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As filed with the Securities and Exchange Commission on September 26, 1997
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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UNITED TENNESSEE BANKSHARES, INC.
(Name of small business issuer in its charter)
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Tennessee 6035 Requested
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<S> <C> <C>
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
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344 Broadway, Newport, Tennessee 37821
(423) 623-6088
(Address and telephone number of principal executive offices and
principal place of business)
Mr. Richard G. Harwood
President and Chief Executive Officer
United Tennessee Bankshares, Inc.
344 Broadway
Newport, Tennessee 37821
(423) 623-6088
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(Name, address, and telephone number of agent for service)
Please send copies of all communications to:
Gary R. Bronstein, Esquire
K. Scott Fife, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Dollar Maximum Maximum Amount of
Title of Each Class Amount Offering Aggregate Registration
of Securities to be Price Per Offering Fee
to be Registered Registered Security Price (1)
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<S> <C> <C> <C> <C>
Common Stock, no par value $14,547,500 $10.00 $14,547,500 $4,408.33
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(1) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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P R O S P E C T U S
UNITED TENNESSEE BANKSHARES, INC.
(HOLDING COMPANY FOR NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION)
Between 935,000 and 1,454,750 Shares of Common Stock
Newport Federal Savings and Loan Association is converting from mutual to
stock form and forming a holding company, United Tennessee Bankshares, Inc.
This prospectus describes terms pursuant to which our holding company is
offering between 935,000 and 1,454,750 shares of its Common Stock in a
Subscription Offering to our current and former customers and our ESOP in the
following order of priority in accordance with applicable regulatory
requirements: (i) Eligible Account Holders, (ii) the ESOP, (iii) Supplemental
Eligible Account Holders and (iv) Other Members. Subscription rights are not
transferable, and all subscription rights will expire at : p.m.,
Eastern Time, on December , 1997, unless extended. During or after the
Subscription Offering, our holding company may offer shares not sold in the
Subscription Offering to the general public in a Community Offering, with
preference given to permanent residents of our Local Community --Cocke
County, Tennessee. All shares issued in the Conversion will be sold for
$10.00 per share.
Each eligible subscriber (including joint account holders, as a group) may
subscribe for up to 11,000 shares per qualifying deposit or loan in the
Subscription Offering, provided that the maximum number of shares that may be
purchased in the Conversion by any person, together with associates, or group
of persons acting in concert (other than the ESOP) is 22,000. No person may
purchase fewer than 25 shares.
The amount of Common Stock being offered in the Conversion is based on an
independent appraisal of our estimated pro forma market value, which was
$11,000,000 as of September 12, 1997. The amount of Common Stock to be
issued in the Conversion, however, will be based on our estimated value at
the time of the Conversion and may be as low as $9,350,000 or as high as
$14,547,500, depending upon market and financial conditions at that time.
The market price of the shares to be issued may be more or less over time
than our offering price. See "RISK FACTORS"
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OFFERING SUMMARY
Price per Share: $10.00
Number of Shares: 935,000 to 1,454,750
Estimated Offering Expenses: $620,000 to $715,000
Estimated Net Proceeds: $8,730,000 to $13,832,500
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THE SHARES BEING OFFERED ARE NOT DEPOSITS AND ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THE SHARES BEING OFFERED HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION OR ANY
OTHER GOVERNMENT AGENCY, AND NO GOVERNMENT AGENCY HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
FOR ADDITIONAL INFORMATION ABOUT THE CONVERSION, INCLUDING ANSWERS TO
FREQUENTLY ASKED QUESTIONS, PLEASE REFER TO THE MORE DETAILED INFORMATION IN
THIS PROSPECTUS. FOR ASSISTANCE, PLEASE CONTACT OUR STOCK INFORMATION CENTER
AT (423) - .
TRIDENT SECURITIES, INC.
November , 1997
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GLOSSARY
Bank The federally chartered savings association
(also, alone or with converting from mutual to stock form, in its
the Company, as mutual form as "Newport Federal Savings and
appropriate, "we," Loan Association" and its stock form as
"us," etc.) "Newport Federal Bank"
Company The Tennessee corporation named United
(also "our holding Tennessee Bankshares, Inc. formed by the Bank
company," etc.) to serve as its holding company after the
Conversion
Common Stock The common stock of the Company
Community Offering If any, the offering of shares of the Common
Stock to the general public concurrently with
or after commencement of the Subscription
Offering, giving preference to natural persons
and trusts of natural persons (including
individual retirement and Keogh retirement
accounts and personal trusts in which such
natural persons have substantial interests)
who are permanent residents of the Bank's
Local Community
Conversion Conversion of the Bank from mutual to stock
form, the issuance of common stock of the Bank
to the Company and the issuance of the
Company's Common Stock to purchasers in the
Subscription Offering and, if any, the
Community Offering and/or Syndicated Offering
Eligible Account Holders Holders of savings accounts at the Bank with
balances of at least $50 as of December 31,
1995
ESOP Employee Stock Ownership Plan to be
implemented by the Company in the Conversion
Estimated Valuation Range Range of valuation from 15% below to 15% above
the independent appraisal of our estimated pro
forma market value, which was $11,000,000 as
of September 12, 1997
FDIC Federal Deposit Insurance Corporation
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
Local Community The county where our offices are located --
Cocke County, Tennessee
MRP Management Recognition Plan (expected to be
implemented by the Company at least six months
after the Conversion)
Option Plan Stock Option and Incentive Plan (expected to
be implemented by the Company at least six
months after the Conversion)
Other Members Depositor and borrower members of the Bank as
of November , 1997
OTS Office of Thrift Supervision of the United
States Department of the Treasury
RP Financial RP Financial, LC, the firm we engaged to
prepare the appraisal of our
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estimated pro forma market value in the Conversion
and to advise us about our business plan
SEC Securities and Exchange Commission
Subscription Offering The offering of shares of the Common Stock to
Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders and
Other Members
Supplemental Eligible Holders of accounts at the Bank with balances
Account Holders of at least $50 as of September 30, 1997
Syndicated Offering If any, the offering of shares of the Common
Stock to the general public during or after
the Subscription Offering in a syndicated
offering by selected dealers
Trident Securities Trident Securities, Inc., the firm we engaged
to advise and assist us in marketing the
Common Stock and conducting the Subscription
Offering and, if any, the Community Offering
and/or Syndicated Offering
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QUESTIONS & ANSWERS
Set forth below are answers to frequently asked questions about the
Conversion. For additional information about the Conversion, please refer to
the more detailed information in this prospectus. For assistance, please
contact our Stock Information Center at (423) - .
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
1. What are your principal business activities?
Through two full service banking offices in Newport, Tennessee,
we attract deposits from the public and invest those funds
principally in single-family residential real estate loans and,
to a lesser extent, multi-family and commercial real estate loans
and consumer loans, principally in Cocke County, Tennessee. We
also maintain a substantial investment portfolio, primarily of
mortgage-backed securities issued by the FNMA, FHLMC and GNMA,
obligations of the federal government and agencies and
investment-grade obligations of states and political
subdivisions. We derive our income principally from interest
earned on loans, investment securities and other interest-earning
assets. Our principal expenses are interest expense on deposits
and noninterest expenses such as employee compensation, deposit
insurance and miscellaneous other expenses. Funds for these
activities are provided principally by deposit growth, repayments
of outstanding loans and investment securities, other operating
revenues and, from time to time, advances from the Federal Home
Loan Bank of Cincinnati. At June 30, 1997, we had total assets
of $64.2 million, deposits of $56.7 million and equity of $6.5
million, or 10.1% of total assets.
THE CONVERSION
2. What is a Mutual to Stock Conversion?
The Conversion is a change in our legal form of organization. We
currently operate as a federally chartered mutual savings
institution with no stockholders. Through the Conversion, we
will become a federally chartered stock savings institution, we
will change our name to "Newport Federal Bank," we will issue
shares of our stock to United Tennessee Bankshares, Inc., which
will thereby become our holding company, and United Tennessee
Bankshares, Inc., as our holding company, will issue shares of
its Common Stock to investors who purchase shares in the
Conversion. Currently, our depositor and borrower members as
such have voting rights in the Bank and, therefore, are entitled
to elect directors of the Bank and to vote on other important
matters. Following the Conversion, the Company will exercise all
voting rights with respect to the Bank's common stock, and the
Company's stockholders will elect its directors and exercise all
other voting rights with respect to the Common Stock.
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3. Why are you converting?
As a mutual savings institution, we do not have stockholders and
do not have authority to issue capital stock. By converting to
the stock form of organization, we 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 our future growth and performance by providing a larger
capital base from which we may operate, by enhancing our ability
to attract and retain qualified management through stock-based
compensation plans, by enhancing our ability to diversify into
other financial services related activities and by expanding our
ability to provide services to the public.
We believe that the stock form of organization is preferable to
the mutual form of organization for a financial institution. We
recognize the decline in the number of mutual thrifts from over
12,500 mutual institutions in 1929 to under 1,000 mutual thrifts
today.
We believe that converting to the stock form of organization and
changing our name will allow us to compete more effectively with
other community banks and thrifts, and with statewide, regional
and nationwide banks, which are in stock form. We believe that
by combining our existing quality service and products with a
local ownership base we will encourage our customers and
community members who become stockholders to do more business
with us.
Furthermore, because we compete with local and nonlocal banks not
only for customers, but also for employees, we believe that the
stock form of organization will better afford us the opportunity
to attract and retain employees, management and directors through
stock-based compensation plans which are not available to mutual
savings institutions.
4. Will the Conversion have any effect on our deposits and loans?
No. The Conversion will not affect terms and balances of your
deposit accounts and interest rates paid on such accounts.
Deposits will remain federally insured by the FDIC up to the
maximum amount permitted by law. The Conversion also will not
affect terms or conditions of any of our loans or rights and
obligations of our borrowers.
5. Will the Conversion cause any changes in your personnel?
No. Before and after the Conversion, our business of accepting
deposits, making loans and providing financial services will
continue without interruption with the same board of directors,
management and staff.
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6. What approvals must be received before the Conversion becomes effective?
First, our Board of Directors must adopt the Plan of Conversion,
which occurred on May 20, 1997. Second, the OTS must approve the
applications required to effect the Conversion. These approvals
have been obtained. Third, the Plan of Conversion must be
approved by a majority of all votes eligible to be cast by our
members. A special meeting of our members will be held on
December , 1997 to consider and vote upon the Plan of
Conversion. Last, the final amount of Common Stock to be issued
in the Conversion must be approved by the OTS before the
consummation of the Conversion.
THE HOLDING COMPANY
7. What is a holding company?
A holding company is a company that owns another company. In the
Conversion, we will become a subsidiary of United Tennessee
Bankshares, Inc., a company we organized to become our holding
company by acquiring all of our stock to be issued in the
Conversion.
8. Why are you forming a holding company?
We believe that the formation of our holding company will result
in a more versatile financial institution with the ability to
diversify our business activities through existing or newly
formed subsidiaries, although there are no current plans with
respect to such diversification. Our holding company will also
be able to use stock-based compensation programs to attract,
motivate and retain directors, management and employees.
9. What will be the holding company's principal business activities?
We formed United Tennessee Bankshares, Inc. under Tennessee law
in August 1997 for the purpose of becoming our holding company in
the Conversion. Before the Conversion, our holding company will
not have any material assets or liabilities, and it will not
engage in any material operations. Following the Conversion, our
holding company's primary assets will be our outstanding stock, a
portion of the net proceeds of the Conversion and a note
receivable from our ESOP, and it will primarily engage in the
business of directing, planning and coordinating our business
activities. In the future, our holding company may become an
operating company or acquire or organize other operating
subsidiaries, including other financial institutions. Initially,
our holding company will not maintain offices separate from ours
or employ any persons other than its officers, who will not be
separately compensated for such service.
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10. If I buy stock in the Conversion, will I own stock in United Tennessee
Bankshares, Inc. or Newport Federal Savings and Loan Association?
You will own shares of common stock of United Tennessee
Bankshares, Inc. United Tennessee Bankshares, Inc., as our
holding company, will own all of our outstanding stock.
ABOUT BECOMING A STOCKHOLDER
11. What are the Subscription and Community Offerings?
In accordance with applicable regulatory requirements, our
holding company is offering shares of its Common Stock in a
Subscription Offering to our current and former customers and to
our ESOP. Any shares not subscribed for in the Subscription
Offering may be offered to the general public in a Community
Offering with preference given to natural persons and trusts of
natural persons who are permanent residents of our Local
Community, Cocke County, Tennessee. The Subscription Offering,
and the Community Offering, if any, are being managed by Trident
Securities. We anticipate that any shares not sold in the
Subscription or Community Offering may be offered for sale in a
Syndicated Offering, which would be an offering to the general
public on a best efforts basis by a selling group of
broker-dealers managed by Trident Securities.
12. Will I pay a commission to buy shares in the Subscription,
Community or Syndicated Offering?
No. You will not pay a commission to buy any shares in the
Conversion.
13. How many shares of your holding company's stock will be issued in the
Conversion?
Between 935,000 and 1,454,750 shares of the Common Stock will be
sold, all at a price of $10.00 per share.
14. How was the price determined?
The amount of Common Stock being offered in the Conversion is
based on an independent appraisal of our estimated pro forma
market value, which was $11,000,000 as of September 12, 1997.
The amount of Common Stock to be issued in the Conversion,
however, will be based on our estimated value at the time of the
Conversion and may be as low as $9,350,000 or as high as
$14,547,500, depending upon market and financial conditions at
that time.
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15. Who is entitled to buy stock in the Conversion?
The shares of Common Stock to be issued in the Conversion are
being offered in a Subscription Offering to our current and
former customers and our ESOP in the following order of priority
in accordance with applicable regulatory requirements:
1. "Eligible Account Holders" -- our depositors of $50 or
more as of December 31, 1995
2. "ESOP" -- the Employee Stock Ownership Plan to be
implemented by our holding company in the Conversion
3. "Supplemental Eligible Account Holders" -- our depositors of
$50 or more as of September 30, 1997
4. "Other Members" -- our depositor and borrower members
as of November , 1997
Subject to the prior rights of holders of subscription rights,
shares not sold in the Subscription Offering may be offered in a
Community Offering to the general public, with preference given
to natural persons and trusts of natural persons permanently
residing in our Local Community, Cocke County, Tennessee. Shares
not sold in the Subscription or Community Offering may be offered
to the general public in a Syndicated Offering.
16. Are the subscription rights transferable?
No. Subscription rights held by our Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are not
transferable, and persons with subscription rights may not
subscribe for shares for the benefit of any other person.
Persons who directly or indirectly violate this prohibition may
lose their right to purchase shares in the Conversion and may be
subject to criminal prosecution. Each Eligible Account Holder,
Supplemental Eligible Account Holder and Other Member must list
all qualifying savings accounts and loans, as of the respective
qualifying dates, on the Stock Order Form. Persons who do not
list all qualifying savings accounts and loans may be subject to
reduction or rejection of their subscription.
17. What are the minimum and maximum numbers of shares that I can purchase in
the Conversion?
The minimum number of shares is 25. Each eligible subscriber may
subscribe for up to 11,000 shares per qualifying deposit or loan
in the Subscription Offering, provided that the maximum number of
shares that may be purchased in the Conversion by any person,
together with associates, or group of persons acting in concert,
(other than the ESOP) is 22,000. We expect the ESOP to subscribe
for 8% of the shares issued in the Conversion.
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18. Are your Board of Directors and management buying a significant number of
shares?
We expect our directors and executive officers to subscribe for
140,000 shares. The purchase price paid by them will be the same
$10.00 per share price as that paid by all other persons who
purchase shares in the Conversion.
19. How do I subscribe for shares?
To subscribe for shares of the Common Stock in the Subscription
Offering, you should send or deliver a Stock Order Form together
with full payment (or appropriate instructions for withdrawal
from permitted deposit accounts, as described below) to us in the
postage-paid envelope provided, so that the Stock Order Form and
payment or withdrawal authorization instructions are received
before the end of the Subscription Offering, which will expire at
: , Eastern Time, on December , 1997, unless extended.
Payment for shares may be made in cash (if made in person) or by
check or money order. Subscribers who have deposit accounts with
us may include instructions on the Stock Order Form requesting
withdrawal from such deposit account(s) to purchase shares.
Withdrawals from certificates of deposit may be made without
incurring an early withdrawal penalty.
If shares remain available for sale after the expiration of the
Subscription Offering, they may be offered in a Community
Offering, which may begin during or after the Subscription
Offering. Persons who wish to order shares in the Community
Offering should return their Stock Order Form as soon as possible
after the Community Offering begins, because it may be terminated
at any time. Members of the public should contact the Stock
Information Center at (423) - for additional
information.
Owners of self-directed Individual Retirement Accounts (IRAs) may
use the assets of their IRAs to purchase shares of Common Stock
in the Subscription and Community Offerings, provided that their
IRAs are not maintained on deposit with us. Persons with
self-directed IRAs maintained by us must transfer their accounts
to an unaffiliated institution or broker to purchase shares of
Common Stock in the Subscription and Community Offerings. Anyone
interested in doing so should contact the Stock Information
Center no later than five business days before the Expiration
Date.
20. Will I receive interest on funds I submit to purchase shares?
Yes. We will pay interest at our passbook rate from the date
funds are received until completion or termination of the
Conversion. All funds authorized for withdrawal from deposit
accounts with us will earn interest at the applicable account
rate.
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21. May I borrow funds from you to pay for shares purchased in the Conversion?
No. Federal regulations prohibit us from making loans for this
purpose. However, federal regulations do not prohibit you from
obtaining a loan from another source for the purpose of
purchasing shares in the Conversion.
22. How may investors buy or sell shares in the aftermarket?
We have obtained conditional approval for the Common Stock to be
quoted on the Nasdaq Small-Cap Market under the symbol " ."
After shares of the Common Stock commence trading, interested
investors may contact any broker to buy or sell shares. Due to
the amount of Common Stock to be issued in the Conversion, we
cannot assure you that the conditions for quotation on the Nasdaq
Small-Cap Market will be satisfied or that an active and liquid
trading market for the Common Stock will develop or be
maintained.
23. Will the holding company pay dividends?
We intend to adopt a policy of paying regular cash dividends at
an annual rate of $0.30 per share (3.0% based on the $10.00 per
share purchase price of the Common Stock in the Conversion)
following the current fiscal year (that is, following December
31, 1997). Dividends will be subject to determination and
declaration by the Board of Directors, which will take into
account a number of factors, including our consolidated operating
results and financial condition, net worth and capital
requirements as well as regulatory restrictions on the payment of
dividends from the Bank to the Company. We cannot assure you
that dividends will in fact be paid or that, if paid, such
dividends will not be reduced or eliminated in the future.
24. Will the FDIC insure the shares of the holding company?
No. Shares of the Common Stock are not savings deposits or
savings accounts and are not insured by the FDIC or any other
government agency.
25. If I subscribe for shares and later change my mind, may I demand a refund
or change my order?
No. After we receive your order, it cannot be withdrawn or
changed, except with our consent.
26. How can I get additional information about the Conversion?
FOR ADDITIONAL INFORMATION ABOUT THE CONVERSION, PLEASE REFER TO
THE MORE DETAILED INFORMATION IN THIS PROSPECTUS.
FOR ASSISTANCE, OR TO REQUEST ANOTHER PROSPECTUS AND STOCK ORDER
FORM, PLEASE CONTACT OUR STOCK INFORMATION CENTER AT (423) - .
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RISK FACTORS
Before investing in the Common Stock please carefully consider the
matters discussed below. The Common Stock is not a savings account or
deposit and is not insured by the FDIC or any other government agency.
MARKET CONDITIONS AND ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK
The appraisal of our pro forma market value which will determine the
amount of Common Stock to be issued in the Conversion is an estimate based
upon our independent appraiser's evaluation of our business and assessment of
current market conditions. Further, no shares of the Common Stock will be
publicly outstanding and available for trading until after the Conversion,
and thereafter opportunities to purchase or sell shares of the Common Stock
will be limited by the number of shares available at any given time. As a
result, we cannot assure you that you will be able to sell your shares
purchased in the Conversion at or above the initial purchase price, and we
cannot assure you that an active and liquid trading market for the Common
Stock will develop or be maintained. See "THE CONVERSION -- Stock Pricing
and Number of Shares to be Issued" and "MARKET FOR THE COMMON STOCK."
BELOW AVERAGE RETURN ON EQUITY AFTER CONVERSION
Return on equity (net income divided by average equity) is a ratio used
by many investors to compare the performance of a particular company with
other companies. Our post-Conversion return on equity will be below the
average return on equity for many publicly held companies, including many
thrifts and banks. In addition, the expenses associated with our ESOP and
MRP, along with other post-Conversion expenses, are expected to contribute to
reduced earning levels. Over time, we intend to deploy the net proceeds from
the Conversion to increase earnings per share and book value per share,
without assuming undue risk, with the goal of achieving a return on equity
competitive with other publicly traded thrifts. This goal could take a
number of years to achieve, and we cannot assure you that this goal can be
attained. Consequently, you should not expect a competitive return on equity
in the near future. See "SELECTED CONSOLIDATED FINANCIAL INFORMATION AND
OTHER DATA," "CAPITALIZATION" and "PRO FORMA DATA."
POSSIBLE BENEFITS TO MANAGEMENT AND DILUTIVE EFFECTS OF STOCK COMPENSATION
PLANS
Our ESOP is expected to purchase 8% of the shares to be issued in the
Conversion. These shares will be allocated under the ESOP to all eligible
employees, including executive officers, in proportion to their covered
compensation as the loan secured by the ESOP shares is repaid.
At least six months following the Conversion, we expect to adopt a Stock
Option and Incentive Plan (the Option Plan), under which directors and
employees could be granted options to purchase an aggregate amount of Common
Stock equal to 10% of the shares issued in the Conversion at exercise prices
equal to the market price of the Common Stock on the date of grant,
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and a Management Recognition Plan (the MRP), under which directors and
employees could be awarded an aggregate amount of Common Stock equal to 4% of
the shares issued in the Conversion.
If these plans are implemented during the year following the Conversion,
they will be subject to stockholder approval, and it is expected that, in
accordance with applicable regulatory limitations, 50% of the shares and
options under the plans may be granted among our three executive officers and
25% of such shares and options may be granted among our non-employee
directors. Under such regulations, at the midpoint of the estimated valuation
range, all participants in such plans as a group could receive at no cost to
them options to purchase a total of up to 110,000 shares at an exercise price
equal to the value of such shares when the options are granted as well as a
total of up to 44,000 shares ($440,000 in value at the $10.00 price per share
in the Conversion). If the Option Plan and/or MRP is implemented after the
year following the Conversion, the foregoing regulatory restrictions would
not apply, but the plans generally would remain subject to the regulatory
authority of the OTS.
Under these plans, the shares issued to participants could be newly
issued shares or, subject to regulatory restrictions, shares repurchased in
the market. In the event the shares issued under these plans consist of
newly issued shares of Common Stock, the voting interests of existing
stockholders would be diluted. At the midpoint of the estimated valuation
range, if all shares under these plans were newly issued and the exercise
price for the option shares were equal to the price per share in the
Conversion, the number of outstanding shares of Common Stock would increase
from 1,100,000 to 1,254,000, thereby reducing the proportionate voting rights
of stockholders by approximately 12%, the pro forma book value per share of
the outstanding Common Stock at June 30, 1997 would decrease from $14.09 to
$13.59 and the pro forma net income per share of the outstanding Common Stock
for the fiscal year ended December 31, 1996 and the six months ended June 30,
1997 would decrease from $0.78 and $0.32 to $0.67 and $0.29, respectively.
See "PRO FORMA DATA" and "MANAGEMENT -- Certain Compensation Agreements and
Plans -- Stock Option and Incentive Plan" and " -- Management Recognition
Plan."
POSSIBLE ADVERSE IMPACTS OF INTEREST RATES AND ECONOMIC AND INDUSTRY
CONDITIONS
We are vulnerable to fluctuations in market interest rates, and
our net interest margin is affected by general economic conditions and
other factors that influence market interest rates as well as our
ability to respond to changes in such rates. Unlike most industrial
companies, nearly all of our assets and liabilities are monetary. As
a result, interest rates have a greater impact on our performance than
do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the
price of goods and services. We estimate that our net interest income
and the net market value of our assets and liabilities could be
significantly exposed to increases in interest rates. In a rising
interest rate environment, our net interest income could be adversely
affected as liabilities could reprice to higher market rates more
quickly than assets. This effect could be compounded, because the
prepayment speeds of our long-
ix
<PAGE>
term fixed-rate assets could decrease in a rising interest rate environment.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS --Asset/Liability Management."
Significant and rapid changes have occurred in the thrift industry in
recent years, and the future of the industry is subject to various
uncertainties. The traditional role of thrifts as the nation's primary
housing lenders has diminished, and thrifts are subject to increasing
competition for deposits and loans from commercial banks, mortgage bankers,
mutual funds and other financial companies. In addition, the companies
competing against thrifts frequently are substantially larger, with much
greater resources to attract and serve customers. The ability of thrifts to
diversify into lending activities other than real estate lending has been
limited by federal regulations. The thrift industry also faces an uncertain
regulatory environment in which applicable laws, regulations and enforcement
policies are subject to significant change. See "BUSINESS" and "REGULATION."
LIMITED ECONOMY IN MARKET AREA
Substantially all of our loans are secured by properties located in our
primary market area -- Cocke County in East Tennessee. While Cocke County is
experiencing modest population growth, the county is primarily rural, with
relatively high levels of unemployment and low levels of income. While we
are committed to increasing our loan-making and deposit-gathering activities
and pursuing banking opportunities throughout our primary market area, the
limited economy in our primary market area may restrain our growth, and there
can be no assurance that we will be able to sufficiently increase our loan
originations to promptly deploy the Conversion proceeds in our primary market
area. See "BUSINESS -- Market Area."
LOAN PORTFOLIO COMPOSITION
Mobile Home, Residential Construction, Commercial Real Estate and
Consumer Loans. Our loan portfolio includes significant amounts of mobile
home loans, residential construction loans, commercial real estate loans and
consumer loans, all of which expose us to greater risks than traditional
single family residential loans. While our losses on these types of loans
have been insignificant, and we maintain loan loss reserves for perceived
risks of loss on these loans, we cannot assure you that we will not incur
substantial losses on these types of loans in the future. See "BUSINESS --
Lending Activities."
Nonconforming Loans. Our one- to four-family residential mortgage loans
generally are underwritten in accordance with applicable underwriting
guidelines and documentation requirements published by the FNMA and FHLMC for
loans to be eligible for sale to them. However, because we do not sell our
loans, and we do not intend to sell them in the future, when circumstances
warrant, we allow exceptions to the FNMA and FHLMC collateral requirements
based on our knowledge and experience with borrowers and properties in our
market area. For example, we do not always require homes to have air
conditioning or a complete survey or independent appraisal,
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<PAGE>
and we do not always require contractors to be licensed. Our losses on these
types of loans have been insignificant, and we maintain loan loss reserves
for perceived risks of loss on these loans. In the future, we could
experience difficulty if we ever try to sell these loans, and we could incur
losses if defaults on these loans exceed our loan loss reserves. See
"BUSINESS -- Lending Activities."
Adjustable Rate Loans. Our loan portfolio includes a significant amount
of loans with adjustable rates of interest. Adjustable rate loans generally
pose the risk that as interest rates rise, the underlying payments of the
borrowers rise, thereby increasing the potential for loan delinquencies and
loan losses. At the same time, the marketability of the underlying
properties may be adversely affected by higher interest rates. While our
losses on this type of loan have been insignificant, and we maintain loan
loss reserves for perceived risks of loss on these loans, in the event of
substantial and prolonged increases in market interest rates we could incur
significant losses on these loans in the future. See "BUSINESS -- Lending
Activities -- One-to Four-Family Residential Lending."
Nonperforming Loans. Our assets include significant amounts of past due
loans from time to time, particularly during the 15-day grace period before
most loans incur a late penalty. At June 30, 1997 our loans past due 90 days
or more totaled $549,000, or 1.20% of our total loans. While our losses on
nonperforming assets have been insignificant in recent years, we cannot
assure you that our allowance for loan losses will be adequate to absorb all
losses that we may experience or that, in the future, our regulators or
prevailing financial and economic conditions will not result in substantial
charge-offs or increases in loss allowances. In such event, our financial
condition and profitability would be negatively affected. See "BUSINESS --
Lending Activities -- Asset Classification, Allowances for Losses and
Nonperforming Assets."
Substantial Lending Relationships. At June 30, 1997, we had loans
outstanding to six borrowers or groups of affiliated borrowers with aggregate
outstanding balances over $250,000 each and loans outstanding to another
eight borrowers or groups of affiliated borrowers over $200,000 each. These
14 lending relationships totalled $4,056,000, or 8.8% of our total loans. As
a result of their size in relation to our size and profitability, these loans
present more risk to us than smaller loans, because adverse circumstances
among a relatively small number of borrowers could have a disproportionate
adverse effect on us. At June 30, 1997, none of these loans was
nonperforming. See "BUSINESS -- Lending Activities" and "REGULATION --
Regulation of the Bank -- Limits on Loans to One Borrower."
COMPETITION
We experience strong competition in our market area. This competition
arises from local and regional banks, as well as mortgage bankers and
national and local securities firms. Such competition could adversely affect
our business in the future. See "BUSINESS -- Competition."
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<PAGE>
DEPENDENCE ON KEY PERSONNEL
We depend to a considerable degree on key management personnel, and the
loss of such personnel could adversely affect us. We have entered into
employment agreements with our three executive officers. See "MANAGEMENT."
POTENTIAL IMPACT OF PURCHASES BY MANAGEMENT AND STOCK COMPENSATION
PLANS
The 140,000 shares of Common Stock expected to be purchased by our
directors and executive officers in the Conversion, combined with the shares
expected to be awarded or sold to plan participants under the ESOP, the MRP
and the Option Plan, could result in management controlling up to
approximately 35% of the outstanding shares of the Common Stock at the
midpoint of the estimated valuation range (assuming the shares issued under
the MRP and the Option Plan are repurchased treasury shares) and could permit
management to benefit from certain statutory and regulatory provisions, as
well as certain provisions in our Charter and Bylaws, that may tend to
promote the continuity of existing management. If the members of management
were to act in concert with each other, they could have significant influence
over the outcome of any stockholder vote requiring a majority vote and in the
election of directors and could effectively exercise veto power in matters
requiring the approval of our stockholders, such as certain business
combinations. Management might thus have the power to authorize actions that
may be viewed as contrary to the best interests of non-affiliated holders of
the Common Stock and might have veto power over actions that such holders may
deem to be in their best interests. See "PURCHASES BY DIRECTORS AND
EXECUTIVE OFFICERS," "PRO FORMA DATA," "MANAGEMENT -- Certain Compensation
Agreements and Plans," "CERTAIN RESTRICTIONS ON ACQUISITIONS" and "CERTAIN
ANTI-TAKEOVER PROVISIONS."
CHARTER AND BYLAW, STATUTORY AND OTHER PROVISIONS THAT COULD DISCOURAGE
HOSTILE ACQUISITIONS OF CONTROL
Our holding company's Charter and Bylaws contain certain provisions that
could discourage nonnegotiated takeover attempts that certain stockholders
might deem to be in their interests or through which stockholders might
otherwise receive a premium for their shares over the then current market
price and that may tend to perpetuate existing management. In addition,
Tennessee law provides for numerous restrictions on acquisition of the
Company, and federal law contains various restrictions on the acquisition of
control of savings institutions, particularly during the period immediately
following a conversion to stock form. These Charter, Bylaw, statutory and
regulatory provisions, as well as certain other provisions of state and
federal law and certain provisions in our employee compensation agreements
and plans, may have the effect of discouraging or preventing a future
takeover attempt in which stockholders otherwise might receive a substantial
premium for their shares over then-current market prices. For detailed
discussions of those provisions, see "MANAGEMENT -- Certain Compensation
Agreements and Plans," "DESCRIPTION OF COMMON STOCK," "CERTAIN RESTRICTIONS
ON ACQUISITIONS" and "CERTAIN ANTI-TAKEOVER PROVISIONS."
xii
<PAGE>
BUSINESS PLAN TO REMAIN INDEPENDENT LOCAL THRIFT
We have operated as a locally owned and managed, community-oriented
thrift institution for over 60 years, and we plan to continue serving the
saving and borrowing needs of our community as an independent institution in
the same manner following the Conversion. We do not have any plans to be
acquired by any other financial institution, and we urge investors not to
subscribe for shares in the Conversion based on an expectation of a quick
sale by us.
POSSIBLE INCOME TAX CONSEQUENCES OF DISTRIBUTION OF SUBSCRIPTION RIGHTS
If the subscription rights granted to our Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members were deemed to have
an ascertainable value, receipt of such rights could be taxable to recipients
who exercise the subscription rights in an amount equal to such value, and we
could recognize a gain on such distribution. Whether subscription rights are
considered to have any ascertainable value is an inherently factual
determination. We have received an opinion from our independent appraiser
that such rights have no value, but that opinion is not binding on the
Internal Revenue Service.
xiii
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following summary of selected consolidated financial information and
other data does not purport to be complete and is qualified in its entirety by
reference to the detailed information and consolidated financial statements and
accompanying notes appearing elsewhere in this prospectus. The information at
June 30, 1997 and for the six months ended June 30, 1997 and 1996 is derived
from unaudited financial data but, in our opinion, reflects all adjustments
(which comprise only normal recurring accruals) necessary for a fair
presentation of our financial condition and results of operations at that date
and for those periods. For additional information, see the Consolidated
Financial Statements and related Notes.
SELECTED FINANCIAL CONDITION DATA
The following table sets forth information about our financial condition
(including consolidated data from operations of our subsidiary) at the dates
indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -----------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- --------- --------- --------- --------- ---------
(UNAUDITED) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total assets......................................... $ 64,189 $ 60,611 $ 54,019 $ 53,238 $ 51,465 $ 48,552
Loans receivable, net................................ 45,625 44,230 40,365 36,568 34,121 31,682
Cash and amounts due from depository institutions.... 3,081 2,889 1,832 930 2,250 4,480
Investment securities:
Available for sale.................................. 13,769 11,689 10,286 10,325 10,428 --(1)
Held to maturity.................................... 1,059 1,212 1,046 4,863 4,317 11,921(1)
Deposits............................................. 56,725 53,767 47,954 48,761 47,310 45,631
Equity............................................... 6,469 6,103 5,419 4,262 3,835 2,591
- -----------------------------------------------------------------------------------------------------------------------------
Number of:
Real estate loans................................... 1,432 1,448 1,421 1,371 1,351 1,320
Deposit accounts.................................... 6,761 6,908 6,494 5,918 5,159 4,665
Offices............................................. 2 2 2 2 2 2
</TABLE>
- ------------------------
(1) Prior to application of Statement of Financial Accounting Standards ("SFAS")
No. 115, regarding classification of investments as available for sale or
held to maturity.
1
<PAGE>
SELECTED RESULTS OF OPERATIONS DATA
The following table sets forth information about our results of operations
for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income........................................ $ 2,465 $ 2,175 $ 4,536 $ 4,282 $ 3,906 $ 3,926 $ 3,846
Interest expense....................................... 1,304 1,135 2,400 2,218 1,655 1,688 2,022
--------- --------- --------- --------- --------- --------- ---------
Net interest income before provision for loan losses... 1,161 1,040 2,136 2,064 2,251 2,238 1,824
Provision for loan losses.............................. 90 -- -- -- 33 99 205
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for loan losses.... 1,071 1,040 2,136 2,064 2,218 2,139 1,619
Noninterest income..................................... 50 74 150 167 119 112 110
Noninterest expense.................................... 725 560 1,478 1,082 1,038 917 778
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............................. 396 554 808 1,149 1,299 1,334 951
Income taxes........................................... 159 184 225 435 456 433 436
--------- --------- --------- --------- --------- --------- ---------
Net income............................................. $ 237 $ 370 $ 583 $ 714 $ 843 $ 901 $ 515
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
2
<PAGE>
SELECTED RATIOS
The following table sets forth information about our performance, asset
quality and capital at the dates and for the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED
JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on assets (net income divided by average total assets)............... .76% 1.33% 1.01% 1.33% 1.60% 1.80% 1.14%
Return on average equity (net income divided by average equity)............. 7.51 13.18 10.19 14.75 20.92 28.03 22.10
Interest rate spread (combined weighted average interest rate earned less
combined weighted average interest rate cost)............................. 3.30 3.30 3.40 3.60 4.20 4.14 4.38
Net interest margin (net interest income divided by average interest-earning
assets)................................................................... 3.80 3.79 3.83 3.93 4.42 4.84 4.26
Ratio of average interest-earning assets to average interest-bearing
liabilities............................................................... 110.27 111.20 109.30 108.70 107.70 101.65 100.88
Ratio of noninterest expense to average total assets........................ 2.32 2.01 2.57 2.02 1.97 1.83 1.73
Efficiency Ratio (noninterest expense divided by total of net interest
income and noninterest income)............................................ 64.67 50.27 64.65 48.50 44.42 40.74 45.00
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at end of period....................... .99 .58 .63 .54 .96 .81 1.87
Nonperforming loans to total loans at end of period......................... 1.24 .73 .84 .72 1.28 1.20 2.70
Allowance for loan losses to total loans at end of period................... 1.20 1.06 1.10 1.21 1.34 1.36 1.18
Allowance for loan losses to nonperforming loans at end of period........... 96.40 146.49 129.93 168.86 104.40 113.86 43.58
Provision for loan losses to total loans.................................... .19 -- -- -- .09 .28 .63
Net charge-offs to average loans outstanding................................ .02 .01 .01 .01 .03 .01 .07
CAPITAL RATIOS:
Equity to total assets at end of period..................................... 10.08 9.69 10.07 10.03 8.01 7.45 5.34
Average equity to average assets............................................ 10.09 10.10 9.95 9.05 7.63 6.42 5.18
</TABLE>
3
<PAGE>
SELECTED REGULATORY CAPITAL RATIOS
At June 30, 1997, we substantially exceeded all regulatory minimum
capital requirements. The following table sets forth certain information
about our consolidated regulatory capital at that date. For additional
information, see "HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE" and
"REGULATION -- Regulation of the Bank -- Regulatory Capital Requirements."
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT ASSETS(1)
--------- -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Tangible capital....................... $ 5,868 9.14%
Tangible capital requirement........... 963 1.50
--------- -----
Excess................................ $ 4,905 7.64%
--------- -----
--------- -----
Core capital........................... $ 5,868 9.14%
Core capital requirement............... 1,926 3.00
--------- -----
Excess................................ $ 3,942 6.14%
--------- -----
--------- -----
Total capital.......................... $ 6,218 22.45%
Risk-weighted capital requirement...... 2,224 8.00
--------- -----
Excess................................ $ 3,994 14.45%
--------- -----
--------- -----
</TABLE>
- ------------------------
(1) Based on our adjusted total assets for the purposes of the tangible and core
capital requirements and risk-weighted assets for the purpose of the total
regulatory capital requirement.
4
<PAGE>
THE CONVERSION
THE OTS HAS APPROVED OUR PLAN OF CONVERSION. THE OTS APPROVAL DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION.
GENERAL
On May 20, 1997, our Board of Directors unanimously adopted our Plan of
Conversion, pursuant to which we are converting from mutual to stock form as
a wholly owned subsidiary of our holding company. In the Conversion, we will
issue all of our outstanding shares to our holding company, and our holding
company will issue all of its outstanding shares of the Common Stock to our
current and former customers in the Subscription Offering and, if any shares
remain available, to the general public, giving preference to residents of
Cocke County, Tennessee in the Community and Syndicated Offerings. We also
will change our name from "Newport Federal Savings and Loan Association" to
"Newport Federal Bank." The consummation of the Conversion is contingent
upon the satisfaction of certain conditions. The OTS has approved the Plan
of Conversion, subject to its approval by our members at a special meeting to
be held on December , 1997.
All shares of the Common Stock to be issued and sold in the Conversion
will be sold at the same price of $10.00 per share. The aggregate purchase
price of the Common Stock to be issued in the Conversion will be based on the
estimated valuation range of between $9,350,000 and $12,650,000, and will not
be less than $9,350,000 or more than $14,547,500, based upon an independent
appraisal of the estimated pro forma market value of the Common Stock to be
updated at the time of the consummation of the Conversion. Our holding
company will retain half of the net proceeds from the sale of the Common
Stock and will contribute half of the net proceeds to us in exchange for all
of our outstanding common stock.
The following sections describe important aspects of the Conversion. For
additional information, see the Plan of Conversion, which is available for
inspection at each of our offices and at the offices of the SEC and the OTS.
See "ADDITIONAL INFORMATION."
BUSINESS PURPOSES
We have formed United Tennessee Bankshares, Inc. to serve following the
Conversion as our holding company with us as its principal subsidiary. The
portion of the net proceeds from the sale of the Common Stock in the
Conversion to be distributed to us by our holding company will substantially
increase our capital position, which will in turn increase the amount of
funds available for lending and investment and provide greater resources to
support both current operations and future expansion. The holding company
structure will provide greater flexibility than we would have as a savings
institution for diversification of business activities and geographic
operations. We believe that this increased capital and operating flexibility
5
<PAGE>
will enable us to compete more effectively with other types of financial
services organizations. In addition, the Conversion will also enhance our
future access to the capital markets.
The potential impact of the Conversion upon our capital base is
significant. See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE."
The investment of the net proceeds from the sale of the Common Stock will
provide both us and our holding company with additional income to further
increase our respective capital positions. The additional capital will also
assist us in offering new and expanded services to our customers.
After the Conversion, the unissued Common Stock and preferred stock
authorized by our holding company's Charter will permit our holding company,
subject to market conditions and regulatory approval of an offering, to raise
additional equity capital through further sales of securities and to issue
securities in connection with possible acquisitions. At the present time, we
have no plans with respect to additional offerings of securities, other than
the possible issuance of additional shares upon the implementation of the MRP
and the Option Plan. Following the Conversion, our holding company also will
be able to use stock-related incentive programs to attract and retain
executive and other personnel for itself and its subsidiaries. See
"MANAGEMENT -- Certain Compensation Agreements and Plans."
OFFERING OF COMMON STOCK
Under the Plan of Conversion, our holding company is offering the Common
Stock to our current and former customers and our ESOP in the Subscription
Offering, first to our Eligible Account Holders, second to the ESOP, third to
our Supplemental Eligible Account Holders and fourth to our Other Members.
During or after the Subscription Offering, the Company may also offer Common
Stock to the general public in a Community Offering giving preference to
natural persons and trusts of natural persons who are permanent residents of
our Local Community. Subscriptions in the Community Offering will be subject
to the availability of shares of the Common Stock for purchase after
satisfaction of all subscriptions in the Subscription Offering and to our
right to reject any such orders, in whole or in part.
SUBSCRIPTION AND COMMUNITY OFFERINGS
Subscription Rights and Subscription Offering. Our current and former
customers and our ESOP hold nontransferable subscription rights that entitle
them to subscribe for shares of the Common Stock in the Subscription Offering
as follows:
Category 1: "Eligible Account Holders" -- Holders of savings
accounts with us with balances of at least $50 as of December 31,
1995. With respect to each qualifying deposit, Eligible Account
Holders (including joint account holders, as a group) may subscribe
for up to $110,000, or 11,000 shares, of the Common Stock in the
Subscription Offering, subject to the possible subscription priority
of our ESOP and the overall purchase limitation. See below and
"Limitations on Purchases of Shares." If the exercise of subscription
6
<PAGE>
rights in this category results in an oversubscription, shares will be
allocated among subscribing Eligible Account Holders so as to permit
each such Eligible Account Holder, to the extent possible, to purchase
a number of shares sufficient to make his total allocation equal 100
shares or the amount subscribed for, whichever is less. Any shares
not so allocated shall be allocated among the subscribing Eligible
Account Holders on an equitable basis related to the amounts of their
respective qualifying deposits, as compared with the total qualifying
deposits of all subscribing Eligible Account Holders. Subscription
rights of our directors and executive officers and their associates in
this category based on their increased deposits in the one-year period
preceding December 31, 1995 will be subordinated to the subscription
rights of other Eligible Account Holders.
Category 2: ESOP -- The Employee Stock Ownership Plan to be
implemented by our holding company in the Conversion. Our ESOP may
subscribe for up to 10% of the shares issued in the Conversion. We
expect our ESOP to subscribe for 8% of such shares, or 88,000 shares
at the midpoint of the estimated valuation range. We will fill our
ESOP's subscription only to the extent that sufficient shares remain
after satisfaction of subscriptions by Eligible Account Holders,
provided that we may sell any shares sold in excess of the maximum of
the estimated valuation range first to the ESOP.
Category 3: "Supplemental Eligible Account Holders" -- Holders
of savings accounts with us with balances of at least $50 as of
September 30, 1997. With respect to each qualifying deposit,
Supplemental Eligible Account Holders (including joint account
holders, as a group) may subscribe for up to $110,000, or 11,000
shares, of the Common Stock in the Subscription Offering, subject to
the subscription priorities of Eligible Account Holders and our ESOP
and the overall purchase limitation. See "Limitations on Purchases of
Shares." In the event of an oversubscription in this category, the
available shares will be allocated among the subscribing Supplemental
Eligible Account Holders so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to purchase a number
of shares sufficient to make his total allocation (including the
number of shares of Common Stock, if any, allocated to him as an
Eligible Account Holder) equal to 100 shares or the total amount of
his subscription, whichever is less. Any shares not so allocated
shall be allocated among the subscribing Supplemental Eligible Account
Holders on an equitable basis, related to their respective qualifying
deposits, as compared to the total deposits of all subscribing
Supplemental Eligible Account Holders.
Category 4: "Other Members" -- Our depositor and borrower
members as of November , 1997. With respect to each deposit in, or
loan from, us as of November , 1997, Other Members (including joint
7
<PAGE>
account holders and joint loan borrowers, as a group) may subscribe
for up to $110,000, or 11,000 shares, of the Common Stock in the
Subscription Offering, subject to the subscription priorities of
Eligible Account Holders and Supplemental Eligible Account Holders and
our ESOP and the overall purchase limitation. In the event of an
over-subscription in this category, the available shares will be
allocated among subscribing Other Members so as to permit each Other
Member, to the extent possible, to purchase a number of shares
sufficient to make his total allocation equal to the lesser of 100
shares of the number of shares subscribed for by the Other Member.
The shares remaining thereafter will be allocated among subscribing
Other Members whose subscriptions remain unsatisfied on a reasonable
basis, as determined by the Board of Directors.
Our holding company will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled
to subscribe for the Common Stock pursuant to the Plan of Conversion reside.
However, no person will be offered or allowed to purchase any Common Stock
under the Plan of Conversion if he resides in a foreign country or in a state
of the United States with respect to which any or all of the following apply:
(i) a small number of persons otherwise eligible to subscribe for shares
under the Plan of Conversion reside in such state or foreign country; (ii)
the granting of subscription rights or the offer or sale of shares of Common
Stock to such persons would require our holding company or our employees to
register, under the securities laws of such state, as a broker, dealer,
salesman or agent or to register or otherwise qualify its securities for sale
in such state or foreign country; and (iii) such registration or
qualification would be impracticable for reasons of cost or otherwise.
Subscription Rights are NOT Transferable. Subscription rights may be
exercised only by the person(s) to whom they are issued and only for their
own account. The subscription rights granted under the Plan of Conversion
are not transferable, and persons who attempt to transfer their subscription
rights may lose the right to purchase stock in the Conversion and may be
subject to other sanctions and penalties imposed by the OTS. Each person
subscribing for shares of Common Stock must represent to us 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
the shares purchased.
Community and Syndicated Offerings. During or after the Subscription
Offering, we may offer shares of Common Stock not subscribed for in the
Subscription Offering to the general public in a Community Offering, giving
preference to natural persons and trusts of natural persons who are permanent
residents of our Local Community -- Cocke County, Tennessee. Orders accepted
in the Community Offering shall be filled up to a maximum of 2% of the Common
Stock, and thereafter remaining shares shall be allocated on an equal number
of shares basis per order until all orders have been filled. The Common
Stock to be offered in the Community Offering will be offered and sold in a
manner that will achieve the widest distribution of the Common Stock. Orders
for Common Stock in the Community Offering may be filled to the extent shares
of Common Stock remain available after satisfaction of all orders received in
the Subscription Offering, subject to the overall purchase limitation and our
absolute right to accept or reject such orders in whole or in part. We may
8
<PAGE>
terminate the Community Offering at any time after we have received orders
for at least the minimum number of shares available for purchase in the
Conversion.
Trident Securities may enter into agreements with other dealers
("Selected Dealers") to assist in the sale of shares in the Community
Offering (a Syndicated Offering). In the Syndicated Offering, Selected
Dealers may solicit only indications of interest from their customers to
place orders with us as of a certain date (the "Order Date") for the purchase
of shares of the Common Stock. When and if we believe that enough
subscriptions, orders and indications of interest have been received in the
Subscription, Community and Syndicated Offerings to consummate the
Conversion, Trident Securities will request, as of the Order Date, Selected
Dealers to submit orders to purchase shares for which they have previously
received indications of interest from their customers. Selected Dealers will
send confirmations of the orders to such customers on the next business day
after the Order Date. Selected Dealers will debit the accounts of their
customers on the date which will be within three business days from the Order
Date (the "Settlement Date"). On the Settlement Date, funds received by
Selected Dealers will be remitted to us. It is anticipated that the
Conversion would be consummated on the Settlement Date.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in a Community
Offering, and all funds submitted pursuant to a Community or Syndicated
Offering will be promptly refunded with interest. If the Community or
Syndicated Offering extends beyond 45 days following the expiration of the
Subscription Offering, subscribers will have the right to increase, decrease
or rescind subscriptions for stock previously submitted.
LIMITATIONS ON PURCHASES OF SHARES
The Plan of Conversion provides for certain limitations on the purchase
of shares by eligible subscribers and others in the Conversion. Each
subscriber must subscribe for a minimum of 25 shares. Additionally, no
person either alone or with an associate or group of persons acting in
concert (other than our tax-qualified employee stock compensation plans)
currently may purchase more than $220,000 of the Common Stock offered in the
Conversion, except that the ESOP may purchase up to 10% of the Common Stock
to be issued in the Conversion, and shares purchased by the ESOP and
attributable to a participant thereunder shall not be aggregated with shares
purchased by such participant or any other purchaser of Common Stock in the
Conversion. Our Board of Directors determined the current purchase
limitation in order to encourage a wide distribution of the Common Stock in
the Conversion, particularly among our customers and other persons residing
in the communities served by us and to prevent the undue concentration of
stock ownership among a few investors. Our officers, directors and their
associates may not purchase, in the aggregate, more than 34% of the shares to
be issued in the Conversion. For purposes of the Plan of Conversion, the
directors are not deemed to be associates or a group acting in concert solely
by reason of their Board membership.
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Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of our members,
purchase limitations may be increased or decreased at our sole discretion at
any time. Under current regulatory authority, our Boards of Directors may,
in their discretion, increase the maximum purchase limitation referred to
above up to 10%, provided that orders for shares exceeding 5% of the shares
to be issued in the Conversion shall not exceed, in the aggregate, 10% of the
shares to be issued in the Conversion. If such amount is increased,
subscribers for the maximum amount will be given the opportunity to increase
their subscriptions up to the then applicable limit, subject to the rights
and preferences of any person who has priority subscription rights. In the
event that the purchase limitation is decreased after commencement of the
Subscription and Community Offerings, the orders of any person who subscribed
for the maximum number of shares of Common Stock shall be decreased by the
minimum amount necessary so that such person shall be in compliance with the
then maximum number of shares permitted to be subscribed for by such person.
The term "associate" of a person means: (i) any corporation or other
organization (other than us or our holding company or a majority-owned
subsidiary of either) of which such person is an officer or partner or is
directly or indirectly the beneficial owner of 10% or more of any equity
securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or serves as a director or in a similar
fiduciary capacity, provided, however, such term shall not include any of our
or our holding company's employee stock compensation plans in which such
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity; and (iii) any relative or spouse of such person,
or any relative of such spouse, who either has the same home as such person
or who serves a director or officer for us or our holding company or any of
our subsidiaries. Directors are not treated as associates solely because of
their Board membership.
When you purchase Common Stock, you are confirming that your purchase
does not conflict with the purchase limitations imposed under the Plan of
Conversion or by law, rule or regulation. We may determine that persons are
acting in concert based on the circumstances, including current or previous
relationships or actions. In the event that a person (including any
associate or group of persons affiliated or otherwise acting in concert with
such person) violates the purchase limitations, we would have the right to
purchase from such person at the aggregate purchase price all shares acquired
by such person in excess of such purchase limitations or, if such excess
shares have been sold by such person, to receive the difference between the
aggregate purchase price paid for such excess shares and the price at which
such excess shares were sold by such person. Persons who violate the
purchase limitations may be subject to sanctions and penalties imposed by the
OTS.
Stock purchased in the Conversion will be freely transferable, except for
shares purchased by our directors and executive officers. See " --
Limitations on Resales by Management."
PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERINGS
Expiration Date. The Subscription Offering will expire at : p.m.,
Eastern Time, on December , 1997, unless extended (the Expiration Date).
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We will not execute any orders until all shares of Common Stock have been
sold. If all shares of Common Stock have not been sold within 45 days after
the end of the Subscription Offering (unless such period is extended), we
will promptly return all funds delivered to us with interest, and rescind all
charges to savings accounts.
Use of Stock Order Forms. Any person who desires to subscribe for shares
of Common Stock must do so on or before the Expiration Date by delivering (by
mail or in person) to either of our offices a properly executed and completed
original Stock Order Form, together with full payment for all shares for
which the subscription is made. All checks or money orders must be made
payable to "Newport Federal Savings and Loan Association." Stock Order Forms
must be received by the Expiration Date. All subscription rights under the
Plan of Conversion will expire on the Expiration Date. Once tendered,
subscriptions and community orders may not be revoked. In order to ensure
that we properly identify Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members as to their stock purchase priorities, such
persons must list all of their deposit and loan accounts on the Stock Order
Form.
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the
Exchange Act, we will not mail any prospectus any later than five days before
such date or hand deliver any prospectus later than two days before such
date. Execution of the Stock Order Form will confirm receipt or delivery in
accordance with Rule 15c2-8. We will distribute Stock Order Forms only with
a prospectus. The acknowledgment on the Stock Order Form must be signed. We
will accept for processing only orders submitted on original Stock Order
Forms. We will not accept photocopies and facsimile copies of Stock Order
Forms. Payment by cash (if delivered in person), check, money order, bank
draft or debit authorization to an existing account with us must accompany
the Stock Order Form. We will not accept wire transfers.
In the event Stock Order Forms (i) are not delivered and are returned to
the sender by the United States Postal Service or we are unable to locate the
addressee, (ii) are not returned or are received after the Expiration Date,
(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 Stock Order Form
within the time period specified. We may waive any irregularity on any Stock
Order Form or require the submission of corrected Stock Order Forms or the
remittance of full payment for subscribed shares by such date as we may
specify. Our interpretation of the terms and conditions of the Plan of
Conversion and of the Stock Order Form will be final.
Payment for Shares. To be valid, all completed Stock Order Forms must be
accompanied by full payment. You may pay (i) by cash (if delivered in
person), check, bank draft or money order or (ii) by authorization of
withdrawal from deposit accounts maintained with us. Instructions to
withdraw funds from your deposit accounts appear on the Stock Order Form.
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Once such a withdrawal has been authorized, none of the designated withdrawal
amounts may be used by a subscriber for any purpose other than to purchase
stock while the Plan of Conversion 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 completion of the Conversion. In the case of payments made by
cash, check or money order, such funds will be placed in a segregated savings
account established for each subscriber specifically for this purpose (each
insured by the FDIC up to the applicable $100,000 limit), and interest will
be paid at our passbook rate 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 of Common Stock. However, if a partial
withdrawal reduces a certificate account to less than the applicable minimum
balance requirement, the certificate evidencing the remaining balance will
earn interest at the passbook rate.
Owners of self-directed Individual Retirement Accounts (IRAs) may use the
assets of their IRAs to purchase shares of Common Stock in the Subscription
and Community Offerings, provided that their IRAs are not maintained on
deposit with us. Persons with self-directed IRAs maintained by us must
transfer their accounts to an unaffiliated institution or broker to purchase
shares of Common Stock in the Subscription and Community Offerings. Anyone
interested in doing so should contact the Stock Information Center no later
than five business days before the Expiration Date.
Your executed Stock Order Form, once received by us, may not be modified,
amended or rescinded without our consent, unless the Conversion is not
completed within 45 days of the termination of the Subscription Offering.
Payments accompanying your Stock Order Form will not be available to you for
this 45-day period, and may not be available for an additional period if the
OTS approves an extension to complete the Conversion and provided you affirm
or modify, but do not rescind your orders after the initial 45-day period.
If an extension to complete the Conversion is approved by the OTS, you will
be resolicited and must affirmatively reconfirm your orders prior to the
expiration of the resolicitation offering, or your subscription funds will be
promptly refunded. We will continue to pay interest on such funds during the
45-day period and any approved extension period.
For information about procedures for payment for shares through Selected
Dealers, see "Community and Syndicated Offerings."
Federal regulations prohibit us from lending funds or extending credit to
any person to purchase Common Stock in the Conversion.
Delivery of Stock Certificates. Certificates representing shares of the
Common Stock will be delivered to purchasers promptly after the Conversion.
Until certificates for the Common Stock are available and delivered to you,
you may not be able to sell your shares of Common Stock even though trading
of the Common Stock may have commenced.
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FINANCIAL ADVISORY AND SALES ASSISTANCE ARRANGEMENTS
We have engaged Trident Securities as financial and sales advisor in
connection with the offering of the Common Stock, and Trident Securities has
agreed to use its best efforts to solicit subscriptions and purchase orders
for shares of Common Stock in the Offerings. We have agreed to pay Trident
Securities for its services in the Conversion a fixed fee of $20,000 plus a
variable fee of two percent of the Common Stock sold in the Conversion,
excluding shares sold to our directors and executive officers and their
associates and shares sold to our ESOP. Fees paid to Trident Securities may
be deemed to be underwriting fees, and Trident Securities may be deemed to be
an underwriter. Trident Securities will also be reimbursed for allocable
expenses incurred by them, including legal fees. Trident's reimbursable
out-of-pocket expenses other than legal fees will not exceed $10,000, and its
reimbursable legal fees will not exceed $30,000. We have agreed to indemnify
Trident Securities for costs and expenses reasonably incurred in connection
with certain claims or liabilities, including certain liabilities under the
Securities Act. Trident Securities has received an advance towards its
reimbursable expenses in the amount of $10,000. Total fees to and expenses
of Trident Securities are expected to be approximately $235,000 assuming the
sale of $11,000,000 of Common Stock at the midpoint of the estimated
valuation range. For additional information, see " -- Stock Pricing and
Number of Shares to be Issued" and "USE OF PROCEEDS."
Our officers are available at segregated and separately identifiable
areas apart from the areas accessible to the general public for the purposes
of making or withdrawing deposits within each of our offices, to provide
offering materials to prospective investors, to answer their questions (but
only to the extent such information is derived from this prospectus) and to
receive completed Stock Order Forms from prospective investors interested in
subscribing for shares of Common Stock. None of our directors, officers or
employees will receive any commissions or other compensation for their
efforts in connection with sales of shares of Common Stock. Although
information about the stock offering is available at our offices, an
investment in the Common Stock is not a deposit, and the Common Stock is not
federally insured, and officers, directors and others have been instructed to
inform purchasers of these facts prior to sale.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The Plan of Conversion requires that the purchase price of the Common
Stock be based on the appraised pro forma market value of the Common Stock,
as determined on the basis of an independent valuation. We have retained RP
Financial, a company experienced in the evaluation and appraisal of savings
institutions converting from mutual to stock form, to prepare an appraisal of
the estimated pro forma market value of the Common Stock to be sold pursuant
to the Conversion.
RP Financial will receive aggregate fees and reimbursable expenses of
approximately $25,500 for its appraisal and other services in connection with
the Conversion. Further, we have agreed to indemnify RP Financial under
certain circumstances against liabilities and expenses arising out of our
engagement of RP Financial.
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The appraisal contains an analysis of a number of factors including, but
not limited to, our financial condition and operating trends, the competitive
environment within which we operate, operating trends of certain savings
institutions and savings institution holding companies, relevant economic
conditions, both nationally and in Tennessee which affect the operations of
savings institutions, and stock market values of certain institutions. In
addition, RP Financial has advised us that it included in its analysis an
examination of the potential effects of the Conversion on our operating
characteristics and financial performance as these factors relate to our
estimated pro forma market value.
RP Financial has determined that, as of September 12, 1997, the estimated
pro forma market value of the Common Stock to be issued by the Company in the
Conversion was $11,000,000. Both our and our holding company's Boards of
Directors, in consultation with their advisors, have determined to offer the
shares in the Conversion at a price of $10.00 per share, and by dividing the
price per share into the estimated aggregate value, plan to issue 1,100,000
shares of the Common Stock in the Conversion. The price per share was
determined based on a number of factors, including the market price per share
of the stock of other financial institutions. Regulations administered by
the OTS require, however, that the appraiser establish a range of value for
the stock of approximately 15% on either side of the estimated value 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. In accordance with such regulations, RP Financial
has established a range of value of from $9,350,000 to $12,650,000 (the
estimated valuation range), which would result in a range of shares to be
issued from 935,000 to 1,265,000.
At the time of the Closing of the Conversion, RP Financial, after taking
into account factors similar to those involved in its prior appraisal, will
update its estimate of the pro forma market value of the Common Stock to be
issued in the Conversion. If the pro forma market value is higher or lower
than $11,000,000 but is nonetheless within the estimated valuation range --
or within 15% of the maximum of such range -- we will make an approximate
adjustment by raising or lowering the total number of shares to be issued
(within a range of from 935,000 shares to 1,454,750 shares). No
resolicitation of subscribers and other purchasers will be made because of
any such changes in the number of shares to be issued unless the aggregate
purchase price of the Common Stock is below $9,350,000 (the low end of the
estimated valuation range) or is more than $14,547,500 (15% above the maximum
of the estimated valuation range). If the aggregate purchase price falls
outside the range of from $9,350,000 to $14,547,500, subscribers and other
purchasers will be resolicited and given the opportunity to continue their
orders, in which case they will need to affirmatively confirm their
subscriptions prior to the expiration of the resolicitation, or their
subscription funds will be promptly refunded with interest at our passbook
rate. Subscribers will also be given the opportunity to increase, decrease
or rescind their orders. Any change in the estimated valuation range must be
approved by the OTS. The establishment of any new valuation range may be
effected without a resolicitation of votes from our members to approve the
Conversion.
An increase in the number of shares to be issued in the Conversion
(assuming no change in the per share purchase price) would decrease both a
subscriber's ownership interest and our holding company's pro forma net
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income and stockholders' equity on a per share basis while increasing pro
forma net income and stockholders' equity on an aggregate basis. A decrease
in the number of shares to be issued in the Conversion (assuming no change in
the per share purchase price) would increase both a subscribers' ownership
interest and the Company's pro forma net income and stockholders' equity on a
per share basis while decreasing pro forma net income and stockholders'
equity on an aggregate basis. See "PRO FORMA DATA."
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, RP Financial has relied upon and assumed
the accuracy and completeness of financial and statistical information
provided by us. RP Financial did not independently verify the consolidated
financial statements and other information provided by us, and RP Financial
did not value independently our assets and liabilities. Our Boards of
Directors have consulted with RP Financial and carefully reviewed the
methodology and assumptions used by them in preparing the appraisal, and the
Boards have relied upon the expertise of RP Financial, and have not expressly
evaluated the reasonableness or adequacy of the appraisal or the methodology
or assumptions used by RP Financial. The valuation considers both ourselves
and our holding company only as a going concern and should not be considered
as an indication of our liquidation value. 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 or above the initial offering price per share. Copies of
the appraisal report of RP Financial setting forth the method and assumptions
for such appraisal are on file and available for inspection as set forth in
"ADDITIONAL INFORMATION" and at our main office. Any subsequent updated
appraisal report of RP Financial also will be available for inspection.
Promptly after the completion of the Conversion, RP Financial will
confirm to the OTS, so long as such is the case, that, to the best of its
knowledge and judgment, nothing of a material nature has occurred (taking
into account all of the relevant factors including those which would be
involved in a cancellation of the Offerings) that would cause it to conclude
that the aggregate dollar amount of shares ordered in the Conversion was
incompatible with its estimate of our consolidated pro forma market value as
a subsidiary of our holding company. If the circumstances do not justify
such a statement, a new estimated valuation range may be set, and a
resolicitation of subscribers and other purchasers may be held.
RESTRICTIONS ON REPURCHASE OF STOCK
Subject to the exceptions described below, for a period of three years
following the Conversion, our holding company could be restricted from
repurchasing any of its stock from any person. Federal regulations generally
limit repurchases by our holding company of its own capital stock during the
three-year period after the Conversion to (i) repurchases on a pro rata basis
pursuant to an offer, approved by the OTS, made to all stockholders, (ii)
repurchases of qualifying shares of a director or, in certain circumstances,
(iii) repurchases of shares to fund employee stock compensation plans.
However, upon written notification to the OTS, if the OTS does not object,
our holding company may make open market repurchases of its outstanding
Common Stock, provided that: (i) no repurchases may occur in the first year
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following the Conversion except as may be permitted by the OTS, (ii) in the
second and third years after the Conversion, repurchases must be part of an
open-market stock repurchase program that does not allow for the repurchase
of more than 5% of our holding company's outstanding Common Stock during a
12-month period except as may be permitted by the OTS, (iii) the repurchases
would not cause us to become "undercapitalized" (as defined by OTS
regulations), (iv) the repurchases would not materially adversely affect our
holding company's financial condition and (v) there is a valid business
purpose for the repurchases. Furthermore, our holding company may apply for
regulatory approval to repurchase shares in excess of these amounts, but may
not repurchase any of its stock if the effect thereof would cause our equity
to be reduced below the amount required for our liquidation account. See
"REGULATION."
LIMITATIONS ON RESALES BY MANAGEMENT
Shares of the Common Stock purchased by our directors or executive
officers in the Conversion may not be sold for a period of one year following
completion of the Conversion, except in the event of the death of the
director or executive officer or in an exchange of such shares in connection
with a merger or acquisition of the Company approved by the OTS. Any shares
issued to directors and executive officers as a stock dividend, stock split
or otherwise with respect to restricted stock shall be subject to the same
restrictions. Shares not acquired in the Conversion would not be subject to
such restrictions. See also "REGULATION -- Regulation of the Company --
Federal Securities Law."
LIQUIDATION ACCOUNT
In the unlikely event of a complete liquidation of us in our present
mutual form, each holder of a deposit account with us would receive his pro
rata share of our assets remaining after payment of claims of all creditors
(including the claims of all depositors to the withdrawal value of their
accounts). The depositor's pro rata share of such remaining assets would be
the same proportion of such assets as the value of his or her deposit account
was to the total of the value of all deposit accounts in us at the time of
liquidation.
After the Conversion, each deposit account holder on a complete
liquidation would have a claim of the same general priority as the claims of
our other general creditors. Therefore, except as described below, the
depositor's claim would be solely in the amount of the balance in his or her
deposit account plus accrued interest. The depositor would have no interest
in our value above that amount.
Our Plan of Conversion provides for the establishment, upon the
completion of the Conversion, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders
in an amount equal to our regulatory capital as of the date of our latest
statement of financial condition contained in this prospectus. Each Eligible
Account Holder and Supplemental Eligible Account Holder would be entitled, on
a complete liquidation of us after Conversion, to an interest in the
liquidation account. Each Eligible Account Holder and Supplemental Eligible
Account Holder would have an initial interest in such liquidation account
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of the qualifying deposit in
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the related deposit account and the denominator is the total amount of the
qualifying deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders. However, if the amount in the qualifying deposit account on
any annual closing date is less than the amount in such account on the
initial applicable date or any subsequent closing date, then the Eligible
Account Holder's or Supplemental Eligible Account Holder's interest in the
liquidation account would be reduced from time to time by an amount
proportionate to any such reduction. If any such qualified deposit account
is closed, the interest in the liquidation account will be reduced to zero.
Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders were satisfied
would be distributed to the entity or persons holding our stock at that time.
A merger, consolidation, sale of bulk assets, or similar combination or
transaction with an FDIC-insured institution in which we are not the
surviving insured institution would not be considered to be a "liquidation"
under which distribution of the liquidation account could be made. In such a
transaction, the liquidation account would be assumed by the surviving
institution.
The creation and maintenance of the liquidation account will not restrict
the use or application of any of our capital accounts, except that we may not
declare or pay a cash dividend on, or repurchase any of, our stock if the
effect of such dividend or repurchase would be to cause our equity to be
reduced below the aggregate amount then required for the liquidation account.
INTERPRETATION AND AMENDMENT OF THE PLAN OF CONVERSION
To the extent permitted by law, our interpretations of the Plan of
Conversion will be final. We may substantively amend the Plan of Conversion
at any time prior to the mailing of the Plan of Conversion and proxy
materials to our members. After such mailing, we may amend the Plan of
Conversion at any time prior to the special meeting of our members and at any
time following the meeting with the concurrence of the OTS. We may modify or
terminate the Plan of Conversion upon the order of the regulatory authorities
without a resolicitation of proxies or another meeting of our members.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS or any successor agency prior to completion of the
Conversion, the Plan of Conversion will be amended to conform to such
regulations without a resolicitation of proxies or another meeting of our
members. In the event that such new conversion regulations contain optional
provisions, we may amend the Plan of Conversion to utilize such optional
provisions without a resolicitation of proxies or another meeting of our
members. By approval of the Plan of Conversion, our members will be deemed
to have authorized amendment of the Plan of Conversion under the
circumstances described above.
CONDITIONS AND TERMINATION
In order to complete the Conversion, (i) the Plan of Conversion must be
approved by at least a majority of the total number of votes of our members
eligible to be cast at the special meeting of our members and (ii) all shares
of the Common Stock must be sold within 24 months after the members approve
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the Plan of Conversion. If these conditions are not satisfied, we will
terminate the Plan of Conversion and will continue our business in the mutual
form of organization. We may terminate the Plan of Conversion at any time
prior to the special meeting of our members and, with the approval of the
OTS, at any time after the meeting.
UNITED TENNESSEE BANKSHARES, INC.
We incorporated United Tennessee Bankshares, Inc. under the laws of the
State of Tennessee in August 1997 to serve as our holding company following
the Conversion. We have received approval from the OTS for our holding
company to acquire us in the Conversion subject to satisfaction of certain
conditions. Before the Conversion, our holding company has not engaged and
will not engage in any material operations. Following the Conversion, our
holding company will direct, plan and coordinate our business activities. In
the future, our holding company may become an operating company or acquire or
organize other operating subsidiaries, including other financial
institutions. Initially, our holding company will not maintain offices
separate from ours or employ any persons other than its officers who will not
be separately compensated for such service.
The holding company structure will permit us to expand the financial
services we currently offer. As a unitary savings institution holding
company, our holding company will have greater flexibility than we have as a
savings institution to diversify its business activities through existing or
newly formed subsidiaries or through acquisition or merger with other
financial institutions. Our holding company will be subject to regulation by
the OTS. See "REGULATION -- Regulation of the Company -- Activities
Restrictions."
The Company's executive offices are located at 344 W. Broadway, Newport,
Tennessee 37821-0249, and its telephone number is (423) 623-6088.
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
We were organized as a federally chartered mutual savings institution in
1934. We currently operate through two full service banking offices located
in Newport, Tennessee. At June 30, 1997, we had total assets of $64.2
million, deposits of $56.7 million and equity of $6.5 million, or 10.1% of
total assets.
We attract deposits from the general public and invest those funds in
loans secured by first mortgages on owner-occupied single-family residences
in our market area and, to a lesser extent, commercial real estate loans and
consumer loans. We also maintain a substantial investment portfolio,
primarily of mortgage-backed securities issued by the FNMA, FHLMC and GNMA,
obligations of the federal government and agencies and investment-grade
obligations of states and political subdivisions.
We derive our income principally from interest earned on loans,
investment securities and other interest-earning assets. Our principal
expenses are interest expense on deposits and noninterest expenses such as
employee compensation, deposit insurance and miscellaneous other expenses.
Funds for these activities are provided principally by deposit growth,
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repayments of outstanding loans and investment securities, other operating
revenues and, from time to time, advances from the Federal Home Loan Bank of
Cincinnati.
As a federally chartered savings institution, we are subject to extensive
regulation by the OTS. Our lending activities and other investments must
comply with various federal regulatory requirements, and the OTS periodically
examines us for compliance with various regulatory requirements. The FDIC
also has the authority to conduct special examinations. We must also file
reports with the OTS describing our activities and financial condition and
are subject to certain monetary reserve requirements promulgated by the
Federal Reserve Board.
For additional information, see "BUSINESS" and "REGULATION."
USE OF PROCEEDS
The amount of proceeds from the sale of the Common Stock in the
Conversion depends upon the total number of shares actually sold, and the
actual expenses of the Conversion. As a result, we cannot determine the
actual net proceeds from the sale of the Common Stock until the Conversion is
completed. Based on the sale of $11,000,000 of Common Stock (the midpoint of
the estimated valuation range), the net proceeds from the sale of the Common
Stock are estimated to be approximately $10,350,000. We expect the Company
to purchase all of our capital stock to be issued in the Conversion in
exchange for at least half of the net proceeds from sale of Common Stock.
Based on the foregoing assumption, and the ESOP's purchase of 8% of the
shares to be issued in the Conversion, we anticipate that we would receive
$5,175,000 in cash, a portion of which would replenish deposits withdrawn to
purchase shares in the Conversion, and our holding company would retain
$4,295,000 in cash and $880,000 in the form of a note receivable from the
ESOP. See "PRO FORMA DATA."
The proceeds retained by our holding company initially will be invested
in short-term securities and will be available for a variety of corporate
purposes, including additional capital contributions, loans to us, future
acquisitions and diversification of business, dividends to stockholders and
future repurchases of the Common Stock as permitted by the OTS. For
additional information, see "DIVIDENDS" and "BUSINESS."
The proceeds contributed to us will ultimately become part of our general
corporate funds to be used for our business activities, which will include
the origination of loans. Initially, we expect that we will invest the
proceeds in short-term securities. The availability of the proceeds for the
payment of dividends to our holding company will be limited by regulatory
restrictions on our capital distributions. Due to the limited nature of our
holding company's business activities, we do not believe that the offering
proceeds retained after the Conversion will be inadequate to meet our holding
company's needs until dividends are paid by us; however, we cannot assure you
that our holding company will not need additional funds in the future. For
additional information, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Sources of Capital and
Liquidity," "BUSINESS," "REGULATION -- Regulation of the Bank -- Dividend and
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Other Capital Distribution Limitations" and "MANAGEMENT -- Certain
Compensation Agreements and Plans -- Management Recognition Plan."
DIVIDENDS
Dividends on the Common Stock will be subject to determination and
declaration by the Board of Directors of our holding company. The Board of
Directors currently intends to establish a policy of paying regular cash
dividends on the Common Stock at an initial annual rate of $0.30 per share
(3.0% of the $10.00 per share purchase price of the Common Stock in the
Conversion), with the first dividend to be declared and paid following the
current fiscal year (that is, following December 31, 1997). From time to
time, the Board of Directors may also decide to pay special cash dividends.
Special cash dividends, if paid, may be paid in addition to, or in lieu of,
regular cash dividends. The payment of dividends, however, will be subject
to the requirements of applicable law and the determination by the Board of
Directors that our net income, capital and financial condition, banking
industry trends and general economic conditions justify the payment of
dividends. We cannot assure you that dividends will be paid or, if paid,
will continue to be paid in the future. Further, OTS policy prohibits
dividends that would qualify for exemption from federal income taxation as a
return of capital during the year following the Conversion.
Since our holding company initially will have no significant source of
income other than dividends from us, principal and interest payments on the
note receivable from the ESOP and earnings from investment of the cash
proceeds of the Conversion it retains, the payment of dividends by our
holding company will depend in part upon the amount of the proceeds from the
Conversion retained by it and its earnings thereon and the receipt of
dividends from us. Unlike us, our holding company generally is not subject
to regulatory restrictions on the payment of dividends to stockholders.
Under Tennessee law, our holding company generally is permitted to pay
dividends so long as following a dividend it would be able to pay its debts
in the ordinary course of business and its assets would exceed its
liabilities. All capital distributions paid by us are subject to regulatory
restrictions tied to our regulatory capital level. In addition, after the
Conversion, we will be prohibited from paying any dividend that would reduce
our regulatory capital below the amount in the liquidation account to be
provided for the benefit of certain depositors at the time of the Conversion.
See "PRO FORMA DATA," "REGULATION -- Regulation of the Bank -- Regulatory
Capital Requirements" and " -- Dividend and Other Capital Distribution
Limitations" and "THE CONVERSION -- Liquidation Account."
MARKET FOR THE COMMON STOCK
The Company has never issued its Common Stock to the public.
Consequently, there is no established market for the Common Stock. An active
and liquid public trading market for the securities of any issuer, including
the Common Stock of the Company, depends upon the presence in the marketplace
of both willing buyers and willing sellers of the securities at any given
time. The Company has received conditional approval for the Common Stock to
be quoted on the Nasdaq Small-Cap Market under the symbol " ," subject
to certain conditions which we believe will be met, including a minimum
market capitalization and minimum numbers of market makers and stockholders
of record. Trident Securities is expected to make a market in the Common
20
<PAGE>
Stock following consummation of the Conversion and will assist the Company in
seeking to encourage at least two additional market makers to establish and
maintain a market in the Common Stock. Making a market involves maintaining
bid and ask quotations and being able, as principal, to effect transactions
in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. Due to the amount of
Common Stock to be issued in the Conversion, we cannot assure you that the
conditions for quotation on the Nasdaq Small-Cap Market will be satisfied or
that an active and liquid trading market for the Common Stock will develop or
be maintained. See "RISK FACTORS."
21
<PAGE>
PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about the approximate number
of shares of the Common Stock each of our directors and executive officers
intends to purchase, including each person's associates, and by all directors
and executive officers as a group, including all of their associates. Actual
purchases could be more or less than the amounts indicated. For purposes of
the table, we have assumed that 1,100,000 shares of the Common Stock will be
sold for $10.00 per share at the midpoint of the estimated valuation range.
See "THE CONVERSION -- Stock Pricing and Number of Shares to be Issued.(2)
<TABLE>
<CAPTION>
PERCENT AGGREGATE PURCHASE
NAME AND POSITION TOTAL OF PRICE OF
WITH THE BANK SHARES TOTAL INTENDED PURCHASES
- ----------------------------------------------------------- ----------- --------- ------------------
<S> <C> <C> <C>
Clyde E. Driskill, Jr.
Director 22,000 2.0 220,000
Richard G. Harwood
Director, President and Chief Executive Officer 22,000 2.0 220,000
William B. Henry
Director 22,000 2.0 220,000
J. William Myers
Chairman of the Board 22,000 2.0 220,000
Robert L. Overholt
Director 22,000 2.0 220,000
Robert D. Self
Director 10,000 .9 100,000
Nancy L. Bryant
Vice President and Treasurer 10,000 .9 100,000
Peggy Holston
Branch Manager and Assistant Secretary 10,000 .9 100,000
All directors and executive officers
as a group (8 persons) 140,000 12.7 1,400,000
ESOP 88,000 8.0 880,000
MRP 44,000 4.0 440,000
----------- --------- ----------
Total(1) 272,000 24.7% $2,720,000
----------- --------- ----------
----------- --------- ----------
</TABLE>
- ------------------------
(1) Excludes (i) shares that could be allocated to participants in the ESOP,
under which executive officers and other employees could be allocated in
the aggregate 8% of the Common Stock issued in the Conversion, (ii)
shares that could be awarded to participants in the MRP, if adopted,
under which directors, executive officers and other employees could be
awarded an aggregate number of treasury or newly issued shares equal to
4% of the Common Stock issued in the Conversion, and (iii) shares that
could be purchased by participants in the Option Plan, if adopted, under
which directors, executive officers and other employees could be granted
options to purchase an aggregate amount of Common Stock equal to 10% of
the shares issued in the Conversion at exercise prices equal to the
market price of the Common Stock on the date of grant. See "RISK
FACTORS" and "MANAGEMENT--Certain Compensation Agreements and Plans."
22
<PAGE>
CAPITALIZATION
The following table sets forth information about our consolidated
capitalization, including deposits, at June 30, 1997, and our pro forma
consolidated capitalization, giving effect to the sale of Common Stock in the
Conversion, based upon the assumptions set forth in "PRO FORMA DATA" and
below.
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION OF
THE COMPANY AT JUNE 30, 1997 BASED ON THE SALE OF
CAPITALIZATION -----------------------------------------------------------------
OF THE 1,100,000 1,265,000 1,454,750
BANK AT 935,000 SHARES SHARES SHARES SHARES
JUNE 30, AT $10.00 AT $10.00 AT $10.00 AT $10.00
1997 PER SHARE PER SHARE PER SHARE PER SHARE
-------------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Deposits 1....................... $56,725 $56,725 $56,725 $56,725 $56,725
Capital stock
Preferred stock, no par value:
authorized--5,000,000 shares;
assumed outstanding--none....... $ -- $ -- $ -- $ -- $ --
Common Stock, no par value:
authorized--20,000,000 shares;
shares to be outstanding--as
shown........................... -- -- -- -- --
Paid-in capital 2................ -- 8,730 10,350 11,970 13,833
Less: Common Stock expected to
be acquired by ESOP........ -- (748) (880) (1,012) (1,163)
Common stock possibly to be
acquired by MRP............ -- (374) (440) (506) (582)
Retained earnings................ 5,868 5,868 5,868 5,868 5,868
Net unrealized gain on investment
securities..................... 601 601 601 601 601
--------- ------- ------- ------- -------
Total equity.................. $ 6,469 $14,077 $15,499 $16,921 $18,557
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
</TABLE>
- ------------------------
(1) This table does not reflect withdrawals from deposit accounts for the
purchase of Common Stock. Any withdrawals will reduce our pro forma
capitalization by the amount of such withdrawals.
(2) Based upon the estimated net proceeds from the sale of Common Stock.
23
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table sets forth information about our historical and pro
forma capital position relative to our various minimum statutory and
regulatory capital requirements at June 30, 1997. See PRO FORMA DATA" and
"REGULATION--Regulation of the Bank--Regulatory Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT JUNE 30, 1997 BASED ON THE SALE OF 1:
------------------------------------------------------------------------------------
MINIMUM OF MIDPOINT OF MAXIMUM OF MAXIMUM, AS ADJUSTED
935,000 SHARES 1,100,000 SHARES 1,265,000 SHARES 1,454,750 SHARES
HISTORICAL AT AT $10.00 AT $10.00 AT $10.00 AT $10.00
JUNE 30, 1997 PER SHARE PER SHARE PER SHARE PER SHARE
------------------- ------------------ ------------------ ------------------- -------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
AMOUNT ASSETS 2 AMOUNT ASSETS 2 AMOUNT ASSETS 2 AMOUNT ASSETS 2 AMOUNT ASSETS 2
------- ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Capital under generally
accepted accounting
principles............. $6,469 10.08% $9,712 14.24% $10,324 14.98% $10,935 15.70% $11,640 16.50%
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
Tangible capital......... $5,868 9.14% $9,111 13.36% $ 9,723 14.11% $10,334 14.83% $11,039 15.65%
Tangible capital
requirement............. 963 1.50 1,023 1.50 1,034 1.50 1,045 1.50 1,058 1.50
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
Excess.................. $4,905 7.64% $8,088 11.86% $ 8,689 12.61% $ 9,290 13.33% $ 9,981 14.15%
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
Core capital............. $5,868 9.14% $9,111 13.36% $ 9,723 14.11% $10,335 14.83% $11,039 15.65%
Core capital
requirement............. 1,926 3.00 2,045 3.00 2,068 3.00 2,090 3.00 2,116 3.00
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
Excess.................. $3,942 6.14% $7,066 10.36% $ 7,655 11.11% $ 8,245 11.83% $ 8,923 12.65%
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
Total regulatory
capital................. $6,218 22.45% $9,461 33.20% $10,073 35.17% $10,685 37.11% $11,389 39.32%
Risk-based capital
requirement............. 2,224 8.00 2,279 8.00 2,291 8.00 2,303 8.00 2,317 8.00
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
Excess.................. $3,994 14.45% $7,182 25.20% $ 7,782 27.17% $ 8,382 29.11% $ 9,072 31.32%
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
------ ------ ------ ------ ------- ------ ------- ------ ------- ------
</TABLE>
- -----------------------
(1) Assumes our holding company will purchase all of our stock to be issued in
the Conversion in exchange for half of the net proceeds from the
Conversion. Assumes net proceeds distributed to our holding company or us
initially are invested in short-term securities that carry a risk-weight
equal to 20%. Assumes 8% of the shares to be sold in the Conversion are
purchased by the ESOP and that the funds used to purchase such shares are
borrowed from our holding company. The approximate amount expected to be
borrowed by the ESOP is reflected in this table as a reduction of
capital. 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 MRP after the Conversion. The dollar amount of the
Common Stock possibly to be purchased by the MRP is based on the price
per share in the Conversion 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. Does not
reflect a possible increase in capital upon the exercise of options by
participants in the Option Plan. Under the MRP and the Option Plan,
shares issued to participants could be treasury shares or newly issued
shares. The MRP and the Option Plan will not be implemented until at
least six months after the Conversion. See "MANAGEMENT--Certain
Compensation Agreements and Plans."
(2) Based on our total assets determined under generally accepted accounting
principles for equity purposes, adjusted total assets for the purposes of
the tangible and core capital requirements and risk-weighted assets for
the purpose of the total regulatory capital requirement.
24
<PAGE>
PRO FORMA DATA
The following tables set forth information about our historical and,
after giving effect to the Conversion for the periods and at the dates
indicated, pro forma consolidated net income, equity and other data. Pro
forma consolidated income and related data for the six months ended June 30,
1997 and the year ended December 31, 1996 have been calculated as if the
Common Stock to be issued in the Conversion had been sold, and the estimated
net proceeds had been invested at 5.82%, at the beginning of the periods. The
assumed yield is based on the market yield of short-term U.S. government
securities at June 30, 1997, as adjusted for assumed income taxes at 40%.
Unaudited pro forma consolidated equity and related data have been calculated
as if the Common Stock had been sold and was outstanding at the end of each
period, without any adjustment of historical or pro forma equity to reflect
assumed earnings on estimated net proceeds. Per share amounts have been
computed as if the Common Stock had been outstanding at the beginning of the
period or at the dates shown, but without any adjustment of historical or pro
forma stockholders' equity to reflect earnings on estimated net proceeds. The
pro forma data set forth below do not reflect withdrawals from deposit
accounts to purchase shares. For additional financial information, see "RISK
FACTORS," "BUSINESS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" and the Consolidated Financial
Statements and related Notes appearing elsewhere in this prospectus.
THE EQUITY AND RELATED DATA PRESENTED BELOW ARE NOT INTENDED TO REPRESENT
THE FAIR MARKET VALUE OF THE COMMON STOCK, THE CURRENT VALUE OF OUR ASSETS OR
LIABILITIES, OR THE AMOUNTS, IF ANY, THAT WOULD BE AVAILABLE FOR DISTRIBUTION
TO STOCKHOLDERS IN THE EVENT OF LIQUIDATION. FOR ADDITIONAL INFORMATION ABOUT
THE LIQUIDATION ACCOUNT, SEE "THE CONVERSION--LIQUIDATION ACCOUNT." THE PRO
FORMA INCOME AND RELATED DATA DERIVED FROM THE ASSUMPTIONS SET FORTH ABOVE
SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL RESULTS OF OUR OPERATIONS
FOR ANY PERIOD. A CHANGE IN THE NUMBER OF SHARES TO BE ISSUED IN THE
CONVERSION AND OTHER FACTORS MAY MATERIALLY AFFECT THE PRO FORMA DATA. sEE
"THE CONVERSION--STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED."
25
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED, OF
935,000 1,100,000 1,265,000 1,454,750
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
----------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross offering proceeds................................... $ 9,350 $ 11,000 $ 12,650 $ 14,548
Less estimated offering expenses.......................... (620) (650) (680) (715)
----------- ------------ ------------ ------------
Estimated net offering proceeds......................... 8,730 10,350 11,970 13,833
----------- ------------ ------------ ------------
Pro forma ESOP adjustment 1............................... (748) (880) (1,012) (1,164)
Pro forma MRP adjustment 2................................ (374) (440) (506) (582)
----------- ------------ ------------ ------------
Estimated investable net proceeds....................... $ 7,608 $ 9,030 $ 10,452 $ 12,087
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Net income:
Historical net income................................... $ 237 $ 237 $ 237 $ 237
Pro forma income on net proceeds........................ 133 158 183 211
Pro forma ESOP adjustment 1............................. (23) (27) (31) (35)
Pro forma MRP adjustment 2.............................. (23) (27) (31) (35)
----------- ------------ ------------ ------------
Total................................................. $ 324 $ 341 $ 358 $ 378
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Net income per share: 3
Historical net income................................... $ 0.27 $ 0.23 $ 0.20 $ 0.18
Pro forma income on net proceeds........................ 0.15 0.15 0.16 0.16
Pro forma ESOP adjustment 1............................. (0.03) (0.03) (0.03) (0.03)
Pro forma MRP adjustment 2.............................. (0.03) (0.03) (0.03) (0.03)
----------- ------------ ------------ ------------
Total................................................. $ 0.36 $ 0.32 $ 0.30 $ 0.28
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Number of Shares Used in Calculations.................... 863,940 1,016,400 1,168,860 1,344,189
Equity: 4
Historical.............................................. $ 6,469 $ 6,469 $ 6,469 $ 6,469
Estimated net offering proceeds......................... 8,730 10,350 11,970 13,833
Pro forma ESOP adjustment 1............................. (748) (880) (1,012) (1,164)
Pro forma MRP adjustment 2.............................. (374) (440) (506) (582)
----------- ------------ ------------ ------------
Total................................................. $ 14,077 $ 15,499 $ 16,921 $ 18,556
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Equity per share: 3, 4
Historical.............................................. $ 6.92 $ 5.88 $ 5.11 $ 4.45
Estimated net offering proceeds......................... 9.34 9.41 9.46 9.51
Pro forma ESOP adjustment1.............................. (0.80) (0.80) (0.80) (0.80)
Pro forma MRP adjustment 2.............................. (0.40) (0.40) (0.40) (0.40)
----------- ------------ ------------ ------------
Total................................................. $ 15.06 $ 14.09 $ 13.37 $ 12.76
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Number of Shares Used in Calculations.................... 935,000 1,100,000 1,265,000 1,454,750
Offering price as a percentage of pro forma equity per
share 3, 4.............................................. 66.40% 70.97% 74.79% 78.37%
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Ratio of offering price to pro forma annualized net
income per share 3...................................... 13.89x 15.63x 16.67x 17.86x
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED, OF
935,000 1,100,000 1,265,000 1,454,750
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
----------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross offering proceeds................................... $ 9,350 $ 11,000 $ 12,650 $ 14,548
Less estimated offering expenses.......................... (620) (650) (680) (715)
----------- ------------ ------------ ------------
Estimated net offering proceeds......................... 8,730 10,350 11,970 13,833
----------- ------------ ------------ ------------
Pro forma ESOP adjustment 1............................... (748) (880) (1,012) (1,164)
Pro forma MRP adjustment 2................................ (374) (440) (506) (582)
----------- ------------ ------------ ------------
Estimated investable net proceeds...................... $ 7,608 $ 9,030 $ 10,452 $ 12,087
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Net income:5
Historical net income................................... $ 583 $ 583 $ 583 $ 583
Pro forma income on net proceeds........................ 266 315 365 422
Pro forma ESOP adjustment 1............................. (45) (53) (61) (70)
Pro forma MRP adjustment 2.............................. (45) (53) (61) (70)
----------- ------------ ------------ ------------
Total................................................. $ 759 $ 792 $ 826 $ 865
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Net income per share: 3, 5
Historical net income................................... $ 0.67 $ 0.57 $ 0.50 $ 0.43
Pro forma income on net proceeds........................ 0.31 0.31 0.31 0.31
Pro forma ESOP adjustment 1............................. (0.05) (0.05) (0.05) (0.05)
Pro forma MRP adjustment 2.............................. (0.05) (0.05) (0.05) (0.05)
----------- ------------ ------------ ------------
Total................................................. $ .88 $ .78 $ .71 $ .64
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Number of Shares Used in Calculations.................... 867,680 1,020,800 1,173,920 1,350,008
Equity: 4
Historical.............................................. $ 6,103 $ 6,103 $ 6,103 $ 6,103
Estimated net offering proceeds......................... 8,730 10,350 11,970 13,833
Pro forma ESOP adjustment 1............................. (748) (880) (1,012) (1,164)
Pro forma MRP adjustment 2.............................. (374) (440) (506) (582)
----------- ------------ ------------ ------------
Total................................................. $ 13,711 $ 15,133 $ 16,555 $ 18,190
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Equity per share: 3, 4
Historical.............................................. $ 6.53 $ 5.55 $ 4.82 $ 4.20
Estimated net offering proceeds......................... 9.34 9.41 9.46 9.51
Pro forma ESOP adjustment 1............................. (0.80) (0.80) (0.80) (0.80)
Pro forma MRP adjustment 2.............................. (0.40) (0.40) (0.40) (0.40)
----------- ------------ ------------ ------------
Total................................................. $ 14.67 $ 13.76 $ 13.08 $ 12.51
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Number of Shares Used in Calculations.................... 935,000 1,100,000 1,265,000 1,454,750
Offering price as a percentage of pro forma equity per
share 3, 4.............................................. 68.17% 72.67% 76.45% 79.94%
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Ratio of offering price to pro forma annualized net income
per share 3............................................. 11.36x 12.82x 14.08x 15.63x
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
27
<PAGE>
- ------------------
(1) Assumes 8% of the shares to be sold in the Conversion are purchased by the
ESOP, 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,
we expect 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 our
holding company will be providing the ESOP loan, only principal payments
on the ESOP loan are reflected as employee compensation expense. The
provisions of Statement of Position (SOP(2)) 93-6 have been applied for
shares to be acquired by the ESOP and for purposes of computing earnings
per share. See "MANAGEMENT--Certain Compensation Agreements and
Plans--Employee Stock Ownership Plan."
(2) 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 MRP. The dollar amount of the Common Stock possibly to be purchased
by the MRP 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 we accrue compensation expense to reflect the vesting of
such shares pursuant to the MRP, the charge against capital will be
reduced accordingly. In the event the shares issued under the MRP 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--Certain Compensation Agreements and Plans.(2)
(3) In accordance with SOP 93-6, per share data is computed based on the
assumed numbers of shares sold in the Conversion, less the shares
acquired by the ESOP for earnings per share amounts, and ESOP shares are
not included in earnings per share calculations until such shares are
committed to be released, which will occur at the end of operating
periods as related compensation is earned by the participants.
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the Company over its liabilities. 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. The amounts shown
also do not reflect the amounts required to be distributed in the event
of liquidation to eligible depositors from the liquidation account which
will be established upon the consummation of the Conversion. Pro forma
stockholders' equity information is not intended to represent the fair
market value of the Common Stock, the current value of our assets or
liabilities, or the amounts, if any, that would be available for
distribution to stockholders in the event of liquidation. Such pro forma
data may be materially affected by the number of shares sold in the
Conversion and by other factors.
(5) Includes before-tax charge of $317,000 taken during the period representing
a special assessment of 65.7 basis points on our deposits at March 31,
1995 pursuant to legislation enacted to recapitalize our federal deposit
insurance fund. Excluding that charge, based on the assumptions reflected
in this table at the midpoint of the estimated valuation range,
management estimates that pro forma net income for the period would have
been approximately $982,000, or $0.96 per share.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Our principal business consists of accepting deposits from the general
public through our main office and branch office and investing those funds in
loans secured by one- to four-family residential properties located in our
primary market area. We also maintain a portfolio of investment securities and
originate a limited amount of commercial real estate loans and consumer loans.
Our investment securities portfolio consists of U.S. Treasury notes and U.S.
government agency securities, local municipal bonds and mortgage-backed
securities which are guaranteed as to principal and interest by the FHLMC, GNMA
or FNMA. We also maintain an investment in Federal Home Loan Bank of Cincinnati
common stock and FHLMC preferred stock. See "BUSINESS--Investment Activities"
for a description of these investments.
Our net income primarily depends on our net interest income, which is the
difference between interest income earned on loans and investment securities and
interest paid on customers' deposits. Our net income is also affected by
noninterest income, such as service charges on customers' deposit accounts, loan
service charges and other fees, and noninterest expense, primarily consisting of
compensation expense, deposit insurance and other expenses incidental to our
operations.
Our operations and those of the thrift industry as a whole are significantly
affected by prevailing economic conditions, competition and the monetary and
fiscal policies of governmental agencies. Our lending activities are influenced
by demand for and supply of housing and competition among lenders and the level
of interest rates in our market area. Our deposit flows and costs of funds are
influenced by prevailing market rates of interest, primarily on competing
investments, account maturities and the levels of personal income and savings in
our market area.
ASSET/LIABILITY MANAGEMENT
Net interest income, the primary component of our net income, is determined
by the difference or "spread" between the yield earned on our interest-earning
assets and the rates paid on our interest-bearing liabilities, and the relative
amounts of such assets and liabilities. Key components of an asset/liability
strategy are the monitoring and managing of interest rate sensitivity on both
the interest-earning assets and interest-bearing liabilities. The matching of
our assets and liabilities may be analyzed by examining the extent to which our
assets and liabilities are interest rate sensitive and by monitoring the
expected effects of interest rate changes on our net portfolio value.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
net portfolio value and net interest income would tend to increase during
29
<PAGE>
periods of rising interest rates but decrease during periods of falling interest
rates. If our assets mature or reprice more slowly or to a lesser extent than
our liabilities, our net portfolio value and net interest income would tend to
decrease during periods of rising interest rates but increase during periods of
falling interest rates. Our policy has been to mitigate the interest rate risk
inherent in the traditional savings institution business of originating long
term loans funded by short term deposits by pursuing the following strategies:
(i) we have historically maintained liquidity and capital levels to compensate
for unfavorable movements in market interest rates; and (ii) in order to
mitigate the adverse effect of interest rate risk on future operations, we
emphasize the origination of variable rate mortgage loans, and we make limited
amounts of shorter term consumer loans.
The OTS requires us to measure our interest rate risk by computing
estimated changes in the net portfolio value ("NPV") of our cash flows from
assets, liabilities and off-balance sheet items in the event of a range of
assumed changes in market interest rates. These computations estimate the
effect on our NPV of sudden and sustained 1% to 4% increases and decreases in
market interest rates. Our board of directors has adopted an interest rate
risk policy which establishes maximum decreases in our estimated NPV in the
event of 1%, 2%, 3% and 4% increases and decreases in market interest rates,
respectively. The following table sets forth our policy limits and certain
calculations, based on information provided to us by the OTS, with respect to
the sensitivity of our NPV to changes in market interest rates at June 30,
1997.
<TABLE>
<CAPTION>
CHANGE IN NPV
CHANGE IN ----------------------------------
MARKET INTEREST RATES POLICY LIMIT COMPUTATION
--------------------- --------------- -----------------
<S> <C> <C>
+4% -90% -38%
+3% -50 -26
+2% -25 -15
+1% -10 -6
0% -- --
-1% -10 *
-2% -25 *
-3% -50 *
-4% -90% *
</TABLE>
- ------------------------
* No loss calculated.
These calculations indicate that our net portfolio value could be adversely
affected by increases in interest rates. Changes in interest rates also may
affect our net interest income, with increases in rates expected to decrease
income and decreases in rates expected to increase income, as our
interest-bearing liabilities would be expected to mature or reprice more
quickly than our interest-earning assets.
While we cannot predict future interest rates or their effects on our NPV or
net interest income, we do not expect current interest rates to have a material
adverse effect on our NPV or net
30
<PAGE>
interest income in the future. Computations of prospective effects of
hypothetical interest rate changes are based on numerous assumptions,
including relative levels of market interest rates, prepayments and deposit
run-offs and should not be relied upon as indicative of actual results.
Certain shortcomings are inherent in such computations. Although certain
assets and liabilities may have similar maturity or periods of repricing they
may react at different times and 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 mortgage
loans, generally have features which restrict changes in 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 could deviate
significantly from those assumed in making the calculations set forth above.
Additionally, an increased credit risk may result as the ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.
Our Board of Directors is responsible for reviewing our asset and
liability policies. On at least a quarterly basis, the Board reviews interest
rate risk and trends, as well as liquidity and capital ratios and
requirements. Our management is responsible for administering the policies
and determinations of the Board of Directors with respect to our asset and
liability goals and strategies.
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
The following table sets forth information about our average
interest-earning assets and interest-bearing liabilities and reflects the
average yield of interest-earning assets and the average cost of
interest-bearing liabilities for the periods and at the date indicated.
Average balances are derived from month-end balances. We do not believe that
the use of month-end balances instead of daily balances has caused any
material difference in the information presented. Investment securities
include the aggregate of securities available for sale and held to maturity.
The average balance and average yield on investment securities is based on
the fair value of securities available for sale and the amortized cost of
securities held to maturity. The average balance of loans receivable includes
delinquent loans, which are not considered significant. The average balance
of equity includes the net unrealized gain on available for sale securities.
The following table does not reflect any effect of income taxes.
31
<PAGE>
The following table also sets forth information for the periods
indicated and at June 30, 1997 about the difference between our weighted
average yield earned on interest-earning assets and our weighted average rate
paid on interest-bearing liabilities, or "interest rate spread," which
savings institutions have traditionally used as an indicator of
profitability. Another indicator of an institution's net interest income is
its "net yield on interest-earning assets," which is its net interest income
divided by the average balance of interest-earning assets. Net interest
income is affected by the interest rate spread and by the relative amounts of
interest-earning assets and interest-bearing liabilities. Whenever
interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------
AT JUNE 30, 1997 1996
1997 --------------------------------- --------------------
-------------------- AVERAGE AVERAGE
YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE COST BALANCE INTEREST COST BALANCE INTEREST COST
--------- --------- --------- --------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable 1.................... $ 46,468 8.5% $ 44,382 $ 1,958 8.8% $ 41,462 $ 1,803 8.7%
Investment securities................. 14,298 6.8 14,290 438 6.1 11,840 329 5.6
Other interest-earning assets......... 2,029 5.8 2,429 68 5.6 1,440 39 5.4
--------- --------- --------- --------- ---------
Total interest-earning assets........ 62,795 8.0 61,101 2,464 8.1 54,742 2,171 7.9
Noninterest-earning assets............. 1,394 -- 1,464 -- -- 829 -- --
--------- --------- --------- --------- ---------
Total assets......................... $ 64,189 -- $ 62,565 $ 2,464 -- $ 55,571 $ 2,171 --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Interest-bearing liabilities:
Deposits.............................. $ 56,725 4.7 $ 55,412 $ 1,303 4.7 $ 49,239 $ 1,135 4.6
Noninterest-bearing liabilities........ 995 -- 840 -- -- 719 -- --
--------- --------- --------- --------- ---------
Total liabilities.................... 57,720 -- 56,252 1,303 -- 49,958 1,135 --
Equity................................. 6,469 -- 6,313 -- -- 5,613 -- --
--------- --------- --------- --------- ---------
Total liabilities and equity......... $ 64,189 -- $ 62,565 $ 1,303 -- $ 55,571 $ 1,135 --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net interest income.................... $ 1,161 $ 1,036
--------- ---------
--------- ---------
Interest rate spread................... 3.3% 3.3% 3.3%
--------- ----- ---------
--------- ----- ---------
Net yield on interest-earning assets... 3.7% 3.8% 3.8%
--------- ----- ---------
--------- ----- ---------
Ratio of average interest-earning
assets to average interest-bearing
liabilities.......................... 110.7% 110.6% 111.2%
--------- ----- ---------
--------- ----- ---------
</TABLE>
- ------------------------
(1) Includes nonaccrual loans.
32
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- --------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
-------- -------- ------- ------- --------- ------- -------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable 1................. $42,426 $3,720 8.8% $38,262 $3,383 8.8% $35,863 $3,019 8.4%
Investment securities.............. 11,662 726 6.2 13,637 876 6.4 14,261 858 6.0
Other interest-earning assets...... 1,727 90 5.2 578 23 4.0 825 29 3.5
------- ------- ------- ------ -------- ------
Total interest-earning assets..... 55,815 4,536 8.1 52,477 4,282 8.2 50,952 3,906 7.7
Noninterest-earning assets.......... 1,748 -- -- 991 -- -- 1,827 -- --
------- ------- ------- ------ -------- ------
Total assets...................... $57,563 $4,536 -- $53,468 $4,282 -- $52,779 $3,906 --
------- ------- ------- ------ -------- ------
------- ------- ------- ------ -------- ------
Interest-bearing liabilities:
Deposits........................... $51,083 $2,399 4.7 $48,259 $2,218 4.6 $47,313 $1,655 3.5
Noninterest-bearing liabilities..... 752 -- -- 368 -- -- 1,438 -- --
------- ------- ------- ------ -------- ------
Total liabilities................. 51,835 2,399 -- 48,627 2,218 -- 48,751 1,655 --
Equity.............................. 5,728 -- -- 4,841 -- -- 4,028 -- --
------- ------- ------- ------ -------- ------
Total liabilities and equity...... $57,563 2,399 -- $53,468 2,218 -- $52,779 $1,655 --
------- ------- ------- ------ -------- ------
------- ------- ------- ------ -------- ------
Net interest income................. $ 2,137 $2,064 $2,251
------- ------ ------
------- ------ ------
Interest rate spread................ 3.4% 3.6% 4.2%
---- ---- ----
---- ---- ----
Net yield on interest-earning
assets............................ 3.8% 3.9% 4.4%
---- ---- ----
---- ---- ----
Ratio of average interest-earning
assets to average interest-bearing
liabilities....................... 109.3% 108.7% 107.7%
------ ------ ------
------ ------ ------
</TABLE>
- ------------------------
(1) Includes nonaccrual loans.
33
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth information about changes in our interest
income and interest expense 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 prior period rate), (ii) changes in rate (changes in rate
multiplied by prior period volume) and (iii) changes in rate-volume (changes
in rate multiplied by the changes in volume).
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
--------------------------- --------------------------------------------------------
1997 vs. 1996 1996 vs. 1995 1995 vs. 1994
--------------------------- --------------------------- ---------------------------
Increase (Decrease) Increase (Decrease) Increase (Decrease)
Due to Due to Due to
--------------------------- --------------------------- ---------------------------
Rate/ Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total Volume Rate Volume Total
------ ---- ------ ----- ------ ---- ------ ----- ------ ---- ------ -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable................. $127 $21 $ 7 $155 $ 366 $(15) $(14) $ 337 $202 $ 143 $19 $ 364
Investment securities............ 69 30 6 105 (126) (27) 3 (150) (37) 57 (2) 18
Other interest-earning assets.... 27 1 1 29 46 7 14 67 (9) 4 (1) (6)
---- --- --- ---- ----- ---- ---- ----- ---- ----- --- -----
Total interest-earning assets... 223 52 14 289 286 (35) 3 254 156 204 16 376
---- --- --- ---- ----- ---- ---- ----- ---- ----- --- -----
Interest expense:
Deposits......................... 142 25 1 168 130 48 3 181 20 520 23 563
---- --- --- ---- ----- ---- ---- ----- ---- ----- --- -----
Change in net interest income..... $ 81 $27 $13 $121 $ 156 $(83) $ -- $ 73 $136 $(316) $(7) $(187)
---- --- --- ---- ----- ---- ---- ----- ---- ----- --- -----
---- --- --- ---- ----- ---- ---- ----- ---- ----- --- -----
</TABLE>
34
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND DECEMBER 31, 1996
Total assets grew from December 31, 1996 to June 30, 1997 as total assets
increased $3.6 million, or 5.9%, from $60.6 million at December 31, 1996 to
$64.2 million at June 30, 1997. Investment securities available for sale
increased $2.1 million or 17.8% from December 31, 1996 to June 30, 1997,
while investment securities held to maturity decreased slightly. We purchased
investment securities with funds received from increases in deposit accounts
and because of a slight reduction in loan demand.
Loans receivable increased slightly from December 31, 1996 to June 30,
1997 as originations exceeded repayments for the period by approximately $1.5
million. Our market area has experienced an increase in refinancing activity
during this period.
Total deposits increased $2.9 million or 5.4% from $53.8 million at
December 31, 1996 to $56.7 million at June 30, 1997. The growth has been
primarily due to larger institutions closing branches in the area and we have
benefitted from new customer growth.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996 AND 1995
Total assets increased $6.6 million or 12.2% from $54.0 million at
December 31, 1995 to $60.6 million at December 31, 1996. During the year,
investment securities increased approximately $1.6 million while loans
receivable increased $3.9 million or 9.6%. We funded these increases by an
increase in deposit account balances.
Accrued interest receivable increased approximately $101,000 or 52.3%
from $193,000 at December 31, 1995 to $294,000 at December 31, 1996. This
increase is due to the increase in loans receivable and us originating all
new loans on an interest-in-arrears basis. We had previously originated loans
on an interest-in-advance basis.
Total deposits increased approximately $5.8 million or 12.1%. This
increase is also attributable to larger institutions closing branches in the
area and us receiving new customers as a result.
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND 1996
Net income for the six months ended June 30, 1997 and 1996 was $237,000
and $370,000, respectively. The $133,000 decrease in net income was primarily
due to a one-time charge to compensation expense associated with the
implementation of a long-term incentive plan for the board of directors, and
an increase in provision for loan losses. See Notes 3 and 8 of the Notes to
Consolidated Financial Statements for the periods ended June 30, 1997 and
1996 for more information. See also "RISK FACTORS" and "PRO FORMA DATA."
35
<PAGE>
Interest Income. Interest income increased $290,000 from $2.2 million
for the six months ended June 30, 1996 to $2.5 million for the six months
ended June 30, 1997. The increase in total interest income was primarily due
to the $6.4 million increase in the average balance of interest-earning
assets. The increase in the average balance of interest-earning assets was
primarily due to increases in loans and investment securities funded with
similar increases in deposits. The average yield on interest-earning assets
increased slightly from 7.9% for the six months ended June 30, 1996 to 8.1%
for the same period ended June 30, 1997.
The primary source of interest income during the six months ended June
30, 1997 and 1996 was interest earned on loans receivable. Interest income
from loans receivable increased $155,000 from $1.8 million for the six months
ended June 30, 1996 to $2.0 million for the same period in 1997. The increase
was due to the $2.9 million increase in the average balance of loans
receivable from $41.5 million for six months ended June 30, 1996 to $44.4
million for the six months ended June 30, 1997. The increase in interest
income on loans receivable was also due to the 10 basis point increase in the
average yield earned on loans receivable from 8.7% for the six months ended
June 30, 1996 to 8.8% for the same period in 1997. Interest income from
investment securities increased $109,000 from $329,000 for the six months
ended June 30, 1996 to $438,000 for the same period in 1997. The increase was
due to a $2.4 million increase in the average balance of investment
securities coupled with a 50 basis point increase in the average yield earned
on investment securities. Other interest-earning assets also had slight
increases in both the dollar volume and average yields earned on those assets
for the six months ended June 30, 1996 versus the same time period in 1997.
Interest Expense. Interest expense consists of interest paid on
customers' deposits as we have had no borrowed funds. Interest expense
increased $168,000 from $1.14 million for the six months ended June 30, 1996
to $1.30 million for the six months ended June 30, 1997. The increase in
interest expense on deposits was primarily due to the $6.1 million increase
in the average balance of deposits. The average rate paid on deposits also
increased slightly from 4.6% for the six months ended June 30, 1996 to 4.7%
for the same period in 1997.
Net Interest Income. Net interest income was $1.2 million and $1.0
million for the six months ended June 30, 1997 and 1996, respectively. The
increase in net interest income was due to the $6.4 million increase in the
average balance of interest-earning assets versus the $6.2 million increase
in the average balance of interest-bearing liabilities. Our net interest rate
spread remained at 3.3% for each of the six month periods ended June 30, 1997
and 1996.
Provision for Loan Losses. We expensed $90,000 in loan loss provision
for the six months ended June 30, 1997 due in part to the continued growth in
our loans receivable and an increase in our nonperforming loans. We did not
expense any provision for loan losses in the six months ended June 30, 1996.
Provision for loan losses is based on our analysis of various factors
which affect the loan portfolio and our desire to maintain an allowance for
loan losses to provide for losses. In establishing the allowance for loan
losses, we recognize that a substantial portion of our loans,
36
<PAGE>
including loans 90 or more days past due, are secured by mortgages on
residential real estate. At June 30, 1997, the allowance for loan losses
provided coverage of 93.88% of loans 90 or more days past due. We have been
able to maintain our asset quality performance with our underwriting
standards. Nonperforming assets as a percentage of total assets were 1.0% at
June 30, 1997. See "BUSINESS -- Lending Activities -- Asset Classification,
Allowance for Losses and Nonperforming Assets."
Ultimate losses may vary from their estimates; however, estimates are
reviewed periodically and, as adjustments become necessary, they are reported
in earnings in the periods in which they become known. In addition, various
regulatory agencies periodically review our allowance for loan losses and may
require us to recognize additions to the allowance based on judgments about
information available to them at the time of their review.
Noninterest Income. Noninterest income for the six months ended June 30,
1997 and 1996 was $50,000 and $74,000, respectively. The decrease in
noninterest income was primarily due to a $23,000 reduction in deposit
account service charges. This reduction was a one-time adjustment on certain
service charge accounts and management anticipates that deposit account
service charges will return to historical levels in the future.
Noninterest Expense. Noninterest expense for the six months ended June
30, 1997 and 1996 totalled $725,000 and $560,000, respectively. The $165,000
increase in noninterest expense was primarily due to a $203,000 increase in
compensation expense partially offset by a $43,000 decrease in federal
deposit insurance premiums. The $203,000 increase in compensation expense was
due to the implementation of a long-term incentive plan for our Board of
Directors and general salary increases. The decrease in federal deposit
insurance premiums is due to a decrease in the assessment rate imposed by the
FDIC. See Note 7 of the Notes to Consolidated Financial Statements for the
periods ended June 30, 1997 and 1996.
Our operating efficiency ratio (noninterest expense divided by the total
of net interest income and noninterest income) for the six months ended June
30, 1997 and 1996 was 64.67% and 50.27%. The higher operating efficiency
ratio for 1997 was due to the expense recognized upon the implementation of
our long-term incentive plan. Excluding this expense, our adjusted operating
efficiency ratio would have been improved. The lower adjusted operating
efficiency ratio for the six months ended June 30, 1997 was due to a $92,000
increase in net interest income after provision for loan losses versus only a
$15,000 increase in noninterest expense.
For information about anticipated increases in noninterest expenses after
the Conversion, see "RISK FACTORS" and "PRO FORMA DATA."
Income Taxes. Our effective tax rates for the six months ended June 30,
1997 and 1996 were 40% and 33%, respectively. The higher effective tax rate
for the six months ended June 30, 1997 was due to the effect of utilizing the
six year moving average method to determine our tax bad debt deductions and
other changes as mandated by the Small Business Job Protection Act that
Congress
37
<PAGE>
enacted in late 1996. We believe that our effective tax rate will be
approximately 40% in future years. Our effective tax rate is greater than the
statutory federal income tax rate of 34% primarily due to a 6% state excise
tax rate.
COMPARISON OF RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31,
1996, 1995 AND 1994
Net income was $583,000 for the year ended December 31, 1996 compared to
net income of $714,000 for the year ended December 31, 1995. Net income for
1994 was $843,000. The decrease in net income in 1996 over 1995 was primarily
attributable to the special assessment paid to the FDIC of $317,000 (see Note
7 of the Notes to Consolidated Financial Statements). The decrease was
partially offset by a larger growth rate in interest-earning assets than
interest-bearing liabilities. Our net interest margin decreased only 10 basis
points from 3.93% for 1995 to 3.83% for 1996. Net income for 1996 resulted in
a return on average assets of 1.01% compared to 1.33% for 1995, and a return
on average equity of 10.19% for 1996 as compared to 14.75% for 1995.
The $129,000 decrease in net income from 1994 to 1995 was attributable to
the 110 basis point increase in the average cost of deposits from 3.5% in
1994 to 4.6% in 1995. The net interest margin for 1995 of 3.93% was 49 basis
points lower than the net interest margin for 1994. For 1994, we had a return
on average assets of 1.60% and a return on average equity of 20.92%.
Interest Income. Interest income totalled $4.5 million, $4.3 million and
$3.9 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The average yield on interest-earning assets increased in 1995
from 7.7% to 8.2% then decreased slightly in 1996 to 8.1%. The increase in
1995 was due to an overall increase the market interest rates in all
categories of interest-earning assets. The slight decrease in 1996 was
attributable to a small decline in the market rates of investment securities.
The average balance of interest-earning assets increased $3.3 million in 1996
and $1.5 million in 1995 in response to similar increases in average balances
of deposit accounts.
Our primary source of interest income for the three-year period ended
June 30, 1996 was from loans receivable. Interest income from loans
receivable was $3.7 million, $3.4 million and $3.0 million for the years
ended December 31, 1996, 1995 and 1994, respectively. The average yield
earned on loans receivable increased from 8.4% in 1994 to 8.8% in 1995 and
remained at 8.8% for 1996. The average balances of loans receivable also
increased during the period with a $2.4 million increase in 1995 and a $4.2
million increase in 1996 due to strong loan demand in our market area.
Interest income on investment securities increased slightly from 1994 to 1995
primarily because of increases in market rates during that period. Interest
income on investment securities decreased in 1996 by $150,000 due to a $2.0
million decrease in average balances which was used to fund loan growth, and
the average rate declined slightly in accordance with a general market rate
decline.
Interest Expense. For the three year period ended December 31, 1996, our
interest-bearing liabilities consisted totally of customers deposits, as we
had no borrowed funds during that period. Interest expense on deposits
increased each of the three years ended December 31, 1996. Interest
38
<PAGE>
expense totalled $2.4 million, $2.2 million and $1.7 million for the three
years ended December 31, 1996, 1995 and 1994, respectively. The increase in
interest expense was due to the average rates paid on deposits increasing
each of the three years from 3.5% for 1994 to 4.6% for 1995 and to 4.7% for
1996, coupled with increases in average balances of deposits of $946,000 in
1995 and $2.8 million in 1996. The increase in the average rates paid on
deposits was reflective of the increase in both market interest rates and
rates paid on deposits by local competitors.
For information about anticipated increases in noninterest expenses after
the Conversion, see "RISK FACTORS" and "PRO FORMA DATA."
Net Interest Income. The significant increase in rates paid on deposit
accounts in 1995 and 1996 caused net interest income to decrease from 1994 to
1995 and then slightly increase in 1996. Net interest income was $2.1
million, $2.0 million and $2.3 million for the years ended December 31, 1996,
1995 and 1994. The change in net interest income reflects a decrease in our
interest rate spread from 4.2% for 1994 to 3.6% for 1995 and then to 3.4% for
1996, coupled with an increase in average interest-earning assets over
average interest-bearing liabilities each year. Because our interest-bearing
deposits are more rate sensitive than our interest-earning assets, the
average cost of interest-bearing deposits increased at a faster rate than the
average yield on interest-earning assets. Our net interest margin has also
decreased each of the three years ended December 31, 1996. Our net interest
margin was 3.83%, 3.93% and 4.42% for the years ended December 31, 1996, 1995
and 1994.
Provision for Loan Losses. The provision for loan losses was zero in
1996 and 1995, and $33,000 in 1994. The provision has been minimal due in
part to our history of modest charge-offs and strong asset quality for each
of the three years. See "BUSINESS -- Lending Activities -- Asset
Classification, Allowance for Losses and Nonperforming Assets."
Noninterest Income. Noninterest income for the years ended December 31,
1996, 1995 and 1994 was $150,000, $167,000 and $119,000, respectively.
Noninterest income consisted primarily of customer service fees related to
customers' deposit accounts and loan service charges. For 1994, noninterest
income was lower due to a net loss recognized on the sales of investment
securities available for sale of $10,000 versus a gain on sales in 1995 of
$27,000. Noninterest income decreased from 1995 to 1996 primarily due to a
net loss on sales of investment securities available for sale in 1996 of
$4,000.
Noninterest Expense. Noninterest expense for the years ended June 30,
1996, 1995 and 1994 was $1.5 million, $1.1 million and $1.0 million,
respectively. The increase in noninterest expense in 1995 represented
increases in noninterest expense items. Compensation represents the largest
component of our noninterest expense. The increase in noninterest expense in
1996 was primarily due to a special assessment for deposit insurance totaling
$317,000 (see Note 7 of the Notes to Consolidated Financial Statements).
39
<PAGE>
Our operating efficiency, measured by our efficiency ratios (noninterest
expense divided by the total of net interest income and noninterest income),
was 64.7%, 48.5% and 44.4% for the years ended December 31, 1996, 1995 and
1994, respectively. The higher operating efficiency ratio for 1996 was due to
the inclusion of the special assessment for deposit insurance in noninterest
expense of $317,000. Excluding this special assessment, our adjusted
operating efficiency ratio for 1996 would have been 50.8%. The slight
increase in the ratio was due to the addition of new employees to provide
customer service for our increases in loans and deposits. The adjusted ratios
of noninterest expense to average total assets ratio (excluding the FDIC
special assessment) were 2.02%, 2.02% and 1.97% for the years ended December
31, 1996, 1995 and 1994, respectively.
Income Taxes. Our effective tax rate remained relatively stable for each
of the three years ended December 31, 1996. Our effective tax rate was 28%,
38% and 35% for the years ended December 31, 1996, 1995 and 1994,
respectively. The 1996 effective tax rate was lower than anticipated
primarily due to the effect on deferred taxes of changes in our tax bad debt
reserve and the methods required to be used to calculate tax bad debt
deductions. See Note 6 of the Notes to Consolidated Financial Statements.
SOURCES OF CAPITAL AND LIQUIDITY
We have historically maintained substantial levels of capital. The
assessment of capital adequacy depends on several factors, including asset
quality, earnings trends, liquidity and economic conditions. We seek to
maintain high levels of regulatory capital to give us maximum flexibility in
the changing regulatory environment and to respond to changes in market and
economic conditions. These levels of capital have been achieved through
consistent earnings enhanced by low levels of noninterest expense and have
been maintained at those high levels as a result of our policy of moderate
growth generally confined to our market area. Average equity to average total
assets at June 30, 1997 and December 31, 1996 and 1995 and 1994 was 10.13%,
9.95%, 9.05% and 7.63%, respectively. At June 30, 1997 and December 31, 1996,
we exceeded all current regulatory capital requirements and met the
definition of a "well-capitalized" institution, the highest regulatory
category. See "SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER
DATA -- Selected Regulatory Capital Ratios."
We will, as a result of the Conversion, have substantially increased
capital. Although it is expected that we could therefore pay substantial
dividends if permitted by the OTS, there can be no assurance our holding
company's resources of funds will be sufficient to satisfy our liquidity
needs in the future. See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL
COMPLIANCE" and "PRO FORMA DATA."
Following the Conversion, our holding company initially will have no
business other than ours. We expect that the net proceeds of the Conversion
to be retained by our holding company, together with dividends that may be
paid from us to our holding company following the Conversion, will provide
sufficient funds for its initial operations. Our holding company's primary
sources of liquidity in the future will be dividends paid by us and repayment
of the ESOP loan. We will be
40
<PAGE>
subject to certain regulatory limitations with respect to the payment of
dividends to our holding company. See "DIVIDENDS" and "REGULATION --
Regulation of the Bank -- Dividend and Other Capital Distribution
Limitations."
We are required to maintain minimum levels of liquid assets as defined by
OTS regulations. This requirement, which may be varied at the discretion of
the OTS depending on economic conditions and deposit outflows, is based upon
a percentage of deposits and, if any, short-term borrowings. Current OTS
regulations require that a savings institution maintain liquid assets of not
less than 5% of its average daily balance of net withdrawal deposit accounts
and borrowings payable in one year or less, of which short-term liquid assets
must consist of not less than 1%. At June 30, 1997, our liquidity, as
measured for regulatory purposes, was 9.6% or $5.4 million in excess of the
minimum OTS liquidity requirement of 5% and 4.3% or $2.4 million in excess of
the OTS short-term liquidity requirement of 1%. We seek to maintain a
relatively high level of liquidity in order to retain flexibility in terms of
lending and investment opportunities and deposit pricing, and in order to
meet funding needs of deposit outflows and loan commitments. Historically, we
have been able to meet our liquidity demands through internal sources of
funding.
Our most liquid assets are cash and amounts due from depository
institutions, which are short-term highly liquid investments with original
maturities of less than three months that are readily convertible to known
amounts of cash. The levels of these assets are dependent on our operating,
financing and investing activities during any given period. At June 30, 1997
and December 31, 1996, 1995 and 1994, cash and amounts due from depository
institutions totalled $3.1 million, $2.9 million, $1.8 million and $930,000,
respectively.
Our primary sources of funds are deposits, proceeds from principal and
interest payments on loans and investment securities and earnings. While
scheduled principal repayments on loans and investment securities are a
relatively predictable source of funds, deposit flows and loan and investment
securities prepayments are greatly influenced by general interest rates,
economic conditions, competition and other factors. We do not solicit
deposits outside of our market area through brokers or other financial
institutions.
We have also designated certain securities as available for sale in order
to meet liquidity demands. At June 30, 1997, we had designated securities
with a fair value of $13.8 million as available for sale. In addition to
internal sources of funding, we as a member of the Federal Home Loan Bank
have substantial borrowing authority with the Federal Home Loan Bank. Our use
of a particular source of funds is based on need, comparative total costs and
availability.
Another source of liquidity is the anticipated net proceeds of the
Conversion. In the Conversion, we will receive at least half of the net
proceeds. We expect to use these funds for our business activities, including
investment in interest-earning assets. See "USE OF PROCEEDS."
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<PAGE>
For additional information about cash flows from our operating, investing
and financing activities, see the consolidated financial statements and
related notes appearing elsewhere in this prospectus.
At June 30, 1997, we had outstanding approximately $1.5 million in
commitments to originate loans and unused lines of credit. At the same date,
the total amount of certificates of deposit which were scheduled to mature in
one year or less was $30.5 million. We anticipate that we will have resources
to meet our current commitments through internal funding sources described
above. Historically, we have been able to retain a significant amount of our
deposits as they mature.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and related Notes appearing
elsewhere in this prospectus have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time
due to inflation.
Virtually all of our assets and liabilities are monetary. As a result,
changes in interest rates have a greater impact on our performance than do
the effects of general levels of inflation. Interest rates do not necessarily
move in the same direction or to the same extent as the price of goods and
services. For additional information, see "RISK FACTORS -- Possible Adverse
Impacts of Interest Rates and Economic and Industry Conditions."
IMPACT OF NEW ACCOUNTING STANDARDS
The following are recently issued accounting standards which we have yet
to adopt. For information about recent accounting standards which we have
adopted, see the Notes to Consolidated Financial Statements.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities. In June 1996, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
(SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities." SFAS No. 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities.
Those standards are based on consistent application of a
financial-components approach that focuses on control. Under that approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. This statement is effective for
transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and is to be applied
prospectively.
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In December 1996, the FASB issued Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125." SFAS No. 127 provides a one year deferral on
selected portions of SFAS No. 125.
We have never entered into any transactions related to transfers of
financial assets, sales of loans with servicing retained, or servicing of
loans for other entities. In addition, we do not anticipate entering into any
of these types of transactions in the future. Therefore, SFAS No. 125 and
SFAS No. 127 will not have any effect on our financial condition or results
of operations.
Earnings Per Share. In August 1997, the FASB issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," and Statement
of Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure." SFAS Nos. 128 and 129 establish standards for computing
and presenting earnings per share and makes them comparable to international
standards. These statements are effective for financial statements issued for
periods ending after December 15, 1997.
Although we do not have any outstanding stock, these statements will
apply to our holding company's consolidated financial statements after the
Conversion. Application of these statements is not anticipated to have a
significant impact on the preparation of our holding company's consolidated
financial statements.
BUSINESS
GENERAL
Following the Conversion, our holding company will direct, plan and
coordinate our business activities. In the future, our holding company may
become an operating company or acquire or organize other operating
subsidiaries, including other financial institutions. Initially, our holding
company will not maintain offices separate from ours or employ any persons
other than its officers, who will not be separately compensated for such
service.
We attract deposits from the general public and invest those funds in
loans secured by first mortgages on owner-occupied single-family residences
in our market area and, to a lesser extent, commercial real estate loans and
consumer loans. We also maintain a substantial investment portfolio.
We derive our income principally from interest earned on loans,
investment securities and other interest-earning assets. Our principal
expenses are interest expense on deposits and noninterest expenses such as
employee compensation, deposit insurance and miscellaneous other expenses.
Funds for these activities are provided principally by deposit growth,
repayments of outstanding loans and investment securities, other operating
revenues and, from time to time, advances from the Federal Home Loan Bank of
Cincinnati.
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<PAGE>
MARKET AREA
Our primary market area is Cocke County, Tennessee. To a lesser extent,
we accept deposits and offer loans in surrounding areas.
Cocke County is primarily rural, with a population of approximately
32,000 persons and relatively high unemployment levels and low income levels.
Approximately one-third of the county comprises Douglas Lake and portions of
the Cherokee National Forest and the Great Smoky Mountains National Park. In
recent periods, the population growth rate has been significantly above the
national rate and somewhat below the state rate (since 1990, 10.0% compared
with 7.7% and 10.6%, respectively), partially due to increased numbers of
retirees moving into the area. However, unemployment levels have been
significantly higher than state and national levels (for June 1997, 7.1%
compared with 5.8% and 5.2%, respectively), and income levels have been
substantially lower than state and national averages (for 1997, $11,800
compared with $16,600 and $18,100, respectively, per person), due in part to
the seasonal nature of tourism related employment. Over the next five years,
demographic trends in the county are expected to be consistent with recent
experience, with the differences between county, state and national
population growth rates decreasing and the differences between county, state
and national income levels growing.
The economy in our primary market area includes a variety of industries,
including farming, manufacturing, services, retail and wholesale trade and
tourism. Significant employers include Hunt Wesson in the food processing
industry and Falcon Products in the furniture industry.
COMPETITION
We experience substantial competition both in attracting and retaining
savings deposits and in the making of mortgage and other loans.
Direct competition for savings deposits comes from other savings
institutions, credit unions, regional bank holding companies and commercial
banks. Significant competition for our other deposit products and services
comes from money market mutual funds and brokerage firms. Our direct
competitors include three banks, two of which are branches of large regional
banks headquartered outside our market area, and one branch of a credit union
headquartered outside our market area. The primary factors in competing for
loans are interest rates and loan origination fees and the quality and range
of services offered by various financial institutions. Competition for
origination of real estate loans normally comes from other savings
institutions, commercial banks, credit unions, mortgage bankers and mortgage
brokers.
Our principal primary competition comes from financial institutions
headquartered in our primary market area and from various non-local
commercial banks that have branch offices located in our primary market area.
Many competing financial institutions have financial resources substantially
greater than ours and offer a wider variety of deposit and loan products. Our
principal competitive strategy has been to emphasize quality customer service.
44
<PAGE>
LENDING ACTIVITIES
We principally originate loans secured by mortgages on single-family
residences in our primary market area. We also make commercial real estate
loans and a variety of consumer loans.
With certain limited exceptions, the maximum amount that a savings
institution may lend to any borrower (including certain related entities of
the borrower) at one time may not exceed 15% of the unimpaired capital and
surplus of the institution, plus an additional 10% of unimpaired capital and
surplus for loans fully secured by readily marketable collateral. At June 30,
1997, the maximum amount that we could have lent to any one borrower without
prior OTS approval under those regulations was approximately $1.0 million. At
that date, the largest aggregate amount of loans that we had outstanding to
any one borrower was $499,000, we had a total of seven lending relationships
with aggregate loan amounts over $250,000, and none of these loans was
nonperforming. For additional information, see "REGULATION -- Regulation of
the Bank -- Limits on Loans to One Borrower."
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<PAGE>
Loan Portfolio Composition. The following table sets forth information
about the composition of our loan portfolio by type of loan at the dates
indicated. At June 30, 1997, we had no concentrations of loans exceeding 10%
of gross loans other than as disclosed below.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, -------------------------------------------------------------------
1997 1996 1995 1994
------------------- --------------------- ------------------ ------------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
-------- ------ -------- ------ -------- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Real estate loans:
One- to four-family residential........ $39,663(1) 82.3% $39,549 86.6% $36,534 86.8% $33,634 88.2%
Commercial............................. 3,285 6.8 2,265 5.0 1,370 3.3 1,215 3.2
Construction........................... 3,024 6.3 1,889 4.1 2,341 5.6 1,540 4.0
Consumer loans:
Automobile............................. 708 1.5 664 1.4 514 1.2 331 0.9
Loans to depositors, secured by
deposits............................. 570 1.2 509 1.1 588 1.4 781 2.0
Home equity and second mortgage........ 242 0.5 234 0.5 233 0.5 152 0.4
Other.................................. 698 1.4 565 1.3 512 1.2 467 1.3
------- ----- ------- ----- ------- ----- ------- -----
48,190 100.0% 45,675 100.0% 42,092 100.0% 38,120 100.0%
------- ----- ------- ----- ------- ----- ------- -----
----- ----- ----- -----
Less:
Loans in process....................... 1,722 688 980 835
Deferred fees and discounts............ 267 263 251 219
Allowance for loan losses.............. 576 494 496 498
------- ------- ------- -------
Total................................ $45,625 $44,230 $40,365 $36,568
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- ------------------------
(1) Includes $6,876 (in thousands) in loans secured by real estate with mobile
homes permanently attached to the property.
46
<PAGE>
Loan Maturity Schedules. The following table sets forth information
about dollar amounts of loans maturing in our portfolio based on their
contractual terms to maturity, including scheduled repayments of principal,
at December 31, 1996. Demand loans, loans having no stated schedule of
repayments and no stated maturity and overdrafts are reported as due in one
year or less. The table does not include any estimate of prepayments which
significantly shorten the average life of all mortgage loans and may cause
our repayment experience to differ from that shown below.
<TABLE>
<CAPTION>
DUE AFTER DUE AFTER DUE AFTER
DUE DURING THE YEAR ENDING 3 THROUGH 5 5 THROUGH 10 10 THROUGH 15 DUE AFTER 15
DECEMBER 31, YEARS AFTER YEARS AFTER YEARS AFTER YEARS AFTER
-------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999 1996 1996 1996 1996 TOTAL
------ ------ ------ ------------- ------------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Real estate loans:
One-to four-family residential... $ 40 $ 254 $ 392 $1,547 $4,134 $14,345 $18,837 $39,549
Commercial....................... -- 38 19 255 524 1,003 426 2,265
Construction..................... 1,889 -- -- -- -- -- -- 1,889
Consumer........................... 774 212 324 536 52 74 -- 1,972
------ ----- ----- ------ ------ ------- ------- -------
Total.......................... $2,703 $ 504 $ 735 $2,338 $4,710 $15,422 $19,263 $45,675
------ ----- ----- ------ ------ ------- ------- -------
------ ----- ----- ------ ------ ------- ------- -------
</TABLE>
The following table sets forth information about dollar amounts of our
loans due one year or more after December 31, 1997 that had predetermined
interest rates and that had adjustable interest rates at that date.
<TABLE>
<CAPTION>
PREDETERMINED FLOATING OR
RATE ADJUSTABLE RATES
------------- ----------------
<S> <C> <C>
(IN THOUSANDS)
Real estate loans:
One- to four-family residential....... $ 6,737 $ 32,772
Commercial............................ 608 1,657
Construction.......................... -- --
Consumer................................ 1,198 --
------- --------
Total............................... $ 8,543 $ 34,429
------- --------
------- --------
</TABLE>
47
<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of loans is substantially less
than their contractual terms because of prepayments. In addition, due-on-sale
clauses on loans generally give us the right to declare a loan immediately
due and payable in the event, among other things, that the borrower sells the
real property subject to the mortgage and the loan is not repaid. The average
life of mortgage loans tends to increase when current mortgage loan market
rates are substantially higher than rates on existing mortgage loans and,
conversely, decrease when current mortgage loan market rates are
substantially lower than rates on existing mortgage loans.
Loan Originations, Purchases and Sales. The following table sets forth
information about our loan originations during the periods indicated. We do
not purchase or sell loans.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family residential....... $ 4,442 $ 4,338 $ 8,305 $ 6,459 $ 7,304
Commercial............................ 876 765 1,439 1,226 526
Construction.......................... 1,947 1,912 2,770 2,750 1,914
Consumer loans.......................... 610 516 1,081 1,014 732
------- ------- ------- ------- -------
Total loans originated.............. $ 7,875 $ 7,531 $13,595 $11,449 $10,476
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
One- to Four-Family Residential Lending. Our principal lending activity
consists of the origination of loans secured by mortgages on existing
single-family residences in our primary market area. We also originate
significant amounts of loans for the construction of such residences. The
purchase price or appraised value of most of such residences generally has
been between $40,000 and $70,000, with our original loan amounts averaging
approximately $45,000. At June 30, 1997, $39.7 million, or 82.3%, of our
total loans were secured by one- to four-family residences, a substantial
majority of which were existing, owner-occupied, single-family residences in
our primary market area. At June 30, 1997, $32.8 million, or 82.6%, of our
one- to four-family residential loans had adjustable interest rates, and $6.9
million, or 17.4%, had fixed rates. During the six months ended June 30,
1997, we originated $3.9 million of adjustable rate loans, which was
approximately 88% of total mortgage loan originations for that period, and at
that date we had $1.5 million of loan commitments, 87.6% of which were for
adjustable rate loans.
Our one- to four-family residential mortgage loans may have adjustable or
fixed rates of interest. These loans generally are for terms of up to 25
years for adjustable rate loans and 15 years for fixed rate loans, amortized
on a monthly basis, with principal and interest due each month. Residential
real estate loans often remain outstanding for significantly shorter periods
than their contractual terms. Borrowers may refinance or prepay loans at
their option without penalty. These loans customarily contain "due-on-sale"
clauses which permit us to accelerate repayment of a loan upon transfer of
ownership of the mortgaged property.
48
<PAGE>
While it is not our policy to sell our loans in the secondary market, our
one- to four-family residential mortgage loans generally are underwritten in
accordance with applicable underwriting guidelines and documentation
requirements published by the FNMA and FHLMC for loans to be eligible for
sale to them, except with respect to their requirements with respect to
mortgaged properties (for example, in light of our experience in our market
area, we do not always require homes to have air conditioning or a complete
survey or independent appraisal, and we do not always require contractors to
be licensed).
Our lending policies generally limit the maximum loan-to-value ratio on
one-to four-family residential mortgage loans secured by owner-occupied
properties to 95% of the lesser of the appraised value or purchase price,
with private mortgage insurance or other enhancement required on loans with
loan-to-value ratios in excess of 80%. The maximum loan-to-value ratio on
mortgage loans secured by non-owner-occupied properties generally is limited
to 75%.
Our adjustable rate one- to four-family residential mortgage loans
generally are indexed to the weekly average rate on U.S. Treasury securities
adjusted to a constant maturity of one year. The rates at which interest
accrues on these loans typically are adjustable annually, often after an
initial period of up to five years before the first rate adjustment,
generally with limitations on adjustments of two percent per adjustment
period, and six percent over the life of the loan, and an interest rate floor
equal to the initial interest rate on the loan. While our adjustable rate
loans frequently are originated with initially discounted interest rates,
such loans are underwritten and borrowers are qualified based on the fully
indexed interest rate. Our adjustable rate loans do not permit negative
amortization.
Adjustable rate loans help reduce our exposure to increases in prevailing
market interest rates. However, there are unquantifiable credit risks
resulting from potential increases in costs to borrowers in the event of
upward repricing of adjustable rate loans. It is possible that during periods
of rising interest rates, the risk of default on adjustable rate loans may
increase due to increases in interest costs to borrowers. Further, adjustable
rate loans which provide for initial rates of interest below the fully
indexed rates may be subject to increased risk of delinquency or default as
the higher, fully indexed rate of interest subsequently replaces the lower,
initial rate. Further, although adjustable rate loans allow us to increase
the sensitivity of our interest-earning assets to changes in interest rates,
the extent of this interest sensitivity is limited by the initial fixed rate
period before the first adjustment and the periodic and lifetime interest
rate adjustment limitations and the ability of borrowers to refinance the
loans. Accordingly, we can give no assurance that yields on our adjustable
rate loans will fully adjust to compensate for increases in our cost of
funds. Finally, adjustable rate loans increase our exposure to decreases in
prevailing market interest rates, although decreases in our cost of funds and
our interest rate adjustment limitations and floor tend to offset this effect.
We offer loans to individuals for construction of one- to four-family
owner-occupied residences located in our primary market area, with such loans
usually converting to permanent financing upon completion of construction. At
June 30, 1997, our loan portfolio included $3.0 million of loans secured by
properties under construction, all of which were
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<PAGE>
construction/permanent loans structured to become permanent loans upon the
completion of construction. From time to time, we also offer loans to
qualified builders for the construction of one- to four-family residences
located in our primary market area. Because such homes are intended for
resale, such loans generally are not covered by permanent financing
commitments by us. All construction loans are secured by a first lien on the
property under construction. Loan proceeds are disbursed in increments as
construction progresses and as inspections warrant. Construction/permanent
loans are underwritten in accordance with the same requirements as our
permanent mortgages, except the loans generally provide for disbursement in
stages during a construction period of up to six months, during which period
the borrower may or may not be required to make monthly payments. Borrowers
must satisfy all credit requirements that would apply to our permanent
mortgage loan financing prior to receiving construction financing for the
subject property.
