stock market in late-January. Higher interest rates extended the downturn, as
the 30-year bond approached 7.0 percent at the end of January. A high degree of
market volatility was evident throughout most of February 1997, reflecting
concern over speculative excesses in the stock market; particularly, as the DJIA
closed above the 7000 mark in mid-February. Profit taking, growing expectations
of a correction and comments by the Federal Reserve Chairman pulled the market
lower in late-February.
Following a downturn in late-February 1997, the market recovered in
early-March. Despite increasing expectations of an interest rate hike by the
Federal Reserve, the Dow Jones Industrial Average ("DJIA") closed to a new
record high of 7085.16 on March 11, 1997. However, an upward revision to the
January retail sales figure triggered a one day sell-off in stocks and bonds on
March 13, 1997, as the stronger than expected growth heightened expectations of
an interest rate increase by the Federal Reserve. Unease over higher interest
rates, profitability concerns in the technology sector and litigation concerns
for tobacco stocks pulled the stock market lower in mid-March. As expected, the
Federal Reserve increased the rate on short-term funds by 0.25 percent at its
late-March meeting. Following the rate increase, the sell-off in the stock
market became more severe amid further signs of an accelerating economy. Stocks
bottomed-out on news of a stronger than expected rise in core producer prices
for March, with the DJIA closing at 6391.69 on April 11, 1997, or 9.8 percent
below its all-time high recorded a month ago.
Some favorable first quarter earnings reports and news of a possible
settlement by tobacco companies to resolve the threat of liability lawsuits
provided for a modest recovery in the stock market in mid-April 1997. In late-
April, the release of economic data which indicated mild inflationary pressures
furthered the rally in bond and stock prices. News of a budget agreement and a
favorable ruling for tobacco companies sent the stock market soaring to record
highs in early-May. Mixed economic data and the Federal Reserve's decision to
leave its target for the federal-funds rate unchanged at its May meeting
sustained a positive trend in the stock market through the end of May. Profit
worries caused a sell-off in high-technology stocks in early-June, while
declining interest rates served to stabilize the broader market. The stock
market rose during late June, July and early August based on positive consumer
confidence, little sign of inflation with continued low unemployment rates, and
continued strong second quarter earnings reports. After reaching an all time
high of
<PAGE>
RP Financial, LC.
Page 4.10
8259.31 on August 6, 1997, the DJIA suffered declines of 157 points on August 8,
101 points on August 12, and 247 points on August 15, 1997 to close at 7694.66
as of that date, a decline of 6.8 percent in less than two weeks. The recent
decline was attributed to investor fears of inflation, public statements
regarding the health of the economy by regional federal reserve bank presidents,
and an overall perception that the market had reached excessive levels, leading
to certain profit-taking.
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. A bullish outlook on
the financial institution sector in general served to bolster prices in early-
April 1996, as a number of analysts forecasted healthy first quarter earnings
for thrift and bank stocks and that the financial institution sector would
outperform the market in general during the balance of 1996. However, thrift
prices declined following the release of the March employment report, as
interest-rate sensitive stocks were pulled lower by the unfavorable interest
rate outlook. The downturn was abbreviated by the generally strong first
quarter earnings posted by bank and thrift issues, which provided for a mild
upward trend in thrift stocks in mid-April. Paralleling the stock market in
general, thrift prices dropped sharply in early-May following the rise in
interest rates caused by the strong first quarter GDP growth. Thrift prices
rebounded in mid-May, as interest rates declined slightly on the strength of
tame inflation news. At the end of May and through mid-June, uncertainty over
future interest rate trends provided for a flat thrift stock market.
The Supreme Court's ruling in favor of thrifts seeking damages for
goodwill served to boost thrift prices in the beginning of July 1996, but the
upturn was abbreviated by a sharp increase in interest rates. The sharp rise in
interest rates, which was prompted by the stronger than expected June
unemployment report, pushed interest-rate sensitive issues in general lower.
Generally favorable second quarter earnings and lower interest rates supported a
modest recovery in thrift prices in mid-July, although concerns about future
interest rate trends moderated the impact of the healthy second quarter
earnings. Lower interest rates and the announced acquisitions of two large
California thrifts, American Savings with $20 billion in assets and CalFed
Bancorp with $14 billion in assets, pushed the SNL Index higher in late-July and
through mid-August. Thrift stocks settled into a narrow trading range in late-
August and early-September, as higher interest rates dampened interest in the
thrift sector. For the balance of September, trading activity in thrift stocks
was somewhat mixed. Higher thrift prices were recorded in mid-September, as the
yield on the 30-year U.S. Treasury bond briefly dropped below 7.0 percent.
However, the rally in financial services stocks faltered in late-September,
reflecting renewed fears about higher interest rates and rising bad debt on
credit cards.
Thrift prices generally moved higher during October and November
1996. The upward trend in thrift prices was supported by lower interest rates,
with the slow down in economic growth pushing the 30-year U.S. bond rate below
6.5 percent during the second half of November. Investors also reacted
positively to the SAIF rescue legislation, in light of the reduction in deposit
insurance premiums to be paid by SAIF-insured
<PAGE>
RP Financial, LC.
Page 4.11
thrifts following the one time special assessment. Similar to the overall stock
market, thrift prices traded lower in early-December. Profit taking and
expectations of higher interest rates were factors contributing to the pull back
in thrift issues.
Bullish sentiment for thrift stocks heightened at the beginning of
1997, as investors reacted positively to the favorable inflation data and
generally strong fourth quarter earnings. The rally in thrift issues was driven
by the large California institutions, reflecting expectations that there would
be further consolidation among the large California thrifts. The acquisition
speculation for the large California thrifts became a reality in mid-February,
as H.F. Ahamanson's unsolicited offer to acquire Great Western Financial sent
the SNL Index soaring in mid-February. Stable interest rates and acquisition
activity supported higher thrift prices in early-March, with the SNL Index
posting a new high of 579.1 on March 11, 1997. Like the stock market in
general, the peak in thrift prices was followed by a sharp sell-off in mid-
March. In fact, interest-rate sensitive issues were among the sectors hardest
hit by the revised January retail sales report, as the 30-year bond approached
7.0 percent. Interest-rate sensitive issues continued to experience selling
pressure in late-March and early-April, as signs of a strengthening economy
pushed interest rates higher. The sell-off in thrift stocks culminated on April
11, 1997, as interest rates increased sharply on news of the higher than
expected rise in core producer prices for March. Thrift prices edged modestly
higher in mid-April, reflecting generally favorable first quarter earnings and a
slight decline in interest rates following the release of economic data which
showed that inflation was low. Favorable inflation data and the budget
agreement provided for a more substantial rally in thrift stocks in late-April
and early-May, as interest-rate sensitive issues were bolstered by a decline in
interest rates. Thrift stocks continued to trend higher through the second
quarter of 1997, based on the improved interest-rate outlook, consumer
confidence and the overall rise in the stock market. The SNL Index for all
publicly-traded thrifts closed at 659.4 on August 15, 1997, an increase of 62.3
percent from one year ago.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Bank's pro forma market value. Interest in converting savings
institution issues receded somewhat in the second quarter of 1996, as indicated
by fewer oversubscriptions and generally weak aftermarket trading performance.
However, interest returned to converting issues during the second half of 1996,
as most offerings experienced healthy oversubscriptions. Fewer offerings, more
attractive pricing, lower interest rates, and the general positive trend in
thrift prices were among the most prominent factors contributing to the renewed
investor interest shown for converting thrift issues. The favorable market
environment for converting thrift issues has generally been sustained during the
first two quarters of 1997; however, in comparison to other periods of market
strength for thrift stocks, the
<PAGE>
RP Financial, LC.
Page 4.12
number of conversion offerings completed during the past three months has been
relatively low. As shown in Table 4.2, the median one week change in price for
offerings completed during the latest three months equaled positive 45.6
percent.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
118.89 percent reflects a discount of 19.0 percent from the average P/B ratio of
all publicly-traded savings institutions (equal to 146.85 percent), and the
average core P/E ratio of 35.06 times reflects a premium of 93.7 percent from
the all public average core P/E ratio of 18.10 times. The pricing ratios of the
better capitalized but lower earning recently converted savings institutions
(based on return on equity measures) suggest that the investment community has
determined to discount their stocks on a book basis until the earnings improve
through redeployment and leveraging of the proceeds over the longer term.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall savings institution market and the new
issue market. The overall market for savings institution stocks is considered
to be healthy, as savings institution stocks are currently exhibiting pricing
ratios that are approaching historically high levels. Investor interest in the
new issue market has been favorable, as most of the recently completed offerings
have been oversubscribed and have recorded price increases in initial post-
conversion trading activity.
C. Acquisition Market
------------------
Also considered in the valuation was the potential impact on Medford's
stock price of recently completed and pending acquisitions of other thrifts
operating in Medford's market area. As shown in Exhibit IV-4, there were
thirteen Massachusetts savings institutions acquired since the beginning of
1995, although two of these transactions reflected the mergers of two mutual
institutions. The recent acquisition activity involving Massachusetts savings
institutions may imply a certain degree of acquisition speculation for the
Bank's stock. To the extent that acquisition speculation may impact the Bank's
offering, we have largely taken this into account in selecting primarily
Massachusetts savings institutions that also experience a degree of acquisition
speculation.
Taking these factors and trends into account, RP Financial concluded that a
slight upward adjustment was appropriate in the valuation analysis for purposes
of marketing of the issue.
<PAGE>
TABLE 4.2
RECENT CONVERSIONS (LAST THREE MONTHS)
CONVERSION PRICING CHARACTERISTICS: SORTED CHRONOLOGICALLY
<TABLE>
<CAPTION> OFFERING
INSTITUTIONAL INFORMATION PRE-CONVERSION DATA INFORMATION INSIDER PURCHASES
------------------------- ------------------- ----------- -----------------
FINANCIAL INFO. ASSET QUALITY
-------------- ------------- BENEFIT PLANS
-------------
CONVERSION EQUITY/ NPAS/ RES. GROSS % OF EXP/ RECOG. MGMT.
INSTITUTION STATE DATE TICKER ASSETS ASSETS ASSETS COV. PROC. MID. PROC. ESOP PLANS & DIS.
- ----------- --------------------- ------ ------ ------ --- ----- ---- ----- ---- ----- ------
($MIL) (%) (%)(2) (%) ($MIL) (%) (%) (%) (%) (%)(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FirstSpartan Fin. Corp. SC 07/09/97 FSPT 388 11.81% 0.75% 44% 86.6 132% 1.6% 8.0% 4.0% 1.5%
GSB Financial Corp. NY 07/09/97 GOSB $96 12.68% 0.07% 188% $22.5 132% 4.1% 8.0% 4.0% 2.6%
FirstBank Corp. ID 07/02/97 FBNW 138 8.00% 0.99% 68% 19.8 132% 3.5% 8.0% 4.0% 8.2%
Montgomery Fin. Corp.(5) IN 07/01/97 MONT 94 9.83% 0.91% 20% 11.9 132% 4.5% 8.0% 4.0% 4.6%
Community First Bank'g Corp. GA 07/01/97 CFBC 366 7.02% 1.68% 40% 48.3 132% 2.9% 8.0% 4.0% 1.0%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 72 6.78% 0.63% 89% 8.6 132% 4.7% 8.0% 4.0% 9.8%
Security Bancorp TN 06/30/97 P.Sheet 46 5.46% 0.06% NM 4.4 132% 6.9% 8.0% 4.0% 2.0%
Sistersville Bancorp WV 06/26/97 P.Sheet 27 17.91% 0.31% 198% 6.6 110% 6.8% 8.0% 4.0% 5.4%
SFB Bancorp TN 05/30/97 P.Sheet 47 10.04% 0.80% 82% 7.7 132% 3.2% 8.0% 4.0% 5.3%
Rocky Ford Financial CO 05/22/97 P.Sheet 21 13.92% 0.00% NA 4.2 132% 8.3% 8.0% 4.0% 23.6%
AVERAGES: $129 10.35% 0.62% 91% $22.3 130% 4.6% 8.0% 4.0% 6.4%
MEDIANS: 83 9.94% 0.69% 75% 10.2 132% 4.3% 8.0% 4.0% 4.9%
AVERAGES, EXCLUDING 2ND STEPS $133 10.40% 0.59% 101% $23.4 130% 4.7 8.0% 4.0% 6.6%
MEDIANS, EXCLUDING 2ND STEPS 72 10.04% 0.63% 82% 8.6 132% 4.1 8.0% 4.0% 5.3%
<CAPTION>
INSTITUTIONAL INFORMATION
-------------------------
PRO FORMA DATA
PRICING RATIOS(4) FIN. CHARACTERISTICS
--------------------------------------------
CONVERSION IPO
INSTITUTION STATE DATE TICKER P/TB P/E/(5) P/A ROA TE/A ROE PRICE
- ----------- --------------------- ---- ------ --- --- ---- --- -----
(%) (x) (%) (%) (%) (%) ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Spartan Fin. Corp. SC 07/09/97 FSPT 72.4% 17.3 19.1% 1.1% 26.3% 4.2% $20.00
GSB Financial Corp. NY 07/09/97 GOSB 72.5% 22.5 19.6% 0.9% 27.1% 3.2% 10.00
FirstBank Corp. ID 07/02/97 FBNW 71.4% 22.8 12.9% 0.6% 18.0% 3.1% 10.00
Montgomery Fin. Corp. (5) IN 07/01/97 MONT 89.1% 24.1 16.0% 0.7% 17.9% 3.7% 10.00
Community First Bank'g Corp. GA 07/01/97 CFBC 72.3% 24.5 11.9% 0.5% 16.4% 2.9% 20.00
First Robinson Fin. Corp. (9) IL 06/30/97 FRFC 71.4% 16.7 10.9% 0.7% 15.2% 4.3% 10.00
Security Bancorp TN 06/30/97 P.Sheet 72.0% 14.1 8.8% 0.6% 12.2% 5.1% 10.00
Sistersville Bancorp WV 06/26/97 P.Sheet 65.0% 18.9 20.6% 1.1% 31.6% 3.4% 10.00
SFB Bancorp TN 05/30/97 P.Sheet 70.1% 13.9 14.5% 1.0% 20.7% 5.1% 10.00
Rocky Ford Financial CO 05/22/97 P.Sheet 67.9% 14.6 17.7% 1.2% 26.1% 4.6% 10.00
AVERAGES: 72.4% 18.9 15.2% 0.8% 21.2% 4.0% $12.00
MEDIANS: 71.7% 18.1 15.2% 0.8% 19.3% 3.9% 10.00
AVERAGES, EXCLUDING 2ND STEPS 70.6% 18.4 15.1% 0.8% 21.5% 4.0% $12.22
MEDIANS, EXCLUDING 2ND STEPS 71.4% 17.3 14.5% 0.9% 20.7% 4.2% 10.00
<CAPTION>
INSTITUTIONAL INFORMATION POST-IPO PRICING TRENDS
------------------------- -----------------------
CLOSING PRICE
FIRST AFTER AFTER
TRADING % FIRST % FIRST %
CONVERSION DAY CHG. WEEK(6) CHG. MONTH(7) CHG.
INSTITUTION STATE DATE TICKER --- ---- ------- ---- -------- ----
- ----------- --------------------- ($) (%) ($) (%) ($) (%)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Spartan Fin. Corp. SC 07/09/97 FSPT $36.69 83.4% $36.62 83.1% $35.63 78.1%
GSB Financial Corp. NY 07/09/97 GOSB 14.63 46.3% 14.75 47.5% 14.38 43.8%
FirstBank Corp. ID 07/02/97 FBNW 15.81 58.1% 15.56 55.6% 17.88 78.8%
Montgomery Fin. Corp. (5) IN 07/01/97 MONT 11.13 11.2% 11.25 12.5% 11.75 17.5%
Community First Bank'g Corp. GA 07/01/97 CFBC 31.88 59.4% 33.00 65.0% 34.25 71.3%
First Robinson Fin. Corp. (9) IL 06/30/97 FRFC 14.50 45.0% 14.38 43.8% 16.50 65.0%
Security Bancorp TN 06/30/97 P.Sheet 14.50 45.0% 15.00 50.0% 15.25 52.5%
Sistersville Bancorp WV 06/26/97 P.Sheet 13.75 37.5% 13.88 38.8% 14.00 40.0%
SFB Bancorp TN 05/30/97 P.Sheet 13.81 38.1% 13.38 33.8% 14.00 40.0%
Rocky Ford Financial CO 05/22/97 P.Sheet 13.00 30.0% 13.13 31.3% 13.50 35.0%
AVERAGES: $17.97 45.4% $18.09 46.1% $18.71 52.2%
MEDIANS: 14.50 45.0% 14.56 45.6% 14.01 48.1%
AVERAGES, EXCLUDING 2ND STEPS $18.73 49.2% 18.85 49.9% $17.99 52.2%
MEDIANS, EXCLUDING 2ND STEPS 14.50 45.0% 14.75 47.5% 15.25 52.5%
</TABLE>
AUGUST 11, 1997
Note - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings.
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Seocnd - step conversions.
(9) Simultaneously converted to commercial bank charter.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
--------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ------------------------------------
Financial Insitution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------------- -------- ------ ------ ------ ----- ------ ----- ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
All Public Companies 22.36 178.58 1.23 15.75 19.65 141.92 17.37 146.85 18.10
Special Selection Grouping(8) 22.92 65.90 0.66 18.86 28.19 118.89 25.08 118.89 27.98
Comparable Group
- -----------------------------
Special Comparative Group(8)
- -----------------------------
CFBC Community First Bnkg. Co. of GA 34.19 82.53 0.82 27.66 NM 123.61 20.29 123.61 NM
FBNW FirstBank Corp. of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
FSPT FirstSpartan Fin. Corp. of SC 35.75 158.37 1.16 27.63 NM 129.39 34.06 129.39 NM
GOSB GSB Financial Corp. of NY 14.66 32.96 0.44 13.78 28.19 106.39 28.79 106.39 NM
MONT Montgomery Fin. Corp. of IN 11.75 19.42 0.42 11.22 NM 104.72 18.76 104.72 27.98
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------- --------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ----------- -----------
Financial Insitution Share(1) Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- ----------------------- ------- ---- ------- ------ ------ ------ ---- ---- ---- ----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
All Public Companies 0.39 1.77 29.95 1,316 12.77 0.82 0.65 6.51 0.83 8.17
Special Selection Grouping(8) 0.00 0.00 0.00 249 21.15 1.95 0.67 3.02 0.74 3.45
Comparable Group
- -----------------------------
Special Comparative Group(8)
- -----------------------------
CFBC Community First Bnkg. Co. of GA 0.00 0.00 0.00 407 16.42 NA 0.25 1.52 0.49 2.96
FBNW FirstBank Corp. of Clarkston WA 0.00 0.00 0.00 154 18.04 1.95 0.70 3.86 0.57 3.14
FSPT FirstSpartan Fin. Corp. of SC 0.00 0.00 0.00 465 26.32 NA 0.95 3.62 1.11 4.20
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 114 27.06 NA 1.02 3.77 0.86 3.19
MONT Montgomery Fin. Corp. of IN 0.00 0.00 0.00 104 17.91 NA 0.42 2.32 0.67 3.74
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets;
P/TB = Price to tangible book value; and P/CORE = Price to estimated
core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Converted Last 3 Mths (no MHC);
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information in this report has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or completeness of
such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.15
8. Management
----------
Medford's management team has experience and expertise in all of the key
areas of the Bank's operations. Exhibit IV-5 lists Medford's Board of Directors
and executive management with summary resumes. The Bank's operations to date
indicates that Medford's management team, in conjunction with the Board, has
developed and implemented an effective operating philosophy. With the exception
of a human resources manager, Medford has no apparent senior management or Board
vacancies and there appears to be a well-defined organizational structure.
Similarly, the financial results of the Peer Group companies indicate that
they have been effectively managed, as all of the Peer Group companies
maintained capital positions in compliance with regulatory requirements, solid
core earnings and favorable credit quality measures. We have therefore
concluded that, in general, Medford is currently being operated at least as
effectively as the Peer Group companies and no adjustment for this factor was
necessary.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
The 1996 recapitalization of the SAIF insurance fund has removed the
difference in deposit insurance costs between BIF and SAIF-insured institutions.
Thus, although two of the Peer Group members are SAIF-insured, the deposit
insurance costs are similar. As a fully-converted BIF-insured institution,
Medford will operate in substantially the same regulatory environment as the
Peer Group members -- all of whom are adequately capitalized institutions and
are operating with no apparent restrictions. Exhibit IV-6 reflects the Bank's
pro forma regulatory capital ratios. On balance, RP Financial concluded that no
adjustment to the Bank's value was warranted for this factor.
Summary of Adjustments
----------------------
Overall, we believe the Bank's pro forma market value should take into
account the valuation adjustments relative to the Peer Group:
<PAGE>
RP Financial, LC.
Page 4.16
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
Financial Condition Moderate Downward
Profitability, Growth and Viability Moderate Downward
of Earnings
Asset Growth No Adjustment
Primary Market Area No Adjustment
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue Slight Upward
Management No Adjustment
Effect of Government Regulations and
Regulatory Reform No Adjustment
Valuation Approaches
--------------------
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing Medford's to-be-issued stock -- the
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches
- -- all performed on a pro forma basis including the effects of the conversion
proceeds. In computing the pro forma impact of the conversion and the related
pricing ratios, we have incorporated the valuation parameters disclosed in
Medford's prospectus for offering expenses, and the effective tax rate and stock
benefit plan assumptions (summarized in Exhibits IV-7 and IV-8). We have
utilized the reinvestment rate set forth in the prospectus, the one year T-Bill
rate as of June 30, 1997 of 5.82 percent, after comparing this rate to the rate
derived from the OTS's suggested formula (5.78 percent). With regard to the
employee stock ownership plan and stock reward plans, we have performed the
valuation assuming the ESOP purchases an amount equal to 8.0 percent of the
offering (10 year amortization) and the RSP acquires 4.0 percent of the
offering. In our estimate of value, we assessed the relationship of the pro
forma pricing ratios relative to the Peer Group and the recent conversions.
RP Financial's valuation placed emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
------------
long-term value for a stock. Since the Bank and the Peer Group
reported pro forma core profitability, the P/E approach was heavily
considered in this valuation. In applying this approach, we took into
account primarily estimated core earnings.
o P/B Approach. P/B ratios have generally served as a useful benchmark
------------
in the valuation of savings institution stocks, with the greater
determinant of long term value being earnings. We have also modified
the P/B approach to exclude the impact of intangible assets (i.e.,
price/tangible book value or "P/TB"). RP Financial considered the P/TB
approach to be a reliable indicator of value given current market
conditions, particularly the market for new conversions, which often
exhibit a willingness to pay premium P/E multiples in the expectation
that such institutions will implement leveraging strategies to promote
earnings growth. At the
<PAGE>
RP Financial, LC.
Page 4.17
same time, with lower ROE ratios, new conversions are typically
discounted on a book value basis relative to the market at least until
there is partial realization of leveraging strategies.
o P/A Approach. P/A ratios are generally a less reliable indicator of
------------
market value, as investors do not place exclusive weight simply on the
size of total assets as a determinant of market value. Furthermore,
this approach does not take into account the amount of stock purchases
funded by deposit withdrawals, thus understating the pro forma P/A
ratio. Investors place significantly greater weight on book value and
earnings -- which have received greater weight in our valuation
analysis. At the same time, the P/A ratio is an indicator of
franchise value and, in the case of a highly capitalized institution,
a high P/A ratio limits the investment community's willingness to pay
average market multiples for earnings and book value when ROE is low.
The Bank intends to adopt Statement of Position ("SOP" 93-6), which will
cause earnings per share computations to be based on shares issued and
outstanding excluding shares owned by an ESOP where there is not a commitment to
release such shares. For the purpose of preparing the pro forma pricing tables
and exhibits, we have reflected all shares issued in the offering including
shares purchased by the ESOP as outstanding to capture the full dilutive impact
of such stock to the Bank's shareholders. However, we have considered the
impact of adoption of SOP 93-6 on the Bank in the determination of the Bank's
pro forma value.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/TB and P/E approaches, followed by the P/A approach, RP
Financial concluded that the pro forma market value of the Bank's conversion
stock is $20,500,000 at the midpoint at this time.
1. Price-to-Tangible Book ("P/TB"). The application of the P/TB valuation
-------------------------------
method requires calculating the Bank's pro forma market value by applying a
valuation P/TB ratio to Medford's pro forma tangible book value. Based on the
$20,500,000 midpoint valuation, Medford's pro forma P/TB ratio was 70.21
percent. In comparison to the average P/TB ratio for the Peer Group of 151.67
percent, Medford's valuation reflected a discount of 53.71 percent. RP
Financial considered a discount under the P/TB approach to be reasonable in
light of the valuation adjustments discussed previously. Given the historically
high P/TB pricing for thrifts in today's market, a valuation discount under the
P/TB approach could only be expected and is consistent with the aftermarket
trading of new conversion issues.
Given the emphasis on limiting near term aftermarket trading in the revised
appraisal guidelines, RP Financial also considered the pro forma P/TB ratios of
recent conversions in its valuation analysis. It is these companies that
provide a proxy for aftermarket trading for new thrift issues. At the midpoint
value of $20,500,000, Medford's pro forma P/TB ratio of 70.21 percent
represented a discount of 41.0 percent from the 118.89 percent average P/TB
ratio of the recently converted thrifts (see Table 4.3). At the super maximum
of
<PAGE>
RP Financial, LC.
Page 4.18
the valuation range, Medford's pro forma P/B ratio of 77.75 percent is
discounted by approximately 34.6 percent from the new conversions.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation method
-------------------------
requires calculating the Bank's pro forma market value by applying a valuation
P/E multiple times the pro forma earnings base. Ideally, the pro forma earnings
base is composed principally of the Bank's recurring earnings base, that is,
earnings adjusted to exclude any one-time non-operating items, plus the
estimated after-tax earnings benefit of the reinvestment of net conversion
proceeds. Medford reported net income of $741,000 for fiscal 1997, which
included net non-operating items such as gains on the sale of loans, a write-off
of the Bank's investment in the Massachusetts Thrift Fund, and a special
dividend from the Co-operative Central Bank share insurance fund. As shown
below, the Bank's core earnings were calculated to equal the following (Note:
the adjustments applied to the Peer Group's earnings in the calculation of core
earnings are shown in Exhibit IV-9, including the SAIF assessment):
Amount
------
Pre-Tax Net Operating Income ($000)
Less: Tax Adjustment(1) $1,098
(456)
-----
Adjusted (Core) Income After Tax $642
(1) Tax rate equal to fiscal 1997 effective tax rate.
Based on Medford's trailing twelve month core earnings, and incorporating
the impact of the pro forma assumptions previously discussed, the Bank's pro
forma core P/E multiple at the $20,500,000 midpoint value equaled 19.69 times.
Comparatively, the Peer Group posted an average core P/E multiple of 16.31
times, which indicates a premium of 20.72 percent in the Bank's pro forma
earnings multiple. In reaching the valuation conclusion, we also evaluated the
Bank's price/earnings multiple on the basis of projected earnings as reflected
in the business plan.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio to the Bank's pro forma asset
base, conservatively assuming no deposit withdrawals are made to fund stock
purchases. In all likelihood there will be deposit withdrawals, which results
in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, Medford's value equaled 12.28 percent of pro
forma assets. Comparatively, the Peer Group companies exhibited an average P/A
ratio of 13.09 percent, which implies a 6.19 percent premium being applied to
the Bank's pro forma P/A ratio.
<PAGE>
RP Financial, LC.
Page 4.19
Valuation Conclusion
--------------------
Based on the foregoing, it is our opinion that, as of August 15, 1997, the
aggregate pro forma market value of the Bank was $20,500,000 at the midpoint,
equal to 2,050,000 shares offered at $10.00 per share. Pursuant to the
conversion guidelines, the 15 percent offering range includes a minimum of
$17,425,000 and a maximum of $23,575,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 1,742,500 shares
at the minimum to 2,357,500 shares at the maximum. The Holding Company's
offering also includes a provision for a super maximum, which would result in an
offering size of $27,111,250, equal to 2,711,125 shares at the $10.00 per share
offering price. The comparative pro forma valuation ratios relative to the Peer
Group are shown in Table 4.4, and the key valuation assumptions are detailed in
Exhibit IV-7. The pro forma calculations for the range are detailed in Exhibit
IV-8.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1706 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Medford Co-operative 8k of MA and the Comparables
As of August 15, 1957
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
---------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ------------------------------------
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------ ------ ------ ----- ------ ----- ------ ------
($) ($MIL) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medford Co-operative 8k of MA
- -----------------------------
Superrange 10.00 27.11 0.43 12.86 21.31 77.75 15.71 77.75 23.10
Range Maximum 10.00 23.58 0.47 13.50 19.62 74.05 13.90 74.05 21.39
Range Midpoint 10.00 20.50 0.51 14.24 17.98 70.21 12.28 70.21 19.59
Range Minimum 10.00 17.43 0.56 15.24 16.16 65.51 10.61 65.61 17.79
BIF-Insured Thrifts(7)
- ----------------------
Averages 24.77 336.00 1.61 15.69 14.87 160.38 17.72 166.67 16.08
Medians -- -- -- -- 14.01 160.49 14.74 166.67 14.78
All-Non-MHC State of MA(7)
- --------------------------
Averages 22.87 84.29 1.64 15.00 12.66 158.70 14.72 162.87 14.07
Medians -- -- -- -- 13.02 152.48 13.29 152.44 13.36
Comparable Gross Averages
- -------------------------
Averages 19.51 38.53 1.22 14.12 13.57 144.89 13.09 151.67 16.31
Medians -- -- -- -- 13.99 141.24 11.94 150.49 14.69
State of MA
- -----------
ABBK Ablington Savings Bank of MA 29.25 54.17 1.92 18.73 13.54 156.17 10.81 173.38 15.23
AFCB Affiliated Comm BC, Inc of MA 25.00 161.63 1.74 15.49 16.34 151.61 14.82 152.44 14.37
ANOB Andover Bancorp, Inc. of MA 29.87 153.77 2.65 19.59 11.62 152.48 12.29 152.48 11.27
BFO BostonFed Bancorp of MA 19.50 115.97 0.88 14.08 NM 138.49 12.32 143.38 22.16
CEBK Central Co-Op. Bank of MA 19.50 38.32 1.46 17.07 13.54 114.24 11.94 128.29 13.36
CIRE Emerald Island Bancorp, MA 21.00 47.17 1.60 13.39 13.82 156.87 11.10 156.83 13.13
FCB Falmouth Co-Op Bank of MA 17.00 24.74 0.49 15.40 NM 110.39 26.36 110.39 NM
FESX First Essex Bancorp of MA 16.50 123.82 1.15 11.57 12.50 142.61 9.94 164.18 14.35
FAB FirstFed America Bancorp of MA 18.94 164.91 0.50 14.26 NM 132.82 16.15 132.82 NM
HIFS Hingham Inst. for Sav. of MA 23.05 30.05 1.86 15.62 12.40 147.63 13.81 147.63 12.40
HPBC Home Port Bancorp, Inc. of MA 20.62 37.98 1.71 11.39 11.99 181.04 19.11 181.04 12.06
IPSW Ipswich SB of Ipswich MA 23.50 27.92 1.32 9.11 13.99 257.96 14.74 257.96 17.80
LSBX Lawrence Savings Bank of MA 11.12 47.53 1.38 7.45 7.94 149.25 11.47 149.26 8.06
MASB MassBank Corp. of Reading MA 52.75 141.42 3.45 35.92 14.49 146.85 15.62 146.85 15.29
MFLR Mayflower Co-Op. Bank of MA 14.62 16.57 1.30 13.21 14.00 140.95 13.29 143.45 14.32
MDBX Medford Bank of Medford MA 30.90 136.23 2.29 21.24 12.24 141.24 12.70 151.59 13.10
MWBX MetroWest Bank of MA 6.50 90.69 0.52 3.02 12.50 215.23 16.01 215.23 12.50
PBKB People's SB of Brockton MA 16.25 58.42 0.69 8.56 14.01 189.84 10.65 198.17 23.55
SISB SIS Bancorp Inc of MA 30.00 167.31 3.29 18.52 9.06 161.99 11.86 161.99 9.12
SWCB Sandwich Co-Op. Bank of MA 33.50 63.85 2.27 20.55 14.96 163.02 13.44 171.01 14.75
SOSA Somerset Savings Bank of MA(7) 4.00 66.61 0.24 1.96 16.00 204.88 12.94 204.08 16.67
WRNB Warren Bancorp of Peabody MA 17.87 67.57 1.71 9.62 8.89 161.90 18.87 181.98 10.45
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------ -------------------------------------------------
Reported Core
Amount/ Payout/ Total Equity NPAs/ ------------ -----------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ----- -------- ------ ------ ------ ----- ----- ---- -----
($) ($) (%) ($MIL) ($) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medford Co-operative 8k of MA
- -----------------------------
Superrange 0.20 2.00 46.21 113 20.20 0.00 0.74 3.65 0.68 3.37
Range Maximum 0.20 2.00 42.76 170 18.78 0.00 0.71 3.77 0.65 2.46
Range Midpoint 0.20 2.00 39.38 167 17.49 0.00 0.68 3.90 0.62 3.57
Range Minimum 0.20 2.00 35.58 164 16.17 0.00 0.66 4.06 0.60 3.69
BIF-Insured Thrifts(7)
- ----------------------
Averages 0.47 1.77 29.13 2,185 11.76 0.98 1.16 11.41 1.17 11.37
Medians -- -- -- -- -- -- -- -- -- --
All-Non-MHC State of MA(7)
- --------------------------
Averages 0.48 2.00 29.55 636 9.25 0.62 1.06 12.53 1.05 12.22
Medians -- -- -- -- -- -- -- -- -- --
Comparable Gross Averages
- -------------------------
Averages 0.38 1.92 29.87 310 9.58 0.97 0.79 9.40 0.79 9.37
Medians
State of MA
- -----------
ABBK Ablington Savings Bank of MA 0.40 1.37 20.83 501 6.92 0.20 0.82 12.05 0.73 10.71
AFCB Affiliated Comm BC, Inc of MA 0.48 1.92 27.59 1,090 9.78 0.39 0.96 9.78 1.09 11.12
ANOB Andover Bancorp, Inc. of MA 0.68 2.28 25.66 1,251 8.06 1.01 1.10 13.91 1.13 14.34
BFO BostonFed Bancorp of MA 0.28 1.44 31.82 941 8.90 0.52 0.47 4.33 0.65 5.95
CEBK Central Co-Op. Bank of MA 0.32 1.64 21.92 321 10.45 0.80 0.88 8.78 0.90 8.90
EIRE Emerald Island Bancorp, MA 0.28 1.33 17.50 425 7.08 0.40 0.85 12.35 0.89 13.00
FCB Falmouth Co-Op Bank of MA 0.20 1.18 40.82 94 23.88 0.07 0.84 3.43 0.79 3.23
FESX First Essex Bancorp of MA 0.48 2.91 41.74 1,245 6.97 0.56 0.96 13.00 0.83 11.33
FAB FirstFed America Bancorp of MA 0.00 0.00 0.00 1,021 12.16 0.40 -0.20 -2.35 0.47 5.61
HIFS Hingham Inst. for Sav. of MA 0.48 2.08 24.81 218 9.35 0.41 1.21 12.60 1.21 12.60
HPBC Home Port Bancorp, Inc. of MA 0.80 3.88 46.78 199 10.56 0.08 1.67 15.78 1.66 15.69
IPSW Ipswich SB of Ipswich MA 0.24 1.02 18.18 189 5.71 1.52 1.21 20.41 0.95 16.04
LSBX Lawrence Savings Bank of MA 0.00 0.00 0.00 366 8.69 0.30 1.75 20.90 1.73 20.60
MASB MassBank Corp. of Reading MA 1.28 2.43 37.10 905 10.54 0.16 1.10 10.79 1.04 10.23
MFLR Mayflower Co-Op. Bank of MA 0.60 3.22 46.15 125 9.43 1.03 1.00 10.42 0.98 10.18
MDBX Medford Bank of Medford MA 0.72 2.40 31.44 1,073 8.99 0.37 1.08 12.07 1.01 11.29
MWBX MetroWest Bank of MA 0.12 1.85 23.08 566 7.44 0.91 1.38 18.37 1.38 18.37
PBKB People's SB of Brockton MA 0.44 2.71 63.77 549 5.61 0.82 0.80 14.41 0.47 8.37
SISB SIS Bancorp Inc of MA 0.56 1.87 17.02 1,435 7.20 0.47 1.38 18.82 1.37 18.70
SWCB Sandwich Co-Op. Bank of MA 1.20 3.58 52.86 475 8.24 1.28 0.94 11.30 0.95 11.45
SOSA Somerset Savings Bank of MA(7) 0.00 0.00 0.00 515 6.34 6.28 0.81 13.81 0.78 13.26
WRNB Warren Bancorp of Peabody MA 0.52 2.91 30.41 358 10.37 1.15 2.13 22.09 1.81 18.79
</TABLE>
Comparable to Group
- --------------------
<PAGE>
RP FINANCIAL, LC.
- -----------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 4.4
Public Marketing Pricing
Medford Co-operative BA of MA and the Comparables
As of August 15, 1997
Market Per Share Data
Capitalization ---------------- Pricing Ratios(3)
---------------- Core Book -----------------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ----- ------ ----- ----- ----- ----- ----- ------
($) ($Mil) ($) ($) (%) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEBK Central Co-Op. Bank of MA 19.50 38.32 1.46 17.07 13.54 114.24 11.94 128.29 13.36
EIRE Emerald Island Bancorp, MA 21.00 47.17 1.60 13.39 13.82 156.83 11.10 156.83 13.13
FCB Falmouth Co-Op Bank of MA 17.00 24.74 0.49 15.40 NM 110.39 26.36 110.39 NM
IPSW Ipswich SB of Ipswich MA 23.50 27.92 1.32 9.11 13.99 257.96 14.74 257.96 17.80
MFLR Mayflower Co-Op. Bank of MA 18.62 16.57 1.30 13.21 14.00 140.95 13.29 143.45 14.32
MDBK Medford Bank of Medford MA 30.00 136.23 2.29 21.24 12.20 141.24 12.70 151.59 13.10
MCBN Mid-Coast Bancorp of ME 25.00 5.83 1.66 22.06 23.58 113.33 9.75 113.33 15.06
NHTB NH Thrift Bancshares of NH 16.75 34.19 0.65 11.47 NM 146.03 10.92 172.33 25.77
NHSB Newmil Bancorp. of CT 13.00 49.64 0.65 8.27 19.12 157.19 15.43 157.19 20.00
NBH Northeast Bancorp of ME 14.75 18.81 0.86 13.49 15.86 109.34 7.60 126.50 17.15
TBK Tolland Bank of CT 15.50 24.18 1.16 10.60 13.96 146.23 10.15 150.49 13.36
</TABLE>
<TABLE>
<CAPTION>
Dividends(4)
----------------------------
Amount/ Payout
Share Yield Ratio(5)
-------- ------ -------
($) (%) (%)
<S> <C> <C> <C>
CEBK Central Co-Op. Bank of MA 0.32 1.64 21.92
EIRE Emerald Island Bancorp, MA 0.28 1.33 17.50
FCB Falmouth Co-Op Bank of MA 0.20 1.18 40.82
IPSW Ipswich SB of Ipswich MA 0.24 1.02 18.18
MFLR Mayflower Co-Op. Bank of MA 0.60 3.22 46.15
MDBK Medford Bank of Medford MA 0.72 2.40 31.44
MCBN Mid-Coast Bancorp of ME 0.52 2.08 31.33
NHTB NH Thrift Bancshares of NH 0.50 2.99 NM
NHSB Newmil Bancorp. of CT 0.24 1.85 36.92
NBH Northeast Bancorp of ME 0.32 2.17 37.21
TBK Tolland Bank of CT 0.20 1.29 17.24
</TABLE>
<TABLE>
<CAPTION>
Financial Characteristics(6)
--------------------------------------------------------------
Reported Core
Total Equity/ NPAs/ --------------- --------------
Assets Assets Assets ROA ROE ROA ROE
------ ------ ------ ----- ----- ----- -----
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
CEBK Central Co-Op. Bank of MA 321 10.45 0.88 0.88 8.78 0.90 8.90
EIRE Emerald Island Bancorp, MA 425 7.08 0.40 0.85 12.35 0.89 13.00
FCB Falmouth Co-Op Bank of MA 94 23.88 0.07 0.84 3.43 0.79 3.23
IPSW Ipswich SB of Ipswich MA 189 5.71 1.52 1.21 20.41 0.95 16.04
MFLR Mayflower Co-Op. Bank of MA 125 9.43 1.03 1.00 10.42 0.98 10.18
MDBK Medford Bank of Medford MA 1,073 8.99 0.37 1.08 12.07 1.01 11.29
MCBN Mid-Coast Bancorp of ME 60 8.60 0.73 0.43 4.92 0.67 7.71
NHTB NH Thrift Bancshares of NH 313 7.48 1.03 0.33 4.46 0.49 6.59
NHSB Newmil Bancorp. of CT 323 9.81 1.11 0.83 8.14 0.79 7.78
NBH Northeast Bancorp of ME 248 6.95 1.37 0.51 6.99 0.47 6.47
TBK Tolland Bank of CT 238 6.94 2.13 0.75 11.37 0.78 11.89
</TABLE>
- ---------------------
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted to
omit the impact of non-operating items (including the SAIF assessment) on a
tax effected basis, and is shown on a pro forma basis where appropriate.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets;
P/TB = Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and total asset balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
I-1 Map of Office Locations
I-2 Medford's Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Fixed Rate and Adjustable Rate Loans
I-8 Gap Analysis
I-9 Loan Portfolio Composition
I-10 Contractual Maturity By Loan Type
I-11 Loan Originations, Purchases, and Sales
I-12 Non-Performing Assets
I-13 Classified Assets
I-14 Deposit Composition
II-1 List of Branch Offices
II-2 Historical Interest Rates
II-3 Demographic/Economic Reports
II-4 Sources of Personal Income/Employment Sectors
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 New England Peer Institutions
III-3 New England Peer Institutions
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS(continued)
IV-1 Stock Prices: August 15, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Directors and Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Medford Co-operative Bank
Map of Office Locations
<PAGE>
[MAP OF MASSACHUSETTS APPEARS HERE]
<PAGE>
EXHIBIT I-2
Medford Co-operative Bank
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Medford Co-operative Bank
Key Operating Ratios
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED JUNE 30,
----------------------------------------
1997 1996 1995 1994 1993
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING RATIOS:
Interest rate spread(1).............. 3.62% 3.49% 3.49% 3.67% 3.78%
Net interest margin(2)............... 3.81 3.63 3.63 3.81 3.93
Return on average assets............. 0.54 0.48 0.55 0.75 0.97
Return on average equity............. 6.40 5.53 6.46 9.61 12.98
ASSET QUALITY RATIOS:
Non-performing loans as a percent
of net loans......................... 0.32 0.66 1.08 1.08 1.40
Non-performing assets as a percent
of total assets...................... 0.24 0.47 0.78 0.92 1.37
Allowance for loan losses as a
percent of non-performing loans...... 267.67 119.29 87.21 89.27 66.19
Net charge-offs to average
loans, net........................... 0.04 0.13 0.12 0.19 0.24
CAPITAL RATIOS:
Average equity to average assets..... 8.42 8.60 8.47 7.81 7.46
Regulatory Tier I leverage capital
ratio................................ 8.08 8.57 8.30 8.00 7.65
Total surplus to total assets........ 7.98 8.33 8.30 8.00 7.65
Operating expenses as a percentage
of average total assets.............. 3.15 3.08 2.97 2.62 2.63
Efficiency ratio(3).................. 73.76 77.30 74.25 64.78 61.72
</TABLE>
- ----------
(1) Interest rate spread represents the difference between weighted average
yield on interest-earning assets and the weighted average cost of interest-
bearing liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
(3) Operating expenses divided by the sum of net interest income and other
income.
<PAGE>
EXHIBIT I-4
Medford Co-operative Bank
Investment Portfolio Composition
<TABLE>
<CAPTION>
AT JUNE 30,
-----------------------------------------------
1997 1996
--------------------- -----------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
---------- ------ --------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Securities available for sale:
Marketable equity securities... $ 3,543 $ 3,819 $ 1,639 $ 1,568
------- ------- ------- -------
Total................ 3,543 3,819 1,639 1,568
------- ------- ------- -------
Securities held to maturity:
U.S. Government and Agency
securities..................... $14,976 $14,908 $16,899 $16,767
Other bonds and obligations.... 2,528 2,523 27 27
------- ------- ------- -------
Total................ $17,504 $17,43l $16,926 $16,794
------- ------- ------- -------
Total.......... $21,047 $21,250 $18,565 $18,362
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-5
Medford Co-operative Bank
Yields and Costs
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------------------------------------------------------------------
1997 1996 1995
--------------------------- --------------------------- ---------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED YIELD/ AVERAGE EARNED YIELD/ AVERAGE EARNED YIELD/
BALANCE OR PAID RATE BALANCE OR PAID RATE BALANCE OR PAID RATE
------- -------- ------- ------- -------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Total loans, net.............. $103,223 $8,397 8.13% $ 86,651 $7,115 8.21% $ 78,398 $6,323 8.07%
Investments................... 20,686 1,208 5.84% 23,306 1,364 5.85% 26,452 1,358 5.13%
Other earning assets(1)....... 5.896 294 4.99% 8.836 449 5.08% 9.762 484 4.96%
-------- ------ -------- ------ -------- ------
Total interest-earning assets. 129.805 9.899 7.63% 118.793 8.928 7.52% 114.612 8.165 7.12%
-------- ------ -------- ------ -------- ------
Cash and due from banks......... 2,188 1,627 1,089
Other assets.................... 5.638 5.445 4.904
Total assets.................. $137.631 $125.865 $120.605
======== ======== ========
Interest-bearing liabilities:
Regular and other deposits... $ 40,419 $1,114 3.46% $ 39,818 $1,121 2.82% $ 44,451 $1,304 2.93%
Now accounts................. 15,710 281 1.79% 14,681 286 1.94% 14,175 313 2.21%
Money market deposits........ 6,070 157 2.59% 6,154 157 2.54% 6,557 161 2.46%
Certificates of deposit...... 57,223 3,149 5.50% 52,340 3,005 5.74% 44,216 2,107 4.77%
Total interest-bearing
deposits.................. 119,422 4.701 3.94% 112.993 4569 4.04% 109.399 3.885 3.55%
-------- ------ -------- ------ ----- -------- ------ -----
FHLB Borrowings 3.289 210 6.38% -- -- -- -- -- --
-------- ------ -------- ------ ----- -------- ------ -----
Total interest-bearing
liabilities............... 122,711 4.911 4.00% 112,993 4.569 4.04% 109,399 3.885 3.55%
------ ------ ------
Demand deposit accounts...... 3,056 1,756 721
Other liabilities............... 277 288 268
-------- -------- --------
Total liabilities............ 126,044 115,037 110,388
Surplus......................... 11.587 10.828 10.217
-------- -------- --------
Total liabilities and surplus... $137,631 $125,865 $120,605
======== ======== ========
Net interest income............. $4,988 $4,359 $4,280
====== ====== ======
Interest rate spread............ 3.63% 3.48% 3.57%
Net interest margin............. 3.84% 3.67% 3.73%
Interest earning assets/interest
bearing liabilities........... 1.06x 1.05x 1.05x
</TABLE>
- ----------
(1) At June 30,1997, other earning assets included Bank Investment
Fund Liquidity Fund, FHLB overnight deposits, federal funds sold,
the Co-operative Central Reserve Fund and FHLB Ideal Way Accountant.
