<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
HERITAGE FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 6036 APPLIED FOR
(STATE OR OTHER (PRIMARY SICC NO.) (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
----------------
201 5TH AVENUE S.W.
OLYMPIA, WASHINGTON 98501
(360) 943-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DONALD V. RHODES
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
HERITAGE FINANCIAL CORPORATION
201 5TH AVENUE S.W.
OLYMPIA, WASHINGTON 98501
(360) 943-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF COMMUNICATIONS TO:
J. JAMES GALLAGHER, ESQ.
SANDRA L. GALLAGHER, ESQ.
GORDON, THOMAS, HONEYWELL, MALANCA,
PETERSON & DAHEIM, P.L.L.C.
1201 PACIFIC AVENUE, SUITE 2200
TACOMA, WASHINGTON 98402
(253) 572-5050
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT BEING PURCHASE PRICE AGGREGATE AMOUNT OF
SECURITIES BEING REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par
value.................. 7,013,835 shares $10.00 $70,138,350 $21,254.05
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee. As
described in the Prospectus, the actual number of shares to be issued and
sold are subject to adjustment based upon the estimated pro forma market
value of the registrant and market and financial conditions.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
HERITAGE FINANCIAL CORPORATION
----------------
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM S-1 ITEM NO. AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
----------------------------- -------------------------------------
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus..... Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus.... Insider Front Cover Page; Outside Back
Cover Page
3. Summary Information and Risk
Factors...................... Summary; Risk Factors
4. Use of Proceeds............... Summary; Use of Proceeds
5. Determination of Offering
Price........................ Summary--Stock Pricing and Number of
Shares to be Issued in the Conversion;
The Conversion
6. Dilution...................... Not Applicable
7. Selling Security Holders...... Not Applicable
8. Plan of Distribution.......... Front Cover Page; Summary; The Conversion
9. Description of Securities to
be Registered................ Description of Capital Stock
10. Interests of Named Experts and
Counsel...................... Not Applicable
11. Information with Respect to
the Registrant............... Summary; Selected Consolidated Financial
and Other Data; Dividend Policy; Market
for Common Stock; Management's Discussion
of Analysis of Financial Condition and
Results of Operations; Business of the
Company; Business of the Bank; Management;
Consolidated Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities.................. Part II--Item 14
</TABLE>
<PAGE>
PROSPECTUS
HERITAGE FINANCIAL CORPORATION [LOGO]
(HOLDING COMPANY FOR HERITAGE SAVINGS BANK)
UP TO 6,098,998 SHARES OF COMMON STOCK (ANTICIPATED MAXIMUM)
$10.00 PER SHARE
Heritage Financial Corporation (the "Company"), a Washington corporation, is
offering up to 6,098,998 shares (which may be increased to 7,013,835 shares
under certain circumstances described below) of its common
(continued on following page)
FOR ADDITIONAL INFORMATION ON HOW TO SUBSCRIBE FOR COMMON STOCK, PLEASE CALL
THE STOCK INFORMATION CENTER AT (360) .
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 11.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC"), THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ("FEDERAL
RESERVE") OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION
OR OTHER STATE AGENCY, INCLUDING THE WASHINGTON DEPARTMENT OF FINANCIAL
INSTITUTIONS, DIVISION OF BANKS (THE "DIVISION"), NOR HAS THE SEC, THE
FDIC, THE FEDERAL RESERVE OR ANY OTHER AGENCY OR ANY STATE SECURITIES
COMMISSION OR OTHER STATE AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY, NOR
ARE THEY INSURED OR GUARANTEED BY THE COMPANY OR THE BANK.
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<TABLE>
<CAPTION>
ESTIMATED FEES,
UNDERWRITING
PURCHASE COMMISSIONS AND OTHER ESTIMATED NET
PRICE(1) EXPENSES(2) PROCEEDS(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share............ $ 10.00 $ 0.28 $ 9.72
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Midpoint Per Share........... $ 10.00 $ 0.26 $ 9.74
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Maximum Per Share............ $ 10.00 $ 0.25 $ 9.75
- ------------------------------------------------------------------------------
Maximum Per Share, as
adjusted(4)................. $ 10.00 $ 0.23 $ 9.77
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Minimum Total................ $30,600,000 $ 867,000 $29,733,000
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Midpoint Total............... $36,000,000 $ 942,000 $35,058,000
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Maximum Total................ $41,400,000 $1,016,000 $40,384,000
- ------------------------------------------------------------------------------
Maximum Total, as
adjusted(4)................. $47,610,000 $1,102,000 $46,508,000
</TABLE>
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(1) Based upon the minimum, midpoint, maximum and 15% above the maximum of the
Valuation Price Range as hereinafter defined, respectively, determined in
accordance with an independent appraisal prepared by RP Financial, LC.
("RP Financial"). Does not include shares of Common Stock to be issued to
Minority Stockholders in the Exchange.
(2) Consists of the estimated costs to the Company and the Bank to be incurred
in connection with the Conversion, including estimated fixed expenses of
$460,000 and marketing fees to be paid to the Agent in connection with the
Offerings, which are estimated to be $482,000 at the midpoint of the
Valuation Price Range, as hereinafter defined. See "The Conversion--
Marketing Arrangements." The actual fees and expenses may vary
substantially from the estimates. See "Pro Forma Data." The fees paid to
the Agent may be deemed to be underwriting fees. See "The Conversion--
Marketing Arrangements" for information relating to indemnification of the
Agent.
(3) Actual net proceeds may vary substantially from estimated amounts
depending on the number of shares sold in the Offerings and other factors.
Includes the proposed purchase of shares of Conversion Stock by the ESOP
which will be funded by a loan to the ESOP from the Company. See
"Capitalization" and "Pro Forma Data."
(4) Gives effect to an increase in the number of shares which could occur
without a resolicitation of subscribers or any right of cancellation of
stock orders due to an increase in the Valuation Price Range of up to 15%
above the maximum of the Valuation Price Range to reflect regulatory
considerations and changes in market and financial conditions following
commencement of the Offerings. See "The Conversion--Stock Pricing and
Number of Shares to be Issued."
----------------
RYAN, BECK & CO.
----------------
The date of this Prospectus is , 1997.
<PAGE>
(continued from previous page)
stock, no par value per share (the "Common Stock" or "Company Common Stock"),
in connection with the conversion and reorganization (the "Conversion") of
Heritage Financial Corporation, MHC (the "Mutual Holding Company" or "MHC")
from a state chartered mutual holding company to a Washington stock
corporation. Heritage Savings Bank, a Washington stock savings bank ("Heritage
Bank" or the "Bank") is a 66.31% owned subsidiary of the MHC. The Conversion
will cause the Bank to become a wholly owned subsidiary of the Company and
will be effected pursuant to a Plan of Conversion and Reorganization (the
"Plan of Conversion" or "Plan"). At June 30, 1997, the Mutual Holding Company
held $120,000 in assets, in addition to 1,200,000 shares of common stock, par
value $1.00 per share, of the Bank ("Bank Common Stock"). The remaining
609,616 shares, or approximately 33.69% of the Bank Common Stock (the
"Minority Shares"), are owned by members of the public, including the Bank's
employees, directors, and existing Employee Stock Ownership Plan ("ESOP")
(together, the "Minority Stockholders"). The Minority Shares, as of
consummation of the Conversion (the "Effective Time"), will be exchanged for
Company Common Stock.
THE OFFERINGS. Pursuant to the Plan, nontransferable subscription rights to
subscribe for up to 4,140,000 shares (subject to adjustment up to 4,761,000
shares) of Common Stock (the "Conversion Stock") have been granted to certain
depositors and borrowers of the Bank as of specified record dates (the
"Subscription Offering"). In order of priority, the Subscription Offering is
being made to (i) depositors with $50.00 or more on deposit at the Bank as of
June 30, 1996 ("Eligible Account Holders"); (ii) the Bank's ESOP, a tax
qualified employee benefit plan; (iii) depositors with $50.00 or more on
deposit at the Bank as of , 1997 ("Supplemental Eligible Account
Holders"); and (iv) depositors of the Bank as of , 1997 ("Voting Record
Date") other than Eligible Account Holders and Supplemental Eligible Account
Holders, and borrowers with loans outstanding on July 21, 1993 which continue
to be outstanding as of , 1997 ("Other Members").
Commencing concurrently with the Subscription Offering, the Company is
offering the shares of Conversion Stock not subscribed for in the Subscription
Offering in order of priority to (i) the Minority Stockholders who are not
Eligible Account Holders, Supplemental Eligible Account Holders or Other
Members ("Minority Stockholders' Offering") and (ii) to certain members of the
general public to whom a copy of this Prospectus is delivered by or on behalf
of the Company (the "Community Offering"). The Mutual Holding Company and the
Bank have determined that the Bank's local community consists of the counties
of Thurston, Mason, Pierce, King, Snohomish, Kitsap and Grays Harbor in the
State of Washington (the "Local Community"). In the Community Offering, a
preference may be given to stock orders from natural persons who are residents
of the Local Community. It is anticipated that shares of Conversion Stock not
subscribed for in the Subscription, Minority Stockholders' and Community
Offerings, will be offered on a best efforts basis by a selling group of
broker-dealers to members of the general public to whom a copy of this
Prospectus is delivered by or on behalf of the Company (the "Syndicated
Community Offering"). The Subscription Offering, Minority Stockholders'
Offering, Community Offering and any Syndicated Community Offering are
referred to collectively as the "Offerings." The Company reserves the right,
in its absolute discretion, to accept or reject, in whole or in part, any or
all stock orders in the Minority Stockholders' Offering, Community Offering or
Syndicated Community Offering either at the time of receipt of an order or as
soon as practicable following the termination of the Offerings. If an order is
rejected in part, the subscriber does not have the right to cancel the
remainder of the order. Purchase of shares of Conversion Stock in the
Offerings are subject to limitations. See "The Conversion--Limitations on
Purchases and Ownership of Shares."
The Company and the Bank have engaged Ryan Beck & Co., Inc. (hereinafter
referred to as "Ryan Beck" or the "Agent") to consult with and advise them in
the Conversion, and the Agent has agreed to use its best efforts to assist in
the sale of Conversion Stock in the Offerings and to manage any Syndicated
Community Offering. The Agent is not obligated to take or purchase any shares
of Common Stock in the Offerings. See "The Conversion--Marketing
Arrangements."
<PAGE>
(continued from previous page)
THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, PACIFIC TIME, ON , 1997
("EXPIRATION DATE"), UNLESS EXTENDED BY THE COMPANY FOR UP TO DAYS TO
, 1997. THE COMMUNITY OFFERING AND MINORITY STOCKHOLDERS' OFFERING ARE ALSO
EXPECTED TO TERMINATE AT NOON, PACIFIC TIME, ON , 1997, BUT MAY BE
EXTENDED. If the Conversion is not consummated within 45 days after the last
day of the Subscription Offering (which may conclude no later than ,
1997) and the Company elects to extend the Offerings, with the approval of the
Division, if necessary, subscribers will be notified in writing of the time
period within which they must notify the Company of any intention to increase,
decrease or rescind stock orders. If an affirmative response to any such
resolicitation is not received by the Company, a subscriber's stock order will
be rescinded and subscription funds will be returned promptly, together with
interest from the date such funds were received by the Company, and all
withdrawal authorizations from deposit accounts at the Bank will be
terminated. If the Offerings are not extended or, in any event, if the
Conversion is not consummated by , 1997, all stock orders will be
rescinded, funds returned and withdrawal authorizations terminated, as
described above.
THE EXCHANGE. In addition to the Offerings, each share of Bank Common Stock
held by the Mutual Holding Company will be canceled and each share of Bank
Common Stock held by the Minority Stockholders will be converted into shares
of Common Stock (the "Exchange Shares") pursuant to a ratio (the "Exchange
Ratio") that will result in the Minority Stockholders owning in the aggregate
approximately 32.12% of the Company (the "Exchange"), before giving effect to
certain items, including any shares of Conversion Stock purchased by such
Minority Stockholders in the Offerings. The dilution of Minority Stockholder
ownership interest from the 33.69% current ownership interest in the Bank to
an approximate 32.12% ownership interest in the Company reflects a policy of
the FDIC requiring the Exchange Ratio to be adjusted downward to reflect the
aggregate amount of Bank Common Stock dividends waived by the MHC and certain
assets held by the MHC. The Exchange Ratio is expected to be between 2.3752
and 3.2135, resulting in a range of between 1,447,959 and 1,958,998 Exchange
Shares to be issued in the Conversion (which may be increased to 2,252,835
shares, as described below). THE ACTUAL EXCHANGE RATIO WILL BE BASED ON THE
NUMBER OF SHARES OF CONVERSION STOCK SOLD IN THE OFFERINGS AND THE MINORITY
STOCKHOLDERS' PERCENTAGE OWNERSHIP INTEREST IN THE BANK IMMEDIATELY PRIOR TO
THE EFFECTIVE TIME. THE EXCHANGE RATIO IS NOT DEPENDENT ON THE MARKET VALUE OF
THE MINORITY SHARES. SEE "SUMMARY--THE EXCHANGE RATIO."
INDEPENDENT VALUATION. Pursuant to applicable Washington law and regulations
of the FDIC, the offering of Conversion Stock in the Offerings is required to
be based on an independent valuation of the pro forma market value of the Bank
and the Mutual Holding Company. RP Financial prepared an independent appraisal
which states that the aggregate pro forma market value of the Bank and the
Mutual Holding Company, inclusive of the sale of an approximate 67.88%
ownership interest in the Offerings, was $53,034,770 at the midpoint as of
August 15, 1997 and as updated on , 1997 (the "Appraisal"). The
Appraisal was multiplied by 67.88%, which is the Mutual Holding Company's
percentage ownership interest in the Bank as adjusted upward from the actual
interest of 66.31% to reflect $1,230,000 of dividends declared by the Bank and
waived by the Mutual Holding Company and the $120,000 in assets, other than
Bank Common Stock held by the MHC. The resulting amount, $36,000,000, is the
midpoint of the dollar amount of Conversion Stock to be offered in the
Offerings. The minimum and maximum of the offering range were set at 15% below
and above the midpoint, respectively, resulting in an offering range of
$30,600,000 to $41,400,000 (the "Valuation Price Range") of Conversion Stock.
The Boards of Directors of the Company and the Bank determined that the
Conversion Stock would be sold at $10.00 per share (the "Purchase Price"),
resulting in a range of 3,060,000 to 4,140,000 shares of Conversion Stock
being offered.
THE 6,098,998 SHARES OF COMMON STOCK OFFERED HEREBY (SUBJECT TO ADJUSTMENT
UP TO 7,013,835 SHARES AS DESCRIBED HEREIN) INCLUDE UP TO 4,140,000 SHARES OF
CONVERSION STOCK AND UP TO 1,958,998 SHARES OF EXCHANGE SHARES. The Valuation
Price Range, and therefore the number of shares offered, may be increased or
decreased prior to completion of the Conversion to reflect regulatory
considerations and changes in market and economic conditions. In any case,
however, through the Exchange Ratio, the Conversion Stock and the Exchange
<PAGE>
(continued from previous page)
Shares will represent approximately 67.88% and 32.12%, respectively, of Common
Stock outstanding, unless the Company issues unissued shares to the ESOP
immediately following the Conversion. See "The Conversion--Stock Pricing and
Number of Shares to be Issued."
No resolicitation of subscribers will be made and subscribers will not be
permitted to modify or cancel their subscriptions unless (i) the gross
proceeds from the sale of the Conversion Stock are less than the minimum or
more than 15% above the maximum of the current Valuation Price Range or (ii)
the Offerings are extended beyond .
PURCHASE LIMITATIONS AND OWNERSHIP LIMITATION. The Plan sets forth purchase
limitations applicable to the Offerings. The minimum stock order is 25 shares.
Except for the ESOP, which is expected to purchase 8% of the Conversion Stock
sold, no person (or persons through a single subscription right), together
with any associate or group of persons acting in concert, may subscribe for
more than $250,000 in all categories of the Offerings combined. In addition to
these purchase limitations, no person, together with any associate or group of
persons acting in concert may, upon completion of the Conversion, own more
than 2% of the Common Stock outstanding. This ownership limitation pertains to
the aggregate of Conversion Stock purchased and Exchange Shares received by
the subscriber. Notwithstanding the foregoing, no Minority Stockholder will be
required to dispose of Minority Shares if, without purchasing Conversion
Stock, the Exchange will result in ownership of in excess of 2% of the Common
Stock. The purchase limitations and ownership limitation may be changed at the
discretion of the Company, as described herein. See "The Conversion--
Limitations on Purchases and Ownership of Shares."
REQUIRED APPROVALS. The consummation of the Conversion is subject to the
receipt of regulatory approvals from the Division, the FDIC and the Federal
Reserve, the ratification by members of the MHC and the approval of the
Minority Stockholders of the Bank in the manner set forth herein. See "The
Conversion--General."
MARKET FOR COMMON STOCK. The Company has received conditional approval to
have the Common Stock quoted on the National Association of Securities Dealers
Automated Quotation ("Nasdaq") National Market under the symbol " ." There
can be no assurance that an active and liquid trading market for the Common
Stock will develop, or, if developed, be maintained. The Minority Shares,
which will be exchanged for Common Stock, are not traded on any exchange and
there is currently no established trading market for them.
<PAGE>
[MAP SHOWS LOCATION OF THE COMPANY'S
OFFICES IN THURSTON, MASON AND PIERCE COUNTIES IN
THE STATE OF WASHINGTON]
THE CONVERSION IS CONTINGENT UPON THE RECEIPT OF ALL REQUIRED REGULATORY
APPROVALS, RATIFICATION BY MEMBERS OF THE MHC, APPROVAL BY THE STOCKHOLDERS OF
THE BANK, AND THE SALE OF AT LEAST THE MINIMUM NUMBER OF SHARES OFFERED
PURSUANT TO THE PLAN.
<PAGE>
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY, NOR ARE
THEY INSURED OR GUARANTEED BY THE COMPANY OR THE BANK.
SUMMARY
The information set forth below should be read in conjunction with and is
qualified in its entirety by, the more detailed information and Consolidated
Financial Statements (including the Notes thereto) presented elsewhere in this
Prospectus. The purchase of Common Stock is subject to certain risks. This
Prospectus contains certain forward-looking statements within the meaning of
the federal securities laws. Actual results and timing of certain events could
differ materially from those projected in the forward-looking statements due to
a number of factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
HERITAGE FINANCIAL CORPORATION
The Company is a Washington corporation organized in August 1997 at the
direction of the Bank to hold all of the capital stock of the Bank upon
consummation of the Conversion. The Company has not engaged in any significant
business to date. Upon completion of the Conversion, the Company will be
regulated by the Federal Reserve. The Company has filed an application with the
Federal Reserve Bank of San Francisco to become a bank holding company and for
approval to acquire the Bank. Immediately following the Conversion, the only
significant assets of the Company will be the capital stock of the Bank, a
portion of the net proceeds of the Offerings and a note receivable from the
ESOP evidencing a loan from the Company to fund the purchase of Conversion
Stock by the Bank's ESOP. See "Use of Proceeds." Management believes that the
holding company structure and proceeds of the Offerings can facilitate possible
future acquisitions of other financial institutions, such as commercial banks
or savings institutions, or branches of other financial institutions and
thereby further expansion in existing and new market areas. The holding company
structure will also provide increased flexibility to the Company to diversify
into a variety of banking-related activities and to repurchase its stock. There
are no present plans, arrangements, agreements, or understandings, written or
oral, regarding any such acquisitions, activities or repurchases.
The main office of the Company is located at 201 5th Avenue S.W., Olympia,
Washington 98501 and its telephone number is (360) 943-1500.
HERITAGE BANK
The Bank was established in 1927 and has maintained its headquarters in
Olympia, Thurston County, Washington (the state capital) continuously since
that date and currently serves Thurston, Pierce and Mason Counties in the South
Puget Sound region of Washington as its primary market area. In 1992, the Bank
converted from a federally chartered mutual savings bank to a state chartered
mutual savings bank. In connection with the organization of the Mutual Holding
Company in 1994 (the "MHC Reorganization"), the Bank merged into an interim
institution formed as a subsidiary of the Mutual Holding Company, thereby
becoming a stock savings bank and a subsidiary of the Mutual Holding Company.
The Bank sold approximately 33.3% of its shares of common stock to the general
public and to an ESOP in connection with the MHC Reorganization. The MHC was
issued the remaining 66.7%. Stock options exercised by Minority Stockholders
have increased total outstanding shares to 1,809,616 at June 30, 1997.
The Bank is regulated by the Division as its primary state regulator and by
the FDIC as its primary federal regulator. The Bank's deposits have been
federally insured since 1935 by the FDIC (under the Savings Association
Insurance Fund ("SAIF")) and its predecessor, the Federal Savings and Loan
Insurance Corporation. The Bank has been a member of the Federal Home Loan Bank
("FHLB") System since 1932. At
1
<PAGE>
June 30, 1997, the Bank had total assets of $242.2 million, total deposits of
$209.8 million and stockholders' equity of $27.7 million, or 11.44% of total
assets, on a consolidated basis.
The Bank traditionally has offered a variety of savings products and
originated one- to four-family mortgage loans (principally for sale in the
secondary market) and, to a lesser extent, multifamily, commercial real estate
and construction loans. Beginning in fiscal 1994, the Bank began to implement a
growth strategy which is intended to broaden its products and services from
traditional thrift products and services to those more closely related to
commercial banking. That strategy entails:
. Geographic and Product Expansion
. Loan Portfolio Diversification
. Development of Relationship Banking
. Maintenance of Asset Quality
The Bank's strategy to date has resulted in the following changes in the
Bank's operations.
Geographic and Product Expansion. Since the end of fiscal 1994, the Bank has
doubled its number of offices, to ten full service locations. New branches were
opened in the West Olympia and Indian Summer areas of Thurston County in fiscal
1995, and an office was opened in Lakewood, Pierce County, in fiscal 1996. In
October 1996, an office was established in Tacoma, Pierce County, and the tenth
office was opened, in downtown Tacoma, in the spring of 1997. During the last
four years, the Bank has constructed new buildings in Lacey, Thurston County,
and Shelton, Mason County, to replace existing branch buildings and to better
serve customers in these markets. The Bank has installed Automated Teller
Machines at six of its offices. The Bank intends to continue its growth
strategy on a basis it considers prudent. The number and timing of future
branch openings will depend on various factors, including maintaining an
infrastructure to accommodate growth, targeting promising market areas, and, in
the case of acquisitions of financial institutions or branches, identifying
favorable opportunities.
Concurrent with geographic expansion, the Bank has (i) developed business
checking accounts and commercial lending products and other services for
businesses and high net worth individuals; (ii) introduced Visa debit and
credit cards; (iii) installed an automated voice response system for customer
account inquiries and (iv) developed products to assist realtors and potential
borrowers to obtain information about loan programs and qualifications. To
accommodate new products and to improve internal operating and reporting, the
Bank converted to a new data processing system with a data service bureau and
installed a personal computer network.
Loan Portfolio Diversification. Since initiating its expansion activities,
total loans increased to $208.2 million at June 30, 1997 from $130.4 million at
June 30, 1993. During this period, the Bank targeted growth in commercial
loans, taking advantage of market opportunities and the higher interest rates
and shorter terms of such loans relative to residential mortgage loans. As a
result, commercial loans increased to $39.4 million, or 18.95% of total loans,
from $1.2 million, or 0.92% of total loans, at June 30, 1993. One- to four-
family residential loans increased in amounts outstanding but decreased to
49.68% from 56.29% of total loans, and multifamily and commercial real estate
loans similarly increased in amounts outstanding while decreasing to 24.60%
from 30.97% of total loans during that period. Most of the Bank's commercial
business loans are collateralized by real estate, but repayment is expected
from a source other than operation or sale of the real estate. See "Business of
the Bank--Lending Activities."
Development of Relationship Banking. In fiscal 1994, the Bank initiated
efforts to develop a business banking department under the direction of a
senior officer with commercial banking experience in Thurston County. The new
department concentrated its efforts on development of expanded lending and
deposit relationships with existing and new customers of the Bank in Thurston
and Mason counties. In June 1996, the Bank hired a former south Puget Sound
Regional Manager for a large commercial bank. The management
2
<PAGE>
addition was made for the purpose of enhancing the Bank's relationship banking
capacity and to establish a commercial banking presence in Pierce County. Since
that time, the Bank has also hired six additional lending officers who have
experience lending to small businesses and individuals in the Pierce County
market. While the banking market is very competitive, recent mergers of
regional commercial banks with significant presence in the Bank's principal
market areas have, in management's view, provided a greater opportunity for
community banks to fill a personal service niche which the Bank believes has
been created by the mergers. Management believes that the Bank can develop a
larger market share in the Pierce County market, while continuing to expand in
the Thurston and Mason County markets, by delivering efficient and personalized
banking service and developing relationships with small businesses and high net
worth individuals who are seeking a relationship with a responsive, service
oriented provider of financial services and products.
Maintenance of Asset Quality. While pursuing its growth strategy, the Bank
will continue its policy of seeking to employ consistent underwriting and loan
monitoring procedures, in order to maintain asset quality. The Bank's loan
portfolio grew 59.6% between June 30, 1993 and June 30, 1997. Nonperforming
loans remained less than $436,000 during the four year period, as did total
nonperforming assets. At June 30, 1997, nonperforming loans constituted 0.06%
of the Bank's total loans and the allowance for loan losses to nonperforming
loans was 2069.17%. See "Business of the Bank--Delinquencies and Nonperforming
Assets."
The Bank conducts business from its main office located at 201 5th Avenue
S.W., Olympia, Washington 98501 and its nine branch offices located in
Thurston, Pierce and Mason Counties of Washington. The Bank's telephone number
is (360) 943-1500.
THE MUTUAL HOLDING COMPANY
The MHC is a Washington chartered mutual holding company which was
incorporated in January 1994, in connection with the MHC Reorganization. The
Mutual Holding Company's only significant assets are approximately 66.31% of
the outstanding shares of Bank Common Stock and $120,000 in cash. Subsequent to
the MHC Reorganization, the Mutual Holding Company has engaged in no
significant activity other than holding the Bank Common Stock. Accordingly, the
information set forth in this Prospectus includes the Mutual Holding Company
but relates primarily to the Bank and its subsidiary. The Consolidated
Financial Statements reflect only the financial condition and results of
operations of the Bank and its subsidiaries.
THE CONVERSION AND THE OFFERINGS
On July 1, 1997, the Boards of Directors of the Bank and the Mutual Holding
Company adopted the Plan, which was subsequently amended. In August 1997 the
Bank incorporated the Company under Washington law as a wholly-owned subsidiary
of the Bank. Pursuant to the Plan, (i) the Mutual Holding Company will convert
from the mutual to stock form of organization and simultaneously merge into the
Bank, with the Bank being the surviving institution, and the shares of Bank
Common Stock currently held by the Mutual Holding Company will be canceled and
(ii) the Bank will then merge with an interim bank ("Interim"), with the Bank
being the surviving institution and becoming a wholly-owned subsidiary of the
Company.
Consummation of the Conversion is conditioned upon: (i) approval of the Plan
by the Division; (ii) the nonobjection of the FDIC; (iii) approval by the
Federal Reserve of the Company's acquisition of the Bank; (iv) approval of the
Plan by at least a majority of the total number of votes eligible to be cast by
members of the Mutual Holding Company; (v) approval of the Plan by a majority
of the votes cast by the Minority Stockholders; and (vi) successful completion
of the Offerings. Special Meetings of Members of the Mutual Holding Company and
stockholders of the Bank, called for the purpose of submitting the Plan for
approval, will be held on , 1997 (the "Special Meetings"). It is possible
that there could be a significant delay in the completion of the Conversion as
a result of, among other things, delays in receiving approval by the Division
or
3
<PAGE>
the Federal Reserve, or a notice of nonobjection to the Conversion from the
FDIC, or by difficulty in completing the Offerings due to market conditions.
See "Risk Factors--Risk of Delayed Offering."
The Board of Directors of the Bank believes that the Conversion offers a
number of advantages which will be important to the future growth and
performance of the Bank. The Conversion is intended to: (i) provide
substantially increased capital to expand the operations of the Bank; (ii)
improve future access to capital markets; (iii) enhance the Company's and the
Bank's ability to expand directly or through mergers and acquisitions and to
diversify operations into new business activities (although there are no
specific agreements, arrangements or understandings, written or oral, regarding
any such mergers or diversified activities); and (iv) afford customers and
others the opportunity to become stockholders of the Company and thereby
participate more directly in any future growth of the Company and the Bank.
Additionally, by converting to the stock holding company form of organization,
the Company will be structured in the form used by many commercial banks and
business entities and a growing number of savings institutions.
The Company is offering up to 4,140,000 (or 4,761,000 if the Valuation Price
Range is increased by 15%) shares of Conversion Stock at $10.00 per share to
holders of subscription rights in the following order of priority: (i) Eligible
Account Holders; (ii) the Bank's ESOP; (iii) Supplemental Eligible Account
Holders; and (iv) Other Members. In the event the number of shares offered in
the Conversion is increased above the maximum of the Valuation Price Range, the
Bank's ESOP shall have a priority right to purchase any such shares exceeding
the maximum of the Valuation Price Range up to an aggregate of 8% of the
Conversion Stock sold in the Offerings. Concurrently, and subject to the prior
rights of holders of subscription rights, any shares of Conversion Stock not
subscribed for in the Subscription Offering are being offered by the Company,
in order of priority, in (i) the Minority Stockholders' Offering to Minority
Stockholders and (ii) in the Community Offering to certain members of the
general public. Preference may be given in the Community Offering to natural
persons who are permanent residents of the Local Community. The Bank has
engaged Ryan Beck to consult with and advise the Company and the Bank in the
Offerings and Ryan Beck has agreed to use its best efforts to assist the
Company in the sale of Conversion Stock in the Offerings. Ryan Beck is not
obligated to take or purchase any shares of Conversion Stock in the Offerings.
If all shares of Conversion Stock are not sold through the Subscription,
Minority Stockholders', and Community Offerings, then the Company expects to
offer the remaining shares to the general public in a Syndicated Community
Offering managed by Ryan Beck. All shares of Conversion Stock will be sold at
the $10.00 Purchase Price per share in the Offerings. See "Use Of Proceeds,"
"Pro Forma Data" and "The Conversion--Stock Pricing and Number of Shares to be
Issued."
The Subscription Offering will expire at Noon, Pacific Time, on ,
unless extended by the Bank and the Company. The Minority Stockholders'
Offering, Community Offering and Syndicated Community Offering may terminate on
the same date, however in no event later than , 1997, unless extended
pursuant to regulatory approval. See "The Conversion."
EFFECTS OF THE EXCHANGE ON MINORITY STOCKHOLDERS
The following are effects of the Conversion on Minority Stockholders,
assuming that at the minimum, midpoint, maximum and 15% above the maximum of
the Valuation Price Range, one Minority Share will be exchanged for 2.3752,
2.7943, 3.2135 and 3.6955 shares of Common Stock, respectively. See "Pro Forma
Data."
Effect of the Exchange on Stockholders' Equity Per Share. The Conversion will
increase the stockholders' equity per share of Minority Stockholders. At June
30, 1997, stockholders' equity was $15.31 for each share of the Bank Common
Stock outstanding, including shares held by the Mutual Holding Company. Based
on the pro forma information set forth in "Pro Forma Data" assuming the sale of
3,600,000 shares of Conversion Stock at the midpoint of the Valuation Price
Range, at June 30, 1997, the pro forma stockholders' equity per share of Common
Stock was $11.04, and the pro forma stockholders' equity for the aggregate
number of Exchange
4
<PAGE>
Shares to be received for each Minority Share was $30.85. The pro forma
stockholders' equity at June 30, 1997 for the aggregate number of Exchange
Shares to be received for each Minority Share was $28.41, $33.32 and $36.14 at
the minimum, maximum, and adjusted maximum of the Valuation Price Range.
Effect of the Exchange on Earnings Per Share. The Conversion will also affect
Minority Stockholders' pro forma earnings per share. For the year ended June
30, 1997, the earnings per share was $1.26 for each share of the Bank Common
Stock outstanding, including shares held by the Mutual Holding Company. Based
on the pro forma information set forth in "Pro Forma Data," assuming the sale
of 3,600,000 shares of Common Stock at the midpoint of the Valuation Price
Range, the pro forma earnings per share of Common Stock was $0.66 for such
period, and the pro forma earnings for the aggregate number of Exchange Shares
to be received for each Minority Share was $1.84. For the year ended June 30,
1997, the pro forma earnings per share for the aggregate number of Exchange
Shares to be received for each Minority Share was $1.76, $1.93 and $2.03 at the
minimum, maximum, and adjusted maximum of the Valuation Price Range.
Effect of the Exchange on Market Value. The aggregate number of Exchange
Shares to be received for each share of Bank Common Stock will have a
calculated estimated value of $23.75, $27.94, $32.13 and $36.95 at the minimum,
midpoint, maximum and adjusted maximum of the Valuation Price Range based on
the $10.00 Purchase Price of the Conversion Stock. The most recent known stock
trade of Minority Shares preceding the date of this Prospectus was March 12,
1997 at a price of $18.00.
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING SHARES
To ensure that each purchaser receives a Prospectus at least 48 hours prior
to the Expiration Date, Prospectuses may not be mailed later than five days
prior to such date or be hand delivered later than two days prior to such date.
Order forms may only be distributed with a Prospectus. Execution of a stock
order form will confirm receipt or delivery of the Prospectus. The Company will
not be required to accept orders submitted on photocopied or telecopied stock
order forms. Payment in full by check, bank draft, money order, or withdrawal
authorization from any existing certificate of deposit or other deposit account
at the Bank must accompany each stock order form. The Bank is prohibited from
lending funds for the purchase of the Conversion Stock. See "The Conversion--
Procedure for Purchasing Shares in Offerings."
To help ensure that each prospective purchaser is properly identified as to
such person's stock purchase priority and to assist in stock allocation in the
event of oversubscription, depositors as of the Eligibility Record Date and
Supplemental Eligibility Record Date must list on the order form all Bank
deposit accounts as of the applicable date, giving all account holders names
for each account number. Failure to list all accounts may result in the
subscriber's loss of subscription rights.
PURCHASE LIMITATIONS AND OWNERSHIP LIMITATION
The Plan sets forth purchase limitations applicable to the Offerings. The
minimum stock order is 25 shares. Except for the ESOP, which is expected to
purchase 8% of the Conversion Stock sold, no person (or persons through a
single subscription right), together with any associate or group of persons
acting in concert, may subscribe for more than $250,000 in all categories of
the Offerings combined. In addition to these purchase limitations, no person,
together with any associate or group of persons acting in concert may, upon
completion of the Conversion, own more than 2% of the Common Stock outstanding.
This ownership limitation pertains to the aggregate of Conversion Stock
purchased and Exchange Shares received by the subscriber. Notwithstanding the
foregoing, no Minority Stockholder will be required to dispose of Minority
Shares if, without purchasing Conversion Stock, the Exchange will result in
ownership of in excess of 2% of the Common Stock. The purchase limitations and
ownership limitation may be changed at the discretion of the Company, as
described herein. See "The Conversion--Limitations on Purchases and Ownership
of Shares".
5
<PAGE>
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
Pursuant to applicable Washington law and regulations of the FDIC, the
offering of Conversion Stock in the Offerings is required to be based on an
independent valuation of the pro forma market value of the Bank and the Mutual
Holding Company. RP Financial prepared an independent appraisal, which states
that the aggregate pro forma market value of the Bank and the Mutual Holding
Company, inclusive of the sale of an approximate 67.88% ownership interest in
the Offerings, was $53,034,770 at the midpoint as of August 15, 1997 and as
updated on , 1997. The Appraisal was multiplied by 67.88%, which is the
Mutual Holding Company's percentage ownership interest in the Bank as adjusted
upward from the actual interest of 66.31% to reflect $1,230,000 of dividends
declared by the Bank and waived by the Mutual Holding Company and the $120,000
in assets held by the MHC. The resulting amount, $36,000,000, is the midpoint
of the dollar amount of Conversion Stock to be offered in the Offerings. The
minimum and maximum of the offering range were set at 15% below and above the
midpoint, respectively, resulting in an offering range of $30,600,000 to
$41,400,000 of Conversion Stock. The Boards of Directors of the Company and the
Bank determined that the Conversion Stock would be sold at $10.00 per share
Purchase Price, resulting in a range of 3,060,000 to 4,140,000 shares of
Conversion Stock being offered. The $10.00 Purchase Price in the Offerings is a
uniform price for all subscribers, including the Bank's Board of Directors, its
management and ESOP. See "The Conversion--Stock Pricing and Number of Shares to
be Issued."
THE APPRAISAL IS BASED ON A NUMBER OF FACTORS AND IS NOT INTENDED AND SHOULD
NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF
PURCHASING CONVERSION STOCK NOR CAN ASSURANCE BE GIVEN THAT PURCHASERS OF THE
CONVERSION STOCK OR RECIPIENTS OF THE EXCHANGE SHARES WILL BE ABLE TO SELL SUCH
SHARES AFTER THE CONVERSION AT A PRICE THAT IS EQUAL TO OR ABOVE THE PURCHASE
PRICE. Further, the pro forma stockholders' equity reflected in "Pro Forma
Data" is not intended to represent the fair market value of the Common Stock
and may be greater than amounts that would be available for distribution to
stockholders in the event of liquidation.
If necessary, depending on regulatory considerations and changes in market
and financial conditions or material changes in the financial condition or
performance of the Bank, the Valuation Price Range may be revised based on an
updated Appraisal prepared by RP Financial and approved by applicable
regulatory agencies. The actual number of shares of Conversion Stock sold must
be supported by a final Appraisal. No resolicitation of subscribers will be
made and subscribers will not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Conversion Stock
are less than the minimum or more than 15% above the maximum of the current
Valuation Price Range or the Offerings are extended beyond .
THE EXCHANGE RATIO
The Bank and the Mutual Holding Company must demonstrate to the satisfaction
of the Division and the FDIC that the basis for the Exchange is fair and
reasonable. The Boards of Directors of the Bank and the Company have determined
that each Minority Share will, on the Effective Time, be converted into
Exchange Shares through the Exchange Ratio. The Exchange Ratio ensures that
Minority Stockholders will own approximately the same aggregate percentage of
the outstanding Common Stock (which will consist of Conversion Stock plus
Exchange Shares) as they own of the outstanding Bank Common Stock immediately
prior to the Effective Time. The Minority Stockholders, however, will
experience a dilution in ownership interest, from a 33.69% current ownership
interest in the Bank to an approximately 32.12% interest in the Company. This
is because the FDIC requires that the Exchange Ratio be adjusted downward to
reflect the aggregate amount of Bank Common Stock dividends waived by the
Mutual Holding Company and the amount of assets other than Bank Common Stock
held by the Mutual Holding Company. See "The Conversion--The Exchange."
Based on the 609,616 Minority Shares outstanding at June 30, 1997, the
Exchange Ratio is expected to be within a range of 1,447,959 to 1,958,998
Exchange Shares for the Minority Shares outstanding immediately prior to the
Effective Time. See "The Conversion--Stock Pricing and Number of Shares to be
Issued."
6
<PAGE>
The following table sets forth, based upon the minimum, midpoint, maximum and
15% above the maximum of the Valuation Price Range: (i) the total number of
shares of Conversion Stock and Exchange Shares to be issued in the Conversion;
(ii) the percentage of the total Common Stock represented by the Conversion
Stock and the Exchange Shares; and (iii) the Exchange Ratio. The table assumes
that there is no cash paid in lieu of issuing fractional Exchange Shares.
<TABLE>
<CAPTION>
CONVERSION STOCK EXCHANGE SHARES TOTAL SHARES OF
TO BE ISSUED(1) TO BE ISSUED(1) COMMON STOCK TO
----------------- ----------------- BE EXCHANGE
AMOUNT PERCENT AMOUNT PERCENT OUTSTANDING(2) RATIO
--------- ------- --------- ------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Minimum................. 3,060,000 67.88% 1,447,959 32.12% 4,507,959 2.3752
Midpoint................ 3,600,000 67.88 1,703,449 32.12 5,303,449 2.7943
Maximum................. 4,140,000 67.88 1,958,998 32.12 6,098,998 3.2135
15% above maximum ...... 4,761,000 67.88 2,252,835 32.12 7,013,835 3.6955
</TABLE>
- --------
(1) Assumes that outstanding options to purchase 42,717 shares of Bank Common
Stock at June 30, 1997 are not exercised prior to consummation of the
Conversion. Assuming that all of such options are exercised prior to such
consummation, the percentages represented by the Conversion Stock and the
Exchange Shares would amount to 66.40% and 33.60% respectively, and the
Exchange Ratio would amount to 2.4838, 2.9233, 3.3628, and 3.8682 at the
minimum, midpoint, maximum and 15% above the maximum of the Valuation Price
Range, respectively.
(2) Assumes that the Company does not issue authorized, but unissued shares to
the ESOP immediately following the Conversion.
THE ACTUAL EXCHANGE RATIO IS NOT DEPENDENT ON THE MARKET VALUE OF MINORITY
SHARES. IT WILL BE CALCULATED BASED UPON THE NUMBER OF SHARES OF CONVERSION
STOCK SOLD IN THE OFFERINGS AND THE MINORITY STOCKHOLDERS' PERCENTAGE OWNERSHIP
INTEREST IN THE BANK IMMEDIATELY PRIOR TO THE EFFECTIVE TIME. THE EXCHANGE
RATIO IS NOT DEPENDENT ON THE MARKET VALUE OF THE MINORITY SHARES.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
No person may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the Plan or to transfer the shares of Conversion Stock to be issued upon
their exercise. Each person exercising subscription rights will be required to
certify that a purchase of Conversion Stock is solely for the purchaser's own
account and that there is no agreement or understanding regarding the sale or
transfer of such shares. The Company and the Bank will pursue any and all legal
and equitable remedies in the event they become aware of the transfer of
subscription rights and will not honor subscriptions known by them to involve
the transfer of such rights.
Following the Conversion there generally will be no restrictions on the
transfer or sale of shares by purchasers other than affiliates of the Company
and the Bank. See "Supervision and Regulation--Federal Securities Laws" and
"The Conversion--Restrictions on Transferability by Directors and Officers and
NASD Members."
BENEFITS OF THE CONVERSION TO MANAGEMENT
ESOP. The Bank currently has an ESOP, a tax-qualified employee benefit plan
for officers and employees of the Company and the Bank, which intends to
purchase 8% of the Conversion Shares. The ESOP owned 21,763 shares of Bank
Common Stock at June 30, 1997. For additional information concerning the ESOP,
see "Management--Benefits--Employee Stock Ownership Plan."
MRP. The Company intends to seek stockholder approval of a Management
Recognition Plan and Trust ("MRP") at a meeting of stockholders occurring no
earlier than six months following consummation of the
7
<PAGE>
Conversion. The MRP, which will be funded with a number of shares of Common
Stock equal to up to 4% of the number of shares of Conversion Stock issued in
the Conversion, is a non-tax-qualified restricted stock plan intended for the
benefit of key employees and directors of the Company and the Bank. If
stockholder approval of the MRP is obtained, it is expected that shares of
Common Stock of the Company will be awarded at no cost to such recipients. For
additional information concerning the MRP and shares intended to be awarded
thereunder, see "Management--Benefits--Management Recognition Plan."
Stock Option Plan. The Company intends to seek stockholder approval of a
stock option plan ("1998 Stock Option Plan"), which will reserve a number of
shares of Common Stock equal to 10% of the number of shares of Conversion Stock
in the Conversion, at a meeting of stockholders occurring no earlier than six
months following consummation of the Conversion. If stockholder approval of the
1998 Stock Option Plan is obtained, it is expected that options to acquire up
to 414,000 shares of Common Stock will be awarded to key employees and
directors of the Company and the Bank (based on the issuance of the maximum of
the Valuation Price Range). The exercise price of such options will be 100% of
the fair market value of the Common Stock on the date the option is granted.
Options granted to officers and directors are valuable only to the extent that
such options are exercisable and the market price for the underlying share of
Common Stock is in excess of the exercise price. An option effectively
eliminates the market risk of holding the underlying security since no
consideration is paid for the option until it is exercised and, therefore, the
recipient may, within the limits of the term of the option wait to exercise the
option until such time as the market price exceeds the exercise price. For
additional information concerning the 1998 Stock Option Plan and options
intended to be granted thereunder, see "Management--Benefits--1998 Stock Option
Plan."
For information concerning the possible voting control of officers, directors
and employees following the Conversion, see "Risk Factors--Voting Power of
Directors and Executive Officers."
USE OF PROCEEDS
Depending upon the number of shares sold and the expenses of the Conversion,
net proceeds from the sale of the Conversion Stock are estimated to range from
$29.7 million to $40.4 million (or $46.5 million if the Valuation Price Range
is increased by 15%). See "Pro Forma Data." After giving effect to the proposed
purchase of shares by the ESOP and MRP, the Company plans to contribute to the
Bank 50% of the net proceeds and retain the remaining net proceeds. This would
result in the Company retaining approximately $17.5 million of net proceeds
(50% of $35.1 million) based on the issuance of 3,600,000 shares at the
midpoint of the Valuation Price Range.
Because shares of Conversion Stock may be purchased in the Offerings by Bank
customers using funds on deposit at the Bank, the net amount of funds available
to the Bank following the Offerings will be reduced to the extent that shares
are purchased with funds on deposit. Net proceeds contributed to the Bank will
increase the Bank's capital. The Bank will use the funds contributed to it for
general corporate purposes, including increased lending, possible purchase of
loan participation, and investment in securities of the type currently held by
the Bank. In addition, depending on the level of market interest rates
following consummation of the Conversion, the Bank may use a portion of the
proceeds to retire any outstanding FHLB advances.
A portion of the net proceeds retained by the Company will be used for a loan
by the Company to the Bank's ESOP to fund the ESOP's purchase of shares in the
Offerings. The remaining net proceeds will initially be invested primarily in
U.S. Government and agency securities and other investment securities of the
type currently held by the Bank. Such proceeds will be available for additional
contributions to the Bank in the form of debt or equity, to support future
internal growth of the Bank and the Company, for possible future acquisitions
of financial institutions or branches, as a source of dividends to the
stockholders of the Company, and for future repurchases of Common Stock to the
extent permitted under applicable law and regulations. Currently, as discussed
below under "Use of Proceeds," there are no specific plans, arrangements,
agreements or understandings, written or oral, regarding any such acquisitions
or repurchases.
8
<PAGE>
MARKET FOR COMMON STOCK
The Company has received conditional approval to have the Common Stock listed
on the Nasdaq National Market under the symbol " ." Ryan Beck has agreed to
act as a market maker for the Company's Common Stock following consummation of
the Conversion. No assurance can be given that an active and liquid trading
market for the Common Stock will develop, or, if developed, be maintained.
Further, no assurance can be given that purchasers will be able to sell their
shares at or above the Purchase Price after the Conversion. See "Risk Factors--
Absence of Prior Market for the Common Stock" and "Market for Common Stock."
DIVIDENDS
The Board of Directors of the Company intends to declare cash dividends on
the Common Stock commencing with the first full quarter following consummation
of the Conversion. The first quarterly dividend is expected to be in an amount
that will be equivalent to $0.40, annually, on existing Minority Shares. Based
upon the Valuation Price Range, the Exchange Ratio is expected to be 2.3752,
2.7943, 3.2135 and 3.6955 at the minimum, midpoint, maximum and 15% above the
maximum of the Valuation Price Range, respectively, resulting in an initial
quarterly dividend of $0.042, $0.036, $0.031 and $0.027 per share,
respectively, on the Exchange Shares following consummation of the Conversion.
However, no assurances can be given as to the amount of a dividend or that a
dividend will be paid, or if paid, that the dividend will not be reduced or
eliminated in future periods. See "Dividend Policy," "The Conversion--Effects
of Conversion to Stock Form on Depositors and Borrowers of the Bank" and
"Supervision and Regulation--The Company."
DISSENTERS' RIGHTS
The Plan of Conversion provides that stockholders of the Bank have the right
to dissent from the mergers of the Bank with the MHC and with an interim bank
formed to facilitate the Conversion, with the Bank as the surviving entity in
each merger, and, subject to certain conditions, to receive payment of the
"value" of their shares of Bank Common Stock, as provided in the Washington
Business Corporation Act ("WBCA"), Revised Code of Washington, Chapter 23B.13.
See "The Conversion--The Exchange" and "--Dissenters' Rights."
RISK FACTORS
See "Risk Factors" for a discussion of certain risks that should be
considered by all prospective investors.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated financial and other data
of the Bank at the dates and for the periods indicated. This information is
derived from and is qualified in its entirety by reference to the detailed
information and Consolidated Financial Statements and Notes thereto presented
elsewhere in this Prospectus.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Net interest income.... $ 6,363 $ 6,788 $ 8,227 $ 8,332 $ 9,512
Provision for loan
losses................ 926 -- -- -- (270)
Noninterest income..... 4,648 4,019 3,040 4,298 3,347
Noninterest
expense(1)............ 6,178 7,421 7,425 8,422 11,105
Federal income tax
expense (benefit)..... 2,061 1,154 1,308 1,435 (245)
Net income............. 1,846 2,232 2,534 2,773 2,269
Earnings per share(2).. N.A. $ 0.35 $ 1.41 $ 1.54 $ 1.26
PERFORMANCE RATIOS:
Net interest
spread(3)............. 3.35% 3.45% 4.14% 3.84% 4.06%
Net interest
margin(4)............. 3.72 3.83 4.57 4.31 4.50
Efficiency ratio(1).... 56.11 68.67 65.90 66.68 77.89
Return on average
assets................ 1.03 1.18 1.30 1.31 0.99
Return on average
equity................ 15.11 13.05 11.67 11.38 8.62
<CAPTION>
AT JUNE 30
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........... $ 179,236 $ 194,102 $ 204,897 $ 222,052 $ 242,164
Loans receivable, net.. 121,356 123,258 150,526 161,744 199,188
Loans held for sale.... 7,435 4,110 5,944 5,286 6,323
Deposits............... 153,266 165,922 174,797 191,119 209,781
FHLB advances.......... -- -- -- -- 890
Other borrowed funds... 7,174 4,100 3,252 -- --
Stockholders' equity... $ 12,863 $ 20,662 $ 23,065 $ 25,633 $ 27,714
Book value per share... N.A. $ 11.48 $ 12.78 $ 14.20 $ 15.31
Equity to assets
ratio................. 7.18% 10.64% 11.26% 11.54% 11.44%
ASSET QUALITY RATIOS:
Nonperforming loans to
loans................. 0.07% 0.07% 0.06% 0.03% 0.06%
Allowance for loan
losses to loans....... 1.27 1.32 1.09 1.11 1.32
Allowance for loan
losses to
nonperforming loans... 1,709.28 1,776.04 1,791.67 3,672.55 2,069.17
Nonperforming assets to
total assets.......... 0.14 0.05 0.05 0.02 0.05
OTHER DATA:
Number of full service
banking offices....... 5 5 7 8 10
Number of full-time
equivalent employees.. 98 119 116 136 145
</TABLE>
- --------
(1) The efficiency ratio is recurring noninterest expense divided by the sum of
net interest income and noninterest income. The Bank paid a one-time
deposit assessment of $1.1 million to the FDIC, Savings Association
Insurance Fund in November 1996, which was excluded from the calculation of
the efficiency ratio for 1997.
(2) The Bank became a stock bank as of January 31, 1994. Per share data prior
to 1994 is not applicable. The earnings per share data for 1994 is
calculated using only the earnings for the five months ended June 30, 1994.
Weighted average number of shares of Bank Common Stock outstanding during
the years ended June 30, 1994, 1995, 1996 and 1997 were 1,800,000
1,800,000, 1,805,166 and 1,807,910, respectively.
(3) Net interest spread is the difference between the average yield on interest
earning assets and the average cost of interest bearing liabilities.
(4) Net interest margin is net interest income divided by average interest
earning assets.
10
<PAGE>
RISK FACTORS
Before investing in shares of the Common Stock offered hereby, prospective
investors should carefully consider the matters presented below, in addition
to matters discussed elsewhere in this Prospectus.
GROWTH STRATEGY
The Bank's ability to pursue its growth strategy successfully is
significantly dependent upon generating an increasing volume of loans and
deposits, through internal growth or by acquisitions of banks or branches, at
acceptable risk levels and upon acceptable terms. The Bank has expanded its
loans to $208.2 million at June 30, 1997, from $130.4 million at June 30,
1993, an increase of 59.6%. During that same period, the commercial loan
portfolio increased to $39.4 million from $1.2 million, and the Bank's full
service offices increased to ten from five. Commercial loans generally involve
a higher level of credit risk than do residential loans and many of the
commercial loans, though granted to customers known to officers of the Bank,
are relatively unseasoned since they have been on the books of the Bank for a
short period of time. Although the Bank has not incurred significant credit
losses in recent periods, there can be no assurance that it will not incur
significant credit losses in the future. Heritage Bank is continuing to
emphasize its established mortgage banking business of originating and selling
residential mortgage loans while broadening its products and services to those
more closely related to commercial banking. There can be no assurance of the
Bank's ability to sustain income derived from its mortgage banking business at
recent levels or to increase such income.
Moreover, there can be no assurance that the Bank will be successful in
expanding its asset base and fee income to a level acceptable to management
and in managing the costs and implementation risks associated with its growth
strategy, identifying and acquiring attractive banks or branches on terms
favorable to the Bank, integrating such acquisitions, or preventing deposit
erosion at acquired institutions or branches. Acquisitions and branching by
the Company or the Bank will also be subject to regulatory approvals and there
can be no assurance that the Company or the Bank will succeed in securing such
approvals. The Bank's ability to pursue its growth strategy also may be
adversely affected by general economic conditions. See "Business of the Bank--
General" and "--Competition."
RELIANCE ON MORTGAGE BANKING OPERATIONS
Mortgage banking activities significantly influence the Bank's results of
operations. The Bank's mortgage banking operations involve the origination and
sale of mortgage loans primarily for the purpose of generating income. The
profitability of mortgage banking operations depends primarily on managing the
volume of loan originations and sales and the expenses associated with loan
originations so that gains on the sale of loans together with fee income
exceeds the costs of this activity. Changes in the level of interest rates and
the condition of the local and national economies affect the amount of loans
originated by the Bank and demanded by investors to whom the loans are sold.
Generally, the Bank's loan origination and sale activity and, therefore, its
results of operations, may be adversely affected by an increasing interest
rate environment to the extent such environment results in decreased loan
demand by borrowers and/or investors. Accordingly, the volume of loan
originations and the profitability of this activity can vary significantly
from period to period. During the years ended June 30, 1996 and 1997, the
Bank's single family mortgage originations totaled $140.1 million and $104.2
million, respectively. In addition, the Bank's results of operations are
affected by the amount of noninterest expenses associated with mortgage
banking activities, such as compensation and benefits, occupancy and equipment
expenses, and other operating expenses. During periods of reduced loan demand,
the Bank's results of operations may be adversely affected to the extent that
it is unable to reduce expenses commensurate with the decline in loan
originations. During the years ended June 30, 1996 and 1997, the Bank's net
gains on sales of loans were $3.0 million and $2.0 million, respectively. In
comparison, the Bank's pre-tax income for these periods was $4.2 million and
$2.0 million, respectively.
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OVERHEAD EXPENSES
Competition in the banking industry has led many banks to focus on expense
reduction as a method of increasing stockholder returns. The Bank, however,
has embarked on a growth strategy as a method of increasing profitability.
That strategy has involved incurring substantial expenses concentrated in: (i)
personnel hired in anticipation of growth and expanded market share; (ii)
maintaining the Bank's mortgage origination capacity while mortgage
origination volumes have fluctuated; (iii) facilities expansion; and (iv)
upgrading of data processing capabilities. As a result of pursuing its growth
strategy and emphasis on personal service, the Bank's expense ratios are
higher than those of many similarly sized banking companies. At June 30, 1997,
the Bank's efficiency ratio was 77.89%. While the Bank anticipates that its
efficiency ratio will improve gradually as overhead expenses are allocated
over a larger asset base, there can be no assurance that it will decline to
the levels of certain of the Bank's more efficient competitors, many of whom
are following strategies different from those of the Bank. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Failure by the Bank to improve its efficiency ratio over time could adversely
affect the value of the Common Stock.
NONRESIDENTIAL LENDING
The Bank has a diversified loan portfolio with a substantial amount of loans
other than traditional one- to four-family permanent (excluding construction)
residential loans. The Bank has changed the relative concentration of its loan
portfolio in recent years. One- to four-family permanent residential loans
decreased to 49.68% of total loans at June 30, 1997 from 56.29% of total loans
at June 30, 1993. During that same time commercial business loans increased to
18.95% of total loans from 0.92% of total loans. At June 30, 1997, $104.7
million, or 50.3%, of the Bank's loan portfolio (including loans in process
and deferred loan fees) consisted of loans other than one- to four-family
permanent residential loans. Included among these other loans are multi-family
and commercial real estate, construction, commercial and consumer loans.
Although such loans typically have higher yields than one- to four-family
residential loans, such loans are typically more sensitive to economic
conditions, involve higher concentrations of investment in a single borrower
or project (with the exception of consumer loans) are more difficult to
monitor and carry a higher level of credit risk than do permanent residential
loans. The Bank has attempted to address these risks by utilizing conservative
underwriting procedures, requiring real estate as collateral for most
commercial business loans, and limiting its out-of-area loans and its multi-
family and commercial construction loans. See "Business of the Bank--Lending
Activities."
POTENTIAL ADVERSE IMPACT OF CHANGES IN INTEREST RATES
The financial condition and operations of the Bank, and of financial
institutions in general, are influenced significantly by general economic
conditions, by the related monetary and fiscal policies of the federal
government and by the regulations of the Division and the FDIC. Deposit flows
and the cost of funds are influenced by interest rates of competing
investments and general market rates of interest. Lending activities are
affected by the demand for mortgage financing and for consumer and other types
of loans, which in turn is affected by the interest rates at which such
financing may be offered and by other factors affecting the supply of housing
and the availability of funds. The Bank's profitability, like that of most
financial institutions, is dependent to a large extent on its net interest
income, which is the difference between the interest income received from its
interest earning assets and the interest expense incurred in connection with
its interest bearing liabilities. The Bank, like other savings institutions,
is vulnerable to an increase in interest rates to the extent that its interest
earning assets have longer effective maturities than its interest bearing
liabilities. Under such circumstances, material and prolonged increases in
interest rates generally would adversely affect net interest income, while
material and prolonged decreases in interest rates generally would have a
favorable effect on net interest income. See "Management's Discussion and
Analysis of Financial Condition and Result of Operations--Asset/Liability
Management."
Changes in the level of interest rates also affect the amount of other loans
originated by the Bank and, thus, the amount of loan and commitment fees, as
well as the value of the Bank's investment securities and other
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interest earning assets. Decreases in rates may result in borrower
prepayments, subjecting the Bank to reinvestment risk. Moreover, volatility in
interest rates also can result in disintermediation, or the flow of funds away
from savings institutions into direct investments, such as U.S. Government and
corporate securities and other investment vehicles which, because of the
absence of federal insurance premiums and reserve requirements, generally pay
higher rates of return than insured savings institutions.
OTHER POSITIONS OCCUPIED BY CHIEF EXECUTIVE OFFICER
In addition to his position as Chairman, President and Chief Executive
Officer of the Company and the Bank, Mr. Donald V. Rhodes is the Chairman of
the Board and Chief Executive Officer of Washington Independent Bancshares,
Inc. ("WIB"), a closely held bank holding company, and its subsidiary, Central
Valley Bank, N.A. ("CVB"), which is headquartered in Toppenish, Washington.
Mr. Daryl D. Jensen, a director of the Company and the Bank, is also a
director of WIB and CVB. WIB had total assets of $48.6 million at June 30,
1997. CVB serves a market area in central Washington approximately 150 miles
east of Olympia. Mr. Rhodes beneficially owns 7.82% of WIB's common stock and
Mr. Jensen beneficially owns 3.87% of such common stock. While Mr. Rhodes
currently devotes and intends to continue devoting a majority of his time to
Heritage Bank matters, there can be no assurance that this will continue to be
the case. See "Certain Transactions--Transactions With Central Valley Bank."
COMPETITION
The Bank's strategy involves the significant expansion of the Bank
throughout its principal market areas in the South Puget Sound region of
Washington. During the past several years, substantial consolidation among
financial institutions in Washington has occurred. The Bank anticipates a
continuation of the consolidation trend in Washington. Many other financial
institutions, most of which have greater resources than the Bank, compete with
the Bank for banking business in the Bank's market area. Among the advantages
of some of these institutions are their superior technological resources, and
their ability to make larger loans, finance extensive advertising campaigns,
access international money markets and allocate their investment assets to
regions of highest yield and demand. The Bank does not have a significant
market share of the deposit-taking or lending activities in the areas in which
it conducts operations. Although the Bank has been able to compete effectively
in its market areas to date, there can be no assurance that it will be able to
continue to do so in the future. The Bank also faces deposit competition from
securities firms, mortgage bankers, insurance companies and other investment
vehicles such as mutual funds. See "Business of the Bank--Competition."
ANTI-TAKEOVER PROVISIONS
Provisions in the Company's Governing Instruments and Washington
Law. Certain provisions included in the Company's Articles of Incorporation
and in the Washington Business Corporation Act will assist the Company in
maintaining its independence as a separate, publicly owned corporation. These
provisions may discourage potential takeover attempts, particularly those
which have not been negotiated with the Board of Directors. As a result, these
provisions may preclude takeover attempts which certain stockholders may deem
to be in their interest and perpetuate existing management. These provisions
include, among other things, a provision limiting voting rights of beneficial
owners of more than 10% of the Common Stock. In addition, the Articles of
Incorporation provide for the election of directors to staggered terms of
three years and for their removal without cause only upon the vote of holders
of 66 2/3% of the outstanding voting shares and provisions for approval of
certain business combinations. The Articles of Incorporation also contain
provisions regarding the timing and content of stockholder proposals and
nominations. Certain provisions of the Articles of Incorporation of the
Company cannot be amended by stockholders unless an 66 2/3% stockholder vote
is obtained. The Board of Directors believes that these provisions are in the
best interest of the Company and its stockholders.
Policy of Independence. Potential investors should not invest with the
expectation that the Company or the Bank may be merged into or its assets sold
to another company in the foreseeable future. The Board of
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Directors of the Company believes it is in the long-term best interest of the
Company and its stockholders to remain independent and the Board has adopted a
statement of policy that the Company intends to remain independent for the
foreseeable future. See "Restrictions on Acquisition of the Company and the
Bank."
GEOGRAPHIC CONCENTRATION
Substantially all of the Bank's loans are collateralized by real estate
located in the Puget Sound region of Washington. The Bank's growth and
profitability are dependent upon economic conditions in the region.
Unfavorable changes in economic conditions affecting the region, such as in
the aerospace, natural resources or software industries, or significant
decline in foreign trade or in the large military base presence in the area
may have an adverse impact on the risk of loss associated with the loan
portfolio and on operations of the Company in general.
VOTING POWER OF DIRECTORS AND EXECUTIVE OFFICERS
Directors and executive officers of the Company (11 persons), at June 30,
1997, beneficially owned 159,103 shares (including 33,216 unexercised stock
options exercisable within 60 days under the existing 1994 and 1997 Stock
Option Plans), or 8.6%, of the outstanding Bank Common Stock on a fully
diluted basis. Based on their anticipated purchases of Conversion Stock at the
midpoint of the Valuation Price Range, they expect to hold approximately
438,760 shares, or 8.3%, of the shares of Common Stock outstanding upon
consummation of the Conversion (including 92,811 unexercised stock options
exercisable within 60 days). See "Conversion Stock to be Purchased by
Management Pursuant to Subscription Rights" and "Management--Beneficial
Ownership of Bank Common Stock."
Directors and officers are also expected to control the voting of
approximately 8% of the shares of Common Stock issued in the Conversion
through the ESOP. Under the terms of the ESOP, the unallocated shares will be
voted by the independent ESOP trustee in the same proportion as the votes cast
by participants with respect to the allocated shares. At a meeting of
stockholders to be held no earlier than six months following the consummation
of the Conversion, the Company intends to seek stockholder approval of the
Company's MRP. Assuming the receipt of stockholder approval, the Company
expects to acquire Common Stock on behalf of the MRP in an amount equal to 4%
of the Conversion Stock, or 165,000 shares at the maximum of the Valuation
Price Range. These shares will be acquired either through open market
purchases or from authorized but unissued Common Stock. Under the terms of the
MRP, the MRP committee or the MRP trustees will have the power to vote
unallocated and unvested shares [in the same proportion as they receive
instructions from recipients with respect to allocated shares which have not
been earned and distributed]. The trustees will not vote allocated shares
which have not been distributed if they do not receive instructions from the
recipient. The Company intends to reserve for future issuance pursuant to the
1998 Stock Option Plan a number of authorized shares of Common Stock equal to
10% of the Conversion Stock issued in the Conversion (414,000 shares at the
maximum of the Valuation Price Range) and to seek stockholder approval of the
1998 Stock Option Plan at a meeting of stockholders to be held no earlier than
six months following consummation of the Conversion. Consequently, assuming
(1) the receipt of stockholder approval for the MRP and the 1998 Stock Option
Plan, (ii) the open market purchase of shares on behalf of the MRP, (iii) the
purchase by the ESOP of 8% of the Common Stock sold in the Offerings, and (iv)
the exercise of stock options equal to 10% of the number of shares of Common
Stock issued in the Conversion, directors, officers and employees of the
Holding Company and the Bank would have voting control on a fully diluted
basis of 38.9% of the Common Stock, based on the issuance of the maximum of
the Valuation Price Range. Management's potential voting control could,
together with additional stockholder support, preclude or make more difficult
takeover attempts that certain stockholders deem to be in their best interest
and may tend to perpetuate existing management.
NEW EXPENSES ASSOCIATED WITH ESOP AND MRP
The Company will recognize additional material employee compensation and
benefit expenses as a result of the ESOP's purchase of Conversion Stock in the
Offerings and the expected subsequent implementation of the
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MRP. The actual aggregate amount of these new expenses cannot be currently
predicted because applicable accounting practices require that they be based
on the fair market value of the shares of Common Stock when the expenses are
recognized, which would occur when shares are committed to be released in the
case of the ESOP and over the vesting period of awards made to recipients in
the case of the MRP. These expenses have been reflected in the pro forma
financial information under "Pro Forma Data" assuming the Purchase Price
($10.00 per share) as fair market value. Actual expenses, however, will be
based on the fair market value of the Common Stock at the time of recognition,
which may be higher or lower than the Purchase Price.
RETURN ON EQUITY AFTER THE CONVERSION
As a result of the Conversion, stockholders' equity will be substantially
increased. The increase in equity is likely to adversely affect the Company's
ability to maintain a return on average equity (net income divided by average
stockholders' equity) at historical levels, absent a corresponding increase in
net income. There can be no assurance that the Company will be able to
increase net income in future periods in amounts commensurate with the
increase in equity resulting from the Conversion. "Management--Benefits--
Employee Stock Ownership Plan" and "--Management Recognition Plan."
POSSIBLE DILUTIVE EFFECTS OF BENEFIT PLANS
Subject to stockholder approval, the MRP intends to acquire an amount of
Common Stock of the Company up to 4% of the shares issued in the Conversion.
Such shares of Common Stock of the Company may be acquired by the Company in
the open market or from authorized but unissued shares of Common Stock of the
Company. In the event that the MRP acquires authorized but unissued shares of
Common Stock from the Company, the voting interests of existing stockholders
will be diluted and net income per share and stockholders' equity per share
will be decreased. See "Pro Forma Data" and "Management--Benefits--Management
Recognition Plan."
The 1998 Stock Option Plan, if approved by stockholders, will provide for
options for up to a number of shares of Common Stock of the Company equal to
10% of the shares issued in the Conversion. Such shares will likely be
authorized but unissued shares of Common Stock of the Company; therefore, upon
exercise of the options will result in the dilution of the voting interests of
existing stockholders and will decrease net income per share and stockholders'
equity per share. See "Management--Benefits--1998 Stock Option Plan."
If the ESOP is unable to purchase 8% of the Conversion Stock in the
Offerings, it may acquire authorized but unissued shares of Common Stock,
which would reduce the voting interests of stockholders and would decrease net
income per share and stockholders' equity per share.
ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK
The Company has not previously issued capital stock and, consequently, there
is no existing market for the Common Stock. The Company has received
conditional approval to list the Common Stock on the Nasdaq National Market
under the symbol " ." One of the listing requirements is the presence of
three market makers. Ryan Beck has advised the Company that it intends to make
a market in the Common Stock following the completion of the Conversion so
long as the volume of trading activity and certain other market-making
considerations justify it doing so. While the Company anticipates that it will
be able to obtain the commitment from at least two other broker-dealers to act
as market makers for the Common Stock, there can be no assurance there will be
three or more market makers for 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 prices, subject to securities
laws and regulatory constraints. Additionally, the development of a liquid
public market depends on the existence of willing buyers and sellers, the
presence of which is not within the control of the Company, the Bank or any
market maker. The number of active buyers and sellers of the Common Stock at
any particular time may be limited. Under such circumstances, investors in the
Common Stock could
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have difficulty disposing of their shares on short notice. Investors should
not view the Common Stock as a short term investment. There can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue, nor is there any assurance
that persons purchasing shares or receiving Exchange Shares will be able to
sell them at or above the Purchase Price. See "Market for Common Stock."
POSSIBLE INCREASE IN VALUATION PRICE RANGE AND NUMBER OF SHARES ISSUED
The number of shares to be sold in the Conversion may be increased as a
result of an increase in the Valuation Price Range of up to 15% to reflect
regulatory considerations and changes in market and financial conditions
following the commencement of the Offerings. In the event that the Valuation
Price Range is so increased, it is expected that the Company will issue up to
4,761,000 shares of Common Stock at the Purchase Price for an aggregate price
of up to $47,610,000. An increase in the number of shares will decrease a
subscriber's proportionate share of the pro forma net income per share and
stockholders' equity per share and will increase the Company's pro forma
consolidated stockholders' equity and net income. Such an increase will also
increase the Purchase Price as a percentage of pro forma stockholders' equity
per share and net income per share. See "Pro Forma Data."
RISK OF DELAYED OFFERING
The Company and the Bank expect to complete the Conversion within the time
periods indicated in this Prospectus. Nevertheless, it is possible that there
could be a significant delay in the completion of the Conversion as a result
of delays in receiving approval of or non objection from a necessary
regulatory authority, receiving member or stockholder approval or completing
the Offerings. If the Conversion is not completed by (45 days after
the last day of the fully extended Subscription Offering) and the Division
consents to an extension of time to complete the Conversion, subscribers will
be given the right to modify or rescind their subscriptions. In such event,
unless an affirmative indication is received from subscribers that they wish
to continue to subscribe for shares, their funds will be returned promptly,
together with interest at the Bank's passbook rate, or their withdrawal
authorizations will be terminated.
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
If the subscription rights granted to Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are deemed to have an ascertainable
value, receipt of such rights may result in a taxable gain (either as capital
gain or ordinary income) to those Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members who receive and/or exercise the
subscription rights, in an amount equal to such value. Additionally, the Bank
could be required to recognize a gain for tax purposes on such distribution.
Whether subscription rights are considered to have ascertainable value is an
inherently factual determination. The Bank has been advised by RP Financial
that such rights have no value, however, RP Financial's conclusion is not
binding on the Internal Revenue Service ("IRS"). See "The Conversion--Effects
of Conversion to Stock Form on Depositors and Borrowers of the Bank--Tax
Effects."
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USE OF PROCEEDS
Depending upon the number of shares sold and the expenses of the Conversion,
net proceeds from the sale of the Conversion Stock are estimated to range from
$29.7 million to $40.4 million (or $46.5 million if the Valuation Price Range
is increased by 15%). See "Pro Forma Data." The Company plans to contribute to
the Bank 50% of the net proceeds and retain the remaining net proceeds. This
would result in the Company retaining approximately $17.5 million of net
proceeds (50% of $35.1 million) based on the issuance of 3,600,000 shares at
the midpoint of the Valuation Price Range.
Receipt of the net proceeds of the sale of the Conversion Stock will
increase the Bank's capital. The Bank will use the funds contributed to it for
general corporate purposes, including increased lending, possible purchase of
loan participations or investment in U.S. Government or agency securities and
mortgage backed securities of the type currently held by the Bank. In
addition, depending on the level of market interest rates following
consummation of the Conversion, the Bank may use a portion of the proceeds to
retire any outstanding FHLB advances.
In connection with the Conversion and the establishment of the ESOP, the
Company intends to loan the ESOP the amount necessary for it to acquire 8% of
the shares issued in the Conversion. The Company's loan to fund the ESOP may
range from $2,448,000 to $2,880,000 to $3,312,000 based on the sale of
3,060,000 shares (at the minimum of the Valuation Price Range), 3,600,000
shares (at the midpoint of the Valuation Price Range), and 4,140,000 shares
(at the maximum of the Valuation Price Range), respectively, at $10.00 per
share. If 15% above the maximum of the Valuation Price Range, or 4,761,000
shares, are sold in the Conversion, the Company's loan to the ESOP would be
approximately $3,809,000.
The remaining net proceeds retained by the Company initially will be
invested primarily in investment securities of the type currently held by the
Bank. Such proceeds will be available for additional contributions to the Bank
in the form of debt or equity, to support future acquisition and
diversification activities, as a source of dividends to the stockholders of
the Company and for future repurchases of Common Stock to the extent permitted
under applicable law and regulations. Currently, there are no specific plans,
arrangements, agreements or understandings, written or oral, regarding any
diversification or acquisition activities. The Conversion will also facilitate
the Company's access to the capital markets.
Upon completion of the Conversion, the Board of Directors will have the
authority to adopt stock repurchase plans, subject to statutory and regulatory
requirements. Since the Company has not yet issued stock, there is currently
insufficient information upon which an intention to repurchase stock could be
based. The facts and circumstances upon which the Board of Directors may
determine to repurchase stock in the future may include but are not limited
to: (i) market and economic factors such as the price at which the stock is
trading in the market, the volume of trading, the attractiveness of other
investment alternatives in terms of the rate of return and risk involved in
the investment, the ability to increase the book value and/or earnings per
share of the remaining outstanding shares, and an improvement in the Company's
return on equity; (ii) the avoidance of dilution to stockholders by not having
to issue additional shares to cover the exercise of stock options or to fund
employee stock benefit plans; (iii) the ability of the Company to utilize
pooling of interests accounting treatment in connection with future mergers
and acquisitions; and (iv) any other circumstances in which repurchases would
be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to a determination by the Board of Directors that
both the Company and the Bank will be capitalized in excess of all applicable
regulatory requirements after any such repurchases and that capital will be
adequate taking into account, among other things, the level of nonperforming
and other risk assets, the Company's and the Bank's current and projected
results of operations and asset/liability structure, the economic environment
and tax and other regulatory considerations.
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DIVIDEND POLICY
GENERAL
The Board of Directors of the Company intends to declare cash dividends on
the Common Stock commencing with the first full quarter following consummation
of the Conversion. The first quarterly dividend is expected to be in an amount
that will be equivalent to $0.40, annually, on existing Minority Shares. Based
upon the Valuation Price Range, the Exchange Ratio is expected to be 2.3752,
2.7943, 3.2135 and 3.6955 at the minimum, midpoint, maximum and 15% above the
maximum of the Valuation Price Range, respectively, resulting in an initial
quarterly dividend of $0.042, $0.036, $0.031 and $0.027 per share,
respectively, on the Exchange Shares following consummation of the Conversion.
In addition, the Board of Directors may determine to pay periodic special cash
or stock dividends in addition to, or in lieu of, regular cash dividends.
Declarations or payments of any future dividends (regular and special) will be
subject to determination by the Company's Board of Directors, which will take
into account the amount of the net proceeds retained by the Company, the
Company's financial condition, results of operations, tax considerations,
capital requirements, industry standards, economic conditions and other
factors, including the regulatory restrictions that affect the payment of
dividends by the Bank to the Company discussed below. Under Washington law,
the Company is prohibited from paying a dividend if, as a result of its
payment, the Company would be unable to pay its debts as they became due in
the normal course of business, or if the Company's total liabilities would
exceed its total assets. In order to pay such cash dividends, however, the
Company must have available cash either from the net proceeds raised in the
Offerings and retained by the Company, dividends received from the Bank or
earnings on Company assets. No assurances can be given that any dividends,
either regular or special, will be declared or, if declared, what the amount
of dividends will be or whether such dividends, if commenced, will continue.
CURRENT REGULATORY RESTRICTIONS
Dividends from the Company will depend, in part, upon receipt of dividends
from the Bank because the Company initially will have no source of income
other than dividends from the Bank and earnings from the investment of the net
proceeds from the Conversion retained by the Company. The Division has the
authority under its supervisory powers to prohibit the payment of dividends by
the Bank to the Company. For a period of ten years after the Conversion, the
Bank may not, without prior approval of the Division, declare or pay a cash
dividend in an amount in excess of one-half of (i) the greater of the Bank's
net income for the current fiscal year or (ii) the average of the Bank's net
income for the current fiscal year and not more than two of the immediately
preceding fiscal years. In addition, the Bank may not declare or pay a cash
dividend on its capital stock if the effect thereof would be to reduce the net
worth of the Bank below the amount required for the liquidation account to be
established pursuant to the Plan of Conversion. See "Supervision and
Regulation--Banking Subsidiary" and "The Conversion--Effects of Conversion to
Stock Form on Depositors and Borrowers of the Bank--Liquidation Account."
TAX CONSIDERATIONS
In addition to the foregoing, earnings of the Bank appropriated to bad debt
reserves and deducted for federal income tax purposes cannot be used by the
Bank to pay cash dividends to the Company without the payment of federal
income taxes by the Bank at the then current income tax rate on the amount
deemed distributed, which would include the amount of any federal income taxes
attributable to the distribution. See "Business of the Bank--Federal Taxation"
and Note 10 of Notes to the Consolidated Financial Statements included
elsewhere herein. The Company does not contemplate any distribution by the
Bank that would result in a recapture of the Bank's bad debt reserve or create
the above-mentioned federal tax liabilities.
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MARKET FOR COMMON STOCK
The Company has not previously issued capital stock, and, consequently,
there is no established market for the Common Stock. The Board of Directors of
the Company and the Bank determined that the Common Stock would be sold at
$10.00 per share. The Company has received conditional approval to have its
Common Stock quoted on the Nasdaq National Market under the symbol " " upon
completion of the Conversion. One of the requirements for initial quotation of
the Common Stock on the Nasdaq National Market is that there be at least three
market makers for 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. Ryan Beck has advised the Company that
it intends to make a market in the Common Stock following the completion of
the Conversion, subject to compliance with applicable laws and regulations.
While the Company anticipates that prior to the completion of the Conversion
it will be able to obtain the commitment from at least two other broker-
dealers to act as market makers for the Common Stock, there can be no
assurance there will be three or more market makers for the Common Stock.
Additionally, the development of a liquid public market depends on the
existence of willing buyers and sellers, the presence of which is not within
the control of the Company, the Bank or any market maker. The number of active
buyers and sellers of the Common Stock at any particular time may be limited.
Under such circumstances, investors in the Common Stock could have difficulty
disposing of their shares on short notice. Investors should not view the
Common Stock as a short term investment. There can be no assurance that an
active and liquid trading market for the Common Stock will develop or that, if
developed, it will continue, nor is there any assurance that persons
purchasing shares will be able to sell them at or above the Purchase Price or
that quotations will be available on the Nasdaq National Market as
contemplated.
19
<PAGE>
CAPITALIZATION
The following table presents the historical consolidated capitalization of
the Bank at June 30, 1997, and the pro forma consolidated capitalization of
the Company after giving effect to the assumptions set forth under "Pro Forma
Data," based on the sale of the number of shares of Conversion Stock set forth
below in the Conversion at the minimum, midpoint, maximum and 15% above the
maximum of the Valuation Price Range.
<TABLE>
<CAPTION>
COMPANY PRO FORMA CONSOLIDATED CAPITALIZATION
BASED UPON THE SALE OF
----------------------------------------------------------
MAXIMUM AS
MINIMUM MIDPOINT MAXIMUM ADJUSTED
3,060,000 3,600,000 4,140,000 4,761,000
SHARES AT SHARES AT SHARES AT SHARES AT
PURCHASE PURCHASE PURCHASE PURCHASE
CAPITALIZATION PRICE OF PRICE OF PRICE OF PRICE OF
AS OF JUNE 30, $10.00 $10.00 $10.00 $10.00 PER
1997 PER SHARE PER SHARE PER SHARE SHARE(1)
-------------- --------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits(2)............. $209,781 $209,781 $209,781 $209,781 $209,781
Borrowings:
FHLB advances.......... 890 890 890 890 890
-------- -------- -------- -------- --------
Total deposits and
borrowings............ $210,671 $210,671 $210,671 $210,671 $210,671
======== ======== ======== ======== ========
Stockholders' equity:(3)
Preferred stock (no par
value per share);
2,500,000 shares
authorized; none
outstanding(4)........ -- -- -- -- --
Common Stock (no par
value per share);
15,000,000 shares
authorized(5)......... 1,810 -- -- -- --
Additional paid-in
capital............... 4,103 35,646 40,971 46,297 52,421
Retained earnings...... 21,801 21,921 21,921 21,921 21,921
Less:
Common Stock acquired
by ESOP(6)........... -- (2,448) (2,880) (3,312) (3,809)
Common Stock acquired
by MRP(6)............ -- (1,224) (1,440) (1,656) (1,904)
-------- -------- -------- -------- --------
Total stockholders'
equity................. $ 27,714 $ 53,895 $ 58,572 $ 63,250 $ 68,629
======== ======== ======== ======== ========
</TABLE>
- -------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Valuation Price Range of up to 15%
to reflect regulatory considerations and changes in market and financial
conditions following the commencement of the Offerings.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Conversion Stock in the Offerings. Such withdrawals would reduce pro
forma deposits by the amount of such withdrawals.
(3) Assumes (i) that the 609,616 Minority Shares outstanding at June 30, 1997
are converted into 1,447,959, 1,703,449, 1,958,998 and 2,252,835 Exchange
Shares at the minimum, midpoint, maximum and 15% above the maximum of the
Valuation Price Range, respectively, and (ii) that no fractional shares
of Exchange shares will be issued by the Company. Pro forma retained
earnings include $120,000 of assets held by the MHC.
(4) The Bank has 5,000,000 shares of Preferred Stock authorized, $1.00 par
value per share, none of which are outstanding. The Company has 2,500,000
shares of Preferred Stock authorized, no par value per share, none of
which are outstanding or will be outstanding after the completion of the
Conversion.
(5) The Bank has 10,000,000 shares of Common Stock authorized, $1.00 par
value per share. The Company has 15,000,000 shares of Common Stock
authorized, no par value per share.
(6) Assumes that 8% and 4% of the shares sold in the Offerings will be
purchased by the ESOP and MRP, respectively. No shares actually will be
purchased by the MRP in the Offerings. Such purchases by the MRP would
occur only upon receipt of stockholder approval which is expected no
earlier than six months after completion of the Conversion. A purchase by
the MRP in the Offerings has been included on a pro forma basis to give
an indication of its effect on capitalization. The pro forma presentation
does not show the impact of (a) results of operations after the
Conversion, (b) changing market prices of shares of Common Stock after
the Conversion, (c) a smaller than 4% purchase by the MRP, or (d) the
purchase by the MRP or ESOP of Common Stock out of authorized but
unissued shares. Assumes that the funds used to acquire the ESOP shares
will be borrowed from the Company for a 15 year term at the prime rate.
For an estimate of the impact of the loan on earnings, see "Pro Forma
Data." If the ESOP obtained a loan from a third party, other borrowings
would increase by the amount of Common Stock acquired by the ESOP. The
Bank intends to make contributions to the ESOP sufficient to service and
ultimately retire its debt. The amount to be acquired by the ESOP and MRP
is reflected as a reduction of stockholders' equity. There can be no
assurance that stockholder approval of the MRP will be obtained. See
"Management--Benefits--Employee Stock Ownership Plan" and "--Management
Recognition Plan."
20
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents the Bank's historical and pro forma capital
position relative to its capital requirements at June 30, 1997. The amount of
capital infused into the Bank for purposes of the following table is 50% of
the net proceeds of the Offerings, plus the $120,000 of MHC assets. For
purpose of the table below, the amount expected to be borrowed by the ESOP and
the cost of the shares expected to be acquired by the MRP are deducted from
pro forma regulatory capital. For a discussion of the assumptions underlying
the pro forma capital calculations presented below, see "Use of Proceeds,"
"Capitalization" and "Pro Forma Data." The definitions of the terms used in
the table are those provided in the applicable regulations.
<TABLE>
<CAPTION>
PRO FORMA AT JUNE 30, 1997
------------------------------------------------------------------------------------
MINIMUM OF MAXIMUM OF 15% OF MAXIMUM OF
VALUATION PRICE MIDPOINT OF VALUATION VALUATION PRICE VALUATION PRICE
RANGE PRICE RANGE RANGE RANGE
------------------ -------------------------- ------------------ ------------------
3,060,000 SHARES 4,140,000 SHARES 4,761,000 SHARES
AT PURCHASE PRICE 3,600,000 SHARES AT AT PURCHASE PRICE AT PURCHASE PRICE
OF $10.00 PER PURCHASE PRICE OF OF $10.00 PER OF $10.00 PER
JUNE 30, 1997 SHARE $10.00 PER SHARE SHARE SHARE
------------------ ------------------ -------------------------- ------------------ ------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1)
------- ---------- ------- ---------- ------------ ------------- ------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 (leverage)
capital........... $27,714 11.68% $39,029 15.55% $ 41,043 16.20% $43,058 16.83% $45,375 17.54%
Tier 1 (leverage)
capital
requirement(2).... 7,118 3.00 7,529 3.00 7,602 3.00 7,676 3.00 7,760 3.00
------- ----- ------- ----- ------------ ---------- ------- ----- ------- -----
Excess............. $20,596 8.68% $31,500 12.55% $ 33,441 13.20% $35,382 13.83% $37,615 14.54%
======= ===== ======= ===== ============ ========== ======= ===== ======= =====
Tier 1 risk based
capital........... $27,714 15.65% $39,029 21.70% $ 41,043 22.75% $43,058 23.81% $45,375 25.01%
Tier 1 risk based
capital
requirement....... 7,085 4.00 7,196 4.00 7,215 4.00 7,235 4.00 7,257 4.00
------- ----- ------- ----- ------------ ---------- ------- ----- ------- -----
Excess............. $20,629 11.65% $31,833 17.70% $ 33,828 18.75% $35,823 19.81% $38,118 21.01%
======= ===== ======= ===== ============ ========== ======= ===== ======= =====
Total risk based
capital........... $29,935 16.90% $41,278 22.95% $ 43,298 24.00% $45,319 25.06% $47,643 26.26%
Total risk based
capital
requirement....... 14,171 8.00 14,391 8.00 14,430 8.00 14,469 8.00 14,514 8.00
------- ----- ------- ----- ------------ ---------- ------- ----- ------- -----
Excess............. $15,764 8.90% $26,887 14.95% $ 28,868 16.00% $30,850 17.06% $33,129 18.26%
======= ===== ======= ===== ============ ========== ======= ===== ======= =====
</TABLE>
- -------
(1) For the risk-based capital calculations, the portion of the net proceeds
contributed to the Bank (after ESOP and MRP deductions) were assumed to
be invested in U.S. Government Agency debt securities with a weighted
average risk-weighing of 20%.
(2) As a Washington state chartered savings bank, the Bank is subject to the
capital requirements of the FDIC and the Division. The FDIC requires
state-chartered banks, including the Bank, to have a minimum leverage
ratio of Tier 1 capital to total assets of at least 3%, provided,
however, that all institutions, other than those (i) receiving the
highest rating during the examination process and (ii) not anticipating
any significant growth, are required to maintain a ratio of 1% to 2%
above the stated minimum, with an absolute total capital to risk-weighted
assets of at least 8%. The Bank has not been notified by the FDIC of any
leverage capital requirement specifically applicable to it. However, for
the purposes of this table, the Bank has assumed that its leverage
capital requirement is 3% of total average assets.
21
<PAGE>
CONVERSION STOCK TO BE PURCHASED BY MANAGEMENT PURSUANT TO
SUBSCRIPTION RIGHTS
The following table sets forth, for each director and executive officer and
for all of the directors and executive officers as a group, (i) Exchange
Shares to be held upon consummation of the Conversion based upon their
beneficial ownership of Bank Common Stock as of June 30, 1997, (ii) proposed
purchase of Conversion Stock, assuming shares are available to satisfy their
subscriptions, and (iii) total shares of Common Stock to be held upon
consummation of the Conversion, in each case assuming that the Conversion
Stock is sold at the midpoint of the Valuation Price Range. No individual has
entered into a binding agreement with respect to such intended purchases, and,
therefore, actual purchases could be more or less than indicated below.
Directors and executive officers and their associates may not purchase in
excess of 20% of the shares sold in the Conversion. Directors, officers and
employees will pay the Purchase Price ($10.00 per share) for each share for
which they subscribe.
<TABLE>
<CAPTION>
PROPOSED PURCHASE
OF CONVERSION TOTAL COMMON STOCK
NUMBER OF STOCK TO BE HELD
EXCHANGE ------------------ ------------------
SHARES TO NUMBER
BE HELD NUMBER OF PERCENTAGE
(1)(2) AMOUNT OF SHARES SHARES OF TOTAL
--------- -------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Donald V. Rhodes
Director, Chairman of the
Board, President and Chief
Executive Officer of the
Company; Chairman of the
Board and President of the
Bank......................... 77,625 $250,000 25,000 102,625 1.94%
Lynn M. Brunton
Director..................... 41,914 50,000 5,000 46,914 0.88
John A. Clees
Director..................... 33,531 40,000 4,000 37,531 0.71
Daryl D. Jensen
Director..................... 50,297 50,000 5,000 55,297 1.04
H. Edward Odegard
Director..................... 41,914 25,000 2,500 44,414 0.84
James P. Senna
Director..................... 27,943 75,000 7,500 35,443 0.67
Philip S. Weigand
Director..................... 49,157 50,000 5,000 54,157 1.02
John D. Parry
Executive Vice President--
Administration............... 8,941 70,000 7,000 15,941 0.30
Brian L. Vance
Executive Vice President--
Loan Administration.......... 5,588 150,000 15,000 20,588 0.39
James Hastings
Senior Vice President and
Treasurer.................... 3,073 50,000 5,000 8,073 0.15
Wendy Gauksheim
Senior Vice President--
Corporate Services Officer... 11,777 60,000 6,000 17,777 0.34
------- -------- ------ ------- ----
All directors and executive
officers as a group
(11 persons)................. 351,760 $820,000 82,000 435,787 8.27%
======= ======== ====== ======= ====
</TABLE>
- --------
(1) Excludes 67,546 shares which may be received upon the exercise of
outstanding stock options granted under the existing 1994 and 1997 Stock
Option Plans. Based upon the Exchange Ratio of 2.7943 Exchange Shares for
each Minority Share at the midpoint of the Valuation Price Range, the
persons named in the table would have options to purchase Common Stock as
follows: Mr. Rhodes, 55,886 shares; Ms. Brunton, 9,313 shares; Mr. Clees,
9,313 shares; Mr. Jensen, 9,313 shares; Mr. Odegard, 9,313 shares; Mr.
Senna, 9,313 shares; Mr. Weigand, 8,055 shares; Mr. Parry, 27,943 shares;
Mr. Vance, 27,943 shares; Mr. Hastings, 18,162 shares; Ms. Gauksheim,
4,191 shares; and all directors and executive officers as a group,
188,745 shares.
(2) Excludes stock options that may be granted under 1998 Stock Option Plan
and awards that may be granted under the MRP if such plans are approved
by stockholders at an annual or special meeting at least six months
following the Conversion. See "Management--Benefits."
22
<PAGE>
PRO FORMA DATA
Applicable law requires that the aggregate Purchase Price of the Common
Stock to be issued in the Conversion be based upon an independent appraisal of
the estimated pro forma market value of the Common Stock. At August 15, 1997,
the Valuation Price Range of the Offerings is from a minimum of $30.6 million
to a maximum of $41.4 million, with a midpoint of $36.0 million or, at a price
per share of $10.00, a minimum number of shares of 3,060,000, a maximum number
of shares of 4,140,000 and a midpoint number of shares of 3,600,000. The
actual net proceeds from the sale of the Common Stock cannot be determined
until the Conversion is completed. However, net proceeds are currently based
upon the following assumptions: (i) all of the shares of Conversion Stock will
be sold in the Subscription and Minority Stockholder's Offerings; (ii) Ryan
Beck will receive a management and advisory fee of $50,000 and a marketing fee
of 1.5% of the aggregate dollar amount of Common Stock sold in the
Subscription and Minority Stockholder Offerings; (iii) approximately 11.3%,
10.8%, 10.4% and 10.1% of the Conversion Stock issued in the Conversion at the
minimum, midpoint, maximum, and 15% above the maximum, of the Valuation Price
Range, respectively, will be sold to the ESOP and to directors, officers and
employees or members of such persons' immediate families, for which no fee
will be paid to Ryan Beck, and (iv) Conversion expenses, excluding the fees
paid to Ryan Beck, will be approximately $460,000. Actual fees and expenses
may vary from this estimate, because the fees paid will depend upon the
percentages and total number of shares sold in the various categories of
Offerings and other factors. See "The Conversion--Marketing Arrangements."
The pro forma consolidated net income of the Company for the year ended June
30, 1997 has been calculated as if the Conversion had been completed at the
beginning of the period and the estimated net proceeds received by the Company
and the Bank had been invested at 6.74%, the arithmetic average of the yield
earned by the Bank on its interest earning assets and the rates paid on its
deposits. As discussed under "Use of Proceeds," the Company expects to retain
50% of the net Conversion proceeds from which it will fund the ESOP loan. A
pro forma after-tax return of 4.45% is used for both the Company and the Bank
for the 12 month period, after giving effect to an incremental tax rate of
34.0%.
Historical and pro forma per share amounts have been calculated by dividing
historical and pro forma amounts by the indicated number of shares of Common
Stock. Per share amounts have been computed as if the Common Stock had been
outstanding at the beginning of the period or at June 30, 1997, but without
any adjustment of per share historical or pro forma stockholders' equity to
reflect the earnings on the estimated net proceeds.
The following table summarizes the historical net income and stockholders'
equity of the Bank and the pro forma consolidated net income and stockholders'
equity of the Company at and for the year ended June 30, 1997, based on the
minimum, midpoint, maximum, and a 15% increase in the maximum of the Valuation
Price Range. No effect has been given to (i) the shares to be reserved for
issuance under the Company's 1998 Stock Option Plan, which is expected to be
adopted by stockholders at a meeting to be held no earlier than six months
following consummation of the Conversion; (ii) withdrawals from deposit
accounts for the purpose of purchasing Conversion Stock in the Conversion;
(iii) the issuance of shares from authorized but unissued shares to the MRP,
which is expected to be adopted by stockholders at a meeting to be held no
earlier than six months following consummation of the Conversion; or (iv) the
establishment of a liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders. See "Management--Benefits--
1998 Stock Option Plan" and "The Conversion--Stock Pricing and Number of
Shares to be Issued."
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE CONVERSION AT THE DATE ON WHICH THE CONVERSION
ACTUALLY OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE RESULTS OF
OPERATIONS. STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE BETWEEN THE STATED
AMOUNTS OF CONSOLIDATED ASSETS AND LIABILITIES OF THE COMPANY COMPUTED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. STOCKHOLDERS' EQUITY
HAS NOT BEEN INCREASED OR DECREASED TO REFLECT THE DIFFERENCE BETWEEN THE
CARRYING VALUE OF LOANS AND OTHER ASSETS AND THEIR MARKET VALUE. STOCKHOLDERS'
EQUITY IS NOT INTENDED TO REPRESENT FAIR MARKET VALUE NOR DOES IT REPRESENT
AMOUNTS THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT
OF LIQUIDATION.
23
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED JUNE 30, 1997
----------------------------------------------
15% ABOVE
MINIMUM OF MAXIMUM OF MAXIMUM OF
VALUATION MIDPOINT OF VALUATION VALUATION
PRICE VALUATION PRICE PRICE
RANGE PRICE RANGE RANGE RANGE
---------- ----------- ---------- ----------
3,060,000 3,600,000 4,140,000 4,761,000
SHARES AT SHARES AT SHARES AT SHARES AT
PURCHASE PURCHASE PURCHASE PURCHASE
PRICE OF PRICE OF PRICE OF PRICE OF
$10.00 PER $10.00 PER $10.00 PER $10.00 PER
SHARE SHARE SHARE SHARE
---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds................... $30,600 $36,000 $41,400 $47,610
Less expenses.................... (867) (942) (1,016) (1,102)
--------- --------- --------- ---------
Estimated net proceeds.......... $29,733 $35,058 $40,384 $46,508
Less: Common Stock purchased by
ESOP(2)......................... (2,448) (2,880) (3,312) (3,809)
Less: Common Stock purchased by
MRP(3).......................... (1,224) (1,440) (1,656) (1,904)
--------- --------- --------- ---------
Estimated Net Proceeds for
Reinvestment................... $26,061 $30,738 $35,416 $40,795
========= ========= ========= =========
For the 12 Months Ended June 30,
1997
Consolidated Net Income:
Historical(5)................... $ 2,269 $ 2,269 $ 2,269 $ 2,269
Pro forma income on net
proceeds(1).................... 1,159 1,367 1,575 1,815
Earnings on assets at MHC....... 5 5 5 5
Pro forma ESOP Adjustment(2).... (108) (127) (146) (168)
Pro forma MRP Adjustment(3)..... (162) (190) (219) (251)
--------- --------- --------- ---------
Pro forma Net Income............ $ 3,163 $ 3,324 $ 3,484 $ 3,670
========= ========= ========= =========
Earnings Per Share (reflects SOP
93-6)(4):
Historical(5)................... $ 0.53 $ 0.45 $ 0.39 $ 0.34
Pro forma income on net proceeds
............................... 0.28 0.28 0.28 0.28
Earnings on Capital at Company.. -- -- -- --
Pro forma ESOP Adjustment(2).... (0.03) (0.03) (0.03) (0.03)
Pro forma MRP adjustment(3)..... (0.04) (0.04) (0.04) (0.04)
--------- --------- --------- ---------
Pro forma earnings per share.... $ 0.74 $ 0.66 $ 0.60 $ 0.55
========= ========= ========= =========
Offering price as a multiple of
pro forma earnings per share.... 13.51x 15.15x 16.67x 18.18x
At June 30, 1997
Stockholders' Equity:
Historical(5)................... $27,714 $27,714 $27,714 $27,714
Assets at MHC................... 120 120 120 120
Estimated Net Proceeds.......... 29,733 35,058 40,384 46,508
Less: Common Stock purchased by
ESOP(2)........................ (2,448) (2,880) (3,312) (3,809)
Less: Common Stock purchased by
MRP(3)......................... (1,224) (1,440) (1,656) (1,904)
--------- --------- --------- ---------
Pro forma Stockholders' Equity.. $53,895 $58,572 $63,250 $68,629
========= ========= ========= =========
Stockholders' equity per share
(does not reflect SOP 93-6):
Historical(5)................... $ 6.15 $ 5.23 $ 4.54 $ 3.95
Assets at MHC................... 0.03 0.02 0.02 0.02
Estimated net proceeds.......... 6.59 6.60 6.62 6.62
Less: Common Stock purchased by
ESOP(2)........................ (0.54) (0.54) (0.54) (0.54)
Less: Common Stock purchased by
MRP(3)......................... (0.27) (0.27) (0.27) (0.27)
--------- --------- --------- ---------
Pro forma Stockholders' Equity
Per Share...................... $ 11.96 $ 11.04 $ 10.37 $ 9.78
========= ========= ========= =========
Offering price as a percentage
of pro forma stockholders'
equity per share............... 83.61% 90.58% 96.43% 102.25%
Offer price as a percentage of
pro forma tangible equity...... 83.61% 90.58% 96.43% 102.25%
Number of Shares used in book
value per share calculations... 4,507,955 5,303,476 6,098,998 7,013,847
</TABLE>
24
<PAGE>
- --------
(1) No effect has been given to withdrawals from deposit accounts for the
purpose of purchasing Conversion Stock. The net amount of funds available
to the Bank for investment following the Offerings will be reduced to the
extent that shares are purchased with funds on deposit.
(2) Assumes that 8% of the Conversion Stock issued in the Conversion will be
purchased by the ESOP. The funds used to acquire such shares will be
borrowed by the ESOP (at an interest rate equal to the prime rate as
published in The Wall Street Journal on the closing date of the
Conversion, which rate is currently 8.50%) from the net proceeds of the
Offerings retained by the Company. The amount of this borrowing has been
reflected as a reduction from gross proceeds to determine estimated net
proceeds for reinvestment. The Bank intends to make contributions to the
ESOP at least equal to the principal and interest requirement of the
debt. As the debt is repaid, stockholders' equity will be increased. The
Bank's payment of the ESOP debt is based upon equal installments of
principal over a 15 year period, assuming a federal income tax rate of
34.0%. Interest income earned by the Company on the ESOP debt offsets the
interest paid by the Bank on the ESOP loan. No reinvestment is assumed on
proceeds contributed to fund the ESOP. The ESOP expense reflects adoption
of Statement of Position ("SOP") 93-6, which will require recognition of
compensation expense as shares are committed to be released to employee's
accounts and the exclusion of unallocated shares from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the $10.00
per share Purchase Price. See "Management--Benefits--Employee Stock
Ownership Plan."
(3) Assumes that the required stockholder approval has been received, that
the shares were acquired by the MRP at the beginning of the period
presented in open market purchases at $10.00 per share, that 20% of the
amount contributed was an amortized expense during such period, and that
the federal income tax rate is 34.0%. For purposes of this table,
compensation expense is recognized on a straight-line basis over the five
year term of shares issued under the MRP. In the event the fair market
value per share is greater than $10.00 per share on the date shares are
awarded under the MRP, total MRP expense would increase. See "Risk
Factors--New Expenses Associated with ESOP and MRP." The total of the
estimated MRP purchases was multiplied by 20% (the total percent of
shares for which expense is recognized in the first year) resulting in
pre-tax MRP expense of $244,800, $288,000, $331,200 and $380,800 at the
minimum, midpoint, maximum and 15% above the maximum of the Valuation
Price Range, respectively, for the year ended June 30, 1997. The issuance
of authorized but unissued shares of Common Stock pursuant to the MRP in
the amount of 4% of the Conversion Stock issued in the Offerings would
dilute the voting interests of existing stockholders by approximately
2.65% and under such circumstances pro forma net income per share for the
year ended June 30, 1997 would be $0.72, $0.64, $0.59, and $0.54 at the
minimum, midpoint, maximum and 15% above the maximum of the Valuation
Price Range, respectively, and stockholders' equity per share at June 30,
1997 would be $11.64, $10.75, $10.10, and $9.53 at the minimum, midpoint,
maximum and 15% above the maximum of such range, respectively. No effect
has been given to the shares reserved for issuance under the proposed
1998 Stock Option Plan. If stockholders approve the 1998 Stock Option
Plan following the Conversion, the Company will have reserved for
issuance under the 1998 Stock Option Plan authorized by unissued shares
of Common Stock representing an amount of shares equal to 10% of the
Conversion Stock sold in the Offerings. See "Management--Benefits--1998
Stock Option Plan" and "--Benefits--Management Recognition Plan" and
"Risk Factors--Possible Dilutive Effect of Benefit Plans."
(4) Per share amounts are based upon shares outstanding of 4,271,315,
5,025,076, 5,778,838 and 6,645,663, at the minimum, midpoint, maximum and
15% above the maximum of the Valuation Price Range for the year ended
June 30, 1997, respectively, which includes the Conversion Stock and
Exchange Shares, less the number of shares assumed to be held by the ESOP
not released within the first year following the Conversion.
(5) Historical per share amounts have been computed as if the Conversion
Stock expected to be issued in the Conversion had not been outstanding at
the beginning of the period, and without any adjustment of historical net
income or historical retained earnings to reflect the investment of the
estimated net proceeds of the sale of shares in the Conversion, the
additional ESOP expense or the proposed MRP expense, as described above.
25
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of Heritage Savings Bank and
Subsidiaries for each of the fiscal years in the three year period ended June
30, 1997 are a part of the consolidated financial statements of Heritage
Savings Bank and subsidiaries, and should be read in conjunction therewith,
which financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The Consolidated Financial
Statements as of June 30, 1996 and 1997, and for each of the years in the
three year period ended June 30, 1997, and the report thereon, are included
elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME:
Loans..................... $13,115 $14,894 $16,743
Mortgage backed
securities............... 722 552 464
Investment securities and
FHLB dividends........... 1,118 854 757
Interest bearing
deposits................. 268 575 548
------- ------- -------
Total interest income... 15,223 16,875 18,512
------- ------- -------
INTEREST EXPENSE:
Deposits.................. 6,639 8,528 8,999
Borrowed funds............ 357 15 1
------- ------- -------
Total interest expense.. 6,996 8,543 9,000
------- ------- -------
Net interest income..... 8,227 8,332 9,512
PROVISION FOR LOAN LOSSES... -- -- (270)
------- ------- -------
Net interest income after
provision for loan
losses................... 8,227 8,332 9,782
------- ------- -------
NONINTEREST EXPENSE:
Gains on sales of loans,
net...................... 1,665 3,049 2,006
Commissions on sales of
annuities and
securities............... 241 296 220
Service charges on
deposits................. 207 353 462
Rental income............. 209 221 210
Gain on sale of premises.. 356 -- 84
Other income.............. 362 379 365
------- ------- -------
Total noninterest
income................. 3,040 4,298 3,347
------- ------- -------
NONINTEREST EXPENSE:
Salaries and employee
benefits................. 4,176 4,711 5,468
Building occupancy........ 979 1,254 1,717
FDIC premiums and special
assessment............... 380 407 1,262
Data processing........... 462 493 534
Marketing................. 200 162 257
Offices supplies &
printing................. 257 229 243
Other..................... 971 1,166 1,624
------- ------- -------
Total noninterest
expense................ 7,425 8,422 11,105
------- ------- -------
Income before federal
income tax expense..... 3,842 4,208 2,024
Federal income tax expense
(benefit).................. 1,308 1,435 (245)
------- ------- -------
Net income.............. $ 2,534 $ 2,773 $ 2,269
======= ======= =======
Earnings per common share... $1.41 $1.54 $1.26
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is intended to assist in understanding the
financial condition and results of operations of the Bank. The information
contained in this section should be read in conjunction with the Consolidated
Financial Statements and accompanying Notes thereto and the other sections
contained in this Prospectus. The Mutual Holding Company's only material
activity is to hold Bank Common Stock and invest its available funds in
accounts at the Bank. The MHC has not conducted any operations to date and
therefore has no reported results of operations.
OPERATING STRATEGY
The Bank traditionally has offered a variety of savings products and
originated one- to four-family mortgage loans (principally for sale in the
secondary market) and, to a lesser extent, multi-family, commercial real
estate and construction loans. Beginning in fiscal 1994, the Bank began to
implement a growth strategy which is intended to broaden its products and
services from traditional thrift products and services to those more closely
related to commercial banking. That strategy entails (1) geographic and
product expansion, (2) loan portfolio diversification, (3) development of
relationship banking, and (4) maintenance of asset quality. (See "Business of
the Bank--Implementation of Growth Strategy" and "--Lending Activities") The
Bank intends to continue to fund its assets primarily with retail deposits,
although FHLB advances may be used as a supplemental source of funds, and it
believes that the capital raised in the Offerings will enhance its ability to
continue implementing its growth strategy.
Concurrent with geographic expansion, the Bank has (i) developed business
checking accounts and commercial lending products and other services for
businesses and high net worth individuals; (ii) introduced Visa(TM) debit and
credit cards; (iii) installed an automated voice response system for customer
account inquiries and (iv) developed products to assist realtors and potential
borrowers to obtain information about loan programs and qualifications. To
accommodate new products and to improve internal operating and reporting, the
Bank converted to a new data processing system with a data service bureau and
installed a personal computer network.
The Bank has incurred substantial expenses as it carried out its growth
strategy. Those expenses have been concentrated in (i) personnel hired in
anticipation of growth and expanded market share; (ii) maintaining the Bank's
mortgage origination capacity while mortgage origination volumes have
fluctuated; (iii) facilities expansion and (iv) upgrading of data processing
capabilities. Management believes that those expenditures will have a negative
impact on earnings in the near term, but that the investments are necessary to
produce an expected improvement in earnings as the Bank seeks to broaden its
product mix and expand its market share throughout its market area.
The Bank's profitability depends primarily on its net interest income, which
is the difference between the income it receives on its loan and investment
portfolio and its cost of funds, which consists of interest paid on deposits
and borrowed funds. The Bank also generates noninterest income through service
charges and fees and income from mortgage banking operations. The Bank's
noninterest expenses consist primarily of compensation and employee benefits,
occupancy, deposit insurance premiums, data processing and other operating
costs. Like most financial institutions, the Bank's interest income and cost
of funds are affected significantly by general economic conditions,
particularly changes in market interest rates, and by government policies and
the actions of regulatory authorities.
NET INTEREST INCOME
Changes in net interest income result from changes in volume, net interest
spread and net interest margin. Volume refers to the average dollar amounts of
interest earning assets and interest bearing liabilities. Net interest spread
refers to the difference between the average yield on interest earning assets
and the average cost of interest bearing liabilities. Net interest margin
refers to net interest income divided by average interest earning assets and
27
<PAGE>
is influenced by the level and relative mix of interest earning assets and
interest bearing liabilities. During the years ended June 30, 1995, 1996 and
1997, average interest earning assets amounted to $180.2 million, $193.5
million and $211.2 million, respectively. During these same periods, average
interest bearing liabilities were $162.5 million, $175.1 million and $191.1
million, respectively, and net interest margins were 4.57%, 4.31% and 4.50%,
respectively.
The following table sets forth for the periods indicated information for the
Bank with respect to average balances of assets and liabilities, as well as
the total dollar amounts of interest income from interest earning assets and
interest expense on interest bearing liabilities, resultant yields or costs,
net interest income, net interest spread, net interest margin and the ratio of
average interest earning assets to average interest bearing liabilities. The
average loan balances presented in the table are net of allowances for loan
losses. Nonaccrual loans have been included in the tables as loans carrying a
zero yield.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------------------------------------------------------------
1995 1996 1997
--------------------------- --------------------------- ---------------------------
INTEREST INTEREST INTEREST
AVERAGE EARNED/ AVERAGE AVERAGE EARNED/ AVERAGE AVERAGE EARNED/ AVERAGE
BALANCE(1) PAID RATE BALANCE(1) PAID RATE BALANCE(1) PAID RATE
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans................... $142,598 $13,115 9.20% $160,823 $14,894 9.26% $182,791 $16,743 9.16%
Mortgage backed
securities............. 9,231 722 7.82 6,715 552 8.22 5,598 464 8.29
Investment securities
and FHLB stock......... 22,516 1,118 4.97 15,096 854 5.66 12,360 757 6.12
Interest earning
deposits............... 5,837 268 4.59 10,820 575 5.31 10,414 548 5.26
-------- ------- ------ -------- ------- ------ -------- ------- ------
Total interest earning
assets................. 180,182 $15,223 8.45% $193,454 $16,875 8.72% $211,163 $18,512 8.77%
Noninterest earning
assets................. 14,818 18,002 18,974
-------- -------- --------
Total assets........... $195,000 $211,456 $230,137
======== ======== ========
INTEREST BEARING
LIABILITIES:
Certificates of
deposit................ $ 89,602 $ 4,415 4.93% $109,559 $ 6,336 5.78% $119,133 $ 6,599 5.54%
Savings accounts........ 28,178 927 3.29 28,407 1,030 3.63 29,703 1,055 3.55
Interest bearing demand
and money market
accounts............... 40,594 1,297 3.19 36,930 1,162 3.15 42,271 1,345 3.18
-------- ------- ------ -------- ------- ------ -------- ------- ------
Total interest bearing
deposits.............. 158,374 6,639 4.19 174,896 8,528 4.88 191,107 8,999 4.71
FHLB advances........... 658 41 6.23 -- -- 27 1 4.99
Other borrowed funds.... 3,453 316 9.15 171 15 8.77 -- -- --
-------- ------- ------ -------- ------- ------ -------- ------- ------
Total interest bearing
liabilities........... 162,485 6,996 4.31% 175,067 8,543 4.88 191,134 9,000 4.71%
Demand and other
noninterest bearing
deposits............... 6,001 6,537 7,955
Other noninterest
bearing liabilities.... 4,797 5,489 4,711
Stockholders' equity.... 21,717 24,363 26,337
-------- -------- --------
Total liabilities and
stockholders' equity.. $195,000 $211,456 $230,137
======== ======== ========
Net interest income..... $ 8,227 $ 8,332 $ 9,512
Net interest spread..... 4.14% 3.84% 4.06%
Net interest margin..... 4.57% 4.31% 4.50%
Average interest earning
assets to average
interest bearing
liabilities............ 110.89% 110.51% 110.48%
</TABLE>
28
<PAGE>
The following table sets forth the amounts of the changes in the Bank's net
interest income attributable to changes in volume and changes in interest
rates. Changes attributable to the combined effect of volume and interest
rates have been allocated proportionately to changes due to volume and the
changes due to interest rates.
<TABLE>
<CAPTION>
1995 COMPARED TO 1996 COMPARED TO
1996 INCREASE 1997 INCREASE
(DECREASE) DUE TO (DECREASE) DUE TO
---------------------- ---------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ------ ------ ------ ----- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans.......................... $1,676 $ 103 $1,779 $2,034 $(185) $1,849
Mortgage backed securities..... (197) 27 (170) (92) -- (88)
Investment securities and FHLB
stock......................... (368) 104 (264) (155) 58 (97)
Interest earning deposits...... 229 78 307 (22) (5) (27)
------ ------ ------ ------ ----- ------
Total interest income........ $1,340 $ 312 $1,652 $1,765 $(128) $1,637
====== ====== ====== ====== ===== ======
Certificates of deposit........ $ 984 $ 937 $1,921 $ 554 $(291) $ 263
Savings accounts............... 8 95 103 47 (22) 25
Interest bearing demand
deposits...................... (118) (17) (135) 168 15 183
------ ------ ------ ------ ----- ------
Total interest on deposits... 874 1,015 1,889 769 (298) 471
FHLB advances.................. (41) -- (41) 1 -- 1
Other borrowed funds........... (300) (1) (301) (15) -- (15)
------ ------ ------ ------ ----- ------
Total interest expense....... $ 533 $1,014 $1,547 $ 755 $(298) $ 457
====== ====== ====== ====== ===== ======
</TABLE>
RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
Net Income. Net income was $2.3 million, or $1.26 per share, for the year
ended June 30, 1997 compared to $2.8 million, or $1.54 per share, for the year
ended June 30, 1996, an 18.2% decline, primarily as a result of noninterest
expense increasing more rapidly than net interest income, coupled with a
decrease in noninterest income. The increase in noninterest expenses was
attributable to two factors: (1) the expansion in Pierce County of the Bank's
branch office network and development of the Bank's relationship banking
capacity; and (2) the legislatively-mandated, one-time assessment levied by
the FDIC on all SAIF-insured institutions to recapitalize the SAIF deposit
insurance fund. The decrease in noninterest income was principally the result
of lower gains on sales of loans due to a decline in the volume of
originations of residential mortgage loans.
Net Interest Income. Net interest income increased $1.2 million, or 14.2%,
in 1997 compared to 1996 primarily due to a $22.0 million increase in the
average balance of loans. The growth in average loan balances was most
pronounced in commercial loans ($17.7 million of the total $22.0 million
increase). Net interest income increased as a result of an improved net
interest spread coupled with average interest earning assets increasing more
rapidly than average interest bearing liabilities, with the difference funded
by noninterest bearing deposits.
Net interest margin, which is net income divided by average interest earning
assets, for 1997 increased to 4.50% from 4.31% in 1996. The increase was
primarily the result of a growth in earning assets at increased rates coupled
with a decline in the average cost of interest bearing deposits (particularly
for certificates of deposit). Certificates of deposit with scheduled
maturities of one year or less increased to 90% of certificate accounts as of
June 30, 1997 compared to 83% as of June 30, 1996, while average rates on
certificates decreased to 5.54% from 5.78%. The increase in the average yield
on interest earning assets was the result of shifting funds from lower
yielding investments and mortgage backed securities into higher yielding loans
and the overall growth in loans, particularly commercial loans.
Provision for Loan Losses. In 1997, the Bank recorded a $1.2 million
recovery on a multifamily mortgage loan which had been partially charged off
in a prior year. In its most recent evaluation of the adequacy of the Bank's
allowance for loan losses as of June 30, 1997, management determined that the
allowance balance was more than adequate to cover any potential losses in the
Bank's loan portfolio and therefore reduced the allowance balance through a
$270,000 negative provision for loan losses.
29
<PAGE>
Management considers the allowance for loan losses at June 30, 1997 to be
adequate to cover reasonably foreseeable loan losses based on management's
assessment of various factors affecting the loan portfolio, including the
level of problem loans, business conditions, estimated collateral values, loss
experience and credit concentrations.
Noninterest Income. Total noninterest income decreased $951,000, or 22.1%,
in 1997 compared with 1996. The major component of this category, gains on
sales of loans, decreased $1.0 million, or 34.2% from 1996 to 1997 due to a
lower volume of mortgage loans sold ($87.0 million in 1997 compared to $119.5
million in 1996). Commissions on sales of annuities and securities declined
$76,000, or 25.7%, as a result of lower sales volume due to staff turnover.
Service charges on deposits increased $109,000, or 30.8%, due to growth in
personal and business checking accounts. In June 1997, the Bank sold its
former branch premises in Shelton, recognizing an $84,000 gain on the sale.
Noninterest Expense. Total noninterest expense increased $2.7 million, or
31.9%, in 1997 compared with 1996. The increase was attributable to: (i) the
Bank's expansion of its branch network in Pierce County and development of the
Bank's relationship banking capacity; and (ii) a one-time special assessment
of $1.1 million required by legislation enacted in August 1996, to
recapitalize the SAIF fund of the FDIC. Total noninterest expense (less the
nonrecurring SAIF assessment of $1.1 million) was 77.89% of adjusted revenue
(the sum of net interest income plus noninterest income), for the year ended
June 30, 1997 as compared to 66.68% for the same period in 1996. Total
noninterest expense for the Bank is expected to decline in relation to
revenues as the Bank's asset base grows.
Salaries and employee benefits increased $757,000, or 16.1%. The increase
reflects the hiring of a Senior Loan Administrator (in June 1996) and six
commercial lending officers for the Pierce County market (four of which were
hired in June 1996), the staffing additions for the 80th and Pacific branch
(which opened in October 1996) and the full year effect of staffing additions
for the Lakewood branch (which opened in February 1996). Occupancy expense
increased $463,000, or 36.9%, as result of the operating costs of the new
branch facilities opened during 1996 and 1997 and the full year depreciation
impact of the installation of a bank-wide personal computer network in March
1996. FDIC premiums and special assessment increased $855,000, or 210%, due to
the $1.1 million special assessment mentioned above. The Bank's federal
deposit insurance premiums were reduced by the FDIC from 0.23% (on an
annualized basis) of insured deposits for the quarter ended September 30, 1996
to 0.06% of insured deposits for the semi-annual period ended June 30, 1997.
Income Taxes. The Bank recorded a Federal income tax benefit of $245,000 for
the year ended June 30, 1997 as a result of the reversal of $938,000 deferred
tax liability related to the potential recapture of the pre-1988 additions to
the tax bad debt reserve which could have been triggered by the MHC
Reorganization in January 1994. Based on subsequent legislation, the Bank
reversed the $938,000 deferred tax liability as a reduction of Federal income
tax expense during the year ended June 30, 1997.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
Net income. Net income increased $239,000, or 9.4%, for the year ended June
30, 1996 to $2.8 million from $2.5 million for the year ended June 30, 1995.
This increase resulted primarily from noninterest income increasing more
rapidly than noninterest expenses, while net interest income rose slightly.
Net Interest Income. Net interest income increased $105,000, or 1.3%, in
1996 compared with 1995 despite growth in average loans of $18.2 million, or
12.8%, due principally to a decrease in net interest spread to 3.84% in 1996
from 4.14% in 1995. Average interest bearing liabilities increased by $16.5
million (concentrated in certificates of deposit), or 10.4%, in 1996, while
average interest earning assets increased by $13.3 million, or 7.4%. The
average rate on interest bearing liabilities rose to 4.88% from 4.31% in 1995,
while the average rate on interest earning assets increased to 8.72% from
8.45%.
30
<PAGE>
The increase in loans resulted from a greater emphasis on commercial lending
coupled with an increase in residential and commercial real estate mortgage
loans. The growth in certificates of deposit reflected rate promotions offered
in concert with the new branch openings in 1995 and 1996 and was accompanied
by a reduction of $3.7 million, or 9.0%, in lower cost interest bearing demand
deposits.
Provision for Loan Losses. There were no provisions for loan losses in 1995
or 1996 as management deemed the allowance for loan losses at June 30, 1995
and 1996 adequate to provide for reasonably foreseeable loan losses at those
dates.
Noninterest Income. Noninterest income increased $1.3 million, or 41.4%, to
$4.3 million for 1996, from $3.0 million for 1995. Gains on sales of loans
increased $1.4 million, or 83.1%, due to a larger volume of mortgage loan
originations ($140.2 million in 1996 versus $93.6 million in 1995) and
mortgage loans sold ($119.5 million in 1996 versus $63.3 million in 1995).
Commissions on sales of annuities and securities increased $55,000, or 23%, as
a result of higher sales volume and a shift in relative mix of sales from
lower fee producing securities sales into variable annuities. Service charges
on deposits increased $146,000, or 71%, due to growth in personal and business
noninterest bearing checking accounts. The gain on sale of premises in 1995
occurred due to the sale of a former branch facility in Lacey.
Noninterest Expense. Noninterest expense for 1996 increased $997,000, or
13.4%, from 1995 due principally to an increase in compensation and occupancy
expense. Salaries, bonuses and employee benefits increased by $535,000, or
12.8%, due to staffing additions related to new branches opened (Indian Summer
in January 1995 and Lakewood in February 1996), increases in mortgage banking
support staff and information systems support, management bonuses and
increases in employee benefit plan contributions. Occupancy expense increased
$275,000, or 28.1%, due to the operating costs of the new branch facilities
opened in 1995 and 1996 and the depreciation impact of the installation of a
personal computer network in March 1996. Federal deposit insurance premiums
increased as a result of higher average deposit levels in 1996, while data
processing expenses increased due to greater transaction processing levels
related to checking accounts (business and personal). Marketing expenses
decreased by $38,000 as a result of one less new branch opening in 1996.
Office supplies and printing decreased by $28,000 due to management's efforts
in controlling the growth of these expenditures. Other noninterest expenses
increased $195,000 as a result of branch expansion and growth in customer
accounts, increased professional services and higher business and occupation
taxes due to increased revenues in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are customer deposits, loan repayments,
loan sales, maturing investment securities and advances from the FHLB of
Seattle. These funds, together with retained earnings, equity and other
borrowed funds, are used to make loans, acquire investment securities and
other assets and to fund continuing operations. While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by the level of interest rates,
economic conditions and competition.
The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to fund operations.
The Bank generally maintains sufficient cash and short term investments to
meet short term liquidity needs. At June 30, 1997, cash and cash equivalents
totaled $7.6 million, or 3.1% of total assets, and investment securities
classified as held to maturity with maturities of one year or less amounted to
$3.8 million, or 1.6% of total assets. At June 30, 1997, the Bank maintained a
credit facility with the FHLB of Seattle for up to 20% of assets or $48.4
million (of which only $890,000 was outstanding at that date).
To fund the growth of the Bank, management's strategy has been to build core
deposits (which the Bank defines to include all deposits except public funds)
through the development of its branch office network and commercial banking
relationships. Total deposits increased $18.7 million, or 9.8%, to $209.8
million at June 30,
31
<PAGE>
1997 from $191.1 million at June 30, 1996. Of this increase, $3.6 million was
in the form of a short term public deposit which matured and was withdrawn in
July 1997. Historically, the Bank has been able to retain a significant amount
of its deposits as they mature. Management anticipates that the Bank will
continue to rely on the same sources of funds in the future and will use those
funds primarily to make loans and purchase investment securities.
Heritage Bank is subject to certain regulatory capital requirements. As of
June 30, 1996 and 1997, the Bank was classified as a "well capitalized"
institution under the criteria established by the FDIC Act. See "Historical
and Pro Forma Regulatory Capital Compliance."
ASSET/LIABILITY MANAGEMENT
The Bank's primary financial objective is to achieve long term profitability
while controlling its exposure to fluctuations in market interest rates. To
accomplish this objective, management has formulated an interest rate risk
management policy that attempts to manage the mismatch between asset and
liability maturities while maintaining an acceptable interest rate sensitivity
position. The principal strategies which the Bank employs to control its
interest rate sensitivity are: (i) sale of most long term, fixed rate, one-to
four-family residential mortgage loan originations in the secondary mortgage
market; (ii) retention of some adjustable rate mortgage loans; (iii) the
origination of commercial loans and residential construction loans at variable
interest rates for terms generally one year or less; and (iv) keeping
investment securities with generally short term maturities. Additionally, the
Bank offers noninterest bearing demand deposit accounts to businesses and
individuals. The Bank's longer term objective is to reduce its dependency on
certificates of deposit, which tend to be a higher cost source of funds and
most susceptible to movement from the Bank if market interest rates increase,
by increasing its proportion of noninterest bearing demand deposits, interest
bearing demand deposits and money market accounts and savings deposits.
The Bank's asset and liability management strategies have resulted in a
negative one year "gap" of 9.18% as of June 30, 1997. This one year gap is the
difference between the dollar amount of its interest earning assets and
interest bearing liabilities that mature or reprice within one year as a
percentage of total interest earning amounts, based on certain estimates and
assumptions as discussed below. Although management believes that the
implementation of its operating strategies has reduced the potential effects
of changes in market interest rates on the Bank's results of operations, the
negative gap indicates that increases in market interest rates may adversely
affect the Bank's results.
32
<PAGE>
The following table sets forth the estimated maturity or repricing and the
resulting interest rate sensitivity gap of the Bank's interest earning assets
and interest bearing liabilities at June 30, 1997 based upon estimates of
expected mortgage prepayment rates and deposit decay rates consistent with
national trends. The Bank has adjusted mortgage loan maturities for loans held
for sale by reflecting these loans in the zero to three month category which
is consistent with their sale in the secondary mortgage market. The amounts in
the table are derived from the Bank's internal data, and because certain
assumptions have been utilized in presenting this data, the amounts may not be
consistent with financial information appearing elsewhere in this Prospectus
that have been prepared in accordance with generally accepted accounting
principles. The amounts in the tables also could be significantly affected by
external factors, such as changes in prepayment assumptions, early withdrawal
of deposits and competition.
<TABLE>
<CAPTION>
ESTIMATED MATURITY OR REPRICING WITHIN
----------------------------------------------------------
0-3 4-12 1-5 5-10 MORE THAN
MONTHS MONTHS YEARS YEARS 10 YEARS TOTAL
------- -------- ------- ------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans.................. $45,321 $ 77,607 $57,294 $23,942 $4,029 $208,193
Mortgage backed
securities............ -- 35 23 207 4,894 5,159
Investment securities.. 321 3,496 4,689 -- -- 8,506
FHLB stock............. 1,511 -- -- -- -- 1,511
Interest earning
deposits.............. 175 -- -- -- -- 175
------- -------- ------- ------- ------ --------
Total interest earning
assets............... $47,328 $ 81,138 $62,006 $24,149 $8,923 $223,544
Noninterest earning
assets................ 18,620
--------
Total assets.......... $242,164
========
INTEREST BEARING
LIABILITIES
Deposits
Certificates of
deposit............... $35,412 $ 78,394 $12,866 $ 109 -- $126,781
Savings accounts....... 2,417 6,084 15,074 3,998 801 28,374
Interest bearing demand
and money market
deposits.............. 9,879 15,921 15,889 2,863 585 45,137
------- -------- ------- ------- ------ --------
Total interest bearing
deposits............. 47,708 100,399 43,829 6,970 1,386 200,292
FHLB advances.......... 890 -- -- -- -- 890
------- -------- ------- ------- ------ --------
Total interest bearing
liabilities.......... $48,598 $100,399 $43,829 $ 6,970 $1,386 $201,182
Noninterest bearing
liabilities and
equity................ 40,982
--------
Total liabilities and
equity............... $242,164
========
RATE SENSITIVITY GAP.... $(1,270) $(19,261) $18,177 $17,179 $7,537 $ 22,362
Cumulative rate
sensitivity gap:
Amount................. (1,270) (20,531) (2,354) 14,825 22,362
As a percentage of
interest earning
assets................ (0.57)% (9.18)% (1.05)% 6.63%
======= ======== ======= =======
</TABLE>
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while interest rates on other types may lag behind
changes in market interest rates. Additionally, certain assets, such as
adjustable rate mortgages, have features which restrict changes in the
interest rates of such assets both on a short term basis and over the lives of
such assets. Further, in the event of a change in market interest rates,
prepayment and early withdrawal levels could deviate significantly from those
assumed in calculating the tables. Finally, the ability of many borrowers to
service their adjustable rate debt may decrease in the event of a substantial
increase in market interest rates.
33
<PAGE>
MARKET RISK DISCLOSURES ON FINANCIAL INSTRUMENTS
The table below provides information as of June 30, 1997 about the Bank's
financial instruments that are sensitive to changes in interest rates. The
table presents principal cash flows and related weighted average interest
rates by expected maturity dates. The data in this table may not be consistent
with the amounts in the preceding table which represents amounts by the
repricing date or maturity date (whichever occurs sooner) adjusted by
estimates such as mortgage prepayments and deposit decay or early withdrawal
rates.
<TABLE>
<CAPTION>
BY EXPECTED MATURITY DATE
------------------------------------------------------------------------
YEAR ENDED JUNE 30
------------------------------------------------------------------------
AFTER FAIR
1998 1999 2000 2001 2002 2002 TOTAL VALUE
-------- ------- ------ ------ ------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT SECURITIES
Amounts maturing:
Fixed rate............. $ 3,817 $ 4,689 $ -- $ -- $ -- $ -- $ 8,506 $ 8,498
Weighted average
interest rate......... 5.87% 5.83% 5.85%
MORTGAGE BACKED
SECURITIES
Amounts maturing:
Fixed rate............. $ -- $ -- $ -- $ 23 $ -- $ 5,101 $ 5,124 $ 5,343
Weighted average
interest rate......... 8.50% 8.30% 8.30%
Adjustable rate........ -- -- -- -- -- 35 35 37
Weighted average
interest rate......... 8.28% 5.85%
-------- ------- ------ ------ ------- -------- -------- --------
Totals................ $ -- $ -- $ -- $ 23 $ -- $ 5,136 $ 5,159 $ 5,380
8.50% 8.30% 8.30%
LOANS
Amounts maturing
Fixed rate............. $ 8,373 $ 1,910 $1,641 $ 930 $ 7,967 $ 86,982 $107,803 $ 98,896
Weighted average
interest rate......... 8.94% 8.93% 9.15% 9.31% 8.90% 8.59% 8.66%
Adjustable rate........ 29,351 5,908 1,001 2,704 3,913 57,513 100,390 110,948
Weighted average
interest rate......... 9.62% 9.05% 9.48% 9.67% 9.01% 8.69% 9.03%
-------- ------- ------ ------ ------- -------- -------- --------
Totals................ $ 37,724 $ 7,818 $2,642 $3,634 $11,880 $144,495 $208,193 $209,845
9.47% 9.02% 9.27% 9.57% 8.94% 8.63% 8.84%
CERTIFICATES OF DEPOSIT
Amounts maturing:
Fixed rate............. $113,806 $10,437 $2,299 $ 61 $ 69 $ 109 $126,781 $126,568
Weighted average
interest rate......... 5.46% 5.56% 5.75% 5.35% 5.14% 6.60% 5.47%
</TABLE>
IMPACT OF INFLATION AND CHANGING PRICES
The primary impact of inflation on the Bank's operations is increased
operating costs. Unlike most industrial companies, virtually all the assets
and liabilities of a financial institution are monetary in nature. As a
result, interest rates generally have a more significant impact on a financial
institution's performance than the effects of general levels of inflation.
Although interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services, increases in inflation
generally have resulted in increased interest rates.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Statements Board ("FASB") issued Statement of
Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS No. 128
establishes standards for computing and presenting earnings per share ("EPS")
and applies to entities with publicly-held common stock or potential common
stock. It replaces the presentation of primary EPS with a presentation of
basis EPS and requires the dual presentation of basic and diluted EPS on the
fact of the income statement. SFAS No. 128 is effective for the financial
statements for the periods ending after December 15, 1997. SFAS No. 128
requires restatement of all prior period EPS data presented. The impact of its
adoption is not expected to be material to the Company.
34
<PAGE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS 130 establishes standards for reporting comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
financial statements. This Statement requires that the Bank (a) classify items
of other comprehensive income by their nature in its financial statements and
(b) display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of
the statement of financial condition. This Statement is effective for the year
ending June 30, 1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information". SFAS 131 requires public companies to
report financial and descriptive information about its operating segments.
Operating segments are components of a business about which separate financial
information is available that is evaluated regularly by the chief operating
decision-maker in deciding how to allocate resources and in assessing
performance. The adoption of SFAS 131 is required for the fiscal year ended
June 30, 1999 and the Bank is currently evaluating the effect of this
Statement.
On January 28, 1997, the SEC amended their rules and regulations to require
public companies to provide enhanced descriptions of accounting policies for
derivative financial instruments and derivative commodity instruments in the
footnotes to their financial statements. The accounting policy requirement
became effective for all filings that include financial statements for periods
ending after June 15, 1997. The Bank had no derivative financial instruments
or derivative commodity instruments at June 30,1997 or at any time during the
three year period then ended. The Bank believes that it is in compliance with
this amended rule.
BUSINESS OF THE COMPANY
GENERAL
The Company was organized as a Washington business corporation at the
direction of the Board of Directors of the Bank in August 1997 for the purpose
of becoming a holding company for the Bank upon completion of the Conversion.
The Company has filed an application with the Federal Reserve Bank of San
Francisco to become a bank holding company and for approval to acquire the
Bank. Immediately following the Conversion, the only significant assets of the
Company will be the capital stock of the Bank, that portion of the net
proceeds of the Offerings to be retained by the Company and a note receivable
from the ESOP evidencing a loan from the Company to fund the Bank's ESOP. See
"Use of Proceeds." Management believes that the holding company structure and
proceeds of the Offerings may facilitate possible future acquisitions of other
financial institutions, such as commercial banks or savings institutions, or
branches of other financial institutions and thereby further expansion into
existing and new market areas. The holding company structure will also provide
increased flexibility to the Company to diversify into a variety of banking-
related activities and to repurchase its stock.
BUSINESS
Prior to the Conversion, the Company will not engage in any significant
operations. Upon completion of the Conversion, the Company's sole business
activity will be the ownership of the stock of the Bank. Following the
Conversion, the Company will be engaged in the business of directing, planning
and coordinating the business activities of the Bank. In the future, the
Company may acquire or organize other operating subsidiaries, including other
financial institutions, although there are no current plans, arrangements,
agreements or understandings, written or oral, to do so.
Initially, the Company will neither own nor lease any property but will
instead use the premises, equipment and furniture of the Bank with the payment
of appropriate rental fees in accordance with applicable laws and regulations.
Since the Company will only hold the capital stock of the Bank, the
competitive conditions applicable to the Company will be the same as those
confronting the Bank. See "Business of the Bank--Competition."
35
<PAGE>
BUSINESS OF THE BANK
GENERAL
The Bank is a state-chartered stock savings bank headquartered in Olympia,
Washington, the state capital of Washington. The Bank was originally chartered
in 1927 and since 1935 its savings accounts have been federally insured. At
June 30, 1997, the Bank had $242.2 million of total assets, $214.5 million of
total liabilities, including $209.8 million of deposits, and $27.7 million of
stockholders' equity. The Bank presently has ten full service offices in its
market areas of Thurston, Pierce and Mason Counties.
IMPLEMENTATION OF GROWTH STRATEGY
Geographic and Product Expansion. Since the end of fiscal 1994, the Bank has
doubled its number of offices, to ten full service locations. New branches
were opened in the West Olympia and Indian Summer areas of Thurston County in
fiscal 1995, and an office was opened in Lakewood, Pierce County, in fiscal
1996. In October 1996, an office was established in Tacoma, Pierce County, and
the tenth office was opened, in downtown Tacoma, in the Spring of 1997. During
the last four years, the Bank has constructed new buildings in Lacey, Thurston
County, and Shelton, Mason County, to replace existing branch buildings and to
better service customers in these markets. The Bank has installed Automated
Teller Machines at six of its offices.
Concurrent with geographic expansion, the Bank has (i) developed business
checking accounts and commercial lending products and other services for
businesses and high net worth individuals; (ii) introduced Visa(TM) debit and
credit cards; (iii) installed an automated voice response system for customer
account inquiries and (iv) developed products to assist realtors and potential
borrowers to obtain information about loan programs and qualifications. To
accommodate new products and to improve internal operating and reporting, the
Bank converted to a new data processing system with a data service bureau and
installed a personal computer network.