Construction financing involves a higher degree of risk of loss than
long-term financing on existing, improved, occupied real estate. Risk of loss
on a construction loan depends upon the accuracy of the initial estimate of
the property's value at completion of construction and the estimated cost
(including interest) of construction. During the construction phase, a number
of factors could cause delays and cost overruns. If the estimate of
construction costs is inaccurate, we may be required to advance funds beyond
the amount originally committed to permit completion of construction. If the
estimate of value is inaccurate, we may be confronted, at or prior to the
maturity of the loan, with a property having a value which is insufficient to
assure full repayment. The ability of a builder to sell completed residences
will depend on, among other things, demand, pricing, availability of
comparable properties and economic conditions. We have tried to minimize this
risk by limiting construction lending to qualified borrowers in our market
area and by limiting the aggregate amount of outstanding construction loans.
Commercial Real Estate Lending. We originate limited amounts of
commercial real estate loans in order to benefit from the higher origination
fees and interest rates, as well as shorter terms to maturity, than could be
obtained from single-family mortgage loans. Our commercial real estate loans
are secured by churches, restaurants, offices, apartments and other
income-producing commercial properties. At June 30, 1997, we had 66 of these
loans totaling $3.3 million, with a median loan balance of approximately
$65,000, none of which had a balance exceeding $385,000. None of these loans
was classified as substandard, doubtful or loss or designated as special
mention at that date. For information about our asset classification policies
and nonperforming assets, see "Asset Classification, Allowance for Losses and
Nonperforming Assets."
Our commercial real estate loans generally are limited to original
balances not exceeding $500,000 on properties in our primary market area,
with terms of up to 25 years. These loans generally have annually adjustable
interest rates, with limitations on adjustments of two percent per year, and
maximum loan-to-value ratios of 75%.
The following paragraphs set forth information about our commercial real
estate loans with outstanding balances exceeding $250,000 at June 30, 1997.
None of these loans was classified
50
<PAGE>
as substandard, doubtful or loss or designated as special mention at that
date. For information about our asset classification policies, see "Asset
Classification, Allowance for Losses and Nonperforming Assets."
Retail Properties in Newport, Tennessee. In May 1996, we made a $400,000
loan secured by several local retail properties. At that time, an appraisal
indicated a loan-to-value ratio of approximately 51%. The loan is being
amortized over 15 years. At June 30, 1997, the outstanding balance was
$385,000, and the loan was fully performing in accordance with its terms.
Restaurant in Newport, Tennessee. In April 1997, we made a $283,000 loan
secured by a local restaurant. At that time, an appraisal indicated a
loan-to-value ratio of approximately 72%. The loan is being amortized over
15 years. At June 30, 1997, the outstanding balance was $273,000, and the
loan was fully performing in accordance with its terms.
Commercial real estate lending entails significant additional risks
compared with single family residential lending. For example, commercial real
estate loans typically involve large loan balances to single borrowers or
groups of related borrowers, the payment experience on such loans typically
is dependent on the successful operation of the real estate project, and
these risks can be significantly impacted by supply and demand conditions in
the market for multi-family residential units and commercial office space,
and, as such, may be subject to a greater extent to adverse conditions in the
economy generally. In addition, church loans may depend on the congregation's
voluntary contributions, which may be affected by local employment levels and
other factors. To minimize the effects of these risks, we generally limit
commercial real estate lending to our primary market area and to borrowers
with which we have substantial experience or who are otherwise well known to
us. It is our policy to obtain personal guarantees from all principals
obtaining commercial real estate loans. In assessing the value of such
guarantees, we review the individual's personal financial statements, credit
reports, tax returns and other financial information.
The aggregate amount of loans which federally chartered savings
institutions may make on the security of liens on commercial real estate may
not exceed 400% of the institution's capital.
Consumer Lending. Our consumer loans consist of automobile loans, demand
loans secured by savings accounts with us, home equity loans secured by
second mortgages on single-family residences in our market area and other
loans. These loans totaled approximately $2.2 million at June 30, 1997. At
that date, we had 429 consumer loans, with a median loan balance of
approximately $4,000, none of which had a balance exceeding $41,000, and none
of our ten largest consumer loans was adversely classified or designated.
Consumer loans generally involve more risk than first mortgage loans.
Repossessed collateral for a defaulted loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of damage,
loss or depreciation, and the remaining deficiency often does
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<PAGE>
not warrant further substantial collection efforts against the borrower. In
addition, loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be adversely affected by job
loss, divorce, illness or personal bankruptcy. Further, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered. These loans may
also give rise to claims and defenses by a borrower against us, and a
borrower may be able to assert against us claims and defenses which it has
against the seller of the underlying collateral. In underwriting consumer
loans, we consider the borrower's credit history, an analysis of the
borrower's income, expenses and ability to repay the loan and the value of
the collateral.
Collection Policies. When a borrower fails to make a payment on a loan,
we generally take prompt steps to have the delinquency cured and the loan
restored to current status. Once the payment grace period has expired (in
most instances 15 days after the due date), we impose a late charge, if
applicable. If we do not promptly receive payment, we send a notice 15 days
after the expiration of the grace period. If the loan becomes 60 days
delinquent, we contact the borrower and attempt to formulate an affirmative
plan to cure the delinquency. If a loan becomes 90 days delinquent, we review
the loan, and, if payment is not made, we pursue foreclosure or other
appropriate action.
Asset Classification, Allowance for Losses and Nonperforming Assets.
Federal regulations require savings institutions to classify their assets on
the basis of quality on a regular basis. An asset is classified as
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. 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 an institution to a
sufficient degree of risk to warrant classification but do possess credit
deficiencies or potential weaknesses deserving our close attention. Assets
classified as substandard or doubtful require an institution to establish
general allowances for loan losses. If an asset or portion thereof is
classified loss, an institution must either establish a specific allowance
for loss in the amount of the portion of the asset classified loss, or charge
off such amount. Federal examiners may disagree with an institution's
classifications. If an institution does not agree with an examiner's
classification of an asset, it may appeal this determination to the OTS
Regional Director.
We regularly review our assets to determine whether assets require
classification or re-classification, and the Board of Directors reviews and
approves all classifications. As of June 30, 1997, we had no assets
classified as loss or as doubtful, $646,000 of assets classified as
substandard and no assets designated as special mention. Our total adversely
classified assets represented approximately 1% of our total assets and 12% of
our tangible regulatory capital at June 30, 1997. At that date, substantially
all of our adversely classified or designated assets were one- to four-family
residences in our primary market area, and none of such assets was in excess
of $60,000. At June 30, 1997, we did not expect to incur any loss in excess
of attributable existing reserves on any of our adversely classified or
designated assets. See "MANAGEMENT'S
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<PAGE>
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
In extending credit, we recognize that losses will occur and that the
risk of loss will vary with, among other things, the type of credit being
extended, the creditworthiness of the obligor over the term of the
obligation, general economic conditions and, in the case of a secured
obligation, the quality of the security. It is our policy to maintain
allowances for losses based on our assessment of the loan portfolio. We
increase the allowance for losses by charging provisions for losses against
our income.
Our methodology for establishing the allowance for losses takes into
consideration probable losses that have been identified in connection with
specific assets as well as losses that have not been identified but can be
expected to occur. We conduct regular reviews of our assets and evaluate the
need to establish allowances on the basis of this review. Allowances are
established on a regular basis based on an assessment of risk in our assets
taking into consideration the composition and quality of the portfolio,
delinquency trends, current charge-off and loss experience, the state of the
real estate market, regulatory reviews conducted in the regulatory
examination process, general economic conditions and other factors deemed
relevant by us. Allowances are provided for individual assets, or portions of
assets, when ultimate collection is considered improbable based on the
current payment status of the assets and the fair value or net realizable
value of the collateral. At the date of foreclosure or other repossession or
at the date we determine a property is an "in-substance foreclosed" property,
we transfer the property to real estate acquired in settlement of loans at
the lower of cost or fair value. Fair value is defined as the amount in cash
or cash-equivalent value of other consideration that a property would yield
in a current sale between a willing buyer and a willing seller. Fair value is
measured by market transactions. If a market does not exist, fair value of
the property is estimated based on selling prices of similar properties in
active markets or, if there are no active markets for similar properties, by
discounting a forecast of expected cash flows at a rate commensurate with the
risk involved. Fair value generally is determined through an appraisal at the
time of foreclosure. At June 30, 1997, we held no properties acquired in
settlement of loans for which market values were unavailable. Any amount of
cost in excess of fair value is charged-off against the allowance for loan
losses. We record an allowance for estimated selling costs of the property
immediately after foreclosure. Subsequent to acquisition, the property is
periodically evaluated, and an allowance is established if the estimated fair
value of the property, less estimated costs to sell, declines. If, upon
ultimate disposition of the property, net sales proceeds exceed the net
carrying value of the property, a gain on sale of real estate is recorded.
The banking regulatory agencies, including the OTS, have adopted a policy
statement about maintenance of an 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) for
the portions of the portfolio that have not been classified (including those
53
<PAGE>
loans designated as special mention), estimated credit losses over the
upcoming 12 months given the facts and circumstances as of the evaluation
date. 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 our policy on allocating these allowances to determine
whether it is reasonable based on all relevant factors.
We actively monitor our asset quality and charge off loans and properties
acquired in settlement of loans against the allowances for losses on such
loans and such properties when appropriate and provide specific loss
allowances when necessary. Although we believe we use the best information
available to make determinations with respect to the allowances for losses,
future adjustments may be necessary if economic conditions differ
substantially from the economic conditions in the assumptions used in making
the initial determinations.
The following table sets forth information about our allowance for loan
losses for the periods indicated. See also "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ -------------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period.......... $ 494 $ 496 $ 496 $ 498 $ 475
Charge-offs:
Consumer.............................. (8) (4) (4) (2) (12)
Recoveries:
Consumer.............................. -- 1 2 -- 2
------ ------ ------ ------ ------
Net charge-offs......................... (8) (3) (2) (2) (10)
Provision for loan losses............... 90 -- -- -- 33
------ ------ ------ ------ ------
Balance at end of period................ $ 576 $ 493 $ 494 $ 496 $ 498
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of net charge-offs to average
loans outstanding during the period... .02% .01% .01% .01% .03%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
54
<PAGE>
The following table sets forth information about our allowance for loan
losses by asset category at the dates indicated. The allocation of the
allowance to each category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------------
AT JUNE 30, 1997 1996 1995 1994
---------------------- ---------------------- ----------------------- ----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ------------- ------ ------------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Real estate mortgage:
One- to four-family residential.. $ 376 82.3% $ 300 86.6% $ 300 86.8% $ 300 88.2%
Commercial....................... 24 6.8 23 5.0 20 3.3 20 3.2
Construction..................... 45 6.3 39 4.1 42 5.6 33 4.0
Consumer........................... 131 4.6 132 4.3 134 4.3 145 4.6
------ ----- ------ ----- ------ ----- ------ -----
Total allowance for loan losses.. $ 576 100.0% $ 494 100.0% $ 496 100.0% $ 498 100.0%
------ ----- ------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ ----- ------ -----
</TABLE>
55
<PAGE>
During periods of recession or other economic distress, numerous
financial institutions throughout the United States have incurred substantial
losses due to significant increases in loss provisions and charge-offs
resulting largely from higher levels of loan delinquencies and foreclosures.
As a result of losses experienced by many financial institutions during these
periods, there has been a greater level of scrutiny by regulatory authorities
of the loan portfolios of financial institutions undertaken as part of
examinations of such institutions by the FDIC, OTS or other federal or state
regulators. While we believe we have established our existing loss allowances
in accordance with generally accepted accounting principles, there can be no
guarantee or assurance that such reserves are, or in the future will be,
adequate to absorb all loan losses or that regulators, in reviewing our
assets, will not make us increase our loss allowance, thereby negatively
affecting our reported financial condition and results of operations.
The following table sets forth information about our nonperforming assets
at the dates indicated. At these dates, we did not have any assets accounted
for on a nonaccrual basis or modified in a troubled debt restructuring. For
information about our interest accrual practices, see Note 1 of the Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, --------------------------------
1997 1996 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Accruing loans which are contractually
past due 90 days or more:
Real estate:
One- to four-family residential.......... $ 482 $ 375 $ 282 $ 398
Commercial............................... 57 -- -- 48
Consumer................................... 10 5 11 31
----- ----- ----- -----
Total.................................... $ 549 $ 380 $ 293 $ 477
----- ----- ----- -----
----- ----- ----- -----
Percentage of total loans.................... 1.24% .84% .72% 1.28%
----- ----- ----- -----
----- ----- ----- -----
Other nonperforming assets(1)................ $ 41 $ -- $ -- $ 36
----- ----- ----- -----
----- ----- ----- -----
Percentage of total assets................... .06% -- % -- % .07%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- ------------------------
(1) Other nonperforming assets includes property acquired through foreclosure or
repossession. This property is carried at the lower of its fair value less
estimated selling costs or the principal balance of the related loan,
whichever is lower.
At June 30, 1997, we had identified approximately $49,000 of loans which
amount is not reflected in the preceding table but as to which known
information about possible credit problems of borrowers caused us to have
doubts as to the ability of the borrowers to comply with present loan
repayment terms, all of which was included in our adversely classified or
designated asset amounts at that date. At that date, we did not expect to
incur any loss in excess of attributable existing reserves on any of our
assets.
56
<PAGE>
INVESTMENT ACTIVITIES
We are permitted under federal law to make certain investments, including
investments in securities issued by various federal agencies and state and
municipal governments, deposits at the Federal Home Loan Bank of Cincinnati,
certificates of deposit in federally insured institutions, certain bankers'
acceptances and federal funds. We may also invest, subject to certain
limitations, in commercial paper rated in one of the two highest investment
rating categories of a nationally recognized credit rating agency, and
certain other types of corporate debt securities and mutual funds. Federal
regulations require us to maintain an investment in Federal Home Loan Bank
stock and a minimum amount of liquid assets which may be invested in cash and
specified securities. From time to time, the OTS adjusts the percentage of
liquid assets which savings institutions are required to maintain. See
"REGULATION -- Regulation of the Bank -- Liquidity Requirements."
We make investments in order to maintain the levels of liquid assets
required by regulatory authorities and manage cash flow, diversify our
assets, obtain yield and, under prior federal income tax law, satisfy certain
requirements for favorable tax treatment. These investment activities consist
of investments in mortgage-backed securities and other investment securities,
primarily securities issued or guaranteed by the U.S. government or agencies
thereof and securities issued by municipalities and other governmental
authorities. Investment and aggregate investment limitations and credit
quality parameters of each class of investment are prescribed in our
investment policy. Securities purchases are authorized by the investment
committee of our Board of Directors and ratified by our Board of Directors.
Securities designated as "held to maturity" are those assets which we
have the ability and intent to hold to maturity. The held to maturity
investment portfolio is carried at amortized cost. Securities designated as
"available for sale" are those assets which we might not hold to maturity and
thus are carried at market value with unrealized gains or losses, net of tax
effect, recognized in equity.
Mortgage-backed securities typically represent an interest in a pool of
fixed-rate or adjustable-rate mortgage loans, the principal and interest
payments on which are passed from the mortgage borrowers to investors such as
us. Mortgage-backed security sponsors may be private companies or
quasi-governmental agencies such as the FHLMC, FNMA and GNMA, which guarantee
the payment of principal and interest to investors. Mortgage-backed
securities can represent a proportionate participation interest in a pool of
loans or, alternatively, an obligation to repay a specified amount secured by
a pool of loans (commonly referred to as a "collateralized mortgage
obligation," or "CMO"). Mortgage-backed securities generally increase the
quality of our assets by virtue of the credit enhancements that back them,
are more liquid than individual mortgage loans and may be used to
collateralize borrowings or other obligations. Our mortgage-backed securities
portfolio primarily consists of seasoned securities issued by one of the
quasi-governmental agencies.
57
<PAGE>
The actual maturity of a mortgage-backed security varies, depending on
when the mortgagors prepay or repay the underlying mortgages. Prepayments of
the underlying mortgages may shorten the life of the investment, thereby
adversely affecting its yield to maturity and the related market value of the
mortgage-backed security. The yield is based upon the interest income and the
amortization of the premium or accretion of the discount related to the
mortgage-backed security. Premiums and discounts on mortgage-backed
securities are amortized or accreted over the estimated term of the
securities using a level yield method. The prepayment assumptions used to
determine the amortization period for premiums and discounts can
significantly affect the yield of the mortgage-backed security, and these
assumptions are reviewed periodically to reflect the actual prepayment. The
actual prepayments of the underlying mortgages depend on many factors,
including the type of mortgage, the coupon rate, the age of the mortgages,
the geographical location of the underlying real estate collateralizing the
mortgages and general levels of market interest rates. The difference between
the interest rates on the underlying mortgages and the prevailing mortgage
interest rates is an important determinant in the rate of prepayments. During
periods of falling mortgage interest rates, prepayments generally increase,
and, conversely, during periods of rising mortgage interest rates,
prepayments generally decrease. If the coupon rate of the underlying mortgage
significantly exceeds the prevailing market interest rates offered for
mortgage loans, refinancing generally increases and accelerates the
prepayment of the underlying mortgages. Prepayment experience is more
difficult to estimate for adjustable-rate mortgage-backed securities.
All of our securities issued by municipalities or comparable governmental
authorities were rated "A" or higher by a nationally recognized credit rating
agency at the time of purchase. We regularly monitor the ratings of these
holdings by reference to nationally published rating media and by
communication with the issuer where necessary. As of June 30, 1997, none of
these securities had been downgraded from its original rating, and these
issues were primarily obligations of Tennessee municipalities. At June 30,
1997, these securities had a weighted average coupon of 5.6% and a weighted
average term to maturity of approximately 43 months. The carrying value of
these securities was $1.1 million, or 7.1% of our investment securities at
that date. None of our privately issued securities is insured or guaranteed
by FHLMC or FNMA.
58
<PAGE>
The following table sets forth information about carrying values of our
investment securities at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -------------------------------
1997 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Securities available for sale:
Mortgage-backed securities........................................... $ 7,757 $ 7,400 $ 7,696 $ 7,076
U.S. government and agency securities................................ 4,487 2,989 1,513 2,465
FHLMC preferred stock................................................ 981 774 585 354
FHLB stock........................................................... 529 511 477 414
Other................................................................ 15 15 15 15
Securities held to maturity:
Obligations of states and political subdivisions..................... 1,059 1,212 1,046 1,307
Mortgage-backed securities........................................... -- -- -- 3,557
--------- --------- --------- ---------
Total............................................................... $ 14,828 $ 12,901 $ 11,332 $ 15,188
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The following table sets forth information about scheduled maturities,
amortized cost, market values and average yields for our investment portfolio
at June 30, 1997. None of our investments had a scheduled maturity of one
year or less.
<TABLE>
<CAPTION>
ONE TO FIVE YEARS FIVE TO TEN YEARS MORE THAN TEN YEARS TOTAL INVESTMENT PORTFOLIO
------------------ ----------------- ------------------- --------------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING MARKET AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE VALUE YIELD
-------- ------- -------- ------- -------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Securities available for sale:
Mortgage-backed securities....... $4,589 6.2% $ 932 6.0% $2,236 5.0% $ 7,757 $ 7,757 5.8%
U.S. government and agency
securities...................... 3,495 6.1 992 6.5 -- -- 4,487 4,487 6.2
FHLMC preferred stock............ -- -- -- -- 981 20.4 981 981 20.4
FHLB stock....................... -- -- -- -- 529 7.0 529 529 7.0
Other............................ -- -- -- -- 15 -- 15 15 --
Securities held to maturity:
Obligations of states and
political subdivisions.......... 278 5.5 781 5.6 -- -- 1,059 1,079 5.6
------ ------ ------ ------- -------
Total........................... $8,362 $2,705 $3,761 $14,828 $14,848
------ ------ ------ ------- -------
------ ------ ------ ------- -------
</TABLE>
Deposit Activity and Other Sources of Funds
General. Deposits are the primary source of our funds for lending,
investment activities and general operational purposes. In addition to
deposits, we derive funds from loan principal and interest repayments,
maturities of investment securities and mortgage-backed securities and
interest
59
<PAGE>
payments thereon. Although loan repayments are a relatively stable source of
funds, 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,
or on a longer term basis for general operational purposes. We have access to
borrow advances from the Federal Home Loan Bank of Cincinnati, which we use
from time to time.
Deposits. We attract deposits principally from within our primary market
area by offering competitive rates on our deposit instruments, including
money market accounts, negotiable order of withdrawal ("NOW") accounts,
passbook savings accounts, individual retirement accounts ("IRAs"), and
certificates of deposit which range in maturity from 90 days to three years.
Deposit terms vary according to the minimum balance required, the length of
time the funds must remain on deposit and the interest rate. Maturities,
terms, service fees and withdrawal penalties for our deposit accounts are
established on a periodic basis. In determining the characteristics of our
deposit accounts, we consider the rates offered by competing institutions,
lending and liquidity requirements, growth goals and federal regulations. We
do not accept brokered deposits or pay negotiated rates for jumbo deposits.
We attempt to compete for deposits with other financial institutions in
our market area by offering competitively priced deposit instruments that are
tailored to the needs of our customers. Additionally, we seek to meet
customers' needs by providing convenient customer service to the community,
efficient staff and convenient hours of service. Substantially all of our
depositors are local residents who reside in our primary market area.
Our savings deposits at June 30, 1997 were represented by the various
types of savings programs listed below.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INTEREST MINIMUM MINIMUM PERCENTAGE OF
RATE TERM CATEGORY AMOUNT BALANCE TOTAL SAVINGS
- ----------- --------------------- ---------------------------------- ------------ -------------- -------------
<C> <S> <C> <C> <C> <C>
(IN THOUSANDS)
Demand deposits:
2.36 None NOW accounts $ -- $ 3,896 6.87%
3.24 None Money market 2,500 1,835 3.23
3.25 None Savings deposits-passbook -- 9,681 17.07
---------- -----
Total demand deposits 15,412 27.17
---------- -----
Certificates of Deposit
-----------------------
5.12 91 days Fixed-term, fixed-rate 2,500 5,082 8.96
5.23 6 months-Regular Fixed-term, fixed-rate 2,500 8,225 14.50
5.19 6 months-IRA Fixed-term, fixed-rate 100 543 0.96
5.33 12 months Fixed-term, fixed-rate 1,000 6,325 11.15
5.42 18 months-Regular Fixed-term, fixed-rate 1,000 2,552 4.50
5.39 18 months-IRA Fixed-term, fixed-rate 100 3,930 6.93
5.58 30 months Fixed-term, fixed-rate 1,000 857 1.51
5.60 Jumbos Fixed-term, fixed-rate 100,000 13,799 24.32
---------- -----
Total certificates of deposit 41,313 72.83
---------- -----
Total deposits $ 56,725 100.00%
---------- -----
---------- -----
</TABLE>
60
<PAGE>
The following tables set forth information about our average deposit
balances and rates during the periods presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------------- ----------------------------------------------------
1997 1996 1996 1995 1994x
---------------- ---------------- ---------------- ---------------- ----------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NOW accounts.................. $ 3,728 2.4% $ 2,933 2.5% $ 3,086 2.5% $ 2,884 2.5% $ 2,531 2.5%
Money market deposits......... 2,046 3.2 2,057 3.3 2,176 3.3 2,241 3.3 3,486 2.8
Savings deposits-- passbook... 9,611 3.3 9,802 3.3 9,776 3.3 10,579 3.3 16,852 2.8
Certificates of deposit....... 40,027 5.4 34,447 5.3 36,044 5.3 32,555 5.3 24,444 5.0
------- ------- ------- ------- -------
Total....................... $55,412 $49,239 $51,082 $48,259 $47,313
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
61
<PAGE>
The following table sets forth information about changes in dollar
amounts of our deposits in various types of accounts between the dates
indicated.
<TABLE>
<CAPTION>
INCREASE INCREASE
BALANCE AT (DECREASE) BALANCE AT (DECREASE)
JUNE 30, % OF FROM DEC. DECEMBER 31, % OF FROM DEC.
1997 DEPOSITS 31, 1996 1996 DEPOSITS 31, 1995
----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
NOW accounts....................................... $ 3,896 6.9% $ 508 $ 3,388 6.3% $ 576
Money market deposit............................... 1,835 3.2 (439) 2,274 4.2 240
Savings deposits--passbook......................... 9,681 17.1 (12) 9,693 18.0 (465)
Certificates of deposit............................ 27,514 48.5 1,093 26,421 49.2 1,971
Jumbo certificates................................. 13,799 24.3 1,808 11,991 22.3 3,491
----------- ----------- ----------- ------------ ----------- -----------
$ 56,725 100.00% $ 2,958 $ 53,767 100.00% $ 5,813
----------- ----------- ----------- ------------ ----------- -----------
----------- ----------- ----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
INCREASE
BALANCE AT (DECREASE) BALANCE AT
DECEMBER 31, % OF FROM DEC. DECEMBER 31, % OF
1995 DEPOSITS 31, 1994 1994 DEPOSITS
------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
NOW accounts........................................ $ 2,812 5.9% $ (37) $ 2,849 5.8%
Money market deposit................................ 2,034 4.2 (557) 2,591 5.3
Savings deposits--passbook.......................... 10,158 21.2 (1,645) 11,803 24.2
Certificates of deposit............................. 24,450 51.0 2,983 21,467 44.0
Jumbo certificates.................................. 8,500 17.7 (1,551) 10,051 20.7
------------ ----------- ----------- ------------ -----------
$ 47,954 100.00% $ (807) $ 48,761 100.00%
------------ ----------- ----------- ------------ -----------
------------ ----------- ----------- ------------ -----------
</TABLE>
62
<PAGE>
The following table sets forth information about our time deposits
classified by rates at the dates indicated.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -------------------------------
1997 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
2.00--3.99%........... $ -- $ -- $ 534 $ 5,158
4.00--5.99%........... 41,279 37,298 31,963 25,880
6.00--7.99%........... 34 1,114 453 480
--------- --------- --------- ---------
$ 41,313 $ 38,412 $ 32,950 $ 31,518
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The following table sets forth information about amounts and maturities
of our time deposits at June 30, 1997.
<TABLE>
<CAPTION>
AMOUNT DUE
--------------------------------------------------
LESS THAN AFTER
RATE ONE YEAR 1-2 YEARS 2-3 YEARS 3 YEARS TOTAL
- ---- --------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
4.00--5.99%......... $ 38,826 $ 2,225 $ 228 -- $41,279
6.00--7.99%......... 34 -- -- -- 34
--------- ------- ------- ------- -------
$ 38,860 $ 2,225 $ 228 $ -- $41,313
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
</TABLE>
The following table sets forth information about amounts of our
certificates of deposit of $100,000 or more by time remaining until maturity
at June 30, 1997.
<TABLE>
<CAPTION>
CERTIFICATES
MATURITY PERIOD OF DEPOSIT
- --------------- --------------
(IN THOUSANDS)
<S> <C>
Six months or less............................. $ 11,185
Over six through 12 months..................... 2,419
Over 12 months................................. 195
----------
Total........................................ $ 13,799
----------
----------
</TABLE>
The following table sets forth information about our savings activities
for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Deposits................................................... $ 29,437 $ 25,910 $ 53,859 $ 48,431 $ 53,706
Withdrawals................................................ 27,782 23,352 50,446 51,455 53,911
--------- --------- --------- --------- ---------
Net increase (decrease) before interest credited........... 1,655 2,558 3,413 (3,024) (205)
Interest credited.......................................... 1,303 1,135 2,400 2,218 1,655
--------- --------- --------- --------- ---------
Net increase (decrease) in savings deposits............... $ 2,958 $ 3,693 $ 5,813 $ (806) $ 1,450
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
63
<PAGE>
In the unlikely event we are liquidated after the Conversion, depositors
will be entitled to full payment of their deposit accounts prior to any
payment being made to our holding company.
Borrowings. Savings deposits historically have been the primary source
of funds for our lending, investments and general operating activities. We
are authorized, however, to use advances from the Federal Home Loan Bank of
Cincinnati to supplement our supply of lendable funds and to meet deposit
withdrawal requirements. The Federal Home Loan Bank functions as a central
reserve bank providing credit for savings institutions and certain other
member financial institutions. As a member of the Federal Home Loan Bank
System, we are required to own stock in the Federal Home Loan Bank and are
authorized to apply for advances. Advances are pursuant to several different
programs, each of which has its own interest rate and range of maturities.
Advances from the Federal Home Loan Bank of Cincinnati are secured by our
stock in the Federal Home Loan Bank and first mortgage loans. We have not
obtained any advances or other borrowings in recent years.
SUBSIDIARY ACTIVITIES
As a federally chartered savings institution, we are permitted to invest
an amount equal to 2% of our assets in non-savings institution service
corporation subsidiaries, with an additional investment of 1% of assets where
such investment serves primarily community, inner-city and community
development purposes. Under such limitations, as of June 30, 1997 we were
authorized to invest up to approximately $1.9 million in the stock of or
loans to such subsidiaries, including the additional 1% investment for
community inner-city and community development purposes. Institutions meeting
their applicable minimum regulatory capital requirements may invest up to 50%
of their regulatory capital in conforming first mortgage loans to such
subsidiaries in which they own 10% or more of the capital stock. We have one
subsidiary service corporation, NFS Service Corporation, the only asset of
which is stock of our data processing service provider. At June 30, 1997, our
aggregate investment in the subsidiary service corporation totalled $15,000.
64
<PAGE>
Offices
The following table sets forth information about our offices at June 30,
1997.
<TABLE>
<CAPTION>
YEAR OWNED OR APPROXIMATE
OPENED LEASED BOOK VALUE SQUARE FOOTAGE DEPOSITS
----------- ----------- ----------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Main Office: 344 W. Broadway Newport,
Tennessee..................................... 1973 Owned $ 84,152 8,000 $ 37,819
Branch Office: 263 E. Broadway Newport,
Tennessee..................................... 1960 Owned $ 796 5,400 $ 18,906
</TABLE>
The book value of our aggregate investment in properties, premises and
equipment totalled approximately $212,753 at June 30, 1997. See Note 4 of the
Notes to Consolidated Financial Statements.
EMPLOYEES
As of June 30, 1997, we had 18 full-time employees and one part-time
employee, none of whom was represented by a collective bargaining agreement.
We consider our relationships with our employees to be good.
LEGAL PROCEEDINGS
From time to time, we are a party to various legal proceedings incident
to our business. At June 30, 1997, there were no legal proceedings to which
we were a party, or to which any of our property was subject, which we
expected to result in a material loss, and there were no pending regulatory
proceedings to which we were a party, or to which any of our properties was
subject, which we expected to result in a material loss.
REGULATION
Set forth below is a brief description of certain laws which relate to
us. The description is not complete and is qualified in its entirety by
references to applicable laws and regulations.
GENERAL
As a federally chartered and insured savings institution, we are subject
to extensive regulation by the OTS and the FDIC. Our lending activities and
other investments must comply with various federal and state statutory and
regulatory requirements, and the OTS periodically examines us for compliance
with various regulatory requirements. The FDIC also has authority to conduct
periodic examinations of us. We must file reports with the OTS describing our
activities and our
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financial condition and we must obtain approvals from regulatory authorities
before entering into certain transactions such as the Conversion or mergers
with other financial institutions. We are also subject to certain reserve
requirements promulgated by the Federal Reserve Board. Our relationship with
our depositors and borrowers is also regulated to a great extent by federal
and state law, especially in such matters as the ownership of savings
accounts and the form and content of our mortgage documents. This supervision
and regulation is primarily intended to protect depositors. The regulatory
structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of loan loss reserves for regulatory purposes. Any change
in regulations, whether by the OTS, the FDIC or any other government agency,
could have a material adverse impact on our operations.
REGULATION OF THE BANK
Insurance of Deposit Accounts. The FDIC maintains two separate funds for
the insurance of deposits up to prescribed statutory limits. The Bank
Insurance Fund ("BIF") insures the deposits of commercial banks and the
Savings Association Insurance Fund ("SAIF") insures the deposits of savings
institutions such as us. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and the SAIF.
The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such assessment rates if such
target level has been met. The FDIC has established a risk-based assessment
system for both SAIF and BIF members. Under this system, assessments are set
within a range, based on the risk the institution poses to its deposit
insurance fund. This risk level is determined based on the institution's
capital level and the FDIC's level of supervisory concern about the
institution.
Because a significant portion of the assessments historically paid into
the SAIF by savings institutions were used to pay the cost of prior savings
institution failures, the reserves of the SAIF were below the level required
by law. The BIF, however, met its required reserve level. As a result,
deposit insurance premiums for deposits insured by the BIF were substantially
less than premiums for deposits such as ours which are insured by the SAIF.
In 1996, Congress enacted legislation to recapitalize the SAIF and to
eliminate the significant premium disparity between the BIF and the SAIF.
Under this law, institutions with deposits insured by the SAIF were required
to pay a special assessment equal to $0.657 per $100 of SAIF-assessable
deposits held at March 31, 1995. We recognized an expense of $317,000 for
this special assessment during fiscal 1996.
Beginning January 1, 1997, our annual deposit insurance premium was
reduced from 0.23% to 0.0644% of total assessable deposits. BIF institutions
still pay lower assessments than comparable SAIF institutions, because BIF
institutions pay only 20% of the rate paid by SAIF institutions on their
deposits with respect to obligations issued by a federally chartered
corporation which provided some of the financing required to resolve the
thrift crisis in the 1980s.
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The recapitalization legislation also provides for the merger of the SAIF
and BIF effective January 1, 1999, assuming there are no savings institutions
under federal law. Under separate proposed legislation, Congress is
considering the elimination of the federal thrift charter and the separate
federal regulation of thrifts. As a result, we might have to convert to a
different financial institution charter and be regulated under federal law as
a national bank or under Tennessee law as a state chartered commercial bank,
including being subject to the more restrictive activity limitations imposed
on national banks. We cannot predict the impact of our conversion to, or
regulation as, a bank until legislation requiring such change is enacted.
Regulatory Capital Requirements. OTS capital regulations require savings
institutions, such as us, to meet three capital standards: (1) tangible
capital equal to at least 1.5 % of total adjusted assets, (2) core capital
equal to at least 3.0 % of total adjusted assets, and (3) total regulatory
capital equal to at least 8.0 % of total risk-weighted assets. In addition,
the OTS may require that a savings institution that has a risk-based capital
ratio less than 8.0%, a ratio of Tier 1 capital to risk-weighted assets of
less than 4.0% or a ratio of Tier 1 capital to adjusted total assets of less
than 4.0% (3.0% if the institution has received the highest rating on its
most recent examination) take certain actions to increase its capital ratios.
If the institution's capital is significantly below the minimum required
levels or if it is unsuccessful in increasing its capital ratios, the OTS may
significantly restrict its activities.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders'
equity (including retained earnings), non-cumulative perpetual preferred
stock and minority interests in the equity accounts of consolidated
subsidiaries, certain non-withdrawable accounts and pledged deposits of
mutual savings institutions and qualifying supervisory goodwill, less
non-qualifying intangible assets, certain mortgage servicing rights and
certain investments. Tier 1 has the same definition as core capital.
Total regulatory capital equals the sum of core capital plus
supplementary capital. The components of supplementary capital include, among
other items, cumulative perpetual preferred stock, perpetual subordinated
debt, mandatory convertible subordinated debt, intermediate-term preferred
stock, and the portion of the allowance for loan losses not designated for
specific loan losses. Overall, supplementary capital is limited to 100% of
core capital. We must calculate our risk-weighted assets by multiplying each
asset and off-balance sheet item by various risk factors as determined by the
OTS, which range from 0% for cash to 100% for delinquent loans, property
acquired through foreclosure, commercial loans, and other assets.
At June 30, 1997, we substantially exceeded all regulatory capital
requirements. For additional information about our consolidated regulatory
capital compliance at June 30, 1997, see "SELECTED CONSOLIDATED FINANCIAL
INFORMATION AND OTHER DATA."
Dividend and Other Capital Distribution Limitations. OTS regulations
require us to give the OTS 30 days advance notice of any proposed declaration
of dividends to our holding company.
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The OTS may prohibit the payment of dividends by us to our holding company.
In addition, we may not declare or pay a cash dividend on our capital stock
if the effect would be to reduce our regulatory capital below the amount
required for the liquidation account to be established at the time of the
Conversion. See "THE CONVERSION -- Liquidation Account."
OTS regulations limit capital distributions by savings institutions, such
as cash dividends, payments to repurchase or otherwise acquire its shares,
payments to stockholders of another institution in a cash-out merger, and
other distributions charged against capital. The rule establishes three tiers
of institutions based primarily on an institution's capital level. An
institution that exceeds all of its fully phased-in capital requirements
before and after a proposed capital distribution ("Tier 1 institution") and
has not been advised by the OTS that it is in need of more than the normal
supervision can, after prior notice and nonobjection but without the approval
of the OTS, make capital distributions during a calendar year equal to the
greater of (i) 100% of its net income to date during the calendar year plus
the amount that would reduce by one-half its "surplus capital ratio" (the
excess capital over its fully phased-in capital requirements) at the
beginning of the calendar year, or (ii) 75% of its net income over the most
recent four quarter period. Any additional capital distributions require
prior regulatory approval. As of June 30, 1997, we qualified as a Tier 1
institution.
We are prohibited from making a capital distribution if, after making the
distribution, we would be undercapitalized (that is, not meet any one of our
minimum regulatory capital requirements). Further, we cannot distribute
regulatory capital that is needed to maintain our liquidation account.
Qualified Thrift Lender Test. Savings institutions must meet a Qualified
Thrift Lender test. We must maintain at least 65% of our portfolio assets
(total assets less intangible assets, property we use in conducting our
business and liquid assets in an amount not exceeding 20% of total assets) in
Qualified Thrift Investments to satisfy the test. Qualified Thrift
Investments consist primarily of residential mortgage loans and
mortgage-backed and other securities related to domestic, residential real
estate or manufactured housing. The shares of stock we own in the Federal
Home Loan Bank of Cincinnati also qualify as Qualified Thrift Investments.
Subject to an aggregate limit of 20% of portfolio assets, we may also count
the following as Qualified Thrift Investments: (i) 50% of the dollar amount
of residential mortgage loans originated for sale, (ii) investments in the
capital stock or obligations of any service corporation or operating
subsidiary as long as such subsidiary derives at least 80% of its revenues
from domestic housing related activities, (iii) 200% of the dollar amount of
loans and investments to purchase, construct or develop "starter homes,"
subject to certain other restrictions, (iv) 200% of the dollar amount of
loans for the purchase, construction or development of domestic residential
housing or community centers in "credit needy" areas or loans for small
businesses located in such areas, (v) loans for the purchase, construction or
development of community centers, (vi) loans for personal, family, household
or educational purposes, subject to a maximum of 10% of portfolio assets, and
(vii) shares of FHLMC or FNMA stock.
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If we satisfy the test, we will continue to enjoy full borrowing
privileges from the Federal Home Loan Bank of Cincinnati. If we do not
satisfy the test we may lose our borrowing restrictions and be subject to
activities and branching restrictions applicable to national banks.
Compliance with the Qualified Thrift Lender test is determined on a monthly
basis in nine out of every 12 months. As of June 30, 1997, we were in
compliance with our Qualified Thrift Lender requirement with approximately
95% of our assets invested in Qualified Thrift Investments.
Transactions With Affiliates. Generally, transactions between our
affiliates and us are subject to certain limitations. Such transactions must
be on terms as favorable to us as comparable transactions with
non-affiliates. In addition, certain of these transactions are restricted to
an aggregate percentage of our capital. Collateral in specified amounts must
usually be provided by affiliates in order to receive loans from us. Our
affiliates include our holding company and any company which would be under
common control with us. In addition, we may not extend credit to any
affiliate engaged in activities not permissible for a bank holding company or
acquire the securities of any affiliate that is not a subsidiary. The OTS has
the discretion to treat subsidiaries of savings institution as affiliates on
a case-by-case basis.
Loans to Directors, Executive Officers and Principal Stockholders. We
cannot make loans in excess of certain levels to our directors, executive
officers or, after the Conversion, 10% or greater stockholders (or any of
their affiliates) unless the loan is approved in advance by a majority of our
Board of Directors with any "interested" director not voting. We are also
prohibited from paying overdrafts of our directors or executive officers. We
are also subject to certain other restrictions on the amount and type of
loans to executive officers and directors and must annually report such loans
to our regulators.
Limits on Loans to One Borrower. We generally are subject to the lending
limits applicable to national banks. With certain limited exceptions, our
loans and extensions of credit outstanding to a person at one time may not
exceed 15% of our unimpaired capital and surplus. We may lend an additional
amount, equal to 10% of unimpaired capital and surplus, if such loan is fully
secured by readily marketable collateral. We are additionally authorized to
make loans to one borrower, for any purpose, in an amount not to exceed
$500,000 or, by order of the Director of the OTS, in an amount not to exceed
the lesser of $30,000,000 or 30% of unimpaired capital and surplus to develop
residential housing, provided: (i) the purchase price of each single-family
dwelling in the development does not exceed $500,000; (ii) the institution is
in compliance with its fully phased-in capital requirements; (iii) the loans
comply with applicable loan-to-value requirements, and; (iv) the aggregate
amount of loans made under this authority does not exceed 150% of unimpaired
capital and surplus. We are also authorized to make loans to one borrower to
finance the sale of real property acquired in satisfaction of debts in an
amount up to 50% of unimpaired capital and surplus. Certain types of loans
are excepted from the lending limits.
At June 30, 1997, the maximum amount that we could have lent to any one
borrower under the 15% limit was approximately $1.0 million. At such date,
the largest aggregate amount of loans that we had outstanding to any one
borrower or group of affiliated borrowers was $499,000.
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Liquidity Requirements. All savings institutions are required to
maintain an average daily balance of liquid assets equal to a certain
percentage of the sum of its average daily balance of net withdrawable
deposit accounts and, if any, borrowings payable in one year or less. The
liquidity requirement may vary from time to time (between 4% and 10%)
depending upon economic conditions and savings flows of all savings
institutions. At June 30, 1997, our required liquid asset ratio was 5.0% and
our actual ratio was 9.6%. Monetary penalties may be imposed upon
institutions for violations of liquidity requirements.
Federal Home Loan Bank System. We are a member of the Federal Home Loan
Bank of Cincinnati, which is one of 12 regional Federal Home Loan Banks. Each
Federal Home Loan Bank serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from funds deposited by
savings institutions and proceeds derived from the sale of consolidated
obligations of the Federal Home Loan Bank System. It makes loans to members
(that is, advances) in accordance with policies and procedures established by
the board of directors of the Federal Home Loan Bank.
As a member, we are required to purchase and maintain stock in the
Federal Home Loan Bank of Cincinnati in an amount equal to at least 1% of our
aggregate unpaid residential mortgage loans, home purchase contracts or
similar obligations at the beginning of each year, or 1/20 of our advances
from the Federal Home Loan Bank of Cincinnati, whichever is greater. At June
30, 1997, we had $529,000 in Federal Home Loan Bank stock, at cost, which was
in compliance with this requirement. The Federal Home Loan Bank imposes
various limitations on advances such as limiting the amount of certain types
of real estate related collateral to a percentage of a member's capital and
limiting total advances to a member. At June 30, 1997, we had no advances
outstanding.
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain noninterest-bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super
NOW checking accounts) and non-personal time deposits. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve
Board may be used to satisfy the liquidity requirements that are imposed by
the OTS. At June 30, 1997, our reserve met the minimum level required by the
Federal Reserve System.
REGULATION OF THE COMPANY
General. Our holding company will be required to register and file
reports with the OTS and will be subject to regulation and examination by the
OTS. In addition, the OTS will have enforcement authority over our holding
company and any non-savings institution subsidiaries. This will permit the
OTS to restrict or prohibit activities that it determines to be a serious
risk to us. This regulation is intended primarily for the protection of our
depositors and deposit insurance fund and not for the benefit of stockholders
of our holding company.
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Our holding company will also be required to file certain reports with,
and comply with the rules and regulations of, the SEC under the federal
securities laws.
Activities Restrictions. Since our holding company will own only one
savings institution, it will be able to diversify its operations into
activities not related to banking, but only so long as we satisfy the
Qualified Thrift Lender test. If our holding company controls more than one
savings institution, it would lose the ability to diversify its operations
into non-banking related activities, unless such other savings institutions
each also qualify as a Qualified Thrift Lender and were acquired in a
supervised acquisition. See "REGULATION OF THE ASSOCIATION -- Qualified Thrift
Lender Test."
Restrictions on Acquisitions. Our holding company must obtain approval
from the OTS before acquiring control of any other savings institution or
savings and loan holding company, substantially all the assets thereof or in
excess of 5% of the outstanding shares of another savings institution or
savings and loan holding company. Our holding company's directors and
officers or persons owning or controlling more than 25% of our holding
company's stock, must also obtain approval of the OTS before acquiring
control of any savings institution or savings and loan holding company.
The OTS may approve acquisitions that will result in the formation of a
multiple savings and loan holding company which controls savings institutions
in more than one state only if: (i) the multiple savings and loan holding
company involved controls a savings institution which operated a home or
branch office in the state of the institution to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act; or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by state-chartered institutions or savings and loan holding
companies located in the state where the acquiring entity is located (or by a
holding company that controls such state-chartered savings institutions).
Federal Securities Law. Our holding company has filed with the SEC a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), for the registration of the Common Stock. Upon completion
of the Conversion, the Common Stock will be registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, under
OTS regulations, generally may not be deregistered for at least three years
thereafter. Our holding company will be subject to the information, proxy
solicitation, insider trading restrictions and other requirements of the
Exchange Act.
The registration under the Securities Act of the Common Stock does not
cover the resale of such shares. Shares of the Common Stock purchased by
persons who are not affiliates of the Company generally may be resold without
registration. Shares purchased by an affiliate of the Company will be subject
to certain resale restrictions. As long as our holding company meets the
current public information requirements, each affiliate of our holding
company who complies with
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the other conditions would be able to sell a limited number of shares based
upon the number of shares outstanding and the average trading volume for the
Common Stock.
TAXATION
FEDERAL TAXATION
We are subject to the provisions of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), in the same general manner as other
corporations. However, prior to August 1996, savings institutions such as us,
which met certain definitional tests and other conditions prescribed by the
Internal Revenue Code could benefit from certain favorable provisions
regarding their deductions from taxable income for annual additions to their
bad debt reserve. The amount of the bad debt deduction that a qualifying
savings institution could claim for tax purposes with respect to additions to
its reserve for bad debts for "qualifying real property loans" could be based
upon our actual loss experience (the "experience method" or as a percentage
of our taxable income (the "percentage of taxable income method").
Historically, we used the method that would allow us to take the largest
deduction.
In August 1996, the Internal Revenue Code was revised to equalize the
taxation of savings institutions and banks. Savings institutions, such as us,
no longer have a choice between the percentage of taxable income method and
the experience method in determining additions to bad debt reserves. Thrifts
with $500 million of assets or less may still use the experience method,
which is generally available to small banks currently. Larger thrifts may
only take a tax deduction when a loan is actually charged off. Any reserve
amounts added after 1987 will be taxed over a six year period beginning in
1996; however, bad debt reserves set aside through 1987 are generally not
taxed. A savings institution may delay recapturing into income its post-1987
bad debt reserves for an additional two years if it meets a
residential-lending test. This law is not expected to have a material impact
on us. At June 30, 1997, we had $340,000 of post-1987 bad debt reserves.
Earnings appropriated to our bad debt reserve and claimed as a tax
deduction including our supplemental reserves for losses will not be
available for the payment of cash dividends or for distribution (including
distributions made on dissolution or liquidation), unless we include the
amount in income, along with the amount deemed necessary to pay the resulting
federal income tax. If such amount is used for any purpose other than bad
debt losses, including a dividend distribution or a distribution in
liquidation, it will be subject to federal income tax at the then current
rate.
The Internal Revenue Code imposes a tax ("AMT") on alternative minimum
taxable income ("AMTI") at a rate of 20 %. AMTI is increased by certain
preference items, including the excess of the tax bad debt reserve deduction
using the percentage of taxable income method over the deduction that would
have been allowable under the experience method. Only 90% of AMTI can be
offset by net operating loss carryovers of which we currently have none. 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, our AMTI is increased by an amount
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equal to 75% of the amount by which our adjusted current earnings exceeds our
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 million is imposed
on corporations, including us, whether or not an AMT is paid. Under pending
legislation, the AMT rate would be reduced to zero for taxable years
beginning after December 31, 1994, but this rate reduction would be suspended
for taxable years beginning in 1995 and 1996 and the suspended amounts would
be refunded as tax credits in subsequent years.
Our holding company may exclude from its income 100% of dividends
received from us as a member of the same affiliated group of corporations. A
70% dividends received deduction generally applies with respect to dividends
received from corporations that are not members of such affiliated group,
except that an 80% dividends received deduction applies if our holding
company owns more than 20% of the stock of a corporation paying a dividend.
The above exclusion amounts, with the exception of the affiliated group
figure, were reduced in years in which we used the percentage of taxable
income bad debt deduction method.
Our federal income tax returns have not been audited by the Internal
Revenue Service since 1992.
STATE TAXATION
In addition to our federal income tax liability, the State of Tennessee
imposes an excise tax on savings institutions and other corporations at the
rate of 6% of net taxable income, which is computed based on federal taxable
income subject to certain adjustments. The State of Tennessee also imposes
franchise and privilege taxes on savings institutions and other corporations
which, in our case, have not constituted significant expense items.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors also serve as the directors of our holding company. Both
Boards of Directors are divided into three classes, with directors serving
for three-year terms, and approximately one-third of the directors being
elected at each annual meeting of stockholders. Certain of our officers also
serve as officers of our holding company. Because we are a mutual savings
institution, our members have elected our Board of Directors. Upon completion
of the Conversion, exclusive voting rights over us will be vested in our
holding company, whose Board of Directors will be elected by its
stockholders. All officers are elected annually.
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The following table sets forth information about our directors and
executive officers.
<TABLE>
<CAPTION>
AGE DIRECTOR SINCE TERM TO EXPIRE
--- --------------- -----------------
<S> <C> <C> <C>
Directors:
- ----------
Clyde E. Driskill, Jr....................................................... 66 1980 1998
Richard G. Harwood.......................................................... 51 1989 1999
President and Chief Executive Officer
William B. Henry............................................................ 67 1978 2000
J. William Myers............................................................ 56 1975 2000
Chairman of the Board
Robert L. Overholt.......................................................... 54 1983 1998
Robert D. Self.............................................................. 67 1978 1999
Other Executive Officers:
- -------------------------
Nancy L. Bryant............................................................. 53 -- --
Vice President and Treasurer
Peggy Holston............................................................... 48 -- --
Branch Manger and Assistant Secretary
</TABLE>
The principal occupation of our directors and executive officers is set
forth below.
Clyde E. Driskill, Jr. has been the owner and president of Driskill's
Furniture, Inc., a furniture and appliance retail establishment located in
Newport, Tennessee, since 1960. Mr. Driskill has served as the Chairman of
the Newport Regional Planning Commission and of the Newport/Cocke County
Industrial Development Commission.
Richard G. Harwood serves as President and Chief Executive Officer of us
and our holding company. Mr. Harwood joined us as Senior Vice President in
1984. He has acted as the Vice Chairman of the Economic Development
Commission, a director for the United Way of Cocke County and Treasurer for
the Newport Lions Club.
William B. Henry has been an optometrist in Newport, Tennessee since
1961. He is presently serving as the secretary of the Newport Utilities Board
and is a member of the Newport/Cocke County Economic Development Commission.
J. William Myers is a lawyer. He has practiced law in Newport, Tennessee
since 1966. Mr. Myers serves as Chairman of the Board. He is active with
Habitat for Humanity.
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Robert L. Overholt has been the owner/manager of Home Supply of Newport,
Tennessee, Inc., a building supply establishment, since 1966. Mr. Overholt is
active with the Shriners and Habitat for Humanity.
Robert D. Self has been the owner Bob Self Auto Parts, an auto parts
supplier located in Newport, Tennessee, since 1969. Mr. Self is active with
the Newport Lions Club and serves on the board of directors of the Stokley
Memorial Library.
Nancy L. Bryant serves as Vice President and Treasurer of us and our
holding company. Ms. Bryant joined us in 1966. She is a member of the Newport
Business Women's Club, serves as a Director and Treasurer of Habitat for
Humanity and received the 1993 Citizen of the Year Award from the Newport
Chamber of Commerce.
Peggy Holston has been employed with us since 1971 and serves as our
Assistant Secretary and Branch Manager. She has served on the Board of
Directors of the Newport/Cocke County Chamber of Commerce and is a member of
the Newport Business Women's Club.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors holds regular meetings on a monthly basis and
special meetings as needed. During the year ended December 31, 1996, the
Board met 13 times. No current director attended fewer than 75% of his Board
and committee meetings during the year ended December 31, 1996.
Our Executive Committee, which consists of Chairman Myers and Directors
Harwood and Henry, acts as a compensation committee, and in that capacity
reviews the performance of our officers. The Executive Committee met once in
this capacity for fiscal 1996.
Our full Board of Directors acts as an audit committee and met once in
this capacity to examine and approve the independent audit report for fiscal
1996.
Our Board of Directors does not have a standing nominating committee for
selecting the management nominees for election as directors. Under our
holding company's Bylaws, the full Board of Directors acts as the nominating
committee. Our Board of Directors met once to select nominees for election at
our 1997 annual member meeting.
DIRECTOR COMPENSATION
Our directors currently receive fees of $6,000 per year, plus $200 per
regular Board meeting attended and $50 per committee meeting attended, plus
the amount of any credit to their account under a long-term incentive plan
implemented in fiscal 1997 and described below. In addition, the Chairman
receives a salary of $6,180 per year. For fiscal 1996, directors' fees
totalled $51,500. Our directors do not receive additional compensation for
service as directors of the Company.
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Long-Term Incentive Plan. We adopted the Newport Federal Savings and Loan
Association Long-Term Incentive Plan, effective June 19, 1997. On the
effective date, we established a bookkeeping account in the name of each
director, and credited each account with an amount equal to the product of
(i) $1,291, and (ii) the director's full years of service as a director, up
to 20 years. On each December 31 (excluding December 31, 1997), each
participant who is then a director and has 20 or fewer years of service shall
have his account credited with an amount equal to the product of $1,291 and
the safe performance factor, which is determined based on our actual
performance as compared to budgeted goals for return on average equity,
non-performing assets and composite regulatory rating. The safe performance
factor may not exceed 1.2. All amounts credited to participants' accounts are
fully vested at all times. Until distributed in accordance with the terms of
the plan, each participant's account will be credited with a rate of return
equal to our highest rate of interest paid on certificates of deposit having
a term of one year. Following the Conversion, each participant may
prospectively elect to have the dividend-adjusted rate of return on the
Common Stock measure future appreciation. Beginning with the fiscal year
following a participant's termination of service, the participant's account
will receive an investment return measured by the participant's election
between up to two different mutual funds (or other investments) selected by
the Board.
Each participant may elect to receive plan benefits in a lump sum or over
a period shorter than ten years, and in the absence of an election will
receive payments in five substantially equal installments. In the event of a
participant's death, the balance of his plan account will be paid in a lump
sum (unless the participant elects a distribution period up to ten years) to
his designated beneficiary, or if none, his estate.
Any compensation accrued under the plan will be paid from our general
assets. We have established a trust in order to hold assets with which to pay
compensation. Trust assets would be subject to claims of our general
creditors. In the event a participant prevails over us in a legal dispute as
to the terms or interpretation of the plan, he would be reimbursed for his
legal and other expenses. Upon the implementation of the plan, we recognized
compensation expense totaling $151,000 to provide for participants' initial
account balances.
Deferred Compensation Plan. We have established a Deferred Compensation
Plan for our directors and select executive officers. Before each calendar
year begins, each non-employee director may elect to defer receipt of all or
part of his fees for the year, and any other participant may elect to defer
receipt of up to 25% of his compensation for the year. Deferred amounts are
credited at the end of the calendar year to a bookkeeping account in the
participant's name along with the investment return which would have resulted
if such deferred amounts had been invested, based upon the participant's
choice, between the dividend-adjusted rate of return on the Common Stock and
our highest annual rate of interest on certificates of deposit having a
one-year term. Each participant may make an election to receive distributions
either in a lump sum or in annual installments over a period up to ten years.
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We expect (but are under no legal obligation) to make quarterly
contributions to a grantor trust in an amount equal to the accrued expense
associated with the Deferred Compensation Plan. In the event of a change in
control (as defined in the Employment Agreements, see below), we will contribute
to the trust an amount sufficient to provide the trust with assets having an
overall value equal to the aggregate account balances under the plan. The
trust's assets would remain subject to the claims of our general creditors and
be available for eventual payments to participants.
EXECUTIVE COMPENSATION
The following table sets forth compensation for the fiscal year ended
December 31, 1996 awarded to or earned by our Chief Executive Officer for
services rendered in all capacities.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND FISCAL -------------------------------
PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1)
- -------------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
Richard G. Harwood,
President and Chief 1996 $ 67,723 $ 1,303 $ 12,403
Executive Officer
</TABLE>
- ------------------------
(1) Consists of director fees ($6,500) and matching contribution to defined
contribution retirement plan ($5,903); excludes appraisal fees for services
to borrowers; excludes indirect compensation in the form of certain
perquisites and other personal benefits which did not exceed 10% of salary
and bonus.
CERTAIN COMPENSATION AGREEMENTS AND PLANS
Our Board of Directors and that of our holding company have approved the
following employment agreements and stock-based compensation plans.
Basis for Awards of Benefits and Compensation. The Boards of Directors have
evaluated and approved the terms of the employment agreements and other
compensation plans described below. In their review of the terms of the
employment agreements and the compensation of the executive officers, the Boards
of Directors considered a number of factors, including the experience, tenure
and ability of the executive officers, their performance for us during their
tenure and various legal and regulatory requirements about types and amounts of
compensation that may be paid to employees of savings institutions.
Employment Agreements. We intend to enter into employment agreements (the
"Employment Agreements") with Richard Harwood, Nancy Bryant and Peggy Holston
(the "Employees") under which they will continue to serve as President, as Vice
President and Treasurer and as Branch Manager and Assistant Secretary,
respectively, of us and as President, as Vice President and Treasurer and as
Secretary, respectively, of our holding company. In such capacities, the
Employees collectively are responsible for overseeing all of our operations and
for implementing the policies adopted by the Boards of Directors. The Boards
believe that the Employment
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Agreements assure fair treatment of the Employees in their careers with us by
assuring them of some financial security.
The Employment Agreements will become effective upon their execution and
will provide for a term of three years for Mr. Harwood and 18 months for
Mses. Bryant and Holston, with an annual base salary equal to each Employee's
existing base salary rate in effect on the effective date. On each
anniversary date of the commencement of the Employment Agreements, the term
of each Employee's employment may be extended for an additional one-year
period beyond the then effective expiration date, upon a determination by the
Boards of Directors that the performance of the Employee has met the required
performance standards and that such Employment Agreement should be extended.
The Employment Agreements provide each Employee with a salary review by the
Boards of Directors not less often than annually, as well as with inclusion
in any discretionary bonus plans, retirement and medical plans, customary
fringe benefits, vacation and sick leave. An Employment Agreement shall
terminate upon the Employee's death, may terminate upon the Employee's
disability and is terminable by us for "just cause" (as defined in the
Employment Agreements). In the event of termination for just cause, no
severance payments are available. If we terminate an Employee without just
cause, the Employee will be entitled to a continuation of his or her
compensation from the date of termination through the remaining term of the
Employment Agreement plus an additional 12 month's salary. In addition, Mr.
Harwood is entitled, at his election, to either continued participation in
compensation plans which he would have been eligible to participate in
through his Employment Agreement's expiration date or the cash equivalent
thereof. If Mr. Harwood's employment is terminated for any reason other than
just cause, he shall be entitled to purchase from us, at his own expense
which shall not exceed applicable statutory rates, family medical insurance
under any group health plan that we maintain for our employees. This right
shall be (i) in addition to, and not in lieu of, any other rights that Mr.
Harwood has under his agreement, and (ii) shall continue until he first
becomes eligible for participation in Medicare. If the Employment Agreements
are terminated due to an Employee's "disability" (as defined in the
Employment Agreements), the Employee will be entitled to a continuation of
his or her compensation through the date of such termination, including any
period prior to the establishment of the Employee's disability. In the event
of an Employee's death during the term of the Employment Agreement, the
Employee's estate will be entitled to receive his or her salary through the
last day of the calendar month in which the Employee's death occurred. An
Employee is able to voluntarily terminate his or her Employment Agreement by
providing 90 days' written notice to us, in which case the Employee is
entitled to receive only his or her compensation, vested rights and benefits
up to the date of termination.
In the event of (i) an Employee's involuntary termination of employment
other than for "just cause" during the period beginning six months before a
change in control and ending on the later of the first anniversary of the
change in control or the expiration date of the Employment Agreement (the
"Protected Period"), (ii) an Employee's voluntary termination within 90 days
of the occurrence of certain specified events occurring during the Protected
Period which have not been consented to by the Employee, or (iii) an
Employee's voluntary termination of employment for any reason within the
30-day period beginning on the date of the change in control, the Employee
will be paid within
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10 days of such termination (or the date of the change in control, whichever
is later) as follows: (a) Mr. Harwood will receive an amount equal to the
difference between (i) 2.99 times his "base amount," as defined in Section
280G(b)(3) of the Internal Revenue Code and (ii) the sum of any other
parachute payments, as defined under Section 280G(b)(2) of the Internal
Revenue Code, that he receives on account of the change in control; and (b)
Mses. Bryant and Holston will each be entitled to a severance payment equal
to 1.5 times her base salary then in effect, subject to the limitation on
parachute payments set forth in Section 280G of the Internal Revenue Code.
"Change in Control" means any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25% of the
voting stock of us or our holding company, (ii) the acquisition of the
ability to control the election of a majority of our directors, (iii) the
acquisition of a controlling influence over our management or policies by any
person or by persons acting as a "group" (within the meaning of Section 13(d)
of the Exchange Act) or, (iv) during any period of two consecutive years,
individuals (the "Continuing Directors") who at the beginning of such period
constitute our Board of Directors (the "Existing Board") cease for any reason
to constitute at least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing Board was
approved by a vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. Notwithstanding the
foregoing, our holding company's ownership of us shall not of itself
constitute a Change in Control for purposes of the agreements. For purposes
of this paragraph only, the term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity
not specifically listed herein. The Employment Agreements provide that within
10 business days of a change in control, we shall fund, or cause to be
funded, a trust in the amount of 2.99 times Mr. Harwood's base amount and 1.5
times Mses. Bryant's and Holston's base amounts. The payments that would be
made to Mr. Harwood and Mses. Bryant and Holston, assuming their termination
of employment under the foregoing circumstances at June 30, 1997, would have
been approximately $207,000, $56,000 and $50,000, respectively. These
provisions may have an anti-takeover effect by making it more expensive for a
potential acquirer to obtain control of us. For more information, see
"CERTAIN ANTI-TAKEOVER PROVISIONS -- Restrictions on Acquisition of
Securities." In the event that an Employee prevails over us, or obtains a
written settlement in a legal dispute as to the Employment Agreement, he or
she will be reimbursed for his or her legal and other expenses.
Employee Stock Ownership Plan. In connection with the Conversion, our
holding company's Board of Directors adopted our Employee Stock Ownership Plan
(the ESOP), effective July 1, 1997. Employees who have attained age 21 and
completed one year of service are eligible to participate in the ESOP.
The ESOP will be funded by contributions made by us or our holding
company in cash or shares of Common Stock. The ESOP intends to borrow funds
from our holding company in an amount sufficient to purchase 8% of the Common
Stock issued in the Conversion. This loan will be secured by the shares of
Common Stock purchased and earnings thereon. Shares purchased with such loan
proceeds will be held in a suspense account for allocation among participants
as the loan is repaid. The Company expects to contribute sufficient funds to
the ESOP to repay such loan over
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a ten-year period. Contributions to the ESOP and shares released from the
suspense account will be allocated among participants on the basis of their
annual wages.
Upon the occurrence of a "change in control" (as defined in the ESOP), the
outstanding balance of any outstanding securities acquisition loans under the
ESOP will be discharged through a transfer or sale of shares held as collateral
under such loan, with any remaining shares allocated to participant accounts pro
rata based on their account balances.
It is expected that our holding company will administer the ESOP and that
Directors Henry, Overholt and Self will be appointed as trustees of the ESOP
(the "ESOP Trustees"). The ESOP Trustees must vote all allocated shares held in
the ESOP in accordance with the instructions of the participants. Unallocated
shares and allocated shares for which no timely direction is received are
expected to be voted by the ESOP Trustees in the same proportion as the
participant-directed voting of allocated shares.
Stock Option and Incentive Plan. We intend to implement a Stock Option and
Incentive Plan (the Option Plan) at least six months after the Conversion. If
the Option Plan is implemented within one year after the Conversion, it will be
subject to the regulatory restrictions described below (see " -- Regulatory
Restrictions Applicable to Stock Compensation Plans"). The purpose of the Option
Plan is to provide additional incentive to directors and employees by
facilitating their acquisition of Common Stock. The Option Plan will have a term
of ten years, after which no awards may be made.
A number of shares equal to 10% of the Common Stock sold in the Conversion
is expected to be reserved for future issuance by the Company -- in the form of
newly issued shares, treasury shares or shares acquired and held in trust --
upon exercise of stock options ("Options") or stock appreciation rights
("SARs") granted pursuant to the Option Plan.
The Option Plan will be administered by a committee (the "Option Committee")
of at least two non-employee directors designated by the Board of Directors.
Directors Henry, Overholt, and Self currently are expected to serve as the
Option Committee. Directors and employees will be eligible to receive awards
under the Option Plan, and the Option Committee will select the recipients of
awards, the number of shares to be subject to such awards, and any special terms
and conditions of such awards.
Subject to applicable regulatory restrictions, each Option will have an
exercise price not less than 100% of the market value of the underlying shares
on the date of the grant, will become exercisable upon terms determined by the
Option Committee and will become immediately exercisable upon a change in
control (as defined in the Employment Agreements) or an optionee's termination
of employment due to retirement, death or disability. Nevertheless, each Option
will expire no later than ten years from the date it is granted.
Exercise of a SAR will entitle the holder to receive, as the Option
Committee prescribes in the grant, all or a percentage of the excess of the
then fair market value of the shares of Common
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Stock subject to the SAR at the time of its exercise over the aggregate
exercise price of the shares subject to the SAR. Payment to the holder may be
made in cash or shares of Common Stock, as determined by the Option Committee.
The Company will receive no monetary consideration for the granting of
awards under the Option Plan, and will receive no monetary consideration other
than the Option exercise price for each share issued to optionees upon the
exercise of Options.
It is expected that upon the implementation of the Option Plan, Mr. Harwood
and Mses. Bryant and Holston will receive Awards of 25%, 13.175% and 11.825%,
respectively, of the shares reserved under the Option Plan, and each director at
that time who is not then an employee will receive an Award of 5% of such
shares. Subject to applicable regulatory requirements, at any time following the
Conversion, we or our holding company may contribute sufficient funds to a
grantor trust to purchase, and such trust may purchase, a number of shares of
Common Stock equal to 10% of the shares sold in the Conversion. Such shares
would be held by the trust for issuance to optionees upon the exercise of
Options in the event the Option Plan is implemented. Whether such shares are
purchased, and the timing of such purchases, will depend on market and other
conditions and the alternative uses of capital available to our holding company.
Management Recognition Plan. We intend to implement a Management
Recognition Plan (the MRP) at least six months after completion of the
Conversion. If the MRP is implemented within one year after the Conversion, it
will be subject to the regulatory restrictions described below (see
"-- Regulatory Restrictions Applicable to Stock Compensation Plans"). The
purpose of the MRP is to enable us to attract, motivate and retain personnel of
experience and ability in key positions of responsibility.
A number of shares equal to 4% of the shares of Common Stock sold in the
Conversion would be reserved for future issuance under the MRP. The same
non-employee directors who are appointed to the Option Committee are expected to
act, by majority, as the committee (the "MRP Committee") responsible for
selecting the directors and employees who will receive MRP awards, as well as
making general decisions associated with the MRP's operation. The directors
serving as the MRP Committee are also expected to serve as trustees of the trust
associated with the MRP (the "MRP Trust"). In that capacity, they will have the
responsibility to hold and invest all funds contributed to the MRP Trust. Shares
held in the MRP Trust will be voted by the MRP trustees in the same proportion
as the shares held by our ESOP and will be distributed as each award vests. Our
holding company's Board of Directors can terminate the MRP at any time, and, if
it does so, any shares not subject to outstanding awards will revert to our
holding company.
Subject to the regulatory requirements described below (see " -- Regulatory
Restrictions Applicable to Stock Compensation Plans"), each MRP award will vest
in accordance with conditions determined by the MRP Committee, with an
acceleration of vesting to 100% upon a participant's death, disability or
retirement or a "change in control" as defined in the Employment Agreements.
Dividends on unvested shares will be held in the MRP Trust for payment as
vesting occurs.
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It is expected that upon the implementation of the MRP, Mr. Harwood and
Mses. Bryant and Holston will receive awards of 25%, 13.175% and 11.825%,
respectively, of the shares reserved for MRP awards and each director at that
time who is not then an employee will receive an award of 5% of such shares.
Subject to applicable regulatory requirements, at any time following the
Conversion, we may contribute sufficient funds to the MRP Trust so that the
trust can purchase a number of shares of Common Stock equal to 4% of those sold
in the Offering. Whether those shares will be purchased in the open market or
newly issued by our holding company, and the timing of such purchases, will
depend on market and other conditions and the alternative uses of capital
available to us.
Regulatory Restrictions Applicable to Stock Compensation Plans. Current OTS
regulations and policies require that, if the Option Plan or MRP is implemented
within one year following the Conversion, (i) no employee may receive awards
exceeding 25% of the shares subject to the plan, (ii) non-employee directors may
not receive awards exceeding 30% in the aggregate, and 5% individually, of the
shares subject to the plan, (iii) awards must vest over a period of at least
five years and may not vest upon an individual's retirement or a corporate
change in control, (iv) the exercise price for Options must at least equal the
fair market value of the underlying shares on the Option grant date, and (v) the
plan may not be implemented, and no awards may be made, before stockholder
approval of the plan.
TRANSACTIONS WITH MANAGEMENT
We offer loans to our directors, officers and employees. These loans are
made in the ordinary course of business with the same collateral, interest rates
and underwriting criteria as those of comparable transactions prevailing at the
time and do not involve more than the normal risk of collectibility or present
other unfavorable features, except each director, officer and employee may
obtain one mortgage loan and one consumer loan with waived origination fees and
a 1% discount on the interest rate (on adjustable rate loans, the discounted
rate applies only until the rate adjusts). At June 30, 1997, no director or
executive officer had more than $60,000 of preferential loans from us at any
time since December 31, 1996, except J. William Myers, Chairman of the Board of
Directors, who had an adjustable rate mortgage loan with an initial interest
rate of 7.75% whose largest balance during that period and whose balance at the
end of that period was $225,000. At June 30, 1997, our loans to directors and
executive officers totalled approximately $530,000, or 8.2% of our equity and
.83% of our total assets at that date.
J. William Myers, our Chairman of the Board, is a lawyer in Newport,
Tennessee. He performs routine legal services on our behalf and our borrowers,
principally in connection with the closing of mortgage loans. In fiscal 1996,
fees for such services totaled $62,500.
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CERTAIN RESTRICTIONS ON ACQUISITIONS
Federal laws and regulations impose a number of restrictions on the
acquisitions of savings institutions, such as us, and savings institution
holding companies, such as our holding company. In addition, certain Tennessee
statutes would also impose restrictions on the acquisition of our holding
company.
OTS CONVERSION REGULATIONS
OTS regulations prohibit a person from (i) making an offer, announcing an
intent to make an offer or other arrangement to purchase stock, or (ii)
acquiring stock in our holding company or subscription rights in us from another
person, prior to completion of the Conversion. Further, no person without the
prior written approval of the Director of the OTS, may make an offer or announce
of an offer to purchase shares or actually acquire shares in us or our holding
company for a period of three years from the date of the completion of the
Conversion if, upon the completion of such offer or acquisition, that person
would become the beneficial owner of more than 10% of a class of equity security
of us or our holding company.
CHANGE IN BANK CONTROL ACT AND SAVINGS INSTITUTION HOLDING COMPANY
PROVISIONS OF HOME OWNERS' LOAN ACT
The Change in Bank Control Act provides that no person, acting directly or
indirectly or through or in concert with one or more persons, may acquire
control of us unless the OTS has been given 60 days' prior written notice and
the OTS does not issue a notice disapproving the proposed acquisition. The OTS
may prohibit an acquisition of control if it finds, among other things, that (i)
the acquisition would result in a monopoly or substantially lessen competition,
(ii) the financial condition of the acquiring person might jeopardize our
financial stability, or (iii) the competence, experience or integrity of the
acquiring person indicates that it would not be in the interest of our
depositors or the public to permit the acquisition of control by such person. In
addition, certain provisions of the Home Owners' Loan Act provide that no
company may acquire control of us without the prior approval of the OTS. Any
company that acquires such control becomes a savings institution holding company
and will be subject to registration, examination and regulation by the OTS.
TENNESSEE ANTI-TAKEOVER STATUTES
Tennessee has enacted the following statutes which might restrict the
acquisition of the Company.
The Tennessee Control Share Acquisition Act prohibits a person who
acquires over specified limits of shares of our holding company (that is,
20%, 33 % or 50% of its outstanding shares) from voting those shares in
excess of each specified limit unless a majority of our holding company's
disinterested stockholders vote to
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approve voting rights for the excess shares. Our holding company's
Charter expressly provides that any control share acquisitions will be
governed by this statute.
The Tennessee Business Combination Act imposes conditions on a person
owning more than 10% of our holding company's outstanding voting stock (an
"interested stockholder") in connection with business combinations with our
holding company for a period of five years following the date such person
became an interested stockholder, unless such business combination is
otherwise approved in accordance with the terms of the statute.
The Tennessee Greenmail Act makes it unlawful, under certain specified
circumstances, for our holding company to purchase any of its outstanding
shares of a certain class at a price above the market value of the shares
from a stockholder owning more than 3% of the shares to be purchased, if
such person has held his shares for less than two years, unless the purchase
is approved by a majority of the outstanding shares of that class of
securities or our holding company makes a similar offer to all stockholders
of that class of securities.
The Tennessee Investor Protection Act imposes conditions on offerors
making a tender offer for our holding company and requires such offeror file
with the Tennessee Commissioner of Insurance a registration statement
containing information similar to that required by federal law, including
any plans which the offeror has in acquiring control of our holding company.
CERTAIN ANTI-TAKEOVER PROVISIONS
While we are not aware of any effort that might be made to obtain control of
our holding company after the Conversion, we believe that it is appropriate to
include certain provisions in our holding company's Charter to protect the
interests of our holding company and its stockholders from hostile takeovers
("anti-takeover provisions"). We believe that the provisions described below
reduce our holding company's vulnerability to takeover attempts and certain
other transactions which have not been negotiated with and approved by us. These
provisions will also assist us in the orderly deployment of the net proceeds of
the Conversion into productive assets after the Conversion. In our judgment, our
holding company's Board of Directors is in the best position to consider all
relevant factors and to negotiate for what is in the best interests of its
stockholders and other constituents. Accordingly, we believe that it is in the
best interests of our holding company and its stockholders to encourage
potential acquirors to negotiate directly with our holding company's Board of
Directors and that these provisions will encourage such negotiations and
discourage nonnegotiated takeover attempts. It is also our view that these
provisions should not discourage persons from proposing a merger or other
transaction at prices reflective of the true value of our holding company and
which is in the best interests of all stockholders.
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Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which
have not been negotiated with and approved by us present to stockholders the
risk of a takeover on terms which may be less favorable than might otherwise
be available. A transaction which is negotiated and approved by us, on the
other hand, can be carefully planned and undertaken at an opportune time in
order to obtain maximum value for our holding company and stockholders, with
due consideration given to matters such as the management and business of the
acquiring corporation and maximum strategic development of our holding
company's assets. As a result, stockholders who might desire to participate
in such a transaction may not have an opportunity to do so. Such provisions
may also render the removal of the current Board of Directors or management
of our holding company more difficult.
The following discussion generally summarizes certain provisions of the
Charter and Bylaws of our holding company that may be deemed to have such an
"anti-takeover" effect. The description of these provisions is necessarily
general, and you should refer to the full text of the Charter and Bylaws for a
more detailed description of these provisions. See "ADDITIONAL INFORMATION."
CLASSIFIED BOARD OF DIRECTORS
Article IX of the Charter provides that the Board of Directors is to be
divided into three classes which shall be as nearly equal in number as possible
and will serve for three year terms. No director may be removed at any time
except for cause and by the affirmative vote of at least 80% of the outstanding
shares entitled to vote.
Management believes that the staggered election of directors tends to
promote continuity of management because only one-third of the Board of
Directors is subject to election each year. Staggered terms guarantee that in
the ordinary course of business approximately two-thirds of the directors, at
any one time have had at least one year's experience as directors of the
Company.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of shares, to force an
immediate change in the composition of a majority of the Board of Directors.
Since the terms of only one-third of the incumbent directors expire each
year, it requires at least two annual elections for the stockholders to
change a majority, whereas a majority of a non-classified board could be
changed in one year.
STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS
Article XV of the Charter requires the approval of the holders of at
least 80% of the outstanding shares of voting stock, and a majority of such
shares not including shares deemed beneficially owned by a "Related Person,"
as defined therein, to approve certain "Business Combinations," as defined
therein. Under Tennessee law absent this provision mergers, share exchanges
and sales of substantially all assets generally would require approval by the
vote of the holders of a majority of the outstanding shares of common stock,
except under the Tennessee
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Business Combination Act an "interested stockholder" (generally defined to
include any stockholder owning 10% or more of the outstanding voting stock)
may not engage in a business combination (as broadly defined in this Act) for
a period of five years following the date he became an interested stockholder
unless the business combination or the transaction by which the interested
stockholder became an interested stockholder was approved prior to such date
by the Board of Directors. Article XV requires the approval of the
stockholders in accordance with the increased voting requirements in
connection with any such transactions except in cases where the proposed
transaction has been approved in advance by at least two-thirds of the
Continuing Directors (generally, those members of the Board of Directors who
are not affiliated with the Related Person and were directors before the
Related Person became a Related Person). The provisions of Article XV apply
to any "Business Combination" which is defined to include (i) any merger,
share exchange or consolidation with or into a Related Person; (ii) any sale,
lease, exchange, transfer or other disposition of all or a substantial part
of assets to a Related Person (the term "substantial part" is defined to
include more than 25% of total assets); (iii) any merger or consolidation of
a Related Person; (iv) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the assets of a Related Person;
(v) the issuance of any securities to a Related Person; (vi) the acquisition
of any securities of a Related Person; (vii) any reclassification of the
common stock, or any recapitalization involving the common stock; and (vii)
any agreement, contract or other arrangement providing for any of the
foregoing transactions.
RESTRICTIONS ON CALL OF SPECIAL MEETINGS OF STOCKHOLDERS
Article VIII of the Charter provides that special meetings of stockholders
may be called only by the Board of Directors or a committee thereof. This
provision may discourage stockholder attempts to disrupt the business between
annual meetings of stockholders and may deter hostile takeovers by making it
more difficult for a person or entity to obtain immediate control.
ABSENCE OF CUMULATIVE VOTING
Article VIII of the Charter provides that stockholders may not cumulate
their votes in the election of directors. The absence of cumulative voting
rights effectively means that the holders of a majority of the shares voted at a
meeting of stockholders could, if they so chose, elect all directors, thus
precluding minority stockholder representation on the Board of Directors.
RESTRICTIONS ON ACQUISITIONS OF SECURITIES
Article XIV of the Charter provides that for a period of five years
following the completion of the Conversion, no person may directly or indirectly
acquire or offer to acquire the beneficial ownership of more than 10% of any
class of equity security. In addition, for a period of five years following the
completion of the Conversion, each share beneficially owned in excess of the
10%, as determined by the Board of Directors, shall not be entitled to vote.
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Additionally, the Charter further restricts voting rights of shares of any
class of equity security beneficially owned in excess of the 10% limit beyond
five years after the Conversion. During this period if any person acquires the
beneficial ownership of more than 10% of any class of equity security without
the prior approval by two-thirds of the Continuing Directors (as defined in the
Charter), then, for each vote in excess of 10%, such person shall be entitled to
cast only one-hundredth of one vote with respect to each vote in excess of 10%
of the voting power of the outstanding shares of voting stock which such record
holders would otherwise be entitled to cast without giving effect to the
provision, and the aggregate voting power of such record holders shall be
allocated proportionately among such record holders.
This provision does not apply to (i) any underwriter or member of an
underwriting or selling group involving a public sale or resale of securities,
(ii) any proxy granted to one or more of the Company's "Continuing Directors,"
as defined, by a stockholder, (iii) any employee compensation plans thereof, or
(iv) any transaction approved in advance by a majority of the Continuing
Directors.
AUTHORIZED SHARES
The Charter authorizes the issuance of up to 5,000,000 shares of serial
preferred stock, which may be issued with rights and preferences which could
impede an acquisition. This preferred stock, none of which has been issued,
together with authorized but unissued shares of common stock (the Charter
authorizes the issuance of up to 20,000,000 shares of the Common Stock), also
could represent additional capital required to be purchased by the acquiror.
AMENDMENT TO CHARTER AND BYLAWS
Amendments to the Charter must be approved by a majority of the Board of
Directors and also by a majority of the outstanding shares entitled to vote
in the election of directors cast at a meeting called for that purpose.
However, approval by at least 80% of the outstanding voting stock is required
to amend Charter provisions: (i) governing quorum requirements, the calling
of special meetings and the absence of cumulative voting rights, (ii)
governing the number of directors, the filling of vacancies on the Board of
Directors and classified terms of the Board of Directors, (iii) requiring
written notice of nominations for the election of directors and new business
proposals, (iv) governing removal of directors, (v) pertaining to the
elimination of the liability of the directors for monetary damages, with
certain exceptions, for breach of duty, (vi) providing for the
indemnification of directors, officers, employees and agents, (vii) imposing
restrictions on certain acquisitions of more than 10% of the stock, (viii)
governing the requirement for the approval of certain business combinations,
(ix) about the consideration of certain nonmonetary factors in the event of
an offer by another party, (x) making the Tennessee "Control Share
Acquisition" Act applicable and (xi) governing the required stockholder vote
for amending the Bylaws and Charter.
The Bylaws may be amended by a majority vote of the Board of Directors or
by the affirmative vote of at least 80% of the outstanding shares entitled to
vote in the election of directors cast at a meeting called for that purpose.
The Bylaws contain numerous powers about its
87
<PAGE>
governance, such as fixing the number of directors and determining the number
of directors constituting a quorum. By reducing the ability of a potential
corporate raider to make changes in the Bylaws and to reduce the authority of
the Board of Directors or impede its ability to manage, this provision 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.
COMPENSATION AGREEMENTS AND PLANS
In addition to the provisions of the Charter and Bylaws described above,
certain existing and proposed compensation agreements and plans, contain
provisions which also may discourage hostile takeover attempts which we might
conclude are not in our best interests. For a description of certain
compensation agreements and plans and provisions thereof relating to changes in
control, see "MANAGEMENT -- Certain Compensation Agreements and Plans."
DESCRIPTION OF COMMON STOCK
GENERAL
Our holding company is authorized to issue 20,000,000 shares of the Common
Stock and 5,000,000 shares of serial preferred stock. Our holding company
expects to issue a maximum of 1,454,750 shares of the Common Stock in the
Conversion. Our holding company will not issue shares of serial preferred stock
in the Conversion and expects to reserve for future issuance under the Option
Plan an amount of authorized but unissued shares of Common Stock equal to 10% of
the shares to be issued in the Conversion. The capital stock of the Company will
represent nonwithdrawable capital, will not be an account of an insurable type,
and will not be insured by the FDIC or any other government agency.
COMMON STOCK
Voting Rights. Each share of the Common Stock is identical with every
other share of the Common Stock. The holders of the Common Stock will possess
exclusive voting rights. In the event that shares of serial preferred stock
are issued in the future, these serial preferred stock shares may also have
voting rights as determined by the Board of Directors. As a stockholder, you
have one vote for each share you hold of record and you are entitled to vote
on all matters submitted to a vote of holders of shares of the Common Stock.
See "CERTAIN RESTRICTIONS ON ACQUISITION -- Tennessee Anti-Takeover Statutes"
and "CERTAIN ANTI-TAKEOVER PROVISIONS -- Restrictions on Acquisitions of
Securities" for information about a possible reduction in voting rights when
certain events occur.
Dividends. From time to time, dividends may be declared and paid to the
holders of the Common Stock, who will share equally in any such dividends. For
information about cash dividends, see "DIVIDENDS" and "TAXATION."
88
<PAGE>
Liquidation. In the event of a liquidation, dissolution or winding up, each
holder of shares of the Common Stock would be entitled to receive, after payment
of all debts and liabilities, a pro rata portion of all assets available for
distribution to holders of the Common Stock. If any serial preferred stock is
issued, the holders thereof may have a priority in liquidation or dissolution
over the holders of the Common Stock.
Restrictions on Acquisition of the Common Stock. See "CERTAIN RESTRICTIONS
ON ACQUISITIONS" and "CERTAIN ANTI-TAKEOVER PROVISIONS" for discussions of
limitations on acquisition of shares of the Common Stock.
Other Characteristics. Holders of the Common Stock will not have preemptive
rights with respect to any additional shares of the Common Stock which may be
issued. The Common Stock is not subject to call for redemption, and the
outstanding shares of the Common Stock, when issued and upon receipt of the full
purchase price therefor, will be fully paid and nonassessable.
SERIAL PREFERRED STOCK
None of the 5,000,000 authorized shares of serial preferred stock will be
issued in the Conversion. After the Conversion is completed, the Board of
Directors is authorized to issue serial preferred stock and to fix and state
voting powers, designations, preferences or other special rights of such shares
and the qualifications, limitations and restrictions thereof. The serial
preferred stock may rank prior to the Common Stock as to dividend rights or
liquidation preferences, or both, and may have full or limited voting rights.
The Board of Directors has no present intention to issue any of the serial
preferred stock.
REGISTRATION REQUIREMENTS
Following the completion of the Conversion, we will register the Common
Stock with the SEC pursuant to the Exchange Act. Federal regulations prohibit us
from deregistering the Common Stock for at least three years following the
completion of the Conversion. Upon registering under the Exchange Act, the
Company will be subject to the proxy solicitation and annual and periodic
reporting and other requirements of the Exchange Act.
LEGAL MATTERS
Housley Kantarian & Bronstein, P.C., Washington, D.C., will advise us about
the legality of the Common Stock and federal income tax consequences of the
Conversion. Pugh & Company, P.C., certified public accountants, Knoxville,
Tennessee, will advise us about the Tennessee income tax consequences of the
Conversion. Housley Kantarian & Bronstein, P.C. and Pugh & Company, P.C. have
consented to the references herein to their opinions. Breyer & Aguggia,
Washington, D.C., will advise Trident Securities about certain legal matters
with respect to the Conversion.
89
<PAGE>
EXPERTS
We have included the Consolidated Financial Statements and related Notes of
Newport Federal Savings and Loan Association and its subsidiary at December 31,
1996 and 1995 and for each of the years in the three year period ended December
31, 1996 in this prospectus in reliance upon the report of Pugh & Company, P.C.,
appearing herein and upon the authority of said firm as experts in accounting
and auditing.
RP Financial has consented to the publication in this prospectus of the
summary of its letter to us setting forth its opinion as to the estimated pro
forma aggregate market value of the Common Stock to be issued in the Conversion
and the value of subscription rights to purchase the Common Stock and to the use
of its name and statements in this prospectus.
ADDITIONAL INFORMATION
Our holding company has filed a Registration Statement on Form SB-2 (File
No. 333- ) with the SEC to register the Common Stock under the Securities
Act. This prospectus does not contain all the information in the Registration
Statement, including the exhibits and certain parts omitted in accordance
with the rules and regulations of the SEC. The exhibits include, among other
things, the appraisal report prepared by RP Financial. You may inspect this
information at the SEC's public reference facilities located at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and you may obtain copies 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. You may also obtain copies of these materials 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. In addition, the SEC maintains a World
Wide Web site that contains reports, proxy and information statements and
other information about registrants, including our holding company, that file
electronically with the SEC. The address for the SEC's Website is
"http://www.sec.gov." The statements contained in this prospectus referring
to the contents of any agreement or other document filed as an exhibit to the
Registration Statement are, of necessity, brief descriptions and are not
necessarily complete; each such statement is qualified by reference to such
contract or document.
We have filed a Conversion Application on Form AC with the OTS. This
prospectus omits certain information contained in the Form AC, including the
exhibits of the Form AC. You may inspect the Form AC, including the exhibits,
which include the appraisal report prepared by RP Financial, at no charge at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at the OTS
Central Regional Office, at 200 West Madison Avenue, Suite 1300, Chicago,
Illinois 60606.
90
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's Letter F-1
Consolidated Statements of Financial Condition as of June 30, 1997 F-2
and 1996 (unaudited)
Consolidated Statements of Income for the Six-Month Periods
Ended June 30, 1997 and 1996 (unaudited) F-3
Consolidated Statements of Changes in Equity for the Six-Month Periods
Ended June 30, 1997 and 1996 (unaudited) F-4
Consolidated Statements of Cash Flows for the Six-Month Periods
Ended June 30, 1997 and 1996 (unaudited) F-5
Notes to the Consolidated Financial Statements for the Six-Month Periods
Ended June 30, 1997 and 1996 F-7
Independent Auditor's Report F-15
Consolidated Statements of Financial Condition as of
December 31, 1996 and 1995 F-16
Consolidated Statements of Income for the Years
Ended December 31, 1996, 1995 and 1994 F-17
Consolidated Statements of Changes in Equity for the Years
Ended December 31, 1996, 1995 and 1994 F-18
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994 F-19
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1996, 1995 and 1994 F-21
All schedules are omitted because the required information is not applicable or
is presented in the financial statements or related notes.
Separate financial statements of United Tennessee Bankshares, Inc. have not been
included since it will not engage in material transactions until after
conversion. United Tennessee Bankshares, Inc., which has been inactive to date,
has no significant assets, liabilities, revenues, expenses or contingent
liabilities.
91
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
Newport, Tennessee
We have compiled the accompanying consolidated statements of financial
condition of Newport Federal Savings and Loan Association and subsidiary as of
June 30, 1997 and 1996, and the related consolidated statements of income,
changes in equity, and cash flows for the six month periods then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of consolidated financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying consolidated financial statements and,
accordingly, do not express an opinion or any other form of assurance on them.
/s/ Pugh & Company, P.C.
--------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
July 18, 1997
F-1
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997 1996
- ----------------------------------------------------------------------------------- ------------- -------------
-ASSETS -
<S> <C> <C>
Cash and Amounts Due From Depository Institutions.................................. $ 3,080,831 $ 2,186,711
Investment Securities:
Available for Sale, at Fair Value................................................. 13,768,743 11,298,284
Held to Maturity (Fair Value of $1,078,630 in 1997 and $1,069,217 in 1996)........ 1,058,744 1,045,710
Loans Receivable, Net.............................................................. 45,624,985 42,789,289
Premises and Equipment, Net........................................................ 212,753 231,870
Foreclosed Real Estate--Held for Sale.............................................. 41,186 -0-
Accrued Interest Receivable........................................................ 354,671 274,230
Other Assets....................................................................... 46,721 23,096
------------- -------------
TOTAL ASSETS....................................................................... $ 64,188,634 $ 57,849,190
------------- -------------
------------- -------------
-LIABILITIES AND EQUITY -
LIABILITIES
Deposits
Demand........................................................................... $ 15,412,060 $ 15,104,383
Term............................................................................. 41,312,736 36,542,620
------------- -------------
Total Deposits.................................................................. 56,724,796 51,647,003
Accrued Interest Payable.......................................................... 253,697 210,604
Deferred Income Taxes............................................................. 500,213 295,361
Other Liabilities................................................................. 241,144 85,254
------------- -------------
Total Liabilities................................................................ 57,719,850 52,238,222
------------- -------------
EQUITY
Retained Earnings................................................................. 5,868,107 5,417,897
Net Unrealized Gain on Investment Securities...................................... 600,677 193,071
------------- -------------
Total Equity..................................................................... 6,468,784 5,610,968
------------- -------------
TOTAL LIABILITIES AND EQUITY....................................................... $ 64,188,634 $ 57,849,190
------------- -------------
------------- -------------
</TABLE>
See Accountant's Compilation Report.
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997 1996
- -------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
INTEREST INCOME
Loans................................................................................ $ 1,957,893 $ 1,803,331
Investment Securities................................................................ 438,359 332,758
Other Interest-Earning Assets........................................................ 68,463 38,600
------------ ------------
Total Interest Income............................................................... 2,464,715 2,174,689
INTEREST EXPENSE ON DEPOSITS.......................................................... 1,303,488 1,134,872
------------ ------------
NET INTEREST INCOME................................................................... 1,161,227 1,039,817
PROVISION FOR LOAN LOSSES............................................................. 90,000 -0-
------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES................................... 1,071,227 1,039,817
------------ ------------
NONINTEREST INCOME
Deposit Account Service Charges...................................................... 16,937 40,015
Loan Service Charges and Fees........................................................ 27,820 27,132
Net Gain (Loss) on Sales of Interest-Earning Assets.................................. -0- (3,589)
Other................................................................................ 5,622 10,524
------------ ------------
Total Noninterest Income............................................................ 50,379 74,082
------------ ------------
NONINTEREST EXPENSE
Compensation and Benefits............................................................ 447,139 243,910
Occupancy and Equipment.............................................................. 79,895 77,129
Federal Deposit Insurance Premiums................................................... 23,000 66,000
Data Processing Fees................................................................. 49,693 47,991
Advertising and Promotion............................................................ 23,840 26,609
Loss on Foreclosed Real Estate....................................................... -0- 917
Other................................................................................ 101,699 96,966
------------ ------------
Total Noninterest Expense........................................................... 725,266 559,522
------------ ------------
INCOME BEFORE INCOME TAXES............................................................ 396,340 554,377
INCOME TAXES.......................................................................... 159,720 184,500
------------ ------------
NET INCOME............................................................................ $ 236,620 $ 369,877
------------ ------------
------------ ------------
</TABLE>
See Accountant's Compilation Report. The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
FOR THE SIX MONTH FOR THE SIX MONTH
PERIOD ENDED JUNE 30, 1997 PERIOD ENDED JUNE 30, 1996
-------------------------------------- ---------------------------------------
NET NET
UNREALIZED UNREALIZED
GAIN ON GAIN ON
RETAINED INVESTMENT TOTAL RETAINED INVESTMENT TOTAL
EARNINGS SECURITIES EQUITY EARNINGS SECURITIES EQUITY
------------ ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, BEGINNING OF PERIOD............. $ 5,631,487 $ 471,423 $ 6,102,910 $ 5,048,020 $ 371,028 $ 5,419,048
Net Income................................ 236,620 -0- 236,620 369,877 -0- 369,877
Change in Net Unrealized Gain on
Investment Securities................... -0- 129,254 129,254 -0- (177,957) (177,957)
------------ ----------- ----------- ------------ ------------ -----------
BALANCES, END OF PERIOD................... $ 5,868,107 $ 600,677 $ 6,468,784 $ 5,417,897 $ 193,071 $ 5,610,968
------------ ----------- ----------- ------------ ------------ -----------
------------ ----------- ----------- ------------ ------------ -----------
</TABLE>
See Accountant's Compilation Report. The accompanying notes are an integral
part of these financial statements.
F-4
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income............................................................................ $ 236,620 $ 369,877
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Loan Losses........................................................... 90,000 -0-
Depreciation........................................................................ 24,000 24,000
Amortization of Investment Securities Premiums and Discounts, Net................... (12,649) 3,535
Increase in Unearned Loan Fees...................................................... 10,169 7,880
Net (Gain) on Sales of Foreclosed Real Estate....................................... -0- (5,377)
Federal Home Loan Bank Stock Dividends.............................................. (18,100) (8,200)
Net (Gain) Loss on Sales of Interest-Earning Assets................................. -0- 3,589
Deferred Income Taxes (Benefit)..................................................... (63,555) -0-
(Increase) Decrease in:
Accrued Interest Receivable........................................................ (60,314) (81,060)
Other Assets....................................................................... 23,059 23,953
Increase (Decrease) in:
Accrued Interest Payable........................................................... 27,700 12,982
Other Liabilities.................................................................. 210,169 41,517
----------- -----------
Total Adjustments................................................................. 230,479 22,819
----------- -----------
Net Cash Provided by Operating Activities.............................................. 467,099 392,696
----------- -----------
INVESTING ACTIVITIES
Purchases of Investment Securities Available for Sale................................. (2,496,641) (3,473,445)
Proceeds From Sales of Investment Securities Available for Sale....................... -0- 1,003,203
Proceeds From Maturities of Investment Securities Available for Sale.................. -0- 500,000
Principal Payments Received on Investment Securities Available for Sale............... 657,265 672,364
Purchases of Investment Securities Held to Maturity................................... (137,850) -0-
Proceeds From Maturities of Investment Securities Held to Maturity.................... 290,000 -0-
Net Increase in Loans................................................................. (1,536,422) (2,427,013)
Purchases of Premises and Equipment, Net.............................................. (8,998) (6,092)
----------- -----------
Net Cash Used in Investing Activities............................................. (3,232,646) (3,730,983)
----------- -----------
</TABLE>
See Accountant's Compilation Report.
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997 1996
------------ ------------
<S> <C> <C>
FINANCING ACTIVITIES
Net Increase in Deposits............................................................. 2,957,851 3,692,836
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................................. 192,304 354,549
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................ 2,888,527 1,832,162
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $ 3,080,831 $ 2,186,711
------------ ------------
------------ ------------
Supplementary Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest............................................................................. $ 1,275,788 $ 1,121,890
Income Taxes......................................................................... $ 161,291 $ 133,000
Supplementary Disclosures of Noncash Investing Activities:
Sale of Foreclosed Real Estate by Origination of Mortgage Loans...................... $ -0- $ 61,000
Acquisition of Foreclosed Real Estate................................................ $ 41,186 $ 49,380
Change in Unrealized Gain on Investment Securities Available for Sale................ $ 208,474 $ (287,027)
Change in Deferred Income Taxes Associated With Unrealized Gain on Investment
Securities Available for Sale....................................................... $ 79,220 $ (109,070)
Change in Net Unrealized Gain on Investment Securities Available for Sale............ $ 129,254 $ (177,957)
</TABLE>
See Accountant's Compilation Report.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation--The consolidated financial statements include the
accounts of Newport Federal Savings and Loan Association and its wholly owned
subsidiary, NFS Service Corporation. The subsidiary is a service corporation
whose only asset is a $15,000 investment in Data Services Corporation of
Cincinnati, Ohio, (see Note 2) which provides data processing services to the
Association. The subsidiary has liabilities of $698 payable to the Association
and shareholder's equity of $14,302 and as of both June 30, 1997 and 1996.
Results of operations of the subsidiary were $-0- for each of the six month
periods ended June 30, 1997 and 1996. All intercompany accounts have been
eliminated.
Reclassifications--Certain items in the 1996 consolidated financial statements
have been reclassified to conform with the 1997 consolidated financial
statements.
Nature of Operations--The Association provides a variety of financial
services to individuals and corporate customers through its two offices in
Newport, Tennessee. The Association's primary deposit products are
interest-bearing savings accounts and certificates of deposit. Its primary
lending products are one-to-four family first mortgage loans.
Use of Estimates--The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collection of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible, based
on evaluations of the collectibility of loans and prior loan loss experience.
The evaluations take into consideration such factors as changes in the nature
and volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and economic conditions that may affect the borrowers' ability to
pay.
Real estate acquired through, or in lieu of, loan foreclosure is carried at
the lower of cost or fair value less estimated costs to sell. Cost includes the
balance of the loan plus acquisition costs and improvements made thereafter to
facilitate sale. Costs related to the holding of the real estate are expensed.
Cash and Cash Equivalents--Cash and cash equivalents include "Cash and
Amounts Due from Depository Institutions."
See Accountant's Compilation Report.
F-7
<PAGE>
Cash and Amounts Due From Depository Institutions--Cash and amounts due from
depository institutions includes approximately $2,431,000 on deposit with the
Federal Home Loan Bank of Cincinnati as of June 30, 1997 ($1,492,000 as of June
30, 1996).
Investment Securities--In accordance with SFAS No. 115, the Association has
segregated its securities into the following categories:
(a) Held to Maturity--These debt securities are carried at cost, adjusted for
amortization of premiums and accretion of discounts, which are
recognized as adjustments to interest income, using a method which
approximates the level yield method. In placing securities in this
category, the Association has expressed a positive intent and ability
to hold such securities until they mature. The Association has classified
all of its obligations of states and political subdivisions in its held to
maturity portfolio.
(b) Available for Sale--All other debt and equity securities have been
placed in this category. These securities are carried at fair value based on
quoted market prices. Any unrealized gain or loss is reported in the
consolidated statements of financial condition as a component of equity, net
of any deferred tax effect.
Realized gains or losses on the sales of securities available for sale are
based on the net proceeds and amortized cost of the securities sold, using the
specific identification method. See Note 2 for additional information on
investment securities.
Loan Fees--Loan fees, net of initial direct costs related to initiating and
closing loans, have been deferred and are being amortized into interest income
over the remaining lives of the loans as an adjustment of yield, using the level
yield method.
Recognition of Interest on Loans--Unearned interest on installment loans is
recognized as income over the terms of the loans using a declining balance
method. Interest on other loans is calculated by using the simple interest
method on the principal outstanding. Accrual of interest is discontinued on a
loan when management believes, after considering economic and business
conditions and collection efforts, that the borrowers' financial condition is
such that the collection of interest is doubtful.
Premises and Equipment, Net--Premises and equipment are stated at cost less
accumulated depreciation. Depreciation, computed principally using the
straight-line method for financial accounting purposes and accelerated methods
for income tax reporting purposes, is based on estimated useful lives of five to
thirty years.
Income Taxes--Income taxes are provided for the tax effects of the
transactions reported in the consolidated financial statements and consist of
taxes currently due plus deferred taxes related primarily to differences between
the basis of investment securities, allowance for loan losses, deferred loan
fees, and accumulated depreciation for financial accounting and income tax
reporting. The deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled. An
appropriate provision is made in the consolidated financial statements for
deferred income taxes in recognition of these differences.
See Accountant's Compilation Report.
F-8
<PAGE>
NOTE 2--INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities
classified as available for sale are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES AVAILABLE FOR SALE
--------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
As of June 30, 1997
- -------------------
Debt Securities:
U.S. Treasury Securities and Obligations of U.S.
Government Corporations and Agencies................. $ 4,480,138 $ 21,175 $ (14,667) $ 4,486,646
Mortgage-Backed Securities............................. 7,748,423 95,897 (87,243) 7,757,077
------------- ------------ ------------- ------------
Total Debt Securities.................................. 12,228,561 117,072 (101,910) 12,243,723
------------- ------------ ------------- ------------
Equity Securities:
Federal Home Loan Bank of Cincinnati Stock............. 528,900 -0- -0- 528,900
Federal Home Loan Mortgage Corporation Preferred
Stock................................................ 27,448 953,672 -0- 981,120
Data Services Corporation Stock........................ 15,000 -0- -0- 15,000
------------- ------------ ------------- ------------
Total Equity Securities................................ 571,348 953,672 -0- 1,525,020
------------- ------------ ------------- ------------
$ 12,799,909 $ 1,070,744 $ (101,910) $ 13,768,743
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
As of June 30, 1996
- -------------------
Debt Securities:
U.S. Treasury Securities and Obligations of U.S.
Government Corporations and Agencies................. $ 2,478,218 $ -0- $ (49,148) $ 2,429,070
Mortgage-Backed Securities............................. 7,981,213 42,725 (253,908) 7,770,030
------------- ------------ ------------- ------------
Total Debt Securities.................................. 10,459,431 42,725 (303,056) 10,199,100
------------- ------------ ------------- ------------
Equity Securities:
Federal Home Loan Bank of Cincinnati Stock............. 485,000 -0- -0- 485,000
Federal Home Loan Mortgage Corporation Preferred
Stock................................................ 27,448 571,736 -0- 599,184
Data Services Corporation Stock........................ 15,000 -0- -0- 15,000
------------- ------------ ------------- ------------
Total Equity Securities................................ 527,448 571,736 -0- 1,099,184
$ 10,986,879 $ 614,461 $ (303,056) $ 11,298,284
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
Gross realized gains and losses from sales of investment securities classified
as available for sale are as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Gross Realized Gains............................................................................. $ -0- $ -0-
Gross Realized Losses............................................................................ -0- (3,589)
--- ---------
$ -0- $ (3,589)
--- ---------
--- ---------
</TABLE>
The amortized cost and estimated fair value of investment securities
classified as held to maturity are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES HELD TO MATURITY
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
As of June 30, 1997
Obligations of States and Political Subdivisions............. $ 1,058,744 $ 19,886 $ -0- $ 1,078,630
------------ ----------- ----------- ------------
As of June 30, 1996 Obligations of States and Political
Subdivisions............................................... $ 1,045,710 $ 25,942 $ (2,435) $ 1,069,217
------------ ----------- ----------- ------------
</TABLE>
See Accountant's Compilation Report.
F-9
<PAGE>
The amortized cost and estimated fair value of debt securities as of June 30,
1997 and, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------- --------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Due in One Year or Less................................ $ -0- $ -0- $ -0- $ -0-
Due After One Year Through Five Years.................. 8,129,925 8,083,648 277,850 278,178
Due After Five Years Through Ten Years................. 1,956,909 1,923,911 780,894 800,452
Due After Ten Years.................................... 2,141,727 2,236,164 -0- -0-
------------- ------------- ------------ ------------
$ 12,228,561 $ 12,243,723 $ 1,058,744 $ 1,078,630
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The Association did not sell any investment securities classified as held to
maturity or transfer any investments between categories during the periods ended
June 30, 1997 and 1996.
Investments with book values of approximately $1,600,000 and $1,400,000
(which approximates market values) as of June 30, 1997 and 1996, respectively,
were pledged to secure deposits of public funds.
NOTE 3--LOANS RECEIVABLE
The Association provides mortgage and consumer lending services to
individuals primarily in the East Tennessee area. Loans receivable are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
First mortgage loans (principally conventional):
Secured by one-to-four family residences......................................... $ 39,662,996 $ 38,327,849
Secured by other properties...................................................... 3,284,932 2,095,374
Construction loans............................................................... 3,023,800 2,369,700
------------- -------------
45,971,728 42,792,923
Less:
Undisbursed portion of construction loans.......................................... 1,721,830 1,156,393
Net deferred loan origination fees................................................. 266,854 256,685
------------- -------------
Net first mortgage loans......................................................... 43,983,044 41,379,845
------------- -------------
Consumer and commercial loans:
Loans to depositors, secured by deposits......................................... 569,853 558,536
Automobile....................................................................... 708,247 607,922
Home equity and second mortgage.................................................. 241,655 236,329
Other............................................................................ 698,844 501,500
------------- -------------
2,218,599 1,904,287
Less unearned interest............................................................. 231 1,177
------------- -------------
Net consumer and commercial loans................................................ 2,218,368 1,903,110
------------- -------------
Less allowance for loan losses..................................................... 576,427 493,666
------------- -------------
$ 45,624,985 $ 42,789,289
------------- -------------
------------- -------------
</TABLE>
The Association had outstanding loan commitments of approximately $1,450,000
and $1,020,000 (in addition to undisbursed portion of construction loans) at
rates ranging from 6% to 10% as of June 30, 1997 and 1996, respectively.
See Accountant's Compilation Report.
F-10
<PAGE>
Activity in the allowance for loan losses consists of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Allowance at beginning of period.......................................................... $ 493,718 $ 496,445
Provision charged to expense.............................................................. 90,000 -0-
Charge offs, net of recoveries............................................................ (7,291) (2,779)
---------- ----------
Allowance at end of period................................................................ $ 576,427 $ 493,666
---------- ----------
---------- ----------
</TABLE>
As of June 30, 1997 and 1996, the Association had loans amounting to
approximately $646,000 and $382,000, respectively, that were specifically
classified as impaired. The average individual loan balance of these loans
amounted to approximately $25,000 and $22,000 for the periods ended June 30,
1997 and 1996, respectively. The allowance for loan losses related to
impaired loans amounted to approximately $32,000 and $19,000 as of June 30,
1997 and 1996, respectively. The following is a summary of cash receipts on
these loans and how they were applied in the six month period ended June 30,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash receipts applied to reduce principal balance........................................... $ 23,570 $ 15,631
Cash receipts recognized as interest income................................................. 7,312 4,945
--------- ---------
Total cash receipts......................................................................... $ 30,882 $ 20,576
--------- ---------
--------- ---------
</TABLE>
NOTE 4--PREMISES AND EQUIPMENT, NET
Premises and equipment, net are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land...................................................................................... $ 46,000 $ 46,000
Buildings................................................................................. 606,430 606,430
Furniture and equipment................................................................... 246,127 240,464
---------- ----------
898,557 892,894
Less accumulated depreciation............................................................. 685,804 661,024
---------- ----------
$ 212,753 $ 231,870
---------- ----------
---------- ----------
</TABLE>
NOTE 5--DEPOSITS
A summary of deposits is as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Demand Deposits:
Now Accounts....................................................................... $ 3,895,876 $ 3,056,885
Money Market Deposit Accounts...................................................... 1,835,265 2,226,483
Passbook Savings................................................................... 9,680,919 9,821,015
------------- -------------
Total Demand Deposits.............................................................. 15,412,060 15,104,383
------------- -------------
Term Deposits:
Less than $100,000................................................................. 27,514,208 25,475,961
$100,000 or More.................................................................. 13,798,528 11,066,659
------------- -------------
Total Term Deposits................................................................ 41,312,736 36,542,620
------------- -------------
$ 56,724,796 $ 51,647,003
------------- -------------
------------- -------------
</TABLE>
See Accountant's Compilation Report.
F-11
<PAGE>
As of June 30, 1997, the scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<S> <C>
1997.......................................................................... $30,457,881
1998.......................................................................... 10,413,962
1999.......................................................................... 345,893
2000.......................................................................... 95,000
-----------
$41,312,736
-----------
-----------
</TABLE>
NOTE 6-INCOME TAXES
Income taxes as shown in the consolidated statements of income differ from
the amount computed using the statutory federal income tax rate due to tax
exempt interest income and state excise tax expense. Income taxes consist of:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Current................................................................................... $ 223,275 $ 184,500
Deferred Benefit.......................................................................... (63,555) -0-
---------- ----------
$ 159,720 $ 184,500
---------- ----------
---------- ----------
</TABLE>
Deferred tax liabilities have been provided for taxable temporary
differences related to the allowance for loan losses, accumulated depreciation,
investments and loans. Deferred tax assets have been provided for deductible
temporary differences related to the allowance for loan losses and deferred loan
fees. The net deferred tax liability in the accompanying consolidated statements
of financial condition include the following components:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred Tax Liabilities.................................................................. $ 682,174 $ 389,907
Deferred Tax Assets....................................................................... 181,961 94,546
---------- ----------
Net Deferred Tax Liability............................................................... $ 500,213 $ 295,361
---------- ----------
---------- ----------
</TABLE>
In 1996, Congress enacted the Small Business Job Protection Act which
effectively removes any recapture provisions related to tax bad debt reserves
accumulated by the Association prior to 1988. However, any reserves accumulated
after 1987 must be recaptured over a six year period. The tax liability
associated with this recapture is included in the Association's deferred tax
liability as of June 30, 1997 and 1996. This change in tax law did not have a
significant impact on income tax expense.
Beginning in 1996, the Association will utilize the six year moving average
method to determine its tax bad debt deductions. The effect of this change will
be to increase taxable income in 1996 and future years.
NOTE 7--REGULATORY MATTERS
The Association is subject to various regulatory capital requirements
administered by its primary federal regulator, the Office of Thrift Supervision
(OTS). Failure to meet the minimum regulatory capital requirements can initiate
certain mandatory, and possible additional discretionary actions by regulators,
that if undertaken, could have a direct material affect on the Association and
the consolidated financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Association must meet specific capital guidelines involving quantitative
measures of the Association's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Association's
capital amounts and classification under the prompt corrective action guidelines
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors. Management believes that the Association
meets all capital adequacy requirements to which it is subject.
See Accountant's Compilation Report.
F-12
<PAGE>
Quantitative measures established by OTS regulations to ensure capital
adequacy require the Association to maintain minimum amounts and ratios of
"tangible capital" and "core capital" to "adjusted total assets" and "risk based
capital" to "risk-weighted assets" (as defined in the regulations). The
Association's actual capital amounts and minimum capital requirements of the OTS
are presented in the following table. All amounts are in thousands of dollars.
<TABLE>
<CAPTION>
TO COMPLY WITH
MINIMUM CAPITAL
ACTUAL REQUIREMENTS
---------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO
--------- ----- --------- -----
<S> <C> <C> <C> <C>
As of June 30, 1997:
- --------------------
Tangible Capital
(To Adjusted Total Assets).................................... $5,868 9.1% $ 963 1.5%
Core Capital
(To Adjusted Total Assets).................................... $5,868 9.1% $1,926 3.0%
Risk-Based Capital
(To Risk-Weighted Assets)..................................... $6,218 22.4% $2,224 8.0%
As of June 30, 1996:
- --------------------
Tangible Capital
(To Adjusted Total Assets).................................... $5,418 9.4% $ 868 1.5%
Core Capital
(To Adjusted Total Assets).................................... $5,418 9.4% $ 1,736 3.0%
Risk-Based Capital
(To Risk-Weighted Assets)..................................... $5,740 22.3% $ 2,061 8.0%
</TABLE>
As of June 30, 1997 the Association is categorized as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Association must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the
table below. There are no conditions or events since that date that
management believes have changed the institution's category. The
Association's actual capital amounts and ratios are also presented in the
following table. All amounts are in thousands of dollars.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
ACTION PROVISIONS
ACTUAL
---------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO
--------- ----- --------- -----
<S> <C> <C> <C> <C>
As of June 30, 1997:
- --------------------
Total Capital
(To Risk-Weighted Assets)........................................ $ 6,218 22.2% $ 2,780 10.0%
Tier I Capital
(To Risk-Weighted Assets)....................................... $ 5,868 21.0% $ 1,668 6.0%
Tier I Capital
(To Average Assets)............................................. $ 5,868 9.3% $ 3,128 5.0%
As of June 30, 1996:
- --------------------
Total Capital
(To Risk-Weighted Assets)........................................ $ 5,740 22.3% $ 2,576 10.0%
Tier I Capital
(To Risk-Weighted Assets)....................................... $ 5,418 21.0% $ 1,546 6.0%
Tier I Capital
(To Average Assets)............................................. $ 5,418 9.7% $ 2,779 5.0%
</TABLE>
In 1996 Congress enacted the Deposit Insurance Funds Act, which required the
Association to pay a special assessment to the Federal Deposit Insurance
Corporation of $316,765 in November 1996. In 1997, the Association's federal
deposit insurance premiums will be based on an assessment rate of .000648
multiplied times insured deposit balances, which should significantly reduce the
required premium amount.
See Accountant's Compilation Report.
F-13
<PAGE>
NOTE 8--RETIREMENT PLANS
The Association has established a 401(k) retirement plan which allows
eligible officers and employees to contribute up to fifteen percent of their
annual compensation on a tax-deferred basis. The Association has the option, at
the discretion of the board of directors, to make contributions to the plan.
Total retirement plan expense was $20,409 and $18,437 for the periods ended June
30, 1997 and 1996, respectively.
In June 1997, the Association established a long-term incentive plan for the
board of directors to provide target retirement benefits of 75% of board fees
for ten years for directors who retire with twenty or more years of service. As
of June 30, 1997, a liability totalling $150,991 is included in "other
liabilities" in the consolidated statement of condition and the corresponding
expense is included in "compensation and benefits" in the consolidated statement
of income for the six month period ended June 30, 1997.
NOTE 9--SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Association's business activity is with customers located within
East Tennessee. Investments in state and municipal securities involve
governmental entities within the State of Tennessee. As of June 30, 1997, the
Association had concentrations of loans in real estate lending and consumer
lending. Generally these loans are secured by the underlying real estate and
consumer goods. The usual risk associated with such concentrations are
generally mitigated by being spread over several hundred unrelated borrowers
and by adequate collateral loan to value ratios.
NOTE 10--PLAN OF CONVERSION
In May 1997, the board of directors, subject to approval of the deposit
accountholders (members) and the Office of Thrift Supervision, approved a
plan of reorganization from a mutual savings association to a capital stock
savings bank and the concurrent formation of a holding company. The
conversion is expected to be accomplished through amendment of the
Association's charter and the sale of the holding company's common stock in
an amount equal to the consolidated pro forma market value of the holding
company and the Association after giving effect to the conversion. A
subscription offering of the shares of common stock will be offered initially
to depositors, borrowers, directors, officers, employees and employee benefit
plans of the Association and to certain other eligible subscribers. Any
shares of common stock not sold in the offering are expected to be sold to
the public.
At the time of the conversion, the Association will establish a liquidation
account in an amount equal to its capital as of the date of the latest
consolidated statement of financial condition appearing in the final
prospectus. The liquidation account will be maintained for the benefit of
eligible accountholders who continue to maintain their accounts at the
Association after the conversion. The liquidation account will be reduced
annually to the extent that eligible accountholders have reduced their
qualifying deposits as of each anniversary date. Subsequent increases will
not restore an eligible accountholder interest in the liquidation account. In
the event of a complete liquidation, each eligible accountholder will be
entitled to receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts then
held.
Conversion costs are being deferred and will be deducted from the proceeds
of the shares sold in the conversion. If the conversion is not completed, all
costs will be charged to expense. As of June 30, 1997 the amount of conversion
costs that have been incurred and deferred is $25,000.
See Accountant's Compilation Report.
F-14
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board Of Directors
Newport Federal Savings
and Loan Association
Newport, Tennessee
We have audited the accompanying consolidated statements of financial
condition of Newport Federal Savings and Loan Association and subsidiary as
of December 31, 1996 and 1995, and the related consolidated statements of
income, changes in equity, and cash flows for the years ended December 31,
1996, 1995 and 1994. These consolidated financial statements are the
responsibility of the Association'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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 Newport
Federal Savings and Loan Association and subsidiary as of December 31, 1996
and 1995, and the results of their operations and their cash flows for the
years ended December 31, 1996, 1995 and 1994, in conformity with generally
accepted accounting principles.
/s/Pugh & Company, P.C.
Certified Public Accountants
January 17, 1997
F-15
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN
ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 1995
- ----------------------------------------------------------------------------------- ------------- -------------
-ASSETS -
<S> <C> <C>
Cash and Amounts Due From Depository Institutions.................................. $ 2,888,527 $ 1,832,162
Investment Securities:
Available for Sale, at Fair Value................................................. 11,688,661 10,285,859
Held to Maturity (Fair Value of $1,240,710 in 1996 and $1,087,684 in 1995)........ 1,212,377 1,046,208
Loans Receivable, Net.............................................................. 44,229,918 40,364,779
Premises and Equipment, Net........................................................ 227,755 249,778
Accrued Interest Receivable........................................................ 294,357 193,170
Other Assets....................................................................... 69,780 47,049
------------- -------------
TOTAL ASSETS....................................................................... $ 60,611,375 $ 54,019,005
------------- -------------
------------- -------------
-LIABILITIES AND EQUITY -
LIABILITIES
Deposits
Demand........................................................................... $ 15,354,820 $ 15,003,381
Term............................................................................. 38,412,125 32,950,786
------------- -------------
Total Deposits................................................................. 53,766,945 47,954,167
Accrued Interest Payable........................................................... 225,997 197,622
Deferred Income Taxes.............................................................. 484,548 404,431
Other Liabilities.................................................................. 30,975 43,737
------------- -------------
Total Liabilities.............................................................. 54,508,465 48,599,957
------------- -------------
EQUITY
Retained Earnings................................................................. 5,631,487 5,048,020
Net Unrealized Gain on Investment Securities...................................... 471,423 371,028
------------- -------------
Total Equity................................................................... 6,102,910 5,419,048
------------- -------------
TOTAL LIABILITIES AND EQUITY....................................................... $ 60,611,375 $ 54,019,005
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
INTEREST INCOME
Loans.................................................................. $ 3,719,759 $ 3,383,137 $ 3,018,477
Investment Securities.................................................. 726,423 875,650 858,420
Other Interest-Earning Assets.......................................... 90,035 22,971 28,675
------------ ------------ ------------
Total Interest Income................................................. 4,536,217 4,281,758 3,905,572
INTEREST EXPENSE ON DEPOSITS............................................ 2,399,548 2,217,664 1,654,637
------------ ------------ ------------
NET INTEREST INCOME..................................................... 2,136,669 2,064,094 2,250,935
PROVISION FOR LOAN LOSSES............................................... -0- -0- 33,000
------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES..................... 2,136,669 2,064,094 2,217,935
NONINTEREST INCOME
Deposit Account Service Charges........................................ 82,627 70,186 66,340
Loan Service Charges and Fees.......................................... 57,194 58,295 57,319
Net Gain (Loss) on Sales of Interest-Earning Assets.................... (3,589) 26,789 (10,419)
Other.................................................................. 13,395 11,652 5,778
------------ ------------ ------------
Total Noninterest Income.............................................. 149,627 166,922 119,018
------------ ------------ ------------
NONINTEREST EXPENSE
Compensation and Benefits.............................................. 517,002 476,442 446,162
Occupancy and Equipment................................................ 146,133 136,290 153,766
Federal Deposit Insurance Premiums..................................... 452,000 132,000 124,720
Data Processing Fees................................................... 112,856 109,455 98,264
Advertising and Promotion.............................................. 53,468 52,775 49,397
Loss on Foreclosed Real Estate......................................... 988 712 242
Other.................................................................. 195,582 174,453 165,295
------------ ------------ ------------
Total Noninterest Expense............................................... 1,478,029 1,082,127 1,037,846
------------ ------------ ------------
INCOME BEFORE INCOME TAXES.............................................. 808,267 1,148,889 1,299,107
INCOME TAXES............................................................ 224,800 434,737 456,317
------------ ------------ ------------
NET INCOME.............................................................. $ 583,467 $ 714,152 $ 842,790
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Years Ended December 31, 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN
(LOSS) ON
RETAINED INVESTMENT TOTAL
EARNINGS SECURITIES EQUITY
------------ ----------- ------------
<S> <C> <C> <C>
BALANCES, JANUARY 1, 1994................................................. $ 3,491,078 $ 343,952 $ 3,835,030
Net Income................................................................ 842,790 -0- 842,790
Change in Net Unrealized Gain ............................................
(Loss) on Investment Securities.......................................... -0- (415,925) (415,925)
------------ ----------- ------------
BALANCES, DECEMBER 31, 1994............................................... 4,333,868 (71,973) 4,261,895
Net Income................................................................ 714,152 -0- 714,152
Change in Net Unrealized Gain ............................................
(Loss) on Investment Securities.......................................... -0- 443,001 443,001
------------ ----------- ------------
BALANCES, DECEMBER 31, 1995............................................... 5,048,020 371,028 5,419,048
Net Income................................................................ 583,467 -0- 583,467
Change in Net Unrealized Gain (Loss) on Investment Securities............. -0- 100,395 100,395
------------ ----------- ------------
BALANCES, DECEMBER 31, 1996............................................... $ 5,631,487 $ 471,423 $ 6,102,910
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income............................................................... $ 583,467 $ 714,152 $ 842,790
----------- ----------- -----------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Loan Losses.............................................. -0- -0- 33,000
Depreciation........................................................... 44,450 49,613 41,645
Amortization of Investment Securities Premiums and Discounts, Net...... (7,612) 25,389 46,408
Increase in Unearned Loan Fees......................................... 13,150 32,969 12,773
Net (Gain) on Sales of Foreclosed Real Estate.......................... (5,377) (4,129) (178)
Federal Home Loan Bank Stock Dividends................................. (34,000) (30,400) (22,600)
Net (Gain) Loss on Sales of Interest-Earning Assets.................... 3,589 (26,789) 10,419
Deferred Income Taxes.................................................. 18,584 166,993 20,800
(Increase) Decrease in:
Accrued Interest Receivable........................................... (101,187) (38,280) (46,361)
Other Assets.......................................................... (22,731) (7,457) (15,624)
Increase (Decrease) in:
Accrued Interest Payable.............................................. 28,375 23,518 114,603
Accrued Income Taxes.................................................. -0- -0- (24,340)
Other Liabilities..................................................... (12,762) 2,440 5,650
----------- ----------- -----------
Total Adjustments................................................... (75,521) 193,867 176,195
----------- ----------- -----------
Net Cash Provided by Operating Activities......................... 507,946 908,019 1,018,985
----------- ----------- -----------
INVESTING ACTIVITIES
Purchases of Investment Securities Available for Sale................... (3,965,945) (1,038,511) (3,900,550)
Proceeds From Sales of Investment Securities Available for Sale......... 1,003,203 4,191,894 1,139,939
Proceeds From Maturities of Investment Securities Available for Sale.... 500,000 -0- -0-
Principal Payments Received on Investment Securities Available for
Sale................................................................... 1,260,389 1,188,975 1,462,766
Purchases of Investment Securities Held to Maturity..................... (166,667) -0- -0-
Proceeds From Maturities of Investment Securities Held to Maturity...... -0- 260,000 150,000
Net Increase in Loans................................................... (3,872,912) (3,814,824) (2,533,183)
Purchases of Plant and Equipment, Net................................... (22,427) (12,274) (113,238)
Proceeds From Sales of Foreclosed Real Estate........................... -0- 25,162 4,726
----------- ----------- -----------
Net Cash Provided by (Used in) Investing Activities............... (5,264,359) 800,422 (3,789,540)
----------- ----------- -----------
</TABLE>
F-19
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits.................................... 5,812,778 (806,377) 1,450,338
------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... 1,056,365 902,064 (1,320,217)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................ 1,832,162 930,098 2,250,315
------------ ------------ -----------
CASH AND CASH EQUIVALENTS, END OF YEAR.................................. $ 2,888,527 $ 1,832,162 $ 930,098
------------ ------------ -----------
------------ ------------ -----------
Supplementary Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest............................................................... $ 2,371,173 $ 2,194,146 $ 1,540,034
Income Taxes........................................................... $ 231,305 $ 269,749 $ 459,114
Supplementary Disclosures of Noncash
Investing Activities:
Transfer of Mortgage-Backed and
Related Securities From Held to Maturity
Category to Available for Sale Category.............................. $ -0- $ 3,218,265 $ -0-
Sale of Foreclosed Real Estate
by Origination of Mortgage Loans..................................... $ 61,000 $ 109,395 $ 13,000
Acquisition of Foreclosed Real Estate.................................. $ 49,380 $ 94,554 $ 53,422
Change in Unrealized Gain on Investment Securities
Available for Sale.................................................... $ 161,928 $ 714,517 $ (670,846)
Change in Deferred Income Tax Associated With
Unrealized Gain on Investment Securities Available
for Sale.............................................................. $ 61,533 $ 271,516 $ (254,921)
Change in Net Unrealized Gain on Investment
Securities Available for Sale......................................... $ 100,395 $ 443,001 $ (415,925)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 AND 1994
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation--The consolidated financial statements include the
accounts of Newport Federal Savings and Loan Association and its wholly owned
subsidiary, NFS Service Corporation. The subsidiary is a service corporation
whose only asset is a $15,000 investment in Data Services Corporation of
Cincinnati, Ohio, (see Note 2) which provides data processing services to the
Association. The subsidiary has liabilities of $698 payable to the
Association and shareholder's equity of $14,302 as of December 31, 1996, 1995
and 1994. Results of operations of the subsidiary were $-0- for the years
ended December 31, 1996, 1995 and 1994. All intercompany accounts have been
eliminated.
Reclassifications--Certain items in the 1994 and 1995 consolidated financial
statements have been reclassified to conform with the 1996 consolidated
financial statements.
Nature of Operations--The Association provides a variety of financial
services to individuals and corporate customers through its two offices in
Newport, Tennessee. The Association's primary deposit products are
interest-bearing savings accounts and certificates of deposit. Its primary
lending products are one-to-four family first mortgage loans.
Use of Estimates--The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change relate to the determination of the
allowance for losses on loans and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collection of the principal is
unlikely. The allowance is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and prior
loan loss experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and economic conditions that may
affect the borrowers' ability to pay.
Real estate acquired through, or in lieu of, loan foreclosure is carried at
the lower of cost or fair value less estimated costs to sell. Cost includes
the balance of the loan plus acquisition costs and improvements made
thereafter to facilitate sale. Costs related to the holding of the real
estate are expensed.
Cash and Cash Equivalents--Cash and cash equivalents include "Cash and
Amounts Due from Depository Institutions."
Cash and Amounts Due From Depository Institutions--Cash and amounts due from
depository institutions includes approximately $2,270,000 on deposit with the
Federal Home Loan Bank of Cincinnati as of December 31, 1996 ($1,245,000 in
1995).
F-21
<PAGE>
Investment Securities--In accordance with SFAS No. 115, the Association has
segregated its securities into the following categories:
(a) Held to Maturity--These debt securities are carried at cost, adjusted
for amortization of premiums and accretion of discounts, which are
recognized as adjustments to interest income, using a method which
approximates the level yield method. In placing securities in this category,
the Association has expressed a positive intent and ability to hold such
securities until they mature. The Association has classified all of its
obligations of states and political subdivisions in its held to maturity
portfolio.
(b) Available for Sale--All other debt and equity securities have been
placed in this category. These securities are carried at fair value based on
quoted market prices. Any unrealized gain or loss is reported in the
consolidated statements of financial condition as a component of equity,
net of any deferred tax effect.
Realized gains or losses on the sales of securities available for sale are
based on the net proceeds and amortized cost of the securities sold, using the
specific identification method. See Note 2 for additional information on
investment securities.
Loan Fees--Loan fees, net of initial direct costs related to initiating and
closing loans, have been deferred and are being amortized into interest income
over the remaining lives of the loans as an adjustment of yield, using the level
yield method.
Recognition of Interest on Loans--Unearned interest on installment loans is
recognized as income over the terms of the loans using a declining balance
method. Interest on other loans is calculated by using the simple interest
method on the principal outstanding. Accrual of interest is discontinued on a
loan when management believes, after considering economic and business
conditions and collection efforts, that the borrowers' financial condition is
such that the collection of interest is doubtful.
Premises and Equipment, Net--Premises and equipment are stated at cost less
accumulated depreciation. Depreciation, computed principally using the
straight-line method for financial accounting purposes and accelerated
methods for income tax reporting purposes, is based on estimated useful lives
of five to thirty years.
Income Taxes--Income taxes are provided for the tax effects of the
transactions reported in the consolidated financial statements and consist of
taxes currently due plus deferred taxes related primarily to differences
between the basis of investment securities, allowance for loan losses,
deferred loan fees, and accumulated depreciation for financial accounting and
income tax reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled. An appropriate provision is made in the consolidated financial
statements for deferred income taxes in recognition of these differences.
F-22
<PAGE>
NOTE 2--INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities
classified as available for sale are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES AVAILABLE FOR SALE
-----------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
As of December 31, 1996
Debt Securities:
U.S. Treasury Securities and Obligations of
U.S. Government Corporations and Agencies.... $ 2,977,719 $ 22,151 $(11,212) $ 2,988,658
Mortgage-Backed Securities.................... 7,397,334 87,245 (83,884) 7,400,695
----------------- ----------- ------------- -------------
Total Debt Securities........................ 10,375,053 109,396 (95,096) 10,389,353
----------------- ----------- ------------- -------------
Equity Securities:
Federal Home Loan Bank of Cincinnati Stock.... 510,800 -0- -0- 510,800
Federal Home Loan Mortgage Corporation
Preferred Stock.............................. 27,448 746,060 -0- 773,508
Data Services Corporation Stock............... 15,000 -0- -0- 15,000
----------------- ----------- ------------- -------------
Total Equity Securities........................ 553,248 746,060 -0- 1,299,308
----------------- ----------- ------------- -------------
$10,928,301 $855,456 $(95,096) $ 11,688,661
----------------- ----------- ------------- -------------
----------------- ----------- ------------- -------------
As of December 31, 1995
Debt Securities:
U.S. Treasury Securities and Obligations of
U.S. Government Corporations and Agencies... $ 1,515,904 $ -0- $ (2,745) $ 1,513,159
Mortgage-Backed Securities.................... 7,652,275 85,324 (41,867) 7,695,732
Total Debt Securities........................ 9,168,179 85,324 (44,612) 9,208,891
Equity Securities:
Federal Home Loan Bank of Cincinnati Stock.... 476,800 -0- -0- 476,800
Federal Home Loan Mortgage Corporation
Preferred Stock.............................. 27,448 557,720 -0- 585,168
Data Services Corporation Stock............... 15,000 -0- -0- 15,000
Total Equity Securities...................... 519,248 557,720 -0- 1,076,968
----------------- ----------- ------------- -------------
$ 9,687,427 $643,044 $ (44,612) $10,285,859
----------------- ----------- ------------- -------------
----------------- ----------- ------------- -------------
</TABLE>
Gross realized gains and losses from sales of investment securities
classified as available for sale are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
Gross Realized Gains............................................................ $ -0- $ 40,039 $ 589
Gross Realized Losses........................................................... (3,589) (13,250) (11,008)
--------- --------- ----------
$ (3,589) $ 26,789 $ (10,419)
--------- --------- ----------
--------- --------- ----------
</TABLE>
The amortized cost and estimated fair value of investment securities
classified as held to maturity are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES HELD TO MATURITY
------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
As of December 31, 1996
Obligations of States and
Political Subdivisions..................................... $ 1,212,377 $ 28,333 $ -0- $ 1,240,710
------------ ----------- --- ------------
------------ ----------- --- ------------
As of December 31, 1995
Obligations of States and
Political Subdivisions..................................... $ 1,046,208 $ 41,476 $ -0- $ 1,087,684
------------ ----------- --- ------------
------------ ----------- --- ------------
</TABLE>
F-23
<PAGE>
The amortized cost and estimated fair value of debt securities as of
December 31, 1996, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------- --------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Due in One Year or Less................................ $ -0- $ -0- $ 115,109 $ 116,225
Due After One Year Through Five Years.................. 6,560,967 6,513,756 315,601 322,017
Due After Five Years Through Ten Years................. 1,487,467 1,463,296 781,667 802,468
Due After Ten Years.................................... 2,326,619 2,412,301 -0- -0-
------------- ------------- ------------ ------------
$ 10,375,053 $ 10,389,353 $ 1,212,377 $ 1,240,710
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The Association did not sell any investment securities classified as held to
maturity during the years ended December 31, 1996, 1995, and 1994.
In 1995, in accordance with paragraph 61 of the FASB Special Report No.
155-B, the Association transferred mortgage-backed and related securities with
an amortized cost of $3,218,265 from its held to maturity category to its
available for sale category. These securities had a net unrealized loss of
approximately $26,000 on the date transferred. There were no transfers between
categories in 1996.
Investments with book values of approximately $1,400,000 (which approximates
market values) as of both December 31, 1996 and 1995, respectively, were pledged
to secure deposits of public funds.
NOTE 3--LOANS RECEIVABLE
The Association provides mortgage and consumer lending services to
individuals primarily in the East Tennessee area. Loans receivable are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
First mortgage loans (principally conventional):
Secured by one-to-four family residences.......................................... $ 39,549,254 $ 36,534,109
Secured by other properties....................................................... 2,264,532 1,369,572
Construction loans................................................................ 1,889,100 2,340,900
------------- -------------
43,702,886 40,244,581
------------- -------------
Less:
Undisbursed portion of construction loans......................................... 688,450 979,822
Net deferred loan origination fees................................................ 261,955 248,805
------------- -------------
Net first mortgage loans......................................................... 42,752,481 39,015,954
------------- -------------
Consumer and commercial loans:
Loans to depositors, secured by deposits.......................................... 509,139 587,651
Automobile........................................................................ 664,253 513,868
Home equity and second mortgage................................................... 233,882 232,540
Other............................................................................. 564,579 512,932
------------- -------------
1,971,853 1,846,991
------------- -------------
Less unearned interest............................................................. 698 1,721
------------- -------------
Net consumer and commercial loans................................................ 1,971,155 1,845,270
------------- -------------
Less allowance for loan losses..................................................... 493,718 496,445
------------- -------------
$ 44,229,918 $ 40,364,779
------------- -------------
------------- -------------
</TABLE>
F-24
<PAGE>
The Association had outstanding loan commitments of approximately $799,000
and $634,000 (in addition to undisbursed portion of construction loans) at rates
ranging from 6% to 10% as of December 31, 1996 and 1995, respectively.
Activity in the allowance for loan losses consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Allowance at beginning of year............................................... $ 496,445 $ 498,452 $ 474,809
Provision charged to expense................................................ -0- -0- 33,000
Charge offs, net of recoveries.............................................. (2,727) (2,007) (9,357)
---------- ---------- ----------
Allowance at end of year..................................................... $ 493,718 $ 496,445 $ 498,452
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
As of December 31, 1996 and 1995, the Association had loans amounting to
approximately $380,000 and $294,000, respectively, that were specifically
classified as impaired. The average individual loan balance of these loans
amounted to approximately $25,000 and $18,000 as of December, 31, 1996 and 1995,
respectively. The allowance for loan losses related to impaired loans amounted
to approximately $-0- and $8,000 as of December 31, 1996 and 1995, respectively.
The following is a summary of cash receipts on these loans and how they were
applied in 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash receipts applied to reduce principal balance........................................... $ 36,747 $ 23,160
Cash receipts recognized as interest income................................................. 33,061 26,263
--------- ---------
Total cash receipts......................................................................... $ 69,808 $ 49,423
--------- ---------
--------- ---------
</TABLE>
NOTE 4--PREMISES AND EQUIPMENT, NET
Premises and equipment, net are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land...................................................................................... $ 46,000 $ 46,000
Buildings................................................................................. 606,430 606,430
Furniture and equipment................................................................... 256,799 234,372
---------- ----------
909,229 886,802
Less accumulated depreciation............................................................. 681,474 637,024
$ 227,755 $ 249,778
---------- ----------
---------- ----------
</TABLE>
NOTE 5--DEPOSITS
A summary of deposits is as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ -------------
<S> <C> <C>
Demand Deposits:
Now Accounts............................................................ $ 3,387,886 $ 2,812,048
Money Market Deposit Accounts........................................... 2,273,793 2,033,635
Passbook Savings........................................................ 9,693,141 10,157,698
------------------------ -------------
Total Demand Deposits.................................................. 15,354,820 15,003,381
------------------------ -------------
Term Deposits:
Less than $100,000...................................................... 26,421,000 24,449,952
$100,000 or More........................................................ 11,991,125 8,500,834
Total Term Deposits.................................................... 38,412,125 32,950,786
------------------------ -------------
$ 53,766,945 $ 47,954,167
------------------------ -------------
------------------------ -------------
</TABLE>
F-25
<PAGE>
As of December 31, 1996, the scheduled maturities of certificates of deposit
are as follows:
<TABLE>
<S> <C>
1997.......................................................................... $34,255,238
1998.......................................................................... 3,884,456
1999.......................................................................... 177,431
2000.......................................................................... 95,000
-----------
$38,412,125
-----------
-----------
</TABLE>
NOTE 6--INCOME TAXES
Income taxes as shown in the consolidated statements of income differ from
the amount computed using the statutory federal income tax rate due to tax
exempt interest income and state excise tax expense. Income taxes consist of:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current...................................................................... $ 206,216 $ 267,744 $ 435,517
Deferred..................................................................... 18,584 166,993 20,800
---------- ---------- ----------
$ 224,800 $ 434,737 $ 456,317
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Deferred tax liabilities have been provided for taxable temporary
differences related to the allowance for loan losses, accumulated depreciation,
investments and loans. Deferred tax assets have been provided for deductible
temporary differences related to the allowance for loan losses and deferred loan
fees. The net deferred tax liability in the accompanying consolidated statements
of financial condition include the following components:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred Tax Liabilities.................................................................. $ 583,986 $ 498,977
Deferred Tax Assets....................................................................... 99,438 94,546
---------- ----------
Net Deferred Tax Liability............................................................... $ 484,548 $ 404,431
---------- ----------
---------- ----------
</TABLE>
In 1996, Congress enacted the Small Business Job Protection Act which
effectively removes any recapture provisions related to tax bad debt reserves
accumulated by the Association prior to 1988. However, any reserves accumulated
after 1987 must be recaptured over a six year period. The tax liability
associated with this recapture is included in the Association's deferred tax
liability as of December 31, 1996. This change in tax law did not have a
significant impact on income tax expense.
Beginning in 1996, the Association will utilize the six year moving average
method to determine its tax bad debt deductions. The effect of this change will
be to increase taxable income in 1996 and future years.
NOTE 7--REGULATORY MATTERS
The Association is subject to various regulatory capital requirements
administered by its primary federal regulator, the Office of Thrift
Supervision (OTS). Failure to meet the minimum regulatory capital
requirements can initiate certain mandatory, and possible additional
discretionary actions by regulators, that if undertaken, could have a direct
material affect on the Association and the consolidated financial statements.
Under the regulatory capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Association must meet specific capital
guidelines involving quantitative measures of the Association's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Association's capital amounts and
classification under the prompt corrective action guidelines are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors. Management believes that the Association meets all capital
adequacy requirements to which it is subject.