<PAGE>
EXHIBIT I-6
Medford Co-operative Bank
Loan Loss Allowance Activity
<TABLE>
YEARS ENDED JUNE 30,
------------------------------
1997 1996 1995
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Average loans, net................................... $103,223 $ 86,651 $ 78,398
======== ======== ========
Period-end total loans............................... $114,568 $ 94,760 $ 80,217
======== ======== ========
Allowance for loan losses at beginning of period.... 742 757 749
Provision charged to operations..................... 272 100 100
Plus recoveries..................................... 20 23 27
Loans charged-off................................... (57) (138) (119)
-------- -------- --------
Allowance for loan losses at end of period.......... $ 977 $ 742 $ 757
======== ======== ========
Ratios:
Allowance for loan losses to period end net loans... 0.85% 0.78% 0.94%
Allowance for loan losses to non-performing loans... 267.67% 119.29% 87.21%
Net charge-offs to average loans, net............... 0.04% 0.13% 0.12%
Net charge-offs to allowance for loan losses........ 3.79% 15.50% 12.15%
</TABLE>
<PAGE>
EXHIBIT I-7
Medford Co-operative Bank
Fixed Rate and Adjustable Rate Loans
<TABLE>
AT JUNE 30, 1997
--------------------------------------------------------
RESIDENTIAL COMMERCIAL
MORTGAGE REAL ESTATE COMMERCIAL CONSUMER TOTAL
ESTATE LOANS LOANS LOANS LOANS
----------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Loan balance by type scheduled
to mature after one year:
Fixed-rate $ 31,621 $ 1,221 $ 1,032 $ 1,396 $ 35,270
Adjustable-rate 61,122 16,626 2,645 259 80,652
</TABLE>
<PAGE>
EXHIBIT I-8
Medford Co-operative Bank
Gap Analysis
<TABLE>
AT JUNE 30, 1997
------------------------------------------------------------
OVER ONE OVER
THROUGH THREE OVER
ONE YEAR THREE THROUGH SEVEN
OR LESS YEARS SEVEN YEARS YEARS TOTAL
-------- -------- ----------- ----- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment securities....................... $ 9,493 $ 8,011 -- -- $ 17,504
Other Interest-earning assets............... 7,618 -- -- -- 7,618
Adjustable-rate one- to four- family loans.. 13,841 12,940 31,668 -- 58,449
Fixed rate one- to four- family loans....... 2,792 5,583 10,585 12,794 31,754
Commercial real estate loans................ 3,320 10,264 3,097 1,166 17,847
Commercial loans............................ 2,290 486 901 -- 3,677
Home equity loans........................... 1,564 -- -- -- 1,564
Consumer loans.............................. 64 482 312 797 1.655
------- --------- -------- ------ --------
Total interest-earning assets.............. 40,982 37,766 46,563 14,757 140,068
INTEREST-BEARING LIABILITIES:
Certificates of deposit..................... 48,316 10,475 344 -- 59,135
Money market accounts....................... 6,489 -- -- -- 6,489
NOW accounts................................ 1,498 2,996 5,992 7,489 17,975
Regular and other deposits.................. 3,400 6,800 13,600 16,994 40,794
FHLB Borrowings............................. 2,125 2,355 2,214 838 7,532
------- --------- ------- ------- --------
Total interest-bearing liabilities......... 61,828 22,626 22,150 25,321 131,925
Interest rate sensitivity gap................ ($20,846) $ 15,140 $24,413 ($10,564) $ 8,143
======= ========= ======= ======= ========
Cumulative interest rate sensitivity gap..... ($20,846) ($ 5,706) $18,707 $ 8,143 $ 8,143
======= ========= ======= ======= ========
Cumulative Ratio of interest-earning assets to
interest-bearing liabilities................. 66.3% 93.2% 117.6% 106.2% 106.2%
Ratio of cumulative interest rate sensitivity
gap to total assets......................... (13.9)% (3.8)% 12.5% 5.4% 5.4%
</TABLE>
<PAGE>
EXHIBIT I-9
Medford Co-operative Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
AT JUNE 30,
------------------------------------------------------------
1997 1996 1995
------------------ ---------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage loans.... $ 90,203 78.7% $82,459 87.0% $73,458 91.6%
Commercial real estate loans.. 17,847 15.6 8,280 8.7 3,909 4.9
Commercial loans.............. 3,677 3.2 1,715 1.8 415 0.5
Consumer loans................ 1,655 1.4 1,781 1.9 1,832 2.3
Home equity loans............. 1,564 1.4 1,176 1.2 1,248 1.6
Construction loans............ 976 0.9 285 0.4 358 0.4
-------- ----- ------ ----- ------ -----
Total loans................... 115,922 101.2 95,696 101.0 81,220 101.3
Less:
Deferred loan origination
fees........................ 37 - 60 0.1 111 0.1
Unadvanced principal.......... 340 0.3 134 0.1 135 0.2
Allowance for loan
losses....................... 977 0.9 742 0.8 757 1.0
-------- ----- -------- ----- ------- -----
Loans, net.................... $114,568 100.0% $ 94,760 100.0% $80,217 100.0%
======== ===== ======== ===== ======= =====
</TABLE>
<PAGE>
EXHIBIT I-10
Medford Co-operative Bank
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
AT JUNE 30, 1997
---------------------------------------------------------------
RESIDENTIAL COMMERCIAL
MORTGAGE REAL ESTATE COMMERCIAL CONSUMER TOTAL
ESTATE LOANS LOANS LOANS LOANS
----------- ----------- ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Total loans scheduled to mature:
In one year or less .............. $ 1,625 $ -- $ 1,103 $ 57 $ 2,785
After 1 year through 5 years...... 2,405 121 1,888 871 5,285
Beyond five years................. 88,713 17,726 686 727 107,852
------- -------- -------- ------- --------
Total............................... $92,743 $ 17,847 $ 3,677 $ 1,655 $115,922
======== ======== ======== ======= ========
</TABLE>
<PAGE>
EXHIBIT I-11
Medford Co-operative Bank
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
1997 1996 1995
-------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Beginning balance.................................... $ 94,760 $ 80,217 $ 77,988
-------- -------- --------
Mortgage originations............................... 28,423 24,712 8,807
Consumer loan originations.......................... 959 1,033 1,545
Commercial real estate loan originations............ 10,573 5,357
Commercial loan originations........................ 4,771 2,908 445
-------- ------- --------
Total loans originated............................ 44,726 34,010 10,797
-------- ------- --------
Less:
Amortization and payoffs............................ 15,055 16,561 7,812
Provision for loan losses........................... 272 100 100
Transfers to foreclosed real estate................. -- 83 298
Total loans sold.................................... 8,750 1,598 358
Loans participations................................ 841 1,125 --
-------- ------- -------
Ending balance....................................... $114,568 $94,760 $80,217
======== ======= =======
</TABLE>
<PAGE>
EXHIBIT I-12
Medford Co-operative Bank
Non-Performing Assets
<TABLE>
<CAPTION>
At June 30,
--------------------------
1997 1996 1995
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Loans 30-89 days past due
(not included in non-performing loans)......... $1,708 $1,265 $1,769
Loans 30-89 days past due as a percent of total loans.. 1.49% 1.33% 2.21%
Non-performing loans (90 days past due)................ 365 622 868
Total non-performing loans.......................
Foreclosed real estate................................. -- -- 104
------ ------ ------
Total non-performing assets...................... 365 622 972
Non-performing loans as a percent of net loans......... 0.32% 0.66% 1.08%
Non-performing assets as a percent of total assets..... 0.24% 0.47% 0.78%
</TABLE>
<PAGE>
EXHIBIT I-13
Medford Co-operative Bank
Classified Assets
Federal regulations require each banking institution to classify its
asset quality on a regular basis. In addition, in connection with examinations
of such banking institutions, federal and state examiners have authority to
identify problem assets and, if appropriate, classify them. An asset is
classified substandard if it is determined to be inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral
pledged, if any. As a general rule, the Bank will classify a loan as substandard
if the Bank can no longer rely on the borrower's income as the primary source
for repayment of the indebtedness and must look to secondary sources such as
guarantors or collateral. An asset is classified as doubtful if full
collection is highly questionable or improbable. An asset is classified as loss
if it is considered uncollectible, even if a partial recovery could be expected
in the future. The regulations also provide for a special mention designation,
described as assets which do not currently expose a banking institution to a
sufficient degree of risk to warrant classification but do possess credit
deficiencies or potential weaknesses deserving management's close attention.
Assets classified as substandard or doubtful require a banking institution to
establish general allowances for loan losses. If an asset or portion thereof is
classified as a loss, a banking institution must either establish specific
allowances for loan losses in the amount of the portion of the asset classified
as a loss, or charge off such amount. Examiners may disagree with a banking
institution's classifications and amounts reserved. If a banking institution
does not agree with an examiner's classification of an asset, it may appeal this
determination to the Regional Director of the FDIC. At June 30, 1997, the Bank
had no assets classified as special mention, doubtful or loss, and $1.4 million
in assets designated as substandard.
<PAGE>
EXHIBIT I-14
Medford Co-operative Bank
Deposit Composition
<TABLE>
<CAPTION>
AT JUNE 30,
-------------------------------------------------------
1997 1996 1995
---------------- ----------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Savings deposits............................... $ 40,794 31.6% $ 40,019 33.5% $ 40,399 35.4%
NOW accounts................................... 17,975 13.9 15,480 12.9 14,275 12.5
Money market deposits.......................... 6,489 5.0 6,366 5.3 5,755 5.1
Demand deposits................................ 4,910 3.8 4,103 3.4 1,883 1.7
Certificates of deposit........................ 59,135 45.7 53,666 44.9 51,513 45.3
-------- ----- -------- ---- -------- -----
Total deposits $129,303 100.0% $119,634 100.0% $113,825 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
<PAGE>
EXHIBIT II-1
Medford Co-operative Bank
List of Office Locations
<TABLE>
<CAPTION>
YEAR COMPLETED SQUARE FOOTAGE NET BOOK VALUE
-------------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Main Office: 60 High Street
Medford, MA 02155 1931 7,000 $ 1,180
West Medford Office: 430 High Street
Medford, MA 02155 1970 2,500 $ 45
Salem Street Office: 201 Salem Street
Medford, MA 02155 1995 3,500 $ 947
High School
Educational Branch: 489 Winthrop Street
Medford, MA 02155 1986 500 $ -0-
</TABLE>
<PAGE>
Exhibit II-2
Historical Interest Rates(1)
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
--------------- ---- ------ ------ ------
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
Quarter 2 8.25% 5.16% 5.68% 6.87%
Quarter 3 8.25% 5.03% 5.69% 6.92%
Quarter 4 8.25% 5.18% 5.49% 6.64%
1997: Quarter 1 8.50% 5.32% 6.00% 7.10%
Quarter 2 8.50% 5.17% 5.66% 6.78%
August 15, 1997 8.50% 5.27% 5.50% 6.52%
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-3
Demographic/Economic Reports
<PAGE>
- --------------------------------------------------------------------------------
STATE DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
STATE 00
STATE NAME UNITED STATES
Population
- ----------
1980 226,542,204
1990 248,709,873
1997 267,805,150
2002 281,208,787
Population Growth Rate 1.0
Households
- ----------
1990 91,947,410
1997 99,019,931
2002 104,000,643
Household Growth Rate 1.0
Average Household Size 2.64
Families
- --------
1990 64,517,947
1997 68,999,546
Family Growth Rate 0.9
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 80.3 78.4
% Black 12.1 12.4
% Asian/
Pacific Isl. 2.9 3.7
% Hispanic* 9.0 10.8
</TABLE>
1997 Age Distribution
- ---------------------
0-4 7.2
5-9 7.4
10-14 7.1
15-19 7.1
20-24 6.5
25-44 31.4
45-64 20.5
65-84 11.3
85+ 1.4
18+ 74.3
Median Age
- ----------
1990 32.9
1997 34.8
Male/Female Ratio 95.9
Per Capita Income $18,100
1997 Household Income*
- -------------------------
Base 99,019,225
% less than $15K 17.7
% $15K-25K 14.4
% $25K-50K 33.5
% $50K-100K 26.5
% $100K-150K 5.4
% greater than $150K 2.6
Median Household Income
- -----------------------
1997 $36,961
2002 $42,042
1997 Average Disposable Income
- ---------------------------------
Total $35,584
Householder less than 35 $30,999
Householder 35-44 $40,281
Householder 45-54 $45,940
Householder 55-64 $39,611
Householder 65+ $22,603
Spending Potential Index*
- -------------------------
Auto Loan 100
Home Loan 100
Investments 100
Retirement Plans 100
Home Repair 100
Lawn & Garden 100
Remodeling 100
Appliances 100
Electronics 100
Furniture 100
Restaurants 100
Sporting Goods 100
Theater/Concerts 100
Toys & Hobbies 100
Travel 100
Video Rental 100
Apparel 100
Auto Aftermarket 100
Health Insurance 100
Pet & Supplies 100
- -------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current dollars,
including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the ratio
of the average amount spent locally to the average U.S. spending for a product
or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 8/18/97
4
<PAGE>
- --------------------------------------------------------------------------------
STATE DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
STATE 25
STATE NAME MASSACHUSETTS
Population
- ----------
1980 5,737,093
1990 6,016,425
1997 6,113,063
2002 6,180,593
Population Growth Rate 0.2
Households
- ----------
1990 2,247,110
1997 2,316,225
2002 2,367,509
Household Growth Rate 0.4
Average Household Size 2.54
Families
- --------
1990 1,514,746
1997 1,567,872
Family Growth Rate 0.5
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 89.8 87.1
% Black 5.0 6.0
% Asian/
Pacific Isl. 2.4 3.4
% Hispanic* 4.8 6.4
</TABLE>
1997 Age Distribution
- ---------------------
0-4 6.6
5-9 7.0
10-14 6.6
15-19 6.4
20-24 6.4
25-44 33.2
45-64 20.4
65-84 11.8
85+ 1.6
18+ 76.5
Median Age
- ----------
1990 33.6
1997 35.4
Male/Female Ratio 93.8
Per Capita Income $20,310
1997 Household Income*
- -------------------------
Base 2,316,196
% less than $15K 16.4
% $15K-25K 11.3
% $25K-50K 31.2
% $50K-100K 31.4
% $100K-150K 6.7
% greater than $150K 3.0
Median Household Income
- -----------------------
1997 $42,084
2002 $45,253
1997 Average Disposable Income
- ---------------------------------
Total $36,638
Householder less than 35 $34,429
Householder 35-44 $40,483
Householder 45-54 $47,074
Householder 55-64 $43,118
Householder 65+ $20,492
Spending Potential Index*
- -------------------------
Auto Loan 102
Home Loan 110
Investments 112
Retirement Plans 108
Home Repair 103
Lawn & Garden 104
Remodeling 97
Appliances 102
Electronics 103
Furniture 108
Restaurants 107
Sporting Goods 104
Theater/Concerts 107
Toys & Hobbies 104
Travel 110
Video Rental 100
Apparel 107
Auto Aftermarket 104
Health Insurance 101
Pet & Supplies 103
- -------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current dollars,
including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the ratio
of the average amount spent locally to the average U.S. spending for a product
or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 8/18/97
5
<PAGE>
- --------------------------------------------------------------------------------
MSA DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
MSA 1123
MSA NAME BOSTON-WOR-LAW-LW-BR
Population
- ----------
1980 5,336,242
1990 5,685,998
1997 5,824,917
2002 5,921,284
Population Growth Rate 0.3
Households
- ----------
1990 2,111,440
1997 2,190,958
2002 2,249,569
Household Growth Rate 0.5
Average Household Size 2.57
Families
- --------
1990 1,432,816
1997 1,486,514
Family Growth Rate 0.5
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 90.6 88.1
% Black 4.6 5.5
% Asian/
Pacific Isl. 2.5 3.4
% Hispanic* 4.3 5.7
</TABLE>
1997 Age Distribution
- ---------------------
0-4 6.7
5-9 7.1
10-14 6.7
15-19 6.3
20-24 6.2
25-44 33.9
45-64 20.4
65-84 11.1
85+ 1.5
18+ 76.1
Median Age
- ----------
1990 33.2
1997 35.1
Male/Female Ratio 94.5
Per Capita Income $20,591
1997 Household Income*
- -------------------------
Base 2,190,940
% less than $15K 15.4
% $15K-25K 10.9
% $25K-50K 31.2
% $50K-100K 32.5
% $100K-150K 7.0
% greater than $150K 3.1
Median Household Income
- -----------------------
1997 $43,345
2002 $46,222
1997 Average Disposable Income
- ---------------------------------
Total $37,740
Householder less than 35 $35,498
Householder 35-44 $41,594
Householder 45-54 $48,069
Householder 55-64 $43,616
Householder 65+ $20,883
Spending Potential Index*
- -------------------------
Auto Loan 102
Home Loan 112
Investments 111
Retirement Plans 109
Home Repair 102
Lawn & Garden 104
Remodeling 97
Appliances 102
Electronics 104
Furniture 109
Restaurants 109
Sporting Goods 105
Theater/Concerts 107
Toys & Hobbies 105
Travel 110
Video Rental 100
Apparel 108
Auto Aftermarket 105
Health Insurance 101
Pet & Supplies 103
- -------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current dollars,
including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the ratio
of the average amount spent locally to the average U.S. spending for a product
or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 8/18/97
6
<PAGE>
- --------------------------------------------------------------------------------
COUNTY DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
STATE/COUNTY 25017
COUNTY NAME MIDDLESEX MA
Population
- ----------
1980 1,367,034
1990 1,398,468
1997 1,417,974
2002 1,431,426
Population Growth Rate 0.2
Households
- ----------
1990 519,527
1997 534,396
2002 545,815
Household Growth Rate 0.4
Average Household Size 2.55
Families
- --------
1990 347,305
1997 358,954
Family Growth Rate 0.5
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 92.1 89.4
% Black 2.9 3.6
% Asian/
Pacific Isl. 3.7 5.4
% Hispanic* 3.4 4.5
</TABLE>
1997 Age Distribution
- ---------------------
0-4 6.2
5-9 6.8
10-14 6.3
15-19 5.9
20-24 6.0
25-44 35.5
45-64 20.8
65-84 11.0
85+ 1.5
18+ 77.8
Median Age
- ----------
1990 33.6
1997 35.6
Male/Female Ratio 94.5
Per Capita Income $23,587
1997 Household Income*
- -------------------------
Base 534,396
% less than $15K 12.5
% $15K-25K 9.3
% $25K-50K 28.7
% $50K-100K 35.6
% $100K-150K 9.2
% greater than $150K 4.6
Median Household Income
- -----------------------
1997 $49,414
2002 $50,838
1997 Average Disposable Income
- ---------------------------------
Total $42,262
Householder less than 35 $38,471
Householder 35-44 $45,349
Householder 45-54 $53,547
Householder 55-64 $50,158
Householder 65+ $24,269
Spending Potential Index*
- -------------------------
Auto Loan 105
Home Loan 122
Investments 119
Retirement Plans 119
Home Repair 106
Lawn & Garden 111
Remodeling 99
Appliances 104
Electronics 108
Furniture 115
Restaurants 117
Sporting Goods 109
Theater/Concerts 115
Toys & Hobbies 108
Travel 119
Video Rental 102
Apparel 117
Auto Aftermarket 111
Health Insurance 103
Pet & Supplies 106
- -------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current dollars,
including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the ratio
of the average amount spent locally to the average U.S. spending for a product
or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 8/18/97
7
<PAGE>
- --------------------------------------------------------------------------------
ZIP CODE DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
ZIP CODE 02155
POST OFFICE NAME MEDFORD, MA
Population
- ----------
1980 57,239
1990 56,852
1997 52,954
2002 51,767
Population Growth Rate -1.0
Households
- ----------
1990 21,667
1997 20,473
2002 20,244
Household Growth Rate -0.8
Average Household Size 2.5
Families
- --------
1990 14,367
1997 13,573
Family Growth Rate -0.8
<TABLE>
<CAPTION>
Race 1990 1997
- ---- ---- ----
<S> <C> <C>
% White 93.4 91.2
% Black 4.1 5.0
% Asian/
Pacific Isl. 2.0 3.1
% Hispanic* 1.7 2.4
</TABLE>
1997 Age Distribution
- ---------------------
0-4 5.3
5-9 5.8
10-14 5.3
15-19 6.3
20-24 6.5
25-44 33.2
45-64 20.6
65-84 15.3
85+ 1.9
18+ 81.1
Median Age
- ----------
1990 34.7
1997 36.9
Male/Female Ratio 89
Per Capita Income $19,629
1997 Household Income*
- -------------------------
Base 20,474
% less than $15K 15.8
% $15K-25K 10.5
% $25K-50K 31.2
% $50K-100K 34.2
% $100K-150K 6.9
% greater than $150K 1.5
Median Household Income
- -----------------------
1997 $43,283
2002 $44,483
1997 Average Disposable Income
- ---------------------------------
Total $35,523
Householder less than 35 $38,033
Householder 35-44 $38,242
Householder 45-54 $47,062
Householder 55-64 $45,862
Householder 65+ $19,566
Spending Potential Index*
- -------------------------
Auto Loan 101
Home Loan 109
Investments 116
Retirement Plans 106
Home Repair 105
Lawn & Garden 105
Remodeling 94
Appliances 101
Electronics 100
Furniture 108
Restaurants 107
Sporting Goods 102
Theater/Concerts 106
Toys & Hobbies 103
Travel 111
Video Rental 99
Apparel 105
Auto Aftermarket 103
Health Insurance 102
Pet & Supplies 102
- -------------------------------------------------------------------------------
* Persons of Hispanic Origin may be of any race.
* Income represents the annual income for the preceding year in current dollars,
including an adjustment for inflation or cost-of-living increase.
* The Spending Potential Index (SPI) is calculated by CACI from the Consumer
Expenditure Survey, Bureau of Labor Statistics. The index represents the ratio
of the average amount spent locally to the average U.S. spending for a product
or service, multiplied by 100.
- --------------------------------------------------------------------------------
Copyright 1997 CACI (800) 292-CACI FAX: (703) 243-6272 8/18/97
8
<PAGE>
EXHIBIT II-4
Sources of Personal Income/Employment Sectors
<PAGE>
August 18, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY/1/
For Counties and Metropolitan Areas
(thousands of dollars)
<TABLE>
<CAPTION>
(25-000) MASSACHUSETTS
- -----------------------------------------------------------------------------------------------------------------------------------
ITEM 1989 1990 1991 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income by place of residence
Total personal income ($000) 130,466,394 133,890,016 136,623,485 141,403,618 146,994,304 154,736,460
Nonfarm personal income 130,289,025 133,712,207 136,712,614 141,171,609 146,718,194 154,521,042
Farm income/2/ 177,369 177,809 226,871 232,009 276,110 215,418
Population (thousands)/3/ 6,015.5 6,018.4 6,001.6 5,999.3 6,017.9 6,041.2
Per capita personal income (dollars) 21,688 22,247 22,764 23,570 24,426 25,614
Derivation of total personal income
Earnings by place of work 96,936,682 98,744,794 98,577,403 103,882,534 108,486,211 114,277,019
Less: Personal cont. for social insur./4/ 6,137,478 6,422,066 6,525,035 6,860,241 7,185,092 7,687,132
Plus: Adjustment for residence/5/ -1,893,885 -1,961,021 -2,045,339 -2,132,645 -2,296,126 -2,489,003
Equals: Net earn. by place of residence 88,905,319 90,361,707 90,007,029 94,889,648 99,004,993 104,100,884
Plus: Dividends, interest, and rent/6/ 23,656,499 23,630,183 23,952,815 22,818,390 23,529,419 24,696,803
Plus: Transfer payments 17,904,576 19,898,126 22,663,641 23,695,580 24,469,892 25,938,773
Earnings by place of work
Components of Earnings:
Wages and salaries 80,826,993 82,193,743 81,440,430 85,235,713 88,431,692 92,925,455
Other labor income 7,766,012 8,095,689 8,585,514 9,276,212 9,972,317 10,669,178
Proprietors' income/7/ 8,343,677 8,455,362 8,551,459 9,370,609 10,082,202 10,682,386
Farm proprietors' income 108,379 97,066 147,074 153,747 190,816 132,542
Nonfarm proprietors' income 8,236,298 8,358,296 8,404,385 9,216,862 9,891,386 10,549,844
Earnings by Industry:
Farm earnings 177,369 177,809 226,871 232,009 276,110 215,418
Nonfarm earnings 96,759,313 98,566,985 98,350,532 103,650,525 108,210,101 114,961,601
Private earnings: 84,801,502 86,033,070 85,749,401 90,811,253 94,666,646 99,888,654
Ag. Ser...for...and other/8/ 528,668 542,668 532,042 508,751 512,701 548,217
Mining 61,489 57,420 51,758 54,636 56,773 65,002
Construction 5,768,065 4,909,404 4,048,768 3,781,247 4,203,886 4,723,232
Manufacturing 20,231,993 19,920,200 19,771,606 20,202,906 20,173,027 20,764,633
Nondurable goods 5,804,355 5,830,709 5,869,519 6,146,542 6,378,046 6,765,204
Durable goods 14,427,638 14,089,491 13,902,087 14,056,363 13,794,981 13,999,429
Transportation and public utilities 4,775,636 5,012,580 5,123,206 5,383,127 5,562,071 5,827,207
Wholesale trade 6,785,745 6,858,146 6,711,766 7,076,266 7,156,836 7,656,880
Retail trade 9,690,859 9,421,002 9,161,811 9,478,094 9,730,590 10,262,761
Finance, insurance, and real estate 7,341,887 7,716,759 7,769,004 9,112,939 9,693,408 10,279,644
Services 29,616,879 31,594,891 32,579,440 35,213,288 37,577,354 39,761,078
Government and government enterprises 11,957,811 12,533,915 12,601,131 12,839,272 13,543,455 14,172,947
Federal, civilian 1,987,346 2,167,163 2,234,828 2,265,402 2,533,669 2,585,421
Military 481,817 495,952 520,845 521,207 488,484 437,154
State and local 9,488,648 9,870,800 9,845,458 10,052,663 10,521,302 11,150,372
- ---------------------
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
August 18, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY/1/
For Counties and Metropolitan Areas
(thousands of dollars)
<TABLE>
<CAPTION>
(25-017) MIDDLESEX MASSACHUSETTS
- -----------------------------------------------------------------------------------------------------------------------------------
ITEM 1989 1990 1991 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income by place of residence
Total personal income ($000) 35,131,356 36,170,580 36,951,613 38,639,714 40,015,178 42,090,080
Nonfarm personal income 35,103,327 36,140,861 36,918,964 38,609,384 39,980,624 42,063,409
Farm income/2/ 28,029 29,719 32,649 30,330 34,554 26,671
Population (thousands)/3/ 1,400.8 1,398.3 1,394.6 1,395.9 1,395.9 1,403.3
Per capita personal income (dollars) 25,080 25,867 26,497 27,681 28,622 29,994
Derivation of total personal income
Earnings by place of work 27,711,953 28,002,256 28,140,341 29,331,168 30,364,196 31,813,770
Less: Personal cont. for social insur./4/ 1,739,757 1,811,326 1,849,575 1,925,043 2,000,225 2,133,893
Plus: Adjustment for residence/5/ -1,117,801 -895,947 -874,376 -601,615 -430,157 -298,413
Equals: Net earn. by place of residence 24,854,395 25,294,983 25,416,390 26,804,510 27,933,814 29,381,464
Plus: Dividends, interest, and rent/6/ 6,594,837 6,782,136 6,952,776 6,936,116 6,992,423 7,340,936
Plus: Transfer payments 3,682,124 4,093,461 4,582,447 4,900,088 5,088,941 5,367,680
Earnings by place of work
Components of Earnings:
Wages and salaries 23,310,047 23,527,795 23,491,035 24,288,155 24,973,724 26,090,550
Other labor income 2,243,503 2,310,424 2,467,408 2,631,592 2,791,974 2,967,702
Proprietors' income/7/ 2,158,403 2,164,037 2,181,898 2,411,421 2,598,498 2,755,518
Farm proprietors' income 12,747 12,498 16,278 13,901 18,422 11,473
Nonfarm proprietors' income 2,145,656 2,151,539 2,165,620 2,397,520 2,580,076 2,744,046
Earnings by Industry:
Farm earnings 28,029 29,719 32,649 30,330 34,554 26,671
Nonfarm earnings 27,683,924 27,972,537 28,107,692 29,300,838 30,329,642 31,787,099
Private earnings: 25,232,633 25,376,557 25,488,505 26,676,687 27,534,666 28,952,368
Ag. Ser...for fish and other/8/ 107,180 115,615 114,147 112,417 118,913 128,287
Mining 15,345 14,541 12,989 13,997 12,485 13,345
Construction 1,501,135 1,293,370 1,076,175 1,015,073 1,111,644 1,249,676
Manufacturing 7,528,160 7,268,197 7,269,392 7,317,311 7,122,316 7,175,370
Nondurable goods 1,385,745 1,398,471 1,417,143 1,502,791 1,515,399 1,659,679
Durable goods 6,141,415 5,869,726 5,852,249 5,814,520 5,606,917 5,515,691
Transportation and public utilities 995,510 1,052,644 1,047,187 1,106,111 1,214,868 1,266,543
Wholesale trade 2,484,804 2,484,599 2,415,243 2,491,890 2,438,911 2,621,774
Retail trade 2,455,268 2,340,980 2,297,770 2,291,702 2,355,571 2,480,225
Finance, insurance, and real estate 1,005,625 1,018,746 1,033,980 1,285,371 1,345,626 1,430,154
Services 9,139,606 9,787,865 10,221,622 11,042,815 11,814,332 12,586,994
Government and government enterprises 2,451,291 2,595,980 2,619,187 2,624,151 2,794,976 2,834,731
Federal, civilian 448,609 464,841 527,038 522,541 645,111 644,798
Military 247,824 248,502 264,747 264,628 228,651 189,384
State and local 1,754,858 1,882,637 1,827,402 1,836,982 1,921,214 2,000,549
- ---------------------
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes for Table CADS
1/ 1969-74 BASED ON 1967 SIC. 1975-87 BASED ON 1972 SIC. 1988-94 BASED ON 1987
SIC.
2/ Farm income consists of proprietors' net farm income, the wages of hired
farm labor, the pay-in-kind of hired farm labor, and the salaries of
officers of corporate farms.
3/ Census Bureau midyear population estimates. Estimates for 1990-94 reflect
county population estimates available as of October 1996.
4/ Personal contributions for social insurance are included in earnings by type
and industry but excluded from personal income.
5/ U.S. adjustment for residence consists of adjustments for border workers;
income of U.S. residents commuting outside U.S. borders to work less income
of foreign residents commuting inside U.S. borders to work plus certain
Caribbean seasonal workers.
6/ Includes the capital consumption adjustment for rental income of persons.
7/ Includes the inventory valuation and capital consumption adjustments.
8/ "Other" consists of wages and salaries of U.S. residents employed by
international organizations and foreign embassies and consulates in the U.S.
13/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census: those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area into Aleutians East Borough and
Aleutians West Census Area. Denali and Lake + Peninsula Boroughs begin in
1991. Estimates from 1993 forward separate Skagway-Yakutat-Angoon Census
Area into Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
14/ Cibola. NM was separated from Valencia in June 1981, but in these estimates,
Valencia includes Cibola through the end of 1981.
15/ La Paz county, AZ was separated from Yuma county on January 1, 1983.
E The estimate shown here constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information.
(L) Less than $50,000. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
August 18, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY/1/
For Counties and Metropolitan Areas
(number of jobs)
(25-000) MASSACHUSETTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Employment by Place of Work
Total full- & part-time employment 3,717,433 3,612,433 3,438,111 3,409,452 3,461,906 3,532,259
By type:
Wage and salary employment 3,280,393 3,160,333 2,987,389 2,964,158 3,012,636 3,074,350
Proprietors' employment 437,040 452,100 450,722 446,294 449,270 467,909
Farm proprietors' employment 6,699 6,678 6,636 6,672 6,241 5,954
Nonfarm proprietors' employment/2/ 430,341 446,422 444,086 438,622 443,029 451,955
By Industry:
Farm employment 12,834 12,993 12,690 12,508 12,429 12,280
Nonfarm employment 3,704,599 3,599,440 3,425,421 3,396,944 3,449,477 3,519,979
Private employment 3,250,171 3,148,562 2,988,678 2,968,359 3,017,124 3,091,048
Ag.serv..for..fish.. and other/3/ 29,150 29,778 26,774 24,976 27,136 28,494
Mining 2,842 2,676 2,357 2,198 2,327 2,448
Construction 187,106 156,005 128,682 122,878 129,407 138,114
Manufacturing 573,149 533,203 496,690 477,732 466,821 462,847
Transportation and public utilities 141,975 144,033 137,771 134,280 138,266 142,656
Wholesale trade 190,807 181,644 171,510 170,299 166,662 172,827
Retail trade 623,923 593,419 556,298 554,380 561,577 578,805
Finance, insurance, and real estate 306,631 295,778 279,510 269,795 274,662 282,197
Services 1,194,588 1,214,026 1,189,086 1,211,821 1,250,247 1,282,660
Government and government enterprises 454,428 450,878 436,743 428,585 432,353 428,931
Federal, civilian 62,480 64,151 60,971 60,045 60,401 59,835
Military 40,843 39,808 39,994 38,820 36,107 31,093
State and local 351,105 346,919 336,778 329,720 335,845 338,003
</TABLE>
See footnotes at end of table REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
<TABLE>
<CAPTION>
August 18, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY /1/
For Counties and Metropolitan Areas
(number of jobs)
(25-017) MIDDLESEX MASSACHUSETTS
- ----------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Employment by Place of Work
Total full- & part-time employment 975,051 946,894 906,434 891,757 892,594 905,636
By Type:
Wage and salary employment 861,323 829,049 787,710 773,737 773,754 784,536
Proprietors' employment 113,728 117,845 118,724 118,020 118,840 121,100
Farm proprietors' employment 598 594 591 595 557 531
Nonfarm proprietors' employment /2/ 113,130 117,251 118,133 117,425 118,283 120,569
By Industry:
Farm employment 1,813 1,757 1,643 1,710 1,640 1,599
Nonfarm employment 973,238 945,137 904,791 890,047 890,954 904,037
Private employment 879,220 850,920 813,879 801,680 803,797 819,157
Ag. serv.. for.. fish.. and other /3/ 5,281 5,126 4,870 4,542 5,007 5,254
Mining 772 723 675 608 609 593
Construction 45,404 38,266 31,858 30,822 32,139 34,601
Manufacturing 184,437 168,936 156,532 146,813 138,941 135,316
Transportation and public utilities 29,120 29,999 28,548 27,964 29,748 30,872
Wholesale trade 62,699 58,831 54,646 53,596 50,282 52,202
Retail trade 144,545 135,503 128,151 124,546 125,579 128,470
Finance, insurance, and real estate 58,603 55,480 52,009 49,286 50,674 52,230
Services 348,359 358,056 356,591 363,504 370,818 379,619
Government and government enterprises 94,018 94,217 90,912 88,367 87,157 84,880
Federal, civilian 15,213 15,477 16,127 15,869 15,577 15,288
Military 16,183 14,353 13,897 13,246 11,613 9,568
State and local 63,622 64,387 60,888 59,252 59,967 60,024
See footnotes at end of table. June 1996 REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes for Table CA25
/1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-94 based on 1987
SIC.
/2/ Excludes limited partners.
/3/ "Other" consists of the number of jobs held by U.S. residents employed by
international organizations and foreign embassies and consulates in the
United States.
/4/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
/5/ La Paz county, AZ was separated from Yuma county on January 1, 1983.
/6/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census: those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area into Aleutians East Bor. and Aleutians
West Census Area. Denali and Lake + Pennisula Boroughs begin in 1991.
Estimates from 1993 forward separate Skagway-Yakutat-Angoon Census Area
into Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
E Estimate shown constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
<TABLE>
<CAPTION>
August 18, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(25-000) MASSACHUSETTS
- ----------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 130,466,394 133,890,016 136,623,485 141,403,618 146,994,304 154,736,460
Nonfarm personal income 130,289,025 133,712,207 136,396,614 141,171,609 146,718,194 154,521,042
Far income 177,369 177,809 226,871 232,009 276,110 215,418
Derivation of Total Personal Income
Net earnings/1/ 88,905,319 90,361,707 90,007,029 94,889,648 99,004,993 104,100,884
Transfer payments 17,904,576 19,898,126 222,663,641 23,695,580 24,469,892 25,938,773
Income maintenance/2/ 1,510,488 1,625,254 1,748,599 1,951,971 2,023,756 2,052,764
Unemployment insurance 766,447 1,126,369 1,352,527 1,706,860 1,210,817 868,862
Retirement and other 15,627,641 17,146,476 19,562,515 20,036,759 21,225,319 23,017,147
Dividends, interests,
and rent 23,656,499 23,630,183 23,952,715 22,818,390 23,529,419 24,696,803
Population (thousands)/3/ 6,015.5 6,018.4 6,001.6 5,999.3 6,017.9 6,041.2
Per Capita Incomes ($)/4/
Per capita personal income 21,688 22,247 22,764 23,570 24,428 25,614
Per capita net earnings 14,779 15,014 14,997 15,817 16,452 17,232
Per capita transfer payments 2,976 3,306 3,776 3,950 4,065 4,294
Per capita income
maintenance 251 270 291 325 336 340
Per capita unemployment
insurance 127 187 225 285 201 144
Per capita retirement & other 2,598 2,849 3,260 3,340 3,527 3,810
Per capita dividends, interest,
& rent 3,933 3,926 3,991 3,804 3,910 4,088
Place of Work Profile
Total earnings (place of
work $000) 96,936,682 98,774,794 98,577,403 103,882,534 108,486,211 114,277,019
Wages and salaries 80,826,993 82,193,743 81,440,430 85,235,713 88,431,692 92,925,455
Other labor income 7,766,012 8,095,689 8,585,514 9,276,212 9,972,317 10,669,178
Proprietors' income 8,343,677 8,455,362 8,551,469 9,370,609 10,082,202 10,682,386
Nonfarm proprietors'
income 8,235,298 8,358,296 8,404,385 9,216,862 9,891,386 10,549,844
Farm proprietors'
income 108,376 97,066 147,074 153,747 190,816 132,542
Total employment (full &
part-time) 3,717,433 3,612,433 3,438,111 3,409,452 3,461,906 3,532,259
Wage and salary jobs 3,280,393 3,160,333 2,987,389 2,964,158 3,012,636 3,074,350
Number of proprietors 437,040 452,100 450,722 445,294 449,270 457,909
Number of nonfarm
proprietors/5/ 430,341 445,422 444,086 438,622 443,029 451,955
Number of farm proprietors 6,699 6,678 6,636 6,672 6,241 5,954
Average earnings per job ($) 26,076 27,335 28,672 30,469 31,337 32,352
Wage & salary earnings
per job ($) 24,639 26,008 27,261 28,755 29,354 30,226
Average earnings per nonfarm
proprietor ($) 19,137 18,765 18,925 21,013 22,327 23,343
See footnotes at end of table. June 1996 REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
August 18, 1997
Regional Economic Profile
For Counties and Metropolitan Areas
<TABLE>
<CAPTION>
(25-017) MIDDLESEX MASSACHUSETTS
- -----------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 35,131,356 36,170,580 36,951,613 38,639,714 40,015,178 42,090,080
Nonfarm personal income 35,103,327 36,140,861 36,918,964 38,609,384 39,980,624 42,063,409
Farm income 28,029 29,719 32,649 30,330 34,554 26,671
Derivation of Total Personal Income
Net earnings 1/ 24,854,395 25,294,983 25,416,390 26,804,510 27,933,814 29,381,464
Transfer payments 3,682,124 4,093,461 4,582,447 4,900,088 5,088,941 5,367,680
Income maintenance 2/ 222,575 237,931 258,952 289,447 303,509 309,269
Unemployment insurance 155,074 227,457 273,932 359,529 248,747 177,584
Retirement and other 3,304,475 3,628,073 4,049,563 4,251,112 4,536,685 4,880,827
Dividends, interest and rent 6,594,837 6,782,136 6,952,776 6,935,116 6,992,423 7,340,936
Population (thousands) 3/ 1,400.8 1,398.3 1,394.6 1,395.9 1,398.0 1,403.3
Per Capita Incomes (s) 4/
Per capita personal income 25,080 25,867 26,497 27,681 28,622 29,994
Per capita net earnings 17,743 18,090 18,225 19,202 19,981 20,937
Per capita transfer payments 2,629 2,927 3,286 3,510 3,640 3,825
Per capita income maintenance 159 170 186 207 217 220
Per capita unemployment insurance 111 163 196 258 178 127
Per capita retirement & other 2,359 2,595 2,904 3,045 3,245 3,478
Per capita dividends, interest & rent 4,708 4,850 4,986 4,968 5,002 5,231
Place of Work Profile
Total earnings (place of work $000) 27,711,953 28,002,256 28,140,341 29,331,168 30,364,196 31,813,770
Wages and salaries 23,310,047 23,527,795 23,491,035 24,288,155 24,973,724 26,090,650
Other labor income 2,243,50 2,310,424 2,467,408 2,631,592 2,791,974 2,967,702
Proprietors income 2,158,403 2,164,037 2,181,898 2,411,421 2,598,498 2,744,045
Nonfarm proprietors' inco 2,145,656 2,151,539 2,165,620 2,397,520 2,580,076 2,744,045
Farm proprietors' income 12,747 12,498 16,278 13,901 18,422 11,473
Total employment (full & part-time) 975,051 946,894 906,434 891,757 892,594 905,636
Wage and salary jobs 861,323 829,049 787,710 773,737 773,754 784,536
Number of proprietors 113,728 117,845 118,724 118,020 118,840 121,100
Number of nonfarm proprietors /5 113,130 117,251 118,133 117,425 118,283 120,569
Number of farm proprietors 598 594 591 595 557 531
Average earnings per job ($) 28,421 29,573 31,045 32,891 34,018 35,129
Wage & salary earnings per job ($) 27,063 28,379 29,822 31,391 32,276 33,256
Average earnings per nonfarm proprietor ($) 18,966 18,350 18,332 20,417 21,813 22,759
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
Footnotes for Table CA30
1/ Total earnings less personal contributions for social insurance adjusted to
place of residence.
2/ Includes supplemental security income payments, payments to families with
dependent children (AFDC), general assistance payments, food stamp payments,
and other assistance payments, including emergency assistance.
3/ Census Bureau midyear population estimates. Estimates for 1990-94 reflect
county population estimates available as of October 1995.
4/ Type of income divided by population yields a per capita for that type of
income.
5/ Excludes limited partners.
6/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
7/ La Paz county, AZ was separated from Yuma county on January 1, 1983.
8/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area Into Aleutians East Bor. and Aleutians
West Census Area. Denali and Lake + Peninsula Boroughs begin in 1991.