Loan Portfolio Diversification. Since initiating its expansion activities,
the Bank has supplemented its traditional mortgage loan products with an
increased emphasis on variable interest rate commercial loans. Total loans
increased to $208.2 million at June 30, 1997 from $130.4 million at June 30,
1993, commercial loans increased to $39.4 million, or 18.95% of total loans,
from $1.2 million, or 0.92% of total loans at June 30, 1993. One- to four-
family residential loans increased in amounts outstanding but decreased to
49.68% from 56.29% of total loans, and multi-family and commercial real estate
loans similarly increased in amounts outstanding while decreasing to 24.60%
from 30.97% of total loans during that period. Most of the loans categorized
by the Bank as commercial business loans are collateralized by real estate,
but repayment is expected from a source other than operations or sale of the
real estate. See "--Lending Activities."
Development of Relationship Banking. In fiscal 1994, the Bank initiated
efforts to develop a business banking department under the direction of a
senior officer with commercial banking experience in Thurston County. The new
department concentrated its efforts on development of expanded lending and
deposit relationships with existing and new customers of the Bank in Mason and
Thurston counties. In June 1996, the Bank hired a former south Puget Sound
Regional Manager for a large commercial bank as Senior Vice President--Loan
Administration. The management addition was made for the purpose of enhancing
the Bank's relationship banking capacity and to establish a commercial banking
presence in Pierce County. Since that time, the Bank has also hired six
additional lending officers who have experience lending to small businesses
and individuals in the Pierce County market. While the banking market is very
competitive, recent mergers of regional commercial banks with significant
presence in the Bank's principal market areas have, in management's view,
provided a greater opportunity for community banks to fill a personal service
niche which the Bank believes has been created by the mergers. Management
believes that the Bank can develop a larger market share in the Pierce County
market while continuing to expand in the Thurston and Mason County markets, by
delivering an efficient and personalized banking service and developing
relationships with small businesses and high net worth individuals who are
seeking a relationship with a responsive, service oriented provider of
financial products and services.
36
<PAGE>
Maintenance of Asset Quality. While pursuing its growth strategy, the Bank
will continue its policy of seeking to employ consistent underwriting and loan
monitoring procedures, in order to maintain asset quality. The Bank's loan
portfolio grew 59.6% between June 30, 1993 and June 30, 1997. Nonperforming
loans remained at less than $436,000 during the four year period, as did total
nonperforming assets. At June 30, 1997, nonperforming loans constituted 0.06%
of the Bank's total loans and the allowance for loan losses to nonperforming
loans was 2069.17%.
The Bank's main office is located at 201 5th Avenue S.W., Olympia,
Washington 98501 and its telephone number is (360) 943-1500.
MARKET AREAS
The Bank has been, and intends to continue to be, a community-oriented
financial institution offering financial services to meet the needs of the
communities it serves. Headquartered in Olympia, Thurston County, Washington,
the Bank conducts business from ten full service offices, five in Thurston
County, one in Mason County and four in Pierce County. The Bank has two
mortgage origination offices, one in Thurston and one in Pierce County, both
of which operate within banking offices.
Olympia enjoys a stable economic climate, largely due to government
employment and military personnel, both retired and active. State government
is by far the largest and most important employer in Thurston County,
employing over 40% of the total county work force. Federal, county, and
municipal government comprise nearly 50% of the county's employment base. Fort
Lewis and McChord Air Force Base are both located in the Bank's primary market
area.
Thurston County has a population of 197,600 as of April 1, 1997 and was one
of the fastest growing metropolitan counties in the state of Washington as
reported in the national 1990 census. Thurston County's growth has been
spurred by an increase in government employment in the 1980's and the
expansion of a large retirement population, including many former military
personnel.
Pierce County, where Tacoma is located, has a population of 674,300 as of
April 1, 1997. Its economy is well-diversified, with the principal industry
being aerospace, shipping, military-related government employment, agriculture
and forest products. Pierce County's economy is expected to benefit over the
next few years because of Intel Corporation's decision to build a computer
chip facility in DuPont and the expansion of the Matsushita semiconductor
plant in Puyallup, east of Tacoma. The Puget Sound Economic Forecaster, a
regional publication providing economic forecasts and commentary, predicts
that Pierce County will likely have the strongest economic performance in the
Puget Sound region through 1999. Forbes magazine recently published its
prediction that the Tacoma area would be among the top twenty-five cities in
the United States in terms of job growth, especially in the areas of computers
and semiconductors.
The Bank's market area also includes Shelton and the surrounding Mason
County area. The population of Mason County is approximately 47,900 and its
economy is substantially dependent upon timber and the forest products
industries.
LENDING ACTIVITIES
General. The Bank traditionally has originated one- to four-family mortgage
loans and, to a lesser extent, multifamily, commercial real estate and
construction loans. In fiscal 1994, the Bank implemented a growth strategy
which is intended to broaden its products and services from traditional thrift
products and services to those more closely related to commercial banking. In
this regard, in 1993, the Bank began to emphasize relationship banking, in
order to improve customer loyalty through maximizing the number of lending and
deposit relationships with a customer. The focus also included expanding the
Bank's commercial business lending capabilities. In early fiscal 1997, several
commercial loan officers, experienced in the Puget Sound region, were hired to
continue the expansion. The loan officers, in addition to bringing to the Bank
some previous
37
<PAGE>
customer relationships, have taken advantage of the opportunity to attract
customers of banks that have been acquired in the recent wave of mergers with
out-of-area acquirors. Such customers often perceive that non-local decision
makers do not provide the efficient, personal service they were used to
receiving. It is possible that the large out-of-area acquirors will begin to
better serve small business and professionals. Heritage Bank anticipates,
however, that it will, by then, have more fully developed its reputation as a
commercial lender. As the Bank pursues its strategy, management is continuing
to emphasize strong asset quality.
The Bank's overall lending operations are guided by loan policies which are
reviewed and approved annually by its Board of Directors, and which outline
the basic policies and procedures by which lending operations are conducted.
Generally, the policies address the types of loans, underwriting and
collateral requirements, terms, interest rate and yield considerations, and
compliance with laws and regulations. The Bank supplements its own supervision
of the loan underwriting and approval process with periodic but informal loan
audits by an experienced internal loan quality specialist, who reviews credit
quality, loan documentation and compliance with laws and regulations.
During the loan process, the Bank assesses both the borrower's ability to
repay the loan and the adequacy of the underlying collateral. Potential
residential borrowers complete an application which is submitted to a loan
officer of the Bank. As part of the loan application process, qualified
independent fee appraisers inspect and appraise the property which is offered
to secure the loan. The Bank also obtains information concerning the income,
financial condition, employment, and credit history of the applicant. The
Bank's loan officers and the loan underwriting department analyze the loan
application and the property to be used as collateral. Loans to be sold on the
secondary market are approved or denied based on guidelines established by
secondary market agencies such as the Federal National Mortgage Association
("FNMA"), the Federal Housing Authority (the "FHA") or the Veteran's
Administration (the "VA"). Loans to be placed in the portfolio are approved or
denied by a loan committee consisting of the loan officer and the Chief
Executive Officer. Loan requests for less than $1.5 million and where the
borrower's total bank liability is less than $1.5 million may be approved by
the Chief Executive Officer. Loan requests for over $1.5 million or any
request where the borrower's total bank liabilities exceeds $1.5 million must
be approved by the Chief Executive Officer and either the Board of Directors
or the Board Executive Committee.
38
<PAGE>
The following table sets forth at the dates indicated the Bank's loan
portfolio composition by type of loan. These balances are net of deferred loan
fees and prior to deduction for the allowance for loan losses.
<TABLE>
<CAPTION>
AT JUNE 30
----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---------------- ---------------- ---------------- ---------------- ----------------
% OF % OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL TOTAL
BALANCE LOANS BALANCE LOANS BALANCE LOANS BALANCE LOANS BALANCE LOANS
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial.............. $ 1,203 0.92% $ 4,902 3.80% $ 9,983 6.31% $ 18,269 10.82% $ 39,445 18.95%
Real estate mortgages
One- to four-family
residential(1)........ 73,431 56.29 70,019 54.25 90,985 57.52 93,157 55.15 103,439 49.68
Five or more family
residential and
commercial
properties............ 40,395 30.97 39,731 30.78 38,494 24.33 42,560 25.20 51,209 24.60
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total real estate
mortgages............. 113,826 87.26 109,750 85.03 129,479 81.85 135,717 80.35 154,648 74.28
Real estate construction
One- to four-family
residential........... 12,115 9.29 13,251 10.26 16,504 10.43 14,509 8.59 12,683 6.09
Five or more family
residential and
commercial
properties............ 2,970 2.28 -- -- 1,538 0.97 393 0.23 1,029 0.50
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total real estate
construction(2)....... 15,085 11.57 13,251 10.26 18,042 11.40 14,902 8.82 13,712 6.59
Consumer................ 997 0.76 1,934 1.50 1,812 1.15 1,105 0.65 1,467 0.70
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Gross loans............. $131,111 100.51% $129,837 100.59% $159,316 100.71% $169,993 100.64% $209,272 100.52%
Less deferred loan
fees................... (662) (0.51) (763) (0.59) (1,126) (0.71) (1,090) (0.64) (1,079) (0.52)
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total loans............. $130,449 100.00% $129,074 100.00% $158,190 100.00% $168,903 100.00% $208,193 100.00%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
- --------
(1) Includes loans held for sale of $7,435, $4,110, $5,944, $5,286 and $6,322,
respectively.
(2) Balances are net of undisbursed loan proceeds.
The following table presents at June 30, 1997, (i) the aggregate maturities
of loans in the named categories of the Bank's loan portfolio and (ii) the
aggregate amounts of fixed rate and variable or adjustable rate loans in the
named categories that mature after one year:
<TABLE>
<CAPTION>
MATURING
-------------------------------
WITHIN 1-5 AFTER
1 YEAR YEARS 5 YEARS TOTAL
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial.................................. $17,341 $ 8,791 $13,313 $39,445
Real estate construction.................... 10,718 2,364 630 13,712
------- ------- ------- -------
Total..................................... $28,059 $11,155 $13,943 $53,157
======= ======= ======= =======
Fixed rate loans............................ $ 6,444 $ 5,395 $11,839
Variable or adjustable rate loans........... 4,711 8,548 13,259
------- ------- -------
Total..................................... $11,155 $13,943 $25,098
======= ======= =======
</TABLE>
REAL ESTATE LENDING
One- to Four-Family Residential Real Estate Lending. The majority of
residential loans have been originated through the Bank and are secured by
one- to four-family residences located in the Bank's primary market area. The
Bank's underwriting standards require that one- to four-family portfolio loans
generally be owner-occupied and that loan amounts not exceed 80% (90% with
private mortgage insurance) of the current appraised value or cost, whichever
is lower, of the underlying collateral. Terms typically range from 15 to 30
years. The Bank offers both fixed-rate mortgages and adjustable rate mortgages
("ARMs"), with repricing based on a Treasury Bill or other index. The Bank's
ability to generate volume in ARMs however, is largely a function
39
<PAGE>
of consumer preference and the interest rate environment. The Bank's current
policy is not to make ARMs with discounted initial interest rates (i.e.,
"teasers"). The Bank generally sells all government guaranteed mortgages, most
other fixed rate mortgages and other ARM loans in the secondary market.
Multifamily and Commercial Real Estate Lending. The Bank has made, and
anticipates continuing to make, on a selective basis, multifamily and
commercial real estate loans in the Bank's primary market areas. Commercial
real estate loans are made for small shopping centers, warehouses and
professional offices, generally owner occupied. Cash flow coverage to debt
servicing requirements is generally 1.2 times or more. The Bank's underwriting
standards generally require that the loan-to-value ratio for multifamily and
commercial real estate loans not exceed 80% of appraised value or cost,
whichever is lower.
At June 30, 1997, the Bank had $51.2 million, or 24.6% of the Bank's total
loans receivable, secured by multifamily and commercial real estate loans
located primarily in the Bank's primary market area.
Multifamily and commercial real estate loans generally range in principal
balance from $1.0 million to $2.0 million. At June 30, 1997, the largest such
loan had an outstanding principal balance of $3.1 million and was secured by a
144 unit apartment complex located in the Bank's primary market area. At June
30, 1997, this loan was performing according to its terms.
Multifamily and commercial real estate mortgage lending affords the Bank an
opportunity to receive interest at rates higher than those generally available
from one- to four-family residential lending. However, loans secured by such
properties usually are greater in amount, more difficult to evaluate and
monitor and, therefore, involve a greater degree of risk than one- to four-
family residential mortgage loans. Because payments on loans secured by
multifamily and commercial real estate properties are often dependent on the
successful operation and management of the properties, repayment of such loans
may be affected by adverse conditions in the real estate market or the
economy. The Bank seeks to minimize these risks by strictly scrutinizing the
financial condition of the borrower, the quality of the collateral and the
management of the property securing the loan. The Bank also generally obtains
personal guarantees from financially capable borrowers based on a review of
personal financial statements.
Construction Loans. The Bank originates one- to four-family residential
construction loans for the construction of custom homes (where the home buyer
is the borrower) and provides financing to builders for the construction of
pre-sold homes and speculative residential construction. The Bank loans to
builders who have demonstrated a favorable record of performance and
profitable operations and who are building in markets that management
understands and in which it is comfortable with the economic conditions. The
Bank further endeavors to limit its construction lending risk through
adherence to strict underwriting procedures. Loans to one builder are
generally limited on a case-by-case basis with unsold home limits based on
builder strengths. Heritage Bank's underwriting standards require that the
loan-to-value ratio for pre-sold homes and speculative residential
construction not exceed 80% of appraised value or builder's cost less
overhead, whichever is less. Speculative construction and land development
loans are generally priced with a variable rate of interest using the prime
rate as the index. The Bank generally requires builders to have some tangible
form of equity in each construction project. That objective may be achieved by
restricting draws to less than the acquisition cost of land plus a percentage
of the builder's costs less overhead incurred to date, requiring that loan
fees be paid from outside funds, requiring the builder to place equity funds
in a construction loan account or by not reimbursing fees incurred by the
builder such as legal fees, architectural fees, and building permits. Also,
the Bank generally requires prompt and thorough documentation of all draw
requests and utilizes outside inspectors to inspect the project prior to
paying any draw requests from builders.
Construction lending affords the Bank the opportunity to achieve higher
interest rates and fees with shorter terms to maturity than does its single-
family permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated costs of the
project. The nature of these loans is such that they are generally more
difficult to evaluate and
40
<PAGE>
monitor. If the estimate of construction cost proves to be inaccurate, the
Bank may be required to advance funds beyond the amount originally committed
to permit completion of the project. If the estimate of value upon completion
proves to be inaccurate, the Bank may be confronted with a project whose value
is insufficient to assure full repayment. Projects may also be jeopardized by
disagreements between borrowers and builders and by the failure of builders to
pay subcontractors. Loans to builders to construct homes for which no
purchaser has been identified carry more risk because the payoff for the loan
depends on the builder's ability to sell the property prior to the time that
the construction loan is due.
The Bank has reduced its activity in residential construction lending with
originations of $16.3 million for fiscal 1997, $20.5 million in fiscal 1996
and $21.3 million for fiscal 1995. The reductions reflect changes in market
conditions rather than a decision to deemphasize residential construction
lending.
COMMERCIAL BUSINESS LENDING
The Bank offers commercial loans to sole proprietorships, partnerships and
corporations in real estate related industries and firms in the health care,
legal and other professions. The types of commercial loans offered are
business lines of credit which are secured by real estate or securities,
business term loans secured by real estate for either working capital or lot
acquisition, Small Business Association ("SBA") loans and unsecured business
loans. Unsecured credit is reserved for business customers with impeccable
character and demonstrated capability to repay. All unsecured loans in excess
of $150,000 require the approval of the Chief Executive Officer. All unsecured
loans in excess of $500,000 require approval of the Board of Directors.
Commercial business lending generally involves greater risk than residential
mortgage lending and involves risks that are different from those associated
with residential and commercial real estate lending. Real estate lending is
generally considered to be collateral based lending with loan amounts based on
predetermined loan to collateral values and liquidation of the underlying real
estate collateral is viewed as the primary source of repayment in the event of
borrower default. Although the Bank's commercial business loans are often
collateralized by real estate, the decision to grant a commercial business
loan depends primarily on the creditworthiness and cash flow of the borrower
(and any guarantors), while liquidation of collateral is a secondary source of
repayment.
Collateral for these loans is generally owner occupied business or
residential real estate. The Bank generally limits its exposure to any one
borrowing relationship to $1.5 million, though loan relationships up to $4.0
million have been approved.
CONSUMER LENDING
The Bank does not actively solicit consumer loans, which are offered
primarily as a convenience to existing customers. While these types of loans
are primarily secured by real estate, they also include savings and
certificate of deposit loans, vehicle and recreational vehicle loans, stock
secured loans and secured and unsecured lines of credit.
ORIGINATION AND SALES OF LOANS
The Bank originates real estate and other loans at each of the Bank's
offices with approximately two-thirds of the residential mortgage volumes
generated from its two loan origination offices. Walk-in customers and
referrals from real estate brokers are important sources of loan originations.
Consistent with the Bank's asset/liability management strategy, the Bank
sells a majority of its fixed rate and ARM residential mortgage loans into the
secondary market. Commitments to sell mortgage loans generally are made during
the period between the taking of the loan application and the closing of the
mortgage loan. The timing of making these sale commitments is dependent upon
the timing of the borrower's election to lock-in the mortgage interest rate
and fees prior to loan closing. Most of these sale commitments are made on a
"best
41
<PAGE>
efforts" basis whereby the Bank is only obligated to sell the mortgage if the
mortgage loan is approved and closed by the Bank.
When the Bank sells mortgage loans, it typically also sells the servicing of
the loans (i.e., collection of principal and interest payments). The Bank
serviced $23.3 million and $19.2 million in loans for others as of June 30,
1996 and 1997, respectively. The Bank received fee income of $75,000 during
fiscal 1997 for these servicing activities.
The following table presents summary information concerning the Bank's
origination and sale of residential mortgage loans and the gains achieved on
such activities.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1995 1996 1997
------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
One- to four-family residential mortgage loans:
Originated..................................... $93,564 $140,232 $104,145
Sold........................................... 63,261 119,544 87,003
Gains on sales of loans, net..................... $ 1,665 $ 3,049 $ 2,006
</TABLE>
The decrease in volume of originations of one- to four-family residential
mortgage loans in 1997 compared with 1996 was due to weakness in the
residential mortgage market and the loss of two key producers by the end of
fiscal 1996. The Bank has a minimal amount of purchased loans and loan
participations.
COMMITMENTS AND CONTINGENT LIABILITIES
In the ordinary course of business, the Bank enters into various types of
transactions that include commitments to extend credit that are not included
in the Consolidated Financial Statements. The Bank applies the same credit
standards to these commitments as it uses in all its lending activities and
has included these commitments in its lending risk evaluations. The Bank's
exposure to credit loss under commitments to extend credit is represented by
the amount of these commitments. At June 30, 1997, the Bank had outstanding
commitments to extend credit, including letters of credit, in the amount of
$17.8 million.
DELINQUENCIES AND NONPERFORMING ASSETS
Delinquency Procedures. When a borrower fails to make a required payment on
a loan, the Bank attempts to cause the delinquency to be cured by contacting
the borrower. In the case of loans other than commercial business loans, a
late notice is sent 15 days after the due date. If the delinquency is not
cured by the 30th day, a second notice is mailed and, if appropriate, the
borrower is contacted by telephone. Additional written and verbal contacts are
made with the borrower between 60 and 90 days after the due date.
In the event a real estate loan payment is past due for 45 days or more,
loan servicing personnel perform an in-depth review of the loan status, the
condition of the property, and the circumstances of the borrower. Based upon
the results of its review, the Bank may negotiate and accept a repayment
program with the borrower, accept a voluntary deed in lieu of foreclosure or,
when deemed necessary, initiate foreclosure proceedings. If foreclosed on,
real property is sold at a public sale and the Bank may bid on the property to
protect its interest. A decision as to whether and when to initiate
foreclosure proceedings is made by the loan committee and is based on such
factors as the amount of the outstanding loan in relation to the value of the
property securing the original indebtedness, the extent of the delinquency,
and the borrower's ability and willingness to cooperate in curing the
delinquency.
Real estate acquired by the Bank by deed in lieu of foreclosure or as a
result of foreclosure is classified as real estate owned ("REO") until it is
sold. When property is acquired, it is recorded at the lower of cost or
estimated fair value at the date of acquisition, not to exceed net realizable
value, and any write-down resulting therefrom is charged to the allowance for
loan losses. Upon acquisition, all costs incurred in maintaining the
42
<PAGE>
property are expensed. Costs relating to the development and improvement of
the property, however, are capitalized to the extent of the property's net
realizable value.
The Bank considers loans as in-substance foreclosed if the borrower has
little or no equity in the property based upon its estimated fair value, if
repayment can be expected only to come from operation or sale of the
collateral, and if the borrower has effectively abandoned control of the
collateral or has continued to retain control of the collateral but because of
the borrower's current financial status, it is doubtful that the borrower will
be able to repay the loan in the foreseeable future.
Delinquencies in the commercial business loan portfolio are handled on a
case-by-case basis. Generally, notices are sent and personal contact is made
with the borrower when the loan is 15 days past due. Loan officers are
responsible for collecting loans they originate or which are assigned to them.
Depending on the nature of the loan and the type of collateral securing the
loan, the Bank may negotiate and accept a modified payment program or take
such other actions as the circumstances warrant.
Classification of Assets. Federal regulations require that the Bank classify
its assets on a regular basis. In addition, in connection with examinations of
the Bank, the Division and FDIC examiners have authority to identify problem
assets and, if appropriate, require them to be classified. There are three
classifications for problem assets: Substandard, Doubtful, and Loss.
Substandard assets have one or more defined weaknesses and are characterized
by the distinct possibility that the Bank will sustain some loss if the
deficiencies are not corrected. Doubtful assets have the weaknesses of
Substandard assets, with the additional characteristics that the weaknesses
make collection or liquidation in full on the basis of currently existing
facts, conditions and values questionable, and there is a high possibility of
loss. An asset classified as Loss is considered uncollectible and of such
little value that continuance as an asset of the institution is not warranted.
Assets classified as Substandard or Doubtful require the institution to
establish prudent general allowances for loan losses. If an asset or portion
thereof is classified as Loss, the institution must charge off such amount. In
March 1997, the FDIC performed its most recent examination of the Bank and the
regulators' assessment of the Bank's classified assets is consistent with the
Bank's internal classifications.
Nonperforming Assets. Nonperforming assets consist of nonaccrual loans,
restructured loans and real estate owned. The following table sets forth at
the dates indicated information with respect to nonaccrual loans, restructured
loans and real estate owned of the Bank.
<TABLE>
<CAPTION>
AT JUNE 30,
-------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................. $ 97 $ 96 $ 96 $ 51 $ 133
Restructured loans............... -- -- -- -- --
------- ------- ------- ------- -------
Total nonperforming loans...... 97 96 96 51 133
Real estate owned................ 157 -- -- -- --
------- ------- ------- ------- -------
Total nonperforming assets..... $ 254 $ 96 $ 96 $ 51 $ 133
======= ======= ======= ======= =======
Accruing loans past due 90 days
or more......................... -- -- -- -- --
Potential problem loans.......... $ 3,662 $ 3,568 $ 3,718 $ 1,613 $ 68
Allowance for loan losses........ 1,658 1,705 1,720 1,873 2,752
Nonperforming loans to loans..... 0.07% 0.07% 0.06% 0.03% 0.06%
Allowance for loan losses to
loans........................... 1.27% 1.32% 1.09% 1.11% 1.32%
Allowance for loan losses to
nonperforming loans............. 1709.28% 1776.04% 1791.67% 3672.55% 2069.17%
Nonperforming assets to total
assets.......................... 0.14% 0.05% 0.05% 0.02% 0.05%
</TABLE>
Nonaccrual Loans. The Bank's financial statements are prepared on the
accrual basis of accounting, including the recognition of interest income on
its loan portfolio, unless a loan is placed on a nonaccrual basis. Loans are
placed on nonaccrual status when there are serious doubts about the
collectibility of principal or
43
<PAGE>
interest. The Bank's policy is to place a loan on nonaccrual status when the
loan becomes past due for 90 days or more. Amounts received on nonaccrual
loans generally are applied first to principal and then to interest only after
all principal has been collected.
At June 30, 1997, the Bank had $133,000 of nonaccrual loans which represents
one single family mortgage. Interest on nonaccrual loans foregone was
approximately $990 for the year ended June 30, 1997. There was no interest
foregone on nonaccrual loans in fiscal 1995 and 1996.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level considered adequate
by management to provide for reasonably foreseeable loan losses based on
management's assessment of various factors affecting the loan portfolio,
including a review of problem loans, business conditions and loss experience
and an overall evaluation of the quality of the underlying collateral, holding
and disposal costs and costs of capital. The allowance is increased by
provisions for loan losses charged to operations and reduced by loans charged
off, net of recoveries.
While management believes that it uses the best information available to
determine the allowance for loan losses, unforeseen market conditions could
result in adjustments to the allowance for loan losses, and net income could
be significantly affected, if circumstances differ substantially from the
assumptions used in determining the allowance.
The following table sets forth for the periods indicated information
regarding changes in the Bank's allowance for loan losses:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total loans outstanding at
end of period(1)........... $130,449 $129,074 $158,190 $168,903 $208,193
Average loans outstanding
during period.............. 125,829 123,800 144,266 161,501 184,617
Allowance balance at
beginning of period........ 2,511 1,658 1,705 1,720 1,873
Provision for loan losses... 926 -- -- -- (270)
Charge-offs:
Real estate(2)............ (1,866) -- -- -- --
Commercial................ -- -- -- -- (3)
Consumer.................. -- -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs....... (1,866) -- -- -- (3)
-------- -------- -------- -------- --------
Recoveries:
Real estate(2)............ 87 47 15 153 1,152
Commercial................ -- -- -- -- --
Consumer.................. -- -- -- -- --
-------- -------- -------- -------- --------
Total recoveries........ 87 47 15 153 1,152
-------- -------- -------- -------- --------
Net (charge-offs)
recoveries........... (1,779) 47 15 153 1,149
-------- -------- -------- -------- --------
Allowance balance at end of
period..................... $ 1,658 $ 1,705 $ 1,720 $ 1,873 $ 2,752
======== ======== ======== ======== ========
Ratio of net (charge-offs)
recoveries during period to
average loans outstanding.. (1.41)% 0.04% 0.01% 0.09% 0.62%
======== ======== ======== ======== ========
</TABLE>
- --------
(1) Includes loans held for sale.
(2) During this five year period, all of the charge-offs and recoveries shown
under the real estate category relate to real estate mortgages. None of
the above activity related to real estate construction loans.
44
<PAGE>
The following table shows the allocation of the allowance for loan losses
for the last five years. The allocation is based upon an evaluation of defined
loan problems, historical ratios of loan losses for the Bank and industry wide
and other factors which may affect future loan losses in the categories shown
below:
<TABLE>
<CAPTION>
AT JUNE 30
-------------------------------------------------------------------------------
1993 1994 1995 1996 1997
--------------- --------------- --------------- --------------- ---------------
% OF % OF % OF %OF % OF
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS(1) AMOUNT LOANS(1) AMOUNT LOANS(1) AMOUNT LOANS(1) AMOUNT LOANS(1)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE APPLICABLE TO:
Commercial.............. $ 34 0.9% $ 144 3.8% $ 200 6.3% $ 446 10.8% $1,094 18.8%
Real estate mortgages:
One- to four-family
residential........... 100 56.0 92 53.9 115 57.1 110 54.8 128 49.4
Five or more family
residential and
commercial
properties............ 1,190 30.8 1,120 30.6 1,136 24.2 959 25.0 748 24.5
Real estate
construction:
One- to four-family
residential........... 175 9.2 248 10.2 182 10.4 239 8.5 197 6.1
Five or more family
residential and
commercial
properties............ 89 2.3 -- 0.0 29 0.9 12 0.2 31 0.5
Consumer................ 6 0.8 13 1.5 10 1.1 3 0.7 7 0.7
Unallocated............. 64 88 48 103 546
------ ------ ------ ------ ------
Total.................. $1,658 100.0% $1,705 100.0% $1,720 100.0% $1,873 100.0% $2,752 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
- --------
(1) Represents the total of all outstanding loans in each category as a
percent of total loans outstanding.
INVESTMENT ACTIVITIES
Investment securities are those securities which the Bank has the ability to
hold to maturity and the intent to hold on a long-term basis or until
maturity. Events which may be reasonably anticipated are considered when
determining the Bank's intent to hold investment securities for the
foreseeable future. Investment securities are carried at cost, adjusted for
amortization of premiums and accretion of discounts. At June 30, 1997, the
Bank had no securities classified as available for sale or trading.
The investment policy of the Bank, which is established by the Board of
Directors and monitored by the Audit and Finance Committee, is designed
primarily to provide and maintain liquidity, to generate a favorable return on
investments without incurring undue interest rate and credit risk, and to
complement the Bank's lending activities. This policy dictates that
investments will be made with the intent of holding them to maturity. The
Bank's policy permits investment in various types of liquid assets permissible
under applicable regulations, which include U.S. Treasury obligations, U.S.
Government agency obligations, certain certificates of deposit of insured
banks, FHLB stock and federal funds. Investment in non-investment grade bonds
is not permitted under this policy.
45
<PAGE>
The following table summarizes the amortized cost, gross unrealized gains
and losses and the resulting fair value of securities held for investment:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
June 30, 1995:
U.S. Government and its agencies...... $18,094 $ 24 $ (70) $18,048
Mortgage backed securities............ 7,465 314 (5) 7,774
------- ---- ----- -------
Total held for investment........... 25,559 338 (75) 25,822
June 30, 1996:
U.S. Government and its agencies...... 15,292 5 (127) 15,170
Mortgage backed securities............ 5,979 159 (2) 6,136
------- ---- ----- -------
Total held for investment........... 21,271 164 (129) 21,306
June 30, 1997:
U.S. Government and its agencies...... 8,506 9 (17) 8,498
Mortgage backed securities............ 5,159 224 (3) 5,380
------- ---- ----- -------
Total held for investment........... $13,665 $233 $ (20) $13,878
======= ==== ===== =======
</TABLE>
For the above indicated dates, the Bank had no securities available for sale
or trading.
The following table sets forth certain information regarding the carrying
value, weighted average yields and maturities or periods to repricing of the
Bank's investment securities and mortgage backed securities at June 30, 1997.
<TABLE>
<CAPTION>
US GOVERNMENT AND ITS MORTGAGE BACKED
AGENCIES SECURITIES TOTAL
---------------------- ---------------------- -----------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE YIELD COST VALUE YIELD COST VALUE YIELD
--------- ------ ----- --------- ------ ----- --------- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Less than one year...... $3,817 $3,820 5.87% $ 35 $ 37 8.28% $ 3,851 $ 3,857 5.90%
One to five years....... 4,689 4,678 5.83 23 24 8.50 4,712 4,702 5.84
Five to ten years....... -- -- -- 207 209 7.92 207 209 7.92
After ten years......... -- -- -- 4,894 5,110 8.32 4,894 5,110 8.32
------ ------ ------ ------ ------- -------
Total................. $8,506 $8,498 $5,159 $5,380 $13,665 $13,878
====== ====== ====== ====== ======= =======
</TABLE>
The Bank held $1.5 million of FHLB stock at June 30, 1997. The stock has no
contractual maturity and amounts in excess of the required minimum for FHLB
membership may be redeemed at par. At June 30, 1997, the Bank was required to
maintain an investment in the stock of FHLB of Seattle of at least $1.4
million.
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
General. The Bank's primary sources of funds are customer deposits and loan
repayments. Scheduled loan repayments are a relatively stable source of funds,
while deposit inflows and outflows and unscheduled loan prepayments, which are
influenced significantly by general interest rate levels, interest rates
available on other investments, competition, economic condition and other
factors, are not. Although the Bank's deposit balances have been increasing,
such balances have been influenced in the past by adverse changes in the
thrift industry and may be affected by such developments in the future.
Borrowings may be used on a short term basis to compensate for reductions in
other sources of funds (such as deposit inflows at less than projected
levels). Borrowings may also be used on a longer term basis to support
expanded lending activities and to match the maturity or repricing intervals
of assets.
46
<PAGE>
Deposit Activities. The Bank offers a variety of accounts for depositors
designed to attract both short term and long term deposits. These accounts
include certificates of deposit ("CDs"), regular savings accounts, money
market accounts, checking and negotiable order of withdrawal ("NOW") accounts,
and individual retirement accounts ("IRAs"). These accounts generally earn
interest at rates established by management based on competitive market
factors and management's desire to increase or decrease certain types or
maturities of deposits. At June 30, 1997, the Bank had no brokered deposits.
The more significant deposit accounts offered by Heritage Bank are described
below.
CERTIFICATES OF DEPOSIT. The Bank offers several types of CDs with
maturities ranging from 30 days to five years and which require a minimum
deposit of $100. In addition, the Bank offers a CD that has a maturity of
four to 11 months and a minimum deposit of $2,500 and permits additional
deposits at the initial rate throughout the certificate term. Interest is
credited quarterly or at maturity. Finally, jumbo CDs are offered in
amounts of $100,000 or more for terms of 30 days to 12 months. The jumbo
CDs pay simple interest and are credited either quarterly or at maturity.
REGULAR SAVINGS ACCOUNTS. The Bank offers savings accounts that allow for
unlimited deposits and withdrawals, provided that a $100 minimum balance is
maintained. Interest is compounded daily and credited quarterly.
MONEY MARKET ACCOUNTS. Money market accounts pay a variable interest rate
that is tiered depending on the balance maintained in the account. Minimum
opening balances vary. Interest is compounded daily and paid monthly.
CHECKING AND NOW ACCOUNTS. Checking and NOW accounts are non-interest and
interest bearing and may be charged service fees based on activity and
balances. NOW accounts pay interest, but require a higher minimum balance
to avoid services charges.
INDIVIDUAL RETIREMENT ACCOUNTS. IRAs permit contributions of up to $2,000
per year and pay interest at fixed rates. Maturities are available from one
to five years and interest is compounded daily and credited quarterly.
SOURCES OF FUNDS
Deposit Activities. The following table sets forth for the periods indicated
the average balances outstanding and the weighted average interest rates for
each major category of deposits:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------------ ------------------ ------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
AVERAGE RATE AVERAGE RATE AVERAGE RATE AVERAGE RATE AVERAGE RATE
BALANCE(1) PAID BALANCE(1) PAID BALANCE(1) PAID BALANCE(1) PAID BALANCE(1) PAID
---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest bearing demand
and money market
Accounts............... $ 27,018 3.26% $ 34,932 2.99% $ 40,594 3.19% $ 36,930 3.15% $ 42,271 3.18%
Savings................. 27,283 3.63 31,520 3.26 28,178 3.29 28,407 3.63 29,703 3.55
Certificates of
deposit................ 95,622 5.32 88,904 4.68 89,602 4.93 109,559 5.78 119,133 5.54
Total interest bearing
deposits.............. 149,923 4.64 155,355 4.02 158,374 4.19 174,895 4.88 191,107 4.71
Demand and other
noninterest bearing
deposits............... 4,256 6,183 6,001 6,537 7,955
-------- -------- -------- -------- --------
Total deposits......... $154,179 4.51% $161,538 3.86% $164,375 4.04% $181,432 4.70% $199,063 4.52%
======== ======== ======== ======== ========
</TABLE>
- --------
(1) Average balances were calculated using average daily balances.
47
<PAGE>
The following table sets forth for the periods indicated the change in the
balances of deposits during the year and the impact of interest credited
thereon.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net increase in deposits........................ $ 8,875 $16,322 $18,662
Less: Interest credited....................... (6,639) (8,528) (8,999)
------- ------- -------
Net increase before interest credited........... $ 2,236 $ 7,794 $ 9,663
======= ======= =======
</TABLE>
The following table shows the amount and maturity of certificates of deposit
that had balance of $100,000 or more as of June 30, 1997:
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------
(IN THOUSANDS)
<S> <C>
Remaining maturity:
Three months or less...................................... $ 8,330
Over three months through six months...................... 1,670
Over six months through 12 months......................... 6,234
Over twelve months........................................ 1,748
-------
Total................................................... $17,982
=======
</TABLE>
At June 30, 1996 and 1997 certificates of deposits with balances of $100,000
or more totaled $11.7 million and $18.0 million, respectively.
In the unlikely event the Bank is liquidated after the Conversion,
depositors will be entitled to full payment of their deposit accounts prior to
any payment being made to the Company's stockholders. Substantially all of the
Bank's depositors are residents of the State of Washington.
Borrowings. Savings deposits are the primary source of funds for the Bank's
lending and investment activities and for its general business purposes. The
Bank has in the past, however, relied upon advances from the FHLB of Seattle
to supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The FHLB of Seattle has served as one of the Bank's secondary
sources of liquidity. Advances from the FHLB of Seattle are typically secured
by the Bank's first mortgage loans, and stock issued by the FHLB of Seattle,
which is held by the Bank. At June 30, 1997, the Bank had advances from the
FHLB of Seattle totaling $890,000.
The FHLB functions as a central reserve bank providing credit for savings
and loan associations and certain other member financial institutions. As a
member, the Bank is required to own capital stock in the FHLB and is
authorized to apply for advances on the security of such stock and certain of
its mortgage loans and other assets (principally securities which are
obligations of, or guaranteed by, the United States) provided certain
standards related to creditworthiness have been met. Advances are made
pursuant to several different programs. Each credit program has its own
interest rate and range of maturities. Depending on the program, limitations
on the amount of advances are based either on a fixed percentage of an
institution's net worth or on the FHLB's assessment of the institution's
creditworthiness. Under its current credit policies, the FHLB of Seattle
generally limits advances to 20.0% of a member's assets, and short term
borrowings of less than one year may not exceed 10.0% of the institution's
assets. The FHLB of Seattle determines specific lines of credit for each
member institution.
In August 1986, Heritage Capital Corporation ("HCC"), a special purpose
wholly owned finance subsidiary, issued and sold $21.9 million aggregate
principal amount of collateralized mortgage obligations. These bonds,
including interest, were repaid in quarterly installments from principal and
interest payments on the underlying collateral. In August 1995, HCC called and
repaid the then remaining unpaid balance of the bonds in accordance with the
terms of the indenture. HCC was then liquidated.
48
<PAGE>
COMPETITION
The Bank competes for loans and deposits with other thrifts, commercial
banks, credit unions, mortgage bankers and other institutions in the scope and
type of services offered, interest rates paid on deposits, pricing of loans,
and number and locations of branches, among other things. Many of these
competitors have substantially greater resources than the Bank. Particularly
in times of high interest rates, the Bank also faces significant competition
for investors' funds from short term money market securities and other
corporate and government securities.
The Bank competes for loans principally through the range and quality of the
services it provides, interest rates and loan fees, and the locations of its
branches. The Bank actively solicits deposit-related clients and competes for
deposits by offering depositors a variety of savings accounts, checking
accounts and other services.
Competition has intensified as a result of changes in Washington banking
laws that permit (i) statewide branching of Washington-domiciled financial
institutions and (ii) out-of-state holding companies to acquire Washington-
based financial institutions, provided that the laws of the state in which the
out-of-state institutions conduct their principal operations similarly permit
a Washington-based institution to acquire financial institutions domiciled in
their state. During the past several years, substantial consolidation among
financial institutions in Washington has occurred. Management believes that
due to this consolidation, customers in the Bank's market areas will seek a
relationship with smaller, service-oriented institutions like the Bank.
PROPERTIES
The Company's executive offices and the main office of the Bank are located
in approximately 18,000 square feet of the headquarters building and adjacent
office space which is owned and located in downtown Olympia. At June 30, 1997,
the Bank had five offices located in Thurston County, including the main
office, all of which are owned, with one office located on leased land, one
office in Shelton, Mason County, which is owned, and four offices in Tacoma
and surrounding areas of Pierce County, all but one of which is owned.
EMPLOYEES
At June 30, 1997, the Bank had 145 full-time equivalent employees. The Bank
believes that employees play a vital role in the success of a service company.
None of the Bank's employees are covered by a collective bargaining agreement
with the Bank and management believes that they have a good relationship with
the employees.
SUBSIDIARIES
At June 30, 1997, the Bank has one wholly-owned subsidiary, Sound Service
Associates, Inc. Sound Service Associates, Inc.'s operations consist of the
sale of tax-deferred annuities, mutual funds and other securities.
LEGAL PROCEEDINGS
Periodically and in the ordinary course of business, various claims and
lawsuits are brought against the Bank, such as claims to enforce liens,
condemnation proceedings on properties in which the Bank holds security
interest, claims involving the making and servicing of real property loans and
other issues incident to the Bank's business. In the opinion of the Bank's
management and outside legal counsel, the ultimate liability, if any,
resulting from such claims or lawsuits will not have a material adverse effect
on the financial position or results of operations of the Bank.
FEDERAL TAXATION
General. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax
rules applicable to the Bank.
49
<PAGE>
The Bank has been permitted under the Internal Revenue Code to deduct an
annual addition to a reserve for bad debts in determining taxable income,
subject to certain limitations. The deduction was based on either specified
experience formulas or a percentage of taxable income before such deduction.
The Bank used the percentage of taxable income method for the years ended June
30, 1995 and 1996. This deduction has historically been greater than the loan
loss provisions recorded for financial accounting purposes. Deferred income
taxes are provided on differences between the bad debt reserve for tax and
financial reporting purposes only to the extent of the tax reserves arising
subsequent to June 30, 1988. Savings institutions were not required to provide
a deferred tax liability for the tax bad debt reserves accumulated as of June
30, 1988 which for the Bank amounted to $938,000. Starting in the fiscal year
ended June 30, 1994, the Bank established and maintained a deferred income tax
liability of $938,000 due to the potential recapture of the pre-1988 tax bad
debt reserve which could have been triggered by the formation of the mutual
holding company; a change to a commercial bank charter (which management had
been contemplating); or possible legislation which was being debated in
Congress.
Legislation enacted in August 1996 eliminated certain conditions under which
recapture of the pre-1988 additions to the tax bad debt reserve would be
required. Such conditions are principally conversion to a commercial bank
charter or merger with a commercial bank. The pre-1988 reserves would be
required to be recaptured under certain other conditions such as payment of
dividends in excess of accumulated earnings and profits or other distributions
made in connection with the dissolution or liquidation of the Bank. Based on
this legislation, the Bank reversed the $938,000 deferred tax liability as a
reduction of Federal income tax expense during the year ended June 30, 1997.
The legislation also repealed the reserve method for determining income tax
deductions described above. Under the legislation, the Bank will be required
to recapture the post-1988 additions to its bad debt reserve as taxable income
over a six to eight year period. The Bank has provided the appropriate
deferred tax liability for these post-1988 additions in the prior years so
this legislation had no adverse impact on the results of operations for the
year ended June 30, 1997.
STATE TAXATION
The State of Washington does not currently have a net income tax. A business
and occupation tax based on a percentage of gross receipts is assessed on the
Bank at 1.6% of gross receipts; however interest received on loans secured by
first mortgages or deeds of trust on residential properties is not subject to
such tax. The Bank was most recently audited in August 1995 by the Washington
State Department of Revenue for the period January 1991 through September
1994.
50
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers of the Bank. The Board is presently comprised
of seven members who are elected annually and until their successors are
elected and qualified. Executive officers are elected to serve annually at the
discretion of the Board of Directors. All persons listed below are expected to
serve as the directors and executive officers of the Company and the Bank
following the Conversion.
DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH BANK SINCE
- ---- --- ------------------ --------
<S> <C> <C> <C>
Donald V. Rhodes......... 61 Director, Chairman of the Board and 1989
Chief Executive Officer of the Company;
Chairman of the Board and President of
the Bank (1)(2)
Lynn M. Brunton.......... 59 Director (1)(2)(3) 1990
John A. Clees............ 49 Director (1)(2)(3) 1990
Daryl D. Jensen.......... 58 Director (1)(3) 1985
H. Edward Odegard........ 66 Director (2) 1987
James P. Senna........... 62 Director 1976
Philip S. Weigand........ 59 Director (1)(2) 1985
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<CAPTION>
NAME AGE POSITION WITH BANK
- ---- --- ------------------
<S> <C> <C> <C>
John D. Parry............ 51 Executive Vice President--Administration
Brian L. Vance........... 43 Executive Vice President--Loan
Administration
James Hastings........... 45 Senior Vice President and Treasurer
Wendy K. Gauksheim....... 37 Senior Vice President--Corporate
Services Officer and Corporate Secretary
of the Bank
</TABLE>
- --------
(1) Serves as a member of the Executive Committee.
(2) Serves as a member of the Audit and Finance Committee.
(3) Serves as a member of the Personnel and Compensation Committee.
The principal occupation during the past five years of each director and
executive officer of the Bank is set forth below. All directors and executive
officers have held their present positions with Heritage Bank for five years
unless otherwise stated.
DONALD V. RHODES has been a director, President and Chief Executive Officer
of the Bank since 1989. He was elected as Chairman of the Board in 1990. Since
1985, Mr. Rhodes has also served as Chairman, President and Chief Executive
Officer of Washington Independent Bancshares, Inc., and as Chairman and Chief
Executive Officer of that company's wholly owned subsidiary, Central Valley
Bank, at June 30, 1997 a $48.6 million in assets commercial bank headquartered
in Toppenish, Washington.
LYNN M. BRUNTON is presently a community volunteer. As a community volunteer
she serves as a member of the St. Peter Hospital Community Board and is
actively involved in several local and community organizations.
JOHN A. CLEES is the President of Clees Miles CPA Group, since October 1995
and was managing partner of Gattis, Clees and Company, an accounting firm
located in Olympia, Washington prior to that time.
DARYL D. JENSEN is the President and a director of Sunset Life Insurance
Company of America, and serves as a director of its parent company, Kansas
City Life Insurance Company.
51
<PAGE>
H. EDWARD ODEGARD is recently retired. Mr. Odegard was the co-owner and
manager of The Valley Athletic Club, Tumwater, Washington, from 1974 to 1993.
JAMES P. SENNA is the President and Chief Executive Officer of Shee Atika,
Incorporated, Sitka, Alaska.
PHILIP S. WEIGAND is a retired Lieutenant Colonel after 20 years of service
with the U.S. Marine Corps and is currently a real estate agent with Virgil
Adams Real Estate, located in Olympia, Washington.
JOHN D. PARRY has been employed by Heritage Bank since 1994, currently
serving as Executive Vice President--Administration. Prior to joining the
Bank, Mr. Parry was Senior Vice President in charge of Washington banking
operations of the Washington Division, Great American First Savings Bank, a
California headquartered thrift institution.
BRIAN L. VANCE has been employed by Heritage Bank since 1996, currently
serving as Executive Vice President--Loan Administration. Prior to joining the
Bank, Mr. Vance was employed for over 20 years with West One Bank, in both
Idaho and Washington. Prior to leaving West One, he was Senior Vice President
and Regional Manager of banking operations for the South Puget Sound Region.
JAMES HASTINGS has been employed by Heritage Bank since 1985, currently
serving as Senior Vice President and Treasurer. Mr. Hastings is a Certified
Public Accountant with over 20 years of banking and thrift experience either
in public accounting or with financial institutions.
WENDY K. GAUKSHEIM has been employed by Heritage Bank since 1987, currently
serving as Senior Vice President--Corporate Services Officer.
52
<PAGE>
BENEFICIAL OWNERSHIP OF BANK COMMON STOCK
The following table sets forth, as of June 30, 1997, certain information as
to the beneficial ownership of Bank Common Stock by: (i) persons known by the
Bank to beneficially own more than 5% of the outstanding shares of Common
Stock, except for MHC; (ii) the directors of the Bank; (iii) the executive
officers of the Bank; and (iv) by all officers and directors as a group. For
purposes of this table, an individual is considered to beneficially own shares
of Bank Common Stock if he or she has or shares voting power (which includes
the power to vote or direct the voting of the shares) or investment power
(which includes the power to dispose of or direct the disposition of the
shares). Unless otherwise indicated, all shares are owned directly by the
officers and directors or by the officers and directors indirectly through a
trust, corporation or association, or by the officers and directors or their
spouses as custodians or trustees for the shares of minor children. Shares
which are subject to stock options that are exercisable within 60 days of June
30, 1997 are deemed to be beneficially owned. For information regarding
proposed purchases of Conversion Stock by the directors and officers and their
anticipated ownership of Common Stock upon consummation of the Conversion, see
"Conversion Stock to be Purchased by Management Pursuant to Subscription
Rights."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AT JUNE 30, 1997
------------------------------
PERCENT OF OUTSTANDING
NAME NUMBER BANK COMMON STOCK
---- ------- ----------------------
<S> <C> <C>
Donald V. Rhodes (1)........................ 37,780 2.1%
Lynn M. Brunton (2)......................... 17,000 0.9
John A. Clees (3)........................... 14,000 0.8
Daryl D. Jensen (4)......................... 20,000 1.1
H. Edward Odegard (5)....................... 17,000 0.9
James P. Senna (6).......................... 12,000 0.7
Philip S. Weigand (7)....................... 19,142 1.1
John D. Parry (8)........................... 8,200 0.5
Brian L. Vance (9).......................... 3,666 0.2
James Hastings (10)......................... 6,100 0.3
Wendy K. Gauksheim.......................... 4,215 0.2
------- ---
All officers and directors as a group (11
persons)................................... 159,103 8.8%
======= ===
</TABLE>
- --------
(1) Includes 10,000 shares of Bank Common Stock which may be received upon
the exercise of stock options that are exercisable within 60 days of June
30, 1997.
(2) Includes 2,000 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(3) Includes 2,000 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(4) Includes 2,000 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(5) Includes 2,000 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(6) Includes 2,000 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(7) Includes 1,550 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(8) Includes 5,000 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(9) Includes 1,666 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
(10) Includes 5,000 shares of Bank Common Stock which may be received upon the
exercise of stock options that are exercisable within 60 days of June 30,
1997.
53
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Bank is conducted through meetings and activities of the
Board of Directors and its committees. During the fiscal year ended June 30,
1997, the Board of Directors held 12 meetings, including one special meeting.
No director attended fewer than 75% of the total meetings of the Board of
Directors or of committees on which such director served.
The Executive Committee of the Board of Directors consists of Donald V.
Rhodes, Chairman of the Board, and directors Jensen, Weigand, Clees and
Brunton. The Executive Committee did not meet during the fiscal year ended
June 30, 1997. The Executive Committee meets as necessary between meetings of
the full Board of Directors.
The Audit and Finance Committee, consists of John Clees, who acts as
Chairman, and directors Rhodes, Weigand, Odegard and Brunton. Mr. Rhodes will
no longer participate as a member of the Audit and Finance Committee
subsequent to completion of the Conversion. The Audit and Finance Committee
met four times during the fiscal year ended June 30, 1997. The Bank's
management and external auditors provide the Committee with reports and
findings regarding compliance policies and procedures, internal controls, and
operating procedures.
The other standing committee of the Board is the Personnel and Compensation
Committee. The Committee consists of Daryl Jensen, who acts as Chairman, and
directors Brunton and Clees. The Committee met three times during the fiscal
year ended June 30, 1997.
In addition to the committees described above, the Bank has from time to
time established other committees whose members consist of its directors and
officers. These committees include the Strategic Planning Committee, the
Donations Committee, and the Community Reinvestment Act Committee.
DIRECTORS' COMPENSATION
Directors receive an annual retainer of $6,000 and a monthly fee of $500 for
each meeting attended. Directors also received $100 for each committee meeting
attended with the Chairman of the Committee receiving $150.
54
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following information is furnished for the
Chief Executive Officer of the Bank and for the executive officers of the Bank
who received salary and bonus in excess of $100,000 for the year ended June
30, 1997. No other executive officers of the Bank received salary and bonus in
excess of $100,000 during the year ended June 30, 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------- -------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS AWARDS ($)(1) OPTIONS (#) COMPENSATION(2)
- ------------------ ---- -------- ------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald V. Rhodes,....... 1997 $148,906 $ 10,000 $16,350
Chairman, President and 1996 135,385 64,350 -- 15,026
Chief Executive Officer 1995 135,560 47,190 $50,000 -- 13,200
John D. Parry,.......... 1997 95,621 5,000 13,686
Executive Vice 1996 90,406 28,803 -- 11,634
President-- 1995 85,195 23,459 5,000 --
Administration
Brian L. Vance,......... 1997 91,004 5,000 --
Executive Vice 1996 -- -- 5,000 --
President--Loan
Administration
James Hastings,......... 1997 87,984 1,500 10,184
Senior Vice President 1996 87,684 27,070 -- 7,883
and Treasurer 1995 84,916 21,356 -- 7,316
</TABLE>
- --------
(1) At June 30, 1997, the value of the aggregate restricted stock holdings
outstanding was estimated at $90,000. Dividends are paid on the
outstanding shares of restricted stock.
(2) Includes the Bank's contribution to its defined contribution retirement
plan and existing ESOP and 401(k) for Messrs. Rhodes, Parry, Vance and
Hastings, respectively.
BENEFITS
General. Following three months of employment, the Bank provides medical,
dental, life and disability insurance benefits for full-time employees,
subject to certain deductibles and copayments. Dependent medical and dental
coverage are available at the employee's expense.
Pension Plan. The Bank maintains a defined contribution retirement plan. The
plan allows participation to all employees upon completion of one year of
service and the attainment of 21 years of age. It is the Bank's policy to fund
plan costs as accrued. Employee vesting occurs over a period of seven years,
at which time they become fully vested. The Bank accrued a contribution in the
amount of $246,000 to the pension plan in fiscal 1997.
401(k) Plan. The Bank maintains a salary savings 401(k) plan for its
employees. All persons employed as of July 1, 1984 automatically participate
in the plan. All employees hired after that date who are at least 21 years of
age and with one year of service to the Bank may participate in the plan.
Employees who participate may contribute a portion of their salary which is
matched by the employer at 50% up to certain specified limits. Employee
vesting in employer portions is similar to the retirement plan described
above.
Employee Stock Ownership Plan. The Board of Directors has authorized the
amendment of the Bank's existing ESOP for employees of the Bank to become
effective upon the completion of the Conversion. The ESOP is intended to
satisfy the requirements for an employee stock ownership plan under the Code
and the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Common Stock owned by the existing ESOP are Minority Shares that will be
converted into Exchange Shares on the Effective Time of the Conversion. Full-
time employees of the Company and the Bank who have been credited with at
least 1,000 hours of service
55
<PAGE>
during a 12-month period and who have attained age 21 are eligible to
participate in the ESOP. The ESOP owned 21,763 shares of Bank Common Stock at
June 30, 1997. There was no debt incurred in connection with the acquisition
of those shares.
In order to fund the purchase of up to 8% of the Conversion Stock to be
issued in the Offerings, it is anticipated that the ESOP will borrow funds
from the Company. Such loan will equal 100% of the aggregate purchase price of
the Conversion Stock. The loan to the ESOP will be repaid principally from the
Bank's contributions to the ESOP and dividends payable on Common Stock held by
the ESOP over the fifteen-year term of the loan. The interest rate for the
ESOP loan is expected to be the prime rate as published in The Wall Street
Journal on the closing date of the Conversion. See "Pro Forma Data." In the
event of oversubscription by Eligible Account Holders, the Company may issue
shares of Common Stock to the ESOP at the Purchase Price immediately following
the Offerings to satisfy the ESOP's order to purchase 8% of Conversion Stock
in the Offerings and/or the ESOP may purchase shares of Common Stock in the
open market. Purchases of additional shares of Common Stock from the Company
would dilute the interests of other stockholders. In any plan year, the Bank
may make additional discretionary contributions to the ESOP for the benefit of
plan participants in either cash or shares of Common Stock, which may be
acquired through the purchase of outstanding shares in the market or from
individual stockholders or which constitute authorized but unissued shares or
shares held in treasury by the Company. The timing, amount, and manner of such
discretionary contributions will be affected by several factors, including
applicable regulatory policies, the requirements of applicable laws and
regulations, and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held in a
suspense account and released on a pro rata basis as the loan is repaid.
Discretionary contributions to the ESOP and shares released from the suspense
account will be allocated among participants on the basis of each
participant's proportional share of total compensation. Forfeitures will be
reallocated among the remaining plan participants and may reduce the amount of
the Bank's contributions. Benefits may be payable upon a participant's
retirement, early retirement, death, disability, or termination of employment.
The Bank's contributions to the ESOP are not fixed so benefits payable under
the ESOP cannot be estimated.
A committee appointed by the Board of Directors of the Bank serves as
trustee of the ESOP. Under the ESOP, the trustee must vote all allocated
shares held in the ESOP in accordance with the instructions of plan
participants. Unallocated shares and allocated shares for which no
instructions are received must be voted in the same ratio on any matter as
those shares for which instructions are given. The ESOP is subject to the
requirements of ERISA and the regulations of the IRS and the Department of
Labor issued thereunder.
Pursuant to SOP 93-6, Employers' Accounting for Employee Stock Ownership
Plans, this statement changes the measure of compensation expense recorded by
an employer for a leveraged ESOP from the historical cost of the ESOP shares
to the fair market value of the ESOP shares when allocated to participants'
accounts. See "Pro Forma Data" for a discussion of the effects of SOP 93-6 on
the reporting of ESOP-related compensation expense.
If the ESOP purchases unissued shares from the Company, total stockholders'
equity would neither increase nor decrease. However, on a per share basis,
stockholders' equity and net earnings would decrease because of the increase
in the number of outstanding shares.
Existing Stock Option Plans. In September 1994, the Bank's stockholders
approved the adoption of the 1994 Stock Option Plan, providing for the award
of a restricted stock award to a key officer, incentive stock options to
employees and nonqualified stock options to directors of the Bank at the
discretion of the Board of Directors. On September 24, 1996, the stockholders
of the Bank approved the adoption of the 1997 Stock Option Plan which is
generally similar to the 1994 plan. The 1997 plan does not affect any options
granted under the 1994 plan.
56
<PAGE>
Under both of these stock option plans, on the date of grant, the exercise
price of the option must at least equal the market value per share of Bank
Common Stock. The 1994 plan provides for the grant of options and stock awards
of up to 67,000 shares. The 1997 plan provides for the granting of options for
up to 50,000 common shares. All shares under the 1994 plan have been awarded
and all shares subject to option are fully vested. A total of 5,000 shares
were issued under the 1994 plan as a restricted stock award subject to lapse
provisions that end in 1999. A total of 5,002 shares remain available for
grant under the 1997 plan. All awards made under the plan require vesting over
a three year period beginning January 31, 1998. Under both existing plans,
options must be exercised within five years of vesting. Outstanding options
will be converted in the Exchange, using the Exchange Ratio, to become options
for Company Common Stock. Set forth below is certain information for Messrs.
Rhodes, Parry, Vance and Hastings concerning options granted in fiscal year
1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
PERCENTAGE
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE PER EXPIRATION GRANT DATE
NAME GRANTED IN 1997 SHARE DATE(1) VALUE(2)
- ---- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Donald V. Rhodes.......... 10,000 19.2% $18.45 1/31/05 $31,900
John D. Parry............. 5,000 9.6 18.45 1/31/05 15,950
Brian L. Vance............ 5,000 9.6 18.45 1/31/05 15,950
James Hastings............ 1,500 2.9 18.45 1/31/05 4,785
</TABLE>
- --------
(1) One third of the options vest (become exercisable) on January 31, 1998,
1999 and 2000. These options expire five years after they become
exercisable.
(2) Calculated using the minimum value method.
1998 Stock Option Plan. The Board of Directors of the Company intends to
adopt the Stock Option Plan and to submit the Stock Option Plan to the
stockholders for approval at a meeting held no earlier than six months
following consummation of the Conversion. The approval of a majority vote of
the Company's stockholders is required prior to the implementation of the
Stock Option Plan. The Stock Option Plan will comply with all applicable
regulatory requirements.
The Stock Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Company
as an incentive to contribute to the success of the Company and the Bank, and
to reward officers and key employees for outstanding performance and the
attainment of targeted objectives. The Stock Option Plan will provide for the
grant of incentive stock options ("ISOs"), intended to comply with the
requirements of Section 422 of the Code, and nonqualified stock options
("NQOs"). Upon receipt of stockholder approval of the Stock Option Plan, stock
options may be granted to key employees of the Company and its subsidiaries,
including the Bank and to nonemployee directors. The Stock Option Plan will be
administered and interpreted by a committee of the Board of Directors
("Committee") which is "disinterested" pursuant to applicable regulations
under the federal securities laws. Unless sooner terminated, the Stock Option
Plan will continue in effect for a period of ten years from the date the Stock
Option Plan is adopted by the Board of Directors.
A number of authorized shares of Common Stock equal to 10% of the number of
shares of Conversion Stock sold in connection with the Conversion will be
reserved for future issuance under the Stock Option Plan (414,000 shares based
on the issuance of 4,140,000 shares at the maximum of the Valuation Price
Range). Such shares will be authorized but unissued shares or treasury shares.
In the event of a stock split, reverse stock split, stock dividend, or similar
event, the number of shares of Common Stock under the Stock Option Plan, the
number of shares to which any award relates and the exercise price per share
under any option may be adjusted by the Committee to reflect the increase or
decrease in the total number of shares of Common Stock outstanding.
57
<PAGE>
Under the Stock Option Plan, the Committee will determine which officers and
key employees will be granted options, whether such options will be ISOs or
NQOs, the number of shares subject to each option, and the exercisability of
such options. The per share exercise price of an option will at least equal
100% of the fair market value of a share of Common Stock on the date the
option is granted.
The number of options granted to nonemployee directors and the terms thereof
will be determined under a formula set forth in the Stock Option Plan. The
formula will provide that no individual nonemployee director may be awarded an
option covering in excess of 5% of the number of shares of Common Stock
reserved under the Plan. All options granted to nonemployee directors will be
NQOs and such options will be granted at an exercise price equal to 100% of
the fair market value of the Common Stock on the date the option is granted.
Each stock option that is awarded to an officer or key employee will remain
exercisable at any time on or after the date it vests through the earlier to
occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination or death or disability), unless such period is extended
by the Committee. Each stock option that is awarded to a nonemployee director
will remain exercisable through the earlier to occur of the fifth anniversary
of the date of grant or one year (two years in the event of a nonemployee
director's death or disability) following the termination of a nonemployee
director's service on the Board. Options granted upon the effective date of
the Stock Option Plan will become exercisable ratably over a minimum five-year
period following the date of grant. However, unvested options will be
immediately exercisable in the event of the recipient's death, disability,
retirement, or a change in control of the Company. A "change in control" is
deemed to occur when (a) a person other than the Company purchases shares of
Common Stock pursuant to a tender or exchange offer for such shares; (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of Securities
Exchange Act of 1934, as amended ("Exchange Act") who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; (c) the membership of the Board of Directors changes
as the result of a contested election; or (d) stockholders of the Company
approve a merger, consolidation, sale or disposition of all or substantially
all of the Company assets, or a plan of partial or complete liquidation. All
stock options are nontransferable except by will or the laws of descent or
distribution.
Under current provisions of the Code, the federal tax treatment of ISOs and
NQOs is different. With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option
is granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option. If the holding period requirements are
not satisfied, the difference between the fair market value of the Common
Stock on the date of grant and the option exercise price, if any, will be
taxable to the optionee at ordinary income tax rates. A federal income tax
deduction generally will not be available to the Company as a result of the
grant or exercise of an ISO, unless the optionee fails to satisfy the holding
period requirements. With respect to NQOs the grant of an NQO is generally not
a taxable event for the optionee and no tax deduction will be available to the
Company. However, upon the exercise of an NQO, the difference between the fair
market value of the Common Stock on the date of exercise and the option
exercise price will generally be treated as compensation to the optionee upon
exercise, and the Company will be entitled to a compensation expense deduction
in the amount of income realized by the optionee.
Although no specific award determinations have been made at this time, the
Company and the Bank anticipate that if stockholder approval is obtained it
would provide awards to its directors, officers and employees to the extent
and under terms and conditions permitted by applicable regulations. The size
of individual awards will be determined prior to submitting the 1997 Stock
Option Plan for stockholder approval, and disclosure of anticipated awards
will be included in the proxy materials for such meeting.
Management Recognition Plan. Following the Conversion, the Board of
Directors of the Company intends to adopt an MRP for officers, employees, and
nonemployee directors of the Company and the Bank. The MRP
58
<PAGE>
will enable the Company and the Bank to provide participants with a
proprietary interest in the Company as an incentive to contribute to the
success of the Company and the Bank.
The MRP will be submitted to stockholders for approval at a meeting no
earlier than six months following the consummation of the Conversion. The
approval of a majority vote of the Company's stockholders is required prior to
implementation of the MRP. The MRP will comply with all applicable regulatory
requirements. The MRP expects to acquire a number of shares of Common Stock
equal to 4% of the Conversion Stock sold in connection with the Conversion
(165,600 shares based on the issuance of 4,140,000 shares in the Conversion at
the maximum of the Valuation Price Range). Such shares will be acquired on the
open market with funds contributed by the Company to a trust which the Company
may establish in conjunction with the MRP ("MRP Trust") or may be acquired
from authorized but unissued or treasury shares of the Company.
A committee of the Board of Directors of the Company will administer the
MRP, the members of which will also serve as trustees of the MRP Trust, if
formed. The trustees will be responsible for the investment of all funds
contributed by the Company to the MRP Trust. Shares of Common Stock granted
pursuant to the MRP will be in the form of restricted stock payable ratably
over a minimum five-year period following the date of grant. Compensation
expense in the amount of the fair market value of the Common Stock at the date
of grant will be recognized pro rata over the number of years during which the
shares are payable. An MRP award recipient is entitled to voting, dividend,
and other stockholder rights while the shares are restricted. During the
period of restriction, all shares will be held in escrow by the Company or by
the MRP Trust. If a recipient terminates employment for reasons other than
death, disability, retirement, or a change in control of the Company, the
recipient will forfeit all rights to allocated shares which are then subject
to restriction. In the event of the recipient's death, disability, retirement,
or a change in control of the Company, all restrictions will expire and all
allocated shares will become unrestricted. A "change in control" is deemed to
occur when (a) a person other than the Company purchases shares of Common
Stock pursuant to a tender or exchange offer for such shares; (b) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) who
is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 25% or more of the combined voting power of the
Company's then outstanding securities; (c) the membership of the Board of
Directors changes as the result of a contested election; or (d) stockholders
of the Company approve a merger, consolidation, sale or disposition of all or
substantially all of the Company's assets, or a plan of partial or complete
liquidation.
All unallocated shares may be transferred by the Company to the MRP Trust.
The trustees of the MRP Trust will be authorized to vote such shares in the
same proportion as they receive instructions from award recipients with
respect to allocated shares which have not been earned and distributed.
The Board of Directors of the Company may terminate the MRP at any time and,
upon termination, all unallocated shares of Common Stock will revert to the
Company.
A recipient of an MRP award in the form of restricted stock will generally
not recognize income upon an award of shares of Common Stock, and the Company
will not be entitled to a federal income tax deduction, until the termination
of the restrictions. Upon such termination, the recipient will recognize
ordinary income in an amount equal to the fair market value of the Common
Stock at that time, and the Company will be entitled to a deduction in the
same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions. In that
event, the Company will be entitled to a deduction in such year and in the
same amount. Any gain or loss recognized by the recipient upon subsequent
disposition of the stock will be either a capital gain or capital loss.
Although no specific award determinations have been made at this time, the
Company and the Bank anticipate that if stockholder approval is obtained it
would provide awards to its directors, officers and employees to the extent
and under terms and conditions permitted by applicable regulations. Under
current policy of the FDIC, if the 1997 MRP is implemented within one year of
the consummation of the Conversion, (i) no officer or
59
<PAGE>
employees could receive an award covering in excess of 25%; (ii) no
nonemployee director could receive in excess of 5%; and (iii) nonemployee
directors, as a group, could not receive in excess of 30% of the number of
shares reserved for issuance under the MRP. The size of individual awards will
be determined prior to submitting the MRP for stockholder approval, and
disclosure of anticipated awards will be included in the proxy materials for
such meeting.
CERTAIN TRANSACTIONS
LOANS TO DIRECTORS AND EXECUTIVE OFFICERS
Certain of the Bank and Company directors and executive officers and their
immediate families are also customers and depositors of the Bank and it is
anticipated that such individuals will continue to be customers of the Bank in
the future. All transactions between the Bank and the Bank's directors,
executive officers and their immediate families were made in the ordinary
course of business on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons, and in the opinion of management did not involve more than
the normal risk of collectibility or present other unfavorable features. At
June 30, 1997, loans to directors and executive officers represented 3.9% of
the Bank's stockholders' equity.
TRANSACTIONS WITH CENTRAL VALLEY BANK
Since June 30, 1995, the Bank has entered into contractual agreements to
purchase loan participations in an aggregate amount of $1.1 million from
Central Valley Bank. The aggregate outstanding balance of such participations
at June 30, 1997 was $531,300, consisting of two loan participations. Both
participations are current and performing as agreed. Mr. Rhodes is Chairman
and Chief Executive Officer of Central Valley Bank and of Heritage Bank.
SUPERVISION AND REGULATION
The Company and the Bank are subject to extensive Federal and Washington
state legislation, regulation and supervision. These laws and regulations are
primarily intended to protect depositors and the FDIC rather than shareholders
of the Company. The laws and regulations affecting banks and bank holding
companies have changed significantly over recent years, and there is reason to
expect that similar changes will continue in the future. Any change in
applicable laws, regulations or regulatory policies may have a material effect
on the business, operations and prospects of the Company. The Company is
unable to predict the nature or the extent of the effects on its business and
earnings that any fiscal or monetary policies or new federal or state
legislation may have in the future. The following information is qualified in
its entirety by reference to the particular statutory and regulatory
provisions described herein.
The Company. The Company is subject to regulation as a bank holding company
within the meaning of the Bank Holding Company Act of 1956, as amended, (the
"BHCA"). As such, the Company is supervised by the Federal Reserve.
The Federal Reserve has the authority to order bank holding companies to
cease and desist from unsound practices and violations of conditions imposed
by it. The Federal Reserve is also empowered to assess civil money penalties
against companies and individuals who violate the BHCA or orders or
regulations thereunder in amounts up to $1.0 million per day or order
termination of non-banking activities of non-banking subsidiaries of bank
holding companies, and to order termination of ownership and control of a non-
banking subsidiary by a bank holding company. Certain violations may also
result in criminal penalties. The FDIC is authorized to exercise comparable
authority under the Federal Deposit Insurance Act and other statutes with
respect to state nonmember banks such as the Bank.
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The Federal Reserve takes the position that a bank holding company is
required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it is the Federal Reserve's position that in serving as a
source of strength to its subsidiary banks, bank holding companies should be
prepared to use available resources to provide adequate capital funds to their
subsidiary banks during periods of financial stress or adversity and should
maintain the financial flexibility and capital raising capacity to obtain
additional resources for assisting their subsidiary banks. A bank holding
company's failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve to be
an unsafe and unsound banking practice, a violation of the Federal Reserve's
regulations or both. The Federal Deposit Insurance Act requires an
undercapitalized institution to submit to the Federal Reserve a capital
restoration plan with a guarantee by each company having control of the bank.
The BHCA prohibits a bank holding company, with certain exceptions, from
acquiring direct or indirect ownership or control of any company which is not
a bank or from engaging in any activities other than those of banking,
managing or controlling banks and certain other subsidiaries, or furnishing
services to or performing services for its subsidiaries. One principal
exception to these prohibitions allows a bank holding company to acquire an
interest in companies whose activities are found by the Federal Reserve, by
order or by regulation, to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. The Company must obtain
the approval of the Federal Reserve before it acquires all, or substantially
all, of the assets of any bank, or ownership or control of more than 5% of the
voting shares of a bank.
The Company is required under the BHCA to file an annual report and periodic
reports with the Federal Reserve and such additional information as the
Federal Reserve may require pursuant to the BHCA. The Federal Reserve may
examine a bank holding company and any of its subsidiaries and charge the
company for the cost of such an examination.
The Company and any subsidiaries which it may control are deemed
"affiliates" within the meaning of the Federal Reserve Act, and transactions
between bank subsidiaries of the Company and its affiliates are subject to
certain restrictions. With certain exceptions, the Company and its
subsidiaries are prohibited from tying the provision of certain services, such
as extensions of credit, to other services offered by the Company or its
affiliates.
Banking regulations require bank holding companies and banks to maintain a
minimum "leverage" ratio of core capital to adjusted quarterly average total
assets of at least 3%. In addition, banking regulators have adopted risk-based
capital guidelines under which risk percentages are assigned to various
categories of assets and off-balance sheet items to calculate a risk-adjusted
capital ratio. Tier I capital generally consists of common shareholders'
equity (which does not include unrealized gains and losses on securities),
less goodwill and certain identifiable intangible assets, while Tier II
capital includes the allowance for loan losses and subordinated debt, both
subject to certain limitations. Regulatory risk-based capital guidelines
require a minimum Tier I capital of 4% of risk-adjusted assets and minimum
total capital ratio (combined Tier I and Tier II) of 8%. For a discussion of
the Bank's capital ratios, see "Banking Subsidiary."
Banking Subsidiary. The Bank is a Washington state-chartered savings bank,
the deposits of which are insured by the FDIC. It is subject to regulation by
the FDIC and the Division. Although the Bank is not a member of the Federal
Reserve System, the Federal Reserve supervisory authority over the Company can
also affect the Bank.
Among other things, applicable federal and state statutes and regulations
which govern a bank's operations relate to minimum capital requirements,
required reserves against deposits, investments, loans, legal lending limits,
mergers and consolidations, borrowings, issuance of securities, payment of
dividends, establishment of branches and other aspects of its operations. The
Division and the FDIC also have authority to prohibit banks under their
supervision from engaging in what they consider to be unsafe and unsound
practices.
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The Bank is required to file periodic reports with the FDIC and the Division
and is subject to periodic examinations and evaluations by those regulatory
authorities. Based upon such an evaluation, the regulators may revalue the
assets of an institution and require that it establish specific reserves to
compensate for the differences between the regulator-determined value and the
book value of such assets. These examinations must be conducted every 12
months, except that certain well-capitalized banks may be examined every 18
months. The FDIC and the Division may each accept the results of an
examination by the other in lieu of conducting an independent examination.
As a subsidiary of a bank holding company, the Bank is subject to certain
restrictions in its dealings with the Company and with other companies that
may become affiliated with the Company.
Dividends paid by the Bank will provide substantially all of the Company's
cash flow. Applicable federal and Washington state regulations restrict
capital distributions by institutions such as the Bank, including dividends.
Such restrictions are tied to the institution's capital levels after giving
effect to such distributions. At June 30, 1997, the Bank's leverage ratio was
11.7% compared with 11.6% at June 30, 1996. Tier I and total capital ratios
for the Bank at June 30, 1997 were 15.6% and 16.9%, respectively, compared
with 17.7% and 18.9%, respectively, at June 30, 1996. The FDIC has established
the qualifications necessary to be classified as a "well-capitalized" bank,
primarily for assignment of FDIC risk-based insurance premium rates discussed
below. To qualify as "well-capitalized," banks must have a Tier I risk-
adjusted capital ratio of at least 6%, a total risk-adjusted capital ratio of
at least 10%, and a leverage ratio of at least 5%. The Bank qualified as
"well-capitalized" at June 30, 1997.
Federal laws generally bar institutions which are not well capitalized from
accepting brokered deposits. The FDIC has issued rules which prohibit under-
capitalized institutions from soliciting or accepting such deposits.
Adequately capitalized institutions are allowed to solicit such deposits, but
only to accept them if a waiver is obtained from the FDIC.
Other Regulatory Developments. Congress has enacted significant federal
banking legislation in recent years. Included in this legislation have been
the FIRREA and the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"). FIRREA, among other things, (i) created two deposit insurance
funds administered by the FDIC, the Bank Insurance Fund ("BIF") and the SAIF;
(ii) permitted commercial banks that meet certain housing-related asset
requirements to secure advances and other financial services from local FHLBs;
(iii) restructured the federal regulatory agencies for savings associations;
and (iv) greatly enhanced the regulators' enforcement powers over financial
institutions and their affiliates.
FDICIA went substantially farther than FIRREA in establishing a more
rigorous regulatory environment. Under FDICIA, regulatory authorities are
required to enact a number of new regulations, substantially all of which are
now effective. These regulations include, among other things, (i) a new method
for calculating deposit insurance premiums based on risk, (ii) restrictions on
acceptance of brokered deposits except by well-capitalized institutions, (iii)
additional limitations on loans to executive officers and directors of banks,
(iv) the employment of interest rate risk in the calculation of risk-based
capital, (v) safety and soundness standards that take into consideration,
among other things, management, operations, asset quality, earnings and
compensation, (vi) a five-tiered rating system from well-capitalized to
critically undercapitalized, along with the prompt corrective action the
agencies may take depending on the category, and (vii) new disclosure and
advertising requirements with respect to interest paid on savings accounts.
FDICIA and regulations adopted by the FDIC impose additional requirements
for annual independent audits and reporting when a bank begins a fiscal year
with assets of $500 million or more. Such banks, or their holding companies,
are also required to establish audit committees consisting of directors who
are independent of management. The Bank had less than $500 million in assets
at June 30, 1997.
Also, the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking Act") provides banks with greater opportunities
to merge with other institutions and to open branches
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nationwide. The Interstate Banking Act also allows a bank holding company
whose principal operations are in one state to apply to the Federal Reserve
for approval to acquire a bank that is headquartered in a different state.
States cannot "opt out" but may impose minimum time periods, not to exceed
five years, for the target bank's existence.
The Interstate Banking Act also allows bank subsidiaries of bank holding
companies to establish "agency" relationships with their depository
institution affiliates. In an agency relationship, a bank can accept deposits,
renew time deposits, close and service loans, and receive payments for a
depository institution affiliate. States cannot "opt out."
In addition, the Interstate Banking Act allows banks whose principal
operations are located in different states to apply to federal regulators to
merge. This provision takes effect June 1, 1997, unless states enact laws to
either (i) authorize such transactions at an earlier date or (ii) prohibit
such transactions entirely. The Interstate Banking Act also allows banks to
apply to establish de novo branches in states in which they do not already
have a branch office. This provision took effect June 1, 1997, but (i) states
must enact laws to permit such branching and (ii) a bank's primary federal
regulator must approve any such branch establishment. The Washington
legislature passed legislation that allows, subject to certain conditions,
mergers or other combinations, relocations of banks' main office and branching
across state lines in advance of the June 1, 1997 date established by federal
law.
Further effects on the Company and the Bank may result from the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "Community
Development Act"). The Community Development Act (i) establishes and funds
institutions that are focused on investing in economically distressed areas
and (ii) streamlines the procedures for certain transactions by financial
institutions with federal banking agencies.
Among other things, the Community Development Act requires the federal
banking agencies to (i) consider the burdens that are imposed on financial
institutions when new regulations are issued or new compliance burdens are
created and (ii) coordinate their examinations of financial institutions when
more than one agency is involved. The Community Development Act also
streamlines the procedures for forming certain one-bank holding companies and
engaging in authorized non-banking activities.
The Bank's deposit accounts are insured by the FDIC under the SAIF to the
maximum extent permitted by law. The Bank pays deposit insurance premiums to
the FDIC based on a risk-based assessment system established by the FDIC for
all SAIF-member institutions. Under applicable regulations, institutions are
assigned to one of three capital groups that are based solely on the level of
an institution's capital ("well capitalized", "adequately capitalized" or
"undercapitalized"). The matrix so created results in nine assessment risk
classifications, with rates that until September 30, 1996 ranged from 0.23%
for well capitalized, financially sound institutions with only a few minor
weaknesses to 0.31% for undercapitalized institutions that pose a substantial
risk of loss to the SAIF unless effective corrective action is taken. The
Bank's assessments expensed for the year ended June 30, 1997 equaled $1.3
million, which includes the $1.1 million special SAIF assessment.
Pursuant to recent changes in federal law, the FDIC imposed a special
assessment on each depository institution with SAIF-assessable deposits which
resulted in the SAIF achieving its designated reserve ratio. In connection
therewith, the FDIC reduced the assessment schedule for SAIF members,
effective January 1, 1997, to a range of 0% to 0.27%, with most institutions,
including the Bank, paying 0%. This assessment schedule is the same as that
for the BIF, which reached its designated reserve ratio in 1995. In addition,
since January 1, 1997, SAIF members are charged an assessment of 0.065% of
SAIF-assessable deposits for the purpose of paying interest on the obligations
issued by the Financing Corporation ("FICO") in the 1980s to help fund the
thrift industry cleanup. BIF-assessable deposits will be charged an assessment
to help pay interest on the FICO bonds at a rate of approximately .013% until
the earlier of December 31, 1999 or the date upon which the last savings
association ceases to exist, after which time the assessment will be the same
for all insured deposits.
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Recent legislative changes provide for the merger of the BIF and SAIF into
the Deposit Insurance Fund on January 1, 1999, but only if no insured
depository institution is a savings association on that date. The recent
change contemplates the development of a common charter for all federally
chartered depository institutions and the abolition of separate charters for
national banks and federal savings associations. It is not known what form the
common charter may take and what effect, if any, the adoption of a new charter
would have on the operation of the Bank.
In addition to the changes to the BIF and SAIF assessment rates implemented
by the recent legislation, various regulatory relief provisions were enacted.
The new legislation includes, among other things, changes to (i) the Truth in
Lending Act and the Real Estate Settlement Procedures Act to coordinate and
simplify the two laws' disclosure requirements; (ii) eliminate civil liability
for violations of the Truth in Savings Act after five years; (iii) streamline
the application process for a number of bank holding company and bank
applications; (iv) establish a privilege from discovery in any civil or
administrative proceeding or bank examination for any fair lending self-test
results conducted by, or on behalf of, a financial institution in certain
circumstances; (v) repeal the FDICIA requirement that independent public
accountants attest to compliance with designated safety and soundness
regulations; (vi) impose a continuous regulatory review of regulations to
identify and eliminate outdated and unnecessary rules; and (vii) various other
miscellaneous provisions to reduce bank regulatory burden.
FEDERAL SECURITIES LAWS
The Company has filed a Registration Statement with the SEC under the
Securities Act of 1933, as amended ("Securities Act") for the registration of
the Common Stock to be issued in the Conversion. Upon completion of the
Conversion, the Common Stock will be registered with the SEC under the
Exchange Act and generally may not be deregistered for at least three years
thereafter. The Company will then 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 to be issued
in the Conversion does not cover the resale of such shares. Shares of the
Common Stock purchased by persons who are not affiliates of the Company may be
resold without registration. Shares purchased by an affiliate of the Company
may comply with the resale restrictions of Rule 144 under the Securities Act.
If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the
other conditions of Rule 144 (including those that require the affiliate's
sale to be aggregated with those of certain other persons) would be able to
sell in the public market, without registration, a number of shares not to
exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of the Company or (ii) the average weekly volume of trading in such
shares during the preceding four calendar weeks. Provision may be made in the
future by the Company to permit affiliates to have their shares registered for
sale under the Securities Act under certain circumstances. There are currently
no demand registration rights outstanding. However, in the event the Company,
at some future time, determines to issue additional shares from its authorized
but unissued shares, the Company might offer registration rights to certain of
its affiliates who want to sell their shares.
THE CONVERSION
The Division has given approval to the Plan subject to the satisfaction of
certain conditions imposed by the Division in its approval. In addition, the
Conversion will not be consummated until the Bank receives from the FDIC a
notice of nonobjection to the Conversion and the Federal Reserve approves the
application of the Company to become a bank holding company and to acquire the
Bank. The Division's approval, however, does not constitute a recommendation
or endorsement of the Plan.
GENERAL
On July 1, 1997, the Boards of Directors of the Mutual Holding Company and
the Bank unanimously adopted the Plan of Conversion, which was subsequently
amended, pursuant to which the Bank will reorganize
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into the stock holding company form of organization and the Company, a newly
formed Washington corporation, will offer and sell the Common Stock. It is
intended that following the Conversion all of the common stock of the Bank
will be held by the Company. THE FOLLOWING DISCUSSION OF THE PLAN OF
CONVERSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN OF
CONVERSION, WHICH IS AVAILABLE FROM THE BANK UPON REQUEST. The Division has
approved the Plan of Conversion subject to the satisfaction of certain
conditions imposed by the Division in its approval. In addition, completion of
the Conversion is subject to (i) the nonobjection of the FDIC; (ii) approval
by the Federal Reserve of the Company's acquisition of the Bank; (iii)
approval of the Plan by at least a majority of the total number of votes
eligible to be cast by members of the Mutual Holding Company (iv) approval of
the Plan by a majority of the votes cast by the Minority Stockholders; and (v)
successful completion of the Offerings. It is possible that there could be a
significant delay in the completion of the Conversion as a result of delays in
receiving a notice of nonobjection to the Conversion from the FDIC or in
receiving the approval of the Federal Reserve. See "Risk Factors--Risk of
Delayed Offering."
The Plan of Conversion provides generally that (i) the Mutual Holding
Company, which currently owns 66.31% of the Bank, will convert from mutual to
stock form and simultaneously merge with the Bank, with the Bank being the
surviving entity, and the shares of Bank Common Stock currently held by the
Mutual Holding Company will be canceled; (ii) the Bank will then merge into
Interim, a to be formed wholly-owned subsidiary of the Company, with the Bank
being the surviving entity (and with the 1,200,000 shares of the Company's
Common Stock currently held by the Bank being canceled); and (iii) the
Conversion Stock will be offered by the Company in the Offerings. Applicable
law requires that a minimum number of shares of Conversion Stock offered for
sale in the Conversion be sold in order for the Conversion to become
effective. The Conversion will be effected only upon completion of the sale of
at least $30.6 million of Conversion Stock to be issued pursuant to the Plan
of Conversion.
As part of the Conversion, the Company is making a Subscription Offering of
its Conversion Stock to holders of subscription rights in the following order
of priority: (i) Eligible Account Holders; (ii) the Bank's ESOP; (iii)
Supplemental Eligible Account Holders; and (iv) Other Members. Commencing
concurrently with the Subscription Offering, the Company is offering the
shares of Conversion Stock not subscribed for in the Subscription Offering in
order of priority to (i) the Minority Stockholders who are not Eligible
Account Holders, Supplemental Eligible Account Holders or Other Members and
(ii) to certain members of the general public to whom a copy of this
Prospectus is delivered by or on behalf of the Company.
Shares of Common Stock not sold in the Subscription, Minority Stockholders'
and Community Offerings may be offered in the Syndicated Community Offering.
If a Syndicated Community Offering is determined not to be feasible, the Board
of Directors of the Bank will consult with the regulatory authorities to
determine an appropriate alternative method for selling the unsubscribed
shares of Conversion Stock. The Plan of Conversion provides that the
Conversion must be completed within 24 months after the date of the approval
of the Plan of Conversion by the members of the Mutual Holding Company. No
sales of Conversion Stock may be completed in the Offerings unless the Plan of
Conversion is approved by the members of the Mutual Holding Company and
Minority Stockholders of the Bank.
The completion of the Offerings is subject to market conditions and other
factors beyond the Bank's control. No assurance can be given as to the length
of time after approval of the Plan of Conversion at the Special Meetings that
will be required to complete the sale of the Conversion Stock or to receive
the required approvals of regulatory authorities. If delays are experienced,
significant changes may occur in the estimated pro forma market value of the
Conversion Stock, together with corresponding changes in the net proceeds
realized by the Company from the sale of the Conversion Stock. In the event
the Conversion is terminated, the Bank would be required to charge all
Conversion expenses against current income.
Orders for shares of Conversion Stock will not be filled until at least
3,060,000 shares of Conversion Stock have been sold, the Division and the FDIC
approve the final Appraisal, the Federal Reserve approves the application of
the Company to become a bank holding company and acquire the Bank and the
Conversion closes. If the Conversion is not completed by , 1997 (45 days
after the last day of the fully extended
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Subscription Offering) and the Division consents to an extension of time to
complete the Conversion, subscribers will be given the right to increase,
decrease or rescind their subscriptions. Unless an affirmative indication is
received from subscribers that they wish to continue to subscribe for shares,
the funds will be returned promptly, together with accrued interest at the
Bank's passbook rate from the date payment was received by the Company, and
all withdrawal authorizations from deposit accounts of those subscribers will
be terminated. If such period is not extended, or, in any event, if the
Conversion is not completed by , all withdrawal authorizations will be
terminated and all funds held will be promptly returned together with accrued
interest at the Bank's passbook rate from the date payment is received.
PURPOSES OF CONVERSION
The Mutual Holding Company, as a Washington-chartered mutual holding
company, does not have stockholders and has no authority to issue capital
stock. By converting to the stock holding company form of organization, the
Company will be structured in the form used by many commercial banks and
business entities and a growing number of savings institutions. Management of
the Bank believes that the Conversion offers a number of advantages which will
be important to the future growth and performance of the Bank. The Conversion
is intended to: (i) provide substantially increased capital to expand the
operations of the Bank; (ii) to improve future access to capital markets;
(iii) enhance the Company's and the Bank's ability to expand directly or
through mergers and acquisitions and to diversify operations into new business
activities (although there are no specific agreements, arrangements or
understandings, written or oral, regarding any such mergers or diversified
activities); and (iv) afford customers and others the opportunity to become
stockholders of the Company and thereby participate more directly in any
future growth of the Bank. While the Bank, prior to the consummation of the
Conversion, has the ability to raise additional capital through the sale of
additional shares of its common stock, that ability is limited by the mutual
holding company structure which, among other things, requires that the Mutual
Holding Company hold a majority of the outstanding shares of Bank Common
Stock. The Conversion also will result in an increase in the number of shares
of Common Stock to be outstanding as compared to the number of outstanding
shares of Minority Shares, which will increase the likelihood of the
development of an active and liquid trading market. See "Market for Common
Stock." In addition, the Conversion permits the Company to engage in
repurchases of its outstanding stock without adverse federal income tax
consequences, unlike the Bank and MHC. Currently, the Company has no plans to
engage in any stock repurchases.
After completion of the Conversion, there will be a substantial amount of
authorized but unissued Common Stock available for issuance to raise
additional equity capital or to be used in connection with possible
acquisitions. At the present time, the Company has no plans with respect to
specific acquisitions or additional offerings of securities, other than the
issuance of authorized but unissued shares upon exercise of stock options, the
possible issuance of authorized but unissued shares to the MRP. Following the
Conversion, the Company will be able to use stock-based incentive programs to
attract and retain executive and other personnel for itself and its
subsidiaries. For a description of the programs which have been adopted by the
Company, see "Management--Benefits--1998 Stock Option Plan."
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE BANK
Voting Rights. Depositors and borrowers will have no voting rights in the
Bank or the Company and therefore will not be able to elect directors of the
Bank or the Company or to control their affairs. Subsequent to the Conversion,
voting rights will be vested exclusively in the Company, as the sole
stockholder, with respect to the Bank and the holders of the Common Stock as
to matters pertaining to the Company. Each holder of Common Stock shall be
entitled to vote on any matter to be considered by the stockholders of the
Company. A stockholder will be entitled to one vote for each share of Common
Stock owned.
Savings Accounts and Loans. The Bank's savings accounts, account balances
and existing FDIC insurance coverage of savings accounts will not be affected
by the Conversion. Furthermore, the Conversion will not affect
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the loan accounts, loan balances or obligations of borrowers under their
individual contractual arrangements with the Bank.
Tax Effects. The Bank has received an opinion from KPMG Peat Marwick LLP
that for federal income tax purposes: (1) the conversion of the Mutual Holding
Company from mutual to stock form and the simultaneous merger of the Mutual
Holding Company with and into the Bank, with the Bank being the surviving
institution, will qualify as a conversion within the meaning of Section
368(a)(1)(A) of the Code, (2) no gain or loss will be recognized by the Bank
upon the receipt of the assets of the Mutual Holding Company in such merger,
(3) the merger of the Bank with and into Interim, with the Bank being the
surviving institution, will qualify as a conversion within the meaning of
Section 368(a)(1)(A) of the Code, (4) no gain or loss will be recognized by
Interim upon the transfer of its assets to the Bank, (5) no gain or loss will
be recognized by the Bank upon the receipt of the assets of Interim, (6) no
gain or loss will be recognized by the Company upon the sale of shares of
Common Stock in the Offering, (7) the Eligible Account Holders and
Supplemental Eligible Account Holders will recognize gain, if any, upon the
issuance to them of withdrawable savings accounts in the Bank following the
Conversion, interests in the liquidation account and nontransferable
subscription rights to purchase Common Stock, but only to the extent of the
value, if any, of the subscription rights, and (8) the tax basis to the
holders of Common Stock purchased in the Offering will be the amount paid
therefor, and the holding period for the shares of Common Stock will begin on
the date of consummation of the Offerings if purchased through the exercise of
subscription rights and on the day after the date of purchase if purchased in
the Community Offering or Syndicated Community Offering. Unlike a private
letter ruling issued by the IRS, an opinion of a tax advisor is not binding on
the IRS and the IRS could disagree with the conclusions reached therein. In
the event of such disagreement, no assurance can be given that the conclusions
reached in an opinion of a tax advisor would be sustained by a court if
contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that the
receipt of subscription rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan will be taxable to
the extent, if any, that the subscription rights are deemed to have a fair
market value. RP Financial, whose findings are not binding upon the IRS, has
issued a letter indicating that it believes 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 Conversion Stock at a
price equal to its estimated fair market value, which will be the same price
paid by purchasers in the Offerings. If the subscription rights are deemed to
have a fair market value, the receipt of such rights may be taxable to those
Eligible Account Holders, Supplemental Eligible Account Holders, and Other
Members who exercise their subscription rights by purchasing Conversion Stock.
The Bank could also recognize a gain on the distribution of such subscription
rights. Eligible Account Holders, Supplemental Eligible Account Holders, and
Other Members are encouraged to consult with their own tax advisers as to the
tax consequences in the event the subscription rights are deemed to have a
fair market value.
The Bank has also received an opinion from Gordon, Thomas, Honeywell,
Malanca, Peterson & Daheim, P.L.L.C. that no gross receipts will be recognized
for Washington business and occupation tax purposes by either the Bank or its
Eligible Account Holders and Supplemental Eligible Account Holders as a result
of the implementation of the Plan of Conversion.
The opinions of KPMG Peat Marwick LLP and Gordon, Thomas, Honeywell,
Malanca, Peterson & Daheim, P.L.L.C. and the letter from RP Financial are
filed as exhibits to the Registration Statement. See "Additional Information."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
Liquidation Account. In the unlikely event of a complete liquidation of the
Mutual Holding Company in its present mutual form, each depositor in the Bank
would receive a pro rata share of any assets of the Mutual Holding Company
remaining after payment of claims of all creditors (including the claims of
all depositors up
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to the withdrawal value of their accounts). Each depositor's pro rata share of
such remaining assets would be in the same proportion as the value of his
deposit account to the total value of all deposit accounts in the Bank at the
time of liquidation. After the Conversion, each depositor, in the event of a
complete liquidation of the Bank, would have a claim as a creditor of the same
general priority as the claims of all other general creditors of the Bank.
However, except as described below, his or her claim would be solely in the
amount of the balance in his or her deposit account plus accrued interest.
Each stockholder would not have an interest in the value or assets of the Bank
or the Company above that amount.
The 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 the amount of any dividends waived by the MHC plus the greater
of (1) the Bank's retained earnings of $12.9 million at June 30, 1993, the
date of the latest statement of financial condition contained in the final
offering circular utilized in the MHC Reorganization, or (2) 66.31% of the
Bank's total stockholders' equity as reflected in its latest statement of
financial condition contained in the final Prospectus utilized in the
Offerings. As of the date of this Prospectus, the initial balance of the
liquidation account would be $18.4 million. Each Eligible Account Holder and
Supplemental Eligible Account Holder, if he were to continue to maintain his
deposit account at the Bank, would be entitled, upon a complete liquidation of
the Bank after the Conversion to an interest in the liquidation account prior
to any payment to the Company as the sole stockholder of the Bank. Each
Eligible Account Holder and Supplemental Eligible Account Holder would have an
initial interest in such liquidation account for each deposit account,
including passbook accounts, transaction accounts such as checking accounts,
money market deposit accounts and certificates of deposit, held in the Bank at
the close of business on June 30, 1996 or , 1997, as the case may be.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have a pro rata interest in the total liquidation account for each of his
deposit accounts based on the proportion that the balance of each such deposit
account on the June 30, 1996 Eligibility Record Date or the , 1997
Supplemental Eligibility Record Date, as the case may be, bore to the balance
of all deposit accounts in the Bank on such date.
If, however, on any June 30 annual closing date of the Bank, commencing June
30, 1997, the amount in any deposit account is less than the amount in such
deposit account on June 30, 1996 or , 1997, as the case may be, or any
other annual closing date, then the interest in the liquidation account
relating to such deposit account would be reduced by the proportion of any
such reduction, and such interest will cease to exist if such deposit account
is closed. In addition, no interest in the liquidation account would ever be
increased despite any subsequent increase in the related deposit account. Any
assets remaining after the above liquidation rights of Eligible Account
Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of the Bank.
THE OFFERINGS
THE OFFERINGS ARE EXPECTED TO EXPIRE ON THE EXPIRATION DATE, UNLESS EXTENDED
OR CONTINUED AS DESCRIBED ON THE COVER PAGE OF THIS PROSPECTUS. ALL PURCHASES
ARE SUBJECT TO THE MAXIMUM PURCHASE LIMITATIONS AND OVERALL LIMITATIONS
DESCRIBED UNDER "THE CONVERSION--LIMITATIONS ON PURCHASE AND OWNERSHIP OF
SHARES". FOR ADDITIONAL INFORMATION ON HOW TO SUBSCRIBE FOR CONVERSION STOCK,
PLEASE CALL THE STOCK INFORMATION CENTER AT (360) .
Subscription Offering. In accordance with the Plan, nontransferable
subscription rights to purchase the Conversion Stock have been granted to all
persons and entities entitled to purchase the Conversion Stock in the
Subscription Offering. The amount of the Conversion Stock which these parties
may purchase will be subject to the availability of the Conversion Stock for
purchase. Subscription priorities have been established for the allocation of
available stock. If all the Conversion Stock offered is subscribed and
purchased in categories of higher priority, no shares will be available for
purchase to prospective purchasers in the remaining categories. These
priorities are as follows:
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CATEGORY 1: Eligible Account Holders. Each depositor with $50.00 or more on
deposit at the Bank as of June 30, 1996 will receive nontransferable
subscription rights to subscribe for up to the greater of the purchase
limitation established by the Bank for the Community Offering, one-tenth of
one percent (.10%) 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. If the exercise of subscription
rights in this category results in an oversubscription, shares of Conversion
Stock will be allocated among subscribing Eligible Account Holders so as to
permit each Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation equal to 100 shares
or the number of shares subscribed for, whichever is less. Thereafter,
unallocated shares will be allocated among subscribing Eligible Account
Holders proportionately, based on the amount of their respective qualifying
deposits, as compared to total qualifying deposits of all subscribing Eligible
Account Holders. Subscription rights received by officers and directors in
this category based on their increased deposits in the Bank in the one year
period preceding June 30, 1996 are subordinated to the subscription rights of
other Eligible Account Holders.
CATEGORY 2: ESOP. The Plan of Conversion provides that the ESOP shall
receive nontransferable subscription rights to purchase up to 8% of the shares
of Conversion Stock issued in the Conversion. In the event the number of
shares offered in the Conversion is increased above the maximum of the
Valuation Price Range, the ESOP shall have a priority right to purchase any
such shares exceeding the maximum of the Valuation Price Range up to an
aggregate of 8% of the Conversion Stock.
CATEGORY 3: Supplemental Eligible Account Holders. Each depositor with
$50.00 or more on deposit as of , 1997 will receive nontransferable
subscription rights to subscribe for up to the greater of the purchase
limitation established by the Bank for the Community Offering, one-tenth
(.10%) of one percent of the total offering of Conversion Stock or fifteen
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount
of qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of subscription rights in this category results in an
oversubscription, shares of Conversion Stock will be allocated among
subscribing Supplemental Eligible Account Holders so as to permit each
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation equal 100 shares or
the number of shares actually subscribed for, whichever is less. Thereafter,
unallocated shares will be allocated among subscribing Supplemental Eligible
Account Holders proportionately, based on the amount of their respective
qualifying deposits as compared to total qualifying deposits of all
Supplemental Eligible Account Holders.
CATEGORY 4: Other Members. Each depositor of the Bank as of the Voting
Record Date ( , 1997) and each borrower with a loan outstanding on July
21, 1993, which continues to be outstanding as of the Voting Record Date, will
receive nontransferable Subscription Rights to purchase up to the purchase
limitation established by the Bank, to the extent shares are available after
filing subscriptions by Eligible Account Holders, the Bank's ESOP and
Supplemental Eligible Account Holders. In the event of an oversubscription in
this category, the available shares will be allocated proportionately based on
the amount of the respective subscriptions.
CATEGORY 5: Minority Stockholders. Minority Stockholders as of the Voting
Record Date will receive nontransferable subscription rights to purchase
shares up to the purchase limitation established by the Bank, to the extent
available after filing the Subscription Offering subscription In the event of
an oversubscription, the available shares will be allocated proportionately on
the basis of the amounts of their respective subscriptions.
Subscription rights are nontransferable. Persons selling or otherwise
transferring their rights to subscribe for Conversion Stock in the
Subscription Offering or subscribing for Conversion Stock on behalf of another
person will be subject to forfeiture of such rights and possible further
sanctions and penalties imposed by government
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<PAGE>
agencies. Each person exercising subscription rights will be required to
certify that he or she is purchasing such shares solely for his or her own
account and that he or she has no agreement or understanding with any other
person for the sale or transfer of such shares. ONCE TENDERED, SUBSCRIPTION
ORDERS CANNOT BE REVOKED WITHOUT THE CONSENT OF THE BANK AND THE COMPANY.
Community Offering. Concurrently with the Subscription Offering and the
Minority Stockholders' Offering, the Company is offering shares of the
Conversion Stock to certain members of the general public in a Community
Offering. Preference may be given first to natural persons residing in the
Local Community (such persons are referred to as "Preferred Subscribers").
Purchasers in the Community Offering, together with their associates and
groups acting in concert, may order up to $250,000 in aggregate purchase price
of Conversion Stock. Subject to the foregoing, if the amount of available
stock is insufficient to fill the orders of Preferred Subscribers stock will
be allocated first to each Preferred Subscriber whose order is accepted by the
Bank in an amount equal to the lesser of 100 shares or the number of shares
subscribed for by each such Preferred Subscriber, if possible. Thereafter,
unallocated shares will be allocated among the Preferred Subscribers whose
order remains unsatisfied proportionately, on the basis of the amounts of the
respective subscriptions. If the orders of Preferred Subscribers are
completely filled, but there are insufficient shares to fill the orders of
others, available shares will be allocated to the other members of the general
public who purchase in the Community Offering applying the same allocation
described above for Preferred Subscribers. THE RIGHT OF ANY PERSON TO PURCHASE
SHARES IN THE COMMUNITY OFFERING IS SUBJECT TO THE ABSOLUTE RIGHT OF THE
COMPANY AND THE BANK TO ACCEPT OR REJECT SUCH ORDERS IN WHOLE OR IN PART.
If all of the Common Stock offered in the Subscription Offering and the
Minority Stockholders' Offering is subscribed for, no Conversion Stock will be
available for purchase in the Community Offering and all funds submitted
pursuant to the Community Offering will be promptly refunded with interest.
Syndicated Community Offering. The Plan provides that all shares of
Conversion Stock not purchased in the Subscription, Minority Stockholders' and
Community Offerings may be offered for sale to certain members of the general
public in a Syndicated Community Offering through a syndicate of registered
broker-dealers to be managed by Ryan Beck acting as agent of the Company to
assist the Company and the Bank in the sale of the Common Stock. The Company
and the Bank have the right to reject orders, in whole or part, in their sole
discretion in the Syndicated Community Offering. Neither Ryan Beck nor any
other registered broker-dealer shall have any obligation to take or purchase
any shares of the Conversion Stock in the Syndicated Community Offering;
however, Ryan Beck has agreed to use its best efforts in the sale of shares in
the Syndicated Community Offering.
No person, together with any associate or group of persons acting in
concert, will be permitted to subscribe in the Syndicated Community Offering
for shares of Common Stock with an aggregate Purchase Price of more than
$250,000. See "--Marketing Arrangements" for a description of the commission
to be paid to the selected dealers and to Ryan Beck.
If a syndicate of selected dealers is formed to assist in the Syndicated
Community Offering, a purchaser may pay for his shares with funds held by or
deposited with a selected dealer. Selected dealers are expected to solicit
indications of interest from their customers to place orders for shares. Such
selected dealers shall subsequently contact their customers who indicated an
interest and seek their confirmation as to their intent to purchase. The
selected dealer will then acknowledge confirmation of the order by its
customer in writing on the following business day and will debit such
customer's account on the third business day after the customer has confirmed
his intent to purchase (the "debit date"). On or before noon of the next
business day following the debit date, the selected dealer will send funds to
the Bank for deposit in a segregated account. Although purchasers' funds are
not required to be in their accounts with selected dealers until the debit
date, once a confirmation of an intent to purchase has been given to the
selected dealer, the purchaser has no right to rescind his order.
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<PAGE>
The Syndicated Community Offering may run concurrent to the Subscription,
Minority Stockholders' and Community Offering or subsequent to such offerings.
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration Date, unless extended by the Company with any
required regulatory approval, but in no case later than .
THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, PACIFIC TIME, ON , 1997
("EXPIRATION DATE"), UNLESS EXTENDED BY THE COMPANY FOR UP TO DAYS TO
, 1997. THE MINORITY STOCKHOLDERS' OFFERING AND COMMUNITY OFFERING ARE
ALSO EXPECTED TO TERMINATE AT NOON, PACIFIC TIME, ON , 1997, BUT MAY BE
EXTENDED. Such extensions may be granted without notice to subscribers. If the
Conversion is not consummated within 45 days after the last day of the
Subscription Offering (which may conclude no later than , 1997) and the
Company elects to extend the Offerings, with the approval of the Division, if
necessary, subscribers will be notified in writing of the time period within
which they must notify the Company of any intention to increase, decrease or
rescind stock orders. If an affirmative response to any such resolicitation is
not received by the Company, a subscriber's stock order will be rescinded and
subscription funds will be returned promptly, together with interest from the
date such funds were received by the Company, and all withdrawal
authorizations from deposit accounts at the Bank will be terminated. No single
extension may exceed 90 days. If the Offerings are not extended or, in any
event, if the Conversion is not consummated by , 1997, all stock orders
will be rescinded, funds returned and withdrawal authorizations terminated, as
described above.
In the event the Company is unable to find purchasers from the general
public for an insignificant number of unsubscribed shares, other purchase
arrangements will be made by the Board of Directors of the Bank, if feasible.
Such other arrangements will be subject to the approval of the Division.
Persons in Non-Qualified States. The Company and the Bank will make
reasonable efforts to comply with the securities laws of all states in the
United States in which persons entitled to subscribe for stock pursuant to the
Plan reside. However, the Company and the Bank are not required to offer stock
in the Subscription Offering to any person who resides in a foreign country or
resides in a state of the United States with respect to which (i) a small
number of persons otherwise eligible to subscribe for shares of Conversion
Stock reside in such state; or (ii) the Company or the Bank determines that
compliance with the securities laws of such state would be impracticable for
reasons of cost or otherwise, including but not limited to a request that the
Company and the Bank or their officers, directors or trustees register as a
broker, dealer, salesman or selling agent, under the securities laws of such
state, or a request to register or otherwise qualify the subscription rights
or Conversion Stock for sale or submit any filing with respect thereto in such
state. Where the number of persons eligible to subscribe for shares in one
state is small, the Company and the Bank will base their decision as to
whether or not to offer the Conversion Stock in such state on a number of
factors, including the size of accounts held by account holders in the state,
the cost of registering or qualifying the shares or the need to register the
Company, its officers, directors or employees as brokers, dealers or salesmen.
THE EXCHANGE
General. The regulations and policies governing mutual holding companies
provide that in a conversion of a mutual holding company to the stock holding
company form of organization, the Minority Stockholders will be entitled to
exchange their Minority Shares for Exchange Shares, provided the Bank and the
Mutual Holding Company demonstrate to the satisfaction of the Division and the
FDIC that the basis for the exchange is fair and reasonable. The Boards of
Directors of the Bank and the Company have determined that each Minority Share
will, at the Effective Time of the Conversion, be converted into and become
the right to receive a number of Exchange Shares determined pursuant to the
Exchange Ratio that ensures that after the Conversion and before giving effect
to purchases of Conversion Stock by Minority Stockholders in the Offering, and
receipt by Minority Stockholders of cash in lieu of fractional shares,
Minority Stockholders will own approximately the same aggregate percentage of
the Common Stock as they own of the Bank Common Stock immediately prior to the
Effective Time adjusted downward to reflect the aggregate amount of Bank
Common Stock dividends waived by the Mutual Holding Company and the amount of
assets, other than Bank Common Stock held by the Mutual
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Holding Company. The Mutual Holding Company had assets of $120,000 and waived
$1,230,000 in dividends, as of June 30, 1997.
The adjustments described above decrease the Minority Stockholders'
ownership interest to 32.12% from 33.69% based on the following calculation:
Bank Stockholders' Equity at 6/30/97--Aggregate Dividends Waived by MHC x
- -------------------------------------------------------------------------
Minority Stockholders' 33.69% Ownership = 32.1925%
- --------------------------------------------------
Bank Stockholders' Equity at 6/30/97
The adjustment described above would further adjust the Minority
Stockholders ownership interest as follows:
32.1925% x Pro Forma Market Value of the Company--Market Value of Assets of
- ---------------------------------------------------------------------------
MHC Other than Bank Common Stock = 32.12%
- ----------------------------------------
(Rounded)
Pro Forma Market Value of the Company
To determine the Exchange Ratio, the adjusted Minority Stockholders'
ownership interest was multiplied by the number of shares to be issued in the
Conversion, and the result was divided by the number of Minority Shares
outstanding (609,616) shares as of June 30, 1997. Immediately prior to
consummation of the Conversion, the Bank will recalculate the Minority
Stockholders' ownership interest pursuant to the above formula, which will
take into account changes in stockholders' equity and percentage ownership at
such date.
The following table sets forth, based upon the minimum, midpoint, maximum
and 15% above the maximum of the Valuation Price Range, the following: (i) the
total number of shares of Conversion Stock and Exchange Shares to be issued in
the Conversion, (ii) the percentage of the total Common Stock represented by
the Conversion Stock and the Exchange Shares, and (iii) the Exchange Ratio.
The table assumes that there is no cash paid in lieu of issuing fractional
Exchange Shares.
<TABLE>
<CAPTION>
CONVERSION STOCK EXCHANGE SHARES TOTAL SHARES
TO BE ISSUED(1) TO BE ISSUED(1) OF COMMON
----------------- ----------------- STOCK TO BE EXCHANGE
AMOUNT PERCENT AMOUNT PERCENT OUTSTANDING RATIO
--------- ------- --------- ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Minimum.............. 3,060,000 67.88% 1,447,959 32.12% 4,507,959 2.3752
Midpoint............. 3,600,000 67.88 1,703,449 32.12 5,303,449 2.7943
Maximum.............. 4,140,000 67.88 1,958,998 32.12 6,098,998 3.2135
15% above maximum.... 4,761,000 67.88 2,252,835 32.12 7,013,835 3.6955
</TABLE>
- --------
(1) Assumes that outstanding options to purchase 42,717 shares of Bank Common
Stock at June 30, 1997 are not exercised prior to consummation of the
Conversion. Assuming that all of such options are exercised prior to such
consummation, the percentages represented by the Conversion Stock and the
Exchange Shares would amount to 66.40% and 33.60%, respectively, and the
Exchange Ratio would amount to 2.4838, 2.9233, 3.3628, and 3.8682 at the
minimum, midpoint, maximum and 15% above the maximum of the Valuation
Price Range, respectively.
(2) Assumes that the Company does not issue authorized but unissued shares to
the ESOP immediately following the Conversion.
The actual Exchange Ratio is not dependent on the market value of the
Minority Shares. It will be determined based upon the number of shares of
Common Stock issued in the Offerings and the Minority Stockholders' percentage
ownership in the Bank prior to consummation of the Conversion adjusted
downward to take into account the effect of the aggregate amount of dividends
declared by the Bank and waived by the Mutual Holding Company and the assets
of the Mutual Holding Company). At the minimum, midpoint and maximum of the
Valuation Price Range, one Minority Share will be exchanged for 2.3752, 2.7943
and 3.2135 shares of common Stock, respectively (which have calculated
equivalent estimated value of $23.75, $27.94 and $32.13 based on the Purchase
Price of Conversion Stock in the Offerings and the aforementioned Exchange
Ratios). However, there can be no assurance as to the actual market value of a
share of Common Stock after the
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Conversion or that such shares can be sole at or above the $10.00 per share
Purchase Price. Any increase or decrease in the number of shares of Conversion
Stock will result in a corresponding change in the number of Exchange Shares,
so that upon consummation of the Conversion, the Conversion Stock and the
Exchange Stock will represent approximately 67.88% and 32.12%, respectively,
of the Company's total outstanding shares of Common Stock. Each holder of a
certificate or certificates evidencing issued and outstanding Minority Shares
will be entitled to receive in exchange therefor a certificate or certificates
representing the number of full shares of Common Stock for which the Minority
Shares will have been converted based on the Exchange Ratio. To effect the
Exchange, a duly appointed agent of the Bank will promptly mail to each such
holder of record of an outstanding certificate which immediately prior to the
consummation of the Conversion evidenced Minority Shares, a letter of
transmittal (which will specify that delivery shall be effected, and risk of
loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
Exchange effected by the Conversion and of the procedure for surrendering to
the Exchange Agent such certificate in exchange for a certificate or
certificates evidencing Common Stock. MINORITY STOCKHOLDERS SHOULD NOT FORWARD
TO THE BANK OR THE EXCHANGE AGENT CERTIFICATES UNTIL THEY HAVE RECEIVED THE
TRANSMITTAL LETTER.
No holder of a certificate representing shares of Bank Common Stock will be
entitled to receive any dividends in respect of the Common Stock into which
such shares shall have been converted by virtue of the conversion until the
certificate representing such shares of Bank Common Stock is surrendered in
exchange for certificates representing shares of Common Stock. In the event
that dividends are declared and paid by the Company in respect of Common Stock
after the consummation of the Conversion but prior to surrender of
certificates representing shares of Bank Common Stock, dividends payable in
respect of shares of Common Stock not then issued will accrue (without
interest). Any such dividends will be paid (without interest) upon surrender
of the certificates representing such shares of Bank Common Stock. The Company
will be entitled, after the consummation of the Conversion, to treat
certificates representing shares of Bank Common Stock as evidencing ownership
of the number of full shares of Common Stock into which the shares of Bank
Common Stock represented by such certificates shall have been converted,
notwithstanding the failure on the part of the holder thereof to surrender
such certificates.
The Company shall not be obligated to deliver a certificate or certificates
representing shares of Common Stock to which a holder of Bank Common Stock
would otherwise be entitled as a result of the Conversion until such holder
surrenders the certificate or certificates representing the shares of Bank
Common Stock for exchange as provided above, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a bond as may be
required in each case by the Company.
DISSENTERS' RIGHTS
The Plan of Conversion provides that stockholders of the Bank have the right
to dissent from the mergers of the Bank with the MHC and with an interim bank
formed to facilitate the Conversion, with the Bank as the surviving entity in
each Merger, and, subject to certain conditions, to receive payment of the
"value" of their shares of Bank Common Stock, as provided in Washington law.
Under Washington state law (RCW 23B.13), a stockholder of the Bank may
exercise "dissenters' rights" and receive the fair value of his or her shares
in cash, if certain procedures are followed. To exercise these rights, a Bank
stockholder must (i) deliver to the Bank, before the vote on approval of the
Conversion is taken, written notice of intent to demand payment for his or her
shares if the Conversion is effected, and (ii) not vote in favor of the
Conversion. Following consummation of the Conversion, the Company will send a
Dissenters' Notice to each Bank stockholder who has properly perfected his or
her dissenters' rights. A dissenting shareholder must also follow the
procedures set forth in the Dissenters' Notice. The Dissenters' Notice will
include instructions to completing the exercise of dissenters' rights,
including that the dissenting stockholder must (1) make written demand for
payment of the fair value of his or her shares in the form sent to the
stockholder by the corporation along with the Dissenters' Notice (this notice
will prescribe a time period within which the demand must be made), (2)
certify that the beneficial ownership of his or Bank Common Stock shares was
acquired before the
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<PAGE>
date set forth in the Dissenters' Notice, and (3) surrender his or her stock
certificates representing shares of the Bank Common Stock in accordance with
the Dissenters' Notice. If a stockholder exercises dissenters' rights, the
dissenting stockholder is entitled to receive the fair value of his or her
shares in cash. Such value may be higher or lower than the value of Exchange
Shares issuable pursuant to the Conversion.
A vote against the Conversion will not in and of itself satisfy the
requirements of the Washington statute; a stockholder who does not deliver to
the Bank prior to the Special Meeting a written notice of the stockholder's
intent to demand payment for the fair value of the shares of Bank Common Stock
held will lose the right to exercise dissenters' rights. In addition, any
stockholder electing to exercise dissenters' rights must either vote against
the Conversion or abstain from voting. The failure of a stockholder to comply
strictly with the statutory requirements will result in a loss of dissenters'
rights. A copy of the relevant statutory provisions is attached as Appendix
and Minority Stockholders are urged to refer to this Appendix for a complete
statement concerning dissenters' rights. The foregoing summary of such rights
is qualified in its entirety by reference to such Appendix .
MARKETING ARRANGEMENTS
The Bank and the Company have engaged Ryan Beck, a National Association of
Securities Dealers ("NASD") member firm as a financial and marketing advisor
in connection with the Offerings, and Ryan Beck has agreed to use its best
efforts to assist the Company with the solicitation of subscriptions for
shares of Conversion Stock in the Offerings. The services to be rendered by
Ryan Beck include the following: (i) consulting as to the securities marketing
implications of any aspect of the Plan or related corporate documents; (ii)
reviewing all offering documents, including the Prospectus, stock order forms
and related offering materials; (iii) assisting in the design and
implementation of a marketing strategy for the Offerings; (iv) organizing and
supervising the Stock Information Center, including the proxy solicitation in
connection with the Special Meetings to approve the Conversion; (v) training
Bank personnel with respect to the Conversion and their roles in the process;
(vi) assisting management in scheduling and preparing for meetings with
potential investors and broker-dealers; (vii) soliciting stock orders; and
(viii) providing such other general advice and assistance as may be requested
to promote the successful completion of the Conversion. In addition, Ryan Beck
will manage any Syndicated Community Offering.
The engagement of Ryan Beck and the services performed thereunder, including
any "due diligence" investigation of the operations of the Bank, should not be
construed as an endorsement or recommendation of the suitability of an
investment in the Common Stock or a verification of the accuracy or
completeness of the information contained herein. Ryan Beck has not prepared
any report or opinion constituting a recommendation or advice to the Bank or
to persons who may purchase shares in the Offerings regarding the suitability
of an investment in the Common Stock or as to the prices at which the Common
Stock may trade.
Based upon negotiations between the Bank, the Company and Ryan Beck, Ryan
Beck will receive a management and advisory fee of $50,000, a marketing fee
equal to 1.50% of the aggregate Purchase Price of Conversion Stock sold in the
Subscription and Minority Stockholders' Offerings, and a marketing fee of 2.0%
on such sales in the Community Offering. No fees will be paid to Ryan Beck on
subscriptions by any director, officer or employee of the Bank or the Company
or members of their immediate families or the ESOP. In the event that a
selected dealers agreement is entered into in connection with a Syndicated
Community Offering, the Bank will pay a fee to such selected dealers of up to
7.0% including a management fee to Ryan Beck of 1.50% for shares sold by NASD
member firms, other than Ryan Beck. Fees to Ryan Beck and to any other NASD
member firm may be deemed to be underwriting fees and Ryan Beck and such
broker-dealers may be deemed to be underwriters.
Ryan Beck will also be reimbursed for its reasonable out-of-pocket expenses,
including legal fees of its counsel, up to $35,000, and other expenses not to
exceed $15,000 without Company approval. The Bank and the Company have agreed
to indemnity Ryan Beck in connection with certain claims or liabilities,
including certain liabilities under the Securities Act. Ryan Beck has received
advances towards its fees totaling $25,000. Total
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<PAGE>
fees to Ryan Beck, including the $50,000 management and advisory fee, are
estimated to be $407,000 and $556,000 at the minimum and the maximum of the
Valuation Price Range, respectively. See "Pro Forma Data" for the assumptions
used to arrive at these estimates.
The management and employees of the Bank may participate in the Offerings in
clerical capacities, providing administrative support in effecting sales
transactions or answering questions of a mechanical nature, such as the proper
execution of the order form. Management of the Bank may answer questions
regarding the business of the Bank. Other questions of prospective purchasers,
including investment related questions, will be directed to Ryan Beck
registered representatives. The management and employees of the Bank have been
instructed not to solicit offers to purchase Conversion Stock or to provide
advice regarding the purchase of Conversion Stock. None of the Bank's
employees or directors who participate in the Offerings will receive any
special compensation or other remuneration for such activities.
None of the Bank's personnel participating in the Offerings are registered
or licensed as a broker or dealer or an agent of a broker or dealer. The
Bank's personnel will assist in the above-described sales activities pursuant
to an exemption from registration as a broker or dealer provided by Rule 3a4-l
("Rule 3a4-l ") promulgated under the Exchange Act. Rule 3a4-l generally
provides that an "associated person of an issuer" of securities shall not be
deemed a broker solely by reason of participation in the sale of securities of
such issuer if the associated person meets certain conditions. Such conditions
include, but are not limited to, that the associated person participating in
the sale of an issuer's securities not be compensated in connection therewith
at the time of participation, that such person not be associated with a broker
or dealer and that such person observe certain limitations on his
participation in the sale of securities. For purposes of this exemption,
"associated person of an issuer" is defined to include any person who is a
director, officer or employee of the issuer or a company that controls, is
controlled by or is under common control with the issuer.
PROCEDURE FOR PURCHASING SHARES IN OFFERINGS
To ensure that each purchaser receives a Prospectus at least 48 hours before
the Expiration Date in accordance with Rule l5c2-8 of the Exchange Act, no
Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the stock
order form will confirm receipt or delivery in accordance with Rule 15c2-8.
Stock order forms will only be distributed with a Prospectus.
To purchase shares in the Subscription, Minority Stockholders' and Community
Offerings, an executed stock order form, with the required payment for each
share subscribed for, or with appropriate authorization for withdrawal from
the subscriber's deposit accounts with the Bank must be received by the Bank
at any of its branch offices by Noon, Pacific Time, on the Expiration Date.
Stock order forms which are not received by such time or are executed
defectively or are received without full payment (or appropriate withdrawal
instructions) are not required to be accepted. In addition, the Bank is not
obligated to accept orders submitted on photocopied or facsimilied stock order
forms. Notwithstanding the foregoing, the Company shall have the right, in its
sole discretion, to permit institutional investors to submit irrevocable
orders together with a legally binding commitment for payment and to
thereafter pay for the shares of Conversion Stock for which they subscribe in
the Community Offering at any time prior to 48 hours before the completion of
the Conversion. The Company and the Bank have the right to waive or permit the
correction of incomplete or improperly executed stock order forms, but do not
represent that they will do so. Pursuant to the Plan of Conversion, the
interpretation by the Company and the Bank of the terms and conditions of the
Plan of Conversion and acceptability of the order form will be final. Once
received, an executed stock order form may not be modified, amended or
rescinded without the consent of the Bank unless the Company conducts a
resolicitation of subscribers.
In order to help ensure that prospective purchasers are properly identified
as to their stock purchase priorities, depositors as of the Eligibility Record
Date (June 30, 1996) or the Supplemental Eligibility Record Date ( , 1997)
must list all accounts on the stock order form, all account holders' names in
each Bank deposit account, and the account number.
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Payment for subscriptions may be made (i) in cash if delivered in person at
any branch office of the Bank; (ii) by check, bank draft or money order; or
(iii) by authorization of withdrawal from deposit accounts maintained with the
Bank. Interest will be paid on payments made by cash, check, bank draft or
money order at the Bank's passbook rate of interest from the date payment is
received until the completion or termination of the Conversion. If payment is
made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn will continue to accrue interest at the contractual
rates until completion or termination of the Conversion, but a hold will be
placed on such funds, thereby making them unavailable to the depositor. At the
completion of the Conversion, withdrawals will be made and the funds received
in the Offerings will be used to purchase the shares of Conversion Stock. The
shares issued in the Conversion cannot and will not be insured by the FDIC or
any other governmental agency.
The Bank will waive any applicable penalties for early withdrawal from
certificate accounts at the Bank. If the remaining balance in a certificate
account is reduced below the applicable minimum balance requirement at the
time that the funds actually are transferred under the authorization, the
certificate will be canceled at the time of the withdrawal, without penalty,
and the remaining balance will earn interest at the passbook rate.
The ESOP will not be required to pay for the shares subscribed for at the
time it subscribes, but rather, may pay for such shares of Conversion Stock
subscribed for at the Purchase Price upon consummation of the Offerings;
provided, that there is in force from the time of its subscription until such
time, a loan commitment from an unrelated financial institution or the Company
to lend to the ESOP, at such time, the aggregate Purchase Price of the shares
for which it subscribed.
Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares of Conversion Stock in the Offerings, provided that such IRAs are not
maintained at the Bank. Persons with self-directed IRAs maintained at the Bank
must have their accounts transferred to an unaffiliated institution or broker
to purchase shares of Conversion Stock in the Offerings. In addition, the
provisions of ERISA and IRS regulations require that officers, directors and
ten percent shareholders who use self-directed IRA funds to purchase shares of
Conversion Stock in the Offerings, make such purchases for the exclusive
benefit of IRAs.
Certificates representing, shares of Conversion Stock purchased, and any
refund due, will be mailed to purchasers at such address as may be specified
in properly completed stock order forms as soon as practicable following
consummation of the sale of all shares of Conversion Stock. Any certificates
returned as undeliverable will be disposed of in accordance with applicable
law. Until certificates for the Common Stock are available and delivered to
subscribers and purchasers, subscribers and purchasers may not be able to sell
the shares of Common Stock for which they subscribed or purchased.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The Plan of Conversion requires that the aggregate purchase price of the
securities sold in connection with the Conversion be based upon an estimated
pro forma value of the Bank and the MHC (i.e., taking into account the
expected receipt of proceeds from the sale of securities in the Conversion) as
determined by an independent appraisal. The Bank and the Company have retained
RP Financial to prepare an appraisal of the pro forma market value of the
common stock and a business plan. A COPY OF THE APPRAISAL IS AVAILABLE FOR
INSPECTION AT EACH OFFICE OF THE BANK. RP Financial will receive a fee
expected to total approximately $35,000 for its appraisal services and
preparation of a business plan, plus reasonable out-of-pocket expenses
incurred in connection with the appraisal. The Bank has agreed to indemnify RP
Financial under certain circumstances against liabilities and expenses
(including legal fees) arising out of, related to, or based upon the
Conversion.
RP Financial prepared the Appraisal dated August 15, 1997 and as updated on
, which states that the aggregate pro forma market value of the Bank and
the Mutual Holding Company inclusive of the sale of an approximate 67.88%
ownership interest in the Offerings was $53,034,770 at the midpoint as of
August 15, 1997 and as updated on , 1997. The Appraisal was multiplied by
67.88%, which is the Mutual Holding Company's percentage ownership interest in
the Bank as adjusted upward from the 66.31% to reflect $1,230,000
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of dividends declared by the Bank and waived by the Mutual Holding Company and
the $120,000 in assets held by the MHC. The resulting amount, $36,000,000, is
the midpoint of the dollar amount of Conversion Stock to be offered in the
Offerings. The minimum and maximum of the offering range were set at 15% below
and above the midpoint, respectively, resulting in an offering range of
$30,600,000 to $41,400,000 of Conversion Stock. The Boards of Directors of the
Company and the Bank determined that the Conversion Stock would be sold at
$10.00 per share, resulting in a range of 3,060,000 to 4,140,000 shares of
Conversion Stock being offered. The Plan of Conversion requires that all of
the shares subscribed for in the Offerings be sold at the same price per
share.
The Appraisal involved a comparative evaluation of the operating and
financial statistics of the Bank with those of other thrift institutions. The
Appraisal also took into account such other factors as the market for thrift
institution stocks generally, prevailing economic conditions, both nationally
and in the State of Washington, which affect the operations of thrift
institutions, the competitive environment within which the Bank operates and
the effect of the Bank becoming a subsidiary of the Company. No detailed
individual analysis of the separate components of the MHC's and the Bank's
assets and liabilities was performed in connection with the evaluation. The
Board of Directors reviewed the appraisal, including the methodology and the
appropriateness of the assumptions utilized by RP Financial, and the Board
accepted the valuation.
Following commencement of the Subscription and Community Offerings, the
maximum of the Valuation Price Range may be increased up to 15% and the number
of shares of Conversion Stock to be issued in the Conversion may be increased
to 4,761,000 shares due to regulatory considerations, changes in market
conditions or general financial and economic conditions, without the
resolicitation of subscribers. See "--Limitations on Purchases and Ownership
of Shares" as to the method of distribution and allocation of additional
shares that may be issued in the event of an increase in the Valuation Price
Range to fill unfilled orders in the Offerings.
No sale of the shares will take place until RP Financial confirms to the
Division and the FDIC that, to the best of RP Financial's knowledge and
judgment, nothing of a material nature has occurred which would cause it to
conclude that the aggregate Purchase Price (i.e. gross proceeds) received in
the Offerings is incompatible with its Appraisal. If, however, the facts do
not justify such a statement, the Offerings may be canceled, a new Valuation
Price Range and price per share set and new Subscription, Minority
Stockholders, Community and Syndicated Community Offerings held.
If, based on RP Financial's estimate, the pro forma market value of Common
Stock as of such date is not more than 15% above the maximum and not less than
the minimum of the Valuation Price Range, then (1) with the approval of the
Division and the FDIC, the number of shares of Common Stock to be issued
Conversion may be increased or decreased, pro rata to the increase or decrease
in value without resolicitation of subscriptions, to no more than 4,761,000
shares or no less than 3,060,000 shares, and (2) all shares purchased in the
Offerings will be purchased for the Purchase Price of $10.00 per share. If the
number of shares issued in the Conversion is increased due to an increase of
up to 15% in the Valuation Price Range to reflect Regulatory Consideration and
changes in market and financial conditions. See "--Limitations on Purchases
and Ownership of Shares."
In formulating the Appraisal, RP Financial relied upon the truthfulness,
accuracy and completeness of all documents the Bank furnished it. RP Financial
also considered financial and other information from regulatory agencies,
other financial institutions and other public sources, as appropriate. While
RP Financial believes this information to be reliable, RP Financial does not
guarantee the accuracy or completeness of such information and did not
independently verify the financial statements and other data provided by the
Bank and the Company or independently value the assets or liabilities of the
Company and the Bank. THE APPRAISAL BY RP FINANCIAL IS NOT INTENDED TO BE, AND
MUST NOT BE INTERPRETED AS, A RECOMMENDATION OF ANY KIND AS TO THE
ADVISABILITY OF VOTING TO APPROVE THE CONVERSION OR OF PURCHASING SHARES OF
COMMON STOCK. MOREOVER, BECAUSE THE APPRAISAL IS NECESSARILY BASED ON MANY
FACTORS WHICH CHANGE FROM TIME TO TIME, THERE IS NO ASSURANCE THAT PERSONS WHO
PURCHASE CONVERSION STOCK
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OR RECEIVE EXCHANGE SHARES IN THE CONVERSION WILL BE ABLE TO SELL SHARES
THEREAFTER AT PRICES AT OR ABOVE THE PURCHASE PRICE.
LIMITATIONS ON PURCHASES AND OWNERSHIP OF SHARES
The Plan of Conversion sets forth purchase limitations applicable to the
Offerings. The minimum stock order is 25 shares. Except for the ESOP, which is
expected to purchase 8% of the Conversion Stock sold, no person (or persons
through a single subscription right), together with any associate or group or
persons acting in concert, may subscribe for more than $250,000 in all
categories of the Offerings combined. In addition to these purchase
limitations, no person, together with any associate or group of persons acting
in concert may, upon completion of the Conversion, own more than 2% of the
Common Stock outstanding. This ownership limitation pertains to the aggregate
of Conversion Stock purchased and Exchange Shares received by the subscriber.
Notwithstanding the foregoing, no Minority Stockholder will be required to
dispose of Minority Shares if, without purchasing Conversion Stock, the
Exchange will result in ownership of in excess of 2% of the Common Stock. The
purchase limitations and ownership limitation may be changed at the discretion
of the Company, as described herein.
The Bank's and the Company's Boards of Directors may, in their sole
discretion, increase the maximum purchase limitation to 9.99% of the shares of
Conversion Stock sold in the Conversion, provided that orders for shares which
exceed 5% of the shares of Conversion Stock sold in the Conversion may not
exceed, in the aggregate, 10% of the shares sold in the Conversion. If the
Board of Directors decides to increase the purchase limitation above $250,000,
all persons who subscribed for the maximum number of shares will be given the
opportunity to increase their subscriptions accordingly, subject to the rights
and preferences of any person who has priority subscription rights.
In the event of an increase in the total number of shares offered in the
Conversion due to an increase in the Valuation Price Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be allocated in the following
priority in accordance with the Plan: (i) to fill the ESOP's subscription of
8% of the Adjusted Maximum number of shares; (ii) in the event that there is
an oversubscription by Eligible Account Holders, to fill their unfulfilled
subscriptions; (iii) in the event that there is an oversubscription by
Supplemental Eligible Account Holders, to fill their unfulfilled
subscriptions; (iv) in the event that there is an oversubscription by Other
Members, to fill their unfulfilled subscriptions; (v) in the event that there
is an oversubscription by Minority Stockholders to fill their subscriptions;
and (iv) to fill unfulfilled subscriptions in the Community Offering with
preference to Preferred Subscribers.
The term "associate" of a person is defined in the Plan to mean (i) any
corporation or organization (other than the Bank or a majority-owned
subsidiary of the Bank or the 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 (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person or who is a
director or officer of the Bank, or any of its subsidiaries, or the Mutual
Holding Company. For example, a corporation of which a person serves as an
officer would be an associate of such person and, therefore, all shares
purchased by such corporation would be included with the number of shares
which such person could purchase individually under the above limitations.
The term "acting in concert" is defined in the Plan to mean (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii)
a combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. A
person or company which acts in concert with another person or company ("other
party") shall also be deemed to be acting in concert with any person or
company who is also acting in concert with that other party, except that any
tax-qualified employee stock benefit plan will not be deemed to be acting in
concert with its trustee or a person who serves in a similar capacity solely
for the purpose of determining whether stock held
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by the trustee and stock held by the plan will be aggregated. The term
"officer" is defined in the Plan to mean an executive officer of the Bank, the
Company or the MHC.
Common Stock purchased or received in the Exchange pursuant to the
Conversion will be freely transferable, except for shares purchased by
directors and officers of the Bank and the Company and by NASD members. See
"--Restrictions on Transferability by Directors and Officers and NASD
Members."
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS
Shares of Conversion Stock purchased by directors and officers of the
Company may not be sold for a period of one year following completion of the
Conversion, except in the event of the death of the stockholder or in any
exchange of the Common Stock in connection with a merger or acquisition of the
Company. Shares of Common Stock received by directors or officers upon
exercise of options issued pursuant to the Stock Option Plan are not subject
to this restriction. Accordingly, shares of Common Stock issued by the Company
to directors and officers shall bear a legend giving appropriate notice of the
restriction and, in addition, the Company will give appropriate instructions
to the transfer agent for the Common Stock with respect to the restriction on
transfers. Any shares issued to directors and officers as a stock dividend,
stock split or otherwise with respect to restricted Common Stock shall be
subject to the same restrictions.
Purchases of outstanding shares of Common Stock of the Company by directors,
executive officers (or any person who was an executive officer or director of
the Bank after adoption of the Plan of Conversion) and their associates during
the three-year period following Conversion may be made only through a broker
or dealer registered with the SEC, except with the prior written approval of
the Division. This restriction does not apply, however, to negotiated
transactions involving more than 1% of the Company's outstanding Common Stock
or to the purchase of stock pursuant to the Stock Option Plan.
The Company has filed with the SEC a registration statement under the
Securities Act for the registration of the Common Stock to be issued pursuant
to the Conversion. The registration under the Securities Act of shares of the
Common Stock to be issued in the Conversion does not cover the resale of such
shares. Shares of Common Stock purchased by persons who are not affiliates of
the Company may be resold without registration. Shares purchased by an
affiliate of the Company will be subject to the resale restrictions of Rule
144 under the Securities Act. If the Company meets the current public
information requirements of Rule 144 under the Securities Act, each affiliate
of the Company who complies with the other conditions of Rule 144 (including,
those that require the affiliate's sale to be aggregated with those of certain
other persons) would be able to sell in the public market, without
registration, a number of shares not to exceed, in any three-month period, the
greater of (i) 1% of the outstanding shares of the Company or (ii) the average
weekly volume of trading, in such shares during the preceding, four calendar
weeks. Provision may be made in the future by the Company to permit affiliates
to have their shares registered for sale under the Securities Act under
certain circumstances.
In addition, under guidelines of the NASD, members of the NASD and their
associates are subject to certain restrictions on the transfer of securities
purchased in accordance with subscription rights and to certain reporting
requirements upon purchase of such securities.
RESTRICTIONS ON ACQUISITION OF THE COMPANY AND THE BANK
The following discussion is a summary of certain provisions of Washington
and Federal law and regulations and Washington corporate law, as well as the
Articles of Incorporation and Bylaws of the Company, relating to stock
ownership and transfers, the Board of Directors and business combinations, all
of which may be deemed to have "anti-takeover" effects. The description of
these provisions is necessarily general and reference should be made to the
actual law and regulations and to the Articles of Incorporation and Bylaws of
the Company. See "Additional Information" as to how to obtain a copy of these
documents.