F-26
<PAGE>
Quantitative measures established by OTS regulations to ensure capital
adequacy require the Association to maintain minimum amounts and ratios of
"tangible capital" and "core capital" to "adjusted total assets" and "risk based
capital" to "risk-weighted assets" (as defined in the regulations). The
Association's actual capital amounts and minimum capital requirements of the OTS
are presented in the following table. All amounts are in thousands of dollars.
<TABLE>
<CAPTION>
TO COMPLY WITH
MINIMUM CAPITAL
ACTUAL REQUIREMENTS
------------------------ ----------------------
AMOUNT RATIO AMOUNT RATIO
--------- ----- --------- -----
<S> <C> <C> <C> <C>
As of December 31, 1996:
Tangible Capital (To Adjusted Total Assets)............................. $ 5,631 9.3% $ 909 1.5%
Core Capital (To Adjusted Total Assets)................................. $ 5,631 9.3% $ 1,818 3.0%
Risk-Based Capital (To Risk-Weighted Assets)............................ $ 5,972 21.9% $ 2,179 8.0%
As of December 31, 1995:
Tangible Capital (To Adjusted Total Assets)............................. $ 5,048 9.3% $ 810 1.5%
Core Capital (To Adjusted Total Assets)................................. $ 5,048 9.3% $ 1,621 3.0%
Risk-Based Capital (To Risk-Weighted Assets)............................ $ 5,323 24.2% $ 1,759 8.0%
</TABLE>
As of December 31, 1996 the Association is categorized as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized, the Association must maintain minimum total risk-based,
Tier I risk-based and Tier I leverage ratios as set forth in the table below.
There are no conditions or events since that date that management believes have
changed the institution's category. The Association's actual capital amounts and
ratios are also presented in the following table. All amounts are in thousands
of dollars.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
ACTION PROVISIONS
ACTUAL
------------------------ ----------------------
AMOUNT RATIO AMOUNT RATIO
--------- ----- -------- -----
<S> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (To Risk-Weighted Assets)................................. $ 5,972 21.9% $2,724 10.0%
Tier I Capital (To Risk-Weighted Assets)................................ $ 5,631 20.7% $1,634 6.0%
Tier I Capital (To Average Assets)...................................... $ 5,631 9.8% $2,866 5.0%
As of December 31, 1995:
Total Capital (To Risk-Weighted Assets)................................. $ 5,323 24.2% $2,199 10.5%
Tier I Capital (To Risk-Weighted Assets)................................ $ 5,048 23.0% $1,319 6.0%
Tier I Capital (To Average Assets)...................................... $ 5,048 9.4% $2,681 5.0%
</TABLE>
In 1996 Congress enacted the Deposit Insurance Funds Act, which required the
Association to pay a special assessment to the Federal Deposit Insurance
Corporation of $316,765. In 1997, the Association's federal deposit insurance
premiums will be based on an assessment rate of .000648 multiplied times insured
deposit balances, which should significantly reduce the required premium amount.
F-27
<PAGE>
NOTE 8--RETIREMENT PLAN
The Association has established a 401(k) retirement plan which allows
eligible officers and employees to contribute up to fifteen percent of their
annual compensation on a tax-deferred basis. The Association has the option,
at the discretion of the board of directors, to make contributions to the
plan. Total retirement plan expense was $36,521, $40,147, and $30,174 for the
years ended December 31, 1996, 1995, and 1994, respectively.
NOTE 9--SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Association's business activity is with customers located within
East Tennessee. Investments in state and municipal securities involve
governmental entities within the State of Tennessee. As of December 31, 1996,
the Association had concentrations of loans in real estate lending and
consumer lending. Generally these loans are secured by the underlying real
estate and consumer goods. The usual risk associated with such concentrations
are generally mitigated by being spread over several hundred unrelated
borrowers and by adequate collateral loan to value ratios.
F-28
<PAGE>
- ------------------------------------ --------------------------------------
- ------------------------------------ --------------------------------------
No one has been authorized to give UNITED TENNESSEE BANKSHARES, INC.
any information or to make any
representation other than as
contained in this prospectus. This
prospectus is not an offer to sell
or a solicitation of an offer to (Holding Company for
buy any of the securities offered Newport Federal Savings and
hereby to any person in any Loan Association)
jurisdiction in which such offer
or solicitation is not authorized
or in which the person making such
offer or solicitation is not
qualified to do so or to any
person to whom it is unlawful.
Neither the delivery of this
prospectus nor any sale hereunder
shall under any circumstances
create any implication that there
has been no change in the affairs
of the Company or the Bank since
any of the dates as of which
information is furnished herein or
since the date hereof.
Table of Contents
Page
----
QUESTIONS AND ANSWERS...... (i)
RISK FACTORS............... (viii)
SELECTED CONSOLIDATED
FINANCIAL INFORMATION AND
OTHER DATA................ 1 PROSPECTUS
THE CONVERSION............. 5
UNITED TENNESSEE
BANKSHARES, INC........... 18
NEWPORT FEDERAL SAVINGS AND
LOAN ASSOCIATION.......... 18
USE OF PROCEEDS............ 19
DIVIDENDS.................. 20
MARKET FOR THE COMMON
STOCK..................... 20
PURCHASES BY DIRECTORS AND
EXECUTIVE OFFICERS........ 22
CAPITALIZATION............. 23
HISTORICAL AND PRO FORMA
REGULATORY CAPITAL
COMPLIANCE................ 24 Between 935,000
PRO FORMA DATA............. 25 and 1,454,750 Shares
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS................ 29 COMMON STOCK
BUSINESS................... 43
REGULATION................. 65
TAXATION................... 72
MANAGEMENT................. 73
CERTAIN RESTRICTIONS ON
ACQUISITIONS.............. 83
CERTAIN ANTI-TAKEOVER
PROVISIONS................ 84
DESCRIPTION OF COMMON
STOCK..................... 88
REGISTRATION REQUIREMENTS.. 89
LEGAL MATTERS.............. 89
EXPERTS.................... 90
ADDITIONAL INFORMATION..... 90
INDEX TO CONSOLIDATED TRIDENT SECURITIES, INC.
FINANCIAL STATEMENTS...... 91
Until December , 1997, or 25 days
after commencement of any
Syndicated Offering, whichever is
later, all dealers effecting
transactions in the registered
securities, whether or not
participating in this November , 1997
distribution, may be required to
deliver a prospectus. This is in
addition to the obligation of
dealers to deliver a prospectus
when acting as underwriters and
with respect to their unsold
allotments or subscriptions.
- ------------------------------------ --------------------------------------
- ------------------------------------ --------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article XIII of the Charter of the registrant (the "Corporation") sets
forth circumstances under which directors, officers, employees and agents shall
or may be indemnified against liability which they incur in their capacities as
follows:
ARTICLE XIII - Indemnification
(A) Except as provided in Section (B) of this Article, the Corporation
shall indemnify a director who is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative ("proceeding"), because he is or was a director against
liability incurred in such proceeding if (1) he conducted himself in good faith;
(2) he reasonably believed, (a) in the case of conduct in his official capacity
with the Corporation, that his conduct was in the Corporation's best interest
and, (b) in all other cases, that his conduct was at least not opposed to its
best interests; and, (3) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
The Corporation shall further indemnify any director and any officer who is
not a director who was wholly successful, on the merits or otherwise, in the
defense of any proceedings to which he was a party because he is or was a
director of the Corporation against reasonable expenses incurred by him in
connection with the proceeding.
(B) The Corporation shall not indemnify a director in connection with a
proceeding by or in the right of the Corporation in which the director was
adjudged liable to the Corporation or in connection with any other proceeding
charging improper personal benefit to him, whether or not involving action in
his official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him.
(C) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if (1) the director furnishes the Corporation a
written affirmation of his good faith belief that he has met the standard of
conduct set forth in Section (A) of this Article; (2) he provides the
Corporation a written undertaking, executed personally or on his behalf, to
repay the advance if it is ultimately determined that he is not entitled to
indemnification; and (3) a determination is made that the facts then known to
those making the determination would not preclude indemnification under this
Article XIII.
(D) The Corporation may not indemnify a director hereunder unless
authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because he
has met the standard set forth in Section (A) of this Article XIII. The
determination shall be made:
(1) By the board of directors by majority vote of a quorum consisting
of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under Subsection (1) of this
Section, by majority vote of a committee duly designated by the board of
directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to the
proceeding;
(3) By independent special legal counsel;
(a) Selected by the board of directors or its committee in the
manner prescribed in Subsections (1) or (2) of this Section;
II-1
<PAGE>
(b) If a quorum of the board of directors cannot be obtained
under Subsection (1) of this Section and a committee cannot be
designated under Subsection (2) of this Section, selected by majority
vote of the full board of directors (in which selection directors who
are parties may participate); or
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not
be voted on the determination.
(E) Authorization of indemnification and evaluation that indemnification
is permissible shall be made in the same manner as the determination that
indemnification is permissible, except that, if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under Subsection (3)
of this Section to select counsel.
(F) The Corporation may indemnify and advance expenses to an officer,
employee or agent of the Corporation who is not a director to the same extent as
a director hereunder.
(G) The Corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
Corporation, or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan or other
enterprise, against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee or agent,
whether or not the Corporation would have power to indemnify him against the
same liability hereunder.
Article XII of the Corporation's Charter eliminates directors' liability to
the Corporation or its stockholders as follows:
ARTICLE XII - Elimination of Directors' Liability
Directors of the Corporation shall have no liability to the Corporation or
its shareholders for monetary damages for breach of fiduciary duty as a
director, provided that this Article XII shall not eliminate liability of a
director (A) for any breach of the director's duty of loyalty to the Corporation
or its shareholders; (B) for acts or omissions that are not in good faith or
that involve intentional misconduct or a knowing violation of law; or (C) for
unlawful distributions under Section 48-18-304 of the Tennessee Business
Corporation Act.
If the Tennessee Business Corporation Act is amended to permit further
elimination or limitation of the personal liability of directors, then the
liability of directors of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Tennessee Business Corporation Act, as so
amended. Any repeal or modification of this Article XII or applicable Tennessee
law shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
II-2
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.
ESTIMATED EXPENSES INCIDENT TO THE CONVERSION
Legal fees and expenses,
including special and local counsel.....................$ 115,000
EDGAR file conversions and filings,
printing, postage and mailings.......................... 100,000
Accounting fees and expenses............................. 30,000
Appraisal fees and expenses.............................. 20,500
Business Plan and related
consulting fees and expenses............................ 5,000
Blue Sky filing fees and expenses
(including legal counsel)............................... 10,000
Filing fees (OTS, SEC and Nasdaq)........................ 25,000
Conversion agent fees and expenses....................... 8,500
Stock transfer agent and certificates................... 15,000
Sales agent's expenses................................... 40,000
Other expenses........................................... 61,000
-------
Subtotal............................................. 430,000
Sales agent's fees*....................190,000/220,000/250,000/285,000
-------------------------------
Total*............................$620,000/650,000/680,000/715,000
-------------------------------
-------------------------------
*Based on minimum/midpoint/maximum/maximum, as adjusted (see Prospectus in
PartI)
Item 26. Recent Sales of Unregistered Securities.
Not applicable.
Item 27. Exhibits:
(a) The exhibits filed as a part of this registration statement
areas follows:
1.1 Engagement Letter with Trident Securities, Inc.
1.2 Form of Agency Agreement with Trident Securities, Inc.
2 Plan of Conversion (Exhibit A to Proxy Statement filed as Exhibit 99.2)
3.1 Charter of United Tennessee Bankshares, Inc.
3.2 Bylaws of United Tennessee Bankshares, Inc.
4 Form of Stock Certificate of United Tennessee Bankshares, Inc.
5 Opinion of Housley Kantarian & Bronstein, P.C. regarding
legality of securities being registered
8.1 Federal Tax Opinion of Housley Kantarian & Bronstein, P.C.
II-3
<PAGE>
8.2 State Tax Opinion of Pugh & Company, P.C.
8.3 Opinion of RP Financial, LC as to the value of subscription rights
for tax purposes
10.1 Form of United Tennessee Bankshares, Inc. Stock Option and
Incentive Plan
10.2 Form of United Tennessee Bankshares, Inc. Management Recognition
Plan and Trust Agreement
10.3(a) Employment Agreements between Newport Federal Savings and Loan
Association and Richard G. Harwood, Nancy L. Bryant and
Peggy Holston
10.3(b) Forms of Guarantee Agreements between United Tennessee
Bankshares, Inc. and Richard G. Harwood, Nancy L. Bryant and Peggy
Holston
10.4 Newport Federal Savings and Loan Association Long-Term Incentive
Plan
10.5 Newport Federal Savings and Loan Association Deferred
Compensation Plan
23.1 Consents of Housley Kantarian & Bronstein, P.C. (in opinions filed
as Exhibits 5 and 8.1)
23.2 Consent of Pugh & Company, P.C.
23.3 Consent of RP Financial, LC
24 Power of Attorney (see signature page)
27 Financial Data Schedule
99.1 Forms of Stock Order Form and Certification
99.2 Forms of Proxy Statement for Special Meeting of Members of Newport
Federal Savings and Loan Association and Proxy Card
99.3 Forms of Miscellaneous Solicitation and Marketing Materials
99.4 Appraisal Report dated September 12, 1997
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
Item 28. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
II-4
<PAGE>
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 ("Securities Act").
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information 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 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement, certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer 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 small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Newport,
State of Tennessee, as of the date set forth below.
UNITED TENNESSEE BANKSHARES, INC.
Date: September 25, 1997 By: /s/ Richard G. Harwood
------------------------------------
Richard G. Harwood
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned directors and executive officers of United Tennessee
Bankshares, Inc., hereby severally constitute and appoint Richard G. Harwood,
with full power of substitution, our true and lawful attorney and agent, to do
any and all things in our names in the capacities indicated below which said
Richard G. Harwood may deem necessary or advisable to enable United Tennessee
Bankshares, Inc. to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with the registration of United Tennessee Bankshares, Inc. common
stock, including specifically, but not limited to, power and authority to sign
for us in our names in the capacities indicated below, the registration
statement and any and all amendments (including post-effective amendments)
thereto; and we hereby ratify and confirm all that said Richard G. Harwood shall
do or cause to be done by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities stated as of the date set forth above.
/s/ Richard G. Harwood /s/ J. William Myers
- ----------------------------------- -------------------------
Richard G. Harwood J. William Myers
President, Chief Executive Officer and Chairman of the Board
(Principal Executive, Financial
and Accounting Officer)
/s/ Clyde E. Driskill, Jr. /s/ William B. Henry
- ----------------------------------- -------------------------
Clyde E. Driskill, Jr. William B. Henry
Director Director
/s/ Robert L. Overholt /s/ Robert D. Self
- ----------------------------------- -------------------------
Robert L. Overholt Robert D. Self
Director Director
<PAGE>
TRIDENT SECURITIES, INC
4601 SIX FORKS ROAD, SUITE 400
RALEIGH, NORTH CAROLINA 27609
TELEPHONE(919)781-6900
FACSIMILE(919)787-1470
May 2, 1997
Board of Directors
Newport Federal Savings and Loan Association
1303 West Broadway
Newport, Tennessee 37821
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Newport Federal Savings and Loan
Association, Newport, Tennessee (the "Association") concerning our investment
banking services in connection with the conversion of the Association from a
mutual to a capital stock form of organization.
Trident is prepared to assist the Association 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 Association's Plan of Conversion.
The specific terms of the services contemplated hereunder shall be set forth
in a definitive sales agency agreement (the "Agreement") between Trident and
the Association to be executed on the date the offering circular/prospectus
is declared effective by the appropriate regulatory authorities. The price of
the shares during the subscription offering and community offering will be
the price established by the Association'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 Association.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the
Association 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 Association will determine the selected dealers to assist the
Association during the community offering. At the appropriate time, Trident
in conjunction with its counsel, will conduct an examination of the relevant
documents and records of the Association as Trident deems necessary and
appropriate. The Association will make all documents, records and other
information deemed necessary by Trident or its counsel available to them upon
request.
For its services hereunder, Trident will receive the following compensation
and reimbursement from the Association:
1. A management fee in the amount of $20,000.
<PAGE>
2. A commission equal to two percent (2.0%) of the aggregate dollar
amount of capital stock sold in the subscription and community
offerings, excluding any shares of conversion stock sold to the
Association's directors, executive officers and the employee benefit
plan. Additionally, commissions will be excluded on those shares sold
to "associates" of the Association's directors and executive officers.
The term "associates" as used herein shall have the same meaning as
that found in the Association's Plan of Conversion.
3. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by Trident and the Association to reflect market requirements
at the time of the stock allocation in a Syndicated Community
Offering.
4. The foregoing fees and commissions are to be payable to Trident at
closing as defined in the Agreement to be entered into between the
Association and Trident.
5. Trident shall be reimbursed for allocable expenses incurred by them,
including legal fees, whether or not the Agreement is consummated.
Trident's out-of-pocket expenses will not exceed $10,000 and its legal
fees will not exceed $30,000. The Association 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 Association will pay all other expenses of
the conversion including but not limited to its attorneys' fees, NASD filing
fees, and filing and registration fees and fees of either Trident's
attorneys or the attorneys relating to any required state securities law
filings, telephone charges, air freight, rental equipment, supplies,
transfer agent charges, foes relating to auditing and accounting and costs of
printing all documents necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material
dealings within the last 12 months between the Association and any NASD
member or any person related to or associated with any such member with the
exception of Synovus Securities; (c) none of the officers or directors of the
Association has any affiliation with the NASD; (d) except as contemplated by
this engagement letter with Trident, the Association has no financial or
management consulting contracts outstanding with any other person; (e) the
Association has not granted Trident a right of first refusal with respect to
the underwriting of any future offering of the Association stock; and (f)
there has been no intermediary between Trident and the Association in
connection with the public offering of the Association's shares, and no
person is being compensated in any manner for providing such service.
The Association agrees to indemnify and hold harmless Trident and each
person, if any, who controls the firm against all losses, claims, damages or
labilities, 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
<PAGE>
common law, that arise out of or are based upon the conversion or the
engagement hereunder of Trident except as a result of Trident's negligence.
If the foregoing indemnification is unavailable for any reason, the
Association agrees to contribute to such Losses in the proportion that its
financial interest in the conversion bears to that of the indemnified
parties. If the Agreement is entered into with respect to the common stock
to be issued in the conversion, the Agreement 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 Association
and Trident.
This letter is merely a statement of intent and is not a binding legal
agreement except as to paragraph (5) 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 Association agree in principle to the
contents hereof and propose to proceed promptly, and in good faith, to work
out the arrangements with respect to the proposed offering, any legal
obligations between Trident and the Association shall be only as set forth in
a duly executed Agreement. Such Agreement shall be in form and content
satisfactory to Trident and the Association, as well as their counsel, and
Trident's obligations thereunder shall be subject to, among other things,
there being in Trident's opinion no material adverse change in the condition
or obligations of the Association or no market conditions which might render
the sale of the shares by the Association hereby contemplated inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter along with the advance payment
of $10,000. This proposal is open for you 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 16th day
of May, 1997
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
By: /S/ Richard Harwood
-------------------
Richard Harwood
President
<PAGE>
Exhibit 1.2
UNITED TENNESSEE BANKSHARES, INC.
Up to 1,454,750 Shares
of Common Stock
(Par Value $0.01 Per Share)
$10.00 Per Share
SALES AGENCY AGREEMENT
________, 1997
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
United Tennessee Bankshares, Inc., a Tennessee corporation ("Company"), and
Newport Federal Savings & Loan Association, a federally chartered and insured
mutual savings and loan association ("Association"), hereby confirm as of the
date above their respective agreements with Trident Securities, Inc.
("Trident"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introduction. The Association intends to convert from a federally
chartered mutual savings and loan association to a federally chartered stock
savings and loan association as a wholly-owned subsidiary of the Company
(together with the Offerings, as defined below, the issuance of shares of
common stock of the Association to the Company, and the incorporation of the
Company, collectively the "Conversion") pursuant to a plan of conversion
adopted on May 20, 1997 ("Plan") by the Association's Board of Directors. In
accordance with the Plan, the Company is offering shares of its common stock,
par value $.01 per share ("Shares" or the "Common Stock"), pursuant to
nontransferable subscription rights in a subscription offering ("Subscription
Offering"), in order of priority, to (i) the Association's Eligible Account
Holders (as defined in the Plan), (ii) the Association's Employee Stock
Ownership Plan ("ESOP"), (iii) the Association's Supplemental Eligible
Account Holders (as defined in the Plan), and (iv) the Association's Other
Members (as defined in the Plan). Any shares of the Common Stock not sold in
the Subscription Offering are being offered to the general public in a
community offering, with preference being given to natural persons and trusts
of natural persons who are permanent residents of Cocke County, Tennessee
("Association's Local Community") ("Community Offering"), and, if necessary,
through a syndicate of NASD-registered broker-dealers managed by Trident in a
syndicated community offering ("Syndicated Community Offering"). The
Community Offering and the Syndicated Community Offering may commence
currently with or at any time during the Subscription Offering or after the
expiration
<PAGE>
Trident Securities, Inc.
Page 2
of the Subscription Offering. The Subscription Offering, the Community
Offering and the Syndicated Community Offering are collectively referred to
as the "Offerings." Purchases of Shares in the Offerings are subject to
certain limitations and restrictions as described in the Plan.
The Company and the Association have been advised by Trident that it
intends to utilize its best efforts to assist the Company and the Association
with the sale of the Shares in the Subscription Offering and, if applicable,
in the Community Offering and the Syndicated Community Offering.
2. Representations and Warranties.
(a) The Company and the Association jointly and severally represent and
warrant to Trident that:
(i) The Company has filed with the Commission a registration
statement, including exhibits and an amendment or amendments thereto, on
Form SB-2 (No. 333-_____), including a Prospectus relating to the
Offerings, for the registration of the Shares under the Securities Act of
1933, as amended ("Securities Act"); and such registration statement has
been declared effective under the Securities Act and no stop order has been
issued with respect thereto and no proceedings therefor have been initiated
or, to the Company's best knowledge, threatened by the Commission. Except
as the context may otherwise require, such registration statement, as
amended or supplemented, on file with the Commission at the time the
registration statement became effective, including the Prospectus,
financial statements, schedules, exhibits and all other documents filed as
part thereof, as amended and supplemented, is herein called the
"Registration Statement," and the prospectus, as amended or supplemented,
on file with the Commission at the time the Registration Statement became
effective is herein called the "Prospectus," except that if any prospectus
filed by the Company with the Commission pursuant to Rule 424(b) of the
general rules and regulations of the Commission under the Securities Act
(together with the published policies and actions of the Commission
thereunder, the "Securities Act Regulations") differs from the form of
prospectus on file at the time the Registration Statement became effective,
the term "Prospectus" shall refer to the Rule 424(b) prospectus from and
after the time it is filed with the Commission and shall include any
amendments or supplements thereto from and after their dates of
effectiveness or use, respectively.
(ii) The Association has filed an Application for Approval of
Conversion on Form AC, including exhibits (as amended or supplemented, the
"Form AC" or the "Conversion Application") with the Office of Thrift
Supervision ("OTS") under the Home Owners' Loan Act, as amended ("HOLA"),
and the rules and regulations, including published policies and actions of
the OTS thereunder (collectively, the "OTS Regulations"), which has been
approved by the OTS; and the Prospectus and the proxy
<PAGE>
Trident Securities, Inc.
Page 3
statement for the solicitation of proxies from the members of the
Association for the special meeting of members to approve the Plan ("Proxy
Statement") included as part of the Form AC have been approved for use by
the OTS. No order has been issued by the OTS preventing or suspending the
use of the Prospectus or the Proxy Statement and no action by or before the
OTS revoking such approvals is pending or, to the Association's best
knowledge, threatened. The Company has filed with the OTS an application
on Form H-e(1)-S (as amended or supplemented, the "Holding Company
Application") promulgated under the savings and loan holding company
provisions of the HOLA and the regulations promulgated thereunder and has
received approval of its acquisition of the Association from the OTS.
(iii) As of the date hereof (i) the Registration Statement and the
Prospectus complied with the Securities Act and the Securities Act
Regulations, (ii) the Registration Statement does not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (iii) the
Prospectus does not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Representations or warranties in this
subsection shall not apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Company or the
Association by or on behalf of Trident relating to Trident expressly for
use in the Registration Statement or Prospectus.
(iv) The Company has been duly incorporated as a Tennessee corporation
and the Association has been duly organized as a mutual savings and loan
association under the laws of the United States, and each of them is
validly existing and in good standing under the laws of their jurisdiction
of organization with full power and authority to own its property and
conduct its business as described in the Registration Statement and
Prospectus; the Association is a member of the Federal Home Loan Bank of
Cincinnati; and the deposit accounts of the Association are insured by the
Savings Association Insurance Fund ("SAIF") administered by the Federal
Deposit Insurance Corporation ("FDIC") up to the applicable legal limits.
Each of the Company and the Association is not required to be qualified to
do business as a foreign corporation in any jurisdiction where
non-qualification would have a material adverse effect on the financial
condition, operations, business, properties or assets of the Company and
the Association.
(v) The Association has good, marketable and insurable title to its
assets described in the Prospectus as owned by it, free and clear of all
liens, charges, encumbrances or restrictions, except for liens for taxes
not yet due, except as described in the Prospectus and except as do not in
the aggregate have a material adverse effect upon the financial condition,
operations, business, properties or assets of the Association;
<PAGE>
Trident Securities, Inc.
Page 4
and all of the leases and subleases material to the financial condition,
operations, business, assets or properties of the Association, under which
it holds properties, including those described in the Prospectus, are in
full force and effect as described therein.
(vi) NFS Service Corporation ("Subsidiary"), the Association's sole
subsidiary corporation, is duly organized and in good standing under the
laws of the State of Tennessee, with full power and authority to own its
property and conduct its business and is not required to be qualified to do
business as a foreign corporation in any jurisdiction where the failure to
be so qualified would have a material adverse effect on the business,
financial condition, operations, properties or assets of the Subsidiary.
The Subsidiary holds all licenses, certificates and permits from
governmental authorities necessary for the conduct of its business, except
where failure to obtain such licenses, permits or authorizations would not
have a material adverse effect on the financial condition, operations,
property, assets or business of the Subsidiary. All of the outstanding
stock of the Subsidiary has been duly authorized and is fully paid and
nonassessable, and such stock is owned directly by the Association, free
and clear of any liens or encumbrances. The activities of the Subsidiary
are permitted to subsidiaries of a federally-chartered savings and loan
association by the OTS Regulations.
(vii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary actions on the part of each of the
Company and the Association, and this Agreement is a valid and binding
obligation of each of the Company and the Association, enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors of
insured financial institutions and their holding companies, the accounts of
whose subsidiaries are insured by the FDIC, by general equity principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law, or laws relating to the safety and soundness of insured
depository institutions and their affiliates, and except to the extent that
the provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or by applicable law, including without limitation,
Section 23A of the Federal Reserve Act, 12 U.S.C. Section 371c (("Section
23A")).
(viii) There is no litigation or governmental proceeding pending
or, to the best knowledge of the Company or the Association, threatened
against or involving the Company, the Association or the Subsidiary, or any
of their respective assets which individually or in the aggregate would
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business, assets or properties of the
Company, the Association or the Subsidiary, taken as a whole. Any
litigation
<PAGE>
Trident Securities, Inc.
Page 5
or governmental proceeding is not considered "threatened" unless the
potential litigation or governmental authority had manifested to the
management of the Company, the Association or the Subsidiary a present
intention to initiate such litigation or proceeding.
(ix) The Company and the Association have received the opinions of
Housley Kantarian & Bronstein, P.C. with respect to the federal income tax
consequences of the Conversion, and of Pugh & Company, P.C., Knoxville,
Tennessee, with respect to Tennessee income tax consequences of the
Conversion, to the effect that the Conversion will constitute a tax-free
reorganization under the Internal Revenue Code of 1986, as amended, and
will not be a taxable transaction for the Association or the Company under
the laws of Tennessee; and the facts and representations made by the
Company and the Association and relied upon in rendering such opinions are
accurate and complete, and neither the Company nor the Association have
taken any action inconsistent therewith.
(x) Neither the Company nor the Association nor the Subsidiary is in
violation of any rule or regulation of the OTS or the FDIC that could
reasonably be expected to result in any enforcement action against the
Company, the Association or the Subsidiary, or their officers or directors,
that might have a material adverse effect on the financial condition,
operations, businesses, assets or properties of the Company, the
Association, and the Subsidiary, taken as a whole.
(xi) RP Financial, LC. ("RP Financial"), the firm that prepared the
independent appraisal dated as of _______, 1997, is independent with
respect to the Company and the Association within the meaning of the OTS
Regulations. The Company and the Association believe RP Financial to be
experienced and expert in rendering appraisals of thrift institutions, and
nothing has come to the attention of the Company and the Association which
has caused them to believe that the appraisal by RP Financial was not
prepared in accordance with the requirements of the OTS Regulations.
(xii) Pugh & Company, P.C., the firm that certified the consolidated
financial statements of the Association at December 31, 1996 and 1995 and
for each of years in the two year period ended December 31, 1996 filed as
part of the Registration Statement and the Conversion Application, is
independent with respect to the Company and the Association as required by
the Securities Act, the Securities Act Regulations, the Code of Professional
Ethics of the American Institute of Certified Public Accountants, and
Title 12 of the Code of Federal Regulations Parts 563c and 571, and nothing
has come to the attention of the Company and the Association which has
caused them to believe that such firm is not independent within the meaning
of such provisions.
(xiii) The consolidated financial statements and related notes which
are included in the Registration Statement and the Prospectus fairly present
the consolidated financial condition, earnings, equity and cash flows of the
Association at the respective dates
<PAGE>
Trident Securities, Inc.
Page 6
thereof and for the respective periods covered thereby and comply as to
form with the applicable accounting requirements of the Securities Act
Regulations and the OTS Regulations. Such financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied throughout the periods involved, except as
set forth therein, and such financial statements are consistent with
financial statements and other reports filed by the Association with the
OTS, except as GAAP may otherwise require. The financial tables in the
Prospectus accurately present the information purported to be shown thereby
at the respective dates thereof and for the respective periods covered
thereby.
(xiv) There has been no material change in the financial condition,
operations, business, assets or properties of the Company, the Association
and the Subsidiary, taken as a whole, since the latest date set forth in the
Prospectus, except as set forth therein; and the capitalization, assets,
properties and business of each of the Company and the Association conform
in all material aspects to the descriptions thereof contained in the
Prospectus. Neither the Company nor the Association nor the Subsidiary has
any material liabilities of any kind, contingent or otherwise, except as set
forth in the Prospectus.
(xv) There has been no breach or default (or the occurrence of any
event which, with notice or lapse of time or both, would constitute a
default) under, or creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the Company, the
Association or the Subsidiary pursuant to any of the terms, provisions or
conditions of, any agreement, contract, indenture, bond, debenture, note,
instrument or obligation to which the Company, the Association or the
Subsidiary is a party or by which any of them or any of their respective
assets or properties may be bound or is subject, or violation of any
governmental license or permit or any enforceable published law,
administrative regulation or order or court order, writ, injunction or
decree, which breach, default, encumbrance or violation would have a
material adverse effect on the financial condition, operations, business,
assets or properties of the Company, the Association and the Subsidiary,
taken as a whole; all agreements which are material to the financial
condition, results of operations or business of the Company, the
Association and the Subsidiary, taken as a whole, are in full force and
effect, and no party to any such agreement has instituted or, to the best
knowledge of the Company, the Association and the Subsidiary, threatened
any action or proceeding wherein the Company, the Association or the
Subsidiary would be alleged to be in default thereunder.
(xvi) Neither the Company nor the Association nor the Subsidiary is in
violation of its respective charter or bylaws. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby by the Company and the Association do not conflict with or result in
a breach of the charter or bylaws of the
<PAGE>
Trident Securities, Inc.
Page 7
Company or the Association (in either mutual or stock form) or constitute
a material breach of or default (or an event which, with notice or lapse of
time or both, would constitute a default) under, give rise to any right of
termination, cancellation or acceleration contained in, or result in the
creation or imposition of any lien, charge or other encumbrance upon any of
the properties or assets of the Company or the Association pursuant to any
of the terms, provisions or conditions of, any material agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which the
Company or the Association is a party (other than the establishment of a
liquidation account pursuant to the Plan) or violate any governmental
license or permit or any law, administrative regulation or order or court
order, writ, injunction or decree (subject to the satisfaction of certain
conditions imposed by the OTS in connection with its approval of the
Conversion Application), which breach, default, encumbrance or violation
would have a material adverse effect on the financial condition, operations
or business of the Company and the Association, taken as a whole.
(xvii) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as otherwise may
be indicated or contemplated therein, none of the Company or the Association
has issued any securities which will remain issued at the Closing Date or
incurred any liability or obligation, direct or contingent, or borrowed
money, except borrowings or liabilities in the ordinary course of business,
or entered into any other transaction not in the ordinary course of business
and not consistent with prior practices, which is material in light of the
business of the Company and the Association, taken as a whole.
(xviii) The issuance and the sale of the Shares have been duly
authorized by all necessary action of the Company and approved by the OTS
and, when issued in accordance with the terms of the Plan for the
consideration described therein, shall be validly issued, fully paid and
nonassessable and shall conform to the description thereof contained in the
Prospectus; the issuance of the Shares is not subject to preemptive rights,
except as set forth in the Prospectus; and good title to the Shares will be
transferred by the Company upon issuance thereof against payment therefor,
free and clear of all claims, encumbrances, security interests and liens
against the Company whatsoever. The issuance and sale of the capital stock
of the Association to the Company has been duly authorized by all necessary
action of the Association and the Company and all appropriate regulatory
authorities (subject to the satisfaction of various conditions imposed by
the OTS in connection with its approvals of the Conversion Application and
the Holding Company Application), and such capital stock, when issued in
accordance with the terms of the Plan, will be fully paid and nonassessable
and will conform in all material respects to the description thereof
contained in the Prospectus.
(xix) No approval of any regulatory, supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance
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Trident Securities, Inc.
Page 8
of the Shares, except such approvals as have been obtained and except for
the declaration of effectiveness of any required post-effective amendment
by the Commission and approval thereof by the OTS, the issuance of the
Association's Federal Stock Charter by the OTS and as may be required under
the "blue sky" or securities laws of various jurisdictions.
(xx) All contracts and other documents required to be filed as
exhibits to the Registration Statement, the Conversion Application or the
Holding Company Application have been filed with the Commission or the OTS
or both, as the case may be.
(xxi) The Company, the Association and the Subsidiary have timely
filed all required federal, state and local franchise tax returns, and no
deficiency has been asserted with respect to such returns by any taxing
authorities, and the Company, the Association and the Subsidiary have paid
all taxes that have become due and, to the best of their knowledge, have
made adequate reserves for accrued tax liabilities, except where any
failure to make such filings, payments and reserves, or the assertion of
such a deficiency, would not have a material adverse effect on the
financial condition or results of operations of the Company, the
Association and the Subsidiary, taken as a whole.
(xxii) All of the loans represented as assets of the Association
and the Subsidiary as of the most recent date for which financial condition
data is included in the Prospectus meet or are exempt from all requirements
of federal, state or local law pertaining to lending, including without
limitation truth in lending (including the requirements of Regulation Z and
12 C.F.R. Part 226 and Section 563.99), real estate settlement procedures,
consumer credit protection, equal credit opportunity and all disclosure
laws applicable to such loans, except for violations which, if asserted,
would not have a material adverse effect on the Company, the Association
and the Subsidiary, taken as a whole.
(xxiii) The records of Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members (as those terms are defined in
the Plan) delivered to Trident by the Association or its agent for use
during the Conversion have been reviewed by the Association and, to its
best knowledge, are accurate, reliable and complete; and Trident shall have
no liability to any person relating to the reliability, accuracy or
completeness of such records or for any denial or allocation of a
subscription to purchase shares to any person based upon such records.
(xxiv) Neither the Company nor the Association nor the Subsidiary
or, to the best knowledge of the Company, the Association and the
Subsidiary, the employees of the Company, the Association or the
Subsidiary, has made any payment of funds of the Company, the Association
or the Subsidiary prohibited by law, and no funds of the
<PAGE>
Trident Securities, Inc.
Page 9
Company, the Association or the Subsidiary have been set aside to be used
for any payment prohibited by law.
(xxv) To the best knowledge of the Company, the Association and the
Subsidiary, the Company, the Association and the Subsidiary comply with
all laws, rules and regulations relating to environmental protection and
neither the Company, the Association nor the Subsidiary is subject to
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any similar law, except for
violations which, if asserted, would not have a material adverse effect on
the Company, the Association and the Subsidiary, taken as a whole. There
are no actions, suits, regulatory investigations or other proceedings
pending or, to the best knowledge of the Company, the Association or the
Subsidiary, threatened against the Company, the Association or the
Subsidiary relating to environmental protection. To the best knowledge of
the Company, the Association and the Subsidiary, no disposal, release or
discharge of hazardous or toxic substances, pollutants or contaminants,
including petroleum and gas products, as any of such terms may be defined
under federal, state or local law, has been caused by the Company, the
Association or the Subsidiary or, to the best knowledge of the Company, the
Association and the Subsidiary, and except as already disclosed in the
Prospectus, has occurred on, in or at any of the facilities or properties
owned or leased by the Company, the Association or the Subsidiary or in
which the Association or the Subsidiary has a security interest, except
such disposal, release or discharge which would not have a material adverse
effect on the financial condition, operations, business, assets or
properties of the Company, the Association or the subsidiary, taken as a
whole.
(xxvi) All documents prepared and delivered by the Association or
the Company or their representatives in connection with the Conversion
were, on the dates on which they were delivered, true, complete and
correct.
(xxvii) The allowance for loan losses contained in the Association's
consolidated financial statements contained in the Prospectus were
established according with the past practices and experiences of the
Association and with generally accepted accounting principles, and the
allowance for loan losses at September 30, 1997 disclosed in the Prospectus
is adequate in all material respects under generally accepted accounting
principles to provide for possible losses on loans (including, without
limitation, accrued interest receivable) and credit commitments outstanding
as of such date.
(b) Trident represents and warrants to the Company and the Association
that:
(i) Trident is registered as a broker-dealer and is in good standing
with the Commission and the NASD.
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Trident Securities, Inc.
Page 10
(ii) Trident is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to provide the services to be furnished to the Company
and the Association hereunder.
(iii) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of Trident, and this
Agreement is a legal, valid and binding obligation of Trident, enforceable
in accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of registered broker-dealers accounts
of whose may be protected by the Securities Investor Protection Corporation
or by general equity principles, regardless of whether such enforceability
is considered in a proceeding in equity or at law, and except to the extent
that the provisions of Sections 8 and 9 hereof may be unenforceable as
against public policy).
(iv) Trident and, to Trident's best knowledge, its employees, agents
and representatives who shall perform any of the services required
hereunder to be performed by Trident, shall be duly authorized and shall
have all licenses, approvals and permits necessary to perform such
services, and Trident is a registered selling agent in the jurisdictions in
which the Company is relying on such registration for the sale of the
Shares, and will remain so registered until the Conversion is consummated
or terminated.
(v) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the
charter or bylaws of Trident or violate, conflict with or constitute a
breach of, or default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, any material agreement, indenture
or other instrument by which Trident is bound or under any governmental
license or permit or any law, administrative regulation, authorization,
approval or order or court decree, injunction or order.
(vi) All funds received by Trident to purchase Common Stock will be
handled in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended ("Exchange Act").
(vii) No action or proceeding against Trident before the
Commission, the NASD, any state securities commission, or any state or
federal court is pending or, to Trident's best knowledge, threatened
concerning Trident's activities as a broker-dealer.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
of the representations and warranties herein contained, but subject to the terms
and conditions herein
<PAGE>
Trident Securities, Inc.
Page 11
set forth, the Company and the Association hereby employ Trident as their agent
to utilize its best efforts to assist the Company with the Company's sale of the
Shares in the Offerings, and Trident hereby accepts such employment. The
employment of Trident hereunder shall terminate (a) forty-five (45) days after
the Subscription and Community Offering closes, unless the Company and the
Association, with the approval of the OTS, are permitted to extend such period
of time, or (b) upon consummation of the Conversion, whichever date shall first
occur.
In the event the Company is unable to sell a minimum of 935,000 Shares (or
such lesser amount as the OTS may permit) within the period herein provided,
this Agreement shall terminate, and the Company and the Association shall refund
promptly to any persons who have subscribed for any of the Shares, the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the other party hereunder, except as set forth in Sections 6, 8, 9 and 10
hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in special interest-bearing accounts with the
Association until all Shares are sold and paid for will be made prior to the
commencement of the Subscription and Community Offering, with provision for
prompt refund to the purchasers as set forth above, or for delivery to the
Company if all Shares are sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on or as soon as possible
following the Closing Date against payment to the Company by any means
authorized pursuant to the Prospectus, at the principal office of the Company,
344 West Broadway, Newport, Tennessee, or at such other place as shall be agreed
upon between the parties hereto. The date upon which the Company shall release
or deliver the Shares sold in the Offerings, in accordance with the terms
hereof, is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the offering price of the Common Stock ordered on or
before twelve noon on the next business day following receipt or execution of an
order form by Trident to the Association for deposit in a segregated account or
(b) to solicit indications of interest in which event (i) Trident will
subsequently contact any potential subscriber indicating interest to confirm the
interest and give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii) Trident
will mail acknowledgements of receipt of orders to each subscriber confirming
interest on the business day following such confirmation, (iii) Trident will
debit accounts of such subscribers on the third business day ("debit date")
following receipt of the confirmation referred to in (i), and (iv) Trident will
forward completed order forms together with such funds to the Association on or
before twelve noon on the next business day following the debit date for deposit
in a segregated account. Trident acknowledges that if the procedure in (b) is
adopted, subscribers' funds are not required to be in their accounts until the
debit date.
<PAGE>
Trident Securities, Inc.
Page 12
Trident shall receive the following compensation and expense reimbursement
for its services hereunder:
(a) (i) a management fee of $20,000, (ii) a commission equal to 2.0%
of the aggregate dollar amount of Common Stock sold in the Subscription
Offering and the Community Offering, excluding Shares sold to the
Association's directors, executive directors, their "associates" as defined
in the Plan, and the Association's ESOP, and (iii) if applicable, a
commission to be agreed upon by Trident and the Company for Shares sold by
other member firms of the NASD through a selected dealers arrangement in
the Syndicated Community Offering, which aggregate commission shall be
determined at the discretion of the Company and the Association with the
advice of Trident. All such fees shall be paid to Trident in next-day
funds on the Closing Date.
(b) Reimbursement for reasonable out-of-pocket allocable expenses,
including but not limited to travel, food, lodging and legal fees, incurred
by it whether or not the Offerings are successfully completed; provided,
however, that reimbursable legal fees will not exceed $30,000 and that
other reimbursable expenses will not exceed $10,000, and, provided further,
that neither the Company nor the Association shall reimburse Trident for
any of the foregoing expenses accrued after Trident shall have notified the
Company or the Association of its election to terminate this Agreement
pursuant to Section 11 hereof or after such time as the Company or the
Association shall have given notice in accordance with Section 12 hereof
that Trident is in breach of this Agreement. Full reimbursement of Trident
shall be made in next-day funds on the Closing Date or, if the Conversion
is not completed and is terminated for any reason, within ten (10) business
days of receipt by the Company of a written request detailing allocable
expenses from Trident for reimbursement of such expenses. Trident
acknowledges receipt of a $10,000 advance payment from the Association,
which shall be credited against the total reimbursement due Trident
hereunder. In the event this Agreement is terminated pursuant to Section
11 hereof, Trident shall be reimbursed only for its actual allocable
expenses.
(c) Reimbursement for any expenses of the Company and the Association
set forth in Section 6 hereof to the extent paid by Trident on behalf of
the Company and the Association. Full reimbursement shall be made in
next-day funds on the Closing Date or, if the Conversion is not completed
and is terminated for any reason, within ten (10) business days of receipt
by the Company and the Association of a written request for such
reimbursement detailing such reimbursements.
Notwithstanding the limitations on reimbursement of Trident for its
allocable expenses provided in subsection (b) above and notwithstanding any
reimbursement of Trident pursuant to subsection (c) above, in the event that a
resolicitation or other event causes the Offerings to be extended beyond their
original expiration date, Trident shall be reimbursed for its reasonable
<PAGE>
Trident Securities, Inc.
Page 13
allocable expenses incurred during such extended period, provided that the
allowance for allocable expenses provided for in subsection (b) above has been
exhausted and subject to the following: such reimbursement shall be in an
amount equal to the product obtained by dividing $40,000 (the reimbursable
expenses and legal fees limitation set forth in Section (b) above by the total
number of days of the unextended Subscription Offering (calculated from the date
of the Prospectus to the intended close of the Subscription Offering as stated
in the Prospectus) and multiplying such product by the number of days of the
extension (that number of days from the date of the supplemental prospectus used
in the extended Subscription Offering to the closing of the extension of the
Subscription Offering described in such supplemental prospectus).
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
assisting the Company on a best efforts basis in offering a minimum of 935,000
and a maximum of 1,265,000 Shares, subject to adjustment up to 1,454,750 Shares
(except as the OTS may permit to be decreased or increased) in the Offerings.
The Shares are to be offered to the public at the price set forth on the cover
page of the Prospectus and the first page of this Agreement.
5. Further Agreements. The Company and the Association jointly and
severally covenant and agree that:
(a) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus and through and including the Closing
Date, except as otherwise may be indicated or contemplated therein, neither the
Company nor the Association will issue any securities which will remain issued
at the Closing Date or incur any liability or obligation, direct or contingent,
or borrow money, except borrowings or liabilities in the ordinary course of
business, or enter into any other transaction not in the ordinary course of
business and consistent with prior practices, which is material in light of the
financial condition, operations, business, properties or assets of the Company
and the Association, taken as a whole.
(b) If any Shares remain unsubscribed following completion of the
Subscription Offering and the Community Offering, the Company (i) will, if
deemed necessary, promptly file with the Commission a post-effective amendment
to such Registration Statement relating to the results of the Subscription and
the Community Offerings, any additional information with respect to the proposed
plan of distribution and any revised pricing information or (ii) if no such
post-effective amendment is required, will file with, or mail for filing to, the
Commission a prospectus or prospectus supplement containing information relating
to the results of the Subscription and Community Offerings and pricing
information pursuant to Rule 424(c) of the Securities Act Regulations, in either
case in a form reasonably acceptable to the Company and Trident.
(c) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company shall be within the range as set forth
in the Prospectus under the caption "Capitalization," and no Common Stock shall
be outstanding immediately prior to the
<PAGE>
Trident Securities, Inc.
Page 14
Closing Date (other than any shares of Common Stock issued in connection with
the initial capitalization of the Company, which shares will be canceled upon
consummation of the Conversion); and the certificates representing the Shares
will conform in all material respects with the requirements of Tennessee law and
OTS Regulations.
(d) At all times subsequent to the date of the Prospectus through and
including the Closing Date (i) the Registration Statement and the Prospectus
will comply with the Securities Act and the Securities Act Regulations, (ii) the
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (iii) the Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Agreements in this
subsection shall not apply to statements or omissions made in reliance upon and
in conformity with written information furnished to the Company or the
Association relating to Trident by or on behalf of Trident expressly for use in
the Registration Statement or Prospectus.
(e) Upon amendment of the Association's charter and bylaws as provided in
the OTS Regulations and completion of the sale by the Company of the Shares as
contemplated by the Prospectus, (i) the Association will be converted pursuant
to the Plan to a federally chartered capital stock savings and loan association
with full power and authority to own its property and conduct its business as
described in the Prospectus, (ii) all of the authorized and outstanding capital
stock of the Association will be owned of record and beneficially by the
Company, and (iii) the Company will have no direct subsidiaries other than the
Association.
(f) The Company shall deliver to Trident, from time to time, such number
of copies of the Prospectus as Trident reasonably may request. The Company
authorizes Trident to use the Prospectus in any lawful manner in connection with
the offer and sale of the Shares.
(g) The Company will notify Trident immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
becomes effective or any supplement to the Prospectus has been filed, (ii) of
the issuance by the Commission of any stop order relating to the Registration
Statement or of the initiation or the threat of any proceedings for that
purpose, (iii) of the receipt of any notice with respect to the suspension of
the qualification of the Shares for offering or sale in any jurisdiction, and
(iv) of the receipt of any comments from the staff of the Commission relating to
the Registration Statement. If the Commission enters a stop order relating to
the Registration Statement at any time, the Company will make every reasonable
effort to obtain the lifting of such order at the earliest possible moment.
<PAGE>
Trident Securities, Inc.
Page 15
(h) During the time when a prospectus is required to be delivered under
the Securities Act, the Company will comply with all requirements imposed upon
it by the Securities Act and by the Securities Act Regulations to permit the
continuance of offers and sales of or dealings in the Shares in accordance with
the provisions hereof and the Prospectus. If during the period when the
Prospectus is required to be delivered in connection with the offer and sale of
the Shares any event relating to or affecting the Company and the Association,
taken as a whole, shall occur as a result of which it is necessary, in the
reasonable opinion of counsel for Trident, to amend or supplement the Prospectus
in order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company forthwith shall prepare and furnish to Trident a reasonable number
of copies of an amendment or amendments or of a supplement or supplements to the
Prospectus (in form and substance reasonably satisfactory to counsel for
Trident) which shall amend or supplement the Prospectus so that, as amended or
supplemented, the Prospectus shall not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser of the Shares, not misleading. The Company will not
file or use any amendment or supplement to the Registration Statement or the
Prospectus unless Trident has been first furnished a copy or if Trident shall
reasonably object after having been furnished such copy. For the purposes of
this subsection the Company and the Association shall furnish such information
with respect to themselves as Trident from time to time may reasonably request.
(i) The Company and the Association will take all reasonably necessary
action as may be required to qualify or register the Shares for offer and sale
by the Company under the securities or blue sky laws of such jurisdictions as
Trident and the Company or its counsel may agree upon; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any such jurisdiction. In each jurisdiction where
such qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in connection with
the distribution of the Shares, shall file and make such statements or reports
as are, or reasonably may be, required by the laws of such jurisdiction.
(j) Appropriate entries will be made in the financial records of the
Association to establish a liquidation account for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders (as those terms are
defined in the Plan) in accordance with the OTS Regulations.
(k) The Company will file a registration statement for the Common Stock
under Section 12(g) of the Exchange Act prior to completion of the Offerings
pursuant to the Plan and shall request that such registration statement be
effective upon completion of the Conversion. The Company shall maintain the
effectiveness of such registration for a minimum period of three years or for
such shorter period as may be required by applicable law.
<PAGE>
Trident Securities, Inc.
Page 16
(l) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 of the Securities Act Regulations) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date (as defined in said Rule 158) of the Registration
Statement.
(m) For a period of three (3) years from the date of this Agreement, the
Company will furnish to Trident, as soon as publicly available after the end of
each fiscal year, a copy of its annual report to shareholders for such year; and
the Company will furnish to Trident (i) as soon as publicly available, a copy of
each report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and (ii) from time
to time, such other public information concerning the Company as Trident may
reasonably request.
(n) The Company shall use the net proceeds from the sale of the Shares in
the manner set forth in the Prospectus.
(o) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived in writing by Trident.
(p) The Company shall advise Trident, if necessary, as to the allocation
of deposits, in the case of Eligible Account Holders and Supplemental Eligible
Account Holders, and votes, in the case of Other Members, and of the Shares in
the event of an oversubscription, and shall provide Trident final instructions
as to the allocation of the Shares ("Allocation Instructions") in such event and
the Allocation Instructions shall be accurate, reliable and complete. Trident
shall be entitled to rely on the Allocation Instructions and shall have no
liability in respect of its reliance thereon, including without limitation, any
liability for or related to any denial or grant of a subscription in whole or in
part.
(q) The Company and the Association will take such actions and furnish
such information as are reasonably requested by Trident in order for Trident to
comply with the NASD's "Interpretation Relating to Free-Riding and Withholding."
(r) At the Closing Date, the Company and the Association will have
completed the conditions precedent to, and shall have conducted the Conversion
in all material respects in accordance with, the Plan, OTS Regulations and all
other applicable laws, regulations, published decisions and orders, including
all terms, conditions, requirements and provisions precedent to the Conversion
imposed by the OTS.
(s) The Company will use its best efforts to obtain approval for and
maintain quotation of its shares of common stock on the Nasdaq stock market
effective on or prior to the Closing Date.
<PAGE>
Trident Securities, Inc.
Page 17
6. Payment of Expenses. Subject to Section 3(c) hereof, whether or not
the Conversion is consummated, the Company and the Association shall pay the
following expenses: (a) all regulatory filing fees, including but not limited to
those payable to the Commission, OTS, "blue sky" authorities and the NASD
(including fees payable to the NASD for Trident's filing pursuant to the NASD
Corporate Finance Rule), (b) all stock issue and transfer taxes which may be
payable with respect to the sale of the Shares, (c) attorneys' fees of the
Company and the Association, (d) attorneys' fees relating to any required "blue
sky" laws research and filings, (e) telephone charges, (f) air freight, (g)
rental equipment, (h) supplies, (i) transfer agent and registrar fees and
expenses, (j) auditing and accounting fees and expenses, (k) costs of printing
and mailing all documents necessary in connection with the Conversion, and (l)
slide production expenses in connection with any community investor meetings to
be held by Trident.
7. Conditions of Trident's Obligations. Except as may be waived in
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
performance by the Company and the Association of their obligations hereunder,
and to the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinions
of Housley Kantarian & Bronstein, P.C., special counsel for the Company and
the Association, and _______________, local counsel for the Company and the
Association, each dated the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to counsel for Trident and stating that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Tennessee, and the Association is validly existing as a mutual
savings and loan association under the laws of the United States, each
with full power and authority to own its properties and conduct its
business as described in the Prospectus;
(ii) the Association is a member of the Federal Home Loan Bank of
Cincinnati, and the deposit accounts of the Association are insured by
the SAIF up to the applicable legal limits; and no action or
proceeding to suspend or revoke such membership or insurance coverage
is pending or, to such counsel's Actual Knowledge, threatened;
(iii) the activities of the Association and the Subsidiary as
described in the Prospectus are permitted under the HOLA and OTS
Regulations;
(iv) the Subsidiary is validly existing as a corporation in good
standing under the laws of the State of Tennessee with full power and
authority to own its properties and conduct its business as described
in the Prospectus; to such
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counsel's Actual Knowledge, the Subsidiary has obtained all licenses,
permits and other governmental authorizations required for the conduct
of its business as described in the Prospectus, except where the
failure to obtain such licenses, permits or governmental authorization
would not have a material adverse effect on the financial condition,
operations, business, properties or assets of the Subsidiary; to such
counsel's Actual Knowledge, all of the leases and subleases material
to the business of the Subsidiary under which the Subsidiary holds
properties are in full force and effect; the Subsidiary is not in
violation of its articles of incorporation or, to such counsel's
Actual Knowledge, bylaws; all of the outstanding stock of the
Subsidiary has been duly authorized and is validly issued, fully paid
and nonassessable, and such stock is owned directly by the
Association, free and clear of all material liens, encumbrances or
other claims or restrictions;
(v) the Company, the Association and the Subsidiary are each
duly qualified to do business and are in good standing as a foreign
corporation in each jurisdiction where the ownership or leasing of its
properties or the conduct of its business requires such qualification,
unless the failure to be so qualified would not have a material
adverse effect on the Company, the Association and the Subsidiary,
taken as a whole.
(vi) to such counsel's Actual Knowledge, the Association has
obtained all licenses, permits and other governmental authorizations
required for the conduct of its business as described in the
Prospectus, except where the failure to obtain such licenses, permits
or governmental authorizations would not have a material adverse
effect on the financial condition, operations, business, properties or
assets of the Company and the Association, taken as a whole; to such
counsel's Actual Knowledge, all of the leases and subleases material
to the business of the Association under which the Association holds
properties are in full force and effect; the Association is not in
violation of its charter or, to such counsel's Actual Knowledge,
bylaws;
(vii) the Plan has been duly adopted and approved by the Boards of
Directors of the Association and the Company and the members of the
Association; the Plan complies with, and to such counsel's Actual
Knowledge, the Conversion has been effected in all material respects in
accordance with, the HOLA and the OTS Regulations; to such counsel's
Actual Knowledge, all of the terms, conditions, requirements and
provisions with respect to the Plan and the Conversion imposed by
the OTS, except with respect to the Conversion Application (which is
covered by opinion (xix) below) and the filing or submission of
certain required post-Conversion reports or other materials by the
Company or the Association, have been complied with by the Company and
the
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Page 19
Association; and, to such counsel's Actual Knowledge, no person has
sought to obtain regulatory or judicial review of the final action of
the OTS in approving the Plan;
(viii) the Company has authorized Common Stock as set forth in
the Registration Statement and the Prospectus, and the description
thereof in the Registration Statement and the Prospectus is accurate
and complete in all material respects;
(ix) the issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of
the Company; the Shares, upon receipt of consideration and issuance in
accordance with the terms of the Plan and this Agreement, will be
validly issued, fully paid, nonassessable and, except as disclosed in
the Prospectus, free of preemptive rights (other than subscription
rights granted pursuant to the Plan), and good title thereto shall be
transferred by the Company free and clear of all claims, encumbrances,
security interests and liens created by the Company;
(x) the certificates for the Shares are in due and proper form
and comply in all material respects with applicable Tennessee law and
OTS Regulations;
(xi) the issuance and sale of the capital stock of the
Association to the Company have been duly authorized by all necessary
corporate action of the Association and the Company and have received
the approval of the OTS, and such capital stock, upon receipt of
payment and issuance in accordance with the terms of the Plan, will be
validly issued, fully paid and nonassessable;
(xii) subject to the satisfaction of the conditions to the OTS
approval of the Conversion Application and the Holding Company
Application, no further approval, authorization, consent or other
order of any regulatory agency is required in connection with the
execution and delivery of this Agreement, the issuance and sale of the
Shares and the consummation of the Conversion, except with respect to
the issuance to the Association's Federal Stock Charter by the OTS,
and except as may be required under the "blue sky" securities laws of
various jurisdictions and the regulations of the NASD (as to which no
opinion need be rendered);
(xiii) the execution and delivery of this Agreement and the
consummation of the Conversion have been duly and validly authorized
by all necessary corporate action on the part of each of the Company
and the Association; and this Agreement is a legal, valid and binding
obligation of each of the Company and
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Page 20
the Association, enforceable in accordance with its terms (except as
the enforceability thereof may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization, receivership, conservatorship
or other similar laws relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of depository
institutions whose accounts are insured by the FDIC or savings and
loan holding companies the accounts of whose subsidiaries are insured
by the FDIC; (ii) general equity principles, regardless of whether
such enforceability is considered in a proceeding in equity or at law,
or (iii) laws relating to the safety and soundness of insured
depository institutions and their affiliates, and except to the extent
that the provisions of Sections 8 and 9 hereof may be unenforceable as
against public policy or applicable law, including but not limited to,
Section 23A of the Federal Reserve Act, as amended);
(xiv) except as set forth in the Prospectus, there are no legal or
governmental proceedings pending or, to such counsel's Actual
Knowledge, threatened against or involving the assets of the Company,
the Association or the Subsidiary which would have a material adverse
effect on the Company, the Association and the Subsidiary, taken as a
whole;
(xv) the statements in the Prospectus under the captions
"Regulation," "Taxation," "Dividends," "Certain Restrictions on
Acquisition of the Company" "Regulation" and "Description of Capital
Stock," insofar as they are, or refer to, statements of law or legal
conclusions (excluding financial or statistical data or stock
valuation information included therein, as to which an opinion need
not be expressed), have been prepared or reviewed by such counsel and
are accurate and complete in all material respects;
(xvi) the Form AC has been approved by the OTS, and the
Prospectus and the Proxy Statement have been authorized for use by the
OTS; the Registration Statement has been declared effective by the
Commission; and no proceedings are pending by or before the Commission
or the OTS seeking to revoke or rescind the orders declaring the
Registration Statement effective or approving the Conversion
Application or, to such counsel's Actual Knowledge, are contemplated
or threatened;
(xvii) the execution and delivery of this Agreement and the
consummation of the Conversion by the Company and the Association do
not conflict with or result in a breach of the charter or bylaws of
the Company or the Association (in either mutual or stock form), or,
to such counsel's Actual Knowledge, constitute a breach of or default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, give rise to any right of termination,
cancellation or acceleration contained in, or result in the creation
or imposition
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Page 21
of any lien, charge or other encumbrance upon any of the properties
or assets of the Company or the Association pursuant to any of the
terms, provisions or conditions of, any material agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which
the Company or the Association is a party (other than the
establishment of the liquidation account pursuant to the Plan) or
violate any governmental license or permit or any enforceable published
law, administrative regulation or order or court order, writ,
injunction or decree (subject to the satisfaction of certain conditions
imposed by the OTS in connection with its approval of the Conversion
Application and the Holding Company Application), which breach,
default, encumbrance or violation would have a material adverse effect
on the financial condition, operations, business, assets or properties
of the Company and the Association taken as a whole;
(xviii) to such counsel's Actual Knowledge, there has been no
breach of any provision of the Company's, the Association's or the
Subsidiary's charter or bylaws or breach or default (or the occurrence
of any event which, with notice or lapse of time or both, would
constitute a default) by the Company, the Association or the
Subsidiary under any agreement, contract, indenture, bond, debenture,
note, instrument or obligation to which the Company, the Association
or the Subsidiary is a party or by which any of them or any of their
respective assets or properties may be bound, which breach or default
would have a material adverse effect on the financial condition,
operations, business, assets or properties of the Company, the
Association and the Subsidiary taken as a whole;
(xix) at the time the Conversion Application was approved by
the OTS and the Registration Statement was declared effective by the
Commission, the Conversion Application and the Registration Statement
(including the Prospectus and the Proxy Statement contained therein),
complied as to form in all material respects with the requirements of
the Securities Act, the HOLA, the Securities Act Regulations and the
OTS Regulations, as the case may be (except as to information provided
in writing by Trident with respect to Trident included therein and
financial statements, notes to financial statements, financial tables
and other financial and statistical data and stock valuation
information included therein, as to which no opinion need be
rendered); to such counsel's Actual Knowledge, all documents and
exhibits required to be filed with the Conversion Application and the
Registration Statement have been so filed; and the descriptions in the
Conversion Application and the Registration Statement of such
documents and exhibits are accurate and complete in all material
respects; and
(xx) upon the effectiveness of the Association's stock charter
and bylaws in accordance with applicable regulations and completion of
the sale by the Company of the Shares as contemplated by the
Prospectus and the Plan, (i) the
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Page 22
Association will be converted to a permanent capital stock savings
and loan association under the laws of the United States with full
power and authority to own its property and conduct its business as
described in the Prospectus, and (ii) all of the outstanding capital
stock of the Association will be owned of record and, to such
counsel's Actual Knowledge, beneficially by the Company, free and
clear of all liens, charges, encumbrances and restrictions.
In rendering such opinions, such counsels may rely as to certain
matters of fact on certificates of executive officers and directors of the
Company and the Association and certificates of public officials delivered
pursuant hereto. Such counsels may assume that any agreement is the valid
and binding obligation of any parties to such agreement other than the
Company, the Association and the Subsidiary. Such opinion may be governed
by, and interpreted in accordance with, the Legal Opinion Accord ("Accord")
of the ABA Section of Business Law (1991), and, as a consequence,
references in such opinions to such counsel's "Actual Knowledge" shall be
as such term is defined in the Accord (or knowledge based on certificates).
For purposes of such opinion, no proceeding shall be deemed to be pending,
no order or stop order shall be deemed to be issued, and no action shall be
deemed to be instituted unless, in each case, a director or executive
officer of the Company or the Association, or its counsel, shall have
received a copy of such proceeding, order, stop order or action. Such
opinion may be limited to statutes, regulations and judicial
interpretations and to facts as they exist as of the date of such opinions.
In rendering such opinions, such counsels need assume no obligation to
revise or supplement it should such statutes, regulations and judicial
interpretations be changed by legislative or regulatory action, judicial
decision or otherwise. Such counsels need express no view, opinion or
belief with respect to whether any proposed or pending legislation, if
enacted, or any proposed or pending regulations or policy statements issued
by any regulatory agency, whether or not promulgated pursuant to any such
legislation, would affect the validity of the execution and delivery by the
Company and the Association of this Agreement or the issuance of the
Shares.
(b) At the Closing Date, Trident shall receive the letter of Housley
Kantarian & Bronstein, P.C., special counsel for the Company and the
Association, dated the Closing Date, addressed to Trident, in form and
substance reasonably satisfactory to counsel for Trident and to the effect
that: (i) based on such counsel's participation in conferences with
representatives of the Company, the Association, its counsel, the
independent appraiser, the independent certified public accountants,
Trident and its counsel, review of documents and applicable law (including
the requirements of Form SB-2) and the experience such counsel has gained
in its practice under the Securities Act (relying as to factual matters on
certificates of officers and other written factual representations by the
Company and the Association), nothing has come to such counsel's attention
that would lead it to believe that the Registration Statement, as amended
or supplemented (except as to information in respect of Trident contained
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Trident Securities, Inc.
Page 23
therein and except as to the financial statements, notes to financial
statements, financial tables and other financial and statistical data and
stock valuation information contained therein, as to which such counsel
need express no view), at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading, and
that the Prospectus, as amended or supplemented (except as to information
in respect of Trident contained therein and except as to financial
statements, notes to financial statements, financial tables and other
financial and statistical data and stock valuation information contained
therein as to which such counsel need express no view), as if its date and
at the Closing Date, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(in issuing such letter, such counsel may indicate that it has not
confirmed the accuracy or completeness of or otherwise verified the factual
information contained in the Registration Statement or the Prospectus and
that it does not assume any responsibility for the accuracy or completeness
thereof.)
(c) Counsel for Trident shall have been furnished such documents as
they reasonably may require for the purpose of enabling them to review or
pass upon the sale of the Shares as herein contemplated and related
proceedings, and for the purpose of evidencing the accuracy, completeness
or satisfaction of any of the representations, warranties or conditions
herein contained, including but not limited to, resolutions of the Board of
Directors of the Company and the Association regarding the authorization of
this Agreement and the transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material adverse change in the
financial condition, business, operations, assets or properties of the
Company and the Association, taken as a whole, since the latest date as of
which such condition is set forth in the Prospectus, except as referred to
or contemplated therein; (ii) there shall have been no transaction entered
into by the Company or the Association after the latest date as of which
the financial condition of the Company or the Association is set forth in
the Prospectus other than transactions referred to or contemplated therein,
transactions in the ordinary course of business, and transactions which are
not material to the Company and the Association, taken as a whole; (iii)
none of the Company or the Association shall have received from the OTS or
Commission any directive (oral or written) to make any change in the method
of conducting their respective businesses which is material to the business
of the Company and the Association, taken as a whole, with which they have
not complied; (iv) no action, suit or proceeding, at law or in equity or
before or by any federal or state commission, board or other administrative
agency, shall be pending or threatened against the Company or the
Association or affecting any of their respective assets, wherein an
unfavorable decision, ruling or finding would have a material adverse
effect on the
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Trident Securities, Inc.
Page 24
business, operations, financial condition or income of the Company and the
Association, taken as a whole; and (v) the Shares shall have been qualified
or registered for offering and sale by the Company under the securities or
"blue sky" laws of such jurisdictions as Trident and the Company shall have
agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
principal executive officer and the principal financial officer of each of
the Company and the Association, dated the Closing Date, to the effect
that: (i) they have examined the Prospectus and, at the time the Prospectus
became authorized for final use, the Prospectus did not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading with respect to the Company or the
Association; (ii) since the date the Prospectus became authorized for final
use, no event has occurred which should have been set forth in an amendment
or supplement to the Prospectus which has not been so set forth, including
specifically, but without limitation, any material adverse change in the
business, financial condition, operations, assets or properties of the
Company or the Association and, the conditions set forth in clauses (ii)
through (iv) inclusive of subsection (d) of this Section 7 have been
satisfied; (iii) no order has been issued by the Commission or the OTS to
suspend the Offerings or the effectiveness of the Prospectus, and, to the
best knowledge of such officers, no action for such purposes has been
instituted or threatened by the Commission or the OTS; (iv) to the best
knowledge of such officers, no person has sought to obtain review of the
final actions of the OTS approving the Plan; and (v) all of the
representations and warranties contained in Section 2 of this Agreement are
true and correct, with the same force and effect as though expressly made
on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other
documents, (i) copies of the letters from the OTS authorizing the use of
the Prospectus and the Proxy Statement, (ii) a copy of the order of the
Commission declaring the Registration Statement effective; (iii) copy of
the certificate from the OTS evidencing the corporate existence of the
Association; (iv) copy of the certificate from the FDIC evidencing the
insured status of the Association, (v) a copy of the letter from the
appropriate Delaware authority evidencing the incorporation (and, if
generally available from such authority, good standing) of the Company;
(vi) a copy of the Company's certificate of incorporation certified by the
appropriate Delaware governmental authority; and, (vii) if available, a
copy of the letter from the OTS approving the Association's Federal Stock
Charter.
(g) As soon as available after the Closing Date, Trident shall
receive a certified copy of the Association's Federal Stock Charter as
executed by the OTS.
(h) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from Pugh & Company, independent certified
public accountants,
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Page 25
addressed to Trident and the Company, in substance and form reasonably
satisfactory to counsel for Trident, with respect to the consolidated
financial statements of the Association and certain financial information
contained in the Prospectus.
(i) At the Closing Date, Trident shall receive a letter in form and
substance reasonably satisfactory to counsel for Trident from Pugh &
Company, independent certified public accountants, dated the Closing Date
and addressed to Trident and the Company, confirming the statements made by
them in the letter delivered by them pursuant to the preceding subsection
as of a specified date not more than five (5) days prior to the Closing
Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company or the
Association prepared for Trident's reliance and delivered to Trident or to
counsel for Trident shall be deemed a representation and warranty by the Company
and the Association to Trident as to the statements made therein. If any
condition to Trident's obligations hereunder to be fulfilled prior to or at the
Closing Date is not so fulfilled, Trident may terminate this Agreement or, if
Trident so elects, may waive in writing any such conditions which have not been
fulfilled, or may extend the time of their fulfillment.
8. Indemnification.
(a) The Company and the Association jointly and severally agree to
indemnify and hold harmless Trident, its officers, directors and employees and
each person, if any, who controls Trident within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, against any and all
loss, liability, claim, damage and expense whatsoever and shall further promptly
reimburse such persons for any legal or other expenses reasonably incurred by
each or any of them in investigating, preparing to defend or defending against
any action, proceeding or claim (whether commenced or threatened) arising out of
or based upon (A) (i) any untrue or alleged untrue statement of a material fact
or the omission or alleged omission of a material fact required to be stated or
necessary to make the statements, in light of the circumstances under which they
were made, not misleading in (i) the Registration Statement or the Prospectus
(ii) any application (including the Form AC) or other document or communication
(in this Section 8 collectively called "Application") prepared or executed by or
on behalf of the Company, the Association or based upon written information
furnished by or on behalf of the Company or the Association, filed in any
jurisdiction to register or qualify the Shares under the securities laws thereof
or filed with the OTS or Commission with respect to the offering of the Shares,
unless such statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Company or the Association with
respect to Trident by or on behalf of Trident expressly for use in the
Prospectus or any amendment or supplement thereof or in any Application, as the
case may be, or (B) the Conversion or the engagement of
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Page 26
Trident hereunder, unless such action, proceeding or claim arises as a result of
Trident's gross negligence, bad faith or willful misconduct.
(b) The Company shall indemnify and hold Trident harmless for any
liability whatsoever arising out of (i) the Allocation Instructions or (ii) any
records of Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members (as those terms are defined in the Plan) delivered to Trident by
the Association or its agents for use during the Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the
Association, their officers, directors and employees and each person, if any,
who controls the Company and the Association within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, to the same extent as
the foregoing indemnity from the Company and the Association to Trident, but
only with respect to statements or omissions, if any, made in the Prospectus or
any amendment or supplement thereof, in any Application or to a purchaser of the
Shares in reliance upon, and in conformity with, information furnished in
writing to the Company or the Association with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus or any amendment or
supplement thereof or in any Application.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of any action, proceeding or claim (whether commenced or threatened) such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party of such
action, proceeding or claim; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 8. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than the
reasonable cost of investigation except as otherwise provided herein. In the
event the indemnifying party elects to assume the defense of any such action and
retain counsel acceptable to the indemnified party, the indemnified party may
retain additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such suit
include such indemnifying party and the indemnified party, and such indemnified
party shall have been advised by counsel that one or more material legal
defenses may be available to the indemnified party which may not be available to
the indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the indemnifying
party's obligation to bear the fees and expenses of such counsel. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one separate firm of
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Page 27
attorneys (and any special counsel that said firm may retain) for all
indemnified parties in connection with any one action, proceeding, claim or suit
or separate but similar or related actions, proceedings or claims in the same
jurisdiction arising out of the same general allegations or circumstances. An
indemnifying party against whom indemnity may be sought shall not be liable to
indemnify an indemnified party under this Section 8 if any settlement of any
such action is effected without such indemnifying party's consent. To the
extent applicable, this Section 8 is subject to and limited by public policy and
the provisions of applicable law, including but not limited to, Section 23A.
9. Contribution. In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in Section 8
above is for any reason held to be unavailable to Trident, the Company and/or
the Association other than in accordance with its terms, the Company and the
Association or Trident shall contribute to the aggregate losses, liabilities,
claims, damages, and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Association or Trident (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Association on the one hand and Trident on the other from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above, but also the
relative fault of the Company or the Association on the one hand and Trident on
the other hand in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Association on the one hand and Trident on the other shall be
deemed to be in the same proportion as the total net proceeds from the
Conversion received by the Company and the Association bear to the total fees
received by Trident under this Agreement. The relative fault of the Company or
the Association on the one hand and Trident on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Association or by Trident
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Association and Trident agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
the indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, Trident
shall not be required to contribute any amount in excess of the amount by which
fees owed Trident pursuant to this Agreement exceeds the amount of any
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Trident Securities, Inc.
Page 28
damages which Trident has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. To the extent applicable, this
Section 9 is subject to and limited by public policy and the provisions of
applicable law, including but not limited to, Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
respective indemnities of the Company and the Association and Trident and the
representation and warranties of the Company and the Association and of Trident
set forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company or the Association
or any controlling person or indemnified party referred to in Section 8 hereof,
and shall survive any termination or consummation of this Agreement and/or the
issuance of the Shares, and any legal representative of Trident, the Company,
the Association and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
11. Termination. Trident may terminate this Agreement by giving the
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make it, in
Trident's reasonable opinion, impracticable to proceed with the offering of the
Shares; or if trading on the New York Stock Exchange shall have suspended; or if
the United States shall have become involved in a war or major hostilities; or
if a general banking moratorium has been declared by a state or federal
authority which has material effect on the Association or the Conversion; or if
a moratorium in foreign exchange trading by major international banks or persons
has been declared; or if there shall have been a material change in the
capitalization, condition or business of the Company, or if the Association
shall have sustained a material or substantial loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act,
whether or not said loss shall have been insured; or if there shall have been a
material change in the condition or prospects of the Company or the Association.
(b) Any party hereto may terminate this Agreement by giving notice
pursuant to Section 12 hereof of a material breach of this Agreement by the
other party at any time after this Agreement becomes effective.
(c) If this Agreement is terminated as provided in this Section 11, the
party terminating this Agreement shall notify the non-terminating party promptly
by telephone or telegram, confirmed by letter.
<PAGE>
Trident Securities, Inc.
Page 29
(d) If this Agreement is terminated by Trident for any of the reasons
set forth in subsection (a) above, and to fulfill its obligations, if any,
pursuant to Sections 3, 6, 8(a) and 9 of this Agreement and upon demand, the
Company and the Association shall pay Trident the full amount so owing
thereunder.
(e) The Association may terminate the Conversion in accordance with the
terms of the Plan. Such termination shall be without liability to any party,
except that the Company and the Association shall be required to fulfill
their obligations pursuant to Sections 3(b), 3(c), 6, 8(a), 9 and 10 of this
Agreement.
12. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc.,
4601 Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr.
R. Lee Burrows, Jr. (with a copy to Breyer & Aguggia, 1300 I Street, N.W.,
Suite 470 East, Washington, D.C. 20005, Attention: Paul M. Aguggia, Esquire)
and if sent to the Company or the Association, shall be mailed, delivered or
telegraphed and confirmed to United Tennessee Bankshares, Inc. or Newport
Federal Savings & Loan Association, 344 West Broadway, Newport, Tennessee
37821, Attention: Richard G. Harwood, President (with a copy to Housley
Kantarian & Bronstein, P.C. 1220 19th Street, N.W., Suite 700, Washington, DC
20036, Attention: K. Scott Fife, Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, Trident, the Company, the Association and the
controlling and other persons referred to in Section 8 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any provision
herein contained.
14. Construction. Unless preempted by federal law, this Agreement shall
be governed by and construed in accordance with the substantive laws of North
Carolina.
15. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute but one and the same
instrument.
* * *
<PAGE>
Trident Securities, Inc.
Page 30
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
UNITED TENNESSEE BANKSHARES, INC.
By:
-------------------------------------
Richard G. Harwood
President and Chief Executive Officer
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
By:
-------------------------------------
Richard G. Harwood
President and Chief Executive Officer
Agreed to and accepted as of
the date first written above:
TRIDENT SECURITIES, INC.
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT 3.1
UNITED TENNESSEE BANKSHARES, INC.
CHARTER
ARTICLE I - Corporate Name
The name of the corporation is United Tennessee Bankshares, Inc. (the
"Corporation").
ARTICLE II - Registered Office and Agent
The street address and zip code of the Corporation's registered office are
344 W. Broadway, Newport, Tennessee 37821. The Corporation's registered office
is located in Cocke County. The name of the Corporation's initial registered
agent at its registered office is Richard Harwood.
ARTICLE III - Principal Office
The street address and zip code of the Corporation's principal office are
344 W. Broadway, Newport, Tennessee 37821.
ARTICLE IV - Purpose and Powers
The purpose or purposes for which the Corporation is organized are to
engage in any lawful business for which corporations may be incorporated
pursuant to the laws of Tennessee. The Corporation shall have all the powers of
a corporation organized under such laws. The Corporation is for profit.
ARTICLE V - Capital Stock
The total number of shares of all classes of capital stock which the
Corporation has authority to issue is 25,000,000, of which 20,000,000 shares
shall be common stock, no par value, and of which 5,000,000 shares shall be
preferred stock, no par value. The shares may be issued from time to time as
authorized by the board of directors without the approval of the Corporation's
shareholders except as otherwise provided in this Article V or the rules of a
national securities exchange or automated quotation system, if applicable. The
consideration for the issuance of the shares shall be paid in full before their
issuance. The consideration for the shares, other than cash, shall be
determined by the board of directors in accordance with the provisions of the
Tennessee Business Corporation Act. In the absence of actual fraud in the
transaction, the judgment of the board of directors as to the value of such
consideration 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 Corporation which is transferred
to stated capital upon the issuance of shares as a share dividend shall be
deemed to be consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock and a statement of the relative powers,
designations, preferences and rights of the shares of each class of and series
(if any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
(A) Except as provided in this Article V (or in any amendments thereto)
the holders of common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote for each share
held by such holder.
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Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends, but only when and as declared by
the board of directors.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having
preferences over the common stock in any such event, the full preferential
amounts to 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 Corporation, to
receive the remaining assets of the Corporation available for distribution, in
cash or in kind.
Each share of common stock shall have the same relative powers, preferences
and rights as, and shall be identical in all respects with, all the other shares
of common stock of the Corporation.
(B) The board of directors of the Corporation is authorized to amend
this Charter, by adoption of articles of amendment effective without shareholder
approval, to provide for the issuance of serial preferred stock in series and to
fix the preferences, limitations and relative rights of each such series,
including, but not limited to, determination of any of the following:
(1) the distinctive designation for each series and the number of
shares constituting such series;
(2) the voting rights, full, conditional or limited, of shares of
such series;
(3) whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions upon
which, such shares may be redeemed;
(4) the dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date(s), the payment date(s) for dividends, and the
participating or other special rights, if any, with respect to dividends;
(5) the amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(6) whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and
the manner of its application, including the price(s) at which such shares
may be redeemed or purchased through the application of such fund;
(7) 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
Corporation and, if so convertible or exchangeable, the conversion price(s)
or the rate(s) of exchange, and the adjustments thereof, if any, at which
such conversion or exchange may be made, and any other terms and conditions
of such conversion or exchange;
(8) the price or other consideration for which the shares of such
series shall be issued;
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(9) whether the shares of such series that are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock; and
(10) any other designations, preferences, limitations or rights that
are now or hereafter permitted by applicable law and are not inconsistent
with the provisions of this Charter.
Each share of each series of serial preferred stock shall have the same
preferences and relative rights as, and be identical in all respects with, all
other shares of the same series.
ARTICLE VI - Preemptive Rights
No shareholder of the Corporation shall have, as a matter of right, the
preemptive right to purchase or subscribe for shares of any class, now or
hereafter authorized, or to purchase or subscribe for securities or other
obligations convertible into or exchangeable for such shares or which by
warrants or otherwise entitle the holders thereof to subscribe for or purchase
any such shares.
ARTICLE VII - Repurchase of Shares
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the shareholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine, subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE VIII - Shareholder Meetings; Cumulative Voting
(A) A majority of the outstanding shares of the Corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. Where voting is by voting group, a majority of the votes
entitled to be cast on any matter by each voting group constitutes a quorum of
each such voting group for action on that matter. If less than a majority of
such shares is represented at a meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum.
(B) Special meetings of shareholders may be called at any time, but only
by the board of directors or a committee of the board of directors that has been
duly designated by the board of directors.
(C) There shall be no cumulative voting by shareholders of any class or
series in the election of directors of the Corporation.
ARTICLE IX - Directors
The number of directors of the Corporation shall be such number, not more
than 15 (exclusive of directors, if any, to be elected by holders of preferred
stock of the Corporation, voting separately as a class), as shall be provided
from time to time in or in accordance with the bylaws, provided that no action
shall be taken to decrease or increase the number of directors from time to time
unless at least two-thirds of the directors then in office shall concur in said
action. Vacancies in the board of directors of the Corporation, however caused,
and newly created directorships shall be filled only by a vote of at least
two-thirds of the directors then in office, whether or not a
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quorum, and any director so chosen shall hold office for a term expiring at
the next meeting of shareholders at which directors are elected.
At the first meeting of shareholders of the Corporation, the board of
directors of the Corporation shall be divided into three classes as nearly equal
in number as the then total number of directors constituting the entire board of
directors shall permit, which classes shall be designated Class I, Class II and
Class III. At such meeting of shareholders, directors assigned to Class I shall
be elected to hold office for a term expiring at the first succeeding annual
meeting of shareholders thereafter, directors assigned to Class II shall be
elected to hold office for a term expiring at the second succeeding annual
meeting thereafter, and directors assigned to Class III shall be elected to hold
office for a term expiring at the third succeeding annual meeting thereafter.
Thereafter, at each annual meeting of shareholders of the Corporation, directors
of classes the terms of which expire at such annual meeting shall be elected for
terms of three years. Notwithstanding the foregoing, a director whose term
shall expire at any annual meeting shall continue to serve until such time as
his successor shall have been duly elected and shall have qualified unless his
position on the board of directors shall have been abolished by action taken to
reduce the size of the board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the immediately
preceding paragraph. The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing,
no decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. Should the number of directors of the
Corporation be increased, the additional directorships shall be allocated among
classes as appropriate so that the number of directors in each class is as
specified in the immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the board of directors shall consist of said
directors so elected in addition to the number of directors fixed as provided
above in this Article IX. Notwithstanding the foregoing, and except as
otherwise may be required by law, whenever the holders of any one or more series
of preferred stock of the Corporation shall have the right, voting separately as
a class, to elect one or more directors of the Corporation, the terms of the
director or directors elected by such holders shall expire at the next
succeeding annual meeting of shareholders.
ARTICLE X - Notice for Nominations and Proposals
(A) Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meetings of shareholders may be
made by the board of directors of the Corporation or by any shareholder of the
Corporation entitled to vote generally in the election of directors. In order
for a shareholder of the Corporation to make any such nominations and/or
proposals, he shall give notice thereof in writing, delivered or mailed by first
class United States mail, postage prepaid, to the secretary of the Corporation
not fewer than 30 days nor more than 60 days prior to any such meeting;
provided, however, that if notice or public disclosure of the meeting is
effected fewer than 40 days before the meeting, such written notice shall be
delivered or mailed, as prescribed, to the secretary of the Corporation not
later than the close of the 10th day following the day on which notice of the
meeting was mailed to shareholders. Each such notice given by a shareholder
with respect to nominations for the election of directors shall set forth (1)
the name, age, business address and, if known, residence address of each nominee
proposed in such notice; (2) the principal occupation or employment of each such
nominee; (3) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee; (4) such other information as would be
required to be included in a proxy statement soliciting proxies for the election
of the proposed nominee pursuant to Regulation 14A of the Securities Exchange
Act of 1934, as amended, including, without limitation, such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director, if elected; and, (5) as to the shareholder giving such notice, (a) his
name and address as they appear on the Corporation's books and (b) the class and
number of shares of the Corporation which are beneficially owned by such
shareholder. In
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addition, the shareholder making such nomination shall promptly provide any
other information reasonably requested by the Corporation.
(B) Each such notice given by a shareholder to the secretary with respect
to business proposals to bring before a meeting shall set forth in writing as to
each matter: (1) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting;
(2) the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business; (3) the class and number of shares of the
Corporation which are beneficially owned by the shareholder; and (4) any
material interest of the shareholder in such business. Notwithstanding anything
in this Charter to the contrary, no business shall be conducted at the meeting
except in accordance with the procedures set forth in this Article X.
(C) The chairman of the annual or special meeting of shareholders may, if
the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if he
should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding adjourned special or annual meeting of the shareholders taking place
thirty days or more thereafter. This provision shall not require the holding of
any adjourned or special meeting of shareholders for the purpose of considering
such defective nomination or proposal.
ARTICLE XI - Removal of Directors
Notwithstanding any other provision of this Charter or the bylaws of the
Corporation, no director of the Corporation may be removed at any time unless
for cause and upon the affirmative vote of the holders of at least 80% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the shareholders called for that purpose, except as
otherwise required by law.
ARTICLE XII - Elimination of Directors' Liability
Directors of the Corporation shall have no liability to the Corporation or
its shareholders for monetary damages for breach of fiduciary duty as a
director, provided that this Article XII shall not eliminate liability of a
director (A) for any breach of the director's duty of loyalty to the Corporation
or its shareholders; (B) for acts or omissions that are not in good faith or
that involve intentional misconduct or a knowing violation of law; or (C) for
unlawful distributions under Section 48-18-304 of the Tennessee Business
Corporation Act.
If the Tennessee Business Corporation Act is amended to permit further
elimination or limitation of the personal liability of directors, then the
liability of directors of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Tennessee Business Corporation Act, as so
amended. Any repeal or modification of this Article XII or applicable Tennessee
law shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE XIII - Indemnification
(A) Except as provided in Section (B) of this Article, the Corporation
shall indemnify a director who is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative ("proceeding"), because he is or was a director against
liability incurred in such proceeding if (1) he conducted himself in good faith;
(2) he reasonably believed, (a) in the case of conduct in his official capacity
with the Corporation, that his conduct was in the Corporation's best interest
and, (b) in all other cases, that his conduct was at least not opposed to its
best interests; and, (3) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
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The Corporation shall further indemnify any director and any officer who is
not a director who was wholly successful, on the merits or otherwise, in the
defense of any proceedings to which he was a party because he is or was a
director of the Corporation against reasonable expenses incurred by him in
connection with the proceeding.
(B) The Corporation shall not indemnify a director in connection with a
proceeding by or in the right of the Corporation in which the director was
adjudged liable to the Corporation or in connection with any other proceeding
charging improper personal benefit to him, whether or not involving action in
his official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him.
(C) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if (1) the director furnishes the Corporation a
written affirmation of his good faith belief that he has met the standard of
conduct set forth in Section (A) of this Article; (2) he provides the
Corporation a written undertaking, executed personally or on his behalf, to
repay the advance if it is ultimately determined that he is not entitled to
indemnification; and (3) a determination is made that the facts then known to
those making the determination would not preclude indemnification under this
Article XIII.
(D) The Corporation may not indemnify a director hereunder unless
authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because he
has met the standard set forth in Section (A) of this Article XIII. The
determination shall be made:
(1) By the board of directors by majority vote of a quorum consisting
of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under Subsection (1) of this
Section, by majority vote of a committee duly designated by the board of
directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to the
proceeding;
(3) By independent special legal counsel;
(a) Selected by the board of directors or its committee in the
manner prescribed in Subsections (1) or (2) of this Section;
(b) If a quorum of the board of directors cannot be obtained
under Subsection (1) of this Section and a committee cannot be
designated under Subsection (2) of this Section, selected by majority
vote of the full board of directors (in which selection directors who
are parties may participate); or
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not
be voted on the determination.
(E) Authorization of indemnification and evaluation that indemnification
is permissible shall be made in the same manner as the determination that
indemnification is permissible, except that, if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under Subsection (3)
of this Section to select counsel.
(F) The Corporation may indemnify and advance expenses to an officer,
employee or agent of the Corporation who is not a director to the same extent as
a director hereunder.
(G) The Corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
Corporation, or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or
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agent of another foreign or domestic corporation, partnership, joint venture,
employee benefit plan or other enterprise, against liability asserted against
or incurred by him in that capacity or arising from his status as a director,
officer, employee or agent, whether or not the Corporation would have power
to indemnify him against the same liability hereunder.
ARTICLE XIV - Acquisition of Capital Stock
(A) Five Year Prohibition. For a period of five years from the effective
date of the completion of the conversion of Newport Federal Savings and Loan
Association from mutual to stock form (which entity shall become a wholly owned
subsidiary of the Corporation upon such conversion), no person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than 10%
of any class of equity security of the Corporation. In addition, for a period
of five years from the completion of the conversion of Newport Federal Savings
and Loan Association from mutual to stock form, and notwithstanding any
provision to the contrary in this Charter or the bylaws of the Corporation,
where any person directly or indirectly acquires beneficial ownership of more
than 10% of any class of equity security of the Corporation in violation of this
Article XIV, the securities beneficially owned in excess of 10% shall not be
counted as shares entitled to vote, shall not be voted by any person or counted
as voting shares in connection with any matter submitted to the shareholders for
a vote, and shall not be counted as outstanding for purposes of determining a
quorum or the affirmative vote necessary to approve any matter submitted to the
shareholders for a vote.
(B) Prohibition After Five Years. If, at any time after five years from
the effective date of the completion of the conversion of Newport Federal
Savings and Loan Association from mutual to stock form, any person shall acquire
the beneficial ownership of more than 10% of any class of equity security of the
Corporation without the prior approval by a two-thirds vote of the Continuing
Directors, as defined in Article XV of this Charter, then the record holders of
voting stock of the Corporation beneficially owned by such acquiring person
shall have only the voting rights set forth in this Section (B) on any matter
requiring their vote or consent. With respect to each vote in excess of 10% of
the voting power of the outstanding shares of voting stock of the Corporation
which such record holders would otherwise be entitled to cast without giving
effect to this Section (B), such record holders in the aggregate shall be
entitled to cast only one-hundredth (1/100) of a vote, and the aggregate voting
power of such record holders, so limited for all shares of voting stock of the
Corporation beneficially owned by such acquiring person, shall be allocated
proportionately among such record holders. For each such record holder, this
allocation shall be accomplished by multiplying the aggregate voting power, as
so limited, of the outstanding shares of voting stock of the Corporation
beneficially owned by such acquiring person by a fraction whose numerator is the
number of votes represented by the shares of voting stock of the Corporation
owned of record by such record holder (and which are beneficially owned by such
acquiring person) and whose denominator is the total number of votes represented
by the shares of voting stock of the Corporation that are beneficially owned by
such acquiring person. A person who is a record owner of shares of voting stock
of the Corporation that are beneficially owned simultaneously by more than one
person shall have, with respect to such shares, the right to cast the least
number of votes that such person would be entitled to cast under this Section
(B) by virtue of such shares being so beneficially owned by any of such
acquiring persons.
(C) Definitions. The term "person" means 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 acting in concert formed for the purpose of acquiring, holding or
disposing of securities of the Corporation. The term "acquire" includes every
type of acquisition, whether effected by purchase, exchange, operation of law or
otherwise. The term "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for or request for invitation for
tenders of, a security or interest in a security for value. The term "acting in
concert" includes (1) knowing participation in a joint activity or conscious
parallel action towards a common goal whether or not pursuant to an express
agreement and (2) a combination or pooling of voting or other interests in the
Corporation's outstanding shares for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. The term "beneficial ownership" shall
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have the meaning defined in Rule 13d-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934.
(D) Exclusion for Underwriters, Employee Benefit Plans and Certain
Proxies. The restrictions contained in this Article XIV shall not apply to (1)
any underwriter or member of an underwriting or selling group involving a public
sale or resale of securities of the Corporation or a subsidiary thereof;
provided, however, that upon completion of the sale or resale of such
securities, no such underwriter or member of such selling group is a beneficial
owner of more than 10% of any class of equity security of the Corporation; (2)
any proxy granted to one or more Continuing Directors, as defined in Article XV
of this Charter, by a shareholder of the Corporation; (3) any employee benefit
plans of the Corporation or a subsidiary thereof; or (4) any transaction
approved in advance by a majority of such Continuing Directors. In addition,
the Continuing Directors, as defined in Article XV of this Charter, the officers
and employees of the Corporation and its subsidiaries, the directors of
subsidiaries of the Corporation, the employee benefit plans of the Corporation
and its subsidiaries, entities organized or established by the Corporation or
any subsidiary thereof pursuant to the terms of such plans and trustees and
fiduciaries with respect to such plans acting in such capacity shall not be
deemed to be a group with respect to their beneficial ownership of voting stock
of the Corporation solely by virtue of their being directors, officers or
employees of the Corporation or a subsidiary thereof or by virtue of the
Continuing Directors, as defined in Article XV of this Charter, the officers and
employees of the Corporation and its subsidiaries and the directors of
subsidiaries of the Corporation being fiduciaries or beneficiaries of an
employee benefit plan of the Corporation or a subsidiary of the Corporation.
Notwithstanding the foregoing, no director, officer or employee of the
Corporation or any of its subsidiaries, or group of any of them, shall be exempt
from the provisions of this Article XIV should any such person or group become a
beneficial owner of more than 10% of any class of equity security of the
Corporation.
(E) Determinations. A majority of the Continuing Directors, as defined in
Article XV of this Charter, shall have the power to construe and apply the
provisions of this Article XIV and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (1) the number of shares beneficially owned by any person; (2)
whether a person has an agreement, arrangement or understanding with another as
to the matters referred to in the definition of beneficial ownership; (3) the
application of any other definition or operative provision of this Article XIV
to the given facts; or (4) any other matter relating to the applicability or
effect of this Article XIV. Any constructions, applications or determinations
made by the Continuing Directors, as defined in Article XV of this Charter,
pursuant to this Article XIV 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.
ARTICLE XV - Approval of Business Combinations
The shareholder vote required to approve a Business Combination (as
hereinafter defined) shall be as set forth in this Article XV, in addition to
any other requirements under applicable law.
(A) (1) Except as otherwise expressly provided in this Article XV, the
affirmative vote of the holders of (i) at 80% of the outstanding shares
entitled to vote thereon (and, if any class or series of shares is entitled
to vote thereon separately, the affirmative vote of the holders of at least
two-thirds of the outstanding shares of each such class or series) and (ii)
a majority of the outstanding shares entitled to vote thereon not including
shares deemed beneficially owned by a Related Person (as hereinafter
defined) shall be required in order to authorize any of the following:
(a) any merger, share exchange or consolidation of the
Corporation with or into a Related Person;
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage, or any other security
device, of all or any Substantial Part (as hereinafter
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defined) of the assets of the Corporation (including without
limitation any voting securities of a subsidiary) or of a subsidiary
to a Related Person;
(c) any merger or consolidation of a Related Person with or into
the Corporation or a subsidiary;
(d) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage, or any other capital device,
of all or any Substantial Part of the assets of a Related Person to
the Corporation or a subsidiary;
(e) the issuance of any securities of the Corporation or a
subsidiary to a Related Person;
(f) the acquisition by the Corporation or a subsidiary of any
securities of a Related Person;
(g) any reclassification of the common stock of the Corporation,
or any recapitalization involving the common stock of the Corporation;
and
(h) any agreement, contract or other arrangement providing for
any of the transactions described in this Section (A).
(2) Such affirmative vote shall be required notwithstanding any other
provision of this Charter, any provision of law, or any agreement with any
national securities exchange or automated quotation system which might
otherwise permit a lesser vote or no vote.
(3) The term "Business Combination" as used in this Article XV shall
mean any transaction which is referred to in any one or more of Subsections
(1)(a) through (1)(h) of this Section.
(B) The provisions of Section (A) of this Article shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by any other provision of this
Charter, any provisions of law or any agreement with any federal regulatory
agency, national securities exchange or automated quotation system, if the
Business Combination shall have been approved by at least two-thirds of the
Continuing Directors (as hereinafter defined); provided, however, that such
approval shall be effective only if obtained at a meeting at which a Continuing
Director Quorum (as hereinafter defined) is present.
(C) For the purpose of this Article XV the following definitions apply:
(1) The term "Related Person" shall mean (a) any individual,
corporation, partnership or other person or entity which together with its
"affiliates" (as that term is defined in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934) "beneficially
owns" (as that term is defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934) in the aggregate 10%
or more of the outstanding shares of the common stock of the Corporation;
and (b) any "affiliate" (as that term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934) of any such individual, corporation,
partnership or other person or entity. Without limitation, any shares of
the common stock of the Corporation which any Related Person has the right
to acquire pursuant to any agreement, upon exercise of conversion rights,
warrants or options or otherwise shall be deemed "beneficially owned" by
such Related Person.
(2) The term "Substantial Part" shall mean more than 25 percent of
the total assets of the Corporation, as of the end of its most recent
fiscal year ending prior to the time the determination is made.
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(3) The term "Continuing Director" shall mean any member of the board
of directors of the Corporation who is unaffiliated with a Related Person
and was a member of the board of directors prior to the time that the
Related Person became a Related Person, and any successor of a Continuing
Director who is recommended to succeed a Continuing Director by a majority
of Continuing Directors then on the board of directors.
(4) The term "Continuing Director Quorum" shall mean at least
two-thirds of the Continuing Directors capable of exercising the powers
conferred on them.
(D) In addition to Sections (A) through (C) of this Article, the Tennessee
Business Combination Act, as amended, shall apply to the Corporation; provided,
however, that Section 48-35-207(1) of the Tennessee Business Combination Act
shall not apply to the Corporation.
ARTICLE XVI - Evaluation of Business Combinations
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and of the shareholders, when evaluating a
Business Combination (as defined in Article XV of this Charter) or a tender or
exchange offer, the board of directors of the Corporation shall, in addition to
considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant: (A) the social and economic effects of the transaction on
the Corporation, its subsidiaries, employees, depositors, loan and other
customers and creditors and the other elements of the communities in which the
Corporation and its subsidiaries operate or are located; (B) the business and
financial condition and earnings prospects of the acquiring person or entity,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition and other likely financial obligations of the acquiring person or
entity, and the possible effect of such conditions upon the Corporation and its
subsidiaries and the other elements of the communities in which the Corporation
and its subsidiaries operate or are located; and (C) the competence, experience
and integrity of the acquiring person or entity and its or their management.
ARTICLE XVII - Control Share Acquisitions
"Control share acquisitions," as defined in Section 48-35-302 of the
Tennessee Code, respecting the shares of the Corporation shall be governed by
and subject to the provisions of the Tennessee Control Share Acquisition Act,
and Sections 48-35-308 and 48-35-309 of the Tennessee Control Share Acquisition
Act shall apply to the Corporation.
ARTICLE XVIII - Incorporator
The name, address and zip code of the Corporation's incorporator are
Richard Harwood, 344 W. Broadway, Newport, Tennessee 37821.
ARTICLE XIX - Amendment of Bylaws
To the extent permitted by the Tennessee Business Corporation Act, the
board of directors of the Corporation is expressly authorized to repeal, alter,
amend or rescind the bylaws of the Corporation by vote of a majority of the
board of directors at a legal meeting held in accordance with the bylaws.
Notwithstanding any other provision of this Charter or the bylaws of the
Corporation (and notwithstanding the fact that some lesser percentage may be
specified by law), the bylaws shall be repealed, altered, amended or rescinded
by the shareholders of the Corporation only by vote of at least 80% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the shareholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting).
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ARTICLE XX - Amendment of Charter
The Corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Charter in the manner now or hereafter prescribed by
law, and all rights conferred on shareholders herein are granted subject to this
reservation. Notwithstanding the foregoing, the provisions set forth in
Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI, XVII and XIX of this Charter
and this Article XX may not be repealed, altered, amended or rescinded in any
respect unless the same is approved by the affirmative vote of the holders at
least 80% of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (considered for this purpose as a
single class) cast at a meeting of the shareholders called for that purpose
(provided that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting); except that such repeal,
alteration, amendment or rescission may be made by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as a single class) if the same is first approved by a majority
of the Continuing Directors, as defined in Article XV of this Charter.
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THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the Tennessee Business Corporation Act,
does make this Charter, hereby declaring and certifying that this is his act and
deed and the facts herein stated are true, and accordingly has hereunto set his
hand as of the date set forth below.
Date: August 14, 1997 /s/ Richard Harwood
-------------------- ---------------------------
Richard Harwood
Incorporator
<PAGE>
Exhibit 3.2
UNITED TENNESSEE BANKSHARES, INC.
BYLAWS
ARTICLE I - Home Office
The home office of United Tennessee Bankshares, Inc. (the "Corporation")
shall be at 344 W. Broadway, Newport, Tennessee.
ARTICLE II - Shareholders
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Corporation or at such
other place in Tennessee as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
Corporation for the election of directors and for the transaction of any
other business of the Corporation shall be held annually as determined by the
board of directors.
Section 3. Special Meetings. Special meetings of the shareholders
for any purpose or purposes may be called at any time by a majority of the
board of directors or by a committee of the board of directors that has been
duly designated by the board of directors.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with rules and procedures adopted by the board of
directors. The board of directors shall designate, when present, either the
chairman of the board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 10 days nor more than two (2) months before
the date of the meeting, either personally or by mail, by or at the direction
of the chairman of the board, the president, the secretary or the directors
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided, however, that with respect to meetings at which a plan of
merger, share exchange, sale of all or substantially all of the Corporation's
assets or dissolution of the Corporation is proposed to be considered, such
notice shall be provided to each shareholder of the Corporation whether or
not entitled to vote. If mailed, such notice shall be deemed to be delivered
when deposited in the mail, addressed to the shareholder at the address as it
appears on the stock transfer books or records of the Corporation as of the
record date prescribed in Section 6 with postage prepaid. When any
shareholders' meeting, either annual or special, is adjourned for 30 days or
more, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for fewer than 30 days or of the business
to be transacted at the meeting, other than an announcement at the meeting at
which such adjournment is taken. If a meeting is adjourned to a date more
than four (4) months after the date fixed for the original meeting, a new
record date for the adjourned meeting must be fixed, and notice of the
adjourned meeting must be given to shareholders as of the new record date.
A shareholder may waive any notice required hereunder provided the waiver
is in writing, signed by him and delivered to the Corporation for inclusion
in the minutes or filing with the corporate records. A shareholder's
attendance at a meeting (i) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
(or promptly upon his arrival) objects to holding the meeting or transacting
business at the meeting, and (ii) waives objection to consideration of a
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particular matter at a meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors shall fix in advance a date as the
record date for any such determination of shareholders. Such date in any
case shall be not more than 70 days and, in case of a meeting of
shareholders, not fewer than 10 days prior to the date on which the
particular action requiring such determination of shareholders, is to be
taken. When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment, except adjournment to a date more than four
(4) months after the date fixed for the original meeting, in which case a new
record date shall be set.
Section 7. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make a complete list
of the shareholders entitled to notice of such meeting, or any adjournment,
arranged in alphabetical order, with the address and the number of shares
held by each. Such list of shareholders shall be kept on file at the home
office of the Corporation and shall be subject to inspection by any
shareholder, upon written demand by such shareholder, his agent or his
attorney, beginning two (2) business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting. If
the right to vote at any meeting is challenged, the person presiding thereat
may rely on such list as evidence of the right of the person challenged to
vote at such meeting. A shareholder or his agent or attorney is entitled on
written demand to copy such list, during regular business hours and at his
expense, during the period it is available for inspection, provided (i) his
demand is made in good faith and for a proper purpose, (ii) he describes with
reasonable particularity his purpose and the records he desires to inspect,
and (iii) the records are directly connected with his purpose.
Section 8. Proxies. At all meetings of shareholders, a shareholder
may appoint a proxy to vote or otherwise act for him by signing an
appointment form, either personally or by his duly authorized attorney in
fact. Proxies solicited on behalf of the management shall be voted as
directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. A proxy shall be valid
for eleven months from the date of its execution unless another period is
expressly provided in the appointment form.
Section 9. Voting. At each election for directors every shareholder
entitled to vote at such election shall be entitled to one (1) vote for each
share of stock held by him. Unless otherwise provided in the Corporation's
Charter or by applicable law, a majority of those votes cast by shareholders
entitled to vote at a lawful meeting shall be sufficient to pass on a
transaction or matter. Where voting is by voting group, action on a matter
(other than the election of directors) by a voting group is approved if the
votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the Corporation's Charter or applicable law
requires a greater number of affirmative votes.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
shareholders of the Corporation, any one (1) or more of such shareholders may
cast, in person or by proxy, all votes to which such ownership is entitled.
In the event an attempt is made to cast conflicting votes, in person or by
proxy, by the several persons in whose names shares of stock stand, the vote
or votes to which those persons are entitled shall be cast as directed by a
majority of those holding such shares and present in person or by proxy at
such meeting, but no votes shall be cast for such stock if a majority cannot
agree.
Section 11. Voting of Shares of Certain Holders. Shares standing in
the name of another corporation may be voted by an officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
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into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name. Shares standing
in the name of a receiver may be voted by such receiver, and shares held by
or under the control of a receiver may be voted by such receiver without the
transfer into his name if authority to do so is contained in an appropriate
order to the court or other public authority by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Neither treasury shares of its own stock held by the Corporation nor
shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the
total number of outstanding shares at any given time for purposes of any
meeting.
Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than
nominees for office, as inspectors of election to act at such meeting or any
adjournment. The number of inspectors shall be either one (1) or three (3).
Any such appointment shall not be altered at the meeting. If inspectors of
election are not so appointed, the chairman of the board or the president may
make such appointment at the meeting. In case any person appointed as
inspector fails to appear or fails or refuses to act, the vacancy may be
filled by appointment by the board of directors in advance of the meeting or
at the meeting by the chairman of the board or the president.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of
a quorum and the authenticity, validity and effect of proxies; receiving
votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the rights to vote; counting
and tabulating all votes or consents; determining the result; and performing
such other acts as may be proper to conduct the election or vote with
fairness to all shareholders.
Section 13. Nominating Committee. The board of directors shall act as
a nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death or other incapacity of a management nominee, the nominating committee
shall deliver written nominations to the secretary at least 20 days prior to
the date of the annual meeting. Provided such committee makes such
nominations, no nominations for directors except those made by the nominating
committee shall be voted upon at the annual meeting unless other nominations
by shareholders are made in writing and delivered to the secretary of the
Corporation in accordance with the provisions of the Corporation's Charter.
Section 14. New Business. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the secretary of the
Corporation in accordance with the provisions of the Corporation's Charter.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees, but in connection with such reports no new business shall be
acted upon at such annual meeting unless stated and filed as provided in the
Corporation's Charter.
Section 15. Informal Action by Shareholders. Any action required to
be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of shareholders, may be taken without a meeting. If all
shareholders entitled to vote on the action consent to taking such action
without a meeting, the affirmative vote of the number of shares that would be
necessary to authorize or take such action at a meeting is the act of the
shareholders. The action must be evidenced by one (1) or more written
consents describing the action taken, signed by each shareholder entitled to
vote on the action, in one (1) or more counterparts, indicating each signing
shareholder's vote or abstention on the action, and delivered to the
Corporation for inclusion in the minutes or filing with the corporate
records. A consent signed under this section has the effect of a meeting
vote and may be described as such in any document.
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ARTICLE III - Board of Directors
Section 1. General Powers. The business and affairs of the
Corporation shall be under the direction of its board of directors. The
board of directors shall annually elect a chairman of the board and a
president from among its members and shall designate, when present, either
the chairman of the board or the president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of
six members, as determined by resolution of the board of directors. In
accordance with the provisions of the Corporation's Charter, at the first
meeting of shareholders of the Corporation the board of directors shall be
divided into three classes as nearly equal in number as possible. At
succeeding annual meetings of shareholders, the members of each class shall
be elected for a term of three (3) years and until their successors are
elected and qualified. One (1) class shall be elected by ballot annually.
The board of directors may increase or decrease the number of directors, but
in no event shall such number be increased or decreased beyond the range
established in the Corporation's Charter.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
after, and at the same place as, the annual meeting of shareholders or at
such other time and place as the board of directors shall determine. The
board of directors may provide, by resolution, the time and place for the
holding of additional regular meetings without other notice than such
resolution.
Section 4. Qualification. Directors need not be the beneficial
owners of shares of capital stock of the Corporation.
Section 5. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman of the board,
the president, or one-third of the directors. The persons authorized to call
special meetings of the board of directors may fix any place within Tennessee
as the place for holding any special meeting of the board of directors called
by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person.
Section 6. Notice of Special Meeting. Written notice of any special
meeting shall be given to each director at least two (2) days previous
thereto delivered personally, by telegram or by telecopy, or at least five
(5) days previous thereto delivered by mail at the address at which the
director is most likely to be reached. Such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid, 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 secretary. 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 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.
Section 7. Quorum. Except as otherwise provided by the Corporation's
Charter, a majority of the number of directors fixed by Section 2 shall
constitute a quorum for the transaction of business at any meeting of the
board of directors; however, if less than such majority is present at a
meeting, a majority of the directors present may adjourn the meeting from
time to time. Notice of any adjourned meeting shall be given in the same
manner as prescribed by Section 6.
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 these
bylaws, the Corporation's Charter or applicable law.
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Section 9. Action Without a Meeting. Any action required or
permitted to be taken by the board of directors at a meeting may be taken
without a meeting. If all directors consent to taking such action without a
meeting, the affirmative vote of the number of directors that would be
necessary to authorize or take such action at a meeting is the act of the
board. The action must be evidenced by one (1) or more written consents
describing the action taken, signed by each director in one (1) or more
counterparts, indicating each signing director's vote or abstention on the
action, and shall be included in the minutes or filed with the corporate
records reflecting the action taken. Action taken under this section is
effective when the last director signs the consent, unless the consent
specifies a different effective date. A consent signed under this section
has the effect of a meeting vote and may be described as such in any document.
Section 10. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the home office of the
Corporation addressed to the board of directors, the chairman of the board or
the president. Unless otherwise specified, such resignation shall take effect
upon delivery. More than three (3) consecutive absences from regular meetings
of the board of directors, unless excused by resolution of the board of
directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of
directors shall be filled in accordance with the provisions of the
Corporation's Charter.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a
reasonable fixed sum, and reasonable expenses of attendance, if any, may be
allowed for actual attendance at each regular or special meeting of the board
of directors. Members of either standing or special committees may be
allowed such compensation for actual attendance at committee meetings as the
board of directors may determine.
Section 13. Presumption of Assent. A director of the Corporation who
is present at a meeting of the board of directors at which action on any
Corporation matter is taken shall be presumed to have assented to the action
taken unless (i) he objects at the beginning of the meeting (or promptly upon
his arrival) to holding the meeting or transacting business at the meeting;
(ii) his dissent or abstention from the action taken is entered in the
minutes of the meeting; or (iii) he delivers written notice of his dissent or
abstention to the presiding officer of the meeting before its adjournment or
to the Corporation immediately after adjournment of the meeting. The right
of dissent or abstention is not available to a director who votes in favor of
the action taken.
Section 14. Removal of Directors. Any director or the entire board of
directors may be removed only in accordance with the provisions of the
Corporation's Charter.
Section 15. Age Limitation. Unless otherwise resolved by a majority
of the board of directors, no director as of September 12, 1997 shall be
eligible for election, reelection, appointment or reappointment to the board
of directors of the Corporation after he becomes 75 years of age, and no
other person shall be eligible for election, reelection, appointment or
reappointment to the board of directors of the Corporation after he or she
becomes 75 years of age. This age limitation does not prevent any director
from serving for the full term to which he or she is elected or appointed.
This age limitation does not apply to an advisory director or director
emeritus.
ARTICLE IV -- Committees of the Board of Directors
The board of directors may, by resolution passed by a majority of the
whole board, designate one (1) or more committees, as they may determine to
be necessary or appropriate for the conduct of the business of the
Corporation, and may prescribe the duties, constitution and procedures
thereof. Each committee shall consist of one (1) or more directors of the
Corporation. The board may designate one (1) or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee.
The board of directors shall have power, by the affirmative vote of a
majority of the authorized number of directors, at any time to change the
members of, to fill vacancies in and to discharge any committee of the board.
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Any member of any such committee may resign at any time by giving notice to
the Corporation; provided, however, that notice to the board, the chairman of
the board, the chief executive officer, the chairman of such committee or the
secretary shall be deemed to constitute notice to the Corporation. Such
resignation shall take effect upon receipt of such notice or at any later
time specified therein; and, unless otherwise specified therein, acceptance
of such resignation shall not be necessary to make it effective. Any member
of any such committee may be removed at any time, either with or without
cause, by the affirmative vote of a majority of the authorized number of
directors at any meeting of the board called for that purpose.
ARTICLE V -- OFFICERS
Section 1. Positions. The officers of the Corporation shall be a
president and a secretary and may be one (1) or more vice presidents and a
treasurer, each of whom shall be elected by the board of directors. The
board of directors may also designate the chairman of the board as an
officer. The president shall be the chief executive officer unless the board
of directors designates the chairman of the board as chief executive officer.
The president shall be a director of the Corporation. The offices of the
secretary and treasurer may be held by the same person, and a vice president
may also be either the secretary or treasurer. The board of directors may
designate one (1) or more vice presidents as executive vice president or
senior vice president. The board of directors may also elect or authorize the
appointment of such other officers as the business of the Corporation may
require. The officers shall have such authority and perform such duties as
the board of directors may from time to time authorize or determine. In the
absence of action by the board of directors, the officers shall have such
powers and duties as generally pertain to their respective offices. The
secretary of the Corporation shall be responsible for preparing minutes of
the directors' and shareholders' meetings and for authenticating records of
the Corporation.
Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually at the first meeting of the board of
directors held after each annual meeting of shareholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death, resignation or
removal. Election or appointment of an officer, employee or agent shall not
of itself create contractual rights. The board of directors may authorize
the Corporation to enter into an employment contract with any officer in
accordance with applicable law; however, no such contract shall impair the
right of the board of directors to remove any officer at any time in
accordance with Section 3.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the Corporation will
be served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the
board of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the board of directors by employment contracts or
otherwise.
ARTICLE VI -- Contracts, Loans, Checks and Deposits
Section 1. Contracts. To the extent permitted by applicable law, and
except as otherwise prescribed by the Corporation's Charter or these bylaws
with respect to certificates for shares, the board of directors may authorize
any officer, employee or agent of the Corporation to enter into any contract
or execute and deliver any instrument in the name of and on behalf of the
Corporation. Such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name
unless authorized by the board of directors. Such authority may be general
6
<PAGE>
or confined to specific instances. The Corporation shall not lend money to,
or guarantee the obligation of, any officer or director unless the board of
directors determines that the loan or guarantee benefits the Corporation and
either approves the specific loan or guarantee or a general plan authorizing
loans and guarantees.
Section 3. Checks, Drafts, etc. All checks, drafts, other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one (1) or more officers,
employees or agents of the Corporation in such manner as shall from time to
time be determined by the board of directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in any duly authorized depositories as the board of directors may
select.
ARTICLE VII -- Certificates for Shares and their Transfer
Section 1. Certificates for Shares. The shares of the Corporation
shall be represented by certificates signed by the chief executive officer or
by any other officer of the Corporation authorized by the board of directors,
attested by the secretary or an assistant secretary and sealed with the
corporate seal or a facsimile thereof. The signature of such officers upon a
certificate may be facsimiles if the certificate is manually signed on behalf
of a transfer agent or a registrar other than the Corporation itself or one
(1) of its employees. Each certificate for shares of capital stock shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled,
and no new certificates shall be issued until the form certificate for a like
number of shares has been surrendered and cancelled, except that in the case
of a lost or destroyed certificate a new certificate may be issued upon such
terms and indemnity to the Corporation as the board of directors may
prescribe.
Section 2. Form of Certificate. Each certificate representing shares
issued by the Corporation shall state on its face the name of the
Corporation, that the Corporation is organized under the laws of Tennessee,
the name of the person to whom it is issued, the number and class of shares
and the designation of the series, if any, the certificate represents. Each
certificate shall set forth upon its face or back, or shall state
conspicuously, that the Corporation will furnish to any shareholder upon
request, and without charge, a full statement of the designations,
preferences, limitations and relative rights of each class authorized to be
issued, the variations in the relative rights and preferences between the
shares of each series so far as the same have been fixed and determined and
the authority of the board of directors to fix and determine the relative
rights and preferences of subsequent series. Other matters in regard to the
form of the certificates shall be determined by the board of directors.
Any restrictions imposed on the transfer or registration of transfer of
shares of the Corporation shall be noted conspicuously on the front or back
of each certificate representing such shares.
Section 3. Transfer of Shares. Transfer of shares of capital stock
of the Corporation shall be made only on its stock transfer books. Authority
for such transfer shall be given only by the holder of record, by his legal
representative, who shall furnish proper evidence of such authority, or by
his attorney authorized by a duly executed power of attorney and filed with
the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Corporation shall be deemed by the
Corporation to be the owner for all purposes.
Section 4. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the shareholders entitled to examine the
stock ledger, the list required by Section 7 of Article II or the books of
the Corporation or to vote in person or by proxy at any meeting of
shareholders.
Section 5. Lost Certificates. The board of directors may direct a
new certificate to be issued in place of any certificate theretofore issued
by the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
7
<PAGE>
stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate, or his legal representative, to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 6. Record Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, 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 the Corporation shall
have express or other notice thereof, except as otherwise provided by law.
ARTICLE VIII -- Fiscal Year; Annual Audit
The fiscal year of the Corporation shall end on the 31st day of December
of each year. The Corporation shall be subject to an annual audit as of the
end of its fiscal year by independent public accountants appointed by and
responsible to the board of directors.
ARTICLE IX -- Dividends
Subject only to the terms of the Corporation's Charter and applicable
law, the board of directors may from time to time declare, and the
Corporation may pay, dividends on the outstanding classes of the
Corporation's capital stock which are eligible for dividends. Dividends may
be paid in cash, in property or in the Corporation's own stock.
ARTICLE X -- Corporate Seal
The corporate seal of the Corporation shall be in such form as the board
of directors may provide.
ARTICLE XI -- Amendments
In accordance with the Corporation's Charter, these bylaws may be
repealed, altered, amended or rescinded by the shareholders of the
Corporation only by the affirmative vote of at least 80% of the outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one (1) class) cast at
a meeting of the shareholders called for that purpose (provided that notice
of such proposed repeal, alteration, amendment or rescission is included in
the notice of such meeting). In addition, these bylaws may be repealed,
altered, amended or rescinded by the board of directors by the affirmative
vote of a majority of the board of directors at a legal meeting held in
accordance with the provisions of these bylaws; provided, however, that an
amendment to the first sentence of this Article XI may be made only by the
shareholders of the Corporation.
8
<PAGE>
EXHIBIT 4
COMMON STOCK
NUMBER ____ ___ SHARES
UNITED TENNESSEE BANKSHARES, INC.
Newport, Tennessee
CUSIP: _____________
This certifies that
is the owner of
fully paid and nonassessable shares of common
stock, no par value, of
United Tennessee Bankshares, Inc. (the "Corporation"), a Tennessee
corporation. 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.
IN WITNESS WHEREOF, this certificate to be executed
the Corporation has caused by the facsimile caused a
signature of its duly authorized facsimile of its corporate seal to
officers and has be hereunto affixed. Dated:
________________ ___________________________________
Peggy Holston Richard G. Harwood
Secretary President & Chief Executive Officer
Countersigned and Registered:
____________________________
Transfer Agent and Registrar
By: _______________________
Authorized Signature
SEE REVERSE FOR CERTAIN RESTRICTIONS ON TRANSFER
<PAGE>
The shares represented by this certificate are issued subject to
all the provisions of the Charter and Bylaws of the Corporation as from time
to time amended (copies of which are on file at the principal executive
office of the Corporation), to all of which the holder by acceptance hereof
assents.
The Corporation will furnish without charge to each stockholder who
so requests, the powers, designations, preferences and relative
participating, optional or special rights of each class of stock or series
thereof, and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request shall be made in writing to the
Secretary of the Corporation.
The Charter includes a provision which prohibits any person from
directly or indirectly acquiring the beneficial ownership of more than 10% of
any class of equity security of the Corporation. This provision does not
apply to the purchase of shares by underwriters in connection with a public
offering, the granting of proxies to certain directors of the Corporation by
stockholders of the Corporation or the acquisition of shares by an employee
benefit plan of the Corporation or a subsidiary. Such provision eliminates
the voting rights of securities acquired in violation of the provision. Such
provision will expire five years from the date of completion of the
conversion of Newport Federal Savings and Loan Association, Newport,
Tennessee from mutual to stock form. The Charter also imposes certain
restrictions on the voting rights of beneficial owners of more than 10% of
any class of equity security of the Corporation after five years from the
date of completion of the conversion of Newport Federal Savings and Loan
Association from mutual to stock form.
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.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF TRANSFER MIN ACT - ....Custodian....under Uniform Transfers to Minors Act..
(Cust) (Minor) (State)
Additional abbreviations may also be used though not in the above list.
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
For value received,________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/ /
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
______________________________________________________________________________
________________________________________________________________________ Shares
of the common stock evidenced by this certificate, and do hereby irrevocably
constitute and appoint ____________________________ , Attorney, to transfer the
said shares on the books of the Corporation, with full power of substitution.
Dated ____________________________
__________________________________
Signature
__________________________________
Signature
In presence of: __________________
<PAGE>
EXHIBIT 5
[LETTERHEAD OF HOUSLEY KANTARIAN & BRONSTEIN, P.C.]
September 24, 1997
Board of Directors
United Tennessee Bankshares, Inc.
344 Broadway
Newport, Tennessee 37821
RE: Registration Statement on Form SB-2
Ladies and Gentlemen:
You have requested our opinion as special counsel to Newport Federal
Savings and Loan Association (the "Corporation") as to certain matters in
connection with the Registration Statement on Form SB-2 to be filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Registration Statement"). The Registration Statement relates
to shares of common stock of the Corporation (the "Common Stock") to be
issued in connection with the simultaneous conversion of Newport Federal
Savings and Loan Association from mutual to stock form and reorganization
into the holding company form of ownership as a wholly owned subsidiary of
the Corporation.
In rendering this opinion, we understand that the Common Stock will be
offered and sold in the manner described in the Prospectus which is a part of
the Registration Statement. We have examined such records and documents and
made such examination as we have deemed relevant in connection with this
opinion.
Based upon the foregoing, it is our opinion that the shares of Common
Stock will, when issued and sold as contemplated by the Registration
Statement, be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus under the
heading "Legal Matters."
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Gary R. Bronstein
--------------------------------------
Gary R. Bronstein
<PAGE>
[LETTERHEAD OF HOUSLEY KANTARIAN & BRONSTEIN, P.C.]
Exhibit 8.1
September 25, 1997
Board of Directors
Newport Federal Savings and Loan Association
344 W. Broadway
Newport, Tennessee 37821
Re: Proposed Holding Company Conversion
Federal Income Tax Consequences
Gentlemen:
In accordance with your request, set forth hereinbelow is the opinion of
this firm relating to certain federal income tax consequences of the proposed
conversion of Newport Federal Savings and Loan Association (the "Bank") from
a federally chartered mutual savings association to a federally chartered
capital stock savings association to be named "Newport Federal Bank" (the
"Converted Bank") and the concurrent acquisition of 100% of the outstanding
capital stock of the Converted Bank by United Tennessee Bankshares, Inc. (the
"Holding Company"), a Tennessee corporation formed at the direction of the
Board of Directors of the Bank to become the parent holding company of the
Converted Bank (the "Conversion").
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate, including
but not limited to the Plan of Conversion as adopted by the Bank's Board of
Directors on May 20, 1997 and amended by the Bank's Board of Directors on
June 12, 1997 (the "Plan"); the federal mutual charter and bylaws of the
Bank, as amended; the Federal Stock Charter and Bylaws of the Converted Bank;
the charter and bylaws of the Holding Company; the Affidavit of
Representations dated as of the date hereof provided to us by the Bank (the
"Affidavit"), and the Prospectus (the "Prospectus") included in the Holding
Company's Registration Statement on Form SB-2 being filed with the Securities
and Exchange Commission ("SEC") in connection with the Conversion (the
"Registration Statement"). In such examination, we have assumed, and have
not independently verified, the genuineness of all signatures on original
documents where due execution and delivery are requirements to the
effectiveness thereof. Terms used but not defined herein, whether
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 2
capitalized or not, shall have the same meaning as defined in the Plan.
BACKGROUND
Based solely upon our review of such documents, and upon such information
as the Bank has provided to us (which we have not attempted to verify in any
respect), and in reliance upon such documents and information, we set forth
hereinbelow a general summary of the relevant facts and proposed transaction,
qualified in its entirety by reference to the documents cited above.
The Bank is a federally chartered mutual savings association which was
chartered as a federal mutual savings association in 1934 and is in the process
of converting to a federally chartered capital stock savings association. It is
currently a member of the Federal Home Loan Bank system and its deposits are
insured by the Federal Deposit Insurance Corporation ("FDIC") up to the
applicable limits. The Bank is subject to comprehensive regulation and
supervision by the FDIC and the Office of Thrift Supervision ("OTS"), and to
examination by the OTS. The Bank operates through two offices located in
Newport, Tennessee.
The principal business of the Bank consists of attracting deposits from
the general public and investing these deposits in loans secured by first
mortgages on single-family residences in the Bank's market area. The Bank
derives its income principally from interest earned on loans and, to a lesser
extent, interest earned on mortgage-backed securities and investment
securities and noninterest income. Funds for these activities are provided
principally by operating revenues, deposits and repayments of outstanding
loans and investment securities and mortgage-backed securities. At June 30,
1997, the Bank had total assets of $64.2 million, deposits of $56.7 million,
and equity (substantially restricted) of $6.5 million.
As a federally chartered mutual savings association, the Bank has no
authorized capital stock. Instead, the Bank, in mutual form, has a unique
equity structure. A savings depositor of the Bank is entitled to payment of
interest on his or her account balance as declared and paid by the Bank, but
has no right to a distribution of any earnings of the Bank except for
interest paid on his deposit. Rather, such earnings become retained earnings
(or equity) of the Bank. However, a savings depositor does have a right to
share pro rata, with respect to the withdrawal value of his respective
savings account, in any liquidation proceeds distributed if the Bank is ever
liquidated.
Further, savings depositors and certain borrowers are members of the Bank
and thereby have voting rights in the Bank. Under the Bank's federal mutual
charter, as amended, each savings depositor is entitled to cast one vote for
each $100 or fraction thereof held in a withdrawable deposit account of the
Bank, and each borrower member (hereinafter "borrower") is entitled to one vote
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 3
in addition to the votes (if any) to which such person is otherwise entitled in
such borrower's capacity as a savings depositor of the Bank. Also under such
federal mutual charter, no member is entitled to cast more than 1,000 votes.
All of the interests held by a savings depositor in the Bank cease when such
depositor closes his or her accounts with the Bank.
The Holding Company was incorporated in August 1997 under the laws of the
State of Tennessee to act as the savings and loan holding company of the
Converted Bank upon consummation of the Conversion. Prior to consummation of
the Conversion, the Holding Company has not been engaged in, and is not expected
to engage in, any material operations. After the Conversion, the Holding
Company's principal business will be overseeing the business of the Converted
Bank. The Holding Company has an authorized capital structure of 20 million
shares of common stock (the "Common Stock"), no par value per share, and 5
million shares of serial preferred stock, no par value per share.
PROPOSED TRANSACTION
The Board of Directors of the Bank has decided that in order to attract new
capital to the Bank to increase its net worth, to support future savings growth,
to increase the amount of funds available for lending and investment, to provide
greater resources for the expansion of customer services, and to facilitate
future expansion, it would be advantageous for the Bank to convert from a
federally chartered mutual savings association to a federally chartered capital
stock savings association. In addition, the Board of Directors intends to
implement stock option plans and other stock benefit plans following the
Conversion in order to better attract and retain qualified directors and
officers. It is the further desire of the Board of Directors to reorganize the
Converted Bank as the wholly owned subsidiary of the Holding Company to enhance
flexibility of operations, diversification of business opportunities and
financial capability for business and regulatory purposes and to enable the
Converted Bank to compete more effectively with other financial service
organizations.
Accordingly, pursuant to the Plan, the Bank will be converted from a
federally chartered mutual savings association to a federally chartered capital
stock savings association. The Converted Bank will then issue to the Holding
Company 100,000 shares of the Converted Bank's common stock, representing all of
the shares of capital stock to be issued by the Converted Bank in the
Conversion, and the Holding Company will make payment to the Converted Bank of
an amount equal to at least 50% of the aggregate net proceeds realized by the
Holding Company from the sale of its Common Stock sold pursuant to the Plan
(after deducting the amount necessary to fund a loan to an Employee Stock
Ownership Plan being established in connection with the Conversion), or such
other portion of the aggregate net proceeds as may be authorized or required by
the OTS. Pursuant to the Prospectus, the Holding Company currently anticipates
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 4
making such payment to the Converted Bank of an amount equal to 50% of the
aggregate net proceeds from the sale of the Common Stock.
Also pursuant to the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering. Shares of Common Stock
remaining, if any, may then be offered to the general public in a Community
Offering. Shares of the Common Stock not otherwise subscribed for in the
Subscription Offering and Community Offering may be offered at the discretion of
the Holding Company to certain members of the general public as part of a
community offering on a best efforts basis by a selling group of selected
broker-dealers.
The purchase price per share and total number of shares of Common Stock to
be offered and sold pursuant to the Plan will be determined by the Boards of
Directors of the Bank and the Holding Company, on the basis of the estimated pro
forma market value of the Converted Bank, as a subsidiary of the Holding
Company, which will in turn be determined by an independent appraiser. The
aggregate purchase price for all shares of the Common Stock will be equal to
such estimated pro forma market value. Pursuant to the Plan, all such shares of
Common Stock will be issued and sold at a uniform price per share. The
Conversion, including the sale of newly issued shares of the stock of the
Converted Bank to the Holding Company, will be deemed effective concurrently
with the closing of the sale of the Common Stock.
Under the Plan and in accordance with regulations of the OTS, the shares of
Common Stock will first be offered through the Subscription Offering pursuant to
non-transferable subscription rights on the basis of preference categories in
the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans (for example, the ESOP);
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
However, any shares of Common Stock sold in excess of the maximum of the
Estimated valuation range may be first sold to Tax-Qualified Employee Stock
Benefit Plans set forth in category (2) above.
Any shares of Common Stock not subscribed for in the Subscription Offering
will be offered in the Community Offering in the following order of priority:
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 5
(a) Natural persons and trusts of natural persons (including individual
retirement and Keogh retirement accounts and personal trusts in which
such natural persons have substantial interests) who are permanent
Residents of the Bank's Local Community; and
(b) The general public.
Shares not sold in the Subscription Offering and the Community Offering, if
any, may thereafter be offered for sale to certain members of the general public
as part of a community offering on a best efforts basis by a selling group of
selected broker-dealers. The sale of shares in the Subscription Offering,
Community Offering, and as sold through the selected broker-dealers would be
consummated at the same time.
The Plan also provides for the establishment of a Liquidation Account by
the Converted Bank for the benefit of all Eligible Account Holders and
Supplemental Eligible Account Holders in an amount equal to the regulatory
capital of the Bank as of the date of the latest statement of financial
condition contained in the final prospectus issued in connection with the
Conversion. The establishment of the Liquidation Account will not operate to
restrict the use or application of any of the net worth accounts of the
Converted Bank, except that the Converted Bank may not declare or pay cash
dividends on or repurchase any of its stock if the result thereof would be to
reduce its regulatory capital below the amount required to maintain the
Liquidation Account. All such account holders will have an inchoate interest in
a proportionate amount of the Liquidation Account with respect to each savings
account held and will be paid by the Converted Bank in event of liquidation
prior to any liquidating distribution being made with respect to capital stock.
Under the Plan, the Conversion shall not be deemed to be a liquidation of the
Bank for purposes of distribution of the Liquidation Account. Instead, upon
consummation of the Conversion, the Liquidation Account, together with the
related rights and obligations of the Converted Bank, shall be assumed by the
Converted Bank.
Following the Conversion, voting rights in the Converted Bank will rest
exclusively with the sole holder of stock in the Converted Bank, which will be
the Holding Company. Voting rights in the Holding Company will rest exclusively
in the holders of the Common Stock. The Conversion will not interrupt the
business of the Bank.
The Stock Conversion will not interrupt the business of the Bank. The
Converted Bank will, after the Conversion, engage in the same business as that
of the Bank immediately prior to the Conversion, and will continue to be subject
to regulation and supervision by the OTS and the FDIC. Further, the deposits of
the Converted Bank will continue to be insured by the FDIC. Each depositor will
retain a withdrawable savings account or accounts equal in dollar amount to, and
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 6
on the same terms and conditions as, the withdrawable account or accounts at the
time of Conversion except to the extent funds on deposit are used to pay for
Common Stock purchased in connection with the Conversion. All loans of the Bank
will remain unchanged and retain their same characteristics in the Converted
Bank immediately following the Conversion.
The Plan must be approved by the OTS and by an affirmative vote of at least
a majority of the total votes eligible to be cast at a meeting of the Bank's
Members called to vote on the Plan.
Immediately prior to the Conversion, the Bank will have a positive net
worth determined in accordance with generally accepted accounting principles.
OPINION
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Conversion will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
(the "Code"), and no gain or loss will be recognized to either the
Bank or to the Converted Bank as a result of the Conversion (see Rev.
Rul. 80-105, 1980-1 C.B. 78).
2. The assets of the Bank will have the same basis in the hands of the
Converted Bank as in the hands of the Bank immediately prior to the
Conversion (Section 362(b) of the Code).
3. The holding period of the assets of the Bank to be received by the
Converted Bank will include the period during which the assets were
held by the Bank prior to the Conversion (Section 1223(2) of the
Code).
4. No gain or loss will be recognized by the Converted Bank upon its
receipt of money from the Holding Company in exchange for shares of
common stock of the Converted Bank (Section 1032(a) of the Code). The
Holding Company will be transferring solely cash to the Converted Bank
in exchange for all the outstanding capital stock of the Converted
Bank and therefore will not recognize any gain or loss upon such
transfer. (Section 351(a) of the Code; see Rev. Rul. 69-357, 1969-1
C.B. 101).
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 7
5. No gain or loss will be recognized by the Holding Company upon its
receipt of money in exchange for shares of the Common Stock (Section
1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members of the Bank
upon the issuance to them of deposit accounts in the Converted Bank in
the same dollar amount and on the same terms and conditions in
exchange for their deposit accounts in the Bank held immediately prior
to the Conversion. (Section 1001(a) of the Code; Treas. Reg. Section
1.1001-1(a)).
7. The tax basis of the savings accounts of the Eligible Account Holders,
Supplemental Eligible Account Holders, and Other Members in the
Converted Bank received as part of the Conversion will equal the tax
basis of such account holders' corresponding deposit accounts in the
Bank surrendered in exchange therefor (Section 1012 of the Code).
8. Each depositor of the Bank will recognize gain upon the receipt of his
or her respective interest in the Liquidation Account established by
the Converted Bank pursuant to the Plan and the receipt of his or her
subscription rights deemed to have been received for federal income
tax purposes, but only to the extent of the excess of the combined
fair market value of a depositor's interest in such Liquidation
Account and subscription rights over the depositor's basis in the
former interests in the Bank other than deposit accounts. Persons who
subscribe in the Conversion but who are not depositors of the Bank
will recognize gain upon the receipt of subscription rights deemed to
have been received for federal income tax purposes, but only to the
extent of the excess of the fair market value of such subscription
rights over such person's former interests in the Bank, if any. Any
such gain realized in the Conversion would be subject to immediate
recognition.
9. The basis of each account holder's interest in the Liquidation Account
received in the Conversion and to be established by the Converted Bank
pursuant to the Conversion will be equal to the value, if any, of that
interest.
10. No gain or loss will be recognized upon the exercise of a subscription
right in the Conversion. (Rev. Rul. 56-572, 1956-2 C.B.182).
11. The basis of the shares of Common Stock acquired in the Conversion
will be equal to the purchase price of such shares, increased, in the
case of such shares acquired pursuant to the exercise of subscription
rights, by the fair market value, if any, of the subscription rights
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 8
exercised (Section 1012 of the Code).
12. The holding period of the Common Stock acquired in the Conversion
pursuant to the exercise of subscription rights will commence on the
date on which the subscription rights are exercised (Section 1223(6)
of the Code). The holding period of the Common Stock acquired in the
Community Offering will commence on the date following the date on
which such stock is purchased (Rev. Rul. 70-598, 1970-2 C.B. 168; Rev.
Rul. 66-97, 1966-1 C.B. 190).
SCOPE OF OPINION
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any
state, local, foreign, or other federal tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder and Internal Revenue Service rulings as they now
exist. These authorities are all subject to change, and such change may be
made with retroactive effect. We can give no assurance that, after such
change, our opinion would not be different. We undertake no responsibility to
update or supplement our opinion subsequent to consummation of the
Conversion. Prior to that time, we undertake to update or supplement our
opinion in the event of a material change in the federal income tax
consequences set forth above and to file such revised opinion as an exhibit
to the Registration Statement and the Bank's Application for Conversion on
Form AC ("Form AC"). This opinion is not binding on the Internal Revenue
Service and there can be no assurance, and none is hereby given, that the
Internal Revenue Service will not take a position contrary to one or more of
the positions reflected in the foregoing opinion, or that our opinion will be
upheld by the courts if challenged by the Internal Revenue Service.
CONSENTS
We hereby consent to the filing of this opinion with the OTS as an exhibit
to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
September 25, 1997
Page 9
We also hereby consent to the filing of this opinion with the SEC and the
OTS as exhibits to the Registration Statement and Form AC, respectively, and the
references to our firm in the Proxy Statement and the Prospectus, which are
parts of both the Registration Statement and Form AC, under the headings
"Description of Plan of Conversion -- Effect of Conversion to Stock Form on Our
Depositors and Borrowers -- Tax Effects" and "Legal Matters," respectively.
Very truly yours,
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Gary R. Bronstein
---------------------
Gary R. Bronstein
<PAGE>
Exhibit 8.2
[Letterhead of Pugh & Company, P.C.]
Board of Directors
Newport Federal Savings and Loan Association
344 W. Broadway
Newport, TN 37821
Gentlemen:
In accordance with your request following is our opinion regarding the
Tennessee franchise and excise (income) tax consequences of the proposed
conversion of Newport Federal Savings and Loan Association ("Association")
from a federally-chartered mutual savings association to a
federally-chartered capital stock savings association ("Converted
Association"), and the concurrent acquisition of 100% of the outstanding
capital stock of the Converted Association by United Tennessee Bankshares,
Inc. ("Holding Company"), a Tennessee Corporation formed at the direction of
The Board of Directors of the Association to become the Parent Holding
Company of the Converted Association(the "Conversion"). Our opinion as to
the Tennessee tax consequences is based upon the draft federal income tax
opinion relating to the Conversion, prepared by the law firm of Housley,
Kantarian & Bronstein, P.C. We have assumed that their opinion contains a
complete summary of the relevant facts surrounding the proposed transaction.
We have not attempted to independently verify those facts.
Tennessee imposes an excise tax at the rate of six percent of the net
earnings for business done in the State by all corporations organized for
profit (Section 67-4-806(a)) of Tennessee Code Annotated (TCA). The term
"net earnings" is defined as federal taxable income before the operating loss
deduction and special deductions provided for in 26 U.S.C. Sections 241-247
and 249-250, and subject to certain specified adjustments (Section
67-4-805(a)(1), TCA). None of the specified adjustments would relate to the
proposed transaction. Accordingly, since for federal income tax purposes
there will be no gain or loss recognized by either Association or Converted
Association as a result of the transaction, there will likewise be no gain or
loss recognized for Tennessee excise tax purposes. Similarly, there will be
no gain or loss recognized by Converted Association or Holding Company for
Tennessee excise tax purposes on the receipt of money in exchange for the
shares of common stock to be issued.
Tennessee imposes an income tax in the amount of six percent on incomes
derived by way of dividends from stocks or from interest on bonds, of each
person, partnership, trust, and certain other entities (Section 67-2-102,
TCA) subject to certain exemptions. The shareholders of Holding Company will
not receive any taxable dividends or taxable interest as a part of the
proposed transaction. If Holding Company pays dividends to shareholders in
the future, such dividends will be subject to the income tax for those
shareholders who are Tennessee residents.