Estimates from 1993 forward separate Skagway-Yakutat-Angoon Census Area into
Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
(l) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
____________________
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 47,532 391 12-31 10/72 49.87 4,854
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,095 246 12-31 05/59 78.94 4,479
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,218 154 06-30 10/83 28.63 1,440
CSA Coast Savings Financial of CA NYSE California R.E. 9,103 92 12-31 12/85 45.19 841
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,886 82 12-31 01/71 21.69 580
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,193 25 12-31 12/83 33.75 357
WES Westcorp Inc. of Orange CA NYSE California Div. 3,678 26 12-31 05/86 19.87 520
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,534 33 12-31 / 11.50 222
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,096 45 12-31 05/86 25.50 331
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,631 23 03-31 03/96 19.62 367
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,295 18 12-31 10/91 34.00 195
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 2,238 13 12-31 / 24.75 240
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,191 36 12-31 / 39.31 236
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 984 M 19 06-30 06/95 14.87 93
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 909 M 14 12-31 04/94 15.75 113
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 838 M 6 12-31 / 15.63 41
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 810 M 9 12-31 / 17.50 137
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 781 M 8 06-30 12/93 20.50 96
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 615 9 06-30 06/96 19.62 97
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 504 8 12-31 / 27.25 63
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 422 M 7 12-31 02/95 16.37 53
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 15.12 35
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 371 3 12-31 / 15.37 45
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 119 M 3 12-31 01/96 10.50 9
PAMM PacificAmerica Money Ctr of CA (3) OTC Los Angeles CA Div. 112 M 1 12-31 06/96 25.00 48
Florida Companies
_________________
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,730 56 12-31 11/83 15.87 285
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,649 M 1 12-31 / 42.87 1,149
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Florida Companies (continued)
_____________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BKUNA BankUnited SA of FL OTC Miami FL Thrift 1,807 14 09-30 12/85 11.62 103
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,558 M 40 09-30 09/93 32.75 165
HARB Harbor FSB, MHC of FL (46.0) OTC Eastern FL Thrift 1,117 23 09-30 01/94 45.75 227
FFFL Fidelity FSB, MHC of FL (47.4) OTC Southeast FL Thrift 927 M 20 12-31 01/94 24.00 162
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 682 M 19 12-31 10/94 25.62 130
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 387 9 12-31 01/94 29.00 67
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 320 M 11 12-31 10/88 5.44 46
Mid-Atlantic Companies
______________________
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 20,087 87 12-31 08/86 19.37 2,009
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,300 82 06-30 01/94 64.00 2,883
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 10,898 120 12-31 08/86 14.87 1,041
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 7,665 46 12-31 11/93 46.50 975
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,909 36 09-30 04/94 38.59 925
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,032 M 34 11-30 04/86 47.75 697
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY, MA Thrift 3,602 71 06-30 04/92 38.13 489
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,552 15 12-31 06/93 26.63 469
NYB New York Bancorp, Inc. of NY AMEX Southeastern NY Thrift 3,284 29 09-30 01/88 30.87 667
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,159 6 12-31 01/97 23.87 1,042
GRTR The Greater New York SB of NY (3) OTC New York NY Div. 2,571 M 14 12-31 06/87 21.94 301
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 2,567 15 12-31 03/90 27.25 338
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,289 39 06-30 06/96 17.50 299
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,071 18 03-31 08/94 20.25 214
HARS Harris SB, MHC of PA (24.2) OTC Southeast PA Thrift 2,044 31 12-31 01/94 26.00 292
NWSB Northwest SB, MHC of PA (29.9) OTC Pennsylvania Thrift 1,997 M 53 06-30 11/94 18.75 438
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 1,927 M 28 06-30 03/94 29.87 262
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,782 20 12-31 09/93 37.00 162
JSB JSB Financial, Inc. of NY AMEX New York City NY Thrift 1,531 M 13 12-31 06/90 44.13 434
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,509 16 12-31 11/86 14.25 177
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,467 13 12-31 11/93 51.44 524
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,448 10 12-31 07/96 33.75 290
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
__________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,322 17 06-30 07/94 29.50 142
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,315 15 06-30 06/96 19.00 249
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,162 22 06-30 02/84 25.50 179
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 25 02-28 06/87 45.87 147
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,033 16 12-31 07/92 27.75 202
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 991 28 06-30 07/87 29.25 119
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 880 13 12-31 11/85 7.63 96
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 879 17 12-31 08/84 30.50 117
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 860 7 12-31 11/95 20.69 165
MBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 811 M 17 09-30 08/92 24.19 69
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 750 13 12-31 03/96 17.25 138
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 740 M 10 09-30 10/94 16.87 186
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 714 7 12-31 06/95 16.37 107
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 706 M 9 12-31 06/90 16.00 85
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 692 15 12-31 12/86 34.00 100
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 673 16 12-31 10/95 18.87 89
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 641 14 06-30 07/94 19.25 79
TSBS Trenton SB, FSB MHC of NJ(35.0 OTC Central NJ Thrift 631 14 12-31 08/95 28.13 254
FSNJ First SB of NJ, MHC (45.9) OTC Northern NJ Thrift 579 D 4 03-31 01/95 32.50 100
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 555 18 12-31 12/88 26.00 62
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 522 10 12-31 04/87 20.00 54
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 520 4 09-30 09/86 20.62 63
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 505 M 10 07-31 10/95 19.87 72
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 482 M 8 07-31 12/93 33.00 76
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 478 M 9 12-31 12/95 15.75 69
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 419 9 12-31 07/83 13.25 51
CNY Carver Bancorp, Inc. of NY OTC New York, NY Thrift 414 8 03-31 10/94 12.62 29
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 411 4 12-31 04/93 27.75 57
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 379 6 12-31 03/87 22.87 55
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 371 8 12-31 11/89 21.75 62
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 363 8 09-30 06/88 21.25 33
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 357 9 12-31 01/95 21.25 50
HARL Harleysville SA of PA OTC Southeastern PA Thrift 337 4 09-30 08/87 25.00 41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
__________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 321 5 09-30 01/95 27.12 33
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 305 M 6 06-30 03/87 21.75 45
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 300 6 12-31 01/96 17.37 48
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 296 M 4 09-30 09/93 37.50 23
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 295 5 06-30 11/93 27.25 48
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 288 4 09-30 04/96 16.75 51
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 19.25 58
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 284 3 09-30 04/96 16.31 77
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 282 5 09-30 08/94 20.62 36
LFED Leeds FSB, MHC of MD (36.2) OTC Baltimore MD Thrift 282 M 1 06-30 05/94 22.00 76
IFSB Independence FSB of DC OTC Washington DC Ret. 263 M 2 12-31 06/85 13.50 17
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 261 0 12-31 06/96 22.00 47
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 258 M 4 07-31 / 7.00 30
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 256 6 09-30 04/96 18.37 36
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 244 7 12-31 03/95 16.25 53
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 229 P 9 12-31 07/97 14.75 41
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Ret. 228 6 12-31 03/85 23.50 17
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 217 4 04-30 11/94 18.50 33
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 216 9 03-31 08/94 19.12 32
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 209 M 6 06-30 02/87 21.50 31
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 183 3 06-30 12/95 16.25 52
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 177 6 12-31 04/97 14.37 30
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 173 3 12-31 06/95 19.25 24
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 150 P 3 03-31 04/97 13.50 31
PRBC Prestige Bancorp of PA OTC Thrift 136 0 12-31 06/96 16.50 15
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 120 S 1 03-31 10/95 17.50 26
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 114 P 2 09-30 07/97 14.66 33
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 111 2 03-31 06/96 23.25 15
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 104 M 2 06-30 01/97 15.37 17
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 5 09-30 04/96 15.12 22
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 66 M 2 09-30 07/93 24.25 6
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 M 3 12-31 07/96 15.50 9
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COFI Charter One Financial of OH OTC OH,MI Div. 14,565 155 12-31 01/88 53.06 2,451
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,097 107 06-30 12/84 40.56 874
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,931 129 12-31 12/80 31.37 1,136
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,611 52 12-31 05/87 23.12 786
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,647 M 42 06-30 01/94 100.25 923
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,236 M 20 12-31 01/90 31.50 485
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,098 33 03-31 01/92 45.00 389
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 3,046 45 12-31 03/94 33.25 459
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,575 14 12-31 08/94 25.25 409
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,926 33 03-31 07/92 53.00 240
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,646 13 09-30 06/93 34.75 184
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,609 37 12-31 02/85 19.00 156
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,530 M 44 12-31 11/89 24.25 222
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,521 28 12-31 08/83 20.75 219
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 1,519 M 15 12/31 / 19.25 263
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,404 14 09-30 07/92 31.37 168
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,297 M 32 12-31 04/93 30.75 153
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,020 15 09-30 03/92 44.25 143
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 861 26 12-31 08/94 25.50 125
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 845 17 12-31 06/90 26.00 132
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 708 25 06-30 12/89 16.87 137
NASB North American SB of MO OTC KS,MO M.B. 689 M 7 09-30 09/85 51.00 115
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 683 16 06-30 01/88 31.00 105
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 673 22 12-31 07/92 10.50 45
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 638 20 12-31 12/83 26.87 119
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 635 M 13 03-31 01/88 16.50 83
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 607 5 12-31 04/95 14.50 51
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 603 13 12-31 / 14.00 71
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 599 10 06-30 06/93 28.13 117
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 567 7 12-31 06/94 24.87 105
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 562 19 06-30 04/92 22.37 67
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 552 9 06-30 10/95 15.12 141
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 535 12 12-31 05/96 21.12 103
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 525 4 12-31 03/96 16.12 90
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 497 5 06-30 02/92 40.50 85
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Mid-West Companies (continued)
______________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 490 5 09-30 12/93 21.50 60
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 472 M 7 12-31 / 18.50 59
FFSX First FS&LA. MHC of IA (46.0) OTC Western IA Thrift 469 13 06-30 07/92 25.00 71
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 447 3 06-30 / 11.50 37
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 433 12 03-31 04/94 24.75 50
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 12 12-31 03/92 27.00 34
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 418 12 12-31 07/95 16.12 57
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 410 3 06-30 01/94 22.50 32
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 409 9 09-30 06/94 30.25 59
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 400 M 6 12-31 07/94 24.00 55
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 398 8 12-31 03/87 18.37 59
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 397 5 12-31 03/94 20.25 38
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 393 8 09-30 12/95 21.25 88
PFSL Pocahnts Fed, MHC of AR (46.4) OTC Northeast AR Thrift 379 6 09-30 04/94 23.50 38
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 378 6 12-31 06/92 20.87 55
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 378 11 09-30 10/94 18.12 55
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 377 8 06-30 07/87 22.25 93
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 370 M 12 09-30 09/93 17.37 47
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 356 M 9 06-30 12/92 21.00 54
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 353 5 12-31 09/96 17.50 120
INBI Industrial Bancorp of OH OTC Northern OH Thrift 347 10 12-31 08/95 14.50 77
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 346 10 12-31 03/85 26.50 51
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 342 9 12-31 01/93 29.87 43
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 9 09-30 03/95 21.37 54
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 332 9 12-31 06/90 16.00 27
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 329 8 12-31 07/94 38.00 57
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 4 09-30 08/88 16.00 32
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 312 1 12-31 06/92 26.25 65
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 288 6 09-30 07/87 25.87 59
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 287 6 06-30 11/90 24.50 28
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 272 6 12-31 05/96 16.75 43
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 271 M 6 03-31 09/93 27.00 67
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 270 1 06-30 04/87 36.00 25
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Mid-West Companies (continued)
______________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 257 M 5 09-30 10/94 19.50 39
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 252 M 6 03-31 06/93 17.75 40
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 250 M 4 06-30 08/87 9.25 23
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 243 7 06-30 12/93 16.00 30
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 235 2 06-30 06/93 23.50 31
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 234 M 4 09-30 03/94 20.75 35
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 230 M 4 12-31 02/93 23.25 28
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 5 09-30 03/94 21.50 37
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 227 7 12-31 01/88 20.00 24
FFFD North Central Bancshares of IA OTC Central IA Thrift 213 4 12-31 03/96 16.50 54
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 212 M 3 07-31 12/96 16.75 42
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 208 3 09-30 04/95 17.25 45
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 202 7 12-31 04/95 16.50 32
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 201 6 09-30 06/92 18.25 29
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 201 M 9 12-31 07/92 22.25 36
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 200 2 09-30 10/94 13.87 32
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 200 4 06-30 04/95 18.75 59
HCBB HCB Bancshares of AR OTC Southern AR Thrift 199 P 6 06-30 05/97 14.00 37
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 188 M 4 12-31 02/95 20.50 19
PULB Pulaski SB, MHC of MO (29.0) OTC St. Louis MO Thrift 178 M 5 09-30 05/94 21.00 44
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 176 3 12-31 08/96 16.75 41
EGLB Eagle BancGroup of IL OTC Central IL Thrift 174 3 12-31 07/96 16.62 21
MARN Marion Capital Holdings of IN OTC Central IN Thrift 173 2 06-30 03/93 23.50 42
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 173 M 3 12-31 06/95 16.75 30
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 166 M 8 06-30 04/94 17.25 28
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 165 3 12-31 04/97 15.50 32
FFWD Wood Bancorp of OH OTC Northern OH Thrift 164 6 06-30 08/93 16.50 35
JXSB Jcksnville SB,MHC of IL (44.6) OTC Central IL Thrift 164 M 4 12-31 04/95 17.62 22
FBSI First Bancshares of MO OTC Southcentral MO Thrift 160 M 6 06-30 12/93 24.00 28
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 158 M 3 06-30 04/93 28.00 20
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 156 3 06-30 03/95 15.00 26
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 150 M 2 06-30 04/95 23.50 34
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 147 4 12-31 11/92 34.50 12
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Mid-West Companies (continued)
______________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 138 M 3 12-31 12/96 16.75 20
GTPS Great American Bancorp of IL OTC East Central IL Thrift 137 3 12-31 06/95 17.37 31
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 135 2 12-31 09/96 15.37 43
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 132 M 3 03-31 12/95 14.50 19
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 128 M 3 06-30 07/95 9.38 32
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 128 3 09-30 03/94 16.75 24
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 124 M 6 09-30 10/92 9.62 16
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 121 4 12-31 12/93 24.25 12
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 120 2 12-31 12/93 22.00 22
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 111 2 09-30 10/93 12.75 13
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 109 M 1 06-30 04/95 12.37 21
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 2 09-30 10/95 15.00 30
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 108 P 2 06-30 04/97 16.50 29
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 108 3 03-31 09/95 16.50 14
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 108 M 5 09-30 04/95 21.75 15
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 107 1 09-30 11/96 15.87 32
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 104 P 4 06-30 07/97 11.75 19
FTNB Fulton Bancorp of MO OTC Central MO Thrift 99 M 2 06-30 10/96 20.00 34
CNSB CNS Bancorp of MO OTC Central MO Thrift 98 M 5 12-31 06/96 17.12 28
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 97 M 3 06-30 02/95 15.00 14
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 97 2 09-30 06/95 10.50 16
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 15.75 13
CBES CBES Bancorp of MO OTC Western MO Thrift 95 M 2 06-30 09/96 17.87 18
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 1 12-31 08/94 16.50 35
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 94 4 12-31 04/96 15.00 14
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 91 M 3 06-30 12/94 15.25 14
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 91 M 4 06-30 08/95 16.25 13
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 90 M 2 09-30 09/96 17.25 26
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 89 M 2 06-30 08/95 12.62 17
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 88 M 1 06-30 01/94 13.37 13
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 86 3 06-30 06/94 18.87 8
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 86 2 06-30 01/94 21.50 17
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 85 M 1 06-30 04/96 15.50 23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
Mid-West Companies (continued)
______________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 85 2 12-31 10/93 18.25 8
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 83 1 12-31 06/95 14.00 18
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 83 M 3 09-30 10/94 11.75 11
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 83 1 12-31 11/96 14.62 32
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 80 M 1 09-30 02/95 20.50 17
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 79 M 3 06-30 03/95 16.25 12
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 75 2 06-30 02/95 15.00 19
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 71 M 2 06-30 03/95 12.62 7
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 1 09-30 03/95 15.63 13
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 68 M 1 06-30 12/96 15.12 14
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 64 2 12-31 01/95 17.62 19
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 61 1 12-31 01/95 20.00 19
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 2 09-30 06/95 18.50 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 1 09-30 06/96 16.62 19
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 57 2 09-30 03/97 14.12 19
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 48 M 2 09-30 10/95 12.50 12
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 M 1 June 04/96 8.50 21
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 45 2 09-30 02/95 21.00 7
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 40 M 1 06-30 07/96 15.25 15
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 39 M 1 06-30 07/96 15.12 7
LONF London Financial Corp. of OH OTC Central OH Thrift 38 M 1 09-30 04/96 15.25 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 36 M 1 03-31 12/95 15.00 11
New England Companies
_____________________
PBCT Peoples Bank, MHC of CT (37.4) (3) OTC Southwestern CT Div. 7,870 97 12-31 07/88 26.75 1,633
WBST Webster Financial Corp. of CT OTC Central CT Thrift 5,944 77 12-31 12/86 50.00 599
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 5,591 132 12-31 12/86 38.19 1,045
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,013 19 09-30 02/87 32.75 206
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 1,859 43 12-31 02/87 18.87 248
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,435 24 12-31 02/95 30.00 167
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,251 12 12-31 05/86 29.87 154
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
New England Companies (continued)
_________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,245 15 12-31 08/87 16.50 124
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,090 11 12-31 10/95 25.00 162
MDBK Medford Bank of Medford MA (3) OTC Eastern MA Thrift 1,073 16 12-31 03/86 30.00 136
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,021 12 03-31 01/97 18.94 165
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 984 12 12-31 06/87 31.87 85
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 941 M 10 12-31 10/95 19.50 116
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 905 14 12-31 05/86 52.75 141
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 874 11 12-31 07/86 26.50 136
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 824 14 12-31 06/96 21.62 114
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 713 19 12-31 11/86 24.50 133
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 33.25 80
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 616 11 12-31 05/86 39.37 98
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 606 15 12-31 12/81 37.75 87
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 566 11 12-31 10/86 6.50 91
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 549 M 14 12-31 10/86 16.25 58
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 515 5 12-31 07/86 4.00 67
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 501 7 12-31 06/86 29.25 54
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 475 M 11 12-31 07/86 33.50 64
PETE Primary Bank of NH (3) OTC Southern NH Thrift 432 9 12-31 10/93 25.75 54
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 428 3 12-31 07/86 30.00 76
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 425 8 12-31 09/86 21.00 47
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 366 5 12-31 05/86 11.12 48
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 358 6 12-31 07/86 17.87 68
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 323 13 06-30 02/86 13.00 50
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 321 M 8 03-31 10/86 19.50 38
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 313 M 10 12-31 05/86 16.75 34
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 259 3 12-31 02/88 17.19 102
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 248 M 8 06-30 08/87 14.75 19
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 238 7 12-31 12/86 15.50 24
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 218 5 12-31 12/88 23.06 30
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 199 2 12-31 08/88 20.62 38
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 189 5 12-31 05/93 23.50 28
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 187 5 12-31 11/86 4.94 32
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
New England Companies (continued)
_________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 152 7 12-31 / 10.62 14
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 149 P 4 09-30 10/96 15.87 23
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 140 M 8 12-31 06/93 13.00 16
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 125 M 4 04-30 12/87 18.62 17
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 94 2 09-30 03/96 17.00 25
NTMG Nutmeg FS&LA of CT OTC CT M.B. 94 M 3 12-31 / 11.00 8
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 60 2 03-31 11/89 25.00 6
North-West Companies
____________________
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 48,764 290 12-31 03/83 62.37 7,881
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,760 89 09-30 11/82 26.62 1,263
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,833 31 12-31 / 39.75 319
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,686 41 06-30 / 17.75 99
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,008 M 16 03-31 11/95 24.50 258
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 728 7 09-30 10/95 19.31 193
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 519 12 03-31 08/86 15.00 111
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 432 6 12-31 12/85 21.75 59
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 352 M 6 06-30 08/92 14.75 38
RVSB Rvrview SB,FSB MHC of WA(41.7) OTC Southwest WA M.B. 230 9 03-31 10/93 27.00 65
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 154 P 5 03-31 07/97 18.25 36
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 15.25 40
South-East Companies
____________________
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,667 32 09-30 11/83 31.25 199
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,488 20 12-31 10/94 24.75 244
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,353 63 06-30 03/91 25.25 347
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,248 M 31 9-30 12/83 22.50 174
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 939 M 25 12-31 04/95 24.50 169
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 895 8 06-30 12/95 16.00 275
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
South-East Companies (continued)
________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 817 M 23 06-30 01/78 24.00 139
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 710 15 12-31 08/92 50.75 84
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 666 D 10 03-31 04/86 16.87 77
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 665 19 12-31 12/85 15.87 84
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 618 12 12-31 11/80 13.62 68
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 559 11 12-31 10/94 29.25 132
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 503 9 09-30 09/90 24.87 115
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 465 P 5 06-30 07/97 35.75 158
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 407 P 12 12-31 07/97 34.19 83
TSH Teche Holding Company of LA AMEX Southern LA Thrift 394 M 9 09-30 04/95 18.75 64
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 352 17 03-31 08/91 24.50 37
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 335 M 11 06-30 10/93 14.00 61
FSTC First Citizens Corp of GA OTC Western GA M.B. 326 M 9 03-31 03/86 30.00 55
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 294 5 06-30 01/94 20.50 75
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 276 9 12-31 07/80 12.00 37
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 262 M 4 12-31 07/96 21.62 59
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 242 2 09-30 10/96 19.25 87
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 228 8 12-31 / 40.50 31
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 223 D 5 09-30 10/96 39.00 59
FLAG Flag Financial Corp of GA OTC Western GA M.B. 222 M 4 12-31 12/86 14.25 29
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 206 M 1 09-30 03/96 18.37 85
ESX Essex Bancorp of VA AMEX VA,NC M.B. 190 12 12-31 / 2.00 2
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 175 3 03-31 03/88 21.75 28
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 175 3 09-30 04/96 17.50 75
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 171 5 09-30 07/95 22.50 40
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 9 09-30 02/87 7.25 22
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 135 3 09-30 08/94 24.75 28
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 129 M 3 06-30 07/93 24.00 37
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 123 3 12-31 04/97 15.75 54
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 123 2 06-30 12/95 11.00 30
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 109 M 4 06-30 11/96 17.37 32
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 20.00 17
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 106 3 12-31 12/93 18.50 16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
South-East Companies (continued)
________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 106 2 12-31 04/96 21.50 41
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 M 4 06-30 10/95 15.50 19
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 101 4 12-31 07/95 16.50 14
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 100 M 1 06-30 12/96 79.00 32
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 93 M 2 09-30 02/95 16.37 13
SFNB Security First Netwrk Bk of GA OTC GA (Internet) Div. 80 M 1 12-31 / 11.62 98
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 70 M 1 09-30 12/96 15.50 18
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 2 09-30 04/96 17.00 33
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 M 1 06-30 07/94 21.06 15
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 33 1 12-31 07/96 16.75 16
South-West Companies
____________________
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,964 40 12-31 / 29.75 148
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 31.75 26
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 226 6 09-30 04/96 17.00 42
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 177 7 03-31 11/91 16.53 19
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 113 2 09-30 01/95 19.25 20
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 105 3 12-31 08/86 6.62 8
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 87 M 1 06-30 06/95 19.00 16
Western Companies (Excl CA)
___________________________
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,510 M 26 12-31 01/96 17.50 290
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 956 35 06-30 01/94 21.75 121
GBCI Glacier Bancorp of MT OTC Western MT Div. 568 16 12-31 03/84 18.50 126
UBMT United Fin. Corp. of MT OTC Central MT Thrift 108 M 4 12-31 09/86 23.50 29
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 89 2 12-31 09/93 22.75 14
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 54 1 09-30 03/96 14.12 13
</TABLE>
<PAGE>
RP FINANCIAL, LC.
__________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 26, 1997(1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
______ ___________________________________ ______ _________________ ________ ______ _______ ____ _____ ______ ______
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 08/26/97
<PAGE>
EXHIBIT III-2
New England Peer Institutions
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1706 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
---------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ------------------------------------
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ------ ------ ----- ------ ----- ------ ------
($) ($MIL) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Special Selection Grouping(8) 20.34 53.06 1.47 13.17 13.17 155.22 14.05 161.26 15.04
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
BKCT Bancorp Connecticut of CT 30.00 76.02 2.03 17.32 13.95 173.21 17.75 173.21 14.78
CEBK Central Co-Op, Bank of MA 19.50 38.32 1.46 17.07 13.54 114.24 11.94 128.29 13.36
- -----------------------------------------------------------------------------------------------------------
EIRE Emerald Island Bancorp, MA 21.00 47.17 1.60 13.39 13.82 156.83 11.10 156.83 13.13
- -----------------------------------------------------------------------------------------------------------
LSBX Lawrence Savings Bank of MA 11.12 47.53 1.38 7.45 7.94 149.26 12.97 146.26 8.06
NHTB NH Thrift Bancshares of NH 16.75 34.19 0.65 11.47 NM 146.03 10.92 172.33 25.77
- -----------------------------------------------------------------------------------------------------------
NHSB Newmil Bancorp. of CT 13.00 49.84 0.65 8.27 19.12 157.19 15.43 157.19 20.00
- -----------------------------------------------------------------------------------------------------------
POBS Portsmouth Bank Shrs Inc
of NH(7) 17.19 101.54 0.91 11.39 16.69 150.92 39.14 150.92 18.89
PETE Primary Bank of NH(7) 25.75 53.79 1.47 14.33 20.77 179.69 12.46 179.94 17.52
SMCB Sandwich Co-Op, Bank of MA 33.50 63.85 2.27 20.55 14.96 163.02 13.44 171.01 14.76
WRNB Warren Bancorp of Peabody MA 17.87 67.57 1.71 9.82 8.89 181.98 18.67 181.98 10.45
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------ -------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ------------ -----------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ----- -------- ------ ------ ------ ----- ----- ---- -----
($) ($) (%) ($MIL) ($) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Special Selection Grouping(8) 0.51 2.20 29.84 376 9.05 0.92 1.13 12.8 1.10 12.38
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
BKCT Bancorp Connecticut of CT 1.00 3.33 49.26 428 10.25 1.19 1.32 12.60 1.24 11.90
CEBK Central Co-Op, Bank of MA 0.32 1.64 21.92 321 10.45 0.88 0.88 8.78 0.90 8.90
- ------------------------------------------------------------------------------------------------------------------
EIRE Emerald Island Bancorp, MA 0.28 1.33 17.50 425 7.08 0.40 0.85 12.35 0.89 13.00
- ------------------------------------------------------------------------------------------------------------------
LSBX Lawrence Savings Bank of MA 0.00 0.00 0.06 366 8.69 0.30 1.75 20.90 1.73 20.60
NHTB NH Thrift Bancshares of NH 0.50 2.99 NH 313 7.48 1.03 0.33 4.460 0.49 6.59
- ------------------------------------------------------------------------------------------------------------------
NHSB Newmil Bancorp. of CT 0.24 1.85 36.92 323 9.81 1.11 0.83 8.14 0.79 7.78
- ------------------------------------------------------------------------------------------------------------------
POBS Portsmouth Bank Shrs Inc
of NH(7) 0.60 3.49 65.93 259 25.93 0.50 2.29 9.13 2.02 8.07
PETE Primary Bank of NH(7) 0.00 0.00 0.06 432 6.93 0.82 0.61 9.35 0.73 11.09
SMCB Sandwich Co-Op, Bank of MA 1.20 0.58 52.86 475 8.24 1.28 0.94 11.30 0.95 11.45
WRNB Warren Bancorp of Peabody MA 0.52 2.91 30.41 358 10.37 1.15 2.13 22.09 1.81 18.79
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimated core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets;
P/TB = Price to tangible book value; and P/CORE = Price to core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated
core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and asset
balances.
(7) Excludes from averages those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
(8) Includes New England Companies; Assets $250 = $500 Million;
Source: Corporate reports, offering circulars, and RP Financial, LC,
calculations. The information provided in report has been obtained from
sources we believe are reliable, but we cannot guarantee the accuracy
or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-3
New England Peer Institutions
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
---------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ------------------------------------
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ------ ------ ----- ------ ----- ------ ------
($) ($MIL) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Special Selection Grouping(8) 17.78 21.05 1.43 12.97 16.24 142.92 13.48 145.09 15.56
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
AFED AF SALA Bancorp, Inc. of NT 15.87 23.09 0.61 14.05 26.02 112.95 15.45 112.95 26.02
BSBC Branford SB of CT(7) 4.94 32.40 0.32 2.64 15.44 187.12 17.37 187.12 15.44
FCB Falmouth Co-Op Bank of MA 17.00 24.74 0.49 15.40 NM 110.39 26.36 110.39 NM
- -----------------------------------------------------------------------------------------------------------
FCME First Coastal Corp. of ME 10.62 14.43 4.36 10.35 2.36 102.61 9.47 102.61 2.44
HIFS Hingbam Inst. for Sav. of MA 23.05 30.05 1.86 15.62 12.40 147.63 13.81 147.63 12.40
HPBC Home Port Bancorp, Inc. of MA 20.62 37.98 1.71 11.39 11.99 181.04 19.11 181.04 12.06
IPSW Ipswich SB of Ipswich MA 23.50 27.92 1.32 9.11 13.99 257.98 14.74 257.96 17.80
- -----------------------------------------------------------------------------------------------------------
KSBK KSB Bancorp of Kingfield ME(7) 13.00 16.09 1.08 8.10 12.50 160.49 11.50 170.60 12.04
MFLR Mayflower Co-Op Bank of MA 18.62 16.57 1.30 13.21 14.00 140.95 13.29 143.45 14.32
- -----------------------------------------------------------------------------------------------------------
MCBN Mid-Coast Bancorp of ME 25.00 5.83 1.66 22.05 23.58 113.33 9.75 113.33 15.06
- -----------------------------------------------------------------------------------------------------------
MBN Northeast Bancorp of ME 14.75 18.81 0.86 13.49 15.86 109.34 7.60 126.50 17.15
- -----------------------------------------------------------------------------------------------------------
NTMG Nutmeg FS&LA of CT 11.00 7.98 0.44 7.35 28.21 149.66 8.52 149.66 25.00
TBK Tolland Bank of CT 15.50 24.18 1.16 10.60 13.96 146.23 10.15 150.49 13.35
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------ -------------------------------------------------
Reported Core
Amount/ Payout Total Equity NPAs ------------ -----------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ----- -------- ------ ------ ------ ----- ----- ---- -----
($) (%) (%) ($MIL) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Special Selection Grouping(8) 0.32 1.63 26.34 160 10.00 1.04 1.16 9.57 1.14 9.43
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
AFCO AFSALA Bancorp, Inc. of NT 0.15 1.01 26.23 149 13.68 NA 0.59 4.34 0.59 4.34
BSBC Branford SB of CT(7) 0.08 1.62 25.00 187 9.28 1.42 1.16 12.75 1.16 12.75
FCB Falmouth Co-Op Bank of MA 0.20 1.18 40.82 94 23.88 0.07 0.84 3.43 0.79 3.23
- ------------------------------------------------------------------------------------------------------------------
FCME First Coastal Corp. of ME 0.00 0.00 0.00 152 9.23 2.01 4.21 NM 4.08 NM
HIFS Hingham Inst. for Sav. of MA 0.48 2.08 25.81 218 9.35 0.41 1.21 12.69 1.21 12.60
HPBC Home Port Bancorp, Inc. of MA 0.80 3.88 46.78 199 10.56 0.08 1.67 15.78 1.66 15.69
IPSW Ipswich SB of Ipswich MA 0.24 1.02 18.18 189 5.71 1.52 1.21 20.41 0.95 16.04
- ------------------------------------------------------------------------------------------------------------------
KSBK KSB Bancorp of Kingfield ME(7) 0.08 0.62 7.41 140 7.16 1.70 0.96 13.72 1.00 14.25
MFLA Mayflower Co-Op Bank of MA 0.60 3.22 46.15 125 9.43 1.03 1.00 10.42 0.98 10.11
- ------------------------------------------------------------------------------------------------------------------
MCBN Mid-Coast Bancorp of ME 0.52 2.08 31.33 60 8.60 0.73 0.43 4.92 0.67 7.71
- ------------------------------------------------------------------------------------------------------------------
MBN Northeast Bancorp of ME 0.32 2.17 17.21 218 6.95 1.37 0.51 6.99 0.47 6.47
- ------------------------------------------------------------------------------------------------------------------
NTMG Nutmeg FS&LA of CT 0.00 0.00 0.00 94 5.69 NA 0.31 5.46 0.35 6.16
TBK Tolland Bank of CT 0.20 1.29 17.24 238 6.94 2.13 0.75 11.37 0.78 11.89
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit the impact of non-operating items (including the SAIF
assessment) on a tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity asset balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes New England Companies; Assets less than $250 Million.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of August 15, 1997
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
_____________________________________________
SAIF-Insured Thrifts(304) 21.80 5,467 154.7 22.97 14.95 21.69 0.31 191.94 26.17
NYSE Traded Companies(8) 39.81 38,507 1,743.3 42.22 24.94 39.76 0.07 264.18 26.51
AMEX Traded Companies(17) 19.58 4,784 116.6 21.23 13.62 19.54 0.46 319.46 22.48
NASDAQ Listed OTC Companies(279) 21.39 4,507 108.8 22.49 14.73 21.28 0.31 179.72 26.38
California Companies(21) 26.21 18,883 739.4 27.78 16.27 26.14 0.36 126.40 30.12
Florida Companies(6) 26.42 12,199 353.9 27.35 15.37 26.50 0.56 159.59 39.66
Mid-Atlantic Companies(58) 22.84 6,425 154.4 23.88 14.85 22.76 0.62 178.01 34.14
Mid-West Companies(147) 20.63 3,371 87.7 21.60 14.55 20.37 0.54 216.04 23.08
New England Companies(10) 24.67 4,651 140.4 25.14 15.95 24.72 0.42 338.93 33.74
North-West Companies(7) 22.82 12,610 325.1 23.87 16.71 23.13 -1.18 158.41 20.52
South-East Companies(42) 21.44 3,622 74.6 23.60 15.68 21.58 -0.57 159.14 22.52
South-West Companies(7) 19.99 1,785 39.9 20.59 13.05 19.97 0.11 -1.93 22.97
Western Companies (Excl CA)(6) 19.69 5,288 98.8 21.06 14.72 19.94 -1.01 279.05 16.92
Thrift Strategy(240) 20.74 3,584 82.1 21.78 14.52 20.64 0.28 169.59 24.93
Mortgage Banker Strategy(37) 27.29 13,181 481.8 28.56 17.55 27.12 0.11 251.42 33.52
Real Estate Strategy(11) 23.23 7,531 199.4 24.17 14.51 22.73 2.58 201.83 34.18
Diversified Strategy(12) 29.85 23,678 787.6 33.56 18.25 29.78 0.67 184.83 26.32
Retail Banking Strategy(4) 15.56 3,472 59.4 17.94 11.38 15.91 -2.26 346.07 15.18
Companies Issuing Dividends(254) 22.00 5,331 154.9 23.17 15.12 21.97 0.19 203.07 25.59
Companies Without Dividends(50) 20.69 6,218 153.1 21.88 14.01 20.14 0.99 116.60 29.89
Equity/Assets (less than)6%(23) 24.87 17,391 527.9 26.16 15.23 24.17 -0.28 153.11 33.69
Equity/Assets 6-12%(147) 24.14 5,734 180.8 25.28 15.91 24.08 0.21 205.56 29.61
Equity/Assets (more than)12%(134) 18.89 3,189 65.1 20.06 13.91 18.82 0.51 160.31 20.94
Converted Last 3 Mths (no MHC)(5) 22.92 2,546 65.9 23.95 21.52 22.82 0.39 0.00 -9.62
Actively Traded Companies(42) 29.51 17,211 626.9 31.29 19.19 29.76 -0.95 209.10 31.58
Market Value Below $20 Million(63) 16.95 892 14.2 17.77 12.44 16.86 0.59 222.47 22.08
Holding Company Structure(269) 21.82 5,279 154.1 22.96 15.10 21.71 0.24 174.13 24.90
Assets Over $1 Billion(62) 31.29 17,248 586.4 33.01 20.07 31.01 -0.29 222.61 29.69
Assets $500 Million-$1 Billion(49) 21.41 5,442 105.0 22.59 13.95 21.31 0.33 209.78 32.01
Assets $250-$500 Million(68) 21.88 2,512 51.9 22.73 15.05 21.81 0.56 175.50 29.00
Assets less than $250 Million(125) 17.48 1,498 24.8 18.55 12.89 17.42 0.46 124.29 20.55
Goodwill Companies(121) 24.85 8,828 256.0 26.17 16.19 24.80 0.28 215.58 29.09
Non-Goodwill Companies(181) 19.82 3,246 87.9 20.90 14.15 19.67 0.34 158.73 24.08
Acquirors of FSLIC Cases(10) 33.10 33,585 1,450.5 35.04 21.31 33.37 -1.65 258.83 30.73
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C>
0.85 1.17 15.95 15.48 156.73
1.96 2.83 21.63 20.63 384.39
0.71 0.98 14.98 14.83 106.88
0.83 1.13 15.83 15.36 152.85
1.03 1.40 17.01 16.41 263.42
1.03 0.99 13.60 12.90 186.25
1.01 1.41 16.22 15.53 172.23
0.84 1.11 16.00 15.69 139.03
0.78 1.30 17.03 15.95 226.99
0.91 1.21 14.25 13.72 140.82
0.60 0.87 15.00 14.69 119.73
0.66 1.19 16.36 15.47 218.19
0.90 1.06 15.93 15.27 106.33
0.80 1.11 16.06 15.67 140.72
1.22 1.58 16.63 15.62 241.32
0.93 1.44 14.71 14.40 223.92
1.03 1.29 12.79 12.35 177.31
0.18 -0.01 13.12 12.68 168.63
0.93 1.25 16.08 15.57 154.24
0.42 0.69 15.21 15.00 170.56
1.06 1.57 13.78 12.90 288.18
1.04 1.41 16.41 15.71 197.22
0.63 0.85 15.83 15.68 92.93
0.55 0.66 18.86 18.86 92.92
1.51 2.00 17.53 16.89 237.20
0.54 0.84 15.41 15.28 119.86
0.84 1.16 16.23 15.78 154.60
1.36 1.88 18.12 16.84 256.76
0.97 1.14 14.25 13.77 156.79
0.86 1.21 16.74 16.24 167.57
0.57 0.82 15.16 15.10 104.38
1.03 1.39 16.44 15.28 204.75
0.74 1.02 15.63 15.63 125.55
1.66 2.43 18.86 17.79 305.78
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and are not
annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on
trailing twelve month common earnings and average common equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the number
of institutions included in the respective averages. All figures have been adjusted for stock splits, stock dividends, and
secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations. The
information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
____________________________________________
BIF-Insured Thrifts(69) 24.92 9,829 340.7 25.97 15.50 24.89 0.13 196.51 32.99
NYSE Traded Companies(3) 36.04 52,819 1,710.6 37.21 20.41 35.93 0.48 271.27 37.94
AMEX Traded Companies(5) 22.15 4,239 88.6 23.35 13.87 22.37 -1.21 91.23 40.75
NASDAQ Listed OTC Companies(61) 24.54 7,848 284.8 25.57 15.37 24.49 0.24 202.24 31.91
California Companies(4) 20.66 5,592 117.4 21.11 10.59 20.47 0.72 450.00 42.62
Mid-Atlantic Companies(18) 26.41 17,456 515.2 27.48 15.94 26.43 -0.23 129.63 31.90
Mid-West Companies(2) 12.50 942 11.8 12.50 9.12 12.50 0.00 0.00 23.52
New England Companies(36) 23.38 4,578 111.8 24.51 14.66 23.31 0.22 208.56 32.63
North-West Companies(4) 30.91 36,749 2,077.2 33.16 18.31 31.20 -0.06 149.35 35.46
South-East Companies(5) 30.80 2,083 45.1 31.05 22.17 30.75 0.30 0.00 30.38
Thrift Strategy(45) 24.90 4,911 159.5 25.85 15.90 24.83 0.14 193.02 32.44
Mortgage Banker Strategy(10) 23.96 25,700 543.6 25.12 14.51 23.93 0.36 216.91 34.02
Real Estate Strategy(6) 17.94 4,200 74.3 18.41 11.18 17.84 0.50 302.93 25.18
Diversified Strategy(7) 31.05 30,188 1,573.6 33.19 16.94 31.47 -0.75 164.26 41.60
Retail Banking Strategy(1) 23.50 706 16.6 23.75 14.75 23.12 1.64 63.54 28.77
Companies Issuing Dividends(56) 26.55 10,864 392.8 27.71 16.73 26.51 0.24 190.69 32.31
Companies Without Dividends(13) 16.95 4,758 85.0 17.47 9.47 16.96 -0.41 256.60 36.25
Equity/Assets (less than)6%(5) 27.15 49,456 2,030.7 29.37 15.07 27.40 -0.23 149.68 52.80
Equity/Assets 6-12%(47) 25.50 6,119 202.7 26.57 15.67 25.42 0.29 208.66 31.47
Equity/Assets (more than)12%(17) 22.67 6,266 136.1 23.30 15.21 22.69 -0.19 31.35 30.14
Actively Traded Companies(23) 27.31 18,091 696.3 28.91 16.93 27.37 -0.23 238.44 30.72
Market Value Below $20 Million(8) 16.03 959 14.7 16.35 11.15 15.89 0.71 120.49 19.21
Holding Company Structure(46) 25.33 9,784 370.0 26.38 15.93 25.25 0.32 197.26 32.36
Assets Over $1 Billion(18) 31.64 29,498 1,157.1 33.28 18.51 31.85 -0.50 196.07 35.15
Assets $500 Million-$1 Billion(16) 25.45 5,181 106.7 26.60 16.26 25.45 -0.23 170.61 33.66
Assets $250-$500 Million(16) 20.49 3,013 57.3 21.26 12.81 20.31 0.58 241.32 29.17
Assets less than $250 Million(19) 22.03 1,420 27.9 22.70 14.38 21.89 0.63 173.12 33.84
Goodwill Companies(32) 26.33 16,101 612.8 27.70 16.44 26.47 -0.32 189.38 32.41
Non-Goodwill Companies(37) 23.65 4,164 94.8 24.41 14.66 23.47 0.52 209.58 33.49
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
____________________________________________
BIF-Insured Thrifts(69) 1.64 1.64 15.90 15.08 160.68
NYSE Traded Companies(3) 1.93 1.92 19.07 14.47 239.94
AMEX Traded Companies(5) 1.27 1.22 15.00 14.63 143.44
NASDAQ Listed OTC Companies(61) 1.66 1.67 15.80 15.16 157.70
California Companies(4) 1.92 1.84 12.63 12.62 129.94
Mid-Atlantic Companies(18) 1.29 1.37 16.20 14.32 169.90
Mid-West Companies(2) 0.21 0.32 12.77 12.04 50.95
New England Companies(36) 1.94 1.87 14.77 14.20 172.00
North-West Companies(4) 1.17 1.46 13.81 13.29 177.88
South-East Companies(5) 1.28 1.32 26.62 26.62 97.87
Thrift Strategy(45) 1.60 1.58 16.77 15.82 149.70
Mortgage Banker Strategy(10) 1.51 1.57 14.44 14.00 187.42
Real Estate Strategy(6) 1.50 1.43 10.98 10.97 128.42
Diversified Strategy(7) 2.21 2.40 14.12 13.29 199.00
Retail Banking Strategy(1) 1.13 1.10 20.32 19.48 322.70
Companies Issuing Dividends(56) 1.59 1.61 16.72 15.75 171.40
Companies Without Dividends(13) 1.85 1.83 11.87 11.79 108.12
Equity/Assets (less than)6%(5) 1.30 1.45 10.70 10.33 202.62
Equity/Assets 6-12%(47) 1.93 1.90 15.62 14.48 184.86
Equity/Assets (more than)12%(17) 0.99 1.05 18.34 18.21 83.83
Actively Traded Companies(23) 1.88 1.88 16.00 15.22 195.10
Market Value Below $20 Million(8) 1.30 1.32 14.40 13.89 133.44
Holding Company Structure(46) 1.60 1.62 16.23 15.54 148.54
Assets Over $1 Billion(18) 1.80 1.89 15.89 14.41 199.28
Assets $500 Million-$1 Billion(16) 1.90 1.83 16.54 15.18 183.94
Assets $250-$500 Million(16) 1.28 1.29 13.62 13.40 136.62
Assets less than $250 Million(19) 1.56 1.56 17.33 17.08 125.17
Goodwill Companies(32) 1.60 1.62 15.72 14.00 194.19
Non-Goodwill Companies(37) 1.67 1.66 16.05 16.05 130.41
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations. The
information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(22) 23.13 4,936 43.5 24.14 14.34 22.51 2.89 226.16 37.41
BIF-Insured Thrifts(2) 21.50 32,163 208.0 22.75 11.63 21.69 1.08 239.90 47.83
NASDAQ Listed OTC Companies(24) 22.98 7,529 59.2 24.01 14.08 22.43 2.71 230.74 38.57
Florida Companies(3) 31.79 5,609 80.3 31.92 17.46 30.83 3.39 0.00 29.39
Mid-Atlantic Companies(11) 20.00 6,654 47.9 20.33 12.51 19.16 4.41 177.50 48.18
Mid-West Companies(7) 20.23 2,029 15.1 22.54 14.01 19.90 1.45 274.81 28.17
New England Companies(1) 26.75 61,053 405.4 29.00 14.00 28.25 -5.31 239.90 38.96
South-East Companies(1) 39.00 1,505 27.5 41.00 20.25 39.25 -0.64 0.00 60.82
Thrift Strategy(22) 22.79 4,852 41.9 23.76 14.09 22.14 3.11 226.16 38.54
Diversified Strategy(1) 26.75 61,053 405.4 29.00 14.00 28.25 -5.31 239.90 38.96
Companies Issuing Dividends(23) 23.39 7,767 61.2 24.48 14.11 22.85 2.58 230.74 38.57
Companies Without Dividends(1) 14.75 2,760 18.3 14.75 13.62 14.00 5.36 0.00 0.00
Equity/Assets 6-12%(16) 23.40 9,632 74.3 24.58 14.20 22.89 2.71 230.74 35.02
Equity/Assets >12%(8) 22.13 3,322 29.0 22.88 13.84 21.50 2.72 0.00 47.79
Actively Traded Companies(1) 27.75 7,264 94.5 29.50 14.32 29.00 -4.31 177.50 50.00
Holding Company Structure(1) 27.75 7,264 94.5 29.50 14.32 29.00 -4.31 177.50 50.00
Assets Over $1 Billion(5) 29.00 21,577 161.1 29.80 15.56 28.77 1.24 208.70 39.93
Assets $500 Million-$1 Billion(4) 25.92 6,964 74.9 26.04 13.96 24.17 7.39 0.00 45.33
Assets $250-$500 Million(4) 22.06 2,541 19.9 24.94 15.17 21.41 2.85 274.81 27.17
Assets less than $250 Million(11) 19.05 2,129 14.8 19.71 12.82 18.78 1.92 0.00 41.65
Goodwill Companies(9) 27.77 15,815 123.9 29.52 15.56 26.86 3.99 230.74 42.36
Non-Goodwill Companies(15) 20.03 2,429 19.4 20.62 13.18 19.70 1.93 0.00 35.53
MHC Institutions(24) 22.98 7,529 59.2 24.01 14.08 22.43 2.71 230.74 38.57
MHC Converted Last 3 Months(1) 14.75 2,760 18.3 14.75 13.62 14.00 5.36 0.00 0.00
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
_________________________________
SAIF-Insured Thrifts(22) 0.67 0.99 13.00 12.70 122.58
BIF-Insured Thrifts(2) 0.81 0.73 9.79 9.78 101.80
NASDAQ Listed OTC Companies(24) 0.68 0.97 12.69 12.42 120.60
Florida Companies(3) 1.12 1.55 15.33 15.09 165.24
Mid-Atlantic Companies(11) 0.48 0.71 11.63 11.16 99.12
Mid-West Companies(7) 0.63 1.01 12.27 12.25 128.12
New England Companies(1) 1.39 1.03 10.93 10.92 128.90
South-East Companies(1) 1.00 1.41 19.69 19.69 148.17
Thrift Strategy(22) 0.65 0.96 12.78 12.50 120.19
Diversified Strategy(1) 1.39 1.03 10.93 10.92 128.90
Companies Issuing Dividends(23) 0.70 0.98 12.61 12.33 122.49
Companies Without Dividends(1) 0.32 0.67 14.36 14.36 82.97
Equity/Assets 6-12%(16) 0.73 1.06 12.55 12.22 139.64
Equity/Assets >12%(8) 0.59 0.79 12.97 12.83 82.54
Actively Traded Companies(1) 0.80 1.25 13.39 11.94 142.18
Holding Company Structure(1) 0.80 1.25 13.39 11.94 142.18
Assets Over $1 Billion(5) 1.12 1.34 13.21 12.33 152.67
Assets $500 Million-$1 Billion(4) 0.72 0.91 12.97 12.61 113.62
Assets $250-$500 Million(4) 0.76 1.19 13.00 12.97 147.88
Assets less than $250 Million(11) 0.39 0.68 12.17 12.17 92.99
Goodwill Companies(9) 0.95 1.18 12.96 12.26 141.98
Non-Goodwill Companies(15) 0.52 0.84 12.53 12.53 107.45
MHC Institutions(24) 0.68 0.97 12.69 12.42 120.60
MHC Converted Last 3 Months(1) 0.32 0.67 14.36 14.36 82.97
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations. The
information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 49.87 97,336 4,854.1 53.19 25.00 49.69 0.36 165.97 53.45
CSA Coast Savings Financial of CA 45.19 18,616 841.3 48.75 30.25 45.81 -1.35 290.92 23.40
CFB Commercial Federal Corp. of NE 40.56 21,553 874.2 40.94 25.33 39.44 2.84 999.19 26.75
DME Dime Bancorp, Inc. of NY* 19.37 103,719 2,009.0 20.25 12.87 19.56 -0.97 92.54 31.32
DSL Downey Financial Corp. of CA 21.69 26,733 579.8 23.75 15.40 21.75 -0.28 99.72 16.05
FRC First Republic Bancorp of CA* 24.75 9,693 239.9 24.81 12.87 24.12 2.61 450.00 47.76
FED FirstFed Fin. Corp. of CA 33.75 10,575 356.9 34.62 17.75 33.37 1.14 108.98 53.41
GSB Glendale Fed. Bk, FSB of CA 28.63 50,306 1,440.3 28.00 17.50 28.75 -0.42 76.18 23.14
GDW Golden West Fin. Corp. of CA 78.94 56,739 4,479.0 84.62 55.00 79.06 -0.15 201.41 25.06
GPT GreenPoint Fin. Corp. of NY* 64.00 45,044 2,882.8 66.56 35.50 64.12 -0.19 N.A. 34.74
WES Westcorp Inc. of Orange CA 19.87 26,195 520.5 23.87 13.25 20.19 -1.58 171.08 -9.19
AMEX Traded Companies
_____________________
ANA Acadiana Bancshares of LA* 21.62 2,731 59.0 22.25 12.37 21.88 -1.19 N.A. 45.39
BKC American Bank of Waterbury CT* 37.75 2,306 87.1 39.00 25.87 37.87 -0.32 101.33 34.82
BFD BostonFed Bancorp of MA 19.50 5,947 116.0 19.94 11.87 19.62 -0.61 N.A. 32.20
CFX CFX Corp of NH* 18.87 13,144 248.0 21.00 12.50 19.00 -0.68 58.57 21.74
CBK Citizens First Fin.Corp. of IL 16.75 2,594 43.4 16.87 10.50 16.75 0.00 N.A. 16.56
ESX Essex Bancorp of VA(8) 2.00 1,057 2.1 2.37 1.00 1.56 28.21 -88.06 -8.68
FCB Falmouth Co-Op Bank of MA* 17.00 1,455 24.7 17.50 11.00 17.00 0.00 N.A. 29.57
FAB FirstFed America Bancorp of MA 18.94 8,707 164.9 19.00 13.62 18.87 0.37 N.A. N.A.