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WASHINGTON LAW
As required by Washington law, as soon as practicable following the
Conversion, the Bank will enter into an agreement with the Division which will
provide that for a period of three years following the date of Conversion, any
company significantly engaged in an unrelated business activity (either
directly or through an affiliate thereof) shall not be permitted to acquire
control of the Bank. For purposes of this agreement, a person or company shall
be deemed to have "control" of the Bank if the person directly or indirectly
or acting, in concert with one or more other persons or through one or more
subsidiaries, owns, controls, or holds with power to vote, or holds proxies
representing, more than 25% of the voting shares of the Company, or controls
in any manner the election of a majority of the directors of the Company. A
company shall be deemed to be "significantly engaged" in an unrelated business
activity if such activity represents on either an actual or a pro forma basis
more than 15% of its consolidated net worth at the close of its preceding
fiscal year or of its consolidated net earnings for such fiscal year. The term
"unrelated business activity" means any business activity not authorized for a
savings bank or any subsidiary thereof.
In addition, for a period of three years following completion of the
Conversion, no person or entity may make directly, or indirectly, any offer to
acquire or actually acquire capital stock of the Bank (or the Company) if,
after consummation of such acquisition, such person would be the beneficial
owner of more than 10% of the Bank's (or Company's) capital stock, without the
prior approval of the Division. However, approval is not required for
purchases directly from the Bank or Company or the underwriters or selling
group acting on their behalf with a view towards public resale, or for
purchases not exceeding 1% per annum of the shares outstanding.
FEDERAL BANKING LAW
Federal Change in Bank Control Law. The Change in Bank Control Act requires
any person or group of persons acting in concert who at any time intend to
acquire control of an insured depository institution or its parent holding
company to give 60 days prior written notice to the "appropriate Federal
banking agency." The Federal Reserve is the "appropriate Federal banking
agency" for bank holding companies. Control for these purposes exists when the
acquiring party owns or controls at least 10% of any class of voting
securities of a bank holding company registered under the Exchange Act or has
the power to direct the management or policies of an institution.
Federal Bank Holding Company Law. The BHCA provides that no company may
acquire "control" of a bank or bank holding company) without the prior
approval of the Federal Reserve. Any company that acquires such control
becomes a "bank holding company" subject to registration, examination and
regulation by the Federal Reserve. Pursuant to the BHCA, a company has control
over a bank or bank holding company if it has the power to vote 25% or more of
any class of voting stock of the bank or bank holding company, controls the
election of a majority of the directors of the bank or bank holding company,
or exercises a controlling, influence over the management or policies of the
bank or bank holding company. The Federal Reserve may find that a company
controls a bank or bank holding company if the company owns or controls more
than 10% of any class of voting securities of the bank or bank holding company
and certain other relationships exist between the company and the bank or bank
holding company. The Federal Reserve may prohibit an acquisition of control if
it finds, among other things, that (i) the acquisition would result in a
monopoly or substantially, lessen competition, (ii) the financial condition of
the acquiring person might jeopardize the financial stability of the
institution, or (iii) the competence, experience or integrity of the acquiring
person indicates that it would not be in the interest of the depositors or the
public to permit the acquisition of control by such person.
ANTI-TAKEOVER PROVISIONS
A number of provisions of the Company's Articles of Incorporation and Bylaws
deal with matters of corporate government and certain rights of stockholders.
The following discussion is a general summary of certain provisions of the
Company's Articles of Incorporation and Bylaws and regulatory provisions
relating to stock ownership and transfers, the Board of Directors and business
combinations which might be deemed to have a potential "anti-takeover" effect.
These provisions may have the effect of discouraging a future takeover
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attempt which is not approved by the Board of Directors but which individual
Company stockholders may deem to be in their best interests or in which
stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. Such
provisions will also render the removal of incumbent Board of Directors or
management of the Company more difficult. The following description of certain
of the provisions of the Articles of Incorporation and Bylaws of the Company
is necessarily general, and reference should be made in each case to such
Articles of Incorporation and Bylaws, which are incorporated herein by
reference. See "Additional Information" as to how to obtain a copy of these
documents.
Policy of Independence. In addition to Article and Bylaw provisions which
might be deemed to have potential "anti-takeover" effects, the Company's Board
of Directors has adopted a statement of policy that the Company intends to
remain independent for the foreseeable future. Thus, potential investors
should not invest in Company Common Stock with the expectation that the
Company or the Bank may be merged into or its assets sold to another company
in the foreseeable future.
Restrictions on Acquisitions of Securities. The Articles of Incorporation
provide that for a period of five years from the effective date of the
Conversion, no person may acquire directly or indirectly acquire the
beneficial ownership of more than 10% of any class of equity security of the
Company, unless such offer or acquisition shall have been approved in advance
by a two-thirds vote of the Company's Continuing Directors (as defined in the
Articles of Incorporation). This provision does not apply to any employee
stock benefit plan of the Company. In addition, during such five-year period,
no shares beneficially owned in violation of the foregoing percentage
limitation, as determined by the Company's Board of Directors, shall be
entitled to vote in connection with any matter submitted to stockholders for a
vote. Additionally, the Articles of Incorporation provides for further
restrictions on voting rights of shares owned in excess of 10% of any class of
equity security of the Company beyond five years after the Conversion.
Specifically, the Articles of Incorporation provides that if, at any time
after five years from the Conversion, any person acquires the beneficial
ownership of more than 10% of any class of equity security of the Company,
then, with respect to each vote in excess of 10%, the record holders of voting
stock of the Company beneficially owned by such person shall be entitled to
cast only one-hundredth of-one vote with respect to each vote in excess 10% of
the voting power of the outstanding shares of voting stock of the Company
which such record holders would otherwise be entitled to cast without giving
effect to the provision, and the aggregate voting power of such record holders
shall be allocated proportionately among such record holders. An exception
from the restriction is provided if the acquisition of more than 10% of the
securities received the prior approval by a two-thirds vote of the Company's
"Continuing Directors." Under the Company's Articles of Incorporation, the
restriction on voting shares beneficially owned in violation of the foregoing
limitations is imposed automatically. In order to prevent the imposition of
such restrictions, the Board of Directors must take affirmative action
approving in advance a particular offer to acquire or acquisition. Unless the
Board took such affirmative action, the provision would operate to restrict
the voting by beneficial owners of more than 10% of the Company's Common Stock
in a proxy contest.
Board of Directors. The Board of Directors of the Company is divided into
three classes, each of which shall contain approximately one-third of the
whole number of the members of the Board. The members of each class shall be
elected for a term of three years, with the terms of office of all members of
one class expiring each year so that approximately one-third of the total
number of directors are elected each year. The Company's Articles of
Incorporation provides that the size of the Board shall be as set forth in the
Bylaws. The Bylaws currently set the number of directors at eight. The
Articles of Incorporation provides that any vacancy occurring in the Board,
including a vacancy created by an increase in the number of directors, shall
be filled by a vote of two-thirds of the directors then in office and any
director so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which the director has been
chosen expires. The classified Board is intended to provide for continuity of
the Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting, power to gain control of the Board
of Directors without the consent of the incumbent Board of Directors of the
Company. The Articles of Incorporation of the Company provide that a director
may be removed from the Board of Directors prior to the expiration of his term
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only for cause and only upon the vote of 66.66% of the outstanding shares of
voting stock. In the absence of this provision, the vote of the holders of a
majority of the shares could remove the entire Board, but only with cause, and
replace it with persons of such holders' choice.
Cumulative Voting Special Meetings and Action by Written Consent. The
Articles of Incorporation do not provide for cumulative voting for any
purpose. Moreover, the Articles of Incorporation provides that special
meetings of stockholders of the Company may be called only by the Board of
Directors of the Company and that stockholders may take action only at a
meeting and not by written consent.
Authorized Shares. The Articles of Incorporation authorize the issuance of
15,000,000 shares of Common Stock and 2,500,000 shares of preferred stock. The
shares of Common Stock and preferred stock were authorized in an amount
greater than that to be issued in the Conversion to provide the Company's
Board of Directors with as much flexibility as possible to effect, among other
transactions, financings, acquisitions, stock dividends, stock splits and the
exercise of employee stock options. However, these additional authorized
shares may also be used by the Board of Directors consistent with its
fiduciary duty to deter future attempts to gain control of the Company. The
Board of Directors also has sole authority to determine the terms of any one
or more series of preferred stock, including voting rights, conversion rates,
and liquidation preferences. As a result of the ability to fix voting rights
for a series of preferred stock, the Board has the power to the extent
consistent with its fiduciary duty to issue a series of preferred stock to
persons friendly to management in order to attempt to block a tender offer,
merger or other transaction by which a third party seeks control of the
Company, and thereby assist members of management to retain their positions.
The Company's Board currently has no plans for the issuance of additional
shares, other than the issuance of shares of Common Stock upon exercise of
stock options.
Stockholder Vote Required to Approve Business Combinations with Principal
Stockholders. The Articles of Incorporation require the approval of the
holders of at least 66.66% of the Company's outstanding shares of voting stock
to approve certain "Business Combinations" (as defined therein) involving a
"Related Person" (as defined therein) except in cases where the proposed
transaction has been approved in advance by a majority of those members of the
Company's Board of Directors who are unaffiliated with the Related Person and
were directors prior to the time when the Related Person became an Related
Person. The term "Related Person" is defined to include any individual,
corporation, partnership or other entity (other than the Company or its
subsidiary) which owns beneficially or controls, directly or indirectly, 10%
or more of the outstanding shares of voting stock of the Company or an
affiliate of such person or entity. This provision of the Articles of
Incorporation applies to any "Business Combination" which is defined to
include: (i) any merger or consolidation of the Company with or into any
Related Person; (ii) any sale, lease, exchange, mortgage, transfer, or other
disposition of 25% or more of the assets of the Company or combined assets of
the Company and its subsidiaries to a Related Person; (iii) any, merger or
consolidation of a Related Person with or into the Company or a subsidiary of
the Company; (iv) any sale, lease, exchange, transfer, or other disposition of
25% or more of the assets of a Related Person to the Company or a subsidiary
of the Company; (v) the issuance of any securities of the Company or a
subsidiary of the Company to a Related Person; (vi) the acquisition by the
Company or a subsidiary, of the Company of any securities of a Related Person;
(vii) any reclassification of common stock of the Company or any
recapitalization involving the common stock of the Company; or (viii) any
agreement or other arrangement providing for any of the foregoing.
Under Washington law, absent this provision, business combinations,
including mergers, consolidations and sales of substantially all of the assets
of a corporation must, subject to certain exceptions, be approved by the vote
of the holders of a majority of the outstanding shares of common stock of the
Company and any other affected class of stock. One exception under Washington
law to the majority approval requirement applies to stockholders owning 15% or
more of the common stock of a corporation for a period of less than three
years. Such 15% stockholder, in order to obtain approval of a business
combination, must obtain the approval of two-thirds of the outstanding stock,
excluding the stock owned by such 15% stockholder, or satisfy other
requirements under Washington law relating to board of director approval of
his acquisition of the shares of the Company. The increased stockholder vote
required to approve a business combination may have the effect of
82
<PAGE>
foreclosing mergers and other business combinations which a majority of
stockholders deem desirable and place the power to prevent such a merger or
combination in the hands of a minority of stockholders.
Amendment of Articles of Incorporation and Bylaws. Amendments to the
Company's Articles of Incorporation must be approved by a majority of its
Board of Directors and also by a majority of the outstanding shares of its
voting stock, provided, however, that an affirmative vote of at least 66.66%
of the outstanding voting stock entitled to vote (after giving effect to the
provision limiting voting rights) is required to amend or repeal certain
provisions of the Articles of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
directors, director and officer indemnification by the Company and amendment
of the Company's Bylaws and Articles of Incorporation. The Company's Bylaws
may, be amended by its Board of Directors, or by a vote of 66.66% of the total
votes eligible to be voted at a duly constituted meeting of stockholders.
Stockholder Nominations and Proposals. The Articles of Incorporation of the
Company requires a stockholder who intends to nominate a candidate for
election to the Board of Directors, or to raise new business at a stockholder
meeting to give not less than 30 nor more than 50 days' advance notice to the
Secretary of the Company. The notice provision requires a stockholder who
desires to raise new business to provide certain information to the Company
concerning the nature of the new business, the stockholder and the
stockholder's interest in the business matter. Similarly, a stockholder
wishing to nominate any person for election as a director must provide the
Company with certain information concerning the nominee and the proposing
stockholder.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Company is authorized to issue 15,000,000 shares of Common Stock having
no par value per share and 2,500,000 shares of preferred stock having no par
value per share. The Company, currently expects to issue up to 6,098,998
shares of Common Stock and no shares of preferred stock in the Conversion.
Each share of the Common Stock will have the same relative rights as, and will
be identical in all respects with, each other share of Common Stock. Upon
payment of the Purchase Price for the Common Stock, in accordance with the
Plan of Conversion, all such stock will be duly authorized, fully paid and
nonassessable.
THE COMMON STOCK OF THE COMPANY WILL REPRESENT NONWITHDRAWABLE CAPITAL, WILL
NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY THE FDIC.
COMMON STOCK
Dividends. The Company can pay dividends out of statutory surplus or from
certain net profits if, as and when declared by its Board of Directors. The
payment of dividends by the Company is subject to limitations which are
imposed by law and applicable regulation. See "Dividend Policy" and
"Supervision and Regulation." The holders of Common Stock of the Company will
be entitled to receive and share equally in such dividends as may be declared
by the Board of Directors of the Company out of funds legally available
therefor. If the Company issues preferred stock, the holders thereof may have
a priority over the holders of the Common Stock with respect to dividends.
Voting Rights. Upon Conversion, the holders of Common Stock of the Company
will possess exclusive voting rights in the Company. They will elect the
Company's Board of Directors and act on such other matters as are required to
be presented to them under Washington law or as are otherwise presented to
them by the Board of Directors. Except as discussed in "Restrictions on
Acquisition of the Company and the Bank," each holder of Common Stock will be
entitled to one vote per share and will not have any right to accumulate votes
in the election of directors. If the Company issues preferred stock, holders
of the Company preferred stock may also possess voting rights. Certain matters
require a vote of 66.66% of the outstanding shares entitled to vote thereon.
See "Restrictions on Acquisition of the Company and the Bank."
83
<PAGE>
Liquidation. In the event of any liquidation, dissolution or winding up of
the Bank, the Company, as holder of the Bank's capital stock would be entitled
to receive, after payment or provision for payment of all debts and
liabilities of the Bank (including all deposit accounts and accrued interest
thereon) and after distribution of the balance in the special liquidation
account to Eligible Account Holders and Supplemental Eligible Account Holders
(see "The Conversion"), all assets of the Bank available for distribution. In
the event of liquidation, dissolution or winding up of the Company, the
holders of its Common Stock would be entitled to receive, after payment or
provision for payment of all its debts and liabilities, all of the assets of
the Company available for distribution. If Company preferred stock is issued,
the holders thereof may have a priority over the holders of the Common Stock
in the event of liquidation or dissolution.
Preemptive Rights. Holders of the Common Stock of the Company will not be
entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the authorized Company preferred stock will be issued
in the Conversion and there are no plans to issue the preferred stock. Such
stock may be issued with such designations, powers, preferences and rights as
the Board of Directors may from time to time determine. The Board of Directors
can, without stockholder approval, issue preferred stock with voting,
dividend, liquidation and conversion rights which could dilute the voting
strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
RESTRICTIONS ON ACQUISITION
Acquisitions of the Company are restricted by provisions in its Articles of
Incorporation and Bylaws and by the rules and regulations of various
regulatory agencies. See "Supervision and Regulation" and "Restrictions on
Acquisition of the Company and the Bank."
COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL. As a result of the Conversion, holders of the Bank Common Stock
will become stockholders of the Company, a Washington corporation. There are
certain differences in stockholder rights arising from distinctions between
the Bank's Washington State Stock Articles and Bylaws and the Company's
Articles of Incorporation and Bylaws and from distinctions between laws with
respect to savings institutions and the Washington Business Corporation Act
("WBCA").
The discussion herein is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the
material differences and similarities affecting the rights of stockholders.
The discussion is qualified in its entirety by reference to the Articles of
Incorporation and Bylaws of the Company and the Bank ("Articles" and "Bylaws")
and the WBCA. See "Additional Information" for procedures for obtaining a copy
of the Company's Articles and Bylaws.
AUTHORIZED CAPITAL STOCK. The Company's authorized capital stock consists of
15,000,000 shares of Common Stock, no par value per share, and 2,500,000
shares of preferred stock, no par value per share ("Preferred Stock"). The
Bank's authorized capital stock consists of 10,000,000 shares of Bank Common
Stock, par value $1.00 per share, and 5,000,000 shares of blank check
preferred stock, par value $1.00 per share. The shares of Common Stock and
Preferred Stock were authorized in an amount greater than that to be issued in
the Conversion to provide the Company's Board of Directors with flexibility to
effect, among other transactions, financings, acquisitions, stock dividends,
stock splits and grants of employee stock options. The Board of Directors has
sole authority to determine the terms of any one or more series of Preferred
Stock, including dividends, voting rights, conversion rates, if any, and
liquidation preferences.
84
<PAGE>
ISSUANCE OF CAPITAL STOCK. Pursuant to applicable laws and regulations, the
MHC is required to own not less than a majority of the outstanding Bank Common
Stock. There will be no such restriction applicable to the Company following
consummation of the Conversion.
Neither the Articles of the Bank or the Company contain restrictions on the
issuance of shares of capital stock to directors, officers or controlling
persons. Thus, stock-related compensation plans such as stock option plans
could be adopted by either Company without stockholder approval and shares of
capital stock could be issued directly to directors or officers without
stockholder approval. Unlike the Bank, the Company will be subject to
jurisdiction of the NASD. The Rules of the NASD generally require corporations
with securities which are quoted on the Nasdaq National Market to obtain
stockholder approval of most stock compensation plans for directors, officers
and key employees of the corporation. Moreover, although generally not
required, stockholder approval of stock related compensation plans may be
sought in certain instances in order to qualify such plans for favorable
federal income tax and securities law treatment under current laws and
regulations. The Company plans to submit the stock compensation plans
discussed herein to its stockholders for approval.
VOTING RIGHTS. Neither the Bank's Articles or Bylaws nor the Company's
Articles or Bylaws currently provide for cumulative voting in elections of
directors. For additional information regarding voting rights, see "--
Limitations on Acquisitions of Voting Stock and Voting Rights" below.
PAYMENT OF DIVIDENDS. The ability of the Bank to pay dividends on its
capital stock is restricted by applicable Washington banking law and by
federal income tax considerations related to savings institutions such as the
Bank. See "Supervision and Regulation--Banking Subsidiary." Although the
Company is not subject to these restrictions as a Washington corporation, such
restrictions will indirectly affect the Company because dividends from the
Bank will be a primary source of funds of the Company for the payment of
dividends to stockholders of the Company.
Certain restrictions generally imposed on Washington corporations may also
have an impact on the Company's ability to pay dividends. The WBCA provides
that dividends may be paid only if, after giving effect to the dividend, the
Company will be able to pay its debts as they become due in the ordinary
course of business and the Company's total assets will not be less than the
sum of its total liabilities plus the amount that would be needed, if the
Company were to be dissolved at the time of the dividend, to satisfy the
preferential rights of persons whose right to payment is superior to those
receiving the dividend.
BOARD OF DIRECTORS. The Company's Articles require the Board of Directors of
the Company to be divided into three classes as nearly equal in number as
possible and that the members of each class shall be elected for a term of
three years and until their successors are elected and qualified, with one
class being elected annually. No such provision is contained in the Articles
or Bylaws of the Bank.
Under the Bank's Bylaws, any vacancies in the Board of Directors of the Bank
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the Board of Directors. Persons elected by the
directors of the Bank to fill vacancies may only serve until the next annual
meeting of stockholders. Under the Company's Articles, any vacancy occurring
in the Board of Directors of the Company, including any vacancy created by
reason of an increase in the number of directors, may be filled by the
remaining directors, and any director so chosen shall hold office for the
remainder of the term to which the director has been elected and until his or
her successor is elected and qualified.
Under the Bank's Bylaws, any director may be removed with or without cause
by the holders of a majority of the outstanding voting shares. The Company's
Articles provide that any director may be removed for cause by a majority of
the directors of the Company or by the holders of at least 66 2/3% of the
outstanding voting shares of the Company.
LIMITATIONS ON LIABILITY. The Company's Articles provide that directors
shall not be personally liable for monetary damages to the Company or Bank for
conduct other than conduct that is adjudged to involve intentional
85
<PAGE>
misconduct and other acts defined in the Articles as "Egregious Conduct." This
provision might, in certain instances, discourage or deter shareholders or
management from bringing a lawsuit against directors for a breach of their
duties even though such an action, if successful, might have benefited the
Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS-DIRECTORS. Directors and persons
who serve as officers and directors of the Bank and the Company are
indemnified with respect to certain actions pursuant to their respective
Articles, which comply with applicable Washington law regarding
indemnification. The WBCA allows the Company to indemnify the aforementioned
persons for expenses, settlements, judgments and fines in suits in which such
person has made a party by reason of the fact that he or she is or was an
agent of the Company. No such indemnification may be given if the acts or
omissions of the person are adjudged to be in violation of law, if such person
is liable to the corporation for an unlawful distribution, or if such person
personally received a benefit to which he or she was not entitled.
SPECIAL MEETINGS OF STOCKHOLDERS. The Company's and the Bank's Articles
provide that special meetings of the stockholders may be called by the
Chairman, President, a majority of the Board of Directors or the holders of
not less than one tenth of the outstanding capital stock of the Company
entitled to vote at the meeting.
STOCKHOLDER NOMINATIONS. The Company's Articles and the Bank's Bylaws
generally provide that any stockholder desiring to make a nomination for the
election of directors at a meeting of stockholders must submit written notice
to the Company at least 14 days and not more than 50 days in advance of the
meeting, together with certain information relating to the nomination. Failure
to comply with these advance notice requirements will preclude such
nominations from being considered at the meeting. Management believes that it
is in the best interests of the Company and its stockholders to provide
sufficient time to enable management to disclose to stockholders information
about a dissident slate of nominations for directors. This advance notice
requirement may also give management time to solicit its own proxies in an
attempt to defeat any dissident slate of nominations, should management
determine that doing so is in the best interest of stockholders generally.
Similarly, adequate advance notice of stockholder proposals will give
management time to study such proposals and to determine whether to recommend
to the stockholders that such proposals be adopted. In certain instances, such
provisions could make it more difficult to oppose management's nominees, even
if stockholders believe such nominees or proposals are in their best
interests.
STOCKHOLDER ACTION WITHOUT A MEETING. The Bylaws of the Company and the Bank
provide that any action to be taken or which may be taken at any annual or
special meeting of stockholders may be taken if a consent in writing, setting
forth the actions so taken, is given by the holders of all outstanding shares
entitled to vote.
STOCKHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS. The WBCA provides that a
stockholder may inspect books and records upon written demand stating the
purpose of the inspection, if such purpose is reasonably related to such
person's interest as a stockholder.
LIMITATIONS ON ACQUISITIONS OF VOTING STOCK AND VOTING RIGHTS. The Company's
Articles of Incorporation provide that no person shall directly or indirectly
offer to acquire or acquire the beneficial ownership of (i) more than 10% of
the issued and outstanding shares of any class of an equity security of the
Company, or (ii) any securities convertible into, or exercisable for, any
equity securities of the Company if, assuming conversion or exercise by such
person of all securities of which such person is the beneficial owner which
are convertible into, or exercisable for, such equity securities (but of no
securities convertible into, or exercisable for, such equity securities of
which such person is not the beneficial owner), such person would be the
beneficial owner of more than 10% of any class of an equity security of the
Company. The term "person" is broadly defined in the Articles to prevent
circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to the Company by underwriters or a selling
group acting on its behalf, (ii) any employee benefit plan established by the
Company or the Bank, and (iii) any other offer or acquisition approved in
advance by the affirmative vote
86
<PAGE>
of two-thirds of the Company's Board of Directors. In the event that shares
are acquired in violation of this restriction, all shares beneficially owned
by any person in excess of 10% during the period ending five years from the
Effective Time of the Conversion shall not be counted as shares entitled to
vote and shall not be voted by any person or counted as voting shares in
connection with any matters submitted to stockholders for a vote. If at any
time after five years from the Effective Time of the Conversion shares are
acquired in violation of this restriction, all shares beneficially owned in
excess of 10% shall be counted at one hundredth of a vote.
Neither the Articles nor the Bylaws of the Bank contains a provision which
restricts voting rights of certain stockholders of the Bank in the manner set
forth above.
REGISTRATION REQUIREMENTS
The Company will register the Common Stock with the SEC pursuant to Section
12(g) of the Exchange Act upon the completion of the Conversion and will not
deregister its Common Stock for a period of at least three years following the
completion of the Conversion. Upon such registration, the proxy and tender
offer rules, insider trading reporting and restrictions, annual and periodic
reporting and other requirements of the Exchange Act will be applicable to the
Company and its stockholders.
LEGAL AND TAX OPINIONS
The legality of the Common Stock has been passed upon for the Company by
Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, P.L.L.C. The federal
tax consequences of the Offerings have been opined upon by KPMG Peat Marwick
LLP and the Washington tax consequences of the Offerings have been opined upon
by Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, P.L.L.C. and they
have consented to the references herein to their opinions. Certain legal
matters will be passed upon for Ryan Beck by Breyer and Aguggia, Washington,
D.C.
EXPERTS
The consolidated financial statements of Heritage Savings Bank and
Subsidiaries as of June 30, 1996 and 1997, and for each of the years in the
three year period ended June 30, 1997 have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, upon the
authority of said firm as experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of its
letter to the Bank setting forth its opinion as to the estimated pro forma
market value of the Common Stock and to the use of its name and statements
with respect to it appearing herein.
87
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement on Form S-1
(File No. 333- ) under the Securities Act with respect to the Common Stock
offered in the Conversion. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 500 West
Madison Street, Suite 1400, Room 1100, Chicago, Illinois 60661; and 7 World
Trade Center (13th Floor), New York, New York 10048. Copies may be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street N.W., Washington, D.C. 20549.
The Bank has filed with the Division an Application for Approval of
Conversion, which includes proxy materials for the Mutual Holding Company's
Special Meeting, the Minority Stockholder Meeting and certain other
information. This Prospectus omits certain information contained in such
Application. The Application, including the proxy materials, exhibits and
certain other information that are a part thereof, may be inspected, without
charge, at the offices of the Division at the General Administration Building,
Third Floor West, 210 11th Avenue West, Olympia, Washington 98504.
88
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
HERITAGE SAVINGS BANK AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Independent Auditors' Report............................................ F-2
Consolidated Statements of Financial Condition as of June 30, 1996 and
1997................................................................... F-3
Consolidated Statements of Income for the Years Ended June 30, 1995,
1996 and 1997.......................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended June
30, 1994, 1995, 1996 and 1997.......................................... F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 1995,
1996 and 1997.......................................................... F-6
Notes to the Consolidated Financial Statements.......................... F-7
</TABLE>
Separate financial statements on the Company have not been included since it
will not engage in material transactions until after the Conversion. The
Company, which has been inactive to date, has no significant assets,
liabilities, revenues, expenses or contingent liabilities.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Heritage Savings Bank
We have audited the accompanying consolidated statements of financial
condition of Heritage Savings Bank and subsidiaries as of June 30, 1996 and
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended June 30,
1997. These consolidated financial statements are the responsibility of the
Savings Bank's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally acceptable auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Heritage Savings Bank and subsidiaries as of June 30, 1996 and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended June 30, 1997 in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Seattle, Washington
August 8, 1997
F-2
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30
-----------------
1996 1997
-------- -------
<S> <C> <C>
ASSETS
Cash on hand and in banks................................... $ 6,308 7,412
Interest earning deposits................................... 11,774 175
Investment securities held to maturity...................... 15,292 8,506
Mortgage backed securities held to maturity................. 5,979 5,159
Loans held for sale......................................... 5,286 6,323
Loans receivable............................................ 163,617 201,870
Less: Allowance for loan losses............................. (1,873) (2,752)
-------- -------
Loans, net.............................................. 161,744 199,118
Premises and equipment, net................................. 11,209 12,202
Federal Home Loan Bank stock................................ 1,400 1,511
Accrued interest receivable................................. 1,385 1,380
Prepaid expenses and other assets........................... 1,675 378
-------- -------
$222,052 242,164
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits.................................................... 191,119 209,781
Advances from Federal Home Loan Bank........................ -- 890
Advance payments by borrowers for taxes and insurance....... 535 473
Accrued expenses and other liabilities...................... 3,515 2,605
Deferred Federal income taxes............................... 1,250 701
-------- -------
196,419 214,450
-------- -------
Stockholders' equity:
Preferred stock, $1 par value per share. 5,000,000 shares
authorized; none outstanding............................. -- --
Common stock, $1 par value per share 10,000,000 shares
authorized; 1,805,666 and 1,809,616 shares outstanding,
respectively............................................. 1,806 1,810
Additional paid-in capital................................ 4,067 4,103
Retained earnings, substantially restricted............... 19,760 21,801
-------- -------
Total stockholders' equity.............................. 25,633 27,714
Commitments and contingencies -------- -------
$222,052 242,164
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30
---------------------
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
Interest income:
Loans................................................. $13,115 14,894 16,743
Mortgage backed securities............................ 722 552 464
Investment securities and Federal Home Loan Bank
dividends............................................ 1,118 854 757
Interest bearing deposits............................. 268 575 548
------- ------ ------
Total interest income............................... 15,223 16,875 18,512
------- ------ ------
Interest expense:
Deposits.............................................. 6,639 8,528 8,999
Borrowed funds........................................ 357 15 1
------- ------ ------
Total interest expense.............................. 6,996 8,543 9,000
------- ------ ------
Net interest income............................... 8,227 8,332 9,512
Provision for loan losses............................... -- -- (270)
------- ------ ------
Net interest income after provision for loan
losses........................................... 8,227 8,332 9,782
------- ------ ------
Noninterest income:
Gains on sales of loans, net.......................... 1,665 3,049 2,006
Commissions on sales of annuities and securities...... 241 296 220
Services charges on deposits.......................... 207 353 462
Rental income......................................... 209 221 210
Gain on sale of premises.............................. 356 -- 84
Other income.......................................... 362 379 365
------- ------ ------
Total noninterest income............................ 3,040 4,298 3,347
------- ------ ------
Noninterest expense:
Salaries and employee benefits........................ 4,176 4,711 5,468
Building occupancy.................................... 979 1,254 1,717
FDIC premiums and special assessment.................. 380 407 1,262
Data processing....................................... 462 493 534
Marketing............................................. 200 162 257
Office supplies and printing.......................... 257 229 243
Other................................................. 971 1,166 1,624
------- ------ ------
Total noninterest expense........................... 7,425 8,422 11,105
------- ------ ------
Income before Federal income tax expense
(benefit)........................................ 3,842 4,208 2,024
Federal income tax expense (benefit).................... 1,308 1,435 (245)
------- ------ ------
Net income........................................ $ 2,534 2,773 2,269
======= ====== ======
Earnings per common share............................... $ 1.41 1.54 1.26
======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at June 30, 1994............... $1,800 4,017 14,845 20,662
Restricted stock award................. 5 45 -- 50
Net income............................. -- -- 2,534 2,534
Cash dividend paid..................... -- -- (181) (181)
------ ----- ------ ------
Balance at June 30, 1995............... $1,805 4,062 17,198 23,065
Exercise of stock options.............. 1 5 -- 6
Net income............................. -- -- 2,773 2,773
Cash dividend paid..................... (211) (211)
------ ----- ------ ------
Balance at June 30, 1996............... 1,806 4,067 19,760 25,633
Exercise of stock options.............. 4 36 -- 40
Net income............................. -- -- 2,269 2,269
Cash dividend paid..................... -- -- (228) (228)
------ ----- ------ ------
Balance at June 30, 1997............... $1,810 4,103 21,801 27,714
====== ===== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 2,534 2,773 2,269
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 157 349 996
Deferred loan fees, net of amortization......... 363 35 11
Provision for loan losses....................... -- -- (270)
Net increase in loans held for sale............. (1,816) 615 (1,037)
Deferred Federal income tax expense (benefit)... 41 262 (549)
Federal Home Loan Bank stock dividends.......... (108) (99) (111)
Net change in accrued interest receivable,
prepaid expenses and other assets, and accrued
expenses and other liabilities................. 70 411 392
------- ------- -------
Net cash provided by operating activities..... 1,241 4,346 1,701
------- ------- -------
Cash flows from investing activities:
Loans originated, net of principal payments and
loan sales....................................... (27,649) (11,211) (37,115)
Principal payments of mortgage backed securities.. 2,771 1,493 825
Proceeds from:
Sale of Federal Home Loan Bank Stock............ 860 -- --
Maturities of investment securities held to
maturity....................................... 6,900 13,300 9,160
Purchase of investment securities held to
maturity......................................... (2,132) (10,445) (2,345)
Purchase of premises and equipment................ (2,696) (2,204) (2,023)
------- ------- -------
Net cash used in investing activities......... (21,946) (9,067) (31,498)
------- ------- -------
Cash flows from financing activities:
Net increase in deposits.......................... 8,875 16,322 18,662
Net increase in FHLB advances..................... -- -- 890
Net decrease in other borrowed funds.............. (848) (3,252) --
Net decrease (increase) in advance payments by
borrowers for taxes and insurance................ 100 (100) (62)
Cash dividends paid............................... (181) (211) (228)
Issuance of restricted stock award and exercise of
stock options.................................... 50 6 40
------- ------- -------
Net cash provided by financing activities..... 7,996 12,765 19,302
------- ------- -------
Net increase (decrease) in cash and cash
equivalents.................................. (12,709) 8,044 (10,495)
Cash and cash equivalents at beginning of year...... 22,747 10,038 18,082
------- ------- -------
Cash and cash equivalents at end of year............ $10,038 18,082 7,587
======= ======= =======
Supplemental disclosures of cash flow information:
Cash payments for:
Interest expense................................ $ 6,631 8,527 8,945
Federal income taxes............................ 1,265 1,395 620
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
The business of Heritage Savings Bank (the "Bank"), which is focused in
Thurston, Mason and Pierce counties, consists primarily of attracting deposits
from the general public and originating for sale or investment purposes first
mortgage loans on residential properties located in western Washington. The
Bank also makes residential construction loans, income property loans,
business loans and consumer loans, primarily second mortgage loans. Although
the Bank has a diversified loan portfolio and its market area enjoys a stable
economic climate, a substantial portion of its borrowers ability to repay
these loans is dependent upon the economic stability of the major employers,
Federal, State and local governments.
Loans originated by the Bank that are secured by real estate have loan to
value ratios of generally no more than 80% of the appraised amount. The Bank
currently requires customers to obtain private mortgage insurance on all fixed
and adjustable rate mortgage loans above an 80% loan-to-value ratio.
Heritage Savings Bank, a Washington State stock savings bank, is majority-
owned by Heritage Financial Corporation, M.H.C. (HFC), a Washington State
mutual holding company.
(b) Basis of Presentation
The accounting and reporting policies of the Bank and its subsidiaries conform
to generally accepted accounting principles and to general practices within
the financial institutions industry, where applicable. In preparing the
consolidated financial statements, management makes estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of financial statements and the
reported amounts of income and expense during the reported periods. Actual
results could differ from these estimates. All significant intercompany
balances and transactions among the Bank and its subsidiaries have been
eliminated in consolidation.
The accompanying consolidated financial statements include the accounts of the
Bank and its wholly-owned subsidiaries, Sound Service Associates, Inc. and
Heritage Capital Corporation. Sound Service Associates, Inc. operations
primarily consist of the sale of tax-deferred investment products. Heritage
Capital Corporation was incorporated as a limited purpose financing subsidiary
to issue collateralized mortgage obligations which were retired in August
1995. Certain amounts in the consolidated financial statements for prior years
have been reclassified to conform to the current consolidated financial
statement presentation.
(c) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents includes cash
on hand and in banks and interest bearing deposits.
(d) Investment Securities
Investment securities are recorded at cost, adjusted for amortization of
premiums or accretion of discounts using the interest method. These
investments are carried at cost because the Bank has the ability, and it is
management's intent, to hold them to maturity. The Bank has no investment
securities classified available for sale or held for trading purposes.
F-7
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(e) Loans Receivable and Mortgage-Backed Securities
Loans and mortgage backed securities are generally recorded at cost, net of
discounts, unearned fees and deferred fees. Discounts and premiums on
purchased loans and mortgage-backed securities are amortized using the
interest method over the remaining contractual life, adjusted for actual
prepayments. Mortgage loans held for sale are carried at the lower of
amortized cost or market value determined on an aggregate basis. Any loan that
management determines will not be held to maturity is classified as held for
sale at the time of origination, purchase or securitization. Unrealized losses
on such loans are included in the consolidated statements of income. Mortgage
backed securities are carried at amortized cost because the Bank has the
ability, and it is management's intent, to hold them to maturity.
(f) Loan Fees
Loan origination fees and certain direct origination costs are deferred and
amortized as an adjustment of the loans yields over the contractual lives,
adjusted for prepayment of the loans, using the interest method. In the event
loans are sold, the deferred net loan origination fees or costs are recognized
as a component of the gains or losses on the sales of loans.
(g) Allowance for Loan Losses
A valuation allowance for loans is based on management's estimate of the
amount necessary to recognize possible losses inherent in the loan portfolio.
In determining the level to be maintained, management evaluates many factors
including the borrowers ability to repay, economic and market trends and
conditions, holding costs and absorption periods. In the opinion of
management, the present allowance is adequate to absorb reasonably foreseeable
loan losses.
Effective July 1, 1995, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting for Creditors for Impairment of a Loan,
and its amendment, SFAS No. 118, Accounting by Creditors for Impairment of a
Loan--Income Recognition and Disclosures. These statements require that
impaired loans are measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, based on the loan's observable market price or the fair value of
collateral; if the loan is collateral dependent. In accordance with SFAS No.
114, the Bank excludes smaller balance, homogeneous loans from its impairment
evaluation. The adoption of this statement had no impact on these financial
statements.
While management uses available information to recognize losses on these
loans, future additions to the allowances may be necessary based on changes in
economic conditions, particularly in the western Washington region. In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Banks allowance for losses on
loans. Such agencies may require the Bank to make additions to the allowance
based on their judgments about information available to them at the time of
their examinations.
(h) Nonaccrual Loans
The accrual of interest on loans is discontinued and the loan is considered
impaired when, in the opinion of management, the collectibility of principal
or interest is in doubt or generally when the loans are contractually past due
90 days or more with respect to principal or interest. When accrual of
interest is discontinued on a loan, the interest accrued but not collected is
charged against operations. Thereafter, payments received are generally
applied to principal. However, based on management's assessment of the
ultimate collectibility of an impaired or nonaccrual loan, interest income may
be recognized on a cash basis. Impaired loans and other nonaccrual loans
(smaller balance, homogeneous loans) are returned to an accrual status when
management determines that the circumstances have improved to the extent that
there has been a sustained period of repayment performance and both principal
and interest are deemed collectible.
F-8
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(i) Mortgage Banking Operations
The Bank sells mortgage loans primarily on a servicing released basis and
recognizes a cash or a present value gain or loss. A cash gain or loss is
recognized to the extent that the sales proceeds of the mortgage loans sold
exceed or are less than the net book value at the time of sale.
In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which
provides consistent standards for distinguishing transfers of assets that are
sales from transfers that are secured borrowings. This Standard supersedes
SFAS No. 122, Accounting for Mortgage Servicing Rights, in the measurement and
valuation of mortgage servicing rights. This Standard is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively only.
The adoption of this pronouncement did not have a material impact on the
financial statements of the Bank.
Loan servicing income is recorded when earned. Loan servicing costs are
charged to expense as incurred.
(j) Real Estate Owned
Real estate acquired by the Bank in satisfaction of debt is recorded at fair
value at time of foreclosure and is carried at the lower of the new cost basis
or fair value. Subsequently, foreclosed assets are carried at the lower of
cost or fair value less estimated costs to sell. Costs related to the
improvement of the property are capitalized subject to the above limitations;
those related to holding the property, net of rental income, are charged to
expense.
(k) Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets. The estimated useful lives used to
compute depreciation and amortization include buildings and building
improvements, 30 to 40 years; and furniture, fixtures and equipment, 3 to 10
years.
During 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This
pronouncement deals with the measurement and reporting of long-lived assets
that either will be held and used in operations or that will be disposed of.
The adoption did not have a material impact on the results of operations or
financial condition of the Bank.
(l) Federal Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
the deferred tax assets and liabilities of a change in tax rate is recognized
in income in the period that includes the enactment date.
(m) Recent Financial Accounting Pronouncements
SFAS No. 128, "Earnings Per Share," issued in February 1997, establishes
standards for computing and presenting earnings per share ("EPS") and applies
to entities with publicly-held common stock or potential common stock. It
replaces the presentation of primary EPS with a presentation of basic EPS and
requires the dual presentation of basic and diluted EPS on the fact of the
income statement. SFAS No. 128 is effective for the financial statements for
the periods ending after December 15, 1997. SFAS No. 128 requires restatement
of all prior period EPS data presented. The impact of its adoption is not
expected to be material to the Bank.
F-9
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes standards for reporting comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of financial
statements. This Statement requires that the Bank (a) classify items of other
comprehensive income by their nature in its financial statements and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
statement of financial condition. This Statement is effective for the year
ending June 30, 1999.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires public
companies to report financial and descriptive information about its operating
segments. Operating segments are components of a business about which separate
financial information is available that is evaluated regularly by the chief
operating decision-maker in deciding how to allocate resources and in
assessing performance. The adoption of SFAS 131 is required for the fiscal
year ended June 30, 1999 and the Bank is currently evaluating the effect of
this Statement.
On January 28, 1997, the Securities and Exchange Commission amended their
rules and regulations to require public companies to provide enhanced
descriptions of accounting policies for derivative financial instruments and
derivative commodity instruments in the footnotes to their financial
statements. The accounting policy requirements become effective for all
filings that include financial statements for periods ending after June 15,
1997. The Bank had no derivative financial instruments or derivative commodity
instruments at June 30, 1997 or at any time during the three year period then
ended. The Bank believes that it is in compliance with this amended rule.
(2) LOANS RECEIVABLE AND LOANS HELD FOR SALE
Loans receivable and loans held for sale at June 30 consist of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Commercial loans........................................... $ 18,269 $ 39,445
-------- --------
Real Estate Mortgages:
One to four family residential........................... 93,157 103,439
Five or more family residential and commercial real
estate.................................................. 42,560 51,209
-------- --------
Total real estate mortgage............................. 135,717 154,648
-------- --------
Real Estate Construction:
One to four family residential........................... 14,509 12,683
Five or more family residential and commercial real
estate.................................................. 393 1,029
-------- --------
Total real estate construction......................... 14,902 13,712
Consumer................................................... 1,105 1,467
-------- --------
Subtotal................................................. 169,993 209,272
Unamortized yield adjustments.............................. (1,090) (1,079)
-------- --------
Total Loans Receivable and Loans Held for Sale......... $168,903 $208,193
======== ========
</TABLE>
Loans to directors and officers amounted to $1,534 and $1,087 as of June 30,
1996 and 1997, respectively.
Accrued interest on loans receivable amounted to $1,001 and $1,198 as of June
30, 1996 and 1997, respectively. The Bank had $51 and $133 of impaired loans
which are nonaccruing as of June 30, 1996 and 1997, respectively. The weighted
average interest rate on loans was 8.6% and 8.8% as of June 30, 1996 and 1997,
respectively.
F-10
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Details of certain mortgage banking activities at June 30 are as follows:
<TABLE>
<CAPTION>
1996 1997
------- ------
<S> <C> <C>
Loans held for sale at lower of cost or market............ $ 5,286 6,323
Loans serviced for others................................. 23,257 19,162
Commitments to sell mortgage loans........................ 10,170 8,134
Commitments to fund loans (at interest rates approximating
market rates)
Fixed rate.............................................. 5,533 1,902
Variable or adjustable rate............................. 877 193
</TABLE>
Servicing fee income from loans serviced for others amounted to $114, $90, and
$75 for the years ended June 30, 1995, 1996 and 1997, respectively.
Commitments to sell mortgage loans are made primarily during the period
between the taking of the loan application and the closing of the mortgage
loan. The timing of making these sale commitments is dependent upon the timing
of the borrowers election to lock-in the mortgage interest rate and fees prior
to loan closing. Most of these sale commitments are made on a best-effort
basis whereby the Bank is only obligated to sell the mortgage if the mortgage
loan is approved and closed by the Bank.
(3) MORTGAGE BACKED SECURITIES
The amortized cost and fair values of mortgage backed securities held to
maturity at June 30 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
1996
Federal Home Loan Mortgage
Corporation....................... $1,290 29 -- 1,319
Federal National Mortgage
Association....................... 1,784 42 (2) 1,824
Government National Mortgage
Association....................... 2,905 88 -- 2,993
------ --- --- -----
$5,979 159 (2) 6,136
====== === === =====
1997
Federal Home Loan Mortgage
Corporation....................... $1,062 47 (1) 1,108
Federal National Mortgage
Association....................... 1,371 51 (2) 1,420
Government National Mortgage
Association....................... 2,726 126 -- 2,852
------ --- --- -----
$5,159 224 (3) 5,380
====== === === =====
</TABLE>
The amortized cost and fair values of mortgage backed securities, by
contractual maturity, at June 30, 1997 are shown below:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -----
<S> <C> <C>
Due after three years through five years................... $ 23 24
Due after five years through ten years..................... 207 209
After ten years............................................ 4,929 5,147
------ -----
Totals................................................... $5,159 5,380
====== =====
</TABLE>
F-11
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Mortgage backed securities included net unamortized discounts of $77 and $71
as of June 30, 1996 and 1997, respectively. Accrued interest receivable on
mortgage backed securities was $50 and $43 at June 30, 1996 and 1997,
respectively.
(4) ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<S> <C>
Balance at June 30, 1994.............. $1,705
Recoveries............................ 15
------
Balance at June 30, 1995.............. $1,720
Recoveries............................ 153
------
Balance at June 30, 1996.............. $1,873
Provision............................. (270)
Recovery.............................. 1,152
Chargeoff............................. (3)
------
Balance at June 30, 1997.............. $2,752
======
</TABLE>
In May 1996, the Bank sold its interest in two loans which were partially
charged off. This sale resulted in an excess of net proceeds over the book
basis of these loans of $1.3 million. The Bank recorded a recovery of $148 in
1996 which was the pro rata portion of the sale proceeds received in cash
versus the amount the Bank financed for the purchaser. The additional $1,152
was recognized as a recovery in 1997 as the Bank received additional
collateral on this financing.
(5) INVESTMENT SECURITIES
The amortized cost and fair values of investment securities held to maturity
at June 30 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
1996
U.S. Government and its agencies... $15,292 5 (127) 15,170
======= === ==== ======
1997
U.S. Government and its agencies... $ 8,506 -- (17) 8,498
======= === ==== ======
</TABLE>
The amortized cost and fair value of investment securities, by contractual
maturity, at June 30, 1997 are shown below:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -----
<S> <C> <C>
Due in one year or less.................................... $3,817 3,820
Due after one year through three years..................... 4,689 4,678
------ -----
Totals................................................... $8,506 8,498
====== =====
</TABLE>
There were no sales of investment securities during the years ended June 30,
1995, 1996 and 1997.
Accrued interest on investment securities amounted to $111 and $125 as of June
30, 1996 and 1997, respectively.
F-12
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At June 30, 1996 and 1997, investment securities with amortized cost values of
$897 and $1,244, respectively, were pledged to secure public deposits and for
other purposes as required or permitted by law.
(6) PREMISES AND EQUIPMENT
A summary of premises and equipment at June 30 follows:
<TABLE>
<CAPTION>
1996 1997
------- ------
<S> <C> <C>
Land........................................................ $ 2,903 3,371
Buildings and building improvements......................... 7,724 8,029
Furniture, fixtures and equipment........................... 4,478 4,983
------- ------
15,105 16,383
Less accumulated depreciation............................... 3,896 4,181
------- ------
$11,209 12,202
======= ======
</TABLE>
The Bank holds property for investment which is recorded at the lower of cost
or fair value of $1,072 and $659 as of June 30, 1996 and 1997, respectively.
(7) DEPOSITS
Deposits at June 30 consist of the following:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE 1996 1997
INTEREST RATE AT ---------------- ----------------
JUNE 30, 1997 AMOUNT PERCENT AMOUNT PERCENT
---------------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Demand deposits.............. -- $ 7,510 3.9% $ 9,489 4.5%
NOW accounts................. 2.38% 17,978 9.4 20,641 9.8
Money market accounts........ 3.91 19,331 10.1 24,496 11.7
Savings accounts............. 3.51 29,543 15.5 28,374 13.6
Certificate accounts:
Below 3%................... -- -- 102 --
3% to 4%................... 404 0.2 366 0.2
4% to 5%................... 12,183 6.4 14,044 6.7
5% to 6%................... 71,575 37.5 103,691 49.4
6% to 7%................... 27,783 14.5 7,806 3.7
7% to 8%................... 4,777 2.5 737 0.4
8% to 10%.................. 35 -- 35 --
---- -------- ----- -------- -----
5.47 116,757 61.1 126,781 60.4
==== ======== ===== ======== =====
4.47% $191,119 100.0% $209,781 100.0%
==== ======== ===== ======== =====
</TABLE>
The combined weighted average interest rate of deposits was 4.66% and 4.47% at
June 30, 1996 and 1997, respectively. Accrued interest payable on deposits was
$24 and $78 at June 30, 1996 and 1997, respectively.
F-13
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest expense, by category, for the year ended June 30 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ----- -----
<S> <C> <C> <C>
NOW accounts................................................. $ 360 404 490
Money market accounts........................................ 1,522 1,489 1,603
Savings accounts............................................. 342 300 307
Certificate accounts......................................... 4,415 6,335 6,599
------ ----- -----
$6,639 8,528 8,999
====== ===== =====
</TABLE>
Scheduled maturities of certificate accounts at June 30 are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Within one year......................................... $ 96,928 113,806
Between one and two years............................... 12,138 10,437
Between two and three years............................. 5,995 2,299
Between three and four years............................ 1,465 61
Between four and five years............................. 125 69
Over five years......................................... 106 109
-------- -------
$116,757 126,781
======== =======
</TABLE>
As of June 30, 1996 and 1997, certificates of deposit issued in denominations
in excess of $100 totaled $9,130 and $15,481, respectively.
(8) FHLB ADVANCES AND STOCK
The Bank is required to maintain an investment in the stock of the Federal
Home Loan Bank of Seattle in an amount equal to at least 1% of the unpaid
principal balances of the Bank's residential mortgage loans or 5% of its
outstanding advances from the FHLB, whichever is greater. Purchases and sales
of stock are made directly with the FHLB at par value.
A summary of FHLB Advances follows:
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED
JUNE 30
-------------------------
1995 1996 1997
-------- ---------------
<S> <C> <C> <C>
Balance at June 30........ $ -- $ -- $ 890
Average balance........... 658 -- 27
Maximum amount outstanding
at any month end......... 3,875 -- 1,300
Average interest rate:
During the year......... 6.24% -- 5.41%
At June 30.............. -- -- 6.45%
</TABLE>
The $890 outstanding balance of FHLB Advances at June 30, 1997 matured on July
1, 1997.
Advances from the FHLB are collateralized by a blanket pledge on FHLB stock
owned by the Bank, deposits at the FHLB and all mortgages or deeds of trust
securing such properties. In accordance with the pledge agreement, the Bank
must maintain unencumbered collateral in an amount equal to varying
percentages ranging from 100% to 125% of outstanding advances depending on the
type of collateral.
The Bank may borrow from the FHLB in amounts up to 20% of the Bank's total
assets.
F-14
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) OTHER BORROWED FUNDS
In August 1986, the Bank issued $21.9 million in collateralized mortgage
obligations. The bonds have been repaid in quarterly installments, including
interest, from principal and interest payments received on the underlying
collateral (Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation mortgage backed securities). Under the terms of the bond
indenture, the Bank may call the bonds when their outstanding balance is equal
to or less than 10% of the original issue amount which amounts to $2.2
million. On August 1, 1995, the Bank called and repaid the then outstanding
balance of the remaining bonds.
(10) FEDERAL INCOME TAXES
Federal income tax expense (benefit) at June 30 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ ----- ----
<S> <C> <C> <C>
Current............................................... $1,267 1,173 304
Deferred.............................................. 41 262 (549)
------ ----- ----
$1,308 1,435 (245)
====== ===== ====
</TABLE>
Federal income tax expense differs from that computed by applying the Federal
statutory income tax rate of 34% for the year ended June 30 as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ----- ----
<S> <C> <C> <C>
Income tax expense at Federal statutory rate........ $1,306 1,431 688
Reversal of provision for base year bad debt
reserve............................................ -- -- (938)
Other, net.......................................... 2 4 5
------ ----- ----
$1,308 1,435 (245)
====== ===== ====
</TABLE>
The Bank has been permitted under the Internal Revenue Code to deduct an
annual addition to a reserve for bad debts in determining taxable income,
subject to certain limitations. The deduction was based on either specified
experience formulas or a percentage of taxable income before such deduction.
The Bank used the percentage of taxable income method for the years ended June
30, 1995 and 1996. This deduction was historically greater than the loan loss
provisions recorded for financial accounting purposes. Deferred income taxes
are provided on differences between the bad debt reserve for tax and financial
reporting purposes only to the extent of the tax reserves arising subsequent
to June 30, 1988. Savings institutions were not required to provide a deferred
tax liability for the tax bad debt reserves accumulated as of June 30, 1988
which for the Bank amounted to $938. Starting in the fiscal year ended June
30, 1994, the Bank established and maintained a deferred income tax liability
of $938 due to the potential recapture of the pre-1988 tax bad debt reserve
which could have been triggered by the formation of the mutual holding
company; a change to a commercial bank charter (which management had been
contemplating); or possible legislation which was being debated in Congress.
Legislation enacted in August 1996 eliminated certain conditions under which
recapture of the pre-1988 additions to the tax bad debt reserve would be
required. Such conditions are principally conversion to a commercial bank
charter or merger with a commercial bank. The pre-1988 reserves would be
required to be recaptured under certain other conditions such as payment of
dividends in excess of accumulated earnings and profits or other distributions
made in connection with the dissolution or liquidation of the Bank. Based on
this legislation, the Bank reversed the $938 deferred tax liability as a
reduction of Federal income tax expense during the year ended June 30, 1997.
F-15
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The legislation also repealed the reserve method for determining income tax
deductions described above. Under the legislation, the Bank will be required
to recapture the post-1988 additions to its bad debt reserve as taxable income
over a six to eight year period. The Bank has provided the appropriate
deferred tax liability for these post-1988 additions in the prior years so
this legislation had no adverse impact on the results from operations for the
year ended June 30, 1997.
The following table presents major components of the deferred Federal income
tax liability resulting from differences between financial reporting and tax
bases at June 30:
<TABLE>
<CAPTION>
1996 1997
------ -----
<S> <C> <C>
Deferred tax liabilities:
Provision for base year tax bad debt reserve.............. $ 938 --
Deferred loan fees........................................ 241 412
Premises and equipment.................................... 236 358
FHLB stock................................................ 287 324
Other..................................................... 37 11
------ -----
Total deferred tax liabilities.......................... 1,739 1,105
====== =====
Deferred tax assets:
Loan loss allowances...................................... (407) (292)
Vacation benefits......................................... (60) (64)
Other..................................................... (22) (48)
------ -----
Total deferred tax assets............................... (489) (404)
------ -----
Deferred taxes payable, net............................. $1,250 701
====== =====
</TABLE>
(11) CONTINGENCIES
The Bank is involved in numerous business transactions which, in some cases,
depend on regulatory determination as to compliance with rules and
regulations. Also, the Bank has certain litigation and negotiations in
progress. All such matters are attributable to activities arising from normal
operations. In the opinion of management, after review with legal counsel, the
eventual outcome of the aforementioned matters is unlikely to have a
materially adverse effect on the Bank's consolidated financial statements or
its financial position.
(12) STOCKHOLDERS' EQUITY
(a) Stock Offering and Reorganization
On July 1, 1997, the Board of Directors of Heritage Financial Corporation,
MHC, approved a Plan of Conversion and Reorganization whose purpose is to
convert the current Mutual Holding Company to the stock form of organization.
The Mutual Holding Company currently owns a majority of the common stock of
Heritage Savings Bank. The Holding Company will offer its common stock upon
the terms and conditions set forth in the Plan of Conversion. As a part of the
Conversion, each minority stockholder of the Bank will receive common stock of
the Holding Company in exchange for their shares of common stock of the Bank.
Conversion costs will be deferred and reduce the proceeds from the shares sold
in the conversion. If the conversion is not completed, all costs will be
charged as an expense. As of June 30, 1997, no significant conversion costs
have been incurred.
F-16
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) Earnings Per Common Share
Earnings per common share is computed based on the weighted average number of
shares of common stock outstanding during the year which amounted to 1,805,166
and 1,807,910 shares for the years ended June 30, 1996 and 1997, respectively.
Common stock equivalents have not been considered because they do not have a
dilutive impact.
(c) Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements.
Pursuant to minimum capital requirements of the Federal Deposit Insurance
Corporation, the Bank is required to maintain a leverage ratio (capital to
assets ratio) of 3% and risk-based capital ratios of Tier 1 capital and total
capital (to total risk-weighted assets) of 4% and 8%, respectively. At June
30, 1997, the Bank exceeded the minimum capital requirements and the
requirements for well capitalized institutions as shown below. As of June 30,
1996 and 1997, the Bank was classified as a "well capitalized" institution
under the criteria established by the FDIC Act.
<TABLE>
<CAPTION>
WELL-
MINIMUM CAPITALIZED
REQUIREMENTS REQUIREMENTS ACTUAL
-----------------------------------------
$ % $ % $ %
------- -------------- ------------- ----
<S> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30, 1996:
Leverage ratio...................... $ 6,652 3% $ 11,087 5% $25,633 11.6%
Risk-based capital:
Tier 1............................ 5,799 4% 8,699 6% 25,633 17.7%
Total............................. 11,598 8% 14,498 10% 27,446 18.9%
AS OF JUNE 30, 1997:
Leverage ratio...................... 7,118 3% 11,864 5% 27,714 11.7%
Risk-based capital:
Tier 1............................ 7,085 4% 10,628 6% 27,714 15.6%
Total............................. 14,171 8% 17,714 10% 29,935 16.9%
</TABLE>
On September 30, 1996, legislation was signed into law to recapitalize the
Savings Association Insurance Fund (SAIF). The effect of this legislation was
to require a one-time assessment on all federally insured savings
institutions' deposits under SAIF at .657% of insured deposits at March 31,
1995. The Bank's assessment was approximately $1.1 million which was charged
to earnings in the quarter ended September 30, 1996 and paid in November 1996.
(d) Cash Dividend
At the Board of Directors meeting on August 28, 1996, a cash dividend of $.375
per share on the Bank's issued and outstanding common stock was declared. The
dividend was paid in October 1996 to shareholders of record as of September
30, 1996 and was paid only to shareholders other than HFC. The dividend waiver
on the 1,200,000 shares owned by HFC was approved by regulatory agencies. The
Bank's ability to pay dividends is predicated upon its earning capability and
is subject to legal and regulatory restrictions.
F-17
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(13) STOCK OPTION PLANS
In September 1994, the Bank's stockholders approved the adoption of the 1994
stock option plan, providing for the award of a restricted stock award to a
key officer, incentive stock options to employees and nonqualified stock
options to directors of the Bank at the discretion of the Board of Directors.
On September 24, 1996, the stockholders of the Bank approved the adoption of
the 1997 stock option plan which is generally similar to the 1994 plan. The
1997 plan does not affect any options granted under the 1994 plan.
Under both of these stock option plans, on the date of grant, the exercise
price of the option must at least equal the market value per share of the
Bank's common stock. The 1994 plan provides for the grant of options and stock
awards up to 67,000 shares. The 1997 plan provides for the granting of options
for up to 50,000 common shares.
Stock options are generally exercisable ratably over three years and expire
five years after they become exercisable which amounts to an average term of
seven years.
The following table summarizes activity on stock options for the years ended
June 30, 1996 and 1997:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS EXERCISABLE OPTIONS
-------------------------- -------------------------
SHARES UNDER OPTION SHARES AVG. OPTION PRICE SHARES AVG. OPTION PRICE
- ------------------- ------- ----------------- ------ -----------------
<S> <C> <C> <C> <C>
Balance at July 1,
1994................... 50,000 $ 10.20
Options granted......... -- --
Became exercisable...... -- -- 15,000 $ 10.22
Less: Exercised -- --
Expired or
canceled............ (5,000) 10.00
------- ------- ------ -------
Balance at June 30,
1995................... 45,000 $ 10.22 15,000 $ 10.22
======= ======= ====== =======
Options granted......... 7,000 16.00
Became exercisable...... 15,000 10.22
Less: Exercised......... (666) 10.00 (666) 10.00
Expired or
canceled............ -- -- -- --
------- ------- ------ -------
Balance at June 30,
1996................... 51,334 $ 11.01 29,334 $ 10.23
======= ======= ====== =======
Options granted......... 59,998 18.45 -- --
Became exercisable...... -- -- 17,333 11.00
Less: Exercised......... (3,950) 10.00 (3,950) 10.00
Expired or
canceled............ -- -- -- --
------- ------- ------ -------
Balance at June 30,
1997................... 107,382 $ 15.21 42,717 $ 10.56
======= ======= ====== =======
</TABLE>
A restricted stock award of 5,000 shares has been awarded to the chairman and
requires five years of continuous employment from the date of award. These
5,000 shares were issued to the Chairman during the year ended June 30, 1995
and recorded as compensation expense using the fair value of the shares on the
date of award.
F-18
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Financial data pertaining to outstanding stock options at June 30, 1997 were
as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF REMAINING CONTRACTUAL
EXERCISE PRICE OPTION SHARES LIFE (IN YEARS)
-------------- ------------- ---------------------
<S> <C> <C>
$10.00 35,384 3.6
$12.00 5,000 4.0
$16.00 7,000 6.0
$18.45 59,998 6.6
------- ---
107,382 5.4
======= ===
</TABLE>
During 1995, the FASB issued the SFAS No. 123, Accounting for Stock-based
Compensation, effective for years beginning after December 15, 1995. The
statement requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) application
of the fair value recognition provision in the statement. Under the fair value
recognition method, compensation cost is measured at the grant date of the
option, based on the value of the award and is recognized over the vesting
period. Under existing rules ("intrinsic value based method"), compensation
cost is the excess, if any, of the market value of the stock at grant date
over the amount an employee must pay to acquire the stock. None of the Bank
stock options have any intrinsic value at grant date and, under Accounting
Principles Board Opinion No. 25 (APB No. 25), no compensation cost has been
recognized for them. SFAS No. 123 does not alter the existing accounting rules
for employee stock-based programs. Companies may continue to follow rules
outlined in APB No. 25, but they will now be required to disclose the pro
forma amounts of net income and earnings per share that would have been
reported had they elected to follow the fair value recognition provision of
SFAS No. 123. Effective July 1, 1996, the Bank adopted the disclosure
requirements of SFAS No. 123, but has determined that it will continue to
measure its employee stock-based compensation arrangements under the
provisions of APB Opinion 25. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation cost for the Bank's
stock option plans been determined consistent with SFAS 123, the Bank's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------
1995 1996 1997
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net income:
As reported...................................... $ 2,534 $ 2,773 $ 2,269
Pro forma........................................ 2,534 2,772 2,239
Earnings per share:
As reported...................................... $ 1.41 $ 1.54 $ 1.26
Pro forma........................................ 1.41 1.54 1.24
</TABLE>
No options were granted during 1995; therefore, there is no pro forma impact
on net income for the year ended June 30, 1995.
The compensation expense included in the pro forma net income attributable to
fully diluted common stock and fully diluted earnings per share is not likely
to be representative of the effect on reported net income for future years
because options vest over several years and additional awards generally are
made each year.
The fair value of options granted is estimated on the date of grant using the
minimum value method with the following weighted average assumptions used for
grants in 1996 and 1997: annual dividend yield of 3% for both years; risk-free
interest rates of 6.50% for both years; and expected lives of seven years for
both years. The weighted average grant date fair value per share of options
granted during the years ended June 30, 1996 and 1997 was $3.09 and $3.19,
respectively.
F-19
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) EMPLOYEE BENEFIT PLANS
The Bank maintains a defined contribution retirement plan. The plan allows
participation to all employees upon completion of one year of service and the
attainment of 21 years of age. It is the Bank's policy to fund plan costs as
accrued. Employee vesting occurs over a period of seven years, at which time
they become fully vested. Charges of approximately $172, $192 and $246 are
included in the consolidated statements of income for the years ended June 30,
1995, 1996 and 1997, respectively.
The Bank also maintains a salary savings 401(k) plan for its employees. All
persons employed as of July 1, 1984 automatically participate in the plan. All
employees hired after that date who are at least 21 years of age and with one
year of service to the Bank may participate in the plan. Employees who
participate may contribute a portion of their salary which is matched by the
employer at 50% up to certain specified limits. Employee vesting in employer
portions is similar to the retirement plan described above. Employer
contributions for the years ended June 30, 1995, 1996 and 1997 were $84, $82
and $87, respectively.
The Bank has established an Employee Stock Ownership Plan (ESOP) effective
July 1, 1993, which allows participation to all employees upon completion of
one year of service and the attainment of 21 years of age. The ESOP is funded
by employer contributions in cash or common stock. Employee vesting occurs
over a period of seven years. The Bank contributed $0 and $44 to the ESOP for
the years ended June 30, 1995 and 1996. The Bank has accrued $75 for its ESOP
contribution for the year ended June 30, 1997.
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
Because broadly traded markets do not exist for most of the Bank's financial
instruments, the fair value calculations attempt to incorporate the effect of
current market conditions at a specific time. Fair valuations are management's
estimates of values. These calculations are subjective in nature, involve
uncertainties and matters of significant judgment and do not include tax
ramifications; therefore, the results cannot be determined with precision,
substantiated by comparison to independent markets and may not be realized in
an actual sale or immediate settlement of the instruments. There may be
inherent weaknesses in any calculation technique, and changes in the
underlying assumptions used, including discount rates and estimates of future
cash flows, could significantly affect the results. For all of these reasons,
the aggregation of the fair value calculations presented herein do not
represent, and should not be construed to represent, the underlying value of
the Bank.
When possible, quoted market prices are used to determine fair value. In cases
where a quoted market price is not available, the fair value of financial
instruments is estimated using the present value of future cash flows or other
valuation methods.
(a) Financial Instruments With Book Value Equal to Fair Value
The fair value of financial instruments that are short-term or reprice
frequently and that have little or no risk are considered to have a fair value
equal to book value. Assets that are included in this category include cash
and due from banks and interest-bearing deposits. Liabilities included in this
category include deposits with no contractual maturity such as demand
accounts, checking accounts, money market accounts, passbook savings accounts
and FHLB advances which reprice daily.
(b) Investment Securities
The fair value of all investment securities excluding Federal Home Loan Bank
(FHLB) stock was based upon quoted market prices. FHLB stock is not publicly
traded, however it may be redeemed on a dollar-for-dollar basis, for any
amount the Bank is not required to hold. The fair value is therefore equal to
the book value.
F-20
<PAGE>
HERITAGE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(c) Loans
The loan portfolio is composed of single family and income property mortgages
(both fixed rate and adjustable rate), construction, business and consumer
loans. For most loans, fair value is estimated using market prices for
mortgage backed securities with similar rates and average maturities adjusted
for servicing costs or calculated by discounting expected cash flows over the
estimated life of the loans using a current market rate reflecting the risk
associated with comparable loans. Construction loans which are variable rate
and short-term are reflected with fair values equal to book value.
(d) Deposits
Deposits are comprised of passbook, commercial and basic checking, money
market and fixed maturity accounts. For deposits with no contractual maturity
such as demand accounts, checking accounts, money market accounts and passbook
savings accounts, SFAS 107 stipulates that the fair value is equal to the book
value. The fair value of fixed maturity deposits is based on discounted cash
flows using the difference between the deposit rate and an alternative cost of
funds rate.
(e) Off-Balance Sheet Financial Instruments
The fair value of off-balance sheet commitments to extend credit is considered
equal to its notional amount.
The table below presents the book value amount of the Bank's financial
instruments and their corresponding fair values at June 30:
<TABLE>
<CAPTION>
1996 1997
--------------------- ---------------------
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash on hand and in banks.......... $ 6,308 6,308 7,412 7,412
Interest bearing deposits.......... 11,774 11,774 175 175
Investment securities.............. 15,292 15,170 8,506 8,498
FHLB stock......................... 1,400 1,400 1,511 1,511
Mortgage backed securities......... 5,979 6,136 5,159 5,380
Loans.............................. 167,030 167,237 205,441 207,094
FINANCIAL LIABILITIES
Savings, money market and demand... 74,362 74,362 83,000 83,000
Time certificates.................. 116,757 116,460 126,781 126,568
-------- ------- ------- -------
Total deposits..................... $191,119 190,822 209,781 209,568
-------- ------- ------- -------
FHLB advances...................... $ -- -- 890 890
</TABLE>
F-21
<PAGE>
===============================================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 1
Selected Consolidated Financial and Other Data........................... 10
Risk Factors............................................................. 11
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 18
Market for Common Stock.................................................. 19
Capitalization........................................................... 20
Historical and Pro Forma Regulatory Capital Compliance................... 21
Conversion Stock to be Purchased by Management Pursuant to Subscription
Rights.................................................................. 22
Pro Forma Data........................................................... 23
Heritage Savings Bank and Subsidiaries Consolidated Statements of
Income.................................................................. 26
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business of the Company.................................................. 35
Business of the Bank..................................................... 36
Management............................................................... 51
Certain Transactions..................................................... 60
Supervision and Regulation............................................... 60
The Conversion........................................................... 64
Restrictions on Acquisition of the Company and the Bank.................. 79
Description of Capital Stock of the Company.............................. 83
Comparison of Stockholders' Rights....................................... 84
Registration Requirements................................................ 87
Legal and Tax Opinions................................................... 87
Experts.................................................................. 87
Additional Information................................................... 88
Index to Consolidated Financial Statements............................... F-1
</TABLE>
===============================================================================
===============================================================================
6,098,998 SHARES
[LOGO]
HERITAGE FINANCIAL CORPORATION
COMMON STOCK
----------------
PROSPECTUS
----------------
RYAN, BECK & CO.
, 1997
===============================================================================
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Commission registration fee.................................... $ 21,254
NASD Filing fee................................................ 5,000
Legal.......................................................... 125,000
Accounting Fees and Expenses................................... 75,000
Appraisal and Business Plan Fees and Expenses.................. 35,000
Conversion Agent Fees and Expenses............................. 11,500
Marketing Agent Fixed Fee...................................... 50,000
Marketing Agent Counsel Fees and Expenses...................... 40,000
Printing, Postage and Mailing.................................. 80,000
Transfer Agent and Registrar Fees, Expenses.................... 7,500
Miscellaneous Expenses......................................... 9,746
--------
Total........................................................ $460,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide, among other things, for the
indemnification of directors, and authorize the Board to pay reasonable
expenses incurred by, or to satisfy a judgment or fine against, a current or
former director in connection with any personal legal liability incurred by
the individual while acting for the Company within the scope of his or her
employment, and which was not the result of conduct finally adjudged to be
"egregious" conduct. "Egregious" conduct is defined as intentional misconduct,
a knowing violation of law, or participation in any transaction from which the
person will personally receive a benefit in money, property, or services to
which that person is not legally entitled. The Articles of Incorporation also
include a provision that limits the liability of directors of the Company from
any personal liability to the Company or its shareholders for conduct not
found to have been egregious.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The financial statements and exhibits filed as part of this Registration
Statement are as follows:
(a) List of Exhibits
<TABLE>
<C> <S>
1.1 Form of proposed Agency Agreement among Heritage Financial Corporation,
Heritage Bank and Ryan Beck & Co., Inc.*
1.2 Engagement Letter by and between Heritage Financial Corporation,
Heritage Bank and Ryan Beck & Co., Inc.*
2 Amended and Restated Plan of Conversion and Reorganization of Heritage
Financial Corporation, M.H.C.
3.1 Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4. Form of Certificate for Common Stock.*
5 Opinion of Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim,
P.L.L.C. regarding legality of the Common Stock.
8.1 Federal Tax Opinion of KPMG Peat Marwick LLP.*
8.2 State Tax Opinion of Gordon, Thomas, Honeywell, Malanca, Peterson &
Daheim, P.L.L.C.*
8.3 Letter from RP Financial, LC. as to the value of subscription rights.
10.1 Proposed Form of Stock Option Plan.
10.2 Proposed form of Management Recognition Plan and Trust Agreement.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim,
P.L.L.C. (included in opinion filed as Exhibit 5 to this Registration
Statement).
23.3 Consent of RP Financial, LC.
24 Power of Attorney.
27 Financial Data Schedule.
99.1 Order and Acknowledgment Form.*
99.2 Solicitation and Marketing Materials.*
99.3 Appraisal Report of RP Financial, LC.
</TABLE>
- --------
* To be filed by amendment.
(b) Financial Statement Schedules.
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
II-2
<PAGE>
(iii) To include any material information with respect to the plan of
distribution of previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OLYMPIA, STATE OF
WASHINGTON, ON SEPTEMBER 12, 1997.
HERITAGE FINANCIAL CORPORATION
/s/ Donald V. Rhodes
By: _________________________________
DONALD V. RHODES CHAIRMAN,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON SEPTEMBER 12, 1997 IN THE
CAPACITIES INDICATED.
SIGNATURE TITLE
PRINCIPAL EXECUTIVE OFFICER:
/s/ Donald V. Rhodes Chairman, President and Chief
- ------------------------------------- Executive Officer
DONALD V. RHODES
PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER:
/s/ James Hastings Senior Vice President and Treasurer
- -------------------------------------
JAMES HASTINGS
A MAJORITY OF THE BOARD OF
DIRECTORS:
/s/ Lynn M. Brunton
_____________________________________
LYNN M. BRUNTON
/s/ John A. Clees
_____________________________________
JOHN A. CLEES
/s/ Daryl D. Jensen
_____________________________________
DARYL D. JENSEN
II-4
<PAGE>
SIGNATURE
/s/ H. Edward Odegard*
_____________________________________
H. EDWARD ODEGARD
/s/ James P. Senna*
_____________________________________
JAMES P. SENNA
/s/ Philip S. Weigand*
_____________________________________
PHILIP S. WEIGAND
*By: /s/ Donald V. Rhodes
_____________________________________
DONALD V. RHODES
ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE NO.
------- --------
<C> <S> <C>
1.1 Form of proposed Agency Agreement among Heritage Financial
Corporation, Heritage Bank and Ryan Beck & Co., Inc.*
1.2 Engagement Letter by and between Heritage Financial
Corporation, Heritage Bank and Ryan Beck & Co., Inc.*
2 Amended and Restated Plan of Conversion and Reorganization
of Heritage Financial Corporation, M.H.C.
3.1 Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4. Form of Certificate for Common Stock.*
5 Opinion of Gordon, Thomas, Honeywell, Malanca, Peterson &
Daheim, P.L.L.C. regarding legality of the Common Stock.
8.1 Federal Tax Opinion of KPMG Peat Marwick LLP.*
8.2 State Tax Opinion of Gordon, Thomas, Honeywell, Malanca,
Peterson & Daheim, P.L.L.C.*
8.3 Letter from RP Financial, LC. as to the value of
subscription rights.
10.1 Proposed Form of Stock Option Plan.
10.2 Proposed form of Management Recognition Plan and Trust
Agreement.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Gordon, Thomas, Honeywell, Malanca, Peterson &
Daheim, P.L.L.C. (included in opinion filed as Exhibit 5
to this Registration Statement).
23.3 Consent of RP Financial, LC.
24 Power of Attorney.
27 Financial Data Schedule.
99.1 Order and Acknowledgment Form.*
99.2 Solicitation and Marketing Materials.*
99.3 Appraisal Report of RP Financial, LC.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 2
AMENDED AND RESTATED
PLAN OF CONVERSION AND REORGANIZATION
OF
HERITAGE FINANCIAL CORPORATION, MHC
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. INTRODUCTION........................................................ 1
2. DEFINITIONS......................................................... 2
3. PROCEDURES FOR CONVERSION........................................... 8
4. HOLDING COMPANY APPLICATIONS AND APPROVALS.......................... 11
5. SALE OF SUBSCRIPTION SHARES......................................... 11
6. NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK............. 12
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY............. 14
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)... 14
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)............. 15
10. SUBSCRIPTION RIGHTS OF SUPPLEMENT ELIGIBLE ACCOUNT HOLDERS
(THIRD PARTY)....................................................... 15
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY).............. 16
12. MINORITY STOCKHOLDERS (FIFTH PRIORITY).............................. 17
13. COMMUNITY OFFERING (SIXTH PRIORITY)................................. 17
14. SYNDICATED COMMUNITY OFFERING....................................... 19
15. LIMITATION ON PURCHASES AND OWNERSHIP............................... 20
16. PAYMENT FOR CONVERSION STOCK........................................ 22
17. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS........ 23
18. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT..... 25
19. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES................... 25
20. ESTABLISHMENT OF LIQUIDATION ACCOUNT................................ 26
</TABLE>
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21. VOTING RIGHTS OF STOCKHOLDERS......................................... 27
22. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION...................... 27
23. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS
FOLLOWING THE CONVERSION.............................................. 28
24. TRANSFER OF DEPOSIT ACCOUNTS.......................................... 29
25. REGISTRATION AND MARKETING............................................ 29
26. TAX RULINGS OR OPINIONS............................................... 29
27. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS......................... 30
28. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY............... 31
29. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK.......................... 32
30. CHARTER AND BYLAWS.................................................... 32
31. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE......................... 33
32. EXPENSES OF CONVERSION................................................ 33
33. AMENDMENT OR TERMINATION OF PLAN...................................... 33
34. CONDITIONS TO CONVERSION.............................................. 34
35. INTERPRETATION........................................................ 34
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PLAN OF CONVERSION AND REORGANIZATION OF
HERITAGE FINANCIAL CORPORATION, MHC
1. INTRODUCTION
This Plan of Conversion and Reorganization (the "Plan") provides for the
conversion of Heritage Financial Corporation, MHC, a state of Washington mutual
holding company (the "Mutual Holding Company") into Heritage Financial
Corporation, a capital stock corporation organized under the state law of
Washington (the "Holding Company"). The Mutual Holding company currently owns a
majority of the common stock of Heritage Savings Bank (the "Bank"), a stock
savings bank which is headquartered in Olympia, Washington. The purpose of the
Conversion is to convert the Mutual Holding Company to the capital stock form of
organization which will provide the Holding Company and the Bank with greater
flexibility and capital resources to respond to changing regulatory and market
conditions and to effect corporate transactions, including mergers and
acquisitions. The Holding Company will offer its Common Stock upon the terms
and conditions set forth herein to Eligible Account Holders, the Employee Plans
established by the Bank or the Holding Company, Supplemental Eligible Account
Holders, Other members, and Minority Stockholders in the respective priorities
set forth in this Plan. Any shares of Conversion Stock not subscribed for by
the foregoing classes of persons will be offered for sale to certain members of
the public who reside in the Bank's Community directly by the Holding Company
through a Community Offering or a Syndicated Community Offering or through an
underwritten firm commitment public offering, or through a combination thereof.
As part of the Conversion, each Minority Stockholder will receive Common Stock
of the Holding Company in exchange for Minority Shares. The Conversion will
result in the voting interests of the Mutual Holding Company's members being
transferred to persons who purchase Conversion Stock in the Offering and persons
who exchange common stock to the Bank for Common Stock of the Holding company.
The Conversion will have no impact on depositors, borrowers or customers of the
Bank. After the Conversion, the Bank will continue to be regulated by the
Division as its chartering authority. The Bank also will continue to be a
member of the Federal Home Loan Bank System and all its insured savings deposits
will continue to be insured by the FDIC to the extent provided by applicable
law.
This Plan, as amended, has been adopted by the Board of Directors of the
Mutual Holding Company, and must also be adopted by (i) the affirmative vote of
a
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majority of the total number of votes entitled to be cast by Voting Members of
the Mutual Holding Company at a Special Meeting of Members to be called for that
purpose, (ii) holders of at least two-thirds of the outstanding common stock of
the Bank at the Special Meeting of Stockholders, and (iii) at least a majority
of the votes cast, in person or by proxy, of the Minority Stockholders. Prior
to the submission of this Plan to the Voting Members and stockholders of the
Bank for consideration, the Plan must be approved by the Applicable Regulatory
Authorities.
2. DEFINITIONS
For the purposes of this Plan, the following terms have the following
meanings:
ACCOUNT HOLDER: Any Person holding a Deposit Account in the Bank.
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 or company which acts in concert with another person or company ("other
party") shall also be deemed to be acting in concert with any person or company
who is also acting in concert with that other party, except that any tax-
qualified employee stock benefit plan will not be deemed to be acting in concert
with its trustee or a person who serves in a similar capacity solely for the
purpose of determining whether stock held by the trustee and stock held by the
plan will be aggregated.
AFFILIATE: Any person that controls, is controlled by, or is under common
control with another person.
APPLICABLE REGULATORY AUTHORITIES: The Division, FDIC or Fed, as
applicable in the circumstances.
ASSOCIATE: The term Associate when used to indicate a relationship with
any person, means (i) any corporation or organization (other than the Bank or a
majority-owned subsidiary of the Bank) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10 percent or
more of any class of equity securities, (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity except that for the
purposes of Sections 8 through 15 hereof, the term "Associate" does not include
any Non-Tax-Qualified Employee Stock Benefit Plan or any Tax-Qualified
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Employee Stock Benefit Plan in which a person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity, and except
that, for purposes of aggregating total shares that may be held by Officers and
Directors the term "Associate" does not include any Tax-Qualified Employee Stock
Benefit Plan, and (iii) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a director or
officer of the Bank or the Holding Company, if utilized, or any of its parents
or subsidiaries.
BANK: Heritage Savings Bank in its current stock form or in the form
following the Conversion, as the context of the reference indicates.
BANK MERGER: The merger of the Interim Bank with the Bank as set forth in
this Plan pursuant to which the Bank will become a wholly owned subsidiary of
the Holding Company.
CODE: The Internal Revenue Code of 1986, as amended.
COMMON STOCK: The shares of common stock, no par value per share, to be
issued by the Holding Company.
COMMUNITY: The Washington counties of Thurston, Pierce, Mason and Lewis,
which constitute the Bank's "local community".
COMMUNITY OFFERING: The offering for sale to certain members of the
general public directly by the Holding Company of any shares not subscribed for
in the Subscription Offering.
CONTROL (including the terms "controlled by", "controlling" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
CONVERSION: The conversion and reorganization of the Mutual Holding
Company to stock form pursuant to this Plan, including the MHC Merger, the Bank
Merger, the Share Exchange and the Offering, and all steps incident or necessary
thereto.
CONVERSION STOCK: The Subscription Shares and the Exchange Shares issued
in the Conversion.
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DEPOSIT ACCOUNT: The term Deposit Account means any withdrawable account
as defined in Revised Code of Washington ("RCW") 32.32.180, including
certificates of deposit.
DIRECTOR: A member of the Board of Directors of the Bank, the Holding
Company or the Mutual Holding Company, as appropriate in the context.
DIVISION: Washington Department of Financial Institutions, Division of
Banks.
ELIGIBLE ACCOUNT HOLDER: Any Person holding a Qualifying Deposit on the
Eligibility Record Date and the date of the adoption of this Plan for purposes
of determining subscription rights and establishing subaccount balances in the
Liquidation Account.
ELIGIBILITY RECORD DATE: The date for determining Eligible Account Holders
of the Bank which is June 30, 1996.
EMPLOYEES: All Persons who are employed by the Bank or the Mutual Holding
Company.
EMPLOYEE PLANS: The Tax-Qualified Employee Stock Benefit Plans of the Bank
or the Holding Company.
ESOP: An Employee Stock Ownership Plan and related trust established by
the Bank or the Holding Company.
ESTIMATED PRICE RANGE: The range of the estimated pro forma market value
of the total number of shares of Conversion Stock to be issued in the
Conversion, as determined by the Independent Appraiser prior to the Subscription
Offering and as it may be amended from time to time thereafter.
EXCHANGE RATIO: The rate at which shares of Holding Company Common Stock
are exchanged for Minority Shares upon consummation of the Conversion. The
Exchange Ratio shall be determined as of the closing of the Conversion and shall
be the rate that will result in the Minority Stockholders owning in the
aggregate the same percentage of the outstanding shares of Common Stock of the
Holding Company immediately upon completion of the Conversion as the percentage
of Bank common stock owned by them in the aggregate immediately prior to the
consummation of the Conversion before giving effect to (i) the payment of cash
in lieu of issuing fractional shares of Holding Company Common Stock, and (ii)
any shares of Common Stock purchased by the Minority Stockholders in the
Conversion.
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EXCHANGE SHARES: Shares of Common Stock, no par value per share, of the
Holding Company issued to Minority Stockholders in exchange for Minority Shares.
FDIC: The Federal Deposit Insurance Corporation.
FED: Board of Governors of the Federal Reserve System or the Federal
Reserve Bank of San Francisco.
HOLDING COMPANY: The Washington corporation formed for the purpose of
acquiring all of the shares of capital stock of the Bank in connection with the
Conversion. Shares of Common Stock of the Holding Company will be issued in the
Conversion to Participants and others.
INDEPENDENT APPRAISER: The appraiser retained by the Mutual Holding
Company and the Bank to prepare an appraisal of the pro forma market value of
the Conversion Stock.
INTERIM BANK: One or more interim bank subsidiaries of the Bank or the
Holding Company established by the Bank or the Holding Company to effect the
Conversion.
LIQUIDATION ACCOUNT: The account established for the Members as set forth
in Section 20.
MHC MERGER: The merger of the Mutual Holding Company with the Bank as set
forth in this Plan.
MINORITY SHARES: Any outstanding common stock of the Bank held by persons
other than the Mutual Holding Company.
MINORITY STOCKHOLDER: Any owner of Minority Shares immediately prior to
the closing of the Conversion.
MINORITY STOCK OFFERING: The offering of the Bank's common stock to
persons other than the Mutual Holding Company in connection with the formation
of the Mutual Holding Company.
MUTUAL HOLDING COMPANY: Heritage Financial Corporation, MHC, the mutual
holding company of the Bank.
OFFERING: The offering for sale, pursuant to this Plan, of Common Stock in
a Subscription Offering, Community Offering, and Syndicated Community Offering
(or
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underwritten public offering), as the case may be. The term "Offering" does not
include the Common Stock of the Holding Company issued in exchange for Minority
Shares pursuant to this Plan.
OFFICER: An executive officer of the Bank, the Holding Company or the
Mutual Holding Company as appropriate in the context.
ORDER FORM: Any form (together with any attached cover letter) sent by the
Bank to any Participant or Person containing among other things a description of
the alternatives available to such Person under the Plan and by which any such
Person may make elections regarding subscriptions for Conversion Stock in the
Subscription Offering.
OTHER MEMBER: Any Member on the Voting Record Date who is not an Eligible
Account Holder or Supplemental Account Holder.
PARTICIPANT: Any Eligible Account Holder, Employee Plan, Supplemental
Eligible Account Holder, Other Member or Minority Stockholder.
PERSON: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust (including Individual Retirement Accounts and KEOGH
Accounts), any unincorporated organization, a government or political
subdivision thereof or any other entity.
PLAN: The Plan of Conversion and Reorganization of the Mutual Holding
Company, including the MHC Merger and the Bank Merger, as it exists on the date
hereof and as it may hereafter be amended in accordance with its terms.
PLAN OF MERGER: This document effecting the merger of the Mutual Holding
Company with and into the Bank and cancellation of Bank shares held by the
Mutual Holding Company.
PROSPECTUS: The one or more documents used in offering the Conversion
Stock in the Offering and the Exchange Shares.
QUALIFYING DEPOSIT: The aggregate balance of all Deposit Accounts in the
Bank of (i) an Eligible Account Holder at the close of business on the
Eligibility Record Date, provided such aggregate balance is not less than $50,
and (ii) a Supplemental Eligible Account Holder at the close of business on the
Supplemental Eligibility Record Date, provided such aggregate balance is not
less than $50.
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RECOGNITION PLANS: The Bank's Recognition and Retention Plans and Trusts
adopted by the Board of Directors of the Bank and/or the Holding Company.
RESIDENT: Any person who occupies a dwelling within the Community, has a
present intent to remain within the Community for a period of time, and
manifests the genuiness of that intent by establishing an ongoing physical
presence within the Community together with an indication that such presence
within the Community is something other than merely transitory in nature. To
the extent the person is a corporation or other business entity, the principal
place of business or headquarters shall be in the Community. To the extent a
person is a personal benefit plan, the circumstances of the beneficiary shall
apply with respect to this definition. In the case of all other benefit plans,
circumstances of the trustee shall be examined for purposes of this definition.
The Bank may utilize such evidence provided to it to make a determination as to
whether a person is a resident. In all cases, however, such a determination
shall be in the sole discretion of the Bank. A Participant must be a "Resident"
for purposes of determining whether such person "resides" in the Community as
such term is used in this Plan.
SEC: The Securities and Exchange Commission.
SHARE EXCHANGE: The Exchange of Minority Shares for Holding Company Common
Stock in the Conversion.
SPECIAL MEETING OF MEMBERS: The special meeting of members of the Mutual
Holding Company and any adjournments thereof held to consider and vote upon this
Plan.
SPECIAL MEETING OF STOCKHOLDERS: The special meeting of stockholders of
the Bank and any adjournments thereof held to consider and vote upon the Plan.
SUBSCRIPTION OFFERING: The offering of Conversion Stock to Participants.
SUBSCRIPTION PRICES: The price per share of Conversion Stock to be paid by
Participants in the Subscription Offering and Persons of the Community Offering.
SUBSCRIPTION SHARES: The no par value common stock offered and issued by
the Holding Company in the Offering, Subscription Shares do not include Bank
common stock held by the Minority Stockholders exchanged for shares of Common
Stock of the Holding Company in the Share Exchange.
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SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER: Any Person, other than Directors and
Officers of the Bank and their Associates, holding a Qualifying Deposit on the
Supplemental Eligibility Record Date, who is not a Eligible Account Holder.
SUPPLEMENTAL ELIGIBILITY RECORD DATE: The date for determining
Supplemental Eligible Account Holders, as determined according to applicable
law.
SYNDICATED COMMUNITY OFFERING: The offering of Conversion Stock following
the Subscription and Community Offerings through a syndicate of broker-dealers.
TAX-QUALIFYING EMPLOYEE STOCK BENEFIT PLAN: Any defined benefit plan or
defined contribution plan, 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. The Bank may make scheduled discretionary contributions to a tax-
qualified employee stock benefit plan, provided such contributions do not cause
the Bank to fail to meets its regulatory capital requirement. A "Non-Tax-
Qualified Employee Stock Benefit Plan" is any defined benefit plan or defined
contribution plan which is not so qualified.
VOTING MEMBER: Any Person who at the close of business on the Voting
Record Date is entitled to vote as a member of the Mutual Holding Company
pursuant to its charter and bylaws.
VOTING RECORD DATE: The date fixed by the Directors in accordance with
applicable law for determining eligibility to vote at the Special Meeting of
Members and/or the Special Meeting of Stockholders.
3. PROCEDURES FOR CONVERSION
A. After approval of the Plan by the Board of Directors of the Bank, the
Plan shall be submitted together with all other requisite material to the
Division , FDIC and Fed, as applicable for its approval. Notice of the adoption
of the Plan by the Board of Directors of the Holding Company and the submission
of the Plan to applicable regulators for approval will be published in a
newspaper having general circulation in each community in which an office of the
Bank is located and copies of the Plan will be made available at each office of
the Bank for inspection by the Members. Upon receipt of notice from the
applicable regulators to do so, the Mutual Holding Company also will cause to be
published a notice of the filing of an application to convert in accordance with
the provisions of the Plan.
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B. The Plan will be submitted to a vote of (i) the Voting Members at the
Special Meeting of Members, and (ii) the Stockholders of the Bank at the Special
Meeting of Stockholders. The Mutual Holding Company may, at its option, mail to
all Members of the Voting Record Date, at their last known address appearing on
the records of the Bank, a proxy statement in either long or summary form
describing the Plan which will be submitted to a vote of the members at the
Special Meeting of Members. The Holding Company will also mail to all
Participants either a Prospectus and Order Form for the purchase of Conversion
Stock or a letter informing them of their right to receive a Prospectus and
Order Form and a postage prepaid card to request such materials, subject to the
provisions of Sections 17 and 18 hereof. In addition, all Participants will
receive, or be given the opportunity to request by either returning a postage
prepaid card which will be distributed with the proxy statement or letter, a
copy of the Plan as well as the certificate of incorporation or bylaws of the
Holding Company. Upon approval of the Plan by a majority of the total
outstanding votes of the Voting Members, and a majority of the stockholders of
the Bank (including a majority of the votes cast in person or by proxy by the
Minority Stockholders at the Special Meeting), the Mutual Holding Company, the
Holding Company and the Bank will take all other necessary steps pursuant to
applicable laws and regulations to consummate the Conversion and Offering. The
Conversion must be completed within 24 months of the approval of the Plan by the
Voting Members, unless a longer time period is permitted by governing laws and
regulations.
C. The Conversion will be effected as follows, or in any other manner
approved by the applicable regulators which is consistent with the purposes of
this Plan and applicable laws and regulations. The choice of which method to
use to effect the Conversion will be made by the Board of Directors of the
Mutual Holding Company immediately prior to the closing of the Conversion. Each
of the steps set forth below shall be deemed to occur in such order as is
necessary to consummate the Conversion pursuant to the Plan, the intent of the
Board of Directors of the Mutual Holding Company and the Bank, and Applicable
Regulatory Authorities regulations. Approval of the Plan by the Members and
stockholders of the Bank shall also constitute approval of each of the
conditions to the implementation of the Plan, including the Bank Merger and the
MHC Merger, as discussed herein.
1. The Bank will organize the Holding Company (which will become the
stock holding company of the Bank) as a first tier subsidiary of the
Bank.
2. The Holding Company will organize Interim Bank as a wholly-owned
subsidiary of the Holding Company.
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3. The Mutual Holding Company will merge with and into the Bank (the "MHC
Merger") pursuant to the Plan of Merger attached hereto as Exhibit A
between the Mutual Holding Company and the Bank whereby the shares of
Bank common stock held by the Mutual Holding Company will be canceled
and each Eligible Account Holder and Supplement Eligible Account
Holder will receive an interest in the Liquidation Account of the Bank
in exchange for such Member's interest in the Mutual Holding Company.
4. Interim Bank will merge with and into the Bank (the "Bank Merger")
with the Bank as the resulting entity pursuant to the Agreement of
Merger attached hereto as Exhibit B between the Bank, the Holding
Company and the Interim Bank whereby each Minority Stockholder shall
receive Common Stock of the Holding Company in exchange for Minority
Shares, based on the Exchange Ratio, with cash paid in lieu of
fractional shares based upon the Actual Purchase Price.
5. All of the shares of common stock of Interim Bank held by the Holding
Company shall be converted into shares of common stock of the Bank.
6. Contemporaneously with the Bank Merger, the Holding Company will offer
for sale in the Offering Shares of Conversion Stock representing the
pro forma market value of the Holding Company immediately prior to the
Conversion.
D. As part of the Conversion, each of the Minority Shares shall
automatically, without further action of the holder thereof, be converted into
and become the right to receive Common Stock based upon the Exchange Ratio
established by the Board of Directors of the Holding Company and the Bank,
subject to approval by Applicable Regulatory Authorities. The basis for
exchange of Minority Shares for Common Stock shall be fair and reasonable and
may, at the election of the Board of Directors, be supported by the opinion of
an independent financial adviser. Options to purchase shares of Bank common
stock which are outstanding immediately prior to the consummation of the
conversion shall be converted into options to purchase shares of Common Stock,
with the number of shares subject to the option and the exercise price per share
to be adjusted based upon the Exchange Ratio so that the aggregate exercise
price remains unchanged, and with the duration of the option remaining
unchanged.
E. Concurrently with the filing of the Conversion Application with the
Applicable Regulatory Authorities, the Holding Company shall also seek to
register the
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Conversion Stock with the SEC and any appropriate state securities authorities.
In addition, if required by applicable law and regulations, the Bank shall
prepare preliminary proxy materials as well as other applications and
information for review by the Applicable Regulatory Authorities in connection
with the solicitation of Voting Members and Minority Stockholder approval of the
Bank Merger and the MHC Merger.
F. The Articles of Incorporation of the Bank shall be amended upon
consummation of the Conversion to reflect the establishment of the Liquidation
Account. The Bylaws of the Bank shall be unaffected by the Conversion.
G. The home office and branch offices of the Bank shall be unaffected by
the Conversion. The executive offices of the Holding Company shall be located
at the current offices of the Mutual Holding Company.
H. Stockholders of the Bank shall have the right to dissent from the MHC
Merger and the Bank Merger in the manner provided by Chapter 23B of the
Washington Business Corporation Act, Revised Code of Washington Chapter 23B.13.
4. HOLDING COMPANY APPLICATIONS AND APPROVALS
The Board of Directors of the Holding Company will take all necessary steps
to complete the Conversion and the Offering. The Holding Company shall make
timely applications for any requisite regulatory approvals, including an
Application on Form Y-3 to be filed with the Fed and a Registration Statement on
Form S-1 to be filed with the SEC. The Bank will be a wholly-owned subsidiary
of the Holding Company unless the Holding Company is eliminated in the
Conversion.
5. SALE OF SUBSCRIPTION SHARES
The Subscription Shares will be offered simultaneously in the Subscription
Offering to the Participants in the respective priorities set forth in Sections
8 and 13 of this Plan. The Subscription Offering may be commenced as early as
the mailing of the Proxy Statement for the Special Meeting of Members and must
be commenced in time to complete the Conversion within the time period specified
in Section 3. The Common Stock will not be insured by the FDIC. The Bank will
not knowingly lend funds or otherwise extend credit to any Person to purchase
shares of the Common Stock.
Any shares of Common Stock not subscribed for in the Subscription Offering
will be offered for sale in the Community Offering as provided in Section 13 of
this
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Plan. The Subscription Offering may be commenced prior to the Special Meeting of
Members and, in that event, the Community Offering may also be commended prior
to the Special Meeting of Members. The offer and sale of Common Stock prior to
the Special Meeting of Members shall, however, be conditioned upon approval of
the Plan by the Voting Members and stockholders of the Bank.
If feasible, any shares of Common Stock remaining after the Subscription
and Community Offerings, will be sold in a Syndicated Community Offering as
provided in Section 14 of this Plan in a manner that will achieve the widest
distribution of the Common Stock. The sale of all Common Stock subscribed for
in the Subscription and Community Offerings will be consummated simultaneously
on the date the sale of Common Stock in the Syndicated Community Offering is
Consummated and only if all unsubscribed for Common Stock is sold.
6. NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK
The total number of shares (or a range thereof) of Common Stock to be
issued and offered for sale in the Offering will be determined jointly by the
Board of Directors of the Bank and Board of Directors of the Holding Company
immediately prior to the commencement of the Subscription and Community
Offerings, subject to adjustment thereafter if necessitated by market or
financial conditions, with the approval of the Applicable Regulatory
Authorities, if necessary. In particular, the total number of shares may be
increased by up to 15% of the number of shares offered in the Subscription and
Community Offerings if the Estimated Price Range is increased subsequent to the
commencement of the Subscription and Community Offerings to reflect changes in
market and financial conditions and the aggregate purchase price is not more
than 15% above the maximum of the Estimated Price Range.
All shares sold in the Offering will be sold at a uniform price per share
referred to in this Plan as the Subscription Price. The aggregate purchase
price for all shares of Common Stock will not be inconsistent with the estimated
consolidated pro forma market value of the Holding Company. The estimated
consolidated pro forma market value of the Holding Company will be determined
for such purpose by the Independent Appraiser. Prior to the commencement of the
Subscription and Community Offerings, an Estimated Price Range will be
established, which range will vary within 15% above to 15% below the midpoint of
such range. The number of shares of Conversion Stock to be issued and the
purchase price per share may be increased or decreased by the Holding Company.
In the event that the aggregate purchase price of the Conversion Stock is below
the minimum of the Estimated Price Range, or materially above the
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maximum of the Estimated Price Range, resolicitation of purchasers may be
required, provided that up to a 15% increase above the maximum of the Estimated
Price Range will not be deemed material so as to require a resolicitation. Any
such resolicitation shall be effected in such manner and within such time as the
Bank shall establish, with the approval of the Applicable Regulatory Authorities
if required. Up to a 15% increase in the number of shares to be issued which is
supported by an appropriate change in the estimated pro forma market value of
the Holding Company will not be deemed to be material so as to require a
resolicitation of subscriptions. Based upon the independent valuation as updated
prior to the commencement of the Subscription and Community Offerings, the Board
of Directors of the Holding Company will fix the Subscription Price. If there is
a Syndicated Community Offering of shares of Common Stock not subscribed for in
the Subscription and Community Offerings, the price per share at which the
Common Stock is sold in such Syndicated Community Offering shall be equal to the
Subscription Price.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Holding company and to the Applicable Regulatory Authorities
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 Common
Stock at the Subscription Price is incompatible with its estimate of the
aggregate consolidated pro forma market value of the Holding Company. An
increase in the aggregate value of the Common Stock by up to 15% would not be
deemed to be material. If such confirmation is not received, the Holding
Company may cancel the Subscription and Community Offerings and/or the
Syndicated Community Offering, extend the Conversion, establish a new
Subscription Price and/or Estimated Price Range, extend, reopen or hold new
Subscription and Community Offerings and/or Syndicated Community Offering to
take such other action as the Applicable Regulatory Authorities may permit.
The Common Stock to be issued in the Conversion shall be fully paid and
nonassessable.
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY
Upon the consummation of the Conversion, the Holding Company will own all
of the capital stock of the Bank.
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The Holding Company will apply to the Applicable Regulatory Authorities to
retain 50% of the proceeds of the Offering. The Holding Company believes that
the Offering proceeds will provide economic strength to the Holding company and
the Bank for the future of a highly competitive and regulated environment and
would facilitate the possible expansion through acquisitions of financial
service organizations, possible diversification into other related businesses
and for other business and investment purposes, including the possible payment
of dividends and possible future repurchases of the Common Stock as permitted by
the Applicable Regulatory Authorities.
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)
A. Each Eligible Account Holder shall receive, without payment,
nontransferable subscription rights to subscribe for shares of Common Stock
equal to an amount up to the greater of $250,000 in aggregate purchase price of
the Conversion Stock issued in the Conversion, or one-tenth of one percent
(.10%) of the total offering of shares of Conversion Stock, or fifteen 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 each case on the Eligibility Record Date, subject
to the maximum purchase limitations specified in Section 15A and the minimum
purchase limitation in Section 15C and exclusive of any increase in the total
number of shares due to an increase in the Estimated Price Range up to 15%.
B. In the event that Eligible Account Holders exercise Subscription Rights
for a number of shares of Conversion Stock in excess of the total number of such
shares eligible for subscription, the shares of Conversion Stock shall be
allocated among the subscribing Eligible Account Holders as of the Eligibility
Record Date so as to permit each subscribing Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
total allocation to Conversion Stock equal to the lesser of 100 shares or the
number of share subscribed for by the Eligible Account Holder. Any shares
remaining after that allocation will be allocated among the subscribing Eligible
Account Holders as of the Eligibility Record Date whose subscriptions remain
unsatisfied in the proportion that the amount of the Qualifying Deposit of each
Eligible Account Holder whose subscription remains unsatisfied bears to the
total amount of the Qualifying Deposits of all Eligible Account Holders whose
subscriptions remain unsatisfied. If the amount so allocated exceeds the amount
subscribed for by any one or more Eligible Account Holders as of the Eligibility
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Record Date, the excess shall be reallocated (one or more times as necessary)
among those Eligible Account Holders whose subscriptions are still not fully
satisfied on the same principle until all available shares have been allocated.
C. Subscription rights as Eligible Account Holders received by Directors
and Officers and their Associates which are based on deposits made by such
persons during the twelve (12) months preceding the Eligibility Record Date
shall be subordinated to the Subscription Rights of all other Eligible Account
Holders.
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)
The Employee Plans of the Holding Company and the Bank shall receive,
without payment, subscription rights to purchase in the aggregate up to 8% of
the Common Stock offered in the Subscription Offering, including any shares of
Common Stock to be issued in the Subscription Offering as a result of an
increase in the Estimated Price Range after commencement of the Subscription
Offering and prior to completion of the Conversion. Consistent with applicable
laws and regulations and practices and policies of the Applicable Regulatory
Authorities, the Employee Plans may use funds contributed by the Holding Company
or the Bank and/or borrowed from an independent financial institution to
exercise such subscription rights, and the Holding Company and the Bank may make
scheduled discretionary contributions thereto, provided that such contributions
do not cause the Holding Company or the Bank to fail to meet any applicable
regulatory capital requirements. The Employee Plans shall not be deemed to be
Associates or Affiliates of or Persons Acting in Concert with any Director or
Officer of the Holding company or the Bank.
10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD PARTY)
A. Each Supplemental Eligible Account Holder shall receive, without
payment, nontransferable subscription rights to subscribe for shares of Common
Stock equal to an amount up to the greater of $250,000 in aggregate purchase
price of the Conversion Stock issued in the Conversion, or one-tenth of one
percent (.10%) of the total offering of shares of Conversion Stock, or fifteen
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to be issued by a
fraction of which the numerator is the amount of the Qualifying Deposit of the
Supplemental Eligible Account Holder and the denominator is the total amount of
Qualifying Deposits of all Supplemental Eligible Account Holders, in each case
on the Supplemental Eligibility Record Date, subject to
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the availability of sufficient shares after filling in full all subscription
orders of the Eligible Account Holders and Employee Plans under sections 8 and 9
hereof, subject to the maximum purchase limitation specified in Section 15A and
the minimum purchase limitation in Section 15C and exclusive of any increase in
the total number of shares issued due to an increase in the Estimated Price
Range of up to 15%.
B. In the event that Supplemental Eligible Account Holders exercise
Subscription Rights for a number of shares of Conversion Stock in excess of the
total number of such shares eligible for subscription, the shares of Conversion
Stock shall be allocated among the subscribing Supplemental Eligible Account
Holders as of the Supplemental Eligibility Record Date so as to permit each such
subscribing Supplemental Eligible Account Holder, to the extent possible, to
purchase a number of shares sufficient to make his or her total allocation of
Conversion Stock equal to the lessor of 100 shares or the number of shares
subscribed for by each such Supplemental Eligible account Holder. Any shares
remaining after that allocation will be allocated among the subscribing
Supplemental Eligible Account Holders as of the Supplemental Eligibility Record
date whose subscriptions remain unsatisfied in the proportion that the amount of
Qualifying Deposit of each such Supplemental Eligible Account Holder bears to
the total amount of the Qualifying Deposits of all Supplemental Eligible Account
Holders as of the Supplemental Eligibility Record Date.
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)
A. Each Other Member shall receive, without payment, nontransferable
subscription rights to subscribe for shares of Common Stock equal to an amount
up to the greater of $250,000 in aggregate purchase price of the Conversion
Stock issued in the Conversion or one-tenth of one percent (.10%) of the total
offering of shares of Conversion Stock, subject to the maximum purchase
limitation specified in Section 15A and the minimum purchase limitation
specified in Section 15C and exclusive of any increase in the total number of
shares issued due to an increase in the Estimated Price Range of up to 15%.
B. In the event that such Other Members subscribe for a number of shares
of Conversion Stock which, when added to the shares of conversion stock
subscribed for by the Eligible Account Holders, Employee Plans and Supplemental
Eligible Account Holders, is in excess of the total number of shares of
Conversion Stock being issued, the subscriptions of such Other Members will be
allocated first to Other Members as of the Voting Record Date in proportion to
the amounts of their relative
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subscriptions and thereafter to nonresident Other Members in proportion to the
amounts of their relative subscriptions.
12. MINORITY STOCKHOLDERS (FIFTH PRIORITY)
A. Each Minority Stockholder as of the Voting Record Date shall receive,
without payment, nontransferable subscription rights to subscribe for shares of
Common Stock equal to an amount up to the greater of $250,000 in aggregate
purchase price of the Conversion Stock issued in the Conversion or one-tenth of
one percent (.10%) of the total offering of shares of Conversion Stock, subject
to the maximum purchase limitation specified in Section 15A and the minimum
purchase limitation specified in Section 15C and exclusive of an increase in the
total number of shares issued due to an increase in the Estimated Price Range of
up to 15%.
B. In the event that such Minority Stockholders subscribe for a number of
shares of Conversion Stock which, when added to the shares of Conversion Stock
subscribed for by Eligible Account Holders, Employee Plans, Supplemental
Eligible Account Holders and Other Members, is in excess of the total number of
shares of Conversion Stock being issued, the subscriptions of such Minority
Stockholders will be allocated among subscribing Minority Stockholders in
proportion to the amounts of their relative subscriptions.
13. COMMUNITY OFFERING (SIXTH PRIORITY)
If less than the total number of shares of Common Stock to be subscribed
for in the Offering are sold in the Subscription Offering, it is expected that
shares remaining unsubscribed for will be made available for purchase in the
Community Offering to certain members of the general public, which may subscribe
together with any Associate or group of persons Acting in Concert for up to
$250,000 in aggregate purchase price of the shares of Conversion Stock issued in
the Conversion subject to the maximum purchase limitation specified in Section
15A and the minimum purchase limitation specified in Section 15C and exclusive
of an increase in the total number of shares issued due to an increase in the
Estimated Price Range of up to 15%. The shares may be made available in the
Community Offering through a direct community marketing program which may
provide for utilization of a broker, dealer, consultant or investment banking
firm experienced and expert in the sale of savings institutions securities.
Such entities may be compensated on a fixed fee basis or on a commission basis,
or a combination thereof. In offering the unsubscribed for shares to the public
in the Community Offering, a number of shares equal to the lesser of 25% of the
Conversion Stock or 25% of the Common Stock not subscribed for in the
Subscription
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Offering, at the discretion of the Holding Company, may be initially reserved
for institutional investors. Shares offered in the Community Offering will be
available for purchase by the general public and preference may be given to
natural persons residing in the Bank's Local Community which consists of the
counties of Thurston, Mason, Pierce, King, Snohomish, Kitsap, and Grays Harbor
in the State of Washington (such natural persons referred to as the "Preferred
Subscribers"). Any excess of shares, and those not subscribed for by
institutional investors, will be available for purchase by the general public.
The Holding Company shall make distribution of the Conversion Stock to be sold
in the Community Offering in such a manner as to promote a wide distribution of
Conversion Stock. The Holding Company reserves the right to reject any or all
orders in whole or in part, which are received in the Community Offering. The
number of shares of Conversion Stock that any person may purchase in the
Community Offering shall not exceed the maximum purchase limitation specified in
Section 15A nor be less than the minimum purchase limitation specified in
Section 15C.
To the extent that there are shares remaining after all subscriptions by
institutional investors are filled, if the Preferred Subscribers in the
Community Offering, whose orders would otherwise be accepted, subscribe for more
shares than are available for purchase, the shares available to them will be
allocated among the Preferred Subscribers in the manner which permits each such
person to the extent possible, to purchase the number of shares necessary to
make his total allocation of Conversion Stock equal to the lesser of 100 shares
or the number of shares subscribed for by such persons. Thereafter, unallocated
shares will be allocated among the Preferred Subscribers whose subscriptions
remain unsatisfied in the proportion that the number subscribed for by each
bears to the total number of shares subscribed for by all Preferred Subscribers
whose subscriptions remain unsatisfied. To the extent that there are shares
remaining after all subscriptions by Preferred Subscribers, any remaining shares
will be allocated among members of the general public using the foregoing
allocation as applied to Preferred Subscribers. The Holding Company may
establish all other terms and conditions of such offer. It is expected that the
Community Offering will commence concurrently with the Subscription Offering.
The Community Offering must be completed within 45 days after the completion of
the Subscription Offering unless otherwise extended by the Applicable Regulatory
Authorities.
14. SYNDICATED COMMUNITY OFFERING
If feasible, the Board of Directors may determine to offer all shares of
Common Stock not subscribed for in the Subscription and Community Offerings will
be sold in a Syndicated Community Offering, subject to such terms, conditions
and procedures as may be determined by the Holding Company, in a manner that
will achieve the widest distribution of the Common Stock subject to the right of
the Holding Company to
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accept or reject in whole or in part all subscriptions in the Syndicated
Community Offering. In the Syndicated Community Offering, any person together
with any Associate or group of Persons acting in concert may purchase up to
$250,000 in aggregate purchase price of the shares of Conversion Stock offered
in the Conversion subject to the maximum purchase limitation specified in
Section 15A and the minimum purchase limitation specified in Section 15C and
exclusive of an increase in the total number of shares issued due to an increase
in the Estimated Price Range of up to 15%. Provided that the Subscription
Offering has commenced, the Bank may commence the Syndicated Community Offering
at any time after the mailing to the Members of the Proxy Statement to be used
in connection with the Special Meeting of Members, provided that the completion
of the offer and sale of the Conversion Stock shall be conditioned upon the
approval of this Plan by the Voting Members. If the Syndicated Community
Offering is not sooner commenced pursuant to the provisions of the preceding
sentence, the Syndicated Community Offering will be commenced as soon as
practicable following the date upon which the Subscription and Community
Offerings terminate.
Alternatively, if a Syndicated Community Offering is not held, the Bank
shall have the right to sell any shares of Conversion Stock remaining following
the Subscription and Community Offerings in an underwritten firm commitment
public offering. The provisions of Section 15 hereof shall not be applicable to
sales to underwriters for purposes of such an offering but shall be applicable
to the sales by the underwriters to the public. The price to be paid by the
underwriters in such an offering shall be equal to the Actual Purchase Price
less an underwriting discount to be negotiated among such underwriters and the
Bank, which will in no event exceed an amount deemed to be acceptable by the
Applicable Regulatory Authorities.
If for any reason a Syndicated Community Offering or an underwritten firm
commitment public offering of shares of Conversion Stock not sold in the
Subscription and Community Offerings cannot be effected, or in the event that
any insignificant residue of shares of Conversion Stock is not sold in the
Subscription and Community Offerings or in the Syndicated Community or
underwritten firm commitment public offering, other arrangements will be made
for the disposition of unsubscribed shares by the Bank, if possible. Such other
purchase arrangements will be subject to the approval of the Applicable
Regulatory Authorities.
15. LIMITATION ON PURCHASES AND OWNERSHIP
The following limitations shall apply to all purchases of shares of
Conversion Stock and ownership of Conversion Stock upon completion of the
Conversion:
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A. The maximum number of shares of Common Stock which may be subscribed
for or purchased in all categories in the Offering by any Person or Participant
together with any Associate or group of Persons Acting in Concert shall not
exceed shares with an aggregate purchase price of $250,000, except for the
Employee Plans which may subscribe for up to 8% of the Common Stock offered in
the Subscription Offering (including shares issued in the event of an increase
in the Estimated Price Range of 15%); provided, however, that, in the event the
maximum purchase limitation is increased to allow purchase of shares of
Conversion Stock with an aggregate purchase price that exceeds $250,000, orders
for Conversion Stock in the Community Offering and in the Syndicated Offering
(or, alternatively, an underwritten firm commitment public offering), if any,
shall, as determined by the Bank, first be filled to a maximum of $250,000 in
aggregate purchase price of shares of Conversion Stock offered and thereafter
remaining shares shall be allocated, on an equal number of shares basis per
order until all orders have been filled.
B. The maximum number of shares of Common Stock which may be purchased in
all categories of the Conversion by Officers and Directors of the Bank and their
Associates in the aggregate, shall not exceed 20% of the Conversion Stock issued
in the Conversion.
C. A minimum of 25 shares of Common Stock must be purchased by each Person
purchasing shares in the Offering to the extent those shares are available;
provided, however, that in the event the minimum number of shares of Common
Stock purchased times the price per share exceeds $500, then such minimum
purchase requirement shall be reduced to such number of shares which when
multiplied by the price per share shall not exceed $500, as determined by the
Board.
If the number of shares of Common Stock otherwise allocable pursuant to
Sections 8 through 14, inclusive, to any Person or that Person's Associates
would be in excess of $250,000 in aggregate purchase price, the number of shares
of Common Stock allocated to each such person shall be reduced to $250,000 in
aggregate purchase price, and then the number of shares allocated to each group
consisting of a Person and that Person's Associates shall be reduced so that the
aggregate allocation to that Person and his or her Associates complies with the
above limits, and such maximum number of shares shall be reallocated among that
Person and his or her Associates as they may agree, or in the absence of an
agreement, in proportion to the shares subscribed by each (after first applying
the maximums applicable to each Person, separately).
In addition to their purchase limitations, no person, together with any
associate or group of persons acting in concert may, upon completion of the
Conversion, own
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more than 2% of the Common Stock outstanding; provided that no Minority
Stockholders will be required to dispose of Minority Shares if, without
purchasing Conversion Stock, the Exchange Rate will result in ownership of an
excess of 2% of the Common Stock.
Depending upon market or financial conditions, the Board of Directors of
the Holding Company, with the approval of the Applicable Regulatory Authorities
and without further approval of the Members, may decrease or further increase
the purchase and ownership limitations in this Plan, provided that the maximum
purchase limitations may not be increased to a percentage in excess of 9.99%.
In the event that the maximum purchase limitation is increased, orders for
Common Stock exceeding 50% of the shares of Conversion Stock issued in the
Conversion shall not exceed, in the aggregate, 10% of the total shares of
Conversion Stock sold in the Conversion. If the Holding Company increases the
maximum purchase limitations, the Holding Company is only required to resolicit
Persons who subscribed for the maximum purchase amount and may, in the sole
discretion of the Holding Company resolicit certain other large subscribers.
In the event of an increase in the total number of shares offered in the
Conversion due to an increase in the Estimated Price Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be used in the following order
of priority: (i) to fill the Employee Plans' subscription to the Adjusted
Maximum; (ii) in the event that there is an oversubscription at the Eligible
Account Holder, Supplemental Eligible Account Holder, Other Member, or Minority
Stockholder levels, to fill unfulfilled subscriptions of such subscribers
according to such respective priorities exclusive of the Adjusted Maximum; and
(iii) to fill unfulfilled subscriptions in the Community Offering exclusive of
the Adjusted Maximum with preference given to natural persons residing in the
Community.
For purposes of this Section 15, the Directors of the Bank and the Holding
Company shall not be deemed to be associates or a group affiliated with each
other or otherwise Acting in Concert solely as a result of their being Directors
of the Bank or the Holding Company.
Each Person purchasing Conversion Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the above purchase
limitations contained in this Plan.
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16. PAYMENT FOR CONVERSION STOCK
All payments for Conversion Stock subscribed for in the Subscription,
Community and Syndicated Community Offerings must be delivered in full to the
Holding Company, together with a properly completed and executed Order Form, or
purchase order in the case of the Syndicated Community Offering, on or prior to
the expiration date of the Offering; provided, however, that if the Employee
Plans subscribe for shares during the Subscription Offering, such plans will not
be required to pay for the shares at the time they subscribe but rather may pay
for such shares of Conversion Stock subscribed for by such plans at the
Subscription Price upon consummation of the Conversion.
Notwithstanding the foregoing, the Holding Company shall have the right, in
its sole discretion, to permit institutional investors to submit contractually
irrevocable orders in the Offering and to thereafter submit payment by wire
transfer for the Conversion Stock for which they are subscribing in the Offering
at any time prior to 48 hours before the completion of the Conversion, unless
such 48 hour period is waived by the Holding Company in its sole discretion.
Payment for Conversion Stock subscribed for shall be made either in cash
(if delivered in person), check, money order, certified or teller's check or
bank draft. Alternatively, subscribers in the Subscription and Community
Offerings may pay for the shares subscribed for by authorizing the Bank on the
Order Form to make a withdrawal from the subscriber's Deposit Account at the
Bank in an amount equal to the Subscription Price of such shares. Such
authorized withdrawal, whether from a savings passbook or certificate account,
shall be without penalty as to premature withdrawal. If the authorized
withdrawal is from a certificate account, and the remaining balance does not
meet the applicable minimum balance requirement, the certificate shall be
canceled at the time of withdrawal, without penalty, and the remaining balance
will earn interest at the passbook rate. Funds for which a withdrawal is
authorized will remain in the subscriber's Deposit Account but may not be used
by the subscriber during the Subscription and Community Offerings. Thereafter,
the withdrawal will be given effect only to the extent necessary to satisfy the
subscription (to the extent it can be filled) at the Subscription Price per
share. Interest will continue to be earned on any amounts authorized for
withdrawal until such withdrawal is given effect. Interest will be paid by the
Bank at not less than the passbook annual rate on payments for Conversion Stock
received in cash or by check. Such interest will be paid from the date payment
is received by the Bank until consummation or termination of the Conversion. If
for any reason the Conversion is not consummated, all payments made by
subscribers in the Subscription, Community
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and Syndicated Community Offerings will be refunded to them with interest. In
case of amounts authorized for withdrawal from Deposit Accounts, refunds will be
made by canceling the authorization for withdrawal. The Bank is prohibited by
regulation from knowingly making any loans or granting any lines of credit for
the purchase of stock in the Conversion, and therefore, will not do so.
17. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the Prospectus prepared by the Holding Company
and Bank has been declared effective by the SEC, Order Forms will be distributed
to the Eligible Account Holders, Employee Plans, Supplemental Eligible Account
Holders, Other Members and Minority Stockholders at their last known addresses
appearing on the records of the Bank for the purpose of Subscribing for shares
of Conversion Stock in the Subscription Offering and will be made available for
use by those Persons entitled to purchase in the Community Offering.
Notwithstanding the foregoing, the Bank may elect to send Order Forms only to
those Persons who request them after receipt of such notice in a form approved
by the Applicable Regulatory Authorities and which is adequate to apprise the
Eligible Account Holders, Employee Plans, Supplemental Eligible Account Holders,
Other Members and Minority Stockholders of the pendency of the Subscription
Offering. Such notice may be included with the proxy statement for the Special
Meeting of Members and the proxy statement for the Special Meeting of
Stockholders and may also be included in the notice of the pendency of the
Conversion and the Special Meeting of Members sent to all Eligible Account
Holders in accordance with regulations of the Applicable Regulatory Authorities.
Each Order Form will be preceded or accompanied by a prospectus describing
the Holding Company, the Bank, the Conversion Stock and the Subscription and
Community Offerings. Each Order Form will contain, among other things, the
following:
A. A specified date by which all Order Forms must be received by the
Holding Company, which date shall be not less than twenty (20), nor more than
forty-five (45) days, following the date on which the Order Forms are mailed by
the Holding Company, and which date will constitute the termination of the
Subscription Offering;
B. The Subscription Price per share for shares of Conversion Stock to be
sold in the Subscription and Community Offerings;
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C. A description of the minimum and maximum number of shares of Conversion
Stock which may be subscribed for pursuant to the exercise of Subscription
Rights or otherwise purchased in the Community Offering;
D. Instructions as to how the recipient of the Order Form is to indicate
thereon the number of shares of Conversion Stock for which such person elects to
subscribe and the available alternative methods of payment therefor;
E. An acknowledgment that the recipient of the Order Form has received a
final copy of the prospectus prior to execution of the Order Form;
F. A statement to the effect that all subscription rights are
nontransferable, will be void at the end of the Subscription Offering, and can
only be exercised by delivering to the Holding Company within the subscription
period such properly completed and executed Order Form, together with payment,
in the full amount of the aggregate purchase price as specified in the Order
Form for the shares of Conversion Stock for which the recipient elects to
subscribe in the Subscription Offering (or by authorizing on the Order Form that
the Bank withdraw said amount from the subscriber's Deposit Account at the
Bank); and
G. A statement to the effect that the executed Order Form, once received
by the Holding Company, may not be modified or amended by the subscriber without
the consent of the Holding Company.
Notwithstanding the above, the Holding Company reserves the right in its
sole discretion to accept or reject orders received on photocopied or
facsimilied order forms.
18. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT
In the event Order Forms (a) are not delivered and are returned to the
Holding Company or the Bank by the United States Postal Service or the Holding
Company is unable to locate the addressee, (b) are not received back by the
Holding Company or are received by the Holding Company after the expiration date
specified thereon, (c) are defectively filled out or executed, (d) are not
accompanied by the full required payment, or, in the case of institutional
investors in the Community Offering, by delivering irrevocable orders together
with a legally binding commitment to pay in cash, check, money order or wire
transfer the full amount of the Purchase Price prior to 48 hours before the
completion of the Conversion, unless waived by the Holding Company, for the
shares of Conversion Stock subscribed for (including cases in which
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deposit accounts from which withdrawals are authorized are insufficient to cover
the amount of the required payment), or (e) are not mailed pursuant to a "no
mail" order placed in effect by the account holder, the subscription rights of
the Person to whom such rights have been granted will lapse as though such
Person failed to return the completed Order Form within the time period
specified thereon; provided, however, that the Holding Company may, but will not
be required to, waive any immaterial irregularity on any Order Form or require
the submission of corrected Order Forms or the remittance of full payment for
subscribed shares by such date as the Holding Company may specify. The
interpretation of the Holding Company of terms and conditions of this Plan and
of the Order Forms will be final, subject to the authority of the Applicable
Regulatory Authorities.
19. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES
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 shares of Conversion Stock pursuant to this Plan reside. However,
no such Person will be issued subscription rights or be permitted to purchase
shares of Conversion Stock in the Subscription Offering if such Person resides
in a foreign country; or in a State of the United States with respect to which
all of the following apply: A. a small number of Persons otherwise eligible to
subscribe for shares under the Plan reside in such state; B. the issuance of
subscription rights or the offer or sale of shares of Conversion Stock to such
Persons would require the Holding Company under the securities laws of such
state, to register as a broker, dealer, salesman or agent or to register or
otherwise qualify its securities for sale in such state; such registration or
qualification would be impracticable for reasons of cost or otherwise.
20. ESTABLISHMENT OF LIQUIDATION ACCOUNT
The Bank shall establish at the time of Conversion a liquidation account in
an amount equal to 66.31% (the Mutual Holding Company stock ownership interest
in the Bank) of the Bank's total stockholders' equity as reflected in its June
30, 1997 statement of financial condition, which is the latest statement of
financial condition expected to be contained in the final Prospectus utilized in
the Conversion. The liquidation account will be maintained by the Bank for the
benefit of the Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain their Deposit Accounts at the Bank. Each
Eligible Account Holder shall, with respect to his Deposit Account, hold a
related inchoate interest in a portion of the liquidation account balance, in
relation to his Deposit Account balance at the Eligibility Record Date or to
such balance as it may be subsequently reduced, as hereinafter provided.
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In the unlikely event of a complete liquidation of the Bank (and only in
such event), following all liquidation payments to creditors (including those to
Account Holders to the Extent of their Deposit Accounts) each Eligible Account
Holder and Supplemental Eligible Account Holder shall be entitled to receive a
liquidating distribution from the liquidation account, in the amount of the then
adjusted subaccount balance for his Deposit Account then held, before any
liquidation distribution may be made to any holders of the Bank's capital stock.
No merger, consolidation, purchase of bulk assets with assumption of Deposit
Accounts and other liabilities, or similar transactions with an FDIC-insured
institution, in which the Bank is not the surviving institution, shall be deemed
to be a complete liquidation for this purpose. In such transactions, the
liquidation account shall be assumed by the surviving institution.
The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction, the
numerator of which is the amount of the Qualifying Deposits of such account
holder and the denominator of which is the total amount of all Qualifying
Deposits of all Eligible Account Holders and Supplemental Account Holders. Such
initial subaccount balance shall not be increased, but shall be subject to
downward adjustment as described below.
If, at the close of business on any June 30 annual closing date, commencing
on or after the effective date of the Conversion, the deposit balance in the
Deposit Account of an Eligible Account Holder or Supplemental Eligible Account
Holder is less than the lesser of (i) the balance in the Deposit Account at the
close of business on any other annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date, or (ii) the amount of the
Qualifying Deposit in such Deposit Account as of the Eligibility Record Date or
Supplemental Eligibility Record Date, the subaccount balance for such Deposit
Account shall be adjusted by reducing such subaccount balance in an amount
proportionate to the reduction in such deposit balance. In the event of such
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any subsequent increase in the deposit balance of the related
Deposit Account. If any such Deposit Account is closed, the related subaccount
shall be reduced to zero.
The creation and maintenance of the liquidation account shall not operate
to restrict the use or application of any of the net worth accounts of the Bank,
except that the Bank shall not declare or pay a cash dividend on, or repurchase
any of, its capital stock if the effect thereof would cause its net worth to be
reduced below (i) the amount required for the liquidation account; or (ii) the
net worth requirements contained in the Rules and Regulations of the Applicable
Regulatory Authorities.
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21. VOTING RIGHTS OF STOCKHOLDERS
Following consummation of the Conversion, voting rights with respect to the
Bank shall be held and exercised exclusively by the holders of its capital
stock. The holders of the voting capital stock of the Holding Company shall
have the exclusive voting rights with respect to the Holding Company.
22. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION
A. All shares of Conversion Stock purchased or received by Directors or
Officers of the Holding Company or the Bank in the Conversion shall be subject
to the restriction that, except as provided in Section 22B, below, or as may be
approved by the Applicable Regulatory Authorities, no interest in such shares
may be sold or otherwise disposed of for value for a period of one (1) year
following the date of purchase.
B. The restriction on disposition of shares of Conversion Stock set forth
in Section 22A above shall not apply to the following:
(i) Any exchange of such shares in connection with a merger or
acquisition involving the Bank or the Holding Company, as the case may be,
which has been approved by the Applicable Regulatory Authorities; and
(ii) Any disposition of such shares following the death of the person
to whom such shares were initially sold under the terms of the Plan.
C. With respect to all shares of Conversion Stock subject to restrictions
on resale or subsequent disposition, each of the following provisions shall
apply:
(i) Each certificate representing shares restricted within the meaning
of Section 22A, above, shall bear a legend prominently stamped on its face
giving notice of the restriction;
(ii) Instructions shall be issued to the stock transfer agent for the
Holding Company not to recognize or effect any transfer of any certificate
or record of ownership of any such shares in violation of the restriction
on transfer; and
(iii) Any shares of capital stock of the Holding Company issued with
respect to a stock dividend, stock split, or otherwise with respect to
ownership of outstanding shares of Conversion Stock subject to the
restriction on transfer
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<PAGE>
hereunder shall be subject to the same restriction as is applicable to such
Conversion Stock.
23. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
CONVERSION
For a period of three years following the Conversion, no Officer, Director
or their Associates shall purchase, without the prior written approval of the
Applicable Regulatory Authorities, any outstanding shares of Common Stock of the
Holding Company except from a broker-dealer registered with the SEC. This
provision shall not apply to negotiated transactions involving more than 1% of
the outstanding shares of Common Stock of the Holding Company, the exercise of
any options pursuant to a stock option plan or purchase of common stock of the
Holding Company made by or held by any Tax-Qualified Employee Stock Benefit Plan
or Non-Tax-Qualified Employee Stock Benefit Plan of the Bank or the Holding
Company (including the Employee Plans or the Recognition Plans) which may be
attributable to any Officer or Trustee. As used herein, the term "negotiated
transaction" means a transaction in which the securities are offered and the
terms and arrangements relating to any sale are arrived at through direct
communications between the seller or any person acting on its behalf and the
purchaser or his investment representative. The term "investment
representative" shall mean a professional investment advisor acting as agent for
the purchaser and independent of the seller and not acting on behalf of the
seller in connection with the transaction.
24. TRANSFER OF DEPOSIT ACCOUNTS
Each person holding a Deposit Account at the Bank at the time of Conversion
shall retain an identical Deposit Account at the Bank following Conversion in
the same amount and subject to the same terms and conditions (except as to
voting and liquidation rights).
25. REGISTRATION AND MARKETING
Within the time period required by applicable laws and regulations, the
Holding Company will register the securities issued in connection with the
Conversion pursuant to the Securities Exchange Act of 1934 and will not
deregister such securities for a period of at least three years thereafter,
except that the maintenance of registration for three years requirement may be
fulfilled by any successor to the Bank or any holding company of the Bank. In
addition, the Bank or Holding Company will use its best efforts to encourage and
assist a market-maker to establish and maintain a market for
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<PAGE>
the Conversion Stock and to list those securities on a national or regional
securities exchange or the NASDAQ National Market.
26. TAX RULINGS OR OPINIONS
Consummation of the Conversion is expressly conditioned upon prior receipt
by the Mutual Holding Company and the Bank of either a ruling or an opinion of
counsel with respect to federal tax laws, and either a ruling or an opinion of
counsel with respect to Washington tax laws, to the effect that consummation of
the transactions contemplated by the Conversion and this Plan will not result in
a taxable reorganization under the provisions of the applicable codes or
otherwise result in any adverse tax consequences to the Mutual Holding Company,
the Holding Company or the Bank, or the account holders receiving subscription
rights before or after the Conversion, except in each case to the extent, if
any, that subscription rights are deemed to have value on the date such rights
are issued.
27. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS
A. The Holding Company and the Bank are authorized to adopt Tax-Qualified
Employee Stock Benefit Plans in connection with the Conversion, including
without limitation, an ESOP. Existing as well as any newly created Tax-
Qualified Employee Stock Benefit Plans may purchase shares of Conversion Stock
in the Conversion, to the extent permitted by the terms of such benefit plans
and this Plan.
B. As a result of the Conversion, the Holding Company shall be deemed to
have ratified and approved the Bank's 1994 Stock Option Plan, 1997 Stock Option
Plan, Employee Stock Ownership Plan, and 1994 Management and Directors
Recognition Plans and shall have agreed to issue (and reserve for issuance)
Holding Company Common Stock in lieu of Bank common stock pursuant to the terms
of such benefit plans. Upon consummation of the Conversion, the Bank common
stock held by such benefit plans shall be converted into Holding Company Common
Stock based upon the Exchange Ratio. Also upon consummation of the Conversion,
(i) all rights to purchase, sell or receive Bank common stock and all rights to
elect to make payment in Bank common stock under any agreement between the Bank
and any Director, Officer or Employee thereof or under any plan or program of
the Bank shall automatically, by operation of law, be converted into and shall
become an identical right to purchase, sell or receive Holding Company Common
Stock and an identical right to make payment in Holding Company Common Stock
under any such agreement between the Bank and any Director, Officer or Employee
thereof or under such plan or program of the Bank, and (ii) rights outstanding
under existing Stock Option Plans shall be assumed by the
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<PAGE>
Holding Company and thereafter shall be rights only for shares of Holding
Company Common Stock, with each such right being for a number of shares of
Holding Company common stock based upon the Exchange Ratio and the number of
shares of Savings Bank Common Stock that were available thereunder immediately
prior to consummation of the Conversion, and the price adjusted to reflect the
Exchange Ratio but with no change in any other term or condition of such right.
C. The Holding Company and the Bank are authorized to enter into
employment agreements and their executive officers.
D. The Holding Company and the Savings Bank are authorized to adopt stock
option plans, restricted stock grant plans and other Non-Tax-Qualified Employee
Stock Benefit Plans, provided that no such plans be established, no stock
options shall be grated, and no shares of Conversion Stock shall be purchased
pursuant to any of such plans prior to the earlier of (i) the one-year
anniversary of the consummation of the Conversion or (ii) the receipt of
stockholder approval of such plans at the first annual meeting of stockholders
following the Conversion.
28. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY
A. In accordance with Applicable Regulatory Authorities regulations, for a
period of three years from the date of consummation of the Conversion, no
Person, other than the Holding Company, shall directly or indirectly offer to
acquire to acquire the beneficial ownership of more than 10% of any class of an
equity security of the Bank without the prior written consent of the Applicable
Regulatory Authorities.
B. (i) The charter of the Bank contains a provision stipulating that no
person, except the Holding Company, for a period of five years following the
date of Conversion shall directly or indirectly offer to acquire or acquire the
beneficial ownership of more than 10% of any class of an equity security of the
Bank, without the prior written approval of the Applicable Regulatory
Authorities. In addition, such charter may also provide that for a period of
five years following Conversion, shares beneficially owned in violation of the
above-described charter provision shall not be entitled to vote and shall not be
voted by any person or counted as voting stock in connection with any matter
submitted to stockholders for a vote. In additional, special meetings of the
stockholders relating to changes in control or amendment of the charter may only
be called by the Board of Directors, and shareholders shall not be permitted to
cumulate their votes for the election of directors.
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<PAGE>
(ii) The Articles of Incorporation of the Holding Company will contain
a provision stipulating that in no event shall any record owner of any
outstanding shares of the Holding Company's common stock who beneficially owns
in excess of 10% of such outstanding shares to be entitled or permitted to any
vote in respect to any shares held in excess of 10%. In addition, the Articles
of Incorporation and Bylaws of the Holding Company contain provisions which
provide for staggered terms of the directors, noncumulative voting for
directors, limitations on the call of special meetings, a fair price provision
for certain business combinations and certain notice requirements.
C. For the purposes of Section 28.B(i):
(i) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust, an unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution.
(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value;
(iii) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise, and;
(iv) The term "security" includes non-transferable subscription rights
issued pursuant to a plan of conversion as well as a "security" as defined in 15
U.S.C. (S) 8c(a)(10).
29. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK
A. The Holding Company may not repurchase any shares of its capital stock
during the first three years following consummation of the Conversion, other
than pursuant to (i) an offer to repurchase made by the Holding Company on a pro
rata basis to all of its stockholders and which is approved by the Applicable
Regulatory Authorities, (ii) the repurchase of qualifying shares of a director,
if any (iii) purchases in the open market by a Tax-Qualified or Non-Tax-
Qualified Employee Stock Benefit Plan in an amount reasonable and appropriate to
fund the plan, or (iv) a repurchase program approved by the Applicable
Regulatory Authorities.
B. The Bank shall not declare or pay a cash dividend on, or repurchase of
any of, its capital stock if the effect thereof would cause its regulatory
capital to be
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<PAGE>
reduced below (i) the amount required for the Liquidation Account or (ii) the
regulatory capital requirements of Applicable Regulatory Authorities. Otherwise,
the Bank may declare dividends to make capital distributions in accordance with
applicable law and regulations.
C. Notwithstanding anything to the contrary in this Plan, the Holding
Company may repurchase capital stock to the extent and subject to the
requirements set forth in applicable statutes or regulations, or as otherwise
may be approved by the Applicable Regulatory Authorities.
30. CHARTER AND BYLAWS
By voting to adopt this Plan, Members of the Mutual Holding Company will be
voting to adopt a Stock Certificate of Incorporation and Bylaws for a Washington
corporation attached as Exhibits D and E to this Plan.
31. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE
The Effective Date of the Conversion shall be the date upon which the
Articles of Combination shall be filed with the Division of Banks with respect
to the MHC Merger and the Bank Merger, with the Bank being the surviving
institution in each case. The Articles of Combination shall be filed with the
Applicable Regulatory Authorities after all requisite regulatory, member and
stockholder approvals have been obtained, all applicable waiting periods have
expired, and sufficient subscriptions and orders for Conversion Stock have been
received. The Closing of the sale of all shares of Conversion Stock sold in the
Subscription Offering, Community Offering and/or Syndicated Community Offering
shall occur simultaneously on the effective date of the Closing.
32. EXPENSES OF CONVERSION
The Mutual Holding Company, the Bank and the Holding Company may retain and
pay for the services of legal, financial and other advisors to assist in
connection with any or all aspects of the Conversion, including the Offering,
and such parties shall use their best efforts to assure that such expenses shall
be reasonable.
33. AMENDMENT OR TERMINATION OF PLAN
If deemed necessary or desirable, this Plan may be substantively amended as
a result of comments from regulatory authorities or otherwise at any time prior
to solicitation of proxies from Members and Bank stockholders to vote on this
Plan by the
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<PAGE>
Board of Directors of the Mutual Holding Company, and at any time thereafter by
the Board of Directors of the Mutual Holding Company with the concurrence of the
Applicable Regulatory Authorities. Any amendment to this Plan made after
approval by the Members and Bank stockholders with the approval of the
Applicable Regulatory Authorities shall not necessitate further approval by the
Members unless otherwise required by the Applicable Regulatory Authorities. This
Plan may be terminated by the Board of Directors of the Mutual Holding Company
at any time prior to the Special Meeting of Members and the Special Meeting of
Stockholders to vote on this Plan, and at any time thereafter with the
concurrence of the Applicable Regulatory Authorities.
By adoption of the Plan, the Members of the Mutual Holding Company
authorize the Board of Directors of the Mutual Holding Company to amend or
terminate the Plan under the circumstances set forth in this Section.
34. CONDITIONS TO CONVERSION
Consummation of the Conversion pursuant to this Plan is expressly
conditioned upon the following:
A. Prior receipt by the Mutual Holding Company and the Bank of rulings of
the United States Internal Revenue Service and the Washington State taxing
authorities, or opinions of counsel or tax advisors as described in Section 26
hereof;
B. The sale of all of the Conversion Stock offered in the Conversion; and
C. The completion of the Conversion within the time period specified in
Section 3 of this Plan.
35. INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Bank
shall be final, subject to the authority of the Applicable Regulatory
Authorities.
This Amended and Restated Plan of Conversion and Reorganization was adopted
on this 28th day of August, 1997.
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<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
HERITAGE FINANCIAL CORPORATION
The undersigned, being the Chairman, President and Chief Executive Officer
of Heritage Financial Corporation, executes in duplicate the following Articles
of Incorporation for the corporation.
ARTICLE 1
(NAME)
The name of the corporation shall be HERITAGE FINANCIAL CORPORATION.
ARTICLE 2
(DURATION)
The corporation's period of duration shall be perpetual.
ARTICLE 3
(PURPOSE)
The purpose for which the corporation is organized is the transaction of
any and all lawful business for which corporations may be incorporated under the
Washington Business Corporation Act.
ARTICLE 4
(SHARES AUTHORIZED)
SECTION 4.1 The aggregate number of shares which the corporation shall
have authority to issue is 15,000,000 common shares with no par value
(hereinafter referred to as "the common stock") and 2,500,000 preferred shares
with no par value (hereinafter referred to as "the preferred stock"). The
preferred stock is senior to the common stock, and the common stock is subject
to the rights and preferences of the preferred stock as provided in the
following section.
SECTION 4.2 The board of directors is hereby vested with authority to
divide any or all of the preferred stock into one or
<PAGE>
more series and, within the limitations set forth in the Washington Business
Corporation Act, as amended from time to time, to fix and determine or to amend
the relative rights and preferences of the preferred stock or of any series so
established.
ARTICLE 5
(PREEMPTIVE RIGHTS)
No shareholder shall have the preemptive right to acquire unissued shares
of the corporation.
ARTICLE 6
(CUMULATIVE VOTING)
Each shareholder entitled to vote at any election for directors shall have
the right to vote, in person or by proxy, the number of shares owned by him for
as many persons as there are directors to be elected and for whose election he
has a right to vote, and no shareholder shall be entitled to cumulate his votes.
ARTICLE 7
(AMENDMENT OF ARTICLES)
The corporation reserves the right to amend, alter, change or repeal any
provision of its Articles of Incorporation to the extent permitted by the laws
of the State of Washington. All rights of shareholders are granted subject to
this reservation.
ARTICLE 8
(REGISTERED OFFICE AND AGENT)
The address of the initial registered office of the corporation is 1201
Pacific Avenue, Suite 2200, Tacoma, WA 98402. The name of its initial
registered agent at that address is Gordon, Thomas, Honeywell, Malanca, Peterson
& Daheim, P.L.L.C., attention: J. James Gallagher.
ARTICLE 9
(DIRECTORS)
9.1. Number, Vacancies. The number of directors of the corporation shall
be such number, not less than 5 nor more than 25 (exclusive of directors, if
any, to be elected by holders of
<PAGE>
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,
however, that no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director, and provided further, 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 by a vote of two-thirds
of the directors then in office, whether or not a quorum, and any director so
chosen shall hold office for a term expiring at the annual meeting of
shareholders at which the term of the class to which the director has been chose
expires and when the director's successor is elected and qualified.
9.2 Classified Board. The board of directors of the corporation shall be
divided into three classes of directors which shall be designated Class 1, Class
2 and Class 3. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. Such classes shall
be as nearly equal in number as the then total number of directors constituting
the entire board of directors shall permit, with the terms of office of all
members of one class expiring each year. Subject to the provisions of Section
9.1, should the number of directors not be equally divisible by three, the
excess director or directors shall be assigned to Classes 2 or 3 as follows:
(i) if there shall be an excess of one directorship over a number equally
divisible by three, such extra directorship shall be classified in Class 3; and
(ii) if there be an excess of two directorships over a number equally divisible
by three, one shall be classified in Class 2 and the other in Class 3. At the
first annual meeting of stockholders, directors in Class 1 shall be elected to
hold office for a term expiring at the third succeeding annual meeting
thereafter. At the second annual meeting of stockholders, directors of Class 2
shall be elected to hold office for a term expiring at the third succeeding
meeting thereafter. At the third annual meeting of stockholders, directors of
Class 3 shall be elected to hold office for a term expiring at the third
succeeding meeting thereafter. Thereafter, at each succeeding annual meeting,
directors of each class shall be elected for three year terms. Notwithstanding
the foregoing, the 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
<PAGE>
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 in
Section 9.1. 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 stockholders.
ARTICLE 10
(NOMINATIONS TO BOARD OF DIRECTORS)
Nominations for election to the board of directors may be made by the board
of directors or by any stockholder of any outstanding class of stock of the
corporation entitled to vote for the election of directors. Nominations, other
than those made by the board of directors, shall be made in writing and shall be
delivered or mailed, U.S. mail, postage prepaid, to the Chairman of the
corporation not less than fourteen (14) days nor more than fifty (50) days prior
to any meeting of shareholders called for the election of directors; provided,
however, that if less than twenty-one days' notice of the meeting is given to
shareholders, such nomination shall be delivered or mailed, U.S. mail, postage
prepaid, to the Chairman of the corporation not later than the close of business
on the seventh day following the day on which the notice of meeting was mailed.
Such notification shall contain the following information to the extent known to
the notifying shareholder:
(a) The name and address of each proposed nominee;
(b) The principal occupation of each proposed nominee;
(c) The total number of shares of stock of the corporation that will be
voted for each proposed nominee;
<PAGE>
(d) The name and address of the notifying shareholder; and
(e) The number of shares of common stock of the corporation owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in his discretion, be
disregarded by the Chairman of the meeting, and upon his instructions, the vote
teller may disregard all votes cast for such nominee.
ARTICLE 11
(REMOVAL OF DIRECTORS)
Notwithstanding any other provision of these Articles of Incorporation or
the Bylaws of the corporation, any director or the entire board of directors of
the corporation may be removed, at any time, but only for cause and only by the
affirmative vote of the holders of at least 66-2/3% 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
stockholders called for that purpose. Notwithstanding the foregoing, 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 preceding provisions of this Article 11 shall
not apply with respect to the director or directors elected by such holders of
preferred stock.
ARTICLE 12
(ACQUISITION OF CAPITAL STOCK)
12.1 Five Year Prohibition. For a period of five years from the effective
date of the completion of the conversion of Heritage Savings Bank to become a
wholly-owned subsidiary of this corporation, no person shall directly or
indirectly offer to acquire or acquire beneficial ownership of more than 10% of
any class of equity security of the corporation, unless such offer or
acquisition shall have been approved in advance by two-thirds vote of the
Continuing Directors, as defined in Article 14. In addition, for a period for
five years from the completion of the conversion of Heritage Savings Bank to
become a wholly-owned subsidiary of this corporation upon such conversion, and
notwithstanding any provision to the contrary in these Articles of Incorporation
or in 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 12, the securities beneficially
owned in excess of 10% shall not be counted as shares entitled to
<PAGE>
vote, shall not be voted by any person or counted as voting shares in connection
with any matter submitted to the stockholders for a vote, and shall not be
counted as outstanding for purposes of determining a quorum or the affirmative
vote necessary to approve any matter submitted to the stockholders for a vote.
12.2 Prohibition after Five Years. If, at any time after five years from
the effective date of the completion of the conversion of Heritage Savings Bank
to become a wholly-owned subsidiary of the corporation upon such conversion, 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 14), 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 12.2 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 12.2, the record holders in the aggregate
shall be entitled to cast only one-hundredth 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, 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
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 12.2 by virtue of such shares being so beneficially
owned by any of such acquiring persons.
Section 12.3 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 "group acting in concert" includes (a)
knowing participation in a joint activity or conscious parallel action towards a
common goal whether or not pursuant to an express
<PAGE>
agreement, and (b) a combination or pooling of voting or other interest 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 have the meaning defined in
Rule 13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
Section 12.4 Exclusion for Employee Benefit Plans, Directors, Officers,
Employees and Certain Proxies. The restrictions contained in this Article 12
shall not apply to (i) 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, (ii) any proxy granted to one or more Continuing Directors (as
defined in Article 14) by a stockholder of the corporation or (iii) any employee
benefit plans of the corporation. In addition, the Continuing Directors of the
corporation, 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 or
voting stock of the corporation solely by virtue of their being directors,
officers or employees of the corporation or subsidiary thereof or by virtue of
the Continuing Directors of the corporation, 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 12 should any such person or group become a beneficial owner or more
than 10% of any class or equity security of the corporation.
Section 12.5 Determinations. A majority of the Continuing Directors (as
defined in Article 14) shall have the power to construe and apply the provisions
of the Article and to make all determinations necessary or desirable to
implement such provisions, including but not limited to matters with respect to
(i) the number of shares beneficially owned by any person, (ii) whether a person
has an agreement, arrangement, or understanding with another as to the matters
referred to in the definition of beneficial ownership, (iii) the application of
any other
<PAGE>
definition or operative provision of this Article 12 to the given
facts or (iv) any other matter relating to the applicability or effect of this
Article 12 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 stockholders.
ARTICLE 13
(BUSINESS TRANSACTIONS WITH OFFICERS, DIRECTORS AND
SHAREHOLDERS)
The corporation may enter into a contract and otherwise transact business
as vendor, purchaser, or otherwise, with its directors, officers and
shareholders, and with corporations, associations, firms and entities in which
they are or may become interested as directors, officers, shareholders, members
or otherwise, as freely as though such adverse interest did not exist, even
though the vote, action or presence of such director, officer or shareholder may
be necessary to obligate the corporation upon such contract or transaction; and
in the absence of fraud, no such contract or transaction shall be avoided and no
such director, officer or shareholder shall be held liable to account to the
corporation, by reason of such adverse interest or any fiduciary relationship to
the corporation arising out of such office or stock ownership, for any profit or
benefit realized by him through any such contract or transaction; provided that
the nature of the interest of such director, officer or shareholder, though not
necessarily the details or extent thereof, be disclosed or known to the board of
directors or shareholders of the corporation, at the meeting thereof at which
such contract or transaction is authorized or confirmed. A general notice that
a director, officer or shareholder of the corporation is interested in any
corporation, association, firm or entity shall be sufficient disclosure as to
such director, officer or shareholder with respect to all contracts and
transactions with that corporation, association, firm or entity.
ARTICLE 14
(CERTAIN BUSINESS COMBINATIONS)
SECTION 14.1 In addition to the requirements of any applicable statute,
and notwithstanding any other provisions of any other articles of these Articles
of Incorporation, the affirmative vote of not less than 66 2/3% of the total
shares attributable to persons other than a Control Person (as defined below),
considered for the purposes of this Article 11 as one class, which are entitled
to be voted in an election of directors shall be required for the approval of
any Business Combination
<PAGE>
(as defined below) between the corporation and any Control Person.
SECTION 14.2 The approval requirements of Section 11.1 shall not apply if
either:
(a) The Business Combination is approved by at least a majority of
Continuing Directors (as defined below) of the corporation; or
(b) All the following conditions are satisfied:
(i) The cash or fair market value of the property, securities or other
consideration to be received per share in the Business Combination by holders of
the common stock of the corporation is not less than the higher of: (A) the
highest price per share (including brokerage commissions, soliciting dealers'
fees and dealer-management compensation) paid by such Control Person in
acquiring any of its holdings of the corporation's common stock; (B) the highest
per share market price of the common stock during the three-month period
immediately preceding the date of the proxy statement described in (iii) below;
or (C) the per share value of the common stock at the end of the fiscal quarter
immediately prior to the Business Combination, as determined by an appraisal
prepared by persons, selected by the Continuing Directors, who are independent
of the corporation and the Control Person, and who are experienced and expert in
the area of corporate appraisal.
(ii) After becoming a Control Person and prior to the consummation of
such Business Combination (A) such Control Person shall not have acquired any
newly issued shares of capital stock, directly or indirectly, from the
corporation (except upon conversion of convertible securities acquired by it
prior to becoming a Control Person or upon compliance with the provisions of
this Article 11 or as a result of a pro rata stock dividend or stock split), and
(B) such Control Person shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided by the
corporation, or made any major changes in the corporation's business or equity
capital structure; and
(iii) A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934, whether or not the corporation is then subject
to such requirements, shall be mailed to the public stockholders of the
corporation for the purpose of soliciting stockholder approval of such Business
Combination.
SECTION 14.3 For the purpose of this Article 14:
<PAGE>
(a) The term "Business Combination" shall mean (i) any merger or
consolidation of the corporation with or into a Control Person, (ii) 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
defined below) of the assets of the corporation (including without limitation
any voting securities of a subsidiary) or of a subsidiary, to a Control Person,
(iii) any merger or consolidation of a Control Person with or into the
corporation or a subsidiary of the corporation, (iv) any sale, lease, exchange,
transfer or other disposition of all or any Substantial Part of the assets of a
Control Person to the corporation or a subsidiary of the corporation, (v) the
issuance of any securities of the corporation or a subsidiary of the corporation
to a Control Person, (vi) the acquisition by the corporation or a subsidiary of
the corporation of any securities of a Control Person, (vii) any
reclassification of common stock of the corporation, or any recapitalization
involving common stock of the corporation, consummated within five years after a
Control Person becomes a Control Person, or (viii) any agreement, contract or
other arrangement providing for any of the transactions described in this
definition of Business Combination;
(b) The term "Continuing Director" shall mean (i) a director who was a
member of the board of directors of the corporation immediately prior to the
time that a Control Person became the beneficial owner (as this term is defined
in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934 on the date on which this amendment becomes effective) of 10% or
more of the outstanding shares of common stock of the corporation or (ii) a
person so designated before initially becoming a director by a majority of the
then Continuing Directors.
(c) The term "Control Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with their
Affiliates and Associates (as those terms are defined on the date on which this
amendment becomes effective in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934) is the beneficial owner in the
aggregate of 20% or more of the outstanding shares of common stock of the
corporation, and any Affiliate or Associate of any such individual, corporation,
partnership or other person or entity;
(d) The term "Substantial Part" shall mean more than 10% of the total
assets of the corporation in question, as of the end of its most recent fiscal
year prior to the time the determination is being made;
<PAGE>
(e) Without limitation, any shares of common stock of the corporation which
any Control Person has the right to acquire at any time pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, shall be deemed outstanding and beneficially owned by such Control
Person for purposes of this Article 14; and
(f) For the purposes of Section 14.2(b)(i) of this Article 14, the phrase
"other consideration to be received" shall include, without limitation, common
stock of the corporation retained by its existing public stockholders in the
event of a Business Combination with such Control Person in which the
corporation is the surviving corporation.
SECTION 14.4 For the purposes of this Article 14, a majority of the
Continuing Directors shall have the power and duty to determine on the basis of
information known to them (a) whether a proposed transaction is subject to the
provisions of this Article 14, (b) the amount of shares of the corporation
Beneficially Owned by any person, (c) whether a person is an Affiliate or
Associate of another, and (d) such other matters as to which a determination may
be required by the provisions of this Article 14.
SECTION 14.5 The provisions set forth in this Article 14 may not be
repealed or amended in any respect or in any manner including any merger or
consolidation of the corporation with any other corporation unless the surviving
corporation's Articles of Incorporation contain an article to the same effect as
this Article 14, except by the affirmative vote of the holders of not less than
66-2/3% of the outstanding shares of common stock of the corporation, subject to
the provisions of any series of preferred stock which may at the time be
outstanding; provided, however, that if there is a Control Person such action
must be approved by not less than 66-2/3% of the total shares entitled to be
voted in an election of directors attributable to shares owned by person other
than the Control Persons.
ARTICLE 15
(CONSIDERATION OF NON-MONETARY FACTORS)
The board of directors of the corporation, when evaluating any offer of
another party to (a) make a tender or exchange offer for any equity security of
the corporation, (b) merge or consolidate the corporation with another
corporation, or (c) purchase or otherwise acquire all or substantially all of
the properties and assets of the corporation, shall, in connection with the
exercise of its judgment in determining what is in the
<PAGE>
best interests of the corporation and its stockholders, give due consideration
to all relevant factors, including without limitation the social and economic
effects on the employees, customers, suppliers and other constituents of the
corporation and its subsidiaries and on the communities in which the corporation
and its subsidiaries operate or are located.
ARTICLE 16
(INDEMNIFICATION - LIMITATION OF LIABILITY)
SECTION 16.1 - DEFINED TERMS. As used in this Article 16:
(a) "Egregious conduct" by a person shall mean acts or omissions that
involve intentional misconduct or a knowing violation of law, conduct violating
section 23A.08.450 of the Revised Code of Washington, or participation in any
transaction from which the person will personally receive a benefit in money,
property, or services to which the person is not legally entitled.
(b) "Finally adjudged" shall mean stated in a judgment based upon
clear and convincing evidence by a court having jurisdiction, from which there
is no further right to appeal.
(c) "Director" shall mean any person who is a director of the
corporation and any person who, while a director of the corporation, is serving
at the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, or is a fiduciary or party in
interest in relation to any employee benefit plan covering any employee of the
corporation or of any employer in which it has an ownership interest; and
"conduct as a director" shall include conduct while a director is acting in any
of such capacities.
(d) "Officer-director" shall mean any person who is simultaneously
both an officer and director of the corporation and any person who, while
simultaneously both an officer and director of the corporation, is serving at
the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, or is a fiduciary or party in
interest in relation to any employee benefit plan covering any employee of the
corporation or of any employer in which it has an ownership interest; and
"conduct as an officer-director" shall include conduct while an officer-director
is acting as an officer of the corporation or in any of such other capacities.
<PAGE>
(e) "Subsidiary corporation" shall mean any corporation at least
eighty percent of the voting stock of which is held beneficially by this
corporation.
SECTION 16.2 - LIABILITY OF DIRECTORS. No director, officer-director,
former director or former officer-director of the corporation shall be
personally liable to the corporation or its shareholders for monetary damages
for conduct as a director or officer-director unless the conduct is finally
adjudged to have been egregious conduct, as defined herein.
SECTION 16.3 - LIABILITY OF SUBSIDIARY DIRECTORS. No director, officer-
director, former director, or former officer-director of a subsidiary
corporation shall be personally liable in any action brought directly by this
corporation as a shareholder of the subsidiary corporation or derivatively on
behalf of the subsidiary corporation (or by any shareholder of this corporation
double-derivatively on behalf of this corporation and the subsidiary
corporation) for monetary damages for conduct as a director or officer-director
of such subsidiary corporation unless the conduct is finally adjudged to have
been egregious conduct, as defined herein.
SECTION 16.4 - INDEMNIFICATION OF DIRECTORS. The corporation shall
indemnify any person who is, or is threatened to be made, a party to any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
and whether by or in the right of the corporation or its shareholders or by any
other party, by reason of the fact that the person is or was a director or
officer-director of the corporation or of a subsidiary corporation against
judgments, penalties or penalty taxes, fines, settlements (even if paid or
payable to the corporation or its shareholders or to a subsidiary corporation)
and reasonable expenses, including attorneys' fees, actually incurred in
connection with such proceeding unless the liability and expenses were on
account of conduct finally adjudged to be egregious conduct, as defined herein.
The reasonable expenses, including attorneys' fees, of such person incurred in
connection with such proceeding shall be paid or reimbursed by the corporation,
upon request of such person, in advance of the final disposition of such
proceeding upon receipt by the corporation of a written, unsecured promise by
the person to repay such amount if it shall be finally adjudged that the person
is not eligible for indemnification. All expenses incurred by such person in
connection with such proceeding shall be considered reasonable unless finally
adjudged to be unreasonable.
SECTION 16.5 - PROCEDURE. No action by the board of directors, the
shareholders, independent counsel, or any other person or persons shall be
necessary or appropriate to the
<PAGE>
determination of the corporation's indemnification obligation in any specific
case, to the determination of the reasonableness of any expenses incurred by a
person entitled to indemnification under this Article 16, nor to the
authorization of indemnification in any specific case.
SECTION 16.6 - INTERNAL CLAIMS EXCEPTED. Notwithstanding section 16.4, the
corporation shall not be obligated to indemnify any person for any expenses,
including attorneys' fees, incurred to assert any claim against the corporation
(except a claim based on section 16.7) or any person related to or associated
with it, including any person who would be entitled hereby to indemnification in
connection with the claim.
SECTION 16.7 - ENFORCEMENT OF RIGHTS. The corporation shall indemnify any
person granted indemnification rights under this Article 16 against any
reasonable expenses incurred by the person to enforce such rights.
SECTION 16.8 - SET-OFF OF CLAIMS. Any person granted indemnification
rights herein may directly assert such rights in set-off of any claim raised
against the person by or in the right of the corporation and shall be entitled
to have the same tribunal which adjudicates the corporation's claim adjudicate
the person's entitlement to indemnification by the corporation.
SECTION 16.9 - CONTINUATION OF RIGHTS. The indemnification rights provided
in this Article 16 shall continue as to a person who has ceased to be a director
or officer-director and shall inure to the benefit of the heirs, executors, and
administrators of such person.
SECTION 16.10 - EFFECT OF AMENDMENT OR REPEAL. Any amendment or repeal of
this Article 16 shall not adversely affect any right or protection of a
director, officer-director, former director or former officer-director existing
at the time of such amendment or repeal with respect to acts or omissions
occurring prior to such amendment or repeal.
SECTION 16.11 - SEVERABILITY OF PROVISIONS. Each of the substantive
provisions of this Article 13 is separate and independent of the others, so that
if any provision hereof shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions.
<PAGE>
ARTICLE 17
(AMENDMENTS)
The corporation reserves the right to amend or repeal any provision
contained in these Articles of Incorporation in the manner prescribed by the
Washington Business Corporation Act and all rights conferred upon stockholders
are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of these Articles of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of the
corporation required by law or by these Articles of Incorporation, the
affirmative vote of the holders of 66-2/3% of the voting power of all the then-
outstanding shares of the capital stock of the corporation entitled to vote
generally in the election of Directors (after giving effect to the provisions of
Article 12), voting together as a single class, shall be required to amend or
repeal this Article 17, Article 9, Article 12, Article 14 or Article 16.
The name and address of the incorporator is Donald V. Rhodes, Heritage
Bank, 201 5th Avenue S.W., Olympia, Washington 98502.
Executed in duplicate this 18th day of August, 1997.
HERITAGE FINANCIAL CORPORATION
By: /s/ Donald V. Rhodes
---------------------------
Donald V. Rhodes
Chairman, President and
Chief Executive Officer
<PAGE>
CONSENT TO APPOINTMENT AS REGISTERED AGENT
The undersigned hereby consents to serve as registered agent, in the State
of Washington, for the following corporation: Heritage Financial Corporation.
DATED this 18th day of August, 1997.
/s/ J. James Gallagher
--------------------------------
J. James Gallagher
Gordon, Thomas, Honeywell, Malanca,
Peterson & Daheim P.L.L.C.
1201 Pacific Avenue
2200 First Interstate Plaza
Tacoma, WA 98401
<PAGE>
Exhibit 3.2
BYLAWS OF
HERITAGE FINANCIAL CORPORATION
AUGUST 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C>
ARTICLE 1 - MEETINGS OF SHAREHOLDERS................................... 1
Section 1.1 - Shareholder Meetings.................................... 1
Section 1.2 - Annual Meeting.......................................... 1
Section 1.3 - Special Meetings........................................ 1
Section 1.4 - Notice.................................................. 1
Section 1.5 - Quorum.................................................. 2
Section 1.6 - Adjournment............................................. 2
Section 1.7 - Chairman of Meeting..................................... 2
Section 1.8 - Secretary of Meeting.................................... 2
Section 1.9 - Conduct of Meetings..................................... 2
Section 1.10 - Consent to Action...................................... 2
Section 1.11 - Proxies................................................ 2
Section 1.12 - Shareholder Advisor.................................... 3
Section 1.13 - Recording of Proceedings............................... 3
Section 1.14 - Record Date............................................ 3
Section 1.15 - List of Shareholders................................... 3
ARTICLE 2 - DIRECTORS.................................................. 4
Section 2.1 - Management of Corporation............................... 4
Section 2.2 - Number of Directors..................................... 4
Section 2.3 - Qualifications and Nominations of Directors............. 4
Section 2.4 - Annual Meetings......................................... 4
Section 2.5 - Place of Meetings....................................... 4
Section 2.6 - Regular Meetings........................................ 4
Section 2.7 - Special Meetings........................................ 4
Section 2.8 - Notices................................................. 4
Section 2.9 - Quorum.................................................. 5
Section 2.10 - Attendance by Conference Telecommunication............. 5
Section 2.11 - Consent to Action...................................... 5
Section 2.12 - Compensation........................................... 5
Section 2.13 - Manifestation of Dissent............................... 6
ARTICLE 3 - COMMITTEES OF THE BOARD OF DIRECTORS....................... 6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.1 - Executive Committee.................................... 5
Section 3.2 - Audit Committee........................................ 6
Section 3.3 - Other Committees....................................... 7
Section 3.4 - Rules of Procedure..................................... 7
ARTICLE 4 - OFFICERS AND EMPLOYEES.................................... 7
Section 4.1 - Officers............................................... 7
Section 4.2 - Election............................................... 7
Section 4.3 - Removal and Vacancy.................................... 8
Section 4.4 - Compensation........................................... 8
Section 4.5 - Exercise of Rights as Stockholders..................... 8
Section 4.6 - Duties of Chairman of the Board........................ 8
Section 4.7 - Duties of Vice Chairman................................ 9
Section 4.8 - Duties of President.................................... 9
Section 4.9 - Duties of Vice President............................... 9
Section 4.10 - Duties of Secretary................................... 9
Section 4.11 - Duties of Treasurer................................... 9
Section 4.11 - Other Officers........................................ 9
Section 4.12 - Clerks and Agents..................................... 10
ARTICLE 5 - SHARES AND CERTIFICATES FOR SHARES........................ 10
Section 5.1 - Consideration.......................................... 10
Section 5.2 - Stock Certificates..................................... 10
Section 5.3 - Lost Certificates...................................... 10
Section 5.4 - Transfer of Shares..................................... 11
Section 5.5 - Holder of Record....................................... 11
Section 5.6 - Issuance of Shares..................................... 11
Section 5.7 - Subscriptions.......................................... 11
Section 5.8 - Payment of Subscriptions............................... 11
Section 5.9 - Default in Payment of Subscriptions.................... 12
ARTICLE 6 - SEAL...................................................... 11
Section 6.1 - Corporate Seal......................................... 12
ARTICLE 7 - MISCELLANEOUS PROVISIONS.................................. 12
Section 7.1 - Fiscal Year............................................ 12
Section 7.2 - Records................................................ 12
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8 - BYLAWS.................................................... 13
Section 8.1 - Inspection............................................. 13
Section 8.2 - Amendments............................................. 13
</TABLE>
iii
<PAGE>
BYLAWS OF
HERITAGE FINANCIAL CORPORATION
ARTICLE 1
---------
Meetings of Shareholders
------------------------
SECTION 1.1 - SHAREHOLDER MEETINGS. Shareholder meetings shall be held at
the principal office of the corporation, or at such other location within or
without the State of Washington as shall be determined by the Board of Directors
and stated in the Notice of Meeting.
SECTION 1.2 - ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and for the transaction of such other
business as may properly be brought before the meeting shall be held on such day
and at such time following the close of the corporation's fiscal year as shall
be determined each year by the Board of Directors. If such annual meeting is
omitted by oversight or otherwise during such period, a subsequent annual
meeting may nonetheless be held, and any business transacted or elections held
at such meeting shall be as valid as if the annual meeting had been held during
the period provided above.
SECTION 1.3 - SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the Chairman, the President, a majority of the Board of
Directors, or any shareholder or shareholders holding in the aggregate not less
than one-tenth of all shares entitled to vote at the special meeting.
Shareholders may hold a meeting at any time and place without notice or call,
upon appropriate waivers signed by all shareholders who are entitled to vote at
a shareholders' meeting.
SECTION 1.4 - NOTICE. Written notice stating the place, day, and hour of
the meeting, and in case of a special meeting the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) days nor more
that sixty (60) days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary, or the person or
persons calling the meeting to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation. Each shareholder shall be responsible for providing the Secretary
with the shareholder's current mailing
1
<PAGE>
address to which notices of meetings and all other corporate notices may be
sent. A shareholder may waive any notice required for any meeting by executing a
written waiver of notice either before or after said meeting and such waiver
shall be equivalent to the giving of such notice. The attendance of a
shareholder at a shareholders' meeting, in person or by proxy, shall constitute
a waiver of notice of the meeting.
SECTION 1.5 - QUORUM . A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. When a quorum is present at any meeting, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless otherwise
provided by law.
SECTION 1.6 - ADJOURNMENT. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders.
SECTION 1.7 - CHAIRMAN OF MEETING. The Chairman, or in his absence, the
President or the Vice Chairman, shall preside at all meetings of the
shareholders unless the Board of Directors shall otherwise determine. The Board
of Directors may appoint any shareholder to act as chairman of the meeting.
SECTION 1.8 - SECRETARY OF MEETING. The Secretary shall act as a secretary
at all meeting of the shareholders, and in his absence, the presiding officer
may appoint any person to act as secretary.
SECTION 1.9 - CONDUCT OF MEETINGS. Shareholder meetings shall be conducted
in an orderly and fair manner, but the presiding officer shall not be bound by
any technical rules of parliamentary procedure.
SECTION 1.10 - VOTING. Each outstanding share entitled to vote shall have
one vote on each matter submitted to a vote at a meeting of shareholders.
SECTION 1.11 - PROXIES. At all meetings of shareholders, a shareholder may
vote by a proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy.
2
<PAGE>
SECTION 1.12 - SHAREHOLDER ADVISOR. A shareholder or holder of a valid
proxy may be accompanied at any shareholders' meeting by one personal advisor,
but no such advisor may address the meeting without the consent of the presiding
officer.
SECTION 1.13 - RECORDING OF PROCEEDINGS. The proceedings of a
shareholders' meeting may not be mechanically or electronically recorded other
than by the Secretary or acting secretary without the express approval of all
individuals in attendance at the meeting.
SECTION 1.14 - RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or 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 may fix in advance a date as the record date for any such
determination of shareholders. Such date in any case shall not be more than
sixty (60) days and, in case of a meeting of shareholders, not less than ten
(10) days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
Board of Directors, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. 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 thereof.
SECTION 1.15 - LIST OF SHAREHOLDERS. The Secretary of the corporation
shall make a complete record of the shareholders entitled to vote at a meeting
of shareholders, or any adjournment thereof, arranged in alphabetical order,
with the address of and the number of shares held by each as shown on the
corporation's stock transfer books on the record date. Such record shall be
kept on file at the registered office of the corporation for a period of ten
(10) days prior to the meeting of shareholders. Such record shall be produced
and kept open at the time and place of the shareholders' meeting and shall be
subject to the inspection of any shareholder during the meeting for any proper
purpose.
3
<PAGE>
ARTICLE 2
---------
Directors
---------
SECTION 2.1 - MANAGEMENT OF CORPORATION. All corporate powers shall be
exercised by, or under authority of, and the business and affairs of the
corporation shall be managed under the direction of the Board of Directors
(hereinafter sometimes referred to as the "Board").
SECTION 2.2 - NUMBER OF DIRECTORS. The initial number of directors is
stated in the Articles of Incorporation. The number to be elected by the
shareholders shall consist of not less than five (5) nor more than twenty-five
(25) persons. The exact number within such minimum and maximum limits shall be
fixed and determined by resolution of the Board of Directors.
SECTION 2.3 - NOMINATIONS OF DIRECTORS. Any nomination to the Board of
Directors (other than one proposed by the existing Board of the corporation)
must be made in the manner set forth in the Articles of Incorporation.
SECTION 2.4 - ANNUAL MEETINGS. Immediately after the annual meeting of
shareholders, the Directors shall meet to elect officers and transact any other
business they deem appropriate.
SECTION 2.5 - PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held within or without this state.
SECTION 2.6 - REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as the Board may by
vote from time to time designate.
SECTION 2.7 - SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman, the President or the Vice Chairman or by any two
(2) directors.
SECTION 2.8 - NOTICES. Notices of special meetings of the Board of
Directors stating the date, time, place and in general terms the purpose or
purposes thereof shall be delivered to each director, by mailing written notice
at least two (2) days before the meeting or by telephoning, telegraphing or
personally advising each director at least one (1) day before the meeting. A
special meeting shall be held not more than twenty (20) days after the delivery
of said notice. If mailed, such notice shall be deemed to be delivered when
deposited in the United
4
<PAGE>
States mail, postage prepaid, addressed to the director at the address provided
to the Secretary. An entry of the service of notice, given in the manner above
provided, shall be made in the minutes of the proceedings of the Board of
Directors, and such entry, if read and approved at the subsequent meeting of the
Board, shall be conclusive on the question of service. Attendance of a director
at a special 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 was not lawfully called or
convened. A director also may waive any notice required for any meeting by
executing a written waiver of notice either before or after said meeting, and
such waiver shall be the equivalent of giving such notice.
SECTION 2.9 - QUORUM. A majority of the directors shall constitute a quorum
for the transaction of business. Unless otherwise provided in the Articles of
Incorporation or these Bylaws, 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. A majority of those present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn from time to time,
without further notice, until a quorum shall attend. When a quorum shall attend,
any business may be transacted which might have been transacted at the meeting
had the same been held on the date stated in the notice of meeting.
SECTION 2.10 - ATTENDANCE BY CONFERENCE TELECOMMUNICATION. Members of the
Board of Directors may participate in a meeting of such Board by means of a
conference telephone or similar communications equipment, by means of which all
persons participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting.
SECTION 2.11 - CONSENT TO ACTION. Any action which may be taken at a
meeting of the Board of Directors, or at a meeting of any committee of the
Board, 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 or all the members of
the committee. Such consent shall have the same force and effect as a unanimous
vote at a duly convened meeting.
SECTION 2.12 - COMPENSATION. The directors shall receive such reasonable
compensation for their services as directors and as members of any committee
appointed by the Board as may be prescribed by the Board of Directors, and may
be reimbursed by the corporation for ordinary and reasonable expenses incurred
in the performance of their duties.
SECTION 2.13 - MANIFESTATION OF DISSENT. A director of the corporation who
5
<PAGE>
is present at a meeting of the Board at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
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 corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE 3
---------
Committees of the Board of Directors
------------------------------------
SECTION 3.1 - EXECUTIVE COMMITTEE. By resolution adopted by a majority of
the entire Board of Directors, the Board may designate from among its members an
Executive Committee of not less than three (3) nor more than seven (7) members,
one of whom shall be the Chairman, who shall also act as chairman of the
Executive Committee. Any member of the Board may serve as an alternate member
of the Executive Committee in the absence of a regular member or members. The
Executive Committee shall have and may exercise all of the authority of the
Board of Directors during the intervals between meetings of the Bank, except
that the committee shall not have the authority to: (1) authorize or approve a
distribution or issuance of shares, except according to a general formula or
method prescribed by the Board of Directors, (2) approve or propose to
shareholders actions or proposals requiring shareholder approval, (3) fill
vacancies on the Board of Directors or any committee thereof, (4) amend the
Articles of Incorporation pursuant to RCW 23B.10.020, (5) adopt, amend or repeal
Bylaws, (6) approve a plan of merger not requiring shareholder approval, or (7)
authorize or approve the issuance or sale or contract for sale of shares, or
determine the designation and relative rights, preferences, and limitations of a
class or series of shares, except within certain limits specifically prescribed
by the Board of Directors.
SECTION 3.2 - AUDIT COMMITTEE. By resolution adopted by a majority of the
entire Board of Directors, the Board may appoint from among its members an Audit
Committee of three (3) or more, none of whom shall be active officers of the
corporation, and may designate one (1) of such members as chairman of the
Committee. The Board may also designate one or more directors as alternates to
serve as a member or members of the Committee in the absence of a regular member
or members. The Committee shall establish and maintain continuing
communications between the Board and the corporation's independent auditors,
6
<PAGE>
internal auditors, and members of financial management with respect to the audit
of the corporation's accounts and financial affairs and the audit of the
corporation's controlled subsidiaries. The Committee shall have such other
powers and perform such other duties as may from time to time be prescribed by
the Board of Directors.
SECTION 3.3 - OTHER COMMITTEES. By resolution adopted by a majority of the
entire Board of Directors, the Board may designate from among its members such
other committees as it may deem necessary, each of which shall consist of not
less than two (2) directors and have such powers and duties as may from time to
time be prescribed by the Board.
SECTION 3.4 - RULES OF PROCEDURE. The majority of the members of any
committee may fix its rules of procedure. All actions by any committee shall be
reported in written minutes available at any reasonable time to any Board
member. Such actions shall be subject to revision, alteration and approval by
the Board of Directors; provided, that no rights or acts of third parties who
have relied in good faith on the authority granted herein shall be affected by
such revision or alteration.
ARTICLE 4
---------
Officers and Employees
----------------------
SECTION 4.1 - OFFICERS. The Board of Directors may elect a Chairman and a
Vice Chairman of the Board and shall elect a President. It shall also elect one
or more Vice Presidents, a Secretary and a Treasurer and such additional
officers as in the opinion of the Board the business of the corporation
requires. The Board may also elect or appoint, or in its discretion delegate to
the Chairman the authority to appoint, from time to time such other or
additional officers as are desirable for the conduct of the business of the
corporation.
SECTION 4.2 - ELECTION. None of the officers, except the Chairman, Vice
Chairman, and President, need be directors. The officers shall be elected
annually by the Board of Directors at the meeting of the Board following the
annual meeting of shareholders, and they shall hold office at the pleasure of
the Board of Directors.
SECTION 4.3 - REMOVAL AND VACANCY. Any officer, agent, or employee of the
corporation may be removed by the Board of Directors at any time with or without
cause. Such removal, however, shall be without prejudice to the contract
rights, if any, of the persons so removed. Election or appointment of an
officer or
7
<PAGE>
agent or employee shall not of itself create contract rights. If any corporate
office becomes vacant by reason of death, resignation, removal or otherwise, the
Board of Directors or the executive officer possessing delegated authority to
appoint such an officer, shall have power to fill such vacancies. In case of the
absence or disability of any officer, the Board of Directors or the Chairman may
delegate the powers or duties of any such officer to another officer for the
time being.
SECTION 4.4 - COMPENSATION. The compensation of the Chairman shall be
fixed by the Board of Directors. Unless fixed by the Board of Directors, the
compensation for all other officers, employees or agents of the corporation
shall be established by or at the direction of the Chairman.
SECTION 4.5 - EXERCISE OF RIGHTS AS STOCKHOLDERS. Unless otherwise ordered
by the Board of Directors, the Chairman or his designee acting by written
designation, shall have full power and authority on behalf of the corporation to
attend and to vote at any meeting of shareholders of any corporation in which
this corporation may hold stock, other than in a fiduciary capacity, and may
exercise on behalf of this corporation any and all of the rights and powers
incident to the ownership of such stock at any such meeting, and shall have
power and authority to execute and deliver proxies and consents on behalf of
this corporation in connection with the exercise by this corporation of the
rights and powers incident to the ownership of such stock. The Board of
Directors, from time to time, may confer like powers upon any other person or
persons.
SECTION 4.6 - DUTIES OF CHAIRMAN OF THE BOARD. Unless the Board shall
otherwise determine, the Chairman shall preside at all meetings of the
shareholders and at meetings of the Board of Directors and the Executive
Committee. The Chairman shall see that all orders and resolutions of the Board
of Directors and the Executive Committee are carried into effect and shall be
the person to whom the Vice Chairman and President, and all other officers
designated by the Chairman, shall report. The Chairman may delegate such duties
as he sees fit to delegate to the Vice Chairman, the President, or other
officers of the corporation. The Chairman may appoint agents or employees other
than those appointed by the Board of Directors, and shall perform such other
duties as may be prescribed from time to time by the Board of Directors or by
the Bylaws.
8
<PAGE>
SECTION 4.7 - DUTIES OF VICE CHAIRMAN. The Vice Chairman may assist the
Chairman in the performance of the Chairman's duties and shall have such powers
and exercise such other duties as shall be delegated to such officer by the
Chairman or the Board. In the absence of the Chairman, the Vice Chairman shall
perform all of the duties and assume all of the responsibilities of the
Chairman.
SECTION 4.8 - DUTIES OF PRESIDENT. The President shall, subject to the
authority granted to the Chairman and the Vice Chairman, be the chief operating
officer of the corporation and shall have general supervision over the day-to-
day business of the corporation. The President shall have such other authority
and shall exercise such other duties as shall, from time to time, be delegated
to such officer by the Chairman or by the Board.
SECTION 4.9 - DUTIES OF VICE PRESIDENT. The Vice Presidents shall have
such powers and perform such duties as may be assigned to them by the Board of
Directors or the Chairman. A Vice President designated by the Board of
Directors shall perform all of the duties of the President in case of absence or
disability of the President
SECTION 4.10 - DUTIES OF SECRETARY. The Secretary shall, subject to the
direction of the Chairman keep the minutes of all meetings of the shareholders
and of the Board of Directors, and to the extent ordered by the Board of
Directors or the Chairman the minutes of all meetings of all committees. He
shall cause notice to be given of the meetings of the shareholders, of the Board
of Directors, and of any committee appointed by the Board. He shall have
custody of the corporate seal and general charge of the records, documents, and
papers of the corporation not pertaining to the performance of the duties vested
in other officers, which shall at all reasonable times be open to the
examination of any director. Without limiting the generality of the foregoing,
the Secretary shall have charge (directly or through such transfer agents or
registrars as the Board of Directors may appoint) of the issuance, transfer, and
registration of certificates for shares of the corporation and of the records
pertaining thereto. Said records shall be kept in such manner as to show at any
time the number of shares of the corporation issued and outstanding, the manner
in which and the time when such shares were paid for, the names and addresses of
the holders of record thereof, the numbers and classes of shares held by each,
and the time when each became such holder of record. He shall perform such
other duties as may be assigned to him by the Board of Directors or the
Chairman.
SECTION 4.11 - DUTIES OF TREASURER. Except as otherwise set forth herein,
the Treasurer shall, subject to the direction of the Chairman have general
custody
9
<PAGE>
of all the property, funds and securities of the corporation and have general
supervision of the collection and disbursement of funds of the corporation. He
shall provide for the keeping of proper records of all transactions of the
corporation. He shall perform such other duties as may be assigned to him by the
Board of Directors or the Chairman.
SECTION 4.12 - OTHER OFFICERS. Such other officers as shall be appointed
by the Board of Directors, or the Chairman, acting pursuant to delegated
authority of the Board, shall exercise such powers and perform such duties as
pertain to their several offices, or as may be conferred upon or assigned to
them by the Board of Directors or the Chairman or his designee.
SECTION 4.13 - CLERKS AND AGENTS. The Chairman, or any other officer of
the corporation authorized by him, may, subject to the supervision of the Board
of Directors, appoint such custodians, bookkeepers and other clerks, agents, and
employees as he shall deem advisable for the prompt and orderly transaction of
the business of the corporation and shall define their duties, fix the salaries
to be paid to them and dismiss them.
ARTICLE 5
---------
Shares and Certificates for Shares
----------------------------------
SECTION 5.1 - CONSIDERATION. Certificates for shares of the corporation
shall be issued only when fully paid for.
SECTION 5.2 - STOCK CERTIFICATES. The certificates shall be in such form
as designated by the Board of Directors, shall be numbered in the order in which
they shall be issued, and shall be signed, either manually or in facsimile, by
the President and by the Secretary, or by such officers as may be designated by
the Board of Directors. If a corporate seal is maintained, it or a facsimile
thereof may be affixed to the certificates. Each certificate shall state upon
its face the name of the corporation and that the corporation is organized under
the laws of the State of Washington, the name of the person to whom it is
issued, and the number and class of shares and the designation of the series, if
any, the certificate represents.
SECTION 5.3 - LOST CERTIFICATES. No new certificates shall be issued until
the former certificate for the shares represented thereby shall have been
surrendered and cancelled, except in the case of lost or destroyed certificates,
and in that case only after the receipt of a bond or other security by the
corporation,
10
<PAGE>
satisfactory to the Board of Directors, indemnifying the corporation and all
persons against loss in consequence of the issuance of such new certificate.
SECTION 5.4 - TRANSFER OF SHARES. Shares of the corporation may be
transferred by endorsement by the signature of the owner, his agent, attorney or
legal representative, and the delivery of the certificate; but no transfer shall
be valid except between the parties thereto, until the same shall have been
entered upon the books of the corporation, so as to show the names of the
parties, by and to whom transferred, the numbers and designation of the shares
and the date of transfer.
SECTION 5.5 - HOLDER OF RECORD. The person registered on the books of the
corporation as the owner of the issued shares shall be recognized by the
corporation as the person exclusively entitled to have and to exercise the
rights and privileges incident to the ownership of such shares. Notwithstanding
the preceding sentence, the Board of Directors may adopt by resolution a
procedure whereby a shareholder may certify in writing to the corporation that
all or a portion of the shares registered in the name of such shareholder are
held for the account of a specified person or persons. Upon receipt by the
corporation of a certification complying with such an adopted procedure, the
person specified in the certification shall be deemed, for the purpose or
purposes set forth in the certification, to be the holders of record of the
number of shares specified in place of the shareholder making the certification.
SECTION 5.6 - ISSUANCE OF SHARES. Any shares authorized but not issued by
this corporation shall be issued, sold, or otherwise transferred by this
corporation only upon authorization of the Board of Directors.
SECTION 5.7 - SUBSCRIPTIONS. A subscription for shares of this corporation
shall be in writing and upon such terms as may be approved by the Board of
Directors.
SECTION 5.8 - PAYMENT OF SUBSCRIPTIONS. A subscription for shares shall be
paid in accordance with the terms set forth in the subscription or related
subscription agreement, if any. If the subscription or subscription agreement
does not require payment on or before a stated date or at a fixed period after a
stated date, then payment shall be made in such manner and at such times as may
be determined by the Board of Directors and expressed by it in a written call
for payment; provided that the call shall be uniform as to all shares of the
same class or series and that the call shall be mailed to each subscriber at his
last post office address known to the corporation at least thirty (30) days in
advance of the date upon which payment or the first installment, if installment
payments are called for,
11
<PAGE>
is due.
SECTION 5.9 - DEFAULT IN PAYMENT OF SUBSCRIPTIONS. If a payment required
by a subscription, a subscription agreement, or a call of the Board of Directors
is not paid when due, then the corporation may make written demand for payment
upon the defaulting subscriber by personal service or by mailing a copy of the
demand to the subscriber at his last post office address known to the
corporation. If the payment is not made within twenty (20) days of the serving
or mailing of the demand for payment, the corporation may terminate the
subscription, forfeit the subscriber's rights thereunder, retain as liquidated
damages any sums previously paid on the subscription, and hold and dispose of
the shares as though never subject to the subscription. In lieu of forfeiture,
the corporation may proceed to collect the amount due in the same manner as any
debt due the corporation.
ARTICLE 6
---------
Seal
----
SECTION 6.1 - CORPORATE SEAL. In the exercise of its discretion the Board
of Directors may adopt and maintain a suitable seal for the corporation.
ARTICLE 7
---------
Miscellaneous Provisions
------------------------
SECTION 7.1 - FISCAL YEAR. The fiscal year of the corporation shall be the
June 30.
SECTION 7.2 - RECORDS. The Articles of Incorporation, the Bylaws, and the
proceedings of all meetings of the shareholders, the Board of Directors and
standing committees of the Board shall be recorded in appropriate minute books
provided for that purpose. The minutes of each meeting shall be signed by the
Secretary or other officer appointed to act as Secretary.
ARTICLE 8
---------
Bylaws
------
SECTION 8.1 - INSPECTION. A copy of the Bylaws, with all amendments
thereto, shall at all times be kept in a convenient place at the principal
office of the corporation, and shall be open for inspection by all shareholders
during normal
12
<PAGE>
business hours.
SECTION 8.2 - AMENDMENTS. The Bylaws may be amended, altered or repealed,
at any regular meeting of the Board of Directors, by a vote of the majority of
the whole Board of Directors, provided that a written statement of the proposed
action shall have been personally delivered or mailed to all directors at least
two (2) days prior to any such meeting.
I HEREBY CERTIFY that the foregoing are the Bylaws of Heritage Financial
Corporation in effect on this 28th day of August, 1997.
/s/ Wendy K. Gauksheim
-------------------------
Secretary
13
<PAGE>
Exhibit 5
[Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim Letterhead]
September 12, 1997
Heritage Financial Corporation
201 5th Avenue S.W.
Olympia, WA 98501
Re: Legality of Securities to be Issued
Dear Ladies and Gentlemen:
We have acted as your counsel in connection with the registration by
Heritage Financial Corporation (the "Company") under the Securities Act of 1933
as amended (the "Act") of up to 7,013,835 shares of the Company's common stock,
no par value, (the "Shares") to be issued and sold by the Company, as Conversion
Stock or Exchange Shares, in the manner set forth in the Registration Statement
on Form S-1 ("Registration Statement") that is being filed under the Act with
respect to the offering of the Shares.
In connection with the offering of the Shares, we have examined (1) the
Company's Articles of Incorporation, (2) the Registration Statement, and (3)
such other documents as we have deemed necessary to form the opinion expressed
below. As to various questions of fact independently established, we have
relied upon statements of officers of the Company.
Based on this examination, we advise you that in our opinion the Shares, or
any portion of the Shares, have been duly authorized and when issued and sold by
the Company in the manner described in the Registration Statement and after the
Registration Statement has become effective, will be validly issued, fully paid
and non-assessable.
The foregoing opinion is limited to the federal laws of the United States
and the laws of the State of Washington, and we express no opinion as to the
effect of the laws of any other jurisdiction.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the reference in the Prospectus contained in the Registration
Statement to this
<PAGE>
September 10, 1997
Page 2
firm under the caption "Legal Matters" as having passed upon the validity of the
Shares. In giving this consent, we do not admit that we come within the category
of persons whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Securities and Exchange Commission enacted under the Act.
Very truly yours,
GORDON, THOMAS, HONEYWELL,
MALANCA, PETERSON
& DAHEIM, P.L.L.C.
By: /s/ J. James Gallagher
------------------------------------
J. James Gallagher
JJG:jwh
<PAGE>
Exhibit 8.3
RP FINANCIAL, LC.
- -------------------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
August 15, 1997
Boards of Directors
Heritage Financial Corporation, M.H.C
Heritage Bank
201 5th Avenue
Olympia, Washington 98501
Re: Plan of Conversion: Subscription Rights
Heritage Financial Corporation, M.H.C.
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Conversion and Agreement and Plan of
Reorganization (the "Plan") adopted by the Board of Directors of Heritage Bank
(the "Bank") and Heritage Financial Corporation, M.H.C. (the "Mutual Holding
Company"). Pursuant to the Plan, Heritage Financial Corporation (the "Company")
will offer and sell the Conversion Stock.
We understand that "Subscription Rights" to purchase shares of the
Conversion Stock are to be issued to (i) Eligible Account Holders; (ii) the
ESOP; (iii) Supplemental Eligible Account Holders; (iv) Other Members; and (v)
Minority Stockholders, collectively referred to as the "Recipients". Based
solely upon our observation that the Subscription Rights will be available to
such Recipients without cost, will be legally non-transferable and of short
duration, and will afford the Recipients the right only to purchase shares of
Conversion 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:
(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 Company's value alone. Accordingly, no assurance can be
given that persons who subscribe to shares of Conversion 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 P. Hennessey
---------------------------
James P. Hennessey
Senior 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
1998 STOCK OPTION PLAN
OF
HERITAGE FINANCIAL CORPORATION
1. Purpose of the Plan. The purpose of this Plan is to provide additional
incentives to Employees and Directors of Heritage Financial Corporation,
Heritage Savings Bank and future Subsidiaries, if any, thereby helping to
attract and retain the best available personnel for positions of responsibility
with said corporations and otherwise promoting the success of the business
activities of said corporations. It is intended that Options issued pursuant to
this Plan shall constitute either "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code or nonqualified stock options.
2. Definitions. As used herein, the following definitions shall apply:
a. "Board" shall mean the Board of Directors of the Employer.
b. "Bank" shall mean Heritage Savings Bank, a Washington stock
savings bank.
c. "Change in Control" shall mean an event deemed to occur if and
when:
(1) an offeror other than the Employer purchases shares of the
Common Stock of the Employer or the Bank pursuant to a tender or
exchange offer for such shares;
(2) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Employer or the Bank representing
twenty (20%) percent or more of the combined voting power of the
Employer's or the Bank's then outstanding securities;
(3) the membership of the Board of Directors of the Employer or the
Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24)
month period (whether commencing before or after the date of adoption
of this Plan) do not constitute a majority of the Board at the end of
such period; or
(4) shareholders of the Employer or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Employer's or the Bank's assets or a plan of partial or complete
liquidation. If any of such events (1) - (4) occur, the Board shall
determine the effective date of the Change in Control resulting
therefrom.
-1-
<PAGE>
d. "Code" shall mean the Internal Revenue Code of 1986, as amended.
e. "Common Stock" shall mean the Employer's no par value common
stock.
f. "Committee" shall mean the Board or the Committee appointed by the
Board in accordance with subsection 4.a. of the Plan.
g. "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of sick
leave, military leave, or any other approved leave of absence, except as
provided under applicable Incentive Stock Option Rules.
h. "Director" shall mean any person who has been elected or appointed
as a member of the Board of Directors of the Employer and who occupied that
position at the date an Option was granted to such person.
i. "Employee" shall mean any person employed by the Employer or any
Parent or Subsidiary of the Employer which now exists or is hereafter
organized or is acquired by the Employer.
j. "Employer" shall mean Heritage Financial Corporation, a Washington
corporation.
k. "Exchange Act" shall mean the Securities Exchange Act of 1934.
l. "Incentive Stock Option" shall mean an Option intended to satisfy
Section 422 of the Code.
m. "Nonqualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
n. "Option" shall mean a stock option granted in writing pursuant to
the Plan. Options shall include both Incentive Stock Options and
Nonqualified Stock Options, as the context requires.
o. "Optioned Stock" shall mean the Common Stock subject to an Option.
p. "Optionee" shall mean an Employee or Director who receives an
Option.
q. "Parent" shall mean any corporation having a relationship with the
Employer as described in Section 424(e) of the Code.
-2-
<PAGE>
r. "Plan" shall mean this Stock Option Plan.
s. "Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted
by the SEC under the Exchange Act, or any successor rule in effect from
time to time.
t. "SEC" shall mean the Securities and Exchange Commission.
u. "Shareholder-Employee" shall mean an Employee who owns, at the
time an Incentive Stock Option is granted, stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Employer or of any Parent or Subsidiary. For this purpose, the
attribution of stock ownership rules provided in Section 424(d) of the Code
shall apply.
v. "Subsidiary" shall mean any corporation having a relationship with
the Employer as described in Section 424(f) of the Code.
3. Stock Subject to Options.
a. Number of Shares Reserved. The maximum number of shares available
pursuant to the Plan is ___________ shares of the Common Stock of the
Employer (subject to adjustment as provided in subsection 6.i. of the
Plan). During the term of this Plan, the Employer will at all times
reserve and keep available a sufficient number of shares of its Common
Stock to satisfy the requirements of the Plan.
b. Expired, Forfeited, Terminated or Canceled Options. If any
outstanding Option expires, is forfeited, canceled, terminated, otherwise
becomes unexercisable for any reason without having been exercised in full,
or is exercised through the delivery of Common Stock, the shares of Common
Stock allocable to the unexercised portion of such Option shall again
become available for other Options, to the extent permissible under Rule
16b-3.
4. Administration of the Plan.
a. The Committee. The Plan shall be administered by the Board
directly, acting as a Committee of the whole, or if the Board elects, by a
separate Committee appointed by the Board for that purpose and consisting
of at least three Board members. All references in the Plan to the
"Committee" shall refer to such separate Committee, if any is established,
or if none is then in existence, shall refer to the Board as a whole. Once
appointed, any such Committee shall continue to serve until otherwise
directed by the Board. From time to time the Board may increase the size
of the Committee and appoint additional members thereof, remove members
(with or without cause), appoint new members in substitution therefor, and
fill vacancies however caused. In appointing members to such Committee, the
Board shall consider whether to
-3-
<PAGE>
appoint individuals qualifying as (1) "outside directors," as such term is
used in Section 162(m) of the Code, and (2) "non-employee directors" as
such term is used in Rule 16b-3.
The Committee shall select one of its members as chairman, and shall
hold meetings at such times and places as the chairman or a majority of the
Committee may determine.
At least annually, the Committee shall present a written report to the
Board indicating the persons to whom Options have been granted since the
date of the last such report, and in each case the date or dates of Options
granted, the number of shares optioned, and the Option price per share.
At all times, the Board shall have the power to remove all members of
the Committee and thereafter to directly administer the Plan as a Committee
of the whole.
b. Powers of the Committee. Except for the terms and conditions
explicitly set forth in the Plan, the Committee shall have the authority
and discretion to:
(1) determine the persons to whom Options are to be granted, the
type of Options granted, the times of grant, and the number of shares
to be represented by each Option;
(2) determine the Option price for the shares of Common Stock to
be issued pursuant to each Option, subject to the provisions of
subsection 6.b. of the Plan, and the date and other conditions upon
which each option becomes exercisable (including provisions related to
vesting);
(3) determine all other terms and conditions of each Option
granted under the Plan, which need not be identical;
(4) determine whether, and to what extent, and under what
circumstances, Options may be settled or exercised in cash, Common
Stock, other securities, other Options or other property, or canceled,
forfeited or suspended;
(5) modify or amend the terms of any Option previously granted,
or to grant substitute Options, subject to the provisions of
subsections 6.i. and 6.m of the Plan;
(6) interpret the Plan;
-4-
<PAGE>
(7) authorize any person or persons to execute and deliver Option
agreements or to take any other actions deemed by the Committee to be
necessary or appropriate to effectuate the grant of Options; and
(8) make all other determinations and take all other actions
which the Committee deems necessary or appropriate, including the
adoption of rules and procedures regarding the Plan, to administer the
Plan in accordance with its terms and conditions.
All actions of the Committee shall be either by (i) a majority vote of
the members of the full Committee at a meeting of the Committee, or (ii) by
unanimous written consent of all members of the full Committee without a
meeting thereof, or in such other manner as is authorized by Rule 16b-3.
All decisions, determinations and interpretations of the Committee
shall be final and binding upon all persons, including all Optionees and
any other holders or persons interested in any Options, unless otherwise
expressly determined by a vote of the majority of the entire Board. No
member of the Committee or of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Option.
5. Eligibility. Options may be granted only to Employees and Directors
who the Committee, in its discretion, from time to time selects; provided that
Directors who are not also Employees may not be granted Incentive Stock Options.
Granting of Options pursuant to the Plan shall be entirely discretionary
with the Committee, without any obligation to provide uniform treatment to
Employees or Directors. The adoption of this Plan shall not confer upon any
person any right to receive any Option or Options pursuant to the Plan unless
and until said Options are granted by the Committee, in its sole discretion.
Neither the adoption of the Plan nor the granting of any Options pursuant to the
Plan shall confer upon any Employee any right with respect to continuation of
employment, nor shall the same interfere in any way with the Employee's right or
with the right of the Employer or any Subsidiary to terminate the employment
relationship at any time.
6. Terms and Conditions of Options. All Options granted pursuant to the
Plan must be authorized by the Committee, and must be documented in written
agreements in such form as the Committee shall from time to time approve, which
agreements shall comply with and be subject to all of the following terms and
conditions, unless waived or modified by the Committee:
a. Number of Shares; Annual Limitation. Each Option agreement shall
state whether the Option is an Incentive Stock Option or a Nonqualified
Stock Option and the number of shares subject to Option. Any number of
Options may be granted to a single Optionee at any time and from time to
time,
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except that in the case of Incentive Stock Options, the aggregate fair
market value (determined as of the time each Option is granted) of all
shares of Common Stock with respect to which Incentive Stock Options become
exercisable for the first time by an Employee in any one calendar year
(under all incentive stock option plans of the Employer, its Parent and all
of its Subsidiaries taken together) shall not exceed $100,000.
b. Option Price and Consideration. The Option price for the shares
of Common Stock to be issued pursuant to the Option shall be such price as
is determined by the Committee, but shall in no event be less than the fair
market value of the Common Stock on the date of grant of the Option.
Further, in the case of an Incentive Stock Option granted to an Employee
who, immediately before the grant of such Incentive Stock Option, is a
Shareholder-Employee, the Incentive Stock Option price shall be at least
110% of the fair market value of the Common Stock on the date of grant of
the Incentive Stock Option. The fair market value shall be determined by
the Committee in its discretion; provided, however, that in the event that
------------------
there is a public market for the Common Stock, the fair market value shall
be the mean of the bid and asked prices of the Common Stock as of the date
of grant as reported on the National Association of Securities Dealers
Automatic Quotation System (NASDAQ), or, in the event the Common Stock is
listed on a stock exchange, the fair market value shall be the closing
price on the exchange as of the date of grant of the Option. The Option
price shall be payable either:
(1) in United States dollars upon exercise of the Option; or
(2) such other consideration of comparable value deemed to be
acceptable by the Committee, including without limitation, Common
Stock, other securities, other Options or other property.
c. Term and Other Conditions of Options. Notwithstanding anything to
the contrary in this Plan or in any Options, no Incentive Stock Option
granted pursuant to the Plan shall in any event be exercisable after the
expiration of ten (10) years from the date such Option is granted, except
that the term of an Incentive Stock Option granted to an Employee who,
immediately before such Incentive Stock Option is granted, is a
Shareholder-Employee, shall be for not more than five (5) years from the
date of grant thereof. Subject to the foregoing and other applicable
provisions of the Plan, including, but not limited to, subsection 6.e.
herein, the term of each Option, and other conditions with respect to
exercise, shall be determined by the Committee in its discretion. Except as
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otherwise specifically provided in this Plan, all Options granted
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hereunder:
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(1) require that the Optionee maintain Continuous Status as an
Employee from the date of grant through and including date of
exercise; and
(2) upon termination of the Optionee's Continuous Status as an
Employee, the Options held by said Optionee shall terminate on said
date, notwithstanding any contrary term in the Option, except as such
term is consistent with this Plan.
d. Manner of Exercise; Cashless Exercise. An Option shall be deemed
to be exercised when written notice of exercise has been given to the
Employer in accordance with the terms of the Option by the person entitled
to exercise the Option, together with full payment for the shares of Common
Stock subject to said notice. The Committee may, in its discretion, allow
for the cashless exercise of an Option whereby an Optionee can exercise an
Option or a portion thereof without making a direct payment of the Option
price to the Employer. Any cashless exercise shall be subject to:
(1) the requirements of Rule 16b-3, federal income tax laws, and
any other applicable laws;
(2) the terms of any written agreements executed in connection
with the grant of any such Options; and
(3) any procedures and policies established from time to time by
the Committee.
e. Death of Optionee. In the event of the death of an Optionee who,
until death, had been in Continuous Status as an Employee since the date of
grant of the Option, the Option shall terminate one year after the date of
death of the Optionee or the expiration date otherwise provided in the
Option agreement, whichever is earlier, but in no event sooner than three
months following the Optionee's death. Any Option exercisable under this
subsection 6.e., may be exercised by the Optionee's estate, or by such
person or persons who have acquired the right to exercise the Option by
bequest or by inheritance or by reason of the death of the Optionee.
f. Disability of Optionee. If an Optionee's Continuous Status as an
Employee is terminated at any time during the Option period by reason of a
disability (within the meaning of Section 22(e)(3) of the Code) any
Incentive Stock Option then held by the Optionee shall terminate one year
after the date of termination or, if earlier, the expiration date otherwise
provided in the Option agreement. If the Optionee's Continuous Status as
an Employee terminates by reason of disability, any Nonqualified Stock
Option held by the Optionee shall terminate on the expiration date provided
in the Options, or if no such date is
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provided, then such Options shall terminate one year after the date of
termination as an Employee.
g. Termination of Status as an Employee. If an Optionee's Continuous
Status as an Employee is terminated at any time after the grant of his
Option for any reason other than death or disability, as provided in
subsections 6.e and f. above, and not by reason of fraud or willful
misconduct, as provided below, such Optionee's:
(1) Incentive Stock Options shall terminate on the earlier of (i)
the same day of the third month after the date of termination of his
status as an Employee, or (ii) the expiration date otherwise provided
in the Options;
(2) Nonqualified Stock Options shall terminate on the expiration
date provided in the Option, or if no such date is provided, then such
Options shall terminate on the same day of the third month after the
date of termination as an Employee.
If an Optionee's Continuous Status as an Employee is terminated at any
time after the grant of the Option by reason of fraud or willful
misconduct, then all of the Employee's Options shall terminate on such
termination date.
h. Non-transferability of Options. No Option granted pursuant to the
Plan may be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee,
only by the Optionee.
i. Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of the Employer, the number of shares
of Common Stock covered by each outstanding Option, the number of shares of
Common Stock available for grant of additional Options, and the price per
share of Common Stock specified in each outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from any stock split or other
subdivision or consolidation of shares, the payment of any stock dividend
(but only on the Common Stock) or any other increase or decrease in the
number of such shares of Common Stock effected without receipt of
consideration by the Employer; provided, however, that conversion of any
convertible securities of the Employer shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Committee, whose determination in that respect shall be final,
binding and conclusive.
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No Incentive Stock Option shall be adjusted by the Committee pursuant
to this subsection 6.i. in a manner which causes the Incentive Stock Option
to fail to continue to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code.
Except as otherwise expressly provided in this subsection 6.i., no
Optionee shall have any rights by reason of any stock split or the payment
of any stock dividend or any other increase or decrease in the number of
shares of Common Stock. Except as otherwise expressly provided in this
subsection 6.i., any issue by the Employer of shares of stock of any class,
or securities convertible into shares of stock of any class, shall not
affect the number of shares or price of Common Stock subject to any
Options, and no adjustments in Options shall be made by reason thereof.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Employer to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure.
j. Date of Grant of Option. The date of grant of an Option shall,
for all purposes, be the date on which the Committee makes the
determination granting such Option. Said date of grant shall be specified
in the Option agreement.
k. Conditions Upon Issuance of Shares. Shares of Common Stock shall
not be issued with respect to an Option granted under the Plan unless the
exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, as amended, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Common Stock may
then be listed, and shall be further subject to the approval of counsel for
the Employer with respect to such compliance.
As a condition to the exercise of an Option, the Employer may require
the person exercising such Option to represent and warrant at the time of
exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such
Common Stock if, in the opinion of counsel for the Employer, such a
representation is required by any of the aforementioned relevant provisions
of law.
l. Change in Control. In the event of a Change in Control, all then
outstanding Options shall become fully vested and exercisable as of the
effective date of the Change in Control. If, in connection with or as a
consequence of a Change in Control, the Employer or the Bank is merged into
or consolidated with another corporation, or if the Employer or the Bank
sells or otherwise disposes of substantially all of its assets to another
corporation, then unless
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provisions are made in connection with such transaction for the continuance
of the Plan and/or the assumption or substitution of then outstanding
Options with new options covering the stock of the successor corporation,
or parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices, such Options shall be canceled as of
the effective date of the merger, consolidation, or sale and the Optionee
shall be paid in cash an amount equal to the difference between the fair
market value of the Common Stock subject to the Options as of the effective
date of the such corporate event (determined by the Committee under
subsection 6.b.) and the exercise price of the Options.
m. Substitute Stock Options. In connection with the acquisition or
proposed acquisition by the Employer or any Subsidiary, whether by merger,
acquisition of stock or assets, or other reorganization transaction, of a
business any employees of which have been granted Incentive Stock Options,
the Committee is authorized to issue, in substitution of any such
unexercised stock option, a new Option under this Plan which confers upon
the Optionee substantially the same benefits as the old option; provided,
however, that the issuance of any new Option for an old Incentive Stock
Option shall satisfy the requirements of Section 424(a) of the Code.
n. Tax Compliance. The Employer, in its sole discretion, may take
any actions reasonably believed by it to be required to comply with any
local, state, or federal tax laws relating to the reporting or withholding
of taxes attributable to the grant or exercise of any Option or the
disposition of any shares of Common Stock issued upon exercise of an
Option, including, but not limited to:
(1) withholding from any person exercising an Option a number of
shares of Common Stock having a fair market value equal to the amount
required to be withheld by Employer under applicable tax laws, and
(2) withholding from any form of compensation or other amount due
an Optionee or holder of shares of Common Stock issued upon exercise
of an Option, any amount required to be withheld by Employer under
applicable tax laws. Withholding or reporting shall be considered
required for purposes of this subsection 6.n. if any tax deduction or
other favorable tax treatment available to Employer is conditioned
upon such reporting or withholding.
o. Other Provisions. Option agreements executed pursuant to the Plan
may contain such other provisions as the Committee shall deem advisable,
provided in the case of Incentive Stock Options that the provisions are not
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inconsistent with the provisions of Section 422(b) of the Code or with any
of the other terms and conditions of this Plan.
p. Director Options. Notwithstanding the terms and conditions set
forth above in this section 6, no Director who is not also an Employee
shall be granted an Incentive Stock Option. In addition, Nonqualified
Stock Options granted to a Director who ceases to be a member of the Board
of Employer or any Subsidiary shall be exercisable on such terms and
conditions as the Committee shall determine.
q. Stock Appreciation Rights. The Committee may, in its discretion
and on such terms as it may decide which are not inconsistent with the Plan
or any applicable law, award in any Option, stock appreciation rights
("SARs"). SARs shall provide at the Optionee's election but subject to its
terms, for payment to the Optionee in cash, Common Stock or other property,
in an amount equal to the appreciation in the Option, where that payment is
exchanged for the Option.
7. Term of the Plan. The Plan shall become effective (and grants of
Options may thereafter be made) on the date of adoption of the Plan by the Board
or the date of shareholder approval of the Plan as provided in Section 9 of the
Plan, whichever is earlier. Any Option granted prior to shareholder approval is
fully contingent on such approval being obtained, and shall become void ab
initio if shareholder approval is not timely obtained. Unless sooner terminated
as provided in subsection 8.a. of the Plan, the Plan shall terminate (and grants
of Options may not thereafter be made) on the tenth anniversary of its effective
date; provided, that the Plan terms remain in effect as to any Option which was
timely granted and which remains outstanding after the Plan terminates.
8. Amendment or Termination.
a. Amendment or Termination of the Plan. The Board may terminate the
Plan at any time. The Board may amend the Plan at any time and from time
to time in such respects as the Board may deem advisable, except that,
without approval of the holders of a majority of the outstanding shares of
the Common Stock, no such revision or amendment shall:
(1) increase the number of shares of Common Stock subject to the
Plan other than in connection with an adjustment under subsection 6.i.
of the Plan;
(2) change the designation of the class of persons eligible to be
granted Options, as provided in Section 5 of the Plan; or
(3) make any other amendments to the Plan which would require
shareholder approval under any applicable law or regulation.
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<PAGE>
b. Amendment or Termination of Outstanding Options. Except as
otherwise provided in this Plan or in an Option, the Committee may
retroactively or prospectively waive any condition or rights under, amend
any terms of, or alter, accelerate, suspend, discontinue, cancel or
terminate, any Option previously granted; provided, that if any such action
would impair the rights of any Optionee or then holder of the Option, it
shall have no effect without the consent of the affected Optionee or
holder.
9. Shareholder Approval. The Plan shall be subject to approval by a
majority of the outstanding shares of Common Stock of the Employer present and
entitled to vote at a duly convened meeting of the shareholders of the Employer.
CERTIFICATE OF ADOPTION
I certify that the foregoing Plan was adopted by the Board of Directors of
Heritage Financial Corporation, on _____________, 1997 and was approved by its
shareholders on ______________, 1997.
----------------------------------
Secretary
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Exhibit 10.2
1998 MANAGEMENT RECOGNITION PLAN
OF
HERITAGE FINANCIAL CORPORATION
1. Purpose of the Plan.
The purpose of the Plan is to increase the proprietary and vested interest
of key Employees of Heritage Financial Corporation in the growth, development
and financial success of the Company by granting them awards of Restricted
Shares.
2. Definitions. As used herein, the following definitions shall apply.
a. "Affiliate" shall mean the Bank or any present or future
corporation that would be a "parent" or "subsidiary" of the Company as
defined in Section 424(f) and (g) of the Code.
b. "Award" shall mean an award of Restricted Shares under the Plan.
c. "Bank" shall mean Heritage Savings Bank, a Washington stock
savings bank.
d. "Board" shall mean the Board of Directors of the Company.
e. "Change in Control" shall have the meaning set forth in Section
6.b. hereof.
f. "Code" shall mean the Internal Revenue Code of 1986, as amended.
g. "Committee" shall mean the Board or the committee of the Board
designated by the Board to administer the Plan.
h. "Common Stock" shall mean the Company's no par value common stock.
i. "Company" shall mean Heritage Financial Corporation, a Washington
corporation.
j. "Designated Beneficiary" shall have the meaning set forth in
Section 4.b. hereof.
k. "Disability" shall have the meaning set forth in Section 22(e)(3)
of the Code.
l. "Effective Date" shall have the meaning set forth in Section 7.a.
hereof.
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m. "Employee" shall mean any person who is currently employed by the
Company or an Affiliate, including officers and officers who are members of
the Board.
n. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
o. "Participant" shall mean an Employee to whom an award of
Restricted Shares is granted pursuant to the Plan.
p. "Plan" shall mean this Management Recognition Plan.
q. "Restricted Shares" shall mean shares which are awarded to an
Employee that are subject to the transfer and forfeitability restrictions
described in Section 5.c.
r. "Retirement" shall mean termination of service as an Employee at
or after age 65.
3. Shares Subject to the Plan.
a. Number of Shares Reserved. The maximum number of shares that may
be subject of Awards under this Plan shall be __________, shares of Common
Stock, subject to adjustment as provided in Section 3.b. The Company shall
at all times reserve and keep available a sufficient number of its shares
of Common Stock to satisfy the requirements of the Plan. In the event that
a trust is established in connection with the Plan pursuant to Section
7.d., the Company may authorize the trustees of the trust to purchase
shares in the open market with funds contributed by the Company or the Bank
and such shares shall be included in the number of shares that may be the
subject of Awards. In the event that Restricted Shares are forfeited for
any reason, such shares shall thereafter again be available for award
pursuant to the Plan.
b. Changes in the Company's Shares. In the event that the Committee
shall determine that any recapitalization, reorganization, merger,
consolidation, stock split, spin-off, combination, or exchange of Common
Stock or other similar corporate event affects the Common Stock such that
an adjustment is required in order to preserve the benefits or potential
benefit intended under this Plan, the Committee shall, in such manner as it
may deem equitable, adjust any or all of the number and kind of shares of
Common Stock which thereafter may be awarded under the Plan, or which are
subject to outstanding Awards.
4. Administration.
a. Administration. The Plan shall be administered by the Committee,
which shall have the power to interpret the Plan and to adopt such rules
for the administration, interpretation and application of the Plan as are
consistent with its
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terms and provisions and to interpret, amend or revoke any such rules. All
actions taken and all interpretations and determinations made by the
Committee shall be binding upon all persons, including the Company,
stockholders, directors, Participants and Designated Beneficiaries. The
Secretary of the Company shall be authorized to implement the Plan in
accordance with its terms, and to take such actions of a ministerial nature
as shall be necessary to effectuate the intent and purposes thereof. No
member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan
or the awards hereunder, and all members of the Board shall be fully
protected by the Company in respect to any such action, determination or
interpretation.
b. Designated Beneficiaries. If a Participant dies prior to
receiving any payment due under the Plan, such payment shall be made to his
Designated Beneficiary. A Participant's Designated Beneficiary shall be
the beneficiary specifically designated by a Participant in writing to
receive amounts due the Participant in the event of the Participant's
death. A married Participant must obtain the written consent of his or her
spouse to name someone other than the spouse as the sole primary (non
contingent) Designated Beneficiary. In the absence of an effective
designation by the Participant (including lack of required spousal
consent), Designated Beneficiary shall mean the Participant's surviving
spouse or, if none, his estate.
5. Restricted Shares.
a. Eligibility; Awards Under the Plan. Employees (including officers
and employee directors of the Company) shall be eligible to participate in
the Plan upon designation by the Committee. To the extent that Common
Stock is available for grant under the Plan, the Committee may determine
which of the Employees shall be granted an Award and the number of
Restricted Shares covered by each Award. In selecting those Employees to
whom Awards will be granted and the number of shares of Common Stock
covered by such Awards, the Committee shall consider the position and
responsibilities of the eligible Employees, the length and value of their
services to the Company and its Affiliates, the compensation paid to the
Employees and any other factors the Committee may deem relevant, and the
Committee may request the written recommendation of the chief executive
officer and other senior executive officers of the Company and its
Affiliates.
b. Fractions of Shares. Whenever under the terms of the Plan a
fractional share would be required to be issued, the fractional share shall
be rounded up to the next full share.
c. Terms of Awards. The Restricted Shares awarded hereunder shall be
awarded only pursuant to a written agreement, which shall be executed by
the Participant and a duly authorized officer of the Company and which
shall contain the following terms and conditions:
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(1) An award of Restricted Shares must be accepted by the
Participant within a period of sixty (60) days (or such other period
as the Board may specify at grant) after the award date by the
execution of a Restricted Share award agreement in the form provided
by the Company;
(2) A Participant shall not be permitted to sell, transfer,
pledge, assign or otherwise encumber Restricted Shares awarded under
the Plan prior to the date on which such shares vest, except in
accordance with the laws of descent and distribution;
(3) Except as otherwise provided herein, a Participant shall
have, with respect to the Restricted Shares, all of the rights of a
stockholder of the Company, including the right to vote such Shares
and to receive any cash dividends declared thereon. Stock dividends,
if any, issued with respect to Restricted Shares shall be treated as
additional Restricted Shares that are subject to the same restrictions
and other terms and conditions that apply with respect to the
Restricted Shares with respect to which such dividends are paid; and
(4) Subject to the applicable provisions of the Restricted Share
Award agreement and this Section, a Participant's interest in Shares
shall immediately become fully vested and nonforfeitable, and the
restrictions set forth herein shall lapse upon the sooner of (i)
ratably over a five (5) year period whereby twenty (20%) percent of
the Award shall vest on each of the first through the fifth
anniversaries of the date of grant, (ii) upon the Participant's
Retirement, death or Disability, or (iii) upon the effective date of a
Change in Control.
d. Stock Certificates. A stock certificate registered in the name of
each Participant receiving a Restricted Share Award (or in the name of a
trustee for the benefit of each Participant) shall be issued in respect of
such shares. Such certificate shall bear whatever appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Award as the Board shall determine. The Board may, in its sole discretion,
require that the stock certificates evidencing Restricted Shares be held in
custody by the Company (or in trust by a trustee) until the restrictions
thereon shall have lapsed.
6. Change in Control Provisions.
a. Lapse of Restrictions and Immediate Vesting. Upon a Change in
Control, the transferability and forfeiture restrictions placed on any
Restricted Shares by Section 4.2 shall lapse and such Shares shall be
deemed fully vested and owned by the Participant as of such date.
b. Definition of Change in Control. "Change in Control" shall mean
an event deemed to occur if and when:
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(1) an offeror other than the Company purchases shares of the
Common Stock of the Company or the Bank pursuant to a tender or
exchange offer for such shares;
(2) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company or the Bank
representing twenty (20%) percent or more of the combined voting power
of the Company's or the Bank's then outstanding securities;
(3) the membership of the Board of Directors of the Company or
the Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four
(24) month period (whether commencing before or after the date of
adoption of this Plan) do not constitute a majority of the Board at
the end of such period; or
(4) shareholders of the Company or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Company's or the Bank's assets or a plan of partial or complete
liquidation. If any of such events (1) - (4) occur, the Board shall
determine the effective date of the Change in Control resulting
therefrom.
7. Miscellaneous.
a. Effective Date; Shareholder Approval; Term. The Plan shall become
effective (and Awards may thereafter be made) on the date of adoption by
the Board or the date of shareholder approval, whichever is earlier. Any
Award made prior to shareholder approval is fully contingent on such
approval being obtained within twelve (12) months following Board approval,
and shall be void ab initio if shareholder approval is not timely obtained.
Unless sooner terminated, the Plan shall continue in effect until tenth
(10th) anniversary of the Effective Date.
b. Amendment, Suspension or Termination of the Plan. The Plan may be
wholly or partially amended or otherwise modified, suspended or terminated
at any time or from time to time by the Board; provided, however, that
amendments to the Plan shall not be effective unless approved by the
affirmative vote of the stockholders of the Company owning a majority of
the outstanding shares of the Company at a meeting of stockholders of the
Company held within twelve (12) months of the date of adoption of such
amendment, where such amendment will:
(1) increase the total number of shares of Common Stock reserved
for the purposes of the Plan;
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(2) change in any respect the class of persons who are eligible
to be Participants;
(3) extend the maximum period for granting Awards as provided
herein; or
(4) otherwise materially increase the benefits accruing to
Participants under the Plan.
From and after the Effective Date, neither the amendment, suspension
nor termination of the Plan shall, without the consent of the Participant,
alter or impair any rights or obligations under any Award theretofore
granted. No Awards may be granted during any period of suspension nor
after termination or expiration of the Plan.
c. Regulations and Other Approvals. The obligation of the Company to
deliver Common Stock with respect to any Award granted under the Plan shall
be subject to all applicable laws, rules and regulations, including all
applicable federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or
appropriate by the Board. The Board may make such changes as may be
necessary or appropriate to comply with the rules or requirements of any
governmental authority. Each Award is subject to the requirement that, if
at any time the Board determines, in its sole discretion, that the listing,
registration or qualification of Common Stock issuable pursuant to the Plan
is required by any securities exchange or under any United States, state or
federal law, or the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with,
issuance of Common Stock, then no such Stock shall be issued, in whole or
in part, unless listing, registration, qualification, consent or approval
has been effected or obtained free of any conditions as acceptable to the
Board. In the event that the disposition of Common Stock acquired pursuant
to the Plan is not covered by a then current registration statement under
the Securities Act of 1933, and is not otherwise exempt from such
registration, such Stock shall be restricted against transfer to the extent
required by the Securities Act of 1933 or regulations thereunder, and the
Board may require any individual receiving Common Stock pursuant to the
Plan, as a condition precedent to receipt of such Stock, to represent to
the Company in writing that the Stock acquired by such individual are
acquired for investment only and not with a view to distribution. The
certificate for any Common Stock acquired pursuant to the Plan shall
include any legend that the Board deems appropriate to reflect any
restrictions on transfer.
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d. Trust Arrangement. All benefits under the Plan represent an
unsecured promise to pay by the Company. The Plan shall be unfunded and the
benefits hereunder shall be paid only form the general assets of the
Company resulting in the Participants having no greater rights that the
Company's general creditors; provided, however, that nothing herein shall
prevent or prohibit the Company from establishing a trust or other
arrangement for the purpose of providing for the payment of the benefits
payable under the Plan.
e. Governing Law. The Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of
the State of Washington without giving effect to the choice of law
principles thereof.
f. Titles; Construction. Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of
the Plan. The masculine pronoun shall include the feminine and neuter and
the singular shall include the plural, when the context so indicates.
CERTIFICATE OF ADOPTION
I certify that the foregoing Plan was adopted by the Board of Directors of
Heritage Financial Corporation, on _____________, 1997 and was approved by its
shareholders on ______________, 1997.
------------------------------------------------
Secretary
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EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTS
- --------------------------------------------------------------------------------
The Board of Directors
Heritage Savings Bank:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Heritage Savings Bank and Subsidiaries Consolidated
Statements of Income," "The Conversion - Effects of Conversion to Stock Form on
Depositors and Borrowers of the Bank - Tax Effects," "Legal and Tax Opinions"
and "Experts."
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Seattle, Washington
September 10, 1997
<PAGE>
Exhibit 23.3
RP FINANCIAL, LC.
- -------------------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
September 2, 1997
Boards of Directors
Heritage Financial Corporation, M.H.C
Heritage Bank
201 5th Avenue
Olympia, Washington 98501
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Heritage Financial Corporation, M.H.C., the mutual holding company
for Heritage Bank, Olympia, Washington, and any amendments thereto, in the Form
S-1 Registration Statement and any amendments thereto for Heritage Financial
Corporation. 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 Heritage Financial
Corporation.
Sincerely,
RP FINANCIAL, LC.
/s/ James P. Hennessey
---------------------------
James P. Hennessey
Senior 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 24
POWER OF ATTORNEY
-----------------
Each director of Heritage Financial Corporation (the "Company"), whose
signature appears below, hereby appoints Donald V. Rhodes, as his or her
attorney to sign, in his or her name and behalf and in any and all capacities
stated below, (i) the Company's Registration Statement on Form S-1 (the
"Registration Statement") for the registration of securities in connection with
the Company's offering of common stock, no par value, ("Common Stock"), as
described in the Prospectus included in the Registration Statement, and likewise
to sign any and all amendments and other documents relating thereto as shall be
necessary to cause the Registration Statement to become effective (including
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission; (ii) any document deemed necessary by such attorney to cause the
issuance of securities to be made in compliance with the Blue Sky and securities
laws of any state or foreign jurisdiction (the signing of any such document to
be conclusive evidence that the attorney considers such document necessary or
desirable); (iii) appropriate applications to the State of Washington, Division
of Banks, the Federal Deposit Insurance Corporation and the Federal Reserve Bank
of San Francisco for approvals or nonobjections by such regulatory authorities
of the Conversion and the Offerings as described in the Registration Statement;
and (iv) any and all such documents upon the advice of legal counsel to carry
out the Conversion and offering of the Common Stock to the public, each such
person hereby granting to each such attorney power to act with our without the
other and full power of substitution and revocation, and hereby ratifying all
that any such attorney or his substitute may do by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Power of
Attorney has been signed by the following persons in the capacities indicated,
on the 28th day of August, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Donald V. Rhodes Director
- ----------------------------
Donald V. Rhodes
/s/ Lynn M. Brunton Director
- ----------------------------
Lynn M. Brunton
/s/ John A. Clees Director
- ----------------------------
John A. Clees
/s/ Daryl D. Jensen Director
- ----------------------------
Daryl D. Jensen
</TABLE>
<PAGE>
<TABLE>
<S> <C>
/s/ H. Edward Odegard Director
- ----------------------------
H. Edward Odegard
/s/ James P. Senna Director
- ----------------------------
James P. Senna
/s/ Philip S. Weigand Director
- ----------------------------
Philip S. Weigand
</TABLE>
-2-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE ON FORM S-1 FOR THE YEAR ENDED JUNE 30, 1997
CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE REGISTRANT'S TO BE WHOLLY-OWNED SUBSIDIARY, HERITAGE SAVINGS
BANK, AND ITS SUBSIDIARIES, AS WELL AS THE GUIDE 3 TABLES INCLUDED IN THIS FORM
S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM S-1 FILING. THIS
FORM S-1 DOES NOT INCLUDE SEPARATE FINANCIAL STATEMENTS ON THE REGISTRANT SINCE
IT WILL NOT ENGAGE IN MATERIAL TRANSACTIONS UNTIL AFTER THE CONVERSION. THE
REGISTRANT, WHICH HAS BEEN INACTIVE TO DATE, HAS NO SIGNIFICANT ASSETS,
LIABILITIES, REVENUES, EXPENSES OR CONTINGENT LIABILITIES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 7,412
<INT-BEARING-DEPOSITS> 175
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 8,506
<INVESTMENTS-MARKET> 8,498
<LOANS> 208,193
<ALLOWANCE> 2,752
<TOTAL-ASSETS> 242,164
<DEPOSITS> 209,781
<SHORT-TERM> 890
<LIABILITIES-OTHER> 2,605
<LONG-TERM> 0
0
0
<COMMON> 1,810
<OTHER-SE> 25,904
<TOTAL-LIABILITIES-AND-EQUITY> 242,164
<INTEREST-LOAN> 16,743
<INTEREST-INVEST> 757
<INTEREST-OTHER> 1,012
<INTEREST-TOTAL> 18,512
<INTEREST-DEPOSIT> 8,999
<INTEREST-EXPENSE> 9,000
<INTEREST-INCOME-NET> 9,512
<LOAN-LOSSES> (270)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,105
<INCOME-PRETAX> 2,024
<INCOME-PRE-EXTRAORDINARY> 2,024
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,269
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
<YIELD-ACTUAL> 8.77
<LOANS-NON> 133
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 68
<ALLOWANCE-OPEN> 1,873
<CHARGE-OFFS> 3
<RECOVERIES> 1,152
<ALLOWANCE-CLOSE> 2,752
<ALLOWANCE-DOMESTIC> 2,206
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 546
</TABLE>
<PAGE>
Exhibit 99.3
CONVERSION APPRAISAL REPORT
HERITAGE FINANCIAL CORPORATION, M.H.C.
PROPOSED HOLDING COMPANY FOR
HERITAGE BANK
OLYMPIA, WASHINGTON
STOCK PRICES AS OF:
AUGUST 15, 1997
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC.]
August 15, 1997
Boards of Directors
Heritage Financial Corporation, M.H.C
Heritage Bank
201 5th Avenue
Olympia, Washington 98501
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
transaction described below.
This appraisal is furnished pursuant to the requirements of 563b.7 and has
been prepared in accordance with the "Guidelines for Appraisal Reports for the
Valuation of Savings and Loan Associations Converting from Mutual to Stock Form
of Organization" (Valuation Guidelines) of the Office of Thrift Supervision
("OTS"), including the most recent revisions as of October 21, 1994, and
applicable regulatory interpretations thereof. Such Valuation Guidelines are
relied upon by the Washington Department of Financial Institutions, Division of
Banks (the "Division") and the Federal Deposit Insurance Corporation (FDIC) in
evaluating conversion appraisals in the absence of separate written valuation
guidelines by the respective agencies.
Description of Reorganization
- -----------------------------
We understand that the Board of Directors of Heritage Financial
Corporation, a Washington-chartered mutual holding company (the "Mutual Holding
Company"), and the Board of Directors of Heritage Bank (the "Bank"), a majority-
owned subsidiary of the Mutual Holding Company, has adopted a Plan of
Conversion, incorporated herein by reference, in which the Mutual Holding
Company will be combined with the Bank simultaneously with the Mutual Holding
Company's conversion to stock form and a newly-formed Washington stock
corporation, to be known as Heritage Financial Corporation (the "Holding
Company"), will become the holding company of the Bank. Pursuant to the
reorganization, the Mutual Holding Company will cease to exist and the
outstanding shares of Common Stock held by the Mutual Holding Company will be
cancelled (67.88 percent of the outstanding Common Stock as of the date hereof
adjusted for the impact of waived dividends and the value of Mutual Holding
Company assets), and the outstanding Minority Shares (32.12 percent of the
outstanding Common Stock as of the date hereof) will be converted into the
Exchange Shares pursuant to the Exchange Ratio. The Exchange Ratio will result
in the holders of the outstanding Minority Shares owning in the aggregate
approximately the same percentage of the Common Stock to be outstanding upon the
completion of the Conversion and Reorganization (i.e., the Conversion Shares and
the Exchange Shares) as the percent of Heritage Common Stock owned by them in
the aggregate immediately before consummation of the Conversion and
Reorganization adjusted for the impact of waived dividends and the value of
Mutual Holding Company assets but before giving effect to any (i) payment of
cash in lieu of issuing fractional Exchange Shares and (ii) shares of Conversion
Stock purchased by the Bank's stockholders in the Conversion Offerings. Other
than shares of the Bank, the only material asset of the Mutual Holding Company
is approximately $120,000 of cash that will be merged with the Bank's assets
upon completion of the reorganization.
<PAGE>
RP Financial, LC
Boards of Directors
August 15, 1997
Page 2
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm that
specializes in financial valuations and analyses of business enterprises and
securities. The background and experience of RP Financial are detailed in
Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting the Bank in the preparation of its business plan, we are
independent of the Bank, the Mutual Holding Company, the Holding Company and
other parties engaged by the Bank and the Holding Company to assist in the stock
issuance process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed the Holding Company's
Application for Approval of Conversion, including the Proxy Statement, as filed
with the Division and the FDIC, the Holding Company's Form S-1 registration
statement as filed with the Securities and Exchange Commission ("SEC"). We have
conducted a financial analysis of the Bank that has included a review of its
audited financial information for fiscal years ended 1993 through 1997 and
various unaudited information and internal financial reports and due diligence
related discussions with the Bank's management; KPMG Peat Marwick, LLP., the
Bank's independent auditor; Gordon, Thomas, Honeywell, Malanca, Petersen &
Daheim, P.L.L.C., the Bank's conversion counsel; and Ryan Beck & Co., the Bank's
financial and marketing advisor in connection with the Holding Company's stock
offering. All conclusions set forth in the Appraisal were reached independently
from such discussions. In addition, where appropriate, we have considered
information based on other available published sources that we believe are
reliable. While we believe the information and data gathered from all these
sources are reliable, we cannot guarantee the accuracy and completeness of such
information.
We have investigated the competitive environment within which the Bank
operates and have assessed the Bank's relative strengths and weaknesses. We have
kept abreast of the changing regulatory and legislative environment for
financial institutions and analyzed the potential impact on the Bank and the
industry as a whole. We have analyzed the potential effects of conversion on the
Bank's operating characteristics and financial performance as they relate to the
pro forma market value. We have reviewed the overall conditions in the Bank's
primary market area as set forth in demographic, economic and competitive
information prepared by CACI, SNL Securities and other third party private and
governmental sources. We have compared the Bank's financial performance and
condition with selected publicly-traded thrifts and thrift holding companies in
accordance with the Valuation Guidelines, as well as all publicly-traded thrifts
and thrift holding companies. We have reviewed the current conditions in the
securities markets in general and in the market for thrift stocks in particular,
including the market for existing thrift issues and the market for initial
public offerings by thrifts and thrift holding companies. We have excluded from
such analyses publicly-traded mutual holding companies and thrifts subject to
announced or rumored acquisition and/or other unusual characteristics.
Our Appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Bank, its independent auditors, legal counsel and other authorized
agents are truthful, accurate and complete. We did not independently verify the
financial statements and other information provided by the Bank, its independent
auditors, legal counsel and other authorized agents nor did we independently
value the assets or liabilities of the Bank. The valuation considers the Bank
only as a going concern and should not be considered as an indication of the
liquidation value.
Our appraised value is predicated on a continuation of the current
operating environment for the Bank and Holding Company and for all thrifts and
their holding companies. Changes in the local, state and national economy, the
legislative and regulatory environment for financial institutions, the stock
market, interest rates, and other external forces (such as natural disasters or
significant world events) may occur from time to time,
<PAGE>
RP Financial, LC
Boards of Directors
August 15, 1997
Page 3
often with great unpredictability, and may materially impact the value of thrift
stocks as a whole or the Bank's and Holding Company's values alone. It is our
understanding that there are no current plans for selling control of the Holding
Company or the Bank following Conversion. To the extent that such factors can be
foreseen, they have been factored into our analysis. The estimated pro forma
market value is defined as the price at which the Holding Company's Common
Stock, immediately upon completion of the conversion offering, would change
hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
Valuation Conclusion
- --------------------
It is our opinion that, as of August 15, 1997, the aggregate pro forma
market value of the Bank and the Mutual Holding Company, inclusive of the sale
of an approximate 67.88 percent ownership interest in the Subscription and
Community Offerings, was $53,034,770 at the midpoint. Based on this valuation
and the approximate 67.88 percent ownership interest being sold in the
Subscription and Community Offerings, the midpoint of the Holding Company's
stock offering was $36,000,000, equal to 3,600,000 shares offered at a per share
value of $10.00. Pursuant to the Conversion Guidelines, the 15 percent offering
range includes a minimum of $30,600,000 and a maximum of $41,400,000. Based on
the $10.00 per share offering price, this range equates to an offering of
3,060,000 shares at the minimum to 4,140,000 shares at the maximum. The Holding
Company's offering also includes a provision for a super range, which if
exercised, would result in an offering size of $47,610,000, equal to 4,761,000
shares at the $10.00 per share offering price.
Exchange Ratio for Public Shares
- --------------------------------
The FDIC conversion regulations provide that in a conversion of a mutual
holding company, the minority stockholders are entitled to exchange their shares
of the Bank's common stock for common stock of the Holding Company. The Board
of the Mutual Holding Company has independently established a formula to
determine the exchange ratio. The formula has been designed to preserve the
current aggregate percentage ownership in the Bank represented by the Minority
Shares, adjusted for the impact of waived dividends and the value of Mutual
Holding Company assets pursuant to FDIC requirements, which is an approximate
32.86 percent ownership interest. Pursuant to the formula, the Exchange Ratio
will be determined at the end of the Holding Company's stock offering based on
the total number of shares sold in the Subscription and Community Offerings.
Based upon this formula, and the valuation conclusion and offering range
concluded herein, the Exchange Ratio would be 2.3752 shares, 2.7943 shares,
3.2135 shares and 3.6955 shares of Heritage Financial stock issued for each
Minority Share, at the minimum, midpoint, maximum and super range of the
offering, respectively.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the initial offering will thereafter be able to sell
such shares at prices related to the foregoing valuation of the pro forma market
value. The appraisal reflects only a valuation range as of this date for the pro
forma market value of the Bank immediately upon issuance of the stock.
RP Financial's valuation was determined based on the financial condition,
operations and shares outstanding as of June 30, 1997, the date of the financial
data included in the Prospectus. The proposed
<PAGE>
RP Financial, LC
Boards of Directors
August 15, 1997
Page 4
Exchange Ratio and the exchange of Minority Shares for newly issued Holding
Company shares was determined by the Boards of Directors of the Mutual Holding
Company and the Bank. RP Financial expresses no opinion on the proposed Exchange
Ratio and the exchange of Minority Shares for newly issued Holding Company
shares. The de minimus balance of Mutual Holding Company assets contributed to
the Bank in conjunction with the conversion were considered in the estimate of
pro forma market value.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated should market conditions or changes in
Heritage's operating results warrant. The valuation will also be updated at the
completion of the Holding Company's stock offering. These updates will consider,
among other things, any developments or changes in the Bank's financial
performance and condition, management policies, current conditions in the equity
markets for thrift shares, both existing issues and new issues, and the market
for the Minority Shares. Also, these updates will consider changes in other
external factors which impact value including, but not limited to: various
changes in the legislative and regulatory environment (including changes in the
appraisal guidelines), the stock market and the market for thrift stocks, and
interest rates. Should any such new developments or changes be material, in our
opinion, to the valuation of the shares, appropriate adjustments to the
estimated pro forma market value will be made. The reasons for any such
adjustments will be explained in the update at the date of the release of the
update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Ronald S. Riggins
Ronald S. Riggins
President
/s/ James P. Hennessey
James P. Hennessey
Senior Vice President
<PAGE>
R.P. Financial, L.C.
TABLE OF CONTENTS
HERITAGE FINANCIAL CORPORATION, M.H.C.
HERITAGE BANK
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
<S> <C>
Introduction 1.1
Plan of Conversion and Holding Company Reorganization 1.2
Strategic Overview 1.3
Balance Sheet Trends 1.5
Income and Expense Trends 1.8
Interest Rate Risk Management 1.12
Lending Activities and Strategy 1.12
Asset Quality 1.15
Funding Composition and Strategy 1.16
Subsidiary 1.16
Legal Proceedings 1.17
CHAPTER TWO MARKET AREA
- -----------
Introduction 2.1
Market Area Demographics 2.2
Economy 2.4
Unemployment 2.5
Competition 2.6
CHAPTER THREE PEER GROUP ANALYSIS
- -------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.8
Loan Composition 3.11
Credit Risk 3.11
Interest Rate Risk 3.14
Summary 3.16
</TABLE>
<PAGE>
TABLE OF CONTENTS
HERITAGE FINANCIAL CORPORATION, M.H.C.
HERITAGE BANK
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
- ----------- ------
CHAPTER FOUR VALUATION ANALYSIS
- ------------
<S> <C>
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.3
3. Asset Growth 4.4
4. Primary Market Area 4.5
5. Dividends 4.5
6. Liquidity of the Shares 4.7
7. Marketing of the Issue 4.7
A. The Public Market 4.7
B. The New Issue Market 4.11
C. Second Step Conversion Market 4.11
D. Acquisition Market 4.15
E. Market for Heritage Stock 4.15
8. Management 4.17
9. Effect of Government Regulation and Regulatory Reform 4.17
Summary of Adjustments 4.17
Valuation Approaches 4.18
1. Price-to-Tangible Book ("P/B") 4.20
2. Price-to-Earnings ("P/E") 4.20
3. Price-to-Assets ("P/A") 4.21
Comparison to Recent Conversions 4.21
Valuation Conclusion 4.22
Establishment of Exchange Ratio 4.22
</TABLE>
<PAGE>
LIST OF TABLES
HERITAGE FINANCIAL CORPORATION, M.H.C.
HERITAGE BANK
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statement 1.9
2.1 Summary Demographic Data 2.3
2.2 Major Employers in Heritage Bank's Markets 2.5
2.3 Market Area Unemployment Trends 2.6
2.4 Deposit Summary 2.7
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.9
3.4 Loan Portfolio Composition Comparative Analysis 3.12
3.5 Credit Risk Measures and Related Information 3.13
3.6 Interest Rate Risk Comparative Analysis 3.15
4.1 Peer Group Market Area Comparative Analysis 4.6
4.2 Conversion Pricing Characteristics 4.12
4.3 Market Pricing Comparatives 4.13
4.4 Pricing Characteristics and After-Market Trends -
Second Step Conversions 4.14
4.5 Inplied Pricing Ratios Full Conversion Basis 4.16
4.6 Public Market Pricing 4.23
4.7 Calculation of Exchange Ratios 4.24
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
Heritage Bank ("Heritage" or the "Bank") is a state-chartered stock savings
bank headquartered in Olympia, Washington. The City of Olympia is the county
seat of Thurston County and is also the Capitol of the State of Washington.
Olympia is a deep-water port located at the southern end of the Puget Sound
located approximately 60 miles south of Seattle and 115 miles north of Portland,
Oregon. In addition to its main office in Olympia, the Bank operates a branch in
West Olympia as well as three other offices in Thurston County (two in Lacey and
one in Tumwater). The Bank has extended its market area in contiguous areas
along the southern Puget Sound by opening three branches in Tacoma (Pierce
County) and one office in Shelton (Mason County). Additionally, Heritage
operates two loan centers; one each in Olympia and Tacoma.
Heritage was organized in 1927 and has a long history of service to its
primary market. Currently, Heritage is a member of the Federal Home Loan Bank
("FHLB") system, with its deposits insured up to the regulatory maximums by the
Federal Deposit Insurance Corporation ("FDIC") under the Savings Association
Insurance Fund ("SAIF"). The Bank's primary regulators are the Washington
Department of Financial Institutions, Division of Banks (the "Division"), and
the FDIC. At June 30, 1997, Heritage had total assets of $242.1 million, total
deposits of $209.8 million, and stockholders' equity of $27.7 million, equal to
11.4 percent of total assets. For the fiscal year ended June 30, 1997, the Bank
reported net income of $2.3 million for a return of 0.98 percent of average
assets.
On January 31, 1994, the Bank completed a reorganization from a mutual
savings bank to a stock savings bank through the formation of a Washington
chartered mutual holding company. Pursuant to the reorganization, Heritage
transferred substantially all of its assets and liabilities to a newly-formed
stock bank in exchange for 1,200,000 shares of stock issued to Heritage
Financial Corporation, M.H.C. (the "Mutual Holding Company"). Simultaneously,
the Bank sold 600,000 shares of stock to the public in a subscription and
community offering. As of June 30, 1997, after taking into account the exercise
of options, there were 1,809,616 total shares of the Bank common stock issued
and outstanding, of which 1,200,000 shares, or 66.31 percent, are owned by the
Mutual Holding Company and 609,616 shares, or 33.69 percent, are owned by the
public. Since the mutual holding company reorganization, Heritage has paid cash
dividends to minority shareholders equal to $0.30 per share in fiscal 1994,
$0.35 per share in fiscal 1995, and $0.375 per share in fiscal 1996; the right
to receive dividends was waived by the Mutual Holding Company. The total amount
of waived dividends is equal to $1,230,000. Adjusting for the ownership impact
of dividends waived by the Mutual Holding Company and the market value of assets
held by the Mutual Holding Company other than Heritage common stock as
9
<PAGE>
RP Financial, LC.
Page 1.2
required by the FDIC in all second step stock offerings of mutual holding
companies, the adjusted ownership ratios of the Mutual Holding Company and the
minority stockholders are equal to 67.88 percent and 32.12 percent,
respectively.
Plan of Conversion and Holding Company Reorganization
- -----------------------------------------------------
On July 1, 1997, the Board of Directors of the Bank and the Mutual Holding
Company adopted the Plan of Conversion and Agreement and Plan of Reorganization
(the "Plan") pursuant to which the Mutual Holding Company will convert from a
state chartered mutual holding company to a Washington chartered stock
corporation. In the reorganization process, to become effective concurrent with
the completion of the stock sale, which is targeted for the fourth calendar
quarter of 1997: the Bank will become a wholly-owned subsidiary of the Holding
Company and the outstanding Minority Shares (32.12 percent of the outstanding
Heritage Common Stock as of the date hereof as adjusted pursuant to FDIC
requirements) will be converted into the Exchange Shares pursuant to the
Exchange Ratio. The Exchange Ratio will result in the holders of the
outstanding Minority Shares owning in the aggregate approximately the same
percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
Shares) as the percent of Heritage Common Stock owned by them in the aggregate
immediately before consummation of the Conversion and Reorganization, before
giving effect to any (i) payment of cash in lieu of issuing fractional Exchange
Shares and (ii) shares of Conversion Shares purchased by the Savings Bank's
stockholders in the Conversion Offerings. Other than shares of the Bank, the
only material asset of the Mutual Holding Company is approximately $120,000 of
cash that will be merged with the Bank's assets upon completion of the
reorganization.
Going forward, Heritage Financial will own 100 percent of the Bank's stock,
and the Bank will be Heritage Financial's sole subsidiary. Up to 50 percent of
the net proceeds received from the sale of common stock will be used to purchase
all of the then to be issued and outstanding capital stock of the Bank, with the
balance of the proceeds being retained by the Holding Company. At this time, no
other activities are contemplated for Heritage Financial other than the
ownership of the Bank, a loan to the employee stock ownership plan ("ESOP"), the
payment of quarterly dividends to shareholders, and investment of the cash
retained at the Holding Company in investment securities consistent with the
Bank's current investment practices and procedures. In the future, Heritage
Financial may repurchase shares, diversify its business possibly through
existing or newly-formed subsidiaries, through acquisitions or mergers of other
insured financial institutions as well as other related companies. There are
currently no arrangements, understandings or agreements regarding any such
acquisitions or mergers.
10
<PAGE>
RP Financial, LC.
Page 1.3
Strategic Overview
- ------------------
Throughout much of its corporate history, Heritage's strategic focus has
been that of a community oriented financial institution with a primary focus on
meeting the borrowing and savings needs of its local customers in the southern
Puget Sound area of Washington including primarily the Olympia area. In this
regard, Heritage has historically pursued a residential lending strategy typical
of a thrift institution with a moderate level of diversification into
residential construction lending, commercial real estate lending and mortgage
banking. However, owing to adverse market and interest rate conditions
prevailing in the last decade, Heritage's capital position was at relatively
modest levels (approximately 4 percent of assets in the late 1980s), hampering
the Bank's operating flexibility and overall profitability.
With the employment of Heritage's current managing officer in the latter
half of 1989, Heritage sought to build on its strengths and continued to
emphasize higher yielding construction loans as well as commercial real estate
and multi-family mortgage loans. Moreover, the Bank has been able to capitalize
on its secondary market operations and the mortgage banking operations,
substantially enhancing earnings during the refinancing boom of the early to mid
1990s and continuing to contribute to net income today.
More recently, the Bank has adopted strategies designed to further its
objectives of becoming a community bank. Such strategies have included
diversifying the loan portfolio with increased emphasis on building commercial
relationships. In this regard, Heritage is seeking to capitalize on the
substantial consolidation within the financial services industry in its market
wherein a number of the largest and most effective competitors in the commercial
banking arena have been acquired by other banking organizations headquartered
out of state (i.e., companies such as Key Bank and Wells Fargo have acquired
institutions formerly headquartered in the State of Washington). The foregoing
acquisition activity has led to (1) growth in the Bank's business customers as
they became dissatisfied with post-acquisition changes in fee structures, new
policies and procedures, staffing turnover, service and changes in customer
emphasis and (2) available commercial lenders with an established book of
business.
In view of the foregoing, Heritage has emphasized a business banking
program wherein it has employed experienced commercial lenders to originate
loans to small to medium sized businesses for various purposes such as working
capital and/or inventory or receivables financing (the commercial loans are
typically secured by real estate). The Bank has employed seven commercial loan
officers since commencing the program in 1993, including the employment of a
senior credit officer, and the growth of the commercial loan portfolio since
1993 is the primary factor leading to the growth of the commercial loan
portfolio to approximately $39 million today. The Bank has sought to expand the
commercial loan portfolio throughout the market area but has focused on Pierce
County (i.e., the Tacoma market) which is larger and where its
11
<PAGE>
RP Financial, LC.
Page 1.4
commercial lenders have experience and contacts. On the liability side, the Bank
has successfully sought to increase non-interest demand deposits and other
transaction accounts. The Bank continues to pursue deposit growth in the local
market area, with an emphasis on retail core deposits and, wherever possible,
demand deposits of the retail and commercial variety.
The Bank believes a large portion of the recent growth in commercial
lending is attributable to the book of business of recently employed commercial
lenders. Accordingly, the Bank expects a slowdown in the growth of commercial
loans as the "transfer" of the books of business to the Bank gives way to new
production.
Following the mutual holding company reorganization in 1994, the Bank
embarked on a growth and expansion strategy with the objectives of building the
franchise and leveraging newly raised capital. The above referenced business
banking strategy is one facet of Heritage's effort to expand and increase
earnings. Likewise, the Bank has sought to continue to expand construction and
residential mortgage lending operations. With regard to the residential
mortgage lending, Heritage typically sells most residential mortgage loans to
the secondary market on a servicing released basis to generate fee income. In
order to facilitate efforts to expand the Bank's franchise and earnings
capacity, Heritage has doubled the number of branches it operates to a total of
ten adding two branches in Thurston County in fiscal 1995, one branch in Pierce
County in fiscal 1996, and two more branches in Pierce County during fiscal
1997. Additionally, Heritage has constructed two new buildings to replace
outmoded existing structures in Thurston and Mason Counties.
The Bank's lending strategy, growth of loans/assets and increased
capitalization has led to growth in net interest income over the last several
years. At the same time, the recent significant investment in fixed assets and
staffing (particularly in the lending area) has been expensive in terms of
increased operating costs although management believes that the long term
benefits to Heritage's earnings capacity outweigh the near-term costs. As a
result, recent profitability has declined significantly from earlier levels.
The business plan of the Bank reflects a continuation of the current lending and
deposit strategies, with the additional capital raised in the second step
conversion being utilized to fund further growth.
The Mutual Holding Company's and the Bank's Board of Directors have
determined that a full conversion to stock form is an attractive business
strategy at this time for several reasons. First, it will provide the capital
necessary to improve the overall competitive position of the Bank in its market
area, enhancing the Bank's flexibility with regard to rates and services.
Second, the conversion is expected to provide the opportunity for expanded local
stock ownership which could enhance the Bank's financial success if local
shareholders consolidate their banking business with Heritage and promote the
Bank's products and services to other local residents. Third, the conversion is
expected to provide the Bank with greater flexibility to expand its
12
<PAGE>
RP Financial, LC.
Page 1.5
franchise via internal growth, branch purchases and de novo branching. The
additional capital will also provide additional capital for future acquisitions
although there are presently no specific plans for such activities.
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 Heritage Financial. Such funds will be
invested initially into short term liquidity investments consistent
with the Bank's current portfolio composition, and a loan to the
Bank's Employee Stock Ownership Plan ("ESOP") to fund stock purchases
in the conversion. Going forward, the Holding Company funds will be
utilized for various corporate purposes, including the payment of
regular dividends and possibly special dividends, possible repurchase
of common stock consistent with regulatory limitations and time
frames, and possible diversification through the purchase of other
operating entities or financial institutions.
o Heritage. The remaining 50 percent of the net proceeds of the
--------
conversion will be infused into the Bank in exchange for all of the
Bank's newly issued stock. Proceeds infused into the Bank will
initially be held in short-term cash and investments until the Bank is
able to redeploy the funds into loans receivable pursuant to the
underlying lending objectives of the Bank.
On a pro forma basis, Heritage will be in an overcapitalized position.
The Board of Directors has determined to pursue a strategy of controlled growth
in its southern Puget Sound markets in order to leverage capital and, over time,
to diversify Heritage's product lines in conjunction with the unique
opportunities presented by fundamental changes occurring with respect to the
Bank's market and the nature of the competition. Post-acquisition asset growth
is expected to be funded through internal deposit growth, additional branching
and, to a limited extent, borrowings. The Board recognizes that asset growth is
a long term strategy, however, and that the Bank will operate in the near term
in an overcapitalized position, leading to a below average return on equity.
Balance Sheet Trends
- --------------------
After the minority stock offering in 1994, Heritage embarked on a
controlled growth and expansion strategy which included internal growth and de
novo branching. The impact of this strategy is evidenced in the summary balance
sheet data set forth in Table 1.1, which shows that Heritage's total assets
increased from $179.2 million at the end of fiscal 1993 to $242.2 million at the
end of fiscal 1997, which reflects a 7.8 percent compounded annual increase.
Heritage's capital ratio increased significantly from 7.2 percent of assets as
of the end of fiscal 1993 to 10.6 percent as of the end of fiscal 1994, through
the retention of earnings and the completion of the stock offering in
conjunction with the formation of the mutual holding company. Subsequently,
Heritage's capital has increased significantly in dollar terms as a result of
the Bank's strong earnings, but only modestly as a percent of assets as a result
of interim growth of assets. As of June 30, 1997,
13
<PAGE>
Table 1.1
Heritage Bank
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
---------------------------------------------------------------------------
1993 1994 1995 1996
-------------------- ----------------- ----------------- -----------------
Amount Pct Amount Pct Amount Pct Amount Pct
------- ------- ------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($000) (%) ($000) (%) ($000) (%) ($000) (%)
Total Amount of:
Assets $179,246 100.0% $194,102 100.0% $204,897 100.0% $222,052 100.0%
Loans Receivable (net) 121,362 67.7% 123,258 63.5% 150,526 73.5% 160,038 72.1%
Loans Held for Sale 7,435 4.1% 4,110 2.1% 5,944 2.9% 6,993 3.1%
Mortgage-Backed Securities 16,987 9.5% 10,227 5.3% 7,465 3.6% 5,979 2.7%
Cash and Interest Bearing Deposits 17,876 10.0% 22,747 11.7% 10,038 4.9% 18,082 8.1%
Investment Securities 7,271 4.1% 22,795 11.7% 18,094 8.8% 15,292 6.9%
Deposits 153,226 85.5% 165,922 85.5% 174,797 85.3% 191,119 86.1%
FHLB Advances 0 0.0% 0 0.0% 0 0.0% 0 0.0%
Other Borrowed Funds 7,174 4.0% 4,100 2.1% 3,525 1.7% 0 0.0%
Stockholders' Equity 12,863 7.2% 20,662 10.6% 23,065 11.3% 25,633 11.5%
Number of Banking Offices 5 5 7 8
Full-Time Equivalent Employees 98 119 116 136
Non-Performing Assets 0.14% 0.05% 0.05% 0.02%
Allowance for Loan Losses/Loans 1.27% 1.32% 1.09% 1.11%
Avg. Int.-Earning Assets/Avg. Int.-Bearing Liab. 104.36% 106.14% 110.89% 110.51%
<CAPTION>
For the Fiscal Year Ended
June 30,
------------------------- Annual
1997 Growth
------------------------- Rate
Amount Pct Pct
----------- ---------- ------
($000) (%) (%)
<S> <C> <C>
Total Amount of:
Assets $242,164 100.0% 7.81%
Loans Receivable (net) 199,032 82.2% 13.16%
Loans Held for Sale 6,409 2.6% -3.64%
Mortgage-Backed Securities 5,159 2.1% -25.76%
Cash and Interest Bearing Deposits 7,587 3.1% -19.29%
Investment Securities 8,506 3.5% 4.00%
Deposits 209,781 86.6% 8.17%
FHLB Advances 890 0.4% N.M.
Other Borrowed Funds 0 0.0% -100.00%
Stockholders' Equity 27,714 11.4% 21.15%
Number of Banking Offices 10
Full-Time Equivalent Employees 145
Non-Performing Assets 0.05%
Allowance for Loan Losses/Loans 1.32%
Avg. Int.-Earning Assets/Avg. Int.-Bearing Liab 110.48%
____________________________
</TABLE>
(1) Ratios are as a percent of ending assets.
Source: Heritage's audited financial reports. RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.7
stockholders' equity equaled $27.7 million, or 11.4 percent of assets. All of
Heritage's capital consisted of tangible capital as of the fiscal year ended
June 30, 1997.
With the balance sheet growth realized by Heritage, the mixture of
interest-earning assets has also changed modestly as well. Loans receivable
comprise the largest segment of interest-earning assets, totaling $199.0
million, or 88.2 percent of total assets, as of June 30, 1997. The balance of
loans receivable reflects steady growth over the last five fiscal years, with
compounded annual growth equal to 13.2 percent. Furthermore, the growth of
loans has exceeded the increase in total assets largely reflecting the
redeployment of funds from cash, investments and mortgage-backed securities
("MBS") into whole loans. Additionally, in conjunction with growth realized in
the loan portfolio, the composition of the loan portfolio has changed as well
with commercial loans increasing in proportion to total loans. Notwithstanding
the reorientation of Heritage's operations to a more "bank like" operating
strategy, mortgage loans including loans secured by one-to-four family
properties, multi-family and commercial mortgages and properties under
construction continue to comprise in excess of 80 percent of total loans.
Commercial loans currently approximate 19.0 percent of total loans which
represents a significant increase from a balance of less than 1 percent of loans
at the end of fiscal 1993. Management's strategy in recent years has been to
improve net interest income and overall profitability through increasing the
loans/assets ratio.
In addition to portfolio loans, Heritage has maintained a portfolio of
loans classified as available for sale ("AFS") in connection with secondary
market activities. The balance of the AFS portfolio has fluctuated over the
last five fiscal years based on various factors including the level of interest
rates and the volume of loan originations. As of June 30, 1997, the balance of
loans held for sale totaled $6.4 million, equal to 2.6 percent of total assets,
comparable with prior year levels. As of June 30, 1997, the Bank was servicing
$19.2 million of loans for others, primarily on a non-recourse basis, an
increase/decrease from prior year levels, as the Bank has primarily been selling
loans on a servicing released basis over the last several years.
Heritage's investment securities equaled $8.5 million, or 3.5 percent of
total assets, as of June 30, 1997, while cash and interest bearing deposits
totaled $7.6 million, or 3.1 percent of assets. As of June 30, 1997, the cash
and investments portfolio consisted of cash, interest-earning deposits in other
financial institutions, and U.S. Treasury and agency obligations. Additionally,
MBS totaled approximately $5.2 million, or 2.1 percent of assets; the Bank has
not been an active purchaser of MBS and most of the securities in the portfolio
were purchased prior to 1993. The Bank's philosophy with respect to the
management of cash and investments has been to maintain the portfolio at
relatively modest levels in short- to intermediate-term high quality securities.
No major changes to the composition and practices with respect to the management
of the investment portfolio are anticipated over the near term and, accordingly,
the level of cash and investments is expected to remain at low to moderate
levels. The level of cash and investments is expected to increase initially
following conversion
15
<PAGE>
although it is management's expectation that such funds at the Bank level will
gradually be redeployed into lending activities.
Over the last five years, Heritage has primarily relied on retail deposits
raised through the branches, internal cash flows and retained earnings to fund
operations. Deposit balances have also realized moderate annual growth equal to
8.2 percent since fiscal year end 1993, partially facilitated by the opening of
five new retail branch offices since the beginning of fiscal 1995. In the
future, the Bank will be seeking to continue to increase retail deposits by
offering a competitive array of products and services, with the objective of
growing the deposit base in conjunction with the overall growth in its southern
Puget Sound markets. The employment of borrowed funds by Heritage has been
relatively limited over the last five fiscal years as the Bank has preferred to
build its franchise through the expansion of the retail deposit base.
Income and Expense Trends
- -------------------------
Heritage's earnings have been relatively strong over the last five fiscal
years, declining sharply in fiscal 1997. As detailed in Table 1.2, Heritage's
profitability reflected a growth trend from fiscal 1993 to fiscal 1996, as
reported earnings increased from $1.8 million, or 1.03 percent of average
assets, to $2.7 million, equal to 1.31 percent of average assets, reflecting:
(1) balance sheet growth; (2) limited asset quality problems; (3) net interest
income growth; and (4) strong revenues from the sale of loans into the secondary
market. Earnings diminished in fiscal 1997 to equal $2.3 million, equal to 0.98
percent of average assets, as a result of: (1) the special SAIF assessment,
$1.1 million; (2) higher operating expenses as a result of significant growth
and expansion including the employment of additional loan officers in connection
with the business banking program and opening of new branch offices; and (3)
reduction in the amount of gains on the sale of loans relative to the levels
reported in fiscal 1996, reflecting reduced volume and lower ratio of gain per
dollar of loans sold.
Heritage's recent earnings strength is largely attributable to its four
prong lending strategy which focuses on: (1) construction lending which
provides high yielding, short-term assets; (2) portfolio mortgage lending; (3)
commercial lending in conjunction with the recently implemented business banking
strategy; and (4) secondary market operations, where Heritage originates loans
for resale generally on a servicing released basis. The foregoing operating
strategies have been successful for the Bank due to management's ability to
maintain asset quality while seeking to generate higher yields, facilitated by
the benefits of local banking consolidation.
The impact of the Bank's operating strategy is evidenced in the summary
statement of operations for the last five fiscal periods set forth in Table 1.2.
Net interest income earned by Heritage reached a recent
16
<PAGE>
Table 1.2
Heritage Bank
Historical Income Statement
(Amount and Percent of Average Assets) (1)
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
-------------------- ----------------- -----------------
1993 1994 1995
-------------------- ----------------- -----------------
Amount Pct Amount Pct Amount Pct
0 (%) 0 (%) 0 (%)
<S> <C> <C> <C> <C> <C> <C>
Interest Income $14,249 7.95% $13,520 7.15% $15,223 7.81%
Interest Expense (7,886) -4.40% (6,732) -3.56% (6,996) -3.59%
------- ------ ------- ------ ------- ------
Net Interest Income $ 6,363 3.55% $ 6,788 3.59% $ 8,227 4.22%
Provision for Loan Losses (926) -0.52% 0 0.00% 0 0.00%
------- ------ ------- ------ ------- ------
Net Interest Income after Provisions $ 5,437 3.03% $ 6,788 3.59% $ 8,227 4.22%
Other Non-Interest Income 819 0.46% 922 0.49% 1,019 0.52%
Operating Expense (6,178) -3.45% (7,421) -3.92% (7,425) -3.81%
------- ------ ------- ------ ------- ------
Net Operating Income $ 78 0.04% $ 289 0.15% $ 1,821 0.93%
Gains on the Sale of Loans 3,829 2.14% 3,097 1.64% 1,665 0.85%
Special SAIF Assessment 0 0.00% 0 0.00% 0 0.00%
Gains on the Sale of Premises 0 0.00% 0 0.00% 356 0.18%
------- ------ ------- ------ ------- ------
Non-Operating Income/Expense $ 0 0.00% $ 0 0.00% $ 356 0.18%
Net Income Before Tax $ 3,907 2.18% $ 3,386 1.79% $ 3,842 1.97%
Income Taxes (2,061) -1.15% (1,154) -0.61% (1,308) -0.67%
------- ------ ------- ------ ------- ------
Net Income (Loss) $ 1,846 1.03% $ 2,232 1.18% $ 2,534 1.30%
Adjusted Net Income Calculations
- --------------------------------
Net Operating Income $ 78 0.04% $ 289 0.15% $ 1,821 0.93%
Tax Effect (2) (27) -0.01% (98) -0.05% (619) -0.32%
------- ------ ------- ------ ------- ------
Adjusted Net Income $ 51 0.03% $ 191 0.10% $ 1,202 0.62%
Net Operating Income and Gains on Sale of Loans $ 3,907 2.18% $ 3,386 1.79% $ 3,486 1.79%
Tax Effect (2) (1,328) -0.74% (1,151) -0.61% (1,185) -0.61%
------- ------ ------- ------ ------- ------
Adjusted Net Income $ 2,579 1.44% $ 2,235 1.18% $ 2,301 1.18%
Efficiency Ratio
Excluding Gains on the sale of Loans 86.02% 96.25% 80.30%
Including Gains on the sale of Loans 56.11% 68.67% 68.05%
Effective Tax Rate 52.75%(3) 34.08% 34.04%
<CAPTION>
For the Fiscal Year Ended June 30,
----------------- -----------------
1996 1997
----------------- -----------------
Amount Pct Amount Pct
0 (%) 0 (%)
<S> <C> <C> <C> <C>
Interest Income $16,875 7.97% $18,512 8.00%
Interest Expense (8,543) -4.04% (9,000) -3.89%
------- ------ ------- ------
Net Interest Income $ 8,332 3.94% $ 9,512 4.11%
Provision for Loan Losses 0 0.00% 270 0.12%
------- ------ ------- ------
Net Interest Income after Provisions $ 8,332 3.94% $ 9,782 4.22%
Other Non-Interest Income 1,249 0.59% 1,257 0.54%
Operating Expense (8,422) -3.98% (10,016) -4.33%
------- ------ ------- ------
Net Operating Income $ 1,159 0.55% $ 1,023 0.44%
Gains on the Sale of Loans 3,049 1.44% 2,006 0.87%
Special SAIF Assessment 0 0.00% (1,089) -0.47%
Gains on the Sale of Premises 0 0.00% 84 0.04%
------- ------ ------- ------
Non-Operating Income/Expense $ 0 0.00% $(1,005) -0.43%
Net Income Before Tax $ 4,208 1.99% $ 2,024 0.87%
Income Taxes (1,435) -0.68% 245 0.11%
------- ------ ------- ------
Net Income (Loss) $ 2,773 1.31% $ 2,269 0.98%
Adjusted Net Income Calculations
- --------------------------------
Net Operating Income $ 1,159 0.55% $ 1,023 0.44%
Tax Effect (2) (394) -0.19% (348) -0.15%
------- ------ ------- ------
Adjusted Net Income $ 765 0.36% $ 675 0.29%
Net Operating Income and Gains on Sale of Loans $ 4,208 1.99% $ 3,029 1.31%
Tax Effect (2) (1,431) -0.68% (1,030) -0.44%
------- ------ ------- ------
Adjusted Net Income $ 2,777 1.31% $ 1,999 0.86%
Efficiency Ratio
Excluding Gains on the sale of Loans 87.90% 93.01%
Including Gains on the sale of Loans 66.68% 78.40%
Effective Tax Rate 34.10% -12.10%(4)
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 34 percent throughout periods shown.
(3) Excluding the $730,000 deferred tax liability established in fiscal 1993,
the effective tax rate would have approximated 34.1 percent.
(4) Excluding the reversal of the deferred tax liability of $938,000, the
effective tax rate would have equaled 34.2 percent.
Source: Heritage's prospectus and audited financial reports. RP Financial
calculations.
<PAGE>
historical high in fiscal 1997, totaling $9.5 million, or 4.11 percent of
average assets. The Bank generates relatively strong net interest income, due
both to higher asset yields and above average capitalization, coupled with a
comparatively low cost of funds (see Exhibit I-3 for detail regarding the Bank's
yield-cost spreads). The Bank's relatively strong net interest income ratio,
averaging over 400 basis points on average assets over the last three fiscal
years, has been supported by the following factors: (1) the Bank's strong
capital position; (2) good asset quality; (3) modest reduction in the proportion
of lower yielding investment securities; and (4) the increasing diversification
of the loan portfolio into higher yielding high risk weight loans. The benefits
of the Bank's stronger asset yields have been offset, to an extent, by the
higher cost of funds since fiscal 1995.
The Bank's non-interest income has steadily increased over the last few
years, ranging from $0.82 million to $1.25 million since fiscal 1995,
principally due to growth, although the ratio has grown slightly due to
increased transaction accounts, equaling 0.54 percent of average assets in
fiscal 1997. Although Heritage has been an active seller of conforming
residential loans into the secondary market, most loans are sold on a servicing
released basis and the portfolio balance of loans serviced for others totaled
less than $20 million as of the end of fiscal 1997, with servicing income
representing approximately 6 percent of total other non-interest income.
Heritage's operating expenses have been subject to increase over the last
several years, both as measured in dollar terms and as a percent of average
assets. Specifically, operating expense have increased from $6.2 million,
equal to 3.45 percent of average assets, in fiscal 1993, to $10.0 million, equal
to 4.33 percent of average assets, in fiscal 1997. Heritage's operating
expenses are inflated relative to thrift industry averages by its
diversification into construction and commercial lending, as well as its
mortgage banking activities. Additionally, the Bank's operating expenses have
been subject to upward pressures owing to the doubling of Heritage's branch
offices to a total of ten over the last three fiscal years and the
implementation of the business banking strategy and the employment of a total of
seven additional commercial loan officers since 1993.
The increase in Heritage's operating expenses have been an important factor
in the reduction in the Bank's earnings from fiscal 1996 to fiscal 1997, as the
$1.6 million increase raised the operating expense ratio by 35 basis points.
Management believes the Bank is making the requisite investment in fixed assets
and personnel to realize growth in the Bank's franchise value and future
earnings over the longer term. Heritage expects that operating expenses will
continue to increase in the future as the Bank continues to grow and expand. In
this regard, management believes it will continue to open new branches over time
and/or acquire other branches or smaller financial institutions which will also
serve to increase operating expenses (no new branches or acquisitions are
planned at this time). Furthermore, Heritage expects to experience upward
pressure on expense levels due to inflation, the cost of stock based benefit
plans resulting from the second step conversion and the costs of an expanded
shareholder base.
18
<PAGE>
The Bank's gain on sale of loans has contributed on average 80 percent of
pre-tax income over the last five years and 99 percent during fiscal 1997. The
gains are influenced by the volume of loans originated for sale, but also the
market for loans. The gains on sale peaked in 1993 at $3.8 million (during a
high loan refinance period), and during the past year approximated $2.0 million.
Such gains are expected to remain a component of income, albeit a potentially
volatile source of income.
Non-operating gains and losses have also impacted Heritage's historical
earnings, particularly during the most recent fiscal year. For the fiscal year
ended June 30, 1997, net non-operating expense totaled $1.0 million, equal to
0.43 percent of assets, comprised of two components: (1) the special SAIF
assessment ($1.1 million); and (2) gains on the sale of fixed assets ($84,000).
From a valuation perspective, the special SAIF assessment and the gain on the
sale of fixed assets are clearly one-time non-recurring events.
We typically exclude gains and other non-operating items in computing the
efficiency ratio; although, in the Bank's case, since the mortgage banking
operations expense cannot be readily quantified, it is appropriate to also
consider the Bank's efficiency ratio incorporating the gains on sale of loans.
The Bank's rising efficiency ratio, computed in either fashion, clearly reflects
the impact of recent expansion.
Overall, Heritage's asset quality is relatively good and credit related
losses have been low, particularly given the level of commercial and
construction lending. For the twelve months ended June 30, 1997, Heritage
reported a loan loss recovery equal to $270,000, or 0.12 percent of average
assets. As of June 30, 1997, the Bank maintained valuation allowances of $2.8
million, equal to 1.32 percent of net loans receivable and reserve coverage as a
percent of non-performing assets was more than 20 times. It is anticipated that
valuation allowances will be established in future periods per the Bank's
adopted general reserve policy, and management will continue to assess the
adequacy of valuation allowances relative to the performance of its loan
portfolio on an ongoing basis. The Bank's current policy is to accrue $10,000
per month in valuation allowances.
The Bank reported an income tax benefit of $245,000, equal to 0.11 percent
of assets, for the twelve months ended June 30, 1997. The tax benefit is the
result of the reversal of a $938,000 deferred tax liability established at the
time of the mutual holding company reorganization for the potential recapture of
pre-1988 tax bad debt reserves. Based on legislation enacted in 1996, the Bank
was able to reverse this prior expense. Absent the reversal of the deferred tax
liability, Heritage would have recorded a $693,000 tax expense indicating an
effective tax rate of 34.24 percent. This adjusted effective tax rate is
comparable to previous years levels.
19
<PAGE>
Interest Rate Risk Management
- -----------------------------
Heritage manages interest rate risk primarily from the asset side of the
balance sheet. To control interest rate risk, Heritage has implemented several
strategies, including: (1) diversifying the loan portfolio into shorter-term
loans, most notably construction and commercial loans; (2) selling the majority
of long term residential mortgages originated into the secondary market on a
servicing released basis to generate fee income; (3) striving to fund operations
through comparatively low cost retail deposits; and (4) by building the balance
of lower-rate/fee-generating transaction accounts.
These strategies have served to increase the sensitivity of the Bank's
assets to changes in interest rates, lengthen the duration of liabilities and
reduced the Bank's reliance on net interest income for overall earnings. The
gap analysis set forth in Exhibit I-8 reflects the impact of the foregoing
strategies on the Bank's repricing structure. The gap measures indicate a
modest liability sensitive position with a cumulative gap-to-assets ratio equal
to negative 9.2 percent in the one year or less bucket and negative 1.1 percent
in the five year or less period. These measures indicate that net earnings
would be modestly exposed to downward pressures in a rising rate environment.
Lending Activities and Strategy
- -------------------------------
Heritage's lending strategy has been developed to take advantage of (1) the
Bank's historical strengths in the areas of permanent residential mortgage and
residential construction lending; (2) the relatively strong economy prevailing
in its markets; and (3) the recent trend toward consolidation of the banking
sector in its market which has alienated some customers of several of Heritage's
largest competitors and provided the Bank with the opportunity to employ
experienced commercial bankers.