Assuming that Holding Company and Converted Association form a unitary
business as defined in Section 67-4-804(a)(16), TCA, they will be required to
file a combined Tennessee franchise and excise tax return (Section
67-4-914(c), TCA) for the year in which the proposed transaction is
consummated and all succeeding years. The franchise tax liability will be
<PAGE>
Board of Directors
Newport Federal Savings and Loan Association
Page 2
equal to the sum of the separate franchise tax liabilities computed for each
corporation included in the combined return.
Holding Company's franchise tax base will be reduced by the value of its
investment in the stock of the Converted Association recorded on its balance
sheet (Section 67-4-905(b), TCA). In addition, Holding Company's franchise
tax will be prorated in its initial year to reflect only the portion of the
year that it was in existence. Converted Association's franchise tax will be
computed by including the increased capital resulting from the proposed stock
offering. Since Converted Association will be considered to have been in
existence for the entire year, its franchise tax will not be prorated,
despite the fact that the increased capital will not have been available for
the entire year.
The Tennessee Department of Revenue takes the position that a franchise
and excise tax return is required for each period for which a U.S.
corporation income tax return is filed. Since the taxable year of
Association will not end on the effective date of the conversion for federal
income tax purposes, the same result will be applicable for Tennessee
franchise and excise tax purposes.
Our opinion is based on the facts as contained in the draft federal
income tax opinion prepared by Housley, Kantarian & Bronstein, P.C. and on
their opinion of the federal income tax consequence included therein, and is
also based on existing tax law and authorities that are subject to change.
We can give no assurance that, after such change, our opinion would not be
different. No opinion is expressed as to the tax treatment of the
transaction under the provisions of any other section of TCA, or under the
Internal Revenue Code. We undertake no responsibility to update or
supplement our opinion subsequent to consummation of the Conversion. This
opinion is not binding on the Tennessee Department of Revenue and there can
be no assurance, and none is hereby given, that the Tennessee Department of
Revenue will not take a position contrary to one or more of the positions
reflected in the foregoing opinion, or that our opinion will be upheld by the
courts if challenged.
We hereby consent to the filing of this opinion with the Office of Thrift
Supervision (OTS) as an exhibit to the Application H-(e)1-S filed by the
Holding Company with the OTS in connection with the Conversion.
We also hereby consent to the filing of this opinion with the SEC and the
OTS as exhibits to the Registration Statement and the Association's
Application for Conversion on Form AC.
Very truly yours,
/s/Pugh & Company, P.C.
-------------------------------
Pugh & Company, P.C.
Certified Public Accountants
September 22, 1997
<PAGE>
EXHIBIT 8.3
RP Financial, LC.
- --------------------------------------------
Financial Services Industry Consultants
September 22, 1997
Board of Directors
Newport Federal Savings and Loan Association
344 West Broadway
Newport, Tennessee 37821
Re: Plan of Conversion: Subscription Rights
Newport Federal Savings and Loan Association
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 Newport Federal Savings and Loan Association ("Newport Federal"
or the "Association") whereby the Association will convert from a federal
mutual savings and loan association to a federal stock savings and loan
association and issue all of the Association's outstanding capital stock to
United Tennessee Bankshares, 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; (3)
Supplemental Eligible Account Holders; and (4) Other Members. 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 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
<PAGE>
Exhibit 10.1
UNITED TENNESSEE BANKSHARES, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
1. Purpose of the Plan.
The purpose of this Plan is to advance the interests of the Company
through providing select key Employees and Directors of the Association, the
Company, and their Affiliates with the opportunity to acquire Shares. By
encouraging such stock ownership, the Company seeks to attract, retain and
motivate the best available personnel for positions of substantial
responsibility and to provide additional incentives to Directors and key
Employees of the Company or any Affiliate to promote the success of the
business.
2. Definitions.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).
(c) "Association" shall mean Newport Federal Savings & Loan Association.
(d) "Awards" shall mean, collectively, Options and SARs, unless the
context clearly indicates a different meaning.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean both the Stock Option Committee appointed by
the Board in accordance with Paragraph 5(a) hereof, and the Board.
(h) "Common Stock" shall mean the common stock of the Company.
(i) "Company" shall mean United Tennessee Bankshares, Inc.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the
case of sick leave, military leave or any other leave of absence approved by
the Company, in the case of transfers between payroll locations of the
Company or between the Company, an Affiliate or a successor, or in the case
of a Director's performance of services in an emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any member of the
board of directors of any Affiliate that the Board has by resolution
designated as being eligible for participation in this Plan.
(l) "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be
of indefinite duration and to substantially prevent a Participant from
fulfilling his or her duties or responsibilities to the Company or an
Affiliate.
(m) "Effective Date" shall mean the date specified in Paragraph 14
hereof.
(n) "Employee" shall mean any person employed by the Company, the
Association, or an Affiliate.
<PAGE>
(o) "Exercise Price" shall mean the price per Optioned Share at which
an Option or SAR may be exercised.
(p) "ISO" shall mean an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422
of the Code.
(q) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall have the meaning provided in Rule
16b-3.
(s) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(v) "OTS Award Limitations" shall mean the following percentage
limitations, determined with respect to the total Shares reserved for Awards
under this Plan: 25% for total Awards to any particular Employee, 5% for
total Awards to any particular non-Employee Director, and 30% for total
Awards to the non-Employee Directors as a group.
(w) "Participant" shall mean any person who receives an Award pursuant
to the Plan.
(x) "Plan" shall mean this United Tennessee Bankshares, Inc. 1997 Stock
Option and Incentive Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right to receive the
appreciation in value, or a portion of the appreciation in value, of a
specified number of shares of Common Stock.
(bb) "Year of Service" shall mean a full twelve-month period, measured
from the date of an Award and each annual anniversary of that date, during
which a Participant has not terminated Continuous Service for any reason.
3. Term of the Plan and Awards.
(a) Term of the Plan. The Plan shall continue in effect for a term of
ten years from the Effective Date, unless sooner terminated pursuant to
Paragraph 16 hereof. No Award shall be granted under the Plan after ten
years from the Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed 10 years;
provided, however, that in the case of an Employee who owns Shares
representing more than 10% of the outstanding Common Stock at the time an ISO
is granted, the term of such ISO shall not exceed five years.
-2-
<PAGE>
4. Shares Subject to the Plan.
(a) General Rule. Except as otherwise required under Section 11, the
aggregate number of Shares deliverable pursuant to Awards shall not exceed
________ Shares, which equals 10% of the Shares issued by the Company in
connection with the Association's conversion from mutual to stock form
("Conversion"). Such Shares may either be authorized but unissued Shares,
Shares held in treasury, or Shares held in a grantor trust. If any Awards
should expire, become unexercisable, or be forfeited for any reason without
having been exercised, the Optioned Shares shall, unless the Plan shall have
been terminated, be available for the grant of additional Awards under the
Plan.
(b) Special Rule for SARs. The number of Shares with respect to which
an SAR is granted, but not the number of Shares which the Company delivers or
could deliver to an Employee or individual upon exercise of an SAR, shall be
charged against the aggregate number of Shares remaining available under the
Plan; provided, however, that in the case of an SAR granted in conjunction
with an Option, under circumstances in which the exercise of the SAR results
in termination of the Option and vice versa, only the number of Shares
subject to the Option shall be charged against the aggregate number of Shares
remaining available under the Plan. The Shares involved in an Option as to
which option rights have terminated by reason of the exercise of a related
SAR, as provided in Paragraph 10 hereof, shall not be available for the grant
of further Options under the Plan.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be administered by
the Committee, which shall consist of not less than two (2) members of the
Board who are Non-Employee Directors. Members of the Committee shall serve
at the pleasure of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by the Board.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select
Participants and grant Awards, (ii) to determine the form and content of
Awards to be issued in the form of Agreements under the Plan, (iii) to
interpret the Plan, (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The Committee
shall have and may exercise such other power and authority as may be
delegated to it by the Board from time to time. A majority of the entire
Committee shall constitute a quorum and the action of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by a majority of the Committee without a meeting, shall be deemed
the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall
be bound by the terms and restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the Plan, but
each Agreement may include such additional provisions and restrictions
determined by the Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms of the Plan.
In particular, the Committee shall set forth in each Agreement (i) the
Exercise Price of an Option or SAR, (ii) the number of Shares subject to the
Award, and its expiration date, (iii) the manner, time, and rate (cumulative
or otherwise) of exercise or vesting of such Award, and (iv) the
restrictions, if any, to be placed upon such Award, or upon Shares which may
be issued upon exercise of such Award. The Chairman of the Committee and
such other Directors and officers as shall be designated by the Committee are
hereby authorized to execute Agreements on behalf of the Company and to cause
them to be delivered to the recipients of Awards.
(d) Effect of the Committee's Decisions. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
-3-
<PAGE>
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in
connection with the Plan or any Award, granted hereunder to the full extent
provided for under the Company's governing instruments with respect to the
indemnification of Directors.
6. Grant of Options.
(a) General Rule. Only Employees shall be eligible to receive Awards.
In selecting those Employees to whom Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position,
duties and responsibilities of the eligible Employees, the value of their
services to the Company and its Affiliates, and any other factors the
Committee may deem relevant. Notwithstanding the foregoing, the Committee
shall automatically make the Awards specified in Paragraphs 6(b) and 9
hereof, and (ii) no Employee or non-Employee Director shall receive Options
in excess of the OTS Award Limitations. [Not applicable if Plan is implemented
more than one year after Conversion.]
(b) Automatic Grants to Employees. On the Effective Date, each of the
following Employees shall receive an Option (in the form of an ISO, to the
extent permissible under the Code) to purchase the number of Shares listed
below (but not to exceed the OTS Award Limitations), at an Exercise Price per
Share equal to the Market Value of a Share on the Effective Date; provided
that such grant shall not be made to an Employee whose Continuous Service
terminates on or before the Effective Date:
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
Richard Harwood 25%
Nancy Bryant 13.175%
Peggy Holston 11.825%
[Formula and limits may change if Plan is adopted more than one year after
Conversion.]
With respect to each of the above-named Participants, the Option
granted to the Participant hereunder (i) shall vest in accordance with the
general rule set forth in Paragraph 8(a) of the Plan, (ii) shall have a term
of ten years from the Effective Date, and (iii) shall be subject to the
general rule set forth in Paragraph 8(c) with respect to the effect of a
Participant's termination of Continuous Service on the Participant's right to
exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date
the Option is granted, of the Shares with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all incentive stock option plans, as defined in Section 422 of the Code, of
the Company or any present or future Affiliate of the Company) shall not
exceed $100,000. Notwithstanding the foregoing, the Committee may grant
Options in excess of the foregoing limitations, in which case Options granted
in excess of such limitation shall be Non-ISOs.
7. Exercise Price for Options.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns
Shares representing more than 10% of the Company's outstanding Shares of
Common Stock at the time an ISO is granted, the Exercise Price shall not be
less than 110% of the Market Value of the Optioned Shares at the time the ISO
is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National
Market System) on the date in question, then the Market Value per Share shall
be the average of the highest and lowest selling price on such exchange on
such date, or if there were no sales
-4-
<PAGE>
on such date, then the Exercise Price shall be the mean between the bid and
asked price on such date. If the Common Stock is traded otherwise than on a
national securities exchange on the date in question, then the Market Value
per Share shall be the mean between the bid and asked price on such date, or,
if there is no bid and asked price on such date, then on the next prior
business day on which there was a bid and asked price. If no such bid and
asked price is available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and absolute
discretion.
8. Exercise of Options.
(a) Generally. Each Option shall become exercisable with respect to
twenty percent (20%) of the Optioned Shares upon the Participant's completion
of each of five Years of Service, provided that an Option shall become fully
(100%) exercisable immediately upon termination of the Participant's
Continuous Service due to the Participant's Disability or death. An Option
may not be exercised for a fractional Share. [If the Plan is adopted more
than one year after the Association's Conversion, Options may become
exercisable according to a different schedule, with vesting accelerated to
100% upon an Optionee's retirement or termination of service in connection
with a change in control.]
(b) Procedure for Exercise. A Participant may exercise Options,
subject to provisions relative to its termination and limitations on its
exercise, only by (1) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (2) payment to the Company
(contemporaneously with delivery of such notice) in cash, in Common Stock, or
a combination of cash and Common Stock, of the amount of the Exercise Price
for the number of Shares with respect to which the Option is then being
exercised. Each such notice (and payment where required) shall be delivered,
or mailed by prepaid registered or certified mail, addressed to the Treasurer
of the Company at its executive offices. Common Stock utilized in full or
partial payment of the Exercise Price for Options shall be valued at its
Market Value at the date of exercise, and may consist of Shares subject to
the Option being exercised.
(c) Period of Exercisability. Except to the extent otherwise provided
in the terms of an Agreement, an Option may be exercised by a Participant
only while he is an Employee and has maintained Continuous Service from the
date of the grant of the Option, or within one year after termination of such
Continuous Service (but not later than the date on which the Option would
otherwise expire, and the Participant must exercise an ISO within three
months after termination of Continuous Service in order to preserve the
Option as an ISO), except if the Employee's Continuous Service terminates by
reason of --
(1) "Just Cause" which for purposes hereof shall have the meaning
set forth in any unexpired employment or severance agreement between the
Participant and the Association and/or the Company (and, in the absence
of any such agreement, shall mean termination because of the Employee's
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), then the Participant's rights to exercise such Option shall
expire on the date of such termination;
(2) death, then to the extent that the Participant would have been
entitled to exercise the Option immediately prior to his death, such
Option of the deceased Participant may be exercised within two years
from the date of his death (but not later than the date on which the
Option would otherwise expire) by the personal representatives of his
estate or person or persons to whom his rights under such Option shall
have passed by will or by laws of descent and distribution;
(3) Disability, then to the extent that the Participant would have
been entitled to exercise the Option immediately prior to his or her
Disability, such Option may be exercised within one year from the date
of
-5-
<PAGE>
termination of employment due to Disability, but not later than the date
on which the Option would otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
(e) Mandatory Six-Month Holding Period. Notwithstanding any other
provision of this Plan to the contrary, common stock of the Company that is
purchased upon exercise of an Option or SAR may not be sold within the
six-month period following the grant of that Option or SAR.
9. Grants of Options to Non-employee Directors
(a) Automatic Grants. Notwithstanding any other provisions of this
Plan, each Director who is not an Employee but is a Director on the Effective
Date shall receive, on said date, Non-ISOs to purchase a number of Shares
(not to exceed OTS Award Limitations) equal to the lesser of five percent
(5%) of the number of Shares reserved under Paragraph 4(a) hereof, and the
quotient obtained by dividing --
(i) 30 percent (30%) of the number of Shares reserved under
Paragraph 4(a) hereof, by
(ii) the number of Directors entitled to receive an Option on the
Effective Date, pursuant to this Paragraph 9(a).
[Formula and limits may change if Plan is adopted more than one year after
Conversion.]
Such Non-ISOs shall have an Exercise Price per Share equal to the Market
Value of a Share on the date of grant.
(b) Terms of Exercise. Options received under the provisions of this
Paragraph (i) shall become exercisable in accordance with paragraph 8(a) of
the Plan, and (ii) may be exercised from time to time by written notice of
intent to exercise the Option with respect to all or a specified number of
the Optioned Shares, and payment to the Company (contemporaneously with the
delivery of such notice), in cash, in Common Stock, or a combination of cash
and Common Stock, of the amount of the Exercise Price for the number of the
Optioned Shares with respect to which the Option is then being exercised.
Each such notice and payment shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the Company at
the Company's executive offices. A Director who exercises Options pursuant
to this Paragraph may satisfy all applicable federal, state and local income
and employment tax withholding obligations, in whole or in part, by
irrevocably electing to have the Company withhold shares of Common Stock, or
to deliver to the Company shares of Common Stock that he already owns, having
a value equal to the amount required to be withheld; provided that to the
extent not inconsistent herewith, such election otherwise complies with those
requirements of Paragraphs 8 and 19 hereof.
Options granted under this Paragraph shall have a term of ten years;
provided that Options granted under this Paragraph shall expire one year
after the date on which a Director terminates Continuous Service on the Board
for a reason other than death, but in no event later than the date on which
such Options would otherwise expire. In the event of such Director's death
during the term of his directorship, Options granted under this Paragraph
shall become immediately exercisable, and may be exercised within two years
from the date of his death by the personal representatives of his estate or
person or persons to whom his rights under such Option shall have passed by
will or by laws of descent and distribution, but in no event later than the
date on which such Options would otherwise expire. Unless otherwise
inapplicable or inconsistent with the provisions of this Paragraph, the
Options to be granted to Directors hereunder shall be subject to all other
provisions of this Plan.
(c) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
-6-
<PAGE>
10. SARs (Stock Appreciation Rights)
(a) Granting of SARs. In its sole discretion, the Committee may from
time to time grant SARs to Employees either in conjunction with, or
independently of, any Options granted under the Plan. An SAR granted in
conjunction with an Option may be an alternative right wherein the exercise
of the Option terminates the SAR to the extent of the number of shares
purchased upon exercise of the Option and, correspondingly, the exercise of
the SAR terminates the Option to the extent of the number of Shares with
respect to which the SAR is exercised. Alternatively, an SAR granted in
conjunction with an Option may be an additional right wherein both the SAR
and the Option may be exercised. An SAR may not be granted in conjunction
with an ISO under circumstances in which the exercise of the SAR affects the
right to exercise the ISO or vice versa, unless the SAR, by its terms, meets
all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the Exercise
Price of the ISO and the Market Value of the Shares subject to the ISO
at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable, and
under the same conditions;
(4) The SAR may be exercised only when the ISO may be exercised; and
(5) The SAR may be exercised only when the Market Value of the Shares
subject to the ISO exceeds the Exercise Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR shall
not be less than the Market Value of the Optioned Shares on the date of grant.
The provisions of Paragraph 8(c) regarding the period of exercisability
of Options are incorporated by reference herein, and shall determine the
period of exercisability of SARs.
(c) Exercise of SARs. An SAR granted hereunder shall be exercisable at
such times and under such conditions as shall be permissible under the terms
of the Plan and of the Agreement granted to a Participant, provided that an
SAR may not be exercised for a fractional Share. Upon exercise of an SAR,
the Participant shall be entitled to receive, without payment to the Company
except for applicable withholding taxes, an amount equal to the excess of
(or, in the discretion of the Committee if provided in the Agreement, a
portion of) the excess of the then aggregate Market Value of the number of
Optioned Shares with respect to which the Participant exercises the SAR, over
the aggregate Exercise Price of such number of Optioned Shares. This amount
shall be payable by the Company, in the discretion of the Committee, in cash
or in Shares valued at the then Market Value thereof, or any combination
thereof.
(d) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8(b) as to the procedure for exercising
Options are incorporated by reference, and shall determine the procedure for
exercising SARs.
11. Effect of Changes in Common Stock Subject to the Plan.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares reserved for issuance under the Plan, and the number and kind of
shares subject to outstanding Awards, and the Exercise Price thereof, shall
be proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
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<PAGE>
(b) Transactions in which the Company is Not the Surviving Entity. In
the event of (i) the liquidation or dissolution of the Company, (ii) a merger
or consolidation in which the Company is not the surviving entity, or (iii)
the sale or disposition of all or substantially all of the Company's assets
(any of the foregoing to be referred to herein as a "Transaction"), all
outstanding Awards, together with the Exercise Prices thereof, shall be
equitably adjusted for any change or exchange of Shares for a different
number or kind of shares or other securities which results from the
Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b)(1) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code,
of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different Shares
or Securities. If, by reason of any adjustment made pursuant to this
Paragraph, a Participant becomes entitled to new, additional, or different
shares of stock or securities, such new, additional, or different shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph,
the issuance by the Company or an Affiliate of shares of stock of any class,
or of securities convertible into Shares or stock of another class, for cash
or property or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number, class, or Exercise
Price of Shares then subject to Awards or reserved for issuance under the
Plan.
(f) Certain Special Dividends. The Exercise Price of shares subject to
outstanding Awards shall be proportionately adjusted upon the payment of a
special large and nonrecurring dividend that has the effect of a return of
capital to the stockholders.
12. Non-Transferability of Awards.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Awards may transfer such Awards (but not
Incentive Stock Options) to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Awards so transferred may thereafter be transferred only
to the Participant who originally received the grant or to an individual or
trust to whom the Participant could have initially transferred the Awards
pursuant to this Paragraph 12. Awards which are transferred pursuant to this
Paragraph 12 shall be exercisable by the transferee according to the same
terms and conditions as applied to the Participant.
13. Time of Granting Awards.
The date of grant of an Award shall, for all purposes, be the later of
the date on which the Committee makes the determination of granting such
Award, and the Effective Date. Notice of the determination shall be given to
each Participant to whom an Award is so granted within a reasonable time
after the date of such grant.
14. Effective Date.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the total votes
eligible to be cast at a duly called meeting of the Company's stockholders
held in accordance with applicable laws, provided that the Plan shall not be
submitted for such approval within the six-month period after the
Association completes its Conversion. No Awards may be made prior to
approval of the Plan by the stockholders of the Company.
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<PAGE>
15. Modification of Awards.
At any time, and from time to time, the Board may authorize the
Committee to direct execution of an instrument providing for the modification
of any outstanding Award, provided no such modification shall confer on the
holder of said Award any right or benefit which could not be conferred on him
by the grant of a new Award at such time, or impair the Award without the
consent of the holder of the Award.
16. Amendment and Termination of the Plan.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Award, alter or impair any rights
or obligations under any Award theretofore granted.
17. Conditions Upon Issuance of Shares.
(a) Compliance with Securities Laws. Shares of Common Stock shall not
be issued with respect to any Award unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder shall relieve the Company of any liability in respect of the
non-issuance or sale of such Shares. As a condition to the exercise of an
Option or SAR, the Company may require the person exercising the Option or
SAR to make such representations and warranties as may be necessary to assure
the availability of an exemption from the registration requirements of
federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to
impose a right of first refusal or to establish repurchase rights or both of
these restrictions.
18. Reservation of Shares.
The Company, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the
Plan.
19. Withholding Tax.
The Company's obligation to deliver Shares upon exercise of Options
and/or SARs shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and employment tax withholding
obligations. The Committee, in its discretion, may permit the Participant to
satisfy the obligation, in whole or in part, by irrevocably electing to have
the Company withhold Shares, or to deliver to the Company Shares that he
already owns, having a value equal to the amount required to be withheld.
The value of the Shares to be withheld, or delivered to the Company, shall be
based on the Market Value of the Shares on the date the amount of tax to be
withheld is to be determined. As an alternative, the Company may retain, or
sell without notice, a number of such Shares sufficient to cover the amount
required to be withheld.
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<PAGE>
20. No Employment or Other Rights.
In no event shall an Employee's or Director's eligibility to participate
or participation in the Plan create or be deemed to create any legal or
equitable right of the Employee, Director, or any other party to continue
service with the Company, the Association, or any Affiliate of such
corporations. Except to the extent provided in Paragraphs 6(b) and 9(a), no
Employee or Director shall have a right to be granted an Award or, having
received an Award, the right to again be granted an Award. However, an
Employee or Director who has been granted an Award may, if otherwise
eligible, be granted an additional Award or Awards.
21. Governing Law.
The Plan shall be governed by and construed in accordance with the laws
of the State of Tennessee, except to the extent that federal law shall be
deemed to apply.
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Exhibit 10.2
UNITED TENNESSEE BANKSHARES, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each member
of the Committee hereby accepts his or her appointment hereunder upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Association, and their Affiliates with a
proprietary interest in the Company, and as compensation for their past
contributions to the Association, and as an incentive to make such contributions
in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Association" means Newport Federal Savings & Loan Association.
3.03 "Beneficiary" means the person or persons designated by a Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if any
or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Committee" means the Management Recognition Plan Committee appointed
by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of the Company.
3.07 "Company" means United Tennessee Bankshares, Inc.
3.08 "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
<PAGE>
3.09 "Date of Conversion" means the date of the conversion of the
Association from mutual to stock form.
3.10 "Director" means a member of the Board.
3.11 "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
3.12 "Effective Date" means the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the Company or an
Affiliate.
3.14 "Non-Employee Director" shall have the meaning provided in Rule 16b-3
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
3.15 "OTS Award Limitations" shall mean the following percentage
limitations, determined with respect to the total shares reserved for awards
under this Plan: 25% for total Plan Share Awards to any particular Employee, 5%
for total Plan Share Awards to any particular non-Employee Director, and 30% for
total Plan Share Awards to the non-Employee Directors as a group.
3.16 "Participant" means an Employee or Director who holds a Plan Share
Award.
3.17 "Plan" means this United Tennessee Bankshares, Inc. Management
Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
3.19 "Plan Share Award" means a right granted under this Plan to receive
Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean that agreement entered into
pursuant to the terms hereof between the Company and the Trustee, and "Trust"
means the trust created thereunder.
3.22 "Trustee" means that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3.23 "Year of Service" shall mean a full twelve-month period, measured from
the date of a Plan Share Award and each annual anniversary of that date, during
which a Participant's Continuous Service has not terminated for any reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role and Powers of the Committee. The Plan shall be administered
and interpreted by the Committee, which shall consist of not less than two
members of the Board who are Non-Employee Directors. In the absence at any time
of a duly appointed Committee, the Plan shall be administered by those members
of the Board who are Non-Employee Directors, and by the Board if there are less
than two Non-Employee Directors.
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The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content of
Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan, (iv)
to prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other determinations necessary or advisable for the administration
of the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. Subject to
Section 4.02, the interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted hereunder shall be
final and binding. The Committee shall act by vote or written consent of a
majority of its members, and shall report its actions and decisions with respect
to the Plan to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the Board one or more
persons or entity to act as Trustee(s) in accordance with the provisions of this
Plan and the Trust.
4.02 Role of the Board. The members of the Committee shall be appointed
or approved by, and will serve at the pleasure of, the Board. The Board may in
its discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard
to the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-Employee Directors.
4.03 Limitation on Liability. No member of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it.
If a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Company shall indemnify such member against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust, provided that the Association may also make contributions
to the Trust. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Employees shall be permitted.
5.02 Investment of Trust Assets; Maximum Plan Share Awards. The Trustee
shall invest Trust assets only in accordance with the Trust Agreement; provided
that the Trust shall not purchase, and Plan Share Awards shall not be made with
respect to, more than four percent (4%) of the number of Shares issued on the
Date of Conversion. Common Stock purchased by the Trust may be newly issued
shares, treasury shares, or shares held in grantor trust.
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<PAGE>
5.03 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Except as otherwise provided in Section 6.04 hereof,
the Committee shall make Plan Share Awards only to Employees. In selecting
those Employees to whom Plan Share Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, (i) the Committee shall automatically
make the Plan Share Awards specified in Sections 6.04 and 6.05 hereof; and (ii)
no Employee or non-Employee Director shall receive Plan Share Awards in excess
of the OTS Award Limitations. [Not applicable if Plan is implemented more than
one year after Date of Conversion.]
6.02 Allocations. The Committee will determine which Employees will be
granted discretionary Plan Share Awards, and the number of Shares covered by
each Plan Share Award, provided that in no event shall any Awards be made which
will violate the governing instruments of the Association or its Affiliates or
any applicable federal or state law or regulation. In the event Plan Shares are
forfeited for any reason or additional shares of Common Stock are purchased by
the Trustee, the Committee may, from time to time, determine which of the
Employees referenced in Section 6.01 above will be granted additional Plan Share
Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 Form of Allocation. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, the
Committee shall notify the Participant in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 Automatic Grants to Non-Employee Directors. Notwithstanding any
other provisions of this Plan, each Director who is not an Employee but is a
Director on the Effective Date shall receive, on said date, a Plan Share Award
for a number of Shares equal to the lesser of five (5%) of the number of Plan
Shares which the Trust is authorized to purchase pursuant to Section 5.02 of the
Plan and the quotient obtained by dividing --
(i) thirty percent (30%) of the number of Plan Shares which the Trust is
authorized to purchase pursuant to Section 5.02 of the Plan, by
(ii) the number of Directors entitled to receive Plan Share Awards on the
Effective Date, pursuant to this Section 6.04.
[Formula and limits may change if Plan is adopted more than one year after Date
of Conversion.]
Plan Share Awards received under the provisions of this Section shall become
vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter or accelerate said vesting requirements. Unless otherwise
inapplicable or inconsistent with the provisions of this Section, the Plan Share
Awards to be granted hereunder shall be subject to all other provisions of this
Plan.
6.05 Automatic Grants to Employees. On the Effective Date, each of the
following individuals shall receive a Plan Share Award as to the number of Plan
Shares listed below (not to exceed the OTS Award Limitations), provided that
such award shall not be made to an individual who is not an Employee on the
Effective Date:
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Employee Shares Subject to Plan Share Award
-------- ----------------------------------
Richard Harwood 25%
Nancy Bryant 13.175%
Peggy Holston 11.825%
[Formula and limits may change if Plan is adopted more than one year after Date
of Conversion.]
Plan Share Awards received under the provisions of this Section shall become
vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 Allocations Not Required. Notwithstanding anything to the contrary
in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or
Director shall have any right or entitlement to receive a Plan Share Award
hereunder, such Awards being at the total discretion of the Committee, nor shall
any Employees or Directors as a group have such a right. The Committee may,
with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Company at any time and cease
issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Twenty percent (20%) of the Plan Shares subject to a
Plan Share Award shall be earned and become non-forfeitable by a Participant
upon his or her completion of each of five Years of Service. [May be different
if Plan receives stockholder approval more than one year after the Date of
Conversion.]
(b) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose service with
the Company or an Affiliate terminates due to the Participant's death or
Disability, shall be deemed earned as of the Participant's last day of service
with the Company or an Affiliate and shall be distributed as soon as practicable
thereafter. [If the Plan receives stockholder approval more than one year after
the Date of Conversion, vesting would accelerate to 100% upon a Participant's
retirement or termination of service in connection with a change in control.]
7.02 Accrual of Dividends. Whenever Plan Shares are paid to a
Participant or Beneficiary under Section 7.03, such Participant or
Beneficiary shall also be entitled to receive, with respect to each Plan
Share paid, an amount equal to any cash dividends (including special large
and nonrecurring dividends, including one that has the effect of a return of
capital to the Company's stockholders) and a number of shares of Common Stock
equal to any stock dividends, declared and paid with respect to a share of
Common Stock between the date the relevant Plan Share Award was initially
granted to such Participant and the date the Plan Shares are being distributed.
There shall also be distributed an appropriate amount of net earnings, if any,
of the Trust with respect to any cash dividends so paid out.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
subsections (c) and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
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(b) Form of Distribution. The Trustee shall distribute all Plan Shares,
together with any shares representing stock dividends, in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
(c) Withholding. The Trustee shall withhold from any cash payment made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, the
Trustee shall require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares.
The Trustee shall pay over to the Company or Affiliate which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
(d) Timing: Exception for 10% Shareholders. Notwithstanding Subsections
(a) and (b) above, no Plan Shares may be distributed prior to the date which is
five (5) years from the Date of Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common Stock
unless such action is approved in advance by a majority vote of non-employee
directors of the Board. To the extent this limitation would delay the date on
which a Participant receives Plan Shares, the Participant may elect to receive
from the Trust, in lieu of vested Plan Shares, a cash amount equal to the fair
market value of such Plan Shares. Any Plan Shares remaining undistributed
solely by reason of the operation of this Subsection (d) shall be distributed to
the Participant or his Beneficiary on the date which is five years from the Date
of Conversion.
(e) Regulatory Exceptions. No Plan Shares shall be distributed unless and
until all of the requirements of all applicable law and regulation shall have
been fully complied with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be required by
applicable law and regulations.
7.04 Voting of Plan Shares. All shares of Common Stock held by the Trust
(whether or not subject to a Plan Share Award) shall be voted by the Trustee in
the same proportion as the trustee of the Company's Employee Stock Ownership
Plan votes Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed by the Board.
7.05. Deferral Elections by Participants. At any time that is at least
six months prior to the date on which a Participant becomes vested in the first
20% of his or her Plan Share Award, the Participant may irrevocably elect, on
the form attached hereto as Exhibit "A" (the "Election Form"), to defer the
receipt of all or a percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award (the "Deferred
Shares"). The MRP Committee shall establish and maintain an individual account
in the name of each Participant who files an Election Form for the purpose of
tracking deferred earnings attributable to cash dividends paid on Deferred
Shares (the "Cash Account"). On the last day of each fiscal year of the
Company, the Committee shall credit to the Participant's Cash Account earnings
on the balance of the Cash Account at a rate equal to the yield on Common Stock,
as determined from time to time by the MRP Committee in its sole discretion.
The Deferred Shares, together with any cash or stock dividends attributable
thereto (the "Deferred Earnings"), will be distributed to the Participant in
accordance with the deferral schedule (the "Deferral Schedule") selected by the
Participant in his or her Election Form. The Trustee shall hold each
Participant's Deferred Shares and Deferred Earnings in the Trust until
distribution is required pursuant to the election set forth in the
Participant's Election Form.
Notwithstanding any other provision of the Plan or a Participant's Election
Form, in the event the Participant suffers an unforeseeable emergency hardship
within the contemplation of this paragraph, the Participant may apply to the
Committee for a distribution of all or a portion of his Deferred Shares and
Deferred Earnings prior to the basis for any such distribution. The hardship
must result from a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which
are not considered hardships include post-secondary school expenses or the
desire to purchase a residence. In no event will a distribution be made to the
extent the hardship could be relieved through reimbursement or compensation by
insurance or otherwise, or by liquidation of the Participant's nonessential
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assets to the extent such liquidation would not itself cause a severe financial
hardship. The amount of any distribution hereunder shall be limited to the
amount necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship and the amount
which qualifies for distribution, if any, shall be made by the Committee in its
sole discretion. The Committee may require evidence of the purpose and amount
of the need, and may establish such application or other procedures as it deems
appropriate.
No Participant may assign his or her claim to Deferred Shares and Deferred
Earnings during his or her lifetime, and any deferral election made hereunder
shall be irrevocable. A Participant's right to Deferred Shares and Deferred
Earnings shall at all times constitute an unsecured promise of the Company to
pay benefits as they come due. The right of the Participant or his or her
beneficiary to receive benefits hereunder shall be solely an unsecured claim
against the general assets of the Company. Neither the Participant nor his or
her beneficiary shall have any claim against or rights in any specific assets or
other fund of the Company, and any assets in the Trust shall be deemed general
assets of the Company.
All distributions made by the Company and/or the Trustees pursuant to
elections made hereunder shall be subject to applicable federal, state, and
local tax withholding and to such other deductions as shall at the time of such
payment be required under any income tax or other law, whether of the United
States or any other jurisdiction, and, in the case of payments to a beneficiary,
the delivery to the Committee and/or Trustees of all necessary waivers,
qualifications and other documentation.
ARTICLE VIII
MISCELLANEOUS
8.01 Adjustments for Capital Changes.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares
which may be purchased under the Plan, and the number and kind of shares subject
to outstanding Plan Share Awards, shall be proportionately adjusted for any
increase, decrease, change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company which results from a
merger, consolidation, recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in which the number
or kind of shares is changed without the receipt or payment of consideration by
the Company.
(b) Transactions in which the Company is Not the Surviving Entity. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding Plan
Share Awards shall be adjusted for any change or exchange of shares of Common
Stock for a different number or kind of shares or other securities which results
from the Transaction.
(c) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Section, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the shares pursuant to the Plan Share Award before the adjustment
was made. In addition, the Committee shall have the discretionary authority to
impose on the Shares subject to Plan Share Awards to Employees such restrictions
as the Committee may deem appropriate or desirable, including but not limited to
a right of first refusal, or repurchase option, or both of these restrictions.
(d) Other Issuances. Except as expressly provided in this Section, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into shares of Common Stock or stock of another class,
for cash or property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
7
<PAGE>
8.02 Amendment and Termination of Plan. The Board may, by resolution, at
any time amend or terminate the Plan; provided that no amendment or termination
of the Plan shall, without the written consent of a Participant, impair any
rights or obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance with this Section
8.02 shall include the power to direct the Trustee to return to the Company all
or any part of the assets of the Trust, including shares of Common Stock held in
the Plan Share Reserve. However, the termination of the Trust shall not affect
a Participant's right to earn Plan Share Awards and to receive a distribution of
Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or the Board.
8.03 Nontransferability. Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Awards pursuant to this Section 8.03. Plan Share Awards which are transferred
pursuant to this Section 8.03 shall be exercisable by the transferee according
to the same terms and conditions as applied to the Participant.
8.04 No Employment or Other Rights. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee or Director to continue
in the service of the Company, the Association, or an Affiliate thereof.
8.05 Voting and Dividend Rights. No Participant shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 Governing Law. The Plan and Trust shall be governed and construed
under the laws of the State of Tennessee to the extent not preempted by Federal
law.
8.07 Effective Date. The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders of the Company who own at least a
majority of the total votes eligible to be cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws, provided that
the Plan shall not be submitted for such approval within the six-month period
after the Date of Conversion. [Stockholder approval may be unnecessary, or
involve a different vote requirement, if the Plan is implemented more than one
year after the Date of Conversion.] In no event shall Plan Share Awards be made
prior to the Effective Date.
8.08 Term of Plan. This Plan shall remain in effect until the earlier of
(i) termination by the Board, or (ii) the distribution of all assets of the
Trust. Termination of the Plan shall not affect any Plan Share Awards
previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 Tax Status of Trust. It is intended that (i) the Trust associated
with the Plan be treated as a grantor trust of the Company under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
time, and (ii) that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of general unsecured
creditors of the Company, the Plan constitutes a mere unfunded promise to make
benefit payments in the future, the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be maintained in conformity
with Revenue Procedure 92-64 (as the same may be amended from time to time).
<PAGE>
TRUST AGREEMENT
UNDER THE UNITED TENNESSEE BANKSHARES, INC.
MANAGEMENT RECOGNITION PLAN
-----------------
Trust Agreement
-----------------
This Agreement made this _____ day of _________, 1997 by and between United
Tennessee Bankshares, Inc. (the "Company") and William Henry, Robert Overholt,
and Robert Self (acting by majority, the "Trustee").
WHEREAS, the Company maintains the United Tennessee Bankshares, Inc.
Management Recognition Plan (the "Plan"), and has incurred or expects to incur
liability under the terms of the Plan with respect to the individuals
participating in the Plan ("Participants");
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's general creditors in the event of Insolvency, as defined in
Section 3(a) hereof, until paid to Participants and their beneficiaries in such
manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan.
NOW, THEREFORE, the parties do hereby establish this Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
(a) The Company hereby deposits, or will shortly hereafter deposit, with
the Trustee in trust (i) a number of shares of the Company's common stock
("Common Stock") equal to four percent (4%) of the number of shares of Common
Stock issued by the Company in connection with the conversion of Newport Federal
Savings & Loan Association (the "Association") from mutual to stock form, or
(ii) an amount expected to be sufficient to permit the Trust to purchase said
shares. Said shares or amount shall become the initial principal of the Trust
to be held, administered and disposed of by the Trustee as provided in this
Trust Agreement.
(b) The Trust shall become irrevocable upon the effective date of the
Plan.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Participants and general creditors as herein set
forth. Participants and their beneficiaries shall have no preferred claim on,
or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Participants and their beneficiaries against the Company.
Any assets held by the Trust will be subject to the claims of the Company's
general creditors under federal and state law in the event of Insolvency, as
defined in Section 3(a) herein.
<PAGE>
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the Plan),
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to Participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Participants or
their beneficiaries as they become due under the terms of the Plan. The Company
shall notify the Trustee of its decision to make payment of benefits directly
prior to the time amounts are payable to Participants or their beneficiaries.
In addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
When Company Is Insolvent.
(a) The Trustee shall cease payment of benefits to Participants and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their
beneficiaries.
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or their
beneficiaries, shall liquidate the Trust's investment in Common Stock, and shall
hold the assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants or their beneficiaries as general creditors of the Company with
respect to benefits due under the Plan or otherwise.
<PAGE>
(3) The Trustee shall resume the payment of benefits to Participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is not Insolvent (or is no
longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
(a) The Trustee shall have sole discretion as to the investment of Trust
assets, except that to the extent reasonably practicable, the Trustee shall
invest all assets of the Trust in Common Stock provided that the Trust shall not
purchase from time to time a number of shares of Common Stock exceeding 4% of
the shares of Common Stock issued in the Association's mutual-to-stock
conversion.
(b) All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Participants, except that voting rights with respect
to Common Stock will be exercised in accordance with the terms of the Plan.
(c) Subject to applicable federal and state securities laws, if for any
reason the Trustee will be selling shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Beneficiary 20 business days within which to
purchase, at fair market value, all or part of the shares of Common Stock that
the Trustee holds for the benefit of the Beneficiary, and (ii) to the extent
purchases by Beneficiaries are insufficient to eliminate the Trusts' excess
holdings of Common Stock, to offer to sell, and to sell, all or any part of the
excess shares held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan maintained by
the Company or the Association; third, directors of the Association; fourth,
officers of the Association; fifth, members of the general public.
Section 6. - Disposition of Income.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each fiscal year
of the Company and within 20 days after the removal or resignation of the
Trustee, the Trustee shall deliver to the Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchased and sold with the cost or
net proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities and other property
held in the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
<PAGE>
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity, the terms of the Plan or this Trust and is given in writing
by the Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor the Trustee, or to loan to any person
the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
Section 9. Compensation and Expenses of Trustee.
The Company shall pay all administrative expenses and the Trustee's fees
and expenses relating to the Plan and this Trust. If not so paid, the fees and
expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
The Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the Company receives
such notice (unless the Company and the Trustee agree otherwise). The Trustee
(or any individual serving as one of the trustees who act by majority as the
Trustee) may be removed by the Company on 30 days notice or upon shorter notice
accepted by the Trustee.
If the Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a successor trustee, all assets shall
subsequently be transferred to the successor trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
<PAGE>
If the Trustee resigns or is removed in accordance with Section 10 hereof,
the Company may appoint any other party as a successor to replace the Trustee
upon resignation or removal. The appointment shall be effective when accepted
in writing by the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust assets. The former
trustee shall execute any instrument necessary or reasonably requested by the
Company or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor trustee shall not be responsible for, and the
Company shall indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes successor
trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company, provided that no such amendment shall make the
Trust revocable.
(b) The Trust shall not terminate until the date on which Participants and
their beneficiaries are no longer entitled to benefits pursuant to the terms
hereof. Upon termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their beneficiaries if
they are then entitled to payment of benefits), the Company may terminate this
Trust prior to the time all benefit payments under the Plan have been made. All
assets in the Trust at termination shall be returned to the Company.
<PAGE>
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant to the terms of
the Plan.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee, to the extent not preempted by federal
law.
(d) The Trustee agrees to be bound by the terms of the Plan, as in effect
from time to time.
(e) The Trustee shall act by vote or written consent of a majority of its
duly appointed members.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused
this Agreement to be executed, and its corporate seal affixed, and the Trustees
have executed this Agreement, this_____ day of________________, 1997.
ATTEST: UNITED TENNESSEE BANKSHARES, INC.
- ------------------------ By:
-------------------------------
Its President
ATTEST:
- ------------------------ -------------------------------
William Henry, Trustee
- ----------------------- -------------------------------
Robert Overholt, Trustee
- ----------------------- -------------------------------
Robert Self, Trustee
<PAGE>
Exhibit 10.3(a)
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
__________________________
Employment Agreement with
Richard Harwood
__________________________
AGREEMENT entered into and effective this 19th day of August, 1997, by
and between Newport Federal Savings & Loan Association (the "Association")
and Richard Harwood (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association as
its President and is experienced in all phases of the business of the
Association; and
WHEREAS, the Board of Directors (the "Board") of the Association believes
it is in the best interests of the Association to enter into this Agreement
with the Employee in order to assure continuity of management of the
Association and to reinforce and encourage the continued attention and
dedication of the Employee to his assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean any one of the following events:
(i) the acquisition of ownership, holding or power to vote more than 25% of
the voting stock of the Association or the Company, (ii) the acquisition of
the ability to control the election of a majority of the Association's or the
Company's directors, (iii) the acquisition of a controlling influence over
the management or policies of the Association or of the Company by any person
or by persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two
consecutive years, individuals (the "Continuing Directors") who at the
beginning of such period constitute the Board of Directors of the Association
or of the Company (the "Existing Board") cease for any reason to constitute
at least two-thirds thereof, provided that any individual whose election or
nomination for election as a member of the Existing Board was approved by a
vote of at least two-thirds of the Continuing Directors then in office shall
be considered a Continuing Director. Notwithstanding the foregoing, the
Company's ownership of the Association shall not of itself constitute a
Change in Control for purposes of the Agreement.
<PAGE>
For purposes of this paragraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any
other form of entity not specifically listed herein.
(b) "Company" shall mean United Tennessee Bankshares, Inc.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and
regulations in effect from time to time.
(d) "Code Section 280G Maximum" shall mean the product of 2.99 and
the Employee's "base amount" as defined in Code Section 280G(b)(3).
(e) "Disability" shall mean a physical or mental infirmity which
impairs the Employee's ability to substantially perform his duties under this
Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Association's long-term disability plan (or, if
the Association has no such plan in effect, which impairs the Employee's
ability to substantially perform his duties under this Agreement for a period
of 180 consecutive days).
(f) "Effective Date" shall mean the date referenced in the opening
paragraph of this Agreement.
(g) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Employee in writing: (i) the
requirement that the Employee move his personal residence, or perform his
principal executive functions, more than thirty (30) miles from his primary
office as of the later of the Effective Date and the most recent voluntary
relocation by the Employee; (ii) a material reduction in the Employee's base
compensation under this Agreement as the same may be increased from time to
time; (iii) the failure by the Association or the Company to continue to
provide the Employee with compensation and benefits provided under this
Agreement as the same may be increased from time to time, or with benefits
substantially similar to those provided to him under any of the employee
benefit plans in which the Employee now or hereafter becomes a participant,
or the taking of any action by the Association or the Company which would
directly or indirectly reduce any of such benefits or deprive the Employee of
any material fringe benefit enjoyed by him under this Agreement; (iv) the
assignment to the Employee of duties and responsibilities materially
different from those normally associated with his position; (v) a failure to
reelect the Employee to the Board of Directors of the Association or the
Company, if the Employee has served on such Board at any time during the term
of the Agreement; or (vi) a material diminution or reduction in the
Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Association.
(h) "Just Cause" shall mean, in the good faith determination of the
Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated
<PAGE>
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. The Employee shall have no right
to receive compensation or other benefits for any period after termination
for Just Cause. No act, or failure to act, on the Employee's part shall be
considered "willful" unless he has acted, or failed to act, with an absence
of good faith and without a reasonable belief that his action or failure to
act was in the best interest of the Association and the Company.
(i) "Protected Period" shall mean the period that begins on the
date six months before a Change in Control and ends on the later of the first
annual anniversary of the Change in Control or the expiration date of this
Agreement.
(j) "Trust" shall mean the Newport Federal Savings & Loan
Association Grantor Trust Agreement.
2. Employment. The Employee is employed as the President of the
Association. The Employee shall render such administrative and management
services for the Association as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Association. The Employee's other
duties shall be such as the Board may from time to time reasonably direct,
including normal duties as an officer of the Association.
3. Base Compensation. The Association agrees to pay the Employee
during the term of this Agreement a salary at the rate of $69,131 per annum,
payable in cash not less frequently than monthly. The Board shall review,
not less often than annually, the rate of the Employee's salary, and in its
sole discretion may decide to increase his salary.
4. Discretionary Bonuses. The Employee shall participate in an
equitable manner with all other senior management employees of the
Association in discretionary bonuses that the Board may award from time to
time to the Association's senior management employees. No other compensation
provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans.
(a) The Employee shall be eligible to participate in any of the
following plans or programs that the Association may now or in the future
maintain: group hospitalization, disability, health, dental, sick leave,
life insurance, travel and/or accident insurance, auto allowance/auto lease,
retirement, pension, and/or other present or future qualified or nonqualified
plans provided by the Association, generally which benefits, taken as a
whole, must be at least as favorable as those in effect on the Effective Date.
(b) The Employee shall also be eligible to participate in any
fringe benefits which are or may become available to the Association's senior
management employees, including
<PAGE>
for example: any stock option or incentive compensation plans, and any other
benefits which are commensurate with the responsibilities and functions to be
performed by the Employee under this Agreement. The Employee shall be
reimbursed for all reasonable out-of-pocket business expenses which he shall
incur in connection with his services under this Agreement upon
substantiation of such expenses in accordance with the policies of the
Association.
6. Term. The Association hereby employs the Employee, and the Employee
hereby accepts such employment under this Agreement, for the period
commencing on the Effective Date and ending 36 months thereafter (or such
earlier date as is determined in accordance with Section 10 or 12 hereof).
Additionally, on each annual anniversary date from the Effective Date, the
Employee's term of employment shall be extended for an additional one-year
period beyond the then effective expiration date, provided the Board
determines in a duly adopted resolution that the performance of the Employee
has met the Board's requirements and standards, and that this Agreement shall
be extended. Only those members of the Board of Directors who have no
personal interest in this Employment Agreement shall discuss and vote on the
approval and subsequent review of this Agreement.
7. Loyalty; Noncompetition.
(a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and
efforts to the faithful performance of his duties hereunder; provided,
however, from time to time, Employee may serve on the boards of directors of,
and hold any other offices or positions in, companies or organizations, which
will not present any conflict of interest with the Association or any of its
subsidiaries or affiliates, or unfavorably affect the performance of
Employee's duties pursuant to this Agreement, or will not violate any
applicable statute or regulation. "Full business time" is hereby defined as
that amount of time usually devoted to like companies by similarly situated
executive officers. During the term of his employment under this Agreement,
the Employee shall not engage in any business or activity contrary to the
business affairs or interests of the Association.
(b) Nothing contained in this Section shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities
of any business dissimilar from that of the Association, or, solely as a
passive or minority investor, in any business.
8. Standards. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Association will provide Employee with the
working facilities and staff customary for similar executives and necessary
for him to perform his duties.
9. Vacation and Sick Leave. At such reasonable times as the Board
shall in its discretion permit, the Employee shall be entitled, without loss
of pay, to absent himself voluntarily from the performance of his employment
under this Agreement, all such voluntary absences to count as vacation time,
provided that:
<PAGE>
(a) The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for
senior management employees of the Association.
(b) The Employee shall not receive any additional compensation from
the Association on account of his failure to take a vacation or sick leave,
and the Employee shall not accumulate unused vacation or sick leave from one
fiscal year to the next, except in either case to the extent authorized by
the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Association for such additional
periods of time and for such valid and legitimate reasons as the Board may in
its discretion determine. Further, the Board may grant to the Employee a
leave or leaves of absence, with or without pay, at such time or times and
upon such terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which event
the Employee's estate shall be entitled to receive the compensation due the
Employee through the last day of the calendar month in which his death
occurred.
(b) Disability. (1) The Association may terminate the Employee's
employment after having established the Employee's Disability, in which event
the Employee shall be entitled to the compensation and benefits provided for
under this Agreement for (i) any period during the term of this Agreement and
prior to the establishment of the Employee's Disability during which the
Employee is unable to work due to the physical or mental infirmity, and (ii)
any period of Disability which is prior to the Employee's termination of
employment pursuant to this Section 10(b); provided that any benefits paid
pursuant to the Association's long term disability plan will continue as
provided in such plan without reduction for payments made pursuant to this
Agreement.
(2) During any period that the Employee shall receive
disability benefits and to the extent that the Employee shall be physically
and mentally able to do so, he shall furnish such information, assistance and
documents so as to assist in the continued ongoing business of the
Association and, if able, shall make himself available to the Association to
undertake reasonable assignments consistent with his prior position and his
physical and mental health. The Association shall pay all reasonable
expenses incident to the performance of any assignment given to the Employee
during the disability period.
<PAGE>
(c) Just Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time, for Just Cause. The
Employee shall have no right to receive compensation or other benefits for
any period after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may, by
written notice to the Employee, immediately terminate his employment at any
time for a reason other than his Disability or Just Cause, in which event the
Employee shall be entitled to receive the following compensation and benefits
(unless such termination occurs during the Protected Period, in which event
the benefits and compensation provided for in Section 12 shall apply): (i)
the salary provided pursuant to Section 3 hereof, up to the expiration date
of this Agreement, including any renewal term (the "Expiration Date"), plus
said salary for an additional 12-month period, and (ii) at the Employee's
election either (A) cash in an amount equal to the cost to the Employee of
obtaining all health, life, disability and other benefits which the Employee
would have been eligible to participate in through the Expiration Date based
upon the benefit levels substantially equal to those that the Association
provided for the Employee at the date of termination of employment or (B)
continued participation under such Association benefit plans through the
Expiration Date, but only to the extent the Employee continues to qualify for
participation therein. All amounts payable to the Employee shall be paid, at
the option of the Employee, either (I) in periodic payments through the
Expiration Date, or (II) in one lump sum within ten days of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an
event that constitutes Good Reason (unless such voluntary termination occurs
during the Protected Period, in which event the benefits and compensation
provided for in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. (1) If the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Association's affairs by an order issued under Sections
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
1818(e)(4) and (g)(1)), all obligations of the Association under this
Agreement shall terminate, as of the effective date of the order, but vested
rights of the parties shall not be affected.
(2) If the Association is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of
the date of default; however, this Paragraph shall not affect the vested
rights of the parties.
(3) If a notice served under Section 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits
the Employee from participating in the conduct of the Association's affairs,
the Association's obligations under this Agreement shall be suspended as of
the date of such service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Association may in its discretion
(i) pay the Employee all or part of the compensation withheld while its
contract obligations were suspended, and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.
<PAGE>
(4) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with both 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder, and Regulatory Bulletin 27A, but only to the extent required
thereunder on the date any payment is required pursuant to this Agreement.
(g) Voluntary Termination by Employee. Subject to Section 12
hereof, the Employee may voluntarily terminate employment with the
Association during the term of this Agreement, upon at least 90 days' prior
written notice to the Board of Directors, in which case the Employee shall
receive only his compensation, vested rights and employee benefits up to the
date of his termination (unless such termination occurs pursuant to Section
10(d) hereof or within the Protected Period, in Section 12(a) hereof, in
which event the benefits and compensation provided for in Sections 10(d) or
12, as applicable, shall apply).
(h) Post-termination Health Insurance. If the Employee's
employment terminates with the Association or the Company for any reason
other than Just Cause, the Employee shall be entitled to purchase from the
Association, at the Employee's own expense which shall not exceed applicable
COBRA rates, family medical insurance under any group health plan that the
Association or the Company maintains for its employees. This right shall be
(i) in addition to, and not in lieu of, any other rights that the Employee
has under this Agreement, and (ii) shall continue until the Employee first
becomes eligible for participation in Medicare.
11. No Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Employee in any
subsequent employment.
12. Change in Control.
(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in subsection (b) hereof in the event that
either (i) the Employee voluntarily terminates employment for any reason
within the 30-day period beginning on the date of a Change in Control, (ii)
the Employee voluntarily terminates employment within 90 days of an event
that both occurs during the Protected Period and constitutes Good Reason, or
(iii) the Association or the Company or their successor(s) in interest
terminate the Employee's employment without his written consent and for any
reason other than Just Cause during the Protected Period.
(b) Amount of Severance Benefit. If the Employee becomes entitled
to collect severance benefits pursuant to Section 12(a) hereof, the
Association shall:
(i) pay the Employee a severance benefit equal to the difference
between the Code Section 280G Maximum and the sum of any other
"parachute payments" as defined under Code Section 280G(b)(2) that the
Employee receives on account of the Change in Control, and
<PAGE>
(ii) pay for long-term disability and provide such medical
benefits as are available to the Employee under the provisions of
COBRA, for eighteen (18) months (or such longer period, up to 24
months, if COBRA is amended).
The amount payable under Section 12(b)(i) shall be paid in one lump sum
within ten days of the later of the date of the Change in Control and the
Employee's last day of employment with the Association or the Company. In
the event that the Employee, the Association, and the Company jointly agree
that the Employee has collected an amount exceeding the Code Section 280G
Maximum, the parties may agree in writing that such excess shall be treated
as a loan ab initio, which the Employee shall repay to the Association, on
terms and conditions mutually agreeable to the parties, together with
interest at the applicable federal rate provided for in Section 7872(f)(2)(B)
of the Code.
(c) Funding of Grantor Trust upon Change in Control. Not later than
ten business days after a Change in Control, the Association shall (i)
deposit in a Trust an amount equal to the Code Section 280G Maximum, unless
the Employee has previously provided a written release of any claims under
this Agreement, and (ii) provide the trustee of the Trust with a written
direction to hold said amount and any investment return thereon in a
segregated account for the benefit of the Employee, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. Upon the later of the Trust's final payment of all amounts
due under the following paragraph or the date twelve months after the Change
in Control, the trustee of the Trust shall pay to the Association the entire
balance remaining in the segregated account maintained for the benefit of the
Employee. The Employee shall thereafter have no further interest in the
Trust.
During the 15-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice
requesting that the trustee pay to the Employee an amount designated in the
notice as being payable pursuant to this Agreement. Within three business
days after receiving said notice, the trustee of the Trust shall send a copy
of the notice to the Association via overnight and registered mail return
receipt requested. On the tenth (10th) business day after mailing said
notice to the Association, the trustee of the Trust shall pay the Employee
the amount designated therein in immediately available funds, unless prior
thereto the Association provides the trustee with a written notice directing
the trustee to withhold such payment. In the latter event, the trustee shall
submit the dispute to non-appealable binding arbitration for a determination
of the amount payable to the Employee pursuant to this Agreement, and the
costs of such arbitration shall be paid by the Association. The trustee
shall choose the arbitrator to settle the dispute, and such arbitrator shall
be bound by the rules of the American Arbitration Association in making his
determination. The parties and the trustee shall be bound by the results of
the arbitration and, within three days of the determination by the
arbitrator, the trustee shall pay from the Trust the amounts required to be
paid to the Employee and/or the Association, and in no event shall the
trustee be liable to either party for making the payments as determined by
the arbitrator.
13. Indemnification. The Association and the Company agree that their
respective Bylaws shall continue to provide for indemnification of directors,
officers, employees and agents
<PAGE>
of the Association and the Company, including the Employee during the full
term of this Agreement, and to at all times provide adequate insurance for
such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the event
that any dispute arises between the Employee and the Association as to the
terms or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Employee takes to
defend against any action taken by the Association or the Company, the
Employee shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, provided
that the Employee obtains either a written settlement or a final judgement by
a court of competent jurisdiction substantially in his favor. Such
reimbursement shall be paid within ten days of Employee's furnishing to the
Association written evidence, which may be in the form, among other things,
of a cancelled check or receipt, of any costs or expenses incurred by the
Employee.
15. Federal Income Tax Withholding. The Association may withhold all
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation
or ruling.
16. Successors and Assigns.
(a) Association. This Agreement shall not be assignable by the
Association, provided that this Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of the Association which
shall acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Employee. Since the Association is contracting for the unique
and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties hereunder without first
obtaining the written consent of the Association; provided, however, that
nothing in this paragraph shall preclude (i) the Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
the executors, administrators, or other legal representatives of the Employee
or his estate from assigning any rights hereunder to the person or persons
entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation
or to exclusion, attachment, levy or similar process or assignment by
operation of law, and any attempt, voluntary or involuntary, to effect any
such action shall be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
<PAGE>
18. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto and shall
supersede any prior agreement between the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: NEWPORT FEDERAL SAVINGS & LOAN
ASSOCIATION
/s/ W. B. Henry By: /s/ J. William Myers
- --------------------------- --------------------------------
Secretary Its Chairman of the Board
WITNESS:
/s/ Nancy Bryant /s/ Richard Harwood
- --------------------------- --------------------------------
Richard Harwood
<PAGE>
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
__________________________
Employment Agreement with
Nancy Bryant
__________________________
AGREEMENT entered into and effective this 19th day of August, 1997, by
and between Newport Federal Savings & Loan Association (the "Association")
and Nancy Bryant (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association as
Vice President and Treasurer and is experienced in all phases of the business
of the Association; and
WHEREAS, the Board of Directors (the "Board") of the Association believes
it is in the best interests of the Association to enter into this Agreement
with the Employee in order to assure continuity of management of the
Association and to reinforce and encourage the continued attention and
dedication of the Employee to her assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean any one of the following events:
(i) the acquisition of ownership, holding or power to vote more than 25% of
the voting stock of the Association or the Company, (ii) the acquisition of
the ability to control the election of a majority of the Association's or the
Company's directors, (iii) the acquisition of a controlling influence over
the management or policies of the Association or of the Company by any person
or by persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two
consecutive years, individuals (the "Continuing Directors") who at the
beginning of such period constitute the Board of Directors of the Association
or of the Company (the "Existing Board") cease for any reason to constitute
at least two-thirds thereof, provided that any individual whose election or
nomination for election as a member of the Existing Board was approved by a
vote of at least two-thirds of the Continuing Directors then in office shall
be considered a Continuing Director. Notwithstanding the foregoing, the
Company's ownership of the Association shall not of itself constitute a
Change in Control for purposes of the Agreement.
<PAGE>
For purposes of this paragraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any
other form of entity not specifically listed herein.
(b) "Company" shall mean United Tennessee Bankshares, Inc.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and
regulations in effect from time to time.
(d) "Code Section 280G Maximum" shall mean the product of 2.99 and
the Employee's "base amount" as defined in Code Section 280G(b)(3).
(e) "Disability" shall mean a physical or mental infirmity which
impairs the Employee's ability to substantially perform her duties under this
Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Association's long-term disability plan (or, if
the Association has no such plan in effect, which impairs the Employee's
ability to substantially perform her duties under this Agreement for a period
of 180 consecutive days).
(f) "Effective Date" shall mean the date referenced in the opening
paragraph of this Agreement.
(g) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Employee in writing: (i) the
requirement that the Employee move her personal residence, or perform her
principal executive functions, more than thirty (30) miles from her primary
office as of the later of the Effective Date and the most recent voluntary
relocation by the Employee; (ii) a material reduction in the Employee's base
compensation under this Agreement as the same may be increased from time to
time; (iii) the failure by the Association or the Company to continue to
provide the Employee with compensation and benefits provided under this
Agreement as the same may be increased from time to time, or with benefits
substantially similar to those provided to her under any of the employee
benefit plans in which the Employee now or hereafter becomes a participant,
or the taking of any action by the Association or the Company which would
directly or indirectly reduce any of such benefits or deprive the Employee of
any material fringe benefit enjoyed by her under this Agreement; (iv) the
assignment to the Employee of duties and responsibilities materially
different from those normally associated with her position; (v) a failure to
reelect the Employee to the Board of Directors of the Association or the
Company, if the Employee has served on such Board at any time during the term
of the Agreement; or (vi) a material diminution or reduction in the
Employee's responsibilities or authority (including reporting
responsibilities) in connection with her employment with the Association.
(h) "Just Cause" shall mean, in the good faith determination of the
Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated
<PAGE>
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. The Employee shall have no right
to receive compensation or other benefits for any period after termination
for Just Cause. No act, or failure to act, on the Employee's part shall be
considered "willful" unless she has acted, or failed to act, with an absence
of good faith and without a reasonable belief that her action or failure to
act was in the best interest of the Association and the Company.
(i) "Protected Period" shall mean the period that begins on the
date six months before a Change in Control and ends on the later of the first
annual anniversary of the Change in Control or the expiration date of this
Agreement.
(j) "Trust" shall mean the Newport Federal Savings & Loan
Association Grantor Trust Agreement.
2. Employment. The Employee is employed as the Vice President and
Treasurer of the Association. The Employee shall render such administrative
and management services for the Association as are currently rendered and as
are customarily performed by persons situated in a similar executive
capacity. The Employee shall also promote, by entertainment or otherwise, as
and to the extent permitted by law, the business of the Association. The
Employee's other duties shall be such as the Board may from time to time
reasonably direct, including normal duties as an officer of the Association.
3. Base Compensation. The Association agrees to pay the Employee
during the term of this Agreement a salary at the rate of $37,178 per annum,
payable in cash not less frequently than monthly. The Board shall review,
not less often than annually, the rate of the Employee's salary, and in its
sole discretion may decide to increase her salary.
4. Discretionary Bonuses. The Employee shall participate in an
equitable manner with all other senior management employees of the
Association in discretionary bonuses that the Board may award from time to
time to the Association's senior management employees. No other compensation
provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans.
(a) The Employee shall be eligible to participate in any of the
following plans or programs that the Association may now or in the future
maintain: group hospitalization, disability, health, dental, sick leave,
life insurance, travel and/or accident insurance, auto allowance/auto lease,
retirement, pension, and/or other present or future qualified or nonqualified
plans provided by the Association, generally which benefits, taken as a
whole, must be at least as favorable as those in effect on the Effective Date.
(b) The Employee shall also be eligible to participate in any
fringe benefits which are or may become available to the Association's senior
management employees, including
<PAGE>
for example: any stock option or incentive compensation plans, and any other
benefits which are commensurate with the responsibilities and functions to be
performed by the Employee under this Agreement. The Employee shall be
reimbursed for all reasonable out-of-pocket business expenses which she shall
incur in connection with her services under this Agreement upon
substantiation of such expenses in accordance with the policies of the
Association.
6. Term. The Association hereby employs the Employee, and the Employee
hereby accepts such employment under this Agreement, for the period
commencing on the Effective Date and ending eighteen (18) months thereafter
(or such earlier date as is determined in accordance with Section 10 or 12
hereof). Additionally, on each annual anniversary date from the Effective
Date, the Employee's term of employment shall be extended for an additional
one-year period beyond the then effective expiration date, provided the Board
determines in a duly adopted resolution that the performance of the Employee
has met the Board's requirements and standards, and that this Agreement shall
be extended. Only those members of the Board of Directors who have no
personal interest in this Employment Agreement shall discuss and vote on the
approval and subsequent review of this Agreement.
7. Loyalty; Noncompetition.
(a) During the period of her employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all her full business time, attention, skill, and
efforts to the faithful performance of her duties hereunder; provided,
however, from time to time, Employee may serve on the boards of directors of,
and hold any other offices or positions in, companies or organizations, which
will not present any conflict of interest with the Association or any of its
subsidiaries or affiliates, or unfavorably affect the performance of
Employee's duties pursuant to this Agreement, or will not violate any
applicable statute or regulation. "Full business time" is hereby defined as
that amount of time usually devoted to like companies by similarly situated
executive officers. During the term of her employment under this Agreement,
the Employee shall not engage in any business or activity contrary to the
business affairs or interests of the Association.
(b) Nothing contained in this Section shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities
of any business dissimilar from that of the Association, or, solely as a
passive or minority investor, in any business.
8. Standards. The Employee shall perform her duties under this
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Association will provide Employee with the
working facilities and staff customary for similar executives and necessary
for her to perform her duties.
9. Vacation and Sick Leave. At such reasonable times as the Board
shall in its discretion permit, the Employee shall be entitled, without loss
of pay, to absent himself voluntarily from the performance of her employment
under this Agreement, all such voluntary absences to count as vacation time,
provided that:
<PAGE>
(a) The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for
senior management employees of the Association.
(b) The Employee shall not receive any additional compensation from
the Association on account of her failure to take a vacation or sick leave,
and the Employee shall not accumulate unused vacation or sick leave from one
fiscal year to the next, except in either case to the extent authorized by
the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of her employment with the Association for such additional
periods of time and for such valid and legitimate reasons as the Board may in
its discretion determine. Further, the Board may grant to the Employee a
leave or leaves of absence, with or without pay, at such time or times and
upon such terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon her death during the term of this Agreement, in which event
the Employee's estate shall be entitled to receive the compensation due the
Employee through the last day of the calendar month in which her death
occurred.
(b) Disability. (1) The Association may terminate the Employee's
employment after having established the Employee's Disability, in which event
the Employee shall be entitled to the compensation and benefits provided for
under this Agreement for (i) any period during the term of this Agreement and
prior to the establishment of the Employee's Disability during which the
Employee is unable to work due to the physical or mental infirmity, and (ii)
any period of Disability which is prior to the Employee's termination of
employment pursuant to this Section 10(b); provided that any benefits paid
pursuant to the Association's long term disability plan will continue as
provided in such plan without reduction for payments made pursuant to this
Agreement.
(2) During any period that the Employee shall receive
disability benefits and to the extent that the Employee shall be physically
and mentally able to do so, she shall furnish such information, assistance
and documents so as to assist in the continued ongoing business of the
Association and, if able, shall make himself available to the Association to
undertake reasonable assignments consistent with her prior position and her
physical and mental health. The Association shall pay all reasonable
expenses incident to the performance of any assignment given to the Employee
during the disability period.
<PAGE>
(c) Just Cause. The Board may, by written notice to the Employee,
immediately terminate her employment at any time, for Just Cause. The
Employee shall have no right to receive compensation or other benefits for
any period after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may, by
written notice to the Employee, immediately terminate her employment at any
time for a reason other than her Disability or Just Cause, in which event the
Employee shall be entitled to receive the following compensation and benefits
(unless such termination occurs during the Protected Period, in which event
the benefits and compensation provided for in Section 12 shall apply): the
salary provided pursuant to Section 3 hereof, up to the expiration date of
this Agreement, including any renewal term (the "Expiration Date"), plus said
salary for an additional 12-month period. All amounts payable to the
Employee shall be paid, at the option of the Employee, either (I) in periodic
payments through the Expiration Date, or (II) in one lump sum within ten days
of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an
event that constitutes Good Reason (unless such voluntary termination occurs
during the Protected Period, in which event the benefits and compensation
provided for in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. (1) If the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Association's affairs by an order issued under Sections
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
1818(e)(4) and (g)(1)), all obligations of the Association under this
Agreement shall terminate, as of the effective date of the order, but vested
rights of the parties shall not be affected.
(2) If the Association is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of
the date of default; however, this Paragraph shall not affect the vested
rights of the parties.
(3) If a notice served under Section 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits
the Employee from participating in the conduct of the Association's affairs,
the Association's obligations under this Agreement shall be suspended as of
the date of such service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Association may in its discretion
(i) pay the Employee all or part of the compensation withheld while its
contract obligations were suspended, and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.
(4) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with both 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder, and Regulatory Bulletin 27A, but only to the extent required
thereunder on the date any payment is required pursuant to this Agreement.
<PAGE>
(g) Voluntary Termination by Employee. Subject to Section 12
hereof, the Employee may voluntarily terminate employment with the
Association during the term of this Agreement, upon at least 90 days' prior
written notice to the Board of Directors, in which case the Employee shall
receive only her compensation, vested rights and employee benefits up to the
date of her termination (unless such termination occurs pursuant to Section
10(d) hereof or within the Protected Period, in Section 12(a) hereof, in
which event the benefits and compensation provided for in Sections 10(d) or
12, as applicable, shall apply).
11. No Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Employee in any
subsequent employment.
12. Change in Control.
(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in subsection (b) hereof in the event that
either (i) the Employee voluntarily terminates employment for any reason
within the 30-day period beginning on the date of a Change in Control, (ii)
the Employee voluntarily terminates employment within 90 days of an event
that both occurs during the Protected Period and constitutes Good Reason, or
(iii) the Association or the Company or their successor(s) in interest
terminate the Employee's employment without her written consent and for any
reason other than Just Cause during the Protected Period.
(b) Amount of Severance Benefit. If the Employee becomes entitled
to collect severance benefits pursuant to Section 12(a) hereof, the
Association shall:
(i) pay the Employee a severance benefit equal to 1.5 times her
base salary then in effect, but in no event greater than the
difference between the Code Section 280G Maximum and the sum of any
other "parachute payments" as defined under Code Section 280G(b)(2)
that the Employee receives on account of the Change in Control, and
(ii) pay for long-term disability and provide such medical
benefits as are available to the Employee under the provisions of
COBRA, for eighteen (18) months (or such longer period, up to 24
months, if COBRA is amended).
The amount payable under Section 12(b)(i) shall be paid in one lump sum
within ten days of the later of the date of the Change in Control and the
Employee's last day of employment with the Association or the Company. In
the event that the Employee, the Association, and the Company jointly agree
that the Employee has collected an amount exceeding the Code Section 280G
Maximum, the parties may agree in writing that such excess shall be treated
as a loan ab initio, which the Employee shall repay to the Association, on
terms and conditions mutually agreeable to the parties, together with
interest at the applicable federal rate provided for in Section 7872(f)(2)(B)
of the Code.
<PAGE>
(c) Funding of Grantor Trust upon Change in Control. Not later than
ten business days after a Change in Control, the Association shall (i)
deposit in a Trust an amount equal to the Code Section 280G Maximum, unless
the Employee has previously provided a written release of any claims under
this Agreement, and (ii) provide the trustee of the Trust with a written
direction to hold said amount and any investment return thereon in a
segregated account for the benefit of the Employee, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. Upon the later of the Trust's final payment of all amounts
due under the following paragraph or the date twelve months after the Change
in Control, the trustee of the Trust shall pay to the Association the entire
balance remaining in the segregated account maintained for the benefit of the
Employee. The Employee shall thereafter have no further interest in the
Trust.
During the 15-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice
requesting that the trustee pay to the Employee an amount designated in the
notice as being payable pursuant to this Agreement. Within three business
days after receiving said notice, the trustee of the Trust shall send a copy
of the notice to the Association via overnight and registered mail return
receipt requested. On the tenth (10th) business day after mailing said
notice to the Association, the trustee of the Trust shall pay the Employee
the amount designated therein in immediately available funds, unless prior
thereto the Association provides the trustee with a written notice directing
the trustee to withhold such payment. In the latter event, the trustee shall
submit the dispute to non-appealable binding arbitration for a determination
of the amount payable to the Employee pursuant to this Agreement, and the
costs of such arbitration shall be paid by the Association. The trustee
shall choose the arbitrator to settle the dispute, and such arbitrator shall
be bound by the rules of the American Arbitration Association in making his
determination. The parties and the trustee shall be bound by the results of
the arbitration and, within three days of the determination by the
arbitrator, the trustee shall pay from the Trust the amounts required to be
paid to the Employee and/or the Association, and in no event shall the
trustee be liable to either party for making the payments as determined by
the arbitrator.
13. Indemnification. The Association and the Company agree that their
respective Bylaws shall continue to provide for indemnification of directors,
officers, employees and agents of the Association and the Company, including
the Employee during the full term of this Agreement, and to at all times
provide adequate insurance for such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the event
that any dispute arises between the Employee and the Association as to the
terms or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Employee takes to
defend against any action taken by the Association or the Company, the
Employee shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, provided
that the Employee obtains either a written settlement or a final judgement by
a court of competent jurisdiction substantially in her favor. Such
reimbursement shall be paid within ten days of Employee's furnishing to the
Association written evidence, which may be in the form, among other things,
of a cancelled check or receipt, of any costs or expenses incurred by the
Employee.
<PAGE>
15. Federal Income Tax Withholding. The Association may withhold all
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation
or ruling.
16. Successors and Assigns.
(a) Association. This Agreement shall not be assignable by the
Association, provided that this Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of the Association which
shall acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Employee. Since the Association is contracting for the unique
and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating her rights or duties hereunder without first
obtaining the written consent of the Association; provided, however, that
nothing in this paragraph shall preclude (i) the Employee from designating a
beneficiary to receive any benefit payable hereunder upon her death, or (ii)
the executors, administrators, or other legal representatives of the Employee
or her estate from assigning any rights hereunder to the person or persons
entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation
or to exclusion, attachment, levy or similar process or assignment by
operation of law, and any attempt, voluntary or involuntary, to effect any
such action shall be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto and shall
supersede any prior agreement between the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: NEWPORT FEDERAL SAVINGS & LOAN
ASSOCIATION
/s/ W. B. Henry By: /s/ J. William Myers
- --------------------------- ---------------------------------
Secretary Its Chairman of the Board
WITNESS:
/s/ Richard Harwood /s/ Nancy Bryant
- --------------------------- --------------------------------
Nancy Bryant
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION AND NANCY BRYANT
AND PEGGY HOLSTON
1997 AMENDMENT
__________________________
WHEREAS, on September 9, 1997, Newport Federal Savings & Loan Association
(the "Association") entered into an Employment Agreement (the "Agreement")
with Nancy Bryant (the "Employee"); and Peggy Holston.
WHEREAS, the Board of Directors of the Association and the Employee have
determined that it is in the best interests of the Association and the
Employee to amend the Agreement.
NOW, THEREFORE, the Agreement shall be amended as follows, with such
amendment to become effective immediately upon execution hereof:
1. The first sentence of Section 10(d) of the Agreement shall be amended
in its entirety to provide as follows:
The Board may, by written notice to the Employee, immediately
terminate her employment at any time for a reason other than her
Disability or Just Cause, in which event the Employee shall be
entitled to receive the following compensation and benefits (unless
such termination occurs during the Protected Period, in which event
the benefits and compensation provided for in Section 12 shall apply):
(i) the salary provided pursuant to Section 3 hereof, up to the
expiration date of this Agreement, including any renewal term (the
"Expiration Date"), plus said salary for an additional 12-month
period, and (ii) at the Employee's election either (A) cash in an
amount equal to the cost to the Employee of obtaining all health,
life, disability and other benefits which the Employee would have been
eligible to participate in through the Expiration Date based upon the
benefit levels substantially equal to those that the Association
provided for the Employee at the date of termination of employment, or
(B) continued participation under such Association benefit plans
through the Expiration Date, but only to the extent the Employee
continues to qualify for participation therein.
2. Section 10 of the Agreement shall be further amended by adding the
following subsection (h) immediately at the end thereof:
(h) Post-termination Health Insurance. If the Employee's
employment terminates with the Association or the Company for any
reason other
<PAGE>
1997 Amendment
Page 2
than Just Cause, the Employee shall be entitled to purchase from the
Association, at the Employee's own expense which shall not exceed
applicable COBRA rates, family medical insurance under any group
health plan that the Association or the Company maintains for its
employees. This right shall be (i) in addition to, and not in lieu
of, any other rights that the Employee has under this Agreement, and
(ii) shall continue until the Employee first becomes eligible for
participation in Medicare.
3. Nothing contained herein shall be held to alter, vary or affect any
of the terms, provisions, or conditions of the Agreement other than as stated
above.
WHEREFORE, the undersigned hereby approve this 1997 Amendment to the
Agreement.
Date of Execution: September 9, 1997
[EXECUTIVE]
/s/ Nancy Bryant
- ----------------------------------------
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
By /s/ Richard Harwood Attest:
-------------------------------- -----------------------
Its President
----------------------------
CORPORATE SEAL
<PAGE>
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
__________________________
Employment Agreement with
Peggy Holston
__________________________
AGREEMENT entered into and effective this 19th day of August, 1997, by
and between Newport Federal Savings & Loan Association (the "Association")
and Peggy Holston (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association as
Branch Manager and Assistant Secretary and is experienced in all phases of
the business of the Association; and
WHEREAS, the Board of Directors (the "Board") of the Association
believes it is in the best interests of the Association to enter into this
Agreement with the Employee in order to assure continuity of management of
the Association and to reinforce and encourage the continued attention and
dedication of the Employee to her assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean any one of the following
events: (i) the acquisition of ownership, holding or power to vote more than
25% of the voting stock of the Association or the Company, (ii) the
acquisition of the ability to control the election of a majority of the
Association's or the Company's directors, (iii) the acquisition of a
controlling influence over the management or policies of the Association or
of the Company by any person or by persons acting as a "group" (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), or (iv)
during any period of two consecutive years, individuals (the "Continuing
Directors") who at the beginning of such period constitute the Board of
Directors of the Association or of the Company (the "Existing Board") cease
for any reason to constitute at least two-thirds thereof, provided that any
individual whose election or nomination for election as a member of the
Existing Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a Continuing
Director. Notwithstanding the foregoing, the Company's ownership of the
Association shall not of itself constitute a Change in Control for purposes
of the Agreement.
<PAGE>
For purposes of this paragraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any
other form of entity not specifically listed herein.
(b) "Company" shall mean United Tennessee Bankshares, Inc.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and as interpreted through applicable rulings and
regulations in effect from time to time.
(d) "Code Section 280G Maximum" shall mean the product of 2.99 and
the Employee's "base amount" as defined in Code Section 280G(b)(3).
(e) "Disability" shall mean a physical or mental infirmity which
impairs the Employee's ability to substantially perform her duties under this
Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Association's long-term disability plan (or, if
the Association has no such plan in effect, which impairs the Employee's
ability to substantially perform her duties under this Agreement for a period
of 180 consecutive days).
(f) "Effective Date" shall mean the date referenced in the opening
paragraph of this Agreement.
(g) "Good Reason" shall mean any of the following events, which
has not been consented to in advance by the Employee in writing: (i) the
requirement that the Employee move her personal residence, or perform her
principal executive functions, more than thirty (30) miles from her primary
office as of the later of the Effective Date and the most recent voluntary
relocation by the Employee; (ii) a material reduction in the Employee's base
compensation under this Agreement as the same may be increased from time to
time; (iii) the failure by the Association or the Company to continue to
provide the Employee with compensation and benefits provided under this
Agreement as the same may be increased from time to time, or with benefits
substantially similar to those provided to her under any of the employee
benefit plans in which the Employee now or hereafter becomes a participant,
or the taking of any action by the Association or the Company which would
directly or indirectly reduce any of such benefits or deprive the Employee of
any material fringe benefit enjoyed by her under this Agreement; (iv) the
assignment to the Employee of duties and responsibilities materially
different from those normally associated with her position; (v) a failure to
reelect the Employee to the Board of Directors of the Association or the
Company, if the Employee has served on such Board at any time during the term
of the Agreement; or (vi) a material diminution or reduction in the
Employee's responsibilities or authority (including reporting
responsibilities) in connection with her employment with the Association.
(h) "Just Cause" shall mean, in the good faith determination of
the Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated
<PAGE>
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. The Employee shall have no right
to receive compensation or other benefits for any period after termination
for Just Cause. No act, or failure to act, on the Employee's part shall be
considered "willful" unless she has acted, or failed to act, with an absence
of good faith and without a reasonable belief that her action or failure to
act was in the best interest of the Association and the Company.
(i) "Protected Period" shall mean the period that begins on the
date six months before a Change in Control and ends on the later of the first
annual anniversary of the Change in Control or the expiration date of this
Agreement.
(j) "Trust" shall mean the Newport Federal Savings & Loan
Association Grantor Trust Agreement.
2. Employment. The Employee is employed as the Branch Manager and
Assistant Secretary of the Association. The Employee shall render such
administrative and management services for the Association as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Employee shall also promote, by entertainment or
otherwise, as and to the extent permitted by law, the business of the
Association. The Employee's other duties shall be such as the Board may from
time to time reasonably direct, including normal duties as an officer of the
Association.
3. Base Compensation. The Association agrees to pay the Employee
during the term of this Agreement a salary at the rate of $33,376 per annum,
payable in cash not less frequently than monthly. The Board shall review,
not less often than annually, the rate of the Employee's salary, and in its
sole discretion may decide to increase her salary.
4. Discretionary Bonuses. The Employee shall participate in an
equitable manner with all other senior management employees of the
Association in discretionary bonuses that the Board may award from time to
time to the Association's senior management employees. No other compensation
provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans.
(a) The Employee shall be eligible to participate in any of the
following plans or programs that the Association may now or in the future
maintain: group hospitalization, disability, health, dental, sick leave,
life insurance, travel and/or accident insurance, auto allowance/auto lease,
retirement, pension, and/or other present or future qualified or nonqualified
plans provided by the Association, generally which benefits, taken as a
whole, must be at least as favorable as those in effect on the Effective Date.
(b) The Employee shall also be eligible to participate in any
fringe benefits which are or may become available to the Association's senior
management employees, including
<PAGE>
for example: any stock option or incentive compensation plans, and any other
benefits which are commensurate with the responsibilities and functions to be
performed by the Employee under this Agreement. The Employee shall be
reimbursed for all reasonable out-of-pocket business expenses which she shall
incur in connection with her services under this Agreement upon
substantiation of such expenses in accordance with the policies of the
Association.
6. Term. The Association hereby employs the Employee, and the
Employee hereby accepts such employment under this Agreement, for the period
commencing on the Effective Date and ending eighteen (18) months thereafter
(or such earlier date as is determined in accordance with Section 10 or 12
hereof). Additionally, on each annual anniversary date from the Effective
Date, the Employee's term of employment shall be extended for an additional
one-year period beyond the then effective expiration date, provided the Board
determines in a duly adopted resolution that the performance of the Employee
has met the Board's requirements and standards, and that this Agreement shall
be extended. Only those members of the Board of Directors who have no
personal interest in this Employment Agreement shall discuss and vote on the
approval and subsequent review of this Agreement.
7. Loyalty; Noncompetition.
(a) During the period of her employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all her full business time, attention, skill, and
efforts to the faithful performance of her duties hereunder; provided,
however, from time to time, Employee may serve on the boards of directors of,
and hold any other offices or positions in, companies or organizations, which
will not present any conflict of interest with the Association or any of its
subsidiaries or affiliates, or unfavorably affect the performance of
Employee's duties pursuant to this Agreement, or will not violate any
applicable statute or regulation. "Full business time" is hereby defined as
that amount of time usually devoted to like companies by similarly situated
executive officers. During the term of her employment under this Agreement,
the Employee shall not engage in any business or activity contrary to the
business affairs or interests of the Association.
(b) Nothing contained in this Section shall be deemed to prevent
or limit the Employee's right to invest in the capital stock or other
securities of any business dissimilar from that of the Association, or,
solely as a passive or minority investor, in any business.
8. Standards. The Employee shall perform her duties under this
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Association will provide Employee with the
working facilities and staff customary for similar executives and necessary
for her to perform her duties.
9. Vacation and Sick Leave. At such reasonable times as the Board
shall in its discretion permit, the Employee shall be entitled, without loss
of pay, to absent himself voluntarily from the performance of her employment
under this Agreement, all such voluntary absences to count as vacation time,
provided that:
<PAGE>
(a) The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for
senior management employees of the Association.
(b) The Employee shall not receive any additional compensation
from the Association on account of her failure to take a vacation or sick
leave, and the Employee shall not accumulate unused vacation or sick leave
from one fiscal year to the next, except in either case to the extent
authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee
shall be entitled without loss of pay, to absent himself voluntarily from the
performance of her employment with the Association for such additional
periods of time and for such valid and legitimate reasons as the Board may in
its discretion determine. Further, the Board may grant to the Employee a
leave or leaves of absence, with or without pay, at such time or times and
upon such terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon her death during the term of this Agreement, in which event
the Employee's estate shall be entitled to receive the compensation due the
Employee through the last day of the calendar month in which her death
occurred.
(b) Disability. (1) The Association may terminate the Employee's
employment after having established the Employee's Disability, in which event
the Employee shall be entitled to the compensation and benefits provided for
under this Agreement for (i) any period during the term of this Agreement and
prior to the establishment of the Employee's Disability during which the
Employee is unable to work due to the physical or mental infirmity, and (ii)
any period of Disability which is prior to the Employee's termination of
employment pursuant to this Section 10(b); provided that any benefits paid
pursuant to the Association's long term disability plan will continue as
provided in such plan without reduction for payments made pursuant to this
Agreement.
(2) During any period that the Employee shall receive
disability benefits and to the extent that the Employee shall be physically
and mentally able to do so, she shall furnish such information, assistance
and documents so as to assist in the continued ongoing business of the
Association and, if able, shall make himself available to the Association to
undertake reasonable assignments consistent with her prior position and her
physical and mental health. The Association shall pay all reasonable
expenses incident to the performance of any assignment given to the Employee
during the disability period.
<PAGE>
(c) Just Cause. The Board may, by written notice to the Employee,
immediately terminate her employment at any time, for Just Cause. The
Employee shall have no right to receive compensation or other benefits for
any period after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may,
by written notice to the Employee, immediately terminate her employment at
any time for a reason other than her Disability or Just Cause, in which event
the Employee shall be entitled to receive the following compensation and
benefits (unless such termination occurs during the Protected Period, in
which event the benefits and compensation provided for in Section 12 shall
apply): the salary provided pursuant to Section 3 hereof, up to the
expiration date of this Agreement, including any renewal term (the
"Expiration Date"), plus said salary for an additional 12-month period. All
amounts payable to the Employee shall be paid, at the option of the Employee,
either (I) in periodic payments through the Expiration Date, or (II) in one
lump sum within ten days of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an
event that constitutes Good Reason (unless such voluntary termination occurs
during the Protected Period, in which event the benefits and compensation
provided for in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. (1) If the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Association's affairs by an order issued under Sections
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
1818(e)(4) and (g)(1)), all obligations of the Association under this
Agreement shall terminate, as of the effective date of the order, but vested
rights of the parties shall not be affected.
(2) If the Association is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of
the date of default; however, this Paragraph shall not affect the vested
rights of the parties.
(3) If a notice served under Section 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits
the Employee from participating in the conduct of the Association's affairs,
the Association's obligations under this Agreement shall be suspended as of
the date of such service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Association may in its discretion
(i) pay the Employee all or part of the compensation withheld while its
contract obligations were suspended, and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.
(4) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with both 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder, and Regulatory Bulletin 27A, but only to the extent required
thereunder on the date any payment is required pursuant to this Agreement.
<PAGE>
(g) Voluntary Termination by Employee. Subject to Section 12
hereof, the Employee may voluntarily terminate employment with the
Association during the term of this Agreement, upon at least 90 days' prior
written notice to the Board of Directors, in which case the Employee shall
receive only her compensation, vested rights and employee benefits up to the
date of her termination (unless such termination occurs pursuant to Section
10(d) hereof or within the Protected Period, in Section 12(a) hereof, in
which event the benefits and compensation provided for in Sections 10(d) or
12, as applicable, shall apply).
11. No Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Employee in any
subsequent employment.
12. Change in Control.
(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in subsection (b) hereof in the event that
either (i) the Employee voluntarily terminates employment for any reason
within the 30-day period beginning on the date of a Change in Control, (ii)
the Employee voluntarily terminates employment within 90 days of an event
that both occurs during the Protected Period and constitutes Good Reason, or
(iii) the Association or the Company or their successor(s) in interest
terminate the Employee's employment without her written consent and for any
reason other than Just Cause during the Protected Period.
(b) Amount of Severance Benefit. If the Employee becomes entitled
to collect severance benefits pursuant to Section 12(a) hereof, the
Association shall:
(i) pay the Employee a severance benefit equal to 1.5 times her
base salary then in effect, but in no event greater than the
difference between the Code Section 280G Maximum and the sum of any
other "parachute payments" as defined under Code Section 280G(b)(2)
that the Employee receives on account of the Change in Control, and
(ii) pay for long-term disability and provide such medical
benefits as are available to the Employee under the provisions of
COBRA, for eighteen (18) months (or such longer period, up to 24
months, if COBRA is amended).
The amount payable under Section 12(b)(i) shall be paid in one lump sum
within ten days of the later of the date of the Change in Control and the
Employee's last day of employment with the Association or the Company. In
the event that the Employee, the Association, and the Company jointly agree
that the Employee has collected an amount exceeding the Code Section 280G
Maximum, the parties may agree in writing that such excess shall be treated
as a loan ab initio, which the Employee shall repay to the Association, on
terms and conditions mutually agreeable to the parties, together with
interest at the applicable federal rate provided for in Section 7872(f)(2)(B)
of the Code.
<PAGE>
(c) Funding of Grantor Trust upon Change in Control. Not later
than ten business days after a Change in Control, the Association shall (i)
deposit in a Trust an amount equal to the Code Section 280G Maximum, unless
the Employee has previously provided a written release of any claims under
this Agreement, and (ii) provide the trustee of the Trust with a written
direction to hold said amount and any investment return thereon in a
segregated account for the benefit of the Employee, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. Upon the later of the Trust's final payment of all amounts
due under the following paragraph or the date twelve months after the Change
in Control, the trustee of the Trust shall pay to the Association the entire
balance remaining in the segregated account maintained for the benefit of the
Employee. The Employee shall thereafter have no further interest in the
Trust.
During the 15-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice
requesting that the trustee pay to the Employee an amount designated in the
notice as being payable pursuant to this Agreement. Within three business
days after receiving said notice, the trustee of the Trust shall send a copy
of the notice to the Association via overnight and registered mail return
receipt requested. On the tenth (10th) business day after mailing said
notice to the Association, the trustee of the Trust shall pay the Employee
the amount designated therein in immediately available funds, unless prior
thereto the Association provides the trustee with a written notice directing
the trustee to withhold such payment. In the latter event, the trustee shall
submit the dispute to non-appealable binding arbitration for a determination
of the amount payable to the Employee pursuant to this Agreement, and the
costs of such arbitration shall be paid by the Association. The trustee
shall choose the arbitrator to settle the dispute, and such arbitrator shall
be bound by the rules of the American Arbitration Association in making his
determination. The parties and the trustee shall be bound by the results of
the arbitration and, within three days of the determination by the
arbitrator, the trustee shall pay from the Trust the amounts required to be
paid to the Employee and/or the Association, and in no event shall the
trustee be liable to either party for making the payments as determined by
the arbitrator.
13. Indemnification. The Association and the Company agree that their
respective Bylaws shall continue to provide for indemnification of directors,
officers, employees and agents of the Association and the Company, including
the Employee during the full term of this Agreement, and to at all times
provide adequate insurance for such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the
event that any dispute arises between the Employee and the Association as to
the terms or interpretation of this Agreement, whether instituted by formal
legal proceedings or otherwise, including any action that the Employee takes
to defend against any action taken by the Association or the Company, the
Employee shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, provided
that the Employee obtains either a written settlement or a final judgement by
a court of competent jurisdiction substantially in her favor. Such
reimbursement shall be paid within ten days of Employee's furnishing to the
Association written evidence, which may be in the form, among other things,
of a cancelled check or receipt, of any costs or expenses incurred by the
Employee.
<PAGE>
15. Federal Income Tax Withholding. The Association may withhold all
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation
or ruling.
16. Successors and Assigns.
(a) Association. This Agreement shall not be assignable by the
Association, provided that this Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of the Association which
shall acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Employee. Since the Association is contracting for the unique
and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating her rights or duties hereunder without first
obtaining the written consent of the Association; provided, however, that
nothing in this paragraph shall preclude (i) the Employee from designating a
beneficiary to receive any benefit payable hereunder upon her death, or (ii)
the executors, administrators, or other legal representatives of the Employee
or her estate from assigning any rights hereunder to the person or persons
entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation
or to exclusion, attachment, levy or similar process or assignment by
operation of law, and any attempt, voluntary or involuntary, to effect any
such action shall be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto and shall
supersede any prior agreement between the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: NEWPORT FEDERAL SAVINGS & LOAN
ASSOCIATION
/s/ W. B. Henry By: /s/ J. William Myers
- ---------------------------- -------------------------------------
Secretary Its Chairman of the Board
WITNESS:
/s/ Richard Harwood /s/ Peggy Holston
- ---------------------------- -------------------------------------
Peggy Holston
<PAGE>
EMPLOYMENT AGREEMENT
BETWEEN
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION AND NANCY BRYANT
AND PEGGY HOLSTON
1997 AMENDMENT
___________________
WHEREAS, on September 9, 1997, Newport Federal Savings & Loan
Association (the "Association") entered into an Employment Agreement (the
"Agreement") with Nancy Bryant (the "Employee"); and Peggy Holston.
WHEREAS, the Board of Directors of the Association and the Employee have
determined that it is in the best interests of the Association and the
Employee to amend the Agreement.
NOW, THEREFORE, the Agreement shall be amended as follows, with such
amendment to become effective immediately upon execution hereof:
1. The first sentence of Section 10(d) of the Agreement shall be
amended in its entirety to provide as follows:
The Board may, by written notice to the Employee, immediately
terminate her employment at any time for a reason other than her
Disability or Just Cause, in which event the Employee shall be
entitled to receive the following compensation and benefits (unless
such termination occurs during the Protected Period, in which event
the benefits and compensation provided for in Section 12 shall
apply): (i) the salary provided pursuant to Section 3 hereof, up to
the expiration date of this Agreement, including any renewal term
(the "Expiration Date"), plus said salary for an additional 12-month
period, and (ii) at the Employee's election either (A) cash in an
amount equal to the cost to the Employee of obtaining all health,
life, disability and other benefits which the Employee would have
been eligible to participate in through the Expiration Date based
upon the benefit levels substantially equal to those that the
Association provided for the Employee at the date of termination of
employment, or (B) continued participation under such Association
benefit plans through the Expiration Date, but only to the extent
the Employee continues to qualify for participation therein.
2. Section 10 of the Agreement shall be further amended by adding the
following subsection (h) immediately at the end thereof:
(h) Post-termination Health Insurance. If the Employee's
employment terminates with the Association or the Company for any
reason other
<PAGE>
1997 Amendment
Page 2
than Just Cause, the Employee shall be entitled to purchase from the
Association, at the Employee's own expense which shall not exceed
applicable COBRA rates, family medical insurance under any group
health plan that the Association or the Company maintains for its
employees. This right shall be (i) in addition to, and not in lieu
of, any other rights that the Employee has under this Agreement, and
(ii) shall continue until the Employee first becomes eligible for
participation in Medicare.
3. Nothing contained herein shall be held to alter, vary or affect any
of the terms, provisions, or conditions of the Agreement other than as stated
above.
WHEREFORE, the undersigned hereby approve this 1997 Amendment to the
Agreement.
Date of Execution: September 9, 1997
[EXECUTIVE]
/s/ Peggy Holston
- ------------------------------------
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
By /s/ Richard Harwood Attest: /s/ Nancy Bryant
------------------------------- ------------------------
Its President
---------------------------
CORPORATE SEAL
<PAGE>
Exhibit 10.3(b)
UNITED TENNESSEE BANKSHARES, INC.
-------------------------
Guarantee Agreement with
Richard Harwood
-------------------------
THIS AGREEMENT is entered into this day of , 1997 (the
"Effective Date"), by and between United Tennessee Bankshares, Inc. (the
"Company") and Richard Harwood (the "Employee").
WHEREAS, the Employee has heretofore been employed by Newport Federal
Savings & Loan Association (the "Association") as its President, is experienced
in all phases of the business of the Association, and has become the
of the Company; and
WHEREAS, the Board of Directors (the "Board") of the Company believes it is
in the best interests of the Company to enter into this Agreement with the
Employee in order to encourage continuity of management of the Association and
the Company, and to reinforce the continued attention and dedication of the
Employee to his assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship between the Company and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Consideration from Company: Joint and Several Liability. In lieu of
paying the Employee a base salary during the term of this Agreement, the Company
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Association for the payment of all amounts due under
the employment agreement (the "Association Agreement") of even date herewith
between the Association and the Employee, provided that Section 10(f) of the
Association Agreement shall be inapplicable to this Agreement. Nevertheless,
the Board may in its discretion at any time during the term of this Agreement
agree to pay the Employee a base salary for the remaining term of this
Agreement. If the Board agrees to pay such salary, the Board shall thereafter
review, not less often than annually, the rate of the Employee's salary, and in
its sole discretion may decide to increase his salary.
2. Discretionary Bonuses; Participation in Retirement, Medical and Other
Plans. The Employee shall participate in an equitable manner with all other
senior management employees of the Company in discretionary bonuses that the
Board may award from time to time to the Company's senior management employees,
as well as in (i) any of the following plans or programs that the Company may
now or in the future maintain: group hospitalization, disability, health,
dental, sick leave, life insurance, travel and/or accident insurance, auto
allowance/auto
<PAGE>
lease, retirement, pension, and/or other present or future qualified plans
provided by the Company, generally which benefits, taken as a whole, must be
at least as favorable as those in effect on the Effective Date; and (ii) any
fringe benefits which are or may become available to the Company's senior
management employees, including for example: any stock option or incentive
compensation plans, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement.
3. Indemnification. The Company agrees that its Bylaws shall continue to
provide for indemnification of directors, officers, employees and agents of the
Company, including the Employee, during the full term of this Agreement, and to
at all times provide adequate insurance for such purposes.
4. Successors and Assigns.
(a) Company. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.
(b) Employee. Since the Company is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his rights or duties hereunder without first obtaining the written
consent of the Company; provided, however, that nothing in this paragraph shall
preclude (i) the Employee from designating a beneficiary to receive any benefit
payable hereunder upon his death, or (ii) the executors, administrators, or
other legal representatives of the Employee or his estate from assigning any
rights hereunder to the person or persons entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
5. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
6. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
<PAGE>
7. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
8. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: UNITED TENNESSEE BANKSHARES, INC.
By:
- ------------------------ -------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ------------------------ ----------------------------------
Richard Harwood
-3-
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
--------------------------
Guarantee Agreement with
Nancy Bryant
--------------------------
THIS AGREEMENT is entered into this day of , 1997 (the
"Effective Date"), by and between United Tennessee Bankshares, Inc. (the
"Company") and Nancy Bryant (the "Employee").
WHEREAS, the Employee has heretofore been employed by Newport Federal
Savings & Loan Association (the "Association") as its Vice President and
Treasurer, is experienced in all phases of the business of the Association, and
has become the of the Company; and
WHEREAS, the Board of Directors (the "Board") of the Company believes it is
in the best interests of the Company to enter into this Agreement with the
Employee in order to encourage continuity of management of the Association and
the Company, and to reinforce the continued attention and dedication of the
Employee to her assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship between the Company and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Consideration from Company: Joint and Several Liability. In lieu of
paying the Employee a base salary during the term of this Agreement, the Company
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Association for the payment of all amounts due under
the employment agreement (the "Association Agreement") of even date herewith
between the Association and the Employee, provided that Section 10(f) of the
Association Agreement shall be inapplicable to this Agreement. Nevertheless,
the Board may in its discretion at any time during the term of this Agreement
agree to pay the Employee a base salary for the remaining term of this
Agreement. If the Board agrees to pay such salary, the Board shall thereafter
review, not less often than annually, the rate of the Employee's salary, and in
its sole discretion may decide to increase her salary.
2. Discretionary Bonuses; Participation in Retirement, Medical and Other
Plans. The Employee shall participate in an equitable manner with all other
senior management employees of the Company in discretionary bonuses that the
Board may award from time to time to the Company's senior management employees,
as well as in (i) any of the following plans or programs that the Company may
now or in the future maintain: group hospitalization, disability,
<PAGE>
health, dental, sick leave, life insurance, travel and/or accident insurance,
auto allowance/auto lease, retirement, pension, and/or other present or
future qualified plans provided by the Company, generally which benefits,
taken as a whole, must be at least as favorable as those in effect on the
Effective Date; and (ii) any fringe benefits which are or may become
available to the Company's senior management employees, including for
example: any stock option or incentive compensation plans, and any other
benefits which are commensurate with the responsibilities and functions to be
performed by the Employee under this Agreement.
3. Indemnification. The Company agrees that its Bylaws shall continue to
provide for indemnification of directors, officers, employees and agents of the
Company, including the Employee, during the full term of this Agreement, and to
at all times provide adequate insurance for such purposes.
4. Successors and Assigns.
(a) Company. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.
(b) Employee. Since the Company is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating her rights or duties hereunder without first obtaining the written
consent of the Company; provided, however, that nothing in this paragraph shall
preclude (i) the Employee from designating a beneficiary to receive any benefit
payable hereunder upon her death, or (ii) the executors, administrators, or
other legal representatives of the Employee or her estate from assigning any
rights hereunder to the person or persons entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
5. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
6. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
-2-
<PAGE>
7. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
8. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: UNITED TENNESSEE BANKSHARES, INC.
By:
- ------------------------ -------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ------------------------ ----------------------------------
Nancy Bryant
-3-
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
--------------------------
Guarantee Agreement with
Peggy Holston
--------------------------
THIS AGREEMENT is entered into this day of , 1997 (the
"Effective Date"), by and between United Tennessee Bankshares, Inc. (the
"Company") and Peggy Holston (the "Employee").
WHEREAS, the Employee has heretofore been employed by Newport Federal
Savings & Loan Association (the "Association") as its Branch Manager and
Assistant Secretary, is experienced in all phases of the business of the
Association, and has become the of the Company; and
WHEREAS, the Board of Directors (the "Board") of the Company believes it is
in the best interests of the Company to enter into this Agreement with the
Employee in order to encourage continuity of management of the Association and
the Company, and to reinforce the continued attention and dedication of the
Employee to her assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship between the Company and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Consideration from Company: Joint and Several Liability. In lieu of
paying the Employee a base salary during the term of this Agreement, the Company
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Association for the payment of all amounts due under
the employment agreement (the "Association Agreement") of even date herewith
between the Association and the Employee, provided that Section 10(f) of the
Association Agreement shall be inapplicable to this Agreement. Nevertheless,
the Board may in its discretion at any time during the term of this Agreement
agree to pay the Employee a base salary for the remaining term of this
Agreement. If the Board agrees to pay such salary, the Board shall thereafter
review, not less often than annually, the rate of the Employee's salary, and in
its sole discretion may decide to increase her salary.
2. Discretionary Bonuses; Participation in Retirement, Medical and Other
Plans. The Employee shall participate in an equitable manner with all other
senior management employees of the Company in discretionary bonuses that the
Board may award from time to time to the Company's senior management employees,
as well as in (i) any of the following plans or programs that the Company may
now or in the future maintain: group hospitalization, disability,
<PAGE>
health, dental, sick leave, life insurance, travel and/or accident insurance,
auto allowance/auto lease, retirement, pension, and/or other present or
future qualified plans provided by the Company, generally which benefits,
taken as a whole, must be at least as favorable as those in effect on the
Effective Date; and (ii) any fringe benefits which are or may become
available to the Company's senior management employees, including for
example: any stock option or incentive compensation plans, and any other
benefits which are commensurate with the responsibilities and functions to be
performed by the Employee under this Agreement.
3. Indemnification. The Company agrees that its Bylaws shall continue to
provide for indemnification of directors, officers, employees and agents of the
Company, including the Employee, during the full term of this Agreement, and to
at all times provide adequate insurance for such purposes.
4. Successors and Assigns.
(a) Company. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.
(b) Employee. Since the Company is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating her rights or duties hereunder without first obtaining the written
consent of the Company; provided, however, that nothing in this paragraph shall
preclude (i) the Employee from designating a beneficiary to receive any benefit
payable hereunder upon her death, or (ii) the executors, administrators, or
other legal representatives of the Employee or her estate from assigning any
rights hereunder to the person or persons entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
5. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
6. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
-2-
<PAGE>
7. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
8. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: UNITED TENNESSEE BANKSHARES, INC.
By:
- ------------------------ ------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ------------------------ ---------------------------------
Peggy Holston
-3-
<PAGE>
Exhibit 10.4
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
LONG-TERM INCENTIVE PLAN
The Board of Directors of Newport Federal Savings and Loan Association has
adopted this Long-term Incentive Plan, effective June 19, 1997, in order to
provide competitive compensation for its Directors, to attract, retain, and
motivate its Directors, and to encourage the long-term financial success of the
Association through a performance-based benefit formula.
ARTICLE I
Definitions
-----------
The following words and phrases, when used in the Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise.
"Account" shall mean a bookkeeping account maintained by the Association in
the name of the Participant.
"Affiliate" shall mean any "parent corporation" or "subsidiary corporation"
of the Association, as the terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Association" shall mean Newport Federal Savings and Loan Association, and
any successor to its interest.
"Beneficiary" shall mean the person or persons whom a Participant may
designate as the beneficiary of the Participant's Benefits. A Participant's
election of a Beneficiary shall be made on the Election Form, shall be revocable
by the Participant during his lifetime, and shall be effective only upon its
delivery to an executive officer of the Association and acceptance by the Board
(which acceptance shall be presumed unless, within ten business days of delivery
of the Participant's election, the Board provides the Participant with a written
notice detailing the reasons for its rejection).
"Benefits" shall mean, collectively, the benefits payable under Articles II
and III of the Plan.
"Board" shall mean the Board of Directors of the Association.
"Change in Control" shall mean any of the following events:
(a) If the Association is in the "mutual" form of organization, a "Change
in Control" shall be deemed to have occurred if: (i) as a result of, or in
connection with, any exchange offer, merger or other business combination, sale
of assets or contested election, any combination of the foregoing transactions,
or any similar transaction, the persons who were Directors of the
<PAGE>
Association before such transaction cease to constitute a majority of the Board
of Directors of the Association or any successor to the Association, (ii) the
Association transfers substantially all of its assets to another corporation
which is not an Affiliate of the Association, (iii) the Association sells
substantially all of the assets of an Affiliate which accounted for 50% or more
of the controlled group's assets immediately prior to such sale, (iv) any
"person" including a "group", exclusive of the Board of Directors of the
Association or any committee thereof, is or becomes the "beneficial owner",
directly or indirectly, of proxies of the Association representing twenty-five
percent (25%) or more of the combined voting power of the Association's members,
or (v) the Association is merged or consolidated with another corporation and,
as a result of the merger or consolidation, less than seventy percent (70%) of
the outstanding proxies relating to the surviving or resulting corporation are
given, in the aggregate, by the former members of the Association.
(b) If the Association is in the "stock" form of organization, a "Change
in Control" shall mean any one of the following events: (i) the acquisition of
ownership, holding or power to vote more than 25% of the voting stock of the
Association, (ii) the acquisition of the ability to control the election of a
majority of the Association's directors, (iii) the acquisition of a controlling
influence over the management or policies of the Association by any person or by
persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the beginning of such
period constitute the Board of Directors of the Association (the "Existing
Board") cease for any reason to constitute at least two-thirds thereof, provided
that any individual whose election or nomination for election as a member of the
Existing Board was approved by a vote of at least two-thirds of the Continuing
Directors then in office shall be considered a Continuing Director.
Notwithstanding the foregoing, the Association's mere formation of a holding
company shall not of itself constitute a Change in Control for purposes of the
Agreement. For purposes of this paragraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur solely by reason of a transaction in which the Association converts to the
stock form of organization, or creates an independent holding company in
connection therewith. The decision of the Board as to whether a Change in
Control has occurred shall be conclusive and binding.
"Director" shall mean a member of the Board.
"Effective Date" shall mean the date on which the Plan first becomes
effective, as referenced in the opening paragraph of this document.
"Election Form" shall mean the form attached hereto as Exhibit "A".
"Employee" shall mean any person who is employed by the Association.
2
<PAGE>
"Participant" shall mean an individual who serves on the Board at some time
on or after the Effective Date.
"Plan" shall mean this Newport Federal Savings and Loan Association
Long-term Incentive Plan.
"Safe Performance Factor" shall be determined by the Board, in its
discretion, for each calendar year during the term of this Plan; provided that
said Safe Performance Factor shall in no event be less than 0 or more than 1.2.
Attached as Exhibit "B" is the formula that the Board expects to follow (and
shall be entitled to rely upon) in making this determination.
"Trust Agreement" shall mean that agreement entered into pursuant to the
terms hereof between the Association and the Trustee, and "Trust" means the
trust created thereunder.
"Trustee" shall mean that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan Assets for the
purposes set forth herein.
ARTICLE II
Credits to Accounts
-------------------
Initial and Annual Credits. Each Participant who is a Director on the
Effective Date shall have his Account credited with an amount equal to the
product of $1,291 and his full years of service as a Director, up to 20 years,
prior to the Effective Date. On each December 31 following 1997, each
Participant who is a Director on such date and has 20 or fewer years of service
shall have his Account credited with an amount equal to the product of $1,291
and the Safe Performance Factor.
Investment Return. Until distributed in accordance with the terms of the
Plan, each Participant's Account shall be credited with a rate of return, on any
amounts previously credited, equal to the highest rate of interest paid by the
Association on certificates of deposit having a term of one year. If the
Association converts to stock form, each Participant may prospectively elect
between the return associated with such certificates of deposit and the
dividend-adjusted rate of return on the Association's common stock (or that of
its holding company, if one exists). Beginning with the fiscal year following a
Participant's termination of service, the Participant's Account shall receive an
investment return measured by the Participant's election between up to two
different mutual funds (or other investments) selected by the Board. Any
credits required hereunder shall occur on each December 31 following the
Effective Date.
Vesting. Amount credited to Participants' Accounts on the Effective Date
and thereafter shall be fully vested at all times.
3
<PAGE>
ARTICLE III
Distribution from Accounts; Election Forms
------------------------------------------
General Rule. Account balances shall be paid, in cash, in five equal
annual installments beginning during the first quarter of the calendar year
which next follows the calendar year in which the Participant ceases to be a
Director for any reason, with subsequent payments being made by the last day of
the first quarter of each subsequent calendar year, until the Participant has
collected the entire value of his Account. Notwithstanding the foregoing: (i)
a Participant may elect on his Election Form to have his Account paid in a
single lump sum distribution, or in annual payments over a period of ten years
or less, and (ii) to the extent required under federal banking law, the amounts
otherwise payable to a Participant shall be reduced to the extent that on the
date of a Participant's termination of employment, either (A) the present value
of his Benefits exceeds the limitations that are set forth in Regulatory
Bulletin 27a of the Office of Thrift Supervision, as in effect on the Effective
Date, or (B) such reduction is necessary to avoid subjecting the Association to
liability under Section 280G of the Internal Revenue Code of 1986, as amended.
Death Benefits. If a Participant dies before receiving all Benefits
payable pursuant to the preceding paragraph, then the remaining balance of the
Participant's Account shall be distributed in a lump sum to the Participant's
designated Beneficiary (or estate, in the absence of a validly named or living
Beneficiary) not later than the first day of the second month following the date
of the Participant's death; provided that a Participant may specify on the
Election Form a distribution period that effectuates the annual installment
payments selected by the Participant (with payments made as though the
Participant survived to collect all benefits, and retired on the date of his
death if payments had not previously begun).
Elections. In order to be effective, a Participant's initial Election Form
must be submitted more than one year before the date on which the Participant
first becomes entitled to collect benefits from the Plan. Elections made
pursuant to this Article III shall become irrevocable one year prior to the
Participant's termination of service as a Director or Employee, provided that
beneficiary designations made pursuant to executed Election Forms shall be
revocable during the Participant's lifetime and a Participant may, by submitting
an effective superseding Election Form at any time and from time to time,
prospectively change the designated Beneficiary and the manner of payment to a
Beneficiary.
ARTICLE IV
Source of Benefits
------------------
General Rule. Benefits shall constitute an unfunded, unsecured promise by
the Association to provide such payments in the future, as and to the extent
such Benefits become payable. Benefits shall be paid from the general assets of
the Association, and no person shall, by virtue of this Plan, have any interest
in such assets (other than as an unsecured creditor of the Association). For
any fiscal year during which a Trust is maintained, (i) the Trustee shall inform
the Board annually prior to the commencement of each fiscal year as to the
manner in which such
4
<PAGE>
Trust assets shall be invested, and (ii) the Board shall, as soon as practicable
after the end of each fiscal year of the Association, provide the Trustee with a
schedule specifying the amounts payable to each Participant, and the time for
making such payments.
Change in Control. In the event of a Change in Control, the Association
shall contribute to the Trust an amount sufficient to provide the Trust with
assets having an overall value equivalent to the value of the aggregate Account
balances under the Plan.
ARTICLE V
Assignment
----------
Except as otherwise provided by this Plan, it is agreed that neither the
Participant nor his Beneficiary nor any other person or persons shall have any
right to commute, sell, assign, transfer, encumber and pledge or otherwise
convey the right to receive any Benefits hereunder, which Benefits and the
rights thereto are expressly declared to be nontransferable.
ARTICLE VI
No Retention of Services
------------------------
The Benefits payable under this Plan shall be independent of, and in
addition to, any other compensation payable by the Association to a Participant,
whether in the form of fees, bonus, retirement income under employee benefit
plans sponsored or maintained by the Association or otherwise. This Plan shall
not be deemed to constitute a contract of employment between the Association and
any Participant.
ARTICLE VII
Rights of Directors;
--------------------
Termination or Suspension under Federal Law
-------------------------------------------
The rights of the Participants under this Plan and of their Beneficiaries
(if any) shall be solely those of unsecured creditors of the Association. If
the Participant is removed and/or permanently prohibited from participating in
the conduct of the Association's affairs by an order issued under Sections
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
1818(e)(4) or (g)(1)), all obligations of the Association under this Plan shall
terminate, as of the effective date of the order, but vested rights of the
parties shall not be affected. If the Association is in default (as defined in
Section 3(x)(1) of FDIA), all obligations under this Plan shall terminate as of
the date of default; however, this Paragraph shall not affect the vested rights
of the parties.
All obligations under this Plan shall terminate, except to the extent that
continuation of this Plan is necessary for the continued operation of the
Association: (i) by the Director of the Office of Thrift Supervision ("Director
of OTS"), or his designee, at the time that the Federal Deposit Insurance
Corporation ("FDIC") or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Association under the
authority contained in Section 13(c)
5
<PAGE>
of FDIA; or (ii) by the Director of the OTS, or his designee, at the time that
the Director of the OTS, or his designee approves a supervisory merger to
resolve problems related to operation of the Association or when the Association
is determined by the Director of the OTS to be in an unsafe or unsound
condition. Such action shall not affect any vested rights of the parties.
If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Participant from
participating in the conduct of the Association's affairs, the Association's
obligations under this Plan shall be suspended as of the date of such service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Association may in its discretion (i) pay the Participant all or
part of the compensation withheld while its contract obligations were suspended,
and (ii) reinstate (in whole or in part) any of its obligations which were
suspended.
ARTICLE VIII
Reorganization
--------------
The Association agrees that it will not merge or consolidate with any other
corporation or organization, or permit its business activities to be taken over
by any other organization, unless and until the succeeding or continuing
corporation or other organization shall expressly assume the rights and
obligations of the Association herein set forth. The Association further agrees
that it will not cease its business activities or terminate its existence, other
than as heretofore set forth in this paragraph, without having made adequate
provision for the fulfillment of its obligation hereunder.
ARTICLE IX
Amendment and Termination
-------------------------
The Board may amend or terminate the Plan at any time, provided that no
such amendment or termination shall, without the written consent of an affected
Participant, alter or impair any vested rights of the Participant under the
Plan.
ARTICLE X
State Law
---------
This Plan shall be construed and governed in all respects under and by the
laws of the State of Tennessee, except to the extent preempted by federal law.
If any provision of this Plan shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.
6
<PAGE>
ARTICLE XI
Headings; Gender
Headings and subheadings in this Plan are inserted for convenience and
reference only and constitute no part of this Plan. This Plan shall be
construed, where required, so that the masculine gender inludes the feminine.
ARTICLE XII
Interpretation of the Plan
The Board shall have sole and absolute discretion to administer,
construe, and interpret the Plan, and the decisions of the Board shall be
conslusive and binding all affected parties (unless such decisions are
arbitrary adn capricious).
ARTICLE XIII
Duration of Plan
In the event any dispute shall arise between a Participant and the
Association as to the terms or interpretation of this Plan, whether
instituted by formal legal proceedings or otherwise, including any action
taken by a Participant to enforce the terms of this Plan or in defending
against any action taken by the Association, the Association shall reimbuse
the Participant for all costs and expenses, including reasonable attorneys'
fees, arising from such dispute, proceedings or actions; provided that the
Participant shall return such amounts to the Association if he fails to
obtain a final judgment by a court of competent jurisdiction or obtain a
settlement of such dispute, proceedings, or actions substantially in his
favor. Such reimbursements to a Participant shall be paid within 10 days of
the Participant furnishing to the Association written evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs
or expenses incurred by the Participant. Any such request for reimbursement
by a Participant shall be made no more frequently than at 30 day intervals.
ARTICLE XIV
Duration of Plan
Unless terminated earlier in accordance with Article IX, this Plan shall
remain in effect during the term of service of the Participants and until all
Benefits payable hereunder have been made.
7
<PAGE>
Exhibit A
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
LONG-TERM INCENTIVE PLAN
------------------------
Election Form
-------------
AGREEMENT, made this ____ day of ________, 19__, by and between
____________ (the "Participant"), and Newport Federal Savings and Loan
Association (the "Association").
WHEREAS, the Association has established the Newport Federal Savings and
Loan Association Long-term Incentive Plan (the "Plan"), and the Participant is
eligible to participate in the Plan.
NOW THEREFORE, it is mutually agreed as follows:
1. Form of Payment. The Participant, by the execution hereof, agrees to
participate in the Plan upon the terms and conditions set forth therein, and, in
accordance therewith, elects to have his Account distributed in:
/ / one lump sum payment.
/ / substantially equal annual payments over a period of _____ years
(no more than 10).
2. Designation of Beneficiary. In the event of the Participant's death
before he or she has collected all of the benefits payable under the Plan, the
Participant hereby directs that any survivorship benefits payable under Article
III of the Plan be distributed to the beneficiary or beneficiaries designated
under subparagraphs a and b of this paragraph 2, in the manner elected pursuant
to paragraph 3 hereof:
a. Primary Beneficiary. The Participant hereby designates the person(s)
named below to be his or her primary beneficiary and to receive the balance of
any unpaid benefits under the Plan.
Name of
Primary Beneficiary Mailing Address Percentage of
Death Benefit
%
%
b. Contingent Beneficiary. In the event that the primary beneficiary or
beneficiaries named above are not living at the time of the Participant's death,
the Participant hereby designates the following person(s) to be his or her
contingent beneficiary for purposes of the Plan:
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<PAGE>
Name of Mailing Address Percentage of
Contingent Beneficiary Death Benefit
%
%
3. The Participant elects to have his Account distributed to his
beneficiary ---
/ / in one lump sum payment.
/ / in accordance with the payment schedule selected in paragraph 1
hereof (with payments made as though the Participant survived to
collect all benefits, and as though the Participant terminated
service on the date of his death, if payments had not already
begun).
4. Effect of Election. The elections made hereunder shall become
irrevocable one year prior to the date on which the Participant's service with
the Association terminates for any reason. Notwithstanding the foregoing, the
Participant may, by submitting an effective superseding Election Form at any
time and from time to time, prospectively change the Beneficiary designation and
the manner of payment to a Beneficiary. Such elections shall, however, become
irrevocable upon the Participant's death.
5. Association's Commitment. The Association agrees to make payment of
all amounts due the Participant in accordance with the terms of the Plan and the
elections made by the Participant herein.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
Witnessed by: PARTICIPANT
- ------------------------------ ------------------------------
Participant
Print Name:
-------------------
Witnessed by: ASSOCIATION
- ------------------------------ NEWPORT FEDERAL SAVINGS
AND LOAN ASSOCIATION
Print Name:
-------------------
By
----------------------------
Its
-------------------------
10
<PAGE>
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
DEFERRED COMPENSATION PLAN
Newport Federal Savings & Loan Association (the "Association") hereby
establishes a Deferred Compensation Plan (the "Plan") for a determined class
(the "Class") consisting of its directors, its President, and certain other
officers and key employees, as herein provided.
The Association expects (but shall be under no legal obligation) on a
quarterly basis to contribute to the trust associated with the Plan (the
"Trust") amounts equivalent to the aggregate amount deferred pursuant to the
deferred compensation agreement (the "Agreement") or Agreements made by each
participant in the Plan ("Participant"), which amounts would then be used to
assist the Association in making eventual payment to Participants under the
terms and conditions of the Plan. In the event of a "change in control" (as
defined in the Association's Long-term Incentive Plan), the Association shall
contribute to the Trust an amount sufficient to provide the Trust with assets
having an overall value equivalent to the value of the aggregate account
balances under the Plan.
The Trust and any assets held therein to assist the Association in
meeting its obligations under the Plan and the Agreements will conform to the
provisions of the model trust, as described in Revenue Procedure 92-64. It
is the intention of the parties that the Plan and the arrangements associated
therewith (including the Agreements) be unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974,
as amended.
ARTICLE I - DESIGNATED CLASS; PARTICIPATION
The Class eligible to participate in the Plan shall be limited to members
of the Board of Directors ("Board") of the Association (including the
Chairman), the Association's President, and such other officers or key
employees of the Association as the Board may identify by resolution as being
eligible for participation in the Plan. However, an individual within the
Class shall become a Participant only if the individual first enters into a
properly completed Agreement.
ARTICLE II - DEFERRED AMOUNTS
Deferred amounts shall be credited by the Association at the end of each
fiscal quarter, in accordance with the terms of the Plan, and the Agreements
entered into between the Participants and the Association, as provided for in
Article I hereof. The funds so deferred quarterly shall be credited by the
Association to a bookkeeping account ("Account") in the name of each
Participant, according to the terms of the Participant's Agreement. In
addition to the amounts credited quarterly in the Accounts of Participants,
the Association shall adjust each Account at the end of each fiscal quarter
to reflect any appreciation or depreciation attributable to the investment
election which the Participant makes in the Agreement as to his or her
Account. Notwithstanding the foregoing, beginning with the quarter following
a Participant's termination of service, the Participant's Account will
receive an investment return measured by his or her choice between up to two
different mutual funds (or other investment choices determined by the Board).
ARTICLE III - ANTI-ALIENATION; PARTICIPANTS TO BE UNSECURED
CREDITORS
(a) A Participant's interest in the Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge; and the Association shall not be obligated to make
any payments to persons other than as specifically provided in the Plan.
Such payments shall be made in the regular course of business from the
general funds of the Association as they become due, except that such
payments may be made from the Trust in accordance with its terms.
1
<PAGE>
(b) Neither the Participants, nor their beneficiaries, nor any other
person or persons having or claiming a right to payments hereunder or to any
interest in the Plan shall have a secured claim against the assets of the
Association, and such persons shall rely solely on the unsecured promise of
the Association for the payment of any benefits pursuant to the Plan.
Nothing herein shall be construed to give any person any right, title,
interest, or claim in or to any specific asset, fund, reserve, account, or
property of any kind whatsoever owned by them or in which it may have any
right, title or interest now or in the future; but such persons shall have
the right to enforce his or her claim against the Association in the same
manner as any unsecured creditor.
ARTICLE IV - PAYMENTS TO PARTICIPANTS
(a) A Participant's Account shall be paid in accordance with the
elections made in the particular Agreement or Agreements applicable to the
deferred amounts.
(b) A Participant may elect in his or her Agreement to have the amounts
deferred pursuant to the Agreement, and any earnings credited thereto,
distributed beginning during the first 15 days of January of either --
(i) the calendar year immediately following the year in which the
Participant ceases service with the Association, or
(ii) the later of (I) the calendar year immediately following the
year in which the Participant ceases service with the Association, and
(II) a specific date designated by the Participant, but not later than
the year in which the Participant will attain 70 years of age, or
(iii) the year in which the Participant attains age 70.
(c) A Participant may further elect in his or her Agreement to have the
amounts deferred pursuant to the Agreement, and any earnings credited
thereto, distributed either (i) monthly over a period of up to 10 years or
(ii) in a lump sum. In the absence of a valid election in the Participant's
Agreement, the Participant's Account shall be paid in five substantially
equal annual installments.
(d) If a Participant should die before receiving all deferred
compensation benefits payable hereunder, then such payment(s) shall be made
to the beneficiary designated by the Participant in his or her Agreement. If
the beneficiary has predeceased the Participant or survives the Participant
but then dies before all benefits payable hereunder have been paid, then the
aggregate benefits then unpaid shall be paid over to the beneficiary's
estate, in a lump sum, on the 90th day following the date of the
Participant's death.
ARTICLE V - AMOUNT OF DEFERRED COMPENSATION
A Participant who is a member of the Board of the Association or its
to-be-formed holding company and who is not an employee of the Association or
its to-be-formed holding company may elect to have any portion of his
director's fees deferred under this Plan. Any other Participant may elect to
defer quarterly under the Plan up to 25% of his or her calendar year income
to be earned in the calendar year and otherwise become payable in cash from
the Association or its to-be-formed holding company. The Participant's
Agreement must be submitted either more than one year before the date on
which the Participant's service terminates for any reason or within 30 days
of the Plan's effective date, in order to be effective with respect to the
timing of benefit distributions.
ARTICLE VI - CHANGES TO AGREEMENTS
(a) Distribution elections made pursuant to Article IV shall become
irrevocable one year before the Participant first becomes entitled to receive
a distribution pursuant to Article IV. Nevertheless, beneficiary
2
<PAGE>
designations made pursuant to the Participant's executed Agreement shall be
revocable during the Participant's lifetime and the Participant may, by
submitting an effective superseding Agreement at any time and from time to
time, prospectively change the designated Beneficiary and the manner of
payment to a Beneficiary. In addition, a Participant's election with respect
to the amounts deferred will continue in full force and effect until December
31st of the next calendar year in which it becomes effective, and thereafter
until the Participant revokes said election in writing to the Association or
the Participant terminates his or her service or the Plan is terminated,
whichever occurs first.
(b) If a Participant elects to have his or her deferred amounts invested
in the common stock fund of [Holding Company] (the "Company"), the
effectiveness of any investment election that the Participant makes shall be
deferred until the next following date on which said election would not
result in an "opposite way" transaction for purposes of SEC Rule 16b-3. For
purposes of this paragraph, an "opposite way" transaction shall be defined as
an election that affects a "sale" of the Company's common stock by a
Participant within six months of an election that affects a "purchase" (and
vice versa), whether under this Plan or another plan maintained by the
Company or the Association. This six-month "opposite way" rule will not
apply, however, if the Participant elects to receive a distribution in
connection with his or her death or termination of employment.
ARTICLE VII - MISCELLANEOUS PROVISIONS
(a) The Board shall be responsible for the management and control of the
operation and administration of the Plan, including any and all
interpretations and decisions pertaining to the granting or denial of
benefits, claims, and any and all interpretations and decisions pertaining to
the review or denial of benefit claims. The Plan shall inure to the benefit
of the Participants and shall be binding upon the Association, its successors
and assigns. The Board shall have discretion to amend or terminate the Plan
at any time and from time to time, provided that no change in the Plan which
adversely affects any Participant (or beneficiary collecting benefits) shall
be made without the written consent of the Participant (or beneficiary) so
affected.
(b) All references herein to "the Association" shall be deemed to refer
with equal force and effect to any corporate or other successor of the
Association which shall acquire, directly or indirectly, by merger,
consolidation, purchase, or otherwise, all or substantially all of the assets
of the Association.
(c) In the event any parts of the Plan are found to be void, the
remaining provisions of this Plan shall, nevertheless, be binding with the
same effect as though the void parts were deleted.
(d) The Secretary of the Association shall maintain a copy of the Plan
and any amendments thereto.
ARTICLE VIII - EFFECTIVE DATE
The Plan shall become effective August 19, 1997.
3
<PAGE>
Exhibit "A"
NEWPORT FEDERAL SAVINGS & LOAN ASSOCIATION
DEFERRED COMPENSATION PLAN
_______________________________
Deferred Compensation Agreement
_______________________________
AGREEMENT, made this ____ day of ________, 19__, by and between
____________ (the "Participant"), and Newport Federal Savings & Loan
Association (the "Association").
WHEREAS, the Association has established the Newport Federal Savings &
Loan Association Deferred Compensation Plan (the "Plan"), and the Participant
is eligible to participate in the Plan.
NOW THEREFORE, it is mutually agreed as follows:
1. The Participant, by the execution hereof, agrees to participate in
the Plan upon the terms and conditions set forth therein, and, in accordance
therewith, makes the following elections:
a. The amount of fees/compensation which the Participant hereby
elects to defer is ______ percent (____%) of the amount otherwise earned from
the date of this Agreement forward. This election will continue in force
until revoked by the Participant in a writing sent to the Association, or
until the Participant ceases service with the Association, or until the Plan
is terminated by appropriate corporate action, whichever shall first occur.
b. Investment Direction. Until completely distributed in
accordance with the terms of the Plan, the Participant elects to have his or
her Account invested as follows --
___% in a fund (the "Savings Fund") invested in savings accounts
having a return equal to the highest interest rate which the
Association pays on certificates of deposit having a term of one
year.
___% in a fund (the "Stock Fund") having an investment return equal
to the dividend-adjusted rate of return on [Holding Company's]
common stock, provided that the Savings Fund shall control for
the period prior to the closing date of the [Holding Company's]
initial public offering.
c. Form of Payment. The Participant, by the execution hereof,
agrees to participate in the Plan upon the terms and conditions set forth
therein, and, in accordance therewith, elects to have his or her Account
distributed in:
1
<PAGE>
/ / one lump sum payment.
/ / substantially equal annual payments over a period of _____ years
(no more than 10).
d. The amounts deferred and any related accumulated income on such
deferrals shall be distributed beginning on the first day of the second month
following:
/ / the calendar year immediately following the year in which the
Participant ceases service with the Association.
/ / the later of the calendar year immediately following the year
in which the Participant ceases service with the Association, and
____________, 19__ (a specific date not later than the year in which the
Participant will attain 70 years of age).
/ / the year in which the Participant attains 70 years of age.
e. All distributions made pursuant to the Plan and this Agreement
will be made in cash or by check.
2. Designation of Beneficiary. In the event of the Participant's death
before he or she has collected all of the benefits payable under the Plan,
the Participant hereby directs that any survivorship benefits payable under
Article IV(d) of the Plan be distributed to the beneficiary or beneficiaries
designated under subparagraphs a and b of this paragraph 2 in the manner
elected pursuant to paragraph 1 hereof:
a. Primary Beneficiary. The Participant hereby designates the
person(s) named below to be his or her primary beneficiary and to receive the
balance of any unpaid benefits under the Plan.
Name of Primary Mailing Address Percentage of
Beneficiary Death Benefit
%
%
b. Contingent Beneficiary. In the event that the primary beneficiary
or beneficiaries named above are not living at the time of the Participant's
death, the Participant hereby designates the following person(s) to be his or
her contingent beneficiary for purposes of the Plan:
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<PAGE>
Name of Contingent Mailing Address Percentage of
Beneficiary Death Benefit
%
%
3. Effect of Election. The elections made in paragraphs 1c and 1d
hereof shall become irrevocable one year prior to the Participant's
termination of service. The Participant may, by submitting an effective
superseding Agreement, at any time and from time to time, prospectively
change either the Beneficiary designation and the manner of payment to a
Beneficiary or the election made in paragraph 1b hereof, effective as of the
first of the month that next follows the Association's receipt and acceptance
of the revised Agreement. Such elections shall, however, become irrevocable
upon the Participant's death. Also, please note that to the extent that a new
investment election results in an "opposite-way" transaction for purposes of
SEC Rule 16b-3, the effectiveness of the investment election shall be
deferred until the next following date on which said election will not result
in an "opposite-way" transaction.
4. Association's Commitment. The Association agrees to make payment of
all amounts due the Participant in accordance with the terms of the Plan and
the elections made by the Participant herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
Witnessed by: PARTICIPANT
Print Name: Participant
Witnessed by: NEWPORT FEDERAL SAVINGS & LOAN
ASSOCIATION
By
Print Name: Its
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF PUGH & COMPANY, P.C.]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
As the independent certified public accountant of Newport Federal Savings and
Loan Association and its subsidiary, we hereby consent to the use of our
report and to all references to our firm included in or made part of this
registration statement or application.
/s/ Pugh & Company, P.C.
Certified Public Accountants
September 22, 1997
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF RP FINANCIAL, LC]
September 22, 1997
Board of Directors
Newport Federal Savings and Loan Association
344 West Broadway
Newport, Tennessee 37821
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Newport Federal Savings and Loan Association, Newport,
Tennessee, and any amendments thereto, in the Form SB-2 Registration Statement
for United Tennessee Bankshares, Inc., and any amendments thereto, and in the
Form AC for Newport Federal Savings and Loan Association, and any amendments
thereto. We also hereby consent to the inclusion of, summary of and
references to our Appraisal Report and our statement concerning subscription
rights in such filings including the Prospectus of United Tennessee
Bankshares, Inc.
Very truly yours,
RP FINANCIAL, LC.
/s/ James J. Oren
James J. Oren
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,580,831
<INT-BEARING-DEPOSITS> 1,500,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,768,743
<INVESTMENTS-CARRYING> 1,058,744
<INVESTMENTS-MARKET> 1,069,217
<LOANS> 46,468,497
<ALLOWANCE> 576,427
<TOTAL-ASSETS> 64,188,634
<DEPOSITS> 56,724,796
<SHORT-TERM> 0
<LIABILITIES-OTHER> 995,054
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 6,468,784
<TOTAL-LIABILITIES-AND-EQUITY> 64,188,634
<INTEREST-LOAN> 1,976,955
<INTEREST-INVEST> 438,359
<INTEREST-OTHER> 68,463
<INTEREST-TOTAL> 2,464,715
<INTEREST-DEPOSIT> 1,303,488
<INTEREST-EXPENSE> 1,303,488
<INTEREST-INCOME-NET> 1,161,227
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 725,266
<INCOME-PRETAX> 396,340
<INCOME-PRE-EXTRAORDINARY> 236,620
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236,620
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.7
<LOANS-NON> 0
<LOANS-PAST> 549,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 49,000
<ALLOWANCE-OPEN> 493,718
<CHARGE-OFFS> 7,291
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 576,427
<ALLOWANCE-DOMESTIC> 576,427
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
(PROPOSED HOLDING COMPANY FOR NEWPORT
FEDERAL)
NEWPORT, TENNESSEE
STOCK ORDER FORM
NOTE: PLEASE READ THE INSTRUCTIONS AND GUIDE ON
THE BACK AS YOU COMPLETE THIS FORM.
DEADLINE: THE SUBSCRIPTION OFFERING WILL EXPIRE AT EASTERN
TIME, ON , 1997, UNLESS EXTENDED.
<TABLE>
<S> <C> <C> <C> <C>
(1) NUMBER OF SHARES PURCHASE PRICE (2) TOTAL PAYMENT DUE
X $10.00 =
THE MINIMUM NUMBER OF SHARES THAT MAY BE SUBSCRIBED FOR IS 25 SHARES, AND THE MAXIMUM NUMBER OF
SHARES THAT MAY BE PURCHASED BY ANY PERSON TOGETHER WITH ASSOCIATES OR GROUP OF PERSONS ACTING
IN CONCERT IS 22,000 SHARES.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
METHOD OF PAYMENT IMPORTANT PURCHASER INFORMATION
(3) / / ENCLOSED IS A CHECK, BANK DRAFT OR
MONEY ORDER MADE PAYABLE
TO UNITED TENNESSEE BANKSHARES, (5) A / / ELIGIBLE ACCOUNT HOLDER--CHECK HERE IF YOU WERE A
INC. IN THE AMOUNT OF: DEPOSITOR OF AT LEAST $50.00 AT NEWPORT FEDERAL
SAVINGS AND LOAN ASSOCIATION ON DECEMBER 31, 1995.
ENTER
$ CASH CAN BE INFORMATION BELOW FOR ALL DEPOSIT ACCOUNTS THAT
USED ONLY YOU HAD AT NEWPORT FEDERAL SAVINGS AND LOAN
IF ASSOCIATION ON DECEMBER 31, 1995.
PRESENTED
IN PERSON
AT
A BRANCH
OFFICE OF
NEWPORT
FEDERAL
SAVINGS AND (5) B / / SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER--CHECK HERE
LOAN IF YOU WERE A DEPOSITOR OF AT LEAST $50.00 AT
ASSOCIATION. NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION ON
SEPTEMBER 30, 1997, BUT
(4) / / THE UNDERSIGNED AUTHORIZES ARE NOT AN ELIGIBLE ACCOUNT HOLDER. ENTER
WITHDRAWAL FROM THIS (THESE) INFORMATION BELOW FOR ALL DEPOSIT ACCOUNTS THAT
ACCOUNT(S) AT NEWPORT FEDERAL YOU HAD AT NEWPORT FEDERAL SAVINGS AND LOAN
SAVINGS AND LOAN ASSOCIATION. ASSOCIATION ON SEPTEMBER 30, 1997.
PLEASE CONTACT THE STOCK
INFORMATION CENTER BY ,
1997 IF YOU WISH TO USE YOUR IRA TO
PURCHASE STOCK. (5) C / / OTHER MEMBER--CHECK HERE IF YOU WERE A DEPOSITOR
OR LOAN CUSTOMER AT NEWPORT FEDERAL SAVINGS AND
LOAN ASSOCIATION ON , 1997, BUT ARE
NOT AN ELIGIBLE ACCOUNT HOLDER OR A SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDER. ENTER INFORMATION BELOW
FOR ALL DEPOSIT ACCOUNTS OR LOANS THAT YOU HAD AT
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION ON
, 1997.
</TABLE>
<TABLE>
<CAPTION>
ACCOUNT TITLE DEPOSIT LOAN ACCOUNT
ACCOUNT NUMBER AMOUNT (NAMES OF ACCOUNTS) ACCOUNT ACCOUNT NUMBER
<S> <C> <C> <C> <C>
$ / / / /
$ / / / /
$ / / / /
TOTAL WITHDRAWAL
AMOUNT $ / / / /
THERE IS NO PENALTY FOR EARLY WITHDRAWALS USED FOR STOCK PAYMENT. / / / /
/ / / /
/ / / /
</TABLE>
IMPORTANT COMMUNITY OFFERING INFORMATION
(6) / / CHECK HERE IF YOU ARE RESIDENT OF COCKE COUNTY, TENNESSEE
STOCK REGISTRATION (SEE BACK UNDER STOCK OWNERSHIP GUIDE)
(7) FORM OF STOCK OWNERSHIP:
<TABLE>
<S> <C><C> <C><C> <C><C> <C><C>
/ / INDIVIDUAL / / JOINT TENANTS WITH RIGHT / / TENANTS IN COMMON / / UNIFORM TRANSFER TO
OF SURVIVORSHIP MINORS
/ / FIDUCIARY (E.G., TRUST, / / CORPORATION OR / / OTHER
ESTATE, ETC.) PARTNERSHIP -------------------------------------------------------
</TABLE>
(8) NAME(S) IN WHICH YOUR STOCK IS TO BE
REGISTERED (PLEASE PRINT CLEARLY) SOCIAL SECURITY NO. OR TAX ID NO.