GAF GA Financial Corp. of PA 17.25 7,985 137.7 19.50 11.62 17.00 1.47 N.A. 14.09
JSB JSB Financial, Inc. of NY 44.13 9,845 434.5 46.50 33.12 44.40 -0.61 283.74 16.13
KNK Kankakee Bancorp of IL 29.87 1,425 42.6 30.75 19.12 29.50 1.25 198.70 20.69
KYF Kentucky First Bancorp of KY 12.62 1,319 16.6 15.12 10.56 12.25 3.02 N.A. 16.10
NYB New York Bancorp, Inc. of NY 30.87 21,591 666.5 32.00 15.12 31.06 -0.61 335.40 59.37
PDB Piedmont Bancorp of NC 11.00 2,751 30.3 19.12 9.25 11.12 -1.08 N.A. 4.76
SSB Scotland Bancorp of NC 17.00 1,914 32.5 17.19 12.00 17.19 -1.11 N.A. 20.40
SZB SouthFirst Bancshares of AL 16.37 821 13.4 17.25 12.25 17.00 -3.71 N.A. 23.55
SRN Southern Banc Company of AL 15.50 1,230 19.1 15.75 12.25 15.75 -1.59 N.A. 18.14
SSM Stone Street Bancorp of NC 21.50 1,898 40.8 27.25 16.75 21.31 0.89 N.A. 4.88
TSH Teche Holding Company of LA 18.75 3,438 64.5 19.37 12.87 18.12 3.48 N.A. 30.48
FTF Texarkana Fst. Fin. Corp of AR 22.50 1,790 40.3 23.00 13.62 22.37 0.58 N.A. 43.95
THR Three Rivers Fin. Corp. of MI 16.25 824 13.4 16.62 12.62 16.00 1.56 N.A. 16.07
TBK Tolland Bank of CT* 15.50 1,560 24.2 17.00 7.59 16.12 -3.85 113.79 72.22
WSB Washington SB, FSB of MD 7.00 4,247 29.7 7.37 4.38 6.69 4.63 460.00 43.74
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 36.00 698 25.1 36.25 26.19 36.25 -0.69 N.A. 26.32
AFED AFSALA Bancorp, Inc. of NY 15.87 1,455 23.1 16.12 11.31 15.63 1.54 N.A. 32.25
ALBK ALBANK Fin. Corp. of Albany NY 38.13 12,825 489.0 41.00 27.00 37.25 2.36 64.00 21.55
AMFC AMB Financial Corp. of IN 15.00 964 14.5 15.00 10.25 15.00 0.00 N.A. 13.21
ASBP ASB Financial Corp. of OH 12.37 1,721 21.3 18.25 11.50 12.25 0.98 N.A. -4.85
ABBK Abington Savings Bank of MA* 29.25 1,852 54.2 31.00 16.50 30.25 -3.31 341.84 50.00
AABC Access Anytime Bancorp of NM 6.62 1,193 7.9 6.75 5.25 6.50 1.85 -1.93 20.36
AFBC Advance Fin. Bancorp of WV 15.37 1,084 16.7 16.00 12.75 15.25 0.79 N.A. N.A.
AADV Advantage Bancorp of WI 44.25 3,234 143.1 44.25 31.25 42.00 5.36 380.98 37.21
AFCB Affiliated Comm BC, Inc of MA 25.00 6,465 161.6 25.25 15.20 24.75 1.01 N.A. 46.20
ALBC Albion Banc Corp. of Albion NY 24.25 250 6.1 24.25 16.50 23.62 2.67 86.54 44.78
ABCL Allied Bancorp of IL 31.37 5,345 167.7 31.37 23.25 31.37 0.00 213.70 25.48
ATSB AmTrust Capital Corp. of IN 12.62 526 6.6 12.75 8.75 12.62 0.00 N.A. 26.20
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 1.98 3.16 20.35 17.34 488.33
CSA Coast Savings Financial of CA 0.99 2.48 24.06 23.76 488.97
CFB Commercial Federal Corp. of NE 2.05 2.89 19.77 17.53 329.27
DME Dime Bancorp, Inc. of NY* 1.05 1.33 10.21 9.74 193.67
DSL Downey Financial Corp. of CA 0.86 1.43 15.26 15.05 220.16
FRC First Republic Bancorp of CA* 1.56 1.33 16.56 16.55 230.89
FED FirstFed Fin. Corp. of CA 1.13 2.07 19.14 18.93 396.52
GSB Glendale Fed. Bk, FSB of CA 0.79 1.85 17.82 15.84 322.39
GDW Golden West Fin. Corp. of CA 6.74 8.22 43.90 43.90 689.03
GPT GreenPoint Fin. Corp. of NY* 3.17 3.09 30.44 17.11 295.27
WES Westcorp Inc. of Orange CA 1.11 0.55 12.71 12.67 140.42
AMEX Traded Companies
_____________________
ANA Acadiana Bancshares of LA* 0.47 0.47 16.70 16.70 95.82
BKC American Bank of Waterbury CT* 3.13 2.69 21.77 20.90 262.73
BFD BostonFed Bancorp of MA 0.64 0.88 14.08 13.60 158.23
CFX CFX Corp of NH* 1.10 1.31 10.52 9.84 141.44
CBK Citizens First Fin.Corp. of IL 0.30 0.59 14.74 14.74 104.69
ESX Essex Bancorp of VA(8) -0.05 0.05 0.49 0.31 179.83
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.49
FAB FirstFed America Bancorp of MA -0.21 0.50 14.26 14.26 117.25
GAF GA Financial Corp. of PA 0.80 1.02 14.25 14.10 93.89
JSB JSB Financial, Inc. of NY 2.75 2.61 34.47 34.47 155.50
KNK Kankakee Bancorp of IL 1.62 2.02 26.59 24.99 239.77
KYF Kentucky First Bancorp of KY 0.53 0.70 10.86 10.86 67.42
NYB New York Bancorp, Inc. of NY 1.98 2.32 7.73 7.73 152.08
PDB Piedmont Bancorp of NC -0.19 0.30 7.42 7.42 44.62
SSB Scotland Bancorp of NC 0.51 0.62 13.44 13.44 36.30
SZB SouthFirst Bancshares of AL 0.05 0.30 15.82 15.82 113.17
SRN Southern Banc Company of AL 0.13 0.44 14.42 14.27 85.35
SSM Stone Street Bancorp of NC 0.80 0.96 16.13 16.13 55.91
TSH Teche Holding Company of LA 0.80 1.10 15.23 15.23 114.47
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.62 15.03 15.03 95.73
THR Three Rivers Fin. Corp. of MI 0.61 0.88 15.22 15.22 110.64
TBK Tolland Bank of CT* 1.11 1.16 10.60 10.30 152.71
WSB Washington SB, FSB of MD 0.30 0.44 5.05 5.05 60.83
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 1.18 0.50 32.00 31.34 387.52
AFED AFSALA Bancorp, Inc. of NY 0.61 0.61 14.05 14.05 102.70
ALBK ALBANK Fin. Corp. of Albany NY 2.29 2.82 25.85 22.59 280.88
AMFC AMB Financial Corp. of IN 0.66 0.73 14.61 14.61 97.70
ASBP ASB Financial Corp. of OH 0.39 0.57 10.00 10.00 63.58
ABBK Abington Savings Bank of MA* 2.16 1.92 18.73 16.87 270.66
AABC Access Anytime Bancorp of NM -0.45 -0.11 6.53 6.53 87.72
AFBC Advance Fin. Bancorp of WV 0.35 0.71 14.76 14.76 95.55
AADV Advantage Bancorp of WI 1.27 2.81 29.05 27.16 315.25
AFCB Affiliated Comm BC, Inc of MA 1.53 1.74 16.49 16.40 168.67
ALBC Albion Banc Corp. of Albion NY 0.22 0.93 23.62 23.62 265.26
ABCL Allied Bancorp of IL 0.91 1.33 23.40 23.11 262.72
ATSB AmTrust Capital Corp. of IN 0.40 0.26 13.73 13.58 135.04
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
AHCI Ambanc Holding Co., Inc. of NY* 15.75 4,392 69.2 16.62 9.75 16.00 -1.56 N.A. 40.00
ASBI Ameriana Bancorp of IN 18.37 3,230 59.3 19.00 13.25 18.50 -0.70 99.02 14.81
AFFFZ America First Fin. Fund of CA(8) 39.31 6,011 236.3 39.56 28.00 39.31 0.00 109.65 29.95
ANBK American Nat'l Bancorp of MD(8) 19.87 3,613 71.8 19.87 10.00 19.87 0.00 N.A. 63.94
ABCW Anchor Bancorp Wisconsin of WI 53.00 4,524 239.8 53.50 33.00 50.50 4.95 80.46 48.25
ANDB Andover Bancorp, Inc. of MA* 29.87 5,148 153.8 32.25 20.21 30.12 -0.83 177.86 16.59
ASFC Astoria Financial Corp. of NY 46.50 20,978 975.5 48.75 26.25 47.12 -1.32 77.14 26.12
AVND Avondale Fin. Corp. of IL 14.50 3,495 50.7 18.50 12.75 14.75 -1.69 N.A. -15.30
BKCT Bancorp Connecticut of CT* 30.00 2,534 76.0 30.00 21.25 27.25 10.09 242.86 33.33
BPLS Bank Plus Corp. of CA 11.50 19,308 222.0 13.75 9.62 11.44 0.52 N.A. 0.00
BWFC Bank West Fin. Corp. of MI 15.00 1,753 26.3 15.12 10.25 15.00 0.00 N.A. 41.24
BANC BankAtlantic Bancorp of FL 15.87 17,978 285.3 16.62 9.60 16.62 -4.51 205.19 48.32
BKUNA BankUnited SA of FL 11.62 8,869 103.1 12.00 7.25 10.87 6.90 114.00 16.20
BKCO Bankers Corp. of NJ(8)* 27.25 12,392 337.7 30.12 17.94 28.75 -5.22 336.00 35.44
BVCC Bay View Capital Corp. of CA 25.50 12,979 331.0 28.62 17.50 25.75 -0.97 29.11 20.34
BFSB Bedford Bancshares of VA 24.75 1,142 28.3 25.25 16.50 24.25 2.06 135.71 40.47
BFFC Big Foot Fin. Corp. of IL 16.75 2,513 42.1 17.50 12.31 17.50 -4.29 N.A. 28.85
BSBC Branford SB of CT(8)* 4.94 6,559 32.4 5.00 3.00 4.94 0.00 133.02 27.65
BYFC Broadway Fin. Corp. of CA 10.50 835 8.8 11.25 9.00 10.50 0.00 N.A. 13.51
CBES CBES Bancorp of MO 17.87 1,025 18.3 17.87 12.62 17.69 1.02 N.A. 25.40
CCFH CCF Holding Company of GA 16.50 820 13.5 17.12 12.25 17.12 -3.62 N.A. 11.86
CENF CENFED Financial Corp. of CA 34.00 5,729 194.8 35.00 20.23 34.38 -1.11 116.84 27.87
CFSB CFSB Bancorp of Lansing MI 26.00 5,096 132.5 27.00 16.32 27.00 -3.70 188.89 46.64
CKFB CKF Bancorp of Danville KY 20.00 925 18.5 20.75 17.50 20.00 0.00 N.A. -1.23
CNSB CNS Bancorp of MO 17.12 1,653 28.3 17.50 11.62 17.00 0.71 N.A. 13.23
CSBF CSB Financial Group Inc of IL* 12.50 942 11.8 12.50 9.12 12.50 0.00 N.A. 23.52
CBCI Calumet Bancorp of Chicago IL 40.50 2,111 85.5 41.37 27.75 41.37 -2.10 100.00 21.80
CAFI Camco Fin. Corp. of OH 18.50 3,215 59.5 19.25 14.05 18.50 0.00 N.A. 22.35
CMRN Cameron Fin. Corp. of MO 17.25 2,627 45.3 18.00 14.00 17.50 -1.43 N.A. 7.81
CAPS Capital Savings Bancorp of MO 16.00 1,892 30.3 18.25 9.62 16.00 0.00 20.75 23.08
CFNC Carolina Fincorp of NC* 17.37 1,851 32.2 17.75 13.00 17.37 0.00 N.A. 29.92
CNY Carver Bancorp, Inc. of NY 12.62 2,314 29.2 13.37 7.37 12.37 2.02 101.92 52.97
CASB Cascade SB of Everett WA(8) 14.75 2,571 37.9 16.80 10.40 14.00 5.36 15.23 14.34
CATB Catskill Fin. Corp. of NY* 16.31 4,720 77.0 17.00 10.56 17.00 -4.06 N.A. 16.50
CNIT Cenit Bancorp of Norfolk VA 50.75 1,650 83.7 51.50 32.69 51.25 -0.98 219.58 22.29
CEBK Central Co-Op. Bank of MA* 19.50 1,965 38.3 20.69 14.75 19.25 1.30 271.43 11.43
CENB Century Bancshares of NC* 79.00 407 32.2 79.00 62.00 79.00 0.00 N.A. 21.54
CBSB Charter Financial Inc. of IL 21.25 4,150 88.2 21.50 11.00 21.44 -0.89 N.A. 70.00
COFI Charter One Financial of OH 53.06 46,186 2,450.6 57.94 35.83 52.37 1.32 203.20 26.33
CVAL Chester Valley Bancorp of PA 21.75 2,054 44.7 24.00 14.10 24.00 -9.38 91.97 46.96
CTZN CitFed Bancorp of Dayton OH 45.00 8,638 388.7 45.25 25.00 41.75 7.78 400.00 36.36
CLAS Classic Bancshares of KY 14.50 1,320 19.1 15.00 11.25 14.75 -1.69 N.A. 24.78
CMSB Cmnwealth Bancorp of PA 17.50 17,096 299.2 17.50 10.50 16.75 4.48 N.A. 16.67
CBSA Coastal Bancorp of Houston TX 29.75 4,972 147.9 30.87 18.00 30.25 -1.65 N.A. 30.08
CFCP Coastal Fin. Corp. of SC 24.87 4,641 115.4 27.75 14.25 25.50 -2.47 148.70 57.90
CMSV Commty. Svgs, MHC of FL (48.5) 25.62 5,090 60.6 26.00 16.00 25.75 -0.50 N.A. 24.98
CBNH Community Bankshares Inc of NH(8)* 39.37 2,489 98.0 40.25 18.50 39.12 0.64 949.87 92.05
CFTP Community Fed. Bancorp of MS 18.37 4,629 85.0 20.00 13.00 17.75 3.49 N.A. 8.06
CFFC Community Fin. Corp. of VA 21.75 1,275 27.7 23.50 20.50 22.75 -4.40 210.71 4.82
CFBC Community First Bnkg Co. of GA 34.19 2,414 82.5 34.87 31.87 34.00 0.56 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.00 949 14.2 15.37 10.00 15.25 -1.64 N.A. 32.39
COOP Cooperative Bk.for Svgs. of NC 24.50 1,492 36.6 27.00 16.75 24.50 0.00 145.00 20.99
CRZY Crazy Woman Creek Bncorp of WY 14.12 955 13.5 14.25 10.25 13.87 1.80 N.A. 17.67
DNFC D&N Financial Corp. of MI 19.00 8,191 155.6 19.50 12.75 19.25 -1.30 117.14 13.43
DCBI Delphos Citizens Bancorp of OH 15.87 2,039 32.4 16.62 11.75 15.75 0.76 N.A. 32.25
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
AHCI Ambanc Holding Co., Inc. of NY* -0.65 -0.65 13.85 13.85 108.86
ASBI Ameriana Bancorp of IN 0.75 1.05 13.49 13.48 123.14
AFFFZ America First Fin. Fund of CA(8) 5.51 6.76 30.76 30.38 364.44
ANBK American Nat'l Bancorp of MD(8) 0.37 0.86 12.54 12.54 139.86
ABCW Anchor Bancorp Wisconsin of WI 3.10 3.99 26.49 25.99 425.70
ANDB Andover Bancorp, Inc. of MA* 2.57 2.65 19.59 19.59 243.00
ASFC Astoria Financial Corp. of NY 1.96 2.80 28.59 24.01 365.36
AVND Avondale Fin. Corp. of IL -0.85 -2.63 15.85 15.85 173.75
BKCT Bancorp Connecticut of CT* 2.15 2.03 17.32 17.32 169.05
BPLS Bank Plus Corp. of CA -0.46 0.04 9.27 9.26 183.03
BWFC Bank West Fin. Corp. of MI 0.53 0.47 12.89 12.89 88.80
BANC BankAtlantic Bancorp of FL 1.22 0.89 8.54 7.02 151.88
BKUNA BankUnited SA of FL 0.29 0.48 7.59 6.15 203.77
BKCO Bankers Corp. of NJ(8)* 2.12 2.27 16.42 16.18 207.14
BVCC Bay View Capital Corp. of CA 0.97 1.58 15.12 12.69 238.56
BFSB Bedford Bancshares of VA 1.14 1.46 16.80 16.80 118.61
BFFC Big Foot Fin. Corp. of IL 0.04 0.35 14.34 14.34 84.46
BSBC Branford SB of CT(8)* 0.32 0.32 2.64 2.64 28.44
BYFC Broadway Fin. Corp. of CA -0.39 0.10 16.35 16.35 142.23
CBES CBES Bancorp of MO 0.69 0.86 17.08 17.08 92.90
CCFH CCF Holding Company of GA 0.05 0.07 14.36 14.36 122.93
CENF CENFED Financial Corp. of CA 1.98 2.82 20.85 20.81 400.68
CFSB CFSB Bancorp of Lansing MI 1.37 1.73 12.65 12.65 165.90
CKFB CKF Bancorp of Danville KY 1.17 0.86 15.75 15.75 65.74
CNSB CNS Bancorp of MO 0.31 0.47 14.73 14.73 59.35
CSBF CSB Financial Group Inc of IL* 0.21 0.32 12.77 12.04 50.95
CBCI Calumet Bancorp of Chicago IL 2.72 3.45 36.46 36.46 235.23
CAFI Camco Fin. Corp. of OH 0.94 1.11 14.24 13.10 146.95
CMRN Cameron Fin. Corp. of MO 0.78 0.97 17.18 17.18 79.22
CAPS Capital Savings Bancorp of MO 0.82 1.15 11.28 11.28 128.18
CFNC Carolina Fincorp of NC* 0.65 0.61 13.92 13.92 58.71
CNY Carver Bancorp, Inc. of NY -0.74 0.01 14.93 14.32 178.81
CASB Cascade SB of Everett WA(8) 0.61 0.77 8.46 8.46 137.04
CATB Catskill Fin. Corp. of NY* 0.85 0.86 15.08 15.08 60.22
CNIT Cenit Bancorp of Norfolk VA 3.75 3.44 31.12 28.58 430.03
CEBK Central Co-Op. Bank of MA* 1.44 1.46 17.07 15.20 163.33
CENB Century Bancshares of NC* 4.31 4.36 73.51 73.51 245.57
CBSB Charter Financial Inc. of IL 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 2.98 3.73 21.15 19.80 315.35
CVAL Chester Valley Bancorp of PA 0.87 1.28 12.72 12.72 148.58
CTZN CitFed Bancorp of Dayton OH 1.94 2.73 22.83 20.57 358.59
CLAS Classic Bancshares of KY 0.45 0.62 14.67 12.38 99.66
CMSB Cmnwealth Bancorp of PA 0.69 0.88 12.89 10.08 133.89
CBSA Coastal Bancorp of Houston TX 1.45 2.52 19.85 16.50 596.15
CFCP Coastal Fin. Corp. of SC 0.95 1.04 6.68 6.68 108.33
CMSV Commty. Svgs, MHC of FL (48.5) 0.81 1.22 15.05 15.05 134.05
CBNH Community Bankshares Inc of NH(8)* 2.17 1.73 17.31 17.31 247.44
CFTP Community Fed. Bancorp of MS 0.63 0.75 14.92 14.92 44.51
CFFC Community Fin. Corp. of VA 1.32 1.67 18.86 18.86 137.58
CFBC Community First Bnkg Co. of GA 0.42 0.82 27.66 27.66 168.47
CIBI Community Inv. Bancorp of OH 0.66 0.98 11.82 11.82 102.68
COOP Cooperative Bk.for Svgs. of NC -1.80 0.45 18.03 18.03 236.22
CRZY Crazy Woman Creek Bncorp of WY 0.58 0.71 14.67 14.67 56.83
DNFC D&N Financial Corp. of MI 1.10 1.45 10.95 10.84 196.42
DCBI Delphos Citizens Bancorp of OH 0.72 0.72 14.93 14.93 52.56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
DIME Dime Community Bancorp of NY 19.00 13,093 248.8 20.00 12.75 18.94 0.32 N.A. 28.81
DIBK Dime Financial Corp. of CT* 26.50 5,147 136.4 28.00 15.12 26.62 -0.45 152.38 53.62
EGLB Eagle BancGroup of IL 16.62 1,238 20.6 16.87 11.50 16.50 0.73 N.A. 11.77
EBSI Eagle Bancshares of Tucker GA 16.87 4,552 76.8 18.50 13.62 17.50 -3.60 132.69 8.84
EGFC Eagle Financial Corp. of CT 32.75 6,279 205.6 34.50 24.00 33.31 -1.68 274.29 7.38
ETFS East Texas Fin. Serv. of TX 19.25 1,025 19.7 19.25 14.50 18.53 3.89 N.A. 17.59
EMLD Emerald Financial Corp of OH 14.00 5,062 70.9 15.00 10.50 14.25 -1.75 N.A. 24.44
EIRE Emerald Island Bancorp, MA* 21.00 2,246 47.2 21.00 11.60 20.37 3.09 175.59 31.25
EFBC Empire Federal Bancorp of MT 15.25 2,592 39.5 15.50 12.50 15.12 0.86 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 19.50 2,011 39.2 20.50 12.75 20.50 -4.88 N.A. 34.48
EQSB Equitable FSB of Wheaton MD 37.50 602 22.6 39.25 24.50 38.75 -3.23 N.A. 32.74
FFFG F.F.O. Financial Group of FL(8) 5.44 8,446 45.9 5.50 2.62 5.50 -1.09 -34.54 61.42
FCBF FCB Fin. Corp. of Neenah WI 27.00 2,464 66.5 28.00 17.00 27.00 0.00 N.A. 45.95
FFBS FFBS Bancorp of Columbus MS 24.00 1,557 37.4 26.00 20.25 24.00 0.00 N.A. 4.35
FFDF FFD Financial Corp. of OH 15.50 1,455 22.6 15.63 10.12 15.50 0.00 N.A. 16.98
FFLC FFLC Bancorp of Leesburg FL 29.00 2,318 67.2 29.37 18.25 27.75 4.50 N.A. 34.88
FFFC FFVA Financial Corp. of VA 29.25 4,521 132.2 31.00 17.00 30.00 -2.50 N.A. 42.68
FFWC FFW Corporation of Wabash IN 28.00 697 19.5 29.25 19.50 28.75 -2.61 N.A. 27.97
FFYF FFY Financial Corp. of OH 28.13 4,145 116.6 28.25 23.87 27.50 2.29 N.A. 11.14
FMCO FMS Financial Corp. of NJ 26.00 2,388 62.1 31.50 15.50 26.00 0.00 188.89 42.47
FFHH FSF Financial Corp. of MN 18.12 3,033 55.0 18.25 11.50 17.75 2.08 N.A. 19.84
FOBC Fed One Bancorp of Wheeling WV 21.25 2,373 50.4 22.00 14.25 22.00 -3.41 112.50 34.92
FBCI Fidelity Bancorp of Chicago IL 21.50 2,792 60.0 21.50 16.25 21.50 0.00 N.A. 26.47
FSBI Fidelity Bancorp, Inc. of PA 21.25 1,550 32.9 21.70 15.23 21.25 0.00 174.90 16.89
FFFL Fidelity FSB, MHC of FL (47.4) 24.00 6,766 76.5 24.00 12.37 22.25 7.87 N.A. 35.21
FFED Fidelity Fed. Bancorp of IN 9.25 2,490 23.0 11.75 7.50 8.87 4.28 31.21 -5.13
FFOH Fidelity Financial of OH 16.12 5,579 89.9 16.37 9.62 15.63 3.13 N.A. 40.17
FIBC Financial Bancorp, Inc. of NY 20.62 1,722 35.5 21.00 14.00 20.25 1.83 N.A. 37.47
FBSI First Bancshares of MO 24.00 1,160 27.8 25.25 15.00 24.25 -1.03 88.24 44.40
FBBC First Bell Bancorp of PA 16.37 6,511 106.6 17.37 13.12 16.37 0.00 N.A. 23.55
FBER First Bergen Bancorp of NJ 19.25 3,000 57.8 19.50 9.75 19.25 0.00 N.A. 67.39
SKBO First Carnegie,MHC of PA(45.0) 13.50 2,300 14.0 14.75 11.62 13.87 -2.67 N.A. N.A.
FCIT First Cit. Fin. Corp of MD(8) 34.00 2,951 100.3 36.50 16.12 34.50 -1.45 291.25 86.30
FSTC First Citizens Corp of GA 30.00 1,829 54.9 30.50 20.75 29.50 1.69 140.00 18.81
FCME First Coastal Corp. of ME* 10.62 1,359 14.4 11.25 5.87 10.63 -0.09 N.A. 37.03
FFBA First Colorado Bancorp of Co 17.50 16,561 289.8 20.12 13.50 17.75 -1.41 430.30 2.94
FDEF First Defiance Fin.Corp. of OH 15.12 9,341 141.2 15.50 10.50 15.06 0.40 N.A. 22.23
FESX First Essex Bancorp of MA* 16.50 7,504 123.8 18.25 11.00 16.62 -0.72 175.00 25.76
FFES First FS&LA of E. Hartford CT 31.87 2,676 85.3 31.87 18.00 31.25 1.98 390.31 38.57
FFSX First FS&LA. MHC of IA (46.0) 25.00 2,828 21.7 35.00 20.75 24.25 3.09 274.81 28.21
BDJI First Fed. Bancorp. of MN 21.75 683 14.9 21.75 13.75 21.00 3.57 N.A. 17.57
FFBH First Fed. Bancshares of AR 21.12 4,896 103.4 21.62 13.75 21.25 -0.61 N.A. 33.08
FTFC First Fed. Capital Corp. of WI 24.25 9,141 221.7 26.50 13.00 24.00 1.04 223.33 54.75
FFKY First Fed. Fin. Corp. of KY 22.25 4,170 92.8 23.00 17.75 21.75 2.30 41.27 9.88
FFBZ First Federal Bancorp of OH 18.25 1,572 28.7 19.50 11.75 18.00 1.39 82.50 14.06
FFCH First Fin. Holdings Inc. of SC 31.25 6,357 198.7 34.50 18.75 31.25 0.00 155.10 38.89
FFBI First Financial Bancorp of IL 18.25 415 7.6 18.75 15.50 18.25 0.00 N.A. 15.00
FFHC First Financial Corp. of WI(8) 31.37 36,209 1,135.9 32.12 18.00 31.25 0.38 99.17 28.04
FFHS First Franklin Corp. of OH 20.00 1,192 23.8 21.00 14.25 20.00 0.00 52.44 21.21
FGHC First Georgia Hold. Corp of GA 7.25 3,052 22.1 8.25 4.17 7.06 2.69 89.30 27.87
FSPG First Home Bancorp of NJ 20.00 2,708 54.2 20.12 13.31 19.87 0.65 233.33 44.20
FFSL First Independence Corp. of KS 12.75 997 12.7 13.12 9.25 12.75 0.00 N.A. 22.95
FISB First Indiana Corp. of IN 20.75 10,561 219.1 24.30 17.37 21.50 -3.49 53.70 -3.04
FKFS First Keystone Fin. Corp of PA 27.12 1,228 33.3 27.12 16.75 26.37 2.84 N.A. 40.88
FLKY First Lancaster Bncshrs of KY 15.25 959 14.6 16.25 13.87 15.25 0.00 N.A. 4.31
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
DIME Dime Community Bancorp of NY 0.94 1.01 14.58 12.56 100.44
DIBK Dime Financial Corp. of CT* 2.82 2.83 13.52 13.08 169.78
EGLB Eagle BancGroup of IL -0.12 0.27 16.69 16.69 140.80
EBSI Eagle Bancshares of Tucker GA 0.80 1.09 12.74 12.74 146.35
EGFC Eagle Financial Corp. of CT 0.19 1.13 22.02 17.19 320.65
ETFS East Texas Fin. Serv. of TX 0.34 0.70 19.97 19.97 109.95
EMLD Emerald Financial Corp of OH 0.81 1.00 9.03 8.89 119.14
EIRE Emerald Island Bancorp, MA* 1.52 1.60 13.39 13.39 189.23
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.81 0.90 15.74 15.72 127.65
EQSB Equitable FSB of Wheaton MD 2.20 3.52 24.92 24.92 491.70
FFFG F.F.O. Financial Group of FL(8) 0.25 0.36 2.46 2.46 37.89
FCBF FCB Fin. Corp. of Neenah WI 0.99 1.17 19.25 19.25 110.06
FFBS FFBS Bancorp of Columbus MS 0.96 1.21 16.05 16.05 82.64
FFDF FFD Financial Corp. of OH 0.44 0.61 14.50 14.50 58.62
FFLC FFLC Bancorp of Leesburg FL 1.06 1.53 22.51 22.51 167.00
FFFC FFVA Financial Corp. of VA 1.32 1.60 16.29 15.95 123.62
FFWC FFW Corporation of Wabash IN 1.98 2.46 22.75 22.75 227.32
FFYF FFY Financial Corp. of OH 1.28 1.82 19.82 19.82 144.57
FMCO FMS Financial Corp. of NJ 1.56 2.29 15.24 14.97 232.38
FFHH FSF Financial Corp. of MN 0.78 0.99 14.16 14.16 124.71
FOBC Fed One Bancorp of Wheeling WV 0.99 1.41 16.63 15.86 150.32
FBCI Fidelity Bancorp of Chicago IL 0.95 1.33 18.22 18.18 175.45
FSBI Fidelity Bancorp, Inc. of PA 1.08 1.72 15.83 15.83 234.39
FFFL Fidelity FSB, MHC of FL (47.4) 0.49 0.78 12.08 11.98 136.99
FFED Fidelity Fed. Bancorp of IN 0.17 0.30 5.17 5.17 100.52
FFOH Fidelity Financial of OH 0.51 0.75 12.17 10.74 94.06
FIBC Financial Bancorp, Inc. of NY 0.87 1.55 15.35 15.28 164.04
FBSI First Bancshares of MO 1.18 1.45 19.80 19.77 137.97
FBBC First Bell Bancorp of PA 1.06 1.23 10.78 10.78 109.72
FBER First Bergen Bancorp of NJ 0.38 0.66 13.47 13.47 94.92
SKBO First Carnegie,MHC of PA(45.0) 0.24 0.35 10.21 10.21 65.23
FCIT First Cit. Fin. Corp of MD(8) 1.20 1.78 14.95 14.95 234.41
FSTC First Citizens Corp of GA 1.45 1.44 16.29 12.22 178.44
FCME First Coastal Corp. of ME* 4.50 4.36 10.35 10.35 112.13
FFBA First Colorado Bancorp of Co 0.84 0.82 11.60 11.60 91.15
FDEF First Defiance Fin.Corp. of OH 0.43 0.59 12.60 12.60 59.12
FESX First Essex Bancorp of MA* 1.32 1.15 11.57 10.05 165.97
FFES First FS&LA of E. Hartford CT 1.52 2.50 23.63 23.63 367.56
FFSX First FS&LA. MHC of IA (46.0) 0.69 1.19 13.74 13.63 165.69
BDJI First Fed. Bancorp. of MN 0.49 1.02 17.62 17.62 157.71
FFBH First Fed. Bancshares of AR 0.81 1.11 16.36 16.36 109.31
FTFC First Fed. Capital Corp. of WI 1.18 1.37 10.64 9.97 167.40
FFKY First Fed. Fin. Corp. of KY 1.14 1.36 12.40 11.68 90.50
FFBZ First Federal Bancorp of OH 0.88 1.23 9.66 9.65 128.03
FFCH First Fin. Holdings Inc. of SC 1.43 2.10 16.03 16.03 262.26
FFBI First Financial Bancorp of IL -0.85 0.94 17.63 17.63 203.69
FFHC First Financial Corp. of WI(8) 1.51 2.03 11.67 11.37 163.81
FFHS First Franklin Corp. of OH 0.36 1.21 17.17 17.06 190.39
FGHC First Georgia Hold. Corp of GA 0.32 0.25 4.21 3.86 51.24
FSPG First Home Bancorp of NJ 1.64 2.14 12.85 12.64 192.91
FFSL First Independence Corp. of KS 0.47 0.75 11.60 11.60 111.21
FISB First Indiana Corp. of IN 1.17 1.43 13.77 13.60 144.00
FKFS First Keystone Fin. Corp of PA 1.35 1.93 19.09 19.09 261.24
FLKY First Lancaster Bncshrs of KY 0.46 0.56 14.44 14.44 42.18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
FLFC First Liberty Fin. Corp. of GA 22.50 7,725 173.8 23.75 13.83 23.25 -3.23 342.91 22.48
CASH First Midwest Fin. Corp. of IA 17.37 2,734 47.5 17.87 15.00 17.37 0.00 N.A. 13.31
FMBD First Mutual Bancorp of IL 16.12 3,507 56.5 16.12 12.62 15.50 4.00 N.A. 7.47
FMSB First Mutual SB of Bellevue WA* 21.75 2,702 58.8 22.25 11.59 20.62 5.48 180.65 36.71
FNGB First Northern Cap. Corp of WI 26.87 4,417 118.7 26.87 15.25 25.75 4.35 84.55 65.35
FFPB First Palm Beach Bancorp of FL 32.75 5,031 164.8 34.00 21.50 33.25 -1.50 N.A. 38.65
FSLA First SB SLA MHC of NJ (47.5) 27.75 7,264 94.5 29.50 14.32 29.00 -4.31 177.50 50.00
FSNJ First SB of NJ, MHC (45.9)(8) 32.50 3,064 45.7 34.00 14.00 32.75 -0.76 N.A. 41.30
SOPN First SB, SSB, Moore Co. of NC 20.50 3,679 75.4 24.00 16.75 21.25 -3.53 N.A. 9.33
FWWB First Savings Bancorp of WA* 24.50 10,519 257.7 24.75 16.00 24.62 -0.49 N.A. 33.37
SHEN First Shenango Bancorp of PA 27.75 2,072 57.5 29.25 20.25 28.50 -2.63 N.A. 23.33
FSFC First So.east Fin. Corp. of SC(8) 14.00 4,388 61.4 14.87 9.12 14.00 0.00 N.A. 49.25
FBNW FirstBank Corp of Clarkston WA 18.25 1,984 36.2 19.00 15.50 18.25 0.00 N.A. N.A.
FFDB FirstFed Bancorp of AL 16.53 1,148 19.0 18.50 12.50 18.13 -8.83 N.A. 32.24
FSPT FirstSpartan Fin. Corp. of SC 35.75 4,430 158.4 37.00 35.00 35.62 0.36 N.A. N.A.
FLAG Flag Financial Corp of GA 14.25 2,037 29.0 14.87 9.75 14.75 -3.39 45.41 32.56
FLGS Flagstar Bancorp, Inc of MI 19.25 13,670 263.1 20.00 13.00 0.00 -1.00 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 20.69 7,979 165.1 23.50 17.37 20.31 1.87 N.A. 14.18
FBHC Fort Bend Holding Corp. of TX 31.75 827 26.3 32.00 16.87 30.75 3.25 N.A. 24.51
FTSB Fort Thomas Fin. Corp. of KY 10.50 1,495 15.7 14.75 9.25 11.00 -4.55 N.A. -28.18
FKKY Frankfort First Bancorp of KY 9.38 3,385 31.8 12.25 8.00 9.25 1.41 N.A. -17.50
FTNB Fulton Bancorp of MO 20.00 1,719 34.4 20.37 12.50 19.75 1.27 N.A. 30.12
GFSB GFS Bancorp of Grinnell IA 13.37 988 13.2 14.25 10.12 13.37 0.00 N.A. 25.89
GUPB GFSB Bancorp of Gallup NM 19.00 839 15.9 19.75 13.50 19.00 0.00 N.A. 19.72
GSLA GS Financial Corp. of LA 15.75 3,438 54.1 16.12 13.37 15.25 3.28 N.A. N.A.
GOSB GSB Financial Corp. of NY 14.66 2,248 33.0 14.87 14.25 14.37 2.02 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 17.62 1,076 19.0 18.25 13.00 17.75 -0.73 N.A. 23.65
GBCI Glacier Bancorp of MT 18.50 6,812 126.0 20.25 14.33 18.50 0.00 283.02 13.29
GFCO Glenway Financial Corp. of OH 24.50 1,140 27.9 27.00 18.25 27.00 -9.26 N.A. 19.51
GTPS Great American Bancorp of IL 17.37 1,760 30.6 17.50 13.25 17.50 -0.74 N.A. 17.29
GTFN Great Financial Corp. of KY 33.25 13,791 458.6 35.12 26.81 33.25 0.00 N.A. 14.18
GSBC Great Southern Bancorp of MO 16.87 8,105 136.7 18.00 13.62 16.75 0.72 477.74 -5.28
GDVS Greater DV SB,MHC of PA (19.9)* 16.25 3,272 10.6 16.50 9.25 15.12 7.47 N.A. 56.70
GSFC Green Street Fin. Corp. of NC 17.50 4,298 75.2 18.87 13.37 17.25 1.45 N.A. 12.90
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 18.75 3,125 18.2 20.50 9.75 18.25 2.74 N.A. 55.47
HCBB HCB Bancshares of AR 14.00 2,645 37.0 14.12 12.62 13.87 0.94 N.A. N.A.
HEMT HF Bancorp of Hemet CA 14.87 6,282 93.4 15.87 9.25 15.25 -2.49 N.A. 33.72
HFFC HF Financial Corp. of SD 22.37 2,979 66.6 22.37 14.75 21.88 2.24 347.40 29.23
HFNC HFNC Financial Corp. of NC 16.00 17,192 275.1 22.06 14.87 16.25 -1.54 N.A. -10.46
HMNF HMN Financial, Inc. of MN 24.87 4,212 104.8 25.75 15.37 24.75 0.48 N.A. 37.25
HALL Hallmark Capital Corp. of WI 22.50 1,443 32.5 23.75 14.50 22.75 -1.10 N.A. 26.76
HARB Harbor FSB, MHC of FL (46.0) 45.75 4,970 103.9 45.75 24.00 44.50 2.81 N.A. 27.97
HRBF Harbor Federal Bancorp of MD 19.12 1,693 32.4 20.00 12.75 20.00 -4.40 91.20 21.40
HFSA Hardin Bancorp of Hardin MO 16.50 859 14.2 16.75 11.25 16.75 -1.49 N.A. 32.00
HARL Harleysville SA of PA 25.00 1,652 41.3 25.00 14.00 25.00 0.00 40.85 58.23
HFGI Harrington Fin. Group of IN 11.50 3,257 37.5 13.00 9.75 11.75 -2.13 N.A. 6.98
HARS Harris SB, MHC of PA (24.2) 26.00 11,223 70.6 26.00 14.75 24.75 5.05 N.A. 42.47
HFFB Harrodsburg 1st Fin Bcrp of KY 15.00 2,025 30.4 19.00 14.75 15.75 -4.76 N.A. -20.51
HHFC Harvest Home Fin. Corp. of OH 11.75 935 11.0 13.75 9.25 12.75 -7.84 N.A. 20.51
HAVN Haven Bancorp of Woodhaven NY 37.00 4,377 161.9 38.37 25.56 36.25 2.07 N.A. 29.28
HVFD Haverfield Corp. of OH(8) 26.50 1,906 50.5 27.37 17.00 26.75 -0.93 70.97 38.60
HTHR Hawthorne Fin. Corp. of CA 15.63 2,629 41.1 16.12 6.62 15.00 4.20 -43.16 92.25
HMLK Hemlock Fed. Fin. Corp. of IL 15.50 2,076 32.2 15.50 12.50 15.25 1.64 N.A. N.A.