Heritage's lending operations consist of four major segments as follows:
(1) construction lending which provides high yielding, short-term assets; (2)
portfolio mortgage lending; (3) commercial lending in conjunction with the
recently implemented business banking strategy; and (4) secondary market
operations in which Heritage originates loans for resale generally on a
servicing released basis. Such lending strategy is consistent with Heritage's
community bank orientation, as evidenced in the Bank's loan portfolio
composition (see Exhibits I-9). As of June 30, 1997, permanent mortgage loans
secured by 1-4 family properties totaled $103.4 million, or 49.7 percent of net
loans, and 1-4 family construction loans totaled $12.7 million, or 6.1 percent
of net loans. Together, 1-4 family construction and permanent loans comprised
55.8 percent of Heritage's total loan portfolio.
20
<PAGE>
Consistent with the Bank's community banking strategy, the Bank offers a
wide array of products and services and has diversified its loan portfolio with
mortgages secured by multi-family and commercial properties totaling $51.2
million, equal to 24.6 percent of loans. Commercial loans, which represents a
rapidly growing segment of the loan portfolio, equaled $39.4 million, or 19.0
percent of net loans, at the end of fiscal 1997. Consumer loans comprise a
relatively small portion of the loan portfolio. In the future, Heritage will
seek further diversification consistent with community bank operations,
including efforts to originate and service small business lending and deposit
relationships. In this regard, management will remain watchful of competitive
and economic conditions and will continue to seek to build its business banking
orientation. It is management's belief that the continued to development of the
business banking segment along with its traditional business lines including
mortgage and construction lending will enhance the Bank's profitability and
consistency of earnings.
Heritage originates both fixed rate and adjustable rate 1-4 family loans
with the majority of loans originated for resale into the secondary market on a
servicing released basis. It is the Bank's current practice to only retain the
following residential mortgage loans: (1) loans which are non-conforming to the
secondary market guidelines (non-conforming due to some non credit related
factor); (2) construction/permanent loans (i.e., construction loans on pre-sold
or custom loans which convert to a permanent loan at the end of the construction
period); and (3) loans to customers with a comprehensive relationship with
Heritage ("relationship loans"). Heritage offers a full line of fixed and
adjustable rate loans with a broad range of rates, maturities and repricing
structures so as to be competitive with the other local financial institutions,
mortgage bankers and brokers offering similar loan products. Residential loans
originated for resale are generally underwritten to conform to agency secondary
market standards, with loans sold through various private conduits as well as
the Federal Home Loan Mortgage Corporation ("FHLMC") and Federal National
Mortgage Association ("FNMA") depending upon pricing.
In order to provide the necessary incentives and to track the profitability
of the residential mortgage operations, Heritage has informally structured its
residential mortgage lending operations into a divisional structure (there is no
distinct corporate entity). Currently, the Heritage Mortgage Division employs a
total of 10 commissioned mortgage originators who operate from two mortgage
centers (in Olympia, Thurston County and Lakewood, Pierce County).
Additionally, branch managers are also provided more modest financial incentives
for originating residential mortgages. Management believes that the division
structure has been successful in enhancing origination volume and overall
revenues as gains on the sale of loans have been a substantial contributor to
the Bank's net income over the last five fiscal years.
Construction lending is a key aspect of Heritage's overall operating
strategy and has enabled the Bank to more actively participate in the growth
occurring in its market, shorten the average duration of assets, and
21
<PAGE>
has helped to support the Bank's yields albeit at the expense of accepting a
somewhat higher level of credit risk. The majority of the Bank's construction
lending is in Thurston, Pierce and Mason Counties. The Bank originates both
loans on pre-sold homes, as well as builder or "spec" houses, with the amount of
spec loans outstanding at any one time generally in the range of 80 to 125. For
pre-sold homes, the Bank makes either fixed rate or ARM construction loans at
terms comparable to its permanent loan products with a few exceptions: (1) loans
are interest-only for the construction period; and (2) for fixed rate
construction loans, the rate is set at an approximate 75 basis point premium to
the permanent fixed rate loan rate to compensate the Bank for interest rate risk
over the construction phase of the loan. The Bank has had good historical
experience with the credit quality of its pre-sold construction loans.
The majority of spec construction loans are made to a group of
approximately 12 builders active in the Thurston, Pierce and Mason County
markets. Spec construction loans are generally variable rate interest only
loans with rates of Prime plus either 1.5 or 2.0 percent, made with a term of up
to twelve months. Heritage has taken a number of steps to minimize the risks
inherent in construction lending. Spec loans are secured by individual houses
(i.e., no line of construction credit lines). Funding of construction loan
draws is carefully controlled, monitored by experienced loan officers.
Additionally, construction lending is subject a number of limitations pursuant
to the Bank's loan underwriting guidelines, including a maximum loan-to-value
ratio of 75 percent.
In conjunction with its construction lending, the Bank has also made land
development loans. Land loans are typically limited to local developers with
whom the Bank has established relationships for the purpose of developing
residential subdivisions (i.e., installing roads, sewers, water and other
utilities), as well as loans to individuals to build lots. Land loans are
secured by a lien on the property and made with a variety of fixed and
adjustable terms and are made with maximum loan-to-value ratios of 75% of the
discounted future value of the property. The Bank may finance the acquisition
and development of up to 180 lots and all such loans will be secured by
properties in Thurston and Mason Counties only and the Bank seeks to obtain
personal guarantees from the principals of its corporate borrowers.
Heritage has and will continue to make loans for the purchase or financing
of various types of multi-family and commercial real estate loans. Heritage's
commercial real estate and multi-family loan portfolios are largely comprised of
loans originated in-house and secured by properties in the primary market in the
southern Puget Sound region. At June 30, 1997, the balance of multi-family and
commercial mortgage loans equaled $51.2 million, 24.6 percent of net loans.
Multi-family and commercial real estate loans are secured by apartments (up to
25 units generally) and other structures such as strip malls, retail shops and
various other properties. Most income producing property loans are for the
purpose of financing existing structures rather than new construction. The
typical balance of a multi-family or commercial mortgage loan ranges between
22
<PAGE>
$300,000 to $1.5 million; the largest loan outstanding currently had a principal
balance of $3.1 million. Management typically limits the maximum loan-to-value
ratio for a newly-constructed building to 75 percent and 65 percent for an
existing structure. Consistent with the broad product line appropriate for a
community bank, Heritage's lending activity is expected to continue to include
multi-family and commercial real estate lending.
Commercial loans comprise the most rapidly growing segment of the
commercial loan portfolio and equaled approximately 19.0 percent of total loans
as of June 30, 1997. Heritage established a business banking department in
fiscal 1993 head by an individual with significant commercial lending experience
with other local commercial banks. The Bank offers commercial loans to sole
proprietorships, professional partnerships and various other small businesses.
The types of commercial loans offered include lines of credit, business term
loans and Small Business Administration loans ("SBA"). Most line of credit and
business term loans are secured by real estate and other assets such as
inventory or accounts receivable. Unsecured business loans are generally
reserved for customers with very strong financial conditions and a demonstrated
capacity to repay their obligations.
As discussed previously, residential mortgage loans originated for resale
have comprised a significant portion of the Bank's loan volume and the related
gains have contributed to earnings. The impact of loan volume on earnings and
the magnitude of Heritage's secondary market operations is reflected in the
schedule below.
<TABLE>
<CAPTION>
Year ended June 30,
1995 1996 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Gains on sale of loans, net $ 1,665 $ 3,049 $ 2,006
One to four family residential mortgage loans:
Originated 93,564 140,232 104,145
Sold 63,261 119,544 87,003
Gains/Loans sold 2.63% 2.55% 2.31%
Loans serviced for others $ 28,647 $ 23,257 $ 19,162
</TABLE>
Asset Quality
- -------------
Heritage's asset quality has been strong over the last five fis cal years,
notwithstanding the Bank's increasing emphasis on higher risk weight lending.
Specifically, as reflected in Exhibit I-11, the balance of NPAs in H eritage's
portfolio has fluctuated at relatively modest levels since 1993, and equaled
$133,000, or 0.05 percent of assets, as of June 30, 1997. As of June 30, 1997,
Heritage's NPAs consisted of solely of non-accrual loans. At that date, the
Bank's loan loss reserves equaled $2.752 million, or 1.32 percent of the net
loan
23
<PAGE>
portfolio and reserve coverage as a percent of NPAs was more than 20 times.
These credit quality ratios, coupled with the strong local economy, reflect
relatively good credit quality and low risk of credit losses at the Bank. At the
same time, the relatively rapid growth of the commercial loan portfolio and the
resultant lack of seasoning coupled with the relatively high level of
construction loans as well as multi-family and commercial mortgage loans may
increase the Bank's relative risk exposure in comparison to other savings
institutions with a more traditional operating strategy.
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Bank's primary source of funds, and as
of June 30, 1997, totaled $209.8 million, which reflects 8.2 percent compounded
annual growth since the end of fiscal 1993. As discussed previously, following
the mutual holding company reorganization in 1994, Heritage embarked on a growth
and expansion strategy with the objective of building the franchise and
leveraging capital. Growth and entry into new markets has been facilitated by
the opening of five new offices which increased the number of retail branches to
a total of ten. Management believes that Heritage's deposit pricing places the
Bank in the middle of the range of the local competition. Notwithstanding
pricing deposits "at the market", Heritage has been successful in growing its
deposit base as a result of economic and population growth in the local markets
and attracting new customers as a result of consolidation in the local banking
industry.
Lower costing savings and transaction accounts comprised approximately 40
percent of Heritage's deposits, totaling $83.0 million at June 30, 1997. The
proportion of savings and transaction accounts reflects a modest increase since
fiscal 1993 partially as a result of implementation of the business banking
program which has resulted in the generation in a modest level of commercial
deposit accounts. The balance of the deposit base is comprised of CDs, the
majority of which have remaining maturities of one year or less.
As of June 30, 1997, borrowed funds totaled only $890,000 and consisted
solely of FHLB advances. The Bank utilizes borrowings primarily for the purpose
of generating additional liquidity and typically employs either FHLB advances or
reverse repurchase agreements.
Subsidiary
- ----------
Heritage has two wholly-owned subsidiaries, Sound Service ("Sound Service")
Associates, Inc., and Heritage Capital Corporation ("Heritage Capital"). Sound
Service's operations consist of the sale of tax-deferred annuities, mutual funds
and other securities. Heritage Capital is currently inactive.
24
<PAGE>
Legal Proceedings
- -----------------
Other than the routine legal proceedings that occur in the Bank's ordinary
course of business, the Bank is not involved in litigation which is expected to
have a material impact on the Bank's financial condition or operations.
25
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Heritage conducts operations out of its headquarters office in Olympia,
Washington. The City of Olympia is the county seat of Thurston County and is
also the Capitol of the State of Washington. Olympia is a deep-water port
located at the southern end of the Puget Sound located approximately 60 miles
south of Seattle and 115 miles north of Portland, Oregon. In addition to its
main office in Olympia, the Bank operates a branch in West Olympia as well as
three other offices in Thurston County (two in Lacey and one in Tumwater). The
Bank has extended its market area in contiguous areas along the southern Puget
Sound by opening three branches in Tacoma (Pierce County) and one office in
Shelton (Mason County). Additionally, Heritage operates two loan centers; one
each in Olympia and Tacoma.
The market environment in Heritage's three county market area is relatively
diverse. Mason County to the northwest of Olympia is the most rural of the
Bank's markets and the income base is centered around the timber and forest
products industries. Thurston County including the Olympia area is heavily
reliant on government employment due to the presence of the state capitol and
the area serves as headquarters for many state governmental agencies. To a
lesser extent, the Thurston County market also derives a portion of its income
from the trade and services sector. The Tacoma market (Pierce County) has
participated to a greater extent in the strong economic growth achieved within
the Seattle metropolitan area, led by the electronics, aerospace and
shipping/transportation sectors. Additionally, Pierce County is home to two
large military bases (McChord Air Force Base and Fort Lewis Army Base) which
have increased in size, notwithstanding the general downsizing trend experienced
within the U.S. armed forces.
Understanding the key characteristics and trends prevailing in Heritage's
market is important to the valuation as they affect the relative risk level of
an investment in the Bank's stock as well as its ability to generate future
earnings and sustain earnings growth. Critical areas to be assessed included
demographic statistics and the related growth trends, the nature and stability
of the local economy including an analysis of major industries and/or employers
and income and employment trends and the nature and intensity of the competitive
environment. The focus of the analysis will be on the three counties where
Heritage operates branch offices including Thurston, Pierce and Mason Counties,
with particular emphasis on Thurston County given the relatively large
proportion of the Bank's overall business generated there (approximately three
quarters of Heritage's total deposits are in the main office or the four
Thurston County branches).
<PAGE>
RP Financial, LC.
Page 2.2
Market Area Demographics
- ------------------------
The following section presents demographic details regarding Heritage's
market area. Exhibit II-2 displays comparative demographic trends for all three
counties where Heritage operates branch offices and this data is summarized in
Table 2.1. Data for the State of Washington and the United States has been
provided for comparative purposes.
Demographic data including that pertaining to total population and
households provides evidence of several noteworthy trends. First, the
population base of the Pacific Northwest region in general, including the State
of Washington experienced relatively rapid growth through the 1980s, with
compounded annual growth rates exceeding the national average by 81 percent.
Relatively high growth rates for the region have resulted from a variety of
factors including growth of trade with Japan and other Asian nations, a
perceived attractive lifestyle, and a relatively moderate cost of living
(particularly in comparison to California), among other factors.
Such broad regional trends have influenced demographic trends in the Bank's
market as well. Since 1960, Thurston County has experienced a rapid in-
migration with the centralization of state offices in Olympia in the 1960s, the
impact of Fort Lewis and the establishment of Evergreen State College have all
been contributing factors to the growth. Relatively strong growth trends have
continued in Thurston County since 1990, particularly in the eastern areas of
the county which are proximate to the Tacoma market. The total population of
Thurston County was estimated to equal approximately 202,000, which reflects a
25 percent increase from the beginning of the decade and a 3.8 percent
compounded annual growth rate, which is well above the average for the nation
and the State of Washington. Thurston County's relatively inexpensive housing
costs relative to the larger Tacoma market have been a factor in the relatively
strong population growth reported during the 1990s.
The population of Pierce County has also been strong, albeit at somewhat
lower levels than have been reported for Thurston County. However, the
relatively urban nature of Pierce County is evidenced by the population total of
666,000 as of 1997, which reflects 13.7 percent growth since the beginning of
the decade and a 2.2 percent compounded annual rate of growth. Mason County is
a relatively rural market with approximately 50,000 residents currently.
Although population and household growth rates have been high, the absolute
level of growth has been relatively modest.
Income levels in Heritage's market are generally below the state and
national averages. Specifically, per capita income equaled $15,967 and $16,543
in Thurston and Pierce Counties as compared to $17,434 and $18,100 for the state
and U.S. Median household income compared more favorably to the state and
national
<PAGE>
Table 2.1
Heritage Bank
Summary Demographic Data
<TABLE>
<CAPTION>
Year Growth Rate Growth Rate
--------------------------------- 1990-97 1997-2002
1990 1997 2002 ------- ---------
---- ---- ----
<S> <C> <C> <C> <C> <C>
Population (000)
- ---------------
UNITED STATES 248,710 267,805 281,209 1.2% 1.0%
WASHINGTON 4,867 5,622 6,143 2.4% 1.8%
THURSTON COUNTY 161 202 229 3.8% 2.6%
MASON COUNTY 38 50 58 4.5% 3.0%
PIERCE COUNTY 586 666 721 2.2% 1.6%
Households (000)
- ---------------
UNITED STATES 91,947 99,020 104,001 1.2% 1.0%
WASHINGTON 1,872 2,150 2,343 2.3% 1.7%
THURSTON COUNTY 62 77 88 3.7% 2.6%
MASON COUNTY 15 19 22 4.5% 3.1%
PIERCE COUNTY 215 244 264 2.1% 1.6%
Median Household Income ($)
- --------------------------
UNITED STATES $29,199 $36,961 $42,042 4.0% 2.6%
WASHINGTON 31,938 36,073 38,812 2.0% 1.5%
THURSTON COUNTY 31,491 35,401 38,217 2.0% 1.5%
MASON COUNTY 24,708 29,560 33,765 3.0% 2.7%
PIERCE COUNTY 30,043 36,868 41,933 3.5% 2.6%
Per Capita Income - ($)
- ------------------------
UNITED STATES $13,179 $18,100 ---- 4.5% N/A
WASHINGTON 14,455 17,434 ---- 3.8% N/A
THURSTON COUNTY 13,825 15,967 ---- 2.9% N/A
MASON COUNTY 11,095 13,979 ---- 4.7% N/A
PIERCE COUNTY 12,647 16,543 ---- 5.5% N/A
</TABLE>
<TABLE>
<CAPTION>
1997 Age Distribution(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
- ----------------------- ---------- ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 21.7 13.6 31.4 20.5 12.7 34.8
WASHINGTON 22.0 13.7 30.9 21.5 11.9 35.1
THURSTON COUNTY 21.3 14.2 29.9 22.7 11.9 35.7
MASON COUNTY 19.5 12.2 26.1 24.3 17.9 40.2
PIERCE COUNTY 23.0 14.6 31.5 19.9 10.9 33.1
</TABLE>
<TABLE>
<CAPTION>
Less Than $15,000 to $25,000 to $50,000 to $100,000 to
1997 HH Income Dist.(%) $15,000 25,000 50,000 100,000 150,000 $150,000+
- ---------------------- ---------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 17.7 14.4 33.5 26.5 5.4 2.6
WASHINGTON 16.8 15.4 36.1 25.7 4.2 1.8
THURSTON COUNTY 15.7 16.5 38.7 25.3 3.0 0.8
MASON COUNTY 21.2 18.6 39.1 18.3 2.1 0.7
PIERCE COUNTY 15.6 15.0 37.0 26.9 4.1 1.3
</TABLE>
Source: CACI.
<PAGE>
RP Financial, LC.
Page 2.4
averages with income levels equaling $35,401 and $36,868 in Thurston and Pierce
Counties, respectively, as compared to $36,073 for the State of Washington and
$36,961 for the U.S.
Economy
- -------
Historically, the economy of Heritage's markets have been based on timber
and other natural resources. Logging and ancillary industries have
traditionally provided a substantial portion of earnings with the area's
renowned forests providing a large supply of relatively inexpensive and
accessible wood. Commencing in the 1960s, the government of the State of
Washington expanded significantly and many government operations were
centralized in Olympia. Furthermore, Fort Lewis and McChord Air Force Base have
continued to play an important role in the local economy as a result of the
large number of military personnel living off base and as a result of
significant number of civilian jobs which have been created. More recently,
economic growth has been the result of the growth of regional, national and
international trade, continued expansion of Boeing (primarily affecting the
Pierce County market) and growth of the high-tech sector.
With respect to the high tech sector, Intel Corporation, the world's
largest manufacturer of computer chips has begun the first stages of a massive
manufacturing and research center in Dupont (Pierce County) near the Thurston
County border. The plant will eventually employ 6,000 people directly, and it
will create an estimated 16,000 additional support industry jobs. The
Matsushita Electric Company has announced its intention to invest $600 million
to build a new production line at its Puyallup plant, adding approximately 200
to 300 jobs in the process.
Table 2.2 provides a list of the largest employers in the three counties
where Heritage maintains branch offices. Notwithstanding the diversification of
the economy which has been observed over the last several decades, the county,
state and federal governments continue to be a major source of employment within
the Bank's three county market.
<PAGE>
RP Financial, LC.
Page 2.5
Table 2.2
Heritage Bank
Major Employers in Heritage Bank's Markets
<TABLE>
<CAPTION>
Employer Activity Employees
- -------- -------- ---------
<S> <C> <C>
Thurston County
- ---------------
Washington State Employees Government 21,700
Local Public Education Education 5,700
Local Government (Exc. Education) Government 2,800
St. Peter Hospital Health Care 1,969
Federal Government Government 1,000
The Evergreen State College Education 592
Pierce County
- -------------
U.S. Army (Fort Lewis) Government 25,400
U.S. Air Force (McChord Air Force Base) Government 5,400
Tacoma Public Schools Education 3,638
Madigan Army Medical Center Government 2,900
Pierce County Government 2,600
Multi-Care Medical Center Health Care 2,457
Mason County
- ------------
Simpson Timber Company Lumber, Plywood 918
Shelton School District Education 650
Washington Corrections Center Correctional Facility 625
Little Creek Casino Gambling Establishment 388
Mason County Government 365
Mason General Hospital Health Care 310
</TABLE>
Source: Local chamber of commerce and economic development agencies.
Unemployment
- ------------
Data pertaining to unemployment rates reflect the relatively strong economy
prevailing in Thurston and Pierce Counties which are below the state and
national averages. Unemployment rates are comparatively higher in Mason County
although management believes that many of those counted as unemployed in these
areas are able to earn income on a contract or day basis in logging or from
other sources.
<PAGE>
RP Financial, LC.
Page 2.6
Table 2.3
Heritage Bank
Market Area Unemployment Trends(1)
<TABLE>
<CAPTION>
June 1996 June 1997
Region Unemployment Unemployment
- ------ ------------- -------------
<S> <C> <C>
United States 5.5% 5.2%
Washington 6.3 4.6
Thurston County 6.3 4.9
Pierce County 6.4 4.7
Mason County 7.7 6.6
</TABLE>
(1) Unemployment rates are not seasonally adjusted.
Source: Bureau of Labor Statistics.
Competition
- -----------
Forecasts of increases in population, households and median household
income should support deposit growth by financial institutions operating in the
market area. Table 2.4 display deposit trends for savings institutions and
commercial banks in the markets served by Heritage. The data indicates that
since 1994 for Washington overall, commercial bank deposits grew at the expense
of thrift deposits, with commercial bank deposits increasing at a 3.4 percent
annual rate while deposits at savings institutions declined slightly. Overall,
the thrift institution market share declined from 32.2 percent as of June 30,
1994, to 30.6 percent as of June 30, 1996. The deposit markets in the counties
encompassing Heritage's markets reflect dissimilar trends as deposits at savings
institutions generally increased at a modestly greater pace than commercial
banks resulting in slightly increased market share.
Overall, the market area is extremely competitive due to the number and
size of financial institutions that operate within it. Additionally, not only
does Heritage face substantial competition from large banks and savings
institutions such as Washington Mutual Savings Bank, Wells Fargo, Key Corp and
SeaFirst. Since 1994, Heritage has been seeking to actively grow both through
internal growth through existing branches and by acquiring or building new
branches. The Bank's efforts to grow through de novo branching have been
relatively successful and most of the growth effort has been directed toward
increasing market share in the Tacoma market.
Despite the high number of lenders in the Olympia market area, many of whom
are substantially larger than Heritage, the Bank in recent years has
consistently ranked at the top residential mortgage lender in terms
<PAGE>
-------------------------
Table 2.4
Heritage Bank
Deposit Summary
-------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
As of June 30,
--------------------------------------------------------------------------
1994 1996
-------------------------------------- ------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
-------- ------ -------- -------- ------ -------- -----------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
A. Deposit Summary
- ------------------
State of Washington $50,635,995 100.0% 1,733 $52,893,344 100.0% 1,745 2.2%
Commercial Banks 34,312,879 67.8% 1,147 36,693,703 69.4% 1,168 3.4%
Savings Institutio 16,323,116 32.2% 586 16,199,641 30.6% 577 -0.4%
Thurston County $ 1,264,863 100.0% 63 $ 1,373,348 100.0% 68 4.2%
Commercial Banks 774,351 61.2% 35 813,204 59.2% 35 2.5%
Savings Institution 490,512 38.8% 28 560,144 40.8% 33 6.9%
Heritage Bank (1) 132,338 27.0% 3 145,418 26.0% 5 4.8%
Heritage Bank (2) 10.5% 10.6%
Mason County $ 237,084 100.0% 12 $ 252,398 100.0% 13 3.2%
Commercial Banks 192,771 81.3% 8 203,950 80.8% 9 2.9%
Savings Institution 44,313 18.7% 4 48,448 19.2% 4 4.6%
Heritage Bank (1) 18,805 42.4% 1 23,275 48.0% 1 11.3%
Heritage Bank (2) 7.9% 9.2%
Pierce County $ 5,337,616 100.0% 198 $ 4,545,273 100.0% 193 -7.7%
Commercial Banks 3,621,365 67.8% 135 3,702,053 81.4% 134 1.1%
Savings Institution 1,716,251 32.2% 63 843,220 18.6% 59 -29.9%
Heritage Bank (1) 16,042 0.9% 1 24,225 2.9% 2 22.9%
Heritage Bank (2) 0.3% 0.5%
(1) Percent of S&L deposits.
(2) Percent of total deposits.
Source: FDIC; OTS
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
RP Financial, LC.
Page 2.8
of loans closed in Thurston County with a market share approximating 15 percent.
The Bank is also a significant competitor with respect to the residential
construction loan market.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Bank's operations versus a group of
comparable savings institutions (the "Peer Group") selected from the universe of
all publicly-traded savings institutions. The basis of the pro forma market
valuation of the Bank is provided by these institutions. Factors affecting the
Bank's pro forma value such as financial condition, credit risk, interest rate
risk, loan composition and recent operating results can be readily assessed in
relation to the Peer Group. Current market pricing of the Peer Group, subject
to appropriate adjustments to account for differences between Bank and the Peer
Group, will then be used as a basis for the pro forma valuation of Bank's to-be-
issued common stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have also excluded from the Peer Group those
companies under acquisition, and recent conversions, since their pricing ratios
are subject to distortion and/or do not have a seasoned trading history. We have
considered only "fully converted" institutions, i.e., no mutual holding company
subsidiaries, because on a pro forma basis after the second step conversion
Heritage will be a fully converted institution.
From the universe of publicly-traded thrifts, we selected ten institutions
with characteristics similar to those of Bank. In the selection process, we
applied two primary "screens" to the universe of all public companies:
o SCREEN #1. SAVINGS INSTITUTIONS BASED AND OPERATING IN THE STATE OF
WASHINGTON. Given the importance of geographic location and
similarity of markets incorporated into investor's investment
decisions, we analyzed all Washington headquartered publicly-traded
savings institutions for possible inclusion in Heritage's valuation
Peer Group. Exhibit III-2 provides summary financial and pricing
characteristics of all full stock publicly-traded savings institutions
based in the State of Washington. Four companies, excluding Riverview
Savings Bank which is also currently in mutual holding company form,
had operations and markets sufficiently similar to warrant their
inclusion in the Peer Group including First Mutual Savings Bank
(FMSB), First Savings Bank of Washington (FWWB), Horizon Financial
Corp, and Interwest Savings Bank (IWBK). State of Washington savings
institutions excluded from the Peer Group are as follows:
- Cascade Savings Bank owing to its material pending acquisition of a
local commercial bank;
<PAGE>
RP Financial, LC.
Page 3.2
- FirstBank Corp. of Clarkston, WA, owing to its status as a recent
conversion (July 1997);
- Sterling Financial Corp. owing to its highly leveraged position
(4.10 percent equity/assets) and its relatively complex capital
structure which includes preferred stock, which distorts the
pricing ratios;
- Washington FS&LA due to its larger size ($5.8 billion of assets)
and its unique operating strategy wherein the product line is
relatively limited (i.e., Washington Federal only recently
instituted checking accounts) and the primary asset investment is
long-term fixed rate mortgages and the operating expense ratio is
among the lowest in the industry; and
- Washington Mutual, Inc. as result of its significantly greater size
($90 billion) and recently completed acquisition of Great Western
Bank of California (the acquisition was completed as of July 1,
1997, making Washington Mutual the largest savings institution in
the country).
o SCREEN #2. NORTHWESTERN (OUTSIDE THE STATE OF WASHINGTON) AND WESTERN
INSTITUTIONS, WITH ASSETS OF $100 MILLION TO $2 BILLION, EQUITY-TO-
ASSETS RATIOS BETWEEN 10.0 PERCENT AND 25.0 PERCENT, AND POSITIVE CORE
EARNINGS. Four companies met the criteria for Screen #2 and were
included in the Peer Group including First Colorado Bancorp, Klamath
First Bancorp of Oregon, WesterFed Financial Corp. of Montana, and
United Financial Corp. of Montana. Exhibit III-3 details the
financial characteristics of all publicly-traded Northwestern and
Western institutions.
o The above selection criteria yielded eight peer group companies, two
short of the minimum required by the appraisal guidelines. Therefore,
it was necessary to select institutions in less comparable markets,
and in order to maintain the northwest orientation of the Peer Group,
we limited the out-of-market companies to two institutions. Our
selection criteria focused on well-capitalized Midwest institutions
(with equity/assets ratios over 10 percent), relative comparability in
terms of size ($200 million to $400 million in assets) and market
capitalization (in the range of $50 million) and strong profitability
(excluding the special SAIF assessment). We selected two institutions
among the nine institutions meeting such criteria which, like
Heritage, are emphasizing higher risk-weight lending.
Table 3.1 on the following page shows the general characteristics of each
of the Peer Group companies and Table 4.1 provides summary demographic data for
the primary market areas served by each of the Peer Group companies. While there
are some differences between the Peer Group companies and the Bank, we believe
that the Peer Group provides a good representation of publicly-traded thrifts
with operations comparable to those of the Bank and, thus, will provide a good
basis for valuation. The following sections present a comparison of Bank's
financial condition, income and expense trends, loan composition, interest rate
risk and credit risk versus the Peer Group. The conclusions drawn from the
comparative analysis are then factored into the valuation analysis discussed in
the final chapter.
A summary description of the key characteristics of each of the Peer Group
companies, which we determined warranted their inclusion as a comparable
institution to Bank, is detailed below.
<PAGE>
RP FINANCIAL, LC.
_______________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
August 17, 1997(1)
<TABLE>
<CAPTION>
Primary Operating
Ticker Financial Institution Exchg. Market Strat.(2)
------ ----------------------------------- ------ ----------------- ---------
<S> <C> <C> <C> <C>
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div.
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B.
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift
UBMT United Fin. Corp. of MT OTC Central MT Thrift
<CAPTION>
Total Fiscal Conv. Stock Market
Ticker Financial Institution Assets Offices Year Date Price Value
------ ----------------------------------- ------ ------- ----- ------ ------ ------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C>
IWBK Interwest SB of Oak Harbor WA 1,833 31 12-31 / 39.75 319
FFBA First Colorado Bancorp of Co 1,510 M 26 12-31 01/96 17.50 290
FWWB First Savings Bancorp of WA (3) 1,008 M 16 03-31 11/95 24.50 258
WSTR WesterFed Fin. Corp. of MT 956 35 06-30 01/94 21.75 121
KFBI Klamath First Bancorp of OR 728 7 09-30 10/95 19.31 193
HRZB Horizon Financial Corp. of WA (3) 519 12 03-31 08/86 15.00 111
FMSB First Mutual SB of Bellevue WA (3) 432 6 12-31 12/85 21.75 59
FFHH FSF Financial Corp. of MN 378 11 09-30 10/94 18.12 55
CMRN Cameron Fin. Corp. of MO 208 3 09-30 04/95 17.25 45
UBMT United Fin. Corp. of MT 108 M 4 12-31 09/86 23.50 29
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and Ret.=Retail
Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information published in
SNL Securities Quarterly Thrift Report, and financial reports of
publicly-traded thrifts.
Date of Last Update: 08/17/97
<PAGE>
RP Financial, LC.
Page 3.4
o Interwest SB of Oak Harbor, Washington. Included as a member of the Peer
Group based primarily on its operations in the State of Washington,
relatively diversified loan portfolio and comparable earnings levels.
Interwest is larger in size ($1.8 billion in assets) and maintains a more
leveraged capital position.
o First Colorado Bancorp of Colorado. Selected based on its location in a
healthy expanding market which has facilitated growth as well as strong
earnings and asset quality. Additionally, like Heritage, First Colorado
operated in mutual holding company form until completing its second step
conversion in January 1996. Differences include First Colorado's
comparatively greater investment in permanent residential mortgage loans.
o First Savings Bancorp of Washington. Selected based on its location in the
State of Washington and overall similarity of operations including a focus
on residential lending supplemented by construction and other high risk
weight loans. First Savings Bancorp also generates strong earnings, has a
modest loan servicing portfolio, and maintains a high capital ratio; all
the foregoing characteristics are similar to Heritage on a pro forma basis.
o WesterFed Financial Corp. of Montana. Included in the Peer Group given its
location in the West, and strong capital position. Moreover, like
Heritage, WesterFed has commenced a relatively active commercial loan
program as evidenced by its loan portfolio composition. WesterFed
Financial Corp. maintains comparatively lower profitability levels.
o Klamath First Bancorp of OR. Selected due to its Northwest market area,
strong capital and earnings levels and broadly similar interest-earning
asset composition. Klamath First maintains a comparatively greater
emphasis on residential mortgage lending for portfolio.
o Horizon Financial Corp. of WA. Selected due to Horizon Financial's
Northwest market area, strong capital position, similar interest-earning
asset composition, strong net interest margin and secondary market
activities. Horizon Financial maintains a comparatively larger mortgage
loan servicing portfolio.
o First Mutual SB of Bellevue WA. Included in the Peer Group primarily based
on its location in the State of Washington and strong earnings and asset
quality. Additionally, First Mutual has a high level of 100 percent risk-
weight loans thereby enhancing its level of comparability to the Bank.
First Mutual's risk-assets to total assets ratio equaled 61.71 percent,
which was only modestly lower than the 73.14 percent ratio reported by the
Bank.
o FSF Financial Corp. of MN. Included in the Peer Group primarily based on
its similar lending strategy including a significant investment in
construction loans and commercial business loans. FSF Financial Corp. also
operates with a strong capital position, appears to possess good asset
quality and maintains a modest portfolio of loans serviced for others.
o Cameron Financial Corp. of MO. Cameron Financial Corp. maintains a similar
asset size and equity level relative to Heritage on a pro forma basis.
Cameron Financial also deploys a significant portion of interest-earning
assets into construction loans. Cameron Financial maintains strong
earnings due to its higher risk-weight lending emphasis.
<PAGE>
RP Financial, LC.
Page 3.5
o United Financial Corp. of MT. Selected due to Western market area, strong
capital and earnings levels and relatively good credit quality. United
maintains a relatively higher level of cash and investments and lower level
of loans in comparison to Heritage.
In aggregate, the Peer Group companies are more highly capitalized than the
industry average (14.3 percent of assets versus 13.0 percent for the all SAIF
average), generate higher earnings as a percent of average assets (1.13 percent
core ROAA versus 0.76 percent for the all SAIF average), and generate a higher
ROE (8.4 percent core ROE versus 7.5 percent for the all SAIF average).
Overall, the Peer Group was priced at a modest premium to the all SAIF average
based on the P/B ratio and the core P/E multiple but were priced comparably on a
reported earnings basis.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for Bank and the Peer
Group, reflecting the expected similarities and some differences given the
selection procedures outlined above. The Bank's ratios reflect balances as of
June 30, 1997, while the Peer Group's ratios reflect the latest publicly
available information, either as of March 31, 1997 or June 30, 1997. The Bank's
stockholders' equity of 11.4 percent was below the Peer Group's average net
worth ratio of 14.3 percent; however, with the addition of stock proceeds, the
Bank's pro forma capital position (consolidated with the holding company) can be
expected to be comparable to or exceed the Peer Group's ratio. All of Heritage's
and substantially all of the Peer Group's capital was tangible capital, as
intangible assets equaled only 0.4 percent of total assets for the Peer Group on
average. Both the Bank's and the Peer Group's capital ratios reflected capital
surpluses with respect to the regulatory capital requirements, with the Peer
Group's ratios currently indicating slightly greater capital surpluses. On a pro
forma basis, the Bank's capital surpluses are expected to exceed the Peer
Group's ratios.
The interest-earning asset compositions for the Bank and the Peer Group
were broadly similar, with loans and mortgage-backed securities constituting the
bulk of interest-earning assets for Bank and the Peer Group. The Bank's level of
loans was much higher than the Peer Group's ratio (84.8 percent versus 67.5
percent for the Peer Group), while the Peer Group maintained a higher balance of
MBS (9.7 percent versus 2.1 percent for the Bank). Comparatively, the Bank's
cash and investments to assets ratio was lower than the comparable ratio for the
Peer Group (19.3 percent versus 6.6 percent for the Bank). Immediately following
the conversion, the Bank's cash and investments level will increase pending
longer run redeployment of funds, although such ratio will still fall below the
Peer Group average. A more detailed analysis of the respective loan portfolios
of Heritage and the Peer Group (detailed in a following section) shows that: (1)
both Heritage and the Peer Group are primarily mortgage lenders; and (2)
Heritage has diversified its loan portfolio to include a greater proportion of
high risk weight loans including construction, multi-family and commercial
mortgage
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of June 30, 1997
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
----------- ------ ------ -------- -------- ------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage Bank
- -------------
June 30, 1997 6.6 84.8 2.1 86.6 0.4 0.0 11.4 0.0 11.4 0.0
SAIF-Insured Thrifts 18.1 67.1 11.5 71.0 14.7 0.2 12.6 0.2 12.4 0.0
State of WA 14.3 69.0 13.0 65.7 23.4 0.1 9.3 0.4 9.0 0.2
Comparable Group Average 19.3 67.5 9.7 66.6 17.5 0.0 14.3 0.4 13.9 0.0
Mid-West Companies 22.1 74.5 0.0 57.4 25.1 0.0 16.5 0.0 16.5 0.0
North-West Companies 17.2 71.1 8.8 67.5 18.2 0.0 12.7 0.3 12.4 0.0
Western Companies (Excl CA) 21.0 57.0 17.6 71.3 11.3 0.0 15.4 0.7 14.7 0.0
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CMRN Cameron Fin. Corp. of MO 11.4 84.0 0.0 60.0 16.9 0.0 21.7 0.0 21.7 0.0
FFHH FSF Financial Corp. of MN 32.7 65.1 0.0 54.7 33.3 0.0 11.4 0.0 11.4 0.0
North-West Companies
- --------------------
FMSB First Mutual SB of Bellevue WA 3.6 79.9 13.6 79.8 12.0 0.0 6.8 0.0 6.8 0.0
FWWB First Savings Bancorp of WA(1) 29.2 64.1 3.1 54.1 29.1 0.0 14.8 1.2 13.6 0.0
HRZB Horizon Financial Corp. of WA 9.2 78.1 10.5 82.6 0.0 0.0 15.6 0.0 15.6 0.0
IWBK Interwest SB of Oak Harbor WA 29.6 60.1 6.4 64.1 28.5 0.0 6.8 0.1 6.6 0.0
KFBI Klamath First Bancorp of OR 14.7 73.0 10.3 57.2 21.4 0.0 19.5 0.0 19.5 0.0
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co(1) 7.7 71.9 17.6 76.5 8.4 0.0 12.7 0.0 12.7 0.0
UBMT United Fin. Corp. of MT(1) 42.7 33.1 20.6 71.5 4.6 0.0 22.6 0.0 22.6 0.0
WSTR WesterFed Fin. Corp. of MT 12.6 66.0 14.5 66.0 20.8 0.0 10.9 2.2 8.7 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage Bank
- -------------
June 30, 1997 9.06 -51.78 21.73 9.76 NM 8.12 8.12 11.68 11.68 16.90
SAIF-Insured Thrifts 12.19 8.07 13.39 7.80 18.84 0.28 -0.56 10.99 11.07 23.11
State of WA 15.79 22.79 13.74 18.58 6.58 9.63 8.69 8.25 10.34 18.99
Comparable Group Average 20.38 -4.05 25.41 20.51 18.47 2.87 -0.37 12.32 12.82 25.02
Mid-West Companies 16.24 1.98 20.23 5.58 34.25 -6.22 -6.22 13.71 13.71 22.85
North-West Companies 19.53 -1.38 18.60 22.12 -1.33 5.97 4.59 11.84 13.18 25.61
Western Companies (Excl CA) 24.53 -11.61 40.21 27.77 30.39 3.76 -4.75 11.72 11.77 25.68
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CMRN Cameron Fin. Corp. of MO 18.35 2.30 18.47 1.28 NM -2.59 -2.59 17.11 17.11 25.59
FFHH FSF Financial Corp. of MN 14.13 1.66 22.00 9.88 34.25 -9.85 -9.85 10.30 10.30 20.10
North-West Companies
- --------------------
FMSB First Mutual SB of Bellevue WA 11.82 5.12 10.66 21.47 -26.73 15.38 15.38 6.90 6.90 11.94
FWWB First Savings Bancorp of WA(1) 35.58 19.16 41.09 45.69 NM -3.57 -11.30 NM 13.65 24.77
HRZB Horizon Financial Corp. of WA 5.10 -17.96 8.40 5.49 NM 1.19 1.19 NM 15.38 30.39
IWBK Interwest SB of Oak Harbor WA 29.61 NM 11.06 32.30 24.07 28.92 29.75 NM NM NM
KFBI Klamath First Bancorp of OR 15.55 -11.85 21.78 5.64 NM -12.07 -12.07 16.77 16.77 35.32
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co(1) 1.13 -71.72 30.03 5.49 2.45 -20.50 -19.52 11.41 11.56 22.10
UBMT United Fin. Corp. of MT(1) 3.01 -14.65 24.34 -2.31 NM -0.86 -0.86 15.20 15.20 40.40
WSTR WesterFed Fin. Corp. of MT 69.46 51.52 66.25 80.14 58.33 32.63 6.12 8.54 8.54 14.54
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.7
loans and commercial business loans. Overall, Bank's interest-earning assets
amounted to 93.5 percent of assets, which was below the comparable Peer Group
ratio of 96.5 percent; on a post-conversion basis, the Bank's ratio of interest-
earning assets will increase.
The Bank's funding liabilities reflect a funding strategy similar to that
of the Peer Group's funding composition, with retail deposits constituting the
major source of interest-bearing funds utilized by the Bank and the Peer Group.
The Bank's deposits equaled 86.6 percent of assets, which was higher than the
Peer Group average of 66.6 percent. Partially offsetting Bank's higher ratio of
deposits was its much lower level of borrowings, as indicated by borrowings-to-
assets ratios of 0.4 percent and 17.5 percent for the Bank and the Peer Group,
respectively. Total interest-bearing liabilities maintained by the Bank and the
Peer Group, as a percent of assets, equaled 87.0 percent and 84.1 percent,
respectively, with the Peer Group's lower ratio being supported by maintenance
of a higher capital position, a situation which will largely be addressed with
the completion of the conversion of the mutual holding company and the second
step stock offering.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Bank's IEA/IBL ratio is lower than the Peer
Group's ratio, based on respective ratios of 107.5 percent and 114.7 percent.
The additional capital realized from stock proceeds should serve to partially
address the lower IEA/IBL ratio currently maintained by the Bank, as the
interest free capital realized in the Bank's stock offering are expected to be
deployed into interest-earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. Bank's growth rates are based on annual growth for the
twelve months ended June 30, 1997, while the Peer Group's growth rates are based
on annual growth for the most recent twelve month period available. Asset growth
rates of positive 9.1 percent and 20.4 percent were posted by the Bank and the
Peer Group, respectively. The Bank's asset growth measures reflect that strong
loan growth was recorded during the period (positive growth rate of 21.7
percent), with funding for the loan portfolio being provided by the redeployment
of funds from the cash and investment portfolio and deposit growth. The Peer
Group's stronger asset growth was skewed upward by the strong growth posted by
First Savings Bancorp of Washington and WesterFed Financial, both of which
completed acquisitions during the trailing twelve month period (the median
growth rate for the Peer Group of 14.8 percent continues to exceed the Bank's
growth rate). Paralleling growth trends observed with respect to Heritage's
operations, the Peer Group's growth was primarily realized in the loan and MBS
portfolio with such growth funded with a reduction in cash and investments and
increases to the deposit base.
Heritage's asset growth was funded primarily through growth of deposits,
which increased by 9.8 percent in the most recent fiscal year. The Peer Group's
deposit growth was skewed somewhat by the aforementioned acquisition activity;
the median deposit growth figure compares relatively closely to the Bank's
<PAGE>
RP Financial, LC.
Page 3.8
deposit growth rate. The Peer Group's faster asset growth has also reflected
increased utilization of borrowed funds, which increased by an average of 18.5
percent for the most recent twelve month period.
Despite recording a comparable return on average assets ratio, Bank posted
a stronger capital growth rate than the Peer Group (positive 8.1 percent versus
2.9 percent growth for the Peer Group). Higher dividend payments and stock
repurchases (the Peer Group is comprised of full stock companies) contributed to
the Peer Group's slight capital decline. Following the increase in capital
realized from conversion proceeds, the Bank's pro forma capital growth rate is
expected to be depressed from historical levels by: (1) a higher pro forma
capital position and comparatively lower marginal returns; (2) dividends to be
paid on all outstanding shares (dividends on shares owned by the mutual holding
company have been waived to date); and (3) potential capital management
programs.
Income and Expense Components
- -----------------------------
The Bank and the Peer Group reported net income to average assets ratios of
0.98 percent and 0.97 percent, respectively, based on earnings for the twelve
months ended June 30, 1997 or the most recent twelve month period reported (see
Table 3.3). Both the Bank's and most of the Peer Group members' earnings were
depressed by the one time SAIF assessment, which is shown as a non-operating
item under net gains in Table 3.3. The Bank's operations compared favorably to
the Peer Group with respect to net interest income and non-interest income,
which is partially reflective of the high yields and fee income generated by
Heritage's construction and commercial lending operations. The benefits of the
Bank's higher revenues, however, are offset by its higher operating expenses.
Heritage's net interest income for the last 12 months equaled 4.11 percent
of average assets versus an average of 3.44 percent reported by the Peer Group.
A number of factors contribute to Heritage's favorable level of net interest
income, particularly a strong spread supported by high yields and modestly lower
cost of funds, despite a lower IEA/IBL ratio. Asset yields are supported by
Heritage's greater proportionate investment in loans and the composition of the
loan portfolio which is heavily weighted toward comparatively higher yielding
commercial business, multi-family/commercial mortgage and construction loans.
In another key area of core earnings strength, the Bank maintained a
considerably higher level of operating expenses than the Peer Group. For the
period covered in Table 3.3, the Bank and the Peer Group recorded operating
expense to average assets ratios of 4.33 percent and 1.96 percent, respectively.
The Bank's higher operating expense ratio can in part be explained by its higher
risk weight loan portfolio, which are personnel intensive but which also
generate notably higher yields and fee revenues. Additionally, the Bank's
secondary market activities generate gains on sale and compensation expense
without a corresponding level of
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended June 30, 1997
<TABLE>
<CAPTION>
Net Interest Income Other Income
------------------------------ --------------------
Loss NII
Net Provis. After Loan R.E. Other
Income Income Expense NII on IEA Provis. Fees Oper. Income
------ ------ ------- ------ ------- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage Bank
- -------------
June 30, 1997 0.98 8.00 3.89 4.11 -0.12 4.22 0.00 0.00 0.54
SAIF-Insured Thrifts 0.58 7.37 4.09 3.28 0.14 3.14 0.12 0.00 0.32
State of WA 0.78 7.72 4.47 3.25 0.19 3.06 0.12 0.01 0.39
Comparable Group Average 0.97 7.54 4.10 3.44 0.11 3.32 0.18 0.01 0.19
Mid-West Companies 0.86 7.70 4.17 3.53 0.13 3.39 0.06 0.00 0.18
North-West Companies 1.06 7.78 4.31 3.47 0.15 3.32 0.14 0.01 0.18
Western Companies (Excl CA) 0.88 7.01 3.70 3.32 0.04 3.27 0.31 0.01 0.20
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CMRN Cameron Fin. Corp. of MO 1.06 8.01 3.99 4.03 0.24 3.78 0.08 0.00 0.02
FFHH FSF Financial Corp. of MN 0.66 7.39 4.36 3.03 0.03 3.00 0.05 0.00 0.33
North-West Companies
- --------------------
FMSB First Mutual SB of Bellevue WA 1.02 8.29 4.71 3.58 0.37 3.21 0.21 0.00 0.14
FWWB First Savings Bancorp of WA(1) 1.05 7.58 4.10 3.48 0.16 3.32 0.09 0.00 0.19
HRZB Horizon Financial Corp. of WA 1.56 7.73 4.16 3.56 0.03 3.53 0.21 0.00 0.05
IWBK Interwest SB of Oak Harbor WA 0.87 7.89 4.55 3.34 0.12 3.23 0.21 0.05 0.47
KFBI Klamath First Bancorp of OR 0.81 7.42 4.03 3.38 0.05 3.33 0.00 0.01 0.06
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co(1) 0.92 7.02 3.83 3.20 0.08 3.12 0.00 0.02 0.33
UBMT United Fin. Corp. of MT(1) 1.09 6.86 3.30 3.56 0.00 3.56 0.41 0.00 0.23
WSTR WesterFed Fin. Corp. of MT 0.63 7.16 3.97 3.19 0.06 3.13 0.52 0.00 0.04
<CAPTION>
G&A/Other Exp. Non-Op. Items
---------------- --------------
Total
Other G&A Goodwill Net Extrao.
Income Expense Amort. Gains Items
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Heritage Bank
- -------------
June 30, 1997 0.54 4.33 0.00 0.43 0.00
SAIF-Insured Thrifts 0.44 2.33 0.03 -0.29 0.00
State of WA 0.52 2.13 0.05 -0.19 0.00
Comparable Group Average 0.37 1.96 0.01 -0.22 0.00
Mid-West Companies 0.24 1.89 0.00 -0.34 0.00
North-West Companies 0.34 1.86 0.01 -0.19 0.00
Western Companies (Excl CA) 0.52 2.18 0.03 -0.20 0.00
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CMRN Cameron Fin. Corp. of MO 0.10 1.78 0.00 -0.41 0.00
FFHH FSF Financial Corp. of MN 0.38 2.01 0.00 -0.27 0.00
North-West Companies
- --------------------
FMSB First Mutual SB of Bellevue WA 0.36 1.98 0.00 0.03 0.00
FWWB First Savings Bancorp of WA(1) 0.28 2.15 0.04 0.08 0.00
HRZB Horizon Financial Corp. of WA 0.27 1.47 0.00 0.04 0.00
IWBK Interwest SB of Oak Harbor WA 0.73 2.24 0.01 -0.47 0.00
KFBI Klamath First Bancorp of OR 0.06 1.47 0.00 -0.63 0.00
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co(1) 0.35 2.01 0.02 0.02 0.00
UBMT United Fin. Corp. of MT(1) 0.64 2.09 0.00 -0.38 0.00
WSTR WesterFed Fin. Corp. of MT 0.56 2.45 0.07 -0.25 0.00
<CAPTION>
Yields, Costs, and Spreads
--------------------------
MEMO: MEMO:
Yield Cost Yld-Cost Assets/ Effective
On Assets Of Funds Spread FTE Emp. Tax Rate
--------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C>
Heritage Bank
- -------------
June 30, 1997 8.77 4.71 4.06 1,670 0.00
SAIF-Insured Thrifts 7.40 4.64 2.76 4,586 37.06
State of WA 7.15 4.54 2.61 4,300 36.84
Comparable Group Average 7.79 4.98 2.81 4,098 35.44
Mid-West Companies 7.94 5.19 2.75 4,102 38.67
North-West Companies 8.01 5.16 2.85 4,527 34.23
Western Companies (Excl CA) 7.32 4.54 2.78 3,523 35.30
Comparable Group
- ----------------
Mid-West Companies
- ------------------
CMRN Cameron Fin. Corp. of MO 8.33 5.36 2.97 4,002 37.23
FFHH FSF Financial Corp. of MN 7.56 5.02 2.54 4,203 40.12
North-West Companies
- --------------------
FMSB First Mutual SB of Bellevue WA 8.53 5.14 3.40 NM 32.92
FWWB First Savings Bancorp of WA(1) 7.82 5.40 2.42 3,463 29.64
HRZB Horizon Financial Corp. of WA 7.91 5.05 2.86 4,322 33.89
IWBK Interwest SB of Oak Harbor WA 8.22 4.92 3.30 3,117 34.31
KFBI Klamath First Bancorp of OR 7.55 5.29 2.26 7,207 40.38
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co(1) 7.22 4.63 2.59 4,264 37.35
UBMT United Fin. Corp. of MT(1) 7.15 4.36 2.79 3,715 37.16
WSTR WesterFed Fin. Corp. of MT 7.59 4.65 2.95 2,590 31.40
</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 3.10
assets reflected on the books. The Bank also maintains a relatively large
number of branches for its asset size as the number of branches has doubled over
the last three years as Heritage has sought to expand its franchise. Overall,
the relatively high level of personnel maintained by the Bank is indicated by an
assets per full time equivalent employee measure of $1.7 million, which was well
below the Peer Group average of $4.1 million.
Sources of non-interest operating income, which does not include gains
realized from the Bank's secondary market loan sales and other sources of non-
operating income, made a higher contribution to the Bank's earnings than the
Peer Group's, based on comparative non-interest operating income to average
assets ratios of 0.54 percent and 0.37 percent, respectively. The higher non-
interest income is attributable to many of the same factors which tend to
increase Heritage's expenses relative to the Peer Group -- including fee income
and charges from its lending and retail depository operations.
Given the high level of non-interest income generated by Heritage, the
Bank's expense coverage ratio provides a less meaningful indication of core
earnings strength compared to the expense coverage ratios of the Peer Group
companies, which in general maintain a lower level of diversification and less
significant off-balance sheet operations than Bank. The Bank maintained a less
favorable expense coverage than the Peer Group, reporting expense coverage
ratios of 0.95 times and 1.76 times, respectively. Even after taking non-
interest income into account (but not gains on sale), however, the Bank's
efficiency ratio of 93.1 percent remains less favorable in comparison to the
Peer Group's average efficiency ratio of 51.4 percent.
On a post-conversion basis, the Bank's operating expenses can be expected
to increase with the addition of the expenses related to the stock benefit plans
and continued efforts at diversifying operations consistent with the community
banking strategy. However, at the same time, the infusion of interest-earning
assets following the completion of the stock offering will enhance overall
earnings levels.
Loss provisions were low for both Heritage and the Peer Group with Heritage
reporting a net recovery equal to 0.12 percent of average assets while the Peer
Group reported loan loss provisions equal to 0.08 percent of assets on average.
Generally, both the Bank and the Peer Group on average currently maintain good
asset quality and reserve coverage ratios.
Net non-operating items had a positive impact on Heritage's operating
results and resulted in a net expense on average for the Peer Group.
Specifically, net non-operating income, comprised primarily of gains on the sale
of loans offset by the special SAIF assessment equaled 0.43 percent of assets
for the Bank whereas the Peer Group reported non-operating expenses equal to
0.22 percent of assets on average. The disparity is primarily the result of the
significant revenues Heritage derives from loans sold to the secondary market
which
<PAGE>
RP Financial, LC.
Page 3.11
are recurring in nature but volatile in response to changing market interest
rates, competitive conditions, and loan volume.
The Bank was in a fully taxable position in fiscal 1997 but reported a
reversal of taxes equal to 0.11 percent of assets as result of the elimination
of a deferred tax liability. Conversely, the Peer Group reported an effective
tax rate of approximately 35.4 percent for the most recent twelve month period.
Heritage remains in a fully taxable position and, thus, its future effective tax
rate is expected to approximate the Peer Group average.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of Bank and the
Peer Group. An emphasis on mortgage lending for both Heritage and the Peer Group
is apparent as mortgage loans (including MBS and construction loans), comprised
82.4 percent and 96.5 percent of loans for the Bank and the Peer Group,
respectively. One-to-four family mortgage loans and MBS comprised 51.6 percent
of loans for Heritage as compared to 74.0 percent for the Peer Group.
Heritage's loan portfolio reflects a modestly greater level of
diversification into high risk-weight assets, with the Bank more heavily
invested in multi-family/commercial mortgages, commercial business loans and
construction loans. Based on the most recent available data, Heritage's multi-
family/commercial mortgage portfolio equaled approximately 24.3 percent of loans
and MBS which is well in excess of the Peer Group average of 13.3 percent.
Similarly, with the Bank's emphasis on its business banking strategy, commercial
business loans approximated 18.7 percent of loans and MBS, which was well above
the 4.9 percent average for the Peer Group. As a result of the foregoing,
Heritage's risk weighted assets to total assets ratio of 73.14 percent well
exceeded the Peer Group average 53.29 percent.
Overall, the Heritage loan portfolio appears to provide the Bank with an
avenue for growth and stronger yield potential than the Peer Group. At the same
time, the higher risk weighting of the loan portfolio generally and unseasoned
nature of the Bank's commercial portfolio could potentially expose Heritage to a
relatively greater level of credit risk, notwithstanding its good experience
with respect to the credit quality of the portfolio thus far.
Credit Risk
- -----------
Table 3.5 reflects the relative credit risk factors of Heritage and the
Peer Group companies. In the financial analysis of the Bank included in Section
One, we noted that Heritage's asset quality has been strong as the level of non-
performing assets has been low and the level of credit related losses has been
low since 1993.
<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.
Institution MBS Family & Land Comm RE Business Consumer
- ----------- ------ ------ ------- ------- -------- --------
(%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
Heritage Bank 2.45 49.12 6.51 24.32 18.73 0.70
SAIF-Insured Thrifts 15.42 61.51 5.35 11.70 6.49 1.71
State of WA 15.63 54.63 9.74 15.82 2.56 2.88
Comparable Group Average 11.94 62.07 9.21 13.27 4.94 0.94
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 0.01 71.13 32.92 4.64 3.98 0.36
FFHH FSF Financial Corp. of MN 0.04 68.10 12.73 6.58 15.53 2.79
FFBA First Colorado Bancorp of Co(1) 9.80 71.27 3.23 11.72 5.36 0.03
FMSB First Mutual SB of Bellevue WA 8.18 39.61 6.68 45.38 0.11 0.04
FWWB First Savings Bancorp of WA(1) 6.05 59.08 8.56 16.32 3.57 2.87
HRZB Horizon Financial Corp. of WA 5.59 82.29 2.45 11.11 0.08 0.00
IWBK Interwest SB of Oak Harbor WA 18.50 49.42 10.64 12.92 4.02 2.07
KFBI Klamath First Bancorp of OR 11.33 83.53 2.88 4.15 0.73 0.01
UBMT United Fin. Corp. of MT(1) 40.95 36.06 9.53 11.65 4.84 1.18
WSTR WesterFed Fin. Corp. of MT 18.95 60.18 2.47 8.21 11.15 0.00
<CAPTION>
RWA/ Serviced Servicing
Institution Assets For Others Assets
- ----------- ------ ---------- ---------
(%) ($000) ($000)
<S> <C> <C> <C>
Heritage Bank 73.14 19,162 0
SAIF-Insured Thrifts 51.61 364,952 2,911
State of WA 56.59 3,570,830 21,441
Comparable Group Average 53.29 125,847 203
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 65.32 0 0
FFHH FSF Financial Corp. of MN 51.58 39,191 31
FFBA First Colorado Bancorp of Co(1) 53.25 22 468
FMSB First Mutual SB of Bellevue WA 61.71 381,000 697
FWWB First Savings Bancorp of WA(1) 58.93 208,359 354
HRZB Horizon Financial Corp. of WA 52.24 90,622 0
IWBK Interwest SB of Oak Harbor WA 49.63 269,536 342
KFBI Klamath First Bancorp of OR 45.21 1,089 0
UBMT United Fin. Corp. of MT(1) 34.34 0 0
WSTR WesterFed Fin. Corp. of MT 60.72 268,647 142
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of June 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------ ------ ------ ------- -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage Bank 0.00 0.05 0.06 1.32 2069.17 2069.17 1,149 -0.56
SAIF-Insured Thrifts 0.29 0.78 0.84 0.82 177.46 128.34 378 0.15
State of WA 0.23 0.72 0.89 0.89 154.97 91.54 471 0.08
Comparable Group Average 0.13 0.30 0.22 0.67 267.65 197.51 44 0.02
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 0.00 0.73 0.28 0.97 347.55 111.82 0 0.00
FFHH FSF Financial Corp. of MN 0.02 0.03 0.02 0.34 NA 636.64 5 0.01
FFBA First Colorado Bancorp of Co(1) 0.08 0.23 0.20 0.38 191.75 121.82 52 -0.01
FMSB First Mutual SB of Bellevue WA 0.00 0.01 NA 1.27 NA NA 0 0.00
FWWB First Savings Bancorp of WA(1) 0.11 0.30 0.27 0.97 366.82 215.39 148 0.09
HRZB Horizon Financial Corp. of WA 0.00 NA NA 0.84 NA NA 0 0.00
IWBK Interwest SB of Oak Harbor WA 0.70 0.64 0.43 0.78 179.94 73.79 91 0.03
KFBI Klamath First Bancorp of OR 0.00 0.08 0.11 0.23 213.23 213.23 1 0.00
UBMT United Fin. Corp. of MT(1) 0.39 0.42 NA 0.21 NA 16.41 0 0.00
WSTR WesterFed Fin. Corp. of MT 0.01 0.25 0.24 0.73 306.59 191.01 142 0.09
</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
The Peer Group's asset quality is also relatively favorable although the level
of non-performing assets, chargeoffs, and coverage ratios are modestly less
favorable than those reported by the Bank. As shown in Table 3.5, Bank's ratio
of non-performing assets and accruing loans that are more than 90 days past due
equaled 0.05 percent of assets, versus a comparative ratio of 0.30 percent for
the Peer Group. Similarly, the Bank and the Peer Group's ratio of non-
performing loans to total loans was similarly low, equal to 0.06 percent and
0.22 percent of loans, respectively. The Bank maintains higher reserve ratios
as the ratio of valuation allowances to total loans equaled 1.32 percent and
0.67 percent for the Bank and the Peer Group, respectively. Both the Bank and
the Peer Group reported total valuation allowances well in excess of the level
of non-performing loans.
Interest Rate Risk
- ------------------
Table 3.6 reflects various key ratios highlighting the relative interest
rate risk exposure of the Bank versus the Peer Group companies. In terms of
balance sheet composition, Bank's interest rate risk characteristics were
considered to be less favorable than the Peer Group's. In particular, Bank's
lower capital position and lower IEA/IBL ratio indicate a greater dependence on
the yield-cost spread to sustain the net interest margin. Likewise, Bank's
higher level of non-interest earning assets results in a lower capacity to
generate interest income in comparison to the Peer Group. However, on a pro
forma basis, the infusion of stock proceeds should serve to address the Bank's
lower equity-to-assets ratio, while Bank's IEA/IBL ratio and level of non-
interest earning assets will likely remain less favorable than the Peer Group's
ratios.
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.
Heritage's net interest income reflects a growth trend while the Peer Group's
net interest margin was more stable. However, we believe this trend for the Bank
is primarily the result of the changing composition of assets and the growing
capital level rather than the Bank's higher interest rate risk exposure. It is
expected that the infusion of the stock proceeds will serve to enhance the level
and stability of the Bank's net interest margin, as interest-sensitive
liabilities will be funding a lower proportion of Bank's assets.
The traditional interest rate risk measures do not capture the impact of
interest rates on the Bank's mortgage banking activity, as interest rates
significantly impact the volume of loans and the level of gains on sale. In
this regard, we believe the Bank's exposure to changing interest rates is far
greater than for the Peer Group, given the Bank's dependency on gains on sale.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of June 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
--------------------------
Non-Earn.
Equity/ IEA/ Assets/
Institution Assets IBL Assets
----------- ------ ------ ------
(%) (%) (%)
<S> <C> <C> <C>
Heritage Bank 11.4 107.5 6.5
SAIF-Insured Thrifts 12.3 112.7 3.3
State of WA 9.0 108.2 3.7
Comparable Group Average 13.9 115.2 3.5
Comparable Group
----------------
CMRN Cameron Fin. Corp. of MO 21.7 124.0 4.6
FFHH FSF Financial Corp. of MN 11.4 111.2 2.1
FFBA First Colorado Bancorp of Co(1) 12.7 114.6 2.7
FMSB First Mutual SB of Bellevue WA 6.8 105.9 2.9
FWWB First Savings Bancorp of WA(1) 13.6 115.9 3.6
HRZB Horizon Financial Corp. of WA 15.6 118.4 2.2
IWBK Interwest SB of Oak Harbor WA 6.6 103.8 3.9
KFBI Klamath First Bancorp of OR 19.5 124.7 2.0
UBMT United Fin. Corp. of MT(1) 22.6 126.5 3.6
WSTR WesterFed Fin. Corp. of MT 8.7 107.1 7.0
</TABLE>
<TABLE>
<CAPTION>
Quarterly Change in Net Interest Income
----------------------------------------------------------
Institution 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>
Heritage Bank 28 12 19 20 16 -17
SAIF-Insured Thrifts 1 -0 0 -1 8 7
State of WA -4 -1 -13 16 2 21
Comparable Group Average 5 -8 -3 7 6 14
Comparable Group
----------------
CMRN Cameron Fin. Corp. of MO -2 -24 4 -6 6 10
FFHH FSF Financial Corp. of MN 6 -1 -10 8 22 -6
FFBA First Colorado Bancorp of Co(1) NA 9 2 -13 16 55
FMSB First Mutual SB of Bellevue WA 12 -0 4 4 2 26
FWWB First Savings Bancorp of WA(1) NA -6 -5 27 -17 4
HRZB Horizon Financial Corp. of WA 1 -16 13 -3 2 21
IWBK Interwest SB of Oak Harbor WA -10 -3 -28 39 2 24
KFBI Klamath First Bancorp of OR -3 -7 -20 -8 -1 8
UBMT United Fin. Corp. of MT(1) NA 6 7 16 9 -0
WSTR WesterFed Fin. Corp. of MT 29 -32 6 7 15 5
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.16
Summary
- -------
Based on the above analysis and the criteria employed by RP Financial in
the selection of the companies for the Peer Group, RP Financial concluded that
the Peer Group forms a reasonable basis for determining the pro forma market
value of Bank. Such general characteristics as regional market area, asset size,
capital position, interest-earning asset composition, funding composition, core
earnings measures and loan composition all tend to support the reasonability of
the Peer Group from a financial standpoint.
<PAGE>
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 estimate pro forma market value of the common stock to be
issued in conjunction with the Bank'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. Such guidelines are relied upon by the Washington Department
of Financial Institutions, Division of Banks (the "Division") and the Federal
Deposit Insurance Corporation ("FDIC") in evaluating conversion appraisals in
the absence of separate written valuation guidelines by the respective agencies.
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 the valuation, incorporating
valuation adjustments for key differences. In addition, the pricing
characteristics of recent conversion, both at conversion and in the aftermarket,
must be considered. Furthermore, the valuation must incorporate the unique
characteristics of the conversion of the MHC, specifically: (1) the MHC will be
selling only a partial ownership interest in the Subscription and Community
Offerings, instead of a 100 percent ownership interest as would be the case in a
standard conversion; (2) the MHC assets will be consolidated with the Bank's
assets; and (3) the incorporation of the FDIC's dividend waiver policy, which
effectively dilutes the pro forma ownership of the current minority
shareholders.
RP Financial Approach to the Valuation
- --------------------------------------
RP Financial's valuation analysis complies with the above referenced
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 analysis cannot
possibly fully account for all the market forces which impact aftermarket
trading activity and pricing characteristics of a stock on a given day.
<PAGE>
RP Financial, LC.
Page 4.2
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Bank's operations and financial
condition; (2) monitor the Bank's operations and financial condition relative to
the Peer Group to identify any fundamental changes; (3) monitor the external
factors affecting value including, but not limited to, local and national
economic conditions, interest rates, and the stock market environment, including
the market for thrift stocks; and (4) monitor pending initial and second step
conversion offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their related impact on value, if any, over the course of the conversion
process. RP Financial will also prepare a final valuation update at the closing
of the conversion offering to determine if the preliminary range of value
continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability), may materially impact the market value of all thrift
stocks, including Heritage, or Heritage's value alone. To the extent a change
in factors impacting the Bank's value can be reasonably anticipated and/or
quantified, RP Financial has incorporated the estimated impact into its
analysis.
Valuation Analysis
- ------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
such differences between the Bank and the Peer Group and how those differences
affect the pro forma valuation. Emphasis is placed on the specific strengths and
weaknesses of the Bank relative to the Peer Group in such key areas as financial
condition, profitability, growth and viability of earnings, asset growth,
primary market area, dividends, liquidity of the issue, marketing of the issue,
management, and the effect of government regulations and/or regulatory reform.
We have also considered the market for thrift stocks, and in particular new
issues, including second step conversions, to assess the impact on value of
Heritage coming to market at this time.
1. Financial Condition
-------------------
The financial strength of an institution is an important determinant in pro
forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources
<PAGE>
RP Financial, LC.
Page 4.3
in assessing investment attractiveness. The similarities and differences in the
Bank's financial strength can be summarized as follows:
o Overall A/L Composition. The Bank and the Peer Group maintain broadly
-----------------------
similar balance sheet structures with mortgage loans and MBS
comprising the majority of assets funded primarily by retail deposits.
The Bank maintains a higher proportion overall of loans receivable
than the Peer Group, offset by a lower level of cash and investments
and mortgage-backed securities. Heritage has a higher level of
diversification into higher risk weight loans relative to the Peer
Group, indicating higher yield potential but greater potential credit
risk. The Peer Group is currently supplementing deposits with higher
borrowings utilization which appears to reflect capital leveraging
strategies.
o Credit Risk. The Peer Group maintains a lower risk-weighted assets
-----------
ratio, while Heritage reported more favorable asset quality figures.
o Balance Sheet Liquidity. Heritage maintained a lower level of cash
-----------------------
and investments and mortgage-backed securities than the Peer Group,
although the Bank's proportion of cash and investments is expected to
initially increase on a pro forma basis. The Bank appears to have
greater current borrowings capacity than the Peer Group, as the Bank
has a much smaller balance of borrowed funds as of the most recent
period.
o Capital. While the Bank maintains a lower capital position in
-------
relation to the Peer Group, following the infusion of conversion
proceeds, the Bank's capital position is expected to exceed the Peer
Group average. The increase in capital will depress the Bank's pro
forma return on equity until the proceeds can be effectively
reinvested and leveraged over time. Given the Bank's orientation to
grow through retail means, the Bank's return on equity is expected to
remain below the Peer Group average over the intermediate term.
On balance, we believe the Bank, on a pro forma basis, has relatively
comparable financial condition characteristics as the Peer Group. Therefore, we
concluded that no valuation adjustment was warranted for the Bank's financial
strength.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are an important factor in determining pro forma market value, as
the level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings heavily influence the multiple
the investment community will pay for earnings. The major factors considered in
the valuation are described below.
o Reported Earnings. While the Bank reported comparable profitability
-----------------
over the last 12 months the earnings composition was very different,
while both reflected the special SAIF assessment. Heritage's earnings
were largely supported by gains on the sale of loans and the reversal
of the deferred tax liability, whereas the Peer Group's profitability
reflected more traditional recurring revenue sources.
o Core Earnings. The Bank maintains a less favorable core earnings
-------------
posture relative to the Peer Group, net of the special SAIF
assessment, gains on sale and reversal of the deferred tax
<PAGE>
RP Financial, LC.
Page 4.4
liability. The Bank's stronger net interest income and non-interest
operating income are more than offset by the higher operating expenses,
with the mortgage banking expenses contributing to the higher ratio. The
Bank's earnings have substantially benefited from its mortgage banking
activity, but gains on sale typically are a more volatile source of
earnings, and fluctuate based on changes in the economy, interest rates,
competition and mortgage loan volumes, among other factors. Redeployment
of conversion proceeds into interest-earning assets should enhance
Heritage's net interest income, while operating expenses for the Bank
are expected to increase as well. On a pro forma basis, Heritage's core
profitability is expected to remain lower than the Peer Group's.
o Interest Rate Risk. Heritage's gap measures indicated a relatively
------------------
modest exposure to interest rate risk. Likewise, the Peer Group's
changes in net interest income indicated a relatively modest exposure
to interest rate risk. The Bank's interest rate risk posture should
be moderated by the anticipated redeployment of stock proceeds into
interest-earning assets. The traditional interest rate risk measures
do not capture the impact of interest rates on the Bank's mortgage
banking activity, as interest rates significantly impact both the
volume of loans and the level of gains on sale. In this regard, we
believe the Bank's exposure to changing interest rates is far greater
than for the Peer Group, given the Bank's dependency on gains on sale.
o Credit Risk. Heritage reported net recoveries over the most recent
-----------
trailing twelve month period while the Peer Group reported a modest
level of loan loss provisions. In terms of future exposure to credit
quality related losses, while the Bank maintains a lower ratio of non-
performing assets relative to the Peer Group, the Bank's higher risk-
weighted assets ratio suggests greater potential exposure to earnings
in the event of an increase in delinquencies.
o Earnings Growth Potential. Several factors were considered in assessing
-------------------------
earnings growth potential. Heritage's recent loan demand has been
strong, the surrounding market area is exhibiting healthy growth
trends, deposit and loan growth has been healthy, and the Bank will
have excess capital to leverage. Additionally, the Bank has been
making significant investments in branches and personnel, which have
caused expenses to increase but which are anticipated to provide long-
term earnings benefits. While the Bank's earnings may have greater
upside potential than the Peer Group, there has been insufficient time
for such earnings growth to be demonstrated.
o Return on Equity. On a pro forma basis the Bank's pro forma return on
----------------
equity will be lower than the Peer Group average as a result of its
higher pro forma capital position and lower pro forma equity.
Overall, a moderate downward valuation adjustment was warranted for
profitability, growth and viability of the Bank's earnings.
3. Asset Growth
------------
The Bank's asset growth in recent periods has been lower than the Peer
Group median (after excluding the two institutions who completed large
acquisitions during the last 12 months). Since both the Bank and the Peer Group
companies operate in healthy growing markets and since the Bank's capacity to
grow increases with the additional capital raised through conversion, coupled
with the investment in new branches
<PAGE>
RP Financial, LC.
Page 4.5
and personnel, we concluded that no adjustment was warranted relative to the
Peer Group for the Bank's asset growth potential.
4. Primary Market Area
-------------------
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Summary demographic and deposit
market share data for the Bank and the Peer Group is included in Table 4.1. The
Bank's primary market area of Thurston County, Washington is a growing, healthy
market area with an influx of new employers and a moderate to strong demand for
residential mortgages. The Bank's primary market is growing at a faster rate
than the Peer Group's primary market areas (13.8 percent projected growth for
Thurston County projected through 2002 versus 7.2 percent growth on average for
the Peer Group). Offsetting the advantage provided by faster population growth
in Thurston County, the Bank's competitive position is less attractive than the
Peer Group (the Bank's deposit market share is 10.5 percent versus an average of
21.8 percent for the Peer Group). The per capita income in the Bank's market
falls within the range indicated by the Peer Group ($15,967 in per capita income
for Thurston County versus an average and median of $17,507 and $15,963,
respectively for the Peer Group). The unemployment rates in Thurston County are
relatively comparable to the primary market areas of the Peer Group companies.
Based on the foregoing, we concluded that no valuation adjustment was warranted
for market area.
5. Dividends
---------
The Holding Company has indicated its intentions to pay an annual cash
dividend at a yield ranging from 1.08 percent to 1.68 percent dependent upon the
total shares sold in the offering) based on the initial offering price of $10.00
per share. As publicly-traded thrifts' capital levels and profitability have
improved and as weak institutions have been resolved, the proportion of
institutions with cash dividend policies has increased. All ten institutions in
the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 0.92 percent to 4.17 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.09 percent as of August 15,
1997, representing an average earnings payout ratio of 35.69 percent. As of
August 15, 1997, approximately 84 percent of all publicly-traded SAIF-insured
thrifts have adopted cash dividend policies (see Exhibit IV-2), exhibiting an
average yield of 2.01 percent and an average payout ratio of 42.30 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.
Heritage's planned initial dividend yield is lower than the Peer Group's average
dividend yield; however, Heritage has the earnings strength to support a cash
dividend at a level comparable to
<PAGE>
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Population Proj. 1997
----------------- Pop. 1990-97 1997-2002 Median
Institution County 1990 1997 2002 % Change % Change Age
- ----------- ------ ---- ---- ---- -------- -------- ---
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
Cameron Fin. Corp. of MO Clinton 17 18 20 10.8% 6.7% 36.8
FSF Financial Corp. of MN McLeod 32 34 35 6.0% 3.9% 34.1
First Colorado Bancorp of CO Jefferson 438 500 543 14.1% 8.5% 35.9
First Mutual SB of Bellevue WA King 1,507 1,634 1,722 8.4% 5.4% 36.1
First Savings Bancorp of WA Walla Walla 48 54 58 11.2% 6.9% 35.0
Horizon Financial Corp. of WA Whatcom 128 156 175 21.9% 12.4% 34.5
Interwest SB of Oak Harbor WA Island 60 70 77 17.0% 10.0% 35.2
Klamath First Bancorp of OR Klamath 58 63 67 10.0% 6.3% 36.7
United Financial Corp. of MT Cascade 78 81 84 4.6% 3.1% 34.9
WesterFed Fin. Corp. of MT Missoula 79 90 97 14.1% 8.5% 34.0
- ----------- --- --- --- ---- ---- ----
Averages: 244 270 288 11.8% 7.2% 35.3
Medians: 69 76 81 11.0% 6.8% 35.1
Heritage Bank of Olympia, WA Thurston 161 202 229 25.1% 13.8% 35.7
<CAPTION>
1997 Estimated
Per Capita Income
----------------- Deposit
% State Market June 1997
Institution County Amount Average Share(1) Unemployment Rates
- ----------- ------ ------ ------- -------- ------------------
State County
----- ------
<S> <C> <C> <C> <C> <C> <C>
Cameron Fin. Corp. of MO Clinton 15,721 89.0% 39.4% 4.1% 4.4%
FSF Financial Corp. of MN McLeod 19,509 93.7% 22.1% 3.6% 3.8%
First Colorado Bancorp of CO Jefferson 28,823 114.4% 8.8% 3.9% 2.9%
First Mutual SB of Bellevue WA King 21,960 126.0% 1.1% 4.6% 3.3%
First Savings Bancorp of WA Walla Walla 14,165 81.2% 23.4% 4.6% 4.8%
Horizon Financial Corp. of WA Whatcom 16,204 92.9% 18.7% 4.6% 5.8%
Interwest SB of Oak Harbor WA Island 16,731 96.0% 37.3% 4.6% 3.6%
Klamath First Bancorp of OR Klamath 13,879 81.9% 45.5% 5.1% 7.6%
United Financial Corp. of MT Cascade 14,055 102.6% 4.6% 4.9% 5.2%
WesterFed Fin. Corp. of MT Missoula 14,021 102.3% 17.0% 4.9% 4.0%
------ ----- ---- --- ---
Averages: 17,507 98.0% 21.8% 4.5% 4.5%
Medians: 15,963 94.8% 20.4% 4.6% 4.2%
Heritage Bank of Olympia, WA Thurston $15,967 91.6% 10.5% 4.6% 4.9%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total county
deposits at 6/30/97.
Sources: CACI, Inc, SNL Securities
<PAGE>
RP Financial, LC.
Page 4.7
the Peer Group (i.e., comparable dividend paying capacity) and we thus concluded
no valuation adjustment was warranted.
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. It is anticipated
that Heritage's stock will also be traded on the NASDAQ National Market System;
at present there is very limited liquidity of the shares. The number of shares
outstanding and market capitalization provides an indication of the potential
liquidity there will be in a particular stock. The market capitalization of the
Peer Group companies ranged from $28.7 million to $319.4 million as of August
15, 1997, with an average market value of $148.1 million. The shares outstanding
of the Peer Group members ranged from 1.2 million to 14.6 million, with average
shares outstanding of approximately 6.5 million. The Bank's pro forma market
value will be materially lower than the Peer Group average, and pro forma shares
outstanding will be lower than the Peer Group average -- both factors which
would suggest lower liquidity in the shares of Heritage stock. Accordingly, we
applied a slight downward adjustment for this factor.
7. Marketing of the Issue
----------------------
We considered in the valuation the various market segments which exist for
thrift stocks: (1) the aftermarket for public companies, in which trading
activity is regular and investment decisions are made based upon financial
condition, earnings, capital, ROE and dividends; (2) the new issue market in
which converting thrifts are evaluated on the basis of the same factors but on a
pro forma basis without the benefit of a stock trading history and reporting
quarterly operating results as a publicly-held company; (3) the market for
second step conversions by MHCs; and (4) the acquisition market for thrift
franchises. We also considered the limited trading activity in the Bank's stock
to date.
A. Public Market
-------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
<PAGE>
RP Financial, LC.
Page 4.8
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. Expectations that the
Federal Reserve would not tighten interest rates at its July 1996 meeting
provided for a rally in the bond market in late-June, as the 30-year bond yield
moved back below 7.0 percent. The positive interest rate outlook also served to
boost the stock market in early-July, but the rally was cut short by a larger
than expected drop in June unemployment. Bond and stock prices tumbled
following the June unemployment report, as highlighted by a 115 point one-day
decline in the DJIA and an increase in the 30-year bond yield to 7.18 percent.
The release of second quarter earnings reports provided for a volatile stock
market in mid-July, especially among the technology stocks. Overall, the stock
market declined due to earnings disappointments, with a more severe decline
occurring in the technology driven NASDAQ Composite Index. At the same time
bond prices recovered, as the 30-year bond yield dropped below 7.0 percent
following statements by the Federal Reserve Chairman which indicated he expected
the economy to slow down in the second half of 1996. Stocks and bonds rallied
in late-July and early-August, as economic data indicated a healthy but
moderating economy. However, higher interest rates pushed stocks lower in late-
August, reflecting increasing expectations that the Federal Reserve would
tighten interest rates in September. The decline in the stock market was
reversed in early-September, as investors reacted positively to the inflation
data contained in the August employment report. Oil stocks sustained the upward
trend in the stock market in early-September, as renewed tension between the
U.S. and Iraq pushed crude oil prices to their highest level in five years.
Both bond and stock prices surged higher in mid-September, as most of the
economic data for August indicated that the economy was slowing down and
investors became more optimistic that the Federal Reserve would not raise
interest rates in September.
The Federal Reserve's decision not to raise interest rates at its
September 1996 meeting, and generally healthy third quarter earnings results
sustained the upward momentum in the stock market during the beginning of the
fourth quarter. Favorable inflation data and lower interest rates further
spurred the upward trend in the stock market prior to the election. Investors
were cheered by the "status quo" election results, as stocks rallied strongly
immediately following the election with the DJIA posting ten consecutive
advances through mid-November. Economic stability and a rising bond market
sustained the stock market rally through the end of November. For the entire
month of November, the DJIA increased 492.3 points, or 8.2 percent. Following
the rapid rise in the stock market during November, stocks retreated during the
first half of December. Profit taking, concern about speculative excesses in
the stock market and higher interest rates all contributed to the decline in the
stock market.
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,
<PAGE>
RP Financial, LC.
Page 4.9
economic data which reflected moderate growth and low inflation, and favorable
fourth quarter earnings particularly in the technology sector. However, a
disappointing fourth quarter earnings report by IBM ignited a sell-off in the
stock market in late-January. Higher interest rates extended the downturn, as
the 30-year bond approached 7.0 percent at the end of January. A high degree of
market volatility was evident throughout most of February 1997, reflecting
concern over speculative excesses in the stock market; particularly, as the DJIA
closed above the 7000 mark in mid-February. Profit taking, growing expectations
of a correction and comments by the Federal Reserve Chairman pulled the market
lower in late-February.
Following a downturn in late-February 1997, the market recovered in
early-March. Despite increasing expectations of an interest rate hike by the
Federal Reserve, the Dow Jones Industrial Average ("DJIA") closed to a new
record high of 7085.16 on March 11, 1997. However, an upward revision to the
January retail sales figure triggered a one day sell-off in stocks and bonds on
March 13, 1997, as the stronger than expected growth heightened expectations of
an interest rate increase by the Federal Reserve. Unease over higher interest
rates, profitability concerns in the technology sector and litigation concerns
for tobacco stocks pulled the stock market lower in mid-March. As expected, the
Federal Reserve increased the rate on short-term funds by 0.25 percent at its
late-March meeting. Following the rate increase, the sell-off in the stock
market became more severe amid further signs of an accelerating economy. Stocks
bottomed-out on news of a stronger than expected rise in core producer prices
for March, with the DJIA closing at 6391.69 on April 11, 1997, or 9.8 percent
below its all-time high recorded a month ago. Some favorable first quarter
earnings reports and news of a possible settlement by tobacco companies to
resolve the threat of liability lawsuits provided for a modest recovery in the
stock market in mid-April. 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. Non-threatening
inflation data, such as declining retail sales and wholesale prices for May,
provided for positive trends in stock and bond prices through in mid-June 1997.
The stock market rally stalled in late-June, following remarks by Japan's Prime
Minister which were interpreted as an indication that Japan would be a seller of
U.S. stocks and bonds. However, the downturn was brief, as the Federal
Reserve's decision to leave rates unchanged at the July 2 meeting, along with
new economic data that indicated inflation was still under control, pushed stock
and bond prices in early-July. Technology stocks rallied the stock market to
new highs through the end of July, as a number of technology companies posted
favorable second quarter earnings. Congressional testimony by the Federal
Reserve Chairman on July 22 sent the financial markets soaring, as he indicated
the state of the economy was favorable and an increase in interest rates was not
imminent. Through the first half of August, the market sold off sharply in
response to concerns regarding the level of corporate earnings, higher bond
rates and a declining dollar. On August 15, 1997, the DJIA closed at 7694.66,
translating
<PAGE>
RP Financial, LC.
Page 4.10
into an increase of 37.1 percent from a year ago but a 6.8 percent decline from
the record high reached in early August.
Thrift prices generally moved higher during October and November
1996. The upward trend in thrift prices was supported by lower interest rates,
with the slow down in economic growth pushing the 30-year U.S. bond rate below
6.5 percent during the second half of November. Investors also reacted
positively to the SAIF rescue legislation, in light of the reduction in deposit
insurance premiums to be paid by SAIF-insured thrifts following the one time
special assessment. Similar to the overall stock market, thrift prices traded
lower in early-December. Profit taking and expectations of higher interest
rates were factors contributing to the pull back in thrift issues.
Bullish sentiment for thrift stocks heightened at the beginning of
1997, as investors reacted positively to the favorable inflation data and
generally strong fourth quarter earnings. The rally in thrift issues was driven
by the large California institutions, reflecting expectations that there would
be further consolidation among the large California thrifts. The acquisition
speculation for the large California thrifts became a reality in mid-February,
as H.F. Ahamanson's unsolicited offer to acquire Great Western Financial sent
the SNL Index soaring in mid-February. Stable interest rates and acquisition
activity supported higher thrift prices in early-March, with the SNL Index
posting a new high of 579.1 on March 11, 1997. Like the stock market in
general, the peak in thrift prices was followed by a sharp sell-off in mid-
March. In fact, interest-rate sensitive issues were among the sectors hardest
hit by the revised January retail sales report, as the 30-year bond approached
7.0 percent. Interest-rate sensitive issues continued to experience selling
pressure in late-March and early-April, as signs of a strengthening economy
pushed interest rates higher. The sell-off in thrift stocks culminated on April
11, 1997, as interest rates increased sharply on news of the higher than
expected rise in core producer prices for March. Thrift prices edged modestly
higher in mid-April, reflecting generally favorable first quarter earnings and a
slight decline in interest rates following the release of economic data which
showed that inflation was low. Favorable inflation data and the budget
agreement provided for a more substantial rally in thrift stocks in late-April
and early-May, as interest-rate sensitive issues were bolstered by a decline in
interest rates. Thrift stocks continued to increase through May and most of
June 1997, which was largely attributable to the improved interest-rate outlook
and the ongoing trend of consolidation occurring among thrift and bank issues.
Generally favorable second quarter earnings and the 30-year U.S. Treasury bond
yield declining below 6.50 percent sustained the positive trend in thrift prices
during July. The increase largely abated, however, in the first half of August
in conjunction with the selloff in the broader market. The SNL Index for all
publicly-traded thrifts closed at 659.4 on August 15, 1997, an increase of 62.3
percent from one year ago.
<PAGE>
RP Financial, LC.
Page 4.11
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts, including second step conversions, is also
an important consideration in determining the Bank's pro forma market value.
The favorable market environment for converting thrift issues has generally been
sustained during the first two quarters of 1997, with most offerings
experiencing oversubscriptions and trading higher in initial post-conversion
trading activity. As shown in Table 4.2, the median one week change in price
for the oversubscribed offerings completed during the latest three months
equaled positive 46.1 percent, partially reflecting the overall market
enthusiasm in general and for initial public offerings of non-financial services
companies.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts, both at the time of conversion and in
the aftermarket. The median pro forma price/tangible book ratio of recent
conversions, excluding second step conversions, was 71.4 percent. The current
average P/TB ratio of the four standard conversions completed in the most recent
three month period (and are NASDAQ listed) of 122.4 percent reflects a discount
of 14.4 percent from the average P/TB ratio of all publicly-traded SAIF-insured
thrifts (equal to 142.95 percent). In contrast, the one second step conversion
completed during the last three months maintained a pro forma price/tangible
book ratio of 89.1 percent and the stock had appreciated 12.5 percent by the end
of the first week.
The pricing ratios of the better capitalized but lower earning
recently converted thrifts (based on return on equity measures) suggest that the
investment community has determined to discount their stocks on a book basis
until the earnings improve through redeployment and leveraging of the proceeds
over the longer term.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks are currently exhibiting pricing ratios that are approaching historically
high levels. Investor interest in the new issue market has been favorable, as
most of the recently completed offerings have been oversubscribed and have
recorded healthy price increases in initial post-conversion trading activity.
C. Second Step Conversion Market
-----------------------------
There is a pronounced difference in the pricing of second step
conversions relative to full conversion offerings in which 100 percent of the
shares are issued. As noted in Table 4.4, during the past 18 months, the median
pro forma price/tangible book ratios of second step conversions equaled 88.6
percent, as
<PAGE>
RP Financial, LC.
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
<TABLE>
<CAPTION>
Institutional Information Pre-Conversion Data Offering Insider Purchases
------------------------------
Financial Info. Asset Quality Information
- --------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
---------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ Recog.
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. ESOP Plans
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- ----- ---- -----
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FirstSpartan Fin. Corp. SC *07/09/97 FSPT 388 11.81% 0.75% 44% 88.6 132% 1.6% 8.0% 4.0%
GSB Financial Corp. NY 07/09/97 GOSB $96 12.68% 0.07% 188% $22.5 132% 4.1% 8.0% 4.0%
FirstBank Corp. ID *07/02/97 FBNW 138 8.00% 0.99% 68% 19.8 132% 3.5% 8.0% 4.0%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 94 9.83% 0.91% 20% 11.9 132% 4.5% 8.0% 4.0%
Community First Bankg. Corp. GA 07/01/97 CFBC 366 7.02% 1.68% 40% 48.3 132% 2.9% 8.0% 4.0%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 72 6.78% 0.63% 89% 8.6 132% 4.7% 8.0% 4.0%
Security Bancorp TN 06/30/97 P. Sheet 46 5.46% 0.06% NM 4.4 132% 6.9% 8.0% 4.0%
Sistersville Bancorp WV 06/26/97 P. Sheet 27 17.91% 0.31% 198% 6.6 110% 6.8% 8.0% 4.0%
SFB Bancorp TN 05/30/97 P. Sheet 47 10.04% 0.80% 82% 7.7 132% 3.2% 8.0% 4.0%
Rocky Ford Financial CO 05/22/97 P. Sheet 21 13.92% 0.00% NA 4.2 132% 8.3% 8.0% 4.0%
Averages: $129 10.35% 0.62% 91% $22.3 130% 4.6% 8.0% 4.0%
Medians: 83 9.94% 0.69% 75% 10.2 132% 4.3% 8.0% 4.0%
Averages, Excluding 2nd Steps $133 10.40% 0.59% 101% $23.4 130% 4.7% 8.0% 4.0%
Medians, Excluding 2nd Steps 72 10.04% 0.63% 82% 8.6 132% 4.1% 8.0% 4.0%
<CAPTION>
Post IPO
Pricing
Institutional Information Pro Forma Data Trends
------------------------------------------------------
Insider
Purchases Pricing Ratios(4) Fin. Characteristics
- ------------------------------------------------------------------------------------------------------------------
Conversion Mgmt. IPO
Institution State Date Ticker & Dirs. P/TB P/E(5) P/A ROA TE/A ROE Price
- ----------- ----- ---- ------ ------- ---- ------ --- --- ---- --- -----
(%)(3) (%) (x) (%) (%) (%) (%) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FirstSpartan Fin. Corp. SC *07/09/97 FSPT 1.5% 72.4% 17.3 19.1% 1.1% 26.3% 4.2% $20.00
GSB Financial Corp. NY 07/09/97 GOSB 2.6% 72.5% 22.5 19.6% 0.9% 27.1% 3.2% 10.00
FirstBank Corp. ID *07/02/97 FBNW 8.2% 71.4% 22.8 12.9% 0.6% 18.0% 3.1% 10.00
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 4.6% 89.1% 24.1 16.0% 0.7% 17.9% 3.7% 10.00
Community First Bankg. Corp. GA 07/01/97 CFBC 1.0% 72.3% 24.5 11.9% 0.5% 16.4% 2.9% 20.00
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 9.8% 71.4% 16.7 10.9% 0.7% 15.2% 4.3% 10.00
Security Bancorp TN 06/30/97 P. Sheet 2.0% 72.0% 14.1 8.8% 0.6% 12.2% 5.1% 10.00
Sistersville Bancorp WV 06/26/97 P. Sheet 5.4% 65.0% 18.9 20.6% 1.1% 31.6% 3.4% 10.00
SFB Bancorp TN 05/30/97 P. Sheet 5.3% 70.1% 13.9 14.5% 1.0% 20.7% 5.1% 10.00
Rocky Ford Financial CO 05/22/97 P. Sheet 23.6% 67.9% 14.6 17.7% 1.2% 26.1% 4.6% 10.00
Averages: 6.4% 72.4% 18.9 15.2% 0.8% 21.2% 4.0% $12.00
Medians: 4.9% 71.7% 18.1 15.2% 0.8% 19.3% 3.9% 10.00
Averages, Excluding 2nd Steps 6.6% 70.6% 18.4 15.1% 0.8% 21.5% 4.0% $12.22
Medians, Excluding 2nd Steps 5.3% 71.4% 17.3 14.5% 0.9% 20.7% 4.2% 10.00
<CAPTION>
Institutional Information Post-IPO Pricing Trends
---------------------------------------------------
Closing Price:
- -------------------------------------------------------------------------------------------------------------------
First After After
Conversion Trader % First % First %
Institution State Date Ticker Day Chg. Week(6) Chg. Month(7) Chg.
- ----------- ----- ---- ------ ------ ---- ------- ---- -------- ----
($) (%) ($) (%) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FirstSpartan Fin. Corp. SC *07/09/97 FSPT $36.69 83.4% $36.62 83.1% $35.63 78.1%
GSB Financial Corp. NY 07/09/97 GOSB 14.63 46.3% 14.75 47.5% 14.38 43.8%
FirstBank Corp. ID *07/02/97 FBNW 15.81 58.1% 15.56 55.6% 17.88 78.8%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 11.13 11.3% 11.25 12.5% 11.75 17.5%
Community First Bankg. Corp. GA 07/01/97 CFBC 31.88 59.4% 33.00 65.0% 34.25 71.3%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 14.50 45.0% 14.38 43.8% 16.50 65.0%
Security Bancorp TN 06/30/97 P. Sheet 14.50 45.0% 15.00 50.0% 15.25 52.5%
Sistersville Bancorp WV 06/26/97 P. Sheet 13.75 37.5% 13.88 38.8% 14.00 40.0%
SFB Bancorp TN 05/30/97 P. Sheet 13.81 38.1% 13.38 33.8% 14.00 40.0%
Rocky Ford Financial CO 05/22/97 P. Sheet 13.00 30.0% 13.13 31.3% 13.50 35.0%
Averages: $17.97 45.4% $18.09 46.1% $18.71 52.2%
Medians: 14.50 45.0% 14.56 45.6% 14.81 48.1%
Averages, Excluding 2nd Steps $18.73 49.2% $18.85 49.9% $17.99 52.2%
Medians, Excluding 2nd Steps 14.50 45.0% 14.75 47.5% 15.25 52.5%
</TABLE>
August 11, 1997
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
<PAGE>
RP FINANCIAL, L.C.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
TABLE 4.3
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ---------------
----------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ --------------------------------------
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ------ ----- ------ ------ ------ ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Special Selection Grouping(8) 22.92 65.90 0.66 18.86 28.19 118.89 25.08 118.89 27.98
State of WA 28.25 1253.31 1.47 13.97 18.21 174.62 18.19 183.06 18.83
Comparable Group
- ----------------
Special Comparative Group(8)
- -----------------------------
CFBC Community First Bnkg Co. of GA 34.19 82.53 0.82 27.66 NM 123.61 20.29 123.61 NM
FBNW FirstBank Corp of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
FSPT FirstSpartan Fin. Corp. of SC 35.75 158.37 1.16 27.63 NM 129.39 34.06 129.39 NM
GOSB GSB Financial Corp. of NY 14.66 32.96 0.44 13.78 28.19 106.39 28.79 106.39 NM
MONT Montgomery Fin. Corp. of IN 11.75 19.42 0.42 11.22 NM 104.72 18.76 104.72 27.98
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------- ----------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------ ----- -------- ------ ------ ------ ---- ---- ---- ----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
Financial Institution
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Special Selection Grouping(8) 0.00 0.00 0.00 249 21.15 1.95 0.67 3.02 0.74 3.45
State of WA 0.44 1.43 24.56 7,519 10.40 0.72 0.92 9.00 1.02 11.19
Comparable Group
- ----------------
Special Comparative Group(8)
- -----------------------------
CFBC Community First Bnkg Co. of GA 0.00 0.00 0.00 407 16.42 NA 0.25 1.52 0.49 2.96
FBNW FirstBank Corp of Clarkston WA 0.00 0.00 0.0O 154 18.04 1.95 0.70 3.86 0.57 3.14
FSPT FirstSpartan Fin. Corp. of SC 0.00 0.00 0 00 465 26.32 NA 0.95 3.62 1.11 4 20
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 114 27.06 NA 1.02 3.77 0.86 3.19
MONT Montgomery Fin. Corp. of IN 0.00 0.00 0.00 104 17.91 NA 0.42 2.32 0.67 3.74
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operat1ng items (includ1ng 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 div1dend 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 c1rculars, and RP Financial, LC.
calculations. The information provided in this report has been obtained from
sources we bel1eve are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
-----------------------------------------------
Pricing Characteristics and After-Market Trends
Second Step Conversions
-----------------------------------------------
<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>
Montgomery Fin. Corp. IN 07/01/97 MONT $94 9.83% 0.91% 20% 11.9 132% 4.5% 8.0% 4.0% 4.6%
Cumberland Mtn. Bncshrs. KY *04/01/97 P. Sheet 92 5.14% 1.31% 19% 4.4 132% 8.0% 6.2% 4.0% 4.5%
Kenwood Bancorp OH *07/01/96 P. Sheet 48 6.88% 0.00% NM 1.6 102% 22.2% 8.0% 4.0% 6.4%
Commonwealth Bancorp PA *06/17/96 CMSB 2,054 6.71% 0.51% 109% 98.7 110% 1.9% 8.0% 4.0% 0.1%
Westwood Financial Corp. NJ 06/07/96 WWFC 85 7.05% 0.00% NM 3.9 99% 9.9% 0.0% 0.0% 2.5%
Jacksonville Bancorp TX 04/01/96 JXVL 198 10.47% 1.41% 36% 16.2 106% 4.4% 8.0% 4.0% 2.0%
North Central Bancshares IA 03/21/96 FFFD 180 16.47% 0.17% 562% 26 106% 3.5% 3.2% 0.0% 0.5%
Fidelity Financial of Ohio OH *03/04/96 FFOH 227 13.23% 0.50% 69% 22.8 132% 3.2% 8.0% 4.0% 5.6%
First Colorado Bancorp CO *01/02/96 FFBA 1,400 12.71% 0.31% 20% 134.1 105% 1.9% 10.0% 2.0% 2.0%
Charter Financial IL *12/29/95 CBSB 293 12.17% 0.27% 281% 29.2 116% 3.4% 3.3% 0.0% 0.1%
American Nat'l Bancorp MD *11/03/95 ANBK 426 6.80% 2.23% 67% 21.8 132% 3.3% 8.0% 4.0% 0.6%
First Defiance Fin. Corp. OH *10/02/95 FDEF 476 15.27% 0.24% 135% 64.8 132% 2.3% 8.0% 4.0% 0.9%
Community Bank Shares IN *04/10/95 CBIN 205 7.00% 0.33% 80% 10.1 132% 4.4% 8.0% 0.0% 17.9%
Fed One Bancorp WV *01/19/95 FOBC 305 9.2% 0.32% 142% 16.1 85% 7.7% 7.0% 4.0% 0.9%
Home Financial Corp. FL *10/25/94 HOFL 1,005 13.4% 0.91% 44% 175.6 112% 3.1% 8.0% 4.0% 0.6%
Jefferson Bancorp LA *08/18/94 JEBC 257 6.3% 0.9% 25% 16.1 107% 3.9% 7.0% 3.0% 1.5%
Average: $459 9.92% 0.65% 115% $40.1 115% 5.5% 6.8% 2.8% 3.2%
Medians: 242 9.54% 0.42% 68% $19.0 111% 3.7% 8.0% 4.0% 1.8%
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pro Forma Data Post-IPO Pricing Trends
--------------------------------------------- -----------------------
Pricing Ratios(4) Fin. Characteristics Closing Price:
- ------------------------------------------------------- ------------------------ -------------------- ----------------
First
IPO Trading %
Conversion P/TB P/E(7)P/Core P/A ROA TE/A ROE Price Day Chg.
Institution State Date Ticker ---- ------------ --- --- ---- --- ----- --- ----
- ----------- ----- ---- ------ (%) (x) (x) (%) (%) (%) (%) ($) ($) (%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Montgomery Fin. Corp. IN 07/01/97 MONT 89.1% 24.1 24.1 16.0% 0.7% 17.9% 3.7% 10.00 11.13 11.2%
Cumberland Mtn. Bncshrs. KY *04/01/97 P. Sheet 81.2% 13.8 13.8 7.1% 0.5% 8.8% 5.9% 10.00 11.88 18.8%
Kenwood Bancorp OH *07/01/96 P. Sheet 67.6% NM NM 6.0% 0.1% 8.8% 1.7% 10.00 NT NA
Commonwealth Bancorp PA *06/17/96 CMSB 09.3% 12.1 12.5 8.4% 0.7% 6.7% 10.4% 10.00 10.50 5.0%
Westwood Financial Corp. NJ 06/07/96 WWFC 80.0% 10.1 10.1 7.3% 0.7% 9.2% 7.9% 10.00 10.75 7.5%
Jacksonville Bancorp TX 04/01/96 JXVL 77.7% 14.9 14.9 12.6% 0.8% 16.2% 5.2% 10.00 9.75 -2.5%
North Central Bancshares IA 03/21/96 FFFD 74.2% 12.1 12.5 19.7% 1.6% 26.5% 6.1% 10.00 10.88 8.7%
Fidelity Financial of Ohio OH *03/04/96 FFOH 82.6% 18.1 18.1 16.6% 0.9% 20.0% 4.6% 10.00 10.50 5.0%
First Colorado Bancorp CO *01/02/96 FFBA 87.0% 12.7 13.4 13.2% 1.0% 15.2% 6.9% 10.00 11.44 14.4%
Charter Financial IL *12/29/95 CBSB 81.4% 12.3 12.3 15.5% 1.3% 19.1% 6.6% 10.00 10.81 8.1%
American Nat'l Bancorp MD *11/03/95 ANBK 83.9% 17.7 17.7 9.0% 0.5% 10.7% 4.7% 10.00 9.38 -6.3%
First Defiance Fin. Corp. OH *10/02/95 FDEF 85.6% 18.2 18.2 20.6% 1.1% 24.1% 4.7% 10.00 10.38 3.8%
Community Bank Shares IN *04/10/95 CBIN 85.5% 10.3 9.0 9.3% 0.9% 10.9% 8.3% 10.00 12.00 20.0%
Fed One Bancorp WV *01/19/95 FOBC 67.9% 9.0 9.0 8.8% 1.0% 13.0% 7.6% 10.00 11.00 10.0%
Home Financial Corp. FL *10/25/94 HOFL 86.4% 10.6 12.4 21.3% 2.0% 24.6% 8.2% 10.00 9.59 -4.1%
Jefferson Bancorp LA *08/18/94 JEBC 71.7% 10.2 10.2 7.9% 0.8% 11.1% 7.0% 10.00 13.00 30.0%
Average: 81.9% 13.7 13.9 12.4% 0.9% 15.2% 6.2%$10.00 $10.86 8.6%
Medians: 82.0% 12.3 13.5 10.9% 0.9% 14.1% 6.4%$10.00 $10.81 8.1%
- -------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
---------------------------------
Closing Price:
- ------------------------------------------------------- ---------------------------------
After After
First % First %
Conversion Week(5) Chg. Month(6) Chg.
Institution State Date Ticker ------- ---- -------- ----
- ----------- ----- ---- ------ ($) (%) ($) (%)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Montgomery Fin. Corp. IN 07/01/97 MONT 11.25 12.5% $12.13 21.2%
Cumberland Mtn. Bncshrs. KY *04/01/97 P. Sheet 12.25 22.5% 12.63 26.3%
Kenwood Bancorp OH *07/01/96 P. Sheet NT NA NT NA
Commonwealth Bancorp PA *06/17/96 CMSB 10.75 7.5% 10.00 0.0%
Westwood Financial Corp. NJ 06/07/96 WWFC 10.38 3.8% 10.62 6.2%
Jacksonville Bancorp TX 04/01/96 JXVL 9.63 -3.8% 9.88 -1.2%
North Central Bancshares IA 03/21/96 FFFD 10.69 6.9% 10.44 4.4%
Fidelity Financial of Ohio OH *03/04/96 FFOH 10.00 0.0% 10.13 1.3%
First Colorado Bancorp CO *01/02/96 FFBA 11.63 16.3% 12.00 20.0%
Charter Financial IL *12/29/95 CBSB 10.88 8.8% 11.38 13.8%
American Nat'l Bancorp MD *11/03/95 ANBK 9.75 -2.5% 9.88 -1.3%
First Defiance Fin. Corp. OH *10/02/95 FDEF 10.31 3.1% 10.13 1.3%
Community Bank Shares IN *04/10/95 CBIN 12.75 27.5% 12.25 22.5%
Fed One Bancorp WV *01/19/95 FOBC 11.00 10.0% 11.62 16.2%
Home Financial Corp. FL *10/25/94 HOFL 10.00 0.0% 10.31 3.1%
Jefferson Bancorp LA *08/18/94 JEBC 14.25 42.5% 14.25 42.5%
Average: $11.03 10.3% $11.17 11.7%
Medians: 10.75 7.5% 10.62 6.2%
</TABLE>
Note: "NT" - Not Traded; "NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts. August 6, 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) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Price to core earnings if converted after 9/30/96 due to impact of SAIF
assessment.
<PAGE>
RP Financial, LC.
Page 4.15
compared to the median price/tangible book of conversions over the last three
months which equaled 71.4 percent, perhaps reflecting the smaller offering and
some seasoning as a public company for second steps in general. Furthermore, as
shown in Table 4.5, assuming the publicly-traded MHCs completed second step
conversions (utilizing standard assumptions for each MHC) at their current
market prices, the implied median price/tangible book is computed at
approximately 88.9 percent -- apparently the investment community is factoring
in the potential impact of a second step conversion into the market price of
MHCs today. As noted above, the most recently completed second step conversion
closed at an 89.1 percent pro forma price/tangible book ratio. Accordingly,
before adjusting Heritage's value for fundamental differences, it would be
expected that the pro forma price/tangible book would share more pricing
similarity with the second step transactions than the standard stock conversion
offerings.
D. Acquisition Market
------------------
Also considered in the valuation was the potential impact on
Heritage's stock price of recently completed and pending acquisitions of other
thrifts operating in Heritage's market area. As shown in Exhibit IV-4, there
was one Northwest U.S. (Washington, Oregon, Idaho) thrift acquired in 1996 and
1997, but the Northwest U.S. market is home to several highly acquisitive
financial institutions and Northwest U.S. based institutions typically trade
with some acquisition speculation built into their stock prices. The
acquisition speculation involving Northwest U.S. thrifts may imply a certain
degree of acquisition speculation for the Bank's stock. To the extent that
acquisition speculation may impact the Bank's offering, we have largely taken
this into account in selecting primarily Northwest U.S. thrifts.
E. Market for Heritage Stock
-------------------------
Typically, we would consider the trading price of Heritage's minority
shares in the pro forma valuation of a second step stock offering of a mutual
holding company. However, Heritage stock is not listed on an exchange or NASDAQ
and trades on a very infrequent basis in privately negotiated transactions.
Accordingly, we concluded that such trading information had little relevance in
the pro forma valuation analysis.
* * * * * * * * * * *
Taking these factors and trends into account, primarily recent trends
in the new issue market, market conditions overall, and the 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.
<PAGE>
RP FINANCIAL, L.C.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.5
MHC INSTITUTIONS -- IMPLIED PRICING RATIOS FULL CONVERSION BASIS
FIRST LANCASTER FSB AND THE COMPARABLES
As of August 15, 1997
<TABLE>
<CAPTION>
Fully Converted
Implied Value Per Share (B)
------------------ ----------------
Implied Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ --------------------------------------
Share(1) Val(8) EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------ ------ ------ ------ ------ ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(7)
- -----------------------
Averages 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Medians --- --- --- --- 20.89 132.62 15.26 134.17 17.91
All Non-MHC State of WA(7)
- --------------------------
Averages 25.59 429.47 1.49 14.13 17.78 178.02 17.18 189.03 16.08
Medians --- --- --- --- 14.02 177.49 19.44 193.91 16.09
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 22.98 186.27 1.29 24.56 21.93 92.00 18.53 92.99 18.89
Medians --- --- --- --- 22.73 88.87 17.95 88.87 18.03
Publicly-Traded MHC Institutions, Full Conversion Basis
- --------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 25.62 130.41 1.53 26.57 22.88 96.42 17.60 96.42 16.75
FFFL Fidelity FSB, MHC of FL (47.4) 24.00 162.38 1.07 22.74 NM 105.54 16.25 106.01 22.43
SKBO First Carnegie, MHC of PA (45.0) 13.50 31.05 0.52 16.45 NM 82.07 18.89 82.07 25.96
FFSX First FS&LA, MHC of IA (46.0) 25.00 70.70 1.58 28.31 23.15 88.31 13.87 88.65 15.82
FSLA First SB SLA MHC of NJ (47.5) 27.75 201.58 1.58 25.78 24.56 107.64 17.95 114.06 17.56
GDVS Greater DV SB, MHC of PA (19.9) 16.25 53.17 0.72 19.58 NM 82.99 18.98 82.99 22.57
HARB Harbor FSB, MHC of FL (46.0) 45.75 227.38 3.20 39.73 17.53 115.15 18.63 116.98 14.30
HARS Harris SB, MHC of PA (24.2) 26.00 291.80 1.44 31.15 20.97 83.47 13.08 88.68 18.06
JXSB Jcksnville SB, MHC of IL (44.6) 17.62 22.41 0.99 21.46 NM 82.11 12.86 82.11 17.80
LFED Leeds FSB, MHC of MD (36.2) 22.00 76.01 1.22 25.00 23.16 88.00 23.56 88.00 18.03
NWSB Northwest SB, MHC of PA (29.9) 18.75 438.30 1.11 19.34 21.80 96.95 19.43 99.52 16.89
PBCT Peoples Bank, MHC of CT (37.4) 26.75 1633.17 1.49 27.82 14.46 96.15 18.35 96.19 17.95
PERT Perpetual of SC, MHC (46.8) 39.00 58.70 1.88 37.10 26.53 105.12 23.55 105.12 20.74
PFSL Pocahnts Fed, MHC of AR (46.4) 23.50 38.35 2.22 25.38 13.99 92.59 9.68 92.59 10.59
PHSB Ppls Home SB, MHC of PA (45.0) 14.75 40.71 0.85 21.17 29.50 69.67 16.43 69.67 17.35
PULB Pulaski SB, MHC of MO (29.0) 21.00 43.97 1.16 23.63 22.58 88.87 21.54 88.87 18.10
PLSK Pulaski SB, MHC of NJ (46.0) 14.37 29.75 0.69 16.72 NM 85.94 15.59 85.94 20.83
SBFL SB Fngr Lakes MHC of NY (33.1) 18.50 33.02 0.79 22.03 NM 83.98 14.04 83.98 23.42
TSBS Trenton SB, FSB MHC of NJ (35.0) 28.13 254.21 1.15 27.27 21.98 103.15 32.98 107.00 24.46
WAYN Wayne S&L Co. MHC of OH (47.8) 17.75 39.90 1.00 20.44 NM 86.84 14.51 86.84 17.75
WCFB Wbstr Cty FSB MHC of IA (45.2) 16.50 34.65 0.85 18.12 23.91 91.06 31.32 91.06 19.41
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------- ----------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ----- -------- ------ ------- ------ ------ ------ ------ ------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF - Insured Thrifts(7)
- -------------------------
Averages 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of WA(7)
- --------------------------
Averages 0.38 1.24 16.82 2,358 10.25 0.98 0.83 8.40 0.98 11.11
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 0.63 2.68 45.52 1,029 20.19 0.61 0.80 3.99 1.03 5.21
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.90 3.51 58.82 741 18.25 0.57 0.81 4.25 1.10 5.80
FFFL Fidelity FSB, MHC of FL (47.4) 0.80 3.33 74.77 999 15.40 0.30 0.57 3.45 0.78 4.73
SKBO First Carnegie, MHC of PA (45.0) 0.30 2.22 57.69 164 23.02 0.74 0.57 2.49 0.73 3.16
FFSX First FS&LA, MHC of IA (46.0) 0.48 1.92 30.38 510 15.71 0.11 0.61 3.88 0.89 5.68
FSLA First SB SLA MHC of NJ (47.5) 0.48 1.73 30.38 1,123 16.68 0.68 0.76 4.48 1.06 6.26
GDVS Greater DV SB, MHC of PA (19.9) 0.36 2.22 50.00 280 22.87 2.79 0.64 2.73 0.86 3.71
HARB Harbor FSB, MHC of FL (46.0) 1.40 3.06 43.75 1,220 16.18 0.46 1.10 6.75 1.35 8.28
HARS Harris SB, MHC of PA (24.2) 0.58 2.23 40.28 2,230 15.68 0.65 0.70 4.10 0.81 4.76
JXSB Jcksnv111e SB, MHC of IL (44.6) 0.40 2.27 40.40 174 15.66 0.39 0.44 2.57 0.80 4.63
LFED Leeds FSB, MHC of MD (36.2) 0.76 3.45 62.30 323 26.77 0.02 1.04 3.85 1.33 4.94
NWSB Northwest SB, MHC of PA (29.9) 0.32 1.71 28.83 2,256 20.04 0.72 0.94 4.48 1.21 5.79
PBCT Peoples Bank, MHC of CT (37.4) 0.68 2.54 45.64 8,901 19.08 0.90 1.32 6.85 1.06 5.51
PERT Perpetual of SC, MHC (46.8) 1.40 3.59 74.47 249 22.41 0.23 0.98 4.47 1.25 5.72
PFSL Pocahnts Fed, MHC of AR (46.4) 0.90 3.83 40.54 396 10.46 0.15 0.70 6.76 0.92 8.93
PHSB Ppls Home SB, MHC of PA (45.0) 0.00 0.00 0.00 248 23.58 NA 0.56 2.36 0.95 4.02
PULB Pulaski SB, MHC of MO (29.0) 1.00 4.76 NM 204 24.23 0.49 0.95 3.96 1.19 4.94
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 2.09 43.48 191 18.13 0.65 0.43 2.87 0.77 5.08
SBFL SB Fngr Lakes MHC of NY (33.1) 0.40 2.16 50.63 235 16.71 0.69 0.34 1.98 0.63 3.63
TSBS Trenton SB, FSB MHC of NJ (35.0) 0.35 1.24 30.43 771 31.97 0.73 1.61 4.76 1.44 4.28
WAYN Wayne S&L Co. MHC of OH (47.8) 0.62 3.49 62.00 275 16.71 0.70 0.49 2.90 0.82 4.91
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 4.85 NM 111 34.40 0.26 1.31 3.83 1.61 4.72
</TABLE>
(1) Current stock price of m1nority stock. Average of High/Low or Bid/Ask price
per share.
(2) EPS (estimated core earnings) is based on reported trailing twelve month
data, adjusted to omit non-operating gains and losses (including the SAIF
assessment) on a tax effected basis. Public MHC data reflects additional
earnings from reinvestment of proceeds of second step conversion.
(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. Ratios are pro
forma assuming a second step conversion to full stock form.
(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 (earnings adjusted to reflect second step
conversion).
(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 and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
(8) Figures estimated by RP Financial to reflect second step conversion of the
MHC to full stock form.
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 4.17
8. Management
----------
Heritage's management team has experience and expertise in all of the key
areas of the Bank's operations. Exhibit IV-5 lists Heritage's Board of Directors
and executive management with summary resumes. The Bank's operations to date
indicates that Heritage's management team, in conjunction with the Board, has
developed and implemented an effective operating philosophy. Heritage has no
apparent senior management or Board vacancies and there appears to be a well-
defined organizational structure. Similarly, the financial results of the Peer
Group companies indicate that they have been effectively managed, as all of the
Peer Group companies maintained healthy capital positions, solid core earnings
and favorable credit quality measures. We have therefore concluded that, in
general, Heritage is currently being operated at least as effectively as the
Peer Group companies and no adjustment for this factor was necessary.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
The Bank and most of the Peer Group companies were similarly impacted by
the recently enacted SAIF rescue legislation, as the affected institutions are
SAIF-insured and subject to the same one time assessment and their deposits will
be assessed at the same rate going forward. In summary, as a fully-converted
SAIF-insured savings bank, Heritage will operate in substantially the same
regulatory environment as the Peer Group members -- all of whom are adequately
capitalized institutions and are operating with no apparent restrictions.
Exhibit IV-6 reflects the Bank's pro forma regulatory capital ratios. On
balance, RP Financial concluded that no adjustment to the Bank's value was
warranted for this factor.
Summary of Adjustments
- ----------------------
Overall, we believe the Bank's pro forma market value should take into
account the valuation adjustments relative to the Peer Group:
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
Financial Condition No Adjustment
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth No Adjustment
Primary Market Area No Adjustment
Dividends No Adjustment
Liquidity of the Shares Slight Downward
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government
Regulations and Regulatory Reform No Adjustment
<PAGE>
RP Financial, LC.
Page 4.18
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 Heritage's to-be-issued stock -- the
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches
- -- all performed on a pro forma basis including the effects of the conversion
proceeds from selling the MHC's interest to the public. In computing the pro
forma impact of the conversion and the related pricing ratios, we have
incorporated the assumptions disclosed in Heritage's prospectus for offering
expenses, and the effective tax rate and stock benefit plan assumptions
(summarized in Exhibits IV-7 and IV-8). Each of the assumptions are described
more fully below.
o Conversion Expenses. The Bank 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 Bank to assist in
completing the conversion transaction.
o Effective Tax Rate. The Bank, in consultation with its outside
------------------
auditors, has determined the marginal effective tax rate on the net
reinvestment benefit of the conversion proceeds to be 34 percent based
on the statutory Federal rate.
o Reinvestment Rate. The pro forma section in the draft prospectus
-----------------
incorporates a 6.74 percent reinvestment rate, equivalent to the
arithmetic average of the yield on assets and the cost of deposits for
the fiscal year ended June 30, 1997. This calculated rate is
reasonably similar to the blended reinvestment rate in the first 12
months of the business plan post-conversion, reflecting the current
anticipated use of conversion proceeds, incorporating a flat rate
interest rate scenario and the estimated impact of deposit withdrawals
to fund purchases equal to 20 percent of the stock issued in the
conversion.
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 Bank'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 15 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.
o Consolidation of MHC Assets with Bank Assets. Concurrent with the
--------------------------------------------
conversion transaction $120,000 of equity held by the MHC will be
consolidated with the Bank. The method of accounting for the MHC
assets in the valuation is consistent with the methodology and formula
promulgated by the FDIC. Since the MHC assets in the instant case are
nominal, the valuation impact is likewise nominal.
o Impact of Waived Dividends by MHC. The MHC has waived $1.230 million in
---------------------------------
cash dividends to date, which pursuant to the FDIC dividend waiver
policy reduces the minority ownership from 33.69 percent currently to
32.12 percent on a converted basis. The Bank does not intend to pay
additional dividends until after the conversion is completed.
<PAGE>
RP Financial, LC.
Page 4.18
RP Financial's valuation considered each of the following valuation approaches
promulgated in the regulatory valuation guidelines, as described more fully
below:
o P/E Approach. The P/E approach is generally the best indicator of long-
------------
term value for a stock. Since the Bank and the Peer Group reported
pro forma earnings on both a core and reported basis, the P/E approach
was considered in this valuation. In applying this approach, we took
into account both reported earnings and estimated core earnings.
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. We have also modified the P/B approach to
exclude the impact of intangible assets (i.e., price/tangible book
value or "P/TB"). 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/TB approach to be a
reliable indicator of value given current market conditions,
particularly the market for new conversions, which often exhibit a
willingness to pay premium P/E multiples in the expectation that such
institutions will implement leveraging strategies to promote earnings
growth. At the same time, with lower ROE ratios, new conversions are
typically discounted on a book value basis relative to the market at
least until there is partial realization of leveraging strategies.
o P/A Approach. Investors typically do not place significant weight on
------------
simply the size of total assets as a determinant of market value
without making risk adjustments. This approach, as set forth in the
regulatory guidelines, does not take into account the amount of stock
purchases funded by deposit withdrawals, thus understating the pro
forma P/A ratio. Investors generally place significantly 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 a highly capitalized institution,
high P/A ratios may limit the investment community's willingness to
pay market multiples for earnings and book value when ROE is expected
to be low.
The Bank intends to adopt Statement of Position ("SOP" 93-6), which will
cause earnings per share computations to be based on shares issued and
outstanding excluding shares owned by an ESOP where there is not a commitment to
release such shares. For the purpose of preparing the pro forma pricing tables
and exhibits, we have reflected all shares issued in the offering including
shares purchased by the ESOP as outstanding to capture the full dilutive impact
of such stock to the Bank's shareholders. However, we have considered the impact
of adoption of SOP 93-6 on the Bank in the determination of the Bank's pro forma
value.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/TB and P/E approaches, followed by the P/A approach, RP
Financial concluded that the pro forma market value of the Bank's conversion
stock is $53,034,770 at the midpoint at this time (please note this valuation
figure reflects immaterial rounding of the stock offering amount to eliminate
fractional shares).
<PAGE>
RP Financial, LC.
Page 4.20
1. Price-to-Tangible Book ("P/TB"). The application of the P/TB valuation
-------------------------------
method requires calculating the Bank's pro forma market value by applying a
valuation P/TB ratio to Heritage's pro forma tangible book value. The Bank's
book value at June 30, 1997 equaled $27,714,000. The $120,000 of mutual holding
company assets will be consolidated with the Holding Company as a result of the
conversion. Based on the $53,034,770 midpoint valuation, Heritage's pro forma
P/TB ratio was 90.56 percent. In comparison to the average and median P/TB
ratios for the Peer Group of 156.63 percent and 141.29 percent, respectively,
Heritage's valuation reflected a 42.2 percent and 35.9 percent discount,
respectively, to the Peer Group average and median values. RP Financial
considered the discount under the P/TB approach to be reasonable in light of the
valuation adjustments discussed previously, the nature of the calculation of the
pro forma P/TB ratio which mathematically results in a ratio discounted to book
value, comparatively lower 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 Bank's pro forma market value by applying a valuation
P/E multiple times the pro forma earnings base. Ideally, the pro forma earnings
base is composed principally of the Bank's recurring earnings base, that is,
earnings adjusted to exclude any one-time non-operating items, plus the
estimated after-tax earnings benefit of the reinvestment of net conversion
proceeds. The typical financial institution's earnings are more heavily
influenced by standard sources of profitability rather than on gains, and thus
we look to base the valuation primarily on "core" profitability. In the case of
Heritage, however, gains on sale of loans stemming from the Bank's mortgage
banking activities have represented approximately 80 percent of pre-tax profits
on average over the last five fiscal years. In Table 1.2, we evaluated the
Bank's adjusted earnings inclusive and exclusive of the gains on sale of loans,
both excluding non-operating items (the special SAIF assessment, the gain on the
sale of premises and the reversal of the tax liability). In evaluating the Peer
Group, we have computed core earnings, which excludes all gains/losses as well
as the impact of the SAIF assessment and extraordinary items. (Note: the
adjustments applied to the Peer Group's earnings in the calculation of core
earnings are shown in Exhibit IV-9, including the SAIF assessment.) The same
adjustments applied to the Bank would result in "core" earnings being very low,
given the Bank's earnings composition. At the same time, the Bank's reported
earnings are misleading particularly given the reversal of the deferred tax
liability. For these reasons, we have considered both reported earnings of
$2.269 million and "core" earnings of $0.675 million (computed in the same
fashion as the Peer Group's core earnings) in reaching a valuation conclusion.
We have also considered the Bank's adjusted earnings to account only for the
non-operating items (the special SAIF assessment and the gain on sale of
premises) and the reversal of the deferred tax liability, approximating $1.999
million. In comparison, the Bank's business plan indicates an annual earnings
rate of $2.26 million on a pre-conversion basis.
<PAGE>
RP Financial, LC.
Page 4.21
Based on the $53,034,770 midpoint value and the three earnings figures
referenced above, the indicated pro forma P/E multiples at the midpoint and
supermaximum relative to the Peer Group medians are as follows:
<TABLE>
<CAPTION>
Peer
Heritage Heritage Group
Midpoint Supermax Median
<S> <C> <C> <C>
Reported Earnings 15.98x 19.14x 22.12x
"Core" Earnings (excludes gain on sale of loans) 30.73x 33.87x 19.28x
Adjusted Earnings (includes gains on sale of loans) 17.39x 20.66x N/A
</TABLE>
RP Financial also considered the impact of SOP 936 in examining the Bank's
P/E ratios.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio to the Bank's pro forma asset
base, conservatively assuming no deposit withdrawals are made to fund stock
purchases. In all likelihood there will be deposit withdrawals, which results
in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, Heritage's value equaled 19.43 percent of pro
forma assets. Comparatively, the Peer Group companies exhibited an average P/A
ratio of 19.95 percent, which implies a 2.6 percent discount being applied to
the Bank's pro forma P/A ratio.
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 on average closed their offerings
at their supermaximum levels given the oversubscribed nature of their offerings
and prevailing market conditions at closing, indicating an average
price/tangible book ratio of 71.7 percent. On average, the prices of recent
conversions appreciated by 46.1 percent after one week. In comparison, the
Bank's P/TB ratio at the appraised midpoint reflects a premium relative to the
closing ratios, 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).
<PAGE>
RP Financial, LC.
Page 4.22
Valuation Conclusion
- --------------------
It is our opinion that, as of August 15, 1997, the aggregate pro forma
market value of the Bank, inclusive of the sale of the MHC's ownership interest
in the Subscription and Community Offering was $53,034,770 at the midpoint.
Based on this valuation and the approximate 67.88 percent ownership interest
being sold in the Subscription and Community Offerings, the midpoint value of
the Holding Company's stock offering was $36,000,000 (i.e., 0.6788 x
$53,034,770), equal to 3,600,000 shares at a per share value of $10.00. Pursuant
to regulatory conversion guidelines, the 15 percent offering range includes a
minimum offering value of $30,600,000 and a maximum value of $41,400,000. Based
on the $10.00 per share offering price, this range equates to an offering of
3,060,000 shares at the minimum to 4,140,000 shares at the maximum. The Holding
Company's offering also includes a provision for a superrange, which if
exercised, would result in an offering size of $47,610,000, equal to 4,761,000
shares at the $10.00 per share offering price. The comparative pro forma
valuation ratios relative to the Peer Group are shown in Table 4.6, and the key
valuation assumptions are detailed in Exhibit IV-7. The pro forma calculations
for the range are detailed in Exhibit IV-8.
Establishment of Exchange Ratio
- -------------------------------
The conversion regulations provide that in a conversion of a mutual holding
company, the minority stockholders are entitled to exchange their shares of the
Bank's common stock for common stock of the Holding Company. The Board of
Trustees of the Mutual Holding Company has independently established a formula
to determine the exchange ratio. The formula has been designed to preserve the
current aggregate percentage ownership in the Bank represented by the Minority
Shares, adjusted for the impact of waived dividends and Mutual Holding Company
assets, which is an approximate 32.12 percent ownership interest. Pursuant to
the formula, the Exchange Ratio will be determined at the end of the Holding
Company's stock offering based on the total number of shares sold in the
Subscription and Community offerings. Based upon this formula, and the
valuation conclusion and offering range concluded above, the Exchange Ratio
would be 2.3752 shares, 2.7943 shares, 3.2135 shares and 3.6955 shares of
Heritage Financial Corp. stock issued for each Minority Share, at the minimum,
midpoint, maximum and supermaximum of the offering, respectively.
The Exchange Ratio formula and share exchange procedures were determined
independently by the Board of Directors. RP Financial expresses no opinion on
the proposed exchange of Holding Company shares for the Minority Shares or on
the proposed Exchange Ratio.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.6
Public Market Pricing
Heritage Bank and the Comparables
as of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
-------------- Core Book Pricing Ratios (3)
Price Market 12-Mth Value/ ------------------------------------------
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------ ------- ------ ---- ---- ----- ------ ------
($) ($MIL) ($) ($) (X) (%) (%) (%) (X)
Heritage Bank
- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange 10.00 70.15 0.52 9.78 19.14 102.21 24.78 102.21 33.87
Range Maximum 10.00 61.00 0.57 10.37 17.53 96.44 21.97 96.44 32.33
Range Midpoint 10.00 53.04 0.63 11.04 15.98 90.56 19.43 90.56 30.73
Range Minimum 10.00 45.09 0.70 11.95 14.27 83.66 16.80 83.66 28.80
SAIF-Insured Thrifts(7)
- -----------------------
Averages 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Medians --- --- --- --- 20.89 132.62 15.26 134.17 17.91
All Non-MHC State of WA(7)
- --------------------------
Averages 28.25 1253.31 1.47 13.97 18.21 174.62 18.19 183.06 18.83
Medians --- --- --- --- 14.02 177.49 19.44 193.91 16.09
Comparable Group Averaqes
- -------------------------
Averages 21.84 148.05 1.17 14.72 21.71 151.65 19.95 156.63 19.61
Medians --- --- --- --- 22.12 136.74 20.32 141.29 19.28
State of WA
- -----------
CASB Cascade SB of Everett WA(7) 14.75 37.92 0.77 8.46 24.18 174.35 10.76 174.35 19.16
FMSB First Mutual SB of Bellevue WA 21.75 58.77 1.52 10.91 13.94 199.36 13.60 199.36 14.31
FWWB First Savings Bancorp of WA 24.50 257.72 0.84 14.13 27.53 173.39 25.58 188.46 29.17
FBNW FirstBank Corp of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
HRZB Horizon Financial Corp. of WA 15.00 111.26 1.05 10.91 14.02 137.49 21.45 137.49 14.29
IWBK Interwest SB of Oak Harbor WA 39.75 319.43 2.47 15.46 21.64 257.12 17.43 262.90 16.09
STSA Sterling Financial Corp. of WA 17.75 98.81 0.90 12.41 NM 143.03 5.86 164.05 19.72
WFSL Washington FS&LA of Seattle WA 26.62 1263.44 2.14 14.66 13.72 181.58 21.93 198.81 12.44
WAMU Washington Mutual Inc. of WA 62.37 7880.89 2.42 19.30 NM NM 16.16 NM 25.77
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 17.25 45.32 0.97 17.18 22.12 100.41 21.77 100.41 17.78
FFHH FSF Financial Corp. of MN 18.12 54.96 0.99 14.16 23.23 127.97 14.53 127.97 18.30
FFBA First Colorado Bancorp of Co 17.50 289.82 0.82 11.60 20.83 150.86 19.20 150.86 21.34
FMSB First Mutual SB of Bellevue WA 21.75 58.77 1.52 10.91 13.94 199.36 13.60 199.36 14.31
FWWB First Savings Bancorp of WA 24.50 257.72 0.84 14.13 27.53 173.39 25.58 188.46 29.17
HRZB Horizon Financial Corp. of WA 15.00 111.26 1.05 10.91 14.02 137.49 21.45 137.49 14.29
IWBK Interwest SB of Oak Harbor WA 39.75 319.43 2.47 15.46 21.84 257.12 17.43 262.90 16.09
KFBI Klamath First Bancorp of OR 19.31 193.47 0.83 14.20 NM 135.99 26.58 135.99 23.27
UBMT United Fin. Corp. of MT 23.50 28.74 1.16 19.95 25.00 117.79 26.68 117.79 20.26
WSTR WesterFed Fin. Corp. of MT 21.75 121.04 1.02 18.73 26.85 116.12 12.67 145.10 21.32
</TABLE>
<TABLE>
<CAPTION>
Financial Characteristics(6)
Dividends(4) ----------------------------------------------------
----------------------- Reported Core MEMO:
Amount/ Payout Total Equity/ NPAs/ ------------ ----------- Exchange MEMO:
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROA Ratio Offering
------- ----- ------ ------ ------ ------ ---- ----- ----- ---- -------- --------
($) (%) (%) ($MIL) (%) (%) (%) (%) (%) (%) ($MIL)
Heritage Bank
- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange 0.10 1.01 19.41 283 24.24 0.05 1.29 5.34 0.73 3.02 3.6972 47.6
Range Maximum 0.12 1.17 20.44 278 22.78 0.05 1.25 5.50 0.68 2.98 3.2150 41.4
Range Midpoint 0.13 1.34 21.43 273 21.45 0.05 1.22 5.67 0.63 2.95 2.7956 36.0
Range Minimum 0.16 1.58 22.52 268 20.08 0.05 1.18 5.86 0.58 2.90 2.3763 30.6
SAIF-Insured Thrifts(7)
- -----------------------
Averages 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of WA(7)
- --------------------------
Averages 0.44 1.43 24.56 7,519 10.40 0.72 0.92 9.00 1.02 11.19
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averaqes
- -------------------------
Averages 0.44 2.09 35.69 768 14.28 0.30 0.97 7.38 1.11 8.41
Medians --- --- --- --- --- --- --- --- --- ---
State of WA
- -----------
CASB Cascade SB of Everett WA(7) 0.00 0.00 0.00 352 6.17 0.39 0.46 7.49 0.58 9.46
FMSB First Mutual SB of Bellevue WA 0.20 0.92 13.16 432 6.82 0.01 1.02 15.34 1.00 14.95
FWWB First Savings Bancorp of WA 0.28 1.14 33.33 1,008 14.75 0.30 1.05 6.25 1.00 5.90
FBNW FirstBank Corp of Clarkston WA O.00 0.00 0.00 154 18.04 1.95 0.70 3.86 0.57 3.14
HRZB Horizon Financial Corp. of WA 0.40 2.67 38.10 519 15.60 NA 1.57 9.99 1.54 9.80
IWBK Interwest SB of Oak Harbor WA 0.60 1.51 24.29 1,833 6.78 0.64 0.87 12.91 1.18 17.52
STSA Sterling Financial Corp. of WA 0.00 0.00 0.00 1,686 4.10 0.61 0.10 2.46 0.32 7.91
WFSL Washington FS&LA of Seattle WA 0.92 3.46 42.99 5,760 12.08 0.73 1.67 14.37 1.84 15.85
WAMU Washington Mutual Inc. of WA 1.08 1.73 44.63 48,764 5.00 0.81 0.35 6.81 0.74 14.45
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 0.28 1.62 28.87 208 21.69 0.73 1.07 4.43 1.33 5.51
FFHH FSF Financial Corp. of MN 0.50 2.76 50.51 378 11.35 0.03 0.66 5.22 0.84 6.63
FFBA First Colorado Bancorp of Co 0.44 2.51 53.66 1,510 12.73 0.23 0.92 6.21 0.90 6.07
FMSB First Mutual SB of Bellevue WA 0.20 0.92 13.16 432 6.82 0.01 1.02 15.34 1.00 14.95
FWWB First Savings Bancorp of WA 0.28 1.14 33.33 1,008 14.75 0.30 1.05 6.25 1.00 5.90
HRZB Horizon Financial Corp. of WA 0.40 2.67 38.10 519 15.60 NA 1.57 9.99 1.54 9.80
IWBK Interwest SB of Oak Harbor WA 0.60 1.51 24.29 1,833 6.78 0.64 0.87 12.91 1.18 17.52
KFBI Klamath First Bancorp of OR 0.30 1.55 36.14 728 19.55 0.08 0.81 3.67 1.23 5.54
UBMT United Fin. Corp. of MT 0.98 4.17 NM 108 22.65 0.42 1.09 4.70 1.34 5.80
WSTR WesterFed Fin. Corp. of MT 0.44 2.02 43.14 956 10.91 0.25 0.63 5.09 0.79 6.41
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.24
Table 4.7
Heritage Bank
Calculation of Exchange Ratios
<TABLE>
<CAPTION>
Shares Price/ Exchange Implied
Offered Share Shares(1) Exch. Ratio(2)
--------- ------ ------------ --------------
<S> <C> <C> <C> <C>
Super Maximum 4,761,000 $10.00 2,252,847 3.6955
Maximum 4,140,000 10.00 1,958,998 3.2135
Midpoint 3,600,000 10.00 1,703,476 2.7943
Minimum 3,060,000 10.00 1,447,955 2.3792
</TABLE>
(1) Calculated to preserve the Minority Shares percentage ownership in the
Holding Company at 32.12 percent.