STREET ADDRESS
CITY COUNTY STATE ZIP CODE
<TABLE>
<S> <C> <C>
(9) TELEPHONE INFORMATION DAYTIME PHONE EVENING PHONE
( ) ( )
</TABLE>
(10) / / CHECK HERE IF YOU WOULD LIKE CASH DIVIDENDS DEPOSITED DIRECTLY INTO
YOUR NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION ACCOUNT. OTHERWISE,
DIVIDENDS WILL BE MAILED TO YOU IN THE FORM OF A CHECK.
<TABLE>
<S> <C>
ENTER THE ACCOUNT NUMBER TO BE USED FOR DIRECT DEPOSIT:
</TABLE>
NASD AFFILIATION
(11) / / CHECK HERE IF YOU ARE A MEMBER OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. ("NASD"), A PERSON ASSOCIATED WITH A NASD MEMBER, A
MEMBER OF THE IMMEDIATE FAMILY OF ANY SUCH PERSON TO WHOSE SUPPORT SUCH PERSON
CONTRIBUTES, DIRECTLY OR INDIRECTLY, OR THE HOLDER OF AN ACCOUNT IN WHICH A NASD
MEMBER OR PERSON ASSOCIATED WITH A NASD MEMBER HAS A BENEFICIAL INTEREST. TO
COMPLY WITH CONDITIONS UNDER WHICH AN EXEMPTION FROM THE NASD'S INTERPRETATION
WITH RESPECT TO FREE-RIDING AND WITHHOLDING IS AVAILABLE, YOU AGREE, IF YOU HAVE
CHECKED THE NASD AFFILIATION BOX, (I) NOT TO SELL, TRANSFER OR HYPOTHECATE THE
STOCK FOR A PERIOD OF 150 DAYS FOLLOWING ISSUANCE, AND (II) TO REPORT THIS
SUBSCRIPTION IN WRITING TO THE APPLICABLE NASD MEMBER WITHIN ONE DAY OF PAYMENT
THEREFOR.
ACKNOWLEDGMENT
(12) / / TO BE EFFECTIVE, THIS STOCK ORDER FORM MUST BE FULLY COMPLETED, SIGNED
ON BOTH SIDES AND ACTUALLY RECEIVED BY NEWPORT FEDERAL SAVINGS AND LOAN
ASSOCIATION NO LATER THAN THE DEADLINE AT THE TOP OF THIS PAGE, OTHERWISE THIS
STOCK ORDER FORM AND ALL SUBSCRIPTION RIGHTS WILL BE VOID. COMPLETED STOCK ORDER
FORMS, TOGETHER WITH THE REQUIRED PAYMENT OR WITHDRAWAL AUTHORIZATION, MAY BE
DELIVERED TO A BRANCH OFFICE OF NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION OR
MAY BE MAILED TO THE POST OFFICE BOX INDICATED ON THE ENCLOSED BUSINESS REPLY
ENVELOPE. ALL RIGHTS EXERCISABLE HEREUNDER ARE NOT TRANSFERABLE, AND SHARES
PURCHASED UPON EXERCISE OF SUCH RIGHTS MUST BE PURCHASED FOR THE ACCOUNT OF THE
PERSON EXERCISING SUCH RIGHTS.
IT IS UNDERSTOOD THAT THIS STOCK ORDER FORM WILL BE ACCEPTED IN ACCORDANCE WITH,
AND SUBJECT TO, THE TERMS AND CONDITIONS OF THE PLAN OF CONVERSION OF NEWPORT
FEDERAL SAVINGS AND LOAN ASSOCIATION DESCRIBED IN THE ACCOMPANYING PROSPECTUS.
IF THE PLAN OF CONVERSION IS NOT APPROVED BY THE VOTING MEMBERS OF NEWPORT
FEDERAL SAVINGS AND LOAN ASSOCIATION AT A SPECIAL MEETING TO BE HELD ON ,
1997, OR ANY ADJOURNMENT THEREOF, ALL ORDERS WILL BE CANCELLED, AND FUNDS
RECEIVED AS PAYMENT, WITH ACCRUED INTEREST, WILL BE RETURNED PROMPTLY. THE
UNDERSIGNED AGREES THAT AFTER RECEIPT BY NEWPORT FEDERAL SAVINGS AND LOAN
ASSOCIATION, THIS STOCK ORDER FORM MAY NOT BE MODIFIED, WITHDRAWN OR CANCELLED
(UNLESS THE CONVERSION IS NOT COMPLETED WITHIN 45 DAYS OF THE COMPLETION OF THE
SUBSCRIPTION OFFERING) WITHOUT NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION'S
CONSENT AND, IF AUTHORIZATION TO WITHDRAW FROM DEPOSIT ACCOUNTS AT NEWPORT
FEDERAL SAVINGS AND LOAN ASSOCIATION HAS BEEN GIVEN AS PAYMENT FOR SHARES, THE
AMOUNT AUTHORIZED FOR WITHDRAWAL SHALL NOT OTHERWISE BE AVAILABLE FOR WITHDRAWAL
BY THE UNDERSIGNED.
UNDER PENALTY OF PERJURY, I CERTIFY THAT THE SOCIAL SECURITY OR TAX ID NUMBER
AND OTHER INFORMATION PROVIDED IN THIS STOCK ORDER FORM ARE TRUE, CORRECT AND
COMPLETE THAT I AM NOT SUBJECT TO BACK-UP WITHHOLDING, THAT I AM PURCHASING FOR
MY OWN ACCOUNT AND THAT THERE IS NO AGREEMENT OR UNDERSTANDING REGARDING THE
TRANSFER OF MY SUBSCRIPTION RIGHTS OR THE SALE OR TRANSFER OF THE SECURITY BEING
OFFERED.
APPLICABLE FEDERAL REGULATIONS PROHIBIT ANY PERSON FROM TRANSFERRING OR ENTERING
INTO ANY AGREEMENT DIRECTLY OR INDIRECTLY TO TRANSFER THE LEGAL OR BENEFICIAL
OWNERSHIP OF SUBSCRIPTION RIGHTS OR THE UNDERLYING SECURITIES TO THE ACCOUNT OF
ANOTHER. NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION MAY PURSUE ANY AND ALL
LEGAL AND EQUITABLE REMEDIES IN THE EVENT IT BECOMES AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY IT TO INVOLVE SUCH
TRANSFER.
I ACKNOWLEDGE THAT THE COMMON STOCK BEING OFFERED IS NOT A SAVINGS OR DEPOSIT
ACCOUNT AND IS NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND, THE BANK
INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED TWICE: BELOW AND ON THE
ACKNOWLEDGEMENT FORM ON THE REVERSE HEREOF.
SIGNATURE(S)
<TABLE>
<S> <C>
(13) SIGNATURE SIGNATURE
DATE DATE
</TABLE>
<TABLE>
<S> <C> <C>
FOR OFFICE USE ONLY STOCK INFORMATION CENTER
DATE RECEIVED // CATEGORY NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
ORDER # DEPOSIT 344 BROADWAY
BATCH # DATE INPUT // NEWPORT, TN 37821
(423) -
</TABLE>
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
(PROPOSED HOLDING COMPANY FOR NEWPORT FEDERAL)
- ---------------------------------------------------------
STOCK ORDER FORM
INSTRUCTIONS AND GUIDE
- ---------------------------------------------------------
STOCK OWNERSHIP GUIDE
- ----------------------
INDIVIDUAL--
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership rights,
such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP--
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
TENANTS IN COMMON--
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.
UNIFORM TRANSFER TO MINORS--
Stock may be held in the name of a custodian for a minor under the Uniform
Transfer to Minors Act of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for Custodian
is "CUST" while the Uniform Transfer to Minors Act is "Unif Tran Min Act."
Standard U.S. Postal Service state abbreviation should be used to describe the
appropriate state. For example, stock held by John Doe as custodian for Susan
Doe under the Tennessee Uniform Transfer to Minors Act will be abbreviated John
Doe. CUST Susan Doe Unif Trans Min Act, TN (use minor's social security number).
FIDUCIARIES--
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
- The name(s) of the fiduciary. If an individual, list the first name,
middle initial and last name. If a corporation, list the full corporate
title (name). If an individual and a corporation, list the corporation's
title before the individual.
- The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
- A copy and description of the document governing the fiduciary
relationship, such as living trust agreement or court order. Without
documentation establishing a fiduciary relationship, your stock may be
registered in a fiduciary capacity.
- The date of the document governing the relationship except that the date
of a trust created by a will need not be included in the description.
- The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe
Trustee Under Agreement Dated 10-1-87 for Susan Doe.
You may mail your completed Stock Order Form in the envelope that has been
provided, or you may deliver your Stock Order Form to Newport Federal Savings
and Loan Association. If you are purchasing in the Subscription Offering, your
Stock Order Form, properly completed, and payment in full (or withdrawal
authorization), at the Purchase Price must be received by Newport Federal
Savings and Loan Association no later than , Eastern Time, on
, 1997. Stock Order Forms shall be deemed received only upon actual
receipt at one of Newport Federal Savings and Loan Association's offices.
If you need further assistance, please call the Stock Information Center at
(423) . We will be pleased to help you with the completion of your Stock
Order Form or answer any questions you may have.
ITEM INSTRUCTIONS
ITEMS 1 AND 2--
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares purchased
by the Purchase Price of $10.00 per share. The minimum purchase is 25 shares.
Each eligible subscriber (including joint account holders or borrowers, as a
group) may subscribe for up to 11,000 shares per qualifying deposit or loan
account, provided that the aggregate maximum amount of stock that may be
purchased by any person, together with associates, or group of persons acting in
concert (other than the ESOP) is 22,000 shares. If the maximum purchase
limitation is increased, any subscriber who has subscribed for 22,000 shares,
and other subscribers at the discretion of Newport Federal, will be given the
opportunity to increase their subscriptions up to the higher maximum purchase
limitation.
ITEM 3--
Payment for shares may be made in cash (only if delivered by you in person) or
by check, bank draft or money order made payable to United Tennessee Bankshares,
Inc. Your funds will earn interest at Newport Federal Savings and Loan
Association's passbook rate until the conversion is completed or terminated. DO
NOT MAIL CASH TO PURCHASE STOCK! Please check this box if your method of payment
is by cash, check, bank draft or money order.
ITEM 4--
If you pay for your stock by a withdrawal from a deposit account at Newport
Federal Savings and Loan Association, insert the account number(s) and the
amount of your withdrawal authorization for each account. The total amount
withdrawn should equal the amount of your stock purchase. There will be no
penalty assessed for early withdrawals from certificate accounts used for stock
purchases. This form of payment may not be used if your account is an Individual
Retirement Account. PLEASE CONTACT THE STOCK INFORMATION CENTER FOR INFORMATION
REGARDING PURCHASES FROM AN INDIVIDUAL RETIREMENT ACCOUNT.
ITEM 5--
IMPORTANT:
Please check the appropriate box if you were:
a. Eligible Account Holders: A depositor at Newport Federal Savings and Loan
Association on December 31, 1995 with at least $50.00 on deposit. You must enter
information below for all deposit accounts that you had at Newport Federal
Savings and Loan Association on December 31, 1995 to ensure proper
identification of your purchase rights and preferences.
b. Supplemental Eligible Account Holders: A depositor at Newport Federal Savings
and Loan Association on September 30, 1997 with at least $50.00 on deposit, but
you are not an Eligible Account Holder. You must enter information below for all
deposit accounts that you had at Newport Federal Savings and Loan Association on
September 30, 1997 to ensure proper identification of your purchase rights and
preferences.
c. Other Members: A depositor or loan customer at Newport Federal Savings and
Loan Association on , 1997, but you are not an Eligible Account
Holder or a Supplemental Eligible Account Holder. You must enter information
below for all deposit accounts or loans that you had at Newport Federal Savings
and Loan Association on , 1997 to ensure proper identification of
your purchase rights and preferences.
ITEM 6--
Please check the box if you are a resident of Cocke County, Tennessee.
ITEMS 7, 8 AND 9--
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your common stock. Please
complete items 7, 8 and 9 as fully and accurately as possible, and be certain to
supply your social security number or tax identification number and your daytime
and evening telephone number(s). If you have any questions or concerns regarding
the registration of your stock, please consult your legal advisor. Stock
ownership must be registered in one of the ways described under "Stock Ownership
Guide."
ITEM 10--
Please check this box if you would like cash dividends deposited directly into
your account at Newport Federal Savings and Loan Association. Enter the account
number to be used for direct deposit.
ITEM 11--
Please check this box if you are a member of the NASD or if this item otherwise
applies to you.
ITEMS 12 AND 13--
Please sign and date the Stock Order Form on both the front and back where
indicated. Review the Stock Order Form carefully before you sign, including the
acknowledgement. Normally, one signature is required on each side. Additional
signatures are required only when payment is to be made by withdrawal from a
deposit account that requires multiple signatures to withdraw funds. If you have
any remaining questions, or if you would like assistance in completing your
Stock Order Form, you may call the Stock Information Center. The Stock
Information Center phone number is (423) . The Stock Information Center
is open between the hours of a.m. and p.m., Eastern Time, Monday,
Tuesday, Thursday and Friday.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED BELOW AND ON THE FRONT OF THIS
FORM:
ACKNOWLEDGEMENT FORM
I/WE ACKNOWLEDGE THAT THE COMMON STOCK OF UNITED TENNESSEE BANKSHARES, INC.
BEING OFFERED IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT FEDERALLY INSURED AND
IS NOT GUARANTEED BY NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION, NEWPORT,
TENNESSEE, OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that the security being offered is federally insured or
guaranteed, or is as safe as an insured deposit, I/we should call the Office
of Thrift Supervision, Central Regional Director, Ronald N. Karr at (312)
917-5000.
I/We further certify that, before purchasing the common stock, no par value,
of United Tennessee Bankshares, Inc., I/we received a prospectus dated
, 1997 .
The prospectus that I/we received contains disclosure concerning the nature
of the security being offered and describes the risks involved in the
investment, including but not limited to:
<TABLE>
<C><S> <C> <C><C> <C>
1. Market Conditions and Absence of Prior Market for (Page ) 7. Competition (Page )
the Common Stock 8. Dependence on Key Personnel (Page )
2. Below Average Return on Equity After Conversion (Page ) 9. Potential Impact of Purchases by Management and (Page )
Stock
3. Possible Benefits to Management and Dilutive (Page ) Compensation Plans
Effects of Stock
Compensation Plans 10. Charter and Bylaw, Statutory and Other Provisions (Page )
That Could
4. Possible Adverse Impacts of Interest Rates and (Page ) Discourage Hostile Acquisitions of Control
Economic and
Industry Conditions 11. Business Plan to Remain Independent Local Thrift (Page )
5. Limited Economy in Market Area (Page ) 12. Possible Income Tax Consequences of Distribution (Page )
of
6. Loan Portfolio Composition (Page ) Subscription Rights
PRINT NAME PRINT NAME
SIGNATURE SIGNATURE
DATE
</TABLE>
<PAGE>
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
344 Broadway
Newport, Tennessee 37821
(423) 623-6088
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Newport Federal Savings and Loan Association (the "Bank") will be
held at __________________________, _______________________, Newport, Tennessee,
on December __, 1997 at __:__ _.m. The business to be taken up at the Special
Meeting shall be:
(1) To consider and vote upon a Plan of Conversion providing for the
conversion of the Bank from a federally chartered mutual savings
association to a federally chartered stock savings association to be
known as Newport Federal Bank, as a wholly owned subsidiary of United
Tennessee Bankshares, Inc., a newly organized Tennessee corporation
formed by the Bank for the purpose of becoming the holding company for
the Bank, and the related transactions provided for in such Plan of
Conversion, including the amendment of the Bank's existing Federal
Mutual Charter and Bylaws to read in the form of a Federal Stock
Charter and Bylaws for the Bank, pursuant to the laws of the United
States and the Rules and Regulations administered by the Office of
Thrift Supervision.
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice of Special Meeting of
Members, the Board of Directors is not aware of any other matters
that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those members
of the Bank at the close of business on November __, 1997, who continue as
members until the Special Meeting and, should the Special Meeting be, from time
to time, adjourned to a later time, until the final adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
William B. Henry
Secretary
November __, 1997
Newport, Tennessee
-----------------
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY MATERIAL
AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING
IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
Bank The federally chartered savings association
(also, alone or with the Company, as converting from mutual to stock form, in its
appropriate, "we," "us," etc.) mutual form as "Newport Federal Savings and
Loan Association" and its stock form as
"Newport Federal Bank"
Company The Tennessee corporation named United
(also "our holding company," etc.) Tennessee Bankshares, Inc. formed by the Bank
to serve as its holding company after the
Conversion
Common Stock The common stock of the Company
Community Offering If any, the offering of shares of the Common
Stock to the general public concurrently with
or after commencement of the Subscription
Offering, giving preference to natural persons
and trusts of natural persons (including
individual retirement and Keogh retirement
accounts and personal trusts in which such
natural persons have substantial interests)
who are permanent residents of the Bank's
Local Community
Conversion Conversion of the Bank from mutual to stock
form, the issuance of common stock of the Bank
to the Company and the issuance of the
Company's Common Stock to purchasers in the
Subscription Offering and, if any, the
Community Offering and/or Syndicated Offering
Eligible Account Holders Holders of savings accounts at the Bank with
balances of at least $50 as of December 31,
1995
ESOP Employee Stock Ownership Plan to be
implemented by the Company in the Conversion
Estimated Valuation Range Range of valuation from 15% below to 15% above
the independent appraisal of our estimated pro
forma market value, which was $11,000,000 as
of September 12, 1997
FDIC Federal Deposit Insurance Corporation
Local Community The county where our offices are located --
Cocke County, Tennessee
Other Members Depositor and borrower members of the Bank as
of November , 1997
OTS Office of Thrift Supervision of the United
States Department of the Treasury
RP Financial RP Financial, LC, the firm we engaged to
prepare the appraisal of our estimated pro
forma market value in the Conversion and to
advise us about our business plan
SEC Securities and Exchange Commission
Subscription Offering The offering of shares of the Common Stock to
Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders and
Other Members
Supplemental Eligible Holders of accounts at the Bank with balances
Account Holders of at least $50 as of September 30, 1997
Syndicated Offering If any, the offering of shares of the Common
Stock to the general public during or after
the Subscription Offering in a syndicated
offering by selected dealers
Trident Securities Trident Securities, Inc., the firm we engaged
to advise and assist us in marketing the
Common Stock and conducting the Subscription
Offering and, if any, the Community Offering
and/or Syndicated Offering
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS
Set forth below are answers to frequently asked questions about
the Conversion and related matters. For additional information,
please refer to the more detailed information in this proxy statement
and the accompanying prospectus. For assistance, please contact the
Stock Information Center at (423) ___-_____.
The Conversion
1. What is a Mutual to Stock Conversion?
The Conversion is a change in our legal form of organization. We
currently operate as a federally chartered mutual savings
institution with no stockholders. Through the Conversion, we
will become a federally chartered stock savings institution, we
will change our name to "Newport Federal Bank," we will issue
shares of our stock to United Tennessee Bankshares, Inc., which
will thereby become our holding company, and United Tennessee
Bankshares, Inc., as our holding company, will issue shares of
its Common Stock to investors who purchase shares in the
Conversion. Currently, our depositor and borrower members as
such have voting rights in the Bank and, therefore, are entitled
to elect directors of the Bank and to vote on other important
matters. Following the Conversion, the Company will exercise all
voting rights with respect to the Bank's common stock, and the
Company's stockholders will elect its directors and exercise all
other voting rights with respect to the Common Stock.
2. Why are you converting?
As a mutual savings institution, we do not have stockholders and
do not have authority to issue capital stock. By converting to
the stock form of organization, we 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 our future growth and performance by providing a larger
capital base from which we may operate, by enhancing our ability
to attract and retain qualified management through stock-based
compensation plans, by enhancing our ability to diversify into
other financial services related activities and by expanding our
ability to provide services to the public.
We believe that the stock form of organization is preferable to
the mutual form of organization for a financial institution. We
recognize the decline in the number of mutual thrifts from over
12,500 mutual institutions in 1929 to under 1,000 mutual thrifts
today.
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We believe that converting to the stock form of organization and
changing our name will allow us to compete more effectively with
other community banks and thrifts, and with statewide, regional
and nationwide banks, which are in stock form. We believe that
by combining our existing quality service and products with a
local ownership base we will encourage our customers and
community members who become stockholders to do more business
with us.
Furthermore, because we compete with local and nonlocal banks not
only for customers, but also for employees, we believe that the
stock form of organization will better afford us the opportunity
to attract and retain employees, management and directors through
stock-based compensation plans which are not available to mutual
savings institutions.
3. Will the Conversion have any effect on our deposits and loans?
No. The Conversion will not affect terms and balances of your
deposit accounts and interest rates paid on such accounts.
Deposits will remain federally insured by the FDIC up to the
maximum amount permitted by law. The Conversion also will not
affect terms or conditions of any of our loans or rights and
obligations of our borrowers.
4. Will the Conversion cause any changes in your personnel?
No. Before and after the Conversion, our business of accepting
deposits, making loans and providing financial services will
continue without interruption with the same board of directors,
management and staff.
5. What approvals must be received before the Conversion becomes
effective?
First, our Board of Directors must adopt the Plan of Conversion,
which occurred on May 20, 1997. Second, the OTS must approve the
applications required to effect the Conversion. These approvals
have been obtained. Third, the Plan of Conversion must be
approved by a majority of all votes eligible to be cast by our
members. A special meeting of our members will be held on
November , 1997 to consider and vote upon the Plan of
Conversion. Last, the final amount of Common Stock to be issued
in the Conversion must be approved by the OTS before the
consummation of the Conversion.
The Holding Company
6. What is a holding company?
A holding company is a company that owns another company. In the
Conversion, we will become a subsidiary of United Tennessee
Bankshares, Inc., a company we organized to become our holding
company by acquiring all of our stock to be issued in the
Conversion.
7. Why are you forming a holding company?
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We believe that the formation of our holding company will result
in a more versatile financial institution with the ability to
diversify our business activities through existing or newly
formed subsidiaries, although there are no current plans with
respect to such diversification. Our holding company will also
be able to use stock-based compensation programs to attract,
motivate and retain directors, management and employees.
8. What will be the holding company's principal business activities?
We formed United Tennessee Bankshares, Inc. under Tennessee law
in August 1997 for the purpose of becoming our holding company in
the Conversion. Before the Conversion, our holding company will
not have any material assets or liabilities, and it will not
engage in any material operations. Following the Conversion, our
holding company's primary assets will be our outstanding stock, a
portion of the net proceeds of the Conversion and a note
receivable from our ESOP, and it will primarily engage in the
business of directing, planning and coordinating our business
activities. In the future, our holding company may become an
operating company or acquire or organize other operating
subsidiaries, including other financial institutions. Initially,
our holding company will not maintain offices separate from ours
or employ any persons other than its officers, who will not be
separately compensated for such service.
About Voting For the Plan of Conversion
9. Am I eligible to vote at the Special Meeting?
You are eligible to vote at the Special Meeting of Members to be
held on November ___, 1997 if you were a depositor or borrower
with us at the close of business on the Voting Record Date
(November ___, 1997) and continue as such until the Special
Meeting.
10. How many votes do I have?
As an account holder with us, you have one vote for each $100, or
fraction thereof, on deposit in your account(s) with us. Each
borrower member may cast one vote in addition to the number of
votes, if any, he or she is entitled to cast as an account
holder. No member may cast more than 1,000 votes.
11. If I vote against the Plan of Conversion and it is approved,
may I buy stock in the Subscription Offering?
Yes. Voting against the Plan of Conversion would not restrict
you from purchasing shares of the common stock of our holding
company in the Subscription Offering.
12. Did the Board of Directors of Newport Federal Savings and
Loan Association adopt the Plan of Conversion?
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Yes. Our Board of Directors adopted the Plan of Conversion and
urges all members to vote FOR approval of the Plan of Conversion.
13. What would happen if Newport Federal Savings and Loan
Association did not get enough votes to approve the Plan of
Conversion?
The Conversion would not take place, and we would remain a mutual
savings institution.
14. As a qualifying depositor or borrower of Newport Federal
Savings and Loan Association, am I required to vote?
No. However, failure to return your proxy card or otherwise vote
would have the same effect as a vote AGAINST the Plan of
Conversion.
15. What is a Proxy Card?
A proxy card gives you the ability to vote without attending the
Special Meeting in person. If you received more than one
informational packet, then you should vote the proxy cards in all
packets. Your proxy card(s) is (are) located in the window
sleeve of your informational packet(s).
You may attend the Special Meeting and vote, even if you have
returned your proxy card, if you choose to do so. However, if
you are unable to attend, you still are represented by proxy.
Previously executed proxies, other than those proxies related to
the Conversion which were sent to you, will not be used to vote
for approval of the Plan of Conversion, even if you do not
execute another proxy or attend the Special Meeting and vote in
person.
16. How can I get additional information about the Conversion?
For additional information about the Conversion, please refer to
the more detailed information in this proxy statement and the
accompanying prospectus.
For assistance, or to request another prospectus and stock order
form, please contact our Stock Information Center at (423) -
.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY UNITED TENNESSEE BANKSHARES, INC.
COMMON STOCK. SUCH OFFERS AND SOLICITATIONS MAY BE MADE ONLY BY MEANS
OF THE ACCOMPANYING PROSPECTUS. ADDITIONAL COPIES OF THE PROSPECTUS
MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (423)
___-____.
THE SHARES OF UNITED TENNESSEE BANKSHARES, INC. COMMON STOCK
BEING OFFERED ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED
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BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
344 Broadway
Newport, Tennessee 37821
(423) 623-6088
PROXY STATEMENT
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY OUR BOARD OF
DIRECTORS FOR USE AT A SPECIAL MEETING OF OUR MEMBERS TO BE HELD ON
DECEMBER __, 1997. WE URGE YOU TO VOTE FOR THE PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A Special Meeting of Members (the "Special Meeting") of Newport
Federal Savings and Loan Association ("us" or the "Bank") will be held
at ________________________________________________, Newport,
Tennessee on _________________, December __, 1997, at __:__ _.m.,
Eastern Time, for the purpose of considering and voting upon a Plan of
Conversion adopted by our Board of Directors which, if approved by a
majority of the total votes eligible to be cast by the members, will
permit us to convert from a federal mutual savings association to a
federal stock savings association to be known or Newport Federal Bank
as a wholly owned subsidiary of United Tennessee Bankshares, Inc.
("our holding company" or the "Company"), a Tennessee corporation we
formed for the purpose of becoming the holding company for us
(collectively, the "Conversion"). The Conversion is contingent upon
our members' approval of the Plan of Conversion.
The Plan of Conversion provides in part that after receiving
authorization from the Office of Thrift Supervision ("OTS"), our
holding company will offer for sale shares of its common stock, par
value $.01 per share (the "Common Stock"), through the issuance of
nontransferable subscription rights, first to our depositors as of
December 31, 1995 with $50.00 or more on deposit with us on that date
("Eligible Account Holders"), second to our holding company's Employee
Stock Ownership Plan (the "ESOP") (a tax-qualified employee stock
benefit plan of our holding company, as defined in the Plan of
Conversion), third to our depositors as of September 30, 1997 with
$50.00 or more on deposit with us on that date ("Supplemental Eligible
Account Holders") and fourth to our depositor and borrower members as
of November __, 1997 ("Other Members") (collectively, the
"Subscription Offering"). Subscription rights received in any of the
foregoing categories will be subordinated to the subscription rights
of those in a prior category, with the exception that any shares of
Common Stock sold in excess of the maximum of the estimated valuation
range as established in an independent appraisal, as discussed below,
may be first sold to the ESOP. During or after the Subscription
Offering, our holding company may offer shares of the Common Stock not
sold in the Subscription Offering to the general public, in a
community offering (the "Community Offering"). In the Community
Offering, preference may be given to natural persons and trusts of
natural persons who are permanent residents of our local community,
Cocke County, Tennessee. Any shares of Common Stock not purchased in
the Subscription and Community Offerings may be sold to a
<PAGE>
syndicate of underwriters to be managed by Trident Securities, Inc. ("Trident
Securities"). The aggregate price of the Common Stock to be issued by the
Company under the Plan of Conversion is currently expected to be between
$9,350,000 and $14,547,500, subject to a final independent appraisal of our
estimated pro forma market value as converted and as a wholly owned
subsidiary of our holding company before the consummation of the Conversion.
See "THE CONVERSION -- Stock Pricing and Number of Shares to be Issued" in
the accompanying prospectus.
Adoption of our proposed stock charter and bylaws is an integral
part of the Plan of Conversion. Copies of the Plan of Conversion and
the proposed stock charter and bylaws are attached to this proxy
statement. These documents provide, among other things, for the
termination of voting rights of members and their rights to receive
any surplus remaining in the event of our liquidation. These rights,
except for the rights of Eligible Account Holders and Supplemental
Eligible Account Holders in the liquidation account to be established
for their benefit upon completion of the Conversion, will vest
exclusively in our holding company as the sole holder of our
outstanding capital stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF CONVERSION
WILL NOT OBLIGATE ANY PERSON TO PURCHASE STOCK.
The Conversion will be accomplished through adoption of a new
charter and bylaws to authorize our issuance of capital stock to our
holding company. Under the Plan of Conversion, between 935,000 and
1,454,750 shares of the Common Stock are being offered for sale by our
holding company. Upon completion of the Conversion, we will issue all
of our newly issued shares of capital stock (100,000 shares) to our
holding company in exchange for at least 50% of the net proceeds in
the Conversion. None of our assets will be distributed in order to
effect the Conversion other than to pay expenses incurred as a result
of the Conversion.
The net proceeds from the sale of Common Stock in the Conversion
will substantially increase our capital, which will increase the
amount of funds available for lending and investment, and support
current operations and the continued growth of our business. The
holding company structure will provide greater flexibility than we
alone would have for diversification of business activities and
geographic operations. Management believes that this increased
capital and operating flexibility will enable us to compete more
effectively with other savings institutions and other types of
financial service organizations. Management also believes that the
Conversion will enhance the future access of both us and our holding
company to the capital markets.
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UNITED TENNESSEE BANKSHARES, INC.
We incorporated United Tennessee Bankshares, Inc. under the laws
of the State of Tennessee in August 1997 to serve as our holding
company following the Conversion. We have received approval from the
OTS for our holding company to acquire us in the Conversion subject to
satisfaction of certain conditions. Before the Conversion, our
holding company has not engaged and will not engage in any material
operations. Following the Conversion, our holding company will
direct, plan and coordinate our business activities. In the future,
our holding company may become an operating company or acquire or
organize other operating subsidiaries, including other financial
institutions. Initially, our holding company will not maintain
offices separate from ours or employ any persons other than its
officers who will not be separately compensated for such service.
The holding company structure will permit us to expand the
financial services we currently offer. As a unitary savings
institution holding company, our holding company will have greater
flexibility than us (as a savings institution) to diversify its
business activities through existing or newly formed subsidiaries or
through acquisition or merger with other financial institutions. Like
us, our holding company will be subject to regulation by the OTS.
Our holding company's executive offices are located at 344 W.
Broadway, Newport, Tennessee 37821-0249, and its telephone number is
(423) 623-6088.
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
We were organized as a federally chartered mutual savings
institution in 1934. We currently operate through two full service
banking offices located in Newport, Tennessee. At June 30, 1997, we
had total assets of $64.2 million, deposits of $56.7 million and
equity of $6.5 million, or 10.1% of total assets.
We attract deposits from the general public and invests those
funds in loans secured by first mortgages on owner-occupied
single-family residences in our market area and, to a lesser extent,
commercial real estate loans and consumer loans. We also maintain a
substantial investment portfolio.
We derive our income principally from interest earned on loans,
investment securities and other interest-earning assets. Our
principal expenses are interest expense on deposits and borrowings and
noninterest expenses such as employee compensation, deposit insurance
and miscellaneous other expenses. Funds for these activities are
provided principally by deposit growth, repayments of outstanding
loans and investment securities, other operating revenues and, from
time to time, advances from the Federal Home Loan Bank of Cincinnati.
As a federally chartered savings institution, we are subject to
extensive regulation by the OTS. Our lending activities and other
investments must comply with various federal regulatory requirements,
and the OTS periodically examines us for compliance with various
regulatory
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requirements. The FDIC also has the authority to conduct
special examinations. We must file also reports with OTS describing
our activities and financial condition and are also subject to certain
reserve requirements promulgated by the Federal Reserve Board.
For additional information, see "BUSINESS" and "REGULATION" in
the accompanying prospectus.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
Our Board of Directors has fixed the close of business on
November __, 1997 as the record date for the determination of members
entitled to notice of and to vote at the Special Meeting (the "Voting
Record Date"). Under our current mutual charter, our members include
all of our holders of deposit or other authorized accounts and all of
our borrowers. All members of record as of the close of business on
the Voting Record Date who remain members until the date of the
Special Meeting will be entitled to vote at the Special Meeting.
At the Special Meeting, or any adjournment thereof, each
depositor member may cast one vote for each $100, or fraction thereof,
of the aggregate withdrawal value of all of his or her savings
accounts with us as of the Voting Record Date. Each borrower member
will be entitled to one vote in addition to the number of votes to
which he or she is entitled as a depositor. No member may cast more
than 1,000 votes.
Approval of the Plan of Conversion to be presented at the Special
Meeting will require the affirmative vote of at least a majority of
the total outstanding votes of our members eligible to be cast at the
Special Meeting. As of the Voting Record Date for the Special
Meeting, there were approximately _____ votes eligible to be cast, of
which _____ votes constitute a majority.
Members may vote at the Special Meeting or any adjournment
thereof in person or by proxy. All properly executed proxies received
by us will be voted in accordance with the instructions indicated on
the proxies by the members giving such proxies. If no contrary
instructions are given, proxies will be voted in favor of the Plan of
Conversion. If any other matters are properly presented before the
Special Meeting and may properly be voted upon, the proxies solicited
hereby will be voted on such matters by the proxy holders named
therein as directed by our Board of Directors. Valid, previously
executed general proxies, which typically are obtained from members
when they open their accounts with us, will not be used to vote for
approval of the Plan of Conversion, even if the respective members do
not execute another proxy or attend the Special Meeting and vote in
person. Any member giving a proxy you have the right to revoke your
proxy at any time before the voting at the Special Meeting by
delivering either written notice or a duly executed proxy bearing a
later date to the Secretary of Newport Federal Savings and Loan
Association. The Secretary must receive this written notice or the
later dated proxy prior to the Special Meeting or any adjournment
thereof. You may also revoke your proxy by attending the Special
Meeting and voting in person.
FAILURE TO RETURN AN EXECUTED PROXY FOR THE SPECIAL MEETING
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OR TO ATTEND THE SPECIAL MEETING IN ORDER TO VOTE IN PERSON WOULD HAVE THE
SAME EFFECT AS VOTING AGAINST THE CONVERSION.
Proxies may be solicited by our officers, directors or other
employees, in person, by telephone or through other forms of
communication. These persons will be reimbursed us only for their
expenses incurred in connection with such solicitation.
The proxies solicited hereby will be used only at the Special
Meeting and at any adjournment thereof; they will not be used at any
other meeting.
DESCRIPTION OF PLAN OF CONVERSION
The OTS has approved our Plan of Conversion. The OTS approval
does not constitute a recommendation or endorsement of the Plan of
Conversion.
Effect of Conversion to Stock Form on Our Depositors and Borrowers
General. Each depositor in a mutual savings institution (such as
us) has both a deposit account and a pro rata ownership interest in
the equity of that institution based upon the balance in his or her
deposit account. However, this ownership interest is tied to the
depositor's account and has no tangible market value separate from
such deposit account. Any other depositor who opens a deposit account
obtains a pro rata interest in the net worth of the institution
without any additional payment beyond the amount of the deposit. A
depositor who reduces or closes his or her account receives a portion
or all of the balance in the account but nothing for his or her
ownership interest, which is lost to the extent that the balance in
the account is reduced.
Consequently, depositors normally do not have a way to realize
the value of their ownership, which has realizable value only in the
unlikely event that the mutual institution is liquidated. In such
event, the depositors of record at that time, as owners, would share
pro rata in any residual equity after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable
capital stock will be created to represent the ownership of us. Our
capital stock is separate and apart from deposit accounts and is not
insured by the FDIC. Under the Plan of Conversion, all of our capital
stock will be acquired by our holding company in exchange for a
portion of the net proceeds from the sale of the Common Stock in the
Conversion. The Common Stock will represent an ownership interest in
our holding company and will be issued upon consummation of the
Conversion to persons who elect to purchase the shares of Common Stock
being offered.
Continuity. During the Conversion process, our normal business
of accepting deposits and making loans will continue without
interruption. We will continue to be subject to regulation by the OTS
and the FDIC, and our FDIC insurance will continue without
interruption. After the
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Conversion, we will continue to provide services for depositors and borrowers
under our current policies and by our present management and staff.
The Board of Directors serving at the time of the Conversion will
serve as the Boards of Directors for us and our holding company after
the Conversion. All of our officers at the time of the Conversion
will retain their positions with us after the Conversion.
Voting Rights. Upon the completion of the Conversion, former
depositor and borrower members as such will have no voting rights in
us in stock form or our holding company and, therefore, will not be
able to elect our directors or our holding company's directors or to
control our affairs. Currently, these voting rights are accorded to
our depositor and borrower members. Following the Conversion, voting
rights will be vested exclusively in the stockholders of our holding
company which, in turn, will own all of our capital stock. Each
holder of Common Stock is entitled to vote on any matter to be
considered by the stockholders of our holding company, subject to the
provisions of our holding company's Charter.
Deposit Accounts and Loans. Our deposit accounts, the balances
of individual accounts and existing federal deposit 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 us.
Tax Effects. We have received an opinion from our special
counsel, Housley Kantarian & Bronstein, P.C., Washington, D.C., as to
federal income tax consequences of the Conversion, and as to generally
applicable federal income tax consequences of the Conversion to our
account holders and to persons who purchase Common Stock in the
Conversion. The opinion provides that the Conversion will constitute
one or more reorganizations for federal income tax purposes under
Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
("Internal Revenue Code"). Among other things, the opinion also
provides that: (i) no gain or loss will be recognized by us in our
mutual or stock form by reason of the Conversion; (ii) no gain or loss
will be recognized by our account holders upon the issuance to them of
accounts with us in stock form immediately after the Conversion, in
the same dollar amounts and on the same terms and conditions as their
accounts with us immediately prior to the Conversion; (iii) the tax
basis of each account holder's interest in the liquidation account
will be equal to the value, if any, of that interest; (iv) the tax
basis of the Common Stock purchased in the Conversion will be equal to
the amount paid therefor increased, in the case of Common Stock
acquired pursuant to the exercise of subscription rights, by the fair
market value, if any, of the subscription rights exercised; (v) the
holding period for the Common Stock purchased in the Conversion will
commence upon the exercise of such holder's subscription rights and
otherwise on the day following the date of such purchase; and (vi)
gain or loss will be recognized to account holders upon the receipt of
liquidation rights or the receipt or exercise of subscription rights
in the Conversion, to the extent such liquidation rights and
subscription rights are deemed to have value, as discussed below.
The opinion of Housley Kantarian & Bronstein, P.C. is based in
part upon, and subject to the
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continuing validity in all material respects through the date of the
Conversion of, our various representations and upon certain assumptions and
qualifications, including that the Conversion is consummated in the manner
and according to the terms provided in the Plan of Conversion. Such opinion
is also based upon the Internal Revenue Code, regulations now in effect or
proposed thereunder, current administrative rulings and practice and judicial
authority, all of which are subject to change and such change may be made
with retroactive effect. Unlike private letter rulings received from the
Internal Revenue Service ("IRS"), an opinion is not binding upon the IRS and
there can be no assurance that the IRS will not take a position contrary to
the positions reflected in such opinion, or that such opinion will be upheld
by the courts if challenged by the IRS.
Housley Kantarian & Bronstein, P.C. has advised us that an
interest in a liquidation account has been treated by the IRS, in a
series of private letter rulings which do not constitute formal
precedent, as having nominal, if any, fair market value and therefore
it is likely that the interests in the liquidation account established
by us as part of the Conversion will similarly be treated as having
nominal, if any, fair market value. Accordingly, it is likely that
our depositors who receive an interest in such liquidation account
established by us pursuant to the Conversion will not recognize any
gain or loss upon such receipt.
Housley Kantarian & Bronstein, P.C. has further advised us that the
federal income tax treatment of the receipt of subscription rights pursuant
to the Conversion is uncertain, and recent private letter rulings issued by
the IRS have been in conflict. For instance, the IRS adopted the position in
one private ruling that subscription rights will be deemed to have been
received to the extent of the minimum pro rata distribution of such rights,
together with the rights actually exercised in excess of such pro rata
distribution, and with gain recognized to the extent of the combined fair
market value of the pro rata distribution of subscription rights plus the
subscription rights actually exercised. Persons who do not exercise their
subscription rights under this analysis would recognize gain upon receipt of
rights equal to the fair market value of such rights, regardless of exercise,
and would recognize a corresponding loss upon the expiration of unexercised
rights that may be available to offset the previously recognized gain. Under
another IRS private ruling, subscription rights were deemed to have been
received only to the extent actually exercised. This private ruling required
that gain be recognized only if the holder of such rights exercised such
rights, and that no loss be recognized if such rights were allowed to expire
unexercised. There is no authority that clearly resolves this conflict among
these private rulings, which may not be relied upon for precedential effect.
However, based upon express provisions of the Internal Revenue Code and in
the absence of contrary authoritative guidance, Housley Kantarian &
Bronstein, P.C. has provided in its opinion that gain will be recognized upon
the receipt rather than the exercise of subscription rights. Further, also
based upon a published IRS ruling and consistent with recognition of gain
upon receipt rather than exercise of the subscription rights, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that the subsequent
exercise of the subscription rights will not give rise to gain or loss.
Regardless of the position eventually adopted by the IRS, the tax
consequences of the receipt of the subscription rights will depend, in part,
upon their valuation for federal income tax purposes.
If the subscription rights are deemed to have a fair market
value, the receipt of such rights
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will be taxable to Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members who exercise their subscription rights, even though
such persons would have received no cash from which to pay taxes on such
taxable income. We could also recognize a gain on the distribution of such
subscription rights in an amount equal to their aggregate value. In the
opinion of RP Financial, LC ("RP Financial") whose opinion is not binding
upon 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 shares of the Common Stock at a price equal to its estimated
fair market value, which will be the same price as the price paid by
purchasers in the Community Offering for unsubscribed shares of Common Stock.
We encourage Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members to consult with their own tax advisors as to the tax
consequences in the event that the subscription rights are deemed to have a
fair market value. Because the fair market value, if any, of the
subscription rights issued in the Conversion depends primarily upon the
existence of certain facts rather than the resolution of legal issues,
Housley Kantarian & Bronstein, P.C., has neither adopted the opinion of RP
Financial as its own nor incorporated such opinion of RP Financial in its
opinion issued in connection with the Conversion.
We have also received the opinion of Pugh & Company, P.C.,
certified public accountants, Knoxville, Tennessee, to the effect that
no gain or loss will be recognized as a result of the Conversion for
purposes of Tennessee tax law.
THE FEDERAL AND STATE INCOME TAX DISCUSSION SET FORTH ABOVE DOES
NOT PURPORT TO CONSIDER ALL ASPECTS OF FEDERAL AND STATE INCOME
TAXATION WHICH MAY BE RELEVANT TO EACH ELIGIBLE SUBSCRIBER ENTITLED TO
SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH AS TRUSTS,
INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT PLAN OF
CONVERSIONS, INSURANCE COMPANIES AND ELIGIBLE SUBSCRIBERS WHO ARE NOT
CITIZENS OR RESIDENTS OF THE UNITED STATES. DUE TO THE INDIVIDUAL
NATURE OF TAX CONSEQUENCES, EACH ELIGIBLE SUBSCRIBER IS URGED TO
CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF
SUCH FEDERAL AND STATE INCOME TAX CONSEQUENCES ON HIS OR HER OWN
PARTICULAR FACTS AND CIRCUMSTANCES, INCLUDING THE RECEIPT AND EXERCISE
OF SUBSCRIPTION RIGHTS, AND ALSO AS TO ANY OTHER TAX CONSEQUENCES
ARISING OUT OF THE CONVERSION.
Liquidation Account. In the unlikely event of our complete
liquidation in our present mutual form, each of our deposit account
holders would receive his or her pro rata share of our assets
remaining after payment of claims of all creditors (including the
claims of all depositors to the withdrawal value of their accounts).
The depositor's pro rata share of such remaining assets would be the
same proportion of such assets as the value of his or her deposit
account was to the total of the value of all deposit accounts with us
at the time of liquidation.
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After the Conversion, each deposit account holder on a complete
liquidation would have a claim of the same general priority as the
claims of our other general creditors. Therefore, except as described
below, the depositor's claim would be solely in the amount of the
balance in his or her deposit account plus accrued interest. The
depositor would have no interest in our value above that amount.
Our Plan of Conversion provides for the establishment, upon the
completion of the Conversion, of a special "liquidation account" for
the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders in an amount equal to our regulatory capital as of the
date of its latest statement of financial condition contained in the
accompanying prospectus being used in connection with the Conversion.
Each Eligible Account Holder and Supplemental Eligible Account Holder
would be entitled, on our complete liquidation after the Conversion,
to an interest in the liquidation account. Each Eligible Account
Holder and Supplemental Eligible Account Holder would have an initial
interest in such liquidation account determined by multiplying the
opening balance in the liquidation account by a fraction of which the
numerator is the amount of the qualifying deposit in the related
deposit account and the denominator is the total amount of the
qualifying deposits of all of our Eligible Account Holders and
Supplemental Eligible Account Holders. However, if the amount in the
qualifying deposit account on any annual closing date is less than the
amount in such account on the initial applicable date or any
subsequent closing date, then the Eligible Account Holder's or
Supplemental Eligible Account Holder's interest in the liquidation
account would be reduced from time to time by an amount proportionate
to any such reduction. If any such qualified deposit account is
closed, the interest in the liquidation account will be reduced to
zero.
Any assets remaining after the above liquidation rights of
Eligible Account Holders and Supplemental Eligible Account Holders
were satisfied would be distributed to the entity or persons holding
our capital stock at that time. A merger, consolidation, sale of bulk
assets, or similar combination or transaction with an FDIC-insured
institution in which we are not the surviving insured institution
would not be considered to be a "liquidation" under which distribution
of the liquidation account could be made. In such a transaction, the
liquidation account would be assumed by the surviving institution.
The creation and maintenance of the liquidation account will not
restrict the use or application of any of our capital accounts, except
that we may not declare or pay a cash dividend on, or repurchase any
of, our capital stock if the effect of such dividend or repurchase
would be to cause our equity to be reduced below the aggregate amount
then required for the liquidation account.
Interpretation and Amendment of the Plan of Conversion
To the extent permitted by law, our interpretations of the Plan
of Conversion will be final. We may substantively amend the Plan of
Conversion at any time prior to the mailing of the Plan of Conversion
and proxy materials to our members. After such mailing, we may amend
the Plan of Conversion at any time prior to the special meeting of our
members and at any time following the
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meeting with the concurrence of the OTS. We may modify or terminate the Plan
of Conversion upon the order of the regulatory authorities without a
resolicitation of proxies or another meeting of our members.
In the event that mandatory new regulations pertaining to
conversions are adopted by the OTS or any successor agency prior to
completion of the Conversion, the Plan of Conversion will be amended
to conform to such regulations without a resolicitation of proxies or
another meeting of our members. In the event that such new conversion
regulations contain optional provisions, we may amend the Plan of
Conversion to utilize such optional provisions without a
resolicitation of proxies or another meeting of our members. By
approval of the Plan of Conversion, our members will be deemed to have
authorized amendment of the Plan of Conversion under the circumstances
described above.
Conditions and Termination
In order to complete the Conversion, (i) the Plan of Conversion
must be approved by at least a majority of the total number of votes
of our members eligible to be cast at the special meeting of our
members and (ii) all shares of the Common Stock must be sold within 24
months after the members approve the Plan of Conversion. If these
conditions are not satisfied, we will terminate the Plan of Conversion
and will continue our business in the mutual form of organization. We
may terminate the Plan of Conversion at any time prior to the special
meeting of our members and, with the approval of the OTS, at any time
after the meeting.
Other
All statements made in this Proxy Statement are hereby qualified
by the contents of the Plan of Conversion which is attached as Exhibit
A to this Proxy Statement. Please consult the Plan of Conversion for
further information. In addition, please refer to the section
entitled "The Conversion" in the accompanying prospectus for a more
detailed discussion of various aspects of the Plan of Conversion.
CHARTER AND BYLAWS
The following is a summary of certain provisions of the charter
and bylaws which will become effective upon our conversion into a
federally chartered stock savings association. Complete copies of the
stock charter and bylaws are attached as Exhibits B and C to this
proxy statement.
In stock form, we will be authorized to issue 20,000,000 shares
of common stock with no par value. Our common stock will not be
insured by the FDIC. All of our outstanding common stock will be
owned by our holding company. Accordingly, exclusive voting rights
with respect to our affairs after the Conversion will be vested in our
holding company's Board of Directors.
Our stock charter provides that the number of directors shall be
not fewer than five or more
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than 15, with the exact number to be fixed in the Bylaws. The proposed stock
bylaws provide that the number directors shall be six. Directors will serve
for terms of three years and the terms of directors will be staggered so that
approximately one-third of the Board is elected each year.
In addition to the common stock, we will be authorized to issue
5,000,000 shares of serial preferred stock, with no par value. The
Board of Directors will be permitted, without further stockholder
approval, to authorize the issuance of preferred stock in series and
to fix the voting powers, designations, preferences and relative,
participating, optional, conversion and other special rights of the
shares of each series of the preferred stock and the qualifications,
limitations and restrictions thereof. Preferred stock may rank prior
to common stock in dividend rights, liquidation preferences, or both,
and may have voting rights.
Neither the stock charter nor the bylaws provide for
indemnification of officers and directors. However, we will be
required by OTS regulations (as we currently are) to indemnify its
directors, officers and employees against legal and other expenses
incurred in defending lawsuits brought against them by reasons of the
performance of their official duties. Indemnification may be made to
any such person only if final judgment on the merits is in his favor
or, in case of (i) settlement, (ii) final judgment against him or
(iii) final judgment in his favor, other than on the merits, if a
majority of our directors determines that he was acting in good faith
within the scope of his employment or authority as he could reasonably
have perceived it under the circumstances and for a purpose he could
have reasonably believed under the circumstances was in our best
interest or the best interest of our stockholders. If a majority of
our directors concludes that in connection with an action any person
ultimately may become entitled to indemnification, the directors may
authorize payment of reasonable costs and expenses arising from
defense or settlement of such action.
HOW TO ORDER STOCK
The accompanying prospectus contains information about our
business and financial condition of the and additional information
about the Conversion and the Subscription Offering and the Community
Offering. Enclosed is a Stock Order Form you must use to purchase for
stock. You are not obligated to purchase for stock, and voting to
approve the Conversion will not obligate you to purchase for stock.
All Subscription Rights are nontransferable and will expire if
not exercised by returning the accompanying Stock Order Form with full
payment (or appropriate instructions authorizing withdrawal from a
savings or certificate account with us) for all shares for which
subscription is made to our holding company by __:__ _.m., Eastern
Time, on December __, 1997, unless extended by us. A postage-paid
reply envelope is provided for this purpose. Provided that not all of
the shares are subscribed for in the Subscription Offering by our
members, the remaining shares may be offered to the general public in
the Community Offering with preference given to natural persons and
trusts of natural persons who reside in Cocke County, Tennessee.
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The information contained in this proxy statement is limited in
its scope to use in the solicitation of proxies for the Special
Meeting to vote on the Plan of Conversion. It is not intended for use
in the offering of the Common Stock. Such offering is made only by
the prospectus.
ADDITIONAL INFORMATION
The information contained in the accompanying prospectus includes
a more detailed description of the Plan of Conversion and is intended
to help you evaluate the Conversion.
All persons eligible to vote at the Special Meeting should review
both this proxy statement and the accompanying prospectus carefully.
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS
PROXY MATERIAL AND, WHETHER OR NOT YOU PLAN OF CONVERSION TO BE
PRESENT IN PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT
YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN
PERSON IF YOU ATTEND THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY
BY WRITTEN INSTRUMENT DELIVERED TO THE SECRETARY OF NEWPORT FEDERAL
SAVINGS AND LOAN ASSOCIATION AT ANY TIME PRIOR TO OR AT THE SPECIAL
MEETING OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY THE COMMON STOCK. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
William B. Henry
Secretary
November __, 1997
Newport, Tennessee
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Exhibit A
Newport Federal Savings and Loan Association
Newport, Tennessee
PLAN OF CONVERSION
FROM MUTUAL TO STOCK ORGANIZATION
I. General.
On May 20, 1997, the Board of Directors of Newport Federal Savings and
Loan Association, Newport, Tennessee (the "Bank"), after careful study and
consideration, adopted this Plan of Conversion from Mutual to Stock
Organization (the "Plan"), whereby the Bank will convert from a federal
mutual savings association named "Newport Federal Savings and Loan
Association" to a federal capital stock savings association named "Newport
Federal Bank" (the "Converted Bank") as a wholly owned subsidiary of a
Holding Company to be formed at the direction of the Bank (the "Conversion").
The Board of Directors amended the Plan on September 12, 1997.
The Conversion is subject to regulations of the Director of the Office of
Thrift Supervision of the United States Department of the Treasury ("OTS")
pursuant to Section 5(i) of the Home Owners' Loan Act and Part 563b of the
Rules and Regulations Applicable to All Savings Associations.
The Plan is subject to the prior written approval of the OTS and must be
adopted by the affirmative vote of at least a majority of the total
outstanding votes of the Members of the Bank. Pursuant to the Plan, shares
of Conversion Stock in the Holding Company will be offered in a Subscription
Offering pursuant to non-transferable Subscription Rights at a predetermined
and uniform price first to the Bank's Eligible Account Holders of record as
of December 31, 1995, second to the Bank's Tax-Qualified Employee Stock
Benefit Plans, third to Supplemental Eligible Account Holders of record as of
the last day of the calendar quarter preceding OTS approval of the Bank's
application to convert to stock form and fourth to Other Members of the Bank.
Concurrently with the Subscription Offering, shares not subscribed for in
the Subscription Offering may be offered by the Bank to the general public in
a Community Offering. Shares remaining, if any, may then be offered to the
general public in an underwritten public offering or otherwise. The
aggregate Purchase Price of the Conversion Stock will be based upon an
independent appraisal of the Bank and will reflect the estimated pro forma
market value of the Converted Bank, as a subsidiary of the Holding Company.
It is the desire of the Board of Directors to attract new capital to the
Converted Bank to increase its net worth, to support future savings growth,
to increase the amount of funds available for other lending and investment,
to provide greater resources for the expansion of customer services and to
facilitate future expansion. In addition, the Board of Directors currently
intends to implement stock option plans and other stock benefit plans
subsequent to the Conversion to better attract and retain qualified directors
and officers. It is the further desire of the Board of Directors to
reorganize the Converted Bank as the wholly owned subsidiary of the Holding
Company to enhance flexibility of operations, diversification of business
opportunities and financial capability for business and regulatory purposes
and to enable the Converted Bank to compete more effectively with other
financial service organizations.
No change will be made in the Board of Directors or management of the
Bank as a result of the Conversion.
II. Definitions.
Acting in Concert: The term "Acting in Concert" means (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or
(ii) a combination or pooling of voting or other interests in the securities
of an issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
A person (as defined by 12 C.F.R. Section 563b.2(a)(26)) who acts in concert
with another person ("other party") shall also be deemed to be acting in
concert with any person who is also acting in concert with that other party,
except that any Tax-Qualified
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Employee Stock Benefit Plan will not be deemed to be acting in concert with
its trustee or a person who serves in a similar capacity solely for the
purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
Associate: The term "Associate," when used to indicate a relationship
with any person, means (i) any corporation or organization (other than the
Bank, the Holding Company or a majority-owned subsidiary of the Bank or the
Holding Company) 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, except that such term shall not include a
"Tax-Qualified Employee Stock Benefit Plan," as defined herein; and (iii) any
relative or spouse of such person, or any relative of such spouse, who has
the same home as such person or who is a director of the Bank or the Holding
Company, or any of their subsidiaries.
Bank: The term "Bank" means the converting savings association in its
pre-conversion form as a federal mutual savings association named "Newport
Federal Savings and Loan Association."
Capital Stock: The term "Capital Stock" means any and all authorized
shares of stock of the Converted Bank.
Community Offering: The term "Community Offering" means the offering of
shares of Conversion Stock to the general public by the Holding Company
concurrently with or after commencement of the Subscription Offering, giving
preference to natural persons and trusts of natural persons (including
individual retirement and Keogh retirement accounts and personal trusts in
which such natural persons have substantial interests) who are permanent
Residents of the Bank's Local Community.
Conversion: The term "Conversion" means (i) the amendment of the Bank's
federal mutual charter and bylaws to authorize issuance of shares of Capital
Stock by the Converted Bank and to conform to the requirements of a federal
capital stock savings association under the laws of the United States and
applicable regulations; (ii) the issuance and sale of Conversion Stock by the
Holding Company in the Subscription and Community Offerings and/or in an
underwritten public offering or otherwise; and (iii) the purchase by the
Holding Company of all the Capital Stock of the Converted Bank to be issued
in the Conversion immediately following or concurrently with the close of the
sale of the Conversion Stock.
Conversion Stock: The term "Conversion Stock" means the shares of common
stock to be issued and sold by the Holding Company pursuant to the Plan.
Converted Bank: The term "Converted Bank" means the converting savings
association in its post-conversion form as a federal capital stock savings
association named " Newport Federal Bank."
Eligibility Record Date: The term "Eligibility Record Date" means the
close of business on December 31, 1995.
Eligible Account Holder: The term "Eligible Account Holder" means each
holder of one or more Qualifying Deposits in the Bank on the Eligibility
Record Date.
Holding Company: The term "Holding Company" means a corporation to be
incorporated by the Bank under state law for the purpose of becoming a
holding company for the Converted Bank through the issuance and sale of
Conversion Stock under the Plan and the concurrent acquisition of 100% of the
Capital Stock to be issued and sold pursuant to the Plan.
Holding Company Stock: The term "Holding Company Stock" means any and
all authorized shares of stock of the Holding Company.
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Independent Appraiser: The term "Independent Appraiser" means a person
independent of the Bank, experienced and expert in the area of corporate
appraisal, and acceptable to the OTS, retained by the Bank to prepare an
appraisal of the pro forma market value of the Converted Bank, as a
subsidiary of the Holding Company.
Local Community: The term "Local Community" means the county or counties
in which the Bank's office or offices are located.
Market Maker: The term "Market Maker" means a dealer (i.e., 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) who, with respect to a particular security, (i)(a) regularly
publishes bona fide, competitive bid and offer quotations in a recognized
interdealer quotation system or (b) furnishes bona fide competitive bid and
offer quotations on request and (ii) is ready, willing and able to effect
transactions in reasonable quantities at its quoted prices with other brokers
or dealers.
Member: The term "Member" means any person or entity who qualifies as a
member of the Bank under its federal mutual charter and bylaws prior to the
Conversion.
Officer: The term "Officer" means an executive officer of the Holding
Company or the Bank (as applicable), including the Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents in charge of
principal business functions, Secretary and Treasurer.
Order Form: The term "Order Form" means the order form or forms to be
used by Eligible Account Holders, Supplemental Eligible Account Holders and
other persons eligible to purchase Conversion Stock pursuant to the Plan.
Other Member: The term "Other Member" means any person, other than an
Eligible Account Holder or a Supplemental Eligible Account Holder, who is a
Member as of the Voting Record Date.
OTS: The term "OTS" means the Office of Thrift Supervision of the United
States Department of the Treasury or any successor agency having jurisdiction
over the Conversion.
Plan: The term "Plan" means this Plan of Conversion under which the Bank
will convert from a federal mutual savings association to a federal capital
stock savings association as a wholly owned subsidiary of the Holding
Company, as originally adopted by the Board of Directors or amended in
accordance with the terms hereof.
Qualifying Deposit: The term "Qualifying Deposit" means each savings
balance in any Savings Account in the Bank as of the close of business on the
Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable, which is equal to or greater than $50.00.
Registration Statement: The term "Registration Statement" means the
Registration Statement on Form S-1, or such other form as may be appropriate,
and any amendments thereto, filed by the Holding Company with the SEC
pursuant to the Securities Act of 1933, as amended, to register shares of
Conversion Stock.
Resident: The term "Resident," as used in this Plan in relation to the
preference afforded natural persons and trusts of natural persons in the
Local Community, includes any natural person who occupies a dwelling within
the Local Community, has an intention to remain within the Local Community
for a period of time (manifested by establishing a physical, ongoing,
non-transitory presence within the Local Community) and continues to reside
therein at the time of the Community Offering. The Bank may utilize deposit
or loan records or such other evidence provided to it to make the
determination as to whether a person is residing in the Local Community. To
the extent the "person" is a corporation or other business entity, the
principal place of business or headquarters should be within the Local
Community. To the extent the "person" is a personal benefit plan, the
circumstances of the beneficiary shall apply with respect to this
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definition. In the case of all other benefit plans, circumstances of the
trustee shall be examined for purposes of this definition. In all cases,
such determination shall be in the sole discretion of the Bank.
Sale: The terms "sale" and "sell" mean every contract to sell or
otherwise dispose of a security or an interest in a security for value, but
such terms do not include an exchange of securities in connection with a
merger or acquisition approved by the OTS or any other federal agency having
jurisdiction.
Savings Account: The term "Savings Account" means a withdrawable deposit
in the Bank.
SEC: The term "SEC" means the Securities and Exchange Commission or any
successor agency.
Special Meeting: The term "Special Meeting" means the Special Meeting of
Members to be called for the purpose of submitting the Plan to the Members
for their approval.
Subscription Offering: The term "Subscription Offering" means the
offering of shares of Conversion Stock to Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible Account
Holders and Other Members under the Plan.
Subscription and Community Prospectus: The term "Subscription and
Community Prospectus" means the final prospectus to be used in connection
with the Subscription and Community Offerings.
Subscription Rights: The term "Subscription Rights" means
non-transferable, non-negotiable, personal rights of Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members to purchase Conversion Stock offered under
the Plan.
Supplemental Eligibility Record Date: The term "Supplemental Eligibility
Record Date" means the last day of the calendar quarter preceding the
approval of the Plan by the OTS.
Supplemental Eligible Account Holder: The term "Supplemental Eligible
Account Holder" means each holder of one or more Qualifying Deposits in the
Bank (other than Officers and directors of the Bank and their Associates) on
the Supplemental Eligibility Record Date.
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 or the Holding Company, such as an employee
stock ownership plan, stock bonus plan, profit sharing plan or other plan,
which, with its related trust, meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code of 1986, as amended.
"Non-Tax-Qualified Employee Stock Benefit Plan" means any defined benefit
plan or defined contribution plan which is not so qualified.
Voting Record Date: The term "Voting Record Date" means the date fixed
by the Board of Directors of the Bank to determine Members of the Bank
entitled to vote at the Special Meeting.
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III. Steps Prior to Submission of the Plan to the Members for Approval.
Prior to submission of the Plan to its Members for approval, the Bank
must receive approval from the OTS of an Application for Approval of
Conversion on Form AC, which includes the Plan to convert to the stock form
of organization (the "Application"). The following steps must be taken prior
to such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. Promptly after adoption of the Plan by the Board of Directors, the
Bank shall notify its Members of the adoption of the Plan by publishing a
statement in a newspaper having a general circulation in each community in
which the Bank maintains an office and/or by mailing a letter to each of
its Members.
C. A press release relating to the proposed Conversion may be
submitted to the local media.
D. Copies of the Plan adopted by the Board of Directors shall be made
available for inspection by Members at each office of the Bank.
E. The Bank shall cause the Holding Company to be incorporated under
state law, and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
F. The Bank shall submit or cause to be submitted the Application to
the OTS. The Holding Company shall submit or cause to be submitted an
Application H-(e)1 or Application H-(e)1-S to the OTS and the Registration
Statement to the SEC. Upon receipt of advice from the regulatory
authorities that the Application has been received and is in the prescribed
form, the Bank shall publish a "Notice of Filing of an Application for
Conversion to a Stock Savings Association" in a newspaper of general
circulation, as referred to in Paragraph III.B. herein. The Bank also
shall prominently display a copy of such notice in each of its offices.
The Holding Company shall publish notice of the filing of the Application
H-(e)1 or H-(e)1-S in accordance with applicable regulations.
G. The Bank shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which
shall state that the Conversion will not result in a taxable reorganization
for federal income tax purposes to the Bank. Receipt of a favorable
opinion or ruling is a condition precedent to completion of the Conversion.
H. The Plan shall be submitted to a vote of the Members at the
Special Meeting after approval by the OTS.
IV. Meeting of Members.
Following receipt of approval of the Plan by the OTS, the Special Meeting
to vote on the Plan shall be scheduled in accordance with the Bank's bylaws
and applicable regulations. Notice of the Special Meeting will be given by
means of a proxy statement authorized for use by the OTS. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to
the Special Meeting, the Bank will distribute proxy solicitation materials to
all voting Members as of the Voting Record Date established for voting at the
Special Meeting. Proxy materials will also be sent to each beneficial holder
of an Individual Retirement Account where the name of the beneficial holder
is disclosed on the Bank's records. The proxy solicitation materials will
include a copy of the Proxy Statement and other documents authorized for use
by the regulatory authorities and may also include a Subscription and
Community Prospectus as provided in Paragraph VI. below. The Bank will also
advise each Eligible Account Holder and Supplemental Eligible Account Holder
not entitled to vote at the Special Meeting of the proposed Conversion and
the scheduled Special Meeting and provide a postage paid card on which to
indicate whether he or she wishes to receive the Subscription and
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Community Prospectus, if the Subscription and Community Offerings are not
held concurrently with the proxy solicitation.
Pursuant to applicable regulations, an affirmative vote of at least a
majority of the total outstanding votes of the Members will be required for
approval of the Plan. Voting may be in person or by proxy. The OTS shall be
promptly notified of the actions of the Members at the Special Meeting.
V. Summary Proxy Statement.
The Proxy Statement to be furnished to Members may be in summary form,
provided that a statement is made in boldface type that a more detailed
description of the proposed transaction may be obtained by returning an
enclosed postage paid card or other written communication requesting a
supplemental information statement. Without prior approval from the OTS, the
Special Meeting shall not be held fewer than 20 days after the last day on
which the supplemental information statement is mailed to Members requesting
the same. The supplemental information statement may be combined with the
Subscription and Community Prospectus if the Subscription and Community
Offerings are commenced concurrently with the proxy solicitation of Members
for the Special Meeting.
VI. Offering Documents.
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Community
Offering concurrently with or during the proxy solicitation of Members and
may close the Subscription and Community Offerings before the Special
Meeting, provided that the offer and sale of the Conversion Stock shall be
conditioned upon approval of the Plan by the Members at the Special Meeting.
The Bank's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members to return to
the Bank by a reasonable date certain a postage-paid written communication
requesting receipt of a Subscription and Community Prospectus in order to be
entitled to receive a Subscription and Community Prospectus, provided that
the Subscription Offering shall not be closed until the expiration of 30 days
after mailing proxy solicitation materials to voting Members and a
postage-paid written communication to non-voting Eligible Account Holders and
Supplemental Eligible Account Holders. If the Subscription Offering is
commenced within 45 days after the Special Meeting, the Bank shall transmit,
no more than 30 days prior to the commencement of the Subscription Offering,
to each voting Member who had been furnished with proxy solicitation
materials and to each non-voting Eligible Account Holder and Supplemental
Eligible Account Holder, written notice of the commencement of the
Subscription Offering which shall state that the Bank is not required to
furnish a Subscription and Community Prospectus to them unless they return by
a reasonable date certain a postage-paid written communication requesting the
receipt of the Subscription and Community Prospectus.
Prior to commencement of the Subscription and Community Offerings, the
Holding Company shall file the Registration Statement with the SEC pursuant
to the Securities Act of 1933, as amended. The Holding Company shall not
distribute the Subscription and Community Prospectus until the Registration
Statement containing the same has been declared effective by the SEC and the
aforementioned documents have been approved by the OTS. The Subscription and
Community Prospectus may be combined with the Proxy Statement for the Special
Meeting.
VII. Consummation of Conversion.
The date of consummation of the Conversion will be the effective date of
the amendment of the Bank's federal mutual charter to read in the form of a
federal stock charter, which shall be the date of the issuance and sale of
the Conversion Stock. After receipt of all orders for Conversion Stock, and
concurrently with the execution thereof, the amendment of the Bank's federal
mutual charter to authorize the issuance of shares of Capital Stock and to
conform to the requirements of a federal capital stock savings association
will be declared effective by the OTS, and the amended
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bylaws approved by the Members will become effective. At such time, the
Conversion Stock will be issued and sold by the Holding Company, the Capital
Stock to be issued in the Conversion will be issued and sold to the Holding
Company, and the Converted Bank will become a wholly owned subsidiary of the
Holding Company. The Converted Bank will issue to the Holding Company
100,000 shares of its common stock, representing all of the shares of Capital
Stock to be issued by the Converted Bank in the Conversion, and the Holding
Company will make payment to the Converted Bank of at least 50 percent of the
aggregate net proceeds realized by the Holding Company from the sale of the
Conversion Stock under the Plan, or such other portion of the aggregate net
proceeds as may be authorized or required by the OTS.
VIII. Stock Offering.
A. General.
The aggregate purchase price of all shares of Conversion Stock which
will be offered and sold will be equal to the estimated pro forma market
value of the Converted Bank, as a subsidiary of the Holding Company, as
determined by an independent appraisal. The exact number of shares of
Conversion Stock to be offered will be determined by the Board of Directors
of the Bank and the Board of Directors of the Holding Company, or their
respective designees, in conjunction with the determination of the Purchase
Price (as that term is defined in Paragraph VIII.B. below). The number of
shares to be offered may be subsequently adjusted prior to completion of
the Conversion as provided below.
B. Independent Evaluation and Purchase Price of Shares.
All shares of Conversion Stock sold in the Conversion will be sold at
a uniform price per share referred to in this Plan as the "Purchase Price."
The Purchase Price and the total number of shares of Conversion Stock to
be offered in the Conversion will be determined by the Board of Directors
of the Bank and the Board of Directors of the Holding Company, or their
respective designees, immediately prior to the simultaneous completion of
all such sales contemplated by this Plan on the basis of the estimated pro
forma market value of the Converted Bank, as a subsidiary of the Holding
Company, at such time. The estimated pro forma market value of the
Converted Bank, as a subsidiary of the Holding Company, will be determined
for such purpose by an Independent Appraiser on the basis of such
appropriate factors as are not inconsistent with applicable regulations.
Immediately prior to the Subscription and Community Offerings, a
subscription price range of shares for the offerings will be established
(the "Valuation Range"), which will vary from 15% above to 15% below the
midpoint of such range. The number of shares of Conversion Stock
ultimately issued and sold will be determined at the close of the
Subscription and Community Offerings and any other offering. The
subscription price range and the number of shares to be offered may be
changed subsequent to the Subscription and Community Offerings as the
result of any appraisal updates prior to the completion of the Conversion,
without notifying eligible purchasers in the Subscription and Community
Offerings and without a resolicitation of subscriptions, provided the
aggregate Purchase Price is not below the low end or more than 15 percent
above the high end of the Valuation Range previously approved by the OTS or
if, in the opinion of the Boards of Directors of the Bank and the Holding
Company, the new Valuation Range established by the appraisal update does
not result in a materially different capital position of the Converted
Bank.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Bank and the Holding Company and to the OTS that, to the
best knowledge of the Independent Appraiser, nothing of a material nature
has occurred which, taking into account all relevant factors, would cause
the Independent Appraiser to conclude that the aggregate value of the
Conversion Stock at the Purchase Price is incompatible with its estimate of
the aggregate consolidated pro forma market value of the Converted Bank, as
a subsidiary of the Holding Company. If such confirmation is not received,
the Bank may cancel the Subscription and Community Offerings and/or any
other
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offering, extend the Conversion, establish a new Valuation Range,
extend, reopen or hold new Subscription and Community Offerings and/or
other offerings or take such other action as the OTS may permit.
C. Subscription Offering.
Non-transferable Subscription Rights to purchase shares of Conversion
Stock will be issued at no cost to Eligible Account Holders, Tax-Qualified
Employee Stock Benefits Plans, Supplemental Eligible Account Holders and
Other Members pursuant to priorities established by applicable regulations.
All shares must be sold, and, to the extent that Conversion Stock is
available, no subscriber will be allowed to purchase fewer than 25 shares
of Conversion Stock, provided that this number shall be decreased if the
aggregate purchase price exceeds $500. The priorities established by
applicable regulations for the purchase of shares are as follows:
1. Category No. 1: Eligible Account Holders.
a. Each Eligible Account Holder shall receive, without payment,
with respect to each Qualifying Deposit in the Bank on the Eligibility
Record Date, non-transferable Subscription Rights to purchase
Conversion Stock in an amount equal to the greater of $110,000,
one-tenth of one percent of the total offering of shares of Conversion
Stock or 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Conversion Stock
to be issued by a fraction of which the numerator is the amount of the
Qualifying Deposit of the Eligible Account Holder and the denominator
is the total amount of Qualifying Deposits of all Eligible Account
Holders in the Converted Bank in each case on the Eligibility Record
Date.
b. Non-transferable Subscription Rights to purchase Conversion
Stock received by Officers and directors of the Bank and their
Associates based on their increased deposits in the Bank in the one
year period preceding the Eligibility Record Date shall be
subordinated to all other subscriptions involving the exercise of
non-transferable Subscription Rights to purchase shares pursuant to
this Subscription Category.
c. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among subscribing Eligible Account Holders as follows:
(I) Shares of Conversion Stock shall be allocated among
subscribing Eligible Account Holders so as to permit each such
Account Holder, to the extent possible, to purchase a number of
shares of Conversion Stock sufficient to make its total
allocation equal to 100 shares or the total amount of its
subscription, whichever is less.
(II) Any shares not so allocated shall be allocated among
the subscribing Eligible Account Holders on an equitable basis,
related to the amounts of their respective aggregate Qualifying
Deposits, as compared to the total aggregate Qualifying Deposits
of all subscribing Eligible Account Holders.
2. Category No. 2: Tax-Qualified Employee Stock Benefit Plans.
a. Tax-Qualified Employee Stock Benefit Plans of the Converted
Bank shall receive, without payment, non-transferable Subscription
Rights to purchase up to 10% of the shares of Conversion Stock issued
in the Conversion.
b. Subscription rights received in this Category shall be
subordinated to the Subscription Rights received by Eligible Account
Holders pursuant to Category No. 1, provided that any shares
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of Conversion Stock sold in excess of the high end of the Valuation
Range may be first sold to Tax-Qualified Employee Stock Benefit Plans.
3. Category No. 3: Supplemental Eligible Account Holders.
a. In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment of the Application
filed prior to OTS approval, then each Supplemental Eligible Account
Holder shall receive, without payment, with respect to each Qualifying
Deposit in the Bank on the Supplemental Eligibility Record Date,
non-transferable Subscription Rights to purchase Conversion Stock in
an amount equal to the greater of $110,000, one-tenth of one percent
of the total offering of shares of Conversion Stock or 15 times the
product (rounded down to the next whole number) obtained by
multiplying the total number of the shares of Conversion Stock to be
issued by a fraction of which the numerator is the amount of the
Qualifying Deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of the Qualifying Deposits of all
Supplemental Eligible Account Holders on the Supplemental Eligibility
Record Date.
b. Subscription Rights received pursuant to this Category shall
be subordinated to the Subscription Rights received by the Eligible
Account Holders and by Tax-Qualified Employee Stock Benefit Plans
pursuant to Category Nos. 1 and 2.
c. Any non-transferable Subscription Rights to purchase shares
received by an Eligible Account Holder in accordance with Category No.
1 shall reduce to the extent thereof the Subscription Rights to be
distributed to such Eligible Account Holder pursuant to this Category.
d. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among the subscribing Supplemental Eligible Account Holders
as follows:
(I) Shares of Conversion Stock shall be allocated among
subscribing Supplemental Eligible Account Holders so as to permit
each such Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares of Conversion Stock
sufficient to make its total allocation (including the number of
shares of Conversion Stock, if any, allocated in accordance with
Category No. 1) equal to 100 shares of Conversion Stock or the
total amount of its subscription, whichever is less.
(II) Any shares of Conversion Stock not allocated in
accordance with subparagraph (I) above shall be allocated among
the subscribing Supplemental Eligible Account Holders on an
equitable basis, related to the amounts of their respective
aggregate Qualifying Deposits on the Supplemental Eligibility
Record Date as compared to the total aggregate Qualifying
Deposits of all subscribing Supplemental Eligible Account Holders
in each case on the Supplemental Eligibility Record Date.
4. Category No. 4: Other Members.
a. Each Other Member, other than those Members who are Eligible
Account Holders or Supplemental Eligible Account Holders, shall
receive, without payment, with respect to each deposit account in, or
loan from, the Bank on the Voting Record Date, non-transferable
Subscription Rights to purchase Conversion Stock in an amount equal to
the greater of $110,000 or one-tenth of one percent of the total
offering of shares of Conversion Stock.
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<PAGE>
b. Subscription Rights received pursuant to this Category shall
be subordinated to the Subscription Rights received by Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders pursuant to Category Nos. 1, 2
and 3.
c. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, the shares of Conversion Stock
available shall be allocated among subscribing Other Members so as to
permit each subscribing Other Member, to the extent possible, to
purchase a number of shares sufficient to make his or her total
allocation of Conversion Stock equal to the lesser of 100 shares or
the number of shares subscribed for by the Other Member. The shares
remaining thereafter will be allocated among subscribing Other Members
whose subscriptions remain unsatisfied on a reasonable basis as
determined by the Board of Directors.
Order Forms may provide that the maximum purchase limitation
shall be based on the midpoint of the Valuation Range. In the event
the aggregate Purchase Price of the Conversion Stock issued and sold
is below the midpoint of the Valuation Range, that portion of
subscriptions in excess of the maximum purchase limitation will be
refunded. In the event the aggregate Purchase Price of Conversion
Stock issued and sold is above the midpoint of the Valuation Range,
persons who have subscribed for the maximum purchase limitation may be
given the opportunity to increase their subscriptions so as to
purchase the maximum number of shares subject to the availability of
shares. The Bank will not otherwise notify subscribers of any change
in the number of shares of Conversion Stock offered.
D. Community Offering.
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights in the Subscription Offering may be
sold in a Community Offering, which may commence concurrently with the
Subscription Offering. Shares of Conversion Stock will be offered in
the Community Offering to the general public, giving preference to
natural persons and the trusts of natural persons (including
individual retirement and Keogh retirement accounts and personal
trusts in which such natural persons have substantial interests) who
are permanent Residents of the Local Community. The Community
Offering may commence concurrently with or as soon as practicable
after the completion of the Subscription Offering and must be
completed within 45 days after the last day of the Subscription
Offering, unless extended by the Holding Company with the approval of
the OTS. The offering price of the Conversion Stock to the general
public in the Community Offering will be the same price paid for such
stock by Eligible Account Holders and other persons in the
Subscription Offering. If sufficient shares are not available to
satisfy all orders in the Community Offering, the shares available
will be allocated by the Holding Company in its discretion. The
Holding Company shall have the right to accept or reject orders in the
Community Offering in whole or in part.
2. Orders accepted in the Community Offering shall be filled up
to a maximum of 2% of the Conversion Stock, and thereafter remaining
shares shall be allocated on an equal number of shares basis per order
until all orders have been filled.
3. The Conversion Stock to be offered in the Community Offering
will be offered and sold in a manner that will achieve the widest
distribution of the Conversion Stock.
E. Other Offering.
In the event a Community Offering does not appear feasible, the
Bank will immediately consult with the OTS to determine the most
viable alternative available to effect the completion of
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the Conversion. Should no viable alternative exist, the Bank may
terminate the Conversion with the concurrence of the OTS.
F. Limitations Upon Purchases of Shares of Conversion Stock.
The following additional limitations and exceptions shall apply to all
purchases of Conversion Stock:
1. No Person may purchase fewer than 25 shares of Conversion
Stock in the Conversion, to the extent such shares are available.
2. Purchases of Conversion Stock in the Community Offering by
any person, when aggregated with purchases by an Associate of that
person, or a group of persons Acting in Concert, shall not exceed
$220,000 of the Conversion Stock, except that Tax-Qualified Employee
Stock Benefit Plans may purchase up to 10% of the total shares of
Conversion Stock to be issued in the Conversion, and shares to be held
by the Tax-Qualified Employee Stock Benefit Plans and attributable to
a participant thereunder shall not be aggregated with shares of
Conversion Stock purchased by such participant or any other purchaser
of Conversion Stock in the Conversion.
3. Officers and directors of the Bank and the Holding Company,
and Associates thereof, may not purchase in the aggregate more than
34% of the shares of Conversion Stock issued in the Conversion, or
such greater amount as may be permitted under applicable legal limits.
4. Directors of the Holding Company and the Bank shall not be
deemed to be Associates or a group Acting in Concert with other
directors solely as a result of membership on the Board of Directors
of the Holding Company or the Bank or any of their subsidiaries.
5. Purchases of shares of Conversion Stock in the Conversion by
any person, when aggregated with purchases by an Associate of that
person, or a group of persons Acting in Concert, shall not exceed
$220,000 of the Conversion Stock, except that Tax-Qualified Employee
Stock Benefit Plans may purchase up to 10% of the total shares of
Conversion Stock to be issued in the Conversion, and shares purchased
by the Tax-Qualified Employee Stock Benefit Plans and attributable to
a participant thereunder shall not be aggregated with shares purchased
by such participant or any other purchaser of Conversion Stock in the
Conversion.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the Holding Company and the Bank may
increase or decrease any of the purchase limitations set forth herein at
any time. Under current regulatory authority, the Boards of Directors of
the Holding Company and the Bank may, in their discretion, increase the
maximum purchase limitations in the Subscription Offering and/or, if
applicable, the Community Offering or other offering up to 9.99%, provided
that orders for shares exceeding 5% of the shares to be issued in the
Conversion shall not exceed, in the aggregate, 10% of the shares to be
issued in the Conversion. In the event that the individual purchase
limitation is increased after commencement of the Subscription and
Community Offerings, the Holding Company and the Bank shall permit any
person who subscribed for the maximum number of shares of Conversion Stock
to purchase an additional number of shares, such that such person shall be
permitted to subscribe for the then maximum number of shares permitted to
be subscribed for by such person, subject to the rights and preferences of
any person who has priority Subscription Rights. In the event that either
the individual purchase limitation or the number of shares of Conversion
Stock to be sold in the Conversion is decreased after commencement of the
Subscription and Community Offerings, the orders of any person who
subscribed for the maximum number of shares of Conversion Stock shall be
decreased by the minimum amount necessary so that such person shall be in
compliance with the then maximum number of shares permitted to be
subscribed for by such person.
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<PAGE>
Each person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or regulation.
In the event that such purchase limitations are violated by any person
(including any Associate or group of persons affiliated or otherwise Acting
in Concert with such person), the Holding Company shall have the right to
purchase from such person at the actual Purchase Price per share all shares
acquired by such person in excess of such purchase limitations or, if such
excess shares have been sold by such person, to receive the difference
between the actual Purchase Price per share paid for such excess shares and
the price at which such excess shares were sold by such person. This right
of the Holding Company to purchase such excess shares shall be assignable
by the Holding Company.
G. Restrictions on and Other Characteristics of Stock Being Sold.
1. Transferability.
Except as provided in Paragraph XIII. below, Conversion Stock
purchased by persons other than directors and Officers of the Bank and
directors and Officers of the Holding Company will be transferable
without restriction. Conversion Stock purchased by such directors or
Officers shall not be sold for a period of one year from the date of
Conversion except for any sale of such shares (i) following the death
of the original purchaser or (ii) resulting from an exchange of
securities in a merger or acquisition approved by the applicable
regulatory authorities.
The Conversion Stock issued by the Holding Company to such
directors and Officers shall bear the following legend giving
appropriate notice of the one-year holding period restriction:
"The shares of stock evidenced by this Certificate are restricted
as to transfer for a period of one year from the date of this
Certificate pursuant to applicable regulations of the Office of
Thrift Supervision of the United States Department of the
Treasury. Except in the event of the death of the registered
holder, the shares represented by this Certificate may not be
sold prior thereto without a legal opinion of counsel for the
Holding Company that said sale is permissible under the
provisions of applicable laws and regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent for the Holding Company Stock with
respect to the applicable restrictions relating to the transfer of
restricted stock. Any shares of Holding Company Stock subsequently
issued as a stock dividend, stock split or otherwise, with respect to
any such restricted stock, shall be subject to the same holding period
restrictions for such directors and Officers as may be then applicable
to such restricted stock.
2. Repurchase and Dividend Rights.
Pursuant to present regulations, except as otherwise permitted by
the OTS, the Holding Company may not, for a period of three years from
the date of Conversion, repurchase Holding Company Stock from any
person, with the exception of (i) repurchases on a pro rata basis
pursuant to offers approved by the OTS and made to all stockholders,
(ii) repurchases of qualifying shares of directors or, (iii) unless
prohibited by the OTS, repurchases of shares to fund employee stock
benefit plans of the Holding Company or the Bank. Upon 10 days'
written notification to the OTS Regional Director for the Converted
Bank and the Chief Counsel of the Corporate and Securities Division of
the OTS, however, the Holding Company may make open market repurchases
of outstanding Holding Company Stock, provided that (i) such Regional
Director and Chief Counsel do not object based on a determination that
(a) the repurchases would materially adversely affect the financial
condition of the Converted Bank, (b) the information submitted by the
Converted Bank is insufficient upon which to base a conclusion as to
whether the Converted Bank's financial condition would be materially
A-12
<PAGE>
adversely affected, or (c) the Converted Bank does not demonstrate a
valid purpose for the repurchases. Except as otherwise permitted by
the OTS, (i) no repurchases may occur in the first year following the
Conversion; (ii) any repurchases in the second and third years
following the Conversion must be part of an open-market stock
repurchase program that allows no more than five percent (5%) of the
outstanding Holding Company Stock to be purchased during any 12 month
period; and (iii) any repurchases within the first three years
following the Conversion must not cause the Converted Bank to become
"undercapitalized," as defined pursuant to 12 C.F.R. Section 565.4 or
a successor regulation.
Present regulations also provide that the Converted Bank may not
declare or pay a cash dividend on or repurchase any of its Capital
Stock if the result thereof would be to reduce the regulatory capital
of the Converted Bank below the amount required for the Liquidation
Account. Further, any dividend declared or paid on, or repurchase of,
the Capital Stock shall be in compliance with the Rules and
Regulations of the OTS, or other applicable regulations.
The above limitations shall not preclude payment of dividends on,
or repurchases of, Holding Company Stock in the event applicable
federal regulatory limitations are liberalized subsequent to the
Conversion.
3. Voting Rights.
After Conversion, holders of Savings Accounts and obligors on
loans will not have voting rights in the Converted Bank. Exclusive
voting rights with respect to the Holding Company shall be vested in
the holders of Holding Company Stock, and the Holding Company will
have exclusive voting rights with respect to the Capital Stock. Each
stockholder of the Holding Company will be entitled to vote on any
matters coming before the stockholders of the Holding Company for
consideration and will be entitled to one vote for each share of stock
owned by said stockholder.
4. Purchases by Officers, Directors and Associates Following
Conversion.
Without the prior approval of the OTS, Officers and directors of
the Converted Bank and Officers and directors of the Holding Company,
and their Associates, shall be prohibited for a period of three years
following completion of the Conversion from purchasing outstanding
shares of Holding Company Stock, except from a broker or dealer
registered with the SEC. Notwithstanding this restriction, negotiated
transactions involving more than 1% of the total outstanding shares of
Holding Company Stock and purchases made and shares held by a
Tax-Qualified Employee Stock Benefit Plan or Non-Tax-Qualified
Employee Stock Benefit Plan which may be attributable to Officers or
directors may be made without OTS permission or the use of a broker or
dealer.
H. Mailing of Offering Materials and Collation of Subscriptions.
The sale of all shares of Conversion Stock offered pursuant to the
Plan must be completed within 24 months after approval of the Plan at the
Special Meeting. After approval of the Plan by the OTS and the declaration
of the effectiveness of the Subscription and Community Prospectus by the
SEC, the Holding Company shall distribute such Subscription and Community
Prospectus and Order Forms for the purchase of shares in accordance with
the terms of the Plan.
The recipient of an Order Form will be provided neither fewer than 20
days nor more than 45 days from the date of mailing, unless extended, to
complete, execute and return properly the Order Form to the Holding Company
or the Bank. Self-addressed, postage paid return envelopes will accompany
these forms when mailed. The Bank or Holding Company will collate the
returned executed Order Forms upon completion of the Subscription Offering.
Failure of any eligible subscriber to return a properly completed and
executed
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<PAGE>
Order Form within the prescribed time limits shall be deemed a waiver and
a release by such person of any rights to purchase shares of Conversion
Stock hereunder.
The sale of all shares of Conversion Stock shall be completed within
45 days after the last day of the Subscription Offering unless extended by
the Holding Company and the Bank with the approval of the OTS.
I. Method of Payment.
Payment for all shares of Conversion Stock subscribed for in the
Subscription and Community Offerings must be received in full by the Bank
or the Holding Company, together with properly completed and executed Order
Forms, indicating thereon the number of shares being subscribed for and
such other information as may be required thereon, on or prior to the
expiration date specified on the Order Form, unless such date is extended
by the Holding Company and the Bank; provided, however, that payments by
Tax-Qualified Employee Stock Benefit Plans for Conversion Stock may be made
to the Bank concurrently with the completion of the Conversion.
Payment for all shares of Conversion Stock may be made in cash (if
delivered in person) or by check or money order, or, if the subscriber has
a Savings Account in the Bank (including a certificate of deposit), the
subscriber may authorize the Bank to charge the subscriber's Savings
Account for the purchase amount. The Bank shall pay interest at not less
than the passbook rate on all amounts paid in cash or by check or money
order to purchase shares of Conversion Stock in the Subscription and
Community Offerings from the date payment is received until the Conversion
is completed or terminated. The Bank shall not knowingly loan funds or
otherwise extend credit to any person for the purpose of purchasing
Conversion Stock.
If a subscriber authorizes the Bank to charge its Savings Account, the
funds will remain in the subscriber's Savings Account and will continue to
earn interest, but may not be used by the subscriber until all Conversion
Stock has been sold or the Conversion is terminated, whichever is earlier.
The withdrawal will be given effect only concurrently with the sale of all
shares of Conversion Stock in the Conversion and only to the extent
necessary to satisfy the subscription at a price equal to the Purchase
Price. The Bank will allow subscribers to purchase shares of Conversion
Stock by withdrawing funds from certificate accounts without the assessment
of early withdrawal penalties. In the case of early withdrawal of only a
portion of such account, the certificate evidencing such account shall be
cancelled if the remaining balance of the account is less than the
applicable minimum balance requirement. In that event, the remaining
balance will earn interest at the passbook rate. This waiver of the early
withdrawal penalty is applicable only to withdrawals made in connection
with the purchase of Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order From, and in the case of an employee stock ownership
plan, together with evidence of a loan commitment from the Holding Company
or an unrelated financial institution for the purchase of the shares of
Conversion Stock, during the Subscription Offering and by making payment
for the shares of Conversion Stock on the date of the closing of the
Conversion.
J. Undelivered, Defective or Late Order Forms; Insufficient Payment.
In the event an Order Form (i) is not delivered and is returned to the
Holding Company or the Bank by the United States Postal Service (or the
Holding Company or the Bank is unable to locate the addressee); (ii) is not
received by the Holding Company or the Bank, or is received by the Holding
Company or the Bank after termination of the date specified thereon; (iii)
is defectively completed or executed; or (iv) is not accompanied by the
total required payment for the shares of Conversion Stock subscribed for
(including cases in which the subscribers' Savings Accounts are
insufficient to cover the authorized withdrawal for the required payment),
the Subscription Rights of the person to whom such rights have been granted
will not be honored
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and will be treated as though such person failed to return the completed
Order Form within the time period specified therein. Alternatively, the
Holding Company or the Bank may, but will not be required to, waive any
irregularity relating to any Order Form or require the submission of a
corrected Order Form or the remittance of full payment for subscribed
shares of Conversion Stock by such date as the Holding Company or the Bank
may specify. Subscription orders, once tendered, cannot be revoked. The
Holding Company's and the Bank's interpretation of the terms and
conditions of this Plan and acceptability of the Order Forms will be
final and conclusive.
K. Members in Non-Qualified States or in Foreign Countries.
The Holding Company will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons
entitled to subscribe for Conversion Stock pursuant to the Plan reside.
However, no such person will be offered or receive 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 any or all of the following
apply: (i) a small number of persons otherwise eligible to subscribe for
shares of Conversion Stock under this Plan reside in such state or foreign
country; (ii) the granting of Subscription Rights or the offer or sale of
shares of Conversion Stock to such person would require the Holding Company
or the Bank or their employees to register, under the securities laws of
such state, as a broker, dealer, salesman or agent or to register or
otherwise qualify its securities for sale in such state or foreign country;
and (iii) such registration qualification would be impracticable for
reasons of cost or otherwise. No payments will be made in lieu of the
granting of Subscription Rights to any such person.
L. Sales Commissions.
Sales commissions may be paid as determined by the Boards of Directors
of the Bank and the Holding Company or their designees to securities
dealers assisting subscribers in making purchases of Conversion Stock in
the Subscription Offering or in the Community Offering, if the securities
dealer is named by the subscriber on the Order Form. In addition, a sales
commission may be paid to a securities dealer for advising and consulting
with respect to, or for managing the sale of Conversion Stock in, the
Subscription Offering, the Community Offering or any other offering.
IX. Charter and Bylaws.
As part of the Conversion, a federal stock charter and bylaws will be
adopted to authorize the Converted Bank to operate as a federal capital stock
savings association. By approving the Plan, the Members of the Bank will
thereby approve amending the Bank's existing federal mutual charter and
bylaws to read in the form of a federal stock charter and bylaws. Prior to
completion of the Conversion, the proposed federal stock charter and bylaws
may be amended in accordance with the provisions and limitations for amending
the Plan under Paragraph XIV. below. The effective date of the amendment of
the Bank's federal mutual charter and bylaws to read in the form of a federal
stock charter and bylaws shall be the date of the issuance of the Conversion
Stock, which shall be the date of consummation of the Conversion.
X. Registration and Market Making.
In connection and concurrently with the Conversion, the Holding Company
shall register the Holding Company Stock with the SEC pursuant to the
Securities Exchange Act of 1934, as amended, and shall undertake not to
deregister the Holding Company Stock for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the Holding Company
Stock. The Holding Company shall also use its best efforts to have the
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Holding Company Stock quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System or listed on a national or regional
securities exchange.
XI. Status of Savings Accounts and Loans Subsequent to Conversion.
All Savings Accounts in the Bank will retain the same status after
Conversion as these accounts had prior to Conversion. Subject to Paragraph
VIII.I. hereof, each holder of a Savings Account in the Bank shall retain,
without payment, a withdrawable Savings Account or Savings Accounts in the
Converted Bank, equal in dollar amount and on the same terms and conditions
as in effect prior to Conversion. All Savings Accounts will continue to be
insured by the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation up to the applicable limits of insurance coverage. All
loans shall retain the same status after Conversion as these loans had prior
to Conversion. After Conversion, holders of Savings Accounts and obligors on
loans of the Bank will not have voting rights in the Converted Bank.
Exclusive voting rights with respect to the Holding Company shall be vested
in the holders of the Conversion Stock issued by the Holding Company, and the
Holding Company will have exclusive voting rights with respect to the
Converted Bank's Capital Stock.
XII. Liquidation Account.
After the Conversion, holders of Savings Accounts will not be entitled to
share in the residual assets after liquidation of the Converted Bank.
However, pursuant to applicable regulations, the Bank shall, at the time of
the Conversion, establish a Liquidation Account in an amount equal to its
regulatory capital as of the date of the latest statement of financial
condition contained in the final prospectus to be used in connection with the
Conversion. The function of the Liquidation Account is to establish a
priority on liquidation, and, except as provided in Paragraph VIII.G.2.
above, the existence of the Liquidation Account shall not operate to restrict
the use or application of any of the net worth accounts of the Converted Bank.
The Liquidation Account shall be maintained by the Converted Bank
subsequent to Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in
the Converted Bank. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to each Savings Account held, have a
related inchoate interest in a portion of the Liquidation Account
("subaccount balance").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the Liquidation Account by a
fraction of which the numerator is the amount of the qualifying deposit in
the related Savings Account and the denominator is the total amount of the
qualifying deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders in the Bank. Such initial subaccount balance shall not be
increased but shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder to which the subaccount
relates at the close of business on any annual closing date subsequent to the
Eligibility Record Date or Supplemental Eligibility Record Date is less than
the lesser of (i) the deposit balance in such Savings Account at the close of
business on any annual closing date subsequent to the Eligibility Record Date
or the Supplemental Eligibility Record Date, or (ii) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or
the Supplemental Eligibility Record Date, then the subaccount balance for
such Savings Account shall be adjusted by reducing such subaccount balance in
an amount proportionate to the reduction in such deposit balance. In the
event of a downward adjustment, the subaccount balance shall not be
subsequently increased, notwithstanding any increase in the deposit balance
of the related Savings Account. If any such Savings Account is closed, the
related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Converted Bank (and only in
such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
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Liquidation Account in the amount of the then-current adjusted subaccount
balances for Savings Accounts then held before any liquidation distribution
may be made to stockholders. No merger, consolidation, sale of bulk assets
or similar combination or transaction with another institution insured by the
Federal Deposit Insurance Corporation shall be considered to be a complete
liquidation for these purposes. In such transactions, the Liquidation
Account shall be assumed by the surviving institution.
XIII. Restrictions on Acquisition of Holding Company.
A. Present regulations provide that for a period of three years
following completion of the Conversion, no person (i.e., an individual, a
group acting in concert, a corporation, a partnership, an association, a
joint stock company, a trust or any unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities of an insured institution or
its holding company) shall directly, or indirectly, offer to purchase or
actually acquire the beneficial ownership of more than 10% of any class of
Holding Company Stock without the prior approval of the OTS. However,
approval is not required for purchases directly from the Holding Company or
underwriters or a selling group acting on its behalf with a view towards
public resale, or for purchases not exceeding 1% per annum of the shares
outstanding, or for the acquisition of securities by one or more
Tax-Qualified Employee Stock Benefit Plans of the Holding Company or the
Converted Bank, provided that the plan or plans do not have beneficial
ownership in the aggregate of more than 25% of any class of Holding Company
Stock. Civil penalties may be imposed by the OTS for willful violation or
assistance of any violation. Where any person, directly or indirectly,
acquires beneficial ownership of more than 10% of any class of Holding
Company Stock within such three-year period, without the prior approval of
the OTS, Holding Company Stock 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.
B. The Holding Company may provide in its Articles of Incorporation a
provision that, for a period of five years following the date of the
completion of the Conversion, no person shall directly or indirectly offer
to acquire or actually acquire the beneficial ownership of more than 10% of
any class of Holding Company Stock except with respect to purchases by one
or more Tax-Qualified Employee Stock Benefit Plans of the Holding Company
or Converted Bank. The Holding Company may provide in its Articles of
Incorporation for such other provisions affecting the acquisition of
Holding Company Stock as shall be determined by its Board of Directors.
XIV. Interpretation and Amendment or Termination of the Plan.
The Bank's Board of Directors shall have the sole discretion to interpret
and apply the provisions of the Plan to particular facts and circumstances and
to make all determinations necessary or desirable to implement such provisions,
including but not limited to matters with respect to giving preference to
natural persons and trusts of natural persons who are permanent Residents of the
Bank's Local Community, and any and all interpretations, applications and
determinations made by the Board of Directors 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 Bank and its members and
subscribers in the Subscription and Community Offerings, subject to the
authority of the OTS.
If deemed necessary or desirable, the Plan may be substantively amended at
any time prior to submission of the Plan and proxy materials to the Members by a
two-thirds vote of the Bank's Board of Directors. After submission of the Plan
and proxy materials to the Members, the Plan may be amended by a two-thirds vote
of the Bank's Board of Directors at any time prior to the Special Meeting and at
any time following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors may modify or terminate the Plan upon the
order of the regulatory authorities without a resolicitation of proxies or
another Special Meeting.
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In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS or any successor agency prior to the completion of the
Conversion, the Plan will be amended to conform to the new mandatory regulations
without a resolicitation of proxies or another Special Meeting. In the event
that new conversion regulations adopted by the OTS or any successor agency prior
to completion of the Conversion contain optional provisions, the Plan may be
amended to utilize such optional provisions at the discretion of the Board of
Directors without a resolicitation of proxies or another Special Meeting.
By adoption of the Plan, the Bank's Members authorize the Board of
Directors to amend and/or terminate the Plan under the circumstances set forth
above.
XV. Expenses of the Conversion.
The Holding Company and the Bank will use their best efforts to assure that
expenses incurred in connection with the Conversion shall be reasonable.
XVI. Contributions to Tax-Qualified Employee Stock Benefit Plans.
The Holding Company and the Converted Bank may make scheduled discretionary
contributions to their Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Converted Bank to fail to meet its
then-applicable regulatory capital requirements.
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Exhibit B
NEWPORT FEDERAL BANK
FEDERAL STOCK CHARTER
Section 1. Corporate title. The full corporate title of the bank is
Newport Federal Bank (the "Bank").
Section 2. Office. The home office shall be located in Newport,
Tennessee.
Section 3. Duration. The duration of the Bank is perpetual.
Section 4. Purpose and powers. The purpose of the Bank is to pursue any
or all of the lawful objectives of a Federal Bank chartered under section 5
of the Home Owners' Loan Act and to exercise all of the express, implied, and
incidental powers conferred thereby and by all acts amendatory thereof and
supplemental thereto, subject to the Constitution and laws of the United
States as they are now in effect, or as they may hereafter be amended, and
subject to all lawful and applicable rules, regulations, and orders of the
Office of Thrift Supervision ("Office").
Section 5. Capital stock. The total number of shares of all classes of
the capital stock that the Bank has authority to issue is 25,000,000 of which
20,000,000 shares shall be common stock of par value of $1.00 per share and
of which 5,000,000 shares shall be serial preferred stock of par value of
$1.00 per share. The shares may be issued from time to time as authorized by
the board of directors without the approval of its stockholders, except as
otherwise provided in this Section 5 or to the extent that such approval is
required by governing law, rule, or regulation. The consideration for the
issuance of the shares shall be paid in full before their issuance and shall
not be less than the par value. Neither promissory notes nor future services
shall constitute payment or part payment for the issuance of shares of the
Bank. The consideration for the shares shall be cash, tangible or intangible
property (to the extent direct investment in such property would be permitted
to the Bank), 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 retained
earnings of the Bank that is transferred to common stock or paid-in capital
accounts upon the issuance of shares as a stock dividend shall be deemed to
be the consideration for their issuance.
Except for shares issued in the initial organization of the Bank or in
connection with the conversion of the Bank from the mutual to the stock form
of capitalization, no shares of capital stock (including shares issuable upon
conversion, exchange or exercise of other securities) shall be issued,
directly or indirectly, to officers, directors, or controlling persons of the
Bank other than as part of a general public offering or as qualifying shares
to a director, unless the issuance or the plan under which they would be
issued has been approved by a majority of the total votes eligible to be cast
at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, except
as to the cumulation of votes for the election of directors, unless the
charter otherwise provides that there shall be no such cumulative voting:
Provided, that this restriction on voting separately by class or series shall
not apply:
(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the board of
directors, less than a majority thereof, in the event of default in the
payment of dividends on any class or series of preferred stock;
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(ii) To any provision which would require the holders of preferred
stock, voting as a class or series, to approve the merger or consolidation of
the Bank with another corporation or the sale, lease, or conveyance (other
than by mortgage or pledge) of properties or business in exchange for
securities of a corporation other than the Bank if the preferred stock is
exchanged for securities of such other corporation: Provided, That no
provision may require such approval for transactions undertaken with the
assistance or pursuant to the direction of the Office or the Federal Deposit
Insurance Corporation;
(iii) To any amendment which would adversely change the specific terms
of any class or series of capital stock as set forth in this Section 5 (or in
any supplementary sections hereto), including any amendment which would
create or enlarge any class or series ranking prior thereto in rights and
preferences. An amendment which increases the number of authorized shares of
any class or series of capital stock, or substitutes the surviving savings
association in a merger or consolidation for the Bank, shall not be
considered to be such an adverse change.
A description of the different classes and series (if any) 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 (if
any) of capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
supplementary sections thereto), the holders of common stock shall
exclusively possess all voting power. Each holder of shares of common stock
shall be entitled to one vote for each share held by such holder, except as
to the cumulation of votes for the election of directors, unless the charter
otherwise provides that there shall be no such cumulative voting.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock
having preference over the common stock as to the payment of dividends, the
full amount of dividends and of sinking fund, retirement fund or other
retirement payments, if any, to which such holders are respectively entitled
in preference to the common stock, then dividends may be paid on the common
stock and on any class or series of stock entitled to participate therewith
as to dividends out of any assets legally available for the payment of
dividends.
In the event of any liquidation, dissolution, or winding up of the Bank,
the holders of the common stock (and the holders of any class or series of
stock entitled to participate with the common stock in the distribution of
assets) shall be entitled to receive, in cash or in kind, the assets of the
Bank available for distribution remaining after: (i) payment or provision
for payment of the Bank's debts and liabilities; (ii) distributions or
provision for distributions in settlement of its liquidation account; and
(iii) distributions or provisions for distributions to holders of any class
or series of stock having preference over the common stock in the
liquidation, dissolution, or winding up of the Bank. Each share of common
stock shall have the same relative rights as and be identical in all respects
with all the other shares of common stock.
B. Preferred stock. The Bank may provide in supplementary sections to
its charter for one or more classes of preferred stock, which shall be
separately identified. The shares of any class may be divided into and
issued in series, with each series separately designated so as to distinguish
the shares thereof from the shares of all other series and classes. The
terms of each series shall be set forth in a supplementary section to the
charter. All shares of the same class shall be identical except as to the
following relative rights and preferences, as to which there may be
variations between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or
other special rights, if any, with respect to dividends;
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(c) The voting powers, full or limited, if any, of shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which, such shares may
be redeemed;
(e) The amount(s) payable upon the shares of such series in the event of
voluntary or involuntary liquidation, dissolution, or winding up of the Bank;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of such fund and the manner of
its application, including the price(s) at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the Bank
and, if so, the conversion price(s) or the rate(s) of exchange, and the
adjustments thereof, if any, at which such conversion or exchange may be
made, and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such series
shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares
of the same series.
The board of directors shall have authority to divide, by the adoption of
supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the
remainder of this charter, fix and determine the relative rights and
preferences of the shares of any series so established.
Prior to the issuance of any preferred shares of a series established by
a supplementary charter section adopted by the board of directors, the Bank
shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
Section 6. Preemptive rights. Holders of the capital stock of the Bank
shall not be entitled to preemptive rights with respect to any shares of the
Bank which may be issued.
Section 7. Liquidation account. Pursuant to the requirements of the
Office's regulations (12 C.F.R. Part 563b), the Bank shall establish and
maintain a liquidation account for the benefit of its savings account holders
as of December 31, 1995 and September 30, 1997 ("eligible savers"). In the
event of a complete liquidation of the Bank, it shall comply with such
regulations with respect to the amount and the priorities on liquidation of
each of the Bank's eligible saver's inchoate interest in the liquidation
account, to the extent it is still in existence: Provided, that an eligible
saver's inchoate interest in the liquidation account shall not entitle such
eligible saver to any voting rights at meetings of the Bank's stockholders.
Section 8. Directors. The Bank shall be under the direction of a board
of directors. The authorized number of directors, as stated in the Bank's
bylaws, shall not be fewer than five or more than fifteen except when a
greater or lesser number is approved by the Director of the Office, or his or
her delegate.
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Section 9. Amendment of charter. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is first proposed by the board of directors of the Bank,
approved by the stockholders by a majority of the votes eligible to be cast
at a legal meeting, unless a higher vote is otherwise required, and approved
or preapproved by the Office.
NEWPORT FEDERAL BANK
Attest: By:
------------------------ ---------------------------
William B. Henry Richard G. Harwood
Secretary President
OFFICE OF THRIFT SUPERVISION
Attest: By:
------------------------ ---------------------------
Effective Date:
--------------
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<PAGE>
Exhibit C
NEWPORT FEDERAL BANK
BYLAWS
ARTICLE I - Home Office
The home office of Newport Federal Bank (the "Bank") shall be located at
344 W. Broadway, Newport, in the County of Cocke in the State of Tennessee.
ARTICLE II - Stockholders
Section 1. Place of Meetings. All annual and special meetings of
stockholders shall be held at the home office of the Bank or at such other
place in the State of Tennessee as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the stockholders of the Bank
for the election of directors and for the transaction of any other business
of the Bank shall be held annually within 150 days after the end of the
Bank's fiscal year at such date and time within such 150-day period as the
board of directors may determine.
Section 3. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by the regulations of
the Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president, or a majority of the board of
directors, and shall be called by the chairman of the board, the president,
or the secretary upon the written request of the holders of not less than
one-tenth of all of the outstanding capital stock of the Bank entitled to
vote at the meeting. Such written request shall state the purpose or
purposes of the meeting and shall be delivered to the home office of the Bank
addressed to the chairman of the board, the president, or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with rules and procedures adopted by the board of
directors. The board of directors shall designate, when present, either the
chairman of the board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day,
and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 20 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
chairman of the board, the president, or the secretary, or the directors
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the mail, addressed to the stockholder at the address as it
appears on the stock transfer books or records of the Bank as of the record
date prescribed in Section 6 of this Article II with postage prepaid. When
any stockholders' meeting, either annual or special, is adjourned for 30 days
or more, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than 30 days or of the business
to be transacted at the meeting, other than an announcement at the meeting at
which such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the
record date for any such determination of stockholders. Such date in any
case shall be not more than 60 days and, in case of a meeting of
stockholders, not fewer than 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, such determination
shall apply to any adjournment.
<PAGE>
Section 7. Voting Lists. At least 20 days before each meeting of the
stockholders, the officer or agent having charge of the stock transfer books
for shares of the Bank shall make a complete list of the stockholders
entitled to vote at such meeting, or any adjournment, arranged in
alphabetical order, with the address and the number of shares held by each.
This list of stockholders shall be kept on file at the home office of the
Bank and shall be subject to inspection by any stockholder of record or the
stockholder's agent at any time during usual business hours for a period of
20 days prior to such meeting. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to inspection
by any stockholder of record or the stockholder's agent during the entire
time of the meeting. The original stock transfer book shall constitute prima
facie evidence of the stockholders entitled to examine such list or transfer
books or to vote at any meeting of stockholders.
In lieu of making the stockholder list available for inspection by
stockholders as provided in the preceding paragraph, the board of directors
may perform such acts as required by paragraphs (a) and (b) of Rule 14a-7 of
the General Rules and Regulations under the Securities Exchange Act of 1934,
as may be duly requested in writing, with respect to any matter which may be
properly considered at a meeting of stockholders, by any stockholder who is
entitled to vote on such matter and who shall defray the reasonable expenses
to be incurred by the Bank in performance of the act or acts required.
Section 8. Quorum. A majority of the outstanding shares of the Bank
entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of stockholders. If less than a majority of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the
meeting as originally notified. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to constitute less than a quorum. If a
quorum is present, the affirmative vote of a majority of the shares
represented at the meeting and entitled to vote on the subject matter shall
be the act of stockholders, unless the vote of a greater number of
stockholders voting together or voting by classes is required by law or the
charter. Directors, however, are elected by a plurality of the votes cast at
an election of directors.
Section 9. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the
identity of the stockholder. Proxies solicited on behalf of the management
shall be voted as directed by the stockholder or, in the absence of such
direction, as determined by a majority of the board of directors. No proxy
shall be valid more than eleven months from the date of its execution except
for a proxy coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of
written directions to the Bank to the contrary, at any meeting of the
stockholders of the Bank any one or more of such stockholders may cast, in
person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes
to which those persons are entitled shall be cast as directed by a majority
of those holding such shares and present in person or by proxy at such
meeting, but no votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares of Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian, or conservator may be
voted by him or her, either in person or by proxy, without a transfer of such
shares into his or her name. Shares held in trust in an IRA or Keough
Account, however, may be voted by the Bank if no other instructions are
received. Shares standing in the name of a trustee may be voted by him or
her, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him or her without a transfer of such shares into his or her
name. Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or
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under the control of a receiver may be voted by such receiver without the
transfer into his or her name if authority to do so is contained in an
appropriate order of the court or other public authority by which such
receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Neither treasury shares of its own stock held by the Bank nor shares held
by another corporation, if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the Bank, shall
be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Unless otherwise provided in the Bank's
charter, every stockholder entitled to vote at an election for directors
shall have the right to vote, in person or by proxy, the number of shares
owned by the stockholder for as many persons as there are directors to be
elected and for whose election the stockholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of
such directors to be elected multiplied by the number of shares shall equal
or by distributing such votes on the same principle among any number of
candidates.
Section 13. Inspectors of Election. In advance of any meeting of
stockholders, the board of directors may appoint any persons other than
nominees for office as inspectors of election to act at such meeting or any
adjournment. The number of inspectors shall be either one or three. Any such
appointment shall not be altered at the meeting. If inspectors of election
are not so appointed, the chairman of the board or the president may, or on
the request of not fewer than 10 percent of the votes represented at the
meeting shall, make such appointment at the meeting. If appointed at the
meeting, the majority of the votes present shall determine whether one or
three inspectors are to be appointed. In case any person appointed as
inspector fails to appear or fails or refuses to act, the vacancy may be
filled by appointment by the board of directors in advance of the meeting or
at the meeting by the chairman of the board or the president.
Unless otherwise prescribed by applicable regulations of the Office, the
duties of such inspectors shall include: determining the number of shares
and the voting power of each share, the shares represented at the meeting,
the existence of a quorum, and the authenticity, validity and effect of
proxies; receiving votes, ballots, or consents; hearing and determining all
challenges and questions in any way arising in connection with the rights to
vote; counting and tabulating all votes or consents; determining the result;
and such acts as may be proper to conduct the election or vote with fairness
to all stockholders.
Section 14. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death or other incapacity of a management nominee, the nominating committee
shall deliver written nominations to the secretary at least 20 days prior to
the date of the annual meeting. Upon delivery, such nominations shall be
posted in a conspicuous place in each office of the Bank. No nominations for
directors except those made by the nominating committee shall be voted upon
at the annual meeting unless other nominations by stockholders are made in
writing and delivered to the secretary 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
stockholders 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 stockholder entitled to vote and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the Bank
at least five days before the date of the annual meeting, and all other
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business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting.
Any stockholder may make any other proposal at the annual meeting and the
same may be discussed and considered, but unless stated in writing and filed
with the secretary at least five days before the meeting, such proposal shall
be laid over for action at an adjourned, special, or annual meeting of the
stockholders taking place 30 days or more thereafter. This provision shall
not prevent the consideration and approval or disapproval at the annual
meeting of reports of officers, directors, and committees; but in connection
with such reports, no new business shall be acted upon at such annual meeting
unless stated and filed as herein provided.
Section 16. Informal Action by Stockholders. Any action required to be
taken at a meeting of the stockholders, or any other action which may be
taken at a meeting of stockholders, may be taken without a meeting if consent
in writing, setting forth the action so taken, shall be given by all of the
stockholders entitled to vote with respect to the subject matter.
ARTICLE III - Board of Directors
Section 1. General Powers. The business and affairs of the Bank shall
be under the direction of its board of directors. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, the chairman of the board or the
president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of six
members, and shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall
be elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw following the
annual meeting of stockholders. The board of directors may provide, by
resolution, the time and place, for the holding of additional regular
meetings without other notice than such resolution. Directors may
participate in a meeting by means of a conference telephone or similar
communications device through which all persons participating can hear each
other at the same time. Participation by such means shall constitute
presence in person for all purposes.
Section 4. Qualification. Directors need not be the beneficial owners
of capital stock of the Bank.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the
president, or one-third of the directors. The persons authorized to call
special meetings of the board of directors may fix any place, within the
Bank's normal lending territory, as the place for holding any special meeting
of the board of directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least 24 hours prior thereto when delivered personally or
by telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice
shall be deemed to be delivered when deposited in the mail so addressed, with
postage prepaid if mailed, when delivered to the telegraph company if sent by
telegram, or when the Bank receives notice of delivery if electronically
transmitted. Any director may waive notice of any meeting by a writing filed
with the secretary. The attendance of a director at a meeting shall
constitute a waiver of notice of such 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 to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the board of directors need be specified in the notice of waiver
of notice of such meeting.
C-4
<PAGE>
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the board of directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall
be given in the same manner as prescribed by Section 6 of this Article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
board of directors, unless a greater number is prescribed by regulation of
the Office or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the Bank addressed
to the chairman of the board or the president. Unless otherwise specified,
such resignation shall take effect upon receipt by the chairman of the board
or the president. More than three consecutive absences from regular meetings
of the board of directors, unless excused by resolution of the board of
directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the board of directors. A director
elected to fill a vacancy shall be elected to serve 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 only until the next election of
directors by the stockholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a
reasonable fixed sum, and reasonable expenses of attendance, if any, may be
allowed for attendance at each regular or special meeting of the board of
directors. Members of either standing or special committees may be allowed
such compensation for attendance at committee meetings as the board of
directors may determine.
Section 13. Presumption of Assent. A director of the 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 secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the secretary of
the Bank within five days after the date a copy of the minutes of the meeting
is received. Such right to dissent shall not apply to a director who voted
in favor of such action.
Section 14. Removal of Directors. At a meeting of stockholders called
expressly for that purpose, any director may be removed for cause by a vote
of the holders of a majority of the shares then entitled to vote at an
election of directors. If less than the entire board is to be removed, no
one of the directors may be removed if the votes cast against the removal
would be sufficient to elect a director if then cumulatively voted at an
election of the class of directors of which such director is a part.
Whenever the holders of the shares of any class are entitled to elect one or
more directors by the provisions of the charter or supplemental sections
thereto, the provisions of this section shall apply, in respect to the
removal of a director or directors so elected, to the vote of the holders of
the outstanding shares of that class and not to the vote of the outstanding
shares as a whole.
Section 15. Age Limitation. Unless otherwise resolved by a majority of the
board of directors, no director as of September 12, 1997 shall be eligible for
election, reelection, appointment or reappointment to the board of directors
C-5
<PAGE>
of the Bank after he becomes 75 years of age, and no other person shall be
eligible for election, reelection, appointment or reappointment to the board
of directors of the Bank after he or she becomes 75 years of age. The age
limitation does not apply to an advisory director or director emeritus.
ARTICLE IV - Executive and Other Committees
Section 1. Appointment. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer
and two or more of the other directors to constitute an executive committee.
The designation of any committee pursuant to this Article IV and the
delegation of authority shall not operate to relieve the board of directors,
or any director, of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority
of the board of directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the executive committee; and
except also that the executive committee shall not have the authority of the
board of directors with reference to: the declaration of dividends; the
amendment of the charter or bylaws of the Bank, or recommending to the
stockholders a plan of merger, consolidation, or conversion; the sale, lease,
or other disposition of all or substantially all of the property and assets
of the Bank otherwise than in the usual and regular course of its business; a
voluntary dissolution of the Bank; a revocation of any of the foregoing; or
the approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until
the next regular annual meeting of the board of directors following his or
her designation and until a successor is designated as a member of the
executive committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may
fix from time to time by resolution. Special meetings of the executive
committee may be called by any member thereof upon not less than one day's
notice stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the executive committee may waive notice of
any meeting and no notice of any meeting need be given to any member thereof
who attends in person. The notice of a meeting of the executive committee
need not state the business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution
adopted by a majority of the full board of directors. Any member of the
executive committee may resign from the executive committee at any time by
giving written notice to the president or secretary of the Bank. Unless
otherwise specified, such resignation shall take effect upon its receipt; the
acceptance of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
C-6
<PAGE>
proceedings and report the same to the board of directors for its information
at the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as it may
determine to be necessary or appropriate for the conduct of the business of
the Bank and may prescribe the duties, constitution, and procedures thereof.
ARTICLE V - Officers
Section 1. Positions. The officers of the Bank shall be a president,
one or more vice presidents, a secretary, and a treasurer, each of whom shall
be elected by the board of directors. The board of directors may also
designate the chairman of the board as an officer. The president shall be
the chief executive officer, unless the board of directors designates the
chairman of the board as chief executive officer. The president shall be a
director of the Bank. The offices of the secretary and treasurer or
comptroller may be held by the same person and a vice president may also be
either the secretary or the treasurer or comptroller. The board of directors
may designate one or more vice presidents as executive vice president or
senior vice president. The board of directors may also elect or authorize
the appointment of such other officers as the business of the Bank may
require. The officers shall have such authority and perform such duties as
the board of directors may from time to time authorize or determine. In the
absence of action by the board of directors, the officers shall have such
powers and duties as generally pertain to their respective offices.
Section 2. Election and Term of Office. The officers of the Bank shall
be elected annually at the first meeting of the board of directors held after
each annual meeting of the stockholders. If the election of officers is not
held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or removal
in the manner hereinafter provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The board
of directors may authorize the Bank to enter into an employment contract with
any officer in accordance with regulations of the Office; but no such
contract shall impair the right of the board of directors to remove any
officer at any time in accordance with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the Bank will be
served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the
board of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the board of directors.
ARTICLE VI - Contracts, Loans, Checks, and Deposits
Section 1. Contracts. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the Bank to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Bank. Such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the Bank
and no evidence of indebtedness shall be issued in its name unless authorized
by the board of directors. Such authority may be general or confined to
specific instances.
C-7
<PAGE>
Section 3. Checks, Drafts, etc. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Bank shall be signed by one or more officers, employees, or
agents of the Bank in such manner as shall from time to time be determined by
the board of directors.
Section 4. Deposits. All funds of the Bank not otherwise employed shall
be deposited from time to time to the credit of the Bank in any duly
authorized depositories as the board of directors may select.
ARTICLE VII - Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the Bank shall be in such form as shall be determined by the
board of directors and approved by the Office. Such certificates shall be
signed by the chief executive officer or by any other officer of the Bank
authorized by the board of directors, attested by the secretary or an
assistant secretary, and sealed with the corporate seal or a facsimile
thereof. The signatures of such officers upon a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer
agent or a registrar other than the Bank itself or one of its employees.
Each certificate for shares of capital stock shall be consecutively numbered
or otherwise identified. The name and address of the person to whom the
shares are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the Bank. All certificates
surrendered to the Bank for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares has been surrendered and cancelled, except that in the case of a lost
or destroyed certificate, a new certificate may be issued upon such terms and
indemnity to the Bank as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of
the Bank shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by
his or her attorney authorized by a duly executed power of attorney and filed
with the Bank. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name
shares of capital stock stand on the books of the Bank shall be deemed by the
Bank to be the owner for all purposes.
ARTICLE VIII - Fiscal Year
The fiscal year of the Bank shall end on the 31st day of December of each
year. The appointment of accountants shall be subject to annual ratification
by the stockholders.
ARTICLE IX - Dividends
Subject to the terms of the Bank's charter and the regulations and orders
of the Office, the board of directors may, from time to time, declare, and
the Bank may pay, dividends on its outstanding shares of capital stock.
ARTICLE X - Corporate Seal
The board of directors shall provide a savings association seal which
shall be two concentric circles between which shall be the name of the Bank.
The year of incorporation or an emblem may appear in the center.
ARTICLE XI - Amendments
These bylaws may be amended in a manner consistent with regulations of
the Office and shall be effective after: (i) approval of the amendment by a
majority vote of the authorized board of directors, or by a majority of the
votes cast by stockholders of the Bank at any legal meeting, and (ii) receipt
of any applicable regulatory approval. When a savings association fails to
meet its quorum requirements, solely due to vacancies on the board, then the
affirmative vote of a majority of the sitting board will be required to amend
the bylaws.
C-8
<PAGE>
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON DECEMBER __, 1997)
The undersigned member of Newport Federal Savings and Loan Association (the
"Bank") hereby appoints J. William Myers and Richard G. Harwood, or any one of
them, with full powers of substitution, as attorneys-in-fact and agents for and
in the name of the undersigned, to vote such votes as the undersigned may be
entitled to cast at the Special Meeting of Members of the Bank to be held at
__________________, ____________________, Newport, Tennessee, on
________________, December __, 1997, at __:__ _.m., Eastern Time, and at any
adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
FOR AGAINST
Approval of the Plan of Conversion providing for
the conversion of the Bank from a federally
chartered mutual savings association to a
federally chartered stock savings association to
be known as "Newport Federal Bank", as a wholly
owned subsidiary of United Tennessee Bankshares,
Inc., including the amendment of the Bank's
Federal Mutual Charter and Bylaws to read in the
form of a Federal Stock Charter and Bylaws for the
Bank.
/ / / /
In their discretion, on any other matters that may
lawfully come before the meeting.
NOTE: The Board of Directors is not aware of any other matters that may come
before the Meeting.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN OF CONVERSION IF
NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at the meeting or at
any adjournment thereof and, after notification to the Secretary of Newport
Federal Savings and Loan Association at the meeting of the member's decision to
terminate this proxy, then the power of said attorneys-in-fact or agents shall
be deemed terminated and of no further force and effect. The undersigned hereby
revokes any and all proxies heretofore given.
The undersigned acknowledges receipt of notice of the meeting and a proxy
statement dated November__, 1997 and a prospectus dated November __, 1997 prior
to the execution of this proxy.
----------------------
Date
----------------------
Signature
Note: Only one signature is required in
the case of a joint account.
<PAGE>
Exhibit 99.3
United Tennessee Bankshares, Inc.
Proposed Holding Company for
Newport Federal Savings and Loan Association
Newport, Tennessee
Proposed Marketing Materials
_______-97
<PAGE>
Marketing Materials
United Tennessee Bankshares, Inc.
Newport, TN
Table of Contents
I. Press Releases
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Method of Distribution
C. Example
IV. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
V. Proxy Reminder
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers receive prompt accurate
information in a simultaneous manner, Trident advises the Association to
forward press releases to area newspapers, radio stations, etc. at various
points during the conversion process.
Only press releases approved by Conversion Counsel and the OTS will be
forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion
2. Close of Stock Offering
<PAGE>
C. Distribution List
National Distribution List
National Thrift News Wall Street Journal
- -------------------- -------------------
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
- --------------- --------------
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
- ------- ------------------------
Dow Jones & Company 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
- --------------
229 West 43rd Street
New York, NY 10036
<PAGE>
Local Media List
(To be provided)
Newspaper
- ---------
Radio
- -----
<PAGE>
PRESS RELEASE FOR IMMEDIATE RELEASE
----------------------
For More Information Contact:
Richard G. Harwood, President and CEO
(423) _____________
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
--------------------------------------------
CONVERSION TO STOCK FORM APPROVED
---------------------------------
Newport, Tennessee (November __, 1997) - Richard G. Harwood, President and
Chief Executive Officer of Newport Federal Savings and Loan Association of
Newport, TN ("Newport Federal"), Newport, Tennessee, announced that Newport
Federal has received approval from the Office of Thrift Supervision to convert
from a federally-chartered mutual savings association to a federally-chartered
stock savings association. In connection with the Conversion, Newport Federal
has formed a holding company, United Tennessee Bankshares, Inc., to hold all of
the outstanding capital stock of Newport Federal.
United Tennessee Bankshares, Inc. is offering up to ________ shares of its
common stock, subject to adjustment, at a price of $10.00 per share. Certain
account holders and borrowers of Newport Federal will have an opportunity to
subscribe for stock through a Subscription Offering that expires on _________,
1997. Shares that are not subscribed for during the Subscription Offering may
be offered subsequently to the general public in a Direct Community Offering,
with first preference given permanent residents of Cocke County, Tennessee. The
Subscription Offering and Community Offerings will be managed by Trident
Securities, Inc. of Raleigh, North Carolina. Copies of the Prospectus relating
to the offerings and describing the Plan of Conversion will be mailed to
customers on or about November __, 1997.
As a result of the Conversion, Newport Federal will be structured in the
stock form as are all commercial banks and an increasing number of savings
institutions and will be a wholly-
<PAGE>
owned subsidiary of United Tennessee Bankshares, Inc. According to Mr.
Harwood, "Our day to day operations will not change as a result of the
Conversion and deposits will continue to be insured by the FDIC up to the
applicable legal limits."
Customers with questions concerning the stock offering should call Newport
Federal's Stock Information Center at (423) ________, or visit one of Newport
Federal's offices.
<PAGE>
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Richard G. Harwood, President and CEO
(423) ________
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION OF NEWPORT, TN
-----------------------------------------------------------
COMPLETES INITIAL STOCK OFFERING
--------------------------------
Newport, Tennessee - (December __, 1997) Richard G. Harwood, President and
Chief Executive Officer of Newport Federal Savings and Loan Association of
Newport, TN ("Newport Federal"), announced today that United Tennessee
Bankshares, Inc., the proposed holding company for Newport Federal, has
completed its initial stock offering in connection with the Savings Bank's
conversion from mutual to stock form. A total of _________ shares were sold at
the price of $10.00 per share.
On December __, 1997, Newport Federal's Plan of Conversion was approved by
it's voting members at a special meeting of members.
Mr. Harwood said that the officers and boards of directors of United
Tennessee Bankshares, Inc. and Newport Federal wished to express their thanks
for the response to the stock offering and that Newport Federal looks forward to
serving the needs of its customers and new stockholders as a community-based
stock institution. The stock is anticipated to commence trading on today on the
NASDAQ "small cap market" under the symbol "____". Trident Securities, Inc. of
Raleigh, North Carolina managed the stock offering.
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify
Newport Federal's customers and members of the local community that
the conversion offering is underway.
The intended use of advertisement "B" is to remind Newport Federal's
customers of the closing date of the Subscription Offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval
possibly run weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the
subscription offering.
Trident may feel it is necessary to run more ads in order to remind
customers of the close of the Subscription Offering and the Community
Offering, if conducted.
Alternatively, Trident may, depending upon the response from the
customer base, choose to run fewer ads or no ads at all.
These ads will run in the local newspapers.
The ad size will be as shown or smaller.
<PAGE>
- --------------------------------------------------------------------------------
This announcement is neither an offer to sell nor a solicitation of an offer to
buy these securities. The offer is made only by the Prospectus. These shares
have not been approved or disapproved by the Securities and Exchange Commission,
the Office of Thrift Supervision or the Federal Deposit Insurance Corporation,
nor has such Commission, Office or Corporation passed upon the accuracy or
adequacy of the Prospectus. Any representation to the contrary is unlawful.
New Issue _________, 1997
_______ Shares
These shares are being offered pursuant
to a Plan of Conversion whereby
Newport Federal Savings and Loan Association
of Newport, TN
will convert from a federal mutual savings bank to a
federal capital stock savings bank
and become a wholly owned subsidiary of
United Tennessee Bankshares, Inc.
Common Stock
-------------
Price $10.00 Per Share
-------------
Trident Securities, Inc.
For a copy of the prospectus call (423) ________.
Copies of the Prospectus may be obtained in any State in which this
announcement is circulated from Trident Securities, Inc. or such other
brokers and dealers as may legally offer these securities in such state.
The common stock will not be insured by the FDIC or any other government agency.
- --------------------------------------------------------------------------------
<PAGE>
Advertisement (B)
- --------------------------------------------------------------------------------
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION OF Newport, TN
____________, 1997 IS THE DEADLINE TO
ORDER STOCK OF UNITED TENNESSEE BANKSHARES, INC.
Customers of Newport Federal Savings and Loan Association of Newport, TN
have the opportunity to invest in
Newport Federal Savings and Loan Association of Newport, TN
by subscribing
for common stock in its proposed holding company
UNITED TENNESSEE BANKSHARES, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (423) ________.
This announcement is neither an offer to sell nor a
solicitation of an offer to buy the common stock of
United Tennessee Bankshares, Inc. The offer is made only by the
Prospectus. The shares of common stock are not
deposits or savings accounts and will not be insured
by the Federal Deposit Insurance Corporation
or any other government agency.
Copies of the Prospectus may be obtained in any State in which this
announcement is circulated from Trident Securities, Inc. or such other
brokers and dealers as may legally offer these securities in such state.
- --------------------------------------------------------------------------------
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves two purposes: a) to answer some of the most
commonly asked questions in "plain, everyday language"; and b) to
highlight in brochure form the purchase commitments of the Association's
officers and directors shown in the Prospectus. Although most of the
answers are taken verbatim from the Prospectus, it saves the individual
from searching for the answer to a simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and
Answer brochure. However, regardless of the method the brochures are
always accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing
to all members of the Savings Bank.
2. Question and Answer brochures are available in Newport Federal's
offices.
3. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
<PAGE>
PROPOSED OFFICER AND DIRECTOR PURCHASES
<TABLE>
<CAPTION>
Percent of Shares at
Maximum of
Anticipated Number Anticipated Dollar Estimated Valuation
Name of Shares Purchased Amount Purchased Range
- ---- ------------------- ------------------ --------------------
<S> <C> <C> <C>
Clyde E. Driskill,Jr. 22,000 220,000 2.0
Director
Richard G. Harwood 22,000 220,000 2.0
President, Chief Executive
Officer and Director
William B. Henry 22,000 220,000 2.0
Director
J. William Myers 22,000 220,000 2.0
Chairman of the Board
Robert L. Overholt 22,000 220,000 2.0
Director
Robert D. Self 10,000 100,000 .9
Director
Nancy L. Bryant 10,000 100,000 .9
Vice President and Treasurer
Peggy Holston 10,000 100,000 .9
Branch Manager and
Assistant Secretary
All directors and executive 140,000 1,400,000 12.7
officers as a group (8 persons)
ESOP 88,000 880,000 8.0
MRP 44,000 440,000 4.0
------- ----------- ---
272,000 $2,720,000 24.7%
------- ----------- ----
------- ----------- ----
</TABLE>
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY UNITED TENNESSEE BANKSHARES, INC. COMMON STOCK. SUCH OFFER AND
SOLICITATION MAY BE MADE ONLY BY THE PROSPECTUS. PLEASE READ THE PROSPECTUS
PRIOR TO MAKING AN INVESTMENT DECISION.
THE SHARES OF UNITED TENNESSEE BANKSHARES, INC. COMMON STOCK ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
QUESTIONS AND ANSWERS
REGARDING
THE PLAN OF CONVERSION
On _________, 1997, the Board of Directors of Newport Federal Savings and
Loan Association of Newport, TN ("Newport Federal") unanimously adopted, and
on _______, 1997 unanimously amended, the Plan of Conversion, pursuant to
which Newport Federal will convert from a federally-chartered mutual savings
association to a federally-chartered stock savings association ("Stock
Conversion"). In addition, all of Newport Federal's outstanding capital
stock will be issued to the holding company, United Tennessee Bankshares,
Inc. ("Security Bancorp"), which was organized by Newport Federal to own
Newport Federal as a subsidiary.
This brochure is provided to answer general questions you might have about
the Conversion. Following the Conversion, Newport Federal will continue to
provide financial services to its depositors, borrowers and other customers
as it has in the past and will operate with its existing management and
employees. The Conversion will not affect the terms, balances, interest
rates or existing federal insurance coverage on Newport Federal's deposits or
the terms or conditions of any loans to existing borrowers under their
individual contract arrangements with Newport Federal.
For complete information regarding the Conversion, see the Prospectus and the
Proxy Statement dated ________, 1997. Copies of each of the Prospectus and
the Proxy Statement may be obtained by calling the Stock Information Center
at (423) ________.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY UNITED TENNESSEE BANKSHARES, INC. COMMON STOCK. SUCH OFFER AND
SOLICITATION MAY BE MADE ONLY BY THE PROSPECTUS. PLEASE READ THE PROSPECTUS
PRIOR TO MAKING AN INVESTMENT DECISION.
THE SHARES OF UNITED TENNESSEE BANKSHARES, INC. COMMON STOCK ARE NOT SAVINGS
OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE
FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
<PAGE>
QUESTIONS & ANSWERS
Set forth below are answers to frequently asked questions about the
Conversion. For additional information about the Conversion, please refer to
the more detailed information in this prospectus. For assistance, please
contact our Stock Information Center at (423) - .
Newport Federal Savings and Loan Association
1. What are your principal business activities?
Through two full service banking offices in Newport, Tennessee, we
attract deposits from the public and invest those funds principally
in single-family residential real estate loans and, to a lesser
extent, multi-family and commercial real estate loans and consumer
loans, principally in Cocke County, Tennessee. We also maintain a
substantial investment portfolio, primarily of mortgage-backed
securities issued by the FNMA, FHLMC and GNMA, obligations of the
federal government and agencies and investment-grade obligations of
states and political subdivisions. We derive our income
principally from interest earned on loans, investment securities
and other interest-earning assets. Our principal expenses are
interest expense on deposits and noninterest expenses such as
employee compensation, deposit insurance and miscellaneous other
expenses. Funds for these activities are provided principally by
deposit growth, repayments of outstanding loans and investment
securities, other operating revenues and, from time to time,
advances from the Federal Home Loan Bank of Cincinnati. At June
30, 1997, we had total assets of $64.2 million, deposits of $56.7
million and equity of $6.5 million, or 10.1% of total assets.
The Conversion
2. What is a Mutual to Stock Conversion?
The Conversion is a change in our legal form of organization. We
currently operate as a federally chartered mutual savings
institution with no stockholders. Through the Conversion, we will
become a federally chartered stock savings institution, we will
change our name to "Newport Federal Bank," we will issue shares of
our stock to United Tennessee Bankshares, Inc., which will thereby
become our holding company, and United Tennessee Bankshares, Inc.,
as our holding company, will issue shares of its Common Stock to
investors who purchase shares in the Conversion. Currently, our
depositor and borrower members as such have voting rights in the
Bank and, therefore, are entitled to elect directors of the Bank
and to vote on other important matters. Following the Conversion,
the Company will exercise all voting rights with respect to the
Bank's common stock, and the Company's stockholders will elect its
directors and exercise all other voting rights with respect to the
Common Stock.
<PAGE>
3. Why are you converting?
As a mutual savings institution, we do not have stockholders and do not
have authority to issue capital stock. By converting to the stock form
of organization, we 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 our future growth and
performance by providing a larger capital base from which we may
operate, by enhancing our ability to attract and retain qualified
management through stock-based compensation plans, by enhancing our
ability to diversify into other financial services related activities
and by expanding our ability to provide services to the public.
We believe that the stock form of organization is preferable to the
mutual form of organization for a financial institution. We recognize
the decline in the number of mutual thrifts from over 12,500 mutual
institutions in 1929 to under 1,000 mutual thrifts today.
We believe that converting to the stock form of organization and
changing our name will allow us to compete more effectively with other
community banks and thrifts, and with statewide, regional and
nationwide banks, which are in stock form. We believe that by
combining our existing quality service and products with a local
ownership base we will encourage our customers and community members
who become stockholders to do more business with us.
Furthermore, because we compete with local and nonlocal banks not only
for customers, but also for employees, we believe that the stock form
of organization will better afford us the opportunity to attract and
retain employees, management and directors through stock-based
compensation plans which are not available to mutual savings
institutions.
4. Will the Conversion have any effect on our deposits and loans?
No. The Conversion will not affect terms and balances of your deposit
accounts and interest rates paid on such accounts. Deposits will remain
federally insured by the FDIC up to the maximum amount permitted by
law. The Conversion also will not affect terms or conditions of any of
our loans or rights and obligations of our borrowers.
5. Will the Conversion cause any changes in your personnel?
No. Before and after the Conversion, our business of accepting
deposits, making loans and providing financial services will continue
without interruption with the same board of directors, management and
staff.
<PAGE>
6. What approvals must be received before the Conversion becomes
effective?
First, our Board of Directors must adopt the Plan of Conversion, which
occurred on May 20, 1997. Second, the OTS must approve the applications
required to effect the Conversion. These approvals have been obtained.
Third, the Plan of Conversion must be approved by a majority of all
votes eligible to be cast by our members. A special meeting of our
members will be held on November , 1997 to consider and vote upon the
Plan of Conversion. Last, the final amount of Common Stock to be issued
in the Conversion must be approved by the OTS before the consummation
of the Conversion.
The Holding Company
7. What is a holding company?
A holding company is a company that owns another company. In the
Conversion, we will become a subsidiary of United Tennessee Bankshares,
Inc., a company we organized to become our holding company by acquiring
all of our stock to be issued in the Conversion.
8. Why are you forming a holding company?
We believe that the formation of our holding company will result in a
more versatile financial institution with the ability to diversify our
business activities through existing or newly formed subsidiaries,
although there are no current plans with respect to such
diversification. Our holding company will also be able to use
stock-based compensation programs to attract, motivate and retain
directors, management and employees.
9. What will be the holding company's principal business activities?
We formed United Tennessee Bankshares, Inc. under Tennessee law in
August 1997 for the purpose of becoming our holding company in the
Conversion. Before the Conversion, our holding company will not have
any material assets or liabilities, and it will not engage in any
material operations. Following the Conversion, our holding company's
primary assets will be our outstanding stock, a portion of the net
proceeds of the Conversion and a note receivable from our ESOP, and it
will primarily engage in the business of directing, planning and
coordinating our business activities. In the future, our holding
company may become an operating company or acquire or organize other
operating subsidiaries, including other financial institutions.
Initially, our holding company will not maintain offices separate from
ours or employ any persons other than its officers, who will not be
separately compensated for such service.
<PAGE>
10. If I buy stock in the Conversion, will I own stock in United Tennessee
Bankshares, Inc. or Newport Federal Savings and Loan Association?
You will own shares of common stock of United Tennessee Bankshares, Inc.