HBNK Highland Federal Bank of CA 27.25 2,300 62.7 27.25 14.25 25.62 6.36 N.A. 60.29
HIFS Hingham Inst. for Sav. of MA* 23.06 1,303 30.0 25.25 14.25 23.25 -0.82 405.70 22.99
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
FLFC First Liberty Fin. Corp. of GA 1.20 0.93 11.87 10.62 161.56
CASH First Midwest Fin. Corp. of IA 0.99 1.29 15.70 13.89 135.40
FMBD First Mutual Bancorp of IL 0.10 0.32 15.30 11.59 119.10
FMSB First Mutual SB of Bellevue WA* 1.56 1.52 10.91 10.91 159.89
FNGB First Northern Cap. Corp of WI 0.87 1.26 16.28 16.28 144.38
FFPB First Palm Beach Bancorp of FL -0.02 0.15 20.95 20.41 309.73
FSLA First SB SLA MHC of NJ (47.5) 0.80 1.25 13.39 11.94 142.18
FSNJ First SB of NJ, MHC (45.9)(8) -0.70 0.47 16.18 16.18 188.83
SOPN First SB, SSB, Moore Co. of NC 1.06 1.27 18.26 18.26 79.97
FWWB First Savings Bancorp of WA* 0.89 0.84 14.13 13.00 95.79
SHEN First Shenango Bancorp of PA 1.69 2.20 21.75 21.75 198.56
FSFC First So.east Fin. Corp. of SC(8) 0.01 0.70 7.80 7.80 76.29
FBNW FirstBank Corp of Clarkston WA 0.54 0.44 14.00 14.00 77.62
FFDB FirstFed Bancorp of AL 0.95 1.45 14.48 13.20 153.77
FSPT FirstSpartan Fin. Corp. of SC 1.00 1.16 27.63 27.63 104.97
FLAG Flag Financial Corp of GA -0.07 0.15 10.25 10.25 109.02
FLGS Flagstar Bancorp, Inc of MI 0.00 0.00 6.07 6.07 111.13
FFIC Flushing Fin. Corp. of NY* 0.93 0.97 16.68 16.68 107.79
FBHC Fort Bend Holding Corp. of TX 0.74 1.71 23.24 21.64 385.33
FTSB Fort Thomas Fin. Corp. of KY 0.33 0.50 10.40 10.40 64.84
FKKY Frankfort First Bancorp of KY 0.24 0.36 9.93 9.93 37.91
FTNB Fulton Bancorp of MO 0.41 0.58 14.47 14.47 57.86
GFSB GFS Bancorp of Grinnell IA 0.85 1.09 10.32 10.32 89.22
GUPB GFSB Bancorp of Gallup NM 0.69 0.87 16.88 16.88 103.59
GSLA GS Financial Corp. of LA 0.34 0.34 16.36 16.36 35.85
GOSB GSB Financial Corp. of NY 0.52 0.44 13.78 13.78 50.92
GWBC Gateway Bancorp of KY(8) 0.52 0.72 16.04 16.04 59.32
GBCI Glacier Bancorp of MT 1.10 1.23 8.12 7.90 83.33
GFCO Glenway Financial Corp. of OH 1.06 1.78 23.89 23.57 251.83
GTPS Great American Bancorp of IL 0.19 0.24 16.68 16.68 77.83
GTFN Great Financial Corp. of KY 1.59 1.51 20.40 19.53 220.89
GSBC Great Southern Bancorp of MO 1.15 1.30 7.45 7.45 87.33
GDVS Greater DV SB,MHC of PA (19.9)* 0.23 0.42 8.64 8.64 74.69
GSFC Green Street Fin. Corp. of NC 0.56 0.68 14.73 14.73 40.62
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.37 0.56 8.80 8.80 63.86
HCBB HCB Bancshares of AR -0.08 0.29 13.73 13.16 75.24
HEMT HF Bancorp of Hemet CA -0.40 -2.74 12.87 10.53 156.71
HFFC HF Financial Corp. of SD 1.23 1.67 17.78 17.78 188.54
HFNC HFNC Financial Corp. of NC 0.43 0.59 9.37 9.37 52.08
HMNF HMN Financial, Inc. of MN 0.94 1.17 19.42 19.42 134.58
HALL Hallmark Capital Corp. of WI 1.33 1.68 20.56 20.56 284.01
HARB Harbor FSB, MHC of FL (46.0) 2.05 2.64 18.85 18.23 224.69
HRBF Harbor Federal Bancorp of MD 0.58 0.90 16.48 16.48 127.80
HFSA Hardin Bancorp of Hardin MO 0.58 0.89 15.69 15.69 125.75
HARL Harleysville SA of PA 1.46 2.00 13.31 13.31 203.79
HFGI Harrington Fin. Group of IN 0.61 0.51 7.67 7.67 137.18
HARS Harris SB, MHC of PA (24.2) 0.79 0.99 14.59 12.76 182.15
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.23 0.49 11.11 11.11 88.88
HAVN Haven Bancorp of Woodhaven NY 2.09 3.11 24.20 24.12 407.02
HVFD Haverfield Corp. of OH(8) 1.02 1.94 15.52 15.52 181.61
HTHR Hawthorne Fin. Corp. of CA 2.40 1.21 12.37 12.37 318.74
HMLK Hemlock Fed. Fin. Corp. of IL 0.10 0.55 14.57 14.57 79.44
HBNK Highland Federal Bank of CA 0.96 1.41 16.39 16.39 219.30
HIFS Hingham Inst. for Sav. of MA* 1.86 1.86 15.62 15.62 166.99
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
HBEI Home Bancorp of Elgin IL 17.50 6,856 120.0 19.31 11.81 18.25 -4.11 N.A. 29.63
HBFW Home Bancorp of Fort Wayne IN 21.37 2,525 54.0 21.75 15.75 21.25 0.56 N.A. 12.47
HBBI Home Building Bancorp of IN 21.00 312 6.6 22.00 17.00 20.50 2.44 N.A. 6.33
HCFC Home City Fin. Corp. of OH 15.12 952 14.4 15.19 12.00 15.00 0.80 N.A. 14.11
HOMF Home Fed Bancorp of Seymour IN 31.00 3,396 105.3 31.00 17.33 30.50 1.64 208.46 20.39
HWEN Home Financial Bancorp of IN 15.12 486 7.3 15.75 12.00 15.25 -0.85 N.A. 18.59
HPBC Home Port Bancorp, Inc. of MA* 20.62 1,842 38.0 21.75 13.87 20.75 -0.63 157.75 24.97
HMCI Homecorp, Inc. of Rockford IL 16.00 1,693 27.1 16.00 11.83 14.25 12.28 60.00 25.49
HZFS Horizon Fin'l. Services of IA 18.87 426 8.0 19.75 14.00 18.87 0.00 N.A. 24.80
HRZB Horizon Financial Corp. of WA* 15.00 7,417 111.3 16.50 10.65 15.37 -2.41 31.35 27.77
IBSF IBS Financial Corp. of NJ 16.87 11,012 185.8 18.75 12.50 15.63 7.93 N.A. 24.14
ISBF ISB Financial Corp. of LA 24.50 6,901 169.1 26.25 14.75 24.37 0.53 N.A. 36.11
ITLA Imperial Thrift & Loan of CA* 17.50 7,836 137.1 18.25 13.00 18.12 -3.42 N.A. 16.67
IFSB Independence FSB of DC 13.50 1,280 17.3 14.75 6.75 14.37 -6.05 575.00 68.75
INCB Indiana Comm. Bank, SB of IN 15.25 922 14.1 19.00 13.25 15.25 0.00 N.A. -6.15
INBI Industrial Bancorp of OH 14.50 5,277 76.5 14.69 10.25 14.50 0.00 N.A. 13.73
IWBK Interwest SB of Oak Harbor WA 39.75 8,036 319.4 40.12 25.62 39.62 0.33 297.50 23.26
IPSW Ipswich SB of Ipswich MA* 23.50 1,188 27.9 25.00 9.75 22.25 5.62 N.A. 95.83
JXVL Jacksonville Bancorp of TX 17.00 2,490 42.3 17.00 10.75 16.62 2.29 N.A. 16.28
JXSB Jcksnville SB,MHC of IL (44.6) 17.62 1,272 10.0 18.00 11.50 16.62 6.02 N.A. 32.98
JSBA Jefferson Svgs Bancorp of MO 30.75 4,971 152.9 32.25 22.25 32.00 -3.91 N.A. 18.27
JOAC Joachim Bancorp of MO 15.00 760 11.4 15.25 12.50 14.25 5.26 N.A. 3.45
KSAV KS Bancorp of Kenly NC 18.50 885 16.4 19.12 13.59 18.50 0.00 N.A. 24.08
KSBK KSB Bancorp of Kingfield ME(8)* 13.00 1,238 16.1 16.00 6.82 14.37 -9.53 N.A. 69.49
KFBI Klamath First Bancorp of OR 19.31 10,019 193.5 20.12 13.75 19.19 0.63 N.A. 22.60
LSBI LSB Fin. Corp. of Lafayette IN 20.50 932 19.1 21.25 14.76 21.25 -3.53 N.A. 10.39
LVSB Lakeview SB of Paterson NJ 33.00 2,302 76.0 33.87 19.20 32.25 2.33 N.A. 32.69
LARK Landmark Bancshares of KS 21.50 1,711 36.8 22.12 15.50 21.50 0.00 N.A. 19.44
LARL Laurel Capital Group of PA 21.50 1,443 31.0 22.50 14.75 21.37 0.61 67.97 30.30
LSBX Lawrence Savings Bank of MA* 11.12 4,274 47.5 12.87 6.00 11.87 -6.32 223.26 36.78
LFED Leeds FSB, MHC of MD (36.2) 22.00 3,455 27.5 22.00 13.00 20.87 5.41 N.A. 37.50
LXMO Lexington B&L Fin. Corp. of MO 16.62 1,138 18.9 16.62 10.00 16.12 3.10 N.A. 23.11
LIFB Life Bancorp of Norfolk VA 24.75 9,847 243.7 26.62 15.00 26.00 -4.81 N.A. 37.50
LFBI Little Falls Bancorp of NJ 17.37 2,745 47.7 17.50 10.37 17.12 1.46 N.A. 36.24
LOGN Logansport Fin. Corp. of IN 14.00 1,260 17.6 15.00 11.12 14.00 0.00 N.A. 24.44
LONF London Financial Corp. of OH 15.25 515 7.9 17.50 10.00 15.63 -2.43 N.A. 8.00
LISB Long Island Bancorp, Inc of NY 38.59 23,968 924.9 41.00 27.75 39.00 -1.05 N.A. 10.26
MAFB MAF Bancorp of IL 31.50 15,393 484.9 34.75 16.83 32.37 -2.69 270.59 35.95
MBLF MBLA Financial Corp. of MO 23.50 1,298 30.5 24.75 19.00 23.50 0.00 N.A. 23.68
MFBC MFB Corp. of Mishawaka IN 20.75 1,690 35.1 20.75 15.50 20.50 1.22 N.A. 24.85
MLBC ML Bancorp of Villanova PA 20.25 10,566 214.0 20.87 12.69 20.25 0.00 N.A. 43.41
MBB MSB Bancorp of Middletown NY* 24.19 2,837 68.6 24.19 15.50 23.50 2.94 141.90 23.29
MSBF MSB Financial Corp. of MI 15.00 1,249 18.7 16.50 8.62 13.00 15.38 N.A. 57.89
MGNL Magna Bancorp of MS(8) 25.25 13,754 347.3 27.37 16.75 25.00 1.00 405.00 44.29
MARN Marion Capital Holdings of IN 23.50 1,768 41.5 23.75 19.25 23.00 2.17 N.A. 22.08
MRKF Market Fin. Corp. of OH 14.12 1,336 18.9 14.75 12.25 14.25 -0.91 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 16.75 1,411 23.6 16.87 14.25 16.75 0.00 N.A. 12.64
MFSL Maryland Fed. Bancorp of MD 45.87 3,210 147.2 50.50 28.09 47.50 -3.43 336.86 32.00
MASB MassBank Corp. of Reading MA* 52.75 2,681 141.4 53.00 32.50 51.87 1.70 327.82 38.38
MFLR Mayflower Co-Op. Bank of MA* 18.62 890 16.6 19.75 14.75 18.00 3.44 272.40 9.53
MECH Mechanics SB of Hartford CT* 21.62 5,290 114.4 21.75 12.25 21.75 -0.60 N.A. 37.27
MDBK Medford Bank of Medford MA* 30.00 4,541 136.2 32.00 22.25 30.06 -0.20 328.57 16.50
MERI Meritrust FSB of Thibodaux LA 40.50 774 31.3 41.50 30.75 40.50 0.00 N.A. 28.08
MWBX MetroWest Bank of MA* 6.50 13,953 90.7 6.81 3.69 6.69 -2.84 57.77 21.04
MCBS Mid Continent Bancshares of KS 30.25 1,958 59.2 31.75 18.50 29.25 3.42 N.A. 29.44
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
HBEI Home Bancorp of Elgin IL 0.25 0.43 13.73 13.73 51.43
HBFW Home Bancorp of Fort Wayne IN 0.72 1.15 17.62 17.62 132.62
HBBI Home Building Bancorp of IN 0.29 0.74 18.51 18.51 144.44
HCFC Home City Fin. Corp. of OH 0.51 0.77 14.77 14.77 71.68
HOMF Home Fed Bancorp of Seymour IN 2.02 2.35 17.05 16.53 201.06
HWEN Home Financial Bancorp of IN 0.45 0.64 15.12 15.12 81.16
HPBC Home Port Bancorp, Inc. of MA* 1.72 1.71 11.39 11.39 107.90
HMCI Homecorp, Inc. of Rockford IL 0.27 0.85 12.81 12.81 195.87
HZFS Horizon Fin'l. Services of IA 0.65 1.04 19.75 19.75 201.81
HRZB Horizon Financial Corp. of WA* 1.07 1.05 10.91 10.91 69.93
IBSF IBS Financial Corp. of NJ 0.35 0.60 11.45 11.45 67.20
ISBF ISB Financial Corp. of LA 0.77 1.04 16.58 14.06 136.06
ITLA Imperial Thrift & Loan of CA* 1.36 1.36 11.76 11.71 103.43
IFSB Independence FSB of DC 0.29 0.66 13.39 11.74 205.28
INCB Indiana Comm. Bank, SB of IN 0.16 0.50 12.27 12.27 99.06
INBI Industrial Bancorp of OH 0.45 0.88 11.63 11.63 65.68
IWBK Interwest SB of Oak Harbor WA 1.82 2.47 15.46 15.12 228.05
IPSW Ipswich SB of Ipswich MA* 1.68 1.32 9.11 9.11 159.41
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (44.6) 0.33 0.77 13.26 13.26 128.80
JSBA Jefferson Svgs Bancorp of MO 0.69 1.64 21.38 16.29 260.90
JOAC Joachim Bancorp of MO 0.24 0.37 13.60 13.60 46.92
KSAV KS Bancorp of Kenly NC 1.08 1.40 16.22 16.21 119.91
KSBK KSB Bancorp of Kingfield ME(8)* 1.04 1.08 8.10 7.62 113.08
KFBI Klamath First Bancorp of OR 0.55 0.83 14.20 14.20 72.65
LSBI LSB Fin. Corp. of Lafayette IN 0.95 0.80 18.31 18.31 201.75
LVSB Lakeview SB of Paterson NJ 2.78 1.93 19.91 15.92 209.23
LARK Landmark Bancshares of KS 1.13 1.33 18.38 18.38 133.31
LARL Laurel Capital Group of PA 1.56 2.00 15.06 15.06 144.54
LSBX Lawrence Savings Bank of MA* 1.40 1.38 7.45 7.45 85.71
LFED Leeds FSB, MHC of MD (36.2) 0.63 0.90 13.20 13.20 81.59
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA 1.01 1.23 15.94 15.49 151.14
LFBI Little Falls Bancorp of NJ 0.29 0.51 14.51 13.40 109.29
LOGN Logansport Fin. Corp. of IN 0.74 0.96 12.67 12.67 65.99
LONF London Financial Corp. of OH 0.54 0.79 14.63 14.63 73.66
LISB Long Island Bancorp, Inc of NY 1.44 1.67 22.17 21.95 246.53
MAFB MAF Bancorp of IL 1.51 2.10 16.57 14.39 210.25
MBLF MBLA Financial Corp. of MO 1.11 1.42 21.98 21.98 180.91
MFBC MFB Corp. of Mishawaka IN 0.72 1.10 20.11 20.11 138.63
MLBC ML Bancorp of Villanova PA 1.36 1.23 13.68 13.44 196.03
MBB MSB Bancorp of Middletown NY* 0.95 1.02 19.72 8.48 285.75
MSBF MSB Financial Corp. of MI 0.65 0.80 10.16 10.16 59.81
MGNL Magna Bancorp of MS(8) 1.35 1.49 10.06 9.79 98.39
MARN Marion Capital Holdings of IN 1.38 1.65 22.10 22.10 98.02
MRKF Market Fin. Corp. of OH 0.32 0.32 14.82 14.82 42.35
MFCX Marshalltown Fin. Corp. of IA(8) 0.30 0.65 14.23 14.23 90.38
MFSL Maryland Fed. Bancorp of MD 2.17 3.14 30.22 29.84 360.57
MASB MassBank Corp. of Reading MA* 3.64 3.45 35.92 35.92 337.72
MFLR Mayflower Co-Op. Bank of MA* 1.33 1.30 13.21 12.98 140.10
MECH Mechanics SB of Hartford CT* 2.76 2.76 15.93 15.93 155.69
MDBK Medford Bank of Medford MA* 2.45 2.29 21.24 19.79 236.19
MERI Meritrust FSB of Thibodaux LA 1.99 3.10 24.22 24.22 295.20
MWBX MetroWest Bank of MA* 0.52 0.52 3.02 3.02 40.60
MCBS Mid Continent Bancshares of KS 1.87 2.12 19.59 19.59 208.68
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
MIFC Mid Iowa Financial Corp. of IA 9.62 1,676 16.1 10.00 6.00 9.62 0.00 92.40 51.02
MCBN Mid-Coast Bancorp of ME 25.00 233 5.8 25.00 18.00 25.00 0.00 337.83 31.58
MWBI Midwest Bancshares, Inc. of IA 34.50 348 12.0 35.00 24.50 35.00 -1.43 245.00 30.19
MWFD Midwest Fed. Fin. Corp of WI 22.25 1,625 36.2 24.50 15.50 21.75 2.30 345.00 20.27
MFFC Milton Fed. Fin. Corp. of OH 13.87 2,310 32.0 16.00 12.25 13.62 1.84 N.A. -4.34
MIVI Miss. View Hold. Co. of MN 15.63 819 12.8 15.75 11.37 15.12 3.37 N.A. 30.25
MBSP Mitchell Bancorp of NC* 16.75 931 15.6 16.75 11.34 16.75 0.00 N.A. 17.54
MBBC Monterey Bay Bancorp of CA 16.37 3,245 53.1 18.25 13.12 16.25 0.74 N.A. 10.98
MONT Montgomery Fin. Corp. of IN 11.75 1,653 19.4 14.00 11.00 11.87 -1.01 N.A. -9.62
MSBK Mutual SB, FSB of Bay City MI 10.50 4,274 44.9 11.25 5.12 10.75 -2.33 20.00 90.91
NHTB NH Thrift Bancshares of NH 16.75 2,041 34.2 16.87 9.87 16.31 2.70 262.55 32.73
NSLB NS&L Bancorp of Neosho MO 18.50 707 13.1 18.75 12.00 16.62 11.31 N.A. 35.83
NMSB Newmil Bancorp. of CT* 13.00 3,834 49.8 13.12 7.00 12.62 3.01 104.08 33.33
NASB North American SB of MO 51.00 2,257 115.1 55.00 30.75 50.00 2.00 ***.** 48.91
NBSI North Bancshares of Chicago IL 22.00 997 21.9 22.37 15.75 22.25 -1.12 N.A. 33.33
FFFD North Central Bancshares of IA 16.50 3,258 53.8 16.81 11.25 16.50 0.00 N.A. 21.68
NBN Northeast Bancorp of ME* 14.75 1,275 18.8 14.94 12.75 14.75 0.00 25.53 5.36
NEIB Northeast Indiana Bncrp of IN 16.75 1,763 29.5 18.00 12.00 17.00 -1.47 N.A. 22.98
NWEQ Northwest Equity Corp. of WI 15.75 839 13.2 15.75 10.25 15.25 3.28 N.A. 29.95
NWSB Northwest SB, MHC of PA (29.9) 18.75 23,376 131.0 18.75 10.75 17.37 7.94 N.A. 40.24
NSSY Norwalk Savings Society of CT* 33.25 2,404 79.9 36.50 20.87 34.62 -3.96 N.A. 42.28
NSSB Norwich Financial Corp. of CT* 24.50 5,413 132.6 24.50 15.00 22.25 10.11 250.00 24.87
NTMG Nutmeg FS&LA of CT 11.00 725 8.0 11.00 7.00 10.75 2.33 N.A. 46.67
OHSL OHSL Financial Corp. of OH 23.25 1,196 27.8 25.25 19.50 24.50 -5.10 N.A. 8.80
OCFC Ocean Fin. Corp. of NJ 33.75 8,606 290.5 35.75 21.25 34.50 -2.17 N.A. 32.35
OCN Ocwen Financial Corp. of FL 42.87 26,800 1,148.9 44.75 20.25 44.00 -2.57 N.A. 60.26
OFCP Ottawa Financial Corp. of MI 25.50 4,911 125.2 25.62 16.00 25.62 -0.47 N.A. 51.70
PFFB PFF Bancorp of Pomona CA 19.62 18,716 367.2 19.75 11.25 19.56 0.31 N.A. 31.94
PSFI PS Financial of Chicago IL 14.62 2,182 31.9 14.87 11.62 14.50 0.83 N.A. 24.43
PVFC PVF Capital Corp. of OH 21.00 2,556 53.7 21.00 12.27 19.50 7.69 377.27 46.65
PCCI Pacific Crest Capital of CA* 15.37 2,938 45.2 15.37 8.13 15.12 1.65 N.A. 33.65
PAMM PacificAmerica Money Ctr of CA* 25.00 1,900 47.5 26.00 8.37 24.50 2.04 N.A. 72.41
PALM Palfed, Inc. of Aiken SC 15.87 5,284 83.9 17.50 12.50 15.50 2.39 3.25 13.36
PBCI Pamrapo Bancorp, Inc. of NJ 21.75 2,843 61.8 23.75 18.50 20.50 6.10 286.32 8.75
PFED Park Bancorp of Chicago IL 16.75 2,431 40.7 16.87 10.31 16.62 0.78 N.A. 28.85
PVSA Parkvale Financial Corp of PA 29.25 4,055 118.6 29.50 20.80 28.00 4.46 253.26 12.50
PEEK Peekskill Fin. Corp. of NY 16.25 3,193 51.9 17.00 12.50 16.00 1.56 N.A. 14.04
PFSB PennFed Fin. Services of NJ 29.50 4,822 142.2 30.50 17.50 29.81 -1.04 N.A. 45.68
PWBC PennFirst Bancorp of PA 16.00 5,306 84.9 16.59 12.27 16.37 -2.26 100.50 29.14
PWBK Pennwood SB of PA* 15.50 610 9.5 15.50 9.50 15.50 0.00 N.A. 12.73
PBKB People's SB of Brockton MA* 16.25 3,595 58.4 17.37 10.00 16.75 -2.99 173.57 53.01
PFDC Peoples Bancorp of Auburn IN 25.87 2,274 58.8 27.00 19.25 25.25 2.46 47.83 27.75
PBCT Peoples Bank, MHC of CT (37.4)* 26.75 61,053 405.4 29.00 14.00 28.25 -5.31 239.90 38.96
PFFC Peoples Fin. Corp. of OH 17.25 1,491 25.7 17.37 10.87 17.37 -0.69 N.A. 27.78
PHBK Peoples Heritage Fin Grp of ME* 38.19 27,371 1,045.3 40.25 20.62 38.87 -1.75 149.44 36.39
PSFC Peoples Sidney Fin. Corp of OH 16.50 1,785 29.5 16.50 12.56 16.50 0.00 N.A. N.A.
PERM Permanent Bancorp of IN 24.75 2,011 49.8 26.50 15.75 25.25 -1.98 N.A. 22.22
PMFI Perpetual Midwest Fin. of IA 20.25 1,883 38.1 22.00 17.00 20.12 0.65 N.A. 5.19
PERT Perpetual of SC, MHC (46.8) 39.00 1,505 27.5 41.00 20.25 39.25 -0.64 N.A. 60.82
PCBC Perry Co. Fin. Corp. of MO 20.50 808 16.6 22.25 15.50 20.50 0.00 N.A. 20.59
PHFC Pittsburgh Home Fin. of PA 18.37 1,969 36.2 18.37 10.25 17.12 7.30 N.A. 37.40
PFSL Pocahnts Fed, MHC of AR (46.4) 23.50 1,632 17.7 23.50 14.25 22.25 5.62 N.A. 34.29
POBS Portsmouth Bank Shrs Inc of NH(8)* 17.19 5,907 101.5 18.50 12.38 17.25 -0.35 65.13 25.29
PTRS Potters Financial Corp of OH 24.25 487 11.8 24.75 15.50 24.12 0.54 N.A. 21.25
PKPS Poughkeepsie Fin. Corp. of NY 7.63 12,595 96.1 8.13 4.75 8.00 -4.63 -1.55 45.33
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
MIFC Mid Iowa Financial Corp. of IA 0.64 0.84 6.71 6.70 73.73
MCBN Mid-Coast Bancorp of ME 1.06 1.66 22.06 22.06 256.39
MWBI Midwest Bancshares, Inc. of IA 1.81 3.01 29.09 29.09 421.10
MWFD Midwest Fed. Fin. Corp of WI 1.72 1.35 10.66 10.24 123.74
MFFC Milton Fed. Fin. Corp. of OH 0.39 0.54 11.37 11.37 86.53
MIVI Miss. View Hold. Co. of MN 0.59 0.88 16.08 16.08 85.20
MBSP Mitchell Bancorp of NC* 0.51 0.60 15.39 15.39 35.49
MBBC Monterey Bay Bancorp of CA 0.31 0.57 13.98 12.82 130.16
MONT Montgomery Fin. Corp. of IN 0.26 0.42 11.22 11.22 62.63
MSBK Mutual SB, FSB of Bay City MI 0.18 0.07 9.57 9.57 157.56
NHTB NH Thrift Bancshares of NH 0.44 0.65 11.47 9.72 153.37
NSLB NS&L Bancorp of Neosho MO 0.41 0.64 16.52 16.52 84.46
NMSB Newmil Bancorp. of CT* 0.68 0.65 8.27 8.27 84.26
NASB North American SB of MO 3.85 3.74 24.35 23.56 305.38
NBSI North Bancshares of Chicago IL 0.58 0.81 16.95 16.95 119.95
FFFD North Central Bancshares of IA 1.02 1.18 14.81 14.81 65.34
NBN Northeast Bancorp of ME* 0.93 0.86 13.49 11.66 194.14
NEIB Northeast Indiana Bncrp of IN 0.94 1.11 14.87 14.87 98.06
NWEQ Northwest Equity Corp. of WI 0.88 1.11 13.22 13.22 115.48
NWSB Northwest SB, MHC of PA (29.9) 0.56 0.81 8.30 7.80 85.45
NSSY Norwalk Savings Society of CT* 2.42 2.77 20.69 19.95 256.81
NSSB Norwich Financial Corp. of CT* 1.42 1.35 14.70 13.27 131.66
NTMG Nutmeg FS&LA of CT 0.39 0.44 7.35 7.35 129.17
OHSL OHSL Financial Corp. of OH 1.09 1.56 21.21 21.21 192.15
OCFC Ocean Fin. Corp. of NJ 0.06 1.49 27.35 27.35 168.27
OCN Ocwen Financial Corp. of FL 2.59 1.88 8.40 8.40 98.86
OFCP Ottawa Financial Corp. of MI 0.82 1.32 15.31 12.29 175.39
PFFB PFF Bancorp of Pomona CA 0.21 0.61 14.51 14.36 140.60
PSFI PS Financial of Chicago IL 0.70 0.71 14.66 14.66 37.88
PVFC PVF Capital Corp. of OH 1.40 1.80 9.79 9.79 139.38
PCCI Pacific Crest Capital of CA* 1.11 1.04 8.95 8.95 126.32
PAMM PacificAmerica Money Ctr of CA* 3.64 3.64 13.26 13.26 59.13
PALM Palfed, Inc. of Aiken SC 0.13 0.76 10.37 10.37 125.83
PBCI Pamrapo Bancorp, Inc. of NJ 1.16 1.60 16.62 16.49 130.49
PFED Park Bancorp of Chicago IL 0.62 0.86 16.27 16.27 72.22
PVSA Parkvale Financial Corp of PA 1.72 2.54 18.54 18.40 244.45
PEEK Peekskill Fin. Corp. of NY 0.57 0.75 14.71 14.71 57.18
PFSB PennFed Fin. Services of NJ 1.43 2.09 20.17 16.87 274.11
PWBC PennFirst Bancorp of PA 0.56 0.84 9.41 8.59 133.10
PWBK Pennwood SB of PA* 0.46 0.73 15.30 15.30 78.57
PBKB People's SB of Brockton MA* 1.16 0.69 8.56 8.20 152.65
PFDC Peoples Bancorp of Auburn IN 1.39 1.82 19.23 19.23 126.46
PBCT Peoples Bank, MHC of CT (37.4)* 1.39 1.03 10.93 10.92 128.90
PFFC Peoples Fin. Corp. of OH 0.52 0.52 16.18 16.18 60.15
PHBK Peoples Heritage Fin Grp of ME* 2.36 2.39 15.77 13.29 204.27
PSFC Peoples Sidney Fin. Corp of OH 0.56 0.73 14.09 14.09 60.57
PERM Permanent Bancorp of IN 0.72 1.30 19.74 19.45 215.43
PMFI Perpetual Midwest Fin. of IA 0.25 0.61 18.00 18.00 210.96
PERT Perpetual of SC, MHC (46.8) 1.00 1.41 19.69 19.69 148.17
PCBC Perry Co. Fin. Corp. of MO 0.77 1.02 18.07 18.07 98.66
PHFC Pittsburgh Home Fin. of PA 0.69 0.88 14.21 14.06 130.15
PFSL Pocahnts Fed, MHC of AR (46.4) 1.39 1.93 14.76 14.76 232.05
POBS Portsmouth Bank Shrs Inc of NH(8)* 1.03 0.91 11.39 11.39 43.92
PTRS Potters Financial Corp of OH 1.16 2.06 21.97 21.97 248.85
PKPS Poughkeepsie Fin. Corp. of NY 0.24 0.37 5.85 5.85 69.88
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PHSB Ppls Home SB, MHC of PA (45.0) 14.75 2,760 18.3 14.75 13.62 14.00 5.36 N.A. N.A.
PRBC Prestige Bancorp of PA 16.50 915 15.1 16.75 10.25 16.00 3.13 N.A. 22.22
PETE Primary Bank of NH(8)* 25.75 2,089 53.8 26.75 11.31 25.50 0.98 N.A. 68.96
PFNC Progress Financial Corp. of PA 13.25 3,814 50.5 14.00 6.00 13.25 0.00 20.35 58.30
PSBK Progressive Bank, Inc. of NY* 30.50 3,821 116.5 32.00 19.33 30.37 0.43 128.12 34.07
PROV Provident Fin. Holdings of CA 19.62 4,920 96.5 20.12 10.87 19.00 3.26 N.A. 40.14
PULB Pulaski SB, MHC of MO (29.0) 21.00 2,094 12.6 22.00 12.37 20.50 2.44 N.A. 44.83
PLSK Pulaski SB, MHC of NJ (46.0) 14.37 2,070 13.7 14.37 11.50 13.87 3.60 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 20.62 3,071 63.3 21.00 15.50 20.50 0.59 66.69 30.92
QCFB QCF Bancorp of Virginia MN 23.50 1,426 33.5 25.00 14.75 23.50 0.00 N.A. 28.77
QCBC Quaker City Bancorp of CA 20.50 4,703 96.4 20.50 11.40 20.00 2.50 173.33 34.87
QCSB Queens County Bancorp of NY* 51.44 10,181 523.7 51.87 23.50 51.00 0.86 N.A. 62.89
RCSB RCSB Financial, Inc. of NY(8)* 47.75 14,591 696.7 51.75 26.12 46.98 1.64 287.90 64.66
RARB Raritan Bancorp. of Raritan NJ* 22.87 2,412 55.2 25.50 13.67 24.00 -4.71 255.12 47.55
REDF RedFed Bancorp of Redlands CA 15.75 7,174 113.0 16.87 9.62 16.12 -2.30 N.A. 16.67
RELY Reliance Bancorp, Inc. of NY 29.87 8,776 262.1 30.12 17.00 28.75 3.90 N.A. 53.18
RELI Reliance Bancshares Inc of WI(8)* 8.50 2,528 21.5 10.12 6.50 8.44 0.71 N.A. 25.93
RIVR River Valley Bancorp of IN 16.75 1,190 19.9 16.75 13.25 15.50 8.06 N.A. 21.82
RSLN Roslyn Bancorp, Inc. of NY* 23.87 43,642 1,041.7 24.31 15.00 23.81 0.25 N.A. N.A.
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 27.00 2,419 24.7 27.50 13.18 25.50 5.88 N.A. 69.70
SCCB S. Carolina Comm. Bnshrs of SC 21.06 704 14.8 25.25 15.00 22.50 -6.40 N.A. 40.40
SBFL SB Fngr Lakes MHC of NY (33.1) 18.50 1,785 10.9 18.50 12.75 18.25 1.37 N.A. 34.55
SFED SFS Bancorp of Schenectady NY 19.25 1,236 23.8 19.25 12.50 19.03 1.16 N.A. 30.51
SGVB SGV Bancorp of W. Covina CA 15.12 2,342 35.4 15.50 8.56 15.37 -1.63 N.A. 34.40
SISB SIS Bancorp Inc of MA* 30.00 5,577 167.3 30.37 18.87 30.37 -1.22 N.A. 31.18
SWCB Sandwich Co-Op. Bank of MA* 33.50 1,906 63.9 34.25 20.25 33.75 -0.74 288.63 12.61
SECP Security Capital Corp. of WI(8) 100.25 9,208 923.1 101.44 60.50 99.00 1.26 N.A. 35.93
SFSL Security First Corp. of OH 16.50 5,003 82.5 17.00 8.83 16.00 3.13 58.65 36.59
SFNB Security First Netwrk Bk of GA 11.62 8,426 97.9 28.25 5.50 11.00 5.64 N.A. 13.37
SMFC Sho-Me Fin. Corp. of MO(8) 38.00 1,499 57.0 40.25 17.00 38.00 0.00 N.A. 74.71
SOBI Sobieski Bancorp of S. Bend IN 16.25 760 12.4 16.50 11.75 16.37 -0.73 N.A. 12.07
SOSA Somerset Savings Bank of MA(8)* 4.00 16,652 66.6 4.00 1.44 3.97 0.76 -21.88 103.05
SSFC South Street Fin. Corp. of NC* 19.25 4,496 86.5 19.50 12.12 18.75 2.67 N.A. 37.50
SCBS Southern Commun. Bncshrs of AL 15.50 1,137 17.6 15.87 13.00 15.50 0.00 N.A. 16.98
SMBC Southern Missouri Bncrp of MO 17.25 1,638 28.3 18.00 13.50 17.25 0.00 N.A. 15.00
SWBI Southwest Bancshares of IL 20.87 2,652 55.3 21.75 17.83 20.75 0.58 108.70 14.36
SVRN Sovereign Bancorp of PA 14.87 70,010 1,041.0 16.50 8.54 15.56 -4.43 232.66 35.92
STFR St. Francis Cap. Corp. of WI 34.75 5,308 184.5 38.75 25.00 35.00 -0.71 N.A. 33.65
SPBC St. Paul Bancorp, Inc. of IL 23.12 33,988 785.8 24.37 13.23 22.37 3.35 107.73 47.54
STND Standard Fin. of Chicago IL(8) 25.25 16,210 409.3 25.62 16.25 25.25 0.00 N.A. 28.70
SFFC StateFed Financial Corp. of IA 21.50 784 16.9 22.75 15.50 21.75 -1.15 N.A. 30.30
SFIN Statewide Fin. Corp. of NJ 18.87 4,710 88.9 19.12 12.00 19.12 -1.31 N.A. 31.32
STSA Sterling Financial Corp. of WA 17.75 5,567 98.8 19.25 13.00 18.25 -2.74 95.27 25.71
SFSB SuburbFed Fin. Corp. of IL 27.00 1,262 34.1 27.50 16.25 27.50 -1.82 304.80 42.11
ROSE T R Financial Corp. of NY* 26.63 17,609 468.9 28.25 13.75 27.00 -1.37 N.A. 50.03
THRD TF Financial Corp. of PA 19.25 4,083 78.6 20.50 14.37 19.12 0.68 N.A. 18.46
TPNZ Tappan Zee Fin., Inc. of NY 17.50 1,497 26.2 17.62 12.00 17.62 -0.68 N.A. 28.49
ESBK The Elmira SB FSB of Elmira NY* 23.50 706 16.6 23.75 14.75 23.12 1.64 63.54 28.77
GRTR The Greater New York SB of NY(8)* 21.94 13,717 301.0 22.94 11.37 22.12 -0.81 135.66 61.09
TSBS Trenton SB, FSB MHC of NJ(35.0 28.13 9,037 87.7 28.13 13.50 24.50 14.82 N.A. 75.81
TRIC Tri-County Bancorp of WY 22.75 609 13.9 24.25 18.00 22.75 0.00 N.A. 26.39
TWIN Twin City Bancorp of TN 20.00 853 17.1 20.50 16.25 19.50 2.56 N.A. 15.94
UFRM United FS&LA of Rocky Mount NC 12.00 3,074 36.9 12.50 7.00 12.25 -2.04 269.23 41.18
UBMT United Fin. Corp. of MT 23.50 1,223 28.7 24.00 18.00 23.87 -1.55 123.81 22.08
VABF Va. Beach Fed. Fin. Corp of VA 13.62 4,976 67.8 15.00 7.75 14.00 -2.71 190.41 44.28
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C>
PHSB Ppls Home SB, MHC of PA (45.0) 0.32 0.67 14.36 14.36 82.97
PRBC Prestige Bancorp of PA 0.47 0.83 16.51 16.51 148.33
PETE Primary Bank of NH(8)* 1.24 1.47 14.33 14.31 206.65
PFNC Progress Financial Corp. of PA 0.54 0.65 5.78 5.10 109.77
PSBK Progressive Bank, Inc. of NY* 2.30 2.26 19.67 17.57 230.00
PROV Provident Fin. Holdings of CA 0.39 0.34 17.37 17.37 125.10
PULB Pulaski SB, MHC of MO (29.0) 0.59 0.82 11.04 11.04 84.92
PLSK Pulaski SB, MHC of NJ (46.0) 0.21 0.51 10.20 10.20 85.68
PULS Pulse Bancorp of S. River NJ 1.20 1.80 13.63 13.63 169.39
QCFB QCF Bancorp of Virginia MN 1.41 1.41 18.98 18.98 104.93
QCBC Quaker City Bancorp of CA 0.50 0.91 14.79 14.77 166.03
QCSB Queens County Bancorp of NY* 2.15 2.18 17.08 17.08 144.08
RCSB RCSB Financial, Inc. of NY(8)* 2.66 2.64 21.69 21.14 276.36
RARB Raritan Bancorp. of Raritan NJ* 1.46 1.55 12.48 12.27 157.31
REDF RedFed Bancorp of Redlands CA 0.15 0.57 10.36 10.35 126.66
RELY Reliance Bancorp, Inc. of NY 1.16 1.77 17.65 12.37 219.55
RELI Reliance Bancshares Inc of WI(8)* 0.28 0.28 8.89 8.89 18.53
RIVR River Valley Bancorp of IN 0.27 0.43 14.37 14.15 116.24
RSLN Roslyn Bancorp, Inc. of NY* 0.59 0.93 14.58 14.51 72.39
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 0.88 1.10 10.67 9.74 94.94
SCCB S. Carolina Comm. Bnshrs of SC 0.52 0.70 17.11 17.11 65.93
SBFL SB Fngr Lakes MHC of NY (33.1) 0.15 0.51 11.63 11.63 121.40
SFED SFS Bancorp of Schenectady NY 0.60 1.07 17.44 17.44 139.85
SGVB SGV Bancorp of W. Covina CA 0.31 0.75 12.77 12.56 174.78
SISB SIS Bancorp Inc of MA* 3.31 3.29 18.52 18.52 257.23
SWCB Sandwich Co-Op. Bank of MA* 2.24 2.27 20.55 19.59 249.34
SECP Security Capital Corp. of WI(8) 4.40 5.26 62.79 62.79 396.07
SFSL Security First Corp. of OH 1.28 1.62 11.88 11.67 126.88
SFNB Security First Netwrk Bk of GA -3.47 -3.58 3.79 3.73 9.44
SMFC Sho-Me Fin. Corp. of MO(8) 2.08 2.35 19.81 19.81 219.35
SOBI Sobieski Bancorp of S. Bend IN 0.30 0.60 16.03 16.03 104.05
SOSA Somerset Savings Bank of MA(8)* 0.25 0.24 1.96 1.96 30.90
SSFC South Street Fin. Corp. of NC* 0.45 0.57 13.58 13.58 53.77
SCBS Southern Commun. Bncshrs of AL 0.19 0.47 13.54 13.54 61.66
SMBC Southern Missouri Bncrp of MO 0.70 0.69 15.85 15.85 101.15
SWBI Southwest Bancshares of IL 1.05 1.44 15.69 15.69 142.66
SVRN Sovereign Bancorp of PA 0.62 0.96 6.25 4.71 155.67
STFR St. Francis Cap. Corp. of WI 1.77 1.95 24.43 21.59 310.01
SPBC St. Paul Bancorp, Inc. of IL 0.93 1.34 11.67 11.64 135.68
STND Standard Fin. of Chicago IL(8) 0.74 1.07 17.11 17.08 158.83
SFFC StateFed Financial Corp. of IA 1.17 1.42 19.43 19.43 109.28
SFIN Statewide Fin. Corp. of NJ 0.76 1.29 13.90 13.88 142.93
STSA Sterling Financial Corp. of WA 0.28 0.90 12.41 10.82 302.93
SFSB SuburbFed Fin. Corp. of IL 1.23 1.79 21.92 21.84 338.12
ROSE T R Financial Corp. of NY* 1.83 1.65 12.51 12.51 201.70
THRD TF Financial Corp. of PA 0.84 1.13 17.44 15.30 156.93
TPNZ Tappan Zee Fin., Inc. of NY 0.53 0.49 14.35 14.35 80.07
ESBK The Elmira SB FSB of Elmira NY* 1.13 1.10 20.32 19.48 322.70
GRTR The Greater New York SB of NY(8)* 1.38 0.74 11.75 11.75 187.40
TSBS Trenton SB, FSB MHC of NJ(35.0 0.86 0.73 11.79 10.81 69.82
TRIC Tri-County Bancorp of WY 1.10 1.40 22.50 22.50 146.89
TWIN Twin City Bancorp of TN 0.66 0.93 16.18 16.18 125.84
UFRM United FS&LA of Rocky Mount NC 0.19 0.33 6.70 6.70 89.63
UBMT United Fin. Corp. of MT 0.94 1.16 19.95 19.95 88.08
VABF Va. Beach Fed. Fin. Corp of VA 0.26 0.58 8.50 8.50 124.16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VFFC Virginia First Savings of VA(8) 24.00 5,805 139.3 24.00 11.87 23.75 1.05 ***.** 88.24
WHGB WHG Bancshares of MD 15.12 1,462 22.1 15.50 11.00 15.12 0.00 N.A. 15.24
WSFS WSFS Financial Corp. of DE* 14.25 12,421 177.0 15.12 7.75 14.25 0.00 96.55 39.84
WVFC WVS Financial Corp. of PA* 27.25 1,747 47.6 27.75 20.37 26.87 1.41 N.A. 10.68
WRNB Warren Bancorp of Peabody MA* 17.87 3,781 67.6 19.00 12.00 17.75 0.68 430.27 19.13
WFSL Washington FS&LA of Seattle WA 26.62 47,462 1,263.4 29.25 19.89 28.37 -6.17 82.45 10.50
WAMU Washington Mutual Inc. of WA* 62.37 126,357 7,880.9 69.12 35.00 64.19 -2.84 236.05 44.01
WYNE Wayne Bancorp of NJ 22.00 2,120 46.6 22.75 12.50 21.62 1.76 N.A. 44.26
WAYN Wayne S&L Co. MHC of OH (47.8) 17.75 2,248 12.7 19.25 12.67 18.25 -2.74 N.A. 8.70
WCFB Wbstr Cty FSB MHC of IA (45.2) 16.50 2,100 15.7 17.50 12.50 17.50 -5.71 N.A. 20.00
WBST Webster Financial Corp. of CT 50.00 11,985 599.3 51.87 30.62 51.75 -3.38 429.66 36.05
WEFC Wells Fin. Corp. of Wells MN 16.50 1,959 32.3 16.50 11.75 16.00 3.13 N.A. 25.76
WCBI WestCo Bancorp of IL 26.25 2,476 65.0 26.75 20.00 26.00 0.96 162.50 22.09
WSTR WesterFed Fin. Corp. of MT 21.75 5,565 121.0 23.50 14.25 22.87 -4.90 N.A. 19.18
WOFC Western Ohio Fin. Corp. of OH 24.00 2,312 55.5 24.00 19.62 23.25 3.23 N.A. 10.34
WWFC Westwood Fin. Corp. of NJ 23.25 645 15.0 23.25 10.37 20.00 16.25 N.A. 40.91
WEHO Westwood Hmstd Fin Corp of OH 15.37 2,795 43.0 16.00 10.37 15.37 0.00 N.A. 26.82
WFI Winton Financial Corp. of OH 16.00 1,986 31.8 16.75 11.25 15.50 3.23 N.A. 39.13
FFWD Wood Bancorp of OH 16.50 2,119 35.0 16.50 9.00 16.50 0.00 N.A. 45.63
YFCB Yonkers Fin. Corp. of NY 16.75 3,036 50.9 17.62 10.25 16.75 0.00 N.A. 30.15
YFED York Financial Corp. of PA 25.50 7,008 178.7 26.75 14.54 25.50 0.00 169.84 56.92
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C>
VFFC Virginia First Savings of VA(8) 1.81 1.66 11.35 10.96 140.79
WHGB WHG Bancshares of MD 0.34 0.34 14.16 14.16 68.56
WSFS WSFS Financial Corp. of DE* 1.47 1.48 6.32 6.27 121.45
WVFC WVS Financial Corp. of PA* 1.69 2.11 18.83 18.83 168.69
WRNB Warren Bancorp of Peabody MA* 2.01 1.71 9.82 9.82 94.69
WFSL Washington FS&LA of Seattle WA 1.94 2.14 14.66 13.39 121.37
WAMU Washington Mutual Inc. of WA* 1.14 2.42 19.30 18.32 385.92
WYNE Wayne Bancorp of NJ 0.50 0.50 16.44 16.44 123.13
WAYN Wayne S&L Co. MHC of OH (47.8) 0.32 0.73 10.28 10.28 112.18
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.48 0.64 10.53 10.53 45.09
WBST Webster Financial Corp. of CT 1.60 2.86 24.91 21.28 495.93
WEFC Wells Fin. Corp. of Wells MN 0.73 1.08 14.64 14.64 103.13
WCBI WestCo Bancorp of IL 1.41 1.78 19.18 19.18 125.85
WSTR WesterFed Fin. Corp. of MT 0.81 1.02 18.73 14.99 171.72
WOFC Western Ohio Fin. Corp. of OH 0.48 0.69 23.21 21.87 173.04
WWFC Westwood Fin. Corp. of NJ 0.78 1.34 15.76 14.04 172.70
WEHO Westwood Hmstd Fin Corp of OH 0.30 0.45 14.17 14.17 48.18
WFI Winton Financial Corp. of OH 1.60 1.34 11.36 11.12 159.81
FFWD Wood Bancorp of OH 0.79 0.94 9.52 9.52 77.36
YFCB Yonkers Fin. Corp. of NY 0.76 1.02 14.14 14.14 94.89
YFED York Financial Corp. of PA 1.01 1.29 14.28 14.28 165.87
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
______________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(304) 13.04 12.79 0.54 5.57 3.54 0.75 7.52 0.80 124.72 0.82
NYSE Traded Companies(8) 5.98 5.71 0.52 8.36 4.43 0.70 12.24 1.26 77.65 1.32
AMEX Traded Companies(17) 15.84 15.76 0.66 4.79 3.08 0.97 7.08 0.63 116.33 0.72
NASDAQ Listed OTC Companies(279) 13.08 12.83 0.53 5.53 3.55 0.73 7.40 0.80 126.79 0.81
California Companies(21) 7.44 7.18 0.31 4.97 2.94 0.41 6.70 2.30 64.66 1.36
Florida Companies(6) 7.62 7.24 0.90 11.26 3.96 0.80 9.84 0.62 87.78 0.66
Mid-Atlantic Companies(58) 10.80 10.44 0.63 6.53 4.15 0.87 9.06 0.82 101.18 0.92
Mid-West Companies(147) 14.10 13.92 0.68 5.39 3.83 0.90 7.12 0.64 143.21 0.70
New England Companies(10) 8.46 8.09 0.38 4.70 3.11 0.62 7.96 0.60 121.61 1.05
North-West Companies(7) 15.91 15.62 0.83 6.61 3.59 1.04 8.85 0.68 127.72 0.61
South-East Companies(42) 16.73 16.53 -0.10 4.71 2.03 0.13 6.65 0.90 124.35 0.87
South-West Companies(7) 10.80 10.54 0.38 2.90 2.41 0.66 6.39 0.65 100.15 0.71
Western Companies (Excl CA)(6) 16.19 15.79 0.99 6.65 4.57 1.16 7.70 0.31 139.06 0.72
Thrift Strategy(240) 14.22 14.00 0.66 5.07 3.63 0.89 6.98 0.73 128.65 0.74
Mortgage Banker Strategy(37) 7.48 7.04 0.51 7.18 3.79 0.65 9.42 1.05 100.28 1.01
Real Estate Strategy(11) 7.36 7.17 0.55 6.99 4.18 0.77 10.37 1.41 103.85 1.37
Diversified Strategy(12) 11.24 11.00 -2.27 13.29 1.03 -2.32 14.65 0.77 135.26 1.12
Retail Banking Strategy(4) 8.40 8.19 0.11 2.23 0.78 0.03 1.72 1.76 147.14 1.83
Companies Issuing Dividends(254) 13.24 12.98 0.69 5.96 3.97 0.92 7.94 0.69 127.50 0.78
Companies Without Dividends(50) 11.87 11.75 -0.30 3.34 1.16 -0.19 5.11 1.57 106.18 1.07
Equity/Assets (less than)6%(23) 4.92 4.62 0.41 8.17 4.18 0.56 11.31 1.70 84.01 1.05
Equity/Assets 6-12%(147) 8.65 8.32 0.56 6.58 3.89 0.75 8.80 0.89 122.54 0.92
Equity/Assets >12%(134) 18.92 18.78 0.54 4.07 3.08 0.78 5.54 0.52 135.75 0.67
Converted Last 3 Mths (no MHC)(5) 21.15 21.15 0.67 3.02 2.55 0.74 3.45 1.95 27.73 0.58
Actively Traded Companies(42) 8.62 8.38 0.74 9.01 4.95 0.95 11.89 1.31 98.15 0.97
Market Value Below $20 Million(63) 15.16 15.08 0.55 3.57 2.99 0.80 5.59 0.70 101.98 0.67
Holding Company Structure(269) 13.42 13.20 0.64 5.34 3.60 0.86 7.28 0.80 119.72 0.80
Assets Over $1 Billion(62) 7.81 7.30 0.62 8.12 4.08 0.81 10.91 0.94 97.19 0.98
Assets $500 Million-$1 Billion(49) 10.12 9.82 0.65 6.79 4.15 0.80 8.14 1.10 173.56 1.06
Assets $250-$500 Million(68) 11.10 10.78 0.58 5.34 3.71 0.81 7.53 0.71 122.22 0.73
Assets less than $250 Million(125) 17.58 17.52 0.44 4.02 2.98 0.66 5.68 0.66 119.79 0.70
Goodwill Companies(121) 9.23 8.62 0.34 6.80 3.77 0.50 8.99 0.81 110.93 0.90
Non-Goodwill Companies(181) 15.44 15.44 0.67 4.77 3.40 0.91 6.58 0.80 132.94 0.76
Acquirors of FSLIC Cases(10) 7.19 6.79 0.57 7.79 4.31 0.82 11.71 1.48 56.52 0.89
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
______________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(304) 21.05 135.66 17.06 140.35 18.28 0.36 1.71 35.44
NYSE Traded Companies(8) 21.61 181.67 10.58 193.62 14.94 0.29 0.81 17.23
AMEX Traded Companies(17) 21.75 123.34 20.49 124.30 19.31 0.42 2.14 44.64
NASDAQ Listed OTC Companies(279) 20.99 134.96 17.05 139.63 18.33 0.36 1.71 35.66
California Companies(21) 20.92 147.53 10.38 154.64 17.86 0.15 0.54 12.59
Florida Companies(6) 18.97 156.02 17.49 176.08 20.95 0.24 0.85 13.78
Mid-Atlantic Companies(58) 20.93 140.49 14.67 145.83 16.91 0.39 1.68 37.11
Mid-West Companies(147) 20.93 129.44 17.27 132.51 18.21 0.36 1.81 36.36
New England Companies(10) 23.02 142.92 11.69 153.73 20.84 0.43 1.60 34.27
North-West Companies(7) 17.78 158.57 21.89 165.90 17.88 0.35 1.41 26.99
South-East Companies(42) 21.72 140.89 24.31 145.05 20.29 0.41 1.98 42.26
South-West Companies(7) 21.09 119.49 12.30 126.86 17.59 0.35 1.71 52.02
Western Companies (Excl CA)(6) 22.42 135.00 20.18 140.88 19.02 0.56 2.80 54.77
Thrift Strategy(240) 21.35 128.57 17.64 132.48 18.51 0.37 1.83 38.17
Mortgage Banker Strategy(37) 20.38 165.22 11.92 176.24 18.07 0.34 1.23 27.83
Real Estate Strategy(11) 18.95 155.33 11.08 158.06 15.45 0.13 0.77 11.26
Diversified Strategy(12) 19.66 206.55 30.54 213.74 16.54 0.40 1.34 29.94
Retail Banking Strategy(4) 17.27 122.53 10.00 126.51 16.78 0.20 1.26 18.18
Companies Issuing Dividends(254) 21.06 136.86 17.04 141.86 18.13 0.43 2.01 41.69
Companies Without Dividends(50) 20.98 128.60 17.16 131.46 19.48 0.00 0.00 0.00
Equity/Assets (less than)6%(23) 19.68 171.92 9.33 182.24 16.54 0.22 0.83 15.13
Equity/Assets 6-12%(147) 20.03 145.97 12.72 153.23 16.79 0.38 1.60 33.90
Equity/Assets >12%(134) 22.79 119.54 22.83 121.05 20.40 0.37 1.97 41.71
Converted Last 3 Mths (no MHC)(5) 28.19 118.89 25.08 118.89 27.98 0.00 0.00 0.00
Actively Traded Companies(42) 19.25 168.42 14.03 174.16 15.83 0.49 1.74 31.67
Market Value Below $20 Million(63) 22.84 110.87 16.65 111.95 19.72 0.33 1.96 41.30
Holding Company Structure(269) 21.43 133.21 17.07 137.34 18.50 0.37 1.76 36.83
Assets Over $1 Billion(62) 20.35 168.63 13.59 182.06 17.11 0.44 1.37 29.78
Assets $500 Million-$1 Billion(49) 19.43 148.92 15.14 153.97 17.94 0.34 1.55 36.51
Assets $250-$500 Million(68) 20.48 134.89 14.62 140.17 17.18 0.36 1.75 32.01
Assets less than $250 Million(125) 22.54 116.43 20.66 117.10 19.67 0.33 1.89 40.44
Goodwill Companies(121) 20.23 151.64 14.02 163.47 17.24 0.39 1.56 32.14
Non-Goodwill Companies(181) 21.70 125.03 18.97 125.03 19.05 0.34 1.80 37.97
Acquirors of FSLIC Cases(10) 20.02 166.97 11.63 179.44 15.93 0.38 1.42 23.87
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances; ROI (return on investment) is current EPS divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations.