(2) Calculated as pro forma exchange shares divided by 609,616 existing
Minority Shares outstanding.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
I-1 Map of Office Location
I-2 Heritage Bank's Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Fixed Rate and Adjustable Rate Loans
I-8 Gap Analysis
I-9 Loan Portfolio Composition
I-10 Contractual Maturity Of Assets and Liabilities
I-11 Non-Performing Assets
I-12 Deposit Composition
II-1 Historical Interest Rates
II-2 Demographic/Economic Reports
II-3 Sources of Personal Income/Employment Sectors
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 State of Washington Peer Thrifts
III-3 Northwest U.S. and Western U.S. Peer Thrifts
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS (continued)
<TABLE>
<S> <C>
IV-1 Stock Prices: August 15, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Directors and Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
</TABLE>
<PAGE>
EXHIBIT I-1
Heritage Bank
Map of Office Location
<PAGE>
EXHIBIT I-1
Heritage Bank
Map of Office Location
[MAP OF HERITAGE SAVINGS BANK BRANCH LOCATIONS APPEAR HERE]
<PAGE>
EXHIBIT I-2
Heritage Bank
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Heritage Bank
Key Operating Ratios
<PAGE>
EXHIBIT 1-3
Heritage Bank
Key Operating Ratios
<TABLE>
<CAPTION>
For the Years Ended June
30
-------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operations Data:
Net interest income $6,363 $6,788 $8,227 $8,332 $9,512
Provision for loan losses 926 - - - (270)
Noninterest income 4,648 4,019 3,040 4,298 3,347
Noninterest expense(1) 6,178 7,421 7,425 8,422 11,105
Federal Income Tax Expense (Benefit) 2,061 1,154 1,308 1,435 (245)
Net income 1,846 2,232 2,534 2,773 2,269
Earnings per share (2) N.A. $1.28 $1.41 $1.54 $1.26
Performance Ratios:
Net interest spread(3)
Net interest margin(4) 3.73% 3.83% 4.75% 4.31% 4.59%
Efficiency ratio(1) 56.11% 68.67% 65.90% 66.68% 77.89%
Return on average assets 1.03% 1.18% 1.30% 1.31% 0.98%
Return on average equity 15.22% 13.06% 11.62% 11.33% 8.49%
<CAPTION>
At June 30
----------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $ 179,246 $ 194,102 $ 204,897 $ 222,052 $ 242,164
Loans receivable, net 121,362 123,258 150,526 161,746 199,188
Loans held for sale 7,435 4,110 5,944 5,286 6,323
Deposits 153,266 165,922 174,797 191,119 209,781
FHLB advances - - - - 890
Other borrowed funds 7,174 4,100 3,525 - -
Stockholders' equity $ 12,863 $ 20,662 $ 23,065 $ 25,633 $ 27,714
Book value per share N.A. $ 11.48 $ 12.78 $ 14.20 $ 15.31
Equity to assets ratio 7.18% 10.64% 11.26% 11.54% 11.44%
Asset Quality Ratios:
Nonperforming loans to loans 0.07% 0.07% 0.06% 0.03% 0.06%
Allowance for loan losses to loans 1.27% 1.32% 1.09% 1.11% 1.32%
Allowance for loan losses to
nonperforming loans 1709.28% 1776.04% 1791.67% 3672.55% 2069.17%
Nonperforming assets to total assets 0.14% 0.05% 0.05% 0.02% 0.05%
Other Data:
Number of banking offices 5 5 7 8 10
Number of full-time equivalent employees 98 119 116 136 145
</TABLE>
- ------------------------
(1) The efficiency ratio is recurring noninterest expense divided by the sum of
net interest income and noninterest income. The Bank paid a one-time deposit
assessment of $1.09 million to the FDIC. Savings Association Insurance Fund
in November 1996, which was excluded from the calculation of the efficiency
ratio for 1997.
(2) The Bank became a stock Bank as of January 31, 1994. Per share data prior to
1994 is not applicable. The earnings per share data for 1994 is calculated
using only the earnings for the five months ended June 30, 1994. Weighted
average number of shares of Common Stock outstanding during the years ended
June 30, 1994, 1995, 1996 and 1997 were 1,800,000, 1,305, 166, 1,807,910,
and _______ respectively.
(3) Net interest spread is total interest earned on interest earning assets less
total cost of interest bearing liabilities.
(4) Net interest margin is net interest income divided by average interest
earning assets.
<PAGE>
EXHIBIT I-4
Heritage Bank
Investment Portfolio Composition
<PAGE>
EXHIBIT I-4
Heritage Bank
Investment Portfolio Composition
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
June 30, 1995:
U.S. Government and its agencies $18,094 $ 24 $ (70) $18,048
Mortgagebacked securities 7,465 314 (5) 7,774
------- ---- ----- -------
Total held for investment 25,559 338 (75) 25,822
June 30, 1996:
U.S. Government and its agencies 15,292 5 (127) 15,170
Mortgagebacked securities 5,979 159 (2) 6,136
------- ---- ----- -------
Total held for investment 21,271 164 (129) 21,306
June 30, 1997:
U.S. Government and its agencies 8,506 9 (17) 8,498
Mortgagebacked securities 5,159 224 (3) 5,380
------- ---- ----- -------
Total held for investment $13,665 $233 $ (20) $13,878
======= ==== ===== =======
</TABLE>
<PAGE>
EXHIBIT I-5
Heritage Bank
Yields and Costs
<PAGE>
EXHIBIT I-5
Heritage Bank
Yields and Costs
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
INTEREST INTEREST INTEREST
AVERAGE EARNED/ AVERAGE AVERAGE EARNED/ AVERAGE AVERAGE EARNED/ AVERAGE
BALANCE (1) PAID RATE BALANCE (1) PAID RATE BALANCE (1) PAID RATE
---------- ---- ---- ----------- ---- ---- ---------- ---- ----
(DOLLARS IN THOUSANDS)
INTEREST EARNINGS ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $142,598 $13,115 9.20% $160,823 $14,894 9.26% $182,791 $16,743 9.16%
Mortgage backed securities 9,231 722 7.82 6,715 552 8.22 5,598 464 8.29
Investment securities and
FHLB stock 22,516 1,118 4.97 15,096 854 5.66 12,360 757 6.12
Interest earnings deposits 5,837 268 4.59 10,820 575 5.31 10,414 548 5.26
-------- ------- ------ -------- ------- ----- -------- ------- -----
Total interests earnings assets 180,182 15,223 8.45% 193,454 16,875 8.72% 211,163 18,512 8.77%
Noninterest earning assets 14,741 18,225 20,368
-------- -------- --------
Total assets $194,923 211,679 231,531
INTEREST BEARING LIABILITIES:
Certificates of deposit $ 89,602 $ 4,415 4.93% $109,559 $ 6,336 5.78% $119,133 $ 6,599 5.54%
Savings accounts 28,178 927 3.29 28,407 1,030 3.63 29,703 1,055 3.55
Interest bearing demand deposits 40,594 1,297 3.19 36,930 1,162 3.15 42,271 1,355 3.18
-------- ------- ------ -------- ------- ----- -------- ------- -----
Total interest bearing deposits 158,374 6,639 4.19 174,896 8,528 4.88 191,107 8,999 4.71
FHLB advances 658 41 6.23 -- -- 27 1 4.99
Other borrowed funds 3,453 316 9.15 164 15 9.15 -- --
-------- ------- ------ -------- ------- ----- -------- ------- -----
Total interest bearing 162,485 6,996 4.31 175,060 8,543 4.88 191,134 9,000 4.71
liabilities
Demand and other noninterest
bearing deposits 6,001 6,537 7,955
Other noninterest bearing
liabilities 4,830 5,607 5,716
Stockholders' equity 21,607 24,475 26,726
-------- -------- --------
Total liabilities and
stockholders' equity $194,923 $211,679 $231,531
Net interest income $ 8,227 $ 8,332 $ 9,512
Net interest spread 4.14% 3.84% 4.06%
Net interest margin 4.57% 4.31% 4.50%
Average interest earning assets
to average interest bearing
liabilities 110.39% 110.51% 110.48%
</TABLE>
<PAGE>
EXHIBIT I-6
Heritage Bank
Loan Loss Allowance Activity
<PAGE>
EXHIBIT 1-6
Heritage Bank
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total loans outstanding at end of period(1) $ 130,449 $ 129,074 $ 158,190 $ 168,903 $ 208,192
Average loans outstanding during period $ 125,829 $ 123,800 $ 144,266 $ 161,501 $ 184,617
Allowance balance at beginning of period $ 2,511 $ 1,658 $ 1,705 $ 1,720 $ 1,873
Provision for loan losses 926 - - - (270)
Charge-offs:
Real estate (2) (1,866) - - - -
Commercial - - - - (3)
Consumer - - - - -
--------- --------- --------- --------- ---------
Total charge-offs (1,866) - - - (3)
========= ========= ========= ========= =========
Recoveries:
Real estate (2) 87 47 15 153 1,152
Commercial - - - - -
Consumer - - - - -
--------- --------- --------- --------- ---------
Total recoveries 87 47 15 153 1,152
--------- --------- --------- --------- ---------
Net (charge-offs) recoveries (1,779) 47 15 153 1,149
--------- --------- --------- --------- ---------
Allowance balance at end of period $ 1,658 $ 1,705 $ 1,720 $ 1,373 $ 2,752
========= ========= ========= ========= =========
Ratio of net (charge-offs) recoveries
during period to average loans outstanding (1.41%) (0.04%) (0.01%) (0.09%) 0.62%
========= ========= ========= ========= =========
</TABLE>
- ------------
(1) Includes loans held for sale
(2) During this five year period, all of the charge-offs and recoveries shown
under the Real Estate category relate to real estate mortgages. None of the
above activity related to real estate construction loans.
<PAGE>
EXHIBIT I-7
Heritage Bank
Fixed Rate and Adjustable Rate Loans
<PAGE>
EXHIBIT I-7
Heritage Bank
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------
Within 1-5 After
1 year years 5 years Total
---------- --------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial $17,341 $ 8,791 $13,313 $39,445
Real estate construction 10,718 2,364 630 13,712
------- ------- ------- -------
Total $28,059 $11,155 $13,943 $53,157
======= ======= ======= =======
Fixed rate loans - $ 6,444 $ 5,396 $11,840
Variable or adjustable
rate loans - 4,711 8,547 13,258
------- ------- ------- -------
Total $ - $11,155 $13,943 $25,098
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT I-8
Heritage Bank
Gap Analysis
<PAGE>
EXHIBIT 1-8
Heritage Bank
Gap Analysis
<TABLE>
<CAPTION>
ESTIMATED MATURITY OR REPRICING WITHIN
------------------------------------------------------------------------------------
0-3 4-12 1-5 5-10 MORE THAN
MONTHS MONTHS YEARS YEARS 10 YEARS TOTAL
------ ------ ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $ 45,321 $ 77,607 $ 57,294 $ 23,942 $ 4,029 $ 208,193
Mortgage backed securities - 35 23 207 4,894 5,159
Investment securities 321 3,496 4,689 - - 8,506
FHLB stock 1,511 - - - - 1,511
Interest earning deposits 175 - - - - 175
-------- -------- -------- -------- --------- ---------
Total interest earning assets $ 47,328 $ 81,138 $ 62,006 $ 24,149 $ 8,923 $ 223,544
Noninterest earning assets 18,620
---------
Total assets $ 242,164
=========
INTEREST BEARING LIABILITIES
Deposits
Certificates of deposit 35,412 78,394 12,866 109 - 126,781
Savings accounts 2,417 6,084 15,074 3,998 801 28,374
Interest bearing demand
and money market deposits 9,879 15,921 15,889 2,863 585 45,137
-------- -------- -------- -------- --------- ---------
Total interest bearing
deposits 47,708 100,399 43,829 6,970 1,386 200,292
FHLB advances 890 - - - - 890
-------- -------- -------- -------- --------- ---------
Total interest bearing
liabilities 48,598 100,399 43,829 6,970 1,386 201,182
Noninterest bearing liabilities and
equity 40,982
---------
Total liabilities and equity $ 242,164
=========
Rate sensitivity gap $ (1,270) $ (19,261) $ 18,177 $ 17,179 $ 7,537 $ 22,362
Cumulative rate sensitivity gap:
Amount (1,270) (20,531) (2,354) 14,825 22,362
As a percentage of interest-earning (0.57%) (9.18%) (1.05%) 6.63%
assets
</TABLE>
<PAGE>
EXHIBIT I-9
Heritage Bank
Loan Portfolio Composition
<PAGE>
EXHIBIT I-9
Heritage Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---------------- --------------- ----------------- ----------------- ---------------
% of % of % of % of % of
Balance Total Balance Total Balance Total Balance Total Balance Total
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial
Real Estate Mortgages $ 1,203 0.92% $ 4,902 3.80% $ 9,983 6.31% $ 18,269 10.82% $ 39,445 18.95%
One- to four-family
residential (1) 73,431 56.29 70,019 54.25 90,985 57.52 93,157 55.15 103,438 49.68
Five or more family
residential and
commercial properties 40,395 30.97 39,731 30.78 38,494 24.33 42,560 25.20 51,209 24.60
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total real estate
mortgages 113,826 87.26 109,750 85.03 129,479 81.85 135,717 80.35 154,647 74.28
Real estate construction
One- to four-family
residential 12,115 9.29 13,251 10.27 16,504 10.43 14,509 8.59 12,683 6.09
Five or more family
residential and
commercial properties 2,970 2.28 -- 0.00 1,538 0.97 393 0.23 1,029 0.49
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total real estate
construction 15,085 11.56 13,251 10.27 18,042 11.41 14,902 8.82 13,712 6.59
Consumer 997 0.76 1,934 1.50 1,812 1.15 1,105 0.65 1,467 0.70
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total loans $131,111 100.51% $129,837 100.59% $159,316 100.71% $169,993 100.65% $209,271 100.52%
Less deferred loan fees
and other (662) (-0.51) (763) (-0.59) (1,126) (-0.71) (1.090) (-0.65) (1,079) (-0.52)
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Net loans $130,449 100.00% $129,074 100.00% $158,190 100.00% $168,903 100.00% $208,192 100.00%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
- --------------------
(1) Includes loans held for sale of $7,435, $4,110, $5,944, $5,286 and $6,322,
respectively.
<PAGE>
EXHIBIT I-10
Heritage Bank
Contractual Maturity of Assets and Liabilities
<PAGE>
EXHIBIT I-10
Heritage Bank
Contractual Maturity of Assets and Liabilities
<TABLE>
<CAPTION>
BY EXPECTED MATURITY DATE
-------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------------------
After Fair
1998 1999 2000 2001 2002 2002 Total Value
----------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities
Amounts maturing:
Fixed rate $ 3,817 $ 4,689 $ - $ - $ - $ - $ 8,506 $ 8,498
Weighted average
interest rate 5.87% 5.83% 5.85%
MORTGAGE BACKED SECURITIES
Amounts maturing:
Fixed rate $ - - - $ 23 $ - $ 5,101 $ 5,124 $ 5,343
Weighted average
interest rate 8.50% 8.30% 8.30%
Adjustable rate - - - - - 35 35 37
Weighted average
interest rate 8.28% 5.85%
-----------------------------------------------------------------------------------------------------
Totals - $ - $ - $ 23 $ - $ 5,136 5,159 $ 5,380
8.50% 8.30% 8.30%
LOANS
Amounts maturing
Fixed rate $ 8,373 $ 1,910 $1,641 $ 930 $ 7,967 $ 86,982 $107,803 $ 98,396
Weighted average
interest rate 8.94% 8.93% 9.15% 9.31% 8.90% 8.59% 8.66%
Adjustable rate $ 29,351 5,908 1,001 2,704 3,913 57,513 100,390 110,948
Weighted average
interest rate 9.62% 9.05% 9.48% 9.67% 9.01% 8.69% 9.03%
-----------------------------------------------------------------------------------------------------
Totals $ 37,724 $ 7,818 $2,642 $3,634 $11,880 $144,495 $208,193 $209,845
9.47% 9.02% 9.27% 9.57% 8.94% 8.63% 8.84%
CERTIFICATE OF DEPOSIT
Amount maturing:
Fixed Rate $113,806 $10,437 $2,299 $ 61 $ 69 $ 109 $126,781 $126,568
Weighted average
interest rate 5.46% 5.57% 5.75% 5.35% 5.14% 6.60% 5.47%
</TABLE>
<PAGE>
EXHIBIT I-11
Heritage Bank
Non-Performing Assets
<PAGE>
EXHIBIT I-11
Heritage Bank
Non-Performing Assets
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------------------------------------------
1993 1994 1995 1996 1997
-------- ------- ------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 97 $ 96 $ 96 $ 51 $ 133
Restructured loans -- -- -- -- --
------ ------ ------ ------ ------
Total nonperforming loans 97 96 96 51 133
Real estate owned 157 -- -- -- --
--- --- --- --- ---
Total nonperforming assets $ 254 $ 96 $ 96 $ 51 $ 133
====== ====== ====== ====== ======
Accruing loans past due 90 days or more -- -- -- -- --
Potential problems loans $3,662 $3,568 $3,718 $1,613 $ 68
Allowance for loan losses 1,658 1,705 1,720 1,873 2,752
Nonperforming loans to loans 0.07% 0.07% 0.06% 0.03% 0.06%
Allowance for loan losses to loans 1.27% 1.32% 1.09% 1.11% 1.32%
Allowance for loan losses to nonperforming loans 1,709.28% 1,776.04% 1,791.67% 3,672.55% 2,069.17%
Nonperforming assets to total assets 0.14% 0.05% 0.05% 0.02% 0.05%
</TABLE>
<PAGE>
EXHIBIT I-12
Heritage Bank
Deposit Composition
<PAGE>
EXHIBIT 1-12
Heritage Bank
Deposit Composition
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
-----------------------------------------------------------------------------------------------
Average Average Average Average Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate Balance Rate
(1) Paid (1) Paid (1) Paid (1) Paid (1) Paid
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest bearing demand and
Money Market Accounts $ 27,018 3.26% $ 34,932 2.99% $ 40,594 3.19% $ 36,930 3.15% $ 42,271 3.18%
Savings 27,283 3.63 31,520 3.26 28,178 3.29 28,407 3.63 29,703 3.55
Certificates of deposit 95,622 5.32 88,904 4.68 89,602 4.93 109,559 5.78 119,133 5.54
Total interest bearing deposits 149,923 4.64 155,355 4.02 158,374 4.19 174,895 4.88 191,107 4.71
Demand and other noninterest
bearing deposits 4,256 6,183 6,001 6,537 7,955
-------- -------- -------- --------- --------
Total deposits $154,179 4.51% $161,538 3.86% $164,375 4.04% $181,432 4.70% $199,063 4.52%
======== ======== ======== ======== ========
</TABLE>
- --------------------------
(1) Average balances were calculated using average daily balances.
<PAGE>
EXHIBIT II-1
Historical Interest Rates
<PAGE>
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%
August 15, 1997 8.50% 5.27% 5.50% 6.52%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-2
Demographic/Economic Reports
<PAGE>
STATE DEMOGRAPHIC REPORT
STATE 00
STATE NAME UNITED STATES
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
1980 226,542,204 0-4 7.2 Total $35,584
1990 248,709,873 5-9 7.4 Householder less than 35 $30,999
1997 267,805,150 10-14 7.1 Householder 35-44 $40,281
2002 281,208,787 15-19 7.1 Householder 45-54 $45,940
20-24 6.5 Householder 55-64 $39,611
Population Growth Rate 1 25-44 31.4 Householder 65+ $22,603
45-64 20.5
Households 65-84 11.3
- ---------- 85+ 1.4 Spending Potential Index*
1990 91,947,410 18+ 74.3 -------------------------
1997 99,019,931 Auto Loan 100
2002 04,000,643 Home Loan 100
Median Age Investments 100
---------- Retirement Plans 100
Household Growth Rate 1 1990 32.9 Home Repair 100
Average Household Size 2.64 1997 34.8 Lawn & Garden 100
Remodeling 100
Families Male/Female Ratio 95.9 Appliances 100
- -------- Electronics 100
1990 64,517,947 Per Capita Income $18,100 Furniture 100
1997 68,999,546 Restaurants 100
Sporting Goods 100
Family Growth Rate 0.9 1997 Household Income* Theater/Concerts 100
-------------------------- Toys & Hobbies 100
Race 1990 1997 Base 99,019,225 Travel 100
- ---- ---- ---- % less than $15K 17.7 Video Rental 100
% White 80.3 78.4 % $15K-25K 14.4 Apparel 100
% Black 12.1 12.4 % $25K-50K 33.5 Auto Aftermarket 100
% Asian % $50K-100K 26.5 Health Insurance 100
/Pacific Isl. 2.9 3.7 % $100K-150K 5.4 Pets & Supplies 100
% greater than $150K 2.6
% Hispanic* .9 10.8
Median Household Income
--------------------------
1997 $36,961
2002 $42,042
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 7/8/97
<PAGE>
STATE DEMOGRAPHIC REPORT
STATE 53
STATE NAME WASHINGTON
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
1980 4,132,353 0-4 7.1 Total $35,220
1990 4,866,692 5-9 7.5 Householder less than 35 $29,181
1997 5,622,133 10-14 7.4 Householder 35-44 $39,261
2002 6,143,145 15-19 7.1 Householder 45-54 $46,172
20-24 6.6 Householder 55-64 $40,443
Population Growth Rate 2 25-44 30.9 Householder 65+ $22,358
45-64 21.5
Households 65-84 10.5
- ---------- 85+ 1.4
1990 1,872,431 18+ 73.9
1997 2,150,214 Spending Potential Index*
2002 2,343,179 Median Age ------------------------
---------- Auto Loan 100
Household Growth Rate 1.9 1990 33.1 Home Loan 99
Average Household Size 2.56 1997 35.1 Investments 98
Retirement Plans 98
Families Male/Female Ratio 98.3 Home Repair 99
- -------- Lawn & Garden 99
1990 1,264,934 Per Capita Income $17,434 Remodeling 101
1997 1,478,750 Appliances 100
Electronics 100
Family Growth Rate 2.2 1997 Household Income* Furniture 100
----------------------- Restaurants 101
Base 2,150,211 Sporting Goods 98
Race 1990 1997 %less than $15K 16.8 Theater/Concerts 98
- ---- ---- ---- %$15K-25K 15.4 Toys & Hobbies 100
% White 88.5 86.4 %$25K-50K 36.1 Travel 97
% Black 3.1 3.3 %$50K-100K 25.7 Video Rental 99
% Asian %$100K-150K 4.2 Apparel 100
/Pacific Isl. 4.3 5.7 %greater than $150K 1.8 Auto Aftermarket 99
Health Insurance 99
% Hispanic* 4.4 5.5 Median Household Income Pets & Supplies 99
------------------------
1997 $36,073
2002 $38,812
</TABLE>
- -------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
COUNTY DEMOGRAPHIC REPORT
STATE/COUNTY 53045
COUNTY NAME MASON WA
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ----------- --------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
1980 31,184 0-4 6 Total $28,727
1990 38,341 5-9 6.4 Householder less than 35 $26,379
1997 49,995 10-14 7.1 Householder 35-44 $32,359
2002 58,030 15-19 7.1 Householder 45-54 $38,292
20-24 5.1 Householder 55-64 $34,490
Population Growth Rate 3.7 25-44 26.1 Householder 65+ $18,408
45-64 24.3
Households 65-84 16.5
- ---------- 85+ 1.4
1990 14,565 18+ 76
1997 18,983
2002 22,108 Spendino Potential Index*
-------------------------
Median Age Auto Loan 100
---------- Home Loan 79
Household Growth Rate 3.7 1990 36.9 Investments 91
Average Household Size 2.53 1997 40.2 Retirement Plans 90
Home Repair 97
Families Male/Female Ratio 105.5 Lawn & Garden 97
- -------- Remodeling 116
1990 10,688 Per Capita Income $13,979 Appliances 101
1997 14,222 Electronics 94
Furniture 86
Family Growth Rate 4 1997 Household Income* Restaurants 88
------------------------ Sporting Goods 97
Base 18,983 Theater/Concerts 89
Race 1990 1997 % less than $15K 21.2 Toys & Hobbies 99
- ---- ---- ---- % $15K-25K 18.6 Travel 87
% White 93.3 92.4 % $25K-50K 39.1 Video Rental 98
% Black 0.9 1 % $50K-100K 18.3 Apparel 89
% Asian % $100K-150K 2.1 Auto Aftermarket 92
/Pacific Isl. 1.2 1.6 % greater than $150K 0.7 Health Insurance 104
Pets & Supplies 99
% Hispanic* 2.3 2.9
Median Household Income
-----------------------
1997 $29,560
2002 $33,765
</TABLE>
- --------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
COUNTY DEMOGRAPHIC REPORT
STATE/COUNTY 53067
COUNTY NAME THURSTON WA
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ------------------------------
<S> <C> <C> <C> <C>
1980 124,264 0-4 6.7 Total $32,832
1990 161,238 5-9 7.1 Householder less than 35 $26,711
1997 201,629 10-14 7.5 Householder 35-44 $36,292
2002 229,483 15-19 7.5 Householder 45-54 $43,419
20-24 6.7 Householder 55-64 $36,763
25-44 29.9 Householder 65+ $21,759
45-64 22.7
Population Growth Rate 3.1 65-84 10.4
85+ 1.5
Households 18+ 74 Spending Potential Index*
- ---------- ------------------------
1990 62,150 Auto Loan 100
1997 77,102 Home Loan 96
2002 87,506 Investments 95
Median Aqe Retirement Plans 95
---------- Home Repair 98
Household Growth Rate 3 1990 33.7 Lawn & Garden 97
Average Household Size 2.58 1997 35.7 Remodeling 102
Appliances 100
Electronics 100
Furniture 99
Families Male/Female Ratio 95.2 Restaurants 100
- -------- Sporting Goods 98
1990 43,336 Theater/Concerts 96
1997 55,301 Per Capita Income $15,967 Toys & Hobbies 100
Travel 93
Family Growth Rate 3.4 1997 Household Income* Video Rental 99
---------------------- Apparel 99
Base 77,102 Auto Aftermarket 98
Race 1990 1997 %less than $15K 15.7 Health Insurance 98
- ---- ------- ------ %$15K-25K 16.5 Pet & Supplies 99
% White 91.9 90 %$25K-50K 38.7
% Black 1.8 2.1 %$50K-100K 25.3
% Asian %$100K-150K 3
/Pacific Isl. 3.8 5.1 %greater than $150K 0.8
% Hispanic* 3 3.9
Median Household Income
-----------------------
1997 $35,401
2002 $38,217
</TABLE>
- --------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
COUNTY DEMOGRAPHIC REPORT
STATE/COUNTY 53053
COUNTY NAME PIERCE WA
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
1980 485,667 0-4 7.9 Total $34,984
1990 586,203 5-9 7.7 Householder less than 35 $29,329
1997 666,121 10-14 7.4 Householder 35-44 $38,302
2002 721,239 15-19 7.2 Householder 45-54 $46,477
20-24 7.4 Householder 55-64 $40,712
25-44 31.5 Householder 65+ $23,108
Population Growth Rate 1.8 45-64 19.9
65-84 9.7
Households 85+ 1.2 SPENDING POTENTIAL INDEX*
- ---------- 18+ 73 ------------------------
1990 214,652 Auto Loan 98
1997 243,653 Home Loan 96
2002 263,512 Investments 95
Median Age Retirement Plans 94
---------- Home Repair 98
Household Growth Rate 1.8 1990 31.3 Lawn & Garden 97
Average Household Size 2.64 1997 33.1 Remodeling 99
Appliances 98
Families Male/Female Ratio 99.6 Electronics 98
- -------- Furniture 98
1990 151,672 Restaurants 98
1997 176,019 Per Capita Income $16,543 Sporting Goods 96
Theater/Concerts 96
Family Growth Rate 2.1 1997 Household Income* Toys & Hobbies 98
--------------------- Travel 94
Base 243,653 Video Rental 98
Race 1990 1997 %less than $15K 15.6 Apparel 97
- ---- ------ ------ %$15K-25K 15 Auto Aftermarket 97
% White 85.1 82.3 %$25K-50K 37 Health Insurance 97
% Black 7.2 7.9 %$50K-100K 26.9 Pets & Supplies 98
% Asian %$100K-150K 4.1
/Pacific Isl. 5 6.6 %greater than $150K 1.3
% Hispanic* 3.5 4.6
Median Household Income
-----------------------
1997 $36,868
2002 $41,933
</TABLE>
- --------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
EXHIBIT II-3
Sources of Personal Income/Employment Sectors
<PAGE>
August 19, 1997
PERSONAL INCOME BY MAJOR SOURCE AND
EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
(53-000) WASHINGTON
<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) 85,837,927 94,420,291 101,206,147 109,678,572 114,808,532 120,359,599
Nonfarm personal income 84,551,830 93,090,718 99,832,573 108,136,078 113,006,982 119,011,808
Farm income 2/ 1,286,097 1,329,573 1,373,574 1,542,494 1,801,550 1,347,791
Population (thousands) 3/ 4,746.3 4,901.2 5,018.2 5,146.1 5,258.7 5,343.2
Per capita personal income (dollars) 18,085 19,265 20,168 21,313 21,832 22,526
Derivation of total personal income
Earnings by place of work 61,720,547 67,714,969 72,686,190 79,506,546 82,620,602 86,489,904
Less: Persona1 cont. for socia1 insur. 4/ 3,943,060 4,348,410 4,604,523 4,949,475 5,152,453 5,531,690
Plus: Adjustment for residence 5/ 819,201 904,840 981,591 1,039,383 1,113,048 1,208,185
Equals: Net earn. by place of residence 58,596,688 64,271,399 69,063,258 75,596,454 78,581,197 82,166,399
Plus: Dividends, interest, and rent 6/ 14,705,624 16,268,165 16,519,752 16,953,333 17,756,682 18,765,320
Plus: Transfer payments 12,535,615 13,880,727 15,623,137 17,128,785 18,470,653 19,427,880
Earnings by place of work
Components of Earnings:
Wages and salaries 48,871,618 54,138,170 57,960,221 62,938,652 64,643,379 67,701,950
Otner labor income 4,221,517 4,778,362 5,389,265 6,085,587 6,549,704 7,051,462
Proprietors' income 7/ 8,627,412 8,798,437 9,336,704 10,482,307 11,427,519 11,736,492
Farm proprietors' income 872,626 837,953 889,510 1,064,916 1,285,104 810,010
Nonfarm proprietors' income 7,754,786 7,960,484 8,447,194 9,417,391 10,142,415 10,926,482
Earnings by Industry:
Farm earnings 1,286,097 1,329,573 1,373,574 1,542,494 1,801,550 1,347,791
Nonfarm earnings 60,434,450 66,385,396 71,312,616 77,964,052 80,819,052 85,142,113
Private earnings 49,446,842 54,365,159 58,078,596 63,632,562 65,780,047 69,619,370
Ag. serv., for., fish., and other 8/ 901,691 1,068,518 1,189,304 1,160,267 1,134,947 1,214,162
Mining 160,853 169,335 176,685 169,823 163,915 182,024
Construction 3,985,418 4,509.377 4,776,033 5,194,479 5,365,643 5,763,916
Manufacturing 12,887,987 13,802,351 13,800,156 14,645,082 14,460,971 14,897,039
Nondurable goods 3,219,702 3,509,449 3,309,438 3,495,486 3,703,041 3,940,838
Durable goods 9,668,285 10,292,902 10,490,718 11,149,596 10,757,930 10,956,201
Transportation and public utilities 3,918,864 4,198,698 4,439,202 4,751,763 4,960,036 5,207,909
Wholesale trade 3,810,856 4,261,944 4,572,855 4,930,327 5,074,603 5,430,529
Retail trade 6,407,801 6,966,200 7,374,321 7,915,781 8,252,821 8,849,976
Finance, insurance, and real estate 3,266,391 3,581,681 3,790,542 4,544,021 4,835,997 4,838,003
Services 14,106,981 15,807,055 17,959,498 20,321,019 21,531,114 23,235,812
Government and government enterprises 10,987,608 12,020,237 13,234,020 14,331,490 15,039,005 15,522,743
Federal, civilian 2,246,275 2,447,024 2,598,514 2,734,296 2,864,954 2,943,175
Military 1,381,118 1,458,485 1,561,706 1,664,826 1,638,036 1,654,083
State and loc 7,360,215 8,114,728 9,073,800 9,932,368 10,536,015 10,925,485
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
(53-053) PIERCE WASHINGTON
<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) 9,063,251 10,038,231 10,646,663 11,491,193 12,047,345 12,683,943
Nonfarm personal income 9,030,695 10,006,975 10,609,037 11,447,298 12,007,971 12,649,848
Farm income 2/ 32,556 31,256 37,626 43,895 39,374 34,095
Population (thousands) 3/ 570.5 590.5 605.0 619.5 631.9 638.3
Per capita personal income (dollars) 15,888 16,999 17,598 18,549 19,066 19,870
Derivation of total personal income
Earnings by place of work 5,353,535 5,806,045 6,182,798 6,721,704 7,140,962 7,533,892
Less: Personal cont. for social insur. 4/ 344,913 374,581 392,793 420,794 449,970 486,065
Plus: Adjustment for residence 5/ 1,112,893 1,252,903 1,409,597 1,537,287 1,480,802 1,551,152
Equals: Net earn. by place of residence 6,121,515 6,684,367 7,199,602 7,838,197 8,171,794 8,598,979
Plus: Dividends, interest, and rent 6/ 1,318,219 1,567,263 1,440,662 1,454,826 1,507,665 1,594,945
Plus: Transfer payments 1,623,517 1,786,601 2,006,399 2,198,170 2,367,886 2,490,019
Earnings by place of work
Components of Earnings:
Wages and salaries 4,452,747 4,848,764 5,130,733 5,527,494 5,844,864 6,136,464
Other labor income 319,458 361,413 406,527 459,444 506,371 552,374
Proprietors' income 7/ 581,330 595,868 645,538 734,766 789,727 845,054
Farm proprietors' income 18,911 16,818 22,860 30,050 25,196 19,670
Nonfarm proprietors' income 562,419 579,050 622,678 704,716 764,531 825,384
Earnings by Industry:
Farm earnings 32,556 31,256 37,626 43,895 39,374 34,095
Nonfarm earnings 5,320,979 5,774,789 6,145,172 6,677,809 7,101,588 7,499,797
Private earnings 3,679,999 4,050,321 4,303,062 4,740,781 5,025,112 5,377,204
Ag. serv., for., fish., and other 8/ 41,802 52,093 57,086 65,436 69,812 73,479
Mining 4,855 5,153 6,266 6,848 7,177 7,549
Construction 380,892 434,418 451,479 478,054 518,380 569,690
Manufacturing 659,522 694,108 687,795 695,225 704,779 819,009
Nondurable goods 271,270 286,257 299,733 323,141 333,206 358,325
Durable goods 388,252 407,851 388,062 372,084 371,573 460,684
Transportation and public utilities 305,627 340,516 365,426 392,261 414,256 423,360
Wholesale trade 287,133 315,750 316,064 351,798 379,838 408,376
Retail trade 611,237 654,307 701,690 772,071 805,803 870,042
Finance, insurance, and real estate 227,745 249,866 272,902 359,481 395,984 387,995
Services 1,161,186 1,304,110 1,444,354 1,619,607 1,729,083 1,817,704
Government and government enterprises 1,640,980 1,724,468 1,842,110 1,937,028 2,076,476 2,122,593
Federal, civilian 291,809 306,527 327,861 307,866 348,465 354,124
Military 618,873 601,793 609,553 639,539 673,600 668,680
State and local 730,298 816,148 904,696 989,623 1,054,411 1,099,789
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
WASHINGTON
(53-067) THURSTON
<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) 2,651,612 2,946,318 3,232,859 3,516,523 3,734,018 3,950,934
Nonfarm personal income 2,630,467 2,924,405 3,209,464 3,487,450 3,707,955 3,924,758
Farm income 2/ 21,145 21,913 23,395 29,073 26,063 26,176
Population (thousands) 3/ 156.4 163.0 169.5 176.6 183.4 187.2
Per capita personal income (dollars) 16,956 18,073 19,069 19,908 20,364 21,101
Derivation of total personal income
Earnings by place of work 1,574,918 1,751,999 1,966,104 2,160,958 2,300,006 2,411,366
Less: Personal cont. for social insur. 4/ 95,757 107,337 117,827 127,192 136,247 146,445
Plus: Adjustment for residence 5/ 253,537 284,735 290,344 319,053 328,871 369,866
Equals: Net earn. by place of residence 1,732,698 1,929,397 2,138,621 2,352,819 2,492,630 2,634,787
Plus: Dividends, interest, and rent 6/ 452,559 494,193 501,028 522,128 544,760 575,846
Plus: Transfer payments 466,355 522,728 593,210 641,576 696,628 740,301
Earnings by place of work
Components of Earnings:
Wages and salaries 1,299,416 1,453,585 1,630,863 1,777,990 1,887,461 1,967,609
Other labor income 95,442 109,805 130,040 147,578 164,393 176,782
Proprietors' income 7/ 180,060 188,609 205,201 235,390 248,152 266,975
Farm proprietors' income 11,828 11,621 12,773 19,177 15,046 15,030
Nonfarm proprietors' income 168,232 176,988 192,428 216,213 233,106 251,945
Earnings by Industry:
Farm earnings 21,145 21,913 23,395 29,073 26,063 26,176
Nonfarm earnings 1,553,773 1,730,086 1,942,709 2,131,885 2,273,943 2,385,190
Private earnings 863,109 962,939 1,070,875 1,174,548 1,262,385 1,363,442
Ag. serv., for., fish., and other 8/ 16,864 18,432 20,177 21,073 22,174 23,861
Mining 1,663 1,633 2,162 2,486 2,623 3,015
Construction 99,835 117,078 127,581 132,033 138,107 152,026
Manufacturing 109,887 114,747 123,710 138,127 145,548 160,113
Nondurable goods 55,914 59,491 60,284 67,353 70,073 75,418
Durable goods 53,973 55,256 63,426 70,774 75,475 84,695
Transportation and public utilities 60,011 60,244 59,815 62,734 69,602 72,167
Wholesale trade 46,892 60,514 69,936 67,613 66,492 70,644
Retail trade 174,194 188,430 211,629 230,218 244,397 265,456
Finance, insurance, and real estate 47,425 52,081 56,434 72,092 79,694 82,678
Services 306,338 349,780 399,431 448,172 493,748 533,482
Government and government enterprises 690,664 767,147 871,834 957,337 1,011,558 1,021,748
Federal, civilian 27,830 32,016 32,251 34,180 37,142 40,373
Military 7,919 8,042 8,617 10,374 10,358 10,849
State and local 654,915 727,089 830,966 912,783 964,058 970,526
</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 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(53-000) WASHINGTON
<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 2,709,394 2,849,112 2,899,285 2,954,509 3,001,833 3,071,025
By Type:
Wage and salary employment 2,261,708 2,369,933 2,388,656 2,424,985 2,465,499 2,526,349
Proprietors' employment 447,686 479,179 510,629 529,524 536,334 544,676
Farm proprietors' employment 37,971 36,838 36,647 36,809 35,565 35,077
Nonfarm proprietors' employment 2/ 409,715 442,341 473,982 492,715 500,769 509,599
By Industry:
Farm employment 78,800 82,364 78,769 70,304 74,373 78,495
Nonfarm employment 2,630,594 2,766,748 2,820,516 2,884,205 2,927,460 2,992,530
Private employment 2,173,067 2,291,854 2,336,034 2,387,944 2,427,505 2,486,235
Ag. serv., for., fish., and other 3/ 45,147 48,776 51,830 51,354 55,800 57,724
Mining 5,494 5,507 5,288 4,897 4,810 4,911
Construction 145,151 159,794 162,862 169,395 170,138 175,562
Manufacturing 380,605 388,741 370,157 366,230 361,537 359,011
Transportation and public utilities 121,821 126,936 128,141 128,755 130,564 134,290
Wholesale trade 134,486 141,816 144,706 148,993 148,793 155,508
Retail trade 449,430 470,056 478,678 494,467 501,757 518,825
Finance, insurance, and real estate 213,507 219,959 223,535 226,232 231,400 232,587
Services 677,426 730,269 770,837 797,621 822,706 847,817
Government and government enterprises 457,527 474,894 484,482 496,261 499,955 506,295
Federal, civilian 71,827 74,794 72,965 73,471 72,205 72,188
Military 80,627 79,718 78,443 79,058 76,603 75,289
State and local 305,073 320,382 333,074 343,732 351,147 358,818
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC
Table CA25 INFORMATION SYSTEM
BUREAU OF ECONOMIC
June 1996 ANALYSIS
<PAGE>
August 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
WASHINGTON
(53-045) MASON
<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 12,871 13,715 13,975 14,132 14,612 15,124
By Type:
Wage and salary employment 9,865 10,444 10,367 10,517 10,920 11,367
Proprietors' employment 3,006 3,271 3,608 3,615 3,692 3,757
Farm proprietors' employment 194 188 187 188 182 179
Nonfarm proprietors' employment 2/ 2,812 3,083 3,421 3,427 3,510 3,578
By Industry:
Farm employment 305 414 214 211 208 208
Nonfarm employment 12,566 13,301 13,761 13,921 14,404 14,916
Private employment 9,791 10,467 10,753 10,814 11,177 11,564
Ag. serv for., fish., and other 3/ 623 723 657 590 646 623
Mining 15 19 19 16 17 18
Construction 666 833 1,088 1,256 1,307 1,343
Manufacturing 2,279 2,264 2,085 1,923 1,913 1,986
Transportation and public utilities 372 440 412 389 442 478
Wholesale trade 316 423 423 402 440 460
Retail trade 2,232 2,293 2,301 2,429 2,484 2,565
Finance, insurance, and real estate 955 942 1,134 1,036 1,089 1,136
Services 2,333 2,530 2,634 2,773 2,839 2,955
Government and government enterprises 2,775 2,834 3,008 3,107 3,227 3,352
Federal, civilian 120 130 120 114 115 115
Military 200 199 206 215 210 204
State and local 2,455 2,505 2,682 2,778 2,902 3,033
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 BUREAU OF ECONOMIC ANALYSIS
June 1996
</TABLE>
<PAGE>
August 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(53-053) PIERCE WASHINGTON
<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 269,376 278,439 279,827 286,894 294,628 302,747
By Type:
Wage and salary employment 226,433 232,782 230,419 234,857 241,854 249,137
Proprietors' employment 42,943 45,657 49,408 52,037 52,774 53,610
Farm proprietors' employment 1,366 1,331 1,325 1,328 1,283 1,265
Nonfarm proprietors' employment 2/ 41,577 44,326 48,083 50,709 51,491 52,345
By Industry:
Farm employment 2,639 2,515 2,405 2,139 2,128 2,166
Nonfarm employment 266,737 275,924 277,422 284,755 292,500 300,581
Private employment 194,889 204,397 208,114 215,405 221,349 228,659
Ag.serv., for., fish., and other 3/ 2,745 2,938 3,226 3,312 3,758 3,860
Mining 232 244 238 260 273 267
Construction 15,208 16,742 16,545 17,003 17,519 18,322
Manufacturing 23,843 23,681 22,338 22,004 21,608 23,600
Transportation and public utilities 10,026 10,595 10,959 11,134 11,583 11,728
Wholesale trade 10,508 10,898 10,994 11,791 12,342 12,779
Retail trade 44,955 46,546 47,740 50,452 50,774 52,927
Finance, insurance, and real estate 20,315 21,103 21,894 22,530 23,559 23,460
Services 67,057 71,650 74,180 76,919 79,933 81,716
Government and government enterprises 71,848 71,527 69,308 69,350 71,151 71,922
Federal, civilian 11,154 11,215 10,905 10,606 11,063 11,166
Military 31,076 28,877 25,930 25,359 26,011 25,659
State and local 29,618 31,435 32,473 33,385 34,077 35,097
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(53-067) THURSTON WASHINGTON
<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 79,225 84,094 88,142 91,120 93,653 96,222
By Type:
Wage and salary employment 65,702 69,322 72,085 74,013 76,307 78,588
Proprietors' employment 13,523 14,772 16,057 17,107 17,346 17,634
Farm proprietors' employment 895 872 868 870 841 830
Nonfarm proprietors' employment 2/ 12,628 13,900 15,189 16,237 16,505 16,804
By Industry:
Farm employment 1,619 1,489 1,496 1,348 1,388 1,438
Nonfarm employment 77,606 82,605 86,646 89,772 92,265 94,784
Private employment 50,549 54,054 56,730 59,215 61,385 63,777
Ag.serv., for., fish and other 3/ 1,370 1,387 1,427 1,494 1,738 1,751
Mining 104 96 96 121 130 136
Construction 4,139 4,638 4,999 5,051 5,106 5,244
Manufacturing 4,263 4,377 4,118 4,524 4,733 4,972
Transportation and public utilities 2,250 2,174 2,128 2,165 2,344 2,351
Wholesale trade 1,959 2,363 2,607 2,479 2,441 2,581
Retai1 trade 13,592 14,082 14,800 15,539 15,856 16,678
Finance, insurance, and real estate 4,626 4,985 5,222 5,463 5,672 5,749
Services 18,246 19,952 21,333 22,379 23,365 24,315
Government and government enterprises 27,057 28,551 29,916 30,557 30,880 31,007
Federal, civilian 833 913 855 877 908 960
Military 953 945 971 1,035 983 963
State and local 25,271 26,693 28,090 28,645 28,989 29,084
</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 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(53-000) WASHINGTON
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 85,837,927 94,420,291 101,206,147 109,678,572 114,808,532 120,359,599
Nonfarm personal income 84,551,830 93,090,718 99,832,573 108,136,078 113,006,982 119,011,808
Farm income 1,286,097 1,329,573 1,373,574 1,542,494 1,801,550 1,347,791
Derivation of Total Personal Income
Net earnings 1/ 58,596,688 64,271,399 69,063,258 75,596,454 78,581,197 82,166,399
Transfer payments 12,535,615 13,880,727 15,623,137 17,128,785 18,470,653 19,427,880
Income maintenance 2/ 936,599 1,033,494 1,269,911 1,463,732 1,595,315 1,675,315
Unemployment insurance 395,663 479,161 672,953 940,858 1,148,628 1,058,170
Retirement and other 11,203,353 12,368,072 13,680,273 14,724,195 15,726,710 16,694,395
Dividends, interest, and rent 14,705,624 16,268,165 16,519,752 16,953,333 17,756,682 18,765,320
Population (thousands) 3/ 4,746.3 4,901.2 5,018.2 5,146.1 5,258.7 5,343.2
Per Capita Incomes ($) 4/
Per capita personal income 18,085 19,265 20,168 21,313 21,832 22,526
Per capita net earnings 12,346 13,113 13,763 14,690 14,943 15,378
Per capita transfer payments 2,641 2,832 3,113 3,328 3,512 3,636
Per capita income maintenance 197 211 253 284 303 314
Per capita unemployment insurance 83 98 134 183 218 198
Per capita retirement & other 2,360 2,523 2,726 2,861 2,991 3,124
Per capita dividends, interest, & rent 3,098 3,319 3,292 3,294 3,377 3,512
Place of Work Profile
Total earnings (place of work, $000) 61,720,547 67,714,969 72,686,190 79,506,546 82,620,602 86,489,904
Wages and salaries 48,871,618 54,138,170 57,960,221 62,938,652 64,643,379 67,701,950
Other labor income 4,221,517 4,778,362 5,389,265 6,085,587 6,549,704 7,051,462
Proprietors' income 8,627,412 8,798,437 9,336,704 10,482,307 11,427,519 11,736,492
Nonfarm proprietors' income 7,754,786 7,960,484 8,447,194 9,417,391 10,142,415 10,926,482
Farm proprietors' income 872,626 837,953 889,510 1,064,916 1,285,104 810,010
Total employment (full & part-time) 2,709,394 2,849,112 2,899,285 2,954,509 3,001,833 3,071,025
Wage and salary jobs 2,261,708 2,369,933 2,388,656 2,424,985 2,465,499 2,526,349
Number of proprietors 447,686 479,179 510,629 529,524 536,334 544,676
Number of nonfarm proprietors /5 409,715 442,341 473,982 492,715 500,769 509,599
Number of farm proprietors 37,971 36,838 36,647 36,809 35,565 35,077
Average earnings per job ($) 22,780 23,767 25,070 26,910 27,523 28,163
Wage & salary earnings per job ($) 21,608 22,844 24,265 25,954 26,219 26,798
Average earnings per nonfarm proprietor ($) 18,927 17,996 17,822 19,113 20,254 21,441
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(53-045) MASON WASHINGTON
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 506,103 551,277 600,128 654,180 690,838 729,638
Nonfarm personal income 504,868 549,238 599,728 653,167 689,743 728,897
Farm income 1,235 2,039 400 1,013 1,095 741
Derivation of Total Personal Income
Net earnings 1/ 271,871 298,254 321,295 351,352 368,007 386,175
Transfer payments 121,957 133,262 155,756 173,830 190,918 204,282
Income maintenance 2/ 8,134 9,179 11,592 13,659 14,721 16,632
Unemployment insurance 2,699 3,481 5,298 6,663 9,226 8,777
Retirement and other 111,124 120,602 138,866 153,508 166,971 178,873
Dividends, interest, and rent 112,275 119,761 123,077 128,998 131,913 139,181
Population (thousands) 3/ 37.3 38.7 40.7 42.5 44.3 45.9
Per Capita Incomes ($) 4/
Per capita personal i 11,736,492
Nonfarm proprietors' income 7,754,786 7,960,484 8,447,194 9,417,391 10,142,415 10,926,482
Farm proprietors' income 872,626 837,953 889,510 1,064,916 1,285,104 810,010
Total employment (full & part-time) 2,709,394 2,849,112 2,899,285 2,954,509 3,001,833 3,071,025
Wage and salary jobs 2,261,708 2,369,933 2,388,656 2,424,985 2,465,499 2,526,349
Number of proprietors 447,686 479,179 510,629 529,524 536,334 544,676
Number of nonfarm proprietors /5 409,715 442,341 473,982 492,715 500,769 509,599
Number of farm proprietors 37,971 36,838 36,647 36,809 35,565 35,077
Average earnings per job ($) 22,780 23,767 25,070 26,910 27,523 28,163
Wage & salary earnings per job ($) 21,608 22,844 24,265 25,954 26,219 26,798
Average earnings per nonfarm proprietor ($) 18,927 17,996 17,822 19,113 20,254 21,441
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
</TABLE>
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and
Metropolitan Areas
(53-045) MASON WASHINGTON
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 506,103 551,277 600,128 654,180 690,838 729,638
Nonfarm personal income 504,868 549,238 599,728 653,167 689,743 728,897
Farm income 1,235 2,039 400 1,013 1,095 741
Derivation of Total Personal Income
Net earnings 1/ 271,871 298,254 321,295 351,352 368,007 386,175
Transfer payments 121,957 133,262 155,756 173,830 190,918 204,282
Income maintenance 2/ 8,134 9,179 11,592 13,659 14,721 16,632
Unemployment insurance 2,699 3,481 5,298 6,663 9,226 8,777
Retirement and other 111,124 120,602 138,866 153,508 166,971 178,873
Dividends, interest, and rent 112,275 119,761 123,077 128,998 131,913 139,181
Population (thousands) 3/ 37.3 38.7 40.7 42.5 44.3 45.9
Per Capita Incomes ($) 4/
Per capita personal i,632 239,874 254,269
Other labor income 15,198 16,642 18,941 20,969 23,246 25,009
Proprietors' income 37,675 39,730 40,835 47,016 50,334 54,023
Nonfarm proprietors' income 37,351 39,669 40,704 46,300 49,588 53,641
Farm proprietors' income 324 61 131 716 746 382
Total employment (full & part-time) 12,871 13,715 13,975 14,132 14,612 15,124
Wage and salary jobs 9,865 10,444 10,367 10,517 10,920 11,367
Number of proprietors 3,006 3,271 3,608 3,615 3,692 3,757
Number of nonfarm proprietors /5 2,812 3,083 3,421 3,427 3,510 3,578
Number of farm proprietors 194 188 187 188 182 179
Average earnings per job ($) 18,006 18,309 19,344 20,918 21,452 22,038
Wage & salary earnings per job ($) 18,133 18,646 20,311 21,644 21,966 22,369
Average earnings per nonfarm proprietor ($) 13,283 12,867 11,898 13,510 14,128 14,992
</TABLE>
See footnotes at end of table, REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(53-053) PIERCE WASHINGTON
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 9,063,251 10,038,231 10,646,663 11,491,193 12,047,345 12,683,943
Nonfarm personal income 9,030,695 10,006,975 10,609,037 11,447,298 12,007,971 12,649,848
Farm income 32,556 31,256 37,626 43,895 39,374 34,095
Derivation of Total Personal Income
Net earnings 1/ 6,121,515 6,684,367 7,199,602 7,838,197 8,171,794 8,598,979
Transfer payments 1,623,517 1,786,601 2,006,399 2,198,170 2,367,886 2,490,019
Income maintenance 2/ 138,334 148,369 181,673 205,876 227,816 240,261
Unemployment insurance 42,313 48,796 70,233 101,596 126,556 120,201
Retirement and other 1,442,870 1,589,436 1,754,493 1,890,698 2,013,514 2,129,557
Dividends, interest, and rent 1,318,219 1,567,263 1,440,662 1,454,826 1,507,665 1,594,945
Population (thousands) 3/ 570.5 590.5 605.0 619.5 631.9 638.3
Per Capita Incomes ($) 4/
Per capita personal income 15,888 16,999 17,598 18,549 19,066 19,870
Per capita net earnings 10,731 11,319 11,900 12,652 12,932 13,471
Per capita transfer payments 2,846 3,025 3,316 3,548 3,747 3,901
Per capita income maintenance 242 251 300 332 361 376
Per capita unemployment insurance 74 83 116 164 200 188
Per capita retirement & other 2,529 2,692 2,900 3,052 3,187 3,336
Per capita dividends, interest, & rent 2,311 2,654 2,381 2,348 2,386 2,499
Place of Work Profile
Total earnings (place of work, $000) 5,353,535 5,806,045 6,182,798 6,721,704 7,140,962 7,533,892
Wages and salaries 4,452,747 4,848,764 5,130,733 5,527,494 5,844,864 6,136,464
Other labor income 319,458 361,413 406,527 459,444 506,371 552,374
Proprietors' income 581,330 595,868 645,538 734,766 789,727 845,054
Nonfarm proprietors' income 562,419 579,050 622,678 704,716 764,531 825,384
Farm proprietors' income 18,911 16,818 22,860 30,050 25,196 19,670
Total employment (full & part-time) 269,376 278,439 279,827 286,894 294,628 302,747
Wage and salary jobs 226,433 232,782 230,419 234,857 241,854 249,137
Number of proprietors 42,943 45,657 49,408 52,037 52,774 53,610
Number of nonfarm proprietors /5 41,577 44,326 48,083 50,709 51,491 52,345
Number of farm proprietors 1,366 1,331 1,325 1,328 1,283 1,265
Average earnings per job ($) 19,874 20,852 22,095 23,429 24,237 24,885
Wage & salary earnings per job ($) 19,665 20,830 22,267 23,536 24,167 24,631
Average earnings per nonfarm
proprietor ($) 13,527 13,063 12,950 13,897 14,848 15,768
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and
Metropolitan Areas
(53-067) THURSTON WASHINGTON
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total persona1 income ($000) 2,651,612 2,946,318 3,232,859 3,516,523 3,734,018 3,950,934
Nonfarm personal income 2,630,467 2,924,405 3,209,464 3,487,450 3,707,955 3,924,758
Farm income 21,145 21,913 23,395 29,073 26,063 26,176
Derivation of Total Personal Income
Net earnings 1/ 1,732,698 1,929,397 2,138,621 2,352,819 2,492,630 2,634,787
Transfer payments 466,355 522,728 593,210 641,576 696,628 740,301
Income maintenance 2/ 28,472 31,157 38,883 46,521 49,468 52,132
Unemployment insurance 12,949 16,138 21,181 28,927 37,156 35,074
Retirement and other 424,934 475,433 533,146 566,128 610,004 653,095
Dividends, interest, and rent 452,559 494,193 501,028 522,128 544,760 575,846
Population (thousands) 3/ 156.4 163.0 169.5 176.6 183.4 187.2
Per Capita Incomes ($) 4/
Per capita personal income 16,956 18,073 19,069 19,908 20,364 21,101
Per capita net earnings 11,080 11,835 12,615 13,320 13,594 14,072
Per capita transfer payments 2,982 3,206 3,499 3,632 3,799 3,954
Per capita income maintenance 182 191 229 263 270 278
Per capita unemployment insurance 83 99 125 164 203 187
Per capita retirement & other 2,717 2,916 3,145 3,205 3,327 3,488
Per capita dividends, interest, & rent 2,894 3,031 2,955 2,956 2,971 3,075
Place of Work Profile
Total earnings (place of work, $000) 1,574,918 1,751,999 1,966,104 2,160,958 2,300,006 2,411,366
Wages and salaries 1,299,416 1,453,585 1,630,863 1,777,990 1,887,461 1,967,609
Other labor income 95,442 109,805 130,040 147,578 164,393 176,782
Proprietors' income 180,060 188,609 205,201 235,390 248,152 266,975
Nonfarm proprietors' income 168,232 176,988 192,428 216,213 233,106 251,945
Farm proprietors' income 11,828 11,621 12,773 19,177 15,046 15,030
Total employment (full & part-time) 79,225 84,094 88,142 91,120 93,653 96,222
Wage and salary jobs 65,702 69,322 72,085 74,013 76,307 78,588
Number of proprietors 13,523 14,772 16,057 17,107 17,346 17,634
Number of nonfarm proprietors /5 12,628 13,900 15,189 16,237 16,505 16,804
Number of farm proprietors 895 872 868 870 841 830
Average earnings per job ($) 19,879 20,834 22,306 23,716 24,559 25,060
Wage & salary earnings per job ($) 19,777 20,969 22,624 24,023 24,735 25,037
Average earnings per nonfarm proprietor ($) 13,322 12,733 12,669 13,316 14,123 14,993
</TABLE>
See footnotes at end of table, REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA30
1/ Total earnings less personal contributions for social insurance adjusted to
place of residence.
2/ Includes supplemental security income payments, payments to families with
dependent children (AFDC), general assistance payments, food stamp
payments, and other assistance payments, including emergency assistance.
3/ Census Bureau midyear population estimates. Estimates for 1990-94 reflect
county population estimates available as of October 1995.
4/ Type of income divided by population yields a per capita for that type of
income.
5/ Excludes limited partners.
6/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
7/ La Paz county, AZ was separated from Yuma county on January 1, 1983.
8/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area Into Aleutians East Bor. and
Aleutians West Census Area. Denali and Lake + Peninsula Boroughs begin in
1991. Estimates from 1993 forward separate Skagway-Yakutat-Angoon Census
Area into Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
(L) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
Table CA30 June 1996 REGIONAL ECONOMIC INFORMATION
SYSTEM BUREAU OF ECONOMIC ANALYSIS
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ----- ------- ---------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
California Companies
--------------------
<C> <S> <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 49.87 4,854
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,095 246 12-31 05/59 78.94 4,479
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,218 154 06-30 10/83 28.63 1,440
CSA Coast Savings Financial of CA NYSE California R.E. 9,103 92 12-31 12/85 45.19 841
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,886 82 12-31 01/71 21.69 580
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,193 25 12-31 12/83 33.75 357
WES Westcorp Inc. of Orange CA NYSE California Div. 3,678 26 12-31 05/86 19.87 520
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,534 33 12-31 / 11.50 222
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,096 45 12-31 05/86 25.50 331
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,631 23 03-31 03/96 19.62 367
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,295 18 12-31 10/91 34.00 195
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 2,238 13 12-31 / 24.75 240
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,191 36 12-31 / 39.31 236
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 984 M 19 06-30 06/95 14.87 93
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 909 M 14 12-31 04/94 15.75 113
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 838 M 6 12-31 / 15.63 41
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 810 M 9 12-31 / 17.50 137
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 781 M 8 06-30 12/93 20.50 96
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 615 9 06-30 06/96 19.62 97
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 504 8 12-31 / 27.25 63
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 422 M 7 12-31 02/95 16.37 53
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 15.12 35
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 371 3 12-31 / 15.37 45
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 119 M 3 12-31 01/96 10.50 9
PAMM PacificAmerica Money Ctr of CA (3) OTC Los Angeles CA Div. 112 M 1 12-31 06/96 25.00 48
Florida Companies
-----------------
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,730 56 12-31 11/83 15.87 285
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,649 M 1 12-31 / 42.87 1,149
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
-----------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BKUNA BankUnited SA of FL OTC Miami FL Thrift 1,807 14 09-30 12/85 11.62 103
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,558 M 40 09-30 09/93 32.75 165
HARB Harbor FSB, MHC of FL (46.0) OTC Eastern FL Thrift 1,117 23 09-30 01/94 45.75 227
FFFL Fidelity FSB, MHC of FL (47.4) OTC Southeast FL Thrift 927 M 20 12-31 01/94 24.00 162
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 682 M 19 12-31 10/94 25.62 130
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 387 9 12-31 01/94 29.00 67
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 320 M 11 12-31 10/88 5.44 46
Mid-Atlantic Companies
----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 20,087 87 12-31 08/86 19.37 2,009
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,300 82 06-30 01/94 64.00 2,883
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 10,898 120 12-31 08/86 14.87 1,041
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 7,665 46 12-31 11/93 46.50 975
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,909 36 09-30 04/94 38.59 925
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,032 M 34 11-30 04/86 47.75 697
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY, MA Thrift 3,602 71 06-30 04/92 37.12 476
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,552 15 12-31 06/93 26.00 458
NYB New York Bancorp, Inc. of NY AMEX Southeastern NY Thrift 3,284 29 09-30 01/88 30.87 667
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,159 6 12-31 01/97 23.87 1,042
GRTR The Greater New York SB of NY (3) OTC New York NY Div. 2,571 M 14 12-31 06/87 21.94 301
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 2,567 15 12-31 03/90 27.25 338
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,289 39 06-30 06/96 17.50 299
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,071 18 03-31 08/94 20.25 214
HARS Harris SB, MHC of PA (24.2) OTC Southeast PA Thrift 2,044 31 12-31 01/94 26.00 292
NWSB Northwest SB, MHC of PA (29.9) OTC Pennsylvania Thrift 1,997 M 53 06-30 11/94 18.75 438
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 1,927 M 28 06-30 03/94 29.87 262
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,782 20 12-31 09/93 36.62 160
JSB JSB Financial, Inc. of NY AMEX New York City NY Thrift 1,531 M 13 12-31 06/90 44.56 439
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,509 16 12-31 11/86 14.25 177
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,467 13 12-31 11/93 51.12 520
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,448 10 12-31 07/96 33.75 290
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
----------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,322 17 06-30 07/94 29.50 142
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,315 15 06-30 06/96 19.06 250
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,162 22 06-30 02/84 25.50 179
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 25 02-28 06/87 45.87 147
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,033 16 12-31 07/92 27.75 202
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 991 28 06-30 07/87 29.25 119
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 880 13 12-31 11/85 7.69 97
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 879 17 12-31 08/84 29.25 112
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 860 7 12-31 11/95 20.75 166
MBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 811 M 17 09-30 08/92 24.19 69
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 750 13 12-31 03/96 17.25 138
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 740 M 10 09-30 10/94 16.87 186
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 714 7 12-31 06/95 16.37 107
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 706 M 9 12-31 06/90 16.00 85
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 692 15 12-31 12/86 34.00 100
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 673 16 12-31 10/95 18.87 89
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 641 14 06-30 07/94 19.25 79
TSBS Trenton SB, FSB MHC of NJ(35.0 OTC Central NJ Thrift 631 14 12-31 08/95 28.13 254
FSNJ First SB of NJ, MHC (45.9) OTC Northern NJ Thrift 579 D 4 03-31 01/95 32.50 100
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 555 18 12-31 12/88 26.00 62
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 522 10 12-31 04/87 20.00 54
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 520 4 09-30 09/86 20.62 63
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 505 M 10 07-31 10/95 19.87 72
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 482 M 8 07-31 12/93 33.00 76
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 478 M 9 12-31 12/95 15.75 69
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 419 9 12-31 07/83 13.25 51
CNY Carver Bancorp, Inc. of NY OTC New York, NY Thrift 414 8 03-31 10/94 12.62 29
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 411 4 12-31 04/93 27.75 57
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 379 6 12-31 03/87 22.87 55
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 371 8 12-31 11/89 21.75 62
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 363 8 09-30 06/88 21.25 33
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 357 9 12-31 01/95 21.25 50
HARL Harleysville SA of PA OTC Southeastern PA Thrift 337 4 09-30 08/87 25.00 41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
----------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 321 5 09-30 01/95 27.12 33
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 305 M 6 06-30 03/87 21.75 45
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 300 6 12-31 01/96 17.37 48
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 296 M 4 09-30 09/93 37.50 23
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 295 5 06-30 11/93 27.25 48
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 288 4 09-30 04/96 16.75 51
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 19.25 58
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 284 3 09-30 04/96 16.31 77
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 282 5 09-30 08/94 20.62 36
LFED Leeds FSB, MHC of MD (36.2) OTC Baltimore MD Thrift 282 M 1 06-30 05/94 22.00 76
IFSB Independence FSB of DC OTC Washington DC Ret. 263 M 2 12-31 06/85 13.50 17
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 261 0 12-31 06/96 22.00 47
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 258 M 4 07-31 / 7.00 30
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 256 6 09-30 04/96 18.37 36
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 244 7 12-31 03/95 16.25 53
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 229 P 9 12-31 07/97 14.75 41
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Ret. 228 6 12-31 03/85 23.50 17
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 217 4 04-30 11/94 18.50 33
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 216 9 03-31 08/94 19.12 32
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 209 M 6 06-30 02/87 21.50 31
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 183 3 06-30 12/95 16.25 52
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 177 6 12-31 04/97 14.37 30
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 173 3 12-31 06/95 19.25 24
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 150 P 3 03-31 04/97 13.50 31
PRBC Prestige Bancorp of PA OTC Thrift 136 0 12-31 06/96 16.50 15
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 120 S 1 03-31 10/95 17.50 26
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 114 P 2 09-30 07/97 14.66 33
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 111 2 03-31 06/96 23.25 15
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 104 M 2 06-30 01/97 15.37 17
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 5 09-30 04/96 15.12 22
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 66 M 2 09-30 07/93 24.25 6
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 M 3 12-31 07/96 15.50 9
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COFI Charter One Financial of OH OTC OH,MI Div. 14,565 155 12-31 01/88 53.06 2,451
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,097 107 06-30 12/84 40.56 874
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,931 129 12-31 12/80 31.37 1,136
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,611 52 12-31 05/87 23.12 786
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,647 M 42 06-30 01/94 100.25 923
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,236 M 20 12-31 01/90 31.50 485
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,098 33 03-31 01/92 45.00 389
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 3,046 45 12-31 03/94 33.25 459
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,575 14 12-31 08/94 25.25 409
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,926 33 03-31 07/92 53.00 240
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,646 13 09-30 06/93 34.75 184
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,609 37 12-31 02/85 19.00 156
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,530 M 44 12-31 11/89 24.25 222
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,521 28 12-31 08/83 20.75 219
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 1,519 M 15 12/31 / 19.25 263
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,404 14 09-30 07/92 31.37 168
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,297 M 32 12-31 04/93 30.75 153
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,020 15 09-30 03/92 44.25 143
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 861 26 12-31 08/94 25.50 125
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 845 17 12-31 06/90 26.00 132
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 708 25 06-30 12/89 16.87 137
NASB North American SB of MO OTC KS,MO M.B. 689 M 7 09-30 09/85 51.00 115
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 683 16 06-30 01/88 31.00 105
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 673 22 12-31 07/92 10.50 45
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 638 20 12-31 12/83 26.87 119
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 635 M 13 03-31 01/88 16.50 83
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 607 5 12-31 04/95 14.50 51
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 603 13 12-31 / 14.00 71
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 599 10 06-30 06/93 28.13 117
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 567 7 12-31 06/94 24.87 105
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 562 19 06-30 04/92 22.37 67
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 552 9 06-30 10/95 15.12 141
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 535 12 12-31 05/96 21.12 103
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 525 4 12-31 03/96 16.12 90
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 497 5 06-30 02/92 40.50 85
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 490 5 09-30 12/93 21.50 60
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 472 M 7 12-31 / 18.50 59
FFSX First FS&LA. MHC of IA (46.0) OTC Western IA Thrift 469 13 06-30 07/92 25.00 71
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 447 3 06-30 / 11.50 37
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 433 12 03-31 04/94 24.75 50
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 12 12-31 03/92 27.00 34
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 418 12 12-31 07/95 16.12 57
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 410 3 06-30 01/94 22.50 32
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 409 9 09-30 06/94 30.25 59
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 400 M 6 12-31 07/94 24.00 55
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 398 8 12-31 03/87 18.37 59
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 397 5 12-31 03/94 20.25 38
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 393 8 09-30 12/95 21.25 88
PFSL Pocahnts Fed, MHC of AR (46.4) OTC Northeast AR Thrift 379 6 09-30 04/94 23.50 38
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 378 6 12-31 06/92 20.87 55
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 378 11 09-30 10/94 18.12 55
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 377 8 06-30 07/87 22.25 93
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 370 M 12 09-30 09/93 17.37 47
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 356 M 9 06-30 12/92 21.00 54
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 353 5 12-31 09/96 17.50 120
INBI Industrial Bancorp of OH OTC Northern OH Thrift 347 10 12-31 08/95 14.50 77
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 346 10 12-31 03/85 26.50 51
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 342 9 12-31 01/93 29.87 43
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 9 09-30 03/95 21.37 54
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 332 9 12-31 06/90 16.00 27
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 329 8 12-31 07/94 38.00 57
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 4 09-30 08/88 16.00 32
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 312 1 12-31 06/92 26.25 65
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 288 6 09-30 07/87 25.87 59
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 287 6 06-30 11/90 24.50 28
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 272 6 12-31 05/96 16.75 43
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 271 M 6 03-31 09/93 27.00 67
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 270 1 06-30 04/87 36.00 25
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 257 M 5 09-30 10/94 19.50 39
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 252 M 6 03-31 06/93 17.75 40
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 250 M 4 06-30 08/87 9.25 23
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 243 7 06-30 12/93 16.00 30
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 235 2 06-30 06/93 23.50 31
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 234 M 4 09-30 03/94 20.75 35
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 230 M 4 12-31 02/93 23.25 28
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 5 09-30 03/94 21.50 37
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 227 7 12-31 01/88 20.00 24
FFFD North Central Bancshares of IA OTC Central IA Thrift 213 4 12-31 03/96 16.50 54
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 212 M 3 07-31 12/96 16.75 42
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 208 3 09-30 04/95 17.25 45
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 202 7 12-31 04/95 16.50 32
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 201 6 09-30 06/92 18.25 29
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 201 M 9 12-31 07/92 22.25 36
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 200 2 09-30 10/94 13.87 32
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 200 4 06-30 04/95 18.75 59
HCBB HCB Bancshares of AR OTC Southern AR Thrift 199 P 6 06-30 05/97 14.00 37
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 188 M 4 12-31 02/95 20.50 19
PULB Pulaski SB, MHC of MO (29.0) OTC St. Louis MO Thrift 178 M 5 09-30 05/94 21.00 44
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 176 3 12-31 08/96 16.75 41
EGLB Eagle BancGroup of IL OTC Central IL Thrift 174 3 12-31 07/96 16.62 21
MARN Marion Capital Holdings of IN OTC Central IN Thrift 173 2 06-30 03/93 23.50 42
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 173 M 3 12-31 06/95 16.75 30
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 166 M 8 06-30 04/94 17.25 28
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 165 3 12-31 04/97 15.50 32
FFWD Wood Bancorp of OH OTC Northern OH Thrift 164 6 06-30 08/93 16.50 35
JXSB Jcksnville SB,MHC of IL (44.6) OTC Central IL Thrift 164 M 4 12-31 04/95 17.62 22
FBSI First Bancshares of MO OTC Southcentral MO Thrift 160 M 6 06-30 12/93 24.00 28
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 158 M 3 06-30 04/93 28.00 20
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 156 3 06-30 03/95 15.00 26
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 150 M 2 06-30 04/95 23.50 34
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 147 4 12-31 11/92 34.50 12
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 138 M 3 12-31 12/96 16.75 20
GTPS Great American Bancorp of IL OTC East Central IL Thrift 137 3 12-31 06/95 17.37 31
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 135 2 12-31 09/96 15.37 43
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 132 M 3 03-31 12/95 14.50 19
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 128 M 3 06-30 07/95 9.38 32
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 128 3 09-30 03/94 16.75 24
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 124 M 6 09-30 10/92 9.62 16
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 121 4 12-31 12/93 24.25 12
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 120 2 12-31 12/93 22.00 22
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 111 2 09-30 10/93 12.75 13
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 109 M 1 06-30 04/95 12.37 21
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 2 09-30 10/95 15.00 30
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 108 P 2 06-30 04/97 16.50 29
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 108 3 03-31 09/95 16.50 14
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 108 M 5 09-30 04/95 21.75 15
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 107 1 09-30 11/96 15.87 32
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 104 P 4 06-30 07/97 11.75 19
FTNB Fulton Bancorp of MO OTC Central MO Thrift 99 M 2 06-30 10/96 20.00 34
CNSB CNS Bancorp of MO OTC Central MO Thrift 98 M 5 12-31 06/96 17.12 28
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 97 M 3 06-30 02/95 15.00 14
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 97 2 09-30 06/95 10.50 16
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 15.75 13
CBES CBES Bancorp of MO OTC Western MO Thrift 95 M 2 06-30 09/96 17.87 18
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 1 12-31 08/94 16.50 35
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 94 4 12-31 04/96 15.00 14
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 91 M 3 06-30 12/94 15.25 14
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 91 M 4 06-30 08/95 16.25 13
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 90 M 2 09-30 09/96 17.25 26
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 89 M 2 06-30 08/95 12.62 17
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 88 M 1 06-30 01/94 13.37 13
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 86 3 06-30 06/94 18.87 8
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 86 2 06-30 01/94 21.50 17
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 85 M 1 06-30 04/96 15.50 23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 85 2 12-31 10/93 18.25 8
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 83 1 12-31 06/95 14.00 18
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 83 M 3 09-30 10/94 11.75 11
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 83 1 12-31 11/96 14.62 32
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 80 M 1 09-30 02/95 20.50 17
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 79 M 3 06-30 03/95 16.25 12
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 75 2 06-30 02/95 15.00 19
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 71 M 2 06-30 03/95 12.62 7
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 1 09-30 03/95 15.63 13
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 68 M 1 06-30 12/96 15.12 14
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 64 2 12-31 01/95 17.62 19
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 61 1 12-31 01/95 20.00 19
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 2 09-30 06/95 18.50 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 1 09-30 06/96 16.62 19
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 57 2 09-30 03/97 14.12 19
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 48 M 2 09-30 10/95 12.50 12
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 M 1 June 04/96 8.50 21
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 45 2 09-30 02/95 21.00 7
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 40 M 1 06-30 07/96 15.25 15
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 39 M 1 06-30 07/96 15.12 7
LONF London Financial Corp. of OH OTC Central OH Thrift 38 M 1 09-30 04/96 15.25 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 36 M 1 03-31 12/95 15.00 11
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT (37.4) (3) OTC Southwestern CT Div. 7,870 97 12-31 07/88 26.75 1,633
WBST Webster Financial Corp. of CT OTC Central CT Thrift 5,944 77 12-31 12/86 50.00 599
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 5,591 132 12-31 12/86 38.19 1,045
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,013 19 09-30 02/87 32.75 206
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 1,859 43 12-31 02/87 18.87 248
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,435 24 12-31 02/95 30.00 167
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,251 12 12-31 05/86 29.87 154
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
---------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,245 15 12-31 08/87 16.50 124
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,090 11 12-31 10/95 25.00 162
MDBK Medford Savings Bank of MA (3) OTC Eastern MA Thrift 1,073 16 12-31 03/86 30.00 136
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,021 12 03-31 01/97 18.94 165
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 984 12 12-31 06/87 31.87 85
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 941 M 10 12-31 10/95 19.50 116
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 905 14 12-31 05/86 52.75 141
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 874 11 12-31 07/86 26.50 136
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 824 14 12-31 06/96 21.62 114
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 713 19 12-31 11/86 24.50 133
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 33.25 80
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 616 11 12-31 05/86 39.37 98
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 606 15 12-31 12/81 37.75 87
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 566 11 12-31 10/86 6.50 91
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 549 M 14 12-31 10/86 16.25 58
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 515 5 12-31 07/86 4.00 67
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 501 7 12-31 06/86 29.25 54
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 475 M 11 12-31 07/86 33.50 64
PETE Primary Bank of NH (3) OTC Southern NH Thrift 432 9 12-31 10/93 25.75 54
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 428 3 12-31 07/86 30.00 76
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 425 8 12-31 09/86 21.00 47
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 366 5 12-31 05/86 11.12 48
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 358 6 12-31 07/86 17.87 68
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 323 13 06-30 02/86 13.00 50
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 321 M 8 03-31 10/86 19.50 38
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 313 M 10 12-31 05/86 16.75 34
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 259 3 12-31 02/88 17.19 102
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 248 M 8 06-30 08/87 14.75 19
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 238 7 12-31 12/86 15.50 24
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 218 5 12-31 12/88 23.06 30
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 199 2 12-31 08/88 20.62 38
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 189 5 12-31 05/93 23.50 28
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 187 5 12-31 11/86 4.94 32
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
---------------------------------
<C> <S> <C> <S> <C> <C> <C> <C> <C> <C> <C>
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 152 7 12-31 / 10.62 14
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 149 P 4 09-30 10/96 15.87 23
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 140 M 8 12-31 06/93 13.00 16
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 125 M 4 04-30 12/87 18.62 17
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 94 2 09-30 03/96 17.00 25
NTMG Nutmeg FS&LA of CT OTC CT M.B. 94 M 3 12-31 / 11.00 8
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 60 2 03-31 11/89 25.00 6
North-West Companies
--------------------
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 48,764 290 12-31 03/83 62.37 7,881
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,760 89 09-30 11/82 26.62 1,263
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,833 31 12-31 / 39.75 319
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,686 41 06-30 / 17.75 99
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,008 M 16 03-31 11/95 24.50 258
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 728 7 09-30 10/95 19.31 193
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 519 12 03-31 08/86 15.00 111
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 432 6 12-31 12/85 21.75 59
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 352 M 6 06-30 08/92 14.75 38
RVSB Rvrview SB,FSB MHC of WA(41.7) OTC Southwest WA M.B. 230 9 03-31 10/93 27.00 65
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 154 P 5 03-31 07/97 18.25 36
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 15.25 40
South-East Companies
--------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,667 32 09-30 11/83 31.25 199
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,488 20 12-31 10/94 24.75 244
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,353 63 06-30 03/91 25.25 347
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,248 M 31 9-30 12/83 22.50 174
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 939 M 25 12-31 04/95 24.50 169
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 895 8 06-30 12/95 16.00 275
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
--------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 817 M 23 06-30 01/78 24.00 139
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 710 15 12-31 08/92 50.75 84
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 666 D 10 03-31 04/86 16.87 77
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 665 19 12-31 12/85 15.87 84
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 618 12 12-31 11/80 13.62 68
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 559 11 12-31 10/94 29.25 132
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 503 9 09-30 09/90 24.87 115
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 465 P 5 06-30 07/97 35.75 158
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 407 P 12 12-31 07/97 34.19 83
TSH Teche Holding Company of LA AMEX Southern LA Thrift 394 M 9 09-30 04/95 18.75 64
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 352 17 03-31 08/91 24.50 37
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 335 M 11 06-30 10/93 14.00 61
FSTC First Citizens Corp of GA OTC Western GA M.B. 326 M 9 03-31 03/86 30.00 55
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 294 5 06-30 01/94 20.50 75
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 276 9 12-31 07/80 12.00 37
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 262 M 4 12-31 07/96 21.62 59
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 242 2 09-30 10/96 19.25 87
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 228 8 12-31 / 40.50 31
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 223 D 5 09-30 10/96 39.00 59
FLAG Flag Financial Corp of GA OTC Western GA M.B. 222 M 4 12-31 12/86 14.25 29
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 206 M 1 09-30 03/96 18.37 85
ESX Essex Bancorp of VA AMEX VA,NC M.B. 190 12 12-31 / 2.00 2
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 175 3 03-31 03/88 21.75 28
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 175 3 09-30 04/96 17.50 75
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 171 5 09-30 07/95 22.50 40
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 9 09-30 02/87 7.25 22
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 135 3 09-30 08/94 24.75 28
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 129 M 3 06-30 07/93 24.00 37
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 123 3 12-31 04/97 15.75 54
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 123 2 06-30 12/95 11.00 30
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 109 M 4 06-30 11/96 17.37 32
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 20.00 17
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 106 3 12-31 12/93 18.50 16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 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)
--------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 106 2 12-31 04/96 21.50 41
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 M 4 06-30 10/95 15.50 19
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 101 4 12-31 07/95 16.50 14
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 100 M 1 06-30 12/96 79.00 32
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 93 M 2 09-30 02/95 16.37 13
SFNB Security First Netwrk Bk of GA OTC GA (Internet) Div. 80 M 1 12-31 / 11.62 98
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 70 M 1 09-30 12/96 15.50 18
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 2 09-30 04/96 17.00 33
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 M 1 06-30 07/94 21.06 15
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 33 1 12-31 07/96 16.75 16
South-West Companies
--------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,964 40 12-31 / 29.75 148
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 31.75 26
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 226 6 09-30 04/96 17.00 42
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 177 7 03-31 11/91 16.53 19
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 113 2 09-30 01/95 19.25 20
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 105 3 12-31 08/86 6.62 8
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 87 M 1 06-30 06/95 19.00 16
Western Companies (Excl CA)
---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,510 M 26 12-31 01/96 17.50 290
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 956 35 06-30 01/94 21.75 121
GBCI Glacier Bancorp of MT OTC Western MT Div. 568 16 12-31 03/84 18.50 126
UBMT United Fin. Corp. of MT OTC Central MT Thrift 108 M 4 12-31 09/86 23.50 29
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 89 2 12-31 09/93 22.75 14
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 54 1 09-30 03/96 14.12 13
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
August 31, 1997(1)
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------- ---------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 08/31/97
<PAGE>
EXHIBIT III-2
State of Washington Peer Thrifts
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
-------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ------- ------- ------- ------- ------- ------- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
State of WA 28.25 1253.31 1.47 13.97 18.21 174.62 18.19 183.06 18.83
Comparable Group
- ----------------
State of WA
- -----------
CASB Cascade SB of Everett WA(7) 14.75 37.92 0.77 8.46 24.18 174.35 10.76 174.35 19.16
FMSB First Mutual SB of Bellevue WA 21.75 58.77 1.52 10.91 13.94 199.36 13.60 199.36 14.31
FWWB First Savings Bancorp of WA 24.50 257.72 0.84 14.13 27.53 173.39 25.58 188.46 29.17
FBNW FirstBank Corp of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
HRZB Horizon Financial Corp. of WA 15.00 111.26 1.05 10.91 14.02 137.49 21.45 137.49 14.29
IWBK Interwest SB of Oak Harbor WA 39.75 319.43 2.47 15.46 21.84 257.12 17.43 262.90 16.09
RVSB Rvrview SB,FSB MHC of WA(41.7)(7) 27.00 24.73 1.10 10.67 NM 253.05 28.44 277.21 24.55
STSA Sterling Financial Corp. of WA 17.75 98.81 0.90 12.41 NM 143.03 5.86 164.05 19.72
WFSL Washington FS&LA of Seattle WA 26.62 1263.44 2.14 14.66 13.72 181.58 21.93 198.81 12.44
WAMU Washington Mutual Inc. of WA 62.37 7880.89 2.42 19.30 NM NM 16.16 NM 25.77
<CAPTION>
Financial Characteristics(6)
Dividends(4) -------------------------------------------------------
----------------------- Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- ---------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ------ ------- ------ ------- ------- ------- ------- ------- --------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
State of WA 0.44 1.43 24.56 7,519 10.40 0.72 0.92 9.00 1.02 11.19
Comparable Group
- ----------------
State of WA
- -----------
CASB Cascade SB of Everett WA(7) 0.00 0.00 0.00 352 6.17 0.39 0.46 7.49 0.58 9.46
FMSB First Mutual SB of Bellevue WA 0.20 0.92 13.16 432 6.82 0.01 1.02 15.34 1.00 14.95
FWWB First Savings Bancorp of WA 0.28 1.14 33.33 1,008 14.75 0.30 1.05 6.25 1.00 5.90
FBNW FirstBank Corp of Clarkston WA 0.00 0.00 0.00 154 18.04 1.95 0.70 3.86 0.57 3.14
HRZB Horizon Financial Corp. of WA 0.40 2.67 38.10 519 15.60 NA 1.57 9.99 1.54 9.80
IWBK Interwest SB of Oak Harbor WA 0.60 1.51 24.29 1,833 6.78 0.64 0.87 12.91 1.18 17.52
RVSB Rvrview SB,FSB MHC of WA(41.7)(7) 0.24 0.89 8.26 230 11.24 0.14 0.96 8.70 1.20 10.87
STSA Sterling Financial Corp. of WA 0.00 0.00 0.00 1,686 4.10 0.61 0.10 2.46 0.32 7.91
WFSL Washington FS&LA of Seattle WA 0.92 3.46 42.99 5,760 12.08 0.73 1.67 14.37 1.84 15.85
WAMU Washington Mutual Inc. of WA 1.08 1.73 44.63 48,764 5.00 0.81 0.35 6.81 0.74 14.45
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-3
Northwest U.S. and Western U.S. Peer Thrifts
<PAGE>
RP FINANCIAL, LC.
--------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
-------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ --------------------------------------
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
--------------------- -------- ------- ------- ------- ------- ------- ----- ----- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Special Selection Grouping(8) 26.06 1025.95 1.31 14.07 18.21 162.40 20.82 168.97 19.38
State of WA 28.25 1253.31 1.47 13.97 18.21 174.62 18.19 183.06 18.83
Comparable Group
----------------
Special Comparative Group(8)
----------------------------
CASB Cascade SB of Everett WA(7) 14.75 37.92 0.77 8.46 24.18 174.35 10.76 174.35 19.16
EFBC Empire Federal Bancorp of MT 15.25 39.53 0.46 14.76 NM 103.32 36.05 103.32 NM
FMSB First Mutual SB of Bellevue WA 21.75 58.77 1.52 10.91 13.94 199.36 13.60 199.36 14.31
FWWB First Savings Bancorp of WA 24.50 257.72 0.84 14.13 27.53 173.39 25.58 188.46 29.17
FBNW FirstBank Corp of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
HRZB Horizon Financial Corp. of WA 15.00 111.26 1.05 10.91 14.02 137.49 21.45 137.49 14.29
IWBK Interwest SB of Oak Harbor WA 39.75 319.43 2.47 15.46 21.84 257.12 17.43 262.90 16.09
KFBI Klamath First Bancorp of OR 19.31 193.47 0.83 14.20 NM 135.99 26.58 135.99 23.27
RVSB Rvrview SB,FSB MHC of WA(41.7)(7) 27.00 24.73 1.10 10.67 NM 253.05 28.44 277.21 24.55
STSA Sterling Financial Corp. of WA 17.75 98.81 0.90 12.41 NM 143.03 5.86 164.05 19.72
WFSL Washington FS&LA of Seattle WA 26.62 1263.44 2.14 14.66 13.72 181.58 21.93 198.81 12.44
WAMU Washington Mutual Inc. of WA 62.37 7880.89 2.42 19.30 NM NM 16.16 NM 25.77
<CAPTION>
Dividends (4) Financial Characteristics(6)
-------------------------- -----------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
--------------------- ------ ----- ------- ------ ------ ------ -------- --- ---- ---
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Special Selection Grouping(8) 0.41 1.49 29.79 6,099 13.76 0.58 0.90 7.80 1.05 9.82
State of WA 0.44 1.43 24.56 7,519 10.40 0.72 0.92 9.00 1.02 11.19
Comparable Group
----------------
Special Comparative Group(8)
----------------------------
CASB Cascade SB of Everett WA(7) 0.00 0.00 0.00 352 6.17 0.39 0.46 7.49 0.58 9.46
EFBC Empire Federal Bancorp of MT 0.30 1.97 65.22 110 34.89 0.06 0.83 2.37 1.09 3.12
FMSB First Mutual SB of Bellevue WA 0.20 0.92 13.16 432 6.82 0.01 1.02 15.34 1.00 14.95
FWWB First Savings Bancorp of WA 0.28 1.14 33.33 1,008 14.75 0.30 1.05 6.25 1.00 5.90
FBNW FirstBank Corp of Clarkston WA 0.00 0.00 0.00 154 18.04 1.95 0.70 3.86 0.57 3.14
HRZB Horizon Financial Corp. of WA 0.40 2.67 38.10 519 15.60 NA 1.57 9.99 1.54 9.80
IWBK Interwest SB of Oak Harbor WA 0.60 1.51 24.29 1,833 6.78 0.64 0.87 12.91 1.18 17.52
KFBI Klamath First Bancorp of OR 0.30 1.55 36.14 728 19.55 0.08 0.81 3.67 1.23 5.54
RVSB Rvrview SB,FSB MHC of WA(41.7)(7) 0.24 0.89 8.26 230 11.24 0.14 0.96 8.70 1.20 10.87
STSA Sterling Financial Corp. of WA 0.00 0.00 0.00 1,686 4.10 0.61 0.10 2.46 0.32 7.91
WFSL Washington FS&LA of Seattle WA 0.92 3.46 42.99 5,760 12.08 0.73 1.67 14.37 1.84 15.85
WAMU Washington Mutual Inc. of WA 1.08 1.73 44.63 48,764 5.00 0.81 0.35 6.81 0.74 14.45
</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 North-West Companies;
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.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
All Public Companies 22.36 178.58 1.23 15.75 19.65 141.92 17.37 146.85 18.10
Special Selection Grouping(8) 19.69 98.83 1.06 15.93 22.42 135.00 20.18 140.88 19.02
State of WA 28.25 1253.31 1.47 13.97 18.21 174.62 18.19 183.06 18.83
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CRZY Crazy Woman Creek Bncorp of WY 14.12 13.48 0.71 14.67 24.34 96.25 24.85 96.25 19.89
FFBA First Colorado Bancorp of Co 17.50 289.82 0.82 11.60 20.83 150.86 19.20 150.86 21.34
GBCI Glacier Bancorp of MT 18.50 126.02 1.23 8.12 16.82 227.83 22.20 234.18 15.04
TRIC Tri-County Bancorp of WY 22.75 13.85 1.40 22.50 20.68 101.11 15.49 101.11 16.25
UBMT United Fin. Corp. of MT 23.50 28.74 1.16 19.95 25.00 117.79 26.68 117.79 20.26
WSTR WesterFed Fin. Corp. of MT 21.75 121.04 1.02 18.73 26.85 116.12 12.67 145.10 21.32
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ----------- -----------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ----- ------- ------ ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
All Public Companies 0.39 1.77 29.25 1,316 12.77 0.82 0.65 6.51 0.83 8.17
Special Selection Grouping(8) 0.56 2.80 47.00 547 16.19 0.31 0.99 6.65 1.16 7.70
State of WA 0.44 1.43 24.56 7,519 10.40 0.72 0.92 9.00 1.02 11.19
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CRZY Crazy Woman Creek Bncorp of WY 0.40 2.83 56.34 54 25.81 0.39 1.06 3.69 1.30 4.52
FFBA First Colorado Bancorp of Co 0.44 2.51 53.66 1,510 12.73 0.23 0.92 6.21 0.90 6.07
GBCI Glacier Bancorp of MT 0.48 2.59 39.02 568 9.74 0.27 1.44 15.09 1.61 16.87
TRIC Tri-County Bancorp of WY 0.60 2.64 42.86 89 15.32 NA 0.80 5.14 1.02 6.55
UBMT United Fin. Corp. of MT 0.98 4.17 NM 108 22.65 0.42 1.09 4.70 1.34 5.80
WSTR WesterFed Fin. Corp. of MT 0.44 2.02 43.14 956 10.91 0.25 0.63 5.09 0.79 6.41
</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 Western Companies (Excl CA);
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of August 15, 1997
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
_______________________ _______________________________________________
Shares Market 52 Week (1) % Change From
_______________ _______________________
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
_____________________ _______ _______ _______ _______ _______ _______ _______ _______ ________
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
_____________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(304) 21.80 5,467 154.6 22.97 14.95 21.69 0.31 191.94 26.16
NYSE Traded Companies(8) 39.81 38,507 1,743.3 42.22 24.94 39.76 0.07 264.18 26.51
AMEX Traded Companies(17) 19.61 4,784 116.9 21.23 13.62 19.54 0.52 320.40 22.55
NASDAQ Listed OTC Companies(279) 21.39 4,507 108.8 22.49 14.73 21.28 0.30 179.68 26.37
California Companies(21) 26.21 18,883 739.4 27.78 16.27 26.14 0.36 126.40 30.12
Florida Companies(6) 26.42 12,199 353.9 27.35 15.37 26.50 0.56 159.59 39.66
Mid-Atlantic Companies(58) 22.83 6,425 154.3 23.88 14.85 22.76 0.59 178.02 34.11
Mid-West Companies(147) 20.63 3,371 87.7 21.60 14.55 20.37 0.54 216.04 23.08
New England Companies(10) 24.67 4,651 140.4 25.14 15.95 24.72 0.42 338.93 33.74
North-West Companies(7) 22.82 12,610 325.1 23.87 16.71 23.13 -1.18 158.41 20.52
South-East Companies(42) 21.44 3,622 74.6 23.60 15.68 21.58 -0.57 159.14 22.52
South-West Companies(7) 19.99 1,785 39.9 20.59 13.05 19.97 0.11 -1.93 22.97
Western Companies (Excl CA)(6) 19.69 5,288 98.8 21.06 14.72 19.94 -1.01 279.05 16.92
Thrift Strategy(240) 20.74 3,584 82.0 21.78 14.52 20.64 0.28 169.60 24.92
Mortgage Banker Strategy(37) 27.29 13,181 481.8 28.56 17.55 27.12 0.11 251.42 33.52
Real Estate Strategy(11) 23.23 7,531 199.4 24.17 14.51 22.73 2.58 201.83 34.18
Diversified Strategy(12) 29.85 23,678 787.6 33.56 18.25 29.78 0.67 184.83 26.32
Retail Banking Strategy(4) 15.56 3,472 59.4 17.94 11.38 15.91 -2.26 346.07 15.18
Companies Issuing Dividends(254) 22.00 5,331 154.9 23.17 15.12 21.97 0.18 203.07 25.58
Companies Without Dividends(50) 20.69 6,218 153.1 21.88 14.01 20.14 0.99 116.60 29.89
Equity/Assets Less Than 6%(23) 24.85 17,391 527.9 26.16 15.23 24.17 -0.32 153.11 33.62
Equity/Assets 6-12%(147) 24.13 5,734 180.7 25.28 15.91 24.08 0.20 205.51 29.59
Equity/Assets Greater Than 12%(134) 18.89 3,189 65.1 20.06 13.91 18.82 0.52 160.60 20.96
Converted Last 3 Mths (no MHC)(5) 22.92 2,546 65.9 23.95 21.52 22.82 0.39 0.00 -9.62
Actively Traded Companies(42) 29.52 17,211 627.0 31.29 19.19 29.76 -0.90 209.22 31.64
Market Value Below $20 Million(63) 16.95 892 14.2 17.77 12.44 16.86 0.59 222.47 22.08
Holding Company Structure(269) 21.82 5,279 154.1 22.96 15.10 21.71 0.24 174.13 24.89
Assets Over $1 Billion(62) 31.27 17,248 586.2 33.01 20.07 31.01 -0.33 222.59 29.63
Assets $500 Million-$1 Billion(49) 21.41 5,442 105.0 22.59 13.95 21.31 0.35 209.81 32.03
Assets $250-$500 Million(68) 21.88 2,512 51.9 22.73 15.05 21.81 0.56 175.50 29.00
Assets less than $250 Million(125) 17.48 1,498 24.8 18.55 12.89 17.42 0.46 124.29 20.55
Goodwill Companies(121) 24.84 8,828 255.9 26.17 16.19 24.80 0.25 215.51 29.05
Non-Goodwill Companies(181) 19.82 3,246 87.9 20.90 14.15 19.67 0.35 158.84 24.09
Acquirors of FSLIC Cases(10) 33.11 33,585 1,450.6 35.04 21.31 33.37 -1.58 258.91 30.84
<CAPTION>
Current Per Share Financials
________________________________________
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
_____________________ ________ _______ _______ _______ _______
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
_____________________________________________
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(304) 0.85 1.17 15.95 15.48 156.73
NYSE Traded Companies(8) 1.96 2.83 21.63 20.63 384.39
AMEX Traded Companies(17) 0.71 0.98 14.98 14.83 106.88
NASDAQ Listed OTC Companies(279) 0.83 1.13 15.83 15.36 152.85
California Companies(21) 1.03 1.40 17.01 16.41 263.42
Florida Companies(6) 1.03 0.99 13.60 12.90 186.25
Mid-Atlantic Companies(58) 1.01 1.41 16.22 15.53 172.23
Mid-West Companies(147) 0.84 1.11 16.00 15.69 139.03
New England Companies(10) 0.78 1.30 17.03 15.95 226.99
North-West Companies(7) 0.91 1.21 14.25 13.72 140.82
South-East Companies(42) 0.60 0.87 15.00 14.69 119.73
South-West Companies(7) 0.66 1.19 16.36 15.47 218.19
Western Companies (Excl CA)(6) 0.90 1.06 15.93 15.27 106.33
Thrift Strategy(240) 0.80 1.11 16.06 15.67 140.72
Mortgage Banker Strategy(37) 1.22 1.58 16.63 15.62 241.32
Real Estate Strategy(11) 0.93 1.44 14.71 14.40 223.92
Diversified Strategy(12) 1.03 1.29 12.79 12.35 177.31
Retail Banking Strategy(4) 0.18 -0.01 13.12 12.68 168.63
Companies Issuing Dividends(254) 0.93 1.25 16.08 15.57 154.24
Companies Without Dividends(50) 0.42 0.69 15.21 15.00 170.56
Equity/Assets Less Than 6%(23) 1.06 1.57 13.78 12.90 288.18
Equity/Assets 6-12%(147) 1.04 1.41 16.41 15.71 197.22
Equity/Assets Greater Than 12%(134) 0.63 0.85 15.83 15.68 92.93
Converted Last 3 Mths (no MHC)(5) 0.55 0.66 18.86 18.86 92.92
Actively Traded Companies(42) 1.51 2.00 17.53 16.89 237.20
Market Value Below $20 Million(63) 0.54 0.84 15.41 15.28 119.86
Holding Company Structure(269) 0.84 1.16 16.23 15.78 154.60
Assets Over $1 Billion(62) 1.36 1.88 18.12 16.84 256.76
Assets $500 Million-$1 Billion(49) 0.97 1.14 14.25 13.77 156.79
Assets $250-$500 Million(68) 0.86 1.21 16.74 16.24 167.57
Assets less than $250 Million(125) 0.57 0.82 15.16 15.10 104.38
Goodwill Companies(121) 1.03 1.39 16.44 15.28 204.75
Non-Goodwill Companies(181) 0.74 1.02 15.63 15.63 125.55
Acquirors of FSLIC Cases(10) 1.66 2.43 18.86 17.79 305.78
</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
<TABLE>
<CAPTION>
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------ ------- ------- ------ ------ ----- ------ --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(69) 24.88 9,829 340.3 25.97 15.50 24.89 0.01 196.23 32.82
NYSE Traded Companies(3) 36.04 52,819 1,710.6 37.21 20.41 35.93 0.48 271.27 37.94
AMEX Traded Companies(5) 22.15 4,239 88.6 23.35 13.87 22.37 -1.21 91.23 40.75
NASDAQ Listed OTC Companies(61) 24.50 7,848 284.4 25.57 15.37 24.49 0.10 201.92 31.72
California Companies(4) 20.66 5,592 117.4 21.11 10.59 20.47 0.72 450.00 42.62
Mid-Atlantic Companies(18) 26.27 17,456 514.0 27.48 15.94 26.43 -0.68 128.07 31.20
Mid-West Companies(2) 12.50 942 11.8 12.50 9.12 12.50 0.00 0.00 23.52
New England Companies(36) 23.38 4,578 111.8 24.51 14.66 23.31 0.22 208.56 32.63
North-West Companies(4) 30.91 36,749 2,077.2 33.16 18.31 31.20 -0.06 149.35 35.46
South-East Companies(5) 30.80 2,083 45.1 31.05 22.17 30.75 0.30 0.00 30.38
Thrift Strategy(45) 24.85 4,911 159.0 25.85 15.90 24.83 -0.03 192.57 32.20
Mortgage Banker Strategy(10) 23.96 25,700 543.6 25.12 14.51 23.93 0.36 216.91 34.02
Real Estate Strategy(6) 17.94 4,200 74.3 18.41 11.18 17.84 0.50 302.93 25.18
Diversified Strategy(7) 31.05 30,188 1,573.6 33.19 16.94 31.47 -0.75 164.26 41.60
Retail Banking Strategy(1) 23.50 706 16.6 23.75 14.75 23.12 1.64 63.54 28.77
Companies Issuing Dividends(56) 26.50 10,864 392.4 27.71 16.73 26.51 0.10 190.39 32.10
Companies Without Dividends(13) 16.95 4,758 85.0 17.47 9.47 16.96 -0.41 256.60 36.25
Equity/Assets Less Than 6%(5) 27.15 49,456 2,030.7 29.37 15.07 27.40 -0.23 149.68 52.80
Equity/Assets 6-12%(47) 25.44 6,119 202.2 26.57 15.67 25.42 0.11 208.34 31.21
Equity/Assets Greater Than 12%(17) 22.68 6,266 136.1 23.30 15.21 22.69 -0.17 31.35 30.16
Actively Traded Companies(23) 27.24 18,091 696.0 28.91 16.93 27.37 -0.46 237.92 30.42
Market Value Below $20 Million(8) 16.03 959 14.7 16.35 11.15 15.89 0.71 120.49 19.21
Holding Company Structure(46) 25.27 9,784 369.5 26.38 15.93 25.25 0.14 196.82 32.09
Assets Over $1 Billion(18) 31.58 29,498 1,156.1 33.28 18.51 31.85 -0.70 196.07 34.83
Assets $500 Million-$1 Billion(16) 25.36 5,181 106.4 26.60 16.26 25.45 -0.50 169.67 33.29
Assets $250-$500 Million(16) 20.49 3,013 57.3 21.26 12.81 20.31 0.58 241.32 29.17
Assets less than $250 Million(19) 22.03 1,420 27.9 22.70 14.38 21.89 0.63 173.12 33.84
Goodwill Companies(32) 26.28 16,101 612.6 27.70 16.44 26.47 -0.46 188.95 32.21
Non-Goodwill Companies(37) 23.62 4,164 94.4 24.41 14.66 23.47 0.44 209.58 33.35
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ ------- ------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(69) 1.64 1.64 15.90 15.08 160.68
NYSE Traded Companies(3) 1.93 1.92 19.07 14.47 239.94
AMEX Traded Companies(5) 1.27 1.22 15.00 14.63 143.44
NASDAQ Listed OTC Companies(61) 1.66 1.67 15.80 15.16 157.70
California Companies(4) 1.92 1.84 12.63 12.62 129.94
Mid-Atlantic Companies(18) 1.29 1.37 16.20 14.32 169.90
Mid-West Companies(2) 0.21 0.32 12.77 12.04 50.95
New England Companies(36) 1.94 1.87 14.77 14.20 172.00
North-West Companies(4) 1.17 1.46 13.81 13.29 177.88
South-East Companies(5) 1.28 1.32 26.62 26.62 97.87
Thrift Strategy(45) 1.60 1.58 16.77 15.82 149.70
Mortgage Banker Strategy(10) 1.51 1.57 14.44 14.00 187.42
Real Estate Strategy(6) 1.50 1.43 10.98 10.97 128.42
Diversified Strategy(7) 2.21 2.40 14.12 13.29 199.00
Retail Banking Strategy(1) 1.13 1.10 20.32 19.48 322.70
Companies Issuing Dividends(56) 1.59 1.61 16.72 15.75 171.40
Companies Without Dividends(13) 1.85 1.83 11.87 11.79 108.12
Equity/Assets Less Than 6%(5) 1.30 1.45 10.70 10.33 202.62
Equity/Assets 6-12%(47) 1.93 1.90 15.62 14.48 184.86
Equity/Assets Greater Than 12%(17) 0.99 1.05 18.34 18.21 83.83
Actively Traded Companies(23) 1.88 1.88 16.00 15.22 195.10
Market Value Below $20 Million(8) 1.30 1.32 14.40 13.89 133.44
Holding Company Structure(46) 1.60 1.62 16.23 15.54 148.54
Assets Over $1 Billion(18) 1.80 1.89 15.89 14.41 199.28
Assets $500 Million-$1 Billion(16) 1.90 1.83 16.54 15.18 183.94
Assets $250-$500 Million(16) 1.28 1.29 13.62 13.40 136.62
Assets less than $250 Million(19) 1.56 1.56 17.33 17.08 125.17
Goodwill Companies(32) 1.60 1.62 15.72 14.00 194.19
Non-Goodwill Companies(37) 1.67 1.66 16.05 16.05 130.41
</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 August 15, 1997
<TABLE>
<CAPTION>
Current Per Share Financials
- ----------------------------
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
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(22) 23.13 4,936 43.5 24.14 14.34 22.51 2.89 226.16 37.41
BIF-Insured Thrifts(2) 21.50 32,163 208.0 22.75 11.63 21.69 1.08 239.90 47.83
NASDAQ Listed OTC Companies(24) 22.98 7,529 59.2 24.01 14.08 22.43 2.71 230.74 38.57
Florida Companies(3) 31.79 5,609 80.3 31.92 17.46 30.83 3.39 0.00 29.39
Mid-Atlantic Companies(11) 20.00 6,654 47.9 20.33 12.51 19.16 4.41 177.50 48.18
Mid-West Companies(7) 20.23 2,029 15.1 22.54 14.01 19.90 1.45 274.81 28.17
New England Companies(1) 26.75 61,053 405.4 29.00 14.00 28.25 -5.31 239.90 38.96
South-East Companies(1) 39.00 1,505 27.5 41.00 20.25 39.25 -0.64 0.00 60.82
Thrift Strategy(22) 22.79 4,852 41.9 23.76 14.09 22.14 3.11 226.16 38.54
Diversified Strategy(1) 26.75 61,053 405.4 29.00 14.00 28.25 -5.31 239.90 38.96
Companies Issuing Dividends(23) 23.39 7,767 61.2 24.48 14.11 22.85 2.58 230.74 38.57
Companies Without Dividends(1) 14.75 2,760 18.3 14.75 13.62 14.00 5.36 0.00 0.00
Equity/Assets 6-12%(16) 23.40 9,632 74.3 24.58 14.20 22.89 2.71 230.74 35.02
Equity/Assets greater than 12%(8) 22.13 3,322 29.0 22.88 13.84 21.50 2.72 0.00 47.79
Actively Traded Companies(1) 27.75 7,264 94.5 29.50 14.32 29.00 -4.31 177.50 50.00
Holding Company Structure(1) 27.75 7,264 94.5 29.50 14.32 29.00 -4.31 177.50 50.00
Assets Over $1 Billion(5) 29.00 21,577 161.1 29.80 15.56 28.77 1.24 208.70 39.93
Assets $500 Million-$1 Billion(4) 25.92 6,964 74.9 26.04 13.96 24.17 7.39 0.00 45.33
Assets $250-$500 Million(4) 22.06 2,541 19.9 24.94 15.17 21.41 2.85 274.81 27.17
Assets less than $250 Million(11) 19.05 2,129 14.8 19.71 12.82 18.78 1.92 0.00 41.65
Goodwill Companies(9) 27.77 15,815 123.9 29.52 15.56 26.86 3.99 230.74 42.36
Non-Goodwill Companies(15) 20.03 2,429 19.4 20.62 13.18 19.70 1.93 0.00 35.53
MHC Institutions(24) 22.98 7,529 59.2 24.01 14.08 22.43 2.71 230.74 38.57
MHC Converted Last 3 Months(1) 14.75 2,760 18.3 14.75 13.62 14.00 5.36 0.00 0.00
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ----- -------- ------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(22) 0.67 0.99 13.00 12.70 122.58
BIF-Insured Thrifts(2) 0.81 0.73 9.79 9.78 101.80
NASDAQ Listed OTC Companies(24) 0.68 0.97 12.69 12.42 120.60
Florida Companies(3) 1.12 1.55 15.33 15.09 165.24
Mid-Atlantic Companies(11) 0.48 0.71 11.63 11.16 99.12
Mid-West Companies(7) 0.63 1.01 12.27 12.25 128.12
New England Companies(1) 1.39 1.03 10.93 10.92 128.90
South-East Companies(1) 1.00 1.41 19.69 19.69 148.17
Thrift Strategy(22) 0.65 0.96 12.78 12.50 120.19
Diversified Strategy(1) 1.39 1.03 10.93 10.92 128.90
Companies Issuing Dividends(23) 0.70 0.98 12.61 12.33 122.49
Companies Without Dividends(1) 0.32 0.67 14.36 14.36 82.97
Equity/Assets 6-12%(16) 0.73 1.06 12.55 12.22 139.64
Equity/Assets greater than 12%(8) 0.59 0.79 12.97 12.83 82.54
Actively Traded Companies(1) 0.80 1.25 13.39 11.94 142.18
Holding Company Structure(1) 0.80 1.25 13.39 11.94 142.18
Assets Over $1 Billion(5) 1.12 1.34 13.21 12.33 152.67
Assets $500 Million-$1 Billion(4) 0.72 0.91 12.97 12.61 113.62
Assets $250-$500 Million(4) 0.76 1.19 13.00 12.97 147.88
Assets less than $250 Million(11) 0.39 0.68 12.17 12.17 92.99
Goodwill Companies(9) 0.95 1.18 12.96 12.26 141.98
Non-Goodwill Companies(15) 0.52 0.84 12.53 12.53 107.45
MHC Institutions(24) 0.68 0.97 12.69 12.42 120.60
MHC Converted Last 3 Months(1) 0.32 0.67 14.36 14.36 82.97
</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 August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 49.87 97,336 4,854.1 53.19 25.00 49.69 0.36 165.97 53.45
CSA Coast Savings Financial of CA 45.19 18,616 841.3 48.75 30.25 45.81 -1.35 290.92 23.40
CFB Commercial Federal Corp. of NE 40.56 21,553 874.2 40.94 25.33 39.44 2.84 999.19 26.75
DME Dime Bancorp, Inc. of NY* 19.37 103,719 2,009.0 20.25 12.87 19.56 -0.97 92.54 31.32
DSL Downey Financial Corp. of CA 21.69 26,733 579.8 23.75 15.40 21.75 -0.28 99.72 16.05
FRC First Republic Bancorp of CA* 24.75 9,693 239.9 24.81 12.87 24.12 2.61 450.00 47.76
FED FirstFed Fin. Corp. of CA 33.75 10,575 356.9 34.62 17.75 33.37 1.14 108.98 53.41
GSB Glendale Fed. Bk, FSB of CA 28.63 50,306 1,440.3 28.00 17.50 28.75 -0.42 76.18 23.14
GDW Golden West Fin. Corp. of CA 78.94 56,739 4,479.0 84.62 55.00 79.06 -0.15 201.41 25.06
GPT GreenPoint Fin. Corp. of NY* 64.00 45,044 2,882.8 66.56 35.50 64.12 -0.19 N.A. 34.74
WES Westcorp Inc. of Orange CA 19.87 26,195 520.5 23.87 13.25 20.19 -1.58 171.08 -9.19
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 21.62 2,731 59.0 22.25 12.37 21.88 -1.19 N.A. 45.39
BKC American Bank of Waterbury CT* 37.75 2,306 87.1 39.00 25.87 37.87 -0.32 101.33 34.82
BFD BostonFed Bancorp of MA 19.50 5,947 116.0 19.94 11.87 19.62 -0.61 N.A. 32.20
CFX CFX Corp of NH* 18.87 13,144 248.0 21.00 12.50 19.00 -0.68 58.57 21.74
CBK Citizens First Fin.Corp. of IL 16.75 2,594 43.4 16.87 10.50 16.75 0.00 N.A. 16.56
ESX Essex Bancorp of VA(8) 2.00 1,057 2.1 2.37 1.00 1.56 28.21 -88.06 -8.68
FCB Falmouth Co-Op Bank of MA* 17.00 1,455 24.7 17.50 11.00 17.00 0.00 N.A. 29.57
FAB FirstFed America Bancorp of MA 18.94 8,707 164.9 19.00 13.62 18.87 0.37 N.A. N.A.
GAF GA Financial Corp. of PA 17.25 7,985 137.7 19.50 11.62 17.00 1.47 N.A. 14.09
JSB JSB Financial, Inc. of NY 44.56 9,845 438.7 46.50 33.12 44.40 0.36 287.48 17.26
KNK Kankakee Bancorp of IL 29.87 1,425 42.6 30.75 19.12 29.50 1.25 198.70 20.69
KYF Kentucky First Bancorp of KY 12.62 1,319 16.6 15.12 10.56 12.25 3.02 N.A. 16.10
NYB New York Bancorp, Inc. of NY 30.87 21,591 666.5 32.00 15.12 31.06 -0.61 335.40 59.37
PDB Piedmont Bancorp of NC 11.00 2,751 30.3 19.12 9.25 11.12 -1.08 N.A. 4.76
SSB Scotland Bancorp of NC 17.00 1,914 32.5 17.19 12.00 17.19 -1.11 N.A. 20.40
SZB SouthFirst Bancshares of AL 16.37 821 13.4 17.25 12.25 17.00 -3.71 N.A. 23.55
SRN Southern Banc Company of AL 15.50 1,230 19.1 15.75 12.25 15.75 -1.59 N.A. 18.14
SSM Stone Street Bancorp of NC 21.50 1,898 40.8 27.25 16.75 21.31 0.89 N.A. 4.88
TSH Teche Holding Company of LA 18.75 3,438 64.5 19.37 12.87 18.12 3.48 N.A. 30.48
FTF Texarkana Fst. Fin. Corp of AR 22.50 1,790 40.3 23.00 13.62 22.37 0.58 N.A. 43.95
THR Three Rivers Fin. Corp. of MI 16.25 824 13.4 16.62 12.62 16.00 1.56 N.A. 16.07
TBK Tolland Bank of CT* 15.50 1,560 24.2 17.00 7.59 16.12 -3.85 113.79 72.22
WSB Washington SB, FSB of MD 7.00 4,247 29.7 7.37 4.38 6.69 4.63 460.00 43.74
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 36.00 698 25.1 36.25 26.19 36.25 -0.69 N.A. 26.32
AFED AFSALA Bancorp, Inc. of NY 15.87 1,455 23.1 16.12 11.31 15.63 1.54 N.A. 32.25
ALBK ALBANK Fin. Corp. of Albany NY 37.12 12,825 476.1 41.00 27.00 37.25 -0.35 59.66 18.33
AMFC AMB Financial Corp. of IN 15.00 964 14.5 15.00 10.25 15.00 0.00 N.A. 13.21
ASBP ASB Financial Corp. of OH 12.37 1,721 21.3 18.25 11.50 12.25 0.98 N.A. -4.85
ABBK Abington Savings Bank of MA* 29.25 1,852 54.2 31.00 16.50 30.25 -3.31 341.84 50.00
AABC Access Anytime Bancorp of NM 6.62 1,193 7.9 6.75 5.25 6.50 1.85 -1.93 20.36
AFBC Advance Fin. Bancorp of WV 15.37 1,084 16.7 16.00 12.75 15.25 0.79 N.A. N.A.
AADV Advantage Bancorp of WI 44.25 3,234 143.1 44.25 31.25 42.00 5.36 380.98 37.21
AFCB Affiliated Comm BC, Inc of MA 25.00 6,465 161.6 25.25 15.20 24.75 1.01 N.A. 46.20
ALBC Albion Banc Corp. of Albion NY 24.25 250 6.1 24.25 16.50 23.62 2.67 86.54 44.78
ABCL Allied Bancorp of IL 31.37 5,345 167.7 31.37 23.25 31.37 0.00 213.70 25.48
ATSB AmTrust Capital Corp. of IN 12.62 526 6.6 12.75 8.75 12.62 0.00 N.A. 26.20
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 1.98 3.16 20.35 17.34 488.33
CSA Coast Savings Financial of CA 0.99 2.48 24.06 23.76 488.97
CFB Commercial Federal Corp. of NE 2.05 2.89 19.77 17.53 329.27
DME Dime Bancorp, Inc. of NY* 1.05 1.33 10.21 9.74 193.67
DSL Downey Financial Corp. of CA 0.86 1.43 15.26 15.05 220.16
FRC First Republic Bancorp of CA* 1.56 1.33 16.56 16.55 230.89
FED FirstFed Fin. Corp. of CA 1.13 2.07 19.14 18.93 396.52
GSB Glendale Fed. Bk, FSB of CA 0.79 1.85 17.82 15.84 322.39
GDW Golden West Fin. Corp. of CA 6.74 8.22 43.90 43.90 689.03
GPT GreenPoint Fin. Corp. of NY* 3.17 3.09 30.44 17.11 295.27
WES Westcorp Inc. of Orange CA 1.11 0.55 12.71 12.67 140.42
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 0.47 0.47 16.70 16.70 95.82
BKC American Bank of Waterbury CT* 3.13 2.69 21.77 20.90 262.73
BFD BostonFed Bancorp of MA 0.64 0.88 14.08 13.60 158.23
CFX CFX Corp of NH* 1.10 1.31 10.52 9.84 141.44
CBK Citizens First Fin.Corp. of IL 0.30 0.59 14.74 14.74 104.69
ESX Essex Bancorp of VA(8) -0.05 0.05 0.49 0.31 179.83
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.49
FAB FirstFed America Bancorp of MA -0.21 0.50 14.26 14.26 117.25
GAF GA Financial Corp. of PA 0.80 1.02 14.25 14.10 93.89
JSB JSB Financial, Inc. of NY 2.75 2.61 34.47 34.47 155.50
KNK Kankakee Bancorp of IL 1.62 2.02 26.59 24.99 239.77
KYF Kentucky First Bancorp of KY 0.53 0.70 10.86 10.86 67.42
NYB New York Bancorp, Inc. of NY 1.98 2.32 7.73 7.73 152.08
PDB Piedmont Bancorp of NC -0.19 0.30 7.42 7.42 44.62
SSB Scotland Bancorp of NC 0.51 0.62 13.44 13.44 36.30
SZB SouthFirst Bancshares of AL 0.05 0.30 15.82 15.82 113.17
SRN Southern Banc Company of AL 0.13 0.44 14.42 14.27 85.35
SSM Stone Street Bancorp of NC 0.80 0.96 16.13 16.13 55.91
TSH Teche Holding Company of LA 0.80 1.10 15.23 15.23 114.47
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.62 15.03 15.03 95.73
THR Three Rivers Fin. Corp. of MI 0.61 0.88 15.22 15.22 110.64
TBK Tolland Bank of CT* 1.11 1.16 10.60 10.30 152.71
WSB Washington SB, FSB of MD 0.30 0.44 5.05 5.05 60.83
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.18 0.50 32.00 31.34 387.52
AFED AFSALA Bancorp, Inc. of NY 0.61 0.61 14.05 14.05 102.70
ALBK ALBANK Fin. Corp. of Albany NY 2.29 2.82 25.85 22.59 280.88
AMFC AMB Financial Corp. of IN 0.66 0.73 14.61 14.61 97.70
ASBP ASB Financial Corp. of OH 0.39 0.57 10.00 10.00 63.58
ABBK Abington Savings Bank of MA* 2.16 1.92 18.73 16.87 270.66
AABC Access Anytime Bancorp of NM -0.45 -0.11 6.53 6.53 87.72
AFBC Advance Fin. Bancorp of WV 0.35 0.71 14.76 14.76 95.55
AADV Advantage Bancorp of WI 1.27 2.81 29.05 27.16 315.25
AFCB Affiliated Comm BC, Inc of MA 1.53 1.74 16.49 16.40 168.67
ALBC Albion Banc Corp. of Albion NY 0.22 0.93 23.62 23.62 265.26
ABCL Allied Bancorp of IL 0.91 1.33 23.40 23.11 262.72
ATSB AmTrust Capital Corp. of IN 0.40 0.26 13.73 13.58 135.04
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* 15.75 4,392 69.2 16.62 9.75 16.00 -1.56 N.A. 40.00
ASBI Ameriana Bancorp of IN 18.37 3,230 59.3 19.00 13.25 18.50 -0.70 99.02 14.81
AFFFZ America First Fin. Fund of CA(8) 39.31 6,011 236.3 39.56 28.00 39.31 0.00 109.65 29.95
ANBK American Nat'l Bancorp of MD(8) 19.87 3,613 71.8 19.87 10.00 19.87 0.00 N.A. 63.94
ABCW Anchor Bancorp Wisconsin of WI 53.00 4,524 239.8 53.50 33.00 50.50 4.95 80.46 48.25
ANDB Andover Bancorp, Inc. of MA* 29.87 5,148 153.8 32.25 20.21 30.12 -0.83 177.86 16.59
ASFC Astoria Financial Corp. of NY 46.50 20,978 975.5 48.75 26.25 47.12 -1.32 77.14 26.12
AVND Avondale Fin. Corp. of IL 14.50 3,495 50.7 18.50 12.75 14.75 -1.69 N.A. -15.30
BKCT Bancorp Connecticut of CT* 30.00 2,534 76.0 30.00 21.25 27.25 10.09 242.86 33.33
BPLS Bank Plus Corp. of CA 11.50 19,308 222.0 13.75 9.62 11.44 0.52 N.A. 0.00
BWFC Bank West Fin. Corp. of MI 15.00 1,753 26.3 15.12 10.25 15.00 0.00 N.A. 41.24
BANC BankAtlantic Bancorp of FL 15.87 17,978 285.3 16.62 9.60 16.62 -4.51 205.19 48.32
BKUNA BankUnited SA of FL 11.62 8,869 103.1 12.00 7.25 10.87 6.90 114.00 16.20
BKCO Bankers Corp. of NJ(8)* 27.25 12,392 337.7 30.12 17.94 28.75 -5.22 336.00 35.44
BVCC Bay View Capital Corp. of CA 25.50 12,979 331.0 28.62 17.50 25.75 -0.97 29.11 20.34
BFSB Bedford Bancshares of VA 24.75 1,142 28.3 25.25 16.50 24.25 2.06 135.71 40.47
BFFC Big Foot Fin. Corp. of IL 16.75 2,513 42.1 17.50 12.31 17.50 -4.29 N.A. 28.85
BSBC Branford SB of CT(8)* 4.94 6,559 32.4 5.00 3.00 4.94 0.00 133.02 27.65
BYFC Broadway Fin. Corp. of CA 10.50 835 8.8 11.25 9.00 10.50 0.00 N.A. 13.51
CBES CBES Bancorp of MO 17.87 1,025 18.3 17.87 12.62 17.69 1.02 N.A. 25.40
CCFH CCF Holding Company of GA 16.50 820 13.5 17.12 12.25 17.12 -3.62 N.A. 11.86
CENF CENFED Financial Corp. of CA 34.00 5,729 194.8 35.00 20.23 34.38 -1.11 116.84 27.87
CFSB CFSB Bancorp of Lansing MI 26.00 5,096 132.5 27.00 16.32 27.00 -3.70 188.89 46.64
CKFB CKF Bancorp of Danville KY 20.00 925 18.5 20.75 17.50 20.00 0.00 N.A. -1.23
CNSB CNS Bancorp of MO 17.12 1,653 28.3 17.50 11.62 17.00 0.71 N.A. 13.23
CSBF CSB Financial Group Inc of IL* 12.50 942 11.8 12.50 9.12 12.50 0.00 N.A. 23.52
CBCI Calumet Bancorp of Chicago IL 40.50 2,111 85.5 41.37 27.75 41.37 -2.10 100.00 21.80
CAFI Camco Fin. Corp. of OH 18.50 3,215 59.5 19.25 14.05 18.50 0.00 N.A. 22.35
CMRN Cameron Fin. Corp. of MO 17.25 2,627 45.3 18.00 14.00 17.50 -1.43 N.A. 7.81
CAPS Capital Savings Bancorp of MO 16.00 1,892 30.3 18.25 9.62 16.00 0.00 20.75 23.08
CFNC Carolina Fincorp of NC* 17.37 1,851 32.2 17.75 13.00 17.37 0.00 N.A. 29.92
CNY Carver Bancorp, Inc. of NY 12.62 2,314 29.2 13.37 7.37 12.37 2.02 101.92 52.97
CASB Cascade SB of Everett WA(8) 14.75 2,571 37.9 16.80 10.40 14.00 5.36 15.23 14.34
CATB Catskill Fin. Corp. of NY* 16.31 4,720 77.0 17.00 10.56 17.00 -4.06 N.A. 16.50
CNIT Cenit Bancorp of Norfolk VA 50.75 1,650 83.7 51.50 32.69 51.25 -0.98 219.58 22.29
CEBK Central Co-Op. Bank of MA* 19.50 1,965 38.3 20.69 14.75 19.25 1.30 271.43 11.43
CENB Century Bancshares of NC* 79.00 407 32.2 79.00 62.00 79.00 0.00 N.A. 21.54
CBSB Charter Financial Inc. of IL 21.25 4,150 88.2 21.50 11.00 21.44 -0.89 N.A. 70.00
COFI Charter One Financial of OH 53.06 46,186 2,450.6 57.94 35.83 52.37 1.32 203.20 26.33
CVAL Chester Valley Bancorp of PA 21.75 2,054 44.7 24.00 14.10 24.00 -9.38 91.97 46.96
CTZN CitFed Bancorp of Dayton OH 45.00 8,638 388.7 45.25 25.00 41.75 7.78 400.00 36.36
CLAS Classic Bancshares of KY 14.50 1,320 19.1 15.00 11.25 14.75 -1.69 N.A. 24.78
CMSB Cmnwealth Bancorp of PA 17.50 17,096 299.2 17.50 10.50 16.75 4.48 N.A. 16.67
CBSA Coastal Bancorp of Houston TX 29.75 4,972 147.9 30.87 18.00 30.25 -1.65 N.A. 30.08
CFCP Coastal Fin. Corp. of SC 24.87 4,641 115.4 27.75 14.25 25.50 -2.47 148.70 57.90
CMSV Commty. Svgs, MHC of FL (48.5) 25.62 5,090 60.6 26.00 16.00 25.75 -0.50 N.A. 24.98
CBNH Community Bankshares Inc of NH(8)* 39.37 2,489 98.0 40.25 18.50 39.12 0.64 949.87 92.05
CFTP Community Fed. Bancorp of MS 18.37 4,629 85.0 20.00 13.00 17.75 3.49 N.A. 8.06
CFFC Community Fin. Corp. of VA 21.75 1,275 27.7 23.50 20.50 22.75 -4.40 210.71 4.82
CFBC Community First Bnkg Co. of GA 34.19 2,414 82.5 34.87 31.87 34.00 0.56 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.00 949 14.2 15.37 10.00 15.25 -1.64 N.A. 32.39
COOP Cooperative Bk.for Svgs. of NC 24.50 1,492 36.6 27.00 16.75 24.50 0.00 145.00 20.99
CRZY Crazy Woman Creek Bncorp of WY 14.12 955 13.5 14.25 10.25 13.87 1.80 N.A. 17.67
DNFC D&N Financial Corp. of MI 19.00 8,191 155.6 19.50 12.75 19.25 -1.30 117.14 13.43
DCBI Delphos Citizens Bancorp of OH 15.87 2,039 32.4 16.62 11.75 15.75 0.76 N.A. 32.25
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* -0.65 -0.65 13.85 13.85 108.86
ASBI Ameriana Bancorp of IN 0.75 1.05 13.49 13.48 123.14
AFFFZ America First Fin. Fund of CA(8) 5.51 6.76 30.76 30.38 364.44
ANBK American Nat'l Bancorp of MD(8) 0.37 0.86 12.54 12.54 139.86
ABCW Anchor Bancorp Wisconsin of WI 3.10 3.99 26.49 25.99 425.70
ANDB Andover Bancorp, Inc. of MA* 2.57 2.65 19.59 19.59 243.00
ASFC Astoria Financial Corp. of NY 1.96 2.80 28.59 24.01 365.36
AVND Avondale Fin. Corp. of IL -0.85 -2.63 15.85 15.85 173.75
BKCT Bancorp Connecticut of CT* 2.15 2.03 17.32 17.32 169.05
BPLS Bank Plus Corp. of CA -0.46 0.04 9.27 9.26 183.03
BWFC Bank West Fin. Corp. of MI 0.53 0.47 12.89 12.89 88.80
BANC BankAtlantic Bancorp of FL 1.22 0.89 8.54 7.02 151.88
BKUNA BankUnited SA of FL 0.29 0.48 7.59 6.15 203.77
BKCO Bankers Corp. of NJ(8)* 2.12 2.27 16.42 16.18 207.14
BVCC Bay View Capital Corp. of CA 0.97 1.58 15.12 12.69 238.56
BFSB Bedford Bancshares of VA 1.14 1.46 16.80 16.80 118.61
BFFC Big Foot Fin. Corp. of IL 0.04 0.35 14.34 14.34 84.46
BSBC Branford SB of CT(8)* 0.32 0.32 2.64 2.64 28.44
BYFC Broadway Fin. Corp. of CA -0.39 0.10 16.35 16.35 142.23
CBES CBES Bancorp of MO 0.69 0.86 17.08 17.08 92.90
CCFH CCF Holding Company of GA 0.05 0.07 14.36 14.36 122.93
CENF CENFED Financial Corp. of CA 1.98 2.82 20.85 20.81 400.68
CFSB CFSB Bancorp of Lansing MI 1.37 1.73 12.65 12.65 165.90
CKFB CKF Bancorp of Danville KY 1.17 0.86 15.75 15.75 65.74
CNSB CNS Bancorp of MO 0.31 0.47 14.73 14.73 59.35
CSBF CSB Financial Group Inc of IL* 0.21 0.32 12.77 12.04 50.95
CBCI Calumet Bancorp of Chicago IL 2.72 3.45 36.46 36.46 235.23
CAFI Camco Fin. Corp. of OH 0.94 1.11 14.24 13.10 146.95
CMRN Cameron Fin. Corp. of MO 0.78 0.97 17.18 17.18 79.22
CAPS Capital Savings Bancorp of MO 0.82 1.15 11.28 11.28 128.18
CFNC Carolina Fincorp of NC* 0.65 0.61 13.92 13.92 58.71
CNY Carver Bancorp, Inc. of NY -0.74 0.01 14.93 14.32 178.81
CASB Cascade SB of Everett WA(8) 0.61 0.77 8.46 8.46 137.04
CATB Catskill Fin. Corp. of NY* 0.85 0.86 15.08 15.08 60.22
CNIT Cenit Bancorp of Norfolk VA 3.75 3.44 31.12 28.58 430.03
CEBK Central Co-Op. Bank of MA* 1.44 1.46 17.07 15.20 163.33
CENB Century Bancshares of NC* 4.31 4.36 73.51 73.51 245.57
CBSB Charter Financial Inc. of IL 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 2.98 3.73 21.15 19.80 315.35
CVAL Chester Valley Bancorp of PA 0.87 1.28 12.72 12.72 148.58
CTZN CitFed Bancorp of Dayton OH 1.94 2.73 22.83 20.57 358.59
CLAS Classic Bancshares of KY 0.45 0.62 14.67 12.38 99.66
CMSB Cmnwealth Bancorp of PA 0.69 0.88 12.89 10.08 133.89
CBSA Coastal Bancorp of Houston TX 1.45 2.52 19.85 16.50 596.15
CFCP Coastal Fin. Corp. of SC 0.95 1.04 6.68 6.68 108.33
CMSV Commty. Svgs, MHC of FL (48.5) 0.81 1.22 15.05 15.05 134.05
CBNH Community Bankshares Inc of NH(8)* 2.17 1.73 17.31 17.31 247.44
CFTP Community Fed. Bancorp of MS 0.63 0.75 14.92 14.92 44.51
CFFC Community Fin. Corp. of VA 1.32 1.67 18.86 18.86 137.58
CFBC Community First Bnkg Co. of GA 0.42 0.82 27.66 27.66 168.47
CIBI Community Inv. Bancorp of OH 0.66 0.98 11.82 11.82 102.68
COOP Cooperative Bk.for Svgs. of NC -1.80 0.45 18.03 18.03 236.22
CRZY Crazy Woman Creek Bncorp of WY 0.58 0.71 14.67 14.67 56.83
DNFC D&N Financial Corp. of MI 1.10 1.45 10.95 10.84 196.42
DCBI Delphos Citizens Bancorp of OH 0.72 0.72 14.93 14.93 52.56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DIME Dime Community Bancorp of NY 19.06 13,093 249.6 20.00 12.75 18.94 0.63 N.A. 29.22
DIBK Dime Financial Corp. of CT* 26.50 5,147 136.4 28.00 15.12 26.62 -0.45 152.38 53.62
EGLB Eagle BancGroup of IL 16.62 1,238 20.6 16.87 11.50 16.50 0.73 N.A. 11.77
EBSI Eagle Bancshares of Tucker GA 16.87 4,552 76.8 18.50 13.62 17.50 -3.60 132.69 8.84
EGFC Eagle Financial Corp. of CT 32.75 6,279 205.6 34.50 24.00 33.31 -1.68 274.29 7.38
ETFS East Texas Fin. Serv. of TX 19.25 1,025 19.7 19.25 14.50 18.53 3.89 N.A. 17.59
EMLD Emerald Financial Corp of OH 14.00 5,062 70.9 15.00 10.50 14.25 -1.75 N.A. 24.44
EIRE Emerald Island Bancorp, MA* 21.00 2,246 47.2 21.00 11.60 20.37 3.09 175.59 31.25
EFBC Empire Federal Bancorp of MT 15.25 2,592 39.5 15.50 12.50 15.12 0.86 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 19.50 2,011 39.2 20.50 12.75 20.50 -4.88 N.A. 34.48
EQSB Equitable FSB of Wheaton MD 37.50 602 22.6 39.25 24.50 38.75 -3.23 N.A. 32.74
FFFG F.F.O. Financial Group of FL(8) 5.44 8,446 45.9 5.50 2.62 5.50 -1.09 -34.54 61.42
FCBF FCB Fin. Corp. of Neenah WI 27.00 2,464 66.5 28.00 17.00 27.00 0.00 N.A. 45.95
FFBS FFBS Bancorp of Columbus MS 24.00 1,557 37.4 26.00 20.25 24.00 0.00 N.A. 4.35
FFDF FFD Financial Corp. of OH 15.50 1,455 22.6 15.63 10.12 15.50 0.00 N.A. 16.98
FFLC FFLC Bancorp of Leesburg FL 29.00 2,318 67.2 29.37 18.25 27.75 4.50 N.A. 34.88
FFFC FFVA Financial Corp. of VA 29.25 4,521 132.2 31.00 17.00 30.00 -2.50 N.A. 42.68
FFWC FFW Corporation of Wabash IN 28.00 697 19.5 29.25 19.50 28.75 -2.61 N.A. 27.97
FFYF FFY Financial Corp. of OH 28.13 4,145 116.6 28.25 23.87 27.50 2.29 N.A. 11.14
FMCO FMS Financial Corp. of NJ 26.00 2,388 62.1 31.50 15.50 26.00 0.00 188.89 42.47
FFHH FSF Financial Corp. of MN 18.12 3,033 55.0 18.25 11.50 17.75 2.08 N.A. 19.84
FOBC Fed One Bancorp of Wheeling WV 21.25 2,373 50.4 22.00 14.25 22.00 -3.41 112.50 34.92
FBCI Fidelity Bancorp of Chicago IL 21.50 2,792 60.0 21.50 16.25 21.50 0.00 N.A. 26.47
FSBI Fidelity Bancorp, Inc. of PA 21.25 1,550 32.9 21.70 15.23 21.25 0.00 174.90 16.89
FFFL Fidelity FSB, MHC of FL (47.4) 24.00 6,766 76.5 24.00 12.37 22.25 7.87 N.A. 35.21
FFED Fidelity Fed. Bancorp of IN 9.25 2,490 23.0 11.75 7.50 8.87 4.28 31.21 -5.13
FFOH Fidelity Financial of OH 16.12 5,579 89.9 16.37 9.62 15.63 3.13 N.A. 40.17
FIBC Financial Bancorp, Inc. of NY 20.62 1,722 35.5 21.00 14.00 20.25 1.83 N.A. 37.47
FBSI First Bancshares of MO 24.00 1,160 27.8 25.25 15.00 24.25 -1.03 88.24 44.40
FBBC First Bell Bancorp of PA 16.37 6,511 106.6 17.37 13.12 16.37 0.00 N.A. 23.55
FBER First Bergen Bancorp of NJ 19.25 3,000 57.8 19.50 9.75 19.25 0.00 N.A. 67.39
SKBO First Carnegie,MHC of PA(45.0) 13.50 2,300 14.0 14.75 11.62 13.87 -2.67 N.A. N.A.