United Tennessee Bankshares, Inc., as our holding company, will own all
of our outstanding stock.
About Becoming a Stockholder
11. What are the Subscription and Community Offerings?
In accordance with applicable regulatory requirements, our holding
company is offering shares of its Common Stock in a Subscription
Offering to our current and former customers and to our ESOP. Any
shares not subscribed for in the Subscription Offering may be offered
to the general public in a Community Offering with preference given to
natural persons and trusts of natural persons who are permanent
residents of our Local Community, Cocke County, Tennessee. The
Subscription Offering, and the Community Offering, if any, are being
managed by Trident Securities. We anticipate that any shares not sold
in the Subscription or Community Offering may be offered for sale in a
Syndicated Offering, which would be an offering to the general public
on a best efforts basis by a selling group of broker-dealers managed by
Trident Securities.
12. Will I pay a commission to buy shares in the Subscription, Community or
Syndicated Offering?
No. You will not pay a commission to buy any shares in the Conversion.
13. How many shares of your holding company's stock will be issued in the
Conversion?
Between 935,000 and 1,454,750 shares of the Common Stock will be sold,
all at a price of $10.00 per share.
14. How was the price determined?
The amount of Common Stock being offered in the Conversion is based on
an independent appraisal of our estimated pro forma market value, which
was $11,000,000 as of September 12, 1997. The amount of Common Stock to
be issued in the Conversion, however, will be based on our estimated
value at the time of the Conversion and may be as low as $9,350,000 or
as high as $14,547,500, depending upon market and financial conditions
at that time.
<PAGE>
15. Who is entitled to buy stock in the Conversion?
The shares of Common Stock to be issued in the Conversion are being
offered in a Subscription Offering to our current and former customers
and our ESOP in the following order of priority in accordance with
applicable regulatory requirements:
1. "Eligible Account Holders" -- our depositors of $50 or more as of
December 31, 1995
2. "ESOP" -- the Employee Stock Ownership Plan to be implemented by
our holding company in the Conversion
3. "Supplemental Eligible Account Holders" -- our depositors of $50
or more as of September 30, 1997
4. "Other Members" -- our depositor and borrower members as of
October , 1997
Subject to the prior rights of holders of subscription rights, shares
not sold in the Subscription Offering may be offered in a Community
Offering to the general public, with preference given to natural
persons and trusts of natural persons permanently residing in our Local
Community, Cocke County, Tennessee. Shares not sold in the Subscription
or Community Offering may be offered to the general public in a
Syndicated Offering.
16. Are the subscription rights transferable?
No. Subscription rights held by our Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are not
transferable, and persons with subscription rights may not subscribe
for shares for the benefit of any other person. Persons who directly or
indirectly violate this prohibition may lose their right to purchase
shares in the Conversion and may be subject to criminal prosecution.
Each Eligible Account Holder, Supplemental Eligible Account Holder and
Other Member must list all qualifying savings accounts and loans, as of
the respective qualifying dates, on the Stock Order Form. Persons who
do not list all qualifying savings accounts and loans may be subject to
reduction or rejection of their subscription.
17. What are the minimum and maximum numbers of shares that I can purchase
in the Conversion?
The minimum number of shares is 25. Each eligible subscriber may
subscribe for up to 11,000 shares per qualifying deposit or loan in the
Subscription Offering, provided that the maximum number of shares that
may be purchased in the Conversion by any person, together with
associates, or group of persons acting in concert, (other than the
ESOP) is 22,000. We expect the ESOP to subscribe for 8% of the shares
issued in the Conversion.
<PAGE>
18. Are your Board of Directors and management buying a significant number
of shares?
We expect our directors and executive officers to subscribe for 140,000
shares. The purchase price paid by them will be the same $10.00 per
share price as that paid by all other persons who purchase shares in
the Conversion.
19. How do I subscribe for shares?
To subscribe for shares of the Common Stock in the Subscription
Offering, you should send or deliver a Stock Order Form together with
full payment (or appropriate instructions for withdrawal from permitted
deposit accounts, as described below) to us in the postage-paid
envelope provided, so that the Stock Order Form and payment or
withdrawal authorization instructions are received before the end of
the Subscription Offering, which will expire at : , Eastern Time,
on November , 1997, unless extended. Payment for shares may be made
in cash (if made in person) or by check or money order. Subscribers who
have deposit accounts with us may include instructions on the Stock
Order Form requesting withdrawal from such deposit account(s) to
purchase shares. Withdrawals from certificates of deposit may be made
without incurring an early withdrawal penalty.
If shares remain available for sale after the expiration of the
Subscription Offering, they may be offered in a Community Offering,
which may begin during or after the Subscription Offering. Persons who
wish to order shares in the Community Offering should return their
Stock Order Form as soon as possible after the Community Offering
begins, because it may be terminated at any time. Members of the public
should contact the Stock Information Center at (423) - for
additional information.
Owners of self-directed Individual Retirement Accounts (IRAs) may use
the assets of their IRAs to purchase shares of Common Stock in the
Subscription and Community Offerings, provided that their IRAs are not
maintained on deposit with us. Persons with self-directed IRAs
maintained by us must transfer their accounts to an unaffiliated
institution or broker to purchase shares of Common Stock in the
Subscription and Community Offerings. Anyone interested in doing so
should contact the Stock Information Center no later than five business
days before the Expiration Date.
20. Will I receive interest on funds I submit to purchase shares?
Yes. We will pay interest at our passbook rate from the date funds are
received until completion or termination of the Conversion. All funds
authorized for withdrawal from deposit accounts with us will earn
interest at the applicable account rate.
<PAGE>
21. May I borrow funds from you to pay for shares purchased in the
Conversion?
No. Federal regulations prohibit us from making loans for this
purpose. However, federal regulations do not prohibit you from
obtaining a loan from another source for the purpose of purchasing
shares in the Conversion.
22. How may investors buy or sell shares in the aftermarket?
We have obtained conditional approval for the Common Stock to be quoted
on the Nasdaq Small-Cap Market under the symbol " ." After shares
of the Common Stock commence trading, interested investors may contact
any broker to buy or sell shares. Due to the amount of Common Stock to
be issued in the Conversion, we cannot assure you that the conditions
for quotation on the Nasdaq Small-Cap Market will be satisfied or that
an active and liquid trading market for the Common Stock will develop
or be maintained.
23. Will the holding company pay dividends?
We intend to adopt a policy of paying regular cash dividends at an
annual rate of $0.30 per share (3.0% based on the $10.00 per share
purchase price of the Common Stock in the Conversion) following the
current fiscal year (that is, following December 31, 1997). Dividends
will be subject to determination and declaration by the Board of
Directors, which will take into account a number of factors, including
our consolidated operating results and financial condition, net worth
and capital requirements as well as regulatory restrictions on the
payment of dividends from the Bank to the Company. We cannot assure you
that dividends will in fact be paid or that, if paid, such dividends
will not be reduced or eliminated in the future.
24. Will the FDIC insure the shares of the holding company?
No. Shares of the Common Stock are not savings deposits or savings
accounts and are not insured by the FDIC or any other government
agency.
25. If I subscribe for shares and later change my mind, may I demand a
refund or change my order?
No. After we receive your order, it cannot be withdrawn or changed,
except with our consent.
26. How can I get additional information about the Conversion?
FOR ADDITIONAL INFORMATION ABOUT THE CONVERSION, PLEASE REFER TO THE
MORE DETAILED INFORMATION IN THIS PROSPECTUS.
FOR ASSISTANCE, OR TO REQUEST ANOTHER PROSPECTUS AND STOCK ORDER FORM,
PLEASE CONTACT OUR STOCK INFORMATION CENTER AT (423) - .
<PAGE>
Newport Federal Letterhead
___________, 1997
Dear Individual Retirement Account Participant:
As you know, Newport Federal is in the process of converting from a
federally-chartered mutual savings association to a federally-chartered stock
savings association and has formed United Tennessee Bankshares, Inc. to hold
all of the stock of Newport Federal (the "Conversion"). Through the
Conversion, certain current and former depositors and borrowers of Newport
Federal have the opportunity to purchase shares of common stock of United
Tennessee Bankshares, Inc. in a Subscription Offering. United Tennessee
Bankshares, Inc. currently is offering up to _________ shares, subject to
adjustment, of United Tennessee Bankshares, Inc. at a price of $10.00 per
share.
As the holder of an individual retirement account ("IRA") at Newport
Federal, you have an opportunity to subscribe for shares of common stock of
United Tennessee Bankshares, Inc. using funds being held in your IRA. If you
desire to describe for shares of common stock of United Tennessee Bankshares,
Inc. through your IRA, Trident Securities, Inc. and Newport Federal can
assist you in self-directing those funds. This process can be done without
an early withdrawal penalty and generally without adverse tax consequence to
your retirement account.
If you are interested in receiving more information on self-directing
your IRA, please contact our Conversion Center at (423)________. Because it
may take several days to process the necessary IRA forms, a response is
requested by _______, 1997 to accommodate your interest.
Sincerely,
Richard G. Harwood
President and Chief Executive Officer
This letter is neither an offer to sell nor a solicitation of an offer to buy
United Tennessee Bankshares, Inc. common stock. The offer is made only by
the Prospectus, which was recently mailed to you. The shares of United
Tennessee Bankshares, Inc. common stock are not deposits and will not be
insured by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
IV. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to
Newport Federal's customers and members of the local community that the
stock sale is underway and (2) to remind the customers of the end of the
Subscription Offering. Trident has learned in the past that many people
forget the deadline for subscribing and therefore we suggest the use of
these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used at teller windows and on
customer service representatives' desk.
Approximately 1 - 2 Lobby posters will be used at each office of Newport
Federal
C. Example
D. Size
The counter card will be approximately 8 1/2" x 11".
The lobby poster will be approximately 16" x 20".
<PAGE>
C. POSTER
OR
COUNTER CARD
- --------------------------------------------------------------------------------
"TAKE STOCK IN OUR FUTURE"
"STOCK OFFERING MATERIALS
AVAILABLE HERE"
NEWPORT FEDERAL
- --------------------------------------------------------------------------------
<PAGE>
V. Proxy Reminder
A. Explanation
A proxy reminder is used when the majority of votes needed to adopt the Plan
of Conversion is still outstanding. The proxy reminder is mailed to those
"target vote" depositors who have not previously returned their signed
proxy.
The target vote depositors are determined by the conversion agent.
B. Example
C. Size
Proxy reminder is approximately 8 1/2" x 11".
<PAGE>
B. Example
- --------------------------------------------------------------------------------
P R O X Y R E M I N D E R
Newport Federal Savings and Loan Association of Newport, TN
YOUR VOTE ON OUR PLAN OF CONVERSION HAS NOT BEEN RECEIVED.
- ---------
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
- ---------------------------
VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION WILL NOT AFFECT THE INSURANCE OF YOUR ACCOUNTS.
DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED UP TO THE APPLICABLE
LIMITS.
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
----------------------------
PROXY CARD TO NEWPORT FEDERAL TODAY. PLEASE VOTE ALL PROXY CARDS RECEIVED.
WE RECOMMEND THAT YOU VOTE TO APPROVE THE PLAN OF CONVERSION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
NEWPORT FEDERAL
- --------------------------------------------------------------------------------
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (423)_____.
<PAGE>
EX-99.4
================================================================================
CONVERSION APPRAISAL REPORT
UNITED TENNESSEE BANKSHARES, INC.
PROPOSED HOLDING COMPANY FOR
NEWPORT FEDERAL SAVINGS AND
LOAN ASSOCIATION
Newport, Tennessee
Dated As of:
September 12, 1997
================================================================================
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC.]
September 12, 1997
Board of Directors
Newport Federal Savings and Loan Association
344 West Broadway
Newport, Tennessee 37821-2201
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
Newport Federal Savings and Loan Association, Newport, Tennessee ("Newport
Federal" or the "Association"). The common stock issued in connection with the
Association's conversion will simultaneously be acquired by a holding company,
United Tennessee Bankshares, Inc. (the "Holding Company"), and the Association
intends to change its name to Newport Federal Bank upon completion of the
conversion. Pursuant to the Plan of Conversion, the Common Stock is first being
offered in the Subscription Offering with nontransferable subscription rights
being granted to Eligible Account Holders, the ESOP, Supplemental Eligible
Account Holders and Other Members. To the extent shares remain available for
purchase after filling all orders received in the Subscription Offering, the
Common Stock will be offered in a Community Offering to the general public, with
preference given to Cocke County, Tennessee residents.
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
The Board of Directors of the Association has adopted a Plan of Conversion
pursuant to which the Association will convert from a federally chartered mutual
savings and loan association to a federally chartered stock savings and loan
association and issue all of its outstanding shares to the Holding Company. The
Holding Company will sell in the Subscription Offering and, if necessary, in the
Community Offering Holding Company stock in the amount equal to the appraised
value of the Association. Immediately following the conversion, the only
<PAGE>
RP Financial, LC.
Board of Directors
September 12, 1997
Page 2
significant assets of the Holding Company will be the capital stock of the
Association and the net conversion proceeds remaining after purchase of the
Association's common stock by the Holding Company. The Holding Company will use
50 percent of the net conversion proceeds to purchase the Association'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 Association in the preparation of its business plan,
we are independent of the Association and the other parties engaged by the
Association to assist in the stock conversion process.
Valuation Methodology
In preparing our appraisal, we have reviewed Newport Federal's application
for Approval of Conversion, including the Proxy Statement, as filed with the
OTS, and the Holding Company's Form S-1 registration statement as filed with the
Securities Exchange Commission. We have conducted a financial analysis of the
Association that has included due diligence related discussions with the
Association's management; Pugh & Company, the Association's independent auditor;
Housley, Kantarian & Bronstein, the Association's conversion counsel; and
Trident Securities, Inc., which has been retained by the Association 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
Association operates and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of conversion on the
Association's operating characteristics and financial performance as they relate
to the pro forma market value of Newport Federal. We have reviewed the economy
in the Association's primary market area and have compared the Association's
financial performance and condition with selected publicly-traded thrift
institutions with similar characteristics as the Association's, as well as all
publicly-traded thrifts. We have reviewed conditions in the securities markets
in
<PAGE>
RP Financial, LC.
Board of Directors
September 12, 1997
Page 3
general and in the market for thrift stocks in particular, including the market
for existing thrift issues and the market for initial public offerings by
thrifts.
Our appraisal is based on the Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the assets or liabilities of the Association. The
valuation considers the Association only as a going concern and should not be
considered as an indication of the liquidation value of Newport Federal.
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or significant world events) may occur from time to time, often with
great unpredictability and may materially impact the value of thrift stocks as a
whole or the Association's value alone. It is our understanding Newport Federal
intends to remain an independent institution and there are no current plans for
selling control of the Association as a converted institution. To the extent
that such factors can be foreseen, they have been factored into our analysis.
Pro forma market value is defined as the price at which Newport Federal's
stock, immediately upon completion of the conversion offering, would change
hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
Valuation Conclusion
It is our opinion that, as of September 12, 1997, the aggregate pro forma
market value of the shares to be issued was $11,000,000 at the midpoint, equal
to 1,100,000 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 $9,350,000 and a maximum value of $12,650,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 935,000 shares at
the minimum to 1,265,000 shares at the maximum. In the event that the
Association's appraised value is subject to an increase, up to 1,454,750 shares
may be sold at an issue price of $10.00 per share, for an aggregate market value
of $14,547,500, without a resolicitation.
Limiting Factors and Considerations
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who
<PAGE>
RP Financial, LC.
Board of Directors
September 12, 1997
Page 4
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 Association 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 Association's financial performance and
condition, management policies, and current conditions in the equity markets for
thrift shares. These updates may also consider changes in other external factors
which impact value including, but not limited to: various changes in the
legislative and regulatory environment, the stock market and the market for
thrift stocks, and interest rates. Should any such new developments or changes
be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
Ronald S. Riggins
President and Managing Director
James J. Oren
Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
UNITED TENNESSEE BANKSHARES, INC.
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
Introduction 1.1
Plan of Conversion and Holding Company Reorganization 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.5
Income and Expense Trends 1.9
Interest Rate Risk Management 1.13
Lending Activities and Strategy 1.13
Asset Quality 1.16
Funding Composition and Strategy 1.16
Subsidiary Operations 1.17
Legal Proceedings 1.17
CHAPTER TWO MARKET AREA
Introduction 2.1
National Economic Factors 2.2
Market Area Demographics 2.5
Economy 2.6
Deposit Trends and Competition 2.8
Summary 2.10
CHAPTER THREE PEER GROUP ANALYSIS
Selection of Peer Group 3.1
Financial Condition 3.6
Income and Expense Trends 3.9
Loan Composition 3.12
Interest Rate Risk 3.14
Credit Risk 3.14
Summary 3.17
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
UNITED TENNESSEE BANKSHARES, INC.
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
(continued)
PAGE
DESCRIPTION NUMBER
CHAPTER FOUR VALUATION ANALYSIS
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.5
4. Primary Market Area 4.5
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 4.12
C.The Acquisition Market 4.15
8. Management 4.15
9. Effect of Government Regulation and Regulatory Reform 4.16
Summary of Adjustments 4.16
Valuation Approaches 4.17
1. Price-to-Book ("P/B") 4.18
2. Price-to-Earnings ("P/E") 4.19
3. Price-to-Assets ("P/A") 4.20
Comparison to Recent Conversions 4.20
Valuation Conclusion 4.20
<PAGE>
RP Financial, LC.
LIST OF TABLES
UNITED TENNESSEE BANKSHARES, INC.
NEWPORT FEDERAL SAVINGS AND LOAN ASSOCIATION
TABLE
NUMBER DESCRIPTION PAGE
------ ----------- ----
1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statements 1.10
2.1 Major Employers 2.7
2.2 Market Area Unemployment Trends 2.8
2.3 Deposit Summary 2.9
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.8
3.3 Income as a Percent of Average Assets and Yields,
Costs, Spreads 3.10
3.4 Loan Portfolio Composition and Related Information 3.13
3.5 Interest Rate Risk Measures and Net Interest Income
Volatility 3.15
3.6 Credit Risk Measures and Related Information 3.16
4.1 Recent Conversions Pricing Characteristics 4.13
4.2 Market Pricing Comparatives 4.14
4.3 Public Market Pricing 4.22
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
Newport Federal is a federally-chartered mutual savings and loan
association operating in Newport, Cocke County, Tennessee since 1934, through a
headquarters office and one branch office. The Association's branch office,
located in the downtown area of Newport, was the Association's original
headquarters. In 1973, the Association opened a new office in Newport outside of
downtown on a major road, and redesignated the newly-opened office as the
headquarters. The Association considers its primary market for deposits to
consist of Cocke County, while lending activities also extend, to a lesser
extent, to contiguous counties in eastern Tennessee (see Exhibit I-1). Newport
is located in a rural area near national forest land, approximately 50 miles
east of Knoxville and 45 miles northwest of Asheville, North Carolina. The
Association is currently a member of the Federal Home Loan Bank ("FHLB") system
and is regulated by the Office of Thrift Supervision ("OTS"). The Bank's
deposits are insured up to the regulatory maximums by the Savings Association
Insurance Fund ("SAIF"), which is administered by the Federal Deposit Insurance
Corporation ("FDIC"). As of June 30, 1997, the Association maintained $64.2
million in assets, $56.7 million in deposits and $6.5 million in capital, equal
to 10.1 percent of assets.
Plan of Conversion and Holding Company Reorganization
On May 20, 1997 the Board of Directors of the Association adopted the Plan
of Conversion, incorporated herein by reference, in which the Association will
convert from mutual to stock form and simultaneously change its name to Newport
Federal Bank. United Tennessee Bankshares, Inc. (Bankshares or the "Holding
Company"), a Tennessee corporation, was recently organized to facilitate the
conversion of Newport Federal. In the course of the conversion, the Holding
Company will acquire all of the capital stock that the Association will issue
upon its conversion from the mutual to stock form of ownership. Going forward,
Bankshares will own 100 percent of the Association's stock, and the Association
will be Bankshares' sole subsidiary. A portion of the net proceeds received from
the sale of common stock will be used to purchase
<PAGE>
RP Financial, LC.
Page 1.2
all of the then to be issued and outstanding capital stock of the Association,
with the balance of the proceeds being retained by the Holding Company.
At this time, no other activities are contemplated for the Holding Company
other than the ownership of the Association, a loan to the newly formed employee
stock ownership plan ("ESOP") and investment of the Holding Company's cash into
short- to intermediate-term investment securities. In the future, Bankshares may
acquire or organize other operating subsidiaries, diversify into other
banking-related activities, pay cash or stock dividends or repurchase its stock,
although there are no specific plans to undertake such activities at the present
time.
Strategic Overview
Newport Federal is a community-oriented thrift, with a primary strategic
objective of meeting the borrowing and savings needs of its local customer base.
The market area served by the Association, limited primarily to Cocke County,
Tennessee, has been experiencing moderate population and household growth,
although the total size of the market area is relatively small so the absolute
growth numbers are limited. The economic growth in the Association's primary
market area reflects a general expansion of the various industries present in
the market area, such as manufacturing, services, wholesale and retail trade,
transportation and others. The overall small size of market area has provided
for a highly competitive environment for financial institution services and has
generally limited the Association's growth potential, although recent
acquisitions of local financial institutions by larger, out-of-market financial
institutions have resulted in generally positive effects on the Association's
deposit base and overall business. Newport Federal, however, continues to face
competition from other financial services firms such as mortgage companies and
mutual funds. As explained more fully below, the Association is the classic
thrift institution, funding local residential mortgage loans for portfolio with
retail certificates of deposit ("CDs"). Thus, the Association's pre-tax
profitability is primarily derived from interest rate spread and operating
expenses. As set forth in the Association's business plan, there are no plans to
undergo significant change from the historical niche.
Throughout its history, Newport Federal has pursued a traditional thrift
operating strategy and, thus, 1-4 family permanent mortgage loans (including
permanently attached mobile home
<PAGE>
RP Financial, LC.
Page 1.3
lending) and retail deposits have consistently been the principal components of
the Association's assets and liabilities, respectively. Commercial real estate,
residential construction and consumer loans have increasingly represented a
larger proportion of total loans, cumulatively representing over 17 percent of
total loans. Newport Federal's emphasis on originating 1-4 family permanent
mortgage loans in local and familiar markets appears to have limited credit risk
exposure, as indicated by the favorable credit loss history. At the same time, a
large portion of the loan portfolio does not conform to secondary market
standards due to characteristics of the borrower or the property, but the
Association's intention is to hold such loans in portfolio rather than sell such
loans in the secondary market. The Association has sought to minimize interest
rate risk through emphasizing adjustable rate residential ("ARMs") and
commercial real estate lending and short-term construction and consumer lending.
Due to the limited demand for 1-4 family mortgage loans in the primary
market area, as well as mortgage lending competition, the Association has
typically maintained a relatively large portfolio of cash, investment and
mortgage-backed securities ("MBS"), the majority of which are designated as
available for sale ("AFS").
As a traditional thrift, Newport Federal's core earnings base is largely
dependent upon net interest income and operating expense levels. The
Association's recent earnings strength has been supported by strong net interest
income, reflecting limited utilization of teaser rates and floor rates on ARMs
and relatively low operating expenses given the limited revenue diversification,
limited transaction accounts, no automated teller machines ("ATMs") and low
depreciation expense (the original headquarters office is nearly fully
depreciated). The net income ratio in recent years has also benefited from the
strong capital, in excess of 10 percent of assets, which provides interest-free
funds for investment into interest-earning assets. The Bank's operating expenses
over the last 12 months was inflated due to two unusual items: the $317,000
payment of the SAIF special assessment in the September 1996 quarter and the
$151,000 expense in establishing a director's retirement plan ("DRP") in June
1997. The Association's operating expenses will be subject to increase on a
post-conversion basis to account for the stock benefit plans and cost of
operating a public company.
Given the nature of the Bank's operations, retail deposits have served as
the only interest-bearing source of funds over the last few years. On a
post-conversion basis it is expected the
<PAGE>
RP Financial, LC.
Page 1.4
Bank will not utilize borrowed funds. Newport Federal's balance of deposits has
exhibited a moderate increase in recent years, largely due to the periodic
influx of new customers following acquisitions of other local financial
institutions by larger, out-of-market financial institutions. In this regard,
between year end 1992 and 1995, the Bank's deposits increased at an annual pace
equal to 1.7 percent for a total increase of $2.3 million. Then, as a result of
the 1996 Union Planters acquisition of Franklin Financial, the Association's
deposits grew at an annual rate of 11.7 percent over the next 18 months, for a
total increase of $8.8 million without offering highly competitive deposit
rates. The new customer defection has slowed in recent months, and the
Association anticipates that on a post-conversion basis deposits will grow at a
pace more consistent with its historical experience.
The Association's Board of Directors has elected to convert to the stock
form of ownership to improve the competitive position of Newport Federal. The
additional capital realized from conversion proceeds will increase liquidity to
support funding of future loan growth and other interest-earning assets, and
further reduce interest rate risk by enhancing the rate of interest-earning
assets to interest-bearing liabilities ("IEA/IBL ratio"). The additional funds
realized from the stock offering will also serve as an alternative funding
source to deposits in meeting the Association's future funding needs, which will
allow for competitive pricing in the deposit rates. Additionally, Newport
Federal's equity-to-assets ratio will better position the Association to take
advantage of expansion opportunities as they arise. Such expansion would most
likely occur through acquiring branches or other financial institutions in areas
that would provide for further penetration in the markets currently served by
the Association or nearby surrounding markets. At this time, the Association has
no specific plans for expansion other than growth through the two existing
office facilities and current array of product and service offerings. The
Association's projected internal use of proceeds are highlighted below.
The proceeds from the conversion are expected to be deployed as follows:
o Holding Company. Approximately 50 percent of the net conversion
proceeds will be retained by Bankshares. Such funds will be invested
initially into short-term investments. Over time, the Holding
Company funds may be utilized for various corporate purposes,
including payment of dividends and possible repurchases of common
stock consistent with regulatory limitations.
<PAGE>
RP Financial, LC.
Page 1.5
o Newport Federal. The remaining net conversion proceeds will be
infused into the Association in exchange for all of the
Association's newly-issued stock. Proceeds infused into the
Association will initially be held in short-term investments. Over
time, the proceeds are expected to be redeployed into the
Association's loan growth and normal investment activities.
Overall, it is Newport Federal's objective to pursue moderate growth to
increase shareholder returns, and not compromise the overall risk associated
with Newport Federal's operations. The Association has acknowledged that it
intends to operate with excess capital in the near term, operating with a below
market return on equity, until such time as the new capital can be leveraged in
a safe and sound manner over an extended period of time.
Balance Sheet Trends
Table 1.1 shows key balance sheet items at the close of the last five
fiscal years and at June 30, 1997. Newport Federal's audited financial
statements are incorporated by reference as Exhibit I-2, while historical key
operating ratios are presented in Exhibit I-3. From December 31, 1992 through
June 30, 1997, Newport Federal exhibited annual asset growth of 6.4 percent,
with the faster loan growth (8.4 percent annual rate) leading to an increased
percentage of loans to assets. The cash and investments and MBS balances have
fluctuated in concert with loan demand, the prevailing interest rate environment
and funds availability. The balance of MBS has declined from its 1994 peak of
$10.6 million to $7.8 million currently, as repayments of MBS have been used for
additional loan originations or investment in liquidity. The increased balance
of cash and investments over the last 18 months was also attributable to the
rapid growth in deposits following local acquisition activity over the same
period. Newport Federal's annual deposit growth totaled 5.0 percent, as the
Association attracted new funds from existing customers and from new customers
previously banking with other local competitors.
The balance of loans receivable increased at an 8.4 percent annual rate
between fiscal 1992 and June 30, 1997, and the balance increased at an annual
rate of 8.5 percent since December 31, 1995, concurrent with the
acquisition-related growth. The primary emphasis of Newport Federal's lending
strategy has been the origination of 1-4 family permanent mortgage loans, from
1993 forward such lending has contributed 55 to 70 percent of total loan
originations. As of June 30, 1997, 1-4 family permanent mortgage loans totaled
$39.7 million,
<PAGE>
RP Financial, LC.
Table 1.1
Newport Federal Savings and Loan Association
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
----------------- ---------------- ---------------- ---------------- ----------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $48,552 100.00% $51,465 100.00% $53,238 100.00% $54,019 100.00% $60,611 100.00%
Cash and Cash Equivalents 7,857 16.18% 7,646 14.86% 5,485 10.30% 5,468 10.12% 8,389 13.84%
Mortgage-Backed Securities 7,712 15.88% 9,350 18.17% 10,633 19.97% 7,696 14.25% 7,401 12.21%
Loans Receivable (net) 31,682 65.25% 34,121 66.30% 36,568 68.69% 40,365 74.72% 44,230 72.97%
Deposits 45,631 93.98% 47,310 91.93% 48,761 91.59% 47,954 88.77% 53,767 88.71%
FHLB Advances/Other Borrowings 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Stockholders' Equity 2,591 5.34% 3,835 7.45% 4,262 8.01% 5,419 10.03% 6,103 10.07%
AFS Adjustment --- --- 344 0.67% (72) -0.14% 371 0.69% 471 0.78%
Avg. Interest-Earning Assets/
Interest-Bearing Liabilities 100.88% 101.65% 107.70% 108.70% 109.30%
Non-Performing Assets/Assets 1.87% 0.81% 0.96% 0.54% 0.63%
Allowance for Loan Losses as a
Percent of:
Total Loans 1.18% 1.36% 1.34% 1.21% 1.10%
Non-Performing Loans(1) 43.58% 113.86% 104.40% 168.86% 129.93%
Office Locations 2 2 2 2 2
<CAPTION>
6/30/93-
6/30/97
As of Annual
June 30, 1997 Growth Rate
----------------- -----------
Amount Pct Pct
------ --- ---
($000) (%) (%)
<S> <C> <C> <C>
Total Amount of:
Assets $64,189 100.00% 6.40%
Cash and Cash Equivalents 10,151 15.81% 5.86%
Mortgage-Backed Securities 7,757 12.08% 0.13%
Loans Receivable (net) 45,624 71.08% 8.44%
Deposits 56,725 88.37% 4.95%
FHLB Advances/Other Borrowings 0 0.00% N/M
Stockholders' Equity 6,469 10.08% 22.55%
AFS Adjustment 601 0.94% N/A
Avg. Interest-Earning Assets/
Interest-Bearing Liabilities 110.27%
Non-Performing Assets/Assets 0.92%
Allowance for Loan Losses as a
Percent of:
Total Loans 1.20%
Non-Performing Loans(1) 96.40%
Office Locations 2
</TABLE>
(1) Or Reserve Coverage Ratio.
Source: Newport Federal's audited financial reports and offering documents.
<PAGE>
RP Financial, LC.
Page 1.7
or 82.3 percent of the gross loan portfolio, versus comparative measures of
$33.6 million, or 88.2 percent of gross loans outstanding at fiscal year end
1994. The decline was attributable to growth in commercial and consumer lending,
despite the growth in single-family residential construction loans. Residential
construction increased from $1.5 million, or 4.0 percent of gross loans
outstanding, at fiscal year end 1994 to $3.0 million, or 6.3 percent of gross
loans outstanding, at June 30, 1997. The Association has not sold or purchased
loans over the past five fiscal years, and thus does not maintain a portfolio of
loans serviced for others. Non-residential real estate/multi-family loans
comprise the next largest segment of the loan portfolio, equaling $3.3 million,
or 6.8 percent, of gross loans outstanding, at June 30, 1997, versus comparative
measures of $1.2 million, or 3.2 percent of gross loans outstanding, at fiscal
year end 1994. Most of the growth in non-residential real estate/multi-family
loans was the result of additional lending efforts in the local market area by
the Association, comprised of loan secured by churches, restaurants, offices,
apartments and other income-producing properties.
The non-mortgage (or consumer) loan portfolio, consisting primarily of
automobile loans, loans on savings deposits, home equity/second mortgage loans,
and other consumer loans, also grew since fiscal year end 1994, increasing from
$1.7 million, or 4.6 percent of gross loans outstanding, at fiscal year end
1994, to $2.2 million, or 4.6 percent of gross loans outstanding, at June 30,
1997. Consumer loans area originated by the Association as an additional product
for customers, and are also attractive due to the higher yield and shorter
duration characteristics of these loans.
The Association's asset quality has generally been good, with
non-performing assets dropping to a low of 0.54 percent of total assets at year
end 1995. Over the last 18 months the level of non-performing assets has doubled
to 0.92 percent of assets, a pronounced increase given that the balance of loans
grew by half the amount of total assets over the same period. As a result, the
reserve coverage ratio was cut by over 40 percent during the last 18 months,
from 169 percent at December 31, 1995 to 98 percent at June 30, 1997. The
increase in non-performing assets and the corresponding decline in the reserve
coverage ratio coupled with the increased credit risk profile of the loan
portfolio, led the Association to establish loan loss provisions in 1997 after
two years of no provisions.
<PAGE>
RP Financial, LC.
Page 1.8
The intent of the Association's cash and investments policy is to provide
adequate levels of liquid assets required by regulatory authorities and manage
cash flow, diversify the earning asset base, obtain yield and, under prior
federal income tax law, satisfy certain requirements for favorable tax
treatment. Newport Federal anticipates investing the net proceeds from the stock
offering into investments with short-term maturities, pending deployment into
loans and investments that are consistent with the Association's current lending
and investment strategies. Cash and cash equivalents maintained by the
Association totaled $3.1 million at June 30, 1997, consisting most of
interest-earning deposits in the FHLB ($2.7 million). As of June 30, 1997, the
Association's investments portfolio totaled $14.8 million, or 23.1 percent of
assets. Except for a small portfolio of municipal bonds (obligations of states
and political subdivisions) which are held to maturity, all of the Association's
investments are classified as AFS, as shown in Exhibit I-4. The municipal bonds
totaled $1.1 million, and consisted entirely of investments in Tennessee
municipalities. The $13.8 million AFS investment securities portfolio at June
30, 1997 was concentrated in MBS ($7.8 million), U.S. Government and agency
securities ($4.5 million), FHLMC preferred stock ($1.0 million), FHLB stock
($0.5 million), and other investments ($15,000). As of June 30, 1997, Newport
Federal maintained a pre-tax unrealized gain on the AFS portfolio of $1.0
million. Investment securities are maintained as AFS to provide flexibility for
liquidity and restructuring purposes. The MBS balance increased in fiscal 1994
due to more favorable yield characteristics in comparison to other investment
securities, while subsequent to fiscal 1994 the MBS balance has declined through
principal reduction.
As noted earlier, the Association's former headquarters office has been
substantially fully depreciated, such that the current book value is less than
$800. The Association has no current intentions of selling this office facility,
particularly given the location - rather, certain improvements are being
contemplated which would increase the book value. There is no recent appraised
value of such facility.
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 two
office locations. Currently, savings rates offered by Newport Federal are
generally in line with the local competition, with CDs accounting for the
majority of total deposits. The Association has a portfolio of core deposits
totaling approximately 27 percent of deposits, providing a base of lower costing
deposits for
<PAGE>
RP Financial, LC.
Page 1.9
operations. Newport Federal is authorized to use advances from the FHLB of
Cincinnati to supplement other available funds for operations. Such FHLB
advances, or other borrowings have not been used by the Association in recent
years, as sufficient funds have been available internally.
Positive earnings over the period translated into an annual capital growth
rate of 22.6 percent, and all of the Association's capital is tangible capital.
As of June 30, 1997, Newport Federal's equity-to-assets ratio equaled 10.08
percent, including an unrealized net gain (after-tax) of $0.6 million on
investment securities maintained as AFS. Local market conditions during the
early to mid-1990s were generally conducive to the Association's moderate growth
in order to build the capital ratios, which approximated 5.34 percent at year
end 1992. The Association maintained capital surpluses relative to all of the
regulatory capital requirements at June 30, 1997. The addition of conversion
proceeds will serve to strengthen Newport Federal's capitalization.
Income and Expense Trends
In recent years the Association has experienced strong profitability (see
Table 1.2), ranging from a low of 0.74 percent of average assets over the last
12 months to a high of 1.80 percent of average assets in fiscal 1993. For the
twelve months ended June 30, 1997, the Association's reported net income of
$450,000, equal to 0.74 percent of average assets, was lower than in prior
periods primarily due to three large non-recurring expense items: the $317,000
special SAIF assessment (52 basis points pre-tax), the $151,000 cost of
establishing the DRP and additional loan loss provisions of $90,000. Consistent
with Newport Federal's traditional thrift operating strategy, net interest
income and operating expenses represent the major components of core earnings.
Until the last 12 month period, non-operating items have had only a minor impact
to earnings, while loss provisions and gains(losses) on the sale of assets have
had only small impacts on the income statement in recent years. The
Association's dollar earnings level and profitability ratios have steadily
declined since the 1993 peak due to erosion in the net interest income ratio, as
explained more fully below and, during late 1996 and 1997 to date, the impact of
the special SAIF assessment, the DRP expense and the additional loan loss
reserves. Adjusting for non-operating items, on an after-tax basis, the
Association's adjusted, or
<PAGE>
Table 1.2
Newport Federal Savings and Loan Association
Historical Income Statements
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
------------------ ------------------ ------------------ ----------------- -----------------
Amount Pct(1) Amount Pct(1) Amount Pct(1) Amount Pct(1) Amount Pct(1)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 3,846 8.50% $ 3,926 7.85% $ 3,906 7.41% $ 4,282 7.97% $ 4,536 7.85%
Interest Expense (2,022) -4.47% (1,688) -3.37% (1,655) -3.14% (2,218) -4.13% (2,400) -4.15%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Interest Income $ 1,824 4.03% $ 2,238 4.47% $ 2,251 4.27% $ 2,064 3.84% $ 2,137 3.70%
Provision for Loan Losses (205) -0.45% (99) -0.20% (33) -0.06% 0 0.00% 0 0.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Interest Income after
Provisions $ 1,619 3.58% $ 2,139 4.28% $ 2,218 4.21% $ 2,064 3.84% $ 2,137 3.70%
Other Operating Income $ 110 0.24% $ 112 0.22% $ 129 0.25% $ 140 0.26% $ 153 0.27%
Operating Expense (778) -1.72% (917) -1.83% (1,038) -1.97% (1,082) -2.02% (1,161) -2.01%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Operating Income $ 951 2.10% $ 1,334 2.67% $ 1,310 2.49% $ 1,122 2.09% $ 1,129 1.95%
Gain(Loss) on Sale of Loans and
Securities $ 0 0.00% $( 0) -0.00% $( 10) -0.02% $ 27 0.05% $( 4) -0.01%
Directors Retirement Plan 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
SAIF Special Assessment 0 0.00% 0 0.00% 0 0.00% 0 0.00% (317) -0.55%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Non-Operating Income/Expense $ 0 0.00% $( 0) -0.00% $( 10) -0.02% $ 27 -0.05% $( 320) -0.55%
Net Income Before Tax $ 951 2.10% $ 1,334 2.67% $ 1,299 2.47% $ 1,149 2.14% $ 808 1.40%
Income Taxes (436) -0.96% (433) -0.87% (456) -0.87% (435) -0.81% (225) -0.39%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Inc(Loss) Before Extraordinary
Items $ 515 1.14% $ 901 1.80% $ 843 1.60% $ 714 1.33% $ 583 1.01%
Cumulative Effect of Change in
Accounting For Income Taxes $ 0 0.00% $ 0 0.00% $ 0 0.00% 0 0.00% 0 0.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net Income (Loss) $ 515 1.14% $ 901 1.80% $ 843 1.60% $ 714 1.33% $ 583 1.01%
Adjusted Earnings
Net Operating Income $ 951 2.10% $ 1,334 2.67% $ 1,310 2.49% $ 1,122 2.09% $ 1,129 1.95%
Tax Effect (2) (381) -0.84% (534) -1.07% (524) -0.99% (449) -0.84% (451) -0.78%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Adjusted Earnings $ 571 1.26% $ 800 1.60% $ 786 1.49% $ 673 1.25% $ 677 1.17%
-----------------
Memo:
Efficiency Ratio (3) 40.23% 39.02% 43.60% 49.09% 50.71%
Return on Equity
Reported 22.10% 28.03% 20.92% 14.75% 10.19%
Adjusted 24.47% 24.92% 19.50% 13.91% 11.83%
Effective Tax Rate(4) 45.82% 32.48% 35.13% 37.84% 27.81%
<CAPTION>
12 Months Ended
June 30, 1997
------------------
Amount Pct(1)
------ ------
($000) (%)
<S> <C> <C>
Interest Income $ 4,826 7.93%
Interest Expense (2,568) -4.22%
------- -----
Net Interest Income $ 2,258 3.71%
Provision for Loan Losses (90) -0.15%
------- -----
Net Interest Income after
Provisions $ 2,168 3.56%
Other Operating Income $ 126 0.21%
Operating Expense (1,176) -1.93%
------- -----
Net Operating Income $ 1,118 1.84%
Gain(Loss) on Sale of Loans and
Securities $ 0 0.00%
Directors Retirement Plan (151) -0.25%
SAIF Special Assessment (317) -0.52%
------- -----
Net Non-Operating Income/Expense $( 468) -0.77%
Net Income Before Tax $ 650 1.07%
Income Taxes (200) -0.33%
------- -----
Net Inc(Loss) Before Extraordinary
Items $ 450 0.74%
Cumulative Effect of Change in
Accounting For Income Taxes 0 0.00%
------- -----
Net Income (Loss) $ 450 0.74%
Adjusted Earnings
Net Operating Income $ 1,118 1.84%
Tax Effect (2) (447) -0.73%
------- -----
Adjusted Earnings $ 671 1.10%
Memo:
Efficiency Ratio (3) 49.33%
Return on Equity
Reported 7.43%
Adjusted 11.07%
Effective Tax Rate(4) 30.76%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Based on effective tax rate of 40 percent for each year.
(3) Computed as operating expenses (excluding the special SAIF assessment and
the cost of the directors retirement plan) as a percent of the sum of net
interest income and other operating income (excluding net gains (losses)
on sale).
(4) Since the effective tax rate was reduced in recent periods due to the
method of determining bad debt deductions and changes in tax law and since
the Association's effective tax rate is expected to approximate 40 percent
in future years, adjusted earnings reflect an effective tax rate of 40
percent.
Source: Newport Federal's audited financial reports and offering documents. Key
financial ratios for the past 5 fiscal years are presented in Exhibit I-3.
<PAGE>
RP Financial, LC.
Page 1.11
core, earnings and profitability showed less deterioration, with the decline
principally attributable to narrowing interest rate spreads (particularly given
the higher funding costs). Thus, despite the relatively rapid growth over the
last 18 months, the earnings growth was contained. The Association's return on
equity ("ROE") has rapidly declined from over 28 percent in 1993 to
approximately 7.4 percent during the last 12 months, given the increased capital
levels and the lower earnings levels. Adjusting for net non-operating items, the
adjusted, or core, ROE over the last 12 months approximated 11.1 percent. On a
post-conversion basis, while profitability should increase, the ROE can be
expected to be reduced considerably with the increased capitalization.
While Newport Federal has maintained a relatively strong net interest
income ratio in recent years, the ratio has declined 76 basis points from the
1993 peak of 4.47 percent to 3.71 percent for the most recent 12 months, almost
solely attributable to a higher cost of funds (with the biggest increase
occurring in 1995), despite the increased IEA/IBL ratio over the period. The
Association's interest income has remained relatively stable since fiscal 1993,
ranging from 7.85 percent in fiscal 1993 to 7.93 percent of average assets for
the most recent twelve month period. Thus, the decline in the net interest
margin is thus due to the rising interest expense ratio over the same time
period, which was largely attributable to a more competitive marketplace for
deposits. Such trends are further illustrated by the Association's historical
net interest rate spreads and yields and costs set forth in Exhibit I-5. Newport
Federal's yield-cost spread peaked at 4.2 percent during fiscal 1994, and
steadily declined to 3.3 percent for the most recent twelve month period, due
primarily to rising funding costs.
Non-interest operating income has been a relatively modest contributor to
earnings, reflecting the Association's historical traditional thrift emphasis.
Throughout the period shown in Table 1.2, non-interest operating income ranged
from a low of 0.21 percent of average assets during the twelve months ended June
30, 1997 to 0.26 percent for fiscal 1995. Such income has been limited given the
relatively low proportion of transaction accounts and limited revenue
diversification activities. Growth in such income is expected to be gradual.
Historically, non-operating gains and losses have been limited to gains or
losses on the periodic sale of AFS investment securities or MBS (see Table 1.2).
<PAGE>
RP Financial, LC.
Page 1.12
Newport Federal's operating expense ratio has generally trended higher
over the last several years (before the special SAIF assessment and the DRP
expense), ranging from a low of 1.72 percent of average assets in fiscal 1992 to
a high of 2.02 percent of average assets in fiscal 1995. For the twelve months
ended June 30, 1997, the Association's operating expense to average assets ratio
equaled 1.93 percent. The upward trend exhibited in the operating expense ratio
through 1995 was the result of inflationary pressures during a period of limited
growth. Over the last 18 months, even as normal operating expenses increased,
the ratio as a percent of average assets declined due to interim growth. Further
upward pressure will be placed on the Association's operating expense ratio
following the conversion, due to expenses associated with operating as a
publicly-traded company, including expenses related to the stock benefit plans.
Newport Federal's efficiency ratio (see Table 1.2 for definition) of 49.3
percent for the twelve months ended June 30, 1997 was less favorable than during
1992 and 1993 (at roughly 40 percent), particularly given the decline in the
level of net interest income. Nevertheless, the Association's current efficiency
ratio is in line with industry experience.
Loan loss provisions have impacted the Association's earnings to various
degrees over the last several years, ranging from a low of no loss provisions
during fiscal years 1995 and 1996 to a high of 0.45 percent of average assets
for fiscal 1992 (when non-performing assets approached 1.9 percent of assets).
Loss provisions of $90,000, or 0.15 percent of average assets were established
during the most recent twelve month period, with these provisions incurred due
to continued growth in the overall loan portfolio, the increased risk profile
and the increase in non-performing assets. As of June 30, 1997, the Association
maintained an allowance for loan losses of $576,000, equal to 97.6 percent of
non-performing assets and 1.26 percent of loans (see Exhibit I-6).
Newport Federal's effective tax rate has fluctuated from 27.8 percent in
fiscal 1996 to 45.8 percent in fiscal 1992. The relatively low effective tax
rate posted during fiscal 1996 was due to the effect on deferred taxes of
changes in the tax bad debt reserve and methods required to be used to calculate
tax bad debt deductions. The effective tax rate for the twelve months ended June
30, 1997 was higher at 30.8 percent, due to the effect of utilizing the six-year
moving average method to determine the tax bad debt deductions and other changes
as mandated by the Small Business Job Protection Act enacted by Congress in late
1996. The Association believes
<PAGE>
RP Financial, LC.
Page 1.13
the effective tax rate will be approximately 40 percent in the future, which can
be expected to further reduce the profitability levels.
Interest Rate Risk Management
Newport Federal attempts to manage exposure to interest rate fluctuations
primarily on the asset side of the balance sheet, and has attempted to enhance
the interest sensitivity of its operations through several means, including: (1)
originating variable rate mortgage loans for portfolio (both residential and
non-residential) as well as short-term construction and consumer loans; and (2)
historically maintaining adequate liquidity and capital levels to sustain
unfavorable movements in market interest rates. The investment portfolio is
primarily classified as AFS, and, thus, could be readily sold if interest rate
conditions warrant such action. The diversification into other types of interest
rate sensitive lending further supports Newport Federal's management of interest
rate risk. As of December 31, 1996, of the total loans due after December 31,
1997, ARM loans comprised 80 percent of those loans. Exhibit I-7 displays the
distribution of the Bank's fixed and adjustable rate loans.
Newport Federal monitors its exposure to interest rate risk using the net
portfolio value ("NPV") analysis provided by the OTS on a quarterly basis. Based
on financial data as of June 30, 1997, the Association's estimated changes in
the NPV was equal to a negative 15 percent in the case of a 200 basis point
increase in interest rates. This calculation indicates that the Association's
NPV could be adversely affected by increases in interest rates. Although this
measure is within the Board-established limits of the Association, Newport
Federal is seeking to further reduce exposure to interest rate risk, and the
reinvestment of conversion proceeds is expected to contribute to reduced
exposure. Exhibit I-8 presents the Association's NPV analysis as of June 30,
1997.
Lending Activities and Strategy
The Association's lending activities have emphasized the origination of
1-4 family permanent mortgage loans (see Exhibits I-9 and I-10, which reflect
loan composition and lending activity, respectively). As of June 30, 1997, 1-4
family permanent mortgage loans accounted for $39.7 million, or 82.3 percent of
total loans outstanding, all originated for portfolio retention.
<PAGE>
RP Financial, LC.
Page 1.14
Non-residential real estate/multi-family loans represent the most significant
area of lending diversification for Newport Federal. To a lesser extent, the
Association's loan portfolio includes diversification into construction loans
and consumer loans. The current proportion of 1-4 family permanent loans has
declined since fiscal 1994 due to the Association's portfolio diversification
efforts. Exhibit I-11 provides the contractual maturity of the Association's
loan portfolio by loan type, as of June 30, 1997.
Newport Federal originates both fixed rate and adjustable rate permanent
1-4 family loans, and in the current interest rate environment, ARMs have
accounted for most of the Association's 1-4 family loan volume (during the six
months ended June 30, 1997, approximately 88 percent of loan originations had
adjustable rate features). The Association's lending policies generally limit
the maximum loan-to-value ("LTV") ratio on 1-4 family residential mortgage loans
secured by owner-occupied properties to 95 percent of the lesser of the
appraised value or purchase price, with private mortgage insurance required on
loans with LTVs in excess of 80 percent. The maximum LTV on mortgage loans
secured by non-owner-occupied properties generally is limited to 75 percent.
Newport Federal generally does not sell loans in the secondary market, however
the 1-4 family loans are generally underwritten and documented in accordance
with FNMA and FHLMC guidelines. Certain agency requirements with respect to
mortgaged properties are not periodically not met, leaving a portion of the
Association's residential loan portfolio not saleable.
ARMs originated by the Association generally have 25 year terms, amortized
on a monthly basis. These loans generally are indexed to the weekly average rate
on U.S. Treasury securities adjusted to a constant maturity of one year. The
interest rate on these loans is typically adjustable annually, often after an
initial period of up to five years before the first rate adjustment, with
limitations of two percent per adjustment period and six percent over the life
of the loan. ARM loans are underwritten and borrowers qualified based on the
fully indexed rate. Fixed-rate mortgages are offered with maturities of up to 15
years, with monthly amortization and principal and interest due each month.
Non-residential and multi-family loans originated by the Association are
collateralized by properties in the normal lending territory and consist of
loans with balances of less than $500,000, with terms of up to 25 years (the
Association's portfolio had a mean balance of
<PAGE>
RP Financial, LC.
Page 1.15
$65,000 as of June 30, 1997). These loans generally have annually adjustable
interest rates, with limitations on adjustments of two percent per year and
maximum LTVs of 75 percent. Consistent with the higher credit risk associated
with non-residential and multi-family real estate loans, loan rates offered on
those loans are at a premium to the Association's 1-4 family loan rates, and
higher origination fees are also charged. Properties securing the
non-residential and multi-family loan portfolio include churches, restaurants,
offices, apartments and other income-producing commercial properties in the
local market area. To minimize risk in this lending area, the Association limits
such lending to the local market area to borrowers with whom the Association is
familiar. Newport Federal also generally obtains personal guarantees from
borrowers.
Loans for the construction of one- to four family owner-occupied
residences are also offered by the Association. Such loans totaled $3.0 million,
or 6.3 percent of gross loans receivable, at June 30, 1997, with all loans
structured as construction/permanent loans to become permanent loans upon
completion of the construction phase. To a lesser extent, Newport Federal offers
loans to qualified builders for the construction of 1-4 family residences.
Construction/permanent loans are underwritten in accordance with the same
requirements as permanent mortgages, except the provision for a six month
construction period, and may or may not require monthly interest payments.
Diversification into non-mortgage loans is currently limited to consumer
lending. As of June 30, 1997, consumer loans totaled $2.2 million, or 4.6
percent of gross loans receivable. The Bank offers a variety of types of
consumer loans, including automobile loans, loans secured by deposit accounts,
home equity loans secured by second mortgages and secured and unsecured personal
loans. The most prominent type of consumer loan in the portfolio is automobile.
The Bank considers automobile loans attractive due to generally higher yields
and shorter terms, despite the higher credit risk. Credit risk is managed by
limiting the maximum terms on automobile loans and other security.
As shown in Exhibit I-10, Newport Federal's overall loan origination
volume increased from $10.5 million in 1994 to $13.9 million for the most recent
twelve months. Growth in originations has translated into positive loan growth
over the past three and one-half fiscal years, as originations exceeded
repayments throughout the period. The table highlights the Bank's
<PAGE>
RP Financial, LC.
Page 1.16
increased emphasis on commercial real estate, construction and consumer lending,
with originations increasing from $3.2 million, or 30.3 percent, of loan
originations in fiscal 1994 to $5.5 million, or 40.0 percent of loan
originations for the twelve months ended June 30, 1997. To date, the Association
has not purchased or sold any loans.
Asset Quality
Newport Federal's historical 1-4 family lending emphasis has generally
served to limit credit quality problems. As of June 30, 1997, Newport Federal's
classified assets totaled $646,000, all of which were classified as substandard.
As shown in Exhibit I-12, Newport Federal's non-performing assets ratio has
shown a certain degree of volatility since fiscal 1994, and increased from 0.63
percent of assets at December 31, 1996 to 0.92 percent at June 30, 1997.
Non-performing assets consisted of $549,000 of loans greater than 90 days
delinquent and still accruing and $41,000 of real estate owned (no loans were on
non-accrual status as of June 30, 1997). As of June 30, 1997, the Association
maintained valuation allowances of $576,000, equal to 1.26 percent of gross
loans receivable and 97.6 percent of NPAs, a considerable increase from levels
in previous years. Classified assets are shown in Exhibit I-13.
Funding Composition and Strategy
Deposits have consistently been the Association's primary source of funds
and at June 30, 1997 deposits account for all of the Association's
interest-bearing liabilities. Exhibits I-14 and I-15 provide data pertaining to
Newport Federal's deposit composition and costs at fiscal year ends 1994 through
1996 and as of June 30, 1997. Newport Federal's deposit composition has
consistently reflected a relatively large concentration of CDs, which totaled
$41.3 million, or 72.8 percent of total deposits, and a significant balance of
CDs with a maturity of less than one year (over 94 percent of CDs). Jumbo CDs
(CDs with balances of $100,000 or more) amounted to $13.8 million, or 33.4
percent of CDs and 24.3 percent of total deposits. Newport Federal typically
does not pay a premium rate for higher balance CDs. Since fiscal 1994, CDs have
increased in proportion of the deposit base.
Newport Federal's deposit base also includes a relatively small base of
core deposits (passbook accounts, NOW accounts and MMDAs) which totaled $15.4
million, or 27.2 percent
<PAGE>
RP Financial, LC.
Page 1.17
of total deposits. Passbook accounts were the largest component of core deposits
and totaled $9.7 million, or 17.1 percent of total deposits, at June 30, 1997,
followed by NOW accounts totaling $3.9 million, and money market accounts
totaling $1.8 million, at 6.87 and 3.23 percent of deposits, respectively.
Newport Federal has typically not used borrowings as a funding source and
the Association maintained no borrowings at June 30, 1997. Newport Federal's
deposit growth, internal funding and conversion proceeds are expected to be
adequate enough to fund the substantial portion of the Association's lending and
investment activities in the intermediate term. If borrowings are needed, the
Association has ample borrowing capacity with the FHLB of Cincinnati.
Subsidiary Operations
The Bank currently has one subsidiary, NFS Service Corporation, the only
asset of which is stock in the Association's data processing provider. At June
30, 1997, the aggregate investment in this subsidiary service corporation
totaled $15,000.
Legal Proceedings
Other than the routine legal proceedings that occur in the Association's
ordinary course of business, Newport Federal is not involved in litigation which
is expected to have a material impact on the Association's financial condition
or operations.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
Newport Federal conducts operations out of its headquarters office and a
branch office in Newport, Cocke County, Tennessee (see Exhibit II-1 for a list
of the Association's office locations). Cocke County is located in eastern
Tennessee along the North Carolina border, east of the Knoxville, Tennessee
metropolitan statistical area ("MSA"). The eastern portion of Cocke County is
relatively mountainous, representing the western slope of the Appalachian
Mountains, while the western portion of the county is represented by rolling
hillsides and more agriculture-related land that is proximate to, and accessible
to, major north-south (I-81) and east-west (I-40) interstate transportation
routes. In addition, a number of rivers flow westward through Cocke County,
forming a tributary of the Tennessee River (French Broad River), which has been
impounded into the Douglas Lake, a major regional recreational lake. Newport,
the geographic center of the county, contains approximately 7,000 residents or
one-fifth of the total countywide population, and serves as the economic and
employment center of the county.
Cocke County represents the Association's primary market area for deposit
generation, as most of Newport Federal's depositors are county residents.
Lending activities are also concentrated in Cocke County, and, to a lesser
extent, in contiguous counties in eastern Tennessee (the presence of the
Appalachian Mountains at the eastern end of Cocke County restricts business
activities in this area). In general, the Association's offices operate in a
market area with a small overall population base, but with increasing levels of
population and households. The Cocke County economy, historically based on
agriculture, has shifted to manufacturing over the last 30 years. The local
economy was impacted by the decline of the manufacturing sector of the economy
in the 1980s, and the economy has since diversified into other employment
sectors, such as services and wholesale and retail trade (reflecting growth in
tourism and the retirement population), although manufacturing remains the
largest employment sector.
Competition from other financial institutions operating in Cocke County
includes two large commercial banks (which are subsidiaries of large
superregional bank holding companies)
<PAGE>
RP Financial, LC.
Page 2.2
and one other small locally-owned commercial bank. The superregional commercial
banks, First Union and Union Planters, have a much larger presence than Newport
Federal and entered Cocke County through acquisition over the last few years.
The Association maintains a market share of approximately 19 percent of overall
financial institution deposits in Cocke County. Newport Federal has experienced
periodic growth spurts in deposits and market share in recent years due to
runoff of deposits at the institutions acquired by out-of-market banks. Such
growth has since slowed, which occurred in the first few months following the
acquisitions. The Association's growth has been primarily oriented towards CDs
given Newport Federal does not have ATMs and does not actively pursue commercial
accounts.
Future business and growth opportunities for Newport Federal 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 for
the Association, the relative economic health of the market area and the
relative impact on value.
National Economic Factors
Over the past year, national economic growth has been mixed. 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.
<PAGE>
RP Financial, LC.
Page 2.3
While fourth quarter GDP growth came in at a stronger than expected 4.7
percent annual growth rate (subsequently revised to 3.9 percent), most of the
economic data released during the beginning of the first quarter of 1997
indicated a continuation of moderate economic growth. Such measures as a 1.9
percent decline in December durable goods orders and a modest uptick in the
January 1997 unemployment rate to 5.4 percent, versus 5.3 percent in December
1996, eased concerns that the economy was overheating. However, the increase in
the unemployment rate was attributable to more people entering the job force,
and some markets began to experience labor shortages. In congressional testimony
at the end of February 1997, the Federal Reserve Chairman indicated that he
anticipated recent signs of lower job insecurity among workers would lead to
upward pressure in wages, which could possibly trigger the Federal Reserve to
boost interest rates. 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. However, inflation
measures showed that the "Goldilocks Economy" remained in effect, based on lower
producer prices and a lower than expected increase in the employment cost index.
Some of the reasons cited for the low inflation were a larger labor force, a
measurable increase in productivity, and an increasingly global economy. First
quarter 1997 GDP growth was measured at 5.9 percent, far exceeding analysts'
projections.
Second quarter economic data began to show signs of economic weakening,
based on a number of indicators. A lower than anticipated National Association
of Purchasing Managers index in April indicated a slowdown of expansion in the
manufacturing sector. New home sales also dropped by 7.7 percent in April 1997,
the sharpest decline in six months. Automobile sales for April and May 1997
declined from year earlier levels, and discounting became more common by
automakers. A rise in the June unemployment rate and GDP growth slowing to an
annual rate of 2.2 percent in the second quarter, which was well below the
revised 4.9 percent rate recorded in the first quarter, further signaled that
the economy was slowing to a more sustainable pace. Economic data released in
August provided mixed signals of economic growth, as a decline in
<PAGE>
RP Financial, LC.
Page 2.4
the July unemployment rate and an unexpectedly sharp decline in the U.S. trade
deficit provided indications of a robust economy. At the same time, a modest
increase in the July consumer price index and a decline in July wholesale prices
suggested that inflation remained non-threatening.
Consistent with the mixed economic activity, interest rate trends have
been varied as well over the past year. 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. The Federal Reserve increased short-term interest rates by 0.25
percent in late-March, which was followed by a sharp sell-off in the bond
market. For the first time in six months, the rate on the 30-year benchmark bond
moved above 7.0 percent in late-March.
Inflation concerns pushed interest rates higher during the first half of
April, which was followed by a slight decline in interest rates on rumors of a
national budget accord. News of the budget agreement and favorable inflation
data sustained the rally in bond prices through early-May. Interest rates
stabilized in mid-May, as the Federal Reserve opted not to raise interest rates
at its May meeting. The high level of consumer confidence indicated by the May
reading caused
<PAGE>
RP Financial, LC.
Page 2.5
the 30-year bond yield to edge above 7.0 percent in late-May. However, the
increase was short-lived, as signs of slowing economic growth provided for a
lower interest rate environment during June. The downward trend in interest
rates became more pronounced during July, following the Federal Reserve's
decision to leave rates unchanged at its early-July meeting and the release of
new economic data that indicated inflation was under control. Slower economic
growth indicated by the second quarter GDP growth rate of 2.2 percent sustained
the rally in bond prices at the end of July. However, in early-August, the
stronger than expected job growth reflected in the July employment data and a
falling U.S dollar against the year end mark caused bond prices to tumble. After
recovering briefly on the favorable inflation data indicated by July wholesale
and retail prices, bond prices declined in late-August on news of the narrower
than expected June trade deficit. During early September 1997, one- and
thirty-year U.S. Government bonds were fluctuating in a narrow range. Exhibit
II-2 provides historical interest rate trends from 1991 through September 1997.
Market Area Demographics
Demographic growth trends in the Association's primary market area of
Cocke County have been measured by changes in population, number of households
and median household income and other data, with trends in those areas
summarized by the data presented in Exhibit II-3. Tennessee 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 Association's offices are located in a relatively small market area in
terms of population, as Cocke County reported a total population of
approximately 32,000 as of 1997. Since 1990, Cocke County has experienced
increases in population and households in excess of national averages and in
line with statewide averages, in part reflecting the diversification of the
economy away from agriculture and manufacturing, and illustrating a certain
attractiveness to the county for retirement residents given the nearby
recreational areas. While the rural nature of the county acts to restrict
employment opportunities and leads to below average income levels, the number of
residents and households for Cocke County is projected to continue to increase
through the year 2002. Similarly, the State of Tennessee is expected to continue
to grow in terms of population and households over the next five years.
<PAGE>
RP Financial, LC.
Page 2.6
The rural nature of the primary market area also results in lower income
levels in comparison to statewide and national averages. Estimated per capita
annual income for 1997 in Cocke County is less than $12,000, almost 29 percent
less that statewide averages and approximately two-thirds of the national
average of $18,100. Age distribution figures show that the market area county
has a higher proportion of residents over 45 years of age (reflecting growth in
the retirement population). Income distribution levels are similar to per capita
income figures, revealing that the market area county has a higher proportion of
lower income households (below $15,000 annually). Median household income levels
are approximately 28 percent lower than the state averages and 36 percent less
than national averages. While nearly 30 percent of the households fall in the
low income category, nearly 70 percent of these households fall below the
poverty level. While the higher rates of population and household growth in
Cocke County may be expected to provide business opportunities, the overall
small market area in terms of population and households and the lower income
levels can be expected to limit overall growth opportunities for financial
institutions.
Economy
The economy in Cocke County is generally diversified, represented
primarily by manufacturing (27.0 percent of labor force), wholesale and retail
trade (22.2 percent), services (18.5 percent), government (11.5 percent) and
agriculture (11.2 percent). Table 2.1 displays a list of large employers in
Cocke County and Exhibit II-4 presents additional data concerning sources of
personal income and employment sectors. As shown in Exhibit II-4, manufacturing
has historically been the largest employer, and the number of employees in this
sector increased by 32 percent from 1989 to 1994, a time during which the
overall employment base increased by 16 percent. Table 2.1 reveals that the
manufacturing base is relatively diversified in a number of industries.
Wholesale and retail trade employment accounts for approximately 22 percent of
the labor force, reflecting the previously mentioned major transportation routes
located close to Cocke County. The services sector is represented by employment
in health care, retail and other services-related companies. Tourism has also
become a more significant part of the Cocke County economy in recent years due
to the large geographic portion of Cocke County which is protected land
(approximately 30 percent of the county is located within the Cherokee National
<PAGE>
RP Financial, LC.
Page 2.7
Forest, the Great Smoky Mountain National Park and Douglas Lake). The tourism
industry has promoted whitewater rafting, camping, hiking and other recreational
sports in the county. Agriculture is represented by field crops such as
tomatoes, tobacco and corn, and animal husbandry in areas such as beef cattle
and dairy farms.
<TABLE>
<CAPTION>
Table 2.1
Major Employers
Employer Industry Employees
-------- -------- ---------
<S> <C> <C>
Gatorade & Van Camps Food Processor 700
Falcon Products Restaurant & Hospitality Furniture 400
Baptist Hospital of Cocke County Health Care 360
Spring Arbor Distributors Publication Material Distributor 237
Detroit Gasket International Gaskets 222
Sonoco Products Co. Paperboard Products 220
LaGrange Molded Products Car Floor Mats 217
ACE Products, Inc. Industrial Tires 211
Electro-Voice, Inc. PA Systems, Speakers 206
WAL MART Retailer 120
Wood Products Wooden Furniture Products 100
Newport Utilities Board Electricity-Water Distributor 88
Homemakers of Tennessee Braided Rugs 85
American Appliance Products Wire Fabrication 84
Great Lakes Chemical Inorganic Chemicals 83
</TABLE>
Source: Local Area Demographic Information.
Table 2.2 displays unemployment data in the local market area as of June
1996 and June 1997. The unemployment rates for Cocke County remain above state
and national averages, and the employment situation has declined in the most
recent twelve month period. The continued growth of the market area places
upward pressure on unemployment rates, due to the additional residents moving to
the area, although the overall employment base has also increased as shown in
Exhibit II-4.
<PAGE>
RP Financial, LC.
Page 2.8
Table 2.2
Market Area Unemployment Trends
Region June 1996 June 1997
------ --------- ---------
United States 5.5% 5.2%
Tennessee 5.6 5.8
Cocke County 6.9 7.1
Source: U.S. Bureau of Labor Statistics.
Deposit Trends and Competition
Newport Federal's market area (defined as Cocke County for deposits), is
characterized by the presence of a few locally-based and locally-owned financial
institutions, including commercial banks and savings institutions. There are
three commercial banks in Cocke County, all of which are larger in overall
deposits than Newport Federal.
Table 2.3 displays deposit market trends for the state of Tennessee 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 in part reflecting thrift
acquisitions by commercial banks. This trend also reflects in part the impact of
disintermediation by other types of financial intermediaries such as mutual
funds, investment firms, brokerage houses, and insurance companies.
Deposit trends in Cocke County exhibited a lower rate of deposit increase,
as total deposits increased by 4.4 percent annually over the two year period.
The increase in deposits was recorded by commercial banks, while savings
institutions lost deposits at a rate of 0.8 percent annually. The rate of
deposit growth in Cocke County, lower than statewide averages, reflects in part
the rural market area and alternative investment options for customers. Newport
Federal recorded greater increases in deposits than its competitors, reflecting
the previously referenced runoff following local acquisitions by out-of-market
banks. This has resulted in an increase in deposit market share since June 30,
1994.
<PAGE>
------------------------------------------------
Table 2.3
Newport Federal Savings and Loan Association
Deposit Summary
------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
As of June 30,
------------------------------------------------------------------------
1994 1996
---------------------------------- ----------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
-------- ----- -------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
A. Deposit Summary
State of Tennessee 52,065,254 100.0% 1,794 $58,094,074 100.0% 1,832 5.6%
Commercial Banks 46,709,326 89.7% 1,641 53,365,802 91.9% 1,719 6.9%
Savings and Loans 5,355,928 10.3% 153 4,728,272 8.1% 113 -6.0%
Cocke County $248,355 100.0% 12 $270,782 100.0% 10 4.4%
Commercial Banks 175,471 70.7% 8 199,070 73.5% 7 6.5%
Savings and Loans 72,884 29.3% 4 71,712 26.5% 3 -0.8%
Newport FS&LA 46,718 18.8% 2 51,647 19.1% 2 5.1%
Source: FDIC, OTS.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
RP Financial, LC.
Page 2.10
Summary
The Association's current market share, rural market served, two office
locations and intensity of local competition is expected to limit growth
potential to a moderate pace. 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 Newport Federal's operations versus a
group of comparable savings institutions (the "Peer Group") selected from the
universe of all publicly-traded savings institutions in a manner consistent with
the regulatory valuation guidelines. The basis of the pro forma market valuation
of Newport Federal is derived from the pricing ratios of the Peer Group
institutions, incorporating valuation adjustments for key differences in
relation to the Peer Group. Since no Peer Group can be exactly comparable to
Newport Federal, key areas examined for differences are: financial condition;
profitability, growth and viability of earnings; assets growth; primary market
area; dividends; liquidity of the shares; marketing of the issue; management;
and effect of government regulations and regulatory reform.
Selection of Peer Group
The Peer Group selection process is governed by the general parameters set
forth in the regulatory valuation guidelines. Accordingly, the Peer Group is
comprised of only those publicly-traded savings institutions whose common stock
is either listed on a national exchange (NYSE or AMEX), or is NASDAQ listed,
since the stock trading activity is regularly reported and generally more
frequent than non-publicly traded and closely-held institutions. Non-listed
institutions are inappropriate since the trading activity for thinly-traded or
closely-held stocks is typically highly irregular in terms of frequency and
price and thus may not be a reliable indicator of market value. We have also
excluded from the Peer Group those companies under acquisition or subject to
rumored acquisition, mutual holding companies and recent conversions, since
their pricing ratios are subject to unusual distortion and/or have limited
trading history. A recent listing of the universe of all publicly-traded savings
institutions is included as Exhibit III-1.
Ideally, the Peer Group, which must have at least 10 members to comply
with the regulatory valuation guidelines, should be comprised of locally or
regionally-based institutions with comparable resources, strategies and
financial characteristics. Since there are only just over 400 publicly-traded
institutions nationally, it is typically the case that the Peer Group will be
comprised of institutions with relatively comparable characteristics. To the
extent that
<PAGE>
RP Financial, LC.
Page 3.2
differences exist between the converting institution and the Peer Group,
valuation adjustments will be applied to account for the differences.
In deriving the Association's Peer Group, RP Financial's selection
criteria initially focused on selecting comparable regional institutions. In
selecting the Peer Group institutions conforming with the criteria mentioned
above, we considered the most appropriate candidates to be smaller, highly
capitalized thrifts with generally traditional strategies and operating in small
urban or rural markets in the southeast and the midwest. In this regard, we
restricted the Peer Group candidates to those with less than $200 million in
assets and market capitalization under $50 million, equity to assets over 12
percent and strong core profitability (generally over 1.0 percent). The one
institution not meeting the core profitability parameter was based in nearby
Bristol, Tennessee, so we elected to retain Twin City Bancorp in the Peer Group.
This selection process led to a Peer Group comprised of 19 institutions.
Table 3.1 shows the general characteristics of each of the 19 Peer Group
companies and Exhibit III-2 provides summary demographic and deposit market
share data for the primary market areas served by each of the Peer Group
companies. All but one of the Peer Group companies have completed their stock
conversions in the 1990s.
While there are expectedly some differences between the Peer Group
companies and Newport Federal, we believe that the Peer Group companies, on
average, provide a good basis for valuation subject to valuation adjustments.
The following sections present a comparison of Newport Federal's financial
condition, income and expense trends, loan composition, interest rate and credit
risk versus the Peer Group as of the most recent publicly available date. A
brief introduction to each Peer Group member appears below, ordered by
descending asset size.
Northeast Indiana Bancorp of IN (NEIB). NEIB, with $176 million in assets
and 3 offices, operating in a small city in northeast Indiana, maintains a
relatively high loans/deposits ratio, in part attributable to extensive
utilization of borrowed funds, and has pursued somewhat greater loan
diversification.
Community Financial Corp. of VA (CFFC). CFFC, with $175 million in assets
and 3 offices, operating in a relatively rural market in central Virginia,
maintains a relatively high loans/deposits ratio, in part attributable to
extensive utilization of borrowed funds, and has pursued greater income
property lending.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 176 3 12-31 06/95 17.00 30
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 175 3 03-31 03/88 21.75 28
MARN Marion Capital Holdings of IN OTC Central IN Thrift 173 2 06-30 03/93 23.50 42
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 171 5 09-30 07/95 24.25 43
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 166 M 8 06-30 04/94 17.87 29
FBSI First Bancshares of MO OTC Southcentral MO Thrift 164 6 06-30 12/93 24.00 26
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 135 3 09-30 08/94 25.25 29
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 131 3 06-30 07/93 22.00 34
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 2 09-30 10/95 15.75 32
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 13.75 12
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 106 3 12-31 12/93 18.50 16
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 106 2 12-31 04/96 21.44 41
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 85 M 1 06-30 04/96 15.63 23
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 83 1 12-31 06/95 15.75 20
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 2 09-30 04/96 18.62 36
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 61 1 12-31 01/95 19.00 18
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 M 1 06-30 07/94 23.00 16
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 40 M 1 06-30 07/96 15.50 15
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30 04/96 15.00 8
</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: 09/18/97
<PAGE>
RP Financial, LC.
Page 3.4
Marion Capital Holdings of IN (MARN). MARN, with $173 million in assets
and 2 offices, operating in a relatively small market in central Indiana,
maintains a relatively high loans/deposits ratio, and has pursued greater
income property lending.
Texarkana First Financial Corp of AR (FTF). FTF, with $171 million in
assets and 5 offices, operating in a relatively small market in southwest
Arkansas, maintains a relatively high loans/deposits ratio, and has
pursued somewhat greater loan diversification.
Southern Missouri Bancorp of MO (SMBC). SMBC, with $166 million in assets
and 8 offices, operating in rural southern Missouri, maintains a similar
high level of cash and investments/MBS and has a similar loan mix.
First Bancshares of MO (FBSI). FBSI, with $164 million in assets and 6
offices, operating in rural southwest Missouri, has a relatively high
loans/deposits ratio, partially attributable to funding with borrowings,
and has pursued greater loan diversification.
Bedford Bancshares of VA (BFSB). BFSB, with $135 million in assets and 3
offices, operating in rural southern Virginia, has a relatively high
loans/deposits ratio, partially attributable to funding with borrowings,
and has pursued somewhat greater loan diversification.
FFBS Bancorp of MS (FFBS). FFBS, with $131 million in assets and 3
offices, operating in rural southern Mississippi, has a similar
loans/deposits ratio, and has pursued somewhat greater loan
diversification.
Harrodsburg First Financial Bancorp (HFFB). HFFB, with $109 million in
assets and 2 offices, operating in rural central Kentucky, has a similar
loans/deposits ratio and loan mix.
Twin City Bancorp of TN (TWIN). TWIN, with $107 million in assets and 3
offices, operating in a relatively small city market in Tennessee, has a
similar loans/deposits mix, but has pursued much greater loan
diversification, particularly commercial business lending.
KS Bancorp of NC (KSAV). KSAV, with $106 million in assets and 3 offices,
operating in rural central North Carolina, has a relatively high
loans/deposits ratio and relatively limited loan diversification.
Stone Street Bancorp of NC (SSM). SSM, with $106 million in assets and 2
offices, operating in relatively rural central North Carolina, has a
relatively high loans/deposits ratio, and has a similar loan mix.
FFD Financial Corp of OH (FFDF). FFDF, with $85 million in assets and 1
office, operating in a small market in northeast Ohio, has a relatively
high level of cash and
<PAGE>
RP Financial, LC.
Page 3.5
investments and MBS, partially funded through borrowings utilization, and
has pursued relatively limited loan diversification.
Logansport Financial Corp of IN (LOGN). LOGN, with $83 million in assets
and 1 office, operating in a relatively rural market of northern Indiana,
has a similar loans/deposits ratio and pursued greater loan
diversification, particularly commercial business loans.
Scotland Bancorp of NC (SSB). SSB, with $69 million in assets and 2
offices, operating in a rural market in southern North Carolina, has a
similar loans/deposits ratio and a similar loan mix.
CKF Bancorp of KY (CKFB). CKFB, with $61 million in assets and 1 office,
operating in a rural market in central Kentucky, has a relatively high
loans/deposits ratio, and has pursued somewhat greater loan
diversification, particularly income property lending.
South Carolina Community Bancshares of SC (SCCB). SCCB, with $46 million
in assets and 1 office, operating in a rural market in central South
Carolina, has a relatively similar loans/deposits ratio and a similar loan
mix.
First Lancaster Bancshares of KY (FLKY). FLKY, with $40 million in assets
and 1 office, operating in rural central Kentucky, has a relatively high
loans/deposits ratio, partially funded by borrowings, and has a similar
loan mix.
London Financial Corp of OH (LONF). LONF, with $38 million in assets and 1
office, operating in rural central Ohio, has a similar loans/deposits
ratio and somewhat greater loan diversification.
In the aggregate, the Peer Group companies are more highly capitalized
than the industry average, and, despite higher profitability on a core basis,
have a lower core return on equity ratio. Overall, the Peer Group's pricing
ratios are: lower than average in terms of reported and tangible book value
ratio; higher on an earnings multiple basis; and higher on an assets ratio
basis, relative to all publicly-traded thrifts, as summarized below.
<PAGE>
RP Financial, LC.
Page 3.6
<TABLE>
<CAPTION>
As of September 12, 1997
------------------------
All
Publicly-
Peer Traded
Group Thrifts(2)
----- ----------
<S> <C> <C>
Key Financial Ratios
--------------------
Equity/Assets 20.88% 12.90%
Tangible Equity/Assets 20.88 12.66
Core Return on Assets ("ROA")(3) 1.30 0.85
Core Return on Equity ("ROE")(3) 6.47 7.51
Key Pricing Ratios (Averages)
-----------------------------
Price/Book Ratio ("P/B") 120.48% 144.36%
Price/Tangible Book Ratio ("P/TB") 120.49 148.03
Price/Core Earnings Multiple ("P/E")(3) 18.72x 18.79x
Price/Assets Ratio ("P/A") 25.26% 17.61%
</TABLE>
(1) Excludes institutions in MHC form and subject to acquisition.
(2) Excludes institutions subject to acquisition.
(3) Adjusted to omit non-operating items (including the special SAIF
assessment) on an after-tax basis and extraordinary items.
The following comparative analyses are based on the latest
publicly-available financial information for both the Association and the Peer
Group, which is as of or for the most recent 12 months, principally June 30,
1997. The Association's balance sheet growth rates are annualized for the 18
month period from December 31, 1995 to June 30, 1997.
Financial Condition
The Association is smaller than the average Peer Group member, but during
the past 18 months, the Association experienced faster asset growth than the
average growth experienced by the Peer Group. During this period the Association
realized the benefit of local acquisitions and branch closings. Going forward,
the Association expects its deposit growth to decline to more in line with its
earlier historical experience, which may approximate the Peer Group's average
growth rate for deposits of roughly three percent. Most of the Peer Group
members experienced faster asset growth than deposit growth over the most recent
twelve month period, funded through increased utilization of borrowed funds. The
Peer Group's growth in the loan and MBS portfolio of more than 11 percent
exceeded the Association's growth of 7.3 percent. As a result,
<PAGE>
RP Financial, LC.
Page 3.7
the Association's cash and investments increased rapidly, while the Peer Group's
balance, on average, declined by 8.9 percent. (Note: Data fields designated "NM"
or "not meaningful" in the growth section of Table 3.2, representing growth in
excess of 100 percent, are excluded from averages.)
The Peer Group is better capitalized than the Association on a
pre-conversion basis on both a reported and tangible capital basis, and like the
Association all Peer Group members meet the FDICIA "well-capitalized" standards.
Specifically, the Association's current reported and tangible capital levels of
10.1 and 10.1 percent of assets, respectively, fall below the Peer Group's
reported and tangible capital levels of 20.9 and 20.9 percent, respectively. The
Association's pro forma capital is anticipated to exceed the Peer Group's
average and will provide greater leverage potential than the Peer Group,
although in the intermediate term the higher capital will lead to a disadvantage
in terms of ROE. The Association's tangible equity the past year grew more
quickly than the average Peer Group member given (a) the Association's lower
capitalization currently and (b) the various capital management strategies
employed by the Peer Group, particularly dividends and stock repurchases.
The Association's IEA position (including cash and equivalents) of 99.0
percent of assets exceeds the Peer Group average of 97.5 percent since the
Association has a lower proportion of fixed and other assets. The Association
has a higher level of cash and investments and a higher proportion of MBS than
the Peer Group average. The Association maintains a lower proportion of
loans/assets than the Peer Group, based on measures of 71.1 and 78.6 percent,
respectively.
The Association like the Peer Group now classifies the majority of
investment securities and MBS as AFS.
The Association's IBL ratio of 88.4 percent of assets is higher than the
Peer Group's ratio of 77.5 percent, reflecting the Association's lower
capitalization. On a post-conversion basis, this relationship can be expected to
be reversed with the infusion of new capital and the extent to which deposits
are withdrawn to fund stock purchases. Currently, the Association's funding
liabilities are composed entirely of deposits. The Peer Group's
borrowings/assets ratio approximated 7.0 percent.
<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
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
Newport FS&LA of Newport TN
- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 15.8 71.1 12.1 88.4 0.0 0.0 10.1 0.0 10.1 0.0
SAIF-Insured Thrifts 18.1 67.3 11.4 70.8 14.9 0.2 12.5 0.2 12.2 0.0
Comparable Group Average 14.6 78.6 4.3 70.5 7.0 0.0 20.9 0.0 20.9 0.0
Mid-West Companies 13.5 78.1 5.8 67.7 9.5 0.0 21.6 0.0 21.6 0.0
South-East Companies 15.7 79.1 2.7 73.6 4.2 0.0 20.1 0.0 20.1 0.0
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CKFB CKF Bancorp of Danville KY 6.7 90.9 0.7 69.4 5.3 0.0 24.0 0.0 24.0 0.0
FFDF FFD Financial Corp. of OH(1) 15.2 62.2 21.0 64.1 10.1 0.0 24.7 0.0 24.7 0.0
FBSI First Bancshares of MO 14.9 81.8 0.5 71.8 14.4 0.0 13.5 0.0 13.5 0.0
FLKY First Lancaster Bncshrs of KY(1) 11.0 86.1 1.4 54.3 10.3 0.0 34.2 0.0 34.2 0.0
HFFB Harrodsburg 1st Fin Bcrp of KY 25.1 73.6 0.1 72.0 0.0 0.0 26.9 0.0 26.9 0.0
LOGN Logansport Fin. Corp. of IN 14.2 71.5 9.7 72.6 5.4 0.0 19.2 0.0 19.2 0.0
LONF London Financial Corp. of OH 11.7 77.1 9.6 77.4 2.1 0.0 19.7 0.0 19.7 0.0
MARN Marion Capital Holdings of IN 7.2 85.4 0.0 70.3 4.7 0.0 22.5 0.0 22.5 0.0
NEIB Northeast Indiana Bncrp of IN 9.6 88.3 0.0 49.8 34.6 0.0 15.2 0.0 15.2 0.0
SMBC Southern Missouri Bncrp of MO(1) 19.8 63.6 14.6 75.0 8.2 0.0 15.7 0.0 15.7 0.0
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA 12.2 85.3 0.4 73.9 10.7 0.0 14.2 0.0 14.2 0.0
CFFC Community Fin. Corp. of VA 9.0 88.2 0.0 66.8 18.2 0.0 13.7 0.0 13.7 0.0
FFBS FFBS Bancorp of Columbus MS 21.4 70.9 5.6 79.4 0.0 0.0 19.2 0.0 19.2 0.0
KSAV KS Bancorp of Kenly NC 11.0 85.0 1.3 79.0 6.6 0.0 13.5 0.0 13.5 0.0
SCCB S. Carolina Comm. Bnshrs of SC(1) 20.0 77.0 0.1 73.3 0.0 0.0 26.0 0.0 26.0 0.0
SSB Scotland Bancorp of NC 28.1 69.0 0.6 61.1 0.0 0.0 37.0 0.0 37.0 0.0
SSM Stone Street Bancorp of NC 14.7 81.0 2.5 62.9 0.0 0.0 28.9 0.0 28.9 0.0
FTF Texarkana Fst. Fin. Corp of AR 11.7 84.1 1.8 81.8 0.9 0.0 15.7 0.0 15.7 0.0
TWIN Twin City Bancorp of TN 13.1 71.4 12.1 84.2 0.9 0.0 12.9 0.0 12.9 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.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
Newport FS&LA of Newport TN
- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 12.13 49.07 7.29 11.73 0.00 12.84 12.84 9.19 9.19 22.45
SAIF-Insured Thrifts 12.23 9.06 13.10 8.43 17.19 0.64 -0.10 10.85 10.91 22.56
Comparable Group Average 6.23 -8.91 11.09 3.17 10.69 -4.87 -4.86 17.87 18.54 33.47
Mid-West Companies 6.84 -7.42 11.30 0.61 32.96 -7.40 -7.39 18.85 18.85 35.19
South-East Companies 5.56 -10.57 10.85 6.02 -17.13 -2.62 -2.62 16.62 18.20 31.76
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CKFB CKF Bancorp of Danville KY 3.54 0.42 3.69 0.39 NM -6.80 -6.80 20.96 20.96 36.66
FFDF FFD Financial Corp. of OH(1) 11.98 -39.04 34.68 -18.53 NM NM NM 15.80 15.80 34.10
FBSI First Bancshares of MO 14.13 21.34 12.70 11.07 73.77 -6.41 -6.38 NM NM NM
FLKY First Lancaster Bncshrs of KY(1) 14.66 38.39 14.52 -17.18 19.96 NM NM 31.06 31.06 58.13
HFFB Harrodsburg 1st Fin Bcrp of KY -0.57 -16.40 6.22 0.72 NM -4.85 -4.85 21.10 21.10 43.05
LOGN Logansport Fin. Corp. of IN 7.72 -11.94 10.00 10.28 NM -19.48 -19.48 19.26 19.26 35.88
LONF London Financial Corp. of OH 2.83 -15.46 6.00 2.80 NM -5.36 -5.36 15.60 15.60 30.10
MARN Marion Capital Holdings of IN -2.51 -44.48 3.38 -3.56 31.85 -5.89 -5.89 20.56 20.56 32.25
NEIB Northeast Indiana Bncrp of IN 14.39 0.74 16.25 18.16 22.01 -8.07 -8.07 12.68 12.68 21.49
SMBC Southern Missouri Bncrp of MO(1) 2.28 -7.76 5.62 1.99 17.18 -2.31 -2.31 12.61 12.61 25.01
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA 11.23 4.72 12.14 6.29 81.25 3.52 3.52 12.45 12.45 22.92
CFFC Community Fin. Corp. of VA 10.44 29.00 9.33 6.58 28.00 7.86 7.86 11.61 11.61 17.48
FFBS FFBS Bancorp of Columbus MS 4.42 -22.28 16.26 4.42 NM 2.04 2.04 16.20 16.20 29.90
KSAV KS Bancorp of Kenly NC 13.45 -11.40 17.43 10.33 NM 3.74 3.79 NM NM 13.18
SCCB S. Carolina Comm. Bnshrs of SC(1) 5.27 -10.59 9.17 9.13 NM -4.02 -4.02 23.20 23.20 48.90
SSB Scotland Bancorp of NC -1.43 -21.71 9.61 1.87 -100.00 4.14 4.14 NM 29.27 58.40
SSM Stone Street Bancorp of NC -1.74 -38.64 9.43 -2.44 NM -20.12 -20.12 25.34 25.34 46.98
FTF Texarkana Fst. Fin. Corp of AR 4.45 -27.89 10.74 8.93 NM -18.57 -18.57 15.69 15.69 26.24
TWIN Twin City Bancorp of TN 3.92 3.70 3.52 9.04 -77.78 -2.22 -2.22 11.87 11.87 21.80
</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
The Association's IEA/IBL ratio of 111.99 percent, is lower than Peer
Group's ratio of 125.81 percent, largely due to the Association's lower current
capitalization. The strengthened capital position from conversion, the partial
withdrawal of funds to purchase conversion stock and the reinvestment of
proceeds in IEA should enhance the Association's comparative financial strength
and improve earnings power.
Income and Expense Trends
Reported profitability for the past 12 months approximated 0.74 and 1.07
percent of average assets for the Association and the Peer Group, respectively
(see Table 3.3). The Association's lower profitability not only reflects the
impact of the one-time special assessment also paid by the other members of the
Peer Group, but also reflected the DRP expense. On a core earnings basis, which
excludes the SAIF assessment as well as other net non-operating items on an
after-tax basis, the Association's 1.10 percent profitability was comparable to
the Peer Group's core profitability of 1.30 percent of average assets.
As described in greater detail below, while the bottom lines are
comparable, the earnings composition of the Association and the Peer Group are
somewhat different.
Net Interest Income
The Association's interest income ratio of 7.93 percent of average
assets was well above the Peer Group average of 7.60 percent, reflecting the
Association's higher yield on assets than the Peer Group (8.10 percent and 7.79
percent, respectively). Following reinvestment of conversion proceeds, the
Association's interest income ratio can be expected to increase although yields
may be diluted as such funds are initially invested into short- to
intermediate-term securities.
The Association's 11 basis point disadvantage in the net interest
income ratio was primarily attributable to a higher interest expense ratio
arising from an unfavorable IEA/IBL ratio. The Association's interest expense
ratio was 45 basis points higher than the Peer Group's, despite the
Association's lower cost of funds (4.70 percent versus 4.89 percent for the Peer
Group). Following conversion, the expense ratio is expected to decline.
<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 G&A/Other Exp.
---------------------------- ------------------- ----------------
Loss NII Total
Net Provis. After Loan R.E. Other Other G&A Goodwill
Income Income Expense NII on IEA Provis. Fees Oper. Income Income Expense Amort.
------ ------ ------- ------ ------- ------- ---- ----- ------ ------ ------- -------
Newport FS&LA of Newport TN
- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 0.74 7.93 4.22 3.71 0.15 3.56 0.00 0.00 0.21 0.21 1.93 0.00
SAIF-Insured Thrifts 0.65 7.38 4.10 3.28 0.14 3.14 0.12 0.01 0.30 0.42 2.22 0.02
Comparable Group Average 1.07 7.60 3.77 3.82 0.06 3.77 0.07 0.00 0.17 0.23 2.01 0.00
Mid-West Companies 1.06 7.46 3.81 3.66 0.03 3.62 0.03 -0.02 0.15 0.16 1.95 0.00
South-East Companies 1.08 7.74 3.74 4.00 0.08 3.93 0.11 0.01 0.20 0.32 2.08 0.00
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CKFB CKF Bancorp of Danville KY 1.80 7.48 3.75 3.72 0.00 3.72 0.09 -0.07 0.01 0.03 1.72 0.00
FFDF FFD Financial Corp. of OH(1) 0.77 6.84 3.54 3.30 0.00 3.30 0.00 0.00 0.06 0.06 1.75 0.00
FBSI First Bancshares of MO 0.91 7.51 4.17 3.34 0.05 3.29 0.01 0.04 0.29 0.34 1.92 0.01
FLKY First Lancaster Bncshrs of KY(1) 1.15 8.11 3.60 4.51 0.04 4.47 0.00 -0.01 0.00 -0.01 2.30 0.00
HFFB Harrodsburg 1st Fin Bcrp of KY 1.03 7.09 3.51 3.58 0.02 3.56 0.00 0.00 0.09 0.09 1.58 0.00
LOGN Logansport Fin. Corp. of IN 1.17 7.45 3.67 3.78 0.02 3.76 0.00 0.00 0.16 0.16 1.58 0.00
LONF London Financial Corp. of OH 0.66 7.52 3.84 3.67 0.00 3.67 0.00 0.00 0.19 0.19 2.39 0.00
MARN Marion Capital Holdings of IN 1.39 7.84 3.83 4.01 0.03 3.98 0.05 -0.16 0.16 0.05 1.99 0.00
NEIB Northeast Indiana Bncrp of IN 1.03 7.80 4.25 3.55 0.13 3.42 0.09 0.00 0.20 0.28 1.74 0.00
SMBC Southern Missouri Bncrp of MO(1) 0.71 7.03 3.91 3.12 0.05 3.07 0.03 0.05 0.33 0.41 2.48 0.00
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA 1.01 7.74 3.87 3.87 0.08 3.79 0.30 0.00 0.23 0.52 2.29 0.00
CFFC Community Fin. Corp. of VA 1.01 7.84 4.00 3.84 0.10 3.73 0.01 0.00 0.34 0.35 2.05 0.00
FFBS FFBS Bancorp of Columbus MS 1.16 7.41 3.74 3.68 0.00 3.68 0.14 0.00 0.35 0.50 1.95 0.00
KSAV KS Bancorp of Kenly NC 0.96 8.14 4.31 3.83 0.03 3.80 0.00 0.05 0.14 0.20 1.97 0.01
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.82 7.70 3.65 4.05 0.00 4.05 0.00 0.00 0.15 0.15 2.32 0.00
SSB Scotland Bancorp of NC 1.41 7.42 2.86 4.56 0.03 4.52 0.00 0.00 0.10 0.10 1.97 0.00
SSM Stone Street Bancorp of NC 1.43 7.81 3.18 4.63 0.06 4.57 0.02 0.00 0.12 0.14 2.02 0.00
FTF Texarkana Fst. Fin. Corp of AR 1.41 7.91 4.08 3.83 0.00 3.83 0.18 0.01 0.24 0.44 1.56 0.00
TWIN Twin City Bancorp of TN 0.54 7.70 3.94 3.76 0.41 3.35 0.32 0.05 0.10 0.47 2.61 0.00
<CAPTION>
Non-Op. Items Yields, Costs, and Spreads
-------------- -------------------------
MEMO: MEMO:
Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- --------- -------- ------ ---------- --------
Newport FS&LA of Newport TN
- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 -0.77 0.00 8.10 4.70 3.40 3,569 30.77
SAIF-Insured Thrifts -0.31 0.00 7.44 4.67 2.77 4,566 36.87
Comparable Group Average -0.34 0.00 7.79 4.89 2.90 4,797 34.89
Mid-West Companies -0.26 0.00 7.67 4.95 2.71 5,239 32.35
South-East Companies -0.43 0.00 7.94 4.82 3.11 4,306 37.72
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CKFB CKF Bancorp of Danville KY 0.72 0.00 7.61 5.10 2.51 7,602 34.33
FFDF FFD Financial Corp. of OH(1) -0.45 0.00 6.95 4.64 2.31 5,330 33.54
FBSI First Bancshares of MO -0.29 0.00 7.72 4.91 2.81 2,645 35.69
FLKY First Lancaster Bncshrs of KY(1) -0.40 0.00 8.27 5.31 2.96 5,056 34.43
HFFB Harrodsburg 1st Fin Bcrp of KY -0.49 0.00 7.18 4.90 2.28 7,263 34.55
LOGN Logansport Fin. Corp. of IN -0.54 0.00 7.70 4.79 2.91 6,396 36.07
LONF London Financial Corp. of OH -0.51 0.00 7.63 4.89 2.74 4,249 31.77
MARN Marion Capital Holdings of IN -0.41 0.00 8.44 5.13 3.31 5,590 14.12
NEIB Northeast Indiana Bncrp of IN -0.27 0.00 7.96 5.12 2.84 4,408 38.76
SMBC Southern Missouri Bncrp of MO(1) 0.02 0.00 7.18 4.73 2.45 3,853 30.28
South-East Companies
- --------------------
BFSB Bedford Bancshares of VA -0.43 0.00 7.91 4.58 3.33 3,763 36.66
CFFC Community Fin. Corp. of VA -0.41 0.00 8.08 4.70 3.38 4,177 37.48
FFBS FFBS Bancorp of Columbus MS -0.47 0.00 7.58 4.70 2.88 4,218 34.19
KSAV KS Bancorp of Kenly NC -0.42 0.00 8.37 5.06 3.30 3,659 39.85
SCCB S. Carolina Comm. Bnshrs of SC(1) -0.43 0.00 7.90 5.09 2.81 5,157 43.21
SSB Scotland Bancorp of NC -0.45 0.00 7.57 4.62 2.95 4,963 35.88
SSM Stone Street Bancorp of NC -0.43 0.00 7.96 5.05 2.91 5,895 36.69
FTF Texarkana Fst. Fin. Corp of AR -0.50 0.00 8.10 4.99 3.10 4,896 36.33
TWIN Twin City Bancorp of TN -0.33 0.00 7.96 4.62 3.34 2,025 39.18
</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
On balance, the Association's net interest income ratio can be
expected to increase moderately on a post-conversion basis, and will diminish
the current disadvantage.
Provisions for Loan Losses
During the last 12 months, the Association's provision for loan
losses was higher than the Peer Group average, 0.15 and 0.06 percent of average
assets, respectively. Given the Association's higher non-performing assets and
loan loss allowances as a percent of loans receivable, the reserve coverage
ratios are similar.
Non-Interest Income
The Association reported a reasonably comparable level of
non-interest operating income as the Peer Group, based on levels of 0.21 percent
and 0.23 percent of average assets, respectively. The Peer Group's sources of
non-interest operating income are similar to the Association's. Overall, neither
the Association nor the Peer Group rely heavily on non-interest operating income
as a source of earnings.
Operating Expenses
The Association reported lower operating expenses than the Peer
Group, based on measures of 1.93 and 2.01 percent of average assets,
respectively (excluding the DRP expense and the special SAIF assessment). The
Association's lower operating expense ratio reflects lower depreciation expense
despite a lower assets per full time equivalent employee ($3.6 and $4.8 million,
respectively). Following the conversion transaction, the Association's operating
expenses can be expected to increase with the incorporation of stock benefit
plans and the additional costs of operating as a public company.
Net Non-Operating Items
The Association's net non-operating loss (including the special SAIF
assessment) was higher than the Peer Group's, on average, given the
Association's one-time DRP expense.
<PAGE>
RP Financial, LC.
Page 3.12
Efficiency Ratio
The Association and the Peer Group operate with very similar
efficiency ratios (operating expenses, excluding the DRP expense and the special
SAIF assessment, as a percent of the sum of net interest income before loan loss
provisions and other operating income) than the Peer Group, 49.2 and 49.6
percent, respectively. The Association's efficiency ratio is not expected to
significantly improve on a post-conversion basis.
Income Taxes
The Association's effective tax rate of 30.8 percent was lower than
the Peer Group's average effective tax rate of 34.9 percent. Going forward, the
Association's effective statutory federal and state tax rate is expected to
approximate 40 percent, which can be expected to depress profitability relative
to the Peer Group.
Loan Composition
Perhaps one of the greatest differences between the Association and the
Peer Group is loan composition, with the Association not only a lower ratio of
loans/assets but also a slightly less diversified loan portfolio than the Peer
Group (Table 3.4). The Association's portfolio is dominated by single family
residential mortgages and MBS (nearly 85 percent of total loans and MBS),
underscoring its traditional strategy, versus over 79 percent for the Peer
Group. The Peer Group has a higher proportion of multi-family/commercial real
estate and commercial business loans than the Association. The Peer Group has a
very limited portfolios of loans serviced for others while the Association has
none.
The Association has a comparable balance of construction and land loans in
portfolio as the Peer Group, based on measures of 5.4 and 5.6 percent,
respectively, of total loans and MBS. The Association's consumer loan portfolio
is somewhat greater than that for the Peer Group, both relatively small,
representing approximately 4.0 and 1.4 percent, respectively.
The Association's comparatively lower risk-weighted assets/assets ratio
relative to the Peer Group, measured at 43.4 and 54.8 percent, respectively, are
indicative of the Association's lower proportion of loans to assets as well as a
lower level of fixed and other assets.
<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>
Newport FS&LA of Newport TN 13.86 70.90 5.41 5.87 0.00 3.96 43.37 0 0
SAIF-Insured Thrifts 15.27 61.64 5.27 11.74 6.51 1.71 51.94 406,472 2,933
Comparable Group Average 5.04 74.26 5.62 9.74 5.67 1.42 54.76 6,778 30
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 0.44 74.18 12.64 5.45 7.65 2.82 56.43 2,694 0
CKFB CKF Bancorp of Danville KY 0.01 78.68 4.12 14.36 4.82 0.68 57.69 0 0
CFFC Community Fin. Corp. of VA 0.00 63.50 3.72 26.84 5.34 1.64 68.69 10,513 7
FFBS FFBS Bancorp of Columbus MS 2.74 69.36 5.75 10.36 9.88 1.95 54.06 359 0
FFDF FFD Financial Corp. of OH(1) 23.02 72.12 2.41 3.43 0.84 0.00 42.97 0 0
FBSI First Bancshares of MO 0.76 77.27 8.25 7.29 5.58 2.39 61.61 18 0
FLKY First Lancaster Bncshrs of KY(1) 1.85 88.54 6.85 3.57 0.71 0.00 0.08 0 0
HFFB Harrodsburg 1st Fin Bcrp of KY 0.13 85.52 5.35 8.47 2.93 0.68 49.48 0 0
KSAV KS Bancorp of Kenly NC 1.73 91.60 5.31 1.00 0.35 0.00 104.69 0 0
LOGN Logansport Fin. Corp. of IN 9.85 64.70 2.21 7.98 15.31 0.00 54.44 0 0
LONF London Financial Corp. of OH 12.94 69.79 8.24 11.50 2.21 0.61 51.33 0 0
MARN Marion Capital Holdings of IN 0.02 61.11 5.43 33.55 2.43 0.00 65.01 33,172 0
NEIB Northeast Indiana Bncrp of IN 0.00 71.86 6.54 10.00 9.35 5.08 61.42 2,068 0
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.17 92.16 4.79 4.66 0.84 0.00 47.49 0 0
SSB Scotland Bancorp of NC 1.19 91.73 2.27 4.10 0.52 0.19 44.98 0 0
SMBC Southern Missouri Bncrp of MO(1) 23.44 54.63 3.41 11.71 5.36 1.52 50.88 0 0
SSM Stone Street Bancorp of NC 3.76 81.14 8.41 2.93 0.36 4.61 52.60 0 0
FTF Texarkana Fst. Fin. Corp of AR 1.11 70.86 7.08 13.94 7.31 2.36 61.50 23,267 19
TWIN Twin City Bancorp of TN 12.69 52.27 3.91 3.99 26.03 2.38 55.16 56,682 553
</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 3.14
Interest Rate Risk
Public companies are not required to report interest rate risk in a
standard fashion and many do not specifically quantify their interest rate risk
on a regular basis. Furthermore, the computation of interest rate risk is
predicated on numerous assumptions, many of which are unique among institutions.
As a result, we have sought to measure interest rate risk by evaluating balance
sheet composition and recent quarterly changes in net interest income.
Currently, the Association's asset composition suggests greater interest
rate risk given its lower capitalization, resulting in a lower IEA/IBL ratio. As
a result, the Association has greater dependence of the yield-cost spread to
sustain the net interest margin. Post-conversion capitalization should diminish
the Association's current comparative disadvantage in this regard and thereby
lessen interest rate risk. The interest rate risk associated with the
Association's asset base is further diminished by the proportion of core
deposits maintained by the Association.
The Association's greater fluctuation in net interest income during the
last 5 quarters, as compared to the Peer Group average, suggests greater
interest rate risk exposure. It is expected that the infusion of stock proceeds
will serve to enhance the stability of the Association's net income and diminish
the comparative disadvantage relative to the Peer Group.
Credit Risk
The Association's credit risk exposure initially appears to be somewhat
higher than the Peer Group's, on average, as indicated by a higher
non-performing asset ratio. As shown in Table 3.6, the Association's ratio of
non-performing assets/assets of 0.92 percent, substantially exceeded the Peer
Group's ratio of 0.66 percent. The Association's loss reserves/loans ratio of
1.26 percent was above the Peer Group average of 0.55 percent. The Association's
reserve coverage ratio (loss reserves as a percent of non-performing assets) of
97.6 percent was relatively comparable to the Peer Group average of 90.2
percent. Both the Association and the Peer Group recorded minor net loan
chargeoffs over the past twelve months.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
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
-------------------------- Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 06/30/97 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>
Newport FS&LA of Newport TN 10.1 112.0 1.0 21 10 -1 6 24 0
SAIF-Insured Thrifts 12.2 112.7 3.3 0 0 0 -1 8 7
Comparable Group Average 20.9 127.2 2.6 1 3 -3 -1 10 -3
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 14.2 115.7 2.1 -7 23 -19 -13 -8 15
CKFB CKF Bancorp of Danville KY 24.0 131.5 1.7 14 -14 17 -6 4 -24
CFFC Community Fin. Corp. of VA 13.7 114.2 2.8 -2 -2 -2 9 -2 6
FFBS FFBS Bancorp of Columbus MS 19.2 123.4 2.1 7 -12 2 13 4 -6
FFDF FFD Financial Corp. of OH(1) 24.7 132.7 1.6 NA 8 -5 -7 49 -25
FBSI First Bancshares of MO 13.5 112.8 2.8 -9 14 -5 -10 17 16
FLKY First Lancaster Bncshrs of KY(1) 34.2 152.4 1.5 NA 19 -26 NA 2 15
HFFB Harrodsburg 1st Fin Bcrp of KY 26.9 137.2 1.2 1 2 -4 14 4 -11
KSAV KS Bancorp of Kenly NC 13.5 113.7 2.7 19 2 8 -10 5 16
LOGN Logansport Fin. Corp. of IN 19.2 122.3 4.6 -3 16 -28 2 21 -2
LONF London Financial Corp. of OH 19.7 123.8 1.6 -2 6 -7 -15 57 22
MARN Marion Capital Holdings of IN 22.5 123.5 7.4 -5 12 9 7 -11 -7
NEIB Northeast Indiana Bncrp of IN 15.2 116.1 2.0 2 1 -13 -12 -4 -40
SCCB S. Carolina Comm. Bnshrs of SC(1) 26.0 132.4 2.9 NA -25 11 4 20 -18
SSB Scotland Bancorp of NC 37.0 160.0 2.3 -1 -5 22 -11 NA -18
SMBC Southern Missouri Bncrp of MO(1) 15.7 117.8 2.0 NA -22 -2 14 -4 36
SSM Stone Street Bancorp of NC 28.9 156.1 1.8 -29 32 -3 30 NA -41
FTF Texarkana Fst. Fin. Corp of AR 15.7 118.0 2.5 9 13 -11 -3 1 3
TWIN Twin City Bancorp of TN 12.9 113.5 3.4 18 -15 1 -23 14 14
</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.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of 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>
Newport FS&LA of Newport TN 0.06 0.92 0.00 1.26 0.00 97.63 8 0.02
SAIF-Insured Thrifts 0.28 0.79 0.84 0.82 176.59 130.69 396 0.16
Comparable Group Average 0.05 0.66 0.66 0.55 152.67 90.24 15 0.07
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 0.00 0.60 NA 0.56 NA 79.85 8 0.03
CKFB CKF Bancorp of Danville KY 0.00 1.26 0.69 0.20 29.35 14.79 78 0.57
CFFC Community Fin. Corp. of VA 0.02 0.39 0.41 0.65 157.01 148.67 55 0.14
FFBS FFBS Bancorp of Columbus MS 0.00 0.37 0.04 0.62 NA 118.76 15 0.07
FFDF FFD Financial Corp. of OH(1) 0.00 NA 0.01 0.27 NA NA 1 0.01
FBSI First Bancshares of MO 0.07 0.56 0.04 0.36 845.61 52.51 7 -0.01
FLKY First Lancaster Bncshrs of KY(1) 0.00 0.75 0.53 0.29 54.35 32.89 0 0.00
HFFB Harrodsburg 1st Fin Bcrp of KY 0.00 0.47 NA 0.38 NA 59.81 0 0.00
KSAV KS Bancorp of Kenly NC 0.00 0.35 0.41 0.33 80.53 80.53 0 0.00
LOGN Logansport Fin. Corp. of IN 0.01 0.61 0.84 0.38 45.60 44.88 16 0.11
LONF London Financial Corp. of OH 0.00 0.80 1.03 0.63 61.11 61.11 0 0.00
MARN Marion Capital Holdings of IN 0.00 0.81 0.94 1.35 144.01 144.01 0 0.00
NEIB Northeast Indiana Bncrp of IN 0.03 0.40 0.42 0.71 170.55 159.54 24 0.06
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.54 1.78 1.60 0.81 50.96 35.52 0 0.00
SSB Scotland Bancorp of NC 0.00 NA NA 0.50 NA NA 0 0.00
SMBC Southern Missouri Bncrp of MO(1) 0.07 1.10 1.60 0.64 40.26 37.60 0 0.00
SSM Stone Street Bancorp of NC 0.00 0.27 NA 0.62 NA 187.50 0 0.00
FTF Texarkana Fst. Fin. Corp of AR 0.12 0.46 NA 0.79 NA 145.12 0 0.00
TWIN Twin City Bancorp of TN 0.08 0.16 NA 0.29 NA 130.95 73 0.38
</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 3.17
Summary
Based on the above analysis and the criteria employed by RP Financial in
the selection of the companies for the Peer Group, RP Financial concluded that
the Peer Group forms a reasonable basis for determining the pro forma market
value of the Association. Such general characteristics as regional market area,
asset size, capital position, interest-earning asset composition, and funding
composition all tend to support the reasonability of the Peer Group from a
financial standpoint.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
This chapter presents the valuation analysis, prepared pursuant to the
regulatory valuation guidelines, and valuation adjustments and assumptions used
to determine the estimated pro forma market value of the common stock to be
issued in conjunction with the Association's conversion transaction.
Appraisal Guidelines
The OTS appraisal guidelines, most recently amended in written form in
October 1994, specify the methodology for estimating the pro forma market value
of an institution pursuant to a mutual-to-stock conversion. The valuation
methodology provides for: (1) the selection of a peer group of comparable
publicly-traded institutions, excluding those converted for less than a year,
subject to acquisition or in MHC form; (2) a financial and operational
comparison of the subject company to the selected peer group, identifying key
differences and similarities; and (3) a valuation analysis in which the pro
forma market value of the subject company is determined based on the market
pricing of the peer group as of the date of valuation, incorporating valuation
adjustments for key differences. In addition, the pricing characteristics of
recent conversions, both at conversion and in the aftermarket, must be
considered.
RP Financial Approach to the Valuation
RP Financial's valuation analysis complies with the above-referenced
appraisal guidelines. Accordingly, the valuation incorporates a detailed
analysis based on the Peer Group discussed in Chapter III, incorporating
"fundamental analysis" techniques. Additionally, the valuation incorporates a
"technical analysis" of recently completed stock conversions, including closing
pricing and aftermarket trading of such conversions. It should be noted that
such analyses cannot possibly fully account for all the market forces which
impact trading activity and pricing characteristics of a particular stock on a
given day.
<PAGE>
RP Financial, LC.
Page 4.2
The pro forma market value determined herein is a preliminary value for
the to-be-issued stock. Throughout the conversion process, RP Financial will:
(1) review changes in the Association's operations and financial condition; (2)
monitor the Association's operations and financial condition relative to the
Peer Group to identify any fundamental changes; (3) monitor the external factors
affecting value including, but not limited to, local and national economic
conditions, interest rates, and the stock market environment, including the
market for thrift stocks; and (4) monitor pending conversion offerings
(including those in the offering phase) both regionally and nationally. If
material changes should occur during the conversion process, RP Financial will
prepare updated valuation reports reflecting such changes and their related
impact on value, if any, over the course of the conversion process. RP Financial
will also prepare a final valuation update at the closing of the conversion
offering to determine if the preliminary range of value continues to be
appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability) may materially impact the market value of
all thrift stocks, including the Association, or the Association's value alone.
To the extent a change in factors impacting the Association's value can be
reasonably anticipated and/or quantified, RP Financial has incorporated the
estimated impact into our analysis.
Valuation Analysis
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
the key differences between the Association and the Peer Group and how those
differences affect the pro forma valuation. Emphasis is placed on the specific
strengths and weaknesses of the Association relative to the Peer Group in such
key areas as financial condition, profitability, growth and viability of
earnings, asset growth, primary market area, dividends, liquidity of the issue,
marketing of the issue, management, and the effect of government regulations
and/or regulatory reform. We have
<PAGE>
RP Financial, LC.
Page 4.3
also considered the market for thrift stocks, and in particular new issues, to
assess the impact on value of the Association coming to market at this time.
1. Financial Condition
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
financial condition of the Association and the Peer Group are noted as follows:
o Overall A/L Composition. At the present time, the Association's balance
sheet composition reflects a greater ratio of IEA given the lower level of
fixed and other assets and higher ratio of IBL given the lower current
capitalization, resulting in lower earnings power from a balance sheet
perspective. Post-conversion, however, the Association's disadvantage is
expected to be eliminated.
o Credit Quality. Despite a lower risk weighted assets ratio, the
Association's level of NPAs is higher and reflects a sharp upward trend
over the last 18 months. At the same time, the reserve coverage ratio is
comparable to the Peer Group average.
o Balance Sheet Liquidity. The Association currently maintains a higher
level of cash, investment securities and MBS, and the infusion of the
stock proceeds will initially increase the Association's level of liquid
assets to an even higher level pending investment of the proceeds into
loans and other longer-term investments. The Association appears to have
greater current borrowings capacity than the Peer Group, although the
Association is not expected to utilize borrowings, consistent with its
history, particularly in view of the high pro forma liquidity level. The
Association's loans are generally not ready saleable due to the
characteristics of the borrower, the property or the loan documentation.
In reviewing the disclosure documents for the Peer Group members, it
appears such institutions generally emphasize conforming loans to a
greater extent and some are active in selling loans in the secondary
market.
o Capital. The Association operates with a lower pre-conversion capital
ratio than the Peer Group, but this will be reversed on a post-conversion
basis. The increase in capital will depress the Association's pro forma
return on equity below the Peer Group level until the proceeds can be
effectively reinvested and leveraged over time.
On balance, we believe the Association, on a pro forma basis, has
financial condition characteristics that are comparable to the Peer Group.
Therefore, we concluded that no valuation adjustment was warranted for the
Association's financial strength.
<PAGE>
RP Financial, LC.
Page 4.4
2. Profitability, Growth and Viability of Earnings
Earnings are a key 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 heavily influence the multiple
the investment community will pay for earnings. The major factors considered in
the valuation are described below.
o Reported Earnings. The Association reported lower profitability than the
Peer Group, largely due to the DRP expense (and both realized the impact
of the special SAIF assessment).
o Core Earnings. The Association maintains a relatively comparable core
earnings posture relative to the Peer Group, net of the special SAIF
assessment and net non-operating items, before taking into account the
expected increase in the effective tax rate, which would leave the
Association at a comparative disadvantage. While redeployment of
conversion proceeds into interest-earning assets is expected to enhance
the Association's net interest income, operating expenses for the
Association are expected to increase as well. On a pro forma basis, the
Association's core profitability, with a 40 percent effective tax rate, is
expected to be comparable to the Peer Group.
o Interest Rate Risk. The Association's greater perceived interest rate risk
posture should be partially moderated by the anticipated redeployment of
stock proceeds into interest-earning assets.
o Credit Risk. Loss provisions had a higher impact on the Association's
earnings in comparison to the Peer Group. In terms of future exposure to
credit quality related losses, the Association maintains a higher ratio of
non-performing assets and a comparable reserve coverage ratio. The recent
increase in NPAs suggests that the Association may have higher potential
exposure to earnings from future credit losses.
o Earnings Growth Potential. The Association's earnings growth in recent
years appears to have been largely a function of asset growth facilitated
through the growth spurts attributable to new customers following local
acquisitions. The Association's business plan does not call for new
branching or product diversification, which may lead to continued net
interest erosion with intense competition from the two large banks which
recently entered the local market. It is anticipated that, over time, the
net cash proceeds from conversion will be gradually deployed into loans;
however, it is anticipated that the yield-cost spread immediately
following conversion will be diminished through the initial reinvestment
into short-term securities. The proceeds reinvestment benefit will also be
impacted by the annual expense of the stock plans and operations as a
public company. Over the longer term, the Association will have greater
capacity to leverage than the Peer Group, given the Association's higher
pro forma capital position, positioning the Association for greater
earnings growth
<PAGE>
RP Financial, LC.
Page 4.5
potential, however, the business plan does anticipate slow to moderate
growth consistent with historical experience.
o Return on Equity. The higher pro forma capital position will place the
Association at a disadvantage relative to the Peer Group in terms of
return on equity, despite comparable core profitability.
o Effective Tax Rate. The Association's tax rate is expected to return to
normalized levels of approximately 40.0 percent on a pro forma basis,
which places it above the Peer Group's average effective tax rate.
Overall, a moderate downward valuation adjustment was warranted for
profitability, growth and viability of the Association's earnings.
3. Asset Growth
The Association's ability to grow on a post-conversion basis will depend
largely on the opportunity and ability to attract new customers in the present
markets served in that there are no branch expansion plans, wholesale leveraging
plans or plans to offer a substantially broader array of products and services.
The growth spurt experienced following the most recent local acquisition has
subsided. At the same time, competition has become increasingly intense from the
larger financial institutions who entered the market through acquisition. Thus,
while the Association may be better capitalized to pursue growth through
acquisition on a pro forma basis, the Association is expected to grow at a rate
consistent with the similarly situated Peer Group. Accordingly, we have not
applied an adjustment for this factor.
4. Primary Market Area
The general condition of an 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 served. The Peer Group companies are, on average,
based in similarly sized market areas as the Association which are growing
somewhat more slowly. The two most significant differences between the markets
served by the Association and the Peer Group are: (1) the significantly lower
per capita income in the Association's market area, at 22 percent lower than the
Peer Group median; and (2) the 42 percent higher unemployment rate in the
Association's market area than for the Peer Group. The deposit market share of
the Association and average of the Peer Group is relatively comparable.
<PAGE>
RP Financial, LC.
Page 4.6
On balance, we concluded a slight downward adjustment was appropriate for
the Association's market area.
5. Dividends
The pro forma capitalization and profitability clearly position the
Association to have the capacity to pay cash dividends comparable to the Peer
Group, and the Association has indicated its interest to pay a dividend equal to
$0.30 per share annually, or a three percent dividend yield, beginning after
December 31, 1997. Historically, thrifts typically have not established dividend
policies at the time of their conversion to stock ownership. Newly converted
institutions, in general, have preferred to gain market seasoning, establish an
earnings track record and fully invest the conversion proceeds before
establishing a dividend policy. However, during the late 1980s and early 1990s,
with negative publicity surrounding the thrift industry, there was a tendency
for more thrifts to initiate moderate dividend policies concurrent with their
conversion as a means of increasing the attractiveness of the stock offering.
Today, fewer institutions are compelled to initially establish dividend policies
at the time of their conversion offering as (1) industry profitability has
improved, (2) the number of problem thrift institutions has declined, and (3)
the stock market cycle for thrift stocks is generally more favorable than in the
early-1990s. At the same time, with ROE ratios under pressure, due to high
equity levels, well-capitalized institutions are subject to increased
competitive pressures to offer dividends.
As publicly-traded thrifts' capital levels and profitability have improved
and as weakened institutions have been resolved, the proportion of institutions
with cash dividend policies has increased. All 19 institutions in the Peer Group
presently pay regular cash dividends, with implied dividend yields ranging from
0.8 percent to 3.7 percent. The average dividend yield on the stocks of the Peer
Group institutions was approximately 2.4 percent as of September 5, 1997,
representing an average payout ratio of approximately 43.3 percent of core
earnings. As of September 12, 1997, over four-fifths of all publicly-traded
thrifts had adopted cash dividend policies (see Exhibit IV-1), exhibiting an
average yield of 1.97 percent and an average payout ratio of nearly 42 percent.
The dividend paying thrifts generally maintain higher than average profitability
ratios, facilitating their ability to pay cash dividends, which supports a
market pricing premium on average relative to non-dividend paying thrifts.
<PAGE>
RP Financial, LC.
Page 4.7
Given the Association's capacity and intent to pay a dividend comparable
to the Peer Group based on pro forma capitalization and profitability, and since
no regulatory hurdle exists, we have applied no adjustment for this factor.
6. Liquidity of the Shares
The Peer Group is by definition composed of companies that are traded in
the public markets, all of which trade on the NASDAQ system. 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 $8 million to $43 million
as of September 12, 1997, with an average market value of $26 million. The
shares outstanding of the Peer Group members ranged from 0.5 million to 2.0
million, with an average of approximately 1.3 million. The Association's pro
forma market value is expected to fall in the lower end of the range of market
capitalizations exhibited by the Peer Group companies. The number of shares is
expected to exceed the high end of the Peer Group range due to the anticipated
offer price per share. Overall, since relatively liquid companies comprise the
Peer Group, no adjustment was considered necessary for this factor.
7. Marketing of the Issue
Three separate markets exist for thrift stocks: (1) the after-market for
public companies, in which trading activity is regular and investment decisions
are made based upon financial condition, earnings, capital, ROE and dividends;
(2) the new issue market in which converting thrifts are evaluated on the basis
of the same factors but on a pro forma basis without the benefit of a stock
trading history and reporting quarterly operating results as a publicly-held
company; and (3) the thrift acquisition market. All three of these markets were
considered in the valuation of the Association's to-be-issued stock.
A. The Public Market
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. 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
<PAGE>
RP Financial, LC.
Page 4.8
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. Stocks and bonds rallied
in late-July and early-August 1996, 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
following the election with the DJIA posting ten consecutive advances through
mid-November. Economic stability and a rising bond market sustained the stock
market rally through the end of November. For the entire month of November, the
DJIA increased 492.3 points, or 8.2 percent. Following the rapid rise in the
stock market during November, stocks retreated during the first half of
December. Profit taking, concern about speculative excesses in the stock market
and higher interest rates all contributed to the decline in the stock market.
The stock market resumed an upward trend during the end of 1996 and
the first three weeks of 1997, with the DJIA establishing several new highs in
the process. Factors contributing to the rally in the stock market included the
Federal Reserve's decision to leave rates unchanged at its December meeting,
economic data which reflected moderate growth and low inflation, and favorable
fourth quarter earnings particularly in the technology sector. However, a
<PAGE>
RP Financial, LC.
Page 4.9
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 the 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. Technology stocks rallied the stock market to new highs in mid-July, as
a number of technology companies
<PAGE>
RP Financial, LC.
Page 4.10
posted favorable second quarter earnings. Favorable inflation data, including
second quarter GDP growth slowing to an annual rate of 2.2 percent versus 4.9
percent in the first quarter, and comments by the Federal Reserve Chairman which
indicated that an increase in interest rates was not imminent, spurred bond and
stock prices strongly higher during the second half of July.
A decline in the July 1997 unemployment rate reversed the positive
bond and stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond increasing from 6.32 percent at
the end of July to 6.66 percent as of August 8, 1997. The sell-off pulled stock
prices lower as well. While bond prices firmed in mid-August, notable volatility
was evident in the stock market. The DJIA moved 100 points for five consecutive
days from August 18, 1997 through August 21, 1997, which set a record for
volatility. Profit worries among some of the large blue chip companies and mixed
inflation readings were factors contributing to the roller-coaster performance
of the stock market. On September 12, 1997, the DJIA closed at 7742.97,
translating into an increase of 32.6 percent from year a year ago.
Similar to the overall stock market, the market for thrift stocks
has generally been favorable during the past twelve months. 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 1996. Thrift stocks
settled into a narrow trading range in late-August and early-September, as
higher interest rates dampened interest in the thrift sector. For the balance of
September, trading activity in thrift stocks was somewhat mixed. Higher thrift
prices were recorded in mid-September, as the yield on the 30-year U.S. Treasury
bond briefly dropped below 7.0 percent. However, the rally in financial services
stocks faltered in late-September, reflecting renewed fears about higher
interest rates and rising bad debt on credit cards.
Thrift prices generally moved higher during October and November
1996. The upward trend in thrift prices was supported by lower interest rates,
with the slow down in economic growth pushing the 30-year U.S. bond rate below
6.5 percent during the second half of November. Investors also reacted
positively to the SAIF rescue legislation, in light of the reduction in deposit
insurance premiums to be paid by SAIF-insured thrifts following the one
<PAGE>
RP Financial, LC.
Page 4.11
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. Ahmanson'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; however, 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
declining interest rates.
Thrift stocks continued to trend higher through June and early-July
1997, based on the improved interest rate outlook and an overall positive
outlook for the economy. Generally favorable second quarter earnings and the
30-year U.S. Treasury bond yield declining below 6.50 percent served to further
boost thrift prices in mid-July, with the declining interest rate environment
serving to sustain the rally in thrift prices through the end of July. Thrift
prices generally declined during the first half of August, due to higher
interest rates and profit taking. From July 31, 1997 to August 15, 1997, the SNL
Index declined by 3.7 percent. Thrift prices recovered modestly the following
week, as the Federal Reserve left short-term interest rates
<PAGE>
RP Financial, LC.
Page 4.12
unchanged at its August meeting. The SNL Index for all publicly-traded thrifts
closed at 698.5 on September 12, 1997, an increase of 66.8 percent from one year
ago.
B. The New Issue Market
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Association's pro forma market value. Interest in converting
thrift 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 was sustained during the first quarter
of 1997. Market interest for converting thrift issues (standard conversions)
became very strong in the latter part of the second quarter and early third
quarter of 1997, with the eight new issues that began trading since late June
1997 increasing rapidly on the first day of trading, partially reflecting
general exuberant stock market trends, overall investor enthusiasm for initial
public offerings (including non-financial services companies) and the limited
number of new conversion issues. As shown in Table 4.1, the median one week
change in price for standard conversion offerings (excludes second step
conversion of MHCs) completed during the latest three month period approximated
49 percent. The median pro forma price/tangible book and price/earnings ratios
of the recent conversions, excluding second step conversions, was 71.7 percent
and 18.1 times, generally reflecting closing at supermaximum values.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months and listed on NASDAQ
(see Table 4.2), we note there exists a considerable difference in pricing
ratios compared to the universe of all publicly-traded thrifts with the premium
earnings multiples leading to discounted book multiples. The current average P/B
ratio of the conversions completed in the most recent three month period of
116.4 percent reflects a discount of 19.4 percent from the average 144.4 percent
P/B ratio of all publicly-traded SAIF-insured thrifts. The pricing ratios of the
better capitalized but lower earning recently converted thrifts (with resulting
lower return on equity measures) suggest that
<PAGE>
RP Financial, LC.
September 10, 1997
Table 4.1
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data Insider Purchases
-------------------------------- Offering
Financial Info. Asset Quality Information
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
--------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ Recog. Mgmt.
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. ESOP Plans & Dirs.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- ----- ---- ------ -------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%) (%)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WSB Holding Company PA 08/29/97 WSBH $33 6.04% 2.34% 26% $3.3 132% 8.5% 8.0% 4.0% 31.0%
Bayonne Bancshares (8) NJ 08/22/97 FSNJ 577 8.33% 0.81% 53% 48.7 132% 3.8% 8.0% 4.0% 10.0%
FirstSpartan Fin. Corp. SC* 07/09/97 FSPT 388 11.81% 0.75% 44% 88.6 132% 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.(8) IN 07/01/97 MONT 94 9.83% 0.91% 20% 11.9 132% 4.5% 8.0% 4.0% 4.6%
Community First Bankg. 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. 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%
Averages: $184 9.39% 0.86% 81% $26.3 130% 4.7% 8.0%q 7.6%
Medians: 95 8.17% 0.78% 53% $15.9 132% 4.3% 8.0% 4.0% 5.0%
Averages, Excluding 2nd Steps $146 9.46% 0.85% 93% 25.3 130% 4.9% 8.0% 4.0% 7.7%
Medians, Excluding 2nd Steps $84 7.51% 0.69% 68% $14.2 132% 4.4% 8.0% 4.0% 4.0%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pro Forma Data Post-IPO Pricing Trends
----------------------------------------------------------------------------
Pricing Ratios(4) Fin. Characteristics Closing Price:
- ------------------------------------------------------------------------------------------------- -----------------------------
First After
Conversion IPO Trading % First
Institution State Date Ticker P/TB P/E(5) P/A ROA TE/A ROE Price Day Chg. Week(6)
- ----------- ----- ---- ------ ---- ------ --- --- ---- --- ----- --- ---- -------
(%) (x) (%) (%) (%) (%) ($) ($) (%) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WSB Holding Company PA 08/29/97 WSBH 71.4% 16.6 9.2% 0.6% 12.9% 4.3% $10.00 $13.50 35.0% $14.50
Bayonne Bancshares (8) NJ 08/22/97 FSNJ 00.9% NM 14.6% NM 14.4% NM 10.00 11.75 17.5% 11.88
FirstSpartan Fin. Corp. SC* 07/09/97 FSPT 72.4% 17.3 19.1% 1.1% 26.3% 4.2% 20.00 36.69 83.4% 36.62
GSB Financial Corp. NY 07/09/97 GOSB 72.5% 22.5 19.6% 0.9% 27.1% 3.2% 10.00 14.63 46.3% 14.75
FirstBank Corp. ID* 07/02/97 FBNW 71.4% 22.8 12.9% 0.6% 18.0% 3.1% 10.00 15.81 58.1% 15.56
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 89.1% 24.1 16.0% 0.7% 17.9% 3.7% 10.00 11.13 11.2% 11.25
Community First Bankg. Corp. GA 07/01/97 CFBC 72.3% 24.5 11.9% 0.5% 16.4% 2.9% 20.00 31.88 59.4% 33.00
First Robinson Fin. Corp. IL 06/30/97 FRFC 71.4% 16.7 10.9% 0.7% 15.2% 4.3% 10.00 14.50 45.0% 14.38
Security Bancorp TN 06/30/97 P. Sheet 72.0% 14.1 8.8% 0.6% 12.2% 5.1% 10.00 14.50 45.0% 15.00
Sistersville Bancorp WV 06/26/97 P. Sheet 65.0% 18.9 20.6% 1.1% 31.6% 3.4% 10.00 13.75 37.5% 13.88
Averages: 75.8% 19.7 14.3% 0.7% 19.2% 3.8% $12.00 $17.81 43.8% $18.08
Medians: 72.1% 18.9 13.7% 0.7% 17.2% 3.6% $10.00 $14.50 45.0% $14.63
Averages, Excluding 2nd Steps 71.1% 19.2 14.1% 0.7% 20.0% 3.8% $11.25 $19.41 51.2% $19.71
Medians, Excluding 2nd Steps 71.7% 18.1 12.4% 0.6% 17.2% 3.8% $10.00 $14.56 45.6% $14.88
- -------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
-----------------------
Closing Price:
- -------------------------------------------------------------------------------
After
Conversion % First %
Institution State Date Ticker Chg. Month(7) Chg.
- ----------- ----- ---- ------ ---- -------- ----
(%) ($) (%)
- -------------------------------------------------------------------------------
WSB Holding Company PA 08/29/97 WSBH 45.0% $14.00 40.0%
Bayonne Bancshares (8) NJ 08/22/97 FSNJ 18.8% 12.88 28.8%
FirstSpartan Fin. Corp. SC* 07/09/97 FSPT 83.1% 35.63 78.1%
GSB Financial Corp. NY 07/09/97 GOSB 47.5% 14.38 43.8%
FirstBank Corp. ID* 07/02/97 FBNW 55.6% 17.88 78.8%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 12.5% 11.75 17.5%
Community First Bankg. Corp. GA 07/01/97 CFBC 65.0% 34.25 71.3%
First Robinson Fin. Corp. IL 06/30/97 FRFC 43.8% 16.50 65.0%
Security Bancorp TN 06/30/97 P. Sheet 50.0% 15.25 52.5%
Sistersville Bancorp WV 06/26/97 P. Sheet 38.8% 14.00 40.0%
Averages: 46.0% $18.66 51.7%
Medians: 46.3% $14.88 48.8%
Averages, Excluding 2nd Steps 53.6% $20.30 59.3%
Medians, Excluding 2nd Steps 48.8% $15.88 58.8%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts. September 10, 1997
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
- --------------------------------------------------------------------------------
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.2
Market Pricing Comparatives
Prices As of September 12, 1997
<TABLE>
<CAPTION>
Market Per Share Data Pricing Ratios(3) Dividends(4)
Capitalization -------------- ------------------------------------ ----------------------
---------------- Core Book
Price/ Market 12-Mth Value/ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- --------------------- -------- ------ ------- ----- --- --- --- ---- ------ ------ ----- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 22.79 159.57 1.16 15.73 21.39 144.36 17.61 148.03 18.79 0.38 1.71 29.78
Special Selection Grouping(8) 22.75 65.58 0.70 19.07 27.63 116.36 24.35 116.69 28.26 0.12 0.35 11.32
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CFBC Community First Bnkg Co. of GA 34.75 83.89 1.06 28.74 NM 120.91 18.61 122.57 NM 0.60 1.73 56.60
FBNW FirstBank Corp of Clarkston WA 17.00 33.73 0.44 14.00 NM 121.43 21.90 121.43 NM 0.00 0.00 0.00
FSPT FirstSpartan Fin. Corp. of SC 35.75 158.37 1.16 27.63 NM 129.39 34.06 129.39 NM 0.00 0.00 0.00
GOSB GSB Financial Corp. of NY 14.37 32.30 0.44 13.78 27.63 104.28 28.22 104.28 NM 0.00 0.00 0.00
MONT Montgomery Fin. Corp. of IN 11.87 19.62 0.42 11.22 NM 105.79 18.95 105.79 28.26 0.00 0.00 0.00
<CAPTION>
Financial Characteristics(6)
------------------------------------------------------
Reported Core
Total Equity/ NPAs/ ---------------- -------------
Financial Institution Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------ ------ ------ --- --- --- ---
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,165 12.84 0.79 0.63 5.47 0.85 7.51
Special Selection Grouping(8) 258 20.95 1.67 0.73 3.44 0.75 3.59
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CFBC Community First Bnkg Co. of GA 451 15.40 2.02 0.56 3.65 0.57 3.69
FBNW FirstBank Corp of Clarkston WA 154 18.04 2.07 0.70 3.86 0.57 3.14
FSPT FirstSpartan Fin. Corp. of SC 465 26.32 NA 0.95 3.62 1.11 4.20
GOSB GSB Financial Corp. of NY 114 27.06 NA 1.02 3.77 0.86 3.19
MONT Montgomery Fin. Corp. of IN 104 17.91 0.91 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 provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.15
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. At the same time, the new issues are trading at nearly 33
times pro forma earnings, a level which is seemingly unsupported by fundamentals
(the average industry multiple is 18.8 times and the pro forma ROE of new
conversions is less than half the industry level). Furthermore, at such price
levels, stock repurchases would be dilutive to both earnings per share and book
value per share.
C. The Acquisition Market
Also considered in the valuation was the potential impact on the
Association's stock price of recently completed and pending acquisitions of
other thrifts operating in the Association's market area. As shown in Exhibit
IV-4, there were four Tennessee thrifts acquired in 1995, 1996 and year-to-date
1997, and there are currently no acquisitions pending of Tennessee thrifts. In
light of the Association's extremely high pro forma capital position, which
would tend to make the Association a less attractive acquisition candidate,
acquisition speculation is not expected to have a material influence on the
Association's initial trading price. However, at the same time, the acquisition
market for Tennessee thrifts, as well as for thrifts in general, may imply a
certain degree of acquisition speculation for the Association's stock. To the
extent that acquisition speculation may impact the Association's offering, we
have largely taken this into account in selecting Tennessee, Southeast and
Midwest based companies, which operate in markets that have experienced a
comparable degree of acquisition activity as the Association's market area and,
thus, are subject to the same type of acquisition speculation that may influence
the Association's trading price.
Taking these factors and trends into account, primarily recent trends in
the new issue market, market conditions overall, and recent trends in the
acquisition market, RP Financial concluded that no adjustment was appropriate in
the valuation analysis for purposes of marketing of the issue.
8. Management
The Association's management team is characteristic of a small institution
with senior management wearing many hats. Exhibit IV-5 provides summary resumes
of the Association's Board of Directors and senior management. The financial
characteristics and growth of the
<PAGE>
RP Financial, LC.
Page 4.16
Association suggest that the Association is being effectively managed and there
appears to be a well-defined organizational structure. The Association has no
apparent executive/senior management vacancies. At the same time, as in the case
of the Peer Group, there appears to be limited management depth, which is not
unusual for small institutions. The returns, capital positions, and other
operating measures of the Peer Group companies are indicative of well-managed
financial institutions, which also have generally seasoned Boards and management
teams.
On balance, we concluded that no valuation adjustment relative to the Peer
Group was appropriate for this factor.
9. Effect of Government Regulation and Regulatory Reform
All of the Peer Group companies' deposits were impacted by the recently
enacted SAIF rescue legislation, leading to a special assessment during 1996 and
a reduced deposit insurance premium structure beginning in 1997. Currently,
there are no significant differences between the Association and the Peer Group
from a regulatory perspective, and the Peer Group members operate under the same
regulatory scheme as the Association. On balance, no adjustment to the
Association's value was warranted for this factor.
Summary of Adjustments
Overall, we believe the Association's pro forma market value should be
discounted relative to the Peer Group as follows.
Key Valuation Parameters Valuation Adjustment
- ------------------------ --------------------
Financial Condition No Adjustment
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth No Adjustment
Primary Market Area Slight Downward
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
<PAGE>
RP Financial, LC.
Page 4.17
Valuation Approaches
In applying the accepted valuation methodology promulgated by the
regulatory agencies, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing the Association's to-be-issued stock --
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") -- 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 the
Association's prospectus for offering expenses, reinvestment rate, the effective
tax rate and stock benefit plans (summarized in Exhibits IV-6 and IV-7). Each of
these assumptions are described more fully below.
o Conversion Expenses. The Association has estimated its fixed and variable
conversion expenses over the range of value incorporating the appraised
value determined herein, based on the financial arrangements with the
various third parties engaged by the Association to assist in completing
the conversion transaction.
o Effective Tax Rate. The Association, in consultation with its outside
auditors, has determined the marginal effective tax rate on the net
reinvestment benefit of the conversion proceeds to be 40 percent based on
the statutory Federal and state income tax rates.
o Reinvestment Rate. The pro forma section in the draft prospectus
incorporates a 5.82 percent reinvestment rate, equivalent to yield on the
one-year Treasury bill as of June 30, 1997, the rate utilized herein. The
arithmetic average of the yield on interest-earning assets and cost of
deposits for the current fiscal year to date, indicating a reinvestment
rate of 6.35 percent, appears to be less attainable initially in that the
loans/deposits ratio declined with the deposit growth spurt over the last
18 months, suggesting that investment securities is a more realistic
reinvestment option in the near term (as set forth in the business plan).
o Stock Benefit Plans. The assumptions for the stock benefit plans, i.e.,
the Employee Stock Ownership Plan ("ESOP") and Recognition Plan
("Recognition Plan"), are consistent with the structure as approved by the
Association's Board and the disclosure in the pro forma section of the
prospectus. Specifically, the ESOP is assumed to purchase 8 percent of the
stock in conversion at the initial public offering price, with the Holding
Company funded ESOP loan amortized on a straight-line basis over 10 years.
The Recognition Plan is assumed to purchase 4 percent of the stock in the
aftermarket at a price equivalent to the initial public offering price (we
also considered the impact of the issuance of Recognition Plan shares from
authorized but unissued shares at a price equivalent to the initial public
offering price), with the Recognition Plan cost expensed on a straight
line basis in conjunction with the 5 year vesting schedule.
<PAGE>
RP Financial, LC.
Page 4.18
RP Financial's valuation considered each of the valuation approaches
promulgated in the regulatory valuation guidelines, as described more fully
below.
o P/E Approach. The P/E approach is generally regarded as the best indicator
of long-term value for a stock. Given the traditional thrift operating
strategies employed by the Association and the Peer Group, which provided
a certain degree of financial comparability between the Association and
the Peer Group, the P/E approach was carefully considered in this
valuation. Since reported earnings for both the Association and the Peer
Group included certain unusual items, we also made adjustments to earnings
to arrive at a core earnings estimate and the resulting price/core
earnings ratio.
o P/B Approach. P/B ratios have generally served as a useful benchmark in
the valuation of thrift stocks, with the greater determinant of long term
value being earnings. Recognizing that the pro forma P/B ratio will result
in a below market ratio due to the pro forma nature of the P/B
computation, RP Financial considered the P/B approach to be a reliable
indicator in the context of pro forma value taking into account the
pricing ratios under the P/E and P/A approaches. We have also modified the
P/B approach to exclude the impact of intangible assets (i.e.,
price/tangible book value or "P/TB"), in that the investment community
frequently makes this adjustment in its evaluation of the stock price
level.
o P/A Approach. Investors typically do not place significant weight on
simply the size of total assets as a determinant of market value without
making risk adjustments. Investors generally place greater weight on book
value and earnings for established publicly-traded institutions. At the
same time, the P/A ratio is an indicator of franchise value, and, in the
case of highly capitalized institutions, high P/A ratios may limit the
investment community's willingness to pay market multiples for earnings or
book value when ROE is expected to be low. This approach as set forth in
the regulatory valuation guidelines, does not take into account the amount
of stock purchases funded by deposit withdrawals, thus understating the
pro forma P/A ratio.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the earnings and book approaches, RP Financial concluded that
the pro forma market value of the Association's conversion stock is $11 million
at the midpoint at this time.