The information provided in this report has been obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
</TABLE>
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
_____________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(69) 11.82 11.44 1.18 11.52 7.03 1.19 11.51 0.95 136.91 1.46
NYSE Traded Companies(3) 7.58 6.00 0.77 10.55 5.56 0.78 10.86 1.88 43.17 1.03
AMEX Traded Companies(5) 12.79 12.59 0.86 9.07 5.30 0.86 9.14 1.05 244.27 1.38
NASDAQ Listed OTC Companies(61) 11.97 11.65 1.23 11.83 7.29 1.25 11.78 0.89 131.58 1.49
California Companies(4) 12.01 12.00 2.20 19.75 8.96 2.16 19.13 2.23 65.22 1.58
Mid-Atlantic Companies(18) 11.50 10.83 0.83 8.60 4.77 0.92 9.21 0.89 127.25 1.40
Mid-West Companies(2) 25.06 23.63 0.43 1.59 1.68 0.66 2.42 0.73 42.12 0.53
New England Companies(36) 8.99 8.69 1.27 13.74 8.97 1.22 13.16 0.93 158.24 1.67
North-West Companies(4) 10.54 10.19 1.00 9.60 4.94 1.07 11.27 0.37 154.33 1.05
South-East Companies(5) 27.94 27.94 1.14 4.39 3.35 1.23 4.70 0.70 111.46 0.77
Thrift Strategy(45) 13.14 12.70 1.14 10.09 6.86 1.14 9.89 0.90 143.83 1.41
Mortgage Banker Strategy(10) 8.83 8.62 0.86 11.23 6.17 0.95 11.87 0.71 135.17 1.41
Real Estate Strategy(6) 8.98 8.96 1.37 15.17 8.37 1.28 14.30 1.08 103.33 1.46
Diversified Strategy(7) 9.09 8.68 1.82 19.94 8.65 1.87 20.98 1.57 122.62 1.93
Retail Banking Strategy(1) 6.30 6.04 0.36 5.66 4.81 0.35 5.51 0.66 97.39 0.85
Companies Issuing Dividends(56) 11.17 10.75 1.01 10.62 6.04 1.02 10.63 0.80 145.09 1.40
Companies Without Dividends(13) 14.98 14.83 1.98 16.43 11.86 2.00 16.30 1.68 99.27 1.75
Equity/Assets (less than)6%(5) 5.36 5.21 0.85 15.18 6.37 0.84 15.26 1.28 74.02 1.47
Equity/Assets 6-12%(47) 8.62 8.14 1.20 12.97 8.34 1.18 12.76 0.93 131.75 1.55
Equity/Assets >12%(17) 22.28 22.10 1.23 6.63 3.86 1.32 7.07 0.91 172.99 1.22
Actively Traded Companies(23) 8.66 8.25 1.13 13.30 7.53 1.10 13.10 0.82 140.05 1.49
Market Value Below $20 Million(8) 17.12 16.72 1.22 5.30 9.76 1.31 5.76 1.28 68.04 1.26
Holding Company Structure(46) 13.23 12.88 1.27 11.04 7.00 1.29 11.19 0.88 137.42 1.50
Assets Over $1 Billion(18) 8.82 8.18 1.01 12.27 6.25 1.07 12.91 0.93 127.52 1.48
Assets $500 Million-$1 Billion(16) 9.59 9.03 1.18 12.97 7.50 1.14 12.38 0.93 139.89 1.58
Assets $250-$500 Million(16) 10.93 10.82 1.01 10.76 6.27 1.00 10.62 0.73 154.64 1.59
Assets less than $250 Million(19) 17.35 17.16 1.48 10.14 8.01 1.51 10.11 1.19 128.34 1.21
Goodwill Companies(32) 9.11 8.32 0.91 11.11 6.30 0.94 11.26 1.05 120.49 1.49
Non-Goodwill Companies(37) 14.26 14.26 1.41 11.91 7.69 1.42 11.73 0.87 153.32 1.43
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
_____________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(69) 14.80 156.17 17.62 162.73 15.92 0.47 1.75 27.40
NYSE Traded Companies(3) 18.17 183.14 14.13 174.21 17.96 0.39 0.80 15.59
AMEX Traded Companies(5) 14.39 147.77 17.36 152.55 13.93 0.62 2.52 34.16
NASDAQ Listed OTC Companies(61) 14.60 155.38 17.85 163.31 15.91 0.46 1.72 27.71
California Companies(4) 12.36 164.63 20.52 164.82 13.28 0.00 0.00 0.00
Mid-Atlantic Companies(18) 18.30 155.04 17.70 166.26 18.43 0.48 1.74 36.99
Mid-West Companies(2) 0.00 97.89 24.53 103.82 0.00 0.00 0.00 0.00
New England Companies(36) 12.77 161.74 14.11 168.37 13.46 0.52 2.09 27.47
North-West Companies(4) 18.50 170.08 19.20 175.10 20.88 0.49 1.62 27.22
South-East Companies(5) 22.53 122.46 33.46 122.46 24.84 0.60 1.53 27.78
Thrift Strategy(45) 15.44 149.40 18.51 155.72 16.42 0.51 1.87 31.22
Mortgage Banker Strategy(10) 15.10 170.04 14.82 175.70 16.29 0.36 1.56 17.82
Real Estate Strategy(6) 12.36 164.84 14.76 165.00 12.81 0.20 1.06 11.07
Diversified Strategy(7) 10.86 192.16 18.41 205.87 13.62 0.48 1.42 17.10
Retail Banking Strategy(1) 20.80 115.65 7.28 120.64 21.36 0.64 2.72 56.64
Companies Issuing Dividends(56) 15.78 157.95 17.09 165.79 16.68 0.56 2.10 33.63
Companies Without Dividends(13) 9.66 147.83 20.19 148.68 12.11 0.00 0.00 0.00
Equity/Assets (less than)6%(5) 14.03 215.75 12.66 220.57 18.26 0.38 1.26 16.86
Equity/Assets 6-12%(47) 14.07 160.74 14.23 169.68 14.26 0.53 1.97 27.87
Equity/Assets >12%(17) 19.27 128.73 28.06 130.18 21.20 0.34 1.31 29.40
Actively Traded Companies(23) 13.35 162.69 14.26 172.09 14.82 0.56 2.01 27.11
Market Value Below $20 Million(8) 13.25 110.94 18.44 115.31 17.40 0.27 1.45 29.39
Holding Company Structure(46) 15.30 152.96 19.61 162.38 16.50 0.49 1.76 27.24
Assets Over $1 Billion(18) 16.07 180.36 17.09 187.57 17.47 0.56 1.76 25.60
Assets $500 Million-$1 Billion(16) 14.48 159.19 14.84 176.69 15.26 0.50 1.84 27.63
Assets $250-$500 Million(16) 14.25 153.29 15.86 155.09 14.19 0.42 1.80 27.32
Assets less than $250 Million(19) 14.30 136.40 22.07 138.58 16.42 0.40 1.60 28.81
Goodwill Companies(32) 15.61 161.38 14.57 175.71 16.79 0.51 1.87 28.40
Non-Goodwill Companies(37) 13.99 151.49 20.37 151.49 15.04 0.43 1.63 26.47
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances; ROI (return on investment) is current EPS divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations.
The information provided in this report has been obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. MHC Institutions
_________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(22) 11.94 11.71 0.59 5.18 2.70 0.86 7.79 0.47 180.69 0.79
BIF-Insured Thrifts(2) 10.02 10.02 0.72 8.22 3.31 0.71 7.56 1.85 82.27 1.77
NASDAQ Listed OTC Companies(24) 11.76 11.55 0.60 5.47 2.76 0.85 7.77 0.61 170.33 0.88
Florida Companies(3) 9.48 9.36 0.66 7.02 3.23 0.93 9.86 0.44 122.12 0.77
Mid-Atlantic Companies(11) 12.62 12.22 0.54 4.29 2.25 0.78 6.50 0.85 178.12 1.00
Mid-West Companies(7) 11.74 11.73 0.56 5.11 3.01 0.88 8.20 0.35 172.11 0.62
New England Companies(1) 8.48 8.47 1.12 13.72 5.20 0.83 10.17 0.90 121.39 1.60
South-East Companies(1) 13.29 13.29 0.75 6.48 2.56 1.06 9.13 0.23 290.91 1.01
Thrift Strategy(22) 11.92 11.70 0.57 5.05 2.64 0.85 7.65 0.60 173.05 0.85
Diversified Strategy(1) 8.48 8.47 1.12 13.72 5.20 0.83 10.17 0.90 121.39 1.60
Companies Issuing Dividends(23) 11.48 11.26 0.61 5.63 2.79 0.85 7.92 0.61 170.33 0.86
Companies Without Dividends(1) 17.31 17.31 0.39 2.23 2.17 0.81 4.67 0.00 0.00 1.40
Equity/Assets 6-12%(16) 9.37 9.16 0.51 5.81 2.84 0.76 8.49 0.70 128.72 0.97
Equity/Assets >12%(8) 16.52 16.32 0.77 4.79 2.59 1.01 6.33 0.41 260.48 0.72
Actively Traded Companies(1) 9.42 8.40 0.58 6.23 2.88 0.91 9.74 0.68 83.02 1.06
Holding Company Structure(1) 9.42 8.40 0.58 6.23 2.88 0.91 9.74 0.68 83.02 1.06
Assets Over $1 Billion(5) 8.80 8.22 0.77 8.83 3.72 0.92 10.39 0.68 116.42 1.18
Assets $500 Million-$1 Billion(4) 12.31 11.82 0.79 5.69 2.75 0.90 7.04 0.53 66.53 0.54
Assets $250-$500 Million(4) 10.00 9.98 0.53 5.75 3.34 0.84 9.17 0.25 419.95 0.59
Assets less than $250 Million(11) 13.99 13.99 0.47 3.40 1.98 0.79 5.93 0.78 110.67 0.98
Goodwill Companies(9) 9.75 9.20 0.75 7.62 3.31 0.88 9.23 0.57 132.20 0.92
Non-Goodwill Companies(15) 12.99 12.99 0.51 4.14 2.43 0.82 6.87 0.64 198.06 0.86
MHC Institutions(24) 11.76 11.55 0.60 5.47 2.76 0.85 7.77 0.61 170.33 0.88
MHC Converted Last 3 Months(1) 17.31 17.31 0.39 2.23 2.17 0.81 4.67 0.00 0.00 1.40
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. MHC Institutions
_________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(22) 19.61 176.57 20.68 181.74 22.93 0.64 2.71 54.23
BIF-Insured Thrifts(2) 19.24 216.41 21.25 216.52 25.97 0.52 2.38 48.92
NASDAQ Listed OTC Companies(24) 19.49 180.36 20.73 185.05 23.12 0.63 2.68 53.64
Florida Companies(3) 22.32 203.87 19.00 207.18 19.16 1.03 3.30 68.29
Mid-Atlantic Companies(11) 0.00 173.96 21.52 182.64 24.37 0.39 1.91 46.25
Mid-West Companies(7) 16.91 165.60 19.34 165.85 21.96 0.70 3.52 67.16
New England Companies(1) 19.24 244.74 20.75 244.96 25.97 0.68 2.54 48.92
South-East Companies(1) 0.00 198.07 26.32 198.07 27.66 1.40 3.59 0.00
Thrift Strategy(22) 19.61 177.14 20.73 182.06 22.93 0.63 2.68 54.23
Diversified Strategy(1) 19.24 244.74 20.75 244.96 25.97 0.68 2.54 48.92
Companies Issuing Dividends(23) 19.49 184.25 20.88 189.17 23.20 0.66 2.81 60.35
Companies Without Dividends(1) 0.00 102.72 17.78 102.72 22.01 0.00 0.00 0.00
Equity/Assets 6-12%(16) 19.49 185.89 17.28 191.38 22.22 0.62 2.58 63.16
Equity/Assets >12%(8) 0.00 169.31 27.62 172.40 25.10 0.66 2.87 20.35
Actively Traded Companies(1) 0.00 207.24 19.52 232.41 22.20 0.48 1.73 60.00
Holding Company Structure(1) 0.00 207.24 19.52 232.41 22.20 0.48 1.73 60.00
Assets Over $1 Billion(5) 20.78 219.76 19.37 234.50 22.98 0.69 2.25 61.55
Assets $500 Million-$1 Billion(4) 0.00 202.50 25.64 210.26 21.00 0.68 2.70 40.70
Assets $250-$500 Million(4) 16.91 170.12 17.00 170.49 20.49 0.69 3.17 67.16
Assets less than $250 Million(11) 0.00 155.65 21.51 155.65 25.35 0.55 2.68 0.00
Goodwill Companies(9) 20.78 214.75 21.22 227.06 22.65 0.64 2.22 59.72
Non-Goodwill Companies(15) 16.91 159.20 20.43 159.20 23.41 0.63 2.96 32.37
MHC Institutions(24) 19.49 180.36 20.73 185.05 23.12 0.63 2.68 53.64
MHC Converted Last 3 Months(1) 0.00 102.72 17.78 102.72 22.01 0.00 0.00 0.00
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995. Percent change figures are actual year-to-date and
are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing twelve month common earnings and
average common equity and assets balances; ROI (return on investment) is current EPS divided by current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk. Parentheses following market averages indicate the
number of institutions included in the respective averages. All figures have been adjusted for stock splits, stock
dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies, and RP Financial, Inc. calculations.
The information provided in this report has been obtained from sources we believe are reliable, but we cannot
guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 4.17 3.55 0.39 9.68 3.97 0.62 15.44 1.90 42.90 1.25
CSA Coast Savings Financial of CA 4.92 4.86 0.21 4.28 2.19 0.53 10.73 1.40 65.70 1.37
CFB Commercial Federal Corp. of NE 6.00 5.32 0.65 11.03 5.05 0.91 15.55 0.89 76.36 0.91
DME Dime Bancorp, Inc. of NY* 5.27 5.03 0.56 10.57 5.42 0.71 13.39 1.57 31.98 0.85
DSL Downey Financial Corp. of CA 6.93 6.84 0.44 5.82 3.96 0.73 9.68 0.95 55.76 0.58
FRC First Republic Bancorp of CA* 7.17 7.17 0.70 11.10 6.30 0.60 9.46 1.19 69.68 0.94
FED FirstFed Fin. Corp. of CA 4.83 4.77 0.29 6.19 3.35 0.53 11.34 1.39 134.39 2.46
GSB Glendale Fed. Bk, FSB of CA 5.53 4.91 0.26 4.71 2.76 0.61 11.03 1.46 69.38 1.36
GDW Golden West Fin. Corp. of CA 6.37 6.37 1.02 16.09 8.54 1.24 19.62 1.31 42.43 0.68
GPT GreenPoint Fin. Corp. of NY* 10.31 5.79 1.06 9.99 4.95 1.03 9.74 2.89 27.84 1.30
WES Westcorp Inc. of Orange CA 9.05 9.02 0.87 9.10 5.59 0.43 4.51 0.74 134.25 1.95
AMEX Traded Companies
_____________________
ANA Acadiana Bancshares of LA* 17.43 17.43 0.50 3.67 2.17 0.50 3.67 0.51 192.62 1.37
BKC American Bank of Waterbury CT* 8.29 7.95 1.27 15.35 8.29 1.10 13.19 1.81 48.13 1.45
BFD BostonFed Bancorp of MA 8.90 8.60 0.47 4.33 3.28 0.65 5.95 0.52 114.29 0.74
CFX CFX Corp of NH* 7.44 6.96 0.94 11.53 5.83 1.12 13.73 0.72 120.07 1.23
CBK Citizens First Fin.Corp. of IL 14.08 14.08 0.29 1.95 1.79 0.58 3.84 0.59 37.65 0.26
ESX Essex Bancorp of VA(8) 0.27 0.17 -0.03 -16.67 -2.50 0.03 16.67 2.63 42.63 1.34
FCB Falmouth Co-Op Bank of MA* 23.88 23.88 0.84 3.43 3.06 0.79 3.23 0.07 806.45 0.98
FAB FirstFed America Bancorp of MA 12.16 12.16 -0.20 -2.35 -1.11 0.47 5.61 0.40 235.98 1.10
GAF GA Financial Corp. of PA 15.18 15.02 1.00 5.26 4.64 1.27 6.71 0.12 132.49 0.43
JSB JSB Financial, Inc. of NY 22.17 22.17 1.77 8.09 6.23 1.68 7.68 NA NA 0.62
KNK Kankakee Bancorp of IL 11.09 10.42 0.66 6.35 5.42 0.82 7.92 0.94 67.06 0.92
KYF Kentucky First Bancorp of KY 16.11 16.11 0.80 3.99 4.20 1.06 5.27 0.14 295.31 0.77
NYB New York Bancorp, Inc. of NY 5.08 5.08 1.38 26.83 6.41 1.62 31.44 1.22 48.76 0.97
PDB Piedmont Bancorp of NC 16.63 16.63 -0.42 -1.94 -1.73 0.66 3.07 0.91 71.58 0.79
SSB Scotland Bancorp of NC 37.02 37.02 1.41 3.88 3.00 1.72 4.72 NA NA 0.50
SZB SouthFirst Bancshares of AL 13.98 13.98 0.05 0.31 0.31 0.27 1.89 0.64 44.97 0.40
SRN Southern Banc Company of AL 16.90 16.72 0.15 0.82 0.84 0.51 2.77 NA NA NA
SSM Stone Street Bancorp of NC 28.85 28.85 1.43 4.18 3.72 1.71 5.02 0.27 187.50 0.62
TSH Teche Holding Company of LA 13.30 13.30 0.73 5.04 4.27 1.01 6.94 NA NA 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.70 15.70 1.41 8.40 5.82 1.74 10.38 0.46 145.12 0.79
THR Three Rivers Fin. Corp. of MI 13.76 13.76 0.57 3.94 3.75 0.82 5.68 1.21 44.02 0.80
TBK Tolland Bank of CT* 6.94 6.74 0.75 11.37 7.16 0.78 11.89 2.13 54.09 1.87
WSB Washington SB, FSB of MD 8.30 8.30 0.50 6.00 4.29 0.73 8.80 NA NA 0.92
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN 8.26 8.09 0.31 3.80 3.28 0.13 1.61 0.94 45.77 0.66
AFED AFSALA Bancorp, Inc. of NY 13.68 13.68 0.59 4.34 3.84 0.59 4.34 NA NA 1.38
ALBK ALBANK Fin. Corp. of Albany NY 9.20 8.04 0.84 9.16 6.01 1.04 11.28 0.91 78.77 0.99
AMFC AMB Financial Corp. of IN 14.95 14.95 0.73 4.14 4.40 0.81 4.57 0.81 49.41 0.53
ASBP ASB Financial Corp. of OH 15.73 15.73 0.60 3.01 3.15 0.88 4.40 1.58 50.98 1.22
ABBK Abington Savings Bank of MA* 6.92 6.23 0.82 12.05 7.38 0.73 10.71 0.20 211.97 0.69
AABC Access Anytime Bancorp of NM 7.44 7.44 -0.50 -8.75 -6.80 -0.12 -2.14 1.60 29.31 0.92
AFBC Advance Fin. Bancorp of WV 15.45 15.45 0.39 4.31 2.28 0.79 8.74 0.37 89.84 0.40
AADV Advantage Bancorp of WI 9.21 8.62 0.40 4.49 2.87 0.89 9.94 0.44 128.03 1.01
AFCB Affiliated Comm BC, Inc of MA 9.78 9.72 0.96 9.78 6.12 1.09 11.12 0.39 191.75 1.20
ALBC Albion Banc Corp. of Albion NY 8.90 8.90 0.09 0.93 0.91 0.38 3.93 0.60 79.55 0.65
ABCL Allied Bancorp of IL 8.91 8.80 0.52 5.86 2.90 0.76 8.56 0.15 257.09 0.53
ATSB AmTrust Capital Corp. of IN 10.17 10.06 0.29 2.88 3.17 0.19 1.87 2.84 23.48 0.93
AHCI Ambanc Holding Co., Inc. of NY* 12.72 12.72 -0.62 -4.16 -4.13 -0.62 -4.16 1.06 72.94 1.47
<CAPTION>
Pricing Ratios Dividend Data(6)
_______________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
_____________________
AHM Ahmanson and Co. H.F. of CA 25.19 245.06 10.21 287.60 15.78 0.88 1.76 44.44
CSA Coast Savings Financial of CA NM 187.82 9.24 190.19 18.22 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 19.79 205.16 12.32 231.37 14.03 0.28 0.69 13.66
DME Dime Bancorp, Inc. of NY* 18.45 189.72 10.00 198.87 14.56 0.16 0.83 15.24
DSL Downey Financial Corp. of CA 25.22 142.14 9.85 144.12 15.17 0.32 1.48 37.21
FRC First Republic Bancorp of CA* 15.87 149.46 10.72 149.55 18.61 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 29.87 176.33 8.51 178.29 16.30 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA NM 160.66 8.88 180.74 15.48 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 11.71 179.82 11.46 179.82 9.60 0.44 0.56 6.53
GPT GreenPoint Fin. Corp. of NY* 20.19 210.25 21.68 NM 20.71 1.00 1.56 31.55
WES Westcorp Inc. of Orange CA 17.90 156.33 14.15 156.83 NM 0.40 2.01 36.04
AMEX Traded Companies
_____________________
ANA Acadiana Bancshares of LA* NM 129.46 22.56 129.46 NM 0.36 1.67 NM
BKC American Bank of Waterbury CT* 12.06 173.40 14.37 180.62 14.03 1.44 3.81 46.01
BFD BostonFed Bancorp of MA NM 138.49 12.32 143.38 22.16 0.28 1.44 43.75
CFX CFX Corp of NH* 17.15 179.37 13.34 191.77 14.40 0.88 4.66 NM
CBK Citizens First Fin.Corp. of IL NM 113.64 16.00 113.64 28.39 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 1.11 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 110.39 26.36 110.39 NM 0.20 1.18 38.46
FAB FirstFed America Bancorp of MA NM 132.82 16.15 132.82 NM 0.00 0.00 NM
GAF GA Financial Corp. of PA 21.56 121.05 18.37 122.34 16.91 0.48 2.78 60.00
JSB JSB Financial, Inc. of NY 16.05 128.02 28.38 128.02 16.91 1.40 3.17 50.91
KNK Kankakee Bancorp of IL 18.44 112.34 12.46 119.53 14.79 0.48 1.61 29.63
KYF Kentucky First Bancorp of KY 23.81 116.21 18.72 116.21 18.03 0.50 3.96 NM
NYB New York Bancorp, Inc. of NY 15.59 NM 20.30 NM 13.31 0.60 1.94 30.30
PDB Piedmont Bancorp of NC NM 148.25 24.65 148.25 NM 0.40 3.64 NM
SSB Scotland Bancorp of NC NM 126.49 46.83 126.49 27.42 0.30 1.76 58.82
SZB SouthFirst Bancshares of AL NM 103.48 14.46 103.48 NM 0.50 3.05 NM
SRN Southern Banc Company of AL NM 107.49 18.16 108.62 NM 0.35 2.26 NM
SSM Stone Street Bancorp of NC 26.88 133.29 38.45 133.29 22.40 0.45 2.09 56.25
TSH Teche Holding Company of LA 23.44 123.11 16.38 123.11 17.05 0.50 2.67 62.50
FTF Texarkana Fst. Fin. Corp of AR 17.18 149.70 23.50 149.70 13.89 0.56 2.49 42.75
THR Three Rivers Fin. Corp. of MI 26.64 106.77 14.69 106.77 18.47 0.40 2.46 65.57
TBK Tolland Bank of CT* 13.96 146.23 10.15 150.49 13.36 0.20 1.29 18.02
WSB Washington SB, FSB of MD 23.33 138.61 11.51 138.61 15.91 0.10 1.43 33.33
NASDAQ Listed OTC Companies
___________________________
FBCV 1st Bancorp of Vincennes IN NM 112.50 9.29 114.87 NM 0.40 1.11 33.90
AFED AFSALA Bancorp, Inc. of NY 26.02 112.95 15.45 112.95 26.02 0.16 1.01 26.23
ALBK ALBANK Fin. Corp. of Albany NY 16.65 147.50 13.58 168.79 13.52 0.60 1.57 26.20
AMFC AMB Financial Corp. of IN 22.73 102.67 15.35 102.67 20.55 0.24 1.60 36.36
ASBP ASB Financial Corp. of OH NM 123.70 19.46 123.70 21.70 0.40 3.23 NM
ABBK Abington Savings Bank of MA* 13.54 156.17 10.81 173.38 15.23 0.40 1.37 18.52
AABC Access Anytime Bancorp of NM NM 101.38 7.55 101.38 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 104.13 16.09 104.13 21.65 0.32 2.08 NM
AADV Advantage Bancorp of WI NM 152.32 14.04 162.92 15.75 0.40 0.90 31.50
AFCB Affiliated Comm BC, Inc of MA 16.34 151.61 14.82 152.44 14.37 0.48 1.92 31.37
ALBC Albion Banc Corp. of Albion NY NM 102.67 9.14 102.67 26.08 0.32 1.32 NM
ABCL Allied Bancorp of IL NM 134.06 11.94 135.74 23.59 0.65 2.07 71.43
ATSB AmTrust Capital Corp. of IN NM 91.92 9.35 92.93 NM 0.20 1.58 50.00
AHCI Ambanc Holding Co., Inc. of NY* NM 113.72 14.47 113.72 NM 0.20 1.27 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ ________________________
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
ASBI Ameriana Bancorp of IN 10.96 10.95 0.61 5.52 4.08 0.85 7.73 0.40 71.19 0.38
AFFFZ America First Fin. Fund of CA(8) 8.44 8.34 1.49 19.31 14.02 1.83 23.69 0.40 81.55 0.49
ANBK American Nat'l Bancorp of MD(8) 8.97 8.97 0.28 2.90 1.86 0.65 6.74 0.74 102.82 1.17
ABCW Anchor Bancorp Wisconsin of WI 6.22 6.11 0.75 12.06 5.85 0.96 15.53 0.92 126.05 1.48
ANDB Andover Bancorp, Inc. of MA* 8.06 8.06 1.10 13.91 8.60 1.13 14.34 1.01 99.08 1.41
ASFC Astoria Financial Corp. of NY 7.83 6.57 0.56 7.09 4.22 0.79 10.12 0.51 37.96 0.48
AVND Avondale Fin. Corp. of IL 9.12 9.12 -0.49 -5.19 -5.86 -1.51 -16.06 3.18 96.19 5.33
BKCT Bancorp Connecticut of CT* 10.25 10.25 1.32 12.60 7.17 1.24 11.90 1.19 100.82 1.98
BPLS Bank Plus Corp. of CA 5.06 5.06 -0.26 -5.31 -4.00 0.02 0.46 2.88 58.99 2.11
BWFC Bank West Fin. Corp. of MI 14.52 14.52 0.64 3.91 3.53 0.57 3.47 0.28 51.72 0.20
BANC BankAtlantic Bancorp of FL 5.62 4.62 0.89 14.91 7.69 0.65 10.88 0.97 102.98 1.39
BKUNA BankUnited SA of FL 3.72 3.02 0.21 4.55 2.50 0.34 7.54 0.60 28.73 0.21
BKCO Bankers Corp. of NJ(8)* 7.93 7.81 1.08 13.59 7.78 1.16 14.55 1.14 26.36 0.50
BVCC Bay View Capital Corp. of CA 6.34 5.32 0.39 6.37 3.80 0.63 10.37 NA NA 1.51
BFSB Bedford Bancshares of VA 14.16 14.16 1.01 6.98 4.61 1.29 8.94 0.60 79.85 0.56
BFFC Big Foot Fin. Corp. of IL 16.98 16.98 0.05 0.28 0.24 0.42 2.45 0.09 151.52 0.34
BSBC Branford SB of CT(8)* 9.28 9.28 1.16 12.75 6.48 1.16 12.75 1.42 141.26 3.06
BYFC Broadway Fin. Corp. of CA 11.50 11.50 -0.28 -2.50 -3.71 0.07 0.64 2.06 39.74 1.01
CBES CBES Bancorp of MO 18.39 18.39 0.77 5.22 3.86 0.96 6.51 0.77 54.05 0.46
CCFH CCF Holding Company of GA 11.68 11.68 0.05 0.30 0.30 0.07 0.42 0.18 325.68 0.72
CENF CENFED Financial Corp. of CA 5.20 5.19 0.51 10.04 5.82 0.73 14.30 1.28 58.93 1.10
CFSB CFSB Bancorp of Lansing MI 7.63 7.63 0.85 10.96 5.27 1.07 13.84 0.17 308.01 0.61
CKFB CKF Bancorp of Danville KY 23.96 23.96 1.81 7.25 5.85 1.33 5.33 1.26 14.79 0.20
CNSB CNS Bancorp of MO 24.82 24.82 0.53 2.41 1.81 0.81 3.66 0.45 80.36 0.57
CSBF CSB Financial Group Inc of IL* 25.06 23.63 0.43 1.59 1.68 0.66 2.42 0.73 42.12 0.53
CBCI Calumet Bancorp of Chicago IL 15.50 15.50 1.15 7.22 6.72 1.46 9.16 1.16 102.51 1.57
CAFI Camco Fin. Corp. of OH 9.69 8.91 0.75 8.51 5.08 0.88 10.05 0.68 38.86 0.32
CMRN Cameron Fin. Corp. of MO 21.69 21.69 1.07 4.43 4.52 1.33 5.51 0.73 111.82 0.97
CAPS Capital Savings Bancorp of MO 8.80 8.80 0.67 7.61 5.13 0.93 10.68 0.31 97.24 0.39
CFNC Carolina Fincorp of NC* 23.71 23.71 1.11 4.65 3.74 1.05 4.36 0.28 133.67 0.54
CNY Carver Bancorp, Inc. of NY 8.35 8.01 -0.44 -4.95 -5.86 0.01 0.07 1.37 42.60 1.02
CASB Cascade SB of Everett WA(8) 6.17 6.17 0.46 7.49 4.14 0.58 9.46 0.39 203.69 0.95
CATB Catskill Fin. Corp. of NY* 25.04 25.04 1.43 5.21 5.21 1.45 5.27 0.47 140.85 1.48
CNIT Cenit Bancorp of Norfolk VA 7.24 6.65 0.87 12.05 7.39 0.80 11.05 0.51 103.23 0.76
CEBK Central Co-Op. Bank of MA* 10.45 9.31 0.88 8.78 7.38 0.90 8.90 0.88 102.76 1.23
CENB Century Bancshares of NC* 29.93 29.93 1.76 5.86 5.46 1.78 5.93 0.39 139.39 0.91
CBSB Charter Financial Inc. of IL 14.47 12.80 1.13 7.49 4.94 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 6.71 6.28 0.98 14.64 5.62 1.23 18.32 0.27 164.80 0.73
CVAL Chester Valley Bancorp of PA 8.56 8.56 0.63 7.00 4.00 0.92 10.30 0.47 187.15 1.10
CTZN CitFed Bancorp of Dayton OH 6.37 5.74 0.58 9.12 4.31 0.82 12.83 0.41 143.79 0.95
CLAS Classic Bancshares of KY 14.72 12.42 0.56 3.08 3.10 0.77 4.25 0.82 74.44 0.97
CMSB Cmnwealth Bancorp of PA 9.63 7.53 0.55 5.26 3.94 0.70 6.71 0.50 86.54 0.79
CBSA Coastal Bancorp of Houston TX 3.33 2.77 0.25 7.57 4.87 0.44 13.16 0.58 39.81 0.51
CFCP Coastal Fin. Corp. of SC 6.17 6.17 0.94 15.22 3.82 1.03 16.67 0.21 436.85 1.15
CMSV Commty. Svgs, MHC of FL (48.5) 11.23 11.23 0.63 5.46 3.16 0.96 8.22 0.57 66.20 0.64
CBNH Community Bankshares Inc of NH(8)* 7.00 7.00 0.95 13.33 5.51 0.76 10.63 0.49 141.22 1.01
CFTP Community Fed. Bancorp of MS 33.52 33.52 1.43 4.32 3.43 1.70 5.14 0.35 79.45 0.47
CFFC Community Fin. Corp. of VA 13.71 13.71 1.01 7.32 6.07 1.28 9.26 0.39 148.67 0.65
CFBC Community First Bnkg Co. of GA 16.42 16.42 0.25 1.52 1.23 0.49 2.96 NA NA 0.87
CIBI Community Inv. Bancorp of OH 11.51 11.51 0.67 5.51 4.40 1.00 8.19 0.72 65.53 0.62
COOP Cooperative Bk.for Svgs. of NC 7.63 7.63 -0.80 -10.08 -7.35 0.20 2.52 0.46 50.09 0.29
CRZY Crazy Woman Creek Bncorp of WY 25.81 25.81 1.06 3.69 4.11 1.30 4.52 0.39 136.15 1.04
DNFC D&N Financial Corp. of MI 5.57 5.52 0.61 10.68 5.79 0.80 14.08 0.34 198.09 0.93
DCBI Delphos Citizens Bancorp of OH 28.41 28.41 1.45 6.45 4.54 1.45 6.45 0.35 27.76 0.13
DIME Dime Community Bancorp of NY 14.52 12.50 0.96 5.96 4.95 1.04 6.41 0.73 112.22 1.43
DIBK Dime Financial Corp. of CT* 7.96 7.70 1.90 23.27 10.64 1.91 23.35 0.40 355.33 3.17
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
ASBI Ameriana Bancorp of IN 24.49 136.17 14.92 136.28 17.50 0.60 3.27 NM
AFFFZ America First Fin. Fund of CA(8) 7.13 127.80 10.79 129.39 5.82 1.60 4.07 29.04
ANBK American Nat'l Bancorp of MD(8) NM 158.45 14.21 158.45 23.10 0.12 0.60 32.43
ABCW Anchor Bancorp Wisconsin of WI 17.10 200.08 12.45 203.92 13.28 0.64 1.21 20.65
ANDB Andover Bancorp, Inc. of MA* 11.62 152.48 12.29 152.48 11.27 0.68 2.28 26.46
ASFC Astoria Financial Corp. of NY 23.72 162.64 12.73 193.67 16.61 0.60 1.29 30.61
AVND Avondale Fin. Corp. of IL NM 91.48 8.35 91.48 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 13.95 173.21 17.75 173.21 14.78 1.00 3.33 46.51
BPLS Bank Plus Corp. of CA NM 124.06 6.28 124.19 NM 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI 28.30 116.37 16.89 116.37 NM 0.28 1.87 52.83
BANC BankAtlantic Bancorp of FL 13.01 185.83 10.45 226.07 17.83 0.12 0.76 9.84
BKUNA BankUnited SA of FL NM 153.10 5.70 188.94 24.21 0.00 0.00 0.00
BKCO Bankers Corp. of NJ(8)* 12.85 165.96 13.16 168.42 12.00 0.64 2.35 30.19
BVCC Bay View Capital Corp. of CA 26.29 168.65 10.69 200.95 16.14 0.32 1.25 32.99
BFSB Bedford Bancshares of VA 21.71 147.32 20.87 147.32 16.95 0.56 2.26 49.12
BFFC Big Foot Fin. Corp. of IL NM 116.81 19.83 116.81 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 15.44 187.12 17.37 187.12 15.44 0.08 1.62 25.00
BYFC Broadway Fin. Corp. of CA NM 64.22 7.38 64.22 NM 0.20 1.90 NM
CBES CBES Bancorp of MO 25.90 104.63 19.24 104.63 20.78 0.40 2.24 57.97
CCFH CCF Holding Company of GA NM 114.90 13.42 114.90 NM 0.55 3.33 NM
CENF CENFED Financial Corp. of CA 17.17 163.07 8.49 163.38 12.06 0.36 1.06 18.18
CFSB CFSB Bancorp of Lansing MI 18.98 205.53 15.67 205.53 15.03 0.60 2.31 43.80
CKFB CKF Bancorp of Danville KY 17.09 126.98 30.42 126.98 23.26 0.50 2.50 42.74
CNSB CNS Bancorp of MO NM 116.23 28.85 116.23 NM 0.20 1.17 64.52
CSBF CSB Financial Group Inc of IL* NM 97.89 24.53 103.82 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.89 111.08 17.22 111.08 11.74 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 19.68 129.92 12.59 141.22 16.67 0.49 2.65 52.13
CMRN Cameron Fin. Corp. of MO 22.12 100.41 21.77 100.41 17.78 0.28 1.62 35.90
CAPS Capital Savings Bancorp of MO 19.51 141.84 12.48 141.84 13.91 0.24 1.50 29.27
CFNC Carolina Fincorp of NC* 26.72 124.78 29.59 124.78 28.48 0.24 1.38 36.92
CNY Carver Bancorp, Inc. of NY NM 84.53 7.06 88.13 NM 0.20 1.58 NM
CASB Cascade SB of Everett WA(8) 24.18 174.35 10.76 174.35 19.16 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 19.19 108.16 27.08 108.16 18.97 0.28 1.72 32.94
CNIT Cenit Bancorp of Norfolk VA 13.53 163.08 11.80 177.57 14.75 1.00 1.97 26.67
CEBK Central Co-Op. Bank of MA* 13.54 114.24 11.94 128.29 13.36 0.32 1.64 22.22
CENB Century Bancshares of NC* 18.33 107.47 32.17 107.47 18.12 2.00 2.53 46.40
CBSB Charter Financial Inc. of IL 20.24 155.00 22.43 175.19 14.46 0.32 1.51 30.48
COFI Charter One Financial of OH 17.81 250.87 16.83 267.98 14.23 1.00 1.88 33.56
CVAL Chester Valley Bancorp of PA 25.00 170.99 14.64 170.99 16.99 0.44 2.02 50.57
CTZN CitFed Bancorp of Dayton OH 23.20 197.11 12.55 218.77 16.48 0.36 0.80 18.56
CLAS Classic Bancshares of KY NM 98.84 14.55 117.12 23.39 0.28 1.93 62.22
CMSB Cmnwealth Bancorp of PA 25.36 135.76 13.07 173.61 19.89 0.28 1.60 40.58
CBSA Coastal Bancorp of Houston TX 20.52 149.87 4.99 180.30 11.81 0.48 1.61 33.10
CFCP Coastal Fin. Corp. of SC 26.18 NM 22.96 NM 23.91 0.36 1.45 37.89
CMSV Commty. Svgs, MHC of FL (48.5) NM 170.23 19.11 170.23 21.00 0.90 3.51 NM
CBNH Community Bankshares Inc of NH(8)* 18.14 227.44 15.91 227.44 22.76 0.64 1.63 29.49
CFTP Community Fed. Bancorp of MS 29.16 123.12 41.27 123.12 24.49 0.30 1.63 47.62
CFFC Community Fin. Corp. of VA 16.48 115.32 15.81 115.32 13.02 0.56 2.57 42.42
CFBC Community First Bnkg Co. of GA NM 123.61 20.29 123.61 NM 0.00 0.00 0.00
CIBI Community Inv. Bancorp of OH 22.73 126.90 14.61 126.90 15.31 0.32 2.13 48.48
COOP Cooperative Bk.for Svgs. of NC NM 135.88 10.37 135.88 NM 0.00 0.00 NM
CRZY Crazy Woman Creek Bncorp of WY 24.34 96.25 24.85 96.25 19.89 0.40 2.83 68.97
DNFC D&N Financial Corp. of MI 17.27 173.52 9.67 175.28 13.10 0.20 1.05 18.18
DCBI Delphos Citizens Bancorp of OH 22.04 106.30 30.19 106.30 22.04 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 20.21 130.32 18.92 151.27 18.81 0.18 0.95 19.15
DIBK Dime Financial Corp. of CT* 9.40 196.01 15.61 202.60 9.36 0.40 1.51 14.18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ ________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EGLB Eagle BancGroup of IL 11.85 11.85 -0.09 -0.77 -0.72 0.20 1.73 1.48 35.83 0.76
EBSI Eagle Bancshares of Tucker GA 8.71 8.71 0.59 6.82 4.74 0.80 9.29 0.88 65.80 0.84
EGFC Eagle Financial Corp. of CT 6.87 5.36 0.08 1.08 0.58 0.46 6.44 0.52 94.68 0.86
ETFS East Texas Fin. Serv. of TX 18.16 18.16 0.31 1.65 1.77 0.63 3.40 0.17 141.97 0.50
EMLD Emerald Financial Corp of OH 7.58 7.46 0.72 9.43 5.79 0.89 11.64 0.24 106.84 0.35
EIRE Emerald Island Bancorp, MA* 7.08 7.08 0.85 12.35 7.24 0.89 13.00 0.40 151.40 0.89
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.30 1.09 3.12 0.06 312.50 0.46
EFBI Enterprise Fed. Bancorp of OH 12.33 12.31 0.70 5.12 4.15 0.78 5.69 0.01 NA 0.28
EQSB Equitable FSB of Wheaton MD 5.07 5.07 0.48 9.33 5.87 0.76 14.93 1.07 19.82 0.31
FFFG F.F.O. Financial Group of FL(8) 6.49 6.49 0.68 10.82 4.60 0.97 15.58 3.28 52.54 2.40
FCBF FCB Fin. Corp. of Neenah WI 17.49 17.49 0.92 5.19 3.67 1.08 6.14 0.15 347.77 0.62
FFBS FFBS Bancorp of Columbus MS 19.42 19.42 1.19 6.07 4.00 1.49 7.65 0.42 109.44 0.66
FFDF FFD Financial Corp. of OH 24.74 24.74 0.78 3.42 2.84 1.08 4.74 NA NA 0.27
FFLC FFLC Bancorp of Leesburg FL 13.48 13.48 0.70 4.57 3.66 1.01 6.60 0.19 163.65 0.44
FFFC FFVA Financial Corp. of VA 13.18 12.90 1.11 7.86 4.51 1.34 9.52 0.18 318.63 0.98
FFWC FFW Corporation of Wabash IN 10.01 10.01 0.90 8.74 7.07 1.11 10.86 0.22 150.42 0.48
FFYF FFY Financial Corp. of OH 13.71 13.71 0.90 5.84 4.55 1.27 8.31 0.67 74.18 0.64
FMCO FMS Financial Corp. of NJ 6.56 6.44 0.69 10.76 6.00 1.02 15.79 1.06 48.60 0.92
FFHH FSF Financial Corp. of MN 11.35 11.35 0.66 5.22 4.30 0.84 6.63 0.03 636.64 0.34
FOBC Fed One Bancorp of Wheeling WV 11.06 10.55 0.68 5.85 4.66 0.97 8.33 0.40 101.18 0.93
FBCI Fidelity Bancorp of Chicago IL 10.38 10.36 0.55 5.34 4.42 0.78 7.48 0.80 21.76 0.22
FSBI Fidelity Bancorp, Inc. of PA 6.75 6.75 0.51 7.35 5.08 0.81 11.71 0.44 112.57 1.01
FFFL Fidelity FSB, MHC of FL (47.4) 8.82 8.75 0.39 4.09 2.04 0.62 6.51 0.30 77.48 0.31
FFED Fidelity Fed. Bancorp of IN 5.14 5.14 0.16 3.18 1.84 0.28 5.62 0.16 455.75 0.85
FFOH Fidelity Financial of OH 12.94 11.42 0.70 4.68 3.16 1.02 6.89 0.08 381.04 0.37
FIBC Financial Bancorp, Inc. of NY 9.36 9.31 0.56 5.74 4.22 1.00 10.23 1.81 26.91 0.89
FBSI First Bancshares of MO 14.35 14.33 0.91 5.88 4.92 1.11 7.22 0.32 88.44 0.35
FBBC First Bell Bancorp of PA 9.83 9.83 1.07 7.64 6.48 1.24 8.87 0.07 147.42 0.13
FBER First Bergen Bancorp of NJ 14.19 14.19 0.44 2.73 1.97 0.77 4.74 0.83 129.82 2.50
SKBO First Carnegie,MHC of PA(45.0) 15.65 15.65 0.37 2.35 1.78 0.54 3.43 0.74 33.56 0.66
FCIT First Cit. Fin. Corp of MD(8) 6.38 6.38 0.52 8.53 3.53 0.78 12.66 0.92 97.73 1.20
FSTC First Citizens Corp of GA 9.13 6.85 1.12 11.24 4.83 1.11 11.16 0.97 118.70 1.50
FCME First Coastal Corp. of ME* 9.23 9.23 4.21 NM 42.37 4.08 NM 2.01 85.72 2.52
FFBA First Colorado Bancorp of Co 12.73 12.73 0.92 6.21 4.80 0.90 6.07 0.23 121.82 0.38
FDEF First Defiance Fin.Corp. of OH 21.31 21.31 0.75 3.36 2.84 1.03 4.61 0.45 96.96 0.57
FESX First Essex Bancorp of MA* 6.97 6.06 0.96 13.00 8.00 0.83 11.33 0.56 146.94 1.43
FFES First FS&LA of E. Hartford CT 6.43 6.43 0.42 6.80 4.77 0.70 11.19 0.37 71.33 1.42
FFSX First FS&LA. MHC of IA (46.0) 8.29 8.23 0.43 5.21 2.76 0.73 8.99 0.11 342.10 0.52
BDJI First Fed. Bancorp. of MN 11.17 11.17 0.32 2.57 2.25 0.66 5.34 0.27 137.04 0.76
FFBH First Fed. Bancshares of AR 14.97 14.97 0.77 4.84 3.84 1.06 6.63 0.19 119.50 0.30
FTFC First Fed. Capital Corp. of WI 6.36 5.96 0.74 11.34 4.87 0.86 13.16 NA NA 0.65
FFKY First Fed. Fin. Corp. of KY 13.70 12.91 1.30 9.44 5.12 1.55 11.27 0.64 71.13 0.52
FFBZ First Federal Bancorp of OH 7.55 7.54 0.73 9.58 4.82 1.02 13.38 0.53 163.59 1.01
FFCH First Fin. Holdings Inc. of SC 6.11 6.11 0.57 9.30 4.58 0.84 13.65 1.66 41.99 0.84
FFBI First Financial Bancorp of IL 8.66 8.66 -0.38 -4.73 -4.66 0.42 5.23 0.40 147.92 0.91
FFHC First Financial Corp. of WI(8) 7.12 6.94 0.96 13.35 4.81 1.28 17.95 0.26 148.86 0.64
FFHS First Franklin Corp. of OH 9.02 8.96 0.19 2.14 1.80 0.65 7.20 0.52 82.31 0.62
FGHC First Georgia Hold. Corp of GA 8.22 7.53 0.66 7.98 4.41 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.66 6.55 0.89 13.61 8.20 1.16 17.76 0.64 114.23 1.39
FFSL First Independence Corp. of KS 10.43 10.43 0.43 3.84 3.69 0.69 6.12 0.87 69.37 0.91
FISB First Indiana Corp. of IN 9.56 9.44 0.83 8.86 5.64 1.01 10.83 1.50 91.12 1.62
FKFS First Keystone Fin. Corp of PA 7.31 7.31 0.54 7.21 4.98 0.77 10.30 1.60 30.58 0.84
FLKY First Lancaster Bncshrs of KY 34.23 34.23 1.15 3.72 3.02 1.40 4.52 0.75 32.89 0.29
FLFC First Liberty Fin. Corp. of GA 7.35 6.57 0.84 11.80 5.33 0.65 9.14 0.82 105.31 1.23
CASH First Midwest Fin. Corp. of IA 11.60 10.26 0.76 6.52 5.70 0.99 8.49 0.85 75.48 0.93
FMBD First Mutual Bancorp of IL 12.85 9.73 0.10 0.57 0.62 0.31 1.84 0.18 187.34 0.46
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EGLB Eagle BancGroup of IL NM 99.58 11.80 99.58 NM 0.00 0.00 NM
EBSI Eagle Bancshares of Tucker GA 21.09 132.42 11.53 132.42 15.48 0.60 3.56 75.00
EGFC Eagle Financial Corp. of CT NM 148.73 10.21 190.52 28.98 1.00 3.05 NM
ETFS East Texas Fin. Serv. of TX NM 96.39 17.51 96.39 27.50 0.20 1.04 58.82
EMLD Emerald Financial Corp of OH 17.28 155.04 11.75 157.48 14.00 0.24 1.71 29.63
EIRE Emerald Island Bancorp, MA* 13.82 156.83 11.10 156.83 13.13 0.28 1.33 18.42
EFBC Empire Federal Bancorp of MT NM 103.32 36.05 103.32 NM 0.30 1.97 NM
EFBI Enterprise Fed. Bancorp of OH 24.07 123.89 15.28 124.05 21.67 1.00 5.13 NM
EQSB Equitable FSB of Wheaton MD 17.05 150.48 7.63 150.48 10.65 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL(8) 21.76 221.14 14.36 221.14 15.11 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 27.27 140.26 24.53 140.26 23.08 0.72 2.67 72.73
FFBS FFBS Bancorp of Columbus MS 25.00 149.53 29.04 149.53 19.83 0.50 2.08 52.08
FFDF FFD Financial Corp. of OH NM 106.90 26.44 106.90 25.41 0.30 1.94 68.18
FFLC FFLC Bancorp of Leesburg FL 27.36 128.83 17.37 128.83 18.95 0.48 1.66 45.28
FFFC FFVA Financial Corp. of VA 22.16 179.56 23.66 183.39 18.28 0.48 1.64 36.36
FFWC FFW Corporation of Wabash IN 14.14 123.08 12.32 123.08 11.38 0.72 2.57 36.36