FCIT First Cit. Fin. Corp of MD(8) 34.00 2,951 100.3 36.50 16.12 34.50 -1.45 291.25 86.30
FSTC First Citizens Corp of GA 30.00 1,829 54.9 30.50 20.75 29.50 1.69 140.00 18.81
FCME First Coastal Corp. of ME* 10.62 1,359 14.4 11.25 5.87 10.63 -0.09 N.A. 37.03
FFBA First Colorado Bancorp of Co 17.50 16,561 289.8 20.12 13.50 17.75 -1.41 430.30 2.94
FDEF First Defiance Fin.Corp. of OH 15.12 9,341 141.2 15.50 10.50 15.06 0.40 N.A. 22.23
FESX First Essex Bancorp of MA* 16.50 7,504 123.8 18.25 11.00 16.62 -0.72 175.00 25.76
FFES First FS&LA of E. Hartford CT 31.87 2,676 85.3 31.87 18.00 31.25 1.98 390.31 38.57
FFSX First FS&LA. MHC of IA (46.0) 25.00 2,828 21.7 35.00 20.75 24.25 3.09 274.81 28.21
BDJI First Fed. Bancorp. of MN 21.75 683 14.9 21.75 13.75 21.00 3.57 N.A. 17.57
FFBH First Fed. Bancshares of AR 21.12 4,896 103.4 21.62 13.75 21.25 -0.61 N.A. 33.08
FTFC First Fed. Capital Corp. of WI 24.25 9,141 221.7 26.50 13.00 24.00 1.04 223.33 54.75
FFKY First Fed. Fin. Corp. of KY 22.25 4,170 92.8 23.00 17.75 21.75 2.30 41.27 9.88
FFBZ First Federal Bancorp of OH 18.25 1,572 28.7 19.50 11.75 18.00 1.39 82.50 14.06
FFCH First Fin. Holdings Inc. of SC 31.25 6,357 198.7 34.50 18.75 31.25 0.00 155.10 38.89
FFBI First Financial Bancorp of IL 18.25 415 7.6 18.75 15.50 18.25 0.00 N.A. 15.00
FFHC First Financial Corp. of WI(8) 31.37 36,209 1,135.9 32.12 18.00 31.25 0.38 99.17 28.04
FFHS First Franklin Corp. of OH 20.00 1,192 23.8 21.00 14.25 20.00 0.00 52.44 21.21
FGHC First Georgia Hold. Corp of GA 7.25 3,052 22.1 8.25 4.17 7.06 2.69 89.30 27.87
FSPG First Home Bancorp of NJ 20.00 2,708 54.2 20.12 13.31 19.87 0.65 233.33 44.20
FFSL First Independence Corp. of KS 12.75 997 12.7 13.12 9.25 12.75 0.00 N.A. 22.95
FISB First Indiana Corp. of IN 20.75 10,561 219.1 24.30 17.37 21.50 -3.49 53.70 -3.04
FKFS First Keystone Fin. Corp of PA 27.12 1,228 33.3 27.12 16.75 26.37 2.84 N.A. 40.88
FLKY First Lancaster Bncshrs of KY 15.25 959 14.6 16.25 13.87 15.25 0.00 N.A. 4.31
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DIME Dime Community Bancorp of NY 0.94 1.01 14.58 12.56 100.44
DIBK Dime Financial Corp. of CT* 2.82 2.83 13.52 13.08 169.78
EGLB Eagle BancGroup of IL -0.12 0.27 16.69 16.69 140.80
EBSI Eagle Bancshares of Tucker GA 0.80 1.09 12.74 12.74 146.35
EGFC Eagle Financial Corp. of CT 0.19 1.13 22.02 17.19 320.65
ETFS East Texas Fin. Serv. of TX 0.34 0.70 19.97 19.97 109.95
EMLD Emerald Financial Corp of OH 0.81 1.00 9.03 8.89 119.14
EIRE Emerald Island Bancorp, MA* 1.52 1.60 13.39 13.39 189.23
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.81 0.90 15.74 15.72 127.65
EQSB Equitable FSB of Wheaton MD 2.20 3.52 24.92 24.92 491.70
FFFG F.F.O. Financial Group of FL(8) 0.25 0.36 2.46 2.46 37.89
FCBF FCB Fin. Corp. of Neenah WI 0.99 1.17 19.25 19.25 110.06
FFBS FFBS Bancorp of Columbus MS 0.96 1.21 16.05 16.05 82.64
FFDF FFD Financial Corp. of OH 0.44 0.61 14.50 14.50 58.62
FFLC FFLC Bancorp of Leesburg FL 1.06 1.53 22.51 22.51 167.00
FFFC FFVA Financial Corp. of VA 1.32 1.60 16.29 15.95 123.62
FFWC FFW Corporation of Wabash IN 1.98 2.46 22.75 22.75 227.32
FFYF FFY Financial Corp. of OH 1.28 1.82 19.82 19.82 144.57
FMCO FMS Financial Corp. of NJ 1.56 2.29 15.24 14.97 232.38
FFHH FSF Financial Corp. of MN 0.78 0.99 14.16 14.16 124.71
FOBC Fed One Bancorp of Wheeling WV 0.99 1.41 16.63 15.86 150.32
FBCI Fidelity Bancorp of Chicago IL 0.95 1.33 18.22 18.18 175.45
FSBI Fidelity Bancorp, Inc. of PA 1.08 1.72 15.83 15.83 234.39
FFFL Fidelity FSB, MHC of FL (47.4) 0.49 0.78 12.08 11.98 136.99
FFED Fidelity Fed. Bancorp of IN 0.17 0.30 5.17 5.17 100.52
FFOH Fidelity Financial of OH 0.51 0.75 12.17 10.74 94.06
FIBC Financial Bancorp, Inc. of NY 0.87 1.55 15.35 15.28 164.04
FBSI First Bancshares of MO 1.18 1.45 19.80 19.77 137.97
FBBC First Bell Bancorp of PA 1.06 1.23 10.78 10.78 109.72
FBER First Bergen Bancorp of NJ 0.38 0.66 13.47 13.47 94.92
SKBO First Carnegie,MHC of PA(45.0) 0.24 0.35 10.21 10.21 65.23
FCIT First Cit. Fin. Corp of MD(8) 1.20 1.78 14.95 14.95 234.41
FSTC First Citizens Corp of GA 1.45 1.44 16.29 12.22 178.44
FCME First Coastal Corp. of ME* 4.50 4.36 10.35 10.35 112.13
FFBA First Colorado Bancorp of Co 0.84 0.82 11.60 11.60 91.15
FDEF First Defiance Fin.Corp. of OH 0.43 0.59 12.60 12.60 59.12
FESX First Essex Bancorp of MA* 1.32 1.15 11.57 10.05 165.97
FFES First FS&LA of E. Hartford CT 1.52 2.50 23.63 23.63 367.56
FFSX First FS&LA. MHC of IA (46.0) 0.69 1.19 13.74 13.63 165.69
BDJI First Fed. Bancorp. of MN 0.49 1.02 17.62 17.62 157.71
FFBH First Fed. Bancshares of AR 0.81 1.11 16.36 16.36 109.31
FTFC First Fed. Capital Corp. of WI 1.18 1.37 10.64 9.97 167.40
FFKY First Fed. Fin. Corp. of KY 1.14 1.36 12.40 11.68 90.50
FFBZ First Federal Bancorp of OH 0.88 1.23 9.66 9.65 128.03
FFCH First Fin. Holdings Inc. of SC 1.43 2.10 16.03 16.03 262.26
FFBI First Financial Bancorp of IL -0.85 0.94 17.63 17.63 203.69
FFHC First Financial Corp. of WI(8) 1.51 2.03 11.67 11.37 163.81
FFHS First Franklin Corp. of OH 0.36 1.21 17.17 17.06 190.39
FGHC First Georgia Hold. Corp of GA 0.32 0.25 4.21 3.86 51.24
FSPG First Home Bancorp of NJ 1.64 2.14 12.85 12.64 192.91
FFSL First Independence Corp. of KS 0.47 0.75 11.60 11.60 111.21
FISB First Indiana Corp. of IN 1.17 1.43 13.77 13.60 144.00
FKFS First Keystone Fin. Corp of PA 1.35 1.93 19.09 19.09 261.24
FLKY First Lancaster Bncshrs of KY 0.46 0.56 14.44 14.44 42.18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FLFC First Liberty Fin. Corp. of GA 22.50 7,725 173.8 23.75 13.83 23.25 -3.23 342.91 22.48
CASH First Midwest Fin. Corp. of IA 17.37 2,734 47.5 17.87 15.00 17.37 0.00 N.A. 13.31
FMBD First Mutual Bancorp of IL 16.12 3,507 56.5 16.12 12.62 15.50 4.00 N.A. 7.47
FMSB First Mutual SB of Bellevue WA* 21.75 2,702 58.8 22.25 11.59 20.62 5.48 180.65 36.71
FNGB First Northern Cap. Corp of WI 26.87 4,417 118.7 26.87 15.25 25.75 4.35 84.55 65.35
FFPB First Palm Beach Bancorp of FL 32.75 5,031 164.8 34.00 21.50 33.25 -1.50 N.A. 38.65
FSLA First SB SLA MHC of NJ (47.5) 27.75 7,264 94.5 29.50 14.32 29.00 -4.31 177.50 50.00
FSNJ First SB of NJ, MHC (45.9)(8) 32.50 3,064 45.7 34.00 14.00 32.75 -0.76 N.A. 41.30
SOPN First SB, SSB, Moore Co. of NC 20.50 3,679 75.4 24.00 16.75 21.25 -3.53 N.A. 9.33
FWWB First Savings Bancorp of WA* 24.50 10,519 257.7 24.75 16.00 24.62 -0.49 N.A. 33.37
SHEN First Shenango Bancorp of PA 27.75 2,072 57.5 29.25 20.25 28.50 -2.63 N.A. 23.33
FSFC First So.east Fin. Corp. of SC(8) 14.00 4,388 61.4 14.87 9.12 14.00 0.00 N.A. 49.25
FBNW FirstBank Corp of Clarkston WA 18.25 1,984 36.2 19.00 15.50 18.25 0.00 N.A. N.A.
FFDB FirstFed Bancorp of AL 16.53 1,148 19.0 18.50 12.50 18.13 -8.83 N.A. 32.24
FSPT FirstSpartan Fin. Corp. of SC 35.75 4,430 158.4 37.00 35.00 35.62 0.36 N.A. N.A.
FLAG Flag Financial Corp of GA 14.25 2,037 29.0 14.87 9.75 14.75 -3.39 45.41 32.56
FLGS Flagstar Bancorp, Inc of MI 19.25 13,670 263.1 20.00 13.00 0.00 -1.00 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 20.75 7,979 165.6 23.50 17.37 20.31 2.17 N.A. 14.51
FBHC Fort Bend Holding Corp. of TX 31.75 827 26.3 32.00 16.87 30.75 3.25 N.A. 24.51
FTSB Fort Thomas Fin. Corp. of KY 10.50 1,495 15.7 14.75 9.25 11.00 -4.55 N.A. -28.18
FKKY Frankfort First Bancorp of KY 9.38 3,385 31.8 12.25 8.00 9.25 1.41 N.A. -17.50
FTNB Fulton Bancorp of MO 20.00 1,719 34.4 20.37 12.50 19.75 1.27 N.A. 30.12
GFSB GFS Bancorp of Grinnell IA 13.37 988 13.2 14.25 10.12 13.37 0.00 N.A. 25.89
GUPB GFSB Bancorp of Gallup NM 19.00 839 15.9 19.75 13.50 19.00 0.00 N.A. 19.72
GSLA GS Financial Corp. of LA 15.75 3,438 54.1 16.12 13.37 15.25 3.28 N.A. N.A.
GOSB GSB Financial Corp. of NY 14.66 2,248 33.0 14.87 14.25 14.37 2.02 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 17.62 1,076 19.0 18.25 13.00 17.75 -0.73 N.A. 23.65
GBCI Glacier Bancorp of MT 18.50 6,812 126.0 20.25 14.33 18.50 0.00 283.02 13.29
GFCO Glenway Financial Corp. of OH 24.50 1,140 27.9 27.00 18.25 27.00 -9.26 N.A. 19.51
GTPS Great American Bancorp of IL 17.37 1,760 30.6 17.50 13.25 17.50 -0.74 N.A. 17.29
GTFN Great Financial Corp. of KY 33.25 13,791 458.6 35.12 26.81 33.25 0.00 N.A. 14.18
GSBC Great Southern Bancorp of MO 16.87 8,105 136.7 18.00 13.62 16.75 0.72 477.74 -5.28
GDVS Greater DV SB,MHC of PA (19.9)* 16.25 3,272 10.6 16.50 9.25 15.12 7.47 N.A. 56.70
GSFC Green Street Fin. Corp. of NC 17.50 4,298 75.2 18.87 13.37 17.25 1.45 N.A. 12.90
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 18.75 3,125 18.2 20.50 9.75 18.25 2.74 N.A. 55.47
HCBB HCB Bancshares of AR 14.00 2,645 37.0 14.12 12.62 13.87 0.94 N.A. N.A.
HEMT HF Bancorp of Hemet CA 14.87 6,282 93.4 15.87 9.25 15.25 -2.49 N.A. 33.72
HFFC HF Financial Corp. of SD 22.37 2,979 66.6 22.37 14.75 21.88 2.24 347.40 29.23
HFNC HFNC Financial Corp. of NC 16.00 17,192 275.1 22.06 14.87 16.25 -1.54 N.A. -10.46
HMNF HMN Financial, Inc. of MN 24.87 4,212 104.8 25.75 15.37 24.75 0.48 N.A. 37.25
HALL Hallmark Capital Corp. of WI 22.50 1,443 32.5 23.75 14.50 22.75 -1.10 N.A. 26.76
HARB Harbor FSB, MHC of FL (46.0) 45.75 4,970 103.9 45.75 24.00 44.50 2.81 N.A. 27.97
HRBF Harbor Federal Bancorp of MD 19.12 1,693 32.4 20.00 12.75 20.00 -4.40 91.20 21.40
HFSA Hardin Bancorp of Hardin MO 16.50 859 14.2 16.75 11.25 16.75 -1.49 N.A. 32.00
HARL Harleysville SA of PA 25.00 1,652 41.3 25.00 14.00 25.00 0.00 40.85 58.23
HFGI Harrington Fin. Group of IN 11.50 3,257 37.5 13.00 9.75 11.75 -2.13 N.A. 6.98
HARS Harris SB, MHC of PA (24.2) 26.00 11,223 70.6 26.00 14.75 24.75 5.05 N.A. 42.47
HFFB Harrodsburg 1st Fin Bcrp of KY 15.00 2,025 30.4 19.00 14.75 15.75 -4.76 N.A. -20.51
HHFC Harvest Home Fin. Corp. of OH 11.75 935 11.0 13.75 9.25 12.75 -7.84 N.A. 20.51
HAVN Haven Bancorp of Woodhaven NY 36.62 4,377 160.3 38.37 25.56 36.25 1.02 N.A. 27.95
HVFD Haverfield Corp. of OH(8) 26.50 1,906 50.5 27.37 17.00 26.75 -0.93 70.97 38.60
HTHR Hawthorne Fin. Corp. of CA 15.63 2,629 41.1 16.12 6.62 15.00 4.20 -43.16 92.25
HMLK Hemlock Fed. Fin. Corp. of IL 15.50 2,076 32.2 15.50 12.50 15.25 1.64 N.A. N.A.
HBNK Highland Federal Bank of CA 27.25 2,300 62.7 27.25 14.25 25.62 6.36 N.A. 60.29
HIFS Hingham Inst. for Sav. of MA* 23.06 1,303 30.0 25.25 14.25 23.25 -0.82 405.70 22.99
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FLFC First Liberty Fin. Corp. of GA 1.20 0.93 11.87 10.62 161.56
CASH First Midwest Fin. Corp. of IA 0.99 1.29 15.70 13.89 135.40
FMBD First Mutual Bancorp of IL 0.10 0.32 15.30 11.59 119.10
FMSB First Mutual SB of Bellevue WA* 1.56 1.52 10.91 10.91 159.89
FNGB First Northern Cap. Corp of WI 0.87 1.26 16.28 16.28 144.38
FFPB First Palm Beach Bancorp of FL -0.02 0.15 20.95 20.41 309.73
FSLA First SB SLA MHC of NJ (47.5) 0.80 1.25 13.39 11.94 142.18
FSNJ First SB of NJ, MHC (45.9)(8) -0.70 0.47 16.18 16.18 188.83
SOPN First SB, SSB, Moore Co. of NC 1.06 1.27 18.26 18.26 79.97
FWWB First Savings Bancorp of WA* 0.89 0.84 14.13 13.00 95.79
SHEN First Shenango Bancorp of PA 1.69 2.20 21.75 21.75 198.56
FSFC First So.east Fin. Corp. of SC(8) 0.01 0.70 7.80 7.80 76.29
FBNW FirstBank Corp of Clarkston WA 0.54 0.44 14.00 14.00 77.62
FFDB FirstFed Bancorp of AL 0.95 1.45 14.48 13.20 153.77
FSPT FirstSpartan Fin. Corp. of SC 1.00 1.16 27.63 27.63 104.97
FLAG Flag Financial Corp of GA -0.07 0.15 10.25 10.25 109.02
FLGS Flagstar Bancorp, Inc of MI 0.00 0.00 6.07 6.07 111.13
FFIC Flushing Fin. Corp. of NY* 0.93 0.97 16.68 16.68 107.79
FBHC Fort Bend Holding Corp. of TX 0.74 1.71 23.24 21.64 385.33
FTSB Fort Thomas Fin. Corp. of KY 0.33 0.50 10.40 10.40 64.84
FKKY Frankfort First Bancorp of KY 0.24 0.36 9.93 9.93 37.91
FTNB Fulton Bancorp of MO 0.41 0.58 14.47 14.47 57.86
GFSB GFS Bancorp of Grinnell IA 0.85 1.09 10.32 10.32 89.22
GUPB GFSB Bancorp of Gallup NM 0.69 0.87 16.88 16.88 103.59
GSLA GS Financial Corp. of LA 0.34 0.34 16.36 16.36 35.85
GOSB GSB Financial Corp. of NY 0.52 0.44 13.78 13.78 50.92
GWBC Gateway Bancorp of KY(8) 0.52 0.72 16.04 16.04 59.32
GBCI Glacier Bancorp of MT 1.10 1.23 8.12 7.90 83.33
GFCO Glenway Financial Corp. of OH 1.06 1.78 23.89 23.57 251.83
GTPS Great American Bancorp of IL 0.19 0.24 16.68 16.68 77.83
GTFN Great Financial Corp. of KY 1.59 1.51 20.40 19.53 220.89
GSBC Great Southern Bancorp of MO 1.15 1.30 7.45 7.45 87.33
GDVS Greater DV SB,MHC of PA (19.9)* 0.23 0.42 8.64 8.64 74.69
GSFC Green Street Fin. Corp. of NC 0.56 0.68 14.73 14.73 40.62
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.37 0.56 8.80 8.80 63.86
HCBB HCB Bancshares of AR -0.08 0.29 13.73 13.16 75.24
HEMT HF Bancorp of Hemet CA -0.40 -2.74 12.87 10.53 156.71
HFFC HF Financial Corp. of SD 1.23 1.67 17.78 17.78 188.54
HFNC HFNC Financial Corp. of NC 0.43 0.59 9.37 9.37 52.08
HMNF HMN Financial, Inc. of MN 0.94 1.17 19.42 19.42 134.58
HALL Hallmark Capital Corp. of WI 1.33 1.68 20.56 20.56 284.01
HARB Harbor FSB, MHC of FL (46.0) 2.05 2.64 18.85 18.23 224.69
HRBF Harbor Federal Bancorp of MD 0.58 0.90 16.48 16.48 127.80
HFSA Hardin Bancorp of Hardin MO 0.8 0.89 15.69 15.69 125.75
HARL Harleysville SA of PA 1.46 2.00 13.31 13.31 203.79
HFGI Harrington Fin. Group of IN 0.61 0.51 7.67 7.67 137.18
HARS Harris SB, MHC of PA (24.2) 0.79 0.99 14.59 12.76 182.15
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.23 0.49 11.11 11.11 88.88
HAVN Haven Bancorp of Woodhaven NY 2.09 3.11 24.20 24.12 407.02
HVFD Haverfield Corp. of OH(8) 1.02 1.94 15.52 15.52 181.61
HTHR Hawthorne Fin. Corp. of CA 2.40 1.21 12.37 12.37 318.74
HMLK Hemlock Fed. Fin. Corp. of IL 0.10 0.55 14.57 14.57 79.44
HBNK Highland Federal Bank of CA 0.96 1.41 16.39 16.39 219.30
HIFS Hingham Inst. for Sav. of MA* 1.86 1.86 15.62 15.62 166.99
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HBEI Home Bancorp of Elgin IL 17.50 6,856 120.0 19.31 11.81 18.25 -4.11 N.A. 29.63
HBFW Home Bancorp of Fort Wayne IN 21.37 2,525 54.0 21.75 15.75 21.25 0.56 N.A. 12.47
HBBI Home Building Bancorp of IN 21.00 312 6.6 22.00 17.00 20.50 2.44 N.A. 6.33
HCFC Home City Fin. Corp. of OH 15.12 952 14.4 15.19 12.00 15.00 0.80 N.A. 14.11
HOMF Home Fed Bancorp of Seymour IN 31.00 3,396 105.3 31.00 17.33 30.50 1.64 208.46 20.39
HWEN Home Financial Bancorp of IN 15.12 486 7.3 15.75 12.00 15.25 -0.85 N.A. 18.59
HPBC Home Port Bancorp, Inc. of MA* 20.62 1,842 38.0 21.75 13.87 20.75 -0.63 157.75 24.97
HMCI Homecorp, Inc. of Rockford IL 16.00 1,693 27.1 16.00 11.83 14.25 12.28 60.00 25.49
HZFS Horizon Fin'l. Services of IA 18.87 426 8.0 19.75 14.00 18.87 0.00 N.A. 24.80
HRZB Horizon Financial Corp. of WA* 15.00 7,417 111.3 16.50 10.65 15.37 -2.41 31.35 27.77
IBSF IBS Financial Corp. of NJ 16.87 11,012 185.8 18.75 12.50 15.63 7.93 N.A. 24.14
ISBF ISB Financial Corp. of LA 24.50 6,901 169.1 26.25 14.75 24.37 0.53 N.A. 36.11
ITLA Imperial Thrift & Loan of CA* 17.50 7,836 137.1 18.25 13.00 18.12 -3.42 N.A. 16.67
IFSB Independence FSB of DC 13.50 1,280 17.3 14.75 6.75 14.37 -6.05 575.00 68.75
INCB Indiana Comm. Bank, SB of IN 15.25 922 14.1 19.00 13.25 15.25 0.00 N.A. -6.15
INBI Industrial Bancorp of OH 14.50 5,277 76.5 14.69 10.25 14.50 0.00 N.A. 13.73
IWBK Interwest SB of Oak Harbor WA 39.75 8,036 319.4 40.12 25.62 39.62 0.33 297.50 23.26
IPSW Ipswich SB of Ipswich MA* 23.50 1,188 27.9 25.00 9.75 22.25 5.62 N.A. 95.83
JXVL Jacksonville Bancorp of TX 17.00 2,490 42.3 17.00 10.75 16.62 2.29 N.A. 16.28
JXSB Jcksnville SB,MHC of IL (44.6) 17.62 1,272 10.0 18.00 11.50 16.62 6.02 N.A. 32.98
JSBA Jefferson Svgs Bancorp of MO 30.75 4,971 152.9 32.25 22.25 32.00 -3.91 N.A. 18.27
JOAC Joachim Bancorp of MO 15.00 760 11.4 15.25 12.50 14.25 5.26 N.A. 3.45
KSAV KS Bancorp of Kenly NC 18.50 885 16.4 19.12 13.59 18.50 0.00 N.A. 24.08
KSBK KSB Bancorp of Kingfield ME(8)* 13.00 1,238 16.1 16.00 6.82 14.37 -9.53 N.A. 69.49
KFBI Klamath First Bancorp of OR 19.31 10,019 193.5 20.12 13.75 19.19 0.63 N.A. 22.60
LSBI LSB Fin. Corp. of Lafayette IN 20.50 932 19.1 21.25 14.76 21.25 -3.53 N.A. 10.39
LVSB Lakeview SB of Paterson NJ 33.00 2,302 76.0 33.87 19.20 32.25 2.33 N.A. 32.69
LARK Landmark Bancshares of KS 21.50 1,711 36.8 22.12 15.50 21.50 0.00 N.A. 19.44
LARL Laurel Capital Group of PA 21.50 1,443 31.0 22.50 14.75 21.37 0.61 67.97 30.30
LSBX Lawrence Savings Bank of MA* 11.12 4,274 47.5 12.87 6.00 11.87 -6.32 223.26 36.78
LFED Leeds FSB, MHC of MD (36.2) 22.00 3,455 27.5 22.00 13.00 20.87 5.41 N.A. 37.50
LXMO Lexington B&L Fin. Corp. of MO 16.62 1,138 18.9 16.62 10.00 16.12 3.10 N.A. 23.11
LIFB Life Bancorp of Norfolk VA 24.75 9,847 243.7 26.62 15.00 26.00 -4.81 N.A. 37.50
LFBI Little Falls Bancorp of NJ 17.37 2,745 47.7 17.50 10.37 17.12 1.46 N.A. 36.24
LOGN Logansport Fin. Corp. of IN 14.00 1,260 17.6 15.00 11.12 14.00 0.00 N.A. 24.44
LONF London Financial Corp. of OH 15.25 515 7.9 17.50 10.00 15.63 -2.43 N.A. 8.00
LISB Long Island Bancorp, Inc of NY 38.59 23,968 924.9 41.00 27.75 39.00 -1.05 N.A. 10.26
MAFB MAF Bancorp of IL 31.50 15,393 484.9 34.75 16.83 32.37 -2.69 270.59 35.95
MBLF MBLA Financial Corp. of MO 23.50 1,298 30.5 24.75 19.00 23.50 0.00 N.A. 23.68
MFBC MFB Corp. of Mishawaka IN 20.75 1,690 35.1 20.75 15.50 20.50 1.22 N.A. 24.85
MLBC ML Bancorp of Villanova PA 20.25 10,566 214.0 20.87 12.69 20.25 0.00 N.A. 43.41
MBB MSB Bancorp of Middletown NY* 24.19 2,837 68.6 24.19 15.50 23.50 2.94 141.90 23.29
MSBF MSB Financial Corp. of MI 15.00 1,249 18.7 16.50 8.62 13.00 15.38 N.A. 57.89
MGNL Magna Bancorp of MS(8) 25.25 13,754 347.3 27.37 16.75 25.00 1.00 405.00 44.29
MARN Marion Capital Holdings of IN 23.50 1,768 41.5 23.75 19.25 23.00 2.17 N.A. 22.08
MRKF Market Fin. Corp. of OH 14.12 1,336 18.9 14.75 12.25 14.25 -0.91 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 16.75 1,411 23.6 16.87 14.25 16.75 0.00 N.A. 12.64
MFSL Maryland Fed. Bancorp of MD 45.87 3,210 147.2 50.50 28.09 47.50 -3.43 336.86 32.00
MASB MassBank Corp. of Reading MA* 52.75 2,681 141.4 53.00 32.50 51.87 1.70 327.82 38.38
MFLR Mayflower Co-Op. Bank of MA* 18.62 890 16.6 19.75 14.75 18.00 3.44 272.40 9.53
MECH Mechanics SB of Hartford CT* 21.62 5,290 114.4 21.75 12.25 21.75 -0.60 N.A. 37.27
MDBK Medford Savings Bank of MA* 30.00 4,541 136.2 32.00 22.25 30.06 -0.20 328.57 16.50
MERI Meritrust FSB of Thibodaux LA 40.50 774 31.3 41.50 30.75 40.50 0.00 N.A. 28.08
MWBX MetroWest Bank of MA* 6.50 13,953 90.7 6.81 3.69 6.69 -2.84 57.77 21.04
MCBS Mid Continent Bancshares of KS 30.25 1,958 59.2 31.75 18.50 29.25 3.42 N.A. 29.44
<PAGE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
HBEI Home Bancorp of Elgin IL 0.25 0.43 13.73 13.73 51.43
HBFW Home Bancorp of Fort Wayne IN 0.72 1.15 17.62 17.62 132.62
HBBI Home Building Bancorp of IN 0.29 0.74 18.51 18.51 144.44
HCFC Home City Fin. Corp. of OH 0.51 0.77 14.77 14.77 71.68
HOMF Home Fed Bancorp of Seymour IN 2.02 2.35 17.05 16.53 201.06
HWEN Home Financial Bancorp of IN 0.45 0.64 15.12 15.12 81.16
HPBC Home Port Bancorp, Inc. of MA* 1.72 1.71 11.39 11.39 107.90
HMCI Homecorp, Inc. of Rockford IL 0.27 0.85 12.81 12.81 195.87
HZFS Horizon Fin'l. Services of IA 0.65 1.04 19.75 19.75 201.81
HRZB Horizon Financial Corp. of WA* 1.07 1.05 10.91 10.91 69.93
IBSF IBS Financial Corp. of NJ 0.35 0.60 11.45 11.45 67.20
ISBF ISB Financial Corp. of LA 0.77 1.04 16.58 14.06 136.06
ITLA Imperial Thrift & Loan of CA* 1.36 1.36 11.76 11.71 103.43
IFSB Independence FSB of DC 0.29 0.66 13.39 11.74 205.28
INCB Indiana Comm. Bank, SB of IN 0.16 0.50 12.27 12.27 99.06
INBI Industrial Bancorp of OH 0.45 0.88 11.63 11.63 65.68
IWBK Interwest SB of Oak Harbor WA 1.82 2.47 15.46 15.12 228.05
IPSW Ipswich SB of Ipswich MA* 1.68 1.32 9.11 9.11 159.41
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (44.6) 0.33 0.77 13.26 13.26 128.80
JSBA Jefferson Svgs Bancorp of MO 0.69 1.64 21.38 16.29 260.90
JOAC Joachim Bancorp of MO 0.24 0.37 13.60 13.60 46.92
KSAV KS Bancorp of Kenly NC 1.08 1.40 16.22 16.21 119.91
KSBK KSB Bancorp of Kingfield ME(8)* 1.04 1.08 8.10 7.62 113.08
KFBI Klamath First Bancorp of OR 0.55 0.83 14.20 14.20 72.65
LSBI LSB Fin. Corp. of Lafayette IN 0.95 0.80 18.31 18.31 201.75
LVSB Lakeview SB of Paterson NJ 2.78 1.93 19.91 15.92 209.23
LARK Landmark Bancshares of KS 1.13 1.33 18.38 18.38 133.31
LARL Laurel Capital Group of PA 1.56 2.00 15.06 15.06 144.54
LSBX Lawrence Savings Bank of MA* 1.40 1.38 7.45 7.45 85.71
LFED Leeds FSB, MHC of MD (36.2) 0.63 0.90 13.20 13.20 81.59
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA 1.01 1.23 15.94 15.49 151.14
LFBI Little Falls Bancorp of NJ 0.29 0.51 14.51 13.40 109.29
LOGN Logansport Fin. Corp. of IN 0.74 0.96 12.67 12.67 65.99
LONF London Financial Corp. of OH 0.54 0.79 14.63 14.63 73.66
LISB Long Island Bancorp, Inc of NY 1.44 1.67 22.17 21.95 246.53
MAFB MAF Bancorp of IL 1.51 2.10 16.57 14.39 210.25
MBLF MBLA Financial Corp. of MO 1.11 1.42 21.98 21.98 180.91
MFBC MFB Corp. of Mishawaka IN 0.72 1.10 20.11 20.11 138.63
MLBC ML Bancorp of Villanova PA 1.36 1.23 13.68 13.44 196.03
MBB MSB Bancorp of Middletown NY* 0.95 1.02 19.72 8.48 285.75
MSBF MSB Financial Corp. of MI 0.65 0.80 10.16 10.16 59.81
MGNL Magna Bancorp of MS(8) 1.35 1.49 10.06 9.79 98.39
MARN Marion Capital Holdings of IN 1.38 1.65 22.10 22.10 98.02
MRKF Market Fin. Corp. of OH 0.32 0.32 14.82 14.82 42.35
MFCX Marshalltown Fin. Corp. of IA(8) 0.30 0.65 14.23 14.23 90.38
MFSL Maryland Fed. Bancorp of MD 2.17 3.14 30.22 29.84 360.57
MASB MassBank Corp. of Reading MA* 3.64 3.45 35.92 35.92 337.72
MFLR Mayflower Co-Op. Bank of MA* 1.33 1.30 13.21 12.98 140.10
MECH Mechanics SB of Hartford CT* 2.76 2.76 15.93 15.93 155.69
MDBK Medford Savings Bank of MA* 2.45 2.29 21.24 19.79 236.19
MERI Meritrust FSB of Thibodaux LA 1.99 3.10 24.22 24.22 295.20
MWBX MetroWest Bank of MA* 0.52 0.52 3.02 3.02 40.60
MCBS Mid Continent Bancshares of KS 1.87 2.12 19.59 19.59 208.68
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIFC Mid Iowa Financial Corp. of IA 9.62 1,676 16.1 10.00 6.00 9.62 0.00 92.40 51.02
MCBN Mid-Coast Bancorp of ME 25.00 233 5.8 25.00 18.00 25.00 0.00 337.83 31.58
MWBI Midwest Bancshares, Inc. of IA 34.50 348 12.0 35.00 24.50 35.00 -1.43 245.00 30.19
MWFD Midwest Fed. Fin. Corp of WI 22.25 1,625 36.2 24.50 15.50 21.75 2.30 345.00 20.27
MFFC Milton Fed. Fin. Corp. of OH 13.87 2,310 32.0 16.00 12.25 13.62 1.84 N.A. -4.34
MIVI Miss. View Hold. Co. of MN 15.63 819 12.8 15.75 11.37 15.12 3.37 N.A. 30.25
MBSP Mitchell Bancorp of NC* 16.75 931 15.6 16.75 11.34 16.75 0.00 N.A. 17.54
MBBC Monterey Bay Bancorp of CA 16.37 3,245 53.1 18.25 13.12 16.25 0.74 N.A. 10.98
MONT Montgomery Fin. Corp. of IN 11.75 1,653 19.4 14.00 11.00 11.87 -1.01 N.A. -9.62
MSBK Mutual SB, FSB of Bay City MI 10.50 4,274 44.9 11.25 5.12 10.75 -2.33 20.00 90.91
NHTB NH Thrift Bancshares of NH 16.75 2,041 34.2 16.87 9.87 16.31 2.70 262.55 32.73
NSLB NS&L Bancorp of Neosho MO 18.50 707 13.1 18.75 12.00 16.62 11.31 N.A. 35.83
NMSB Newmil Bancorp. of CT* 13.00 3,834 49.8 13.12 7.00 12.62 3.01 104.08 33.33
NASB North American SB of MO 51.00 2,257 115.1 55.00 30.75 50.00 2.00 ***.** 48.91
NBSI North Bancshares of Chicago IL 22.00 997 21.9 22.37 15.75 22.25 -1.12 N.A. 33.33
FFFD North Central Bancshares of IA 16.50 3,258 53.8 16.81 11.25 16.50 0.00 N.A. 21.68
NBN Northeast Bancorp of ME* 14.75 1,275 18.8 14.94 12.75 14.75 0.00 25.53 5.36
NEIB Northeast Indiana Bncrp of IN 16.75 1,763 29.5 18.00 12.00 17.00 -1.47 N.A. 22.98
NWEQ Northwest Equity Corp. of WI 15.75 839 13.2 15.75 10.25 15.25 3.28 N.A. 29.95
NWSB Northwest SB, MHC of PA (29.9) 18.75 23,376 131.0 18.75 10.75 17.37 7.94 N.A. 40.24
NSSY Norwalk Savings Society of CT* 33.25 2,404 79.9 36.50 20.87 34.62 -3.96 N.A. 42.28
NSSB Norwich Financial Corp. of CT* 24.50 5,413 132.6 24.50 15.00 22.25 10.11 250.00 24.87
NTMG Nutmeg FS&LA of CT 11.00 725 8.0 11.00 7.00 10.75 2.33 N.A. 46.67
OHSL OHSL Financial Corp. of OH 23.25 1,196 27.8 25.25 19.50 24.50 -5.10 N.A. 8.80
OCFC Ocean Fin. Corp. of NJ 33.75 8,606 290.5 35.75 21.25 34.50 -2.17 N.A. 32.35
OCN Ocwen Financial Corp. of FL 42.87 26,800 1,148.9 44.75 20.25 44.00 -2.57 N.A. 60.26
OFCP Ottawa Financial Corp. of MI 25.50 4,911 125.2 25.62 16.00 25.62 -0.47 N.A. 51.70
PFFB PFF Bancorp of Pomona CA 19.62 18,716 367.2 19.75 11.25 19.56 0.31 N.A. 31.94
PSFI PS Financial of Chicago IL 14.62 2,182 31.9 14.87 11.62 14.50 0.83 N.A. 24.43
PVFC PVF Capital Corp. of OH 21.00 2,556 53.7 21.00 12.27 19.50 7.69 377.27 46.65
PCCI Pacific Crest Capital of CA* 15.37 2,938 45.2 15.37 8.13 15.12 1.65 N.A. 33.65
PAMM PacificAmerica Money Ctr of CA* 25.00 1,900 47.5 26.00 8.37 24.50 2.04 N.A. 72.41
PALM Palfed, Inc. of Aiken SC 15.87 5,284 83.9 17.50 12.50 15.50 2.39 3.25 13.36
PBCI Pamrapo Bancorp, Inc. of NJ 21.75 2,843 61.8 23.75 18.50 20.50 6.10 286.32 8.75
PFED Park Bancorp of Chicago IL 16.75 2,431 40.7 16.87 10.31 16.62 0.78 N.A. 28.85
PVSA Parkvale Financial Corp of PA 29.25 4,055 118.6 29.50 20.80 28.00 4.46 253.26 12.50
PEEK Peekskill Fin. Corp. of NY 16.25 3,193 51.9 17.00 12.50 16.00 1.56 N.A. 14.04
PFSB PennFed Fin. Services of NJ 29.50 4,822 142.2 30.50 17.50 29.81 -1.04 N.A. 45.68
PWBC PennFirst Bancorp of PA 16.00 5,306 84.9 16.59 12.27 16.37 -2.26 100.50 29.14
PWBK Pennwood SB of PA* 15.50 610 9.5 15.50 9.50 15.50 0.00 N.A. 12.73
PBKB People's SB of Brockton MA* 16.25 3,595 58.4 17.37 10.00 16.75 -2.99 173.57 53.01
PFDC Peoples Bancorp of Auburn IN 25.87 2,274 58.8 27.00 19.25 25.25 2.46 47.83 27.75
PBCT Peoples Bank, MHC of CT (37.4)* 26.75 61,053 405.4 29.00 14.00 28.25 -5.31 239.90 38.96
PFFC Peoples Fin. Corp. of OH 17.25 1,491 25.7 17.37 10.87 17.37 -0.69 N.A. 27.78
PHBK Peoples Heritage Fin Grp of ME* 38.19 27,371 1,045.3 40.25 20.62 38.87 -1.75 149.44 36.39
PSFC Peoples Sidney Fin. Corp of OH 16.50 1,785 29.5 16.50 12.56 16.50 0.00 N.A. N.A.
PERM Permanent Bancorp of IN 24.75 2,011 49.8 26.50 15.75 25.25 -1.98 N.A. 22.22
PMFI Perpetual Midwest Fin. of IA 20.25 1,883 38.1 22.00 17.00 20.12 0.65 N.A. 5.19
PERT Perpetual of SC, MHC (46.8) 39.00 1,505 27.5 41.00 20.25 39.25 -0.64 N.A. 60.82
PCBC Perry Co. Fin. Corp. of MO 20.50 808 16.6 22.25 15.50 20.50 0.00 N.A. 20.59
PHFC Pittsburgh Home Fin. of PA 18.37 1,969 36.2 18.37 10.25 17.12 7.30 N.A. 37.40
PFSL Pocahnts Fed, MHC of AR (46.4) 23.50 1,632 17.7 23.50 14.25 22.25 5.62 N.A. 34.29
POBS Portsmouth Bank Shrs Inc of NH(8)* 17.19 5,907 101.5 18.50 12.38 17.25 -0.35 65.13 25.29
PTRS Potters Financial Corp of OH 24.25 487 11.8 24.75 15.50 24.12 0.54 N.A. 21.25
PKPS Poughkeepsie Fin. Corp. of NY 7.69 12,595 96.9 8.13 4.75 8.00 -3.87 -0.77 46.48
<CAPTION>
Currrent Per Share Financials
---------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S>
MIFC Mid Iowa Financial Corp. of IA 0.64 0.84 6.71 6.70 73.73
MCBN Mid-Coast Bancorp of ME 1.06 1.66 22.06 22.06 256.39
MWBI Midwest Bancshares, Inc. of IA 1.81 3.01 29.09 29.09 421.10
MWFD Midwest Fed. Fin. Corp of WI 1.72 1.35 10.66 10.24 123.74
MFFC Milton Fed. Fin. Corp. of OH 0.39 0.54 11.37 11.37 86.53
MIVI Miss. View Hold. Co. of MN 0.59 0.88 16.08 16.08 85.20
MBSP Mitchell Bancorp of NC* 0.51 0.60 15.39 15.39 35.49
MBBC Monterey Bay Bancorp of CA 0.31 0.57 13.98 12.82 130.16
MONT Montgomery Fin. Corp. of IN 0.26 0.42 11.22 11.22 62.63
MSBK Mutual SB, FSB of Bay City MI 0.18 0.07 9.57 9.57 157.56
NHTB NH Thrift Bancshares of NH 0.44 0.65 11.47 9.72 153.37
NSLB NS&L Bancorp of Neosho MO 0.41 0.64 16.52 16.52 84.46
NMSB Newmil Bancorp. of CT* 0.68 0.65 8.27 8.27 84.26
NASB North American SB of MO 3.85 3.74 24.35 23.56 305.38
NBSI North Bancshares of Chicago IL 0.58 0.81 16.95 16.95 119.95
FFFD North Central Bancshares of IA 1.02 1.18 14.81 14.81 65.34
NBN Northeast Bancorp of ME* 0.93 0.86 13.49 11.66 194.14
NEIB Northeast Indiana Bncrp of IN 0.94 1.11 14.87 14.87 98.06
NWEQ Northwest Equity Corp. of WI 0.88 1.11 13.22 13.22 115.48
NWSB Northwest SB, MHC of PA (29.9) 0.56 0.81 8.30 7.80 85.45
NSSY Norwalk Savings Society of CT* 2.42 2.77 20.69 19.95 256.81
NSSB Norwich Financial Corp. of CT* 1.42 1.35 14.70 13.27 131.66
NTMG Nutmeg FS&LA of CT 0.39 0.44 7.35 7.35 129.17
OHSL OHSL Financial Corp. of OH 1.09 1.56 21.21 21.21 192.15
OCFC Ocean Fin. Corp. of NJ 0.06 1.49 27.35 27.35 168.27
OCN Ocwen Financial Corp. of FL 2.59 1.88 8.40 8.40 98.86
OFCP Ottawa Financial Corp. of MI 0.82 1.32 15.31 12.29 175.39
PFFB PFF Bancorp of Pomona CA 0.21 0.61 14.51 14.36 140.60
PSFI PS Financial of Chicago IL 0.70 0.71 14.66 14.66 37.88
PVFC PVF Capital Corp. of OH 1.40 1.80 9.79 9.79 139.38
PCCI Pacific Crest Capital of CA* 1.11 1.04 8.95 8.95 126.32
PAMM PacificAmerica Money Ctr of CA* 3.64 3.64 13.26 13.26 59.13
PALM Palfed, Inc. of Aiken SC 0.13 0.76 10.37 10.37 125.83
PBCI Pamrapo Bancorp, Inc. of NJ 1.16 1.60 16.62 16.49 130.49
PFED Park Bancorp of Chicago IL 0.62 0.86 16.27 16.27 72.22
PVSA Parkvale Financial Corp of PA 1.72 2.54 18.54 18.40 244.45
PEEK Peekskill Fin. Corp. of NY 0.57 0.75 14.71 14.71 57.18
PFSB PennFed Fin. Services of NJ 1.43 2.09 20.17 16.87 274.11
PWBC PennFirst Bancorp of PA 0.56 0.84 9.41 8.59 133.10
PWBK Pennwood SB of PA* 0.46 0.73 15.30 15.30 78.57
PBKB People's SB of Brockton MA* 1.16 0.69 8.56 8.20 152.65
PFDC Peoples Bancorp of Auburn IN 1.39 1.82 19.23 19.23 126.46
PBCT Peoples Bank, MHC of CT (37.4)* 1.39 1.03 10.93 10.92 128.90
PFFC Peoples Fin. Corp. of OH 0.52 0.52 16.18 16.18 60.15
PHBK Peoples Heritage Fin Grp of ME* 2.36 2.39 15.77 13.29 204.27
PSFC Peoples Sidney Fin. Corp of OH 0.56 0.73 14.09 14.09 60.57
PERM Permanent Bancorp of IN 0.72 1.30 19.74 19.45 215.43
PMFI Perpetual Midwest Fin. of IA 0.25 0.61 18.00 18.00 210.96
PERT Perpetual of SC, MHC (46.8) 1.00 1.41 19.69 19.69 148.17
PCBC Perry Co. Fin. Corp. of MO 0.77 1.02 18.07 18.07 98.66
PHFC Pittsburgh Home Fin. of PA 0.69 0.88 14.21 14.06 130.15
PFSL Pocahnts Fed, MHC of AR (46.4) 1.39 1.93 14.76 14.76 232.05
POBS Portsmouth Bank Shrs Inc of NH(8)* 1.03 0.91 11.39 11.39 43.92
PTRS Potters Financial Corp of OH 1.16 2.06 21.97 21.97 248.85
PKPS Poughkeepsie Fin. Corp. of NY 0.24 0.37 5.85 5.85 69.88
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PHSB Ppls Home SB, MHC of PA (45.0) 14.75 2,760 18.3 14.75 13.62 14.00 5.36 N.A. N.A.
PRBC Prestige Bancorp of PA 16.50 915 15.1 16.75 10.25 16.00 3.13 N.A. 22.22
PETE Primary Bank of NH(8)* 25.75 2,089 53.8 26.75 11.31 25.50 0.98 N.A. 68.96
PFNC Progress Financial Corp. of PA 13.25 3,814 50.5 14.00 6.00 13.25 0.00 20.35 58.30
PSBK Progressive Bank, Inc. of NY* 29.25 3,821 111.8 32.00 19.33 30.37 -3.69 118.77 28.57
PROV Provident Fin. Holdings of CA 19.62 4,920 96.5 20.12 10.87 19.00 3.26 N.A. 40.14
PULB Pulaski SB, MHC of MO (29.0) 21.00 2,094 12.6 22.00 12.37 20.50 2.44 N.A. 44.83
PLSK Pulaski SB, MHC of NJ (46.0) 14.37 2,070 13.7 14.37 11.50 13.87 3.60 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 20.62 3,071 63.3 21.00 15.50 20.50 0.59 66.69 30.92
QCFB QCF Bancorp of Virginia MN 23.50 1,426 33.5 25.00 14.75 23.50 0.00 N.A. 28.77
QCBC Quaker City Bancorp of CA 20.50 4,703 96.4 20.50 11.40 20.00 2.50 173.33 34.87
QCSB Queens County Bancorp of NY* 51.12 10,181 520.5 51.87 23.50 51.00 0.24 N.A. 61.87
RCSB RCSB Financial, Inc. of NY(8)* 47.75 14,591 696.7 51.75 26.12 46.98 1.64 287.90 64.66
RARB Raritan Bancorp. of Raritan NJ* 22.87 2,412 55.2 25.50 13.67 24.00 -4.71 255.12 47.55
REDF RedFed Bancorp of Redlands CA 15.75 7,174 113.0 16.87 9.62 16.12 -2.30 N.A. 16.67
RELY Reliance Bancorp, Inc. of NY 29.87 8,776 262.1 30.12 17.00 28.75 3.90 N.A. 53.18
RELI Reliance Bancshares Inc of WI(8)* 8.50 2,528 21.5 10.12 6.50 8.44 0.71 N.A. 25.93
RIVR River Valley Bancorp of IN 16.75 1,190 19.9 16.75 13.25 15.50 8.06 N.A. 21.82
RSLN Roslyn Bancorp, Inc. of NY* 23.87 43,642 1,041.7 24.31 15.00 23.81 0.25 N.A. N.A.
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 27.00 2,419 24.7 27.50 13.18 25.50 5.88 N.A. 69.70
SCCB S. Carolina Comm. Bnshrs of SC 21.06 704 14.8 25.25 15.00 22.50 -6.40 N.A. 40.40
SBFL SB Fngr Lakes MHC of NY (33.1) 18.50 1,785 10.9 18.50 12.75 18.25 1.37 N.A. 34.55
SFED SFS Bancorp of Schenectady NY 19.25 1,236 23.8 19.25 12.50 19.03 1.16 N.A. 30.51
SGVB SGV Bancorp of W. Covina CA 15.12 2,342 35.4 15.50 8.56 15.37 -1.63 N.A. 34.40
SISB SIS Bancorp Inc of MA* 30.00 5,577 167.3 30.37 18.87 30.37 -1.22 N.A. 31.18
SWCB Sandwich Co-Op. Bank of MA* 33.50 1,906 63.9 34.25 20.25 33.75 -0.74 288.63 12.61
SECP Security Capital Corp. of WI(8) 100.25 9,208 923.1 101.44 60.50 99.00 1.26 N.A. 35.93
SFSL Security First Corp. of OH 16.50 5,003 82.5 17.00 8.83 16.00 3.13 58.65 36.59
SFNB Security First Netwrk Bk of GA 11.62 8,426 97.9 28.25 5.50 11.00 5.64 N.A. 13.37
SMFC Sho-Me Fin. Corp. of MO(8) 38.00 1,499 57.0 40.25 17.00 38.00 0.00 N.A. 74.71
SOBI Sobieski Bancorp of S. Bend IN 16.25 760 12.4 16.50 11.75 16.37 -0.73 N.A. 12.07
SOSA Somerset Savings Bank of MA(8)* 4.00 16,652 66.6 4.00 1.44 3.97 0.76 -21.88 103.05
SSFC South Street Fin. Corp. of NC* 19.25 4,496 86.5 19.50 12.12 18.75 2.67 N.A. 37.50
SCBS Southern Commun. Bncshrs of AL 15.50 1,137 17.6 15.87 13.00 15.50 0.00 N.A. 16.98
SMBC Southern Missouri Bncrp of MO 17.25 1,638 28.3 18.00 13.50 17.25 0.00 N.A. 15.00
SWBI Southwest Bancshares of IL 20.87 2,652 55.3 21.75 17.83 20.75 0.58 108.70 14.36
SVRN Sovereign Bancorp of PA 14.87 70,010 1,041.0 16.50 8.54 15.56 -4.43 232.66 35.92
STFR St. Francis Cap. Corp. of WI 34.75 5,308 184.5 38.75 25.00 35.00 -0.71 N.A. 33.65
SPBC St. Paul Bancorp, Inc. of IL 23.12 33,988 785.8 24.37 13.23 22.37 3.35 107.73 47.54
STND Standard Fin. of Chicago IL(8) 25.25 16,210 409.3 25.62 16.25 25.25 0.00 N.A. 28.70
SFFC StateFed Financial Corp. of IA 21.50 784 16.9 22.75 15.50 21.75 -1.15 N.A. 30.30
SFIN Statewide Fin. Corp. of NJ 18.87 4,710 88.9 19.12 12.00 19.12 -1.31 N.A. 31.32
STSA Sterling Financial Corp. of WA 17.75 5,567 98.8 19.25 13.00 18.25 -2.74 95.27 25.71
SFSB SuburbFed Fin. Corp. of IL 27.00 1,262 34.1 27.50 16.25 27.50 -1.82 304.80 42.11
ROSE T R Financial Corp. of NY* 26.00 17,609 457.8 28.25 13.75 27.00 -3.70 N.A. 46.48
THRD TF Financial Corp. of PA 19.25 4,083 78.6 20.50 14.37 19.12 0.68 N.A. 18.46
TPNZ Tappan Zee Fin., Inc. of NY 17.50 1,497 26.2 17.62 12.00 17.62 -0.68 N.A. 28.49
ESBK The Elmira SB FSB of Elmira NY* 23.50 706 16.6 23.75 14.75 23.12 1.64 63.54 28.77
GRTR The Greater New York SB of NY(8)* 21.94 13,717 301.0 22.94 11.37 22.12 -0.81 135.66 61.09
TSBS Trenton SB, FSB MHC of NJ(35.0 28.13 9,037 87.7 28.13 13.50 24.50 14.82 N.A. 75.81
TRIC Tri-County Bancorp of WY 22.75 609 13.9 24.25 18.00 22.75 0.00 N.A. 26.39
TWIN Twin City Bancorp of TN 20.00 853 17.1 20.50 16.25 19.50 2.56 N.A. 15.94
UFRM United FS&LA of Rocky Mount NC 12.00 3,074 36.9 12.50 7.00 12.25 -2.04 269.23 41.18
UBMT United Fin. Corp. of MT 23.50 1,223 28.7 24.00 18.00 23.87 -1.55 123.81 22.08
VABF Va. Beach Fed. Fin. Corp of VA 13.62 4,976 67.8 15.00 7.75 14.00 -2.71 190.41 44.28
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- ------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
PHSB Ppls Home SB, MHC of PA (45.0) 0.32 0.67 14.36 14.36 82.97
PRBC Prestige Bancorp of PA 0.47 0.83 16.51 16.51 148.33
PETE Primary Bank of NH(8)* 1.24 1.47 14.33 14.31 206.65
PFNC Progress Financial Corp. of PA 0.54 0.65 5.78 5.10 109.77
PSBK Progressive Bank, Inc. of NY* 2.30 2.26 19.67 17.57 230.00
PROV Provident Fin. Holdings of CA 0.39 0.34 17.37 17.37 125.10
PULB Pulaski SB, MHC of MO (29.0) 0.59 0.82 11.04 11.04 84.92
PLSK Pulaski SB, MHC of NJ (46.0) 0.21 0.51 10.20 10.20 85.68
PULS Pulse Bancorp of S. River NJ 1.20 1.80 13.63 13.63 169.39
QCFB QCF Bancorp of Virginia MN 1.41 1.41 18.98 18.98 104.93
QCBC Quaker City Bancorp of CA 0.50 0.91 14.79 14.77 166.03
QCSB Queens County Bancorp of NY* 2.15 2.18 17.08 17.08 144.08
RCSB RCSB Financial, Inc. of NY(8)* 2.66 2.64 21.69 21.14 276.36
RARB Raritan Bancorp. of Raritan NJ* 1.46 1.55 12.48 12.27 157.31
REDF RedFed Bancorp of Redlands CA 0.15 0.57 10.36 10.35 126.66
RELY Reliance Bancorp, Inc. of NY 1.16 1.77 17.65 12.37 219.55
RELI Reliance Bancshares Inc of WI(8)* 0.28 0.28 8.89 8.89 18.53
RIVR River Valley Bancorp of IN 0.27 0.43 14.37 14.15 116.24
RSLN Roslyn Bancorp, Inc. of NY* 0.59 0.93 14.58 14.51 72.39
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 0.88 1.10 10.67 9.74 94.94
SCCB S. Carolina Comm. Bnshrs of SC 0.52 0.70 17.11 17.11 65.93
SBFL SB Fngr Lakes MHC of NY (33.1) 0.15 0.51 11.63 11.63 121.40
SFED SFS Bancorp of Schenectady NY 0.60 1.07 17.44 17.44 139.85
SGVB SGV Bancorp of W. Covina CA 0.31 0.75 12.77 12.56 174.78
SISB SIS Bancorp Inc of MA* 3.31 3.29 18.52 18.52 257.23
SWCB Sandwich Co-Op. Bank of MA* 2.24 2.27 20.55 19.59 249.34
SECP Security Capital Corp. of WI(8) 4.40 5.26 62.79 62.79 396.07
SFSL Security First Corp. of OH 1.28 1.62 11.88 11.67 126.88
SFNB Security First Netwrk Bk of GA 3.47 -3.58 3.79 3.73 9.44
SMFC Sho-Me Fin. Corp. of MO(8) 2.08 2.35 19.81 19.81 219.35
SOBI Sobieski Bancorp of S. Bend IN 0.30 0.60 16.03 16.03 104.05
SOSA Somerset Savings Bank of MA(8)* 0.25 0.24 1.96 1.96 30.90
SSFC South Street Fin. Corp. of NC* 0.45 0.57 13.58 13.58 53.77
SCBS Southern Commun. Bncshrs of AL 0.19 0.47 13.54 13.54 61.66
SMBC Southern Missouri Bncrp of MO 0.70 0.69 15.85 15.85 101.15
SWBI Southwest Bancshares of IL 1.05 1.44 15.69 15.69 142.66
SVRN Sovereign Bancorp of PA 0.62 0.96 6.25 4.71 155.67
STFR St. Francis Cap. Corp. of WI 1.77 1.95 24.43 21.59 310.01
SPBC St. Paul Bancorp, Inc. of IL 0.93 1.34 11.67 11.64 135.68
STND Standard Fin. of Chicago IL(8) 0.74 1.07 17.11 17.08 158.83
SFFC StateFed Financial Corp. of IA 1.17 1.42 19.43 19.43 109.28
SFIN Statewide Fin. Corp. of NJ 0.76 1.29 13.90 13.88 142.93
STSA Sterling Financial Corp. of WA 0.28 0.90 12.41 10.82 302.93
SFSB SuburbFed Fin. Corp. of IL 1.23 1.79 21.92 21.84 338.12
ROSE T R Financial Corp. of NY* 1.83 1.65 12.51 12.51 201.70
THRD TF Financial Corp. of PA 0.84 1.13 17.44 15.30 156.93
TPNZ Tappan Zee Fin., Inc. of NY 0.53 0.49 14.35 14.35 80.07
ESBK The Elmira SB FSB of Elmira NY* 1.13 1.10 20.32 19.48 322.70
GRTR The Greater New York SB of NY(8)* 1.38 0.74 11.75 11.75 187.40
TSBS Trenton SB, FSB MHC of NJ(35.0 0.86 0.73 11.79 10.81 69.82
TRIC Tri-County Bancorp of WY 1.10 1.40 22.50 22.50 146.89
TWIN Twin City Bancorp of TN 0.66 0.93 16.18 16.18 125.84
UFRM United FS&LA of Rocky Mount NC 0.19 0.33 6.70 6.70 89.63
UBMT United Fin. Corp. of MT 0.94 1.16 19.95 19.95 88.08
VABF Va. Beach Fed. Fin. Corp of VA 0.26 0.58 8.50 8.50 124.16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1A (continued)
Weekly Thrift Market Line - Part One
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VFFC Virginia First Savings of VA(8) 24.00 5,805 139.3 24.00 11.87 23.75 1.05 ***.** 88.24
WHGB WHG Bancshares of MD 15.12 1,462 22.1 15.50 11.00 15.12 0.00 N.A. 15.24
WSFS WSFS Financial Corp. of DE* 14.25 12,421 177.0 15.12 7.75 14.25 0.00 96.55 39.84
WVFC WVS Financial Corp. of PA* 27.25 1,747 47.6 27.75 20.37 26.87 1.41 N.A. 10.68
WRNB Warren Bancorp of Peabody MA* 17.87 3,781 67.6 19.00 12.00 17.75 0.68 430.27 19.13
WFSL Washington FS&LA of Seattle WA 26.62 47,462 1,263.4 29.25 19.89 28.37 -6.17 82.45 10.50
WAMU Washington Mutual Inc. of WA* 62.37 126,357 7,880.9 69.12 35.00 64.19 -2.84 236.05 44.01
WYNE Wayne Bancorp of NJ 22.00 2,120 46.6 22.75 12.50 21.62 1.76 N.A. 44.26
WAYN Wayne S&L Co. MHC of OH (47.8) 17.75 2,248 12.7 19.25 12.67 18.25 -2.74 N.A. 8.70
WCFB Wbstr Cty FSB MHC of IA (45.2) 16.50 2,100 15.7 17.50 12.50 17.50 -5.71 N.A. 20.00
WBST Webster Financial Corp. of CT 50.00 11,985 599.3 51.87 30.62 51.75 -3.38 429.66 36.05
WEFC Wells Fin. Corp. of Wells MN 16.50 1,959 32.3 16.50 11.75 16.00 3.13 N.A. 25.76
WCBI WestCo Bancorp of IL 26.25 2,476 65.0 26.75 20.00 26.00 0.96 162.50 22.09
WSTR WesterFed Fin. Corp. of MT 21.75 5,565 121.0 23.50 14.25 22.87 -4.90 N.A. 19.18
WOFC Western Ohio Fin. Corp. of OH 24.00 2,312 55.5 24.00 19.62 23.25 3.23 N.A. 10.34
WWFC Westwood Fin. Corp. of NJ 23.25 645 15.0 23.25 10.37 20.00 16.25 N.A. 40.91
WEHO Westwood Hmstd Fin Corp of OH 15.37 2,795 43.0 16.00 10.37 15.37 0.00 N.A. 26.82
WFI Winton Financial Corp. of OH 16.00 1,986 31.8 16.75 11.25 15.50 3.23 N.A. 39.13
FFWD Wood Bancorp of OH 16.50 2,119 35.0 16.50 9.00 16.50 0.00 N.A. 45.63
YFCB Yonkers Fin. Corp. of NY 16.75 3,036 50.9 17.62 10.25 16.75 0.00 N.A. 30.15
YFED York Financial Corp. of PA 25.50 7,008 178.7 26.75 14.54 25.50 0.00 169.4 56.92
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- ---------------------- ------- ------- ------- ------- --------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
VFFC Virginia First Savings of VA(8) 1.81 1.66 11.35 10.96 140.79
HGB WHG Bancshares of MD 0.34 0.34 14.16 14.16 68.56
SFS WSFS Financial Corp. of DE* 1.47 1.48 6.32 6.27 121.45
VFC WVS Financial Corp. of PA* 1.69 2.11 18.83 18.83 168.69
RNB Warren Bancorp of Peabody MA* 2.01 1.71 9.82 9.82 94.69
FSL Washington FS&LA of Seattle WA 1.94 2.14 14.66 13.39 121.37
AMU Washington Mutual Inc. of WA* 1.14 2.42 19.30 18.32 385.92
YNE Wayne Bancorp of NJ 0.50 0.50 16.44 16.44 123.13
AYN Wayne S&L Co. MHC of OH (47.8) 0.32 0.73 10.28 10.28 112.18
CFB Wbstr Cty FSB MHC of IA (45.2) 0.48 0.64 10.53 10.53 45.09
BST Webster Financial Corp. of CT 1.60 2.86 24.91 21.28 495.93
EFC Wells Fin. Corp. of Wells MN 0.73 1.08 14.64 14.64 103.13
CBI WestCo Bancorp of IL 1.41 1.78 19.18 19.18 125.85
STR WesterFed Fin. Corp. of MT 0.81 1.02 18.73 14.99 171.72
OFC Western Ohio Fin. Corp. of OH 0.48 0.69 23.21 21.87 173.04
WFC Westwood Fin. Corp. of NJ 0.78 1.34 15.76 14.04 172.70
EHO Westwood Hmstd Fin Corp of OH 0.30 0.45 14.17 14.17 48.18
FI Winton Financial Corp. of OH 1.60 1.34 11.36 11.12 159.81
FWD Wood Bancorp of OH 0.79 0.94 9.52 9.52 77.36
FCB Yonkers Fin. Corp. of NY 0.6 1.02 14.14 14.14 94.89
FED York Financial Corp. of PA 1.01 1.29 14.28 14.28 165.87
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
- ---------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
----------------------------------------------
SAIF-Insured Thrifts(304) 13.04 12.79 0.54 5.57 3.54 0.75 7.52
NYSE Traded Companies(8) 5.98 5.71 0.52 8.36 4.43 0.70 12.24
AMEX Traded Companies(17) 15.84 15.76 0.66 4.79 3.08 0.97 7.08
NASDAQ Listed OTC Companies(279) 13.08 12.83 0.53 5.53 3.55 0.73 7.40
California Companies(21) 7.44 7.18 0.31 4.97 2.94 0.41 6.70
Florida Companies(6) 7.62 7.24 0.90 11.26 3.96 0.80 9.84
Mid-Atlantic Companies(58) 10.80 10.44 0.63 6.53 4.15 0.87 9.06
Mid-West Companies(147) 14.10 13.92 0.68 5.39 3.83 0.90 7.12
New England Companies(10) 8.46 8.09 0.38 4.70 3.11 0.62 7.96
North-West Companies(7) 15.91 15.62 0.83 6.61 3.59 1.04 8.85
South-East Companies(42) 16.73 16.53 -0.10 4.71 2.03 0.13 6.65
South-West Companies(7) 10.80 10.54 0.38 2.90 2.41 0.66 6.39
Western Companies (Excl CA)(6) 16.19 15.79 0.99 6.65 4.57 1.16 7.70
Thrift Strategy(240) 14.22 14.00 0.66 5.07 3.63 0.89 6.98
Mortgage Banker Strategy(37) 7.48 7.04 0.51 7.18 3.79 0.65 9.42
Real Estate Strategy(11) 7.36 7.17 0.55 6.99 4.18 0.77 10.37
Diversified Strategy(12) 11.24 11.00 -2.27 13.29 1.03 -2.32 14.65
Retail Banking Strategy(4) 8.40 8.19 0.11 2.23 0.78 0.03 1.72
Companies Issuing Dividends(254) 13.24 12.98 0.69 5.96 3.97 0.92 7.94
Companies Without Dividends(50) 11.87 11.75 -0.30 3.34 1.16 -0.19 5.11
Equity/Assets 6%(23) 4.92 4.62 0.41 8.17 4.18 0.56 11.31
Equity/Assets 6-12%(147) 8.65 8.32 0.56 6.58 3.89 0.75 8.80
Equity/Assets >12%(134) 18.92 18.78 0.54 4.07 3.08 0.78 5.54
Converted Last 3 Mths (no MHC)(5) 21.15 21.15 0.67 3.02 2.55 0.74 3.45
Actively Traded Companies(42) 8.62 8.38 0.74 9.01 4.94 0.95 11.89
Market Value Below $20 Million(63) 15.16 15.08 0.55 3.57 2.99 0.80 5.59
Holding Company Structure(269) 13.42 13.20 0.64 5.34 3.60 0.86 7.28
Assets Over $1 Billion(62) 7.81 7.30 0.62 8.12 4.08 0.81 10.91
Assets $500 Million-$1 Billion(49) 10.12 9.82 0.65 6.79 4.15 0.80 8.14
Assets $250-$500 Million(68) 11.10 10.78 0.58 5.34 3.71 0.81 7.53
Assets less than $250 Million(125) 17.58 17.52 0.44 4.02 2.98 0.66 5.68
Goodwill Companies(121) 9.23 8.62 0.34 6.80 3.77 0.50 8.99
Non-Goodwill Companies(181) 15.44 15.44 0.67 4.77 3.40 0.91 6.58
Acquirors of FSLIC Cases(10) 7.19 6.79 0.57 7.79 4.31 0.82 11.71
<CAPTION>
Asset Quality Ratios Pricing Ratios
----------------------- ---------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings
- --------------------- ------- ------- ------- ------- ------ ------- ------- -------
(%) (%) (%) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts (no MHCs)
----------------------------------------------
SAIF-Insured Thrifts(304) 0.80 124.72 0.82 21.05 135.66 17.06 140.34 18.28
NYSE Traded Companies(8) 1.26 77.65 1.32 21.61 181.67 10.58 193.62 14.94
AMEX Traded Companies(17) 0.63 116.33 0.72 21.77 123.42 20.51 124.39 19.32
NASDAQ Listed OTC Companies(279) 0.80 126.79 0.81 20.99 134.95 17.05 139.61 18.33
California Companies(21) 2.30 64.66 1.36 20.92 147.53 10.38 154.64 17.86
Florida Companies(6) 0.62 87.78 0.66 18.97 156.02 17.49 176.08 20.95
Mid-Atlantic Companies(58) 0.82 101.18 0.92 20.92 140.44 14.66 145.77 16.91
Mid-West Companies(147) 0.64 143.21 0.70 20.93 129.44 17.27 132.51 18.21
New England Companies(10) 0.60 121.61 1.05 23.02 142.92 11.69 153.73 20.84
North-West Companies(7) 0.68 127.72 0.61 17.78 158.57 21.89 165.90 17.88
South-East Companies(42) 0.90 124.35 0.87 21.72 140.89 24.31 145.05 20.29
South-West Companies(7) 0.65 100.15 0.71 21.09 119.49 12.30 126.86 17.59
Western Companies (Excl CA)(6) 0.31 139.06 0.72 22.42 135.00 20.18 140.88 19.02
Thrift Strategy(240) 0.73 128.65 0.74 21.34 128.55 17.64 132.46 18.51
Mortgage Banker Strategy(37) 1.05 100.28 1.01 20.38 165.22 11.92 176.24 18.07
Real Estate Strategy(11) 1.41 103.85 1.37 18.95 155.33 11.08 158.06 15.45
Diversified Strategy(12) 0.77 135.26 1.12 19.66 206.55 30.54 213.74 16.54
Retail Banking Strategy(4) 1.76 147.14 1.83 17.27 122.53 10.00 126.51 16.78
Companies Issuing Dividends(254) 0.69 127.50 0.78 21.06 136.85 17.04 141.85 18.13
Companies Without Dividends(50) 1.57 106.18 1.07 20.98 128.60 17.16 131.46 19.48
Equity/Assets 6%(23) 1.70 84.01 1.05 19.66 171.85 9.33 182.16 16.53
Equity/Assets 6-12%(147) 0.89 122.54 0.92 20.03 145.95 12.72 153.20 16.79
Equity/Assets >12%(134) 0.52 135.75 0.67 22.79 119.55 22.83 121.06 20.41
Converted Last 3 Mths (no MHC)(5) 1.95 27.73 0.58 28.19 118.89 25.08 118.89 27.98
Actively Traded Companies(42) 1.31 98.15 0.97 19.25 168.48 14.04 174.22 15.84
Market Value Below $20 Million(63) 0.70 101.98 0.67 22.84 110.87 16.65 111.95 19.72
Holding Company Structure(269) 0.80 119.72 0.80 21.43 133.20 17.07 137.33 18.49
Assets Over $1 Billion(62) 0.94 97.19 0.98 20.34 168.56 13.59 181.98 17.10
Assets $500 Million-$1 Billion(49) 1.10 173.56 1.06 19.43 148.94 15.14 153.99 17.95
Assets $250-$500 Million(68) 0.71 122.22 0.73 20.48 134.89 14.62 140.17 17.18
Assets less than $250 Million(125) 0.66 119.79 0.70 22.54 116.43 20.66 117.10 19.67
Goodwill Companies(121) 0.81 110.93 0.90 20.23 151.60 14.01 163.42 17.23
Non-Goodwill Companies(181) 0.80 132.94 0.76 21.71 125.05 18.97 125.05 19.05
Acquirors of FSLIC Cases(10) 1.48 56.52 0.89 20.02 167.07 11.64 179.54 15.95
<CAPTION>
Dividend Data(6)
------------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
- --------------------- ------- --------- --------
($) (%) (%)
<S> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts (no MHCs)
----------------------------------------------
SAIF-Insured Thrifts(304) 0.36 1.71 35.44
NYSE Traded Companies(8) 0.29 0.81 17.23
AMEX Traded Companies(17) 0.42 2.14 44.64
NASDAQ Listed OTC Companies(279) 0.36 1.71 35.66
California Companies(21) 0.15 0.54 12.59
Florida Companies(6) 0.24 0.85 13.78
Mid-Atlantic Companies(58) 0.39 1.68 37.11
Mid-West Companies(147) 0.36 1.81 36.36
New England Companies(10) 0.43 1.60 34.27
North-West Companies(7) 0.35 1.41 26.99
South-East Companies(42) 0.41 1.98 42.26
South-West Companies(7) 0.35 1.71 52.02
Western Companies (Excl CA)(6) 0.56 2.80 54.77
Thrift Strategy(240) 0.37 1.83 38.17
Mortgage Banker Strategy(37) 0.34 1.23 27.83
Real Estate Strategy(11) 0.13 0.77 11.26
Diversified Strategy(12) 0.40 1.34 29.94
Retail Banking Strategy(4) 0.20 1.26 18.18
Companies Issuing Dividends(254) 0.43 2.01 41.69
Companies Without Dividends(50) 0.00 0.00 0.00
Equity/Assets 6%(23) 0.22 0.83 15.13
Equity/Assets 6-12%(147) 0.38 1.60 33.90
Equity/Assets >12%(134) 0.37 1.96 41.71
Converted Last 3 Mths (no MHC)(5) 0.00 0.00 0.00
Actively Traded Companies(42) 0.49 1.74 31.67
Market Value Below $20 Million(63) 0.33 1.96 41.30
Holding Company Structure(269) 0.37 1.76 36.83
Assets Over $1 Billion(62) 0.44 1.37 29.78
Assets $500 Million-$1 Billion(49) 0.34 1.55 36.51
Assets $250-$500 Million(68) 0.36 1.75 32.01
Assets less than $250 Million(125) 0.33 1.89 40.44
Goodwill Companies(121) 0.39 1.56 32.14
Non-Goodwill Companies(181) 0.34 1.80 37.97
Acquirors of FSLIC Cases(10) 0.38 1.41 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-IB (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------
Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
- --------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(69) 11.82 11.44 1.18 11.52 7.04 1.19 11.51
NYSE Traded Companies(3) 7.58 6.00 0.77 10.55 5.56 0.78 10.86
AMEX Traded Companies(5) 12.79 12.59 0.86 9.07 5.30 0.86 9.14
NASDAQ Listed OTC Companies(61) 11.97 11.65 1.23 11.83 7.30 1.25 11.78
California Companies(4) 12.01 12.00 2.20 19.75 8.96 2.16 19.13
Mid-Atlantic Companies(18) 11.50 10.83 0.83 8.60 4.81 0.92 9.21
Mid-West Companies(2) 25.06 23.63 0.43 1.59 1.68 0.66 2.42
New England Companies(36) 8.99 8.69 1.27 13.74 8.97 1.22 13.16
North-West Companies(4) 10.54 10.19 1.00 9.60 4.94 1.07 11.27
South-East Companies(5) 27.94 27.94 1.14 4.39 3.35 1.23 4.70
Thrift Strategy(45) 13.14 12.70 1.14 10.09 6.88 1.14 9.89
Mortgage Banker Strategy(10) 8.83 8.62 0.86 11.23 6.17 0.95 11.87
Real Estate Strategy(6) 8.98 8.96 1.37 15.17 8.37 1.28 14.30
Diversified Strategy(7) 9.09 8.68 1.82 19.94 8.65 1.87 20.98
Retail Banking Strategy(1) 6.30 6.04 0.36 5.66 4.81 0.35 5.51
Companies Issuing Dividends(56) 11.17 10.75 1.01 10.62 6.06 1.02 10.63
Companies Without Dividends(13) 14.98 14.83 1.98 16.43 11.86 2.00 16.30
Equity/Assets 6%(5) 5.36 5.21 0.85 15.18 6.37 0.84 15.26
Equity/Assets 6-12%(47) 8.62 8.14 1.20 12.97 8.35 1.18 12.76
Equity/Assets greater than 12%(17) 22.28 22.10 1.23 6.63 3.85 1.32 7.07
Actively Traded Companies(23) 8.66 8.25 1.13 13.30 7.55 1.10 13.10
Market Value Below $20 Million(8) 17.12 16.72 1.22 5.30 9.76 1.31 5.76
Holding Company Structure(46) 13.23 12.88 1.27 11.04 7.01 1.29 11.19
Assets Over $1 Billion(18) 8.82 8.18 1.01 12.27 6.27 1.07 12.91
Assets $500 Million-$1 Billion(16) 9.59 9.03 1.18 12.97 7.53 1.14 12.38
Assets $250-$500 Million(16) 10.93 10.82 1.01 10.76 6.27 1.00 10.62
Assets less than $250 Million(19) 17.35 17.16 1.48 10.14 8.01 1.51 10.11
Goodwill Companies(32) 9.11 8.32 0.91 11.11 6.31 0.94 11.26
Non-Goodwill Companies(37) 14.26 14.26 1.41 11.91 7.70 1.42 11.73
<CAPTION>
Asset Quality
Ratios Pricing Ratios
----------------------- ---------------------------------------------
Price/ Price/
NPAs Resvs/ Resvs/ Price/ Price/ Price/ lang. Core
Financial Institution Assets NPAs Loans Earnings Book Assets Book Earnings
- --------------------- ------ ------ ------ -------- ------ ------ ------ --------
(%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(69) 0.95 136.91 1.46 14.78 158.45 17.60 164.92 15.90
NYSE Traded Companies(3) 1.88 43.17 1.03 18.17 183.14 14.13 174.21 17.96
AMEX Traded Companies(5) 1.05 244.27 1.38 14.39 147.77 17.36 152.55 13.93
NASDAQ Listed OTC Companies(61) 0.89 131.58 1.49 14.57 158.04 17.83 165.79 15.89
California Companies(4) 2.23 65.22 1.58 12.36 164.63 20.52 164.82 13.28
Mid-Atlantic Companies(18) 0.89 127.25 1.40 18.22 163.92 17.63 174.92 18.36
Mid-West Companies(2) 0.73 42.12 0.53 0.00 97.89 24.53 103.82 0.00
New England Companies(36) 0.93 158.24 1.67 12.77 161.74 14.11 168.37 13.46
North-West Companies(4) 0.37 154.33 1.05 18.50 170.08 19.20 175.10 20.88
South-East Companies(5) 0.70 111.46 0.77 22.53 122.46 33.46 122.46 24.84
Thrift Strategy(45) 0.90 143.83 1.41 15.41 152.78 18.48 159.02 16.39
Mortgage Banker Strategy(10) 0.71 135.17 1.41 15.10 170.04 14.82 175.70 16.29
Real Estate Strategy(6) 1.08 103.33 1.46 12.36 164.84 14.76 165.00 12.81
Diversified Strategy(7) 1.57 122.62 1.93 10.86 192.16 18.41 205.87 13.62
Retail Banking Strategy(1) 0.66 97.39 0.85 20.80 115.65 7.28 120.64 21.36
Companies Issuing Dividends(56) 0.80 145.09 1.40 15.75 160.66 17.07 168.38 16.65
Companies Without Dividends(13) 1.68 99.27 1.75 9.66 147.83 20.19 148.68 12.11
Equity/Assets 6%(5) 1.28 74.02 1.47 14.03 215.75 12.66 220.57 18.26
Equity/Assets 6-12%(47) 0.93 131.75 1.55 14.05 164.00 14.21 172.77 14.23
Equity/Assets greater than 12%(17) 0.91 172.99 1.22 19.28 128.75 28.07 130.21 21.21
Actively Traded Companies(23) 0.82 140.05 1.49 13.32 162.31 14.23 171.67 14.79
Market Value Below $20 Million(8) 1.28 68.04 1.26 13.25 110.94 18.44 115.31 17.40
Holding Company Structure(46) 0.88 137.42 1.50 15.27 156.62 19.58 165.76 16.47
Assets Over $1 Billion(18) 0.93 127.52 1.48 16.04 188.50 17.06 195.78 17.44
Assets $500 Million-$1 Billion(16) 0.93 139.89 1.58 14.44 158.76 14.81 176.21 15.23
Assets $250-$500 Million(16) 0.73 154.64 1.59 14.25 153.29 15.86 155.09 14.19
Assets less than $250 Million(19) 1.19 128.34 1.21 14.30 136.40 22.07 138.58 16.42
Goodwill Companies(32) 1.05 120.49 1.49 15.59 161.15 14.55 175.44 16.77
Non-Goodwill Companies(37) 0.87 153.32 1.43 13.97 156.10 20.35 156.10 15.02
<CAPTION>
Dividend Data(6)
------------------------
Ind. Divi-
Div./ dend Payout
Financial Institution Share Yield Ratio(7)
- --------------------- ----- ----- --------
(%) (%) (%)
<S> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(69) 0.47 1.75 27.40
NYSE Traded Companies(3) 0.39 0.80 15.59
AMEX Traded Companies(5) 0.62 2.52 34.16
NASDAQ Listed OTC Companies(61) 0.46 1.73 27.71
California Companies(4) 0.00 0.00 0.00
Mid-Atlantic Companies(18) 0.48 1.75 36.99
Mid-West Companies(2) 0.00 0.00 0.00
New England Companies(36) 0.52 2.09 27.47
North-West Companies(4) 0.49 1.62 27.22
South-East Companies(5) 0.60 1.53 27.78
Thrift Strategy(45) 0.51 1.87 31.22
Mortgage Banker Strategy(10) 0.36 1.56 17.82
Real Estate Strategy(6) 0.20 1.06 11.07
Diversified Strategy(7) 0.48 1.42 17.10
Retail Banking Strategy(1) 0.64 2.72 56.64
Companies Issuing Dividends(56) 0.56 2.10 33.63
Companies Without Dividends(13) 0.00 0.00 0.00
Equity/Assets 6%(5) 0.38 1.26 16.86
Equity/Assets 6-12%(47) 0.53 1.98 27.87
Equity/Assets greater than 12%(17) 0.34 1.31 29.40
Actively Traded Companies(23) 0.56 2.01 27.11
Market Value Below $20 Million(8) 0.27 1.45 29.39
Holding Company Structure(46) 0.49 1.76 27.24
Assets Over $1 Billion(18) 0.56 1.76 25.60
Assets $500 Million-$1 Billion(16) 0.50 1.84 27.63
Assets $250-$500 Million(16) 0.42 1.80 27.32
Assets less than $250 Million(19) 0.40 1.60 28.81
Goodwill Companies(32) 0.51 1.87 28.40
Non-Goodwill Companies(37) 0.43 1.63 26.47
</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 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(22) 11.94 11.71 0.59 5.18 2.70 0.86 7.79 0.47 180.69 0.79
BIF-Insured Thrifts(2) 10.02 10.02 0.72 8.22 3.31 0.71 7.56 1.85 82.27 1.77
NASDAQ Listed OTC Companies(24) 11.76 11.55 0.60 5.47 2.76 0.85 7.77 0.61 170.33 0.88
Florida Companies(3) 9.48 9.36 0.66 7.02 3.23 0.93 9.86 0.44 122.12 0.77
Mid-Atlantic Companies(11) 12.62 12.22 0.54 4.29 2.25 0.78 6.50 0.85 178.12 1.00
Mid-West Companies(7) 11.74 11.73 0.56 5.11 3.01 0.88 8.20 0.35 172.11 0.62
New England Companies(1) 8.48 8.47 1.12 13.72 5.20 0.83 10.17 0.90 121.39 1.60
South-East Companies(1) 13.29 13.29 0.75 6.48 2.56 1.06 9.13 0.23 290.91 1.01
Thrift Strategy(22) 11.92 11.70 0.57 5.05 2.64 0.85 7.65 0.60 173.05 0.85
Diversified Strategy(1) 8.48 8.47 1.12 13.72 5.20 0.83 10.17 0.90 121.39 1.60
Companies Issuing Dividends(23) 11.48 11.26 0.61 5.63 2.79 0.85 7.92 0.61 170.33 0.86
Companies Without Dividends(1) 17.31 17.31 0.39 2.23 2.17 0.81 4.67 0.00 0.00 1.40
Equity/Assets 6-12%(16) 9.37 9.16 0.51 5.81 2.84 0.76 8.49 0.70 128.72 0.97
Equity/Assets greater than 12%(8) 16.52 16.32 0.77 4.79 2.59 1.01 6.33 0.41 260.48 0.72
Actively Traded Companies(1) 9.42 8.40 0.58 6.23 2.88 0.91 9.74 0.68 83.02 1.06
Holding Company Structure(1) 9.42 8.40 0.58 6.23 2.88 0.91 9.74 0.68 83.02 1.06
Assets Over $1 Billion(5) 8.80 8.22 0.77 8.83 3.72 0.92 10.39 0.68 116.42 1.18
Assets $500 Million-$1 Billion(4) 12.31 11.82 0.79 5.69 2.75 0.90 7.04 0.53 66.53 0.54
Assets $250-$500 Million(4) 10.00 9.98 0.53 5.75 3.34 0.84 9.17 0.25 419.95 0.59
Assets less than $250 Million(11) 13.99 13.99 0.47 3.40 1.98 0.79 5.93 0.78 110.67 0.98
Goodwill Companies(9) 9.75 9.20 0.75 7.62 3.31 0.88 9.23 0.57 132.20 0.92
Non-Goodwill Companies(15) 12.99 12.99 0.51 4.14 2.43 0.82 6.87 0.64 198.06 0.86
MHC Institutions(24) 11.76 11.55 0.60 5.47 2.76 0.85 7.77 0.61 170.33 0.88
MHC Converted Last 3 Months(1) 17.31 17.31 0.39 2.23 2.17 0.81 4.67 0.00 0.00 1.40
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Average. MHC Institutions
- --------------------------------
SAIF-Insured Thrifts(22) 19.61 176.57 20.68 181.74 22.93 0.64 2.71 54.23
BIF-Insured Thrifts(2) 19.24 216.41 21.25 216.52 25.97 0.52 2.38 48.92
NASDAQ Listed OTC Companies(24) 19.49 180.36 20.73 185.05 23.12 0.63 2.68 53.64
Florida Companies(3) 22.32 203.87 19.00 207.18 19.16 1.03 3.30 68.29
Mid-Atlantic Companies(11) 0.00 173.96 21.52 182.64 24.37 0.39 1.91 46.25
Mid-West Companies(7) 16.91 165.60 19.34 165.85 21.96 0.70 3.52 67.16
New England Companies(1) 19.24 244.74 20.75 244.96 25.97 0.68 2.54 48.92
South-East Companies(1) 0.00 198.07 26.32 198.07 27.66 1.40 3.59 0.00
Thrift Strategy(22) 19.61 177.14 20.73 182.06 22.93 0.63 2.68 54.23
Diversified Strategy(1) 19.24 244.74 20.75 244.96 25.97 0.68 2.54 48.92
Companies Issuing Dividends(23) 19.49 184.25 20.88 189.17 23.20 0.66 2.81 60.35
Companies Without Dividends(1) 0.00 102.72 17.78 102.72 22.01 0.00 0.00 0.00
Equity/Assets 6-12%(16) 19.49 185.89 17.28 191.38 22.22 0.62 2.58 63.16
Equity/Assets greater than 12%(8) 0.00 169.31 27.62 172.40 25.10 0.66 2.87 20.35
Actively Traded Companies(1) 0.00 207.24 19.52 232.41 22.20 0.48 1.73 60.00
Holding Company Structure(1) 0.00 207.24 19.52 232.41 22.20 0.48 1.73 60.00
Assets Over $1 Billion(5) 20.78 219.76 19.37 234.50 22.98 0.69 2.25 61.55
Assets $500 Million-$1 Billion(4) 0.00 202.50 25.64 210.26 21.00 0.68 2.70 40.70
Assets $250-$500 Million(4) 16.91 170.12 17.00 170.49 20.49 0.69 3.17 67.16
Assets less than $250 Million(11) 0.00 155.65 21.51 155.65 25.35 0.55 2.68 0.00
Goodwill Companies(9) 20.78 214.75 21.22 227.06 22.65 0.64 2.22 59.72
Non-Goodwill Companies(15) 16.91 159.20 20.43 159.20 23.41 0.63 2.96 32.37
MHC Institutions(24) 19.49 180.36 20.73 185.05 23.12 0.63 2.68 53.64
MHC Converted Last 3 Months(1) 0.00 102.72 17.78 102.72 22.01 0.00 0.00 0.00
</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 1V-1B
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 4.17 3.55 0.39 9.68 3.97 0.62 15.44 1.90 42.90 1.25
CSA Coast Savings Financial of CA 4.92 4.86 0.21 4.28 2.19 0.53 10.73 1.40 65.70 1.37
CFB Commercial Federal Corp. of NE 6.00 5.32 0.65 11.03 5.05 0.91 15.55 0.89 76.36 0.91
DME Dime Bancorp, Inc. of NY* 5.27 5.03 0.56 10.57 5.42 0.71 13.39 1.57 31.98 0.85
DSL Downey Financial Corp. of CA 6.93 6.84 0.44 5.82 3.96 0.73 9.68 0.95 55.76 0.58
FRC First Republic Bancorp of CA* 7.17 7.17 0.70 11.10 6.30 0.60 9.46 1.19 69.68 0.94
FED FirstFed Fin. Corp. of CA 4.83 4.77 0.29 6.19 3.35 0.53 11.34 1.39 134.39 2.46
GSB Glendale Fed. Bk, FSB of CA 5.53 4.91 0.26 4.71 2.76 0.61 11.03 1.46 69.38 1.36
GDW Golden West Fin. Corp. of CA 6.37 6.37 1.02 16.09 8.54 1.24 19.62 1.31 42.43 0.68
GPT GreenPoint Fin. Corp. of NY* 10.31 5.79 1.06 9.99 4.95 1.03 9.74 2.89 27.84 1.30
WES Westcorp Inc. of Orange CA 9.05 9.02 0.87 9.10 5.59 0.43 4.51 0.74 134.25 1.95
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 17.43 17.43 0.50 3.67 2.17 0.50 3.67 0.51 192.62 1.37
BKC American Bank of Waterbury CT* 8.29 7.95 1.27 15.35 8.29 1.10 13.19 1.81 48.13 1.45
BFD BostonFed Bancorp of MA 8.90 8.60 0.47 4.33 3.28 0.65 5.95 0.52 114.29 0.74
CFX CFX Corp of NH* 7.44 6.96 0.94 11.53 5.83 1.12 13.73 0.72 120.07 1.23
CBK Citizens First Fin.Corp. of IL 14.08 14.08 0.29 1.95 1.79 0.58 3.84 0.59 37.65 0.26
ESX Essex Bancorp of VA(8) 0.27 0.17 -0.03 -16.67 -2.50 0.03 16.67 2.63 42.63 1.34
FCB Falmouth Co-Op Bank of MA* 23.88 23.88 0.84 3.43 3.06 0.79 3.23 0.07 806.45 0.98
FAB FirstFed America Bancorp of MA 12.16 12.16 -0.20 -2.35 -1.11 0.47 5.61 0.40 235.98 1.10
GAF GA Financial Corp. of PA 15.18 15.02 1.00 5.26 4.64 1.27 6.71 0.12 132.49 0.43
JSB JSB Financial, Inc. of NY 22.17 22.17 1.77 8.09 6.17 1.68 7.68 NA NA 0.62
KNK Kankakee Bancorp of IL 11.09 10.42 0.66 6.35 5.42 0.82 7.92 0.94 67.06 0.92
KYF Kentucky First Bancorp of KY 16.11 16.11 0.80 3.99 4.20 1.06 5.27 0.14 295.31 0.77
NYB New York Bancorp, Inc. of NY 5.08 5.08 1.38 26.83 6.41 1.62 31.44 1.22 48.76 0.97
PDB Piedmont Bancorp of NC 16.63 16.63 -0.42 -1.94 -1.73 0.66 3.07 0.91 71.58 0.79
SSB Scotland Bancorp of NC 37.02 37.02 1.41 3.88 3.00 1.72 4.72 NA NA 0.50
SZB SouthFirst Bancshares of AL 13.98 13.98 0.05 0.31 0.31 0.27 1.89 0.64 44.97 0.40
SRN Southern Banc Company of AL 16.90 16.72 0.15 0.82 0.84 0.51 2.77 NA NA NA
SSM Stone Street Bancorp of NC 28.85 28.85 1.43 4.18 3.72 1.71 5.02 0.27 187.50 0.62
TSH Teche Holding Company of LA 13.30 13.30 0.73 5.04 4.27 1.01 6.94 NA NA 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.70 15.70 1.41 8.40 5.82 1.74 10.38 0.46 145.12 0.79
THR Three Rivers Fin. Corp. of MI 13.76 13.76 0.57 3.94 3.75 0.82 5.68 1.21 44.02 0.80
TBK Tolland Bank of CT* 6.94 6.74 0.75 11.37 7.16 0.78 11.89 2.13 54.09 1.87
WSB Washington SB, FSB of MD 8.30 8.30 0.50 6.00 4.29 0.73 8.80 NA NA 0.92
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.26 8.09 0.31 3.80 3.28 0.13 1.61 0.94 45.77 0.66
AFED AFSALA Bancorp, Inc. of NY 13.68 13.68 0.59 4.34 3.84 0.59 4.34 NA NA 1.38
ALBK ALBANK Fin. Corp. of Albany NY 9.20 8.04 0.84 9.16 6.17 1.04 11.28 0.91 78.77 0.99
AMFC AMB Financial Corp. of IN 14.95 14.95 0.73 4.14 4.40 0.81 4.57 0.81 49.41 0.53
ASBP ASB Financial Corp. of OH 15.73 15.73 0.60 3.01 3.15 0.88 4.40 1.58 50.98 1.22
ABBK Abington Savings Bank of MA* 6.92 6.23 0.82 12.05 7.38 0.73 10.71 0.20 211.97 0.69
AABC Access Anytime Bancorp of NM 7.44 7.44 -0.50 -8.75 -6.80 -0.12 -2.14 1.60 29.31 0.92
AFBC Advance Fin. Bancorp of WV 15.45 15.45 0.39 4.31 2.28 0.79 8.74 0.37 89.84 0.40
AADV Advantage Bancorp of WI 9.21 8.62 0.40 4.49 2.87 0.89 9.94 0.44 128.03 1.01
AFCB Affiliated Comm BC, Inc of MA 9.78 9.72 0.96 9.78 6.12 1.09 11.12 0.39 191.75 1.20
ALBC Albion Banc Corp. of Albion NY 8.90 8.90 0.09 0.93 0.91 0.38 3.93 0.60 79.55 0.65
ABCL Allied Bancorp of IL 8.91 8.80 0.52 5.86 2.90 0.76 8.56 0.15 257.09 0.53
ATSB AmTrust Capital Corp. of IN 10.17 10.06 0.29 2.88 3.17 0.19 1.87 2.84 23.48 0.93
AHCI Ambanc Holding Co., Inc. of NY* 12.72 12.72 -0.62 -4.16 -4.13 -0.62 -4.16 1.06 72.94 1.47
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------ ------- ------ ------- --------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 25.19 245.06 10.21 287.60 15.78 0.88 1.76 44.44
CSA Coast Savings Financial of CA NM 187.82 9.24 190.19 18.22 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 19.79 205.16 12.32 231.37 14.03 0.28 0.69 13.66
DME Dime Bancorp, Inc. of NY* 18.45 189.72 10.00 198.87 14.56 0.16 0.83 15.24
DSL Downey Financial Corp. of CA 25.22 142.14 9.85 144.12 15.17 0.32 1.48 37.21
FRC First Republic Bancorp of CA* 15.87 149.46 10.72 149.55 18.61 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 29.87 176.33 8.51 178.29 16.30 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA NM 160.66 8.88 180.74 15.48 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 11.71 179.82 11.46 179.82 9.60 0.44 0.56 6.53
GPT GreenPoint Fin. Corp. of NY* 20.19 210.25 21.68 NM 20.71 1.00 1.56 31.55
WES Westcorp Inc. of Orange CA 17.90 156.33 14.15 156.83 NM 0.40 2.01 36.04
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* NM 129.46 22.56 129.46 NM 0.36 1.67 NM
BKC American Bank of Waterbury CT* 12.06 173.40 14.37 180.62 14.03 1.44 3.81 46.01
BFD BostonFed Bancorp of MA NM 138.49 12.32 143.38 22.16 0.28 1.44 43.75
CFX CFX Corp of NH* 17.15 179.37 13.34 191.77 14.40 0.88 4.66 NM
CBK Citizens First Fin.Corp. of IL NM 113.64 16.00 113.64 28.39 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 1.11 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 110.39 26.36 110.39 NM 0.20 1.18 38.46
FAB FirstFed America Bancorp of MA NM 132.82 16.15 132.82 NM 0.00 0.00 NM
GAF GA Financial Corp. of PA 21.56 121.05 18.37 122.34 16.91 0.48 2.78 60.00
JSB JSB Financial, Inc. of NY 16.20 129.27 28.66 129.27 17.07 1.40 3.14 50.91
KNK Kankakee Bancorp of IL 18.44 112.34 12.46 119.53 14.79 0.48 1.61 29.63
KYF Kentucky First Bancorp of KY 23.81 116.21 18.72 116.21 18.03 0.50 3.96 NM
NYB New York Bancorp, Inc. of NY 15.59 NM 20.30 NM 13.31 0.60 1.94 30.30
PDB Piedmont Bancorp of NC NM 148.25 24.65 148.25 NM 0.40 3.64 NM
SSB Scotland Bancorp of NC NM 126.49 46.83 126.49 27.42 0.30 1.76 58.82
SZB SouthFirst Bancshares of AL NM 103.48 14.46 103.48 NM 0.50 3.05 NM
SRN Southern Banc Company of AL NM 107.49 18.16 108.62 NM 0.35 2.26 NM
SSM Stone Street Bancorp of NC 26.88 133.29 38.45 133.29 22.40 0.45 2.09 56.25
TSH Teche Holding Company of LA 23.44 123.11 16.38 123.11 17.05 0.50 2.67 62.50
FTF Texarkana Fst. Fin. Corp of AR 17.18 149.70 23.50 149.70 13.89 0.56 2.49 42.75
THR Three Rivers Fin. Corp. of MI 26.64 106.77 14.69 106.77 18.47 0.40 2.46 65.57
TBK Tolland Bank of CT* 13.96 146.23 10.15 150.49 13.36 0.20 1.29 18.02
WSB Washington SB, FSB of MD 23.33 138.61 11.51 138.61 15.91 0.10 1.43 33.33
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN NM 112.50 9.29 114.87 NM 0.40 1.11 33.90
AFED AFSALA Bancorp, Inc. of NY 26.02 112.95 15.45 112.95 26.02 0.16 1.01 26.23
ALBK ALBANK Fin. Corp. of Albany NY 16.21 143.60 13.22 164.32 13.16 0.60 1.62 26.20
AMFC AMB Financial Corp. of IN 22.73 102.67 15.35 102.67 20.55 0.24 1.60 36.36
ASBP ASB Financial Corp. of OH NM 123.70 19.46 123.70 21.70 0.40 3.23 NM
ABBK Abington Savings Bank of MA* 13.54 156.17 10.81 173.38 15.23 0.40 1.37 18.52
AABC Access Anytime Bancorp of NM NM 101.38 7.55 101.38 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 104.13 16.09 104.13 21.65 0.32 2.08 NM
AADV Advantage Bancorp of WI NM 152.32 14.04 162.92 15.75 0.40 0.90 31.50
AFCB Affiliated Comm BC, Inc of MA 16.34 151.61 14.82 152.44 14.37 0.48 1.92 31.37
ALBC Albion Banc Corp. of Albion NY NM 102.67 9.14 102.67 26.08 0.32 1.32 NM
ABCL Allied Bancorp of IL NM 134.06 11.94 135.74 23.59 0.65 2.07 71.43
ATSB AmTrust Capital Corp. of IN NM 91.92 9.35 92.93 NM 0.20 1.58 50.00
AHCI Ambanc Holding Co., Inc. of NY* NM 113.72 14.47 113.72 NM 0.20 1.27 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ASBI Ameriana Bancorp of IN 10.96 10.95 0.61 5.52 4.08 0.85 7.73 0.40 71.19 0.38
AFFFZ America First Fin. Fund of CA(8) 8.44 8.34 1.49 19.31 14.02 1.83 23.69 0.40 81.55 0.49
ANBK American Nat'l Bancorp of MD(8) 8.97 8.97 0.28 2.90 1.86 0.65 6.74 0.74 102.82 1.17
ABCW Anchor Bancorp Wisconsin of WI 6.22 6.11 0.75 12.06 5.85 0.96 15.53 0.92 126.05 1.48
ANDB Andover Bancorp, Inc. of MA* 8.06 8.06 1.10 13.91 8.60 1.13 14.34 1.01 99.08 1.41
ASFC Astoria Financial Corp. of NY 7.83 6.57 0.56 7.09 4.22 0.79 10.12 0.51 37.96 0.48
AVND Avondale Fin. Corp. of IL 9.12 9.12 -0.49 -5.19 -5.86 -1.51 -16.06 3.18 96.19 5.33
BKCT Bancorp Connecticut of CT* 10.25 10.25 1.32 12.60 7.17 1.24 11.90 1.19 100.82 1.98
BPLS Bank Plus Corp. of CA 5.06 5.06 -0.26 -5.31 -4.00 0.02 0.46 2.88 58.99 2.11
BWFC Bank West Fin. Corp. of MI 14.52 14.52 0.64 3.91 3.53 0.57 3.47 0.28 51.72 0.20
BANC BankAtlantic Bancorp of FL 5.62 4.62 0.89 14.91 7.69 0.65 10.88 0.97 102.98 1.39
BKUNA BankUnited SA of FL 3.72 3.02 0.21 4.55 2.50 0.34 7.54 0.60 28.73 0.21
BKCO Bankers Corp. of NJ(8)* 7.93 7.81 1.08 13.59 7.78 1.16 14.55 1.14 26.36 0.50
BVCC Bay View Capital Corp. of CA 6.34 5.32 0.39 6.37 3.80 0.63 10.37 NA NA 1.51
BFSB Bedford Bancshares of VA 14.16 14.16 1.01 6.98 4.61 1.29 8.94 0.60 79.85 0.56
BFFC Big Foot Fin. Corp. of IL 16.98 16.98 0.05 0.28 0.24 0.42 2.45 0.09 151.52 0.34
BSBC Branford SB of CT(8)* 9.28 9.28 1.16 12.75 6.48 1.16 12.75 1.42 141.26 3.06
BYFC Broadway Fin. Corp. of CA 11.50 11.50 -0.28 -2.50 -3.71 0.07 0.64 2.06 39.74 1.01
CBES CBES Bancorp of MO 18.39 18.39 0.77 5.22 3.86 0.96 6.51 0.77 54.05 0.46
CCFH CCF Holding Company of GA 11.68 11.68 0.05 0.30 0.30 0.07 0.42 0.18 325.68 0.72
CENF CENFED Financial Corp. of CA 5.20 5.19 0.51 10.04 5.82 0.73 14.30 1.28 58.93 1.10
CFSB CFSB Bancorp of Lansing MI 7.63 7.63 0.85 10.96 5.27 1.07 13.84 0.17 308.01 0.61
CKFB CKF Bancorp of Danville KY 23.96 23.96 1.81 7.25 5.85 1.33 5.33 1.26 14.79 0.20
CNSB CNS Bancorp of MO 24.82 24.82 0.53 2.41 1.81 0.81 3.66 0.45 80.36 0.57
CSBF CSB Financial Group Inc of IL* 25.06 23.63 0.43 1.59 1.68 0.66 2.42 0.73 42.12 0.53
CBCI Calumet Bancorp of Chicago IL 15.50 15.50 1.15 7.22 6.72 1.46 9.16 1.16 102.51 1.57
CAFI Camco Fin. Corp. of OH 9.69 8.91 0.75 8.51 5.08 0.88 10.05 0.68 38.86 0.32
CMRN Cameron Fin. Corp. of MO 21.69 21.69 1.07 4.43 4.52 1.33 5.51 0.73 111.82 0.97
CAPS Capital Savings Bancorp of MO 8.80 8.80 0.67 7.61 5.13 0.93 10.68 0.31 97.24 0.39
CFNC Carolina Fincorp of NC* 23.71 23.71 1.11 4.65 3.74 1.05 4.36 0.28 133.67 0.54
CNY Carver Bancorp, Inc. of NY 8.35 8.01 -0.44 -4.95 -5.86 0.01 0.07 1.37 42.60 1.02
CASB Cascade SB of Everett WA(8) 6.17 6.17 0.46 7.49 4.14 0.58 9.46 0.39 203.69 0.95
CATB Catskill Fin. Corp. of NY* 25.04 25.04 1.43 5.21 5.21 1.45 5.27 0.47 140.85 1.48
CNIT Cenit Bancorp of Norfolk VA 7.24 6.65 0.87 12.05 7.39 0.80 11.05 0.51 103.23 0.76
CEBK Central Co-Op. Bank of MA* 10.45 9.31 0.88 8.78 7.38 0.90 8.90 0.88 102.76 1.23
CENB Century Bancshares of NC* 29.93 29.93 1.76 5.86 5.46 1.78 5.93 0.39 139.39 0.91
CBSB Charter Financial Inc. of IL 14.47 12.80 1.13 7.49 4.94 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 6.71 6.28 0.98 14.64 5.62 1.23 18.32 0.27 164.80 0.73
CVAL Chester Valley Bancorp of PA 8.56 8.56 0.63 7.00 4.00 0.92 10.30 0.47 187.15 1.10
CTZN CitFed Bancorp of Dayton OH 6.37 5.74 0.58 9.12 4.31 0.82 12.83 0.41 143.79 0.95
CLAS Classic Bancshares of KY 14.72 12.42 0.56 3.08 3.10 0.77 4.25 0.82 74.44 0.97
CMSB Cmnwealth Bancorp of PA 9.63 7.53 0.55 5.26 3.94 0.70 6.71 0.50 86.54 0.79
CBSA Coastal Bancorp of Houston TX 3.33 2.77 0.25 7.57 4.87 0.44 13.16 0.58 39.81 0.51
CFCP Coastal Fin. Corp. of SC 6.17 6.17 0.94 15.22 3.82 1.03 16.67 0.21 436.85 1.15
CMSV Commty. Svgs, MHC of FL (48.5) 11.23 11.23 0.63 5.46 3.16 0.96 8.22 0.57 66.20 0.64
CBNH Community Bankshares Inc of NH(8)* 7.00 7.00 0.95 13.33 5.51 0.76 10.63 0.49 141.22 1.01
CFTP Community Fed. Bancorp of MS 33.52 33.52 1.43 4.32 3.43 1.70 5.14 0.35 79.45 0.47
CFFC Community Fin. Corp. of VA 13.71 13.71 1.01 7.32 6.07 1.28 9.26 0.39 148.67 0.65
CFBC Community First Bnkg Co. of GA 16.42 16.42 0.25 1.52 1.23 0.49 2.96 NA NA 0.87
CIBI Community Inv. Bancorp of OH 11.51 11.51 0.67 5.51 4.40 1.00 8.19 0.72 65.53 0.62
COOP Cooperative Bk.for Svgs. of NC 7.63 7.63 -0.80 -10.08 -7.35 0.20 2.52 0.46 50.09 0.29
CRZY Crazy Woman Creek Bncorp of WY 25.81 25.81 1.06 3.69 4.11 1.30 4.52 0.39 136.15 1.04
DNFC D&N Financial Corp. of MI 5.57 5.52 0.61 10.68 5.79 0.80 14.08 0.34 198.09 0.93
DCBI Delphos Citizens Bancorp of OH 28.41 28.41 1.45 6.45 4.54 1.45 6.45 0.35 27.76 0.13
DIME Dime Community Bancorp of NY 14.52 12.50 0.96 5.96 4.93 1.04 6.41 0.73 112.22 1.43
DIBK Dime Financial Corp. of CT* 7.96 7.70 1.90 23.27 10.64 1.91 23.35 0.40 355.33 3.17
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
ASBI Ameriana Bancorp of IN 24.49 136.17 14.92 136.28 17.50 0.60 3.27 NM
AFFFZ America First Fin. Fund of CA(8) 7.13 127.80 10.79 129.39 5.82 1.60 4.07 29.04
ANBK American Nat'l Bancorp of MD(8) NM 158.45 14.21 158.45 23.10 0.12 0.60 32.43
ABCW Anchor Bancorp Wisconsin of WI 17.10 200.08 12.45 203.92 13.28 0.64 1.21 20.65
ANDB Andover Bancorp, Inc. of MA* 11.62 152.48 12.29 152.48 11.27 0.68 2.28 26.46
ASFC Astoria Financial Corp. of NY 23.72 162.64 12.73 193.67 16.61 0.60 1.29 30.61
AVND Avondale Fin. Corp. of IL NM 91.48 8.35 91.48 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 13.95 173.21 17.75 173.21 14.78 1.00 3.33 46.51
BPLS Bank Plus Corp. of CA NM 124.06 6.28 124.19 NM 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI 28.30 116.37 16.89 116.37 NM 0.28 1.87 52.83
BANC BankAtlantic Bancorp of FL 13.01 185.83 10.45 226.07 17.83 0.12 0.76 9.84
BKUNA BankUnited SA of FL NM 153.10 5.70 188.94 24.21 0.00 0.00 0.00
BKCO Bankers Corp. of NJ(8)* 12.85 165.96 13.16 168.42 12.00 0.64 2.35 30.19
BVCC Bay View Capital Corp. of CA 26.29 168.65 10.69 200.95 16.14 0.32 1.25 32.99
BFSB Bedford Bancshares of VA 21.71 147.32 20.87 147.32 16.95 0.56 2.26 49.12
BFFC Big Foot Fin. Corp. of IL NM 116.81 19.83 116.81 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 15.44 187.12 17.37 187.12 15.44 0.08 1.62 25.00
BYFC Broadway Fin. Corp. of CA NM 64.22 7.38 64.22 NM 0.20 1.90 NM
CBES CBES Bancorp of MO 25.90 104.63 19.24 104.63 20.78 0.40 2.24 57.97
CCFH CCF Holding Company of GA NM 114.90 13.42 114.90 NM 0.55 3.33 NM
CENF CENFED Financial Corp. of CA 17.17 163.07 8.49 163.38 12.06 0.36 1.06 18.18
CFSB CFSB Bancorp of Lansing MI 18.98 205.53 15.67 205.53 15.03 0.60 2.31 43.80
CKFB CKF Bancorp of Danville KY 17.09 126.98 30.42 126.98 23.26 0.50 2.50 42.74
CNSB CNS Bancorp of MO NM 116.23 28.85 116.23 NM 0.20 1.17 64.52
CSBF CSB Financial Group Inc of IL* NM 97.89 24.53 103.82 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.89 111.08 17.22 111.08 11.74 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 19.68 129.92 12.59 141.22 16.67 0.49 2.65 52.13
CMRN Cameron Fin. Corp. of MO 22.12 100.41 21.77 100.41 17.78 0.28 1.62 35.90
CAPS Capital Savings Bancorp of MO 19.51 141.84 12.48 141.84 13.91 0.24 1.50 29.27
CFNC Carolina Fincorp of NC* 26.72 124.78 29.59 124.78 28.48 0.24 1.38 36.92
CNY Carver Bancorp, Inc. of NY NM 84.53 7.06 88.13 NM 0.20 1.58 NM
CASB Cascade SB of Everett WA(8) 24.18 174.35 10.76 174.35 19.16 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 19.19 108.16 27.08 108.16 18.97 0.28 1.72 32.94
CNIT Cenit Bancorp of Norfolk VA 13.53 163.08 11.80 177.57 14.75 1.00 1.97 26.67
CEBK Central Co-Op. Bank of MA* 13.54 114.24 11.94 128.29 13.36 0.32 1.64 22.22
CENB Century Bancshares of NC* 18.33 107.47 32.17 107.47 18.12 2.00 2.53 46.40
CBSB Charter Financial Inc. of IL 20.24 155.00 22.43 175.19 14.46 0.32 1.51 30.48
COFI Charter One Financial of OH 17.81 250.87 16.83 267.98 14.23 1.00 1.88 33.56
CVAL Chester Valley Bancorp of PA 25.00 170.99 14.64 170.99 16.99 0.44 2.02 50.57
CTZN CitFed Bancorp of Dayton OH 23.20 197.11 12.55 218.77 16.48 0.36 0.80 18.56
CLAS Classic Bancshares of KY NM 98.84 14.55 117.12 23.39 0.28 1.93 62.22
CMSB Cmnwealth Bancorp of PA 25.36 135.76 13.07 173.61 19.89 0.28 1.60 40.58
CBSA Coastal Bancorp of Houston TX 20.52 149.87 4.99 180.30 11.81 0.48 1.61 33.10
CFCP Coastal Fin. Corp. of SC 26.18 NM 22.96 NM 23.91 0.36 1.45 37.89
CMSV Commty. Svgs, MHC of FL (48.5) NM 170.23 19.11 170.23 21.00 0.90 3.51 NM
CBNH Community Bankshares Inc of NH(8)* 18.14 227.44 15.91 227.44 22.76 0.64 1.63 29.49
CFTP Community Fed. Bancorp of MS 29.16 123.12 41.27 123.12 24.49 0.30 1.63 47.62
CFFC Community Fin. Corp. of VA 16.48 115.32 15.81 115.32 13.02 0.56 2.57 42.42
CFBC Community First Bnkg Co. of GA NM 123.61 20.29 123.61 NM 0.00 0.00 0.00
CIBI Community Inv. Bancorp of OH 22.73 126.90 14.61 126.90 15.31 0.32 2.13 48.48
COOP Cooperative Bk.for Svgs. of NC NM 135.88 10.37 135.88 NM 0.00 0.00 NM
CRZY Crazy Woman Creek Bncorp of WY 24.34 96.25 24.85 96.25 19.89 0.40 2.83 68.97
DNFC D&N Financial Corp. of MI 17.27 173.52 9.67 175.28 13.10 0.20 1.05 18.18
DCBI Delphos Citizens Bancorp of OH 22.04 106.30 30.19 106.30 22.04 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 20.28 130.73 18.98 151.75 18.87 0.18 0.94 19.15
DIBK Dime Financial Corp. of CT* 9.40 196.01 15.61 202.60 9.36 0.40 1.51 14.18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<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 -0.72 0.20 1.73 1.48 35.83 0.76
EBSI Eagle Bancshares of Tucker GA 8.71 8.71 0.59 6.82 4.74 0.80 9.29 0.88 65.80 0.84
EGFC Eagle Financial Corp. of CT 6.87 5.36 0.08 1.08 0.58 0.46 6.44 0.52 94.68 0.86
ETFS East Texas Fin. Serv. of TX 18.16 18.16 0.31 1.65 1.77 0.63 3.40 0.17 141.97 0.50
EMLD Emerald Financial Corp of OH 7.58 7.46 0.72 9.43 5.79 0.89 11.64 0.24 106.84 0.35
EIRE Emerald Island Bancorp, MA* 7.08 7.08 0.85 12.35 7.24 0.89 13.00 0.40 151.40 0.89
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.30 1.09 3.12 0.06 312.50 0.46
EFBI Enterprise Fed. Bancorp of OH 12.33 12.31 0.70 5.12 4.15 0.78 5.69 0.01 NA 0.28
EQSB Equitable FSB of Wheaton MD 5.07 5.07 0.48 9.33 5.87 0.76 14.93 1.07 19.82 0.31
FFFG F.F.O. Financial Group of FL(8) 6.49 6.49 0.68 10.82 4.60 0.97 15.58 3.28 52.54 2.40
FCBF FCB Fin. Corp. of Neenah WI 17.49 17.49 0.92 5.19 3.67 1.08 6.14 0.15 347.77 0.62
FFBS FFBS Bancorp of Columbus MS 19.42 19.42 1.19 6.07 4.00 1.49 7.65 0.42 109.44 0.66
FFDF FFD Financial Corp. of OH 24.74 24.74 0.78 3.42 2.84 1.08 4.74 NA NA 0.27
FFLC FFLC Bancorp of Leesburg FL 13.48 13.48 0.70 4.57 3.66 1.01 6.60 0.19 163.65 0.44
FFFC FFVA Financial Corp. of VA 13.18 12.90 1.11 7.86 4.51 1.34 9.52 0.18 318.63 0.98
FFWC FFW Corporation of Wabash IN 10.01 10.01 0.90 8.74 7.07 1.11 10.86 0.22 150.42 0.48
FFYF FFY Financial Corp. of OH 13.71 13.71 0.90 5.84 4.55 1.27 8.31 0.67 74.18 0.64
FMCO FMS Financial Corp. of NJ 6.56 6.44 0.69 10.76 6.00 1.02 15.79 1.06 48.60 0.92
FFHH FSF Financial Corp. of MN 11.35 11.35 0.66 5.22 4.30 0.84 6.63 0.03 636.64 0.34
FOBC Fed One Bancorp of Wheeling WV 11.06 10.55 0.68 5.85 4.66 0.97 8.33 0.40 101.18 0.93
FBCI Fidelity Bancorp of Chicago IL 10.38 10.36 0.55 5.34 4.42 0.78 7.48 0.80 21.76 0.22
FSBI Fidelity Bancorp, Inc. of PA 6.75 6.75 0.51 7.35 5.08 0.81 11.71 0.44 112.57 1.01
FFFL Fidelity FSB, MHC of FL (47.4) 8.82 8.75 0.39 4.09 2.04 0.62 6.51 0.30 77.48 0.31
FFED Fidelity Fed. Bancorp of IN 5.14 5.14 0.16 3.18 1.84 0.28 5.62 0.16 455.75 0.85
FFOH Fidelity Financial of OH 12.94 11.42 0.70 4.68 3.16 1.02 6.89 0.08 381.04 0.37
FIBC Financial Bancorp, Inc. of NY 9.36 9.31 0.56 5.74 4.22 1.00 10.23 1.81 26.91 0.89
FBSI First Bancshares of MO 14.35 14.33 0.91 5.88 4.92 1.11 7.22 0.32 88.44 0.35
FBBC First Bell Bancorp of PA 9.83 9.83 1.07 7.64 6.48 1.24 8.87 0.07 147.42 0.13
FBER First Bergen Bancorp of NJ 14.19 14.19 0.44 2.73 1.97 0.77 4.74 0.83 129.82 2.50
SKBO First Carnegie,MHC of PA(45.0) 15.65 15.65 0.37 2.35 1.78 0.54 3.43 0.74 33.56 0.66
FCIT First Cit. Fin. Corp of MD(8) 6.38 6.38 0.52 8.53 3.53 0.78 12.66 0.92 97.73 1.20
FSTC First Citizens Corp of GA 9.13 6.85 1.12 11.24 4.83 1.11 11.16 0.97 118.70 1.50
FCME First Coastal Corp. of ME* 9.23 9.23 4.21 NM 42.37 4.08 NM 2.01 85.72 2.52
FFBA First Colorado Bancorp of Co 12.73 12.73 0.92 6.21 4.80 0.90 6.07 0.23 121.82 0.38
FDEF First Defiance Fin.Corp. of OH 21.31 21.31 0.75 3.36 2.84 1.03 4.61 0.45 96.96 0.57
FESX First Essex Bancorp of MA* 6.97 6.06 0.96 13.00 8.00 0.83 11.33 0.56 146.94 1.43
FFES First FS&LA of E. Hartford CT 6.43 6.43 0.42 6.80 4.77 0.70 11.19 0.37 71.33 1.42
FFSX First FS&LA. MHC of IA (46.0) 8.29 8.23 0.43 5.21 2.76 0.73 8.99 0.11 342.10 0.52
BDJI First Fed. Bancorp. of MN 11.17 11.17 0.32 2.57 2.25 0.66 5.34 0.27 137.04 0.76
FFBH First Fed. Bancshares of AR 14.97 14.97 0.77 4.84 3.84 1.06 6.63 0.19 119.50 0.30
FTFC First Fed. Capital Corp. of WI 6.36 5.96 0.74 11.34 4.87 0.86 13.16 NA NA 0.65
FFKY First Fed. Fin. Corp. of KY 13.70 12.91 1.30 9.44 5.12 1.55 11.27 0.64 71.13 0.52
FFBZ First Federal Bancorp of OH 7.55 7.54 0.73 9.58 4.82 1.02 13.38 0.53 163.59 1.01
FFCH First Fin. Holdings Inc. of SC 6.11 6.11 0.57 9.30 4.58 0.84 13.65 1.66 41.99 0.84
FFBI First Financial Bancorp of IL 8.66 8.66 -0.38 -4.73 -4.66 0.42 5.23 0.40 147.92 0.91
FFHC First Financial Corp. of WI(8) 7.12 6.94 0.96 13.35 4.81 1.28 17.95 0.26 148.86 0.64
FFHS First Franklin Corp. of OH 9.02 8.96 0.19 2.14 1.80 0.65 7.20 0.52 82.31 0.62
FGHC First Georgia Hold. Corp of GA 8.22 7.53 0.66 7.98 4.41 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.66 6.55 0.89 13.61 8.20 1.16 17.76 0.64 114.23 1.39
FFSL First Independence Corp. of KS 10.43 10.43 0.43 3.84 3.69 0.69 6.12 0.87 69.37 0.91
FISB First Indiana Corp. of IN 9.56 9.44 0.83 8.86 5.64 1.01 10.83 1.50 91.12 1.62
FKFS First Keystone Fin. Corp of PA 7.31 7.31 0.54 7.21 4.98 0.77 10.30 1.60 30.58 0.84
FLKY First Lancaster Bncshrs of KY 34.23 34.23 1.15 3.72 3.02 1.40 4.52 0.75 32.89 0.29
FLFC First Liberty Fin. Corp. of GA 7.35 6.57 0.84 11.80 5.33 0.65 9.14 0.82 105.31 1.23
CASH First Midwest Fin. Corp. of IA 11.60 10.26 0.76 6.52 5.70 0.99 8.49 0.85 75.48 0.93
FMBD First Mutual Bancorp of IL 12.85 9.73 0.10 0.57 0.62 0.31 1.84 0.18 187.34 0.46
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- --------
(%) (X) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EGLB Eagle BancGroup of IL NM 99.58 11.80 99.58 NM 0.00 0.00 NM
EBSI Eagle Bancshares of Tucker GA 21.09 132.42 11.53 132.42 15.48 0.60 3.56 75.00
EGFC Eagle Financial Corp. of CT NM 148.73 10.21 190.52 28.98 1.00 3.05 NM
ETFS East Texas Fin. Serv. of TX NM 96.39 17.51 96.39 27.50 0.20 1.04 58.82
EMLD Emerald Financial Corp of OH 17.28 155.04 11.75 157.48 14.00 0.24 1.71 29.63
EIRE Emerald Island Bancorp, MA* 13.82 156.83 11.10 156.83 13.13 0.28 1.33 18.42
EFBC Empire Federal Bancorp of MT NM 103.32 36.05 103.32 NM 0.30 1.97 NM
EFBI Enterprise Fed. Bancorp of OH 24.07 123.89 15.28 124.05 21.67 1.00 5.13 NM
EQSB Equitable FSB of Wheaton MD 17.05 150.48 7.63 150.48 10.65 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL(8) 21.76 221.14 14.36 221.14 15.11 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 27.27 140.26 24.53 140.26 23.08 0.72 2.67 72.73
FFBS FFBS Bancorp of Columbus MS 25.00 149.53 29.04 149.53 19.83 0.50 2.08 52.08
FFDF FFD Financial Corp. of OH NM 106.90 26.44 106.90 25.41 0.30 1.94 68.18
FFLC FFLC Bancorp of Leesburg FL 27.36 128.83 17.37 128.83 18.95 0.48 1.66 45.28
FFFC FFVA Financial Corp. of VA 22.16 179.56 23.66 183.39 18.28 0.48 1.64 36.36
FFWC FFW Corporation of Wabash IN 14.14 123.08 12.32 123.08 11.38 0.72 2.57 36.36
FFYF FFY Financial Corp. of OH 21.98 141.93 19.46 141.93 15.46 0.70 2.49 54.69
FMCO FMS Financial Corp. of NJ 16.67 170.60 11.19 173.68 11.35 0.20 0.77 12.82
FFHH FSF Financial Corp. of MN 23.23 127.97 14.53 127.97 18.30 0.50 2.76 64.10
FOBC Fed One Bancorp of Wheeling WV 21.46 127.78 14.14 133.98 15.07 0.58 2.73 58.59
FBCI Fidelity Bancorp of Chicago IL 22.63 118.00 12.25 118.26 16.17 0.32 1.49 33.68
FSBI Fidelity Bancorp, Inc. of PA 19.68 134.24 9.07 134.24 12.35 0.36 1.69 33.33
FFFL Fidelity FSB, MHC of FL (47.4) NM 198.68 17.52 200.33 NM 0.80 3.33 NM
FFED Fidelity Fed. Bancorp of IN NM 178.92 9.20 178.92 NM 0.40 4.32 NM
FFOH Fidelity Financial of OH NM 132.46 17.14 150.09 21.49 0.28 1.74 54.90
FIBC Financial Bancorp, Inc. of NY 23.70 134.33 12.57 134.95 13.30 0.40 1.94 45.98
FBSI First Bancshares of MO 20.34 121.21 17.40 121.40 16.55 0.20 0.83 16.95
FBBC First Bell Bancorp of PA 15.44 151.86 14.92 151.86 13.31 0.40 2.44 37.74
FBER First Bergen Bancorp of NJ NM 142.91 20.28 142.91 29.17 0.12 0.62 31.58
SKBO First Carnegie,MHC of PA(45.0) NM 132.22 20.70 132.22 NM 0.30 2.22 NM
FCIT First Cit. Fin. Corp of MD(8) 28.33 227.42 14.50 227.42 19.10 0.00 0.00 0.00
FSTC First Citizens Corp of GA 20.69 184.16 16.81 245.50 20.83 0.44 1.47 30.34
FCME First Coastal Corp. of ME* 2.36 102.61 9.47 102.61 2.44 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 20.83 150.86 19.20 150.86 21.34 0.44 2.51 52.38
FDEF First Defiance Fin.Corp. of OH NM 120.00 25.58 120.00 25.63 0.32 2.12 74.42
FESX First Essex Bancorp of MA* 12.50 142.61 9.94 164.18 14.35 0.48 2.91 36.36
FFES First FS&LA of E. Hartford CT 20.97 134.87 8.67 134.87 12.75 0.60 1.88 39.47
FFSX First FS&LA. MHC of IA (46.0) NM 181.95 15.09 183.42 21.01 0.48 1.92 69.57
BDJI First Fed. Bancorp. of MN NM 123.44 13.79 123.44 21.32 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 26.07 129.10 19.32 129.10 19.03 0.20 0.95 24.69
FTFC First Fed. Capital Corp. of WI 20.55 227.91 14.49 243.23 17.70 0.48 1.98 40.68
FFKY First Fed. Fin. Corp. of KY 19.52 179.44 24.59 190.50 16.36 0.52 2.34 45.61
FFBZ First Federal Bancorp of OH 20.74 188.92 14.25 189.12 14.84 0.24 1.32 27.27
FFCH First Fin. Holdings Inc. of SC 21.85 194.95 11.92 194.95 14.88 0.72 2.30 50.35
FFBI First Financial Bancorp of IL NM 103.52 8.96 103.52 19.41 0.00 0.00 NM
FFHC First Financial Corp. of WI(8) 20.77 268.81 19.15 275.90 15.45 0.60 1.91 39.74
FFHS First Franklin Corp. of OH NM 116.48 10.50 117.23 16.53 0.32 1.60 NM
FGHC First Georgia Hold. Corp of GA 22.66 172.21 14.15 187.82 29.00 0.05 0.69 15.63
FSPG First Home Bancorp of NJ 12.20 155.64 10.37 158.23 9.35 0.40 2.00 24.39
FFSL First Independence Corp. of KS 27.13 109.91 11.46 109.91 17.00 0.25 1.96 53.19
FISB First Indiana Corp. of IN 17.74 150.69 14.41 152.57 14.51 0.48 2.31 41.03
FKFS First Keystone Fin. Corp of PA 20.09 142.06 10.38 142.06 14.05 0.20 0.74 14.81
FLKY First Lancaster Bncshrs of KY NM 105.61 36.15 105.61 27.23 0.50 3.28 NM
FLFC First Liberty Fin. Corp. of GA 18.75 189.55 13.93 211.86 24.19 0.40 1.78 33.33
CASH First Midwest Fin. Corp. of IA 17.55 110.64 12.83 125.05 13.47 0.36 2.07 36.36
FMBD First Mutual Bancorp of IL NM 105.36 13.53 139.09 NM 0.32 1.99 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FMSB First Mutual SB of Bellevue WA* 6.82 6.82 1.02 15.34 7.17 1.00 14.95 0.01 NA 1.27
FNGB First Northern Cap. Corp of WI 11.28 11.28 0.63 5.44 3.24 0.91 7.88 0.06 798.69 0.53
FFPB First Palm Beach Bancorp of FL 6.76 6.59 -0.01 -0.09 -0.06 0.05 0.70 0.73 55.75 0.60
FSLA First SB SLA MHC of NJ (47.5) 9.42 8.40 0.58 6.23 2.88 0.91 9.74 0.68 83.02 1.06
FSNJ First SB of NJ, MHC (45.9)(8) 8.57 8.57 -0.34 -4.31 -2.15 0.23 2.89 0.87 58.25 1.21
SOPN First SB, SSB, Moore Co. of NC 22.83 22.83 1.44 5.83 5.17 1.73 6.99 0.08 241.60 0.31
FWWB First Savings Bancorp of WA* 14.75 13.57 1.05 6.25 3.63 1.00 5.90 0.30 215.39 0.97
SHEN First Shenango Bancorp of PA 10.95 10.95 0.89 7.82 6.09 1.16 10.18 0.54 135.75 1.15
FSFC First So.east Fin. Corp. of SC(8) 10.22 10.22 0.01 0.11 0.07 0.92 7.48 0.11 362.15 0.50
FBNW FirstBank Corp of Clarkston WA 18.04 18.04 0.70 3.86 2.96 0.57 3.14 1.95 27.73 0.74
FFDB FirstFed Bancorp of AL 9.42 8.58 0.62 6.31 5.75 0.94 9.63 0.84 49.36 0.59
FSPT FirstSpartan Fin. Corp. of SC 26.32 26.32 0.95 3.62 2.80 1.11 4.20 NA NA 0.49
FLAG Flag Financial Corp of GA 9.40 9.40 -0.06 -0.68 -0.49 0.14 1.45 4.52 44.14 2.91
FLGS Flagstar Bancorp, Inc of MI 5.46 5.46 0.00 0.00 0.00 0.00 0.00 3.41 8.26 0.32
FFIC Flushing Fin. Corp. of NY* 15.47 15.47 0.93 5.55 4.48 0.97 5.78 0.29 223.21 1.15
FBHC Fort Bend Holding Corp. of TX 6.03 5.62 0.19 3.18 2.33 0.44 7.36 0.37 141.08 1.03
FTSB Fort Thomas Fin. Corp. of KY 16.04 16.04 0.54 2.94 3.14 0.81 4.45 NA NA 0.54
FKKY Frankfort First Bancorp of KY 26.19 26.19 0.62 2.19 2.56 0.93 3.29 0.06 138.89 0.08
FTNB Fulton Bancorp of MO 25.01 25.01 0.74 3.81 2.05 1.05 5.39 0.81 106.69 1.01
GFSB GFS Bancorp of Grinnell IA 11.57 11.57 0.99 8.43 6.36 1.27 10.81 1.54 45.77 0.81
GUPB GFSB Bancorp of Gallup NM 16.30 16.30 0.74 3.86 3.63 0.93 4.86 0.18 199.36 0.69
GSLA GS Financial Corp. of LA 45.63 45.63 1.08 3.63 2.16 1.08 3.63 0.11 293.18 0.84
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.55 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.04 27.04 0.83 3.23 2.95 1.15 4.47 0.90 14.14 0.38
GBCI Glacier Bancorp of MT 9.74 9.48 1.44 15.09 5.95 1.61 16.87 0.27 229.89 0.85
GFCO Glenway Financial Corp. of OH 9.49 9.36 0.43 4.51 4.33 0.72 7.57 0.31 91.62 0.34
GTPS Great American Bancorp of IL 21.43 21.43 0.26 1.09 1.09 0.32 1.37 0.23 140.69 0.44
GTFN Great Financial Corp. of KY 9.24 8.84 0.75 7.89 4.78 0.71 7.50 3.06 15.68 0.72
GSBC Great Southern Bancorp of MO 8.53 8.53 1.38 14.76 6.82 1.56 16.69 1.91 114.73 2.59
GDVS Greater DV SB,MHC of PA (19.9)* 11.57 11.57 0.32 2.71 1.42 0.58 4.95 2.79 43.15 1.93
GSFC Green Street Fin. Corp. of NC 36.26 36.26 1.37 3.84 3.20 1.66 4.66 0.16 83.63 0.18
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 13.78 13.78 0.61 4.30 1.97 0.92 6.51 0.50 216.62 1.36
HCBB HCB Bancshares of AR 18.25 17.49 -0.11 -0.58 -0.57 0.39 2.11 NA NA 1.47
HEMT HF Bancorp of Hemet CA 8.21 6.72 -0.27 -3.07 -2.69 -1.88 -21.03 NA NA NA
HFFC HF Financial Corp. of SD 9.43 9.43 0.66 7.12 5.50 0.89 9.66 0.33 244.25 1.01
HFNC HFNC Financial Corp. of NC 17.99 17.99 0.86 3.47 2.69 1.19 4.76 0.87 97.22 1.14
HMNF HMN Financial, Inc. of MN 14.43 14.43 0.71 4.79 3.78 0.88 5.96 0.08 531.97 0.71
HALL Hallmark Capital Corp. of WI 7.24 7.24 0.48 6.83 5.91 0.61 8.62 0.16 273.18 0.64
HARB Harbor FSB, MHC of FL (46.0) 8.39 8.11 0.95 11.52 4.48 1.23 14.84 0.46 222.68 1.37
HRBF Harbor Federal Bancorp of MD 12.90 12.90 0.46 3.52 3.03 0.71 5.46 0.05 379.63 0.28
HFSA Hardin Bancorp of Hardin MO 12.48 12.48 0.52 3.53 3.52 0.79 5.41 0.09 179.21 0.32
HARL Harleysville SA of PA 6.53 6.53 0.75 11.71 5.84 1.03 16.04 0.03 NA 0.77
HFGI Harrington Fin. Group of IN 5.59 5.59 0.39 8.22 5.30 0.33 6.87 0.25 18.93 0.23
HARS Harris SB, MHC of PA (24.2) 8.01 7.01 0.49 5.78 3.04 0.62 7.24 0.65 64.15 0.97
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.67 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.91 1.96 0.58 4.08 0.15 90.48 0.26
HAVN Haven Bancorp of Woodhaven NY 5.95 5.93 0.56 9.27 5.71 0.83 13.79 0.74 86.28 1.15
HVFD Haverfield Corp. of OH(8) 8.55 8.55 0.57 6.82 3.85 1.08 12.97 1.04 82.48 0.99
HTHR Hawthorne Fin. Corp. of CA 3.88 3.88 0.78 18.33 15.36 0.39 9.24 12.66 12.87 1.92
HMLK Hemlock Fed. Fin. Corp. of IL 18.34 18.34 0.13 0.99 0.65 0.73 5.45 NA NA 1.30
HBNK Highland Federal Bank of CA 7.47 7.47 0.46 6.25 3.52 0.68 9.17 3.09 55.00 2.13
HIFS Hingham Inst. for Sav. of MA* 9.35 9.35 1.21 12.60 8.07 1.21 12.60 0.41 165.13 0.89
HBEI Home Bancorp of Elgin IL 26.70 26.70 0.49 1.99 1.43 0.85 3.42 0.41 69.84 0.36
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 3.37 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 12.82 12.82 0.20 1.59 1.38 0.52 4.05 0.38 47.98 0.29
HCFC Home City Fin. Corp. of OH 20.61 20.61 0.78 6.27 3.37 1.17 9.46 0.62 110.38 0.87
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FMSB First Mutual SB of Bellevue WA* 13.94 199.36 13.60 199.36 14.31 0.20 0.92 12.82
FNGB First Northern Cap. Corp of WI NM 165.05 18.61 165.05 21.33 0.64 2.38 73.56
FFPB First Palm Beach Bancorp of FL NM 156.32 10.57 160.46 NM 0.60 1.83 NM
FSLA First SB SLA MHC of NJ (47.5) NM 207.24 19.52 232.41 22.20 0.48 1.73 60.00
FSNJ First SB of NJ, MHC (45.9)(8) NM 200.87 17.21 200.87 NM 0.50 1.54 NM
SOPN First SB, SSB, Moore Co. of NC 19.34 112.27 25.63 112.27 16.14 0.80 3.90 NM
FWWB First Savings Bancorp of WA* 27.53 173.39 25.58 188.46 29.17 0.28 1.14 31.46
SHEN First Shenango Bancorp of PA 16.42 127.59 13.98 127.59 12.61 0.60 2.16 35.50
FSFC First So.east Fin. Corp. of SC(8) NM 179.49 18.35 179.49 20.00 0.24 1.71 NM
FBNW FirstBank Corp of Clarkston WA NM 130.36 23.51 130.36 NM 0.00 0.00 0.00
FFDB FirstFed Bancorp of AL 17.40 114.16 10.75 125.23 11.40 0.50 3.02 52.63
FSPT FirstSpartan Fin. Corp. of SC NM 129.39 34.06 129.39 NM 0.00 0.00 0.00
FLAG Flag Financial Corp of GA NM 139.02 13.07 139.02 NM 0.34 2.39 NM
FLGS Flagstar Bancorp, Inc of MI NM NM 17.32 NM NM 0.00 0.00 NM
FFIC Flushing Fin. Corp. of NY* 22.31 124.40 19.25 124.40 21.39 0.24 1.16 25.81
FBHC Fort Bend Holding Corp. of TX NM 136.62 8.24 146.72 18.57 0.40 1.26 54.05
FTSB Fort Thomas Fin. Corp. of KY NM 100.96 16.19 100.96 21.00 0.25 2.38 NM
FKKY Frankfort First Bancorp of KY NM 94.46 24.74 94.46 26.06 0.36 3.84 NM
FTNB Fulton Bancorp of MO NM 138.22 34.57 138.22 NM 0.20 1.00 48.78
GFSB GFS Bancorp of Grinnell IA 15.73 129.55 14.99 129.55 12.27 0.26 1.94 30.59
GUPB GFSB Bancorp of Gallup NM 27.54 112.56 18.34 112.56 21.84 0.40 2.11 57.97
GSLA GS Financial Corp. of LA NM 96.27 43.93 96.27 NM 0.28 1.78 NM
GOSB GSB Financial Corp. of NY 28.19 106.39 28.79 106.39 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 109.85 29.70 109.85 24.47 0.40 2.27 NM
GBCI Glacier Bancorp of MT 16.82 227.83 22.20 234.18 15.04 0.48 2.59 43.64
GFCO Glenway Financial Corp. of OH 23.11 102.55 9.73 103.95 13.76 0.80 3.27 NM
GTPS Great American Bancorp of IL NM 104.14 22.32 104.14 NM 0.40 2.30 NM
GTFN Great Financial Corp. of KY 20.91 162.99 15.05 170.25 22.02 0.60 1.80 37.74
GSBC Great Southern Bancorp of MO 14.67 226.44 19.32 226.44 12.98 0.40 2.37 34.78
GDVS Greater DV SB,MHC of PA (19.9)* NM 188.08 21.76 188.08 NM 0.36 2.22 NM
GSFC Green Street Fin. Corp. of NC NM 118.81 43.08 118.81 25.74 0.44 2.51 NM
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 213.07 29.36 213.07 NM 0.40 2.13 NM
HCBB HCB Bancshares of AR NM 101.97 18.61 106.38 NM 0.00 0.00 NM
HEMT HF Bancorp of Hemet CA NM 115.54 9.49 141.22 NM 0.00 0.00 NM
HFFC HF Financial Corp. of SD 18.19 125.82 11.86 125.82 13.40 0.42 1.88 34.15
HFNC HFNC Financial Corp. of NC NM 170.76 30.72 170.76 27.12 0.28 1.75 65.12
HMNF HMN Financial, Inc. of MN 26.46 128.06 18.48 128.06 21.26 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.92 109.44 7.92 109.44 13.39 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.0) 22.32 242.71 20.36 250.96 17.33 1.40 3.06 68.29
HRBF Harbor Federal Bancorp of MD NM 116.02 14.96 116.02 21.24 0.40 2.09 68.97
HFSA Hardin Bancorp of Hardin MO 28.45 105.16 13.12 105.16 18.54 0.48 2.91 NM
HARL Harleysville SA of PA 17.12 187.83 12.27 187.83 12.50 0.40 1.60 27.40
HFGI Harrington Fin. Group of IN 18.85 149.93 8.38 149.93 22.55 0.12 1.04 19.67
HARS Harris SB, MHC of PA (24.2) NM 178.20 14.27 203.76 26.26 0.58 2.23 73.42
HFFB Harrodsburg 1st Fin Bcrp of KY 27.27 103.52 27.88 103.52 20.55 0.40 2.67 72.73
HHFC Harvest Home Fin. Corp. of OH NM 105.76 13.22 105.76 23.98 0.40 3.40 NM
HAVN Haven Bancorp of Woodhaven NY 17.52 151.32 9.00 151.82 11.77 0.60 1.64 28.71
HVFD Haverfield Corp. of OH(8) 25.98 170.75 14.59 170.75 13.66 0.56 2.11 54.90
HTHR Hawthorne Fin. Corp. of CA 6.51 126.35 4.90 126.35 12.92 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 106.38 19.51 106.38 28.18 0.24 1.55 NM
HBNK Highland Federal Bank of CA 28.39 166.26 12.43 166.26 19.33 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 12.40 147.63 13.81 147.63 12.40 0.48 2.08 25.81
HBEI Home Bancorp of Elgin IL NM 127.46 34.03 127.46 NM 0.40 2.29 NM
HBFW Home Bancorp of Fort Wayne IN 29.68 121.28 16.11 121.28 18.58 0.20 0.94 27.78
HBBI Home Building Bancorp of IN NM 113.45 14.54 113.45 28.38 0.30 1.43 NM
HCFC Home City Fin. Corp. of OH 29.65 102.37 21.09 102.37 19.64 0.32 2.12 62.75
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- -------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
HOMF Home Fed Bancorp of Seymour IN 8.48 8.22 1.05 12.65 6.52 1.22 14.72 0.46 117.33 0.62
HWEN Home Financial Bancorp of IN 18.63 18.63 0.57 3.68 2.98 0.82 5.23 NA NA 0.63
HPBC Home Port Bancorp, Inc. of MA* 10.56 10.56 1.67 15.78 8.34 1.66 15.69 0.08 NA 1.56
HMCI Homecorp, Inc. of Rockford IL 6.54 6.54 0.14 2.17 1.69 0.43 6.83 3.35 14.24 0.59
HZFS Horizon Fin'l. Services of IA 9.79 9.79 0.36 3.35 3.44 0.57 5.36 NA NA NA
HRZB Horizon Financial Corp. of WA* 15.60 15.60 1.57 9.99 7.13 1.54 9.80 NA NA 0.84
IBSF IBS Financial Corp. of NJ 17.04 17.04 0.52 2.73 2.07 0.88 4.68 0.08 171.10 0.52
ISBF ISB Financial Corp. of LA 12.19 10.33 0.69 4.59 3.14 0.93 6.20 NA NA 0.80
ITLA Imperial Thrift & Loan of CA* 11.37 11.32 1.45 12.98 7.77 1.45 12.98 1.47 84.20 1.50
IFSB Independence FSB of DC 6.52 5.72 0.14 2.19 2.15 0.33 4.98 NA NA 0.34
INCB Indiana Comm. Bank, SB of IN 12.39 12.39 0.16 1.24 1.05 0.51 3.88 NA NA 0.71
INBI Industrial Bancorp of OH 17.71 17.71 0.72 3.87 3.10 1.42 7.57 0.30 156.98 0.55
IWBK Interwest SB of Oak Harbor WA 6.78 6.63 0.87 12.91 4.58 1.18 17.52 0.64 73.79 0.78
IPSW Ipswich SB of Ipswich MA* 5.71 5.71 1.21 20.41 7.15 0.95 16.04 1.52 56.87 1.18
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 5.29 1.34 8.46 0.78 NA NA
JXSB Jcksnville SB,MHC of IL (44.6) 10.30 10.30 0.29 2.50 1.87 0.67 5.84 0.39 125.08 0.63
JSBA Jefferson Svgs Bancorp of MO 8.19 6.24 0.30 3.89 2.24 0.70 9.24 0.52 117.45 0.82
JOAC Joachim Bancorp of MO 28.99 28.99 0.51 1.71 1.60 0.78 2.64 0.68 30.45 0.31
KSAV KS Bancorp of Kenly NC 13.53 13.52 0.96 6.86 5.84 1.25 8.89 0.35 80.53 0.33
KSBK KSB Bancorp of Kingfield ME(8)* 7.16 6.74 0.96 13.72 8.00 1.00 14.25 1.78 43.20 1.03
KFBI Klamath First Bancorp of OR 19.55 19.55 0.81 3.67 2.85 1.23 5.54 0.08 213.23 0.23
LSBI LSB Fin. Corp. of Lafayette IN 9.08 9.08 0.50 5.24 4.63 0.42 4.41 1.17 63.71 0.84
LVSB Lakeview SB of Paterson NJ 9.52 7.61 1.37 13.73 8.42 0.95 9.53 0.98 66.74 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.89 5.95 5.26 1.05 7.01 0.31 123.70 0.57
LARL Laurel Capital Group of PA 10.42 10.42 1.12 10.61 7.26 1.44 13.60 0.43 212.35 1.31
LSBX Lawrence Savings Bank of MA* 8.69 8.69 1.75 20.90 12.59 1.73 20.60 0.30 328.94 2.29
LFED Leeds FSB, MHC of MD (36.2) 16.18 16.18 0.79 4.89 2.86 1.13 6.98 0.02 977.36 0.30
LXMO Lexington B&L Fin. Corp. of MO 28.32 28.32 1.03 3.49 3.31 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA 10.55 10.25 0.71 6.60 4.08 0.87 8.03 0.39 166.43 1.48
LFBI Little Falls Bancorp of NJ 13.28 12.26 0.27 1.94 1.67 0.48 3.41 NA NA 0.81
LOGN Logansport Fin. Corp. of IN 19.20 19.20 1.17 5.64 5.29 1.52 7.31 0.61 44.88 0.38
LONF London Financial Corp. of OH 19.86 19.86 0.74 3.55 3.54 1.09 5.19 0.79 62.54 0.64
LISB Long Island Bancorp, Inc of NY 8.99 8.90 0.61 6.58 3.73 0.71 7.63 1.03 55.02 0.92
MAFB MAF Bancorp of IL 7.88 6.84 0.79 10.57 4.79 1.10 14.70 0.46 119.42 0.71
MBLF MBLA Financial Corp. of MO 12.15 12.15 0.67 5.10 4.72 0.85 6.52 0.25 109.19 0.50
MFBC MFB Corp. of Mishawaka IN 14.51 14.51 0.56 3.33 3.47 0.85 5.09 NA NA 0.19
MLBC ML Bancorp of Villanova PA 6.98 6.86 0.74 10.26 6.72 0.67 9.28 0.46 163.34 1.71
MBB MSB Bancorp of Middletown NY* 6.90 2.97 0.33 4.82 3.93 0.36 5.17 0.70 36.62 0.60
MSBF MSB Financial Corp. of MI 16.99 16.99 1.19 6.43 4.33 1.47 7.91 0.66 61.34 0.44
MGNL Magna Bancorp of MS(8) 10.22 9.95 1.39 14.23 5.35 1.53 15.70 2.92 26.42 1.11
MARN Marion Capital Holdings of IN 22.55 22.55 1.39 6.09 5.87 1.67 7.28 0.81 144.01 1.35
MRKF Market Fin. Corp. of OH 34.99 34.99 0.84 3.14 2.27 0.84 3.14 0.75 12.24 0.20
MFCX Marshalltown Fin. Corp. of IA(8) 15.74 15.74 0.34 2.15 1.79 0.73 4.66 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.38 8.28 0.61 7.41 4.73 0.89 10.72 0.47 85.38 0.46
MASB MassBank Corp. of Reading MA* 10.64 10.64 1.10 10.79 6.90 1.04 10.23 0.16 149.80 0.87
MFLR Mayflower Co-Op. Bank of MA* 9.43 9.26 1.00 10.42 7.14 0.98 10.18 1.03 90.08 1.56
MECH Mechanics SB of Hartford CT* 10.23 10.23 1.92 19.45 12.77 1.92 19.45 1.13 152.02 2.58
MDBK Medford Savings Bank of MA* 8.99 8.38 1.08 12.07 8.17 1.01 11.29 0.37 176.45 1.22
MERI Meritrust FSB of Thibodaux LA 8.20 8.20 0.67 8.71 4.91 1.05 13.56 0.37 83.87 0.58
MWBX MetroWest Bank of MA* 7.44 7.44 1.38 18.37 8.00 1.38 18.37 0.91 126.64 1.48
MCBS Mid Continent Bancshares of KS 9.39 9.39 1.02 9.79 6.18 1.16 11.10 0.15 71.76 0.19
MIFC Mid Iowa Financial Corp. of IA 9.10 9.09 0.91 9.88 6.65 1.19 12.96 0.02 NA 0.45
MCBN Mid-Coast Bancorp of ME 8.60 8.60 0.43 4.92 4.24 0.67 7.71 0.73 70.32 0.62
MWBI Midwest Bancshares, Inc. of IA 6.91 6.91 0.45 6.61 5.25 0.75 10.99 0.77 63.17 0.81
MWFD Midwest Fed. Fin. Corp of WI 8.61 8.28 1.39 16.14 7.73 1.09 12.66 0.14 543.01 1.01
MFFC Milton Fed. Fin. Corp. of OH 13.14 13.14 0.49 3.07 2.81 0.68 4.25 0.32 86.42 0.46
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HOMF Home Fed Bancorp of Seymour IN 15.35 181.82 15.42 187.54 13.19 0.50 1.61 24.75
HWEN Home Financial Bancorp of IN NM 100.00 18.63 100.00 23.63 0.20 1.32 44.44
HPBC Home Port Bancorp, Inc. of MA* 11.99 181.04 19.11 181.04 12.06 0.80 3.88 46.51
HMCI Homecorp, Inc. of Rockford IL NM 124.90 8.17 124.90 18.82 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 29.03 95.54 9.35 95.54 18.14 0.32 1.70 49.23
HRZB Horizon Financial Corp. of WA* 14.02 137.49 21.45 137.49 14.29 0.40 2.67 37.38
IBSF IBS Financial Corp. of NJ NM 147.34 25.10 147.34 28.12 0.40 2.37 NM
ISBF ISB Financial Corp. of LA NM 147.77 18.01 174.25 23.56 0.40 1.63 51.95
ITLA Imperial Thrift & Loan of CA* 12.87 148.81 16.92 149.44 12.87 0.00 0.00 0.00
IFSB Independence FSB of DC NM 100.82 6.58 114.99 20.45 0.22 1.63 NM
INCB Indiana Comm. Bank, SB of IN NM 124.29 15.39 124.29 NM 0.36 2.36 NM
INBI Industrial Bancorp of OH NM 124.68 22.08 124.68 16.48 0.48 3.31 NM
IWBK Interwest SB of Oak Harbor WA 21.84 257.12 17.43 262.90 16.09 0.60 1.51 32.97
IPSW Ipswich SB of Ipswich MA* 13.99 257.96 14.74 257.96 17.80 0.24 1.02 14.29
JXVL Jacksonville Bancorp of TX 18.89 125.46 18.71 125.46 14.41 0.50 2.94 55.56
JXSB Jcksnville SB,MHC of IL (44.6) NM 132.88 13.68 132.88 22.88 0.40 2.27 NM
JSBA Jefferson Svgs Bancorp of MO NM 143.83 11.79 188.77 18.75 0.40 1.30 57.97
JOAC Joachim Bancorp of MO NM 110.29 31.97 110.29 NM 0.50 3.33 NM
KSAV KS Bancorp of Kenly NC 17.13 114.06 15.43 114.13 13.21 0.60 3.24 55.56
KSBK KSB Bancorp of Kingfield ME(8)* 12.50 160.49 11.50 170.60 12.04 0.08 0.62 7.69
KFBI Klamath First Bancorp of OR NM 135.99 26.58 135.99 23.27 0.30 1.55 54.55
LSBI LSB Fin. Corp. of Lafayette IN 21.58 111.96 10.16 111.96 25.63 0.34 1.66 35.79
LVSB Lakeview SB of Paterson NJ 11.87 165.75 15.77 207.29 17.10 0.25 0.76 8.99