1. Price-to-Book ("P/B"). The application of the P/B valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/B ratio, derived from the Peer Group's P/B ratio, to the
Association's pro forma book value. In applying the P/B approach, we considered
both reported book value and tangible book value, but since the
<PAGE>
RP Financial, LC.
Page 4.19
Association and the Peer Group had effectively no goodwill, there is no
difference in the two figures. Based on the $11 million midpoint valuation, the
Association's pro forma P/B and P/TB ratios were each 71 percent, respectively,
compared to the median P/B and P/TB ratios for the Peer Group each at 115
percent, respectively, the Association's ratios were each discounted by 38.5
percent. RP Financial considered such discounts to be reasonable in light of the
previously referenced valuation adjustments, the nature of the calculation of
the pro forma P/TB ratio which mathematically results in a ratio discounted to
book value, comparatively lower pro forma core ROE and the resulting pricing
ratios under the earnings and assets approaches.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/E multiple, derived from the Peer Group's P/E multiple, times the
pro forma earnings base. In applying this technique, we considered both reported
earnings and a recurring earnings base, that is, earnings adjusted to exclude
any one-time non-operating and extraordinary items, plus the estimated after-tax
earnings benefit from reinvestment of net conversion proceeds. The Association's
reported earnings were $0.450 million for the twelve months ended June 30, 1997.
In deriving the Association's core earnings, the adjustment made to reported
pre-tax earnings were the addback of the expense of the DRP ($0.151 million) and
the special SAIF assessment ($0.317 million), and application of the effective
statutory tax rate of 40.0 percent (to eliminate the impact of the recent
unusual tax adjustments) to core pre-tax earnings. On a tax effected basis,
adjusted earnings approximated $0.671 million. Similar types of adjustments were
applied to the Peer Group in the calculation of their core earnings (Note: see
Exhibit IV-8).
Based on the Association's reported and estimated core earnings, and
incorporating the impact of the pro forma assumptions discussed previously, the
Association's pro forma reported and core P/E multiples at the $11 million
midpoint value were 16.68 and 12.49 times, respectively, which provided for
discounts of 15.4 and 27.8 percent relative to the Peer Group's median reported
and core earnings multiples of 19.72 and 17.29 times, respectively. Such
adjustments reflect the valuation adjustments outlined previously and the other
pricing ratios. RP Financial also considered the impact of SOP 93-6 in examining
the P/E ratios.
<PAGE>
RP Financial, LC.
Page 4.20
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
market value by applying a valuation P/A ratio to the Association's pro forma
asset base, conservatively assuming no deposit withdrawals are made to fund
stock purchases. In all likelihood there will be deposit withdrawals, which
results in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, the Association's value equaled 15.02 percent
of pro forma assets, compared to the Peer Group median P/A ratio of 24.0
percent. While generally emphasized less than the P/E and P/B approaches, the
P/A ratio is an indicator of franchise value and, thus, was considered in the
valuation conclusion.
Comparison to Recent Conversions
As indicated at the beginning of this chapter, RP Financial's analysis of
recent conversion pricing characteristics at conversion (excluding second step
conversions) and in the aftermarket has been limited to a "technical" analysis
and, thus, the pricing characteristics of recent conversions is not the primary
determinate of value herein. Particular focus was placed on the P/B approach in
this analysis since the P/E multiples do not reflect the actual impact of
reinvestment and the source of the conversion funds (i.e., external funds vs.
deposit withdrawals). The recent conversions (excluding second step conversions)
on average closed their offerings at their supermaximum levels given the
oversubscribed nature of their offerings and prevailing market conditions at
closing, indicating a median price/tangible book ratio of 71.7 percent. On
average, the prices of recent conversions appreciated by nearly 49 percent
during the first week of trading. In comparison, the Association's P/TB ratio at
the appraised midpoint is comparable relative to the closing ratios (generally
at their supermaximums), but a discount to the aftermarket ratios. The closing
and aftermarket P/TB ratios are not directly comparable in that the closing
ratio reflects the pro forma impact of conversion on equity whereas the
aftermarket ratio reflects only price (with no further impact on equity
capital).
Valuation Conclusion
It is our opinion that, as of September 12, 1997, the estimated aggregate
pro forma market value of the shares to be issued immediately following the
conversion was $11 million. Based on this valuation, the Directors have
established the Initial Purchase Price and the number
<PAGE>
RP Financial, LC.
Page 4.21
of shares of Conversion Stock to be offered, including the range of value.
Accordingly, the Board has established a range of value of 15 percent above and
below the appraised value of $11 million (or "midpoint"), indicating a minimum
value of $9.35 million and a maximum value of $12.65 million. Based on the
$10.00 per share offering price determined by the Board, this valuation range
equates to an offering of 935,000 shares at the minimum to 1,265,000 shares at
the maximum, and 1,100,000 shares at the midpoint. In the event that the
appraised value is subject to an increase, up to 1,454,750 shares may be sold at
an issue price of $10.00 per share, for an aggregate market value of
$14,547,500, without a resolicitation.
The comparative pro forma valuation ratios relative to the Peer Group are
shown in Table 4.3, and the key valuation assumptions are detailed in Exhibit
IV-6. The pro forma calculations for the range are detailed in Exhibit IV-7, and
pro forma regulatory capital levels are presented in Exhibit IV-9.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Public Market Pricing
Newport FS&LA of Newport TN and the Comparables
As of September 12, 1997
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3) Dividends(4)
--------------- -------------- -------------------------------------- ----------------------
Core Book
Price/ Market 12-Mth Value/ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
-------- ------ ------ ------- ------ ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Newport FS&LA of Newport TN
- ---------------------------
Superrange 10.00 14.55 0.66 12.75 19.86 78.41 19.07 78.41 15.26 0.30 3.00 45.78
Range Maximum 10.00 12.65 0.72 13.37 18.24 74.77 16.95 74.77 13.83 0.30 3.00 41.50
Range Midpoint 10.00 11.00 0.80 14.09 16.68 70.98 15.02 70.98 12.49 0.30 3.00 37.47
Range Minimum 10.00 9.35 0.91 15.05 14.94 66.43 13.02 66.43 11.04 0.30 3.00 33.12
SAIF-Insured Thrifts(7)
- -----------------------
Averages 22.79 159.57 1.16 15.73 21.39 144.36 17.61 148.03 18.79 0.38 1.71 29.78
Medians --- --- --- --- 21.29 137.43 15.90 139.93 18.09 --- --- ---
Comparable Group Averages
- -------------------------
Averages 19.35 26.14 1.06 16.09 20.69 120.48 25.26 120.49 18.72 0.46 2.41 43.27
Medians --- --- --- --- 19.72 115.32 23.97 115.32 17.29 --- --- ---
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 25.25 28.84 1.46 16.80 22.15 150.30 21.29 150.30 17.29 0.56 2.22 38.36
CKFB CKF Bancorp of Danville KY 19.00 17.58 0.86 15.75 16.24 120.63 28.90 120.63 22.09 0.50 2.63 58.14
CFFC Community Fin. Corp. of VA 21.75 27.73 1.67 18.86 16.48 115.32 15.81 115.32 13.02 0.56 2.57 33.53
FFBS FFBS Bancorp of Columbus MS 22.00 34.25 1.20 16.15 23.16 136.22 26.20 136.22 18.33 0.50 2.27 41.67
FFDF FFD Financial Corp. of OH 15.63 22.74 0.61 14.50 NM 107.79 26.66 107.79 25.62 0.30 1.92 49.18
FBSI First Bancshares of MO 24.00 26.30 1.56 20.26 18.60 118.46 16.04 118.64 15.38 0.20 0.83 12.82
FLKY First Lancaster Bncshrs of KY 15.50 14.86 0.56 14.44 NM 107.34 36.75 107.34 27.68 0.50 3.23 NM
HFFB Harrodsburg 1st Fin Bcrp of KY 15.75 31.89 0.73 14.49 28.64 108.70 29.28 108.70 21.58 0.40 2.54 54.79
KSAV KS Bancorp of Kenly NC 18.50 16.37 1.40 16.22 17.13 114.06 15.43 114.13 13.21 0.60 3.24 42.86
LOGN Logansport Fin. Corp. of IN 15.75 19.85 0.96 12.67 21.28 124.31 23.87 124.31 16.41 0.40 2.54 41.67
LONF London Financial Corp. of OH 15.00 7.73 0.73 14.60 NM 102.74 20.20 102.74 20.55 0.24 1.60 32.88
MARN Marion Capital Holdings of IN 23.50 41.55 1.65 22.10 17.03 106.33 23.97 106.33 14.24 0.88 3.74 53.33
NEIB Northeast Indiana Bncrp of IN 17.00 29.97 1.15 15.19 17.35 111.92 17.00 111.92 14.78 0.32 1.88 27.83
SCCB S. Carolina Comm. Bnshrs of SC 23.00 16.19 0.70 17.11 NM 134.42 34.89 134.42 NM 0.60 2.61 NM
SSB Scotland Bancorp of NC 18.62 35.64 0.62 13.44 NM 138.54 51.29 138.54 NM 0.30 1.61 48.39
SMBC Southern Missouri Bncrp of MO 17.87 29.27 0.69 15.85 25.53 112.74 17.67 112.74 25.90 0.50 2.80 72.46
SSM Stone Street Bancorp of NC 21.44 40.69 0.96 16.13 26.80 132.92 38.35 132.92 22.33 0.45 2.10 46.88
FTF Texarkana Fst. Fin. Corp of AR 24.25 43.41 1.62 15.03 18.51 161.34 25.33 161.34 14.97 0.56 2.31 34.57
TWIN Twin City Bancorp of TN 13.75 11.73 0.93 16.18 20.83 84.98 10.93 84.98 14.78 0.43 3.13 46.24
<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>
Newport FS&LA of Newport TN
- ---------------------------
Superrange 76 24.32 0.77 0.96 3.95 1.25 5.14
Range Maximum 75 22.67 0.79 0.93 4.10 1.23 5.41
Range Midpoint 73 21.17 0.81 0.90 4.26 1.20 5.68
Range Minimum 72 19.60 0.82 0.87 4.45 1.18 6.02
SAIF-Insured Thrifts(7)
- -----------------------
Averages 1,165 12.84 0.79 0.63 5.47 0.85 7.51
Medians --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 113 20.88 0.66 1.07 5.30 1.30 6.47
Medians --- --- --- --- --- --- ---
Comparable Group
- ----------------
BFSB Bedford Bancshares of VA 135 14.16 0.60 1.01 6.98 1.29 8.94
CKFB CKF Bancorp of Danville KY 61 23.96 1.26 1.81 7.25 1.33 5.33
CFFC Community Fin. Corp. of VA 175 13.71 0.39 1.01 7.32 1.28 9.26
FFBS FFBS Bancorp of Columbus MS 131 19.23 0.37 1.16 5.96 1.47 7.53
FFDF FFD Financial Corp. of OH 85 24.74 NA 0.78 3.42 1.08 4.74
FBSI First Bancshares of MO 164 13.54 0.56 0.91 6.15 1.10 7.44
FLKY First Lancaster Bncshrs of KY 40 34.23 0.75 1.15 3.72 1.40 4.52
HFFB Harrodsburg 1st Fin Bcrp of KY 109 26.93 0.47 1.03 3.77 1.36 5.01
KSAV KS Bancorp of Kenly NC 106 13.53 0.35 0.96 6.86 1.25 8.89
LOGN Logansport Fin. Corp. of IN 83 19.20 0.61 1.17 5.64 1.52 7.31
LONF London Financial Corp. of OH 38 19.66 0.80 0.66 3.18 1.00 4.83
MARN Marion Capital Holdings of IN 173 22.55 0.81 1.39 6.09 1.67 7.28
NEIB Northeast Indiana Bncrp of IN 176 15.19 0.40 1.04 6.33 1.22 7.42
SCCB S. Carolina Comm. Bnshrs of SC 46 25.95 1.78 0.82 2.99 1.10 4.03
SSB Scotland Bancorp of NC 69 37.02 NA 1.41 3.88 1.72 4.72
SMBC Southern Missouri Bncrp of MO 166 15.67 1.10 0.71 4.42 0.70 4.35
SSM Stone Street Bancorp of NC 106 28.85 0.27 1.43 4.18 1.71 5.02
FTF Texarkana Fst. Fin. Corp of AR 171 15.70 0.46 1.41 8.40 1.74 10.38
TWIN Twin City Bancorp of TN 107 12.86 0.16 0.53 4.13 0.75 5.82
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted to
omit the impact of non-operating items (including the SAIF assessment) on a
tax effected basis, and is shown on a pro forma basis where appropriate.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB =
Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and total
assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
I-1 Map of Office Locations
I-2 Newport Federal'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 NPV Analysis
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases, and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Classified Assets
I-14 Deposit Composition
I-15 Deposit Rate/Maturity
II-1 List of Branch Offices
II-2 Historical Interest Rates
II-3 Demographic/Economic Reports
II-4 Sources of Personal Income/Employment Sectors
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
(continued)
Exhibit
Number Description
- ------- -----------
III-1 General Characteristics of Publicly-Traded Institutions
III-2 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: September 12, 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 Analysis Sheet
IV-7 Pro Forma Effect of Conversion Proceeds
IV-8 Peer Group Core Earnings Analysis
IV-9 Pro Forma Regulatory Capital Ratios
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Newport Federal Savings and Loan Association
Map of Office Locations
<PAGE>
County-Town Tennessee Map
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT I-2
Newport Federal Savings and Loan Association
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Newport Federal Savings and Loan Association
Key Operating Ratios
<PAGE>
Exhibit I-3
Newport Federal Savings and Loan Association
Key Operating Ratios
<TABLE>
<CAPTION>
At or for the
Six Months Ended
June 30, At or for the Year Ended December 31,
----------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Performance Ratios:
Return on assets (net income divided
by average total assets) ....................... 0.76% 1.33% 1.01% 1.33% 1.60% 1.80% 1.14%
Return on average equity (net income
divided by average equity) ..................... 7.51 13.18 10.19 14.75 20.92 28.03 22.10
Interest rate spread (combined weighted
average interest rate earned less combined
weighted average interest rate cost) ........... 3.30 3.30 3.40 3.60 4.20 4.14 4.38
Net interest margin (net interest income
divided by average interest-earning assets) .... 3.80 3.79 3.83 3.93 4.42 4.84 4.26
Ratio of average interest-earning assets
to average interest-bearing liabilities ........ 110.27 111.20 109.30 108.70 107.70 101.65 100.88
Ratio of noninterest expense to average
total assets) .................................. 2.32 2.01 2.57 2.02 1.97 1.83 1.73
Efficiency Ratio (noninterest expense
divided by total net interest income
and noninterest income) ........................... 64.67 50.27 64.65 48.50 44.42 40.74 45.00
Asset Quality Ratios:
Nonperforming assets to total assets
at end of period ............................... 0.99 0.58 0.63 0.54 0.96 0.81 1.87
Nonperforming assets to total assets
at end of period ............................... 1.24 0.73 0.84 0.72 1.28 1.20 2.70
Allowance for loan losses to total
loans at end of period ......................... 1.20 1.06 1.10 1.21 1.34 1.36 1.18
Allowance for loan losses to nonperforming
loans at end of period ......................... 96.40 146.49 129.93 168.86 104.40 113.86 43.58
Provision for loan losses to total loans .......... 0.19 - - - 0.09 0.28 0.63
Net charge-offs to average loans outstanding ...... 0.02 0.01 0.01 0.01 0.03 0.01 0.07
Capital Ratios:
Equity to total assets at end of period ........... 10.08 9.69 10.07 10.03 8.01 7.45 5.34
Average equity to average assets .................. 10.09 10.10 9.95 9.05 7.63 6.42 5.18
</TABLE>
<PAGE>
EXHIBIT I-4
Newport Federal Savings and Loan Association
Investment Portfolio Composition
<PAGE>
EXHIBIT I-4
Newport Federal Savings and Loan Association
Investment Portfolio Composition
<TABLE>
<CAPTION>
At At December 31,
June 30, ----------------------------
1997 1996 1995 1994
-------- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Securities available for sale:
Mortgage-backed securities ............. $ 7,757 $ 7,400 $ 7,696 $ 7,076
U.S. government and agency securities .. 4,487 2,989 1,513 2,465
FHLMC preferred stock .................. 981 774 585 354
FHLB stock ............................. 529 511 477 414
Other .................................. 15 15 15 15
Securities held to maturity:
Obligations of states and political
subdivisions ........................ 1,059 1,212 1,046 1,307
Mortgage-backed securities ............. -- -- -- 3,557
-------- -------- -------- --------
Total ............................... $ 14,828 $ 12,901 $ 11,332 $ 15,188
======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT I-5
Newport Federal Savings and Loan Association
Yields and Costs
<PAGE>
EXHIBIT I-5
Newport Federal Savings and Loan Association
Yields and Costs
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------------------
At June 30, 1997 1996
1997 ----------------------------- -------------------------------
---------------- Average Average
Yield/ Average Yield/ Average Yield/
Balance Cost Balance Interest Cost Balance Interest Cost
------- ---- ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1) ..................... $ 46,468 8.5% $ 44,382 $ 1,958 8.8% $ 41,462 $ 1,803 8.7%
Investment securities ................... 14,298 6.8 14,290 438 6.1 11,840 329 5.6
Other interest-earning assets ........... 2,029 5.8 2,429 68 5.6 1,440 39 5.4
-------- -------- --------- -------- ---------
Total interest-earning assets ........ 62,795 8.0 61,101 2,464 8.1 54,742 2,171 7.9
Noninterest-earning assets ................. 1,394 -- 1,464 -- -- 829 -- --
-------- -------- --------- -------- ---------
Total assets ......................... $ 64,189 -- $ 62,565 $ 2,464 -- $ 55,571 $ 2,171 --
======== ======== ========= ======== =========
Interest-bearing liabilities:
Deposits ................................ $ 56,725 4.7 $ 55,412 $ 1,303 4.7 $ 49,239 $ 1,135 4.6
Noninterest-bearing liabilities ............ 995 -- 840 -- -- 719 -- --
-------- -------- --------- -------- ---------
Total liabilities .................... 57,720 -- 56,252 1,303 -- 49,958 1,135 --
Equity ..................................... 6,469 -- 6,313 -- -- 5,613 -- --
-------- -------- --------- -------- ---------
Total liabilities and equity ......... $ 64,189 -- $ 62,565 $ 1,303 -- $ 55,571 $ 1,135 --
======== ======== ========= ======== =========
Net interest income $ 1,161 $ 1,036
Interest rate spread ....................... 3.3% 3.3% 3.3%
===== ===== =====
Net yield on interest-earning assets ....... 3.7% 3.8% 3.8%
===== ===== =====
Ratio of average interest-earning assets
to average interest-bearing liabilities.. 110.7% 110.6% 111.2%
===== ===== =====
</TABLE>
- -------------
(1) Includes nonaccrual loans.
<PAGE>
EXHIBIT I-5 (continued)
Newport Federal Savings and Loan Association
Yields and Costs
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1996 1995
----------------------------- -------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1) .................... $ 42,426 $ 3,720 8.8% $ 38,262 $ 3,383 8.8%
Investment securities .................. 11,662 726 6.2 13,637 876 6.4
Other interest-earning assets .......... 1,727 90 5.2 578 23 4.0
-------- ---------- -------- ----------
Total interest-earning assets ....... 55,815 4,536 8.1 52,477 4,282 8.2
Noninterest-earning assets ................ 1,748 -- -- 991 -- --
-------- ---------- -------- ----------
Total assets ........................ $ 57,563 $ 4,536 -- $ 53,468 $ 4,282 --
======== ========= ======== =========
Interest-bearing liabilities:
Deposits ............................... $ 51,083 $ 2,399 4.7 $ 48,259 $ 2,218 4.6
Noninterest-bearing liabilities ........... 752 -- -- 368 -- --
-------- ---------- -------- ----------
Total liabilities ................... 51,835 2,399 -- 48,627 2,218 --
Equity .................................... 5,728 -- -- 4,841 -- --
-------- ---------- -------- ----------
Total liabilities and equity ........ $ 57,563 $ 2,399 -- $ 53,468 $ 2,218 --
======== ========= ======== =========
Net interest income ....................... $ 2,137 $ 2,064
========= =========
Interest rate spread ...................... 3.4% 3.6%
===== =====
Net yield on interest-earning assets ...... 3.8% 3.9%
===== =====
Ratio of average interest-earning assets
to average interest-bearing liabilities. 109.3% 108.7%
===== =====
<CAPTION>
Year Ended December 31,
-------------------------------
1994
------------------------------
Average
Average Yield/
Balance Interest Cost
------- -------- ----
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable(1) .................... $ 35,863 $ 3,019 8.4%
Investment securities .................. 14,261 858 6.0
Other interest-earning assets .......... 825 29 3.5
--------- ----------
Total interest-earning assets ....... 50,952 3,906 7.7
Noninterest-earning assets ................ 1,827 -- --
--------- ----------
Total assets ........................ $ 52,779 $ 3,906 --
======== =========
Interest-bearing liabilities:
Deposits ............................... $ 47,313 $ 1,655 3.5
Noninterest-bearing liabilities ........... 1,438 -- --
--------- ----------
Total liabilities ................... 48,751 1,655 --
Equity .................................... 4,028 -- --
--------- ----------
Total liabilities and equity ........ $ 52,779 $ 1,655 --
======== =========
Net interest income ....................... $ 2,251
=========
Interest rate spread ...................... 4.2%
=====
Net yield on interest-earning assets ...... 4.4%
=====
Ratio of average interest-earning assets
to average interest-bearing liabilities. 107.7%
=====
</TABLE>
- -----------------
(1) Includes nonaccrual loans.
<PAGE>
EXHIBIT I-6
Newport Federal Savings and Loan Association
Loan Loss Allowance Activity
<PAGE>
EXHIBIT I-6
Newport Federal Savings and Loan Association
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------- -----------------------
1997 1996 1996 1995 1994
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period ....... $ 494 $ 496 $ 496 $ 498 $ 475
Charge-offs:
Consumer .......................... (8) (4) (4) (2) (12)
Recoveries:
Consumer .......................... -- 1 2 -- 2
----- ----- ----- ----- -----
Net Charge-offs ...................... (8) (3) (2) (2) (10)
Provision for loan losses ............ 90 -- -- -- 33
----- ----- ----- ----- -----
Balance at end of period ............. $ 576 $ 493 $ 494 $ 496 $ 498
===== ===== ===== ===== =====
Ratio of net charge-offs to average
loans outstanding during the period 0.02% 0.01% 0.01% 0.01% 0.03%
===== ===== ===== ===== =====
</TABLE>
<PAGE>
EXHIBIT I-7
Newport Federal Savings and Loan Association
Fixed Rate and Adjustable Rate Loans
<PAGE>
Exhibit I-7
Newport Federal Savings and Loan Association
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
Predetermined Floating or
Rate Adjustable Rates
------------- ----------------
(in thousands)
<S> <C> <C>
Real estate loans:
One- to four-family residential .......... $6,737 $32,772
Commercial ............................... 608 1,657
Construction ............................. -- --
Consumer ................................. 1,198 --
------- --------
Total .................................. $8,543 $34,429
======= ========
</TABLE>
<PAGE>
EXHIBIT I-8
Newport Federal Savings and Loan Association
NPV Analysis
<PAGE>
Exhibit I-8
Newport Federal Savings and Loan Association
NPV Analysis
Change in NPV
Change in -------------------------
Market Interest Rates Policy Computation
- --------------------- ------ ------------
+4% -90% -39%
+3% -50 -27
+2% -25 -15
+1% -10 -6
0% -- --
+1% -10 *
+2% -25 *
+3% -50 *
+4% -90% *
- ----------
* No loss calculated.
<PAGE>
EXHIBIT I-9
Newport Federal Savings and Loan Association
Loan Portfolio Composition
<PAGE>
Exhibit I-9
Newport Federal Savings and Loan Association
Loan Portfolio Composition
<TABLE>
<CAPTION>
At December 31,
At June 30, --------------------------------------------------------------
1997 1996 1995 1994
----------------- ----------------- ------------------ -------------------
Amount % Amount % Amount % Amount %
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family residential .......... $39,663(1) 82.3% $39,549 86.6% $36,534 86.8% $33,634 88.2%
Commercial ............................... 3,285 6.8 2,265 5.0 1,370 3.3 1,215 3.2
Construction ............................. 3,024 6.3 1,889 4.1 2,341 5.6 1,540 4.0
Consumer loans:
Automobile ............................... 708 1.5 664 1.4 514 1.2 331 0.9
Loans to depositors, secured by deposits . 570 1.2 509 1.1 588 1.4 781 2.0
Home equity and second mortgage .......... 242 0.5 234 0.5 233 0.5 152 0.4
Other .................................... 698 1.4 565 1.3 512 1.2 467 1.3
------- ----- ------- ----- ------- ----- ------- -----
48,190 100.0% 45,675 100.0% 42,092 100.0% 38,120 100.0%
------- ===== ------- ===== ------- ===== ------- =====
Less:
Loans in process ......................... 1,722 688 980 835
Deferred fees and discounts .............. 267 263 251 219
Allowance for loan losses ................ 576 494 496 498
------- ------- ------- -------
Total .................................. $45,625 $44,230 $40,365 $36,568
======= ======= ======= =======
</TABLE>
- ----------
(1) Includes $6,876 (in thousands) in loans secured by real estate with mobile
homes permanently attached to the property.
<PAGE>
EXHIBIT I-10
Newport Federal Savings and Loan Association
Loan Originations, Purchases and Sales
<PAGE>
Exhibit I-10
Newport Federal Savings and Loan Association
Loan Originations, Purchases and Sales
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------- -------------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family residential .......... $ 4,442 $ 4,338 $ 8,305 $ 6,459 $ 7,304
Commercial ............................... 876 765 1,439 1,226 526
Construction ............................. 1,947 1,912 2,770 2,750 1,914
Consumer loans ............................. 610 516 1,081 1,014 732
------- ------- ------- ------- -------
Total loans originated.................. $ 7,875 $ 7,531 $13,595 $11,449 $10,476
======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-11
Newport Federal Savings and Loan Association
Contractual Maturity By Loan Type
<PAGE>
EXHIBIT I-11
Newport Federal Savings and Loan Association
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
Due After Due After Due After
Due During the Year Ending 3 Through 5 Through 10 Through Due After 15
December 31, 5 Years After 10 Years After 15 Years After Years After
------------------------- December 31, December 31, December 31, December 31,
1997 1998 1999 1996 1996 1996 1996 Total
---- ---- ---- ------------- -------------- -------------- ------------ -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family residential $ 40 $254 $392 $1,547 $4,134 $14,345 $18,837 $39,549
Commercial .................... -- 38 19 255 524 1,003 426 2,265
Construction .................. 1,889 -- -- -- -- -- -- 1,889
Consumer ........................ 774 212 324 536 52 74 -- 1,972
------ ---- ---- ------ ------ ------- ------- -------
Total ....................... $2,703 $504 $735 $2,338 $4,710 $15,422 $19,263 $45,675
====== ==== ==== ====== ====== ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-12
Newport Federal Savings and Loan Association
Non-Performing Assets
<PAGE>
Exhibit I-12
Newport Federal Savings and Loan Association
Non-Performing Assets
<TABLE>
<CAPTION>
At
June 30, At December 31,
1997 1996 1995 1994
------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Accruing loans which are contractually
past due 90 days or more:
Real estate:
One- to four-family residential ........ $ 482 $ 375 $ 282 $ 398
Commercial ............................. 57 -- -- 48
Consumer ................................. 10 5 11 31
----- ----- ----- -----
Total .................................. $ 549 $ 380 $ 293 $ 477
===== ===== ===== =====
Percentage of total loans .................. 1.24% .84% .72% 1.28%
===== ===== ===== =====
Other nonperforming assets(1) .............. $ 41 $ -- $ -- $ 36
===== ===== ===== =====
Percentage of total assets ................. .06% --% --% .07%
===== ===== ===== =====
</TABLE>
- ----------
(1) Other nonperforming assets includes property acquired through foreclosure or
repossession. This property is carried at the lower of its fair value less
estimated selling costs or the principal balance of the related loan, whichever
is lower.
<PAGE>
EXHIBIT I-13
Newport Federal Savings and Loan Association
Classified Assets
<PAGE>
Exhibit I-13
Newport Federal Savings and Loan Association
Classified Assets
We regularly review our assets to determine whether assets require
classification or re-classification, and the Board of Directors reviews and
approves all classifications. As of June 30, 1997, we had no assets classified
as loss or as doubtful, $646,000 of assets classified as substandard and no
assets designated as special mention. Our total adversely classified assets
represented approximately 1% of our total assets and 12% of our tangible
regulatory capital at June 30, 1997. At that date, substantially all of our
adversely classified or designated assets were one- to four-family residences in
our primary market area, and none of such assets was in excess of $60,000. At
June 30, 1997, we did not expect to incur any loss in excess of attributable
existing reserves on any of our adversely classified or designated assets. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
<PAGE>
EXHIBIT I-14
Newport Federal Savings and Loan Association
Deposit Composition
<PAGE>
Exhibit I-14
Newport Federal Savings and Loan Association
Deposit Composition
<TABLE>
<CAPTION>
Weighted
Average
Interest Minimum Minimum Percentage of
Rate Term Category Amount Balance Total Savings
---- ---- -------- ------ ------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Demand deposits:
2.36 None NOW accounts $ -- $ 3,896 6.87%
3.24 None Money market 2,500 1,835 3.23
3.25 None Savings deposits-passbook -- 9,681 17.07
------- ------
Total demand deposits 15,412 27.17
------- ------
Certificates of Deposit
-----------------------
5.12 91 days Fixed-term, fixed-rate 2,500 5,082 8.96
5.23 6 months-Regular Fixed-term, fixed-rate 2,500 8,225 14.50
5.19 6 months-IRA Fixed-term, fixed-rate 100 543 0.96
5.33 12 months Fixed-term, fixed-rate 1,000 6,325 11.15
5.42 18 months-Regular Fixed-term, fixed-rate 1,000 2,552 4.50
5.39 18 months-IRA Fixed-term, fixed-rate 100 3,930 6.93
5.58 30 months Fixed-term, fixed-rate 1,000 857 1.51
5.60 Jumbos Fixed-term, fixed-rate 100,000 13,799 24.32
------- ------
Total certificates of deposit 41,313 72.83
------- ------
Total deposits $56,725 100.00%
======= ======
</TABLE>
<PAGE>
EXHIBIT I-15
Newport Federal Savings and Loan Association
Deposit Rate/Maturity
<PAGE>
EXHIBIT I-15
Newport Federal Savings and Loan Association
Deposit Rate/Maturity
<TABLE>
<CAPTION>
At At December 31,
June 30, ---------------------------------
1997 1996 1995 1994
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
2.00-3.99% ........... $ -- $ -- $ 534 $ 5,158
4.00-5.99% ........... 41,279 37,298 31,963 25,880
6.00-7.99% ........... 34 1,114 453 480
------- ------- ------- -------
$41,313 $38,412 $32,950 $31,518
======= ======= ======= =======
</TABLE>
The following table sets forth information about amounts and maturities of
our time deposits at June 30, 1997.
<TABLE>
<CAPTION>
Amount Due
-------------------------------------------------------
Less Than After
Rate One Year 1-2 Years 2-3 Years 3 Years Total
- ---- -------- --------- --------- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
4.00-5.99% ........... $38,826 $2,225 $228 $ -- $41,279
6.00-7.99% ........... 34 -- -- -- 34
------- ------ ---- ----- -------
$38,860 $2,225 $228 $ -- $41,313
======= ====== ==== ===== =======
</TABLE>
<PAGE>
EXHIBIT II-1
Newport Federal Savings and Loan Association
List of Branch Offices
<PAGE>
EXHIBIT II-1
Newport Federal Savings and Loan Association
List of Branch Offices
Year Owned or Approximate
Opened Leased Book Value Square Footage Deposits
------ ------ ---------- -------------- --------
(In thousands)
Main Office:
344 W. Broadway
Newport, Tennessee 1973 Owned $84,152 8,000 $37,819
Branch Office:
263 E. Broadway
Newport, Tennessee 1960 Owned $ 796 5,400 $18,906
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
EXHIBIT II-2
Historical Interest Rates(1)
<TABLE>
<CAPTION>
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ---- ------ ------ ------
<S> <C> <C> <C> <C>
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%
September 12, 1997 8.50% 5.08% 5.53% 6.59%
</TABLE>
(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 1997 Age Distribution
- ---------- ---------------------
1980 226,542,204 0-4 7.2
1990 248,709,873 5-9 7.4
1997 267,805,150 10-14 7.1
2002 281,208,757 15-19 7.1
20-24 6.5
Population Growth Rate 1 25-44 31.4
45-64 20.5
Households 65-84 11.3
- ---------- 85+ 1.4
1990 91,947,410 18+ 74.3
1997 99,019,931
2002 104,000,643 Median Age
----------
1990 32.9
Household Growth Rate 1 1997 34.8
Average Household Size 2.64
Male/Female Ratio 95.9
Families
- -------- Per Capita Income $18,100
1990 64,517,947
1997 68,999,546
1997 Household Income*
Family Growth Rate 0.9 ----------------------
Base 99,019,225
%LESS THAN $15K 17.7
Race 1990 1997 % $15K-25K 14.4
- ---- ---- ---- % $25K-50k 33.5
% White 80.3 78.4 % $50K-100k 26.5
% Black 12.1 12.4 % $100K-150K 5.4
% Asian %GREATER THAN $150K2.6
/Pacific Isl. 2.9 3.7
Median Household Income
% Hispanic* 9 10.8 -----------------------
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
Pets & 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 6/12/97
<PAGE>
STATE DEMOGRAPHIC REPORT
State 47
State Name TENNESSEE
Population 1997 Age Distribution
- ---------- ---------------------
1980 4,591,023 0-4 6.7
1990 4,877,185 5-9 6.9
1997 5,394,298 10-14 6.8
2002 5,750,901 15-19 7
20-24 6.4
Population Growth Rate 1.4 25-44 31.3
45-64 21.7
Households 65-84 11.7
- ---------- 85+ 1.4
1990 1,853,725 18+ 75.6
1997 2,062,154
2002 2,208,424 Median Age
----------
1990 33.6
Household Growth Rate 1.5 1997 35.6
Average Household Size 2.55
Male/Female Ratio 93.9
Families
- -------- Per Capita Income $16,636
1990 1,348,019
1997 1,509,207
1997 Household Income*
Family Growth Rate 1.6 ----------------------
Base 2,062,122
%LESS THAN $15K 20.4
Race 1990 1997 % $15K-25K 16.2
- ---- ---- ---- % $25K-50K 34.4
% White 83 82.3 % $50K-100K 22.9
% Black 16 16.3 % $100K-150K 4.2
% Asian %GREATER THAN $150K1.9
/Pacific Isl. 0.7 0.9
Median Household Income
% Hispanic* 0.7 1 -----------------------
1997 $32,965
2002 $35,916
1997 Average Disposable Income
- ------------------------------
Total $34,411
Householder
LESS THAN 35 $29,779
Householder 35-44 $41,005
Householder 45-54 $44,301
Householder 55-64 $37,675
Householder 65+ $21,098
Spending Potential Index*
-------------------------
Auto Loan 99
Home Loan 89
Investments 92
Retirement Plans 93
Home Repair 98
Lawn & Garden 97
Remodeling 104
Appliances 99
Electronics 97
Furniture 94
Restaurants 93
Sporting Goods 98
Theater/Concerts 95
Toys & Hobbies 99
Travel 91
Video Rental 99
Apparel 94
Auto Aftermarket 96
Health Insurance 100
Pets & Supplies 99
- --------------------------------------------------------------------------------
* 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 8/5/97
<PAGE>
COUNTY DEMOGRAPHIC REPORT
State/County 47029
County Name COCKE TN
Population 1997 Age Distribution
- ---------- ---------------------
1980 28,792 0-4 5.8
1990 29,141 5-9 5.9
1997 32,048 10-14 6.2
2002 34,053 15-19 6.8
20-24 6.1
Population Growth Rate 1.4 25-44 30.4
45-64 24.6
Households 65-84 12.9
- ---------- 85+ 1.4
1990 11,191 18+ 78.2
1997 12,431
2002 13,292 Median Age
----------
1990 35.2
Household Growth Rate 1.5 1997 37.8
Average Household Size 2.55
Male/Female Ratio 92.5
Families
- -------- Per Capita Income $11,826
1990 8,483
1997 9,411
1997 Household Income*
Family Growth Rate 1.4 ----------------------
Base 12,431
%LESS THAN $15K 31
Race 1990 1997 % $15K-25K 20.9
- ---- ---- ---- % $25K-50K 34.4
% White 97.5 97.3 % $50K-100K 11.6
% Black 2.1 2.3 % $100K-150K 1.4
% Asian %GREATER THAN $150K0.8
/Pacific Isl. 0.1 0.1
Median Household Income
% Hispanic* 0.5 0.8 -----------------------
1997 $23,706
2002 $25,924
1997 Average Disposable Income
- ------------------------------
Total $25,061
Householder
LESS THAN 35 $20,988
Householder 35-44 $29,150
Householder 45-54 $33,673
Householder 55-64 $27,481
Householder 65+ $16,081
Spending Potential Index*
-------------------------
Auto Loan 97
Home Loan 68
Investments 72
Retirement Plans 76
Home Repair 94
Lawn & Garden 91
Remodeling 109
Appliances 97
Electronics 92
Furniture 80
Restaurants 79
Sporting Goods 94
Theater/Concerts 82
Toys & Hobbies 94
Travel 78
Video Rental 96
Apparel 81
Auto Aftermarket 88
Health Insurance 102
Pets & Supplies 95
- --------------------------------------------------------------------------------
* 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 8/5/97
<PAGE>
EXHIBIT II-4
Sources of Personal Income/Employment Sectors
<PAGE>
August 06, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY (1)
For Counties and Metropolitan Areas
(thousands of dollars)
(47-000) TENNESSEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income by place of residence
Total personal income ($000) 73,177,495 77,785,887 81,680,980 88,787,428 94,008,593 100,656,013
Nonfarm personal income 72,771,041 77,373,824 81,198,230 88,165,751 93,454,547 99,999,192
Farm income (2) 406,454 412,063 482,750 621,677 554,046 656,821
Population (thousands) (3) 4,854.5 4,890.6 4,949.9 5,020.8 5,094.3 5,175.2
Per capita personal income (dollars) 15,074 15,905 16,501 17,684 18,454 19,450
Derivation of total personal income
Earnings by place of work 55,195,242 58,392,711 61,142,233 66,602,989 71,039,512 76,659,750
Less: Personal cont. for social insur. (4) 3,391,604 3,731,627 4,065,344 4,101,720 4,400,339 4,819,243
Plus: Adjustment for residence (5) -662,258 -694,794 -678,327 -618,598 -722,451 -777,927
Equals: Net earn. by place of residence 51,141,380 53,966,290 56,398,562 61,882,671 65,916,722 71,062,580
Plus: Dividends, interest, and rent (6) 10,862,994 11,412,247 11,311,631 11,270,409 11,402,700 12,150,982
Plus: Transfer payments 11,173,121 12,407,350 13,970,787 15,634,348 16,689,171 17,442,451
Earnings by place of work
Components of Earnings:
Wages and salaries 44,233,121 46,781,269 48,642,155 52,705,169 55,949,562 60,152,736
Other labor income 4,470,300 4,904,074 5,461,224 6,228,752 6,787,966 7,359,851
Proprietors' income (7) 6,491,821 6,707,368 7,038,854 7,669,068 8,301,984 9,147,163
Farm proprietors' income 289,423 276,891 351,529 494,831 419,551 528,846
Nonfarm proprietors' income 6,202,398 6,430,477 6,687,325 7,174,237 7,882,433 8,618,317
Earnings by Industry:
Farm earnings 406,454 412,063 482,750 621,677 554,046 656,821
Nonfarm earnings 54,788,788 57,980,648 60,659,483 65,981,312 70,485,466 76,002,929
Private earnings 46,602,398 49,120,859 51,446,475 56,455,635 60,354,483 65,107,242
Ag. serv., for., fish., and other (8) 190,318 226,388 260,297 272,902 297,148 340,278
Mining 214,570 215,149 197,674 196,366 200,308 210,243
Construction 3,329,888 3,27 402,674 434,654 446,394 443,832
State and local 5,761,611 6,173,867 6,478,088 6,795,645 7,316,258 7,951,637
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 06, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY (1)
For Counties and Metropolitan Areas
(thousands of dollars)
<TABLE>
<CAPTION>
(47-029) COCKE TENNESSEE
- -------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income by place of residence
Total personal income ($000) 300,637 328,532 353,162 390,024 414,805 435,511
Nonfarm personal income 296,459 322,817 347,491 383,202 407,901 429,934
Farm income (2) 4,178 5,715 5,671 6,822 6,904 5,577
Population (thousands) (3) 29.1 29.2 29.2 29.4 29.7 30.8
Per capita personal income (dollars) 10,323 11,258 12,082 13,257 13,966 14,139
Derivation of total personal income
Earnings by place of work 150,770 168,485 182,823 205,879 218,378 227,559
Less: Personal cont. for social insur. (4) 9,858 11,161 12,619 13,072 14,024 15,155
Plus: Adjustment for residence (5) 50,139 52,815 52,411 57,251 61,848 65,722
Equals: Net earn. by place of residence 191,051 210,139 222,615 250,058 266,202 278,126
Plus: Dividends, interest, and rent (6) 38,025 37,939 37,252 33,044 32,793 35,029
Plus: Transfer payments 71,561 80,454 93,295 106,922 115,810 122,356
Earnings by place of work
Components of Earnings:
Wages and salaries 111,693 125,354 135,976 153,839 161,979 167,665
Other labor income 12,275 14,138 16,462 19,011 20,501 22,186
Proprietors' income (7) 26,802 28,993 30,385 33,029 35,898 37,708
Farm proprietors' income 3,635 5,089 5,063 6,235 6,283 4,985
Nonfarm proprietors' income 23,167 23,904 25,322 26,794 29,615 32,723
Earnings by Industry:
Farm earnings 4,178 5,715 5,671 6,822 6,904 5,577
Nonfarm earnings 146,592 162,770 177,152 199,057 211,474 221,982
Private earnings 123,880 138,341 151,060 167,472 177,946 190,134
Ag. serv., for., fish., and other (8) 483 568 697 735 832 987
Mining 105 93 102 121 155 164
Construction 5,634 6,887 6,127 5,966 7,303 8,281
Manufacturing 55,098 64,032 72,507 78,445 80,882 86,258
Nondurable goods 36,501 44,630 53,142 57,495 59,323 62,736
Durable goods 18,597 19,402 19,365 20,950 21,559 23,522
Transportation and public utilities 5,890 5,860 6,291 7,394 7,518 7,999
Wholesale trade 2,244 2,300 2,462 4,730 6,071 6,739
Retail trade 22,451 22,930 24,524 26,419 28,406 31,065
Finance, insurance, and real estate 4,005 4,617 4,629 4,903 4,719 4,068
Services 27,970 31,054 33,721 38,759 42,060 44,573
Government and government enterprises 22,712 24,429 26,092 31,585 33,528 31,848
Federal, civilian 1,501 1,603 1,749 2,308 2,277 2,207
Military 1,001 1,132 1,126 1,125 1,108 1,130
State and local 20,210 21,694 23,217 28,152 30,143 28,511
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA05
(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 1995.
(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.
REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 06, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY (1)
For Counties and Metropolitan Areas
(number of jobs)
(47-000) TENNESSEE
<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 2,732,196 2,776,716 2,774,700 2,841,059 2,924,175 3,027,710
By Type:
Wage and salary employment 2,290,173 2,318,245 2,305,718 2,366,557 2,446,218 2,543,658
Proprietors' employment 442,023 458,471 468,982 474,502 477,957 484,052
Farm proprietors' employment 96,534 94,100 91,442 92,959 90,214 88,132
Nonfarm proprietors' employment (2) 345,489 364,371 377,540 381,543 381,743 395,920
By Industry:
Farm employment 112,169 110,538 104,942 107,614 103,764 98,893
Nonfarm employment 2,620,027 2,666,178 2,669,758 2,733,445 2,820,411 2,928,817
Private employment 2,243,077 2,280,249 2,281,716 2,343,957 2,426,820 2,526,927
Ag. serv., for., fish., and other (3) 17,709 19,186 20,354 19,867 21,825 23,908
Mining 9,340 9,155 8,491 7,469 7,343 7,196
Construction 150,863 145,755 140,398 147,129 153,181 161,582
Manufacturing 534,219 532,217 516,171 527,981 542,314 554,372
Transportation and public utilities 133,740 136,311 138,763 140,408 148,746 157,541
Wholesale trade 137,786 139,308 139,587 142,178 141,716 147,836
Retail trade 452,424 463,867 462,873 474,134 489,742 513,503
Finance, insurance, and real estate 167,514 164,483 161,877 157,316 161,702 166,548
Services 639,482 669,967 693,202 727,475 760,251 794,439
Government and government enterprises 376,950 385,929 388,042 389,488 393,591 401,890
Federal, civilian 61,847 64,190 62,849 57,813 56,085 55,704
Military 38,335 39,916 39,547 37,728 34,789 33,154
State and local 276,768 281,823 285,646 293,947 302,717 313,032
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 06, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY (1)
For Counties and Metropolitan Areas
(number of jobs)
(47-029) COCKE TENNESSEE
<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 10,630 11,177 11,308 11,676 12,119 12,370
By Type:
Wage and salary employment 7,636 8,127 8,227 8,521 8,958 9,191
Proprietors' employment 2,994 3,050 3,081 3,155 3,161 3,179
Farm proprietors' employment 1,333 1,298 1,261 1,282 1,244 1,215
Nonfarm proprietors' employment (2) 1,661 1,752 1,820 1,873 1,917 1,964
By Industry:
Farm employment 1,414 1,383 1,331 1,358 1,314 1,271
Nonfarm employment 9,216 9,794 9,977 10,318 10,805 11,099
Private employment 7,890 8,516 8,700 8,958 9,452 9,674
Ag. serv., for., fish., and other (3) 77 82 94 95 101 117
Mining (L) (L) (L) (L) (L) (L)
Construction 417 449 418 410 452 458
Manufacturing 2,517 2,942 3,055 3,022 3,228 3,331
Transportation and public utilities 262 265 301 324 355 363
Wholesale trade 158 137 151 281 385 384
Retail trade 2,033 2,145 2,164 2,182 2,270 2,356
Finance, insurance, and real estate 404 432 401 421 402 365
Services 2,017 2,060 2,110 2,216 2,251 2,292
Government and government enterprises 1,326 1,278 1,277 1,360 1,353 1,425
Federal, civilian 53 51 50 61 58 58
Military 164 175 173 165 151 145
State and local 1,109 1,052 1,054 1,134 1,144 1,221
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<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 + Peninsula 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.
REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 06, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
<TABLE>
<CAPTION>
(47-000) TENNESSEE
- ---------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 73,177,495 77,785,887 81,680,980 88,787,428 94,008,593 100,656,013
Nonfarm personal income 72,711,041 77,373,824 81,198,230 88,165,751 93,454,547 99,999,192
Farm income 406,454 412,063 482,750 621,677 554,046 656,821
Derivation of Total Personal Income
Net earnings (1) 51,141,380 53,966,290 56,398,562 61,882,611 65,916,722 71,062,580
Transfer payments 11,173,121 12,407,350 13,970,787 15,634,348 16,689,171 17,442,451
Income maintenance (2) 965,427 1,121,161 1,297,047 1,584,859 1,706,181 1,726,063
Unemployment insurance 221,146 290,031 388,773 494,911 407,222 296,154
Retirement and other 9,985,548 10,996,158 12,284,967 13,554,578 14,575,768 15,420,234
Dividends, interest, and rent 10,862,994 11,412,247 11,311,631 11,270,409 11,402,700 12,150,982
Population (thousands) (3) 4,854.5 4,890.6 4,949.9 5,020.8 5,094.3 5,175.2
Per Capita Incomes ($) (4)
Per capita personal income 15,074 15,905 16,501 17,684 18,454 19,450
Per capita net earnings 10,535 11,035 11,394 12,325 12,939 13,731
Per capita transfer payments 2,302 2,537 2,822 3,114 3,276 3,370
Per capita income maintenance 199 229 262 316 335 334
Per capita unemployment insurance 46 59 79 99 80 57
Per capita retirement & other 2,057 2,248 2,482 2,700 2,861 2,980
Per capita dividends, interest, & rent 2,238 2,334 2,285 2,245 2,238 2,348
Place of Work Profile
Total earnings (place of work, $000) 55,195,242 58,392,711 61,142,233 66,602,989 71,039,512 76,659,750
Wages and salaries 44,233,121 46,781,269 48,642,155 52,705,169 55,949,562 60,152,736
Other labor income 4,470,300 4,904,074 5,461,224 6,228,752 6,787,966 7,359,851
Proprietors' income 6,491,821 6,707,368 7,038,854 7,669,068 8,301,984 9,147,163
Nonfarm proprietors' income 6,202,398 6,430,477 6,687,325 7,174,237 7,882,433 8,618,317
Farm proprietors' income 289,423 276,891 351,529 494,831 419,551 528,846
Total employment (full & part-time) 2,732,196 2,776,716 2,774,700 2,841,059 2,924,175 3,027,710
Wage and salary jobs 2,290,173 2,318,245 2,305,718 2,366,557 2,446,218 2,543,658
Number of proprietors 442,023 458,471 468,982 474,502 477,957 484,052
Number of nonfarm proprietors (5) 345,489 364,371 377,540 381,543 387,743 395,920
Number of farm proprietors 96,534 94,100 91,442 92,959 90,214 88,132
Average earnings per job ($) 20,202 21,029 22,036 23,443 24,294 25,319
Wage & salary earnings per job ($) 19,314 20,180 21,096 22,271 22,872 23,648
Average earnings per nonfarm proprietor ($) 17,953 17,648 17,713 18,803 20,329 21,768
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA3O June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 06, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
<TABLE>
<CAPTION>
(47-029) COCKE TENNESSEE
- --------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 300,637 328,532 353,162 390,024 414,805 435,511
Nonfarm personal income 296,459 322,817 347,491 383,202 407,901 429,934
Farm income 4,178 5,715 5,671 6,822 6,904 5,577
Derivation of Total Personal Income
Net earnings (1) 191,051 210,139 222,615 250,058 266,202 278,126
Transfer payments 71,561 80,454 93,295 106,922 115,810 122,356
Income maintenance (2) 10,286 11,349 13,240 16,289 16,941 17,267
Unemployment insurance 2,911 3,477 4,589 5,769 4,724 3,969
Retirement and other 58,364 65,628 75,466 84,864 94,145 101,120
Dividends, interest, and rent 38,025 37,939 37,252 33,044 32,793 35,029
Population (thousands) (3) 29.1 29.2 29.2 29.4 29.7 30.8
Per Capita Incomes ($) (4)
Per capita personal income 10,323 11,258 12,082 13,257 13,966 14,139
Per capita net earnings 6,560 7,201 7,616 8,500 8,953 9,029
Per capita transfer payments 2,457 2,757 3,192 3,634 3,899 3,972
Per capita income maintenance 353 389 453 554 570 561
Per capita unemployment insurance 100 119 157 196 159 129
Per capita retirement & other 2,004 2,249 2,582 2,885 3,170 3,283
Per capita dividends, interest, & rent 1,306 1,300 1,274 1,123 1,104 1,137
Place of Work Profile
Total earnings (place of work, $000) 150,770 168,485 182,823 205,879 218,378 227,559
Wages and salaries 111,693 125,354 135,976 153,839 161,979 167,655
Other labor income 12,275 14,138 16,462 19,011 20,501 22,186
Proprietors' income 26,802 28,993 30,385 33,029 35,898 37,708
Nonfarm proprietors' income 23,167 23,904 25,322 26,794 29,615 32,723
Farm proprietors' income 3,635 5,089 5,063 6,235 6,283 4,985
Total employment (full & part-time) 10,630 11,177 11,308 11,676 12,119 12,370
Wage and salary jobs 7,636 8,127 8,227 8,521 8,958 9,191
Number of proprietors 2,994 3,050 3,081 3,155 3,161 3,179
Number of nonfarm proprietors (5) 1,661 1,752 1,820 1,873 1,917 1,964
Number of farm proprietors 1,333 1,298 1,261 1,282 1,244 1,215
Average earnings per job ($) 14,183 15,074 16,168 17,633 18,019 18,396
Wage & salary earnings per job ($) 14,627 15,424 16,528 18,054 18,082 18,242
Average earnings per nonfarm proprietor ($) 13,948 13,644 13,913 14,305 15,449 16,661
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA3O June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA3O
(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 Decenniel 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 $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA3O June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
California Companies
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 47,532 391 12-31 10/72 54.62 5,316
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,095 246 12-31 05/59 86.00 4,880
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,218 154 06-30 10/83 30.81 1,551
CSA Coast Savings Financial of CA NYSE California R.E. 9,103 92 12-31 12/85 48.62 905
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,886 82 12-31 01/71 23.00 615
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,193 25 12-31 12/83 33.69 356
WES Westcorp Inc. of Orange CA NYSE California Div. 3,678 26 12-31 05/86 21.19 555
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,534 33 12-31 / 11.37 220
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,096 45 12-31 05/86 26.50 344
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,631 23 03-31 03/96 19.37 363
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,295 18 12-31 10/91 36.12 207
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 2,238 13 12-31 / 27.62 268
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,191 36 12-31 / 40.37 243
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 912 14 12-31 04/94 16.37 117
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 863 6 12-31 / 17.25 52
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 850 9 12-31 / 18.00 141
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 801 8 06-30 12/93 21.94 103
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 615 9 06-30 06/96 19.87 98
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 504 8 12-31 / 30.25 70
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 413 7 12-31 02/95 16.87 55
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 17.87 42
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 371 3 12-31 / 15.75 46
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 122 3 12-31 01/96 11.00 9
PAMM PacificAmerica Money Ctr of CA (3) OTC Los Angeles CA Div. 112 M 1 12-31 06/96 22.75 43
Florida Companies
- -----------------
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,787 1 12-31 / 43.31 1,161
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,730 56 12-31 11/83 12.56 282
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
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 12.87 114
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,666 40 09-30 09/93 35.00 176
HARB Harbor FSB, MHC of FL (46.6) OTC Eastern FL Thrift 1,117 23 09-30 01/94 57.25 285
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 999 20 12-31 01/94 27.25 185
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 700 19 12-31 10/94 31.12 158
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 387 9 12-31 01/94 32.25 75
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 320 M 11 12-31 10/88 6.62 56
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 20,087 86 12-31 08/86 20.50 2,126
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,300 74 12-31 01/94 58.69 2,644
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 10,898 120 12-31 08/86 16.19 1,133
ASFC Astoria Financial Corp. of NY OTC NY Thrift 7,665 45 12-31 11/93 48.37 1,015
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,909 36 09-30 04/94 43.56 1,044
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,032 M 36 11-30 04/86 51.00 744
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 3,602 70 12-30 04/92 44.25 568
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,552 15 12-31 06/93 27.12 475
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,284 29 09-30 01/88 30.31 654
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,159 6 12-31 01/97 22.25 971
GRTR The Greater New York SB of NY (3) OTC New York NY Div. 2,571 M 14 12-31 06/87 22.75 312
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,289 39 06-30 06/96 17.62 301
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,091 53 06-30 11/94 25.25 590
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,071 18 03-31 08/94 21.25 225
HARS Harris SB, MHC of PA (24.3) OTC Southeast PA Thrift 2,044 31 12-31 01/94 44.25 497
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 1,977 28 06-30 03/94 31.87 280
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,782 20 12-31 09/93 41.75 183
JSB JSB Financial, Inc. of NY AMEX New York City NY Thrift 1,531 13 12-31 06/90 47.94 472
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,509 16 12-31 11/86 15.00 186
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,467 13 12-31 11/93 53.13 541
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,448 10 12-31 07/96 34.06 293
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,322 17 06-30 07/94 30.75 148
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,315 15 06-30 06/96 19.50 255
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,162 22 06-30 02/84 24.37 171
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 25 02-28 06/87 49.00 157
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,033 16 12-31 07/92 34.00 247
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 991 28 06-30 07/87 31.00 126
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 880 13 12-31 11/85 7.87 99
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 879 17 12-31 08/84 33.12 127
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 860 7 12-31 11/95 21.88 175
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 817 9 12-31 06/90 15.87 84
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 814 16 12-31 09/92 23.87 68
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 750 13 12-31 03/96 17.87 143
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 733 10 09-30 10/94 16.62 183
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 714 7 12-31 06/95 15.87 103
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 673 16 12-31 10/95 20.12 95
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 641 14 06-30 07/94 20.25 83
TSBS Trenton SB,FSB MHC of NJ(35.9) OTC Central NJ Thrift 631 14 12-31 08/95 30.00 271
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 577 M 4 03-31 01/95 12.56 38
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 555 18 12-31 12/88 27.25 65
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 522 10 12-31 04/87 20.37 55
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 520 4 09-30 09/86 21.37 66
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 505 M 10 07-31 10/95 20.00 72
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 485 9 12-31 12/95 15.12 66
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 482 M 8 07-31 12/93 36.00 83
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 419 9 12-31 07/83 13.75 52
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 414 7 03-31 10/94 12.00 28
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 411 4 12-31 04/93 31.75 66
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 379 6 12-31 03/87 22.25 54
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 371 8 12-31 11/89 23.75 68
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 20.25 48
HARL Harleysville SA of PA OTC Southeastern PA Thrift 337 4 09-30 08/87 27.00 45
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 324 6 06-30 03/87 21.37 44
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 321 5 09-30 01/95 28.75 35
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 308 4 09-30 09/93 40.00 24
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 300 6 12-31 01/96 16.87 46
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 295 5 06-30 11/93 27.50 48
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 288 4 09-30 04/96 19.25 58
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 17.87 54
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 284 4 09-30 04/96 16.75 79
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 282 5 09-30 08/94 22.75 39
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 282 M 1 06-30 05/94 31.25 108
IFSB Independence FSB of DC OTC Washington DC Ret. 263 M 2 12-31 06/85 13.87 18
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 261 0 12-31 06/96 24.50 52
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 258 M 4 07-31 / 6.94 29
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 256 6 09-30 04/96 18.62 37
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 244 7 12-31 03/95 24.25 79
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 229 P 9 12-31 07/97 16.87 47
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Thrift 228 6 12-31 03/85 25.50 18
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 217 4 04-30 11/94 24.25 43
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 216 9 03-31 08/94 20.00 34
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 212 6 06-30 02/87 24.50 35
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 183 3 06-30 12/95 16.50 53
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 177 6 12-31 04/97 16.25 34
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 173 3 12-31 06/95 21.50 27
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 159 4 09-30 10/96 17.25 25
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 150 P 3 03-31 04/97 16.25 37
PRBC Prestige Bancorp of PA OTC Thrift 136 0 12-31 06/96 17.00 16
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 120 S 1 03-31 10/95 17.37 26
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 114 P 2 09-30 07/97 14.37 32
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 111 2 03-31 06/96 27.16 18
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 104 M 2 06-30 01/97 15.87 17
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 5 09-30 04/96 15.75 23
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 69 2 09-30 07/93 23.25 6
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 50 3 12-31 07/96 16.25 9
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COFI Charter One Financial of OH OTC OH,MI Div. 14,565 155 12-31 01/88 56.19 2,595
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,097 107 06-30 12/84 45.00 970
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,931 129 12-31 12/80 33.25 1,204
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,611 52 12-31 05/87 23.87 811
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,673 42 06-30 01/94 107.75 992
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,236 M 20 12-31 01/90 31.75 489
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,098 33 03-31 01/92 47.50 410
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 3,046 45 12-31 03/94 42.75 590
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,575 14 12-31 08/94 25.62 415
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,926 33 03-31 07/92 27.75 251
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,646 13 09-30 06/93 37.25 198
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,609 37 12-31 02/85 20.37 167
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,530 M 44 12-31 11/89 24.37 223
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,521 28 12-31 08/83 23.50 248
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 1,519 M 15 12/31 / 20.37 278
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,404 14 09-30 07/92 34.00 182
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,297 M 32 12-31 04/93 36.00 180
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,020 15 09-30 03/92 47.75 154
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 861 26 12-31 08/94 25.00 123
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 845 17 12-31 06/90 26.00 132
NASB North American SB of MO OTC KS,MO M.B. 737 7 09-30 09/85 52.00 116
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 708 25 06-30 12/89 19.00 154
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 683 16 06-30 01/88 31.50 107
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 673 22 12-31 07/92 14.00 60
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 653 13 03-31 01/88 17.75 134
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 638 20 12-31 12/83 13.31 118
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 607 5 12-31 04/95 16.87 59
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 603 13 12-31 / 15.00 76
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 599 10 06-30 06/93 26.87 111
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 567 7 12-31 06/94 25.00 105
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 562 19 06-30 04/92 24.12 72
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 552 9 06-30 10/95 15.37 144
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 16.00 89
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 497 5 06-30 02/92 44.25 93
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 490 5 09-30 12/93 23.87 67
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 490 7 12-31 / 18.25 59
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 469 13 06-30 07/92 28.00 79
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 447 3 06-30 / 12.56 41
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 433 12 03-31 04/94 23.00 46
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 12 12-31 03/92 27.50 35
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 418 12 12-31 07/95 15.25 53
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 410 3 06-30 01/94 23.37 34
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 409 9 09-30 06/94 37.25 73
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 398 8 12-31 03/87 21.62 70
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 397 5 12-31 03/94 21.50 40
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 396 6 12-31 07/94 24.50 57
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 (47.0) OTC Northeast AR Thrift 379 6 09-30 04/94 28.00 46
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 378 6 12-31 06/92 21.06 56
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 378 11 09-30 10/94 17.75 54
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 377 8 06-30 07/87 22.75 95
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 375 12 09-30 09/93 18.75 51
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 356 M 9 06-30 12/92 20.50 52
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 353 5 12-31 09/96 18.12 124
INBI Industrial Bancorp of OH OTC Northern OH Thrift 347 10 12-31 08/95 14.87 78
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 346 10 12-31 03/85 27.50 52
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 342 9 12-31 01/93 30.37 43
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 9 09-30 03/95 24.75 62
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 332 9 12-31 06/90 17.00 29
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 329 8 12-31 07/94 40.25 60
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 4 09-30 08/88 15.75 31
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 312 1 12-31 06/92 26.97 67
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 288 6 09-30 07/87 25.00 57
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 287 6 06-30 11/90 27.75 32
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 272 6 12-31 05/96 18.25 47
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 271 M 6 03-31 09/93 26.75 109
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 270 1 06-30 04/87 36.50 25
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 257 M 5 09-30 10/94 24.00 48
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 254 6 03-31 06/93 24.00 54
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 250 M 4 06-30 08/87 9.25 23
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 248 4 09-30 03/94 23.50 40
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 243 7 06-30 12/93 16.37 31
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 235 2 06-30 06/93 24.75 32
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 230 4 12-31 02/93 24.75 30
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 5 09-30 03/94 25.75 44
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 227 7 12-31 01/88 19.75 24
FFFD North Central Bancshares of IA OTC Central IA Thrift 213 4 12-31 03/96 17.00 55
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 212 M 3 07-31 12/96 17.00 43
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 208 3 09-30 04/95 18.00 47
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 9 12-31 07/92 21.75 35
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 202 7 12-31 04/95 16.00 31
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 201 6 09-30 06/92 18.25 29
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 200 2 09-30 10/94 14.37 33
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 200 4 06-30 04/95 22.00 69
HCBB HCB Bancshares of AR OTC Southern AR Thrift 199 P 6 06-30 05/97 13.62 36
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 194 4 12-31 02/95 21.50 20
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 180 3 06-30 04/93 29.87 21
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 178 M 5 09-30 05/94 25.62 54
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 176 3 12-31 06/95 17.00 30
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 17.00 21
MARN Marion Capital Holdings of IN OTC Central IN Thrift 173 2 06-30 03/93 23.50 42
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 166 M 8 06-30 04/94 17.87 29
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 165 3 12-31 04/97 15.12 31
FBSI First Bancshares of MO OTC Southcentral MO Thrift 164 6 06-30 12/93 24.00 26
FFWD Wood Bancorp of OH OTC Northern OH Thrift 164 6 06-30 08/93 17.00 36
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 163 4 12-31 04/95 22.50 29
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 156 3 06-30 03/95 18.62 33
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 150 M 2 06-30 04/95 25.00 36
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 147 4 12-31 11/92 36.50 13
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 140 3 12-31 12/96 16.50 20
GTPS Great American Bancorp of IL OTC East Central IL Thrift 137 3 12-31 06/95 18.00 32
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 135 2 12-31 09/96 15.25 43
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 132 3 06-30 07/95 10.62 35
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 132 M 3 03-31 12/95 14.00 18
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 128 3 09-30 03/94 16.87 24
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 126 6 09-30 10/92 9.62 16
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 121 4 12-31 12/93 24.75 12
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 120 2 12-31 12/93 22.62 23
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 13.00 22
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 111 2 09-30 10/93 14.62 15
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 111 5 09-30 04/95 21.00 14
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 2 09-30 10/95 15.75 32
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 108 P 2 06-30 04/97 15.50 28
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 108 3 03-31 09/95 16.87 14
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 107 1 09-30 11/96 17.37 35
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 104 P 4 06-30 07/97 11.87 20
FTNB Fulton Bancorp of MO OTC Central MO Thrift 99 M 2 06-30 10/96 24.00 41
CNSB CNS Bancorp of MO OTC Central MO Thrift 98 5 12-31 06/96 17.00 28
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 97 2 09-30 06/95 12.25 18
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 16.00 13
CBES CBES Bancorp of MO OTC Western MO Thrift 95 M 2 06-30 09/96 18.00 18
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 1 12-31 08/94 18.50 39
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 94 4 12-31 04/96 14.50 14
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 92 3 06-30 02/95 15.50 14
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 92 1 06-30 01/94 14.25 14
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 91 M 3 06-30 12/94 15.75 15
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 91 M 4 06-30 08/95 16.19 13
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 89 2 06-30 08/95 12.75 17
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 86 2 09-30 09/96 17.00 25
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 22.00 17
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 85 M 1 06-30 04/96 15.63 23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 85 2 12-31 10/93 19.25 8
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 83 1 12-31 06/95 15.75 20
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 83 M 3 09-30 10/94 12.00 11
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 83 1 12-31 11/96 15.25 33
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 82 3 06-30 03/95 17.00 13
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 1 09-30 02/95 20.87 17
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 75 2 06-30 02/95 15.50 19
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 71 M 2 06-30 03/95 12.87 7
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 1 09-30 03/95 15.87 13
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 68 M 1 06-30 12/96 15.50 15
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 64 2 12-31 01/95 17.94 19
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 61 1 12-31 01/95 19.00 18
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 2 09-30 06/95 19.12 14
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 1 09-30 06/96 15.75 18
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 57 2 09-30 03/97 14.62 20
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 48 M 2 09-30 10/95 11.87 11
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 1 June 04/96 8.50 21
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 45 2 09-30 02/95 20.50 6
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 43 1 06-30 07/96 17.00 8
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 40 M 1 06-30 07/96 15.50 15
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30 04/96 15.00 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 35 1 03-31 12/95 14.50 10
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,870 97 12-31 07/88 31.25 1,908
WBST Webster Financial Corp. of CT OTC Central CT Thrift 5,944 77 12-31 12/86 57.75 692
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 5,591 132 12-31 12/86 39.75 1,088
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,013 19 09-30 02/87 36.37 228
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 1,859 43 12-31 02/87 21.25 279
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,435 24 12-31 02/95 33.00 184
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,251 12 12-31 05/86 32.56 168
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
New England Companies (continued)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,245 15 12-31 08/87 18.62 140
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,090 11 12-31 10/95 26.50 171
MDBK Medford Bank of Medford, MA (3) OTC Eastern MA Thrift 1,073 16 12-31 03/86 34.00 154
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,021 12 03-31 01/97 20.12 175
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 984 12 12-31 06/87 34.62 93
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 976 10 12-31 10/95 19.62 117
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 905 14 12-31 05/86 53.31 143
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 874 11 12-31 07/86 29.62 152
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 824 14 12-31 06/96 24.50 130
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 713 19 12-31 11/86 28.37 154
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 36.00 87
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 606 15 12-31 12/81 35.75 82
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 566 11 12-31 10/86 6.37 89
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 549 M 14 12-31 10/86 17.00 61
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 515 5 12-31 07/86 3.97 66
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 502 11 12-31 07/86 39.00 75
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 501 7 12-31 06/86 31.87 59
PETE Primary Bank of NH (3) OTC Southern NH Thrift 432 9 12-31 10/93 26.50 55
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 428 3 12-31 07/86 31.75 80
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 425 8 12-31 09/86 24.50 55
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 366 5 12-31 05/86 12.69 54
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 358 6 12-31 07/86 18.37 69
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 323 13 06-30 02/86 12.25 47
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 321 M 8 03-31 10/86 20.87 41
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 315 10 12-31 05/86 19.37 40
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 248 M 8 06-30 08/87 17.62 22
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 238 7 12-31 12/86 17.37 27
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 218 5 12-31 12/88 25.75 34
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 199 2 12-31 08/88 22.75 42
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 189 5 12-31 05/93 14.12 34
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 187 5 12-31 11/86 5.06 33
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 152 7 12-31 / 11.00 15
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 140 M 8 12-31 06/93 12.50 15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
New England Companies (continued)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 126 4 04-30 12/87 20.00 18
NTMG Nutmeg FS&LA of CT OTC CT M.B. 102 3 12-31 / 10.25 8
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 94 2 09-30 03/96 17.62 26
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 64.00 8,087
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,760 89 09-30 11/82 28.00 1,329
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,833 31 12-31 / 38.75 311
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,686 41 06-30 / 19.62 109
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,008 M 16 03-31 11/95 24.25 255
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 728 7 09-30 10/95 19.87 199
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 519 12 03-31 08/86 15.87 118
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 432 6 12-31 12/85 20.50 55
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 352 M 6 06-30 08/92 12.75 33
RVSB Rvrview SB,FSB MHC of WA(41.7) OTC Southwest WA M.B. 230 9 03-31 10/93 29.25 71
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 154 P 5 03-31 07/97 17.00 34
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 15.63 41
South-East Companies
- --------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,667 32 09-30 11/83 36.00 229
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,488 20 12-31 10/94 25.75 254
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,353 63 06-30 03/91 27.37 376
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,289 31 9-30 12/83 22.12 171
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 939 M 25 12-31 04/95 25.37 175
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 895 8 06-30 12/95 16.81 289
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 848 10 03-31 04/86 17.50 99
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 817 M 23 06-30 01/78 23.94 139
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 710 15 12-31 08/92 50.37 83
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
South-East Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 665 19 12-31 12/85 21.50 114
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 618 12 12-31 11/80 16.00 80
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 559 11 12-31 10/94 32.00 145
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 503 9 09-30 09/90 25.00 116
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 451 12 12-31 07/97 34.75 84
TSH Teche Holding Company of LA AMEX Southern LA Thrift 406 9 09-30 04/95 18.37 63
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 352 17 03-31 08/91 27.50 41
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 335 M 11 06-30 10/93 15.50 68
FSTC First Citizens Corp of GA OTC Western GA M.B. 326 M 9 03-31 03/86 33.00 60
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 11.75 36
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 262 M 4 12-31 07/96 21.75 59
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 256 5 09-30 10/96 52.50 79
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 242 2 09-30 10/96 18.87 85
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 228 8 12-31 / 43.50 34
FLAG Flag Financial Corp of GA OTC Western GA M.B. 222 4 12-31 12/86 15.50 32
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 209 1 09-30 03/96 17.25 80
ESX Essex Bancorp of VA AMEX VA,NC M.B. 190 12 12-31 / 4.44 5
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 18.62 80
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 171 5 09-30 07/95 24.25 43
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 9 09-30 02/87 7.75 24
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 135 3 09-30 08/94 25.25 29
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 131 3 06-30 07/93 22.00 34
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 123 3 12-31 04/97 16.00 55
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 123 2 06-30 12/95 10.56 29
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 112 4 06-30 11/96 17.50 32
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 13.75 12
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 106 3 12-31 12/93 18.50 16
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 106 2 12-31 04/96 21.44 41
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 M 4 06-30 10/95 16.12 20
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 101 4 12-31 07/95 16.50 14
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
South-East Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 100 M 1 06-30 12/96 79.50 32
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 97 2 09-30 02/95 16.75 14
SFNB Security First Netwrk Bk of GA OTC GA (Internet) Div. 79 1 12-31 / 12.00 103
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 70 M 1 09-30 12/96 16.25 18
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 2 09-30 04/96 18.62 36
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 M 1 06-30 07/94 23.00 16
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 33 1 12-31 07/96 17.25 16
South-West Companies
- --------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,964 40 12-31 / 32.50 162
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 33.75 28
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 226 6 09-30 04/96 16.94 42
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 177 7 03-31 11/91 17.75 20
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 113 2 09-30 01/95 19.53 20
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 105 3 12-31 08/86 6.50 8
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 87 M 1 06-30 06/95 18.75 16
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,510 26 12-31 01/96 18.87 313
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 956 35 06-30 01/94 23.25 129
GBCI Glacier Bancorp of MT OTC Western MT Div. 568 16 12-31 03/84 18.69 127
UBMT United Fin. Corp. of MT OTC Central MT Thrift 108 M 4 12-31 09/86 24.12 29
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 89 2 12-31 09/93 23.50 14
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 54 1 09-30 03/96 14.87 14
Other Areas
- -----------
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
September 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(3) FDIC savings bank.
</TABLE>
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 09/18/97
<PAGE>
EXHIBIT III-2
Peer Group Market Area Comparative Analysis
<PAGE>
Exhibit III-2
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
1997 Estimated
Per Capita Income
Population Proj. 1997 ------------------
------------- Pop. 1990-97 1997-2002 Median % State
Institution County 1990 1997 2002 % Change % Change Age Amount Average
- ----------- ------ ---- ---- ---- -------- -------- --- ------ -------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bedford Bancshares of Bedford,VA Bedford City 6 7 7 8.2% 4.1% 40.6 13,850 78.8%
CKF Bancorp of Danville, KY Boyle 26 27 28 6.0% 3.9% 37.4 17,491 104.3%
Community Fin. Corp. of Staunton, VA Staunton City 24 25 25 2.0% 1.4% 39.2 13,224 75.3%
FFBS Bancorp of Columbus, MS Lowndes 59 62 63 3.9% 2.6% 31.5 15,528 115.6%
FFD Financial Corp. of Dover, OH Tuscarawas 84 88 91 5.1% 3.4% 37.1 14,242 82.6%
First Bncshrs of Mountain Grove, MO Wright 17 20 22 18.4% 10.7% 36.9 10,145 57.4%
First Lancaster Bncshrs of Lancaster, KY Garrard 12 14 15 17.0% 10.0% 38.6 14,961 89.2%
Harrodsburg 1st Fin Bcrp of KY Mercer 19 21 22 8.0% 5.1% 38.2 17,737 105.8%
KS Bancorp of Kenly NC Johnston 81 102 116 24.9% 13.8% 36.3 17,233 98.4%
Logansport Fin. Corp. of Logansport, IN Cass 38 39 39 1.4% 1.0% 37.2 15,147 85.5%
London Financial Corp. of London, OH Madison 37 42 45 12.4% 7.6% 35.9 16,029 93.0%
Marion Capital Holdings of Marion, IN Grant 74 73 73 -1.2% -0.8% 36.9 16,040 90.6%
Northeast Indiana Bncrp of IN Huntington 35 37 39 5.3% 3.4% 34.8 17,522 98.9%
S. Carolina Comm. Bnshrs of SC Fairfield 22 22 22 -0.1% -0.1% 32.4 12,525 80.9%
Scotland Bancorp of Laurinburg, NC Scotland 34 36 37 5.7% 3.7% 32.9 14,062 80.3%
Southern MO Bncrp of Popular Bluff, MO Butler 39 40 41 4.0% 2.6% 38.0 12,411 70.3%
Stone Street Bancorp of Mocksville, NC Davie 28 31 33 10.4% 6.5% 38.7 18,754 107.1%
Texarkana Fst. Fin. Corp of AR Miller 38 39 39 1.2% 0.8% 33.9 12,612 93.4%
Twin City Bancorp of Bristol, TN Sullivan 144 151 156 5.0% 3.3% 38.9 16,588 99.7%
--- --- --- ---- ---- ---- ------ -----
Averages: 43 46 48 7.2% 4.4% 36.6 15,058 89.8%
Medians: 35 37 39 5.3% 3.4% 37.1 15,147 90.6%
Newport FS&LA of TN Cocke 29 32 34 10.0% 6.3% 37.8 $11,826 71.1%
<CAPTION>
Deposit
Market July 1997
Institution Share(1) Unemployment Rates
- ----------- -------- ------------------
State County
----- ------
<S> <C> <C> <C>
Bedford Bancshares of Bedford,VA 22.9% 4.3% 3.8%
CKF Bancorp of Danville, KY 12.3% 5.2% 3.4%
Community Fin. Corp. of Staunton, VA 18.1% 4.3% 2.8%
FFBS Bancorp of Columbus, MS 17.7% 5.4% 6.7%
FFD Financial Corp. of Dover, OH 5.3% 4.1% 3.9%
First Bncshrs of Mountain Grove, MO 30.0% 3.9% 7.5%
First Lancaster Bncshrs of Lancaster, KY 20.3% 5.2% 3.2%
Harrodsburg 1st Fin Bcrp of KY 29.5% 5.2% 3.8%
KS Bancorp of Kenly NC 9.0% 4.0% 2.3%
Logansport Fin. Corp. of Logansport, IN 11.5% 3.3% 3.6%
London Financial Corp. of London, OH 9.9% 4.1% 2.3%
Marion Capital Holdings of Marion, IN 18.1% 3.3% 4.6%
Northeast Indiana Bncrp of IN 18.2% 3.3% 3.6%
S. Carolina Comm. Bnshrs of SC 27.1% 5.1% 11.4%
Scotland Bancorp of Laurinburg, NC 17.5% 4.0% 6.9%
Southern MO Bncrp of Popular Bluff, MO 14.1% 3.9% 4.5%
Stone Street Bancorp of Mocksville, NC 25.7% 4.0% 2.3%
Texarkana Fst. Fin. Corp of AR 16.8% 5.8% 5.8%
Twin City Bancorp of Bristol, TN 5.2% 5.9% 4.7%
---- ---- ----
17.3% 4.4% 4.6%
17.7% 4.1% 3.8%
Newport FS&LA of TN 19.1% 5.9% 5.4%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total
county deposits at 6/30/97, excluding credit unions.
Sources: CACI, Inc, SNL Securities
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of September 12, 1997
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
---------------------------------------------
SAIF-Insured Thrifts(304) 22.62 5,545 165.7 23.47 15.21 22.25 1.52 208.08 31.77
NYSE Traded Companies(9) 41.47 36,632 1,755.9 42.64 24.40 41.81 -1.06 298.48 37.75
AMEX Traded Companies(17) 18.99 3,580 80.4 20.59 13.56 18.80 0.82 266.94 24.14
NASDAQ Listed OTC Companies(278) 22.19 4,589 115.8 22.99 15.00 21.79 1.66 196.02 32.01
California Companies(21) 27.88 18,905 797.6 28.76 16.71 27.90 0.21 141.74 37.81
Florida Companies(6) 27.20 13,098 361.6 28.40 16.22 26.97 1.34 169.47 36.55
Mid-Atlantic Companies(59) 23.64 6,380 160.9 24.39 15.08 23.20 1.45 186.85 40.12
Mid-West Companies(147) 21.14 3,474 93.8 21.92 14.60 20.71 1.96 231.07 28.48
New England Companies(9) 27.73 5,009 169.9 28.30 17.22 27.54 -0.04 383.42 42.08
North-West Companies(7) 23.15 12,610 337.1 24.17 17.08 23.37 -1.01 165.08 25.37
South-East Companies(42) 22.43 3,474 76.9 23.86 16.33 22.13 1.49 183.94 27.90
South-West Companies(7) 20.82 1,785 42.2 21.31 13.41 20.36 1.82 -3.70 26.85
Western Companies (Excl CA)(6) 20.55 5,288 104.5 21.19 15.39 20.28 1.34 296.16 22.10
Thrift Strategy(240) 21.47 3,619 86.1 22.31 14.77 21.13 1.52 184.28 30.11
Mortgage Banker Strategy(37) 28.21 13,794 539.2 28.99 17.50 27.50 2.42 273.89 41.52
Real Estate Strategy(11) 24.29 7,817 213.7 25.39 14.90 24.55 -1.02 211.66 39.60
Diversified Strategy(12) 33.60 25,590 917.6 34.78 20.47 33.59 -0.11 197.51 34.00
Retail Banking Strategy(4) 16.72 3,472 64.5 18.31 11.88 16.22 3.46 363.15 22.61
Companies Issuing Dividends(257) 22.78 5,402 165.4 23.66 15.40 22.38 1.64 219.48 30.80
Companies Without Dividends(47) 21.66 6,391 167.0 22.35 14.12 21.51 0.83 131.74 38.30
Equity/Assets LESS THAN 6%(23) 26.48 17,616 569.6 27.41 15.88 26.17 1.11 169.89 39.45
Equity/Assets 6-12%(146) 25.11 5,917 196.2 25.90 16.13 24.63 1.84 222.39 36.45
Equity/Assets GREATER THAN 12%(135) 19.45 3,142 67.0 20.37 14.17 19.20 1.28 172.85 25.22
Converted Last 3 Mths (no MHC)(5) 22.75 2,546 65.6 23.95 21.52 22.77 -0.53 0.00 -8.69
Actively Traded Companies(41) 31.74 17,223 676.0 32.52 19.66 31.25 1.96 233.64 42.37
Market Value Below $20 Million(59) 16.75 892 14.0 17.49 12.35 16.66 0.66 227.31 24.20
Holding Company Structure(269) 22.64 5,342 165.3 23.49 15.33 22.27 1.60 191.52 30.66
Assets Over $1 Billion(62) 32.92 17,408 628.7 33.87 20.44 32.30 1.77 243.47 36.81
Assets $500 Million-$1 Billion(49) 21.86 5,578 108.9 22.77 13.99 21.44 2.06 235.79 39.54
Assets $250-$500 Million(68) 22.76 2,547 54.6 23.52 15.32 22.28 2.07 184.53 34.97
Assets less than $250 Million(125) 17.93 1,446 24.9 18.78 13.14 17.77 0.92 128.41 24.32
Goodwill Companies(124) 26.37 9,162 284.3 27.21 16.89 25.86 1.73 235.83 35.21
Non-Goodwill Companies(178) 20.08 3,074 84.8 20.96 14.09 19.81 1.42 166.44 29.29
Acquirors of FSLIC Cases(10) 35.94 33,589 1,575.3 36.72 21.70 36.02 -0.12 288.24 40.79
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
--------------------------------------------
SAIF-Insured Thrifts(304) 0.85 1.17 15.92 15.45 156.64
NYSE Traded Companies(9) 1.96 2.77 20.08 19.19 358.54
AMEX Traded Companies(17) 0.55 0.84 15.57 15.39 109.25
NASDAQ Listed OTC Companies(278) 0.84 1.14 15.80 15.32 152.57
California Companies(21) 0.96 1.43 17.01 16.41 262.00
Florida Companies(6) 0.98 0.88 13.56 12.84 185.50
Mid-Atlantic Companies(59) 0.98 1.39 16.30 15.66 172.56
Mid-West Companies(147) 0.82 1.09 15.77 15.43 136.67
New England Companies(9) 0.81 1.40 17.48 16.28 242.59
North-West Companies(7) 0.91 1.21 14.25 13.72 140.82
South-East Companies(42) 0.74 1.00 15.43 15.10 123.57
South-West Companies(7) 0.66 1.19 16.36 15.47 218.19
Western Companies (Excl CA)(6) 0.89 1.05 15.96 15.27 106.34
Thrift Strategy(240) 0.80 1.11 16.06 15.66 141.09
Mortgage Banker Strategy(37) 1.16 1.51 16.17 15.15 236.48
Real Estate Strategy(11) 0.90 1.39 14.30 14.00 220.08
Diversified Strategy(12) 1.60 1.86 14.01 13.46 198.90
Retail Banking Strategy(4) 0.18 -0.01 13.11 12.67 168.59
Companies Issuing Dividends(257) 0.92 1.23 16.03 15.51 153.37
Companies Without Dividends(47) 0.48 0.81 15.28 15.05 176.09
Equity/Assets LESS THAN 6%(23) 0.97 1.57 13.79 12.92 286.58
Equity/Assets 6-12%(146) 1.03 1.39 16.35 15.63 197.33
Equity/Assets GREATER THAN 12%(135) 0.66 0.88 15.84 15.68 93.82
Converted Last 3 Mths (no MHC)(5) 0.67 0.70 19.07 19.00 96.56
Actively Traded Companies(41) 1.46 2.01 17.59 16.95 236.50
Market Value Below $20 Million(59) 0.51 0.81 15.19 15.11 115.95
Holding Company Structure(269) 0.83 1.15 16.18 15.73 154.08
Assets Over $1 Billion(62) 1.33 1.84 17.92 16.65 253.12
Assets $500 Million-$1 Billion(49) 0.90 1.12 14.23 13.75 156.24
Assets $250-$500 Million(68) 0.85 1.19 16.63 16.12 167.04
Assets less than $250 Million(125) 0.61 0.86 15.25 15.18 105.59
Goodwill Companies(124) 1.09 1.43 16.57 15.41 204.49
Non-Goodwill Companies(178) 0.70 1.00 15.49 15.49 124.55
Acquirors of FSLIC Cases(10) 1.66 2.43 18.85 17.79 305.74
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
--------------------------------------------
BIF-Insured Thrifts(66) 25.14 7,838 213.1 25.93 15.68 24.85 1.42 217.77 39.74
NYSE Traded Companies(3) 35.60 52,819 1,679.2 38.23 21.66 35.75 3.44 308.78 42.48
AMEX Traded Companies(6) 22.94 4,007 90.3 23.74 14.63 23.04 0.04 111.88 43.33
NASDAQ Listed OTC Companies(57) 24.77 5,554 138.3 25.45 15.44 24.41 1.46 226.71 39.12
California Companies(4) 21.03 5,592 124.6 21.94 11.59 19.89 5.22 513.78 44.69
Mid-Atlantic Companies(17) 26.60 17,448 505.8 28.02 16.41 27.06 -1.07 136.67 34.71
Mid-West Companies(2) 11.87 942 11.2 12.50 9.12 11.87 0.00 0.00 17.29
New England Companies(34) 24.92 4,618 120.3 25.45 15.18 24.30 2.49 235.38 44.40
North-West Companies(4) 20.21 6,879 142.7 21.21 13.31 20.21 0.41 101.74 32.01
South-East Companies(5) 30.97 2,083 45.0 31.27 22.47 30.92 0.30 0.00 31.06
Thrift Strategy(44) 25.61 4,837 154.3 26.41 16.25 25.48 0.88 209.00 39.05
Mortgage Banker Strategy(9) 25.22 25,700 560.9 25.93 15.22 24.26 3.87 240.82 43.39
Real Estate Strategy(6) 19.16 4,200 78.0 19.75 11.55 19.12 0.76 333.31 33.14
Diversified Strategy(7) 25.82 10,955 328.3 26.85 14.80 24.95 3.05 158.95 46.46
Companies Issuing Dividends(54) 26.51 8,326 234.0 27.34 16.72 26.29 1.04 209.89 38.93
Companies Without Dividends(12) 17.69 5,184 99.4 18.28 10.01 17.01 3.49 296.52 44.09
Equity/Assets LESS THAN 6%(5) 16.66 30,528 601.8 16.87 8.97 16.48 1.25 132.29 70.40
Equity/Assets 6-12%(45) 26.97 6,117 204.4 27.80 16.40 26.56 1.95 232.78 40.00
Equity/Assets GREATER THAN 12%(16) 22.63 6,264 131.9 23.48 15.60 22.63 0.08 38.97 30.28
Actively Traded Companies(20) 27.47 11,723 292.4 27.75 16.59 26.37 4.24 270.43 41.77
Market Value Below $20 Million(7) 16.98 901 14.6 17.21 11.17 16.46 2.73 188.73 25.97
Holding Company Structure(43) 25.27 6,631 172.0 25.95 16.00 25.03 1.10 217.60 37.54
Assets Over $1 Billion(17) 30.55 22,573 677.1 31.60 18.31 30.08 2.59 220.20 42.47
Assets $500 Million-$1 Billion(16) 27.64 4,964 110.6 28.39 17.06 27.26 1.11 200.95 40.66
Assets $250-$500 Million(14) 20.00 3,098 58.1 20.99 12.71 20.24 -0.80 249.78 33.77
Assets less than $250 Million(19) 22.23 1,492 29.0 22.68 14.50 21.76 2.49 202.68 41.53
Goodwill Companies(31) 26.30 12,018 344.7 27.21 16.36 26.00 1.67 212.06 40.61
Non-Goodwill Companies(35) 24.13 4,198 98.4 24.81 15.08 23.85 1.20 227.76 39.02
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
--------------------------------------------
BIF-Insured Thrifts(66) 1.63 1.62 15.80 14.99 155.94
NYSE Traded Companies(3) 1.93 1.92 19.07 14.47 239.94
AMEX Traded Companies(6) 1.14 1.11 16.02 13.92 167.23
NASDAQ Listed OTC Companies(57) 1.67 1.66 15.57 15.16 149.42
California Companies(4) 1.94 1.87 12.67 12.66 131.21
Mid-Atlantic Companies(17) 1.27 1.35 16.32 14.46 170.61
Mid-West Companies(2) 0.21 0.32 12.77 12.04 50.95
New England Companies(34) 1.92 1.86 14.64 14.08 169.78
North-West Companies(4) 1.17 1.14 11.98 11.61 108.54
South-East Companies(5) 1.28 1.33 26.59 26.59 98.18
Thrift Strategy(44) 1.57 1.55 16.80 15.86 152.52
Mortgage Banker Strategy(9) 1.51 1.57 14.44 14.00 187.42
Real Estate Strategy(6) 1.52 1.45 11.02 11.01 129.69
Diversified Strategy(7) 2.42 2.39 13.09 12.28 161.61
Companies Issuing Dividends(54) 1.56 1.55 16.59 15.65 163.14
Companies Without Dividends(12) 2.01 1.97 11.50 11.41 116.75
Equity/Assets LESS THAN 6%(5) 1.13 1.04 7.41 7.19 136.87
Equity/Assets 6-12%(45) 1.92 1.89 15.68 14.56 185.36
Equity/Assets GREATER THAN 12%(16) 1.00 1.07 18.34 18.21 84.55
Actively Traded Companies(20) 1.93 1.86 15.82 15.06 184.62
Market Value Below $20 Million(7) 1.39 1.44 14.59 14.29 124.77
Holding Company Structure(43) 1.60 1.59 16.19 15.52 142.25
Assets Over $1 Billion(17) 1.85 1.85 15.65 14.14 186.03
Assets $500 Million-$1 Billion(16) 1.91 1.84 16.93 15.63 189.48
Assets $250-$500 Million(14) 1.21 1.21 13.12 12.96 128.07
Assets less than $250 Million(19) 1.52 1.54 17.04 16.80 120.83
Goodwill Companies(31) 1.60 1.58 15.68 13.95 187.78
Non-Goodwill Companies(35) 1.65 1.65 15.91 15.91 128.22
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
---------------------------------
SAIF-Insured Thrifts(21) 25.84 4,892 51.2 26.96 13.73 25.93 -0.44 279.90 71.05
BIF-Insured Thrifts(2) 27.75 32,163 390.0 28.00 12.29 26.85 3.02 297.08 98.09
NASDAQ Listed OTC Companies(23) 26.05 7,922 88.8 27.08 13.57 26.03 -0.06 285.62 74.66
Florida Companies(3) 29.19 5,931 82.4 30.50 15.63 30.31 -3.60 0.00 52.66
Mid-Atlantic Companies(10) 25.85 6,389 60.0 26.54 12.56 25.69 0.11 240.00 103.44
Mid-West Companies(7) 24.44 2,029 21.7 26.04 14.11 24.58 -0.31 319.79 55.27
New England Companies(1) 31.25 61,053 764.2 31.25 15.33 29.19 7.06 297.08 62.34
Thrift Strategy(21) 25.74 4,796 49.1 26.83 13.47 25.84 -0.48 279.90 75.54
Diversified Strategy(1) 31.25 61,053 764.2 31.25 15.33 29.19 7.06 297.08 62.34
Companies Issuing Dividends(22) 26.59 8,225 92.8 27.68 13.57 26.60 -0.24 285.62 74.66
Companies Without Dividends(1) 16.87 2,760 21.0 16.87 13.62 16.37 3.05 0.00 0.00
Equity/Assets 6-12%(16) 27.72 9,991 114.5 28.88 13.87 27.78 -0.52 285.62 76.11
Equity/Assets >12%(7) 21.70 2,542 22.1 22.37 12.80 21.47 1.15 0.00 68.85
Actively Traded Companies(1) 34.00 7,264 115.7 34.00 14.77 31.00 9.68 240.00 83.78
Holding Company Structure(1) 34.00 7,264 115.7 34.00 14.77 31.00 9.68 240.00 83.78
Assets Over $1 Billion(5) 33.69 25,729 295.4 34.13 14.09 32.58 3.58 268.54 94.36
Assets $500 Million-$1 Billion(3) 29.19 5,931 82.4 30.50 15.63 30.31 -3.60 0.00 52.66
Assets $250-$500 Million(5) 27.81 2,541 30.8 30.00 15.23 27.75 0.13 319.79 61.47
Assets less than $250 Million(10) 20.56 2,207 16.2 21.23 11.97 20.83 -1.09 0.00 78.25
Goodwill Companies(9) 31.67 18,753 217.7 33.29 15.35 31.03 2.02 285.62 79.09
Non-Goodwill Companies(14) 23.24 2,507 24.4 23.97 12.68 23.53 -1.10 0.00 71.70
MHC Institutions(23) 26.05 7,922 88.8 27.08 13.57 26.03 -0.06 285.62 74.66
MHC Converted Last 3 Months(1) 16.87 2,760 21.0 16.87 13.62 16.37 3.05 0.00 0.00
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
---------------------------------
SAIF-Insured Thrifts(21) 0.55 0.87 12.37 12.12 119.03
BIF-Insured Thrifts(2) 0.81 0.73 9.79 9.78 101.80
NASDAQ Listed OTC Companies(23) 0.58 0.86 12.08 11.86 117.12
Florida Companies(3) 0.62 0.94 13.91 13.87 142.53
Mid-Atlantic Companies(10) 0.44 0.71 11.63 11.22 102.82
Mid-West Companies(7) 0.64 1.02 12.33 12.31 128.13
New England Companies(1) 1.39 1.03 10.93 10.92 128.90
Thrift Strategy(21) 0.53 0.85 12.15 11.91 116.42
Diversified Strategy(1) 1.39 1.03 10.93 10.92 128.90
Companies Issuing Dividends(22) 0.59 0.87 11.94 11.71 119.13
Companies Without Dividends(1) 0.32 0.67 14.36 14.36 82.97
Equity/Assets 6-12%(16) 0.63 0.93 12.16 11.85 134.48
Equity/Assets >12%(7) 0.45 0.68 11.87 11.87 71.96
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) 0.89 1.02 11.85 10.91 135.68
Assets $500 Million-$1 Billion(3) 0.62 0.94 13.91 13.87 142.53
Assets $250-$500 Million(5) 0.76 1.19 13.04 13.01 148.11
Assets less than $250 Million(10) 0.32 0.59 11.26 11.26 85.99
Goodwill Companies(9) 0.79 1.01 12.25 11.59 142.66
Non-Goodwill Companies(14) 0.47 0.78 11.99 11.99 104.34
MHC Institutions(23) 0.58 0.86 12.08 11.86 117.12
MHC Converted Last 3 Months(1) 0.32 0.67 14.36 14.36 82.97
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
---------------------
AHM Ahmanson and Co. H.F. of CA 54.62 97,336 5,316.5 55.12 26.00 54.56 0.11 191.31 68.06
CSA Coast Savings Financial of CA 48.62 18,616 905.1 49.87 31.12 49.50 -1.78 320.59 32.77
CFB Commercial Federal Corp. of NE 45.00 21,553 969.9 46.00 26.42 45.12 -0.27 ***.** 40.63
DME Dime Bancorp, Inc. of NY* 20.50 103,719 2,126.2 20.50 12.87 20.19 1.54 103.78 38.98
DSL Downey Financial Corp. of CA 23.00 26,733 614.9 23.75 15.40 22.75 1.10 111.79 23.06
FRC First Republic Bancorp of CA* 27.62 9,693 267.7 27.62 14.87 23.81 16.00 513.78 64.90
FED FirstFed Fin. Corp. of CA 33.69 10,575 356.3 34.87 19.25 34.38 -2.01 108.61 53.14
GSB Glendale Fed. Bk, FSB of CA 30.81 50,349 1,551.3 30.94 17.50 30.94 -0.42 89.60 32.52
GDW Golden West Fin. Corp. of CA 86.00 56,739 4,879.6 87.37 55.50 85.75 0.29 228.37 36.25
GPT GreenPoint Fin. Corp. of NY* 58.69 45,044 2,643.6 66.56 37.25 63.25 -7.21 N.A. 23.56
NYB New York Bancorp, Inc. of NY 30.31 21,591 654.4 32.00 15.12 31.37 -3.38 327.50 56.48
WES Westcorp Inc. of Orange CA 21.19 26,195 555.1 23.87 13.25 21.88 -3.15 189.09 -3.15
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* 21.75 2,731 59.4 22.25 13.12 21.88 -0.59 N.A. 46.27
BKC American Bank of Waterbury CT* 35.75 2,306 82.4 39.00 25.87 37.25 -4.03 90.67 27.68
BFD BostonFed Bancorp of MA 19.62 5,947 116.7 19.94 12.87 18.87 3.97 N.A. 33.02
CFX CFX Corp of NH* 21.25 13,144 279.3 21.25 13.81 20.69 2.71 78.57 37.10
CNY Carver Bancorp, Inc. of NY 12.00 2,314 27.8 13.37 7.37 12.00 0.00 92.00 45.45
CBK Citizens First Fin.Corp. of IL 18.25 2,594 47.3 18.25 11.12 17.37 5.07 N.A. 27.00
ESX Essex Bancorp of VA(8) 4.44 1,057 4.7 4.44 1.00 1.94 128.87 -73.49 102.74
FCB Falmouth Co-Op Bank of MA* 17.62 1,455 25.6 17.75 11.25 17.25 2.14 N.A. 34.30
FAB FirstFed America Bancorp of MA 20.12 8,707 175.2 20.50 13.62 20.00 0.60 N.A. N.A.
GAF GA Financial Corp. of PA 17.87 7,985 142.7 19.50 12.37 18.50 -3.41 N.A. 18.19
JSB JSB Financial, Inc. of NY 47.94 9,845 472.0 49.37 35.00 47.19 1.59 316.87 26.16
KNK Kankakee Bancorp of IL 30.37 1,425 43.3 30.75 20.37 30.00 1.23 203.70 22.71
KYF Kentucky First Bancorp of KY 12.75 1,319 16.8 15.12 10.56 12.87 -0.93 N.A. 17.30
MBB MSB Bancorp of Middletown NY* 23.87 2,844 67.9 24.19 15.50 23.69 0.76 138.70 21.66
PDB Piedmont Bancorp of NC 10.56 2,751 29.1 19.12 9.25 10.69 -1.22 N.A. 0.57
SSB Scotland Bancorp of NC 18.62 1,914 35.6 19.25 12.62 18.25 2.03 N.A. 31.87
SZB SouthFirst Bancshares of AL 16.75 848 14.2 17.25 12.25 16.00 4.69 N.A. 26.42
SRN Southern Banc Company of AL 16.12 1,230 19.8 16.37 12.25 16.00 0.75 N.A. 22.87
SSM Stone Street Bancorp of NC 21.44 1,898 40.7 27.25 17.50 21.31 0.61 N.A. 4.59
TSH Teche Holding Company of LA 18.37 3,438 63.2 19.37 12.87 18.50 -0.70 N.A. 27.84
FTF Texarkana Fst. Fin. Corp of AR 24.25 1,790 43.4 24.87 13.62 24.75 -2.02 N.A. 55.15
THR Three Rivers Fin. Corp. of MI 16.19 824 13.3 16.62 12.62 16.25 -0.37 N.A. 15.64
TBK Tolland Bank of CT* 17.37 1,560 27.1 18.00 8.25 17.50 -0.74 139.59 93.00
WSB Washington SB, FSB of MD 6.94 4,247 29.5 7.37 4.38 7.00 -0.86 455.20 42.51
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN 36.50 698 25.5 36.50 27.14 35.00 4.29 N.A. 28.07
AFED AFSALA Bancorp, Inc. of NY 17.25 1,455 25.1 17.25 11.31 16.50 4.55 N.A. 43.75
ALBK ALBANK Fin. Corp. of Albany NY 44.25 12,825 567.5 44.75 27.37 39.87 10.99 90.32 41.06
AMFC AMB Financial Corp. of IN 14.50 964 14.0 15.00 10.50 14.50 0.00 N.A. 9.43
ASBP ASB Financial Corp. of OH 13.00 1,721 22.4 18.25 11.50 13.12 -0.91 N.A. 0.00
ABBK Abington Savings Bank of MA* 31.87 1,852 59.0 33.00 16.75 31.75 0.38 381.42 63.44
AABC Access Anytime Bancorp of NM 6.50 1,193 7.8 6.88 5.25 6.50 0.00 -3.70 18.18
AFBC Advance Fin. Bancorp of WV 15.87 1,084 17.2 16.25 12.75 15.75 0.76 N.A. N.A.
AADV Advantage Bancorp of WI 47.75 3,234 154.4 49.00 31.25 43.50 9.77 419.02 48.06
AFCB Affiliated Comm BC, Inc of MA 26.50 6,465 171.3 27.12 16.00 26.87 -1.38 N.A. 54.97
ALBC Albion Banc Corp. of Albion NY 23.25 250 5.8 24.25 16.50 23.25 0.00 78.85 38.81
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <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 17.81 15.83 322.12
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
NYB New York Bancorp, Inc. of NY 1.98 2.32 7.73 7.73 152.08
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 0.74 0.96 14.42 13.94 164.10
CFX CFX Corp of NH* 1.10 1.31 10.52 9.84 141.44
CNY Carver Bancorp, Inc. of NY -0.74 0.01 14.93 14.32 178.81
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 2.78 2.65 35.54 35.54 155.52
KNK Kankakee Bancorp of IL 1.62 2.02 26.59 24.99 239.77
KYF Kentucky First Bancorp of KY 0.58 0.75 11.17 11.17 67.44
MBB MSB Bancorp of Middletown NY* 0.49 0.51 21.15 10.38 286.18
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 -0.03 0.25 16.06 16.06 114.72
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 0.78 1.08 15.53 15.53 118.17
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 0.82 0.82 14.74 14.74 109.40
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 0.56 10.15 10.15 65.23
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 0.27 0.96 23.96 23.96 274.51
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
ABCL Allied Bancorp of IL 34.00 5,345 181.7 34.00 23.25 33.62 1.13 240.00 36.00
ATSB AmTrust Capital Corp. of IN 12.87 526 6.8 13.00 8.75 12.75 0.94 N.A. 28.70
AHCI Ambanc Holding Co., Inc. of NY* 15.12 4,392 66.4 16.62 9.75 15.63 -3.26 N.A. 34.40
ASBI Ameriana Bancorp of IN 21.62 3,230 69.8 22.00 13.50 22.00 -1.73 134.24 35.13
AFFFZ America First Fin. Fund of CA(8) 40.37 6,011 242.7 40.37 28.00 40.12 0.62 115.31 33.45
ANBK American Nat'l Bancorp of MD(8) 20.00 3,613 72.3 20.00 11.37 19.62 1.94 N.A. 65.02
ABCW Anchor Bancorp Wisconsin of WI 27.75 9,049 251.1 27.75 16.50 27.37 1.39 88.90 55.29
ANDB Andover Bancorp, Inc. of MA* 32.56 5,148 167.6 32.56 20.52 30.75 5.89 202.88 27.09
ASFC Astoria Financial Corp. of NY 48.37 20,978 1,014.7 49.37 27.37 48.50 -0.27 84.27 31.19
AVND Avondale Fin. Corp. of IL 16.87 3,495 59.0 18.50 12.75 14.62 15.39 N.A. -1.46
BKCT Bancorp Connecticut of CT* 31.75 2,534 80.5 32.75 21.25 32.00 -0.78 262.86 41.11
BPLS Bank Plus Corp. of CA 11.37 19,308 219.5 13.75 9.62 11.62 -2.15 N.A. -1.13
BWFC Bank West Fin. Corp. of MI 18.62 1,753 32.6 18.62 10.25 18.25 2.03 N.A. 75.33
BANC BankAtlantic Bancorp of FL 12.56 22,473 282.3 17.12 12.12 12.50 0.48 201.92 -6.06
BKUNA BankUnited SA of FL 12.87 8,869 114.1 12.87 7.75 12.37 4.04 137.02 28.70
BVCC Bay View Capital Corp. of CA 26.50 12,979 343.9 28.62 17.50 26.56 -0.23 34.18 25.06
FSNJ Bayonne Banchsares of NJ 12.56 3,064 17.6 12.75 5.11 12.22 2.78 N.A. 60.20
BFSB Bedford Bancshares of VA 25.25 1,142 28.8 25.25 16.50 24.00 5.21 140.48 43.30
BFFC Big Foot Fin. Corp. of IL 17.00 2,513 42.7 17.75 12.31 17.12 -0.70 N.A. 30.77
BSBC Branford SB of CT(8)* 5.06 6,559 33.2 5.12 3.19 5.06 0.00 138.68 30.75
BYFC Broadway Fin. Corp. of CA 11.00 835 9.2 11.25 9.00 10.75 2.33 N.A. 18.92
CBES CBES Bancorp of MO 18.00 1,025 18.5 18.00 12.62 17.75 1.41 N.A. 26.32
CCFH CCF Holding Company of GA 16.50 820 13.5 17.12 12.50 17.00 -2.94 N.A. 11.86
CENF CENFED Financial Corp. of CA 36.12 5,729 206.9 36.12 21.82 36.00 0.33 130.36 35.84
CFSB CFSB Bancorp of Lansing MI 26.00 5,096 132.5 27.00 16.36 26.50 -1.89 188.89 46.64
CKFB CKF Bancorp of Danville KY 19.00 925 17.6 20.75 17.50 19.00 0.00 N.A. -6.17
CNSB CNS Bancorp of MO 17.00 1,653 28.1 17.50 12.50 17.00 0.00 N.A. 12.43
CSBF CSB Financial Group Inc of IL* 11.87 942 11.2 12.50 9.12 11.87 0.00 N.A. 17.29
CBCI Calumet Bancorp of Chicago IL 44.25 2,111 93.4 44.25 27.75 43.37 2.03 118.52 33.08
CAFI Camco Fin. Corp. of OH 18.25 3,214 58.7 19.25 14.05 17.75 2.82 N.A. 20.70
CMRN Cameron Fin. Corp. of MO 18.00 2,627 47.3 18.00 14.50 17.75 1.41 N.A. 12.50
CAPS Capital Savings Bancorp of MO 16.37 1,892 31.0 18.25 9.62 15.75 3.94 23.55 25.92
CFNC Carolina Fincorp of NC* 17.50 1,851 32.4 17.87 13.00 17.62 -0.68 N.A. 30.89
CASB Cascade SB of Everett WA(8) 12.75 2,571 32.8 16.80 10.40 12.75 0.00 -0.39 -1.16
CATB Catskill Fin. Corp. of NY* 16.75 4,720 79.1 17.00 11.50 16.25 3.08 N.A. 19.64
CNIT Cenit Bancorp of Norfolk VA 50.37 1,650 83.1 52.75 38.50 49.75 1.25 217.19 21.37
CEBK Central Co-Op. Bank of MA* 20.87 1,965 41.0 21.25 14.75 21.00 -0.62 297.52 19.26
CENB Century Bancshares of NC* 79.50 407 32.4 79.50 62.00 79.50 0.00 N.A. 22.31
CBSB Charter Financial Inc. of IL 21.25 4,150 88.2 21.50 11.87 21.00 1.19 N.A. 70.00
COFI Charter One Financial of OH 56.19 46,186 2,595.2 57.94 37.12 56.25 -0.11 221.09 33.79
CVAL Chester Valley Bancorp of PA 21.37 2,059 44.0 23.00 13.90 21.00 1.76 88.61 51.56
CTZN CitFed Bancorp of Dayton OH 47.50 8,638 410.3 47.50 25.00 45.75 3.83 427.78 43.94
CLAS Classic Bancshares of KY 14.00 1,305 18.3 15.00 11.25 14.25 -1.75 N.A. 20.48
CMSB Cmnwealth Bancorp of PA 17.62 17,096 301.2 17.62 10.87 17.19 2.50 N.A. 17.47
CBSA Coastal Bancorp of Houston TX 32.50 4,972 161.6 32.50 19.62 30.12 7.90 N.A. 42.11
CFCP Coastal Fin. Corp. of SC 25.00 4,641 116.0 27.75 14.25 23.37 6.97 150.00 58.73
CMSV Commty. Svgs, MHC of FL (48.5) 31.12 5,090 76.9 32.75 16.25 32.75 -4.98 N.A. 51.80
CFTP Community Fed. Bancorp of MS 17.25 4,629 79.9 20.00 13.37 17.75 -2.82 N.A. 1.47
CFFC Community Fin. Corp. of VA 21.75 1,275 27.7 23.50 20.50 21.75 0.00 210.71 4.82
CFBC Community First Bnkg Co. of GA 34.75 2,414 83.9 34.87 31.87 34.38 1.08 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.50 929 14.4 16.00 10.33 15.50 0.00 N.A. 36.80
COOP Cooperative Bk.for Svgs. of NC 27.50 1,492 41.0 28.00 18.00 28.00 -1.79 175.00 35.80
CRZY Crazy Woman Creek Bncorp of WY 14.87 955 14.2 14.87 11.00 14.62 1.71 N.A. 23.92
DNFC D&N Financial Corp. of MI 20.37 8,191 166.9 21.00 13.75 20.50 -0.63 132.80 21.61
DCBI Delphos Citizens Bancorp of OH 17.37 2,039 35.4 17.37 11.75 16.75 3.70 N.A. 44.75
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
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
AHCI Ambanc Holding Co., Inc. of NY* -0.64 -0.67 14.29 14.29 110.42
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 1.55 2.00 13.24 13.00 212.83
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 0.98 0.71 6.83 5.61 121.50
BKUNA BankUnited SA of FL 0.29 0.48 7.59 6.15 203.77
BVCC Bay View Capital Corp. of CA 0.97 1.58 15.12 12.69 238.56
FSNJ Bayonne Banchsares of NJ -1.05 0.58 15.69 15.69 188.32
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 -0.19 0.29 14.65 14.65 146.40
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 0.25 0.46 14.84 14.84 59.50
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 1.11 1.24 14.58 13.45 152.41
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* 0.68 0.65 13.75 13.75 60.25
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 0.94 1.33 13.14 13.14 157.20
CTZN CitFed Bancorp of Dayton OH 1.94 2.73 22.83 20.57 358.59
CLAS Classic Bancshares of KY 0.45 0.63 14.84 12.52 100.81
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) 0.73 1.09 15.46 15.46 137.48
CFTP Community Fed. Bancorp of MS 0.59 0.72 12.40 12.40 45.16
CFFC Community Fin. Corp. of VA 1.32 1.67 18.86 18.86 137.58
CFBC Community First Bnkg Co. of GA 1.05 1.06 28.74 28.35 186.68
CIBI Community Inv. Bancorp of OH 0.63 0.96 11.96 11.96 99.36
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
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
DIME Dime Community Bancorp of NY 19.50 13,093 255.3 20.00 13.25 19.50 0.00 N.A. 32.20
DIBK Dime Financial Corp. of CT* 29.62 5,147 152.5 29.87 16.25 29.50 0.41 182.10 71.71
EGLB Eagle BancGroup of IL 17.00 1,238 21.0 17.00 12.25 16.75 1.49 N.A. 14.32
EBSI Eagle Bancshares of Tucker GA 17.50 5,660 99.1 18.50 13.62 16.75 4.48 141.38 12.90
EGFC Eagle Financial Corp. of CT 36.37 6,279 228.4 37.12 25.25 35.87 1.39 315.66 19.25
ETFS East Texas Fin. Serv. of TX 19.53 1,025 20.0 19.53 14.50 19.12 2.14 N.A. 19.30
EMLD Emerald Financial Corp of OH 15.00 5,062 75.9 15.00 10.50 13.75 9.09 N.A. 33.33
EIRE Emerald Island Bancorp, MA* 24.50 2,246 55.0 25.87 12.30 25.50 -3.92 221.52 53.13
EFBC Empire Federal Bancorp of MT 15.63 2,592 40.5 15.75 12.50 15.63 0.00 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 24.00 2,001 48.0 24.00 13.50 19.75 21.52 N.A. 65.52
EQSB Equitable FSB of Wheaton MD 40.00 602 24.1 40.78 24.75 37.50 6.67 N.A. 41.59
FFFG F.F.O. Financial Group of FL(8) 6.62 8,446 55.9 6.88 2.62 5.94 11.45 -20.34 96.44
FCBF FCB Fin. Corp. of Neenah WI 26.75 4,073 109.0 28.00 17.00 26.75 0.00 N.A. 44.59
FFBS FFBS Bancorp of Columbus MS 22.00 1,557 34.3 26.00 21.00 23.00 -4.35 N.A. -4.35
FFDF FFD Financial Corp. of OH 15.63 1,455 22.7 15.63 10.50 14.75 5.97 N.A. 17.96
FFLC FFLC Bancorp of Leesburg FL 32.25 2,318 74.8 32.25 18.25 31.37 2.81 N.A. 50.00
FFFC FFVA Financial Corp. of VA 32.00 4,521 144.7 32.00 17.50 30.25 5.79 N.A. 56.10
FFWC FFW Corporation of Wabash IN 29.87 711 21.2 29.87 19.50 29.50 1.25 N.A. 36.52
FFYF FFY Financial Corp. of OH 26.87 4,145 111.4 28.25 24.00 27.19 -1.18 N.A. 6.16
FMCO FMS Financial Corp. of NJ 27.25 2,388 65.1 31.50 15.50 27.25 0.00 202.78 49.32
FFHH FSF Financial Corp. of MN 17.75 3,033 53.8 18.50 12.12 18.50 -4.05 N.A. 17.39
FOBC Fed One Bancorp of Wheeling WV 20.25 2,373 48.1 22.00 15.37 20.00 1.25 102.50 28.57
FBCI Fidelity Bancorp of Chicago IL 23.87 2,792 66.6 24.00 16.25 22.37 6.71 N.A. 40.41
FSBI Fidelity Bancorp, Inc. of PA 21.25 1,550 32.9 22.00 16.14 22.00 -3.41 174.90 16.89
FFFL Fidelity FSB, MHC of FL (47.7) 27.25 6,771 87.9 28.25 15.00 27.87 -2.22 N.A. 53.52
FFED Fidelity Fed. Bancorp of IN 9.25 2,490 23.0 11.75 7.50 8.50 8.82 31.21 -5.13
FFOH Fidelity Financial of OH 16.00 5,579 89.3 16.37 9.62 16.00 0.00 N.A. 39.13
FIBC Financial Bancorp, Inc. of NY 22.75 1,722 39.2 23.25 14.00 22.87 -0.52 N.A. 51.67
FBSI First Bancshares of MO 24.00 1,096 26.3 25.25 15.00 23.75 1.05 88.24 44.40
FBBC First Bell Bancorp of PA 15.87 6,511 103.3 17.37 13.12 15.94 -0.44 N.A. 19.77
FBER First Bergen Bancorp of NJ 17.87 3,000 53.6 19.50 10.00 18.37 -2.72 N.A. 55.39
SKBO First Carnegie,MHC of PA(45.0) 16.25 2,300 16.8 16.75 11.62 16.50 -1.52 N.A. N.A.
FSTC First Citizens Corp of GA 33.00 1,833 60.5 33.00 20.75 33.00 0.00 164.00 30.69
FCME First Coastal Corp. of ME* 11.00 1,359 14.9 11.25 6.25 10.75 2.33 N.A. 41.94
FFBA First Colorado Bancorp of Co 18.87 16,561 312.5 20.12 14.87 18.56 1.67 471.82 11.00
FDEF First Defiance Fin.Corp. of OH 15.37 9,341 143.6 15.50 10.62 14.75 4.20 N.A. 24.25
FESX First Essex Bancorp of MA* 18.62 7,504 139.7 18.75 11.50 17.87 4.20 210.33 41.92
FFES First FS&LA of E. Hartford CT 34.62 2,676 92.6 35.00 18.75 34.50 0.35 432.62 50.52
FFSX First FS&LA. MHC of IA (46.1) 28.00 2,828 36.5 35.00 20.75 28.00 0.00 319.79 43.59
BDJI First Fed. Bancorp. of MN 21.00 683 14.3 22.00 15.12 22.00 -4.55 N.A. 13.51
FFBH First Fed. Bancshares of AR 21.12 4,896 103.4 21.62 14.75 21.12 0.00 N.A. 33.08
FTFC First Fed. Capital Corp. of WI 24.37 9,141 222.8 26.50 13.67 24.50 -0.53 224.93 55.52
FFKY First Fed. Fin. Corp. of KY 22.75 4,170 94.9 23.00 17.75 21.75 4.60 44.44 12.35
FFBZ First Federal Bancorp of OH 18.25 1,572 28.7 19.75 12.50 18.50 -1.35 82.50 14.06
FFCH First Fin. Holdings Inc. of SC 36.00 6,357 228.9 36.00 19.25 33.62 7.08 193.88 60.00
FFBI First Financial Bancorp of IL 19.25 415 8.0 19.25 15.50 18.87 2.01 N.A. 21.30
FFHC First Financial Corp. of WI(8) 33.25 36,209 1,203.9 33.25 18.70 32.69 1.71 111.11 35.71
FFHS First Franklin Corp. of OH 19.75 1,192 23.5 21.00 14.25 19.75 0.00 50.53 19.70
FGHC First Georgia Hold. Corp of GA 7.75 3,052 23.7 8.25 4.17 7.75 0.00 102.35 36.68
FSPG First Home Bancorp of NJ 20.37 2,708 55.2 20.37 13.50 20.12 1.24 239.50 46.86
FFSL First Independence Corp. of KS 14.62 997 14.6 14.62 9.50 13.75 6.33 N.A. 40.98
FISB First Indiana Corp. of IN 23.50 10,561 248.2 24.30 17.37 22.25 5.62 74.07 9.81
FKFS First Keystone Fin. Corp of PA 28.75 1,228 35.3 28.75 17.75 28.50 0.88 N.A. 49.35
FLKY First Lancaster Bncshrs of KY 15.50 959 14.9 16.25 13.87 15.69 -1.21 N.A. 6.02
FLFC First Liberty Fin. Corp. of GA 22.12 7,725 170.9 23.75 16.50 22.50 -1.69 335.43 20.41
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <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 0.64 0.87 12.45 12.45 149.91
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 0.82 0.91 15.82 15.80 128.29
EQSB Equitable FSB of Wheaton MD 2.20 3.51 25.80 25.80 511.96
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 0.60 0.71 11.65 11.65 66.58
FFBS FFBS Bancorp of Columbus MS 0.95 1.20 16.15 16.15 83.98
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 1.89 2.36 24.11 21.72 253.24
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 (47.7) 0.50 0.79 12.36 12.27 147.58
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 1.29 1.56 20.26 20.23 149.61
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
FSTC First Citizens Corp of GA 1.45 1.43 16.26 12.20 178.05
FCME First Coastal Corp. of ME* 4.50 4.36 10.35 10.35 112.13
FFBA First Colorado Bancorp of Co 0.81 0.80 11.79 11.63 91.20
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 (46.1) 0.69 1.19 13.74 13.63 165.69
BDJI First Fed. Bancorp. of MN 0.47 1.00 17.60 17.60 161.92
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
FLFC First Liberty Fin. Corp. of GA 1.32 1.08 12.30 11.09 166.85
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
CASH First Midwest Fin. Corp. of IA 18.75 2,734 51.3 19.87 15.00 18.87 -0.64 N.A. 22.31
FMBD First Mutual Bancorp of IL 15.25 3,507 53.5 16.12 13.00 15.25 0.00 N.A. 1.67
FMSB First Mutual SB of Bellevue WA* 20.50 2,702 55.4 22.25 12.73 20.50 0.00 164.52 28.85
FNGB First Northern Cap. Corp of WI 13.31 8,834 117.6 14.00 7.62 13.50 -1.41 83.33 63.71
FFPB First Palm Beach Bancorp of FL 35.00 5,031 176.1 35.00 22.75 34.87 0.37 N.A. 48.18
FSLA First SB SLA MHC of NJ (47.5) 34.00 7,264 115.7 34.00 14.77 31.00 9.68 240.00 83.78
SOPN First SB, SSB, Moore Co. of NC 20.50 3,679 75.4 24.00 17.00 21.00 -2.38 N.A. 9.33
FWWB First Savings Bancorp of WA* 24.25 10,519 255.1 24.87 16.56 24.75 -2.02 N.A. 32.01
SHEN First Shenango Bancorp of PA 31.75 2,072 65.8 31.75 20.25 29.00 9.48 N.A. 41.11
FSFC First So.east Fin. Corp. of SC(8) 15.50 4,388 68.0 15.63 9.12 15.63 -0.83 N.A. 65.25
FBNW FirstBank Corp of Clarkston WA 17.00 1,984 33.7 19.00 15.50 17.37 -2.13 N.A. N.A.
FFDB FirstFed Bancorp of AL 17.75 1,148 20.4 18.50 12.50 17.75 0.00 N.A. 42.00
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 15.50 2,037 31.6 15.50 10.00 14.50 6.90 58.16 44.19
FLGS Flagstar Bancorp, Inc of MI 20.37 13,670 278.5 20.37 13.00 19.12 6.54 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 21.88 7,979 174.6 23.50 17.37 22.12 -1.08 N.A. 20.75
FBHC Fort Bend Holding Corp. of TX 33.75 827 27.9 35.00 17.00 33.75 0.00 N.A. 32.35
FTSB Fort Thomas Fin. Corp. of KY 12.25 1,495 18.3 14.75 9.25 11.75 4.26 N.A. -16.21
FKKY Frankfort First Bancorp of KY 10.62 3,280 34.8 12.25 8.00 11.12 -4.50 N.A. -6.60
FTNB Fulton Bancorp of MO 24.00 1,719 41.3 24.00 12.50 21.00 14.29 N.A. 56.15
GFSB GFS Bancorp of Grinnell IA 14.25 988 14.1 14.50 10.12 14.25 0.00 N.A. 34.18
GUPB GFSB Bancorp of Gallup NM 18.75 839 15.7 19.75 13.50 18.75 0.00 N.A. 18.15
GSLA GS Financial Corp. of LA 16.00 3,438 55.0 16.12 13.37 16.00 0.00 N.A. N.A.
GOSB GSB Financial Corp. of NY 14.37 2,248 32.3 14.87 14.25 14.50 -0.90 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 17.94 1,076 19.3 18.25 13.25 17.87 0.39 N.A. 25.89
GBCI Glacier Bancorp of MT 18.69 6,812 127.3 20.25 15.33 18.87 -0.95 286.96 14.45
GFCO Glenway Financial Corp. of OH 27.75 1,140 31.6 27.75 18.25 25.00 11.00 N.A. 35.37
GTPS Great American Bancorp of IL 18.00 1,760 31.7 18.00 13.50 17.75 1.41 N.A. 21.54
GTFN Great Financial Corp. of KY 42.75 13,791 589.6 42.87 27.62 34.87 22.60 N.A. 46.81
GSBC Great Southern Bancorp of MO 19.00 8,105 154.0 19.00 14.37 17.37 9.38 550.68 6.68
GDVS Greater DV SB,MHC of PA (19.9)* 24.25 3,272 15.8 24.75 9.25 24.50 -1.02 N.A. 133.85
GSFC Green Street Fin. Corp. of NC 18.62 4,298 80.0 19.00 14.00 18.62 0.00 N.A. 20.13
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 22.00 3,125 21.3 22.00 9.75 19.12 15.06 N.A. 82.42
HCBB HCB Bancshares of AR 13.62 2,645 36.0 14.12 12.62 13.50 0.89 N.A. N.A.
HEMT HF Bancorp of Hemet CA 14.87 6,282 93.4 15.87 9.50 14.87 0.00 N.A. 33.72
HFFC HF Financial Corp. of SD 24.12 2,979 71.9 24.62 14.75 24.06 0.25 382.40 39.34
HFNC HFNC Financial Corp. of NC 16.81 17,192 289.0 22.06 14.87 16.12 4.28 N.A. -5.93
HMNF HMN Financial, Inc. of MN 25.00 4,212 105.3 25.75 16.00 24.50 2.04 N.A. 37.97
HALL Hallmark Capital Corp. of WI 23.37 1,443 33.7 24.00 15.75 22.12 5.65 N.A. 31.66
HARB Harbor FSB, MHC of FL (46.6)(8) 57.25 4,970 132.6 58.22 29.00 57.75 -0.87 N.A. 60.14
HRBF Harbor Federal Bancorp of MD 20.00 1,693 33.9 20.00 13.87 19.75 1.27 100.00 26.98
HFSA Hardin Bancorp of Hardin MO 16.87 859 14.5 17.00 11.25 16.50 2.24 N.A. 34.96
HARL Harleysville SA of PA 27.00 1,652 44.6 27.25 14.00 25.75 4.85 52.11 70.89
HFGI Harrington Fin. Group of IN 12.56 3,257 40.9 13.00 9.75 12.12 3.63 N.A. 16.84
HARS Harris SB, MHC of PA (24.3) 44.25 11,223 120.5 45.00 14.87 44.25 0.00 N.A. 142.47
HFFB Harrodsburg 1st Fin Bcrp of KY 15.75 2,025 31.9 19.00 14.75 15.25 3.28 N.A. -16.53
HHFC Harvest Home Fin. Corp. of OH 12.00 915 11.0 13.00 9.25 12.00 0.00 N.A. 23.08
HAVN Haven Bancorp of Woodhaven NY 41.75 4,377 182.7 41.75 25.56 40.00 4.37 N.A. 45.88
HVFD Haverfield Corp. of OH(8) 27.50 1,906 52.4 27.94 17.00 27.50 0.00 77.42 43.83
HTHR Hawthorne Fin. Corp. of CA 17.25 3,035 52.4 17.75 6.62 17.37 -0.69 -37.27 112.18
HMLK Hemlock Fed. Fin. Corp. of IL 15.12 2,076 31.4 15.50 12.50 15.12 0.00 N.A. N.A.
HBNK Highland Federal Bank of CA 30.25 2,300 69.6 30.50 14.25 30.25 0.00 N.A. 77.94
HIFS Hingham Inst. for Sav. of MA* 25.75 1,303 33.6 25.75 15.00 23.87 7.88 464.69 37.33
HBEI Home Bancorp of Elgin IL 18.12 6,856 124.2 19.31 11.81 17.62 2.84 N.A. 34.22
HBFW Home Bancorp of Fort Wayne IN 24.75 2,525 62.5 24.75 15.87 22.37 10.64 N.A. 30.26
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
CASH First Midwest Fin. Corp. of IA 1.00 1.27 15.62 13.84 137.10
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 0.44 0.63 8.14 8.14 72.19
FFPB First Palm Beach Bancorp of FL -0.09 0.08 21.76 21.23 331.23
FSLA First SB SLA MHC of NJ (47.5) 0.80 1.25 13.39 11.94 142.18
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 -0.03 0.17 10.44 10.44 108.95
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 -0.11 0.22 6.94 6.94 40.38
FTNB Fulton Bancorp of MO 0.41 0.58 14.47 14.47 57.86
GFSB GFS Bancorp of Grinnell IA 0.88 1.08 10.66 10.66 93.18
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 (46.6)(8) 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 (24.3) 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 0.50 11.35 11.35 90.82
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 0.64 1.38 13.07 13.07 284.38
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
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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
HBBI Home Building Bancorp of IN 20.50 312 6.4 22.00 17.00 20.50 0.00 N.A. 3.80
HCFC Home City Fin. Corp. of OH 15.50 952 14.8 16.25 12.00 15.50 0.00 N.A. 16.98
HOMF Home Fed Bancorp of Seymour IN 31.50 3,396 107.0 31.50 17.83 30.75 2.44 213.43 22.33
HWEN Home Financial Bancorp of IN 17.00 470 8.0 17.00 12.00 16.44 3.41 N.A. 33.33
HPBC Home Port Bancorp, Inc. of MA* 22.75 1,842 41.9 23.50 15.37 22.50 1.11 184.38 37.88
HMCI Homecorp, Inc. of Rockford IL 17.00 1,693 28.8 17.50 11.83 17.00 0.00 70.00 33.33
HZFS Horizon Fin'l. Services of IA 18.87 426 8.0 19.75 14.12 18.87 0.00 N.A. 24.80
HRZB Horizon Financial Corp. of WA* 15.87 7,417 117.7 16.50 10.65 15.37 3.25 38.97 35.18
IBSF IBS Financial Corp. of NJ 16.62 11,012 183.0 18.75 12.61 17.25 -3.65 N.A. 22.30
ISBF ISB Financial Corp. of LA 25.37 6,901 175.1 26.25 14.87 25.00 1.48 N.A. 40.94
ITLA Imperial Thrift & Loan of CA* 18.00 7,836 141.0 18.37 13.00 17.87 0.73 N.A. 20.00
IFSB Independence FSB of DC 13.87 1,281 17.8 14.75 6.75 14.00 -0.93 593.50 73.37
INCB Indiana Comm. Bank, SB of IN 15.75 922 14.5 19.00 14.25 15.75 0.00 N.A. -3.08
INBI Industrial Bancorp of OH 14.87 5,277 78.5 15.37 11.00 14.87 0.00 N.A. 16.63
IWBK Interwest SB of Oak Harbor WA 38.75 8,036 311.4 40.12 27.62 39.25 -1.27 287.50 20.16
IPSW Ipswich SB of Ipswich MA* 14.12 2,376 33.5 14.12 4.87 13.25 6.57 N.A. 135.33
JXVL Jacksonville Bancorp of TX 16.94 2,490 42.2 17.00 11.50 16.50 2.67 N.A. 15.87
JXSB Jcksnville SB,MHC of IL (45.6) 22.50 1,272 13.1 22.50 11.50 22.50 0.00 N.A. 69.81
JSBA Jefferson Svgs Bancorp of MO 36.00 5,005 180.2 36.50 22.25 34.75 3.60 N.A. 38.46
JOAC Joachim Bancorp of MO 14.50 722 10.5 15.25 12.75 14.62 -0.82 N.A. 0.00
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)* 12.50 1,238 15.5 16.00 7.00 12.50 0.00 N.A. 62.97
KFBI Klamath First Bancorp of OR 19.87 10,019 199.1 20.50 13.94 20.12 -1.24 N.A. 26.16
LSBI LSB Fin. Corp. of Lafayette IN 21.50 932 20.0 22.25 15.71 22.25 -3.37 N.A. 15.78
LVSB Lakeview SB of Paterson NJ 36.00 2,302 82.9 37.75 20.68 35.50 1.41 N.A. 44.75
LARK Landmark Bancshares of KS 25.75 1,711 44.1 27.25 15.75 27.25 -5.50 N.A. 43.06
LARL Laurel Capital Group of PA 24.50 1,443 35.4 24.50 14.75 23.50 4.26 91.41 48.48
LSBX Lawrence Savings Bank of MA* 12.69 4,274 54.2 12.87 6.75 11.81 7.45 268.90 56.09
LFED Leeds FSB, MHC of MD (36.3) 31.25 3,455 39.2 32.25 13.25 30.25 3.31 N.A. 95.31
LXMO Lexington B&L Fin. Corp. of MO 15.75 1,138 17.9 16.62 10.25 16.00 -1.56 N.A. 16.67
LIFB Life Bancorp of Norfolk VA 25.75 9,847 253.6 26.62 15.25 25.25 1.98 N.A. 43.06
LFBI Little Falls Bancorp of NJ 16.87 2,745 46.3 17.50 10.37 17.50 -3.60 N.A. 32.31
LOGN Logansport Fin. Corp. of IN 15.75 1,260 19.8 16.00 11.12 15.50 1.61 N.A. 40.00
LONF London Financial Corp. of OH 15.00 515 7.7 17.50 10.87 15.00 0.00 N.A. 6.23
LISB Long Island Bancorp, Inc of NY 43.56 23,968 1,044.0 44.25 28.19 42.50 2.49 N.A. 24.46
MAFB MAF Bancorp of IL 31.75 15,393 488.7 34.75 17.17 31.59 0.51 273.53 37.03
MBLF MBLA Financial Corp. of MO 24.75 1,298 32.1 24.75 19.00 23.25 6.45 N.A. 30.26
MFBC MFB Corp. of Mishawaka IN 23.50 1,690 39.7 23.50 15.50 23.00 2.17 N.A. 41.40
MLBC ML Bancorp of Villanova PA 21.25 10,566 224.5 21.25 13.12 20.87 1.82 N.A. 50.50
MSBF MSB Financial Corp. of MI 15.50 1,249 19.4 16.50 9.12 13.25 16.98 N.A. 63.16
MGNL Magna Bancorp of MS(8) 27.37 13,754 376.4 27.50 16.75 27.12 0.92 447.40 56.40
MARN Marion Capital Holdings of IN 23.50 1,768 41.5 23.75 19.25 23.50 0.00 N.A. 22.08
MRKF Market Fin. Corp. of OH 14.62 1,336 19.5 14.75 12.25 14.19 3.03 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 16.87 1,411 23.8 16.87 14.25 16.75 0.72 N.A. 13.45
MFSL Maryland Fed. Bancorp of MD 49.00 3,210 157.3 50.50 28.45 45.00 8.89 366.67 41.01
MASB MassBank Corp. of Reading MA* 53.31 2,681 142.9 53.31 32.75 52.50 1.54 332.36 39.85
MFLR Mayflower Co-Op. Bank of MA* 20.00 890 17.8 20.00 14.75 18.00 11.11 300.00 17.65
MECH Mechanics SB of Hartford CT* 24.50 5,290 129.6 24.75 13.50 23.75 3.16 N.A. 55.56
MDBK Medford Bank of Medford, MA* 34.00 4,541 154.4 34.00 23.00 32.50 4.62 385.71 32.04
MERI Meritrust FSB of Thibodaux LA 43.50 774 33.7 43.87 30.75 43.87 -0.84 N.A. 37.57
MWBX MetroWest Bank of MA* 6.37 13,953 88.9 6.81 3.87 6.62 -3.78 54.61 18.62
MCBS Mid Continent Bancshares of KS(8) 37.25 1,958 72.9 37.75 18.62 37.50 -0.67 N.A. 59.39
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 25.75 18.00 25.00 0.00 337.83 31.58
MWBI Midwest Bancshares, Inc. of IA 36.50 348 12.7 36.50 24.62 36.00 1.39 265.00 37.74
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
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 0.54 0.68 15.31 15.31 90.44
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 0.33 0.58 11.59 11.59 66.59
ISBF ISB Financial Corp. of LA 0.77 1.04 16.58 14.06 136.06
ITLA Imperial Thrift & Loan of CA* 1.45 1.45 11.92 11.87 108.50
IFSB Independence FSB of DC 0.29 0.66 13.38 11.73 205.12
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* 0.84 0.66 4.55 4.55 79.70
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (45.6) 0.36 0.79 13.43 13.43 127.94
JSBA Jefferson Svgs Bancorp of MO 0.69 1.63 21.24 16.18 259.13
JOAC Joachim Bancorp of MO 0.23 0.38 13.63 13.63 48.39
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 1.51 1.33 18.44 18.44 208.28
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 1.61 2.03 14.73 14.73 146.91
LSBX Lawrence Savings Bank of MA* 1.40 1.38 7.45 7.45 85.71
LFED Leeds FSB, MHC of MD (36.3) 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 0.48 0.73 14.60 14.60 74.25
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 0.77 1.16 20.05 20.05 146.89
MLBC ML Bancorp of Villanova PA 1.36 1.23 13.68 13.44 196.03
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* 1.39 1.31 13.67 13.44 141.20
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(8) 1.87 2.12 19.59 19.59 208.68
MIFC Mid Iowa Financial Corp. of IA 0.71 1.00 7.00 7.00 74.91
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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
MWFD Midwest Fed. Fin. Corp of WI 21.75 1,628 35.4 24.50 16.75 21.25 2.35 335.00 17.57
MFFC Milton Fed. Fin. Corp. of OH 14.37 2,310 33.2 16.00 12.75 13.75 4.51 N.A. -0.90
MIVI Miss. View Hold. Co. of MN 15.87 819 13.0 15.87 11.75 15.87 0.00 N.A. 32.25
MBSP Mitchell Bancorp of NC* 17.25 931 16.1 17.25 12.12 17.12 0.76 N.A. 21.05
MBBC Monterey Bay Bancorp of CA 16.87 3,242 54.7 18.25 13.37 16.62 1.50 N.A. 14.37
MONT Montgomery Fin. Corp. of IN 11.87 1,653 19.6 14.00 11.00 12.00 -1.08 N.A. -8.69
MSBK Mutual SB, FSB of Bay City MI 14.00 4,274 59.8 14.37 5.12 13.87 0.94 60.00 154.55
NHTB NH Thrift Bancshares of NH 19.37 2,048 39.7 19.75 10.00 19.62 -1.27 319.26 53.49
NSLB NS&L Bancorp of Neosho MO 19.12 707 13.5 19.12 12.00 18.75 1.97 N.A. 40.38
NMSB Newmil Bancorp. of CT* 12.25 3,834 47.0 13.75 7.00 13.44 -8.85 92.31 25.64
NASB North American SB of MO 52.00 2,229 115.9 55.00 30.75 49.00 6.12 ***.** 51.82
NBSI North Bancshares of Chicago IL 22.62 997 22.6 22.75 15.75 22.00 2.82 N.A. 37.09
FFFD North Central Bancshares of IA 17.00 3,258 55.4 17.00 12.00 16.87 0.77 N.A. 25.37
NBN Northeast Bancorp of ME* 17.62 1,275 22.5 17.62 12.75 16.75 5.19 49.96 25.86
NEIB Northeast Indiana Bncrp of IN 17.00 1,763 30.0 18.00 12.00 17.50 -2.86 N.A. 24.82
NWEQ Northwest Equity Corp. of WI 16.00 839 13.4 16.75 10.25 16.12 -0.74 N.A. 32.01
NWSB Northwest SB, MHC of PA (30.7) 25.25 23,376 181.2 26.25 11.37 25.87 -2.40 N.A. 88.86
NSSY Norwalk Savings Society of CT* 36.00 2,410 86.8 37.00 22.50 36.75 -2.04 N.A. 54.04
NSSB Norwich Financial Corp. of CT* 28.37 5,413 153.6 29.00 16.12 27.81 2.01 305.29 44.60
NTMG Nutmeg FS&LA of CT 10.25 738 7.6 11.00 7.00 11.00 -6.82 N.A. 36.67
OHSL OHSL Financial Corp. of OH 24.75 1,196 29.6 25.25 19.50 24.12 2.61 N.A. 15.82
OCFC Ocean Fin. Corp. of NJ 34.06 8,606 293.1 35.75 22.37 34.25 -0.55 N.A. 33.57
OCN Ocwen Financial Corp. of FL 43.31 26,800 1,160.7 44.75 20.25 43.75 -1.01 N.A. 61.91
OFCP Ottawa Financial Corp. of MI 25.00 4,911 122.8 25.00 14.54 25.75 -2.91 N.A. 63.51
PFFB PFF Bancorp of Pomona CA 19.37 18,716 362.5 19.87 12.00 19.87 -2.52 N.A. 30.26
PSFI PS Financial of Chicago IL 15.25 2,182 33.3 15.75 11.62 15.50 -1.61 N.A. 29.79
PVFC PVF Capital Corp. of OH 20.50 2,556 52.4 21.75 13.18 21.25 -3.53 365.91 43.16
PCCI Pacific Crest Capital of CA* 15.75 2,938 46.3 15.75 8.13 15.12 4.17 N.A. 36.96
PAMM PacificAmerica Money Ctr of CA* 22.75 1,900 43.2 26.00 10.37 22.75 0.00 N.A. 56.90
PALM Palfed, Inc. of Aiken SC(8) 21.50 5,284 113.6 21.50 13.00 17.75 21.13 39.88 53.57
PBCI Pamrapo Bancorp, Inc. of NJ 23.75 2,843 67.5 23.75 18.50 21.00 13.10 321.85 18.75
PFED Park Bancorp of Chicago IL 16.75 2,431 40.7 17.00 10.37 16.87 -0.71 N.A. 28.85
PVSA Parkvale Financial Corp of PA 31.00 4,055 125.7 31.00 21.40 30.62 1.24 274.40 19.23
PEEK Peekskill Fin. Corp. of NY 16.50 3,193 52.7 17.00 13.25 16.87 -2.19 N.A. 15.79
PFSB PennFed Fin. Services of NJ 30.75 4,822 148.3 30.75 17.62 30.00 2.50 N.A. 51.85
PWBC PennFirst Bancorp of PA 15.87 5,306 84.2 16.59 12.27 15.63 1.54 98.87 28.09
PWBK Pennwood SB of PA* 16.25 580 9.4 16.75 10.00 16.75 -2.99 N.A. 18.18
PBKB People's SB of Brockton MA* 17.00 3,595 61.1 17.50 10.00 17.12 -0.70 186.20 60.08
PFDC Peoples Bancorp of Auburn IN 25.00 2,274 56.9 27.00 19.25 25.00 0.00 42.86 23.46
PBCT Peoples Bank, MHC of CT (40.1)* 31.25 61,053 764.2 31.25 15.33 29.19 7.06 297.08 62.34
PFFC Peoples Fin. Corp. of OH 17.00 1,491 25.3 17.37 10.87 17.25 -1.45 N.A. 25.93
PHBK Peoples Heritage Fin Grp of ME* 39.75 27,371 1,088.0 40.25 22.50 39.50 0.63 159.63 41.96
PSFC Peoples Sidney Fin. Corp of OH 15.50 1,785 27.7 16.50 12.56 16.25 -4.62 N.A. N.A.