FFYF FFY Financial Corp. of OH 21.98 141.93 19.46 141.93 15.46 0.70 2.49 54.69
FMCO FMS Financial Corp. of NJ 16.67 170.60 11.19 173.68 11.35 0.20 0.77 12.82
FFHH FSF Financial Corp. of MN 23.23 127.97 14.53 127.97 18.30 0.50 2.76 64.10
FOBC Fed One Bancorp of Wheeling WV 21.46 127.78 14.14 133.98 15.07 0.58 2.73 58.59
FBCI Fidelity Bancorp of Chicago IL 22.63 118.00 12.25 118.26 16.17 0.32 1.49 33.68
FSBI Fidelity Bancorp, Inc. of PA 19.68 134.24 9.07 134.24 12.35 0.36 1.69 33.33
FFFL Fidelity FSB, MHC of FL (47.4) NM 198.68 17.52 200.33 NM 0.80 3.33 NM
FFED Fidelity Fed. Bancorp of IN NM 178.92 9.20 178.92 NM 0.40 4.32 NM
FFOH Fidelity Financial of OH NM 132.46 17.14 150.09 21.49 0.28 1.74 54.90
FIBC Financial Bancorp, Inc. of NY 23.70 134.33 12.57 134.95 13.30 0.40 1.94 45.98
FBSI First Bancshares of MO 20.34 121.21 17.40 121.40 16.55 0.20 0.83 16.95
FBBC First Bell Bancorp of PA 15.44 151.86 14.92 151.86 13.31 0.40 2.44 37.74
FBER First Bergen Bancorp of NJ NM 142.91 20.28 142.91 29.17 0.12 0.62 31.58
SKBO First Carnegie,MHC of PA(45.0) NM 132.22 20.70 132.22 NM 0.30 2.22 NM
FCIT First Cit. Fin. Corp of MD(8) 28.33 227.42 14.50 227.42 19.10 0.00 0.00 0.00
FSTC First Citizens Corp of GA 20.69 184.16 16.81 245.50 20.83 0.44 1.47 30.34
FCME First Coastal Corp. of ME* 2.36 102.61 9.47 102.61 2.44 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 20.83 150.86 19.20 150.86 21.34 0.44 2.51 52.38
FDEF First Defiance Fin.Corp. of OH NM 120.00 25.58 120.00 25.63 0.32 2.12 74.42
FESX First Essex Bancorp of MA* 12.50 142.61 9.94 164.18 14.35 0.48 2.91 36.36
FFES First FS&LA of E. Hartford CT 20.97 134.87 8.67 134.87 12.75 0.60 1.88 39.47
FFSX First FS&LA. MHC of IA (46.0) NM 181.95 15.09 183.42 21.01 0.48 1.92 69.57
BDJI First Fed. Bancorp. of MN NM 123.44 13.79 123.44 21.32 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 26.07 129.10 19.32 129.10 19.03 0.20 0.95 24.69
FTFC First Fed. Capital Corp. of WI 20.55 227.91 14.49 243.23 17.70 0.48 1.98 40.68
FFKY First Fed. Fin. Corp. of KY 19.52 179.44 24.59 190.50 16.36 0.52 2.34 45.61
FFBZ First Federal Bancorp of OH 20.74 188.92 14.25 189.12 14.84 0.24 1.32 27.27
FFCH First Fin. Holdings Inc. of SC 21.85 194.95 11.92 194.95 14.88 0.72 2.30 50.35
FFBI First Financial Bancorp of IL NM 103.52 8.96 103.52 19.41 0.00 0.00 NM
FFHC First Financial Corp. of WI(8) 20.77 268.81 19.15 275.90 15.45 0.60 1.91 39.74
FFHS First Franklin Corp. of OH NM 116.48 10.50 117.23 16.53 0.32 1.60 NM
FGHC First Georgia Hold. Corp of GA 22.66 172.21 14.15 187.82 29.00 0.05 0.69 15.63
FSPG First Home Bancorp of NJ 12.20 155.64 10.37 158.23 9.35 0.40 2.00 24.39
FFSL First Independence Corp. of KS 27.13 109.91 11.46 109.91 17.00 0.25 1.96 53.19
FISB First Indiana Corp. of IN 17.74 150.69 14.41 152.57 14.51 0.48 2.31 41.03
FKFS First Keystone Fin. Corp of PA 20.09 142.06 10.38 142.06 14.05 0.20 0.74 14.81
FLKY First Lancaster Bncshrs of KY NM 105.61 36.15 105.61 27.23 0.50 3.28 NM
FLFC First Liberty Fin. Corp. of GA 18.75 189.55 13.93 211.86 24.19 0.40 1.78 33.33
CASH First Midwest Fin. Corp. of IA 17.55 110.64 12.83 125.05 13.47 0.36 2.07 36.36
FMBD First Mutual Bancorp of IL NM 105.36 13.53 139.09 NM 0.32 1.99 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FMSB First Mutual SB of Bellevue WA* 6.82 6.82 1.02 15.34 7.17 1.00 14.95 0.01 NA 1.27
FNGB First Northern Cap. Corp of WI 11.28 11.28 0.63 5.44 3.24 0.91 7.88 0.06 798.69 0.53
FFPB First Palm Beach Bancorp of FL 6.76 6.59 -0.01 -0.09 -0.06 0.05 0.70 0.73 55.75 0.60
FSLA First SB SLA MHC of NJ (47.5) 9.42 8.40 0.58 6.23 2.88 0.91 9.74 0.68 83.02 1.06
FSNJ First SB of NJ, MHC (45.9)(8) 8.57 8.57 -0.34 -4.31 -2.15 0.23 2.89 0.87 58.25 1.21
SOPN First SB, SSB, Moore Co. of NC 22.83 22.83 1.44 5.83 5.17 1.73 6.99 0.08 241.60 0.31
FWWB First Savings Bancorp of WA* 14.75 13.57 1.05 6.25 3.63 1.00 5.90 0.30 215.39 0.97
SHEN First Shenango Bancorp of PA 10.95 10.95 0.89 7.82 6.09 1.16 10.18 0.54 135.75 1.15
FSFC First So.east Fin. Corp. of SC(8) 10.22 10.22 0.01 0.11 0.07 0.92 7.48 0.11 362.15 0.50
FBNW FirstBank Corp of Clarkston WA 18.04 18.04 0.70 3.86 2.96 0.57 3.14 1.95 27.73 0.74
FFDB FirstFed Bancorp of AL 9.42 8.58 0.62 6.31 5.75 0.94 9.63 0.84 49.36 0.59
FSPT FirstSpartan Fin. Corp. of SC 26.32 26.32 0.95 3.62 2.80 1.11 4.20 NA NA 0.49
FLAG Flag Financial Corp of GA 9.40 9.40 -0.06 -0.68 -0.49 0.14 1.45 4.52 44.14 2.91
FLGS Flagstar Bancorp, Inc of MI 5.46 5.46 0.00 0.00 0.00 0.00 0.00 3.41 8.26 0.32
FFIC Flushing Fin. Corp. of NY* 15.47 15.47 0.93 5.55 4.49 0.97 5.78 0.29 223.21 1.15
FBHC Fort Bend Holding Corp. of TX 6.03 5.62 0.19 3.18 2.33 0.44 7.36 0.37 141.08 1.03
FTSB Fort Thomas Fin. Corp. of KY 16.04 16.04 0.54 2.94 3.14 0.81 4.45 NA NA 0.54
FKKY Frankfort First Bancorp of KY 26.19 26.19 0.62 2.19 2.56 0.93 3.29 0.06 138.89 0.08
FTNB Fulton Bancorp of MO 25.01 25.01 0.74 3.81 2.05 1.05 5.39 0.81 106.69 1.01
GFSB GFS Bancorp of Grinnell IA 11.57 11.57 0.99 8.43 6.36 1.27 10.81 1.54 45.77 0.81
GUPB GFSB Bancorp of Gallup NM 16.30 16.30 0.74 3.86 3.63 0.93 4.86 0.18 199.36 0.69
GSLA GS Financial Corp. of LA 45.63 45.63 1.08 3.63 2.16 1.08 3.63 0.11 293.18 0.84
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.55 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.04 27.04 0.83 3.23 2.95 1.15 4.47 0.90 14.14 0.38
GBCI Glacier Bancorp of MT 9.74 9.48 1.44 15.09 5.95 1.61 16.87 0.27 229.89 0.85
GFCO Glenway Financial Corp. of OH 9.49 9.36 0.43 4.51 4.33 0.72 7.57 0.31 91.62 0.34
GTPS Great American Bancorp of IL 21.43 21.43 0.26 1.09 1.09 0.32 1.37 0.23 140.69 0.44
GTFN Great Financial Corp. of KY 9.24 8.84 0.75 7.89 4.78 0.71 7.50 3.06 15.68 0.72
GSBC Great Southern Bancorp of MO 8.53 8.53 1.38 14.76 6.82 1.56 16.69 1.91 114.73 2.59
GDVS Greater DV SB,MHC of PA (19.9)* 11.57 11.57 0.32 2.71 1.42 0.58 4.95 2.79 43.15 1.93
GSFC Green Street Fin. Corp. of NC 36.26 36.26 1.37 3.84 3.20 1.66 4.66 0.16 83.63 0.18
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 13.78 13.78 0.61 4.30 1.97 0.92 6.51 0.50 216.62 1.36
HCBB HCB Bancshares of AR 18.25 17.49 -0.11 -0.58 -0.57 0.39 2.11 NA NA 1.47
HEMT HF Bancorp of Hemet CA 8.21 6.72 -0.27 -3.07 -2.69 -1.88 -21.03 NA NA NA
HFFC HF Financial Corp. of SD 9.43 9.43 0.66 7.12 5.50 0.89 9.66 0.33 244.25 1.01
HFNC HFNC Financial Corp. of NC 17.99 17.99 0.86 3.47 2.69 1.19 4.76 0.87 97.22 1.14
HMNF HMN Financial, Inc. of MN 14.43 14.43 0.71 4.79 3.78 0.88 5.96 0.08 531.97 0.71
HALL Hallmark Capital Corp. of WI 7.24 7.24 0.48 6.83 5.91 0.61 8.62 0.16 273.18 0.64
HARB Harbor FSB, MHC of FL (46.0) 8.39 8.11 0.95 11.52 4.48 1.23 14.84 0.46 222.68 1.37
HRBF Harbor Federal Bancorp of MD 12.90 12.90 0.46 3.52 3.03 0.71 5.46 0.05 379.63 0.28
HFSA Hardin Bancorp of Hardin MO 12.48 12.48 0.52 3.53 3.52 0.79 5.41 0.09 179.21 0.32
HARL Harleysville SA of PA 6.53 6.53 0.75 11.71 5.84 1.03 16.04 0.03 NA 0.77
HFGI Harrington Fin. Group of IN 5.59 5.59 0.39 8.22 5.30 0.33 6.87 0.25 18.93 0.23
HARS Harris SB, MHC of PA (24.2) 8.01 7.01 0.49 5.78 3.04 0.62 7.24 0.65 64.15 0.97
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.67 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.91 1.96 0.58 4.08 0.15 90.48 0.26
HAVN Haven Bancorp of Woodhaven NY 5.95 5.93 0.56 9.27 5.65 0.83 13.79 0.74 86.28 1.15
HVFD Haverfield Corp. of OH(8) 8.55 8.55 0.57 6.82 3.85 1.08 12.97 1.04 82.48 0.99
HTHR Hawthorne Fin. Corp. of CA 3.88 3.88 0.78 18.33 15.36 0.39 9.24 12.66 12.87 1.92
HMLK Hemlock Fed. Fin. Corp. of IL 18.34 18.34 0.13 0.99 0.65 0.73 5.45 NA NA 1.30
HBNK Highland Federal Bank of CA 7.47 7.47 0.46 6.25 3.52 0.68 9.17 3.09 55.00 2.13
HIFS Hingham Inst. for Sav. of MA* 9.35 9.35 1.21 12.60 8.07 1.21 12.60 0.41 165.13 0.89
HBEI Home Bancorp of Elgin IL 26.70 26.70 0.49 1.99 1.43 0.85 3.42 0.41 69.84 0.36
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 3.37 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 12.82 12.82 0.20 1.59 1.38 0.52 4.05 0.38 47.98 0.29
HCFC Home City Fin. Corp. of OH 20.61 20.61 0.78 6.27 3.37 1.17 9.46 0.62 110.38 0.87
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ __________ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FMSB First Mutual SB of Bellevue WA* 13.94 199.36 13.60 199.36 14.31 0.20 0.92 12.82
FNGB First Northern Cap. Corp of WI NM 165.05 18.61 165.05 21.33 0.64 2.38 73.56
FFPB First Palm Beach Bancorp of FL NM 156.32 10.57 160.46 NM 0.60 1.83 NM
FSLA First SB SLA MHC of NJ (47.5) NM 207.24 19.52 232.41 22.20 0.48 1.73 60.00
FSNJ First SB of NJ, MHC (45.9)(8) NM 200.87 17.21 200.87 NM 0.50 1.54 NM
SOPN First SB, SSB, Moore Co. of NC 19.34 112.27 25.63 112.27 16.14 0.80 3.90 NM
FWWB First Savings Bancorp of WA* 27.53 173.39 25.58 188.46 29.17 0.28 1.14 31.46
SHEN First Shenango Bancorp of PA 16.42 127.59 13.98 127.59 12.61 0.60 2.16 35.50
FSFC First So.east Fin. Corp. of SC(8) NM 179.49 18.35 179.49 20.00 0.24 1.71 NM
FBNW FirstBank Corp of Clarkston WA NM 130.36 23.51 130.36 NM 0.00 0.00 0.00
FFDB FirstFed Bancorp of AL 17.40 114.16 10.75 125.23 11.40 0.50 3.02 52.63
FSPT FirstSpartan Fin. Corp. of SC NM 129.39 34.06 129.39 NM 0.00 0.00 0.00
FLAG Flag Financial Corp of GA NM 139.02 13.07 139.02 NM 0.34 2.39 NM
FLGS Flagstar Bancorp, Inc of MI NM NM 17.32 NM NM 0.00 0.00 NM
FFIC Flushing Fin. Corp. of NY* 22.25 124.04 19.19 124.04 21.33 0.24 1.16 25.81
FBHC Fort Bend Holding Corp. of TX NM 136.62 8.24 146.72 18.57 0.40 1.26 54.05
FTSB Fort Thomas Fin. Corp. of KY NM 100.96 16.19 100.96 21.00 0.25 2.38 NM
FKKY Frankfort First Bancorp of KY NM 94.46 24.74 94.46 26.06 0.36 3.84 NM
FTNB Fulton Bancorp of MO NM 138.22 34.57 138.22 NM 0.20 1.00 48.78
GFSB GFS Bancorp of Grinnell IA 15.73 129.55 14.99 129.55 12.27 0.26 1.94 30.59
GUPB GFSB Bancorp of Gallup NM 27.54 112.56 18.34 112.56 21.84 0.40 2.11 57.97
GSLA GS Financial Corp. of LA NM 96.27 43.93 96.27 NM 0.28 1.78 NM
GOSB GSB Financial Corp. of NY 28.19 106.39 28.79 106.39 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 109.85 29.70 109.85 24.47 0.40 2.27 NM
GBCI Glacier Bancorp of MT 16.82 227.83 22.20 234.18 15.04 0.48 2.59 43.64
GFCO Glenway Financial Corp. of OH 23.11 102.55 9.73 103.95 13.76 0.80 3.27 NM
GTPS Great American Bancorp of IL NM 104.14 22.32 104.14 NM 0.40 2.30 NM
GTFN Great Financial Corp. of KY 20.91 162.99 15.05 170.25 22.02 0.60 1.80 37.74
GSBC Great Southern Bancorp of MO 14.67 226.44 19.32 226.44 12.98 0.40 2.37 34.78
GDVS Greater DV SB,MHC of PA (19.9)* NM 188.08 21.76 188.08 NM 0.36 2.22 NM
GSFC Green Street Fin. Corp. of NC NM 118.81 43.08 118.81 25.74 0.44 2.51 NM
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 213.07 29.36 213.07 NM 0.40 2.13 NM
HCBB HCB Bancshares of AR NM 101.97 18.61 106.38 NM 0.00 0.00 NM
HEMT HF Bancorp of Hemet CA NM 115.54 9.49 141.22 NM 0.00 0.00 NM
HFFC HF Financial Corp. of SD 18.19 125.82 11.86 125.82 13.40 0.42 1.88 34.15
HFNC HFNC Financial Corp. of NC NM 170.76 30.72 170.76 27.12 0.28 1.75 65.12
HMNF HMN Financial, Inc. of MN 26.46 128.06 18.48 128.06 21.26 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.92 109.44 7.92 109.44 13.39 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.0) 22.32 242.71 20.36 250.96 17.33 1.40 3.06 68.29
HRBF Harbor Federal Bancorp of MD NM 116.02 14.96 116.02 21.24 0.40 2.09 68.97
HFSA Hardin Bancorp of Hardin MO 28.45 105.16 13.12 105.16 18.54 0.48 2.91 NM
HARL Harleysville SA of PA 17.12 187.83 12.27 187.83 12.50 0.40 1.60 27.40
HFGI Harrington Fin. Group of IN 18.85 149.93 8.38 149.93 22.55 0.12 1.04 19.67
HARS Harris SB, MHC of PA (24.2) NM 178.20 14.27 203.76 26.26 0.58 2.23 73.42
HFFB Harrodsburg 1st Fin Bcrp of KY 27.27 103.52 27.88 103.52 20.55 0.40 2.67 72.73
HHFC Harvest Home Fin. Corp. of OH NM 105.76 13.22 105.76 23.98 0.40 3.40 NM
HAVN Haven Bancorp of Woodhaven NY 17.70 152.89 9.09 153.40 11.90 0.60 1.62 28.71
HVFD Haverfield Corp. of OH(8) 25.98 170.75 14.59 170.75 13.66 0.56 2.11 54.90
HTHR Hawthorne Fin. Corp. of CA 6.51 126.35 4.90 126.35 12.92 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 106.38 19.51 106.38 28.18 0.24 1.55 NM
HBNK Highland Federal Bank of CA 28.39 166.26 12.43 166.26 19.33 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 12.40 147.63 13.81 147.63 12.40 0.48 2.08 25.81
HBEI Home Bancorp of Elgin IL NM 127.46 34.03 127.46 NM 0.40 2.29 NM
HBFW Home Bancorp of Fort Wayne IN 29.68 121.28 16.11 121.28 18.58 0.20 0.94 27.78
HBBI Home Building Bancorp of IN NM 113.45 14.54 113.45 28.38 0.30 1.43 NM
HCFC Home City Fin. Corp. of OH 29.65 102.37 21.09 102.37 19.64 0.32 2.12 62.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ ________________________
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOMF Home Fed Bancorp of Seymour IN 8.48 8.22 1.05 12.65 6.52 1.22 14.72 0.46 117.33 0.62
HWEN Home Financial Bancorp of IN 18.63 18.63 0.57 3.68 2.98 0.82 5.23 NA NA 0.63
HPBC Home Port Bancorp, Inc. of MA* 10.56 10.56 1.67 15.78 8.34 1.66 15.69 0.08 NA 1.56
HMCI Homecorp, Inc. of Rockford IL 6.54 6.54 0.14 2.17 1.69 0.43 6.83 3.35 14.24 0.59
HZFS Horizon Fin'l. Services of IA 9.79 9.79 0.36 3.35 3.44 0.57 5.36 NA NA NA
HRZB Horizon Financial Corp. of WA* 15.60 15.60 1.57 9.99 7.13 1.54 9.80 NA NA 0.84
IBSF IBS Financial Corp. of NJ 17.04 17.04 0.52 2.73 2.07 0.88 4.68 0.08 171.10 0.52
ISBF ISB Financial Corp. of LA 12.19 10.33 0.69 4.59 3.14 0.93 6.20 NA NA 0.80
ITLA Imperial Thrift & Loan of CA* 11.37 11.32 1.45 12.98 7.77 1.45 12.98 1.47 84.20 1.50
IFSB Independence FSB of DC 6.52 5.72 0.14 2.19 2.15 0.33 4.98 NA NA 0.34
INCB Indiana Comm. Bank, SB of IN 12.39 12.39 0.16 1.24 1.05 0.51 3.88 NA NA 0.71
INBI Industrial Bancorp of OH 17.71 17.71 0.72 3.87 3.10 1.42 7.57 0.30 156.98 0.55
IWBK Interwest SB of Oak Harbor WA 6.78 6.63 0.87 12.91 4.58 1.18 17.52 0.64 73.79 0.78
IPSW Ipswich SB of Ipswich MA* 5.71 5.71 1.21 20.41 7.15 0.95 16.04 1.52 56.87 1.18
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 5.29 1.34 8.46 0.78 NA NA
JXSB Jcksnville SB,MHC of IL (44.6) 10.30 10.30 0.29 2.50 1.87 0.67 5.84 0.39 125.08 0.63
JSBA Jefferson Svgs Bancorp of MO 8.19 6.24 0.30 3.89 2.24 0.70 9.24 0.52 117.45 0.82
JOAC Joachim Bancorp of MO 28.99 28.99 0.51 1.71 1.60 0.78 2.64 0.68 30.45 0.31
KSAV KS Bancorp of Kenly NC 13.53 13.52 0.96 6.86 5.84 1.25 8.89 0.35 80.53 0.33
KSBK KSB Bancorp of Kingfield ME(8)* 7.16 6.74 0.96 13.72 8.00 1.00 14.25 1.78 43.20 1.03
KFBI Klamath First Bancorp of OR 19.55 19.55 0.81 3.67 2.85 1.23 5.54 0.08 213.23 0.23
LSBI LSB Fin. Corp. of Lafayette IN 9.08 9.08 0.50 5.24 4.63 0.42 4.41 1.17 63.71 0.84
LVSB Lakeview SB of Paterson NJ 9.52 7.61 1.37 13.73 8.42 0.95 9.53 0.98 66.74 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.89 5.95 5.26 1.05 7.01 0.31 123.70 0.57
LARL Laurel Capital Group of PA 10.42 10.42 1.12 10.61 7.26 1.44 13.60 0.43 212.35 1.31
LSBX Lawrence Savings Bank of MA* 8.69 8.69 1.75 20.90 12.59 1.73 20.60 0.30 328.94 2.29
LFED Leeds FSB, MHC of MD (36.2) 16.18 16.18 0.79 4.89 2.86 1.13 6.98 0.02 977.36 0.30
LXMO Lexington B&L Fin. Corp. of MO 28.32 28.32 1.03 3.49 3.31 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA 10.55 10.25 0.71 6.60 4.08 0.87 8.03 0.39 166.43 1.48
LFBI Little Falls Bancorp of NJ 13.28 12.26 0.27 1.94 1.67 0.48 3.41 NA NA 0.81
LOGN Logansport Fin. Corp. of IN 19.20 19.20 1.17 5.64 5.29 1.52 7.31 0.61 44.88 0.38
LONF London Financial Corp. of OH 19.86 19.86 0.74 3.55 3.54 1.09 5.19 0.79 62.54 0.64
LISB Long Island Bancorp, Inc of NY 8.99 8.90 0.61 6.58 3.73 0.71 7.63 1.03 55.02 0.92
MAFB MAF Bancorp of IL 7.88 6.84 0.79 10.57 4.79 1.10 14.70 0.46 119.42 0.71
MBLF MBLA Financial Corp. of MO 12.15 12.15 0.67 5.10 4.72 0.85 6.52 0.25 109.19 0.50
MFBC MFB Corp. of Mishawaka IN 14.51 14.51 0.56 3.33 3.47 0.85 5.09 NA NA 0.19
MLBC ML Bancorp of Villanova PA 6.98 6.86 0.74 10.26 6.72 0.67 9.28 0.46 163.34 1.71
MBB MSB Bancorp of Middletown NY* 6.90 2.97 0.33 4.82 3.93 0.36 5.17 0.70 36.62 0.60
MSBF MSB Financial Corp. of MI 16.99 16.99 1.19 6.43 4.33 1.47 7.91 0.66 61.34 0.44
MGNL Magna Bancorp of MS(8) 10.22 9.95 1.39 14.23 5.35 1.53 15.70 2.92 26.42 1.11
MARN Marion Capital Holdings of IN 22.55 22.55 1.39 6.09 5.87 1.67 7.28 0.81 144.01 1.35
MRKF Market Fin. Corp. of OH 34.99 34.99 0.84 3.14 2.27 0.84 3.14 0.75 12.24 0.20
MFCX Marshalltown Fin. Corp. of IA(8) 15.74 15.74 0.34 2.15 1.79 0.73 4.66 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.38 8.28 0.61 7.41 4.73 0.89 10.72 0.47 85.38 0.46
MASB MassBank Corp. of Reading MA* 10.64 10.64 1.10 10.79 6.90 1.04 10.23 0.16 149.80 0.87
MFLR Mayflower Co-Op. Bank of MA* 9.43 9.26 1.00 10.42 7.14 0.98 10.18 1.03 90.08 1.56
MECH Mechanics SB of Hartford CT* 10.23 10.23 1.92 19.45 12.77 1.92 19.45 1.13 152.02 2.58
MDBK Medford Bank of Medford MA* 8.99 8.38 1.08 12.07 8.17 1.01 11.29 0.37 176.45 1.22
MERI Meritrust FSB of Thibodaux LA 8.20 8.20 0.67 8.71 4.91 1.05 13.56 0.37 83.87 0.58
MWBX MetroWest Bank of MA* 7.44 7.44 1.38 18.37 8.00 1.38 18.37 0.91 126.64 1.48
MCBS Mid Continent Bancshares of KS 9.39 9.39 1.02 9.79 6.18 1.16 11.10 0.15 71.76 0.19
MIFC Mid Iowa Financial Corp. of IA 9.10 9.09 0.91 9.88 6.65 1.19 12.96 0.02 NA 0.45
MCBN Mid-Coast Bancorp of ME 8.60 8.60 0.43 4.92 4.24 0.67 7.71 0.73 70.32 0.62
MWBI Midwest Bancshares, Inc. of IA 6.91 6.91 0.45 6.61 5.25 0.75 10.99 0.77 63.17 0.81
MWFD Midwest Fed. Fin. Corp of WI 8.61 8.28 1.39 16.14 7.73 1.09 12.66 0.14 543.01 1.01
MFFC Milton Fed. Fin. Corp. of OH 13.14 13.14 0.49 3.07 2.81 0.68 4.25 0.32 86.42 0.46
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
_______________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HOMF Home Fed Bancorp of Seymour IN 15.35 181.82 15.42 187.54 13.19 0.50 1.61 24.75
HWEN Home Financial Bancorp of IN NM 100.00 18.63 100.00 23.63 0.20 1.32 44.44
HPBC Home Port Bancorp, Inc. of MA* 11.99 181.04 19.11 181.04 12.06 0.80 3.88 46.51
HMCI Homecorp, Inc. of Rockford IL NM 124.90 8.17 124.90 18.82 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 29.03 95.54 9.35 95.54 18.14 0.32 1.70 49.23
HRZB Horizon Financial Corp. of WA* 14.02 137.49 21.45 137.49 14.29 0.40 2.67 37.38
IBSF IBS Financial Corp. of NJ NM 147.34 25.10 147.34 28.12 0.40 2.37 NM
ISBF ISB Financial Corp. of LA NM 147.77 18.01 174.25 23.56 0.40 1.63 51.95
ITLA Imperial Thrift & Loan of CA* 12.87 148.81 16.92 149.44 12.87 0.00 0.00 0.00
IFSB Independence FSB of DC NM 100.82 6.58 114.99 20.45 0.22 1.63 NM
INCB Indiana Comm. Bank, SB of IN NM 124.29 15.39 124.29 NM 0.36 2.36 NM
INBI Industrial Bancorp of OH NM 124.68 22.08 124.68 16.48 0.48 3.31 NM
IWBK Interwest SB of Oak Harbor WA 21.84 257.12 17.43 262.90 16.09 0.60 1.51 32.97
IPSW Ipswich SB of Ipswich MA* 13.99 257.96 14.74 257.96 17.80 0.24 1.02 14.29
JXVL Jacksonville Bancorp of TX 18.89 125.46 18.71 125.46 14.41 0.50 2.94 55.56
JXSB Jcksnville SB,MHC of IL (44.6) NM 132.88 13.68 132.88 22.88 0.40 2.27 NM
JSBA Jefferson Svgs Bancorp of MO NM 143.83 11.79 188.77 18.75 0.40 1.30 57.97
JOAC Joachim Bancorp of MO NM 110.29 31.97 110.29 NM 0.50 3.33 NM
KSAV KS Bancorp of Kenly NC 17.13 114.06 15.43 114.13 13.21 0.60 3.24 55.56
KSBK KSB Bancorp of Kingfield ME(8)* 12.50 160.49 11.50 170.60 12.04 0.08 0.62 7.69
KFBI Klamath First Bancorp of OR NM 135.99 26.58 135.99 23.27 0.30 1.55 54.55
LSBI LSB Fin. Corp. of Lafayette IN 21.58 111.96 10.16 111.96 25.63 0.34 1.66 35.79
LVSB Lakeview SB of Paterson NJ 11.87 165.75 15.77 207.29 17.10 0.25 0.76 8.99
LARK Landmark Bancshares of KS 19.03 116.97 16.13 116.97 16.17 0.40 1.86 35.40
LARL Laurel Capital Group of PA 13.78 142.76 14.87 142.76 10.75 0.52 2.42 33.33
LSBX Lawrence Savings Bank of MA* 7.94 149.26 12.97 149.26 8.06 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.2) NM 166.67 26.96 166.67 24.44 0.76 3.45 NM
LXMO Lexington B&L Fin. Corp. of MO NM 112.75 31.93 112.75 23.41 0.30 1.81 54.55
LIFB Life Bancorp of Norfolk VA 24.50 155.27 16.38 159.78 20.12 0.48 1.94 47.52
LFBI Little Falls Bancorp of NJ NM 119.71 15.89 129.63 NM 0.20 1.15 68.97
LOGN Logansport Fin. Corp. of IN 18.92 110.50 21.22 110.50 14.58 0.40 2.86 54.05
LONF London Financial Corp. of OH 28.24 104.24 20.70 104.24 19.30 0.24 1.57 44.44
LISB Long Island Bancorp, Inc of NY 26.80 174.06 15.65 175.81 23.11 0.60 1.55 41.67
MAFB MAF Bancorp of IL 20.86 190.10 14.98 218.90 15.00 0.28 0.89 18.54
MBLF MBLA Financial Corp. of MO 21.17 106.92 12.99 106.92 16.55 0.40 1.70 36.04
MFBC MFB Corp. of Mishawaka IN 28.82 103.18 14.97 103.18 18.86 0.32 1.54 44.44
MLBC ML Bancorp of Villanova PA 14.89 148.03 10.33 150.67 16.46 0.40 1.98 29.41
MBB MSB Bancorp of Middletown NY* 25.46 122.67 8.47 285.26 23.72 0.60 2.48 63.16
MSBF MSB Financial Corp. of MI 23.08 147.64 25.08 147.64 18.75 0.28 1.87 43.08
MGNL Magna Bancorp of MS(8) 18.70 250.99 25.66 257.92 16.95 0.60 2.38 44.44
MARN Marion Capital Holdings of IN 17.03 106.33 23.97 106.33 14.24 0.88 3.74 63.77
MRKF Market Fin. Corp. of OH NM 95.28 33.34 95.28 NM 0.28 1.98 NM
MFCX Marshalltown Fin. Corp. of IA(8) NM 117.71 18.53 117.71 25.77 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 21.14 151.79 12.72 153.72 14.61 0.80 1.74 36.87
MASB MassBank Corp. of Reading MA* 14.49 146.85 15.62 146.85 15.29 1.28 2.43 35.16
MFLR Mayflower Co-Op. Bank of MA* 14.00 140.95 13.29 143.45 14.32 0.60 3.22 45.11
MECH Mechanics SB of Hartford CT* 7.83 135.72 13.89 135.72 7.83 0.00 0.00 0.00
MDBK Medford Bank of Medford MA* 12.24 141.24 12.70 151.59 13.10 0.72 2.40 29.39
MERI Meritrust FSB of Thibodaux LA 20.35 167.22 13.72 167.22 13.06 0.70 1.73 35.18
MWBX MetroWest Bank of MA* 12.50 215.23 16.01 215.23 12.50 0.12 1.85 23.08
MCBS Mid Continent Bancshares of KS 16.18 154.42 14.50 154.42 14.27 0.40 1.32 21.39
MIFC Mid Iowa Financial Corp. of IA 15.03 143.37 13.05 143.58 11.45 0.08 0.83 12.50
MCBN Mid-Coast Bancorp of ME 23.58 113.33 9.75 113.33 15.06 0.52 2.08 49.06
MWBI Midwest Bancshares, Inc. of IA 19.06 118.60 8.19 118.60 11.46 0.60 1.74 33.15
MWFD Midwest Fed. Fin. Corp of WI 12.94 208.72 17.98 217.29 16.48 0.34 1.53 19.77
MFFC Milton Fed. Fin. Corp. of OH NM 121.99 16.03 121.99 25.69 0.60 4.33 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
MIVI Miss. View Hold. Co. of MN 18.87 18.87 0.69 3.74 3.77 1.03 5.57 0.33 370.39 1.91
MBSP Mitchell Bancorp of NC* 43.36 43.36 1.40 3.24 3.04 1.64 3.81 2.03 26.19 0.62
MBBC Monterey Bay Bancorp of CA 10.74 9.85 0.28 2.17 1.89 0.51 3.99 0.36 94.16 0.61
MONT Montgomery Fin. Corp. of IN 17.91 17.91 0.42 2.32 2.21 0.67 3.74 NA NA 0.20
MSBK Mutual SB, FSB of Bay City MI 6.07 6.07 0.11 1.93 1.71 0.04 0.75 0.11 272.91 0.67
NHTB NH Thrift Bancshares of NH 7.48 6.34 0.33 4.46 2.63 0.49 6.59 1.03 91.05 1.14
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.22 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 9.81 9.81 0.83 8.14 5.23 0.79 7.78 1.11 152.08 3.18
NASB North American SB of MO 7.97 7.71 1.23 16.83 7.55 1.19 16.35 3.34 26.40 1.00
NBSI North Bancshares of Chicago IL 14.13 14.13 0.49 3.27 2.64 0.68 4.57 NA NA 0.27
FFFD North Central Bancshares of IA 22.67 22.67 1.64 6.41 6.18 1.90 7.41 0.12 823.53 1.20
NBN Northeast Bancorp of ME* 6.95 6.01 0.51 6.99 6.31 0.47 6.47 1.37 77.15 1.32
NEIB Northeast Indiana Bncrp of IN 15.16 15.16 1.04 5.98 5.61 1.23 7.07 NA NA 0.71
NWEQ Northwest Equity Corp. of WI 11.45 11.45 0.78 6.47 5.59 0.98 8.16 1.26 38.04 0.59
NWSB Northwest SB, MHC of PA (29.9) 9.71 9.13 0.69 6.88 2.99 1.00 9.95 0.72 90.87 0.88
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.51 7.28 1.11 14.32 2.09 56.84 1.70
NSSB Norwich Financial Corp. of CT* 11.17 10.08 1.09 10.08 5.80 1.04 9.58 1.29 151.12 2.83
NTMG Nutmeg FS&LA of CT 5.69 5.69 0.31 5.46 3.55 0.35 6.16 NA NA 0.60
OHSL OHSL Financial Corp. of OH 11.04 11.04 0.60 5.14 4.69 0.87 7.36 0.14 162.50 0.31
OCFC Ocean Fin. Corp. of NJ 16.25 16.25 0.04 0.24 0.18 0.98 5.97 0.55 79.68 0.87
OCN Ocwen Financial Corp. of FL 8.50 8.50 2.70 32.38 6.04 1.96 23.50 NA NA NA
OFCP Ottawa Financial Corp. of MI 8.73 7.01 0.48 5.25 3.22 0.78 8.45 0.32 112.76 0.42
PFFB PFF Bancorp of Pomona CA 10.32 10.21 0.16 1.41 1.07 0.46 4.09 1.76 59.73 1.46
PSFI PS Financial of Chicago IL 38.70 38.70 1.94 4.74 4.79 1.96 4.81 0.79 28.66 0.51
PVFC PVF Capital Corp. of OH 7.02 7.02 1.05 15.56 6.67 1.35 20.00 1.20 61.53 0.79
PCCI Pacific Crest Capital of CA* 7.09 7.09 1.04 13.26 7.22 0.97 12.43 1.29 79.26 1.67
PAMM PacificAmerica Money Ctr of CA* 22.43 22.43 5.63 41.65 14.56 5.63 41.65 4.97 27.75 2.22
PALM Palfed, Inc. of Aiken SC 8.24 8.24 0.10 1.29 0.82 0.61 7.54 2.12 51.22 1.32
PBCI Pamrapo Bancorp, Inc. of NJ 12.74 12.64 0.90 6.37 5.33 1.24 8.78 2.77 26.10 1.29
PFED Park Bancorp of Chicago IL 22.53 22.53 0.87 4.19 3.70 1.21 5.81 0.21 134.41 0.73
PVSA Parkvale Financial Corp of PA 7.58 7.53 0.73 9.76 5.88 1.08 14.42 0.27 537.53 1.97
PEEK Peekskill Fin. Corp. of NY 25.73 25.73 0.98 3.54 3.51 1.29 4.65 1.22 27.98 1.35
PFSB PennFed Fin. Services of NJ 7.36 6.15 0.57 7.43 4.85 0.84 10.86 0.59 33.53 0.28
PWBC PennFirst Bancorp of PA 7.07 6.45 0.43 5.89 3.50 0.64 8.83 0.65 93.15 1.49
PWBK Pennwood SB of PA* 19.47 19.47 0.61 3.89 2.97 0.97 6.17 1.13 57.64 1.40
PBKB People's SB of Brockton MA* 5.61 5.37 0.80 14.41 7.14 0.47 8.57 0.82 91.19 1.57
PFDC Peoples Bancorp of Auburn IN 15.21 15.21 1.12 7.33 5.37 1.47 9.59 0.36 83.87 0.38
PBCT Peoples Bank, MHC of CT (37.4)* 8.48 8.47 1.12 13.72 5.20 0.83 10.17 0.90 121.39 1.60
PFFC Peoples Fin. Corp. of OH 26.90 26.90 0.86 3.21 3.01 0.86 3.21 0.01 NA 0.41
PHBK Peoples Heritage Fin Grp of ME* 7.72 6.51 1.28 15.68 6.18 1.29 15.88 0.91 126.66 1.66
PSFC Peoples Sidney Fin. Corp of OH 23.26 23.26 0.92 3.97 3.39 1.21 5.18 1.00 42.00 0.45
PERM Permanent Bancorp of IN 9.16 9.03 0.34 3.64 2.91 0.62 6.57 1.09 45.43 0.99
PMFI Perpetual Midwest Fin. of IA 8.53 8.53 0.12 1.38 1.23 0.29 3.36 0.40 185.58 0.95
PERT Perpetual of SC, MHC (46.8) 13.29 13.29 0.75 6.48 2.56 1.06 9.13 0.23 290.91 1.01
PCBC Perry Co. Fin. Corp. of MO 18.32 18.32 0.78 4.11 3.76 1.03 5.45 0.05 64.10 0.20
PHFC Pittsburgh Home Fin. of PA 10.92 10.80 0.62 4.71 3.76 0.79 6.00 1.60 32.18 0.76
PFSL Pocahnts Fed, MHC of AR (46.4) 6.36 6.36 0.60 9.75 5.91 0.84 13.54 0.15 308.72 1.12
POBS Portsmouth Bank Shrs Inc of NH(8)* 25.93 25.93 2.29 9.13 5.99 2.02 8.07 0.50 53.09 0.76
PTRS Potters Financial Corp of OH 8.83 8.83 0.48 5.37 4.78 0.85 9.54 0.50 350.66 2.78
PKPS Poughkeepsie Fin. Corp. of NY 8.37 8.37 0.35 4.21 3.15 0.54 6.49 4.28 25.28 1.45
PHSB Ppls Home SB, MHC of PA (45.0) 17.31 17.31 0.39 2.23 2.17 0.81 4.67 NA NA 1.40
PRBC Prestige Bancorp of PA 11.13 11.13 0.37 2.84 2.85 0.65 5.01 0.30 85.33 0.38
PETE Primary Bank of NH(8)* 6.93 6.92 0.61 9.35 4.82 0.73 11.09 0.82 75.47 1.08
PFNC Progress Financial Corp. of PA 5.27 4.65 0.54 10.19 4.08 0.65 12.26 1.46 51.92 1.08
PSBK Progressive Bank, Inc. of NY* 8.55 7.64 0.99 12.02 7.54 0.98 11.81 0.85 131.46 1.65
PROV Provident Fin. Holdings of CA 13.88 13.88 0.32 2.24 1.99 0.28 1.95 NA NA 1.31
<CAPTION>
Pricing Ratios Dividend Data(6)
_________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
MIVI Miss. View Hold. Co. of MN 26.49 97.20 18.35 97.20 17.76 0.16 1.02 27.12
MBSP Mitchell Bancorp of NC* NM 108.84 47.20 108.84 27.92 0.00 0.00 0.00
MBBC Monterey Bay Bancorp of CA NM 117.10 12.58 127.69 28.72 0.12 0.73 38.71
MONT Montgomery Fin. Corp. of IN NM 104.72 18.76 104.72 27.98 0.00 0.00 0.00
MSBK Mutual SB, FSB of Bay City MI NM 109.72 6.66 109.72 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH NM 146.03 10.92 172.33 25.77 0.50 2.99 NM
NSLB NS&L Bancorp of Neosho MO NM 111.99 21.90 111.99 28.91 0.50 2.70 NM
NMSB Newmil Bancorp. of CT* 19.12 157.19 15.43 157.19 20.00 0.24 1.85 35.29
NASB North American SB of MO 13.25 209.45 16.70 216.47 13.64 0.80 1.57 20.78
NBSI North Bancshares of Chicago IL NM 129.79 18.34 129.79 27.16 0.48 2.18 NM
FFFD North Central Bancshares of IA 16.18 111.41 25.25 111.41 13.98 0.25 1.52 24.51
NBN Northeast Bancorp of ME* 15.86 109.34 7.60 126.50 17.15 0.32 2.17 34.41
NEIB Northeast Indiana Bncrp of IN 17.82 112.64 17.08 112.64 15.09 0.32 1.91 34.04
NWEQ Northwest Equity Corp. of WI 17.90 119.14 13.64 119.14 14.19 0.52 3.30 59.09
NWSB Northwest SB, MHC of PA (29.9) NM 225.90 21.94 240.38 23.15 0.32 1.71 57.14
NSSY Norwalk Savings Society of CT* 13.74 160.71 12.95 166.67 12.00 0.40 1.20 16.53
NSSB Norwich Financial Corp. of CT* 17.25 166.67 18.61 184.63 18.15 0.56 2.29 39.44
NTMG Nutmeg FS&LA of CT 28.21 149.66 8.52 149.66 25.00 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 21.33 109.62 12.10 109.62 14.90 0.88 3.78 NM
OCFC Ocean Fin. Corp. of NJ NM 123.40 20.06 123.40 22.65 0.80 2.37 NM
OCN Ocwen Financial Corp. of FL 16.55 NM 43.36 NM 22.80 0.00 0.00 0.00
OFCP Ottawa Financial Corp. of MI NM 166.56 14.54 207.49 19.32 0.40 1.57 48.78
PFFB PFF Bancorp of Pomona CA NM 135.22 13.95 136.63 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 20.89 99.73 38.60 99.73 20.59 0.32 2.19 45.71
PVFC PVF Capital Corp. of OH 15.00 214.50 15.07 214.50 11.67 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 13.85 171.73 12.17 171.73 14.78 0.00 0.00 0.00
PAMM PacificAmerica Money Ctr of CA* 6.87 188.54 42.28 188.54 6.87 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC NM 153.04 12.61 153.04 20.88 0.12 0.76 NM
PBCI Pamrapo Bancorp, Inc. of NJ 18.75 130.87 16.67 131.90 13.59 1.00 4.60 NM
PFED Park Bancorp of Chicago IL 27.02 102.95 23.19 102.95 19.48 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 17.01 157.77 11.97 158.97 11.52 0.52 1.78 30.23
PEEK Peekskill Fin. Corp. of NY 28.51 110.47 28.42 110.47 21.67 0.36 2.22 63.16
PFSB PennFed Fin. Services of NJ 20.63 146.26 10.76 174.87 14.11 0.28 0.95 19.58
PWBC PennFirst Bancorp of PA 28.57 170.03 12.02 186.26 19.05 0.33 2.06 58.93
PWBK Pennwood SB of PA* NM 101.31 19.73 101.31 21.23 0.32 2.06 69.57
PBKB People's SB of Brockton MA* 14.01 189.84 10.65 198.17 23.55 0.44 2.71 37.93
PFDC Peoples Bancorp of Auburn IN 18.61 134.53 20.46 134.53 14.21 0.60 2.32 43.17
PBCT Peoples Bank, MHC of CT (37.4)* 19.24 244.74 20.75 244.96 25.97 0.68 2.54 48.92
PFFC Peoples Fin. Corp. of OH NM 106.61 28.68 106.61 NM 0.50 2.90 NM
PHBK Peoples Heritage Fin Grp of ME* 16.18 242.17 18.70 287.36 15.98 0.76 1.99 32.20
PSFC Peoples Sidney Fin. Corp of OH 29.46 117.10 27.24 117.10 22.60 0.20 1.21 35.71
PERM Permanent Bancorp of IN NM 125.38 11.49 127.25 19.04 0.40 1.62 55.56
PMFI Perpetual Midwest Fin. of IA NM 112.50 9.60 112.50 NM 0.30 1.48 NM
PERT Perpetual of SC, MHC (46.8) NM 198.07 26.32 198.07 27.66 1.40 3.59 NM
PCBC Perry Co. Fin. Corp. of MO 26.62 113.45 20.78 113.45 20.10 0.40 1.95 51.95
PHFC Pittsburgh Home Fin. of PA 26.62 129.28 14.11 130.65 20.88 0.24 1.31 34.78
PFSL Pocahnts Fed, MHC of AR (46.4) 16.91 159.21 10.13 159.21 12.18 0.90 3.83 64.75
POBS Portsmouth Bank Shrs Inc of NH(8)* 16.69 150.92 39.14 150.92 18.89 0.60 3.49 58.25
PTRS Potters Financial Corp of OH 20.91 110.38 9.74 110.38 11.77 0.36 1.48 31.03
PKPS Poughkeepsie Fin. Corp. of NY NM 130.43 10.92 130.43 20.62 0.10 1.31 41.67
PHSB Ppls Home SB, MHC of PA (45.0) NM 102.72 17.78 102.72 22.01 0.00 0.00 0.00
PRBC Prestige Bancorp of PA NM 99.94 11.12 99.94 19.88 0.12 0.73 25.53
PETE Primary Bank of NH(8)* 20.77 179.69 12.46 179.94 17.52 0.00 0.00 0.00
PFNC Progress Financial Corp. of PA 24.54 229.24 12.07 259.80 20.38 0.12 0.91 22.22
PSBK Progressive Bank, Inc. of NY* 13.26 155.06 13.26 173.59 13.50 0.68 2.23 29.57
PROV Provident Fin. Holdings of CA NM 112.95 15.68 112.95 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PULB Pulaski SB, MHC of MO (29.0) 13.00 13.00 0.69 5.42 2.81 0.96 7.53 0.49 52.28 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.90 11.90 0.25 2.97 1.46 0.61 7.21 0.65 NA NA
PULS Pulse Bancorp of S. River NJ 8.05 8.05 0.72 9.24 5.82 1.08 13.86 0.69 65.20 1.93
QCFB QCF Bancorp of Virginia MN 18.09 18.09 1.36 7.11 6.00 1.36 7.11 0.40 221.49 2.24
QCBC Quaker City Bancorp of CA 8.91 8.90 0.32 3.45 2.44 0.58 6.28 1.31 NA NA
QCSB Queens County Bancorp of NY* 11.85 11.85 1.60 10.80 4.18 1.63 10.95 0.68 95.23 0.74
RCSB RCSB Financial, Inc. of NY(8)* 7.85 7.65 0.96 12.26 5.57 0.96 12.17 0.76 83.90 1.18
RARB Raritan Bancorp. of Raritan NJ* 7.93 7.80 0.96 12.55 6.38 1.02 13.33 0.29 297.45 1.29
REDF RedFed Bancorp of Redlands CA 8.18 8.17 0.12 1.71 0.95 0.47 6.51 2.19 45.70 1.15
RELY Reliance Bancorp, Inc. of NY 8.04 5.63 0.56 6.63 3.88 0.85 10.11 NA NA 0.57
RELI Reliance Bancshares Inc of WI(8)* 47.98 47.98 1.51 3.15 3.29 1.51 3.15 NA NA 0.52
RIVR River Valley Bancorp of IN 12.36 12.17 0.29 3.41 1.61 0.45 5.43 0.49 170.62 1.03
RSLN Roslyn Bancorp, Inc. of NY* 20.14 20.04 0.86 4.12 2.47 1.35 6.49 0.27 278.21 3.46
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 11.24 10.26 0.96 8.70 3.26 1.20 10.87 0.14 278.46 0.56
SCCB S. Carolina Comm. Bnshrs of SC 25.95 25.95 0.82 2.99 2.47 1.10 4.03 1.78 35.52 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.58 9.58 0.13 1.32 0.81 0.44 4.49 0.69 76.89 1.16
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.44 3.41 3.12 0.79 6.09 0.73 57.17 0.57
SGVB SGV Bancorp of W. Covina CA 7.31 7.19 0.20 2.37 2.05 0.47 5.74 NA NA 0.44
SISB SIS Bancorp Inc of MA* 7.20 7.20 1.38 18.82 11.03 1.37 18.70 0.47 244.29 2.48
SWCB Sandwich Co-Op. Bank of MA* 8.24 7.86 0.94 11.30 6.69 0.95 11.45 1.28 62.63 1.13
SECP Security Capital Corp. of WI(8) 15.85 15.85 1.15 7.17 4.39 1.38 8.57 0.12 918.65 1.44
SFSL Security First Corp. of OH 9.36 9.20 1.10 11.88 7.76 1.39 15.04 0.26 301.46 0.87
SFNB Security First Netwrk Bk of GA 40.15 39.51 -28.82 NM -29.86 -29.73 NM NA NA 1.35
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.04 10.44 5.47 1.17 11.79 0.14 425.11 0.66