LARK Landmark Bancshares of KS 19.03 116.97 16.13 116.97 16.17 0.40 1.86 35.40
LARL Laurel Capital Group of PA 13.78 142.76 14.87 142.76 10.75 0.52 2.42 33.33
LSBX Lawrence Savings Bank of MA* 7.94 149.26 12.97 149.26 8.06 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.2) NM 166.67 26.96 166.67 24.44 0.76 3.45 NM
LXMO Lexington B&L Fin. Corp. of MO NM 112.75 31.93 112.75 23.41 0.30 1.81 54.55
LIFB Life Bancorp of Norfolk VA 24.50 155.27 16.38 159.78 20.12 0.48 1.94 47.52
LFBI Little Falls Bancorp of NJ NM 119.71 15.89 129.63 NM 0.20 1.15 68.97
LOGN Logansport Fin. Corp. of IN 18.92 110.50 21.22 110.50 14.58 0.40 2.86 54.05
LONF London Financial Corp. of OH 28.24 104.24 20.70 104.24 19.30 0.24 1.57 44.44
LISB Long Island Bancorp, Inc of NY 26.80 174.06 15.65 175.81 23.11 0.60 1.55 41.67
MAFB MAF Bancorp of IL 20.86 190.10 14.98 218.90 15.00 0.28 0.89 18.54
MBLF MBLA Financial Corp. of MO 21.17 106.92 12.99 106.92 16.55 0.40 1.70 36.04
MFBC MFB Corp. of Mishawaka IN 28.82 103.18 14.97 103.18 18.86 0.32 1.54 44.44
MLBC ML Bancorp of Villanova PA 14.89 148.03 10.33 150.67 16.46 0.40 1.98 29.41
MBB MSB Bancorp of Middletown NY* 25.46 122.67 8.47 285.26 23.72 0.60 2.48 63.16
MSBF MSB Financial Corp. of MI 23.08 147.64 25.08 147.64 18.75 0.28 1.87 43.08
MGNL Magna Bancorp of MS(8) 18.70 250.99 25.66 257.92 16.95 0.60 2.38 44.44
MARN Marion Capital Holdings of IN 17.03 106.33 23.97 106.33 14.24 0.88 3.74 63.77
MRKF Market Fin. Corp. of OH NM 95.28 33.34 95.28 NM 0.28 1.98 NM
MFCX Marshalltown Fin. Corp. of IA(8) NM 117.71 18.53 117.71 25.77 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 21.14 151.79 12.72 153.72 14.61 0.80 1.74 36.87
MASB MassBank Corp. of Reading MA* 14.49 146.85 15.62 146.85 15.29 1.28 2.43 35.16
MFLR Mayflower Co-Op. Bank of MA* 14.00 140.95 13.29 143.45 14.32 0.60 3.22 45.11
MECH Mechanics SB of Hartford CT* 7.83 135.72 13.89 135.72 7.83 0.00 0.00 0.00
MDBK Medford Savings Bank of MA* 12.24 141.24 12.70 151.59 13.10 0.72 2.40 29.39
MERI Meritrust FSB of Thibodaux LA 20.35 167.22 13.72 167.22 13.06 0.70 1.73 35.18
MWBX MetroWest Bank of MA* 12.50 215.23 16.01 215.23 12.50 0.12 1.85 23.08
MCBS Mid Continent Bancshares of KS 16.18 154.42 14.50 154.42 14.27 0.40 1.32 21.39
MIFC Mid Iowa Financial Corp. of IA 15.03 143.37 13.05 143.58 11.45 0.08 0.83 12.50
MCBN Mid-Coast Bancorp of ME 23.58 113.33 9.75 113.33 15.06 0.52 2.08 49.06
MWBI Midwest Bancshares, Inc. of IA 19.06 118.60 8.19 118.60 11.46 0.60 1.74 33.15
MWFD Midwest Fed. Fin. Corp of WI 12.94 208.72 17.98 217.29 16.48 0.34 1.53 19.77
MFFC Milton Fed. Fin. Corp. of OH NM 121.99 16.03 121.99 25.69 0.60 4.33 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MIVI Miss. View Hold. Co. of MN 18.87 18.87 0.69 3.74 3.77 1.03 5.57 0.33 370.39 1.91
MBSP Mitchell Bancorp of NC* 43.36 43.36 1.40 3.24 3.04 1.64 3.81 2.03 26.19 0.62
MBBC Monterey Bay Bancorp of CA 10.74 9.85 0.28 2.17 1.89 0.51 3.99 0.36 94.16 0.61
MONT Montgomery Fin. Corp. of IN 17.91 17.91 0.42 2.32 2.21 0.67 3.74 NA NA 0.20
MSBK Mutual SB, FSB of Bay City MI 6.07 6.07 0.11 1.93 1.71 0.04 0.75 0.11 272.91 0.67
NHTB NH Thrift Bancshares of NH 7.48 6.34 0.33 4.46 2.63 0.49 6.59 1.03 91.05 1.14
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.22 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 9.81 9.81 0.83 8.14 5.23 0.79 7.78 1.11 152.08 3.18
NASB North American SB of MO 7.97 7.71 1.23 16.83 7.55 1.19 16.35 3.34 26.40 1.00
NBSI North Bancshares of Chicago IL 14.13 14.13 0.49 3.27 2.64 0.68 4.57 NA NA 0.27
FFFD North Central Bancshares of IA 22.67 22.67 1.64 6.41 6.18 1.90 7.41 0.12 823.53 1.20
NBN Northeast Bancorp of ME* 6.95 6.01 0.51 6.99 6.31 0.47 6.47 1.37 77.15 1.32
NEIB Northeast Indiana Bncrp of IN 15.16 15.16 1.04 5.98 5.61 1.23 7.07 NA NA 0.71
NWEQ Northwest Equity Corp. of WI 11.45 11.45 0.78 6.47 5.59 0.98 8.16 1.26 38.04 0.59
NWSB Northwest SB, MHC of PA (29.9) 9.71 9.13 0.69 6.88 2.99 1.00 9.95 0.72 90.87 0.88
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.51 7.28 1.11 14.32 2.09 56.84 1.70
NSSB Norwich Financial Corp. of CT* 11.17 10.08 1.09 10.08 5.80 1.04 9.58 1.29 151.12 2.83
NTMG Nutmeg FS&LA of CT 5.69 5.69 0.31 5.46 3.55 0.35 6.16 NA NA 0.60
OHSL OHSL Financial Corp. of OH 11.04 11.04 0.60 5.14 4.69 0.87 7.36 0.14 162.50 0.31
OCFC Ocean Fin. Corp. of NJ 16.25 16.25 0.04 0.24 0.18 0.98 5.97 0.55 79.68 0.87
OCN Ocwen Financial Corp. of FL 8.50 8.50 2.70 32.38 6.04 1.96 23.50 NA NA NA
OFCP Ottawa Financial Corp. of MI 8.73 7.01 0.48 5.25 3.22 0.78 8.45 0.32 112.76 0.42
PFFB PFF Bancorp of Pomona CA 10.32 10.21 0.16 1.41 1.07 0.46 4.09 1.76 59.73 1.46
PSFI PS Financial of Chicago IL 38.70 38.70 1.94 4.74 4.79 1.96 4.81 0.79 28.66 0.51
PVFC PVF Capital Corp. of OH 7.02 7.02 1.05 15.56 6.67 1.35 20.00 1.20 61.53 0.79
PCCI Pacific Crest Capital of CA* 7.09 7.09 1.04 13.26 7.22 0.97 12.43 1.29 79.26 1.67
PAMM PacificAmerica Money Ctr of CA* 22.43 22.43 5.63 41.65 14.56 5.63 41.65 4.97 27.75 2.22
PALM Palfed, Inc. of Aiken SC 8.24 8.24 0.10 1.29 0.82 0.61 7.54 2.12 51.22 1.32
PBCI Pamrapo Bancorp, Inc. of NJ 12.74 12.64 0.90 6.37 5.33 1.24 8.78 2.77 26.10 1.29
PFED Park Bancorp of Chicago IL 22.53 22.53 0.87 4.19 3.70 1.21 5.81 0.21 134.41 0.73
PVSA Parkvale Financial Corp of PA 7.58 7.53 0.73 9.76 5.88 1.08 14.42 0.27 537.53 1.97
PEEK Peekskill Fin. Corp. of NY 25.73 25.73 0.98 3.54 3.51 1.29 4.65 1.22 27.98 1.35
PFSB PennFed Fin. Services of NJ 7.36 6.15 0.57 7.43 4.85 0.84 10.86 0.59 33.53 0.28
PWBC PennFirst Bancorp of PA 7.07 6.45 0.43 5.89 3.50 0.64 8.83 0.65 93.15 1.49
PWBK Pennwood SB of PA* 19.47 19.47 0.61 3.89 2.97 0.97 6.17 1.13 57.64 1.40
PBKB People's SB of Brockton MA* 5.61 5.37 0.80 14.41 7.14 0.47 8.57 0.82 91.19 1.57
PFDC Peoples Bancorp of Auburn IN 15.21 15.21 1.12 7.33 5.37 1.47 9.59 0.36 83.87 0.38
PBCT Peoples Bank, MHC of CT (37.4)* 8.48 8.47 1.12 13.72 5.20 0.83 10.17 0.90 121.39 1.60
PFFC Peoples Fin. Corp. of OH 26.90 26.90 0.86 3.21 3.01 0.86 3.21 0.01 NA 0.41
PHBK Peoples Heritage Fin Grp of ME* 7.72 6.51 1.28 15.68 6.18 1.29 15.88 0.91 126.66 1.66
PSFC Peoples Sidney Fin. Corp of OH 23.26 23.26 0.92 3.97 3.39 1.21 5.18 1.00 42.00 0.45
PERM Permanent Bancorp of IN 9.16 9.03 0.34 3.64 2.91 0.62 6.57 1.09 45.43 0.99
PMFI Perpetual Midwest Fin. of IA 8.53 8.53 0.12 1.38 1.23 0.29 3.36 0.40 185.58 0.95
PERT Perpetual of SC, MHC (46.8) 13.29 13.29 0.75 6.48 2.56 1.06 9.13 0.23 290.91 1.01
PCBC Perry Co. Fin. Corp. of MO 18.32 18.32 0.78 4.11 3.76 1.03 5.45 0.05 64.10 0.20
PHFC Pittsburgh Home Fin. of PA 10.92 10.80 0.62 4.71 3.76 0.79 6.00 1.60 32.18 0.76
PFSL Pocahnts Fed, MHC of AR (46.4) 6.36 6.36 0.60 9.75 5.91 0.84 13.54 0.15 308.72 1.12
POBS Portsmouth Bank Shrs Inc of NH(8)* 25.93 25.93 2.29 9.13 5.99 2.02 8.07 0.50 53.09 0.76
PTRS Potters Financial Corp of OH 8.83 8.83 0.48 5.37 4.78 0.85 9.54 0.50 350.66 2.78
PKPS Poughkeepsie Fin. Corp. of NY 8.37 8.37 0.35 4.21 3.12 0.54 6.49 4.28 25.28 1.45
PHSB Ppls Home SB, MHC of PA (45.0) 17.31 17.31 0.39 2.23 2.17 0.81 4.67 NA NA 1.40
PRBC Prestige Bancorp of PA 11.13 11.13 0.37 2.84 2.85 0.65 5.01 0.30 85.33 0.38
PETE Primary Bank of NH(8)* 6.93 6.92 0.61 9.35 4.82 0.73 11.09 0.82 75.47 1.08
PFNC Progress Financial Corp. of PA 5.27 4.65 0.54 10.19 4.08 0.65 12.26 1.46 51.92 1.08
PSBK Progressive Bank, Inc. of NY* 8.55 7.64 0.99 12.02 7.86 0.98 11.81 0.85 131.46 1.65
PROV Provident Fin. Holdings of CA 13.88 13.88 0.32 2.24 1.99 0.28 1.95 NA NA 1.31
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MIVI Miss. View Hold. Co. of MN 26.49 97.20 18.35 97.20 17.76 0.16 1.02 27.12
MBSP Mitchell Bancorp of NC* NM 108.84 47.20 108.84 27.92 0.00 0.00 0.00
MBBC Monterey Bay Bancorp of CA NM 117.10 12.58 127.69 28.72 0.12 0.73 38.71
MONT Montgomery Fin. Corp. of IN NM 104.72 18.76 104.72 27.98 0.00 0.00 0.00
MSBK Mutual SB, FSB of Bay City MI NM 109.72 6.66 109.72 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH NM 146.03 10.92 172.33 25.77 0.50 2.99 NM
NSLB NS&L Bancorp of Neosho MO NM 111.99 21.90 111.99 28.91 0.50 2.70 NM
NMSB Newmil Bancorp. of CT* 19.12 157.19 15.43 157.19 20.00 0.24 1.85 35.29
NASB North American SB of MO 13.25 209.45 16.70 216.47 13.64 0.80 1.57 20.78
NBSI North Bancshares of Chicago IL NM 129.79 18.34 129.79 27.16 0.48 2.18 NM
FFFD North Central Bancshares of IA 16.18 111.41 25.25 111.41 13.98 0.25 1.52 24.51
NBN Northeast Bancorp of ME* 15.86 109.34 7.60 126.50 17.15 0.32 2.17 34.41
NEIB Northeast Indiana Bncrp of IN 17.82 112.64 17.08 112.64 15.09 0.32 1.91 34.04
NWEQ Northwest Equity Corp. of WI 17.90 119.14 13.64 119.14 14.19 0.52 3.30 59.09
NWSB Northwest SB, MHC of PA (29.9) NM 225.90 21.94 240.38 23.15 0.32 1.71 57.14
NSSY Norwalk Savings Society of CT* 13.74 160.71 12.95 166.67 12.00 0.40 1.20 16.53
NSSB Norwich Financial Corp. of CT* 17.25 166.67 18.61 184.63 18.15 0.56 2.29 39.44
NTMG Nutmeg FS&LA of CT 28.21 149.66 8.52 149.66 25.00 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 21.33 109.62 12.10 109.62 14.90 0.88 3.78 NM
OCFC Ocean Fin. Corp. of NJ NM 123.40 20.06 123.40 22.65 0.80 2.37 NM
OCN Ocwen Financial Corp. of FL 16.55 NM 43.36 NM 22.80 0.00 0.00 0.00
OFCP Ottawa Financial Corp. of MI NM 166.56 14.54 207.49 19.32 0.40 1.57 48.78
PFFB PFF Bancorp of Pomona CA NM 135.22 13.95 136.63 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 20.89 99.73 38.60 99.73 20.59 0.32 2.19 45.71
PVFC PVF Capital Corp. of OH 15.00 214.50 15.07 214.50 11.67 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 13.85 171.73 12.17 171.73 14.78 0.00 0.00 0.00
PAMM PacificAmerica Money Ctr of CA* 6.87 188.54 42.28 188.54 6.87 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC NM 153.04 12.61 153.04 20.88 0.12 0.76 NM
PBCI Pamrapo Bancorp, Inc. of NJ 18.75 130.87 16.67 131.90 13.59 1.00 4.60 NM
PFED Park Bancorp of Chicago IL 27.02 102.95 23.19 102.95 19.48 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 17.01 157.77 11.97 158.97 11.52 0.52 1.78 30.23
PEEK Peekskill Fin. Corp. of NY 28.51 110.47 28.42 110.47 21.67 0.36 2.22 63.16
PFSB PennFed Fin. Services of NJ 20.63 146.26 10.76 174.87 14.11 0.28 0.95 19.58
PWBC PennFirst Bancorp of PA 28.57 170.03 12.02 186.26 19.05 0.33 2.06 58.93
PWBK Pennwood SB of PA* NM 101.31 19.73 101.31 21.23 0.32 2.06 69.57
PBKB People's SB of Brockton MA* 14.01 189.84 10.65 198.17 23.55 0.44 2.71 37.93
PFDC Peoples Bancorp of Auburn IN 18.61 134.53 20.46 134.53 14.21 0.60 2.32 43.17
PBCT Peoples Bank, MHC of CT (37.4)* 19.24 244.74 20.75 244.96 25.97 0.68 2.54 48.92
PFFC Peoples Fin. Corp. of OH NM 106.61 28.68 106.61 NM 0.50 2.90 NM
PHBK Peoples Heritage Fin Grp of ME* 16.18 242.17 18.70 287.36 15.98 0.76 1.99 32.20
PSFC Peoples Sidney Fin. Corp of OH 29.46 117.10 27.24 117.10 22.60 0.20 1.21 35.71
PERM Permanent Bancorp of IN NM 125.38 11.49 127.25 19.04 0.40 1.62 55.56
PMFI Perpetual Midwest Fin. of IA NM 112.50 9.60 112.50 NM 0.30 1.48 NM
PERT Perpetual of SC, MHC (46.8) NM 198.07 26.32 198.07 27.66 1.40 3.59 NM
PCBC Perry Co. Fin. Corp. of MO 26.62 113.45 20.78 113.45 20.10 0.40 1.95 51.95
PHFC Pittsburgh Home Fin. of PA 26.62 129.28 14.11 130.65 20.88 0.24 1.31 34.78
PFSL Pocahnts Fed, MHC of AR (46.4) 16.91 159.21 10.13 159.21 12.18 0.90 3.83 64.75
POBS Portsmouth Bank Shrs Inc of NH(8)* 16.69 150.92 39.14 150.92 18.89 0.60 3.49 58.25
PTRS Potters Financial Corp of OH 20.91 110.38 9.74 110.38 11.77 0.36 1.48 31.03
PKPS Poughkeepsie Fin. Corp. of NY NM 131.45 11.00 131.45 20.78 0.10 1.30 41.67
PHSB Ppls Home SB, MHC of PA (45.0) NM 102.72 17.78 102.72 22.01 0.00 0.00 0.00
PRBC Prestige Bancorp of PA NM 99.94 11.12 99.94 19.88 0.12 0.73 25.53
PETE Primary Bank of NH(8)* 20.77 179.69 12.46 179.94 17.52 0.00 0.00 0.00
PFNC Progress Financial Corp. of PA 24.54 229.24 12.07 259.80 20.38 0.12 0.91 22.22
PSBK Progressive Bank, Inc. of NY* 12.72 148.70 12.72 166.48 12.94 0.68 2.32 29.57
PROV Provident Fin. Holdings of CA NM 112.95 15.68 112.95 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
EXHIBIT IV-1B
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PULB Pulaski SB, MHC of MO (29.0) 13.00 13.00 0.69 5.42 2.81 0.96 7.53 0.49 52.28 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.90 11.90 0.25 2.97 1.46 0.61 7.21 0.65 NA NA
PULS Pulse Bancorp of S. River NJ 8.05 8.05 0.72 9.24 5.82 1.08 13.86 0.69 65.20 1.93
QCFB QCF Bancorp of Virginia MN 18.09 18.09 1.36 7.11 6.00 1.36 7.11 0.40 221.49 2.24
QCBC Quaker City Bancorp of CA 8.91 8.90 0.32 3.45 2.44 0.58 6.28 1.31 NA NA
QCSB Queens County Bancorp of NY* 11.85 11.85 1.60 10.80 4.21 1.63 10.95 0.68 95.23 0.74
RCSB RCSB Financial, Inc. of NY(8)* 7.85 7.65 0.96 12.26 5.57 0.96 12.17 0.76 83.90 1.18
RARB Raritan Bancorp. of Raritan NJ* 7.93 7.80 0.96 12.55 6.38 1.02 13.33 0.29 297.45 1.29
REDF RedFed Bancorp of Redlands CA 8.18 8.17 0.12 1.71 0.95 0.47 6.51 2.19 45.70 1.15
RELY Reliance Bancorp, Inc. of NY 8.04 5.63 0.56 6.63 3.88 0.85 10.11 NA NA 0.57
RELI Reliance Bancshares Inc of WI(8)* 47.98 47.98 1.51 3.15 3.29 1.51 3.15 NA NA 0.52
RIVR River Valley Bancorp of IN 12.36 12.17 0.29 3.41 1.61 0.45 5.43 0.49 170.62 1.03
RSLN Roslyn Bancorp, Inc. of NY* 20.14 20.04 0.86 4.12 2.47 1.35 6.49 0.27 278.21 3.46
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 11.24 10.26 0.96 8.70 3.26 1.20 10.87 0.14 278.46 0.56
SCCB S. Carolina Comm. Bnshrs of SC 25.95 25.95 0.82 2.99 2.47 1.10 4.03 1.78 35.52 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.58 9.58 0.13 1.32 0.81 0.44 4.49 0.69 76.89 1.16
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.44 3.41 3.12 0.79 6.09 0.73 57.17 0.57
SGVB SGV Bancorp of W. Covina CA 7.31 7.19 0.20 2.37 2.05 0.47 5.74 NA NA 0.44
SISB SIS Bancorp Inc of MA* 7.20 7.20 1.38 18.82 11.03 1.37 18.70 0.47 244.29 2.48
SWCB Sandwich Co-Op. Bank of MA* 8.24 7.86 0.94 11.30 6.69 0.95 11.45 1.28 62.63 1.13
SECP Security Capital Corp. of WI(8) 15.85 15.85 1.15 7.17 4.39 1.38 8.57 0.12 918.65 1.44
SFSL Security First Corp. of OH 9.36 9.20 1.10 11.88 7.76 1.39 15.04 0.26 301.46 0.87
SFNB Security First Netwrk Bk of GA 40.15 39.51 -28.82 NM -29.86 -29.73 NM NA NA 1.35
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.04 10.44 5.47 1.17 11.79 0.14 425.11 0.66
SOBI Sobieski Bancorp of S. Bend IN 15.41 15.41 0.29 1.67 1.85 0.58 3.35 0.25 102.04 0.35
SOSA Somerset Savings Bank of MA(8)* 6.34 6.34 0.81 13.81 6.25 0.78 13.26 6.28 22.01 1.81
SSFC South Street Fin. Corp. of NC* 25.26 25.26 0.92 4.51 2.34 1.17 5.71 0.27 65.44 0.39
SCBS Southern Commun. Bncshrs of AL 21.96 21.96 0.32 2.52 1.23 0.79 6.23 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 15.67 15.67 0.71 4.42 4.06 0.70 4.35 1.10 37.60 0.64
SWBI Southwest Bancshares of IL 11.00 11.00 0.75 6.94 5.03 1.02 9.52 0.30 67.34 0.28
SVRN Sovereign Bancorp of PA 4.01 3.03 0.44 11.07 4.17 0.68 17.14 0.57 78.85 0.72
STFR St. Francis Cap. Corp. of WI 7.88 6.96 0.64 7.35 5.09 0.70 8.09 0.19 181.58 0.80
SPBC St. Paul Bancorp, Inc. of IL 8.60 8.58 0.72 8.22 4.02 1.03 11.84 0.32 232.75 1.09
STND Standard Fin. of Chicago IL(8) 10.77 10.75 0.50 4.46 2.93 0.72 6.44 0.22 136.61 0.50
SFFC StateFed Financial Corp. of IA 17.78 17.78 1.11 6.16 5.44 1.35 7.47 NA NA NA
SFIN Statewide Fin. Corp. of NJ 9.73 9.71 0.54 5.46 4.03 0.91 9.26 0.43 95.58 0.83
STSA Sterling Financial Corp. of WA 4.10 3.57 0.10 2.46 1.58 0.32 7.91 0.61 79.43 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.87 4.56 0.56 8.55 0.48 41.27 0.31
ROSE T R Financial Corp. of NY* 6.20 6.20 0.98 15.72 7.04 0.88 14.18 0.46 90.99 0.80
THRD Financial Corp. of PA 11.11 9.75 0.55 4.76 4.36 0.74 6.40 0.33 92.84 0.62
TPNZ Tappan Zee Fin., Inc. of NY 17.92 17.92 0.70 4.22 3.03 0.65 3.90 NA NA 1.18
ESBK The Elmira SB FSB of Elmira NY* 6.30 6.04 0.36 5.66 4.81 0.35 5.51 0.66 97.39 0.85
GRTR The Greater New York SB of NY(8)* 6.27 6.27 0.74 12.34 6.29 0.40 6.62 NA NA 1.71
TSBS Trenton SB, FSB MHC of NJ(35.0 16.89 15.48 1.34 7.53 3.06 1.14 6.39 0.73 55.92 0.67
TRIC Tri-County Bancorp of WY 15.32 15.32 0.80 5.14 4.84 1.02 6.55 NA NA 1.11
TWIN Twin City Bancorp of TN 12.86 12.86 0.53 4.13 3.30 0.75 5.82 0.16 130.95 0.29
UFRM United FS&LA of Rocky Mount NC 7.48 7.48 0.22 2.87 1.58 0.38 4.98 0.58 135.44 0.98
UBMT United Fin. Corp. of MT 22.65 22.65 1.09 4.70 4.00 1.34 5.80 0.42 16.41 0.21
VABF Va. Beach Fed. Fin. Corp of VA 6.85 6.85 0.21 3.15 1.91 0.47 7.02 1.26 56.59 0.93
VFFC Virginia First Savings of VA(8) 8.06 7.78 1.36 17.14 7.54 1.25 15.72 2.29 47.29 1.19
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.25 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.20 5.16 1.31 23.71 10.32 1.32 23.87 1.70 96.79 2.65
WVFC WVS Financial Corp. of PA* 11.16 11.16 1.07 8.59 6.20 1.34 10.72 0.30 230.13 1.25
WRNB Warren Bancorp of Peabody MA* 10.37 10.37 2.13 22.09 11.25 1.81 18.79 1.15 98.45 1.79
WFSL Washington FS&LA of Seattle WA 12.08 11.03 1.67 14.37 7.29 1.84 15.85 0.73 59.65 0.60
WAMU Washington Mutual Inc. of WA* 5.00 4.75 0.35 6.81 1.83 0.74 14.45 0.81 93.26 1.12
<CAPTION>
Pricing Ratios Dividend Data(6)
--------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Earning Book Assets Book Earnings Share Yield Ratio(7)
------- ------- ------- ------- ------- ------ ------ -------
FINANCIAL INSTITUTION
- ---------------------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PULB Pulaski SB, MHC of MO (29.0) NM 190.22 24.73 190.22 25.61 1.00 4.76 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 140.88 16.77 140.88 28.18 0.30 2.09 NM
PULS Pulse Bancorp of S. River NJ 17.18 151.28 12.17 151.28 11.45 0.70 3.39 58.33
QCFB QCF Bancorp of Virginia MN 16.67 123.81 22.40 123.81 16.67 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA NM 138.61 12.35 138.61 22.53 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 23.78 299.30 35.48 299.30 23.45 1.00 1.96 46.51
RCSB RCSB Financial, Inc. of NY(8)* 17.95 220.15 17.28 225.88 18.09 0.60 1.26 22.56
RARB Raritan Bancorp. of Raritan NJ* 15.66 183.25 14.54 186.39 14.75 0.48 2.10 32.88
REDF RedFed Bancorp of Redlands CA NM 152.03 12.43 152.17 27.63 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 25.75 169.24 13.61 241.47 16.88 0.64 2.14 55.17
RELI Reliance Bancshares Inc of WI(8)* NM 95.61 45.87 95.61 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 116.56 14.41 118.37 NM 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* NM 163.72 32.97 164.51 25.67 0.20 0.84 33.90
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) NM 253.05 28.44 277.21 24.55 0.24 0.89 27.27
SCCB S. Carolina Comm. Bnshrs of SC NM 123.09 31.94 123.09 NM 0.60 2.85 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 159.07 15.24 159.07 NM 0.40 2.16 NM
SFED SFS Bancorp of Schenectady NY NM 110.38 13.76 110.38 17.99 0.28 1.45 46.67
SGVB SGV Bancorp of W. Covina CA NM 118.40 8.65 120.38 20.16 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 9.06 161.99 11.66 161.99 9.12 0.56 1.87 16.92
SWCB Sandwich Co-Op. Bank of MA* 14.96 163.02 13.44 171.01 14.76 1.20 3.58 53.57
SECP Security Capital Corp. of WI(8) 22.78 159.66 25.31 159.66 19.06 1.20 1.20 27.27
SFSL Security First Corp. of OH 12.89 138.89 13.00 141.39 10.19 0.32 1.94 25.00
SFNB Security First Netwrk Bk of GA NM NM 123.09 NM NM 0.00 0.00 NM
SMFC Sho-Me Fin. Corp. of MO(8) 18.27 191.82 17.32 191.82 16.17 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 101.37 15.62 101.37 27.08 0.28 1.72 NM
SOSA Somerset Savings Bank of MA(8)* 16.00 204.08 12.94 204.08 16.67 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 141.75 35.80 141.75 NM 0.40 2.08 NM
SCBS Southern Commun. Bncshrs of AL NM 114.48 25.14 114.48 NM 0.30 1.94 NM
SMBC Southern Missouri Bncrp of MO 24.64 108.83 17.05 108.83 25.00 0.50 2.90 71.43
SWBI Southwest Bancshares of IL 19.88 133.01 14.63 133.01 14.49 0.76 3.64 72.38
SVRN Sovereign Bancorp of PA 23.98 237.92 9.95 NH 15.49 0.08 0.54 12.90
STFR St. Francis Cap. Corp. of WI 19.63 142.21 11.21 160.95 17.82 0.48 1.38 27.12
SPBC St. Paul Bancorp, Inc. of IL 24.86 198.11 17.04 198.63 17.25 0.40 1.73 43.01
STND Standard Fin. of Chicago IL(8) NM 147.57 15.90 147.83 23.60 0.40 1.58 54.05
SFFC StateFed Financial Corp. of IA 18.38 110.65 19.67 110.65 15.14 0.40 1.86 34.19
SFIN Statewide Fin. Corp. of NJ 24.83 135.76 13.20 135.95 14.63 0.40 2.12 52.63
STSA Sterling Financial Corp. of WA NM 143.03 5.86 164.05 19.72 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 21.95 123.18 7.99 123.63 15.08 0.32 1.19 26.02
ROSE T R Financial Corp. of NY* 14.21 207.83 12.89 207.83 15.76 0.60 2.31 32.79
TF Financial Corp. of PA 22.92 110.38 12.27 125.82 17.04 0.40 2.08 47.62
TPNZ Tappan Zee Fin., Inc. of NY NM 121.95 21.86 121.95 NM 0.28 1.60 52.83
ESBK The Elmira SB FSB of Elmira NY* 20.80 115.65 7.28 120.64 21.36 0.64 2.72 56.64
GRTR The Greater New York SB of NY(8)* 15.90 186.72 11.71 186.72 29.65 0.20 0.91 14.49
TSBS Trenton SB, FSB MHC of NJ(35.0 NM 238.59 40.29 260.22 NM 0.35 1.24 40.70
TRIC Tri-County Bancorp of WY 20.68 101.11 15.49 101.11 16.25 0.60 2.64 54.55
TWIN Twin City Bancorp of TN NM 123.61 15.89 123.61 21.51 0.64 3.20 NM
UFRM United FS&LA of Rocky Mount NC NM 179.10 13.39 179.10 NM 0.24 2.00 NM
UBMT United Fin. Corp. of MT 25.00 117.79 26.68 117.79 20.26 0.98 4.17 NM
VABF Va. Beach Fed. Fin. Corp of VA NM 160.24 10.97 160.24 23.48 0.20 1.47 NM
VFFC Virginia First Savings of VA(8) 13.26 211.45 17.05 218.98 14.46 0.10 0.42 5.52
WHGB WHG Bancshares of MD NM 106.78 22.05 106.78 NM 0.20 1.32 58.82
WSFS WSFS Financial Corp. of DE* 9.69 225.47 11.73 227.27 9.63 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 16.12 144.72 16.15 144.72 12.91 0.80 2.94 47.34
WRNB Warren Bancorp of Peabody MA* 8.89 181.98 18.87 181.98 10.45 0.52 2.91 25.87
WFSL Washington FS&LA of Seattle WA 13.72 181.58 21.93 198.81 12.44 0.92 3.46 47.42
WAMU Washington Mutual Inc. of WA* NM NM 16.16 NM 25.77 1.08 1.73 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1B (continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 15, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------ ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
WYNE Wayne Bancorp of NJ 13.35 13.35 0.44 2.94 2.27 0.44 2.94 0.91 83.50 1.15
WAYN Wayne S&L Co. MHC of OH (47.8) 9.16 9.16 0.29 3.14 1.80 0.66 7.16 0.70 51.61 0.43
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.35 23.35 1.06 4.61 2.91 1.42 6.15 0.26 152.85 0.69
WBST Webster Financial Corp. of CT 5.02 4.29 0.41 8.14 3.20 0.74 14.55 0.85 103.47 1.45
WEFC Wells Fin. Corp. of Wells MN 14.20 14.20 0.72 5.07 4.42 1.06 7.49 NA NA NA
WCBI WestCo Bancorp of IL 15.24 15.24 1.12 7.29 5.37 1.42 9.20 0.60 47.07 0.38
WSTR WesterFed Fin. Corp. of MT 10.91 8.73 0.63 5.09 3.72 0.79 6.41 0.25 191.01 0.73
WOFC Western Ohio Fin. Corp. of OH 13.41 12.64 0.31 2.02 2.00 0.44 2.90 0.96 45.88 0.59
WWFC Westwood Fin. Corp. of NJ 9.13 8.13 0.49 5.12 3.35 0.85 8.80 0.13 159.15 0.55
WEHO Westwood Hmstd Fin Corp of OH 29.41 29.41 0.70 2.41 1.95 1.04 3.62 0.06 255.81 0.21
WFI Winton Financial Corp. of OH 7.11 6.96 1.00 14.08 10.00 0.84 11.80 0.35 78.21 0.32
FFWD Wood Bancorp of OH 12.31 12.31 1.07 8.25 4.79 1.27 9.81 0.24 143.64 0.44
YFCB Yonkers Fin. Corp. of NY 14.90 14.90 0.86 5.06 4.54 1.16 6.79 0.57 65.11 1.02
YFED York Financial Corp. of PA 8.61 8.61 0.62 7.41 3.96 0.79 9.46 2.39 23.05 0.64
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- --------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
WYNE Wayne Bancorp of NJ NM 133.82 17.87 133.82 NM 0.20 0.91 40.00
WAYN Wayne S&L Co. MHC of OH (47.8) NM 172.67 15.82 172.67 24.32 0.62 3.49 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 156.70 36.59 156.70 25.78 0.80 4.85 NM
WBST Webster Financial Corp. of CT NM 200.72 10.08 234.96 17.48 0.80 1.60 50.00
WEFC Wells Fin. Corp. of Wells MN 22.60 112.70 16.00 112.70 15.28 0.48 2.91 65.75
WCBI WestCo Bancorp of IL 18.62 136.86 20.86 136.86 14.75 0.60 2.29 42.55
WSTR WesterFed Fin. Corp. of MT 26.85 116.12 12.67 145.10 21.32 0.44 2.02 54.32
WOFC Western Ohio Fin. Corp. of OH NM 103.40 13.87 109.74 NM 1.00 4.17 NM
WWFC Westwood Fin. Corp. of NJ 29.81 147.53 13.46 165.60 17.35 0.20 0.86 25.64
WEHO Westwood Hmstd Fin Corp of OH NM 108.47 31.90 108.47 NM 0.28 1.82 NM
WFI Winton Financial Corp. of OH 10.00 140.85 10.01 143.88 11.94 0.46 2.88 28.75
FFWD Wood Bancorp of OH 20.89 173.32 21.33 173.32 17.55 0.40 2.42 50.63
YFCB Yonkers Fin. Corp. of NY 22.04 118.46 17.65 118.46 16.42 0.24 1.43 31.58
YFED York Financial Corp. of PA 25.25 178.57 15.37 178.57 19.77 0.60 2.35 59.41
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
Exhibit IV-2
Historical Stock Price Indices(1)
<TABLE>
<CAPTION>
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ------ ------- --------- ------ -----
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
Quarter 2 7672.8 885.1 1,442.1 624.5 333.3
August 15, 1997 7694.7 900.8 1,562.0 660.3 354.6
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
ThriftINVESTOR
INDEX VALUES
<TABLE>
<CAPTION>
INDEX VALUES PERCENT CHANGE SINCE
-------------------------------------- ------------------------------
07/31/97 1 MONTH YTD 52 WEEK 1 MONTH YTD 52 WEEK
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 684.5 624.5 483.6 388.4 9.60 41.54 76.24
MHC Index 751.0 683.8 538.0 416.1 9.84 39.59 80.48
INSURANCE INDICES
- ------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 608.2 555.0 439.2 356.2 9.59 38.47 70.76
BIF Thrifts 908.5 832.1 616.8 485.0 9.18 47.28 87.31
STOCK EXCHANGE INDICES
- ------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 197.0 192.7 156.2 132.1 2.20 26.10 49.07
NYSE Thrifts 421.4 368.3 277.3 219.7 14.41 51.96 91.75
OTC Thrifts 779.9 721.8 569.7 462.5 8.05 36.89 68.62
GEOGRAPHIC INDICES
- ------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,342.6 1,267.3 970.7 738.4 5.94 38.31 81.82
Midwestern Thrifts 1,455.2 1,369.4 1,159.3 951.7 6.26 25.52 52.90
New England Thrifts 592.0 553.2 428.9 330.3 7.00 38.02 79.21
Southeastern Thrifts 608.6 561.4 447.2 375.6 8.40 36.10 62.03
Southwestern Thrifts 416.4 419.8 315.9 255.8 -0.82 31.84 62.80
Western Thrifts 730.2 635.1 474.7 392.0 14.97 53.83 86.25
ASSET SIZE INDICES
- ------------------------------------------------------------------------------------------------------------------
Less than $250M 721.9 676.0 586.6 539.7 6.79 23.06 33.75
$250M to $500M 1,011.5 947.0 789.8 673.2 6.81 28.07 50.25
S500M to $1B 672.1 639.2 521.8 436.0 5.15 28.82 54.15
$1B to $5B 747.6 704.8 546.0 429.6 6.08 36.92 74.03
Over $5B 453.3 403.6 305.8 241.6 12.32 48.23 87.66
COMPARATIVE INDICES
- ------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 8,222.6 7,672.8 6,448.3 5,528.9 7.17 27.52 48.72
S&P 500 954.3 885.2 740.7 640.0 7.81 28.83 49.12
</TABLE>
All SNL indices are market-value weighted: i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201,082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, 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, IN, KS, KY, MI, MN, MO,
ND, NE, OH, SD, WI;
New England; CT, MA, ME NH, RI, VT; Southeast: AL, AR, FL, GA, MS, NC, SC, TN,
VA, WV;
Southwest: CO, LA, NM, OK, TX, UT; West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY.
AUGUST 1997
<PAGE>
EXHIBIT IV-4
Heritage Bank
Market Area Acquisition Activity
<PAGE>
WASHINGTON STATE MERGER AND ACQUISITION ACTIVITY 1995-PRESENT
<TABLE>
<CAPTION>
Seller Financials at Completion Deal Terms
------------------------------------------------------------------
Total TgEg/ YTD YTD NPAs/ Rsrvs/ Deal Deal
Ann'd Cqmp Assets Assets ROAA ROAE Assets NPLs Value Price Per
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%) ($M) Share ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/12/96 11/29/96 Washington Federal WA Metropolitan Bancorp WA 761,014 8.14 0.85 12.85 NA NA 67.5 19.834 Stock
07/13/94 01/06/95 First Interstate CA University SB WA 1,116,973 9.42 1.20 12.56 0.80 NA 205.1 NA Cash
Average 938,994 7.78 1.03 12.71 0.80 NA 136.3 19.834
Median 938,994 7.78 1.03 12.71 0.80 NA 136.3 19.834
<CAPTION>
Deal Pricing at Completion
------------------------------------------------------
Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBk Prem/
Ann'd Cqmp Pr/Bk Tg Bk Assets 4-Qtr CoreDeps
Date Date Buyer ST Seller ST (%) (%) (%) EPS (x) (%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/12/96 11/29/96 Washington Federal WA Metropolitan Bancorp WA 149.98 149.98 8.95 NA 7.09
07/13/94 01/06/95 First Interstate CA University SB WA 151.37 188.17 17.58 14.15 11.18
Average 150.68 169.08 13.27 14.15 9.14
Median 150.68 169.08 13.27 14.15 9.14
</TABLE>
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Heritage Bank
Directors and Management Summary Resumes
<PAGE>
Director Resumes
DONALD V. RHODES has been a director, President and Chief Executive Officer
of the Bank since 1989. He was elected as Chairman of the Board in 1990. Since
1985, Mr Rhodes has also served as Chairman, President and Chief Executive
Officer of Washington Independent Bancshares, Inc., and as Chairman and Chief
Executive Officer of that company's wholly-owned subsidiary, Central Valley
Bank, at June 30, 1997, a $48.6 million in assets commercial bank headquartered
in Toppenish, Washington.
LYNN M. BRUNTON is presently a community volunteer. As a community
volunteer, she serves as a member of the Board of Directors for St. Peter
Hospital and is actively involved in several local and community organizations.
JOHN A. CLEES is the President of Clees Miles CPA group since October 1995
and was managing partner of Gattis, Clees and Company, an accounting firm
located in Olympia, Washington, prior to that time.
DARYL D. JENSEN is the President and a director of Sunset Life Insurance
Company of America, and serves as a director of its parent company, Kansas City
Life Insurance Company.
H. EDWARD ODEGARD is recently retired, serving as a consultant to Valley
Athletic Club, Tumwater, Washington. Mr. Odegard was the co-owner and manager
of Valley Athletic Club from 1974 to 1993.
JAMES P. SENNA is the President and Chief Executive Officer of Shee-Atika,
Incorporated, in Sitka, Alaska.
PHILIP S. WEIGAND is a retired Lieutenant Colonel after 20 years of service
with the U.S. Marine Corps and is currently a real estate agent with Virgil
Adams Real Estate, located in Olympia, Washington.
<PAGE>
Senior Management Resumes
DONALD V. RHODES has been a director, President and Chief Executive Officer
of the Bank since 1989. He was elected as Chairman of the Board in 1990. Since
1985, Mr Rhodes has also served as Chairman, President and Chief Executive
Officer of Washington Independent Bancshares, Inc., and as Chairman and Chief
Executive Officer of that company's wholly-owned subsidiary, Central Valley
Bank, at June 30, 1997, a $48.6 million in assets commercial bank headquartered
in Toppenish, Washington.
JOHN PARRY has been employed by Heritage Bank since 1994, currently serving
as Executive Vice President-Administration. Prior to joining the Bank, Mr.
Parry was Senior Vice President in charge of Washington banking operations of
the Washington Division of Great American First Savings Bank, a California
headquartered thrift institution.
BRIAN VANCE has been employed by Heritage Bank since 1996, currently
serving as Executive Vice President-Loan Administrator. Prior to joining the
Bank, Mr. Vance was employed for over 20 years with West One Bank, in both Idaho
and Washington. Prior to leaving West One, he was Senior Vice President and
Regional Manager of banking operations for the South Puget Sound Region.
JAMES HASTINGS has been employed by Heritage Bank since 1985, currently
serving as Senior Vice President and Treasurer. Mr. Hastings is a Certified
Public Accountant with over 20 years of banking and thrift experience either in
public accounting or with financial institutions.
<PAGE>
EXHIBIT IV-6
Heritage Bank
Pro Forma Regulatory Capital Ratios
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at
June 30, 1997
Historical, As Of ------------------
June 30, 1997 Minimum
------------------ ------------------
Percent Percent
Amount of Assets Amount of Assets
------- ---------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
GAAP Capital . . . . . . . . . . . . . . . . $25,022 10.33% $36,337 14.20%
Leverage Capital . . . . . . . . . . . . . . $27,714 11.68% $39,029 15.55%
Leverage Requirement . . . . . . . . . . . . 7,116 3.00% 7,529 3.00%
-------- -------- -------- --------
Excess . . . . . . . . . . . . . . . . . . . $20,598 8.68% $31,500 12.55%
======== ======== ======== ========
Tier 1 Risk-based Capital . . . . . . . . . $27,714 15.65% $39,029 21.70%
Tier 1 Risk-based Requirement . . . . . . . 7,085 4.00% 7,196 4.00%
-------- -------- -------- --------
Excess . . . . . . . . . . . . . . . . . . . $20,629 11.65% $31,833 17.70%
======== ======== ======== ========
Total Capital . . . . . . . . . . . . . . . $29,935 16.90% $41,250 22.93%
Risk-Based Requirement . . . . . . . . . . . 14,171 8.00% 14,391 8.00%
-------- -------- -------- --------
Excess . . . . . . . . . . . . . . . . . . . $15,764 8.90% $26,858 14.93%
======== ======== ======== ========
<CAPTION>
Pro Forma at June 30, 1997
-------------------------------------------------------------------------
Midpoint Maximum Maximum As Adjusted
---------------------- ---------------------- ---------------------
Percent Percent Percent
Amount of Assets Amount of Assets Amount of Assets
------- ---------- ------- ---------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
GAAP Capital . . . . . . . . . . . . . . . . $38,351 14.84% $40,366 15.48% $42,683 16.19%
Leverage Capital . . . . . . . . . . . . . . $41,043 16.20% $43,058 16.83% $45,375 17.54%
Leverage Requirement . . . . . . . . . . . . 7,602 3.00% 7,676 3.00% 7,760 3.00%
-------- -------- -------- -------- -------- --------
Excess . . . . . . . . . . . . . . . . . . . $33,441 13.20% $35,382 13.83% $37,615 14.54%
======== ======== ======== ======== ======== ========
Tier 1 Risk-based Capital . . . . . . . . . $41,043 22.75% $43,058 23.81% $45,375 25.01%
Tier 1 Risk-based Requirement . . . . . . . 7,215 4.00% 7,235 4.00% 7,257 4.00%
-------- -------- -------- -------- -------- --------
Excess . . . . . . . . . . . . . . . . . . . $33,828 18.75% $35,823 19.81% $38,118 21.01%
======== ======== ======== ======== ======== ========
Total Capital . . . . . . . . . . . . . . . $43,264 23.99% $45,279 25.03% $47,596 26.23%
Risk-Based Requirement . . . . . . . . . . . 14,430 8.00% 14,469 8.00% 14,514 8.00%
-------- -------- -------- -------- -------- --------
Excess . . . . . . . . . . . . . . . . . . . $28,834 15.99% $30,810 17.03% $33,081 18.23%
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT IV-7
Pro Forma Analysis Sheet
<PAGE>
Exhibit IV-7
PRO FORMA ANALYSIS SHEET
Heritage Bank
Prices as of August 15, 1997
<TABLE>
<CAPTION>
Peer Group Washington Companies All SAIF Insured
--------------- -------------------- ----------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean Median
- -------------- ------ ----------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 15.97 x 21.71x 22.12x 18.21x 14.02x 21.03x 20.89x
Price-book ratio = P/B 90.55% 1.5165 1.3674 1.7462 1.77 1.38 1.33
Price-tangible book ratio = P/TB 90.55% 1.5663 1.4129 1.8306 1.94 1.43 1.34
Price-assets ratio = P/A 19.43% 0.1995 0.2032 0.1819 0.19 0.17 0.15
<CAPTION>
Valuation Parameters
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $2,269,000 ESOP Stock Purchases (E) 8.00%
Pre-Conversion Book Value (B) $27,834,000 Cost of ESOP Borrowings (S) 0.00%-4
Pre-Conv. Tang. Book Value (TB) $27,834,000 ESOP Amortization (T) 15.00 years
Pre-Conversion Assets (A) $242,284,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 4.45% RRP Vesting (N) 5.00 years
Est. Conversion Expenses (3)(X) 2.62% Percentage Sold (PCT) 67.88%
Tax rate (TAX) 34.00%
</TABLE>
Calculation of Pro Forma Value After Conversion
<TABLE>
<S> <C> <C>
1. V= P/E * Y V= $53,034,767
---------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * B V= $53,034,767
-------------------------
1 - P/B * PCT * (1-X-E-M)
3. V= P/TB * TB V= $53,034,767
--------------------------
1 - P/TB * PCT * (1-X-E-M)
4. V= P/A * A V= $53,034,767
-------------------------
1 - P/A * PCT * (1-X-E-M)
</TABLE>
<TABLE>
<CAPTION>
Full
Gross Exchange Conversion
Conclusion Proceeds Ratio Value
- ---------- -------- -------- ----------
<S> <C> <C> <C>
Minimum $30,600,000 2.3752 $45,079,552
Midpoint $36,000,000 2.7943 $53,034,767
Maximum $41,400,000 3.2135 $60,989,982
Supermaximum Value $47,610,000 3.6955 $70,138,480
</TABLE>
(1) Pricing ratios shown reflect the midpoint of the offering.
(2) Net return reflects a reinvestment rate of 6.74 percent, and a tax rate of
34.00 percent.
(3) Estimated offering expenses based on prospectus.
(4) No cost is applicable since holding company will fund the ESOP loan.
<PAGE>
EXHIBIT IV-8
Pro Forma Effect of Conversion Proceeds
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage Bank
At the Minimum Value
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $ 45,079,552
Exchange Ratio 2.3752
Offering Proceeds $ 30,600,000
Less: Estimated Offering Expenses 867,280
------------
Net Conversion Proceeds $ 29,732,720
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $ 29,732,720
Less: Non-Cash Stock Purchases (1) 3,672,000
------------
Net Proceeds Reinvested $ 26,060,720
Estimated net incremental rate of return 4.45%
Earnings Increase $ 1,159,702
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 107,712
Less: Recognition Plan Vesting (4) 161,568
------------
Net Earnings Increase $ 890,422
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- ----------- ----------
<S> <C> <C> <C>
12 Months ended June 30, 1997 (reported) $ 2,269,000 $ 890,422 $ 3,159,422
12 Months ended June 30, 1997 (core) $ 675,000 $ 890,422 $ 1,565,422
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
Reported as of June 30, 1997 $ 27,834,000 $26,060,720 $ 53,894,720
Tangible as of June 30, 1997 $ 27,834,000 $26,060,720 $ 53,894,720
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ------------
<S> <C> <C> <C>
Reported as of June 30, 1997 $242,284,000 $26,060,720 $268,344,720
</TABLE>
(1) Includes ESOP and Recognition Plan stock purchases equal to 8.0 percent and
4.0 percent of the offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is tax-
effected at a 34.00 percent rate.
(4) Recognition plan is vested over five years, amortization expense is tax-
effected at a 34.00 percent rate.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage Bank
At the Midpoint Value
<TABLE>
<S> <C>
1. Conversion Proceeds $53,034,767
Full Conversion Value 2.7943
Exchange Ratio
Offering Proceeds $36,000,000
Less: Estimated Offering Expenses 941,800
-------
Net Conversion Proceeds $35,058,200
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $35,058,200
Less: Non-Cash Stock Purchases (1) 4,320,000
---------
Net Proceeds Reinvested $30,738,200
Estimated net incremental rate of return 4.45%
Earnings Increase $1,367,850
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 126,720
Less: Recognition Plan Vesting (4) 190,080
-------
Net Earnings Increase $1,051,050
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended June 30, 1997 (reported) $2,269,000 $1,051,050 $3,320,050
12 Months ended June 30, 1997 (core) $675,000 $1,051,050 $1,726,050
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
Reported as of June 30, 1997 $27,834,000 $30,738,200 $58,572,200
Tangible as of June 30, 1997 $27,834,000 $30,738,200 $58,572,200
<CAPTION>
Before Net Cash After
5 Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
Reported as of June 30, 1997 $242,284,000 $30,738,200 $273,022,200
</TABLE>
(1) Includes ESOP and Recognition Plan stock purchases equal to 8.0 percent and
4.0 percent of the offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is tax-
effected at a 34.00 percent rate.
(4) Recognition plan is vested over five years, amortization expense is tax-
effected at a 34.00 percent rate.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage Bank
At the Maximum Value
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $60,989,982
Exchange Ratio 3.2135
Offering Proceeds $41,400,000
Less: Estimated Offering Expenses 1,016,320
-----------
Net Conversion Proceeds $40,383,680
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $40,383,680
Less: Non-Cash Stock Purchases (1) 4,968,000
-----------
Net Proceeds Reinvested $35,415,680
Estimated net incremental rate of return 4.45%
Earnings Increase $ 1,575,998
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 145,728
Less: Recognition Plan Vesting (4) 218,592
-----------
Net Earnings Increase $ 1,211,678
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended June 30, 1997 (reported) $ 2,269,000 $ 1,211,678 $ 3,480,678
12 Months ended June 30, 1997 (core) $ 675,000 $ 1,211,678 $ 1,886,678
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
------------ ----------- ------------
Reported as of June 30, 1997 $ 27,834,000 $35,415,680 $ 63,249,680
Tangible as of June 30, 1997 $ 27,834,000 $35,415,680 $ 63,249,680
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
------------ ----------- ------------
Reported as of June 30, 1997 $242,284,000 $35,415,680 $277,699,680
</TABLE>
(1) Includes ESOP and Recognition Plan stock purchases equal to 8.0 percent and
4.0 percent of the offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is tax-
effected at a 34.00 percent rate.
(4) Recognition plan is vested over five years, amortization expense is tax-
effected at a 34.00 percent rate.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Heritage Bank
At the Supermaximum Value
<TABLE>
<CAPTION>
<S> <C>
1 Conversion Proceeds
Full Conversion Value $ 70,138,480
Exchange Ratio 3.6955
Offering Proceeds $ 47,610,000
Less: Estimated Offering Expenses 1,102,018
Net Conversion Proceeds $ 46,507,982
2 Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $ 46,507,982
Less: Non-Cash Stock Purchases (1) 5,713,200
Net Proceeds Reinvested $ 40,794,782
Estimated net incremental rate of return 4.45%
Earnings Increase $ 1,815,368
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 167,587
Less: Recognition Plan Vesting (4) 251,381
Net Earnings Increase $ 1,396,400
Net
Before Earnings After
3 Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended June 30, 1997 (reported) $ 2,269,000 $ 1,396,400 $ 3,665,400
12 Months ended June 30, 1997 (core) $ 675,000 $ 1,396,400 $ 2,071,400
Before Net Cash After
4 Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
Reported as of June 30, 1997 $ 27,834,000 $40,794,782 $ 68,628,782
Tangible as of June 30, 1997 $ 27,834,000 $40,794,782 $ 68,628,782
Before Net Cash After
5 Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
June 30, 1997 $242,284,000 $40,794,782 $283,078,782
</TABLE>
(1) Includes ESOP and Recognition Plan stock purchases equal to 8.0 percent and
4.0 percent of the offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 15 years, amortization expense is tax-
effected at a 34.00 percent rate.
(4) Recognition plan is vested over five years, amortization expense is tax-
effected at a 34.00 percent rate.
<PAGE>
EXHIBIT IV-9
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>
Net Income Less: Net Tax Effect Less: Extd
to Common Gains(Loss) @ 34% Items
---------- ----------- ---------- ----------
($000) ($000) $000) ($000)
<S> <C> <C> <C> <C>
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 2,037 793 -270 0
FFHH FSF Financial Corp. of MN 2,373 977 -332 0
FFBA First Colorado Bancorp of Co(1) 13,850 -375 128 0
FMSB First Mutual SB of Bellevue WA 4,210 -137 47 0
FWWB First Savings Bancorp of WA(1) 9,314 -701 238 0
HRZB Horizon Financial Corp. of WA 7,912 -208 71 0
IWBK Interwest SB of Oak Harbor WA 14,629 7,910 -2,689 0
KFBI Klamath First Bancorp of OR 5,494 4,252 -1,446 0
UBMT United Fin. Corp. of MT(1) 1,150 400 -136 0
WSTR WesterFed Fin. Corp. of MT 4,507 1,784 -607 0
<CAPTION>
Estimated
Core Income Estimated
to Common Shares Core EPS
---------- ---------- -------
($000) ($000) ($)
<S> <C> <C> <C>
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 2,560 2,627 0.97
FFHH FSF Financial Corp. of MN 3,018 3,033 0.99
FFBA First Colorado Bancorp of Co(1) 13,603 16,561 0.82
FMSB First Mutual SB of Bellevue WA 4,120 2,702 1.52
FWWB First Savings Bancorp of WA(1) 8,851 10,519 0.84
HRZB Horizon Financial Corp. of WA 7,775 7,417 1.05
IWBK Interwest SB of Oak Harbor WA 19,850 8,036 2.47
KFBI Klamath First Bancorp of OR 8,300 10,019 0.83
UBMT United Fin. Corp. of MT(1) 1,414 1,223 1.16
WSTR WesterFed Fin. Corp. of MT 5,684 5,565 1.02
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------
Financial Service Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws
from backgrounds in consulting, regulatory agencies and investment banking,
thereby providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (12)
James J. Oren, Vice President (10)
- --------------------------------------------------------------------------------
WASHINGTON HEADQUARTERS
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
APPRAISAL/PROSPECTUS CROSS REFERENCE SHEET
(Based on prospectus draft dated August 29, 1997)
<TABLE>
<CAPTION>
EXHIBIT NUMBER PROSPECTUS CROSS REFERENCE
- -------------- --------------------------
<S> <C>
Exhibit I-2: Audited Financial Statements Audit Financial Statements (Back of Prospectus)
Exhibit I-3: Key Operating Ratios Page 13
Exhibit I-4: Investment Portfolio Composition Page 59
Exhibit I-5: Yields and Costs Page 37
Exhibit I-6: Loan Loss Allowance Activity Pages 56,57
Exhibit I-7: Fixed and Adjustable Rate Loans Page 52
Exhibit I-8: Gap Analysis Page 43
Exhibit I-9: Loan Portfolio Composition Page 50
Exhibit I-10: Cont. Mat. of Assets and Liabilities Page 44
Exhibit I-11: Non-Performing Assets Pages 55,56
Exhibit 1-12: Deposit Composition Page 61
</TABLE>
<PAGE>
RP FINANCIAL, L.C.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
TABLE 4.3
Market Pricing Comparatives
Prices As of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ---------------
----------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ -----------------------------------
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ------ ----- ------ ------ ------ ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Special Selection Grouping(8) 22.92 65.90 0.66 18.86 28.19 118.89 25.08 118.89 27.98
State of WA 28.25 1253.31 1.47 13.97 18.21 174.62 18.19 183.06 18.83
Comparable Group
- ----------------
Special Comparative Group(8)
- -----------------------------
CFBC Community F1rst Bnkg Co. of GA 34.19 82.53 0.82 27.66 NM 123.61 20.29 123.61 NM
FBNW FirstBank Corp of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
FSPT FirstSpartan Fin. Corp. of SC 35.75 158.37 1.16 27.63 NM 129.39 34.06 129.39 NM
GOSB GSB Financial Corp. of NY 14.66 32.96 0.44 13.78 28.19 106.39 28.79 106.39 NM
MONT Montgomery Fin. Corp. of IN 11.75 19.42 0.42 11.22 NM 104.72 18.76 104.72 27.98
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------- ----------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------ ----- -------- ------ ------ ------ ---- ---- ---- ----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
Financial Institution
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Special Selection Grouping(8) 0.00 0.00 0.00 249 21.15 1.95 0.67 3.02 0.74 3.45
State of WA 0.44 1.43 24.56 7,519 10.40 0.72 0.92 9.00 1.02 11.19
Comparable Group
- ----------------
Special Comparative Group(8)
- -----------------------------
CFBC Community F1rst Bnkg Co. of GA 0.00 0.00 0.00 407 16.42 NA 0.25 1.52 0.49 2.96
FBNW FirstBank Corp of Clarkston WA 0.00 0.00 0.0O 154 18.04 1.95 0.70 3.86 0.57 3.14
FSPT FirstSpartan Fin. Corp. of SC 0.00 0.00 0 00 465 26.32 NA 0.95 3.62 1.11 4 20
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 114 27.06 NA 1.02 3.77 0.86 3.19
MONT Montgomery Fin. Corp. of IN 0.00 0.00 0.00 104 17.91 NA 0.42 2.32 0.67 3.74
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estinate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operat1ng items (includ1ng 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 div1dend 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 c1rculars, and RP Financial, LC.
calculations. The information provided in this report has been obtained from
sources we bel1eve are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, L.C.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.5
MHC INSTITUTIONS -- IMPLIED PRICING RATIOS FULL CONVERSION BASIS
FIRST LANCASTER FSB AND THE COMPARABLES
As of August IS, 1997
<TABLE>
<CAPTION>
Fully Converted
Implied Value Per Share (B)
------------------ ----------------
Implied Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ --------------------------------------
Share(1) Val(8) EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------ ------ ------ ------ ------ ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(7)
- -----------------------
Averages 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Medians --- --- --- --- 20.89 132.62 15.26 134.17 17.91
All Non-MHC State of WA(7)
- --------------------------
Averages 25.59 429.47 1.49 14.13 17.78 178.02 17.18 189.03 16.08
Medians --- --- --- --- 14.02 177.49 19.44 193.91 16.09
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 22.98 186.27 1.29 24.56 21.93 92.00 18.53 92.99 18.89
Medians --- --- --- --- 22.73 88.87 17.95 88.87 18.03
Publicly-Traded MHC Institutions, Full Conversion Basis
- --------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 25.62 130.41 1.53 26.57 22.88 96.42 17.60 96.42 16.75
FFFL FIdelity FSB, MHC of FL (47.4) 24.00 162.38 1.07 22.74 NM 105.54 16.25 106.01 22.43
SKBO First Carnegie,MHC of PA (45.0) 13.50 31.05 0.52 16.45 NM 82.07 18.89 82.07 25.96
FFSX First FS&LA, MHC of IA (46.0) 25.00 70.70 1.58 28.31 23.15 88.31 13.87 88.65 15.82
FSLA First SB SLA MHC of NJ (47.5) 27.75 201.58 1.58 25.78 24.56 107.64 17.95 114.06 17.56
GDVS Greater DV SB, MHC of PA (19.9) 16.25 53.17 0.72 19.58 NM 82.99 18.98 82.99 22.57
HARB Harbor FSB, MHC of FL (46.0) 45.75 227.38 3.20 39.73 17.53 115.15 18.63 116.98 14.30
HARS Harris SB, MHC of PA (24.2) 26.00 291.80 1.44 31.15 20.97 83.47 13.08 88.68 18.06
JXSB Jcksnville SB, MHC of IL (44.6) 17.62 22.41 0.99 21.46 NM 82.11 12.86 82.11 17.80
LFED Leeds FSB, MHC of MD (36.2) 22.00 76.01 1.22 25.00 23.16 88.00 23.56 88.00 18.03
NWSB Northwest SB, MHC of PA (29.9) 18.75 438.30 1.11 19.34 21.80 96.95 19.43 99.52 16.89
PBCT Peoples Bank, MHC of CT (37.4) 26.75 1633.17 1.49 27.82 14.46 96.15 18.35 96.19 17.95
PERT Perpetual of SC, MHC (46.8) 39.00 58.70 1.88 37.10 26.53 105.12 23.55 105.12 20.74
PFSL Pocahnts Fed, MHC of AR (46.4) 23.50 38.35 2.22 25.38 13.99 92.59 9.68 92.59 10.59
PHSB Ppls Home SB, MHC of PA (45.0) 14.75 40.71 0.85 21.17 29.50 69.67 16.43 69.67 17.35
PULB Pulaski SB, MHC of MO (29.0) 21.00 43.97 1.16 23.63 22.58 88.87 21.54 88.87 18.10
PLSK Pulaski SB, MHC of NJ (46.0) 14.37 29.75 0.69 16.72 NM 85.94 15.59 85.94 20.83
SBFL SB Fngr Lakes MHC of NY (33.1) 18.50 33.02 0.79 22.03 NM 83.98 14.04 83.98 23.42
TSBS Trenton SB, FSB MHC of NJ(35.0) 28.13 254.21 1.15 27.27 21.98 103.15 32.98 107.00 24.46
WAYN Wayne S&L Co. MHC of OH (47.8) 17.75 39.90 1.00 20.44 NH 86.84 14.51 86.84 17.75
WCFB Wbstr Cty FSB MHC of IA (45.2) 16.50 34.65 0.85 18.12 23.91 91.06 31.32 91.06 19.41
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------- ----------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ----- -------- ------ ------- ------ ------ ------ ------ ------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF - Insured Thrifts(7)
- -------------------------
Averages 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of WA(7)
- --------------------------
Averages 0.38 1.24 16.82 2,358 10.25 0.98 0.83 8.40 0.98 11.11
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 0.63 2.68 45.52 1,029 20.19 0.61 0.80 3.99 1.03 5.21
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.90 3.51 58.82 741 18.25 0.57 0.81 4.25 1.10 5.80
FFFL Fidelity FSB, MHC of FL (47.4) 0.80 3.33 74.77 999 15.40 0.30 0.57 3.45 0.78 4.73
SKBO First Carnegie, MHC of PA (45.0) 0.30 2.22 57.69 164 23.02 0.74 0.57 2.49 0.73 3.16
FFSX First FS&LA, MHC of IA (46.0) 0.48 1.92 30.38 510 15.71 0.11 0.61 3.88 0.89 5.68
FSLA First SB SLA MHC of NJ (47.5) 0.48 1.73 30.38 1,123 16.68 0.68 0.76 4.48 1.06 6.26
GDVS Greater DV SB, MHC of PA (19.9) 0.36 2.22 50.00 280 22.87 2.79 0.64 2.73 0.86 3.71
HARB Harbor FSB, MHC of FL (46.0) 1.40 3.06 43.75 1,220 16.18 0.46 1.10 6.75 1.35 8.28
HARS Harris SB, MHC of PA (24.2) 0.58 2.23 40.28 2,230 15.68 0.65 0.70 4.10 0.81 4.76
JXSB Jcksnv111e SB, MHC of IL (44.6) 0.40 2.27 40.40 174 15.66 0.39 0.44 2.57 0.80 4.63
LFED Leeds FSB, MHC of MD (36.2) 0.76 3.45 62.30 323 26.77 0.02 1.04 3.85 1.33 4.94
NWSB Northwest SB, MHC of PA (29.9) 0.32 1.71 28.83 2,256 20.04 0.72 0.94 4.48 1.21 5.79
PBCT Peoples Bank, MHC of CT (37.4) 0.68 2.54 45.64 8,901 19.08 0.90 1.32 6.85 1.06 5.51
PERT Perpetual of SC, MHC (46.8) 1.40 3.59 74.47 249 22.41 0.23 0.98 4.47 1.25 5.72
PFSL Pocahnts Fed, MHC of AR (46.4) 0.90 3.83 40.54 396 10.46 0.15 0.70 6.76 0.92 8.93
PHSB Ppls Home SB, MHC of PA (45.0) 0.00 0.00 0.00 248 23.58 NM 0.56 2.36 0.95 4.02
PULB Pulaski SB, MHC of MO (29.0) 1.00 4.76 NM 204 24.23 0.49 0.95 3.96 1.19 4.94
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 2.09 43.48 191 18.13 0.65 0.43 2.87 0.77 5.08
SBFL SB Fngr Lakes MHC of NY (33.1) 0.40 2.16 50.63 235 16.71 0.69 0.34 1.98 0.63 3.63
TSBS Trenton SB, FSB MHC of NJ(35.0) 0.35 1.24 30.43 771 31.97 0.73 1.61 4.76 1.44 4.28
WAYN Wayne S&L Co. MHC of OH (47.8) 0.62 3.49 62.00 275 16.71 0.70 0.49 2.90 0.82 4.91
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 4.85 NM 111 34.40 0.26 1.31 3.83 1.61 4.72
</TABLE>
(1) Current stock price of m1nority stock. Average of High/Low or Bid/Ask price
per share.
(2) EPS (estimated core earnings) is based on reported trailing twelve month
data, adjusted to omit non-operating gains and losses (including the SAIF
assessment) on a tax effected basis. Public MHC data reflects additional
earnings from reinvestment of proceeds of second step conversion.
(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. Ratios are pro
forma assuming a second step conversion to full stock form.
(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 (earnings adjusted to reflect second step
conversion).
(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 and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
(8) Figures estimated by RP Financial to reflect second step conversion of the
MHC to full stock form.
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.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.6
Publ1c Market Pr1cing
Heritage Bank and the Comparables
as of August 15, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------
-------------- Core Book Pricing Ratios (3)
Price Market 12-Mth Value/ ------------------------------------------
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------ ------- ------ ---- ---- ----- ------ ------
($) ($MIL) ($) ($) (X) (%) (%) (%) (X)
Heritage Bank
- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange 10.00 70.15 0.52 9.78 19.14 102.21 24.78 102.21 33.87
Range Maximum 10.00 61.00 0.57 10.37 17.53 96.44 21.97 96.44 32.33
Range Midpoint 10.00 53.04 0.63 11.04 15.98 90.56 19.43 90.56 30.73
Range Minimum 10.00 45.09 0.70 11.95 14.27 83.66 16.80 83.66 28.80
SAIF-Insured Thrifts(7)
- -----------------------
Averages 21.88 147.75 1.15 15.76 21.03 138.23 17.28 142.95 18.56
Medians --- --- --- --- 20.89 132.62 15.26 134.17 17.91
All Non-MHC State of WA(7)
- --------------------------
Averages 28.25 1253.31 1.47 13.97 18.21 174.62 18.19 183.06 18.83
Medians --- --- --- --- 14.02 177.49 19.44 193.91 16.09
Comparable Group Averaqes
- -------------------------
Averages 21.84 148.05 1.17 14.72 21.71 151.65 19.95 156.63 19.61
Medians --- --- --- --- 22.12 136.74 20.32 141.29 19.28
State of WA
- -----------
CASB Cascade SB of Everett WA(7) 14.75 37.92 0.77 8.46 24.18 174.35 10.76 174.35 19.16
FMSB First Mutual SB of Bellevue WA 21.75 58.77 1.52 10.91 13.94 199.36 13.60 199.36 14.31
FWWB First Savings Bancorp of WA 24.50 257.72 0.84 14.13 27.53 173.39 25.58 188.46 29.17
FBNW FirstBank Corp of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
HRZB Horizon Financial Corp. of WA 15.00 111.26 1.05 10.91 14.02 137.49 21.45 137.49 14.29
IWBK Interwest SB of Oak Harbor WA 39.75 319.43 2.47 15.46 21.64 257.12 17.43 262.90 16.09
STSA Sterling Financial Corp. of WA 17.75 98.81 0.90 12.41 NM 143.03 5.86 164.05 19.72
WFSL Washington FS&LA of Seattle WA 26.62 1263.44 2.14 14.66 13.72 181.58 21.93 198.81 12.44
WAMU Washington Mutual Inc. of WA 62.37 7880.89 2.42 19.30 NM NM 16.16 NM 25.77
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 17.25 45.32 0.97 17.18 22.12 100.41 21.77 100.41 17.78
FFHH FSF Financial Corp. of MN 18.12 54.96 0.99 14.16 23.23 127.97 14 53 127.97 18.30
FFBA First Colorado Bancorp of Co 17.50 289.82 0.82 11.60 20.83 150.86 19.20 150.86 21.34
FMSB First Mutual SB of Bellevue WA 21.75 58.77 1.52 10.91 13.94 199.36 13.60 199.36 14.31
FWWB First Savings Bancorp of WA 24.50 257.72 0.84 14.13 27.53 173.39 25.58 188.46 29.17
HRZB Hor1zon Financial Corp. of WA 15.00 111.26 1.05 10.91 14.02 137.49 21.45 137.49 14.29
IWBK Interwest SB of Oak Harbor WA 39.75 319.43 2.47 15.46 21.84 257.12 17.43 262.90 16.09
KFBI Klamath First Bancorp of OR 19.31 193.47 0.83 14.20 NM 135.99 26.58 135.99 23.27
UBMT United Fin. Corp. of MT 23.50 28.74 1.16 19.95 25.00 117.79 26.68 117.79 20.26
WSTR WesterFed Fin. Corp. of MT 21.75 121.04 1.02 18.73 26.85 116.12 12.67 145.10 21.32
</TABLE>
<TABLE>
<CAPTION>
Financial Characteristics(6)
Dividends(4) ----------------------------------------------------
----------------------- Reported Core MEMO:
Amount/ Payout Total Equity/ MPAs/ ------------ ----------- Exchange MEMO:
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROA Ratio Offering
------- ----- ------ ------ ------ ------ ---- ----- ----- ---- -------- --------
($) (%) (%) ($MIL) (%) (%) (%) (%) (%) (%) ($MIL)
Heritage Bank
- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange 0.10 1.01 19.41 283 24.24 0.05 1.29 5.34 0.73 3.02 3.6972 47.6
Range Maximum 0.12 1.17 20.44 278 22.78 0.05 1.25 5.50 0.68 2.98 3.2150 41.4
Range Midpoint 0.13 1.34 21.43 273 21.45 0.05 1.22 5.67 0.63 2.95 2.7956 36.0
Range Minimum 0.16 1.58 22.52 268 20.08 0.05 1.18 5.86 0.58 2.90 2.3763 30.6
SAIF-Insured Thrifts(7)
- -----------------------
Averages 0.38 1.77 29.26 1,147 12.97 0.78 0.54 5.54 0.75 7.54
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of WA(7)
- --------------------------
Averages 0.44 1.43 24.56 7,519 10.40 0.72 0.92 9.00 1.02 11.19
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averaqes
- -------------------------
Averages 0.44 2.09 35.69 768 14.28 0.30 0.97 7.38 1.11 8.41
Medians --- --- --- --- --- --- --- --- --- ---
State of WA
- -----------
CASB Cascade SB of Everett WA(7) 0.00 0.00 0.00 352 6.17 0.39 0.46 7.49 0.58 9.46
FMSB First Mutual SB of Bellevue WA 0.20 0.92 13.16 432 6.82 0.01 1.02 15.34 1.00 14.95
FWWB First Savings Bancorp of WA 0.28 1.14 33.33 1,008 14.75 0.30 1.05 6.25 1.00 5.90
FBNW FirstBank Corp of Clarkston WA O.00 0.00 0.00 154 18.04 1.95 0.70 3.86 0.57 3.14
HRZB Horizon Financial Corp. of WA 0.40 2.67 38.10 519 15.60 NA 1.57 9.99 1.54 9.80
IWBK Interwest SB of Oak Harbor WA 0.60 1.51 24.29 1,833 6.78 0.64 0.87 12.91 1.18 17.52
STSA Sterling Financial Corp. of WA 0.00 0.00 0.00 1,686 4.10 0.61 0.10 2.46 0.32 7.91
WFSL Washington FS&LA of Seattle WA 0.92 3.46 42.99 5,760 12.08 0.73 1.67 14.37 1.84 15.85
WAMU Washington Mutual Inc. of WA 1.08 1.73 44.63 48,764 5.00 0.81 0.35 6.81 0.74 14.45
Comparable Group
- ----------------
CMRN Cameron Fin. Corp. of MO 0.28 1.62 28.87 208 21.69 0.73 1.07 4.43 1.33 5.51
FFHH FSF Financial Corp. of MN 0.50 2.76 50.51 378 11.35 0.03 0.66 5.22 0.84 6.63
FFBA First Colorado Bancorp of Co 0.44 2.51 53.66 1,510 12.73 0.23 0.92 6.21 0.90 6.07
FMSB First Mutual SB of Bellevue WA 0.20 0.92 13.16 432 6.82 0.01 1.02 15.34 1.00 14.95
FWWB First Savings Bancorp of WA 0.28 1.14 33.33 1,008 14.75 0.30 1.05 6.25 1.00 5.90
HRZB Hor1zon Financial Corp. of WA 0.40 2.67 38.10 519 15.60 NA 1.57 9.99 1.54 9.80
IWBK Interwest SB of Oak Harbor WA 0.60 1.51 24.29 1,833 6.78 0.64 0.87 12.91 1.18 17.52
KFBI Klamath First Bancorp of OR 0.30 1.55 36.14 728 19.55 0.08 0.81 3.67 1.23 5.54
UBMT United Fin. Corp. of MT 0.98 4.17 NM 108 22.65 0.42 1.09 4.70 1.34 5.80
WSTR WesterFed Fin. Corp. of MT 0.44 2.02 43.14 956 10.91 0.25 0.63 5.09 0.79 6.41
</TABLE>
<PAGE>
EXHIBIT II-2
Demographic/Economic Reports
<PAGE>
STATE DEMOGRAPHIC REPORT
STATE 00
STATE NAME UNITED STATES
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
1980 226,542,204 0-4 7.2 Total $35,584
1990 248,709,873 5-9 7.4 Householder less than 35 $30,999
1997 267,805,150 10-14 7.1 Householder 35-44 $40,281
2002 281,208,787 15-19 7.1 Householder 45-54 $45,940
20-24 6.5 Householder 55-64 $39,611
Population Growth Rate 1 25-44 31.4 Householder 65+ $22,603
45-64 20.5
65-84 11.3
Households 85+ 1.4
- ---------- 18+ 74.3
1990 91,947,410
1997 99,019,931 Spending Potential Index*
2002 104,000,643 -------------------------
Auto Loan 100
Median Age Home Loan 100
---------- Investments 100
Household Growth Rate 1 1990 32.9 Retirement Plans 100
Average Household Size 2.64 1997 34.8 Home Repair 100
Lawn & Garden 100
Families Remodeling 100
- -------- Male/Female Ratio 95.9 Appliances 100
1990 64,517,947 Electronics 100
1997 68,999,546 Per Capita Income $18,100 Furniture 100
Restaurants 100
Family Growth Rate 0.9 1997 Household Income* Sporting Goods 100
--------------------- Theater/Concerts 100
Base 99,019,225 Toys & Hobbies 100
Race 1990 1997 %less than $15K 17.7 Travel 100
- ---- ---- ---- % $15K-25K 14.4 Video Rental 100
% White 80.3 78.4 % $25K-50K 33.5 Apparel 100
% Black 12.1 12.4 % $50K-100K 26.5 Auto Aftermarket 100
% Asian % $100K-150K 5.4 Health Insurance 100
/Pacific Isl. 2.9 3.7 %greater than $150K 2.6 Pets & Supplies 100
% Hispanic* .9 10.8
Median Househoid Income
-----------------------
1997 $36,961
2002 $42,042
</TABLE>
* 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 7/8/97
<PAGE>
STATE DEMOGRAPHIC REPORT
STATE 53
STATE NAME WASHINGTON
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
1980 4,132,353 0-4 7.1 Total $35,220
1990 4,866,692 5-9 7.5 Householder less than 35 $29,181
1997 5,622,133 10-14 7.4 Householder 35-44 $39,261
2002 6,143,145 15-19 7.1 Householder 45-54 $46,172
20-24 6.6 Householder 55-64 $40,443
25-44 30.9 Householder 65+ $22,358
45-64 21.5
65-84 10.5
Population Growth Rate #2 85+ 1.4
18+ 73.9
Households Spending Potential Index*
- ---------- ------------------------
1990 1,872,431 Auto Loan 100
1997 2,150,214 Home Loan 99
2002 2,343,179 Investments 98
Retirement Plans 98
Median Age Home Repair 99
---------- Lawn & Garden 99
Household Growth Rate 1.9 1990 33.1 Remodeling 101
Average Household Size 2.56 1997 35.1 Appliances 100
Electronics 100
Furniture 100
Families Male/Female Ratio 98.3 Restaurants 101
- -------- Sporting Goods 98
1990 1,264,934 Theater/Concerts 98
1997 1,478,750 Per Capita Income $ 17,434 Toys & Hobbies 100
Travel 97
Family Growth Rate 2.2 1997 Household Income* Video Rental 99
----------------------- Apparel 100
Base 2,150,211 Auto Aftermarket 99
Race 1990 1997 %less than $15K 16.8 Health Insurnce 99
- ---- ------ ------ %$15K-25K 15.4 Pets & Supplies 99
% White 88.5 86.4 %$25K-50K 36.1
% Black 3.1 3.3 %$50K-100K 25.7
% Asian %$100K-150K 4.2
/Pacific Isl. 4.3 5.7 %greater than $150K 1.8
% Hispanic* 4.4 5.5
Median Household Income
------------------------
1997 $ 36,073
2002 $ 38,812
</TABLE>
- -------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
COUNTY DEMOGRAPHIC REPORT
STATE/COUNTY 53045
COUNTY NAME MASON WA
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ----------- --------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1980 31,184 0-4 6 Total $28,727
1990 38,341 5-9 6.4 Householder less than 35 $26,379
1997 49,995 10-14 7.1 Householder 35-44 $32,359
2002 58,030 15-19 7.1 Householder 45-54 $38,292
20-24 5.1 Householder 55-64 $34,490
25-44 26.1 Householder 65+ $18,408
Population Growth Rate 3.7 45-64 24.3
65-84 16.5
Households 85+ 1.4
- ---------- 18+ 76
1990 14,565
1997 18,983 Spendino Potential Index*
2002 22,108 -------------------------
Auto Loan 100
Median Age Home Loan 79
---------- Investments 91
1990 36.9 Retirement Plans 90
Household Growth Rate 3.7 1997 40.2 Home Repair 97
Average Household Size 2.53 Lawn & Garden 97
Remodeling 116
Families Male/Female Ratio 105.5 Appliances 101
- -------- Electronics 94
1990 10,688 Furniture 86
1997 14,222 Per Capita Income $13,979 Restaurants 88
Sporting Goods 97
Family Growth Rate 4 1997 Household Income* Theater/Concerts 89
--------------------- Toys & Hobbies 99
Base 18,983 Travel 87
Race 1990 1997 %less than $15K 21.2 Video Rental 98
- ---- ------ ----- %$15K-25K 18.6 Apparel 89
% White 93.3 92.4 %$25K-50K 39.1 Auto Aftermarket 92
% Black 0.9 1 %$50K-100K 18.3 Health Insurance 104
% Asian %$100K-150K 2.1 Pets & Supplies 99
/Pacific Isl. 1.2 1.6 %greater than $150K 0.7
% Hispanic* 2.3 2.9
Median Household Income
-----------------------
1997 $ 29,560
2002 $ 33,765
</TABLE>
- --------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
COUNTY DEMOGRAPHIC REPORT
STATE/COUNTY 53067
COUNTY NAME THURSTON WA
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ------------------------------
<S> <C> <C> <C> <C>
1980 124,264 0-4 6.7 Total $32,832
1990 161,238 5-9 7.1 Householder less than 35 $26,711
1997 201,629 10-14 7.5 Householder 35-44 $36,292
2002 229,483 15-19 7.5 Householder 45-54 $43,419
20-24 6.7 Householder 55-64 $36,763
25-44 29.9 Householder 65+ $21,759
45-64 22.7
Population Growth Rate 3.1 65-84 10.4
85+ 1.5
Households 18+ 74 Spending Potential Index*
- ---------- ------------------------
1990 62,150 Auto Loan 100
1997 77,102 Home Loan 96
2002 87,506 Investments 95
Median Aqe Retirement Plans 95
---------- Home Repair 98
Household Growth Rate 3 1990 33.7 Lawn & Garden 97
Average Household Size 2.58 1997 35.7 Remodeling 102
Appliances 100
Electronics 100
Furniture 99
Families Male/Female Ratio 95.2 Restaurants 100
- -------- Sporting Goods 98
1990 43,336 Theater/Concerts 96
1997 55,301 Per Capita Income $15,967 Toys & Hobbies 100
Travel 93
Family Growth Rate 3.4 1997 Household Income* Video Rental 99
---------------------- Apparel 99
Base 77,102 Auto Aftermarket 98
Race 1990 1997 %less than $15K 15.7 Health Insurance 98
- ---- ------- ------ %$15K-25K 16.5 Pet & Supplies 99
% White 91.9 90 %$25K-50K 38.7
% Black 1.8 2.1 %$50K-100K 25.3
% Asian %$100K-150K 3
/Pacific Isl. 3.8 5.1 %greater than $150K 0.8
% Hispanic* 3 3.9
Median Household Income
-----------------------
1997 $35,401
2002 $38,217
</TABLE>
- --------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
COUNTY DEMOGRAPHIC REPORT
STATE/COUNTY 53053
COUNTY NAME PIERCE WA
<TABLE>
<CAPTION>
Popuiation 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
1980 485,667 0-4 7.9 Total $34,984
1990 586,203 5-9 7.7 Householder less than 35 $29,329
1997 666,121 10-14 7.4 Householder 35-44 $38,302
2002 721,239 15-19 7.2 Householder 45-54 $46,477
20-24 7.4 Householder 55-64 $40,712
25-44 31.5 Householder 65+ $23,108
Population Growth Rate 1.8 45-64 19.9
65-84 9.7
Households 85+ 1.2 SPENDING POTENTIAL INDEX*
- ---------- 18+ 73 ------------------------
1990 214,652 Auto Loan 98
1997 243,653 Home Loan 96
2002 263,512 Investments 95
Median Age Retirement Plans 94
---------- Home Repair 98
Household Growth Rate 1.8 1990 31.3 Lawn & Garden 97
Average Household Size 2.64 1997 33.1 Remodeling 99
Appliances 98
Families Male/Female Ratio 99.6 Electronics 98
- -------- Fumiture 98
1990 151,672 Restaurants 98
1997 176,019 Per Capita Income $16,543 Sporting Goods 96
Theater/Concerts 96
Family Growth Rate 2.1 1997 Household Income* Toys & Hobbies 98
--------------------- Travel 94
Base 243,653 Video Rental 98
Race 1990 1997 %less than $15K 15.6 Apparel 97
- ---- ------ ------ %$15K-25K 15 Auto Aftermarket 97
% White 85.1 82.3 %$25K-50K 37 Health Insurance 97
% Black 7.2 7.9 %$50K-100K 26.9 Pets & Supplies 98
% Asian %$100K-150K 4.1
/Pacific Isl. 5 6.6 %greater than $150K 1.3
% Hispanic* 3.5 4.6
Median Household Income
-----------------------
1997 $36,868
2002 $41,933
</TABLE>
- --------------------------------------------------------------------------------
* 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 7/8/97
<PAGE>
EXHIBIT II-3
Sources of Personal Income/Employment Sectors
<PAGE>
August 19, 1997
PERSONAL INCOME BY MAJOR SOURCE AND
EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
(53-000) WASHINGTON
<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) 85,837,927 94,420,291 101,206,147 109,678,572 114,808,532 120,359,599
Nonfarm personal income 84,551,830 93,090,718 99,832,573 108,136,078 113,006,982 119,011,808
Farm income 2/ 1,286,097 1,329,573 1,373,574 1,542,494 1,801,550 1,347,791
Population (thousands) 3/ 4,746.3 4,901.2 5,018.2 5,146.1 5,258.7 5,343.2
Per capita personal income (dollars) 18,085 19,265 20,168 21,313 21,832 22,526
Derivation of total personal income
Earnings by place of work 61,720,547 67,714,969 72,686,190 79,506,546 82,620,602 86,489,904
Less: Persona1 cont. for socia1 insur. 4/ 3,943,060 4,348,410 4,604,523 4,949,475 5,152,453 5,531,690
Plus: Adjustment for residence 5/ 819,201 904,840 981,591 1,039,383 1,113,048 1,208,185
Equals: Net earn. by place of residence 58,596,688 64,271,399 69,063,258 75,596,454 78,581,197 82,166,399
Plus: Dividends, interest, and rent 6/ 14,705,624 16,268,165 16,519,752 16,953,333 17,756,682 18,765,320
Plus: Transfer payments 12,535,615 13,880,727 15,623,137 17,128,785 18,470,653 19,427,880
Earnings by place of work
Components of Earnings:
Wages and salaries 48,871,618 54,138,170 57,960,221 62,938,652 64,643,379 67,701,950
Otner labor income 4,221,517 4,778,362 5,389,265 6,085,587 6,549,704 7,051,462
Proprietors' income 7/ 8,627,412 8,798,437 9,336,704 10,482,307 11,427,519 11,736,492
Farm proprietors' income 872,626 837,953 889,510 1,064,916 1,285,104 810,010
Nonfarm proprietors' income 7,754,786 7,960,484 8,447,194 9,417,391 10,142,415 10,926,482
Earnings by Industry:
Farm earnings 1,286,097 1,329,573 1,373,574 1,542,494 1,801,550 1,347,791
Nonfarm earnings 60,434,450 66,385,396 71,312,616 77,964,052 80,819,052 85,142,113
Private earnings 49,446,842 54,365,159 58,078,596 63,632,562 65,780,047 69,619,370
Ag. serv., for., fish., and other 8/ 901,691 1,068,518 1,189,304 1,160,267 1,134,947 1,214,162
Mining 160,853 169,335 176,685 169,823 163,915 182,024
Construction 3,985,418 4,509.377 4,776,033 5,194,479 5,365,643 5,763,916
Manufacturing 12,887,987 13,802,351 13,800,156 14,645,082 14,460,971 14,897,039
Nondurable goods 3,219,702 3,509,449 3,309,438 3,495,486 3,703,041 3,940,838
Durable goods 9,668,285 10,292,902 10,490,718 11,149,596 10,757,930 10,956,201
Transportation and public utilities 3,918,864 4,198,698 4,439,202 4,751,763 4,960,036 5,207,909
Wholesale trade 3,810,856 4,261,944 4,572,855 4,930,327 5,074,603 5,430,529
Retail trade 6,407,801 6,966,200 7,374,321 7,915,781 8,252,821 8,849,976
Finance, insurance, and real estate 3,266,391 3,581,681 3,790,542 4,544,021 4,835,997 4,838,003
Services 14,106,981 15,807,055 17,959,498 20,321,019 21,531,114 23,235,812
Government and government enterprises 10,987,608 12,020,Z37 13,234,020 14,331,490 15,039,005 15,522,743
Federal, civilian 2,246,275 2,447,024 2,598,514 2,734,296 2,864,954 2,943,175
Military 1,381,118 1,458,485 1,561,706 1,664,826 1,638,036 1,654,083
State and loc 7,360,215 8,114,728 9,073,800 9,932,368 10,536,015 10,925,485
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
(53-045) MASON WASHINGTON
<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) 506,103 551,277 600,128 654,180 690,838 729,638
Nonfarm personal income 504,868 549,238 599,728 653,167 689,743 728,897
Fanm income 2/ 1,235 2,039 400 1,013 1,095 741
Population (thousands) 3/ 37.3 38.7 40.7 42.5 44.3 45.9
Per capita personal income (dollars) 13,555 14,242 14,743 15,386 15,599 15,908
Derivation of total personal income
Earnings by place of work 231,753 251,113 270,338 295,617 313,454 333,301
Less: Personal cont. for social insur. 4/ 16,265 17,516 18,764 20,229 21,737 23,683
Plus: Adjustment for residence 5/ 56,383 64,657 69,721 75,964 76,290 76,557
Equals: Net earn. by place of residence 271,871 298,254 321,295 351,352 368,007 386,175
Plus: Dividends. interest. and rent 6/ 112,275 119,761 123,077 128,998 131,913 139,181
Plus: Transfer payments 121,957 133,262 155,756 173,830 190,918 204,282
EARNINGS by place of work
COMPONENTS OF EARNINGS:
Wages and salaries 178,880 194,741 210,562 227,632 239,874 254,269
Other labor income 15,198 16,642 18,941 20,969 23,246 25,009
Proprietors' income 7/ 37,675 39,730 40,835 47,016 50,334 54,023
Fanm proprietors' income 324 61 131 716 746 382
Nonfarm proprietors' income 37,351 39,669 40,704 46,300 49,588 53,641
Earnings by Industry:
Fanm earnings 1,235 2,039 400 1,013 1,095 741
Nonfanm earnings 230,518 249,074 269,938 294,604 312,359 332,560
Private earnings 170,251 184,064 194,765 212,432 225,208 240,426
Ag. serv., for., fish., and other 8/ 7,230 7,718 6,876 7,809 7,992 8,550
Mining 149 333 744 716 829 995
Construction 14,112 20,432 29,658 34,627 38,180 40,930
Manufacturing 70,059 69,163 66,607 68,803 69,593 71,312
Nondurable goods 7,451 8,758 9,107 9,581 10,356 11,119
Durable goods 62,608 60,405 57,500 59,222 59,237 60,193
Transportation and public utilities 8,034 10,212 9,501 10,041 11,231 12,380
Wholesale trade 5,180 6,755 6,673 6,628 7,608 7,836
Retail trade 28,863 30,568 31,870 34,989 36,788 39,264
Finance, insurance, and real estate 6,654 6,982 8,303 10,166 11,169 12,520
Services 29,970 31,901 34,533 38,653 41,818 46,639
Government and government enterprises 60,267 65,010 75,173 82,172 87,151 92,134
Federal, civilian 3,614 3,917 3,734 3,752 3,891 4,251
Mi1itary 1,221 1,286 1,341 1,467 1,536 1,575
State and local 55,432 59,807 70,098 76,953 81,724 86,308
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
(53-053) PIERCE WASHINGTON
<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) 9,063,251 10,038,231 10,646,663 11,491,193 12,047,345 12,683,943
Nonfanm personal income 9,030,695 10,006,975 10,609,037 11,447,298 12,007,971 12,649,848
Fanm income 2/ 32,556 31,256 37,626 43,895 39,374 34,095
Population (thousands) 3/ 570.5 590.5 605.0 619.5 631.9 638.3
Per capita personal income (dollars) 15,888 16,999 17,598 18,549 19,066 19,870
Derivation of total personal income
Earnings by place of work 5,353,535 5,806,045 6,182,798 6,721,704 7,140,962 7,533,892
Less: Personal cont. for social insur. 4/ 344,913 374,581 392,793 420,794 449,970 486,065
Plus: Adjustment for residence 5/ 1,112,893 1,252,903 1,409,597 1,537,287 1,480,802 1,551,152
Equals: Net earn. by place of residence 6,121,515 6,684,367 7,199,602 7,838,197 8,171,794 8,598,979
Plus: Dividends, interest, and rent 6/ 1,318,219 1,567,263 1,440,662 1,454,826 1,507,665 1,594,945
Plus: Transfer payments 1,623,517 1,786,601 2,006,399 2,198,170 2,367,886 2,490,019
Earnings by place of work
Components of Earnings:
Wages and salaries 4,452,747 4,848,764 5,130,733 5,527,494 5,844,864 6,136,464
Other labor income 319,458 361,413 406,527 459,444 506,371 552,374
Proprietors' income 7/ 581,330 595,868 645,538 734,766 789,727 845,054
Farm proprietors' income 18,911 16,818 22,860 30,050 25,196 19,670
Nonfarm proprietors' income 562,419 579,050 622,678 704,716 764,531 825,384
Earnings by Industry:
Farm earnings 32,556 31,256 37,626 43,895 39,374 34,095
Nonfarm earnings 5,320,979 5,774,789 6,145,172 6,677,809 7,101,588 7,499,797
Private earnings 3,679,999 4,050,321 4,303,062 4,740,781 5,025,112 5,377,204
Ag. serv., for., fish., and other 8/ 41,802 52,093 57,086 65,436 69,812 73,479
Mining 4,855 5,153 6,266 6,848 7,177 7,549
Construction 380,892 434,418 451,479 478,054 518,380 569,690
Manufacturing 659,522 694,108 687,795 695,225 704,779 819,009
Nondurable goods 271,270 286,257 299,733 323,141 333,206 358,325
Durable goods 388,252 407,851 388,062 372,084 371,573 460,684
Transportation and public utilities 305,627 340,516 365,426 392,261 414 256 423,360
Wholesale trade 287,133 315,750 316,064 351,798 379,838 408,376
Retail trade 611,237 654,307 701,690 772,071 805,803 870,042
Finance, insurance, and real estate 227,745 249,866 272,902 359,481 395,984 387,995
Services 1,161,186 1,304,110 1,444,354 1,619,607 1,729,083 1,817,704
Government and government enterprises 1,640,980 1,724,468 1,842,110 1,937,028 2,076 476 2,122,593
Federal, civilian 291,809 306,527 327,861 307,866 348,465 354,124
Military 618,873 601,793 609,553 639,539 673,600 668,680
State and local 730,298 816,148 904,696 989,623 1,054,411 1,099,789
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
WASHINGTON
(53-067) THURSTON
<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) 2,651,612 2,946,318 3,232,859 3,516,523 3,734,018 3,950,934
Nonfarm personal income 2,630,467 2,924,405 3,209,464 3,487,450 3,707,955 3,924,758
Farm income 2/ 21,145 21,913 23,395 29,073 26,063 26,176
Population (thousands) 3/ 156.4 163.0 169.5 176.6 183.4 187.2
Per capita personal income (dollars) 16,956 18,073 19,069 19,908 20,364 21,101
Derivation of total personal income
Earnings by place of work 1,574,918 1,751,999 1,966,104 2,160,958 2,300,006 2,411,366
Less: Personal cont, for social insur, 4/ 95,757 107,337 117,827 127,192 136,247 146,445
Plus: Adjustment for residence 5/ 253,537 284,735 290,344 319,053 328,871 369,866
Equals: Net earn, by place of residence 1,732,698 1,929,397 2,138,621 2,352,819 2,492,630 2,634,787
Plus: Dividends, interest, and rent 6/ 452,559 494,193 501,028 522,128 544,760 575,846
Plus: Transfer payments 466,355 522,728 593,210 641,576 696,628 740,301
Earnings by place of work
Components of Earnings:
Wages and salaries 1,299,416 1,453,585 1,630,863 1,777,990 1,887,461 1,967,609
Other labor income 95,442 109,805 130,040 147,578 164,393 176,782
Proprietors' income 7/ 188,060 188,609 205,201 235,390 248,152 266,975
Farm proprietors' income 11,828 11,621 12,773 19,177 15,046 15,030
Nonfarm proprietors' income 168,232 176,988 192,428 216,213 233,106 251,945
Earnings by Industry:
Farm earnings 21,145 21,913 23,395 29,073 26,063 26,176
Nonfarm earnings 1,553,773 1,730,086 1,942,709 2,131,885 2,273,943 2,385,190
Private earnings 863,109 962,939 1,070,875 1,174,548 1,262,385 1,363,442
Ag. serv.. for. fish.. and other 8/ 16,864 18,432 20,177 21,073 22,174 23,861
Mining 1,663 1,633 2,162 2,486 2,623 3,015
Construction 99,835 117,078 127,581 132,033 138,107 152,026
Manufacturing 109,887 114,747 123,710 138,127 145,548 160,113
Nondurable goods 55,914 59,491 60,284 67,353 70,073 75,418
Durable goods 53,973 55,256 63,426 70,774 75,475 84,695
Transportation and public utilities 60,011 60,244 59,815 62,734 69,602 72,167
Wholesale trade 46,892 60,514 69,936 67,613 66,492 70,644
Retail trade 174,194 188,430 211,629 230,218 244,397 265,456
Finance, insurance, and real estate 47,425 52,081 56,434 72,092 79,694 82,678
Services 306,338 349,780 399,431 448,172 493,748 533,482
Government and government enterprises 690,664 767,147 871,834 957,337 1,011,558 1,021,748
Federal, civilian 27,830 32,016 32,251 34,180 37,142 40,373
Military 7,919 8,042 8,617 10,374 10,358 10,849
State and local 654,915 727,089 830,966 912,783 964,058 970,526
</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 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(53-000) WASHINGTON
<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 2,709,394 2,849,112 2,899,285 2,954,509 3,001,833 3,071,025
By Type:
Wage and salary employment 2,261,708 2,369,933 2,388,656 2,424,985 2,465,499 2,526,349
Proprietors' employment 447,686 479,179 510,629 529,524 536,334 544,676
Farm proprietors' employment 37,971 36,838 36,647 36,809 35,565 35,077
Nonfarm proprietors' employment 2/ 409,715 442,341 473,982 492,715 500,769 509,599
By Industry:
Farm employment 78,800 82,364 78,769 70,304 74,373 78,495
Nonfarm employment 2,630,594 2,766,748 2,820,516 2,884,205 2,927,460 2,992,530
Private employment 2,173,067 2,291,854 2,336,034 2,387,944 2,427,505 2,486,235
Ag. serv. for. fish. and other 3/ 45,147 48,776 51,830 51,354 55,800 57,724
Mining 5,494 5,507 5,288 4,897 4,810 4,911
Construction 145,151 159,794 162,862 169,395 170,138 175,562
Manufacturing 380,605 388,741 370,157 366,230 361,537 359,011
Transportation and public utilities 121,821 126,936 128,141 128,755 130,564 134,290
Wholesale trade 134,486 141,816 144,706 148,993 148,793 155,508
Retail trade 449,430 470,056 478,678 494,467 501'757 518,825
Finance, insurance, and real estate 213,507 219,959 223,535 226,232 231,400 232,587
Services 677,426 730,269 770,837 797,621 822,706 847,817
Government and government enterprises 457,527 474,894 484,482 496,261 499,955 506,295
Federal, civilian 71,827 74,794 72,965 73,471 72,205 72,188
Military 80,627 79,718 78,443 79,058 76,603 75,289
State and local 305,073 320,382 333,074 343,732 351,147 358,818
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC
Table CA25 INFORMATION SYSTEM
BUREAU OF ECONOMIC
June 1996 ANALYSIS
<PAGE>
August 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
WASHINGTON
(53-045) MASON
<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 12,871 13,715 13,975 14,132 14,612 15,124
By Type:
Wage and salary employment 9,865 10,444 10,367 10,517 10,920 11,367
Proprietors' employment 3,006 3,271 3,608 3,615 3,692 3,757
Farm proprietors' employment 194 188 187 188 182 179
Nonfarm proprietors' employment 2/ 2,812 3,083 3,421 3,427 3,510 3,578
By Industry:
Farm employment 305 414 214 211 208 208
Nonfarm employment 12,566 13,301 13,761 13,921 14,404 14,916
Private employment 9,791 10,467 10,753 10,814 11,177 11,564
Ag. serv for. fish. and other 3/ 623 723 657 590 646 623
Mining 15 19 19 16 17 18
Construction 666 833 1,088 1,256 1,307 1,343
Manufacturing 2,279 2,264 2,085 1,923 1,913 1,986
Transportation and public utilities 372 440 412 389 442 478
Wholesale trade 316 423 423 402 440 460
Retail trade 2,232 2,293 2,301 2,429 2,484 2,565
Finance, insurance, and real estate 955 942 1,134 1,036 1,089 1,136
Services 2,333 2,530 2,634 2,773 2,839 2,955
Government and government enterprises 2,775 2,834 3,008 3,107 3,227 3,352
Federal, civilian 120 130 120 114 115 115
Military 200 199 206 215 210 204
State and local 2,455 2,505 2,682 2,778 2,902 3,033
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION
SYSTEM BUREAU OF ECONOMIC
Table CA25 June 1996 ANALYSIS
<PAGE>
August 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(53-053) PIERCE WASHINGTON
<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 269,376 278,439 279,827 286,894 294,628 302,747
By Type:
Wage and salary employment 226,433 232,782 230,419 234,857 241,854 249,137
Proprietors' employment 42,943 45,657 49,408 52,037 52,774 53,610
Farm proprietors' employment 1,366 1,331 1,325 1,328 1,283 1,265
Nonfarm proprietors' employment 2/ 41,577 44,326 48,083 50,709 51,491 52,345
By Industry
Fanm employment 2,639 2,515 2,405 2,139 2,128 2,166
Nonfarm employment 266,737 275,924 277,422 284,755 292,500 300,581
Private employment 194,889 204,397 208,114 215,405 221,349 228,659
Ag.serv.,for fish., and other 3/ 2,745 2,938 3,226 3,312 3,758 3,860
Mining 232 244 238 260 273 267
Construction 15,208 16,742 16,545 17,003 17,519 18,322
Manufacturing 23,843 23,681 22,338 22,004 21,608 23,600
Transportation and public utilities 10,026 10,595 10,959 11,134 11,583 11,728
Wholesale trade 10,508 10,898 10,994 11,791 12,342 12,779
Retail trade 44,955 46,546 47,740 50,452 50,774 52,927
Finance, insurance, and real estate 20,315 21,103 21,894 22,530 23,559 23,460
Services 67,057 71,650 74,180 76,919 79,933 81,716
Government and government enterprises 71,848 71,527 69,308 69,350 71,151 71,922
Federal, civilian 11,154 11,215 10,905 10,606 11,063 11,166
Military 31,076 28,877 25,930 25,359 26,011 25,659
State and local 29,618 31,435 32,473 33,385 34,077 35,097
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(53-067) THURSTON WASHINGTON
<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 79,225 84,094 88,142 91,120 93,653 96,222
By Type:
Wage and salary employment 65,702 69,322 72,085 74,013 76,307 78,588
Proprietors' employment 13,523 14,772 16,057 17,107 17,346 17,634
Fanm proprietors' employment 895 872 868 870 841 830
Nonfanm proprietors' employment 2/ 12,628 13,900 15,189 16,237 16,505 16,804
By Industry:
Farm employment 1,619 1,489 1,496 1,348 1,388 1,438
Nonfarm employment 77,606 82,605 86,646 89,772 92,265 94,784
Private employment 50,549 54,054 56,730 59,215 61,385 63,777
Ag.serv.,for.,fish and other 3/ 1,370 1,387 1,427 1.494 1.738 1.751
Mining 104 96 96 121 130 136
Construction 4,139 4,638 4,999 5,051 5,106 5,244
Manufacturing 4,263 4,377 4,118 4,524 4,733 4,972
Transportation and public utilities 2,250 2,174 2,128 2,165 2,344 2,351
Wholesale trade 1,959 2,363 2,607 2,479 2,441 2,581
Retai1 trade 13,592 14,082 14,800 15,539 15,856 16,678
Finance, insurance, and real estate 4,626 4,985 5,222 5,463 5,672 5,749
Services 18,246 19,952 21,333 22,379 23,365 24,315
Government and government enterprises 27,057 28,551 29,916 30,557 30,880 31,007
Federal, civilian 833 913 855 877 908 960
Military 953 945 971 1,035 983 963
State and local 25,271 26,693 28,090 28,645 28,989 29,084
</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 shcwn to avoid disclosure of confidential information.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(53-000) WASHINGTON
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 85,837,927 94,420,291 101,206,147 109,678,572 114,808,532 120,359,599
Nonfarm personal income 84,551,830 93,090,718 99,832,573 108,136,078 113,006,982 119,011,808
Farm income 1,286,097 1,329,573 1,373,574 1,542,494 1,801,550 1,347,791
Derivation of Total Personal Income
Net earnings 1/ 58,596,688 64,271,399 69,063,258 75,596,454 78,581,197 82,166,399
Transfer payments 12,535,615 13,880,727 15,623,137 17,128,785 18,470,653 19,427,880
Income maintenance 2/ 936,599 1,033,494 1,269,911 1,463,732 1,595,315 1,675,315
Unemployment insurance 395,663 479,161 672,953 940,858 1,148,628 1,058,170
Retirement and other 11,203,353 12,368,072 13,680,273 14,724,195 15,726,710 16,694,395
Dividends, interest, and rent 14,705,624 16,268,165 16,519,752 16,953,333 17,756,682 18,765,320
Population (thousands) 3/ 4,746.3 4.901.2 5,018.2 5.146.1 5,258.7 5,343.2
Per Capita Incomes ($) 4/
Per capita personal income 18,085 19,265 20,168 21,313 21,832 22,526
Per capita net earnings 12,346 13,113 13,763 14,690 14,943 15,378
Per capita transfer payments 2,641 2,832 3,113 3,328 3,512 3,636
Per capita income maintenance 197 211 253 284 303 314
Per capita unemployment insurance 83 98 134 183 218 198
Per capita retirement & other 2,360 2,523 2,726 2,861 2,991 3,124
Per capita dividends, interest, & rent 3,098 3,319 3,292 3,294 3,377 3,512
Place of Work Profile
Total earnings (place of work, $000) 61,720,547 67,714,969 72,686,190 79,506,546 82,620,602 86,489,904
Wages and salaries 48,871,618 54,138,170 57,960,221 62,938,652 64,643,379 67,701,950
Other labor income 4,221,517 4,778,362 5,389,265 6,085,587 6,549,704 7,051,462
Proprietors' income 8,627,412 8,798,437 9,336,704 10,482,307 11,427,519 11,736,492
Nonfarm proprietors' income 7,754,786 7,960,484 8,447,194 9,417,391 10,142,415 10,926,482
Farm proprietors' income 872,626 837,953 889,510 1,064,916 1,285,104 810,010
Total employment (full & part-time) 2,709,394 2,849,112 2,899,285 2,954,509 3,001,833 3,071,025
Wage and salary jobs 2,261,708 2,369,933 2,388,656 2,424,985 2,465,499 2,526,349
Number of proprietors 447,686 479,179 510,629 529,524 536,334 544,676
Number of nonfarm proprietors /5 409,715 442,341 473,982 492,715 500,769 509,599
Number of farm proprietors 37,971 36,838 36,647 36,809 35,565 35,077
Average earnings per job ($) 22,780 23,767 25,070 26,910 27,523 28,163
Wage & salary earnings per job ($) 21,608 22,844 24,265 25,954 26,219 26,798
Average earnings per nonfarm proprietor ($) 18,927 17,996 17,822 19,113 20,254 21,441
</TABLE>
See footnotes at end of table REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(53-045) MASON WASHINGTON
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 506,103 551,277 600,128 654,180 690,838 729,638
Nonfarm personal income 504,868 549,238 599,728 653,167 689,743 728,897
Farm income 1,235 2,039 400 1,013 1,095 741
Derivation of Total Personal Income
Net earnings 1/ 271,871 298,254 321,295 351,352 368,007 386,175
Transfer payments 121,957 133,262 155,756 173,830 190,918 204,282
Income maintenance 2/ 8,134 9,179 11,592 13,659 14,721 16,632
Unemployment insurance 2,699 3,481 5,298 6,663 9,226 8,777
Retirement and other 111,124 120,602 138,866 153,508 166,971 178,873
Dividends, interest, and rent 112,275 119,761 123,077 128,998 131,913 139,181
Population (thousands) 3/ 37.3 38.7 40.7 42.5 44.3 45.9
Per Capita Incomes ($) 4/
Per capita personal i 11,736,492
Nonfarm proprietors' income 7,754,786 7,960,484 8,447,194 9,417,391 10,142,415 10,926,482
Farm proprietors' income 872,626 837,953 889,510 1,064,916 1,285,104 810,010
Total employment (full & part-time) 2,709,394 2,849,112 2,899,285 2,954,509 3,001,833 3,071,025
Wage and salary jobs 2,261,708 2,369,933 2,388,656 2,424,985 2,465,499 2,526,349
Number of proprietors 447,686 479,179 510,629 529,524 536,334 544,676
Number of nonfarm proprietors /5 409,715 442,341 473,982 492,715 500,769 509,599
Number of farm proprietors 37,971 36,838 36,647 36,809 35,565 35,077
Average earnings per job ($) 22,780 23,767 25,070 26,910 27,523 28,163
Wage & salary earnings per job ($) 21,608 22,844 24,265 25,954 26,219 26,798
Average earnings per nonfarm proprietor ($) 18,927 17,996 17,822 19,113 20,254 21,441
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSI
</TABLE>
<PAGE>
August 19,1997
REGIONAL ECONOMIC PROFILE
For Counties and
Metropolitan Areas
(53-045) MASON WASHINGTON
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 506.103 551.277 600.128 654.180 690.838 729.638
Nonfarm personal income 504.868 549.238 599.728 653.167 689.743 728.897
Farm income 1.235 2.039 400 1.013 1.095 741
Derivation of Total Personal Income
Net earnings 1/ 271.871 298.254 321.295 351.352 368.007 386.175
Transfer payments 121.957 133.262 155.756 173.830 190.918 204.282
Income maintenance 2/ 8.134 9.179 11.592 13.659 14.721 16.632
Unemployment insurance 2.699 3.481 5.298 6.663 9.226 8.777
Retirement and other 111.124 120.602 138.866 153.508 166.971 178.873
Dividends, interest, and rent 112.275 119.761 123.077 128.998 131.913 139.181
Population (thousands) 3/ 37.3 38.7 40.7 42.5 44.3 45.9
Per Capita Incomes ($) 4/
Per capita personal i,632 239.874 254.269
Other labor income 15.198 16.642 18.941 20.969 23.246 25.009
Proprietors' income 37.675 39.730 40.835 47.016 50.334 54.023
Nonfarm proprietors' income 37.351 39.669 40.704 46.300 49.588 53.641
Farm proprietors' income 324 61 131 716 746 382
Total employment (full & part-time) 12.871 13.715 13.975 14.132 14.612 15.124
Wage and salary obs 9.865 10.444 10.367 10.517 10.920 11.367
Number of proprietors 3.006 3.271 3.608 3.615 3.692 3.757
Number of nonfarm proprietors /5 2.812 3.083 3.421 3.427 3.510 3.578
Number of farm proprietors 194 188 187 188 182 179
Average earnings per job ($) 18.006 18.309 19.344 20.918 21.452 22.038
Wage & salary earnings per job ($) 18.133 18.646 20.311 21.644 21.966 22.369
Average earnings per nonfarm proprietor ($) 13.283 12.867 11.898 13.510 14.128 14.992
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(53-053) PIERCE WASHINGTON
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total personal income ($000) 9,063,251 10,038,231 10,646,663 11,491,193 12,047,345 12,683,943
Nonfarm personal income 9,030,695 10,006,975 10,609,037 11,447,298 12,007,971 12,649,848
Farm income 32,556 31,256 37,626 43,895 39,374 34,095
Derivation of Total Personal Income
Net earnings 1/ 6,121,515 6,684,367 7,199,602 7,838,197 8,171,794 8,598,979
Transfer payments 1,623,517 1,786,601 2,006,399 2,198,170 2,367,886 2,490,019
Income maintenance 2/ 138,334 148,369 181,673 205,876 227,816 240,261
Unemployment insurance 42,313 48,796 70,233 101,596 126,556 120,201
Retirement and other 1,442,870 1,589,436 1,754,493 1,890,698 2,013,514 2,129,557
Dividends, interest, and rent 1,318,219 1,567,263 1,440,662 1,454,826 1,507,665 1,594,945
Population (thousands) 3/ 570.5 590.5 605.0 619.5 631.9 638.3
Per Capita Incomes ($) 4/
Per capita personal income 15,888 16,999 17,598 18,549 19,066 19,870
Per capita net earnings 10,731 11,319 11,900 12,652 12,932 13,471
Per capita transfer payments 2,846 3,025 3,316 3,548 3,747 3,901
Per capita income maintenance 242 251 300 332 361 376
Per capita unemployment insurance 74 83 116 164 200 188
Per capita retirement & other 2,529 2,692 2,900 3,052 3,187 3,336
Per capita dividends, interest, & rent 2,311 2,654 2,381 2,348 2,386 2,499
Place of Work Profile
Total earnings (place of work, $000) 5,353,535 5,806,045 6,182,798 6,721,704 7,140,962 7,533,892
Wages and salaries 4,452,747 4,848,764 5,130,733 5,527,494 5,844,864 6,136,464
Other labor income 319,458 361,413 406,527 459,444 506,371 552,374
Proprietors' income 581,330 595,868 645,538 734,766 789,727 845,054
Nonfarm proprietors' income 562,419 579,050 622,678 704,716 764,531 825,384
Farm proprietors' income 18,911 16,818 22,860 30,050 25,196 19,670
Total employment (full & part-time) 269,376 278,439 279,827 286,894 294,628 302,747
Wage and salary jobs 226,433 232,782 230,419 234,857 241,854 249,137
Number of proprietors 42,943 45,657 49,408 52,037 52,774 53,610
Number of nonfarm proprietors /5 41,577 44,326 48,083 50,709 51,491 52,345
Number of farm proprietors' 1,366 1,331 1,325 1,328 1,283 1,265
Average earnings per job ($) 19,874 20,852 22,095 23,429 24,237 24,885
Wage & salary earnings per job ($) 19,665 20,830 22,267 23,536 24,167 24,631
Average earnings per nonfarm
proprietor ($) 13,527 13,063 12,950 13,897 14,848 15,768
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
August 19, 1997
REGIONAL ECONOMIC PROFILE
For Counties and
Metropolitan Areas
(53-067) THURSTON WASHINGTON
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Place of Residence Profile
Total persona1 income ($000) 2,651,612 2,946,318 3,232,859 3,516,523 3,734,018 3,950,934
Nonfarm personal income 2,630,467 2,924,405 3,209,464 3,487,450 3,707,955 3,924,758
Farm income 21,145 21,913 23,395 29,073 26,063 26,176
Derivation of Total Personal Income
Net earnings 1/ 1,732,698 1,929,397 2,138,621 2,352,819 2,492,630 2,634,787
Transfer payments 466,355 522,728 593,210 641,576 696,628 740,301
Income maintenance 2/ 28,472 31,157 38,883 46,521 49,468 52,132
Unemployment insurance 12,949 16,138 21,181 28,927 37,156 35,074
Retirement and other 424,934 475,433 533,146 566,128 610,004 653,095
Dividends, interest, and rent 452,559 494,193 501,028 522,128 544,760 575,846
Population (thousands) 3/ 156.4 163.0 169.5 176.6 183.4 187.2
Per Capita Incomes ($) 4/
Per capita personal income 16,956 18,073 19,069 19,908 20,364 21,101
Per capita net earnings 11,080 11,835 12,615 13,320 13,594 14,072
Per capita transfer payments 2,982 3,206 3,499 3,632 3,799 3,954
Per capita income maintenance 182 191 229 263 270 278
Per capita unemployment insurance 83 99 125 164 203 187
Per capita retirement & other 2,717 2,916 3,145 3,205 3,327 3,488
Per capita dividends, interest, & rent 2,894 3,031 2,955 2,956 2,971 3,075
Place of Work Profile
Total earnings (place of work, $000) 1,574,918 1,751,999 1,966,104 2,160,958 2,300,006 2,411,366
Wages and salaries 1,299,416 1,453,585 1,630,863 1,777,990 1,887,461 1,967,609
Other labor income 95,442 109,805 130,040 147,578 164,393 176,782
Proprietors' income 180,060 188,609 205,201 235,390 248,152 266,975
Nonfarm proprietors' income 168,232 176,988 192,428 216,213 233,106 251,945
Farm proprietors' income 11,828 11,621 12,773 19,177 15,046 15,030
Total employment (full & part-time) 79,225 84,094 88,142 91,120 93,653 96,222
Wage and salary jobs 65,702 69,322 72,085 74,013 76,307 78,588
Number of proprietors 13,523 14,772 16,057 17,107 17,346 17,634
Number of nonfarm proprietors /5 12,628 13,900 15,189 16,237 16,505 16,804
Number of farm proprietors 895 872 868 870 841 830
Average earnings per job ($) 19,879 20,834 22,306 23,716 24,559 25,060
Wage & salary earnings per job ($) 19,777 20,969 22,624 24,023 24,735 25,037
Average earnings per nonfarm proprietor ($) 13,322 12,733 12,669 13,316 14,123 14,993
</TABLE>
See footnotes at end of table, REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA30
1/ Total earnings less personal contributions for social insurance adjusted to
place of residence.
2/ Includes supplemental security income payments, payments to families with
dependent children (AFDC), general assistance payments, food stamp
payments, and other assistance payments, including emergency assistance.
3/ Census Bureau midyear population estimates. Estimates for 1990-94 reflect
county population estimates available as of October 1995.
4/ Type of income divided by population yields a per capita for that type of
income.
5/ Excludes limited partners.
6/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
7/ La Paz county, AZ was separated from Yuma county on January 1, 1983.
8/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area Into Aleutians East Bor. and
Aleutians West Census Area. Denali and Lake + Peninsula Boroughs begin in
1991. Estimates from 1993 forward separate Skagway-Yakutat-Angoon Census
Area into Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
(L) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
Table CA30 June 1996 REGIONAL ECONOMIC INFORMATION
SYSTEM BUREAU OF ECONOMIC ANALYSIS
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
ThriftINVESTOR
INDEX VALUES
<TABLE>
<CAPTION>
INDEX VALUES PERCENT CHANGE SINCE
-------------------------------------- ------------------------------
07/31/97 1 MONTH YTD 52 WEEK 1 MONTH YTD 52 WEEK
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub.Traded Thrifts 684.5 624.5 483.6 388.4 9.60 41.54 76.24
MHC Index 751.0 683.8 538.0 416.1 9.84 39.59 80.48
Insurance Indices
- ------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 608.2 555.0 439.2 356.2 9.59 38.47 70.76
BIF Thrifts 908.5 832.1 616.8 485.0 9.18 47.28 87.31
STOCK EXCHANGE INDICES
- ------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 197.0 192.7 156.2 132.1 2.20 26.10 49.07
NYSE Thrifts 421.4 368.3 277.3 219.7 14.41 51.96 91.75
OTC Thrifts 779.9 721.8 569.7 462.5 8.05 36.89 68.62
GEOGRAPHIC INDICES
- ------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,342.6 1,267.3 970.7 738.4 5.94 38.31 81.82
Midwestern Thrifts 1,455.2 1,369.4 1,159.3 951.7 6.26 25.52 52.90
New England Thrifts 592.0 553.2 428.9 330.3 7.00 38.02 79.21
Southeastern Thrifts 608.6 561.4 447.2 375.6 8.40 36.10 62.03
Southwestern Thrifts 416.4 419.8 315.9 255.8 -0.82 31.84 62.80
Western Thrifts 730.2 635.1 474.7 392.0 14.97 53.83 86.25
ASSET SIZE INDICES
- ------------------------------------------------------------------------------------------------------------------
Less than $250M 721.9 676.0 586.6 539.7 6.79 23.06 33.75
$250M to $500M 1,011.5 947.0 789.8 673.2 6.81 28.07 50.25
S500M to $1B 672.1 639.2 521.8 436.0 5.15 28.82 54.15
$1B to $5B 747.6 704.8 546.0 429.6 6.08 36.92 74.03
Over $5B 453.3 403.6 305.8 241.6 12.32 48.23 87.66
Comparative Indices
- ------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 8,222.6 7,672.8 6,448.3 5,528.9 7.17 27.52 48.72
S&P 500 954.3 885.2 740.7 640.0 7.81 28.83 49.12
</TABLE>
All SNL indices are market-value weighted: i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201,082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984 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, IN, KS, KY, MI, MN, MO,
ND, NE, OH, SD, WI;
New England; CT, MA, ME NH, RI, VT; Southeast: AL, AR, FL, GA, MS, NC, SC, TN,
VA, WV;
Southwest: CO, LA, NM, OK, TX, UT; West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY.
AUGUST 1997
<PAGE>
EXHIBIT IV-4
Heritage Bank
Market Area Acquisition Activity
<PAGE>
WASHINGTON STATE MERGER AND ACQUISITION ACTIVITY 1995-PRESENT
<TABLE>
<CAPTION>
Seller Financials at Completion Deal Terms
------------------------------------- -------------------
Total TgEg/ YTD YTD NPAs/ Rsrvs/ Deal Deal
Ann'd Comp Assets Assets ROAA ROAE Assets NPLs Value Price Per
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%) ($M) Share ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/12/96 11/29/96 Washington Federal WA Metropolitan Bancorp WA 761,014 8.14 0.85 12.85 NA NA 67.5 19.834 Stock
07/13/94 01/06/95 First Interstate CA University SB WA 1,116,973 9.42 1.20 12.56 0.80 NA 205.1 NA Cash
Average 938,994 7.78 1.03 12.71 0.80 NA 136.3 19.834
Median 938,994 7.78 1.03 12.71 0.80 NA 136.3 19.834
<CAPTION>
Deal Pricing at Completion
------------------------------------------------------
Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBk Prem/
Ann'd Comp Pr/Bk Tg Bk Assets 4-Qtr CoreDeps
Date Date Buyer ST Seller ST (%) (%) (%) EPS (x) (%)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/12/96 11/29/96 Washington Federal WA Metropolitan Bancorp WA 149.98 149.98 8.95 NA 7.09
07/13/94 01/06/95 First Interstate CA University SB WA 151.37 188.17 17.58 14.15 11.18
Average 150.68 169.08 13.27 14.15 9.14
Median 150.68 169.08 13.27 14.15 9.14
</TABLE>
Source: SNL Securities, LC.