PERM Permanent Bancorp of IN 23.00 2,011 46.3 26.50 16.25 23.00 0.00 N.A. 13.58
PMFI Perpetual Midwest Fin. of IA 21.50 1,883 40.5 22.00 17.75 20.87 3.02 N.A. 11.69
PERT Perpetual of SC, MHC (46.8)(8) 52.50 1,505 37.0 53.00 20.25 53.00 -0.94 N.A. 116.49
PCBC Perry Co. Fin. Corp. of MO 20.87 828 17.3 22.25 17.00 21.25 -1.79 N.A. 22.76
PHFC Pittsburgh Home Fin. of PA 18.62 1,969 36.7 19.50 10.81 18.75 -0.69 N.A. 39.27
PFSL Pocahnts Fed, MHC of AR (47.0) 28.00 1,632 21.5 28.50 14.25 28.50 -1.75 N.A. 60.00
PTRS Potters Financial Corp of OH 24.75 487 12.1 24.75 15.50 24.75 0.00 N.A. 23.75
PKPS Poughkeepsie Fin. Corp. of NY 7.87 12,595 99.1 8.13 4.87 7.72 1.94 1.55 49.90
PHSB Ppls Home SB, MHC of PA (45.0) 16.87 2,760 21.0 16.87 13.62 16.37 3.05 N.A. N.A.
PRBC Prestige Bancorp of PA 17.00 915 15.6 17.50 11.00 17.00 0.00 N.A. 25.93
PETE Primary Bank of NH(8)* 26.50 2,089 55.4 26.87 11.67 26.25 0.95 N.A. 73.88
PFNC Progress Financial Corp. of PA 13.75 3,814 52.4 15.12 5.95 14.62 -5.95 24.89 72.31
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
MWFD Midwest Fed. Fin. Corp of WI 1.79 1.37 11.21 10.81 127.18
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 0.29 0.55 14.43 13.30 127.33
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 0.54 0.80 11.78 10.03 153.95
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 4.10 3.86 25.37 24.52 330.46
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 0.98 1.15 15.19 15.19 100.01
NWEQ Northwest Equity Corp. of WI 0.88 1.11 13.22 13.22 115.48
NWSB Northwest SB, MHC of PA (30.7) 0.58 0.82 8.49 8.00 89.47
NSSY Norwalk Savings Society of CT* 2.42 2.76 20.64 19.90 256.17
NSSB Norwich Financial Corp. of CT* 1.42 1.35 14.70 13.27 131.66
NTMG Nutmeg FS&LA of CT 0.33 0.45 7.72 7.72 138.80
OHSL OHSL Financial Corp. of OH 1.12 1.57 21.21 21.21 192.34
OCFC Ocean Fin. Corp. of NJ 0.04 1.49 27.35 27.35 168.27
OCN Ocwen Financial Corp. of FL 2.65 1.60 9.10 8.69 103.99
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(8) 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 0.63 0.91 12.44 11.63 153.97
PWBK Pennwood SB of PA* 0.57 0.92 15.04 15.04 86.17
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 (40.1)* 1.39 1.03 10.93 10.92 128.90
PFFC Peoples Fin. Corp. of OH 0.53 0.53 15.78 15.78 58.01
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)(8) 1.00 1.41 20.13 20.13 170.24
PCBC Perry Co. Fin. Corp. of MO 0.90 1.04 18.80 18.80 97.95
PHFC Pittsburgh Home Fin. of PA 0.69 0.88 14.21 14.06 130.15
PFSL Pocahnts Fed, MHC of AR (47.0) 1.39 1.93 14.76 14.76 232.05
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
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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
PSBK Progressive Bank, Inc. of NY* 33.12 3,821 126.6 34.00 20.00 33.12 0.00 147.72 45.58
PROV Provident Fin. Holdings of CA 19.87 4,920 97.8 20.12 11.50 20.00 -0.65 N.A. 41.93
PULB Pulaski SB, MHC of MO (29.8) 25.62 2,094 16.0 27.50 12.75 26.50 -3.32 N.A. 76.69
PLSK Pulaski SB, MHC of NJ (46.0) 16.25 2,070 15.5 17.50 11.50 17.50 -7.14 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 21.37 3,071 65.6 21.50 15.50 20.50 4.24 72.76 35.68
QCFB QCF Bancorp of Virginia MN 25.00 1,426 35.7 26.25 15.00 25.00 0.00 N.A. 36.99
QCBC Quaker City Bancorp of CA 21.94 4,703 103.2 21.94 11.40 21.25 3.25 192.53 44.34
QCSB Queens County Bancorp of NY* 53.13 10,181 540.9 54.25 24.50 54.25 -2.06 N.A. 68.24
RCSB RCSB Financial, Inc. of NY(8)* 51.00 14,591 744.1 51.75 26.62 50.84 0.31 314.30 75.86
RARB Raritan Bancorp. of Raritan NJ* 22.25 2,412 53.7 25.50 14.17 24.00 -7.29 245.50 43.55
REDF RedFed Bancorp of Redlands CA 16.37 7,174 117.4 17.50 10.75 17.50 -6.46 N.A. 21.26
RELY Reliance Bancorp, Inc. of NY 31.87 8,776 279.7 32.31 17.50 32.00 -0.41 N.A. 63.44
RELI Reliance Bancshares Inc of WI(8)* 8.50 2,528 21.5 10.12 6.50 8.62 -1.39 N.A. 25.93
RIVR River Valley Bancorp of IN 16.50 1,190 19.6 17.25 13.25 16.50 0.00 N.A. 20.00
RSLN Roslyn Bancorp, Inc. of NY* 22.25 43,642 971.0 24.31 15.00 22.12 0.59 N.A. N.A.
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 29.25 2,419 26.8 29.25 13.64 27.75 5.41 N.A. 83.85
SCCB S. Carolina Comm. Bnshrs of SC 23.00 704 16.2 25.25 15.00 23.50 -2.13 N.A. 53.33
SBFL SB Fngr Lakes MHC of NY (33.1) 24.25 1,785 14.3 25.50 12.75 25.00 -3.00 N.A. 76.36
SFED SFS Bancorp of Schenectady NY 21.50 1,236 26.6 21.50 12.50 19.25 11.69 N.A. 45.76
SGVB SGV Bancorp of W. Covina CA 17.87 2,342 41.9 17.87 8.75 15.50 15.29 N.A. 58.84
SISB SIS Bancorp Inc of MA* 33.00 5,577 184.0 33.87 21.50 29.25 12.82 N.A. 44.29
SWCB Sandwich Co-Op. Bank of MA* 39.00 1,915 74.7 39.00 21.75 33.62 16.00 352.44 31.09
SECP Security Capital Corp. of WI(8) 107.75 9,208 992.2 107.75 62.62 105.25 2.38 N.A. 46.10
SFSL Security First Corp. of OH 17.75 7,574 134.4 19.25 9.00 17.50 1.43 70.67 46.94
SFNB Security First Netwrk Bk of GA(8) 12.00 8,620 103.4 25.50 5.50 11.37 5.54 N.A. 17.07
SMFC Sho-Me Fin. Corp. of MO(8) 40.25 1,499 60.3 40.37 18.87 39.37 2.24 N.A. 85.06
SOBI Sobieski Bancorp of S. Bend IN 17.00 775 13.2 17.00 12.25 16.25 4.62 N.A. 17.24
SOSA Somerset Savings Bank of MA(8)* 3.97 16,652 66.1 4.03 1.91 3.97 0.00 -22.46 101.52
SSFC South Street Fin. Corp. of NC* 18.87 4,496 84.8 19.50 12.12 18.50 2.00 N.A. 34.79
SCBS Southern Commun. Bncshrs of AL 16.25 1,137 18.5 16.25 13.00 15.87 2.39 N.A. 22.64
SMBC Southern Missouri Bncrp of MO 17.87 1,638 29.3 18.00 14.00 17.12 4.38 N.A. 19.13
SWBI Southwest Bancshares of IL 21.06 2,652 55.9 21.75 17.92 20.25 4.00 110.60 15.40
SVRN Sovereign Bancorp of PA 16.19 70,010 1,133.5 16.50 8.96 15.50 4.45 262.19 47.99
STFR St. Francis Cap. Corp. of WI 37.25 5,308 197.7 38.75 25.00 36.12 3.13 N.A. 43.27
SPBC St. Paul Bancorp, Inc. of IL 23.87 33,988 811.3 24.37 13.47 24.12 -1.04 114.47 52.33
STND Standard Fin. of Chicago IL(8) 25.62 16,210 415.3 25.87 16.25 25.62 0.00 N.A. 30.58
SFFC StateFed Financial Corp. of IA 22.00 784 17.2 22.75 16.00 22.00 0.00 N.A. 33.33
SFIN Statewide Fin. Corp. of NJ 20.12 4,710 94.8 20.12 12.50 19.25 4.52 N.A. 40.01
STSA Sterling Financial Corp. of WA 19.62 5,567 109.2 20.37 13.00 20.00 -1.90 115.84 38.95
SFSB SuburbFed Fin. Corp. of IL 27.50 1,262 34.7 27.50 16.25 27.50 0.00 312.29 44.74
ROSE T R Financial Corp. of NY* 27.12 17,519 475.1 28.25 14.31 26.87 0.93 N.A. 52.79
THRD TF Financial Corp. of PA 20.25 4,083 82.7 20.50 14.50 20.12 0.65 N.A. 24.62
TPNZ Tappan Zee Fin., Inc. of NY 17.37 1,497 26.0 17.87 12.00 17.87 -2.80 N.A. 27.53
ESBK The Elmira SB FSB of Elmira NY* 25.50 706 18.0 25.50 14.75 24.25 5.15 77.45 39.73
GRTR The Greater New York SB of NY(8)* 22.75 13,717 312.1 23.37 12.00 23.06 -1.34 144.36 67.03
TSBS Trenton SB,FSB MHC of NJ(35.9)(8) 30.00 9,037 97.4 30.25 14.00 29.87 0.44 N.A. 87.50
TRIC Tri-County Bancorp of WY 23.50 609 14.3 24.25 18.00 23.50 0.00 N.A. 30.56
TWIN Twin City Bancorp of TN 13.75 853 11.7 13.75 11.17 13.51 1.78 N.A. 19.57
UFRM United FS&LA of Rocky Mount NC 11.75 3,074 36.1 12.50 7.00 11.50 2.17 261.54 38.24
UBMT United Fin. Corp. of MT 24.12 1,223 29.5 24.12 18.00 24.00 0.50 129.71 25.30
VABF Va. Beach Fed. Fin. Corp of VA 16.00 4,976 79.6 16.25 8.00 14.12 13.31 241.15 69.49
VFFC Virginia First Savings of VA(8) 23.94 5,805 139.0 24.50 12.37 23.87 0.29 ***.** 87.76
WHGB WHG Bancshares of MD 15.75 1,462 23.0 15.87 11.62 15.75 0.00 N.A. 20.05
WSFS WSFS Financial Corp. of DE* 15.00 12,421 186.3 15.37 8.13 15.37 -2.41 106.90 47.20
WVFC WVS Financial Corp. of PA* 27.50 1,747 48.0 28.00 21.00 28.00 -1.79 N.A. 11.70
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
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 (29.8) 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 0.60 0.98 14.94 14.93 170.40
QCSB Queens County Bancorp of NY* 2.15 2.18 17.08 17.08 144.08
RCSB RCSB Financial, Inc. of NY(8)* 2.64 2.61 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 0.31 0.80 10.75 10.71 127.16
RELY Reliance Bancorp, Inc. of NY 1.25 1.85 18.54 13.36 225.25
RELI Reliance Bancshares Inc of WI(8)* 0.16 0.17 9.08 9.08 18.60
RIVR River Valley Bancorp of IN 0.46 0.62 14.63 14.41 118.02
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* 2.34 2.39 20.83 19.94 262.09
SECP Security Capital Corp. of WI(8) 4.88 5.82 64.62 64.62 398.94
SFSL Security First Corp. of OH 0.88 1.10 8.13 7.99 86.25
SFNB Security First Netwrk Bk of GA(8) -3.30 -3.38 3.02 2.97 9.12
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 0.32 0.61 15.95 15.95 105.49
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* 1.84 1.66 12.58 12.58 202.74
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(35.9)(8) 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
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
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of September 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
WRNB Warren Bancorp of Peabody MA* 18.37 3,781 69.5 19.00 12.75 18.00 2.06 445.10 22.47
WFSL Washington FS&LA of Seattle WA 28.00 47,462 1,328.9 29.25 19.89 27.87 0.47 91.91 16.23
WAMU Washington Mutual Inc. of WA(8)* 64.00 126,357 8,086.8 69.12 35.00 63.75 0.39 244.83 47.77
WYNE Wayne Bancorp of NJ 24.50 2,120 51.9 24.87 13.50 24.25 1.03 N.A. 60.66
WAYN Wayne S&L Co. MHC of OH (47.8) 24.00 2,248 25.8 24.25 12.67 24.25 -1.03 N.A. 46.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 18.50 2,100 17.6 18.50 12.75 17.75 4.23 N.A. 34.55
WBST Webster Financial Corp. of CT 57.75 11,985 692.1 58.50 33.50 56.16 2.83 511.76 57.14
WEFC Wells Fin. Corp. of Wells MN 16.00 1,959 31.3 16.50 12.00 16.50 -3.03 N.A. 21.95
WCBI WestCo Bancorp of IL 26.97 2,476 66.8 26.97 20.00 26.50 1.77 169.70 25.44
WSTR WesterFed Fin. Corp. of MT 23.25 5,565 129.4 23.50 15.12 22.12 5.11 N.A. 27.40
WOFC Western Ohio Fin. Corp. of OH 24.50 2,339 57.3 24.50 19.62 23.75 3.16 N.A. 12.64
WWFC Westwood Fin. Corp. of NJ(8) 27.16 645 17.5 27.16 11.00 24.00 13.17 N.A. 64.61
WEHO Westwood Hmstd Fin Corp of OH 15.25 2,795 42.6 16.00 10.37 15.25 0.00 N.A. 25.83
WFI Winton Financial Corp. of OH 15.75 1,986 31.3 16.75 11.25 16.37 -3.79 N.A. 36.96
FFWD Wood Bancorp of OH 17.00 2,119 36.0 17.75 10.00 15.25 11.48 N.A. 50.04
YFCB Yonkers Fin. Corp. of NY 19.25 3,036 58.4 19.87 12.00 19.37 -0.62 N.A. 49.57
YFED York Financial Corp. of PA 24.37 7,008 170.8 26.75 15.23 24.50 -0.53 157.88 49.97
<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
--------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<C> <S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
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(8)* 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) 0.35 0.74 10.46 10.46 113.09
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 0.52 0.72 23.38 21.79 169.51
WWFC Westwood Fin. Corp. of NJ(8) 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 September 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
----------------------------------------------
SAIF-Insured Thrifts(304) 12.90 12.66 0.64 5.53 3.47 0.85 7.52 0.81 127.90 0.82
NYSE Traded Companies(9) 5.88 5.64 0.61 10.41 4.39 0.80 14.37 1.25 74.44 1.28
AMEX Traded Companies(17) 16.10 16.00 0.55 2.86 2.25 0.87 5.19 0.65 149.37 0.72
NASDAQ Listed OTC Companies(278) 12.95 12.69 0.64 5.52 3.52 0.85 7.43 0.80 128.75 0.81
California Companies(21) 7.44 7.18 0.30 4.48 2.35 0.43 6.99 1.88 70.98 1.33
Florida Companies(6) 7.63 7.18 0.92 11.46 3.84 0.74 9.13 1.52 73.71 0.80
Mid-Atlantic Companies(59) 10.86 10.52 0.62 6.34 3.78 0.86 8.94 0.87 96.67 0.94
Mid-West Companies(147) 14.04 13.86 0.68 5.39 3.68 0.90 7.12 0.64 151.15 0.70
New England Companies(9) 7.87 7.46 0.36 4.81 2.94 0.63 8.58 0.63 116.41 1.00
North-West Companies(7) 15.91 15.62 0.83 6.61 3.54 1.04 8.85 0.70 128.29 0.61
South-East Companies(42) 16.10 15.91 0.69 4.82 2.96 0.94 6.59 0.87 130.25 0.85
South-West Companies(7) 10.80 10.54 0.38 2.90 2.26 0.66 6.39 0.65 100.15 0.71
Western Companies (Excl CA)(6) 16.23 15.79 0.98 6.66 4.36 1.16 7.72 0.29 169.72 0.72
Thrift Strategy(240) 14.16 13.95 0.66 5.02 3.44 0.89 7.01 0.72 133.78 0.74
Mortgage Banker Strategy(37) 7.41 6.96 0.50 7.15 3.58 0.64 9.42 1.05 100.69 1.03
Real Estate Strategy(11) 7.33 7.14 0.55 7.01 3.84 0.76 10.31 1.42 97.48 1.35
Diversified Strategy(12) 7.66 7.42 1.06 13.44 4.71 1.08 14.25 1.31 120.54 1.12
Retail Banking Strategy(4) 8.40 8.19 0.11 2.23 0.87 0.03 1.72 1.85 101.37 1.82
Companies Issuing Dividends(257) 13.21 12.94 0.69 5.93 3.79 0.91 7.92 0.70 132.67 0.78
Companies Without Dividends(47) 11.08 10.96 0.35 3.13 1.60 0.50 5.18 1.50 97.37 1.07
Equity/Assets LESS THAN 6%(23) 4.94 4.65 0.38 7.53 3.43 0.56 11.40 1.41 83.13 1.03
Equity/Assets 6-12%(146) 8.61 8.27 0.56 6.60 3.69 0.74 8.80 0.92 123.46 0.94
Equity/Assets GREATER THAN 12%(135) 18.57 18.43 0.76 4.11 3.25 1.01 5.59 0.57 141.49 0.66
Converted Last 3 Mths (no MHC)(5) 20.95 20.90 0.73 3.44 2.96 0.75 3.59 1.67 25.74 0.58
Actively Traded Companies(41) 8.66 8.42 0.72 8.67 4.35 0.95 11.96 1.15 105.56 0.96
Market Value Below $20 Million(59) 15.47 15.40 0.56 3.45 2.90 0.81 5.49 0.79 103.24 0.67
Holding Company Structure(269) 13.38 13.15 0.63 5.29 3.41 0.85 7.28 0.81 123.82 0.81
Assets Over $1 Billion(62) 7.83 7.32 0.62 8.15 3.85 0.80 10.87 1.01 94.74 0.99
Assets $500 Million-$1 Billion(49) 10.15 9.86 0.63 6.37 3.57 0.80 8.11 0.95 170.56 1.06
Assets $250-$500 Million(68) 11.11 10.79 0.58 5.33 3.56 0.81 7.50 0.73 136.74 0.74
Assets less than $250 Million(125) 17.29 17.23 0.68 4.06 3.21 0.92 5.72 0.69 123.36 0.69
Goodwill Companies(124) 9.02 8.42 0.62 7.11 3.96 0.79 9.13 0.86 113.49 0.90
Non-Goodwill Companies(178) 15.44 15.44 0.65 4.45 3.14 0.90 6.45 0.77 137.60 0.77
Acquirors of FSLIC Cases(10) 7.19 6.79 0.57 7.79 3.99 0.82 11.71 1.53 51.85 0.89
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
---------------------------------------------
SAIF-Insured Thrifts(304) 21.40 141.21 17.27 145.46 18.60 0.37 1.68 35.64
NYSE Traded Companies(9) 21.89 195.06 12.31 192.84 15.63 0.32 0.89 18.69
AMEX Traded Companies(17) 22.98 122.62 20.19 123.74 17.96 0.40 2.09 45.59
NASDAQ Listed OTC Companies(278) 21.28 140.69 17.26 145.52 18.74 0.37 1.69 35.91
California Companies(21) 23.56 155.75 10.96 155.23 17.43 0.15 0.51 12.75
Florida Companies(6) 14.58 164.39 17.64 185.32 23.16 0.24 0.85 14.64
Mid-Atlantic Companies(59) 21.25 143.66 15.05 148.25 17.64 0.39 1.64 37.37
Mid-West Companies(147) 21.04 135.68 18.00 138.98 18.67 0.36 1.78 36.08
New England Companies(9) 22.55 154.66 11.88 168.01 18.82 0.46 1.53 34.62
North-West Companies(7) 17.86 161.17 22.12 169.00 18.63 0.36 1.39 27.43
South-East Companies(42) 22.44 144.94 22.26 149.43 19.93 0.44 2.07 44.52
South-West Companies(7) 21.77 123.57 12.52 131.55 18.11 0.35 1.66 52.02
Western Companies (Excl CA)(6) 23.61 140.18 21.03 146.77 20.02 0.56 2.68 55.16
Thrift Strategy(240) 21.61 133.01 18.19 137.06 18.64 0.38 1.80 38.40
Mortgage Banker Strategy(37) 21.14 175.60 12.53 183.19 19.11 0.33 1.16 27.51
Real Estate Strategy(11) 18.64 168.73 12.24 171.73 16.72 0.13 0.74 12.64
Diversified Strategy(12) 20.49 216.48 19.36 224.03 17.80 0.46 1.45 30.22
Retail Banking Strategy(4) 18.52 131.12 10.69 135.24 17.53 0.29 1.78 18.18
Companies Issuing Dividends(257) 21.36 142.29 17.66 146.73 18.46 0.43 1.97 41.61
Companies Without Dividends(47) 21.91 134.46 14.98 137.63 19.73 0.00 0.00 0.00
Equity/Assets LESS THAN 6%(23) 21.69 182.02 9.82 186.08 17.47 0.22 0.79 15.22
Equity/Assets 6-12%(146) 20.53 152.47 13.20 160.11 17.10 0.38 1.54 33.38
Equity/Assets GREATER THAN 12%(135) 22.58 123.80 22.63 125.33 20.57 0.38 1.98 42.75
Converted Last 3 Mths (no MHC)(5) 27.63 116.36 24.35 116.69 28.26 0.12 0.35 11.43
Actively Traded Companies(41) 21.11 181.10 15.00 183.49 16.93 0.49 1.64 31.62
Market Value Below $20 Million(59) 22.53 111.18 17.15 111.82 20.07 0.34 1.99 42.67
Holding Company Structure(269) 21.87 138.85 17.68 142.41 18.79 0.37 1.72 37.07
Assets Over $1 Billion(62) 21.27 179.35 14.34 191.11 18.00 0.43 1.30 29.94
Assets $500 Million-$1 Billion(49) 20.99 153.76 15.62 158.76 18.46 0.34 1.53 35.73
Assets $250-$500 Million(68) 20.85 141.46 15.42 147.08 17.37 0.37 1.74 32.89
Assets less than $250 Million(125) 22.00 119.21 20.25 119.84 19.63 0.34 1.90 40.77
Goodwill Companies(124) 20.91 158.72 13.97 169.52 17.69 0.40 1.53 32.84
Non-Goodwill Companies(178) 21.85 129.27 19.42 129.27 19.29 0.34 1.79 37.92
Acquirors of FSLIC Cases(10) 22.05 180.72 12.59 180.77 17.16 0.38 1.32 23.87
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
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 September 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
---------------------------------------------
BIF-Insured Thrifts(66) 11.89 11.52 1.19 11.58 6.75 1.20 11.41 0.91 143.16 1.45
NYSE Traded Companies(3) 7.58 6.00 0.77 10.55 5.39 0.78 10.86 1.88 43.17 1.03
AMEX Traded Companies(6) 11.89 11.10 0.74 7.96 4.58 0.74 8.04 0.99 209.73 1.25
NASDAQ Listed OTC Companies(57) 12.15 11.91 1.27 12.09 7.10 1.28 11.87 0.84 140.95 1.50
California Companies(4) 11.92 11.90 2.21 19.69 9.19 2.17 19.07 2.23 65.22 1.58
Mid-Atlantic Companies(17) 11.42 10.75 0.83 8.45 4.57 0.91 9.04 0.85 130.78 1.37
Mid-West Companies(2) 25.06 23.63 0.43 1.59 1.77 0.66 2.42 0.56 57.14 0.57
New England Companies(34) 8.99 8.69 1.27 13.76 8.33 1.22 13.17 0.87 162.82 1.66
North-West Companies(4) 12.39 12.00 1.21 10.53 6.01 1.18 10.22 0.16 215.39 1.03
South-East Companies(5) 27.76 27.76 1.14 4.44 3.36 1.23 4.77 0.67 135.35 0.76
Thrift Strategy(44) 12.92 12.50 1.12 9.95 6.42 1.12 9.74 0.83 150.36 1.38
Mortgage Banker Strategy(9) 8.83 8.62 0.86 11.23 5.84 0.95 11.87 0.71 135.17 1.41
Real Estate Strategy(6) 8.88 8.87 1.37 15.11 8.06 1.29 14.24 1.08 103.33 1.46
Diversified Strategy(7) 9.90 9.47 2.11 22.57 9.77 2.09 22.29 1.72 128.49 2.09
Companies Issuing Dividends(54) 11.91 11.50 1.03 10.52 5.72 1.04 10.37 0.77 149.98 1.37
Companies Without Dividends(12) 11.79 11.62 2.05 18.05 12.39 2.04 17.83 1.62 109.06 1.88
Equity/Assets LESS THAN 6%(5) 5.45 5.32 0.97 17.27 6.92 0.87 15.46 1.40 69.21 1.56
Equity/Assets 6-12%(45) 8.62 8.15 1.20 12.92 7.82 1.18 12.69 0.88 134.63 1.54
Equity/Assets GREATER THAN 12%(16) 22.11 21.92 1.24 6.65 3.95 1.34 7.10 0.85 186.23 1.19
Actively Traded Companies(20) 8.85 8.44 1.18 13.70 7.23 1.13 13.05 0.79 144.52 1.51
Market Value Below $20 Million(7) 18.52 18.21 1.35 5.04 10.09 1.47 5.66 1.20 69.33 1.19
Holding Company Structure(43) 13.45 13.10 1.29 11.09 6.77 1.30 11.02 0.86 144.05 1.51
Assets Over $1 Billion(17) 9.09 8.43 1.06 12.66 6.18 1.09 12.80 0.94 129.97 1.51
Assets $500 Million-$1 Billion(16) 9.48 8.95 1.16 12.71 6.93 1.12 12.15 0.84 142.79 1.54
Assets $250-$500 Million(14) 11.16 11.06 1.02 10.71 5.98 1.00 10.53 0.65 165.99 1.62
Assets less than $250 Million(19) 17.18 17.00 1.49 10.18 7.72 1.52 10.15 1.16 137.54 1.18
Goodwill Companies(31) 9.27 8.47 0.93 11.19 6.02 0.94 11.05 0.99 125.67 1.50
Non-Goodwill Companies(35) 14.17 14.17 1.42 11.92 7.39 1.42 11.75 0.85 159.41 1.41
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
--------------------------------------------
BIF-Insured Thrifts(66) 15.60 161.17 18.18 167.81 16.23 0.47 1.71 27.10
NYSE Traded Companies(3) 18.58 186.79 14.14 188.68 18.39 0.39 0.83 15.59
AMEX Traded Companies(6) 15.46 147.93 16.39 171.71 14.83 0.61 2.44 34.16
NASDAQ Listed OTC Companies(57) 15.41 161.23 18.64 166.42 16.18 0.45 1.67 27.40
California Companies(4) 12.64 166.34 19.87 166.52 13.64 0.00 0.00 0.00
Mid-Atlantic Companies(17) 18.99 156.16 17.70 165.50 18.01 0.48 1.72 34.45
Mid-West Companies(2) 0.00 92.95 23.30 98.59 0.00 0.00 0.00 0.00
New England Companies(34) 13.87 171.02 15.24 178.51 14.62 0.52 1.95 27.52
North-West Companies(4) 18.41 168.33 20.28 173.30 19.16 0.29 1.55 27.22
South-East Companies(5) 22.09 123.34 33.56 123.34 24.64 0.68 2.00 40.85
Thrift Strategy(44) 16.40 152.05 18.86 158.17 17.01 0.52 1.87 31.51
Mortgage Banker Strategy(9) 16.19 178.06 15.19 184.24 16.96 0.37 1.47 18.95
Real Estate Strategy(6) 12.97 174.26 15.35 174.42 13.40 0.20 0.99 11.07
Diversified Strategy(7) 11.47 200.02 18.87 214.67 11.85 0.36 1.24 17.10
Companies Issuing Dividends(54) 16.64 161.69 18.34 169.46 17.24 0.55 2.02 32.78
Companies Without Dividends(12) 10.14 158.45 17.28 159.37 10.66 0.00 0.00 0.00
Equity/Assets LESS THAN 6%(5) 15.30 212.24 12.95 219.01 17.90 0.18 1.05 16.86
Equity/Assets 6-12%(45) 14.60 170.20 15.03 179.18 14.86 0.53 1.87 26.96
Equity/Assets GREATER THAN 12%(16) 20.53 128.10 27.75 129.51 20.78 0.37 1.46 31.32
Actively Traded Companies(20) 14.53 177.15 15.37 187.34 15.40 0.53 1.86 26.97
Market Value Below $20 Million(7) 16.98 115.19 20.44 117.45 17.48 0.34 1.70 32.34
Holding Company Structure(43) 15.69 159.10 20.17 167.69 16.65 0.48 1.74 27.12
Assets Over $1 Billion(17) 16.88 189.00 17.67 199.05 17.50 0.53 1.67 26.11
Assets $500 Million-$1 Billion(16) 14.56 168.58 15.60 182.93 15.48 0.54 1.86 26.78
Assets $250-$500 Million(14) 14.56 156.11 16.40 157.50 14.50 0.36 1.64 24.94
Assets less than $250 Million(19) 16.40 134.04 22.48 136.63 17.14 0.43 1.66 30.06
Goodwill Companies(31) 16.18 170.21 15.09 184.59 17.08 0.49 1.78 27.34
Non-Goodwill Companies(35) 15.07 152.76 20.86 152.76 15.45 0.44 1.65 26.89
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
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 September 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
---------------------------------
SAIF-Insured Thrifts(21) 11.74 11.58 0.50 4.56 2.08 0.80 7.31 0.48 186.25 0.74
BIF-Insured Thrifts(2) 10.02 10.02 0.72 8.22 2.70 0.71 7.56 1.85 82.27 1.77
NASDAQ Listed OTC Companies(23) 11.55 11.40 0.53 4.97 2.15 0.79 7.34 0.66 172.39 0.86
Florida Companies(3) 9.81 9.78 0.47 4.51 2.09 0.72 6.91 0.45 64.99 0.46
Mid-Atlantic Companies(10) 12.12 11.84 0.45 3.95 1.63 0.74 6.52 0.89 200.99 1.02
Mid-West Companies(7) 11.79 11.78 0.57 5.19 2.56 0.88 8.23 0.38 185.51 0.62
New England Companies(1) 8.48 8.47 1.12 13.72 4.45 0.83 10.17 0.90 121.39 1.60
Thrift Strategy(21) 11.73 11.58 0.49 4.45 2.01 0.78 7.17 0.64 176.03 0.81
Diversified Strategy(1) 8.48 8.47 1.12 13.72 4.45 0.83 10.17 0.90 121.39 1.60
Companies Issuing Dividends(22) 11.21 11.06 0.53 5.13 2.16 0.79 7.49 0.66 172.39 0.83
Companies Without Dividends(1) 17.31 17.31 0.39 2.23 1.90 0.81 4.67 0.00 0.00 1.40
Equity/Assets 6-12%(16) 9.42 9.21 0.48 5.38 2.19 0.72 7.95 0.74 111.97 0.93
Equity/Assets >12%(7) 17.10 17.10 0.66 3.90 2.06 0.97 5.75 0.14 565.11 0.68
Actively Traded Companies(1) 9.42 8.40 0.58 6.23 2.35 0.91 9.74 0.68 83.02 1.06
Holding Company Structure(1) 9.42 8.40 0.58 6.23 2.35 0.91 9.74 0.68 83.02 1.06
Assets Over $1 Billion(5) 8.85 8.20 0.72 8.19 2.72 0.84 9.28 0.74 89.86 1.13
Assets $500 Million-$1 Billion(3) 9.81 9.78 0.47 4.51 2.09 0.72 6.91 0.45 64.99 0.46
Assets $250-$500 Million(5) 10.02 10.00 0.53 5.82 2.73 0.84 9.19 0.25 419.78 0.60
Assets less than $250 Million(10) 14.11 14.11 0.44 3.04 1.59 0.75 5.55 1.01 83.46 0.95
Goodwill Companies(9) 8.68 8.23 0.62 7.02 2.53 0.78 8.78 0.57 127.39 0.89
Non-Goodwill Companies(14) 12.99 12.99 0.48 3.94 1.96 0.79 6.62 0.72 202.39 0.84
MHC Institutions(23) 11.55 11.40 0.53 4.97 2.15 0.79 7.34 0.66 172.39 0.86
MHC Converted Last 3 Months(1) 17.31 17.31 0.39 2.23 1.90 0.81 4.67 0.00 0.00 1.40
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
---------------------------------
SAIF-Insured Thrifts(21) 20.14 203.50 23.69 199.23 25.19 0.57 2.22 53.82
BIF-Insured Thrifts(2) 22.48 283.29 28.36 283.42 0.00 0.52 1.83 48.92
NASDAQ Listed OTC Companies(23) 21.31 212.89 24.21 209.75 25.19 0.57 2.17 53.12
Florida Companies(3) 0.00 210.88 20.55 211.69 28.55 0.90 3.10 0.00
Mid-Atlantic Companies(10) 0.00 214.15 25.71 206.66 26.19 0.39 1.47 47.15
Mid-West Companies(7) 20.14 199.70 23.16 199.98 23.86 0.70 2.92 67.16
New England Companies(1) 22.48 285.91 24.24 286.17 0.00 0.68 2.18 48.92
Thrift Strategy(21) 20.14 208.32 24.20 204.66 25.19 0.56 2.17 53.82
Diversified Strategy(1) 22.48 285.91 24.24 286.17 0.00 0.68 2.18 48.92
Companies Issuing Dividends(22) 21.31 218.85 24.43 215.90 25.20 0.60 2.30 61.97
Companies Without Dividends(1) 0.00 117.48 20.33 117.48 25.18 0.00 0.00 0.00
Equity/Assets 6-12%(16) 21.31 224.83 21.61 221.36 24.45 0.56 2.05 61.97
Equity/Assets >12%(7) 0.00 184.23 30.95 184.23 27.04 0.57 2.50 0.00
Actively Traded Companies(1) 0.00 253.92 23.91 284.76 27.20 0.48 1.41 60.00
Holding Company Structure(1) 0.00 253.92 23.91 284.76 27.20 0.48 1.41 60.00
Assets Over $1 Billion(5) 22.48 279.08 25.17 285.46 27.20 0.52 1.54 59.38
Assets $500 Million-$1 Billion(3) 0.00 210.88 20.55 211.69 28.55 0.90 3.10 0.00
Assets $250-$500 Million(5) 20.14 214.92 22.12 215.33 19.02 0.69 2.49 67.16
Assets less than $250 Million(10) 0.00 187.55 25.68 187.55 27.52 0.45 2.10 0.00
Goodwill Companies(9) 22.48 252.30 22.67 249.61 25.36 0.57 1.86 61.42
Non-Goodwill Companies(14) 20.14 196.47 24.97 196.47 25.12 0.56 2.33 32.37
MHC Institutions(23) 21.31 212.89 24.21 209.75 25.19 0.57 2.17 53.12
MHC Converted Last 3 Months(1) 0.00 117.48 20.33 117.48 25.18 0.00 0.00 0.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
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 September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <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 3.63 0.62 15.44 1.90 42.90 1.25
CSA Coast Savings Financial of CA 4.92 4.86 0.21 4.28 2.04 0.53 10.73 1.40 65.70 1.37
CFB Commercial Federal Corp. of NE 6.00 5.32 0.65 11.03 4.56 0.91 15.55 0.89 76.36 0.91
DME Dime Bancorp, Inc. of NY* 5.27 5.03 0.56 10.57 5.12 0.71 13.39 1.57 31.98 0.85
DSL Downey Financial Corp. of CA 6.93 6.84 0.44 5.82 3.74 0.73 9.68 0.95 55.76 0.58
FRC First Republic Bancorp of CA* 7.17 7.17 0.70 11.10 5.65 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 2.56 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 7.84 1.24 19.62 1.31 42.43 0.68
GPT GreenPoint Fin. Corp. of NY* 10.31 5.79 1.06 9.99 5.40 1.03 9.74 2.89 27.84 1.30
NYB New York Bancorp, Inc. of NY 5.08 5.08 1.38 26.83 6.53 1.62 31.44 1.22 48.76 0.97
WES Westcorp Inc. of Orange CA 9.05 9.02 0.87 9.10 5.24 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 2.16 0.50 3.67 0.52 190.96 1.35
BKC American Bank of Waterbury CT* 8.29 7.95 1.27 15.35 8.76 1.10 13.19 1.81 48.13 1.45
BFD BostonFed Bancorp of MA 8.79 8.49 0.51 5.08 3.77 0.66 6.58 0.52 114.29 0.74
CFX CFX Corp of NH* 7.44 6.96 0.94 11.53 5.18 1.12 13.73 0.72 120.07 1.23
CNY Carver Bancorp, Inc. of NY 8.35 8.01 -0.44 -4.95 -6.17 0.01 0.07 1.37 42.60 1.02
CBK Citizens First Fin.Corp. of IL 14.08 14.08 0.29 1.95 1.64 0.58 3.84 0.59 37.65 0.26
ESX Essex Bancorp of VA(8) 0.27 0.17 -0.03 -16.67 -1.13 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 2.95 0.79 3.23 0.07 806.45 0.98
FAB FirstFed America Bancorp of MA 12.16 12.16 -0.20 -2.35 -1.04 0.47 5.61 0.40 235.98 1.10
GAF GA Financial Corp. of PA 15.18 15.02 1.00 5.26 4.48 1.27 6.71 0.12 132.49 0.43
JSB JSB Financial, Inc. of NY 22.85 22.85 1.80 8.12 5.80 1.71 7.74 1.08 33.97 0.62
KNK Kankakee Bancorp of IL 11.09 10.42 0.66 6.35 5.33 0.82 7.92 0.94 67.06 0.92
KYF Kentucky First Bancorp of KY 16.56 16.56 0.87 4.64 4.55 1.12 6.00 0.07 630.51 0.75
MBB MSB Bancorp of Middletown NY* 7.39 3.63 0.17 2.40 2.05 0.18 2.50 0.71 38.66 0.63
PDB Piedmont Bancorp of NC 16.63 16.63 -0.42 -1.94 -1.80 0.66 3.07 0.91 71.58 0.79
SSB Scotland Bancorp of NC 37.02 37.02 1.41 3.88 2.74 1.72 4.72 NA NA 0.50
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.18 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 16.90 16.72 0.15 0.82 0.81 0.51 2.77 NA NA NA
SSM Stone Street Bancorp of NC 28.85 28.85 1.43 4.18 3.73 1.71 5.02 0.27 187.50 0.62
TSH Teche Holding Company of LA 13.14 13.14 0.69 5.03 4.25 0.96 6.96 0.27 304.97 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.70 15.70 1.41 8.40 5.40 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 3.77 0.82 5.68 1.21 44.02 0.80
TBK Tolland Bank of CT* 6.94 6.74 0.75 11.37 6.39 0.78 11.89 2.13 54.09 1.87
WSB Washington SB, FSB of MD 8.30 8.30 0.50 6.00 4.32 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 3.23 0.13 1.61 0.94 45.77 0.66
AFED AFSALA Bancorp, Inc. of NY 13.47 13.47 0.79 6.46 4.75 0.79 6.46 0.45 150.77 1.43
ALBK ALBANK Fin. Corp. of Albany NY 9.20 8.04 0.84 9.16 5.18 1.04 11.28 0.91 78.77 0.99
AMFC AMB Financial Corp. of IN 14.95 14.95 0.73 4.14 4.55 0.81 4.57 0.81 49.41 0.53
ASBP ASB Financial Corp. of OH 15.56 15.56 0.60 3.25 3.00 0.86 4.67 1.02 71.62 1.09
ABBK Abington Savings Bank of MA* 6.92 6.23 0.82 12.05 6.78 0.73 10.71 0.20 211.97 0.69
AABC Access Anytime Bancorp of NM 7.44 7.44 -0.50 -8.75 -6.92 -0.12 -2.14 1.60 29.31 0.92
AFBC Advance Fin. Bancorp of WV 15.45 15.45 0.39 4.31 2.21 0.79 8.74 0.37 89.84 0.40
AADV Advantage Bancorp of WI 9.21 8.62 0.40 4.49 2.66 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 5.77 1.09 11.12 0.39 191.75 1.20
ALBC Albion Banc Corp. of Albion NY 8.73 8.73 0.11 1.14 1.16 0.38 4.07 0.72 53.94 0.54
ABCL Allied Bancorp of IL 8.91 8.80 0.52 5.86 2.68 0.76 8.56 0.15 257.09 0.53
<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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
---------------------
AHM Ahmanson and Co. H.F. of CA 27.59 268.40 11.19 NM 17.28 0.88 1.61 44.44
CSA Coast Savings Financial of CA NM 202.08 9.94 204.63 19.60 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 21.95 227.62 13.67 256.70 15.57 0.28 0.62 13.66
DME Dime Bancorp, Inc. of NY* 19.52 200.78 10.59 210.47 15.41 0.16 0.78 15.24
DSL Downey Financial Corp. of CA 26.74 150.72 10.45 152.82 16.08 0.32 1.39 37.21
FRC First Republic Bancorp of CA* 17.71 166.79 11.96 166.89 20.77 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 29.81 176.02 8.50 177.97 16.28 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA NM 172.99 9.56 194.63 16.65 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 12.76 195.90 12.48 195.90 10.46 0.44 0.51 6.53
GPT GreenPoint Fin. Corp. of NY* 18.51 192.81 19.88 NM 18.99 1.00 1.70 31.55
NYB New York Bancorp, Inc. of NY 15.31 NM 19.93 NM 13.06 0.60 1.98 30.30
WES Westcorp Inc. of Orange CA 19.09 166.72 15.09 167.25 NM 0.40 1.89 36.04
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* NM 130.24 22.70 130.24 NM 0.36 1.66 NM
BKC American Bank of Waterbury CT* 11.42 164.22 13.61 171.05 13.29 1.44 4.03 46.01
BFD BostonFed Bancorp of MA 26.51 136.06 11.96 140.75 20.44 0.28 1.43 37.84
CFX CFX Corp of NH* 19.32 202.00 15.02 215.96 16.22 0.88 4.14 NM
CNY Carver Bancorp, Inc. of NY NM 80.38 6.71 83.80 NM 0.20 1.67 NM
CBK Citizens First Fin.Corp. of IL NM 123.81 17.43 123.81 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 2.47 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 114.42 27.32 114.42 NM 0.20 1.14 38.46
FAB FirstFed America Bancorp of MA NM 141.09 17.16 141.09 NM 0.00 0.00 NM
GAF GA Financial Corp. of PA 22.34 125.40 19.03 126.74 17.52 0.48 2.69 60.00
JSB JSB Financial, Inc. of NY 17.24 134.89 30.83 134.89 18.09 1.40 2.92 50.36
KNK Kankakee Bancorp of IL 18.75 114.22 12.67 121.53 15.03 0.48 1.58 29.63
KYF Kentucky First Bancorp of KY 21.98 114.15 18.91 114.15 17.00 0.50 3.92 NM
MBB MSB Bancorp of Middletown NY* NM 112.86 8.34 229.96 NM 0.60 2.51 NM
PDB Piedmont Bancorp of NC NM 142.32 23.67 142.32 NM 0.40 3.79 NM
SSB Scotland Bancorp of NC NM 138.54 51.29 138.54 NM 0.30 1.61 58.82
SZB SouthFirst Bancshares of AL NM 104.30 14.60 104.30 NM 0.50 2.99 NM
SRN Southern Banc Company of AL NM 111.79 18.89 112.96 NM 0.35 2.17 NM
SSM Stone Street Bancorp of NC 26.80 132.92 38.35 132.92 22.33 0.45 2.10 56.25
TSH Teche Holding Company of LA 23.55 118.29 15.55 118.29 17.01 0.50 2.72 64.10
FTF Texarkana Fst. Fin. Corp of AR 18.51 161.34 25.33 161.34 14.97 0.56 2.31 42.75
THR Three Rivers Fin. Corp. of MI 26.54 106.37 14.63 106.37 18.40 0.40 2.47 65.57
TBK Tolland Bank of CT* 15.65 163.87 11.37 168.64 14.97 0.20 1.15 18.02
WSB Washington SB, FSB of MD 23.13 137.43 11.41 137.43 15.77 0.10 1.44 33.33
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN NM 114.06 9.42 116.46 NM 0.40 1.10 33.90
AFED AFSALA Bancorp, Inc. of NY 21.04 117.03 15.77 117.03 21.04 0.16 0.93 19.51
ALBK ALBANK Fin. Corp. of Albany NY 19.32 171.18 15.75 195.88 15.69 0.72 1.63 31.44
AMFC AMB Financial Corp. of IN 21.97 99.25 14.84 99.25 19.86 0.24 1.66 36.36
ASBP ASB Financial Corp. of OH NM 128.08 19.93 128.08 23.21 0.40 3.08 NM
ABBK Abington Savings Bank of MA* 14.75 170.15 11.77 188.92 16.60 0.40 1.26 18.52
AABC Access Anytime Bancorp of NM NM 99.54 7.41 99.54 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 107.52 16.61 107.52 22.35 0.32 2.02 NM
AADV Advantage Bancorp of WI NM 164.37 15.15 175.81 16.99 0.40 0.84 31.50
AFCB Affiliated Comm BC, Inc of MA 17.32 160.70 15.71 161.59 15.23 0.48 1.81 31.37
ALBC Albion Banc Corp. of Albion NY NM 97.04 8.47 97.04 24.22 0.32 1.38 NM
ABCL Allied Bancorp of IL NM 145.30 12.94 147.12 25.56 0.66 1.94 72.53
</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 September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
ATSB AmTrust Capital Corp. of IN 10.17 10.06 0.29 2.88 3.11 0.19 1.87 2.84 23.48 0.93
AHCI Ambanc Holding Co., Inc. of NY* 12.94 12.94 -0.59 -4.26 -4.23 -0.62 -4.45 0.63 124.04 1.40
ASBI Ameriana Bancorp of IN 10.96 10.95 0.61 5.52 3.47 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 13.65 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 1.85 0.65 6.74 0.74 102.82 1.17
ABCW Anchor Bancorp Wisconsin of WI 6.22 6.11 0.75 12.06 5.59 0.96 15.56 0.92 126.05 1.48
ANDB Andover Bancorp, Inc. of MA* 8.06 8.06 1.10 13.91 7.89 1.13 14.34 1.01 99.08 1.41
ASFC Astoria Financial Corp. of NY 7.83 6.57 0.56 7.09 4.05 0.79 10.12 0.51 37.96 0.48
AVND Avondale Fin. Corp. of IL 9.12 9.12 -0.49 -5.19 -5.04 -1.51 -16.06 3.18 96.19 5.33
BKCT Bancorp Connecticut of CT* 10.25 10.25 1.32 12.60 6.77 1.24 11.90 1.19 100.82 1.98
BPLS Bank Plus Corp. of CA 5.06 5.06 -0.26 -5.31 -4.05 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 2.85 0.57 3.47 0.28 51.72 0.20
BANC BankAtlantic Bancorp of FL 5.62 4.62 0.90 14.98 7.80 0.65 10.86 0.97 102.98 1.39
BKUNA BankUnited SA of FL 3.72 3.02 0.21 4.55 2.25 0.34 7.54 0.60 28.73 0.21
BVCC Bay View Capital Corp. of CA 6.34 5.32 0.39 6.37 3.66 0.63 10.37 0.83 137.32 1.51
FSNJ Bayonne Banchsares of NJ 8.33 8.33 -0.52 -6.60 -8.36 0.29 3.65 1.22 43.59 1.36
BFSB Bedford Bancshares of VA 14.16 14.16 1.01 6.98 4.51 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 6.32 1.16 12.75 1.42 141.26 3.06
BYFC Broadway Fin. Corp. of CA 10.01 10.01 -0.14 -1.23 -1.73 0.21 1.88 2.06 39.74 1.01
CBES CBES Bancorp of MO 18.39 18.39 0.77 5.22 3.83 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 5.48 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 6.16 1.33 5.33 1.26 14.79 0.20
CNSB CNS Bancorp of MO 24.94 24.94 0.42 1.70 1.47 0.77 3.13 0.53 72.14 0.58
CSBF CSB Financial Group Inc of IL* 25.06 23.63 0.43 1.59 1.77 0.66 2.42 0.56 57.14 0.57
CBCI Calumet Bancorp of Chicago IL 15.50 15.50 1.15 7.22 6.15 1.46 9.16 1.16 102.51 1.57
CAFI Camco Fin. Corp. of OH 9.57 8.82 0.82 9.11 6.08 0.92 10.18 0.49 54.74 0.32
CMRN Cameron Fin. Corp. of MO 21.69 21.69 1.07 4.43 4.33 1.33 5.51 0.73 111.82 0.97
CAPS Capital Savings Bancorp of MO 8.80 8.80 0.67 7.61 5.01 0.93 10.68 0.31 97.24 0.39
CFNC Carolina Fincorp of NC* 22.82 22.82 1.14 4.92 3.89 1.09 4.70 0.14 254.78 0.51
CASB Cascade SB of Everett WA(8) 6.17 6.17 0.46 7.49 4.78 0.58 9.46 0.39 203.69 0.95
CATB Catskill Fin. Corp. of NY* 25.04 25.04 1.43 5.21 5.07 1.45 5.27 0.47 140.85 1.48
CNIT Cenit Bancorp of Norfolk VA 7.24 6.65 0.87 12.05 7.44 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 6.90 0.90 8.90 0.85 97.49 1.21
CENB Century Bancshares of NC* 29.93 29.93 1.76 5.86 5.42 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 5.30 1.23 18.32 0.27 164.80 0.73
CVAL Chester Valley Bancorp of PA 8.36 8.36 0.66 7.47 4.40 0.93 10.57 0.23 381.68 1.10
CTZN CitFed Bancorp of Dayton OH 6.37 5.74 0.58 9.12 4.08 0.82 12.83 0.41 143.79 0.95
CLAS Classic Bancshares of KY 14.72 12.42 0.55 3.05 3.21 0.77 4.27 0.94 65.45 0.93
CMSB Cmnwealth Bancorp of PA 9.63 7.53 0.55 5.26 3.92 0.70 6.71 0.50 86.54 0.79
CBSA Coastal Bancorp of Houston TX 3.33 2.77 0.25 7.57 4.46 0.44 13.16 0.58 39.81 0.51
CFCP Coastal Fin. Corp. of SC 6.17 6.17 0.94 15.22 3.80 1.03 16.67 0.21 436.85 1.15
CMSV Commty. Svgs, MHC of FL (48.5) 11.25 11.25 0.56 4.87 2.35 0.84 7.27 0.55 67.15 0.63
CFTP Community Fed. Bancorp of MS 27.46 27.46 1.33 4.15 3.42 1.62 5.07 0.30 91.63 0.46
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 15.40 15.19 0.56 3.65 3.02 0.57 3.69 2.02 26.10 0.83
CIBI Community Inv. Bancorp of OH 12.04 12.04 0.62 5.22 4.06 0.94 7.95 0.63 83.42 0.63
COOP Cooperative Bk.for Svgs. of NC 7.63 7.63 -0.80 -10.08 -6.55 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 3.90 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 5.40 0.80 14.08 0.34 198.09 0.93
DCBI Delphos Citizens Bancorp of OH 28.41 28.41 1.45 6.45 4.15 1.45 6.45 0.35 27.76 0.13
DIME Dime Community Bancorp of NY 14.52 12.50 0.96 5.96 4.82 1.04 6.41 0.73 112.22 1.43
DIBK Dime Financial Corp. of CT* 7.96 7.70 1.90 23.27 9.52 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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
ATSB AmTrust Capital Corp. of IN NM 93.74 9.53 94.77 NM 0.20 1.55 50.00
AHCI Ambanc Holding Co., Inc. of NY* NM 105.81 13.69 105.81 NM 0.20 1.32 NM
ASBI Ameriana Bancorp of IN 28.83 160.27 17.56 160.39 20.59 0.64 2.96 NM
AFFFZ America First Fin. Fund of CA(8) 7.33 131.24 11.08 132.88 5.97 1.60 3.96 29.04
ANBK American Nat'l Bancorp of MD(8) NM 159.49 14.30 159.49 23.26 0.12 0.60 32.43
ABCW Anchor Bancorp Wisconsin of WI 17.90 209.59 13.04 213.46 13.88 0.32 1.15 20.65
ANDB Andover Bancorp, Inc. of MA* 12.67 166.21 13.40 166.21 12.29 0.68 2.09 26.46
ASFC Astoria Financial Corp. of NY 24.68 169.19 13.24 201.46 17.28 0.60 1.24 30.61
AVND Avondale Fin. Corp. of IL NM 106.44 9.71 106.44 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 14.77 183.31 18.78 183.31 15.64 1.00 3.15 46.51
BPLS Bank Plus Corp. of CA NM 122.65 6.21 122.79 NM 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI NM 144.45 20.97 144.45 NM 0.32 1.72 60.38
BANC BankAtlantic Bancorp of FL 12.82 183.89 10.34 223.89 17.69 0.13 1.04 13.27
BKUNA BankUnited SA of FL NM 169.57 6.32 209.27 26.81 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 27.32 175.26 11.11 208.83 16.77 0.32 1.21 32.99
FSNJ Bayonne Banchsares of NJ NM 80.05 6.67 80.05 21.66 0.17 1.35 NM
BFSB Bedford Bancshares of VA 22.15 150.30 21.29 150.30 17.29 0.56 2.22 49.12
BFFC Big Foot Fin. Corp. of IL NM 118.55 20.13 118.55 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 15.81 191.67 17.79 191.67 15.81 0.08 1.58 25.00
BYFC Broadway Fin. Corp. of CA NM 75.09 7.51 75.09 NM 0.20 1.82 NM
CBES CBES Bancorp of MO 26.09 105.39 19.38 105.39 20.93 0.40 2.22 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 18.24 173.24 9.01 173.57 12.81 0.36 1.00 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 16.24 120.63 28.90 120.63 22.09 0.50 2.63 42.74
CNSB CNS Bancorp of MO NM 114.56 28.57 114.56 NM 0.24 1.41 NM
CSBF CSB Financial Group Inc of IL* NM 92.95 23.30 98.59 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 16.27 121.37 18.81 121.37 12.83 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 16.44 125.17 11.97 135.69 14.72 0.49 2.68 44.14
CMRN Cameron Fin. Corp. of MO 23.08 104.77 22.72 104.77 18.56 0.28 1.56 35.90
CAPS Capital Savings Bancorp of MO 19.96 145.12 12.77 145.12 14.23 0.24 1.47 29.27
CFNC Carolina Fincorp of NC* 25.74 127.27 29.05 127.27 26.92 0.24 1.37 35.29
CASB Cascade SB of Everett WA(8) 20.90 150.71 9.30 150.71 16.56 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 19.71 111.07 27.81 111.07 19.48 0.28 1.67 32.94
CNIT Cenit Bancorp of Norfolk VA 13.43 161.86 11.71 176.24 14.64 1.00 1.99 26.67
CEBK Central Co-Op. Bank of MA* 14.49 122.26 12.78 137.30 14.29 0.32 1.53 22.22
CENB Century Bancshares of NC* 18.45 108.15 32.37 108.15 18.23 2.00 2.52 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 18.86 265.67 17.82 283.79 15.06 1.00 1.78 33.56
CVAL Chester Valley Bancorp of PA 22.73 162.63 13.59 162.63 16.07 0.42 1.97 44.68
CTZN CitFed Bancorp of Dayton OH 24.48 208.06 13.25 230.92 17.40 0.36 0.76 18.56
CLAS Classic Bancshares of KY NM 94.34 13.89 111.82 22.22 0.28 2.00 62.22
CMSB Cmnwealth Bancorp of PA 25.54 136.70 13.16 174.80 20.02 0.28 1.59 40.58
CBSA Coastal Bancorp of Houston TX 22.41 163.73 5.45 196.97 12.90 0.48 1.48 33.10
CFCP Coastal Fin. Corp. of SC 26.32 NM 23.08 NM 24.04 0.36 1.44 37.89
CMSV Commty. Svgs, MHC of FL (48.5) NM 201.29 22.64 201.29 28.55 0.90 2.89 NM
CFTP Community Fed. Bancorp of MS 29.24 139.11 38.20 139.11 23.96 0.30 1.74 50.85
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 120.91 18.61 122.57 NM 0.60 1.73 57.14
CIBI Community Inv. Bancorp of OH 24.60 129.60 15.60 129.60 16.15 0.32 2.06 50.79
COOP Cooperative Bk.for Svgs. of NC NM 152.52 11.64 152.52 NM 0.00 0.00 NM
CRZY Crazy Woman Creek Bncorp of WY 25.64 101.36 26.17 101.36 20.94 0.40 2.69 68.97
DNFC D&N Financial Corp. of MI 18.52 186.03 10.37 187.92 14.05 0.20 0.98 18.18
DCBI Delphos Citizens Bancorp of OH 24.13 116.34 33.05 116.34 24.13 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 20.74 133.74 19.41 155.25 19.31 0.18 0.92 19.15
DIBK Dime Financial Corp. of CT* 10.50 219.08 17.45 226.45 10.47 0.40 1.35 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
Weekly Thrift Market Line - Part Two
Prices As Of September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
EGLB Eagle BancGroup of IL 11.85 11.85 -0.09 -0.77 -0.71 0.20 1.73 1.48 35.83 0.76
EBSI Eagle Bancshares of Tucker GA 8.30 8.30 0.43 5.14 3.66 0.58 6.99 1.07 63.66 0.95
EGFC Eagle Financial Corp. of CT 6.87 5.36 0.08 1.08 0.52 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 1.74 0.63 3.40 0.17 141.97 0.50
EMLD Emerald Financial Corp of OH 7.58 7.46 0.72 9.43 5.40 0.89 11.64 0.24 106.84 0.35
EIRE Emerald Island Bancorp, MA* 7.08 7.08 0.85 12.35 6.20 0.89 13.00 0.40 151.40 0.89
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.24 1.09 3.12 0.06 312.50 0.46
EFBI Enterprise Fed. Bancorp of OH 12.33 12.32 0.71 5.16 3.42 0.79 5.73 0.03 576.09 0.29
EQSB Equitable FSB of Wheaton MD 5.04 5.04 0.46 9.09 5.50 0.74 14.50 0.49 36.72 0.26
FFFG F.F.O. Financial Group of FL(8) 6.49 6.49 0.68 10.82 3.78 0.97 15.58 3.28 52.54 2.40
FCBF FCB Fin. Corp. of Neenah WI 17.50 17.50 0.92 5.20 2.24 1.09 6.16 0.15 412.16 0.82
FFBS FFBS Bancorp of Columbus MS 19.23 19.23 1.16 5.96 4.32 1.47 7.53 0.37 118.76 0.62
FFDF FFD Financial Corp. of OH 24.74 24.74 0.78 3.42 2.82 1.08 4.74 NA NA 0.27
FFLC FFLC Bancorp of Leesburg FL 13.48 13.48 0.70 4.57 3.29 1.01 6.60 0.19 163.65 0.44
FFFC FFVA Financial Corp. of VA 13.18 12.90 1.11 7.86 4.13 1.34 9.52 0.18 318.63 0.98
FFWC FFW Corporation of Wabash IN 9.52 8.58 0.84 8.39 6.33 1.05 10.48 0.16 203.56 0.50
FFYF FFY Financial Corp. of OH 13.71 13.71 0.90 5.84 4.76 1.27 8.31 0.67 74.18 0.64
FMCO FMS Financial Corp. of NJ 6.56 6.44 0.69 10.76 5.72 1.02 15.79 1.06 48.60 0.92
FFHH FSF Financial Corp. of MN 11.35 11.35 0.66 5.22 4.39 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 4.89 0.97 8.33 0.40 101.18 0.93
FBCI Fidelity Bancorp of Chicago IL 10.38 10.36 0.55 5.34 3.98 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 (47.7) 8.38 8.31 0.38 4.15 1.83 0.60 6.56 0.34 62.82 0.29
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 3.19 1.02 6.89 0.08 381.04 0.37
FIBC Financial Bancorp, Inc. of NY 9.36 9.31 0.56 5.74 3.82 1.00 10.23 1.81 26.91 0.89
FBSI First Bancshares of MO 13.54 13.52 0.91 6.15 5.38 1.10 7.44 0.56 52.51 0.36
FBBC First Bell Bancorp of PA 9.83 9.83 1.07 7.64 6.68 1.24 8.87 0.07 147.42 0.13
FBER First Bergen Bancorp of NJ 14.19 14.19 0.44 2.73 2.13 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 1.48 0.54 3.43 NA NA 0.68
FSTC First Citizens Corp of GA 9.13 6.85 1.12 11.27 4.39 1.11 11.11 NA NA 1.47
FCME First Coastal Corp. of ME* 9.23 9.23 4.21 NM 40.91 4.08 NM 2.01 85.72 2.52
FFBA First Colorado Bancorp of Co 12.93 12.75 0.89 6.25 4.29 0.88 6.17 0.23 121.82 0.38
FDEF First Defiance Fin.Corp. of OH 21.31 21.31 0.75 3.36 2.80 1.03 4.61 0.45 96.96 0.57
FESX First Essex Bancorp of MA* 6.97 6.06 0.96 13.00 7.09 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 4.39 0.70 11.19 0.37 71.33 1.42
FFSX First FS&LA. MHC of IA (46.1) 8.29 8.23 0.43 5.21 2.46 0.73 8.99 0.11 342.10 0.52
BDJI First Fed. Bancorp. of MN 10.87 10.87 0.30 2.56 2.24 0.63 5.44 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 4.84 0.86 13.16 NA NA 0.65
FFKY First Fed. Fin. Corp. of KY 13.70 12.91 1.30 9.44 5.01 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 3.97 0.84 13.65 1.66 41.99 0.84
FFBI First Financial Bancorp of IL 8.66 8.66 -0.38 -4.73 -4.42 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 4.54 1.28 17.95 0.26 148.86 0.64
FFHS First Franklin Corp. of OH 9.02 8.96 0.19 2.14 1.82 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 4.13 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.66 6.55 0.89 13.61 8.05 1.16 17.76 0.64 114.23 1.39
FFSL First Independence Corp. of KS 10.43 10.43 0.43 3.84 3.21 0.69 6.12 0.87 69.37 0.91
FISB First Indiana Corp. of IN 9.56 9.44 0.83 8.86 4.98 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 4.70 0.77 10.30 1.60 30.58 0.84
FLKY First Lancaster Bncshrs of KY 34.23 34.23 1.15 3.72 2.97 1.40 4.52 0.75 32.89 0.29
FLFC First Liberty Fin. Corp. of GA 7.37 6.65 0.88 12.11 5.97 0.72 9.91 0.81 110.00 1.29
CASH First Midwest Fin. Corp. of IA 11.39 10.09 0.74 6.46 5.33 0.94 8.21 0.85 75.48 0.93
FMBD First Mutual Bancorp of IL 12.85 9.73 0.10 0.57 0.66 0.31 1.84 0.18 187.34 0.46
FMSB First Mutual SB of Bellevue WA* 6.82 6.82 1.02 15.34 7.61 1.00 14.95 0.01 NA 1.27
<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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
EGLB Eagle BancGroup of IL NM 101.86 12.07 101.86 NM 0.00 0.00 NM
EBSI Eagle Bancshares of Tucker GA 27.34 140.56 11.67 140.56 20.11 0.60 3.43 NM
EGFC Eagle Financial Corp. of CT NM 165.17 11.34 211.58 NM 1.00 2.75 NM
ETFS East Texas Fin. Serv. of TX NM 97.80 17.76 97.80 27.90 0.20 1.02 58.82
EMLD Emerald Financial Corp of OH 18.52 166.11 12.59 168.73 15.00 0.24 1.60 29.63
EIRE Emerald Island Bancorp, MA* 16.12 182.97 12.95 182.97 15.31 0.28 1.14 18.42
EFBC Empire Federal Bancorp of MT NM 105.89 36.95 105.89 NM 0.30 1.92 NM
EFBI Enterprise Fed. Bancorp of OH 29.27 151.71 18.71 151.90 26.37 1.00 4.17 NM
EQSB Equitable FSB of Wheaton MD 18.18 155.04 7.81 155.04 11.40 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL(8) 26.48 269.11 17.47 269.11 18.39 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 229.61 40.18 229.61 NM 0.80 2.99 NM
FFBS FFBS Bancorp of Columbus MS 23.16 136.22 26.20 136.22 18.33 0.50 2.27 52.63
FFDF FFD Financial Corp. of OH NM 107.79 26.66 107.79 25.62 0.30 1.92 68.18
FFLC FFLC Bancorp of Leesburg FL NM 143.27 19.31 143.27 21.08 0.48 1.49 45.28
FFFC FFVA Financial Corp. of VA 24.24 196.44 25.89 200.63 20.00 0.48 1.50 36.36
FFWC FFW Corporation of Wabash IN 15.80 123.89 11.80 137.52 12.66 0.72 2.41 38.10
FFYF FFY Financial Corp. of OH 20.99 135.57 18.59 135.57 14.76 0.70 2.61 54.69
FMCO FMS Financial Corp. of NJ 17.47 178.81 11.73 182.03 11.90 0.28 1.03 17.95
FFHH FSF Financial Corp. of MN 22.76 125.35 14.23 125.35 17.93 0.50 2.82 64.10
FOBC Fed One Bancorp of Wheeling WV 20.45 121.77 13.47 127.68 14.36 0.58 2.86 58.59
FBCI Fidelity Bancorp of Chicago IL 25.13 131.01 13.61 131.30 17.95 0.32 1.34 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 (47.7) NM 220.47 18.46 222.09 NM 0.90 3.30 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 131.47 17.01 148.98 21.33 0.28 1.75 54.90
FIBC Financial Bancorp, Inc. of NY 26.15 148.21 13.87 148.89 14.68 0.40 1.76 45.98
FBSI First Bancshares of MO 18.60 118.46 16.04 118.64 15.38 0.20 0.83 15.50
FBBC First Bell Bancorp of PA 14.97 147.22 14.46 147.22 12.90 0.40 2.52 37.74
FBER First Bergen Bancorp of NJ NM 132.67 18.83 132.67 27.08 0.20 1.12 52.63
SKBO First Carnegie,MHC of PA(45.0) NM 159.16 24.91 159.16 NM 0.30 1.85 NM
FSTC First Citizens Corp of GA 22.76 202.95 18.53 270.49 23.08 0.44 1.33 30.34
FCME First Coastal Corp. of ME* 2.44 106.28 9.81 106.28 2.52 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 23.30 160.05 20.69 162.25 23.59 0.44 2.33 54.32
FDEF First Defiance Fin.Corp. of OH NM 121.98 26.00 121.98 26.05 0.32 2.08 74.42
FESX First Essex Bancorp of MA* 14.11 160.93 11.22 185.27 16.19 0.48 2.58 36.36
FFES First FS&LA of E. Hartford CT 22.78 146.51 9.42 146.51 13.85 0.60 1.73 39.47
FFSX First FS&LA. MHC of IA (46.1) NM 203.78 16.90 205.43 23.53 0.48 1.71 69.57
BDJI First Fed. Bancorp. of MN NM 119.32 12.97 119.32 21.00 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 26.07 129.10 19.32 129.10 19.03 0.24 1.14 29.63
FTFC First Fed. Capital Corp. of WI 20.65 229.04 14.56 244.43 17.79 0.48 1.97 40.68
FFKY First Fed. Fin. Corp. of KY 19.96 183.47 25.14 194.78 16.73 0.56 2.46 49.12
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 25.17 224.58 13.73 224.58 17.14 0.72 2.00 50.35
FFBI First Financial Bancorp of IL NM 109.19 9.45 109.19 20.48 0.00 0.00 NM
FFHC First Financial Corp. of WI(8) 22.02 284.92 20.30 292.44 16.38 0.60 1.80 39.74
FFHS First Franklin Corp. of OH NM 115.03 10.37 115.77 16.32 0.32 1.62 NM
FGHC First Georgia Hold. Corp of GA 24.22 184.09 15.12 200.78 NM 0.05 0.65 15.63
FSPG First Home Bancorp of NJ 12.42 158.52 10.56 161.16 9.52 0.40 1.96 24.39
FFSL First Independence Corp. of KS NM 126.03 13.15 126.03 19.49 0.25 1.71 53.19
FISB First Indiana Corp. of IN 20.09 170.66 16.32 172.79 16.43 0.48 2.04 41.03
FKFS First Keystone Fin. Corp of PA 21.30 150.60 11.01 150.60 14.90 0.20 0.70 14.81
FLKY First Lancaster Bncshrs of KY NM 107.34 36.75 107.34 27.68 0.50 3.23 NM
FLFC First Liberty Fin. Corp. of GA 16.76 179.84 13.26 199.46 20.48 0.40 1.81 30.30
CASH First Midwest Fin. Corp. of IA 18.75 120.04 13.68 135.48 14.76 0.36 1.92 36.00
FMBD First Mutual Bancorp of IL NM 99.67 12.80 131.58 NM 0.32 2.10 NM
FMSB First Mutual SB of Bellevue WA* 13.14 187.90 12.82 187.90 13.49 0.20 0.98 12.82
</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 September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
FNGB First Northern Cap. Corp of WI 11.28 11.28 0.64 5.50 3.31 0.91 7.88 0.06 798.69 0.53
FFPB First Palm Beach Bancorp of FL 6.57 6.41 -0.03 -0.42 -0.26 0.03 0.37 0.73 55.75 0.60
FSLA First SB SLA MHC of NJ (47.5) 9.42 8.40 0.58 6.23 2.35 0.91 9.74 0.68 83.02 1.06
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 3.67 1.00 5.90 0.30 215.39 0.97
SHEN First Shenango Bancorp of PA 10.95 10.95 0.89 7.82 5.32 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 0.06 0.92 7.48 0.11 362.15 0.50
FBNW FirstBank Corp of Clarkston WA 18.04 18.04 0.70 3.86 3.18 0.57 3.14 2.07 31.12 0.78
FFDB FirstFed Bancorp of AL 9.42 8.58 0.62 6.31 5.35 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 9.58 9.58 -0.03 -0.29 -0.19 0.15 1.65 4.27 47.62 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 4.25 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 2.19 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 2.69 0.81 4.45 1.48 32.73 0.54
FKKY Frankfort First Bancorp of KY 17.19 17.19 -0.28 -1.14 -1.04 0.56 2.28 0.09 86.21 0.08
FTNB Fulton Bancorp of MO 25.01 25.01 0.74 3.81 1.71 1.05 5.39 0.81 106.69 1.01
GFSB GFS Bancorp of Grinnell IA 11.44 11.44 1.00 8.59 6.18 1.22 10.55 NA NA 0.82
GUPB GFSB Bancorp of Gallup NM 16.30 16.30 0.74 3.86 3.68 0.93 4.86 0.18 199.36 0.69
GSLA GS Financial Corp. of LA 45.63 45.63 1.08 3.63 2.13 1.08 3.63 0.11 293.18 0.84
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.62 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.04 27.04 0.83 3.23 2.90 1.15 4.47 0.90 14.14 0.38
GBCI Glacier Bancorp of MT 9.74 9.48 1.44 15.09 5.89 1.61 16.87 0.27 229.89 0.85
GFCO Glenway Financial Corp. of OH 9.49 9.36 0.43 4.51 3.82 0.72 7.57 0.31 91.62 0.34
GTPS Great American Bancorp of IL 21.43 21.43 0.26 1.09 1.06 0.32 1.37 0.23 140.69 0.44
GTFN Great Financial Corp. of KY 9.24 8.84 0.75 7.89 3.72 0.71 7.50 3.06 15.68 0.72
GSBC Great Southern Bancorp of MO 8.53 8.53 1.38 14.76 6.05 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 0.95 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 3.01 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 1.68 0.92 6.51 0.50 216.62 1.36
HCBB HCB Bancshares of AR 18.25 17.49 -0.11 -0.58 -0.59 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 5.10 0.89 9.66 0.33 244.25 1.01
HFNC HFNC Financial Corp. of NC 17.99 17.99 0.86 3.47 2.56 1.19 4.76 0.87 97.22 1.14
HMNF HMN Financial, Inc. of MN 14.43 14.43 0.71 4.79 3.76 0.88 5.96 0.08 531.97 0.71
HALL Hallmark Capital Corp. of WI 7.24 7.24 0.48 6.83 5.69 0.61 8.62 0.16 273.18 0.64
HARB Harbor FSB, MHC of FL (46.6)(8) 8.39 8.11 0.95 11.52 3.58 1.23 14.84 0.46 222.68 1.37
HRBF Harbor Federal Bancorp of MD 12.90 12.90 0.46 3.52 2.90 0.71 5.46 0.05 379.63 0.28
HFSA Hardin Bancorp of Hardin MO 12.48 12.48 0.52 3.53 3.44 0.79 5.41 0.09 179.21 0.32
HARL Harleysville SA of PA 6.53 6.53 0.75 11.71 5.41 1.03 16.04 0.03 NA 0.77
HFGI Harrington Fin. Group of IN 5.59 5.59 0.39 8.22 4.86 0.33 6.87 0.25 18.93 0.23
HARS Harris SB, MHC of PA (24.3) 8.01 7.01 0.49 5.78 1.79 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 3.49 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.87 1.92 0.58 4.07 0.11 117.00 0.26
HAVN Haven Bancorp of Woodhaven NY 5.95 5.93 0.56 9.27 5.01 0.83 13.79 0.74 86.28 1.15
HVFD Haverfield Corp. of OH(8) 8.55 8.55 0.57 6.82 3.71 1.08 12.97 1.04 82.48 0.99
HTHR Hawthorne Fin. Corp. of CA 4.60 4.60 0.23 5.32 3.71 0.51 11.47 7.17 19.99 1.67
HMLK Hemlock Fed. Fin. Corp. of IL 18.34 18.34 0.13 0.99 0.66 0.73 5.45 NA NA 1.30
HBNK Highland Federal Bank of CA 7.47 7.47 0.46 6.25 3.17 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 7.22 1.21 12.60 0.41 165.13 0.89
HBEI Home Bancorp of Elgin IL 26.70 26.70 0.49 1.99 1.38 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 2.91 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 12.82 12.82 0.20 1.59 1.41 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 3.29 1.17 9.46 0.62 110.38 0.87
HOMF Home Fed Bancorp of Seymour IN 8.48 8.22 1.05 12.65 6.41 1.22 14.72 0.46 117.33 0.62
HWEN Home Financial Bancorp of IN 16.93 16.93 0.64 3.78 3.18 0.80 4.76 1.74 31.30 0.67
<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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
FNGB First Northern Cap. Corp of WI NM 163.51 18.44 163.51 21.13 0.32 2.40 72.73
FFPB First Palm Beach Bancorp of FL NM 160.85 10.57 164.86 NM 0.60 1.71 NM
FSLA First SB SLA MHC of NJ (47.5) NM 253.92 23.91 284.76 27.20 0.48 1.41 60.00
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* 27.25 171.62 25.32 186.54 28.87 0.28 1.15 31.46
SHEN First Shenango Bancorp of PA 18.79 145.98 15.99 145.98 14.43 0.60 1.89 35.50
FSFC First So.east Fin. Corp. of SC(8) NM 198.72 20.32 198.72 22.14 0.24 1.55 NM
FBNW FirstBank Corp of Clarkston WA NM 121.43 21.90 121.43 NM 0.00 0.00 0.00
FFDB FirstFed Bancorp of AL 18.68 122.58 11.54 134.47 12.24 0.50 2.82 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 148.47 14.23 148.47 NM 0.34 2.19 NM
FLGS Flagstar Bancorp, Inc of MI NM NM 18.33 NM NM 0.00 0.00 NM
FFIC Flushing Fin. Corp. of NY* 23.53 131.18 20.30 131.18 22.56 0.24 1.10 25.81
FBHC Fort Bend Holding Corp. of TX NM 145.22 8.76 155.96 19.74 0.40 1.19 54.05
FTSB Fort Thomas Fin. Corp. of KY NM 117.79 18.89 117.79 24.50 0.25 2.04 NM
FKKY Frankfort First Bancorp of KY NM 153.03 26.30 153.03 NM 0.36 3.39 NM
FTNB Fulton Bancorp of MO NM 165.86 41.48 165.86 NM 0.20 0.83 48.78
GFSB GFS Bancorp of Grinnell IA 16.19 133.68 15.29 133.68 13.19 0.26 1.82 29.55
GUPB GFSB Bancorp of Gallup NM 27.17 111.08 18.10 111.08 21.55 0.40 2.13 57.97
GSLA GS Financial Corp. of LA NM 97.80 44.63 97.80 NM 0.28 1.75 NM
GOSB GSB Financial Corp. of NY 27.63 104.28 28.22 104.28 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 111.85 30.24 111.85 24.92 0.40 2.23 NM
GBCI Glacier Bancorp of MT 16.99 230.17 22.43 236.58 15.20 0.48 2.57 43.64
GFCO Glenway Financial Corp. of OH 26.18 116.16 11.02 117.73 15.59 0.80 2.88 NM
GTPS Great American Bancorp of IL NM 107.91 23.13 107.91 NM 0.40 2.22 NM
GTFN Great Financial Corp. of KY 26.89 209.56 19.35 218.89 28.31 0.60 1.40 37.74
GSBC Great Southern Bancorp of MO 16.52 255.03 21.76 255.03 14.62 0.40 2.11 34.78
GDVS Greater DV SB,MHC of PA (19.9)* NM 280.67 32.47 280.67 NM 0.36 1.48 NM
GSFC Green Street Fin. Corp. of NC NM 126.41 45.84 126.41 27.38 0.44 2.36 NM
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 250.00 34.45 250.00 NM 0.44 2.00 NM
HCBB HCB Bancshares of AR NM 99.20 18.10 103.50 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 19.61 135.66 12.79 135.66 14.44 0.42 1.74 34.15
HFNC HFNC Financial Corp. of NC NM 179.40 32.28 179.40 28.49 0.28 1.67 65.12
HMNF HMN Financial, Inc. of MN 26.60 128.73 18.58 128.73 21.37 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 17.57 113.67 8.23 113.67 13.91 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 27.93 NM 25.48 NM 21.69 1.40 2.45 68.29
HRBF Harbor Federal Bancorp of MD NM 121.36 15.65 121.36 22.22 0.40 2.00 68.97
HFSA Hardin Bancorp of Hardin MO 29.09 107.52 13.42 107.52 18.96 0.48 2.85 NM
HARL Harleysville SA of PA 18.49 202.85 13.25 202.85 13.50 0.40 1.48 27.40
HFGI Harrington Fin. Group of IN 20.59 163.75 9.16 163.75 24.63 0.12 0.96 19.67
HARS Harris SB, MHC of PA (24.3) NM NM 24.29 NM NM 0.58 1.31 73.42
HFFB Harrodsburg 1st Fin Bcrp of KY 28.64 108.70 29.28 108.70 21.58 0.40 2.54 72.73
HHFC Harvest Home Fin. Corp. of OH NM 105.73 13.21 105.73 24.00 0.40 3.33 NM
HAVN Haven Bancorp of Woodhaven NY 19.98 172.52 10.26 173.09 13.42 0.60 1.44 28.71
HVFD Haverfield Corp. of OH(8) 26.96 177.19 15.14 177.19 14.18 0.56 2.04 54.90
HTHR Hawthorne Fin. Corp. of CA 26.95 131.98 6.07 131.98 12.50 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 103.77 19.03 103.77 27.49 0.24 1.59 NM
HBNK Highland Federal Bank of CA NM 184.56 13.79 184.56 21.45 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 13.84 164.85 15.42 164.85 13.84 0.48 1.86 25.81
HBEI Home Bancorp of Elgin IL NM 131.97 35.23 131.97 NM 0.40 2.21 NM
HBFW Home Bancorp of Fort Wayne IN NM 140.47 18.66 140.47 21.52 0.20 0.81 27.78
HBBI Home Building Bancorp of IN NM 110.75 14.19 110.75 27.70 0.30 1.46 NM
HCFC Home City Fin. Corp. of OH NM 104.94 21.62 104.94 20.13 0.32 2.06 62.75
HOMF Home Fed Bancorp of Seymour IN 15.59 184.75 15.67 190.56 13.40 0.50 1.59 24.75
HWEN Home Financial Bancorp of IN NM 111.04 18.80 111.04 25.00 0.20 1.18 37.04
</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 September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 10.56 10.56 1.67 15.78 7.56 1.66 15.69 0.08 NA 1.56
HMCI Homecorp, Inc. of Rockford IL 6.54 6.54 0.14 2.17 1.59 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 1.22 25.93 0.52
HRZB Horizon Financial Corp. of WA* 15.60 15.60 1.57 9.99 6.74 1.54 9.80 NA NA 0.84
IBSF IBS Financial Corp. of NJ 17.41 17.41 0.49 2.68 1.99 0.86 4.71 0.08 171.10 0.52
ISBF ISB Financial Corp. of LA 12.19 10.33 0.69 4.59 3.04 0.93 6.20 NA NA 0.80
ITLA Imperial Thrift & Loan of CA* 10.99 10.94 1.47 12.75 8.06 1.47 12.75 1.47 84.20 1.50
IFSB Independence FSB of DC 6.52 5.72 0.14 2.19 2.09 0.33 4.98 2.02 9.82 0.32
INCB Indiana Comm. Bank, SB of IN 12.39 12.39 0.16 1.24 1.02 0.51 3.88 NA NA 0.71
INBI Industrial Bancorp of OH 17.71 17.71 0.72 3.87 3.03 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 4.70 1.18 17.52 0.64 73.79 0.78
IPSW Ipswich SB of Ipswich MA* 5.71 5.71 1.21 20.39 5.95 0.95 16.02 1.52 56.87 1.18
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 5.31 1.34 8.46 0.78 NA NA
JXSB Jcksnville SB,MHC of IL (45.6) 10.50 10.50 0.30 2.72 1.60 0.66 5.97 0.66 72.96 0.61
JSBA Jefferson Svgs Bancorp of MO 8.20 6.24 0.30 3.91 1.92 0.70 9.25 0.46 140.15 0.84
JOAC Joachim Bancorp of MO 28.17 28.17 0.47 1.59 1.59 0.77 2.62 0.20 109.86 0.32
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 8.32 1.00 14.25 1.78 43.20 1.03
KFBI Klamath First Bancorp of OR 19.55 19.55 0.81 3.67 2.77 1.23 5.54 0.08 213.23 0.23
LSBI LSB Fin. Corp. of Lafayette IN 8.85 8.85 0.77 8.34 7.02 0.68 7.35 1.17 63.71 0.84
LVSB Lakeview SB of Paterson NJ 9.52 7.61 1.37 13.73 7.72 0.95 9.53 0.98 66.74 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.89 5.95 4.39 1.05 7.01 0.31 123.70 0.57
LARL Laurel Capital Group of PA 10.03 10.03 1.14 10.88 6.57 1.43 13.72 0.43 212.35 1.31
LSBX Lawrence Savings Bank of MA* 8.69 8.69 1.75 20.90 11.03 1.73 20.60 0.30 328.94 2.29
LFED Leeds FSB, MHC of MD (36.3) 16.18 16.18 0.79 4.89 2.02 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 3.49 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA 10.55 10.25 0.71 6.60 3.92 0.87 8.03 0.39 166.43 1.48
LFBI Little Falls Bancorp of NJ 13.28 12.26 0.27 1.94 1.72 0.48 3.41 1.04 33.93 0.82
LOGN Logansport Fin. Corp. of IN 19.20 19.20 1.17 5.64 4.70 1.52 7.31 0.61 44.88 0.38
LONF London Financial Corp. of OH 19.66 19.66 0.66 3.18 3.20 1.00 4.83 0.80 61.11 0.63
LISB Long Island Bancorp, Inc of NY 8.99 8.90 0.61 6.58 3.31 0.71 7.63 1.03 55.02 0.92
MAFB MAF Bancorp of IL 7.88 6.84 0.79 10.57 4.76 1.10 14.70 0.45 120.51 0.71
MBLF MBLA Financial Corp. of MO 12.15 12.15 0.67 5.10 4.48 0.85 6.52 0.25 109.19 0.50
MFBC MFB Corp. of Mishawaka IN 13.65 13.65 0.57 3.66 3.28 0.86 5.52 0.08 177.07 0.19
MLBC ML Bancorp of Villanova PA 6.98 6.86 0.74 10.26 6.40 0.67 9.28 0.46 163.34 1.71
MSBF MSB Financial Corp. of MI 16.99 16.99 1.19 6.43 4.19 1.47 7.91 0.66 61.34 0.44
MGNL Magna Bancorp of MS(8) 10.22 9.95 1.39 14.23 4.93 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 2.19 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 1.78 0.73 4.66 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.38 8.28 0.61 7.41 4.43 0.89 10.72 0.47 85.38 0.46
MASB MassBank Corp. of Reading MA* 10.64 10.64 1.10 10.79 6.83 1.04 10.23 0.16 149.80 0.87
MFLR Mayflower Co-Op. Bank of MA* 9.68 9.52 1.03 10.64 6.95 0.97 10.03 0.96 92.14 1.52
MECH Mechanics SB of Hartford CT* 10.23 10.23 1.92 19.45 11.27 1.92 19.45 1.13 152.02 2.58
MDBK Medford Bank of Medford, MA* 8.99 8.38 1.08 12.07 7.21 1.01 11.29 0.37 176.45 1.22
MERI Meritrust FSB of Thibodaux LA 8.20 8.20 0.67 8.71 4.57 1.05 13.56 0.37 83.87 0.58
MWBX MetroWest Bank of MA* 7.44 7.44 1.38 18.37 8.16 1.38 18.37 0.91 126.64 1.48
MCBS Mid Continent Bancshares of KS(8) 9.39 9.39 1.02 9.79 5.02 1.16 11.10 0.15 71.76 0.19
MIFC Mid Iowa Financial Corp. of IA 9.34 9.34 1.00 10.76 7.38 1.40 15.15 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 4.96 0.75 10.99 0.77 63.17 0.81
MWFD Midwest Fed. Fin. Corp of WI 8.81 8.50 1.43 16.39 8.23 1.09 12.55 0.12 658.13 1.05
MFFC Milton Fed. Fin. Corp. of OH 13.14 13.14 0.49 3.07 2.71 0.68 4.25 0.32 86.42 0.46
MIVI Miss. View Hold. Co. of MN 18.87 18.87 0.69 3.74 3.72 1.03 5.57 0.33 370.39 1.91
MBSP Mitchell Bancorp of NC* 43.36 43.36 1.40 3.24 2.96 1.64 3.81 2.03 26.19 0.62
MBBC Monterey Bay Bancorp of CA 11.33 10.45 0.25 2.04 1.72 0.47 3.87 0.33 111.47 0.60
<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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 13.23 199.74 21.08 199.74 13.30 0.80 3.52 46.51
HMCI Homecorp, Inc. of Rockford IL NM 132.71 8.68 132.71 20.00 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* 14.83 145.46 22.69 145.46 15.11 0.40 2.52 37.38
IBSF IBS Financial Corp. of NJ NM 143.40 24.96 143.40 28.66 0.40 2.41 NM
ISBF ISB Financial Corp. of LA NM 153.02 18.65 180.44 24.39 0.40 1.58 51.95
ITLA Imperial Thrift & Loan of CA* 12.41 151.01 16.59 151.64 12.41 0.00 0.00 0.00
IFSB Independence FSB of DC NM 103.66 6.76 118.24 21.02 0.22 1.59 NM
INCB Indiana Comm. Bank, SB of IN NM 128.36 15.90 128.36 NM 0.72 4.57 NM
INBI Industrial Bancorp of OH NM 127.86 22.64 127.86 16.90 0.48 3.23 NM
IWBK Interwest SB of Oak Harbor WA 21.29 250.65 16.99 256.28 15.69 0.64 1.65 35.16
IPSW Ipswich SB of Ipswich MA* 16.81 NM 17.72 NM 21.39 0.12 0.85 14.29
JXVL Jacksonville Bancorp of TX 18.82 125.02 18.65 125.02 14.36 0.50 2.95 55.56
JXSB Jcksnville SB,MHC of IL (45.6) NM 167.54 17.59 167.54 28.48 0.40 1.78 NM
JSBA Jefferson Svgs Bancorp of MO NM 169.49 13.89 222.50 22.09 0.40 1.11 57.97
JOAC Joachim Bancorp of MO NM 106.38 29.96 106.38 NM 0.50 3.45 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)* 12.02 154.32 11.05 164.04 11.57 0.08 0.64 7.69
KFBI Klamath First Bancorp of OR NM 139.93 27.35 139.93 23.94 0.30 1.51 54.55
LSBI LSB Fin. Corp. of Lafayette IN 14.24 116.59 10.32 116.59 16.17 0.34 1.58 22.52
LVSB Lakeview SB of Paterson NJ 12.95 180.81 17.21 226.13 18.65 0.25 0.69 8.99
LARK Landmark Bancshares of KS 22.79 140.10 19.32 140.10 19.36 0.40 1.55 35.40
LARL Laurel Capital Group of PA 15.22 166.33 16.68 166.33 12.07 0.52 2.12 32.30
LSBX Lawrence Savings Bank of MA* 9.06 170.34 14.81 170.34 9.20 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 236.74 38.30 236.74 NM 0.76 2.43 NM
LXMO Lexington B&L Fin. Corp. of MO 28.64 106.85 30.26 106.85 22.18 0.30 1.90 54.55
LIFB Life Bancorp of Norfolk VA 25.50 161.54 17.04 166.24 20.93 0.48 1.86 47.52
LFBI Little Falls Bancorp of NJ NM 116.26 15.44 125.90 NM 0.20 1.19 68.97
LOGN Logansport Fin. Corp. of IN 21.28 124.31 23.87 124.31 16.41 0.40 2.54 54.05
LONF London Financial Corp. of OH NM 102.74 20.20 102.74 20.55 0.24 1.60 50.00
LISB Long Island Bancorp, Inc of NY NM 196.48 17.67 198.45 26.08 0.60 1.38 41.67
MAFB MAF Bancorp of IL 21.03 191.61 15.10 220.64 15.12 0.28 0.88 18.54
MBLF MBLA Financial Corp. of MO 22.30 112.60 13.68 112.60 17.43 0.40 1.62 36.04
MFBC MFB Corp. of Mishawaka IN NM 117.21 16.00 117.21 20.26 0.32 1.36 41.56
MLBC ML Bancorp of Villanova PA 15.63 155.34 10.84 158.11 17.28 0.40 1.88 29.41
MSBF MSB Financial Corp. of MI 23.85 152.56 25.92 152.56 19.38 0.28 1.81 43.08
MGNL Magna Bancorp of MS(8) 20.27 272.07 27.82 279.57 18.37 0.60 2.19 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 98.65 34.52 98.65 NM 0.28 1.92 NM
MFCX Marshalltown Fin. Corp. of IA(8) NM 118.55 18.67 118.55 25.95 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 22.58 162.14 13.59 164.21 15.61 0.84 1.71 38.71
MASB MassBank Corp. of Reading MA* 14.65 148.41 15.79 148.41 15.45 1.28 2.40 35.16
MFLR Mayflower Co-Op. Bank of MA* 14.39 146.31 14.16 148.81 15.27 0.68 3.40 48.92
MECH Mechanics SB of Hartford CT* 8.88 153.80 15.74 153.80 8.88 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 13.88 160.08 14.40 171.80 14.85 0.72 2.12 29.39
MERI Meritrust FSB of Thibodaux LA 21.86 179.60 14.74 179.60 14.03 0.70 1.61 35.18
MWBX MetroWest Bank of MA* 12.25 210.93 15.69 210.93 12.25 0.12 1.88 23.08
MCBS Mid Continent Bancshares of KS(8) 19.92 190.15 17.85 190.15 17.57 0.40 1.07 21.39
MIFC Mid Iowa Financial Corp. of IA 13.55 137.43 12.84 137.43 9.62 0.08 0.83 11.27
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 20.17 125.47 8.67 125.47 12.13 0.60 1.64 33.15
MWFD Midwest Fed. Fin. Corp of WI 12.15 194.02 17.10 201.20 15.88 0.34 1.56 18.99
MFFC Milton Fed. Fin. Corp. of OH NM 126.39 16.61 126.39 26.61 0.60 4.18 NM
MIVI Miss. View Hold. Co. of MN 26.90 98.69 18.63 98.69 18.03 0.16 1.01 27.12
MBSP Mitchell Bancorp of NC* NM 112.09 48.61 112.09 28.75 0.40 2.32 NM
MBBC Monterey Bay Bancorp of CA NM 116.91 13.25 126.84 NM 0.12 0.71 41.38
</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 September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
MONT Montgomery Fin. Corp. of IN 17.91 17.91 0.42 2.32 2.19 0.67 3.74 0.91 20.00 0.20
MSBK Mutual SB, FSB of Bay City MI 6.07 6.07 0.11 1.93 1.29 0.04 0.75 0.11 272.91 0.67
NHTB NH Thrift Bancshares of NH 7.65 6.52 0.39 5.25 2.79 0.58 7.77 0.70 125.20 1.05
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.14 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 9.81 9.81 0.83 8.14 5.55 0.79 7.78 1.11 152.08 3.18
NASB North American SB of MO 7.68 7.42 1.26 17.18 7.88 1.19 16.18 3.11 27.16 0.98
NBSI North Bancshares of Chicago IL 14.13 14.13 0.49 3.27 2.56 0.68 4.57 NA NA 0.27
FFFD North Central Bancshares of IA 22.67 22.67 1.64 6.41 6.00 1.90 7.41 0.12 814.90 1.19
NBN Northeast Bancorp of ME* 6.95 6.01 0.51 6.99 5.28 0.47 6.47 1.37 77.15 1.32
NEIB Northeast Indiana Bncrp of IN 15.19 15.19 1.04 6.33 5.76 1.22 7.42 0.40 159.54 0.71
NWEQ Northwest Equity Corp. of WI 11.45 11.45 0.78 6.47 5.50 0.98 8.16 1.26 38.04 0.59
NWSB Northwest SB, MHC of PA (30.7) 9.49 8.94 0.69 7.05 2.30 0.98 9.96 0.72 90.87 0.88
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.53 6.72 1.11 14.29 NA NA 1.54
NSSB Norwich Financial Corp. of CT* 11.17 10.08 1.09 10.08 5.01 1.04 9.58 1.29 151.12 2.83
NTMG Nutmeg FS&LA of CT 5.56 5.56 0.26 4.60 3.22 0.35 6.28 1.19 40.69 0.55
OHSL OHSL Financial Corp. of OH 11.03 11.03 0.61 5.29 4.53 0.85 7.42 0.14 161.25 0.31
OCFC Ocean Fin. Corp. of NJ 16.25 16.25 0.03 0.16 0.12 0.98 5.97 0.55 79.68 0.87
OCN Ocwen Financial Corp. of FL 8.75 8.36 2.81 33.59 6.12 1.69 20.28 5.11 17.43 1.34
OFCP Ottawa Financial Corp. of MI 8.73 7.01 0.48 5.25 3.28 0.78 8.45 0.32 112.76 0.42
PFFB PFF Bancorp of Pomona CA 10.32 10.21 0.16 1.41 1.08 0.46 4.09 1.73 60.66 1.46
PSFI PS Financial of Chicago IL 38.70 38.70 1.94 4.74 4.59 1.96 4.81 0.79 28.66 0.51
PVFC PVF Capital Corp. of OH 7.02 7.02 1.05 15.56 6.83 1.35 20.00 1.20 61.53 0.79
PCCI Pacific Crest Capital of CA* 7.09 7.09 1.04 13.26 7.05 0.97 12.43 1.29 79.26 1.67
PAMM PacificAmerica Money Ctr of CA* 22.43 22.43 5.63 41.65 16.00 5.63 41.65 4.97 27.75 2.22
PALM Palfed, Inc. of Aiken SC(8) 8.24 8.24 0.10 1.29 0.60 0.61 7.54 2.12 51.22 1.32
PBCI Pamrapo Bancorp, Inc. of NJ 12.74 12.64 0.90 6.37 4.88 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 5.55 1.08 14.42 0.27 537.53 1.97
PEEK Peekskill Fin. Corp. of NY 25.73 25.73 0.98 3.54 3.45 1.29 4.65 1.22 27.98 1.35
PFSB PennFed Fin. Services of NJ 7.36 6.15 0.57 7.43 4.65 0.84 10.86 0.59 33.53 0.28
PWBC PennFirst Bancorp of PA 8.08 7.55 0.46 6.31 3.97 0.67 9.12 0.65 93.15 1.49
PWBK Pennwood SB of PA* 17.45 17.45 0.70 4.05 3.51 1.12 6.54 0.98 57.43 1.03
PBKB People's SB of Brockton MA* 5.61 5.37 0.80 14.41 6.82 0.47 8.57 0.82 91.19 1.57
PFDC Peoples Bancorp of Auburn IN 15.21 15.21 1.12 7.33 5.56 1.47 9.59 0.36 83.87 0.38
PBCT Peoples Bank, MHC of CT (40.1)* 8.48 8.47 1.12 13.72 4.45 0.83 10.17 0.90 121.39 1.60
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.12 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.72 6.51 1.28 15.68 5.94 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 3.61 1.21 5.18 1.00 42.00 0.45
PERM Permanent Bancorp of IN 9.16 9.03 0.34 3.64 3.13 0.62 6.57 1.09 45.43 0.99
PMFI Perpetual Midwest Fin. of IA 8.53 8.53 0.12 1.38 1.16 0.29 3.36 0.40 185.58 0.95
PERT Perpetual of SC, MHC (46.8)(8) 11.82 11.82 0.59 4.97 1.90 0.83 7.00 0.12 502.32 0.87
PCBC Perry Co. Fin. Corp. of MO 19.19 19.19 0.93 4.93 4.31 1.07 5.70 NA NA 0.19
PHFC Pittsburgh Home Fin. of PA 10.92 10.80 0.62 4.71 3.71 0.79 6.00 1.60 32.18 0.76
PFSL Pocahnts Fed, MHC of AR (47.0) 6.36 6.36 0.60 9.75 4.96 0.84 13.54 0.15 308.72 1.12
PTRS Potters Financial Corp of OH 8.83 8.83 0.48 5.37 4.69 0.85 9.54 0.50 350.66 2.78
PKPS Poughkeepsie Fin. Corp. of NY 8.37 8.37 0.35 4.21 3.05 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 1.90 0.81 4.67 NA NA 1.40
PRBC Prestige Bancorp of PA 11.13 11.13 0.37 2.84 2.76 0.65 5.01 0.30 85.33 0.38
PETE Primary Bank of NH(8)* 6.93 6.92 0.61 9.35 4.68 0.73 11.09 0.82 75.47 1.08
PFNC Progress Financial Corp. of PA 5.27 4.65 0.54 10.19 3.93 0.65 12.26 1.46 51.92 1.08
PSBK Progressive Bank, Inc. of NY* 8.55 7.64 0.99 12.02 6.94 0.98 11.81 0.85 131.46 1.65
PROV Provident Fin. Holdings of CA 13.88 13.88 0.32 2.24 1.96 0.28 1.95 NA NA 1.31
PULB Pulaski SB, MHC of MO (29.8) 13.00 13.00 0.69 5.42 2.30 0.96 7.53 NA NA 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.90 11.90 0.25 2.97 1.29 0.61 7.21 0.65 71.47 0.81
PULS Pulse Bancorp of S. River NJ 8.05 8.05 0.72 9.24 5.62 1.08 13.86 0.69 65.20 1.93
QCFB QCF Bancorp of Virginia MN 18.09 18.09 1.36 7.11 5.64 1.36 7.11 0.40 221.49 2.24
<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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
MONT Montgomery Fin. Corp. of IN NM 105.79 18.95 105.79 28.26 0.00 0.00 0.00
MSBK Mutual SB, FSB of Bay City MI NM 146.29 8.89 146.29 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH NM 164.43 12.58 193.12 24.21 0.50 2.58 NM
NSLB NS&L Bancorp of Neosho MO NM 115.74 22.64 115.74 29.88 0.50 2.62 NM
NMSB Newmil Bancorp. of CT* 18.01 148.13 14.54 148.13 18.85 0.24 1.96 35.29
NASB North American SB of MO 12.68 204.97 15.74 212.07 13.47 0.80 1.54 19.51
NBSI North Bancshares of Chicago IL NM 133.45 18.86 133.45 27.93 0.48 2.12 NM
FFFD North Central Bancshares of IA 16.67 114.79 26.02 114.79 14.41 0.25 1.47 24.51
NBN Northeast Bancorp of ME* 18.95 130.62 9.08 151.11 20.49 0.32 1.82 34.41
NEIB Northeast Indiana Bncrp of IN 17.35 111.92 17.00 111.92 14.78 0.32 1.88 32.65
NWEQ Northwest Equity Corp. of WI 18.18 121.03 13.86 121.03 14.41 0.52 3.25 59.09
NWSB Northwest SB, MHC of PA (30.7) NM 297.41 28.22 NM NM 0.32 1.27 55.17
NSSY Norwalk Savings Society of CT* 14.88 174.42 14.05 180.90 13.04 0.40 1.11 16.53
NSSB Norwich Financial Corp. of CT* 19.98 192.99 21.55 213.79 21.01 0.56 1.97 39.44
NTMG Nutmeg FS&LA of CT NM 132.77 7.38 132.77 22.78 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 22.10 116.69 12.87 116.69 15.76 0.88 3.56 NM
OCFC Ocean Fin. Corp. of NJ NM 124.53 20.24 124.53 22.86 0.80 2.35 NM
OCN Ocwen Financial Corp. of FL 16.34 NM 41.65 NM 27.07 0.00 0.00 0.00
OFCP Ottawa Financial Corp. of MI NM 163.29 14.25 203.42 18.94 0.36 1.44 43.90
PFFB PFF Bancorp of Pomona CA NM 133.49 13.78 134.89 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 21.79 104.02 40.26 104.02 21.48 0.32 2.10 45.71
PVFC PVF Capital Corp. of OH 14.64 209.40 14.71 209.40 11.39 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 14.19 175.98 12.47 175.98 15.14 0.00 0.00 0.00
PAMM PacificAmerica Money Ctr of CA* 6.25 171.57 38.47 171.57 6.25 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 207.33 17.09 207.33 28.29 0.12 0.56 NM
PBCI Pamrapo Bancorp, Inc. of NJ 20.47 142.90 18.20 144.03 14.84 1.00 4.21 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 18.02 167.21 12.68 168.48 12.20 0.52 1.68 30.23
PEEK Peekskill Fin. Corp. of NY 28.95 112.17 28.86 112.17 22.00 0.36 2.18 63.16
PFSB PennFed Fin. Services of NJ 21.50 152.45 11.22 182.28 14.71 0.28 0.91 19.58
PWBC PennFirst Bancorp of PA 25.19 127.57 10.31 136.46 17.44 0.33 2.08 52.38
PWBK Pennwood SB of PA* 28.51 108.05 18.86 108.05 17.66 0.32 1.97 56.14
PBKB People's SB of Brockton MA* 14.66 198.60 11.14 207.32 24.64 0.44 2.59 37.93
PFDC Peoples Bancorp of Auburn IN 17.99 130.01 19.77 130.01 13.74 0.60 2.40 43.17
PBCT Peoples Bank, MHC of CT (40.1)* 22.48 285.91 24.24 286.17 NM 0.68 2.18 48.92
PFFC Peoples Fin. Corp. of OH NM 107.73 29.31 107.73 NM 0.50 2.94 NM
PHBK Peoples Heritage Fin Grp of ME* 16.84 252.06 19.46 299.10 16.63 0.76 1.91 32.20
PSFC Peoples Sidney Fin. Corp of OH 27.68 110.01 25.59 110.01 21.23 0.20 1.29 35.71
PERM Permanent Bancorp of IN NM 116.51 10.68 118.25 17.69 0.40 1.74 55.56
PMFI Perpetual Midwest Fin. of IA NM 119.44 10.19 119.44 NM 0.30 1.40 NM
PERT Perpetual of SC, MHC (46.8)(8) NM 260.80 30.84 260.80 NM 1.40 2.67 NM
PCBC Perry Co. Fin. Corp. of MO 23.19 111.01 21.31 111.01 20.07 0.40 1.92 44.44
PHFC Pittsburgh Home Fin. of PA 26.99 131.03 14.31 132.43 21.16 0.24 1.29 34.78
PFSL Pocahnts Fed, MHC of AR (47.0) 20.14 189.70 12.07 189.70 14.51 0.90 3.21 64.75
PTRS Potters Financial Corp of OH 21.34 112.65 9.95 112.65 12.01 0.36 1.45 31.03
PKPS Poughkeepsie Fin. Corp. of NY NM 134.53 11.26 134.53 21.27 0.10 1.27 41.67
PHSB Ppls Home SB, MHC of PA (45.0) NM 117.48 20.33 117.48 25.18 0.00 0.00 0.00
PRBC Prestige Bancorp of PA NM 102.97 11.46 102.97 20.48 0.12 0.71 25.53
PETE Primary Bank of NH(8)* 21.37 184.93 12.82 185.19 18.03 0.00 0.00 0.00
PFNC Progress Financial Corp. of PA 25.46 237.89 12.53 269.61 21.15 0.11 0.80 20.37
PSBK Progressive Bank, Inc. of NY* 14.40 168.38 14.40 188.50 14.65 0.68 2.05 29.57
PROV Provident Fin. Holdings of CA NM 114.39 15.88 114.39 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 232.07 30.17 232.07 NM 1.00 3.90 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 159.31 18.97 159.31 NM 0.30 1.85 NM
PULS Pulse Bancorp of S. River NJ 17.81 156.79 12.62 156.79 11.87 0.70 3.28 58.33
QCFB QCF Bancorp of Virginia MN 17.73 131.72 23.83 131.72 17.73 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
Exhibit IV-1B
Weekly Thrift Market Line - Part Two
Prices As Of September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
QCBC Quaker City Bancorp of CA 8.77 8.76 0.37 4.12 2.73 0.60 6.74 1.31 74.10 1.19
QCSB Queens County Bancorp of NY* 11.85 11.85 1.60 10.80 4.05 1.63 10.95 0.68 95.23 0.74
RCSB RCSB Financial, Inc. of NY(8)* 7.85 7.65 0.95 12.54 5.18 0.94 12.40 0.76 83.90 1.18
RARB Raritan Bancorp. of Raritan NJ* 7.93 7.80 0.96 12.55 6.56 1.02 13.33 0.29 297.45 1.29
REDF RedFed Bancorp of Redlands CA 8.45 8.42 0.25 3.24 1.89 0.65 8.37 2.19 45.70 1.15
RELY Reliance Bancorp, Inc. of NY 8.23 5.93 0.58 7.07 3.92 0.86 10.46 0.79 33.33 0.57
RELI Reliance Bancshares Inc of WI(8)* 48.82 48.82 0.86 1.78 1.88 0.92 1.89 NA NA 0.53
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.79 0.62 5.72 0.49 170.62 1.03
RSLN Roslyn Bancorp, Inc. of NY* 20.14 20.04 0.86 4.12 2.65 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 3.01 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 2.26 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 0.62 0.44 4.49 0.69 76.89 1.16
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.44 3.41 2.79 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 1.73 0.47 5.74 NA NA 0.44
SISB SIS Bancorp Inc of MA* 7.20 7.20 1.38 18.82 10.03 1.37 18.70 0.47 244.29 2.48
SWCB Sandwich Co-Op. Bank of MA* 7.95 7.61 0.95 11.65 6.00 0.97 11.90 0.83 92.55 1.09
SECP Security Capital Corp. of WI(8) 16.20 16.20 1.25 7.87 4.53 1.50 9.38 0.12 918.65 1.44
SFSL Security First Corp. of OH 9.43 9.26 1.07 11.49 4.96 1.34 14.36 0.28 273.91 0.85
SFNB Security First Netwrk Bk of GA(8) 33.11 32.57 -29.36 NM -27.50 -30.07 NM NA NA 1.28
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.04 10.44 5.17 1.17 11.79 0.14 425.11 0.66
SOBI Sobieski Bancorp of S. Bend IN 15.12 15.12 0.31 1.87 1.88 0.59 3.56 0.15 158.73 0.33
SOSA Somerset Savings Bank of MA(8)* 6.34 6.34 0.81 13.81 6.30 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 2.38 1.17 5.71 0.27 65.44 0.39
SCBS Southern Commun. Bncshrs of AL 21.96 21.96 0.32 2.52 1.17 0.79 6.23 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 15.67 15.67 0.71 4.42 3.92 0.70 4.35 1.10 37.60 0.64
SWBI Southwest Bancshares of IL 11.00 11.00 0.75 6.94 4.99 1.02 9.52 0.30 67.34 0.28
SVRN Sovereign Bancorp of PA 4.01 3.03 0.44 11.07 3.83 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 4.75 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 3.90 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 2.89 0.72 6.44 0.22 136.61 0.50
SFFC StateFed Financial Corp. of IA 17.78 17.78 1.11 6.16 5.32 1.35 7.47 NA NA NA
SFIN Statewide Fin. Corp. of NJ 9.73 9.71 0.54 5.46 3.78 0.91 9.26 0.43 95.58 0.83
STSA Sterling Financial Corp. of WA 4.10 3.57 0.10 2.46 1.43 0.32 7.91 0.61 79.43 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.87 4.47 0.56 8.55 0.48 41.27 0.31
ROSE T R Financial Corp. of NY* 6.20 6.20 0.98 15.73 6.78 0.89 14.19 0.46 90.99 0.80
THRD TF Financial Corp. of PA 11.11 9.75 0.55 4.76 4.15 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 3.05 0.65 3.90 1.73 31.27 1.18
ESBK The Elmira SB FSB of Elmira NY* 6.30 6.04 0.36 5.66 4.43 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 6.07 0.40 6.62 NA NA 1.71
TSBS Trenton SB,FSB MHC of NJ(35.9)(8) 16.89 15.48 1.34 7.53 2.87 1.14 6.39 0.73 55.92 0.67
TRIC Tri-County Bancorp of WY 15.32 15.32 0.80 5.14 4.68 1.02 6.55 NA NA 1.11
TWIN Twin City Bancorp of TN 12.86 12.86 0.53 4.13 4.80 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 1.62 0.38 4.98 0.58 135.44 0.98
UBMT United Fin. Corp. of MT 22.65 22.65 1.09 4.70 3.90 1.34 5.80 NA NA 0.22
VABF Va. Beach Fed. Fin. Corp of VA 6.85 6.85 0.21 3.15 1.63 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 7.56 1.25 15.72 2.29 47.29 1.19
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.16 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.20 5.16 1.31 23.71 9.80 1.32 23.87 1.70 96.79 2.65
WVFC WVS Financial Corp. of PA* 11.16 11.16 1.07 8.59 6.15 1.34 10.72 0.30 230.13 1.25
WRNB Warren Bancorp of Peabody MA* 10.37 10.37 2.13 22.09 10.94 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 6.93 1.84 15.85 0.73 59.65 0.60
WAMU Washington Mutual Inc. of WA(8)* 5.00 4.75 0.35 6.81 1.78 0.74 14.45 0.81 93.26 1.12
WYNE Wayne Bancorp of NJ 13.35 13.35 0.44 2.94 2.04 0.44 2.94 0.91 83.50 1.15
WAYN Wayne S&L Co. MHC of OH (47.8) 9.25 9.25 0.31 3.42 1.46 0.66 7.23 0.73 50.94 0.45
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.35 23.35 1.06 4.61 2.59 1.42 6.15 0.26 152.85 0.69
WBST Webster Financial Corp. of CT 5.02 4.29 0.41 8.14 2.77 0.74 14.55 0.85 103.47 1.45
<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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
QCBC Quaker City Bancorp of CA NM 146.85 12.88 146.95 22.39 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 24.71 NM 36.88 NM 24.37 1.00 1.88 46.51
RCSB RCSB Financial, Inc. of NY(8)* 19.32 235.13 18.45 241.25 19.54 0.60 1.18 22.73
RARB Raritan Bancorp. of Raritan NJ* 15.24 178.29 14.14 181.34 14.35 0.48 2.16 32.88
REDF RedFed Bancorp of Redlands CA NM 152.28 12.87 152.85 20.46 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 25.50 171.90 14.15 238.55 17.23 0.64 2.01 51.20
RELI Reliance Bancshares Inc of WI(8)* NM 93.61 45.70 93.61 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 112.78 13.98 114.50 26.61 0.16 0.97 34.78
RSLN Roslyn Bancorp, Inc. of NY* NM 152.61 30.74 153.34 23.92 0.24 1.08 40.68
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) NM 274.13 30.81 NM 26.59 0.24 0.82 27.27
SCCB S. Carolina Comm. Bnshrs of SC NM 134.42 34.89 134.42 NM 0.60 2.61 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 208.51 19.98 208.51 NM 0.40 1.65 NM
SFED SFS Bancorp of Schenectady NY NM 123.28 15.37 123.28 20.09 0.28 1.30 46.67
SGVB SGV Bancorp of W. Covina CA NM 139.94 10.22 142.28 23.83 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 9.97 178.19 12.83 178.19 10.03 0.56 1.70 16.92
SWCB Sandwich Co-Op. Bank of MA* 16.67 187.23 14.88 195.59 16.32 1.20 3.08 51.28
SECP Security Capital Corp. of WI(8) 22.08 166.74 27.01 166.74 18.51 1.20 1.11 24.59
SFSL Security First Corp. of OH 20.17 218.33 20.58 222.15 16.14 0.32 1.80 36.36
SFNB Security First Netwrk Bk of GA(8) NM NM 131.58 NM NM 0.00 0.00 NM
SMFC Sho-Me Fin. Corp. of MO(8) 19.35 203.18 18.35 203.18 17.13 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 106.58 16.12 106.58 27.87 0.32 1.88 NM
SOSA Somerset Savings Bank of MA(8)* 15.88 202.55 12.85 202.55 16.54 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 138.95 35.09 138.95 NM 0.40 2.12 NM
SCBS Southern Commun. Bncshrs of AL NM 120.01 26.35 120.01 NM 0.30 1.85 NM
SMBC Southern Missouri Bncrp of MO 25.53 112.74 17.67 112.74 25.90 0.50 2.80 71.43
SWBI Southwest Bancshares of IL 20.06 134.23 14.76 134.23 14.63 0.76 3.61 72.38
SVRN Sovereign Bancorp of PA 26.11 259.04 10.40 NM 16.86 0.08 0.49 12.90
STFR St. Francis Cap. Corp. of WI 21.05 152.48 12.02 172.53 19.10 0.48 1.29 27.12
SPBC St. Paul Bancorp, Inc. of IL 25.67 204.54 17.59 205.07 17.81 0.40 1.68 43.01
STND Standard Fin. of Chicago IL(8) NM 149.74 16.13 150.00 23.94 0.40 1.56 54.05
SFFC StateFed Financial Corp. of IA 18.80 113.23 20.13 113.23 15.49 0.40 1.82 34.19
SFIN Statewide Fin. Corp. of NJ 26.47 144.75 14.08 144.96 15.60 0.44 2.19 57.89
STSA Sterling Financial Corp. of WA NM 158.10 6.48 181.33 21.80 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 22.36 125.46 8.13 125.92 15.36 0.32 1.16 26.02
ROSE T R Financial Corp. of NY* 14.74 215.58 13.38 215.58 16.34 0.60 2.21 32.61
THRD TF Financial Corp. of PA 24.11 116.11 12.90 132.35 17.92 0.40 1.98 47.62
TPNZ Tappan Zee Fin., Inc. of NY NM 121.05 21.69 121.05 NM 0.28 1.61 52.83
ESBK The Elmira SB FSB of Elmira NY* 22.57 125.49 7.90 130.90 23.18 0.64 2.51 56.64
GRTR The Greater New York SB of NY(8)* 16.49 193.62 12.14 193.62 NM 0.20 0.88 14.49
TSBS Trenton SB,FSB MHC of NJ(35.9)(8) NM 254.45 42.97 277.52 NM 0.35 1.17 40.70
TRIC Tri-County Bancorp of WY 21.36 104.44 16.00 104.44 16.79 0.60 2.55 54.55
TWIN Twin City Bancorp of TN 20.83 84.98 10.93 84.98 14.78 0.43 3.13 65.15
UFRM United FS&LA of Rocky Mount NC NM 175.37 13.11 175.37 NM 0.24 2.04 NM
UBMT United Fin. Corp. of MT 25.66 120.90 27.38 120.90 20.79 0.98 4.06 NM
VABF Va. Beach Fed. Fin. Corp of VA NM 188.24 12.89 188.24 27.59 0.20 1.25 NM
VFFC Virginia First Savings of VA(8) 13.23 210.93 17.00 218.43 14.42 0.10 0.42 5.52
WHGB WHG Bancshares of MD NM 111.23 22.97 111.23 NM 0.20 1.27 58.82
WSFS WSFS Financial Corp. of DE* 10.20 237.34 12.35 239.23 10.14 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 16.27 146.04 16.30 146.04 13.03 0.80 2.91 47.34
WRNB Warren Bancorp of Peabody MA* 9.14 187.07 19.40 187.07 10.74 0.52 2.83 25.87
WFSL Washington FS&LA of Seattle WA 14.43 191.00 23.07 209.11 13.08 0.92 3.29 47.42
WAMU Washington Mutual Inc. of WA(8)* NM NM 16.58 NM 26.45 1.08 1.69 NM
WYNE Wayne Bancorp of NJ NM 149.03 19.90 149.03 NM 0.20 0.82 40.00
WAYN Wayne S&L Co. MHC of OH (47.8) NM 229.45 21.22 229.45 NM 0.62 2.58 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 175.69 41.03 175.69 28.91 0.80 4.32 NM
WBST Webster Financial Corp. of CT NM 231.83 11.64 271.38 20.19 0.80 1.39 50.00
</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 September 12, 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
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
WEFC Wells Fin. Corp. of Wells MN 14.20 14.20 0.72 5.07 4.56 1.06 7.49 0.28 121.72 0.37
WCBI WestCo Bancorp of IL 15.24 15.24 1.12 7.29 5.23 1.42 9.20 0.60 47.07 0.38
WSTR WesterFed Fin. Corp. of MT 10.91 8.73 0.63 5.09 3.48 0.79 6.41 0.25 191.01 0.73
WOFC Western Ohio Fin. Corp. of OH 13.79 12.85 0.33 2.24 2.12 0.45 3.10 NA NA 0.58
WWFC Westwood Fin. Corp. of NJ(8) 9.13 8.13 0.49 5.12 2.87 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 1.97 1.04 3.62 0.06 255.81 0.21
WFI Winton Financial Corp. of OH 7.11 6.96 1.00 14.08 10.16 0.84 11.80 0.35 78.21 0.32
FFWD Wood Bancorp of OH 12.31 12.31 1.07 8.25 4.65 1.27 9.81 0.24 143.64 0.44
YFCB Yonkers Fin. Corp. of NY 14.90 14.90 0.86 5.06 3.95 1.16 6.79 0.57 65.11 1.02
YFED York Financial Corp. of PA 8.61 8.61 0.62 7.41 4.14 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) ($) (%) (%)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
WEFC Wells Fin. Corp. of Wells MN 21.92 109.29 15.51 109.29 14.81 0.48 3.00 65.75
WCBI WestCo Bancorp of IL 19.13 140.62 21.43 140.62 15.15 0.60 2.22 42.55
WSTR WesterFed Fin. Corp. of MT 28.70 124.13 13.54 155.10 22.79 0.44 1.89 54.32
WOFC Western Ohio Fin. Corp. of OH NM 104.79 14.45 112.44 NM 1.00 4.08 NM
WWFC Westwood Fin. Corp. of NJ(8) NM 172.34 15.73 193.45 20.27 0.20 0.74 25.64
WEHO Westwood Hmstd Fin Corp of OH NM 107.62 31.65 107.62 NM 0.28 1.84 NM
WFI Winton Financial Corp. of OH 9.84 138.64 9.86 141.64 11.75 0.46 2.92 28.75
FFWD Wood Bancorp of OH 21.52 178.57 21.98 178.57 18.09 0.40 2.35 50.63
YFCB Yonkers Fin. Corp. of NY 25.33 136.14 20.29 136.14 18.87 0.24 1.25 31.58
YFED York Financial Corp. of PA 24.13 170.66 14.69 170.66 18.89 0.60 2.46 59.41
</TABLE>
<PAGE>
Exhibit IV-2
Historical Stock Price Indices
<PAGE>
Exhibit IV-2
Historical Stock Price Indices(1)
<TABLE>
<CAPTION>
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. nded DJIA S&P 500 Composite Index Index
- -------------- ---- ------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 676.9 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 703.9 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.4 776.8 252.5 146.2
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 4556.1 544.8 933.4 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
Quarter 2 7672.8 885.1 1,442.1 624.5 333.3
September 12, 1997 7743.0 923.9 1,649.3 698.5 366.9
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historic Thrift Stock Indices
<PAGE>
ThriftINVESTOR
Index Values
<TABLE>
<CAPTION>
Index Values Percent Change Since
------------------------------- ----------------------
08/29/97 1 Month YTD LTM 1 Month YTD LTM
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded
Thrifts 664.6 684.5 483.6 408.3 -2.90 37.43 62.77
MHC Index 851.7 751.0 538.0 423.3 13.40 58.29 101.19
Insurance Indices
- --------------------------------------------------------------------------------
SAIF Thrifts 609.2 608.2 439.2 373.1 0.16 38.70 63.30
BIF Thrifts 838.4 908.5 616.8 514.2 -7.71 35.92 63.05
Stock Exchange Indices
- --------------------------------------------------------------------------------
AMEX Thrifts 200.9 197.0 156.2 139.8 2.01 28.63 43.70
NYSE Thrifts 410.3 421.4 277.3 230.0 -2.63 47.96 78.40
OTC Thrifts 755.6 779.9 569.7 486.4 -3.11 32.63 55.34
Geographic Indices
- --------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,347.6 1,342.6 970.7 792.4 0.38 38.83 70.08
Midwestern Thrifts 1,451.6 1,455.2 1,159.3 996.6 -0.25 25.21 45.66
New England Thrifts 593.0 592.0 428.9 355.8 0.17 38.26 66.65
Southeastern Thrifts 628.7 608.6 447.2 408.0 3.30 40.59 54.08
Southwestern Thrifts 409.6 416.4 315.9 269.2 -1.64 29.68 52.13
Western Thrifts 675.8 730.2 474.7 401.6 -7.44 42.37 68.27
Asset Size Indices
- --------------------------------------------------------------------------------
Less than $250M 750.5 721.9 586.6 555.7 3.97 27.94 35.05
$250M to $500M 1,034.7 1,011.5 789.8 700.1 2.30 31.01 47.79
$500M to $1B 688.4 672.1 521.8 458.7 2.42 31.93 50.05
$1B to $5B 756.5 747.6 546.0 462.3 1.19 38.55 63.66
Over $5B 423.4 453.3 305.8 251.4 -6.60 38.45 68.39
Comparative Indices
- --------------------------------------------------------------------------------
Dow Jones Industrials 7,622.4 8,222.6 6,448.3 5,647.7 -7.30 18.21 34.97
S&P 500 899.5 954.3 740.7 657.4 -5.75 21.43 37.96
</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, 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
Market Area Acquisition Activity
<PAGE>
RP Financial, LC.
Exhibit IV-4
Tennessee Thrift Merger and Acquisition Activity 1995-Present
<TABLE>
<CAPTION>
Seller Financials at Completion
-------------------------------------------
Total TgEq/ YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Assets ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/08/96 10/01/96 Union Planters Corp TN Leader Financial Crp TN 3,098,577 7.97 1.38 17.01 0.40 203.44
03/06/96 10/01/96 Union Planters Corp TN Franklin Financial TN 135,822 8.19 0.69 6.87 NA NA
02/20/96 08/30/96 Peoples First Corp KY Guaranty FSB TN 54,875 5.47 0.82 15.13 0.08 1281.82
02/21/95 11/01/95 First American Corp TN Heritage Federal TN 521,546 9.60 1.13 11.62 0.12 NA
Average 952,705 7.81 1.01 12.66 0.20 742.63
Median 328,684 8.08 0.97 13.38 0.12 742.63
<CAPTION>
Deal Terms and Pricing Completion
------------------------------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/ Deal Pr/
Ann'd Comp Value Price Per Deal Pr/Bk Tg Bk Assets 4-Qtr
Date Date Buyer ($M) Share ($) Consider (%) (%) (%) EPS(x)
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C> <C> <C>
03/08/96 10/01/96 Union Planters Corp 571.1 54.138 Stock 202.16 202.16 17.79 12.39
03/06/96 10/01/96 Union Planters Corp 23.6 19.312 Stock 196.06 NA 17.14 NA
02/20/96 08/30/96 Peoples First Corp 6.5 58.579 Stock 204.08 204.08 11.64 13.16
02/21/95 11/01/95 First American Corp 124.2 35.609 Stock 229.59 232.89 23.52 22.54
Average 181.4 41.410 207.97 213.04 17.52 16.03
Median 73.9 44.874 203.12 204.08 17.47 13.16
</TABLE>
<PAGE>
EXHIBIT IV-5
Directors and Management Summary Resumes
<PAGE>
Exhibit IV-5
Directors and Management Summary Resumes
Clyde E. Driskill, Jr. has been the owner and president of Driskill's
Furniture, Inc., a furniture and appliance retail establishment located in
Newport, Tennessee, since 1960. Mr. Driskill has served as the Chairman of the
Newport Regional Planning Commission and of the Newport/Cocke County Industrial
Development Commission.
Richard G. Harwood serves as President and Chief Executive Officer of us
and our holding company. Mr. Harwood joined us as Senior Vice President in 1984.
He has acted as the Vice Chairman of the Economic Development Commission, a
director for the United Way of Cocke County and Treasurer for the Newport Lions
Club.
William B. Henry has been an optometrist in Newport, Tennessee since 1961.
He is presently serving as the secretary of the Newport Utilities Board and is a
member of the Newport/Cocke County Economic Development Commission.
J. William Myers is a lawyer. He has practiced law in Newport Tennessee
since 1966. Mr. Myers serves as Chairman of the Board. He is active with Habitat
for Humanity.
Robert L. Overholt has been the owner/manager of Home Supply of Newport,
Tennessee, Inc., a building supply establishment, since 1966. Mr. Overholt is
active with the Shriners and Habitat for Humanity.
Robert D. Self has been the owner Bob Self Auto Parts an auto parts
supplier located in Newport, Tennessee since 1969. Mr. Self is active with the
Newport Lions Club and serves on the board of directors of the Stokley Memorial
Library.
Nancy L. Bryant serves as Vice President and Treasurer of us and our
holding company. Ms. Bryant joined us in 1966. She is a member of the Newport
Business Women's Club, serves as a Director and Treasurer of Habitat for
Humanity and received the 1993 Citizen of the Year Award nom the Newport Chamber
of Commerce.
Peggy Holston has been employed with us since 1971 and serves as our
Assistant Secretary and Branch Manager. She has served on the Board of Directors
of the Newport/Cocke County Chamber of Commerce and is a member of the Newport
Business Women's Club.
<PAGE>
EXHIBIT IV-6
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-6
PRO FORMA ANALYSIS SHEET -- PAGE 1
Newport FS&LA of Newport TN
Prices as of September 12, 1997
<TABLE>
<CAPTION>
Comparable All XX All SAIF
Companies Companies Companies
------------- ------------- ---------------
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
-------------- ------ ---------- ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 16.68x 20.69x 19.72x 0.00x 0.00x 21.39x 21.29x
Price-core earnings = P/CORE 12.49x 18.72x 17.29x 0.00x 0.00x 18.79x 18.09x
Price-book ratio = P/B 70.98% 120.48% 115.32% 0.00% 0.00% 144.36% 137.43%
Price-tng book ratio = P/TB 70.98% 120.49% 115.32% 0.00% 0.00% 148.03% 139.93%
Price-assets ratio = P/A 15.02% 25.26% 23.97% 0.00% 0.00% 17.61% 15.90%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conv Earnings (Y) $ 450,000 Est ESOP Borrowings (E) $ 880,000
Pre-Conv Book Value (B) $ 6,469,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $ 64,189,000 Amort of ESOP Borrowings (T) 10 Years
Reinvestment Rate(2) (R) 3.49% Recognition Plans Amount (M $ 440,000
Est Conversion Exp(3) (X) 652,400 Recognition Plans Expense (N)$ 88,000
Proceeds Not Reinvested (Z) $ 1,320,000
</TABLE>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
1. V = P/E (Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) V = $ 11,006,846
--------------------------------------------
1-(P/E)R
2. V = P/B (B-X-E-M) V = $ 10,998,231
-----------------------
1-P/B
3. V = P/A (A-X-M-E) V = $ 10,996,627
----------------------
1-P/A
Total Price Total
Conclusion Shares Per Share Value
- ---------- ------ --------- -----
Appraised Value 1,100,000 $ 10.00 $ 11,000,000
RANGE:
- ------
- Minimum 935,000 $ 10.00 $ 9,350,000
- Maximum 1,265,000 $ 10.00 $ 12,650,000
- Superrange 1,454,750 $ 10.00 $ 14,547,500
(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
40.00 percent.
(3) Conversion expenses include $ 450,000 of fixed expenses, and variable
expenses (marketing assistance) of 2.00 percent paid to market an estimated
92.00 percent of the total gross proceeds.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 40.00 percent.
<PAGE>
RP Financial, Inc.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-6
PRO FORMA ANALYSIS SHEET -- PAGE 2
Newport FS&LA of Newport TN
Prices as of September 12, 1997
<TABLE>
<CAPTION>
Mean Pricing Median Pricing
---------------- ----------------
Valuation Approach Subject Peers (Disc) Peers (Disc)
- ------------------ ------- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 16.68x 20.69x -19.42% 19.72x -15.43%
P/CORE Price-core earnings 12.49x 18.72x -33.26% 17.29x -27.78%
P/B Price-book 70.98% 120.48% -41.08% 115.32% -38.45%
P/TB Price-tang. book 70.98% 120.49% -41.09% 115.32% -38.45%
P/A Price-assets 15.02% 25.26% -40.51% 23.97% -37.33%
Average Premium (Discount) -35.07% -31.49%
</TABLE>
<PAGE>
EXHIBIT IV-7
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-7
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Newport FS&LA of Newport TN
At the Minimum of the Range
1. Conversion Proceeds
Pro-forma market value .............................. $ 9,350,000
Less: Estimated offering expenses ............... 622,040
-----------
Net Conversion Proceeds ............................. $ 8,727,960
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 8,727,960
Less: Held in Non-Earning Assets(5)(1) .......... 1,122,000
-----------
Net Proceeds Reinvested ............................. $ 7,605,960
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 265,600
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 44,880
Less: Recognition Plans Expense(4)............... 44,880
-----------
Net Earnings Increase ............................... $ 175,840
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended June 30, 1997 $ 450,000 $ 625,840
12 Months ended June 30, 1997 (Core) $ 671,000 $ 846,840
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 6,469,000 $ 7,605,960 (3)(4) $ 14,074,960
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 64,189,000 $ 7,605,960 $ 71,794,960
NOTE: Shares for calculating per share amounts: 935,000
(1) Estimated ESOP borrowings of $ 748,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
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 $ 748,000 are omitted from net worth.
(4) $ 374,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 74,800 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<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 EFFECT OF CONVERSION PROCEEDS
Newport FS&LA of Newport TN
At the Midpoint of the Range
1. Conversion Proceeds
Pro-forma market value .............................. $ 11,000,000
Less: Estimated offering expenses ............... 652,400
-----------
Net Conversion Proceeds ............................. $ 10,347,600
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 10,347,600
Less: Held in Non-Earning Assets(5)(1) .......... 1,320,000
-----------
Net Proceeds Reinvested ............................. $ 9,027,600
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 315,244
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 52,800
Less: Recognition Plans Expense(4)............... 52,800
-----------
Net Earnings Increase ............................... $ 209,644
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended June 30, 1997 $ 450,000 $ 659,644
12 Months ended June 30, 1997 (Core) $ 671,000 $ 880,644
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 6,469,000 $ 9,027,600 (3)(4) $ 15,496,600
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 64,189,000 $ 9,027,600 $ 73,216,600
NOTE: Shares for calculating per share amounts: 1,100,000
(1) Estimated ESOP borrowings of $ 880,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
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 $ 880,000 are omitted from net worth.
(4) $ 440,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 88,000 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<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 EFFECT OF CONVERSION PROCEEDS
Newport FS&LA of Newport TN
At the Maximum of the Range
1. Conversion Proceeds
Pro-forma market value .............................. $ 12,650,000
Less: Estimated offering expenses ............... 682,760
-----------
Net Conversion Proceeds ............................. $ 11,967,240
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 11,967,240
Less: Held in Non-Earning Assets(5)(1) .......... 1,518,000
-----------
Net Proceeds Reinvested ............................. $ 10,449,240
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 364,887
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 60,720
Less: Recognition Plans Expense(4)............... 60,720
-----------
Net Earnings Increase ............................... $ 243,447
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended June 30, 1997 $ 450,000 $ 693,447
12 Months ended June 30, 1997 (Core) $ 671,000 $ 914,447
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 6,469,000 $ 10,449,240 (3)(4) $ 16,918,240
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 64,189,000 $ 10,449,240 $ 74,638,240
NOTE: Shares for calculating per share amounts: 1,265,000
(1) Estimated ESOP borrowings of $ 1,012,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
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 $ 1,012,000 are omitted from net worth.
(4) $ 506,000 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 101,200 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<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 EFFECT OF CONVERSION PROCEEDS
Newport FS&LA of Newport TN
At the Superrange Maximum
1. Conversion Proceeds
Pro-forma market value .............................. $ 14,547,500
Less: Estimated offering expenses ............... 717,674
-----------
Net Conversion Proceeds ............................. $ 13,829,826
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 13,829,826
Less: Held in Non-Earning Assets(5)(1) .......... 1,745,700
-----------
Net Proceeds Reinvested ............................. $ 12,084,126
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 421,978
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 69,828
Less: Recognition Plans Expense(4)............... 69,828
-----------
Net Earnings Increase ............................... $ 282,322
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended June 30, 1997 $ 450,000 $ 732,322
12 Months ended June 30, 1997 (Core) $ 671,000 $ 953,322
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 6,469,000 $ 12,084,126 (3)(4) $ 18,553,126
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
June 30, 1997 $ 64,189,000 $ 12,084,126 $ 76,273,126
NOTE: Shares for calculating per share amounts: 1,454,750
(1) Estimated ESOP borrowings of $ 1,163,800 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of 40.00
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 $ 1,163,800 are omitted from net worth.
(4) $ 581,900 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 116,380 and a tax rate of 40.00 percent.
(5) Stock purchased by Recognition Plans does not generate reinvestment
income.
<PAGE>
EXHIBIT IV-8
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
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) ($000) ($)
Comparable Group
- ----------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
BFSB Bedford Bancshares of VA 1,303 553 -188 0 1,668 1,142 1.46
CKFB CKF Bancorp of Danville KY 1,079 -429 146 0 796 925 0.86
CFFC Community Fin. Corp. of VA 1,680 676 -230 0 2,126 1,275 1.67
FFBS FFBS Bancorp of Columbus MS 1,478 599 -204 0 1,873 1,557 1.20
FFDF FFD Financial Corp. of OH(1) 636 375 -128 0 884 1,455 0.61
FBSI First Bancshares of MO 1,413 453 -154 0 1,712 1,096 1.56
FLKY First Lancaster Bncshrs of KY(1) 440 153 -52 0 541 959 0.56
HFFB Harrodsburg 1st Fin Bcrp of KY 1,116 536 -182 0 1,470 2,025 0.73
KSAV KS Bancorp of Kenly NC 957 421 -143 0 1,235 885 1.40
LOGN Logansport Fin. Corp. of IN 931 431 -147 0 1,215 1,260 0.96
LONF London Financial Corp. of OH 247 193 -66 0 374 515 0.73
MARN Marion Capital Holdings of IN 2,439 726 -247 0 2,918 1,768 1.65
NEIB Northeast Indiana Bncrp of IN 1,724 453 -154 0 2,023 1,763 1.15
SCCB S. Carolina Comm. Bnshrs of SC(1) 368 193 -66 0 495 704 0.70
SSB Scotland Bancorp of NC 974 313 -106 0 1,181 1,914 0.62
SMBC Southern Missouri Bncrp of MO(1) 1,149 -40 14 0 1,123 1,638 0.69
SSM Stone Street Bancorp of NC 1,522 456 -155 0 1,823 1,898 0.96
FTF Texarkana Fst. Fin. Corp of AR 2,348 826 -281 0 2,893 1,790 1.62
TWIN Twin City Bancorp of TN 565 351 -119 0 797 853 0.93
</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 IV-9
Pro Forma Regulatory Capital Ratios
<PAGE>
<TABLE>
<CAPTION>
Pro Forma At June 30, 1997 Based on the Sale of(1):
-------------------------------------------------------------
Minimum of Midpoint of Maximum of
935,000 Shares 1,100,000 Shares 1,265,000 Shares
Historical at at $10.00 at $10.00 at $10.00
June 30, 1997 Per Share Per Share Per Share
------------------ -------------------------------------------------------------
Percent of Percent of Percent of Percent of
Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under generally accepted
accounting principles ........ $6,469 10.08% $9,712 14.24% $10,324 14.98% $10,936 15.70%
====== ===== ====== ===== ======= ===== ======= =====
Tangible capital ............... $5,867 9.14% $9,110 13.36% $ 9,722 14.11% $10,334 14.83%
Tangible capital requirement ... 963 1.50 1,023 1.50% 1,034 1.50% 1,045 1.50%
------ ----- ------ ----- ------- ----- ------- -----
Excess ....................... $4,904 7.64% $8,087 11.86% $ 8,688 12.61% $ 9,289 13.33%
====== ===== ====== ===== ======= ===== ======= =====
Core capital ................... $5,867 9.14% $9,110 13.36% $ 9,722 14.11% $10,334 14.83%
Core capital requirement ....... 1,926 3.00 2,045 3.00% 2,068 3.00% 2,090 3.00%
------ ----- ------ ----- ------- ----- ------- -----
Excess ....................... $3,941 6.14% $7,065 10.36% $ 7,654 11.11% $ 8,244 11.83%
====== ===== ====== ===== ======= ===== ======= =====
Total regulatory capital ....... $6,217 22.45% $9,460 33.20% $10,072 35.17% $10,684 37.11%
Risk-based capital requirement . 2,215 8.00 2,279 8.00% 2,291 8.00% 2,303 8.00%
------ ----- ------ ----- ------- ----- ------- -----
Excess ....................... $4,002 14.45% $7,181 25.20% $ 7,781 27.17% $ 8,381 29.11%
====== ===== ====== ===== ======= ===== ======= =====
<CAPTION>
----------------------
Maximum, as adjusted
1,454,750 Shares
at $10.00
Per Share
----------------------
Percent of
Amount Assests(2)
------ ----------
<S> <C> <C>
Capital under generally accepted
accounting principles ........ $11,639 16.50%
======= =====
Tangible capital ............... $11,038 15.65%
Tangible capital requirement ... 1,058 1.50%
------- -----
Excess ....................... $ 9,980 14.15%
======= =====
Core capital ................... $11,038 15.65%
Core capital requirement ....... 2,116 3.00%
------- -----
Excess ....................... $ 8,922 12.65%
======= =====
Total regulatory capital ....... $11,388 39.32%
Risk-based capital requirement . 2,317 8.00%
------- -----
Excess ....................... $ 9,017 31.32%
======= =====
</TABLE>
- ----------
(1) Assumes our holding company will purchase all of our stock to be issued in
the Conversion in exchange for half of the net proceeds from the
Conversion. Assumes net proceeds distributed to our holding company or us
initially are invested in short-term securities that carry a risk-weight
equal to the ratio of risk-weighted assets to total assests at June 30,
1997. Assumes 8% of the shares to be sold in the Conversion are purchased
by the ESOP and that the funds used to purchase such shares are borrowed
from our holding company. The approximate amount expected to be borrowed
by the ESOP is reflected in this table as a reduction of capital. 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 MRP
after the Conversion. The dollar amount of the Common Stock possibly to be
purchased by the MRP is based on the price per share in the Conversion and
is reflected 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. Does not reflect a possible increase in
capital upon the exercise of options by participants in the Option Plan.
Under the MRP and the Option Plan, shares issued to participants could be
treasury shares or newly issued shares or shares. The MRP and the Option
Plan will not be implemented until at least six months after the
Conversion. See "MANAGEMENT -- Certain Compensation Agreements and Plans."
(2) Based on our total assests determined under generally accepted accounting
principles for equity purposes, adjusted total assests for the purposes of
the tangible and core capital requirements and risk-weighted assets for
the purpose of the total regulatory capital requirement.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC.]
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 (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (12)
James J. Oren, Vice President (10)