SOBI Sobieski Bancorp of S. Bend IN 15.41 15.41 0.29 1.67 1.85 0.58 3.35 0.25 102.04 0.35
SOSA Somerset Savings Bank of MA(8)* 6.34 6.34 0.81 13.81 6.25 0.78 13.26 6.28 22.01 1.81
SSFC South Street Fin. Corp. of NC* 25.26 25.26 0.92 4.51 2.34 1.17 5.71 0.27 65.44 0.39
SCBS Southern Commun. Bncshrs of AL 21.96 21.96 0.32 2.52 1.23 0.79 6.23 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 15.67 15.67 0.71 4.42 4.06 0.70 4.35 1.10 37.60 0.64
SWBI Southwest Bancshares of IL 11.00 11.00 0.75 6.94 5.03 1.02 9.52 0.30 67.34 0.28
SVRN Sovereign Bancorp of PA 4.01 3.03 0.44 11.07 4.17 0.68 17.14 0.57 78.85 0.72
STFR St. Francis Cap. Corp. of WI 7.88 6.96 0.64 7.35 5.09 0.70 8.09 0.19 181.58 0.80
SPBC St. Paul Bancorp, Inc. of IL 8.60 8.58 0.72 8.22 4.02 1.03 11.84 0.32 232.75 1.09
STND Standard Fin. of Chicago IL(8) 10.77 10.75 0.50 4.46 2.93 0.72 6.44 0.22 136.61 0.50
SFFC StateFed Financial Corp. of IA 17.78 17.78 1.11 6.16 5.44 1.35 7.47 NA NA NA
SFIN Statewide Fin. Corp. of NJ 9.73 9.71 0.54 5.46 4.03 0.91 9.26 0.43 95.58 0.83
STSA Sterling Financial Corp. of WA 4.10 3.57 0.10 2.46 1.58 0.32 7.91 0.61 79.43 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.87 4.56 0.56 8.55 0.48 41.27 0.31
ROSE T R Financial Corp. of NY* 6.20 6.20 0.98 15.72 6.87 0.88 14.18 0.46 90.99 0.80
THRD TF Financial Corp. of PA 11.11 9.75 0.55 4.76 4.36 0.74 6.40 0.33 92.84 0.62
TPNZ Tappan Zee Fin., Inc. of NY 17.92 17.92 0.70 4.22 3.03 0.65 3.90 NA NA 1.18
ESBK The Elmira SB FSB of Elmira NY* 6.30 6.04 0.36 5.66 4.81 0.35 5.51 0.66 97.39 0.85
GRTR The Greater New York SB of NY(8)* 6.27 6.27 0.74 12.34 6.29 0.40 6.62 NA NA 1.71
TSBS Trenton SB, FSB MHC of NJ(35.0 16.89 15.48 1.34 7.53 3.06 1.14 6.39 0.73 55.92 0.67
TRIC Tri-County Bancorp of WY 15.32 15.32 0.80 5.14 4.84 1.02 6.55 NA NA 1.11
TWIN Twin City Bancorp of TN 12.86 12.86 0.53 4.13 3.30 0.75 5.82 0.16 130.95 0.29
UFRM United FS&LA of Rocky Mount NC 7.48 7.48 0.22 2.87 1.58 0.38 4.98 0.58 135.44 0.98
UBMT United Fin. Corp. of MT 22.65 22.65 1.09 4.70 4.00 1.34 5.80 0.42 16.41 0.21
VABF Va. Beach Fed. Fin. Corp of VA 6.85 6.85 0.21 3.15 1.91 0.47 7.02 1.26 56.59 0.93
VFFC Virginia First Savings of VA(8) 8.06 7.78 1.36 17.14 7.54 1.25 15.72 2.29 47.29 1.19
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.25 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.20 5.16 1.31 23.71 10.32 1.32 23.87 1.70 96.79 2.65
WVFC WVS Financial Corp. of PA* 11.16 11.16 1.07 8.59 6.20 1.34 10.72 0.30 230.13 1.25
WRNB Warren Bancorp of Peabody MA* 10.37 10.37 2.13 22.09 11.25 1.81 18.79 1.15 98.45 1.79
WFSL Washington FS&LA of Seattle WA 12.08 11.03 1.67 14.37 7.29 1.84 15.85 0.73 59.65 0.60
WAMU Washington Mutual Inc. of WA* 5.00 4.75 0.35 6.81 1.83 0.74 14.45 0.81 93.26 1.12
<CAPTION>
Pricing Ratios Dividend Data(6)
________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
PULB Pulaski SB, MHC of MO (29.0) NM 190.22 24.73 190.22 25.61 1.00 4.76 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 140.88 16.77 140.88 28.18 0.30 2.09 NM
PULS Pulse Bancorp of S. River NJ 17.18 151.28 12.17 151.28 11.46 0.70 3.39 58.33
QCFB QCF Bancorp of Virginia MN 16.67 123.81 22.40 123.81 16.67 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA NM 138.61 12.35 138.79 22.53 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 23.93 NM 35.70 NM 23.60 1.00 1.94 46.51
RCSB RCSB Financial, Inc. of NY(8)* 17.95 220.15 17.28 225.88 18.09 0.60 1.26 22.56
RARB Raritan Bancorp. of Raritan NJ* 15.66 183.25 14.54 186.39 14.75 0.48 2.10 32.88
REDF RedFed Bancorp of Redlands CA NM 152.03 12.43 152.17 27.63 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 25.75 169.24 13.61 241.47 16.88 0.64 2.14 55.17
RELI Reliance Bancshares Inc of WI(8)* NM 95.61 45.87 95.61 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 116.56 14.41 118.37 NM 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* NM 163.72 32.97 164.51 25.67 0.20 0.84 33.90
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) NM 253.05 28.44 277.21 24.55 0.24 0.89 27.27
SCCB S. Carolina Comm. Bnshrs of SC NM 123.09 31.94 123.09 NM 0.60 2.85 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 159.07 15.24 159.07 NM 0.40 2.16 NM
SFED SFS Bancorp of Schenectady NY NM 110.38 13.76 110.38 17.99 0.28 1.45 46.67
SGVB SGV Bancorp of W. Covina CA NM 118.40 8.65 120.38 20.16 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 9.06 161.99 11.66 161.99 9.12 0.56 1.87 16.92
SWCB Sandwich Co-Op. Bank of MA* 14.96 163.02 13.44 171.01 14.76 1.20 3.58 53.57
SECP Security Capital Corp. of WI(8) 22.78 159.66 25.31 159.66 19.06 1.20 1.20 27.27
SFSL Security First Corp. of OH 12.89 138.89 13.00 141.39 10.19 0.32 1.94 25.00
SFNB Security First Netwrk Bk of GA NM NM 123.09 NM NM 0.00 0.00 NM
SMFC Sho-Me Fin. Corp. of MO(8) 18.27 191.82 17.32 191.82 16.17 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 101.37 15.62 101.37 27.08 0.28 1.72 NM
SOSA Somerset Savings Bank of MA(8)* 16.00 204.08 12.94 204.08 16.67 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 141.75 35.80 141.75 NM 0.40 2.08 NM
SCBS Southern Commun. Bncshrs of AL NM 114.48 25.14 114.48 NM 0.30 1.94 NM
SMBC Southern Missouri Bncrp of MO 24.64 108.83 17.05 108.83 25.00 0.50 2.90 71.43
SWBI Southwest Bancshares of IL 19.88 133.01 14.63 133.01 14.49 0.76 3.64 72.38
SVRN Sovereign Bancorp of PA 23.98 237.92 9.55 NM 15.49 0.08 0.54 12.90
STFR St. Francis Cap. Corp. of WI 19.63 142.24 11.21 160.95 17.82 0.48 1.38 27.12
SPBC St. Paul Bancorp, Inc. of IL 24.86 198.11 17.04 198.63 17.25 0.40 1.73 43.01
STND Standard Fin. of Chicago IL(8) NM 147.57 15.90 147.83 23.60 0.40 1.58 54.05
SFFC StateFed Financial Corp. of IA 18.38 110.65 19.67 110.65 15.14 0.40 1.86 34.19
SFIN Statewide Fin. Corp. of NJ 24.83 135.76 13.20 135.95 14.63 0.40 2.12 52.63
STSA Sterling Financial Corp. of WA NM 143.03 5.86 164.05 19.72 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 21.95 123.18 7.99 123.63 15.08 0.32 1.19 26.02
ROSE T R Financial Corp. of NY* 14.55 212.87 13.20 212.87 16.14 0.60 2.25 32.79
THRD TF Financial Corp. of PA 22.92 110.38 12.27 125.82 17.04 0.40 2.08 47.62
TPNZ Tappan Zee Fin., Inc. of NY NM 121.95 21.86 121.95 NM 0.28 1.60 52.83
ESBK The Elmira SB FSB of Elmira NY* 20.80 115.65 7.28 120.64 21.36 0.64 2.72 56.64
GRTR The Greater New York SB of NY(8)* 15.90 186.72 11.71 186.72 29.65 0.20 0.91 14.49
TSBS Trenton SB, FSB MHC of NJ(35.0 NM 238.59 40.29 260.22 NM 0.35 1.24 40.70
TRIC Tri-County Bancorp of WY 20.68 101.11 15.49 101.11 16.25 0.60 2.64 54.55
TWIN Twin City Bancorp of TN NM 123.61 15.89 123.61 21.51 0.64 3.20 NM
UFRM United FS&LA of Rocky Mount NC NM 179.10 13.39 179.10 NM 0.24 2.00 NM
UBMT United Fin. Corp. of MT 25.00 117.79 26.68 117.79 20.26 0.98 4.17 NM
VABF Va. Beach Fed. Fin. Corp of VA NM 160.24 10.97 160.24 23.48 0.20 1.47 NM
VFFC Virginia First Savings of VA(8) 13.26 211.45 17.05 218.98 14.46 0.10 0.42 5.52
WHGB WHG Bancshares of MD NM 106.78 22.05 106.78 NM 0.20 1.32 58.82
WSFS WSFS Financial Corp. of DE* 9.69 225.47 11.73 227.27 9.63 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 16.12 144.72 16.15 144.72 12.91 0.80 2.94 47.34
WRNB Warren Bancorp of Peabody MA* 8.89 181.98 18.87 181.98 10.45 0.52 2.91 25.87
WFSL Washington FS&LA of Seattle WA 13.72 181.58 21.93 198.81 12.44 0.92 3.46 47.42
WAMU Washington Mutual Inc. of WA* NM NM 16.16 NM 25.77 1.08 1.73 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
Key Financial Ratios Asset Quality Ratios
__________________________________________________________ _______________________
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
WYNE Wayne Bancorp of NJ 13.35 13.35 0.44 2.94 2.27 0.44 2.94 0.91 83.50 1.15
WAYN Wayne S&L Co. MHC of OH (47.8) 9.16 9.16 0.29 3.14 1.80 0.66 7.16 0.70 51.61 0.43
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.35 23.35 1.06 4.61 2.91 1.42 6.15 0.26 152.85 0.69
WBST Webster Financial Corp. of CT 5.02 4.29 0.41 8.14 3.20 0.74 14.55 0.85 103.47 1.45
WEFC Wells Fin. Corp. of Wells MN 14.20 14.20 0.72 5.07 4.42 1.06 7.49 NA NA NA
WCBI WestCo Bancorp of IL 15.24 15.24 1.12 7.29 5.37 1.42 9.20 0.60 47.07 0.38
WSTR WesterFed Fin. Corp. of MT 10.91 8.73 0.63 5.09 3.72 0.79 6.41 0.25 191.01 0.73
WOFC Western Ohio Fin. Corp. of OH 13.41 12.64 0.31 2.02 2.00 0.44 2.90 0.96 45.88 0.59
WWFC Westwood Fin. Corp. of NJ 9.13 8.13 0.49 5.12 3.35 0.85 8.80 0.13 159.15 0.55
WEHO Westwood Hmstd Fin Corp of OH 29.41 29.41 0.70 2.41 1.95 1.04 3.62 0.06 255.81 0.21
WFI Winton Financial Corp. of OH 7.11 6.96 1.00 14.08 10.00 0.84 11.80 0.35 78.21 0.32
FFWD Wood Bancorp of OH 12.31 12.31 1.07 8.25 4.79 1.27 9.81 0.24 143.64 0.44
YFCB Yonkers Fin. Corp. of NY 14.90 14.90 0.86 5.06 4.54 1.16 6.79 0.57 65.11 1.02
YFED York Financial Corp. of PA 8.61 8.61 0.62 7.41 3.96 0.79 9.46 2.39 23.05 0.64
<CAPTION>
Pricing Ratios Dividend Data(6)
________________________________________ _______________________
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
_______________________________________
WYNE Wayne Bancorp of NJ NM 133.82 17.87 133.82 NM 0.20 0.91 40.00
WAYN Wayne S&L Co. MHC of OH (47.8) NM 172.67 15.82 172.67 24.32 0.62 3.49 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 156.70 36.59 156.70 25.78 0.80 4.85 NM
WBST Webster Financial Corp. of CT NM 200.72 10.08 234.96 17.48 0.80 1.60 50.00
WEFC Wells Fin. Corp. of Wells MN 22.60 112.70 16.00 112.70 15.28 0.48 2.91 65.75
WCBI WestCo Bancorp of IL 18.62 136.86 20.86 136.86 14.75 0.60 2.29 42.55
WSTR WesterFed Fin. Corp. of MT 26.85 116.12 12.67 145.10 21.32 0.44 2.02 54.32
WOFC Western Ohio Fin. Corp. of OH NM 103.40 13.87 109.74 NM 1.00 4.17 NM
WWFC Westwood Fin. Corp. of NJ 29.81 147.53 13.46 165.60 17.35 0.20 0.86 25.64
WEHO Westwood Hmstd Fin Corp of OH NM 108.47 31.90 108.47 NM 0.28 1.82 NM
WFI Winton Financial Corp. of OH 10.00 140.85 10.01 143.88 11.94 0.46 2.88 28.75
FFWD Wood Bancorp of OH 20.89 173.32 21.33 173.32 17.55 0.40 2.42 50.63
YFCB Yonkers Fin. Corp. of NY 22.04 118.46 17.65 118.46 16.42 0.24 1.43 31.58
YFED York Financial Corp. of PA 25.25 178.57 15.37 178.57 19.77 0.60 2.35 59.41
</TABLE>
<PAGE>
Exhibit IV--2
Historical Stock Price Indices(1)
<TABLE>
<CAPTION>
SNL SNL
Nasdaq Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ------ -----
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.7
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.1 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
Quarter 2 7672.8 885.1 1,442.1 624.5 333.3
August 15, 1997 7694.7 900.8 1,562.0 660.3 354.6
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
<TABLE>
<CAPTION>
[LOGO OF ThriftINVESTOR]
INDEX VALUES
INDEX VALUES PERCENT CHANGE SINCE
------------------------------------ ------------------------------
07/31/97 1 MONTH YTD 52 WEEK 1 MONTH YTD 52 WEEK
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
All Pub. Traded Thrifts 684.5 624.5 483.6 388.4 9.60 41.54 76.24
MHC Index 751.0 683.8 538.0 416.1 9.84 39.59 80.48
INSURANCE INDICES
- ------------------------------------------------------------------------------------------------------
SAIF Thrifts 608.2 555.0 439.2 356.2 9.59 38.47 70.76
BIF Thrifts 908.5 832.1 616.8 485.0 9.18 47.28 87.31
STOCK EXCHANGE INDICES
- -------------------------------------------------------------------------------------------------------
AMEX Thrifts 197.0 192.7 156.2 132.1 2.20 26.10 49.07
NYSE Thrifts 421.4 368.3 277.3 219.7 14.41 51.96 91.75
OTC Thrifts 779.9 721.8 569.7 462.5 8.05 36.89 68.62
GEOGRAPHIC INDICES
- --------------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,342.6 1,267.3 970.7 738.4 5.94 38.31 81.82
Midwestern Thrifts 1,455.2 1,369.4 1,159.3 951.7 6.26 25.52 52.90
New England Thrifts 592.0 553.2 428.9 330.3 7.00 38.02 79.21
Southeastern Thrifts 608.6 561.4 447.2 375.6 8.40 36.10 62.03
Southwestern Thrifts 416.4 419.8 315.9 255.8 -0.82 31.84 62.80
Western Thrifts 730.2 635.1 474.7 392.0 14.97 53.83 86.25
ASSET SIZE INDICES
- ----------------------------------------------------------------------------------------------------------
Less than $250M 721.9 676.0 586.6 539.7 6.79 23.06 33.75
$250M to $500M 1,011.5 947.0 789.8 673.2 6.81 28.07 50.25
$500M to $1B 672.1 639.2 521.8 436.0 5.15 28.82 54.15
$1B TO $5B 747.6 704.8 546.0 429.6 6.08 36.92 74.03
Over $5B 453.3 403.6 305.8 241.6 12.32 48.23 87.66
COMPARATIVE INDICES
- -----------------------------------------------------------------------------------------------------------
Dow Jones Industrials 8,222.6 7,672.8 6,448.3 5,528.9 7.17 27.52 48.72
S&P 500 954.3 885.2 740.7 640.0 7.81 28.83 49.12
</TABLE>
All SNL Indices are market-value weighted; i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index began at 100 on March 30, 1984. The
SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR; Midwest: IA, IL, IN, KS, KY, MI, MN,
MO, ND, NE, OH, SD, WI;
New England: CT, MA, ME, NH, RI, VT; Southeast: AL, AR, FL, GA, MS, NC, SC, TN,
VA, WV;
Southwest: CO, LA, NM, OK, TX, UT; West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
<PAGE>
Exhibit IV-4
Massachusetts Thrift Merger and Acquisition Activity 1995-Present
<TABLE>
<CAPTION>
Seller Financials of Completion
------------------------------------------------
Total TgEq/ TTM TTM NPAs/ Rsrvs/
Ann'd Comp Assets Assets ROA ROE Assets NPLs
Data Data Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
02/26/97 07/22/97 MASSBANK Corp MA Glendale Co-Op Bank MA 36,947 16.23 0.38% 2.32% 00.0 NA
09/10/96 05/01/97 Barkshire CNTY SB MA Great Barrington SB MA 274,165 13.93 0.35% 2.54% 0.63 122.04
11/04/96 03/04/97 Citizens Fin'l Group RI Grove Bank MA 596,507 6.49 0.67% 10.30% 0.58 126.33
11/01/96 02/21/97 Bay State FSB MA Union FS&LA MA 38,797 7.45 -0.12% -1.59% 0.59 73.01
08/30/96 01/03/97 UST Corp MA Walden Bancorp, Inc. MA 1,051,743 6.07 0.55% 5.98% 0.91 150.25
08/27/96 01/02/97 Grove Bank MA Greater Boston Bk MA 150,167 7.76 0.09% 1.16% 1.49 259.65
05/31/96 12/06/96 Peoples Heritage Fin ME Family Bancorp MA 867,387 7.14 0.24% 3.07% 1.19 99.85
10/11/95 06/28/96 BankBoston Corp. MA Boston Bancorp MA 2,086,498 8.82 0.69% 8.01% 0.94 125.33
04/26/95 12/08/95 Co-op Bank Concord MA Bank of Braintree MA 194,619 10.74 1.27% 11.78% 1.98 74.31
03/14/95 10/19/95 Main Street Cmmnty MA Lexington Svgs Bank MA 393,659 9.02 0.76% 8.28% 0.76 NA
07/26/94 04/26/95 CFX Corporation NH Orange Savings Bank MA 82,948 9.90 0.17% 1.71% 1.85 NA
05/09/94 01/27/95 Fleet Fin'l Group MA NBB Bancorp, Inc. MA 2,440,568 9.71 0.32% 3.12% 1.45 NA
06/13/94 01/06/95 Citizens Fin'l Group RI Quincy Savings Bank MA 832,558 8.45 0.23% 2.58% 2.38 NA
Average 697,561 9.50 0.43% 4.56% 1.13 129.10
Median 393,659 6.62 0.35% 3.07% 0.94 123.69
</TABLE>
<TABLE>
<CAPTION>
Deal Terms at Completion
-------------------------
Deal Deal
Ann'd Comp Value Price/
Data Data Buyer ST Seller ST ($M) Shr($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
02/26/97 07/22/97 MASSBANK Corp MA Glendale Co-Op Bank MA 7.2 28.00 Cash
09/10/96 05/01/97 Barkshire CNTY SB MA Great Barrington SB MA NA NA NA
11/04/96 03/04/97 Citizens Fin'l Group RI Grove Bank MA 91.8 51.00 Cash
11/01/96 02/21/97 Bay State FSB MA Union FS&LA MA NA NA NA
08/30/96 01/03/97 UST Corp MA Walden Bancorp, Inc. MA 207.0 38.24 Stock
08/27/96 01/02/97 Grove Bank MA Greater Boston Bk MA 21.1 NA Mixture
05/31/96 12/06/96 Peoples Heritage Fin ME Family Bancorp MA 153.8 35.44 Stock
10/11/95 06/28/96 BankBoston Corp. MA Boston Bancorp MA 229.4 42.96 Stock
04/26/95 12/08/95 Co-op Bank Concord MA Bank of Braintree MA 30.4 16.25 Stock
03/14/95 10/19/95 Main Street Cmmnty MA Lexington Svgs Bank MA 41.2 16.75 Stock
07/26/94 04/26/95 CFX Corporation NH Orange Savings Bank MA 11.4 14.94 Stock
05/09/94 01/27/95 Fleet Fin'l Group MA NBB Bancorp, Inc. MA 435.5 49.62 Mixture
06/13/94 01/06/95 Citizens Fin'l Group RI Quincy Savings Bank MA 146.3 25.75 Cash
Average 125.2 32.10
Median 91.6 31.72
</TABLE>
<TABLE>
<CAPTION>
Deal Pricing at Completion
--------------------------------------------
Deal Deal Pr/ Deal Pr/ Deal Pr/
Ann'd Comp Pr/BK Tg Bk Assets 4-Qtr
Data Data Buyer ST Seller ST ($) ($) ($) EPS(x)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
02/26/97 07/22/97 MASSBANK Corp MA Glendale Co-Op Bank MA 114.47 114.47 19.50 25.46
09/10/96 05/01/97 Barkshire CNTY SB MA Great Barrington SB MA NA NA NA NA
11/04/96 03/04/97 Citizens Fin'l Group RI Grove Bank MA NA NA NA NA
11/01/96 02/21/97 Bay State FSB MA Union FS&LA MA NA NA NA NA
08/30/96 01/03/97 UST Corp MA Walden Bancorp, Inc. MA 205.80 239.14 19.73 19.12
08/27/96 01/02/97 Grove Bank MA Greater Boston Bk MA 161.98 161.98 12.82 12.60
05/31/96 12/06/96 Peoples Heritage Fin ME Family Bancorp MA 209.44 228.30 16.76 19.58
10/11/95 06/28/96 BankBoston Corp. MA Boston Bancorp MA 106.63 106.63 13.38 6.15
04/26/95 12/08/95 Co-op Bank Concord MA Bank of Braintree MA 124.74 124.74 14.01 10.67
03/14/95 10/19/95 Main Street Cmmnty MA Lexington Svgs Bank MA NA NA NA NA
07/26/94 04/26/95 CFX Corporation NH Orange Savings Bank MA 128.12 129.45 13.69 28.21
05/09/94 01/27/95 Fleet Fin'l Group MA NBB Bancorp, Inc. MA 168.53 179.07 17.49 14.22
06/13/94 01/06/95 Citizens Fin'l Group RI Quincy Savings Bank MA 192.31 199.30 17.67 22.39
Average 158.89 164.56 16.12 17.38
Median 161.98 161.98 16.76 19.12
</TABLE>
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Medford Co-operative Bank
Directors and Management Summary Resumes
John J. McGlynn is the Chairman of the board of directors of the Bank. Mr.
McGlynn was elected Chairman of the Board in 1992. Mr. McGlynn is the retired
Commissioner of the Public Employee Retirement Administration for the
Commonwealth of Massachusetts and a former member of the Pension Reserves
Investment Management Board.
Robert H. Surabian is the President and Chief Executive Officer and a
Director of the Bank. He has been the President of the Bank since 1979 and was
named Chief Executive Officer in 1991.
Julie Bernardin is a Principal at J.B. Consulting, Medford, Massachusetts,
which provides management and organizational consulting services, including
career counseling and small business consulting.
John A. Hackett is the President and owner of J.J. Ruddy Insurance Agency,
Inc., Medford, Massachusetts, which he has owned for 35 years.
Richard M. Kazanjian is a Director and Partner in Wellington Apparel Co.,
Medford, Ma, a Principal of Consolidated Realty Trust, a General Partner in
Wellington Realty, Medford, MA, and a part-owner and consultant for Graphic
Solutions, Medford, MA.
Dennis M. Raimo is a certified public accountant and is a Partner, the
Treasurer and a Director of the firm of Della Pelle, Quigley, Raimo & Co., P.C.,
Medford, Massachusetts. His firm provides consulting, tax advice, audit and
general accounting services to small and medium-sized businesses.
Robert B. Risman has been the owner of Risman Real Estate, Medford,
Massachusetts, since 1959, which provides residential sales and property
management services.
Lorraine P. Silva is the current Clerk of the Bank. Ms. Silva was employed
by the Bank for 28 years and has been retired since 1988.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Thomas G. Burke, age 50, has been a Senior Vice President and Commercial
Loan Officer of the Bank since 1995. He is responsible for all commercial
lending and supervision of the commercial loan department. Mr. Burke was
employed at Medford Savings Bank from 1990 to 1995, where he was a Vice
President and a Commercial Loan Officer.
Ralph W. Dunham, age 41, has been an Executive Vice President since 1997 and
the Chief Financial Officer of the Bank since 1988. As Chief Financial Officer,
he is responsible for the overall financial management of the Bank. Mr. Dunham
is an attorney and a certified public accountant.
Deborah A. McNeill, age 42, is a Senior Vice President since 1996 and the
Treasurer of the Bank since 1993. She has been an employee of the Bank for 23
years. Her present duties include directing and coordinating the operation of
the accounting and operations department.
Henry T. Sampson, Jr., age 49, has been a Senior Vice President since 1992
and the Chief Residential Loan Officer of the Bank since 1993. Mr. Sampson is
responsible for all non-commercial lending and supervision of the lending
department.
<PAGE>
EXHIBIT IV-6
Medford Co-operative Bank
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
At June 30, 1997
------------------------------------------------------------------------------
Historical Percent of Pro Forma Percent of Capital Percent of
Capital Assets(1) Capital Assets(1) Requirement Assets(1)
--------- ----------- ---------- ---------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Regulatory Tier 1
leverage capital .............. $11,761 8.1% $19,277 12.14% $4,762 4.00%
Tier 1 risk-based capital ....... 11,761 13.3 19,277 12.14 7,216 4.00
Total risk-based capital ........ 11,738 14.4 20,251 22.45 7,216 8.00
</TABLE>
- -------------
(1) For purpose of calculating Regulatory Tier 1 leverage capital, assets are
based on adjusted total average assets. In calculating Tier 1 risked-based
capital and total risk-based capital, assets are based on total risk-
weighted assets.
<PAGE>
EXHIBIT IV-7
Pro Forma Analysis Sheet
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 1
Medford Co-operative Bk of MA
Prices as of August 15, 1997
<TABLE>
<CAPTION>
Comparable All All BIF
Companies Companies Companies
______________ ________________ _______________
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
______________ ______ __________ _____ ______ _____ ______ _____ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 17.98x 15.57x 13.99x 19.84x 19.88x 14.89x 14.01x
Price-core earnings = P/CORE 19.69x 16.31x 14.69x 18.12x 17.35x 16.10x 14.78x
Price-book ratio = P/B 70.21% 144.89% 141.24% 138.37% 132.46% 158.22% 160.49%
Price-tng book ratio = P/TB 70.21% 151.67% 150.49% 142.45% 135.74% 164.59% 168.42%
Price-assets ratio = P/A 12.28% 13.09% 11.94% 17.18% 15.05% 17.74% 14.74%
Valuation Parameters
____________________
Pre-Conv Earnings (Y) $ 741,000 Est ESOP Borrowings (E) $ 1,640,000
Pre-Conv Book Value (B) $ 11,940,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $ 149,653,000 Amort of ESOP Borrowings (T) 10 Years
Reinvestment Rate(2) (R) 3.43% RSP Amount (M) $ 820,000
Est Conversion Exp(3) (X) 782,780 RSP Expense (N) $ 164,000
Proceeds Not Reinvested (Z) $ 2,460,000
Calculation of Pro Forma Value After Conversion
___________________________ ____________________
1. V = P/E (Y-R(X+Z)-ES- (1-TAX)E/T-(1-TAX)N)) V = $ 20,495,427
_________________________________________________
1-(P/E)R
2. V = P/B (B-X-E-M) V = $ 20,497,879
_______________________
1-P/B
3. V = P/A (A-X-M-E) V = $ 20,496,096
______________________
1-P/A
Total Price Total
Conclusion Shares Per Share Value
__________ ________ _________ ________
Appraised Value 2,050,000 $10.00 $ 20,500,000
RANGE:
______
- Minimum 17,425,000 $10.00 1,742,500
- Maximum 23,575,000 $10.00 2,357,500
- Superrange 27,111,250 $10.00 2,711,125
</TABLE>
(1) Pricing ratios shown reflect the midpoint appraised value.
(2) Net return assumes a reinvestment rate of 5.82 percent, and a tax rate of
41.00 percent.
(3) Conversion expenses reflect estimated expenses as presented in offering
document.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 41.00 percent.
<PAGE>
RP Financial, Inc.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 2
Medford Co-operative Bk of MA
Prices as of August 15, 1997
<TABLE>
<CAPTION>
Mean Pricing Median Pricing
_________________ _________________
Valuation Approach Subject Peers (Disc) Peers (Disc)
__________________ _______ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 17.98x 15.57x 15.50% 13.99x 28.55%
P/CORE Price-core earnings 19.69x 16.31x 20.77% 14.69x 34.03%
P/B Price-book 70.21% 144.89% NM% 141.24% NM%
P/TB Price-tang. book 70.21% 151.67% NM% 150.49% NM%
P/A Price-assets 12.28% 13.09% -6.17% 11.94% 2.87%
Average Premium (Discount) 10.03% 21.82%
</TABLE>
<PAGE>
EXHIBIT IV-8
Pro Forma Effect of Conversion Proceeds
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Medford Co-operative Bk of MA
At the Minimum of the Range
<TABLE>
<CAPTION>
<S> <C>
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 17,425,000
Less: Estimated offering expenses --------------- 714,880
___________
Net Conversion Proceeds ----------------------------- $ 16,710,120
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 16,710,120
Less: Held in Non-Earning Assets(5)(1) ---------- 2,091,000
___________
Net Proceeds Reinvested ----------------------------- $ 14,619,120
Estimated net incremental rate of return ------------ 3.43 %
___________
Earnings Increase ----------------------------------- $ 501,991
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 82,246
Less: RSP Expense(4)----------------------------- 82,246
___________
Net Earnings Increase ------------------------------- $ 337,499
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
______ _________________ ________________
12 Months ended June 30, 1997 $ 741,000 $ 1,078,499
12 Months ended June 30, 1997 (Core) $ 642,000 $ 979,499
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
June 30, 1997 $ 11,940,000 $ 14,619,120 (3)(4) $ 26,559,120
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
June 30, 1997 $ 149,653,000 $ 14,619,120 $ 164,272,120
NOTE: Shares for calculating per share amounts: 1,742,500
(1) Estimated ESOP borrowings of $ 1,394,000 with an after-tax cost of 0.00 percent,
assuming a borrowing cost of 0.00 percent and a tax rate of 41.00 percent.
ESOP financed by holding company - excluded from reinvestment and total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $ 1,394,000 are omitted from net worth.
(4) $ 697,000 purchased by the RSP with an estimated pre-tax expense
of $ 139,400 and a tax rate of 41.00 percent.
(5) Stock purchased by RSP does not generate reinvestment income.
</TABLE>
152
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Medford Co-operative Bk of MA
At the Midpoint of the Range
<TABLE>
<CAPTION>
<S> <C>
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 20,500,000
Less: Estimated offering expenses --------------- 782,780
___________
Net Conversion Proceeds ----------------------------- $ 19,717,220
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 19,717,220
Less: Held in Non-Earning Assets(5)(1) ---------- 2,460,000
___________
Net Proceeds Reinvested ----------------------------- $ 17,257,220
Estimated net incremental rate of return ------------ 3.43 %
___________
Earnings Increase ----------------------------------- $ 592,578
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 96,760
Less: RSP Expense(4)----------------------------- 96,760
___________
Net Earnings Increase ------------------------------- $ 399,058
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
______ _________________ ________________
12 Months ended June 30, 1997 $ 741,000 $ 1,140,058
12 Months ended June 30, 1997 (Core) $ 642,000 $ 1,041,058
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
June 30, 1997 $ 11,940,000 $ 17,257,220 (3)(4) $ 29,197,220
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
June 30, 1997 $ 149,653,000 $ 17,257,220 $ 166,910,220
NOTE: Shares for calculating per share amounts: 2,050,000
(1) Estimated ESOP borrowings of $ 1,640,000 with an after-tax cost of 0.00 percent,
assuming a borrowing cost of 0.00 percent and a tax rate of 41.00 percent.
ESOP financed by holding company - excluded from reinvestment and total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $ 1,640,000 are omitted from net worth.
(4) $ 820,000 purchased by the RSP with an estimated pre-tax expense
of $ 164,000 and a tax rate of 41.00 percent.
(5) Stock purchased by RSP does not generate reinvestment income.
</TABLE>
153
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Medford Co-operative Bk of MA
At the Maximum of the Range
<TABLE>
<CAPTION>
<S> <C>
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 23,575,000
Less: Estimated offering expenses --------------- 850,680
___________
Net Conversion Proceeds ----------------------------- $ 22,724,320
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 22,724,320
Less: Held in Non-Earning Assets(5)(1) ---------- 2,829,000
___________
Net Proceeds Reinvested ----------------------------- $ 19,895,320
Estimated net incremental rate of return ------------ 3.43 %
___________
Earnings Increase ----------------------------------- $ 683,165
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 111,274
Less: RSP Expense(4)----------------------------- 111,274
___________
Net Earnings Increase ------------------------------- $ 460,617
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
______ _________________ ________________
12 Months ended June 30, 1997 $ 741,000 $ 1,201,617
12 Months ended June 30, 1997 (Core) $ 642,000 $ 1,102,617
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
June 30, 1997 $ 11,940,000 $ 19,895,320 (3)(4) $ 31,835,320
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
June 30, 1997 $ 149,653,000 $ 19,895,320 $ 169,548,320
NOTE: Shares for calculating per share amounts: 2,357,500
(1) Estimated ESOP borrowings of $ 1,886,000 with an after-tax cost of 0.00 percent,
assuming a borrowing cost of 0.00 percent and a tax rate of 41.00 percent.
ESOP financed by holding company - excluded from reinvestment and total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $ 1,886,000 are omitted from net worth.
(4) $ 943,000 purchased by the RSP with an estimated pre-tax expense
of $ 188,600 and a tax rate of 41.00 percent.
(5) Stock purchased by RSP does not generate reinvestment income.
</TABLE>
154
<PAGE>
RP Financial, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Medford Co-operative Bk of MA
At the Superrange Maximum
<TABLE>
<CAPTION>
<S> <C>
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 27,111,250
Less: Estimated offering expenses --------------- 928,760
___________
Net Conversion Proceeds ----------------------------- $ 26,182,490
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 26,182,490
Less: Held in Non-Earning Assets(5)(1) ---------- 3,253,350
___________
Net Proceeds Reinvested ----------------------------- $ 22,929,140
Estimated net incremental rate of return ------------ 3.43 %
___________
Earnings Increase ----------------------------------- $ 787,341
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 127,965
Less: RSP Expense(4)----------------------------- 127,965
___________
Net Earnings Increase ------------------------------- $ 531,411
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
______ _________________ ________________
12 Months ended June 30, 1997 $ 741,000 $ 1,272,411
12 Months ended June 30, 1997 (Core) $ 642,000 $ 1,173,411
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ _______________
June 30, 1997 $ 11,940,000 $ 22,929,140 (3)(4) $ 34,869,140
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
____ _________________ ___________________ ________________
June 30, 1997 $ 149,653,000 $ 22,929,140 $ 172,582,140
NOTE: Shares for calculating per share amounts: 2,711,125
(1) Estimated ESOP borrowings of $ 2,168,900 with an after-tax cost of 0.00 percent,
assuming a borrowing cost of 0.00 percent and a tax rate of 41.00 percent.
ESOP financed by holding company - excluded from reinvestment and total assets.
(2) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(3) ESOP borrowings of $ 2,168,900 are omitted from net worth.
(4) $1,084,450 purchased by the RSP with an estimated pre-tax expense
of $ 216,890 and a tax rate of 41.00 percent.
(5) Stock purchased by RSP does not generate reinvestment income.
</TABLE>
155
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
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Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended June 30, 1997
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains (Loss) @ 34% Items to Common Shares Core EPS
---------- ------------ ---------- ---------- ----------- ------ ---------
($000) ($000) ($000) ($000) ($000) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
CEBK Central Co-Op. Bank of MA(1) 2,837 49 -17 0 2,869 1,965 1.46
EIRE Emerald Island Bancorp, MA 3,412 287 -98 0 3,601 2,246 1.60
FCB Falmouth Co-Op Bank of MA 751 -50 17 0 718 1,455 0.49
IPSW Ipswich SB of Ipswich MA 1,996 -645 219 0 1,570 1,188 1.32
MFLR Mayflower Co-Op. Bank of MA(1) 1,183 -34 12 0 1,161 890 1.30
MDBK Medford Savings Bank of MA 11,120 -1,110 377 0 10,387 4,541 2.29
MCBN Mid-Coast Bancorp of ME 248 211 -72 0 387 233 1.66
NHTB NH Thrift Bancshares of NH(1) 896 667 -227 0 1,336 2,041 0.65
NMSB Newmil Bancorp. of CT 2,602 -172 58 0 2,488 3,834 0.65
NBN Northeast Bancorp of ME(1) 1,085 26 -9 0 1,102 1,275 0.86
TBK Tolland Bank of CT 1,725 122 -41 0 1,806 1,560 1.16
</TABLE>
(1) Financial Information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC, calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------
Financial Services Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws
from backgrounds in consulting, regulatory agencies and investment banking,
thereby providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (11)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (10)
Timothy M. Biddle, Vice President (7)
Alan P. Carruthers, Director-Community Banking (15)
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WASHINGTON HEADQUARTERS
Rosslyn Center
1700 North Moore Street, Suite 2210
Arlington, VA 22209
159
